Tuesday, October 11, 2016

Wednesday Watch

Posted by Gary .....at 9:25 PM
Evening Headlines
Bloomberg:
  • China Cities Face End of Fairy Tale as Local Default Risks Rise. Finance firms that help keep cash flowing to China’s towns, cities and provinces face rising risks of landmark bond defaults just as they turn to global markets for funds. China’s economic slowdown is weighing on revenue at regional governments, hampering their ability to support the 5.3 trillion yuan ($789 billion) of outstanding onshore notes from local-government financing vehicles, which have yet to suffer nonpayments. Such issuance fell 18 percent last quarter as regulators curbed sales, forcing some to seek funds overseas. Financing units in provinces including Hunan, Jiangsu, Hubei and Sichuan are considering or planning U.S. currency notes, people familiar with the matters have said.
  • Asian Stocks Fall for Fourth Day as Yen Weighs on Japan Shares. Asian stocks headed for a fourth day of declines after U.S. markets slumped on disappointing earnings, volatility spiked, and a stronger yen weighed on Japanese shares. The MSCI Asia Pacific Index lost 0.4 percent to 139.25 as of 9:08 a.m. in Tokyo, while Japan’s Topix index sank 0.7 percent.
  • More Americans Falling Behind on Car Loan Payments, S&P Says. Subprime borrowers are falling behind on their car loan payments at the highest rate in more than six years, and some bonds backed by these loans are vulnerable to getting downgraded, according to S&P Global Ratings. Competition has spurred lenders to loosen standards and resulted in more delinquencies and default by people with weak credit, the ratings firm said. Subprime borrowers were behind by more than 60 days on about 4.85 percent of auto loans in August, the highest level since January 2010. The rate was 4.14 percent in August of last year, S&P said. For prime loans, delinquencies in August rose to 0.5 percent from 0.41 percent in the same month in 2015. The figures apply to loans that have been bundled into bonds.
  • U.S. Consumer Debt Stings as Delinquency Chances Increase: Chart.
  • PC Shipments Drop 3.9% as Declines Slow Before Holiday Shopping. Shipments of personal computers fell 3.9 percent in the third quarter, a narrower decline from earlier this year as the industry tries to free itself from a multiyear slump, market researcher IDC said. PC makers shipped 68 million machines globally in the period, down from 70.7 million a year earlier, IDC said Tuesday in a statement. The report follows a worldwide decline of 4.1 percent in the second quarter. Unit sales in the U.S. rose 1.7 percent, a second consecutive quarterly gain.
  • Earnings Season Arrives With Thud After Stock Investors Cut Risk. Investors who plowed money into an exchange-traded fund designed to weed out companies with the shakiest profits looked prescient Tuesday when U.S. stocks staged one of their worst starts to an earnings season since the bull market began. The S&P 500 Index dropped 1.2 percent to 2,136.73, the fourth-biggest decline recorded since 2009 on the day after Alcoa Inc. reported results that fell short of analysts’ estimates. Shares of the 128-year-old aluminum maker led the slide, plunging more than 11 percent, while companies reporting or warning of disappointing results from Illumina Inc. to Seagate Technologies and Fastenal Co. tumbled as well.
Wall Street Journal:
Fox News:
Night Trading 
  • Asian equity indices are -.75% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.50 -.5 basis point.
  • Asia Pacific Sovereign CDS Index 33.5 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 72.27 -.03%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.09%.

Earnings of Note 
Company/Estimate
  • (CSX)/.45
Economic Releases
10:00 am EST
  • JOLTS Job Openings for August are estimated to fall to 5775 versus 5871 in July.
2:00 pm EST
  • US Fed releases minutes from Sept. 20-21 FOMC meeting.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's George speaking, Fed's Dudley speaking, Eurozone Industrial Production report, Australian inflation data, OPEC monthly update, USDA WASDE Report, weekly MBA Mortgage Applications report, $24B 3Y T-Note auction and the $20B 10Y T-Note auction could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology 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.

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