Today's Headlines

Bloomberg:

• Ukraine to Block Russian Aid Trucks as It Tightens Noose Around Rebels. Ukraine refused to let a convoy that Russia says is loaded with humanitarian aid enter the country in its current form, arguing the mission doesn’t adhere to international rules and must be led by the Red Cross. Russia’s Emergencies Ministry said 280 trucks with 2,000 metric tons of donated food, medicine and water left Moscow for rebel-held eastern Ukraine today. Ukrainian military spokesman Andriy Lysenko said they are carrying military gear in the guise of aid. The Geneva-based International Committee of the Red Cross said it’s not in charge of the convoy at the moment and has asked for details of what it contains. The ICRC needs “some clarification first regarding modalities, practical steps that have to be implemented prior to launch such an operation,” Laurent Corbaz, its head of operations for Europe, said in a video on the Red Cross website. “We seriously need security guarantees, for example, and direct contact with all the parties; this is not settled yet. We need as well to know precisely what is inside the convoy, the size of this convoy, and the various material that is going to be handed over.”

• Maliki Meets Commanders as Tensions Rise in Baghdad. Iraq’s Prime Minister Nouri al-Maliki met with military officers today in the latest sign he won’t hand power willingly to his designated successor, as U.S. and Iraqi forces battled Islamist militants. Maliki ordered his commanders to keep out of the political crisis that has gripped Baghdad since President Fouad Masoum asked a rival Shiite politician to form a government, according to footage of the meeting shown on television. Earlier, militiamen and soldiers had fanned out across the capital in a show of force. A car bomb killed six people in the city.

• EON Emerging Markets Foray to Cut Profit as Russia Slows. Germany’s largest utility sought relief from upheaval in the energy industry at home by investing in emerging markets. It’s not gone to plan. EON SE (EOAN) reports first-half earnings tomorrow and ventures in Brazil, Turkey and Russia are expected to contribute to a 24 percent drop in profit from last year, according to analysts including B. Metzler Seel Sohn & Co. KGaA. The company has challenges in all three countries, picked because they were held to offer better growth than Europe. In Brazil, investments earmarked for utility Eneva SA (ENEV3) have risen almost fourfold as the business of billionaire partner Eike Batista collapsed. Earnings at Turkish venture Haci Omer Sabanci Holding AS (SAHOL) have been held back by a weak currency, and Russia’s economy is slowing because of the Ukraine crisis. 

• Weakest Oil Demand Growth Since ’12 Allays Supply Risk, IEA Says. Global oil demand growth eased to its weakest since 2012 last quarter, calming world markets amid threats to supplies in the Middle East and North Africa, according to the International Energy Agency. The IEA cut estimates for oil demand growth this year and next after the annual expansion in fuel consumption slowed to 700,000 barrels a day in the second quarter, the lowest level since early 2012.

• India CPI Tops Estimate in Test for Rajan as Industry Moderates. India’s consumer-price inflation quickened more than economists estimated, adding pressure on central bank Governor Raghuram Rajan to keep interest rates elevated even after factory output slowed. The consumer-price index rose 7.96 percent in July from a year earlier, compared with a upwardly revised 7.46 percent in June, the Statistics Ministry said in New Delhi today. The median estimate in a Bloomberg News survey of 43 analysts was for a 7.4 percent increase. Industrial production rose 3.4 percent in June compared with a 5.6 percent gain predicted in a separate survey and a revised 5 percent in May.

• German Yields Falling Toward 1% Shows Japan-Style Risks Building. Germany is on the brink of joining an exclusive club of nations able to borrow for a decade at less than 1 percent. For strategists predicting such a scenario, that’s because the European Central Bank isn’t doing enough to prevent a Japanese-style deflationary spiral from taking hold. 

• Euro Falls to Almost Nine-Month Low as Confidence Sags.

• European Stocks Decline as Investors Watch Ukraine Crisis. European stocks fell, following their biggest rally since April, as companies including Henkel AG and Hargreaves Lansdown Plc declined, while a Russian aid convoy left for Ukraine. Henkel lost the most since September 2011 after warning that earnings growth will slow amid conflicts in Ukraine and the Middle East. Hargreaves Lansdown retreated 2.9 percent after UBS AG recommended selling the shares. Prudential Plc gained 2.2 percent after reporting better-than-forecast first-half profit. The Stoxx Europe 600 Index slipped 0.2 percent to 328.74 at the close of trading.

Wall Street Journal:

• Syrian Forces Advance on Aleppo, Rebels Fear Another Siege. Fall of Largest Rebel-Held City Could Benefit Islamic Jihadists Along With Regime.

CNBC:

• Icahn sees 'major asset bubble,' touts activists.

• How Youngstown, Ohio became a poster child for post-industrial America.

• Home sales, price gains cool as summer lingers.

ZeroHedge:

• ISIS And The Coming Escalation In Iraq.

• Bubble Market Stunner: Revenueless Biotech Goes Public, Drops, Trades For Six Days, Then Voids Entire IPO.

• France's 'Recovery' In 1 Hard-To-Believe Chart. (graph)

• China Begins Direct Sales Of Fruit & Vegetables To Russia.

• Will A Hawkish Janet Yellen Be JOLTed By Most Job Openings Since 2001? (graph)

• Ukraine Blocks Russian Humanitarian Convoy, Accuses Kremlin Of Sending "Disguised Military Gear".

Business Insider:

• Junk Bond Funds Just Experienced A 6-Sigma Event. (graph)

• Tensions Still High In Missouri 'War Zone' After Monday's Riots.

• 4 Times Russia Used The Pretext Of Assistance To Invade A Neighbors.

• Startling Photos Show Yazidis Under Siege By ISIS Fleeing Into Syria By The Thousands. (pics) 

• The Forces That Have Kept Profit Margins Fat Are Reversing.

• Islamic State Carves Out A Jihadist Hub In Heart Of Middle East.

• The Outlook For Germany In One Word: 'Grim'. (graph)

Reuters:

• German investor morale plunges on Ukraine, growth worries. German analyst and investor morale plunged in August to its lowest level in more than 1-1/2 years as the crisis in Ukraine took its toll, a survey showed, suggesting that Europe's largest economy is running out of steam. Mannheim-based think tank ZEW's monthly survey of economic sentiment, published on Tuesday, fell for an eighth consecutive month to 8.6 in August, from 27.1 in July. That was its lowest since December 2012, as tensions in Ukraine hit stock markets and robbed firms of the confidence to invest at a time when worries about German economic growth are gaining ground.

Bear Radar

Style Underperformer:

• Small-Cap growth -.85%

Sector Underperformers:

• 1) Coal -2.02% 2) Alt Energy -1.43% 3) Disk Drives -1.40%

Stocks Falling on Unusual Volume:

• KATE, BPL, TCAP, HCLP, OCIP, TKMR, KMP, KMR, KMI, FLO, AEGR, CZR, FENG, JOBS, NDLS, NUAN, EPB, RAX, E, WAC, MCF, TOUR, CST, AMBC, SCAI and SBGI

Stocks With Unusual Put Option Activity:

• 1) NUAN 2) NTAP 3) MGM 4) COP 5) F
  

Stocks With Most Negative News Mentions:

• 1) KATE 2) FLO 3) CSX 4) NTES 5) GM
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.33%

Sector Outperformers:

• 1) Gold & Silver +1.82% 2) HMOs +.25% 3) Utilities +.11%
  

Stocks Rising on Unusual Volume:

• EXAS, ICPT, TRAK, MR, SA, INSY, MTZ and SGEN

Stocks With Unusual Call Option Activity:

• 1) DHR 2) KATE 3) EXAS 4) GALE 5) MNKD
  

Stocks With Most Positive News Mentions:

• 1) ICPT 2) TWTR 3) ANF 4) NEM 5) DF
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Islamic State Funds Caliphate With Mosul Dam as Terror Spreads. Islamic State militants who last week captured the Mosul Dam, Iraq’s largest, had one demand for workers: Keep it going. Arriving in their Toyota pickup trucks, armed with Kalashnikov assault rifles and wearing a patchwork of military uniforms, robes and turbans, jubilant militants from the al-Qaeda breakaway group told workers hiding in management offices they would get their salaries as long as the dam continued to produce electricity for the region under their control, according to a technician who was at the dam when nearly 500 militants drove off Kurdish troops. Islamic State’s rampage through northern Iraq has inspired terror as stories spread of beheadings and crucifixions. At the same time, its fighters are capturing the strategic assets needed to fund the Islamic caliphate it announced in June and strengthen its grip on the territory already captured. 

• Ukraine Says It Is Near End of Operation to Surround Rebels. The Red Cross said it’s working on getting aid to rebel-held areas of east Ukraine, where government forces have encircled major cities, as the U.S. warned Russia not to use the mission to send in troops. The situation in the city of Luhansk and other areas “is critical -- thousands of people are reported to be without access to water, electricity and medical aid,” Laurent Corbaz, the head of the International Committee of the Red Cross’s operations for Europe, said in an e-mailed statement late yesterday. Still, “the practical details of this operation need to be clarified before this initiative can move forward.”

• China’s Trust Asset Growth Slows Amid Shadow Banking Crackdown. China’s trust assets expanded at the slowest pace in two years as the government cracks down on shadow banking and investors reassess the risks of the high-yield investments. Trust companies had 12.5 trillion yuan ($2 trillion) of assets under management as of June 30, up 6.4 percent from three months earlier, the China Trustee Association said in a statement yesterday. That’s the slowest growth since the first quarter of 2012. 

• Pakistan Coup Concerns Mount as Sharif Protests Planned. Pakistani Prime Minister Nawaz Sharif faces his biggest test since taking office, with stocks falling the most in more than five years yesterday on concern protests this week may unseat his government.

• Asian Stocks Extend Gains With Dollar as Wheat Declines. Asian stocks rose, with the regional index extending gains after its biggest one-day jump since June, while the dollar climbed against the euro, Swiss franc and yen. Credit risk in the region declined with wheat. The MSCI Asia Pacific Index added 0.3 percent by 10:45 a.m. in Tokyo.

• Apple’s(AAPL) Suppliers Said to Begin Production of New IPad Tablets. Apple Inc. (AAPL)’s suppliers have started manufacturing new iPads, according to people with knowledge of the matter, as the company works to reinvigorate sales of the tablet computers after two straight quarters of declines. 

Wall Street Journal: 

• Iraqi Political Leaders Clash Over Prime Minister Post. Figure From Prime Minister's Party Nominated to Succeed Him; Islamist Militants Clock New Gains. Iraq's president appointed a candidate to replace Prime Minister Nouri al-Maliki but the longtime leader refused to step aside, setting up a confrontation as the government struggles to combat a rapidly advancing Sunni insurgency. President Fuad Masum designated Haider al-Abadi, a member of Mr. Maliki's Shiite Islamist Dawa party, to form the next government. Mr. Maliki, who was vying for a third four-year term, angrily rejected the nomination in two televised appearances on Monday and vowed to challenge a decision he called a subversion of the constitution and a betrayal of the public will.

• Robin Williams, Actor and Comedian, Dies at 63. Oscar-Winning Actor Believed to Have Died of Suicide by Asphyxiation.

• U.S. Bank Profits Near Record Levels. Industry Posts Second-Highest Profit in 23 Years in Quarter Ended June 30; Improved Credit Quality Helps.

• The Third Iraq War. Limited bombing won't defeat the new terrorist caliphate. 

• The Fed's Systemic-Risk Balancing Act. Using 'macroprudential' tools means recognizing the breadth of the potential trouble in the financial system. 

Zero Hedge:

• Video Of The Russian "Humanitarian Convoy" About To Enter Ukraine. (video)

• French Government Denies Report Of "Several Ebola Cases"; Outbreak Accelerates At Fastest Pace Yet.

• Prepare For Q3 GDP Collapse - Here Comes Polar Vortex 2.0.

• The Credit Bubble's "Final Frontier" – Meet Goldman's FI(A)SCO.

Reuters:

• Nuance(NUAN) 4th-qtr forecast misses expectations. Speech recognition software maker Nuance Communications Inc forecast current-quarter adjusted revenue and profit below expectations as the company continues to struggle from its transition to a subscription-based business model. 

• Intercept's(ICPT) liver drug found effective; shares soar. Drug developer Intercept Pharmaceuticals Inc's shares surged as much as 65 percent after the bell on Monday after the company said its drug to treat liver disease caused by fat buildup was effective in mid-stage trials. 

• China cracking down on Christian groups along North Korea border: sources. China is cracking down on Christian charity groups near its border with North Korea, missionaries and aid groups say, with hundreds of members of the community forced to leave the country and some who remain describing an atmosphere of fear.

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

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 106.50 -2.5 basis points.

• Asia Pacific Sovereign CDS Index 75.0 -1.75 basis points.

• FTSE-100 futures -.02%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures  +.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CREE)/.41

• (FOSL)/.96

• (JDSU)/.13

Economic Releases 
7:30 am EST

• NFIB Small Business Optimism for July is estimated to rise to 96.0 versus 95.0 in June.

10:00 am EST

• JOLTS Job Openings for June are estimated to fall to 4600 versus 4635 in May.
  

2:00 pm EST

• The Monthly Budget Statement for June is estimated at -$96.0B.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German ZEW Index, BoJ Minutes, Japan GDP report, USDA's WASDE report, 3Y $27B T-Note auction, weekly US retail sales reports, (CRL) investor meeting, JPMorgan Auto Conference, Wedbush Life Sciences Conference and the Oppenheimer Tech/Internet/Communications Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial 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.

Stocks Rising into Final Hour on Less Eurozone/Emerging Markets Debt Angst, Short-Covering, Yen Weakness, Tech/Alt Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.21 -9.89%

• Euro/Yen Carry Return Index 142.75 -.05%

• Emerging Markets Currency Volatility(VXY) 6.87 -2.0%

• S&P 500 Implied Correlation 54.55 -5.44%

• ISE Sentiment Index 104.0 +28.40%

• Total Put/Call .72 -32.71%

• NYSE Arms 1.08 +72.01% 

Credit Investor Angst:

• North American Investment Grade CDS Index 62.62 -3.09%

• European Financial Sector CDS Index 71.62 -6.70%

• Western Europe Sovereign Debt CDS Index 36.84 -5.54%
• Asia Pacific Sovereign Debt CDS Index 75.08 -2.11%

• Emerging Market CDS Index 285.30 -3.34%

• China Blended Corporate Spread Index 322.18 +.08%
• 2-Year Swap Spread 23.5 -.25 basis point

• TED Spread 21.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -12.5 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% +1.0 basis point

• Yield Curve 199.0 +1.0 basis point

• China Import Iron Ore Spot $95.30/Metric Tonne -.42%

• Citi US Economic Surprise Index 4.10 +1.1 points

• Citi Emerging Markets Economic Surprise Index 2.0 -.9 point

• 10-Year TIPS Spread 2.24 unch.

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan

• DAX Futures: Indicating -10 open in Germany

Portfolio: 

• Higher: On gains in my tech/medical/biotech sector longs

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:  

• Ukraine Says It Is Near End of Operation to Surround Rebels. Russia said it will go ahead with an aid mission to east Ukraine as the U.S. and Europe repeated warnings to President Vladimir Putin that such a convoy must not be used as a front for military action to support rebels. While Russia said it agreed with Ukraine on the details of extending humanitarian assistance to people in the mainly Russian-speaking Donetsk and Luhansk regions, there was no confirmation of a deal from Ukraine’s government or the Red Cross. The mission may start soon under the aegis of the International Red Cross, a step to which the Ukrainian government has also agreed, Russian Foreign Minister Sergei Lavrov said today.

• Russian Economy Stalls as Putin Reprisal Risks Spillovers. Russia’s economic growth slumped to the weakest in five quarters, underlining the risks to a recovery in the region as President Vladimir Putin retaliates after penalties imposed over the deepening conflict in Ukraine. Gross domestic product advanced 0.8 percent in the second quarter from a year earlier after 0.9 percent growth in the first three months of the year, the Federal Statistics Service said today in an e-mailed statement, citing preliminary data. The Economy Ministry in Moscow had projected 1.1 percent expansion. GDP growth in Poland, Hungary and the Czech Republic probably slowed in the April-June period on a quarterly basis, according to analysts surveyed by Bloomberg.

• Al-Abadi Asked to Form Iraq Government to Replace Maliki. Iraq’s President Fouad Masoum asked the deputy speaker of parliament to try to form a new cabinet and end a three-month political stalemate that’s helped Islamist insurgents seize large swaths of the country. While the U.S. quickly backed Masoum’s designation of Haidar al-Abadi, embattled Prime Minister Nouri al-Maliki rejected Masoum’s move, setting the stage for further political deadlock and potentially a confrontation after Maliki sent troops into the streets of Baghdad early today. 

• China Probes Threaten to Squeeze Foreign Profits. China’s antitrust crackdown signals a new era of regulatory scrutiny in the country and threatens to end the days when products from Audi sedans to Starbucks lattes generate fatter profits in Beijing than in London or New York.

• War Risks Slow Company Bond Sales to Least Since July ’13. Risks from conflicts in the Middle East and Ukraine are combining with concerns credit markets may have become too frothy to curb corporate bond sales. Just $53.6 billion of notes were sold globally in the first eight days of August, data compiled by Bloomberg show. That’s the slowest start to a month since July 2013 after then Federal Reserve Chairman Ben S. Bernanke discussed a timetable for scaling back central bank stimulus, spurring investors to sell riskier assets in an episode dubbed the taper tantrum.

• European Stocks Advance After Russia Calls End to Drills. European stocks rose the most in more than three months after a report that Russian war planes have finished military exercises near Ukraine. Balfour Beatty Plc added 2.5 percent after rejecting a revised merger proposal from Carillion Plc. Banco Popolare SC surged 8.2 percent after the Italian lender unexpectedly posted a profit in the second quarter. Bayerische Motoren Werke AG and Daimler AG each rose more than 2 percent, contributing the most to gains by a gauge of auto-related stocks. The Stoxx Europe 600 Index rallied 1.4 percent to 329.36 at the close as more than 15 stocks climbed for every one that dropped.

• BuzzFeed Gets $50 Million Financing From Andreessen Horowitz. BuzzFeed Inc., the online home of quizzes, lists and, increasingly, serious news, got a $50 million investment reported to value the company at $850 million -- or about half the New York Times Co.’s market capitalization.

• Colgate Total Ingredient Linked to Hormones, Cancer Spotlights FDA Process. The chemical triclosan has been linked to cancer-cell growth and disrupted development in animals. Regulators are reviewing whether it’s safe to put in soap, cutting boards and toys. Consumer companies are phasing it out. Minnesota voted in May to ban it in many products.

Wall Street Journal:

• Russia to Join International Relief Effort as Ukraine Presses Fight. Suffering Among Civilians Rises as Fighting Targets Donetsk, Luhansk.

CNBC:

• All this 'chaos' has Roger McNamee bearish. (video)

ZeroHedge: 

• Putin Defies Western Warning, Will Send "Aid Convoy" To East Ukraine.

• WHO Warns "No End In Sight" As 170 Ebola Healthcare Workers Now Infected.

• Ferguson, St.Louis Violence Continues: Protesters Warn "The Revolution Won't Be Televised". (video)

• Bonds Don't Believe It's All Over. (graph)

• US Postal Service: Over $47 Billion In Losses In The Past Decade And Counting. (graph)

• "Dead Broke" – Meet the Clintons' $100,000 3-Week Hampton Rental.

• Ukraine Says 45,000 Russian Troops On Border With Tanks, Missiles, Warplanes And Attack Helicopters.

• De-escalation Delayed: NATO Chief Warns Again "High Probability" Of Russian Intervention In Ukraine.

Business Insider:

• This Stanford Economist Has Obama's Attention — And It's Causing A Wall Street Freak-Out. Her solution is to "make banks behave more like other companies by forcing them to reduce sharply their reliance on borrowed money," according to The Times article. She says "large banks should be required to raise at least 30 percent of their funding in the form of equity" — which is "six times more than the current average for the largest American banks."

• Islamic State Beheads And Crucifies To Consolidate Grip On Syria's East.