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Tuesday, May 19, 2015

Wednesday Watch

Posted by Gary .....at 11:17 PM
Evening Headlines 
Bloomberg:   
  • Greek Conundrum Puts ECB in Tight Spot as Bailout Talks Progress. European Central Bank policy makers will discuss Greek bank aid on Wednesday in a chore that is getting more uncomfortable every week. The Governing Council will meet in Frankfurt to debate whether to tighten rules on Greek access to Emergency Liquidity Assistance as the country veers toward default. At the same time, officials are well aware their decision could worsen the political crisis just as bailout talks show signs of progress.
  • Buyer-Beware Guide to Emerging-Market Debt, From Brazil to China. As the U.S. prepares to start raising interest rates for the first time in almost a decade, speculation is brewing that emerging-market corporate borrowers could be among the hardest hit. The concern stems largely from the growth of the market: There's $1.3 trillion worth of developing-nation dollar bonds today. Five years ago, that figure was just $444 billion. With so many new names tapping the market, the argument goes, surely some of them must be suspect. Throw in the weakening of economies across much of Latin America, Asia and Eastern Europe -- slowdowns that will cut into companies' sales and government tax revenue -- and the worries only mount. Not that anyone is expecting a full-blown crisis. Emerging-market debt has actually held up well over the past month, preserving gains this year of 5 percent, as the global bond market swooned. Still, investors and analysts are poking around in search of the industries that will be hurt the most by rising borrowing costs. Here's a quick look at some of their findings:  
  • Asian Stocks Rise as Yen Weakness Spurs Japanese Share Gains. Asian stocks rose, with a weaker yen boosting Japanese shares, after data showing U.S. housing starts surged to a seven-year high strengthened the case for an interest-rate increase this year. The MSCI Asia Pacific Index gained 0.2 percent to 153.41 as of 9:01 a.m. in Tokyo. 
  • Leveraged-Loan Buyers Pinched by Shrinking Yields in Supply Drop. Investors who purchase risky corporate loans are being squeezed by borrowers that are taking advantage of a supply shortage to cut rates on their existing debt, sending yields to their lowest in almost a year-and-a-half. Yields have fallen to 4.6 percent from more than 6 percent at the beginning of 2015 as borrowers from PetSmart Inc. to the owner of Burger King and Tim Hortons reduced the interest they pay, according to data compiled by Bloomberg and Standard & Poor’s Capital IQ Leveraged Commentary & Data. Companies are seeking to cut rates on more than $29 billion of loans this month, the most since at least 2013, Bloomberg data show.
  • SEC Said to Propose That Mutual Funds Disclose Risk of Rate Rise. The U.S. Securities and Exchange Commission is set to propose a requirement that mutual-fund companies report how vulnerable their bond portfolios are to interest-rate changes, two people familiar with the matter said. The proposal, which the five-member commission is scheduled to vote on Wednesday, is among the agency’s first moves to address regulators’ concerns that many bond funds could face steep losses if the Federal Reserve’s first interest-rate hike in almost seven years forces them to sell assets quickly.
  • Yellen Says Regulators Ready to Act as Panel Cites Risks. Federal Reserve Chair Janet Yellen said regulators will take steps to address risks to financial stability as officials cited high-speed trading and clearinghouses as potential threats. Yellen, speaking Tuesday at a meeting of the Financial Stability Oversight Council, focused on clearinghouses, platforms where swaps transactions are cleared and settled. The Fed will work with other regulators to evaluate whether rules and risk-management practices are strong enough, she said.
Wall Street Journal:
  • Hillary Clinton’s State Department Staff Kept Tight Rein on Records. Aides scrutinized, sometimes blocked release of documents requested under public-records law. When Hillary Clinton was secretary of state, her staff scrutinized politically sensitive documents requested under public-records law and sometimes blocked their release, according to people with direct knowledge of the activities. In one instance, her chief of staff, Cheryl Mills, told State Department records specialists she wanted to see all documents requested on the controversial Keystone XL pipeline... 
  • Theft of Debit-Card Data From ATMs Soars. Thieves are stealing information to make counterfeit plastic.
  • White House Threatens to Veto Trade Bill Over Currency Measure. Fight heats up over currency-manipulation amendment to fast-track bill. The White House on Tuesday threatened to veto a crucial trade bill if it contains legislation with binding punishments for currency manipulation, the main point of contention between President Barack Obama and congressional critics of his trade policy.
  • Who Is Sid Blumenthal? The many roles of Hillary’s secret diplomatic adviser.
Fox News:
  • Ramadi refugees trapped on road to Baghdad as Shias prepare to retake city. (video) A full-blown humanitarian crisis has developed from ISIS takeover of Ramadi, as an estimated 25,000 Iraqi refugees are now making their way east toward Baghdad, seeking food and shelter wherever they can and facing the prospect of being blocked from the capital city amid fears their ranks could include militants. The United Nations and other aid agencies were handing out food, water and medical supplies along the 60-mile route between the cities, but the situation was worsening amid dwindling supplies and reports the Iraqi army was blocking the refugees from reaching the safety of Baghdad.
Zero Hedge:
  • Are Stocks & Bonds Due For A "Generational" 75% Crash? (graph)
  • Someone Finally Read Obama's Secret Trade Deal And Admits The TPP "Will Damage This Nation".
  • The Untied State Of America. (cartoon)
  • YHOO(YHOO) Tumbles After BABA(BABA) Spinoff Faces IRS Uncertainty. (graph)
  • Crude Crushed, Bonds Battered, & Trannies Tank As Greenback Gains. (graph)
  • The Real Reason Draghi Is Front-Loading Q€ (In 1 'Disappointing' Chart). (graph)
  • The Looming Russell Rebalance – What You Need To Know.
  • Beijing We Have A Problem: China Suffers Record Capital Outflow In Q1. (graph)
  • "Kept Afloat With Nothing But Happy Thoughts". (graph)
  •  "Obama's Strategy Against ISIS Is In Ruins".
  • China Officially Launches Critical Local Government Debt Swap — But Is The PBoC Really Just Issuing Treasury Bonds? (graph)
  • Welcome To The Bubble State, Where Everything Is Unsustainable.
Business Insider:
  • This innovation will help US drillers win the oil price war.
  • European leaders rejected the Greek budget yet again.
  • Etsy(ETSY) is crashing.
  • 5 of the world's biggest banks are expected to plead guilty in an unprecedented criminal case.
Financial Times:
  • Regulators warn of cyber threat to financial stability. US regulators are increasingly concerned about the threat that cyber attacks pose to financial stability after assaults on Sony Pictures and Target highlighted the proliferating range of techniques used by digital raiders.
Evening Recommendations 
BMO:
  • Raised (LC) to Overweight, target $23. 
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 105.50 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 59.0 -.5 basis point.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures +.01%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (AEO)/.12
  • (CTRN)/.75
  • (EV)/.60
  • (HRL)/.63
  • (LOW)/.74
  • (SFUN)/.04
  • (SPLS)/.17
  • (TGT)/1.03
  • (HGR)/.44
  • (LB)/.60
  • (NTAP)/.72
  • (CRM)/.14
  • (SNPS)/.63
  • (WSM)/.44 
Economic Releases 
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -730,000 barrels versus a -2,191,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +200,000 barrels versus a -1,142,000 barrel decline the prior week. Distillate inventories are estimated to rise by +120,000 barrels versus a -2,503,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.27% versus a -1.8% decline prior.
2:00 pm EST
  • April FOMC Minutes release.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Evans speaking, weekly MBA mortgage applications report, BMO Farm to Market conference, (VMW) conference call, (YELP) annual meeting, (HAL) annual meeting, (NVDA) annual meeting, (MDLZ) annual meeting, (TSS) analyst day, (ANN) annual meeting and the (FAF) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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