Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 11.68 +.78%
- Euro/Yen Carry Return Index 144.47 -.29%
- Emerging Markets Currency Volatility(VXY) 5.94 +.84%
- S&P 500 Implied Correlation 50.06 -1.07%
- ISE Sentiment Index 114.0 +20.0%
- Total Put/Call .83 -3.49%
Credit Investor Angst:
- North American Investment Grade CDS Index 56.88 +1.34%
- European Financial Sector CDS Index 63.15 +4.12%
- Western Europe Sovereign Debt CDS Index 28.75 +2.79%
- Asia Pacific Sovereign Debt CDS Index 73.88 +.97%
- Emerging Market CDS Index 230.04 +2.18%
- China Blended Corporate Spread Index 308.78 unch.
- 2-Year Swap Spread 12.5 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% +2.0 basis points
- Yield Curve 206.0 -2.0 basis points
- China Import Iron Ore Spot $95.30/Metric Tonne +1.71%
- Citi US Economic Surprise Index -23.10 -2.8 points
- Citi Emerging Markets Economic Surprise Index -3.30 unch.
- 10-Year TIPS Spread 2.26 unch.
Overseas Futures:
- Nikkei Futures: Indicating +28 open in Japan
- DAX Futures: Indicating +29 open in Germany
Portfolio:
- Slightly Lower: On losses in my retail/tech sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Ukraine Optimism Wavers on Peace as Cease-Fire Winds Down. Ukraine
isn’t “too optimistic” it will soon clinch a peace deal with separatist
rebels in the east, a minister said, as the U.S. and the European Union
raised pressure on Russia to ease violence that’s left hundreds dead. With Ukraine’s government saying the pro-Russian militants have repeatedly
flouted a cease-fire due to expire at 10 a.m. tomorrow, Economy Minister
Pavlo Sheremeta said the conflict may drag on even as peace talks
continue. “We are not too optimistic,” he told a conference in Kiev
today. “Developments are moving in the right direction, but the
situation is quite volatile.”
- Looted Banks Fund Iraq Fighters Eyeing Wealth Al-Qaeda Never Had. The extremist militants battling
government forces in Iraq know it takes more than guns and
ammunition to carve out their Islamic state. As the violence escalates outside Iraq’s largest northern
oil refinery in Baiji, fighters from the Islamic State in Iraq
and the Levant are trying to add to the oil fields and mini-refineries the group already controls in Syria and are also
eyeing factories and power plants. With assets and territory,
ISIL’s leader, Abu Bakr al-Baghdadi, has financial strength that
al-Qaeda never managed to have under Osama bin Laden, who relied
mainly on donations from Sunni Muslim backers living in the Gulf
Cooperation Council nations.
- China Finds $15 Billion of Loans Backed by Fake Gold Trades. China’s
chief auditor discovered 94.4 billion yuan ($15.2 billion) of loans
backed by falsified gold transactions, adding to signs of possible fraud
in commodities financing deals. Twenty-five bullion processors in
China, the biggest producer and consumer of gold, made a combined profit
of more than 900 million yuan from the loans, according to a report on
the National Audit Office’s website.
- Carney at Tolerance Limit as BOE Acts to Curb Housing Risks. Mark Carney said the biggest risks to Britain’s recovery stem from
the housing market as he introduced measures to limit riskier mortgages
and prevent an unsustainable buildup of consumer debt. The
unprecedented action was prompted by booming demand for real estate and
an increase in high loan-to-income mortgages, with the Bank of England
governor saying debt levels put the economy in a vulnerable position.
Today’s announcement is the biggest recent effort by a major central
bank to tackle the threat of an asset bubble and avoid a repeat of the
2008 financial crisis.
- Record-Low Borrowing Costs Leave Euro-Area Bondholders on Edge. After a six-month rally sent borrowing costs in the euro-area
government bonds to an all-time low, investors say they are wary about
boosting their holdings at the current level. Euro-region bonds
rose today, set for the longest run of monthly advances since the end of
2012, after the European Central Bank unveiled an unprecedented package
of stimulus measures designed to boost the economy. That’s sent yields
from the Netherlands to Ireland to record lows this month, while German
10-year borrowing costs are falling toward levels plumbed only at the
height of the region’s debt crisis.
- European Stocks Are Little Changed After Four-Day Decline.
European stocks were little changed, following a four-day decline, as
concern that U.S. interest rates may rise early next year offset a rally
in London Stock Exchange Group Plc. Barclays Plc, which was sued in New
York over its private trading venue, dropped the most in two years. LSE
rose 6.1 percent after agreeing to buy Frank Russell Co. for $2.7
billion. Bwin.Party Digital Entertainment Plc advanced 3.6 percent after
denying a report that it is considering selling some or all of itself
as part of a strategic review. The Stoxx Europe 600 Index slipped less than 0.1 percent to
341.86 at the close in London.
- Bullard Predicts Fed Rate Increase in First Quarter of 2015. Federal
Reserve Bank of St. Louis President James Bullard predicted the central
bank will raise interest rates starting in the first quarter of 2015,
sooner than most of his colleagues think, as unemployment falls and
inflation quickens. Asked about his forecast for the timing of
the first interest-rate increase since 2006, he said: “I’ve left mine at
the end of the first quarter of next year.” “The Fed (FDTR) is closer
to its goal than many people
appreciate,” Bullard said today in an interview with Fox
Business Network. “We’re really pretty close to normal.”
- Treasuries Gain as Consumer Spending Rises Less Than Forecast. Treasuries
rose for a third day as reports showing consumer spending in the U.S.
grew less than forecast in May and weekly jobless claims declined less
than projected suggested interest rates will remain lower for longer.
Yields on benchmark 10-year (USGG10YR) bonds reached the lowest level
in more than three weeks even as the Federal Reserve’s preferred
measure of inflation gains rose to the highest since October
2012. The $29 billion in U.S. seven-year notes to be sold today
yielded 2.13 percent in pre-auction trading, compared with 2.01
percent at a previous auction May 29.
- Aspirin Cuts Pancreatic Cancer Risk by Half, Study Finds. Regular aspirin use cut the risk of
pancreatic cancer by half, according to a finding that adds one
of the most lethal malignancies to the list of diseases the
inexpensive pill may help fight. Men and women who took low-dose, about 75 to 325
milligrams, of aspirin daily, usually to prevent heart disease, had a 48 percent lower risk of pancreatic cancer,
according to research published today in Cancer Epidemiology,
Biomarkers & Prevention, a journal of the American Association
for Cancer Research. Taking aspirin regularly for a decade cut the
risk by 60 percent. Studies have found that regular aspirin use reduces
the risk for colon, esophageal, lung and prostate cancers, and the pill
is often prescribed to lessen heart attack and stroke risk. About
one in 60 adults will develop pancreatic cancer, which has a five-year
survival rate of less than 5 percent, so finding ways to prevent the
disease is “crucial,” said senior study author Harvey Risch.
Wall Street Journal:
MarketWatch.com:
CNBC:
- Why semiconductor stocks may be ready for a fall. Analysts at Goldman Sachs wrote: "In our view, semi stocks have
clearly reached problematic territory not just in the levels but more
importantly in the markets' willingness to overemphasize good news and
ignore bad news." Semiconductor stocks are the most overbought
they've been since the tech bubble in 2000, said Jonathan Krinsky, MKM
Partners Chief Market Technician.
ZeroHedge:
Business Insider:
Threat Matrix:
- ISIS advances on oil fields in Salahaddin, Diyala. While the blitzkrieg of the Islamic State of Iraq and the Sham and its
allies that saw the groups take control of Mosul on June 10 and quickly
approach the outskirts of Samarra has slowed considerably, the advance
has not stopped. ISIS continues to attack in Diyala and Salahaddin
provinces, and has set its sights on oil infrastructure.
Reuters:
- Brazil's Vale joins rivals with China iron ore discounts - sources. Brazil's Vale, the
world's biggest iron ore miner, is starting to offer discounts
on shipments of the steelmaking raw material to top consumer
China, joining Australian rivals in cutting prices following a
global surge in production. The move follows deeper price cuts by Rio Tinto and
Australia's Fortescue Metals Group for lower-grade iron
ore, and indicates China is winning more say over pricing after
years of complaining that costs were too high. Vale is offering some Chinese customers a discount of $2.50
a tonne, including cost and freight, for 62-63 percent grade
standard sinter feed Guaiba (SSFG) for third-quarter contracts,
three mill sources with direct knowledge of the matter said.
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -2.82% 2) Disk Drives -1.21% 3) Road & Rail -.92%
Stocks Falling on Unusual Volume:
- BCS, SCS, BBBY, RDEN, LAZ, MLHR, DEO, FUL, AMBA, AZZ, FINL, CJES, DB, ACN, KEP, AMSG, PM, FIS, E, CS, BUD, DISCA, SYT, UBS, TSCO, BIG, THC, EVHC and FUL
Stocks With Unusual Put Option Activity:
- 1) NKE 2) BID 3) ESRX 4) HCA 5) SLB
Stocks With Most Negative News Mentions:
- 1) OMI 2) ACN 3) DISCA 4) BBBY 5) HAL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.91% 2) Steel +.84% 3) Airlines +.19%
Stocks Rising on Unusual Volume:
- IRM, MEI, WUBA, YOKU, NBR, BKS and SCHN
Stocks With Unusual Call Option Activity:
- 1) BKS 2) D 3) CNP 4) ADT 5) BBBY
Stocks With Most Positive News Mentions:
- 1) KR 2) AA 3) CLF 4) CAG 5) TWTR
Charts:
Evening Headlines
Bloomberg:
- U.S. Ambassador Baucus Says China Cyber Theft Is a Threat. The
U.S. will use diplomatic and legal means to halt China’s computer theft
of trade secrets, its new ambassador in Beijing said today, amid
escalating tensions between the two sides over cybersecurity.
“Cyber-enabled theft of trade secrets by state actors in China has
emerged as a major threat to our economic and thus national security,”
Max Baucus, who took up the post of U.S. ambassador to China in March,
told members
of the American business community during a speech in Beijing today.
- Asian Stocks Rise as Investors Watch for U.S. Recovery.
Asian stocks rose, led by technology shares, amid optimism the U.S.
economy is emerging from a worse-than-estimated contraction last
quarter. Yahoo Japan Corp., an Internet portal operator, added 1.7
percent after saying it will acquire KC Card Co.’s credit and financial
operations. Rakuten Inc. rose 3.5 percent after the Japanese online
retailer was reported to be in talks to invest in a discount airline
with AirAsia Bhd. Innolux Corp., a maker of monitors, jumped 6.9 percent
in Taipei, leading gains among information technology shares. The MSCI Asia Pacific Index gained 0.5 percent to 145.01 as
of 10:56 a.m. in Tokyo, with all of its 10 industry groups
advancing.
- Bed Bath & Beyond(BBBY) Falls as Forecast Trails Estimates.
Bed Bath & Beyond Inc. (BBBY), the operator of about 1,500
home-goods and baby-product stores, fell as much as 7.4 percent in late
trading after forecasting second-quarter profit that was less than
analysts’ estimated amid competition from online retailers. The shares slid as low as $56.60 at 4:56 p.m. in New York.
Wall Street Journal:
- Jihadists Step Up Recruitment Drive. Sunni Insurgents Use Victories in Iraq, Syria, as Calling Card on Social Media to Help Forge Islamic State.
A Sunni jihadist group that has seized vast territories in
Iraq and Syria is parlaying its battlefield successes into a recruitment
drive that is attracting more foreign fighters, say Western and Arab
officials. The message from the Islamic State of Iraq and al-Sham, or
ISIS: Join us in forming a Sunni-led religious state spanning from...
- Lenders Are Warned on Risk. Regulator Urges Caution by Banks About Looser Standards in Pursuit of Profits.
Intense competition in a slow-growth, low-interest-rate environment
is continuing to fuel riskier lending by banks, a top U.S. regulator
warned in a report released on Wednesday. The Office of the
Comptroller of the Currency highlighted two areas in particular where
banks took on more risk in pursuit of profits: high-yielding loans
issued to more speculative borrowers and indirect auto loans, in which
banks provide...
- Boehner Stands Up. The House will sue the President for trampling the separation of powers.
MarketWatch.com:
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
CharlotteObserver.com:
Reuters:
- IRS agents head to Macau as U.S. steps up scrutiny of casinos. U.S. authorities are ramping
up their investigation into money flows from gambling hotspot
Macau to ensure that U.S. casinos with operations there are not
used as conduits to funnel crime proceeds from Asia and
elsewhere into the U.S. financial system. Agents of the U.S. Internal Revenue Service's criminal
enforcement unit traveled to Macau last month to gather
information, two sources familiar with the matter said. An IRS
spokesman declined to comment on Wednesday.
Financial Times:
- Fed warns banks they face tougher tests. The
Federal Reserve has warned banks in the US that tests of their ability
to survive a financial crisis will be made tougher – with new risk
assessments and regular checks to ensure they fix any
weaknesses identified in the process.
Evening Recommendations
Jefferies:
- Rated (CBS) Buy, target $72.
- Rated (FOXA) Buy, target $43.
- Rated (DIS) Buy, target $100.
- Rated (TWX) Buy, target $80.
- Rated (VIAB) Buy, target $100.
- Rated (IPG) Buy, target $23.
- Rated (GCI) Buy, target $35.
- Rated (NWSA) Buy, target $22.
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 73.25 +.5 basis point.
- NASDAQ 100 futures +.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 310K versus 312K the prior week.
- Continuing Claims are estimated to rise to 2565K versus 2561K prior.
- Personal Income for May is estimated to rise +.4% versus a +.3% gain in April.
- Personal Spending for May is estimated to rise +.4% versus a -.1% decline in April.
- The PCE Core for May is estimated to rise +.2% versus a +.2% gain in April.
11:00 am EST
- Kansas City Fed Manufacturing Activity for June is estimated at 10.0 versus 10.0 in May.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lacker speaking, Fed's Bullard speaking, Japan CPI, $29B 7Y T-Note auction, weekly EIA natural gas inventory report, (BIG) analyst conference, (PM) investor day and the (CNO) investor day could impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and industrial 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.
Style Outperformer:
Sector Outperformers:
- 1) Steel +.61% 2) Drugs +.59% 3) Medical Equipment +.54%
Stocks Rising on Unusual Volume:
- MDCI, AERI, GLNG, SBGI, MON, BKS, CBS, IMS, HBI, ZU, NXST, MEG, INFI, SSP, GTN and OMER
Stocks With Unusual Call Option Activity:
- 1) MON 2) EPD 3) VLO 4) MPC 5) AEO
Stocks With Most Positive News Mentions:
- 1) MON 2) CBS 3) AAPL 4) BKS 5) ABBV
Charts:
