Bear Radar

Style Underperformer:

• Large-Cap Growth -.21%

Sector Underperformers:

• 1) Airlines -1.20% 2) Gaming -1.01% 3) Road & Rail -.97%

Stocks Falling on Unusual Volume:

• MNST, V, AXP, TMK, ALJ, TEG, SGNT, PRXL, PRSC, EZCH, AFFY, DIOD, PHMD, LAMR, LGND, LMCA, SODA, OPNT, IOSP, NUAN, AAP, DF, BGG, MUSA, THS, OMG and SEM
  

Stocks With Unusual Put Option Activity:

• 1) WIN 2) CIE 3) VWO 4) DDS 5) NBR
  

Stocks With Most Negative News Mentions:

• 1) SEM 2) MCEP 3) THS 4) JPM 5) BAC
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.55%

Sector Outperformers:

• 1) Homebuilders +2.57% 2) Oil Service +1.44% 3) Gold & Silver +1.29%

Stocks Rising on Unusual Volume:

• IL, MDRX, DK, CNQ, FLT, DDS, GOL, RDEN, PANL, TNGO, SGEN, ARUN, AMRN, CAVM, RBN, MM, FTK, EAT, CXW, YELP, AEP and CJES
  

Stocks With Unusual Call Option Activity:

• 1) DDS 2) SIRI 3) WMB 4) ETFC 5) WIN
  

Stocks With Most Positive News Mentions:

• 1) AEP 2) KBH 3) ROSE 4) MON 5) AXP
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Blink! U.S. Debt Just Grew by $11 Trillion. Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade. In the course of that year, the U.S. government’s fiscal gap -- the true measure of the nation’s indebtedness -- rose by $11 trillion. The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.
• Most Chinese Stocks Drop After Economic Data; PetroChina Falls. Most Chinese stocks fell as investors awaited the release of industrial production data for more signals on the outlook for the economy. PetroChina Co. dropped after the Shanghai Securities News said the oil producer may post a “big” first-half refining loss. Energy and material companies led declines after a government report today showed producer prices posted a steeper decline than economists’ had forecast even as inflation cooled for a fourth month.
• Global Food Reserves Falling as Drought Wilts Crops: Commodities. Stockpiles of the biggest crops will decline for a third year as drought parches fields across three continents, raising food-import costs already forecast by the United Nations to reach a near-record $1.24 trillion. Combined inventories of corn, wheat, soybeans and rice will drop 1.8 percent to a four-year low before harvests in 2013, the U.S. Department of Agriculture estimates. Crops in the U.S., the biggest exporter, are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall already is 20 percent below normal. The International Grains Council began July by forecasting record harvests. It ended with a prediction for a 2 percent drop in output.
• Standard Chartered CEO Says ‘No Grounds’ to Revoke License. Standard Chartered Plc (STAN) Chief Executive Officer Peter Sands hit back at a New York regulator’s claims the bank broke U.S. sanctions, and said he saw “no grounds” for revoking the lender’s license. Standard Chartered has tumbled about 16 percent in London trading this week after New York regulator Benjamin Lawsky threatened to strip the London-based bank of its license to operate in the state, alleging it processed $250 billion of deals with Iranian banks subject to sanctions.
• Rubber Market Poised for Third Surplus in 2013, RCMA Forecasts. Global natural-rubber supply will exceed demand for a third straight year in 2013 and the price of the commodity used to make tires and gloves is set to extend declines, according to RCMA Commodities Asia Group. Production will exceed usage by 299,000 metric tons in 2013, compared with a surplus of 321,000 tons estimated for this year and 4,000 tons in 2011, the Singapore-based trading company said in a presentation e-mailed to Bloomberg. Global stockpiles may gain 26 percent to 1.57 million tons this year, it showed. Rubber fell to the lowest level since 2009 yesterday amid lower consumption in China, the largest user, and Europe. Demand in China may drop 5 percent this year as slumping truck sales cut heavy-duty tire sales, Hangzhou Zhongce Rubber Co., the country’s biggest maker, said last month. Lower prices will hurt growers in Thailand, Indonesia and Malaysia, the three largest producers, while aiding tiremakers such as Bridgestone Corp.
• North Korea Able to Test Nukes in Two Weeks, Study Says. North Korea is technically capable of conducting a nuclear test in as little as two weeks, according to a study published by the Bulletin of the Atomic Scientists.
• Singapore Trims Growth Forecast on Global Slowdown Risks. Singapore cut the upper end of its economic growth forecast for 2012 as a global slowdown from Europe to China weighs on the island’s expansion. The Southeast Asian country’s gross domestic product will probably rise 1.5 percent to 2.5 percent this year, Prime Minister Lee Hsien Loong said in a televised message yesterday on the eve of the city state’s National Day. The government previously predicted growth of 1 percent to 3 percent. The economy grew 1.7 percent in the first half, he said. “Europe and the U.S. face serious economic problems,” Lee said. “Asia is doing better than other regions, but China and India are slowing down.”
• Japan Machinery Orders Rebounded Less Than Forecast in June. Japan’s machinery orders rebounded less than forecast in June, underscoring concerns the world’s third-largest economy’s recovery will slow in the second half of this year. Bookings, an indicator of capital spending, rose 5.6 percent, after slumping 14.8 percent in May, the biggest drop in more than a decade, the Cabinet Office said today in Tokyo. The median estimate of 25 economists surveyed by Bloomberg News was for a 12 percent increase.
• Busson Talking Tie-Ups Shows Decline of Hedge-Fund Middlemen.
• Monster Beverage(MNST) Shares Fall After Profit Trails Estimates. Monster Beverage Corp. fell in late trading after second-quarter profit and sales trailed analysts’ estimates as costs increased. The shares tumbled 10 percent to $61 at 5:32 p.m. in New York.

Wall Street Journal:

• Reports of Our (Low) Debt Have Been Greatly Exaggerated. We knew law school came with a heavy debt load, but in some cases it’s heavier than many supposed. U.S. News & World Report, whose law schools rankings are widely followed by prospective law students, said it is reviewing its data on law student debt load, after several institutions misreported their figures to the magazine.
• Knight(KCG) Held $7 Billion of Stocks Due to Glitch. Knight Capital Group Inc. was holding about $7 billion of stocks at one point on Wednesday last week—a far bigger figure than previously known—as a result of errant trades that forced it to seek emergency funding, according to people familiar with the matter. Knight's traders worked frantically Aug. 1 to sell shares while trying to minimize losses due to a software problem, ultimately paring the total position to about $4.6 billion by the end of the trading day, the people said.
• The Afridi Dossier. The doctor who helped the CIA find bin Laden is still in jail in Pakistan. Perhaps somewhere at CIA headquarters at Langley is a medal of honor for Shakil Afridi, the Pakistani doctor whose bogus hepatitis vaccination scheme helped the agency locate Osama bin Laden in Abbottabad. As things now stand, however, it may be a long while before Dr. Afridi sees that medal.
• Currency-Focused Hedge Funds Rebound in July -Survey. Currency-focused hedge funds showed a monthly investment gain of 0.98% in July, reversing a loss from the previous month, as bets that the euro would decline against a handful of more-attractive currencies paid off, according to a survey released Wednesday. The euro slid 2.8% during the month.
• Hedge Funds Elliott, Baupost, York Capital Lag Broad Market. Several of the hedge-fund industry's biggest names have been underperforming the broad market, underlining the difficulties investment managers--even experienced ones--faced in the second quarter as they grappled with recurring concerns over Europe and sputtering global economic health.
• Bet on Platinum's Fall Is Anti-Euro Wager. Some hedge funds have found a new venue to wager on a worsening outlook for Europe: the platinum market. In recent months, a number of money managers have ratcheted up their bets on a decline in platinum prices to the highest level ever in the futures market. The rationale is simple: Platinum's main use is to scrub pollutants from the tailpipe emissions of diesel-fueled cars, and Europe is by far the world's largest market for those cars.

MarketWatch:

• Dillard's(DDS) net up 76% on sales growth, margin. Dillard's Inc.'s fiscal second-quarter profit rose 76% as the department-store operator saw same-store sales growth and a wider profit margin. Shares jumped 4.3% to $73.33 in after-hours trading.
• Housing regulator warns about ‘eminent domain’ use. The regulator for government-seized mortgage giants Fannie Mae and Freddie Mac on Wednesday warned against the use of so-called eminent domain to restructure home loans.
• Why China's Growth is Worse Than You Think. (video)
  

Business Insider:

• That Brutal Anti-Romney Ad Is Blowing Up In The Obama Campaign's Face.

Zero Hedge:

• Market has Now Fully Priced In Another 1 Trillion LTRO. (graph)
• QE Forever And Ever?
• Confused Why So Many Foreign Banks Are Suddenly Being Charged By The US? Here's Why.
• Rosenberg On The Pending Trade Shock And Q4's 0% GDP Growth. (graphs)
  

CNBC:

• Treasury's Secretive $2.4 Trillion Mutual Fund Guarantee. Details about a secretive government program to bail out money-market mutual funds are finally coming to light. Acting without any explicit Congressional authority, the U.S. Treasury guaranteed in excess of $2.4 trillion of money market funds after the giant Reserve Primary Fund "broke the buck" following the bankruptcy of Lehman Brothers.
• As Glitches Mount, Cyber Safety Net for Businesses Shrinks. It is shaping up to be the year of the glitch. Days after the massive software failure which nearly put Knight Capital Group out of business, exchanges in Tokyo and Spain were forced to suspend some trading due to glitches, while a software bug caused Southwest Airlines to charge online customers several times over for the same flight.

IBD:

• Spirit Airlines'(SAVE) Ultralow Fares Drive Heady Gains.

NY Times:

• With Rate Twist, Banks Increase Mortgage Profit. Interest rates on mortgages and refinancing are at record lows, giving borrowers plenty to celebrate. But the bigger winners are the banks making the loans. Banks are making unusually large gains on mortgages because they are taking profits far higher than the historical norm, analysts say. That 3.55 percent rate for a 30-year mortgage could be closer to 3.05 percent if banks were satisfied with the profit margins of just a few years ago. The lower rate would save a borrower about $30,000 in interest payments over the life of a $300,000 mortgage. “The banks may say, ‘We are offering you record low interest rates, so you should be as happy as a clam,’ ” said Guy D. Cecala, publisher of Inside Mortgage Finance, a home loan publication. “But borrowers could be getting them cheaper.”
• U.S. and Gulf Allies Pursue a Missile Shield Against Iranian Attack. The United States and its Arab allies are knitting together a regional missile defense system across the Persian Gulf to protect cities, oil refineries, pipelines and military bases from an Iranian attack, according to government officials and public documents. It is an enterprise that is meant to send a pointed message to Tehran, and that becomes more urgent as tensions with Iran rise. But it will require partner nations in the gulf to put aside rivalries, share information and coordinate their individual arsenals of interceptor missiles to create a defensive shield encompassing all the regional allies.

Read more here: http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy

Washington Post:

• E-Mails Show President Obama's Involvement in Clean-Energy Loans. President Obama’s staff arranged for him to be personally briefed last summer on a loan program to help clean-energy companies, two months before the program was thrust into headlines by the collapse of its flagship, the solar company Solyndra, records show. About the same time, then-White House Chief of Staff William Daley resolved a dispute among administration officials over another project in the program, clearing the way for a $1.4 billion loan, according to documents and sources familiar with the situation. The documents, a series of e-mails among Energy Department staff members involved in managing the program, provide new details about the level of White House involvement in the controversial initiative. White House officials have said in the past that final decisions about which companies would receive the loan guarantees were made by career staff members at the Energy Department, not political appointees.

Rasmussen Reports:

• 27% Say U.S. Heading in Right Direction.

Reuters:

• Mobile app sparks Obama camp voter drive, privacy fears. President Barack Obama's re-election campaign has taken its digital infrastructure to the streets, arming its ground troops with mobile software that maps Democratic voters and canvassing strategies - and raising the blood pressure of privacy activists who worry about possible misuse.
• U.S. IRS allowed bogus taxpayer IDs -watchdog report. The U.S. Internal Revenue Service has recently issued thousands of tax identification numbers to ineligible people and, in some cases, IRS managers condoned the practice, the tax collection agency's watchdog said on Wednesday. The accusation by the Treasury Inspector General for Tax Administration, or TIGTA, comes at a time of intense national debate about illegal immigrants, many of whom apply for and get taxpayer ID numbers instead of Social Security numbers. After the report was released, a handful of Republican lawmakers slammed the IRS over its management of the Individual Taxpayer Identification Number (ITIN) program. "The appalling management of the ITIN program is a clear example of failed leadership and the buck must stop with you," Republican Congressman Sam Johnson said in a letter to IRS commissioner Doug Shulman on Wednesday.
• Syrian troops push back rebels in Aleppo offensive. Syrian troops and rebels fought over the country's biggest city Aleppo as President Bashar al-Assad's key foreign backer Iran gathered ministers from like-minded states for talks on Thursday about how to end the conflict. Assad's troops assaulted rebel strongholds in Aleppo on Wednesday in one of their biggest ground attacks since rebels seized chunks of Syria's biggest city three weeks ago. Late in the day, each side gave conflicting accounts of how they stood.

Telegraph:

• Olympic triumph masks an altogether grimmer reality. Amid the euphoria of Britain’s Olympic triumphs, it was a wearily familiar story today from the Bank of England, which has brought us back to reality with a bump.

Globe and Mail:

• China’s hot savings products raise concern about U.S.-style problems. The explosive growth of wealth management products in China is sounding alarms for observers who see a parallel between the opaque investments and the subprime mortgages that sunk the U.S. economy. The products consist of packages of high-risk business loans that are sliced into pieces small enough to appeal to average consumers. They are sold through banks and carry attractive rates of interest – although poor disclosure means that most buyers have little idea what assets underpin their investment.

Macrobusiness.com:

• Australia's Sub-Prime Lending. Let’s hope the issues highlighted in the above articles are not just the tip of the iceberg. It is not only the obvious fraud that is the problem, but that lending risk is granular. If misrepresentation of income was commonplace, then how many more bad loans are out there that we don’t yet know about? Like in the US, sub-prime lending was not a problem whilst home prices were increasing. But once prices began falling, delinquencies, foreclosures and recriminations exploded.

China Securities Journal:

• China may set new property market controls as soon as this month. New measures include raising the transaction tax on the sale of existing homes, expanding a property tax trial and stopping the pre-sale of homes.

Financial News:

• The growth of lending by China's banks may continue to slow in the second half of this year, according to a front-page commentary. China faces larger downward economic pressure in 2H.

Shanghai Securities News:

• China's home purchase restrictions are part of a long-term policy to control the property market and the government is unlikely to scrap policies within the next two years, Wang Juelin, a researcher at the Ministry of Housing and Urban-Rural Development, said in an interview.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 148.50 -1.0 basis point.
• Asia Pacific Sovereign CDS Index 127.25 -.25 basis point.
  
• FTSE-100 futures +.42%.
  
• S&P 500 futures +.28%.
  
• NASDAQ 100 futures +.47%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WEN)/.05
• (ATK)/1.42
• (AAP)/1.39
• (EAT)/.58
• (KSS)/.96
• (DV)/.44
• (JWN)/.74
• (NVDA)/.22
• (SMG)/1.98

Economic Releases
8:30 am EST

• The Trade Deficit for June is estimated at -$47.5B versus -$48.7B in May.
• Initial Jobless Claims are estimated to rise to 370K versus 365K the prior week.
• Continuing Claims are estimated to rise to 3275K versus 3272K prior.

10:00 am EST

• Wholesale Inventories for June are estimated to rise +.3% versus a +.3% gain in May
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Fixed Asset Investment/Industrial Production reports, 2Q Mortgage Delinquencies report, 2Q MBA Mortgage Foreclosures, BOJ rate decision, Greece Industrial Production/Jobs reports, 30Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted 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.

Stocks Slightly Higher into Final Hour on Global Central Bank Stimulus Hopes, Short-Covering, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 15.64 -2.19%
  
• ISE Sentiment Index 141.0 +8.46%
  
• Total Put/Call .78 -3.7%
  
• NYSE Arms .73 -8.29%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.96 bps -.28%
  
• European Financial Sector CDS Index 246.09 bps +.32%
  
• Western Europe Sovereign Debt CDS Index 246.52 +.95%
  
• Emerging Market CDS Index 245.50 +1.02%
  
• 2-Year Swap Spread 19.5 +.25 basis point
  
• TED Spread 33.0 -1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -37.0 +.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .11% +1 basis point
  
• Yield Curve 137.0 unch.
  
• China Import Iron Ore Spot $114.90/Metric Tonne -1.12%
  
• Citi US Economic Surprise Index -33.50 +.3 point
  
• 10-Year TIPS Spread 2.19 -2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating +3 open in Japan
• DAX Futures: Indicating -15 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my Biotech and Tech sector longs
  
• Disclosed Trades: Took profits in a consumer discretionary long, added to a tech sector long
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 hugs the flatline despite rising eurozone debt angst, high food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Steel, Hospital, Homebuilding, Education and Airline shares are especially strong, rising more than +1.0%. Lumber is gaining +1.1%. The 10Y Yld is gaining +2 bps to 1.64%. Major Asian indices were mostly higher overnight, led by a +.8% gain in Japan. The Bloomberg European Bank/Financial Services Index is gaining +.97%. Brazilian shares are gaining +2.0%. The Italian 10y Yld is falling -1.2% to 5.9%. On the negative side, Coal, Internet, Disk Drive, Networking, Biotech, REIT, Restaurant and Road & Rail shares are relatively weak, falling more than -1.0%. The Transports continue to trade poorly as they sit out the recent broad market rally. Copper is falling -.77% and the UBS-Bloomberg Ag Spot Index is gaining +.5%. Major European indices are lower today, led down by a -.84% decline in Spain. The Spain sovereign cds is gaining +2.0% to 516.85 bps, the Italy sovereign cds is rising +1.3% to 457.33 bps, the Russia sovereign cds is jumping +3.9% to 162.46 bps and the Israel sovereign cds is surging +3.8% to 140.77 bps. Moreover, the Emerging Markets Sovereign CDS Index is gaining +2.1% to 232.04 bps. The UBS/Bloomberg Ag Spot Index is up +25.0% in about 9 weeks. The benchmark China Iron/Ore Spot Index is down -36.5% since 9/7/11. Moreover, the China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. As well, despite their recent bounces off the lows, the euro, copper and lumber all continue to trade poorly given equity investor perceptions that global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a sluggish rate at +2.0%. US Trucking Traffic continues to soften. Moreover, the Citi US Economic Surprise Index, while showing some improvement recently, is still back to Sept. 2011 levels. Lumber is -12.3% since its Sept. 9th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has declined for 4 straight weeks and has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -50.0% ytd. Shanghai Copper Inventories have risen +74.0% ytd. Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is the lowest since May, 2009. The CRB Commodities Index is now down -17.3% since May 2nd of last year despite the recent surge in food/energy prices. The 10Y T-Note continues to trade too well. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will destroy its own balance sheet to save the euro even as investors have been pricing this outcome into stocks. The Citi Eurozone Economic Surprise Index is at -68.0 points, which is near the lowest since mid-Sept. of last year. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff" and the election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. Little if anything being discussed by global central bankers will actually boost global economic growth in any meaningful way over the intermediate-term, in my opinion. Thus, recent market p/e multiple expansion on global central bank stimulus hopes, is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower food/energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on rising eurozone debt angst, profit-taking, more shorting, technical selling, high food/energy prices, earnings worries, US "fiscal cliff" concerns and rising global growth fears.

Today's Headlines

Bloomberg:

• ECB’s Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit. European Central Bank President Mario Draghi’s bid to bring down Spanish and Italian yields may spur the nations to sell more short-dated notes, swelling the debt pile that needs refinancing in the coming years. “In a way what the ECB has done is making the situation worse,” said Nicola Marinelli, who oversees $160 million at Glendevon King Asset Management in London. “Focusing on the short-end is very dangerous for a country because it means that every year after this they will have to roll over a much larger percentage of their debt.”
• German Exports Fell In June As Crisis Curbed Euro-Area Demand. German exports dropped more than economists forecast in June as the sovereign debt crisis curbed demand from euro-area trading partners. Exports, adjusted for work days and seasonal changes, fell 1.5 percent from May, when they jumped 4.2 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a 1.3 percent decline, according to the median of 15 estimates in a Bloomberg News survey. Imports fell 3 percent from May.
• German June Industrial Production Fell on Construction Output. German industrial production declined in June, led by a drop in construction output. Production fell 0.9 percent from May, when it gained a revised 1.7 percent, the Economy Ministry in Berlin said today. Economists had forecast a drop of 0.8 percent, the median of 34 estimates in a Bloomberg News survey showed. Production fell 0.3 percent from a year earlier when adjusted for working days.
• King Backs Cameron Budget Plan as BOE Lowers Outlook: UK Economy.
• Cathay Pacific Stock Drops on Unexpected First-Half Loss. Cathay Pacific Airways Ltd. (293), the biggest international air-cargo carrier, fell the most in about three months in Hong Kong after posting an unexpected loss on a freight slump, higher fuel costs and waning premium travel. The airline swung to a first-half loss of HK$935 million ($121 million) as it carried 10 percent less cargo and suffered from wider losses at a freight venture with affiliate Air China Ltd. (753) Volumes have fallen because of slower global trade and competition from fast-growing Middle Eastern airlines. “Cargo is really bad,” said Jim Wong, a Hong Kong-based transport analyst at Nomura Holdings Inc.
  
• Fisher Says More Stimulus May Overburden Central Banks. Federal Reserve Bank of Dallas President Richard Fisher said adequate economic stimulus is in place and that global central banks may not have the capacity to undertake additional measures. “We’re at the risk of overburdening the central banks,” Fisher said in an interview today on “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “We keep applying what I call monetary Ritalin to the system. We all know there’s a risk of over-prescribing.” Fisher said the largest banks have $1.5 trillion in excess reserves that they would like to put to work and that the private sector now must take the next steps to boost growth. Lawmakers also must act to eliminate uncertainty about government spending and tax rates, Fisher said. “We have done our job,” Fisher said of the Fed. “We have done enough. Just doing more doesn’t solve the problem. The problem is engaging the transmission. We provided the gas, the gas tank is full.”
• Oil Rises for Fourth Day on Supply, Middle East Tension. Oil rose for a fourth day as a government report showed U.S. stockpiles dropped more than expected and on concern tension in the Middle East will disrupt global supplies. Prices climbed to the highest level since May as the Energy Department said inventories fell 3.73 million barrels last week, more than double the 1.55 million forecast by analysts polled by Bloomberg. Former Syrian Prime Minister Riad Hijab, who defected this week, arrived in Jordan today, and Egyptian aircraft struck gunmen in northern Sinai, killing 20. “The inventory decline is far bigger than what had been expected, and that’s why prices are up,” said Marshall Berol, co-portfolio manager of the Encompass Fund in San Francisco, which has about $300 million in assets. “The tension in the Middle East is escalating.” Crude oil for September delivery rose 25 cents, or 0.3 percent, to $93.92 a barrel at 12:56 p.m. on the New York Mercantile Exchange after increasing to $94.72, the highest intraday level since May 15. Oil traded at $94.37 a barrel before release of the inventory report at 10:30 a.m. Futures have climbed 22 percent since reaching an intraday low of $77.28 on June 28. Brent oil for September settlement advanced 45 cents, or 0.4 percent, to $112.45 on the London-based ICE Futures Europe exchange.
• Northeast Asian LNG Prices Extend Drop on Weak Demand, WGI Says. LNG prices for near-term delivery to northeast Asia fell for a 10th week to their lowest in more than a year amid low demand for the fuel, World Gas Intelligence said.
• Recession Generation Opts to Rent Not Buy Houses to Cars. “Every decision that I have made since I lost my job has been colored by that insecurity I feel about the future,” said Anselmo, 28, who now rents an apartment in Austin, Texas, and works as a consultant for UnitedHealth Group Inc. “Buying a house is just further out on the timeline for me than it used to be.” Anselmo and many of his peers are wary about making large purchases after entering adulthood in the deepest recession and weakest recovery since World War II. Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible.
• Adelson Sues National Jewish Democratic Council For Libel. Sheldon Adelson, chairman of the Las Vegas Sands Corp. (LVS), sued the National Jewish Democratic Council and its top officers for libel, saying the organization falsely claimed he approved of prostitution in his Macau casinos. Adelson, a billionaire and top fundraiser for Republican Mitt Romney’s presidential campaign, filed his $10 million suit today in Manhattan federal court. He claims the NJDC, its president, David Harris, and its chairman, Marc Stanley, “crossed the threshold from constitutionally protected speech to defamation of a public figure.” The suit is over an article that Adelson says was authored by Harris and posted on the NJDC website claiming Adelson approved of prostitution in his Macau casinos and urging Romney to cease accepting his donations.

Wall Street Journal:

• The Romney Hood Fairy Tale. The false, invented analysis behind Obama's tax claims. The charge is that even though Mr. Romney is proposing to cut tax rates for everybody across the board, Mr. Romney will finance this by imposing a tax increase on the middle class. His evidence is a single study by the Tax Policy Center, a liberal think tank that has long opposed cutting income tax rates. The political left always says Daddy Warbucks gets all the tax-cut money. So this is hardly news, except that the media are treating this joint Brookings Institution and Urban Institute analysis as if it's nonpartisan gospel. In fact, it's a highly ideological tract based on false assumptions, incomplete data and dishonest analysis. In other words, it is custom made for the Obama campaign.
• China Firm to Buy Control of U.S.-Backed Battery Maker. A123 Systems Inc., a struggling, U.S. government-backed manufacturer of advanced batteries for electric vehicles, is turning to one of China's largest auto parts makers for a bailout. The Waltham, Mass.-based company said on Wednesday that Wanxiang Group Corp., a Chinese conglomerate, agreed to acquire up to an 80% stake in return for an up to $450 million investment. The investment would secure the future of the company, which warned earlier this year it was in danger of running out of money.
• Health Law Likely to Spur Retail, Restaurant Cuts. Employers in the retail and restaurant industries are more likely than other companies to drop their health plans or cut workers' hours when new health-law requirements take effect in 2014, according to new data from the consulting firm Mercer. A Wall Street Journal article last week said retail and restaurant franchisees were bracing for higher costs as part of the law, and several said they planned to change workers' health benefits.

MarketWatch:

• Good takeover targets beyond Best Buy(BBY).
• Don’t get suckered by the Draghi put. Commentary: Unlike Greenspan, ECB chief doesn’t deliver at all.

CNBC.com:

• A ‘Brixit’ Could Be Next Problem for Europe: Nomura. The U.K. is not renowned for its smooth relationship with its European partners and, like the end of a tempestuous love affair where both partners have tried their best to accommodate the others’ demands, the relationship could finally hit the rocks with Britain leaving the EU for good, according to a report by Nomura.
• Fed Painted ‘in a Box’ as Markets Demand QE3: Kashkari. Ebullient stock markets are increasingly pricing in the possibility that the Federal Reserve will soon unveil another round of monetary stimulus, Pimco Managing Director Neel Kashkari told CNBC Wednesday. “The Fed is really in a box right now,” said Kashkari, who was an architect of the Troubled Asset Relief Program that bailed out major banks during the 2008 financial crisis. Inflation expectations and stocks are at levels that appear to be assuming imminent Fed action, he told CNBC's “Squawk Box.”“Those indicators have already priced in … that the Fed should act,” Kashkari said.
• Why $9 Corn Could Be a Big Problem for the Economy.
• Municipal Finances Reaching an 'Inflection Point': Whitney. Cash-strapped local governments are facing an "inflection point" that will force them into deciding between providing services and honoring debt obligations, financial analyst Meredith Whitney told CNBC.

Business Insider:

• Japan Is Quietly Circling A Financial Black Hole.
• This Is The Genius Way You'll Be Paying For Everything One Day.
• Two Senators Are Trying To Make Jamie Dimon's Worst Nightmare A Reality.
• The Last Two Times Export Orders Collapsed Like This, We Were In A Recession. (graph)
• Obama Is Falling Apart In Colorado, And Here's The Number That Proves It.

Zero Hedge:

• The Pace Of US Downward Revisions Is Picking Up. (graphs)
  
• From Chicago To New York And Back In 8.5 Milliseconds.
• Be Careful What QE You Wish For #2467: Gas Prices Surging Again.
• Flowcharting The ECB's Known Unknown Next Steps.
• Monti's Bluffing Unleashes Bull Market In Crude. (graphs)
  

CNN:

• Why London Bankers Are Shrugging Off Standard Chartered Threat. Money managers in the City of London react to the U.S. allegations that Standard Chartered hid money tied to Iran: Everyone does it. Standard Chartered may be down, but it is certainly not out. While it appears that the bank is in very hot water with state regulators over its business dealings with the Islamic Republic of Iran, its story is far from unique. Many major international banks have done business with Iran in violation of U.S. sanctions – with most paying hefty fines for doing so. That may be why senior bankers and portfolio managers in the City of London don't seem too worried about the beating Standard Chartered's stock has taken in the past few days after New York State regulators threw the book at the bank on Monday. Talk that the bank could lose its ability to work and trade in the state is being dismissed as simply "loony."

Gallup:

• U.S. Small-Business Owners' Optimism Declines in July. (graph)
  

Reuters:

• Iron Ore-Shanghai rebar falls for 4th day in 6, ore hits 2-1/2 yr low. China's steel futures slipped for a fourth day in six on Wednesday as sluggish demand kept pressure on spot prices of raw material iron ore, and further weakness was expected in both commodities before the start of any recovery. Iron ore, down about 17 percent this year, reached its cheapest level in 2-1/2 years as Chinese steel mills, the world's biggest buyers of the ore, limited spot purchases as they awaited a rebound in steel prices.The most-traded January rebar contract on the Shanghai Futures Exchange closed down half a percent at 3,667 yuan ($580) a tonne. The contract hit an all-time low of 3,631 yuan on Friday and is down 11 percent this year. The spot steel market is "still very weak", said an iron ore trader based in Shanghai. "It's difficult to expect any meaningful recovery in both steel and iron ore prices in the near term," the trader said. A stuttering Chinese economy is limiting the country's demand for raw materials. With abundant stocks at home, analysts expect China's imports of iron ore and other commodities such as copper and crude oil to drop for a second month in a row in July. The data is due to be released on Friday.
• Coal miner Alpha Natural(ANR) posts big second-quarter loss. Alpha Natural Resources Inc, which idled four mines and cut production as coal prices slumped this year, reported a quarterly loss of $2.2 billion on Wednesday after charges to write down assets and restructure operations. The company also narrowed its production target for this year and said it might need to further adjust production levels as pricing remains "unattractive" in U.S. domestic and European export markets. Alpha's stock dropped 5.1 percent to $6.55 in Wednesday morning trading on the New York Stock Exchange.
• Copper Slips on Weak Euro; China Data Eyed.
• Fitch updates Greek mortgage assumptions.

Financial Times:

• Rio(RIO) Hurt By Fall in Commodities Prices. Rio Tinto is sticking to plans to plough $16bn into development projects this year on hopes of a pick-up in Chinese growth, even as falling prices for key commodities such as iron ore depressed first-half earnings.

Telegraph:

• McDonald's(MCD) sales worst in two years as US recession bites. McDonald's blamed a 'sluggish' US economy as the world's biggest fast-food chain delivered its worst monthly sales in more than two years.
• Euro founder admits some nations may be forced to leave. One of the founding fathers of the euro admits that some states may be forced to abandon the single currency, but insists Germany would be better off staying in.
• Fears are rising that euro crisis threatens region's biggest economies. New figures are fanning concerns that the eurozone debt crisis is driving its powerhouse economies, France and Germany, into recession.

Corriere:

• Italian Government to Cut 2012 GDP Forecast to -2.1%. The current forecast is for a -1.2% contraction in 2012 GDP.
  

Sydney Morning Herald:

• China Pushes for More Say on Iron Ore Prices. BEIJING is pushing for a greater say in setting the price of iron ore, just as Australia's most important export earner hovers near an eight-month low. The Ministry of Industry and Information Technology - the Chinese agency in charge of the steel industry - last week held a meeting in Beijing with major steel makers to discuss how to better influence the price. ''We need to take advantage of the slowing import growth [of iron ore] and declining price to push for a more equitable iron ore price mechanism,'' a statement on the ministry's website said.

ChannelNewsAsia:

• China Launches Trading Platform for Rare Earth Metals. BEIJING: China on Wednesday launched a trading platform for rare earth metals, state media reported, as it moves to boost its pricing power over the strategic resources for which it dominates global production. China's leading producer of rare earths, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co., started the platform in cooperation with nine other companies and institutions, Xinhua news agency said.

Caixin Online:

• China Criticizes 4 Provinces for Lax Property Controls. China's property inspection team sent by the State Council criticized the Chinese provinces of Hubei, Hunan, Hebei and Shangdong for not "strictly" implementing property control policies.

Etemaad:

• Iran Sees No Drop in Crude-Oil Exports to China. Iran's exports of crude oil to its biggest customer China haven't decreased, citing Iranian Deputy Foreign Minister Abbas Araghchi. "The Chinese are purchasing nearly 150,000 barrels of Iranian crude a day and continue to import oil without any decline," Araghchi said. The two countries have agreed on methods for China to pay for Iranian oil, he said.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.33%

Sector Underperformers:

• 1) Internet -1.30% 2) Disk Drives -1.20% 3) Restaurants -1.04%

Stocks Falling on Unusual Volume:

• TRNX, EZCH, NXTM, WCRX, SODA, PCLN, JIVE, BLKB, FSYS, SPPI, JAZZ, ECPG, Z, EBIX, EXPE, ANEN, TRIP, FOSL, SPRD, MOLX, BBEP, IRWD, WPZ, QUAD, CWH, THS, CCC, AVT, CLH and AH
  

Stocks With Unusual Put Option Activity:

• 1) WFR 2) BZH 3) TSO 4) MET 5) EXPD
  

Stocks With Most Negative News Mentions:

• 1) LOW 2) YUM 3) GM 4) UAL 5) PAY
  

Charts:

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