Wednesday Watch

Evening Headlines 
Bloomberg: 

• Ukraine Conflict Escalation May Yield Stronger NATO Moves. Ukraine’s offensive against pro-Russian separatists may have escalated the conflict to the point where NATO could be compelled to mount a stronger show of force to deter any Russian moves beyond eastern Ukraine. Ukrainian troops retook an airfield and government buildings from armed pro-Russia separatists in the restive east yesterday. White House spokesman Jay Carney said that while the U.S. administration is considering military assistance to Ukraine, lethal aid isn’t an option. The two Ukrainian operations in the eastern Donetsk region have rattled eastern European members of the North Atlantic Treaty Organization, and that will require the 28-member military alliance to deploy defensive forces to member countries such as Poland, said Steven Pifer, a former U.S. ambassador to Ukraine. 

• Chinese Police Confront Trust Investors Demanding Repayment. Chinese investors demanding their money back from a troubled 973 million-yuan ($156 million) high-yield product in Shanxi province were confronted by police in front of a China Construction Bank Corp. (939) branch. People wearing white masks with the words “despicable bank” and “pay back our money” were among at least 30 investors facing special-forces officers in dark uniforms in Taiyuan city, about 521 kilometers (324 miles) southwest of Beijing. The nation’s second-largest bank is the custodian of the Songhuajiang River No. 77 trust, which missed six payments as of last month, according to the Economic Observer. “We have been cheated by CCB,” said Wang Fengying, 60, a Shanxi resident who said her husband had invested 1 million yuan in the product. “Our parents are very old. We need the money for their medical bills and to buy a home for my child. We are so miserable and they won’t even let us demand our money back.”

• Australian Buyers' Dreams Deferred as Housing Prices Rise. Mortgage rates at their lowest in four-and-a-half years are helping drive household debt to record levels in Australia. The average home-loan size jumped to an all-time high of A$322,900 in January, according to Australian Bureau of Statistics data. As cheap money and a shortage of housing in Australia’s biggest cities spurs home values to new heights, first-time buyers face a choice of taking on more debt or dropping out of the market. Australia’s housing debt equaled a record 134.6 percent of disposable income at the end of 2013, up from 130.9 percent a year earlier, according to the central bank. The ratio was 119.9 percent in the U.K., 104.5 percent in Canada, and 78.5 percent in the U.S. at the end of 2012, the most recent data from the Organization for Economic Cooperation and Development showed. “Spiraling house prices will probably lead to trouble later, either because they in turn fall, or households will extend themselves too far,” Martin North, principal at data firm Digital Finance Analytics, wrote on the firm’s website this month.

• Asian Stocks Climb on U.S. Rally; Kiwi Drops Before Data. Asian stocks climbed, with Japan’s Topix index heading for its biggest gain in seven weeks, after U.S. equities rallied on earnings. The currencies of Australia, New Zealand and Malaysia weakened before economic-growth data from China, the countries’ biggest trading partner. The MSCI Asia Pacific Index climbed 0.4 percent as of 9:56 a.m. 

• Scottish Independence Gains Momentum as Poll Shows Gap Narrowing. A survey by TNS published today found the gap narrowed to 12 percentage points from 14 points a month earlier and 19 points in September when the company started monthly polling. The results showed 41 percent of voters in Scotland plan to reject independence, a drop of one point, with 29 percent in favor, an increase of one point. Thirty percent of voters said they were undecided, unchanged from a month before.

• Buyout Loans Eclipse '07 Record in Deal Frenzy: Credit Markets. The U.S. junk-loan market has never fueled so much dealmaking. A total of $85 billion of loans have been raises this year to finance acquisitions, topping 2007's record pace, data compiled by Bloomberg show. Issuance is set to accelerate as Avago Technologies Ltd. locks in the year's second-biggest loan for its takeover of chipmaker LSI Corp as soon as today and Men's Wearhouse Inc. borrows $1.1 billion to fund its deal for Jos. A. Bank Clothiers Inc. Leveraged loans are booming as the value of takeovers in the U.S. reaches levels last seen in 2008. While regulators have warned excesses may be emerging in riskier parts of the market as the Federal Reserve's zero-interest rate policy extends into a sixth year, the loan surge underscores renewed confidence in the ability of the least-creditworthy companies to expand as the world's largest economy strengthens. First-lien borrowings at speculative-grade companies equaled 4.2 times their earnings before interest, taxes, depreciation and amortization in the first quarter, the highest since the 4.6 ratio in the last three months of 2007, according to S&P Capital IQ Leveraged Commentary & Data.

Wall Street Journal:  

• Ukraine Uses Military Force for First Time. Ukraine Sends Armored Units Into Restive East; U.S. Praises 'Measured Response'. Ukraine's military fired its first shots Tuesday in the fight to regain control of the restive east from pro-Russian separatists, as soldiers repelled an armed mob from a military air base. Soldiers riding aboard armored personnel carriers took up positions around the region, setting up checkpoints along key roads, as transport helicopters ferried in dozens of paratroopers and elite security-service officers. 

• Crisis in Ukraine. Streaming Coverage:

• Housing Market Slow to Hit Its Spring Stride. Expected Growth Remains Sluggish as Supply Issues Persist. A flurry of recent housing data suggests that the market's spring selling season is getting off to a slow start, a worrisome sign after a winter of expectations that warmer weather would rekindle growth. Reports from local real-estate agent groups in some of the markets that were the first to rebound, including Las Vegas, Phoenix and San Diego, show year-over-year declines in March home sales.
  

• Goldman(GS) Moves to Energize Stock Trading. 

• Stockbroker Records to Receive More Scrutiny. Regulators Expected to Propose Plan for Background Checks, Measures to Identify Red Flags. 

• Coalition of the Disappointed. Obama fires up racial and gender resentments to get out the vote. You can tell it's an election year because so many noncrises are suddenly urgent priorities. Real median household income is still lower than it was in 2007, the smallest share of Americans is working since 1978, and the Russians are marching west, but Democrats are training fire on race, gender and the grievances of identity politics.

Fox News:

• Administration reportedly holding back on non-lethal aid to Ukraine. The Obama administration reportedly is withholding even non-lethal military aid to Ukraine for fear it could further inflame tensions -- despite already intensifying clashes between the country's government and pro-Russia militiamen. A critical report detailing the requests was sent to Congress and the White House by retired Gen. Wesley Clark and former Defense Department official Phillip Karber, according to The Washington Free Beacon.

CNBC: 

• Intel(INTC) earnings: 38 cents per share on sales of $12.8 billion. Intel posted quarterly earnings Tuesday that edged past expectations, while revenue was slightly below estimates. Shares rose in extended-hours trading.

Zero Hedge: 

• Putin Tells Merkel "Ukraine On The Verge Of A Civil War" As Germany Agrees To Re-Sell Russian Gas To Ukraine.

• Soaring Food Inflation Full Frontal: Beef, Pork And Shrimp Prices Soar To Record Highs. (graph)

• Over 40% Of The S&P 500 Is In Correction Mode. (graph)

• Prince Bandar bin Sultan, Head Of Saudi Intelligence, Has Been Sacked.

• Ukraine Reality Ignored As Stocks Close At Highs On Hopes of More Japan Easing.

• Equity Rallies Are Corrective, Downside Risks Remain, BofAML Says. (graph)

• Tuesday Humor: Biggest Fed Dove Concerned About "Real Erosion Of People's Purchasing Power".

• Baffle With Fake BS: Chinese Q1 GDP Beats And Misses At The Same Time. (graph)

Business Insider:

• Yahoo(YHOO) Soars On Earnings Even Though Its Underlying Business Is Still Stagnant.

• PUTIN: Ukraine Is 'On The Verge Of Civil War'.

c/net: 

• Tax dodgers beware: Keep social media to a minimum. The IRS is said to be data mining Facebook(FB), Instagram, Twitter, and other social media for info that could come handy in audits.

Reuters:

• BHP Billiton(BHP) lifts annual iron ore production guidance. BHP Billiton is lifting its iron ore production this year to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from rivals in Australia and Brazil.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 123.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 87.5 -.75 basis point.

• FTSE-100 futures +.80%.

• S&P 500 futures +.32%.

• NASDAQ 100 futures  +.43%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PNC)/1.65

• (USB)/.73

• (ABT)/.36

• (BAC)/.27

• (STJ)/.95

• (GWW)/2.96

• (COF)/1.70

• (IBM)/2.54

• (KMP)/.73

• (AXP)/1.30

• (SNDK)/1.27

• (URI)/.71

• (KSU)/.99

• (STLD)/.16

• (GOOG)/6.36

• (HTLD)/.20

• (BMI)/.41

Economic Releases
8:30 am EST

• Housing Starts for March are estimated to rise to 970K versus 907K in February.

• Building Permits for March are estimated to fall to 1010K versus 1018K in February.
  

9:15 am EST

• Industrial Production for March is estimated to rise +.5% versus a +.6% gain in February.

• Capacity Utilization for March is estimated to fall to 78.7% versus 78.8% in February

• Manufacturing Production for March is estimated to rise +.6% versus a +.8% gain in February. 

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,235,000 barrels versus a +4,030,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,560,000 barrels versus a -5,188,000 barrel decline the prior week. Distillate inventories are estimated to rise by 30,000 barrels versus a 239,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.01% versus a -.2% decline the prior week.

2:00 pm EST

• U.S. Fed's Beige Book release.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Stein speaking, Fed's Lockhart speaking, Fed's Fisher speaking, German inflation data, Bank of Canada decision, Eurozone CPI, UK unemployment rate, weekly MBA mortgage applications report, (GPS) investor meeting, (RHT) analyst day and the BofA Auto Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.