Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Above Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.76 +8.37%
- Euro/Yen Carry Return Index 136.97 +.23%
- Emerging Markets Currency Volatility(VXY) 10.33 +.39%
- S&P 500 Implied Correlation 64.64 +2.70%
- ISE Sentiment Index 80.0 +3.90%
- Total Put/Call .99 -2.94%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.10 +2.09%
- America Energy Sector High-Yield CDS Index 1,023.0 +.69%
- European Financial Sector CDS Index 67.85 -.27%
- Western Europe Sovereign Debt CDS Index 22.53 -.40%
- Asia Pacific Sovereign Debt CDS Index 61.32 +1.49%
- Emerging Market CDS Index 316.03 +1.32%
- iBoxx Offshore RMB China Corporates High Yield Index 114.10 +.06%
- 2-Year Swap Spread 26.25 -1.0 basis point
- TED Spread 23.5 -2.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -23.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .03% +1.0 basis point
- Yield Curve 132.0 +1.0 basis points
- China Import Iron Ore Spot $55.81/Metric Tonne -.09%
- Citi US Economic Surprise Index -61.90 -4.1 points
- Citi Eurozone Economic Surprise Index 53.10 +2.1 points
- Citi Emerging Markets Economic Surprise Index -3.6 -4.3 points
- 10-Year TIPS Spread 1.80 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -166 open in Japan
- DAX Futures: Indicating +27 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Euro Area Said to Give Greece Five Days to Deliver Plan. (video) Greece has until Monday to show how it will
follow through on reform commitments after the euro area ruled
out speedy access to aid funds, three officials said following a
conference call of finance ministry deputies. The currency bloc left the door open for Greece to access
1.2 billion euros ($1.3 billion) that has been allocated to aid
the banking system, if the cash-strapped nation can show how it
will move ahead with the changes that its creditors are seeking.
At the same time, the euro zone’s other 18 members were adamant
that Greece needs to deliver specific plans to see any more
bailout cash, the officials said.
- Ukraine Bonds Drop as Moody’s Adds to Default Concern Amid Talks. Ukraine’s Eurobond fell for a third day
after Moody’s Investors Service warned that the risk the country
will default on its debt is almost certain. The bonds dropped to a record 38.03 cents on the dollar on
Wednesday after Moody’s lowered the nation’s credit rating by
one step to Ca, the second-lowest level and on par with
Argentina. Ukrainian debt has handed investors losses of 30
percent this quarter, the worst among 59 emerging-market peers,
as investors speculated the former soviet republic’s creditors
will be forced to accept steep writedowns.
- Estonia Must Counter ‘Hostile’ Russian Propaganda, Adviser Says. Estonia’s plans for a Russian-language
television channel will seek to counter propaganda from the
regime of President Vladimir Putin amid tensions over the
Kremlin’s intentions in the Baltic region, according to a
government adviser.
- Sputtering Emerging Markets Threaten Next Global Deflation Shock. The momentum is fading. The cooling of emerging markets runs the
risk of chilling the global economy. The world’s growth engines after the 2008 financial crisis,
emerging markets are losing momentum as manufacturing in China
contracts and recessions loom in Brazil and Russia. At Credit Suisse Group AG, economists predict the expansion
of developing countries will slow to 3.8 percent this year, the
weakest since 2009. By contrast, they see a 2.2 percent pace in
industrial nations, the strongest in five years.
- Saudi Stocks Decline Most in World as Rebels in Yemen Advance. Saudi Arabian stocks dropped the most in
more than three months, leading regional markets lower, after
forces loyal to Yemen’s Shiite Muslim rebels edged closer to the
stronghold of Saudi-backed President Abdurabuh Mansur Hadi. The Tadawul All Share Index was the world’s worst performer
among more than 90 measures tracked by Bloomberg after it fell 5
percent to close at 8,868.12, the steepest loss since Dec. 16.
The Bloomberg GCC 200 Index, a gauge of the Gulf Cooperation
Council’s top 200 equities, also dropped the most in more than
three months. Forces loyal to the president collapsed as rebels
moved deeper into the south toward the port city of Aden.
Violence in the Arabian Peninsula’s poorest country is
threatening to turn into a civil war, raising concerns that
neighbors including Saudi Arabia may be drawn into the conflict.
- Brazil Real Drops as Central Bank Plans to Pare Back Support. Brazil’s real dropped after the central
bank said it will scale back support for the currency. The real lost 0.4 percent to 3.1521 per dollar at 11:26
a.m. in Sao Paulo, extending its run as the worst performing
major currency this year. The real has lost 16 percent against
the dollar on concern that weakening fiscal accounts will cause
the country to lose its investment-grade credit rating.
Officials will stop swap auctions that had bolstered the
currency at the end of this month, the central bank said in a
statement Tuesday.
- Emerging-Market Stocks Halt Seven-Day Advance as China Retreats. Emerging-market stocks ended their longest
rally in seven months amid concern slowing growth in China is
hurting corporate earnings and South Africa may raise interest
rates this year.
Shares in Shanghai fell for the first time in 11 days,
ending the longest winning streak in 23 years. The Shanghai Composite
Index fell 0.8 percent, after a 10-day, 12 percent rally, the longest
winning streak since May
1992.
- Europe Stocks Post Worst Drop in Two Months After Nearing Record. European stocks posted their worst drop in
more than two months, after nearing a record on Tuesday. The Stoxx Europe 600 Index slipped 1.1 percent to 397.95 at
the close of trading, as all but two of 19 industry groups slid.
Technology shares posted the worst performance, extending losses
as U.S. peers also fell. ARM Holdings Plc and ASML Holding NV
lost more than 5.5 percent. Europe’s benchmark gauge closed 0.7 percent away from its
2000 record on Tuesday, up 18 percent for the year amid European
Central Bank stimulus. That pushed the Stoxx 600 to the highest
valuation based on projected profits in at least 10 years,
relative to its own history and to the Standard & Poor’s 500
Index, data show.
- Oil Rises After U.S. Crude Output Gain Shrinks, Dollar Slips. Oil rose to a two-week high in New York as
the shrinking size of U.S. crude production gains and a falling
dollar outweighed rising supply. U.S. crude production rose 3,000 barrels a day to 9.42
million in the seven days ended March 20, the Energy Information
Administration said. The smallest increase since January left
output at the highest level in more than three decades. Prices
retreated initially as the report showed that crude supplies
increased 8.17 million barrels to 466.7 million last week, the
most in records compiled since August 1982. U.S. oil explorers sidelined 41 drilling rigs last week,
the smallest drop in three weeks and down from the average 59-rig weekly decline in February, according to data from Baker
Hughes Inc.
- Strong Dollar Hurting U.S. Steel Mills as Imports Flood Market. The U.S. economic recovery is gaining steam
and the dollar has surged. That’s bad news for the $100 billion
domestic steel industry. Foreign competitors with weaker currencies pay less to
produce the metal. That’s allowing them to undercut U.S.
steelmakers in their own backyard as demand wanes in China,
Russia and Brazil. The result: the amount of imported steel used in the U.S.
has swelled in the first two months of 2015 to 33 percent from
28 percent in 2014, according to the American Iron and Steel
Institute. At the same time, idled production capacity at U.S.
mills has grown to 31 percent, the highest since 2009.
- Gold Heads for Longest Rally Since 2012 on Interest Rate Outlook. Gold headed for its longest rally since
August 2012 as signs of sputtering U.S. economic expansion
fueled bets that interest rates will stay low for longer. Spot prices climbed for a sixth straight session, rising
every day since Federal Reserve policy makers cut their
projections for growth and suggested they aren’t in a hurry to
raise borrowing costs. Higher rates usually send investors to
assets with better yield prospects such as equities and bonds.
Wall Street Journal:
- Boko Haram Abducts More Than 400 People, Says Nigerian Lawmaker. Islamist
extremists fleeing international military offensive aimed at
recapturing northeastern Nigeria. Boko Haram militants have abducted
more than 400 people—most of them
women and children—in recent weeks as the Islamist extremists have fled
an international military offensive aimed at recapturing northeast
Nigeria, a Nigerian lawmaker said Wednesday. The militants have
seized residents of the northeastern town of Damasak and its surrounding
villages since January, Nigerian Senator Maina Ma’aji Lawan said. Mr.
Lawan, who represents the region, said more than 70 women were taken
from his hometown of Baga alone.
MarketWatch.com:
CNBC:
ZeroHedge:
Business Insider:
NY Times:
- Q. and A. With Fed’s Dennis Lockhart: The Year to Raise Rates. Dennis Lockhart just entered his ninth year as president of the Federal
Reserve Bank of Atlanta, and during that time he has never voted to
raise interest rates. He took the job during the very early days of the
financial crisis, and he has never really had the chance. But that is
about to change. Mr. Lockhart said in an interview Monday that he
expected he would vote to start raising rates by September at the
latest.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Education -7.05% 2) Semis -4.32% 3) Biotech -3.62%
Stocks Falling on Unusual Volume:
- ENLK, SXCP, ZSPH,
NSM, APOL, SXC, SONC, BURL, ESPR, FRAN, LBIO, LNN, AIRM, CALA, BIB,
AMPH, IBB, CBMG, SRNE, LOPE, DQ, SJW, TSM, SAGE, HNP, TXN, TWTR, BIIB,
DV, FNSR, HPY, LCI, NVDA, FRAN, HQY, BMRN, EBS, PTCT, LRCX, SWKS, DVAX, BLUE, LDOS, OVAS, QRVO, NLNK, SXC, TGTX, SRNE, ACAD, CLDN, ENLK, CLDN, CEMP, LBIO, ZIOP, ESPR and APOL
Stocks With Unusual Put Option Activity:
- 1) GLW 2) EMB 3) SMH 4) LXK 5) TXN
Stocks With Most Negative News Mentions:
- 1) UPS 2) CMI 3) TWTR 4) F 5) TSLA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Foods +3.52% 2) Energy +1.08% 3) Oil Service +.65%
Stocks Rising on Unusual Volume:
- KFX, KRFT, LL, LXK and TKC
Stocks With Unusual Call Option Activity:
- 1) KRFT 2) SN 3) OPK 4) LOCK 5) ZIOP
Stocks With Most Positive News Mentions:
- 1) GRPN 2) XEL 3) MRK 4) GD 5) EL
Charts:
Evening Headlines
Bloomberg:
- Greeks Celebrate Independence as EU Creditors Discuss Their Fate. Greeks celebrate their independence
Wednesday with a military parade and a folk-music festival
sponsored by the Ministry of Defense, as European officials more
than 1,000 miles away review the financial aid that will shape
their future. The European Central Bank Governing Council will hold a
weekly call to assess the Emergency Liquidity Assistance keeping
Greece’s banking system afloat while euro-area finance ministry
officials will have a separate discussion on the progress of the
country’s economic policy program. Without access to capital
markets, or the ECB’s normal financing operations, Greek banks
rely on almost 70 billion euros ($76 billion) of ELA to cover a
financing shortfall exacerbated by steep deposit withdrawals.
- Ukraine Credit Rating Cut to Second-Lowest Level by Moody’s. Ukraine had its credit rating cut by Moody’s
Investors Service to the second-lowest level as the country
started debt-restructuring negotiations with bondholders. Moody’s lowered the rating by one level to Ca and said in
statement that the likelihood of a default is almost certain.
The credit outlook is negative. Private creditors are likely to suffer “substantial
losses” as a result of the government’s restructuring plan,
Moody’s analysts including Kristin Lindow wrote. Ukraine’s
indebtedness will “remain very high, in spite of the debt
restructuring and plans to introduce reforms,” they said.
- The Place Where China Began Its One-Child Policy Is Dying. On the flat delta of the Yangtze River north of Shanghai, Communist
cadres embraced the call to stem the nation’s ballooning population a
decade before it became national policy in 1979. The result is that
Rudong is a window on China’s future, a windswept place of old people,
closed schools and growing retirement homes.
“China will see more places like Rudong very soon,” said Wang Feng, a
professor of sociology at the University of California at Irvine. “It’s a
microcosm of the rapid demographic and economic transformation China has
been experiencing the last decades. There will be more ghost villages
and deserted or sleepy towns.”
- RBA Warns Easy Global Policy Lifts Risk of Office Price Fall. Australia’s central bank said easy monetary
policy globally is spurring demand for the nation’s office
buildings, even as vacancies climb and rents fall, raising risks
of a future price slump. “Prices have continued to rise at a national level, driven
in particular by investors’ search for yield in the global
environment of low interest rates and ample liquidity, with the
lower Australian dollar also likely to be adding some impetus to
foreign demand,” the central bank said Wednesday in Sydney.
“The risk of a large repricing and associated market
dislocation in the commercial property sector has increased.”
- Asian Stocks Advance as Consumer, Materials Shares Lead Gains. Asian stocks rose, with the regional
benchmark index recovering Tuesday’s loss to head for a six-month high, as consumer staples and materials shares led gains.
The MSCI Asia Pacific Index added 0.2 percent to 148.98 as
of 9:03 a.m. in Tokyo.
Wall Street Journal:
- Google(GOOG) Makes Most of Close Ties to White House. Search giant averages a White House meeting a week during Obama administration.
- Kraft in Talks to be Acquired by 3G Capital. A deal for food company would likely top $40 billion.
- Biotech’s Rally Fuels Bubble Fears. As Valuations Skyrocket and Nasdaq Nears Record, Anxiety Builds. Nasdaq bubble fears are back. But this time around, the biggest dangers may not involve technology stocks. Instead,
some investors are looking askance at biotechnology stocks, a sector
that wasn’t nearly as developed when the Nasdaq Composite Index set its
record close in 2000 of 5048.62.
- Obama’s Israel Tantrum. The leader of the free world takes revenge on an ally. You’ll have to forgive President Obama. The leader of the free world
is still having difficulty accepting that the Israeli people get to
choose their own prime minister, never mind his preferences. The latest White House tantrum in the wake of Benjamin Netanyahu’s re-election last...
Zero Hedge:
- "Not Off The Lows" - Stocks Slammed, Bonds Bid, & Copper Clubbed. (graph)
- What A Permabull Thinks Is The Biggest Threat To The Stock Market. (graph)
- Corporate Profit Margins And Investor Consequences. (graph)
- API Signals Fastest Inventory Build In At Least 34 Years. (graph)
- This Is What The Global Economy Got For $11,000,000,000,000 In QE.(graph)
- These Are 2015's "Black Swans" According To SocGen.
- Market Is Rigged, HFTs Are Harmful, And Nothing Will Change According To ConvergEx Survey.
- "Belief That European QE Will Work Is Far-Fetched," Bill White Warns This Will "End Very Badly".
- The Canadian Housing Bubble Has Begun To Burst. (graph)
- "Profound Shift In Liquidity Risk" May Imperil Market Function, New Report Says. (graph)
Business Insider:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.0 -.75 basis point.
- Asia Pacific Sovereign CDS Index 60.5 +.25 basis point.
- NASDAQ 100 futures +.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (APOL)/-.16
- (PAYX)/.46
- (FIVE)/.60
- (FUL)/.37
- (PVH)/1.73
- (RHT)/.41
- (WOR)/.33
Economic Releases
8:30 am EST
- Durable Goods Orders for February are estimated to rise +.2% versus a +2.8% gain in January.
- Durables Ex Transports for February are estimated to rise +.2% versus a +.3% gain in January.
- Cap Goods Orders Non-Defense Ex-Air for February are estimated to rise +.3% versus a -.3% decline in January.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+4,912,500 barrels versus a +9,622,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -1,687,500 barrels versus a
-4,473,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -856,250 barrels versus a +380,000 barrel gain the
prior week. Finally, Refinery Utilization is estimated to rise by +.54%
versus a +.3% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, German IFO, $35B 5Y T-Note auction, weekly MBA
mortgage applications report and the (AXP) investor day could also
impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial
shares in the region. I expect US stocks to open mixed and to
weaken into the afternoon, finishing modestly lower. The Portfolio is
25% net long heading into the day.