Wednesday Watch

Evening Headlines 
Bloomberg:

• Rebel Stronghold Holds Breath as Shellfire Escalates in Donetsk. The grass is being trimmed, the flowers tended and the potholes on roads filled. Jazz plays out from a café, and a few people are out enjoying the sunshine. Yet puncturing the scene of a European summer is the distant boom, boom, boom of artillery fire and emptiness. This is Donetsk, nicknamed the Ukrainian city of a million roses and now the headquarters of a pro-Russia group wanting to break up the country. With separatists blamed by the U.S. for shooting down a Malaysia Airlines plane last week and killing almost 300 people, the semblance of normality masks a foreboding among residents as to the fate of their city with Ukrainian forces fighting militants in the suburbs.
• Pressure for Cease-Fire Builds on Hamas. Diplomats stepped up pressure on Hamas to accept a cease-fire in Gaza and end a conflict that has killed more than 600 people, as global airlines suspended flights to Tel Aviv because of rocket fire. U.S. Secretary of State John Kerry, who’s in Cairo to promote the Egyptian plan for a truce, said Hamas has “a fundamental choice to make.” Palestinian President Mahmoud Abbas said late yesterday that Hamas agreed to a proposed cease-fire to be followed by five days of talks, even though it rejected the Egyptian initiative last week while Israel accepted it. There was no immediate response from Hamas to the Palestinian Authority leader’s remarks.

• Asian Stocks Gain as Rupiah Climbs With Zinc; Crude Drops. Asian stocks rose, with the regional index extending gains from a six-year high, after U.S. inflation data eased concern over the outlook for Federal Reserve interest-rate increases. Indonesia’s rupiah climbed and zinc rose a third day, while crude oil fell. The MSCI Asia Pacific Index added 0.2 percent by 10:08 a.m. in Tokyo, rising a third day and set to hold its highest close since June 2008.

• Obamacare Subsidy Loss May Boost Premiums, Chase Insurers. A future court ruling that Americans in 36 states can no longer get U.S. subsidies for Obamacare’s insurance plans would boost premiums by 76 percent, allowing many to flee the program and chasing away insurers. It’s a worst-case scenario that could affect almost 5 million people who use subsidies now, and millions more who haven’t yet enrolled. Under the health law, anyone whose premiums exceed 8 percent of their income is exempt from the law’s mandate that all Americans be covered. That may leave only the sickest and most desperate on the rolls, raising coverage costs for insurers. 

• Wall Street Cut From Guest List for Jackson Hole Fed Meeting. Wall Street (SPX) doesn’t lead to Jackson Hole this year. As the Federal Reserve Bank of Kansas City prepares to host next month’s annual gathering of central bankers in Wyoming, seasoned Fed watchers from the financial markets, including the chief U.S. economists of the biggest American banks, aren’t being invited, according to past participants.

Wall Street Journal:

• Iraqi Leader Maliki Loses Backing of Shiite Figure and Iran for New Term. Iraqi Prime Minister Nouri al-Maliki is losing political support for his bid for a third term from core backers, including the country's Shiite religious establishment and ally Iran, say Iraqi officials. The shift, officials said, is prompting members of the premier's own alliance to reconsider their support and dimming the prospect of his stay in power. In recent days, high-level delegations of Iranian military officials and diplomats held a flurry of meetings in Baghdad and the Shiite religious capital Najaf, where they were told that Mr. Maliki, a Shiite, has lost the confidence of all but his most loyal inner circle, Iraqi officials with knowledge of the meetings said. 

• U.S. Officials Lay Out Case Against Russians. Washington Seeks to Counter Russian Claims About MH17 Crash. U.S. intelligence officials presented reporters with their most detailed case yet Tuesday that Russian-backed Ukrainian separatists shot down a Malaysia Airlines jetliner last week, in a bid to counter what American officials see as Russian efforts to muddy the waters with claims of Ukrainian culpability. The officials relied on photographs, social media, and voiceprint analysis of Ukrainian communications intercepts to make their... 

• Appeals Courts Issue Conflicting Rulings on Health-Law Subsidies. Subsidies Seen as Crucial to Implementation of Affordable Care Act.

CNBC: 

• Apple(AAPL) earnings: $1.28 a share, vs. expected EPS of $1.23.

• Global terrorism deaths soar.

• Microsoft(MSFT) earnings: 58 cents a share, vs. expected EPS of 60 cents.

Zero Hedge:

• NY Fed Slams Deutsche Bank (And Its €55 Trillion In Derivatives): Accuses It Of "Significant Operational Risk".

• Turkish PM Cuts Ties With US, Mulls De-Dollarization With Russia.

• The Baltic Dry Index Collapses To 18-Month Lows; Worst July Since 1986. (graph)

• "Authenticity Is As Rare As A Unicorn In Today's Politically-Motivated Markets".

• After Bubble Pops, Saudi Arabia Opens Stock Market To Foreign "Greater Fool" Investors. (graph)

• Poroshenko Demands Ukraine Separatists Be Declared "Terrorists" Under International Law.

Business Insider:

• Bill Ackman Just Finished 'The Most Important Presentation' Of His Career And The Market Is Laughing At Him.

• Investors Taking On Junk Bonds Could Be In For A Nasty Surprise.

• Four Important Charts From Apple's Earnings.

Reuters:

• Intuitive Surgical(ISRG) shows improvement despite profit decline.

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 Should Allow Defaults to Re-Evaluate Risks. China should allow some companies to default, and encourage financial institutions and investors to re-evaluate the risks of investing in local government debt and the property market, reporter Zhang Chaohui says in a front-page commentary. Funds will move back to industries with low risks from sectors with overcapacity after the market recognizes investment risks. Local governments may face bigger payment pressure in 2H on slower economic growth and cooling of land sales and property market, the commentary said.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are unch. to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 103.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 71.50 -1.0 basis point.

• FTSE-100 futures -.19%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures  -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SPG)/2.13

• (DOW)/.72

• (PX)/1.59

• (BA)/1.98

• (BIIB)/2.83

• (GD)/1.77

• (NOC)/2.22

• (DAL)/1.03

• (OC)/.45

• (R)/1.39

• (KNX)/.27

• (GRA)/1.15

• (APD)/1.45

• (WHR)/2.91

• (PEP)/1.23

• (EMC).43

• (NSC)/1.74

• (FCX)/.53

• (QCOM)/1.21

• (CRUS)/.30

• (FFIV)/1.35

• (GILD)/1.79

• (CAKE)/.61

• (RJF)/.76

• (T)/.63

• (ILMN)/.50

• (FB)/.32

• (TSCO)/.95

• (AVB)/1.66

• (FLS)/.92

• (TEX)/.81

• (ETH)/.40

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,422,220 barrels versus a -7,525,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,133,330 barrels versus a +171,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,844,440 barrels versus a +2,528,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall -.1% versus a +2.2% gain the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The HSBC China Manufacturing PMI and the weekly MBA mortgage applications report could also impact trading today.

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