Tuesday Watch

Evening Headlines 
Bloomberg:

• Gaza Rockets Barrage Israel Readying for Possible Escalation. Gaza Strip militants bombarded southern Israel with dozens of rockets, sending Israel closer to escalating its battle against them as it stepped up air strikes and mobilized reserves. About 80 rockets hit Israel from Hamas-controlled Gaza yesterday, reaching as deep as 25 miles (40 kilometers) inside Israeli territory, the military said. The army is reinforcing regular paratrooper and infantry forces on the Gaza border with as many as 1,500 reservists, spokesman Lieutenant-Colonel Peter Lerner said in a phone briefing.

• Beheading #WorldCup Shows Islamic State’s Online Savvy. “This is our ball,” said a tweet accompanying a photo of the decapitated head. “It’s made of skin #WorldCup.” The World Cup hashtag ensured it would pop up on news feeds of the tournament’s followers until Twitter Inc. could take down the posting.

• Ukraine Moves to Destroy Rebel Bases in East, Ruling Out Cease-Fire. Ukraine’s government accused pro-Russian rebels of destroying bridges after the army recaptured territory in the east of the country from the insurgents. The rebels have blown up seven bridges, three of them yesterday, the Ukrainian cabinet said on its website. The insurgents are also laying mines as they retreat, posing a risk to civilians, the Defense Ministry said in a statement.

• Samsung Profit Misses Estimates as Cheap Phones Struggle. Samsung Electronics Co. (005930) posted second-quarter profit that missed analysts’ estimates as the world’s biggest smartphone maker loses market share and a stronger won crimps the value of overseas sales. Operating profit was 7.2 trillion won ($7.1 billion) in the three months ended June, the Suwon, South Korea-based company said in a filing today. That compares with the 8.1 trillion-won average of 34 analyst estimates compiled by Bloomberg.

• Tesla(TSLA) Sued in China for Trademark Infringement. Tesla Motors Inc. (TSLA), the electric carmarker led by Elon Musk, was sued in China for trademark infringement in the latest example of the difficulties foreign companies face doing business in the country. Zhan Baosheng, who registered the rights to the name before the U.S. carmaker entered China, is requesting that Tesla shut its showrooms, service centers and supercharging facilities there; stop all sales and marketing activities in the country; and pay him 23.9 million yuan ($3.9 million) in compensation, according to a lawsuit filed July 3 in Beijing and seen by Bloomberg News.

• China Developers Slow to Pay Realtors Amid Rout, Centaline Says. Chinese developers, hit by tighter liquidity and a widespread anti-graft campaign, are delaying paying fees to realtors who help them sell new projects, according to the nation’s biggest real estate brokerage. Centaline Group, which owns Centaline Property Agency Ltd., has about 1 billion yuan ($161 million) of uncollected receivables due, group founder Shih Wing Ching said in an interview. Developers pay the fees only after they they get the sales proceeds, he said.

• Asian Stocks Slip on Yen Gains. Asian stocks fell, with the regional index slipping from a six-year high, as the yen extended gains amid speculation over the outlook for U.S. interest rates. Crop futures rebounded while precious metals dropped with oil. The MSCI Asia Pacific Index lost 0.4 percent by 10 a.m. in Tokyo, dropping for the first time in three days as Japan’s Topix gauge slid 0.8 percent, headed for its lowest close this month.

• Greece Resists Troika on Third Bailout as Draghi Protests Delays. Greece fought off calls to consider a third bailout as European Central Bank President Mario Draghi warned that the pace of economic fixes is slowing, officials said after euro-area finance ministers met yesterday.

Wall Street Journal: 

• Ukraine Advances, Putin Stays Silent. Interior Ministry Adviser Says Armed Rebel Fighters Unable to Leave City. As Ukraine laid plans for a siege of pro-Russia separatists' remaining bastions Monday, Russian President Vladimir Putin faced a critical decision on whether to answer rebel pleas for military help—a move that could determine what he gains or loses following a monthslong conflict that has roiled global powers. Russia has encouraged and supported the separatists during their insurgency, but has been unusually quiet since the Ukrainian... 

• From Mountains, Island, Secret Town, China's Electronic Spy Shop Watches. Military Organization 3PLA Is Tasked With Monitoring Worldwide Electronic Information. From mountains near Beijing, China's version of the U.S. National Security Agency monitors Russia and tracks missiles. Its military experts analyze Internet phone calls on an island dubbed China's Hawaii, and and it eavesdrops on Europe from a secret town hidden behind an array of residential towers. Using Chinese government websites, academic databases and foreign security expertise, The Wall Street Journal assembled an overview of some secret operations of China's global monitoring organization, the Third Department of... 

• Banks' Cuts Fall Short as Growth Stays Tepid. Rising Pay, Regulatory Costs Offset Recent Efforts.

• James Gorman on the Future of Finance: Big Banks Will Get Bigger. But the Morgan Stanley CEO Also Expects Most Bank Branches to Disappear—and Cash to Become a Museum Piece. 

• Hard-Hit Macro Hedge Funds Stage Nascent Turnaround. Gains Come After Three Consecutive Years of Losses. Global macro hedge funds are showing signs of life after weathering a difficult period.

Fox News: 

• Border crisis could provide cover to ISIS operatives, say experts. The border crisis could be the perfect opportunity for Islamic terrorists looking to sneak sleeper cells into the U.S., say experts. Patrols on the Mexican border have been stretched to the breaking point in recent weeks by a tidal wave of immigrants from Central America. Among the estimated 60,000 people who have streamed across is a small percentage of what agents term "Special Interest Aliens," or SIAs. Terrorism experts say airport security is effective at keeping dangerous jihadists out, but the border breakdown could be America's Achilles heel - providing an entry point for groups like ISIS.

MarketWatch.com:

• Does Facebook(FB) break up marriages? New research suggests a link between social networking and divorce. Facebook users, beware. You may be one “like” away from divorce court.

CNBC: 

• Central banks ending era of clear promises, return to 'artful' policy. The world's major central banks are returning to a more opaque and artful approach to policymaking, ending a crisis-era experiment with explicit promises that they found risked their credibility and did not substitute for action.

Zero Hedge: 

• "This Is The Worst Of All Possible Worlds," The Fed "Is Borrowing Returns From The Future".

• Minimum Wage Consequences? iPhone 6 Will Be Made By "FoxBots".

• Free Lunch Over? Regulators Pressure Banks To Admit Balance Sheets Aren't Riskless. (graph)

• Meet The $1 Billion Company With Zero Revenues.

• Chart Of The Day: The "Weather-Apologist Economist"'s Worst Nightmare.

• Krugman’s Bathtub Economics.

• Why You Feel Poorer. (graph)

• Peak Abenomics. (graph)

Business Insider:

• WAL-MART(WMT) CEO: Things Aren't Getting Better For America's Middle Class.

• This New Tax Law Undercuts National Sovereignty And Undermines The Rights Of US Citizens Abroad.

• Why The Super Typhoon Heading Toward Japan Could Be So Dangerous.

• Warren Buffett's 'Single Best Measure' Of Stock Market Value Is Higher Today Than It Was During The Credit Bubble. (graph)

Reuters:

• Brazil carmakers slash forecasts as June output plunges. Carmakers in Brazil are forecasting the worst drop in production in 16 years after plunging June output highlighted a severe industry slump despite ongoing government stimulus. Production of cars, trucks and buses is expected to fall 10.0 percent in 2014 as sales retreat 5.4 percent, national automakers association Anfavea said on Monday. Brazil's auto output fell 23.3 percent in June from May and plunged 33.3 percent from a year earlier, Anfavea said. Production in the first half of the year was 16.8 percent lower than the first six months of 2013. If output tumbles as much as carmakers now expect, it will be the steepest annual drop since a 23.2 percent plunge in 1998.

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

China Securities Journal:

• China May Grant IPO Permits to 15 Cos. Each Month. About 15 companies are expected to get IPO approval notifications each month from July to Dec., citing an unidentified person from the industry.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 100.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 70.25 -.25 basis point.

• FTSE-100 futures +.03%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures  -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BOBE)/.41

• (AA)/.12

• (AVAV)/.22

• (TCS)/-.06

• (HTZ)/.08

Economic Releases
7:30 am EST

• The NFIB Small  Business Optimism Index for June is estimated to rise to 978.0 versus 96.6 in May.

10:00 am EST

• JOLTs Job Openings for May are estimated to fall to 4350 versus 4455 in April.

3:00 pm EST

• Consumer Credit for May is estimated to fall to $20.0B versus $26.847B in April.
  

Upcoming Splits

• (ALK) 2-for-1

• (ACIW) 3-for-1

Other Potential Market Movers

• The Fed's Kocherlakota speaking, Fed's Lacker speaking, China CPI, 3Y $27B T-Note auction, German trade figures, US weekly retail sales, (KLAC) analyst briefing and the (LRCX) analyst meeting could impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and real estate shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.