Tuesday Watch

Evening Headlines

Bloomberg:

• War Talk Is Back on Russian TV as U.S. Ties Hit Post-Soviet Low. Russian state television is back on a war footing. This time, the ramped-up rhetoric follows the collapse of cease-fire efforts in Syria. As the U.S. and Russia accused each other of sinking diplomacy, Moscow increased its military presence in the Mediterranean and Baltic regions, and suspended a nuclear non-proliferation treaty. A prime-time news program warned that the U.S. wants to provoke a conflict. The sudden escalation puts the relationship back into the deep freeze it was in at the peak of the crisis over Ukraine in 2014, which also sparked a wave of hostility in state media. That anti-U.S. campaign ended as the Kremlin sought an easing of Western punitive measures imposed over the Ukrainian crisis -- hopes that now seem to be in tatters.
• Mobius: EM 'Could Be Blindsided' If Fed Raises Rates. (video)
• Momentum Is Seen Faltering for One of World’s Top Equity Rallies. The biggest stock-market rally in the developed world is going to lose traction before the year is up. So say all nine strategists tracked by Bloomberg, who on average predict a 5.9 percent drop in the FTSE 100 Index by December. A rebound in commodities and a slumping pound since the U.K.’s secession vote have spurred a 14 percent surge in 2016 for the gauge, whose members get most of their revenues from outside the country.
• Goldman(GS) Warns China’s Outflows May Be Worse Than They Look. China’s currency outflows may be bigger than they look, with Goldman Sachs Group Inc warning that a rising amount of capital is exiting the country in yuan rather than in dollars. While the nation’s foreign-exchange reserves have stabilized and lenders’ net foreign-exchange purchases for clients have fallen close to a one-year low, official data show that $27.7 billion in yuan payments left China in August. That’s compared with a monthly average of $4.4 billion in the five years through 2014. Such large cross-border moves can’t be explained by market-driven factors and need to be taken into account when measuring currency outflows, according to MK Tang, Hong Kong-based senior China economist at Goldman Sachs. Any sign of increased capital outflows could disturb a recent calm in China’s foreign-exchange market, adding to pressure from a potential Federal Reserve interest-rate increase and denting the yuan’s image as the world’s newest global reserve currency. The yuan fell to a six-year low on Monday, adding to outflow pressures.
• Asia Stocks Rise as Energy Shares Rally With Oil, Topix Advances. Asian stocks rose as energy shares rallied on expectations major crude producers will work to tighten output, while equities in Japan gained as the yen weakened for a second day. The MSCI Asia Pacific Index added 0.1 percent to 140.70 as of 9:06 a.m. in Tokyo. U.S. crude was near its highest price in more than a year after Saudi Arabia expressed optimism OPEC will be able to cement a deal to curb production, and Russia said it would back such an accord.
• Illumina(ILMN) Slumps in Late Trading on Lower Sales Estimates. Illumina Inc. slumped as much as 26 percent in late U.S. trading after saying third-quarter sales were lower than it anticipated 2 1/2 months ago because of declining demand for its high-speed genetic sequencers. Sales were about $607 million last quarter, the company said in a statement Monday. That’s below Illumina’s July forecast of $625 million to $630 million, and the $628 million average of analysts’ estimates compiled by Bloomberg. The shares were down 23 percent to $142.50 at 5:06 p.m. in New York.

Wall Street Journal:

• House Speaker Paul Ryan’s Rebuff of Donald Trump Roils GOP. Ryan didn’t rescind his endorsement but said he won’t defend or campaign with the presidential nominee.
• Facial Recognition Software Advances Trigger Worries. Russian startup readies a package that correctly matches 73% of people to large photo database.

Fox News:

• Supreme Court Justice Ginsburg on Kaepernick's anthem protests: 'It's dumb and disrespectful'. (video)
• WikiLeaks’ Podesta email release reveals massive Clinton ‘hits’ file on Sanders. (video)

MarketWatch:

• S&P 500’s ‘triangle’ chart pattern warns of a big selloff, analyst says.

CNBC:

• Samsung asks all global partners to stop sales and exchanges of Galaxy Note 7. (video)

Zero Hedge:

• Leaked Emails Expose Tight Link Between CNBC And Clinton Campaign. 
• How The "Perverse Economic Effects Created By ETFs" Are Setting Up The Next Crash.
• The Chart That Gives Citi "The Chills".
• "Can We Stop This Nonsense, Please?"
• Equity Bulls Thank Putin For Saving The World As Oil Hits 15-Month Highs. (graph)

Business Insider:

• The GOP's nightmare scenario is now in play.
• Houston's economy is wobbling.

Night Trading 

• Asian equity indices are unch. to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 111.0 -3.25 basis points. 
• Asia Pacific Sovereign CDS Index 33.0 +.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.71 -.11%. 
• S&P 500 futures +.02%. 
• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (AA)/.32
• (OZRK)/.61
• (FAST)/.45
• (CUDA)/.13
• (HCSG)/.27

Economic Releases
6:00 am EST

• The NFIB Small Business Optimism Index for September is estimated to rise to 95.0 versus 94.4 in August. 

10:00 am EST

• The Labor Market Conditions Index for September is estimated to rise to 1.5 versus -.7 in August.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Germany ZEW Index, Japan Machine Orders, weekly US retail sales reports, (AAL) traffic results and the (YUM) analyst conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology 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.