Bear Radar

Style Underperformer:

• Mid-Cap Value -.20%

Sector Underperformers:

• 1) Gold & Silver -1.52% 2) HMOs -1.41% 3) Steel -1.26%

Stocks Falling on Unusual Volume:

• VNET, AU, WBAI, AVG, HUBG, ATHM, GTAT, CENX, JMEI, EQR, AVB, FUEL, KKD and VRA

Stocks With Unusual Put Option Activity:

• 1) JNK 2) FXY 3) XLE 4) XOM 5) EWT
  

Stocks With Most Negative News Mentions:

• 1) EBAY 2) KKD 3) MON 4) CAT 5) MBLY
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.10%

Sector Outperformers:

• 1) Biotech +.98% 2) Banks +.68% 3) Computer Services +.65%
  

Stocks Rising on Unusual Volume:

• LE, NPSP, PANW, CMGE, RCPT, PAY, WMGI, NDLS, PCYC, HUN and SLCA

Stocks With Unusual Call Option Activity:

• 1) MTG 2) NPSP 3) PANW 4) RICE 5) AVNR

Stocks With Most Positive News Mentions:

• 1) ADM 2) WFC 3) PCYC 4) VIAB 5) DG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg: 

• EU Considers Russian Penalties Amid Fragile Ukraine Truce. European Union governments meet to consider pulling the trigger on tougher Russian sanctions as the bloc weighs the viability of President Vladimir Putin’s truce in Ukraine. The talks in Brussels among the 28 member nations follow the EU’s abrupt decision this week to put on hold for at least a “few days” a second package of economic penalties against Russia over its encroachment in Ukraine. The delay offered more time to assess the effectiveness of the cease-fire without risking further trade retaliation by the Kremlin.
• PBOC Adrift Without Policy Anchor Amid Credit Slump. China’s central bank chief is learning you can’t control what you can’t cut. The People’s Bank of China’s removal of state controls on borrowing costs last year has left Governor Zhou Xiaochuan struggling to influence rates with tools such as adjusting some banks’ reserve requirements and targeted liquidity injections. Those steps haven’t stopped new credit and money-supply growth from slowing. 
• China Stocks Fall Most in Two Weeks as Money-Supply Growth Slows. China’s stocks fell, sending the benchmark index to its biggest loss in two weeks, after Premier Li Keqiang indicated money-supply growth slowed last month. Shaanxi Coal Industry Co. and Datong Coal Industry Co. slid at least 1.7 percent to lead declines for energy companies. Apple Inc. suppliers Suzhou Anjie Technology Co. (002635) and Han’s Laser Technology Co. slumped more than 3 percent after the iPhone maker introduced new products. Four companies including Hubei Feilihua Quartz Glass Co. and Dirui Industrial Co. jumped on the first day of trading in Shenzhen. The Shanghai Composite Index (SHCOMP) dropped 0.6 percent to 2,312.69 at 9:43 a.m.
• Asian Stocks Drop on China While Dollar Gains. Asian stocks fell, with the regional index dropping the most in a month on concern that China’s growth is slowing and speculation that U.S. interest rates will rise sooner than estimated. The dollar traded near a six-year high to the yen and crude oil rose. The MSCI Asia Pacific Index dropped a fifth day, slipping 0.7 percent by 11:59 a.m. in Tokyo. Hong Kong’s Hang Seng Index retreated 1.7 percent as Chinese Premier Li Keqiang announced money-supply growth that was the slowest in five months.
• Goldman(GS) Calls End to Iron Age After ‘Dramatic’ Drop in Ore Price. Iron ore declined sooner than expected this year as supplies exceeded demand and prices are unlikely to recover, according to Goldman Sachs Group Inc., which said 2014 will mark the end of a so-called iron age. This year “is the inflection point where new production capacity finally catches up with demand growth, and profit margins begin their reversion to the historical mean,” analysts Christian Lelong and Amber Cai wrote in a report today entitled: “The end of the Iron Age.” The 2016 forecast was cut to $79 a metric ton from $82 and the 2017 outlook was reduced to $78 from $85, according to the New-York based bank, which stuck with its forecast for prices to average $80 next year.
• Nickel Tumbles Most in 16 Weeks. Nickel for delivery in three months dropped $1,005 to settle at $18,925 a metric ton at 5:50 p.m. on the London Metal Exchange, the biggest decline since May 15. The dollar’s advance damped demand for commodities as alternative investments, Sanders said. Bloomberg indexes of the greenback against 10 currencies extended a rally to the highest since July 2013 with raw materials at the lowest in eight months. Tin fell 2 percent to $20,950 a ton after touching $20,900, the lowest since Aug. 5, 2013. Copper, aluminum, zinc and lead also fell in London. A gauge of the sixmain metals traded on the LME dropped 2.4 percent, the most since March 7. 
• Private Equity’s Quest for Mines Foundering as Commodities Slide. The push by private equity funds to acquire mining assets is slowing as investors struggle to land major deals while commodity prices slide. The funds have raised $1.1 billion for investments in mining and metals this year, compared with about $8.8 billion in 2013, according to data compiled by Bloomberg.
• Banks to Pay Price for Choice to Be Big, Fed’s Tarullo Says. The biggest U.S. banks must decide whether to voluntarily reduce their size and complexity or face capital charges that are some of the toughest in the world, the Federal Reserve’s top financial-regulation official said today.
• Lew Says Treasury Can Act to Reduce Inversions’ Value. The Obama administration can make tax inversions less economically attractive to U.S. companies if Congress doesn’t act to curb the practice, Treasury Secretary Jacob J. Lew said.

Wall Street Journal:

• WSJ/NBC Poll: Almost Two-Thirds Back Attacking Militants. Public in More Hawkish Mood Ahead of President Obama's Speech to the Nation About Islamic State. President Barack Obama will lay out plans Wednesday to combat Islamic State to an American public that has grown increasingly hawkish in the wake of the militant group's videotaped beheadings of two U.S. journalists. Almost two-thirds of respondents in a new Wall Street Journal/NBC News poll believe it is in the nation's interest to confront the group, known as ISIS and as ISIL, which has swept through Syria and northern Iraq. Only...
• Microsoft(MSFT) Near Deal to Buy Minecraft Maker Mojang. Deal May Come This Week, Value Swedish Company at More Than $2 Billion.
• Fossil Fuels Stir Debate at Endowments. Showdown Between Activists and Schools Over Investments in Coal, Oil and Gas Intensifies, With California in Spotlight.
• CFTC Eases Hedge-Fund Advertising Ban. Move Is Aimed at Aligning the CFTC's Restrictions With Similar Rules Set by the SEC.
• Fighting the Internet Invasion of Childhood. When I heard my daughter's screams from Web deprivation, I knew I was onto something.

Fox News: 

• Saudi anti-Christian sweep prompts calls for US involvement. Dozens of Christians arrested at a prayer meeting in Saudi Arabia need America's help, according to a key lawmaker who is pressing the State Department on their behalf. Some 28 people were rounded up Friday by hard-line Islamists from the Commission for the Promotion of Virtue and Prevention of Vice in the home of an Indian national in the eastern Saudi city of Khafji, and their current situation is unknown, according to human rights advocates.

Zero Hedge: 

• 11 Ways You Know You Live In A Country Run By Idiots.
• Small Business Ownership In America Is At An All-Time Low.
• Ebola Outbreak Doubles In 3 Weeks, WHO Warns "Conventional Means Of Control Not Working".
• Economic Confidence Has Gone Nowhere In A Year. (graph)
• The Buyback Party Is Indeed Over: Stock Repurchases Tumble In The Second Quarter.
• You Know It's Bad In Europe When... (table)
• America's Demographic Crash In One Chart. (graph)
• IceCap Asset Management On Europe: "If You Exclude All The Debt, There's No Debt Problem".

Business Insider:

• HANDS-ON PHOTOS: Here's A Close Look At the iPhone 6 And iPhone 6 Plus.
• An Enemy Far More Threatening Than Elizabeth Warren Could Soon Have Major Power Over Wall Street.
• 1 In 3 German Companies Expect Business With Russia To Decline Sharply This Year.

NY Times:

• Looking Beyond China, Some Companies Shift Personnel. General Motors moved the headquarters of its international division here from Shanghai last month. Archer Daniels Midland, the agribusiness giant, is gradually doing the same with its Asia and Pacific operations. Other multinationals, like IBM, have shifted staff members here from China for a few functions, like treasury operations.

Telegraph:

• Golden age for foreign companies in China 'is over'. Foreign investment in China plummets as companies' double-digit growth becomes a thing of the past.

Di Welt:

• Brok Says EU Must Implement New Russia Sanctions Now. Elmar Brok, chairman of European Parliament Committee on Foreign Affairs, says in interview with Die Welt that further delay will expose EU to ridicule. "There is no reason to wait longer. The cease-fire can hold only if all Russian soldiers leave Ukraine," he said.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 91.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 63.0 +.75 basis point.

• FTSE-100 futures -.19%.

• S&P 500 futures -.15%.

• NASDAQ 100 futures  -.17%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (VRA)/.19
• (RH)/.64
• (MW)/1.06

Economic Releases
10:00 am EST

• Wholesale Inventories for July are estimated to rise +.5% versus a +.3% gain in June.
• Wholesale Sales for July are estimated to rise +.6% versus a +.2% gain in June.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,033,330 barrels versus a -905,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +16,670 barrels versus a -2,322,000 barrel decline the prior week. Distillate supplies are estimated to rise by +622,220 barrels versus a +605,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.29% versus a -.2% decline the prior week.

Upcoming Splits

• (CPK) 3-for-2
• (CLR) 2-for-1

Other Potential Market Movers

• The China CPI, Australia Unemployment Rate, $27B 10Y T-Note auction, weekly MBA Mortgage Applications report, BofA Merrill Real Estate Conference, Goldman Communacopia Conference, (POOL) investor day and the (LM) investor day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Rising Emerging Markets/European Debt Angst, Global Growth Worries, Technical Selling, Tech/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.29 +4.98%

• Euro/Yen Carry Return Index 143.38 +.44%

• Emerging Markets Currency Volatility(VXY) 6.97 +5.13%

• S&P 500 Implied Correlation 49.53 +3.45%

• ISE Sentiment Index 82.0 -21.90%

• Total Put/Call .87 -1.14%

• NYSE Arms 1.14 -18.05% 

Credit Investor Angst:

• North American Investment Grade CDS Index 58.82 +3.42%

• European Financial Sector CDS Index 58.84 +2.22%

• Western Europe Sovereign Debt CDS Index 27.87 +4.21%

• Asia Pacific Sovereign Debt CDS Index 62.94 +1.10%

• Emerging Market CDS Index 247.40 +2.85%

• China Blended Corporate Spread Index 307.0 +.65%

• 2-Year Swap Spread 21.75 -.25 basis point

• TED Spread 22.25 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -16.0 +2.75 basis points

Economic Gauges:

• 3-Month T-Bill Yield .01% -1.0 basis point

• Yield Curve 194.0 -1.0 basis point

• China Import Iron Ore Spot $83.20/Metric Tonne -.48%

• Citi US Economic Surprise Index 38.50 +.5 point

• Citi Emerging Markets Economic Surprise Index -11.70 +.5 basis point

• 10-Year TIPS Spread 2.12 -2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -101 open in Japan

• DAX Futures: Indicating -23 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging markets shorts

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• EU to Assess Ukraine Cease-Fire as New Russian Sanctions Weighed. European Union governments tomorrow will reopen discussions about the viability of a cease-fire in Ukraine as the bloc weighs whether to pull the trigger on tougher sanctions against Russia. The scheduled talks in Brussels among diplomats from the 28 member nations follow the EU’s abrupt decision yesterday to put on hold for at least a “few days” a second package of economic penalities against Russia over its encroachment in Ukraine. The delay offered more time to assess the effectiveness of the cease-fire without risking further trade retaliation by the Kremlin.

• Obama Speaking Tomorrow Night on Fighting Islamic State. President Barack Obama will make a televised address from the White House tomorrow night on his strategy for degrading and destroying Islamic State militants operating in Iraq and Syria.

• Another Scots Poll Shows Swing to Independence. (video) Voters in Scotland are embracing independence, according to a poll that provides fresh evidence of a swing away from the U.K. and suggests the result of next week’s referendum is on a knife edge.

• Draghi Plea for ABS Support Rebuffed by France, Germany. Mario Draghi asked European governments to help him help them. The answer so far is “no.” France and Germany, the euro area’s two largest economies, will say they’re not interested in providing state guarantees for the European Central Bank president’s asset-purchase program announced last week, according to a draft document obtained by Bloomberg News.

• China Money-Supply Growth Eases to Five-Month Low. China’s money-supply growth unexpectedly eased to the slowest pace in five months, comments by Premier Li Keqiang indicated, a sign of credit constraints as a property slump weighs on the economy. M2, the government’s broadest measure, rose 12.8 percent in August from a year earlier, Li said today in Tianjin, the state-run Xinhua News Agency reported ahead of the official release by the People’s Bank of China. That compares with a 13.5 percent pace in July, which was also the median estimate for August in a Bloomberg News survey of analysts.

• Brazil Rating Outlook Cut to Negative by Moody’s on Growth. Brazil’s credit rating outlook was cut to negative by Moody’s Investors Service, which said slow economic growth is unlikely to improve in the short term. Moody’s affirmed Brazil’s Baa2 rating, its second-lowest investment grade. The change in outlook comes after data last month showed Latin America’s largest economy entered a recession for the first time in five years, and as President Dilma Rousseff seeks election to a second term in October.

• Europe Stocks Fall Third Day Amid Greece, Portugal Drops. European stocks fell, posting their biggest three-day decline in a month, as national benchmark gauges slipped in Greece, Portugal and Spain. The Stoxx Europe 600 Index dropped 0.4 percent to 344.87 at the close, having extended losses after the U.S. market opened. Greece’s ASE Index fell 2.6 percent, as Portugal’s PSI 20 Index slid 1.5 percent and Spain’s IBEX 35 Index retreated 1.4 percent, for the biggest drops among 18 western-European markets. “We don’t see a huge opportunity in European equities at the moment,” Stewart Richardson, who helps oversee about $100 million as chief investment officer at RMG Wealth Management LLP, said by phone from London. “We don’t expect a significant pick-up in the European economy this year. If Scotland votes Yes in the referendum, that will impact the U.K. economy and spill over into Europe’s economy as well.”

• Commodities Drop to Lowest Since January as Dollar Climbs. Commodities declined to the lowest level in almost eight months as the dollar advanced on speculation that the Federal Reserve will increase interest rates next year, curbing demand for raw materials. The Bloomberg Commodity Index (BCOM) that tracks 22 futures lost as much as 0.5% to 123.6507, the lowest since Jan. 13 and traded at 123.8599 at 2:52 p.m. in London. Nickel tumbled the most since May, corn traded at a four-year low and Brent crude declined for a fourth day.

• Rubber Falls to 5-Year Low as China Supplies Compound Thai Glut. Rubber tumbled to the lowest in five years amid rising stockpiles in China, the world’s largest user, and an oversupply in Thailand, the biggest producer. Prices dropped as much as 4.4 percent in Shanghai and 3 percent in Tokyo. Inventories monitored by the Shanghai Futures Exchange rose 1.6 percent to 166,328 metric tons on Sept. 4, the highest in four months, bourse data show. Global production will outpace demand by 371,000 tons in 2014, the Singapore-based International Rubber Study Group said last month. Thailand started selling stockpiles while it also tries to reduce the glut by felling older trees.

• Don’t Hate Credit, Just Use Leverage for 10% Returns, Says Citi. Stop complaining junk-bond yields are too low. Instead, just use borrowed money to juice returns. That’s the message from Citigroup Inc. (C) analysts, anyway.

• McDonald’s(MCD) Monthly Sales Slump Worst Since 2003. McDonald’s Corp. (MCD), the world’s largest restaurant chain, posted the worst same-store sales decline in more than a decade, hurt by sluggish demand in the U.S. and a health scare involving a Chinese supplier. Sales at stores open at least 13 months fell 3.7 percent in August, the Oak Brook, Illinois-based company said in a statement today. Analysts estimated a 3.1 percent drop. McDonald’s also said that supplier problems in China will reduce third-quarter earnings per share by 15 cents to 20 cents.

ZeroHedge:

• Spain Bond Yields Spike Most In Over A Decade As "Referendum Risk" Spreads. (graph)

• Russia's Response To European Capital Sanctions In One Word.

• "Why This Stock Market Will Never Go Down".

Business Insider: 

• Apple(AAPL) Announces Two New iPhones, A Mobile Payment System, And The Apple Watch.

• The Apple(AAPL) Watch Starts At $349, Will Ship In Early 2015.

Interfax:

• Ukraine Rebels Reiterate Demand for All of Donetsk, Luhansk. Self-proclaimed people's republics are demanding self-determination for Donetsk, Luhansk regions within their full administrative boundaries, citing DNR's 1st Deputy Prime Minister Andrei Purgin.

Bear Radar

Style Underperformer:

• Small-Cap Value -.90%

Sector Underperformers:

• 1) Utilities -1.11% 2) Internet -.91% 3) Alt Energy -.91%

Stocks Falling on Unusual Volume:

• CNSI, VNET, PBY, CMGE, FRAN, LDOS, SHOS, CASY, PF, QIWI, NHI, ARCW, MEI, UTIW, YHOO, BGS, APH, LAYN, VSAR, SWM, THI, CKEC, ATHM, NPSP, TPLM, ADS, AVP, DISCK and GTAT

Stocks With Unusual Put Option Activity:

• 1) ROST 2) EEM 3) GPRO 4) NUAN 5) FOSL
  

Stocks With Most Negative News Mentions:

• 1) GM 2) MCD 3) TWTR 4) GOOG 5) UPS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume