Stocks Dropping into Final Hour on Rising Emerging Markets Debt Angst, Global Growth Concerns, Earnings Worries, Healthcare/Commodity Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.71 +8.21%

• Euro/Yen Carry Return Index 137.01 -1.51%

• Emerging Markets Currency Volatility(VXY) 9.35 +2.52%

• S&P 500 Implied Correlation 40.73 +10.49%

• ISE Sentiment Index 105.0 +38.16%

• Total Put/Call .95 +4.40%

• NYSE Arms 1.18 +55.44% 

Credit Investor Angst:

• North American Investment Grade CDS Index 73.28 +.80%

• European Financial Sector CDS Index 110.02 -4.36%

• Western Europe Sovereign Debt CDS Index 66.04 -1.43%

• Emerging Market CDS Index 287.78 +2.51%

• 2-Year Swap Spread 11.75 -.25 basis point

• TED Spread 18.25 -1 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -4.0 unch.

Economic Gauges:

• 3-Month T-Bill Yield .06% +1 basis point

• Yield Curve 232.0 -3 basis points

• China Import Iron Ore Spot $136.90/Metric Tonne -.15%

• Citi US Economic Surprise Index 13.0 +12.6 points

• Citi Emerging Markets Economic Surprise Index -12.60 -.9 point

• 10-Year TIPS Spread 2.17 -2 basis points

Overseas Futures:

• Nikkei Futures: Indicating -230 open in Japan

• DAX Futures: Indicating -75 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• Draghi Cuts ECB Rates to Combat ‘Prolonged’ Inflation Weakness. The European Central Bank unexpectedly cut its benchmark interest rate to a record low in a bid to prevent slowing inflation from taking hold in a still-fragile euro-area economy. With inflation at the weakest level in four years and less than half the ECB’s target, the Frankfurt-based bank halved its key refinancing rate to 0.25 percent in a shift anticipated by just three of 70 economists in a Bloomberg News survey. “Our monetary-policy stance will remain accommodative for as long as necessary,” ECB President Mario Draghi told reporters in Frankfurt. “We may experience a prolonged period of low inflation.” 

• German Industrial Production Falls as Recovery Slows. German industrial production dropped in September, signaling that growth in Europe’s largest economy may have cooled in the third quarter. Output (GRIPIMOM), adjusted for seasonal swings, fell 0.9 percent from August, when it rose a revised 1.6 percent, the Economy Ministry in Berlin said today. Economists forecast no change, according to the median of 36 estimates in a Bloomberg News survey. 

• Russia Forecasts Losing Ground in Global Economy by 2030. Russia’s share of the world economy will probably shrink during the next 20 years as growth trails the global average, Economy Minister Alexei Ulyukayev said. Gross domestic product will rise at an average pace of 2.5 percent through 2030, less than the 3.4 percent to 3.5 percent global rate, according to the ministry’s updated forecasts. That would reduce Russia’s share of world economic output to 3.4 percent by 2030 from 4 percent last year, the ministry said. 

• Most European Stocks Fall as ECB Lowers Benchmark Rate. Most stocks in Europe fell as an unexpected European Central Bank interest rate cut pointed to prolonged weak growth in the region and stronger U.S. economic data fueled speculation the Federal Reserve may reduce the pace of its bond buying in the coming meetings. HeidelbergCement AG dropped 3.8 percent after saying third-quarter profit fell 7 percent. Bureau Veritas SA lost 3.6 percent as quarterly sales missed analysts’ estimates. Siemens AG rose 3.4 percent after reporting better-than-forecast profit and saying it plans to buy back shares. Swiss Re Ltd. climbed 1.9 percent after third-quarter net income exceeded predictions. The Stoxx Europe 600 Index lost less than 0.1 percent to 323.23 at the close of trading, paring earlier gains of as much as 1.5 percent.

• Euro Falls on Unexpected Interest-Rate Cut; Czech Koruna Tumbles. The euro fell the most in two years versus the dollar after the European Central Bank unexpectedly cut its main refinancing rate to a record-low 0.25 percent to boost growth in the 17-member currency region. The euro fell 0.6 percent to $1.3431 at 2:26 p.m. New York time after slipping as much as 1.6 percent, the biggest drop since December 2011. It touched $1.3296, the weakest level since Sept. 16. The 17-nation shared currency slid 1.5 percent to 131.32 yen. Japan’s currency added 0.9 percent to 97.75 per dollar. The Bloomberg U.S. Dollar Index climbed 0.3 percent to 1,016.04 after touching 1,022.30, highest since Sept. 13. It gained as much as 0.9 percent, the most since Aug. 1. 

• Brent Falls to Four-Month Low as Euro Falls on ECB Cut. Brent crude for December settlement fell $1.54, or 1.5 percent, to $103.70 a barrel on the London-based ICE Futures Europe exchange at 1:23 p.m. in New York. The contract touched $103.52, the lowest intraday price since July 2. The volume of all futures traded was 47 percent above the 100-day average.

• Lew Said to Warn Banks of Tough Volcker Rule in Meetings. Treasury Secretary Jacob J. Lew warned chief executive officers of top U.S. banks in a private meeting last month that the final Volcker rule ban on proprietary trading would be tougher than Wall Street expects.

Wall Street Journal:

• FDA Says Trans Fats Aren't Safe in Food. Determination Could Lead to Ban in Baked Goods, Other Foods. The Food and Drug Administration on Thursday ruled for the first time that trans fats aren't generally considered safe in foods, a sharp shift in policy that could lead to a ban on a substance blamed for contributing to heart attacks and strokes. The move capped a growing movement against trans fats that has included bans in New York City, Seattle and elsewhere. Major food makers and restaurant chains such as McDonald's Corp. have pledged in recent years to avoid trans fats, which are found in some baked goods, refrigerated dough products, frosting and other foods.

Fox News:

• White House website at odds with latest Obama statement. Millions of health insurance plans have been cancelled after ObamaCare went into effect, and President Obama backed away Monday from his previous oft-repeated statement that “if you like your plan, you can keep your plan.”

MarketWatch:

• Italian stocks erase ECB-fueled gains. Italian stocks erased earlier gains and turned lower in afternoon action on Thursday, with banks posting some of the biggest losses. The FTSE MIB index XX:FTSEMIB -2.07% dropped 1.6% to 18,960.56, after trading as high as 19,462.80 earlier in the day. In Italy, shares of Banca Popolare di Milano Scarl IT:PMI -4.99% dropped 3.6%, Mediobanca SpA IT:MB -2.80% fell 3% and Banca Monte dei Paschi di Siena SpA IT:BMPS -3.49% dropped -2.9%.

CNBC: 

• The Twitter IPO Live. 

• ECB cuts rates to new low of 0.25%, euro sinks. (video)

• Obamacare odyssey: Month-long effort to log on to HealthCare.gov. He spent a month on an online Obamacare Odyssey. Since Oct. 2, Miami resident Nick Athanassiadis has spent several hours a day—nearly every day—on the Internet repeatedly trying to create an account on the federal Obamacare marketplace to see if insurance plans being sold there might be less expensive than his current coverage. But despite having a long background in digital and software companies, Athanassiadis was repeatedly thwarted by a head-spinning series of glitches, system outages, blank screens, error messages, broken or nonexistent Web links and other hurdles on the HealthCare.gov site that kept his goal out of reach for weeks. And even when he finally—finally—reached that goal, he didn't like what he saw. 

• Watch Art Cashin: Nobody rings a bell at the top. (video)

Zero Hedge: 

• Consumer Comfort Plunges To 13 Month Lows. (graph)

• Goldman(GS) Cuts Q4 GDP Forecast To 1.5% From 2.0% On Q3 Inventory Buildup.

• And The Latest Firm Under Investigation For Currency Manipulation Is... Goldman(GS).

• European Stocks Dump, Reverse Gains; Demand Moar From Draghi. (graph)

• Japanese Stocks Are Crashing As JPY Surges. (graph)

ValueWalk:

• Third Tesla(TSLA) Model S Catches Fire In Tennessee.

Business Insider: 

• New Video Shows Toronto Mayor Rob Ford Ranting About Wanting To Kill Someone.

DailyFX: 

• Japanese Yen at Potentially Substantial Turning Point. (graph)

The Economist:

• Sleepless nights. After a decade-long boom, emerging markets have flopped and then bounced in the past six months. The gyrations are not over yet.

Reuters: 

• U.S. budget talks hit snag, Republican senator says. The panel of U.S. lawmakers seeking to craft a bipartisan budget deal is in a deadlock early in its deliberations, according to a Senate member, reinforcing fears that a Dec. 13 deadline could produce no agreement. 

• U.S. growth picks up as restocking offsets weak spending.

Telegraph:

• Italy to join deflation club? (graph)

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.30%

Sector Underperformers:

• 1) Gaming -3.34% 2) Alt Energy -3.25% 3) Hospitals -3.0%

Stocks Falling on Unusual Volume:

• SCTY, TSLA, MEI, SNI, BDBD, ROSE, LPI, ATHN, MATX, SN, TWTC, FET, URI, RJET, NLY, WAC, YELP, ENV, QCOM, HPT, CLMT, WFM, TFM, ANSS, FXCM, ALDW, FOXF, CKEC, SBGI, KERX, POWR, JCOM, CTL, RDN, CNQR, NDLS, WPX, CDE, ALNY, FWM, TIPH, KAR, HPT, NSM, HNT, AWI, FSYS, NXTM, SVVC, CKP, WAC, FLO, FET, SOCL, EZPW, IEP, GSVC, CLMT, CRZO, PXD, KLIC, RST and PRSC

Stocks With Unusual Put Option Activity:

• 1) HMA 2) FOXA 3) IGT 4) WFM 5) EWW
  

Stocks With Most Negative News Mentions:

• 1) TSLA 2) BAC 3) Z 4) CREE 5) CMI
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.30%

Sector Outperformers:

• 1) Road & Rail +.41% 2) Homebuilders +.37% 3) Computer Services +.29%
  

Stocks Rising on Unusual Volume:

• AWAY, RDA, LPSN, TPX, JOE, BR, FLTX, DXCM, MW, FWLT, CLDX, AEO, RIG, UNXL, SSYS, HTWR, ACIW, RPTP, BZH, PMTC, FNP, BKD, MTDR and TOL

Stocks With Unusual Call Option Activity:

• 1) HK 2) IGT 3) BMRN 4) CLDX 5) FOXA

Stocks With Most Positive News Mentions:

• 1) JCP 2) LMT 3) AEO 4) K 5) WFC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• Fortescue Races Iron Ore Drop to Cut Debt Cost: Australia Credit. Fortescue Metals Group Ltd. (FMG) is racing both a forecast drop in iron ore prices and the tapering of U.S. stimulus as it seeks to reduce costs of the biggest debt load among junk-rated miners.

• Asia Stocks Slip With U.S. Futures; Aussie Drops on Jobs. Asian stocks fell and copper rose before U.S. economic reports and the European Central Bank’s policy meeting. Australia’s dollar weakened against all its major peers after disappointing jobs data. The MSCI Asia Pacific Index (TPX) slid 0.5 percent as of 12:19 p.m. in Tokyo. 

• Rebar Climbs on Speculation Air Quality Efforts May Curb Output. Steel reinforcement-bar futures in Shanghai rose on speculation that efforts to improve air quality in China may crimp production. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, rose as much as 1 percent to 3,677 yuan ($603) per metric ton, the biggest gain since Nov. 1. Futures traded at 3,672 yuan at 11:15 a.m. local time. 

• Nickel Declines to Two-Week Low on Supply Outlook. Nickel dropped to a two-week low in London as record inventories are fueling concern that ample supplies will overwhelm demand for the metal, used to make stainless steel. Copper also slid. Stockpiles tracked by the London Metal Exchange, which have surged 71 percent this year, reached an all-time high of 239,958 metric tons yesterday. Supply will exceed demand this year by 120,000 tons, up from a 92,000-ton surplus in 2012, according to Barclays Plc.

• Technology Rally Sends Nasdaq Puts to Lowest Since 2010: Options. Options traders are charging the least in three years to bet the Nasdaq 100 Index will fall, cutting prices as investor demand for faster-growing companies fuels gains in stocks from Netflix Inc.(NFLX) to Facebook Inc.(FB). Puts with an exercise price 10% below the PowerShares QQQ Trust cost 5.6 points more than calls betting on a 10% gain, according to three-month data compiled by Bloomberg. The price relationship known as skew for the etf tracking the Nasdaq 100 reached 5.29 on Oct. 21, the lowest level since May 2010.

• Twitter Raises $1.82 Billion Pricing IPO Above Offer Range. Twitter Inc. raised $1.82 billion in its initial public offering, seizing on demand for its shares to price the stock above a proposed range. The sale, the largest IPO by a technology company since Facebook Inc.’s debut in May 2012, values the short-messaging website at $14.2 billion. Twitter sold 70 million shares at $26 each, after offering them for $23 to $25, the San Francisco-based company said in a tweet. Goldman Sachs Group Inc. led the sale, working with Morgan Stanley and JPMorgan Chase & Co.

Wall Street Journal: 

• FAA to Map Out Drone Rules. The Federal Aviation Administration is expected to say Thursday that no major privacy-protection initiatives are necessary before opening U.S. airspace to civilian drones, a finding likely to stoke an outcry amid heightened concerns about the government's surveillance capabilities. In addition to that general policy on privacy protections, industry officials familiar with details of the plan expect FAA chief Michael Huerta to disclose a multiyear regulatory road map intended to eventually pave the way for extensive commercial operations of so-called remotely piloted aerial vehicles nationwide. The Department of Homeland Security previously adopted a similar view on privacy safeguards, but the FAA is the lead agency responsible for developing the Obama administration's comprehensive policy for nonfederal domestic uses of drones. If the FAA's position prevails, it could remove a major stumbling block for the budding industry while speeding up federal approvals for a variety of applications. 

• Edie Sundby's Choice. The ObamaCare lessons in a cancer patient's cancelled insurance. Edie Littlefield Sundby may not have thought she'd ignite a national debate when the stage-4 cancer survivor asked us to publish her Monday op-ed on losing her oncologist due to the Affordable Care Act. But she certainly has, and it's important to understand why. Mrs. Sundby and millions like her must be denied their medical choices if ObamaCare is going to work as its liberal planners intend. 

• Carl Schramm: How ObamaCare Rips Off the 'Young Healthies'. If universal coverage is the goal, inexpensive, simple catastrophic health plans will do. When ObamaCare is under attack, its defenders retreat to several well-worn claims. Among them is a provision that compels insurance companies to allow parents to keep their "children" ages of 21 to 26 on their family policies. Yet this part of the Affordable Care Act was not engineered in response to any noticeable interest group. Instead, political considerations are responsible for the provision—which is an unnecessary and a deceptive ripoff of the "young healthies."

Fox News: 

• Obama meets with Senate Democrats anxious over health care law. President Obama on Wednesday sought to assuage anxious Democrats who are worried that ObamaCare’s troubled rollout is going to come back to haunt them during the 2014 midterm elections. “There’s a lot of pent-up frustration” among Senate Democrats who are facing voters next year, a party source familiar with the meeting told Fox News.

• Common Core lessons blasted for sneaking politics into elementary classrooms. It's exactly what critics of the Common Core school curriculum warned about: Partisan political statements masquerading as English lessons finding their way into elementary school classrooms.

CNBC: 

• Whole Foods(WFM) cuts outlook; Shares drop. Whole Foods Market on Wednesday reported same-store sales that decelerated in the fourth quarter and the grocer lowered its sales forecast for fiscal 2014, sending shares down in after hours trading.

Zero Hedge: 

• "Very Low" Obamacare Enrollment Admitted As Young People Just Say No.

• Keynes' Ghost Continues to Haunt Economics.

• Fukushima Debris "Island" The Size Of Texas Near US West Coast.

• Vice Index Suggests Limp Holiday Sales Growth. (graph)

Business Insider: 

• Shares Of Elon Musk's Solar Company Are Tanking.

• ROSENBERG: In A Market That Knows No Fear, I'm Reminded Of Bob Farrell's Investing Rules.

New York Times:

• A Clash of Goals for China’s Leader. China’s president, Xi Jinping, is about to plunge the country and himself into a risky experiment: an attempt to carry out market-driven economic overhauls while reinforcing the Communist Party’s pillars of political and ideological control. This mixed agenda has magnified doubts about whether he can deliver on his promises of transformation.

Reuters:

• Qualcomm(QCOM) curbs spending as revenue forecast disappoints. Qualcomm Inc on Wednesday forecast revenue below expectations and said it would curb fast-growing operating expenses, stoking concerns the leading mobile chipmaker faces tough competition in Asia, and sending its stock down. 

• The uncomfortable truth in China's property market. In defying four years of official cooling efforts, China's soaring house prices reveal an uncomfortable truth: government is one of the biggest obstacles to the success of taming the market. State income is so entwined in the need for rising land prices that policy efforts to try to curb the house market create an inherent conflict of interest. 

• Exit sparks rising chatter over U.S. swap watchdog top roles. President Barack Obama is expected to soon fill two top roles at the U.S. derivatives regulator, people working closely with the agency said, to prevent a leadership vacuum from blocking crucial Wall Street reforms.

Financial News:

• China May Further Regulate Interbank Business. China is studying further regulating interbank business such as placing caps on bank proprietary "non-standard" debt purchases and wealth product investment in non-standard assets, citing a person familiar with the matter. So-called "quasi-loan" reverse repo agreement sales may also be halted, the report said. Banks may be required to set aside provisions for non-standard assets, according to the report.

Evening Recommendations
 RBC:

• Rated (TWTR) Outperform, target $33.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 137.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 108.25 -1.0 basis point. 

• FTSE-100 futures -.16%.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WEN)/.06

• (ATK)/2.39

• (BZH)/.26

• (MWW)/.08

• (CVC)/.12

• (RGLD)/.24

• (IGT)/.34

• (APA)/2.16

• (DIS)/.76

• (NVDA)/.25

• (GRPN)/.01

• (JOE)/-.01

• (PCLN)/16.22

• (MNST)/.57

• (BNNY)/.29

• (SSYS)/.42

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 335K versus 340K the prior week.

• Continuing Claims are estimated to fall to 2875K versus 2881K prior.

• Advance 3Q GDP is estimated to rise +2.0% versus a +2.5% gain in 2Q.

• Advance 3Q Personal Consumption is estimated to rise +1.6% versus a +1.8% gain in 2Q.

• Advance 3Q GDP Price Index is estimated to rise +1.4% versus a +.6% gain in 2Q.

• Advance 3Q Core PCE is estimated to rise +1.5% versus a +.6% gain in 2Q.
  

3:00 pm EST

• Consumer Credit for September is estimated to fall to $12.0B versus $13.625B in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, Fed's Stein speaking, ECB rate decision, BoE rate decision, 3Q Mortgage Delinquencies, 3Q Mortgage Foreclosures, Bloomberg Weekly Consumer Comfort Index, (OII) Analyst Day, (MJN) Investor Day, (SWI) Analyst Day and the (AA) Investor Day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Central Bank Hopes, Short-Covering, Investor Performance Angst, Utility/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 12.93 -2.56%

• Euro/Yen Carry Return Index 139.11 +.47%

• Emerging Markets Currency Volatility(VXY) 9.05 +1.12%

• S&P 500 Implied Correlation 37.09 -5.84%

• ISE Sentiment Index 76.0 -32.14%

• Total Put/Call .82 +19.48%

• NYSE Arms .74 -34.29% 

Credit Investor Angst:

• North American Investment Grade CDS Index 73.02 -1.98%

• European Financial Sector CDS Index 112.71 -1.39%

• Western Europe Sovereign Debt CDS Index 67.0 unch.

• Emerging Market CDS Index 280.72 -1.19%

• 2-Year Swap Spread 12.0 unch.

• TED Spread 19.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -4.0 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .05% unch.

• Yield Curve 235.0 -1 basis points

• China Import Iron Ore Spot $137.10/Metric Tonne +.22%

• Citi US Economic Surprise Index .4 +.4 point

• Citi Emerging Markets Economic Surprise Index -11.70 +.7 point

• 10-Year TIPS Spread 2.19 +5 basis points

Overseas Futures:

• Nikkei Futures: Indicating +79 open in Japan

• DAX Futures: Indicating +1 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech sector longs and index hedges

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them

• Market Exposure: 50% Net Long