Click Here for Today's Market Take.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 15.77 +12.16%
- Euro/Yen Carry Return Index 138.60 -.44%
- Emerging Markets Currency Volatility(VXY) 10.09 +1.61%
- S&P 500 Implied Correlation 47.85 +6.73%
- ISE Sentiment Index 79.0 -11.24%
- Total Put/Call .95 +35.71%
Credit Investor Angst:
- North American Investment Grade CDS Index 80.97 +1.54%
- European Financial Sector CDS Index 145.23 +3.21%
- Western Europe Sovereign Debt CDS Index 84.91 -.11%
- Emerging Market CDS Index 293.88 +3.78%
- 2-Year Swap Spread 14.0 +.75 basis point
- TED Spread 23.75 -1.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -6.5 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% +1 basis point
- Yield Curve 229.0 -1 basis point
- China Import Iron Ore Spot $131.90/Metric Tonne -1.42%
- Citi US Economic Surprise Index 46.5 -1.3 points
- Citi Emerging Markets Economic Surprise Index 4.20 +.3 point
- 10-Year TIPS Spread 2.18 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating -25 open in Japan
- DAX Futures: Indicating +12 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- Osborne Increases BOE Home-Plan Checks as Bubble Fears Rise. Chancellor
of the Exchequer George Osborne will introduce annual checks with the
Bank of England over his Help-to-Buy program as he responds to mounting
concerns that the plan may fuel excessive house-price increases.
Osborne and the BOE’s Financial Policy Committee will reassess the
program, which helps buyers purchase homes with as little as a 5 percent
deposit, every September starting next year, the Treasury in London
said. The FPC will advise Osborne on whether key parameters, such as the
price cap and the fee charged to lenders, remain appropriate. The
chancellor’s plan has drawn criticism from the International Monetary
Fund and Business Secretary Vince Cable who say it may spark a property
bubble.
- European Stocks Fall on Italy Auction, U.S. Budget Woes.
European stocks declined as Italian bonds fell after a debt auction and
concern grew that budget wrangling in Washington will lead to a
government shutdown. Vallourec (VK) SA plunged 8.2 percent after warning
that slower drilling in Brazil and a weak real may hurt profit. Vestas
Wind Systems A/S (VWS) rose to its highest price since June 2011 after
Mitsubishi Heavy Industries Ltd. and the Danish turbine maker agreed to
form a venture to develop offshore wind energy. The Stoxx Europe 600 Index fell 0.3 percent to 312.18 at
the close of trading.
- Rubber Falls to One-Month Low as Stronger Yen Reduces Appeal. Rubber declined to the lowest level
in a month, paring a quarterly advance, as a strengthening
Japanese currency cut the appeal of the commodity used in tires. The
contract for March delivery on the Tokyo Commodity Exchange lost 2.7
percent to end at 270.2 yen a kilogram ($2,741 a metric ton), the lowest
settlement since Aug. 30. Futures have
gained 14 percent this quarter, the first such climb this year,
paring losses to 11 percent for the year.
- Goldman Sachs(GS), Morgan Stanley(MS) Estimates Lowered by Hintz. Goldman
Sachs Group Inc. (GS) and Morgan Stanley (MS) had their earnings
estimates lowered by Brad Hintz, a Sanford C. Bernstein & Co.
analyst, amid a decline in trading he called “a full-scale rout.” Hintz cut Goldman Sachs’s third-quarter per-share earnings estimate by 15 percent to $2.62 and the full-year estimate by
8.6 percent to $15.59 per share, according to a note today about
the two New York-based banks. Morgan Stanley’s per-share third-quarter estimate was decreased 20 percent to 41 cents, and the
2013 figure dropped 4.8 percent to $1.98. “While the third quarter is typically seasonally soft, Q3
2013 appears to be turning into a full-scale rout in trading as
weak activity and limited risk-taking constrained performance,”
Hintz wrote. Fixed-income trading volume could decline 20
percent to 25 percent on average in the three months ended Sept.
30, he wrote.
Wall Street Journal:
Fox News:
- ‘Stupid’: Dems refuse to consider tax-repeal compromise in ObamaCare standoff. President Obama and his congressional allies are digging in ahead of a
series of key votes on a contentious budget bill, refusing to consider a
potential compromise that might satisfy GOP demands to chip away at the
health law. Senate Majority Leader Harry Reid went so far as to call one counterproposal "stupid."
MarketWatch:
CNBC:
- Blackstone(BX): We're in an 'epic credit bubble'. One of the world's largest investment firms believes the financial system is overly leveraged. "We
are in the middle of an epic credit bubble, in my opinion, the
likes of which I haven't seen in my career in private equity," Joseph
Baratta, The Blackstone Group's global head of private equity, said Thursday night at the Dow Jones Private Equity Analyst Conference in New York City. "The cost of a high
yield bond on an absolute coupon basis is as low as it's ever been."
Zero Hedge:
Business Insider:
@FGoria:
Washington Times:
Real Clear Politics:
Reuters:
- Japan could face debt downgrade if budget deficit doesn't shrink: S&P. Japan
could face a debt downgrade if it does not shrink its budget deficit,
which is unlikely to return to primary balance by a targeted date of
fiscal 2020, even if the prime minister's policies go well, a senior
official of Standard & Poor's said. Japan's outstanding debt
burden is the highest in the world at 1,000 trillion yen, or more than
twice the size of its economy. Standard & Poor's remains doubtful about the scale of Japanese welfare
reform and how much spending can be cut, Takahira Ogawa, director of
sovereign ratings at the agency, told reporters on Friday.
- Brazil sees private banks slowing loan disbursements pace. Brazil's
private-sector banks will keep slowing the pace of new loan
disbursements through the end of the year, the central bank said
on Friday, a sign that an approach to avoiding risky lending
will stretch for a longer period than previously thought. The central bank cut the estimate for loan book growth among
domestic non-government lenders to 6 percent from a prior 10
percent forecast. Likewise, it lowered the same estimate for
foreign lenders operating in the country to 7 percent from 8
percent previously.
- BlackBerry(BBRY) confirms deep loss and revenue drop. BlackBerry Ltd
reported a quarterly loss of nearly $1 billion on Friday, in
line with a warning it gave last week, just days after the
smartphone maker accepted its largest shareholder's tentative
$4.7 billion bid to take it private. The report showed Blackberry turned in a particularly limp
performance in Latin America, a region it recently touted as a
enthusiastic supporter of its devices.
Financial Times:
Style Underperformer:
Sector Underperformers:
- 1) Steel -2.30% 2) Gaming -1.42% 3) Coal -1.41%
Stocks Falling on Unusual Volume:
- UIL, AMPE, CYOU, CLMT, ZOLT, NKTR, LL, DXCM, AZZ, ROYT, PODD, UAL, ACN, IGT, TS, CNH, IP, MSCC, ATRO, MKC, RKT, ANF, QIHU, BNNY, UNXL, LNKD and SAI
Stocks With Unusual Put Option Activity:
- 1) CTB 2) KSS 3) JCP 4) NKE 5) NSM
Stocks With Most Negative News Mentions:
- 1) JCP 2) AAPL 3) YELP 4) FB 5) TSLA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +.67% 2) Alt Energy +.55% 3) Software +.47%
Stocks Rising on Unusual Volume:
- HALO, MHR, BSBR, RDA, FINL, NKE, TSL and FL
Stocks With Unusual Call Option Activity:
- 1) MTW 2) NKTR 3) GERN 4) IP 5) ZOLT
Stocks With Most Positive News Mentions:
- 1) PEGI 2) T 3) FLIR 4) TASR 5) JOY
Charts:
Evening Headlines
Bloomberg:
- Soros Adviser Turned Lawmaker Sees Crisis by 2020: Japan Credit.
Takeshi Fujimaki, a former adviser to billionaire George Soros and now a
member of Japan’s upper house of parliament, said a fiscal crisis in
Asia’s second-biggest economy is inevitable and neither a higher sales
tax nor the 2020 Olympics will be able to stop it. “I decided to
become a politician because I think financial crisis will come sooner or
later,” Fujimaki said in a Sept. 24 interview in Tokyo. “This total
debt will continue to increase. I don’t think Japan can survive until
2020.”
- Japan Inflation Accelerates to Fastest Since 2008 on Energy. Consumer prices excluding fresh food increased 0.8 percent from a year earlier, the statistics bureau said today in Tokyo.
The median forecast of 30 economists surveyed by Bloomberg News
was for a gain of 0.7 percent. Stripping out energy and
perishables, prices fell 0.1 percent.
- Asia Stocks Set for Best Monthly Gain Since Sept. 2010. Tokyo
Electric Power Co. (9501) gained 7.5 percent as the operator of the
crisis-ridden Fukushima Dai-Ichi nuclear station received approval for
nuclear safety checks. Australand Property Group gained 1.3 percent in
Sydney after JPMorgan Chase & Co. advised buying shares of the
developer. Mirabela Nickel Ltd. (MBN) slumped 52 percent after the
Australian producer of the metal said it may
miss its output forecast. The MSCI Asia Pacific Index rose 0.1 percent to 140.66 as
of 9:53 a.m. in Hong Kong.
- Copper Drops, Paring Quarterly Gain, as Data Stoke Stimulus Bets. Copper declined for the first time
in three days, paring the biggest quarterly gain since March
2012, as reports showed the U.S. economy improved, boosting the
case that the Federal Reserve may reduce its stimulus.
The metal for delivery in three months on the London Metal
Exchange fell as much as 0.3 percent to $7,227 a metric ton and traded at $7,240.25 by 11:04 a.m. in Tokyo.
Wall Street Journal:
- No Clear Path to Avoid Shutdown as House GOP Stands Firm. Congress's rocky
path to avoiding a government shutdown became even rougher Thursday, as
Speaker John Boehner said the House wouldn't accept the spending plan
likely to emerge from the Senate.
The Ohio Republican's announcement
foreshadows a set of last-minute legislative volleys between the House
and Senate to fund federal agencies ahead of a deadline Monday, the
final day of the fiscal year. he Senate is expected to pass a bill Friday that would fund the
government for the first 1½ months of the new fiscal year. But Senate
Democrats plan to restore money for the Affordable Care Act that House
Republicans had stripped out, leaving the two chambers in conflict.
CNBC:
Zero Hedge:
Business Insider:
New York Times:
- Report Warns of Chinese Municipal Debt Risks. A report by Nomura said Thursday that Chinese
municipal debt, a focal point of major concern about the country’s
economy, had grown at an alarming 39 percent clip in recent years. The report by Nomura estimated that the financing vehicles used by local
governments to raise cash had created debts totaling at least 19
trillion renminbi, or $3.1 trillion, by the end of last year and posed a
“major risk to the economy.”
Mish's Global Economic Trend Analysis:
Reuters:
- Some U.S. brokers not policing 'hold' recommendations: regulator. Some securities
brokerages are struggling with an industry rule requiring, among other
things, policies to make sure that recommendations to hold securities
are appropriate for their investors, according to findings this week by
Wall Street's industry-funded watchdog.
The Financial Industry
Regulatory Authority (FINRA) rule, which took effect in July 2012,
required that investments recommended by brokerage firms be suitable for
investors at all times, and not just when investors buy them. In the
past, brokers mainly had to worry only that their "buy" and "sell"
recommendations were suitable at the time of sale.
Economic Information Daily:
- China's Local Debt May Have Doubled From End-2010.
New audit of local government debt shows size of debt may have almost
doubled from 2011 results, citing a person involved in the audit. China
found outstanding local government debt of 10.7t yuan at end-2010,
according to audit results released in 2011, the report said.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 116.25 -1.25 basis points.
- NASDAQ 100 futures +.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for August is estimated to rise +.4% versus a +.1% gain in July.
- Personal Spending for August is estimated to rise +.3% versus a +.1% gain in July.
- The PCE Core for August is estimated to rise +.1% versus a +.1% gain in July.
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for September is estimated to rise to 78.0 versus a prior estimate of 76.8.
Upcoming Splits
Other Potential Market Movers
- The Fed's Dudley speaking, Fed's Evans speaking, Fed's Rosengren speaking, Fed's Evans speaking, Eurozone CPI Report, Eurozone Consumer Confidence Report and the Eurozone Industrial Production Report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial
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: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.34 +2.36%
- Euro/Yen Carry Return Index 138.96 +.08%
- Emerging Markets Currency Volatility(VXY) 10.04 +1.1%
- S&P 500 Implied Correlation 46.72 -1.37%
- ISE Sentiment Index 80.0 -4.76%
- Total Put/Call .71 -26.04%
Credit Investor Angst:
- North American Investment Grade CDS Index 79.86 +.34%
- European Financial Sector CDS Index 140.72 +3.26%
- Western Europe Sovereign Debt CDS Index 85.0 +.37%
- Emerging Market CDS Index 282.97 +2.80%
- 2-Year Swap Spread 13.25 +.25 basis points
- TED Spread 25.25 +2.0 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -6.25 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .00% -1 basis point
- Yield Curve 230.0 +2 basis points
- China Import Iron Ore Spot $133.80/Metric Tonne unch.
- Citi US Economic Surprise Index 47.8 +.8 point
- Citi Emerging Markets Economic Surprise Index 3.90 -1.6 points
- 10-Year TIPS Spread 2.20 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +59 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
