Wednesday Watch

Evening Headlines 
Bloomberg:

• Europe Sacrifices a Generation With 17-Year Unemployment Impasse. Seventeen years after their first jobs summit European Union leaders are divided on how to create employment and a fifth of young people are still out of work. At a meeting in Milan today Italian Prime Minister Matteo Renzi plans to tout the new labor laws he’s pushing through. French President Francois Hollande will argue for more spending, a proposal German Chancellor Angela Merkel intends to reject. Britain’s prime minister David Cameron isn’t coming. Their lack of progress may increase the frustration of European Central Bank President Mario Draghi who has faced down internal dissent to deploy unprecedented monetary easing. He’s calling on the politicians to do their bit now and loosen the continent’s rigid labor markets even if that means facing the ire of protected workers. 

• Russian Hardship on Display at Delis as Sausages Shrink. There are many ways to measure the deepening financial crisis spreading across Russia. The ruble is sinking more than any other currency in the world, policy makers have burnt through some $55 billion of foreign reserves and the economy is teetering toward recession. Galina Mityaeva measures it in centimeters.

• IMF Joining Fed in Stock Price Bubble-Spotting Contest. Everyone has an opinion on the stock market nowadays. Three months after the Federal Reserve said prices were stretched in some stocks, the International Monetary Fund weighed in with its own warning, saying the risk of equity losses in 2014 has risen and stock valuations may be “frothy.” 

• Asian Stocks Extend Selloff as Oil Sinks; Dollar Rebounds. Asian stocks dropped, extending a global selloff, and oil dropped amid concern that the global economic outlook is worsening. Treasuries fell and Standard & Poor’s 500 Index futures rose with the dollar before the Federal Reserve releases minutes of its last meeting. The MSCI Asia Pacific Index fell 1 percent by 10:59 a.m. in Tokyo, as Japan’s Topix (TPX) index dropped toward a seven-week low. The Shanghai Composite Index and Chinese yuan were little changed after a weeklong holiday.

• Nickel Drops on China Growth Concern as IMF Lowers World Outlook. Nickel fell for the first time in four days, leading most industrial metals lower, after a gauge of economic strength in China pointed to a slowdown and the International Monetary Fund cut its global growth forecast. Nickel dropped as much as 0.7 percent and tin lost as much as 0.4 percent.

• Gold Extends Rebound From 2014 Low as Dollar to Stocks Retreat. Gold for immediate delivery rose as much as 0.2 percent to $1,211.70 an ounce, and traded at $1,210.55 by 8:10 a.m. in Singapore, according to Bloomberg generic pricing. The metal dropped on Oct. 6 to $1,183.24, the lowest since Dec. 31, as U.S. jobs data signaled the recovery is gaining traction. 

• Dudley Calls Forecast for Mid-2015 Rate Rise ‘Reasonable’. Forecasts for the Federal Reserve to raise interest rates in mid-2015 are “reasonable” as policy makers wait for unemployment to fall further and inflation to rise, New York Fed President William C. Dudley said.

• Traders Losing Faith Send Sears Bearish Bets to Record. Concern that Sears Holdings Corp. (SHLD) is running out of ways to halt a sales slump has driven bearish bets on the unprofitable retailer to a record.

Wall Street Journal:

• Wal-Mart(WMT) to End Health Insurance for Some Part-Time Employees. Cutback to Affect 30,000 Who Work Fewer Than 30 Hours a Week.

• Bundesbank’s Weidmann Criticizes ECB’s Stimulus Measures. Weidmann Warns That ECB Policy Risks Being ‘Held Hostage’ by Politics. German Bundesbank President Jens Weidmann criticized the European Central Bank’s decision to buy private-sector bonds and chastised France for budgetary laxness, taking a hard line against new stimulus just before high-level International Monetary Fund meetings. Mr. Weidmann’s comments, in an interview with The Wall Street Journal, expose some of the deep rifts that have plagued the 18-member eurozone since its debt crisis erupted nearly five years ago. While France and Italy, struggling with stagnant...

• Ping An Offers to Finance Down Payments in China. Program Could Aid Housing Market, but Raises Worry About Risks to Financial System. One of China’s biggest financial firms is offering to lend money to home buyers for down payments, part of a trend that could help the housing market but has prompted worry about risks to the financial system.

• ISIS Marches to a Massacre. The siege of Kobani shows the holes in Obama’s strategy. 

• The Fed’s Mortgage Favoritism by Jeffrey M. Lacker and John A. Weinberg. When the central bank buys private assets, it distorts markets and undermines its claim to independence. 

Fox News:

• UN warns of pending 'massacres' as ISIS closes in on Syrian city. A UN official warned of pending "humanitarian tragedies" and pleaded desperately with the world to intervene on behalf of Kurds trapped in a Syrian city near the Turkish border, as Islamic State fighters stood on the brink of taking it. Kurds from villages throughout northern Syria have fled to Kobani for a final stand as the terrorist group has marauded across huge swaths of land, leaving a trail of death and destruction. With the city under siege for three weeks, the black-clad fighters have begun to raise their flag over neighborhoods and UN Special Envoy for Syria Staffan de Mistura said the city was about to fall.

CNBC:

• Yum(YUM) profits, sales miss Street; Outlook disappoints. Yum Brands reported disappointing full-year guidance and quarterly results on Tuesday, sending shares lower in after-hours trading. The company said it expects full 2014 earnings growth of between 6 percent and 10 percent, versus Wall Street expectations of 14 percent.

Zero Hedge:

• Inside September's "Born Again" Jobs Report. (graph)

• Welcome To A 'New' New Normal Earnings Season. (graph)

• The "Dash-For-Trash" Is Over, Goldman Flip-Flops. (graph)

• President Obama "Has Given Up" On Big Issues, Panetta Fears. (video)

• Small Caps Slammed To 12 Month Lows; Russell Down Over 7% In 2014. (graph)

• Student And Car Debt Exponential; Credit Card Debt Declines. (graph)

• Germany’s Bad Numbers Are Great News For All Of Us.

Business Insider:

• Here Are All The Reasons People Think There's Something Big Happening In North Korea.

• Turkey's President Warns That A Key Syrian Border Town Is 'About To Fall' To ISIS.

• MUNSTER: Teens Aren't Interested In The Apple Watch.

• Hezbollah Just Took Credit For Attacking Israel For The First Time Since 2006.

Reuters:

• Data breach at bond insurer MBIA may affect thousands of local U.S. governments. Bond insurer MBIA was told two weeks ago about a server breach that compromised the data of thousands of local U.S. government entities, but it did not address the problem until earlier this week, according to the cyber security expert who discovered the intrusion. MBIA said on Tuesday it had been notified that some client information at its Cutwater Asset Management unit may have been illegally accessed.

• Banks to change rules governing derivatives market -FT. The world's biggest banks have agreed to change rules that govern the $700 trillion derivatives market, the Financial Times reported on Tuesday. Eighteen banks, ranging from Credit Suisse Group AG to Goldman Sachs Group Inc, have agreed to give up the right to "close out" deals on derivatives contracts if a financial institution runs into trouble, the newspaper said, citing people familiar with the matter.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goal

Shanghai Securities News:

• Chinese Investor Confidence Rises to Over 6-Year High. Chinese investor confidence rose to the highest level since April 2008 in Sept., citing a survey of 4,330 securities investors conducted in the month. The confidence index compiled by China Securities Investor Protection Funds rose 20.5% y/y to 70.5 in Sept., the highest since the index was created. Almost 60% of investors are optimistic on the outlook of China's A-shares market.

Evening Recommendations
Piper Jaffray:

• Cut (GPRO) to Neutral, target $90.

Night Trading

• Asian equity indices are -1.25% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 117.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 67.75 -1.25 basis points.

• FTSE-100 futures -.46%.

• S&P 500 futures +.17%.

• NASDAQ 100 futures  +.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (COST)/1.52

• (MON)/-.24

• (AA)/.22

• (RT)/-.13 

• (RPM)/.78

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,677,780 barrels versus a -1,363,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -660,000 barrels versus a -1,836,000 barrel decline the prior week. Distillate supplies are estimated to fall by -1,100,000 barrels versus a -2,894,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.72% versus a -3.6% decline the prior week.

2:00 pm EST

• Minutes from Sept. 16-17 FOMC Meeting.
  

Upcoming Splits

• (PHX) 2-for-1

• (APH) 2-for-1

Other Potential Market Movers

• The Fed's Evans speaking, Former Fed Chair Bernanke speaking, Fed's Yellen attending Financial Stability Oversight Council Meeting, Australia unemployment rate, $21B 10Y T-Note auction, weekly MBA mortgage applications report, (JCP) analyst meeting, (TFM) analyst day and the (HPQ) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity 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.