MONDAY 2/10/14

Asia finishes higher. NIKK and SSEC both gain about +2%. Softbank is upgraded. Pro-nuclear candidate Yoichi Masuzoe wins the Tokyo gubernatorial race but the electric utility stocks sell off. 40% of the vote is anti-nuclear. The Fukishima nuclear disaster is ongoing with Japan continuing to hide and control the news flow concerning this largest-ever man-made ecological accident in human history. MCD opens the first store in Vietnam to lots of fanfare and a long line of customers waiting to sample their first Big Mac.

The PBOC says “appropriate liquidity” will be maintained in China’s banking system but do not expect the government to bankroll all investments. China also expects volatility to increase moving forward. Initially, the news is received negatively but traders focus on the PBOC continuing to support the markets with liquidity, just like the Fed and BOJ are supporting the US and Japan markets, so stocks rise. Traders are addicted to global easy money. China car makers are strong after government subsidies are extended. Gold rises as China citizens see potential economic trouble ahead and renew their love affair with the yellow metal.

Barclays bank is investigating the theft of data from 27K clients. A bank employee may have sold the information includes savings, mortgage, health and other data that companies are using for targeted marketing campaigns. World citizens must realize that any personal information and communication on the internet is actually non-private and easily accessible by hackers. Global security breaches and other nefarious internet activities occur with frequency. Barclays plans to sell off non-producing loans and address legacy issues moving forward to clean house. Thousands of jobs will be lost. Traders focus on the house cleaning rather than the security breach sending Barclays up +0.5%. Job losses are bullish since companies will perform the same work with less people.

The Swiss vote in favor of immigration controls. The global ‘protectionism’ vibe grows as nations continue to focus on supporting their own economies at the expense of neighbors. Over time, this behavior weakens the global economic environment. L’Oreal gains +4.3% as Nestle plans to divest from this popular cosmetic and health products manufacturer. Concern grows over the capital deficits at Italy and other Euro zone banks. At 3 AM EST, European markets open higher. The dollar/yen leaks lower to 102.10 well off the highs hours earlier so the stronger yen creates a dark cloud on global equities. S&P futures -3. Dow -18. Nasdaq -2. WTIC oil teases 100.

France’s Hollande travels to the US. VOD approaches Grupo Corporativo ONO for a possible purchase. Deutsche Telekom buys the remaining interest in its Czech telecom division. The telecom sector consolidation and repositioning continues. NOK gains +6% after reaching a patent settlement with rival HTC. Commerzbank seeks to sell off Spanish real estate investments.

 The bullish stock market sentiment remains with analyst Laszlo Birinyi reiterating his bullish call that the SPX will be above 1900 by summer time. Global analysts and traders remain optimistic telling investors to stay long the markets. Volatility dropped dramatically late last week and put/call ratios remain subdued indicating ongoing complacency and lack of fear in the markets which is actually a contrarian signal. More stock market selling pain may be ahead due to the ongoing rampant bullish enthusiasm. The overnight global markets show how the risk-on and risk-off market behavior remains in full force. Shamefully, the PBOC, Fed, BOJ and other central bankers control the markets. Traders buy stocks as the money printing is ongoing and increasing and sell when there is any threat that the easy money punch bowl will be taken away.

Central banker actions matter far more than company fundamentals. Moving forward, both BOE Governor Carney and Fed Chair Yellen face a dilemma with their respective unemployment rates falling to 7.0% and 6.5%, only one tick from target levels. Therefore, the central bankers have to develop new phony guidance moving forward. The intent to link a future central bank tightening policy to a lower unemployment rate proves stupid since the jobless rate is falling not due to robust economies but instead due to people dropping out of the work force due to lack of available opportunities (they are no longer counted in the statistics). The UK is undergoing, and likely finishing, a growth spurt so their lower unemployment rate has slightly more merit but the US employment picture remains extremely bleak and will cause structural economic problems for years to come.

At 5:30 AM, European markets deflate toward the flat line with the MIB turning negative due to the bank capital concerns. S&P -5. Dow -40. Nasdaq -4. The 10-year yield is 2.67%. Activist Icahn is pleased with Apple buybacks and says there is not much more he can do. AAPL drops on the news initially but then moves +1.5% higher. HAS drops -2% on weak earnings. YELP leaps +9% on news of a search partnership with Yahoo. YHOO +0.7%. The broad indexes sell off after the opening bell as the futures imply. Financials are weak. The SPX drops to test the 1796 support, then moves lower. Utilities and healthcare sectors are the outperformers to the upside.

European markets end mixed. WTIC crude is above 100 not seen the end of last year. Brent drops at 109. Natty gas drops -3.5% to 4.615 well off the highs despite ongoing cold weather in the States. Traders expect moderating temperatures and the winter season will be ending soon. Copper was positive overnight but turns negative. Emerging market currencies are well-behaved today so this creates some calm in the markets. The dollar/yen leaks lower to 102 sending equities lower.

Bitcoin drops to 580 as the Mt Gox exchange experiences ongoing problems handling transactions. The SPX and Dow trade lower but the Nasdaq trades higher boosted by Apple happy talk. S drops -3.5% on potential snags with the merger with TMUS. HAS recovers today jumping +6% and is a top market performer after the earlier weakness. MS upgrades AXP that pops +1.5%. DKS is up +2.5% on strong sales. AOL loses -3.2% on drama over changes to the 401k and benefits plans. CEO Armstrong, known for inserting his foot into his mouth, apologizes for insensitive statements made about “distressed babies” costing AOL too much money. A large bearish trade is placed in the options market by one of the billion-dollar hedge funds against CAT. The trade in effect bets that the top is in for CAT. Short-seller Jim Chanos has been vocal about shorting Caterpillar.

Into the afternoon it becomes obvious that traders are waiting for Chair Yellen’s debut appearance before Congress tomorrow. The session ends flat with the SPX, Dow and RUT only a hair positive. Tech leads higher with the Nasdaq gaining +0.5%.  The SPX remains under the psychological 1800 level. After the bell, the Rackspace CEO announces his retirement and RAX plummets -11%. BNNY pukes -9%. PANW gains +3% since it plans to make acquisitions. FEYE pops +9% announcing new product offerings.

The Whitehouse announces another delay to the employer mandate for Obamacare. There are 27 changes made by the president to the Obamacare law without any involvement by Congress. This is troublesome from a constitutional law perspective. The US may as well have a king instead of the three branches of government. Obviously, President Obama finally realizes that the health care law is causing serious job losses which are the reason for the latest delay. Others have warned the president of these predictable problems for the last few years. The new health care law should have been delayed for at least one year but instead the law was enacted and the festering mess becomes more complicated with negative news stories increasing daily.

China’s finance regulator is telling smaller banks to set aside more capital. An ex BAC executive pleads guilty to fraud. Bank of America’s Phillip Murphy, a managing director, conspired to defraud cities on municipal bond deals from the late 1990’s through 2006. 17 people were involved in the conspiracy that involved existing or former employees at JPM, UBS, GE and other companies. The House will vote on Wednesday for a bill to increase the debt ceiling limit. Treasury Secretary Lew urges Congress to lift the debt ceiling to preserve the good faith and credit of the US.