Today's Headlines

Bloomberg: 

• EU Criticizes Spending Plans of Biggest Euro-Area Nations. The European Union confronted the euro area’s biggest economies over their spending plans for next year as austerity demands restrain the bloc’s recovery from the longest recession in its history. The EU said that Germany, Europe’s largest economy, has made “no progress” in following recommendations to spur domestic demand, that Spain’s budget risked missing deficit targets and that Italy’s 2014 plan was in danger of breaching debt-reduction rules. The budget plans of euro-area countries “still do not pay sufficient attention” to fiscal consolidation, EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters today in Brussels.

• Most European Stocks Rise as Stoxx 600 Climbs Sixth Week. Most European stocks advanced, with the Stoxx Europe 600 Index rising for a sixth consecutive week, as investors weighed U.S. industrial data to gauge the strength of the world’s largest economy. Vivendi SA climbed 2.8 percent after posting better-than-estimated third-quarter profit and saying it will spin off its French phone carrier SFR by July 2014. Publicis Groupe SA rose 1.6 percent. Julius Baer Group Ltd. slipped 1.6 percent after reporting that its gross margin narrowed as it absorbed wealth-management units acquired from Bank of America Corp. Safran SA (SAF) lost 3.9 percent as the French state, its largest shareholder, reduced its stake. The Stoxx 600 added 0.2 percent to 323 at the close of trading, with about three stocks rising for every two that fell.

• WTI Set for Longest Run of Weekly Losses Since 1998. West Texas Intermediate crude headed for a sixth weekly decline, the longest stretch of losses in 15 years, as rising U.S. supplies countered speculation that the Federal Reserve will maintain stimulus of the economy. WTI for December delivery advanced 19 cents to $93.95 a barrel at 1:18 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 30 percent below the 100-day average.

Wall Street Journal: 

• EPA Shrinks Ethanol Mandate for First Time. The Environmental Protection Agency on Friday proposed for the first time to ease an annual requirement for ethanol in gasoline, acknowledging that mandated levels specified in a 2007 law are difficult, if not impossible, to meet. The EPA is asking refiners in 2014 to blend 15.2 billion gallons of renewable fuel—most of it ethanol—into U.S. gasoline supplies. That is about 16% less than what Congress specified in a 2007 renewable fuels law. The law gives EPA the ability to lower the requirement. 

• The President's ObamaCare Backpedal. His proposal to allow people to keep their health plans will not provide a political escape hatch for beleaguered congressional Democrats.

Fox News:

• House approves ObamaCare insurance fix. The House on Friday approved a bill to let insurance companies sell health plans that had previously been canceled due to ObamaCare regulations, a day after President Obama moved unilaterally to fix the problem. The bill passed 261-157. Thirty-nine Democrats crossed over to support the GOP-backed legislation.

MarketWatch:

• Fuji to end Toyota Camry production in U.S: report. Fuji Heavy Industries Ltd. (7267.TO) is considering terminating its production of Toyota Motor Corp.'s (7203.TO) Camry sedan at a U.S. plant as requested by Toyota, Kyodo News reported Friday, citing Fuji Heavy officials. Fuji, the maker of Subaru cars, started Camry production in 2007 at the Indiana plant which currently has an annual production capacity of 270,000 units including 100,000 units for the Camry.

• Zulily(ZU) shares jump 82% post IPO.

CNBC:

• CME Group says its ClearPort system was hacked. CME Group, the world's largest futures exchange operator, said Friday one of its clearing systems was hacked in July, and the incident is the subject of a federal criminal investigation.

• Cashin: I'm worried about return to dot-com bubbles. (video)

Zero Hedge: 

• And Another Miss: Industrial Production Contracts 0.1% On Expectations Of A Rise. (graph) 

• Spanish FinMin "Concerned" As Public Debt Surges To New Record. (graph) 

• Holiday Spending Plans Collapse. (graph)

• Bubbles And Central Banks - Is There A Connection?

• The History Of Debt.

• Total Healthcare "Enrollment" As A Result Of Obamacare: -3.9 Million.

Business Insider: 

• The French Increasingly Think Europe Is The Problem, Not The Solution.

• Investors Flee From Emerging Markets. (graph)

Yahoo Finance:

• Yellen Sees No Bubbles; Stockman Sees Them “Everywhere”. (video)

Mediaite:

• Dem Rep. During Obamacare Debate: ‘Haven’t Seen So Much Panic on This Floor Since 9/11′. (video)

Reuters:

• U.S. Justice Dept says looking into metals warehousing. 

• Italy at risk of breaking EU rules, France squeezes through. Italy's draft budget plans for 2014 are at risk of breaking European Union rules, while French draft plans barely make it, the European Commission said on Friday. It is the first time that the European Union's executive arm reviews the main assumptions of draft budgets of euro zone countries before they are submitted to national parliaments so as to assess if they are in line with EU laws.

Telegraph:

• EU uses new budget powers to demand more austerity in Italy and Spain. The European Commission has exercised historic new EU powers allowing it to revise national budgets for the first time.

Bear Radar

Style Underperformer:

• Mid-Cap Value -.14%

Sector Underperformers:

• 1) Hospitals -1.65% 2) Disk Drives -1.76% 3) Gaming -.53%

Stocks Falling on Unusual Volume:

• LMOS, WU, GOGO, EJ, EPZM, WHZ, PNW, CHKR, GWPH, ADES, KMB, WGL, HHC, MMS, JWN, GWW, MIDD, CMGE, GSVC, WX, TYC, STML, PAMT, AMZN and HCA

Stocks With Unusual Put Option Activity:

• 1) CTL 2) IRM 3) YUM 4) SPF 5) DE
  

Stocks With Most Negative News Mentions:

• 1) EBAY 2) CSCO 3) PRU 4) HCA 5) BK
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.44%

Sector Outperformers:

• 1) Networking +1.05% 2) Biotech +.94% 3) Homebuilders +.74%
  

Stocks Rising on Unusual Volume:

• FRGI, VNDA, ONVO, A, FENG, YOKU, IRM, MJN, IOC, AWAY, EQIX, XON, LGND, MDRX, INFI, P, BMRN, IRM, RPTP and LNKD

Stocks With Unusual Call Option Activity:

• 1) NIHD 2) ONVO 3) IRM 4) WU 5) SPLS

Stocks With Most Positive News Mentions:

• 1) BA 2) XOM 3) T 4) WMT 5) AAPL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Japan’s Biggest Banks See Profit Declining in Second Half. Mitsubishi UFJ Financial Group Inc. (8306), Sumitomo Mitsui Financial Group Inc. (8316) and Mizuho Financial Group Inc. (8411) increased their combined net income target by 23 percent to 2.26 trillion yen ($23 billion) for the year ending March, company statements showed. If they achieve the goal, second-half profit will fall 46 percent to 794.3 billion yen from the first six months’ 1.47 trillion yen and drop 43 percent from a year earlier. The forecast for lower second-half earnings reflects the banks’ uncertainty over whether Prime Minister Shinzo Abe can sustain an economic recovery that’s been driven by government spending and a weaker yen.

• China State Companies’ Dominance Tested by Market Pledge. China’s state-owned companies, coddled by cheap credit and sheltered monopolies for years, face a less comfortable future after Communist Party leaders pledged to give market forces a bigger role in the economy.

• Asian Stocks Advance as Yellen Supports U.S. Stimulus. Asian stocks rose, with Japan’s Nikkei 225 Stock Average surging beyond 15,000 for the first time since May, after Federal Reserve chairman nominee Janet Yellen signaled she will continue U.S. stimulus efforts. Toyota Motor Co. (7201) climbed 1.3 percent, extending this week’s rally to 2.9 percent, as the yen declined to a two-month low against the dollar, boosting the earnings outlook for Japanese exporters. Dai-ichi Life Insurance Co. surged 3.7 percent in Tokyo after the insurer raised its profit forecast. Luk Fook Holdings (International) Ltd. climbed 7.1 percent in Hong Kong as the jewelry retailer said it expects profit will rise. The MSCI AsiaPacific Index added 1.2 percent to 141.32 as of 10:51 a.m. in Hong Kong, extending this week’s advance to 1.7 percent.

• Rebar Rises in Shanghai to Trim Weekly Loss as Iron Ore Rallies. Steel reinforcement-bar futures in Shanghai advanced, narrowing a weekly loss, as higher iron ore prices helped offset a weaker demand outlook in winter. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, gained as much as 0.4 percent to 3,636 yuan ($597) a metric ton, before trading at 3,632 yuan at 10:28 a.m. local time. The contract lost 0.8 percent this week. 

• Copper Pares Weekly Drop as Yellen Signals Continued Stimulus. Copper rose for a second day, paring a weekly decline, after Federal Reserve Chairman nominee Janet Yellen backed U.S. stimulus measures until the economy improves. The contract for delivery in three months on the London Metal Exchange rose as much 0.6 percent to $7,035.25 a metric ton and traded at $7,029.25 at 10:17 a.m. in Beijing. The two-day rebound helped trim this week’s loss to 1.9 percent.

• Billionaire Paulson Sticks With Gold Wager as Prices Rebound. Billionaire hedge fund manager John Paulson, who cut his gold holdings by more than half in the second quarter, maintained his bet on the metal over the next three months as prices rebounded.

• Germany Digs in Against Risk Sharing in EU Bank-Failure Debate. Germany argued against a joint backstop for struggling euro-area banks as European finance ministers renewed their debate on how to handle the costs of managing failed lenders. German Finance Minister Wolfgang Schaeuble called on his colleagues to rein in their ambitions for the Single Resolution Mechanism proposed by the European Commission, which includes a common fund filled by levies on the financial industry. He said an agreement among European Union member states is possible by year-end as long as they don’t insist on a European fund now. 

• Big Banks’ Use of Bailouts Show Need for New Rules, Senators Say. Big banks’ disproportionate reliance on U.S. aid after the credit crisis reinforces the need for additional steps to ensure the end of too big to fail, Senators Sherrod Brown and David Vitter said today. Brown and Vitter, co-sponsors of a bill that would impose a 15 percent capital requirement on the biggest U.S. lenders, commented after the release of a Government Accountability Office study that showed such firms made greater use of bailout programs introduced after markets collapsed in 2008.

• Temasek Pares U.S. Stocks With Facebook(FB), Monsanto(MON) Exits. Temasek Holdings Pte, Singapore’s state-owned investment firm, exited Facebook Inc. (FB), Monsanto (MON) Co. and Air Products & Chemicals Inc. (APD) in the third quarter as it pared U.S. stock holdings.

• Under Armour(UA) Buying MapMyFitness in $150 Million Deal. Under Armour Inc. (UA) agreed to buy MapMyFitness Inc. for $150 million as the maker of athletic apparel looks to compete with Nike Inc. (NKE) in offering fitness buffs a way to measure their training and performance online. MapMyFitness, founded in 2007, designs applications that allow athletes to record and share their workouts using global-positioning technology, according to a statement from Under Armour. Closely held MapMyFitness has about 20 million registered users worldwide, who can measure their training on more than 400 devices, sensors and wearables.

• Yellen Says Review of Bank Commodity Activity Could Bring Limits. The Federal Reserve may consider limits on bank ownership and trading of physical commodities out of concern that an event such as an oil spill could undermine financial stability. “We are involved in a very comprehensive review” of banks’ commodities activity, Fed Vice Chairman Janet Yellen said today at a Senate hearing on her nomination to become chairman of the central bank. “We want to make sure that these are conducted in a safe and sound manner, and we may be involved in additional rulemaking as we complete this review.”

• Buffett-Backed Heinz to Cut 1,350 Jobs, Close 3 Plants. HJ Heinz Co., the ketchup-maker owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) and 3G Capital, said it will fire 1,350 workers as it closes manufacturing plants in North America.

• Japan Sets Emissions Target in Setback to UN Treaty Talks. Japan set a new target for greenhouse gas emissions that critics say will set back United Nations talks for a treaty limiting fossil fuel emissions. The new target effectively reverses course from the goal set four years ago by allowing a 3.1 percent increase in emissions from 1990 levels rather than seeking a 25 percent cut.

Wall Street Journal: 

• CIA's Financial Spying Bags Data on Americans. Information on International Money Transfers Includes Financial and Personal Data of Americans. The Central Intelligence Agency is building a vast database of international money transfers that includes millions of Americans' financial and personal data, officials familiar with the program say. The program, which collects information from U.S. money-transfer companies including Western Union, WU -0.34% is carried out under the same provision of the Patriot Act that enables the National Security Agency to collect nearly all American phone records, the officials said. Like the NSA program, the mass collection of financial transactions is authorized by a secret national-security court, the Foreign Intelligence Surveillance Court.

• NSA Fallout: Tech Firms Feel a Chill Inside China. Big U.S. computer and software companies are reporting a sudden chill in sales to China, and some blame increased government hostility toward the U.S. In the latest sign, computer-networking-gear maker Cisco Systems Inc. CSCO -10.96% said Wednesday that orders from China in the latest quarter fell 18% from the same period a year earlier. Cisco further projected revenue world-wide would decline 8% to 10% in the current quarter, in part because of continued weakness in China.

Barron's: 

• Moody’s Cuts Credit Ratings of Goldman Sachs(GS), JPMorgan(JPM), Others. Oh boy. Moody’s said it might do it, and now it has. It’s cut the credit rating on a handful of U.S. banks, including Goldman Sachs (GS), JPMorgan Chase (JPM) and Morgan Stanley (MS).

Fox News:

• How ObamaCare will hurt Democrats in 2014 and 2016 by Douglas Schoen.

• Critics from both sides of the aisle take on Obama's health care 'fix'. Critics from both sides of the aisle took on President Obama’s last-minute “fix” to his signature health care law Thursday, with some Democrats saying they remained “concerned” while Republicans renewed calls for delaying its implementation.

CNBC:

• Holiday outlook bleak for Wal-Mart(WMT), Kohl's(KSS). This holiday season may not be one of joy for some big retailers as the aftermath of the recession—low job growth and higher payroll taxes—has lower-income shoppers struggling to make ends meet and cautious about splashing out.

Zero Hedge: 

• "Yellen Has Ensured An Equity Market Crash Is Inevitable".

• The End Of The Line?

• Citi(C) Warns "Fed Is Kicking The Can Over The Edge Of A Cliff".

• China Repo Spikes Most In 5-Month Highs; Japanese Stocks Soar As TEPCO Finds Another Leak. (graph)

Business Insider: 

• Megyn Kelly Explodes On Evasive Obamacare ‘Architect’. (video)

• Now Kyle Bass And Stan Druckenmiller Have Gone Long Herbalife's Stock.

• JIM ROGERS: Investors Need To Remember That The Crowd Is Almost Always Wrong.

• Hong Kong's Economy Is In The Calm Before The Storm.

• Doctors Could Soon Be Performing Transplants Using Organs Infected With HIV.

NY Times:

• U.S. Investigates Currency Trades by Major Banks. From their desks at some of the world’s biggest banks, traders exchanged a series of instant messages that earned them the nickname “the cartel.” Much like companies that rigged the price of vitamins and animal feed, the traders were competitors that hatched alliances for their own profits, federal investigators suspect. The group of traders, the investigators say, shared a mission to alter the price of foreign currencies, the largest and yet least regulated market in the financial world. And ultimately, they flooded the market with trades that potentially raised the cost of currency for clients but aided the banks’ own investments.

IFR:

• Hunt for yield reaches fever pitch. Investors and bankers last week shrugged off concerns of a credit bubble forming and insisted that bumper supply volumes were unlikely to diminish before the end of the year, with issuers keen to pre-empt macroeconomic risks and make use of welcoming market conditions. Since the beginning of October, issuance in the euro and sterling markets by high-yield, corporate and financial institutions has reached US$115bn, according to Thomson Reuters data, just US$22bn short of the total issued in both October and November last year.

Real Clear Politics: 

• Public Approval of Health Care Law. (graph)

Reuters: 

• U.S.-based stock funds attract $1.7 billion - Lipper. 

• Juniper(JNPR) 4th-qtr outlook unchanged, seeing no 'Snowden effect' -exec. A Juniper Networks Inc executive said on Thursday that the company is not making any changes to its financial targets for the current quarter, despite a warning by rival Cisco Systems Inc that revenue could fall up to 10 percent this quarter. 

• Nordstrom(JWN) tempers 2013 same-store sales view, stock down. Nordstrom Inc on Thursday reported a lower quarterly profit, due in part to the earlier timing of its Anniversary Sale, and took down the top end of its full-year forecast for sales at established stores. Nordstrom shares fell 1.7 percent to $62.36 in extended trading.

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:

• Hopes for faster global growth dashed. Disappointing growth figures in the eurozone and Japan driven by weak export numbers have dashed hopes that a global economic recovery would gather pace in the second half of the year.

Telegraph:

• French officials warn of social tinderbox as economy contracts again. Francois Hollande called on France to judge him on his success in “bending the curve in unemployment”, but this has come back to haunt him.

Evening Recommendations
 Stifel:

• Rated (LNKD) Buy, target $300.

• Rated (YELP) Buy, target $85.

Night Trading

• Asian equity indices are +.25% to +1.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 134.0 -4.0 basis points.

• Asia Pacific Sovereign CDS Index 107.50 -4.0 basis points. 

• FTSE-100 futures +.22%.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MMS)/.50

Economic Releases
8:30 am EST

• Empire Manufacturing for November is estimated to rise to 5.0 versus 1.52 in October.

• The Import Price Index for October is estimated to fall -.5% versus a +.2% gain in September.

9:15 am EST

• Industrial Production for October is estimated to rise +.2% versus a +.6% gain in September.
  

• Capacity Utilization for October is estimated at 798.3% versus 78.3% in September.
  

• Manufacturing Production for October is estimated to rise +.2% versus a +.1% gain in September.
  

10:00 am EST

• Wholesale Inventories for September are estimated to rise +.4% versus a +.5% gain in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone GDP/Germany IFO, Eurozone CPI and the (GE) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by industrial 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 75% net long heading into the day.

Stocks Rising into Final Hour on Central Bank Hopes, Less Emerging Markets Debt Angst, Short-Covering, Homebuilding/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.32 -1.60%

• Euro/Yen Carry Return Index 140.39 +.60%

• Emerging Markets Currency Volatility(VXY) 8.87 -2.21%

• S&P 500 Implied Correlation 33.70 -6.26%

• ISE Sentiment Index 144.0 +23.08%

• Total Put/Call .83 +2.47%

• NYSE Arms .62 +30.62% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.03 +.02%

• European Financial Sector CDS Index 109.13 -.34%

• Western Europe Sovereign Debt CDS Index 62.33 -2.61%

• Emerging Market CDS Index 291.85 -2.26%

• 2-Year Swap Spread 11.0 unch.

• TED Spread 16.75 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.75 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.

• Yield Curve 241.0 -1 basis point

• China Import Iron Ore Spot $136.60/Metric Tonne +.37%

• Citi US Economic Surprise Index 11.50 -6.5 points

• Citi Emerging Markets Economic Surprise Index -12.10 +3.8 points

• 10-Year TIPS Spread 2.19 +1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +219 open in Japan

• DAX Futures: Indicating -7 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech/retail sector longs and emerging markets shorts

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.54%

Sector Underperformers:

• 1) Networking -2.81% 2) Coal -1.76% 3) Education -1.73%

Stocks Falling on Unusual Volume:

• CSCO, CRAY, XLNX, CTXS, CIEN, WGL, CAVM, TTS, EPZM, MGAM, GWR, KSS, PRCP, SEAS, AFCE, SDT, WGL, ALGN, SFUN, PEGA, RNR, NTES, FNSR, AVGO, VIAB, BWC, LMIA, PAMT, EZCH and LULU

Stocks With Unusual Put Option Activity:

• 1) MJN 2) LOW 3) XLF 4) XLV 5) ORCL
  

Stocks With Most Negative News Mentions:

• 1) KSS 2) TTS 3) NTES 4) FFIV 5) LULU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume