Monday, April 03, 2017

Tuesday Watch

Evening Headlines
Bloomberg:
  • Australia Losing AAA Would Spark Turn to Bank Debt, NAB Says. Australia’s biggest banks would find new demand for their debt if the country loses its top credit score. That’s the view of Eva Zileli, head of group funding at the nation’s fourth-largest lender by market value, National Australia Bank Ltd. Australian banks receive sovereign support for their credit scores and while a downgrade of the country’s AAA rating would force lenders to pay more to tap debt markets, it would also deepen their investor pool as higher-yielding paper lures new investors, she said.
  • Asia Stocks Drop as Yen Gains; Rand Extends Loss. The yen climbed against the dollar for a third day. Equities in Japan, Australia and South Korea all retreated. U.S. shares were led lower by auto manufacturers that reported worse-than-expected U.S. sales for March. China, Hong Kong, Taiwan and India are closed for a holiday. South Africa’s rand extended losses for a seventh day after the country lost its investment-grade credit rating from S&P Global Ratings for the first time in 17 years. The Russian ruble steadied after declines sparked by a subway bomb in St. Petersburg that killed 11 people. The yen rose 0.2 percent to 110.68 per dollar as of 9:17 a.m. in Tokyo, after climbing 0.4 percent on Monday. The Topix index lost 0.6 percent. Australia’s S&P/ASX 200 Index sank 0.2 percent and South Korea’s Kospi slid 0.4 percent.
  • Trump Cracks Down on H-1B Visa Program That Feeds Silicon Valley. The U.S. administration began to deliver on President Donald Trump’s campaign promise to crack down on a work visa program that channels thousands of skilled overseas workers to companies across the technology industry. Fed up with a program it says favors foreign workers at the expense of Americans, the Trump administration rolled out a trio of policy shifts. The U.S. Citizenship and Immigration Services agency on Friday made it harder for companies to bring overseas tech workers to the U.S. using the H-1B work visa. On Monday, the agency issued a memo laying out new measures to combat what it called "fraud and abuse" in the program. The Justice Department also warned employers applying for the visas not to discriminate against U.S. workers.
Wall Street Journal:
Night Trading 
  • Asian equity indices are unch. to -.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 94.5 unch. 
  • Asia Pacific Sovereign CDS Index 21.25 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 72.03 -.03%. 
  • S&P 500 futures -.15%. 
  • NASDAQ 100 futures -.09%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (CONN)/-.18
  • (SHLM)/.30
  • (ISCA)/.45
Economic Releases
8:30 am EST 
  • The Trade Deficit for February is estimated at -$44.5B versus -$48.5B in January. 
10:00 am EST
  • Factory Orders for February are estimated to rise +1.0% versus a +1.2% gain in January.  
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Tarullo speaking, Eurozone retail sales reports, weekly US retail sales reports, (DAL) traffic data report, (PWR) investor day, Needham Healthcare Conference, BofA Merrill Oil & Gas Conference, World Retail Congress could also impact trading today.
BOTTOM LINE:  Asian indices are modestly lower, weighed down by consumer and commodity 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 Slightly Lower into Final Hour on Less Economic Optimism, Oil Decline, Yen Strength, Retail/Financial Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 12.73 +2.91%
  • Euro/Yen Carry Return Index 123.47 -.39%
  • Emerging Markets Currency Volatility(VXY) 9.04 -.33%
  • S&P 500 Implied Correlation 44.63 +.56%
  • ISE Sentiment Index 54.0 +4.0%
  • Total Put/Call .94 -20.3%
  • NYSE Arms 1.79 +16.89%
Credit Investor Angst:
  • North American Investment Grade CDS Index 66.67 +.13%
  • America Energy Sector High-Yield CDS Index 334.0 -.48%
  • European Financial Sector CDS Index 92.06 +3.86%
  • Western Europe Sovereign Debt CDS Index 12.96 +3.97%
  • Asia Pacific Sovereign Debt CDS Index 21.28 +.47%
  • Emerging Market CDS Index 213.96 +.44%
  • iBoxx Offshore RMB China Corporate High Yield Index 136.55 +.06%
  • 2-Year Swap Spread 35.25 -.75 basis point
  • TED Spread 38.75 -.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -25.0 +.5 basis point
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 72.01 -.18%
  • 3-Month T-Bill Yield .76% unch.
  • Yield Curve 111.0 -3.0 basis points
  • China Import Iron Ore Spot $79.36/Metric Tonne -1.18%
  • Citi US Economic Surprise Index 44.50 -3.5 points
  • Citi Eurozone Economic Surprise Index 47.70 -6.4 points
  • Citi Emerging Markets Economic Surprise Index 31.30 -3.1 points
  • 10-Year TIPS Spread 1.97 unch.
  • 56.7% chance of Fed rate hike at June 14 meeting, 61.3% chance at July 26 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +77 open in Japan 
  • China A50 Futures: Indicating +54 open in China
  • DAX Futures: Indicating +55 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my retail sector longs and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:
  • Euro-Area Unemployment Falls to Lowest Level in Eight Years. Euro-area unemployment fell to the lowest in almost eight years and a measure of manufacturing accelerated as factories in the region’s biggest economies benefited from improving global growth. The average jobless rate declined to 9.5 percent in February from 9.6 percent in January. It’s been decreasing steadily from a peak of more than 12 percent in 2013 and is now at the lowest since May 2009. Separately, IHS Markit said its Purchasing Managers’ Indexes for Germany, France and Italy all rose in March, helping to pushing its euro-region gauge to the highest since 2011. New export business increased in all three nations.
  • U.S. Stocks Decline as Auto Sales Trail Estimates. (video) The Stoxx Europe 600 dropped 0.49 percent, after increasing 5.5 percent for the first three months of the year, the best quarter in two years. The MSCI All Country World Index was down roughly 0.5 percent.
  • Tesla(TSLA) Passes Ford by Market Cap Before Musk Delivers Model 3. (video) The electric-carmaker climbed as much as 5.7 percent a day after beating analysts’ estimates by reporting shipments of 25,000 cars and SUVs in the first quarter. Its market value is now at about $47.6 billion, $2.7 billion more than Ford. Tesla has supplanted Ford even though it delivered fewer than 80,000 vehicles globally last year, compared with 6.7 million from Ford, the second-biggest automaker in the country behind General Motors Co.
Wall Street Journal:

Bear Radar

Style Underperformer:
  • Small-Cap Value -.9%
Sector Underperformers:
  • 1) Retail -1.2% 2) Computer Hardware -1.2% 3) Oil Service -1.0%
Stocks Falling on Unusual Volume: 
  • UTHR, ACOR, KMX, ORLY, BOFI, AXL and ZTO
Stocks With Unusual Put Option Activity:
  • 1) RTN 2) PNRA 3) KMX 4) FIT 5) HUN
Stocks With Most Negative News Mentions:
  • 1) ACOR 2) ORLY 3) FCAU 4) RWLK 5) AZO
Charts: