Today's Headlines

Bloomberg: 

• Asia-Pacific Bond Risk Rises, Credit-Default Swap Prices Show. The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment rose, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan jumped 7 basis points to 141 basis points as of 8:46 a.m. in Singapore, Westpac Banking Corp. (WBC) prices show. The gauge is set for its third straight day of increases, the longest stretch in more than a month, according to data provider CMA. The Markit iTraxx Australia index climbed 3 basis points to 118 basis points as of 10:47 a.m. in Sydney, according to National Australia Bank Ltd. prices. The Markit iTraxx Japan index rose 1.5 basis points to 95.5 basis points as of 9:19 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is heading for its highest close since July 11, CMA data show.

• Jobless Parisians Mean Fewer Peugeots in Slumping France. Marie-Estelle Cevatheean dreams of a new car that would be better suited to her growing family after having a baby late last year. Instead, with no work, the 31-year-old Parisian can’t afford to replace her seven-year-old Citroen (UG) C3 subcompact. “We don’t have the money yet to buy a new car,” Cevatheean said. “I need to find a job first.” With unemployment in France rising and consumer confidence at a record low, auto sales in the country have tumbled more than any other major European market this year. That portends more pain for French automakers Renault SA (RNO) and especially cash-strapped PSA Peugeot Citroen.

• French Auto Suppliers Post Profit Drop on Europe Slump. Michelin & Cie (ML) and Faurecia SA reported a drop of more than 10 percent in first-half profit as automakers pushed prices lower on slumping demand in Europe. Michelin, Europe’s largest tiremaker, said operating profit excluding one-time items declined 13 percent to 1.15 billion euros ($1.52 billion). Faurecia, the region’s biggest maker of car interiors, posted a 16 percent decrease in operating profit to 256 million euros. 

• European Stocks Decline Amid Earnings Reports; BASF Falls. European stocks declined from an almost eight-week high as companies from BASF SE to ABB Ltd. reported earnings that missed analysts’ estimates. BASF fell to a three-month low after also saying that full-year targets now look more challenging. ABB tumbled the most in three months as its first profit increase in six quarters trailed forecasts and its order book shrank. Siemens AG plunged the most since August 2011 after saying it won’t reach its profit-margin goal for the 2014 fiscal year. Michelin (ML)& Cie. lost 1.4 percent after posting a 13 percent slide in first-half earnings. The Stoxx Europe 600 Index dropped 0.5 percent to 299.63 at the close of trading, after earlier falling as much as 1.1 percent. 

• Egypt Islamists Call for ‘Freedom’ Rally Amid Army Pressure. The Muslim Brotherhood’s leader urged Egyptians to rally for “freedom,” setting the Islamists on a collision course with an army that’s signaled it’s losing patience with protests in support of ousted President Mohamed Mursi. The appeal by Mohammed Badie, the Brotherhood’s supreme guide, came a day after military chief Abdelfatah al-Seesi urged Egyptians to take to the streets tomorrow to give the military and police a broad mandate to combat “violence” and “terrorism.” The military issued a further statement on its Facebook page today, giving a 48-hour ultimatum and warning that its tactics in dealing with violence and terrorism would change after tomorrow.

• Soybeans Drop to 17-Month Low on Slack Demand; Corn, Wheat Fall. Soybeans fell to the lowest in 17 months on signs of declining demand for the oilseed and its products and amid favorable weather in the U.S. Midwest. Corn and wheat also dropped. Soybean exports in the week through July 18 fell 32 percent to 82,231 metric tons, the U.S. Department of Agriculture data said in a report today. Soybean-meal and -oil exports fell to marketing-year lows.

• Gold Rises as Jobless Claims Bolster Outlook for Stimulus. Gold gained for the first time in three days after a report showed more Americans filed for unemployment benefits, boosting prospects that the Federal Reserve will maintain stimulus measures to spur economic growth. Gold futures for December delivery rose 0.2 percent to $1,323.10 an ounce at 10:35 a.m. on the Comex in New York. Trading was 30 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

• Palm Drops to Lowest in More Than Three Years on Supplies. Palm tumbled to the lowest level in more than three years as global supplies of the world’s most-consumed cooking oil climb the most since 1999 and demand expands at the slowest pace in more than a decade. Futures slumped as much as 3.2 percent to 2,151 ringgit ($672) a metric ton in intraday trading on the Bursa Malaysia Derivatives in Kuala Lumpur, a level not seen since October 2009, before closing at 2,170 ringgit.

• PulteGroup, Horton Tumble on Lower-Than-Expected Home Orders. PulteGroup Inc. (PHM:US) and D.R. Horton Inc. (DHI:US), the largest U.S. homebuilders, tumbled after reporting lower-than-expected orders, adding to concerns that higher mortgage rates will hamper the nation’s housing recovery. PulteGroup, based in Bloomfield Hills, Michigan, said second-quarter orders fell 12 percent on a lower community count. D.R. Horton said orders increased 12 percent, which was below analysts’ forecast for 28 percent growth, according to Adam Rudiger, an analyst at Wells Fargo & Co. in Boston. 

• SAC Capital Indicted in Six-Year U.S. Insider Probe. SAC Capital Advisors LP, the $14 billion hedge fund founded by Steven A. Cohen, was indicted for perpetrating what prosecutors called an unprecedented insider trading scheme that was revealed as part of the government’s six-year crackdown on Wall Street crime. The insider trading case against the Stamford, Connecticut-based firm is the most significant to be brought by the U.S. since former Goldman Sachs Group Inc. (GS) director Rajat Gupta was charged in October 2011. Gupta, convicted in New York federal court last year, was sentenced to two years in prison.

• Obama Ambassadors Gave At Least $13.6 Million in Campaign Money. When it comes to job benefits, Matthew Barzun is about to enjoy some of the best. As the new U.S. ambassador to the U.K., he’ll live in Winfield House, a London mansion set on 12 acres with gardens second only to those in Buckingham Palace in size. He’ll be able to borrow art from museums for free and host the president as an overnight guest when he’s in town. Barzun, a 42-year-old technology entrepreneur nominated this month to the Court of St. James’s, earned those perks: He raised at least $1.2 million as finance chairman for President Barack Obama’s re-election campaign.

Wall Street Journal:

• Unworkable ObamaCare. Opaque rules, delays and inconsistent guidance from Washington: The chaos is mounting.

Zero Hedge: 

• How Spain Just Made Mario Draghi's Nightmare Worse. (graphs)

• Jobless Claims Rise Modestly, Improving Trend Stalls. (graph)

• Ugly Durable Goods Number Masked By Second Monthly Surge In Boeing Orders. (graph)

• About That US Recession... (graph)

• DR Horton(DHI) On The Real Impact Of Soaring Rates: "Shocked Homebuyers".

• SAC's Real Gross Exposure: Up To $44 Billion.

Business Insider: 

• Europe Looks Fine Now, But A Political Perfect Storm Is Brewing.

• GOOGLE(GOOG): We Have Big Plans For Google TV.

Mortgage Daily:

• Early-Stage Mortgage Delinquency Soars. During June, residential loans that were at least 30 days past due numbered 4,785,000, climbing from 4,569,000 a month earlier.

Forbes:

• Obama Doubles Down on Moving Left by  Doug Schoen.

Reuters:

• Exclusive: DOJ starts probe into Wall St. metals warehousing - sources. The U.S. Department of Justice has started a preliminary probe into the metals warehousing industry following complaints that storage firms owned by Wall Street banks and major traders have inflated prices, sources familiar with the matter said. 

• Harley-Davidson(HOG) profit rises as U.S. demand rebounds. Harley-Davidson Inc reported a 9.9 percent rise in its quarterly profit rose on Thursday, helped by a modest rebound in demand for its motorcycles in the United States, its No. 1 market. 

• Siemens, BASF warnings weigh on European shares. Profit warnings by German heavyweights BASF and Siemens hit the country's stock index and cast a shadow over the broader European market on Thursday.

Telegraph:

• Unilever boss dampens hope of economic recovery in Europe. The chief executive of consumer goods giant Unilever has dampened hopes of an economic recovery in Europe by warning that progress to rebuild the continent’s finances is “very slow”. 

• IMF fears Fed tapering could 'reignite' euro debt crisis. The tapering of stimulus by the US Federal Reserve risks reigniting the eurozone debt crisis and pushing the weakest countries into a "debt-deflation spiral", the International Monetary Fund has warned. 

AFR: 

• Australia at risk from high $US, low yen: OECD. A lower yen and a higher US dollar will drag down growth in Asia posing a threat to the Australian economy, according to a leading global economist.

Xinhua:

• China Hasn't Seen 'Massive' Capital Outflow. There is no trend of "massive" foreign capital outflow, citing Cao Hongying, an official with the foreign investment department of the Ministry of Commerce.

Bear Radar

Style Underperformer:

• Large-Cap Value -.17%

Sector Underperformers:

• 1) Homebuilders -5.92% 2) Gaming -1.23% 3) HMOs -1.17%

Stocks Falling on Unusual Volume:

• TBBK, SI, SUSQ, ABB, F, NFX, WRLD, INFN, CCI, CPSS, ARII, TOWR, BCC, CROX, RDWR, CLFD, CAM, GRA, SLAB, TER, POT, CAKE, STRA, SRPT, MHO, VNTV, PDH, BLUE, CDNS, TWI, PHM, DNKN, PCP, EQIX, FBHS, DFT, TOL, DO, HNT, LEN, TSCO, PTEN, UAL, BRP, WDC, GRA, TKR, MNRO, RYL, DHI and ANGI

Stocks With Unusual Put Option Activity:

• 1) FB 2) XLI 3) AKAM 4) RCL 5) ITB
  

Stocks With Most Negative News Mentions:

• 1) RKT 2) PTEN 3) MCO 4) SCHW 5) SUSQ
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.16%

Sector Outperformers:

• Coal +1.88% 2) Gold & Silver +1.68% 3) Tobacco +1.19%
  

Stocks Rising on Unusual Volume:

• V, COG, RRC, RALY, FLTX, FB, USU, OKE, SPR, BIDU, IMAX, TEAR, APD, FFIV, AMCC, BSX, UA, ETFC, TRIP, ORLY, ITMN, BC, GNC, MJN, IM and CMO

Stocks With Unusual Call Option Activity:

• 1) NRG 2) TRIP 3) SAI 4) CROX 5) BSX
  

Stocks With Most Positive News Mentions:

• 1) CCE 2) NOC 3) UTX 4) STX 5) POT
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• China Wrings Price Cuts in Public Campaign on Graft-to-Collusion. Behind China’s expanding anti-corruption probe of international drugmakers is a populist campaign to drive down drug prices as China, like the U.S., seeks to expand health care to the poor and uninsured. The pressure on multinationals comes as the country faces a slowing economy that threatens its promise to deliver rising living standards and as President Xi Jinping has made affordable health care a key part of the Communist Party’s agenda.

• Beijing Sells Residential Land at Record on Luxury Home Demand. Beijing sold a high-end residential land parcel for a record price as developers sought to tap rising demand for luxury homes even as the government maintains its property curbs. The number of apartments sold for more than 10 million yuan in the Chinese capital jumped 81 percent to 1,388 in the first half from a year earlier, as wealthy buyers favored bigger properties under the government’s purchase restrictions, Bacic & 5i5j said. China’s new home prices rose in all but one city in June, official data showed this month, underscoring Premier Li Keqiang’s struggle to make housing affordable even as the economy cools. 

• Bo Xilai Charged With Corruption, Bribery, Abuse of Power. Former Chinese Politburo member Bo Xilai was charged with bribery, corruption and abuse of power, as the Communist Party’s new leadership seeks to bring to a close its most serious political scandal in two decades.

• Japan Seen Needing $50 Billion to Cushion Sales-Tax Rise. Japanese Prime Minister Shinzo Abe, now sitting on the biggest parliamentary majority in six years, faces the threat of political dissent within months as a planned sales-tax rise threatens to arrest an economic rebound. The world’s third-largest economy has 30 percent odds of tipping into the fourth recession since 2008 should Abe bump the consumption levy to 8 percent in April from 5 percent, according to the median of 23 estimates in a Bloomberg News survey.

• China Stocks Fall as Technology, Small Companies Drop; CSR Gains. Chinese stocks fell as technology and small-company shares slumped after a three-day rally, overshadowing gains for industrial companies. BOE Technology Group Co. slid 4.6 percent, sending a measure of technology shares to the biggest loss among the 10 industries in the CSI 300 Index. CSR Corp., the nation’s biggest trainmaker, and China Railway Construction Corp. jumped more than 5 percent. The government yesterday announced measures to accelerate railway construction, cut taxes for small companies and support exporters by reducing administrative fees. The Shanghai Composite Index (SHCOMP) fell 0.1 percent to 2,031.75 at 10:49 a.m. local time.

• Asian Stocks to Won Slip on Stimulus Bets; Kiwi Gains. Asian stocks fell the most in more than two weeks and emerging-market currencies weakened as investors weighed the withdrawal of Federal Reserve stimulus. Metals and oil retreated, while New Zealand’s dollar rallied. The MSCI Asia Pacific Index lost 0.7 percent to 135.99 as of 12:15 p.m. in Tokyo, the most since July 8. South Korea’s won and Thai baht weakened at least 0.4 percent, while New Zealand’s dollar gained 0.6 percent.

• Spanish Train Crash Kills 77, Biggest Toll Since Madrid Bombing. A train derailment near the northwestern Spanish city of Santiago de Compostela killed at least 77 people, the highest death toll in a rail incident since the 2004 Madrid bombing. The number of fatalities may increase because parts of the wreckage are difficult to access, said a spokeswoman for the high court of the region of Galicia. She requested anonymity citing the policy of the court, which is involved in the legal procedures surrounding the crash. 

• Banks Said to Weigh Suspending Dealings With SAC as Charges Loom. Wall Street banks are debating whether to suspend doing business with SAC Capital Advisors LP if the hedge fund is charged by U.S. prosecutors, according to two people briefed on the matter.

Wall Street Journal:

• Stalled Project Shows Why China's Economy Is Wobbling. The $91 Billion Caofeidian Industrial Zone Is Mired in Debt and Unfulfilled Promise. A $91 billion industrial project here, mired in debt and unfulfilled promise, suggests part of the reason why China's economy is wobbling – and why it will be hard to turn around. The steel mill at the heart of Caofeidian, which is outside the city of Tangshan, about 225 kilometers (140 miles) southeast of Beijing, is losing money. Nearby, an office park planned to be finished in 2010 is a mass of steel frames and unfinished buildings. Work on a residential complex was halted last Christmas, after workers completed the concrete frames. There is even a Bridge to Nowhere: a six-lane span abandoned after 10 support pylons were erected. "You only need to look around to see how things are going," said Zhao Jianjun, a worker at a plant that hasn't produced its steel-reinforced plastic pipes for months. "Look north, west, east," he said, gesturing to empty buildings. Chen Gong, chairman of Beijing Anbound Information, a Chinese think tank, says Caofeidian shows the flaws of the Chinese economic-growth model, in which the government plans investment and companies are expected to follow suit, regardless of market conditions. Chinese local governments are "driven by the blind pursuit of GDP," said Mr. Chen.

• Bond Investors Turn to Cash. Investors are cashing out of bonds but remain hesitant to plunge into stocks. Investors are cashing out of bonds but remain hesitant to plunge into stocks, preferring instead to buy money-market mutual funds despite their low returns. The surprise move highlights persistent investor anxiety with equities even as stock indexes reach new highs.

• The Inequality President. The rich have done fine under Obamanomics, not so the middle class.

• David Skeel: Facing Up to America's Pension Woes. Public retirees everywhere insist that Chapter 9 does not permit any benefit changes. Their legal case is weak.

CNBC:

• Facebook(FB) earnings beat; shares jump 20%. Facebook reported second-quarter earnings and revenue that beat Wall Street forecasts on a growing mobile ad business, sending shares surging in late trading. The social media giant reported revenue of $1.81 billion, up 53 percent from $1.18 billion a year earlier. 

• 'Neighbor vs. neighbor' in US cities, Whitney says. Meredith Whitney painted a dire picture in a CNBC interview Wednesday of cities slashing services and communities battling for mere survival. The financial advisor and analyst said the financial woes facing bankrupt Detroit will become common around the country as local governments do whatever they can to escape onerous debt burdens. 

• Overseas wealthy slow purchases of US real estate. Foreign purchases of real estate in the U.S. dropped 17 percent in the 12 months ended in March compared with the same period a year ago, according to the National Association of Realtors. The high end of the market felt the brunt of it. Sales of homes priced at $1 million or more to overseas buyers dropped to about 6.5 percent of sales from 10 percent—the sharpest drop in any price category.

Zero Hedge:

• Hilsenrath Latest: Toss Up Between Summers And Yellen.

• Hoisington: "The Secular Low In Bond Yields Has Yet To Be Recorded". (graphs)

• Japan’s Future: Less Sex, More Shoplifting.

• These Are The 217 People Who Voted To Preserve NSA Surveillance.

• Things That Make You Go Hmmm... Like Fedspeak.

Business Insider:

• Iran Is Increasingly Calling The Shots For Assad In Syria.

LA Times:

• Kaiser's rising premiums spark employer backlash. State bill would force HMO to reveal details on rates, spending. Some of Kaiser's biggest customers are complaining that the company is no longer a bargain and, even worse, standing in the way of controlling healthcare costs. Critics say the company is so entrenched in the workplace that it refuses to negotiate rates or to fully explain why its premiums keep rising.

CBS News:

• CBS News poll finds more Americans than ever want Obamacare repealed. According to the poll, 36 percent of Americans want Congress to expand or keep the health care law while 39 percent want Congress to repeal it - the highest percentage seen in CBS News polls. The poll also found a majority of Americans - 54 percent - disapprove of the health care law, 36 percent of Americans approve of it and 10 percent said they don't know about it.

Market News International:

• Time for China RRR Cut 'Isn't Here Yet:' MNI Cites PBOC Source. Any move to cut banks' reserve requirement ratio is way off, citing a source close to the People's Bank of China. China's foreign exchange position is likely to deteriorate in coming months as the beginning of the Federal Reserve's tapering of its quantitative easing program nears, the report citing people close the the State Administration of Foreign Exchange as saying.

Reuters:

• Is China's debt nightmare a province called Jiangsu? The nightmare scenario for China's leaders as they try to wean the country off a diet of easy credit and breakneck expansion is a local government buckling under the weight of its own debt. Few provinces fit that bill quite like Jiangsu, home to China's most indebted local government. Hefty borrowings through banks, investment trusts and the bond market by Jiangsu's provincial, city and county governments have saddled the province north of Shanghai with debt far higher than its peers, public records show. Many of the province's mainstay industries, including shipbuilding and the manufacturer of solar panels, are drowning in overcapacity. Profits are dwindling, and the government's tax growth is braking hard. That leaves Jiangsu vulnerable as President Xi Jinping and Premier Li Keqiang slow the country's giant economy to push through reforms aimed at reducing its reliance on the massive investment that made the country the factory to the world in favour of more services- and consumption-led growth. As part of that, Beijing has ordered a clamp down on provincial government borrowing and land sales, the mainstay income for many local administrations. But equally, Beijing expects local governments to absorb much of the cost of downsizing many industries, leaving provinces like Jiangsu caught between a rock and a hard place.

• DOJ probes fracking market over antitrust -Baker Hughes(BHI). The Department of Justice is examining potential antitrust issues in the market for pressure pumping services, which are used in hydraulic fracturing, according to Baker Hughes Inc , owner of the third-largest pressure pumping fleet. The market for pressure pumping equipment has been oversupplied for more than a year because a prolonged slump in natural gas prices led to a slowdown in gas-directed drilling. But in 2011, there was an industry-wide push to add capacity in response to a ramp-up in fracking around the country.

• Japan finmin Aso: Need to take steps for fiscal consolidation. Japanese Finance Minister Taro Aso said on Thursday that it is important to take steps to pare down government debt and ensure that the country's public finances are improving. "We need to take steady steps toward fiscal consolidation. We must maintain market confidence in Japan's fiscal sustainability," Aso said at a seminar in Tokyo. Japan's public debt burden is the worst among major countries at more than twice the size of its $5 trillion economy. The government must decide by this autumn whether to raise its sales tax, which is an important first step toward improving public finances. 

• U.S. IRS pursuing 'stateless income' tax enforcement -official. The U.S. Internal Revenue Service is pursuing tax enforcement cases against companies over the issue of "stateless income," a senior agency official said on Wednesday in a reference to corporate profits that are not taxed by any country. Erik Corwin, an IRS deputy chief counsel, said there were international tax disputes with companies, "most involving consequences of complex restructurings designed either to create stateless income or to affect a tax efficient repatriation."

• Louisiana agency sues big oil firms for hurting wetlands. A Louisiana agency sued 97 oil companies - including BP Plc, Exxon Mobil Corp , Chevron Corp and Royal Dutch Shell Plc - in state court on Wednesday for allegedly damaging hundreds of miles of sensitive wetlands by cutting through them with pipelines and transportation canals. Governor Bobby Jindal quickly accused the agency of overreach and said the filing should be withdrawn.

• Visa(V) raises outlook as card spending accelerates. Visa Inc's quarterly profit beat estimates as people spent more using its cards, and the largest credit and debit card network raised its full-year outlook for revenue and earnings. Visa also authorized a $1.5 billion share buyback program, sending its shares up about 3 percent in after-hours trading.

• Akamai(AKAM) earnings beat estimates as more people watch video online. Akamai Technologies Inc, whose products help to move content quickly over the Internet, posted quarterly results ahead of Wall Street estimates as more people turn to the Web to watch movies and TV programs. 

• Western Digital(WDC) profit beats estimates as cloud demand rises. Hard-disk drive maker Western Digital Corp reported a higher-than-expected quarterly profit after sales rose of its cloud and personal storage products.

China Securities Journal:

• China Won't Ease Deposit Rate Limit in 2013, 2014. China won't loosen the deposit rate cap through next year, citing Wu Xiaoling, a former vice governor of the People's Bank of China.

Shanghai Securities News:

• China Steel, Ship Overcapacity Curb Plan Submitted. China's plan to resolve overcapacity in the steel, cement, aluminum and shipping industry has been submitted to the State Council and won't take long for its official release, citing person close to National Development and Reform Commission. China Petroleum and Chemical Industry Federation will be holding meetings to study overcapacity in the petrochemical industry, citing an unidentified researcher from the federation.

The Economic Observer:

• SMEs' Chronic Credit Crunch. With China’s economic slowdown, small- and medium-sized enterprises are facing huge strains in finding the capital they need to stay afloat. Banks are aggressively calling in loans and refusing to issue new loans to these enterprises, leaving them with few places to turn.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.75% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 141.0 +11.5 basis points.

• Asia Pacific Sovereign CDS Index 104.25 +4.75 basis points.

• FTSE-100 futures +.11%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DOW)/.62

• (IP)/.56

• (ASH)/1.83

• (DO)/1.24

• (CRI)/.44

• (BIIB)/1.93

• (PHM)/.30

• (BG)/1.28

• (HSY)/.71

• (LLL)/1.93

• (HOG)/1.17

• (BSX)/.09

• (ESI)/.88

• (CELG)/1.44

• (RCL)/.08

• (STRA)/1.38

• (GM)/.76

• (PCP)/2.90

• (HOT)/.73

• (DHI)/.34

• (CNX)/.16

• (RTN)/1.30

• (ZMH)/1.44

• (CL)/.70

• (UA)/.14

• (ALXN)/.68

• (LUV)/.37

• (MMM)/1.70

• (BMY)/.44

• (CAM)/.78

• (CBG)/.34

• (MCK)/1.71

• (KLAC)/.78

• (CLF)/.59

• (AMZN)/.06

• (CERN)/.34

• (DECK)/-1.06

• (CB)/1.38

• (SBUX)/.53

• (EXPE)/.81

• (NEM)/.42

• (SPF)/.08 

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 340K versus 334K the prior week.

• Continuing Claims are estimated to fall to 3025K versus 3114K prior.

• Durable Goods Orders for June are estimated to rise +1.4% versus a +3.6% gain in May.

• Durables Ex Transports for June are estimated to rise +.5% versus a +.7% gain in May.

• Cap Goods Orders Non-defense Ex Air for June are estimated to rise +.6% versus a +1.1% gain in May.

11:00 am EST

• Kansas City Fed Manf. Activity for July is estimated to rise to 0.0 versus -5.0 in June.

Upcoming Splits

• (BEN) 3-for-1

Other Potential Market Movers

• The UK gdp report, 7Y T-Note auction and the weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity 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 Falling into Final Hour on Rising Global Growth Fears, Rising Long-Term Rates, Earnings Concerns, Homebuilding/Commodity Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Slightly Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.45 +5.45%

• Euro/Yen Carry Return Index 137.94 +.58%

• Emerging Markets Currency Volatility(VXY) 8.95 +2.05%

• S&P 500 Implied Correlation 53.30 +4.51%

• ISE Sentiment Index 88.0 +10.0%

• Total Put/Call .97 +1.04%

• NYSE Arms .85 -12.88% 

Credit Investor Angst:

• North American Investment Grade CDS Index 76.66 +2.20%

• European Financial Sector CDS Index 143.22 -2.40%

• Western Europe Sovereign Debt CDS Index 91.0 -.54%

• Emerging Market CDS Index 293.17 +5.2%

• 2-Year Swap Spread 15.75 -1.75 bps

• TED Spread 24.50 -.5 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -9.25 +.5 bp

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 223.0 +4 bps

• China Import Iron Ore Spot $132.10/Metric Tonne +.15%

• Citi US Economic Surprise Index -7.50 +1.4 points

• Citi Emerging Markets Economic Surprise Index -30.80 -.9 point

• 10-Year TIPS Spread 2.15 -3 bps

Overseas Futures:

• Nikkei Futures: Indicating -16 open in Japan

• DAX Futures: Indicating -23 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some of them

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• Rolls-Royce China Sales Flatline Amid Xi Austerity Drive. Rolls-Royce, the ultra-luxury car brand owned by Bayerische Motoren Werke AG (BMW), expects sales growth to slow in China this year as an austerity push by President Xi Jinping damps luxury demand. Sales volumes in the company’s second-largest market will be little changed from 2012, Paul Harris, Asia-Pacific regional director for the brand, said in Sydney yesterday. By comparison, Rolls-Royce sales rose 16 percent to 998 vehicles last year, according to estimates at research firm LMC Automotive. Slowing growth in China for the maker of the $380,000 Phantom mirrors the slide in demand this year for sorghum liquor, hand-made tea and Bordeaux wines, as economic expansion cools and the country’s new administration acts to curb spending by government officials. More high-end goods such as luxury cars and yachts may be taxed as part of reform plans this year, the China Daily reported in May, citing an official at the top economic planning agency. 

• Aussie May Fall to 3-Year Low, JPMorgan Says: Technical Analysis.

• Brazil Unemployment Rate Jumps More Than Expected to 6%. Brazil’s unemployment rate rose in June to the highest since April 2012, signaling a weakening labor market after five quarters of below-forecast economic growth in Latin America’s biggest economy. The jobless rate jumped to 6 percent last month from 5.8 percent in May, according to a report today on the National Statistics agency’s website. That was higher than expected by all but 1 of 27 economists surveyed by Bloomberg, whose median forecast was for a 5.8 percent rate. The rate also rose from 5.9 percent the year before, the first rise in June since 2009. 

• Brazil Rues Rousseff Growth at 24-Year Low Amid Lula Pleas. The return to power of Luiz Inacio Lula da Silva, the mentor and predecessor of Brazil President Dilma Rousseff, is gaining traction among her supporters as her party faces a 2014 election having delivered the slowest average growth in 24 years. Rousseff’s poll approval ratings have plummeted to the lowest of her term, and since mid-June she was showered with boos at a sold-out soccer game and by dozens of mayors at a public event. More than 1 million Brazilians took to the streets as the cost of living soars and economic growth forecasts drop. Protests escalated from anger over bus fare increases to discontent over corruption, the quality of public services and government spending priorities. 

• Brazil Real Falls as China Factory Decline Dims Export Outlook. The currency fell for the first time in three days, depreciating 0.8 percent to 2.2316 per dollar at 10:24 a.m. in Sao Paulo. Swap rates due in January climbed one basis point, or 0.01 percentage point, to 8.75 percent, reversing declines.

• Spanish Pension Raids Spell Bad News for Bond Sales: Euro Credit. Spain’s Treasury may find one of its best customers less eager to buy its bonds as budget woes lead Prime Minister Mariano Rajoy to raid a government piggy-bank for a second year. Created in 2000 to guarantee pension payments in times of hardship, the 59.3 billion-euro ($78 billion) Fondo de Reserva was tapped for the first time in December for 7 billion euros to fund Christmas bonuses and a monthly increase for retirees. Further withdrawals will have taken an additional 4.5 billion euros by the end of this month, helping to pay for pensioners’ summer bonuses and tax refunds. “The fund isn’t in a position to accumulate assets anymore, it may even have to sell,” said Jose Antonio Herce, a partner at consultancy firm Analistas Financieros Internacionales in Madrid. “There are more and more pensions to pay and less and less money coming into the Social Security, the fund will melt quickly now that we’ve started taking money out of it.” 

• EU Attacks MasterCard’s(MA) ‘Mad Campaign’ to Derail Card-Fee Curbs. MasterCard Inc. (MA:US) waged a “mad campaign” to derail caps on card fees, the European Union’s financial services commissioner said today as he unveiled plans to slash charges by 6 billion euros ($8 billion) a year. Michel Barnier said MasterCard used misleading information in its lobbying against proposals to cap interchange fees at 0.2 percent for debit card payments and 0.3 percent for credit cards. The limits target card systems also operated by Visa Europe Ltd. where banks charge each other interchange fees, or swipe fees, for handling payments. 

• Europe Stocks Rise on Earnings, Euro-Area Manufacturing. European stocks rose to an almost eight-week high as data signaled Germany is leading a revival in euro-area manufacturing and companies posted results that exceeded estimates.Volvo AB (VOLVB) advanced the most in 10 months after the world’s second-largest truckmaker reported second-quarter earnings that beat forecasts. EasyJet climbed 3.7 percent after saying quarterly sales rose 11 percent on higher capacity utilization and revenue per seat. Syngenta (SYNN) AG fell 4 percent after posting first-half profit and revenue that trailed forecasts. The Stoxx Europe 600 Index added 0.6 percent to 301.1 in London, the highest close since May 30. 

• Treasuries Extend Decline on Weaker-Than-Average 5-Year Auction. Treasuries extended a two-day decline after the U.S. sale of $35 billion in five-year notes was met with weaker than-average demand amid speculation the Federal Reserve will reduce its bond purchases this year. The debt’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.46, down from an average of 2.8 for the past 10 sales. The sale follows lower than demand at yesterday’s $35 billion auction of two-year notes. The U.S. will sell $39 billion in seven-year notes tomorrow.

• Americans Gambling on Rates With Most ARMs Since 2008. In the second year of the U.S. housing recovery, the loans that helped trigger the housing bust are making a comeback. Applications in late June rose to the highest level since 2008 after the Federal Reserve sent fixed rates surging by signaling it may curtail bond buying credited with pushing borrowing costs to the cheapest on record.

• Caterpillar(CAT) Cuts Forecast as Mining Equipment Demand Drops. Caterpillar Inc. (CAT) cut its earnings forecast and posted profit that trailed analysts’ estimates for a third straight quarter as mining-equipment sales declined on slower commodity demand from emerging markets. Earnings in 2013 will be about $6.50 a share on sales of $56 billion to $58 billion, the Peoria, Illinois-based company said today in a statement. That’s lower than analysts’ estimates and down from the company’s April projection of about $7 a share on revenue of $57 billion to $61 billion.

• WTI Falls on U.S. Crude Output Gain, China Manufacturing. WTI oil for September delivery slipped $1.89, or 1.8 percent, to $105.34 a barrel at 11:57 a.m. on the New York Mercantile Exchange. The contract traded at $106.40 before the release of the EIA report at 10:30 a.m. in Washington. The volume of all futures traded was 18 percent less than the 100-day average for the time of day.

Wall Street Journal:

• New York Probes Bloomberg Reporters' Access to Information. New York Attorney General Eric Schneiderman's office is looking into how much access Bloomberg LP news reporters may have had to information about the media and technology company's customers, said people familiar with the inquiries. Officials in the New York Attorney General's investor protection unit in recent weeks have queried Bloomberg about reporters' knowledge of terminal subscribers' activities, said the people. The Attorney General's office has not opened a formal investigation into the Bloomberg practices, said one of the people familiar with the probe.

• Meet William Wilkins. Will the IRS scandal implicate the White House?  Let's hope so.

MarketWatch:

• Ignore the hype, earnings stink. Commentary: Cause for concern in the ugly reports.

CNBC:

• Yet another market bear throws in the growl.

Zero Hedge: 

• Chart Of The Day: New Homes Suffer Biggest Two-Month Price Drop Since Lehman, Second Highest Ever.

• New Home Sales Rise As Average, Median Home Prices Drop To 2012 Levels. (graph)

• What Keeps Mario Draghi Up At Night, And Why The European Depression Has A Ways To Go. (graph)

• About That PMI: Unemployed French Rise To New Record. (graph)

• Obama Approval Tests Record Low; Majority Of Americans Would Vote Out Entire Congress. (graph)

Business Insider: 

• Google(GOOG) Just Wowed Everyone With Its New TV Dongle That Lets You Beam Videos From Your Smartphone.

• Why Iraq Is On The Brink Of Civil War.

• These Countries Will Get Slammed If China Lands Hard.

• George Zimmermann Inundated With Death Threats After George Zimmerman Verdict. 

• Here's What Will Happen If China's Economy Lands Hard.

New York Times:

• Asian Economies Encounter Stiff Winds. “The music has stopped playing,” said Frederic Neumann, a co-head of Asian economics at HSBC, which on July 9 slashed its growth forecasts for Asia, outside of Japan, to 6.1 percent for this year and 6.5 percent next year. The bank had projected 7.2 percent growth for both years.

CNN:

• Borrowers in Obama housing program re-defaulting, watchdog says. Borrowers who received help through the government's main foreclosure prevention program are re-defaulting on their mortgages at alarming rates, a federal watchdog said in a report released Wednesday. Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago. Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.

Value Walk: 

• China Hard Landing: Potential Catalysts for a Complete Collapse.

Real Clear Politics:

• Detroit: Model City for Big Government.

Reuters:

• UN lowers 2013 Latam growth forecast on Brazil, Mexico.

• EU finance arm curbs loans to coal-fired power plants. The European Investment Bank, the EU's finance arm, said it would stop lending to most coal-fired power stations to help the 28-nation bloc reduce pollution and meet climate targets, a move that may put pressure on other lenders. 

• Credit market suggests European bank shares vulnerable on earnings. European bank shares driven higher by strong earnings from U.S. lenders may be set for a fall as their own results season begins, with credit markets reflecting wariness about risks glossed over by equity investors. Forecast-beating earnings from Bank of America and Citigroup lifted shares in European banks last week. However, the market for insurance against banks defaulting on their loans shows more caution over the European sector, which is still struggling with bad debts in the euro zone periphery and regulatory costs. Thomson Reuters StarMine data shows the second-quarter earnings season is set to disappoint, relative to that in the United States. Early reports have not seen much of a bounce in the shares of those European banks that beat expectations. "The credit is a lot more cautious than equity... and European financials are a major culprit from the equity standpoint: they're running ahead of the underlying risks," Chris Parkinson, head of research at Christopher Street Capital, part of GFI Group, said.

AP:

• LG's profit falls on weak TV demand, handset costs. LG Electronics' latest quarterly report underlined challenges facing global electronics makers as weak TV demand and stiffer competition in smartphones undermine profit. The results Wednesday showed an 8 percent decline in April-June net profit to 155.5 billion won ($140 million) even as LG's revenue rose 10 percent from a year earlier to 15.2 trillion won ($13.6 billion). Operating profit fell 9 percent from a year earlier to 479 billion won.

Financial Times:

• Market turbulence revives fears over ETF structural issues. Falling equity markets have resulted in the highest level of failed trades in the $2tn exchange-traded fund (ETF) market for nearly two years – reviving a debate about the structure and liquidity of the popular investment vehicles in times of volatility. The total value of settlement failures for 30 of the biggest ETFs surged to $3.96bn on June 26, according to an analysis of data from the US securities regulator, carried out by the Basis Point Group.

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


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Repubblica:

• IMF Italy Chief Says Credit Crunch EU's Key Problem. EU banking union project needs to go forward quickly, Andrea Montanino, executive director of the IMF in Italy said in an interview. Banks' loans to companies and families need to be looked at and if needed banks should boost capital. The ECB should cut rates further to help recovery.

Xinhua:

• China to Crack Down on Arbitrary School Charges. Ministry of Education bans local govts, institutions, schools to charge for school admissions, bars illegal recruitment, citing guideline jointly released by finance, education ministries, NDRC, audit office, broadcasting & publication regulator.

• China Caps Number of Singing-Competition TV Shows. State General Administration of Press, Publication, Radio, Film & TV tells satellite broadcasters to stop investing in any new singing competition shows, citing news release. Regulator seeks to prevent homogeneous TV schedules. Broadcasters must be "thrifty" with program production, avoid ostentation in line with govt's frugality campaign.