Saturday, December 12, 2015

Today's Headlines

  • Commodity Shares Rout Leads S&P 500 to Biggest Drop in 2 Months. (video) The Standard & Poor’s 500 Index fell the most in more than two months amid a deepening retreat in commodities, and as investors prepare for next week’s Federal Reserve interest rate decision. Equities extended a weekly selloff as crude dropped to the lowest level since 2008 in London on expectations for a continuing supply glut. A measure of volatility jumped more than 60 percent this week, the most since August. DuPont Co. and Dow Chemical Co. slipped at least 2.8 percent after jointly announcing the largest-ever chemical industry merger. The S&P 500 dropped 1.9 percent to 2,012.37 at 4 p.m. in New York, posting its first weekly drop in four and its worst since August. The Dow Jones Industrial Average sank 309.54 points, or 1.8 percent, to 17,265.21. The Nasdaq Composite Index lost 2.2 percent. About 8.3 billion shares traded hands on U.S. exchanges, 16 percent above the three-month average. “I think there’s a lot of uncertainty with global growth that is just factoring into the year-end positioning,” said Kevin Kelly, the New York-based chief investment officer at Recon Capital Partners. “We’ve seen a broad-based selloff today. There’s nowhere to hide out there and that’s why this is so brutal. It seems like a redux of August when the Chinese actually devalued their currency in anticipation of a Fed rate hike and stronger dollar.”  
  • Junk Bonds Are Tanking and Icahn Says Meltdown `Just Beginning'. (video) A day after a prominent Wall Street firm shocked investors by freezing withdrawals from a credit mutual fund, things only got nastier in the junk-bond market. Prices on the high-risk securities sank to levels not seen in six years and, to add to the growing sense of alarm, billionaire investor Carl Icahn said the selloff is only starting. “The meltdown in High Yield is just beginning," Icahn, who’s been betting against the high-yield market, wrote on his verified Twitter account Friday. Icahn’s comments come as junk-bond investors, already stung by the worst losses since 2008, are the most nervous they’ve been in three years after Third Avenue Management took the rare step of freezing withdrawals from a $788 million credit mutual fund. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, rose 36 basis points to 514.52 basis points, the highest since December 2012. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, fell to the lowest levels since 2009. 
  • Barclays Model of China New Yuan Index Shows Pain Far From Over. (graph) China’s efforts to shift the world’s attention away from the yuan-dollar exchange rate to a broader-based index is a sign to traders that the currency’s decline versus the greenback has just begun. A Barclays Plc index with similar components to the new gauge shows just how far the yuan has left to fall. A unit of the People’s Bank of China announced a new yuan index Friday, composed of 13 currencies, to “help bring about a shift in how the public and the market observe RMB exchange rate movements,” according to a central bank statement. Barclays’s yuan trade-weighted index shows the currency’s depreciation against the dollar this year has been offset by gains versus other trading partners, such as Europe and South Korea, giving scope for the Chinese currency to plunge further. 
  • China Steel Output Slumps to a One-Year Low as Prices Collapse. Steelmakers in China reined in production last month as prices collapsed and the onset of winter in the largest producer curbed demand already hurt by a cooling economy. Crude steel output fell 1.6 percent to 63.32 million metric tons from a year earlier, according to data from the statistics bureau released Saturday. So far this year, production has dropped 2.2 percent to 738.38 million tons. China makes about half of the world’s steel.
  • Third Avenue's Now-Frozen Fund Called Liquidity Fears a ‘Myth’. (video) Third Avenue Management LLC rattled credit markets this week when it said that a lack of liquidity had forced it to halt redemptions in its junk-bond mutual fund. Not so long ago, the fund was telling investors that concerns about illiquidity in these markets were a “myth.” The firm’s Third Avenue Focused Credit Fund, with investments in high-yield debt and bank loans, keeps excess cash on hand, lead manager Thomas Lapointe wrote in a 2012 investor commentary reviewed by Bloomberg News. The fund would also remain small enough -- with assets under $3 billion -- to stay nimble in building and liquidating positions, he wrote. The fund had $3.5 billion in assets in the quarter ended June 2014, according to data compiled by Bloomberg, before falling back below $3 billion in assets by the end of that year. 
  • Leveraged ETFs Face SEC Squeeze in Plan to Rein in Derivatives. U.S. regulators have declared war on the $32 billion leveraged ETF industry. A proposal issued Friday by the Securities and Exchange Commission could handicap a product that has drawn warnings from BlackRock Inc.’s Laurence Fink and Wall Street’s brokerage regulator, the Financial Industry Regulatory Authority. Built like mutual funds, leveraged exchange traded funds managed by companies such as ProShare Advisors LLC and Direxion use derivatives that produce daily gains or losses that can be three times greater than an index they track, such as the Standard & Poor’s 500 Index. If eventually approved as a final rule, the SEC’s plan might render some of those strategies unworkable by capping the leverage such funds can derive from derivatives at 150 percent of their net assets. It would also force them to hold a lot more cash to cover potential losses.
  • Cruz Soars to Front of the Pack in Iowa Poll; Trump Support Stays Flat. Bloomberg Politics/Des Moines Register Iowa survey also brings no joy to Ben Carson or Jeb Bush.
 Wall Street Journal: Barron's:
  • Had bullish commentary on (MU), (GWW), (XL), (OAK), (ATU), (FMC), (FOSL), (M), (JWN), (RL) and (BURL).
  • Had bearish commentary on (KMI).
Fox News: 
  • 'A turning point for the world': Obama praises global climate change pact in White House address. (video) President Obama hailed the approval of a far-reaching global climate accord to limit greenhouse gas emissions adopted Saturday in Paris, in a statement from the White House Cabinet Room Saturday afternoon. Praising the pact as a ‘turning point for the world,’ Obama commended leaders from more than 190 countries for working together “to show what is possible when the world stands as one.”
Zero Hedge:
Business Insider:

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