Friday, September 30, 2016

Bear Radar

Style Underperformer:
  • Large-Cap Growth +.7%
Sector Underperformers:
  • 1) Utilities -1.2% 2) Computer Services -.9% 3) Gold & Silver -.8%
Stocks Falling on Unusual Volume: 
  • VEC, CAMP, CTSH, OPHT, VCLT, TARO, CHDN, PBYI, WYNN, KEP, CORE, SR, CBOE, TSE, BIS, GXP, SCSS, LSI, TWLO, SHPG, REGN, Z, SINA and CALM
Stocks With Unusual Put Option Activity:
  • 1) UA 2) CSX 3) EA 4) QCOM 5) DXJ
Stocks With Most Negative News Mentions:
  • 1) CTSH 2) CORE 3) NOG 4) SPWR 5) MYL
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Value +.9%
Sector Outperformers:
  • 1) Computer Hardware +2.1% 2) I-Banks +1.9% 3) Oil Service +1.8%
Stocks Rising on Unusual Volume:
  • LXK, DB, CQH, NXPI, PTCT, GBT, MENT, CS, EBS, COLL, AIR, ROK, COST, AMBA, IM and SHLD
Stocks With Unusual Call Option Activity:
  • 1) DLTR 2) CTSH 3) IP 4) PG 5) THC
Stocks With Most Positive News Mentions:
  • 1) SKX 2) COST 3) SEMG 4) IM 5) MKC
Charts:

Morning Market Internals

NYSE Composite Index:

Thursday, September 29, 2016

Friday Watch

Evening Headlines
Bloomberg:
  • PBOC Seen Switching to Broad Monetary Tightening as Soon as 2017. With China’s economy stable for now and home prices in major cities soaring, analysts are dialing back forecasts for additional monetary stimulus, with some betting on a switch to tightening mode. And as its policy framework evolves, The People’s Bank of China will make its next broad move by guiding interest rates through a corridor, rather than the traditional approach of changes to benchmark lending and deposit rates, according to a Bloomberg survey of 18 economists from Sept. 19 to 26. Here’s a snapshot of the main findings:
  • China Homes Beat Stocks, Wine as Buying Frenzy Stokes Bubble. Even amid the slowest economic growth in a quarter century, China’s homeowners are enjoying returns that put other asset classes to shame - on paper, anyway. Home prices rose the most in six years last month, defying new policies to curb excessive speculation in big cities and government warnings about asset bubbles. While gains have been most pronounced in big cities like Shenzhen, where home prices are up about 60 percent in the past year, smaller cities such as Xiamen have also seen runaway growth, where prices have risen more than 38 percent.
  • Japan’s Consumer Prices Fall for Sixth Straight Month in August. (video) Japan’s consumer prices fell for a sixth straight month in August, underscoring the challenge Bank that Japan Governor Haruhiko Kuroda faces as he tries to spur 2 percent inflation and reflate the nation’s economy. Industrial production made a modest gain, while household spending slumped and the jobless rate held near the lowest since 1995.
  • The U.K. Economy Is Flying Blind 100 Days After the Brexit Vote. Pubs, retailers, airlines. Name the business and it’s likely they’re looking for an answer to what Brexit will actually mean.
  • Asian Stocks Fall as Banks Are Dragged Lower by Global Concerns. What’s set to be the best quarter for Asian stocks since 2012 is ending on a sour note as concern about the financial health of Germany’s biggest lender unnerves investors. The dollar strengthened versus most peers after U.S. data bolstered the case for an interest-rate hike this year. Financial shares were the biggest drag on the MSCI Asia Pacific Index after Deutsche Bank AG slid to a record low in the U.S. as Bloomberg News reported that some hedge funds have cut their exposure to the lender. S&P 500 Index futures also fell along with contracts on the U.K.’s FTSE 100. The MSCI Asia Pacific Index dropped 0.8 percent as of 9:20 a.m. Tokyo time, trimming its quarterly advanced to 8.7 percent. Financial stocks accounted for about a quarter of the decline in the benchmark. Japan’s Topix index slid 1.8 percent as key stock measures lost ground across markets open for trading. Markets in mainland China are shut next week for National Day holidays.
  • Republicans Slam Clinton for Deutsche Speeches as Firm Slumps. The Republican National Committee reignited calls for Hillary Clinton to release details surrounding her paid private speeches to Deutsche Bank on Thursday just as the firm's New York-listed shares fell to a record low. Officials from the German-bank, which U.S. regulators slapped with a massive $14 billion fine earlier this month, paid the Clintons $955,000 between 2012 and 2014 for a total of four speeches, according to financial disclosure records. Hillary Clinton was paid $225,000 for an April 24, 2013 speech and $260,000 for an Oct. 7, 2014 speech. Her husband was paid $200,000 for an Oct. 10, 2012 speech and $270,000 for a speech he gave on Aug. 27, 2014.
  • Specialty Pharma Stocks Tumble in Fear of California's Drug Price Referendum. Big Pharma has more to worry about than just Hillary Clinton.
Wall Street Journal:
Fox News:
  • AGs file suit in last-ditch bid to stop hand-off of internet control. (video) Republican attorneys general are making a last-ditch bid to block the Obama administration from ceding U.S. oversight of the internet’s domain name system, filing suit in federal court ahead of an imminent deadline for the hand-off. The AGs from Texas, Arizona, Oklahoma and Nevada asked a judge late Wednesday to step in and stop the transition to an international oversight body, after GOP lawmakers failed to stall the move as part of a short-term spending bill.
CNBC:
Zero Hedge:
Business Insider:
Telegraph:
21st Century Business Herald:
  • China Should Curb Home Price Rises With Taxes, Land Policy. China should impose property taxes and adjust its land auction system to curb rapid home price rises, Yin Zhongli, researcher with the Chinese Academy of Social Sciences, writes in an article.
Night Trading 
  • Asian equity indices are -1.25% to -.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 118.25 +5.75 basis points. 
  • Asia Pacific Sovereign CDS Index 32.75 +1.5 basis points.
  • Bloomberg Emerging Markets Currency Index 72.76 -.10%
  • S&P 500 futures -.30%
  • NASDAQ 100 futures -.37%.
Morning Preview Links

Earnings of Note
Company/Estimate 

  • (MKC)/.94
Economic Releases
8:30 am EST
  • Personal Income for August is estimated to rise +.2% versus a +.4% gain in July.
  • Personal Spending for August is estimated to rise +.1% versus a +.3% gain in July. 
  • The PCE Core MoM for August is estimated to rise +.2% versus a +.1% gain in July. 
9:45 am EST
  • The Chicago Purchasing Manager for September is estimated to rise to 52.0 versus 51.5 in August. 
10:00 am EST
  • Final Univ. of Mich. Consumer Sentiment  for September is estimated to rise to 90.0 versus a prior estimate of 89.8. 
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The China Manufacturing PMI report and the Canadian GDP report could also impact trading today.
BOTTOM LINE:  Asian indices are lower, weighed down by financial 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 25% net long heading into the day.

Stocks Lower into Final Hour on Eurozone Financial Contagion Fears, Rising European/Emerging Markets/US High-Yield Debt Angst, Technical Selling, Biotech/Financial Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Slightly Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 14.64 +17.8%
  • Euro/Yen Carry Return Index 118.42 +.41%
  • Emerging Markets Currency Volatility(VXY) 10.29 +1.68%
  • S&P 500 Implied Correlation 47.19 +8.92%
  • ISE Sentiment Index 73.0 -9.88%
  • Total Put/Call 1.01 +9.78%
  • NYSE Arms .72 +10.99
Credit Investor Angst:
  • North American Investment Grade CDS Index 77.74 +3.17%
  • America Energy Sector High-Yield CDS Index 666.0 -1.69%
  • European Financial Sector CDS Index 102.0 +.49%
  • Western Europe Sovereign Debt CDS Index 24.45 -.81%
  • Asia Pacific Sovereign Debt CDS Index 32.44 +3.35%
  • Emerging Market CDS Index 239.76 +3.06%
  • iBoxx Offshore RMB China Corporate High Yield Index 132.21 +.05%
  • 2-Year Swap Spread 25.0 +1.0 basis point
  • TED Spread 58.0 -1.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -49.5 -7.75 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 72.84 -.34%
  • 3-Month T-Bill Yield .24% -3.0 basis points
  • Yield Curve 82.0 +1.0 basis point
  • China Import Iron Ore Spot $56.68/Metric Tonne +.35%
  • Citi US Economic Surprise Index -3.40 +1.7 points
  • Citi Eurozone Economic Surprise Index 4.10 +14.5 points
  • Citi Emerging Markets Economic Surprise Index -11.4 -.6 point
  • 10-Year TIPS Spread 1.56% -2.0 basis points
  • 52.7% chance of Fed rate hike at Dec. 14 meeting, 56.6% chance at Feb. 1 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating -108 open in Japan 
  • China A50 Futures: Indicating unch. open in China
  • DAX Futures: Indicating -109 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my index hedges and emerging markets shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 
  • Some Deutsche Bank(DB) Clients Reduce Collateral on Trades. (video) A number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender, a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank. While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes, some funds that use the bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Millennium Partners, Capula Investment Management and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, said a person familiar with the situation who declined to be identified talking about confidential client matters. The hedge funds use Deutsche Bank to clear their listed derivatives transactions because they are not members of clearinghouses. Millennium, Capula and Rokos declined to comment when contacted by phone or e-mail. The lender’s New York-listed shares fell as much as 6.5 percent as of 12:53 p.m. local time.
  • Here's the Smoking Gun That China Has a Huge Housing Bubble. Speculative buyers have eschewed Chinese stocks in favor of property, prompting even the chief economist at the central bank of the world's second largest economy to declare that housing was in a "bubble." But when strategists at UBS AG recently compiled a list of bubblicious housing markets, there weren't any selections from mainland China due to the lack of reliable data on the subject, underscoring the continued difficulty in declaring Chinese real estate to be in overheated territory. But Deutsche Bank AG Chief China Economist Zhiwei Zhang thinks he's pinpointed "a clear sign of a bubble" in the market — one that will end in a major correction in two years' time.  
  • Treasuries Gain as Deutsche Bank Contagion Fear Fuels Haven Bid. Treasuries rallied, reversing earlier losses, as traders sought haven assets on reports that some Deutsche Bank AG clients are pairing back their exposure to the beleaguered German lender. Treasury 10-year yields fell one basis point, or 0.01 percentage point, to 1.56 percent as of 2:43 p.m in New York, according to Bloomberg Bond Trader data. The price of the 1.5 percent security due in August 2026 climbed to 99 13/32.
  • European Stocks Fail to Maintain Gains After U.S. Economic Data. (video) The rally in energy producers wasn’t enough for European equities to maintain their gains after U.S. data stocked concern about the economy as the Federal Reserve contemplates raising interest rates. The Stoxx Europe 600 Index gained less than 0.1 percent, almost completely erasing its advance in the last hour of trading. A report showed U.S. pending home sales slumped in August, just as Fed Bank of Atlanta President Dennis Lockhart said the central bank is nearing its goals of maximum employment and steady inflation near 2 percent.
  • With Deal Done, OPEC Faces Hurdles in Making Output Cuts Work. (video) The challenges OPEC will confront trying to limit output were evident just minutes after the group agreed on the new plan. In an angry and sometimes incoherent briefing, Iraq’s oil minister railed against the journalists and analysts who estimate the amount of crude each member produces. Why? Those estimates will be key to setting quotas and evaluating which countries are meeting their commitments to cap production and which aren’t. Iraq’s minister, Jabbar al-Luaibi, complained Wednesday in Algiers that published estimates of Iraqi output were too low and warned that Iraq will refuse to accept figures that don’t match its own.
  • OPEC Nudges Ruble to Level That Sparked Putin Warning: Chart.
  • Oil Analysts Remain OPEC Skeptics as Pump-at-Will Policy Ditched. (video) Oil analysts, many of whom were surprised by OPEC’s decision on Wednesday to set out the framework of a deal to limit oil production, remain split about the impact of the producer group’s plan. A Bloomberg News survey the week before the gathering showed that just two out of 23 analysts anticipated that the Organization of Petroleum Exporting Countries would overcome its internal rivalries and agree on a strategy. The producer group said in Algiers that it will restrict output to a range of 32.5 million barrels a day to 33 million barrels a day, with the fine details to be hammered out at its next formal meeting in November. Here are a selection of analysts’ comments following the Algiers meeting:
  • Fed Divide Sharpens Between Washington Board and Regional Chief. (video) Remarks from Federal Reserve officials on Thursday highlighted a growing split between its Washington-based Board of Governors and many of the central bank’s regional bank presidents, who are more eager to get on with raising interest rates. Chair Janet Yellen has worked hard to preserve consensus among the 17 current members of the policy-setting Federal Open Market Committee, but it’s started to fray. Three regional Fed presidents dissented in favor of a rate hike at last week’s FOMC meeting and comments since then show that other officials shared their desire to tighten for the first time this year. Philadelphia Fed chief Patrick Harker said the U.S. central bank should begin lifting rates to get ahead of inflation and avoid “falling behind the curve.” His remarks echoed those in recent days from his counterparts in Boston, Dallas, San Francisco, Cleveland and Kansas City.
  • Mercedes EQ Brand Plans 10 Models to Take on Tesla(TSLA).                                                                        
Zero Hedge:
NZZ:
  • Plosser Says It's 'Mystery' Why Fed Isn't Raising Rates. "It's mystery. Different reasons were cited at each past meeting," Charles Plosser, former president of the Federal Reserve Bank of Philadelphia, tells NZZ in response to question why U.S. officials are waiting to tighten policy.