Friday Watch

Evening Headlines 
Bloomberg: 

• Russia Truce Plan at Odds With Reports on APC Movements. Russia proposed a cease-fire for humanitarian aid deliveries to war-torn parts of southeastern Ukraine as a convoy of aid trucks from Moscow waited near the border with rebel-held areas. Even as Russia struck a conciliatory note, news outlets including Novoye Vremya and Hromadske TV reported seeing armored personnel vehicles crossing into Ukraine. The government in Kiev has been saying for months that the separatist rebels are receiving reinforcements from Russian territory. The government in Moscow has repeatedly denied any involvement in the unrest. The dispute over the Russian convoy, which the leadership in Moscow says is carrying emergency supplies, has stoked tensions between the two countries and has prompted the U.S. and the European Union to warn Russia against using aid as a pretext for a military intervention. Russia says the supplies are needed to help citizens of Luhansk and Donetsk, where fighting has cut off water and power connections. 

• Islamic State Said to Challenge Al-Qaeda for Leadership. The radical Islamic State’s advances in Iraq are strengthening its challenge to al-Qaeda in a contest for the leadership of the global jihadi movement, according to five U.S. intelligence officials. Its territorial gains and declaration of a caliphate spanning parts of Syria and Iraq, reinforced by its use of social media to broadcast its accomplishments in many languages, are attracting recruits and even drawing defections from the leadership of the core al-Qaeda group and some affiliates, the officials told reporters at a briefing today. They spoke on the condition of anonymity to discuss intelligence assessments. The U.S. intelligence community thinks the Islamic State has an incentive to conduct a major terrorist strike against U.S. or European targets, in part to further assert itself as the true leader of radical Islam, the officials said. There’s evidence that the group is establishing cells beyond Iraq and Syria, they said.

• Maliki Resigns as Prime Minister to Make Way for Abadi. Iraqi Prime Minister Nouri al-Maliki said he has agreed to leave office and clear the way for his designated successor to take over. The move ends a political impasse and may enable Prime Minister-designate Haidar al-Abadi to pull together a more inclusive government better able to counter Islamist militants advancing in the country’s north, and to heal sectarian and ethnic rifts threatening to tear Iraq apart. 

• Open-Ended Notes Skirt Effort to Curb $14 Trillion Chinese Corporate Debt. Chinese companies are selling a record number of bonds that can be booked as equity this year, sidestepping Premier Li Keqiang’s bid to reduce the world’s biggest corporate debt load. Ten firms have issued perpetual notes that pay higher yields in exchange for having no set maturity date, up from eight last year and two in 2010 when such securities debuted in the nation, Bloomberg-compiled data show. China Railway Construction Corp. led offerings with $800 million of 3.95 percent securities last month. The coupon exceeds the 3.5 percent on its 2023 debentures issued in 2013.

• Asian Stock Index Heads for Best Weekly Gain Since March. Asian stocks were little changed, with the regional benchmark index heading for the biggest weekly rally since March, as investors weighed reports Ukraine tensions are easing and weak economic data that fueled bets central banks will maintain stimulus. Health-care shares rose the most among the 10 industry groups on the regional index while energy stocks led declines. China Mobile Ltd., the world’s largest phone company by users, climbed 2.6 percent as it said it will cut $2 billion from its device subsidy budget. James Hardie Industries Plc., a building-materials supplier, slumped 7 percent in Sydney after reporting profit plunged. Parkson Retail Group Ltd., which operates department stores in China, soared 9.1 percent in Hong Kong after first-half profit beat estimates. The MSCI Asia Pacific Index (MXAP) traded at 147.78 as of 9:50 a.m. in Hong Kong, headed for a 2.5 percent rally this week, the most since the period ended March 28. 

• Wal-Mart’s(WMT) Sales Stagnation Reignites Concern About Economy. Wal-Mart Stores Inc. (WMT)’s latest struggles to revive U.S. sales, following a disappointing Commerce Department report earlier this week, add to evidence that the economy isn’t recovering as quickly as expected. The company posted stagnant same-store sales today in its second-quarter earnings report, marking the sixth straight period of no growth. The world’s largest retailer also cut its earnings forecast for the year, citing higher spending on health care and e-commerce.

• WTI Heads for Fourth Weekly Drop Amid Rising Supply; Brent Gains. West Texas Intermediate headed for a fourth weekly drop, the longest losing streak since November, amid speculation that crude supplies are expanding as global demand slows. Brent gained in London. Futures were little changed in New York after falling 2.1 percent yesterday, the most in two weeks. A supply glut is shielding the market from disruptions, the International Energy Agency said on Aug. 12. Oil production in the U.S., the world’s biggest consumer, rose last month to the fastest pace since April 1987, according to the Energy Information Administration.

Wall Street Journal: 

• Euro-Zone Economy Stalls in Second Quarter as German GDP Slips. Weak Quarter Raises Fears Europe's Recovery Has Faltered as Tensions With Russia Add New Challenges. The euro-zone economy stalled in the second quarter, raising the ugly prospect that the region's meager recovery has lost momentum just as it faces fresh headwinds from Russia and Ukraine. Germany's economy, long Europe's growth engine, shrank for the first time in more than a year, a development economists largely attributed to a mild winter that boosted activity in the first quarter at the expense of the second. The...

• Iraq's Besieged Maliki Quits. Move Is Surprising Reversal. Prime Minister Nouri al-Maliki relinquished power on Thursday, ending eight years of tumultuous rule and opening a new political chapter that U.S. officials hope will move Iraq toward a more united front against marauding jihadists. The surprise move deflates a potential crisis after Mr. Maliki had disputed in court the naming of another politician to the premiership and ominously deployed extra security forces across... 

• Midwestern Farmland Values Flatten as a Hot Market Cools. As Crop Prices Fall, So Does Demand for Land.

• Banks, Financial Firms Load Up on Cheap Debt. Banks and other financial companies world-wide are issuing bonds in the U.S. at a record pace, taking advantage of this year's surprising slump in interest rates and a brightening outlook for the sector. These firms' debt sales hit $391 billion this year through Thursday morning, a 32% jump from the same period last year and a 19% rise from the same span of 2007, a year of record issuance, according to data provider Dealogic. That is a higher year-over-year increase than in the broader U.S. corporate-bond market. Sales by... 

CNBC:

• Coke(KO) buys 16.7% stake in Monster Beverage(MNST), Monster shares soar.

• Evidence suggests Ebola toll underestimated: WHO. Staff with the World Health Organization battling an Ebola outbreak in West Africa see evidence the numbers of reported cases and deaths vastly underestimates the scale of the outbreak, the U.N. agency said on its website on Thursday.

• Pershing Square sues US over Fannie Mae, Freddie Mac. Pershing Square Capital Management LP, the hedge fund firm run by William Ackman, on Thursday sued the U.S. government, claiming that its stripping of profits from Fannie Mae and Freddie Mac unconstitutionally short changes investors in the companies' common stock.

Zero Hedge:

• Putin Punks West (Again): Russian Troops Enter Ukraine, Guardian Reports.

• ISIS Issues Threat To White House; Secret Service Taking "Appropriate Steps".

• US Sending 600 Troops, APCs And Tanks To Countries Bordering Russia To "Reassure Threatened Allies".

• David Tepper Unwinds S&P, Nasdaq Calls; Liquidates QCOM, JPM; Adds To AAL, GM: Full 13F.

• 3 Things Worth Thinking About. (graph)

• 14 Reasons Why The U.S. Economy's Bubble Of False Prosperity May Be About To Burst.

Business Insider: 

• David Einhorn Adds To Apple(AAPL) Stake, Trims Micron(MU).

• EXPERT: Obama's Reconciliation With Iran Helps Fuel Middle East Mayhem.

• Texas National Guard Deploys To US-Mexico Border.

NY Times:

• Hedge Funds Give Quarterly Snapshot of Their Portfolios.

NBCNewYork:

• Thousands Rally in Times Square Over Missouri Shooting. Thousands of people rallied in Times Square and on surrounding blocks Thursday evening over the police shooting of Michael Brown, the unarmed black teenager shot last weekend in Ferguson, Missouri.

Reuters:

• Billions in oil investments at risk from low crude prices, says Carbon Tracker. More than half a trillion dollars of investments in major oil projects over the next decade are at risk from high costs and low crude oil prices, an environmental think tank said on Friday, warning that shareholders' returns could suffer. 

• Applied Materials(AMAT) profit beats on memory chip demand. Chip-equipment maker Applied Materials Inc reported a better-than-expected third-quarter profit as contract manufacturers spend more on technology used to make smartphone and memory chips.

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

Telegraph: 

• France rebels against austerity as Europe's recovery collapses. France’s finance minister sends tremors through European capitals with a defiant warning that his country would no longer try to meet deficit targets.

• Russian armoured vehicles and military trucks cross border into Ukraine. (video) Exclusive: Telegraph witnesses Russian armoured vehicles and military trucks cross the border from Russia into Ukraine.

Evening Recommendations
FBR Capital:

• Rated (ICPT) Underperform, target $172.

• Rated (ENTA) Outperform, target $52.

• Rated (NPSP) Outperform, target $34.

• Rated (ACHN) Outperform, target $12.

• Rated (GILD) Outperform, target $125.

Night Trading

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 103.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 72.5 +.25 basis point.

• FTSE-100 futures +.25%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures  +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (EL)/.54

• (JD)/-.10

Economic Releases 
8:30 am EST

• Empire Manufacturing for August is estimated to fall to 20.0 versus 25.6 in July.

• PPI Final Demand for July is estimated to rise +.1% versus a +.4% gain in June.

• PPI Ex Food & Energy for July is estimated to rise +.2% versus a +.2% gain in June.

9:00 am EST

• Net Long-Term TIC Flows for June.

9:15 am EST

• Industrial Production for July is estimated to rise +.3% versus a +.2% gain in June.

• Capacity Utilization for July is estimated to rise to 79.2% versus 79.1% in June.

• Manufacturing Production for July is estimated to rise +.4% versus a +.1% gain in June.

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for August is estimated to rise to 82.5 versus 81.8 in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK gdp report and Fed's Kocherlakota speaking could also impact trading today.

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