THURSDAY 4/3/14; ECB Rate Decision and Press Conference

Asia indexes are moving higher drunk on the US wine. China is providing more funds for housing and railway projects and creating tax breaks for small businesses which create a happy bullish mood. Railroad stocks pop over +4% but property stocks retreat about -1%. Asia stocks jump higher on China’s ‘mini-stimulus’ but traders are disappointed. Traders expect more shock and awe from China rather than a mini-stimulus that is calibrated, incremental and targeted. It is like expecting a Lamborghini for your birthday and instead you receive a recalled Chevy Cobalt.

The NIKK jumps +0.8% and remains elevated throughout the session due to the big jump higher with the dollar/yen moving above 104 overnight; a 10-week low. Banzai! The weaker yen always fuels stock market gains and overcomes the negativity from higher sales tax. The Shanghai Index starts out higher but finishes down -0.7%. Hang Seng is flat. Asia ends mixed after starting out universally higher. Traders want a bit more meat on the bones for China’s stimulus perhaps a cut in the triple R (required reserve ratio).

ECB Central Bank President Mario Draghi prepares for the epic day ahead. The ECB Rate Decision is 7:45 AM EST and most importantly the Press Conference, where Draghi would provide details on a potential stimulus program is 8:30 AM. The ECB will impact futures and set the market tone today. The consensus is for Draghi to continue playing coy and not act today although he may speak dovishly in the press conference. Dovish lip service may weaken the euro which is the desired direction to fight the ongoing European disinflation and deflation. The IMF urges the ECB to act with stimulus to combat deflation. Spain is mired in deflation.....



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Europe is trading flat as the PMI Services data is slightly weaker than expected with the euro zone at 53.1 versus the previous 53.2. Euro zone retail sales are better than expected. At 5 AM, the dollar/yen is 103.92. Euro 1.3762. Pound 1.6638. The 10-year Treasury yield and UK gilt are at the same level at 2.79%-2.80%. The German bund is 1.62% creating a wide 118 basis point spread for the US Treasury yield versus bund. The Italy 10-year yield is 3.34%.

Russia puts on a brave face and says capital control rules will not be imposed on money entering or leaving the country. The problem is not capital entering but rather the capital flight outward and Russia will change its mind on capital controls once the ruble begins weakening again and Russian stocks sell off. Global markets meander in a sideways funk waiting for Draghi to bring the tablets down from on high and announce the ECB rate decision and potential stimulus plan. The central bankers control global markets.

The Fort Hood Texas shooting results in four dead, 16 injured and the shooter dead from suicide. The murderer had mental issues as is always the typical case with these types of shootings. SWHC and RGR may react to the event. Saxo Bank economist Steen Jakobsen says the S&P 500 will touch 1900 and then tumble as much as -30%. It is odd to see a bearish viewpoint on television since in recent weeks nearly everyone remains firmly entrenched in the bull camp riding the central banker easy money wave.

The PBOC says a path of prudent monetary policy and exchange rate reform is in place moving forward. China’s statement may be in response to the disappointment with the mini-stimulus plan overnight and appears to dampen hopes for a major stimulus announcement. Futures drop a hair with S&P’s dead flat at 5:30 AM. Dollar/yen 103.96. Northern Chile receives a strong 7.8 magnitude aftershock. Federal regulators open a deeper probe into the corruption at Citigroup’s Mexican Banamex unit. C is trading -0.5% pre-market. Tesla will fight the New Jersey’s court rulings that are hurting the car maker. TSLA pops +1%.

The ECB leaves the key benchmark rate unchanged at 0.25% as expected. Futures are non-reactive. The euro moves slightly higher to 1.3772. Dollar/yen 102.92. S&P +1. Gold and silver are moving lower. Copper is down -1%. The 10-year yield remains flat at 2.80%. All eyes and ears now focus on Draghi’s press conference listening for any hints of a stimulus program to combat the ongoing disinflation and deflation.

The Trade Deficit increases. Jobless Claims jump 16K higher to 326K. Draghi takes the stage and provides commentary on the ECB’s policy. Draghi says, “Inflation is expected to remain low this year and then move higher in 2015 and reach the 2% goal in 2016.” He says, “Do not rule out unconventional easing (QE).” Draghi says the “risks to the economy are to the downside” and “unemployment remains high.” Draghi’s comments are dovish so the euro leaks a hair lower to 1.3740 but overall the trader response is not to weaken the euro unless Draghi delivers something more than dovish lip service. Draghi is not too dovish if he is content with disinflation and deflation to remain this year patiently waiting for inflation to arrive in 2015 and 2016. European exporters may be belly-up by then. Futures are flat not knowing which way to turn. Dollar/yen 103.95.

GOOG shares split into GOOG and GOOGL today. The FTC is looking into complaints that Yelp review information is fabricated. YELP dumps -6% continuing the ongoing weakness. Notable short-seller Jim Chanos remains short CAT and HPQ and says China is beginning to panic as growth slows. Into the opening bell the dollar/yen leaps above 104 to 104.07. Banzai! The BOJ is bludgeoning the yen to push the stock market higher. Futures become stronger moving into the bell just like yesterday due to the weaker yen. S&P +3.5. Copper recovers from earlier weakness but remains negative at 3.03. The dollar/yen hits 104.10. S&P +4.

Equities move sideways to begin the day. MON pops +2% on an upgrade. MU +1%. The Dow finally prints a new all-time high at 16604.15 so the Dow Theorists will be happy with the industrials confirming the trannies. This is the first record high print for the Dow this year. The SPX prints a new all-time high at 1893.68. The COMPQ (Nasdaq) and RUT (Russell 2000 small caps) remains below their recent highs. CSX is downgraded and loses -0.8%. AMZN drops -1.2%. Liberty Media cuts its stake in Barnes and Noble. BKS is beaten -14%. LMCA loses -2.2%.

The 5-year yield is up to 1.791%. The 10-year yield is 2.80% flat today. Draghi’s comments are perceived as dovish so the euro weakens to 1.3724. The VIX is up to 13.16 and the SPX is up so one of them is wrong (equities and volatility move inversely to each other). ISM Non-Mfg Index is 53.1 showing improvement from 51.6 last month but drilling down in the data there is continuing softness in many segments. P bounces +5% on better listener numbers after weaker guidance last month.

Equities meander sideways during the session as traders prefer to wait for the jobs number tomorrow. Schwab weighs into the HFT debate as brokers are hit today. SCHW -3.1%. AMTD -4.2%. The ETrade baby is sick with ETFC puking -7%. Biotech is slapped lower today with IBB down -3%. NFLX -2.7%. Facebook continues the face plant with FB collapsing -5.2%. LQDT is downgraded and drops -12% and has lost -35% of its value in the last three days. Freeport McMoran is upgraded since analysts expect metal demand to pick up with a cyclical recovery, however, FCX trades flat. GS removes FRC from the conviction buy list so it loses -0.5%. Ditto EXR that dumps -1.1%.

The Citigroup beating continues. C loses -1.2%. An internal Citigroup memo surfaces where the troubled bank commits to a call to action to right the ship. HD is down -1.1% during the afternoon, the biggest loser on the Dow. If a recovery is robust and strong, Home Depot should be going like gangbusters. Turkey lifts the ban on Twitter but TWTR continues to sell off down -3.7%. WTIC crude oil moves above 100.

The high-growth party stocks continue to receive beatings. WDAY, a darling of long traders, collapses -9% and is down from 116 to 83, -28%, over the last month. Perhaps they should extend their Workday. Splunk is another stock that drops from a lofty peak and splats. SPLK is down -7% and is down from 106 to 66, -38%, losing one-third of its value, over the last month. Old school HPQ loses -1.8%. Strategist Jason Trennert at Strategas says the “Fed will remain accommodative” and he is “very bullish” moving forward. Long-time late night television host David Letterman announces his retirement in 2015. CBS loses -1.2%.

The day ends with the SPX down marginally -0.1% to 1889. The SPX prints a new all-time high at 1893.80 but not a new all-time closing high. The Dow prints the much-awaited new all-time high at 16604.15, above the 16.6K level, but retreats as the day proceeds unable to print the new all-time closing high. Trannies sell off as well so Dow Theorists are left scratching their heads. Technically, the Dow has not printed a new closing high as yet to confirm the trannies. The Nasdaq dumps 39 points, -0.9%, to 4237. The RUT loses 12 points, -1%, to 1181. Tech and small caps, the leaders, are dumped today. Weak biotech stocks create much of the weakness.

Traders are in a wait-and-see mode since the Monthly Jobs Report is only a few hours away. The GRUB IPO prices at 26 above the expected range. The IMS IPO prices at 20. IMS is a large online healthcare data company and should receive a strong positive debut. Both IPO’s begin trading in the morning.