Bull Radar

Style Outperformer:

• Large-Cap Growth +.46%

Sector Outperformers:

• 1) Homebuilders +2.96% 2) Gold & Silver +1.97% 3) Steel +1.09%
  

Stocks Rising on Unusual Volume:

• SFI, GOGO, ONVO, TTEK, SRPT, HFC, SNE, CLNE, XONE, NTI, MPC and WNR

Stocks With Unusual Call Option Activity:

• 1) VIAB 2) DDS 3) FOXA 4) HCA 5) SD

Stocks With Most Positive News Mentions:

• 1) T 2) WMT 3) MCD 4) CPWR 5) AAPL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Local $1.6 Trillion Debt Pile Impedes Rate Freedom: China Credit. Chinese local governments’ $1.6 trillion in bank borrowings are a major obstacle to the freeing up of interest rates in the world’s second-largest economy, according to BNP Paribas SA and Capital Economics Ltd. The financing arms of municipal authorities owed lenders 9.7 trillion yuan ($1.6 trillion), or 14 percent of all loans, in mid-2013, according to China Banking Regulatory Commission figures. Most have weak credit profiles, Moody’s Investors Service said in a Nov. 5 report, noting that only 53 percent of 388 such companies it surveyed in June had enough cash to cover estimated debt payments and interest this year without refinancing.

• China Banks Pay Most for State Funds in Six Months; Swaps Rise. Chinese lenders paid the highest rate of interest since June to borrow government funds today, a sign cash supply in the banking system is waning. The seven-day repurchase rate, a gauge of funding availability in the banking system, climbed 44 basis points, or 0.44 percentage point, to 4.18 percent as of 10:44 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It reached 4.50 percent earlier, the highest level since Nov. 1.

• Nomura’s Akedo Sees Stock Drop Unless Investors Convinced. Japan’s Nikkei 225 Stock Average could fall to 12,000 if the government doesn’t do more to persuade global investors that efforts to boost the economy will succeed, Nomura Holdings Inc. (8604)’s head of Japan equities said. “Worldwide investors are breathlessly watching the future of Japan,” Norikazu Akedo, who oversees equity sales and trading at the nation’s largest brokerage, said in a Nov. 12 interview. 

• Australia Faces Debt Ceiling Impasse as Hockey Warns of Cuts. Australia faces “massive” public spending cuts if the upper house Senate blocks government efforts to increase the nation’s debt ceiling to A$500 billion ($468 billion), Treasurer Joe Hockey said. The Liberal-National coalition government says the current A$300 billion limit will be breached next month, and is seeking Senate approval for the increase after legislation was approved by the lower house yesterday. The opposition Labor party has indicated it will block the law, saying an increase to A$400 billion is sufficient. “If Labor prevents an increase in the debt limit, there is no choice but to have massive cuts to government expenditure,” Hockey said in an Australian Broadcasting Corp. interview today. “The government is running on borrowed money.” 

• Asian Stocks Gain With Metals on Yellen as Yen Declines. Asian stocks climbed the most in a month while metals gained after Federal Reserve chairman nominee Janet Yellen signaled stimulus will be maintained until the U.S. economy improves. The yen dropped for the fourth time in five days against the dollar. The MSCI Asia Pacific Index added 1.1 percent at 1 p.m. in Tokyo as Japan’s Topix Index rose to a three-week high.

• Rebar Declines for Second Day in Shanghai as Spot Trading Slows. Steel reinforcement-bar futures in Shanghai fell for the second day amid waning trading in the spot market and as construction slowed because of winter weather in northern China. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, fell as much as 0.7 percent to 3,620 yuan ($594) a metric ton and traded at 3,628 yuan at 10:57 a.m. local time.

• Gold Advances After Yellen Backs Easing Until Economy Improves. Bullion for immediate delivery rose as much as 0.4 percent to $1,287.01 an ounce, and was at $1,284.66 at 8:49 a.m. in Singapore. Prices rose 1.1 percent yesterday, the most since Oct. 22, as the Bloomberg U.S. Dollar Index lost 0.4 percent.

Wall Street Journal: 

• Yellen: Economy Still Needs Fed Aid. The U.S. economy has grown "significantly stronger" since the 2008 financial crisis and ensuing recession, and but it still needs help from the Federal Reserve as it continues to mend, Janet Yellen will tell senators Thursday. Ms. Yellen, who has been nominated to be the Fed's next leader, is set to speak before the Senate Banking Committee in her confirmation hearing. "We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession," Ms. Yellen, the Fed vice chairwoman, will say in her opening statement, according to her prepared remarks released Wednesday.

• Fundraising Rules Murky Despite JOBS Act. Ban on Ads Ends, but Small Firms Hold Back. When U.S. securities regulators lifted a long-standing ban on advertising to wealthy investors in September, Smári Ásmundsson hoped it would clear the way for him to pitch investments in his Icelandic yogurt company on Facebook and his own website.

• Obama Open to Health-Law Change. Democrats Raise Pressure as New Figures Show Enrollment Far Short of Forecasts; House Vote Due Friday. The government released numbers Wednesday showing that far fewer Americans had enrolled in private insurance plans under the new health law than expected and, in a marked shift, the Obama administration signaled it was open to legislation to fix the troubled rollout. The move came as the administration faced mounting dissatisfaction from Democrats over the law's implementation. New administration figures showed that only 26,794 people nationwide had enrolled in a private health plan through the balky online federal marketplace in its first month—far short of projections.

Fox News: 

• Details emerge about Americans badly injured in Benghazi attack. In addition to the four Americans killed in the Benghazi terror attack last year, at least two other Americans were severely injured in the fighting that night, Fox News has learned. The injuries were sustained by U.S. personnel after mortars struck the CIA annex rooftop they were defending. Fox News is told that one former government contractor -- who is expected to testify this week along with four other contractors in classified sessions on Capitol Hill -- has had multiple surgeries since the attack and has still not regained full use of one arm.

CNBC: 

• Expect taper in the next couple of months: Morgan Stanley(MS). (video) A tapering in the U.S. Federal Reserve's massive stimulus is the right thing to do against the backdrop of a recovery economy and a scaling back of the stimulus program can be expected in the next couple of months, Morgan Stanley Chairman and CEO James Gorman told CNBC on Thursday.

Zero Hedge:

• Something Is Very Wrong With This Picture. (graph) Just because very few actually understood the severity of the Cisco earnings guidance, in which the company forecast an 8-10% drop (let's call it 9%) in quarterly revenues when Wall Street was expecting a 4% increase, we have compiled and presented in chart form the historical and projected quarterly revenue data for CSCO to show today's preannouncement in all its gruesome context. A few points: 

• NY Fed Compares The Current Reach-For-Yield To South Sea Bubble Of 1720.

• "It Is High Time That Central Banking Is Recognized For The Disease It Is". (graph)

• QE Whistleblower Warns "We Are Eerily Similar To 2008".

• Japanese Q3 Growth Tumbles As Abenomics Cracks Following Slide In Consumption And Exports. (graph)

• What An Ex-FOMC Governor Really Wants To Tell You About The Fed.

Business Insider: 

• JPMorgan(JPM) Is Taking Questions From Twitter And Getting Thoroughly Trolled.

• Facebook(FB) CFO David Ebersman Sold $43 Million Of Facebook Shares.

NY Post: 

• Got ObamaCare? Too bad for you. Uncle Sam will spend $2.6 trillion on ObamaCare over the next 10 years, according to the Congressional Budget Office. What’s remarkable is how few people this will leave better off. The middle class is a clear loser: It gets squeezed, since these people earn too much to qualify for adequate subsidies, but too little to afford the needlessly pricey exchange coverage.

Reuters:

• Not so happy birthday: Abenomics ages, challenges remain. A year after Prime Minister Shinzo Abe took financial markets by storm with promises to revive the moribund Japanese economy, data showed growth slowed sharply and that his "Abenomics" policy mix is yet to secure a durable recovery. Growth in the world's third-biggest economy decelerated in the third quarter after leading the Group of Seven industrial powers in the first half of the year, as capital spending, personal consumption and exports moderated. GDP expanded at an annualised clip of 1.9 percent in the July-September quarter, slightly faster than expected by markets but still sharply slower than 3.8 percent growth in April-June and 4.3 percent in the first quarter. 

• Federal spending concerns weigh on NetApp(NTAP) forecast. Data storage equipment maker NetApp Inc forecast current-quarter revenue below analysts' expectations, flagging concern around the U.S government's spending cuts. NetApp shares fell almost 3 percent after the bell.

• Cisco(CSCO) warns of big second quarter revenue drop, shares fall. Network equipment maker Cisco Systems Inc warned that its revenue would decline between 8 percent and 10 percent in its second fiscal quarter, sending its shares down almost 10 percent in late trade. Chief Executive John Chambers blamed weak demand in emerging markets such as China, saying companies there have become more hesitant to buy Cisco products due because of political repercussions from leaks about the United States spying on foreign governments.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times: 

• ECB's Draghi Was Wrong to Reduce Rates, Ifo's Sinn Writes. ECB should aim to offset deflation in Greece, Spain, Portugal by inflating northern euro area, Hans-Werner Sinn, head of German economic institute Ifo, writes in FT opinion piece. Restraint needed rather than activism to achieve that. More conventional monetary policy may give markets better change of fixing imbalances, Sinn writes.

Evening Recommendations

•  None of note
  

Night Trading

• Asian equity indices are +.50% to +1.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 138.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 111.50 +.5 basis point. 

• FTSE-100 futures +.66%.

• S&P 500 futures +.23%.

• NASDAQ 100 futures -.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WMT)/1.13

• (VIAB)/1.44

• (DDS)/1.05

• (KSS)/.85

• (A)/.76

• (JWN)/.66

• (AMAT)/.18

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 330K versus 336K the prior week.

• Continuing Claims are estimated to rise to 2870K versus 2868K prior.

• Preliminary 3Q Non-farm Productivity is estimated to rise +2.2% versus a +2.3% gain in 2Q.

• Preliminary 3Q Unit Labor Costs are estimated to fall -.1% versus unch. in 2Q.

• The Trade Deficit for September is estimated to widen to -$39.0B versus -$38.8B in August.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +595,000 barrels versus a +1,577,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -550,000 barrels versus a -3,755,000 barrel decline the prior week. Distillate inventories are estimated to fall by -947,000 barrels versus a -4,899,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.6% versus a -.5% decline the prior week.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Plosser speaking, UK retail sales, EuroGroup meetings, Eurozone Q3 GDP, Italy 10Y bond auction, 30Y bond auction, weekly EIA natural gas inventory report, Canaccord Med Tech Conference, Goldman Emerging/SMID Cap Growth Conference, (FFIV) analyst meeting, (ALK) investor day and the (ROK) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher 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 Central Bank Hopes, Short-Covering, Investor Performance Angst, Tech/Retail 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) 12.91 +.70%

• Euro/Yen Carry Return Index 139.51 -.06%

• Emerging Markets Currency Volatility(VXY) 9.22 -3.96%

• S&P 500 Implied Correlation 37.47 -3.92%

• ISE Sentiment Index 116.0 +23.4%

• Total Put/Call .80 -1.23%

• NYSE Arms .53 -37.71% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.69 -.90%

• European Financial Sector CDS Index 109.50 +2.44%

• Western Europe Sovereign Debt CDS Index 64.0 +2.07%

• Emerging Market CDS Index 299.58 -.42%

• 2-Year Swap Spread 11.0 +.5 basis point

• TED Spread 17.0 -1.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.5 unch.

Economic Gauges:

• 3-Month T-Bill Yield .07% +1 basis point

• Yield Curve 242.0 -2 basis points

• China Import Iron Ore Spot $136.10/Metric Tonne +.15%

• Citi US Economic Surprise Index 18.0 +.4 point

• Citi Emerging Markets Economic Surprise Index -15.90 -1.1 points

• 10-Year TIPS Spread 2.18 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +149 open in Japan

• DAX Futures: Indicating +39 open in Germany

Portfolio: 

• Higher: On gains in my tech/retail/biotech sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Draghi Goes Face-to-Face With Bank Chiefs on Asset Health. Bank executives traveled to Frankfurt for a first meeting with European Central Bank President Mario Draghi on the ECB’s review of lenders’ assets. Chief executive officers from banks from five countries -- Germany, Belgium, Cyprus, Malta and Luxembourg -- met today with Draghi and other board members at ECB headquarters, a spokeswoman for the central bank said by telephone. The list included Europe’s largest investment bank by revenue, Deutsche Bank AG, and lenders such as Malta’s Bank of Valletta Plc. 

• ECB’s Weidmann Says Low Interest Rates Come With Risks. European Central Bank Governing Council member Jens Weidmann said low interest rates come with risks that can’t be ignored, even though the current policy stance is appropriate. “The expansive monetary policy is justified considering the outlook for price stability,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Frankfurt today. At the same time, “one must not lose sight of the many challenges that come within an environment of low interest rates,” he said. 

• Pound Jumps as Carney Signals Rates May Rise Sooner Than Planned. The pound strengthened for the first time in four days after the Bank of England signaled that policy makers may consider increasing interest rates sooner than they previously forecast as the economy improves.

• European Stocks Drop as Investors Weigh Stimulus Outlook. European stocks fell, posting the biggest two-day drop in a month, as investors weighed corporate earnings and speculated stronger economic data will spur central banks to pare stimulus measures. Stada Arzneimittel AG and Banco Popolare SC declined at least 5.5 percent after reporting profit that missed estimates. ProSiebenSat.1 Media AG slumped to a five-week low after its largest shareholder sold an almost 16 percent stake. ICAP Plc advanced 4.1 percent after saying cost cuts will boost results this year. The Stoxx Europe 600 Index declined 0.6 percent to 319.82 at the close of trading. 

• Copper Falls Most in 15 Weeks on Fed Bets, China Production. Copper futures tumbled the most in 15 weeks amid speculation that the Federal Reserve will scale back U.S. monetary stimulus this year, while output of the metal rose to a monthly record in China. Fed Bank of Atlanta President Dennis Lockhart said yesterday that talks on a cut in bond purchases by the central bank “could well take place” next month. China’s output of refined copper in October climbed 23 percent to 637,000 metric tons from a year earlier. Futures have slumped 14 percent in 2013, partly on prospects for increased mine production. “Imminent tapering and Chinese output surges compounded the weakness,” Michael Turek, a senior director at Newedge Group SA in New York, said in an e-mail. Copper futures for December delivery slumped 2.3 percent to settle at $3.1595 a pound at 1:21 p.m. on the Comex in New York, the biggest drop for a most-active contract since July 26. 

• Attack on Junk-Loans Risks LBO Profits as U.S. Cracks Down. Fees for bankers and payouts for leveraged-buyout funds are at risk of being crimped as federal regulators crack down on underwriting standards in the market for high-risk, high-yield loans. The government, in an annual review of bank credit, looked at a $429 billion sample of leveraged loans and found 42 percent were “criticized,” or classified as having a deficiency that might lead to a loss. Starting in September, it sent letters demanding banks draw up plans to improve the quality of their loans and a warning that regulators will pay close attention to high-risk loan performance in stress tests.

• Yellen Rejoins QE Debate as Hearing Gives Critics Forum. Federal Reserve policy makers have publicly debated whether to maintain their bond-buying pace since well before Janet Yellen was named last month to succeed Chairman Ben S. Bernanke. One voice has been missing: Yellen’s. Tomorrow, she’ll express her views publicly for the first time in seven months on the record stimulus she’s supported and that some lawmakers are using to justify voting against her.

Wall Street Journal:

• ECB's Praet: All Options on Table. Central Bank Could Adopt Negative Deposit Rate, Asset Purchases If Needed.

• For Yellen, Fed's Dual Mandate Guides Thinking. Focus on Maximum Employment, Price Stability Likely a Focal Point at Confirmation Hearing. 

• Italian Banks Still Struggle With Bad Loans. Smaller Banks Lagging in Setting Aside Enough Money to Cover Potential Losses.

Fox News:

• Kerry's push for diplomatic deal with Iran running into congressional opposition. The Obama administration’s efforts to strike a diplomatic deal with Iran over its nuclear program is running into growing criticism on Capitol Hill, with one top lawmaker expressing concern that Secretary of State John Kerry may be willing to give up too much just to say he’s got a deal.

MarketWatch:

• 5 sites teens flock to instead of Facebook(FB). Where America’s youth go online to avoid Mom and Dad.

CNBC:

• Number of U.S. expatriations reaches record high In 2013. The Treasury Department published the names of 560 Americans who renounced their citizenship or are long-term residents who gave back their green cards during the third quarter of 2013, The Wall Street Journal reported. According to tax lawyer Andrew Mitchel who tracks the data, these expatriations reached a record high of 2,369 for the year. The prior highest number of published expatriates was in 2011, said Mitchel. 

• Art could be drawing a disturbing economic picture. The Francis Bacon painting "Three Studies of Lucian Freud" was sold for a whopping $142.4 million as part of a $691.6 million Christie's sale on Tuesday night, making it the most expensive work of art ever sold at auction. Some argue that the sale is giving us a message about inflation that investors aren't getting from the action in gold, the Dollar Index, or the government's official consumer price index data.

Zero Hedge: 

• "Frustrated" Liquidity Addicts Demand Moar From BOJ As Nikkei Rally Stalls, Abenomics Founders And "Hope Fades".

• "Unruffled" Export-Stimulating Germany Blasts Back At Barroso's Bureaucratic Blathering.

• Italian Authorities 'Raid' Apple HQ After $1.4bn Tax Fraud Allegations.

• The Definition Of Insanity. (graph)

• Watch Socialist Paradise Central Planning In Action: Venezuela Looting Edition. (video)

Business Insider:

• The Next Obamacare Shoe To Drop: When Will Insurers Freak Out?

• Democratic Unity On Obamacare Is Collapsing.

Washington Times:

• Concierge medicine: WebMD(WBMD) pockets millions from feds to promote Obamacare.

LA Times:  

• Obama supporter miffed at botched healthcare rollout. Margaret Davis favors wider access to insurance, but under the Affordable Care Act she'd see her premiums rise 88% for inferior coverage.

The Hill:

• DCCC chairman: 'Worst may be yet to come' on budget negotiations. Democratic Congressional Campaign Committee Chairman Steve Israel (D-N.Y.) slammed Republicans in a memo Wednesday, warning that "the worst may be yet to come" in Congress with a possible showdown over the budget in the new year.

Reuters:

• Apple(AAPL), Samsung retrial kicks off over patent damages. .An Apple attorney on Wednesday said Samsung Electronics should pay $379 million for violating patents on the iPhone, as a damages retrial between the two mobile giants got underway. 

• U.S. money funds' euro debt exposure highest since '11 -JPMorgan. U.S. prime money market funds raised their of euro zone debt holdings in October to the highest level since August 2011 as pessimism over that region's economy continues to abate, a report by JPMorgan Securities released on Wednesday showed.

Telegraph:

• German trade surplus could threaten eurozone recovery, says EC. Commission says Germany’s large current account surplus could make it more difficult for Europe's struggling southern states to recover.

Bear Radar

Style Underperformer:

• Large-Cap Value -.03%

Sector Underperformers:

• 1) Airlines -1.07% 2) Steel -.60% 3) Drugs -.30%

Stocks Falling on Unusual Volume:

• CTXS, BBEP, PERY, CWCO, FI, TEAR, BNNY, ITC, DIOD, AMED, MWE, LCC, MCEP, PAMT, IEP, RYAAY, RAX, CVT, FCN, JOE, NUE, WX, OII, ESPR, TGH and AVIV

Stocks With Unusual Put Option Activity:

• 1) EWJ 2) KSS 3) XCO 4) M 5) AKS
  

Stocks With Most Negative News Mentions:

• 1) POST 2) AAPL 3) NUE 4) AMED 5) AGU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.09%

Sector Outperformers:

• 1) Retail +.74% 2) HMOs +.63% 3) Hospitals +.57%
  

Stocks Rising on Unusual Volume:

• TPH, CALL, EJ, LMIA, SINA, HMA, M, GOGO, CSIQ, GSVC, PXD, DECK and WBMD

Stocks With Unusual Call Option Activity:

• 1) LEAP 2) MTW 3) QEP 4) PANW 5) GALE

Stocks With Most Positive News Mentions:

• 1) F 2) M 3) TWTR 4) GOOG 5) LNKD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume