Bloomberg:
- Putin Says Not 100% Certain Assad Will Give Up Weapons. Russian
President Vladimir Putin said he isn’t “100 percent” certain that
Syrian President Bashar al-Assad will fulfill his commitment to give up
chemical
weapons. Putin’s comments today may indicate that Russia, Syria’s
arms provider and ally, harbors doubts about Assad’s
reliability, though less so than the U.S., which has demanded a
quick and intrusive process to prevent the use of Syria’s
chemical arsenal and to test whether the Syrian leader will give
it up.
- Lagarde Sees Subdued Global Growth as IMF Reviews Forecasts. The International Monetary Fund
sees continued sluggish global growth as it reviews its
forecasts, Managing Director Christine Lagarde said. “The IMF will release its updated forecasts in a few
weeks,” Lagarde said in a speech to the U.S. Chamber of
Commerce, according to her prepared remarks. “For now, let me
say that while we are seeing some signs of recovery, global
growth remains subdued.”
The fund will release its new predictions Oct. 8, three
months after cutting its global forecasts to 3.1 percent this
year and 3.8 percent in 2014.
- Adidas Cuts 2013 Earnings Forecast as Euro Gains on Yen to Real. Adidas AG (ADS), the world’s second-largest maker of sporting goods, cut its 2013 earnings forecast because several currencies weakened against the euro. Net income this year will be between 820 million euros ($1.1 billion) and 850 million euros, the Herzogenaurach, Germany-based company said in a statement today. Adidas had previously forecast net income of 890 million euros to 920 million euros. Adidas also cut its operating margin forecast to
about 8.5 percent from a previous forecast of 9 percent.
“The further weakening of several currencies versus the
euro throughout August and September such as the Russian rouble,
Japanese yen, Brazilian real, Argentine peso, Turkish lira and
Australian dollar have intensified the negative currency
translation headwinds already highlighted,” Adidas said today.
- Europe Stocks Rise to Five-Year High as Fed Resists Taper.
European stocks rose to the highest level in more than five years as
the Federal Reserve unexpectedly decided against slowing the pace of its
monthly bond purchases. UniCredit SpA and Standard Chartered Plc
climbed more than 2 percent each as a gauge of lenders advanced.
Randgold Resources Ltd. and Polymetal International Plc jumped at least 7
percent as the price of gold rallied. Cie. Financiere Richemont SA
(CFR) and Swatch Group AG added more than 1 percent as a report showed
Swiss watch exports increased last month.
The Stoxx Europe 600 Index gained 0.6 percent to 315.05,
the highest level since June 2008, at the close of trading,
after earlier surging as much as 1.2 percent.
- Oil Falls Fourth Time in Five Days as Libya Output Rises. WTI for October delivery, which expires tomorrow, slid
$1.53, or 1.4 percent, to $106.54 a barrel at 2:18 p.m. on the New York Mercantile Exchange.
It surged 2.5 percent yesterday, the biggest increase since Aug. 27.
The volume of all futures traded was 1.6 percent below the 100-day
average. The more
active November contract was down $1.21 at $106.07.
- Recovery Disconnects Most in U.S. From Prosperity, Census Shows. More Americans continued to take on
roommates or boarders than before the recession, women had fewer
children, and people were still flocking to college or graduate
school as a way to postpone their entry into the job market. Those are just some measures of a tepid U.S. economy
recorded last year in new Census Bureau reports that offer a
portrait of a nation struggling to fully rebound from the worst
downturn since the Great Depression. The data show a
geographically uneven recovery in which the middle class is
slipping and, on the basis of median household income, no better
off than it was in 1989. Unless there’s significant progress in the next few years,
that reversal could be a watershed in American history.
- Americans’ Views on U.S. Economic Outlook Drop to One-Year Low. Consumers views of the U.S. economic outlook deteriorated in
September to the weakest level in a year as higher borrowing rates
started to chip away at progress in the housing market. The gap
between positive and negative expectations widened to minus 9, the
lowest since August 2012, from minus 5 in the prior two months,
according to results of the Bloomberg Consumer Comfort Index. The weekly
confidence measure rose to a one-month high of minus 29.4 from minus
32.1.
Fox News:
- McCain tells Russian people 'Putin rules for himself' in Pravda op-ed.
Senate Republican John McCain, one of the most vocal advocates for
American military intervention in the crisis in Syria, is firing back
after Russian President Vladimir Putin’s op-ed in the New York Times
last week, in which the Russian chastised Americans for considering a
military strike in Syria and slammed the notion of American
exceptionalism. In an op-ed submitted to the Russian newspaper Pravda, McCain tells the Russian people that Putin "rules for himself, not you." The piece was posted on the paper's website, Pravda.ru, shortly before 10 a.m. Thursday, Moscow time.
- Rules that could 'kill'? Safety, cost concerns over EPA's new coal regs. New clean-energy rules pushed through by the Obama administration are
raising concerns that they could cripple the coal industry -- and may
require power plants to use technology so risky that even the
president's former top energy official once warned it could "kill." The EPA, by Friday, is expected to release a new proposal to set the first-ever carbon dioxide limits for new power plants.
- EU to change how it calculates deficit figures, possibly easing pressure for austerity. European Union finance officials have reached a preliminary agreement
to change the way the bloc determines some deficit figures, which might
lessen the pressure for austerity measures in crisis-hit economies. An
EU official said Thursday the change to the calculation of the
structural deficit would have "very significant" positive consequences
for Spain because of its labor market structure, and somewhat less so
for Ireland, Greece and Portugal.
CNBC:
- Postmaster says USPS may need emergency rate hike. The Postal Service may need an emergency rate increase to stay afloat. That's according to Postmaster General Patrick Donahoe, who's
testifying before a Senate committee. Donahue says the agency's cash
balance next month likely will cover only five days of its average daily
expenses.
Zero Hedge:
- The Fed's Reflexive Catch 22 In One Sentence. Another theme arising from their decision to hold fire was their
worry that financial conditions had tightened over the past few weeks.
If this is the case then the
path of tapering is going to be tough because every time the market
thinks they are going to taper, yields will likely rise and conditions
will tighten.
Business Insider:
Real Clear Politics:
Reuters:
Financial Times:
Telegraph:
- Fed's shock taper decision 'damages credibility'. The US Federal Reserve has damaged its credibility and sown confusion about
central banks’ communication strategies by surprising markets with the
decision to keep quantitative easing on hold, economists and traders have
warned.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Le Monde:
- France Set to Announce New Carbon Tax at Conference. The tax is
expected to bring in EU400-500m for the government in 2014, rising to
EU2.5b in 2015 and EU 4b in 2016. French President Francois Hollande and
Prime Minister Jean-Marc Ayrault will announce the tax at an
environmental conference that starts in Paris tomorrow.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.95% 2) Homebuilders -1.76% 3) Banks -1.50%
Stocks Falling on Unusual Volume:
- ROYT, SSNC, PIR, FLTX, MFRM, CAG, BPOP, BERY, PPO, TGI, TFM, LNC, HOMB, ZION, MSCC, KYTH, INVN, MET, APOG, CLC, KMP, EBIX, PTR, ADBE, CMA, FSC, SBNY, NWBI, KEY, LNC, CODE, DRIV and SIVB
Stocks With Unusual Put Option Activity:
- 1) ADT 2) SPF 3) SCHW 4) PRU 5) DLTR
Stocks With Most Negative News Mentions:
- 1) WFC 2) AAPL 3) TSLA 4) BA 5) MSFT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +.99% 2) Construction +.54% 3) Agriculture +.32%
Stocks Rising on Unusual Volume:
- A, P, USU, FENG, MKTG, SCTY, ISIS, CLDX, GRPN, TSLA and WLT
Stocks With Unusual Call Option Activity:
- 1) RAD 2) GT 3) PBI 4) CAG 5) LVLT
Stocks With Most Positive News Mentions:
- 1) KR 2) JPM 3) EOG 4) MCD 5) CME
Charts:
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.
- 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.
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:
- 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.
Zero Hedge:
- 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:
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:
- 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.
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
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.
- NASDAQ 100 futures +.19%.
Morning Preview Links
Earnings of Note
Company/Estimate
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
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.
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%
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
- 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
Style Underperformer:
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:
