Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Every Sector Declining
- Volume: Slightly Above Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 15.93 +20.05%
- Euro/Yen Carry Return Index 144.67 -.59%
- Emerging Markets Currency Volatility(VXY) 7.62 +4.53%
- S&P 500 Implied Correlation 54.93 +14.49%
- ISE Sentiment Index 70.0 -32.04%
- Total Put/Call 1.13 +29.89%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.20 +4.37%
- European Financial Sector CDS Index 60.66 +3.38%
- Western Europe Sovereign Debt CDS Index 28.39 +2.05%
- Asia Pacific Sovereign Debt CDS Index 64.54 +1.33%
- Emerging Market CDS Index 257.84 +3.21%
- China Blended Corporate Spread Index 308.18 -.66%
- 2-Year Swap Spread 22.5 +.75 basis point
- TED Spread 22.50 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -8.5 unch.
Economic Gauges:
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 195.0 -3.0 basis points
- China Import Iron Ore Spot $78.60/Metric Tonne -1.01%
- Citi US Economic Surprise Index 26.90 unch.
- Citi Emerging Markets Economic Surprise Index -17.20 -.1 point
- 10-Year TIPS Spread 2.01 -3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -240 open in Japan
- DAX Futures: Indicating -22 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/biotech/medical/retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Islamic State Said to Plot Subway Attacks in U.S., France. Islamic
State militants captured in Iraq said the group has been planning
attacks on subways in Paris and in the U.S., Iraqi Prime Minister Haidar
al-Abadi said. The U.S. said it hasn’t confirmed the plot. Iraq has informed the French and U.S. governments about the newly obtained information, Abadi said during a meeting with a
small group of reporters in New York. Abadi, who is in New York for the meeting of the United
Nations General Assembly, said he considers the information
credible and that he’s awaiting further details. The information
comes from recent arrests, he said.
- Putin Party Lawmaker Drafts Bill on Foreign-Asset Freeze. A
United Russia lawmaker proposed a law that would allow the seizure of
foreign state assets in Russia after Italy froze luxury properties
belonging to a childhood friend of President Vladimir Putin. Vladimir
Ponevezhsky, a parliamentarian for Russia’s ruling party, submitted a
bill on compensating individuals who had property seized abroad,
according to the draft posted on the State Duma’s website. Italy this
week froze properties worth 28 million euros ($36 million) belonging to
billionaire Arkady Rotenberg, who is blacklisted by the European Union
and U.S. for his personal ties with Putin amid the conflict in Ukraine.
The bill proposes compensating a Russian citizen who is victim of an
“unlawful” judgment in a foreign court using federal budget funds. The
government would then be allowed to
seize foreign state assets in Russia, including property that is
covered by diplomatic immunity.
- China Watchdog Finds $10 Billion in Fake Currency Trade. China
uncovered almost $10 billion in fraudulent trade nationwide as part of
an investigation begun in April last year, including many irregularities
in the port of Qingdao, the country’s currency regulator said today.
Companies “faked, forged and illegally re-used” documents for exports
and imports, Wu Ruilin, a deputy head of the State Administration of
Foreign Exchange’s inspection department, said at a briefing in Beijing.
The trades have “increased pressure from hot money inflows and provided
an illegal channel for
criminals to move funds,” Wu said, adding that those involved
in such fraud would be severely punished.
- BOE’s Carney Says Rate-Increase Case Getting ‘More Balanced'. Bank
of England Governor Mark Carney said the judgment on when to increase
the benchmark rate from a record low has become “more balanced” in
recent months. Two policy makers pushed for a rate increase in
August and September, as the deepening recovery fractured unanimity for
keeping borrowing costs at 0.5 percent. While the U.K. is poised for the
fastest growth in the Group of Seven, Carney is among the majority who
say weak wages and anemic growth in Europe support keeping rates where
they’ve been since 2009.
- European Stocks Decline With FTSE 100 After BOE’s Carney.
European stocks fell to a four-week low, erasing earlier gains, as U.K.
shares dropped after Bank of England Governor Mark Carney said the time
to increase interest rates is getting closer. The Stoxx Europe 600
Index lost 0.9 percent to 341.44 at the close, after earlier gaining as
much as 0.5 percent. The U.K.’s FTSE 100 Index fell 1 percent
as Carney said the judgment on when to increase the benchmark rate from
a record low has become “more balanced” in recent months.
- Short Sellers Gather in Australia Amid Iron Ore Rout. Investors are using Australia’s stock market to bet that an iron-ore rout has further to run.
Two of the five most-shorted companies in the nation’s benchmark equity
index are producers of the commodity, according to data compiled by
Markit Group Ltd. and Bloomberg. Bearish bets on Atlas Iron Ltd. (AGO)
this month hit a record, the data show.
A gauge of iron-ore prices in China tumbled 41 percent this year
to the lowest since 2009, falling below $80 a dry ton this week.
- Copper Falls to 14-Week Low as Durable-Goods Orders Drop. Copper prices dropped to a 14-week
low after a report showed demand for durable goods in August
tumbled by a record in the U.S., the world’s second-biggest
consumer of the metal. The orders for items meant to last at least
three years
plunged more than 18 percent after surging almost 23 percent in
the prior month, government data showed today. Aluminum, tin, nickel,
lead and zinc dropped in London, while the dollar climbed to the highest
since June 2010 against a basket of 10 currencies, eroding the
investment appeal of commodities.
- Banks Face Stable Funding Rule After Basel Strikes Accord. Global regulators have reached a
deal on a rule requiring banks to use funding sources that won’t
dry up in a crisis. The Basel Committee on Banking Supervision found
an accord this week on the so-called net-stable funding rule that will
force lenders to reduce their reliance on short-term financing, Stefan
Ingves, the group’s chairman, said in a speech yesterday to a gathering
of global regulators in Tianjin, China.
- Consumer Comfort in U.S. Falls to Lowest Since Early June.
Consumer confidence fell last week to an almost four-month low as
Americans’ views of the economy and their finances deteriorated. The
Bloomberg Consumer Comfort Index declined to 35.5 in the period ended
Sept. 21, the worst reading since the first week of June, from 37.2. The
personal finances gauge dropped by the
most since mid-May, while attitudes about the world’s largest economy
were the dimmest in four months.
Fox News:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Fed's Fisher says rates may rise 'sooner rather than later'. The U.S. Federal Reserve may start raising rates around the spring of
2015, at the earlier end of market expectations, Richard Fisher,
president of the Federal Reserve Bank of Dallas said on Thursday. "It's assumed in the market place that we'll start our
liftoff in raising interest rates some time between the spring and the
summer," Fisher, a member of the Federal open Market Committee, the
Fed's main policy making body said at a conference in Rome. "I won't say what we're saying internally, that would not
be appropriate, but maybe sooner rather than later," he said.
- Italy to cut 2014, 2015 GDP forecasts, hike deficit goals - source.
Italy is preparing to slash its economic outlook for this year and 2015
and raise its targets for the budget deficit, a government source told
Reuters on Thursday. A Treasury document to be published next week
will forecast that the economy will contract by 0.2 percent or 0.3
percent this year, compared with the current official forecast made in
April for it to expand 0.8 percent, the source said.
Handelsblatt:
- Russia
Threatens Gas Supply Throttling to Europe. Russian Energy Minister
Alexander Novak threatens gas supply disruptions if the EU continues to
re-export Russian gas to Ukraine, he said in an interview.
MNI:
- Russia Considers Seizing Foreign Assets After Sanctions. Russian
lawmakers are drafting legislation that would allow the government to
seize foreign assets in Russia in response to sanctions.
Style Underperformer:
Sector Underperformers:
- 1) Steel -2.60% 2) HMOs -2.51% 3) Computer Hardware -2.45%
Stocks Falling on Unusual Volume:
- FUL, WPC, CNL, KN, VOC, PCRX, NRP, ACOR, ARLP, SCHL, CHMT, KBH, BSFT, BP, GDOT, WOR, INVN, WBK, RRTS, PHG, CPA, NPO, BNS, XIV, CLW, WTI, NAV, KN, VDSI, ATI, GDOT, CNL and CLF
Stocks With Unusual Put Option Activity:
- 1) HYG 2) BWLD 3) VNQ 4) NKE 5) DXJ
Stocks With Most Negative News Mentions:
- 1) CLF 2) YHOO 3) AAPL 4) F 5) WHR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Utilities -.57% 2) REITs -.65% 3) Gold & Silver -.70%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) PVA 2) CLDX 3) MHR 4) ACI 5) TIBX
Stocks With Most Positive News Mentions:
- 1) HAWK 2) SWFT 3) GLD 4) PAYX 5) OGE
Charts:
Evening Headlines
Bloomberg:
- Islamic State Oil in Syria Said to Be Hit by U.S. Strikes.
U.S. and Arab warplanes struck
small oil refineries in eastern Syria controlled by Islamic State to
reduce the extremist Sunni group’s revenue and impede its mobility, the
Pentagon said. Thirteen strikes by the U.S., Saudi Arabia and the United
Arab Emirates used manned aircraft and drones to attack 12
“modular” refineries used by Islamic State in its oil-smuggling
operations, U.S. Central Command said today in an e-mailed statement.
Initial indications were that the strikes
succeeded, the command said.
- Japan Steps Up Russia Sanctions, Protests Island Visit.
Japan announced new sanctions on
Russia, and lodged a protest after a senior official visited an
island claimed by both nations, adding to tensions that have
delayed a visit by Russian President Vladimir Putin to Tokyo.
- China Steel Mills Hawk Rebar on Alibaba to Export Surplus.
A glut in the world’s biggest steel-making country means that prices
for basic products like rebar used in construction have collapsed, so
Tangshan Donghua is targeting buyers outside China who pay more. The
company now ships as much as 40 percent of its output everywhere from
Southeast Asia to South America to the Middle East, and wants to expand
exports even further.
- Goldman(GS) Sees Japan Stocks Dropping as Abe Runs Out of Tools. Japan
Prime Minister Shinzo Abe is running out of policy options to extend a
rally that sent stocks to a six-year high, according to Goldman Sachs
Group Inc. Investors have largely factored in more share-buying
by the nation’s $1.2 trillion Government Pension Investment Fund and
further fiscal and monetary stimulus to counter the deepest economic
contraction in five years, Kathy Matsui, chief Japan strategist at the
brokerage, said in an interview in Tokyo on Sept. 19. Goldman Sachs cut
Japanese equities to underweight for the next three months on Sept. 5,
projecting the Topix index will slide 5.7 percent from yesterday’s close
in the period.
- Asian Stocks Outside Japan Fall as Kiwi Plunges With Gold.
Asian stocks outside Japan slipped and the dollar climbed after a
four-year high as surging U.S. new-home sales signaled improvement in
the world’s biggest economy. Gold retreated and New Zealand’s dollar
slid after the central bank said again that its strength is unjustified.
The MSCI Asia Pacific excluding Japan Index dropped 0.3 percent at
12:18 p.m. in Tokyo, as Chinese shares in Hong Kong dropped after the
country’s foreign exchange watchdog said it
uncovered $10 billion of trade fraud.
- BlackRock Junk-Bond ETF Sinks as Debt Yield Spikes.
A slump in the U.S. junk-bond
market stretched into a third day as the biggest exchange-traded
fund that buys the debt fell toward the lowest level this year
and yields climbed to the highest since October.
Wall Street Journal:
- Junk-Bond Investors Start to See Warning Signs. Some Pare Riskiest Holdings as They Gird for Long-Running Rally to Falter. Brian Kloss isn't letting buoyant markets and U.S. economic expansion dull his sense of danger. Mr.
Kloss, a portfolio manager who helps oversee junk bonds at Brandywine
Global Investment Management, has been selling bonds from companies with
some of the lowest ratings and highest levels of debt, or leverage.
He's doing so despite a long-running rally in so-called junk bonds at a
time when many analysts forecast that U.S. growth...
- The Big Money Democrats. The liberal superrich may save the Senate for Harry Reid. Harry Reid and his fellow Democrats have made a campaign fetish of
denouncing the Koch brothers and other rich conservative donors for
allegedly buying elections. This turns out to be one of the great
misdirection plays of all time because big money might save the
Democratic Senate majority in November.
Fox News:
- Climate change? China rebuts Obama. While President Obama challenged China at the United Nations to follow
the U.S. lead in pushing for drastic reductions in national carbon
emissions to save the planet from “climate change,” it appears that
China has dramatically different ideas. As in: no.
- Kurds issue desperate plea from Syrian border town as ISIS closes in. Even as U.S. airstrikes continued to pound Islamic State positions in
Syria, Kurdish fighters told FoxNews.com the terror organization was
advancing on the Syrian town of Kobani, where as many as 400,000
residents and refugees are holed up. “Tell the world what is happening” said Rooz Bahjat, a senior Kurdish
military officer said Wednesday by phone. “This could be a massacre if
no help arrives.”
Zero Hedge:
Business Insider:
Reuters:
- Your medical record is worth more to hackers than your credit card. Your medical information is worth 10 times more than your credit card number on the black market.
Last month, the FBI warned healthcare providers to guard against cyber
attacks after one of the largest U.S. hospital operators, Community
Health Systems Inc, said Chinese
hackers had broken into its computer network and stolen the
personal information of 4.5 million patients.
Financial Times:
- ‘Supranationals’ borrow at record levels. The
effects of the global financial crisis have pushed “supranational”
organisations such as the World Bank to issue record levels of debt to
international investors. Pan-national borrowers such as the European Investment Bank,
World Bank and Inter-American Development Bank have raised $219bn on
global debt markets so far this year – the largest sum ever raised at
this point in the year, according to data from Dealogic.
Voice of Russia:
- Xi Says China Won't Support Russia Sanctions. President Xi Jinping said China will never support nor participate in sanctions against Russia no matter how much pressure China faces, citing Russian Federation Council Chairman Valentina Matviyenko, who made comments to reporters after meeting Xi Sept. 23.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 95.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 63.75 -1.25 basis points.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 296K versus 280K the prior week.
- Continuing Claims are estimated to rise to 2440K versus 2429K prior.
- Durable Goods Orders for August are estimated to fall -18.0% versus a +22.6% gain in July.
- Durables Ex Transports for August are estimated to rise +.6% versus a -.8% decline in July.
- Cap Goods Orders Non-Defense Orders Non-Defense Ex Air for August are estimated to rise +.4% versus a -.5% decline in July.
9:45 am EST
- Preliminary Markit US Services PMI is estimated to fall to 59.2 versus 59.5 in August.
11:00 am EST
- Kansas City Fed Manufacturing Activity for September is estimated to rise to 6.0 versus 3.0 in August.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lockhart speaking, Japan CPI, $29B 7Y T-Note auction, 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 industrial and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Almost Sector Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.57 -9.11%
- Euro/Yen Carry Return Index 145.47 -.39%
- Emerging Markets Currency Volatility(VXY) 7.27 -1.62%
- S&P 500 Implied Correlation 48.57 -12.02%
- ISE Sentiment Index 110.0 +50.68%
- Total Put/Call .83 -17.82%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.92 -2.93%
- European Financial Sector CDS Index 58.35 -2.19%
- Western Europe Sovereign Debt CDS Index 27.83 -1.64%
- Asia Pacific Sovereign Debt CDS Index 64.72 -.54%
- Emerging Market CDS Index 249.51 -2.37%
- China Blended Corporate Spread Index 310.22 +.77%
- 2-Year Swap Spread 21.75 -3.0 basis points
- TED Spread 23.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -8.5 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 198.0 -2.0 basis points
- China Import Iron Ore Spot $79.40/Metric Tonne unch.
- Citi US Economic Surprise Index 26.90 +5.8 points
- Citi Emerging Markets Economic Surprise Index -17.10 +1.5 points
- 10-Year TIPS Spread 2.04 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +135 open in Japan
- DAX Futures: Indicating +20 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
