Broad Equity Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.34 -2.27%
- Euro/Yen Carry Return Index 139.38 -1.22%
- Emerging Markets Currency Volatility(VXY) 8.11 +3.97%
- S&P 500 Implied Correlation 39.26 -3.71%
- ISE Sentiment Index 142.0 +56.04%
- Total Put/Call .89 -8.25%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.85 -.29%
- European Financial Sector CDS Index 117.94 -2.40%
- Western Europe Sovereign Debt CDS Index 70.0 +1.45%
- Emerging Market CDS Index 270.21 +.06%
- 2-Year Swap Spread 12.0 +.25 basis point
- TED Spread 20.5 -.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.0 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .04% +1 basis point
- Yield Curve 224.0 +3 basis points
- China Import Iron Ore Spot $131.90/Metric Tonne +.53%
- Citi US Economic Surprise Index 3.80 +5.9 points
- Citi Emerging Markets Economic Surprise Index -11.10 -2.0 points
- 10-Year TIPS Spread 2.17 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +128 open in Japan
- DAX Futures: Indicating +7 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
Style Underperformer:
Sector Underperformers:
- 1) Education -5.30% 2) Gold & Silver -3.61% 3) Homebuilders -1.63%
Stocks Falling on Unusual Volume:
- WTW, AAWW, DATA, TTS, AVP, EXLS, RATE, HGG, GTLS, STRA, RRTS, MDAS, JIVE, PRLB, SNE, SGI, CCMP, NSR, EPL, OTEX, VRX, STAA, JDSU, OSK, MW, NCMI, APOL, ITRI, MGM, SPWR, NSR, CROX, PRAA, RRTS, GTLS, MASI, CNW, JDSU, EPL, OSK, ROVI, HOS, JOSB, ESI, MOH, PDCE, EXAM, SNCR, DLR, NCMI, DV, INT, VOLC, GIMO, RKUS, Q, MUR and WMB
Stocks With Unusual Put Option Activity:
- 1) BYD 2) CIEN 3) WTW 4) JDSU 5) MGM
Stocks With Most Negative News Mentions:
- 1) AVP 2) JDSU 3) HLF 4) V 5) C
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.08% 2) Networking +1.43% 3) HMOs +1.17%
Stocks Rising on Unusual Volume:
- ZLTQ, CRR, CCK, SSNI, CAVM, ARRS, EXPE, THOR, MCHP, PRGO, ITT, HAR, PGTI, SHOO, FLT, CAR, DGI, DWA, SWKS, TRN, HBI, ISIL, CRUS, SHOO, CAH and CJES
Stocks With Unusual Call Option Activity:
- 1) APO 2) TWM 3) ACHN 4) WTW 5) BYD
Stocks With Most Positive News Mentions:
- 1) EL 2) EXPE 3) YHOO 4) CLX 5) AMZN
Charts:
Evening Headlines
Bloomberg:
- Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages.
Japan’s salaries extended the longest slide since 2010, even as Prime
Minister Shinzo Abe urges companies to raise workers’ wages as part of
his bid to reflate the world’s third-largest economy. Regular wages
excluding overtime and bonuses fell 0.3 percent in September from a year
earlier, marking a 16th straight month of decline, according to labor ministry data released today.
- China’s Stocks Decline as Earnings Drag on Banks to Drugmakers. China’s stocks fell, heading for the first monthly loss since June, as earnings (SHCOMP) at banks and consumer staple producers disappointed investors. Developers rallied. China Minsheng Banking Corp. slid 2.3 percent after net income trailed estimates. Inner Mongolia Yili Industrial Group Co. and Guangzhou Baiyunshan Pharmaceutical Holdings Co. both slumped by the daily 10 percent limit after posting earnings. Poly Real Estate Group Co. led a gauge of property stocks to its
biggest gain in three weeks after President Xi Jinping said the
government will accelerate building public housing.
The Shanghai Composite Index retreated 0.7 percent to
2,145.72 at 11:30 a.m. local-time break.
- Asian Stocks Pare Monthly Gain as Fed Fuels Tapering Bets.
Asian stocks fell, trimming the best two-month rally for the regional
benchmark gauge since the start of 2012, after the Federal Reserve
fueled bets it may start paring stimulus sooner than previously
forecast. Alacer Gold Corp. sank 3.5 percent in Sydney as the price of
the precious metal declined. Honda Motor Co. (7267) lost 1.8 percent
after Japan’s third-largest carmaker reported second-quarter profit that
missed analysts’ estimates amid slowing motorcycle sales in Southeast
Asia. National Australia Bank Ltd. (NAB) retreated 2.3 percent as
expenses climbed at the country’s largest lender
by assets.
The MSCI Asia Pacific Index dropped 0.4 percent to 142.70
as of 9:37 a.m. in Hong Kong, with eight of the 10 industry
groups on the measure retreating.
- Rubber Poised for Second Monthly Drop Amid Fed Tapering Bets. Rubber declined for the first time
in four days as speculation the Federal Reserve may cut stimulus sooner than previously expected weighed on investor sentiment. The
contract for delivery in April, the most active by volume on the Tokyo
Commodity Exchange, lost as much as 1.3 percent to 261 yen a kilogram
($2,651 a metric ton) and was at
261.3 yen at 11:34 a.m. local time. Futures fallen 1.7 percent
this month.
- Rebar Set for Monthly Loss on China’s Weak Winter Demand Outlook. Steel reinforcement-bar futures in
Shanghai headed for a monthly loss amid concern that demand for
the building material will be weak in winter ahead. Rebar for
delivery in May, the most-active contract by volume on the Shanghai
Futures Exchange, fell as much as 0.4 percent to 3,630 yuan ($596) a
metric ton, before trading at
3,638 yuan at 10:16 a.m. local time. The contract lost 1.4
percent this month.
- Spying Disclosures Seen Undermining Exports of U.S. Technology. The disclosure of U.S. spying on
allies may temporarily undercut efforts by American companies to
sell technology overseas, according to a former official with
the Department of Homeland Security. “We are going to go through a period of substantial
skepticism abroad about any technology we’re selling people,”
Stewart Baker, a Washington lawyer who headed the department’s
policy directorate, said today at a forum on cybersecurity
hosted by Bloomberg Government and Symantec Corp.
- U.S. Weighs Scanning Social Media for Clues to Rogue Workers. The U.S. government is studying
whether it can scour social-media websites for clues about
potential threats from workers such as Edward Snowden and the
Washington Navy Yard shooter. Both Snowden, a former National Security Agency contractor
who leaked government secrets, and Aaron Alexis, who shot and
killed 12 people, had security clearances. The cases have
exposed a flawed system of vetting such employees, some of whom
are slipping through the cracks. The pilot studies, which looked at the feasibility of using
automated records checks as well as social-media websites, have
turned up “actionable information,” Brian Prioletti, an
assistant director in the Office of the National
Counterintelligence Executive, said in testimony prepared for a
congressional hearing tomorrow.
- BofA(BAC) Warns of More Legal Disputes Ahead as Potential Costs Surge. Bank of America Corp., the second-biggest U.S. lender, said the Department of Justice may file
another suit tied to mortgage bonds and raised its estimate of
possible added losses from legal and regulatory matters by 82
percent to $5.1 billion. A U.S. Attorney’s office intends to recommend civil action
against the Charlotte, North Carolina-based lender tied to the
bundling of home loans into securities, the firm said today in
its quarterly regulatory filing. The bank also said its eventual
legal costs could exceed even its revised estimates.
Wall Street Journal:
- McCain Threatens to Delay Confirmation of Yellen as Fed Chief. Republican Senator to Use Delaying Tactic in Bid to Obtain Information on Benghazi Attacks from Obama Administration.
GOP Sens. John McCain and Lindsey Graham will attempt to delay
confirmation of Janet Yellen to lead the Federal Reserve in a bid to
obtain information from the Obama administration about the attacks on
U.S. facilities in Benghazi, Libya, Mr. McCain said Wednesday. Ms.
Yellen, Mr. Obama's pick to become the first chairwoman of the central
bank, is expected to secure the support of nearly all Democrats, but a
handful of opponents among Senate Republicans have surfaced recently.
Sens. Graham, of South Carolina, and McCain, of Arizona, threatened this
week to put a "hold" on Ms. Yellen's nomination in an effort to press
the White House to release more information about the Benghazi attacks
on Sept. 11, 2012. "That's the only way we get their attention,"
Mr. McCain said in an interview Wednesday evening. "It's the only way
we get any response." Mr. Graham's office confirmed he would also hold
up Ms. Yellen's nomination to press for more information about the
Benghazi attacks.
- U.S. Seeks Chinese Coordination on Oil Reserves. Over the past five years, China has amassed hundreds of millions of barrels in strategic petroleum reserves. Now the U.S. wants China to work with it to coordinate releases of
those barrels when needed to help ensure oil market stability.
- U.S. General Decries Spiraling Iraq Violence. The top U.S. military commander in the Middle
East said Iraq has entered a downward spiral of violence that threatens
to drive the country's prime minister further into the hands of Iran.
- U.S. Blasts Germany's Economic Policies. Employing
unusually sharp language, the U.S. on Wednesday openly
criticized Germany's economic policies and blamed the euro-zone
powerhouse for dragging down its neighbors and the rest of the global
economy. In its semiannual currency report, the Treasury Department
identified Germany's export-led growth model as a major factor
responsible for the 17-nation currency bloc's weak
recovery. The U.S. identified Germany ahead of its traditional target,
China, and the most-recent perceived problem country, Japan, in the "key
findings" section of the report.
Fox News:
Bankrupt solar panel firm took stimulus money, left a toxic mess, says report. A Colorado-based solar company that got hundreds of millions of
dollars in federal loan guarantees before going belly-up didn't just
empty taxpayers' wallets - it left behind a toxic mess of carcinogens,
broken glass and contaminated water, according to a new report.
The Abound Solar plant, which got $400 million in federal loan
guarantees in 2010, when the Obama administration sought to use stimulus
funds to promote green energy, filed for bankruptcy two years later.
Now its Longmont, Colo., facility sits unoccupied, its 37,000 square
feet littered with hazardous waste, broken glass and contaminated water.
The Northern Colorado Business Report estimates it will cost up to $3.7 million to clean and repair the building so it can again be leased.
CNBC:
- Obamacare, shutdown hurt Obama's standing: NBC News/WSJ poll. The troubled rollout of the new health-care law and recent government shutdown have exacted a major toll on President Barack Obama's standing, a new NBC News/Wall Street Journal poll has found.
Obama's job approval rating has tumbled by 5 percentage points in less
than three weeks, the survey showed. In the weakest showing of his
five-year tenure, just 42 percent of Americans approve of the
president's job performance, while 51 disapprove.
Zero Hedge:
Business Insider:
The Blaze:
Reuters:
- Sins of past, present and future haunt banks. The
cost to banks of cleaning up past misdeeds has soared over $100 billion
and is leaving lenders running scared from areas that put them in
potential danger of upsetting regulators. This week alone, Deutsche Bank, UBS and
Lloyds revealed mounting legal bills and Dutch
agricultural specialist Rabobank became the latest lender to be
fined in a global scandal over interest rate rigging with a $1.1
billion penalty. Bankers fear that paying for the sins of the past and
preventing future misdemeanours could be the biggest headache
yet for an industry still trying to bulk up on capital and
liquidity reserves in the wake of the 2007-09 financial crisis.
- Starbucks(SBUX) 2014 profit forecast falls short, shares drop. Starbucks Corp conservatively
forecast 2014 profit below Wall Street's view, despite fourth
quarter profits that jumped 34 percent on strong traffic gains
and an increase in spending by its customers. Shares in the world's biggest coffee chain, one of the
economy-defying growth companies such as burrito chain Chipotle
Mexican Grill and upscale grocer Whole Foods Market Inc
, fell 2.5 percent after hours to $78.80.
- Visa(V) profit falls as U.S. consumer spending weakens.
Visa Inc, the world's largest credit and debit card company, reported a
28 percent fall in quarterly profit due to a higher income tax
provision and was slightly pessimistic about its outlook in the face of
soft U.S. consumer spending. Visa shares fell 3.1 percent to $197.50
in after-hours trade while those of rival MasterCard Inc fell 1 percent,
ahead of its results on Thursday.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 131.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 99.0 -.25 basis point.
- NASDAQ 100 futures -.55%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 338K versus 350K the prior week.
- Continuing Claims are estimated to fall to 2870K versus 2874K prior.
9:00 am EST
- ISM Milwaukee for October is estimated to fall to 53.0 versus 55.0 in September.
9:45 pm EST
- Chicago Purchasing Manager for October is estimated to fall to 55.0 versus 55.7 in September.
Upcoming Splits
Other Potential Market Movers
- The BoJ rate decision, German Retail Sales, Eurozone Unemployment/CPI, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, RBC Consumer Outlook Index for November and the (EW) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.79 +2.76%
- Euro/Yen Carry Return Index 141.15 +.31%
- Emerging Markets Currency Volatility(VXY) 7.82 +.77%
- S&P 500 Implied Correlation 41.84 +3.65%
- ISE Sentiment Index 87.0 -28.69%
- Total Put/Call .98 +36.1%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.93 +2.48%
- European Financial Sector CDS Index 120.85 +2.45%
- Western Europe Sovereign Debt CDS Index 69.0 -1.43%
- Emerging Market CDS Index 270.53 +2.50%
- 2-Year Swap Spread 11.75 unch.
- TED Spread 21.25 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.0 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 basis point
- Yield Curve 221.0 +1 basis point
- China Import Iron Ore Spot $131.20/Metric Tonne -.08%
- Citi US Economic Surprise Index -2.1 -7.1 points
- Citi Emerging Markets Economic Surprise Index -9.10 -4.7 points
- 10-Year TIPS Spread 2.18 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +68 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- China’s Largest Banks Post Biggest Surge in Bad Loans Since 2010. China’s top four banks posted their
biggest increase in soured loans since at least 2010 as a five-year credit spree left companies with excess manufacturing
capacity and slower profit growth amid an economic slowdown. The rise in defaults adds to concerns bank profitability
may decline as policy makers seek to trim production at cement
makers to paper manufacturers that have gorged on credit since
2008, while urging lenders to build buffers to cover loan
losses. China’s biggest state-run banks are trading near record-low valuations as investors brace for a surge in bad debts and
slower credit growth. “Against the backdrop of a slowing economy and
overcapacity problems in some industries, some loans are
gradually going bad,” said May Yan, a Hong Kong-based analyst
at Barclays Plc. “We will see more bad loans forming because of
the legacy of over expansion."
- European Stocks Are Little Changed as Volkswagen Advances.
European stocks were little changed at a one-week high as companies
from Eni SpA (ENI) to Volkswagen AG posted profit that exceeded
estimates, while a gauge of telecommunications companies retreated. Eni,
Italy’s biggest oil company, climbed 1.3 percent. Volkswagen posted its
biggest gain in 15 months as Europe’s
largest carmaker said cost cutting contributed to higher
earnings. TomTom NV added 3.4 percent after the Dutch maker of
navigation systems raised its forecast for 2013. Belgacom SA
dropped 5.3 percent as a competitor cut the price of its mobile-phone
plans. The Stoxx Europe 600 Index added less than 0.1 percent to
320.8 at the close of trading, after earlier climbing as much as
0.7 percent.
- WTI Crude Decreases as U.S. Stockpiles Climb. WTI for December delivery declined $1.18, or 1.2 percent, to $97.02 a barrel at 1:31 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 5.2 percent lower than the 100-day average. Prices are down 5.2 percent this month
after losing 4.9 percent in September.
- Obama Health Vow Won’t Shield Millions From Cancellation. Obama administration officials knew by June 2010 that as many as 10
million people with individual insurance probably would be thrown off
existing plans. That didn’t stop Obama from coming back to the line over and over,
saying as recently as June 2012, “If you’re one of the more than 250
million Americans who already have health insurance, you will keep your
health insurance.” Republican congressional leaders yesterday seized on reports that
hundreds of thousands of Americans received insurance cancellation
notices, questioning the president’s credibility and renewing calls to
delay provisions of the health-care law. As many as 80 percent of
people currently on individual health plans may have to find new health
insurance for next year, said Robert Laszewski, an insurance-industry
consultant in Arlington, Virginia. He estimates that 19 million people
currently hold such policies. “If the president knew that these
letters were coming and still indicated that you could keep your health
care plan if you liked it, now that raises some serious questions about
the sales job of Obamacare,” Cantor said as he emerged from a party
leadership meeting. Obama has been using the line about people keeping
their insurance for years, dating back to his 2008 campaign for
president, including at a presidential debate with Republican John
McCain, an Arizona senator.
- Options Market Hit With Data Disruptions as VIX Lurches. Data transmission was snarled in parts of the options market today as
one of the biggest U.S. venues, International Securities Exchange LLC,
reported issues disseminating prices and the industry’s benchmark gauge
twice swung erratically.
Wall Street Journal:
- Federal Reserve Holds Bond Purchases Steady. The Federal Reserve on Wednesday held steady on its signature $85
billion per-month bond-buying program and gave very few new signals on
when officials expect to pull back on the program or how they see the
economic outlook changing. The Fed's policy-making committee showed itself to be effectively in a
wait-and-see mode on the bond program, leaving investors in a continued
guessing game about the path of a Fed policy which has been an
important driver of asset prices and interest rates. In June Fed chairman Ben Bernanke said he expected the Fed to start
pulling back this year, but with only one more Fed policy meeting in
December before year-end, that now looks less certain. "[T]he Committee decided to await more evidence that progress will be
sustained before adjusting the pace of its purchases," the Fed said in
its statement Wednesday, repeating language it used in September. The Fed made very few changes to its description of current economic
conditions. It said that the economy "continued to expand at a moderate
pace," and labor markets "have shown some further improvement." The Fed
acknowledged that the "recovery in the housing sector slowed somewhat in
recent months," one of the most notables change it made in its
statement.
- Three Takeaways on the Fed’s Policy Statement – December Taper Not Off the Table by Jon Hilsenrath.
- The Outrage Arrives. You can't keep your insurance because Democrats don't want you to control your own health-care spending. The White House has issued a clarification. When the president said
if you like your insurance plan you can keep it, what he meant was you
can keep it if he likes it. Hundreds of thousands of
Americans who are getting policy cancellation notices this month can't
be as surprised as they pretend to be. President Obama made it clear at
his 2010 health care summit what he thought of their taste in insurance. "It's the equivalent of Acme Insurance that I had for my car. .
. . It's basically not health insurance," he explained. "It's house
insurance. . . .
Fox News:
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
The Star Online:
- China GDP figures wrong by US$610bil: report.
China's economy would be at least 3.7 trillion yuan (US$610bil)
bigger than Beijing thinks if the country's local government statistics
were to be believed, state media reported Wednesday. The Economic Information Daily tallied up gross domestic
product (GDP) data from 28 of mainland China's 31 provincial-level
authorities, and arrived at 42.4 trillion yuan for the first nine months
of the year. But the figure for the whole country, already announced by Beijing, is 3.7 trillion yuan lower. The discrepancy – which has been in place for more than two decades – has been widening rapidly in recent years, the Economic Information Daily said. The reliability of Chinese economic data has long been in doubt as
local officials tend to massage the figures upwards in pursuit of
promotion and the newspaper, which is run by the official Xinhua news
agency, pointed to the same problem. "Some regions may have inflated the statistics due to their distorted
perception of achievements, given the fact that the performance
assessment of local governments is often linked with GDP growth," the
report quoted an unnamed National Bureau of Statistics official as
saying.
