Style Underperformer:
Sector Underperformers:
- 1) Airlines -.78% 2) Agriculture -.68% 3) Homebuilders -.63%
Stocks Falling on Unusual Volume:
- CPA, PTR, RYAAY, BIP, DY, JOY, AMAP, TASR, QIHU, GAS, DSW, TIF, QIWI, NWL, SAFM, DWRE, CLVS, CUK, CPA, BIP, ENV, MGA, RGS, SJM, LUX, JBHT and BITA
Stocks With Unusual Put Option Activity:
- 1) EPI 2) JOY 3) OVTI 4) TIF 5) CTSH
Stocks With Most Negative News Mentions:
- 1) SRCL 2) TST 3) PCG 4) ACN 5) MBI
Charts:
Style Outperformer:
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:
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.
- 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:
Business Insider:
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:
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
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.
- NASDAQ 100 futures +.13%.
Morning Preview Links
Earnings of Note
Company/Estimate
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
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.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- 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%
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
- 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
Style Underperformer:
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:
Style Outperformer:
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:
