Stocks Lower into Final Hour on Rising Global Growth Fears, Diminishing Global Central Bank Stimulus Hopes, High Food/Energy Prices, Profit-Taking

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 14.94 +9.05%
  
• ISE Sentiment Index 87.0 -13.86%
  
• Total Put/Call .82 +9.33%
  
• NYSE Arms 1.20 +11.58%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.90 bps +.19%
  
• European Financial Sector CDS Index 239.34 bps -3.34%
  
• Western Europe Sovereign Debt CDS Index 241.65 -2.41%
  
• Emerging Market CDS Index 250.01 +.24%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 33.5 -.75 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -35.0 +1.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .10% +1 basis point
  
• Yield Curve 145.0 +6 basis points
  
• China Import Iron Ore Spot $113.30/Metric Tonne +.35%
  
• Citi US Economic Surprise Index -12.10 +7.6 points
  
• 10-Year TIPS Spread 2.27 +2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating +15 open in Japan
• DAX Futures: Indicating -18 open in Germany
  

Portfolio:

• Higher: On gains in my Medical, Retail, Biotech and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Euro-Area Economic Output Contracted on Spain: Economy. The euro-area economy shrank in the second quarter after the worsening debt crisis and tougher budget cuts forced at least six nations into recessions. Gross domestic product in the 17-nation currency bloc fell 0.2 percent from the first quarter, when it stagnated, the European Union’s statistics office in Luxembourg said today. That’s in line with the median estimate of 35 economists in a Bloomberg survey. The contraction was softened by stronger-than- forecast growth in Germany, the region’s largest economy. Europe’s slump is deepening as governments struggle to restore investor confidence and companies eliminate jobs. While Germany’s economy helped to support the euro region in the first half, surveys are weakening, with a gauge of investor confidence dropping in August. The Bank of Japan (8301) today cited the euro turmoil among risks to its economy. “The ongoing recession in large parts of the periphery will continue to hold back euro-zone growth,” said Martin Van Vliet, an economist at ING Bank in Amsterdam. “Any recovery will likely remain sluggish and fragile. There are a lot of things that could go wrong on the crisis resolution that could derail the envisaged recovery.” Italy’s economy contracted for a fourth straight quarter, shrinking 0.7 percent. In Spain, which received external aid earlier this year, GDP dropped 0.4 percent from the first quarter, when it fell 0.3 percent. Portugal’s economy contracted 1.2 percent in that period and Cyprus also remained in a recession.
• China Reluctance on Reserve Cut Signals Inflation Concern. China’s slower-than-forecast cuts in banks’ reserve requirements show authorities are reluctant to shake their concern inflation will quicken, three months after Premier Wen Jiabao shifted priorities to boosting growth. China has left the reserve ratio for the biggest banks at 20 percent since mid-May while lowering interest rates in June and July, bucking forecasts from HSBC Holdings Plc and Societe Generale SA that the government would build on three ratio reductions since Nov. 30. Industrial-production and loan data for July that missed estimates last week fueled further speculation the People’s Bank of China would cut the ratio as soon as Aug. 10. “The central bank is still concerned about a rebound in inflation, and it is reluctant to loosen too much on the liquidity side,” said Xu Gao, an economist with Everbright Securities Co. in Beijing who previously worked for the World Bank. “The key problem now is that banks have money but the money can’t be channeled to the real economy.”
• China ‘Golden Years’ Are Gone as Growth Slows, Vale Says. China’s “golden years” are gone as economic growth at the world’s second-biggest economy slows, said an official at Vale SA (VALE5), the top iron-ore producer. Vale, which shipped about 44 percent of its iron ore and pellets to Chinese steelmakers in the second quarter, expects the country to start to recover by the end of the year, said Roberto Castello Branco, the Rio de Janeiro-based company’s director of investor relations. Vale sees some “early signals” of recovery, which are still “very weak,” he said. “We are not going to see the spectacular growth rates of 10, 12 percent per year,” Castello Branco said at the Bloomberg Brazil Economic Summit conference in Rio today. “The golden years are gone.” Iron-ore prices dropped to the lowest since Dec. 2009 yesterday on slower growth in China, the biggest user of the steelmaking ingredient, and a weaker outlook for the global economy. Vale said on July 25 that second-quarter profit plummeted 59 percent, missing analysts’ estimates for the fourth time in the past five quarters, after prices for minerals and metals declined. Vale is “very negative” about the prospects for growth in Europe, Castello Branco said.
• Retail Sales in U.S. Rose More Than Forecast in July: Economy. The 0.8 percent advance, the biggest since February and first gain in four months, followed a 0.7 percent decrease in June, Commerce Department figures showed today in Washington. Economists projected a 0.3 percent rise, according to the median forecast in a Bloomberg survey.
• U.S. Technology Calls Jump to Two-Year High on Spending: Options. Traders are boosting bullish wagers on U.S. technology stocks to the highest level in more than two years amid speculation that executives will increase spending on equipment and software even as the recovery slows. The ratio of outstanding calls to buy the Tech Select Sector SPDR Fund versus puts to sell jumped to 1.24 on Aug. 8, according to Bloomberg. That was the highest since June 2010.
  
• Apple’s(AAPL) IPad Shipments, Market Share Surge: IHS. Apple Inc. shipments of iPad tablets surged 44 percent to 17 million in the second quarter, giving the company its biggest share of the market in more than a year as devices from competitors lost ground. Apple’s market share climbed to 69.6 percent in the quarter from 58.1 percent in the previous three-month period, according to a report today from IHS. Cupertino, California-based Apple’s share of the tablet market hasn’t been that high since the first quarter of 2011, when it was 70 percent, IHS said.
• BP Said to Seek $7.9 Billion Selling Gulf of Mexico Fields.
• Knight(KCG) Trading Loss Said to Be Linked to Dormant Software. Knight Capital Group Inc.'s $440 million trading loss stemmed from an old set of computer software that was inadvertently reactivated when a new program was installed, according to two people briefed on the matter.
• U.S. Government Finances Deteriorating, S&P’s Swann Tells MNI. The U.S. government’s finances have deteriorated “gradually” since Standard & Poor’s stripped the country of its top grade, Nikola Swann, an analyst for the credit-rating company, said in an interview with newswire MNI. America has had an AA+ rating with a negative outlook since Aug. 5, 2011, when S&P downgraded the country for the first time, citing the government’s failure to agree on a plan to reduce deficits. The grade may be cut again by 2014, the New York-based unit of McGraw-Hill Cos. said in a June 8 report. “The U.S. fiscal profile has continued to gradually deteriorate since last summer, at a rate in-between our base- case scenario and our downside scenario of August 2011, keeping the U.S. at the high end of our indebtedness range,” Swann said in an interview published today by MNI.

Wall Street Journal:

• Standard Chartered to Pay $340 Million to Settle New York Case.
  

CNBC.com:

• Gold Drops Below $1,600 Per Ounce. Gold prices fell nearly 1 percent on Tuesday, with a breach of support near $1,605 an ounce triggering technical selling, after forecast-beating U.S. retail sales data dampened speculation of another round of monetary easing and lifted the dollar.
• How Bad Is Greece? Worse Than You Think, Ross Says. Though other parts of the continent are improving, Greece actually is worse up close than it appears from the outside, investor Wilbur Ross told CBNC.
• US Small Business Sentiment Slips Again in July: NFIB. U.S. small business sentiment fell for a third straight month in July as owners worried about sales revenue against the backdrop of weak domestic demand, an independent survey showed on Tuesday. The National Federation of Independent Business said its optimism index eased to 91.2 last month from 91.4 in June.
• Home Depot(HD) Earnings Beat Forecasts, Ups Guidance. Home Depot raised its fiscal-year earnings outlook on Tuesday as tight cost controls helped the world's largest home improvement chain offset sales weakness and beat Wall Street's profit estimates in the latest quarter.

Business Insider:

• THE PAUL RYAN BUMP: Mitt Romney Takes His Biggest Gallup Lead In Two Months. Romney leads 47 percent to 45 percent. Back on June 14, Romney held the same 2-point lead. In all, it's a 7-point swing from July 1, when Obama looked to be opening up a huge 5-point lead on Romney.
• Credit Suisse Picks The 7 Best Stocks For The Robot Economy.
• Joe Biden Said Republicans Want To Put Americans 'Back In Chains,' And The Romney Campaign Is Flipping Out. Vice President Joe Biden caused a flare-up on the campaign today, when he told voters at a Virginia campaign event that a Mitt Romney presidency would put Americans "back in chains." The Romney campaign freaked out about the comment, sending out this statement from Press Secretary Andrea Saul: “After weeks of slanderous and baseless accusations leveled against Governor Romney, the Obama Campaign has reached a new low. The comments made by the Vice President of the United States are not acceptable in our political discourse and demonstrate yet again that the Obama Campaign will say and do anything to win this election. President Obama should tell the American people whether he agrees with Joe Biden’s comments.”
• 36 Weird Economic Indicators That You've Never Heard Of.
• There's An Israeli Media Blitz Over A Possible Strike On Iran.
• Chinese Companies Are Pulling Out Of The Once Desirable US Stock Markets.
• BANK OF AMERICA(BAC): The Market Is Engaged In 'Wishful Thinking' And Things Are Going To Collapse Again In Europe.

Zero Hedge:

• Mystery Of July Retail Sales "Beat" Solved: It Is All In The "Seasonal Adjustment".
• Mark Grant And Rick Santelli On Europe: "It's A Ponzi Scheme To Be Honest With You".
• The Economic 'Recovery' In Historical Context.
• The Shape Of The Debt Reset.

Yahoo:

• BofA Merrill Lynch Fund Manager Survey Finds Resurgence in Investor Sentiment. Investor sentiment has risen sharply from the lows of July and fund managers have increased allocations to equities, real estate and commodities, according to the BofA Merrill Lynch Survey of Fund Managers for August. A net 15 percent of the 173 panelists participating in the global survey believe that world economy will get stronger in the coming 12 months. This represents a monthly swing of 28 percentage points, the largest leap in confidence since April to May 2009, when the world emerged from the credit crunch. In July, a net 13 percent said the economy would weaken. BofA Merrill Lynch’s Growth Expectations Composite has risen to 49 from 37 in July. Fears about the outlook for corporate profits have reduced since July. A net 21 percent of the panel expects profits to deteriorate in the coming year, down from a net 38 percent a month ago. The fresh optimism comes amid growing expectations of intervention by the European Central Bank (ECB). The proportion of the panel ruling out more quantitative easing by the ECB has halved to 9 percent, while 38 percent expect the ECB to act during the third quarter (up from 29 percent in July). China’s economy is also providing optimism with a net 14 percent of the regional panel saying China’s economy will improve – the most positive reading since November 2010. “August’s surge in confidence seems to be more a triumph of policy projection and potential than positive economic data. As indicated by the survey, the risk is now that inaction by policy makers would lead to a negative reaction in global markets,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.

Reuters:

• German GDP growth slows, contraction looms. German growth slowed in the second quarter and a key sentiment indicator dropped for the fourth successive month, threatening contraction for Europe's largest economy if the euro zone crisis runs unresolved for much longer. German gross domestic product (GDP) grew by 0.3 percent in the second quarter, data showed on Tuesday, a touch better than expected and helped by exports to countries outside of Europe as well as a pick-up in consumption. But growth slowed from 0.5 percent in the first three months and the forward-looking ZEW sentiment index undercut even the lowest estimate in a Reuters poll, falling to -25.5 from -19.6. "Growth turned out to be pretty solid. But this could be the last positive piece of news out of Germany for some time," said Joerg Kraemer at Commerzbank. "The German economy could contract in the summer. It is fundamentally in good structural shape, but can't decouple from the recession in the euro zone, plus the global economy has also shifted down a gear," he said. If the slowdown were to accelerate, it could affect the willingness of average Germans to contribute to euro zone bailouts, but for now Germany's labour market is holding up well, wages have risen and inflation is relatively low.
• Dick's Sporting(DKS) Sees FY Profit Largely Below Estimates. Dick's Sporting Goods Inc, the largest publicly traded U.S. sports goods retailer, reported a better-than-expected quarterly profit on higher sales, but forecast full-year earnings largely below Wall Street expectations. The company raised its 2012 forecast for the second time in three months and now expects per-share earnings of $2.47 to $2.51 during the year, up from its earlier range of $2.45 to $2.48. Analysts were expecting earnings of $2.51 per share, according to Thomson Reuters I/B/E/S.

Telegraph:

• Mariano Rajoy remains tight-lipped on Spanish bail-out. Spanish prime minister Mariano Rajoy has remained tight-lipped on whether he will make a formal request for a bail-out, as Olli Rehn indicated the ECB and EU were ready to shore up the eurozone.

Bild:

• Oettinger Sees Greek Exit Deal Possible in September. European Union Energy Commissioner Guenther Oettinger said a potential exit from the eurozone by Greece is likely to come as soon as September, citing an interview. A decision is likely to come then as Greece's troika of international creditors - the IMF, the European Commission and the European Central Bank - publishes a report on Greece, Oettinger said.

Kathimerini:

• The proportion of non-performing loans in Greece's banking system has reached 20%, with repayment arrears amounting to 48 billion euros.
  

Shanghai Daily:

• Shanghai's Exports Plunge. SHANGHAI'S exports posted the biggest fall in nearly three years in July, hurt by the worsening European economic crisis, data from Shanghai Customs showed yesterday. The total value of the city's imports and exports in the first seven months rose 1.2 percent on an annual basis to US$462.7 billion, compared with a 2.4 percent climb in the first half, Shanghai Customs said. In July, exports fell 8.6 percent from a year earlier to US$43.8 billion, the biggest drop since November 2009, while imports added 2.7 percent to USS$26.9 billion.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.25%

Sector Underperformers:

• 1) Coal -2.45% 2) Networking -2.20% 3) Steel -1.75%

Stocks Falling on Unusual Volume:

• GRPN, IMPV, CIEN, JNPR, CVLT, DANG, IMOS, EMC, GOL, ANGI, TRS, MCRS, MIDD, STMP, FB, CSOD, BCOV, CHKP, PANL, XTXI, DKS, MWE, VAL, NCR and TW
  

Stocks With Unusual Put Option Activity:

• 1) SPLS 2) MRVL 3) LEN 4) DKS 5) AKS
  

Stocks With Most Negative News Mentions:

• 1) NCR 2) GM 3) WFC 4) CIEN 5) C
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.29%

Sector Outperformers:

• 1) Airlines +.59% 2) Homebuilders +.59% 3) Banks +.56%

Stocks Rising on Unusual Volume:

• SKYW, VELT, PWRD, MNST, CIE, EL, NSM, ISIS, HD and ULTA
  

Stocks With Unusual Call Option Activity:

• 1) ERIC 2) DKS 3) EL 4) NBR 5) SVNT
  

Stocks With Most Positive News Mentions:

• 1) UPS 2) NDSN 3) JEC 4) SKS 5) EL
  

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Italians Say Goodbye to Ferraris as La Dolce Vita Expires. A crackdown on luxury goods combined with budget cuts that have pushed Italy deeper into its fourth recession since 2001 are souring demand for sporty cars and other symbols of the country’s carefree lifestyle. The number of secondhand high- performance cars exported from Italy nearly tripled to 13,633 vehicles in the first five months of 2012, from 4,923 a year earlier, according to auto industry group Unrae.
• Draghi Bond Plan Fails to Entice Scottish Money Men: Euro Credit. European Central Bank President Mario Draghi's pledge to resume sovereign bond purchases has done little to convince Edinburgh's two biggest money managers that it's time to buy Italian and Spanish debt. "Once the dust settles it may be that what is announced by the ECB isn't the breakthrough that we would be looking for," said Jack Kelly, who's responsible for about 6 billion euros of government bonds as investment director at Standard Life Investments, the biggest money manager in the Scottish capital.
• China Stocks Drop for Third Day on Profit Concerns; Citic Slides. China’s stocks fell, sending the benchmark index lower for a third day, on concern the nation’s slowing economy is hurting corporate earnings. Citic Securities Co., the nation’s biggest listed brokerage, dropped 3 percent, adding to yesterday’s 9.1 percent slide, after the Securities Times reported the company denied speculation that it had “huge” losses on its overseas investments. China Merchants Securities Co. slid to the lowest since January after reporting lower first-half profit. Suning Appliance Co., the biggest home appliance retailer by market value, tumbled 8.4 percent after its board approved a bond sale. “The first-half earnings reports are showing companies are in the process of clearing inventories, which is the worst thing for corporate earnings,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. The Shanghai Composite Index (SHCOMP) dropped 0.6 percent to 2,122.80 at 10:44 a.m. local time, heading for the lowest level since Aug. 2.
• Rubber for January delivery declined 1.5% to 210.6 yen a kilogram on the Tokyo Commodity Exchange at 9:01 am local time, the lowest level since October 2009.
• Currency Flows Reversing China to Colombia as Trade Slows. Just three months after the biggest developing economies sold dollars to support their currencies, policy makers from Colombia to China are moving to weaken exchange rates and revive exports as the International Monetary Fund forecasts the slowest trade growth in three years. Colombian Finance Minister Juan Carlos Echeverry urged the central bank on Aug. 3 to boost minimum dollar purchases from $20 million a day, saying the country needs “more ammunition” to drive down the peso in the global “currency war.” The Philippines banned foreign funds from deposit accounts and unexpectedly cut interest rates in July as the peso hit a four- year high. In China, authorities lowered the yuan reference rate to the weakest since November, which according to Citigroup Inc. will create “headwinds” for other Asian currencies.
• Groupon(GRPN) Sales Miss Estimates as Online Deal Demand Dims. Groupon Inc. shares tumbled in late trading after the largest daily-deal website reported second- quarter revenue that missed estimates as economic weakness in Europe curbed international sales of online coupons. Groupon shares fell as much as 21 percent to $5.95 in extended trading following the report.
• California’s Revenue Falls 10.1% Below Forecast, Chiang Says. California tax revenue trailed forecasts in July by $475 million, or 10.1 percent below assumptions in Governor Jerry Brown’s budget, the state controller’s office said. Controller John Chiang, in a monthly update, attributed most of the shortfall to lower-than-expected sales-tax receipts. Sales levies in the most populous state were $295 million, or 33.5 percent below the forecast in Brown’s budget. “July’s sales-tax performance is harder to explain as it is unclear whether consumer activity has slowed or if this is an issue of timing,” Chiang’s office said in the update posted on the controller’s website.
• Obama Lawyers Urge High Court to Back Affirmative Action. The Obama administration urged the U.S. Supreme Court to reaffirm the legality of race-based college admissions, as the justices prepare to review the affirmative action programs that have become fixtures at the nation’s top universities. The high court will hear arguments Oct. 10 on a white woman’s contention that she suffered racial discrimination when the University of Texas rejected her application for admission. The case has broad implications for selective universities, almost all of which use race as an admissions factor to diversify their student bodies.
• Subbarao Says India Lacks Scope for Stimulus to Counter a Crisis. India has no space for economic stimulus to respond to a future crisis partly because it faces elevated inflation, central bank Governor Duvvuri Subbarao said. “Inflation is high, oil prices though they have come off $100 a barrel are at elevated levels, the external sector is under stress,” Subbarao said in a speech in the southern Indian state of Kerala yesterday. “There is just no space for fiscal or monetary response.”
• Peregrine Chief Russell Wasendorf Indicted on 31 Counts. Russell R. Wasendorf Sr., chief executive officer of the collapsed commodity firm Peregrine Financial Group Inc., was indicted by a federal grand jury on 31 counts of making false statements to regulators.

Wall Street Journal:

• Syria's Russian Connection. Regime Attempts to Sidestep Sanctions by Using Foreign Banks in Oil Sales.
• A Green Light for Car Loans. Banks, Finance Firms Boost Auto Lending; Fed Survey Finds Easier Standards. Banks and investors are still wary of lending to Americans purchasing houses and almost everything else, but they are lending people money to buy cars—even to borrowers who must stretch to make their payments.
• Trans-Atlantic Tensions Increase. The special relationship between financial authorities in the U.S. and U.K. is going through a rough patch. Trans-Atlantic regulatory sniping broke out last week for the second time in a month, after the New York State Department of Financial Services alleged that U.K. bank Standard Chartered PLC broke U.S. money-laundering laws. The allegations, which were denied by the bank, led the normally reserved Bank of England governor Mervyn King to chastise U.S. regulators. Settlement discussions between Standard Chartered, the New York Department of Financial Services and other U.S. regulators continued Monday.
• Germany's Wealth Grab. The impulse to soak the rich isn't exclusively French. François Hollande has earned his reputation as archenemy of Europe's wealthy, but don't imagine that the impulse to soak the rich is exclusively Gallic. Lawmakers in Germany's opposition parties are calling for a 1% tax on wealth and assets exceeding €2 million. The Social Democrat-Green proposal would add €11.5 billion to coffers annually, according to calculations by the influential German Institute for Economic Research, or DIW. If you think that's onerous, consider that last month the same think-tank published a report advocating a one-off levy of 10% on all wealth exceeding €250,000.
• The Solar-Painted Desert. Interior gives an environmental pass to its business friends. Who says President Obama isn't pro-business? The trick is being a business he likes. Several weeks ago in a remarkable but little-noticed policy directive, the Interior Department announced that it will allow construction permitting on 285,000 acres of public land in Arizona, California, Colorado, Nevada, New Mexico and Utah for solar energy projects. Even more remarkable, Interior said that energy firms can petition Interior to build solar installations "on approximately 19 million acres"—a larger land mass than Connecticut, Massachusetts, New Hampshire and Vermont combined.

MarketWatch:

• The only way out for China: Andy Xie. Problems only going to get worse as long as government interferes. China’s business conditions continue to deteriorate. Cement, coal and steel prices are still falling. Overcapacity is severe in most industries. Local governments pressure loss-making enterprises to continue production to sustain local gross domestic product. Hence, commodity prices are falling below total costs. Soon the prices may fall below variable costs.

Business Insider:

• Democrats Are Now Officially Freaking Out About Paul Ryan. In the first official sign that the Democratic Party is starting to worry about Paul Ryan's selection as vice president, the Democratic Congressional Campaign Committee sent out a fundraising email Monday urging donations in light of the supersized crowds, which reportedly reached as many as 15,000 in North Carolina. The email, from DCCC field director Brynne Craig, is entitled "disturbing report" and cites a Wall Street Journal piece of the crowd sizes (emphasis added):
• MORGAN STANLEY(MS): The Odds Of A Surprise Fed Move Are Like The Odds Of NASA Finding Extraterrestrial Life.
• The NOAA Is Shopping For 46,000 Rounds Of Ammunition.
• UBS: The Dollar Is Likely To Remain The World's Reserve Currency For The Next 50 Years.
• Why Global Macro Hedge Funds Are Getting Slammed These Days.

Zero Hedge:

• Deep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves.
• Alan Simpson Confirms Reality: "All The Things You Love Will Not Come To Pass". (video) Conjuring images of Jack Nicholson in 'A Few Good Men', Alan Simpson laid out the sad and terrible truth that none of us or our politicians can handle in a very direct and sincere interview with Bloomberg TV's Deirdre Bolton. "Medicare costs stand to squeeze out the rest of domestic government spending," Simpson said, "it is on automatic pilot. It will use up every resource in the government." Simpson also said that the current path of debt, deficit and interest is “totally unsustainable” confirming once again the facade that his 18 years in Washington proved to him that he "never saw any projection of any economist ever come true."

CNBC:

• Why More States May See Gas Prices Above $4. Refining issues and higher crude prices have lit a fire under gasoline prices and could push them above $4 a gallon in more parts of the U.S. in the next few weeks.
• India's Inflation Likely Edged Higher in July. India is expected to report on Tuesday that headline wholesale price index inflation edged higher in July to an annual 7.37 percent from 7.25 percent in June, according to a Reuters poll of economists.
• Euro Zone Output Expected to Shrink in Second Quarter. Euro zone output is seen declining in the second quarter when the European Union releases data on Tuesday, as the debt crisis hurts confidence, making businesses reluctant to invest and consumers worried about spending. Gross domestic product (GDP) in the zone likely shrank 0.2 percent from the first quarter of the year, according to an average of estimates of 55 economists polled by Reuters. The most pessimistic forecast a contraction of 0.7 percent.

IBD:

• Cabela's(CAB) Sees Profit Boost Adding Retail Stores.

Forbes:

• Yes, Obamacare Cuts Medicare More Than A President Romney Would. You wouldn’t know it from listening to the Obama campaign, but there’s only one Presidential candidate in 2012 who has cut Medicare: Barack Obama, whose Affordable Care Act cuts Medicare by $716 billion from 2013-2022. Today, the Romney campaign reiterated its pledge to repeal Obamacare, and promised to “restore the funding to Medicare [and] ensure that no changes are made to the program for those 55 and older.”

CNN:

• Bank fees are on the rise. Watch out for rising bank fees. Checking accounts have been getting more expensive, as banks hike monthly costs, ATM charges and overdraft fees, according to a survey of more than 100 banks released Monday by bank comparison website MoneyRates.com.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows Mitt Romney attracting support from 47% of voters nationwide, while President Obama earns the vote from 44%. Four percent (4%) prefer some other candidate, and four percent (4%) are undecided.

Reuters:

• U.S. Treasury increases auto bailout cost estimate. The U.S. Treasury Department has said the auto industry bailout will cost taxpayers $3.4 billion more than previously thought. Treasury now estimates the 2009 bailout will eventually cost the government $25.1 billion, according to a report sent to Congress on Friday. That is up from the last quarterly estimate of $21.7 billion.

Telegraph:

• World shipping crisis threatens German dominance as Greeks win long game. Germany’s shipping industry faces a wave of bankruptcies over coming months as funding dries up and deepening economic woes across the world cause a sharp contraction in container trade.
• Time to stop the EU navel-gazing. Whilst the Coalition continues to maintain that its policies are sustaining the economy, but our GDP tumbles, this is the time to examine this inherent contradiction between claims and performance.

Macrobusiness.com:

• Australia's Sub Prime Mortgage Scandal Grows. Claims that Australia’s banking sector is conservative, safe and secure have taken a bath in recent days as evidence has emerged of Australia’s own sub-prime lending scandal.

Xinhua:

• China should focus investment in less developed central and western regions, Yi Xianrong, a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, writes in a commentary. The investments may bring "huge" financial and bank risks as some local governments may seek to expand investment only out of self-interest, Yi writes.

Financial News:

• China Should Improve Risk Controls for Growth. Effectively preventing and solving financial risks will help the "stable and relatively fast" development of the economy, according to a front page commentary.

Shanghai Securities News:

• China's slowing econ0omy won't stall stricter property market controls. Stopping a home price rebound will be the government's main goal in 2H.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 151.50 +2.0 basis points.
• Asia Pacific Sovereign CDS Index 125.75 +.75 basis point.
  
• FTSE-100 futures +.39%.
  
• S&P 500 futures +.07%.
  
• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HD)/.97
• (DKS)/.64
• (EL)/.16
• (SKS)/-.09
• (TJX)/.55
• (JDSU)/.12

Economic Releases
8:30 am EST

• The NFIB Small Business Optimism Index for July is estimated to rise to 91.6 versus 91.4 in June.
• The Producer Price Index for July is estimated to rise +.2% versus a +.1% gain in June.
• The PPI Ex Food & Energy for July is estimated to rise +.2% versus a +.2% gain in June.
• Advance Retail Sales for July are estimated to rise +.3% versus a -.5% decline in June.
  
• Retail Sales Less Autos for July are estimated to rise +.4% versus a -.4% decline in June.
• Retail Sales Ex Autos & Gas for July are estimated to rise +.5% versus a -.2% decline in June.

10:00 am EST

• Business Inventories for June are estimated to rise +.2% versus a +.3% gain in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone GDP report, Eurozone Industrial Production report, Germany ZEW Survey, UK Inflation report, IBD/TIPP Economic Optimism Index for August, weekly retail sales reports, Canaccord Genuity Growth Conference, Oppenheimer Tech/Internet/Communications Conference and the Raymond James Bank Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer staple 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 Lower into Final Hour on Eurozone Debt Angst, Rising Global Growth Fears, US Fiscal Cliff Concerns, High Food/Energy Prices

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 14.02 -4.88%
  
• ISE Sentiment Index 106.0 +9.28%
  
• Total Put/Call .75 -25.0%
  
• NYSE Arms 1.03 +53.96%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.63 bps +.20%
  
• European Financial Sector CDS Index 247.52 bps +.16%
  
• Western Europe Sovereign Debt CDS Index 247.38 +.05%
  
• Emerging Market CDS Index 249.11 -.30%
  
• 2-Year Swap Spread 20.0 -.5 basis point
  
• TED Spread 34.25 +.25 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -36.75 +.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .09% -1 basis point
  
• Yield Curve 139.0 unch.
  
• China Import Iron Ore Spot $112.9/Metric Tonne -.79%
  
• Citi US Economic Surprise Index -19.70 +1.2 points
  
• 10-Year TIPS Spread 2.25 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating +15 open in Japan
• DAX Futures: Indicating +17 open in Germany
  

Portfolio:

• Higher: On gains in my Medical and Tech sector longs, emerging markets shorts and index hedges
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short, then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 bounces off morning lows despite eurozone debt angst, high food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Internet, Oil Tanker, Airline and Paper shares are higher on the day. Lumber is gaining +1.45%, Oil is falling -.7%, Gold is down -.62% and the UBS-Bloomberg Ag Spot Index is falling -1.9%. The Germany sovereign cds is falling -1.1% to 64.81 bps. On the negative side, Coal, Alt Energy, Energy Oil Service, Steel, Semi, Networking, HMO and Gaming shares are especially weak, falling more than -1.0%. Small-caps are underperforming. Copper is falling -1.2%. Major Asian indices were mostly lower overnight, led down by a -1.5% decline in China. Chinese stocks continue to sit out the global equity rally off the June lows, which remains a big red flag. Major European indices are mixed as a +.3% gain in Spain is being offset by a -.5% decline in German shares. The Bloomberg European Bank/Financial Services Index is falling -.1%. Brazilian equities are falling -.1%. The France sovereign cds is gaining +.93% to 148.0 bps, the Portugal sovereign cds is gaining +1.2% to 776.85 bps, the UK sovereign cds is rising +2.1% to 57.50 bps, the China sovereign cds is gaining +.65% to 105.75 bps, the Russia sovereign cds is jumping +1.5% to 173.53 bps(+10.0% in 5 days) and the Israel sovereign cds is surging +6.4% to 150.03 bps. Moreover, the Emerging Markets Sovereign CDS Index is gaining +1.3% to 245.31 bps(+8.0% in 5 days). The UBS/Bloomberg Ag Spot Index is up +23.1% since 6/1. The benchmark China Iron/Ore Spot Index is down -37.6% 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. Lumber is -8.0% 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 -65.0% from its Oct. 14th high and is now down around -55.0% ytd. Shanghai Copper Inventories have risen +71.0% 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 -19.3% since May 2nd of last year despite the recent surge in food/energy prices. The 10Y T-Note continues to trade too well, despite recent weakness. 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 in an attempt to "save" the euro even as investors have been pricing this outcome into stocks. Focus Magazine reported over the weekend a recent poll by TNS Emnid found that 52% of Germans don’t want European countries to share debt even if the EU takes control over budgets of individual countries, while 31% were in favor of this. The Citi Eurozone Economic Surprise Index is at -69.60 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 Italian yield curve is flattening too much again, with the spread down -60.0 bps in 6 days to 2.41%. 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. The odds of imminent QE3, which were already lower than perceived in my opinion, are likely plummeting with the recent surge in stock prices, inflation expectations, worrisome food crisis headlines and less pessimistic US economic data. As well, as I have been saying for several weeks, a new massive China stimulus round isn’t as likely as perceived as worries over their real estate bubble and soaring food prices intensify. 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. Apple(AAPL) is once again helping to boost the major averages off their morning lows on more iTV rumors and optimism over the new iPhone release. While Apple will likely consolidate this year’s gains awhile longer, I still expect the shares to outperform over the intermediate-term. Long AAPL. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt angst, profit-taking, more shorting, high food/energy prices, earnings worries, US "fiscal cliff" concerns and rising global growth fears.