Wednesday, December 09, 2015

Thursday Watch

Evening Headlines
  • First Word Asia: Why China's Economy Will Remain Weak for Some Time. (video)
  • China's Hippest Smartphone Maker Warns Shakeout Will Get Worse. The co-founder of one of China’s hottest smartphone makers says a shakeout in the industry is going to get worse before it gets better as dozens of companies with similar products battle for market share and Apple Inc. collects virtually all the profits in the business. “We’re going to have to survive the next few cycles,” Carl Pei, the co-founder of OnePlus, said in an interview. “A lot of pure plays will disappear and big companies will withdraw from the phone market.”
  • Asian Stocks Decline as Jump in Yen Weighs on Japanese Exporters. Asian stocks fell, with the benchmark index set to extend a two-month low, as the yen’s biggest gain in three months weighed on Japanese exporters and health-care shares declined. The MSCI Asia Pacific Index slid 0.3 percent to 129.67 as of 9:01 a.m. in Tokyo, poised for its lowest close since Oct. 6, as health-care and consumer shares led losses. Japan’s Topix index dropped 0.8 percent after the yen jumped 1.2 percent against the dollar on Wednesday, the most since Sept. 1.
  • Iron Ore Sinks in a Sea of Oversupply. (video)
  • No One Knows How Messy the Fed Increase Could Get. The greatest monetary-easing cycle in the history of the U.S. has left a mind-boggling amount of cash floating around in the economy. Banks hold $2.5 trillion in excess reserves -- money they essentially don’t know what to do with -- at the Federal Reserve. So as the Fed prepares to raise interest rates from near zero as soon as next week, bond investors are on edge. Beyond all the "is-this-the-right-move" questions that surround every increase, there’s a logistical concern: With so much cash sloshing around, will Fed officials be able to nudge rates as high as they want? Will the new-fangled tools they’ve created to engineer the move work, or instead sow the kind of confusion that can dent the Fed’s credibility and spur a broader market selloff? Many investors are taking no chances.
  • Wall Street Is Pricing Pipeline MLPs Like Half Will Cut Payouts. (video) Investors expect half the partnerships that control most U.S. oil and gas infrastructure to reduce distributions after America’s largest pipeline company cut its dividend by 74 percent. Traders have dragged the shares of pipeline master-limited partnerships so far down that half of them have a yield, the annual payout divided by stock price, of 10 percent to 51 percent, according to data compiled by Bloomberg. Any yield above 9 percent implies that buyers expect a cut, said Rob Thummel, who manages about $15 billion of energy securities at Tortoise Capital Advisors LLC in Leawood, Kansas.
  • Republicans Offer Puerto Rico a Helping Hand for the First Time. Republicans in the U.S. Congress are proposing their first measures to help Puerto Rico as it runs out of cash, responding to calls from the island’s government and the Obama administration. Representative Sean Duffy of Wisconsin, who sits on the House Financial Services committee, on Wednesday introduced a bill that would give Puerto Rico agencies the ability to file for municipal bankruptcy as long as the commonwealth agrees to let a federal panel oversee its finances. Senator Orrin Hatch, the chairman of the finance committee, said he will file a bill Wednesday afternoon.
Wall Street Journal:
Fox News:
Zero Hedge:
The Long War Journal:
  • Ex-Guantanamo detainee now an al Qaeda leader in Yemen. Al Qaeda in the Arabian Peninsula (AQAP) released a new video featuring a former Guantanamo detainee, Ibrahim Qosi, who is also known as Sheikh Khubayb al Sudani. In July 2010, Qosi plead guilty to charges of conspiracy and material support for terrorism before a military commission. His plea was part of a deal in which he agreed to cooperate with prosecutors during his remaining time in US custody. Qosi was transferred to his home country of Sudan two years later, in July 2012.
The Daily Caller:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -1.25% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 135.0 +1.25 basis points.
  • Asia Pacific Sovereign CDS Index 71.75 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 69.99 +.06%.
  • S&P 500 futures +.33%.
  • NASDAQ 100 futures +.36%.
Morning Preview Links 

Earnings of Note 
  • (CIEN)/.38
  • (FNSR)/.23
  • (RH)/.63
  • (VNCE)/.07 
  • (ADBE)/.60
Economic Releases
8:30 am EST
  • The Import Price Index for November is estimated to fall -.8% versus a -.5% decline in October.
  • Initial Jobless Claims are estimated to rise to 270K versus 269K the prior week.
  • Continuing Claims are estimated to fall to 2155K versus 2161K prior.  
12:00 pm EST
  • 3Q Household Change in Net Worth.
2:00 pm EST
  • Monthly Budget Statement for November. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The SNB rate decision, BoE rate decision, $13B 30Y T-Bond auction, Bloomberg Dec. US Economic Survey, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (YUM) analyst day, (SMG) analyst day, (AMT) investor day, (ALXN) investor day and the (UTX) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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