Tuesday, April 30, 2013

Stocks Higher into Final Hour on Central Bank Hopes, Euro Bounce, Short-Covering, Tech/Commodity Sector Strength

Today's Market Take:

Broad Market Tone:
  • Advance/Decline Line: Modestly Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 13.73 +.15%
  • ISE Sentiment Index 101.0 -36.0%
  • Total Put/Call .84 -6.67%
  • NYSE Arms 1.16 +52.24%
Credit Investor Angst:
  • North American Investment Grade CDS Index 74.91 -1.91%
  • European Financial Sector CDS Index 145.66 -4.79%
  • Western Europe Sovereign Debt CDS Index 94.33 unch.
  • Emerging Market CDS Index 229.30 -1.09%
  • 2-Year Swap Spread 13.75 unch.
  • TED Spread 22.75 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -17.75 +.25 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 146.0 unch.
  • China Import Iron Ore Spot $134.10/Metric Tonne unch.
  • Citi US Economic Surprise Index -1.7 +3.6 points
  • 10-Year TIPS Spread 2.34 -2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating +29 open in Japan
  • DAX Futures: Indicating +21 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my retail/tech sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  • Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 
  • Euro-Area Unemployment Increases to Record 12.1% Amid Recession. The euro-area jobless rate rose to a record in March, increasing pressure on the European Central Bank to take additional measures to boost growth. The euro-area unemployment rate advanced to 12.1 percent from 12 percent in the previous two months, the European Union’s statistics office in Luxembourg said today. That’s in line with the median of 31 economists’ estimates in a Bloomberg News survey. Soaring unemployment “cannot be ignored, because this is the biggest fragmentation that is happening in Europe,” ECB Vice President Vitor Constancio said on April 25. “It’s even worse in what regards youth unemployment.” Today’s report showed that 19.2 million people were jobless in the euro area in March, up 62,000 from the previous month. Youth unemployment was at 24 percent.
  • German Unemployment Climbs in Sign Economic Recovery Delayed. German unemployment rose for a second month in April, adding to signs that Europe’s largest economy is struggling to recover from a slump at the end of last year. The number of people out of work climbed a seasonally adjusted 4,000 to 2.94 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted an increase of 2,000, according to the median of 29 estimates in a Bloomberg News survey. The adjusted jobless rate held at 6.9 percent, just above a two-decade low of 6.8 percent.
  • Slovenia Bank Rescue at 20% of GDP Means No Escaping EU Aid. Slovenia, the first former Communist nation in the euro zone, is facing a typically capitalist dilemma: whether to protect creditors of big banks. Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.8 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output. Even after a successful domestic debt sale two weeks ago, the country may need assistance from the European Union, and holders of bank bonds, including the most senior creditors, could be forced to take losses, according to Raoul Ruparel, head of research at London-based Open Europe. Such a bail-in, which would be the second in the euro zone, after Cyprus, risks deepening divergence in the monetary union by keeping borrowing costs higher in economically weak nations.
  • Fiat Industrial Cuts 2013 Goals on Iveco Europe Truck Sales. Fiat Industrial SpA (FI), the truck and tractor maker spun off from car manufacturer Fiat SpA (F) in 2011, cut earnings and sales targets for 2013 as a recession in Europe led to a first-quarter loss at the Iveco vehicle unit. Revenue will rise as much as 4 percent, compared with a previous forecast of 5 percent, Turin, Italy-based Fiat Industrial said today in a statement. The trading profit margin will amount to 7.5 percent to 8.3 percent of revenue, versus an earlier range prediction of 8.3 percent to 8.5 percent. Amid a recession in the 17 countries sharing the euro, demand for commercial vehicles in Europe fell for a 15th consecutive month in March. MAN SE (MAN), the region’s third-largest producer, lowered its earnings forecast for 2013 on April 26 because of the contraction. Industrywide first-quarter sales of trucks weighing more than 3.5 tons dropped 17 percent to 64,198 vehicles, according to the ACEA trade group. “The news is clearly negative and not discounted,” said Gabriele Gambarova, an analyst at Banca Akros in Milan. “Iveco encountered more difficult market conditions.” Fiat Industrial dropped as much as 5.1 percent to 8.59 euros, the biggest intraday decline since March 19, and was trading down 4.7 percent at 4:20 p.m. in Milan, valuing the manufacturer at 10.5 billion euros. 
  • European Stocks Fall, Trimming 11th Straight Monthly Gain. European stocks declined, paring an 11th straight month of gains, as a report showed business activity in the U.S. unexpectedly shrank this month. Lonmin Plc tumbled 5.7 percent after shuttering a South African platinum furnace. Fiat Industrial SpA sank the most in 11 months after cutting its 2013 earnings target. UBS (UBSN) AG surged the most in six months as profit exceeded analysts’ projections. Deutsche Bank AG rallied the most since September after Germany’s largest lender announced plans to raise as much as $6.5 billion in capital.
  • IBM(IBM) Raises Dividend 12%, Adds $5 Billion in Stock Buybacks. International Business Machines Corp. (IBM), the biggest computer-services company, boosted its dividend 12 percent and approved $5 billion in stock buybacks, rewarding investors after a disappointing earnings report. The dividend of 95 cents a share will be payable on June 10 to shareholders of record on May 10, IBM said today from its annual meeting in Huntsville, Alabama. With the additional buyback funds, IBM has $11.2 billion in its repurchase program
  • Yellen Has the Right of First Refusal at Fed, Meyer Says. Federal Reserve Vice Chairman Janet Yellen has the “right of first refusal” to become the next leader of the central bank when Ben S. Bernanke’s term ends in January, said former Fed governor Laurence Meyer. Meyer, speaking at a Bloomberg Link panel in Washington, said it’s “a bit surprising” that Bernanke couldn’t manage his calendar to allow him to take part in this year’s Fed conference in Jackson Hole, Wyoming.
  • Dollar Drops on Weak Data as Fed Meets; Euro Gains on ECB Bets. The dollar fell versus most major peers as business activity in the U.S. unexpectedly shrank for the first time in more than three years amid bets the Federal Reserve won’t slacken its bond buying under quantitative easing. 
  • Copper Users Press London Exchange to Reduce Warehouse Backlogs. A group of industrial copper users is pressing the London Metal Exchange to reduce growing queues at warehouses that they say are contributing to supply constraints and rising fees.
Fox News:
  • Obama walks back 'red line' stance on Syrian government using chemical weapons. President Obama, who earlier said use of chemical weapons by Syria on its people would be a “red line” requiring action by the U.S., walked the stance back on Tuesday, saying he needs more information on the reported attacks before responding.
  • Special forces could've responded to Benghazi attack, whistle-blower tells Fox News. A military special ops member who watched as the deadly attack on the U.S. Consulate in Benghazi unfolded last September told Fox News the U.S. had highly trained forces just a few hours away, and said he and others feel the government betrayed the four men who died in the attack. Speaking on condition of anonymity, and appearing in a Fox News Channel interview with his face and voice disguised, the special operator contradicted claims by the Obama administration and a State Department review that said there wasn’t enough time for U.S. military forces to have intervened in the Sept. 11 attack in which U.S. Ambassador to Libya Chris Stevens, an embassy employee and two former Navy SEALs working as private security contractors were killed. “I know for a fact that C-110, the EUCOM CIF, was doing a training exercise in … not in the region of North Africa, but in Europe,” the operator told Fox News' Adam Housley. “And they had the ability to act and to respond.”
CNBC: 
  • The Fed Is Destroying Jobs: Ken Griffin. Ken Griffin, the head of the Chicago-based hedge fund Citadel, is not at all pleased with Ben Bernanke. According to Griffin, low interest rates have encouraged businesses to invest in technology that reduces the demand for human labor. Meanwhile, health care reforms have increased the cost of human capital—so it's a double whammy.
  • Sex Superbug Could Be 'Worse Than AIDS'.
Zero Hedge:
Business Insider: 
Reuters: 
  • Cummins(CMI) profit drops sharply, shares tumble 5 pct. Cummins Inc reported a sharper-than-expected drop in first-quarter earnings on Tuesday, citing weak demand for its turbines and engines, especially from the mining and oil and gas industries. The company's shares tumbled 5 percent in morning trading.
  • METALS-Copper shows steepest monthly fall since last May.
  • Empty shops, tight wallets threaten France with recession. French consumers bought fewer cars, tables and chairs, and clothes in the first part of the year, challenging the government's pledge to steer the euro zone's second largest economy away from recession. Consumer spending accounts for more than half of France's output and is the motor of the economy. It fell last year for the first time in 19 years. Record unemployment is still pushing households to keep their wallets closed. An unexpected rebound in March, largely due to heating staying on through cold weather, was not enough to stop a 0.4 percent January to March quarterly decline. The data prompted Jacques Creyssel, head of the FCD business federation, to warn of a fresh contraction in purchasing power this year. 
Telegraph:

Bear Radar

Style Underperformer:
  • Large-Cap Value -.27%
Sector Underperformers:
  • 1) Gold & Silver -1.93% 2) Homebuilding -1.30% 3) Education -1.28%
Stocks Falling on Unusual Volume:
  • SBS, AVEO, MPC, CIE, PFE, RIO, BBL, TNAV, LGCY, BNCL, XYL, TFX, PFMT, BWLD, PCL, MAS, CMI, EGOV, NEM, SLCA, ANV, AEIS, PBI and NUAN
Stocks With Unusual Put Option Activity:
  • 1) AVEO 2) PBI 3) ESRX 4) GNW 5) NUAN
Stocks With Most Negative News Mentions:
  • 1) GRMN 2) CPTS 3) PBI 4) NUAN 5) DISH
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Growth +.14%
Sector Outperformers:
  • 1) Networking +.97% 2) Oil Tankers +.69% 3) Retail +.68%
Stocks Rising on Unusual Volume:
  • UBS, IRF, DB, MPWR, SU, WAIR, OIS, HTWR, MGAM, HPY, GTLS, IVZ, DPZ, BBY, AVP, TXRH, VSH and AGCO
Stocks With Unusual Call Option Activity:
  • 1) HNZ 2) LTD 3) PSX 4) NUAN 5) SIRI
Stocks With Most Positive News Mentions:
  • 1) T 2) OXY 3) HTWR 4) IBM 5) CNH
Charts:

Tuesday Watch

Evening Headlines 
Bloomberg: 
  • Italy’s Letta Plans to Follow EU Budget Rules, Prepares Tax Cuts. Italian Prime Minister Enrico Letta is heading to Berlin on his second full day in office to present his economic growth plan to German Chancellor Angela Merkel. The program calling for tax cuts for business, consumers and homeowners won a confidence vote in the Italian Parliament yesterday and garnered the approval of bond investors, who pushed 10-year government yields to the lowest in two-and-a-half years. Merkel and Letta will hold a press conference at 6 p.m. and then speak over dinner
  • U.K. April Consumer Confidence Unexpectedly Declines, GfK Says. U.K. consumer confidence unexpectedly declined in April as inflation (UKRPCJYR) extended its run above the Bank of England’s goal, increasing households’ concern about their personal finances. A sentiment index by GfK NOP Ltd. fell one point to minus 27, the London-based group said in a report today. Economists had forecast no change, according to the median of 19 estimates in a Bloomberg News survey. A gauge of how consumers see their finances over the next year fell to minus 7 from minus 6.
  • Japan-to-Korea Output Misses Estimates as Taiwan Cools. Japanese and South Korean industrial output was less than estimates in March and Taiwan’s first-quarter growth was half the forecast pace as weakness in global demand limits recoveries in Asian economies. In Japan, production climbed 0.2 percent from the previous month, the trade ministry said in Tokyo today. That was less than the median 0.4 percent forecast in a Bloomberg News survey of 27 economists. South Korea’s output fell 2.6 percent, a separate report showed. Taiwan’s gross domestic product rose 1.54 percent. Today’s data add to signs of a cooling global economy after U.S. gross domestic product rose less than forecast in the first quarter and China reported an unexpected slowdown. “Overseas demand gathered momentum in the past few months, but the pace of growth is moderating a bit now,” said Junko Nishioka, chief economist at Royal Bank of Scotland Group Plc (RBS) in Tokyo and a former Bank of Japan official. “Shipments of cars to the U.S. are slowing.” 
  • China Surprise Gauge Sees Aussie Below Parity: Chart of the Day. China's economic slowdown and falling commodity prices will help snap the Australian dollar's record 10-month stretch above parity with its U.S. counterpart, according to Brown Brothers Harriman. Citigroup's Economic Surprise Index for China slid to negative -27.9, a level unseen since October, signaling actual economic data lagged behind the median estimates in Bloomberg surveys of analysts. "In addition to China, considering the current state of commodity prices, I see strong demand to reduce long positions on the Aussie," said Masashi Murata, a currency stategist in Tokyo at Brown Brothers
  • Copper Set for Worst Month Since May as Demand Concern Grows. Copper dropped, poised for the biggest monthly decline since May, as weakness in Japanese and South Korean industrial output added to global demand concerns. Copper for delivery in three months on the London Metal Exchange fell as much as 0.7 percent to $7,104 a metric ton and was at $7,128 at 10:26 a.m. in Tokyo. The metal has retreated 5.5 percent this month. Futures for delivery in July on the Comex were little changed at $3.2265 per pound. Markets in China are closed through May 1 for public holidays.
Wall Street Journal:
  • Female DNA Found on Bomb in Boston. Investigators Unsure Whether Evidence Means a Woman Aided in the Attack; Russians Allege Suspect's Ties to Jihadists. Investigators have found female DNA on at least one of the bombs used in the Boston Marathon attacks, though they haven't determined whose DNA it is or whether its presence means a woman helped the two brothers suspected in the bombings, according to U.S. officials briefed on the probe. In another development, Russian officials revealed details about contacts between the older brother and suspected Islamist radicals in the Caucasus, including Internet exchanges that led to concerns by investigators that he was trying to join up with jihadist fighters. 
  • Debt and Growth. Attacking Reinhart-Rogoff to revive the spending machine. Perhaps you've read that America's debt burden is no longer a problem. Former White House economist Larry Summers says the U.S. should borrow even more money today because interest rates are low, and his Keynesian brethren are busy trying to discredit economists Kenneth Rogoff and Carmen Reinhart for their famous claim that a country's economic growth begins to fall when debt hits 90% of GDP. Time for Stimulus 5.0!
Fox News:
  • Obama administration officials threatened whistle-blowers on Benghazi, lawyer says. At least four career officials at the State Department and the Central Intelligence Agency have retained lawyers or are in the process of doing so, as they prepare to provide sensitive information about the Benghazi attacks to Congress, Fox News has learned. Victoria Toensing, a former Justice Department official and Republican counsel to the Senate Intelligence Committee, is now representing one of the State Department employees. She told Fox News her client and some of the others, who consider themselves whistle-blowers, have been threatened by unnamed Obama administration officials. “I'm not talking generally, I'm talking specifically about Benghazi – that people have been threatened,” Toensing said in an interview Monday. “And not just the State Department. People have been threatened at the CIA.” 
MarketWatch.com: 
CNBC:
  • Flood of Easy Money Putting This Region at Risk. The risk of asset bubbles in Southeast Asia's fastest-growing emerging economies is rising, warn economists, pointing to red flags including surging domestic credit growth and rapidly rising property prices
Zero Hedge: 
Business Insider: 
Reuters:
  • Japan March retail sales fall 0.3 pct year/yearJapanese retail sales fell 0.3 percent in March from a year earlier, government data showed on Tuesday, down for a third straight month, in a sign the economic recovery is proceeding at a slow pace. The fall compared with the median market forecast for a 0.6 percent annual increase.
Financial Times:
  • Fed faces calls for radical reform. A senior Republican congressman has called for everything from the gold standard to a price level target to be on the table in a 100th anniversary review of the Federal Reserve’s mandate. Kevin Brady, who chairs the joint economic committee, wants Congress to appoint a bipartisan commission that could lead to a radical change in the mandate of the world’s largest and most important central bank.
Telegraph:
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 107.0 -4.5 basis points.
  • Asia Pacific Sovereign CDS Index 87.0 -1.0 basis point.
  • FTSE-100 futures +.27%.
  • S&P 500 futures -.04%.
  • NASDAQ 100 futures +.02%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (NYX)/.56
  • (PFE)/.55
  • (X)/-.22
  • (VLO)/.99
  • (AMG)/2.03
  • (PBI)/.44
  • (COCO)/.05
  • (AGCO)/.88
  • (CMI)/1.86
  • (AVP)/.14
  • (DBD)/.17
  • (FDP)/.95
  • (DDD)/.21
  • (THC)/.30
  • (ZTS)/.33
  • (AET)/1.38
  • (HOT)/.53
  • (ODP)/.04
  • (OSK)/.86
  • (TRW)/1.43
  • (DPZ)/.55
  • (BXP)/1.21
  • (JLL)/.23
  • (EQR)/.63
  • (IACI)/.68     
Economic Releases
8:30 am EST
  • The 1Q Employment Cost Index is estimated to rise +.5% versus a +.5% gain in 4Q. 
9:00 am EST
  • The S&P/CS 20 City MoM% SA for February is estimated to rise +.9% versus a +1.0% gain in January. 
9:45 am EST
  • The Chicago Purchasing Manager Index for April is estimated to rise to 52.5 versus 52.4 in March.
10:00 am EST
  •  Consumer Confidence for April is estimated to rise to 61.0 versus 59.7 in March.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone Unemployment Rate, China Government Manufacturing PMI, US Loan Officer Survey, Canada GDP report, NAPM-Milwaukee for April, weekly retail sales reports, Needham Healthcare Conference and the Barclays Retail/Consumer Discretionary Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Monday, April 29, 2013

Stocks Higher into Final Hour on Less Eurozone Debt Angst, Central Bank Hopes, Short-Covering, Healthcare/Commodity Sector Strength

Broad Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Light
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 13.51 -.73%
  • ISE Sentiment Index 160.0 +41.69%
  • Total Put/Call .89 unch.
  • NYSE Arms .71 -44.13%
Credit Investor Angst:
  • North American Investment Grade CDS Index 76.18 -2.6%
  • European Financial Sector CDS Index 152.99 -3.94%
  • Western Europe Sovereign Debt CDS Index 94.33 -.97%
  • Emerging Market CDS Index 233.15 -2.61%
  • 2-Year Swap Spread 13.75 -.5 bp
  • TED Spread 22.75 -.25 bp
  • 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -.25 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 146.0 +1 bp
  • China Import Iron Ore Spot $134.10/Metric Tonne unch.
  • Citi US Economic Surprise Index -5.3 +7.1 points
  • 10-Year TIPS Spread 2.36 -2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating +46 open in Japan
  • DAX Futures: Indicating +48 open in Germany
Portfolio: 
  • Higher: On gains in my retail/biotech/tech/medical sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  • Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:
  • Euro-Area Economic Confidence Falls More Than Forecast. Economic confidence in the euro area decreased more than economists forecast in April as the 17- nation currency bloc struggled to emerge from a recession and the bailout of Cyprus renewed debt-crisis concerns. An index of executive and consumer sentiment dropped to 88.6 from a revised 90.1 in March, the European Commission in Brussels said today. That’s the lowest since December. Economists had forecast a decline to 89.3, according to the median of 26 estimates in a Bloomberg News survey. Business confidence and investor sentiment in Germany, Europe’s largest economy, dropped more than expected in April. European Central Bank President Mario Draghi said on April 19 that the economic situation in the bloc hadn’t improved since the beginning of the month. At the same time, Draghi expects the economy to recover from a recession later this year and economists forecast growth in the second quarter, a separate Bloomberg survey shows. 
  • Europe Stocks Rise on Italy, U.S. Consumer-Spending Data. European stocks rose, pushing the Stoxx Europe 600 Index toward its longest streak of monthly gains since 1997, as Italy formed a new government and as U.S. consumer spending unexpectedly increased in March. Aberdeen Asset Management Plc surged to its highest price in 12 years after increasing its dividend. Swedish Match AB jumped the most since January 2009 after posting first-quarter profit that beat estimates. Balfour Beatty Plc dropped to the lowest price in 17 months after lowering its full-year profit forecast. The Stoxx 600 advanced 0.5 percent to 297.39, its highest level since April 2. The benchmark gauge has climbed 1.2 percent in April, its 11th month of gains, as investors bet the region’s central bank will cut rates and as companies reported better- than-expected results.
  • Surveillance Cameras Sought by Cities After Boston Bombs. A pedestrian who strolls through Boston’s Financial District, an area of about 40 city blocks, can be seen by at least 233 private and public cameras. In the aftermath of the terrorist bombing there on April 15, Boston Police Commissioner Edward Davis wants even more cameras to boost street-level surveillance, said spokeswoman Cheryl Fiandaca. Other cities, too, now may be spurred to expand their systems, which security specialists said will fuel sales growth in the $3.2 billion video surveillance industry. Such actions increase tensions between law enforcement officials and privacy advocates, who say they worry about Big Brother intrusions into people’s legal activities.
  • Hospital Stocks Rally as Medicare Tempers Budget Cut Blow. HCA Holdings Inc. (HCA), Tenet Healthcare Corp. (THC) and other hospital stocks rose the most in at least six months after the U.S. government proposed new Medicare payment rates that would soften the blow of federal budget cuts. HCA, the largest for-profit hospital company in the U.S., rose 5.5 percent to $40.35 at 10:59 a.m. New York time.
  • Gold Futures Rise on Fed Stimulus Bets; Platinum Jumps. Gold futures for June delivery rose 1.1 percent to $1,469.90 an ounce at 11:59 a.m. on the Comex in New York. The price headed for the biggest monthly drop since December 2011 after entering a bear market on April 12.
CNBC:
  • Bayer to Buy Birth-Control Devices Maker for $1.1 Billion. Germany's Bayer AG has agreed to buy U.S. contraceptive devices maker Conceptus for $1.1 billion, aiming to underpin its position as the world's largest women's healthcare provider. Bayer, whose shares were down 2.3 percent by 0823 GMT, will launch a public tender offer to acquire all Conceptus shares for $31.00 each in cash, in an offer agreed with Conceptus's management, Bayer said on Monday.
  • Growth Outlook Leaves Commodity Investors Cold. Investors are staying away from commodities, fearing that the worst is yet to come after prices plunged in April on signs of slower world economic growth. Wealth managers have been pulling money from commodities since the start of the year, culminating in a major sell off in April when investors dumped gold, copper and oil. Poor economic data from China, Europe and the United States has hit global growth forecasts, making investors reassess the demand for raw materials.
  • Pending Home Sales Tick Upward in March. Contracts to buy existing homes rose slightly in March, as a historically low supply of for-sale listings nationwide continues to plague the housing market. The Pending Home Sales Index from the National Association of Realtors increased 1.5 percent month to month. It is 7 percent higher than March 2012.
Zero Hedge:
Business Insider:
Reuters:
  • North Korea holds back seven South Koreans at industrial zone. North Korea held back seven of 50 remaining South Koreans at the suspended jointly run factory zone north of the heavily armed border on Monday, citing last-minute checks on taxes and wages. The North withdrew its 53,000 workers from the complex this month amid spiraling tension between the two Koreas. The North had prevented South Korean workers and supplies from getting in to the zone since April 3.
  • German, UK banks slam US plans to toughen capital rules. German and British banking lobby groups on Monday slammed plans by U.S. regulators to toughen rules on foreign banks, saying they risk fragmenting banking supervision and causing major disruption to U.S. bank operations. Germany's banking association, BdB, said the push by U.S. regulators to tighten oversight of foreign banks would put European banks at a competitive disadvantage internationally.
  • As shale booms, US crude oil exports jump to 13-yr high. U.S. crude oil exports doubled in February to a 13-year high of 124,000 barrels per day (bpd), government data showed on Monday, as shipments of surplus shale crude to Canada gathered pace. Exports jumped from an average of around 60,000 bpd last year, and have soared from less than 10,000 bpd in 2002, as Canada's refineries increase rail or tanker deliveries, monthly figures from the U.S. Energy Information Administration (EIA) showed.
  • Moody's: High pace of US public finance downgrades continues. Moody's Investors Service continued to downgrade more public finance ratings than it upgraded in the first quarter of 2013, primarily because of cuts to California local governments, the rating agency said on Monday. "We expect rating activity to continue to be skewed toward downgrades over 2013 as local governments continue to struggle with increasing pension and healthcare costs and constraints on key property tax and state aid revenue sources," Moody's Assistant Vice President and Analyst Eileen Hawes said in a statement.
Telegraph:

Bear Radar

Style Underperformer:
  • Small-Cap Growth +.71%
Sector Underperformers:
  • 1) Homebuilding -.22% 2) Gaming -.20% 3) Airlines +.08%
Stocks Falling on Unusual Volume:
  • SBGI, LEAP, TNAV, CX, NXST, ONB, ANW, IBKC, GWAY, AUXL, CHH, ICA, ROP, EXPE, LQDT, ANGI, SBS, EMN and BC
Stocks With Unusual Put Option Activity:
  • 1) AVP 2) HK 3) TDC 4) PRU 5) THC
Stocks With Most Negative News Mentions:
  • 1) EMN 2) UNP 3) GCI 4) BA 5) SYK
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Growth +.82%
Sector Outperformers:
  • 1) Hospitals +2.61% 2) Alt Energy +2.1% 3) Oil Tankers +1.57%
Stocks Rising on Unusual Volume:
  • PBR, MERU, CPTS, SINA, ACT, MDSO, WX, VRX, HCA, MCO, THC, NVDQ, HNT, ETN, SPWR, MHP, CRUS, LPNT, BIIB, SWN, AMBA, SLCA, HMA and CYH
Stocks With Unusual Call Option Activity:
  • 1) HUN 2) THC 3) GPOR 4) ALL 5) CSTR
Stocks With Most Positive News Mentions:
  • 1) ANF 2) STI 3) AOL 4) FLIR 5) PBR
Charts:

Monday Watch

Weekend Headlines 
Bloomberg: 
  • Merkel’s Party Shuns ‘Stone Age’ Greens After Tax-Raising Pledge. Germany’s Greens party backed a campaign platform of tax increases that members of Chancellor Angela Merkel’s Christian Democratic bloc said rules out a coalition after national elections in September. Delegates at a Greens party convention in Berlin yesterday voted through plans to raise the top rate of income tax to 49 percent for those earning 80,000 euros ($104,000) a year or more, and to 45 percent from 42 percent above 60,000 euros. They also backed a “wealth levy” on the richest to pay down 100 billion euros of Germany’s state debt over 10 years.
  • China Industrial Profit Growth Slows as Economic Recovery Wanes. Growth in Chinese industrial companies’ profits slowed in March, adding to evidence the nation’s economic recovery is losing steam. Net income increased 5.3 percent from a year earlier to 464.9 billion yuan ($75 billion), down from a 17.2 percent pace in the first two months, the National Bureau of Statistics said on its website on April 27. Profit in the first quarter rose 12.1 percent to 1.17 trillion yuan, it said. China’s stocks fell for a third straight month in April amid investor concern that the recovery in the country’s economic expansion is losing momentum and will hurt corporate earnings. The benchmark Shanghai Composite Index (SHCOMP) closed 1 percent lower on April 26, the last trading day before a three- day holiday ending May 1. “Profits are only growing in line with sales and with problems of overcapacity and the sluggish global picture, it doesn’t bode well for a speedy return to higher profit margins,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. 
  • Omega Joins Patek Philippe Seeking Growth to Offset Slower ChinaPatek Philippe Chairman Thierry Stern had advice for Swiss watchmakers several years ago that most rivals didn’t heed: don’t overinvest in China. Amid the recent slowdown in China, the executive’s call has proved prescient. Stern said everyone laughed at him when he decided to limit sales in that market to 130 pieces a year as brands including Omega and Cartier opened shops across the mainland. Patek is now selling about 3 percent of the 53,000 watches it makes annually to shops there, reserving the bulk of its production for traditional U.S. and European markets and making Chinese customers who want its watches travel to buy them. Stern warned two years ago that market would slow down.
  • China’s Military Says No Plates for Porsches in Crackdown. China will ban the use of military number plates on luxury cars, including Porsche and Bentley, in a crackdown on abuse of vehicle management within the armed forces amid President Xi Jinping’s campaign against corruption. The change was ordered by the Central Military Commission, headed by Xi, and is part of the military’s effort to reinforce discipline and protect its image, the PLA Daily, the armed forces’ official newspaper, said in a report yesterday. A new license system will go into force on May 1 to clamp down on the sale and use of legal and counterfeit military plates in order to “maintain social harmony, stability and the reputation of the military,” the paper said. Existing plates for all military vehicles will be canceled, it said. 
  • Piaget Sees China Sales Slowing as Stronger Yuan Boosts Travel. Swiss luxury watchmaker Piaget said its sales in China may grow less than 10 percent this year, the slowest in eight years, as Chinese consumers take advantage of the stronger yuan and travel overseas to buy premium goods. Piaget, which makes the $53,000 Altiplano Skeleton 1200S, is also tempering the pace of store openings in China, Dimitri Gouten, its Asia Pacific president, said in an April 27 interview from Shanghai. Sales may lag the “double-digit” growth rates since around 2005, he said. The watchmaker, which is owned by Cie. Financiere Richemont SA (CFR), has 20 boutiques in China and 50 points of sale in total.
  • Detained U.S. Citizen to Face Verdict in N. Korean Court. North Korea said it will hand down a verdict on a detained American citizen accused of crimes against the state, the communist country’s official Korean Central News Agency reported yesterday. Pae Jun Ho, who entered North Korea’s Rason City on Nov. 3 as a tourist, will face judgment in the Supreme Court after admitting to the charges, KCNA said, without citing a source. Pae was involved with a Protestant Christian religious movement, according to a Dec. 11 CNN report that identified him as Kenneth Bae. The State Department is aware of the reports a U.S. citizen will face trial in North Korea, department spokeswoman Jen Psaki said in an e-mail.
  • Asian Officials Must Respond Early to Overheating Risk, IMF Says. Asian policy makers must be ready to respond “early and decisively” to overheating risks in their economies stemming from rapid credit growth and rising asset prices, the International Monetary Fund said. Growth is set to pick up gradually during the year and inflation is expected to stay within central banks’ comfort zones, the Washington-based lender said in a report today. Greater exchange-rate flexibility in the region would play a “useful role” in curbing overheating pressures and coping with speculative capital inflows.
  • Copper Declines for Second Day on U.S., China Demand Concerns. Copper dropped for a second straight session amid concern that lower-than-forecast growth in the U.S. and China, the world’s biggest consumers of the metal, will damp demand. Zinc and lead retreated. Copper for delivery in three months lost as much as 0.7 percent to $6,980 a metric ton on the London Metal Exchange and was at $7,008.25 by 10:23 a.m. in Seoul. Prices slumped 2.1 percent on April 26, the most in more than a week.
  • Gold Gains as Higher Physical Demand Counters Decline From ETPs. Gold advanced, trimming the worst monthly loss since December 2011, as demand for physical metal countered outflows from bullion-backed exchange-traded products. Silver climbed. Bullion for immediate delivery rose as much as 0.6 percent to $1,470.40 an ounce, and traded at $1,469.60 at 9:53 a.m. in Singapore. Gold is heading for an 8.1 percent drop in April after the metal plunged into a bear market this month.
Wall Street Journal: 
  • Companies Feel Pinch on Sales in Europe. Hiding behind the profit gains of America's biggest companies is a worrying slowdown in sales growth. U.S. companies ranging from International Business Machines Corp. to United Technologies Corp. to 3M Co. to Xerox Corp. have missed revenue forecasts, hurt by a combination of Europe's malaise, a stronger dollar and sluggish consumer spending. With earnings reports in from more than half the companies in the Standard & Poor's 500-stock index, first-quarter revenue for the group is expected to shrink 0.3% from a year earlier, according to Thomson Reuters. That would cut short the sales improvement reported at the end of last year and mark the third quarter out of the past four in which revenues have failed to grow by 1% or more.
  • Uncertainty Is the Enemy of Recovery by Bill McNabb. At Vanguard, we estimate that policy uncertainty has created a $261 billion drag on the U.S. economy. Developing a credible, long-term solution to the country's staggering debt is the biggest collective challenge right now. It should be America's biggest collective priority, too. Any comprehensive deficit reduction must take on the imbalance between revenues and expenditures as a share of GDP. That means entitlement reforms, spending reductions and additional tax revenues. This does not have to be about European-style "instant austerity." Because the U.S. dollar is the world's reserve currency, America doesn't have to balance the budget tomorrow. The key is to provide clarity to businesses, financial markets and everyday savers and investors. Make no mistake: A comprehensive, long-term, binding plan that brings the budget into balance over a reasonable time frame is essential. If Washington fails to achieve one, the consequences will be harsh
  • Hollywood Pushes Back Against New China Tax. Twentieth Century Fox is refusing to accept about $23 million it is owed on Chinese box-office receipts for producing "Life of Pi" as a result of a clash between Hollywood and Chinese authorities, studio executives say.
  • Hong Kong Steps Up Flu Fight. Hong Kong immigration and hospital officials are stepping up efforts to fend off the spread of H7N9 bird flu, which surfaced outside China for the first time last week, as floods of mainland Chinese tourists descend on Hong Kong for the Labor Day holiday.
  • In Stocks, Payouts Trump Potential. Investors searching for higher yields are driving up the shares of dividend-paying companies, fueling a debate over whether these traditional haven stocks are getting dangerously expensive. Some buyers argue that dividend stocks have entered a period where demand for income will keep valuations high, perhaps for years, thanks to Federal Reserve easy-money policies that are expected to remain in place at least into 2015. Skeptics say the "this time is different" thesis will prove wrong, and that investors will discover they have overpaid.
  • U.S. Rejects Cash Pay Increases for GM Executives. The U.S. blocked 2013 cash pay increases for top executives at General Motors Co. but allowed several raises to stock-based compensation. The U.S. Treasury Department gained power in 2009 to approve executive compensation at firms that received exceptional federal assistance, following public outrage at bonuses paid at American International Group Inc. after the financial crisis bailouts. AIG has repaid its bailout, leaving GM and Ally Financial Inc., formerly known as GMAC Inc., as the last big firms still under the government's crisis-era bailout programs.
Marketwatch.com:
CNBC: 
  • Loans Borrowed Against Pensions Squeeze Retirees. To retirees, the offers can sound like the answer to every money worry: convert tomorrow's pension checks into today's hard cash. But these offers, known as pension advances, are having devastating financial consequences for a growing number of older Americans, threatening their retirement savings and plunging them further into debt. The advances, federal and state authorities say, are not advances at all, but carefully disguised loans that require borrowers to sign over all or part of their monthly pension checks. They carry interest rates that are often many times higher than those on credit cards.
Business Insider:
CNN: 
  • South Korea withdraws citizens from joint factory after North snubs talks. South Korea started withdrawing its last remaining citizens Saturday from the manufacturing zone jointly operated with North Korea following weeks of tensions between the two. Pyongyang this week shunned an offer by Seoul to hold talks over the Kaesong Industrial Complex after it halted activity there this month. The complex in North Korea was one of the few symbols of inter-Korean cooperation.
Reuters:
  • U.S. lawmakers press Obama to take action on Syria. Republican senators on Sunday pressed U.S. President Barack Obama to intervene in Syria's civil war, saying America could attack Syrian air bases with missiles but should not send in ground troops. Pressure is mounting on the White House to do more to help Syrian rebels fighting against the government of President Bashar al-Assad, which the Obama administration last week said had probably used chemical arms in the conflict. 
  • Europe austerity debate to test periphery political will. Readers of Ireland's largest-selling daily newspaper were confronted by an unexpected front page headline this week when the Irish Independent proclaimed the 'End Of Austerity'. In a country that began cutting spending and hiking taxes almost five years ago, well before the scale of the euro zone's debt crisis was evident, weary Irish voters have more interest than most in the fresh debate over Europe's cornerstone policy.
Financial Times:
  • China’s bosses criticised over high pay. In China, it is not a case of shareholder revolt – the government is the controlling shareholder of virtually all major Chinese companies and has the power to easily change salaries. Rather, public anger about inequality and corruption has made executive pay a focus for media attacks, even from official outlets. The government-run Xinhua news agency said in an editorial: “If the top executives of state-owned companies just fatten themselves, giving themselves high salaries and rich benefits, this is a departure from the original intent of the founding of these companies.” The People’s Daily, the mouthpiece of the Communist party, said: “High pay for high-level executives and low pay for ordinary employees is immoral.
  • High-frequency traders face speed limits. High-frequency traders are facing “speed limits” for the first time on a major trading platform, under a proposal that is being touted as a template for a regulatory clampdown on computer-driven activity. EBS, one of the two dominant trading platforms in the foreign exchange market, is suggesting scrapping the principle of “first in, first out” trading, which it says gives an unfair advantage to the fastest computers and has led to an arms race of spending on technology.
Telegraph:
  • Spanish house prices need to fall further, Goldman warns. Spanish house prices need to fall another 10pc, posing fresh problems for the country’s troubled banking sector, Goldman Sachs has warned. House prices have already collapsed 30pc from their high but are still over-valued, the investment bank claimed as it called for a fundamental restructuring of the country’s lenders. The warning that Spain’s banks are holding the country back followed the government’s decision last week to tear up its deficit reduction plan in the face of collapsing growth
Der Spiegel: 
  • There is no likelihood of reaching agreement with France on main problems facing Europe before Germany's September elections, Nikolaus Meyer-Landrut, Chancellor Angela Merkel's adviser on European politics, said in an interview. France doesn't want to hold talks with Germany before polls, he said.
Yonhap News:
  • S. Korea fuming over Abe's remarks. South Korea is boiling over in anger at Japan after its prime minister suggested that Tokyo's colonization of Korea may not be determined as an "act of aggression," a remark that touched a raw nerve in the neighbor, which still deeply resents its colonial-era suffering.
  • North Korea is still in process of preparing Musdan missile launch, citing presidential office spokesman Yoon Chang Jung. Yoon replied to questions on media reports that North Korea stopped millile launch preparation.
news.com.au:
Xinhua:
  • More H7N9 cases reported in China. Five more H7N9 bird flu cases were confirmed Sunday in four Chinese provinces, according to local health authorities. The latest confirmed cases came from east China's Zhejiang, Jiangxi and Shandong provinces, as well as southeast China's Fujian Province.
Weekend Recommendations
Barron's:
  • Bullish commentary on (HBI) and (DELL).
Night Trading
  • Asian indices are unch. to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.50 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 88.0 -.75 basis point.
  • FTSE-100 futures +.05%.
  • S&P 500 futures -.04%.
  • NASDAQ 100 futures +.07%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (L)/.84
  • (CNA)/.71
  • (IRF)/-.38
  • (HIG)/.82
  • (ADVS)/.30
  • (PCL)/.32
  • (GGP)/.22
  • (PPS)/.70
  • (RVBD)/.24
  • (MAS)/.13
  • (BWLD)/.99
  • (ESRX)/.98
  • (NEM)/.77
  • (HTZ)/.22  
  • (RGR)/1.01
  • (JEC)/.82
Economic Releases
8:30 am EST
  • Personal Income for March is estimated to rise +.4% versus a +1.1% gain in February.
  • Personal Spending for March is estimated unch. versus a +.7% gain in February.
  • The PCE Core for March is estimated to rise +.1% versus a +.1% gain in February.  
10:00 am EST
  • Pending Home Sales for March are estimated to rise +.9% versus a -.4% decline in February.
10:30 am EST
  •  The Dallas Fed Manufacturing Index for April is estimated to fall to 5.0 versus a reading of 7.4 in March.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Italian 10Y auction, China HSBC Manufacturing PMI, Japan Manufacturing PMI and the German CPI could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.