Thursday, May 26, 2011

Bear Radar


Style Underperformer:

  • Large-Cap Value (+.26%)
Sector Underperformers:
  • 1) Oil Tankers -.62% 2) Computer Services -.27% 3) Hospitals -.19%
Stocks Falling on Unusual Volume:
  • CSC, ABT, QSII, HRBN, MICC, MMYT, CRZO, FSLR, SPRD, SAFM, CMCO, ITMN, LULU, GMAN, PCRX, VELT, VRTX, EDE and BWS
Stocks With Unusual Put Option Activity:
  • 1) EP 2) TIF 3) KBH 4) KRE 5) PHM
Stocks With Most Negative News Mentions:
  • 1) DMND 2) AAP 3) WMS 4) EWA 5) RSH
Charts:

Bull Radar


Style Outperformer:

  • Small-Cap Growth (+.19%)
Sector Outperformers:
  • 1) Coal +1.12% 2) Software +.95% 3) Disk Drives +.68%
Stocks Rising on Unusual Volume:
  • CAJ, CKSW, ALLT, LNG, GNOM, NTAP, ASNA, MAKO, CBST, NETL, TIF, GES, GCO, EBS, SIG, HGG, PRXL, FOE, SMTC, XTXI, SD, SHOO, LPS, IPGP, COH, BKD and OB
Stocks With Unusual Call Option Activity:
  • 1) TIF 2) SONS 3) COH 4) CNQ 5) APOL
Stocks With Most Positive News Mentions:
  • 1) BLUD 2) NETL 3) OCR 4) HRS 5) WCC
Charts:

Thursday Watch


Evening Headlines


Bloomberg:

  • Fed Gave Banks Crisis Gains on Secretive Loans as Low as .01%. Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public. The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent. “This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
  • AIG(AIG) Falls as Treasury Seeks Additional Capital for 'High-Risk Proposition'. American International Group Inc. (AIG) fell to the lowest since August as investors bet that losses at the company’s largest unit will discourage buyers of the stock in future government offerings. AIG dropped $1.18, or 4 percent, to $28.28 at 4:01 p.m. in New York Stock Exchange composite trading. The U.S. Treasury Department disposed of 200 million shares yesterday at $29 each. AIG sold 100 million shares, raising $2.9 billion, according to a statement from the company. The transactions leave the government with a 77 percent stake.
  • Freescale Seeks IPO at 47% Discount to Buyout Price After Stock-Price Cut. Freescale Semiconductor Holdings Ltd. is selling shares at a 47 percent discount to what private equity owners paid after cutting the price range in its initial public offering by 17 percent.
  • Australia Home Loan Delinquencies Jump to Record on Rate Rises, Fitch Says. Australian home loan delinquencies jumped to the highest on record in the first quarter, driven by Christmas spending, a November interest rate increase, and recent natural disasters, Fitch Ratings said. Mortgages more than 30 days overdue rose to 1.79 percent of the nation’s residential mortgage backed securities in the quarter ended March 31, from 1.37 percent in the previous three months, according to the London-based ratings firm. The number of “low-doc” loans more than 30 days late climbed to a record 6.74 percent from 5.7 percent, according to the report.
  • SEC Investigates Hybrids for Insider Trading. U.S. regulators are examining whether investors made illegal trades in Fifth Third Bancorp. (FITB)’s trust preferred securities after the volume of transactions spiked 54-fold before the bank said it would redeem the instruments, a person with knowledge of the inquiry said.
  • LinkHSBC, Goldman(GS) Held $355 Million of Libya Funds. HSBC Holdings Plc (HSBA) and Goldman Sachs Group Inc. (GS) are among banks that held funds for Libyan leader Muammar Qaddafi’s government investment fund, according to a document published by advocacy group Global Witness.
  • Platinum Surplus Jumping After Japan Quake. The global platinum surplus may jump eightfold after Japan’s worst earthquake slashed car production, reducing the country’s demand to the lowest level in 28 years, said the nation’s top refiner. Supply will probably outpace demand by as much as five metric tons this year, compared with a surplus of 600 kilograms last year, Shinya Kitaoka, trading section chief at Tanaka Kikinzoku Kogyo K.K., said in an interview. The world palladium shortage may be cut by half, he said.
Wall Street Journal:
  • IRS Scrutinizes Gifts of Real Estate. The Internal Revenue Service has a low-profile but sweeping effort under way to use state land-transfer records for evidence of omissions in reporting gifts of real estate to family members.
  • Edwards' Lawyers in Plea Talks. Justice Department prosecutors and lawyers for former Sen. John Edwards made last-ditch efforts Wednesday to reach a plea agreement that could avert felony charges over alleged campaign-finance violations, people familiar with the matter said. If the talks fail, the prosecutors are expected to seek a grand-jury indictment against Mr. Edwards within days, these people said.
  • Euro Surges on News Chinese White Knight to Make Repeat Appearance, Attempt to Bail Out Europe for Second Time ( Just as Unsuccessfully).
  • No Retreat on Medicare. Republican lawmakers reaffirmed Wednesday their embrace of a controversial Medicare overhaul despite an electoral setback, ensuring the federal health program will remain a divisive issue through the 2012 election. Republicans responded to Democrat Kathy Hochul's Tuesday victory in a traditionally Republican New York Congressional district by saying they needed to attack the Democrats' Medicare position more forcefully, rather than back off their own plan. "We need to make it a choice between a do-nothing approach that will ultimately destroy Medicare, and life-saving reforms," said Rep. Tom Cole (R., Okla.). Added Rep. Cliff Stearns (R., Fla.): "It's a wake-up call on how you frame it. It obviously wasn't framed right."
  • A 62% Top Tax Rate? by Stephen Moore. Democrats have said they only intend to restore the tax rates that existed during the Clinton years. In reality they're proposing rates like those under President Carter.
CNBC:
Business Insider:LinkZero Hedge:
CNNMoney:
Reuters:
Telegraph:
  • Greece Risks 'Return to Drachma'. Greece will have to ditch the euro unless it agrees tougher austerity measures, said a senior Greek official, delivering the strongest warning yet from a European insider as to what is at stake.
Xinhua:
  • China's declining working age population will cause a "remarkable" slowdown in China's economic growth in the next 10 years, according to Peng Wensheng, chief economist at China International Capital Corp. The labor pool is expected to fall "sharply" in absolute terms in the next two to three years, Peng wrote.
Shanghai Securities News:
  • China's industrial output growth is expected to slow in coming months as companies continue to destock and power shortage restrains production, Xu Ce, a researcher with the State Information Center, wrote in a commentary.
Maeil Business Newspaper:
  • Chinese President Hu Jintao agreed to economic aid worth about $100 million for North Korea, including corn and fertilizer, when he met North Korea leader Kim Jong Il in Beijing yesterday.
Shanghai Daily:
  • Shanghai banks' worst-quality loans, those categorized as losses, increased both as a ratio and in absolute terms in the first quarter, citing the China Banking Regulatory Commission's local bureau. They made up 18 percent of all bad loans, up 3.3 percentage points, it said.
China Securities Journal:
  • A cash shortage among Chinese banks may reduce the chances the monetary authority will raise lenders' reserve requirement ratios in the near term, citing traders. Money market rates may stay high and overall cash shortgage is unlikely to ease next month.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 110.0 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 115.50 +.5 basis point.
  • S&P 500 futures +.20%.
  • NASDAQ 100 futures +.15%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (PDCO)/.51
  • (QSII)/.62
  • (OVTI)/.64
  • (RUE)//.29
  • (TIF)/.57
  • (BIG)/.68
  • (GCO)/.47
  • (BCSI)/.32
  • (FRED)/.24
  • (HNZ)/.72
Economic Releases
8:30 am EST
  • Advance 1Q GDP is estimated to rise +2.2% versus a prior estimate of a +1.8% gain.
  • Advance 1Q Personal Consumption is estimated to rise +2.8% versus a prior estimate of a +2.7% gain.
  • Advance 1Q GDP Price Index is estimated to rise +1.9% versus a prior estimate of a +1.9% gain.
  • Advance 1Q Core PCE is estimated to rise +1.5% versus a prior estimate of a +1.5% gain.
  • Initial Jobless Claims for this week are estimated to fall to 404K versus 409K the prior week.
  • Continuing Claims are estimated to fall to 3700K versus 3711K prior.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The G8 Summit in France, 7-Year Treasury Notes Auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, the Sterne Agee Tech Conference, (HNZ) analyst day, (ITRI) investor day, (ITMN) analyst meeting, (SYMC) analyst day and the (RMBS) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.

Wednesday, May 25, 2011

Stocks Higher into Final Hour on Short-Covering, Bargain-Hunting, Commodity Sector Strength


Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.14 -3.82%
  • ISE Sentiment Index 125.0 +73.61%
  • Total Put/Call .71 -10.13%
  • NYSE Arms 1.18 +51.91%
Credit Investor Angst:
  • North American Investment Grade CDS Index 91.0 +.23%
  • European Financial Sector CDS Index 123.08 +11.65%
  • Western Europe Sovereign Debt CDS Index 196.83 -1.50%
  • Emerging Market CDS Index 213.29 +.56%
  • 2-Year Swap Spread 18.0 -3 bps
  • TED Spread 21.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 259.0 -2 bps
  • China Import Iron Ore Spot $173.0/Metric Tonne -.57%
  • Citi US Economic Surprise Index -48.90 -.9 point
  • 10-Year TIPS Spread 2.32% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +88 open in Japan
  • DAX Futures: Indicating +22 open in Germany
Portfolio:
  • Higher: On gains in my Tech, Medical and Biotech sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades back to its 50-day moving average despite weakness in Asian equities, eurozone debt angst, higher food/energy prices, more weak economic data and emerging market inflation fears. On the positive side, Coal, Oil Service, Construction and Road & Rail shares are especially strong, rising more than +1.5%. Small-cap and cyclical shares are outperforming. Lumber is gaining +3.93% and copper is rising +2.42%. The Greece sovereign cds is falling -3.27% to 1,431.70 bps, the Saudi sovereign cds is falling -4.76% to 100.53 bps and the US Muni CDS Index is falling -3.68% to 123.77 bps. On the negative side, Airline, Retail, Telecom, Education and Oil Tanker shares are under mild pressure, falling more than -.5%. Oil is rising +1.83% and the UBS-Bloomberg Ag Spot Index is rising +1.6%. The US price for a gallon of gas is falling -.02/gallon today to $3.81/gallon. It is up .67/gallon in 98 days. The Asia Pacific Sovereign CDS Index is jumping +4.22% to 114.99 bps, the Brazil sovereign cds is gaining 1.8% to 105.0 bps and the China sovereign cds is rising +1.04% to 73.26 bps. The +36% rise in the Eurozone Financial Sector CDS Index over the last 8 days is also a large negative. The Vietnam Stock Index dropped another -4.0% last night and has plunged about -21% in less than 3 weeks. Moreover, the Shanghai Composite continues to trade poorly and has declined about -11% in 5 weeks. The recent strength in commodities is a short-term equity market positive and and much larger long-term negative as emerging market inflation pressures increase to very worrisome levels. The major US averages remain resilient in the face of mounting headwinds. Today's rebound does not appear to me to be the beginning of another sustainable move higher, however further near-term strength is possible. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt worries, technical selling, more shorting, rising food/energy prices and emerging markets inflation fears.

Bear Radar


Style Underperformer:

  • Mid-Cap Value (+.20%)
Sector Underperformers:
  • 1) Airlines -1.47% 2) Oil Tankers -.81% 3) Retail -.38%
Stocks Falling on Unusual Volume:
  • LNG, HRL, AIG, CHD, CVA, VLCCF, PTNR, CSGP, COST, ASIA, CBOE, SAFM, AMAP, LONG, FEIC, GGAL, FSLR, URBN, VELT, ALGT, CME, HRBN, RL, PSS, FRO, TNE, BJ, AEO, KEM and EXPR
Stocks With Unusual Put Option Activity:
  • 1) RL 2) PHM 3) XLK 4) STP 5) NBR
Stocks With Most Negative News Mentions:
  • 1) MLM 2) GPN 3) CSX 4) WMT 5) ENS
Charts:

Bull Radar


Style Outperformer:

  • Small-Cap Growth (+.23%)
Sector Outperformers:
  • 1) Oil Service +1.82% 2) Homebuilders +1.16% 3) Coal +.87%
Stocks Rising on Unusual Volume:
  • PXP, DRQ, CF, IPAR, NTLS, CPKI, AVGO, TTWO, CRI, HEI, TOL, VHI, DY, HPY, BPI, BWA and LEN
Stocks With Unusual Call Option Activity:
  • 1) CLR 2) NETL 3) STP 4) HDY 5) VVUS
Stocks With Most Positive News Mentions:
  • 1) UNH 2) JNJ 3) FLO 4) BSX 5) CECO
Charts: