Bear Radar

Style Underperformer:

• Small-Cap Value +1.09%

Sector Underperformers:

• 1) Coal -.97% 2) Gold & Silver -.43% 3) Computer Hardware +.08%

Stocks Falling on Unusual Volume:

• SWK, GY, ELLI, GDOT, LBY, CQB, IVZ, WNS, LLTC, TDC, GPOR, PAA, DSW and EXC

Stocks With Unusual Put Option Activity:

• 1) GERN 2) GT 3) MCP 4) PXD 5) CSX
  

Stocks With Most Negative News Mentions:

• 1) GDOT 2) CQB 3) CSCO 4) CLD 5) EXC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.41%

Sector Outperformers:

• 1) Biotech +2.24% 2) Banks +2.15% 3) Insurance +2.0%
  

Stocks Rising on Unusual Volume:

• RCPT, AAP, VISN, GDP, NOAH, SCTY, FLTX, GEO, ABT, IRE, MTDR, PXD, NTRS, KERX, CBM, BLOX, RDN, TMH, TPLM and CRZO

Stocks With Unusual Call Option Activity:

• 1) KERX 2) SCSS 3) AAP 4) UBNT 5) PXD

Stocks With Most Positive News Mentions:

• 1) INTC 2) AAPL 3) BAC 4) ABT 5) SCTY
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• Singapore Shows Asia How To Crack Down on Housing Bubble. Singapore, the city-state that banned chewing gum to curb litter, is showing the rest of Asia how to cool a housing bubble. The government this year ramped up efforts to bring down property prices that surged to a record, adopting some of its strictest measures, including a cap on debt at 60 percent of a borrower’s income, higher stamp duties on home purchases and an increase in real-estate taxes. The combination and timing of the curbs is the most comprehensive among governments battling housing bubbles, according to Vishnu Varathan, an economist at Mizuho Bank Ltd.

• China’s Stocks Fall Most in Three Weeks on Economic Concerns. China’s stocks fell the most in three weeks after JPMorgan Chase & Co. advised reducing holdings and companies linked to Shanghai’s free-trade zone tumbled on concern valuations are excessive. Shanghai International Port (Group) Co. and Shanghai Waigaoqiao Free Trade Zone Development Co. plunged more than 7 percent after more than doubling since Aug. 22. Aluminum Corporation of China Ltd. and Jiangxi Copper Co., the nation’s biggest producers of aluminum and copper, led declines for metal producers. Cosco Shipping Co. and China Eastern Airlines Corp. slumped at least 4 percent. The Shanghai Composite Index (SHCOMP) slid 1.6 percent to 2,196.94 at 10:46 a.m., heading for the biggest loss since Sept. 26.

• Asian Stocks Swing Between Gains, Losses on U.S. Impasse. Asian stocks swung between gains and losses as U.S. lawmakers resumed talks to avoid a default ahead of tomorrow’s deadline to raise the debt ceiling. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., fell 0.9 percent in Hong Kong. Japan Tobacco Inc., Asia’s largest listed cigarette maker, dropped 3.1 percent on a report it may raise prices after an increase in the nation’s sales tax. GungHo Online Entertainment Inc. jumped 17 percent in Tokyo after the game developer and its parent SoftBank Corp. agreed to buy 51 percent of Finland’s Supercell Oy. The MSCI Asia Pacific Index was little changed at 141.36 as of 11:23 a.m. in Tokyo, after swing between gains and losses of 0.2 percent.

• Rebar Falls in Shanghai With Chinese Stocks on Economic Outlook. Steel reinforcement-bar futures in Shanghai fell as Chinese stocks dropped the most in three weeks on concern the nation’s economy is losing momentum. Rebar for delivery in January on the Shanghai Futures Exchange fell by as much as 0.7 percent to 3,581 yuan ($587) a metric ton before trading at 3,586 yuan at 10:35 a.m. local time. Prices have dropped 10 percent this year.

• Iron Ore Prices Seen by UBS at Risk of Declining on Steel Output. Iron ore prices are at risk of falling this quarter if a seasonal cut in steel production rates occurs, with prices to extend declines into next year amid surging global supply, according to UBS AG. 

• Rubber Drops from Two-Week High as U.S. Debt Deadline Looms. Rubber retreated from the highest level in more than two weeks as the deadlined loomed for U.S. lawmakers to reach a deal on raising the debt limit and avoiding a default. The contract for March delivery dropped as much as 1.2 percent to 267.5 yen a kilogram ($2,715 a metric ton) on the Tokyo Commodity Exchange and was at 268.6 yen at 11:09 a.m. in Tokyo. The most-active contract ended at 270.8 yen yesterday, the highest settlement since Sept. 26. Prices have fallen 11 percent this year.

• Putin Builds North Korea Rail to Circumvent Suez Canal. Vladimir Putin is inching closer to his goal of turning Russia into a major transit route for trade between eastern Asia and Europe by prying open North Korea, a nuclear-capable dictatorship isolated for half a century. 

• Draghi Turns Judge on Europe Banks as ECB Studies Balance Sheets. The European Central Bank is sizing up just how tough it wants to get with the region’s lenders. Policy makers at the Frankfurt-based ECB will this week try to agree on the ground rules of its three-pronged probe into the health of the 130 banks it will start supervising next year. The process will stress-test balance sheets for exposure to sovereign debt as well as push institutions to admit to more of their bad debt than they have before, according to three officials who spoke on condition of anonymity.

• CME(CME) Boosts Rate Swap Margin 12%. “CME Clearing is closely monitoring the developments related to the U.S. reaching its debt ceiling,” the Chicago-based company said in a notice to members posted on its website today. “Anticipating possible market moves specific to this event, CME will increase margin for all” over-the-counter interest-rate swaps.

• Twitter Plans to List on NYSE Under `TWTR'. (video) 

• Yahoo’s(YHOO) Forecast Trails Estimates as Competition Increases. Yahoo! Inc.’s gains from its stake in China’s Alibaba Group Holding Ltd. aren’t enough to mask the slumping advertising business as Google Inc. and Facebook Inc. take market share.

Wall Street Journal:

• House GOP Abandons Its Proposal. In Senate, Reid and McConnell Resume Their Talks. Last-minute protests from conservatives in the House created a day of delay and confusion in Congress's efforts to avoid a U.S. debt default, as Republican leaders failed to craft a GOP budget proposal that could muster enough votes to pass.

• Budget Battle: Streaming Coverage.

• J.P. Morgan(JPM) to Pay $100 Million in CFTC Pact on 'Whale' Trades.

• Emerging-Markets Investors Sour on Mexico Stocks. Sluggish Growth Outlook Takes Toll on Mexican Stock Market.

• Twitter's Loss Widens. NYSE Gets Coveted Listing Over Rival Nasdaq.

• Advance Auto Parts(AAP) to Buy General Parts International. Deal for $2 Billion to Create One of North America's Biggest Aftermarket Auto-Parts Providers.

• SunTrust(STI) Eliminating 800 Mortgage Employees in Next Several Months. SunTrust Banks Inc. will eliminate 800 mortgage employees as a refinancing boom that boosted many banks' loan volumes comes to a screeching halt amid rising interest rates. The Atlanta bank will cut the positions over the next several months and expects attrition to account for some of the reductions, Sue Mallino, a SunTrust spokeswoman, said in a statement on Tuesday. "Like many financial institutions, we are adjusting our staffing in the mortgage business to reflect current market conditions, particularly the reduced volume of mortgage loan refinancing," Ms. Mallino said.

Fox News:

• House cancels vote on budget, focus turns to Senate. House Republicans abruptly cancelled plans to take up a revised budget proposal Tuesday evening after leaders struggled to round up votes, leading Senate negotiators to resume bipartisan talks in hopes of reaching a deal before Thursday's debt ceiling deadline.

• Fast-food CEO says Obama 'wrong,' health law is hurting job creation. Andy Puzder, the CEO of CKE Restaurants Inc. which is the parent company of Carl’s Jr. and Hardee’s, told Megyn Kelly on “The Kelly File,” that his company and others will choose to hire part-time employees instead of full-time employees because of increased costs from the health care law.

CNBC:

• Puerto Rican government seeks to calm investors about debt. (video) Representatives of the government of Puerto Rico talked to investors Tuesday afternoon, as the U.S. commonwealth tried to assuage market concerns about its ability to repay its massive debt load. 

• Intel(INTC) earnings beat; revenue outlook is light. (video) Intel beat on earnings Tuesday but its current-quarter revenue outlook was light as the PC market continues to struggle.

Zero Hedge:

• Stocks Soar Back To Highs On Reid's Optimism But T-Bills (Once Again) Ain't Buying It One Bit.

• Fitchslapped: French Rating Agency Puts US AAA Rating On Negative Watch - Full Statement.

• As House Republicans Fail To Get The Needed Votes, A Reminder Of What Goldman Warned.

• Radioactivetyphoonado: Watch As "Once In A Decade Storm" Batters Fukushima.

• Dylan Ratigan Rages Over "The Extraction Of America" And The Bought-Off Congress. (video)

Business Insider:

• ANALYSTS: Missing The Debt Ceiling Deadline Would Be 'Manageable' For A Few Days.

• GOLDMAN(GS): Chipotle's(CMG) 'It Factor' Is Fading.

Washington Post: 

• Visits to federal health-care Web site off 88%. The number of visitors to the federal government’s HealthCare.gov Web site dropped 88 percent between Oct. 1 and Oct. 13, according to a new analysis of America’s online use, while less than half of 1 percent of the site’s visitors successfully enrolled for health insurance the first week. The new numbers on the new health-care law — released by Kantar US Insights and based on an assessment conducted by the nonpartisan research firm Millward Brown Digital — provide a partial snapshot of how the federal health-care exchange has fared since it launched at the start of the month. 

• Federal Reserve’s expected ‘taper’ of easy-money policies gets pushback from abroad.

NY Times:

• Export Fair in China Loses Steam. With nearly as much floor space as five McCormick Places in Chicago, the sprawling Canton Fair, which opened in Guangzhou Tuesday morning, is a monument to China’s industrial versatility and export prowess. But although the 12 million square feet of exhibits still offer products as varied as wheelbarrows and Segway knockoffs, the autumn session of the fair hints at the broader malaise now afflicting exporters across China and other East Asian nations. 

• Italian Prime Minister Calls Populism a Threat to Stability in Europe. With European parliamentary elections less than eight months away, Prime Minister Enrico Letta of Italy on Monday warned that the rise of angry populism poses the greatest threat to stability on the Continent and could undermine critical efforts to build and strengthen the euro zone’s political and financial institutions.

The Federalist:

• The Problems Are Just Starting for Obamacare.

Reuters:

• CSX(CSX) sees better 2013, posts higher profit. CSX Corp posted a higher quarterly profit as its non-coal business did well and the railroad increased prices. Jacksonville, Florida-based CSX, the first of the big railroads to report quarterly results, earned $463 million or 46 cents a share, up from $455 million or 44 cents a share, last year.

Telegraph:

• China's soaring fiscal deficit rings alarm bells. Analysts describe rebound of world's second largest economy as “unhealthy” and likely to wither over coming months as Beijing is forced to tighten policy.

Commercial Times:

• Formosa Epitaxy Sees Lower LED Chip Price Next Year. Industry average selling price may drop -10% next year, following a similar decline this year, citing Formosa Epitaxy Chairman Chien Feng-Jen.

Evening Recommendations 
BMO Capital:

• Rated (WFM) Outperform, target $70. 

• Rated (UNFI) Outperform, target $83.

• Rated (TFM) Outperform, target $60.

• Rated (SWY) Outperform, target $38.

• Rated (CASY) Underperform, target $66.

• Rated (SUSS) Outperform, target $60.

• Rated (FWM) Outperform, target $28.

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 136.0 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 106.5 -3.0 basis points. 

• FTSE-100 futures +.12%.

• S&P 500 futures +.49%.

• NASDAQ 100 futures +.35%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CMA)/.71

• (PNC)/1.62

• (USB)/.75

• (NTRS)/.77

• (ABT)/.51

• (KEY)/.22

• (MAT)/1.11

• (SWK)/1.38

• (BK)/.58

• (BLK)/3.88

• (BAC)/.20

• (PEP)/1.17

• (STJ)/.89

• (GWW)/3.04

• (EBAY)/.63

• (XLNX)/.52

• (IBM)/3.96

• (KMI)/.30

• (SNDK)/1.33

• (AXP)/1.22

• (STLD)/.24 

Economic Releases
10:00 am EST

• The NAHB Housing Market Index for October is estimated to fall to 57 versus 58 in September.

2:00 pm EST

• Fed Beige Book

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's George speaking, Fed's Fisher speaking, Fed's Pianalto speaking, Eurozone CPI, UK Unemployment and the weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Stocks Lower into Final Hour on Rising US Debt Ceiling/Shutdown Worries, Earnings Concerns, Technical Selling, Homebuilding/Defense Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 17.89 +11.33%

• Euro/Yen Carry Return Index 138.69 -.54%

• Emerging Markets Currency Volatility(VXY) 8.88 -1.33%

• S&P 500 Implied Correlation 50.41 +12.25%

• ISE Sentiment Index 68.0 -26.88%

• Total Put/Call 1.01 +14.77%

• NYSE Arms .73 +9.54% 

Credit Investor Angst:

• North American Investment Grade CDS Index 77.35 +.74%

• European Financial Sector CDS Index 120.71 -5.77%

• Western Europe Sovereign Debt CDS Index 73.0 +.69%

• Emerging Market CDS Index 268.33 -2.62%

• 2-Year Swap Spread 12.75 -1.0 basis point

• TED Spread 14.75 -4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -8.0 +1.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .10% +4 basis points

• Yield Curve 237.0 +4 basis points

• China Import Iron Ore Spot $133.60/Metric Tonne n/a

• Citi US Economic Surprise Index 30.90 -1.7 points

• Citi Emerging Markets Economic Surprise Index -8.80 +1.4 points

• 10-Year TIPS Spread 2.21 unch.

Overseas Futures:

• Nikkei Futures: Indicating +7 open in Japan

• DAX Futures: Indicating -17 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts 

• Disclosed Trades: Added to my  my (IWM)/(QQQ) hedges

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• Reid Slams House Plan as Senate Pauses for Boehner Move. Senate Majority Leader Harry Reid rejected a House plan to halt the fiscal impasse, as Senate leaders put on hold bipartisan talks aimed at ending the 15-day-old government shutdown and preventing a default.

• Shiller Views U.S. Stocks as ‘Highly Priced’: Chart of the Day.

• Bodies Double as Cash Machines With U.S. Income Lagging: Economy. Hair, breast milk and eggs are doubling as automated teller machines for some cash-strapped Americans such as April Hare. Out of work for more than two years and facing eviction from her home, Hare recalled Louisa May Alcott’s 19th-century novel and took to her computer.

• Apple(AAPL) Hires Burberry Chief to End Search for Retail Head. Apple Inc. (AAPL) hired Burberry Group Plc (BRBY) Chief Executive Officer Angela Ahrendts as head of retail operations, ending a yearlong search and adding the first woman to its 10-member executive team.

Wall Street Journal:

• House, Senate Work on Competing Budget Proposals. GOP Leaders Wavering Over Whether to Bring Initiative to the Floor.

• Budget Battle: Streaming Coverage.

• Citigroup(C) Results Hit by Weak Fixed Income Trading.

• Health Law Stirs Lending Worries for Small Business. Small businesses are griping that the new U.S. health-care law is difficult to understand. Now some may have another complaint: If they don’t have a handle on the law’s cost and impact, they may have a harder time getting a loan.

Fox News:

• White House, Dems preemptively blast House GOP budget plan before it's introduced.
  The White House and its Democratic allies in Congress moved to shoot down an emerging House Republican budget proposal before it even left the ground, blasting the late-breaking plan as a "partisan" product that would imperil efforts to meet the looming debt-ceiling deadline. Senate Democratic Leader Harry Reid turned a deaf ear, declaring categorically that it "won't pass the Senate."

Zero Hedge:

• So Much For Negotiating: White House Rejects House Republican Proposal.

• Treasury Bills Collapse. (graph)

• NY Fed Looks To Seal Documents In Latest Whistleblower Case. 

• Foodstamp Program Shutdown Imminent?

• Are We Approaching Peak Retirement?

Mish's Global Economic Trend Analysis:

• VAT Increase Backfires in Spain, Supermarket Sales Plunge 7.2%. 

9to5Google:

• Google(GOOG) Watch is happening soon, heavy into Kit Kat/Google Now functionality.

Reuters:

• Bank of Italy examines loan books of top two banks - sources. The Bank of Italy is examining the loan books of the country's top lenders UniCredit and Intesa Sanpaolo, three banking sources said on Tuesday, in its push to tidy their balance sheets before next year's sector check-up by the European Central Bank (ECB).

Yonhap News:

• N. Korea ready to make another nuke test anytime: S. Korean envoy. North Korea has "very serious nuclear capabilities" and it is able to conduct another round of nuclear tests "any time," South Korea's nuclear envoy said Tuesday. The communist country has restarted a nuclear reactor at its Yongbyon nuclear center, a provocative move that would provide Pyongyang with enough plutonium to build one atomic bomb a year, according to Seoul's spy agency.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.91%

Sector Underperformers:

• 1) Homebuilders -2.10% 2) Defense -1.96% 3) Networking -1.55%

Stocks Falling on Unusual Volume:

• TDC, FLIR, CVLT, IVZ, WCC, CZR, ATLS, DPZ, APL, MSTR, ETH, INFA, NVS, CTXS, QLIK, RL, APEI, VRNT, ORB, BRO, ZMH, UTEK, VFC, CHKP, ABG, APL and CZR

Stocks With Unusual Put Option Activity:

• 1) ANV 2) KMX 3) OPK 4) WFM 5) X
  

Stocks With Most Negative News Mentions:

• 1) BA 2) JCP 3) FLIR 4) TDC 5) JPM
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume