Sunday, March 31, 2013

Weekly Outlook

U.S. Week Ahead by Reuters (video)

Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by

BOTTOM LINE: I expect US stocks to finish the week modestly lower on global growth fears, Mideast unrest, rising Asia tensions, more Eurozone debt angst, profit-taking, technical selling and more shorting. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Friday, March 29, 2013

Market Week in Review

S&P 500 1,569.19 +1.51%*

 photo boo-6_zps0a3721a2.png

The Weekly Wrap by

*5-Day Change

Weekly Scoreboard*

  • S&P 500 1,569.19 +1.51%
  • DJIA 14,578.54 +1.09%
  • NASDAQ 3,267.52 +1.39%
  • Russell 2000 951.54 +.81%
  • Value Line Geometric(broad market) 408.58 +.89%
  • Russell 1000 Growth 719.95 +1.78%
  • Russell 1000 Value 800.15 +1.27%
  • Morgan Stanley Consumer 973.69 +2.24%
  • Morgan Stanley Cyclical 1,171.41 +.87%
  • Morgan Stanley Technology 737.07 +1.44%
  • Transports 6,255.33 +2.26%
  • Utilities 508.40 +2.42%
  • Bloomberg European Bank/Financial Services 90.45 -2.91%
  • MSCI Emerging Markets 42.63 +.99%
  • Lyxor L/S Equity Long Bias 1,142.17 +1.10%
  • Lyxor L/S Equity Variable Bias 846.04 -.14%
  • NYSE Cumulative A/D Line 180,859 +1.19%
  • Bloomberg New Highs-Lows Index 740 +527
  • Bloomberg Crude Oil % Bulls 29.03 unch.
  • CFTC Oil Net Speculative Position 244,607 +9.34%
  • CFTC Oil Total Open Interest 1,693,684 +2.81%
  • Total Put/Call .89 +1.14%
  • OEX Put/Call 2.53 +48.82%
  • ISE Sentiment 95.0 +1.06%
  • NYSE Arms .85 -53.30%
  • Volatility(VIX) 12.70 -9.22%
  • S&P 500 Implied Correlation 55.79 +1.10%
  • G7 Currency Volatility (VXY) 9.18 -4.57%
  • Smart Money Flow Index 11,431.89 +.33%
  • Money Mkt Mutual Fund Assets $2.629 Trillion +.1%
  • AAII % Bulls 38.4 -1.39%
  • AAII % Bears 28.6 -14.0%
Futures Spot Prices
  • CRB Index 296.39 +.79%
  • Crude Oil 97.23 +3.66%
  • Reformulated Gasoline 311.06 +2.17%
  • Natural Gas 4.02 +2.21%
  • Heating Oil 304.71 +6.12%
  • Gold 1,595.70 -.73%
  • Bloomberg Base Metals Index 201.06 -.73%
  • Copper 340.70 -1.79%
  • US No. 1 Heavy Melt Scrap Steel 341.33 USD/Ton unch.
  • China Iron Ore Spot 137.30 USD/Ton +1.5%
  • Lumber 391.20 +2.11%
  • UBS-Bloomberg Agriculture 1,502.98 -2.94%
  • ECRI Weekly Leading Economic Index Growth Rate 6.6% +20 basis points
  • Philly Fed ADS Real-Time Business Conditions Index .0787 -15.19%
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 114.65 +.24%
  • Citi US Economic Surprise Index 18.90 -10.2 points
  • Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 5/1
  • US Dollar Index 82.98 +.73%
  • Yield Curve 160.0 -7 basis points
  • 10-Year US Treasury Yield 1.85% -8 basis points
  • Federal Reserve's Balance Sheet $3.185 Trillion -.13%
  • U.S. Sovereign Debt Credit Default Swap 37.70 -1.59%
  • Illinois Municipal Debt Credit Default Swap 139.0 +6.07%
  • Western Europe Sovereign Debt Credit Default Swap Index 105.05 +4.06%
  • Emerging Markets Sovereign Debt CDS Index 212.54 +2.52%
  • Israel Sovereign Debt Credit Default Swap 124.57 +2.70%
  • Iraq Sovereign Debt Credit Default Swap 478.86 -.47%
  • China Blended Corporate Spread Index 413.0 +12 basis points
  • 10-Year TIPS Spread 2.52% -2 basis points
  • TED Spread 21.25 -.5 basis point
  • 2-Year Swap Spread 18.25 +.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -19.25 +1.25 basis points
  • N. America Investment Grade Credit Default Swap Index 90.74 +1.24%
  • European Financial Sector Credit Default Swap Index 194.35 +10.20%
  • Emerging Markets Credit Default Swap Index 265.48 +3.75%
  • CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 135.0 +1.0 basis point
  • M1 Money Supply $2.421 Trillion unch.
  • Commercial Paper Outstanding 1,021.60 +.50%
  • 4-Week Moving Average of Jobless Claims 343,000 +3,200
  • Continuing Claims Unemployment Rate 2.4% unch.
  • Average 30-Year Mortgage Rate 3.57% +3 basis points
  • Weekly Mortgage Applications 823.70 +7.6%
  • Bloomberg Consumer Comfort -34.4 -.5 point
  • Weekly Retail Sales +2.8% unch.
  • Nationwide Gas $3.64/gallon -.05/gallon
  • Baltic Dry Index 910.0 -2.15%
  • China (Export) Containerized Freight Index 1,107.55 unch.
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 17.50 unch.
  • Rail Freight Carloads 235,641 +2.99%
Best Performing Style
  • Large-Cap Growth +1.78%
Worst Performing Style
  • Small-Cap Value +.61%
Leading Sectors
  • Biotech +3.3%
  • Hospitals +2.9%
  • Foods +2.8%
  • Medical Equipment +2.8%
  • Semis +2.7%
Lagging Sectors
  • Disk Drives -1.0% 
  • I-Banking -1.0%
  • Gold & Silver -1.4%
  • Homebuilders -1.5%
  • Alt Energy -2.1%
Weekly High-Volume Stock Gainers (9)
Weekly High-Volume Stock Losers (8)
Weekly Charts
*5-Day Change

Thursday, March 28, 2013

Bull Radar

Style Outperformer:
  • Large-Cap Growth +.32%
Sector Outperformers:
  • 1) Oil Tankers +1.39% 2) Biotech +1.37% 3) Road & Rail +.89
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) TER 2) OKE 3) BIIB 4) FL 5) MDCO
Stocks With Most Positive News Mentions:
  • 1) NOC 2) CHK 3) MON 4) LCC 5) BIIB

Thursday Watch

Evening Headlines 
  • Monti Rushes to the Exit as Bersani Seeks ‘Insane’ Person’s Job. Italian Prime Minister Mario Monti can’t wait to quit his job. Pier Luigi Bersani, who has first shot at replacing Monti, said only a lunatic would want to. “Believe me, only an insane person would want to govern at this moment,” Bersani said yesterday in a meeting with rival lawmakers as he sought to persuade them to support his bid to form a government. The contradiction is characteristic of Italian politics at a time when the economy is stuck in recession. Parliament was deadlocked by inconclusive elections last month, and Bersani, after nearly a week of talks, has given no signal that he can break the impasse. He will report to President Giorgio Napolitano today with the results of his negotiations. The incumbent has indicated his desire for a breakthrough. “This government, and I’ll say it in the most respectful way possible, can’t wait to have its mandate rescinded,” Monti said yesterday in a speech to parliament. Italian 10-year bond yields jumped 21 basis points to 4.78 percent yesterday, widening the difference in yield with similar-maturity German bunds 28 basis points to 3.5 percentage points, the biggest gap since Dec. 10
  • Slovenian Austerity After Cyprus Fails to Stem Yield Gain. Slovenia’s pledge to continue austerity measures failed to stem a rise in bond yields to record highs as investors worry the Alpine nation will follow Cyprus as the next euro-region member requiring a bailout. Prime Minister Alenka Bratusek, in her first major policy speech since taking office, told Parliament yesterday that her week-old government would rebuild ailing banks and improve state finances that are in “bad shape” so the country won’t become the sixth euro member to need aid.
  • Cyprus Fig Leaf Masks Hollande Economic Growth Woes: Euro Credit. French President Francois Hollande is basking in borrowing costs are near record lows, helped most recently by investors seeking shelter from problems in Cyprus. The yield on France's benchmark 10-year bond fell 6 basis points to 2.0% during the 10 days as European authorities roiled markets by imposing a tax on depositors in Cypriot banks. The French rate is just short of the all-time low of 1.92% reached in December. "I don't see any value in French bonds" at current levels, said Robin Marshall, director of fixed-income at Smith & Williamson Investment Management in London. "The reforms in France have stalled and the economy is contracting. The problem is the peripheral space helped to divert attention of the market from these problems.    
  • EU to Start Debate on Energy, Climate Rules Amid Crisis. The European Union’s executive started a debate today on EU climate and energy rules as the crisis-ridden bloc seeks a long-term plan to cut greenhouse gases and promote clean power technologies. While the 27-nation bloc is making “good progress” toward its 2020 goals to boost the share of renewable energy and cut greenhouse gases, a framework for the subsequent decade is needed to give investors legal certainty, spur innovation and prepare for a global climate deal, the European Commission said in a consultation paper published in Brussels. The commission invited member states, the European Parliament, industry groups and non-governmental organizations to submit until July 2 their views on EU objectives for 2030.
  • China Stocks Fall Most in Three Weeks as Financial Shares Slump. China stocks fell, dragging the CSI 300 Index (SHSZ300) down the most in three weeks, as banks tumbled on concern new wealth-management product rules will hurt earnings and as the government signaled more flexible interest rates. Industrial Bank Co. lost 9.2 percent, while China Minsheng Banking Corp. declined 7.6 percent, leading a gauge of financial companies to an 11-week low. A directive from the banking regulator for lenders to limit the investment of client funds in debt that isn’t publicly traded will hurt revenue for some banks by 2 percent, according to a Citic Securities Co. report today. “The regulation will hurt banks’ profits,” Zhou Lin, an analyst at Huatai Securities Co., said by phone from Nanjing. That will drag on stocks because “banks have a big weighting” on benchmark indexes, he said. The Shanghai Composite Index (SHCOMP) sank 2.4 percent to 2,245.57 at 10:27 a.m. local time. The CSI 300 Index, which tracks stocks in Shanghai and Shenzhen, tumbled 2.9 percent, the most since March 4, to 2,508.96. Hong Kong’s Hang Seng China Enterprises Index dropped 1.7 percent. The CSI 300 Financials Index slumped 4.7 percent, the most since March 4 and the biggest drop among the CSI 300’s 10 industry groups. The rule to cap investment by Chinese banks’ wealth management products in non-exchange traded products will reduce growth of total social financing, leading to pessimistic expectations about economic recovery, analysts led by Mao Changqing at Citic Securities wrote in a report today
  • Rebar Falls in Shanghai on Concerns Over China’s Property Market. Steel reinforcement-bar futures declined with China’s stocks on concerns that further tightening measures in the property sector may damp demand. Futures for delivery in October dropped as much as 1.2 percent to 3,841 yuan ($618) a metric ton on the Shanghai Futures Exchange, before trading at 3,847 yuan at 11:08 a.m. Shanghai time. The most-active contract has lost 11 percent after climbing to a 10-month high of 4,297 yuan on Feb. 8.
  • Kia Says Weakening Yen Becoming ‘Weapon’ for Japanese Carmakers. The weakening yen is becoming a “weapon” for Japanese automakers by making them more competitive, said a senior executive at South Korea’s second- largest carmaker. “The weakening yen reinforces the Japanese competitors,” Kia Motors Corp. (000270) Vice President Lee Soon Nam told reporters today at the Seoul Motor Show. “The weakening yen will become the Japanese automaker’s weapon, they now have reinforcements.” The Japanese currency has weakened 17 percent against the South Korean won in the past six months, making the country’s exports cheaper versus its Asian neighbor.
  • Japan Sees Population Shrinking 16% by 2040, More Elderly. Japanese population may drop 16% from 2010 level to 107.3m in 2040, according to estimates released by National Institute of Population and Social Security Research yesterday. People who are 65 years old and above will likely account for 36% of total population in 2040, compared with 23% in 2010 and 30% in 2025.
  • Rubber Drops as Debt Crisis, Weak U.S. Data Raise Demand Concern. Rubber declined the most in a week on concern that demand for the commodity will weaken as Europe’s debt crisis is deepening and pending U.S. home sales fell. The contract for delivery in September fell as much as 2.2 percent, the most since March 22, to 276.4 yen a kilogram ($2,936 a metric ton) on the Tokyo Commodity Exchange and was at 276.7 yen at 10:49 a.m. Futures have lost 8.5 percent this year.
  • Lead Prices Drop to Four-Month Low on European Debt Concerns. Lead prices fell to a four-month low in London as a bailout for Cyprus and political deadlock in Italy stoked concern that the euro-area debt crisis will curb metal demand. Tin and copper also dropped. The Cyprus rescue "tarnished" the region's appeal, Swiss bank Pictet & Cie. said, while the euro fell to a four-month low against the dollar. An index of six industrial metals headed for the first two-month slide in more than a year. "The Cyprus situation is dragging everything lower, and the markets look pretty bleak," Grant Barratt, a trader at Jefferies Bache LLc in New York, said in an interview. "The euro isn't helping things." 
  • Red Hat(RHT) Falls as Fourth-Quarter Sales Miss Estimates. Red Hat Inc. (RHT), the largest seller of Linux operating-system software, reported fiscal fourth-quarter sales that missed estimates as some customers -- concerned about sluggish economic growth -- put off purchases. Profit excluding some items was 36 cents a share on sales of $347.9 million, the Raleigh, North Carolina-based company said today in a statement. That compares with analysts’ average prediction of earnings of 30 cents on revenue of $349.3 million, according to data compiled by Bloomberg. Sales and profit forecasts for the current period also missed projections. Tax increases in the U.S. and a worsening recession in Europe are causing businesses to delay upgrading to Red Hat’s Linux software from older Unix systems, according to Richard Williams, an analyst at Cross Research. “The channel checks showed that activity just stopped after the first week of December,” said Williams, who has a hold rating on the stock, with $51 price target. The shares decreased as much as 14 percent in extended trading.
  • PVH(PVH) says Warnaco deal will cut profit in 2013. PVH Corp. says its Warnaco acquisition will require more investments than it initially anticipated and weigh on its earnings for the year. The clothing company also declared that 2013 will be a transitional year as it invests in its brands, and its shares sank in after-hours trading Wednesday.
Wall Street Journal: 
  • Use of Food Stamps Swells Even as Economy Improves. The financial crisis is over and the recession ended in 2009. But one of the federal government's biggest social welfare programs, which expanded when the economy convulsed, isn't shrinking back alongside the recovery. Enrollment in the Supplemental Nutrition Assistance Program, as the modern-day food-stamp benefit is known, has soared 70% since 2008 to a record 47.8 million as of December 2012. The biggest factor behind the upward march of food stamps is a sluggish job market and a rising poverty rate. At the same time, many states have pushed to get more people to apply for SNAP, a program where the federal government picks up the tab. But there is another driver, which has its origins in President Bill Clinton's 1996 welfare overhaul. In recent years, the law has enabled states to ease asset and income tests for would-be participants, with the encouragement of the Obama administration, allowing into the program people with relatively higher incomes as well as savings. By expanding the pool of potential applicants, they are redrawing the landscape of government assistance. It is one reason why SNAP appears to have evolved from a program that rose and fell with the unemployment rate to a more permanent feature of the landscape.
  • China Tightens Regulations on Wealth Management. China moved to rein in wildly popular but opaque investment products that form a key plank of the nation's shadow-banking system, after the high-profile failure of one product offered a glimpse of the risk they pose to the financial system. The rules issued Wednesday by China's banking regulator came as China's four biggest state-run banks said they had more than 3 trillion yuan ($467 billion) worth of such products outstanding at the end of last year, their fullest disclosure yet of their exposure to the products and a move signaling their own caution toward their proliferation. 
  • Bank Havens Seek Distance From Crisis. The risks posed by hosting a large financial industry became a flash point on Wednesday as the Cyprus bailout trained the spotlight on other small euro nations that depend on the sector for jobs and economic growth. The issue has become a sore spot mainly for Luxembourg and Malta after the debate over Cyprus prompted European ministers and politicians to question the viability of housing a large financial center in a small country. Cyprus's bailout requires the country to shrink its large financial-services industry to the euro-zone average, setting an unwelcome precedent for nations whose economic models are based on financial services.
  • Justices Show Reluctance for Broad Marriage Ruling. Two days of arguments on same-sex marriage revealed a Supreme Court uneasy about making sweeping moves on gay rights and holding doubts about whether the cases belonged before the justices at all.
  • Funds Reshape Investment Mold. Hedge funds that specialize in bonds are bulking up on stocks, in the latest sign of investor concern over the health of the long bull market in debt prices. Fund managers that have made winning bets in corporate loans, mortgage bonds and distressed debt are altering course after a flood of cash has pushed up the prices of all sorts of debt investments, raising risks and depressing expected returns.
  • Facebook's(FB) Mark Zuckerberg Starting Political Group. The 28-year-old Facebook Inc. chief executive is in the process of co-organizing a political advocacy group made up of top technology leaders that would push federal legislative reform on issues ranging from immigration to education, said people familiar with the development.
  • Laffer and Moore: The Red-State Path to Prosperity. Blue states with high taxes are struggling to compete for businesses and workers. You can tell a lot about prosperity in America by observing the places people are moving to and where they are packing up and moving from. New Census Bureau data on metropolitan areas indicate that the South and the Sunbelt regions continue to grow, while the Northeast and Midwest continue to shrink. Among the 10 fastest-growing metro areas last year were Raleigh, Austin, Las Vegas, Orlando, Charlotte, Phoenix, Houston, San Antonio and Dallas. All of these are in low-tax, business-friendly red states. Blue-state areas such as Cleveland, Detroit, Buffalo, Providence and Rochester were among the biggest population losers.
Fox News: 
  • What to Cut: Red tape stalls firing of ineffective federal workers. Working for the federal government used to mean a trade-off -- lower salaries, in exchange for higher job security. Today, that trade-off is gone as federal workers often make good money with little risk of being fired. Though numbers are hard to come by in the mammoth 2.4 million-employee federal workforce, an analysis by USA Today found the federal government fired only one half of one percent of its workers in fiscal year 2011. That's about five times smaller than in the private sector.
  • Five Below(FIVE) fourth-quarter profit rises 55%. Five Below Inc.'s fiscal fourth-quarter profit rose 55% as the discount retailer's same-store sales improved, though margins edged down. Shares sank 6.4% after hours to $36.65 after the company forecast weak full-year results.
  • Surging Student-Loan Debt Is Crushing the System. Student-loan defaults surged in the first three months of 2013, while efforts to collect bad loans are faltering, according to credit analysts and government audits. It is the latest twist in a college debt crisis that is hanging over recent graduates and dragging on the broader economy.
  • G4S Readies Guards as Cypriot Banks Prepare to Open. Cyprus reopens its banks on Thursday while limiting withdrawals, banning cheques and curbing the use of Cypriot credit cards abroad, among measures imposed to avert a bank run after it agreed a tough rescue deal with international lenders.
Zero Hedge: 
Business Insider: 
  • Fisker puts U.S. workforce on furlough this week. Fisker Automotive, which has not made a vehicle since July, placed its U.S. workforce on furlough this week as part of its effort to keep costs low while it continues to search for a strategic partner, the U.S. automaker said on Wednesday. 
  • Oil industry to sidestep brunt of new U.S. swaps rules. Oil companies are largely escaping the close scrutiny of derivatives trading they once warned would harm their business and are seeking further delays from U.S. regulators. Beginning in January this year, the top U.S. derivatives regulator has required that companies register as dealers if they trade more than $8 billion in swaps a year, unless they do so to hedge price swings in their day-to-day business. But no large energy companies have yet joined the ranks of the 70 or so investment banks that have registered as swap dealers and are subject to the toughest level of oversight, two people briefed on the matter said.
  • JPMorgan(JPM) risk disclosures fell short for regulators -documents. For months after JPMorgan Chase & Co executives first admitted that they had wrongly brushed off questions about the "London Whale" derivatives losses, officials at the U.S. Securities and Exchange Commission pressed the company to disclose more to investors about risks it was taking.
  • Cyprus has finally killed myth that EMU is benign. The punishment regime imposed on Cyprus is a trick against everybody involved in this squalid saga, against the Cypriot people and the German people, against savers and creditors. All are being deceived. The Cyprus debacle has taught us yet again that EMU has gone off the rails, is a danger to stability, and should be dismantled before it destroys Europe’s post-War order. Whether it marks a watershed moment in the crisis is another matter. Italy, Spain, France and Portugal have their own crises, moving to their own rhythm. The denouement will arrive when the democracies of southern Europe conclude that recovery is a false promise and that the only way to end mass unemployment is to break free of EMU’s contractionary regime. It will be decided by Italy, not Cyprus
  • Fasten your seat belts – a balance of payments crisis looms. Whatever happened to the holy grail of a more balanced UK economy? Britain has been living substantially beyond its means for more than thirty years now. Spending more than we earn long pre-dated the Labour years. And it's getting worse, not better.
Maeil Business Newspaper:
  • The South Korean government will cut its 2013 GDP forecast to mid-2% from 3% today, citing unnamed government officials.
People's Daily:
  • Apple's(AAPL) after-sale service policy may violate Chinese law, citing the General Administration of Quality Supervision, Inspection and Quarantine. The report cites customer complaints about being charged for keypad repairs. Apple must provide free maintenance service within certain period, AQSIQ is cited as saying. Apple should provide free spare phones to customers if products can't be repaired in 7 days, citing AQSIQ. The government will "seriously deal with" Apple if it doesn't rectify problems "if proven true," the report says.
Shanghai Securities News:
  • Yao Jingyuan, researcher at the Counselors' Office of the State Council, said China faces relatively large downward economic pressure in the middle of this year. Yao is also former chief economist at the National Bureau of Statistics. Yao cites growth rate for newly started projects in first two months being nearly 20 percentage points slower than a year earlier.
China Securities Journal:
  • Cities in the central and western Chinese provinces may issue detailed property curb policies in early- or mid-April, citing people familiar with the situation. Tier-2 and tier-3 Chinese cities may impose different property market controls than the nation's major cities, the report said.
21st Century Business Herald:
  • China's southern city of Shenzhen will likely raise in April the down payment for second home purchases to 70%, from 60% currently, citing people familiar with the situation.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.50% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 121.50 +3.0 basis points.
  • Asia Pacific Sovereign CDS Index 95.25 +1.0 basis point.
  • FTSE-100 futures -.24%.
  • S&P 500 futures -.39%.
  • NASDAQ 100 futures -.29%.
Morning Preview Links

Earnings of Note

  • (GME)/2.09
  • (FINL)/.74
  • (CMC)/.18
  • (ACN)/.97
  • (BBRY)/-.32
  • (FRED)/.19
  • (MOS)/.89
  • (SIG)/2.09
  • (UTIW)/.14 
Economic Releases
8:30 am EST
  • Final 4Q GDP is estimated to rise +.5% versus a prior estimate of a +.1% gain.
  • Final 4Q Personal Consumption is estimated to rise +2.1% versus a prior estimate of a +2.1% increase.
  • Final 4Q GDP Price Index is estimated to rise +.9% versus a prior estimate of a +.9% gain.
  • Final 4Q Core PCE is estimated to rise +.9% versus a prior estimate of a +.9% gain.
  • Initial Jobless Claims are estimated to rise to 340K versus 336K the prior week.
  • Continuing Claims are estimated to fall to 3041K versus 3053K prior.
9:45 am EST
  • The Chicago Purchasing Manager report for March is estimated to fall to 56.5 from 56.8 in February.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German jobs report, Japan Manufacturing PMI, Canada GDP report, Japan unemployment rate, 7Y T-Note auction, Kansas City Fed Manufacturing Activity for March, NAPM-Milwaukee for March, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, CIBC Retail/Consumer Conference and the (EBAY) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly lower and maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Wednesday, March 27, 2013

Stocks Slightly Lower into Final Hour on Surging Eurozone Debt Angst, Rising Global Growth Fears, Technical Selling, Financial/Gaming Sector Weakness

Today's Market Take:

Broad Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Mixed
  • Volume: Light
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 13.02 +1.96%
  • ISE Sentiment Index 110.0 +17.02%
  • Total Put/Call .93 +19.23%
  • NYSE Arms .96 +23.05%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.48 +2.15%
  • European Financial Sector CDS Index 199.75 +5.25%
  • Western Europe Sovereign Debt CDS Index 103.82 +3.30%
  • Emerging Market CDS Index 267.55 +2.76%
  • 2-Year Swap Spread 17.75 -.5 bp
  • TED Spread 20.25 -1.5 bps
  • 3-Month EUR/USD Cross-Currency Basis Swap -20.75 -.75 bp
Economic Gauges:
  • 3-Month T-Bill Yield .08% +1 bp
  • Yield Curve 160.0 -6 bps
  • China Import Iron Ore Spot $137.40/Metric Tonne +.22%
  • Citi US Economic Surprise Index 25.10 unch.
  • 10-Year TIPS Spread 2.52 -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +57 open in Japan
  • DAX Futures: Indicating +25 open in Germany
  • Slightly Higher: On gains in my tech, biotech and medical sector longs
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long

Today's Headlines

  • Italian Bonds Slide on Bersani Comments, Lower Demand at Auction. Italian bonds slumped, with five- year yields rising the most in a month, as Democratic Party leader Pier Luigi Bersani said there was no chance of a broad coalition to end the deadlock caused by elections last month. Italy’s 10-year yields extended their first quarterly increase since June as demand fell when the Treasury sold 6.91 billion euros ($8.84 billion) of debt at an auction today. Spanish and Greek bonds also slid as investors shunned the securities of so-called peripheral nations. German bunds gained, with 10-year yields falling to a three-month low, even as European governments vowed the tax on bank accounts to finance Cyprus’s aid package won’t be a precedent for future rescues. Italy’s five-year yield jumped 18 basis points, or 0.18 percentage point, to 3.52 percent at 3:26 p.m. London time after rising as much as 22 basis points, the biggest increase since Feb. 26.
  • Spain Says 2012 Deficit Is Bigger Than First Estimated: Economy. The Spanish government said its 2012 budget deficit will be bigger than first estimated after the European Union requested changes in how tax claims are computed. The budget shortfall excluding aid to the banking sector was 6.98 percent of gross domestic product last year, more than the 6.74 percent predicted on Feb. 28, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid today. That compares with 8.96 percent in 2011.
  • France’s Towns Demand Rescue From ‘Time Bomb’ of Dexia Loans. French towns from Asnieres to Sainte-Etienne are calling on President Francois Hollande’s government to save them from about 10 billion euros ($13 billion) in Dexia loans whose risks they say weren’t made clear. Sitting on debt pegged to foreign interest rates or currencies, many troubled municipalities are struggling to service their loans and clamoring for help from the state. “This is a time bomb for a certain number of local governments,” Sebastien Pietrasanta, the mayor of Asnieres, a Paris suburb, told reporters yesterday.
  • European Stocks Drop as Italian Yilds Surge; TDC Retreats. European stocks fell to a three- week low, led by a selloff in banks, as the leader of Italy’s Democratic Party ruled out the possibility that rival politicians will agree on a broad coalition government. Banca Monte dei Paschi di Siena SpA and Banco Popolare SC slid more than 1 percent as Italian bond yields surged. TDC (TDC) A/S dropped 1.6 percent as its private-equity owner sold another 6.8 percent stake in the Danish phone company. Safran (SAF) SA slipped 1.5 percent as the French government sold 13 million shares in the maker of aircraft engines.
  • Euro Weakens Below $1.28 on Deadlocked Italy, Cyprus Concern. The euro fell to less than $1.28 for the first time in more than four months as a bailout for Cyprus and a political deadlock in Italy undermined demand for the region’s assets. Europe’s shared currency weakened against all 16 of its major peers as demand fell at a sale of Italy’s bonds and the nation’s political parties remained at an impasse after last month’s elections.
  • VIX Contracts Reach Six-Year High Versus S&P 500 Bets: Options. While U.S. stock volatility is stuck close to a six-year low, options used to wager on its resurgence are jumping. The VVIX Index, tracking contracts whose value is tied to swings in the CBOE Volatility Index, has gained 21% since reaching the lowest level of the year on Feb. 19. Over that period, the VIX climbed 3.7%, pushing the ratio between them to the widest in six years on March 15, according to Bloomberg. Divergence between the gauges shows increasing speculation that the VIX is poised for a rebound after losing 45% since the end of 2011. Traders that are buying options on volatility rather than stocks are betting that when losses hit the S&P's 500 Index, they will be rapid, according to Philippe Trouve, a director for equity derivatives at Bank of America in NY.
  • Cliffs(CLF) Declines After Morgan Stanley Downgrade. Cliffs Natural Resources Inc. (CLF), the largest U.S. iron-ore miner, tumbled the most in six weeks after analysts at Morgan Stanley said new supply in North America may reduce the commodity’s price. Cliffs fell 12 percent to $18.94 at 9:41 a.m. in New York, after earlier dropping 15 percent, the most intraday since Feb. 13. The shares (CLF) have declined 51 percent this year, making it the year’s worst performer on the Standard & Poor’s 500 Index.
  • N. Korea Cuts Hotline to South After Attack Threats. North Korea cut off a military hotline with South Korea a day after putting its artillery forces on high alert and threatening to attack the U.S., in the latest escalation of tensions on the peninsula. “Under the situation where a war may break out any moment, there is no need to keep north-south military communications,” the official Korean Central News Agency said, adding that South Korea was informed at 11:20 a.m. today. The regime cut off a separate Red Cross hotline on March 8.
  • Oil-Demand Plateau Seen as Natural Gas Favored: Chart of the Day.
Wall Street Journal:
  • Apple(AAPL) Ire Spreads to China’s SOEs. Want to know who are China’s most hated companies? All you have to do is hit out at one of its most beloved. For the third consecutive day, the Chinese Communist Party’s official mouthpiece, the People’s Daily, has run articles criticizing Apple for its warranty policy in China and calling Apple’s defense of its customer-service practices arrogant. Apple has declined to comment on the coverage. It’s still difficult to know whether the unkind official media attention will dull or polish Apple’s shine if it has an effect at all.
Zero Hedge: 
Business Insider: 
  • Why Derivatives May Be the Biggest Risk for the Global Economy. The very fact that reliable figures are hard to come by is itself part of the problem. The $638 trillion currently reported by the BIS is only a floor. Estimates for the total capital employed in derivatives trading is somewhere between $10 and $20 trillion, roughly comparable to the capitalization of the NYSE. That means that each actual dollar in the derivatives market is supporting between $35 and $70 of nominal value. Losses of only a few percent of face value therefore would be enough to wipe out even the best-capitalized derivatives traders.
  • Cyprus bailout not expected to be euro zone's last -Reuters poll. Cyprus probably won't be the last euro zone country to ask for an international bailout, according to a Reuters poll of economists, who cited Spain and Slovenia as the likeliest candidates. The survey also showed no agreement over whether the latest bailout, which hinges on shutting one of Cyprus's biggest banks at a cost to richer depositors, would be better or worse for the financial stability of the euro zone. There were 16 responses naming Spain, and 16 for Slovenia, whose outsized banking industry has drawn comparisons with Cyprus, making it the latest country to fall under the spotlight of the euro zone's debt crisis. "The Cyprus deal has brought the European banking crisis to a new level," said Lena Komileva, director of G+ Economics, a research consultancy in London.
  • METALS-Copper falls on strong dollar, euro zone worries.
  • China Holds Landing Exercises in Disputed Seas. China's increasingly powerful navy paid a symbolic visit to the country's southernmost territorial claim deep in the South China Sea this week as part of military drills in the disputed Spratly Islands involving amphibious landings and aircraft. The visit to James Shoal, reported by state media, followed several days of drills starting Saturday and marked a high-profile show of China's determination to stake its claim to territory disputed by Vietnam, the Philippines, Taiwan, Malaysia and Brunei amid rising tensions in the region.
  • Cypriot 'solution' threatens further economic carnage among the other PIGS. There is no mess quite so bad that eurocrat intervention won't make even worse. Ever since the Dutch finance minister Jeroen Dijsselbloem declared that Cyprus would act as a template for other struggling eurozone lenders, the sound of screeching brakes and gear sticks being wrenched rapidly into reverse has been deafening. This is what he told Reuters:
  • Cyprus bail-out: live. Cypriots face a suspension of credit card payments for overseas goods and a ban on cashing cheques under draft capital controls designed to avert a run on the banks.  
  • UK economy contracts by 0.3pc - reaction. Britain's economy contracted by 0.3pc in the fourth quarter of 2012, official data confirmed on Wednesday, as industrial production posted its biggest quarterly fall in almost four years. Here experts give their view. 
Die Welt:
  • One Third of Germans Want Deutsche Mark Back. One in three Germans has lost faith in the euro, citing a Forsa poll commissioned by Royal Bank of Scotland's German unit. Only the strongest countries in the euro area should keep the common currency, 43% of respondents said. 50% of those asked said they're concerned they may lose money in a banking crisis.
Ruhr Nachrichten:
  • German Chamber of Commerce Warns of High Labor Costs. A further increase in labor costs in Germany would be hardly bearable, citing Martin Wansleben head of the German Chamber of Commerce. Says more than every third company sees a business risk for the coming months.