Thursday Watch

Evening Headlines 
Bloomberg:

• U.S. Raises Prospect That Syria Will Miss Date for Disclosures. The U.S. raised the prospect that Syria will miss the first test of its compliance with an agreement to give up its chemical weapons. While Secretary of State John Kerry has said that Syria “must submit” a full disclosure of its chemical weapons by Sept. 21, as called for in the U.S.-Russia accord, State Department spokeswoman Marie Harf said today that the U.S. was prepared for some delay. She said the date -- one week after the accord was reached in Geneva that averted U.S. military strikes -- was more a “timeline” than “a hard and fast deadline.” 

• Kuroda Cash Heading to U.S. Dulls Stimulus Impact: Japan Credit. Bank of Japan Governor Haruhiko Kuroda's unprecedented cash provisions are flowing into U.S. bonds and overseas loans instead of fueling investment at home. Treasuries held by Japanese investors rose $52 billion to a record $1.135 trillion as other nations' holdings of the securities dropped by $63 billion in July, U.S. government data show. At the same time, Japanese lenders have become the world's biggest providers of cross-border loans, a report from the Bank for International Settlements showed on Sept. 15.

• Goldman Drawing Negative Loops as SBI Risk Climbs: India Credit. Goldman Sachs Group Inc. warned that “negative feedback loops” triggered by waning investor confidence are threatening India’s finances, after state-owned lenders’ bond risk surged the most in Asia this quarter. The investment bank said in a Sept. 16 report the rupee may drop to 72 per dollar in six months from 63.385 now as weaker capital inflows force the central bank to raise interest rates, hurting lenders and the economy. Rising bad loans then require more capital injections, further worsening perceptions of India’s finances. “There might be a need to recapitalize banks above the budgeted amounts, but there is not much fiscal room available this year,” Tushar Poddar, Mumbai-based economist at Goldman Sachs, said in an interview yesterday.

• Asia Stocks, Bonds Jump on Fed as Copper to Baht Surge. Asian stocks jumped to a four-month high, bond yields and credit risk declined while industrial metals rallied after the Federal Reserve unexpectedly refrained from reducing U.S. economic stimulus. The Thai baht strengthened the most in six years. The MSCI Asia Pacific Index climbed 1.9 percent as of 12:20 p.m. in Tokyo, set for the highest close since May 22. Standard & Poor’s 500 Index futures added 0.1 percent after the measure rose 1.2 percent to a record yesterday. Australian 10-year bond yields fell the most in more than six weeks. Copper jumped 1.6 percent and oil advanced 0.4 percent. The baht gained 2 percent, the Indian rupee surged 2.5 percent and the Malaysian ringgit was up 2.2 percent.

• WTI Oil Gains for Second Day as Fed Maintains Economic Stimulus. West Texas Intermediate crude rose for a second day after the Federal Reserve said it will maintain monthly bond purchases to stimulate economic growth in the U.S., the world’s biggest oil consumer. Futures advanced as much as 0.6 percent in New York after climbing the most in more than three weeks yesterday.

• Gold Jumps Most in 15 Months as Fed Refrains From Stimulus Taper. Gold jumped the most in 15 months after the Federal Reserve unexpectedly refrained from reducing the pace of monthly U.S. bond purchases, increasing demand for the metal as a store of value. Gold for immediate delivery climbed 4.1 percent to $1,364.02 yesterday, the biggest gain since June 1, 2012, rebounding from a drop of as much as 1.4 percent to $1,292.02, the lowest since Aug. 8.

• Merkel Rejects Joint Euro Debt, Promises to Stay Hard Course. German Chancellor Angela Merkel told supporters she’ll stand as a bulwark against joint debt in the euro area if she’s re-elected in four days and continue to extract conditions from indebted nations. Speaking at an election rally of several thousand at a portside warehouse in Hamburg, Merkel denounced plans that have been supported by the opposition Social Democrats, such as a debt-redemption fund and jointly issued euro bonds to overcome the nearly four-year-old European debt crisis.

Wall Street Journal:

• House GOP Ties Government Funding to Health Law. Boehner, Republican Leaders Press Plans to Tie Priorities With Derailing Obamacare. House Republicans said Wednesday that stripping funding from the health-care law championed by President Barack Obama would be their price for keeping federal agencies open after the end of this month, a move that sharply increases the risk of a partial government shutdown in two weeks. GOP leaders said the House would vote Friday on a bill to fund federal agencies for the first 2 1/2 months of the fiscal year, which starts Oct. 1, but strip all health-law funding.

• Four Takeaways on the Fed’s Economic and Rate Projections.

• Stock Investors Are Left Wondering When on Fed's Taper. Stocks Welcomed the Fed Sticking to Its Policy, but Big Questions Remain. One of the oldest clichés on Wall Street is that financial markets hate uncertainty and confusion. On Wednesday, the Federal Reserve gave the markets uncertainty and confusion about plans to wind down its bond-buying program, and markets loved it, sending U.S. stock indexes to records.

• Starbucks Declares Guns Unwelcome, but Doesn't Ban Them. CEO Letter Thrusts Coffee Chain Deeper Into Debate Over Gun Owners' Rights to Carry Firearms in Restaurants.

Fox News:

• Defiant Assad claims government did not use chem weapons, vows to abide by agreement. (video) Syrian President Bashar Assad, in an exclusive interview with Fox News, claimed he is fully committed to carrying out a plan to turn over and destroy his government's chemical weapons -- while continuing to deny responsibility for last month's deadly chemical weapons attack despite new evidence that officials say implicates the Assad regime. 

CNBC:

• No taper brings back talk of currency war.

• Oracle(ORCL) shares skid after cautious outlook. Oracle delivered a cautious second-quarter outlook, which the company attributed to lackluster business-technology spending in the U.S. and Europe. Shares fell nearly 3 percent after-hours. The company said it expects earnings of 64 to 69 cents a share and for revenue to grow 1 percent to 4 percent during the quarter. Analysts currently expect earnings of 69 cents a share and revenue growth of 3 percent.

• Chanos Warns: Beware These Momentum Stocks. (video)

• Fear of missing out fuels China property market.

Zero Hedge:

• Five Years Of Hard Work By The Federal Reserve. (graph)

• More Warnings: "This Time Is Different". (video)

• 63 High Government Debt Episodes And What They Tell Us About Our Options Today.

• Goldman(GS) Flip-Flops: Sees Near-Term Upside In Gold.

• As Bernanke Blows A Bigger Bubble, Everything Is Bought. "We have got to turn the page on this kind of bubble-and-bust mentality that helped to create this mess in the first place, we have got to build a housing system that’s durable and fair and rewards responsibility for generations to come.  That is what we have got to do," - Barack Obama, August 6, 2013.

Business Insider:

• The Entire State Of The US Economy, The Fed, And The Stock Market In One Disturbing Paragraph.

• FLECKENSTEIN: 'All Hell Is Going To Break Loose'.

• The Stories From Inside North Korea's Prison Camps Are Horrifying.

New York Times:

• JPMorgan(JPM) Set to Pay More Than $900 Million in Fines. JPMorgan Chase is expected to pay more than $900 million in fines to government authorities in Washington and London and make a rare admission of wrongdoing on Thursday, a pact that will settle a range of investigations over a multibillion trading blunder the bank suffered last year, according to people briefed on the matter.

Reuters:

• China property developers hoarding $25-billion in cash. China’s biggest property developers are sitting on $25-billion (U.S.) in cash as they prepare for a possible credit crunch and another round of crackdowns on real estate speculation.

• Cleveland Clinic announces job cuts to prepare for Obamacare. The world-renowned Cleveland Clinic said on Wednesday it would cut jobs and slash five to six percent of its $6 billion annual budget to prepare for President Barack Obama's health reforms. The clinic, which has treated celebrities and world leaders such as musician Lou Reed, former Italian Prime Minister Silvio Berlusconi and former Olympic gold medal skater Scott Hamilton, did not say how many of its 44,000 employees would be laid off. But a spokeswoman said that $330 million would be cut from its annual budget. 

• Japan firms' mood dips as emerging economies slow -Reuters Tankan. Confidence among Japanese manufacturers slipped in September from a three-year high the previous month, a Reuters poll showed on Thursday, as concerns about slowing growth in emerging markets hit exporters and a weaker yen pushed up import costs. Since mid-year, the market gains have plateaued, a planned sales tax rise has been a major political issue and some major emerging markets have been badly hit by capital outflows. The index of sentiment at manufacturers fell to plus 12 in September, its lowest since May, from 16 in August in the monthly Reuters poll, which is strongly correlated with the Bank of Japan's tankan poll.

• Qaeda affiliate overruns Syrian town near Turkish border -activists. A rebel group affiliated with al Qaeda overran a Syrian town near the border with Turkey on Wednesday after fighting broke out with units of the Arab- and Western-backed Free Syrian Army, opposition activists said.  

• In sign of downturn, Indian retail landlords finally capitulate on price. In a capitulation that speaks to the depth of the slump in India's economy, usually tight-fisted retail landlords have become uncharacteristically flexible on rents, as Lacoste India CEO Rajesh Jain knows well.

Telegraph:

• No taper: the Fed loses its nerve. So for now, the Fed is holding back, even though it must know that QE has become little more than a confidence trick in so far as the real economy is concerned. It keeps markets happy, and asset prices growing, but it does nothing to address the underlying fault lines in the US and global economies, and indeed in the long term threatens only to make them a great deal worse. The can has been kicked further down the road, but it's still there, and the longer this failure to face up to reality persists, the more painful the eventual denouement will be.

• China's credit boom is spiralling out of control, warns Fitch. China's massive credit boom is rapidly growing to unsustainable levels and over-extended financial institutions risk being pushed over the edge by rising interest rates, according to rating agency Fitch. Fitch warned that China's credit-fuelled expansion continued unabated, despite talk of contracting credit. "To the extent people think there's deleveraging underway, or growth is coming back in a strong way - nothing has really changed," said Charlene Chu, senior director at Fitch Ratings. "The bottom line is we continue to be in the middle of this very large credit boom." According to Fitch's calculations, annual new credit in China climbed to 21 trillion yuan (£2.15 trillion) in August, up from 19 trillion yuan in August 2012, the fifth year that net new credit has exceeded more than one-third of GDP. "It is difficult to see how a situation in which credit – already twice as large as GDP – continues to grow by twice as fast can be sustainable indefinitely," the report said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are +1.0% to +1.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 114.50 -17.5 basis points.

• Asia Pacific Sovereign CDS Index 102.5 -7.75 basis points.

• FTSE-100 futures +1.30%.

• S&P 500 futures +.10%.

• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PIR).21

• (IHS)/1.17

• (RAD)/-.04

• (SCHL)-.68

• (CAG)/.39

• (TIBX)/.22

• (CTAS)/.63

Economic Releases
8:30 am EST  

• Initial Jobless Claims are estimated to rise to 330K versus 292K the prior week.

• Continuing Claims are estimated to rise to 2900K versus 2871K prior.

• The Current Account Deficit for 2Q is estimated at -$97.0B versus -$106.1B in 1Q.

10:00 am EST 

• Philly Fed for Sept. is estimated to rise to 10.3 versus 9.3 in August.

• Existing Home Sales for August are estimated to fall to 5.25M versus 5.39M in July.

• Leading Index for August is estimated to rise +.6% versus a +.6% gain in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ's Kuroda speaking, Fed's Pianalto speaking, (MSFT) financial analyst meeting, UK retail sales report, Bloomberg Economic Expectations Index for Sept. and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by financial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Surging into Final Hour on Central Bank Hopes, Less Emerging Markets Debt Angst, Short-Covering, Metals & Mining/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.57 -6.61%

• Euro/Yen Carry Return Index 138.06 unch.

• Emerging Markets Currency Volatility(VXY) 10.03 -2.62%

• S&P 500 Implied Correlation 45.34 -4.93%

• ISE Sentiment Index 105.0 -29.53%

• Total Put/Call .88 -14.29%

• NYSE Arms .79 +3.30% 

Credit Investor Angst:

• North American Investment Grade CDS Index 68.87 -5.82%

• European Financial Sector CDS Index 131.29 -1.92%

• Western Europe Sovereign Debt CDS Index 89.30 -1.86%

• Emerging Market CDS Index 265.03 -9.32%

• 2-Year Swap Spread 15.25 -.5 basis point

• TED Spread 24.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -8.0 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 237.0 -10 basis points

• China Import Iron Ore Spot $131.70/Metric Tonne +.46%

• Citi US Economic Surprise Index 39.20 -1.5 points

• Citi Emerging Markets Economic Surprise Index 1.10 -.8 point

• 10-Year TIPS Spread 2.21 +4 basis points

Overseas Futures:

• Nikkei Futures: Indicating +320 open in Japan

• DAX Futures: Indicating +105 open in Germany

Portfolio: 

• Higher: On gains in my tech/medical/biotech/retail sector longs 

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.93%

Sector Underperformers:

• 1) HMOs -2.33% 2) Retail -.75% 3) I-Banks -.72%

Stocks Falling on Unusual Volume:

• TWGP, FLTX, FIVE, TGI, PPO, CZR, CBRL, ESRX, MINI, AEGR, LBTYK, ICPT, RYAAY, RKT, CI, CTRX, CQP, SHLD, CLX, BERY, XOOM, CLW, CVS and WPRT

Stocks With Unusual Put Option Activity:

• 1) EBIX 2) FDX 3) ORCL 4) ADBE 5) XRT
  

Stocks With Most Negative News Mentions:

• 1) TGI 2) SHLD 3) FB 4) NVDA 5) BBRY
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.05%

Sector Outperformers:

• 1) Coal +1.26% 2) Software +.25% 3) Road & Rail +.14%
  

Stocks Rising on Unusual Volume:

• RPRX, ADBE, SOHU, SFUN, AFOP, MKTG, VIPS, EGHT, SGMO and VNDA

Stocks With Unusual Call Option Activity:

• 1) AEGR 2) ADBE 3)  DECK 4) ESRX 5) SD
  

Stocks With Most Positive News Mentions:

• 1) BTU 2) JNJ 3) LAYN 4) HUM 5) EBIX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• Vacant Japan Homes Show Holes in Abe’s Push for Housing Growth. More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years. 

• China’s Choking Cities Means Job Cuts at Steel Town: Commodities. After a decade of failed efforts to cut outdated commodity capacity in China, Goldman Sachs Group Inc. says Li is getting serious, driven by the need to reduce severe pollution. Zhang and thousands like him on Galaxy Street live off servicing mills in Tangshan, the largest steel city in China that alone has almost five times as many blast furnaces as North America. “If you shut these plants, we’ll all lose our jobs,” said Zhang. “If there’s no steel industry, we would have a hard time finding other work.” 

• China August Home Prices Rise as Major Cities Post Record Gains. New home prices in China’s four major cities rose the most in August since January 2011, led by Guangzhou, on expectations that the government won’t implement new nationwide property curbs any time soon. Prices climbed in 69 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement today. The number of cities that posted increases last month matched that of in July, June and May, which was the most since August 2011. Prices jumped 19 percent in Guangzhou, while the capital city of Beijing and financial center of Shanghai both rose 15 percent from a year earlier. In Shenzhen, prices rose 18 percent from a year ago. 

• Shanghai in Name Adds $45 Billion of Value Amid Bubble Risk. Zhang Guangdi has watched the market value of his Shanghai International Port Group Co. (600018) shares jump 130 percent since Aug. 22, when China’s commerce ministry said the government approved a free-trade zone in Shanghai. The 67-year-old retiree says he’ll probably sell the 2,935 yuan ($480) stake when the zone, part of Premier Li Keqiang’s plan to liberalize yuan trading and relax government regulation, opens at the end of this month. The port operator is valued at 25 times profit, a 121 percent premium versus the Shanghai Composite Index (SHCOMP), according to data compiled by Bloomberg. 

• Asian Stocks Rise to Near Four-Month High Ahead of Fed. Asian stocks rose, with the regional benchmark index trading near a four-month high, before the Federal Reserve decides later today whether to slow its $85 billion of monthly asset purchases. Mitsui O.S.K. Lines Ltd. and Fanuc Corp. rose at least 3.3 percent in Tokyo as industrial companies led gains on the Asia-Pacific benchmark index. Kawasaki Heavy Industries Ltd. (7012) surged 4.4 percent to a six-year high amid unconfirmed reports the Japanese manufacturer secured a 180 billion yen ($1.8 billion) rail-car order. Kansai Electric Power Co. sank 1.4 percent in Tokyo after the utility halted units at two power plants. The MSCI Asia Pacific Index gained 0.4 percent to 138.69 as of 11:20 a.m. in Hong Kong as seven of the 10 industry groups on the gauge advanced. 

• Rebar Falls to Seven-Week Low as Purchases Slow, Iron Ore Drops. Steel reinforcement-bar futures in Shanghai fell to the lowest level in seven weeks as purchases of the building material slowed before a national holiday and as iron ore prices declined. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.6 percent to 3,626 yuan ($592) a metric ton, the lowest since July 31, before trading at 3,631 yuan at 10:18 a.m. The market will be closed in China for a Mid-Autumn Festival tomorrow and Sept. 20. 

• Gold Tumbles Below $1,300 to Six-Week Low Before Fed Statement. Gold for immediate delivery lost as much as 1.4 percent to $1,292.95 an ounce, the lowest level since Aug. 8, and traded at $1,294.79 at 9:26 a.m. in Singapore, sliding for a third day. Bullion for December delivery slid as much as 1.3 percent to $1,293 on the Comex in New York, the lowest since Aug. 8.

• Dimon Tells JPMorgan Staff to Brace for More Regulatory Woes. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told employees to prepare for more legal woes while the bank undertakes an “unprecedented effort” to comply with regulations. “We are all well aware of the news around the legal and regulatory issues facing our company, and in the coming weeks and months we need to be braced for more to come,” Dimon said today in an e-mail to JPMorgan’s more than 250,000 employees (JPM:US).

• Adobe’s(ADBE) Shift to Subscriptions Puts Brakes on Profit, Sales. Adobe Systems Inc.shares rose after the largest maker of graphic-design tools said it amassed more than 1 million customers for its online services amid a shift away from software installed on personal computers. A 47 percent jump in the number of Web subscribers, which exceeded some analysts’ estimates, coincided with a drop in sales and profit. Revenue for the period through August declined 7.9 percent to $995.1 million, the company said in a statement today, missing the $1.01 billion average of analysts’ projections compiled by Bloomberg.

Wall Street Journal:

• Obama Goes to War. The President finds an enemy he's willing to bomb—Republicans.

MarketWatch.com:

• Equity allocations hit highest level since Feb. 2011, BofA Merrill survey finds.

• The richest households live near the Capitol.

Zero Hedge:

• Largest LBO Ever Prepares For Largest Non-Financial Bankruptcy In 30 Years.

• Look Who's Winning. (graph)

• German Elections: A Nailbiter With Days To Go.

• Don't Catch The Liquidity-Impacted EM Falling Knife (Yet). 

• Meet America's Growing "Lower Class".

• Here It Comes: Obama Calls For Gun Control, Again, In Aftermath Of Shipyard Shootings.

Business Insider:

• PRESENTING: Your Ultimate Guide To The Most Anticipated Fed Announcement In Years.

• Everyone Loves The iPhone 5S.

• Lawmakers Want To Know How Alleged Navy Yard Shooter Got A Security Clearance Despite Troubled Past.

• What Clubgoers Really Think About The Drug 'Molly,' And Why It Has Officials So Worried.

• Obamacare Is Secretly A Bailout Of State And Local Governments.

• CREDIT SUISSE: 3D Printing Is Going To Be Way Bigger Than What The 3D Printing Companies Are Saying.

New York Times:

• Volkswagen Says It Will Bring Electric Vehicle to U.S. in Two Years. Volkswagen, the largest of the European automakers, will bring its first electric car to the United States in two years, joining an increasingly crowded field of battery-powered vehicles on the market.

Reuters:

• U.S. internet sales tax bill to follow seven principles. Legislation that the U.S. House of Representatives will soon take up on allowing states to tax online purchases will follow seven major principles, including keeping the system simple for small businesses and ensuring it will not lead to new taxes, sources present at talks on the matter said on Tuesday.

• White House budget office urges agencies to prepare for possible shutdown. The White House budget office directed federal agencies on Tuesday to prepare for the possibility of a federal government shutdown should Democrats and Republicans fail to find a budget compromise by the end of September.

• U.S. must cut $2 trillion over 10 yrs to stabilize debt-CBO. U.S. lawmakers are far from finished with the job of deficit-cutting, the Congressional Budget Office warned on Tuesday, saying that $2 trillion in additional savings is needed over the next 10 years just to stabilize long-term U.S. debt. 

• U.S. SEC prepares for hedge fund advertising blitz. Investors pull $20.3 bln from U.S. bond funds in September -TrimTabs. 

• Apple(AAPL) iPhone 5C orders 'not overwhelming': carrier source. Pre-orders for Apple Inc's new plastic-backed, brightly colored iPhone 5C have not been "overwhelming," and supply of both that model as well as a more expensive phone has been disappointing, a source at a U.S. wireless carrier told Reuters on Tuesday.

Financial Times:

• Housing price surge begs question of China’s leaders. Residential prices soared in China’s biggest cities in August, raising the possibility that the government will take fresh measures to cool the red-hot market. Some investors and analysts have started to express concern about whether China’s property market is veering into dangerous bubble territory, but the government has so far taken a much more dovish line.

China Daily:

• China Demand for Crab Falls on Anti-Luxury Campaign. Demand for hairy crabs from Yangcheng Lake near Shanghai have "dropped significantly" from previous years mainly because of a government ban on extravagant spending, citing Yang Weilong, chairman of the lake's crab industry group.

China Securities Journal:

• China Faces Risk in Holding U.S. Treasuries. China faces rising risks in holding U.S. Treasuries, Zhang Monan, a researcher with the State Information Center under the National Development and Reform Commission, wrote. China's holdings of U.S. Treasuries aren't safe, Zhang wrote. China "must" change the situation of holding "too much" U.S. Treasuries, Zhang said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 132.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 110.25 +1.5 basis points.

• FTSE-100 futures +.14%.

• S&P 500 futures +.06%.

• NASDAQ 100 futures +.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDX)/1.50

• (SCS)/.25

• (ORCL)/.56

• (MLHR)/.38

• (CBRL)/1.34

• (GIS)/.70

Economic Releases
8:30 am EST  

• Housing Starts for August are estimated to rise to 917K versus 896K in July.

• Building Permits for August are estimated to rise to 950K versus 943K in July.

2:00 pm EST 

• The FOMC is expected to leave the benchmark fed funds rate at .25%. 

• Fed pace of MBS purchases estimated at $40B versus $40B prior.

• Fed pace of Treasury purchases estimated at $40B versus $45B prior.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,200,000 barrels versus a -219,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +500,000 barrels versus a +1,658,000 barrel gain the prior week. Distillate inventories are estimated to rise by +500,000 barrels versus a +2,586,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a +.8% gain the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bernanke speaking, Italian Senate vote on Berlusconi, Japan Trade Balance, weekly MBA Mortgage Applications report, CSFB Steel/Mining Conference and the (DKS) Analyst 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 modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Higher into Final Hour on Central Bank Hopes, Lower Energy Prices, Short-Covering, Tech/Defense Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.59 +1.46%
• Euro/Yen Carry Return Index 138.06 +.22%
• Emerging Markets Currency Volatility(VXY) 10.27 +.49%
• S&P 500 Implied Correlation 47.88 +2.29%

• ISE Sentiment Index 157.0 +42.73%

• Total Put/Call .75 -16.67%

• NYSE Arms .83 -12.85% 

Credit Investor Angst:

• North American Investment Grade CDS Index 73.14 -1.90%

• European Financial Sector CDS Index 133.85 +1.47%

• Western Europe Sovereign Debt CDS Index 91.0 +1.11%

• Emerging Market CDS Index 292.22 -1.06%

• 2-Year Swap Spread 15.75 unch.

• TED Spread 24.75 unch.

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

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 247.0 unch.

• China Import Iron Ore Spot $131.10/Metric Tonne -2.24%

• Citi US Economic Surprise Index 40.70 -5.3 points
• Citi Emerging Markets Economic Surprise Index 1.90 -1.7 points

• 10-Year TIPS Spread 2.17 +3 basis points

Overseas Futures:

• Nikkei Futures: Indicating +178 open in Japan

• DAX Futures: Indicating +17 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech/reatail sector longs 
• Disclosed Trades: None
• Market Exposure: 50% Net Long