Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 12.43 +3.15%
- Euro/Yen Carry Return Index 142.75 -.01%
- Emerging Markets Currency Volatility(VXY) 6.37 -1.39%
- S&P 500 Implied Correlation 52.82 +1.48%
- ISE Sentiment Index 91.0 +1.11%
- Total Put/Call 1.02 -21.54%
Credit Investor Angst:
- North American Investment Grade CDS Index 56.84 +.26%
- European Financial Sector CDS Index 60.75 +.88%
- Western Europe Sovereign Debt CDS Index 30.64 -.79%
- Asia Pacific Sovereign Debt CDS Index 64.94 -.91%
- Emerging Market CDS Index 282.08 +1.51%
- China Blended Corporate Spread Index 310.94 +.06%
- 2-Year Swap Spread 22.5 +1.25 basis points
- TED Spread 21.0 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -17.5 -1.75 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% -1.0 basis point
- Yield Curve 185.0 +2.0 basis points
- China Import Iron Ore Spot $87.90/Metric Tonne +.69%
- Citi US Economic Surprise Index 34.60 +1.7 points
- Citi Emerging Markets Economic Surprise Index -12.70 +.9 point
- 10-Year TIPS Spread 2.13 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +10 open in Japan
- DAX Futures: Indicating -7 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/medical sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 99.0 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 65.5 -.75 basis point.
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for July is estimated to rise +.3% versus a +.4% gain in June.
- Personal Spending for July is estimated to rise +.2% versus a +.4% gain in June.
- The PCE Core MoM for July is estimated to rise +.1% versus a +.1% gain in June.
9:00 am EST
- ISM Milwaukee for August is estimated to fall to 60.0 versus 63.87 in July.
9:45 am EST
- Chicago Purchasing Manager for August is estimated to rise to 56.5 versus 52.6 in July.
9:55 am EST
- Final Univ. of Michigan Consumer Confidence for August is estimated to rise to 80.0 versus a prior estimate of 79.2
Upcoming Splits
Other Potential Market Movers
- The Eurozone CPI report could also impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by technology and industrial
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.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 12.24 +3.90%
- Euro/Yen Carry Return Index 142.77 -.22%
- Emerging Markets Currency Volatility(VXY) 6.49 +1.41%
- S&P 500 Implied Correlation 52.19 +2.88%
- ISE Sentiment Index 91.0 -20.87%
- Total Put/Call 1.05 +17.98%
Credit Investor Angst:
- North American Investment Grade CDS Index 56.60 +1.16%
- European Financial Sector CDS Index 60.49 +1.0%
- Western Europe Sovereign Debt CDS Index 30.98 +5.12%
- Asia Pacific Sovereign Debt CDS Index 66.76 +.76%
- Emerging Market CDS Index 278.77 +2.67%
- China Blended Corporate Spread Index 310.77 -.22%
- 2-Year Swap Spread 21.25 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -15.75 -1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 183.0 -2.0 basis points
- China Import Iron Ore Spot $87.30/Metric Tonne -1.02%
- Citi US Economic Surprise Index 32.90 +5.1 points
- Citi Emerging Markets Economic Surprise Index -13.60 +.1 point
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating -60 open in Japan
- DAX Futures: Indicating +1 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs, index hedges and emerging markets shorts
- Market Exposure: 50% Net Long
Evening Headlines
Bloomberg:
- U.S. Says Russia May Be Directing Ukraine Rebel Offensive. (video)
The U.S. said Russia may be directing a counteroffensive by
separatist rebels in Ukraine as fighting in the battle-torn country’s
easternmost regions spread to previously peaceful areas. Jen
Psaki, the U.S. State Department spokeswoman, cited the reports of fresh
fighting, telling reporters in Washington yesterday that “these
incursions indicate a Russian-directed counter-offensive is likely under
way in Donetsk and Luhansk.” Russian President Vladimir Putin’s
spokesman, Dmitry Peskov, said “this information doesn’t correspond with
reality.” The violence in Ukraine expanded a day after Putin met his
Ukrainian counterpart, Petro Poroshenko, and hailed the talks as a step
toward a political resolution. The government in Kiev said the
fighting, which has claimed more than 2,000 lives according to the
United Nations, has spread to the shores of the Sea of Azov, effectively
opening a new front.
- Islamic State Entrenches in Syrian City as Obama Mulls Next Step. In
the Syrian city of Raqqah on the banks of the Euphrates River,
Islamic State militants are busy building a capital fit for their
followers. Human rights observers say they have stoned women to death
for adultery, while residents report that religious textbooks have been
imported for schools and the market flooded with black cloaks for girls
as young as 6 years old. Even as it wages war on multiple fronts,
the group has had time to focus on the details, recruit thousands into
its forces and celebrate victories by parading the heads of its enemies.
- PBOC Resolve Tested as Shadow Banking Industry Sours. Rising
stress in China’s $6 trillion shadow banking industry is testing
central bank Governor Zhou Xiaochuan’s resolve to limit monetary easing
as risks to the government’s growth target climb. In the past three
months at least 10 trusts backed by assets spanning coal mines in Shanxi
to forests in Fujian have struggled to meet payments,
sparking protests by investors outside banks that distributed their
products. A slump in new credit in July underscored strains on the
industry that funded as much as half of China’s recent growth,
presenting Zhou with a choice: ease policy to avert a slowdown, or hold
the line.
- China Developer Debt Risk Rises as Sales Miss: Chart of the Day.
China’s largest property developers risk missing their full-year sales
targets as tighter credit and an economic slowdown cut demand for real
estate, fueling concern the industry will struggle to repay debt. The CHART OF THE DAY shows the 13 biggest developers that provided full-year
sales targets achieved 49 percent of those goals by the end of July,
the weakest level in at least two years, according to data compiled by
Bloomberg. The ratio of debt to equity on a Bloomberg Industry gauge of
84 Chinese property companies has climbed to 128 percent, the highest
since at least 2005 and almost double the Bloomberg World Real Estate
Index’s 76 percent.
- Asian Stocks Drop While Australian Bonds Climb With Gold.
Asian stocks fell before data on Chinese industrial-company profits,
while Australian and New Zealand bonds paced gains in U.S. Treasuries
after slumping European rates fueled demand for higher yields. Gold
climbed. The MSCI Asia Pacific Index lost 0.2 percent by 10:03 a.m. in Tokyo, declining for the second time this week as Japan’s
Topix index slid 0.6 percent.
Wall Street Journal:
- Islamic State Fills Coffers From Illicit Economy in Syria, Iraq. Group Pirates Oil, Exacts Tribute From Locals, Making It Among World's Richest in Terror. The Islamic State runs a self-sustaining economy across territory it
controls in Syria and Iraq, pirating oil while exacting tribute from a
population of at least eight million, Arab and Western officials said,
making it one of the world's richest terror groups and an unprecedented
threat. That illicit economy presents a new picture of Islamic
State's financial underpinnings. The group was once thought to depend on
funding from Arab Gulf donors and donations from the broader Muslim
world. Now, Islamic State—the former...
- FBI Probes Possible Hacking Incident at J.P. Morgan(JPM). Attack
Appears to Have Been Caused By Malicious Computer Code. The Federal
Bureau of Investigation is probing a computer-hacking
attack on J.P. Morgan Chase & Co. and at least one other large
bank,
in what people familiar with the probe described as a significant
breach of corporate computer security. The timing and extent of
the hacking attacks wasn't immediately clear, though cybersecurity
experts began probing the possible J.P. Morgan breach earlier this
month, according to people...
- Are Stock Prices Headed for a Fall? Long-run equity returns from today's price levels are likely to be considerably lower than their 10% long-run average.
Fox News:
- West Point report describes Islamic State threat as crisis 4 years in the making. (video) A new report from the West Point counterterrorism center challenges
the notion that the Islamic State only recently became a major terror
threat, describing the network's gains in Iraq as a crisis four years in
the making. Meanwhile, Fox News has learned that top aides to President Obama
expect the threat from the organization, also known as ISIS or ISIL, to
outlast Obama's time in office.
- California drivers brace for costly new gas tax. (video) Californians already pay the nation's second highest gas tax at 68 cents
a gallon -- and now it will go up again in January to pay for a
first-in-the-nation climate change law.
MarketWatch.com:
Zero Hedge:
Business Insider:
Forbes:
- Obamacare's Death of a Thousand Rate Hikes. Get ready to pay more for health insurance next year, compliments of Obamacare. A
new analysis from PricewaterhouseCoopers projects that average premiums
for policies sold through Obamacare’s exchanges will increase 7.5
percent in 2015. In nearly one-third of the 29 states that PwC
investigated, premiums will rise by double digits. In Indiana, the
average increase will be 15.4 percent. In Kansas, it’s 13.6 percent.
Florida’s insurance commissioner says premiums are set to climb 13.2
percent. For this latest round of premium shocks, consumers can thank
Obamacare’s unwieldy mix of taxes, regulations, and mandates.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 96.50 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 66.25 +1.25 basis points.
- NASDAQ 100 futures -.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (ANF)/.11
- (DG)/.83
- (FRO)/-.27
- (GCO)/.55
- (TD)/1.09
- (OVTI)/.53
- (SPLK)/-.02
- (ZOES)/.03
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 300K versus 298K the prior week.
- Continuing Claims are estimated to rise to 2510K versus 2500K prior.
- 2Q GDP is estimated to rise +3.9% versus a +4.0% prior estimate.
- 2Q Personal Consumption is estimated to rise +2.4% versus a prior estimate of a +2.5% gain.
- 2Q GDP Price Index is estimated to rise +2.0% versus a prior estimate of a +2.0% gain.
- 2Q Core PCE is estimated to rise +2.0% versus a prior estimate of a +2.0% gain.
10:00 am EST
- Pending Home Sales for July are estimated to rise +.5% versus a -1.1% decline the prior week.
11:00 am EST
- The Kansas City Fed Manufacturing Index for August is estimated to fall to 7.0 versus 9.0 in July.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone Unemployment/Confidence/German CPI reports, Japan
CPI/Industrial Production reports, 7Y $29B T-Note auction, weekly EIA
natural gas inventory report, weekly Bloomberg Consumer Comfort Index,
(IRM) analyst day and the (UHAL) analyst meeting could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down
by technology and industrial 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.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 11.86 +1.98%
- Euro/Yen Carry Return Index 143.12 +.03%
- Emerging Markets Currency Volatility(VXY) 6.42 -1.83%
- S&P 500 Implied Correlation 51.33 +2.97%
- ISE Sentiment Index 106.0 +20.45%
- Total Put/Call .92 +!6.46%
Credit Investor Angst:
- North American Investment Grade CDS Index 56.02 +.35%
- European Financial Sector CDS Index 59.52 +1.99%
- Western Europe Sovereign Debt CDS Index 29.47 +2.13%
- Asia Pacific Sovereign Debt CDS Index 66.05 +.17%
- Emerging Market CDS Index 271.80 -1.44%
- China Blended Corporate Spread Index 311.46 +.58%
- 2-Year Swap Spread 20.25 -2.0 basis points
- TED Spread 21.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.50 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 185.0 -4.0 basis points
- China Import Iron Ore Spot $88.20/Metric Tonne -.79%
- Citi US Economic Surprise Index 27.80 +.5 point
- Citi Emerging Markets Economic Surprise Index -13.70 -.3 point
- 10-Year TIPS Spread 2.14 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -60 open in Japan
- DAX Futures: Indicating -17 open in Germany
Portfolio:
- Slightly Lower: On losses in my retail/biotech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
