Friday Watch

Evening Headlines 
Bloomberg:    

• Putin and Kim Jong Un Go a-Courtin’. Partly to rile the U.S., Russia ships aid to the dictatorship. In his more than three years in power, North Korea’s Kim Jong Un has purged his government of rivals, forged ahead with the country’s nuclear weapons program, and, if the FBI is right, humbled Sony after it dared to mock him in a movie.

• Greece's Achilles Heel. (video)

• China Financials Flash Warning Seen Before 2008 Mainland Slump. Chinese stock bulls may want to take note of the selloff in financial shares. If recent history is a guide, the losses in the CSI 300 Financials Index -- which total 8.1 percent since the start of the year compared with a 1.7 percent gain in the CSI 300 Index - - are signaling that the world-beating rally in Chinese equities could be about to come to an abrupt, and painful, end. The last time the industry lagged behind the broader market by this much in November 2007 and August 2009, the CSI 300 Index lost an average 42 percent over the following 12 months.   

• IDC Widens Global 2015 PC Shipments Outlook to 4.9% Decline. Worldwide personal-computer shipments will fall further than forecast this year as the strong U.S. dollar and the lack of new products threaten sales, researcher IDC said. Shipments will drop 4.9 percent in 2015 instead of the previous forecast for 3.3 percent decline, the Framingham, Massachusetts-based research firm said in a statement Thursday.

• Asian Futures Extend Gains as Fed Rate-Rise Concerns Ease. Asian stocks rose, paring their worst weekly drop this year, after an unexpected decline in U.S. retail sales bolstered the case for low interest rates. The dollar held its retreat versus some major peers, while U.S. oil traded near a six-week low and gold rallied. The MSCI Asia Pacific Index rose a second day, adding 0.2 percent by 10:02 a.m. in Tokyo, to trim its weekly decline to 0.9 percent. 

• Oil CEOs Said to Ask Obama Administration to Lift Export Ban. About a dozen U.S. drilling executives, including ConocoPhillips Chief Executive Officer Ryan Lance, were in Washington this week trying to persuade White House officials and lawmakers to lift the 40-year ban on U.S. oil exports, according to two people familiar with the meetings. Chief executives from the lobbying group Producers for American Crude Oil Exports, or PACE, met with White House senior energy policy adviser Brian Deese March 11 to ask the Obama administration to roll back a prohibition on most U.S. oil exports imposed after the 1973 Arab oil embargo, according to two people, who asked not to be identified because the discussions weren’t public.  

• More Coal Cuts Seen Ahead as Demand for Steel Slows: Commodities. In the last year, mining companies eliminated about 15 million tons of production capacity for the coal used to make steel, while outlining plans to double those cuts in the near future. It won’t be near enough.

• It's Back: Your Guide to the $18 Trillion Debt Ceiling. Bigger than U.S. GDP, the debt limit returns with plenty at stake. The cap on U.S. government borrowing kicks back into action Monday after Congress temporarily suspended it last year. The reinstatement means lawmakers in coming months must either lift or re-suspend the ceiling on the nation's debt, which exceeds the size of the economy and which, divided among the world's population, would make every person on the planet $2,500 poorer. 

Wall Street Journal:

• Fed ‘Stress Tests’ Still Pose Puzzle to Banks. Goldman, J.P. Morgan and Morgan Stanley scaled back plans by at least $11 billion. 

• U.S. Steel(X) to Idle Plant, Lay Off 412 More Workers. Idling of Minnesota iron ore operation is company’s latest move to become more nimble.

• Hostage to Hillary. Democrats march in lock-step behind the Clinton machine. 

Fox News:

• Hackers, probing Clinton server, cite security lapses. (video) Stirred by the controversy surrounding Hillary Clinton’s use of a private email server when she was secretary of state, a determined band of hackers, IT bloggers, and systems analysts have trained their specialized talents and state-of-the-art software on clintonemail.com, the domain under which Clinton established multiple private email accounts, and uncovered serious lapses in security, according to data shared with Fox News. 

MarketWatch.com: 

• Ulta(ULTA) shares rally after results top Street estimates.

CNBC: 

• Fed 'dramatically' inflated these sectors: Expert. (video) "Dramatically" high valuations in stocks and real estate will come down once the Fed abandons easy monetary policy, a private equity manager said Thursday. 

Zero Hedge:

• Why 1.05 Is Far More Important To The EURUSD Than Parity. (graph)

• Bill Ackman Faces FBI Probe Over Possible Herbalife Stock Manipulation. (graph)

• Germans Furious After Varoufakis/Tsipras Admit "Greece Will Never Repay Its Debts".

• Worst Macro Data Since Lehman Sparks Stock Buying Frenzy. (graph)

• The Final Nail In China's Deflationary Coffin: Wages In The 4 Largest Cities Are Now Dropping.

• 3 Things: Strong Dollar, Oil, Missed Employment. (graph)

• Under The Hood Of A Subprime Lender Accused Of Illegally Repoing Soldiers' Cars.

Business Insider:

• ISIS accepted a pledge of allegiance from Africa's deadliest terror group — and it's a 'real game changer'.

• El Pollo Loco's(LOCO) business is on fire.

• THE DRONES REPORT: Market forecasts, regulatory barriers, top vendors, and leading commercial applications.

• Tim Cook names the next big frontiers for Apple(AAPL): The home, the car, and health.

Reuters:

• Germany's Schaeuble says can't rule out "Grexident". German Finance Minister Wolfgang Schaeuble said on Thursday the onus was on Greece to help itself and he could not rule out an accidental exit of the country from the euro zone. "As the responsibility, the possibility to decide what happens only lies with Greece, and because we don't exactly know what those in charge in Greece are doing, we can't rule it out," Schaeuble told Austrian broadcaster ORF when asked about the prospect of a "Grexident".

Financial Times:

• US attacks UK’s ‘constant accommodation’ with China. The Obama administration accused the UK of a “constant accommodation” of China after Britain decided to join a new China-led financial institution that could rival the World Bank.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 105.0 -2.75 basis points.

• Asia Pacific Sovereign CDS Index 65.0 -2.25 basis points.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ANN)/-.03

• (BKE)/1.24

• (CTRN)/.25

• (EBIX)/.39

• (HIBB)/.68

• (RGEN)/.04

Economic Releases
8:30 am EST

• PPI Final Demand for February is estimated to rise +.3% versus a -.8% decline in January.

• PPI Ex Food and Energy for February is estimated to rise +.1% versus a -.1% decline in January.

10:00 am EST

• Preliminary Univ. of Mich. Consumer Confidence for March is estimated to rise to 95.5 versus 95.4 in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan Industrial Production data could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Surging into Final Hour on Central Bank Hopes, Euro Bounce, Less Emerging Markets Debt Angst, Financial/Utility Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.65 -7.23%

• Euro/Yen Carry Return Index 134.47 +.50%

• Emerging Markets Currency Volatility(VXY) 10.63 -.56%

• S&P 500 Implied Correlation 61.68 -.65%

• ISE Sentiment Index 76.0 23.23%

• Total Put/Call 1.07 -3.60%

• NYSE Arms 1.26 +41.92% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.26 -1.52%
• America Energy Sector High-Yield CDS Index 723.0 -2.18%

• European Financial Sector CDS Index 56.29 -.83%

• Western Europe Sovereign Debt CDS Index 20.90 +1.98%
• Asia Pacific Sovereign Debt CDS Index 65.30 -2.99%

• Emerging Market CDS Index 408.32 -.91%

• iBoxx Offshore RMB China Corporates High Yield Index 113.76 -.06%
• 2-Year Swap Spread 27.5 +1.0 basis point

• TED Spread 25.25 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.0 +2.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 144.0 +2.0 basis points

• China Import Iron Ore Spot $57.97/Metric Tonne +.62%

• Citi US Economic Surprise Index -55.60 -5.1 points
• Citi Eurozone Economic Surprise Index 45.3 -1.0 point

• Citi Emerging Markets Economic Surprise Index 6.30 +3.0 points

• 10-Year TIPS Spread 1.72 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +208 open in Japan

• DAX Futures: Indicating +36 open in Germany

Portfolio: 

• Higher: On gains in my biotech/medical/retail sector longs 

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.82%

Sector Underperformers:

• 1) Coal -5.20% 2) Oil Service -1.67% 3) Computer Hardware -.66%

Stocks Falling on Unusual Volume:

• EQM, RP, ACAD, INGN, SGMS, PGEM, CYBR, CMTL, EPZM, TTPH, LMOS, ANIP, KIRK, PLOW, KKD, INTC, WSTC, CNX, DEST, HABT, MRD, MMI, AKRX, QIWI, GCO, TRGP, IM, ANIP, MRD, WK, TECD, KKD, EYES and BOX
  

Stocks With Unusual Put Option Activity:

• 1) NTAP 2) CSX 3) EWT 4) MOS 5) APA

Stocks With Most Negative News Mentions:

• 1) CNX 2) BTU 3) ALKS 4) PBR 5) CVX
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +1.09%

Sector Outperformers:

• 1) Airlines +1.95% 2) Utilities +1.69% 3) Banks +1.55%
  

Stocks Rising on Unusual Volume:

• ISSI, LL, LBIO, MW, PLCE, MYL, MTN, OLED and JBLU

Stocks With Unusual Call Option Activity:

• 1) SGMS 2) BOX 3) SLXP 4) ARO 5) BAX
  

Stocks With Most Positive News Mentions:

• 1) DG 2) F 3) BABA 4) STI 5) RMAX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:    

• Greek Debt Talks: What's Most at Risk? (video)

• Australia’s Lower Jobless Rate Masks Faltering Outlook: Economy. Australian unemployment exceeded 6 percent for a ninth month in February even as hiring improved, with fewer people seeking work in an economy struggling to gain momentum.

• Asian Stocks Advance From One-Month Low as Drugmakers Lead Gains. Asian stocks headed for their first advance this week, after the regional benchmark index closed Wednesday at a one-month low, as health-care and financial shares climbed. The MSCI Asia Pacific Index added 0.1 percent to 142.33 as of 9:01 a.m. in Tokyo after closing yesterday at the lowest since Feb. 12.

• Oil Shock Leaves Gulf Arabs Ruing Missed Chance to End Addiction. Salim Al Aufi, Oman’s undersecretary for oil and gas, likens attempts to cut the reliance on oil during a price slump to acting “with a gun pointed at your head.” If you have to make decisions under pressure, “you will probably make the wrong ones,” he said March 3 in Muscat during a panel discussion on the impact of the oil shock. Oman relied too much on revenue from crude exports when prices were high, he said.

Wall Street Journal:

• Iran Occupies Iraq. As the U.S. leads from behind, Tehran creates a Shiite arc of power. While Washington focuses on Iran-U.S. nuclear talks, the Islamic Republic is making a major but little-noticed strategic advance. Iran’s forces are quietly occupying more of Iraq in a way that could soon make its neighbor a de facto Shiite satellite of Tehran. That’s the larger import of the dominant role Iran and its Shiite militia proxies are playing in the military offensive to take back territory from the Islamic State, or ISIS.

• Euro Plunge Is Picking Up Pace. ECB bond buying continues to drive euro and eurozone-bond yields lower. The yawning gap between the world’s two most influential central banks continued to leave a deep mark on currencies markets Wednesday, with the euro plunging to a 12-year low against the U.S. dollar.

CNBC:

• Oil heading to $20: Expert. (video)

• Box(BOX) loses $1.65 per share, adjusted, vs. expected loss of $1.17 per share. Box Q1 revenue guidance above estimates;Box is reporting adjusted loss of ($1.65) on revenue beat of $63 million, with CNBC. Box reported quarterly earnings that missed analysts' expectations on Wednesday, sending the stock down as much as 17 percent in after-hours trading.

• ISIS and Russia threaten, and NATO cuts spending. NATO warships conducted rapid reaction drills in the Black Sea this week, and the alliance's chief accused Russia of continued aggression in Ukraine. Meanwhile, NATO member states continue to battle ISIS extremists, who insist their goals include sacking Rome. The North Atlantic Treaty Organization is more relevant than it has been for years. But many of its members are moving further away from meeting their defense spending obligations. 

Zero Hedge:

• "We Have Front-Row Seats To An Imminent Market Shock", Hedge Fund Billionaire Warns.

• Deutsche Bank Asks "Is The S&P Ready For Rate Hikes?" (Spoiler Alert: No). (graph)

• Currency Wars... Are Not Working. (graph)

• The European Union's (Other) Deflationary Driver - Job Computerisation. (graph)

• Fed's Annual Stress Test Results: 28/31 Pass - Deutsche & Santander Fail, BofA To Re-Submit.

• Beijing, You Have A Big Problem - In Ten Charts. (graph)

• This Is What A World Addicted To Debt Looks Like. (map)

• "Monetarism Hasn't Worked Anywhere" - Reality On China, Finally. (graph)

• The Mystery Of America's Missing Wage Growth Has Been Solved. (graph)

• China's Latest Spinning Plate: 10 Trillion In Local Government Debt.

• Danger Down Under — A Brief Look At Australia's Trade Flows. (graph)

• Bank Of Korea Unexpectedly Cuts Interest Rate To Record Low 1.75%, 24th Central Bank To Ease In 2015. (graph)

Business Insider:

• Top Silicon Valley angel: 'It might not be a bubble, but sure as hell the rent is too high'.

• BODY LANGUAGE EXPERT: Hillary Clinton showed a 'high level of discomfort' during her press conference.

• REPORT: Chinese e-commerce giant Alibaba(BABA) is investing $200 million in Snapchat at $15 billion valuation.

• Expert hacker: Hillary doesn't know who read her personal email.

• Here's all the terrible stuff that's about to happen to the Wall Street banks that flunked their stress test.

Reuters:

• Shake Shack(SHAK) says comparable sales growth likely to slow in 2015. Shake Shack Inc forecast slowing same-restaurant sales growth in 2015 and swung to a loss in the fourth quarter, helping to send the hamburger chain's shares down as much as 9 percent after its first quarterly report as a public company. Sales at Shacks open at least two years grew 4.1 percent in the year ended Dec. 31, down from 5.9 percent a year earlier, the company said. The company said it expected same-restaurant sales to grow in the low single digits in 2015.

Financial Times:

• Bloated valuations arrest US bull run. Entering its seventh year, the ageing US equity bull market looks vulnerable. Rising concerns about the outlook for US equities reflect their lofty valuations and expectations of higher interest rates. In the past, the combination of rich share prices during periods of tighter monetary policy has proved challenging for the market.

Telegraph:

• Global finance faces $9 trillion stress test as dollar soars. The world is more dollarized today that any time in history, and therefore at the mercy of the US Federal Reserve as rates rise.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 107.75 -1.5 basis points.

• Asia Pacific Sovereign CDS Index 67.25 -.75 basis point.

• S&P 500 futures +.14%.

• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DG)/1.17

• (GCO)/2.38

• (HOV)/-.07

• (PLCE)/.92

• (ARO)/-.05

• (LOCO)/.12

• (ULTA)/1.28

• (ZUMZ)/.79

Economic Releases
8:30 am EST

• Retail Sales Advance for February are estimated to rise +.3% versus a -.8% decline in January.

• Retail Sales Ex Autos for February are estimated to rise +.5% versus a -.9% decline in January.

• Retail Sales Ex Autos and Gas for February are estimated to rise +.3% versus a +.2% gain in January.

• Initial Jobless Claims are estimated to fall to 305K versus 320K the prior week.

• Continuing Claims are estimated to fall to 2400K versus 2421K prior.

• The Import Price Index for February is estimated to rise +.2% versus a -2.8% decline in January.

10:00 am EST

• Business Inventories for January are estimated to rise +.1% versus a +.1% gain in December.

12:00 pm EST

• 4Q Household Change in Net Worth.

2:00 pm EST

• The monthly budget deficit for February is estimated at -$191.0B versus -$193.5B in January.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia unemployment rate, $13B 30Y T-Bond auction, Bloomberg US Economic Survey for March, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (UTX) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and pharmaceutical shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Global Growth Fears, Earnings Worries, Oil Decline, Gaming/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.79 +.60%

• Euro/Yen Carry Return Index 133.72 -1.22%

• Emerging Markets Currency Volatility(VXY) 10.65 -1.21%

• S&P 500 Implied Correlation 61.14 +1.03%

• ISE Sentiment Index 84.0 unch.

• Total Put/Call 1.17 +10.38%

• NYSE Arms .79 -69.90% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.06 -.10%

• America Energy Sector High-Yield CDS Index 738.0 +3.62%

• European Financial Sector CDS Index 56.72 -1.29%

• Western Europe Sovereign Debt CDS Index 20.40 +1.49%

• Asia Pacific Sovereign Debt CDS Index 67.20 -1.07%

• Emerging Market CDS Index 413.22 -.97%

• iBoxx Offshore RMB China Corporates High Yield Index 113.84 -.02%

• 2-Year Swap Spread 26.5 -.75 basis point

• TED Spread 26.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -20.25 +3.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .02% +1.0 basis point

• Yield Curve 142.0 -3.0 basis points

• China Import Iron Ore Spot $57.61/Metric Tonne -.93%

• Citi US Economic Surprise Index -50.50 -.4 point

• Citi Eurozone Economic Surprise Index 46.3 -.8 point

• Citi Emerging Markets Economic Surprise Index 3.30 -9.0 points

• 10-Year TIPS Spread 1.73 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +81 open in Japan

• DAX Futures: Indicating +39 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/medical/retail sector longs 

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

• Market Exposure: Moved to 25% Net Long