Tuesday, August 05, 2014

Tuesday Watch

Evening Headlines 
Bloomberg:
  • Israel, Palestinians Agree on Three-Day Truce in Gaza. Israel and the Palestinians have agreed to a 72-hour truce in the Gaza Strip to take effect today, the latest effort to end four weeks of fighting. Under the Egyptian-brokered accord, hostilities will cease at 8 a.m. local time with no conditions attached, Israel’s Channel 2 television station said. Hamas, the Islamist group that rules Gaza, has accepted the truce, spokesman Fawzi Barhoum said in an e-mail. While Israel hasn’t sent a delegation to the Egyptian capital, it will consider going if militants abide by the cease-fire, an official said on condition of anonymity because he wasn’t authorized to discuss the matter. If quiet is maintained throughout the 72 hours, the Israeli military won’t have to remain in Gaza, he said. 
  • Iraq’s Biggest Dam at Risk as Islamists Fight Kurds for Control. Kurdish security forces clashed with a breakaway al-Qaeda group that’s trying to extend its control in northern Iraq by seizing the country’s largest dam. Fighting is raging near the Mosul dam, and it is a “no man’s land,” Sheikh Ahmed Al-Simmari, a resident of the nearby city of Rabia’ah, said in a phone interview. The Kurds retook the Rabia’ah border post with Syria and the nearby town of Sinjar from the militants after fierce fighting late yesterday, the Kurdistan Democratic Party, one of the groups that governs the largely autonomous region of Kurdish northern Iraq, said on its website.
  • Asia's Next Crisis Is a Flood of Debt. Asia is still traumatized by the great financial crisis of 1997, when Thailand's devaluation of the baht set off a region-wide collapse in markets. Could it happen here again? The mere question will strike many as odd, given Asia's rapid growth and progress in strengthening financial systems, improving transparency and amassing trillions of dollars of currency reserves. But Asia now faces three risks that could quickly undo those gains: Federal Reserve tapering, a Chinese crash and an explosion of household debt. The danger of the Fed pulling too much liquidity out of markets has been well documented. So have China's rising vulnerabilities. Debt, though, deserves far more scrutiny. As economists survey the scene, Thailand once again tops the worry list. Debt there has risen rapidly, underwriting standards appear loose and nonperforming loans are rising.
  • DeMark Says Sell China Stocks Now. The Shanghai Composite Index (SHCOMP) will probably end its world-beating rally within days and fall about 10 percent, said Tom DeMark, the developer of market-timing indicators who predicted the gauge’s peak last year.
  • Weak Japan Exports, Output Said to Raise Concerns at BOJ. Bank of Japan officials are concerned about increasing signs of weakness in the economy following a sales-tax increase, according to people familiar with the central bank’s discussions. Governor Haruhiko Kuroda and his board will discuss this week if they should lower their assessment of the nation’s exports and also whether to express caution about a decline in industrial production, said the people, who asked not to be identified because talks are private. Economists from JPMorgan Chase & Co. and UBS AG cut their estimates for second-quarter gross domestic product after data showed exports unexpectedly declined, retail sales dropped more than forecast and output fell the most since the March 2011 earthquake.
  • Asian Stocks Swing as Won Gains While Corn, Soybeans Fall. Asian stocks fluctuated, with the regional index swinging between gains and losses, while emerging-market currencies climbed before data on global service industries. Australian bonds rose as corn and soybeans fell. The MSCI Asia Pacific Index fell 0.1 percent by 9:58 a.m. in Tokyo, with Japan’s Topix (TPX) index steady while Korea’s Kospi sank 0.5 percent.
  • Baconholics Undeterred by 30-Year High Pig Prices: Commodities. Declining supplies of pigs that resulted from a deadly virus that spread across 30 states since the outbreak began last year have pushed up retail-bacon prices 10 percent in 2014 to $6.106 a pound in June, the highest since at least 1980, government data show. Wholesale pork-belly costs doubled, reaching a record $2.0353 a pound in April, according to the U.S. Department of Agriculture.
Wall Street Journal: 
  • Hospitals Cash In on the Newly Insured. More Surgery, Maternity Care, ER Visits Boost Admissions—to Insurance Firms' Chagrin. A rush of newly insured patients using health services has boosted hospital operators' fortunes but has racked up costs that insurers didn't anticipate, corporate filings and interviews with executives show. People are getting more back surgeries, seeking maternity care and showing up at emergency rooms more frequently, executives say, boosting income for hospital operators. At Tenet Healthcare Corp., patient volumes rose 4%...
  • Abandoning the Kurds. Our long-time allies in northern Iraq deserve U.S. military support. Another day, another Middle Eastern defeat. On Sunday the Islamic State in Iraq and al-Sham, or ISIS, ousted Kurdish forces from three towns in northern Iraq and laid siege to the country's largest dam. The question now is whether the Obama Administration will abandon our long-time Kurdish allies as they battle the jihadist army. Earlier this summer ISIS routed the Iraqi army in Mosul, and its success against the Kurdish peshmerga militia is another ominous turn. Kurdistan has been an island of relative peace and...
Fox News: 
  • Islamic State militants fight for Iraq's two biggest dams. Militants from the Islamic State are battling ferociously to control one of Iraq's most vital resources: water. Fighters with the group launched a three-pronged attack over the weekend in a drive to capture Haditha Dam, in western Iraq, a complex with six power generators located alongside Iraq's second-largest reservoir. At the same time, they are fighting to capture Iraq's largest dam, Mosul Dam, in the north of the country.
MarketWatch.com:
  • China using antitrust law to pressure foreign businesses. China is using its six-year-old antimonopoly law to put foreign businesses under increasing pressure, a development that experts say will intensify as Beijing seeks greater sway over the prices paid by Chinese companies and consumers.
Zero Hedge:
Business Insider:
Reuters: 
  • Tenet Healthcare(THC) raises outlook as patient admissions rise. Hospital operator Tenet Healthcare Corp on Monday posted a narrower quarterly net loss and raised its full-year outlook, saying patient admissions grew at a near-record pace. Patients with commercial insurance, inpatient admissions, outpatient visits, surgeries and emergency department visits all grew at near-record rates, Tenet said.
Xinhua:
  • China Growth to Slow to 'Medium-High Speed'. China's economic growth will slow to "medium-high speed," from "high speed," as the country enters a new norm for growth characterized by improved quality of development, according to a front-page commentary. China must rid itself of focusing on speed while maintaining a bottom-line growth target, the commentary say.
Economic Information Daily:
  • China Local Govts Check Home Loans Amid Mortgage Risks. Banking regulator at northern province of Inner Mongolia asks banks to report scales of overdue and non-performing property loans and plans to deal with such loans within this month. Overdue of property loans expands from developer lendings to home mortgages. Some borrowers would give up loan payment if home prices drop below outstanding mortgages, Shi Laiyin, assistant to president of Bank of Inner Mongolia said.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 107.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 72.75 -2.75 basis points.
  • FTSE-100 futures +.10%.
  • S&P 500 futures -.10%.
  • NASDAQ 100 futures  -.10%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (ADM)/.76
  • (MWW)/.09
  • (CVS)/1.10
  • (SMG)/2.26
  • (ZTS)/.38
  • (EMR)/1.06
  • (ODP)/-.01
  • (HCP)/.75
  • (VMC)/.38
  • (REGN)/2.30
  • (CVC)/.17
  • (COH)/.53
  • (DIS)/1.16
  • (PZZA)/.42
  • (FSLR)/.33
  • (ATVI)/.02
  • (Z)/-.04
  • (JAZZ)/1.92
  • (TDW)/.93
Economic Releases 
9:45 am EST
  • Final Markit US Services PMI for July is estimated to fall to 60.8 versus a 61.0 prior estimate.
10:00 am EST
  • The ISM Non-Manufacturing Composite for July is estimated to rise to 56.5 versus 56.0 in June. 
  • Factory Orders for June are estimated to rise +.6% versus a -.5% decline in May.
  • IBD/TIPP Economic Optimism for August is estimated to rise to 47.3 versus 45.6 in July.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone retail sales reports, Eurozone Services PMI, weekly US retail sales reports, Needham Interconnect Conference and (NATI) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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