Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -3.51% 2) Coal -1.90% 3) Oil Service -1.83%
Stocks Falling on Unusual Volume:
- RIG, HLX, SWC, PZE, COF, SU, STI, SNFCA, WTI, SGY, TSU, TEF, ING, DTV, KOS, LOGM, IPGP, ASGN, EHTH, BGS, LNCO, UPL, A, IPHS, DLR, SAND, SSS, APA, STRA, PRLB, FNV, HSP, DDD, TOT, RDY, NEM, PRO, SPWR, LINE, ORB, STJ, RES, IPI and RKUS
Stocks With Unusual Put Option Activity:
- 1) CIM 2) SMH 3) FITB 4) APA 5) A
Stocks With Most Negative News Mentions:
- 1) LOGM 2) RIG 3) MWW 4) APA 5) BAC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +.93% 2) Homebuilders +.78% 3) HMOs +.64%
Stocks Rising on Unusual Volume:
- QLIK, ELLI, MWV, NTSP, HLF, MNST, WPRT, MM, TILE, AFFY, QCOR and GPS
Stocks With Unusual Call Option Activity:
- 1) TJX 2) HOT 3) MNST 4) XLU 5) UUP
Stocks With Most Positive News Mentions:
- 1) ABX 2) COF 3) PEP 4) VFC 5) CPB
Charts:
Evening Headlines
Bloomberg:
- Hollande Tiptoes Toward Raid on Pensions Under Pressure From EU. President
Francois Hollande is preparing to take on a French sacred cow:
pensions. Facing European Union pressure to reach budget targets, the
Socialist president is risking the wrath of his core supporters
to shrink the pension system, which had a deficit of 14 billion
euros ($19 billion) in 2011. While leaving the issue of fixing the retirement age
to talks between representatives of employees and employers,
Hollande may propose separating pension increases from
inflation, government officials said. He’s venturing upon a
pension overhaul -- which few of his predecessors have managed
without drawing millions into the streets -- as his government
says it’s unlikely to meet this year’s budget-deficit target.
- Asian Stocks Retreat on Earnings. Rio Tinto declined 2.5 percent in Sydney after the miner
reported its biggest loss in at least 15 years. Trend Micro
tumbled 7.8 percent after the Japanese anti-virus software maker’s net income fell 23 percent.
Auckland International Airport Ltd. slumped the most in four years
after a New Zealand pension fund reduced its stake in the nation’s
busiest terminal. The MSCI Asia Pacific Index slid 0.5 percent to
133.23 as of 12:56 p.m. in Hong Kong. Japan’s Nikkei 225 Stock Average
slid 1.9 percent, led by banks and exporters, after Russia’s finance
minister said Group
of 20 nations should take a stronger stance against currency
manipulation.
- Park May Face Prolonged Korea Growth Underperformance: Economy.
South Korea’s incoming President Park Geun Hye may be saddled with an
economy that underperforms for a prolonged period, increasing the allure
of stimulus
spending that could undermine the nation’s fiscal strength.
Growth may stay below potential for a “considerable
time,” the Bank of Korea said yesterday after officials voted
to keep interest rates on hold. Policy makers are concerned
about the need to regain momentum after last year’s 2 percent
expansion, the weakest since 2009.
- Fed’s Bullard Says Balance-Sheet Growth Lifts Exit Concern.
Federal Reserve Bank of St. Louis President James Bullard said central
bank stimulus has been ramped up this year with the decision to increase
outright bond purchases to $85 billion a month and
that a growing balance sheet could be complicated to unwind. “The
current stance of U.S. monetary policy is considerably easier than it
was in 2012,” Bullard said in a speech prepared for delivery today in
Starkville, Mississippi. “The size of the balance sheet could inhibit”
the Fed’s “ability to exit appropriately from the current very expansive
monetary policy.”
- China, Iran Boost Cyber Attacks on U.S., Lawmaker Says. China and Iran are intensifying cyber assaults against the U.S., the
head of the House Intelligence Committee said as he pressed for
legislation to encourage companies to share information on hacker
threats. China’s cyber espionage effort targeting U.S.
industrial secrets “has grown exponentially both in terms of its volume
and damage it’s doing to our economic future,” the intelligence panel’s
chairman, Mike Rogers, said at a hearing yesterday. “We have no
practical deterrents in place today.”
- Oil Heads for Ninth Gain in 10 Weeks as OPEC Seen Cutting Supply. West Texas Intermediate oil headed
for its ninth weekly gain in 10 weeks after a report signaled
OPEC will cut crude shipments this month. Open interest for the
U.S. benchmark contract rose to a record. Futures were little changed in New York after climbing 0.3
percent yesterday, and are up 1.7 percent this week. The number
of contracts outstanding climbed to 1,665,014, the highest level
since the futures began trading on the New York Mercantile
Exchange in March 1983, the exchange’s owner said. The
Organization of Petroleum Exporting Countries will cut crude
shipments by 0.9 percent this month amid lower production by
Saudi Arabia, according to Oil Movements, a tanker tracker.
Crude for March delivery was at $97.33 a barrel, up 2
cents, in electronic trading in New York at 9:15 a.m. in Tokyo.
The volume of all futures traded was 40 percent above the 100-
day average.
- Drone Tests Must Adhere to Privacy Rules, U.S. FAA Says. U.S. aviation regulators will
require test facilities for unmanned aircraft to comply with
federal and state privacy laws, as the government develops the
first rules for operating drones in U.S. skies. “Each site operator and its team members will be required
to operate in accordance with federal, state and other laws
regarding the protection of an individual’s right to privacy,”
the Federal Aviation Administration said in an e-mailed
statement today.
The agency is opening a contest to create six drone test
sites to be run by government agencies or universities, it said
in the statement.
- Heinz(HNZ) Turnaround CEO May Reap $100 Million After Buyout.
Having turned around H.J. Heinz Co., Chief Executive Officer Bill
Johnson may reap about $100 million from the company’s buyout. Warren
Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital
Inc. agreed to buy the iconic ketchup maker for about $23 billion. The
billionaire buyers will pay $72.50 a share, compared with yesterday’s
closing price of $60.48, according to a statement today. Johnson, 64,
held 1.38 million Heinz shares as of Dec. 17, according to data compiled
by Bloomberg News. His total compensation in the fiscal year ended in
March was $16.2 million, including $1.3 million of salary.
- SEC Investigators Review Surge in Heinz(HNZ) Trades Before Merger.
U.S. Securities and Exchange
Commission investigators are reviewing whether a surge in bullish bets
on H.J. Heinz Co. was fueled by inside information about Berkshire
Hathaway Inc. and 3G Capital’s plan to buy the
ketchup maker, a person familiar with the matter said.
Wall Street Journal:
- Abe Nears Decision on BOJ Governor. Japanese
Prime Minister Shinzo Abe is facing a rift with his finance minister,
longtime ally Taro Aso, over who to pick as the next Bank of Japan
governor, a division that epitomizes the difficulty of the selection
process. Government officials said Mr. Abe may make his final decision
in a few
days and order his aides to begin private talks with the opposition
parties to win their support.
- Deferred Pay Draws Fed's Scrutiny. U.S. banks and securities firms would have to step up their
compensation disclosures under rules being considered by the Federal
Reserve, said a person familiar with the central bank's regulatory
efforts. The rules are in the formative stages and wouldn't
take effect for some time. But an early draft has circulated internally
at the Fed, this person said, marking a step on the path toward a public
proposal.
- GOP Stalls Vote on Pick for Pentagon.
Senate Republicans on Thursday blocked, at least temporarily, Chuck
Hagel's nomination to be defense secretary, leaving him damaged and
offering the latest example of how fierce the partisan divide has become
in Congress.
- Shifting Blame Muddles S&P Suit.
Like many other collateralized debt obligations, Delphinus CDO 2007-1
got a triple-A rating and then defaulted within months, causing painful
losses to investors. Who is responsible for the mess? Last year, the
Securities and Exchange Commission blamed Mizuho Financial Group Inc.,
8411.TO -8.17% and the Japanese bank paid $127.5 million to settle a
lawsuit filed by the U.S. agency.
CNBC:
- Currency Wars Come to Moscow as G-20 Meets. It won't quite be hand-to-hand combat, but 'currency wars' will come to
Moscow on Friday as finance officials from the Group of 20 nations spar
over Japan's expansive policies that have driven down the value of the
yen.
Zero Hedge:
Business Insider:
- Mexican Drug Kingpin Named Chicago's First Public Enemy No. 1 Since Al Capone.
Guzman has been on the Forbes' list of billionaires since 2009, and
Washington has a $5 million reward for his capture. However, there are allegations that Guzman works with the U.S. government.
In court documents, a high-ranking member of Sinaloa currently in U.S.
custody asserted that Guzman is a U.S. informant, Sinaloa was "given
carte blanche to continue to smuggle tons of illicit drugs into
Chicago," and Operation Fast and Furious was part of an agreement to
finance and arm the cartel in exchange for information used to take down
its rivals. The claims were corroborated by a Mexican foreign service
officer who doubled as a confidential source for the U.S. security firm
Stratfor when he alleged that the U.S. government works with Mexican
cartels to traffic drugs into the U.S., adding that in 2010 the U.S.
sided with Sinaloa in an attempt to limit the violence in Mexico.
Reuters:
- JP Morgan(JPM) star trader Gulati quits to set up hedge fund: FT. JPMorgan
Chase & Co's global head of equity proprietary trading has quit the
investment bank to set up a hedge fund in Switzerland, the Financial
Times reported on Thursday. Deepak Gulati, one of the
bank's star traders, will launch Argentière Capital sometime in the
second or third quarter of this year, the financial daily quoted two
people familiar with the plans.
Financial Times:
- US residential securities make a comeback. You
might have thought that credit market investors would be glad to see
the back of all those suburban McMansions that homebuilders flung up
across the American sunbelt, back when lenders barely checked a
borrower’s pulse, let alone their credit score. After all, it was the collapse in the value of those homes, used as
collateral in trillions of dollars of mortgage-backed securities, that
triggered a credit crisis from which the US has still not fully
recovered. But
if bankers have their way, the very same McMansions may find their way
back into credit market investors’ portfolios, and soon, as the
collateral behind a whole new kind of security.
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 110.75 -.25 basis point.
- Asia Pacific Sovereign CDS Index 85.0 -.5 basis point.
- NASDAQ 100 futures -.13%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Empire Manufacturing Index for February is estimated to rise to -2.0 versus -7.78 in January.
9:00 am EST
- Net Long-Term TIC Flows for December are estimated to fall to $35.0B versus $52.3B in November.
9:15 am EST
- Industrial Production for January is estimated to rise +.2% versus a +.3% gain in December.
- Capacity Utilization for January is estimated to rise to 78.9% versus 78.8% in December.
- Manufacturing Production for January is estimated unch. versus a +.8% gain in December.
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for February is estimated to rise to 74.8 versus 73.8 in January.
Upcoming Splits
Other Potential Market Movers
- The Fed's Pianalto speaking, Eurozone Trade Data and the (ONNN) Analyst Day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and mining 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.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 114.0 -12.31%
- Total Put/Call .84 -6.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 85.75 -.16%
- European Financial Sector CDS Index 140.28 -.34%
- Western Europe Sovereign Debt CDS Index 100.0 +.28%
- Emerging Market CDS Index 230.40 -1.28%
- 2-Year Swap Spread 15.25 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -17.25 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .10% +1 bp
- China Import Iron Ore Spot $155.10/Metric Tonne n/a
- Citi US Economic Surprise Index -5.0 +2.0 points
- 10-Year TIPS Spread 2.57 unch.
Overseas Futures:
- Nikkei Futures: Indicating -67 open in Japan
- DAX Futures: Indicating +14 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/tech sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Economy Shrinks Most Since Depths of Recession.
The euro-area recession deepened more than economists forecast with the
worst performance in almost four years as the region’s three biggest
economies suffered slumping output. Gross domestic product fell 0.6
percent in the fourth quarter from the previous three months, the
European Union’s statistics office in Luxembourg said today. That’s
the most since the first quarter of 2009 in the aftermath of the
collapse of Lehman Brothers Holdings Inc. and exceeded the 0.4 percent
median forecast of economists in a Bloomberg survey. The data
capped a morning of releases showing that the economies of Germany,
France and Italy all shrank more than forecast in the fourth quarter.
- Italian Economy Shrinks Most in Almost Four Years Before Vote.Italy’s
economy contracted the most in almost four years in the quarter through
December as the country’s fourth recession since 2001 deepened. Gross
domestic product shrank 0.9 percent from the previous three months, a
sixth quarterly contraction and almost five times the 0.2 percent pace
of the third quarter, the National
Statistics Institute Istat in Rome said in a preliminary report
today. The decline was more than the 0.6 percent median forecast
in a Bloomberg News survey of 24 economists. From a year
earlier, output shrank 2.7 percent. Italy’s central bank has called on whichever government
emerges from this month’s elections to consolidate public
finances to boost competitiveness and economic growth, after
revising its GDP forecast for the euro region’s third-biggest
economy. The economy shrank 2.2 percent in 2012, Istat said today.
The Bank of Italy forecast the economy will contract 1 percent
this year and won’t emerge from the recession until the second
half of 2013, citing weak domestic demand. The central bank’s
new forecast is five times the 0.2 percent contraction it
estimated in July.
- S&P 500 Bearish Bets at
Two-Year Low: Options. Puts protecting against a 10% decline in the
S&P 500 cost 7.88 points more than calls betting on a 10% gain,
according to three-month options data compiled by Bloomberg. The price
relationship known as skew fell to 7.49 on Feb. 1, the lowest since
November 2010.
- Euro Drops to Three-Week Low as Recession Deepens; Yen Advances. The euro slid to a three-week low
against the dollar after a report showed Europe’s recession
deepened more than forecast last quarter, sapping demand for the
region’s assets and spurring bets on lower interest rates. The 17-nation currency dropped for a third day versus the
yen as separate data showed gross domestic product shrank in
both Germany and France. “The GDP data out of the euro zone was quite poor, putting
the idea of a potential rate cut by the European Central Bank
back on the table,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut,
said in a telephone interview. “The market priced in further
potential for easier monetary policy coming out of the ECB,
which led to a weaker euro.” The euro slumped 0.9 percent to $1.3327 at 11:43 a.m. New
York time and reached $1.3315, the lowest level since Jan. 24.
- Gold Demand Rose 3.8% in Fourth Quarter, Narrowing Annual Drop. Gold
demand rose 3.8 percent in the
fourth quarter as Indian purchases jumped, narrowing the first drop in
annual usage in three years, the World Gold Council said. India remained
last year’s biggest buyer, ahead of China.
- The Real Risk-Takers Are at the Federal Reserve. In a nutshell: The Fed buys risk-free Treasury securities, depressing the yields. The public is goaded into buying riskier
assets, such as stocks and corporate bonds, sending those prices
higher. Businesses financing themselves with equity have more
money to invest. Consumers feel wealthier and spend more. Whenever I hear the bit about risk-taking, I wonder what
the dividing line is between encouraging higher asset prices and
creating froth in asset markets. How does the Fed know when
asset prices have gotten out of whack?
- Chicago Shamed by Murder as Aurora Has Homicide-Free Year. Aurora saw its factories shrivel and its street gangs
thrive until the past five years, when its police methodically
smothered the criminals by partnering with neighborhood groups
as well as state and federal law enforcement. The agencies drew
from the playbook used to get the Chicago crime icon Al Capone -
- attacking the enterprise, not just the violence it spawns. Aurora’s violent-crime rate has plunged, even as the city’s
population soared 38 percent in the last decade to almost
200,000, roughly the size of Salt Lake City. Aurora’s annual
homicide total in the past five years averaged fewer than 3,
down from 26 in 2002, according to police. The last year for
which the city recorded no killings was 1946.
- BlackBerry(BBRY) Co-Founder Balsillie Sells Stake in Company.Jim Balsillie, who served as co-
chief executive officer of Research In Motion Ltd. until January
of last year, has cut his 5.1 percent ownership stake to zero,
raising concern that he has lost confidence in the company.
- Postal Union Millions to Democrats Roils Saturday Cuts.
All but five of Congress’s 255 Democrats and independents received
campaign donations from postal worker union groups in the past six
years, raising the political risk of Postmaster General Patrick
Donahoe’s move to end Saturday mail delivery. Political action
committees for the seven postal unions contributed $9.6 million from
2007 to 2012 to current members of Congress, 91 percent of it to
Democrats and two independents who caucus with them, according to data
compiled by Bloomberg from the Federal Election Commission and the
Center for Responsive Politics, a Washington-based research group.
- Berkshire(BRK/A) Joins 3G Capital to Buy Heinz(HNZ) in $23 Billion Deal. Warren
Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital
agreed to buy HJ Heinz Co. for about $23 billion as the billionaires
increased
their bets on consumer products. The buyers will pay $72.50 a share,
compared with yesterday’s closing
price of $60.48, according to a statement today. Berkshire will spend
about $12 billion to $13 billion on the deal for the maker of condiments
and Ore-Ida potato snacks. The transaction is valued at about $28
billion including the assumption of debt, according to the statement.
- Hong Kong Bourse to Start After-Hours Futures Trading.
Hong Kong Exchanges & Clearing Ltd., the world’s largest
exchange company by market value, said it received regulatory approval
to start after-hours futures trading and will begin the service on April
8. Hang Seng Index and H-shares Index futures will be available for
trading from 5 p.m. to 11 p.m. from the date, in addition to regular
hours, the bourse said in a statement today. Gold futures will also be
considered for inclusion at a later
stage, it said.
Wall Street Journal:
- Boehner: House Won’t Act First to Avoid Sequester. House Speaker John Boehner
(R., Ohio) challenged the
Senate to pass a bill to avoid the across-the-board spending cuts known
as the sequester, saying the House won’t act to do so first. At a
weekly press conference, Mr. Boehner declined to comment on a
Senate Democratic bill that is expected to be unveiled later Thursday
that would partially defer the $85 billion in scheduled spending cuts by
raising revenues through ending some tax deductions. He said that until
the Senate passes such a bill, there was no reason for him to comment
on it. The Republican leader said the House had passed legislation last year
to shift the burden of the cuts away from defense and other key federal
programs. But that bill died at the end of the last Congress, House GOP
leaders don’t plan to reintroduce it this year.
- Hagel Nomination Again in Jeopardy. Chuck Hagel's confirmation as the next secretary of defense was again
in jeopardy Thursday as Republicans declared he wouldn't have the 60
votes necessary for his nomination to proceed. Republican leaders
told Senate Majority Leader Harry Reid (D., Nev.) they were withholding
GOP votes until they received more information, a Democratic leadership
aide said.
MarketWatch:
- Sen. Warren: Too-big-to-fail is too-big-for-trial. Fed’s Tarullo: changes to Volcker rule ahead. In her first hearing as a U.S. senator Thursday, Elizabeth Warren
criticized federal regulators for settling civil cases with Wall Street
banks instead of taking them to trial.
CNBC:
Zero Hedge:
Business Insider:
Forbes:
Reuters:
The Guardian:
Style Underperformer:
Sector Underperformers:
- 1) Telecom -3.03% 2) Airlines -2.35% 3) Education -2.12%
Stocks Falling on Unusual Volume:
- CTL, WIN, TOT, BCS, BBVA, LBTYA, TV, ECA, NFX, UNFI, BPL, EEP, TAP, AFFY, ULTA, WTW, WFM, STMP, FORR, HSP, CTU, GNRC, LCC, ITRI, PRLB, IPI, ALXN, BIN, TNGO, TRIP, MLU, SSS, MDLZ, PNK, NUS, EIX, UPL, NDAQ, UNG, HSC, AFFY, TROX and STRA
Stocks With Unusual Put Option Activity:
- 1) CTL 2) WFM 3) TRIP 4) Z 5) HYG
Stocks With Most Negative News Mentions:
- 1) EXPE 2) ETR 3) CPN 4) CLH 5) NFX
Charts:
