Tuesday, August 26, 2014

Stocks Slightly Higher into Final Hour on Central Bank Hopes, Less Eurozone Debt Angst, Buyout Speculation, Biotech/Healthcare Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Light
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 11.58 -1.20%
  • Euro/Yen Carry Return Index 143.16 -.12%
  • Emerging Markets Currency Volatility(VXY) 6.56 -2.24%
  • S&P 500 Implied Correlation 49.46 +1.39%
  • ISE Sentiment Index 86.0 -9.47%
  • Total Put/Call .76 -13.64%
  • NYSE Arms .81 +16.94% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 56.19 unch.
  • European Financial Sector CDS Index 58.63 -7.49%
  • Western Europe Sovereign Debt CDS Index 28.85 -7.16%
  • Asia Pacific Sovereign Debt CDS Index 66.04 -1.94%
  • Emerging Market CDS Index 275.54 -.90%
  • China Blended Corporate Spread Index 309.67 -.22%
  • 2-Year Swap Spread 22.25 unch.
  • TED Spread 21.75 -.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -14.0 -.25 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .03% +1.0 basis point
  • Yield Curve 189.0 unch.
  • China Import Iron Ore Spot $88.90/Metric Tonne -.34%
  • Citi US Economic Surprise Index 27.30 +22.1 points
  • Citi Emerging Markets Economic Surprise Index -13.40 +.8 point
  • 10-Year TIPS Spread 2.15 unch.
Overseas Futures:
  • Nikkei Futures: Indicating +35 open in Japan
  • DAX Futures: Indicating -12 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my retail/biotech/medical/tech sector longs
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:
  • Putin Holds Poroshenko Talks as Ukraine Tension Grows. Russian President Vladimir Putin began talks with his Ukrainian counterpart, Petro Poroshenko, as tensions flared on the two nations’ border. Putin said he’s ready for an exchange of opinions on Ukraine as he addressed a summit of the Russian-led Customs Union in Minsk, Belarus. Poroshenko said he’s optimistic about the meeting, which includes European Union foreign-policy chief Catherine Ashton and the presidents of Belarus and Kazakhstan. “I understand that all players who’ve been drawn into the situation would like to exit with dignity,” Poroshenko said in Russian. “I’m ready to discuss different options that would allow such an exit strategy -- an exit to a peaceful future for Ukraine, an exit to a peaceful future for Europe.”
  • Agricultural Bank Braces for More Bad Loans Amid Slowdown. Agricultural Bank of China Ltd., the lender with more retail customers than the population of the euro zone, set aside more money for future bad loans amid the nation’s economic slowdown. The bank boosted provisions for potential soured credit by 56 percent to 15.6 billion yuan ($2.5 billion) in the three months ended June 30 from a year earlier, according to a Hong Kong exchange filing yesterday. Net income rose 12 percent, the weakest pace in five quarters, to 50.6 billion yuan.
  • European Stocks Climb for a Second Day as Lenders Advance. European stocks climbed, completing their biggest two-day gain in four months, as banks advanced on further speculation that the euro area will introduce an asset-purchase program. BNP Paribas SA and Societe Generale SA both gained more than 1.5 percent. WPP Plc (WPP) added 1.4 percent as the advertising agency posted sales that beat projections. Telecity Group Plc (TCY) declined the most in six months after the operator of data centers said its chief executive officer will step down. The Stoxx Europe 600 Index rose 0.7 percent to 342.96 at the close of trading.
  • Iron Ore Risks Extending Drop to Lowest Since 2009. Iron ore prices are at risk of slumping to the lowest level since 2009 as increased supplies from Australia and Brazil boost a global surplus and prompt the closure of some higher-cost Chinese suppliers. The commodity may retreat to $80 a metric ton this year, according to Helen Lau, an analyst at UOB Kay Hian Ltd. in Hong Kong, who’s tracked the market for seven years. Ore with 62 percent content at Qingdao, China, fell 1.2 percent to $89.02 a ton today, according to Metal Bulletin Ltd.’s website. That’s the lowest since September 2012, when it bottomed at $88.08. A price below $88.08 would be the lowest since October 2009. Prices tumbled 34 percent this year as mining companies from BHP Billiton Ltd. (BHP) to Rio Tinto (RIO) Group increased output, pushing the global seaborne market into a glut. Major producers in Australia, which have average costs of about $40 to $50 a ton, are continuing to increase supplies even with prices near the lowest level in five years, Australia & New Zealand Banking Group Ltd. said in a report today.
  • S&P 500 P/E Reversal Seen as Yield Gap Narrows: Chart of the Day
ZeroHedge: 
Business Insider:
Washington Free Beacon:
Reuters:
  • Islamic State turns radical Islam on Syria Muslims. As Islamic State militants advanced in the Syrian province of Deir al-Zor last month, those who had held out against them faced a simple choice: beg for mercy or face certain death. Their options were laid out in stark religious terms by the militant Islamists who are trying to carve out their own state in Syria and Iraq. Defeated fighters were required to "atone" or die, a choice set out in Islamic terms and implying that resisting Islamic State rule amounted to a sin against God.

Bear Radar

Style Underperformer:
  • Mid-Cap Value +.08%
Sector Underperformers:
  • 1) Gaming -.75% 2) Utilities -.74% 3) Airlines -.56%
Stocks Falling on Unusual Volume:
  • BKW, SAFM, BBY, QUNR, RGS, KANG, QIHU, BNS, TSL, MOV, VMW, AMBA, GILD, NUS, CPA, GRUB, DSLV, LTM, ECOL, TRUE, IRBT, RIO, TOUR, LO, LRN, TA and PSEC
Stocks With Unusual Put Option Activity:
  • 1) JNS 2) BBY 3) LEN 4) EWW 5) OIH
Stocks With Most Negative News Mentions:
  • 1) NWL 2) CGI 3) SAVE 4) QIHU 5) UPS
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Growth +.89%
Sector Outperformers:
  • 1) HMOs +1.39% 2) Oil Service +1.32% 3) Gold & Silver +1.28%
Stocks Rising on Unusual Volume:
  • THI, DGLY, JRJC, DSW, ARWR, ISIS, VLCCF, KNDI, KERX, KITE, ENPH, CLDX, DYAX and MOBL
Stocks With Unusual Call Option Activity:
  • 1) LNG 2) DSW 3) UUP 4) ISIS 5) END
Stocks With Most Positive News Mentions:
  • 1) JAH 2) AMZN 3) CELG 4) TWTR 5) ANF
Charts:

Tuesday Watch

Evening Headlines 
Bloomberg: 
  • Putin to Meet Poroshenko as Ukraine Tensions Escalate. Russian President Vladimir Putin is set to meet his Ukrainian counterpart, Petro Poroshenko, as tensions flare on the two nations’ border. The leaders will attend talks today with European Union representatives in Minsk, Belarus, during a summit of the Customs Union, a Russian-led trade bloc. No separate bilateral meeting is yet planned between them, Russian Foreign Minister Sergei Lavrov said yesterday. The talks are bringing no respite to the conflict that the United Nations says has left at least 2,000 dead since Putin annexed Crimea in March. Ukraine yesterday said an armored column including 10 tanks entered from Russia as the government in Moscow unveiled plans to send a second convoy with humanitarian aid into its neighbor’s rebel-held territory.
  • Asian Stock Index Little Changed as Valuations Climb. Asian stocks were little changed after valuations on the regional benchmark index climbed to the highest level this year. Boart Longyear Ltd. (BLY) fell 10 percent, the most in a month, after the Australian mining-services firm posted a first-half loss. Dena Co., a Japanese website owner, surged 5.9 percent, leading gains in the region. Hyundai Heavy Industries Co. climbed 3 percent in Seoul, accounting for the largest increase on South Korea’s Kospi index. China Modern Dairy Holdings Ltd. climbed 7.8 percent in Hong Kong after sales topped analyst estimates. The MSCI Asia Pacific Index (MXAP) slid less than 0.1 percent to 148.64 as of 9:38 a.m in Hong Kong.
Wall Street Journal: 
  • Russia Plans New Aid Convoy; Ukraine Says Moscow Moved Tanks. Kiev Says Moscow Sent Tanks, Armored Vehicles Into Its Territory. Russia said it wants to send a second convoy of what it calls humanitarian aid into Ukraine in the coming days, while Kiev accused Moscow of moving tanks across the border, further damping hopes for peace talks between the Ukrainian and Russian presidents set for Tuesday in Minsk.
  • Insurgency Deepens Iraqi Ethnic, Sectarian Divides. Militant Offensive Threatens to Divide Territory Along Ethnic, Religious Lines. Sunni families in northern Iraq are being prevented from returning to their homes, suspected by their neighbors and Kurdish authorities who control the area of collaborating with the extremist group Islamic State. The offensive by the Sunni militants is threatening to reshape the demographics of once-mixed communities by dividing territory along ethnic and religious lines, Iraqi and Kurdish officials say. Kurds,...
  • How Would the Fed Raise Rates? With banks chock full of excess reserves, the federal-funds rate may prove useless as a tool to drain liquidity.
Fox News:
  • Obama authorizes use of surveillance drones over Syria. President Obama has authorized the use of drones for surveillance in Syria even as the Assad regime demanded that the U.S. seek permission before launching any airstrikes on its territory against Islamic State targets. A senior U.S. official confirmed to Fox News that Obama this weekend authorized the use of drone surveillance over Syria for the first time.
Zero Hedge: 
ValueWalk:
Business Insider:
Financial Times: 
  • James Bullard says Fed will need to alter guidance. The US Federal Reserve will soon need to modify its policy statement as the economy improves and asset purchases end, said St Louis Fed president James Bullard. Mr Bullard said in an interview with the Financial Times that the Fed would have to alter both its declaration of “significant” underutilisation of labour resources and its pledge not to change rates for a “considerable time” after it stops buying assets.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 99.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 67.5 -.25 basis point.
  • FTSE-100 futures +.47%.
  • S&P 500 futures -.10%.
  • NASDAQ 100 futures  -.02%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (TECD/.77)
  • (SAFM)/3.80
  • (BBY)/.31
  • (DSW)/.31
  • (BOBE)/.09
  • (ARUN)/.23
  • (ADI)/.63
  • (SWHC)/.25
Economic Releases 
8:30 am EST
  • Durable Goods Orders for July are estimated to rise +8.0% versus a +.7% gain in June.
  • Durables Ex Transports for July are estimated to rise +.5% versus a +.8% gain in June.
  • Cap Goods Orders Non-Defense Ex Air for July are estimated to rise +.2% versus a +1.4% gain in June.
9:00 am EST
  • The FHFA House Price Index for June is estimated to rise +.3% versus a +.4% gain in May.
  • The S&P/CS 20 City MoM SA for June is estimated unch. versus a -.31% decline in May.
10:00 am EST
  • Consumer Confidence for August is estimated to fall to 89.0 versus 90.9 in July.
  • The Richmond Fed Manufacturing Index for August is estimated to fall to 6.0 versus 7.0 in July.
Upcoming Splits
  • (RKT) 2-for-1
Other Potential Market Movers
  • The 2Y $29B T-Note auction and the weekly US retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Monday, August 25, 2014

Stocks Higher into Final Hour on Central Bank Hopes, Buyout Speculation, Short-Covering, Biotech/Financial Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Mixed
  • Volume: Light
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 11.55 +.70%
  • Euro/Yen Carry Return Index 143.24 -.33%
  • Emerging Markets Currency Volatility(VXY) 6.68 +.91%
  • S&P 500 Implied Correlation 48.31 +7.71%
  • ISE Sentiment Index 95.0 -18.80%
  • Total Put/Call .89 -4.30%
  • NYSE Arms .65 -45.16% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 56.19 -3.09%
  • European Financial Sector CDS Index 63.41 +.78%
  • Western Europe Sovereign Debt CDS Index 31.17 +.26%
  • Asia Pacific Sovereign Debt CDS Index 68.07 +.47%
  • Emerging Market CDS Index 2277.93 -.95%
  • China Blended Corporate Spread Index 310.35 -.42%
  • 2-Year Swap Spread 22.25 -.25 basis point
  • TED Spread 22.25 +.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -13.75 -1.25 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 189.0 -2.0 basis points
  • China Import Iron Ore Spot $89.20/Metric Tonne -1.0%
  • Citi US Economic Surprise Index 5.20 +.7 point
  • Citi Emerging Markets Economic Surprise Index -14.20 +.6 point
  • 10-Year TIPS Spread 2.15 unch.
Overseas Futures:
  • Nikkei Futures: Indicating -33 open in Japan
  • DAX Futures: Indicating -25 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my retail/biotech/medical sector longs
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long