Monday, January 26, 2015

Tuesday Watch

Posted by Gary .....at 10:55 PM
Evening Headlines 
Bloomberg:
  • S&P Cuts Russia's Rating to Junk; Sanctions and Oil Slump Hammer Ruble. Russia’s foreign-currency credit rating was cut to junk by Standard & Poor’s, putting it below investment grade for the first time in a decade, as policy makers struggle to boost growth amid international sanctions and a drop in oil prices. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement released on Monday, the same as countries including Bulgaria and Indonesia. The ratings firm said the outlook is “negative.” Russian stocks on U.S. exchanges tumbled with the ruble following the announcement which came after the close of equity trading in Moscow.
  • Greece’s Odd-Couple Coalition Only Agrees About Ending Austerity. The two men disagree on just about everything, except this: for Greece, the time of German-dictated austerity must end. Alexis Tsipras became prime minister of Greece on Monday by vowing to challenge the budget-cutting policies demanded by the European Union and International Monetary Fund in return for a 240 billion euro ($270 billion) rescue plan. 
  • Syriza’s ‘Bella Ciao’ Casts Shadow Over Italy Presidential Vote. As Greeks welcome Syriza’s historical victory with the Italian partisan anthem “Bella Ciao”, Italian Premier Matteo Renzi is nervously eying resistance within his own party before a key presidential vote this week. “By gaining a clear lead and moving to form a new government in a short time, Syriza leader Alexis Tsipras is also galvanizing his Italian supporters, including a significant number of Renzi’s opponents within his party”, Francesco Galietti, founder of research firm Policy Sonar in Rome, said in a phone interview.
  • Nomura says odds up of Abenomics derailing as tax pledge doubted. Nomura Holdings Inc. says the probability that Prime Minister Shinzo Abe's economic policies will end badly is increasing. The worst-case scenario for Nomura chief credit strategist Toshihiro Uomoto to the end of 2017: the economy contracts in the first half of 2016, Abe delays a sales tax rise for a second time, and the Bank of Japan boosts asset purchases to suppress interest rates, causing the yen to tumble. This month, he raised the probability of these events unfolding to 10 per cent to 20 per cent or more, from about 10 per cent. "Signs are mounting that Japan's fiscal sustainability is beginning to crumble," said Uomoto, ranked Japan's No. 1 credit analyst for the past two years by Nikkei Veritas. 
  • UBS Says Wealthy Asians Are Abandoning Australian Dollars. Asia’s wealthy are falling out of love with the Aussie dollar as record-low yields and sustained declines persuade them to look elsewhere, according to UBS Group AG. (UBSG) Many of the bank’s wealthiest clients in the region began to abandon the currency as Australia’s bond yield premium over the U.S. slid and the Federal Reserve discussed raising interest rates, said Simon Smiles, Zurich-based chief investment officer for ultra-high-net-worth individuals. The 10-year yield is 74 basis points above that of the U.S., down from 130 a year ago. 
  • Rising Vacancies and Default Auctions Show Singapore Property Is on the Decline. The bargain hunters who stuffed themselves into the 50-seat conference room are another sign of the decline of Singapore’s housing market. After five years of price gains, values are falling and defaults are rising following government measures to curb lending and a decline in the number of foreign buyers. Banks auctioned 118 repossessed homes last year, about 10 times the number in 2013, said Mok Sze Sze, head of Singapore auctions at broker Jones Lang LaSalle Inc.
  • Asian Stocks Head for Two-Month High on Yen, Europe Optimism. Asian stocks rose, poised for a two-month high, as a weaker yen buoyed Japanese shares amid optimism the actions of Greece’s new government won’t force the nation to leave the euro currency bloc. The MSCI Asia Pacific Index (MXAP) advanced 0.4 percent to 141.24 as of 9:03 a.m. in Tokyo. 
  • Nickel Leads Most Metals Lower as China Industrial Profits Slow. Most base metals declined as data showed industrial profits grew at the slowest pace on record last year in China, adding to signs that demand in the largest consumer may contract. Nickel lost as much as 1.4 percent while copper dropped as much as 0.5 percent. Industrial profits in 2014 grew at 3.3 percent, the weakest in records going back to 2000, according to data released by the National Bureau of Statistics in Beijing on Tuesday. The figure contracted for a third month in December, falling 8 percent. China’s industrial profits are “just another bit of bad news on top of other bad news,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Because the outlook is so gloomy for some time, it’s just reinforcing the downward movement.” 
  • Goldman Sachs’s Cohn Sees Oil Falling to $30 in Extended Slump. Oil prices will probably continue to decline and could reach as low as $30 a barrel, according to Gary Cohn, president of Goldman Sachs Group Inc. “We’re probably in the lower, longer view,” Cohn, a former oil trader, said Monday in an interview with CNBC.
  • U.S. Says Russian Spy Ring Sought NYSE, Sanction Secrets. Three Russians charged by the U.S. with espionage allegedly sought secrets tied to the New York Stock Exchange and U.S. economic sanctions on Russia, even while one bemoaned his tedious job’s lack of a James Bond flair. The U.S. investigation of the alleged spy ring started within months of the Federal Bureau of Investigation’s June 2010 arrest of 10 Russian agents dubbed the “Illegals,” who had been on “deep cover” assignments, some living in the U.S. for as long as a decade. That year, each of the 10 pleaded guilty to conspiring to act as an unregistered agent of a foreign government, after which they were returned to Russia in a prisoner exchange.
  • Microsoft(MSFT) Business-Software License Sales Miss Estimates. Microsoft Corp. (MSFT)’s software-license sales to businesses fell short of analysts’ estimates in the fiscal second quarter, hurt by weak sales in Japan and China. Commercial-licensing revenue fell to $10.7 billion in the period that ended Dec. 31, the world’s largest software maker said Monday in a statement. Analysts on average had projected $10.9 billion, based on a survey conducted by Bloomberg. Unearned revenue, a measure of future sales, was $21.2 billion, compared with estimates of $21.8 billion. The stock slipped 3 percent in extended trading. 
  • United Technologies(UTX) Cites Surprise Dollar Gain as Forecast Pared. A surging U.S. dollar against the euro and other currencies surprised United Technologies Corp. (UTX) and forced a cut in the company’s annual profit forecast just weeks after it was given to investors. United Technologies slid 2.1 percent to $116.20 at 5:04 p.m. in New York after the close of regular trading. The euro climbed 0.3 percent to $1.1238 at 5 p.m. in New York after sliding to $1.1098, the weakest level since September 2003. 
Wall Street Journal:
MarketWatch.com:
  • U.S. spies on millions of cars. DEA uses license-plate readers to build database for federal, local authorities. The Justice Department has been building a national database to track in real time the movement of vehicles around the U.S., a secret domestic intelligence-gathering program that scans and stores hundreds of millions of records about motorists, according to current and former officials and government documents.
Zero Hedge:
Business Insider:
NY Times:
  • Investment Riches Built on Auto Loans to Poor. Across the country, there is a booming business in lending to the working poor — those Americans with impaired credit who need cars to get to work. But this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars. An influx of investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution.
Reuters:
Telegraph:
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 69.75 +1.0 basis point.
  • S&P 500 futures -.03%.
  • NASDAQ 100 futures -.06%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (MMM)/1.80
  • (AKS)/.08
  • (AAL)/1.51
  • (BMY)/.41
  • (CAT)/1.57
  • (CIT)/.89
  • (COH)/.66
  •  (GLW)/.38
  • (DHR)/1.03
  • (DD)/.71
  • (FCX)/.34
  • (ITW)/1.13
  • (LXK)/1.15
  • (LMT)/2.85
  • (NUE)/.56
  • (OSK)/.25
  • (PH)/1.55
  • (AMGN)/2.05
  • (AAPL)/2.59
  • (T)/.60
  • (BXP)/1.26
  • (EA)/.92
  • (ILMN)/.78
  • (JNPR)/.31
  • (SYK)/1.44
  • (X)/.80
  • (VMW)/1.07
  • (WDC)/2.11
  • (YHOO)/.29
Economic Releases
8:30 am EST
  • Durable Goods Orders for December are estimated to rise +.4% versus a -.7% decline in November.
  • Durables Ex Transports for December are estimated to rise +.6% versus a -.4% decline in November.
  • Cap Goods Orders Non-Defense Ex Air for December are estimated to rise +.9% versus unch. in November.
9:00 am EST
  • The S&P/CS 20 City MoM SA for November is estimated to rise +.65% versus a +.76% gain in October.
9:45 am EST
  • The Preliminary Markit US Services PMI for January is estimated to rise to 53.8 versus 53.3 in December.
10:00 am EST
  • New Home Sales for December are estimated to rise to 450K versus 438K in November.
  • The Consumer Confidence Index for January is estimated to rise to 95.5 versus 92.6 in December.
  • The Richmond Fed Manufacturing Index for January is estimated to fall to 5.0 versus 7.0 in December.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Australia Consumer Price Index, US weekly retail sales reports and the (CRZO) analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
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Stocks Reversing Slightly Higher into Final Hour on Central Bank Hopes, Yen Weakness, Short-Covering, Gaming/Hospital Sector Strength

Posted by Gary .....at 3:26 PM
Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 16.0 -3.96%
  • Euro/Yen Carry Return Index 139.32 +1.02%
  • Emerging Markets Currency Volatility(VXY) 10.28 -3.38%
  • S&P 500 Implied Correlation 65.22 +.38%
  • ISE Sentiment Index 68.0 +9.68%
  • Total Put/Call .89 -29.37%
  • NYSE Arms .83 -48.96% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 66.22 -2.28%
  • America Energy Sector High-Yield CDS Index 725.0 -.75%
  • European Financial Sector CDS Index 57.46 -.70%
  • Western Europe Sovereign Debt CDS Index 23.58 +1.55%
  • Asia Pacific Sovereign Debt CDS Index 67.99 +1.48%
  • Emerging Market CDS Index 391.37 +.79%
  • iBoxx RMB China Corporates High Yield Index 111.78 +.02%
  • 2-Year Swap Spread 25.25 unch.
  • TED Spread 24.5 +.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +1.0 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .01% -1.0 basis point
  • Yield Curve 131.0 unch.
  • China Import Iron Ore Spot $63.54/Metric Tonne -4.34%
  • Citi US Economic Surprise Index -3.70 -2.2 points
  • Citi Eurozone Economic Surprise Index -.4 +.1 point
  • Citi Emerging Markets Economic Surprise Index -10.50 -.2 point
  • 10-Year TIPS Spread 1.61 +1.0 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +247 open in Japan
  • DAX Futures: Indicating +29 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my biotech/retail sector longs 
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long
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Today's Headlines

Posted by Gary .....at 3:00 PM
Bloomberg:
  • Ukrainians Direct Fury at Russia as Mariupol Victims Mourned. Ukrainians gathered to mourn 30 civilians killed by rockets in Mariupol, blaming Russia after the deadliest attack yet on the strategic port city, as fighting between government forces and separatists spread. As President Petro Poroshenko called a day of mourning, dozens congregated Sunday to light candles on Kiev’s Independence Square, the area known as Maidan that was the epicenter of the revolt that overthrew the government last year. In the Black Sea city of Odessa and in Kharkiv, near the Russian border, people gathered at the Russian consulate.
  • EU Renews Push for Russia Sanctions as Clashes Sweep Ukraine. European Union nations edged closer to tightening sanctions against Russia as fighting between government troops and rebels consumed the front line in eastern Ukraine in the deadliest escalation since a September truce. The EU will add more individuals this week to a list of those facing visa bans and asset freezes over Russia’s involvement in the conflict, Latvian President Andris Berzins, whose country holds the 28-nation bloc’s rotating presidency, said in an interview Monday. The recent events in Ukraine are “more than worrying,” French Foreign Minister Laurent Fabius said, with his German counterpart Frank-Walter Steinmeier warning that more attacks would prompt an EU response.
  • Russia Credit Rating Cut to Junk by S&P First Time in Decade. Russia’s credit rating was cut to junk by Standard & Poor’s, putting it below investment grade for the first time in a decade. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement. The grade, which is on par with Bulgaria and Indonesia, has a negative outlook. The world’s biggest energy exporter is on the brink of a recession after oil prices fell to the lowest since 2009 and the U.S. and its allies imposed sanctions over President Vladimir Putin’s actions in Ukraine. The penalties have locked Russian corporate borrowers out of international debt markets and curbed investor appetite for the ruble, stocks and bonds. “Russia’s monetary policy flexibility has become more limited and its economic growth prospects have weakened,” S&P said in a statement. “We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy.”
  • Tsipras Win Draws French Congratulations, German Threat. France’s Francois Hollande congratulated Greek Prime Minister-elect Alexis Tsipras on his election victory while urging a new government to stay the reform course, as a top German official threatened a cut-off in aid. Hollande stressed Greco-French “friendship,” even as he called on Tsipras’s new administration to adhere to “growth and stability” in the euro area, according to a government statement in Paris late Sunday. While Chancellor Angela Merkel’s government didn’t comment on Tsipras, one of her top lieutenants said Germany could scrap financial assistance if a new anti-austerity Syriza government veers off course. 
  • Spain Deflation Risks Mount as Producer Prices Drop Annual 3.7%. Spanish producer prices plunged the most in more than five years last month, adding to concerns that the economy risks falling into a deflationary spiral. Prices of goods leaving factories, refineries and mines dropped 3.7 percent in December from a year earlier, the National Statistics Institute in Madrid said today. Economists forecast a fall of 3.5 percent, according to a Bloomberg News survey. Prices fell 1.1 percent from the previous month.
  • Boko Haram’s Attack on Nigerian State Capital Leaves 65 Dead. At least 65 people were killed in an attack Sunday by Islamist militants on Maiduguri, the capital of the northeastern Nigerian state of Borno, a local militia member said. Armed forces killed 56 militants, while nine soldiers died during the clashes as the military and local vigilante groups fended off an attempt by Boko Haram to capture Maiduguri, Hassan Ibrahim said by phone from the city. The assault was the first major fighting in the state capital since an attack on an army detention center in March. 
  • European Stocks Extend Seven-Year High on ECB After Greek Vote. European stocks rose for an eighth day amid optimism about central-bank stimulus, while Greek shares dropped as opposition party Syriza won the Sunday election. The Stoxx Europe 600 Index advanced 0.6 percent to 372.39 at the close of trading in London, after earlier losing as much as 0.5 percent.
  • Iron Ore Extends Rout as China Slows, Banks Reduce Forecasts. Iron ore retreated to the lowest level in more than five years as a slowdown in China hurt the outlook for demand in the world’s biggest user while the largest mining companies add to supply, boosting a surplus. Ore with 62 percent content delivered to Qingdao, China, tumbled 4.3 percent to $63.54 a dry metric ton, according to data by Metal Bulletin Ltd. That’s the lowest price on record going back to May 2009, and was the biggest one-day fall since Nov. 18. The commodity is 11 percent lower this year.
Wall Street Journal:
  • Medicare to Rework Billions in Payments. HHS Secretary Burwell Wants 50% of Payments Based on Performance by End of 2018. The Obama administration on Monday set an ambitious goal to rework hundreds of billions of dollars in Medicare payments to doctors and hospitals in an effort to reduce waste and make older Americans healthier.
  • European Regulators Pressure Big Banks to Increase Capital. Banks Encouraged to Raise Capital Well Above Formal Regulatory Limits. European regulators are turning up the pressure on large banks to further strengthen their balance sheets amid nagging concerns about Europe’s financial and economic health.
MarketWatch.com:
  • Return of the 3% down payment. It is getting easier for some buyers to land a house with less money up front. More lenders are lowering down-payment requirements, allowing borrowers to commit 3%—or even less—of a home’s purchase price to get a mortgage. Many had been requiring down payments of at least 20% since the recession began.
CNBC:
ZeroHedge:
Business Insider: 
Reuters:
  • Shanghai Plans Stress Test at Banks Over Property Loans. Banks in Shanghai are asked to conduct stress texts over their property loans, citing notice issued by China Banking Regulatory Commission's Shanghai office. The city's banking regulator also asked for continued monitoring over risks stemming from loans borrowed by major property companies outside Shanghai, the report says.
  • Russian rouble weakens sharply after S&P downgrade. Russia's rouble weakened sharply late on Monday to trade around 5 percent lower against the U.S. dollar after ratings agency S&P downgraded Russia's sovereign credit rating to below investment grade. The rouble was trading at 67.56 at 1824 GMT, around 5 percent weaker than the previous close on the Moscow Exchange.
  • Weak retail business in Europe hits Seagate revenue. Hard-drive maker Seagate Technology Plc's revenue forecast for the current quarter fell well short of analyst estimates, largely due to weakness in Europe, sending the company's shares down as much as 12 percent.
  • Mega-funds start to beat retreat from emerging markets. Big pension, insurance and sovereign funds that kept faith with emerging markets during the massive selloffs of 2013 and 2014 may be starting to waver, potentially depriving the sector of a key source of support.
Financial Times:
  • Athens and creditors dig in on Greek debt. Greece and its international creditors dug in on opposite sides of Europe’s struggle over debt, austerity and economic reform on Monday as Alexis Tsipras, leader of the radical leftwing Syriza party, was sworn in as the new prime minister in Athens. Mr Tsipras dismayed EU governments that oppose extensive debt relief for Greece by moving swiftly to form a coalition with the Independent Greeks, a small, rightwing party that is as fiercely opposed as Syriza to the strict conditions attached to the nation’s €245bn bailout.
Telegraph:
Bild:
  • Merkel Ally Friedrich Says Germany May Scrap Greek Aid. Hans-Peter Friedrich, deputy caucus leader for Merkel's Christian Democratic-led bloc in lower house of parliament, warns Germany may scrap debt assistance to Greece. "The Greeks have the right to vote for whom they want," Friedrich tells Bild in interview. "We have the right to no longer finance Greek debt." "The Greeks now must take responsibility and cannot burden German taxpayers," Friedrich says.
Marbridge Daily:
  • Less Than 60% of Online Goods in China Are Genuine Products. China's State Administration for Industry and Commerce (SAIC) has tested 92 batches of products sold online in the second half of 2014 and found that only 54 were genuine articles, equating to 58.7%. The percentage of genuine items on Alibaba Group's (NYSE: BABA) C2C e-commerce site Taobao was the lowest at 37.25%.
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Bear Radar

Posted by Gary .....at 1:16 PM
Style Underperformer:
  • Large-Cap Growth -.01%
Sector Underperformers:
  • 1) Disk Drives -1.54% 2) Computer Hardware -1.42% 3) Software -.93%
Stocks Falling on Unusual Volume:
  • BKD, MAT, STX, TLK, WDC, UPS, CONE, STRA, ACAT, COUP, ETP, KMB, HLSS, COV, GWW, VRSN, SEMI, MNRO, DLTR, MDT, ENTA, JBSS, ORB, PLCE, PODD, RMTI and ETP
Stocks With Unusual Put Option Activity:
  • 1) STX 2) OIL 3) EMR 4) SHLD 5) ILMN
Stocks With Most Negative News Mentions:
  • 1) UPS 2) PX 3) VALE 4) VRSN 5) STRA
Charts:
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Bull Radar

Posted by Gary .....at 11:54 AM
Style Outperformer:
  • Small-Cap Growth +.38%
Sector Outperformers:
  • 1) Networking +4.57% 2) Alt Energy +1.62% 3) Biotech +1.38%
Stocks Rising on Unusual Volume:
  • MWV, OLED, HCA, RKT, AXS, RGP, GNRC, ASPS, POST, HWAY, SEMG, LCI, RGP, DXCM, DHI and ETE
Stocks With Unusual Call Option Activity:
  • 1) AMD 2) HCA 3) NPSP 4) NFX 5) RMTI
Stocks With Most Positive News Mentions:
  • 1) GRMN 2) KSU 3) BBBY 4) VLO 5) MWV
Charts:
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