Friday Watch

Evening Headlines 
Bloomberg: 

• Russia Truce Plan at Odds With Reports on APC Movements. Russia proposed a cease-fire for humanitarian aid deliveries to war-torn parts of southeastern Ukraine as a convoy of aid trucks from Moscow waited near the border with rebel-held areas. Even as Russia struck a conciliatory note, news outlets including Novoye Vremya and Hromadske TV reported seeing armored personnel vehicles crossing into Ukraine. The government in Kiev has been saying for months that the separatist rebels are receiving reinforcements from Russian territory. The government in Moscow has repeatedly denied any involvement in the unrest. The dispute over the Russian convoy, which the leadership in Moscow says is carrying emergency supplies, has stoked tensions between the two countries and has prompted the U.S. and the European Union to warn Russia against using aid as a pretext for a military intervention. Russia says the supplies are needed to help citizens of Luhansk and Donetsk, where fighting has cut off water and power connections. 

• Islamic State Said to Challenge Al-Qaeda for Leadership. The radical Islamic State’s advances in Iraq are strengthening its challenge to al-Qaeda in a contest for the leadership of the global jihadi movement, according to five U.S. intelligence officials. Its territorial gains and declaration of a caliphate spanning parts of Syria and Iraq, reinforced by its use of social media to broadcast its accomplishments in many languages, are attracting recruits and even drawing defections from the leadership of the core al-Qaeda group and some affiliates, the officials told reporters at a briefing today. They spoke on the condition of anonymity to discuss intelligence assessments. The U.S. intelligence community thinks the Islamic State has an incentive to conduct a major terrorist strike against U.S. or European targets, in part to further assert itself as the true leader of radical Islam, the officials said. There’s evidence that the group is establishing cells beyond Iraq and Syria, they said.

• Maliki Resigns as Prime Minister to Make Way for Abadi. Iraqi Prime Minister Nouri al-Maliki said he has agreed to leave office and clear the way for his designated successor to take over. The move ends a political impasse and may enable Prime Minister-designate Haidar al-Abadi to pull together a more inclusive government better able to counter Islamist militants advancing in the country’s north, and to heal sectarian and ethnic rifts threatening to tear Iraq apart. 

• Open-Ended Notes Skirt Effort to Curb $14 Trillion Chinese Corporate Debt. Chinese companies are selling a record number of bonds that can be booked as equity this year, sidestepping Premier Li Keqiang’s bid to reduce the world’s biggest corporate debt load. Ten firms have issued perpetual notes that pay higher yields in exchange for having no set maturity date, up from eight last year and two in 2010 when such securities debuted in the nation, Bloomberg-compiled data show. China Railway Construction Corp. led offerings with $800 million of 3.95 percent securities last month. The coupon exceeds the 3.5 percent on its 2023 debentures issued in 2013.

• Asian Stock Index Heads for Best Weekly Gain Since March. Asian stocks were little changed, with the regional benchmark index heading for the biggest weekly rally since March, as investors weighed reports Ukraine tensions are easing and weak economic data that fueled bets central banks will maintain stimulus. Health-care shares rose the most among the 10 industry groups on the regional index while energy stocks led declines. China Mobile Ltd., the world’s largest phone company by users, climbed 2.6 percent as it said it will cut $2 billion from its device subsidy budget. James Hardie Industries Plc., a building-materials supplier, slumped 7 percent in Sydney after reporting profit plunged. Parkson Retail Group Ltd., which operates department stores in China, soared 9.1 percent in Hong Kong after first-half profit beat estimates. The MSCI Asia Pacific Index (MXAP) traded at 147.78 as of 9:50 a.m. in Hong Kong, headed for a 2.5 percent rally this week, the most since the period ended March 28. 

• Wal-Mart’s(WMT) Sales Stagnation Reignites Concern About Economy. Wal-Mart Stores Inc. (WMT)’s latest struggles to revive U.S. sales, following a disappointing Commerce Department report earlier this week, add to evidence that the economy isn’t recovering as quickly as expected. The company posted stagnant same-store sales today in its second-quarter earnings report, marking the sixth straight period of no growth. The world’s largest retailer also cut its earnings forecast for the year, citing higher spending on health care and e-commerce.

• WTI Heads for Fourth Weekly Drop Amid Rising Supply; Brent Gains. West Texas Intermediate headed for a fourth weekly drop, the longest losing streak since November, amid speculation that crude supplies are expanding as global demand slows. Brent gained in London. Futures were little changed in New York after falling 2.1 percent yesterday, the most in two weeks. A supply glut is shielding the market from disruptions, the International Energy Agency said on Aug. 12. Oil production in the U.S., the world’s biggest consumer, rose last month to the fastest pace since April 1987, according to the Energy Information Administration.

Wall Street Journal: 

• Euro-Zone Economy Stalls in Second Quarter as German GDP Slips. Weak Quarter Raises Fears Europe's Recovery Has Faltered as Tensions With Russia Add New Challenges. The euro-zone economy stalled in the second quarter, raising the ugly prospect that the region's meager recovery has lost momentum just as it faces fresh headwinds from Russia and Ukraine. Germany's economy, long Europe's growth engine, shrank for the first time in more than a year, a development economists largely attributed to a mild winter that boosted activity in the first quarter at the expense of the second. The...

• Iraq's Besieged Maliki Quits. Move Is Surprising Reversal. Prime Minister Nouri al-Maliki relinquished power on Thursday, ending eight years of tumultuous rule and opening a new political chapter that U.S. officials hope will move Iraq toward a more united front against marauding jihadists. The surprise move deflates a potential crisis after Mr. Maliki had disputed in court the naming of another politician to the premiership and ominously deployed extra security forces across... 

• Midwestern Farmland Values Flatten as a Hot Market Cools. As Crop Prices Fall, So Does Demand for Land.

• Banks, Financial Firms Load Up on Cheap Debt. Banks and other financial companies world-wide are issuing bonds in the U.S. at a record pace, taking advantage of this year's surprising slump in interest rates and a brightening outlook for the sector. These firms' debt sales hit $391 billion this year through Thursday morning, a 32% jump from the same period last year and a 19% rise from the same span of 2007, a year of record issuance, according to data provider Dealogic. That is a higher year-over-year increase than in the broader U.S. corporate-bond market. Sales by... 

CNBC:

• Coke(KO) buys 16.7% stake in Monster Beverage(MNST), Monster shares soar.

• Evidence suggests Ebola toll underestimated: WHO. Staff with the World Health Organization battling an Ebola outbreak in West Africa see evidence the numbers of reported cases and deaths vastly underestimates the scale of the outbreak, the U.N. agency said on its website on Thursday.

• Pershing Square sues US over Fannie Mae, Freddie Mac. Pershing Square Capital Management LP, the hedge fund firm run by William Ackman, on Thursday sued the U.S. government, claiming that its stripping of profits from Fannie Mae and Freddie Mac unconstitutionally short changes investors in the companies' common stock.

Zero Hedge:

• Putin Punks West (Again): Russian Troops Enter Ukraine, Guardian Reports.

• ISIS Issues Threat To White House; Secret Service Taking "Appropriate Steps".

• US Sending 600 Troops, APCs And Tanks To Countries Bordering Russia To "Reassure Threatened Allies".

• David Tepper Unwinds S&P, Nasdaq Calls; Liquidates QCOM, JPM; Adds To AAL, GM: Full 13F.

• 3 Things Worth Thinking About. (graph)

• 14 Reasons Why The U.S. Economy's Bubble Of False Prosperity May Be About To Burst.

Business Insider: 

• David Einhorn Adds To Apple(AAPL) Stake, Trims Micron(MU).

• EXPERT: Obama's Reconciliation With Iran Helps Fuel Middle East Mayhem.

• Texas National Guard Deploys To US-Mexico Border.

NY Times:

• Hedge Funds Give Quarterly Snapshot of Their Portfolios.

NBCNewYork:

• Thousands Rally in Times Square Over Missouri Shooting. Thousands of people rallied in Times Square and on surrounding blocks Thursday evening over the police shooting of Michael Brown, the unarmed black teenager shot last weekend in Ferguson, Missouri.

Reuters:

• Billions in oil investments at risk from low crude prices, says Carbon Tracker. More than half a trillion dollars of investments in major oil projects over the next decade are at risk from high costs and low crude oil prices, an environmental think tank said on Friday, warning that shareholders' returns could suffer. 

• Applied Materials(AMAT) profit beats on memory chip demand. Chip-equipment maker Applied Materials Inc reported a better-than-expected third-quarter profit as contract manufacturers spend more on technology used to make smartphone and memory chips.

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: 

• France rebels against austerity as Europe's recovery collapses. France’s finance minister sends tremors through European capitals with a defiant warning that his country would no longer try to meet deficit targets.

• Russian armoured vehicles and military trucks cross border into Ukraine. (video) Exclusive: Telegraph witnesses Russian armoured vehicles and military trucks cross the border from Russia into Ukraine.

Evening Recommendations
FBR Capital:

• Rated (ICPT) Underperform, target $172.

• Rated (ENTA) Outperform, target $52.

• Rated (NPSP) Outperform, target $34.

• Rated (ACHN) Outperform, target $12.

• Rated (GILD) Outperform, target $125.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 103.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 72.5 +.25 basis point.

• FTSE-100 futures +.25%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures  +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (EL)/.54

• (JD)/-.10

Economic Releases 
8:30 am EST

• Empire Manufacturing for August is estimated to fall to 20.0 versus 25.6 in July.

• PPI Final Demand for July is estimated to rise +.1% versus a +.4% gain in June.

• PPI Ex Food & Energy for July is estimated to rise +.2% versus a +.2% gain in June.

9:00 am EST

• Net Long-Term TIC Flows for June.

9:15 am EST

• Industrial Production for July is estimated to rise +.3% versus a +.2% gain in June.

• Capacity Utilization for July is estimated to rise to 79.2% versus 79.1% in June.

• Manufacturing Production for July is estimated to rise +.4% versus a +.1% gain in June.

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for August is estimated to rise to 82.5 versus 81.8 in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK gdp report and Fed's Kocherlakota speaking could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate 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 Higher into Final Hour on Central Bank Hopes, Less Eurozone Debt Angst, Short-Covering, Homebuilding/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.79 -.85%

• Euro/Yen Carry Return Index 143.01 +.08%

• Emerging Markets Currency Volatility(VXY) 6.72 -1.61%

• S&P 500 Implied Correlation 51.31 +.10%

• ISE Sentiment Index 70.0 -12.50%

• Total Put/Call .97 +3.19%

• NYSE Arms 1.20 -5.53% 

Credit Investor Angst:

• North American Investment Grade CDS Index 59.49 -2.01%

• European Financial Sector CDS Index 65.96 -4.46%

• Western Europe Sovereign Debt CDS Index 33.43 -4.27%
• Asia Pacific Sovereign Debt CDS Index 72.81 +.90%

• Emerging Market CDS Index 272.61 -1.14%

• China Blended Corporate Spread Index 315.62 -.32%
• 2-Year Swap Spread 23.0 unch.

• TED Spread 20.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -13.50 -1.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 199.0 -1.0 basis point

• China Import Iron Ore Spot $93.20/Metric Tonne unch.

• Citi US Economic Surprise Index -2.60 -2.3 points

• Citi Emerging Markets Economic Surprise Index -7.70 -2.2 points

• 10-Year TIPS Spread 2.22 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -10 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Ukraine Organizes Aid as Russian Convoy Nears Border. Ukraine sent its own aid to the country’s war-torn east as a Russian convoy with emergency supplies neared the border in defiance of conditions set by the government in Kiev. President Vladimir Putin, visiting the Crimea peninsula he annexed from Ukraine in March, said Russia shouldn’t isolate itself and pledged to work to halt the conflict that’s flared for months between pro-Russian separatists and government forces, killing more than 1,500 people, according to United Nations estimates. The U.S and the European Union have slapped sanctions on Russian businesses and individuals, and Ukraine’s parliament passed a bill today allowing similar measures.

• Finland Sees World on Brink of Cold War Before Putin Meeting. Finnish President Sauli Niinistoe said the world risks sinking into a political deadlock as dangerous as the cold war that dominated relations between the U.S. and the Soviet Union decades ago. As the Finnish head of state prepares to meet President Vladimir Putin in the southern Russian town of Sochi tomorrow, he said talks between the two will focus on finding a way to defuse tensions surrounding the conflict in Ukraine. Russia today confirmed the meeting will take place.

• Euro-Area Pickup Stalls as Big Economies Fail to Grow. The euro area’s recovery unexpectedly stalled in the second quarter as its three biggest economies failed to grow, underlining the vulnerability of the region to weak inflation and the deepening crisis in Ukraine. Gross domestic product in the three months through June was unchanged from the first quarter, when it increased 0.2 percent, Eurostat, the European Union’s statistics office in Luxembourg, said today. The median of 37 forecasts in a Bloomberg News survey was for growth of 0.1 percent. In a separate report, the agency confirmed inflation at 0.4 percent in July.

• Germany 10-Year Bond Yield Drops Below 1% as GDP Shrinks. German bonds rose, pushing 10-year yields below 1 percent, boosting speculation that the European Central Bank will have to act to avert the kind of slump that stymied economic growth in Japan for more than a decade. Euro-area bonds from Ireland to Greece advanced as data showed Europe’s largest economy shrank more in the second quarter than analysts predicted and France’s stagnated.

• France Risks EU Deficit Clash After Scrapping Targets. The French government abandoned its 2014 deficit targets after the economy unexpectedly failed to grow for a second straight quarter, risking a clash with European partners striving to meet their own fiscal goals. Finance Minister Michel Sapin said that European policy is partly to blame for the lack of expansion in the region’s second-biggest economy. French gross domestic product stagnated in the three months through June, national statistics office Insee said today in Paris. Economists forecast a 0.1 percent gain, a Bloomberg survey showed. 

• Commodities Fall to 6-Month Low as Gain for Year Paring. Commodities erased gains for the year as oil and grains declined on signs of ample supplies as economic growth halted in Europe and factory output slowed in China, the biggest consumer of industrial metals and energy. The Bloomberg Commodity Index of 22 raw materials dropped 0.5 percent to 125.593 by 5:11 p.m. in London, for a 0.1 percent decline this year. Lean hogs, Brent crude and gasoline fell at least 2 percent today. Lean hogs, Brent crude and aluminum fell at least 1.6 percent today. Cotton, grains and oilseeds are the worst-performing commodities this year in the Bloomberg index. Soybeans dropped 20 percent and corn lost 12 percent on record U.S. harvests. Brent is heading for a second monthly decline, the longest streak since May 2013, as shale fracking allowed the U.S. to pump the most oil in 27 years even as fighting in the Middle East threatened to disrupt supplies.

• Europe Stocks Climb as GDP Data Fuel Stimulus Speculation. European stocks advanced, reversing earlier losses, as data showing the euro area’s recovery stalled in the second quarter fueled speculation of more central bank stimulus. ThyssenKrupp AG climbed after posting quarterly earnings that beat projections. Royal Boskalis Westminster NV surged 8.2 percent after saying it will start a share buyback program. RWE AG declined 2.1 percent after saying first-half profit fell 62 percent. Novozymes A/S slid 6.5 percent after the supplier of enzymes reported second-quarter net income that trailed analyst estimates. The Stoxx Europe 600 Index rose 0.3 percent to 331.04 at the close of trading, after earlier dropping as much as 0.4 percent.

Wall Street Journal:

• 50 Financial Twitter Feeds You Must Follow. 

ZeroHedge: 

• Putin Says The Petrodollar Must Die, "The Dollar Monopoly In Energy Trade Is Damaging Russia's Economy".

• Conditioned To Catch The Falling Knife.

• Ukraine Passes Russian Sanctions Law: Gas Transit Halt Seems Imminent.

• Copper & Crude Are Getting Crushed. (graph)

• A Full Look Inside The Russian Humanitarian Convoy (And The Tanks Surrounding It). (pics)

• Are There No Hard Limits On Financial Finagling?

• Import Prices Have First Drop Since April; Price Of Imported Cars Plunges Most Since 1992. (graph)

Business Insider: 

• Heavy Russian Military Equipment Is Joining The 'Aid' Convoy To Eastern Ukraine.

• EL-ERIAN: The 'Bad News Is Good News' Trade Has Limits.

• Russia's 'Aid' Convoy Has Gone Rogue And Is 15 Miles From Rebel-Held Ukraine.

• This Is What $11.62 Trillion Worth Of Household Debt Looks Like. (graph)

• Tension Between Obama And Netanyahu Is At An All-Time High.

Stratfor: 

• China's Credit Slowdown Raises Concerns About Overall Economic Health. The dramatic and widely unexpected drop in Chinese credit supply in July has raised concerns that the economic "recovery" China seemed poised to make starting in June -- when aggregate financing in China hit a whopping $320 billion, which was more than seven times greater than July's figure -- has been nipped in the bud. There are also concerns that the coming months will bring even worse news from the world's second-largest economy. These concerns are aggravated by anecdotal reports repeated in mainstream news media saying July's decline is the result of the policy-driven credit tightening by the government and also reflects a drop in Chinese enterprises' demand for new loans. If the latter is the case, it raises important questions about the underlying health and trajectory of China's economy.

InterpreterMagazine:

• BREAKING: Reporters Witness Russian Crossing Into Ukraine. More Russian Armor Spotted Moving Toward Ukraine. (video)

Reuters:

• Rights group says Chinese police open fire on Tibetan protesters. Chinese police have opened fire on Tibetan demonstrators in southwestern China, wounding 10 people, after the Tibetans protested against the detention of a respected village leader, a Tibetan rights group said. The crackdown in the Ganzi prefecture of Sichuan province, a flashpoint for Tibetan protests against Chinese rule, underscores simmering tensions between Tibetans and the Chinese authorities. The UK-based International Campaign for Tibet (ICT) group, citing several Tibetan sources in exile, said late on Wednesday the area "is now under tight control, with local Tibetans including the elderly and children subject to interrogation". Photographs that circulated on social media showed Tibetans with "serious wounds on the head and torso" after the incident, the ICT said.

Telegraph:

• Is the eurozone being dragged into deadly spiral of deflation? Portugal, Greece and Spain are in deflation, official figures show, while Italy's inflation rate fell to zero in July. 

Bear Radar

Style Underperformer:

• Small-Cap Growth -.03%

Sector Underperformers:

• 1) Oil Service -1.22% 2) Steel -.91% 3) Networking -.65%

Stocks Falling on Unusual Volume:

• RRGB, NDLS, EXXI, SEAS, AZPN, LRN, ADVS, VCYT, VIPS, DANG, FNV, XONE, VRNS, RMTI, ITMN, FPI, CSCO, NES, TKMR, BPL, EZCH, SCAI, ULTI, PAAS and QLYS

Stocks With Unusual Put Option Activity:

• 1) JCP 2) DE 3) XLY 4) BK 5) JWN
  

Stocks With Most Negative News Mentions:

• 1) MU 2) RRGB 3) SEAS 4) FCX 5) BLMN
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

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.