Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -3.40% 2) REITs -3.01% 3) Steel -2.41%
Stocks Falling on Unusual Volume:
- SKM, ERF, CLMT, TAYC, IBN, KO, LGCY, GWR, TRN, ASCA, AEC, IRC, PCN, PTY, PHK, JMI, PHT, MRC, LPLA, UTG, MITT, PDT, GOF, CHS, KMM, TSLA, CYBX, ACWX, EQM, EFC, RNP, RQI, WPC, PCI, CLNY, O, CCI, AOL, NNN, HAS, CNQR, DOLE, PCL, ENOC, EPR, N, PHK, WPC, SNH, FAF, MPW and SBRA
Stocks With Unusual Put Option Activity:
- 1) HL 2) HYG 3) DVY 4) OIH 5) IYR
Stocks With Most Negative News Mentions:
- 1) MXIM 2) CMA 3) CQP 4) NSC 5) X
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.29% 2) Networking +.39% 3) Oil Tankers +.09%
Stocks Rising on Unusual Volume:
- STEI, SCI, SFD, TFM, PWRD, SLM, AEGR, TTM, INFI, BWS and SLM
Stocks With Unusual Call Option Activity:
- 1) ADI 2) ATHN 3) MCHP 4) EMN 5) MON
Stocks With Most Positive News Mentions:
- 1) BK 2) TXN 3) LLY 4) MAKO 5) LMT
Charts:
Evening Headlines
Bloomberg:
- BOJ Seen Failing to Tame Volatility as Sale Slumps.
Expectations for the widest bond
price swings in more than four years and the weakest demand at an
auction in nine months added to signs of waning debt market confidence
in Bank of Japan Governor Haruhiko Kuroda. Implied volatility of Japan’s
10-year note futures, a measure of expected moves used to price
options, climbed to 7.23 percent yesterday, the highest since November
2008, according to
data compiled by Bloomberg. A sale of 20-year debt yesterday
drew the lowest demand since August 2012. Expected price
fluctuations for U.S. Treasury futures rose to 5.06 percent from
3.61 percent on April 30.
- Shadow Bank Crackdown
Halts Record Junk Narrowing: China Credit. The yield premium investors
demand to buy China's riskiest bonds is widening, ending a record
five-quarter run of declines, after a crackdown on shadow banking
strained corporate finances. The yield gap on three-year AA- notes over
AAA debt jumped 15 basis points to 137 since March 31, after narrowing
147basis points from the end of 2011, Chinabond indexes show. Chinese
regulators are forcing trust funds and wealth management plans to shift
assets into publicly traded securities, robbing property developers and
local-government finance vehicles of so-called shadow banking funds.
- China Credit-Bubble Call Pits Fitch Against S&P. Chinese banks are adding assets at the rate of an entire
U.S. banking system in five years. To Charlene Chu of Fitch Ratings,
that signals a crisis is brewing. Total lending from banks and
other financial institutions in China was 198 percent of gross domestic
product last year, compared with 125 percent four years earlier,
according to calculations by Chu, the company’s Beijing-based head of
China financial institutions. Fitch cut the nation’s long-term
local-currency debt rating last month, in the first downgrade by one of
the top three rating companies in 14 years. “There is just no way
to grow out of a debt problem when credit is already twice as large as
GDP and growing nearly twice as fast,” Chu, 41, said in an interview. Her views have struck a nerve. “Everyone is talking about credit --
about the credit cycle, leverage and credit-quality problems,” said
Stephen Green, head of Greater China research at Standard Chartered Plc
in Hong Kong, adding that there’s not enough good data available. “It’s a
big black box, and it’s quite scary.”
- Asian Stocks Advance for Second Day on U.S. Data.
Asian stocks rose for a second day after improving U.S. consumer
confidence and home-price data bolstered optimism in the world’s largest
economy. The Australian dollar weakened and the yen strengthened. The MSCI Asia Pacific Index added 0.2 percent by 11:33 a.m. in Tokyo. Japan’s Topix Index advanced 1 percent.
- Rebar Trades Near Lowest in 6 Months on Weak Iron Ore Prices.
Steel reinforcement-bar futures were little changed near the lowest
level in six months after iron ore prices fell and Chinese Premier Li
Keqiang indicated a shift from rapid expansion to stable growth. Rebar
for delivery in October on the Shanghai Futures Exchange fell as much
as 0.7 percent to 3,465 yuan a ($565) a ton, the lowest level for a
most-active contract since Nov. 30,
and was at 3,489 yuan at 10:15 a.m. local time. Futures are set
for a fourth monthly decline.
- Russia’s Syria Missile Sale Signals Protracted Conflict. Russia’s
decision to sell advanced
anti-aircraft missiles to Syria complicates efforts to find a swift
diplomatic resolution to that country’s civil war and underscores the
persistent strains in U.S.-Russian relations. Moscow’s announcement
yesterday came less than 24 hours after U.S. Secretary of State John
Kerry met Russian Foreign Minister Sergei Lavrov to discuss plans for
peace talks on Syria
and a day after the European Union lifted its arms embargo on
Syrian rebel groups.
Wall Street Journal:
Fox News:
- California Dems push anti-fracking bills, aim to curb potential oil bonanza. California
is on the verge of a new gold rush. Expanded hydraulic
fracturing -- or "fracking" -- at the Monterey Shale formation is
sparking estimates that 15 billion barrels of oil could be accessed,
along with millions of jobs and huge contributions to the domestic
energy supply. Even the state's green-friendly Democratic governor,
Jerry Brown, says "the potential is extraordinary." But standing in the
way is a flurry of anti-fracking bills. At last
count, 10 were on the table, all introduced by Democrats seeking tighter
controls over the controversial technology.
- Issa subpoenas State Department for Benghazi documents. Republican Rep. Darrell Issa issued subpoenas Tuesday for a host of
State Department emails and other communications on the Benghazi terror
attack, signaling that the Obama administration's recent document dump
would not satisfy congressional investigators. Issa, chairman of the House Oversight and Government Reform
Committee, claimed in a letter to Secretary of State John Kerry that the
department is still "withholding documents."
CNBC:
- The Fed vs. Congress: Who Is Enabling Whom? The dominant narrative about economic policy has it that the Federal
Reserve's easy money policies are enabling congressional intransigence
and partisanship. But this might be exactly backward.
- Australia's Dollar Slides to 19-Month Low. The Australian dollar tumbled to its lowest level since October 2011
in early Asia trade on Wednesday, extending this month's sharp slide
against a broadly-stronger U.S. currency. The latest
catalyst for move in the Aussie dollar was stronger U.S. economic data
overnight that pushed the greenback higher against all major currencies.
Data published on Tuesday showed consumer confidence rose in May to its
highest level in more than five years.
Zero Hedge:
Business Insider:
Reuters:
- Money from China? Then "Made in China", shipowners told. Chinese
banks have sharply increased loans to global shipowners as European
lenders retreat from the market but some are driving a hard bargain: the
finance often comes with the condition that vessels be built in China.
Financial Times:
- US housing lift could crimp Fed buying. The largest rise in house prices for seven years and a surge in consumer confidence have added to a fast-improving US
economic outlook, increasing the chances the Federal Reserve will slow
its $85bn-a-month in asset purchases.
China Securities Journal:
- China May Expand Property Tax Trial by Large Scope. China's
property tax trials may be expanded by a "relatively large scope"
targeting newly purchased homes, citing a person familiar with the
matter. The effects of a property tax in Shanghai and Chongqing isn't
clear after two years of trials, the person said.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 90.75 -3.0 basis points.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The
Fed's Rosengren speaking, 5Y T-Note auction, Bank of Canada rate
decision, Germany Unemployment/CPI data, weekly MBA mortgage
applications report, weekly retail sales reports, Sanford C. Bernstein
Strategic Decisions Conference, Cowen & Company Tech/Media/Telecom
Conference, KeyBanc Industrial/Auto/Transports Conference and the Citi Consumer Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 72.0 +2.86%
- Total Put/Call 1.02 -19.69%
Credit Investor Angst:
- North American Investment Grade CDS Index 75.25 -.73%
- European Financial Sector CDS Index 136.82 -4.11%
- Western Europe Sovereign Debt CDS Index 81.08 -1.12%
- Emerging Market CDS Index 263.66 +1.42%
- 2-Year Swap Spread 17.50 +1.5 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- Yield Curve 186.0 +10 bps
- China Import Iron Ore Spot $117.80/Metric Tonne -2.56%
- Citi US Economic Surprise Index -14.30 +1.0 point
- 10-Year TIPS Spread 2.27 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +139 open in Japan
- DAX Futures: Indicating -13 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/tech/biotech sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Rajoy Sees Reprieve as Spanish Recession Evidence Mounts. Spain
will probably secure two more years to tame the largest budget deficit
in the European Union (EUBDEURO) as first-quarter data show the effects
of the toughest austerity measures in its democratic history. The
European Commission will decide tomorrow whether to grant Spain until
2016 to bring its deficit back within the EU limit of 3 percent of gross
domestic product. Its verdict is due as a series of releases this week
including mortgage lending, gross domestic product and inflation may
underline that the construction slump that triggered the nation’s
economic crisis in 2008 is far from over.
- Europe Banks Sell Once-Toxic Debt for Subprime Return: Mortgages. The U.S. mortgage bonds that were exported around the globe and
triggered the worst financial crisis since the Great Depression are now
helping Europe’s banks and governments repair balance sheets after
jumping in value. While European banks and governments need to sell assets to raise
capital or repay taxpayer-funded rescues, investors are seeking riskier,
potentially higher-paying securities as central banks globally push
down yields on safer debt. With U.S. home prices rising at the fastest
pace in seven years, that has turbocharged demand for non-agency bonds,
with subprime-backed debt returning 12.7 percent this year after
rallying more than 41 percent in 2012, according to Barclays Plc data.
- European Stocks Rise Most in a Month as AstraZeneca Gains. European stocks advanced, with the Stoxx Europe 600 Index climbing the most in more than a month, as U.S. and U.K. markets reopened following a public holiday. The Stoxx 600 increased 1.3 percent to 308.23 at the close
of trading, extending its rally this month to 3.9 percent.
- RBC's Yen Bull Battles Hedge Funds on Bearish Bets: Currencies.
Royal Bank of Canada's Adam Cole has a message for hedge funds that have
built bets against the yen to the highest since 2007 on speculation the
currency's 24% slide since September will continue. "Currency moves
that are driven by nothing but layer upon layer of leverage are, in the
long run, unsustainable," Cole said in an interview.
- Zoomlion Says It’s Checking Data After Report on Sales. Zoomlion
Heavy Industry Science & Technology Co. (1157), China’s
second-largest maker of construction equipment, denied that it falsified
sales as alleged in a news report published May 27. That article saying sales were improperly accounted for was “distorted” and “misleading,” Zoomlion said in a Shenzhen
stock exchange filing yesterday. KPMG and one other auditor
signed off on the company’s 2012 financial report, the Changsha,
China-based company said in the statement.
- Home Prices in U.S. Rise by Most Since 2006 in March. The
S&P/Case-Shiller index of property values increased 10.9 percent
from March 2012, the biggest 12-month gain since April 2006, after
advancing 9.4 percent in February,
a report showed today in New York. The median projection of 30
economists surveyed by Bloomberg called for a 10.2 percent advance.
- Global Tablet Shipments to Outpace PCs by 2015, IDC Says.
Global tablet shipments will outpace
the entire personal-computer market by 2015, fueled by rising demand for
lower-priced and smaller alternatives to Apple Inc. (AAPL)’s iPad,
market researcher IDC said. Tablet shipments are expected to surge 59
percent to 229.3 million units this year, from 144.5 million in 2012,
Framingham, Massachusetts-based IDC said in a statement today. PC sales
will decline 7.8 percent this year, IDC said in a separate statement,
worse than its prior projection for a 1.3 percent decrease.
Wall Street Journal:
- U.S. Alleges $6 Billion Money-Laundering Operation.
Federal prosecutors have filed criminal charges against seven men who
allegedly set up an Internet-based currency and used it to launder $6
billion in criminal proceeds, a sign of growing concern among law
enforcement about digital cash.
- Bad Debts Rise at Portugal's Bank.
Portuguese banks have strengthened their liquidity and capital levels
since the country requested a bailout in 2011, but bad debts continue
to rise amid a deep recession, the Bank of Portugal said in a report
Tuesday. Portugal's main banks have been reporting an increase in bad debts
since the government started implementing austerity under a €78 billion
($100 billion) bailout requested in early 2011. In exchange for the loan
from European Union peers and the International Monetary Fund, the
country has increased taxes, cut public-sector wages and reduced
spending on infrastructure, health and education.
Fox News:
MarketWatch:
CNBC:
- Hard to See Smooth QE Exit in US, Japan: Dallara. It is difficult to see a smooth exit out of quantitative easing in the
world's largest economy, the U.S. or Japan, said Charles Dallara, former
managing director of Washington-based bank lobby group, the Institute
of International Finance.
Zero Hedge:
Business Insider:
Sober Look:
Market News International:
- Moody's May Downgrade China Rating If GDP Growth Below 6%.
Moody's may downgrade China's sovereign rating if the country's annual
GDP growth falls below 6%, citing Tom Byrne, senior vice president of
Moody's sovereign risk group.
Reuters:
- Drug resistance in new China bird flu raises concern. The
new bird flu strain that has killed 36 people in China has proved
resistant to Tamiflu for the first time, a development scientists said
was "concerning". The H7N9 virus was found to be resistant to Roche's widely used flu drug in three out of 14 patients
who were studied in detail by doctors from Shanghai and Hong Kong. Tamiflu,
which is given as a pill, belongs to a group of medicines known as
neuraminidase inhibitors that currently offer the only known treatment
option for bird flu.
- EU trade chief tells China he won't yield on solar panels. The European Union's trade
chief bluntly told China on Tuesday it was wasting its time
trying to put pressure on him to drop plans to impose punitive
import duties on Chinese solar panels. The European Commission, the EU's executive, accuses China
of flooding Europe with cheap solar panels sold at below the
cost of production, and intends to impose duties.
Financial Times:
- Germany’s top banks €14bn short of Basel III capital, says BaFin. Germany’s
largest banks were €14bn short of the capital needed to meet incoming
Basel III banking rules at the end of last year, according to new
estimates by BaFin, the country’s financial regulator. The banks,
which include the two largest by assets – Deutsche Bank and Commerzbank –
managed to cut their collective capital shortfall from €32bn in the
second half of 2012, as lenders responded to pressure from investors to
improve their balance sheets ahead of the introduction of the Basel III
rule book by 2019.
Telegraph:
Securities Daily:
- China
to Collect 20% Tax on Luxury Vehicles. China plans to begin collecting a
20% luxury tax on vehicles that cost more than 1.7m yuan, citing Luo
Lei, deputy secretary general of the China Association of Automobile
Manufacturers.
Style Underperformer:
Sector Underperformers:
- 1) Utilities -1.31% 2) Education -1.29% 3) REITs -.23%
Stocks Falling on Unusual Volume:
- IOC, CTCM, BPFH, BHP, DCM, CLMT, UBS, ENOC, PHK, BXMT, PDI, PTY, FE, BAH, CCU, NDRO, AGNC, TE, SHLD, MTGE, NRG, VIPS, EXC, PPL, JMI, DOLE, AEP, DUK, CPA, ACT, STRA, FDX, PTY and DOLE
Stocks With Unusual Put Option Activity:
- 1) EXC 2) CHS 3) BK 4) BID 5) TIF
Stocks With Most Negative News Mentions:
- 1) BRCM 2) STJ 3) VRX 4) BA 5) CMCSA
Charts:
