Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.62 +.79%
- Euro/Yen Carry Return Index 135.66 -.12%
- Emerging Markets Currency Volatility(VXY) 11.84 -2.07%
- S&P 500 Implied Correlation 555.19 +.97%
- ISE Sentiment Index 90.0 -53.61%
- Total Put/Call .95 +18.75%
Credit Investor Angst:
- North American Investment Grade CDS Index 82.48 -1.08%
- European Financial Sector CDS Index 146.86 -1.39%
- Western Europe Sovereign Debt CDS Index 85.50 unch.
- Emerging Market CDS Index 340.79 -1.21%
- 2-Year Swap Spread 17.25 +1.0 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .02% -1 bp
- China Import Iron Ore Spot $138.30/Metric Tonne -.14%
- Citi US Economic Surprise Index 30.60 +5.2 points
- Citi Emerging Markets Economic Surprise Index -22.40 +.6 point
- 10-Year TIPS Spread 2.12 -5 bps
Overseas Futures:
- Nikkei Futures: Indicating +65 open in Japan
- DAX Futures: Indicating -30 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail/tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- Israelis Rush for Masks Fearing Retaliation for Syria Strike. Israelis
thronged to distribution
centers to pick up government-issued gas masks, afraid their country
will be targeted in retaliation if the U.S. attacks Syria. The Israel
Postal Service, which is distributing the masks, announced on its
website that the centers would extend their
hours until evening “due to extraordinary demand.” In Haifa,
the biggest city closest to the northern border with Lebanon and
Syria, people waited in line for hours, Israel Radio said. Some
centers ran out of masks.
- Assad’s Syria Chides Bread Lines as Civilians Brace for Hit. Syrians are forming bread lines and stocking up on other food as they brace for a possible U.S.-led attack on their soil. The Syrian government called the hoarding of bread “unjustified,”
state-run news agency Sana reported today, citing Minister of Internal
Trade and Consumer Protection Samir Amin. The government is ready to
provide more flour to meet the increased demand, he said.
- Egypt’s Muslim Brotherhood Gears Up for Rallies Amid Crackdown. The embattled Muslim Brotherhood
called on Egyptians to take to the streets tomorrow in protest
against the military-installed government, looking to regain
footing amid a crackdown on the group. The interim government is going after the Brotherhood as it
tries to move ahead with plans to return to elected rule. It
has arrested hundreds of its members and killed hundreds of its
supporters, and warned today that it would use live fire if
protests against the military’s July 3 toppling of Islamist
President Mohamed Mursi turn violent. In a recorded statement aired late last night, Essam El-Erian, one of the few top Brotherhood leaders yet to be
arrested, called for protests against what he described as “the
bloody, brutal, fascist military coup that has hijacked people’s
will and halted the path of democracy.”
- Rupee Dip Risks Economic Nosedive in India, Billionaire Says. India
needs to immediately use its foreign exchange reserves to arrest the
rupee’s record plunge as the weakening currency has the potential to
send the economy into a “nosedive,” billionaire Adi Godrej said. “The
whole economy will suffer dramatically -- there will be huge inflation,
which will lead to high interest costs and a whole vicious cycle will be
created,” Godrej, chairman of the soaps-to-real estate Godrej group,
said in a phone interview yesterday. “I’m very surprised that the
government and the Reserve Bank of India are not intervening
sufficiently to prevent the volatility.”
- Indonesia Faces Rupiah Test After Rate Move on Record Deficit. Indonesia’s
interest-rate increase yesterday helped the rupiah climb for the first
time this week. To sustain that gain, the country needs to curb a record
current-account gap that’s making it vulnerable to persistent pressure
on emerging-market currencies. Bank Indonesia increased the
benchmark reference rate to 7 percent from 6.5 percent, it said, after a
meeting in Jakarta yesterday that came before the next scheduled policy
review. It also raised the deposit facility rate by half a percentage
point to 5.25 percent, and extended a bilateral swap deal with the Bank
of Japan valued at $12 billion that will allow the two to
borrow from each other’s foreign-exchange reserves.
- El-Erian Says Emerging Market Woes to Create U.S. Headwinds. Weakening emerging-market growth and
spiraling currencies risk creating headwinds for a recovering
U.S. economy, according to Pacific Investment Management Co.’s
Mohamed El-Erian. “Longer term, we should care due to the feedback loop to
the U.S.,” El-Erian, chief executive and co-chief investment
officer of the world’s biggest manager of bond funds, said in a
radio interview today on “Bloomberg Surveillance” with Tom Keene. “You will see a tightening of financial conditions to
markets. You will see growth more challenged and the ability of
U.S. companies to get topline growth from emerging markets is
going to be less going forward.”
- European Stocks Rise, Erase Monthly Drop; Vodafone Surges.
European stocks rose, erasing their monthly loss, as Vodafone Group Plc
surged to an 11-year high while data showed the U.S. economy grew
faster than forecast in the second quarter and a drop in jobless claims
beat estimates. Vodafone jumped 8.2 percent after saying Verizon
Communications Inc. is in talks to acquire its stake in their Verizon
Wireless venture. Carrefour SA rallied the most in seven months after
posting an increase in first-half profit. Zurich Insurance Group AG
declined 2.5 percent as Chairman Josef Ackermann resigned. The Stoxx
Europe 600 Index added 0.8 percent to 300.13. The gauge lost 2.2 percent
in the past three days, closing yesterday at a six-week low, on concern the U.S. will take military action against Syria.
- Gold Falls From 3-Month High as Data May Bolster Tapering. Gold retreated the most in more than
two weeks as better-than-expected U.S. economic data reinforced
the case for the Federal Reserve to slow stimulus measures. Gold futures for December delivery fell 0.4 percent to
settle at $1,412.90 an ounce at 1:55 p.m. on the Comex in New
York, the biggest drop since Aug. 13.
- Fed’s Lacker Says Central Banks’ Future Hinges on Role as Lender. Federal Reserve Bank of Richmond
President Jeffrey Lacker said the future of global central banks
will be shaped partly by a debate over the extent of their role
as a lender of last resort. Lacker said central banks should avoid channeling credit to
specific segments of the economy through rescues or asset-purchase programs. Still, “some writers” say central bank
mandates provide a large role in financial stability, “in which
all available tools, both monetary and credit policy, are used
to minimize financial system ‘disruptions,’” he said. “Aggressive use of a central bank’s asset portfolio to
channel credit to particular economic sectors or entities
threatens dragging the central bank into distributional politics
and places that governance arrangement at risk,” Lacker said
today in Newport News, Virginia.
- Consumer Comfort in U.S. Declines to a More Than Four-Month Low.
Consumer confidence fell for a third straight week to the lowest level
in more than four months as Americans’ views on the economy, finances
and spending soured. The Bloomberg Consumer Comfort Index declined to minus 31.7 for
the period ended Aug. 25, its weakest reading since April 7, from minus
28.8 a week earlier. The gauge has dropped 8.2 points in the three
weeks since reaching a more than five-year high. “Households are
estimating possible reductions in disposable income due to rising
gasoline prices and interest rates,” said Joseph Brusuelas, a senior
economist at Bloomberg LP in New York, adding that consumers have their
eye on political strife in Syria and Egypt. “The way it translates into
the U.S. pocketbook is rising gas prices.”
- Fast-Food Strikes Expand Across U.S. to 50 Cities. Fast-food workers in 50 U.S. cities plan to walk off the job today in an attempt to ratchet up pressure on McDonald’s Corp. and Wendy’s Co. to raise wages. Protests
that began in New York last year are spreading to cities including
Boston, Chicago, Denver, San Diego and Indianapolis, according to the
Service Employees International Union, which is advising the strikers.
About 200 workers showed up at the two-story Rock N Roll McDonald’s
store in Chicago’s River North neighborhood this morning chanting: “Hey
hey, ho ho, poverty wages gotta go!”
- U.S. Banks Earned Record $42.2 Billion in 2nd Quarter, FDIC Says. U.S. banks reported record net
income of $42.2 billion for the second quarter on broad gains
from trading revenue, the Federal Deposit Insurance Corp. said. Banks’ earnings for the three months ending June 30 marked
a second consecutive record quarter, the FDIC said today in its
Quarterly Banking Profile. After the second-most profitable year
on record in 2012, the boom has continued in the first half of
this year as some of the largest banks scored trading success
that outpaced analyst expectations.
Wall Street Journal:
Fox News:
- Aetna(AET) Pulls Out of NY Health Exchange. Aetna Inc, the No. 3 U.S. health insurer, said on Thursday it has
decided not to sell insurance on New York's individual health insurance
exchange, part of the country's healthcare reform. New York is the fifth state where Aetna has pulled its application to
sell the plans that go on sale on October 1 and into effect on January
1, 2014. It has also reversed course in Maryland, Ohio, Georgia, and
Connecticut, where it is based.
MarketWatch:
CNBC:
- US claims, growth beat estimates; stir new taper speculation. The number of Americans filing new claims for unemployment benefits
fell as expected last week, suggesting a strengthening in job gains in
August after a slight pullback the prior month. Meanwhile, the
U.S. economy accelerated more quickly than expected in the second
quarter thanks to a surge in exports, bolstering the case for the
Federal Reserve to wind down a major economic stimulus program.
Zero Hedge:
Business Insider:
Reuters:
Style Underperformer:
Sector Underperformers:
- 1) Coal -2.80% 2) Steel -1.70% 3) Oil Service -.95%
Stocks Falling on Unusual Volume:
- FST, STO, TOT, JASO, UBS, DB, TFM, GCO, SIG, TAHO, FNV, OXM, CPB, WDAY, WDC, STX, QIWI, PSO, AWR, NVS and MORN
Stocks With Unusual Put Option Activity:
- 1) ZNGA 2) VZ 3) BHI 4) WSM 5) ADT
Stocks With Most Negative News Mentions:
- 1) EOG 2) LH 3) TFM 4) WMT 5) JPM
Charts:
Style Outperformer:
Sector Outperformers:
- Homebuilders +2.51% 2) Biotech +1.68% 3) Airlines +1.56%
Stocks Rising on Unusual Volume:
- TSL, VOD, CRUS, GES, MEI, EGAN, LRN, VZ, NOAH, SEAS, YELP, Z, MNLX, DDD, EMES, PGTI, TASR, AFOP, PCYC, AMCX, NBIX, RPTP, MPWR and ZLC
Stocks With Unusual Call Option Activity:
- 1) VZ 2) GIS 3) DG 4) URBN 5) MDLZ
Stocks With Most Positive News Mentions:
- 1) PRGO 2) MHK 3) REGN 4) JNJ 5) MCD
Charts:
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 165.0 -10.0 basis points.
- Asia Pacific Sovereign CDS Index 132.75 -2.0 basis points.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 332K versus 336K the prior week.
- Continuing Claims are estimated to fall to 2988K versus 2999K prior.
- 2Q GDP is estimated to rise +2.2% versus a prior estimate of a +1.7% gain.
- 2Q Personal Consumption is estimated to rise +1.7% versus a prior estimate of a +1.8% gain.
- 2Q GDP Price Index is estimated to rise +.7% versus a prior estimate of a +.7% gain.
- 2Q Core PCE is estimated to rise +.8% versus a prior estimate of a +.8% gain.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Fed's Lacker speaking, Italian 10Y bond auction, German CPI data, Japan inflation data, 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (LSTR) mid-quarter update could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted
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: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 16.39 -2.27%
- Euro/Yen Carry Return Index 135.89 +.28%
- Emerging Markets Currency Volatility(VXY) 12.32 +7.22%
- S&P 500 Implied Correlation 53.61 -1.72%
- ISE Sentiment Index 194.0 +133.73%
- Total Put/Call .77 -24.51%
Credit Investor Angst:
- North American Investment Grade CDS Index 82.90 -1.40%
- European Financial Sector CDS Index 148.92 -1.01%
- Western Europe Sovereign Debt CDS Index 85.50 -3.53%
- Emerging Market CDS Index 343.44 +.36%
- 2-Year Swap Spread 16.25 -2.0 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- China Import Iron Ore Spot $138.50/Metric Tonne -.14%
- Citi US Economic Surprise Index 25.40 -.6 point
- Citi Emerging Markets Economic Surprise Index -23.0 unch.
- 10-Year TIPS Spread 2.17 unch.
Overseas Futures:
- Nikkei Futures: Indicating +58 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail/tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
