Wednesday, August 20, 2014

Thursday Watch

Evening Headlines 
  • Iran Speaks More Softly But Keeps Building Bigger Sticks. While Iran’s military has toned down its rhetoric about military capabilities and exercises, it continues a low-profile buildup of weapons in and near the Strait of Hormuz, according to a classified Pentagon assessment. “Iran’s military strategy is defensive” and designed to “deter an attack, survive an initial strike, retaliate against an aggressor and force a diplomatic solution” while avoiding major concessions, says the unclassified executive summary of a congressionally mandated Pentagon report submitted to lawmakers on July 7. 
  • Retooled Hamas Bloodies Israel With Help From Hezbollah. Hoisting themselves from a tunnel underneath the Gaza border, the Hamas gunmen sprinted through desert brush to attack an Israeli military post and kill five soldiers, retreating with a bounty of captured machine-guns. The strike at Israel’s border with Gaza at Nahal Oz, recorded by a crew member and broadcast on the group’s television station, demonstrates how Hamas’s ragtag Al-Qassam Brigades militia has transformed itself into a disciplined force and inflicted greater damage on Israel’s vastly larger army than ever before. Sixty-four soldiers died, the most in a military conflict since the second Lebanon war in 2006, and more than six times the number of troops killed in Israel’s last ground war in Gaza in 2009.
  • China Baby Boom Wagers Go Bust on Child Cost Burden. Nine months after stock-market wagers on a baby boom in China reached record levels, the bets have turned into some of the nation’s biggest losers as living costs deter couples from having more than one child.
  • Ebola Sickens Economies of West Africa. Sandi Sesay’s boss promised him three months of pay when he told the driver to stop coming to work. The goal was to prevent any possible spread of Ebola at the Sierra Leone mine that employs him. Two weeks later, Sesay, 29, has yet to see any money from Dawnus Construction Ltd., a contractor at London Mining Plc (LOND)’s Marampa iron-ore deposit. 
  • World’s Biggest Wealth Fund Slows Investment in Emerging Markets. Norway’s $880 billion sovereign wealth fund, the world’s largest, is slowing its expansion into emerging markets as it scales back a two-year mission to tap into the fastest growing markets.
  • Asian Stocks Fall After HSBC China Manufacturing Drops. Asian stocks outside Japan fell for the first time in nine days after a private gauge of Chinese manufacturing dropped more than economists forecast. China Shenhua Energy Co., the nation’s biggest coal producer by market capitalization, declined 2.2 percent in Hong Kong. Gambling firm Tatts Group Ltd. slumped 5.3 percent in Sydney after profit missed estimates. Dainippon Screen Manufacturing Co. jumped 3.9 percent in Tokyo after Mitsubishi UFJ Morgan Stanley Securities Co. advised buying shares of the semiconductor-equipment maker. The MSCI Asia Pacific excluding Japan Index slid 0.7 percent to 509.25 as of 11:08 a.m. in Hong Kong, with five shares falling for each two that rose.
Wall Street Journal: 
  • U.S. Tried to Rescue Slain Journalist. Obama Calls for Excising 'Cancer' from Middle East as Officials Reveal Failed Raid to Free Hostages. U.S. Special Operations forces mounted an unsuccessful mission inside Syria earlier this summer to try to rescue several Americans held by Islamic extremists, including the journalist who was beheaded this week, senior Obama administration officials said. President Barack Obama ordered the secret operation, the first of its kind by the U.S. inside Syrian territory since the start of the civil war, after the U.S. received intelligence the Americans were being held by the extremist group known as Islamic State at a...
  • Investors Pour Into Vanguard, Eschewing Stock Pickers. Investors are pouring money into Vanguard Group, the epitome of the hands-off approach to investing, flocking to funds that track market indexes and aren't run by stock pickers or star managers. The inflow has pushed the mutual-fund giant to almost $3 trillion in assets under management for the first time. The surge is part of a sea change in the fund business in which investors are increasingly opting for products that track...
  • So What Will You Do, Mr. President? Denunciations won't stop the men who killed James Foley. President Obama on Wednesday condemned the made-for-YouTube murder of American James Foley with as much passion as we've seen from the cool Commander in Chief.
  • Still awash with cash, world economies take turn for the worse. China's economy is slowing. The euro zone's is a flat line. Japan's sank in the second quarter. Britain has wage deflation. The U.S. economy is ticking over at best. In a world preoccupied by geopolitical crises - from Ukraine, Iraq and Gaza to the Ebola outbreak in West Africa - the global economy has taken something of a back seat. But there are increasing signs it is in trouble despite being awash with cash from record low interest rates.
Zero Hedge:
  • FBI warns healthcare firms they are targeted by hackers. The FBI has warned that healthcare industry companies are being targeted by hackers, publicizing the issue following an attack on U.S. hospital group Community Health Systems Inc that resulted in the theft of millions of patient records. 
  • Hewlett-Packard(HPQ) posts surprise revenue gain after PC sales jump. Hewlett-Packard Co posted a surprise increase in quarterly revenue after sales from its personal computer division climbed 12 percent, but a flat to declining performance from its other units underscored the company's uphill battle to revive growth. Shares of the company dipped 0.8 percent to $34.84 after-hours.
Shanghai Securities News:
  • China 2H Fiscal Spending May Grow About 5.7% Y/Y. China's fiscal spending growth in 2H may slow by 10.1 ppt from 1H, according to a joint report produced by the NDRC's State Information Center, China Development Bank and the Shanghai Securities News published today. 2H fiscal revenue growth may continue to slow due to relatively large downward pressure on the economy.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 102.0 +1.5 basis points.
  • Asia Pacific Sovereign CDS Index 69.75 +.5 basis point.
  • FTSE-100 futures +.11%.
  • S&P 500 futures +.02%.
  • NASDAQ 100 futures  -.04%.
Morning Preview Links

Earnings of Note

  • (DLTR)/.64
  • (HRL)/.48
  • (SHLD)/-2.58
  • (PLCE)/-.45
  • (ROST)/1.08
  • (GPS)/.69
  • (TUES)-.05
  • (INTU)/.07
  • (CRM)/.12
  • (TFM)/.35
  • (GME)/.18
Economic Releases 
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 303K versus 311K the prior week.
  • Continuing Claims are estimated to fall to 2520K versus 2544K prior.
9:45 am EST
  • Preliminary Markit US Manufacturing PMI for August is estimated to fall to 55.7 versus 55.8 in July.
10:00 am EST
  • Philly Fed for August is estimated to fall to 19.5 versus 23.9 in July.
  • Existing Home Sales for July are estimated to fall to 5.02M versus 5.04M in June.
  • Leading Index for July is estimated to rise +.6% versus a +.3% gain in June.
Upcoming Splits
  • (EPD) 2-for-1
Other Potential Market Movers
  • The UK Retail Sales report, Eurozone PMI, Jackson Hole Fed Conference, Bloomberg Economic Expectations Index for August, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial 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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