Bull Radar

Style Outperformer:

• Mid-Cap Value +.32%

Sector Outperformers:

• 1) Hospitals +1.03% 2) Alt Energy +.96% 3) Airlines +.83%
  

Stocks Rising on Unusual Volume:

• OVTI, ARWR, PRGO, AAP, NLNK and TRUE

Stocks With Unusual Call Option Activity:

• 1) LNCO 2) GPS 3) VHC 4) VRX 5) UPL
  

Stocks With Most Positive News Mentions:

• 1) PCP 2) AAP 3) AMZN 4) WMT 5) JCP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• U.S. Tightens Sanctions, Putting More Russian Companies at Risk. The U.S. Treasury broadened the scope of sanctions programs by revising a rule on the ownership of entities by targeted individuals that may extend the measures to at least one Russian company. Today’s change means that a firm can be sanctioned if any combination of sanctioned individuals collectively owns at least 50 percent of it, according to a notice on the department’s website. Previously, the Office of Foreign Assets Control’s so-called 50 percent rule required a single sanctioned person to own 50 percent or more of an entity for it also to be subject to sanctions. “The change in OFAC’s interpretation will be quite significant for those companies with joint ownership by multiple sanctioned persons,” Michael Burton, a sanctions lawyer at Jacobson Burton PLLC in Washington, said in an e-mail.

• Hagel Says Iraq Rescue Less Likely. U.S. troops flew to a mountain in northern Iraq where they found fewer trapped civilians than expected, making it “far less likely” that the U.S. will conduct a rescue, U.S. Defense Secretary Chuck Hagel said. There are several thousand Yezidis remaining on the mountain, according to a military official, who spoke on condition of anonymity to expand on Hagel’s comments.

• Stagflation Stalks Abenomics by William Pesek. Maybe it's time to stop dismissing the risk of stagflation in Japan.

• Xenophobia Concerns in China Mount as Europeans Cry Foul. Tensions in China’s foreign business community escalated to new highs after European companies protested that local authorities involved in an antitrust crackdown are abusing their power through intimidation tactics. Chinese investigators are picking on foreign companies, pressuring them into accepting punishments and depriving them of full hearings, the European Union Chamber of Commerce said yesterday in a statement, without naming anyone. Representatives at the chamber, which has about 1,800 members in the country, declined to elaborate on any specifics beyond the statement. 

• BOK Cuts Rate for 1st Time Since May 2013 to Boost Growth. South Korea’s central bank cut its interest rate for the first time in more than a year, risking inflaming record household debt as it backs government efforts to spur Asia’s fourth-biggest economy.

• Asian Stocks Head for Four-Day Gain on Fed Rate Optimism. Asian stocks rose, with the benchmark index on course to gain for a fourth day, as a slowdown in the U.S. retail sales fueled bets the Federal Reserve won’t raise interest rates earlier than expected. Fairfax Media Ltd., a newspaper publisher, jumped 7.1 percent in Sydney after profit beat estimates. Telstra Corp., Australia’s largest phone company, rose 1.9 percent after announcing a share buyback and posting annual profit above estimates. NCsoft Corp., a maker of online games, advanced 8 percent in Seoul after reporting quarterly profit increased. The MSCI Asia Pacific Index (MXAP) added 0.2 percent to 147.53 as of 10:45 a.m. in Tokyo after rising 2.2 percent the past three days.

• Cisco(CSCO) Cutting 6,000 Jobs as CEO Forecasts Stagnant Growth. Cisco Systems Inc. (CSCO) is cutting 6,000 jobs and forecasting little to no revenue growth in the current quarter amid a slump in demand from phone and cable companies, and weakness in emerging markets. The world’s largest networking-equipment maker, which has about 74,000 employees, said it will take a pretax charge of as much as $700 million. Including the latest round of firings, which represent about 8 percent of the workforce, Cisco has eliminated more than 18,000 people over the past three years.

Wall Street Journal: 

• How Israel Outflanks the White House on Gaza. White House Now Scrutinizing Israeli Requests for Ammunition. White House and State Department officials who were leading U.S. efforts to rein in Israel's military campaign in the Gaza Strip were caught off guard last month when they learned that the Israeli military had been quietly securing supplies of ammunition from the Pentagon without their approval. Since then the Obama administration has tightened its control on arms transfers to Israel. But Israeli and U.S. officials say that the adroit bureaucratic maneuvering made it plain how little influence the White House...

• San Diego Pension Dials Up the Risk to Combat a Shortfall. San Diego County's Pension Manager Is Extreme Example of Those Using Leverage to Boost Performance. A large California pension manager is using complex derivatives to supercharge its bets as it looks to cover a funding shortfall and diversify its holdings. The new strategy employed by the San Diego County Employees Retirement Association is complicated and potentially risky, but officials close to the system say it is designed to balance out...
  

• Awash in Coal, U.S. Imports Even More. Power Plants Reap Benefits From Cheap Colombian Shipments as Mines in Appalachia Begin to Close. Coal imports to the U.S. are rising sharply even as coal mines close throughout Central Appalachia. A big reason: price. It costs $26 a ton to ship coal from Central Appalachia to power plants in Florida compared with $15 a ton to get coal from a mine in Colombia, according to research firm IHS Energy. Labor costs are lower in Colombia, and it's much more cost effective to move coal by ship, which can transport well over...

• Auto-Parts Giants Hunt for Mergers.

• Where ObamaCare Is Going. The government single-payer model that liberals aspire to for the U.S. is increasingly in trouble around the world.  

Fox News:

• Fox News Poll: Majorities disapprove of Obama on Iraq, Israel and Ukraine. A 74-percent majority thinks Obama hasn’t been tough enough on Russia, up from 66 percent in March. Six percent say Obama has been too tough, 10 percent volunteer “about right” and 11 percent have no opinion. Sizable majorities of Democrats (65 percent), independents (69 percent) and Republicans (88 percent) agree Obama should be tougher on Russia. Just 16 percent of voters think Putin takes Obama seriously, while 77 percent think he doesn’t. That jumps to 87 percent among those who think Obama hasn’t been tough enough on Russia. Some 64 percent of Democrats say the Russian president doesn’t take Obama seriously. Thirty-one percent of voters approve of how Obama is handling the situation in Ukraine, while 50 percent disapprove. Approval among Democrats (52 percent) is far outweighed by disapproval among Republicans (70 percent). The president’s ratings are similar on the Israeli-Palestinian conflict: 30 percent approve, while 54 percent disapprove.

MarketWatch.com:

• 4 signs this bull market is on its last legs.

Zero Hedge: 

• As Chinese Credit Plummets US Stocks Soar On Hopes Of More PBOC Easing; But Is Conventional Wisdom Again Wrong? (graph)

• Massive SWAT Presence In Ferguson Unleash Tear Gas & Rubber Bullets: "Go Home Or Be Subject To Arrest - This Is Not Open For Discussion" - Live Feed.

• Job = Just Over Broke.

• Crony Capitalism 101: Want To Avoid The SEC? Bribe Your Friendly, Neighborhood Politician.

• What Do These Numbers Have In Common: 1,039,000,000,000,000 And 2,170,000,000,000. (graph) As the following two charts show, Japan and Italy just broke another record - sovereign debt loads (1.038 quadrillion JPY and 2.17 trillion EUR respectively).

Business Insider:

• Russian Aid Convoy Risks 'Triggering A Dangerously Volatile Situation'. A fleet of 280 Russian trucks carrying humanitarian supplies to Ukraine is currently at a Russian military base 200 miles east of the border, and the confusion surrounding the convoy risks provoking a conflict. 

• Nearly Every Abrupt Market Downturn Shares This One Characteristic. (graph)

• China Is Developing High-Tech Weapons Systems That Will Make Everyone Disturbed.

• Everything Cisco(CSCO) Is Saying About Emerging Markets Is Depressing.

• This Chart Shows How Washington DC's Per Capita Income Rocketed Past The Rest Of The Country.

Telegraph:

• Italy's Renzi must bring back the lira to end depression. It is an incontrovertible fact that Italy’s 14-year disaster coincides with EMU membership. Italy has been in depression for almost six years. The slump has been punctuated by false dawns, overwhelmed each time by the monetary amateurs in charge of EMU policy. The latest recovery fizzled after a single quarter. The economy is in technical recession again. Output has collapsed by 9.1pc from the peak, back to levels last seen 14 years ago. Industrial production is down to 1980 levels. It takes spectacular policy errors to bring about such an outcome in a modern economy.

Xinhua:

• China 1H Energy Consumption Fell Most in 6 Years. China's energy consumption per unit of GDP falls 4.2% y/y in 1H, citing National Development and Reform Commission. Consumption fell 3.7% last year and 3.6% in 2012, the report said.

China Financial News:

• China Banks More Cautious in LGFV, Property Lending. Loan growth has slowed to the real estate industry, local govt financing vehicles and sectors with overcapacity including steel and cement as Chinese financial institutions have been more cautious in lending to these areas since the beginning of July, citing Sheng Songcheng, head of the statistics dept. of the People's Bank of China.

Evening Recommendations
CSFB:

• Rated (TSLA) Outperform, target $325.

• Rated (GM) Underperform, target $33.

• Rated (DLPH) Outperform, target $83.

• Rated (LEAR) Outperform, target $114.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 104.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 72.25 -2.75 basis points.

• FTSE-100 futures -.04%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures  +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AAP)/2.02

• (BGG)/.38

• (KSS)/1.07

• (RRGB)/.90

• (WMT)/1.21

• (A)/.74

• (AMAT)/.27

• (ADSK).,28

• (DDS)/.88

• (JCP)/-.95

• (JWN)/.95

• (SINA)/.10

• (WB)/-.03

• (ZIPR)/-.04

Economic Releases 
8:30 am EST

• Initial Jobless Claims are estimated to rise to 295K versus 289K the prior week.

• Continuing Claims are estimated to fall to 2507K versus 2518K prior.

• The Import Price Index for July is estimated to fall -.3% versus a +.1% gain in June.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone GDP/CPI report, $13B 30Y T-Bond auction, Bloomberg Aug. US Economic Survey, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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.

Stocks Rising into Final Hour on Diminished Russia-Ukraine Tensions, Less Eurozone/Emerging Markets Debt Angst, Yen Weakness, Biotech/Healthcare 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) 13.17 -6.79%

• Euro/Yen Carry Return Index 142.97 +.18%

• Emerging Markets Currency Volatility(VXY) 6.86 -.87%

• S&P 500 Implied Correlation 52.88 -4.17%

• ISE Sentiment Index 75.0 -33.63%

• Total Put/Call .95 -11.21%

• NYSE Arms 1.49 +21.85% 

Credit Investor Angst:

• North American Investment Grade CDS Index 60.89 -3.55%

• European Financial Sector CDS Index 68.48 -5.52%

• Western Europe Sovereign Debt CDS Index 34.92 -4.62%
• Asia Pacific Sovereign Debt CDS Index 72.26 -2.32%

• Emerging Market CDS Index 275.49 -2.78%

• China Blended Corporate Spread Index 316.63 -.77%
• 2-Year Swap Spread 23.0 unch.

• TED Spread 20.25 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.0 -1.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 200.0 unch.

• China Import Iron Ore Spot $93.20/Metric Tonne -.85%

• Citi US Economic Surprise Index -.30 -3.6 points

• Citi Emerging Markets Economic Surprise Index -5.5 -3.5 points

• 10-Year TIPS Spread 2.23 unch.

Overseas Futures:

• Nikkei Futures: Indicating +94 open in Japan

• DAX Futures: Indicating -10 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• Ukraine Will Accept Russian Aid If Red Cross Hands It Out. Ukraine said it would only accept humanitarian aid arriving on hundreds of trucks from Russia if the supplies are distributed by the Red Cross. Ukraine also demanded that its own customs and border officers examine the shipments first near a checkpoint into the Luhansk region, where pro-Russian separatists have been battling government troops for months. Maria Zakharova, spokeswoman for Russia’s Foreign Ministry, didn’t answer a call to her mobile phone outside of office hours in Moscow. There were conflicting reports on the location of the truck convoy. The location of the convoy remained unclear. Russia’s state-run Rossiya 24 television said the trucks had stopped at a military base in the city of Voronezh, about 350 kilometers (220 miles) by road from Luhansk.

• Putin’s Ukraine Aid Doubted in Market as Hryvnia Sets Record Low. Ukrainians didn’t wait to see what’s inside Russian humanitarian trucks heading to the country. Warnings by NATO that Russia may use its aid convoy for a military invasion triggered “panic,” the central bank in Kiev said yesterday as the hryvnia slumped as much as 6.5 percent to a record 13.715 per dollar. The currency rallied 1.9 percent today to 13.15 by 3:30 p.m. in Kiev, paring its 2014 loss to 37 percent as the bank said it was ready to prevent depreciation. Traders in forward contracts are betting on a further 3 percent slide in three months. 

• Kurds Push Attack in North Iraq as Maliki Clings to Power. Kurdish forces fought to retake positions overrun last week by Islamic State fighters in northern Iraq, as Prime Minister Nouri al-Maliki sought to cling to power even after losing the backing of key ally Iran. Kurdish peshmerga troops, bolstered by U.S. airstrikes, fought the Sunni militants near the town of Sinjar, according to Nineveh provincial council member Hisham al-Brefkani. The push came as France said it would supply the Kurds with weapons, and the U.S. and Britain readied plans to rescue ethnic Yazidis trapped by the insurgents in the mountains of northern Iraq.

• Spanish Prices Drop at Fastest Pace Since 2009 Credit Crunch. Consumer prices in Spain fell at the fastest pace since the depths of the credit crunch in 2009 as declining wages curbed the pricing power of retailers. Spanish prices dropped 0.4 percent from a year earlier as measured by a harmonized European Union method. That compared with the median forecast for a 0.3 percent drop in a Bloomberg News survey of 12 economists. Prices slid 1.5 percent on the month while core inflation, which excludes energy and fresh food prices, was zero.

• European Stocks Rise as EON, Swiss Life Climb on Earnings. European stocks rose to their highest level in a week as EON SE and Swiss Life Holding AG (SLHN) reported better-than-expected profit. EON rose the most since September as Germany’s largest utility said higher production at its North Sea fields benefited earnings. Swiss Life rallied 7.1 percent on increased sales of occupational benefits in its home market. Gagfah SA added 2.9 percent after the third-biggest German property company raised its 2014 earnings forecast for a second time. The Stoxx Europe 600 Index gained 0.4 percent to 330.02 at the close of trading.

• Junk-Bond Anxiety Grows as Traders Buy Up Bearish Puts. U.S. options traders are bracing for more losses in junk bonds. Demand for protection against declines has pushed the number of outstanding puts on the iShares iBoxx $ High Yield Corporate Bond exchange-traded fund to five for each call, up from a ratio of 1.6 at the start of 2014, data compiled by Bloomberg show. The eight contracts on the fund with the highest ownership are all bearish. Investors are turning skeptical on the five-year bull market in speculative debt amid concern the gains have gone on too long and that violence in the Middle East and Ukraine will boost demand for safer assets. Speculation that the Federal Reserve will raise interest rates within the next year is also supporting demand for put options, often used as a hedge because their value rises when the ETF (HYG) falls. “Sometimes when an asset class gets to be expensive, you don’t need a catalyst,” Alan Higgins, who helps oversee about $48 billion as U.K. chief investment officer at Coutts & Co. in London, said by phone. “It’s simply that the value is not there.”

• Icahn’s Bubble Worry Meets Onslaught of Debt Complacency. Not even escalating geopolitical conflicts can grind this rally in high-risk debt to a true halt. Consider this: High-yield bonds are up 0.35 percent for August, gaining again after posting their first monthly loss in almost a year. The market’s poised for an annual return of 7.6 percent, building on a 135 percent return in the previous five years. And this: Investors are also bidding up credit-focused closed-end funds that use borrowed money to amplify bets.

• Wall Street Faces Pushback on CMBS Deals as Supply Booms. Wall Street is running into resistance unloading commercial-mortgage backed securities. JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) sweetened terms on a piece of a $1.2 billion bond deal last week to attract buyers, while Deutsche Bank AG (DBK) and Cantor Fitzgerald LP increased the yield they’re offering on securities today, according to people with knowledge of the matter.

• Macy’s Cuts Sales Forecast as Discounts Fail to Spark Growth. Macy’s Inc. (M) missed quarterly earnings estimates and trimmed its annual sales forecast, indicating that the back-to-school and Christmas shopping seasons won’t make up for a sluggish first half of the year. Second-quarter net income rose 3.9 percent to $292 million, or 80 cents a share, from $281 million, or 72 cents, a year earlier, the Cincinnati-based company said today in a statement. Analysts had estimated 86 cents on average, according to data compiled by Bloomberg. The shares tumbled the most in two years.

ZeroHedge: 

• Ferguson Reignites As Police Shoot 2nd Man; Obama's Response "Insultingly Inadequate".

• Ebola Control Goes 'Medieval': From Patient Zero To Pandemic In 7 Months.

• Saxo Bank Warns There Are 3 'Other' Geopolitical Risks Investors Are Ignoring.

• Brazilian Presidential Candidate Dies In Jet Crash.

• The Housing Recovery Continues Apace - Mortgage Apps At 14-Year Low. (graph)

• Retail Sales Miss For Third Month In A Row, Worst Print Since January. (graph)

• Ukraine Slams "Provocation By A Cynical Aggressor", Refuses Russian Convoy Entry.

Reuters:

• Deere(DE) posts lower quarterly profit, cuts full-year outlook. Deere & Co posted a lower quarterly profit on Wednesday and cut its full-year outlook as declining grain prices discouraged farmers from purchasing its tractors, harvesters and other agricultural machinery. Deere also cut its forecast for South America, where rising interest rates in Brazil and tight credit in Argentina are hurting sales. Deere said it now expects full-year industry sales in the region to fall 15 percent in 2014, down from a previously forecast decline of 10 percent.

Bear Radar

Style Underperformer:

• Large-Cap Value +.48%

Sector Underperformers:

• 1) Retail -.90% 2) Steel -.52% 3) Telecom -.20%

Stocks Falling on Unusual Volume:

• SEAS, KING, VSAT, CREE, NVDQ, JDSU, M, FOSL, MYGN, NOAH, TIF, DE, PCOM, LIN, CGI, AXE, KSS, AG, IMOS, WBAI, PKG, JWN, PLCE, RKT, ICE and REXX

Stocks With Unusual Put Option Activity:

• 1) HUN 2) M 3) MMM 4) FOSL 5) NTAP
  

Stocks With Most Negative News Mentions:

• 1) KING 2) SEAS 3) VSAT 4) JCP 5) JDSU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.85%

Sector Outperformers:

• 1) Biotech +1.75% 2) REITs +1.23% 3) Alt Energy +1.21%
  

Stocks Rising on Unusual Volume:

• KATE, CSIQ, INSM, FLT, ICPT, ITMN, JD, INSY, MYCC, GRUB, JAZZ, EMES and PANW

Stocks With Unusual Call Option Activity:

• 1) AMJ 2) ARNA 3) M 4) ARWR 5) CREE
  

Stocks With Most Positive News Mentions:

• 1) PGR 2) F 3) AMZN 4) ITMN 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume