Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.01 -3.56%
- Euro/Yen Carry Return Index 138.06 -.35%
- Emerging Markets Currency Volatility(VXY) 10.07 -.40%
- S&P 500 Implied Correlation 48.62 -1.06%
- ISE Sentiment Index 109.0 +73.02%
- Total Put/Call .87 -20.91%
Credit Investor Angst:
- North American Investment Grade CDS Index 80.48 -1.76%
- European Financial Sector CDS Index 139.26 -5.63%
- Western Europe Sovereign Debt CDS Index 82.0 -6.75%
- Emerging Market CDS Index 287.75 -2.21%
- 2-Year Swap Spread 13.25 unch.
- TED Spread 23.0 -1.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -6.0 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +2 basis points
- Yield Curve 231.0 +1 basis point
- China Import Iron Ore Spot $131.40/Metric Tonne unch.
- Citi US Economic Surprise Index 53.30 +2.8 points
- Citi Emerging Markets Economic Surprise Index .60 -5.6 points
- 10-Year TIPS Spread 2.20 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +15 open in Japan
- DAX Futures: Indicating -6 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/biotech/tech/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Obamacare Exchanges Debut With Websites Down, Delays. The
Obamacare insurance exchanges got off to a rocky start, with many
websites meant to provide new access to the uninsured seeing delays or
breakdowns. New York’s exchange was swamped with 2.5 million
visitors in the first half-hour, officials there said. The U.S.-run
marketplace meant to serve 36 states was unresponsive early today, with
messages saying the site was dealing with “a lot of visitors” or simply
“down.”
Federal officials are aware of the delays and working on fixing them as
quickly as possible, said an administration official who wasn’t
authorized to speak about the issues on the record. Of the 14 states
and Washington D.C. that have their own exchanges, only four --
Massachusetts, Rhode Island, Colorado and Washington, D.C. -- appeared
to be up and ready for business between 9:30 and 10:30 a.m. New York
time. After New York’s website began displaying error messages,
state officials began advising people on Twitter to call to sign up, and
said wait-times at the state call center were about 10 minutes. “The
not-so-good news is the wheels aren’t turning as quickly as they
could,” said Cesar Perales, New York’s secretary of state, at a news
conference in New York City. “We are doing something that has never been
done before.”
- Germany’s Unemployment Unexpectedly Rose in September.
German unemployment unexpectedly increased for a second month in
September, in a sign the recovery in Europe’s largest economy remains
uneven. The number of people out of work climbed a seasonally
adjusted 25,000 to 2.98 million, after gaining by 9,000 in August, the
Nuremberg-based Federal Labor Agency said today. Economists predicted a
decline by 5,000, according to the median of 27 estimates in a Bloomberg News survey. The adjusted jobless rate rose to 6.9 percent from 6.8 percent.
Companies from Siemens AG to RWE AG have announced job cuts as they try
to manage costs amid a recovery in the 17-nation euro area that the
European Central Bank has described as “fragile.”
- Bond Investors Unfazed as French Economy Fix Slows: Euro Credit.
President Francois Hollande has rattled the European Commission and
business leaders by slowing France's economic revamp. So far, the bond
market is unruffled. The Socialist president introduced changes in the
past month to plug the shortfall in the pension system by relying on
this year's already lowered budget-deficit targets. "France is slowly
drifting off course," said Bruno Cavalier, an economist at Oddo
Securities in Paris. "The drift is slow but seems inexorable. Yet it has
met with nothing but indifference from investors."
- European Stocks Advance as Investors Weigh U.S. Shutdown.
European stocks climbed, rebounding from their biggest decline in a
month, as investors assessed the impact of a partial shutdown of the
U.S. government. Telecom Italia SpA rose 5.2 percent after Goldman Sachs
Group Inc. reinstated its buy rating on the shares. Vestas Wind Systems
A/S gained 6.8 percent after Bank of America Corp. raised its price
forecast on the Danish maker of wind turbines. Unilever slid to its
lowest price in 10 months as the world’s second-largest consumer-goods
maker said sales growth slowed in
the third quarter.
The Stoxx Europe 600 Index added 0.8 percent to 312.86 at
the close of trading.
- Copper Falls on Concern U.S. Government Shutdown to Sap Demand. Copper futures fell the most in
almost four weeks in New York on concern that a government
shutdown will slow U.S. economic growth and hinder a global
recovery in manufacturing. Copper futures for delivery in December lost 1.8 percent to
$3.2635 a pound at 10:48 a.m. on the Comex in New York, heading
for the biggest drop since Sept. 4. Through yesterday, the
commodity fell 9 percent this year amid concern that output will
exceed demand. The Standard & Poor’s GSCI
Index of 24 commodities dropped to a seven-week low.
Wall Street Journal:
- Lawmakers, Obama Spar Over Shutdown. Next Steps Uncertain as Senate Rejects Latest House Plan; President Says Health Law Is 'Here to Stay'. President
Barack Obama placed blame for the government shutdown squarely on House
Republicans Tuesday, saying that one faction of one party is holding
the country
hostage over ideological demands.
- Phony Web Traffic Tricks Digital Ads. As Online Marketing Budgets Soar, Fraudsters Skim Millions
with 'Botnets''. The
website Songsrpeople.com looks a lot like other amateur-video sites. It
is wallpapered with clips featuring "the most insane amusement park
ever" and
"your girlfriend's six friends." The site draws tens of thousands of
visitors a month, according to audience
measurement firms. It also has ads for national brands, including Target
Corp., Amazon.com Inc. and State Farm. But Web-security investigators
at a firm called White Ops contend that most
of the site's visitors aren't people. Rather, they are computer-generated
visitors, or "bots," designed to fool advertisers into paying for the traffic,
says White Ops, which has blacklisted the site—and thousands more like it—so
that ads from clients such as Zipcar don't land there.
CNBC:
- Merck(MRK) to slash about 8,500 jobs, cut expenses by about $2.5 billion. Pharmaceutical
giant Merck announced plans on Tuesday to slash an additional 8,500
jobs on top of previously announced job cuts, adding that it planned to
cut operating
expenses by $2.5 billion by the end of 2015. With prior job cuts, Merck's workforce will be reduced by about 20 percent.
- Icahn: I pushed for a $150 billion buyback from Apple CEO Tim Cook. (video) The billionaire investor said Tuesday on
CNBC's "Fast Money" that the tech giant is missing a golden opportunity
if it doesn't issue a bigger share buyback, and he intends to make sure
that shareholders
are represented even if the board does not want to go ahead with a
bigger buyback.
Zero Hedge:
ValueWalk
Business Insider:
SNL:
- Coal mining job losses accelerate, fueling industry's 'war on coal' message. (graph) Employment among U.S. coal
miners plummeted by roughly 19% in the first quarter compared to the end of
2012, according to federal data, with job losses accelerating nationwide as
persistently low natural gas prices and increasing coal plant retirements cut
domestic coal burn and producers come to the conclusion that the current market
downturn may be worse the ever
before.
FuW:
- Zulauf
Asset Management's Zulauf Sees Drop in Global Shares. Felix Zulauf,
founder of Zulauf Asset Management, said in an interview today that "in
the short term, global equity markets are in a correction phase, which
should last all of October." Sees correction of between 5%-7%.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.50% 2) Restaurants -.10% 3) I-Banks +.28%
Stocks Falling on Unusual Volume:
- DMND, GORO, NEM, SWC, ZINC, BSBR, TSO, CCI, SBAC, WD, BECN, AIXG, RH, AON, PINC, CGIX, AXDX, NQ, VMI, ASH, OLED, CRAY, TYPE, ANGI, ADSK, PAYX, HEES, FLTX, UTX, CEF and BUD
Stocks With Unusual Put Option Activity:
- 1) XOP 2) COG 3) UTX 4) XLY 5) PHM
Stocks With Most Negative News Mentions:
- 1) JCP 2) LO 3) ORCL 4) TSLA 5) SYMC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +1.89% 2) HMOs +1.87% 3) Construction +1.83%
Stocks Rising on Unusual Volume:
- EDG, QIWI, CLNE, CREE, MYGN, TASR, JASO, XONE, LKQ, AREX, WAG, CRZO and ESI
Stocks With Unusual Call Option Activity:
- 1) IMMU 2) CLNE 3) EA 4) TSN 5) ABBV
Stocks With Most Positive News Mentions:
- 1) MRK 2) AYI 3) GD 4) NFLX 5) INTC
Charts:
Evening Headlines
Bloomberg:
- Government Shutdown Begins As Deadlocked Congress Flails. The U.S. government began a partial shutdown at midnight for the
first time in 17 years, putting as many as 800,000 federal employees out
of work today, closing national parks and halting some government
services after Congress failed to break a partisan deadlock. No
further negotiations were immediately planned, raising concerns among
some lawmakers that the shutdown could bleed into a fight economists
consider even more consequential: how to raise the nation’s debt limit
to avoid a first-ever default after Oct. 17.
- Asian Stocks Pare Gains as U.S. Budget Deadline Passes.
Asian stocks pared gains as a deadline to avert a shutdown of the U.S.
government passed and a report showed confidence among large Japanese
manufacturers increased before Prime Minister Shinzo Abe unveils plans
for an economic-support package. The MSCI Asia Pacific Index rose 0.1 percent to 138.77 as of 1:01 p.m. in Tokyo, paring a gain of as much as 0.4 percent.
- Rubber Swings Near 1-Month Low on U.S. Budget Woes, Japan Survey.
Rubber swung between gains and
losses, trading near a one-month low, as investors weighed a
potential shutdown of the U.S. government against better-than estimated
manufacturer confidence in Japan. The contract for March delivery on the
Tokyo Commodity Exchange was little changed at 265.6 yen a kilogram
($2,695 a
metric ton) at 11:34 a.m. local time after trading between 267.1
and 264.4. Futures settled at 265.7 yen yesterday, the lowest
close since Aug. 21.
- Biggest Raw-Materials Rally of Year Seen Stalling: Commodities. The biggest rally in commodities in a
year may stall in the fourth quarter as supply of everything
from copper to corn expands, tensions in the Middle East ease
and the Federal Reserve refrains from tapering stimulus as it
seeks more evidence of sustained growth.
Six of 15 commodities will drop by the end of 2013, seven
will gain and two will move less than 1 percent, according to
the median of estimates from 144 analysts surveyed by Bloomberg
News.
- Italy in Disarray as Draghi Pledge Keeps Nation From Brink. Italy’s
government is on the verge of collapse and two of its most senior
executives have lost the confidence of shareholders. Thanks to Mario
Draghi’s promises, bond investors see the turmoil as more of a blip than
a crisis. Yields barely budged yesterday even after Prime Minister
Enrico Letta spent the weekend fighting Silvio Berlusconi’s efforts to
topple his government. Intesa Sanpaolo SpA (ISP), Italy’s second biggest
bank, replaced its chief executive officer and Telecom Italia SpA (TIT)
CEO Franco Bernabe is preparing to resign.
- McCain Pressures Justice to Hold JPMorgan(JPM) Executives Accountable. U.S. Senator John McCain pressured
the Justice Department to hold JPMorgan Chase & Co. executives
individually accountable while they work to settle claims that
the bank packaged and sold bad mortgage bonds to investors. “Will you seek to hold any top officer, director or key
employees within JPMorgan personally accountable for the
wrongdoing?” McCain, of Arizona, wrote in a letter today to
Attorney General Eric Holder. McCain, the ranking Republican on
a Senate subcommittee that probed JPMorgan’s record trading loss
last year, criticized Holder’s Sept. 26 meeting with Chief
Executive Officer Jamie Dimon, calling it “highly unusual.”
Wall Street Journal:
- White House: Agencies, Start Your Shutdowns. The White House directed federal agencies late Monday evening to
implement their plans to partially shut down operations, after lengthy
political maneuvers on Capitol Hill failed to produce an agreement to
fund government services.
- Stock Investors See Slimmer Pickings. Stocks at Loftiest Levels in Years Compared With Profits. Some investors warn that the air is getting thinner for U.S. stocks,
which head into the fourth quarter up 18% for the year and at their
loftiest levels in years compared with corporate profits. The Dow Jones Industrial Average advanced 1.5% during the third
quarter even as economic growth remained uneven. The resiliency of the
stock market's rally prompted several Wall Street strategists to throw
in the towel on negative forecasts.
Fox News:
- Senate kills latest ObamaCare counteroffer, bill kicked back to House. The Senate voted for the second time Monday to kill a Republican
counteroffer that would rein in ObamaCare while funding the government,
kicking the bill back to the House with less than an hour left on the
clock before the government begins to shut down. Lawmakers are facing a midnight deadline to reach an agreement on a
government spending bill. Senate Democrats vow they will not accept any
proposal that targets ObamaCare. The rhetoric was getting more heated as
the deadline neared.
Zero Hedge:
Business Insider:
NY Times:
- Financial Watchdog With Bite to Depart His Agency.
David Meister is waging legal battles against some of the biggest names
in finance. There’s JPMorgan Chase, the nation’s largest bank. The CME
Group, one of the world’s largest futures exchanges. And Jon S. Corzine,
the former governor of New Jersey. But now, Mr. Meister is poised to
step down from his role as head of the Commodity Futures Trading
Commission’s enforcement unit, a move that may put the future of those
cases in question.
Reuters:
- U.S. Postal Service defaults on $5.6 bln for future health benefits. The U.S. Postal Service on
Monday defaulted yet again on a prepayment for the healthcare of
its future retirees as its finances remain in the red and
legislative reform remains elusive.
The agency has blamed the payments, more than $5 billion a
year as mandated by Congress to prefund the Postal Service's
future retirees' healthcare, for contributing to annual losses
of billions of dollars.
- Exclusive: JPMorgan settlement complicated by Washington Mutual - sources. JPMorgan Chase
& Co's possible $11 billion settlement of government mortgage probes
has been complicated by a dispute with the Federal Deposit Insurance
Corp over responsibility for losses at the former Washington Mutual Inc,
said people familiar with the matter.
The dispute, between the
largest U.S. bank and the FDIC, could leave the federal agency on the
hook for billions the bank is expected to pay as part of the settlement
and substantially reduce the amount of the penalty JPMorgan actually
pays to the government, some analysts said.
- China manufacturing tepid in Sept, small firms struggle. China's manufacturing growth
edged up only slightly in September, official data showed on
Tuesday, with small firms struggling in the face of overcapacity
and weak demand, adding to concerns a nascent economic recovery
may be foundering. The official Purchasing Managers' Index (PMI) stood at 51.1
last month from August's 51.0, below expectations in a Reuters
poll for a rise to 51.5, which would have been the highest in 17
months. Chinese factories have sent mixed signals on the extent of
their latest rebound. A separate manufacturing PMI issued by
HSBC on Monday showed manufacturing grew less than expected last
month on soft domestic demand. "Although overall manufacturing is stable, development is
not balanced," said Zhao Qinghe, senior statistician at the NBS
in a comment accompanying the PMI.
- U.S. study says asset managers could pose systemic market risk. Some activities of asset
managers could pose risks to the broader marketplace, according
to a study released by the Treasury Department on Monday that
boosted the likelihood the largest such firms would face tougher
federal scrutiny. The report does not draw any conclusions about particular
asset managers or whether any firms should be designated as
potentially risky to the broader market.
Evening Recommendations
BMO Capital Markets:
- Rated (JBHT) Outperform, target $86.
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 156.50 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 123.0 +3.75 basis points.
- NASDAQ 100 futures +.36%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:58 am EST
- Final Markit US PMI for September is estimated at 53.1.
10:00 am EST
- Construction Spending for August is estimated to rise +.4% versus a +.6% gain in July.
- ISM Manufacturing for September is estimated to fall to 55.0 versus 55.7 in August.
- ISM Prices Paid for September is estimated to rise to 55.0 versus 54.0 in August.
Afternoon:
- Total Vehicle Sales for September are estimated to fall to 15.6M versus 16.02M in August.
Upcoming Splits
Other Potential Market Movers
- The German retail sales report, Eurozone Unemployment Rate/PMI data, weekly retail sales reports, (PCL) investor meeting and the BofA Merrill could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and automaker shares in the region. I expect US stocks to open modestly higher 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: Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.59 +7.31%
- Euro/Yen Carry Return Index 138.50 -.02%
- Emerging Markets Currency Volatility(VXY) 10.10 +.10%
- S&P 500 Implied Correlation 50.0 +5.46%
- ISE Sentiment Index 63.0 -18.18%
- Total Put/Call 1.09 +15.96%
Credit Investor Angst:
- North American Investment Grade CDS Index 81.98 +1.11%
- European Financial Sector CDS Index 147.59 +1.62%
- Western Europe Sovereign Debt CDS Index 87.93 +3.56%
- Emerging Market CDS Index 292.98 -.33%
- 2-Year Swap Spread 13.25 -.75 basis point
- TED Spread 24.25 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -7.0 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .00% -1 basis point
- Yield Curve 230.0 +1 basis point
- China Import Iron Ore Spot $131.40/Metric Tonne -.38%
- Citi US Economic Surprise Index 50.5 +4.0 points
- Citi Emerging Markets Economic Surprise Index 6.20 +2.0 points
- 10-Year TIPS Spread 2.19 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +125 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical 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
