Friday Watch

Evening Headlines 
Bloomberg:

• Hagel Says U.S. Mulls Adding Brigade to Counter Russia. Defense Secretary Chuck Hagel said permanently stationing an additional U.S. Army brigade in Europe is among options to beef up security as Russian troops remain massed along Ukraine’s eastern border. The North Atlantic Treaty Organization has asked its top military commander, U.S. Air Force General Philip Breedlove, to study “a number of new possibilities, new measures, new options that we and NATO should consider,” Hagel said in an interview today in Honolulu with Bloomberg News and Bloomberg Television. Asked if those included permanently stationing a third brigade of 5,000 troops in Europe, Hagel said, “That’s all part of the measures that could be considered.”  

• Tencent Sinks on Valuation Amid Biggest Stock Swings Since 2011. Tencent Holdings Ltd. (700) fell to a two-month low while volatility in the shares rose to the highest level since December 2011 amid growing concern that Internet companies are overvalued.

• Asian Stocks Decline Before U.S Employment Report. Asian stocks fell, with the regional equities benchmark index on course to snap its longest winning streak this year, as investors awaited data on U.S. jobs growth. The MSCI Asia Pacific Index slid 0.2 percent to 138.81 as of 9:01 a.m. in Tokyo, before markets opened in China and Hong Kong.

Wall Street Journal:

• China Cash Shortage Brings IOUs to Fore. Use of Acceptance Drafts Grows as Economy Slows, Banks Hesitate to Lend. 

• Noonan: A Catastrophe Like No Other. The president tries to put a good face on ObamaCare.

• Heading for Asia, U.S. Defense Secretary Sends a Message to China. Chuck Hagel Says Washington Is 'Increasingly Concerned' About Disputes in the South China Sea.

Fox News:

• Ex-CIA boss Morell challenged for omitting key facts on Benghazi. In his opening statement during highly anticipated testimony Wednesday on Benghazi, former CIA deputy director Michael Morell claimed to be an intelligence professional who was willing to lay out the facts -- no matter how damaging.

• Fort Hood gunman may have had angry words with fellow soldiers before rampage, Army says. Fort Hood gunman Ivan Lopez may have had angry words with fellow soldiers before opening fire on the military base and killing three, wounding 16 and then turning the gun on himself, an Army official said Thursday.

MarketWatch.com:

• China central bank: Economy in 'reasonable range'. China's central bank said current domestic economic conditions remain within a "reasonable range," though the economy still faces complicated situations. Domestic price levels are basically steady, but growth continues to slow for some other emerging economies, the People's Bank of China said in a brief statement released Thursday following its quarterly policy meeting.

CNBC:

• Watch Art Cashin: Traders see 'no-lose situation'. (video) Art Cashin said he's hearing that a lot of traders see Friday's March employment report as a "no-lose situation."

Zero Hedge:

• China General Says "War With Japan Increasingly Likely" As Russia Conducts New Army Drill Near Latvia, Estonia.

• White House Petition Launched To Ban HFT Market Abuse.

• The Economic Catastrophe That Is Abenomics Sends Japanese Gas Prices To Five Year Highs. (graph)

• What Happened The Last Time Japan Raised Its Consumption Tax? (graph)

• BATS Admits CEO Lied About HFT On CNBC.

• "Bazooka Theory" And Why The Authorities Won't Pull The Trigger.

Reuters:

• Emerging markets output growth falls 4th straight month-survey. Business activity across emerging markets fell for the fourth straight month in March, with output contracting in three of the four biggest economies, a survey showed on Friday. HSBC's composite emerging markets index of manufacturing and services purchasing managers' surveys slipped to 50.3 from 51.1 in February, teetering on the 50 threshold that marks the difference between expansion and contraction.

Securities Times:

• China's Changsha Denies Report on Home Buying Curbs. Changsha Municipal Commission of Housing and Urban-Rural Development denied that the city is discussing possibility of easing property purchase curbs.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 124.50 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 89.5 +2.0 basis points.

• FTSE-100 futures +.35%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures  +.18%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AZZ)/.42

• (KMX)/.53

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for March is estimated at 200K versus 175K in February.

• The Unemployment Rate for March is estimated to fall to 6.6% versus 6.7% in February.

• Average Hourly Earnings for March are estimated to rise +.2% versus a +.4% gain in February.

Upcoming Splits

• (DEG) 4-for-1

• (SFUN) 5-for-1

• (NJ) 2-for-1

Other Potential Market Movers

• The German Factory Orders report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial 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 50% net long heading into the day.

Stocks Reversing Lower into Final Hour on Global Growth Fears, Russia/Ukraine Tensions, Technical Selling, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.68 +4.51%

• Euro/Yen Carry Return Index 148.61 -.39%

• Emerging Markets Currency Volatility(VXY) 8.46 +1.08%

• S&P 500 Implied Correlation 53.36 +.57%

• ISE Sentiment Index 99.0 -10.81%

• Total Put/Call .86 +32.31% 

• NYSE Arms 1.06 +72.40% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.87 -.64%

• European Financial Sector CDS Index 88.49 -3.11%

• Western Europe Sovereign Debt CDS Index 43.86 -1.86%

• Asia Pacific Sovereign Debt CDS Index 89.89 +2.77%

• Emerging Market CDS Index 288.95 +.13%

• China Blended Corporate Spread Index 350.68 -.91%

• 2-Year Swap Spread 12.25 +1.0 basis point

• TED Spread 21.50 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -1.25 +2.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 234.0 -1.0 basis point

• China Import Iron Ore Spot $115.50/Metric Tonne +.17%

• Citi US Economic Surprise Index -41.80 -9.0 points

• Citi Emerging Markets Economic Surprise Index -6.70 +1.5 point

• 10-Year TIPS Spread 2.15 unch.

Overseas Futures:

• Nikkei Futures: Indicating +13 open in Japan

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical sector longs, index hedges and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• Draghi Says Officials Debate QE to Fight Deflation Risk. Mario Draghi said the European Central Bank is ready to move deeper into uncharted territory in the fight against deflation, with policy makers debating what form of quantitative easing they might need to use. “There was a discussion about QE, it wasn’t neglected,” the ECB president said at a press conference in Frankfurt today after keeping the benchmark interest rate unchanged at a record-low 0.25 percent. “There are obviously different preferences about which QE would be more effective. We will continue working on that in the coming weeks.”

• Draghi Quips IMF Should Extend Its ‘Generous’ Advice to Fed. European Central Bank President Mario Draghi mused today that the International Monetary Fund offers public opinions on how he should conduct monetary policy in a way that it doesn’t with the Federal Reserve. Asked about comments yesterday by IMF Managing Director Christine Lagarde, he told reporters in Frankfurt that the fund has been “extremely generous in its suggestions on what we should do or not do.” Draghi said that “frankly, I would like the IMF to be as generous as they’ve been towards us with also other monetary policy jurisdictions, like for instance issuing statements just a day before an FOMC meeting would take place.” 

• NATO Condemns Russia’s ‘Propaganda’ as Lavrov Cries Foul. NATO accused Russia of spreading “propaganda” after Foreign Minister Sergei Lavrov said the U.S.-led alliance broke a commitment to limit its forces in eastern European countries. Russia, not NATO, is trampling on pledges made in the 1990s by wresting control of Crimea and massing troops near Ukraine’s borders, North Atlantic Treaty Organization Secretary General Anders Fogh Rasmussen told reporters today in Brussels. “This is just another piece of Russian propaganda and disinformation,” Rasmussen said. “Russia is violating every principle and international commitment it has made, first and foremost the commitment not to invade other countries.”  

• As Russia Stumbles, Gazprom Comes Up $910 Billion Short. Back in April 2007, in the midst of the greatest commodities rally on record, OAO Gazprom’s (OGZD) deputy chief executive officer, Alexander Medvedev, was talking big. Russia’s natural-gas export monopoly aspired to be the world’s largest company, he said while offering up a prediction: its market value would quadruple to $1 trillion in as little as seven years. 

• Emerging-Market Stocks Halt Nine-Day Advance on Warning. Emerging-market stocks fell, snapping a nine-day advance, amid concern that the crisis in Ukraine will escalate after NATO leaders warned Russia has troops on a high state of readiness on its neighbor’s border. The MSCI Emerging Markets Index dropped 0.5 percent to 999.65 at 1:12 p.m. New York.

• Europe Stocks Little Changed as Draghi Reiterates Pledge. Stocks in Europe were little changed, after climbing for seven days, as European Central Bank President Mario Draghi said policy makers are prepared to add further measures to support the euro-area economy if necessary. BTG Plc added 1 percent after saying annual sales will be near the top of its forecast range. A gauge of European banks climbed to its highest level since January. Nokian Renkaat Oyj slipped 2.7 percent after cutting its 2014 profit and sales estimates because of weaker Russian demand. Pernod Ricard SA fell 1.2 percent as Credit Suisse Group AG recommended selling the stock. The Stoxx Europe 600 Index advanced 0.1 percent to 337.25 at the close of trading.

• Brent Crude Rises From Five-Month Low on Libya. WTI for May delivery climbed 41 cents, or 0.4 percent, to $100.03 a barrel on the New York Mercantile Exchange. Prices touched $99.07 in intraday trading before rebounding. The volume of all futures traded was 15 percent below the 100-day average.

• ABS: Yield Hunt Boosts Subprime Auto Bonds, Room to Run, DB Says. Subprime auto ABS continues to benefit from the hunt for yield, Deutsche Bank analysts Elen Callahan and Kayvan Darouian write. Many deals oversubscribed, often upsized. Investors comfortable with asset's recent performance are moving down to first-loss piece for yield.

• U.S. Government Said Unaware of GM Faulty Switches in Bailout. The task force President Barack Obama set up to manage General Motors Co. (GM)’s bailout and bankruptcy in 2009 wasn’t aware of the faulty ignition switches linked to 13 deaths in small cars, said people familiar with the matter.

Fox News:

• Mayor Of Fort Hood Shooter's Hometown In Puerto Rico Identifies Ivan Lopez In Photo.

CNBC:

• Sotheby's? The best indicator you've never heard of. (video) Need proof of a speculative bubble? Closely watched hedge fund manager Jim Chanos says he has the best barometer for gauging where 1 percenters are putting their money, given the Federal Reserve's easy money policies that have been fueling their portfolios to record highs.

• China 'panicking' in face of sluggish growth: Chanos. (video) Short-seller Jim Chanos says China is "panicking" in the face of a stalling economy. As the fast-growing economy now deals with a lending bubble, Chanos told CNBC's "Squawk Box" on Thursday his long-running bearish outlook is now coming to fruition.

ZeroHedge:

• Putin 1 - Dimon 0: JPMorgan Unhalts Russian Money Transfer.

• Initial Claims Miss By Most In 5 Weeks; Rise Most In 10 Weeks. (graph)

• Q1 GDP To Tumble As Trade Deficit Surges Most Since September. (graph)

• "HFT Is A Growing Cancer" Says Mom And Pop's Favorite Retail Broker Charles Schwab(SCHW).

• Services Data Misses As Pent-Up "Weather" Demand Fails To Show. (graph)

• His Name Was Jeremy Stein: Fed's Lone Bubble-Spotter Resigns.

• Russia Demands NATO Answers For "Unreasonable" Eastern European Escalation.

• "Damn It, Janet!" Momos Mashed & Biotechs Buggered Once Again. (graph)

Business Insider: 

• Russian Diplomat: US Should 'Practice Yoga, Stick To Food-Combining Diets,' And Forget Crimea's Annexation.

• The Russian Economy Is Contracting. (graph)

Boston Globe:

• Biotech sector fears financial squeeze. As the pressure to make health care more affordable mounts, Massachusetts biotech companies and medical device makers are warning that lower costs for consumers could be bad for business. Companies and investors in the life sciences cluster — a crucial part of the state’s economy — say that new restrictions on payments for drugs and other medical products will stifle innovation and harm patients, according to a report scheduled to be released Thursday at a state biotechnology gathering. In some ways, it puts the industry at odds with what has become a paramount social cause: providing medical care for everyone at reasonable prices. But the companies say their products, though costly, save money in the long term by keeping people out of the hospital. If companies can no longer make reasonable returns on their investments, “this entire sector could disappear overnight,” said Harvard Business School professor Vicki Sato, a molecular and cell biology specialist who advised Health Advances on the study.

Focus News:

• Russia investigating 25 Ukrainian 'terrorists'. Russian television on Thursday reported that security services have detained 25 Ukrainians suspected of planning "sabotage" and "terrorist attacks" in Russia.

Reuters:

• Dealers say GM(GM) customer anxiety rising, sales may take hit. An ignition switch defect linked to deadly crashes and mounting recalls is raising anxiety in General Motors Co showrooms, according to dealers who are fielding more calls from customers concerned about the safety of GM cars. 

• EMERGING MARKETS-Latam markets drop on profit-taking ahead of U.S. data.

Telegraph:

• London house price bubble moves to the suburbs. Prices for homes outside the centre of the Capital are rising at a record pace.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.34%

Sector Underperformers:

• 1) Biotech -3.33% 2) I-Banks -2.03% 3) Software -1.75%

Stocks Falling on Unusual Volume:

• LQDT, KIN, BKS, CACI, GBX, BWEN, AMTD, PEIX, KWEB, MANT, ETFC, GLOG, INDY, DXYN, EXAS, TNET, INSM, SNN, YELP, WDAY, IVZ, BNFT, REX, FEYE, RTRX, THRX, PBPB, MNTA, NMBL, SNMX, SPLK and EXAS

Stocks With Unusual Put Option Activity:

• 1) ETFC 2) GLW 3) DECK 4) AKAM 5) GPS
  

Stocks With Most Negative News Mentions:

• 1) C 2) SBUX 3) UA 4) ETFC 5) BZH
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.06%

Sector Outperformers:

• 1) Semis +.45% 2) Utilities +.31% 3) Steel +.28%
  

Stocks Rising on Unusual Volume:

• RPM, ACTG and AMBA

Stocks With Unusual Call Option Activity:

• 1) DLLR 2) BKS 3) FOXA 4) CY 5) EOG

Stocks With Most Positive News Mentions:

• 1) P 2) T 3) NFLX 4) AAPL 5) NVDA
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• Abe Loan Push Impeded by Companies Hoarding Cash: Japan Credit. Japanese banks are the most keen to lend companies money in 17 years. Corporate treasurers don’t need the cash. A Bank of Japan index measuring the prevalence of mid-sized companies saying banks are willing to make loans rose to 19 in March, the highest since June 1997, according to Tankan data. Yet demand for loans from businesses remains below levels before the global financial crisis, other central bank data show.

• Brazil Lifts Rate to 11% as Food Shock Worsens Price Outlook. Brazil’s central bank extended the world’s longest interest rate tightening cycle, after a food price shock increased chances that inflation will accelerate beyond the target range for a second straight year. The bank’s board, led by its President Alexandre Tombini, today voted unanimously to raise the Selic rate to 11 percent from 10.75 percent, as forecast by all 57 economists surveyed by Bloomberg. Policy makers have raised borrowing costs by 375 basis points, or 3.75 percentage points, in less than a year. 

• Prada Forecasts Slowing Sales Growth as Luxury Demand Slides. Prada SpA (1913), the Italian maker of $2,950 leather handbags, forecast slowing sales growth this year amid a maturing Chinese market and soft demand in Europe. Same-store sales will rise at a “low single-digit” pace in the financial year through January 2015, Milan-based Prada said yesterday, less than last year’s 7 percent increase. Growth will be “mid single-digit” the year after, the company said as it reported profit for last year that missed analyst estimates.

• Asian Stocks Rise on Weaker Yen as Won Slips With Copper. Asian stocks rose, with Japanese shares driving the regional index to its longest rally this year, as the yen traded near a two-month low before a review of euro-area monetary policy and U.S. payrolls data. South Korea’s won snapped a six-day gain as copper and oil fell. The MSCI Asia Pacific Index added 0.1 percent by 10:06 a.m. in Tokyo, rising a seventh day in the longest run of gains since December.

• EPA Failed to Disclose Cancer Risk to People in Studies. The U.S. Environmental Protection Agency failed to disclose cancer risks to people it exposed to harmful pollutants in research studies, a government watchdog says. The EPA, which warns of dangers from diesel exhaust and tiny particles in its rules to cut pollution, recruited people for tests on those pollutants in 2010 and 2011. Consent forms they were given didn’t mention cancer because the agency considered the risks minimal, the agency’s Office of Inspector General said today in a report. “When justifying a job-killing regulation, EPA argues exposure to particulate matter is deadly, but when they are conducting experiments, they say human exposure studies are not harmful,” Louisiana Republican Senator David Vitter said in a statement, reacting to the report.

Wall Street Journal:

• One Dead, at Least 14 Injured in Fort Hood Shooting. Military Base Was Site of Mass Shooting in 2009. A gunman opened fire at Texas' Fort Hood military base Wednesday, injuring at least 14 people before apparently shooting himself, officials said. The incident marks the third time there has been a shooting at a U.S. military base in seven months and comes less than five years after another shooting rampage at Fort Hood ended with 13 dead and more than 30 injured. The base, in a press release, said its Directorate of Emergency Services had received an initial report that a suspected shooter had been killed, but was still trying to confirm that. A Defense Department official said the extent of the injuries wasn't immediately clear.

• Yelp(YELP) Regularly Gets Subpoenas About Users. FTC Says It Has Received 2,046 Complaints Since 2008.  

• Small Banks Look to Sell as Rules Bite. Executives Say Costs of New Regulations Are Taking a Toll.

• Investors Clamor for Risky Debt Offerings. Buyers Grab Securities With Weak Ratings, Tired of Lower Yields on Safer Deals. Risky debt is flying off the shelves. Investors are snapping up low-rated securities backed by companies, home mortgages and car loans at a clip rarely seen since the financial crisis, as fund managers and others tire of paltry yields on safer assets. Buyers poured $3.42 billion into taxable U.S. high-yield mutual funds and exchange-traded funds in the first quarter, outpacing the year-earlier period's $1.76 billion total, said fund tracker Lipper, and following a full-year outflow of $4.98 billion in 2013. At the same time, robust demand for the lowest-rated portions of some asset-backed securities has enabled issuers to cut offered yields, investors said.

CNBC:

• More Americans see middle class status slipping. A sense of belonging to the middle class occupies a cherished place in America. It conjures images of self-sufficient people with stable jobs and pleasant homes working toward prosperity. Yet, nearly five years after the Great Recession ended, more people are coming to the painful realization that they're no longer part of it.

Zero Hedge:

• Lewis Explains The Casino: "Why Are You Even Arguing" That This Is Not Rigged?

• David Stockman: "A Gang Of Unelected PhDs Have Staged An Economics Coup D'Etat".

• JPMorgan(JPM) Explains: The Problem Is The Inexorable Rise In Entitlement Payments.

• The Obamacare Ship Of Fools.

• Reverse Mortgages Spike 20% In 2013 As Baby Boomers Scramble For Cash.

• HSBC China Composite PMI Tumbles To 28-Month Lows As Services Fell (& Rose). (graph)

Reuters:

• Juniper(JNPR) to cut 6 pct jobs, focus on high-growth businesses. Network gear maker Juniper Networks Inc , which is under pressure from investor Elliott Management Corp to slim down, said it plans to reduce its global workforce by 6 percent and focus on its high-growth businesses.

Liquidity crunch a catalyst for big China slowdown – analysts The mini liquidity crunch is the early warning sign of a substantial economic correction long overdue, amid rising leverage and a broken growth model, say bearish analysts.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3222433/Liquidity-crunch-a-catalyst-for-big-China-slowdownanalysts.html?copyrightInfo=true

China Securities Journal:

• China Shouldn't Scrap National Home Buying Curbs. China shouldn't remove home purchase curbs nationwide as supply still can't meet demand in 1st-tier citites and some 2nd-teir cities, according to a front-page commentary written by reporter Zhang Min.

Shanghai Securities News:

• China 1Q Consumer Prices May Rise 2.3%. Chinese consumer prices may rise 2.3% in 1Q and 2.5% for the full year, according to an article by Zhang Qianrong from State Information Center, a think tank affiliated to the National Development and Reform Commission published today. Producer prices may fall 1.9% in 1Q and .6% for the full year, the article said. China should prepare for deflation risks on production overcapacity and declining demand, Zhang wrote.

Evening Recommendations
Piper Jaffray:

• Rated (INTC) Overweight, target $30.

• Rated (FSL) Overweight, target $31.

Night Trading

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 121.0 -.75 basis point.

• Asia Pacific Sovereign CDS Index 87.5 -.75 basis point.

• FTSE-100 futures +.08%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures  -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PERY)/.03

• (GBX)/.60

• (SCHN)/.07

• (MU)/.75

• (GPN)/.95

Economic Releases
8:30 am EST

• The Trade Deficit for February is estimated at -$38.5B versus -$39.1B in January.

• Initial Jobless Claims are estimated to rise to 319K versus 311K the prior week.

• Continuing Claims are estimated to rise to 2843K versus 2823K prior.

9:45 am EST

• Final Markit US Services PMI for March is estimated at 55.5 versus a prior estimate of 55.5.

10:00 am EST

• The ISM Non-Manufacturing Composite for March is estimated to rise to 53.5 versus 51.6 in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China HSBC Services PMI, ECB rate decision/Draghi speaking, Eurozone Services PMI, Challenger Job Cuts for March, RBC Consumer Outlook Index for April, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (BGC) investor day and the (CIEN) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate 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.