Friday, November 30, 2012

Market Week in Review

S&P 500 1,416.18 +.50%*


The Weekly Wrap by

*5-Day Change

Weekly Scoreboard*

  • S&P 500 1,416.18 +.50%
  • DJIA 13,025.58 +.12%
  • NASDAQ 3,010.24 +1.46%
  • Russell 2000 821.92 +1.83%
  • Value Line Geometric(broad market) 358.11 +1.43%
  • Russell 1000 Growth 659.40 +.74%
  • Russell 1000 Value 703.78 +.44%
  • Morgan Stanley Consumer 835.79 +.76%
  • Morgan Stanley Cyclical 1,007.51 +.45%
  • Morgan Stanley Technology 662.85 +.74%
  • Transports 5,119.11 +1.33%
  • Utilities 454.12 +3.07%
  • Bloomberg European Bank/Financial Services 87.81 +1.36%
  • MSCI Emerging Markets 41.75 +.99%
  • Lyxor L/S Equity Long Bias 1,054.15 +.15%
  • Lyxor L/S Equity Variable Bias 801.38 +.37%
  • NYSE Cumulative A/D Line 158,653 +1.20%
  • Bloomberg New Highs-Lows Index 186 +285
  • Bloomberg Crude Oil % Bulls 33.33 unch.
  • CFTC Oil Net Speculative Position 137,254 -22.8%
  • CFTC Oil Total Open Interest 1,522,133 +1.6%
  • Total Put/Call 1.17 +31.46%
  • OEX Put/Call 1.44 +182.35%
  • ISE Sentiment 90.0 -20.4%
  • NYSE Arms .88 +109.5%
  • Volatility(VIX) 15.87 +4.82%
  • S&P 500 Implied Correlation 62.64+.98%
  • G7 Currency Volatility (VXY) 7.53 +.93%
  • Smart Money Flow Index 10,974.20 +1.65%
  • Money Mkt Mutual Fund Assets $2.612 Trillion +.40%
  • AAII % Bulls 40.9 +14.3%
  • AAII % Bears 34.4 -15.7%
Futures Spot Prices
  • CRB Index 298.98 -.03%
  • Crude Oil 88.91 +.74%
  • Reformulated Gasoline 273.03 +.40%
  • Natural Gas 3.56 -8.58%
  • Heating Oil 306.07 -.62%
  • Gold 1,712.70 -2.23%
  • Bloomberg Base Metals Index 216.64 +4.81%
  • Copper 365.0 +3.43%
  • US No. 1 Heavy Melt Scrap Steel 304.33 USD/Ton unch.
  • China Iron Ore Spot 115.60 USD/Ton -2.77%
  • Lumber 340.10 +7.29%
  • UBS-Bloomberg Agriculture 1,617.96 +1.28%
  • ECRI Weekly Leading Economic Index Growth Rate +3.4% -40 basis points
  • Philly Fed ADS Real-Time Business Conditions Index -.3697 +8.87%
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 112.0 +.38%
  • Citi US Economic Surprise Index 43.10 -4.3 points
  • Fed Fund Futures imply 58.0% chance of no change, 42.0% chance of 25 basis point cut on 12/12
  • US Dollar Index 80.15 -.08%
  • Yield Curve 137.0 -5 basis points
  • 10-Year US Treasury Yield 1.62% -7 basis points
  • Federal Reserve's Balance Sheet $2.834 Trillion-.69%
  • U.S. Sovereign Debt Credit Default Swap 36.57 +3.01%
  • Illinois Municipal Debt Credit Default Swap 177.0 +.36%
  • Western Europe Sovereign Debt Credit Default Swap Index 105.33 -8.09%
  • Emerging Markets Sovereign Debt CDS Index 167.90 -5.04%
  • Israel Sovereign Debt Credit Default Swap 140.0 -7.01%
  • Iraq Sovereign Debt Credit Default Swap 500.0 +9.64%
  • China Blended Corporate Spread Index 386.0 -12 basis points
  • 10-Year TIPS Spread 2.42% +2 basis points
  • TED Spread 23.5 +1.0 basis point
  • 2-Year Swap Spread 12.75 -.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -24.75 +2.5 basis points
  • N. America Investment Grade Credit Default Swap Index 99.45 +.21%
  • European Financial Sector Credit Default Swap Index 160.21 -.21%
  • Emerging Markets Credit Default Swap Index 237.46 -6.0%
  • CMBS Super Senior AAA 10-Year Treasury Spread 90.0 unch.
  • M1 Money Supply $2.406 Trillion +.90%
  • Commercial Paper Outstanding 1,025.60 +2.80%
  • 4-Week Moving Average of Jobless Claims 405,300 +9,000
  • Continuing Claims Unemployment Rate 2.6% unch.
  • Average 30-Year Mortgage Rate 3.32% +1 basis point
  • Weekly Mortgage Applications 838.90 -.85%
  • Bloomberg Consumer Comfort -33.0 +.9 point
  • Weekly Retail Sales +2.20% +80 basis points
  • Nationwide Gas $3.40/gallon -.03/gallon
  • U.S. Heating Demand Next 7 Days 41.0% below normal
  • Baltic Dry Index 1,086 -.37%
  • China (Export) Containerized Freight Index 1,122.90 -1.93%
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 -7.69%
  • Rail Freight Carloads 194,538 -21.9%
Best Performing Style
  • Small-Cap Value +2.06%
Worst Performing Style
  • Large-Cap Value +.44%
Leading Sectors
  • Gaming +4.39%
  • Alt Energy +4.26%
  • Networking +3.97%
  • I-Banking +3.84%
  • Internet +3.32%
Lagging Sectors
  • Homebuilders -1.48%
  • Restaurants -1.49%
  • Computer Services -1.74%
  • Coal -2.23%
  • Gold & Silver -2.37%
Weekly High-Volume Stock Gainers (7)
Weekly High-Volume Stock Losers (6)
Weekly Charts
*5-Day Change

Stocks Falling Slightly into Final Hour on Fiscal Cliff Worries, Rising Global Growth Fears, Eurozone Debt Angst, Cyclical Stock Weakness

Today's Market Take:

Broad Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 16.11 +6.97%
  • ISE Sentiment Index 87.0 -27.5%
  • Total Put/Call 1.16 +16.0%
  • NYSE Arms 1.26 +54.97%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.57 -.69%
  • European Financial Sector CDS Index 160.19 +.04%
  • Western Europe Sovereign Debt CDS Index 105.33 bps -.60%
  • Emerging Market CDS Index 237.43 bps +.85%
  • 2-Year Swap Spread 12.75 +.75 basis point
  • TED Spread 23.50 +.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -24.75 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .08% unch.
  • Yield Curve 137.0 +1 basis point
  • China Import Iron Ore Spot $116.90/Metric Tonne -1.11%
  • Citi US Economic Surprise Index 43.10 -.8 point
  • 10-Year TIPS Spread 2.42 +2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating +59 open in Japan
  • DAX Futures: Indicating +6 open in Germany
  • Slightly Higher: On gains in my Tech sector longs and index hedges
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 25% Net Long

Today's Headlines

  • Hollande Mittal Push Risks Hurting Economy by Spooking Investors. President Francois Hollande’s threat to nationalize an ArcelorMittal (MT) steel plant, while saving 600 jobs, may curb the creation of new employment by reinforcing France’s notoriety as a difficult place for business. Hollande has given Lakshmi Mittal, the chief executive officer and biggest shareholder of the world’s largest steelmaker, until Dec. 1 to either keep jobs at the plant, sell all of it or face its nationalization. Industry Minister Arnaud Montebourg, who kicked off the week by saying Mittal is no longer wanted in France, says he’s found a buyer for the whole site, including the part Mittal would like to keep. The tactics are the strongest yet by the French government in a long list of attempts to preserve jobs at home. They come as foreign direct investment inflows have halved in five years, local companies are holding off spending and jobless claims are at their highest in 14 years.
  • Italy Unemployment Rose to Highest in 13 Years in October. Italy’s unemployment rate rose more than expected in October to the highest level in 13 years as businesses refrain from hiring after the recession entered its second year. The unemployment rate rose to a seasonally-adjusted 11.1 percent from 10.8 percent in September, Rome-based national statistics office Istat said in a preliminary report today. Economists had predicted a reading of 10.9 percent, according to the median of eight estimates in a Bloomberg News survey. Unemployment remained above 10 percent for a ninth month.
  • Brazil GDP Grows at Half Forecast Pace as Investment DivesBrazil’s economy expanded in the third quarter at half the pace forecast by economists, as government stimulus efforts fail to revive investment that fell for the fifth straight period. Rate futures plunged. Gross domestic product grew 0.6 percent in the third quarter, the national statistics agency said today in Rio de Janeiro. That was less than the forecasts of all 54 economists surveyed by Bloomberg whose median estimate was for a 1.2 percent expansion. “Today’s report was awful,” Neil Shearing, who was forecasting below-consensus 1 percent growth as chief emerging markets economist for Capital Economics Ltd., said by phone from London. “The really disappointing thing about today’s data is that despite all the policy stimulus over the past year, it’s clear the economy is still struggling to get going.
  • The Economy's Improving? Tell Small Business. According to a Gallup poll out Friday from Wells Fargo (WFC), small business owners’ confidence fell the most since the fall of 2008. The quarterly index, based on responses from 600 business owners, dropped 28 points as more businesses reported declining revenues, payrolls, and capital investment, both in the last 12 months and in their expectations for the year ahead.
  • Recession Left Baby Bust as U.S. Births Lowest Since 1920.
Wall Street Journal: 
  • Boehner: Fiscal Talks at Stalemate. House Speaker John Boehner (R., Ohio) declared talks between the White House and Congress to avert the fiscal cliff at a “stalemate” Friday, as lawmakers from both parties hardened their positions the day after Republicans rejected a White House offer to address fiscal concerns. Mr. Boehner and other top Republicans roundly panned the White House offer, delivered to Capitol Hill by Treasury Secretary Timothy Geithner on Thursday in a series of meetings with Democratic and Republican leaders. House Majority Leader Rep. Eric Cantor (R., Va.) said the proposal was not a “serious offer,” while Mr. Boehner said the White House plan is the “wrong approach.” “There’s a stalemate, let’s not kid ourselves,” Mr. Boehner said. “Right now, we’re almost nowhere.”
  • Fiscal Cliff: Live Stream.
  • U.S., Europe to Huddle on Google(GOOG) Probes.
  • Noonan: The Drawn-Out Crisis: It's the Obama Way. The president seems to prefer frustration to good-faith negotiation.
Zero Hedge:
  • UN chief 'horrified' by Syrian violence. The 20-month conflict in Syria has reached "new and appalling heights of brutality and violence" as the government steps up its shelling and air strikes and rebels boost their attacks, U.N. Secretary-General Ban Ki-moon said on Friday. 
  • Egyptians protest after draft constitution raced through. Tens of thousands of Egyptians protested against President Mohamed Mursi on Friday after an Islamist-led assembly raced through approval of a new constitution in a bid to end a crisis over the Islamist leader's newly expanded powers. "The people want to bring down the regime," they chanted in Tahrir Square, echoing the chants that rang out in the same place less than two years ago and brought down Hosni Mubarak.
  • Canada's economy disappoints in third qtr, outlook dim. Canada's economy lost some fizz in the third quarter as exports suffered their biggest drop in three years and businesses scaled back investments, though the slowdown is unlikely to knock the Bank of Canada off its rate-hike stance. The economy grew at a weaker-than-expected 0.6 percent annual rate in the July-September period, after two straight quarters of 1.7 percent expansion, according to Statistics Canada data on Friday.
Financial Times:
  • It’s 2007 again, thanks to the US Fed. High-yield bond and loan market issuance year to date in both the US and Europe stands at about $570bn – on a par with the peak five years ago. Almost 30 per cent of all junk bonds have few terms, a new high, according to data from JPMorgan, while debt issuance for the purpose of paying the owners dividends is also above 2007 levels. Issuance of collateralised loan obligations this year will come in at about $45bn, more than the past four years combined.

Bear Radar

Style Underperformer:
  • Small-Cap Growth -.55%
Sector Underperformers:
  • 1) Restaurants -1.90% 2) Gold & Silver -1.71% 3) Education -1.65%
Stocks Faling on Unusual Volume:
Stocks With Unusual Put Option Activity:
  • 1) CTIC 2) YUM 3) VRSN 4) NTAP 5) COST
Stocks With Most Negative News Mentions:
  • 1) CSX 2) JCP 3) BA 4) ZNGA 5) BK

Bull Radar

Style Outperformer:
  • Mid-Cap Value -.11%
Sector Outperformers:
  • 1) Oil Service +.41% 2) I-Banks +.35% 3) Telecom +.31%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) SE 2) VRSN 3) SVNT 4) DG 5) WLT
Stocks With Most Positive News Mentions:
  • 1) HITK 2) STJ 3) VMED 4) GD 5) CAG

Friday Watch

Evening Headlines 
  • ECB Withholding Secret Greek Swaps File Keeps Taxpayers in Dark. The European Central Bank’s court victory allowing it to withhold files showing how Greece used derivatives to hide its debt leaves one of the region’s most powerful institutions free from public scrutiny as it assumes even more regulatory power. The European Union’s General Court in Luxembourg ruled yesterday that the central bank was right to keep secret documents that would reveal how much the ECB knew about the true state of Greece’s accounts before the country needed a 240 billion-euro ($311 billion) taxpayer-funded rescue. The case brought by Bloomberg News, the first legal challenge to a refusal by the ECB to make public details of its decision-making process, comes a month before the central bank is due to take responsibility for supervising all of the euro- area’s banks. The central bank already sets narrower limits on its disclosures than its U.S. equivalent, the Federal Reserve. The court’s decision shows the ECB has too broad a discretion to reject requests for disclosure, academics and lawyers said. “It’s a very disturbing ruling,” said Olivier Hoedeman of Corporate Europe Observatory, a Brussels-based research group that challenges lobbying powers in the EU and campaigns for the accountability of EU bodies. “It is such a sweeping, blanket statement that it undermines the right to know.” 
  • Germany Seen Recession-Bound in Poll Showing Euro Crisis Deepens. Germany, Europe’s largest economy, will be tipped into recession as the sovereign debt crisis roiling its neighbors extends into the new year, according to the latest Bloomberg Global Poll. Even as European leaders laud their latest fix for Greece’s debt woes, 53 percent of 862 investors, analysts and traders who are Bloomberg subscribers said this week they think Germany’s economy will drop into a recession for the first time in more than three years. Sixty-four percent expect Europe’s debt turmoil to deepen again despite recent signs of calming in its financial markets. “Germany is starting to feel some pressure as sentiment in the euro-zone weighs on its economy,” said Chanoine Webb, a poll participant and global investment analyst at Close Brothers Asset Management Ltd. in London. “It won’t be able to decouple for much longer.” 
  • Aluminum Demand Growth in China Seen Least in More Than 10 Years. Aluminum consumption in China, the biggest user, expanded at the slowest rate in a decade as economic growth decelerated, said an industry official. Demand gained 5.8% in the first nine months to 14.4 million metric tons from a year earlier, said Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association. The pace is 5 percentage points lower than the same period in 2011 and the least since at least 2000, Wen said in an interview in Chongqing today. "Given the challenges in the global economy and downward pressure in domestic economy, the condition of China's aluminum industry is worsening," Yang Yunbo, director of the association's light metals department, said at a forum in Chongqing today. "Looking forward, we're not optimistic." China is expected to add 1.5 million tons of production capacity this year, according to the group. Output in China Gansu, Ningxia, and Xinjiang regions climbed 55%, 37% and 198% in the first nine months, Wen said. Output rose to a record 1.75 million tons in August and gained 11% from a year ago to 16.5 million tons from January to October, according to the National Bureau of Statistics.
  • Cliff-Skeptics in Both Parties Deepen Fiscal Challenges. President Barack Obama says going over the fiscal cliff by missing the deadline for a deficit reduction deal by year’s end would be a “rude shock” for Americans. Republican House Speaker John Boehner says it would be a “fiasco.” Yet a small and potentially influential group of lawmakers in both parties is emerging as fiscal-cliff skeptics, willing -- and some even arguing -- to take the dive. Their attitude may make striking a compromise a messy and drawn-out process. Allowing the more than $600 billion mix of tax increases and automatic spending cuts to begin in January if no deal is reached isn’t their first choice, these lawmakers said, yet it’s a better alternative than a compromise that violates their principles.
  • North Korea Seen Preparing Rocket Launch as Soon as Next Week. North Korea has moved two sections of a long-range rocket to a launch site in preparation for a firing that may come as soon as next week, according to a U.S. university monitoring project on the totalitarian state.
  • LDP Seen Winning Japan Vote That Risks Policy Gridlock. Three years after its half-century rule of Japan ended, the Liberal Democratic Party is poised to regain power. Even so, a splintered political landscape risks the same gridlock that has led to six leaders in as many years. Polls show that while the LDP will get the most seats in the Dec. 16 election in the Diet’s lower house, other parties may limit its victory.
Wall Street Journal: 
  • Obama's Cliff Offer Spurned. GOP Criticizes Proposal for Tax, Spending Increases With Limited Entitlement Cuts. Obama made an opening bid that calls for a $1.6 trillion tax increase, a $50 billion economic-stimulus program and new power to raise the federal debt limit, a broad set of demands Republicans viewed as a step back in talks.
  • The Fiscal Cliff: Live Stream
  • Egypt Adds Islamic Influence to Constitution.
  • In the End, Greek Crisis Will Hit Taxpayers. Sovereign-debt crises always spark struggles between creditors and debtors over who should suffer losses. Since the Greek crisis exploded nearly three years ago, those fights have played out in euro-zone summits and finance ministers' meetings and have been covered feverishly by the global media. Because of the large number of parties with stakes in the outcome—Greece and 16 other members of the euro zone, the European institutions and the International Monetary Fund—they have been even more complicated than usual. Despite the complications, this week's deal on Greece's debt points to an (almost) iron rule of sovereign-debt crises: Significant losses fall on taxpayers in creditor countries because debt originally extended by private creditors, one way or another, ends up on the balance sheet of the public sector.
  • BlackRock(BLK), Rialto Dump Some of Their 'Skin' in CMBS Game.
  • Alleged Insider Group Includes Editor. When Michael Baron's buddies passed on a hot stock tip at a basketball game last year, the senior editor for financial-news website TST gave it little thought. A year later, the Federal Bureau of Investigation came knocking and told him something he never expected to hear, says a person familiar with his thinking: He had been tied to a sophisticated insider-trading ring. 
  • Recession Big Factor as Birthrate Falls.
  • Obama's Real Fiscal Problem. President Obama is by all accounts more confident than ever since his re-election, telling everyone he sees that he's certain he can pound Republicans enough to get his way on taxes and spending. And if he can't, well, then he can always go over the fiscal cliff and blame Republicans next year for whatever happens to the economy. And maybe he's right. If nothing else, he's been expert at dodging responsibility. The line he's taking so far in budget negotiations could hardly be tougher.
Fox News: 
  • UN General Assembly votes in favor of Palestinian statehood. The U.N. General Assembly voted Thursday in favor of Palestinian statehood, after the Palestinians asked it to recognize a non-member state of Palestine in the Israeli-occupied West Bank and east Jerusalem, and the Hamas-ruled Gaza Strip. The resolution upgrading the Palestinians' status to a nonmember observer state at the United Nations was approved by a more than two-thirds majority of the 193-member world body -- a vote of 138 to 9, with the U.S. and Israel among those who opposed. There were 41 abstentions.
  • Obama wants dividends taxed as income: NYT. According to House Republicans, Treasury Secretary Tim Geithner presented a plan that included taxing dividends as income, The New York Times reported. The New York Times also reported that the White House plan included a 45% estate tax on inheritances over $3.5 million.
Zero Hedge:
Business Insider: 
The Blaze: 
  • Yum(YUM) says key 4th-qtr sales in China to fall. Yum Brands Inc said on Thursday that it expects a decline in fourth-quarter sales at established restaurants in China, where a cooling economy is making it difficult to exceed the 21 percent gain it had there a year earlier. Yum, which saw more than half its total revenue and operating profit for the third quarter of 2012 come from China, said fourth-quarter same-restaurant sales there are expected to be down 4 percent. Yum shares fell 7 percent to $69.25 in extended trading. Stock in Yum is widely viewed as a way for U.S. investors to bet on what is still the world's fastest-growing major economy. The last time Yum reported a decline in same-restaurant sales for China appears to have been in the fourth quarter of 2009, when those sales fell 3 percent in mainland China, according to Yum's financial reports.
  • Israel’s Iron Dome Did ‘Remarkably Well,’ Panetta Says. Defense Secretary Leon Panetta said Iron Dome, the U.S.-funded Israeli missile defense system, performed “remarkably well” in defending Israel against Hamas rockets. Panetta said yesterday the system intercepted about 400 rockets fired at Israel, or about 85 percent of those targeted by its radar and battle-management system as heading toward populated areas.
  • Investors swarm into stock ETFs amid "fiscal cliff" hopes-Lipper.
  • Japan Nov manufacturing PMI edges down to 46.5. Japanese manufacturing activity contracted in November at the fastest pace in 19 months, a survey showed on Friday, as falling exports, weak domestic demand and declining capital expenditure push the world's third-largest economy towards recession. The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 46.5 in November from 46.9 in October. It remained below the 50 threshold that separates contraction from expansion for a sixth straight month.
  • US oil imports in Sept down from year ago-EIA.
  • Citigroup(C) sentences Europe to faster economic death. Citigroup's end of year forecast – Prospects for Economies and Financial Markets in 2013 and Beyond – is in essence a celebration of American revival and ascendancy. It sentences Europe to slow economic death.
  • Bundestag lawyers doubt legality of ECB interest waiver, citing a report by Bundestag legal advisers and Bernd Riexinger, head of Germany's Left Party. The ECB will present a plan to waive interest on government bonds it holds. The loss to German taxpayers would amount to EU2.5B. Riexinger told the newspaper "cancelling interest means cancelling debt" and says he doubts the proposal will withstand judicial review. 
South China Morning Post:
  • Hong Kong Housing Official Says Home Prices May Fall 20%. Prices of apartments in the city will drop on the latest govt measures, which will curb investment demand, citing Stanley Wong, chairman of the Housing Authority's subsidized housing committee. Wong didn't provide a timetable for the decline in prices.
China Daily:
  • China's development faces more risks from increasing "unstable and uncertain factors" to world economic growth, Zhong Sheng said in a commentary.
Financial News:
  • China's financial innovation may cause more "bubbles" and "excess speculation" in the financial market, and bring more risks, Financial News said in a front-page commentary.
  • Yichang Three Gorges Quantong  Coated and Galvanized Plate Co., the second largest private company in China's central province of Hubei, may default on about 7b yuan of debt from more than 10 banks including China Construction Bank, Hankou Bank, Citic Bank, Citic Trust, Guangxi Beibu Gulf Bank and China Minsheng Bank, citing an official from the company.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.0 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 82.75 -1.0 basis point.
  • FTSE-100 futures -.17%.
  • S&P 500 futures -.18%.
  • NASDAQ 100 futures -.07%.
Morning Preview Links

Earnings of Note

  • (GCO)/1.33
  • (UNFI)/.46
Economic Releases
8:30 am EST 
  • Personal Income for October is estimated to rise +.2% versus a +.4% gain in September.
  • Personal Spending for October is estimated unch. versus a +.8% gain in September.
  • PCE Core for October is estimated to rise +.2% versus a +.1% gain in September. 
9:00 am EST
  • NAPM-Milwaukee for November is estimated to rise to 47.0 versus 43.3 in October.
 9:45 am EST
  • Chicago Purchasing Manager for November is estimated to rise to 50.5 versus 49.9 in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Stein speaking, Fed's Kocherlakota speaking, China Manufacturing PMI and the Canadian gdp report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology 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.

Thursday, November 29, 2012

Stocks Slightly Higher into Final Hour on Less Eurozone Debt Angst, Fiscal Cliff Optimism, Short-Covereing, Healthcare/Biotech Sector Strength

 Broad Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 15.09 -2.71%
  • ISE Sentiment Index 120.0 -9.8%
  • Total Put/Call .98 +18.07%
  • NYSE Arms .72 +35.28%
Credit Investor Angst:
  • North American Investment Grade CDS Index 99.83 -1.11%
  • European Financial Sector CDS Index 160.15 -2.51%
  • Western Europe Sovereign Debt CDS Index 105.99 bps -3.63%
  • Emerging Market CDS Index 236.32 bps -6.6%
  • 2-Year Swap Spread 12.0 unch.
  • TED Spread 23.0 +1.0 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -24.75 +3.0 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .08% -1 basis point
  • Yield Curve 136.0 unch.
  • China Import Iron Ore Spot $116.90/Metric Tonne -.85%
  • Citi US Economic Surprise Index 43.90 -3.1 points
  • 10-Year TIPS Spread 2.40 +1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +55 open in Japan
  • DAX Futures: Indicating -7 open in Germany
  • Slightly Higher: On gains in my Tech and Biotech sector longs
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long

Today's Headlines

  • Boehner Urges Obama to ‘Get Serious’ About Cliff Talks. House Speaker John Boehner said President Barack Obama must “get serious” about the fiscal cliff while the speaker remains “hopeful” about talks aimed at averting more than $600 billion in spending cuts and tax increases. Boehner, an Ohio Republican, told reporters today in Washington that there has been no substantial progress in talks between the White House and congressional leaders in the past few weeks. “This is a moment for adult leadership,” he said. “Despite the claims that the president supports a balanced approach, the Democrats have yet to get serious about real spending cuts,” Boehner said. Unless there is a “serious” discussion of spending cuts, “there is a real danger of going off the fiscal cliff,” he said.
  • Finland Rejects Speculation of New Aid to Greece. Speculation on whether Greece needs another bailout is premature and Europe needs to wait and see whether measures agreed to date help the nation regain control of its debt, Finland’s Prime Minister Jyrki Katainen said. “The decisions taken now are the correct ones to support Greece in its extremely difficult situation,” Katainen said in an interview in Helsinki today. “We are committed to the deal by the finance ministers. There’s no point in conjecturing on what that might mean in the future.”
  • Spain Cash-Starved States Nudge Rajoy Toward Rescue: Euro Credit. Spain’s regions are adding to pressure on Prime Minister Mariano Rajoy to seek a European bailout as the funding needs of the country’s cash-strapped states swamp government expectations. Nine of the 17 states have already requested support worth 93 percent of Spain’s 18 billion-euro ($23 billion) regional rescue fund, known as FLA. While the 10-year Spanish bond yield has fallen 251 basis points from a euro-era record of 7.75 percent on July 25, most of the states remain shut out of markets, forcing the government to weigh the cost of extending the rescue facility for another year.
  • German Unemployment Rose for an Eighth Month in November. German unemployment climbed for an eighth straight month in November as Europe’s debt crisis curbed company investment and economic growth. The number of people without a job increased a seasonally adjusted 5,000 to 2.94 million, the Federal Labor Agency in Nuremberg said today. Economists forecast a gain of 16,000, the median of 37 estimates in a Bloomberg News survey shows. 
  • King Signals U.K. Banks Need More Capital Against Losses. Bank of England Governor Mervyn King signaled U.K. banks may need to build up the capital they hold against potential losses, and asked regulators to report back by March on how lenders will comply.
  • China Stocks Drop for Fourth Day as Brokerages Fall. Sinolink Securities Co. plunged by the 10 percent daily limit and Citic Securities Co., the nation’s largest brokerage by value, headed for its biggest loss in three months. The regulator is talking with brokerages about cutting commissions on transactions by 20 percent, the 21st Century Business Herald reported. Liquor maker Luzhou Laojiao Co. led gains by consumer staples companies, the worst performers this month. The Shanghai Composite Index (SHCOMP) dropped 0.5 percent to 1,963.49 at the close, erasing a gain of as much as 0.4 percent. “Volumes have been very weak in the market and the brokerages get hit the most because this means business will suffer,” said Deng Wenyuan, an analyst at Soochow Securities Co., by phone today in Suzhou. “There’s little confidence in the market.
  • China’s Push for Stability Undermines Law, Sociologist Says. The Chinese government’s emphasis on maintaining stability has undermined rule of law in the country, leading local officials to “do evil,” Tsinghua University Professor Sun Liping said at a conference in Beijing today. China has been moving away from the rule of law in the last couple of years as local officials push to enforce limits on childbirth and reach tax collection quotas, Sun, 57, one of the country’s best-known social scientists, told the Caijing Annual Conference in Beijing. The attitude of local officials on the government’s one- child policy is “I just don’t want to see newborn babies, and I don’t care whatever you do to ensure the baby is not delivered,” Sun said.
  • U.S. Retailers’ Sales Miss Estimates After Sandy. U.S. retailers posted November same-store sales that trailed analysts’ estimates as superstorm Sandy depressed traffic early in the month, overwhelming gains from the start of holiday shopping. Sales at Macy’s Inc. (M), the second-biggest U.S. department- store company, fell 0.7 percent, compared with the average projection for a 2.5 percent gain from analysts surveyed by researcher Retail Metrics Inc. Target Corp. (TGT), the second-largest U.S. discount chain, posted a 1 percent decline in same-store sales, missing the estimate for a 2.1 percent increase. Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics rose 1.6 percent, excluding drugstores, trailing the estimate for a 3.5 percent gain, the firm said today.
  • Tiffany(TIF) Cuts Full-Year Profit Forecast, Earnings Missed. Tiffany & Co., the world’s second- largest luxury jewelry retailer, cut its annual profit forecast for the third time this year after higher diamond costs ate into margins and customers curbed spending in weak economies. Tiffany’s gross margin, a key measure of profitability, shrank more than analysts anticipated last quarter as precious- metals costs also increased. Sales, which also trailed the average projection, were “weak,” said Liz Dunn, an analyst with Macquarie Group Ltd. in New York, who rates the shares neutral, the equivalent of hold. The shares dropped 7.9 percent to $58.72 at 9:34 a.m. in New York, the biggest intraday decline since May 24.
  • Jobless Claims in U.S. Decrease as Sandy Effect Dissipates. Applications for jobless benefits decreased by 23,000 to 393,000 in the week ended Nov. 24, Labor Department figures showed today. Economists forecast 390,000 claims, according to the median estimate in a Bloomberg survey.
  • Pending Sales of Existing U.S. Homes Rose 5.2% in October. The index of pending home resales climbed 5.2 percent, exceeding the highest estimate in a Bloomberg survey of economists, to 104.8 after a revised 0.4 percent gain in September, figures from the National Association of Realtors showed today in Washington. The median forecast in the Bloomberg survey called for a 1 percent gain.
  • Student Loans Go Unpaid, Burden U.S. Economy: Chart of the Day.
Wall Street Journal:
  • Fed's Fisher presses for clearer fiscal outlook. Fisher said that a temporary fix would not help employment. Fisher said the Fed would tighten monetary policy when needed but "we are not there yet". Fisher, who is a critic of easy Fed policy, also said he would like the central bank to define how far it is willing to go with its monetary stimulus. "I personally advocate that we do it sooner," he said. Asked when the United States would see a substantial improvement in employment, Fisher said: "Only when we will get clear signals from the fiscal authorities." "You can't expect somebody to hire somebody ... until you have confidence you will get a return on the cost." "From a monetary standpoint, we have given the fuel ... now it's up to the private sector to engage. And it won't happen until we get clarity on the fiscal side."
  • Egypt opposition says wider strikes possible against Mursi. An alliance of Egyptian opposition groups pledged on Thursday to keep up protests against President Mohammed Mursi and said broader civil disobedience was possible to fight what it described as an attempt to "kidnap Egypt from its people". 
  • U.S. gives Iran until March to cooperate with IAEA. The United States set a March deadline on Thursday for Iran to start cooperating in substance with a U.N. nuclear agency investigation, warning Tehran the issue may otherwise be referred to the U.N. Security Council. 
  • Windows PC retail sales fall after Windows 8 - NPD. Consumer sales of Windows-powered personal computers fell 21 percent overall last month, according to a leading retail research firm, indicating a lackluster debut for Microsoft Corp's Windows 8 operating system, which many in the industry had hoped would revive slack PC sales. Since the launch of Windows 8 on Oct. 26, Windows laptop sales are down 24 percent, while desktop sales are down 9 percent compared with the same period last year, said NPD Group, which tracks computer sales weekly using data supplied by retailers.
  • Year-end US fiscal deal must include debt limit hike-Reid. An increase in the U.S. debt limit must be part of any deal to resolve the looming "fiscal cliff" of year-end tax hikes and spending cuts, Senate Majority Leader Harry Reid said on Thursday.
Die Welt:

  • Ifo's Sinn Doubt Euro Crisis States More Competitive. Ifo economic institute President Hans-Werner Sinn questions the view of the EU Commission that crisis-struck states in the euro area are becoming more competitive, citing an interview.

  • The main opposition Syriza party, which opposes Greek loan accord, has 31.5% support among likely voters, a poll by VPRC showed. Greek PM Samaras's New Democracy party would get 26.5% if elections held now. Nationalist Golden Dawn Party would have 12.5% support. 85% are dissatisfied with the way the govt is handling the country's problems.