Style Underperformer:
Sector Underperformers:
- 1) REITs -.77% 2) Energy -.65% 3) Restaurants -.63%
Stocks Falling on Unusual Volume:
- WAC, CTRX, SFY, CHS, QUAD, BKD, BWC, ANIK, ESC, NDLS, BBEP, CIR, EPL, LINE, DATA, QCOR, NTRI, ESI, EDU, LPI, RL, HTWR, EZCH, DPM, DWA, PZZA, AKRX, CQB, CLR, AMAG, LNCO, NKTR, LKQ and NDLS
Stocks With Unusual Put Option Activity:
- 1) ANV 2) IRM 3) HK 4) SLB 5) DECK
Stocks With Most Negative News Mentions:
- 1) GM 2) JNJ 3) KMP 4) GME 5) COP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +2.11% 2) Gold & Silver +1.21% 3) Telecom +1.08%
Stocks Rising on Unusual Volume:
- PEIX, DANG, ZU, IQNT, WDAY, BEAT, MDAS, RP, BBY, MYL, SZYM, TIVO, GTI, NOAH, TROX, BDBD, FSLR, CIE, WLL, SHLD, QLIK, TASR and GPOR
Stocks With Unusual Call Option Activity:
- 1) PEIX 2) TIVO 3) WDAY 4) ZTS 5) MYL
Stocks With Most Positive News Mentions:
- 1) BBY 2) JCP 3) EBAY 4) GOOG 5) TSLA
Charts:
Evening Headlines
Bloomberg:
- Yuan Turns Worst Emerging Carry Trade as PBOC Stokes Volatility.
The yuan has gone from being the most attractive carry trade bet in
emerging markets to the worst in the space of two months as central bank
efforts to weaken the currency cause volatility to surge. The
yuan’s Sharpe ratio, which measures returns adjusted for price swings,
turned negative this year as three-month implied volatility in the
currency rose in February by the most since May, when the Federal
Reserve signaled plans to cut
stimulus. The exchange rate tumbled the most since 2010 on Feb.
25 amid speculation the People’s Bank of China was intervening
to deter one-way bets on currency gains.
- Mersch Says Renminbi May Challenge Dollar’s Reserve Role.
China’s renminbi might one day challenge the role of the U.S. dollar as
the world’s leading reserve currency, European Central Bank Executive
Board member Yves Mersch said. “Having become an important trading
and payment currency, the renminbi is now taking the first steps toward
establishing itself as an international investment currency,” Mersch
said in a speech at Luxembourg’s Renminbi Forum yesterday. “Due to the
size of China’s economy and its importance in global trade and,
potentially, finance, the renminbi might ultimately come to
challenge the U.S. dollar” as a leading reserve currency.
- Hong Kong Editor in Press Freedom Row Critical After Attack. The former chief editor of a Hong Kong newspaper, whose removal from
his post led to protests over press freedom in the city, was critically
injured after being slashed with a knife by assailants on a motorbike today.
The attack on Kevin Lau, chief operating officer at a unit of Media
Chinese International Ltd. (685) and former chief editor at Ming Pao
Daily News, happened days after at least 1,600 demonstrators held a
march to express concerns that media freedom is being eroded.
- Most Chinese Stocks Fall, Led by Energy, Material Companies. Most Chinese stocks fell, led by energy and material companies. The
Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,037.66 at
9:37 a.m. local time. The CSI 300 Index (SHSZ300) lost 0.1 percent. The
Hang Seng China Enterprises Index (HSCEI) declined 0.4
percent.
- Aussie Drops With Sydney Stocks; Gold Slides With Corn.
The Australian (GACGB10) dollar weakened against major peers and
shares in Sydney dropped after private investment fell the most since
2009. Gold held a decline from a 17-week high on speculation the Federal
Reserve will continue stimulus cuts while emerging-market currencies
declined.
- Copper Drops to 12-Week Low on Signs China’s Growth Is Slowing. Copper slipped to the lowest price
in more than two months amid concern that China’s growth is slowing and as stockpiles rose in the biggest user. The
contract for delivery in three months retreated as much as 0.5 percent
to $6,994 a metric ton on the London Metal Exchange, the lowest level
since Dec. 4 and traded at $7,012.25 by 12:21 p.m. in Tokyo. Futures are
down 0.8 percent in
February, poised for a second monthly decline.
- Goldman’s(GS) Gmelich Likens Junk Loans to One-Way Freight Train. Investors
who have been pouring
money into funds that purchase leveraged loans need to be wary
of a reversal in demand, according to Justin Gmelich, the head of credit
trading at Goldman Sachs Group Inc. “It’s been a bit of a one-way
freight train,” Gmelich said in a question and answer session, posted on
the company’s website yesterday. “I would just caution those that are
involved in the loan space to be mindful of the fact that
they’ve been beneficiaries of inflows for 88 straight weeks and
the tide can turn.” The floating-rate debt, which offers a shield for investors
from rising rates, has seen unprecedented demand with the funds
that purchase the debt receiving deposits every single week
since the summer of 2012. That enabled speculative-grade
companies to raise $676 billion last year of bank debt, with
more than 80 percent of that used to escape maturing debt
deadlines, according to data compiled by Bloomberg.
- Vale Posts Record $6.45 Billion Loss After Brazil Tax Accord. Vale
SA (VALE5), the world’s largest iron-ore producer, posted a record
quarterly loss after settling a decade-long tax dispute with Brazil.
Vale’s fourth-quarter net loss widened to $6.45 billion, or $1.25 a
share, from a net loss of $2.62 billion, or 51 cents, a year earlier,
the Rio de Janeiro-based company said today in a
regulatory filing. Earnings before interest, taxes, depreciation
and amortization, or adjusted Ebitda, rose to $6.64 billion,
beating a $5.9 billion average estimate by 17 analysts compiled
by Bloomberg.
Wall Street Journal:
- Bradley A. Smith: Connecting the Dots in the IRS Scandal. The 'smoking gun' in the targeting of conservative groups has been hiding in plain sight. The mainstream press has justified its lack of coverage over the
Internal Revenue Service targeting of conservative groups because
there's been no "smoking gun" tying President
Obama
to the scandal. This betrays a remarkable, if not willful,
failure to understand abuse of power. The political pressure on the IRS
to delay or deny tax-exempt status for conservative groups has been
obvious to anyone who cares to open his eyes. It did not come from a
direct order from the White House, but it didn't have to.
MarketWatch.com:
CNBC:
Zero Hedge:
- Russia Responds To US Warning: Expands Military Presence Globally. Shortly after the US warned Russia over its "provocative actions" with regard Ukraine... RiaNovosti reports defense
minister Sergei Shoigu saying Russia plans "to expand permanent
military presence outside its borders by placing military bases in a
number of foreign countries," including Vietnam, Cuba,
Venezuela, Nicaragua, the Seychelles, and Singapore. "The talks are
under way, and we are close to signing the relevant documents," Shoigu
told reporters in Moscow.
Business Insider:
Reuters:
- Brazil central bank raises interest rate to 10.75 pct. Brazil's
central bank raised
its benchmark interest rate on Wednesday to 10.75 percent from 10.50
percent, slowing the pace of monetary tightening to avoid hurting an
economy that is flirting with recession. Thirty-four of 47 economists polled by Reuters last week
expected the bank to raise its benchmark Selic lending rate
by 25 basis points to 10.75 percent. The rest
expected another 50-bps increase.
- Transocean(RIG) profit slides on lower rig demand. Transocean Ltd, owner of the
world's largest offshore drilling fleet, said on Wednesday that
fourth-quarter profit fell 49 percent from a year ago, hurt by
lower rig utilization. The company's net profit attributable to controlling
interest fell to $233 million, or 64 cents per share, from $456
million, or $1.26 per share, a year earlier.
- Turkish Prime Minister targeted in second audio tape. A second audio
recording, presented as the voice of Turkish Prime Minister
Tayyip Erdogan asking his son not to accept an amount of money
on offer in a business deal but to hold out for more, was published on YouTube by an anonymous poster using a pseudonym on
Wednesday. Erdogan said a similar post on the video-sharing site on
Monday, allegedly of him telling his son Bilal to dispose of
large sums of cash as a graft investigation erupted, was faked
by his political enemies.
- East and West face off over Ukraine's Crimea. Waving
the Russian flag and chanting "Russia! Russia!", protesters in Crimea
have become the last major bastion of resistance to Ukraine's new rulers.
President Viktor Yanukovich's overthrow on Saturday has been accepted
across the vast country, even in his power base in the Russian-speaking
regions of eastern Ukraine. But Crimea, a Black Sea peninsula attached
to the rest of
Ukraine by just a narrow strip of land, is alone so far in
challenging the new order.
Shanghai Securities News:
- China Economy May See More Volatility in 2014. China's economy in
2014 is very likely to see more quarterly or even monthly volatility
because of the occurrence of new economic and financial factors, such as
Internet financing and shadow banking, citing Lu Lei, head of Guangdong
University of Finance, as saying. Central banks need to avoid "too
quickly" changing direction in monetary policy and should us micro-tools
to make economy more stable, Lu said.
Evening Recommendations
Morgan Stanley:
- Rated (MS) Overweight, target $76.
- Rated (WNC) Underweight, target $12.
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 137.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 103.0 -.25 basis point.
- NASDAQ 100 futures +.36%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for January are estimated to fall -1.7% versus a -4.3% decline in December.
- Durables Ex Transports for January are estimated to fall -.3% versus a -1.6% decline in December.
- Cap Goods Orders Non-Defense Ex Air for January are estimated to fall -.2% versus a -1.3% decline in December.
- Initial Jobless Claims are estimated to fall to 335K versus 336K the prior week.
- Continuing Claims are estimated to rise to 2985K versus 2981K prior.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for February is estimated to fall to 2.0 versus 5.0 in January.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, Fed's Lockhart speaking, $29B 7Y T-Note auction,
Japan CPI/Manufacturing PMI, weekly EIA natural gas inventory report,
weekly Bloomberg Consumer Comfort Index, Stifel Industrials Conference,
(STT) analyst forum, (HBI) investor day, (BJRI) analyst day and the (CR)
analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and financial 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: Higher
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.39 +5.27%
- Euro/Yen Carry Return Index 146.20 -.24%
- Emerging Markets Currency Volatility(VXY) 8.93 +2.53%
- S&P 500 Implied Correlation 53.42 +2.67%
- ISE Sentiment Index 106.0 +2.91%
- Total Put/Call .81 -2.41%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.88 +.64%
- European Financial Sector CDS Index 88.54 +1.90%
- Western Europe Sovereign Debt CDS Index 53.0 unch.
- Asia Pacific Sovereign Debt CDS Index 103.04 -.19%
- Emerging Market CDS Index 311.57 +2.63%
- China Blended Corporate Spread Index 362.42 +1.10%
- 2-Year Swap Spread 11.25 -2.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -5.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- Yield Curve 234.0 -5.0 basis points
- China Import Iron Ore Spot $117.80/Metric Tonne -1.09%
- Citi US Economic Surprise Index -11.40 +3.2 points
- Citi Emerging Markets Economic Surprise Index 13.30 -.6 point
- 10-Year TIPS Spread 2.17 unch.
Overseas Futures:
- Nikkei Futures: Indicating -55 open in Japan
- DAX Futures: Indicating -20 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech sector longs and index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- NATO Urges Intact Ukraine as Russia Holds Military Drill. NATO
made a plea for keeping post-revolutionary Ukraine in one piece as
tensions mounted in the Crimea region and the Kremlin ordered a test of
combat readiness
of nearby Russian military units. Defense ministers of the 28-nation
U.S.-led military
alliance called for a “sovereign, independent and stable”
Ukraine, emphasizing the “principle of inviolability of
frontiers.” North Atlantic Treaty Organization Secretary
General Anders Fogh Rasmussen said the warning was addressed
“to whom it may concern.” Allied defense ministers issued the statement
at a meeting in Brussels today after Interfax reported that Russian
President Vladimir Putin ordered the military drills involving around
150,000 troops in Russia’s central and western military districts,
including areas bordering Ukraine.
- Yatsenyuk Named Ukraine Prime Minister as Default Battle Looms. Arseniy
Yatsenyuk was named Ukraine’s new prime minister, giving him
responsibility for steering the country clear of default after the
bloodiest events in the country’s post-World War II history. The announcement by Evehen Nishchuk, spokesman for the
protest movement, was made to a packed Independence Square in
Kiev today, the site of a three-month uprising that culminated
in the overthrow of former President Viktor Yanukovych last
week. Oleksandr Shlapak was named finance minister. Interim
President Oleksandr Turchynov, standing on the same stage, said
he expects parliament to approve the appointments tomorrow.
- European Stocks Decline From Highest Level in Six Years.
European stocks fell from a six-year high as declines in banks
including Credit Suisse Group AG outweighed better-than-forecast data on
U.S. home purchases. Credit Suisse retreated 2.5 percent as a person
familiar
with the matter said U.S. regulators are investigating its
accounting practices. Jeronimo Martins SGPS SA dropped 6.5
percent after reporting 2013 net income that missed predictions.
Anheuser-Busch InBev NV rose 2.8 percent after the brewer posted
earnings growth that exceeded estimates and predicted
improvements in its largest markets.
The Stoxx Europe 600 Index retreated 0.2 percent to 337.7
at the close of trading, paring earlier losses of as much as 0.6
percent.
- Cattle Rise to Record With Hogs Gaining on Shrinking Meat Supply. Cattle futures rose to a record as
ranchers struggle to boost the U.S. herd from a 63-year low, and
hogs climbed to a 34-month high after a virus that kills piglets
spread, spurring concerns that meat supplies will shrink. Beef output in the U.S., the world’s top producer, will
fall 5.3 percent this year to 24.35 billion pounds (11.04
million metric tons), the lowest since 1994, the Department of
Agriculture has forecast. At the start of this year, the cattle
herd fell to 87.7 million head, the lowest since 1951, following
drought and high feed costs. Porcine epidemic virus has killed
more than 4 million pigs, according to an industry group.
- WTI Crude Rises on Cushing Supplies.
WTI for April delivery advanced 76 cents to settle at $102.59 a barrel
on the New York Mercantile Exchange. Prices are up 5.2 percent this
month and 11 percent in the past year. The
volume of all futures traded was 18 percent below the 100-day
average at 2:57 p.m.
- IMF Staff Decry Income Equality in Report Backing Social Welfare.
Economists at the International Monetary Fund, the global lender
criticized for its fiscal austerity prescriptions, defended policies
aimed at reducing income inequality in a study that showed they
strengthen growth. According to the IMF research released today,
income inequality shouldn’t be ignored because it may result in low and
unsustainable
growth. “Non-extreme” redistribution policies such as taxes and social
programs make economic expansions more durable, the economists wrote.
Fox News:
- Greenpeace co-founder: No scientific proof humans are dominant cause of warming climate. A co-founder of Greenpeace told lawmakers there is no evidence man is
contributing to climate change, and said he left the group when it
became more interested in politics than the environment.
Patrick Moore, a Canadian ecologist and business consultant who was a
member of Greenpeace from 1971-86, told members of the Senate
Environment and Public Works Committee environmental groups like the one
he helped establish use faulty computer models and scare tactics in
promoting claims man-made gases are heating up the planet.
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Moody's warns mortgage servicers may turn to offering risky loans. Credit
rating agency Moody's Corp warned that mortgage servicers such as
Ocwen Financial Corp could be pushed into subprime lending as their core
business comes under increased regulatory scrutiny. The rapid
growth of mortgage servicers since the subprime crisis has drawn the
attention of state and federal regulators who are concerned about the
companies' capacity to collect mortgage payments in large volumes.
- Exports of US construction equipment fell 25 pct in 2013, AEM says. Foreign sales of U.S.-made
construction equipment dropped sharply in 2013, snapping a three-year
export surge that had been one of the bright spots in the country's
halting economic recovery, according to a report released on
Wednesday by a leading industry trade group.
The Association of Equipment Manufacturers said foreign
sales of U.S.-made bulldozers, excavators, aerial work platforms
and other big machines used by builders and miners fell 25
percent last year, pulled down by an especially acute decline in
demand in the Asia-Pacific region.
- Global smartphone growth to fall sharply in 2014 - IDC. Growth in global
smartphone shipments will fall sharply this year and keep
slowing through 2018, with average prices dropping significantly
as demand shifts to China and other developing countries, according to market research firm IDC. Annual growth in 2014 is expected to be 19.3 percent and
then decline to 6.2 percent in 2018, IDC said in a report on
Wednesday. That follows a 39.2 percent jump in 2013 when
smartphone shipments topped 1 billion units for the first time.
- Mexico factory exports, consumer imports slip in January. Mexican factory exports fell
in January for the fifth month in a row, while non-oil consumer
imports also dipped, signaling further headwinds for a tepid economic recovery in Latin America's No. 2 economy. Non-oil manufactured exports fell 1.78 percent in January
compared with December, the national statistics agency said on
Wednesday, signaling slack demand from the United States for
local goods.
Southern Metropolis Daily:
- Some Guangzhou, Shenzhen Banks Raise Mortgage Rates. Shanghai
Pudong Development Bank, Huaxia Bank and China Guangfa Bank raised
lending rate for first-home purchases by 10%-20% at their Shenzhen
branches.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.21% 2) Telecom -1.05% 3) Energy -.50%
Stocks Falling on Unusual Volume:
- UTIW, DGI, CLH, VLRS, SEAC, DWA, QEP, AEGR, RGR, FSLR, CLGX, BGFV, ITMN, JAZZ, SWHC, WAC, EPE, LMOS, QCOR, TASR, PEGA, QUNR, EC, CHK, APA, SUSS, KOG, GHDX, NDRO, ECYT, STAY, ESI and QEP
Stocks With Unusual Put Option Activity:
- 1) EBIX 2) SPLS 3) FSLR 4) SCHW 5) DECK
Stocks With Most Negative News Mentions:
- 1) CHK 2) COP 3) ESI 4) VLO 5) WFC
Charts:
