Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.76 -5.49%
- Euro/Yen Carry Return Index 140.80 +.10%
- Emerging Markets Currency Volatility(VXY) 10.21 -1.07%
- S&P 500 Implied Correlation 61.40 -.90%
- ISE Sentiment Index 97.0 -23.62%
- Total Put/Call .97 +11.49%
Credit Investor Angst:
- North American Investment Grade CDS Index 6165 -2.98%
- America Energy Sector High-Yield CDS Index 688.0 -.14%
- European Financial Sector CDS Index 56.58 -3.98%
- Western Europe Sovereign Debt CDS Index 23.35 -4.52%
- Asia Pacific Sovereign Debt CDS Index 65.0 +.32%
- Emerging Market CDS Index 378.36 -2.10%
- iBoxx Offshore RMB China Corporates High Yield Index 113.82 +.02%
- 2-Year Swap Spread 29.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -20.75 +2.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 143.0 -2.0 basis points
- China Import Iron Ore Spot $64.01/Metric Tonne +.90%
- Citi US Economic Surprise Index -47.80 -2.2 points
- Citi Eurozone Economic Surprise Index 49.8 -.8 point
- Citi Emerging Markets Economic Surprise Index -9.70 +1.0 point
- 10-Year TIPS Spread 1.73 -3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +70 open in Japan
- DAX Futures: Indicating +20 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Putin Rejects Talks to Bolster Ukraine Cease-Fire. (video)
- European Commission Accepts Greek Economic Measures After Review. (video) Euro-region finance ministers approved
Greece’s package of new economic measures and paved the way for
an extension to the country’s bailout agreement. The agreement came
on a conference call on Tuesday,
according to an official involved in the talks who asked not to
be named in line with policy. It was confirmed by Slovak Finance
Minister Peter Kazimir on Twitter. Based on the provisional agreement
between Greece and its
official creditors on Feb. 20, the approval of the list was a
condition for extending the availability of bailout funds for
another four months. The current program, which has been keeping
Europe’s most indebted state afloat since 2010, was scheduled to
expire at the end of this month. The list of commitments includes
maintaining current state-asset sales, consolidating pension funds to
reduce costs and
revamping tax collection and administration.
- Russian Bonds Slide as Second Junk Rating Upends Ruble Rally. Russian borrowing costs surged the most in
more than a month and the ruble weakened on concern the nation’s
second junk rating this year will force some investors to sell
sovereign bonds. The yield on local-currency government bonds jumped the
most since Jan. 13 in the first trading day for domestic
securities since Moody’s Investors Service cut Russia to Ba1 on
Friday. The ruble lost 1.5 percent against the dollar, paring
the biggest gain in emerging markets this month, while banks led
declines in the benchmark Micex Index.
- Fidelity Calls End to Emerging Local Bond Rally as Dollar Climbs. The last time developing nations’ local
bonds were this expensive relative to their dollar debt, the
biggest losses on record ensued. Some of the world’s largest
fund managers say another selloff may be in the offing now. Domestic notes sold by emerging-market governments have
returned 2.5 percent this year in local-currency terms, the best
start to a year since 2012, as interest-rate reductions from
Indonesia to Romania cut yields to within 0.48 percentage point
of equivalent dollar-denominated bonds. That’s too small a
spread to reward buyers for the exchange-rate risk, according to
investors including Fidelity Worldwide Investment and Pictet
Asset Management Ltd.
- Europe Stocks Extend 2007 High as Greek Shares Jump on Aid Deal. European stocks extended a seven-year high
as Greece reached a bailout deal and the Federal Reserve pledged
patience on raising interest rates. Greek shares surged. The Stoxx Europe 600 Index rose 0.6 percent to 387.25 at
the close of trading, pushing its gains this year to 13 percent.
The U.K.’s benchmark FTSE 100 Index closed at an all-time high,
climbing 0.5 percent to surpass the previous record in 1999.
Greece’s ASE Index soared 9.8 percent, following a market
holiday on Monday, as euro-area leaders approved a bailout
extension for four more months.
- Cattle Hides Replace Entrails as Dark Omens of Economy. (graph)
- Yellen Signals Fed to Be Flexible After Patient Guidance Changes. (video) Federal Reserve Chair Janet Yellen sought to
prepare investors for a change in the Fed’s pledge to be
“patient” on raising interest rates, saying it would provide
flexibility to tighten when conditions are ripe. A shift in guidance would signal the economy has improved
to the point where an increase “could be warranted at any
meeting,” while not necessarily committing policy makers to a
rate increase on a specific timetable, Yellen said in testimony
Tuesday before the Senate Banking Committee.
- Transocean(RIG) Leads $20 Billion Debt on Junk’s Cusp. Transocean Ltd. is poised to be the first in
a wave of energy-related issuers downgraded to junk status,
making the speculative-grade market even more vulnerable to the
fate of oil as concern mounts that crude will resume its slide. The world’s largest offshore driller, which has about $9
billion of borrowings, may be stripped of its investment-grade
ratings soon after it reports earnings Feb. 25, according to a
report last week from Barclays Plc. As much as $20 billion of
energy-related debt may be cut to junk within 18 months,
expanding what is already the largest part of the high-yield,
high-risk market by 11 percent, analysts led by Brad Rogoff and
Eric Gross wrote in the report.
ZeroHedge:
Style Underperformer:
Sector Underperformers:
- 1) Gaming -3.81% 2) REITs -2.01% 3) Biotech -1.32%
Stocks Falling on Unusual Volume:
- TEP, CBAY, DAKT, EXAS, HCN, DTYS, TRAK, WOR, HVT, ROSE, DPZ, DFT, ALKS, ANET, ORC, IMAX, AMT, MU, M, CLDT, SAH, AIR, OPHT, LEAF, XONE, VTR, RCAP and WOR
Stocks With Unusual Put Option Activity:
- 1) RMD 2) XLY 3) SMH 4) APA 5) FDX
Stocks With Most Negative News Mentions:
- 1) AAL 2) RIG 3) ROSE 4) MU 5) DO
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.12% 2) Alt Energy +1.86% 3) Steel +1.77%
Stocks Rising on Unusual Volume:
- FSLR, DEPO, GTLS, CYBR, SHOO, TOL, SPWR, ZINC, FLWS, SF, RLGY, LNG, NLS and CBRL
Stocks With Unusual Call Option Activity:
- 1) BK 2) LOW 3) HPQ 4) SLXP 5) ACAS
Stocks With Most Positive News Mentions:
- 1) COH 2) DISH 3) MTH 4) SF 5) ISIS
Charts:
Evening Headlines
Bloomberg:
- Sanctions Will Not Deter Putin: Rumer. (video) Eugene Rumer, senior associate and the director of Carnegie’s Russia and
Eurasia Program, discusses the Ukraine crisis with Bloomberg's Trish
Regan on "Street Smart."
- Greek Plan to Tackle Economy Goes Before Finance Chiefs. Greece’s month-old government is about to
find out whether a package of new economic measures sketched in
recent days is enough to win more funding from the rest of the
euro region to keep the country solvent. A draft list was sent to creditor institutions on Monday,
based on a provisional agreement on Feb. 20. A Greek government
official said the policies will be provided to the euro-area
group of finance ministers on Tuesday before they discuss on a
conference call whether the commitments go far enough.
- Asian Stocks Retreat as Investors Await Greece Policies, Yellen. Asian stocks dropped as investors awaited
details on Greece’s package of economic measures and Federal
Reserve Chair Janet Yellen’s testimony to lawmakers.
The MSCI Asia Pacific Index slipped 0.1 percent to 144.79
as of 9.01 a.m. in Tokyo, with seven of its 10 industry groups
retreating.
Wall Street Journal:
- Ukraine’s Hryvnia Hits New Low; New Problems for Cease-Fire. Ukrainian military delays artillery withdrawal; central bank acts on currency. Ukraine’s central bank moved to calm panicky currency markets on Monday
after the hryvnia plummeted to a new low against the dollar, while the
cease-fire in the country’s east showed more signs of unraveling.
- Jury Finds Palestinian Authority, PLO Liable for Terrorist Attacks in Israel a Decade Ago. Federal jury orders groups to pay $218.5 million to victims’ families.
A federal jury in New York on Monday found the Palestinian Authority
and the Palestine Liberation Organization liable for supporting six
terrorist attacks in Israel more than a decade ago and ordered the
groups to pay $218.5 million to the American victims’ families. Monday’s
verdict in Manhattan federal court follows a lengthy legal battle
stemming
- Big Banks Face Scrutiny Over Pricing of Metals. U.S. Justice Department investigates price-setting process for gold, silver, platinum and palladium. U.S. officials are investigating at least 10 major banks for possible
rigging of precious-metals markets, even though European regulators
dropped a similar probe after finding no evidence of wrongdoing,
according to people close to the inquiries.
- U.S., Iran Explore Option of 10-Year Nuclear Freeze. Compromise could see 12-month ‘breakout’ period for a decade, then allow Iran to build capacity. The U.S. and Iran are exploring a nuclear deal that would keep Tehran
from amassing enough material to make a bomb for at least a decade, but
could then allow it to gradually build up its capabilities again.
- Brazil Experts Fear a Two-Year Downturn. Economists say nation is likely to suffer first back-to-back decline in GDP since 1930s. For all the debt crises, hyperinflation and boom-and-bust cycles
Brazil’s economy has suffered in recent decades, the country hasn’t
posted two consecutive years of contraction since the Great Depression.
Zero Hedge:
Business Insider:
Reuters:
- Stifel to buy Sterne Agee for $150 mln. Investment bank Stifel Financial Corp
said it will buy privately held Sterne Agee Group Inc for
$150 million to expand its wealth management and fixed-income
business. The acquisition will add 730 financial advisers, boosting
Stifel's headcount of wealth management professionals by 35
percent to more than 2,800.
- Fed's Williams says wouldn't rule out June rate hike -- Nikkei. "I wouldn't want to eliminate the possibility of a rate hike
in June," Williams was quoted as saying. Williams is among the
voting members this year on the Fed's policy-setting committee
and his thinking on monetary policy is considered in the
mainstream at the central bank.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.25 +1.75 basis points.
- Asia Pacific Sovereign CDS Index 64.75 -.25 basis point.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The S&P/CS 20 City MoM SA for December is estimated to rise +.6% versus a +.74% gain in November.
9:45 am EST
- Preliminary Markit US Services PMI for February is estimated to rise to 54.5 versus 54.2 in January.
10:00 am EST
- Consumer Confidence for February is estimated to fall to 99.5 versus 102.9 in January.
- Richmond Fed Manufacturing Index for February is estimated at 6.0 versus 6.0 in January.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen's testimony to Senate, Eurozone CPI/GDP reports, HSBC
China Manufacturing PMI, $26B 2Y T-Note auction, weekly US retail sales
reports, (JPM) investor day, Wells Fargo Real Estate Conference, (AKAM)
investor summit and the RBC Healthcare Conference could also impact
trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by consumer and industrial shares
in the region. I expect US stocks to open mixed and to weaken
into the afternoon, finishing modestly lower. The Portfolio is 50% net
long heading into the day.
