Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.14 +10.47%
- Euro/Yen Carry Return Index 145.07 +.40%
- Emerging Markets Currency Volatility(VXY) 7.27 +2.83%
- S&P 500 Implied Correlation 52.89 +10.6%
- ISE Sentiment Index 123.0 +20.59%
- Total Put/Call .86 -14.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 60.17 +1.89%
- European Financial Sector CDS Index 58.50 -.69%
- Western Europe Sovereign Debt CDS Index 27.71 -3.77%
- Asia Pacific Sovereign Debt CDS Index 64.24 +.95%
- Emerging Market CDS Index 248.19 +1.95%
- China Blended Corporate Spread Index 308.91 +1.19%
- 2-Year Swap Spread 23.75 +.25 basis point
- TED Spread 22.50 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 205.0 +7.0 basis points
- China Import Iron Ore Spot $82.0/Metric Tonne +.12%
- Citi US Economic Surprise Index 36.20 +.7 point
- Citi Emerging Markets Economic Surprise Index -12.90 -1.2 basis points
- 10-Year TIPS Spread 2.14 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -85 open in Japan
- DAX Futures: Indicating -22 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM), (QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Russia Weighs Response as U.S. and EU Add More Sanctions. Russia threatened retaliation against a U.S. and European Union
decision to stiffen sanctions, saying the move to expand penalties
undermines the peace process in Ukraine. Russia will react
“calmly, appropriately” to the EU sanctions, Foreign Minister Sergei
Lavrov told state TV in an interview. The EU added 15 companies,
including OAO Gazprom Neft, OAO Rosneft and OAO Transneft, and 24 people
to the list of those affected by its sanctions against Russia. The U.S.
will also “deepen and broaden” its measures against Russia’s financial,
energy and defense industries, President Barack Obama said yesterday.
- Scottish Independence Race Tightens Again in ICM Poll. Scotland’s nationalists were
narrowly behind the Better Together campaign in an ICM poll six
days before the independence ballot, with the Yes vote on 49
percent and No on 51 percent after excluding undecided voters. The monthly poll of 1,000 people for the Guardian newspaper
today has an error margin of about 3 percentage points, meaning
the race for the Sept. 18 referendum is too close to call.
- U.S. Widens Sanctions on Russia Banks, Energy, Defense. (video) The U.S. expanded sanctions against Russia to include the country’s
largest bank, OAO Sberbank, energy companies as well as five state-owned
defense and technology companies. “Russia’s economic and
diplomatic isolation will continue to grow as long as its actions do not
live up to its words,” Treasury Secretary Jacob J. Lew said in a
statement. “Russia’s economy is already paying a heavy price for its
unlawful behavior.”
- Congressional Leaders Back Syria Action Amid Calls for More. U.S. House
and Senate leaders are backing President Barack Obama’s call to train
and equip Syrian rebels even as Republicans’ demand for a broader
offensive to defeat Islamic State extremists may delay
congressional action.
- Ukraine Rebels Need NATO Veto to End War: Ex-Putin Envoy. Ukraine needs to give its regions
veto power over future membership in NATO and the European Union
to finally end the uprising by pro-Russian separatists in the
east, a former envoy of President Vladimir Putin said. The easternmost Donetsk and Luhansk regions, where Russian
is the main language, should also be granted greater control
over their security forces, similar to the devolution of power
in the Balkans after the breakup of Yugoslavia, as well as their
finances, Vladimir Lukin said in an interview in Moscow.
- Ibovespa Falls Most in World as Silva Tied With Rousseff in Poll.
The Ibovespa (IBOV) led world losses after a voter poll showed
opposition candidate Marina Silva tied with President Dilma Rousseff in a
second round of October’s election in Brazil. State-run oil producer
Petroleo Brasileiro SA slid amid reduced prospects for a change in
government. Usinas Siderurgicas de Minas Gerais SA fell to a two-month
low as
Citigroup Inc. cut its earnings estimates for the steelmaker.
The Ibovespa slumped 1.4 percent to 57,499.70 at 10:09 a.m.
in Sao Paulo, extending its weekly drop to 5.3 percent.
- Europe Stocks Post First Weekly Loss in More Than a Month.
European stocks were unchanged, after swinging between gains and
losses, as a jump in U.S. retail sales and consumer confidence boosted
optimism about the world’s largest economy while raising concern
interest rates may go up soon. The Stoxx Europe 600 Index was unchanged at 344.27 at the close of trading,
after earlier rising as much as 0.3 percent and falling as much as 0.2
percent.
- Junk-Bond Offerings Struggle as Buyers Return to Fleeing. Junk-bond buyers have indigestion
again. Speculative-grade borrowers from Jupiter Resources Ltd., an
energy firm backed by Apollo Global Management LLC, to AK Steel Holding
Corp. had to sweeten terms yesterday to sell at least $8.7 billion of
debt. The offerings struggled as investors pulled $766 million from
funds that buy the bonds in the past week.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
Marc to Market:
Style Underperformer:
Sector Underperformers:
- 1) REITs -3.03% 2) Homebuilders -2.41% 3) Utilities -1.81%
Stocks Falling on Unusual Volume:
- XCRA, HCN, CBPX, SMLP, DDR, FPL, SDRL, MMLP, RIG, ESV, LDL, OHI, RJUS, SDLP, NE, AKRX, SBUX, DRI, SBRA, MAC, TLLP, MDVN, VTR, SLCA, REX, MPW, RPRX, EOPN and RKUS
Stocks With Unusual Put Option Activity:
- 1) KRE 2) CME 3) VLO 4) EWT 5) OIH
Stocks With Most Negative News Mentions:
- 1) CREE 2) REGN 3) MRK 4) SPG 5) SWFT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Retail +.52% 2) Banks +.27% 3) Internet -.05%
Stocks Rising on Unusual Volume:
- TNET, CNVR, ULTA, VNET, XPO, IPI and NDLS
Stocks With Unusual Call Option Activity:
- 1) ULTA 2) ACAD 3) TAP 4) AVNR 5) ACT
Stocks With Most Positive News Mentions:
- 1) BID 2) ECN 3) LULU 4) YHOO 5) SCTY
Charts:
Evening Headlines
Bloomberg:
- U.S. Joining EU on Russian Curbs Sets Stage for Reprisal. The U.S. will join the European Union in stiffening sanctions on
Russia over Ukraine, prompting the government in Moscow to threaten
retaliation. The U.S. will “deepen and broaden” measures against
Russia’s financial, energy, and defense industries, President Barack
Obama said in a statement yesterday, hours after an announcement by the
EU. The latest round of economic restrictions from both the U.S. and the
EU will take effect today. European companies and taxpayers “will have
to pick up the costs” for the penalties, Dmitry Peskov, a spokesman for
Russian President Vladimir Putin, told Interfax.
- China Credit Gauge Misses Estimates as Growth Risks Escalate. China’s
broadest measure of new credit trailed analyst estimates in August,
adding to the government’s challenge to meet its economic growth target
amid a slumping property market and a pullback in manufacturing.
Aggregate financing was 957.4 billion yuan ($156 billion), the People’s
Bank of China said today in Beijing, compared with the 1.135 trillion
yuan median estimate of economists surveyed by Bloomberg. New
local-currency loans were 702.5 billion yuan,
and M2 money supply grew 12.8 percent from a year earlier.
- Most Asian Stocks Retreat on China Lending; Dollar Gains.
Most Asian stocks slipped with gold after Chinese lending data as wheat
dropped a fifth day. The dollar headed for its biggest weekly gain
versus major peers since November as investors assessed the U.S.-rates
outlook before the Federal Reserve meets next week. The MSCI Asia
Pacific Index (MXAP) lost 0.2 percent by 11:20 a.m. in Tokyo and is set
for its longest losing streak in four years.
- Treasury Is Weighing Action on Hedge-Fund Tax ‘Loophole’. The
U.S. Treasury Department said
it’s considering ways to end a “loophole” that allows hedge-fund
managers to avoid taxes by routing their investments through an
insurance company in low-tax countries like Bermuda. The Treasury,
in an Aug. 9 letter obtained by Bloomberg News today, told Senate
Finance Committee Chairman Ron Wyden that it’s concerned about such
arrangements and is weighing
legislative and administrative responses. Among the hedge-fund managers
who have set up Bermuda
insurance vehicles in recent years are John Paulson’s Paulson &
Co. and Steven A. Cohen’s SAC Capital Advisors LP. Cohen has
since cut ties with his insurer.
- Investors Pull $766 Million From Junk-Bond Funds, Lipper Says. Investors withdrew $766 million
from U.S. funds that buy high-yield bonds in the past week, the
second straight outflow, according to data provider Lipper. The pullback brings net outflows for the funds to $9.7
billion this year, the data show. Investors also pulled $342
million from U.S. leveraged loan funds, the ninth straight
weekly outflow, according to Lipper.
Wall Street Journal:
Fox News:
CNBC:
- Iron ore glut: Are shutdowns the only way out? Spot iron ore prices are at their lowest level since September 2009 amid
a flood of excess inventory and waning demand from China, the world's
largest iron ore consumer, and experts say small mine closures may be
the only catalyst for higher prices.
Zero Hedge:
Business Insider:
NY Times:
- Stressed Borrowers Rattle Resurgent Subprime Lending Industry. Subprime lenders have
surprised everyone in recent years by churning out billions of dollars
in loans that have not led to a pileup of bad debts. But this month,
some signs have appeared that suggest subprime lenders are pushing this
spree to the limit. The problems are occurring when they extend credit
to particularly risky borrowers or make loans that are harder to repay. The latest indicators are a reminder of the constraint that has always dogged subprime
lending: The number of stressed borrowers who can take on debt and repay
it with relative ease is often smaller than lenders believe. “We’re five years into
the new cycle, so you’ve got to imagine that there are excesses
cropping up,” said William Ryan, of Portales Partners, a research firm.
Reuters:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 91.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 63.50 unch.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for August are estimated to rise +.6% versus unch. in July.
- Retail Sales Ex Autos for August are estimated to rise +.3% versus a +.1% gain in July.
- Retail Sales Ex Autos and Gas for August are estimated to rise +.5% versus a +.1% gain in July.
- The Import Price Index for August is estimated to fall -1.0% versus a -.2% decline in July.
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for September is estimated to rise to 83.3 versus 82.5 in August.
10:00 am EST
- Business Inventories for July are estimated to rise +.4% versus a +.4% gain in June.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Industrial Production data and (STX) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down 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.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.91 +.23%
- Euro/Yen Carry Return Index 144.43 +.22%
- Emerging Markets Currency Volatility(VXY) 6.98 -1.69%
- S&P 500 Implied Correlation 48.02 -1.58%
- ISE Sentiment Index 108.0 +12.5%
- Total Put/Call .96 +2.13%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.10 +.80%
- European Financial Sector CDS Index 59.0 -.85%
- Western Europe Sovereign Debt CDS Index 28.80 +.81%
- Asia Pacific Sovereign Debt CDS Index 63.63 +.16%
- Emerging Market CDS Index 248.19 +.89%
- China Blended Corporate Spread Index 305.27 -.95%
- 2-Year Swap Spread 23.5 +.75 basis point
- TED Spread 22.0 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -15.55 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 198.0 +1.0 basis point
- China Import Iron Ore Spot $81.90/Metric Tonne -.36%
- Citi US Economic Surprise Index 35.50 -2.9 points
- Citi Emerging Markets Economic Surprise Index -11.70 +.9 basis point
- 10-Year TIPS Spread 2.13 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -50 open in Japan
- DAX Futures: Indicating -6 open in Germany
Portfolio:
- Higher: On gains in my retail sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
