Bull Radar

Style Outperformer:

• Large-Cap Value +.81%

Sector Outperformers:

• Gold & Silver +1.94% 2) Energy +1.86% 3) Oil Service +1.53%
  

Stocks Rising on Unusual Volume:

• CRUS, STO, TIVO, PNG, ZLC, EXPR, CHS, AVGO, AUXL and SDRL

Stocks With Unusual Call Option Activity:

• 1) TIF 2) LEAP 3) RPRX 4) USO 5) ZQK
  

Stocks With Most Positive News Mentions:

• 1) CRUS 2) TIVO 3) NOC 4) AVGO 5) TIF
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• U.S., Allies Move Closer to Military Strike Against Syria. The U.S., France and Britain stepped closer to a military strike against Syria, laying the legal groundwork to justify action, moving forces into place and rounding up allies in the region. Any armed response would be narrowly focused on Syria’s weapons capabilities and wouldn’t be aimed at deposing President Bashar al-Assad, U.S. and U.K. officials said. U.K. Prime Minister David Cameron said in London that while no decision has been made on a course of action, it would be legal and proportionate. “This is not about wars in the Middle East; this is not even about the Syrian conflict,” Cameron said in televised remarks. “It’s about the use of chemical weapons and making sure as a world we deter their use.” 

• Ito Backs Japan Sales-Tax Plan as Hamada Calls for Gradual Rise. Tokyo University Professor Takatoshi Ito said Japan’s sales tax should be increased as planned as a panel of economists and financial experts considering the levy split on the issue. “Economic indicators show the economy isn’t in a bad state and raising the sales tax wouldn’t slow the economy or the bid to end deflation,” Ito, a former finance ministry official, told reporters yesterday after the meeting in Tokyo. Not proceeding in line with the plan could lead to falling stocks, a stronger yen and a spike in bond yields, Ito wrote in a statement submitted to the panel.

• China Widens Anti-Graft Drive as PetroChina Ousts Managers. China widened its anti-corruption campaign to include the nation’s biggest company by market value, as PetroChina Co. (857) said four senior managers had been removed amid an investigation by authorities. The company’s shares dived as much as 5.9 percent in Hong Kong trading, the most in two years. The departing executives include the chairman of unit Kunlun Energy (135) Co. and the general managers of the company’s two biggest oilfields. Kunlun fell as much as 15 percent, the most in almost five years, slashing its market value to $11.6 billion. The probes signal a broadening crackdown on corruption by China’s new leaders under Xi Jinping that has snared targets from the nation’s biggest phone company to the railway ministry. 

• China Trainmakers’ Profits Decline on Lack of New Orders. China’s biggest trainmakers said sales and profit fell in the first half after the nation delayed orders for bullet trains. CSR Corp. (1766), the country’s biggest trainmaker and a partner of Bombardier Inc. (BBD/B), and China CNR (601299) Corp. said the economic slowdown also damped operations in the period. Shares of both manufacturers declined today.

• China Asks U.S. Not to Meddle in Hong Kong Affairs, Song Says. China is “firmly opposed” to foreign powers meddling in Hong Kong’s affairs and the city’s political reform is an internal issue, Commissioner Song Zhe of China’s Foreign Ministry in Hong Kong told U.S. Consul-General Clifford Hart in a meeting, according to a release on the ministry’s website. China hopes the U.S. envoy in Hong Kong won’t conduct activities that are inappropriate for its status and won’t do things that would hurt Hong Kong’s prosperity and affect China-U.S. relationship, according to the statement.

• Property Stocks Decline on Latest Housing Curbs: Singapore Mover. Singapore’s property stocks fell, driving an index tracking developers to a one-year low, after the government tightened its public housing policy by reducing tenures for new loans and restricting purchases by foreigners. The Singapore property index tracking 43 stocks fell 1.2 percent to 694.15 as of 9:13 a.m. local time, set for the lowest since Sept. 11.

• Philippine Stocks Tumble to Nine-Month Low Amid Outflows Concern. Philippine stocks tumbled for a second day, sending the benchmark index to the lowest level in nine months, amid concern that capital outflows will accelerate. The Philippine Stock Exchange Index (PCOMP) dropped 5.7 percent to 5,578.53 at 10:20 a.m. local time, heading for the lowest close since Nov. 23. Ayala Corp. (AC), owner of the country’s biggest property developer, declined 4.8 percent. SM Investments Corp. (SM), owner of the largest shopping-mall operator and biggest grocery chain, slid 11 percent to the lowest level since October. The PSE index has tumbled 16 percent this month amid concerns that reduced U.S. Federal Reserve stimulus will spur capital outflows and local protests over discretionary government budgets will slow state spending. Foreign investors have sold a net $219 million of Philippine shares in August after buying $1.6 billion this year through July.

• Asian Stocks Drop While Oil Climbs on Syria; Aussie Slips. Asian stocks dropped for a second day, credit risk climbed and oil rose on concern the U.S. will take military action against Syria. Australia’s dollar weakened, while U.S. stock futures gained. The MSCI Asia Pacific Index lost 1.6 percent at 11:19 a.m. in Tokyo. The S&P GSCI Index of commodities jumped to a six-month high as West Texas Intermediate crude rose 2.2 percent. Credit risk in Asia advanced to the highest in two months. The Aussie dollar slid against all its 16 major peers and Indian rupee forwards extended declines. 

• Gold Trades Near Highest Since May as Syria Tensions Spur Demand. Gold traded near the highest level since May after a four-day rally as speculation that the U.S. may lead military strikes against Syria within days spurred investors’ demand for a haven. Silver and platinum advanced. Bullion for immediate delivery rose as much as 0.3 percent to $1,419.55 an ounce and was at $1,417.17 at 11:38 a.m. in Singapore.

• WTI at Two-Year High on Concern Syria Unrest Will Spread. West Texas Intermediate crude surged to the highest price since May 2011 on concern that conflict in Syria may spread to other parts of the Middle East and threaten oil supplies. Futures gained as much as 2.1 percent in New York, extending yesterday’s 2.9 percent advance. The U.S., France and Britain stepped closer to a military strike against Syria, laying the legal groundwork to justify action after the nation allegedly used chemical weapons. London’s Brent may rise as high as $150 a barrel if conflict causes supply disruptions, according to Societe Generale SA. Libya’s National Oil Corp. said output may have dropped below 200,000 barrels a day, the lowest since the 2011 uprising against Muammar Qaddafi. 

• Brent Crude May Spike to $150 on Syria Spillover, SocGen Says. Brent crude may “spike briefly” to $150 a barrel if a U.S.-led attack on Syria sparks further conflict in the Middle East and leads to supply disruptions, Societe Generale SA (GLE) said in a report e-mailed today.

• Rubber Declines for Second Day on Stronger Yen, Syria Tensions. Rubber fell a second day as Japan’s currency maintained its biggest gain in two months amid concern that the U.S. will take military action against Syria. Rubber for delivery in January on Tokyo Commodity Exchange retreated as much as 1.4 percent to 271.7 yen a kilogram ($2,795 a metric ton) and was 273.6 yen at 11:16 a.m. local time. The contract for delivery in February, which started trading today, was at 275.8 yen.

• Bond Binge Expanding Leverage Toward Crisis Peak: Credit Markets. Debt levels have increase faster than cash flow for six straight quarters, boosting the obligations of investment-grade companies in the second quarter to 2.09 times earnings before interest, taxes, depreciation and amortization, according to JPMorgan Chase. That's up from 2.07 times in the first three months of 2013 and compares with 2.13 in the third quarter of 2009, when it peaked after the deepest recession since the Great Depression.  

• U.S. Bank Legal Bills Exceed $100 Billion. The six biggest U.S. banks, led by JPMorgan Chase & Co. and Bank of America Corp., have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years. That’s the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg. The sum tops the banks’ combined profit last year. The mounting bills have vexed bankers who are counting on expense cuts to make up for slow revenue growth and make room for higher payouts. About 40 percent of the legal and litigation outlays arose since January 2012, and banks are warning the tally may surge as regulators, prosecutors and investors press new claims. The prospect is clouding outlooks for stock prices, and by some estimates the damage could last another decade. “They’ve crossed the point of no return when it comes to the effects that these expenses are going to have on earnings,” said Jeffrey Sica, who helps oversee more than $1 billion as head of Sica Wealth Management LLC in Morristown, New Jersey, and doesn’t recommend bank stocks. “This is going to keep on hurting them, and people will start paying more attention.”

Wall Street Journal:

• U.S., Allies Prepare to Act as Syria Intelligence Mounts. Evidence Includes Satellite Images, Intercepted Communications. Evidence Includes Satellite Images, Intercepted Communications. Positions hardened in the international standoff over Syria, as U.S. officials said privately that a flood of previously undisclosed intelligence, including satellite images and intercepted communications, convinced them the Syrian regime had used chemical weapons against its own people. French, U.K. and U.S. military officials talked Tuesday about coordinating their response to the alleged attacks.

• U.S. Tightens Grip on Telecom. The U.S. government has used the merger-approval process to increase its influence over the telecom industry, bringing more companies under its oversight and gaining a say over activities as fundamental as equipment purchases. The leverage has come from a series of increasingly restrictive security agreements between telecom companies and national-security agencies that are designed to head off threats to strategically significant networks and maintain the government's ability to monitor communications, according to a review of the public documents and lawyers who have negotiated the agreements.

• China's Transparency Standards, U.S. Investor Expectations Collide. Government Policy Curtails Scrutiny of Links Between Officialdom and Business. In the almost six years since VisionChina Media Inc. VISN -4.15% raised $115 million in a U.S. initial public offering, the Chinese broadcasting company hasn't told U.S. investors its co-founder is the daughter-in-law of a senior figure in the Chinese Communist Party. Should it have? The omission is legal. But it illustrates wide differences between China's transparency standards and U.S. investors' expectations. The issue of Chinese political interests overlapping with business comes as inconsistencies pile up over how the U.S. and China treat information. Over the past year, Beijing and Washington have butted heads over jurisdiction to regulate auditors and enforce legal rulings. Accusations by U.S. hedge funds that several China-based, U.S.-traded companies engaged in fraudulent accounting have erased billions of dollars in market value, also hitting shares of companies not accused of wrongdoing. More recently in China, one scandal after another has highlighted ties between business and the relatives of politicians.

• Loose Lips on Syria. U.S. leaks tell Assad he can relax. The bombing will be brief and limited. An American military attack on Syria could begin as early as Thursday and will involve three days of missile strikes, according to "senior U.S. officials" talking to NBC News. The Washington Post has the bombing at "no more than two days," though long-range bombers could "possibly" join the missiles. "Factors weighing into the timing of any action include a desire to get it done before the president leaves for Russia next week," reports CNN, citing a "senior administration official."

Fox News:

• Debt ceiling, government shutdown battles simmer in summer recess. The Washington dance of flirting with fiscal catastrophe intensified this week, as the Obama administration warned House Republicans that a deal on increasing the federal debt limit may have to come sooner than expected. The warning came in a letter from Treasury Secretary Jack Lew to House Speaker John Boehner, who along with other members of Congress is still on summer recess and not expected to return until early September. That leaves little time to deal with two looming deadlines that have not yet been addressed.

Zero Hedge:

• The Immense (And Needless) Human Misery Caused By Speculative Credit Bubbles. (graphs)

• Perfect Macro Storm Clobbers Stocks. (graphs)

• Barclays Warns About The Oil Price "Spillover Effects" From Syria.

• What A US Strike On Syria Would Look Like.

• Final Obamacare "Individual Mandate" Rules Released: This Is What You Will Pay.

• China and Japan Really Don't Like Each Other.

• Tepco Lies Again, Admits Radioactive Leak "May" Have Started A Month Earlier.

Business Insider:

• RICHARD KOO: Emerging Markets Are In For A 'Tumultuous New Era'.

• Syrian Electronic Army Suspected In Web Attack On New York Times, Twitter, And Huffington Post.

• Bank CEO Admits To Using Bailout Money To Buy A Luxury Condo In Florida.

• EL-ERIAN: Here Are 4 Once Unthinkable Outcomes That Are Now Reality.

• 2 Reasons Brazil's Central Bank Is Expected To Raise Key Interest Rate.

Reuters:

• The rupee is where? Currency collapse confounds India Inc. Indian companies such as Whirlpool of India Ltd say they can't plan more than a couple of months out as a fast-falling rupee currency drives up the cost of imports, forcing them to raise prices even as consumer spending crumbles. The timing is particularly tough for consumer companies that were counting on India's September-to-December holiday season to spur sales. India's consumers, whose spending helped see the country through the global financial crisis in 2008, are closing their wallets, squeezing companies from carmakers to shampoo sellers. Companies that import finished goods or raw materials are the worst hit as they scramble to hold onto margins while balancing the need to raise prices without deterring buyers.

Financial Times:

• China companies feel the investment hangover. Wooden carvings of two elephants and an eagle, meant to symbolise wisdom and prosperity, flank the entrance to the Chinese chemical producer Yunwei. Today, they suggest a very different interpretation: a lumbering debt load and scavengers picking over the company’s scraps. “Lots of Chinese companies rushed to expand, to be the biggest in the world. This was a source of great pride. Now we see it as a headache,” says a soft-spoken Yunwei executive, back from a business trip where he was trying to sell more of the hard black coking coal piled high in the company’s storage facility in Qujing in the southwestern province of Yunnan.

Telegraph:

• Angela Merkel: Greece should never have been allowed in the euro. Angela Merkel has said Greece should never have been allowed into the euro and put the blame on former chancellor Gerhard Schroeder.

• The Bank of England will lose control of inflation and 1980s mass unemployment will return. Since Bank of England governor Mark Carney issued his “forward guidance”, bond markets have reacted by bringing forward the date at which they implicitly expect interest rates to rise. Bank officials appear mystified by this reaction. But that just indicates how out of touch they are with how the Bank is perceived.

The Independent:

• Does Obama know he’s fighting on al-Qa’ida’s side? ‘All for one and one for all’ should be the battle cry if the West goes to war against Assad’s Syrian regime. If Barack Obama decides to attack the Syrian regime, he has ensured – for the very first time in history – that the United States will be on the same side as al-Qa’ida.

Tokyo Shimbun:

• Japan's April-Sept. China Tour Bookings Drop 75%. Reservations for package tours to China between April and September fell 75% y/y to 6,302 people amid a territorial dispute over islands in the East China Sea and China's air pollution issues, citing information from four Japanese travel agencies.

Xinhua:

• China Shouldn't Focus on GDP in Urbanization. China shouldn't focus on boosting GDP as it urbanizes the country, according to a commentary published today. Development of "ghost cities" and "empty cities" only serve to waste resources and increase debt of local governmnts, the commentary said.

Securities Daily:

• China IPO Resumption 'Realistic'. The resumption of initial public offerings as soon as possible is a "realistic demand," according to a commentary written by Yan Yue.

Global Times:

• New China Consumption Tax. China is mulling on imposing a consumption tax on high-polluting and high-energy-consuming products, the National Development and Reform Commission (NDRC) said Tuesday. The measure is part of China's efforts to save energy and reduce pollution, as the country aims to cut energy consumption per unit of GDP by 3.84 percent annually between 2013 and 2015. Other measures include removing outdated industrial capacity, preventing the fast expansion of high-polluting and high-energy-consuming businesses, as well as encouraging the development of sustainable energy.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -2.25% to -.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 175.0 +14.0 basis points.

• Asia Pacific Sovereign CDS Index 134.75 +8.0 basis points.

• FTSE-100 futures -.53%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ZLC)/-.33

• (CHS)/.32

• (JOY)/1.36

• (BF/B)/.71

• (WSM)/.47

• (TFM)/.32

• (GES)/.35 

Economic Releases
10:00 am EST

• Pending Home Sales for July are estimated unch. versus a -.4% decline in June.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +750,000 barrels versus a -1,428,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,375,000 barrels versus a -4,029,000 barrel decline the prior week. Distillate supplies are estimated to rise by +550,000 barrels versus a +871,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.25% versus a +1.6% gain the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The 5Y Treasury auction, Japan Retail Sales report and the weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Sharply Lower into Final Hour on Rising Mideast Unrest, Increasing Eurozone/Emerging Markets Debt Angst, Global Growth Fears, Financial/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.85 +12.41%

• Euro/Yen Carry Return Index 135.62 -1.33%

• Emerging Markets Currency Volatility(VXY) 11.40 +3.54%

• S&P 500 Implied Correlation 54.78 +7.33%

• ISE Sentiment Index 89.0 -15.24%

• Total Put/Call 1.01 +13.48%

• NYSE Arms 1.73 +31.43% 

Credit Investor Angst:

• North American Investment Grade CDS Index 83.23 +4.62%

• European Financial Sector CDS Index 150.44 +7.1%

• Western Europe Sovereign Debt CDS Index 88.63 +4.8%

• Emerging Market CDS Index 342.50 +5.42%

• 2-Year Swap Spread 18.25 unch.

• TED Spread 22.75 -2.0 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .03% +1 bp

• Yield Curve 236.0 -6 bps

• China Import Iron Ore Spot $138.70/Metric Tonne unch.

• Citi US Economic Surprise Index 26.0 +2.7 points

• Citi Emerging Markets Economic Surprise Index -23.0 +1.4 points

• 10-Year TIPS Spread 2.17 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating -280 open in Japan

• DAX Futures: Indicating -30 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/retail/medical/tech sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.92%

Sector Underperformers:

• 1) Airlines -4.03% 2) Alt Energy -3.21% 3) Homebuilders -2.70%

Stocks Falling on Unusual Volume:

• PTNR, TLK, HDB, IBN, RBS, UGP, NOAH, SAFM, BWS, TIF, UAL, PHI, HDB, SNTS, IFN, SNY, INDY, DDD, ING, BPOP, TMH, MZOR, BITA, ANF, AFOP, OVTI, CEL, ASBC, IBN, DWA, SEAS, SSYS, DAL and RPTP

Stocks With Unusual Put Option Activity:

• 1) EWW 2) TIF 3) XLE 4) UAL 5) XLK
  

Stocks With Most Negative News Mentions:

• 1) APA 2) IDTI 3) BAC 4) AMGN 5) BWS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -1.02%

Sector Outperformers:

• Gold & Silver +1.37% 2) Energy -.12% 3) Utilities -.13%
  

Stocks Rising on Unusual Volume:

• ANV, EXK, HITK, AKRX and UNXL

Stocks With Unusual Call Option Activity:

• 1) GPOR 2) USO 3) CTB 4) VRX 5) QID
  

Stocks With Most Positive News Mentions:

• 1) PEP 2) MON 3) JEC 4) PRGO 5) DSW
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Obama Faces Toughest Foreign Policy Challenge in Syria. President Barack Obama faces the toughest foreign policy dilemma of his administration as he decides how to respond after concluding that Syria’s regime used chemical weapons against innocent civilians. Obama “believes there must be accountability for those who would use the world’s most heinous weapons against the world’s most vulnerable people,” Secretary of State John Kerry said today. White House press secretary Jay Carney told reporters that Obama “has not made” a decision on what action to take. The issue is coming to a head after the U.S. and other nations, including the U.K. and France, concluded that Syrian forces launched a chemical weapons attack on a Damascus suburb last week that opposition groups say killed 1,300 people. Obama previously warned that such action would cross his “red line.” “Barack Obama’s administration is in a grave predicament, much of its own making,” Richard Haass, president of the Council on Foreign Relations in New York, said in a blog posting on the council’s website. “A president of the U.S. cannot say something crosses a red line and then go on conducting business as usual.”  

• Obama 2008 Anti-War Stance Strained by Drumbeat to Act on Syria. Among the pivotal moments of Barack Obama’s political career was an October 2002 speech challenging the tide of public opinion to oppose war with Iraq. His anti-war stance helped him win the Democratic nomination in 2008, and later the White House. Now, inside the Oval Office, Obama confronts the possibility of embroiling the U.S. in another Mideast conflict, as he considers how to respond to evidence that the Syrian government used chemical weapons against civilians. “There’s a level of irony,” in Obama’s dilemma, said Tad Devine, a Democratic strategist and an adviser on the 2004 presidential campaign of John Kerry, who’s now Obama’s secretary of state.

• Tepco’s ‘Whack-a-Mole’ Means Government Takes Over in Fukushima. Japan’s government will lead “emergency measures” to tackle radioactive water spills at the wrecked Fukushima nuclear plant, wresting control of the disaster recovery from the plant’s heavily criticized operator, Tokyo Electric Power Co. (9501) “We’ve allowed Tokyo Electric to deal with the contaminated water situation on its own and they’ve essentially turned it into a game of ‘Whack-a-Mole,’” Trade Minister Toshimitsu Motegi told reporters last night in Fukushima. “From now on, the government will move to the forefront.” 

• Yen Rises on Haven Demand Amid Emerging-Market Rout; Aussie Down. The yen climbed against all of its 16 major counterparts as a selloff in emerging markets boosted demand for haven assets. Asian shares fell amid a freefall in the currencies of India and Indonesia, and as tensions in Syria escalated. The yen strengthened 0.3 percent to 98.24 per dollar as of 12:24 p.m. in Tokyo from yesterday, when it gained 0.2 percent. It added 0.2 percent to 131.39 per euro, after a 0.3 percent rise the previous session. The dollar was little changed at $1.3375 per euro. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, was also little changed at 1,027.83. It reached 1,031.37 on Aug. 22, the most since Aug. 2. India’s rupee slumped 1.5 percent to 64.3075 per dollar yesterday, approaching the record low of 65.56 reached on Aug. 22. Indonesia’s rupiah touched 10,900 against the dollar today, the weakest since April 2009. 

• Philippine Stocks Sink to 2-Month Low on State Spending Concern. Philippine Long Distance Telephone Co. (TEL), the nation’s biggest company by market value, sank to a six-week low while Aboitiz Equity Ventures Inc. (AEV) slumped 6.8 percent. SM Investments Corp. (SM), owner of the nation’s largest shopping-mall operator and biggest grocery chain, fell to the lowest level in eight months. The Philippine Stock Exchange Index (PCOMP) lost 4.4 percent to 5,889.82 as of 11:35 a.m. in Manila, heading for the lowest close since June 25 after being shut yesterday for a holiday. About 60,000 people gathered in the Philippine capital yesterday to protest the misuse of public funds after a government report this month found discretionary budgets from 2007 to 2009 were spent on dubious projects.

• Asian Stocks Fall as U.S. to Hold Syria Accountable. Asian stocks fell, with the regional benchmark index poised to snap a two-day gain, after U.S. Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons. Toyota Motor Corp. (7203), Asia’s biggest carmaker and the heaviest-weighted stock on the MSCI Asia Pacific Index, lost 0.6 percent in Tokyo. Billabong International Ltd., an Australian surfwear company, slumped 10 percent after it posted a loss more than three times its market value and said its core brand was worthless. Tokyo Electric Power Co. jumped 10 percent after the government said it would take over the handling of radioactive water spills at the Fukushima Dai-Ichi nuclear plant. The MSCI Asia Pacific Index fell 0.1 percent to 131.43 as of 12:22 p.m. in Tokyo, with five shares declining for every three that rose on the gauge.

• Rebar Falls Most in a Month as China Construction Activity Slows. Steel reinforcement-bar futures in Shanghai declined by the most in almost a month on concern that slowing purchases for construction projects may reduce demand. Rebar for delivery in January on the Shanghai Futures Exchange retreated as much as 1 percent, the most since July 29, to 3,776 yuan ($617) a metric ton and was at 3,784 yuan at 10:05 a.m. local time. 

• Rubber Declines From 3-Month High as Stronger Yen Reduces Appeal. Rubber dropped from a three-month high as Japan’s currency appreciated, cutting the appeal of yen-based futures that entered a bull market yesterday. Rubber for delivery in January on Tokyo Commodity Exchange fell as much as 0.7 percent to 275 yen a kilogram ($2,800 a metric ton) and traded at 275.6 yen at 10:43 a.m.

Wall Street Journal: 

• Calling Lethal Attack 'a Moral Obscenity,' Kerry Begins Making Case for U.S. Action. In harsh, uncompromising language, Secretary of State John Kerry began laying out the U.S. case for possible military action against Syria, saying there was undeniable evidence that chemical weapons had been used in a deadly attack against a rebel enclave and that it was "a moral obscenity." Obama administration planning now centers on carrying out any U.S. and allied strikes on Syria as part of a coalition with the backing of the North Atlantic Treaty Organization and the Arab League, rather than the United Nations, U.S. and European officials said. Such a route could raise international law concerns but would let the administration avoid a potentially protracted diplomatic fight at the U.N. with Russia, President Bashar al-Assad's main backer on the Security Council.

• Debt Drags on China's Growth. Interest Costs Leave Companies With Less Cash to Invest; the Case of Shougang Group. As worries over China's debt problem mount, the burden of paying off those loans could be the trigger that tips runaway credit into slower economic growth and financial stress. Few areas illustrate the problems better than the old industrial sector, where state-owned steel plants and cement kilns continue to borrow and expand even as overcapacity grows. With debts high and profits low, some companies, such as state-owned steel giant Shougang Group, are using new loans to repay old ones, according to Dagong Global Credit Rating Co.

• Return of the McMansion. Developers Tailor New Housing Stock to Well-Heeled Buyers as Credit Rules Squeeze First-Timers. The average size of a new home now exceeds the lofty levels reached during the housing boom, the latest indication that the new-home market is catering more to older, more affluent buyers and less to younger and first-time buyers.

• Zero Worship: Credit-Card Firms Compete With No-Interest Transfers. Hunt for Customers Pushes Banks to Revive Terms That Were the Rage in the 1990s. U.S. credit-card companies, hungry for new customers as many Americans continue to shun debt, are pumping up a popular promotion that can be risky for both lenders and consumers. Financial companies that issue plastic are flooding mailboxes and email accounts with offers that allow new customers to transfer their existing credit-card balances from other institutions without paying interest for as long as two years.

• John H. Cochrane: The Danger of an All-Powerful Federal Reserve. 'Macroprudential' policy thinkers want central banks to micromanage the entire financial system. Interest rates make the headlines, but the Federal Reserve's most important role is going to be the gargantuan systemic financial regulator. The really big question is whether and how the Fed will pursue a "macroprudential" policy. This is the emerging notion that central banks should intensively monitor the whole financial system and actively intervene in a broad range of markets toward a wide range of goals including financial and economic stability.

MarketWatch.com: 

• Larry Summers to be next Fed chair, CNBC says.

Zero Hedge: 

• Detroitification - It’s The Government, Stupid.

• Western Warplanes Begin Arriving In Cyprus.

• Scandal Erupts Between Russia And Belarus Following Arrest Of Uralkali CEO, Nationalization Threat.

• Driving On Portugal's Ghost Roads: Traffic Crashes By 68% In First Quarter.

• Despite "Austerity" Greek Debt Is Rising At Its Fastest Rate Since March 2010. (graph)

• Syriana: Official Tells CNN US Could Strike Within Hours; Russia Warns Against Attack.

Business Insider: 

• REPORT: Obama Orders Up Report To Justify Syria Strike.

• IT'S OFFICIAL: The Debt Ceiling Will Hit In Mid-October.

• Bill Ackman Gives Up On JC Penney(JCP), Sells Entire Stake. 

• We May Be In The Early Stages Of The Next Global Economic Crisis.

• Will Obamacare Destroy Jobs?

• Why It Still Feels Like Recession To 95% Of America.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -2.0% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 161.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 126.75 -1.5 basis points.

• FTSE-100 futures -.32%.

• S&P 500 futures -.08%.

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RGS)/.12

• (DCI)/.45

• (TIF)/.74

• (MOV)/.32

• (BWS)/.22

• (SAFM)/2.66

• (DSW)/.79

• (WMS)/.31

• (DY)/.46

Economic Releases 
9:00 am EST

• The S&P/CS 20 City MoM SA for June is estimated to rise +1.0% versus a +1.05% gain in May.

10:00 am EST

• Richmond Fed Manufacturing Index for August is estimated to rise to 0.0 versus -11.0 in July.

• Consumer Confidence for August is estimated to fall to 79.0 versus 80.3 in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, 2Y Treasury auction, weekly retail sales reports and the Germany IFO Business Climate Index could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.