Bloomberg:
- Brazil Mid-December Inflation Rises More Than All Forecasts.
Brazil’s consumer prices rose in the month through mid-December by the
most in 11 months, as unemployment tied a record low. Swap rates jumped.
Consumer prices as measured by the IPCA-15 index rose 0.75 percent
in the month through mid-December, the national statistics agency said
in a report published on its website today. That was more than every
estimate from 39 economists surveyed by Bloomberg, whose median forecast
was for a rise of 0.65 percent.
- European Stocks Rise.
European stocks rallied the most in 3 1/2 months as the Federal
Reserve’s decision to slow the pace of its stimulus boosted investor
confidence that the U.S. economic recovery is on course. Saab AB (SAABB)
surged the most in at least 15 years after winning a $4.5 billion order
to supply 36 jet fighters to Brazil’s air force. Amadeus IT Holding SA
jumped to a record after the travel-reservations company said its $500
million purchase of NMTI Holdings Inc. will boost 2013 results. Algeta
ASA also climbed to a record after Bayer AG agreed to acquire the
drugmaker at an increased offer price. The Stoxx Europe 600 Index rose 1.7 percent to 319.44 at
the close, for its biggest two-day gain since June.
- Emerging-Market Stocks Retreat as Turkey Plunges on Corruption.
Emerging-market stocks fell to the
lowest in a month as Turkey’s corruption crisis weighed on the
nation’s shares and Chinese equities retreated on concern higher
funding costs will hurt growth. Turkey’s shares slid the most in the
world as the
government removed Istanbul’s police chief amid a corruption probe. The
Hang Seng China Enterprises Index (HSCEI) lost 1.7 percent on concern
higher funding costs will hurt growth. All but two emerging-market
currencies tracked by Bloomberg weakened, led by the Brazilian real. The
Micex added 0.7 percent as President Vladimir Putin said a decree
pardoning Mikhail Khodorkovsky will be signed soon. Brazil’s Ibovespa
climbed to a one-week high. The MSCI Emerging Markets Index retreated 0.4 percent to 989.01 at 12:41 p.m. in New York.
- Facebook(FB), Zuckerberg Plan to Sell Shares Worth $3.9 Billion. Facebook Inc.
(FB:US) Chief Executive Officer Mark Zuckerberg is selling shares to
help pay taxes, joining the company and board member Marc Andreessen in
an
offering worth about $3.9 billion. About 27 million shares will
be offered by Facebook, with an additional 41.35 million shares by
Zuckerberg and 1.6 million from Andreessen, the company said in a
statement today. Shares of Menlo Park, California-based Facebook fell as
much as 2.7 percent.
CNBC:
ZeroHedge:
ValueWalk:
Business Insider:
NY Times:
- Uninsured Skeptical of Health Care Law in Poll. Americans who lack medical coverage disapprove of President Obama’s
health care law at roughly the same rate as the insured, even though
most say they struggle to pay for basic care, according to the latest
New York Times/CBS News poll. Fifty-three percent of the uninsured disapprove of the law, the poll
found, compared with 51 percent of those who have health coverage. A
third of the uninsured say the law will help them personally, but about
the same number think it will hurt them, with cost a leading concern.
Forbes:
Google Blog:
- Transparency Report: Government removal requests continue to rise.
We launched the Transparency Report in 2010 to provide hard evidence of
how laws and policies affect access to information online. Today, for
the eighth time, we’re releasing new numbers showing requests from
governments to remove content from our services. From January to June
2013, we received 3,846 government requests to remove 24,737 pieces of
content—a 68 percent increase over the second half of 2012. Over the
past four years, one worrying trend has remained consistent: governments
continue to ask us to remove political content. Judges have asked us to remove information that’s critical of them, police
departments want us to take down videos or blogs that shine a light on
their conduct, and local institutions like town councils don’t want
people to be able to find information about their decision-making
processes. These officials often cite defamation, privacy and even
copyright laws in attempts to remove political speech from our services.
In this particular reporting period, we received 93 requests to take
down government criticism and removed content in response to less than
one third of them.
11Alive.com:
- Lockheed Martin(LMT) cuts ties with Boy Scouts over gay leader ban. The
Lockheed Martin Corp. is ending its relationship with the Boy Scouts of
America because the group does not allow gay Scout leaders, company
officials told the Marietta Daily Journal. "While we applaud the
mission of the Boy Scouts and the good things they do in our
communities, their policies that discriminate on the basis of sexual
orientation and religious affiliation conflict with Lockheed Martin policies," said Lockheed spokesman Gordon Johndroe. The reference to "religious affiliation" has to do with the Boy Scouts' ban on atheist members. Marietta's plant contributed about $25,000 to metro Atlanta-area Scouting activities and programs this year. The employee-giving fund called the LM AERO Club contributed another $30,000 this year, Whitaker said.
Reuters:
- Business lobby says recession has pushed Italians to breaking point. Italy's main business lobby group
warned on Thursday that the risk of social breakdown was
growing, despite signs that Italy's two-year recession was
coming to an end. Confindustria, which represents almost 150,000 companies,
said it expected gross domestic product to fall 1.8 percent this
year rather than 1.6 percent.
Financial Times:
- EU launches trade dispute against Brazil. The
EU has launched a potentially explosive trade case against Brazil,
filing papers in the World Trade Organisation against the Latin American
giant for the first time in almost a decade over what it claims are
protectionist taxes levied on cars and other
imports.
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -2.3% 2) REITs -1.32% 3) Homebuilders -1.2%
Stocks Falling on Unusual Volume:
- SMTC, DRI, WGO, CIE, ESS, UHS, ROSE, APOG, MCS, NEOG, SDRL, BRE, CTL, USLV, PODD, LEA, WAB, ICLR, GTU, AAXJ, ATU, KKR, KBH, FNFG and BRLI
Stocks With Unusual Put Option Activity:
- 1) MNST 2) XLE 3) FITB 4) JBL 5) SWKS
Stocks With Most Negative News Mentions:
- 1) BA 2) TGT 3) TSLA 4) SMTC 5) CAT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Oil Tankers +2.99% 2) Coal +1.96% 3) Steel +1.13%
Stocks Rising on Unusual Volume:
- IACI, CCL, ORCL, ACN, SWI, PIR, TMUS, CAG, RCL, X, WOR, SCS, SHLD, OMED and UIS
Stocks With Unusual Call Option Activity:
- 1) PAYX 2) XLP 3) AKS 4) ORCL 5) HYG
Stocks With Most Positive News Mentions:
- 1) ORCL 2) COP 3) IBM 4) AAPL 5) SCTY
Charts:
Evening Headlines
Bloomberg:
- China Rate Swap Surges to Record as Reverse Repos Kept on Hold.
China’s interest-rate swaps jumped the most since July, touching a
record, as the central bank refrained from injecting cash into the
financial system at a time when demand for funds is climbing.
One-year contracts that exchange fixed payments for the floating
seven-day repurchase rate increased 15 basis points to 5.03 percent as
of 10:13 a.m. in Shanghai, according to data compiled by Bloomberg. The
swap climbed as high as 5.07 percent today, the highest in data going
back to April 2006, and has
averaged 3.76 percent this year.
- North Korea Purge Raises Risk of Kim Jong Un’s Show of Force. North Korea’s
execution of Kim Jong Un’s uncle and de facto deputy raises the risk
the leader may take military action against the South to demonstrate his
authority after the purge. South Korea has heightened its combat readiness since Kim’s uncle Jang Song Thaek was executed last week following his
conviction for treason, the highest-ranking official to be
purged since Kim took over upon the death of his father in
December 2011. President Park Geun Hye warned Dec. 16 of
possible “reckless provocations” from the North.
- China’s Stocks Drop for Eighth Day on Concern Over Funding Costs.
Chinese stocks fell for an eight day, extending the benchmark index’s
longest losing streak since June, on concern higher funding costs will
hurt economic growth. Financial companies slid the most among industry
groups. China Minsheng Banking Corp. and Huaxia Bank Co. slumped more
than 1 percent, while Gemdale Corp. led declines for developers with a
1.4 percent retreat. Jiangsu Hengrui Medicine Co. dragged down
health-care companies with a 2.3 percent retreat. Phone stocks gained as
ZTE Corp. climbed 1 percent. The Shanghai Composite Index (SHCOMP) slipped 0.1 percent to 2,146.39 at the 11:30 a.m. break, after changing directions at
least seven times.
- Asian Stocks Rise After Fed Begins Tapering U.S. Stimulus.
Asian stocks rose after the Federal Reserve expressed enough confidence
in the U.S. labor market to taper asset purchases while still promising
to hold interest rates close to zero. Fast Retailing Co., Asia’s
biggest apparel chain, climbed 3.5 percent, pushing Japan’s Nikkei 225
Stock Average toward the highest closing level since 2007 as the yen
touched a five year-low against the dollar. Fanuc Corp. (6954), a
Japanese maker of factory robots, rose 4 percent to be headed for the
highest close on record. Caltex Australia Ltd. surged 11 percent as the
petroleum
refiner said profit may climb to A$340 million ($300 million).
The MSCI Asia Pacific Index advanced 0.2 percent to 138.56
as of 12:01 p.m. in Tokyo, with more than two stocks rising for
each that fell.
- Rebar Rises From 3-Week Low on Improving China, U.S. Economies.
Steel reinforcement-bar futures in
Shanghai climbed from a three-week low as iron ore climbed on
speculation that improving economies in China and the U.S. will boost
demand. Rebar for May delivery on the Shanghai Futures Exchange
gained as much as 0.4 percent to 3,672 yuan ($604) a metric ton and was
at 3,663 yuan at 10:14 a.m. local time. The contract
closed yesterday at 3,656 yuan, the lowest since Nov. 27.
- Copper Falls Third Day as Dollar Rallies on Fed Stimulus Cuts. Copper
declined for a third day as
the dollar strengthened after the Federal Reserve decided to taper its
monthly bond purchases, reducing the appeal of industrial metals as an
alternative investment. The contract for delivery in three months on
the London Metal Exchange dropped as much as 0.6 percent to $7,226 a
metric ton and traded at $7,235 by 10:48 a.m. in Tokyo. The price
touched $7,307.70 on Dec. 16, the highest level since Oct. 23.
The metal is down 8.8 percent this year.
- EU Deadlock Broken as Ministers Agree to Bank Plan. European Union finance ministers
broke a deadlock on how to deal with failing banks, delivering
the agreement lenders demanded before a summit today in
Brussels. The finance chiefs pledged to create a 55 billion-euro ($75
billion) industry-financed resolution fund over the next 10
years, backed an agency to make decisions on handling failing
banks and agreed on cost-sharing procedures.
- EU Lawmakers Fail to Get Deal on Financial Market Rules Overhaul. European Parliament lawmakers and
national officials failed to clinch a deal to overhaul the
bloc’s financial market rulebook, relinquishing their goal of
finding an accord by year-end.
Negotiations broke down in Brussels yesterday over the
scope of planned curbs on commodity derivative speculation and
on investor protection rules, Sven Giegold, a German lawmaker
representing the assembly’s Green group in the talks, said in a
telephone interview. Discussions will resume on Jan. 14 in Strasbourg,
France, he said.
- U.S. Yields Hold at Highest Since 2007 Versus Peers After Fed.
Treasuries held at the cheapest versus their international counterparts
in six years after the Federal Reserve announced plans to trim its debt
purchases. U.S. government securities due in 10 years or more yielded
1.17 percentage points more than non-U.S. sovereign debt as of
yesterday, the most since June 2007, Bank of America Merrill
Lynch data show. The Fed said yesterday it will trim its monthly
bond purchases to $75 billion from $85 billion, curbing the
program known as quantitative easing, or QE, it implemented
support the economy. The move came after data this month showed
improvement in employment, manufacturing and retail sales.
Wall Street Journal:
- France Voices Doubt on Iran Nuclear Deal. Foreign Minister Fabius Concerned Tehran Won't Drop Ability to Build a Bomb. France's foreign minister voiced doubts that
Western powers will reach a final nuclear deal with Iran, questioning
Tehran's willingness to abandon its ability to build an atomic bomb. Laurent Fabius
has propelled France to the forefront of nuclear talks by taking a
tough stance on Iran, which insists its nuclear program is for civilian
and scientific use only.
- National Lampoon's ObamaCare Vacation. State exchange chiefs skip town, while Obama hires a hit man.
President
Obama
has responded to the ObamaCare debacle by bringing in Beltway
liberal mastermind John Podesta as a senior West Wing hand, and he
promptly announced his arrival by likening House Republicans to "a cult
worthy of Jonestown" in an
interview with Politico. The states running their own insurance
exchanges are exacting more accountability for their ObamaCare failures.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Testing time for Chinese media as party tightens control. Early
next year, Chinese journalists will have to pass a new ideology exam to
keep their press cards, in what reporters say is another example of the
ruling Communist Party's increasing control over the media under
President Xi Jinping. It is the first time reporters have been required
to take such a test en masse, state media has said. The exam will be
based on a 700-page manual being sold in bookshops. The manual is
peppered with directives such as "it is absolutely not permitted for
published reports to feature any comments that go against the party
line", and "the relationship between the party and the news media is one
of leader and the led". The impact of increased control in the past year has been chilling, half a dozen reporters at Chinese state media told Reuters, mostly on condition of anonymity to avoid repercussions for talking to the foreign media without permission.
South China Morning Post:
- Communist
Party Tightens Grip on China Journalism Schools. Sr local propaganda
officials to become heads, high-level officials at journalism programs
at 10 top-tier universities, citing 3 people familiar with the plan.
Similar changes may be made at other journalism schools later. Education
on "Marxist view" of journalism to be stepped up.
Shanghai Securities News:
- China Banking Regulatory Commission will closely watch risks from commercial banks' off-balance sheet business and trading operations and will introduce regulations "when conditions are ripe," citing Yang Shaojun, deputy head at the commission's office.
People's Daily:
- Official Says China Trade Outlook Next Year Is Difficult.
China's foreign trade is facing a difficult or "very" difficult outlook
next year, citing Song Lihong, a deputy director at the Ministry of
Commerce's Comprehensive Department. Song said recovery in developed
nations or global economy didn't have the usual impact on China's trade
growth this time. It's hard to say anything optimistic about China's
exports in 2014, Song said. Song said China must abandon the strategy of
obtaining market share with low prices and high volumes.
China Securities Journal:
- China's 50 Cos. May Finish IPO Procedures in January. Fifty
companies may complete initial public offering procedures in China in
Jan., citing data from China Securities Regulatory Commission.
Evening Recommendations
UBS:
- Rated (ALK), (LUV) and (DAL) Buy.
Night Trading
- Asian equity indices are unch. to +1.5% on average.
- Asia Ex-Japan Investment Grade CDS Index 127.5 unch.
- Asia Pacific Sovereign CDS Index 102.25 -.5 basis point.
- NASDAQ 100 futures -.16%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 335K versus 368K the prior week.
- Continuing Claims are estimated to fall to 2775K versus 2791K prior.
10:00 am EST
- The Philly Fed for December is estimated to rise to 10.0 versus 6.5 in November.
- Existing Home Sales for November are estimated to fall to 5.02M versus 5.12M in October.
- The Leading Index for November is estimated to rise +.7% versus a +.2% gain in October.
Upcoming Splits
Other Potential Market Movers
- The weekly EIA natural gas inventory report, $29B 7Y T-Note auction, UK retail sales report, Bloomberg Economic Expectations Index for Dec. and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Almost Every Sector Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.42 -11.04%
- Euro/Yen Carry Return Index 148.58 +.77%
- Emerging Markets Currency Volatility(VXY) 8.94 -1.65%
- S&P 500 Implied Correlation 61.22 -5.71%
- ISE Sentiment Index 122.0 -.81%
- Total Put/Call .86 -1.15%
Credit Investor Angst:
- North American Investment Grade CDS Index 67.97 -2.92%
- European Financial Sector CDS Index 94.93 -1.12%
- Western Europe Sovereign Debt CDS Index 62.0 -1.59%
- Emerging Market CDS Index 268.12 -1.19%
- 2-Year Swap Spread 6.75 -1.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -2.5 -2.75 basis points
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- Yield Curve 255.0 +3.0 basis points
- China Import Iron Ore Spot $133.40/Metric Tonne -.67%
- Citi US Economic Surprise Index 44.10 -1.1 points
- Citi Emerging Markets Economic Surprise Index -14.3 +2.5 points
- 10-Year TIPS Spread 2.16 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +340 open in Japan
- DAX Futures: Indicating +81 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -1.04% 2) Computer Hardware -.62% 3) Oil Service -.51%
Stocks Falling on Unusual Volume:
- AAPL, STLD, EDD, JBL, AFSI, MWE, F, ENTA, EC, PAY, AEGN, GOGO, AVD, ONTX, ADUS, ALB, ESV, EQT, LNKD, GM, MU, BNFT, COO, IRBT, PSG, KKR, EE and NBL
Stocks With Unusual Put Option Activity:
- 1) JBL 2) CCL 3) PAY 4) F 5) XLU
Stocks With Most Negative News Mentions:
- 1) F 2) COP 3) CVX 4) GS 5) TXN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.75% 2) HMOs +1.33% 3) Medical Equipment +1.29%
Stocks Rising on Unusual Volume:
- VCI, ABTL, OMER, HALO, VNET, YRCW and NPSP
Stocks With Unusual Call Option Activity:
- 1) JBL 2) HALO 3) WIN 4) RSH 5) AFSI
Stocks With Most Positive News Mentions:
- 1) JBL 2) FDX 3) TWTR 4) OSK 5) GLD
Charts:
Evening Headlines
Bloomberg:
- China Home Prices Rose in November as Shenzhen Led Increases.
New home prices in China’s four major cities rose, with the southern
business hub of Shenzhen posting the biggest gain in almost three years,
as property measures by local governments failed to deter buyers. Shenzhen
and Guangzhou posted increases of 21 percent from a year earlier, while
prices climbed 18 percent in Shanghai and 16 percent in Beijing, data
from the National Bureau of
Statistics showed today. Prices rose from a year earlier in 69
of 70 cities tracked by the government last month, it showed.
- Aussie Broken Link With U.S. Yield Spells Drop: Australia Credit. The tendency for the Australian
dollar to rise in step with U.S. bond yields has broken down and
that signals more declines for the world’s worst-performing
major currency. The 60-day correlation between the Aussie dollar and
Treasury yields was -0.42 last week, where a reading of -1 means
the two move in opposite directions. That’s the strongest
negative link since 2006 and follows a five-year period ending
in June in which the assets tended to move together as the
outlook for the global economy fluctuated.
- Asian Stocks Rise a Second Day Ahead of Fed Decision.
Asian stocks rose, with the benchmark regional index climbing for a
second day, as investors await a Federal Reserve decision on its
stimulus program. Honda Motor Co. (BHP), which gets 80 percent of its
sales abroad, gained 2.2 percent as the yen weakened against the dollar,
boosting Japanese exporters. Casio Computer Co. (6952) climbed 4.8
percent in Tokyo after Morgan Stanley advised buying the shares.
Wotif.com Holdings Ltd. slumped 30 percent after the Australian
online travel company said it will report lower profit.
The MSCI Asia Pacific Index added 0.5 percent to 138.22 as
of 11:21 a.m. in Hong Kong.
- Rebar Drops to Three-Week Low as China May Curb Property Prices. Steel reinforcement-bar futures
declined to the lowest level in three weeks as iron ore dropped
after gains in home prices in China spurred concern the central government will take measures to rein in the property market. Rebar for May delivery on the Shanghai Futures Exchange lost as much as 0.5 percent to 3,644 yuan ($600) a metric ton,
the lowest intra-day level for the most-active contract since
Nov. 26. Futures, falling for a fifth day, traded at 3,653 yuan
by 11:27 a.m. local time.
- Rubber Declines for Second Day on Signs Demand Slowing in China. Rubber dropped for a second day as
rising stockpiles in China and Japan signaled slow demand for the commodity used in tires. Futures for delivery in May on the Tokyo Commodity Exchange
fell as much as 0.7 percent to 279.2 yen a kilogram ($2,710 a
metric ton) before trading at 280 yen at 11:39 a.m. local time.
Prices fell 7.4 percent this year.
- Spanish Defaults Surge as Banks Forced to Come Clean: Mortgages.
Liliana Proano Males won’t be
decorating her house in Madrid this Christmas because she’s
about to lose it. Males and her husband, who was fired from his job
during the depths of the financial crisis in 2009, can no longer afford
their mortgage. With Spain’s persistently high unemployment rate now at 26 percent, the couple is among the 350,000 homeowners
who may be foreclosed upon by lenders in the next two years as
the housing crisis worsens, according to AFES, a Madrid-based
association that advises on restructuring debt. Since 2008,
about 150,000 families have been hit with a foreclosure.
Wall Street Journal:
- The Judge and the NSA. In Klayman v. Obama, a lower court can't simply wish away Supreme Court precedent. Federal Judge
Richard Leon
has become a sudden political celebrity after his remarkable
opinion holding that antiterror surveillance is unconstitutional and,
even more remarkably, enjoining the entire program. If only his legal
reasoning were as compelling as his new repute.
Fox News:
MarketWatch.com:
CNBC:
- Bernanke should lay groundwork for QE pullback.
It should be a slightly more hawkish Ben Bernanke presiding over his
final press briefing Wednesday, even though many Federal Reserve
watchers say odds are against a move to taper back on stimulus just now.
- US preparing Citigroup, Merrill Lynch charges: report. The U.S. Justice Department is preparing to file civil fraud charges
against Citigroup and Bank of America's Merrill Lynch unit over their
sale of flawed mortgage securities ahead of the financial crisis,
according to people familiar with the probes. Civil investigators
have compiled evidence that allegedly shows that investors lost tens of
billions of dollars after purchasing securities Citigroup had marketed
as safe even though the bank had reason to believe otherwise, one person
said.
Zero Hedge:
ValueWalk:
Business Insider:
Washington Post:
- Obamas, Biden to skip the Winter Olympics in Russia. The
White House announced Tuesday that President Obama, Vice President
Biden and the first lady will not attend the Winter Olympics in Sochi,
Russia, in February, a pointed snub by an administration that is feuding
with Russian leaders on a range of foreign policy and human rights
issues.
South China Morning Post:
People's Daily:
- Other Nations Won't Tolerate Japan as Military Power. No country
with a normal development strategy will tolerate Japan becoming a major
military power as the country denies history and justice, and challenges
international order after World War II, according to a commentary
published by People's Daily.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 127.5 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 102.75 +1.25 basis points.
- NASDAQ 100 futures +.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for November are estimated at 954K.
- Building Permits for November are estimated to fall to 990K versus 1034K in October.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,999,000 barrels versus a -10,585,000 barrel decline the prior week.
Gasoline supplies are estimated to rise by +1,718,000 barrels versus a
+6,717,000 barrel gain the prior week. Distillate Inventories are
estimated to rise by +209,000 barrels versus a +4,541,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to rise +.14% versus a +.2% gain the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
- Fed QE3 Pace for December is estimated at $85B versus $85B in November.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bernanke speaking, UK Unemployment Rate, weekly MBA mortgage applications report, $35 5Y T-Note auction, (CVS) analyst day, (JCI) analyst day and the (F) analyst briefing could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker 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.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 15.96 -.44%
- Euro/Yen Carry Return Index 147.31 -.36%
- Emerging Markets Currency Volatility(VXY) 9.12 +.55%
- S&P 500 Implied Correlation 53.69 -.04%
- ISE Sentiment Index 126.0 -32.68%
- Total Put/Call .91 +15.19%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.88 +.73%
- European Financial Sector CDS Index 96.20 +.03%
- Western Europe Sovereign Debt CDS Index 63.0 +9.1%
- Emerging Market CDS Index 272.15 -1.25%
- 2-Year Swap Spread 8.25 -1.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap .25 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- Yield Curve 252.0 -3.0 basis points
- China Import Iron Ore Spot $134.30/Metric Tonne -.44%
- Citi US Economic Surprise Index 45.20 +9.8 points
- Citi Emerging Markets Economic Surprise Index -16.8 -1.5 points
- 10-Year TIPS Spread 2.18 unch.
Overseas Futures:
- Nikkei Futures: Indicating +75 open in Japan
- DAX Futures: Indicating +23 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedge, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Spain’s Regions Can’t Endure More Budget Cuts, Andalusia Says. Spanish regions can’t endure more
spending cuts, Andalusia’s budget chief said, as she defended
levying a tax on bank deposits. Maria Jesus Montero Cuadrado, budget
chief of Spain’s most populous region, is resisting central government
demands for more cuts through 2015. Undermining health or education is a
“red line” for Andalusia, which has a 36 percent jobless rate, she said in an interview in Seville yesterday.
- China Shibor Jumps Most in Seven Weeks on Year-End Cash Demand.
The Shanghai interbank offered rate, or Shibor, for one-month yuan loans
climbed 68 basis points to 6.24 percent in the biggest jump since Oct.
25, according to the National Interbank Funding Center. The seven-day repurchase rate, a gauge of cash
supply in the banking system, rose the most in more than a month
as the central bank refrained from injecting money for the
fourth auction in a row, according to a trader at a primary
dealer required to bid at the auctions.
- Emerging-Market ETF Declines Before Fed as Turkey Tumbles.
The iShares MSCI Emerging Markets Index exchange-traded fund fell,
snapping a two-day advance, ahead of the Federal Reserve’s policy
statement tomorrow. Turkey’s stocks led world losses amid corruption
arrests. The developing-nation ETF slipped 0.4 percent to $41.07 at 10:48 a.m. in New York. The Borsa Istanbul
National 100 Index sank 5.2 percent after the sons of two
cabinet ministers and the chief executive officer of Turkey’s
largest state-owned bank were arrested as part of a corruption
probe.
- European Stocks Drop Before Fed Meeting; CGG, Rexel Fall.
European stocks retreated, following
their biggest rally in two months, as investors awaited the
outcome of a two-day Federal Reserve meeting starting today. CGG SA, the
largest seismic surveyor of oilfields, fell the most on the benchmark
index after cutting its 2013 earnings target. Rexel (RXL) SA lost 1
percent as Ray Investment SARL sold a 7 percent stake in the company.
Zurich Insurance Group AG (ZURN) climbed 1.9 percent after naming Swiss
Re Ltd.’s George Quinn as its new
chief financial officer.
The Stoxx Europe 600 Index dropped 0.7 percent to 311.31 at
the close of trading.
- Corn Plummeting Spurs Talk of ’80s U.S. Farmland Bust: Mortgages.
American farmers have prospered during a three-year boom in corn and cropland prices. As values have soared since 2011,
farmers bought more acres and upgraded their harvesters to
produce a record corn crop of almost 14 billion bushels in 2013.
Now, as corn prices start to decline, bankers and
agricultural economists are predicting a slowdown in farmland
prices that could turn into a bust. “I can see the fear in farmers’ eyes
when they think of
all the moving pieces around the world gutting the value of next year’s
crop,” said David Kohl, an agricultural economist and president of
consulting firm AgriVisions, who last week spoke at several farming
conferences in northern Nebraska. “Most of them
know the boom in corn prices and farmland prices is coming to a
screeching halt.”
- Riskiest U.S. Borrowers Expand to Six-Month High: Credit Markets.
The number of U.S. companies with the lowest credit ratings has jumped
to the highest level in six months after speculative-grade borrowers
obtained a record amount of bonds and loans in 2013. Some 15 borrowers
are rated B3 with a "negative" outlook, up from 148 three months ago and
the most since reaching a high for the year of 160 in June, according
to Moody's Investors Service. Riskier borrowers are benefiting from the
Fed's decision to hold interest rates near zero for a fifth year,
spurring investor demand for higher-yielding assets. Junk-rated
companies in the U.S. have raised about $377 billion of bonds and $310.8
billion of new loans this year, according to Bloomberg.
- Fed’s $4 Trillion in Assets Draw Lawmakers’ Scrutiny. The
Federal Reserve’s balance sheet is poised to exceed $4 trillion,
prompting warnings its record easing is inflating asset-price bubbles
and drawing renewed lawmaker scrutiny just as Janet Yellen prepares to
take charge. The Fed’s assets rose to a record $3.99 trillion on
Dec. 11, up from $2.82 trillion in September 2012, when it embarked on a
third round of bond buying. Policy makers meet today and tomorrow to
decide whether to start curtailing the $85 billion monthly pace of
purchases. Among Fed officials, “there’s discomfort in the sense that
the portfolio could grow almost without limit,” former Fed Vice
Chairman Donald Kohn said last week during a panel discussion in
Washington. Kohn said there
was “discomfort in the potential financial stability effects” and
added: “There’s some legitimacy in those discomforts.”
- High-Speed Trading, Interest Rates Pose Risks, Treasury Says. The
U.S. financial system’s
vulnerabilities include a sudden spike in interest rates amid greater
risk-taking and high-frequency trading, the Treasury Department said.
While threats to stability have “generally abated” from a year ago,
they remain in markets for short-term funding and credit, interest rates
and volatility, and in automated, high-speed trading that represents a
significant portion of daily equity and foreign exchange volumes, the
Treasury’s Office of Financial Research said in its annual report
released today in Washington.
Wall Street Journal:
- Senate Advances Budget Deal. Two-Year Budget Plan All but Ends Threat of Another Government Shutdown. A two-year budget deal cleared its last major hurdle Tuesday as the
Senate voted to advance a compromise designed to ease the impact of
impending spending cuts and avoid a government shutdown when funding
runs out in mid-January.
- India Removes Security Barriers Around U.S. Embassy. Move Follows Arrest of Indian Diplomat in New York. India retaliated for the arrest of one of its diplomats in New York by
dismantling security barriers on streets around the U.S. embassy in New
Delhi and revoking some privileges given to American consular officials.
- Dollar Lower Against Yen as Possible Fed Tapering in Focus. The dollar fell against the yen amid profit taking during Asian
trading Monday as investors adjusted their positions ahead of a Federal
Reserve policy decision later this week that could see it start scaling
back its massive bond-buying program. The greenback lost some of its gains against the yen as it rose to a
five-year high last week on growing speculation that the Fed will begin
winding down its monthly $85 billion stimulus at its Dec 17-18 policy
meeting.
MarketWatch:
CNBC:
- Fed-inflated stocks a 'hall of mirrors': Jim Grant. (video) The
stock market is being led by the dangerous "monetary manipulation" of
the Federal Reserve's $85-billion-a-month in quantitative easing bond
purchases, Jim Grant—founder and editor of Grant's Interest Rate
Observer—said Tuesday, as the central bank began its final meeting of the year. "The stock market is now a tool of Fed policy," he said on CNBC's "Squawk Box". "What the Fed is doing is an exercise in price control. This is
'stocks.gov' [and] 'bonds.gov,'" Grant said. "The clear and present risk
of the stock market is we're living ... in a hall of mirrors" because
the Fed's accommodative policy is distorting the calculations by which
the market has been traditionally valued.
ZeroHedge:
Business Insider:
The Blaze:
Politico:
- Next Obamacare crisis: Small-business costs? Think the canceled health policies hurt the Obamacare cause? There’s
another political time bomb lurking that could explode not too long
before next year’s elections: rate hikes for small businesses.
Reuters:
- UAW wants to eliminate two-tier wage system: official. A top official
with the United Auto Workers said the American labor union wants to
eliminate the two-tier wage system that pays new automotive workers at a
lower rate than veterans.
Norwood Jewell,
nominated to serve as one of three vice presidents when the union meets
next June to ratify its new leaders, said on Monday that the UAW wants
to dump the two-tier scale that pays entry-level hires at slightly more
than half the rate of veteran workers.
Financial Times:
- China accuses US of ‘harassing’ naval vessels. A
Chinese newspaper has accused a US navy ship of “harassing” a group of
Chinese naval vessels in connection with a maritime incident that
occurred as US Vice-President Joe Biden was visiting China.
Telegraph:
MailOnline:
- Facebook(FB) tracks everything you type even if you DON'T post the update or comment. Have you ever written a comment, or
Facebook status, before deciding not to post it? According to new
Facebook research, 70 per cent of us do this regularly. The
study found that men are more likely to 'self-censor' their social
network posts, compared to women, and this is especially the case if
they have a lot of male friends. More
surprising, however, is the reason why the site knows this information -
because it can track what you type, even if you never post it.
