Style Underperformer:
Sector Underperformers:
- 1) Education -3.30% 2) Oil Service -2.81% 3) Gaming -2.53%
Stocks Faling on Unusual Volume:
- SMG, AAPL, DO, REXX, SMBL, CRZO, VVUS, PHH, MTZ, EBIX, AWI, PANL, GHDX, CNQR, LGCY, OEH, BWC, ALR, APEI, THR, EBIX, HRZN, NVO, SGEN, PHH, MYRG, FSYS, CXO, GNRC, HAR, DWRE, THC, ROSE, KLIC, RP, FL, HSP, MAKO, WFM, HCA, CLR, KSS, MPW and PRGO
Stocks With Unusual Put Option Activity:
- 1) KORS 2) GT 3) USB 4) CTL 5) SAN
Stocks With Most Negative News Mentions:
- 1) DPS 2) PRGO 3) MCD 4) FB 5) CXO
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Oil Tankers +2.23% 2) Networking +1.83% 3) Airlines +1.57%
Stocks Rising on Unusual Volume:
- QCOM, TTM, AMCX, CTL, SD, PTNR, TVL, OAS, EZCH, SLXP, BLMN, BIOS, RGR, AMCX, SAPE, VHC, NXTM, CONN, RGR, VRSN, CTL, DDS, SWHC and DF
Stocks With Unusual Call Option Activity:
- 1) WLL 2) PANL 3) AEO 4) FLR 5) WFM
Stocks With Most Positive News Mentions:
- 1) MSFT 2) ALXN 3) BBY 4) JNPR 5) JPM
Charts:
Evening Headlines
Bloomberg:
- ‘Sad and Depressed’ CEOs See No Light at End of Partisan Impasse. Business leaders, who generally didn’t support President
Barack Obama’s policies in the past four years or his re-election bid,
weren’t in a more-gracious mood after the results were in. Today’s
decline in the U.S. stock markets, the biggest since June, didn’t help. Andrew
Puzder, chief executive officer of Hardee’s burger chain owner CKE
Inc., said he was “sad and depressed” after Republican Mitt Romney’s
defeat and expects the economy “to stay bad with the possibility of
being horrific.” Aetna Inc. CEO Officer Mark Bertolini said the insurer may freeze hiring or cut
jobs if Obama and Republicans don’t avoid next year’s so- called fiscal
cliff of tax increases and spending cuts.
- Big Texas Welcome to Californians. A
slim majority of Californians did
something strange on Election Day. They voted to make themselves worse
off while boosting the economies of Texas, Arizona, Nevada and other
states. They did this by passing Proposition 30, the brainchild of
Democratic Governor Jerry Brown. The ballot initiative raises the sales
tax from 7.25 percent to 7.5 percent and imposes higher income-tax rates
on many Californians. The top marginal tax rate goes from the current
10.3 percent to 13.3 percent, one of the highest in the nation. The higher income taxes will lapse
in seven years -- but are retroactive to Jan. 1, 2012!
In Proposition 30, Brown entreated Californians to join him
in a soak-the-rich scheme, sold as a panacea for the state’s
financially stressed school systems. However, Proposition 30
will hit almost all Californians. Both rich and poor families
will pay higher sales taxes.
- Americans Forget Disaster of Big Government 1970s. Do
Americans suddenly like tax
increases and bigger government? Or did they simply forget what happens
when you raise taxes and make government larger? These are questions to
ask as we analyze the yesterday’s
election results to discern the fiscal consequences.
- Samaras Wins Greek Austerity Bill in Race to Secure Aid. Greek Prime Minister Antonis Samaras
mustered the support of enough lawmakers to secure approval of
austerity measures needed to unlock bailout funds, after more
than 50,000 protesters ringed Parliament. The bill on pension, wage and benefit cuts was approved
with 153 votes in favor in the 300-seat Parliament early today,
according to acting Parliament speaker Athanasios Nakos. A total
of 128 voted against the bill, with 18 voting “present.” One
lawmaker was absent. The voting was televised on state-run Vouli
TV. The vote took its toll on Samaras’s government, with
Samaras expelling one lawmaker from his New Democracy party for
failing to support the bill. Samaras’s main coalition partner,
Pasok, which provides Samaras with the majority he needs to
rule, expelled six lawmakers after the vote for their failure to
support the legislation.
- Spain Said to Consider Palace Sales to Raise Cash.
The Spanish government is considering
a sale of a small, century-old palace in the heart of Madrid’s business
district as part of a plan to raise cash from 100 prime properties, a
person with knowledge of the matter said. Castellana 19, built in 1903
and later used to house Spain’s stock-market regulator, would be sold
outright rather than leased, said the person, who asked not to be
identified because the plan’s details aren’t public. The property
was valued at 28.7 million euros ($37 million) in 2010, the year before
the agency moved out. The government said last month it had selected
100 buildings that could be privatized by the end of 2016.
- Asian Equities Slide, Yen Advances as U.S. Fiscal Cliff Looms. Asian
stocks slid the most in six weeks and the yen advanced as President
Barack Obama’s re- election set up a budget showdown to avert the
so-called fiscal cliff. New Zealand’s dollar declined after the nation’s
unemployment rate unexpectedly surged. The MSCI Asia Pacific Index (MXAP) dropped 1 percent as of 12:27 p.m. in Tokyo.
- Japan Machinery Orders Fall More Than Forecast on Exports. Japan’s machinery orders fell more
than expected in September as slowing global demand hurts
exports, while the nation’s current account surplus narrowed to
its lowest level for the month since at least 1985. Orders, an indicator of capital spending in three to six
months, declined 4.3 percent from the previous month, the
Cabinet Office said today in Tokyo. The median of 29 estimates
in a Bloomberg News survey was for a 2.1 percent drop.
- China’s Economic Growth at Stake as Communist Party Meets. China’s Communist Party kicked off a congress in Beijing to choose its
fifth generation of leaders since taking power in 1949, a decision that
will shape the nation’s economic and financial policies for the next
decade. At the opening ceremony of the congress, President Hu Jintao
walked onto the stage in China’s Great Hall of the People with his
predecessor, Jiang Zemin, 86, who served as general secretary from 1989
through 2002. Hu spoke of the progress China’s economy had made under
his tenure. He said China must further overhaul the economy and reduce
income gaps. The backgrounds of the successful candidates to fill the
top Politburo Standing Committee -- likely all men -- will give
investors clues to their appetite for policy shifts that the World Bank
says China must embrace to become a high-income economy.
- N.Z. Jobless Rate Surges to 13-Year High, Currency Plunges. New Zealand’s unemployment rate
unexpectedly rose last quarter to a 13-year high, adding to
evidence of a faltering recovery and sending the best-performing
Group of 10 currency this year plunging. The jobless rate jumped to 7.3 percent from 6.8 percent in
the second quarter, Statistics New Zealand said in a report
today in Wellington. That’s the highest since the first quarter
of 1999 and was more than the 6.7 percent median estimate in a
Bloomberg survey of economists.
- Gold Rises as Investors Increase ETP Holdings to All-Time High. Gold gained as investors boosted
holdings in exchange-traded products to a record and as a drop
from the highest price in two weeks encouraged buying. Spot gold advanced as much as 0.2 percent to $1,720.50 an
ounce and traded at $1,719.53 at 10:21 a.m. in Singapore. A
fourth day of gains would be the longest since August. The metal
reached $1,731.82 yesterday, the most expensive since Oct. 23.
Holdings in ETPs backed by bullion rose the most in a month to
2,591.995 metric tons, data compiled by Bloomberg show.
Wall Street Journal:
- What County-by-County Results Tell Us About the Election. (map)
- 7 Exit Poll Voter Trends. (video)
- What Obama's Victory Means for Business.
- House GOP Set to Keep Hammering Obama's Energy Plans. The loudest critics of President Barack Obama's energy policies were
re-elected to Congress on Tuesday, teeing up two more years of battles
over signature Republican issues such as U.S. oil production and
environmental regulation.
- The President's Cliff Walk. Boehner offers a fiscal olive branch to the White House. So much for the post-election honeymoon. The financial markets took a
header Wednesday on (take your pick) the return of European troubles,
the risk of a Beltway breakdown over the looming tax cliff, or the
greater prospect of a major tax increase arriving in 2013. The most
important question now is how a re-elected President Obama is going to
deal with this economic policy mess. Specifically, is he going to
consider his re-election to be a mandate to repeat his first-term
record of rejecting all GOP ideas and insisting on his priorities?
CNBC:
Zero Hedge:
Business Insider:
NY Times:
- Obama Victory Fails to Thrill European Business.
European citizens and political leaders welcomed President Barack
Obama’s re-election Wednesday. European money was less enthusiastic.
Many business executives and investors in Europe, like their
counterparts in the United States, would have welcomed a president who
was one of their own. They had more faith in Mitt Romney to steer the
U.S. economy, by far the biggest market for European exports. “The
business community was clearly in favor of Romney, that’s no secret,”
said Fred B. Irwin, president of the American Chamber of Commerce in
Germany. “The business community felt that the Obama administration ignored them.”
Reuters:
- U.S. panel urges wariness as Chinese investment grows. China's fast-growing direct investment in the United States
has created jobs and helped some firms and localities, but the security and
economic risks posed by the large Chinese state role made such investment a
"potential Trojan horse," a congressional advisory panel said in a study on
Wednesday.
- China submarines soon to carry nukes, draft US report says.
China appears to be within two years of deploying submarine-launched
nuclear weapons, adding a new leg to its nuclear arsenal that should
lead to
arms-reduction talks, a draft report by a congressionally mandated U.S.
commission says. China in the meantime remains
"the most threatening" power in cyberspace and presents the largest
challenge to U.S. supply chain integrity, the U.S.-China Economic and
Security Review Commission said in a draft of its 2012 report to the
U.S. Congress. China is alone among the original nuclear weapons states to be expanding its nuclear forces, the report said.
- Big real estate investors say Sandy hurts lower Manhattan values. Lower Manhattan office building
values are likely to suffer as a result of damage inflicted by
Superstorm Sandy that has left thousands of downtown Manhattan
workers unable to return to their offices, major real estate
executives said at a conference on Wednesday. "I think there's been value erosion downtown," Howard
Lutnick, chairman and CEO of Cantor Fitzgerald LP and BGC
Partners Inc, said during the New York University
Schack Institute of Real Estate Capital Markets in Real Estate
conference. "It had just started to come back. The concept now
of fear of flooding is going to affect values."
-
Qualcomm(QCOM) revenue beats Street, shares rise. Qualcomm Inc posted quarterly earnings and revenue that blew past Wall Street expectations and sent its shares
up 8 percent as demand increased for chips used in devices such as the
Apple Inc iPhone and it overcame a supply shortage.
- Monster Bev.(MNST) profit misses, again rejects safety claims. Monster Beverage Corp, facing
investigations into the safety of its energy drinks, reported a
smaller-than-expected quarterly profit as it stepped up
promotional spending. Shares in Monster, which again rejected the safety concerns
as "baseless," slid 12 percent in after-hours trading even as
the company reported rising sales.
- Spain faces long-term debt demand test. Spain
will test appetite for its longer-term debt on Thursday for the first
time in a year and a half, and decent demand could give it some leeway
to delay a request for a European bailout as its borrowing needs for the
year would be met.
- Whole Foods(WFM) sees sales hit from Sandy, shares down. Whole Foods Market Inc,
the largest U.S. natural and organic grocery chain, on Wednesday
reported a profit rise in line with forecasts but said Superstorm Sandy
has dragged sales this quarter, which sent its shares down 2 percent
after hours.
Passauer Neue Presse:
- Peter Bofinger, member of the economic panel advising German Chancellor Angela Merkel, says Europe's debt crisis is worsening, citing an interview. The crash that happened in Greece may follow in Spain, he said. The actions of the ECB don't change the fundamental problems, Bofinger said. A fundamental problem in all countries is that the business cycle is heading into recession.
Evening Recommendations
Night Trading
- Asian equity indices are -1.50% to -1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 119.0 +6.0 basis points.
- Asia Pacific Sovereign CDS Index 87.50 +.5 basis point.
- FTSE-100 futures +.49%.
- S&P 500 futures +.34%.
- NASDAQ 100 futures +.38%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (DDS)/.71
- (FCN)/.60
- (AAP)/1.21
- (SMG)/-.57
- (WEN)/.05
- (MWW)/.05
- (VMC)/.15
- (DUK)/1.44
- (KSS)/.88
- (DIS)/.68
- (NVDA)/.36
- (PSA)/1.68
- (ENR)/1.55
- (IGT)/.32
- (JWN)/.72
- (MCHP)/.48
- (CECO)/-.45
Economic Releases
8:30 am EST
- The Trade Deficit for September is estimated to widen to -$45.0B versus -$44.2B in August.
- The Initial Jobless Claims are estimated to rise to 365K versus 363K the prior week.
- Continuing Claims are estimated to fall to 3257K versus 3263K prior.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Spanish bond auction, BoE rate decision, ECB rate decision, Draghi press conference, China inflation data, 30Y T-Bond auction, weekly Bloomberg Consumer Comfort Index, (K) analyst day, (MMM) investor meeting and the (LRCX) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial 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.
Broad Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Slightly Above Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- VIX 18.87 +7.34%
- ISE Sentiment Index 83.0 -45.75%
- Total Put/Call 1.23 +29.47%
- NYSE Arms 1.61 +190.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 99.42 bps +3.26%
- European Financial Sector CDS Index 174.55 bps +3.57%
- Western Europe Sovereign Debt CDS Index 111.18 bps -.03%
- Emerging Market CDS Index 231.80 bps +1.68%
- 2-Year Swap Spread 10.25 -.75 basis point
- TED Spread 21.75 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -25.5 +.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .09% unch.
- Yield Curve 137.0 -8 basis points
- China Import Iron Ore Spot $121.60/Metric Tonne +.41%
- Citi US Economic Surprise Index 50.50 -.2 point
- 10-Year TIPS Spread 2.47 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating -100 open in Japan
- DAX Futures: Indicating +38 open in Germany
Portfolio:
- Lower: On losses in my tech, biotech, medical and retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Obama May Levy Carbon Tax to Cut U.S. Deficit, HSBC Says. Barack Obama may consider introducing
a tax on carbon emissions to help cut the U.S. budget deficit
after winning a second term as president, according to HSBC
Holdings Plc. A tax starting at $20 a metric ton of carbon dioxide
equivalent and rising at about 6 percent a year could raise $154
billion by 2021, Nick Robins, an analyst at the bank in London,
said today in an e-mailed research note, citing Congressional
Research Service estimates.
- Smith & Wesson(SWHC), Gunmakers Rally After Obama Re-Elected.
Smith & Wesson Holding Corp. (SWHC) climbed the most in two months
to lead a rally among firearms manufacturers as traders speculated that
President Barack Obama’s re-election will spur gun sales. Smith &
Wesson, a maker of pistols and rifles, jumped 7.8 percent to $10.20 at
11:51 a.m. in New York following an 11 percent gain that was the biggest
in intraday trading since Sept. 7. Sturm Ruger & Co. (RGR) rose 5.5
percent to $47.10.
- Republicans to Hold Most Governor Offices Since 2000. Republicans won the North Carolina governor’s office from
Democrats to take control of 30 U.S. statehouses, the most in more than a
decade. The party also held off re-election challenges in Utah
and North Dakota, and retained the corner office in Indiana, where
Republican Mitch Daniels stepped down because of term limits. Democrats
previously controlled the governor’s offices in eight of the 11 states
voting for their chief executives yesterday. The Republican
victories build on gains made two years ago, when the party’s candidates
rode a wave of economic discontent to capture 11 governor’s offices
from Democrats and reclaim a majority it lost in 2006. Its winners this
year pledged to cut taxes and spur economic growth. There were 29
Republicans in governors’ seats heading into yesterday’s election,
compared with 20 held by Democrats and one filled by an independent.
- EU Cuts 2013 Growth Forecast as Crisis Weighs on Germany. The
European Commission said the
euro-zone economy will virtually grind to a halt next year as the debt
crisis ravages southern Europe and gnaws at the economic performance of
export-driven Germany. The 17-nation euro economy will expand 0.1
percent in 2013, down from a May forecast of 1 percent, the commission
said today. It cut the forecast for Germany, Europe’s largest
economy, to 0.8 percent from 1.7 percent.
- German Economy Will Fail to Pick Up in 2013, Advisers Say. German economic growth will fail to
pick up next year as the euro region’s sovereign debt crisis
saps demand for German exports, the government’s council of
economic advisers said in its annual report. The German economy,
Europe’s biggest, will expand 0.8 percent in 2013, the same pace as this
year, the five-member council said in the 476-page report, which was
published in Berlin today. Foreign trade won’t contribute to growth as
imports accelerate faster than exports, it said. “The second half of
2012 is characterized by widespread recessionary trends in the euro zone
that impact on the German
economy through foreign trade and confidence” and damp the
economy’s expansion through declining investment, the report
said.
- Samaras Faces Down Parliament Dissenter as Greeks Strike. Greek Prime Minister Antonis Samaras
faces a test of his fragile coalition government today as he
seeks parliamentary approval of austerity measures to unlock
bailout funds amid the third general strike in six weeks. The bill on pension, wage and benefit cuts was brought to
the 300-seat Parliament today with a roll-call vote expected to
be held late in the evening. Approval of the legislation is the
first of the votes required by Nov. 12 to get a 31 billion-euro
($40 billion) aid tranche.
- Merkel Euro Budget Veto Policy Is Wrong, Council of Advisers Say. Efforts by German Chancellor Angela Merkel’s government to expand powers of the European Commission
to allow it to veto euro area states’ budgets are misplaced and
unrealistic, her panel of economic advisers said. Sovereign rights over budgets must remain under control of
national governments while obligations to follow the fiscal
arrangements devised to stabilize the euro are tightened, said
the group, known as the “Five Wise Men,” in their annual
report presented to Merkel in Berlin today. The veto plan, aired
last month by German Finance Minister Wolfgang Schaeuble,
sparked opposition in France, Italy and Spain.
- Europe Stocks Drop on Economy Concern, U.S. Fiscal Cliff.
European stocks fell the most in two weeks as the European Commission
cut its growth forecast for the region and concern over an impending
fiscal crisis in the U.S. increased after the re-election of President
Barack Obama. Randgold Resources Ltd. (RRS) slumped the most in six
months after predicting that its annual output will be at the bottom of
its target. Holcim Ltd. (HOLN), the world’s largest cement maker, slid
2.4 percent as earnings missed analysts’ estimates. The Stoxx Europe 600 Index (SXXP) declined 1.4 percent to 271.04
at the close of trading, erasing an earlier gain of as much as
0.7 percent.
Wall Street Journal:
- Election 2012.
- Post-Election: Live Blogging the Market Reaction.
- Financials Sink on Regulatory Worries, 'Cliff'.
- Hope Over Experience. A divided country gives Obama a second chance.
Some of our conservative friends will argue that Mr. Obama's victory
thus represents a decline in national virtue and a tipping point in
favor of the "takers" over the makers. They will say the middle class
chose Mr. Obama's government blandishments over Mr. Romney's opportunity
society. We don't think such a narrow victory of an incumbent President
who continues to be personally admired justifies such a conclusion.
Perhaps this fear will be realized over time, but such a fate
continues to be in our hands. There are few permanent victories or
defeats in American politics, and Tuesday wasn't one of them. The battle
for liberty begins anew this morning.
Barron's:
- Fitch Warns of U.S. Rating Downgrade if Fiscal Cliff Isn’t Averted. The election results are barely 12 hours old but Fitch Ratings
has already sent a warning shot across the bow of Obama’s second term
as president, saying on Wednesday that the U.S. triple-A credit rating
is at risk if Washington can’t avoid the fiscal cliff and reduce the
deficit.
MarketWatch.com:
- Gephardt warns of ‘bad days’ for markets. “If it looks like that is happening you could have a couple really bad
days on Wall Street,” Dick Gephardt said at an event hosted by National
Journal magazine. “You could have the markets drop by 1,000 or 2,000
points.”
HedgeFundBlogger.com:
- Hedge Funds Fell in October as Earnings Disappointed. Hedge funds took it on the chin in October, according to recent data compiled by
Bloomberg. Hedge funds reportedly lost 1.9% on average last month as weak
earnings reports appeared to betray an even weaker economy.
Bespoke Investment Group:
Reuters:
- Exclusive: Boeing(BA) to announce major defense division restructuring. Boeing
Co announced a major restructuring of its defense division on Wednesday
that will cut 30 percent of management jobs from 2010 levels, close
facilities in California and consolidate several business units to cut costs. The company told employees about the changes ahead of the planned announcement set for later
Wednesday, a copy of which was reviewed by Reuters. Boeing,
the Pentagon's second-largest supplier, said the changes were the
latest step in an affordability drive that has already reduced the
company's costs by $2.2 billion since 2010, according to the document.
- Colorado, Washington first states to legalize recreational pot. Colorado and
Washington became the first U.S. states to legalize the possession and
sale of marijuana for recreational use on Tuesday in defiance of federal
law, setting the stage for a possible showdown with the Obama
administration. Supporters
of a Colorado constitutional amendment legalizing marijuana were the
first to declare victory, and opponents conceded defeat, after returns
showed the measure garnering nearly 53 percent of the vote versus 47
percent against. But another ballot measure to
remove criminal penalties for personal possession and cultivation of
recreational cannabis was defeated in Oregon, where significantly less
money and campaign organization was devoted to the cause. "Colorado will no
longer have laws that steer people toward using alcohol, and adults will
be free to use marijuana instead if that is what they prefer. And we
will be better off as a society because of it," said Mason Tvert,
co-director of the Colorado pro-legalization campaign.
-
Merkel warns Britain against European Union exit. Germany's Angela Merkel
on Wednesday warned Britain not to turn its back on Europe ahead
of talks in London with Prime Minister David Cameron aimed at
overcoming divisions that threaten to block a European Union
budget deal later this month. Cameron has said he is ready to veto the EU's seven-year
budget and has attacked its "ludicrous" spending plans, in
comments likely to fuel a view among many in Europe that London
is drifting away from the 27-nation union.
USA Today:
Il Sole 24 Ore:
- The European Commission expects Italian gross domestic product to drop -.5% next year. The Italian govt had said on Sept. 20 that the economy would contract -.2% next year.
Style Underperformer:
Sector Underperformers:
- 1) Coal -7.23% 2) Education -6.82% 3) Disk Drives -5.33%
Stocks Faling on Unusual Volume:
- MS, GS, JPM, C, PQ, GDP, TDS, NIHD, TBBK, MBFI, SBGI, DISH, AMED, SFLY, PLXS, LPSN, ACHC, ADES, ONE, AGU, ARLP, AUXL, PRGO, VOLC, AT, KKR, BTH, EZPW, HUM, NRP, BZH, BBEP, CHTR, VSAT, PHMD, NLY, PWE, KELYA, EXXI, BTH, MNTA, BTU, INFI, VVUS, APOL, REXX, WLT, SGY, CLNE, CRZO, DVN, CLD, LLL, XLS, AOL, RAX, LNC, MET, BV, BR, WLP, PCYC, NSM, FGP, LMT, FGP, IACI, NOC, UNH, NS, PBI, AMTG, HII, SLM, BBT, PNC, PRU, MM, FSC, SLCA, KKR, VNR and TXT
Stocks With Unusual Put Option Activity:
- 1) FITB 2) XLV 3) APA 4) JRCC 5) SPLS
Stocks With Most Negative News Mentions:
- 1) UNH 2) AOL 3) RIMM 4) CVX 5) AGU
Charts:
