Style Outperformer:
Sector Outperformers:
- 1) Coal +4.45% 2) Oil Service +.94% 3) Agriculture +.78%
Stocks Rising on Unusual Volume:
- ZLC, UCTT, SIG, GRMN, ARWR, ACT, CF, NBR, SIX, CBL, CCIH, EBIX, DORM, LAD, LL, AHT, GOGO, FLS, SAVE, BRKR and OMER
Stocks With Unusual Call Option Activity:
- 1) ACAS 2) OAS 3) SGY 4) MYL 5) AUXL
Stocks With Most Positive News Mentions:
- 1) LLY 2) GRMN 3) QCOM 4) DVN 5) LNKD
Charts:
Evening Headlines
Bloomberg:
- Ukraine Fighting Kills at Least 18 as Kiev Barricades Burn. Clashes in Ukraine between police
and anti-government activists killed at least 18 people and left
hundreds injured in the bloodiest episode of the country’s
three-month standoff. Eleven civilians and seven policemen were confirmed dead
during clashes yesterday and through the night as security
forces moved to clear out the main protest camp in Kiev.
Thousands gathered on central Independence Square, with burning
barricades ringing protesters hurling firebombs at officers
backed by water cannons and military vehicles.
- Kuroda Easing Doomed as Yen Seen Missing 120 Level. Strategists’
forecasts signal the Bank of Japan will fail to reach its 2 percent
inflation target as yen declines next year won’t be sufficient. Japan’s
currency will tumble 11 percent to 115 per dollar in 2015, according to a
Bloomberg of analysts, short of the 120 level economists estimate will
be needed for consumer prices to reach the BOJ’s goal. The breakeven
rate, which reflects bond investors’ expectation of future inflation,
signal a 1.16 percent increase in the cost of living in the coming
decade. The figure is 2.16 percent in the U.S. and 1.35 percent in
Germany.
- China Cuts Treasury Holdings Most Since 2011 Amid Taper. China, the largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases. The Communist nation reduced its position in U.S. government bonds by $47.8 billion, or 3.6 percent, to $1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data released yesterday. At the same time, international investors increased holdings by 1.4 percent, or by $78 billion, in December, pushing foreign holdings to a record $5.79 trillion.
- Lew Tells G-20 Risks Linger as Emerging Markets Cloud Outlook.
U.S. Treasury Secretary Jacob J. Lew said risks including volatility in
emerging markets and China’s economic agenda are clouding the global
outlook, requiring nations to focus on boosting growth and job creation.
“There
has been considerable volatility in global markets, especially in
several emerging markets,” Lew said in a letter yesterday to his Group
of 20 colleagues. “We are monitoring these developments closely.”
- Most Asian Stocks Fall as Baht Weakens; Oil Extends Climb.
Most Asian stocks fell, snapping a three-day advance in the regional
index, while Thailand’s baht led declines in higher-yielding currencies.
Oil gained before stockpiles data and silver slipped. The MSCI Asia
Pacific Index lost 0.1 percent by 10:54 a.m. in Tokyo and Standard &
Poor’s 500 Index (SPX) futures were down 0.1
percent.
Wall Street Journal:
- Brazil Stocks Close Lower, Pulled Down by Stop-Loss Orders. Brazilian shares closed lower Tuesday, with some stocks plummeting as
stop-loss orders kicked in after the benchmark index dropped below
important levels. The Ibovespa index declined 2.1% to 46599, with shares including PDG
Realty, Anhanguera Educacional Participacoes and Marfrig dropping more
than 8%.
Fox News:
CNBC:
- The China risk you may have forgotten about. China's shadow-banking problems may have grabbed headlines, but its
long-bubbling property sector continues to pose risks to the economy,
analysts said. The property market is the biggest concern
about China right now, Adrian Mowat, chief Asian and emerging market
equity strategist at JPMorgan, told CNBC.
Zero Hedge:
Business Insider:
Reuters:
- U.S. concerned about Japan domestic demand outlook. The United States expressed
concern on Tuesday about whether domestic demand will remain a principal driver of Japan's economy. "Japan's economy has been largely driven by domestic demand over the last two years, but the outlook for domestic demand has
clouded," U.S. Treasury Secretary Jack Lew said in a letter to
members of the Group of 20, which includes many of the world's
largest economies.
South China Morning Post:
- China Said to Push Media to Avoid Foreign-Bank Researchers. Central govt's propaganda debt instructs sr editors to be "cautious" about who they invite to talk about the nation's economy, citing economic researchers working for state-owned media. Govt concerned about what's said about problems, challenges. While there's no "black list or white list," media clearly encouraged to invite economists, analysts from domestic banks, brokerages to speak, esp. on live broadcasts. CBRC reduces meetings with economists from foreign banks; only "small number" of trusted people invited.
People's Daily:
- China Should Boost Risk Control on LGFV Credit, CBRC Head Writes.
China should strengthen risk controls on credit to local government
financing vehicles, property market and industries with overcapacity, China Bnaking Regulatory Commission Chairman Shang Fulin writes in an article. The overall risk to the banking system is controllable, while regional risk are increasing, Shang wrote.
Evening Recommendations
Stifel:
- Rated (URI) Buy, target $99.
- Rated (OSK) Buy, target $66.
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.0 unch.
- Asia Pacific Sovereign CDS Index 101.75 unch.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- PPI Final Demand for January is estimated to rise +.1% versus a +.1% gain in Deember.
- The PPI Ex Food and Energy for January is estimated to rise +.1% versus unch. in December.
- Housing Starts for January are estimated to fall to 950K versus 999K in December.
- Building Permits for January are estimated to fall to 975K versus 986K in December.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lockhart speaking, Fed's Bullard speaking, Fed's Williams
speaking, China HSBC Manufacturing PMI, Japan Trade Balance, weekly
retail sales reports, weekly MBA mortgage applications report and the
Barclays Industrial Select Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted 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
50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.87 +2.21%
- Euro/Yen Carry Return Index 146.85 +.77%
- Emerging Markets Currency Volatility(VXY) 8.63 -.46%
- S&P 500 Implied Correlation 51.58 +1.54%
- ISE Sentiment Index 100.0 +4.17%
- Total Put/Call .75 -8.54%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.91 +.17%
- European Financial Sector CDS Index 88.20 +.40%
- Western Europe Sovereign Debt CDS Index 52.0 -1.89%
- Asia Pacific Sovereign Debt CDS Index 101.83 +.10%
- Emerging Market CDS Index 332.99 +1.10%
- China Blended Corporate Spread Index 355.37 +.26%
- 2-Year Swap Spread 13.25 unch.
- TED Spread 22.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.75 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- Yield Curve 241.0 -2.0 basis points
- China Import Iron Ore Spot $124.40/Metric Tonne unch.
- Citi US Economic Surprise Index 0.0 -17.6 points
- Citi Emerging Markets Economic Surprise Index 20.20 +.1 point
- 10-Year TIPS Spread 2.16 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -18 open in Japan
- DAX Futures: Indicating -4 open in Germany
Portfolio:
- Higher: On gains in my biotech/medical/tech sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- Emerging Markets at Risk From Carry Trade Unwinding, BofA Says. Emerging-market assets are at risk
as the tapering of the Federal Reserve’s stimulus program will
probably trigger a reversal of $2 trillion in carry trades,
according to strategists at Bank of America Merrill Lynch. Carry trades, where investors borrow in a country with low
interest rates to fund purchases of higher-yielding assets
elsewhere, helped developing nations raise foreign-exchange
reserves by $2.7 trillion since the end of the third quarter of
2008, Hong Kong-based Ajay Singh Kapur and Ritesh Samadhiya at
BofA wrote in a research report today. The capital inflows
spurred economic growth and inflated prices, particularly those
of bonds and property, they said.
- PBOC Drains Funds Using Repos for First Time in 8 Months. China’s
central bank sold repurchase contracts for the first time since June,
draining funds from the banking system as money-market rates sink to the
lowest levels in at least three months. The People’s Bank of China
conducted 48 billion yuan ($7.9 billion) of 14-day repurchase contracts
at 3.8 percent today, according to a statement posted on its website.
The monetary authority last issued such contracts on June 6, when it
sold 10 billion yuan of 28-day repos. Today’s rate is higher than both
the 2.75 percent in the June auction and the 2.05 percent when the PBOC
last issued 14-day repos in January 2011.
- European Stocks Are Little Changed as ZEW Index Weakens.
European stocks were little changed, after two days of gains, as a
measure of German investor confidence fell more than forecast and the
Federal Reserve Bank of New York’s general economic index missed
estimates. Inditex SA lost 4 percent as Citigroup Inc. lowered its
rating on the retailer. Centrica (CNA) Plc slid 1.3 percent after UBS AG
recommended selling shares in the largest energy supplier to U.K.
households. Casino (CO) Guichard-Perrachon SA rallied 3.2 percent after
posting an 18 percent jump in 2013 earnings.
The Stoxx Europe 600 Index added less than 0.1 percent to
334.6 at the close of trading.
- Natural Gas Jumps to 2-Week High as Winter Storm Hits.
Natural gas futures jumped to a two-week high in New York as storms and
cold weather boosted heating demand, cutting stockpiles to the lowest
in 10 years.
Gas climbed as much as 6.6 percent as the second storm in
three days brought snow to the Northeast.
Wall Street Journal:
- Deadly Clashes Flare Anew in Ukraine. Government Says It May Take 'Tough Action' If Disorder Continues in Kiev. Three weeks of uneasy truce between the
Ukrainian government and Western-oriented protesters ended Tuesday with
an outburst of violence in which at least three people were killed,
prompting a warning from authorities of a crackdown to restore order. Protesters
outside the Ukrainian parliament hurled broken bricks and Molotov
cocktails at police, who responded with stun grenades and rubber
bullets. There were unconfirmed reports of shootings, and small arms
were visible among some protesters.
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
NY Times:
Reuters:
Style Underperformer:
Sector Underperformers:
- 1) Road & Rail -1.72% 2) Homebuilding -1.60% 3) Compute Hardware-.1.23%
Stocks Falling on Unusual Volume:
- BCOR, DRC, AMWD, KSU, APL, CRAY, WTW, ACO, FDP, NCLH, ATLS, GNC, KO,
WM, CPLA, GEL, RYAAY, ASPS, CHH, GIL, AN, VZ, JOSB, H, CLD, CF, NR, WWW
and CRAY
Stocks With Unusual Put Option Activity:
- 1) ADBE 2) KSU 3) VMW 4) KO 5) CRM
Stocks With Most Negative News Mentions:
- 1) KSU 2) BAC 3) GEL 4) WTW 5) MTZ
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +2.27% 2) Networking +1.06% 3) Drugs +.89%
Stocks Rising on Unusual Volume:
- FRX, ACT, HOLI, GHL, EPL, MNK, INSM, ENT, CCIH, MYGN, GTAT, TASR, JAZZ, SCTY, MYL, CAMP, AUXL, UBNT, CGNX, SLXP, CDE, SJM, GPC and SUNE
Stocks With Unusual Call Option Activity:
- 1) GGP 2) ACT 3) WM 4) AUXL 5) NS
Stocks With Most Positive News Mentions:
- 1) MDT 2) ITW 3) AAPL 4) FRX 5) ZNGA
Charts:
