Bear Radar

Style Underperformer:

• Mid-Cap Growth -.22%

Sector Underperformers:

• 1) Oil Tankers -1.31% 2) Defense -1.24% 3) I-Banks -1.13%

Stocks Falling on Unusual Volume:

• PKT, EA, EQIX, COG, XCO, MET, AA, KEP, SCCO, TGP, TISI, MEMP, RECN, FLTX, EME, IMPV, ICPT, CLDX, BAX, VMI, HOS, MON, CREE, GHL, FNGN, IMAX, CSTM, EV and WHR

Stocks With Unusual Put Option Activity:

• 1) DISH 2) EWY 3) KSS 4) BEN 5) XLV
  

Stocks With Most Negative News Mentions:

• 1) AXP 2) ORCL 3) CREE 4) CME 5) AIG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth -.41%

Sector Outperformers:

• 1) Gold & Silver +1.86% 2) Disk Drives +.84% 3) Homebuilders +.81%
  

Stocks Rising on Unusual Volume:

• MCP, ABX, DISH, WNR, GPN, RUE, RMTI, ALLT, OMER, OSIR, P, VVUS, TRLA, Z, PANW and ANAC

Stocks With Unusual Call Option Activity:

• 1) MDLZ 2) KSS 3) CL 4) CLX 5) CXO

Stocks With Most Positive News Mentions:

• 1) P 2) LMT 3) GPN 4) ADSK 5) VRX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• The Threat of ‘Abegeddon’ From Taxes in Japan. Posterity is watching carefully as Shinzo Abe goes ahead with a sales-tax increase aimed at getting a handle on Japan’s huge debt burden, the world’s largest. Unfortunately history may judge him no better than Ryutaro Hashimoto, the last Japanese prime minister to kill an economic recovery with ill-timed fiscal tightening.

• ADB Cuts Developing Asia Forecasts as Fed Taper Adds Pressure. A slowdown in China and India is reverberating across the region with the Asian Development Bank forecasting easing expansion this year, putting pressure on policy makers to take steps to bolster their economies. Developing Asia, which excludes Japan, will probably grow 6 percent in 2013 and 6.2 percent next year, the Manila-based lender said in a report today. In July, it had forecast expansion of 6.3 percent this year and 6.4 percent in 2014. Slowing growth in two of Asia’s biggest economies is compounded by concern that the Federal Reserve’s impending reduction of its record stimulus will drive investors away from emerging nations and spur volatility in financial markets.

• Asia Stocks Outside Japan Rise as Market Weighs Shutdown. Asian stocks outside Japan rose as investors speculated economic effects would be limited from the first partial U.S. government shutdown in 17 years. Japanese shares fell. Samsung Electronics Co. gained 2.4 percent in Seoul after the consumer-electronics maker said third-quarter earnings will improve at its mobile unit. Paladin Energy Ltd. soared 8.3 percent in Sydney after the uranium explorer reported it is cutting costs. Nissan Motor Co., a Japanese carmaker that gets about 80 percent of its revenue outside Japan, dropped 1 percent as the yen gained. The MSCI Asia Pacific excluding Japan Index gained 0.3 percent to 462.26 as of 11:54 a.m. in Tokyo.

• Rubber Reaches 7-Week Low as U.S. Auto Data Raise Demand Concern. Rubber extended losses for a fourth day to the lowest level in seven weeks after data showed U.S. auto sales fell for the first time in 27 months, raising concern that demand may weaken for the commodity used in tires. The contract for March delivery on the Tokyo Commodity Exchange lost as much as 1.7 percent to 256.4 yen a kilogram ($2,619 a metric ton), the lowest level since Aug. 9. Futures traded at 257.2 yen at 10:28 a.m., extending this year’s losses to 15 percent for a most-active contract. 

• Coal to Surpass Gas in Southeast Asia Power-Use Boom, IEA Says. Coal will replace natural gas as the dominant fuel for producing electricity in Southeast Asia as the region almost doubles its energy consumption in the next two decades, according to the International Energy Agency. The 10 members of ASEAN, with energy demand growing at more than twice the global average, will get 49 percent of their power from coal by 2035, up from 31 percent in 2011, the IEA said today in its Southeast Asia Energy Outlook. The share from gas will drop to 28 percent from 44 percent.

• Maersk Four Rate Rises Fail to Spread as Demand Falls: Freight. Global container-shipping operators’ efforts to boost freight rates this year are failing to bring results because of overcapacity and weak demand. That may undermine the recent rise in container-shipping stocks after second-quarter industry results were better than expected, according to Robin Byde, an analyst at Cantor Fitzgerald Europe in London. The industry’s traditional peak season in the third quarter probably will disappoint, he added.

• Draghi Seen Putting Words Before Action on ECB Policy. Mario Draghi is likely to rely on the power of his voice rather than new policies to steer Europe’s banks through the early stages of an economic recovery. The ECB president will hold off from pumping more cash into the currency bloc’s financial system as long as the threat of action keeps market interest rates under control, according to economists from Berenberg Bank to Nomura International Plc. While Draghi put investors on notice last week that a long-term refinancing operation is possible, other policy makers have played down the likelihood of that for now.

• Samaras Cautions Europeans Against Procrastinating on Greek Debt. Greek Prime Minister Antonis Samaras said the European nations that are financing Greece’s bailout should not wait too long before helping the country address its debt burden. Citing a pledge made in November by euro-area nations to consider further assistance to lower Greece’s debt, Samaras said his country is on track to meet the main condition, an annual budget surplus before interest payments, or primary surplus.

Wall Street Journal:

• Capital Digs In for Long Haul. Congress, Obama Prepare for Siege Over Shutdown, Then Debt Ceiling. Lawmakers and the White House dug in Tuesday for a long fight as the first federal government shutdown in nearly two decades showed no signs of breaking, increasing the likelihood it will become entangled in an even larger battle over the Treasury's ability to pay the government's bills. The two parties held no negotiations to resolve the impasse, instead trading blame. Republicans criticized Senate Democrats as being unwilling to negotiate an end to the standoff that forced federal agencies to curtail a range of activities and begin the furlough of more than 800,000 workers. 

• Budget Battle: Streaming Coverage.

• New York Plans Action on Alleged Mortgage Violations. New York's top prosecutor plans to announce on Wednesday both an agreement with Bank of America Corp. and a lawsuit against Wells Fargo & Co. over alleged violations of a $25 billion mortgage settlement reached last year.

• Weak Trading, Mortgage Slump, Legal Costs to Cut Results at Banks. Analysts Rush to Reduce Estimates. New troubles are piling up for U.S. banks as they prepare to release third-quarter results amid warnings of weak trading revenue, a sharp decline in mortgage-refinancing activity and rising legal costs. Analysts are scrambling to ratchet down earnings estimates ahead of the reports. J.P. Morgan Chase JPM +0.52% & Co. and Wells Fargo WFC +0.41% & Co. are slated to post results on Oct. 11, with Citigroup Inc., C +0.19% Bank of America Corp., BAC +0.72% Morgan Stanley MS +0.71% and Goldman Sachs Group Inc. GS +0.50% due to weigh in the following week.

• Fred Barnes: The President's Shutdown. Where leadership is needed, Obama stays on the sidelines—except when he's attacking Republicans.

Fox News:

• Physicians prepare to deal with increased demand, strain on practices under ObamaCare. As enrollment in ObamaCare begins, physicians throughout the country are preparing to deal with an influx of newly insured patients – as well as the increased financial demands this will place on their practices. While it will take a few years for doctors to fully determine how they will be affected by ObamaCare, some physicians are already anticipating the need to make major changes to the way they run their practices.

MarketWatch.com:

• Power companies look at charging customers for solar energy. Utilities in a few solar-friendly states are looking for ways to charge their solar customers for energy, a story by the Associated Press said. That includes creating extra fees for solar customers, or attempting to roll back or end programs that allow solar customers to trade the solar power they generate on sunny days for grid power the rest of the time.

CNBC:

• Shutdown may last week; budget talks possible: Boehner aide. (video)

Zero Hedge:

• 4 Bearish Divergences For "Different This Time" Believers. (graph)

• Millennials Devastated As American Dream Becomes Nightmare For Most. (graph)

• Trade Of The Decade: Short 'Trust'. (graph)

• Carl iCahn's Nightmare (Or The Credit Bubble In 4 Simple Charts).

• Goldman's(GS) Global Leading Indicator Plunges Back To "Slowdown".

Business Insider:

• Report: Three Top Microsoft(MSFT) Investors Call For Bill Gates To Step Down From The Board.

• MORGAN STANLEY(MS) ECONOMIST: I Worry About A 1913 Scenario With Dire Consequences For The Global Economy. One unintended consequence of QE and ZIRP was a rush of liquidity into emerging markets, which offered a seemingly successful growth model and thus higher expected returns. Five years on, the EM growth model looks severely challenged, as Manoj Pradhan and I already pointed out more than a year ago. 

• The Depressing Reality Of Spain's Youth Unemployment Crisis Brought To Life By A Grim Facebook Post.

• GEORGE SOROS: Europe's Nightmare Is Getting Worse, And Only Germany Can Make It Stop.

• The 'Smart Money' In The Stock Market Has Been Headed For The Exits Since May. (graph)

The Detroit News: 

• Electric vehicle sales slow in September. Electric vehicle sales lagged in September after a very strong August that was fueled by new discounts. General Motors Co. said sales of its plug-in hybrid electric Chevrolet Volt fell 38 percent to 1,766 in September, down from 2,851 in September 2012. But in August, GM sold 3,351 Volts after announcing a hefty price cut. GM slashed the base price of its plug-in hybrid by $5,000, from $39,995 to $34,995, making it the latest automaker to lower prices of electric vehicles in the face of lagging consumer demand. For the first nine months of the year, Volt sales are up just 2.5 percent to 16,760.

Reuters:

• JC Penney(JCP) is sued over share sale, stock plunge. A JC Penney Co shareholder on Tuesday sued the struggling retailer over its surprise decision to issue more than $810 million of stock to shore up liquidity, which led to a steep drop in its share price. 

• Detroit defaults on more than $600 mln of 'unsecured' GO bonds. Detroit on Tuesday defaulted on more than $600 million of general obligation bonds deemed unsecured by the city's emergency manager, a city spokesman said. 

• 'The system is down': Obamacare glitches go public, reasons unclear. Blank boxes where security questions are supposed to appear. Pleas to "be patient." Error messages galore. Notices that "the system is busy right now." Web pages timing out before they load. Garbled lines of text riddled with stray question marks. Technology experts and government officials were stumped about the reasons for the computer glitches plaguing the Obama administration's launch of new health insurance exchanges.

• Nikkei falls to 2-week low, Abe stimulus fails to inspire.

Nikkei:

• Toyota Plans Lower Japan Output on Sales Tax. Co. forecasts domestic production of 3m vehicles next year, 350,000 fewer than planned 2013 production, anticipating impact of sales tax increase. Co. has informed suppliers.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 150.0 -6.5 basis point.

• Asia Pacific Sovereign CDS Index 118.75 -4.25 basis points. 

• FTSE-100 futures -.08%.

• S&P 500 futures -.15%.

• NASDAQ 100 futures -.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MON)/-.43 

Economic Releases 
8:15 am EST

• The ADP Employment Change for September is estimated to rise to 180K versus 176K in August.

 10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,500,000 barrels versus a +2,635,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -700,000 barrels versus a +217,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,000,000 barrels versus a -234,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.95% versus a -2.2% decline the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Rosengren speaking, ECB rate decision, China Non-Manufacturing PMI, weekly MBA mortgage applications report, ISM New York for Sept., (ADSK) investor day, (CXW) analyst day and the (PLL) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and real estate 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.

Stocks Rising into Final Hour on Diminished US Govt Shutdown Fears, Less Eurozone/Emerging Markets Debt Angst, Short-Covering, Healthcare/Biotech 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) 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%

• NYSE Arms .75 -53.56% 

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

Today's Headlines

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.”  

• Obamacare Is a Complete Disaster: Stockman. (video)

• 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.

• Euro’s Eight-Month High at Risk on ECB Stimulus: Market Reversal. Trading patterns in the euro show its rally to an eight-month high is vulnerable, as a political crisis in Italy and speculation the European Central Bank will pump liquidity into the financial system weigh on the currency.

• 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.

• Fed Said to Widen Commodities Review to Goldman, Morgan Stanley. The Federal Reserve has expanded its scrutiny of banks’ physical commodities operations to encompass businesses run by Goldman Sachs Group Inc. (GS:US) and Morgan Stanley (MS:US) that Congress had previously authorized. 

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. 

• Budget Battle: Latest Updates.

• 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. 

• The Political Science of Global Warming. The U.N.'s latest climate-change report should be its last.

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.

• Gold tumbles as investors watch Washington dysfunction. The December gold futures contract was down about 2.6 percent, to $1,292 per troy ounce in late morning trading. Silver also skidded, losing more than 4 percent. 

• Corporate profit outlook is weak and getting weaker. Corporate profits are tracking at about a third of original expectations and trending lower, setting up a potentially rough ride when reporting season begins next week.

• 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:

• Next "Subprime Crisis" Expands As Student Loan Defaults Hit $146 Billion, Highest Default Rate Level Since 1995. (graph)

• Manufacturing ISM Rejects Earlier PMI Data, Spikes To Highest Since April 2011. (graph)

• GM Vehicle Sales Collapse 11%.

• America's Endless Budget Battle.

• The Betrayal Of Berlusconi Smashes Italian Stocks To Best Day In 3 Months. (graph)

• One More "The Status Quo Is Saved" Rally and Then...?

ValueWalk

• Prime Brokers Expect Big Changes in Hedge fund Industry.

Business Insider:

• America's Marriage Crisis Is Making Income Inequality So Much Worse.

• How To Track The Economy Now That The Government Has Stopped Publishing Data.

• Google(GOOG) Just Announced A Huge Move In Its Measurement War With Facebook(FB).

• The Decline Of The US Middle Class Is Getting Even Worse [CHARTS].

• WhatsApp Suddenly Looks Like A Huge Threat To Facebook(FB).

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%.

Bear Radar

Style Underperformer:

• Large-Cap Value +.57%

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:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume