Monday, August 26, 2013

Monday Watch

Weekend Headlines 
Bloomberg: 
  • U.S. Says Syria Used Chemical Arms as UN Plans Inspection. The Obama administration has concluded Syrian President Bashar al-Assad’s regime probably used chemical weaponry against civilians, calling an agreement today to let United Nations inspectors review the area not credible. Syria and the UN agreed to the inspection of the Ghouta area outside Damascus starting tomorrow, a UN spokesman said in a statement today. The agreement five days after the purported attack is too late because constant shelling of the area could have corrupted or destroyed evidence, according to a senior U.S. administration official in an e-mailed statement.
  • Egypt’s Brotherhood Leaders Go on Trial for July Violence. The trial of the supreme guide of Egypt’s Muslim Brotherhood and two of his deputies on charges of inciting violence started in their absence as the Islamist group faces its toughest crackdown in over three decades. In a separate case, former ruler Hosni Mubarak appeared in the court to answer charges relating to his alleged role in the death of protesters in 2011, when a mass uprising led to his ouster and opened the door for the Brotherhood’s rise to power and subsequent fall with the deposing of President Mohamed Mursi. The start of criminal proceedings against Mohammed Badie, the Brotherhood’s top leader, along with Khairat el-Shater and Rashed Bayoumi, comes days after Mubarak was released from prison under a court order and moved to house arrest. It marked part of the military-backed government’s attempt to quash the Islamist organization and stabilize the country after clashes left nearly 1,000 people dead since Mursi’s July 3 ouster
  • Japan to Decide on Sales-Tax Increase by Early Oct., Amari Says. Japanese Prime Minister Shinzo Abe will make a decision on a sales-tax increase by early October, before a gathering of Asia-Pacific leaders in Indonesia, according to Economy Minister Akira Amari. Abe will decide “at the latest” before a summit of leaders from the Asia-Pacific Economic Cooperation forum, which starts in Indonesia on Oct. 7, Amari said yesterday on NHK television.
  • Emerging-Market Currencies Fall to Lowest Since 2010 on Fed. India’s rupee led declines among the currencies of the biggest emerging-market economies as the Federal Reserve signaled a reduction in stimulus is still on track, spurring a wave of cash to flow back into larger nations. The Bloomberg U.S. Dollar Index rose for a second week and touched its highest level since Aug. 2. An equally weighted basket of currencies of Brazil, Russia, India, China and South Africa touched its lowest level versus the dollar since June 2010 on concern a paring of stimulus under the Fed’s quantitative-easing strategy would intensify outflows from the currencies. The Commerce Department may report Aug. 30 that U.S. consumer spending increased 0.3 percent in July. 
  • Bank Profits to Fall Below 5-Year Low on Rupee: Corporate India. Indian banks’ profitability, already at the lowest since 2009, is poised to decline further after measures to stem the rupee’s record slump drove up borrowing costs and exacerbated rising bad loans and slowing loan growth. Return on equity, which measures profit generated with shareholders’ funds, may fall below 10 percent in the year to March for banks from last year’s 12.8 percent, said Vibha Batra, co-head of financial-sector ratings in New Delhi at a unit of Moody’s Investors Service. Stressed assets are approaching levels last seen in 2002, she said on Aug. 21.
  • Freedom on Rates Sparks Worst Bond Drop Since 2010: China Credit. Speculation that China will give banks the freedom to set deposit rates is combining with a cash crunch to spark the worst monthly slump in benchmark sovereign bonds in almost three years. The rate on government notes due 2023 jumped 27 basis points this month to 399% on Aug. 23, the most since November 2010, ChinaBond data show. That has widened their rate advantage to 110 basis points over similar-maturity U.S. treasuries from as low as 78 basis points on July 5.
  • China Construction Bank Profit Growth Slows on Rising Bad Loans. China Construction Bank Corp. (939), the nation’s second-largest lender, posted the smallest profit increase in five quarters, weighed down by rising bad-loan charges as the economy slowed. Net income in the second quarter climbed 9.7 percent to 60.1 billion yuan ($9.82 billion) from 54.8 billion yuan a year earlier, based on figures published by the Beijing-based lender yesterday. That compared with the 58.2 billion yuan median estimate of 11 analysts surveyed by Bloomberg. The earnings reflect how Chinese banks are grappling with rising defaults and weak lending demand as the world’s second-largest economy heads for the slowest pace of expansion in 23 years.
  • BYD Predicts Smaller Third-Quarter Profit on Weak Sales. BYD Co. (1211), the Chinese automaker that counts Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) as a shareholder, predicted the smallest quarterly profit in a year on weaker vehicle sales and mobile phone orders. Net income for the July-to-September quarter may be 3 million ($490,000) to 50 million yuan, according to Bloomberg calculations subtracting the company’s six-month figures from its nine-month projection. A profit at the low end of the forecast would give the Shenzhen, China-based automaker its smallest three-month profit since a loss in the second quarter last year, according to data compiled by Bloomberg. 
  • China Growth Can Sink Closer to 6% on Waning Job Needs: Economy. Chinese officials shifting the economy away from exports and investment can allow growth to sink closer to 6 percent within the next five years without triggering a destabilizing jump in unemployment. The pace of expansion needed to absorb new entrants to the labor force will slip to 6.4 percent in 2018 from 7.3 percent this year, according to the median forecast in a Bloomberg News survey of 12 economists last month.
  • Asian Stocks Rise as U.S. Housing Data Eases Fed Concerns. Asian stocks rose for a second day after a slump in U.S. home sales eased speculation the Federal Reserve will reduce economic stimulus next month. Belle International Holdings Ltd., a retailer of woman’s footwear, advanced 6.9 percent in Hong Kong after reporting first half-net income. Newcrest Mining Ltd. jumped 6.9 percent, leading a surge in Australian gold producers after the price of the precious metal rose above $1,400 an ounce last week. Tokyo Electric Power Co. slumped 7.7 percent in Tokyo after eight tons of filtered water leaked at its crippled Fukushima Dai-Ichi nuclear power plant. The MSCI Asia Pacific Index advanced 0.3 percent to 131.77 as of 12:26 p.m. in Tokyo, with all of the 10 industry groups on the gauge rising
  • Rebar Near 4-Month High on Speculation China to Cut Steel Output. Steel reinforcement-bar futures in Shanghai extended a fourth weekly gain to trade near the highest level in four months on speculation China’s drive to reduce air pollution will cut steel output. Rebar for January delivery gained as much as 0.8 percent to 3,848 yuan ($629) a metric ton, the same level as the high on Aug. 14 which was the highest since April, and was 3,824 yuan at 10:33 a.m. local time. The contract rose 0.2 percent last week.
  • Hedge Fund Gold Bets Reach Six-Month High After Rally. Hedge funds and other speculators raised bets on higher gold prices to the most in six months as signs of slowing U.S. growth drove bullion above $1,400 an ounce for the first time since June. The net-long position increased 29 percent to 73,216 futures and options by Aug. 20, U.S. Commodity Futures Trading Commission data show. Short contracts fell for a second week and to the lowest since Feb. 12. Net-bullish holdings across 18 U.S.-traded commodities jumped 34 percent, the most since July 2010, as wagers on copper and soybeans more than doubled
  • ECB Council Members Split in Jackson Hole Over Room for Rate Cut. European Central Bank Governing Council members split over whether scope remains for further interest-rate cuts as evidence mounts that the euro-area economy is on the mend. Policy makers still can’t rule out lowering the benchmark rate from the record low of 0.5 percent, Bank of Cyprus Governor Panicos Demetriades said in an Aug. 24 interview. By contrast, Bank of Austria Governor Ewald Nowotny said on Aug. 22 that he doesn’t see “many arguments now for a rate cut” after the recent “stream of good news.”
  • Merkel Says G20 Needs to Push Harder to Control Hedge Fund Risks. German Chancellor Angela Merkel told voters at an election rally that she’ll push for greater regulation of hedge funds at next month’s Group of Twenty meeting. Addressing a crowd of about 2,000 in the Rhine city of Bonn, Merkel said she hoped European members of the G20 would “speak with one voice” at a meeting in St. Petersburg, amid slow progress on tightening controls on hedge funds. “It’s not enough to regulate just banks but not hedge funds and shadow banks and I’ll fight for that,” she said. 
  • Germany Must Pay for Euro, Merkel Challenger Steinbrueck Says. Chancellor Angela Merkel’s challenger in next month’s election said Germany will again have to pay the bill to save the euro and that the chancellor has failed to alert voters about a looming third Greek rescue. Social Democrat Peer Steinbrueck said Merkel should have been up front about the cost of rescuing the euro area since 2010, when the first bailout package was set up. Greece will “most likely” need new funds, Finance Minister Wolfgang Schaeuble said, adding that the amount will be “much lower” than previous packages and won’t be determined until next year.
  • Demetriades Says Cannot ‘Rule Out’ Another ECB Interest Rate Cut. European Central Bank Governing Council Member Panicos Demetriades said policy makers can’t “rule out” lowering their key interest rate to a new record low even amid signs the euro-area economy is improving. “That option is still on the cards,” Demetriades said of a rate cut in an interview today in Jackson Hole, Wyoming. “We cannot rule out that possibility although one has to take a look at the new data. That data is more encouraging.” 
  • Multiples Expanding Fastest Since Dot-Com Bubble as Rally Ages. Price gains of stocks in the Standard & Poor’s 500 Index (SPX) are outpacing profits by the fastest rate in 14 years as the bull market extends beyond the average length of rallies since Harry S. Truman was president. The benchmark gauge for U.S. equities has risen 14 percent relative to income over the past 12 months to 16 times earnings, according to data compiled by Bloomberg. Valuations last climbed this fast in the final year of the 1990s technology bubble, just before the index began a 49 percent tumble. The rally that started in March 2009 has now outlasted the average gain since 1946, the data show.
  • Leveraged Debt Exceeds $2 Trillion in Repression: Credit Markets. It took three decades for the amount of speculative-grade debt to reach $1 trillion. It took about seven years to reach $2 trillion as investors sought relief from the financial repression brought on by near-zero interest rates. The market for dollar-denominated junk-rated debt has expanded more than 800% since the end of 1997 from $243 billion, according to Morgan Stanley. That compares with a quadrupling of the investment-grade market to $4.2 trillion as tracked by the Bank of America Merrill Lynch U.S. Corporate Index.
  • Fed Officials Rebuff Coordination Calls as Stimulus Taper Looms. Federal Reserve officials rebuffed international calls to take the threat of fallout in emerging markets into account when tapering U.S. monetary stimulus. The risk that the Fed’s trimming of bond buying will hurt economies from India to Turkey by sparking an exodus of cash and higher borrowing costs was a dominant theme at the annual meeting of central bankers and economists in Jackson Hole, Wyoming, that ended Aug. 24. An index of emerging-market stocks last week fell 2.7 percent, the steepest in two months, compared with a 0.5 percent gain in the Standard & Poor’s 500 Index. 
Wall Street Journal:
  • Nasdaq Focuses on Pivotal 2 Minutes in Trading Halt. The Period Foretold Just How Severe the Market's Problems Were About to Get. Regulators and exchange officials trying to unravel the cause of last week's Nasdaq Stock Market NDAQ +1.21% failure are focusing on an apparently pivotal two-minute period that foretold just how severe the market's problems were about to get, according to people familiar with the discussions. The period between 10:53 a.m. and 10:55 a.m. in New York on Thursday appears to have been crucial to signaling the coming impact of a connection problem between Nasdaq OMX Group Inc.'s systems and rival electronic market NYSE NYX -0.07% Arca, the people said.
  • Pipeline-Capacity Squeeze Reroutes Crude Oil. More U.S. oil is moving via truck, barge and train than at any point since 1981. More crude oil is moving around the U.S. on trucks, barges and trains than at any point since the government began keeping records in 1981, as the energy industry devises ways to get around a pipeline-capacity shortage to take petroleum from new wells to refineries. The improvised approach is creating opportunities for transportation companies even as it strains roads and regulators. And it is a precursor to what may be a larger change: the construction of more than $40 billion in oil pipelines now under way or planned for the next few years, according to energy adviser Wood Mackenzie.
  • Stagnant Wages Are Crimping Economic Growth. Employers Seem Wary to Raise Pay. Americans are spending enough to keep the economy rolling, but don't expect them to splurge unless their paychecks start to grow. Four years into the economic recovery, U.S. workers' pay still isn't even keeping up with inflation. The average hourly pay for a nongovernment, non-supervisory worker, adjusted for price increases, declined to $8.77 last month from $8.85 at the end of the recession in June 2009, Labor Department data show. Stagnant wages erode the spending power of consumers. That means it is harder for them to make purchases ranging from refrigerators to restaurant meals that account for most of the nation's economic growth.
Marketwatch.com: 
Fox News:
  • Cruz presses ahead with defunding ObamaCare, says it will take a 'tsunami' of support. The race to stop ObamaCare before Americans can officially sign up this fall for the government-backed health insurance intensified Sunday with two of the movement’s biggest champions confident they will succeed but acknowledging it will take a “tsunami” of support. Texas Republican Sen. Ted Cruz, a Tea Party-backed lawmaker at the center of the effort to “defund” ObamaCare, said the fight will play out in the weeks before the Oct. 1 signup date and that success will require a grass-roots effort in which Americans across the country must “demand” their elected officials “do the right thing.” “This fight is likely to heat up in the month of September,” Cruz told CNN’s “State of the Union." “That's going to be when the battle is engaged.”
  • Muslim Brotherhood's bid to scapegoat Christians failing, say Egyptians. As their nation descends into violent chaos, Egyptians are increasingly blaming the Muslim Brotherhood, despite attempts by the Islamist group to scapegoat Christians and the military, according to several sources who spoke to FoxNews.com from Cairo. “The Muslim Brotherhood has lost all sympathy with their points due to their violence,” said a Long Island, N.Y., Egyptian-American, who is in a Cairo suburb for a family wedding.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
  • Tropical Storm Fernand forms in Gulf of Mexico, oil ports open. A tropical depression strengthened into tropical storm Fernand on Sunday in the Gulf of Mexico, the U.S. National Hurricane Center said, though the country's main oil exporting ports remained open according to the latest official report. The oil ports of Cayo Arcas, Coatzacoalcos and Dos Bocas were operating normally, officials said on Sunday afternoon. However, Mexican authorities closed the eastern port of Veracruz. 
  • Insight: Zombie borrowers haunt China's shadow banks. Call it the new China Syndrome: Although Asia's biggest economy is slowing down markedly, credit continues to surge. Dead-end projects and dying industries are sucking up an ever-larger portion of new credit, while more productive borrowers are starved for funds. Nowhere is this more evident than in China's shadow banking sector, the non-bank financiers that have pumped credit into the economy at a spectacular rate. Trust companies - firms that sell investment products to Chinese savers and use the proceeds to make loans or buy other types of assets - have posted the fastest growth. A Reuters examination of proprietary data shows that as little as half of trust loans issued in 2012 were used to finance current economic activity, such as a new investment project or increased production at an existing factory. The other half may have been used for refinancing old debt that funded past projects but is no longer contributing to economic growth. The finding offers a possible explanation for the growing disconnect between lending and growth in China. Many analysts have expressed concern that the so-called "credit intensity" of Chinese growth is increasing. Ever more borrowing is required to produce the same amount of economic output. But no one is sure why. Rising credit intensity is exacerbating the huge buildup of debt in China's financial system since Beijing launched its credit-fueled 4 trillion yuan ($650billion) stimulus plan in 2008.
Financial Times:
Focus:
  • Merkel Warns Against Debt Cut for Greece. Angela Merkel says debt cut for Greece could trigger a "domino effect" that would unsettle investors, according to an interview with the German chancellor. 
Handelsblatt:
  • Weidmann Says It's Wrong to Think Crisis Ending. European Central Bank Governing Council member Jens Weidmann said debate over Greek debt cut shows euro crisis not over, according to an interview. Greece must not have more debt write-offs, he said. Draghi's statement that ECB will do everything to rescue euro helped calm markets, but calm is "deceptive", he said.  ECB will soon begin to examine European banks' books, conduct stress tests. Stress tests may show some banks need more capital.
WirtschaftsWoche:
  • Germany's Schaeuble Rejects Euro Bonds. Schaeuble rejects introduction of euro bonds or any other form of liability of the European Union, he said in an interview. Joint liability leads to "false incentives" and "weakening of reform efforts," citing him.
Euro am Sonntag:
  • Pimco Sees No Progress on Common Fiscal Policy. Politicians aren't making "real progress" on a banking union or a common fiscal policy, Andrew Balls, head of European portfolio management at Pimco, said in an interview. European politicians don't have "real growth strategy", Balls said. Pimco is "underweight" in Italian, Spanish bonds as growth will remain weak in the next 3-5 years in those countries. The EU crisis isn't over yet, he said. Pimco doesn't expect German government to change its fundamental positions after the elections.
To Vima:
  • Greece Must Not Undo Its Achievements, Asmussen Says. Greece leaders must preserve their success in dealing with the country's debt crisis, citing Joerg Asmussen, ECB executive board member. While he understands political situation in Greece, Asmussen says there's no alternative solution to the loan agreement with the so-called troika of the ECB, IMF, European Commission.
Proto Thema:
  • Greece May Need EU10B in Aid, Stournaras. Such aid would be economic support package without need for another loan agreement, Finance Minister Yannis Stournaras is cited as saying in an interview.
Asahi:
  • Japan Sales Tax Hike Support Rate Rises to 43% in August. 43% of people surveyed in August said sales tax should be raised as scheduled, 13 points higher than the support rate in July, according to a poll conducted Aug. 24-25. Disapproval rating for the sales tax policy falls 9 points to 49%.
Financial News:
  • PBOC Reverse Repos Doesn't Mean Easing. Injections into the money supply by the Chinese central bank with reverse repurchase operations doesn't indicate a monetary policy easing, according to a commentary written by Xu Shaofeng. A cut in banks' reserve requirement ratio wouldn't be good for economic restructuring, the commentary said.
Weekend Recommendations
Barron's:
  • Bullish commentary on (TTWO), (MSFT) and (BTU).
Night Trading
  • Asian indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 160.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 128.25 -3.25 basis points.
  • FTSE-100 futures n/a.
  • S&P 500 futures +.27%.
  • NASDAQ 100 futures +.27%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • None of note
Economic Releases
8:30 am EST
  • Durable Goods Orders for July are estimated to fall -4.0% versus a +4.2% gain in June.
  • Durables Ex Transports for July are estimated to rise +.5% versus unch. in June.
  • Cap Goods Orders Non-defense Ex Air for July are estimated to rise +.5% versus a +.7% gain in June.
10:30 am EST
  • Dallas Fed Manufacturing Activity for August is estimated to fall to 3.9 versus 4,4 in July.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German import/export data and the (VMW) financial analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the week.

Sunday, August 25, 2013

Weekly Outlook


U.S. Week Ahead by MarketWatch (audio)

Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as increasing Mideast unrest, rising energy prices and more emerging markets debt angst offsets stable long-term rates, short-covering and diminishing fed "taper" worries. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.

Friday, August 23, 2013

Market Week in Review

  • S&P 500 2,096.99 +2.02%*
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The Weekly Wrap by Briefing.com.


*5-Day Change

Weekly Scoreboard*

Indices
  • S&P 500 1,663.50 +.46%
  • DJIA 15,010.50 -.47%
  • NASDAQ 3,657.79 +1.53%
  • Russell 2000 1,038.24 +1.36%
  • S&P 500 High Beta 26.41 +.67%
  • Value Line Geometric(broad market) 440.72 +.82%
  • Russell 1000 Growth 764.98 +1.09%
  • Russell 1000 Value 846.77 +.12%
  • Morgan Stanley Consumer 1,011.99 -.18%
  • Morgan Stanley Cyclical 1,256.53 -.39%
  • Morgan Stanley Technology 786.79 -.11%
  • Transports 6,479.85 +1.66%
  • Utilities 482.94 +.26%
  • Bloomberg European Bank/Financial Services 100.32 -2.27%
  • MSCI Emerging Markets 38.66 -2.26%
  • HFRX Equity Hedge 1,112.62 -.93%
  • HFRX Equity Market Neutral 937.07 -.09%
Sentiment/Internals
  • NYSE Cumulative A/D Line 186,993 +.81%
  • Bloomberg New Highs-Lows Index 15 +280
  • Bloomberg Crude Oil % Bulls 21.21 -32.52%
  • CFTC Oil Net Speculative Position 345,377 -1.45%
  • CFTC Oil Total Open Interest 1,835,367 -5.12%
  • Total Put/Call .79 -13.19%
  • OEX Put/Call 4.37 +157.06%
  • ISE Sentiment 108.0 +38.46%
  • NYSE Arms .91 -17.27%
  • Volatility(VIX) 13.98 -2.71%
  • S&P 500 Implied Correlation 48.72 -3.41%
  • G7 Currency Volatility (VXY) 9.75 +5.29%
  • Emerging Markets Currency Volatility (EM-VXY) 10.72 +11.20%
  • Smart Money Flow Index 11,303.65 -1.31%
  • Money Mkt Mutual Fund Assets $2.638 Trillion +.59%
  • AAII % Bulls 29.0- 16.1%
  • AAII % Bears 42.9 +52.2%
Futures Spot Prices
  • CRB Index 290.79 -.58%
  • Crude Oil 106.42 -1.17%
  • Reformulated Gasoline 300.72 +1.38%
  • Natural Gas 3.49 +3.35%
  • Heating Oil 309.50 +.14%
  • Gold 1,395.60 +1.46%
  • Bloomberg Base Metals Index 194.49 -1.04%
  • Copper 334.85 -.36%
  • US No. 1 Heavy Melt Scrap Steel 338.53 USD/Ton unch.
  • China Iron Ore Spot 138.60 USD/Ton +.51%
  • Lumber 313.50 -1.63%
  • UBS-Bloomberg Agriculture 1,418.38 +.48%
Economy
  • ECRI Weekly Leading Economic Index Growth Rate 4.5% -20 basis points
  • Philly Fed ADS Real-Time Business Conditions Index -.1302 +1.14%
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 117.72 +.17%
  • Citi US Economic Surprise Index 28.50 -8.1 points
  • Citi Emerging Markets Economic Surprise Index -24.60 +4.9 points
  • Fed Fund Futures imply 42.0% chance of no change, 58.0% chance of 25 basis point cut on 9/18
  • US Dollar Index 81.36 +.08%
  • Euro/Yen Carry Return Index 137.68 +1.58%
  • Yield Curve 244.0 -4 basis points
  • 10-Year US Treasury Yield 2.81% -2 basis points
  • Federal Reserve's Balance Sheet $3.603 Trillion -.02%
  • U.S. Sovereign Debt Credit Default Swap 22.27 +1.73%
  • Illinois Municipal Debt Credit Default Swap 179.0 +3.82%
  • Western Europe Sovereign Debt Credit Default Swap Index 85.50 +3.91%
  • Asia Pacific Sovereign Debt Credit Default Swap Index 128.32 +12.86%
  • Emerging Markets Sovereign Debt CDS Index 245.50 +2.38%
  • Israel Sovereign Debt Credit Default Swap 132.0 +7.76%
  • Egypt Sovereign Debt Credit Default Swap 785.0 -3.1%
  • China Blended Corporate Spread Index 385.0 +2 basis points
  • 10-Year TIPS Spread 2.14% -3 basis points
  • TED Spread 23.75 +1 basis point
  • 2-Year Swap Spread 19.5 +.75 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.25 basis point
  • N. America Investment Grade Credit Default Swap Index 79.65 -.47%
  • European Financial Sector Credit Default Swap Index 140.57 +.81%
  • Emerging Markets Credit Default Swap Index 322.01 +1.10%
  • CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 105.0 unch.
  • M1 Money Supply $2.539 Trillion -1.31%
  • Commercial Paper Outstanding 1,020.40 +1.70%
  • 4-Week Moving Average of Jobless Claims 330,500 -1,500
  • Continuing Claims Unemployment Rate 2.3% unch.
  • Average 30-Year Mortgage Rate 4.58% +18 basis points
  • Weekly Mortgage Applications 450.40 -4.56%
  • Bloomberg Consumer Comfort -28.80 -2.2 points
  • Weekly Retail Sales +3.60% -10 basis points
  • Nationwide Gas $3.54/gallon unch.
  • Baltic Dry Index 1,165 +5.72%
  • China (Export) Containerized Freight Index 1,133.04 +.09%
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 20.0 unch.
  • Rail Freight Carloads 256,458 -.59%
Best Performing Style
  • Small-Cap Growth +1.6%
Worst Performing Style
  • Large-Cap Value +.1%
Leading Sectors
  • Software +3.3%
  • Biotech +2.8%
  • Gaming +2.4%
  • REITs +2.3%
  • Gold & Silver +1.9%
Lagging Sectors
  • Agriculture -.6% 
  • Construction -.9%
  • Networking -.9%
  • Computer Hardware -1.2%
  • Homebuilders -1.5%
Weekly High-Volume Stock Gainers (13)
  • NTSC, INCY, TUES, RNET, TASR, CTRN, BBY, AMWD, RRGB, P, DMND, AZPN and URBN
Weekly High-Volume Stock Losers (8)
  • Z, EPAY, CODE, DKS, SPLS, CIE, BKS and ANF
Weekly Charts
ETFs
Stocks
*5-Day Change

Stocks Higher into Final Hour on Falling Long-Term Rates, Less Emerging Markets Debt Angst, Short-Covering, Commodity/Tech Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: About Even
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 14.25 -3.47%
  • Euro/Yen Carry Return Index 137.69 +.18%
  • Emerging Markets Currency Volatility(VXY) 10.73 -2.63%
  • S&P 500 Implied Correlation 49.27 -1.26%
  • ISE Sentiment Index 108.0 +17.39%
  • Total Put/Call .78 -2.50%
  • NYSE Arms .90 -4.84% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 79.12 -1.83%
  • European Financial Sector CDS Index 140.57 -2.41%
  • Western Europe Sovereign Debt CDS Index 85.50 unch.
  • Emerging Market CDS Index 322.66 -1.67%
  • 2-Year Swap Spread 19.50 +.5 bp
  • TED Spread 24.25 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -9.5 +.25 bp
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 244.0 -6 bps
  • China Import Iron Ore Spot $138.60/Metric Tonne +.65%
  • Citi US Economic Surprise Index 28.50 -5.8 points
  • Citi Emerging Markets Economic Surprise Index -24.60 +1.8 points
  • 10-Year TIPS Spread 2.14 +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +65 open in Japan
  • DAX Futures: Indicating -1 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my biotech/retail sector longs and emerging markets shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg
  • Blasts Hit Sunni Mosques in Lebanon, Killing at Least 29. Explosions near two Sunni Muslim mosques in Lebanon’s northern city of Tripoli during Friday prayers killed at least 29 people and wounded more than 500, the official National News Agency said. One blast targeted Al Taqwa Mosque where radical Sunni cleric Sheikh Salem al-Rafei leads prayers. He wasn’t harmed, NNA said. The second hit near the entrance of the Salam mosque, not far from the house of caretaker Prime Minister Najib Miqati, who wasn’t in Tripoli at the time, according to NNA.
  • UN Says One-Millionth Child Refugee Flees Syrian Conflict. The number of children among refugees who have fled Syria’s civil war has reached 1 million, the United Nations said today. An additional 2 million children inside Syria have been forced from their homes by fighting between President Bashar al-Assad’s troops and rebel forces, according to a statement from the United Nations Children’s Fund, known as Unicef, and the UN High Commissioner for Refugees. 
  • Oil Gains as U.S. Home Data Eases Concern on Stimulus. “The market rebounded after the release of the pretty-horrific July home numbers,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “The housing data appears to have put fears of a quick end of stimulus to rest. Housing has been one of the stronger sectors of the economy recently.” WTI crude for October delivery increased $1.78, or 1.7 percent, to $106.81 a barrel at 1:39 p.m. on the New York Mercantile Exchange. Prices are down 0.6 percent this week. The volume of all futures traded was about 12 percent below the 100-day average. Brent oil for October settlement advanced $1.28, or 1.2 percent, to $111.18 a barrel on the London-based ICE Futures Europe exchange. Trading of futures was 6.5 percent above the 100-day average.
  • Reinhart Says Emerging Markets Could Get ‘Ugly’ as Outflows Grow. Carmen Reinhart, a Harvard University economist and co-author of a history of debt crises, said emerging markets are deteriorating as the U.S. recovers and may worsen as global interest rates begin to increase. “It could get very ugly,” Reinhart said today in a Bloomberg Television interview with Sara Eisen from the Federal Reserve’s annual conference in Jackson Hole, Wyoming. “Emerging markets had a capital flow bonanza lasting several years, the golden boom years, and the probability of a banking crisis, the probability of a currency crash, the probability of a default, all increase afterward.”
  • India’s Rupee Set for Worst Week Since 1993 on Fed Stimulus Risk. India’s rupee plunged 4.4 percent to a record this week in its worst performance since 1993 on signs the U.S. is getting closer to reducing stimulus that fueled demand for emerging-market assets. Federal Reserve policy makers were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond purchases later this year if the economy improves, with a few saying tapering might be needed soon, according to the minutes of their July meeting released Aug. 21. Global funds cut holdings of Indian debt by $9.9 billion since Bernanke first flagged possible paring on May 22, leaving the rupee vulnerable to the nation’s record current-account deficit. 
  • Record Bank Rally in Southern Europe May End on Economy. The longest rally in southern Europe’s banking stocks since the sovereign debt crisis began may prove unsustainable as the region’s economies lag behind a recovery in Germany and France. Economic woes in Italy and Spain persist, meaning banks will probably be forced to set aside more provisions as consumers and businesses fall into default. After a six-week increase in the shares of Italian banks, they are trading at 20.7 times projected earnings yesterday, up from 10.3 times profit a year ago, according to data compiled by Bloomberg.
  • Junk Bonds Snap Seven-Week Winning Streak in Europe on Tapering. Junk (BEUH) debt investors lost money for the first time since June in Europe this week as bondholders anticipate the Federal Reserve slowing stimulus. High-yield notes from companies including Italian carmaker Fiat SpA and Portugal Telecom SGPS SA, the country’s biggest telecommunications company, lost investors an average 0.3 percent over the period, paring a 2.6 percent gain in the longest winning streak since Jan. 11, according to Bloomberg bond index data. Investment-grade (BERC) bonds also forfeited 0.3 percent, a second week of losses
  • Fed’s Lockhart Says He Wouldn’t Rule Out September Tapering. Federal Reserve Bank of Atlanta President Dennis Lockhart said he wouldn’t rule out a September move by the central bank to start tapering its bond-buying program as long as the economy’s performance justifies it. “I’m looking at the data as whether they are denying or undermining the outlook I have in my head” for moderate growth, Lockhart said in an interview today on Bloomberg Television with Michael McKee from Jackson Hole, Wyoming, where the Kansas City Fed is hosting a conference. “You can take a cautious first step,” which the Fed could conceivably do, he said. 
  • Economists in Jackson Hole Say QE Less Potent Than Fed Believes. The U.S. central bank’s bond buying is a less potent tool for stimulating growth than policy makers believe, two economists said in a paper released today at a Federal Reserve conference. The paper scrutinizes the stance of some Fed officials that so-called quantitative easing works through a “portfolio-balance channel” in which Fed asset purchases induce investors to rebalance their investments to boost a wide range of financial assets. The research was presented at an annual Kansas City Fed symposium in Jackson Hole, Wyoming.
  • College Leaders Wary of Obama Plan Linking College Aid to Rank. President Barack Obama’s proposal to tie federal student aid to college tuition and outcomes, intended to control costs and support low-income students, may have the opposite effect, some education leaders said. Colleges may be discouraged from accepting and giving aid to students from low-income families because of the risk that they might hurt the school’s rankings, which would include graduation rates, debt levels and future earnings, the officials said. Obama’s proposal, which is subject to congressional approval, is likely to encounter strong opposition from colleges whose students rely on federal financial aid to help cover their costs, educators said.
  • NSA Analysts Intentionally Abused Spying Powers Multiple Times. Some National Security Agency analysts deliberately ignored restrictions on their authority to spy on Americans multiple times in the past decade, contradicting Obama administration officials’ and lawmakers’ statements that no willful violations occurred.
  • U.S. to Review Claims Oil Companies Undercut Renewables. The U.S. Federal Trade Commission said it will examine allegations that oil companies may be undermining efforts to distribute renewable fuels. The FTC will “evaluate” concerns that oil companies are blocking the distribution of renewable fuels by requiring retailers to carry premium gasoline, commission chairwoman Edith Ramirez said in a letter released today by two U.S. lawmakers who had called for an inquiry.
Wall Street Journal: 
  • Bats, Direct Edge in Talks to Merge. Deal Would Create Second-Largest U.S. Stock-Market Operator. Electronic-exchange group BATS Global Markets Inc. is in advanced discussions to merge with rival stock-exchange company Direct Edge Holdings LLC, people familiar with the matter said, in a deal that would create the second-biggest U.S. stock-market operator ahead of Nasdaq OMX Group Inc. NDAQ +1.31%.
Fox News: 
  • Team involved in tracking Benghazi suspects pulling out, sources say. Two weeks after the Obama administration announced charges against suspects in the Benghazi attack, a large portion of the U.S. team that hunted the suspects and trained Libyans to help capture or kill them is leaving Libya permanently. Special operators in the region tell Fox News that while Benghazi targets have been identified for months, officials in Washington could "never pull the trigger." In fact, one source insists that much of the information on Benghazi suspects had been passed along to the White House after being vetted by the Department of Defense and the State Department -- and at least one recommendation for direct action on a Benghazi suspect was given to President Obama as recently as Aug. 7.  
MarketWatch:
Zero Hedge:
Business Insider:
Reuters:
  • Exxon(XOM) selling Iraqi oilfield stakes to Petro China, Pertamina: Iraq minister. Exxon Mobil is selling stakes it controls in Iraq's West Qurna-1 oilfield to China's Petro China and Indonesia's Pertamina, the country's oil minister confirmed on Friday. "25 percent to Petro China and 10 percent to Pertamina," Abdul Kareem Luaibi told Reuters on the sidelines of a ministerial meeting here. He added that the deal would be done "maybe after two to three weeks". Exxon Mobil has a 60 percent stake currently in the giant oilfield and is the operator. Company and industry sources said on Thursday that China and Indonesia were set to join Exxon Mobil's $50 billion project to develop the field.
  • Brazil current account deficit swells in July; FDI falls. Brazil's current account deficit more than doubled in July from a year ago, central bank data showed on Friday, with the country increasingly unlikely to cover that gap this year with slackening direct investment from abroad. 
  • Adding uncertainty, U.S. Fed set for new cast of characters. A new chairman is just the beginning of what could be a big leadership change at the Federal Reserve next year, giving investors yet another reason to second-guess the U.S. central bank's plan to scale back its support for the economy.
Financial Times:
  • Lagarde calls for more crisis ‘lines of defence’. The world needs to build “further lines of defence” against a possible emerging markets crisis but the International Monetary Fund stands ready to provide financial support if needed, its managing director Christine Lagarde declared on Friday. Ms Lagarde’s remarks to the Kansas City Fed’s annual gathering in Jackson Hole, Wyoming, are a sign of growing concern among international policy makers about market turmoil in countries such as Brazil, India and Indonesia.
Boersen-Zeitung:
  • UBS Chairman Says Europe Hasn't Solved Problems. UBS AG Chairman Axel Weber says structural reforms in euro area needed to foster growth. Planned European banking union in danger of being developed with too much haste, Weber said.