Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.65% 2) Utilities +.19% 3) Restaurants +.16%
Stocks Rising on Unusual Volume:
- ENDP, NTWK, WBMD, ELN, BKS, HTZ, CTB, CZR and AMGN
Stocks With Unusual Call Option Activity:
- 1) PANL 2) RDN 3) BKS 4) SD 5) SBAC
Stocks With Most Positive News Mentions:
- 1) STJ 2) WBMD 3) RKT 4) DDS 5) HTZ
Charts:
Weekend Headlines
Bloomberg:
- U.K. Stripped of AAA Rating by Moody’s Amid Outlook Weakness. Britain lost
its top credit rating by Moody’s Investors Service, which cited
weakness in the nation’s growth outlook and challenges to the
government’s fiscal consolidation program. The rating on the U.K. was
lowered one level to Aa1 from Aaa and the outlook on the nation’s debt
changed to stable from negative, Moody’s said in a statement
yesterday. With the U.K.’s high and rising debt burden, deterioration in
the government’s balance sheet is unlikely to be reversed before 2016,
Moody’s said in the statement. “We don’t expect much market impact from
the downgrade, it was widely expected,” David Tinsley, an economist at
BNP
Paribas SA in London, said today in an e-mail. “The bottom line
is that the U.K. needs to find some growth to raise tax
revenues.”
- Correlation at Four-Year Low Leaves Europe Stocks Missing Rally. Euro-region stocks are missing this
year’s global rally as four years of lockstep moves in markets
break down amid diverging outlooks for economic growth. Correlation between the Euro Stoxx 50 Index and the MSCI
All-Country World Index of 45 developed and emerging markets has
fallen to 77 percent, the lowest level since the collapse of
Lehman Brothers Holdings Inc. in 2008, according to data
compiled by Bloomberg. The European gauge has dropped 0.2
percent in 2013.
- H.K. Weekend Property Sales Fall on Doubled Stamp Duty. Residential
property sales in Hong
Kong fell after the government doubled a sales tax, saying bubble risks
are spreading in the world’s most expensive place to buy an apartment. Secondary sales for the 15 most popular housing estates
fell 15 percent at the weekend from the previous weekend,
according to Buggle Lau, chief analyst at Midland Holdings Ltd.,
the city’s biggest publicly traded realtor. The stamp duty on
all properties above HK$2 million ($258,000) was raised to as
much as 8.5 percent of the purchase price.
- China to Expand Short-Selling Program as Part of Reform. China
will expand its short-selling program on Feb. 28 by allowing selected
brokerages to borrow shares from institutional investors, the Shanghai
Securities News reported. Eleven brokerages will be able to borrow
shares in a pre- approved pool of 90 publicly traded companies, according to the report, which cited China Securities Finance Corp. The state-
owned agency was set up to provide securities firms with funds
and stock for short-selling and margin trading. The expansion of short-selling -- in which investors sell
borrowed shares in the expectation of profiting when they fall -
- will increase the efficiency of China’s equity market, help
manage risks and boost brokers’ revenue, the report said.
- KFC Growth Seen Slowing as Indonesia Limits Franchisees. Yum!
Brands Inc. (YUM), owner of the KFC and Pizza Hut dining chains, and
other fast-food companies may be forced to slow store growth in
Indonesia, the world’s fourth- most populous nation, because of
government rules to protect small businesses.
- Fed’s Tarullo Sees Remaining Contagion Risk in Bank Liabilities. Federal
Reserve Governor Daniel Tarullo said large banks are vulnerable to runs
from non-deposit liabilities, and regulators need to do more to curb
such risk. “These vulnerabilities involve both large, prudentially
regulated institutions, and thus too-big-to-fail concerns, and the
broader financial system,” Tarullo said today in the text of remarks to
the Cornell International Law Journal Symposium in New York. “The
liability side of the balance sheets of financial firms has been barely
addressed in the reform agenda.” Fed bank supervision and monetary
policy is increasingly focusing on stemming threats to financial market
stability. Tarullo, the Fed governor in charge of financial regulation
and bank oversight, has worked with Chairman Ben S. Bernanke on the
overhaul of the central bank’s risk surveillance and bank
oversight.
- Rebar Trades Near One-Month Low on Property Curb Expectation. Steel
reinforcement-bar futures
traded near a one-month low in Shanghai as investors cut their exposure
to the building material amid signs of tighter control on property
investment. Rebar for October delivery dropped by as much as 0.9 percent
to 3,998 yuan ($641) a metric ton on the Shanghai
Futures Exchange, the lowest since Jan. 22, before trading at
4,028 yuan at 10:32 a.m. local time. The contract lost 5.6
percent last week.
- Commodities May Drop on Moving-Average Sign: Technical Analysis.
Commodity prices, heading for the biggest weekly drop since early
December, may fall an additional 7.2% in the next two months, according
to technical analysis by Futurepath Trading LLC. The S&P's GSCI
Spot Index of 24 raw materials may fall to 610 by April 30 from
yesterday's settlement of 657.31 after the gauge dropped below the
50-day moving average for the first time since December, said Paul
Kavanaugh, the Chicago-based director of business development. "Market
action is suggesting that we may see some declines," said Kavanaugh, who
correctly predicted in January that gold would drop below $1,600 an
ounce by March. "The tone of the market has changed."
- Gold Bets Cut by Most Since ’07 as Sugar Bears Grow: Commodities. Hedge
funds cut bets on a rally in gold by the most since 2007 and became the
most bearish ever on sugar and coffee as concern that the Federal
Reserve will slow U.S. stimulus programs drove prices for raw materials
to the biggest loss this year. Money managers and other large
speculators reduced their net-long position in gold futures and options
by 40 percent in the week ended Feb. 19 to 42,318, the biggest drop
since July 31, 2007, U.S. Commodity Futures Trading Commission data
show. Wagers across 18 U.S. raw materials tumbled to the lowest since
December 2011 as investors’ net-short positions for sugar and
coffee hit record highs. Bullish corn wagers fell the most since
June 2010.
- BHP(BHP) Says Cost Cutting Needed to Meet Falling Demand for Minerals. BHP Billiton Ltd. (BHP), the world’s
biggest mining company, said a slowdown in demand for minerals
over the next five years makes cutting costs and boosting
productivity a priority. “I’m committed to drive an agenda of productivity and that
will almost certainly” be a “top theme,” Andrew Mackenzie,
the Melbourne-based company’s newly appointed chief executive
officer, said in an interview with the Australian Broadcasting
Corp. today, according to a transcript.
- McCain Says Hagel Not Qualified for Defense, Sees Full Vote. U.S. Senator John McCain said Chuck Hagel isn’t qualified to be secretary of defense while
predicting that the former lawmaker will receive a Senate vote,
barring any further disclosures about his past statements. “I do not believe that Chuck Hagel, who is a friend of
mine, is qualified to be secretary of defense,” Republican
McCain said on CNN’s “State of the Union” program today.
- Iran Says Uranium Reserves Almost Tripled as 16 Plants Planned. Iran
said recent discoveries of uranium resources have almost tripled the
country’s reserves of the radioactive fuel and that it plans to build
reactors at 16 new locations, Iranian news agencies reported.
Finding domestic supplies of uranium to fuel Iran’s civilian power
program is the country’s top priority, Atomic Energy Organization of
Iran head Fereidoon Abbasi told reporters yesterday at an annual
industry meeting in Tehran, Fars News Agency said. Iran now has about 4,400 tons of raw uranium, up from 1,527 tons, the Islamic Republic News Agency said, citing Abbasi.
Wall Street Journal:
- Fresh Front in Budget Battle.
Congressional Leaders Discuss Deal to Avert Shutdown at Cost of
Extending Cuts. Already looking past the current budget impasse gripping
the
capital, congressional leaders are quietly considering a deal to avert a
government shutdown next month—but at the cost of prolonging
across-the-board spending cuts. Attention is beginning to shift
from Friday, when the broad cuts known as the sequester kick in, to the
next budget deadline: Congress must pass a so-called continuing
resolution by the end of March to keep funding government operations.
- Brazil Bank Prioritizes Inflation Fight. The Brazilian central bank's priority is fighting inflation, and not
spurring growth, its president said in an interview before policy makers
meet to set interest rates, even as Latin American's biggest economy
struggles to escape a long stretch of slow growth. Brazil's economy expanded around 1% in 2012, down from 7.5% as
recently as 2010. At the same time, annualized inflation hit 6.2% in
mid-February, close to the maximum the government has said it would
tolerate. Analysts say the perception of dueling policies aimed at stimulating
the economy and tamping down inflation have created confusion in the
market, causing the Brazilian real to gyrate from multi-month lows to
highs in the space of a few months. "Our goal is inflation, so we have to adjust and calibrate our
policies to meet our goals," Central Bank President Alexandre Tombini
told The Wall Street Journal. "Growth is not a goal for the central
bank."
- 'Lost Generation' Feels Italy's Fiscal Squeeze. Forty-Somethings Pay Price of Austerity in Higher Taxes, but Will Reap Lower Pension Benefits. Forty-something Italians are facing austerity for the rest of their working lives—just as they have since becoming adults.
"We are the lost generation," says
Andrea Bolla, the 46-year-old chief executive of energy provider Vivigas
and the Valdo Prosecco winery near the northern city of Verona. He says
he pays more taxes and receives fewer services while navigating more
red tape than his father did while running the family businesses.
Fox News:
- Lawmakers, officials list problems cuts would bring, but appear no closer to compromise. Lawmakers from the White House to Capitol Hill to the Western Plains
agree that the fast-approaching, $85 billion in cuts to the federal
budget jeopardize everything from combat readiness to pre-K programs.
But they also express little optimism about a deal to avert the
reductions before they kick in Friday. All of them made their case over the weekend for President Obama
along with congressional Democrats and Republicans to reach a budget
deal to avert the cuts -- known as sequester. However, both parties
accused each other of extending the stalemate. “It will kick in,” Oklahoma Republican Sen. Tom Coburn told “Fox News
Sunday.” "The reason there is no agreement is because there's no
leadership from the president on actually recognizing what the problem
is."
CNBC:
- Bernanke's Challenge: Prime Markets for End of QE. Federal Reserve Chairman Ben Bernanke is preparing for a most sensitive
task: telling jittery investors who have grown accustomed to the U.S.
central bank's ultra-easy monetary policies that things will eventually
have to change.
Business Insider:
Examiner.com:
- Industry experts worry GM(GM) subprime spree could trigger auto loan bubble.
General Motors has the highest auto loan delinquency rate in the
industry due to its increasing reliance on subprime customers, a fact
some experts fear
could lead to a bubble like the one that wrecked the housing market in
2007 and produced the Great Recession of 2008. "High production costs
and falling profit-per-car have led auto
manufacturers to turn to financing to earn higher profits. Automakers
have capitalized on lending by not only loaning money to customers but
also packaging and selling those loans to investors in a manner similar
to the sale of mortgage-backed securities that created the housing
bubble," according to the Washington Free Beacon's Bill McMorris. "The
dramatic increase in securitization has coincided with GM's acquisition
of AmeriCredit, one of the nation's largest subprime auto lenders, which
it renamed GM Financial (GMF)," McMorris said. John Berlau of the
Competitive Enterprise Institute, a Washington
think tank, and Ed Niedermeyer, a veteran automotive industry analyst,
told McMorris they see multiple worrisome signs on the horizon.
New York Post:
- Amazon(AMZN) Original Series Plans Heat Up. Just about everyone in Tinseltown has been bowled over by Netflix’s first big
original series, “House of Cards.” Now it’s Amazon’s turn to prove it can pick a hit show for its rival
streaming service, although it’s taking a decidedly different tack.
Reuters:
- Tens of thousands in Spain protest economic policy, corruption. Tens of thousands
of Spaniards marched through cities across the country on Saturday to
protest deep austerity, the privatization of public services and
political corruption. Gathering under the banner of
the "Citizen Tide", students, doctors, unionists, young families and
pensioners staged rowdy but non-violent demonstrations as a near
five-year economic slump shows no sign of recovery and mass unemployment
rises.
- Hedge funds grow nervous after credit rally. Hedge fund
managers who profited from a huge rally in credit since last summer are
seeking ways to protect themselves against a sharp market sell-off if
investor confidence evaporates. Managers have been selling some
bonds, increasing short positions or moving away from areas of the
market more sensitive to a swing in sentiment, following a 38 percent
drop since June in the iTraxx index, which measures the credit risk
premium for a basket of high quality European bonds.
- Gloomy Italians vote in election crucial for euro zone.
Italy voted on Sunday in one of the most unpredictable elections in
years, with many voters expressing rage against a discredited elite and
doubt
that a government will emerge strong enough to combat a severe economic
crisis. "I am pessimistic. Nothing will change," said Luciana Li
Mandri, 37, as she cast a ballot in the Sicilian capital Palermo
on the first of two days of voting that continues on Monday. "The usual thieves will be in government."
The Economist:
- New European economic forecasts. The ever-receding recovery. A WEEK after official figures showed a steep fall in euro-zone output in
late 2012 the European Commission (EC) has added to the gloom by
unveiling some gloomy forecasts for 2013. Three months ago the EC
envisaged a modest recovery getting under way in the first half of this
year. Now that is not expected until the second half of 2013.
Telegraph:
Stuttgarter Zeitung:
- Schaeuble Says Won't Be Pressured on Cyprus Aid. Proof that Cyprus is systemically relevant for the stability of the euro region is a precondition for German parliamentary approval of any aid to the country Finance Minister Wolfgang Schaeuble. France will adhere to its European obligations in lowering its budget deficit, he also said. It is in Italy's interest to continue policies carried out by Prime Minister Mario Monti after the elections, Schaeuble said.
Prensa Latina:
- Russia's Medvedev Warns U.S. on Europe Missle Shield Plans. He said Russia still believes U.S. anti-missile defense plans for Europe directed against Russian nuclear capability. Implementation of the plan would have "extremely unpleasant" consequences for international relations as Russia would be forced to respond. Russia also opposes U.S. sanctions on Cuba, he said.
Want China Times:
- Crisis looms as local government debt to mature this year. China's local government debt crisis has been getting worse as
national statistics show that 53% of local government debt will be due
by the end of 2013, when local governments enter a peak period for
repaying loans. Financial reports recently issued by various local governments have
all issued warnings, including information that they have been under
heavy pressure to repay debts and deal with local financial risks that
could not be ignored. China's National Audit Office says 42% of the
debt was due by the end of 2012. This year the local government debt
crisis is greater than in the
past few years due to increasing debts and mounting pressure to repay
amid an economic slowdown and declining financial revenue, warned Zhao
Quanhou, director of the Research Office of Finance under the Ministry
of Finance's Research Institute for Fiscal Science.
Xinhua:
- China's Military to Implement Rules to Manage Spending. China's military will give priority to ensuring combat readiness as it seeks to control non-urgent infrastructure investments, citing a rule approved by Xi Jinping, chairman of the Communist Party of China Central Military Commission.
China Securities Journal:
- China
May Release Detailed Rules on Property Control. Some Chinese ministries
and local governments may announce detailed rules to control property
market "soon," citing a person familiar with the matter. Some of the
measures will likely be announced before the National People's Congress
and the Chinese People's Political Consultative Conference, according to
the report. The CPPCC annual meeting will start on March 3 and the NPC
will begin on March 5.
Weekend Recommendations
Barron's:
- Bullish commentary on (TWI), (SU), (DKS), (ADT), (COH), (GLPW) and (CNQ).
Night Trading
- Asian indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.50 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 83.0 -1.0 basis point.
- NASDAQ 100 futures -.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Dallas Fed Manufacturing Activity for February is estimated to fall to 3.0 versus 5.5 in January.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lockhart speaking, Chicago Fed National Activity Index for January, 2Y T-Note auction, Mobile World Congress, Morgan Stanley Tech/Media/Telecom Conference, Citi Healthcare Conference and the (DRI) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and automaker 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 week.
U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week modestly lower on US sequestration worries, global growth fears, China-Japan/Mideast tensions, Eurozone
debt angst, profit-taking, technical selling and more shorting. My
intermediate-term trading indicators are giving neutral signals and the
Portfolio is 50% net long heading into the week.
S&P 500 1,515.60 -.38%*
The Weekly Wrap by Briefing.com.
*5-Day Change
Indices
- Russell 2000 916.16 -.82%
- Value Line Geometric(broad market) 394.65 -1.07%
- Russell 1000 Growth 691.57 -.41%
- Russell 1000 Value 772.42 -.54%
- Morgan Stanley Consumer 925.0 +.97%
- Morgan Stanley Cyclical 1,116.87 -1.94%
- Morgan Stanley Technology 724.18 -.97%
- Transports 5,943.89 -.06%
- Bloomberg European Bank/Financial Services 96.27 -.77%
- MSCI Emerging Markets 43.47 -1.24%
- Lyxor L/S Equity Long Bias 1,131.29 +.45%
- Lyxor L/S Equity Variable Bias 841.86 +.80%
Sentiment/Internals
- NYSE Cumulative A/D Line 172,199 -1.0%
- Bloomberg New Highs-Lows Index -97 -744
- Bloomberg Crude Oil % Bulls 16.7 -60.5%
- CFTC Oil Net Speculative Position 257,918 -5.48%
- CFTC Oil Total Open Interest 1,650,211 -.2%
- Total Put/Call .92 +4.55%
- OEX Put/Call 1.73 +203.51%
- ISE Sentiment 120.0 -6.25%
- Volatility(VIX) 14.17 +11.93%
- S&P 500 Implied Correlation 58.24 +.80%
- G7 Currency Volatility (VXY) 9.59 +1.80%
- Smart Money Flow Index 11,256.37 -.89%
- Money Mkt Mutual Fund Assets $2.657 Trillion -.90%
Futures Spot Prices
- Reformulated Gasoline 308.88 -1.35%
- Heating Oil 311.25 -3.50%
- Bloomberg Base Metals Index 211.01 -4.88%
- US No. 1 Heavy Melt Scrap Steel 352.67 USD/Ton unch.
- China Iron Ore Spot 153.60 USD/Ton -.97%
- UBS-Bloomberg Agriculture 1,532.32 +.35%
Economy
- ECRI Weekly Leading Economic Index Growth Rate 7.6% -80 basis points
- Philly Fed ADS Real-Time Business Conditions Index .0969 -6.2%
- S&P 500 Blended Forward 12 Months Mean EPS Estimate 113.56 +.14%
- Citi US Economic Surprise Index -4.80 -2.8 points
- Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 3/20
- US Dollar Index 81.47 +1.29%
- Yield Curve 171.0 -2 basis points
- 10-Year US Treasury Yield 1.96% -4 basis points
- Federal Reserve's Balance Sheet $3.077 Trillion +.67%
- U.S. Sovereign Debt Credit Default Swap 39.0 +.41%
- Illinois Municipal Debt Credit Default Swap 146.0 +.69%
- Western Europe Sovereign Debt Credit Default Swap Index 100.55 +.90%
- Emerging Markets Sovereign Debt CDS Index 175.84 +2.96%
- Israel Sovereign Debt Credit Default Swap 123.16 +1.13%
- Iraq Sovereign Debt Credit Default Swap 435.04 +2.36%
- China Blended Corporate Spread Index 379.0 -5 basis points
- 10-Year TIPS Spread 2.54% -1 basis point
- TED Spread 16.75 -2.75 basis points
- 2-Year Swap Spread 14.5 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -19.75 -2.5 basis points
- N. America Investment Grade Credit Default Swap Index 87.52 +1.23%
- European Financial Sector Credit Default Swap Index 150.02 +5.64%
- Emerging Markets Credit Default Swap Index 234.53 +1.10%
- CMBS Super Senior AAA 10-Year Treasury Spread 90.0 unch.
- M1 Money Supply $2.481 Trillion -.45%
- Commercial Paper Outstanding 1,062.90 -2.10%
- 4-Week Moving Average of Jobless Claims 360,800 +8,300
- Continuing Claims Unemployment Rate 2.4% unch.
- Average 30-Year Mortgage Rate 3.56% +3 basis points
- Weekly Mortgage Applications 782.40 -1.68%
- Bloomberg Consumer Comfort -33.4 +2.5 points
- Weekly Retail Sales +2.8% +40 basis points
- Nationwide Gas $3.78/gallon +.14/gallon
- Baltic Dry Index 737.0 -2.12%
- China (Export) Containerized Freight Index 1,152.47 +.69%
- Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 17.50 unch.
- Rail Freight Carloads 251,078 +2.62%
Best Performing Style
Worst Performing Style
Leading Sectors
Lagging Sectors
Weekly High-Volume Stock Gainers (22)
- NTSP, FFCH, LZB, RRGB, QCOR, BRY, AWAY, PCYC, SWY, SSNC, QLIK, TXRH, VNTV, SEE, SCBT, PEGA, THRM, OMX, CTL, BKW, JACK and MDP
Weekly High-Volume Stock Losers (25)
- SKX, LAD, IART, APA, IPHS, TAL, TSLA, OC, AWI, BGS, IPI, GPI, FOR, TAHO, RP, NFX, VAC, DAKT, IPGP, PPO, ASGN, EBIX, LOGM, EHTH and PAY
Weekly Charts
ETFs
Stocks
*5-Day Change
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 112.0 +20.43%
- Total Put/Call .89 -19.09%
Credit Investor Angst:
- North American Investment Grade CDS Index 86.69 -1.95%
- European Financial Sector CDS Index 150.0 -.15%
- Western Europe Sovereign Debt CDS Index 100.55 -.62%
- Emerging Market CDS Index 234.87 -.82%
- 2-Year Swap Spread 14.50 -1 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -19.75 -1.75 bps
Economic Gauges:
- 3-Month T-Bill Yield .12% unch.
- China Import Iron Ore Spot $153.60/Metric Tonne -1.66%
- Citi US Economic Surprise Index -4.80 -.1 point
- 10-Year TIPS Spread 2.54 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +115 open in Japan
- DAX Futures: Indicating +25 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long