Friday Watch

Evening Headlines

Bloomberg:

• Markets' Wildest Assets Are Becoming a Haven While Korea Tension Mounts. Some investors are turning to an unlikely safe haven as the rhetoric between U.S. President Donald Trump and North Korea intensifies. Bitcoin, ethereum and other digital currencies, among the most volatile assets around, are gaining in part as traditional refuges such as gold and U.S. Treasuries lose some of their luster. “We’re seeing investors transferring their funds into cryptocurrencies as they try to diversify their risk in case of a severe downturn in the market,” said Ron Chernesky, chief executive officer of trading platform InvestFeed Inc. which is switching from equity trading to cryptocurrencies. “The space has gone from niche to more widely adopted with one of the main draws being that crypto currencies are seen as less correlated with other assets.”

• Equity Rout Deepens, Bonds Rise on Korea Tension. Stock-index futures in Australia, South Korea and Hong Kong indicated losses for the start of Friday trading after the S&P 500 Index halted an unprecedented stretch of calm on American equity markets and the CBOE Volatility Index soared 44 percent. U.S. President Donald Trump dialed up his warning to North Korea on threats to American allies, lifting gold to a nine-week high and pushing the yen toward 109 per dollar. Treasuries strengthened. Futures on Australia’s S&P/ASX 200 Index fell 1.2 percent and those on Hong Kong’s Hang Seng Index slipped 0.6 percent. Kospi futures lost 1.5 percent. Japanese markets are closed for the Mountain Day public holiday.

• Your Evening Briefing.

• VIX's Highest Close Since Election Sparks Record Rush to Protect. The biggest selloff in U.S. equities since May sparked an unprecedented rush for protection in the options market. About 2.6 million puts and calls tied to the CBOE Volatility Index changed hands on Thursday, the most on record, as the VIX spiked 44 percent to close at the highest level since Nov. 8. About 3.4 call volatility options - a bearish equities trade - have changed hands for every put contract.

Wall Street Journal:

• Dow Falls Nearly 205 Points as North Korea Tensions Persist. Lackluster earnings contribute to blue-chip index suffering its biggest one-day decline since May 17.

• Democrats and the Permanent Crisis. Are even party donors getting tired of the Russia story?

Fox News:

• Trump turns up heat on North Korea, warns of unprecedented response if Guam attacked. (video)

CNBC:

• Nvidia(NVDA) shares fall despite earnings beat. (video)

• Trump pledges to increase missile defense spending by 'many billions of dollars'. (video)

• Farm machinery stocks drop after USDA reports surprisingly high crop yields.

• Nordstrom's(JWN) stock pops as retailer delivers same-store sales growth. (video)

• JPMorgan(JPM) quant who called volatility spike says expect more of the same in September.

Zero Hedge:

• Judge Orders New Search Of State Department Servers For Hillary's Benghazi Emails.

• Another Red Flag For Oil? China’s Crude Imports Slump To 7-Month Low.

• North Korea Responds: Vows To "Mercilessly Wipe Out Provocateurs", Blasts "US Will Suffer Final Doom".

• Trump Thanks Putin For Kicking Out 755 Diplomats: "We'll Save A Lot Of Money". (video)

• In Escalating Standoff, Indian Army Orders People Near Chinese Border To Vacate Village.

• President Trump To Declare Opioid Crisis A "National Emergency" As Deaths Skyrocket.

• Tech Wrecks, Credit Crashes, & VIX Goes Vertical - "Probably Nothing". (graph)

Business Insider:

• Snap(SNAP) misses across the board for Q2 earnings, stock gets whacked.

• Goldman Sachs(GS) seizes a yacht from a US oil mogul.

• Chicago is doomed to become a 'municipal black hole'.

Night Trading 

• Asian equity indices are -1.25% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 85.0 +3.0 basis points. 

• Asia Pacific Sovereign CDS Index 21.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.48 unch.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.25%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JCP)/-.04

• (MGA)/1.47

Economic Releases 
8:30 am EST

• The CPI MoM for July is estimated to rise +.2% versus unch. in June.

• The CPI Ex Food & Energy for July is estimated to rise +.2% versus a +.1% gain in June.

• Real Avg. Weekly/Hourly Earnings YoY for July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kaplan speaking, Fed's Kashkari speaking and the German CPI report could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down 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.