Friday Watch

Night Trading

• Asian equity indices are -.75% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.75 -1.25 basis points.

• Asia Pacific Sovereign CDS Index 75.50 -1.0 basis point.

• FTSE-100 futures +.01%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures  -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KMX)/.66

• (DRI)/.94

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Canadian CPI could impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity 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, Less Eurozone Debt Angst, Short-Covering, Utility/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 10.59 -.19%

• Euro/Yen Carry Return Index 144.77 +.09%

• Emerging Markets Currency Volatility(VXY) 5.93 -2.15%

• S&P 500 Implied Correlation 47.43 -1.35%

• ISE Sentiment Index 92.0 -31.34%

• Total Put/Call .65 -14.47%

• NYSE Arms 1.01 +70.05% 

Credit Investor Angst:

• North American Investment Grade CDS Index 56.25 -1.28%

• European Financial Sector CDS Index 57.81 -6.75%

• Western Europe Sovereign Debt CDS Index 29.78 -1.21%

• Asia Pacific Sovereign Debt CDS Index 75.98 -.77%

• Emerging Market CDS Index 246.23 +1.04%

• China Blended Corporate Spread Index 308.11 -.52%

• 2-Year Swap Spread 15.50 -.5 basis point

• TED Spread 22.0 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.0 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% -1 basis point

• Yield Curve 217.0 +3.0 basis points

• China Import Iron Ore Spot $90.70/Metric Tonne +.44%

• Citi US Economic Surprise Index -10.20 +1.3 points

• Citi Emerging Markets Economic Surprise Index -8.70 +1.2 points

• 10-Year TIPS Spread 2.24 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +29 open in Japan

• DAX Futures: Indicating +4 open in Germany

Portfolio: 

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

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

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Obama Sending 300 Advisers to Help Iraqi Military Battle ISIL. President Barack Obama said he’s sending as many as 300 U.S. military advisers to assist the Iraqi army battle an insurgency and is prepared to take additional “targeted, precise” action if necessary. “American forces will not be returning to combat in Iraq,” Obama said after meeting with his national security team at the White House. The advisers will work with the Iraqi army to coordinate intelligence and training.
• China’s Stocks Post Biggest Loss in Seven Weeks Over IPOs. China’s stocks fell, capping the benchmark index’s biggest loss in seven weeks, amid concerns new share sales will divert funds from existing shares and a property slowdown will hurt economic growth. Yonyou Software Co. and Neusoft Corp. (600718) plunged more than 7 percent as a gauge of technology companies slumped the most among 10 industry groups. Leshi Internet Information & Technology Co., the biggest company in the ChiNext index, posted its steepest loss in two months. China Vanke Co. and Poly Real Estate Group Co. led a retreat for property developers. The Shanghai Composite Index (SHCOMP) fell 1.6 percent to 2,023.74 at the close, the steepest loss since April 28.
• European Stocks Jump as Fed Signals Support Amid Recovery. European stocks rose the most in more than a week after the Federal Reserve repeated its pledge to leave interest rates near their record low and said the world’s largest economy should experience sustained growth. Rolls-Royce Holdings Plc jumped 8.1 percent after saying it will buy back 1 billion pounds ($1.7 billion) of its own shares. Man Group Plc rallied 6 percent after agreeing to buy Numeric Holdings LLC. Electricite de France SA sank 7.7 percent after the French energy minister said tariffs won’t rise in August. Mediaset Espana Comunicacion SA slipped 3.2 percent after Chile eliminated Spain from the World Cup. The Stoxx Europe 600 Index climbed 0.6 percent to 348.15 at the close of trading.
• Fighting the IRS Just Got Harder.
• Gold Surges as Global Stocks Gain, Dollar Weakens on Fed. Gold futures rallied 3.2 percent and the Bloomberg Dollar Spot Index dropped to its lowest level in almost a month.
• Currency Probe Widens as U.S. Said to Target Markups. U.S. prosecutors are broadening their investigation of the foreign-exchange industry as they question salespeople at the world’s biggest banks on their practices, according to two people with knowledge of the matter. The Department of Justice has been asking bankers and clients how much sales teams charge customers to exchange currency, the people said, asking not to be identified because the interviews are private. The move is the first indication prosecutors are probing sales practices.

Wall Street Journal

• Sunni Extremists in Iraq Occupy Hussein's Chemical Weapons Facility. Officials Don't Believe the Militants Will Be Able to Create a Functional Weapon From the Material.
• Premiums Rise at Big Insurers, Fall at Small Rivals Under Health Law. Many Consumers Face Choice of Paying More for Old Plan or Saving Money by Switching.

MarketWatch.com: 

• Brent oil tops $115 a barrel on Iraq worries.

CNBC:

• Coach(COH) closing 70 stores as sales suffer.
• The end of Iraq.

ZeroHedge: 

• Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds. (graph)
• As Ukraine Launches A Debt Restructuring, Is Russia About To Become A "Holdout" Activist Investor?
• After 6 Years Of Unprecedented Central Planning, The Economy Is More Fragile Than Ever.
• The Ultimate Hack - HFT Hedge Fund's Trades "Slowed Down" By Malicious Malware.
• Caterpillar(CAT) Asia Sales Crater By 30% - Company Reports Weakest Stretch Of Global Demand Since Lehman Collapse.
• Philly Fed Beats; Prices Paid & "Hope" Spike Most In 5 Years. (graph)
• US "Ready To Act" As Russia Looks To Ban US Consultants & Block EU Gas Transit.
• Ukraine Truce Lasts "Several Seconds" Before Latest Fighting Involving "4000 Troops, Tanks, APC" Breaks Out.

Business Insider:

• NATO: Russia Is Placing Thousand Of Troops Along The Ukrainian Border. 

meps:

• EU STEEL MARKET PRICES UNDER NEGATIVE PRESSURE IN JUNE - MEPS.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.64%

Sector Underperformers:

• 1) Disk Drives -2.30% 2) Education -2.30% 3) I-Banking -1.41%

Stocks Falling on Unusual Volume:

• OAKS, CMGE, COH, SDLP, USCR, CHFC, PIR, RCPT, KBR, NMBL, CAG, DSLV, UTEK, YPF, BOFI, SCTY, BMA, OMED, VOD, PPO, CODE, FDS, FNF, CBOE, CCIH, RCPT and PPO

Stocks With Unusual Put Option Activity:

• 1) COF 2) COH 3) V 4) AA 5) ORCL
  

Stocks With Most Negative News Mentions:

• 1) FB 2) TRLA 3) RL 4) BIDU 5) NVDA 
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.26%

Sector Outperformers:

• 1) Gold & Silver +2.90% 2) Gaming +.85% 3) Restaurants +.56%
  

Stocks Rising on Unusual Volume:

• EEP, INSM, GLOG, KR, BNFT, CLC, CNL, ISIS and ENTA

Stocks With Unusual Call Option Activity:

• 1) CNP 2) AEO 3) NFX 4) AGNC 5) CCE

Stocks With Most Positive News Mentions:

• 1) LMT 2) WMB 3) BBRY 4) GLD 5) SBUX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• Iran's Status at Stake in Iraq as Ally Maliki Is Attacked. Iran, already deeply mired in Syria’s civil war, now finds itself center stage in a fight against Sunni militants threatening to topple its most important regional partner in Iraq. Iran is pledging to defend Shiite shrines in Iraq and help Prime Minister Nouri al-Maliki defeat an al-Qaeda breakaway group that has routed his northern army. More than 130 members of Iran’s Revolutionary Guards entered Iraq’s eastern Diyala province, which borders the Islamic republic, the BBC reported last week. The conflict will test Iran’s ability to prop up its two closest Arab allies to preserve the political influence built in the region over the past decade. The collapse of Maliki’s government, without a pro-Iranian alternative ready to take over, would cut Iran’s leverage in its power struggle with regional Sunni powers such as Saudi Arabia and in its efforts to overhaul ties with the U.S. 

• Half-Price Kurdish Oil Threatens Iraq Breakup With Turkish Help. A tanker containing a million barrels of crude oil is floating around the Mediterranean, and its cargo is available at half-price. Yet if any country seizes the bargain, it may be pushing Iraq closer to disintegration. The oil aboard the tanker is at the center of a fight over its ownership between the semi-autonomous region of Kurdistan, which pumped and shipped the crude from its territory in northern Iraq, and the central government in Baghdad, which claims the rights to all oil revenue.

• Abenomics Fails to Shake Japan Firms’ Addiction to Cash: Economy. Japanese firms boosted their cash stockpile to a record in the first quarter, underlining challenges Prime Minister Shinzo Abe faces a year and a half into his drive to reflate the economy. Nonfinancial companies’ holdings of cash and deposits rose 4.1 percent to 232 trillion yen ($2.3 trillion) at the end of March, while they increased borrowing from private banks at the slowest pace since the final quarter of 2012, a Bank of Japan report showed yesterday. Households kept more than half of their assets in cash and deposits.

• Asian Stocks Climb to Six-Year High on Fed as Won Rises. Asian stocks rose to the highest in six years and emerging-market currencies gained against the dollar after the U.S. Federal Reserve said interest rates will remain low and China’s premier vowed to ensure the nation’s growth target is achieved. Oil climbed while nickel slid. The MSCI Asia Pacific Index advanced as much as 1.1 percent to 145.18, the highest sine June 2008, as Japan’s Topix index added 1.4 percent by 11:18 a.m. in Tokyo.

• WTI Gains on U.S. Supplies as Iraq Fighting Spreads; Brent Holds. WTI for July delivery gained as much as 31 cents to $106.28 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.23 at 10:56 a.m. Sydney time. The contract fell 39 cents to $105.97 yesterday, the lowest close since June 11. The volume of all futures traded was about 30 percent below the 100-day average. Prices have increased 7.9 percent this year.

• Markit Raises $1.18 Billion Pricing Increased IPO at Midpoint. Markit Ltd., the London-based financial-information provider whose price data forms the basis for much of the global derivatives and bond markets, raised $1.18 billion in a U.S. initial public offering, selling an increased number of shares at the midpoint of the range.

Wall Street Journal: 

• U.S. Signals Iraq's Maliki Should Go. The White House Is Convinced the Shiite Leader Is Unable to Reconcile With the Nation's Sunni Minority and Stabilize a Volatile Political Landscape. The Obama administration is signaling that it wants a new government in Iraq without Prime Minister Nouri al-Maliki, convinced the Shiite leader is unable to reconcile with the nation's Sunni minority and stabilize a volatile political landscape. The U.S. administration is indicating it wants Iraq's political parties to form a new government without Mr. Maliki as he tries to assemble a ruling coalition following elections...

• House Panel Is Subpoenaed as Trading Probe Heats Up. Prosecutors Gathering Evidence for Grand Jury in Centers for Medicare and Medicaid Services Leak Case. 

• BlackRock, Pimco Sue Deutsche Bank, U.S. Bank Over Trustee Roles. Lawsuits Focus on More Than 2,000 Mortgage Bonds.

• The High Price of Obama Fatigue. The IRS isn't Watergate; it's worse than Watergate.

Fox News:

• US flying F-18 surveillance missions over Iraq, Obama reviews options with lawmakers. The United States is flying F-18 surveillance missions over Iraq from an aircraft carrier in the Persian Gulf, officials confirm to Fox News, as President Obama weighs options for "increased security assistance" in the country. The surveillance missions are being launched from the USS George HW Bush. It was already known that the Obama administration had authorized "manned and unmanned" surveillance flights, but F-18's are not traditional surveillance aircraft -- they are attack aircraft.

Zero Hedge: 

• The Death Of The Rust Belt.

• Mortgage Applications Re-Plunge As Rates Tick Up 5bps. (graph)

• Why ISIS Won't Stop With Iraq.

• Those Soaring Food And Gas Prices? The Fed Has A Name For Them: "Noise". (graph)

• Yellen: "No Bubble Here". (graph)

• Hillary Distances Herself From Obama Over Iraq, Iran, Syria, Russia, The IRS And NSA.

• The Iraq Turmoil In 10 Simple Questions.

• Beware Friday's OPEX, JPMorgan Warns "Volatility Too Low, Disconnected From Fundamentals". (graph)

Business Insider:

• How The ISIS Makes Its Millions.

• Bowe Bergdahl's Roommate: He's A Deserter Who Should Be Prosecuted.

Washington Post: 

• U.N. agency raises disaster designation in Iraq as refugees flood into Kurdistan. The United Nations children’s agency UNICEF on Wednesday upgraded Iraq’s latest crisis to a level 3 humanitarian disaster — its most severe designation — as U.N. officials said they were scrambling to provide basic services while preparing to cope with an estimated 1.5 million displaced people.

Brietbart.com: 

• Obama Flunks his Climate Science 101 at University of California, Irvine.

Reuters:

• Red Hat(RHT) raises revenue forecast on strong subscription growth. Red Hat Inc, the world's largest commercial distributor of the Linux operating system, raised its full-year adjusted profit and revenue forecast, helped by strong growth in subscription revenue. Shares of Red Hat rose 4.5 percent in extended trading.

• TD Ameritrade(AMTD) clients start using their cash. Cash represents about 19 percent of assets kept in more than 4 million retail brokerage accounts at the Nebraska-based broker-dealer. In the previous five years, cash levels averaged between 20 percent and 22 percent, said Tom Bradley, president of retail distribution.

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

AP:

• VA chief: More vets wait 30 days for appointment. About 10 percent of veterans seeking medical care at VA hospitals and clinics have to wait at least 30 days for an appointment — more than twice the percentage of veterans the government said last week were forced to endure long waits, the acting veterans affairs secretary said Wednesday.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 102.0 -4.5 basis points.

• Asia Pacific Sovereign CDS Index 76.50 -1.5 basis points.

• FTSE-100 futures +.51%.

• S&P 500 futures +.04%.

• NASDAQ 100 futures  +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KR)/1.05

• (IHS)/1.44

• (SWHC)/.40

• (ORCL)/.95

• (TIBX)/.13

• (ESI)/.71

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 313K versus 317K the prior week.

• Continuing Claims are estimated to fall to 2600K versus 2614K prior.

10:00 am EST

• Philly Fed Business for June is estimated to fall to 14.0 versus 15.4 in May.

• The Leading Index for May is estimated to rise +.6% versus a +.4% gain in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Bloomberg Economic Expectations Index for June, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (COH) investor day could impact trading today.

BOTTOM LINE: Asian indices are mostly 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 mixed. The Portfolio is 50% net long heading into the day.