Friday, May 09, 2014

Stocks Slightly Lower into Final Hour on Russia/Ukraine Tensions, Global Growth Fears, European/Emerging Markets Debt Angst, Utilities/Metals & Mining Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 13.32 -.82%
  • Euro/Yen Carry Return Index 146.03 -.54%
  • Emerging Markets Currency Volatility(VXY) 7.36 -.27%
  • S&P 500 Implied Correlation 56.73 -.27%
  • ISE Sentiment Index 100.0 -13.04%
  • Total Put/Call .93 unch.
  • NYSE Arms 1.45 +41.28% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 64.0 -.15%
  • European Financial Sector CDS Index 74.65 +3.61%
  • Western Europe Sovereign Debt CDS Index 32.21 +.61%
  • Asia Pacific Sovereign Debt CDS Index 84.85 +1.43%
  • Emerging Market CDS Index 269.38 +2.27%
  • China Blended Corporate Spread Index 359.77 +.36%
  • 2-Year Swap Spread 13.75 +.25 basis point
  • TED Spread 19.75 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -4.25 +.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .03% unch.
  • Yield Curve 224.0 +2.0 basis points
  • China Import Iron Ore Spot $102.70/Metric Tonne -.96%
  • Citi US Economic Surprise Index -9.10 +.6 point
  • Citi Emerging Markets Economic Surprise Index -25.40 -.2 point
  • 10-Year TIPS Spread 2.18 unch.
Overseas Futures:
  • Nikkei Futures: Indicating -40 open in Japan
  • DAX Futures: Indicating +21 open in Germany
Portfolio: 
  • Higher: On gains in my tech/retail/medical/biotech sector longs 
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:
  • Putin Visits Crimea as 20 Die in Eastern Ukraine Clashes. Russian President Vladimir Putin visited the Crimea region he annexed in March amid growing tensions as Ukraine said about 20 pro-Russian separatists died in clashes in the eastern port city of Mariupol. Putin’s trip to Sevastopol, the home of Russia’s Black Sea Fleet, was his first since the Crimean peninsula seceded from Ukraine. Ukrainian Interior Minister Arsen Avakov said on his Facebook account at least one serviceman was killed and five wounded in the fighting in Mariupol after about 60 rebels attacked a police building. The city is less than 60 kilometers (37 miles) from the Russian border.
  • Putin's Export Machine Rolls Right Over Sanctions, Outcry. Vladimir Putin’s incursion into Ukraine and the international condemnation that followed haven’t put a dent in Russia’s exports of gas and raw materials. The world’s largest energy producer shipped 2 percent more gas to Europe in the first three months of 2014 than it did in the same period last year, government data show. Diesel output for export increased, while cargoes of grains, palladium and nickel either climbed or were about the same. Russia’s crude oil exports fell 0.2 percent from last year.
  • China’s Stocks Fall for Fourth Weekly Drop as Great Wall Plunges. China’s stocks fell, sending the benchmark index to a fourth week of losses, after Great Wall Motor Co. delayed sales of a vehicle and small-company shares slumped amid concern new equity sales will divert funds. Great Wall Motor Co., China’s biggest maker of sport utility vehicles, plunged 10 percent in Shanghai and 17 percent in Hong Kong after it pushed back sales of its new flagship Haval H8 SUV. Goertek Inc., an Apple Inc. supplier, led declines for technology companies. Data today showed the consumer-price index rose 1.8 percent in April, compared with the median estimate of a 2.1 percent gain. The producer-price index slid 2 percent, the 26th straight decline. The Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,011.14 at the close, extending this week’s loss to 0.8 percent.
  • European Stocks Decline From Six-Year High Amid Earnings. European stocks fell from their highest level in more than six years as companies from Telefonica SA to Petroleum Geo-Services ASA (PGS) posted earnings that missed analysts’ estimates. Telefonica dropped 2.6 percent after saying first-quarter operating income slid 14 percent. PGS fell the most in almost three months after also reporting lower profit margin. Petrofac Ltd. tumbled the most since November after predicting net income will decrease in 2014. Vestas (VWS) Wind Systems A/S rose 7.6 percent after posting an unexpected profit in the first quarter. The Stoxx Europe 600 Index slipped 0.3 percent to 338.54 at the close of trading, paring its fourth weekly gain to 0.2 percent.
  • Iron Ore Slumps to Lowest Since 2012 as Surplus Deepens. Iron ore retreated to the lowest level since 2012, capping a fourth weekly loss and nearing $100 a ton, as increased seaborne supplies of the steel-making raw material boosted a global glut. Ore with 62 percent content delivered to the Chinese port of Tianjin fell 1 percent to $102.70 a dry ton, the lowest level since September 2012, according to data from The Steel Index Ltd. The commodity dropped 23 percent this year, after falling 7.4 percent last year
  • Ralph Lauren(RL) Falls After Sales Forecast Trails Estimates. Ralph Lauren Corp. fell the most in nine months in New York trading after forecasting first-quarter sales that would be less than analysts’ estimated. The shares slid 5.1 percent to $144.25 at 9:48 a.m. and earlier dropped as much as 6.6 percent for the biggest intraday decline since Aug. 7. New York-based Ralph Lauren fell 14 percent this year through yesterday, compared with a 1.5 percent gain for the Standard & Poor’s 500 Index. Sales in the quarter through June will rise as much as 5 percent, the company said today in a statement, implying revenue of about $1.74 billion. Analysts estimated $1.81 billion, on average.
Wall Street Journal: 
  • Ukraine Says Some 20 Separatists Killed in East. Clash Comes as Rebels Push Ahead With Referendum on Autonomy. Police and security forces killed about 20 separatists Friday, Ukraine's interior minister said, in severe fighting between the government and pro-Russian separatists in the country's eastern provinces. Arsen Avakov said a firefight broke out in the southeastern city of Mariupol after gunmen took control of a police station. Ukrainian armed forces then stormed the building, bringing on "a full-scale military...  
MarketWatch:
CNBC:
  • Art Cashin: Watch this 'canary in the coal mine'. (video) Art Cashin said he's carefully watching the Nasdaq Composite, the stock market's current "canary in the coal mine." The bulls are happy it successfully defended support around 4015, but remain cautious.
ZeroHedge: 
ValueWalk:
Business Insider: 
Reuters:
  • Stratasys(SSYS) sticks to forecast, disappointed investors sell. 3D printer maker Stratasys Ltd reported an adjusted quarterly profit that matched the average market estimate and stuck to its full-year forecast on Friday, disappointing investors who had expected better on both counts. Stratasys shares fell as much as 9.6 percent in early trading as investors also overlooked a better-than-expected rise in adjusted revenue, helped in part by the acquisition of consumer 3D printer maker MakerBot last year.
Telegraph:
Interfax:
  • Putin Says Other Countries Must Respect Russia. Russia asking other countries to treat with respect its right for historical justice, self-determination, citing Russian President Vladimir Putin.

Bear Radar

Style Underperformer:
  • Mid-Cap Value -.30%
Sector Underperformers:
  • 1) Utilities -1.0% 2) Gold & Silver -.91% 3) Steel -.87%
Stocks Falling on Unusual Volume:
  • ARP, FUEL, PUK, PRO, AIRM, FF, TUMI, WPPGY, UBNT, SGY, POST, CODI, AAOI, MAIN, ACET, DRQ, AZN, CRTO, ERF, RL, HPT, ABCO, TTI, EBS, MASI, AMCX, PMT, AREX, JAZZ, SSYS, TUMI, SSTK, DRQ, BCEI, XON, POST, TTI, DEPO and UVE
Stocks With Unusual Put Option Activity:
  • 1) VRNG 2) KSS 3) RL 4) JNPR 5) SSYS
Stocks With Most Negative News Mentions:
  • 1) GS 2) MS 3) FUEL 4) ANDE 5) F
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Value +.25%
Sector Outperformers:
  • 1) Computer Services +.69% 2) Gaming +.54% 3) Retail +.45%
Stocks Rising on Unusual Volume:
  • IBN, MDVN, PPO, CSC, OLED and AKRX
Stocks With Unusual Call Option Activity:
  • 1) EPI 2) CLNE 3) IPG 4) THC 5) SPLS
Stocks With Most Positive News Mentions:
  • 1) MAR 2) AAPL 3) YELP 4) TWTR 5) NVDA
Charts:

Friday Watch

Evening Headlines 
Bloomberg:
  • Ukraine Renews Dialogue Offer as Russia Holds Army Drills. Ukraine’s leaders said they’re ready for a dialogue with peaceful representatives of the eastern regions, where pro-Russian separatists said they’ll push ahead with a vote on autonomy after Russian President Vladimir Putin called for a delay. Putin yesterday presided over nationwide army drills, a day after he softened his tone by promising to withdraw troops from the border, voicing support for Ukraine’s presidential election, and saying it’s not the right time for a referendum on secession in the Donetsk and Luhansk regions. Ukrainian premier Arseniy Yatsenyuk said he’s concerned that Russia is “planning provocations” today, when the country holds army parades to celebrate victory in World War II. 
  • Tumble in Fuel Sales Adds to Evidence of China Slowdown. Declining demand for ship fuel in Singapore, the merchant fleet’s biggest refueling hub, is signaling weakening prospects for a rebound in Chinese growth. Fuel oil for immediate delivery traded at the biggest discount to later supplies in 16 months on April 28, according to data from PVM Oil Associates Ltd. Sales of so-called bunker dropped for a third month in March, the longest retreat since November 2007, the latest Maritime and Port Authority data show.
  • Brazil Rate Increase Seen More Likely After Awazu Speech. Brazilian policy makers will continue with the inflation fight they started in April 2013, central bank Director Luiz Awazu Pereira said today, referring to when the country began the world’s longest tightening cycle. After his comments, swap rates on the contract due in January 2017 extended earlier gains as traders unwound bets the central bank will keep interest rates unchanged at 11 percent this month.
  • Investors Pull $400 Million From Emerging-Market Bond ETFs. Investors are pulling out of exchange- traded funds for emerging-market bonds at the fastest pace since November after a three-month rally pushed down yields and dimmed the allure of the securities. U.S.-based ETFs focused on developing-country bonds have posted a net outflow of $400 million this month, according to data compiled by Bloomberg through yesterday. That’s bigger than any full month since November, when they lost $406 million.
  • Japan Stocks Rise While China Drops on CPI; Nickel Jumps. Japanese shares rose a second day, paring a weekly decline, as investors weighed earnings reports from the country’s biggest companies and Canon Inc. announced a share buyback. Nickel extended gains from a two-year high amid supply concerns and the Philippines peso jumped. The Topix index rose 0.9 percent by 12:01 p.m. in Tokyo, paring its weekly decline to 1.1 percent. The MSCI Asia Pacific Index advanced 0.2 percent, while a gauge that excludes Japan fell 0.1 percent as Chinese shares retreated after inflation in Asia’s largest economy fell short of estimates.
Wall Street Journal:
Fox News:
  • Pro-Russian separatists to go ahead with eastern Ukraine referendum. The pro-Russia insurgency in eastern Ukraine decided Thursday to go ahead with Sunday's referendum on autonomy despite a call from Russian President Vladimir Putin to delay it. While Putin's call on Wednesday to postpone the vote was seen as part of an effort to step back from confrontation and negotiate a deal with the West, he fueled tensions again on Thursday by overseeing military exercises that Russian news agencies said simulated a massive retaliatory nuclear strike in response to an enemy attack.
CNBC:
  • At Alibaba, chairman Ma's dealings raise red flags. Part-way through Alibaba Group's long-awaited IPO prospectus was a subtle, but striking, warning: investors should know that lead founder and executive chairman Jack Ma might work against the company's best interests
Zero Hedge:
Business Insider:
Reuters:
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 122.25 -2.75 basis points.
  • Asia Pacific Sovereign CDS Index 83.75 -2.25 basis points.
  • FTSE-100 futures -.16%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures  -.06%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (ALU)/-.04
  • (MT)/.06
  • (CQB)/.14
  • (EBIX)/.37
  • (SATS)/.05
  • (HLT)/.09
  • (RL)/1.63
  • (SSYS)/.40
  • (WLH)/.13
Economic Releases
10:00 am EST
  •  JOLTs Job Openings for March are estimated to fall to 4100 versus 4173 in February.
  • Wholesale Inventories for March are estimated to rise +.5% versus a +.5% gain in February.
  • Wholesale Sales for March are estimated to rise +1.1% versus a +.7% gain in February. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Fisher speaking, Fed's Kocherlakota speaking, UK industrial production, Canadian unemployment rate, USDA's WASDE report and the (BHI) analyst conference 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Thursday, May 08, 2014

Stocks Reversing Lower into Final Hour on Russia/Ukraine Tensions, Yen Strength, Technical Selling, Biotech/Gaming Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Above Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 13.53 +.97%
  • Euro/Yen Carry Return Index 146.72 -.83%
  • Emerging Markets Currency Volatility(VXY) 7.48 -.93%
  • S&P 500 Implied Correlation 57.50 +1.84%
  • ISE Sentiment Index 111.0 +37.04%
  • Total Put/Call .87 -3.33% 
  • NYSE Arms 1.07 +16.79% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 64.44 -.40%
  • European Financial Sector CDS Index 72.08 -4.63%
  • Western Europe Sovereign Debt CDS Index 31.92 -3.88%
  • Asia Pacific Sovereign Debt CDS Index 83.75 -2.58%
  • Emerging Market CDS Index 263.25 -2.09%
  • China Blended Corporate Spread Index 358.46 +.90%
  • 2-Year Swap Spread 13.50 -.25 basis point
  • TED Spread 19.75 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -4.75 -1.0 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .03% unch.
  • Yield Curve 222.0 +4.0 basis points
  • China Import Iron Ore Spot $103.70/Metric Tonne -1.33%
  • Citi US Economic Surprise Index -9.70 +1.5 points
  • Citi Emerging Markets Economic Surprise Index -25.20 +2.5 points
  • 10-Year TIPS Spread 2.18 +2.0 basis points
Overseas Futures:
  • Nikkei Futures: Indicating -93 open in Japan
  • DAX Futures: Indicating -38 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my tech/retail sector longs and index hedges
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 25% Net Long