Style Underperformer:
Sector Underperformers:
- 1) Agriculture -.02% 2) Medical Equipment +.22% 3) Road & Rail +.36%
Stocks Falling on Unusual Volume:
- TU, RCI, EXXI, CRK, DTV, YZC, BCS, CLD, LUV, SIR, RCI, SSW, PAYX, PBYI, NSH, SRPT, APD, MKC, AGN, NLNK, FLT, SCHN, MOS, EXXI, WMC, MON, ISIS, TRIP and UNG
Stocks With Unusual Put Option Activity:
- 1) COF 2) NKE 3) STZ 4) SLB 5) BBBY
Stocks With Most Negative News Mentions:
- 1) VNO 2) APD 3) PAYX 4) M 5) SSW
Charts:
Style Outperformer:
Sector Outperformers:
- HMOs +2.22% 2) Alt Energy +1.90% 3) Oil Tankers +1.76%
Stocks Rising on Unusual Volume:
- NIHD, EVC, CSIQ, WPRT, CAG, SBAC, TWC, CYTK, LPI and INVN
Stocks With Unusual Call Option Activity:
- 1) TWC 2) LUV 3) MSI 4) TMUS 5) RDN
Stocks With Most Positive News Mentions:
- 1) WDC 2) PCP 3) CAG 4) AMZN 5) LMT
Charts:
Evening Headlines
Bloomberg:
- Japan Institutions Cut Shares to New Low in Snub to Abe. Japan’s
biggest quarterly rally in 25 years did little to entice institutional
investors, whose stock holdings fell to the lowest proportion of overall
holdings ever in March. The country’s insurers, lenders and trust banks
pared their Japanese shares to 28 percent of total market value, the
lowest ever, as of March 31, according to Japan Exchange Group Inc.
(8697) Holdings have fallen from a peak of 44.1 percent in 1988. Fukoku
Mutual Life Insurance Co. and Sompo Japan Nipponkoa Asset Management Co.
are betting Prime Minister Shinzo Abe’s policies
will fail to defeat deflation or restore sustainable growth.
- China's
'Likonomics' May Cause Temporary Hard-Landing: Barclays. Li Keqiang-led
govt's key economic policy framework, or "Likonomics", consists of
three pillars, no stimulus, deleveraging and structural reform,
economists at Barclays led by Yiping Huang wrote in a note. During the
past 3 mos, new govt has resisted repeated calls for new stimulus
because it believes state-led investment is no longer sustainable.
Unless economy and markets face imminent risk of collapse, Barclays
doesn't expect policymakers to adopt aggressive fiscal and monetary
expansion. Implementation of Likonomics could point to further downside
risks for both economic growth and asset prices, including exchange
rate. In increasingly likely downside scenario, China could experience
temporary "hard landing" (quarterly growth dropping to 3%) in next 3
years, although economy would bounce back rapidly afterwards.
- Hong Kong Stocks Show Property Collapse to BNP: Chart of the Day.
Hong Kong real estate has become more unhinged from the city's stock
market than ever before as shares of developers tumble while property
prices stay near record highs. Housing prices in Hong Kong, the world's
most expensive property market, have remained elevated even after the
government imposed an extra 15% tax in October on purchases by companies
and non-residents, and pledged to boost land supply to make homes more
affordable. The retreat in developer shares suggests property prices
will eventually tumble, said Arthur Kwong, head of Asia Pacific equities
at BNP Paribas Investment Partners, which manages about $658 billion.
"I would believe the stock market," Kwong said in a June 19 interview in
Hong Kong. "That leads to the conclusion that this time the property
market may collapse quite badly."
- Rudd Beats Gillard in Ballot for Australia Labor Leadership.
Kevin Rudd was sworn in as Australian prime minister for his second
stint in the post, tasked with reviving the ruling Labor party’s
prospects in the next election as it lags behind the opposition in
opinion polls. Rudd was sworn in by Governor-General Quentin Bryce in
Canberra today, along with his new deputy Anthony Albanese and Chris
Bowen as treasurer.
- Asian Stocks Gain as Slow U.S. Growth Lifts Stimulus Bets.
Asian stocks rose for a second day after slower-than-estimated growth
in the U.S. economy stoked speculation the Federal Reserve may hold back
from reducing stimulus. Samsung Electronics Co. (005930), the world’s
largest maker of smartphones, climbed 5.9 percent in Seoul. Industrial
& Commercial Bank of China Ltd. gained 3.2 percent in Hong Kong
after a report showed profit growth at Chinese industrial companies
accelerated in May. Newcrest Mining Ltd., Australia’s biggest gold
producer, jumped 6.8 percent as the bullion headed for its first advance
in four days. The MSCI Asia Pacific Index increased 1.4 percent to
127.94 as of 11:04 a.m. in Tokyo, with about six shares rising for each
that fell. The gauge dropped 13 percent through yesterday from this
year’s high on May 20.
- Draghi Points to Letta as Italian Drop Risks Spiral: Euro Credit.
Investors in Italian and Spanish bonds, which recorded more than twice
the losses incurred by German debt in the past week, shouldn't count on
European Central Bank President Mario Draghi for help just yet. After
declining 3 percent in the past week, Italian bonds are set to
underperform their German peers in June for the first time in three
months. Italy's borrowing costs almost doubled when the nation sold
186-day bills yesterday, while 10-year yields approached 5 percent, a
rate breached by Spanish debt this week for the first time since April.
Spain is due to auction bonds on July 4. "There's a risk we return to
this negative spiral where bond yields creep up and at some point the
market starts to worry about sustainability," said Elwin de Groot,
senior market economist at Rabobank Nederland in Utrecht, in the
Netherlands. "There countries will not be able to cope with such levels
in the long term."
- EU Finance Chiefs Said to Reach Deal on Failing Banks. European Union finance chiefs struck an agreement on how to handle
failing banks, a step they said would bolster investor confidence and
help overcome the euro-area financial crisis. In seven hours of
emergency negotiations in Brussels that wrapped up at about 1:30 a.m.
today, ministers settled on guidelines for assigning losses to private
creditors and regulating public assistance. They also spelled out when
governments can step in and established a role for the European
Stability Mechanism, the euro area’s 500 billion-euro ($651 billion)
firewall fund. “It took a long time and it was arduous and it was
intense,” German Finance Minister Wolfgang Schaeuble told reporters
after the meeting. He said the deal is an “important step” toward making
clear “that shareholders and creditors are liable first and foremost.”
- Industrial Metals Pare Quarterly Declines on Fed Stimulus Bets.
Industrial metals pared quarterly losses after slower-than-estimated
growth in the U.S. economy stoked speculation the Federal Reserve may
hold back from reducing monetary stimulus. Copper for delivery in three
months on the London Metal Exchange rose as much as 0.8 percent to
$6,788 a metric ton and was at $6,785 by 11:37 a.m. in Tokyo. The price
is still down 7.2 percent this month, the most since May 2012, and 10
percent
lower this quarter. Metal for delivery in July on the Comex
advanced 1 percent at $3.07 a pound. The LME Index of six primary metals that includes copper
and aluminum has declined 10 percent this quarter, the most
since the period ended Sept. 30, 2011. The index touched 2,911
on June 24, the lowest level since June 2010, as the Fed said it
may pare bond purchases and investors speculated rising Chinese
funding costs will curb demand.
- Rubber Pares Worst Quarter in Year on Hopes of U.S. Stimulus.
Rubber recovered from a nine-month
low, paring the biggest quarterly decline in a year, amid
optimism the U.S. Federal Reserve will maintain stimulus after
slower-than-estimated growth in the U.S. economy. The contract for
delivery in December rose as much as 1.9 percent to 231.5 yen a kilogram
($2,358 a metric ton) on the Tokyo Commodity Exchange and was at 230.3
yen at 11:02 a.m. Futures have lost 16 percent this quarter, the most since the
three months ended June 2012.
- Ratings Ratio Worst Since 2009 as Profits Slow. Ratio of upgrades to downgrades for corporate credit ratings is 0.89 at Moody's and 0.83 at S&P. Corporate creditworthiness in the U.S. is deteriorating at the fastest pace since 2009,
with earnings growth slowing as yields rise from record lows. The ratio
of upgrades to downgrades fell to 0.89 in the first five months of the
year after reaching a post-crisis high of 1.55 in 2010, according to
data from Moody’s Capital Markets Group. At Standard & Poor’s,
the proportion has declined to 0.83 as of last week from a year earlier.
- FDIC’s Hoenig Says Another Crisis May Resurrect Bailout Specter. Thomas Hoenig, vice chairman of the
Federal Deposit Insurance Corp., said that while his agency can
handle the wind-down of one big failing bank at a time, a larger
crisis could lead to talk of bailouts. Hoenig said the authority given to U.S. banking regulators
in the Dodd-Frank Act to dismantle a large bank may be effective
only in an “idiosyncratic” situation and not a wider
breakdown. In the latter case, lawmakers may be pressured to
weigh a bailout like the Troubled Asset Relief Program of the
2008 credit crisis, he said at a House Financial Services
Committee hearing today.
Wall Street Journal:
- China Cash Crunch Spreads. Businesses Turn to Alternatives Such as Bankers' Acceptances to Pay Their Bills. Even as Chinese officials indicate a softening of their tight grip on
cash, some businesses are reporting liquidity is increasingly hard to
find in some places and that customers are turning to alternatives. It isn't clear how deep the liquidity issues have trickled down from
the financial sector, which has been gripped this month by a cash crunch
widely believed to be aimed at deflating ballooning credit in the
Chinese economy. But it suggests the pain could spread to other areas if
cash borrowing rates for banks remain stubbornly high. Over the past couple of weeks companies have increasingly used bankers'
acceptances—a type of short-term guarantee issued by banks to finance
trade—to pay their bills instead of cash, according to people in a range
of industries around the country.
- Business Feels Pinch of Swift Rate Rise. Sharp increases in long-term interest rates, triggered by Federal
Reserve statements last week, threaten sales of homes, cars and other
big-ticket items that have helped drive the U.S. economic recovery.
Rate increases on interest-sensitive
sectors likely aren't severe enough to derail the recovery, say
economists. But they arrived just as the economy's lagging growth had
showed welcome signs of improvement, raising worries among consumers and
company executives. "It causes me to be a bit more cautious," said
Ron DeFeo, the chief executive of Terex Corp. TEX -0.30% The Westport,
Conn.-based company makes cranes, paving equipment and other heavy
building machines, a business sensitive to interest rate
changes. "I am hesitant because I really don't believe the U.S. economy
is in a strong growth mode."
- Erdogan Tightens Grip on Turkey, Putting Nation at Crossroads. As mayor of Istanbul in the late 1990s, Recep Tayyip Erdogan publicly
read a poem that included the lines: "The mosques are our barracks, the
domes our helmets, the minarets our bayonets and the faithful our
soldiers." The Islamist message earned him a few months in jail from
Turkey's military-backed secular government.
- Historic Win for Gay Marriage. High Court Rulings Lift Bans on Federal Same-Sex Benefits, Weddings in California. The Supreme Court dramatically advanced gay rights Wednesday in
rulings that direct the federal government to provide equal treatment to
same-sex spouses and allow the resumption of gay marriages in
California.
In a pair of 5-4 rulings on the final
day of the court's term, the justices struck down the 1996 Defense of
Marriage Act, which denied federal benefits to gay couples married under
state law, and let stand a ruling that found Proposition 8, a 2008
voter initiative that ended same-sex marriage in California,
unconstitutional.
- Exit Signs Blurry for Private Equity. It all was going so well. For the first 5½ months of the year,
private-equity firms took advantage of soaring markets and eager
investors to raise about $35 billion by selling stakes in their
companies, not to mention billions of dollars more through initial
public offerings.
- Big Coal to Fight Obama Plan. Mining Firms Fear Impact of President's Proposals to Combat Global Warming. The beleaguered domestic coal industry, bracing for the possibility
that no more coal-burning power plants will ever be built on U.S. soil,
is teaming up with other business groups to blunt the impact of
President Obama's climate-change agenda, while also shifting its
business focus to exports. Following the president's announcement Tuesday of a sweeping plan to
cut greenhouse-gas emissions, including at existing coal-fired power
plants, some company officials said Wednesday there is also greater
urgency to develop clean-coal technology, including a cost-effective way
to capture and store carbon dioxide.
Barron's:
- Paychex(PAYX) Slips: FYQ4 Misses, FY14 View Light.
Shares of payroll processing services firm Paycheck (PAYX) are down
$1.06, or 2.8%, at $36.93, in late trading after the company this
afternoon reported fiscal Q4 revenue and profit per share that missed
analysts’
expectations, and projected this year’s revenue slightly below
consensus.
CNBC:
- Massive Protests to Test Egypt Again. Egypt is bracing for massive demonstrations on Sunday, in the most
serious threat to the nation's tenuous stability since the ousting of
its former president, over two years ago.
Zero Hedge:
Business Insider:
Reuters:
- China credit crunch pushes up loan pricing. Reduced
bank liquidity in
China's onshore loan market is pushing up loan pricing as the
country's banks try to curb lending after last week's credit crunch in
the interbank market and stock market slump, loan bankers said on
Wednesday. Some Chinese state-owned and commercial banks have
already asked borrowers to increase the interest margins of existing
loans or renegotiate the margins on deals in the pipeline after the
People's Bank of China (PBOC) said that the onus was on lenders to
better manage their balance sheets. "We will temporarily increase
pricing of loans that haven't
been drawn or fully drawn yet. It applies to all clients," a
Beijing-based banker at a Chinese commercial bank said.
- Costs eat into Bed Bath's(BBBY) profit. U.S. home goods chain Bed Bath & Beyond
Inc missed Wall Street's profit estimates in the first
quarter as higher costs offset better-than-expected sales.
- Turning Market Hits 'Trend-Following' Quant Funds. On the HFRI Macro/CTA Index which charts the
performance of hedge funds, those that used trend-following strategies
fell 2.2 percent in May, according to data from industry tracker Hedge
Fund Research.
- Fresh protests in Brazil despite government concessions. Tens of thousands
of Brazilians took to the streets on Wednesday in new demonstrations
calling for a crackdown on corruption and better public services, just a
day after Congress ceded to some of the key demands galvanizing
protests across the country.
In Belo Horizonte, authorities
said 40,000 people gathered to demand improved education and healthcare as Brazil's third-largest city hosted a Confederations Cup semi-final soccer game between Brazil and Uruguay in a warm-up for the 2014 World Cup. Hooded youths threw stones at police who used teargas to stop marchers 1-1/2
miles from the stadium. A banner hung from a bridge read "FIFA go home"
in reference to the world soccer body. FIFA's president, Sepp Blatter,
attended the game, which was not disrupted by the protests.
La Tribune:
- French
New Car Registrations Drop 4% in June. Registrations of new cars fell
4% in France in the first three weeks of June, citing official
statistics. General Motors Opel brand French registrations down 36%,
Chevrolet down 16%.
Euromoney:
Oriental Morning Post:
- CBRC Asks Trust Companies to Report Payment Sources. Chinese
trust cos. must report their funding sources for payments on products
due June 25-Dec. 31, citing a notice from China Banking Regulatory
Commission's Shanghai branch. Cos. must also identify which bank,
brokerage or financial institution holds each trust product, the report
said.
China Daily:
- Avoiding
Bank Risk More Important Amid Slowdown. Goal of China's recent
liquidity management is to safeguard financial stability, People's Daily
says in a commentary by Gao Yuncai. Banks' financial innovations "must"
be under strict management and ensure risks are controllable, the
commentary says.
Xinhua:
- Some
Small Property Cos. May Lose Financing Ability. Some small property
cos. may lose financing ability because of the recent liquidity shortage
of banks, citing an analyst. Property cos. may also cut prices due to
financing problems. The government should strengthen supervision over
property cos. to prevent some cos. from absconding with payments from
property buyers.
China Business News:
- China Tax Revenue This Year May Be 'Very Severe'. China's tax
revenue this year may be "very severe," citing Song Lan, deputy head at
the State Administration of Taxation. The nation's tax administration
has started survey to investigate the local tax revenue situation since
mid of this month, the report says.
China Securities Journal:
- China Should More Effectively Regulate Banks. China should have
more effective measures to regulate how banks make profit, says front
page commentary written by reporter Ren Xiao. China should accelerate
interest rate liberalization so as to reduce incentive for banks to take
on too much leverage.
Global Times:
- Riot kills 27 in Xinjiang. A riot in a town in Northwest China's Xinjiang Uyghur Autonomous Region
killed 27 people, including 10 rioters on Wednesday, several days ahead
of the anniversary of deadly riots in the region's capital in 2009. An official in Xinjiang, who asked to remain anonymous, told the Global
Times that at around 6 am Wednesday, dozens of thugs armed with knifes
and incendiary devices attacked the township governmental building, a
police station, a station of auxiliary police and a construction site. The
attackers stabbed police officers and auxiliary police officers,
government employees and civilians, set fire to the four buildings, and
confronted police officers who rushed to the scene, said the official. According
to him, after being caught off-guard, nine police officers and
auxiliary police officers were killed, along with another eight
government employees and civilians.
Evening Recommendations
Night Trading
- Asian equity indices are +.75% to +2.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 150.0 -9.5 basis points.
- Asia Pacific Sovereign CDS Index 117.25 -13.25 basis points.
- NASDAQ 100 futures +.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for May is estimated to rise +.2% versus unch. in April.
- Personal Spending for May is estimated to rise +.3% versus a -.2% decline in April.
- The PCE Core for May is estimated to rise +.1% versus unch. in April.
- Initial Jobless Claims are estimated to fall to 345K versus 354K the prior week.
- Continuing Claims are estimated to rise to 2953K versus 2951K prior.
10:00 am EST
- Pending Home Sales for May are estimated to rise +1.0% versus a +.3% gain in April.
11:00 am EST
- The Kansas City Fed Manf. Activity Index for June is estimated to rise to 3.0 versus 2.0 in May.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lockhart speaking, Fed's Powell speaking, 7Y T-Note auction, EU
Leaders Summit, German Retail Sales/Unemployment data, weekly EIA
natural gas inventory report, weekly Bloomberg Consumer Comfort Index,
(LO) Investor Day and the (SONC) Investor Day could also impact trading
today.
BOTTOM LINE: Asian indices are higher, boosted by automaker and real estate
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 17.30 -6.33%
- Euro/Yen Carry Return Index 132.67 -.60%
- Emerging Markets Currency Volatility(VXY) 11.32 +.80%
- S&P 500 Implied Correlation 58.34 -3.35%
- ISE Sentiment Index 72.0 -27.27%
- Total Put/Call .84 -21.50%
Credit Investor Angst:
- North American Investment Grade CDS Index 88.22 -4.44%
- European Financial Sector CDS Index 168.05 -7.2%
- Western Europe Sovereign Debt CDS Index 96.19 -.84%
- Emerging Market CDS Index 336.14 -4.39%
- 2-Year Swap Spread 14.50 -2.5 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 +2.5 bps
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $113.80/Metric Tonne -.18%
- Citi US Economic Surprise Index -8.0 -9.3 points
- Citi Emerging Markets Economic Surprise Index -37.10 +1.1 points
- 10-Year TIPS Spread 1.95 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +341 open in Japan
- DAX Futures: Indicating +16 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/retail/medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -5.02% 2) Education -4.03% 3) Coal -3.52%
Stocks Falling on Unusual Volume:
- GORO, SA, KNDI, TTM, CRAY, VALE, AAPL, RCI, TU, IBKC, GTN, FIVE, TU,
ARB, MG, BCE, BCC, FCFS, UNF, APOL, CEF, GTU, NLNK, WLT, NTGR, PRXL,
MOS, ABX, BBL, BVN, ALGT, RGLD, PCH, MMS and MTGE
Stocks With Unusual Put Option Activity:
- 1) APOL 2) XME 3) BBBY 4) ISRG 5) NEM
Stocks With Most Negative News Mentions:
- 1) NTGR 2) ABX 3) ORLY 4) VALE 5) GS
Charts:
Style Outperformer:
Sector Outperformers:
- Oil Tankers +1.74% 2) Biotech +1.73% 3) Disk Drives +1.45%
Stocks Rising on Unusual Volume:
- EVC, SYNA, MLNX, BKS, SCTY, MU, QSII, HIG, MGM, CYTK and P
Stocks With Unusual Call Option Activity:
- 1) MOS 2) GRA 3) OC 4) P 5) CTXS
Stocks With Most Positive News Mentions:
- 1) HIG 2) MGM 3) KEY 4) ADBE 5) BWLD
Charts:
