Friday, January 31, 2014

Market Week in Review

S&P 500 1,782.59 -.43%*

 photo uyu_zpsdcfb403e.png

The Weekly Wrap by

*5-Day Change

Weekly Scoreboard*

  • S&P 500 1,782.59 -.43%
  • DJIA 15,698.80 -1.13%
  • NASDAQ 4,103.87 -.59%
  • Russell 2000 1,130.88 -1.16%
  • S&P 500 High Beta 29.48 +.79%
  • Wilshire 5000 18,787.80 -.40%
  • Russell 1000 Growth 838.59 -.32%
  • Russell 1000 Value 893.55 -.37%
  • S&P 500 Consumer Staples 419.15 -1.66%
  • Morgan Stanley Cyclical 1,416.05 +.31%
  • Morgan Stanley Technology 890.81 -.95%
  • Transports 7,289.18 +.42%
  • Utilities 506.26 +2.91%
  • Bloomberg European Bank/Financial Services 108.32 -.50%
  • MSCI Emerging Markets 38.56 -1.47%
  • HFRX Equity Hedge 1,154.20 -1.47%
  • HFRX Equity Market Neutral 957.26 +.25%
  • NYSE Cumulative A/D Line 198,396 -.41%
  • Bloomberg New Highs-Lows Index 17 -134
  • Bloomberg Crude Oil % Bulls 25.81 -44.86%
  • CFTC Oil Net Speculative Position 351,146 +3.26%
  • CFTC Oil Total Open Interest 1,591,971 -1.32%
  • Total Put/Call .87 -3.33%
  • OEX Put/Call .75 +10.29%
  • ISE Sentiment 98.0 +24.05%
  • NYSE Arms 1.52 -13.14%
  • Volatility(VIX) 18.41 +1.49%
  • S&P 500 Implied Correlation 59.35 +3.45%
  • G7 Currency Volatility (VXY) 8.44 +1.81%
  • Emerging Markets Currency Volatility (EM-VXY) 10.21 +4.29%
  • Smart Money Flow Index 11,559.36 -2.64%
  • ICI Money Mkt Mutual Fund Assets $2.706 Trillion -.07%
  • ICI US Equity Weekly Net New Cash Flow $2.45 Billion
  • AAII % Bulls 32.2 -15.6%
  • AAII % Bears 32.8 +37.9%
Futures Spot Prices
  • CRB Index 283.31 +.27%
  • Crude Oil 97.49 +.61%
  • Reformulated Gasoline 263.14 -1.57%
  • Natural Gas 4.94 -4.13%
  • Heating Oil 299.71 -5.30%
  • Gold 1,239.80 -2.29%
  • Bloomberg Base Metals Index 186.59 -2.71%
  • Copper 319.70 -2.07%
  • US No. 1 Heavy Melt Scrap Steel 399.0 USD/Ton +4.18%
  • China Iron Ore Spot 122.60 USD/Ton -1.05%
  • Lumber 353.80 -1.17%
  • UBS-Bloomberg Agriculture 1,334.07 +.79%
  • ECRI Weekly Leading Economic Index Growth Rate 4.3% +10 basis points
  • Philly Fed ADS Real-Time Business Conditions Index .1246 -5.82%
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 120.28 -.11%
  • Citi US Economic Surprise Index 49.0 -13.6 points
  • Citi Emerging Markets Economic Surprise Index 12.50 +5.8 points
  • Fed Fund Futures imply 36.0% chance of no change, 64.0% chance of 25 basis point cut on 3/19
  • US Dollar Index 81.31 +1.03%
  • Euro/Yen Carry Return Index 143.58 -1.66%
  • Yield Curve 231.0 -7 basis points
  • 10-Year US Treasury Yield 2.64% -8 basis points
  • Federal Reserve's Balance Sheet $4.059 Trillion +.11%
  • U.S. Sovereign Debt Credit Default Swap 30.50 +9.55%
  • Illinois Municipal Debt Credit Default Swap 160.0 +3.61%
  • Western Europe Sovereign Debt Credit Default Swap Index 55.0 +3.13%
  • Asia Pacific Sovereign Debt Credit Default Swap Index 116.12 -2.39%
  • Emerging Markets Sovereign Debt CDS Index 260.0 +5.05%
  • Israel Sovereign Debt Credit Default Swap 94.50 +2.72%
  • South Korea Sovereign Debt Credit Default Swap 71.24 -3.07%
  • China Blended Corporate Spread Index 361.75 +9.0 basis points
  • 10-Year TIPS Spread 2.13% unch.
  • TED Spread 21.50 +2.5 basis points
  • 2-Year Swap Spread 13.0 -2.0 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -7.75 -3.75 basis points
  • N. America Investment Grade Credit Default Swap Index 71.75 -.38%
  • European Financial Sector Credit Default Swap Index 101.03 -2.88%
  • Emerging Markets Credit Default Swap Index 338.87 +.43%
  • CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 110.50 +.5 basis point
  • M1 Money Supply $2.678 Trillion +.65%
  • Commercial Paper Outstanding 1,014.0 -.40%
  • 4-Week Moving Average of Jobless Claims 333,000 +1,500
  • Continuing Claims Unemployment Rate 2.3% unch.
  • Average 30-Year Mortgage Rate 4.32% -7 basis points
  • Weekly Mortgage Applications 403.40 -.17%
  • Bloomberg Consumer Comfort -31.8 -.8 point
  • Weekly Retail Sales +3.10% +10 basis points
  • Nationwide Gas $3.28/gallon -.01/gallon
  • Baltic Dry Index 1,127 -9.55%
  • China (Export) Containerized Freight Index 1,158.16 +2.61%
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 -20.0%
  • Rail Freight Carloads 245,883 -8.06%
Best Performing Style
  • Mid-Cap Growth +.4%
Worst Performing Style
  • Small-Cap Value -1.5%
Leading Sectors
  • Homebuilders +6.4%
  • Gaming +4.9%
  • Utilities +2.9%
  • Road & Rail +1.9%
  • Steel +1.5%
Lagging Sectors
  • I-Banks -2.1% 
  • Gold & Silver -2.1%
  • Airlines -3.3%
  • Tobacco -4.5%
  • Education -5.9%
Weekly High-Volume Stock Gainers (19)
Weekly High-Volume Stock Losers (36)
Weekly Charts
*5-Day Change

Stocks Falling into Final Hour on Rising Global Growth Fears, Yen Strength, Earnings Concerns, Financial/Tech Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 17.77 +2.78%
  • Euro/Yen Carry Return Index 143.83 -.97%
  • Emerging Markets Currency Volatility(VXY) 10.21 +.79%
  • S&P 500 Implied Correlation 58.48 +1.32%
  • ISE Sentiment Index 96.0 -25.0%
  • Total Put/Call .81 -1.22%
  • NYSE Arms 1.28 +13.42% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 71.15 -.71%
  • European Financial Sector CDS Index 101.03 +1.08%
  • Western Europe Sovereign Debt CDS Index 55.0 -1.79%
  • Asia Pacific Sovereign Debt CDS Index 116.52 +1.32%
  • Emerging Market CDS Index 339.17 +.30%
  • 2-Year Swap Spread 13.0 +.5 basis point
  • TED Spread 22.25 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -7.75 -2.5 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 232.0 -3.0 basis points
  • China Import Iron Ore Spot $122.60/Metric Tonne unch.
  • Citi US Economic Surprise Index 49.0 +.9 point
  • Citi Emerging Markets Economic Surprise Index 12.50 +1.3 points
  • 10-Year TIPS Spread 2.13 -1.0 basis point
Overseas Futures:
  • Nikkei Futures: Indicating -160 open in Japan
  • DAX Futures: Indicating +2 open in Germany
  • Lower: On losses in my tech/biotech sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  • Market Exposure: 50% Net Long

Today's Headlines

  • Brazil Real Heads for Fourth Monthly Decline as Deficit Widens. Brazil’s real was headed for a fourth straight monthly decline as part of a broad drop in emerging-market currencies after the government’s budget deficit widened in December to almost the widest since 2009. The currency depreciated 2 percent to 2.4092 per U.S. dollar in January as of 3:09 p.m. in Sao Paulo and was little changed for the day. Swap rates on contracts maturing in January 2015 rose three basis points, or 0.03 percentage point, to 11.66 percent, extending their increase this month to 108 basis points, the most since the global financial crisis in 2008
  • Argentine Bonds Plunge Most in Emerging Markets on Outflows. Argentine dollar bonds tumbled the most in emerging markets on concern government measures from devaluation to rate increases aren’t enough to improve the country’s deteriorating debt payment capacity. Argentine government dollar bonds due 2015 fell 3.88 cents on the dollar to 85.75 cents, driving yields up to 19.12 percent, the highest since June 2012. The extra yield investors demand to own Argentine bonds over U.S. Treasuries widened 75 basis points to 1,142 basis points, while the average spread on emerging-market bonds rose 11 basis points at 10:28 a.m. in New York, according to JPMorgan Chase & Co.’s EMBIG index
  • Asian Currencies Drop in Week on China Slowdown Signs, Fed Taper. Asian currencies declined for a third week, led by the Thai baht and Malaysia’s ringgit, amid concern a slowdown in China and U.S. stimulus cuts will deepen the selloff in emerging markets. The Bloomberg JPMorgan-Asia Dollar Index (ADXY) fell 0.1 percent this week as a report signaled China’s manufacturing contracted for the first time in six months. The Federal Reserve said Jan. 29 it will pare its monthly bond purchases by $10 billion to $65 billion from February, following a similar reduction in January. The baht had its worst week in almost a month after global funds pulled money from the nation’s assets amid concern a Feb. 2 election will trigger more violence.
  • European Banks Face 5.5% Capital Hurdle in EBA Stress Test. The largest banks in Europe will have to show their capital won’t dip below 5.5 percent of their assets in an economic crisis, the European Union’s top banking regulator said. The exercise, which will examine a sample of 124 banks that cover more than half of each EU member state’s banking industry, is scheduled to begin around the end of May, the European Banking Authority said in a statement today. Results will be published at the end of October.
  • European Stocks Drop, Posting Their Worst January in Four Years. European stocks fell, posting their worst start to the year since 2010, as companies from Electrolux AB to Vedanta Resources Plc dropped after reporting results. Electrolux slid the most since August 2011 after earnings missed analysts’ estimates. Vedanta Resources Plc lost 3.6 percent after saying copper output in Zambia, Australia and India declined. LVMH Moet Hennessy Louis Vuitton SA jumped 7.9 percent after reporting growth in fashion and leather-goods sales rebounded in the fourth quarter. The Stoxx Europe 600 Index slipped 0.3 percent to 322.52 at the close of trading, paring earlier losses of as much as 1.7 percent
  • WTI Oil Falls From 2014 High on Emerging Economies. WTI for March delivery fell 57 cents, or 0.6 percent, to $97.66 a barrel at 2:19 p.m. on the New York Mercantile Exchange. WTI climbed 0.9 percent to $98.23 yesterday, the highest settlement since Dec. 31. The volume of all contracts traded was 13 percent above the 100-day average. Futures are up 1.2 percent this week and down 0.8 percent this month. 
  • House Republicans’ Economic Agenda Targets Middle Class. U.S. House Republican leaders are preparing an economic agenda that includes energy proposals aimed at lowering utility bills and countering President Barack Obama’s focus on income inequality, according to a document obtained by Bloomberg News
  • IMF calls for ‘urgent action’ amid EM crisis. (video) The International Monetary Fund (IMF) has responded to the ongoing volatility in emerging markets by stressing the need for coherent macroeconomic policies and urgent policy action in some countries. Emerging markets have been hit over the past week amid concerns that growth in the region will slow as the U.S. Federal Reserve tightens its monetary policy, draining global liquidity. A number of emerging market currencies have seen major falls against the dollar, with some central banks forced to raise rates and intervene in the markets to limit the swings.
Business Insider: 
Futures Magazine:
Financial Times:
  • Economic danger lurks in China’s shadow banks. Of all the economic dangers to flare up over the past week, the most unsettling was at first glance also the most esoteric: the near default of a high-yield loan product held by a few hundred small-time Chinese investors. First, the direct risks. Credit Equals Gold No. 1 is just one of a wave of Chinese shadow banking products that will fail to live up to their outlandishly confident names when they mature this year. The drama over repayment will be played out again and again.
Taipei Times:

Bear Radar

Style Underperformer:
  • Large-Cap Value -.82%
Sector Underperformers:
  • 1) I-Banking -1.87% 2) Networking -1.60% 3) Energy -1.52%
Stocks Falling on Unusual Volume:
Stocks With Unusual Put Option Activity:
  • 1) CNX 2) PBI 3) EXC 4) AVP 5) LEA
Stocks With Most Negative News Mentions:
  • 1) NEM 2) MS 3) MAT 4) SYMC 5) XOM

Bull Radar

Style Outperformer:
  • Small-Cap Value -.23%
Sector Outperformers:
  • 1) Homebuilders +2.83% 2) Restaurants +.89% 3) REITs +.61%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) ARAY 2) TIVO 3) ITMN 4) ZNGA 5) MAT
Stocks With Most Positive News Mentions:
  • 1) TSN 2) WMT 3) GOOG 4) CVX 5) RTN

Friday Watch

Evening Headlines 
  • Abenomics at Risk as Workers Struggle to Keep Up With Inflation. For his economic strategy to work, the Prime Minister says earnings at companies like Toyota, where profit is projected to double to a record 1.86 trillion yen ($18.2 billion) this year, must lead to higher pay. Employees like Matsui have yet to see the benefits -- in the 11 months through November, pay for the average Japanese worker rose just 0.2 percent; it’s fallen 15 percent in the past decade and a half. Japan’s unions will begin contract negotiations next month in labor’s biggest bid so far to share in the benefits of Abenomics. “This is a litmus test for whether Abenomics works or falls apart,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “How can you get growth to go up without getting money into people’s pockets?”  
  • Emerging Market Rout May Signal ‘Sudden Stop’: Cutting Research. Brazil, South Africa, Turkey and Ukraine are the emerging markets most at risk of a “sudden stop,” in the view of Morgan Stanley. That’s defined as a halt or even a reversal in capital flows into a country, slashing access to international financial markets for an extended period and weakening the economy. The term is often linked to 1995 work by Rudi Dornbusch, the late international economics professor at the Massachusetts Institute of Technology in Cambridge. Mexico, Indonesia, India and Thailand are also in some jeopardy of such a phenomenon as investors turn sour on emerging markets, London-based economists Manoj Pradhan and Patryk Drozdzik said in two reports to clients over the past week. They wrote as central banks in India, Turkey and South Africa raised interest rates to shoreup confidence in their currencies.
  • Emerging-Market Shocks Pressure Dormant Volatility: Currencies. Volatility in foreign exchange markets, after falling to some of the lowest levels since before the financial crisis, has nowhere to go but up as emerging economies falter, say the world's biggest dealers. "The market hasn't accepted some of the risk events that are on the horizon," Ian Stannard, the head of Europe currency strategy at Morgan Stanley in London, said in a Jan. 27 phone interview. "Foreign-exchange volatility is still at relatively low levels so there's scope for it to move higher. China still poses the biggest spillover risk from emerging markets."  
  • China Making Air Force, Navy Upgrades, U.S. Officials Say. China’s air force is fielding new precision-guided cruise missiles, long-range bombers and drones as its Navy expands its long-range punch, according to U.S. military intelligence officials. “While we would not characterize the modernization as accelerated,” it’s “progressing at a steady pace” and is significant, Lee Fuell, a director at the Air Force’s National Air and Space Intelligence Center, said in a presentation released today. 
  • Rubber Futures in Tokyo Advance, Paring Monthly Loss. Rubber in Tokyo advanced, paring the biggest monthly decline since May 2012, as increased spending by U.S. consumers raised optimism that demand for the commodity used in tires may increase. The contract for delivery in July rose as much as 1.7 percent to 231.8 yen a kilogram ($2,255 a metric ton) on the Tokyo Commodity Exchange, before trading at 230.6 yen at 11:24 a.m. local time. Futures tumbled 16 percent this month and fell into a bear market amid swelling inventories in China, the biggest consumer. Rubber fell 9.3 percent last year.
  • Ukraine Warring Factions Trade Barbs With President Sick. Ukraine’s opposition accused Viktor Yanukovych of foul play as the president placed himself on sick leave and said his rivals are escalating the nation’s two-month political crisis. The two sides are in dispute over steps meant to reduce tension in the wake of deadly anti-government clashes last week. While Yanukovych’s cabinet fell with the Jan. 28 resignation of former Prime Minister Mykola Azarov, the opposition rejected an amnesty law for protesters pushed through yesterday and said he may use illness to avoid canceling anti-protest laws.
  • Puerto Rico Will Be Cut to Junk Within 30 Days, UBS Says. Puerto Rico’s general-obligation bonds are poised to be cut to junk within the next month, according to UBS AG. “Given the myriad obstacles facing Puerto Rico, we believe that at least one rating agency will take such an action within the next 30 days,” analysts Thomas McLoughlin and Kristin Stephens at UBS Wealth Management in New York wrote in a report dated yesterday. 
  • ECB Seeking to Unmask Weak Banks Wants Risky Loan Details. The European Central Bank asked Europe’s biggest lenders to disclose loans on their balance sheets that are at risk of default as part of its review of the health of the region’s financial system. Banks also had to provide figures on loans they have restructured for clients, a document distributed to 128 banks taking part in an asset quality review and obtained by Bloomberg showed. The document, in the form of an excel spreadsheet, asked banks to note how many of their loans classified as “performing” have already been restructured, and how many loans that don’t yet meet the standard definition of non-performing -- 90 days past due -- are “unlikely to pay.”
  • Bonds Prove Bears Wrong in Best Start Since 2008 as Stocks Tank. Bonds are up, stocks are down and it’s snowing in Atlanta. The start of the year in financial markets has gone as almost no one expected, with fixed-income assets worldwide posting their biggest January returns since 2008 and equity prices falling the most since 2010. Gold, given up for dead in 2013 as prices tumbled 28 percent, is rallying.
Wall Street Journal: 
  • Selloff's Spread to Europe Is Sign of Broad Fear. Until This Week, European Emerging Markets Had Largely Dodged Weakness That Hit Peers Elsewhere. Until this week, European emerging markets had largely dodged the vicious selloff that has swept through their peers elsewhere. Now, they are cracking. The Hungarian forint took a heavy blow early Thursday, dropping as much as 1% against the dollar. The Polish zloty and the Czech koruna also stumbled. The currencies clawed back some ground late in the day, but analysts cited Thursday's gyrations as a sign that the market's fear of investments seen as risky is broad. Whether bouts of weakness in such countries persist will be a barometer of wider emerging-market strains.
Fox News: 
  • House GOP leaders back limited path to legal status for illegal immigrants. House Republican leaders on Thursday endorsed a limited path to legal status for some illegal immigrants, in a move Democrats said could open the door to a deal on comprehensive immigration legislation. The position was included in a document released by party leaders during their annual retreat in Maryland. The "standards for immigration reform" document ruled out a special path to citizenship for illegal immigrants.
  • Blankfein’s pay to rise 10% to $23 million for 2013. Lloyd Blankfein, chairman and chief executive of Goldman Sachs, may earn as much as $23 million in 2013 – a 10 percent increase on the previous year – despite the bank's struggle to overcome a slump in fixed income trading
  • Will Argentina’s woes hit this country? (video) Argentina's latest monetary ailment may prove contagious for some of its Latin American neighbors, with Brazil likely to be the first to catch the fever. "What has been happening in Argentina will have a negative impact on the Brazilian economy," Tony Volpon, a strategist for Latin America at Nomura, told CNBC, citing long-standing trade ties. "For example, about 70-80 percent of Brazilian car exports actually go to Argentina. So they are vulnerable."
Zero Hedge: 
Business Insider: 
  • Will the emerging market rout get even worse? Watch corporate bonds. Global investors have suddenly remembered that emerging markets have a rich, recent history of florid financial crises. The cracks are starting to emerge everywhere: wobbly “wealth management products” in China, the Turkish lira’s tumble, the selloff in Brazilian bond markets and last summer’s mini-rupee crisis.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 149.25 +1.75 basis points.
  • Asia Pacific Sovereign CDS Index 115.0 -.75 basis point.
  • FTSE-100 futures -.26%.
  • S&P 500 futures -.21%.
  • NASDAQ 100 futures +.19%.
Morning Preview Links

Earnings of Note

  • (CVX)/2.58
  • (D)/.88
  • (LEA)/1.59
  • (LM)/.95
  • (LYB)/1.40
  • (MA)/.60
  • (MAT)/1.20
  • (MJN)/.76
  • (PCAR)/.93
  • (SPG)/2.43
  • (TYC)/.45
  • (TSN)/.63
  • (WY)/.28
Economic Releases
8:30 am EST
  • The Employment Cost Index for 4Q is estimated to rise +.4% versus a +.4% gain in 3Q.
  • Personal Income for December is estimated to rise +.2% versus a +.2% gain in November.
  • Personal Spending for December is estimated to rise +.2% versus a +.5% gain in November.
  • PCE Core for December is estimated to rise +.1% versus a +.1% gain in November.
9:45 am EST
  • Chicago Purchasing Manager for January is estimated to fall to 59.0 versus a reading of 59.1 in December.
9:55 am EST
  • Final Univ. of Michigan Consumer Confidence for January is estimated to rise to 81.0 versus a prior estimate of 80.4.
Upcoming Splits
  • (TD) 2-for-1
Other Potential Market Movers
  • The China Manufacturing PMI, Eurozone CPI and the Eurozone Unemployment rate 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 day.

Thursday, January 30, 2014

Stocks Rising into Final Hour on Earnings, Yen Weakness, Short-Covering, Biotech/Gaming Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Around Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • Volatility(VIX) 16.24 -6.40%
  • Euro/Yen Carry Return Index 145.19 -.39%
  • Emerging Markets Currency Volatility(VXY) 10.11 -2.32%
  • S&P 500 Implied Correlation 55.54 -2.70%
  • ISE Sentiment Index 131.0 +32.32%
  • Total Put/Call .79 -15.96%
  • NYSE Arms 1.40 +21.10% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 71.07 -1.82%
  • European Financial Sector CDS Index 99.94 -2.97%
  • Western Europe Sovereign Debt CDS Index 56.0 +4.38%
  • Asia Pacific Sovereign Debt CDS Index 115.20 -.45%
  • Emerging Market CDS Index 337.49 +.17%
  • 2-Year Swap Spread 12.50 +.5 basis point
  • TED Spread 2.25 +2.75 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -5.25 -1.25 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .02% -2.0 basis points
  • Yield Curve 235.0 +3.0 basis points
  • China Import Iron Ore Spot $122.60/Metric Tonne unch.
  • Citi US Economic Surprise Index 48.10 -2.6 points
  • Citi Emerging Markets Economic Surprise Index 11.2 +.8 point
  • 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
  • Nikkei Futures: Indicating +198 open in Japan
  • DAX Futures: Indicating +34 open in Germany
  • Slightly Higher: On gains in my tech/biotech/medical/retail sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long

Today's Headlines

  • Rajan Warns of Global Policy Breakdown as Emerging Markets Slide. India central bank Governor Raghuram Rajan warned of a breakdown in global policy coordination a day after the Federal Reserve further cut stimulus, weakening emerging-market currencies from the rupee to the Turkish lira. Rajan, a former chief economist at the International Monetary Fund, called for greater cooperation among policy makers weeks before finance chiefs from the world’s top developed and emerging markets gather in Sydney. The Fed’s statement yesterday made no mention of developing economies. 
  • Japan Inc Profits Boom Masks Fading Export Gains From Yen. Soaring profits among Japanese manufacturers are masking weakness in exports as the yen’s slide against the dollar fails to deliver the boost seen after previous bouts of currency depreciation. Export volumes fell 1.5 percent in 2013 from the previous year, Finance Ministry data show, even following a 12 percent decline in the yen against the dollar during 2012. That contrasts with a 7.8 percent surge in 2006 after a similar currency move.
  • Abe Doomsday Risk Prompts Moody's Warning on JGBs: Japan Credit. Moody's Investors Service says Japan's biggest banks need to cut bond holdings and boost loans to protect their balance sheets from potential losses should Prime Minister Shinzo Abe's stimulus spur yield surges. Lenders' stockpiles of sovereign debt were at 138.9 trillion yen($1.36 trillion) in November, after peaking at a record 171 trillion yen in March 2012, Bank of Japan data show. "Banks need to rebalance their portfolios away from JGBs," Graeme Knowd, a Tokyo-based associate managing director at Moody's who overseas financial institutions, said in a phone interview. "It if turns out that Abenomics hasn't worked and only ended up leaving Japan with a bigger pile of debt," a "doomsday scenario for JGBs" isn't "a zero probability scenario," he said. 
  • Ukrainian Bonds Tumble Second Day as Russia Threatens Aid Delay. Ukrainian bonds slumped, pushing yields to a six-week high, as Russia threatened to delay an aid package and President Viktor Yanukovych refused to unconditionally pardon protesters. Yields on dollar-denominated debt due in June surged 127 basis points to 13.25 percent at 2:48 p.m. in Kiev, the highest since Dec. 16 on a closing basis. The cost of insuring the country’s debt with credit-default swaps jumped 50 basis points to 1,004 basis points, Europe’s highest, according to CMA data. 
  • Lift 'EM Cookie Crumble' Hedges as Tightening Hurts Growth: HSBC. Further accumulation of "EM cookie crumble" hedges is warranted for developed-market investors, Bert Lourenco, head of EMEA rates research at HSBC, writes in e-mailed comments. Only way for EM countries to stop capital outflows is to raise rates to reset a financing equilibrium - and in turn destroy domestic demand. Cumulative impact of just about every major emerging-market policy tightening will probably be negative for global growth outlook and risky assets
  • Diageo’s Sales Growth Trails Estimates Amid China Cutbacks. Diageo Plc (DGE), the world’s biggest distiller, said a slowdown in emerging markets including China and Nigeria weighed on first-half sales growth, sending the shares down the most since 2009. “Diageo is not immune to broader macroeconomic pressures, especially at present in many key emerging markets,” Eddy Hargreaves, an analyst at Canaccord in London, said in a note.
  • European Stocks Advance; Givaudan Increases, Diageo Falls. European stocks rose, paring this month’s loss for the Stoxx Europe 600 Index (EC11CHPM), as companies from Givaudan SA (GIVN) to Hennes & Mauritz AB (HMB) reported earnings. Givaudan jumped 6.3 percent after posting full-year net income that beat analyst estimates. Roche Holding AG (ROG) climbed 4.3 percent after forecasting that profit will increase faster amid rising sales. Diageo Plc (DGE), the world’s biggest distiller, lost 4.7 percent after the world’s biggest distiller reported sales growth that missed analysts’ estimates. H&M dropped 3.6 percent. The Stoxx 600 added 0.3 percent to 323.32 at the close of trading in London.
  • Oil, Mining Stocks Face Emerging-Currency Risk: Chart of the Day. Energy and raw-material producers may have the most at stake among U.S. stocks as emerging-market currencies fall, according to Gina Martin Adams, a Wells Fargo strategist. "High correlations between emerging-market currencies and commodity prices suggest commodity-sensitive sectors in the S&P 500 are likely to suffer most" as the decline worsens, Martin Adams wrote in a report.
  • Consumer Confidence in U.S. Fell Last Week to Two-Month Low. Consumer confidence dropped last week to the lowest level in two months as more Americans said it was not a good time to shop. The Bloomberg Consumer Comfort Index declined to minus 31.8 in the week ended Jan. 26 from minus 31 reading the prior period. The buying-climate gauge slumped to a three-month low.
  • UPS(UPS) Profit Fell 8.5% After Holiday Shipping Snafu. UPS said fourth-quarter profit dropped 8.5 percent as a late surge in online Christmas shopping snarled operations and led to missed deliveries that boosted costs. Bloomberg's Lee Klaskow reports on Bloomberg Television's "In The Loop."
Wall Street Journal:
Fox News:
  • Wall Street's new housing bonanza. Wall Street's latest trillion-dollar idea involves slicing and dicing debt tied to single-family homes and selling the bonds to investors around the world.
  • Outlook for company profits is getting pretty ugly. (video) Some 80 percent of those companies have lowered their outlook, according to S&P Capital IQ, contradicting the widely held narrative that the economy is beginning to achieve the escape velocity it needs to attain a full-fledged recovery.
Business Insider:
  • Potash Corp(POT) sees weaker than expected year ahead, shares dive. Potash Corp of Saskatchewan , the world's biggest fertilizer company, on Thursday reported a sharply lower quarterly profit and produced 2014 forecasts that were below Wall Street expectations. The company's disappointing outlook shows that the global potash market has far to go to recover from a slide in prices, due to years of soft demand, burgeoning supplies and last summer's breakup of rival Belarusian Potash Company (BPC).
  • Emerging market currency falls in graphs. Emerging markets are experiencing the worst rout in five years, with their currencies plummeting against the dollar. Here we take a look at those countries most exposed to risk.