WEDNESDAY 2/12/14

China export data jumps strongly but it is chalked up to the distortions due to the lunar new year holiday. Crude oil, iron ore and copper imports hit record highs. Aussie miners are boosted higher. SSEC gains +0.3% and the Hang Seng jumps +1.5%. The NIKK gains +0.6% returning from holiday. Japan machinery orders sink and begin to reinforce a negative trend. The data is troubling considering all the obscene stimulus added to the economy over the last year. Japan power companies jump +5% on news that as many as 10 nuclear plants may be restarted by this summer despite the ongoing Fukishima nuclear disaster. TM recalls 1.9 million Prius cars, one-half of all models manufactured since inception five years ago. Software problems are causing vehicle parts to overheat. Malaysia economic data reinforces a recovering economy. At 4:45 AM EST, a 7.3 earthquake occurs in China. The dollar/yen is 102.50. WTIC crude oil is 101 with Brent oil at 109. Copper trades higher.

BOE’s Carney discusses the quarterly inflation report updating forward guidance. The 7.0% unemployment rate threshold set as a limit that would trigger tightening remains in place but Carney downplays its importance creating a more nuanced approach to the guideline. Carney says interest rates can remain low even if the 7% unemployment rate threshold is hit which he expects over the next couple months. Reporters press Carney on this new ‘fuzzy’ guidance moving forward. This follows along with Fed Chair Yellen downplaying the 6.5% unemployment rate target. The rate is dropping not due to robust employment but rather people giving up looking for work and no longer counted. The pound jumps from 1.6456 to 1.6522. Traders currently project that the BOE will raise rates in April 2015 which is only 14 months away.

Euro 1.3637. Ireland reports record exports and property prices are increasing, however, the long road back to economic strength remains a challenge. Companies continue to take advantage of Ireland’s low taxes using the country as a tax haven. Many Irish remain underwater and behind in their mortgage payments. The 10-year Ireland note yield falls to 3.28%. The German bund is 1.70%. European indexes move higher continuing the rally. Refiner Total pops +1% after reporting weak earnings but increases the dividend and announces a plan to cut expenses. Heineken jumps +2.2% as folks drink their troubles away.

The Bitstamp bitcoin exchange halts trading. Bitcoin is 531 facing many challenges over the last two weeks and is being targeted by hackers that are introducing malicious code creating denial of service attacks. Both Mt. Gox and Bitstamp, the two key bitcoin exchanges, continue to suspend transactions. Mortgage Applications are down -2% with both refi’s and mortgage loans dropping showing lower demand for homes.

Global bellwether DE beats on earnings and moves +1.8% higher pre-market. Deere does not increase forward guidance showing that the global environment remains challenging moving forward. Permabull JPM strategist Thomas Lee reiterates his upside call for this year telling folks to buy the market and expect double-digit returns in the stock market this year. Lee says this may be a historic bull market only in the middle innings. As the morning arrives on the East Coast, dollar/yen drops to 102.27 so the stronger yen drops the futures to the flat line. Mortgage Applications fall -2%. France’s Hollande travels from Washington, DC, to the US West Coast to meet with tech companies.

Equities float higher after the opening bell but remain in a sideways churn pattern all day long. OC insulates itself from the downside jumping +13% after beating on earnings and declaring a dividend. AMZN pukes -3.5% after receiving a downgrade from UBS. A poll finds that Amazon customers will not renew Prime if the price is raised as planned. DE loses the pre-market gains and trades -1% lower. In the afternoon, the Senate approves the debt ceiling limit placing this issue to rest until March 2015. The broad indexes yawn since the Senate approval was a slam-dunk after the House buckled yesterday  The Senate Banking Committee postpones tomorrows hearings with Fed Chair Yellen due to the icy weather covering the southern US and moving up the East Coast.

Concern is increasing over the housing sector as inventory grows and demand slackens. Areas such as Arizona are showing a strong drop off in home buyers while at the same time inventories are catapulting higher. Non-bank mortgage service companies are expanding quickly and there are questions on the potential future solvency of these firms now handling more than one trillion in loans. The hedge funds as well as wealthy Chinese, Russian and Malaysian buyers are all-in to the real estate market and are now looking at each other wondering if they are going to become the bag holders for the next real estate slump.

The day ends with the SPX and Dow slightly negative and the Nasdaq and RUT slightly positive. The dollar/yen idles along at 102.50 all day which causes the stock market to move sideways. The four-day market rally ends. PG loses -2% creating weakness in the Dow. TRI reports weak earnings and is crushed -6.2%. DOW loses -1% after refusing to split the company in two to unlock value as activist hedge fund Third Point desires. DD loses -0.5% in sympathy. SDRL is drilled -5% on news that the dividend may be cut. WCG becomes ill losing -9%. PCYC receives a drug approval and jumps +3.1%. The 10-year Treasury yield climbs to 2.76%.

After the bell, CBS gains +1.5% after beating on earnings and announcing a larger stock repurchase program (buyback). WFM loses -4.5% providing stale earnings missing on the top and bottom lines. Cisco beats marginally on top and bottom lines and raises dividend. CSCO trades flat. MDLZ trades flat on uninspiring earnings. ANGI needs to write a better review on its web site since it pukes -14% in AH trading. As late trading continues, CSCO pukes -4%.

Obamacare enrollment reaches 3.3 million remaining less than one-half of the 7 million goal needed by the end of March only six weeks away. The Whitehouse brags that the young adult enrollment increases 65% but the data released is sketchy and unverifiable. The Whitehouse will not release how many people have actually paid the premium. Only 11% of the new enrollees were not previously insured. All this turmoil with health insurance is helping far fewer folks than intended while causing a major disruption of everyone’s health insurance. Physicians complain of rising administration costs. Doctor’s offices are now burdened with a new diagnosis code system that will require many more man hours to file paperwork. Of course the physicians and insurers will pass along the higher costs to the patient.

Senator Rand Paul, a 2016 presidential candidate, sues President Obama and the NSA with a class-action lawsuit representing all American citizens that own a cell phone or land line. The government is illegally and unconstitutionally spying on all Americans without any warrants or probable cause. 3000 flights are delayed as the severe winter storm travels north through the eastern US. North Carolina is a mess with folks stranded on roadways like Atlanta last week. One foot of snow may hit Washington, DC. Business and commerce will be negatively affected into the weekend.