Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.36 -2.55%
- Euro/Yen Carry Return Index 147.86 -.04%
- Emerging Markets Currency Volatility(VXY) 8.10 -2.06%
- S&P 500 Implied Correlation 54.74 -1.01%
- ISE Sentiment Index 129.0 +2.38%
- Total Put/Call .75 -16.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.45 -2.05%
- European Financial Sector CDS Index 78.87 -2.34%
- Western Europe Sovereign Debt CDS Index 34.30 -2.83%
- Asia Pacific Sovereign Debt CDS Index 89.19 +.69%
- Emerging Market CDS Index 279.31 -.37%
- China Blended Corporate Spread Index 349.30 -2.52%
- 2-Year Swap Spread 11.75 +.75 basis point
- TED Spread 20.25 -1.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.25 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +1 basis point
- Yield Curve 224.0 -1.0 basis point
- China Import Iron Ore Spot $105.40/Metric Tonne -2.68%
- Citi US Economic Surprise Index -32.50 -11.5 points
- Citi Emerging Markets Economic Surprise Index -27.0 -.7 point
- 10-Year TIPS Spread 2.19 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +16 open in Japan
- DAX Futures: Indicating +27 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Ukraine Vows to Stanch Separatism as Militants Spread. Ukraine’s
acting president vowed to create a special police force to staunch the
spread of separatism in the country’s east, vowing to overcome unrest he
says is stoked by Russia and hold an election slated for May 25. Following
an expansion of sanctions against people and companies linked to
Vladimir Putin’s inner circle this week, the Russian president warned
that further economic penalties over the crisis may lead the government
to reconsider participation by foreign companies in his country’s energy
and other key industries. European officials pressed their criticism of
Russia’s commitment to an accord seeking to defuse tensions. As
part of a creeping campaign by pro-Russian militants across Ukraine’s
east, armed men seized government buildings in the city of Horlivka
today, while news service Unian reported a member of the Donetsk
electoral commission was kidnapped by “terrorists.”
- Republicans Seek More Sanctions on Russia. President
Barack Obama would be authorized to arm pro-Ukrainian forces and
sanction Russian banks and oil companies under legislation introduced by
the top Republican on the Senate Foreign Relations Committee. The
bill by Bob Corker of Tennessee will serve as the minority party’s
counterproposal in the Democratic Party-controlled Senate to steps taken
by the administration.
- Putin's Threat to Retaliate for Sanctions Carries Risks.
President Vladimir Putin’s threats to retaliate for further sanctions
on Russia set the stage for escalating economic warfare that may have
painful effects for U.S. and European companies. While
the Russian leader is casting himself as reluctant to take
countermeasures against additional penalties from the U.S. and European
Union, he hasn’t ruled out doing so eventually. Such a move could dash
billions of dollars in foreign investment in some of the world’s biggest
untapped oil reserves.
- Bondholders Urged U.S. to Curb Russia Sanctions, Fitch Says. The
U.S. is holding off on sanctions against some Russian companies because
it doesn’t want to hurt American holders of their debt, according to Fitch Ratings. “We’ve heard quite a lot of anecdotal evidence that there’s actually a lot of consultation with big investors and bondholders in terms of what sanctions might be imposed by the U.S.,” James Watson, a managing director at Fitch, told reporters today in London. “It seems there has been a significant push back on potentially sanctioning companies that
have significant foreign debt.”
- Vale Profit Falls After China Slowdown Weighs on Iron-Ore. Vale
SA (VALE), the largest iron-ore producer, posted a steeper decline in
first-quarter profit than analysts expected after selling the steel
ingredient 25 percent
cheaper than a market reference price. Shares slumped. Mounting concern that economic growth is slowing in China, Vale’s biggest buyer, is pushing down iron-ore prices and
holding the miner’s shares close to a five-year low.
- Credit Suisse, BNP Paribas at Risk of Criminal Charges Over Taxes, Business With Banned Nations.
Credit Suisse Group AG (CSGN) and BNP Paribas SA (BNP) are at risk of
being criminally charged by U.S. and state prosecutors, a
person familiar with the matter said, signaling that authorities are
taking a tougher approach as they seek to resolve probes of major banks.
- European Stocks Little Changed Before Fed Policy Decision.
European stocks were little changed
from a three-week high, as a report showing U.S. economic growth
stalled offset better-than-forecast jobs data, while investors
awaited a Federal Reserve decision on monetary policy. Banco Bilbao
Vizcaya Argentaria SA slipped 1.1 percent
after reporting a drop in first-quarter profit. BNP Paribas SA
fell 3.2 percent after saying it may need to pay much more than the $1.1
billion it set aside for alleged U.S. sanctions breaches. Alstom (ALO)
SA jumped 9.3 percent as General Electric Co.
made a 12.4 billion-euro ($17.2 billion) bid for the French
company’s energy business.
The Stoxx Europe 600 Index retreated 0.1 percent to 337.89
at the close of trading, paring its monthly advance to 1.1
percent.
Wall Street Journal:
- EU Arms Sales to Russia Should Be Restricted as Part of More Severe Sanctions -UK. Restrictions on arms sales to Russia should be part of any so-called stage three
European Union sanctions on Moscow if there is any further Russian incursion
into southern and eastern Ukraine, Prime Minister David Cameron said on
Wednesday. The comment is likely to be noted in France, which has a 1.4 billion euro
($1.95 billion) order from Russia for two Mistral-class warships. The first
Mistral, a high-tech amphibious assault ship capable of deploying helicopters
and tanks, is due to arrive in Russia by the end of the year.
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- U.S. government says it lost $11.2 billion on GM(GM) bailout. The U.S.
government lost $11.2 billion on its bailout of General Motors Co, more
than the $10.3 billion the Treasury Department estimated when it sold
its remaining GM shares in December, according to a government report
released on Wednesday.
The $11.2 billion loss
includes a write-off in March of the government's remaining $826
million investment in "old" GM, the quarterly report by a Treasury
watchdog said.
Style Underperformer:
Sector Underperformers:
- 1) Social Media -2.42% 2) Biotech -1.11% 3) Steel -1.10%
Stocks Falling on Unusual Volume:
- POWI, VPRT, RM, CNQR, FEIC, PRTA, ICLR, WSH, ISIS, LL, AUXL, PNRA, DWA, MSCI, COH, NCR, PRXL, WTS, MEOH, DLB, BGFV, ESRX, USNA, EXC, RDA, ORB, ECOM, EBAY, KRA, SWI, BURL, CG, STAA, EZPW, ZLTQ and NDLS
Stocks With Unusual Put Option Activity:
- 1) ESRX 2) XCO 3) AKAM 4) EBAY 5) COH
Stocks With Most Negative News Mentions:
- 1) EXC 2) ABEV 3) VALE 4) BGG 5) AGCO
Charts:
Style Outperformer:
Sector Outperformers:
- 1) HMOs +2.23% 2) Agriculture +.79% 3) Computer Services +.38%
Stocks Rising on Unusual Volume:
- POM, ENR, AZPN, LOGM, CHRW, LVLT, HPY, SLCA, CHU, GWPH, MGAM, PBF, TWI, WLP, GMED, KLIC and SEE
Stocks With Unusual Call Option Activity:
- 1) RDN 2) KSU 3) NCR 4) SGYP 5) LVLT
Stocks With Most Positive News Mentions:
- 1) LMT 2) WMT 3) AMZN 4) AAPL 5) IBM
Charts:
Evening Headlines
Bloomberg:
- Putin Says Sanctions Jeopardize U.S., EU Energy Deals. Russian
President Vladimir Putin warned that further economic sanctions over
the Ukraine crisis may lead Russia to reconsider participation by U.S.
and European Union companies in energy and other key industries. While his government has prepared measures to retaliate for penalties imposed
by the U.S. and its allies, Putin told reporters in Minsk, Belarus,
yesterday that he doesn’t consider them necessary for now, though that
may change. If sanctions continue, “then of course we will have
to consider who’s working and how in the Russian Federation, in the key
sectors of the Russian economy, including energy,” he said. “We really
don’t want to take these reciprocal steps.”
- Moody’s Says Developer Default Risk to Slow Sales: China Credit. Moody’s
Investors Service said the
risk more Chinese property developers will default, after the collapse
of Zhejiang Xingrun Real Estate Co., will make it harder for them to
raise funds just as apartment sales cool. The builders have issued $500
million of offshore yuan or dollar bonds this month, compared with $1.6
billion in the same period last year and a record $9.2 billion in the
first quarter, data compiled by Moody’s show. The price of property securities,
which account for 32 percent of a Bank of America Merrill Lynch
index of China dollar bonds, slumped 4.9 percent in the past
year, paring their returns to 0.9 percent. That compares with a
1.6 percent total gain for dollar bonds globally, according to
Bank of America.
- Asian Stocks Rise Ahead of Bank of Japan, Fed Decisions. Asian stocks rose as investors weighed corporate earnings before the Bank of Japan and Federal Reserve report on monetary policy.
Kyocera Corp. climbed 4.2 percent in Tokyo after the electronics and
solar-panel maker reported full-year profit that beat analyst estimates.
SoftBank Corp., the Japanese phone company controlled by Masayoshi Son,
gained 1.7 percent after
unit Sprint Corp. boosted its full-year forecast and reported
first-quarter sales that topped estimates. Woolworths Ltd.
slipped 2.6 percent as quarterly food and liquor sales by the
Australian retailer fell short of expectations. The MSCI Asia Pacific Index gained 0.2 percent to 137.76 as
of 9:40 a.m. in Tokyo, with all 10 industry groups on the gauge
rising.
- Deutsche Bank Among 15 Europe Lenders Cut to Negative by S&P. Deutsche
Bank AG (DBK), Germany’s largest lender, was among 15 European banks
that had their outlooks cut to negative by Standard & Poor’s on the
prospect that governments are less likely to provide aid. The outlooks were lowered from stable “to reflect our view that extraordinary government support is likely to diminish as
regulators implement resolution frameworks,” the ratings firm
said yesterday in a statement.
- Boiled Frog Syndrome Invades CMBS as Risks Mount: Credit Markets. The growing din surrounding loosening standards in the
commercial-mortgage bond market is doing little to deter buyers.
Investors are lapping up the debt and accepting less interest to do so
even as Moody's Investors Service warns that risk are building in debt
linked to properties ranging from shopping malls and skyscrapers to hotels. After a month-long lull in issuance, Wall Street banks were poised to sell about $3.6 billion of the securities yesterday, a week after the ratings company said investors were facing a case of "boiling frog syndrome," where they fail to react to gradually increasing threats until it's too late. "There is no doubt underwriting is getting weaker," Keerthi Raghavan, a debt analyst at Barclays Plc in New York, said in an interview. The pace of deterioration "really picked up steam starting in the middle of 2013."
Wall Street Journal:
- Supreme Court Revives EPA Rule on Air Pollution Across State Lines. Court's 6-2 Ruling Is Victory for Obama Administration; 28 States Will Have to Reduce Power-Plant Emissions. The Environmental Protection Agency can reinstate limits
on power-plant pollution that blows across state lines, the Supreme
Court ruled Tuesday, handing a defeat to electric utilities that opposed
the effort as costly regulatory overreach. The court's 6-2
ruling breathes new life into a 2011 EPA measure known as the
Cross-State Air Pollution Rule, which requires 28 states to reduce
emissions that hurt air quality in...
- Enrollment in Student-Debt Forgiveness Programs Soars in 2014. Two federal programs that offer to wipe away huge accumulations of student debt have grown at a rapid clip this year, putting them among the government’s fastest-growing forms of financial assistance. The
Journal reported last week that enrollment in the plans—which allow
students to rack up big debts and then forgive the unpaid balance after a
set period—surged nearly 40% in the second half of 2013.
- Pro-Russia Forces Extend Grasp in Ukrainian City of Luhansk. Militants Break Down Doors to Government Building; President Criticizes Local Police. Pro-Russia militants in masks broke down doors and stormed government
buildings Tuesday in another area of Ukraine that hugs the Russian
border, as the new government in Kiev criticized local police for
failing to stem the growing unrest.
- A Foreign Policy Flirting With Chaos. The most egregious case of fecklessness has been on Syria. Doubts about American dependability were raised far and wide. American foreign policy is in troubling disarray. The result is
unwelcome news for the world, which largely depends upon the United
States to promote order in the absence of any other country able and
willing to do so. And it is bad for the U.S., which cannot insulate
itself from the world.
Fox News:
CNBC:
- California drove Toyota out of state: Torrance Mayor. (video)
Torrance Mayor Frank Scotto blames the state of California for Toyota
Motor's decision to relocate its North American headquarters from the
city to Plano, Texas. "The state of California lost Toyota," Scotto
said on "Power Lunch" Tuesday. He pointed to a number of issues in the
Golden State that negatively
affect companies' bottom line: tax structure, workers' compensation
and liability insurance.
Zero Hedge:
Business Insider:
CNN:
- SEC chair: We've found 'bogus' private equity and hedge fund fees.
SEC Chairwoman Mary Jo White today testified in front of the U.S.
House Committee on Financial Services, to discuss the Agency's recent
activities and 2015 budget request. As part of that overview, White
suggested that recent examinations of hedge fund and private equity fund
managers have uncovered some very unsavory activities. Namely, charging
improper fees to investors and portfolio companies.
Reuters:
- U.S. Steel(X) returns to profit but warns of weaker 2nd qtr. United States Steel Corp returned to profit in the first quarter, but the steelmaker said Tuesday it expected reduced operating income in the second quarter as cold weather slowed transportation of raw materials and finished products. The Pittsburgh-based steelmaker also said it expects to
report a loss in its flat-rolled segment, its biggest unit by
shipments, in the second quarter. Its shares fell in after-hours
trading.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 125.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 88.5 -.25 basis point.
- NASDAQ 100 futures -.35%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15 am EST
- The ADP Employment Change for April is estimated to rise to 210K versus 191K in March.
8:30 am EST
- The 1Q Employment Cost Index is estimated to rise +.5% versus a +.5% gain in 4Q.
- Advance 1Q GDP is estimated to rise +1.2% versus a +2.6% gain in 4Q.
- Advance 1Q Personal Consumption is estimated to rise +2.0% versus a +3.3% gain in 4Q.
- Advance 1Q GDP Price Index is estimated to rise +1.6% versus a +1.6% gain in 4Q.
- Advance 1Q Core PCE is estimated to rise +1.2% versus a +1.3% gain in 4Q.
9:00 am EST
- ISM Milwaukee for April is estimated to fall to 56.0 versus 56.03 in March.
9:45 am EST
- Chicago Purchasing Manager for April is estimated to rise to 57.0 versus 55.9 in March.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,111.110 barrels versus a +3,524,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -422,220 barrels versus a
-274,000 barrel decline the prior week. Distillate supplies are
estimated to rise by +683,330 barrels versus a +597,000 barrel gain the
prior week.
2:00 pm EST
- The Fed's QE3 Pace for April is estimated to fall to $45B versus $55B prior.
- The Fed is estimated to leave the benchmark fed funds rate at .25%.
Upcoming Splits
Other Potential Market Movers
- The
China Manufacturing PMI, Eurozone inflation data, German unemployment
rate, BoJ decision and the weekly MBA mortgage applications report could
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 13.64 -2.36%
- Euro/Yen Carry Return Index 147.80 -.22%
- Emerging Markets Currency Volatility(VXY) 8.21 -1.20%
- S&P 500 Implied Correlation 54.76 -1.93%
- ISE Sentiment Index 144.0 +69.41%
- Total Put/Call .91 +1.11%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.44 -.81%
- European Financial Sector CDS Index 80.76 -1.95%
- Western Europe Sovereign Debt CDS Index 35.30 +.31%
- Asia Pacific Sovereign Debt CDS Index 88.98 +.11%
- Emerging Market CDS Index 279.28 -2.50%
- China Blended Corporate Spread Index 358.31 +.96%
- 2-Year Swap Spread 11.0 -.5 basis point
- TED Spread 21.50 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -5.25 -3.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 225.0 -1.0 basis point
- China Import Iron Ore Spot $108.30/Metric Tonne -.28%
- Citi US Economic Surprise Index -21.0 +.4 point
- Citi Emerging Markets Economic Surprise Index -26.30 -.2 point
- 10-Year TIPS Spread 2.17 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +202 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
