Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.93 -12.27%
- Euro/Yen Carry Return Index 143.67 -.05%
- Emerging Markets Currency Volatility(VXY) 6.58 -2.08%
- S&P 500 Implied Correlation 56.30 -6.7%
- ISE Sentiment Index 92.0 +113.95%
- Total Put/Call 1.21 -2.42%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.74 -4.30%
- European Financial Sector CDS Index 71.86 -4.23%
- Western Europe Sovereign Debt CDS Index 36.32 -3.75%
- Asia Pacific Sovereign Debt CDS Index 73.46 -2.68%
- Emerging Market CDS Index 278.45 -.71%
- China Blended Corporate Spread Index 310.95 +.44%
- 2-Year Swap Spread 20.75 -.25 basis point
- TED Spread 22.25 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 202.0 -1.0 basis point
- China Import Iron Ore Spot $95.40/Metric Tonne +.21%
- Citi US Economic Surprise Index -12.70 +.3 point
- Citi Emerging Markets Economic Surprise Index 1.40 +1.8 points
- 10-Year TIPS Spread 2.23 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +56 open in Japan
- DAX Futures: Indicating +64 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Putin Sanctions Drive Away Banks as Loans Dry Up. Lending to Russian companies
reached a crescendo last year, with international banks pledging $31
billion to OAO Rosneft to buy TNK-BP. As sanctions are tightened against
the nation, even the smallest deals have dried up. No
Russian companies received loans in U.S. dollars, Swiss francs or euros
last month, the first time this has happened in at least five years,
according to data compiled by Bloomberg. Global banks fell away in the
second quarter, with lending plunging 42 percent from a year earlier to
$4.7 billion as the Ukraine conflict worsened after President Vladimir
Putin annexed Crimea in March. That was the least for any quarter since
2012.
- Libya House Meets as Egypt Sounds Alarm on Growing Mayhem. Libya’s newly elected legislature met
for the handover from its predecessor body, a transition marred
by militia fighting that has left scores dead, sent foreigners
fleeing and pushed the country deeper into chaos. Lawmakers from the House of Representatives, meeting today
amid high security, took over from the General National Congress
against a backdrop of unrest unseen since the 2011 ouster and
killing of Muammar Qaddafi.
- European Stocks Fall for a Fourth Day as Nestle Retreats. European equities declined for a fourth day as the region’s two largest stocks retreated, outweighing reduced concern about the region’s most indebted lenders after Portugal bailed out Banco Espirito Santo SA. Nestle SA and Novartis AG both dropped more than 1 percent. Immofinanz AG slid 2.7 percent after the Austrian property
developer reported annual profit that missed projections and
said a delay in the construction of a Moscow shopping center
hurt rental income. Banco Comercial Portugues SA rallied 6.1
percent. HSBC Holdings Plc gained after reporting lower
provisions for bad debt in the first half.
The Stoxx Europe 600 Index lost 0.2 percent to 331.15 at the close of trading, the lowest level since April 16.
- Lacker Says Markets May Be Surprised by Pace of Rate Rise. Investors may be underestimating the
pace at which the Federal Reserve will raise interest rates over
the next two years, said Jeffrey Lacker, president of the
Federal Reserve Bank of Richmond. Short-term interest-rate markets have for months priced in
a slower tempo of increases than policy makers themselves
forecast. That’s risky because the misalignment, a bet against a
rate path that the central bank alone controls, could lead to
volatility if traders have to adjust rapidly, Lacker said. “When there is that kind of gap, it gets your attention,”
Lacker, a consistent critic of the Fed’s record easing who votes
on policy next year, said in an Aug. 1 interview at his Richmond
office overlooking the James River. “It wouldn’t be good for it
to be closed with great rapidity.”
ZeroHedge:
Business Insider:
Telegraph:
Le Monde:
- France's Hollande Sees Real Risk of Europe Deflation. The "real
risk of deflation" could have "negative budgetary consequences, both for
revenue and for debt," French President Francois Hollande said. Much will depend on euro's exchange rate "which has declined these past few days, but not enough," he said.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.21% 2) Airlines -1.14% 3) Utilities -.91%
Stocks Falling on Unusual Volume:
- TKMR, EVR, ALR, KORS, INSM, ASPS, ORBK, CZR, WWWW, OCN, IPXL, DORM, CAH, CLDN, USM, RESI, RIG, AEP, AFOP, NU, KEYW, SRE, AXDX, SJI and NPO
Stocks With Unusual Put Option Activity:
- 1) SM 2) KRE 3) MTW 4) JNK 5) XLU
Stocks With Most Negative News Mentions:
- 1) AEP 2) QLGC 3) RIG 4) ESV 5) LLL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Internet +.43% 2) Software +.36% 3) Homebuilders +.22%
Stocks Rising on Unusual Volume:
- PIKE, DRTX, TREX, BWP, RLGY and BCRX
Stocks With Unusual Call Option Activity:
- 1) XLU 2) CZR 3) INSM 4) BWP 5) ED
Stocks With Most Positive News Mentions:
- 1) WAG 2) VRSN 3) WMT 4) LMT 5) GRPN
Charts:
Weekend Headlines
Bloomberg:
- Iraqi Militants Capture Two Oil Fields in North, Kurdish Towns. Militants
from Islamic State, a
breakaway al-Qaeda group, took control of two oil fields and
some predominantly Kurdish towns in northern Iraq following clashes,
according to the Northern Oil Co. The Ain Zala and Batma oil fields,
which together have an output of 30,000 barrels per day, are under full
control of the group, according to a statement by the state-run
Northern Oil Co. The Sunni Islamist militants last month occupied the
Qayyara oil field north of Baghdad. Islamic State, which was previously
known as Islamic State in Iraq and Levant, has seized territory in
northern and western Iraq, taking over oil wells and fighting for
control of
refineries.
- Israel Announces 7-Hour Cease-Fire as Diplomatic Efforts Falters. Israel
announced a seven-hour cease-fire for much of Gaza after renewed
violence yesterday, including the shelling of a United Nations shelter,
tripped up diplomatic efforts to end four weeks of conflict. The
“humanitarian window” will apply from 10 a.m. to 5 p.m. local time in
all areas of Gaza except those where the Israel Defense Forces are
currently operating, the IDF said in
an e-mailed statement. “The IDF will respond to any attempt to exploit
this
window to harm Israeli civilians and IDF soldiers,” then IDF
said in the statement.
- Portugal Announces $6.6 Billion Banco Espirito Santo Rescue. Portugal’s
central bank took control of Banco Espirito Santo SA, once the
country’s largest lender by market value, in a 4.9 billion-euro ($6.6
billion) bailout that will leave junior bondholders with losses. The
Bank of Portugal’s Resolution Fund will move Banco Espirito Santo’s
deposit-taking operations and most of its assets to a new company, Novo
Banco, which it will own outright. The fund will finance the rescue with
a Treasury loan to be repaid by Novo Banco’s eventual sale. Espirito
Santo shareholders and junior bondholders will be left with the most
“problematic” assets, including loans to other parts of the Espirito
Santo Group and the lender’s stake in its Angolan operation, according
to a central bank statement yesterday.
- China Central Bank Signals No Broad Monetary Easing.
The People’s Bank of China warned that the country’s credit and money
supply have increased rapidly and indicated that it will refrain from
broader monetary easing to support growth. “The total debt level has
been rising relatively quickly,” the PBOC said in its second-quarter
monetary policy report on Aug. 1. “Our existing money supply and credit
are already relatively large and their growth is also high.” The
International Monetary Fund said last week that China’s reliance on debt
and investment has created “rising vulnerabilities” and that failure to
change its growth pattern increases the likelihood of a sharp economic
slowdown. The
Washington-based lender urged the nation’s leaders to lower the
country’s annual expansion target, rein in credit and speed up
reforms. “Restructuring and reform of the economy remains an
arduous task,” the central bank said in its 54-page report.
“It’s not appropriate to expand overall liquidity sharply to
solve structural problems.”
- China’s Fraught IPOs.
China’s Internet companies are exploding in value, so foreign investors
naturally want a piece of the action. A little problem: Chinese law
restricts foreign investment in Internet businesses (along with those in
banking, mining and private education). Not to worry — where there’s
a will, there’s a way, in this case an exotic corporate structure that
magically turns a Chinese company into a foreign one with shares that
overseas investors can buy. And they have.
- Armenia-Azeri War Risks Grow as Clashes Intensify. The
leaders of Armenia and Azerbaijan plan to meet this week in a bid to
defuse escalating tensions between the two countries after at least 15
soldiers were killed in the worst clashes in two decades. The fighting
in the past week in the disputed region of Nagorno-Karabakh has been the
deadliest since the two former
Soviet states signed a cease-fire in 1994. Armenian President
Serzh Sargsyan will hold talks with his Azeri counterpart Ilham Aliyev in the Russian city of Sochi on Aug. 8-9, Armenian Prime
Minister Hovik Abrahamyan said on the government’s website.
- Asian Stocks Fall, Extending Biggest Drop in Three Months.
Asian stocks fell, after the regional benchmark index last week capped
its biggest daily drop in almost three months, as a
smaller-than-forecast increase in U.S. payrolls overshadowed a bailout
for Portugal’s Banco Espirito Santo SA. Honda Motor Co., which gets 47
percent of its auto sales in North America, fell 1.3 percent in Tokyo.
Kubota Corp., a Japanese maker of industrial and farm machinery, lost 3
percent, leading losses among industrial shares. Horizon Oil Ltd., an
Australian oil explorer, slumped 8.1 percent on speculation Roc
Oil Co. may end plans to combine with Horizon Oil.
The MSCI Asia Pacific Index lost 0.2 percent to 147.41 as
of 9:24 a.m. in Tokyo.
- Gold Industry Takeovers Reach Three-Year High as Hunters Feast. There’s
no sign of a let up in gold industry takeovers as a surge in
acquisitions by producers, led by Agnico Eagle Mines Ltd. (AEM) and
Yamana Gold Inc. (YRI), has pushed deals to a three-year high. Mid-sized and small producers are seizing on assets discarded by larger competitors as they trim portfolios to focus
on their most profitable operations after gold last year notched
up the biggest annual drop in more than three decades.
- Euro Near Eight-Month Low as Short Bets Surge to Most Since 2012. The euro was 0.4 percent from its
lowest level versus the dollar since November as investors held
the largest position in two years betting on a drop in the
currency before the region’s central bank meets this week. Europe’s common currency slid 3.2 percent in the past three
months amid unprecedented stimulus as the European Central Bank
acted to spur inflation that slowed in July to the weakest in
almost five years. Policy makers meet again Aug. 7. Australia’s
dollar rose a second day after retail sales in the nation
climbed at twice the pace economists forecast. The greenback
held gains versus most major peers with data tomorrow predicted
to show growth in services activity accelerated.
- U.S. Credit Risk Gauge Caps Biggest Jump in Six Months. A measure of U.S. credit risk posted
its biggest weekly increase in six months as a regulator
suspended trading of shares in a Portuguese bank and Argentina defaulted on its debt. The
Markit CDX North American Investment Grade Index, a credit-default
swaps benchmark used to hedge against losses or to speculate on
creditworthiness, climbed 7 basis points this week to 66.6 basis points,
the biggest advance since the period ended Jan. 24, according to
data compiled by Bloomberg. As the Federal Reserve moves closer to
curbing its unprecedented stimulus measures, Argentina failed to make an
interest payment and Banco Espirito Santo SA shares were suspended by
Portugal’s securities regulator. “We’re having a short-term panic,” said
Brian Reynolds, chief market strategist for brokerage firm Rosenblatt
Securities Inc. in New York. “Argentina being legally declared in default was the switch that made everyone pile onto bearish positions,
betting on spread widening and a decline in stock prices.”
Wall Street Journal:
- Junk-Debt Liquidity Concerns Bring Sales. Investors Worry Exiting Positions Could Get Harder. A shakeout in the junk-bond market is drawing only cautious interest
from bargain-hunters, underscoring investor fears that many once-hot
securities could prove hard to sell in an increasingly difficult trading
environment. U.S. funds investing in debt rated below investment
grade lost an average 1.33% last month, according to a Barclays PLC
index, their second-worst monthly performance since November 2011. In
June 2013, after the...'
- Jihadists Extend Control Into Lebanese City. Islamic State Seizes Territory in Lebanon. A jihadist group that has already seized control of large swaths of
Syria and Iraq extended its territorial claims into Lebanon on Sunday,
taking over a small city there after overrunning police posts and a
military barracks. Fighters from the extremist group, which calls
itself the Islamic State, streamed across the border from Syria in what
Lebanon's defense minister called a premeditated attack after one of
its commanders was...
MarketWatch.com:
CNBC:
- China services data shows 6-month low. Growth in China's services sector slipped to a six-month low in July
as new orders rose at their weakest rate in at least a year, data
showed, taking some of the shine off an industry that has been a bright
spot in the Chinese economy this year. The official Purchasing Managers' Index (PMI) for
the non-manufacturing sector slowed to 54.2 in July from June's 55, the
National Bureau of Statistics said on Sunday. That is the weakest
reading since January.
Business Insider:
Weekend Recommendations
Barron's:
- Bullish commentary on (EMC), (USTR), (DSW), (FTD) and (DHI).
- Bearish commentary on (TWTR), (HLF) and (CSC).
Night Trading
- Asian indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 75.50 +.5 basis point.
- NASDAQ 100 futures +.23%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The
Eurozone Investor Confidence, Eurozone PPI, HSBC China Services PMI,
Reserve Bank of Australia Decision and the ISM New York for July could
also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial 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 week.
Week Ahead by Bloomberg.
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week modestly lower on
Mideast/Ukraine-Russia tensions,
technical selling, global growth worries, rising Emerging Markets/European debt angst and Fed
rate hike concerns. My intermediate-term trading indicators are giving
neutral signals and the Portfolio is 50% net long heading into the week.