Thursday Watch

Night Trading 

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 113.0 -.25 basis point.
• Asia Pacific Sovereign CDS Index 38.25 -3.75 basis points.
• Bloomberg Emerging Markets Currency Index 72.25 -.04%. 
• S&P 500 futures +.10%. 
• NASDAQ 100 futures +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (CPB)/.50
• (CIEN)/.38
• (GCO)/.27
• (JOY)/.12
• (LE)/-.02
• (LULU)/.38
• (VRA)/.13
• (AMBA)/.38
• (AVGO)/2.76
• (COO)/2.29
• (SWHC)/.54
• (PAY)/.40  

Economic Releases  
7:30 am

• Challenger Job Cuts YoY for August. 

8:30 am EST

• Final 2Q Non-Farm Productivity is estimated to fall -.6% versus a -.5% decline in 1Q.
• Final 2Q Unit Labor Costs are estimated to rise +2.1% versus a +2.0% gain in 1Q.
• Initial Jobless Claims are estimated to rise to 265K versus 261K the prior week.
• Continuing Claims are estimated to fall to 2143K versus 2145K prior.   

9:45 am EST

• Final Markit US Manufacturing PMI for August is estimated at 52.1 versus a prior estimate of 52.1.

10:00 am EST

• Construction Spending MoM for July is estimated to rise +.5% versus a -.6% decline in June.
• ISM Manufacturing for August is estimated to fall to 52.0 versus 52.6 in July.
• ISM Prices Paid for August is estimated to fall to 54.8 versus 55.0 in July. 

Afternoon:

• Total Vehicle Sales for August are estimated to fall to 17.2M versus 17.77M in July.
  

Upcoming Splits 

• (CHD) 2-for-1

Other Potential Market Movers

• The Fed's Mester speaking, Eurozone PMI report, weekly EIA natural gas inventory report, (LB) August sales report and the (F) sales call could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.

Stocks Falling into Afternoon on Fed Rate-Hike Fears, Global Growth Worries, Oil Decline, Energy/Defense Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.92 +6.1%

• Euro/Yen Carry Return Index 120.47 +.52%

• Emerging Markets Currency Volatility(VXY) 10.19 -.29%

• S&P 500 Implied Correlation 47.89 +3.86%

• ISE Sentiment Index 42.0 -51.15%
  

• Total Put/Call 1.15 +18.6%

• NYSE Arms 1.87 +72.93% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.34 +1.36%
  

• America Energy Sector High-Yield CDS Index 691.0 +2.13%

• European Financial Sector CDS Index 90.23 +2.54%

• Western Europe Sovereign Debt CDS Index 24.07 -5.4%

• Asia Pacific Sovereign Debt CDS Index 38.38 -8.84%

• Emerging Market CDS Index 246.68 -.38%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.48 -.25%

• 2-Year Swap Spread 25.0 +.5 basis point

• TED Spread 51.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -40.25 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.26 -.16%
• 3-Month T-Bill Yield .32% unch.

• Yield Curve 78.0 +1.0 basis point
  

• China Import Iron Ore Spot $58.97/Metric Tonne -.57%

• Citi US Economic Surprise Index 13.5 +1.4 points

• Citi Eurozone Economic Surprise Index -3.1 -9.1 points

• Citi Emerging Markets Economic Surprise Index -7.9 -2.0 points

• 10-Year TIPS Spread 1.47% unch.
• 40.1% chance of Fed rate hike at Nov. 2 meeting, 60.2% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -3 open in Japan 
• China A50 Futures: Indicating +6 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.0%

Sector Underperformers:

• 1) Energy -2.0% 2) Oil Service -2.0% 3) Disk Drives -1.6%

Stocks Falling on Unusual Volume: 

• AVAV, GIII, NCS, HRB, RBA, PANW, RPD, BZUN, TEDU, USCR, WPPGY, TASR, DG, PRXL, STC, AMBA, ANF, PRLB, DBVT, SNOW, USG, SCSC, SWHC, YRD, EXA, HAIN, BF/B, PRXL, RPD and SRI

Stocks With Unusual Put Option Activity:

• 1) XLF 2) CIEN 3) COF 4) AKS 5) GPS

Stocks With Most Negative News Mentions:

• 1) GIII 2) UA 3) PRLB 4) FSLR 5) ANF

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.5%

Sector Outperformers:

• 1) Foods +.1% 2) Utilities -.3% 3) Restaurants -.3%

Stocks Rising on Unusual Volume:

• ININ, VEEV, BOBE, CHS, MTRX, ISIL, CAL, BLOX, YY, TWTR and ISIL

Stocks With Unusual Call Option Activity:

• 1) AKS 2) TLRD 3) MDVN 4) HSY 5) GNC

Stocks With Most Positive News Mentions:

• 1) APPS 2) ENOC 3) KEQU 4) VEEV 5) DSW

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.8% Below 100-Day Average
• 0 Sectors Rising, 10 Sectors Declining
• 29.7% of Issues Advancing, 66.7% Declining
• 80 New 52-Week Highs, 7 New Lows
• 63.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.0%
• Vix 13.8 +4.8%
• Total Put/Call 1.25 +28.9%
• TRIN/Arms 1.46 +35.0%

Wednesday Watch

Evening Headlines

Bloomberg: 

• Political Hotspots May Bubble Up on G-20 Sidelines in China. This weekend the leaders of 20 of the world’s major economies gather in China to talk about issues ranging from the global economy to the threat of terrorism. As usual, it’s the sideline tensions that may capture attention. Last year’s summit in Turkey was overshadowed by Islamic State’s deadly attacks on Paris just days before. The violence, which left 130 people dead and hundreds wounded, spurred a flurry of meetings on the sidelines, mostly about Syria, where a civil war helped create the conditions for the terrorist group to grow. The previous year in Australia, talks were dominated by Russia’s occupation of Crimea and its alleged support for Ukraine separatists. The host country’s then leader, Tony Abbott, threatened to "shirtfront" -- or tackle -- Vladimir Putin, who ended up leaving the summit early. As leaders prepare to meet in China, there are several hot-button issues to watch for:
• Pimco’s Baz Says Japan In a Bind as Total Debt Tops 600% of GDP. There’s “very little” that Japan can do about its mounting debt pile, which presents a potential risk to growth, according to Pacific Investment Management Co.’s Jamil Baz. With a government debt load that’s 2 1/2 times the size of annual gross domestic product and a total national borrowing burden that’s six times as large, “Japan is suffering from the excesses of the past” and the country “is in a bind right now,’’ the fund manager’s head of client analytics said in an interview in Sydney last week. Japan’s economy is still struggling to gain traction even after policy makers hit it with repeated doses of budgetary stimulus and unprecedented monetary easing to drag the country out of its deflationary funk. The Bank of Japan’s adoption of negative interest rates has pushed down debt financing costs for now, but repeated delays to a planned sales tax increase, a new 28 trillion yen ($272 billion) fiscal boost from Prime Minister Shinzo Abe and the pressures of an aging population mean the borrowing pile is likely to keep on growing.
• Asian Futures Look Beyond U.S. Losses as Yen, Oil Nurse Declines. Most Asian index futures shrugged off a retreat in the U.S., signaling gains for the last day of August following a selloff in the yen. The resurgent dollar weighed on crude oil. Futures on stock gauges in Sydney and Hong Kong edged higher, even as a drop in Apple Inc. helped drag the S&P 500 Index down 0.2 percent Tuesday, almost erasing its August advance. Nikkei 225 Stock Average futures climbed in Osaka and Singapore as Japan’s currency traded near its weakest level in a month versus the dollar. U.S. crude fell for a third session, ahead of government data expected to show American oil stockpiles rose last week, reviving concern over a glut in the commodity. Gold traded near an almost six-week low.
• Mystery Shrouding Oil on Chinese Islands Puzzles Crude Markets. China’s got the world puzzling over its oil hoard. From underground caverns by the Yellow Sea to a scattering of islands in the Yangtze River delta, the government has been stockpiling crude for emergencies in a network of storage sites dotted around the country. Record purchases this year by the world’s biggest energy consumer have helped oil prices recover from the worst crash in a generation. What the country plans to do next could determine where they go from here. The difficulty is that nobody outside China really knows for certain. The government won’t say how much it’s holding or when the tanks will be full. Energy Aspects Ltd. says the country will probably keep buying and fill up commercial tanks if it has to, while the likes of JPMorgan Chase & Co. say the purchases may soon stop. The difference in opinion is equivalent to about 1.1 million barrels a day, or more than the Asian country buys from Saudi Arabia.

Wall Street Journal:

• The CIA’s Venture-Capital Firm, Like Its Sponsor, Operates in the Shadows. In-Q-Tel provides only limited information about its investments, and some of its trustees have ties to funded companies.

Fox News:

• FBI to release Clinton probe files, as candidate pressed to answer new questions ‘under oath’. (video) Hillary Clinton is facing the possibility of new revelations on her personal email scandal on multiple fronts, as the FBI prepares to release some of the documents from its investigation in a matter of days – and a watchdog group sends the Democratic presidential nominee a detailed set of questions she’s expected to answer “under oath” by next month.

Zero Hedge:

• Another Donor Email Seeking Another Favor; Huma Worries The "Problem Is She Keeps Emailing HRC Directly".
• Food Deflation Driving "Least Profitable Year In 20 Years" As Farmers And Grocers Get Crushed. (graph)
• Debt, Deficits & Economic Warnings. (graph)
• With Japan's Unemployment Rate At 21 Year Lows, "A Hidden Problem" Is Revealed.
• Michael Lewitt: "We're In The Late Stages of Ponzi Finance".
• Oil Extends Losses After Big Distillates Inventory Build. (graph)
• Deutsche Bank Calculates How Much Of The S&P's Value Is Due To Central Banks. (graph)
• Obama Admits 10,000 Syrian Refugees: This Is Where They Are Headed.
• Soros Seeks To "Reshape American Justice System" By Pouring Funds Into "Powerful" District Attorney Races.
• Crude Carnage & A Confident Consumer Send Stocks Lower, USD Higher. (graph)

Business Insider:

• The FBI recovered 30 of Hillary Clinton's emails regarding the Benghazi attack.
• People are freaking out over Canada's housing market.
• Midtown Manhattan has a ton of empty office space.

Night Trading 

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 113.25 unch.
• Asia Pacific Sovereign CDS Index 42.0 +.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.38 unch. 
• S&P 500 futures -.02%. 
• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BOBE)/.44
• (BF/B)/.37
• (CHS)/.22
• (CTRP)/-.02
• (BLOX)/.06
• (OXM)/1.38
• (CRM)/.22
• (SMTC)/.33
• (SCVL)/.27  

Economic Releases  
8:15 am

• The ADP Employment Change for August is estimated to fall to 175K versus 179K in July. 

9:45 am EST

• Chicago Purchasing Manager for August is estimated to fall to 54.0 versus 55.8 in July.

10:00 am EST

• Pending Home Sales MoM for July are estimated to rise +.7% versus a +.2% gain in June.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +825,000 barrels versus a +2,501,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,010,000 barrels versus a +36,000 barrel gain the prior week. Distillate supplies are estimated to fall by -155,000 barrels versus a +122,000 gain the prior week. Finally, Refinery Utilization is estimated to fall by -.62% versus a -1.0% decline the prior week.

Upcoming Splits 

• (CHD) 2-for-1

Other Potential Market Movers

• The Fed's Rosengren speaking, Fed's Kashkari speaking, Fed's Evans speaking, Australia Retail Sales report, China Manufacturing PMI and the weekly MBA Mortgage Applications report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology 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.