Tuesday Watch

Evening Headlines 
Bloomberg:  

• Assad Cheered in Damascus for Canny Survivor’s Delaying Tactics. Osama Salloum was on the balcony of his Damascus apartment last week when a procession of honking cars celebrating President Bashar al-Assad’s birthday passed by. The 34-year-old accountant joined the youths waving flags and singing patriotic songs not only because he wanted to mark Assad’s Sept. 11 birthday, “but also to express gratitude for the government’s wise policies that prevented a U.S. strike,” he said. “Syrian diplomacy has borne the best of fruits.” 

• Kerry Says U.S. Isn’t Wavering on Seeking Assad’s Ouster. Secretary of State John Kerry said the U.S. isn’t softening its opposition to Syrian President Bashar al-Assad by making a deal that envisions his cooperation in securing and eliminating Syrian chemical weapons over the next nine months. Speaking to reporters in Paris shortly before a United Nations report confirmed the use in Syria of the nerve agent sarin, Kerry said yesterday that there’s no conflict between sending international chemical-weapons experts to work with Assad’s regime and the “strategic goal” of ending his rule. 

• Rupiah Passes Rupee as Asia’s Worst Currency: Chart of the Day. Indonesia’s record current-account deficit will drive away foreign investors and add pressure on the rupiah, the worst-performing currency in Asia since the beginning of June, according to Nomura Holdings Inc. 

• RBA Says Rate Cuts Still Possible, Signals No Moves Imminent. Australia’s central bank repeated it retains the option of reducing interest rates and said a further drop in the currency would aid the economy as resource investment slows, minutes of the Sept. 3 meeting showed. “Members agreed that the bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them,” the Reserve Bank of Australia said in notes of the meeting, at which it left its benchmark rate at a record low, released in Sydney today. “Some further decline in the exchange rate would be helpful.” 

• China Stocks Fall for Third Day, Longest Losing Streak in Month. China’s stocks fell for a third day, the longest stretch of losses in a month, after foreign investment data trailed economists’ estimates. Consumer-staples producers and Shanghai-based port operators and airlines slid. Shanghai International Port (Group) Co. dropped the most in four weeks after UBS AG downgraded the stock to sell. China Eastern Airlines Corp. retreated at least 5 percent for a second day before details of the Shanghai free-trade zone will be released later this month. Kweichow Moutai Co. led declines for consumer-staples companies. A report showed foreign-direct investment grew 0.6 percent last month, compared with the median estimate of 12.5 percent growth compiled by Bloomberg. The Shanghai Composite Index (SHCOMP) fell 0.8 percent to 2,212.66 at 10:34 a.m.

• Asia Stocks Fall From Four-Month High Before Fed Meeting. Asian stocks fell, with the benchmark regional index declining from a four-month high, as the Federal Reserve begins a two-day policy meeting at which it is forecast to reduce the pace of its U.S. bond buying. Samsung Electronics Co. (005930), Asia’s biggest technology company, sank 2.5 percent in Seoul, retreating from the highest level since May. Daiichi Sankyo Co. (4568), a drugmaker that owns 64 percent of Ranbaxy Laboratories Ltd., tumbled 5.7 percent in Tokyo after U.S. regulators restricted imports from one of the Indian drugmaker’s facilities. Japan’s Topix index rose 0.4 percent as the equity market reopened after a holiday. The MSCI Asia Pacific Index slipped 0.3 percent to 138.32 as of 11:38 a.m. in Hong Kong as nine of the 10 industry groups on the gauge declined.

• Rebar Trades Near Six-Week Low as China Steel Output Gains. Steel reinforcement-bar futures in Shanghai traded near the lowest in more than six weeks as output climbed in China, the biggest user. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.3 percent to 3,636 yuan ($594) a metric ton and was at 3,642 yuan at 10:06 a.m. local time. Futures declined to 3,628 yuan yesterday, the lowest intra-day level for a most-active contract since July 31.

• Binge Drinking Reaches Extreme Among U.S High School Seniors. Binge drinking is common among U.S. high school seniors with some reporting extremes of 15 or more alcoholic beverages in a row, a level of consumption that can lead to poisoning and death, a U.S. study found. 

• Fed Leader Doubt Erodes Low-Rate Message as QE Taper Looms. Federal Reserve officials will gather in their Washington board room this week to decide on policies that will unfold over the next two to three years without knowing who will lead the institution during that time. Yesterday’s announcement that Lawrence Summers has withdrawn his name from Obama’s list of candidates to succeed Fed Chairman Ben S. Bernanke threatens to weaken the central bank’s policy message by leaving the succession unsettled just as it considers scaling back record accommodation. 

• NYSE Reviewing Upgrade as Possible Cause of Options Outage. NYSE Euronext (NYX:US) is looking into whether a software upgrade at a subsidiary disrupted a price feed that briefly halted U.S. options exchanges today. Securities Industry Automation Corp., the NYSE unit that oversees the quote dissemination service linking U.S. options markets, is focusing on a programming update that may have led to today’s halt, said Rich Adamonis, an NYSE Euronext spokesman.

Wall Street Journal: 

• At Least 13 Killed in Washington Navy Yard Shooting. Pursuit of Another Potential Shooter Continues. A man who had been forced out of the military after a 2010 gun arrest opened fire inside a Navy building Monday morning, killing 12 people and injuring about a dozen more as he sprayed bullets into a cafeteria of unsuspecting military workers, officials said. Authorities said the alleged gunman, Aaron Alexis of Fort Worth, Texas, was killed in a shootout with police at the scene, but that wasn't the end to a chaotic day in the nation's capital that saw security officials lock down military buildings and the U.S. Senate, and cancel the Washington Nationals game scheduled later in the evening.

• Yellen Is Now Top Fed Hopeful. White House Leans to Vice Chairwoman After Summers's Withdrawal From Consideration. Federal Reserve Vice Chairwoman Janet Yellen emerged as the front-runner to become the White House's nominee to lead the central bank, a day after Lawrence Summers pulled out of the contest amid congressional resistance, according to people familiar with the matter. 

• How China Lost Its Mojo: One Town's Story. Once Booming Yantian Looks for New Sources of Growth. Not long ago, this factory town in southeastern China was an emblem of the country's massive export boom. Today, it is a symbol of China's struggle to sustain a growth streak. Low wages, easy access to overseas markets, and a business-savvy leadership helped transform Yantian in the 1990s from a sleepy agricultural hamlet to a manufacturing hub with close to 150,000 people. By 1998, more than 400 foreign firms set up shop, churning out electronics, toys and watches for export. A golf course and high-end hotel sprang up to keep Japanese and Hong Kong factory bosses amused.

• GM(GM) Developing Car to Rival Tesla(TSLA). Cost of Advanced Battery-Technology Remains Hurdle to Building Longer-Range Vehicles. General Motors Co. is developing an electric car that can go 200 miles on a charge for around $30,000, officials at the largest U.S. auto maker said, offering a challenge to luxury electric-car startup Tesla Motors Inc. Doug Parks, GM's vice president of global product programs, disclosed the effort on Monday at GM's battery laboratory and test facility in Warren, Mich., but didn't say when the car would be available. He said while the technology is available now, the cost of the batteries remains too high to be able to pull off the feat today.

• U.S. Overstates Leaks by Gas-Drillers, Says Study. University of Texas Researchers Challenge Methane Emissions by Fracking.

• Obama Feels a Pinch From Congressional Democrats. Resistance to Summers for Fed Role Suggests Softening Clout Ahead of Budget Talks. The Democratic uproar that sank Lawrence Summers's chances of taking charge of the Federal Reserve suggests that President Barack Obama's clout on Capitol Hill is eroding ahead of crucial decisions about government spending and the debt ceiling. Mr. Obama often singles out House Republicans for blocking his agenda in Congress. But as his second term plays out, he also is confronting restive factions within his own party that are uneasy with some of his policies.

Fox News:

• Police believe Navy vet acted alone in DC shooting rampage that killed 12.

CNBC:

• US indicts two ex-JPMorgan traders in 'London Whale' scandal. A U.S. grand jury has indicted two former JPMorgan Chase traders at the center of the bank's "London Whale" scandal, court papers made public on Monday show.

Zero Hedge: 

• On The "Lunatics" At The Fed" Bill Fleckenstein Warns "As The Fantasy Dies, Gold Will Soar".

• 25 Fast Facts About The Federal Reserve.

• David Stockman On 2008: "Hank Paulson's Folly: AIG Was Safe Enough to Fail" Part 1.

• Washington Shooting Suspect Was HP Contractor Upgrading Navy, Marine Equipment.

• TEPCO Releases Typhoon Water Into Ocearn, Says It Was Safe.

Business Insider: 

• IBM(IBM) Vows To Spend $1 Billion To Promote An Operating System That Competes With Windows.

• 5 Reasons For The Fed To 'Taper' That Have Nothing To Do With Economic Data.

• Yes, You Can Still Get A Government-Backed Mortgage With Just 3.5% Down.

• Americans Are Rekindling Their Dangerous Love For Credit. 

• Traders Are Beginning To See Dreaded 'Black Candles' Appearing In The Market.

Reuters: 

• Mosaic(MOS) cuts 3rd-quarter outlook for potash, phosphate. U.S. fertilizer company Mosaic Co cut its third-quarter outlook for the price and sales volume of potash and phosphate on Monday, saying crop nutrient markets had softened in the wake of the breakup of the Belarusian Potash Company (BPC). The company's shares eased 0.9 percent in New York after markets closed.

Telegraph: 

• Mario Draghi risks row with Germany over bank plan. Mario Draghi has put the European Central Bank on a collision course with Berlin after insisting that Europe needs a single authority to wind up failing banks — just two days after Germany said the idea was legally questionable.

 Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 131.0 -4.0 basis points.

• Asia Pacific Sovereign CDS Index 108.75 -6.5 basis points.

• FTSE-100 futures -.15%.

• S&P 500 futures -.14%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ADBE)/.34

• (FDS)/1.19

Economic Releases
8:30 am EST  

• The Consumer Price Index for August is estimated to rise +.2% versus a +.2% gain in July.

• The CPI Ex Food & Energy for August is estimated to rise +.2% versus a +.2% gain in July.

9:00 am EST 

• Net Long-Term TIC Flows for July are estimated at -$15.0B versus -$66.9B in June. 

10:00 am EST

• The NAHB Housing Market Index for September is estimated to fall to 58 versus 59 in October.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Housing Price data, Eurozone Trade Balance report, UK Inflation Data, Germany ZEW Index, CBO Long Term Budget Forecast, weekly retail sales report, CSFB Chemical/Agricultural Conference, RBC Capital Financial Institutions Conference and the CSFB Small/Mid-Cap Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and technology 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.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.26%

Sector Underperformers:

• 1) Disk Drives -.22% 2) Networking -.16% 3) Restaurants +.15%

Stocks Falling on Unusual Volume:

• MILL, GRPN, AAPL, HSNI, CBEY, NTLS, EZCH, PERI, ODFL, XONE, QIHU, UA, MW, EPAY, ARCP, NTLS, LRN, ALTR, NVS, IGTE, AWR, USM, GIMO, MTZ, SINA, BCEI, BID, RGR, ABFS and CTB

Stocks With Unusual Put Option Activity:

• 1) CVC 2) COH 3) CMI 4) KBH 5) HYG
  

Stocks With Most Negative News Mentions:

• 1) BBRY 2) MSFT 3) FB 4) AAPL 5) GOOG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.97%

Sector Outperformers:

• 1) Homebuilders +2.56% 2) HMOs +1.75% 3) Agriculture +1.59%
  

Stocks Rising on Unusual Volume:

• BFR, GTE, BZ, PKG, SOHU, RMTI, AVG, HTH, KS, HSC, ATI, TASR, LPX and UNXL

Stocks With Unusual Call Option Activity:

• 1) XLU 2) MW 3) EA 4) RSH 5) NFX
  

Stocks With Most Positive News Mentions:

• 1) JBLU 2) AVB 3) CELG 4) SCTY 5) SWHC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg: 

• Syrian Chemical Weapons Agreement Faces Major Obstacles. Syria must disclose the complete details of its chemical weapons and related facilities by next Saturday, a critical test of whether President Bashar al-Assad will comply with the U.S.-Russian accord on finding, securing and eliminating his toxic armaments. The plan agreed upon by Russia and the U.S. is to follow a “tightly fixed schedule” that envisions international monitors taking control of Syria’s chemical weapons until they can be destroyed or removed from the country by mid-2014, a timetable that will be difficult to meet even if Assad’s regime cooperates. There are gaps in what officially is called a “framework” that add to the uncertainties about whether it will deliver as promised by U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov. If Assad fails to comply, President Barack Obama will again confront the issue of whether to use U.S. military force. “It’s a wait-and-see game at this point,” said Faiza Patel, a former official at the Organization for the Prohibition of Chemical Weapons, the international body that oversees the Chemical Weapons Convention banning such arms.

• No Faith in Stocks Stops China Effort to Cool Housing. Matthew Zhou and his wife spent 1.6 million yuan ($261,000) to buy a two-bedroom apartment last month in eastern Shanghai after seeing no potential for long-term returns in China’s financial markets. “Home prices keep rising, so I’d rather buy a place now than put the money in the stock market,” said Zhou, a 30-year old information technology engineer at a state-controlled bank in Shanghai, who plans to leave the home empty while the couple live with her parents. Gains in equities “could never outpace the growth of home prices,” he said. The willingness of people like Zhou to shun other investments in favor of property shows why residential prices have defied a more than three-year-long government campaign to rein them in and is among the forces crippling efforts by the central government to deal with an expanding housing bubble.

• China Reins in Popular Voices With New Microblog Controls. Chinese microblogger Dong Rubin mused to his 45,000 followers last month that he might face arrest amid a government crackdown on Internet rumors. On Sept. 10, he was detained for misreporting the worth of his business. Dong joined a group of people who had gone online to criticize government-sanctioned projects or voice political opinions and wound up in detention on unrelated allegations. This year, Dong opposed plans for an oil refinery in the southern city of Kunming where he lives, a project that spurred street protests. 

• Record Rout in Government Banks as Buffers Drop: Corporate India. Shares of India’s state-run banks are trading near record-low valuations as concern grows about narrowing risk buffers and rising bad loans. Indian Bank, United Bank (UNTDB) of India Ltd. and Union Bank of India, have fallen more than 55 percent this year to Sept. 12, the most among the nine government banks that are leading declines for India’s 40 bank stocks. Shares of the nine lenders are all trading below the value of their assets amid lower-than-average capital adequacy levels and bad loan ratios that are about double those of private-sector lenders.

• Singapore Banks on Asean Lure as Job Crunch Raises Angst. Singapore is counting on Southeast Asia’s economic boom to lure investment as the island’s clampdown on foreign labor raises wage costs and makes it difficult for companies to fill positions.

• Loans to Emerging Markets Jumped Most on Record, BIS Report Says. Banks increased lending in developing nations by the most on record in the first quarter, helping to double the share of interbank loans going to emerging markets, the Bank for International Settlements said. Foreign lending to developing nations rose 8.4 percent, or $267 billion, in the three months ended March 31 from the quarter before, the Basel, Switzerland-based institution said in its quarterly report released today. Loans in Brazil, China and Russia contributed 85 percent to the growth, according to banks reporting to BIS. Cross-border credit to developed nations fell 1.5 percent. 

• China’s Stocks Swing Between Gains and Losses; Airlines Slump. China’s stocks swung between gains and losses as property developers and coal companies advanced, whike banks and airlines declined. China Coal Energy Co. led gains for coal producers after sales volumes increased. Shanghai Waigaoqiao Free Trade Zone Development Co. rallied 10 percent. China Eastern Airlines Corp., the second-biggest domestic carrier, slid 3.8 percent after valuations jumped to a one-year high last week. Shanghai Pudong Development Bank Co. fell 3.4 percent.

• Dollar Sinks as Asian Stocks Rise on Summers; Crude Slips. The dollar weakened against all its major peers while Asian stocks climbed with U.S. index and Treasury futures as Lawrence Summers withdrew his bid to become Federal Reserve chairman. Crude oil fell after the U.S. and Russia agreed on a plan to eliminate Syria’s chemical weapons. The Bloomberg U.S. Dollar Index dropped 0.5 percent at 10:41 a.m. in Hong Kong and the greenback slumped 1 percent against the Australian dollar. Standard & Poor’s 500 Index (SPX) futures jumped 1 percent and the MSCI Asia Pacific Excluding Japan Index gained 1.2 percent with Japanese markets closed. Ten-year Treasury futures rose 0.8 percent and Australian bond yields dropped as much as 15 basis points. 

• Rebar Futures Decline to Six-Week Low as Mills Increase Output. Steel reinforcement-bar futures in Shanghai dropped for a fifth day, slipping to the lowest level in more than six weeks, on concern that increased production by steel mills will weigh on prices. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.4 percent to 3,643 yuan ($595) a metric ton, the lowest intra-day level since Aug. 1. Futures traded at 3,644 yuan at 11:30 a.m. local time, down 8.6 percent this year. The building material lost 1.8 last week.

• Gold Bulls Cut Wagers as Goldman Sees More Losses: Commodities. Speculators got less bullish on gold, selling long contracts at the fastest pace this year as prices fell the most in almost three months on prospects for less central-bank stimulus. Goldman Sachs Group Inc. said the retreat has further to go. The net-long position held by hedge funds and other large speculators fell 16 percent to 84,929 futures and options in the week ended Sept. 10, U.S. Commodity Futures Trading Commission data show. Long holdings dropped 10 percent, the most since December, and short bets increased 9.8 percent. The net-bullish position across 18 U.S.-traded commodities slid 4.1 percent, with investors adding to bearish wagers on wheat and corn.

• Merkel Ally FDP Defeated a Week Before Federal Vote. Germany’s Free Democratic Party said it will step up its campaign to remain Chancellor Angela Merkel’s coalition ally after a state election defeat one week before the national vote. Support for the FDP fell to 3 percent in Bavarian regional elections today from 8 percent five years ago, bouncing the party out of the state legislature, according to separate projections by public broadcasters ARD and ZDF. “This is without a doubt a serious defeat for the FDP,” FDP head Philipp Roesler told reporters in televised remarks. “But from now it’s about Germany. This result is a wake-up call to all liberals in Germany”.

Wall Street Journal: 

• Victory on Summers Emboldens Liberals as New Fights Loom. Chest-thumping by liberals after Lawrence Summers‘s decision to withdraw from consideration as the next chairman of the Federal Reserve could have broad implications, not just on the central bank but also for how Democrats maneuver during looming budget fights. A number of Democrats and liberals quickly called Mr. Summers’s move a victory for their cause, and they tried to leverage the decision to pressure President Barack Obama to nominate Fed vice chairman Janet Yellen to the post.

• Fed to Meet Amid Trio of Threats to Economy. Central Bank Faces Rising Rates, Turmoil Abroad, Budget Fight at Home.

• Choosing the Next Fed Chief: Streaming Coverage.

• Syria Deal Draws Fire From Key Republicans. Key Republican lawmakers condemned a U.S.-Russia deal to force Syria to give up its chemical weapons as a feeble exercise that won’t rid the regime of its arsenal and that gives Moscow dangerous new power in the Middle East.

• Confronting Syria: Streaming Coverage. 

• Floods Still Wreaking Havoc in Colorado. After three days of flooding, rain continued to soak parts of Colorado on Sunday, and the National Weather Service warned of possible flash floods in rural areas and big cities including Denver and Boulder. Across the state, officials had confirmed four fatalities; two more people were presumed dead and hundreds remained stranded or unaccounted for.

• Why the Russians Can't Be Trusted in Syria. Moscow isn't even complying with a commitment to destroy its own chemical weapons.

Marketwatch.com: 

• Are China reform hopes fizzling out? Commentary: Policy moves signal backward steps.

• Standoff in Philippines may worry some investors. A deadly standoff in Zamboanga City in the southern Philippines is resurrecting worries about that region’s stability and might even take away from the whole country’s reputation as one of Asia’s hottest economies.

Fox News:

• State Department’s Benghazi review let senior officials off the hook, report finds. The State Department review of the Benghazi terror attack let senior officials off the hook for the policy decisions that led to sub-standard security at the U.S. compound in eastern Libya, according to a draft House committee report obtained by Fox News. The nearly 100-page report concludes that the State Department’s internal review board -- called the Accountability Review Board, or ARB -- was flawed. The report by Republicans on the House Oversight and Government Reform Committee alleges the board’s probe was not comprehensive, its interviews were not thorough, and the investigation itself may have been damaged by conflicts of interest.

Zero Hedge:

• Larry Summers Withdraws From Fed Chairman Race.

• Syrian Rebels Furious At U.S.-Russian Deal. (video)

• More Official Reactions To Summers' Stunner.

• Behold,The Insatiable Rise Of HFT Quote Spam. (video)

• El-Erian: What's Happening To Bonds And Why?

• The German Federal Election: The Full Infographic.

• Military Times Survey: 75% of Troops Oppose Strikes On Syria.

• Record High Grade Leverage Means PIK Toggle LBO Debt Is Back And Worse Than Ever. (graph)

• White House Scraps Option For Labor Union Obamacare Exemption, Despite AFL-CIO Anger.

• 3 Potential "Taper" Surprises And FOMC Sugar-Coating.

• BAML Warns "If The US Economy Does Not Significantly Accelerate Now, It Never Will". (graph)

• Merkel Wins Bellwether Vote As Coalition Partner Founders; Anti-Euro Party Ascent Could Derail Coalition.

• Five Years After Lehman, BIS Ex-Chief Economist Warns "It's Worse This Time".

Business Insider:

• The Syrian Chemical Weapons Deal Is Nothing More Than A Face-Saving Stalling Tactic.

• Vladimir Putin Is 'Basking In The Glory Of Having Flipped The Diplomatic Bird' To America.

• Analyst: Nearly Half Of Syrian Rebel Fighters Are Either Jihadists Or Hardline Islamists.

• ANALYST: 'Nominating Yellen Now Could Make Obama Look Weak'.

• Five Years After Lehman, Could Another Collapse Be On The Horizon?

• Japan Is Completely Switching Off Nuclear Power Again.

• At Least 4 People Dead, Another 350 Unaccounted For In Colorado Flood Disaster.

• IMF WARNS: China Is Taking Ever Greater Risks And Putting The Financial System In Danger. 

• Stocks Are Increasingly Vulnerable To A Severe Decline.

Wall Street All-Stars:

• Indicator Update: Will Bernanke Change Course?

New York Times: 

• Tax Increase Proposal Raises Fear of a Slowdown in Japan. What could possibly go wrong? A plan to raise taxes at the worst conceivable moment, economists warned.

Reuters:

• Inflation adds to headaches for Indian central bank chief's first meeting. When he holds only his first policy review this week, India's new central bank chief has to confront what may well prove to be the biggest challenge of his time in office. 

• Portugal's next bailout review could drop the compliments. Portugal's leaders have generally done what their international lenders have advised, setting a pattern of government compliance and official praise. This week's bailout inspection could be different. 

• Obama will deal on budget, not on debt limit -ABC interview. President Barack Obama, in an interview broadcast on Sunday, blamed conservative Republicans for a stalemate on the budget and insisted that while he is willing to haggle over taxes and government spending, he will not make a deal would that would impose conditions on increasing the nation's debt limit. 

• EU officials pile pressure on Italy to keep government afloat. European Union officials warned Italy on Sunday not to let politics ruin recovery prospects and upset debt markets in a week that could signal the end of Erico Letta's fragile five-month-old government.

Messaggero:

• EU to Be Rigorous on Italy Budget Plan, Barroso Says. EU Commission president says in an interview that Italian govt's 2013 budget will be rigorously analyzed by EU. Italy is being encouraged to meet its targets, Barroso said.

Il Giornale:

• Italian Senator Was Asked to Help Form New Government. Robert Calderoli of opposition Northern League refused to help build a new majority, citing senator. Approaching Calderoli shows PM Enrico Letta's PD party seeks to build new majority without former PM Silvio Berlusconi's PDL. Italy Senate vote on Berlusconi may occur by Oct. 15.

Il Sole 24 Ore:

• Italy's Economic Reforms Have Disappointed: EU's Rehn Says. EU Economic and Monetary Affairs commissioner said missed reform opportunities have hurt economic growth and employment. Says he is confident govt will respect 2013 budget targets. Says political stability is of primary importance. Says recent data shows Italian economy remains relatively weak, without clear sign of recovery.

• Letta Says Property Tax Will Be Collected If Govt Falls. Italian PM says no coalition party wants to be responsible for eventual govt collapse, citing Enrico Letta's comments at political rally yesterday. Letta says annual budget will be written by EU officials if govt fails.

ABC:

• Germany's Roesler Says Spain Must Continue Budget Cuts. German Vice Chancellor Philipp Roesler says Spain must keep cutting its budget deficit and pushing through reforms to boost economic growth as concerns about the country's indebtedness persist. 

Le Monde:

• Former ECB Head Trichet Sees New Crisis Without Reforms. Jean-Claude Trichet says in interview that governments and private sector must use respite provided by central banks to improve budgets, structural reforms, prudential rules, risk controls.

La Stampa:

• Italy's Baretta Says Luxury Homes May Be Taxed More in 2013. Italian finance undersecretary says in an interview that resources needed to meet 2013 deficit targets. 

Yomiuri:

• Poll Shows Japan Tax Increase to Curb Consumer Spending. 56% of respondents plan to cut household spending if gov't raises consumption tax to 8% in April from 5% now, citing own poll.

Shanghai Securities News: 

• China Outstanding Local Govt Debt About 15-18t Yuan now, citing China's Chengxin rating co. executive vice president Yan Yan.

Weekend Recommendations

Barron's:

• Bullish commentary on (ABX), (CSC), (X), (LUV), (APA), (KSS), (CST), (PAY) and (SNI).

Night Trading

• Asian indices are +.50% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 135.0 -5.0 basis points.

• Asia Pacific Sovereign CDS Index 115.25 +3.5 basis points.

• FTSE-100 futures +1.09%.

• S&P 500 futures +1.11%.

• NASDAQ 100 futures +1.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
8:30 am EST

• Empire Manufacturing for September is estimated to rise to 9.0 versus 8.24 in August.
  

9:15 am EST

• Industrial Production for August is estimated to rise +.4% versus unch. in July. 

• Capacity Utilization for August is estimated to rise to 77.9% versus 77.6% in July.

• Manufacturing Production for August is estimated to rise +.4% versus a -.1% decline in July.

Upcoming Splits

• (CGNX) 2-for-1

• (AFOP) 2-for-1

Other Potential Market Movers

• The Bank of Australia minutes, Eurozone CPI data and the Morgan Stanley Industrials/Autos Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by industrial and financial shares in the region. I expect US stocks to open higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (audio). 
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as rising energy prices, technical selling and emerging markets debt angst offset central bank hopes, stable long-term rates and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,687.99 +1.98%*




The Weekly Wrap by Briefing.com.

*5-Day Change