Wednesday, July 03, 2013

Stocks Slightly Higher on Central Bank Hopes, Short-Covering, Tech/Precious Metals Sector Strength


Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Light
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 16.57 +.79%
  • Euro/Yen Carry Return Index 135.38 -.59%
  • Emerging Markets Currency Volatility(VXY) 11.08 +2.88%
  • S&P 500 Implied Correlation 56.75 +1.32%
  • ISE Sentiment Index 97.0 +34.72%
  • Total Put/Call 1.05 +2.94%
  • NYSE Arms .80 -17.65% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 85.69 -.47%
  • European Financial Sector CDS Index 169.88 +4.03%
  • Western Europe Sovereign Debt CDS Index 103.12 +10.3%
  • Emerging Market CDS Index 334.63 +1.76%
  • 2-Year Swap Spread 18.0 +.5 bp
  • TED Spread 24.0 -1.25 bps
  • 3-Month EUR/USD Cross-Currency Basis Swap -11.0 -1.25 bps
Economic Gauges:
  • 3-Month T-Bill Yield .04% +2.0 bps
  • Yield Curve 213.0 +1 bp
  • China Import Iron Ore Spot $120.50/Metric Tonne +1.0%
  • Citi US Economic Surprise Index -13.20 -11.4 points
  • Citi Emerging Markets Economic Surprise Index -34.80 +.8 point
  • 10-Year TIPS Spread 2.04 -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -12 open in Japan
  • DAX Futures: Indicating unch. open in Germany
Portfolio: 
  • Higher: On gains in my tech sector longs and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 25% Net Long

Bear Radar

Style Underperformer:
  • Mid-Cap Value -.60%
Sector Underperformers:
  • 1) Hospitals -2.42% 2) Coal -2.06% 3) REITs -1.70%
Stocks Falling on Unusual Volume:
  • LINE, VNR, BSBR, DB, AMT, CVC, DLLR, MXWL, NQ, BBRY, SAP, ARP, BBEP, MJN, LINE, NVR, QRE, LNCO, ALDW, TS, RHI, KYE, VC, REG, KMF, CVRR, OSTK, TW, THC, PSX, X, WNR, HCA, APA, BUD, UHS, NTI, HCA, CYNO, QRE, X, SCO, RHI and ATLS
Stocks With Unusual Put Option Activity:
  • 1) DELL 2) APA 3) SKS 4) TSO 5) DKS
Stocks With Most Negative News Mentions:
  • 1) LULU 2) AA 3) MJN 4) COP 5) BTU
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Growth -.20%
Sector Outperformers:
  • Gold & Silver +1.49% 2) Computer Services +.59% 3) Networking +.58%
Stocks Rising on Unusual Volume:
  • LEAP, FTNT and QLGC
Stocks With Unusual Call Option Activity:
  • 1) FTNT 2) DELL 3) SVU 4) MJN 5) SNTA
Stocks With Most Positive News Mentions:
  • 1) AN 2) PEG 3) BEAT 4) VLO 5) APA
Charts:

Wednesday Watch

Evening Headlines 
Bloomberg: 
  • Zhou Pulling China Punch Bowl Set to Shape PBOC Legacy: Economy. Zhou Xiaochuan earned distinction as the G-20’s longest-serving central bank chief helping keep China out of a financial crisis the past decade. In the wake of June’s record liquidity squeeze, his legacy hangs in the balance. Zhou and his colleagues at the People’s Bank of China left investors, bankers and market participants in the dark for four days after the overnight lending rate between banks hit a record 11.7 percent June 20 before releasing a week-old statement as the central bank’s first word on its objectives. Zhou himself kept mum until he reiterated a pledge to maintain market stability on June 28. 
  • Glaxo, Danone Probed as China Scrutinizes Foreign Firms. China’s probes of GlaxoSmithKline Plc (GSK) and Danone highlight challenges for foreign companies in a market where they may be a bigger “prize” for regulators seeking to allay concerns that medicines and foods are unsafe. The U.K. drugmaker is being probed for alleged bribery, while Danone, along with Nestle SA’s (NESN) Wyeth brand, Mead Johnson Nutrition Co. (MJN) and Abbott Laboratories (ABT), are under investigation for pricing that may have violated anti-monopoly laws. 
  • Expanding Aluminum Glut Signals Price Declines: Chart of the Day. Aluminum prices, which have fallen for three straight quarters, may be poised for further declines as new production in China and the Middle East increases global output even as Alcoa Inc.(AA) trims capacity. Production has gained 5.1% since the end of 2011, helping drive prices down 9.3%, according to data from the Intl Aluminum Institute. Output will reach a record near 50 million metric tons this year, up from 45 million in 2012, Harbor Intelligence forecasts
  • China Hongqiao Adding Aluminum Output as Global Smelters Cut. China Hongqiao Group Ltd. (1378), the nation’s largest non-state aluminum producer, and competitors are boosting or maintaining output as the government seeks to trim capacity amid a global glut. China Hongqiao’s production will rise about 10 percent to 2 million metric tons this year, said Christine Wong, executive director secretary and head of investor relations. Xinfa Group and East Hope Group said they aren’t planning cuts. The companies are three of China’s five biggest aluminum makers. Their stance may hamper curtailment efforts by top global producers including Aluminum Corp. of China Ltd., United Co. Rusal and Alcoa Inc. (AA) who are cutting output to ease worldwide over supply.
  • Chinese Stocks Slump on Growth Concern as Banks, Developers Fall. China’s stocks fell for the first time in four days, led by financial and industrial companies, as growth in services industries slowed and investors speculated initial public offerings will resume this quarter. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, slid 2.2 percent and developer Gemdale Corp. sank 4.5 percent. Sany Heavy Industry Co., the largest machinery maker, tumbled 3.6 percent to its lowest level in almost three years as oil surged in New York. The non-manufacturing purchasing managers’ index fell to 53.9 in June, an official report showed, while Credit Suisse Group AG said regulators may allow share sales by October. The Shanghai Composite Index (SHCOMP) slumped 2 percent to 1,966.30 at 11:06 a.m. local time, heading for the biggest loss since June 24 and snapping a three-day, 2.9 percent rally. The CSI 300 Index declined 2.3 percent to 2,170.59. The Hang Seng China Enterprises Index slumped 3.1 percent, taking its loss this year to 22 percent. “Leading indicators like PMI suggest the economy is still weak,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Uncertainty over when IPOs will be resumed also weighs on sentiment. The earlier rebound isn’t sustainable.” The Shanghai Composite has tumbled 19 percent from its recent peak on Feb. 6 as data from industrial production to exports pointed to a sustained slowdown in the world’s second-largest economy. Stocks also slumped as overnight money-market rates surged to record highs.
  • Oil Climbs on Egypt as Asian Stocks Decline; Won Weakens. Crude oil rallied above $100 a barrel for the first time in nine months on political turmoil in Egypt and shrinking U.S. stockpiles. Asian stocks snapped a five-day gain, as South Korea’s won and Australia’s dollar fell. West Texas Intermediate Crude surged 2.4 percent to $101.92 a barrel by 12:08 p.m. in Tokyo, set to close at a 14-month high. The MSCI Asia Pacific Index of equities slid 1.2 percent, ending the longest run of gains since April. The won lost 0.6 percent after the yen breached the 100 per dollar mark for the first time in a month, as the Aussie weakened 0.4 percent. Standard & Poor’s 500 Index (SPX) futures slipped 0.2 percent, while the Shanghai Composite Index dropped 1.9 percent as a gauge of services declined in June. 
  • U.S. Gears to Impose Stricter Rules on 8 Largest Banks. JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Goldman Sachs Group Inc. are among eight U.S. banks facing new domestic rules on capital and debt that would be even stricter than global standards approved yesterday. Lenders will be forced to maintain a ratio of capital to assets that exceeds the 3 percent floor set by the Basel Committee on Banking Supervision, Federal Reserve Governor Daniel Tarullo said yesterday. Another measure would compel banks to hold a minimum amount of equity and long-term debt to help authorities dismantle failing lenders, Tarullo said. The remarks show U.S. regulators plan to ratchet up demands for bigger buffers against losses to prevent a repeat of the 2008 credit crisis, ignoring bankers who say lending and profit will suffer. The measures would come on top of toughened global standards known as Basel III that Fed governors approved unanimously, even as Tarullo said parts remain too weak. “We’re in the first few chapters of a horror story for the big banks, with the worst to come,” said Coryann Stefansson, a managing director at PricewaterhouseCoopers LLP. “It’s clear that the U.S. is willing to push for stronger capital.”
Fox News: 
  • Egypt teeters on brink of overthrow, 23 reported killed in Tuesday clashes. Egypt teetered on the brink of overthrow late Tuesday after a defiant Egyptian President Mohammed Morsi rejected an ultimatum issued by the military and at least 23 people were reported killed in clashes between his supporters and opponents. Defense officials have pledged to intervene if the government does not address public demands and end the political turmoil engulfing Cairo. In a speech to the nation broadcast live late Tuesday, Morsi said he would not step down and would protect his "constitutional legitimacy" with his life. The deadly clashes came just one day before the deadline set by the military for Morsi and his opponents to work out their differences. The Associated Press reported that at least 23 people were killed in Cairo Tuesday and more than 200 injured, according to hospital and security officials who spoke on condition of anonymity because they were not authorized to talk to the media.
  • Administration delays key ObamaCare insurance mandate. The Obama administration announced Tuesday that it is delaying a major provision in the health care overhaul, putting off until 2015 a requirement that many employers offer health insurance. The announcement was made late Tuesday by the Treasury Department, at the beginning of the holiday week while Congress was on recess. It comes amid reports that the administration is running into roadblocks as it prepares to implement ObamaCare. The change in the employer mandate is arguably the most significant concession the administration has made to date. Sen. John Barrasso, R-Wyo., a critic of the law, seized on the delay as a "clear admission" that the law is "unaffordable, unworkable and unpopular." "It's also a cynical political ploy to delay the coming train wreck associated with ObamaCare until after the 2014 elections," he said
MarketWatch.com: 
  • China services data show sluggish growth in June. A pair of surveys monitoring China's services sector released Wednesday showed weak growth for June. The government-sponsored version of China's services Purchasing Managers' Index fell to 53.9 for June from May's 54.3. 
CNBC: 
  • S&P Cuts Ratings of Credit Suisse, Barclays, Deutsche Bank. Standard & Poor's announced Tuesday that it is cutting the credit ratings of three major European banks: Credit Suisse, Barclays and Deutsche Bank. The downgrades, to A from A+, are because of higher risk, the company said in a statement, citing greater regulation and "uncertain market conditions."
  • Portugal Throws New Curve Ball in Euro Debt Crisis. Portugal faced a full-blown crisis on Tuesday after Foreign Minister Paulo Portas became the second minister to resign from the center-right government in a 24-hour period. Portugal's Prime Minister Pedro Passos Coelho, speaking live on TV to the nation on Tuesday night said he had not accepted Portas' resignation and would speak to his coalition partner. The leader of the opposition Socialist party speaking to the nation on TV on Tuesday night called for fresh elections and said the government had lost the confidence of the people.
Zero Hedge: 
Reuters: 
StraitsTimes: 
  • Singapore debt levels 'among highest in Asia'. Singapore households are among the most indebted in Asia relative to what they earn, according to a Standard Chartered report this week. Households had borrowings worth 151 per cent of their annual income last year, second in the region only to Malaysia, with debt at 182 per cent of income. This is mainly because consumers here take on large dollops of property debt, amounting to 111 per cent of household income - the highest level in the region, Stanchart said.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.75% to -.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 152.50 +4.0 basis points.
  • Asia Pacific Sovereign CDS Index 109.75 -1.0 basis point.
  • FTSE-100 futures -.54%.
  • S&P 500 futures -.18%.
  • NASDAQ 100 futures -.19%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (ISCA)/.48
Economic Releases
8:15 am EST
  • The ADP Employment Change for June is estimated to rise to 160K versus 135K in May.
8:30 am EST
  • The Trade Deficit for May is estimated at -$40.1B versus -$40.3B in April.
  • Initial Jobless Claims are estimated to fall to 345K versus 346K the prior week.
  • Continuing Claims are estimated to fall to 2958K versus 2965K prior.
10:00 am EST
  • The ISM Non-Manufacturing Composite for June is estimated to rise to 54.0 versus 53.7 in May.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,250,000 barrels versus an +18,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +700,000 barrels versus a +3,653,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +1,567,000 barrel gain the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone Services PMI/Retail Sales reports, Japan 30Y bond auction, BoJ's Kuroda speaking, weekly MBA Mortgage Applications report, Challenger Job Cuts for June, RBC Consumer Outlook Index for July and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity 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.

Tuesday, July 02, 2013

Stocks Reversing Lower into Final Hour on Rising Global Growth Fears, Emerging Markets Unrest, Technical Selling, Metals & Mining/Homebuilding Sector Weakness


Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 16.60 +1.41%
  • Euro/Yen Carry Return Index 136.18 +.93 +.32%
  • Emerging Markets Currency Volatility(VXY) 10.67 +.28%
  • S&P 500 Implied Correlation 56.75 -2.36%
  • ISE Sentiment Index 71.0 -20.22%
  • Total Put/Call 1.01 -10.99%
  • NYSE Arms 1.03 -14.11% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 85.82 +1.69%
  • European Financial Sector CDS Index 164.09 +.28%
  • Western Europe Sovereign Debt CDS Index 93.50 -.46%
  • Emerging Market CDS Index 325.34 +3.31%
  • 2-Year Swap Spread 17.50 +2.0 bps
  • TED Spread 25.25 -1.0 bp
  • 3-Month EUR/USD Cross-Currency Basis Swap -9.75 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .02% +! bp
  • Yield Curve 212.0 -1 bp
  • China Import Iron Ore Spot $119.30/Metric Tonne +2.05%
  • Citi US Economic Surprise Index -1.80 +1.8 points
  • Citi Emerging Markets Economic Surprise Index -35.40 -.8 point
  • 10-Year TIPS Spread 2.05 +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating +212 open in Japan
  • DAX Futures: Indicating -34 open in Germany
Portfolio: 
  • Higher: On gains in my tech/biotech sector longs and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 25% Net Long

Bear Radar

Style Underperformer:
  • Mid-Cap Value +.09%
Sector Underperformers:
  • 1) Gold & Silver -2.16% 2) Airlines -2.02% 3) Steel -1.26%
Stocks Falling on Unusual Volume:
  • FMS, LINE, BRY, DVA, IDT, BBEP, MMS, LNCO, AZZ, WBMD, GBX, ENV, MJN, HON, SHLM, CACI, LGND, TRN, WPRT, COR, PBF, FLTX, KRO, KCAP and BRY
Stocks With Unusual Put Option Activity:
  • 1) IYT 2) ONXX 3) HON 4) KLAC 5) COF
Stocks With Most Negative News Mentions:
  • 1) ILMN 2) TSCO 3) RIG 4) NEM 5) DVA
Charts: