Bear Radar

Style Underperformer:

• Large-Cap Growthh -.06%

Sector Underperformers:

• 1) Coal -2.43% 2) Homebuilders -1.06% 3) Steel -.52%

Stocks Falling on Unusual Volume:

• SOHU, SFUN, IRE, BTU, AREX, MKTO, SSYS, PVR, EZCH, HWAY, VRTX, UA, YY, VIPS, BBL and NBIX

Stocks With Unusual Put Option Activity:

• 1) AVNR 2) MNST 3) ANV 4) HFC 5) CBS
  

Stocks With Most Negative News Mentions:

• 1) FB 2) MSFT 3) AAPL 4) WFC 5) GLD
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.61%

Sector Outperformers:

• 1) Airlines +1.71% 2) HMOs +1.40% 3) Hospitals +1.04%
  

Stocks Rising on Unusual Volume:

• EROC, NQ, PRFT, FST, GSVC, BTH, ULTA, RMTI, UNFI, SWY, TROX, INTC, TRLA, REGN, AMAP, ECYT, AET, OWW and OLED

Stocks With Unusual Call Option Activity:

• 1) NIHD 2) STZ 3) ULTA 4) AMTD 5) MYGN
  

Stocks With Most Positive News Mentions:

• 1) UNFI 2) OXY 3) BBY 4) TRLA 5) TIBX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Hoyer Says Obama Could Strike Syria Without Congress Vote. The second-ranking House Democrat said President Barack Obama has the authority to use military force against Syria without returning to the U.S. Congress for approval should diplomacy fail to compel Syria to surrender its chemical weapons arsenal. Democratic Whip Steny Hoyer of Maryland said neither he nor House Minority Leader Nancy Pelosi “believe the president is required to come to Congress in this instance, and could act on his own.” He made his comments in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. 

• BRIC Markets Sink to Worst Place for Investors in Global Poll. The largest developing nations for the first time have the worst market opportunities as optimism for stronger growth shifts to the U.S. and Europe, according to a Bloomberg Global Poll. India fared the poorest, followed by Brazil, Russia and China, a worldwide poll of investors, analysts and traders who are Bloomberg subscribers showed this week. The number of respondents who see the European Union as one of the two best opportunities rose to 34 percent, its best showing in the poll dating to 2009, with the U.S. at 51 percent. 

• China Rejects Open Nomination for Election of Hong Kong Leader. The Hong Kong public can’t nominate candidates for the next chief executive election under the city’s de facto constitution, China’s top official in the former British colony said, rejecting a lawmaker’s proposal. 

• Asian Stocks Fall, Snapping 11-Day Rally, Ahead of Fed. Asian stocks fell, with the regional benchmark index on course to snap an 11-day rally, as the U.S. and Russia hold talks on Syria and investors await the outcome of a Federal Reserve meeting next week. BHP Billiton Ltd. (BHP), the biggest mining company, slipped 1.1 percent in Sydney as metal futures headed for a weekly decline. Mitsui OSK Lines Ltd., which has the world’s largest merchant shipping fleet, fell 3.3 percent after a gauge of freight rates halted an eight-day rally. Sun Hung Kai Properties Ltd., the world’s No. 2 developer by market value, dropped 1.8 percent in Hong Kong after setting a lower sales target this year. The MSCI Asia Pacific Index dropped 1 percent to 136.31 as of 12:43 p.m. in Tokyo, halting its longest stretch of gains this year, as three shares fell for each that rose.

• Rubber Set for Worst Week Since June as Yen’s Gain Cuts Appeal. Rubber dropped for a second day, heading for the worst weekly loss since June, as the Japanese currency strengthened to near a one-week high against the dollar, reducing the appeal of the yen-based contracts. Futures for February delivery on the Tokyo Commodity Exchange fell as much as 2.3 percent to 271.6 yen a kilogram ($2,721 a metric ton), the lowest since Sept. 2, and was at 272.8 yen at 10:42 a.m. local time. Prices lost 3.5 percent this week, the biggest drop since the five days through June 14.

• Rebar Heads for Third Weekly Loss on Output Gain, Demand Concern. Steel reinforcement-bar futures in Shanghai headed for a third weekly loss as steel mills expanded production while demand remained lackluster. Rebar for delivery in January on the Shanghai Futures Exchange declined as much as 1 percent to 3,672 yuan ($600) a metric ton, the lowest since Aug. 6, and was at 3,678 yuan at 10:07 a.m. local time. The most-active contract has lost 1.2 percent this week. 

• Washington Leadership Vacuum Raises Risks of Shutdown. President Barack Obama couldn’t get Democrats to go along on Syria. House Speaker John Boehner couldn’t get fellow Republicans to go along on a budget bill. The one man who has proven he can cut deals with the White House, Senate Republican leader Mitch McConnell of Kentucky, is consumed with a tough re-election bid. It’s enough to have Americans asking: Who’s running Washington? 

• Fed Message Muddled as Misunderstood Taper Meets Slowing Growth. Federal Reserve Chairman Ben S. Bernanke and his colleagues meeting next week are poised to take two steps that appear inconsistent. They will probably lower their estimates for growth for this year and next for the third consecutive time. Simultaneously, they are forecast to start scaling back the $85 billion in monthly bond purchases they have been relying on to stoke the recovery.

• Hedge-Fund Manager 36 South Doubles Bets on Securities Swings. 36 South Capital Advisors LLP, whose Black Swan Fund returned 204 percent in 2008, has doubled bets this year on greater fluctuations in markets including currencies, commodities and equities. The manager overseeing $626 million has increased volatility investments to 90 percent of assets from 50 percent at the beginning of the year, Chief Executive Officer and Head of Investments Jerry Haworth of the London-based company said in a telephone interview yesterday. Central bank intervention, including asset purchases globally in the wake of the 2008 global financial crisis, have calmed investor jitters and suppressed price gyrations, making protection against bigger security price swings cheaper to obtain for funds such as 36 South.

• Banks Allying With Hedge Funds as Capital Rules Bite.

• Twitter Says It Filed Confidential IPO Registration With U.S. Twitter Inc., the microblogging service with more than 200 million members worldwide, filed to go public, moving closer to the most highly anticipated offering since Facebook Inc. Goldman Sachs Group Inc. (GS) will be the lead underwriter for the initial public offering, according to people with knowledge of the matter who asked not to be identified because the information isn’t public. Twitter -- which disclosed it had filed to go public in one of its 140-character messages known as a tweet -- didn’t say when it may complete its market debut, or how much it plans to raise.

Wall Street Journal:

• GE(GE) Closes In on Algeria Power Sale. General Electric Co. is close to securing a nearly $2 billion sale to Algeria of turbines for six power plants, according to people familiar with the matter, a major contract win for the conglomerate's crucial but struggling power-turbine business.

• Embattled J.P. Morgan(JPM Bulks Up Oversight. Bank to Increase Spending, Staff as It Faces Host of Regulatory and Legal Woes. J.P. Morgan Chase & Co., facing a host of regulatory and legal woes, plans to spend an additional $4 billion and commit 5,000 extra employees this year to clean up its risk and compliance problems, according to people close to the bank. As part of a companywide effort, the bank is spending an additional $1.5 billion on managing risk and complying with regulations, including a 30% increase in risk-control staffing, these people said. In addition, it expects to add $2.5 billion to its litigation reserves in the second half of the year, these people said. 
• At Wells Fargo(WFC), a Bear Among Bulls. Contrarian Analyst Sees S&P 500 Falling to Finish Year. Gina Martin Adams is out on a limb. The strategist at Wells Fargo WFC -0.56% Securities is the only stock-market guru at a major Wall Street firm calling for U.S. shares to slump. She is sticking with a call made earlier this year that the S&P 500-stock index will end 2013 at 1440. That would mean a 14% decline over the next 31/2 months, all but wiping out this year's gains. Ms. Adams reasons that once the Federal Reserve begins to pull back on its stimulus efforts, the stock market will lose a crucial source of support amid soft earnings growth.
• Doubts Rise as China Touts Upturn. Beijing's Reliance on Credit-Fueled Megaprojects, Exports Raises Questions About Rebound's Length. China's leaders are trumpeting their commitment to overhauls, but there are signs a recent turnaround in the Chinese economy relies on old policies, raising doubts about how long the rebound can continue. Some economists and business leaders say Beijing is pulling the same levers it has used in the past to produce growth, leaving untouched a reliance on exports abroad and credit-fueled investment in large infrastructure projects at home—the very model China says it wants to scrap.
• Hedge Funds Are Among the Winners of the Lehman Spoils. Investors Profit Via Claims on Bankrupt Bank's Assets; Paulson Up $1 Billion-Plus.
• Vladimir Putin Takes Exception. A riddle wrapped in a mystery inside an op-ed piece.

Fox News:

• Tea Party Republicans flex muscle, put Boehner in tight spot as shutdown looms. House Speaker John Boehner once again finds himself caught in the middle of a Capitol brawl between Tea Party Republicans and his Democratic counterparts, as he tries to navigate the choppy political waters and prevent a government shutdown at the end of the month. Tea Party-aligned members of Boehner's caucus are flexing their muscle and pressuring him to allow a vote on an anti-ObamaCare measure as part of ongoing budget talks. They want the vote tied directly to the budget measure, and rejected a compromise plan earlier this week -- leaving unclear how Congress might pass a short-term spending bill before funding runs out on Sept. 30.

CNBC:

• Five years after Lehman, is another crisis possible? (poll)

Zero Hedge:

• The Slow Rise And Quick Fall Of The SEC's Enforcements.

• Employment: Trending Down. (graphs)

• 2600 Years Of Financial Innovation. (graph)

• Nigel Farage Slams Barroso's European "Disaster". (video)

• Last Time We Checked, "Hope" Still Isn't A Strategy.

• Goldman(GS) Expects $10-15bn Taper And Fed Walking-Back From Employment Thresholds.

• On A Taper "Relief-Rally", Moar "Boots On The Ground", And "European Instability".

ValueWalk:

• EUR Likely To Fall As Selling Pressure Looms: SocGen.

Real Clear Politics:

• Cruz: When America Doesn't Lead, The World Is A More Dangerous Place. (video)

Reuters:

• California Senate votes to raise minimum wage to $10 by 2016.

• U.S. central bankers criticize SEC's money-market proposals. Heads of the 12 U.S. Federal Reserve regional banks on Thursday strongly criticized a component of a U.S. Securities and Exchange Commission proposal aimed at preventing runs on money-market funds, saying it does little to change current rules. 

• Online sales tax bill moving ahead in U.S. House. The U.S. Congress is moving ahead on legislation allowing states to collect sales taxes from online shopping, with the chairman of a key committee expected to release basic principles for the bill shortly. 

Telegraph:

• Italy floated plans to leave euro in 2011, says ECB insider.

• We’ve let a good financial crisis go to waste since Lehman Brothers collapsed. The financial system remains unchanged – banks are still too big to be allowed to fail.

• Eurozone industrial slump dashes hopes of strong recovery. Eurozone industrial output fell sharply in July, eroding all the gains made so far this year and casting serious doubts on the strength of economic recovery. 

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 140.0 +5.0 basis points.

• Asia Pacific Sovereign CDS Index 111.75 -2.0 basis points.

• FTSE-100 futures +.02%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DRI)/.70

Economic Releases
8:30 am EST  

• The Producer Price Index for August is estimated to rise +.2% versus unch. in July.

• The PPI Ex Food & Energy for August is estimated to rise +.1% versus a +.1% gain in July.

• Advance Retail Sales for August are estimated to rise +.5% versus a +.2% gain in July.

• Retail Sales Ex Auto for August estimated to rise +.3% versus a +.5% gain in July.

• Retail Sales Ex Auto and Gas for August is estimated to rise +.3% versus a +.4% gain in July.

9:55 am EST 

• Preliminary Univ of Mich. Consumer Confidence for September is estimated to fall to 82.0 versus 82.1 in August.
  

10:00 am EST

• Business Inventories for July are estimated to rise +.2% versus unch. in August.

Upcoming Splits

• (CGNX) 2-for-1

• (AFOP) 2-for-1

Other Potential Market Movers

• The Eurozone Trade balance report and (PFG) investor day could also impact trading today.

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

Stocks Lower into Final Hour on Rising Syria/Russia Tensions, Reversal Higher in Long-Term Rates, Profit-Taking, Commodity/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.24 +3.04%

• Euro/Yen Carry Return Index 137.86 -.56%

• Emerging Markets Currency Volatility(VXY) 10.39 -.48%

• S&P 500 Implied Correlation 46.30 +5.89%

• ISE Sentiment Index 92.0 -.20%

• Total Put/Call .84 -8.70%

• NYSE Arms 1.10 +54.17% 

Credit Investor Angst:

• North American Investment Grade CDS Index 77.35 +1.74%

• European Financial Sector CDS Index 138.09 +3.53%

• Western Europe Sovereign Debt CDS Index 90.0unch.

• Emerging Market CDS Index 309.90 +1.07%

• 2-Year Swap Spread 15.25 unch.

• TED Spread 24.50 +.5 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -8.5 unch.

Economic Gauges:

• 3-Month T-Bill Yield .01% -1 bp

• Yield Curve 247.0 +1 bp

• China Import Iron Ore Spot $135.20/Metric Tonne +.07%

• Citi US Economic Surprise Index 56.80 +3.3 points

• Citi Emerging Markets Economic Surprise Index 3.80 +7.9 points

• 10-Year TIPS Spread 2.11 -2 bps

Overseas Futures:

• Nikkei Futures: Indicating -37 open in Japan

• DAX Futures: Indicating -7 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:   

• Assad Sets Conditions as U.S.-Russia Geneva Talks Open. Syrian President Bashar al-Assad set what may be unacceptable conditions for the U.S. in negotiating a chemical-weapons deal, saying it must be a “two-way street” in which the Obama administration drops its military threats and stops arming Syrian rebels. Assad set out his terms as Secretary of State John Kerry told top Syrian opposition figures in a phone call that the option of a U.S. military strike remains on the table and that the U.S. will continue to stand by the rebels, according to a State Department official who asked not to be named because the talks were private.
• Richemont Sales Growth Misses Estimates on China Sales. Cie. Financiere Richemont SA (CFR), the world’s largest jewelry maker, reported revenue growth for the first five months of its fiscal year that missed estimates because of weak demand in mainland China. Sales rose 9 percent, excluding currency shifts, in the period through August, Geneva-based Richemont said today. Analysts expected 10 percent growth, according to the median of 21 estimates gathered by Bloomberg News. The stock fell as much as 3.7 percent, leading declines in the Swiss SMI Index. Revenue in the Asia-Pacific region, the source of 41 percent of Richemont’s sales last year, is rising more slowly as China cracks down on the use of watches and jewelry as bribes and illegitimate gifts. Growth in that market was 4 percent in the five months, continuing a slowdown in the last fiscal year and compared with a 46 percent gain a year earlier. 
• Rupiah Forwards Gain Most Since 2010 as Central Bank Raises Rate. Indonesia’s rupiah forwards gained the most since May 2010 and the onshore spot rate pared losses after the central bank unexpectedly boosted borrowing costs. Stocks and government bonds advanced. Bank Indonesia raised the reference rate to 7.25 percent, from 7 percent, as predicted by only four of 23 analysts surveyed by Bloomberg.
• Euro-Area Industrial Output Declines More Than Forecast. Euro-area industrial output contracted more than economists forecast in July as manufacturers struggled to shake off the legacy of a record-long recession. Factory production in the 17-nation euro area fell 1.5 percent from June, when it gained 0.6 percent, the European Union’s statistics office in Luxembourg said today. That’s more than the 0.3 percent contraction forecast by economists, according to the median of 33 estimates in a Bloomberg News survey. (EUITEMUM) In the year, output fell 2.1 percent.
• Italy Industrial Output Unexpectedly Falls as Slump Persists. Italian industrial production unexpectedly fell in July, signaling that the euro region’s third-biggest economy may still be stuck in its longest recession since World War II. Output fell 1.1 percent from June, when it rose a revised 0.2 percent, national statistics office Istat said in Rome today. Economists had estimated a 0.3 percent increase, according to the median of 16 estimates in a Bloomberg News survey. Output fell 4.3 percent from a year earlier when adjusted for working days. “We need to see a considerable upward correction in the following months to see activity gaining momentum over the quarter,” Annalisa Piazza, an analyst at Newedge Group in London, said in a note to investors. “So far, it looks like activity will remain on a downward trend.”  
• Italy Yield Premium Over Spain Reaches 18-Month High; Bunds Gain. The extra yield investors demand to hold Italian 10-year bonds over Spain’s widened to the most in 18 months as Italy’s cost of borrowing for three years climbed to the highest since October at a debt auction. Italian 10-year yields were about five basis points from a two-month high amid speculation a vote on whether to expel former premier Silvio Berlusconi from the Senate could destabilize Enrico Letta’s coalition government. The Rome-based Treasury sold a combined 5.5 billion euros ($7.32 billion) of securities due in 2016 and 2028. German (GDBR10) 10-year bunds rose along with Finnish and Dutch securities as investors sought the region’s safest assets.
• Europe Stocks Drop From Five-Year High on Industrial Data. European stocks slipped from the highest level in more than five years as the region’s industrial output contracted more than forecast. Sanofi fell 2.6 percent after withdrawing a U.S. application for a diabetes drug. Cie. Financiere Richemont (CFR) SA dropped 2.3 percent as revenue missed analysts’ estimates. Vivendi SA advanced 2.7 percent after saying it will begin a formal study to separate its French phone unit from its media businesses. Home Retail Group Plc (HOME) surged 5.4 percent to a two-year high as sales exceeded projections. The Stoxx Europe 600 Index slipped less than 0.1 percent to 310.74 at the close of trading, as four stocks declined for every three that gained. 
• Crude Rises a Second Day Amid U.S.-Russia Talks on Syria. West Texas Intermediate crude climbed a second day ahead of talks between the U.S. and Russia to resolve the crisis in Syria, a conflict that’s bolstered concern that Middle Eastern oil supplies may be disrupted. Futures rose as much as 1.5 percent as U.S. Secretary of State John Kerry arrived in Geneva to meet with Russian Foreign Minister Sergei Lavrov for discussions on a plan for Syria to surrender its chemical weapons. President Barack Obama has made their use the rationale for a potential attack on Syrian President Bashar al-Assad’s war-making ability. 
• Copper Reaches One-Week Low on Concern About Outlook for Demand. Copper reached a one-week low in London as reports of slumping prices, reduced industrial production and higher unemployment from Germany to Australia fanned concern about the outlook for demand.
• Gold Futures Fall Most in Nine Weeks on Fed Stimulus Bets. Gold futures tumbled the most in nine weeks after a report showed U.S. jobless claims last week fell to the lowest since April 2006, boosting speculation that the Federal Reserve will scale back fiscal stimulus soon. First-time claims for unemployment insurance fell by 31,000 to 292,000 in the week ended Sept. 7, government data showed. Analysts forecast 330,000.
• Consumer Comfort Steadies in U.S. After Four-Week Fall: Economy. (graph) The Bloomberg Consumer Comfort Index (COMFCOMF) rose to minus 32.1 in the week ended Sept. 8 from minus 32.3. The drop was within the survey’s margin of error of 3 percentage points. A measure of households’ assessment of the economy fell to the lowest level since mid-May.
• Disney(DIS) to Buy Up to $8 Billion of Stock Starting Next Year. Walt Disney Co. (DIS), the world’s biggest entertainment company, plans to buy back $6 billion to $8 billion of its stock starting next year, stepping up efforts to increase investor returns. The company, based in Burbank, California, will borrow to finance some of the repurchases, Chief Financial Officer Jay Rasulo said today at an investor conference in Beverly Hills, California. The company intends to maintain its debt ratings.

Wall Street Journal:

• Assad Demands End to U.S. 'Threats'. Syrian Leader States Conditions as Envoys Convene in Geneva. Syrian President Bashar al-Assad insisted that the U.S. give up its "policy of threats" and halt arms shipments to rebels before his government turns over its chemical weapons, as U.S. and Russian delegations arrived in Geneva to begin talks aimed at forging a road map for the shutdown of the weapons program. Mr. Assad's comments, in his first public statement on the Russian proposal that Syria hand over its chemical weapons, underlined the distance between Syria and its backers in Moscow on one side and the U.S. and its allies on the other.
• Economists Expect Tapering Announcement Next Week. Majority in WSJ Survey See Enough Evidence for Fed to Begin Pullback.

Fox News:

• My fellow members of Congress, let's vote on a Syria strike and bring Obama back from Never Never Land. Over the past ten days, friends and foes alike from die hard liberals to staunch conservatives have been clear and united in their message: do not involve America in yet another war. Why? It is a religious civil war. It will escalate. There is no imminent U.S. national security interest at stake.

CNBC: 

• Watch Art Cashin: 'We're heavily overbought'.

Zero Hedge: 

• Assad Lays Down His Conditions: "US Must Stop Aiding Terrorists", Israel Disposing Of WMDs; Accuses Saudi, Qatar And Turkey.
• Stratfor Warns "It Is Not Ending, But Evolving" In Syria.
• The "Real" America: Near Record 20% Struggle To Afford Food, Highest Since Crisis Began. (graphs)
• Five Years Later: 18 Dollars Of Debt For Every Dollar Of GDP; Total G7 Debt/GDP: 440%. (graph)
• Draghi's Termination Of Berlusconi Explained: Sylvio Threatened To Leave Euro.
• Italian Housing Market Faces Ongoing Collapse. (graph)
• Merkel's Mounting Imbalances. (graphs)

Reuters: 

• IMF warns Italy not to let up on reforms, sound finances.

Telegraph: 

• Currency debasement never works – just ask Henry VIII.

Bear Radar

Style Underperformer:

• Small-Cap Value -.54%

Sector Underperformers:

• 1) Gold & Silver -3.98% 2) Alt Energy -1.56% 3) Road & Rail -1.32%

Stocks Falling on Unusual Volume:

• BPOP, VLO, NIHD, BCE, PBR, SJR, CARB, UBNT, SFUN, EZCH, UMPQ, MW, KRC, LULU, BITA, WFT, OLED, XONE, MGAM, BRC, IIVI, KND, CZR, CODE and ALDW

Stocks With Unusual Put Option Activity:

• 1) S 2) MDY 3) FIO 4) DG 5) GDP
  

Stocks With Most Negative News Mentions:

• 1) AMD 2) JPM 3) TSO 4) DD 5) ISRG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume