Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +4.58% 2) Disk Drives +2.26% 3) Homebuilding +1.46%
Stocks Rising on Unusual Volume:
- KERX, SFUN, SNDK, BITA, SCTY, WGO, CLB, PVTB, IRE, LHO, JKS, CGEN, BTU, NQ, BVN, NTCT, INSY, DHR, STLD, CAMP, VZ, AMBA, AXP, PPG, HBI, SPLK, ABT and HALO
Stocks With Unusual Call Option Activity:
- 1) SVU 2) HRB 3) BHI 4) MNST 5) XLNX
Stocks With Most Positive News Mentions:
- 1) VZ 2) PPG 3) SNDK 4) BTU 5) SCTY
Charts:
Evening Headlines
Bloomberg:
- Asia’s Waning Competitiveness Seen in Trade Disconnect.
Asia’s exporters are failing to benefit from a recovery in advanced
nations, putting the onus on
policy makers to shift reliance to domestic demand as a driver
of economic growth. China’s exports unexpectedly fell last month, while
overseas shipments from Taiwan and South Korea also declined. Asia’s export-led growth engine is showing “signs of serious defects,” according to Frederic Neumann, Hong Kong-based co-head of Asian economics at HSBC Holdings Plc, who says the
region’s trade data has disappointed over the past couple of
years and may be evidence of a loss in competitiveness.
- BlackRock(BLK) Cuts Hong Kong Investment Seeing Drop in Prices. BlackRock
Inc. (BLK) is reducing its investment in Hong Kong, betting the city’s
equity and property markets will trail other Asian countries as growth
slows in the world’s two biggest economies. Hong Kong stocks may
underperform as the U.S. pares stimulus and China tightens credit, said
Andrew Swan, head of Asian equities at BlackRock, which manages $3.86
trillion as of June 30. Home values in the city may fall more than 10
percent into 2014 amid government measures to curb prices and rising
U.S. interest rates, he said.
- Asian Stocks Gain as Congress Passes Deal to End Shutdown. Honda Motor Co., which gets about 46 percent of its car sales from North America, gained 1.3 percent in Tokyo. Kansai Electric Power Co. added 2.6 percent after the Japanese utility reported an unexpected first-half profit. Boral Ltd. advanced 5.9 percent after USG Corp. agreed to pay the Australian company as much as $575 million to create a jointly owned building-materials business spanning Asia and the Middle East. The MSCI Asia Pacific Index gained 0.7 percent to 142.06 as
of 11:34 a.m. in Tokyo, with more than three shares rising for
each that fell.
- Rebar Rises for First Time in Three Days on China Capacity Cuts. Steel reinforcement-bar futures in Shanghai rose for the first time in three days as China said it would cut steel capacity. Rebar for delivery in January on the Shanghai Futures Exchange gained as much as 0.5 percent to 3,586 yuan ($588) a metric ton, before trading at 3,569 yuan at 10:42 a.m. local time. The most-active contract closed at the lowest level in
more than three months yesterday.
- Rubber Rises to Three-Week High on U.S. Debt Deal as Yen Drops. Rubber rallied to a three-week high
as U.S. lawmakers reached a deal to raise the debt ceiling,
easing concern of a default in the world’s biggest economy. The
contract for March delivery gained as much as 2.3 percent to 276 yen a
kilogram ($2,795 a metric ton) on the Tokyo Commodity Exchange, the highest level since Sept. 27, before trading at 273.2 yen at 11:24 a.m. local time.
- Record Copper Output in China Seen by Antaike on Smelter Fees. Copper
output in China is set to remain at record levels for the rest of 2013
as high treatment fees encourage smelters in the biggest producer to run
at full capacity. Monthly production in the fourth quarter may be
about 560,000 metric tons, matching an all-time high in August and above
average output of 534,112 tons for the first eight months, said Yang
Changhua, an analyst at Beijing Antaike Information
Development Co.
- Euro Capitals Tighten Fiscal Leash as EU Starts Austerity Police.
In Madrid, the government is paring spending on roads and rails. In
Rome, state property is to be sold off. In The Hague, lawmakers agreed
to the second set of extraordinary cuts in two years. Even with the 17-nation euro area projecting economic
expansion next year for the first time since 2011, policy makers
are keeping a fiscal leash on growth by maintaining austerity
policies born in the fight to save the euro.
- EBay(EBAY) Holiday Quarter Forecast Trails Analysts’ Estimates. EBay
Inc. (EBAY) issued sales and profit forecasts that fell short of
analysts’ estimates ahead of the key holiday shopping season, citing
“dramatically decelerating U.S. e-commerce growth.” Fourth-quarter sales will be $4.5 billion to $4.6 billion,
the operator of the largest online marketplace said in a
statement today. Analysts on average were projecting revenue of
$4.64 billion, according to data compiled by Bloomberg. EBay
forecast profit excluding some items of 79 cents to 81 cents a
share for the period, below analysts’ prediction of 83 cents.
Wall Street Journal:
- House Conservatives Gird for Next Budget Battles.
After enduring weeks of barbs by Democrats and even some fellow
Republicans for picking a fight with President Barack Obama over the
health law, some of the assembled conservatives were eager to return
fire.
- ObamaCare's Black Box. Why the exchanges are worse than even the critics imagined. This
isn't some coding error, or even the Health and Human Service
Department's usual incompetence. The failures that have all but disabled
ObamaCare are the result of deliberate political choices, which HHS and
the White House are compounding with secrecy and stonewalling.
Barron's:
- Nike(NKE) CEO Sells on Heels of Record High.
Four
Nike
insiders,
including
the
chief
executive,
sold
181,734
shares
for
$13,289,735,
an
average
of
$73.13
each,
from
Oct.
1
through
15
through
options
exercises
and
open-market
selling.
Fox News:
- Congress approves bill to end partial shutdown, raise debt ceiling. The House voted Wednesday to approve a short-term bill ending the
partial government shutdown and raising the debt ceiling, sending the
deal to the president’s desk and capping one of the most bitter and
brutal political fights in recent memory. The bill cleared the House on a 285-144 vote, lifted over the finish
line by a large chunk of Democrats. All House Democrats voted in favor
of the bill and 87 Republicans did as well. 144 Republicans voted
against it.
CNBC:
- Bernanke won't have to testify in AIG(AIG) case—for now.
Federal Reserve Chairman Ben Bernanke does not have to testify in the
multibillion-dollar lawsuit by the former chief of American
International Group against the United States over the insurer's 2008
bailout, a federal appeals court said on Wednesday.
Zero Hedge:
Business Insider:
Washington Post:
Reuters:
- Xilinx(XLNX) forecasts weak revenue from industrial, aerospace businesses.
Chipmaker Xilinx Inc forecast current-quarter revenue largely below
Wall Street's estimates as it expects lower revenue at its industrial
and aerospace
businesses. Xilinx shares fell 4.5 percent after the company said it
expects current-quarter revenue to be up or down 2 percent
sequentially.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 104.25 -2.25 basis points.
- NASDAQ 100 futures +.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 335K versus 374K the prior week.
- Continuing Claims are estimated to rise to 2915K versus 2905K prior.
10:00 am EST
- Philly Fed Business Outlook for October is estimated to fall to 15.0 versus 22.3 in September.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Fed's Evans speaking, Fed's George speaking, Fed's Kocherlakota speaking, China GDP/Industrial Production/Retail Sales, weekly EIA natural gas inventory report, Bloomberg Economic Expectations for Oct., weekly Bloomberg Consumer Comfort Index, (PETM) analyst day, (SAFM) investor conference and the UK retail sales could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 15.51 -18.81%
- Euro/Yen Carry Return Index 139.29 +.57%
- Emerging Markets Currency Volatility(VXY) 8.80 -1.35%
- S&P 500 Implied Correlation 43.34 -16.89%
- ISE Sentiment Index 81.0 unch.
Credit Investor Angst:
- North American Investment Grade CDS Index 73.85 -4.21%
- European Financial Sector CDS Index 120.35 -.30%
- Western Europe Sovereign Debt CDS Index 70.0 -4.1%
- Emerging Market CDS Index 262.66 -2.0%
- 2-Year Swap Spread 13.50 +.75 basis point
- TED Spread 15.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -7.50 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .10% unch.
- Yield Curve 234.0 -3 basis points
- China Import Iron Ore Spot $133.70/Metric Tonne +.07%
- Citi US Economic Surprise Index 26.80 -4.1 points
- Citi Emerging Markets Economic Surprise Index -7.20 +1.6 points
- 10-Year TIPS Spread 2.19 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +213 open in Japan
- DAX Futures: Indicating -7 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/biotech/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, added to my tech/biotech sector longs
- Market Exposure: Moved to 75% Net Long
Style Underperformer:
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:
Style Outperformer:
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:
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.
- 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.
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.
- 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:
Zero Hedge:
Business Insider:
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.
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:
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:
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.
- NASDAQ 100 futures +.35%.
Morning Preview Links
Earnings of Note
Company/Estimate
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
Upcoming Splits
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.
