Bull Radar

Style Outperformer:

• Large-Cap Value -.70%

Sector Outperformers:

• 1) HMOs +2.27% 2) Gold & Silver +2.12% 3) Tobacco +.38%
  

Stocks Rising on Unusual Volume:

• DRC, SCSS, HAWK, FCS, BURL and WWE

Stocks With Unusual Call Option Activity:

• 1) KMP 2) MTG 3) WWE 4) SNDK 5) UNH
  

Stocks With Most Positive News Mentions:

• 1) PM 2) UNH 3) INTC 4) BBRY 5) IBM
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• U.S., EU Escalate Russia Sanctions as Putin Holds Firm. The Obama administration, acting in concert with the European Union, imposed sanctions on Russian banks, energy companies and defense firms in the latest attempt to punish the country over Ukraine. The U.S. and EU, which say Russia is supporting the rebels in Ukraine, sought to squeeze the country’s $2 trillion economy by limiting access to financing. Among the companies hit by the U.S. penalties were OAO Rosneft (ROSN), Russia’s largest oil company, natural gas producer OAO Novatek (NVTK), OAO Gazprombank, the country’s third-largest lender, and state economic development lender Vnesheconombank, the U.S. Treasury Department said today. 

• Israel Agrees to Cease-Fire as Troops Prepare for Invasion. Israel agreed to a United Nations request for a temporary cease-fire on humanitarian grounds even as it prepared its troops for a possible ground invasion. The truce will last five hours starting at 10 a.m. local time today to allow civilians to resupply provisions, the army said in an e-mailed statement late yesterday. Any attacks launched at Israel during that time will be met “firmly and decisively,” it said. Hamas and other factions also agreed to a five-hour truce, Al-Jazeera reported, without saying how it obtained the information. Al-Jazeera didn’t identify the other factions. 

• China Rallying for All Wrong Reasons to Top-Rated Analyst. The more China does to boost economic growth, the more bearish David Cui gets on the nation’s stock market. The Bank of America Corp. (BAC) strategist, ranked No. 1 by Institutional Investor magazine, says the state spending and monetary stimulus that drove a 14 percent rally in the Hang Seng China Enterprises Index (HSCEI) from this year’s low in March are only making equities less appealing as leverage rises and free cash flow dwindles. He predicts the gauge will drop to 9,600 by year-end, or 8.4 percent below yesterday’s close. Cui’s pessimistic outlook for the largest emerging market puts him at odds with bulls at some of the biggest banks and money-management firms, including Goldman Sachs Group Inc. and BlackRock Inc. He says policy makers’ unwillingness to endure the “short-term pain” of slower growth, needed to cut debt and shift the economy toward a consumption-based model, will prevent a sustainable rally. “Given that growth is still being driven by the usual factors, it means the core issue is getting worse as people are building up debt,” Cui said in a phone interview on July 14. “The issue is whether this growth is good quality and sustainable. My belief is that it’s not.” 

• What to Fear If China Crashes by William Pesek.

• China Finds Debt Addiction Hard to Break in Growth Quest. China’s leaders are having trouble breaking their addiction to debt-fueled investment. Outstanding credit rose to 206.3 percent of gross domestic product last quarter from 202.1 percent in January-to-March, according to data compiled by Bloomberg from government releases the past two days. Investment in fixed assets, a typical outlet for loans, accelerated in June for the first time since August. President Xi Jinping’s government is aiming for about 7.5 percent economic expansion this year, and a deeper slowdown could complicate structural changes he’s implementing -- such as bringing more private capital into state-owned enterprises. The central bank has eased constraints on bank lending in recent months and ceased referring to a November projection that China might undergo an unwinding of its debt build-up. “There are reasons to continue wondering how this is going to end,” said Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, who formerly worked at the World Bank. 

• Brazil Holds Key Rate at 11% as Economy Risks Stagflation. Brazil kept borrowing costs unchanged for the second straight meeting, as slowing growth gives the central bank no leeway to raise rates with inflation running above the upper limit of its target. The bank’s board, led by its President Alexandre Tombini, today held the benchmark Selic at 11 percent, as forecast by all 57 economists surveyed by Bloomberg. The central bank lifted borrowing costs by 375 basis points in the year through April before halting May 28. 

• Australia Scraps Carbon Price as Abbott Meets Election Vow. Australia’s Senate voted to scrap the nation’s price on carbon, fulfilling a key election pledge by Prime Minister Tony Abbott and leaving the nation without an approved mechanism to tackle emissions. The repeal bill was passed 39 votes to 32 in the 76-member upper house today, dismantling a law introduced by the previous Labor government that initially charged polluters A$23 ($21.50) per ton of greenhouse gases emitted. Repealing the carbon price may put Australia, which is hosting the Group of 20 nations summit in November, at loggerheads with President Barack Obama, who is seeking to form a worldwide agreement to combat climate change.

• Las Vegas(LVS) Sands Profit Misses Estimates as Macau Slows. Las Vegas Sands Corp. (LVS), the world’s largest casino operator, reported second-quarter sales and profit that missed analysts’ forecasts, as gambling slowed industrywide in Macau, the No. 1 market. Sands, with leadership in the mass market, contended with an industrywide drop in betting in Macau, the only part of China where casino gambling is legal. The action was clipped by lower spending from high-rollers known as VIPs, with industry revenue in June shrinking 3.7 percent to 27.2 billion patacas ($3.4 billion).

• Asian Stocks Advance for a Fourth Day Led by Materials. Asian stocks rose for a fourth day, with the regional benchmark index on course for the longest winning streak in more than a month, as material and industrial shares led the advance. BHP Billiton Ltd. (BHP), the world’s largest miner, gained 1.5 percent and Fortescue Metals Group Ltd. climbed 3.5 percent in Sydney as iron-ore prices held near a seven-week high. Taiwan Semiconductor Manufacturing Co. (2330) slumped 4.6 percent, leading declines on the regional gauge, after the world’s largest contract maker of chips said it will face stiffer competition next year. The MSCI Asia Pacific Index gained 0.2 percent to 147.47 as of 9:33 a.m. in Hong Kong.

• Most Base Metals Drop for Second Day on Rising Supplies. Most industrial metals fell as copper dropped to a two-week low after Goldman Sachs Group Inc. forecast commodities will drop over the next five years on increasing supplies. Copper for delivery in three months on the London Metal Exchange retreated as much as 0.4 percent to $7,049 a metric ton, the lowest price since July 2, and was at $7,057.50 by 10:45 a.m. in Tokyo. The metal has lost 4.1 percent this year, the most among the six main metals on the bourse.

• Bubble Fears Setting in as S&P 500 Surge Stirs Angst. Two years of uninterrupted gains in U.S. stocks are sowing anxiety among financial professionals, with three in five saying the market is on the verge of a bubble or already in one, the Bloomberg Global Poll found. Forty-seven percent of those surveyed said the equity market is close to unsustainable levels while 14 percent already saw a bubble, according to a quarterly poll of 562 investors, analysts and traders who are Bloomberg subscribers. Almost a third of respondents called the market for lower-rated corporate debt overheated and most said stock swings will increase within six months, the July 15-16 poll showed. 

• Murdoch Open to Bid Above $75 Billion for Time Warner(TWX).

Wall Street Journal:

• Top Justice Official Tells Banks Lawsuits May Be Coming. The Justice Department official leading the high-stakes talks with the nation’s largest banks over soured mortgage securities suggested Wednesday that lawsuits could be coming against institutions that don’t offer to pay large enough settlements and admit past misconduct.

• China Plays a Big Role as U.S. Treasury Yields Fall. Record Chinese Purchases of Treasury Bonds, Notes Could Help Explain Falling Yield on U.S.'s 10-Year Note. Investors wrestling with what is driving the surprise U.S. bond rally of 2014 got a clue Wednesday fingering a familiar suspect: China. The world's most populous nation boosted its official holdings of Treasury debt maturing in more than a year by $107.21 billion for the first five months of 2014, according to U.S. data released Wednesday. That is the biggest first-five-month increase since record keeping began in 1977 and surpasses the $81 billion bought by China for all of 2013, according to Ian Lyngen, senior government-bond strategist at CRT Capital Group LLC.

• BofA(BAC), Justice Remain Far Apart on Mortgage Pact. Bank Reaches Separate Settlement With AIG, Reports 43% Profit Drop.

• Jack Lew's Flee America Plan. The Obama Treasury wants to drive more U.S. companies overseas. 

• The Meaning of Russia's Military Campaign Against Ukraine. Moscow has broken the trust that many worked long to build. Now NATO must adapt to this new security threat.

MarketWatch.com: 

• Why the aptly named Carney would flop at Apple(AAPL).

CNBC: 

• Visa(V) Launches Checkout, Another Play for Digital Payments.

Zero Hedge: 

• Putin Responds: "US Sanctions Will Boomerang And Cause Very Serious Damage".

• Carl Icahn "Very Nervous" About Stocks Due To Fed's "Excessive Money Printing". (video)

• "Good News Is Bad News", BofA Says "Reduce Risky Assets" Because Jobs Are Improving So Fast. (video)

• Q1 Productivity Collapsed Most In Over 60 Years; Goldman Fears Consequences. (graph)

• Druckenmiller Warns Fed's "Market Obsession" Creates "Long-Term Risks To The Economy". (video)

• Peak Animal Spirits. (graph)

Business Insider:

• Canada’s Magnificent Housing Bubble Is At Risk, Fitch Says.

• Each Child Migrant Entering The US Costs Up To $1000 Per Day.

Reuters: 

• Supply constraints hits SanDisk's(SNDK) forecast, shares fall. SanDisk Corp gave a current-quarter revenue forecast that was below Wall Street's estimate, warning that it would be unable to the meet the booming demand for solid-state drives and memory chips, and its shares fell 9 percent in extended trading. The company also reported second-quarter profit and revenue that barely beat analysts' expectations, disappointing investors who have seen the company blow past Wall Street's forecasts for at least the past eight quarters.

• Yum's(YUM) China rebound dimmed by India, Pizza Hut weakness. Yum Brands Inc on Wednesday said its KFC business bounced back in China, its No. 1 market, but its stock fell more than 2 percent in extended-hours trading on disappointing quarterly results from its India, Taco Bell and Pizza Hut divisions.

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

Telegraph:

• Fed kicks off global dollar squeeze as Janet Yellen turns hawkish. A vast wash of dollars flooded the global financial system when the Fed cut rates near zero and then bought $3.5 trillion of bonds. This may now go into reverse.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 101.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 70.50 -1.0 basis point.

• FTSE-100 futures -.24%.

• S&P 500 futures -.25%.

• NASDAQ 100 futures  -.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MTB)/1.90

• (KEY)/.26

• (BHI)/.90

• (AN)/.87

• (SHW)/2.93

• (POOL)/1.61

• (ADS)/2.73

• (BX)/.72

• (PPG)2.79

• (DHR)/.94

• (UNH)/1.26

• (MAT)/.18

• (FITB)/.43

• (PM)/1.24

• (BAX)/1.22

• (MS)/.56

• (SYK)/1.08

• (COF)/1.82

• (IBM)/4.31

• (GOOG)/6.25

• (SLB)/1.36

• (CY)/.12

Economic Releases
8:30 am EST

• Housing Starts for June are estimated to rise to 1020K versus 1001K in May.

• Building Permits for June are estimated to rise to 1035K versus 991K in May.
  

• Initial Jobless Claims are estimated to rise to 310K versus 304K the prior week. 

• Continuing Claims are estimated to fall to 2580K versus 2584K prior.

10:00 am EST

• Philly Fed Business Outlook Index for July is estimated to fall to 16.0 versus 17.8 in June.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Eurozone inflation data, (GM) CEO testimony to Congress, Bloomberg Economic Expectations Index for July, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology 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 Higher into Final Hour on Buyout Speculation, Earnings Optimism, Less Eurozone Debt Angst, Energy/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 11.19 -6.44%

• Euro/Yen Carry Return Index 143.53 -.35%

• Emerging Markets Currency Volatility(VXY) 5.87 -1.51%

• S&P 500 Implied Correlation 48.52 -4.30%

• ISE Sentiment Index 170.0 +78.95%

• Total Put/Call .83 +1.22%

• NYSE Arms .69 -11.22% 

Credit Investor Angst:

• North American Investment Grade CDS Index 56.88 -1.23%

• European Financial Sector CDS Index 68.68 -5.96%

• Western Europe Sovereign Debt CDS Index 35.77 -1.68%
• Asia Pacific Sovereign Debt CDS Index 70.64 -1.15%

• Emerging Market CDS Index 231.96 -.56%

• China Blended Corporate Spread Index 304.68 +.38%
• 2-Year Swap Spread 18.25 unch.

• TED Spread 21.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 205.0 -2.0 basis point

• China Import Iron Ore Spot $98.0/Metric Tonne unch.

• Citi US Economic Surprise Index -13.0 +2.7 points

• Citi Emerging Markets Economic Surprise Index -1.60 +2.2 points

• 10-Year TIPS Spread 2.22 -2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +86 open in Japan

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech medical sector longs

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• EU Said to Expand Russia Sanctions After Putin Holds Firm. European Union governments are set to impose their broadest sanctions yet against Russia, punishing President Vladimir Putin for flouting an ultimatum to end the rebellion in Ukraine, a draft document showed. EU leaders meeting in Brussels later today may agree to penalize Russian companies, halt lending for investment projects in Russia, stop bilateral cooperation programs and further clamp down on commerce with Crimea, according to the draft statement obtained by Bloomberg News. Calls on Russia to stop meddling in Ukraine and supporting separatist rebels “have not been fully met,” EU leaders said in the draft. The 28-nation bloc “condemns the continuation of illegal activities by armed militants in eastern Ukraine” and will “proceed with the expansion of restrictive measures.” 

• Israel Renews Gaza Bombing After Hamas Rejects Truce Plan. Israel renewed its air raids on the Gaza Strip after a Palestinian rocket bombardment left an Egyptian truce proposal the Israelis accepted in tatters. Hamas, the militant movement that controls Gaza, said it wasn’t consulted on the Egyptian plan, and its military wing rejected it. Within six hours, the cease-fire efforts crumbled after Gaza militants barraged Israel with 50 rockets, according to the Israeli army’s count. The Palestinian death toll climbed above 200 in the fighting that followed, while an Israeli man became his country’s first fatality from fire since Israel ratcheted up its campaign against Gaza rocket squads last week.

• European Stocks Advance as Portuguese Lenders Lead Rally. European stocks advanced the most since April as Portuguese banks led a rally by euro-zone lenders and a report showed China’s economy expanded at a better-than-expected pace. Banco Espirito Santo SA jumped the most in at least 21 years after a Portuguese newspaper said the lender may raise 2 billion euros ($2.7 billion) from new shareholders to strengthen its capital ratios. Rio Tinto Group added 2.8 percent as the mining company said quarterly iron-ore production climbed 11 percent. Gtech SpA gained 4.1 percent after agreeing to buy International Game Technology for $4.7 billion. The Stoxx Europe 600 Index rose 1.3 percent to 342.97 at the close in London.

• Yellen Says Fed Won’t Rule Out Broker Support in Banking Crisis. Federal Reserve Chair Janet Yellen said she wouldn’t rule out expanding access to the central bank’s discount window to broker-dealers and other non-banks under certain circumstances during a financial crisis. “It depends what the circumstances are,” Yellen said today in response to questions from the House Financial Services Committee during her semi-annual testimony. “A broad- based scheme in a situation of systemic risk is a possibility but it is something that would have to be very serious to consider.”

CNBC:

• Druckenmiller: Fed policy 'fraught with unappreciated risk'. (video) Stan Druckenmiller, the retired founder of hedge fund firm Duquesne Capital Management, says the Federal Reserve is putting the economy at risk by continuing its aggressive market intervention.

• Beige Book: Economy expands at moderate to modest pace.

• Time Warner(TWX) rebuffs Fox bid, but Murdoch determined. Rupert Murdoch's 21st Century Fox said on Wednesday it had offered to buy Time Warner, a move that would unite two of the world's most powerful media conglomerates, but Time Warner rebuffed its offer. 

• US immigration worries on the rise: Gallup poll.

• Google(GOOG) likely 'trillion dollar company': Tech pro.

ZeroHedge: 

• Outrage Follows Report Government To Spend $50 Million On Resort For "Young Illegal Immigrants".

• Fed's Fisher Wants Some Steam Out Of The Market, But "No Popping The Bubble".

• Why America's Healthcare (Sickcare) System Is Broken And Unfixable. (graph) 

• Spot Bank of America's(BAC) "One-Time, Non-Recurring" Litigation Charges. (graph)

• Homebuilder Sentiment Surges, Beats By Most In A Year Led By "Future" Hopes. (graph)

• Industrial Production Drops, Misses By Most Since January. (graph)

• US Encourages Corporations To Engage In M&A "Inversion" Bubble, Then Shames Them By Demanding "Economic Patriotism". (graph)

Business Insider: 

• DRUCKENMILLER: Every Ounce Of Intuition In My Body Tells Me The Fed Has Gone Too Far.

• FBI: A Chinese Hacker Stole Massive Amounts Of Intel On 32 US Military Projects.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.10%

Sector Underperformers:

• 1) Biotech -1.08% 2) Banks -.61% 3) Restaurants -.60%

Stocks Falling on Unusual Volume:

• ININ, FOX, IMAX, FOXA, LCI, HSY, TSM, COV, YHOO, ALB, BBRY, SHPG, LGND, RDN, PNC, MRTN, ROST, ASML, FL, LJPC, MDT, ADMS, TJX, CAB, AKRX, AXDX and YHOO

Stocks With Unusual Put Option Activity:

• 1) YUM 2) SNDK 3) BHI 4) CSX 5) M
  

Stocks With Most Negative News Mentions:

• 1) MILL 2) ROST 3) POT 4) NSM 5) BGC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.17%

Sector Outperformers:

• 1) Gold & Silver +1.90% 2) Steel +1.39% 3) Computer Services +1.36%
  

Stocks Rising on Unusual Volume:

• IGT, TWX, JOY, TSEM, MLNX, HCA, INTC, VIAB, DISCA, UHS, CYH, THC, AIR, CLF, KEYW, CSH, PRAA and IMGN

Stocks With Unusual Call Option Activity:

• 1) PFE 2) HCA 3) FTNT 4) TWX 5) CHRW
  

Stocks With Most Positive News Mentions:

• 1) INTC 2) HCA 3) IBM 4) CVX 5) KORS
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume