Monday, December 21, 2015

Tuesday Watch

Evening Headlines
  • Funds With $3 Trillion Take Rain Check on Emerging Stocks. (video) Rich pickings will be hard to find in emerging-market shares next year. That’s the conclusion of most money managers as they see off the third successive year of declines that took stock prices to the lowest level in a decade relative to their developed peers and shaved more than $4 trillion off their value in the last six months alone. A combination of dollar strength, domestic political turmoil and lower prices for metals and oil is driving investor caution. Ten out of 12 multi-asset managers overseeing a combined $3 trillion said in a Bloomberg survey they will either maintain or cut holdings in developing-nation equities in 2016. "Emerging markets will continue to be a drag on global growth," said Michael Kelly, who oversees $12.9 billion as managing director and global head of asset allocation at PineBridge Investments LLC in New York. “While valuations have been beaten down, fundamentals will continue to deteriorate,” said Kelly, who has an underweight stance. 
  • Bonds Set to Beat Stocks Globally in 2015 After China Falters. Bonds are poised to outperform stocks globally for a second year, the first time that has happened in more than a decade, as slowing growth in China drives demand for the safest assets. The Global Broad Market Index of bonds from Bank of America Merrill Lynch has risen 1.3 percent this year, while the MSCI All Country World Index of shares has slumped 3.1 percent including reinvested dividends. In 2014, debt returned 7.8 percent and stocks advanced 4.8 percent. Bonds haven’t outperformed equities for two straight years since 2001 and 2002 when a bubble in technology shares burst.
  • What the Spain-Italy 10-Year Spread Shows: Chart. (graph) 
  • Are Italy's Bank Failures Just the Tip of the Iceberg? (video) 
  • Toshiba Falls to Three-Year Low After $4.5 Billion Loss Forecast. Toshiba Corp. fell more than 7 percent on Tuesday after forecasting a record 550 billion yen ($4.5 billion) loss and announcing plans to cut more jobs as it restructures businesses. The shares slid to as low as 236.9 yen in early trade in Tokyo. The slump follows a decline of 9.8 percent on Monday.
  • Asian Stocks Little Changed After China Signals More Stimulus. Asian stocks were little changed in thin trading as investors weighed the prospect of more stimulus from Chinese leaders. The MSCI Asia Pacific Index added less than 0.1 percent to 130.05 as of 9:12 a.m. in Tokyo.
  • Is There More High-Yield Carnage Coming? (video) 
Wall Street Journal: 
  • Dividend Dilemma Hounds Energy Companies. In the midst of the worst commodity slump in years, investors still want their dividends. In the midst of the worst commodity slump in years, investors still want their dividends. That was illustrated as energy firm Oneok Inc. said Monday it was committed in 2016 to sustaining the dividend at its unit that processes and transports natural gas. Oneok’s shares soared $2.92, or 15%, to $21.85, making the Tulsa, Okla., company the day’s biggest gainer in the S&P 500. Oneok’s shares are down 56% so far this year.
  • SEC to Retrench on SAC’s Cohen. Shift reflects changing legal landscape.
  • Driver in Las Vegas Strip Car Incident Expected to Be Charged With Murder. Lakeisha Holloway is suspected of intentionally driving into pedestrians, killing one person and injuring dozens. 
  • Let’s Elect Hillary Now. We want a president we can loathe all of the time—not support some of the time. Let us now pledge to elect Hillary Clinton as the 45th president of the United States. Let’s skip the petty dramas of primaries and caucuses, the debate histrionics, the sour spectacle of the convention in Cleveland. Let’s fast-forward past that sinking October feeling when we belatedly realize we’re going to...
Fox News:
  • Republicans blast Kerry for suggesting Iran could skirt new visa rules. (video) Republicans on Monday blasted Secretary of State John Kerry for suggesting in a letter to his Iranian counterpart that the administration could help the country get around new visa restrictions passed by Congress. “Instead of bending over backwards to try to placate the Iranian regime, the White House needs to be holding it accountable for its recent missile tests, its continued support for terrorism, and its wrongful imprisonment of Americans,” House Foreign Affairs Committee Chairman Ed Royce, R-Calif., said in a statement to
Zero Hedge:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 141.5 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 74.5 unch.
  • Bloomberg Emerging Markets Currency Index 69.43 +.12%.
  • S&P 500 futures -.02%.
  • NASDAQ 100 futures -.05%.
Morning Preview Links 

Earnings of Note 
  • (CAG)/.59
  • (PAYX)/.51
  • (CAMP)/.29
  • (MU)/.23
  • (NKE)/.86 
Economic Releases
8:30 am EST
  • 3Q GDP is estimated to rise +1.9% versus a prior estimate of a +2.1% gain.
  • 3Q Personal Consumption is estimated to rise +2.9% versus a prior estimate of a +3.0% gain.  
  • 3Q GDP Price Index is estimated to rise +1.3% versus a prior estimate of a +1.3% gain.
  • Core PCE QoQ is estimated to rise +1.3% versus a prior estimate of a +1.3% gain. 
9:00 am EST
  • The FHFA House Price Index MoM for October is estimated to rise +.5% versus a +.8% gain in September.
10:00 am EST
  • Existing Home Sales for November are estimated to fall to 5.35M versus 5.36M in October. 
  • Richmond Fed Manufacturing Index for December is estimated to rise to -1.0 versus -3.0 in November.
Upcoming Splits
  • (NKE) 2-for-1
  • (ENSG) 2-for-1
Other Potential Market Movers
  • The German Consumer Confidence, weekly US retail sales reports, (STE) conference call and the (ESRX) financial guidance call could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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