Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.15% 2) Coal -1.08% 3) Education -1.01%
Stocks Falling on Unusual Volume:
- ADT, NSR, SI, CTXS, ESI, OSTK, ALGT, ORMP, CHEF, DEO, CARB, WCC, EXAR, ABAX, BEAV, CLB, USLV, WHR, KMT, MLNX, TSCO, MGAM, FBHS, SYMC, POT, MUR, BTU, NTLS, AMCC, KMT, SYMC, NSR and ESI
Stocks With Unusual Put Option Activity:
- 1) ADT 2) UA 3) CTXS 4) SYMC 5) CAM
Stocks With Most Negative News Mentions:
- 1) POT 2) BTU 3) CNH 4) APOL 5) CTXS
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +3.72% 2) Biotech +3.23% 3) HMOs +2.65%
Stocks Rising on Unusual Volume:
- ACCL, UA, CNQR, FLDM, ALXN, CRR, NOW, ACXM, MEOH, HAR, CSII, AUXL, HBI, CAVM, HSH, FB, PBI, P, UTEK, FIO, FLDM, WWE, FOXA, DKS, CAM, SPLK, BC, AN, BX, DRE, LVS, ARWR and WYNN
Stocks With Unusual Call Option Activity:
- 1) ADT 2) CWH 3) AMCC 4) CTXS 5) MJN
Stocks With Most Positive News Mentions:
- 1) AAPL 2) V 3) A 4) BC 5) AN
Charts:
Evening Headlines
Bloomberg:
- Calm Broken in Global Markets Amid Concern of Emerging Contagion.
Declines that erased $1.7 trillion
from global stocks as currencies from Turkey to Argentina slid are
proving a Wall Street maxim, according to Brian Barish of Cambiar
Investors LLC. “You’re never fully prepared for something like this,” Barish, president of Denver-based Cambiar, which manages $9
billion, said in a phone interview. “You say to yourself, ‘I
know the froth is picking up, I know this is starting to get a
little out of hand, this is going to get ugly when the hammer
comes down.’ You know all of that, but you just don’t know what
is going to get sold and why and by who.”
- China Said to Probe Credit Loophole Used to Access Cash. China is probing a loophole that allowed executives at steel traders and other companies to
bridge liquidity shortages for their firms by exceeding credit-card limits, according to three people familiar with the matter. The People’s Bank of China opened an investigation into
abuses of credit card pre-authorizations earlier this month, the
people said, asking not to be identified because the probe
hasn’t been made public. The probe is examining transactions in
December and early January, and found that companies and people
gained an aggregate of as much as 10 billion yuan ($1.6 billion)
in that time.
- Record Cash Leaves Emerging Market ETFs on Lira Drop: Currencies.
Investors are pulling money from exchange-traded funds that track
emerging markets at the fastest rate on record, as China's slowing
growth and cuts to central-bank stimulus sink currencies from Turkey to
Brazil. More than $7 billion flowed from ETFs investing in
developing-nation assets in January, the most since the securities were
created, data compiled by Bloomberg show. The iShares MSCI Emerging
Markets ETF(EEM) has seen its assets shrink by 11%, while the Vanguard
FTSE Emerging Markets ETF is poised for the biggest monthly redemption
since the fund was started in 2005. The WisdomTree Emerging Markets
Local Debt Fund is on track for an eighth straight month of withdrawals.
- Abe Crunch Year Sees Biggest Risk Jump Among Peers: Japan Credit. Japan’s
default risk jumped the most
among developed nations this year as the world’s third-largest
economy faces mounting challenges from energy import costs and a
budget overhaul. Credit-default swaps that insure Japanese government
bonds against nonpayment for five years touched 56 basis points on Jan.
27, the highest since Nov. 5, according to data provider
CMA. It has risen 14 basis points this month, the most among the
22 sovereigns tracked by Bloomberg, followed by Iceland’s 13
basis point increase.
- Treasury Wine Slumps as China Austerity Hits Earnings. Treasury Wine Estates Ltd. (TWE), the Australian maker of A$785-a-bottle ($686) Penfolds Grange, said
first-half earnings fell as China’s crackdown on official gift
giving curbed demand for premium vintages. The shares slumped by
a record. Profit before interest, tax and other items dropped to
between A$42 million and A$46 million in the six months ended
Dec. 31, from A$73.4 million a year earlier, the Melbourne-based
company said in a regulatory filing based on unaudited figures.
Full-year earnings will be between A$190 million and A$210
million, compared with an earlier forecast for as much as A$250
million, it said.
“Chinese austerity may be an ongoing issue for some
time,” said Will Seddon, who helps manage about A$550 million
at White Funds Management Pty. in Sydney.
- Erdogan to Give Rate Rise Time Before Trying Plan B. Turkey’s prime minister said he’ll give the central bank’s
emergency interest-rate increase time to succeed in halting a market
slump, before trying alternative measures that he said are ready to be
deployed. Recep Tayyip Erdogan said his government will be
“patient” as it waits to see the impact of the decision to raise all
Turkey’s main rates, according to Hurriyet newspaper and other local
media, which cited comments he made to reporters late yesterday during a
plane journey back from Iran. Erdogan said he won’t be able to
maintain faith in the central bank’s policy shift unless it leads to a
revival in the lira and the country’s stock market, and interest rates
come back down. He said rates “aren’t the only instrument” and the
government may announce its “plan B or plan C” within a few weeks,
without giving details.
- Asian Stocks Slump on Fed Cuts to Bond Buying, China PMI.
Asian stocks fell for the fifth time in six days after the Federal
Reserve pressed on with cuts to U.S. economic stimulus and as a report
showed China’s manufacturing industry contracted. Honda Motor Co., which
gets 83 percent of its auto sales abroad, lost 2.6 percent as Japanese
exporters retreated after the yen gained from the close of equity
markets in Tokyo yesterday. Treasury Wine Estates Ltd. (TWE) slumped by a
record 20 percent in Sydney as the world’s second-largest publicly
traded wine maker said earnings fell. Hitachi Metals Ltd. surged 4.9
percent in Tokyo, leading gains on the regional benchmark index, after
profit at the steel manufacturer topped analyst estimates. The MSCI Asia Pacific Index lost 1.6 percent to 134.54 as of 12:23 p.m. in Hong Kong, with all 10 industry groups on the
gauge falling.
- Rubber Near 16-Month Low as Yen Gains After Fed Cuts Bond Buying.
Rubber in Tokyo declined, trading near a 16-month low as Japan’s
currency advanced against the dollar, reducing the appeal of
yen-denominated futures, after the Federal Reserve cut the pace of bond
buying. The contract for delivery in July fell as much as 1.7 percent to 228.6 yen a kilogram ($2,238 a metric ton) on the
Tokyo Commodity Exchange. Futures have lost 16 percent in
January, heading for the biggest monthly drop since September
2011. They slipped into a bear market on Jan. 28.
- Rebar Heads for Monthly Drop on Iron Ore Before Chinese Holidays.
Steel reinforcement-bar futures in
Shanghai headed for a second monthly decline as iron ore prices dropped
to the lowest in more than six months and as demand for the construction
material slowed before Lunar New Year holidays. Rebar for May delivery fell as much as 0.3 percent to 3,433
yuan ($567) a metric ton on the Shanghai Futures Exchange before
trading at 3,442 yuan by 10:37 a.m. local time. The most-active
contract is set for a 3.6 percent declined in January after a
2.7 percent loss in December.
- Fed Officials Unite Behind Taper as Yellen Era Begins: Economy. Federal
Reserve policy makers cut the pace of bond buying for a second straight
meeting, uniting behind a strategy of gradual withdrawal from Ben S.
Bernanke’s unprecedented easing policy as Janet Yellen prepares to
succeed him as chairman. The Federal Open Market Committee said it will trim monthly purchases by
$10 billion to $65 billion, citing labor-market indicators that “were
mixed but on balance showed further improvement” and economic growth
that has “picked up in recent quarters.”
Wall Street Journal:
CNBC:
Zero Hedge:
Business Insider:
The Blaze:
Reuters:
- Exclusive - Mitsubishi UFJ, Morgan Stanley eye deal to serve hedge funds. Morgan
Stanley and Mitsubishi UFJ Financial Group Inc (8306.T) are considering
forming a partnership to provide administrative services to hedge funds,
a senior official of the Japanese lender said on Wednesday. The two
banks have been examining ways to collaborate in that area since MUFG
purchased a fund-servicing business last year, Masaaki Tanaka, deputy
president of MUFG, told Reuters in an interview.
- Egypt to put Al Jazeera journalists on trial -prosecutor. Egypt will put an Australian, two
Britons and a Dutchwoman on trial for aiding 16 Egyptians
belonging to a "terrorist organisation", the public prosecutor
said on Wednesday, describing the four as Al Jazeera
correspondents. Three of the Qatar-based television network's journalists -
Peter Greste, an Australian; Mohamed Fahmy, a Canadian-Egyptian
national; and Baher Mohamed - were detained in Cairo on Dec. 29
and remain in custody, Al Jazeera said.
- Qualcomm(QCOM) says year on track, focuses on China. Leading mobile
chipmaker Qualcomm Inc posted higher fiscal first-quarter revenue that
slightly missed estimates as smartphone growth shifted to China, but it
bumped up its full-year earnings outlook and said 2014 was playing out as expected.
- FOREX-Yen in favour again as risk aversion flares up. Investors ploughed back into the
yen early on Thursday as safe-haven demand returned with a
vengeance, while the New Zealand dollar came in the cross hair
of sellers after the central bank left interest rates steady.
- Weak PC shipments hit Symantec revenue. Symantec
Corp reported a 5 percent fall in quarterly revenue as a decline in
sales of personal computers hurt demand for its security software. Shares of the company, the maker of Norton anti-virus software, fell 3 percent after the bell.
- Turkey's face-saving rate hike spares lira, may hit growth. A massive rate hike
may have stalled the Turkish lira's fall and salvaged the central
bank's credibility, but it stunts growth at a politically fraught time
for Prime Minister Tayyip Erdogan and may not shield Turkey from a fragile global backdrop for long.
Telegraph:
- World risks deflationary shock as BRICS puncture credit bubbles. As matters stand, the next recession will push the Western economic system
over the edge into deflation.
Half the world economy is one accident away from a deflation trap. The
International Monetary Fund says the probability may now be as high as 20pc.
China Securities Journal:
- China's Property Cos. May Face Financing Problems. Some property
developers in China may face financing problems as regulators rein in
shadow lending. There is an oversupply of real estate in tier-3 and
tier-4 cities, says Chen Yifeng, chairman of Topina Capital, adding co.
is "very cautious" in choosing property projects to finance.
People's Daily:
- China Should Probe China Credit Trust, Product Seller. China
should investigate China Credit Trust Co. and its sales agency,
Industrial & Commercial Bank of China, about why a bailed-out
trust co. failed to conduct due diligence on underlying projects,
according to a commentary. China should investigate on if China Credit
Trust fulfilled its duty in investigating investment targets, if it got
any kickback and if it highlighted investment risks.
Shanghai Securities News:
- China PBOC May Control M2 Growth at About 13% in 2014. People's
Bank of China may control M2 growth at about 13% this year and new yuan
loans at about 9t yuan, citing research jointly made with Industrial and
Commercial Bank of China.
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 147.50 +6.5 basis points.
- Asia Pacific Sovereign CDS Index 115.75 +3.0 basis points.
- NASDAQ 100 futures +.29%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Advance 4Q GDP is estimated to rise +3.2% versus a prior estimate of +4.1%.
- Advance 4Q Personal Consumption is estimated to rise +3.7% versus a +2.0% prior estimate.
- Advance 4Q GDP Price Index is estimated to rise +1.2% versus a prior estimate of a +2.0% gain.
- Advance Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.4% gain.
- Initial Jobless Claims are estimated to rise to 330K versus 326K the prior week.
- Continuing Claims are estimated to fall to 3000K versus 3056K prior.
10:00 am EST
- Pending Home Sales for December are estimated to fall -.3% versus a +.2% gain in November.
Upcoming Splits
Other Potential Market Movers
- The
Japan CPI, 7Y T-Note auction, German Unemployment rate, Eurozone
Consumer Confidence, weekly EIA natural gas inventory report and the
Costco(COST) annual meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology
and industrial shares in the region. I expect US stocks to open
modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 17.58 +11.28%
- Euro/Yen Carry Return Index 145.55 -.83%
- Emerging Markets Currency Volatility(VXY) 10.16 +5.72%
- S&P 500 Implied Correlation 58.13 +4.03%
- ISE Sentiment Index 109.0 -16.15%
- Total Put/Call .90 +13.92%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.78 +5.41%
- European Financial Sector CDS Index 101.36 +1.35%
- Western Europe Sovereign Debt CDS Index 53.65 -.65%
- Asia Pacific Sovereign Debt CDS Index 114.19 +1.35%
- Emerging Market CDS Index 337.20 +7.15%
- 2-Year Swap Spread 12.0 -2.5 basis points
- TED Spread 19.50 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.0 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .04% -1.0 basis point
- Yield Curve 232.0 -9.0 basis points
- China Import Iron Ore Spot $122.60/Metric Tonne -1.05%
- Citi US Economic Surprise Index 50.70 -1.3 points
- Citi Emerging Markets Economic Surprise Index 10.4 +2.4 points
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating -398 open in Japan
- DAX Futures: Indicating -51 open in Germany
Portfolio:
- Lower: On loses in my tech/biotech/medical/retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Investors Rebel as EM Rate Hikes Fail to Buoy Curencies.
Investors beating a retreat from emerging markets tested the resolve
of central banks fighting to protect their economies from sliding
exchange rates. The Turkish lira resumed a decline and South
Africa’s rand touched its lowest level in more than five years against
the dollar after policy makers raised interest rates higher than
predicted by economists. Russia’s ruble tumbled to a record, Brazil’s
real slid to the weakest since August and Hungary’s forint tumbled the
most in more than 18 months.
- Ruble Weakens to Record Low Against Basket as Currencies Slide.
The ruble dropped to a record low
against the basket as steps by central banks in Turkey and South Africa
failed to shore up emerging-market currencies. The ruble weakened 1.2
percent to 40.9632 against Bank Rossii’s target dollar-euro basket, the
lowest level on a closing basis, as of 6:01 p.m. in Moscow. The currency
was at 40.9332 by 6 p.m., when the central bank stops its market
operations. The yield on ruble-denominated OFZ bonds due
February 2027 rose 14 basis points to 8.39 percent.
- Yen Advances as South Africa Stokes Rout in Emerging Markets. The yen gained against all except
one of 24 emerging-market currencies as South Africa’s central
bank joined Turkey in raising its benchmark interest-rate in
moves that failed to reassure investors. The dollar rose for a fourth day against the euro as the
Federal Reserve ends a policy meeting and after a European
Central Bank official said euro appreciation runs counter to the
bank’s price-stability aim. The rand fell the most since April
as policy makers said their actions weren’t aimed at the
currency. Russia’s ruble extended its slump to 13 days and
Hungary’s forint weakened. “It’s a broad-based theme of bold-but-futile attempts by
central banks in the most beleaguered countries to fight the
avalanche and ferocity of the attack on their currencies --
which is obviously failing,” Robbert Van Batenburg, director of
market strategy at Newedge Group in New York, said by phone.
“It’s denting if not completely diminishing the faith the
currency market has in the ability of central banks to fight
against the attacks on currencies.”
- Abe Crunch Year Sees Risk rise Most After Iceland: Japan Credit.
Japan's default risk jumped the most among developed nations after
Iceland this year as the world's third-largest economy faces mounting
challenges from energy import costs and a budget overhaul.
Credit-default swaps that insure Japanese government bonds against
nonpayment for five years touched 56 basis points on Jan. 27, the
highest since Nov. 5, according to CMA. It has risen 12.8 basis points
this month, the most among the 22 sovereigns tracked by Bloomberg after
Iceland's 13 point increase. A global rout in emerging markets in 2014
has shifted investor attention on Japan's more than 1 quadrillion yen
($9.7 trillion) debt load, the world's heaviest as a proportion of gross
domestic product. "There are concerns about Japan's growing fiscal and
trade deficits," said Takayuki Atake, the Tokyo-based head of credit
research at SMBC Nikko Securities Inc. a unit of Japan's second-largest
banking group by market value. "The risk scenario we need to be on a
lookout for is for the fiscal situation to deteriorate while the economy
lags behind, leading to questions about Japan's credibility."
- Canon Forecast Misses Analyst Estimates Amid Camera Slump. Canon
Inc. (7751)’s forecast for annual net income missed analyst estimates
as the world’s largest camera maker stumbles amid slowing demand.
Net income will probably total 240 billion yen ($2.3 billion) in 2014,
the Tokyo-based company said in a statement today. That’s less than the
267 billion yen average of 22analyst estimates compiled by Bloomberg.
- Merkel Warns of ‘Deceptive Calm’ as Euro Crisis Risk Remains. German Chancellor Angela Merkel
called for a fresh push to create “real economic union”
through changes to European treaties, saying that the euro-area
debt crisis isn’t yet defeated. Addressing lawmakers in Berlin today in her first policy
speech of the year, Merkel said that Europe risks falling behind
unless the 18-nation euro region expands binding commitments and
improves its current “unsatisfactory” coordination on economic
policy. “Without decisive progress on this front, without a
quantum leap, we won’t overcome the European sovereign-debt
crisis,” Merkel said.
- Europe Stocks Decline as Bank Shares, Automakers Retreat.
European stocks fell, as automakers and retailers declined, and the
Turkish central bank’s interest rate increases failed to support
emerging-market currencies. Fiat (F) SpA slid 4.1 percent after posting
earnings that missed analysts’ forecasts. Nordea Bank AB (NDA) lost 2.3
percent after its chief executive said it will need to cut more jobs to
adjust to slow growth. Mulberry Group Plc tumbled 27 percent after
saying full-year pre-tax profit will miss market estimates. Anglo
American Plc gained 5.7 percent after saying fourth-quarter platinum
production rose 25 percent. The Stoxx Europe 600 Index dropped 0.6 percent to 322.38 at
the close of trading, paring earlier losses of as much as 1.5
percent.
- Gold Climbs on Speculation of Emerging Markets Safe-Haven Demand.
Gold advanced in London and New York
on speculation a global rout of emerging markets will spur demand for
precious metals as a safe haven. Turkey’s financial markets have plunged
since news of a corruption scandal broke last month. That coincided
with a flow of money out of emerging economies that weakened currencies
from Brazil to South Africa. Gold fell earlier today amid expectations
the Federal Reserve will cut stimulus more today. “Gold should be in
demand as long as the turmoil persists,” Daniel Briesemann, an analyst
at Commerzbank AG in Frankfurt, said by e-mail today. “That’s why gold
has recovered its early losses.” Gold for immediate delivery rose 0.2 percent to $1,259.81 an ounce by 12:37 p.m. in London, after falling as much as 0.6
percent. April futures climbed 0.7 percent to $1,259.40 an ounce
on the Comex in New York. Trading on Comex was 62 percent higher
than the average for the past 100 days for this time of day,
according to data compiled by Bloomberg.
- Natural Gas Soars to Four-Year High on Outlook for Supply Drop. Natural gas surged to a four-year
high on the last day of February futures trading on speculation
that a government report tomorrow will show a bigger-than-normal
inventory drop as frigid weather eroded supplies. Gas jumped as much
as 13 percent as the Energy Information Administration may say
stockpiles slid by 232 billion cubic feet last week, compared with a
five-year average decrease of 162 billion, according to the median of
12 analyst estimates compiled by Bloomberg. WSI Corp. in Andover,
Massachusetts, said the weather may be colder than usual in most of the
contiguous
U.S. from Feb. 3 through Feb. 7.
- Copper Heads for Longest Slump in 15 Months on Economy. Copper
futures headed for the
longest slump in 15 months on speculation that rising borrowing costs in
emerging markets will damp economic growth, eroding demand for
industrial metals. The South Africa Reserve Bank unexpectedly
increased its benchmark interest rates, following central banks from
Turkey to Brazil. Countries tightened monetary policy to bolster their
currencies. A gauge of global equities approached the lowest in six
weeks, while aluminum, nickel, zinc and lead dropped. Copper has dropped 12 percent in the past 12 months, partly as economic growth eased in China,
the world’s largest user. Global production will outstrip consumption
by 167,000 metric tons this year, following a deficit of 137,000 tons in
2013, Barclays Plc has said. “More problems in emerging markets are going to limit the demand for copper,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said in a telephone
interview. “Some people think anytime a country has to raise
interest rates just to keep money there, that means there’s
something wrong.”
- Fed Tapers QE to $65 Billion.
The Federal Reserve will trim its monthly bond buying by $10 billion to
$65 billion, sticking to its plan for a gradual withdrawal from
departing Chairman Ben S. Bernanke’s unprecedented easing policy.
“Labor market indicators were mixed but on balance showed further
improvement,” the Federal Open Market Committee (FDTR) said today in a
statement following a two-day meeting in Washington that was the last
for Bernanke, who will be succeeded by Vice Chairman Janet Yellen on
Feb. 1. “The unemployment rate declined but remains elevated.”
Wall Street Journal:
MarketWatch:
- Turkey rate hike stirs Black Wednesday memories. Parallels lie mostly on the surface, but illustrate central bankers’ lament. Don’t take it too far, but the failure of Turkey’s stunning rate hike to
provide lasting support for the Turkish lira is stirring memories of
the currency crisis that made billionaire George Soros a household name
more than two decades ago.
CNBC:
- Obama's education focus overlooks next financial contagion. With the $1.2 trillion student loan crisis accelerating, President
Barack Obama gave a nod in his State of the Union speech to the millions
of young Americans starting their adult lives in crushing debt but
offered no new proposals for relief.
ZeroHedge:
Business Insider:
The Blaze:
Reuters:
Finanz und Wirtschaft:
- Capital Controls Part of Solution, Stiglitz says. Controls part
of solution to capital flight, Joesph Stiglitz said in an interview.
Style Underperformer:
Sector Underperformers:
- 1) Education -2.92% 2) Airlines -2.02% 3) Gaming -1.85%
Stocks Falling on Unusual Volume:
- TGI, CVLT, BCA, BKU, TUP, RES, MKC, GIB, CRUS, ENR, SI, BDE, T, GHL, BA, LBTYK, VPRT, CTRL, CFX, LBTYA, BOKF, VMW, SDRL, KMP, RXN, HOMB, BDE, GHL, ESI, YHOO and FLDM
Stocks With Unusual Put Option Activity:
- 1) EWY 2) BID 3) XLP 4) SMH 5) KRE
Stocks With Most Negative News Mentions:
- 1) MCD 2) TGT 3) JPM 4) KMP 5) CRUS
Charts:
