Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.06 -3.26%
- Euro/Yen Carry Return Index 143.94 +.33%
- Emerging Markets Currency Volatility(VXY) 7.10 +1.43%
- S&P 500 Implied Correlation 49.58 -2.57%
- ISE Sentiment Index 88.0 +10.0%
- Total Put/Call .92 +4.55%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.79 -1.20%
- European Financial Sector CDS Index 59.08 +.64%
- Western Europe Sovereign Debt CDS Index 28.56 +2.49%
- Asia Pacific Sovereign Debt CDS Index 63.63 +.78%
- Emerging Market CDS Index 247.61 -.16%
- China Blended Corporate Spread Index 308.22 +.39%
- 2-Year Swap Spread 22.75 +1.0 basis point
- TED Spread 21.25 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -15.25 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- Yield Curve 197.0 +3.0 basis points
- China Import Iron Ore Spot $82.20/Metric Tonne -1.20%
- Citi US Economic Surprise Index 38.40 -.1 point
- Citi Emerging Markets Economic Surprise Index -12.60 -.9 basis point
- 10-Year TIPS Spread 2.11 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +127 open in Japan
- DAX Futures: Indicating +33 open in Germany
Portfolio:
- Higher: On gains in my medical/biotech/tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Ukraine Sees Russian Pullback as EU, U.S. Mull Sanctions. Ukrainian
President Petro Poroshenko said Russia has withdrawn more than
two-thirds of its troops from his country as the U.S. and the European
Union prepare their toughest sanctions yet against the Kremlin. “According to the latest information from
our intelligence unit, 70 percent of Russia’s troops have been recalled
across the border,” Poroshenko said in Kiev. “This gives more hope the
peace initiatives have good prospects.”
- Cheney Says Obama’s Policies Spurred Rise of Terrorists. President
Barack Obama’s “disengaged” foreign policy has contributed to the rise
of Islamic State militants in the Middle East and Russian aggression
against Ukraine, former Vice President Dick Cheney said today. “There’s a connection between these problems, between a disengaged president and some very volatile situations abroad,” Cheney,
a Republican, said during a speech to the American Enterprise
Institute, a Washington-based policy research group. “We’re nearing a
crisis in the decline of American
military power,” he added. “It has to be addressed, and right
away.”
- Europeans Once Keen on Obama Now Desert Him, Poll Shows. Europeans
once keen on Barack Obama as the bringer of an era of multinational
good feelings are having second thoughts about the U.S. president, a
poll found. Obama’s European approval rating dropped to 64 percent,
sliding for the fifth straight year from 85 percent when he took office,
according to a poll released today in Brussels by the German Marshall
Fund of the United States. The falling-out was most pronounced in
Germany, due to outrage at National Security Agency snooping on
Chancellor Angela Merkel. Obama’s numbers also slipped in France and
Italy, and were unchanged in Britain.
- Barclays Cuts Euro Forecast to Most Bearish on Economy Slowdown.
Barclays Plc lowered its one-year
euro forecast to the most bearish of Wall Street banks as the
currency union’s economy deteriorates and as increasingly
aggressive monetary policy signals further depreciation.
- European Stocks Little Changed as Investors Weigh ECB.
Lingering questions about whether
the European Central Bank’s stimulus measures will kickstart the
region’s stagnant economy outweighed prospects for peace in Ukraine,
keeping investors in European stocks on the sidelines. The benchmark Stoxx Europe 600 Index slipped less than 0.1 percent to 344.7 at the close, after falling as much as 0.6
percent in intra-day trading. The gauge has declined 1.2 percent
since reaching a two-month high on Sept. 4.
- Commodities Fall to 8-Month Low as Brent Stays Below $100. Commodities dropped to an eight-month low as signs of abundant supplies and slowing economic
growth curbed demand for raw materials. The Bloomberg Commodity Index of 22 raw materials fell 0.3
percent by 3:24 p.m. in London after earlier declining 0.4
percent to 122.9665, the lowest since Jan. 10. The gauge
declined 2.1 percent this year. Brent oil traded below $100 a
barrel for a third day.
- Top LBO Fund Investors Pile on Leverage to Boost Returns. Some of the world’s biggest investors in leveraged-buyout funds are
themselves using unprecedented levels of debt to boost returns. “Leverage
is a double-edged sword,” said Oliver Gottschalg, a professor at French
business school HEC Paris. “It can boost the performance on the upside
and rapidly eat into capital on the downside. The more leverage you
apply, the more extreme the outcome will be for the investor.”
- Profit-Margin Peak Points to U.S. Stock Shift: Chart of the Day. (graph) Profitability at U.S. companies may
have reached its peak for the current economic expansion,
according to Sean Darby, Jefferies Group Inc.’s chief global
equity strategist.
- BofA(BAC) Trading Executives Leave Firm as Job Cuts Loom. Bank
of America Corp. trading executives David Moore and David Hartney
departed as the firm prepares to eliminate fixed-income and equities
jobs worldwide,
according to people with knowledge of the moves.
Wall Street Journal:
Barron's:
ZeroHedge:
Business Insider:
Reuters:
- U.S. mortgage applications fall to lowest since Dec 2000 -MBA. Applications for U.S. home
mortgages fell last week to the lowest since December 2000 as
interest rates rose for the first time in four weeks, an
industry group said on Wednesday. The Mortgage Bankers Association said its seasonally
adjusted index of mortgage application activity, which includes
both refinancing and home purchase demand, fell 7.2 percent in
the week ended Sept. 5. The MBA's seasonally adjusted index of refinancing
applications dropped 10.7 percent to the lowest since November
2008, while the gauge of loan requests for home purchases, a
leading indicator of home sales, fell 2.6 percent.
Style Underperformer:
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:
Style Outperformer:
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:
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:
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:
Business Insider:
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:
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
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.
- 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.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- 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%
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
