Style Underperformer:
Sector Underperformers:
- 1) Education -1.66% 2) Software -1.43% 3) HMOs -1.11%
Stocks Falling on Unusual Volume:
- SP, ECOL, TITN, EPB, CEQP, FRAN, PFPT, MSFT, BOBE, KR, BIG, EA, CUK, ELGX, QLTY, ADBE, BWP, OMED, PHI, MDP, MBT, SJM, THRX, SFUN and NCR
Stocks With Unusual Put Option Activity:
- 1) IEF 2) FNSR 3) MSFT 4) PAYX 5) PHM
Stocks With Most Negative News Mentions:
- 1) TITN 2) LB 3) KR 4) TD 5) EOG
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +2.02% 2) Gaming +.82% 3) Papers +.53%
Stocks Rising on Unusual Volume:
- PBYI, MEI, CONN, MFRM, GGP, DG, KFY, ARRS, AWAY, MKTG, LNG and SCTY
Stocks With Unusual Call Option Activity:
- 1) CONN 2) DG 3) CNP 4) BRCM 5) T
Stocks With Most Positive News Mentions:
- 1) TWTR 2) OCR 3) LNKD 4) YHOO 5) T
Charts:
Evening Headlines
Bloomberg:
- China Risks Cooler South Korea Ties With Air Defense Zone. China’s overlap of its new air zone with that of South Korea
in the East China Sea has complicated its efforts to forge closer ties
with President Park Geun Hye and gives her an incentive to further
strengthen relations with the U.S. Park will tomorrow meet Vice
President Joseph Biden, who has called on South Korea and Japan to stand
with the U.S. in the face of China’s assertion of its military muscle.
Park and her top defense officials were hosting Chinese state councilor
Yang Jiechi less than three weeks ago as part of her effort to boost
trade and secure China’s help in containing North Korea.
- China Swap Rate Rises for Fifth Day After PBOC Doesn’t Add Funds.
China’s one-year interest rate swaps rose for a fifth day as the
central bank refrained from adding funds to the interbank market. The
People’s Bank of China didn’t inject money by selling 14-day
reverse-repurchase agreements today, according to two traders at primary
dealers required to bid at the auctions. The monetary authority
auctioned the contracts on Nov. 21 and Nov. 28, after a two-week halt. The
PBOC drained a net 47 billion yuan ($7.7 billion) this week, after
injecting 17 billion yuan last week, according to data compiled by
Bloomberg. The cost of interest-rate swaps, the fixed payment needed to
receive the floating seven-day repo rate, rose one basis point, or 0.01
percentage point, to 4.7 percent as of 10:15 a.m. in Shanghai, according
to data compiled by Bloomberg. That matched yesterday’s intra-day peak,
which was the highest level
since June 21.
- Most Asian Stocks Drop After U.S. Data; Aussie Bonds Fall.
Most Asian stocks fell, while
Australian bond yields climbed to a two-year high and gold retreated.
Indian equities rallied with the rupee as votes were counted for state
elections. Almost two shares dropped for each that gained on the MSCI Asia Pacific Index, which was little changed at 1:03 p.m. in Tokyo.
- Copper Falls Amid Speculation Fed May Taper Monetary Stimulus. Copper fell after the biggest daily
gain yesterday in 11 weeks as traders turned their attention to the likelihood of stimulus cuts by the Federal Reserve. Metal for delivery in three months on the London Metal Exchange fell as much as 0.4 percent to $7,065 a metric ton and
traded at $7,066 at 10:49 a.m. in Tokyo.
- Rebar Falls From 7-Week High on Ore Inventory, Freezing Weather.
Steel reinforcement-bar futures in Shanghai fell with iron ore as
inventory of the raw material in China surged and freezing temperatures
slowed construction projects. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, fell as much as 0.3 percent to 3,701
yuan ($608) a metric ton, and traded 3,703 yuan at 10:40 a.m.
local time.
- Currency Volatility Climbs to 8-Week High Before U.S. Data, ECB. “After what has been a relative dearth of U.S. data,
markets have swung back to focusing on the U.S.,” said Callum Henderson, the Singapore-based global head of currency research
at Standard Chartered Plc. “I would think we’re going to see
more choppy price action from now until year end.” JPMorgan’s Global FX Volatility Index was at 8.8 percent,
headed for the highest close since Oct. 9.
- Treasury Yields Climb to 11-Week High as ADP Spurs Jobs Optimism. Treasuries slid, pushing 10-year
yields to the highest level since September, as industry data
showed job growth accelerated more than forecast, adding to bets the Federal Reserve may reduce bond purchases this month. The difference in yields on two- and 10-year notes approached the widest level since July 2011.
- Spain Credit Falls to ’05 Shadow After Price Collapse: Mortgages.
Spanish property broker Donpiso
pledges on its website it can sell homes within 60 days. That’s
possible, said Juan Luis Nolasco, who runs one of the firm’s Madrid
branches, only if owners are realistic about prices and the difficulties
buyers face getting mortgages after six years of falling values. “A
lot of sellers are still living in the land of Peter Pan,” Nolasco said,
referring to the fictional Neverland. “The biggest problem is lack of
access to financing for buyers.” Currently, it can take about six
months to sell a property, he said. Buying a home hasn’t gotten any
easier for Spaniards, even after home prices tumbled as much as 40
percent. Rising borrowing costs, currently more than one-and-a-half
times the cost in Germany, the end of mortgage tax breaks, and shrinking
disposable incomes are making it increasingly difficult for Spanish
families to own their own home. Fewer than 15,000 mortgages were
granted in September compared with about 129,000 at the September 2005
peak, according to the National Statistics
Institute.
- Job Cuts Loom at European Banks as Stagnant Economy Pinches Fees. European banks, which eliminated more
than 140,000 jobs in two years, are poised to keep shrinking. Lenders in the region probably will cut at least 5 percent
of trading and advisory staff next year, according to a survey
of three London-based investment-bank recruiters, and the
reductions could reach 15 percent, two of them said. That would
be twice the 7 percent shrinkage across the industry since 2011.
- RBS and S&P Sued by European CPDO Investors in Class Action. Royal Bank of Scotland Group Plc (RBS) and
Standard & Poor’s were sued in the Netherlands by 16 investors
over a complex derivative product that fell in value by as much
as 90 percent during the financial crisis. The class-action lawsuit relates to so-called constant-proportion debt obligations created by RBS’s ABN Amro unit and
rated AAA by McGraw Hill Financial Inc.’s S&P, according to
Bentham IMF Ltd. (IMF), the company which is funding the case. The
investors are seeking about $250 million.
Wall Street Journal:
- Volcker Rule Won't Allow Banks to Use 'Portfolio Hedging". In
a defeat for Wall Street, the "Volcker rule" won't allow banks to enter
trades designed to protect against losses held in a broad portfolio of
assets, according to people familiar with the rule. The practice,
known as portfolio hedging, has become a focal point of regulators
drafting the rule, a controversial plank of the 2010 Dodd-Frank
financial law that seeks to prevent banks from putting their own capital
at risk in pursuit of trading profits.
- Apple(AAPL), China Mobile Sign Deal to Offer iPhone.
Tie-Up Would Give Apple Access to 700 Million Subscribers. China Mobile
Ltd. has signed a long-awaited deal with Apple Inc. to offer iPhones on
its network, a person familiar with the situation said, an arrangement
that would give the U.S. technology giant a big boost in the world's
largest mobile market. The
rollout of iPhones on the world's largest mobile carrier by users, with
over 700 million subscribers, is expected to start later this month,
around the time of a Dec. 18 China Mobile conference in Guangzhou,
according to two people familiar with the carrier's plans. China Mobile
is one of the world's last major carriers that doesn't offer the iPhone. At
the Dec. 18 event, China Mobile plans to unveil a brand for its
fourth-generation, or 4G, network. China Mobile executives have said
they would only begin to sell the iPhone after introducing 4G services.
China's Ministry of Industry and Information Technology said Wednesday
it gave licenses to China Mobile and its smaller rivals to operate the
higher-speed mobile networks, clearing one of the last hurdles.
- Medicaid Is Latest Health-Site Victim. States
are warning that they may not process Medicaid enrollments from people
who have signed up for the health program through the troubled
HealthCare.gov site, raising the prospect that several hundred thousand
low-income people who thought they had obtained insurance actually may
not have it. The
federal health-insurance site, which serves residents in 36 states, is
designed to sell policies from private insurers. But some people who
apply for coverage through the site discover they are eligible instead
for Medicaid, the joint federal-state health-insurance program for the
poor and disabled.
- Jihadists Returning Home to Europe from Syria Pose New Terror Threat.
Series of Arrests Heighten Fears, Problem Expected to Grow as Conflict
Drags On. Scores of jihadist fighters from Europe who
streamed to Syria to join Islamic extremist rebels have begun returning
home, where some are suspected of plotting terror attacks, according to
U.S. and European intelligence and security officials. Authorities in
the U.K. and France recently made several terror-related arrests of
individuals suspected of links to Syria. "They're
real committed jihadists," a senior U.S. intelligence official said.
"The concern is that we're at the very early stages of this."
- Drug-Cost Surprises Lurk Inside New Health Plans. Americans with chronic illnesses—who are
expected to be among the biggest beneficiaries of the health law—face
widely varying out-of-pocket drug costs that could be obscured on the
new insurance exchanges. Under the law,
patients can't be denied coverage due to existing conditions or charged
higher rates than healthier peers. The law also sets an annual
out-of-pocket maximum of up to $6,350 for individuals and $12,700 for
families, after which insurers pay the full tab.
Barron's:
Fox News:
- Reid exempts some staff from having to buy insurance on ObamaCare exchange. Senate Majority Leader Harry Reid is allowing some staffers to keep
their health insurance instead of making them buy it through an
ObamaCare exchange, although he was one of the strongest Capitol Hill
supporters of the 2010 law. The Nevada Democrat is exercising his discretion under the
president’s signature law to designate which staffers can keep their
federal insurance plan and which must now purchase a policy through the
District of Columbia’s health-care exchange. However, he purportedly is the only top congressional leader to
exercise that option, which resulted in sharp criticism Wednesday from
Texas Republican Sen. Ted Cruz, perhaps the staunchest ObamaCare
opponent on the Hill.
CNBC:
- Christmas taper talk picking up steam. Even with spotty economic data, the unofficial odds are rising that the
Fed will announce plans at its December meeting to taper its bond-buying
program.
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
- U.S. House passes bill to exempt private equity funds from rules. The U.S. House of
Representatives passed a bill on Wednesday that would largely
spare private equity fund advisers from federal regulations
enacted after the 2007-2009 financial crisis.
The bill would exempt many private equity fund advisers from
a provision in the 2010 Dodd-Frank Wall Street Reform law which
required advisers with more than $150 million in assets under
management to register with the U.S. Securities and Exchange
Commission.
- Aeropostale's(ARO) holiday quarter forecast disappoints. Apparel retailer Aeropostale Inc forecast a much bigger-than-expected loss for the holiday shopping
quarter as it struggles to keep up with the tastes of young shoppers,
sending its shares down 4 percent in extended trading.
Aeropostale, under pressure from some investors to sell itself, also reported its fourth straight quarterly loss.
Financial Times:
- Brazil trade growth poor in spite of weak currency.
Brazilian trade has grown much less than expected this year in spite of
a sharp weakening of the local currency against the dollar,
highlighting the country’s declining competitiveness. Brazilian
container traffic is forecast to rise 4 per cent in 2013 compared with
earlier expectations of 6-7 per cent, according to the world’s largest
shipping company by volume, Maersk Line.
- Iran threatens to trigger oil price war. Tension
between Iran and Saudi Arabia over Tehran’s plans to raise oil output
spilled into the open on Wednesday as Opec rolled over its production
target in the belief a wall of supply will fail to materialise next year.
The oil producers’ cartel controls around a third of the global oil
market and, as the only source of spare capacity, exerts a big influence
over prices.
Nikkei:
- Japan May Cut Tax Exemption for Workers on Over 10m Yen. Japan's
govt and ruling coalition are considering reducing income tax exemption
on company workers with annual salary of more than 10m yen. Change may
be included in 2014 tax system plan to be compiled this month. Change
would mean additional 70,000 - 110,000 yen in annual taxes for worker on
15m yen salary.
China Business News:
- Shanghai Warns on Commercial Property Financing Risks.
China Banking Regulatory Commission's Shanghai branch asks banks to pay
"high attention" to risks of financing to the city's commercial real
estate, citing a notice issued by the regulator. The regulator says
Shanghai commercial property prices rose "too fast" and the potential
risks are "way larger" than those in residential property sector,
according to the report. Banks in Shanghai have issued over 70b yuan
outstanding loans to 149 city complexes as of September, 30-40% higher
than the same period last year, the report cites regulator's survey as
saying.
Evening Recommendations
Deutsche Bank:
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 135.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 111.0 +.75 basis point.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 322K versus 316K the prior week.
- Continuing Claims are estimated to rise to 2800K versus 2776K prior.
- 3Q GDP is estimated to rise 3.1% versus a prior estimate of a +2.8% gain.
- 3Q Personal Consumption is estimated to rise +1.5% versus a prior estimate of a +1.5% gain.
- 3Q GDP Price Index is estimated to rise +1.9% versus a prior estimate of a +1.9% gain.
- 3Q Core PCE is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.
10:00 am EST
- Factor Orders for October are estimated to fall -1.0% versus a +1.7% gain in September.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Fisher speaking, Fed's Lockhart speaking, ECB's Draghi speaking,
BoE rate decision, ECB rate decision, Challenger Job Cuts report for
November, RBC Consumer Outlook Index for December, weekly EIA natural
gas inventory report, weekly Bloomberg Consumer Comfort Index and the
(HSP) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity
and industrial shares in the region. I expect US stocks to open
mixed and to weaken into the afternoon, finishing modestly lower. The
Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.58 +.27%
- Euro/Yen Carry Return Index 144.69 -.41%
- Emerging Markets Currency Volatility(VXY) 9.13 +1.0%
- S&P 500 Implied Correlation 54.79 +.16%
- ISE Sentiment Index 117.0 +42.68%
- Total Put/Call .85 -1.16%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.19 +1.23%
- European Financial Sector CDS Index 99.54 +1.10%
- Western Europe Sovereign Debt CDS Index 61.63 +2.73%
- Emerging Market CDS Index 303.82 +.59%
- 2-Year Swap Spread 9.75 unch.
- TED Spread 19.0 -1.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .05% +1 basis point
- Yield Curve 255.0 +5 basis points
- China Import Iron Ore Spot $139.70/Metric Tonne +1.09%
- Citi US Economic Surprise Index 5.30 +.2 point
- Citi Emerging Markets Economic Surprise Index -12.20 -.6 point
- 10-Year TIPS Spread 2.13 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating -85 open in Japan
- DAX Futures: Indicating -17 open in Germany
Portfolio:
- Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- Euro-Area Economic Growth Slows as Exports, Consumption Cool. The
euro area’s nascent recovery from
a record-long recession nearly stalled in the third quarter as
exports and household consumption cooled. Gross domestic product rose
0.1 percent after a 0.3 percent gain in the previous three months, the
European Union’s statistics office in Luxembourg said today. That’s in line with Eurostat’s initial estimate. From a year earlier, the economy contracted 0.4 percent. “There’s no sign in the incoming data that growth is accelerating in the fourth quarter,”
said Elga Bartsch, chief European economist at Morgan Stanley &
Co. in London. “We are concerned Europe will lack an engine of growth;
we are worried about the core -- France, the Netherlands and Germany.”
- European Stocks Decline.
European stocks declined for a fourth day, their longest losing streak
in more than five months, as better-than-expected U.S. jobs data fueled
concern the Federal Reserve will pare stimulus measures sooner than
forecast. Elekta AB dropped 5.4 percent after posting quarterly profit
that missed forecasts. Standard Chartered (STAN) Plc slid 6.5 percent,
leading European banks lower. PSA Peugeot Citroen advanced 5.3 percent
as Goldman Sachs Group Inc. added the
shares to its conviction-buy list.
The Stoxx Europe 600 Index slid 0.6 percent to 317.24 at
the close of trading, after earlier losing as much as 1.1
percent. The benchmark fell 1.5 percent yesterday as investors
weighed valuations before U.S. jobs data this week.
- Treasury Yields Climb to Highest Since September on Job Growth. Treasuries
fell, pushing 10-year yields (USGG10YR) to the highest in more than two
months, as an industry report showed job growth quickened more than
forecast, adding to bets the Federal Reserve may advocate slowing bond
purchases at
this month’s policy meeting.
- Iran Plans to Meet Foreign Oil Companies to Seek Investment. Iran
plans to meet with international
oil companies as soon as March to try to entice investors to its energy
industry once world powers lift sanctions, the Persian Gulf state’s oil
minister said. Iran, once OPEC’s second-largest producer, is talking
with European companies about future projects, Bijan Namdar Zanganeh
told reporters today in Vienna. The minister said he hopes Exxon Mobil
Corp. (XOM), Royal Dutch Shell (RDSA) Plc, BP (BP/) Plc, Eni SpA and
Statoil ASA (STL) will invest in the country. Iranian officials will
meet with international companies in London in March, he said, declining
to identify them.
- Gold Rebounds From Five-Month Low as Commodity Prices Advance. Gold futures for February delivery rose 0.5 percent to
$1,227.10 an ounce at 11:53 a.m. on the Comex in New York.
Prices earlier reached $1,210.80, the lowest since July 5. Gold’s 14-day relative-strength index fell to near 32
today. A reading below 30 signals to some analysts who study
historical patterns that the price may be set to rebound.
- WTI Crude Gains as Supplies Tumble First Time in 11 Weeks.
WTI crude for January delivery increased 82 cents, or 0.9 percent, to
$96.86 a barrel at 11:42 a.m. on the New York Mercantile Exchange. The
contract traded at $96.95 before the release of the report at 10:30 a.m.
in Washington. Futures touched $97.53, the highest level since Oct. 30.
The volume of
all futures traded was 65 percent more than the 100-day average.
- Youth Break With President on Obamacare Support in Poll.
The nation’s youth, a group that twice rallied behind President Barack
Obama at the ballot box, is failing to support his signature domestic
achievement. More than half of those 18 to 29 years old say they
disapprove of Obamacare and expect it will increase their health-care
costs, and 4 in 10 say they anticipate the quality of their coverage
will get worse because of it, a survey by Harvard University’s Institute of Politics shows. In
a finding perhaps more troubling for the White House, almost half in
that age group, the so-called millennials, say they’re unlikely to
enroll in insurance through a government exchange, even if eligible.
That could put at risk the economics of the Patient Protection and
Affordable Care Act, which needs young, healthy people to enroll in
large numbers to offset the costs of caring for older, sicker Americans.
“The reasons for the current lack of support among millennials
for the Affordable Care Act are many,” the survey’s findings said.
Fox News:
- Iran enrichment capacity expanded dramatically on Obama's watch. Before he paused to allow reporters to ask questions about the nuclear
deal with Iran that he had just announced in Geneva, Secretary of State
John Kerry seemed to anticipate one line of criticism about the accord
-- that it effectively cedes to the Islamic regime the right to enrich
uranium, despite half a dozen U.N. Security Council resolutions
declaring the activity illegal. And he moved, preemptively, to address
it.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
CNN:
- Average student loan debt: $29,400. Student
loan debt continues to pile up on America's college graduates, topping
an average $29,000 per student last year. The average debt load for the
class of 2012 was $29,400 -- up more than 10% from the previous year, according to a report released Wednesday by the Institute for College Access & Success' Project on Student Debt.
Chicago Tribune:
Reuters:
- S&P
Sees More Sovereign Downgrades Than Upgrades in '14. Sovereign rating
downgrades may outnumber upgrades in 2014, citing S&P head of
sovereign ratings for EMEA, Moritz Kraemer.
- Libyan assembly votes to follow Islamic law. Libya's national
assembly voted on Wednesday to make sharia, Islamic law, the basis of
all legislation and for state institutions in a decision that may impact
banking, criminal and financial laws.
- Russia faces budget shortfalls, risks erasing oil savings - document. Russia
will face huge fiscal shortfalls in the next two decades unless it cuts
spending, and it could wipe out its oil savings in as little as three
years, according to sources and a strategy document obtained by Reuters. Russia's funding gap could reach $300 billion between
2017-20, the Finance Ministry's budget strategy to 2030 shows.
That is three times the current value of the Reserve Fund, a
rainy-day fund of windfall energy revenues.
- Exclusive: U.S. plans new bank fraud cases in early 2014 - attorney general. The U.S. Justice Department plans to bring civil mortgage fraud cases against
several financial institutions early in 2014, using as a template the case that
ended last month in JPMorgan Chase & Co's (JPM.N) $13 billion settlement, U.S. Attorney General
Eric Holder said on Wednesday. In an interview with Reuters, Holder would not say which companies or how
many could face lawsuits but said the Justice Department was in contact with
them and it was hard to say whether the talks would lead to settlements.
UPI:
- Markit warns France may slide back into recession. France, with Europe's second largest economy, is in danger of sliding
back into recession, Markit Economics chief economist said Wednesday. While
the composite index for businesses in the eurozone showed growth for
the fifth consecutive month in November, the indexes for France and
Italy showed continued contraction, the research firm reported. In
France, the business index came to 48, putting the contraction there at
a faster pace than Italy, where the index that uses 50 as a break-even
point, came in at 48.8 for the month.
Financial Times:
BBC:
Xinhua:
- Xi stresses adherence to Marxist philosophy. General Secretary of the Communist
Party of China (CPC) Central Committee Xi Jinping has urged all Party
members to learn Marxist philosophy to better understand the country's
situation and help push forward all types work. Xi made the remarks
on Tuesday at a group study of the Political
Bureau of the CPC Central Committee, China's top leadership, on the
basic theory and methodology of Karl Marx's historical materialism,
according to a statement released on Wednesday. Historical materialism
is a methodological approach to the study of society, economics and
history. When presiding over the group study, Xi said Marxist philosophy,
which has revealed the general rule of human society development, still
has strong vitality and serves as powerful arms of thought for guiding
communists to make progress.
Style Underperformer:
Sector Underperformers:
- 1) Airlines -1.91% 2) HMOs -1.37% 3) Medical Equipment -1.24%
Stocks Falling on Unusual Volume:
- EXPR, EPB, ACMP, BOBE, ESS, GIB, SHLD, OVTI, CLVS, OAS, BIG, KMI, MEI, AVG, KMR, ECOL, ASPS, SDRL, ORLY, ENSG, LUX, FIVE, KMP, MPC, ACMP, RAX, RTN, HFC and TDC
Stocks With Unusual Put Option Activity:
- 1) ADT 2) AKS 3) IEF 4) KMI 5) TXN
Stocks With Most Negative News Mentions:
- 1) SHLD 2) T 3) C 4) EBAY 5) JPM
Charts:
