Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 117.50 +1.5 basis points.
- NASDAQ 100 futures +.29%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 325K versus 309K the prior week.
- Continuing Claims are estimated to rise to 2818K versus 2787K prior.
- 2Q GDP is estimated to rise +2.6% versus a prior estimate of a +2.5% gain.
- 2Q Personal Consumption is estimated to rise +1.9% versus a prior estimate of a +1.8% gain.
- 2Q GDP Price Index is estimated to rise +.8% versus a prior estimate of a +.8% gain.
- 2Q Core PCE is estimated to rise +.8% versus a prior estimate of a +.8% gain.
10:00 am EST
- Pending Home Sales for August are estimated to fall -1.0% versus a -1.3% decline in July.
11:00 am EST
- Kansas City Fed Manufacturing Activity for September is estimated at 8.0 versus 8.0 in August.
Upcoming Splits
Other Potential Market Movers
- The Fed's George speaking, Fed's Stein speaking, Fed's Kocherlakota speaking, China Industrial Profits Report, Japan CPI, UK GDP Report, weekly Bloomberg Consumer Comfort Index and the (ORCL) Financial Analyst Meeting 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 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.06 -.14%
- Euro/Yen Carry Return Index 138.88 +.13%
- Emerging Markets Currency Volatility(VXY) 9.97 +1.32%
- S&P 500 Implied Correlation 47.28 -2.09%
- ISE Sentiment Index 86.0 -3.37%
- Total Put/Call .96 +10.34%
Credit Investor Angst:
- North American Investment Grade CDS Index 79.51 +.69%
- European Financial Sector CDS Index 136.28 -.63%
- Western Europe Sovereign Debt CDS Index 84.68 -1.53%
- Emerging Market CDS Index 275.22 +.15%
- 2-Year Swap Spread 13.0 -2.25 basis points
- TED Spread 23.25 -.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.75 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 228.0 -4 basis points
- China Import Iron Ore Spot $133.80/Metric Tonne +.83%
- Citi US Economic Surprise Index 47.0 +.38 point
- Citi Emerging Markets Economic Surprise Index 5.50 +.4 point
- 10-Year TIPS Spread 2.19 unch.
Overseas Futures:
- Nikkei Futures: Indicating -1 open in Japan
- DAX Futures: Indicating -6 open in Germany
Portfolio:
- Slightly Lower: On losses in my medical/retail/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Hollande Faces Europe’s Glass-Half-Empty Test on Budget Plan. President
Francois Hollande’s government sought to show the European Commission
it’s serious about public-spending cuts with its 2014 budget today,
after changes to the pension system failed to impress. “There’s
always the question of whether the glass is half full or half empty”
with France, European Economic Affairs Commissioner Olli Rehn said at a
Sept. 13 meeting of euro-area finance ministers. “France is
going in the right direction in terms of economic reforms but there is
still much more to do.”
- Jain Says Deutsche Bank’s Debt-Trading Revenue Falls. Deutsche Bank AG (DBK) co-Chief Executive Officer Anshu Jain said third-quarter revenue from trading debt probably slumped at Germany’s largest bank. “We currently anticipate debt sales and trading revenues in the third quarter to decline significantly from last year,” Jain, 50, told investors at a conference in London today. “Market activity was substantially lower which has affected our
corporate banking and securities revenues.”
- Most European Stocks Drop as Nordea, Carnival Decline. Most
European stocks fell amid concern over budget talks in the world’s
largest economy and as a report showed U.S. durable-goods orders
excluding transportation unexpectedly dropped. Nordea Bank AB slid 2.6
percent as Sweden sold its remaining stake in the Nordic region’s
largest lender. Carnival Corp. (CCL), the world’s biggest cruise-ship
operator, slumped 6.7 percent for the biggest drop in the Stoxx Europe
600 Index. ThyssenKrupp AG rallied 3.7 percent as Cevian Capital AB
boosted
its holding in the German steelmaker. The Stoxx 600 dropped 0.1 percent to 313.02 at the close of
trading, as three shares retreated for every two that gained.
- Wal-Mart(WMT) Cutting Orders as Unsold Merchandise Piles Up. Wal-Mart Stores Inc. (WMT) is cutting orders it places with suppliers this quarter and next to address rising inventories the company flagged in last month’s earnings report. Last week, an ordering manager at the company’s
Bentonville, Arkansas, headquarters described the pullback in an e-mail
to a supplier, who said others got similar messages. “We are looking at
reducing inventory for Q3 and Q4,” said the Sept. 17 e-mail, which was
reviewed by Bloomberg News. “Wal-Mart’s inventory is well above their goal,” said Poonam Goyal, an
analyst at Bloomberg Industries. “Most of the inventory increase was
because of missed sales.”
- Demand for U.S. Capital Goods Climbs Less Than Forecast. Bookings (CGNOXAI%) for non-military capital equipment excluding aircraft increased 1.5 percent after a 3.3 percent drop in July, the Commerce Department reported today in Washington. The median forecast of economists surveyed by Bloomberg projected a 2 percent gain. Sales were down 3.3 percent over the past three months at an annualized
rate, compared with a 0.9 percent decline at the end of the second
quarter, indicating business investment will take time to rebound.
Wall Street Journal:
Fox News:
- Kerry signs UN arms treaty, senators threaten to block it. Secretary of State John Kerry on Wednesday signed a controversial
U.N. treaty on arms regulation, riling U.S. lawmakers who vow the Senate
will not ratify the agreement. As he signed the document, Kerry called the treaty a "significant
step" in addressing illegal gun sales, while claiming it would also
protect gun rights.
CNBC:
- The Fed's 'hidden agenda' behind money-printing. One thing is clear: Based on CBO projections, if interest rates
just rise to their 20-year average, we will have an untenable,
unacceptable interest rate bill whose beneficiaries are China, Japan,
and others who own our bonds. And if Americans find out that
the lion's share of their income tax payments are going to service the
debt, prepare for a new American revolution.
Zero Hedge:
Business Insider:
CNN:
- Syrian rebels reject interim government, embrace Sharia. A collection of some of Syria's most powerful rebel brigades have
rejected a Western-backed opposition group that announced the creation
of an interim government in exile this month. The 13 rebel groups, led
by the al Qaeda-linked al-Nusra Front, also called on supporters of the
Syrian opposition to embrace Sharia law "and make it the sole source of
legislation."
Xinhua:
- Shanghai
Zone Facebook(FB) Ban Lift Report Incorrect. A media report that
Shanghai free-trade zone will lift a ban on Facebook Internet access is
incorrect, citing a person familiar with the matter. Internet management
rules in the Shanghai pilot free-trade zone won't change.
Style Underperformer:
Sector Underperformers:
- 1) Medical Equipment -1.48% 2) HMOs -.30% 3) Coal -.26%
Stocks Falling on Unusual Volume:
- JCP, NXST, KSS, DISH, UGP, COG, DB, CM, CLDT, CPRT, LNDC, DQ, AIR, CCL, BAX, FNP, CLVS, CUK, SEAS, TSU, ABT, MNTX, SYK, BBRG, MKTO, COG, BCEI and CZR
Stocks With Unusual Put Option Activity:
- 1) JCP 2) AMAT 3) DLTR 4) CCL 5) BBBY
Stocks With Most Negative News Mentions:
- 1) NVDA 2) AMZN 3) JCP 4) FB 5) BBRY
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +2.15% 2) Homebuilders +1.09% 3) Banks +.89%
Stocks Rising on Unusual Volume:
- NTLS, ANW, SZYM, IQNT, MAKO, ASNA, FU, XRS, SSNI, PCRX, UNXL, GSVC, AMBA, CTRP, GCAP and KERX
Stocks With Unusual Call Option Activity:
- 1) MAKO 2) MTG 3) ASNA 4) KERX 5) UNXL
Stocks With Most Positive News Mentions:
- 1) SBUX 2) DFRG 3) ANR 4) CSC 5) WBMD
Charts:
Evening Headlines
Bloomberg:
- China Beige Book Shows Slowdown, Opposite Official Data. China’s
economy slowed this quarter as growth in manufacturing and
transportation weakened in contrast with official signs of an expansion
pickup, a private survey showed. Increases in business-investment and
real estate revenue also slowed, while service industries picked up and
employees became tougher to find, the survey from New York-based China
Beige Book International said yesterday. The report is based on
responses from 2,000 people from Aug. 12 to Sept. 4 as well as 32
in-depth interviews conducted later in September. The quarterly report,
modeled on the U.S. Federal Reserve’s Beige Book business survey,
diverges from government figures showing faster July and August gains in
factory production that have spurred analysts from Citigroup Inc. to
Deutsche Bank AG to upgrade expansion estimates. Nomura Holdings Inc.
is among banks skeptical that any rebound will be sustained next year.
The results “show the conventional wisdom of a renewed, strong economic
expansion in China to be seriously flawed,” China Beige Book President
Leland Miller and Craig Charney, research and polling director, said in a statement. The
data “reveal weakening gains in profits, revenues, wages, employment
and prices, all showing slipping growth on-quarter -- no disaster, but
certainly
not the powerful expansion suggested by the consensus narrative.”
- Party Will Pay the Price for China’s Rebalancing.
We need to keep the impact of financial repression in mind in
understanding the Chinese growth model. It is a fundamental cause of
China’s rapid expansion and its extraordinary imbalances. State-owned
enterprises, like other large-scale investors, have benefited from
artificially low interest rates, and it is quite easy to prove that over
the past decade they have beStudies done by the mainland research organization Unirule Institute
of Economics suggest that more than 100 percent, and perhaps much closer
to 200 percent, of theaggregate profitability of state-owned
enterprises in
China over the past decade can be explained by monopoly pricing and
direct subsidies. Without these subsidies, according to Unirule,
state-owned enterprises earned a negative return on equity equal to 6
percent to 7 percenten value destroyers on a very significant scale. .
- Asian Stocks Fall Second Day as U.S. Confidence Declines.
Asian stocks fell for a second day, paring the best monthly advance
since January 2012 for the regional benchmark index, after U.S. consumer
confidence slumped in September to a four-month low. Mitsui Chemicals
Inc. lost 4.8 percent in Tokyo, leading materials producers lower. NTT
Data Corp., a Japanese network-services company, slumped 7.5 percent,
pacing a retreat in technology firms. Tokyo Electron Ltd. surged 14
percent after Applied Materials Inc., the largest chipmaking-equipment
supplier, agreed to buy the company for $9.39 billion in stock. The MSCI Asia Pacific Index fell 0.2 percent to 140.20 as of 10:24 a.m. in Hong Kong, with six of the 10 industry groups
on the gauge declining.
- Rebar Trades Near Lowest in 11 Weeks as Producers Reduce Prices. Steel reinforcement-bar futures
traded near the lowest level in 11 weeks after some Chinese
steel producers cut prices, increasing concern that inventories
are rising as supply outpaces demand. Rebar for delivery in January
on the Shanghai Futures Exchange fell as much as 0.3 percent to 3,617
yuan ($591) a metric ton and traded at 3,619 yuan at 10:45 a.m. The
most-active contract declined to 3,612 yuan on Sept. 23, the lowest
since July 10. Futures have lost 3.6 percent this month.
- Lew Says Investors May Be Too Hopeful on Debt-Limit Debate.
U.S. Treasury Secretary Jacob J. Lew said investor confidence that a
deal can be struck to raise the debt limit is “a bit greater than it
should be” and the government probably will have less than $50 billion
in cash by mid-October. Lew, who spoke at the Bloomberg Markets 50
Summit in New York today, repeated that President Barack Obama won’t
negotiate with congressional Republicans on increasing the $16.7
trillion ceiling on the nation’s borrowing authority.
- Americans in Poll Doubt Economy Rebound. Fewer
people anticipate improvement in the economy’s strength over the
next year than in the last survey in June, with 27 percent saying the
expansion will be more robust, down from 39 percent who expected
improvement three months earlier. Forty-four percent of poll respondents
say they expect the economy, which has expanded for nine consecutive
quarters, to remain about the same, while 28 percent see it weakening. “We’re
still in a recession; I don’t know why they say it’s over,” says Chris
Sams, 28, a disabled Navy veteran from Daingerfield, Texas. “It may be
over in Washington, D.C., where the per capita income is higher than
anywhere else, but down here the minimum wage is the highest
wage.”
Wall Street Journal:
- Iran Applies Brakes to U.S. Mideast Plans. Tehran
Decides Against Meeting of President at U.N. President Barack Obama
argued the U.S. case before world leaders for resolving the Middle
East's deepest conflicts, but pushback from Iran dimmed hopes that had
been building for a rapid leap forward. Iranian President Hasan
Rouhani's decision against meeting Mr. Obama—or even exchanging a
handshake—at the
U.N. General Assembly in New York on Tuesday soured what American and
European officials had hoped would mark an advancement in efforts to
wind down tensions.
Mr. Rouhani followed that rebuff with
an address to the U.N. in which he aired his hopes for reconciliation
while holding firm on Iran's right to enrich uranium and criticizing
some aspects of American foreign policy, including economic sanctions on
Tehran.
- iPhone ‘Teardown’ Shows Apple’s(AAPL) Strong Margins. Apple is holding the line with strong margins on sales of its smartphones, including the lower-end iPhone 5C model,
according to data provided by
the research firm IHS iSuppli. Apple earns about $450 on its 16 gigabyte
iPhone 5S, minus the component costs and assembly for the device, which
sells for $649 without a contract. Those costs of the components and
manufacturing make up about 30% of the price, similar to that of last
year’s iPhone 5 and the new iPhone 5C, which sells for about $100 less.
- Copart(CPRT) 4th-Quarter Net Down 8%; Won't Pursue REIT Conversion. Copart Inc.'s (CPRT) shares fell Tuesday after the car auctioneer
reported a weaker-than-expected fiscal fourth-quarter profit due to
higher expenses. Though revenue growth topped analysts' expectations, the bottom line
surprisingly fell 8% from a year ago as Copart's expenses--including
yard operation and vehicle sale costs--jumped from the prior year.
Shares slid 11% to $30.35 in after-hours trading.
- Cashing Out After Post-Fed Rally. The stock market's surge is pushing some investors to cash in a few
of their chips. Even as shares climbed to new highs in recent weeks,
some money managers pared their equity holdings. Their reasons: after
such a strong run, the rally may be losing steam and the Federal Reserve
will soon begin withdrawing the massive monetary stimulus it has been
injecting into the economy since the financial crisis. Contributing to the shift out of stocks are valuations that many
investors are finding less attractive and jitters about the renewed
brinkmanship in Washington, D.C., over upcoming budget battles. To be
sure, the fund managers say they are not turning bearish on stocks.
Rather, they're deciding that a dose of defense is warranted.
Fox News:
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
- Fighting in Syria between moderate rebels, al Qaeda intensifies -U.S. Moderate Syrian rebels are
engaged in their fiercest fighting to date with al
Qaeda-affiliated fighters on Syria's northern and eastern
borders, a senior U.S. State Department official said on
Tuesday. "There is a real firefight," the official said of battles
between al Qaeda's Islamic State of Iraq and the Levant (ISIL) and the
Free Syrian Army led by Salim Idriss, a more moderate group of rebels
trying to oust Syrian President Bashar al-Assad.
- Netanyahu says Rouhani speech 'cynical', Iran buying time. Israeli Prime Minister
Benjamin Netanyahu said on Wednesday that Iranian President
Hassan Rouhani's U.N. address was "cynical" and Tehran was
stalling for time in order to develop nuclear arms. "It was a cynical speech full of hypocrisy," Netanyahu said
in a statement after Rouhani addressed the annual gathering of world leaders at the United Nations General Assembly.
Evening Recommendations
Keefe Bruyette:
- Raised (CME) to Outperform, target $89.
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 151.0 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 116.0 +15.75 basis points. (new series)
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for August are estimated to fall -.2% versus a -7.3% decline in July.
- Durables Ex Transports for August are estimated to rise +1.0% versus a -.6% decline in July.
- Cap Goods Orders Non-defense Ex Air for August are estimated to rise +2.0% versus a -3.3% decline in July.
10:00 am EST
- New Home Sales for August are estimated to rise +1.5% versus a -1.5% decline in July.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,000,000
barrels versus a -4,368,000 barrel decline the prior week. Gasoline
supplies are estimated to fall by -750,000 barrels versus a -1,627,000
barrel decline the prior week. Distillate supplies are estimated to fall
by -925,000 barrels versus a -1,079,000 barrel decline the prior week.
Finally, Refinery Utilization is estimated to fall by -.88% versus unch. the prior week.
Upcoming Splits
Other Potential Market Movers
- The Eurozone GFK Confidence report, Germany Import/Export Prices reports, 5-Year T-Note auction, weekly MBA mortgage applications report, 2Q Household Networth Change and the KBW Insurance Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial 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.
