Bull Radar

Style Outperformer:

• Small-Cap Growth +.43%

Sector Outperformers:

• 1) Gaming +2.28% 2) Oil Service +.98% 3) Road & Rail +.77%
  

Stocks Rising on Unusual Volume:

• JNS, AGIO, DMND, BBRY, RPRX, NKE, LM, MU, DGLY, AMBA, KPTI and AZPN

Stocks With Unusual Call Option Activity:

• 1) CDNS 2) CVEO 3) NKE 4) ABBV 5) ACAS

Stocks With Most Positive News Mentions:

• 1) NKE 2) BBRY 3) NOC 4) MU 5) LNKD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:

• Russia Risks Recession as Oil Drop Seen Squeezing Budget. The easing of tensions in Ukraine will offer little respite to Russia as the lowest oil prices in more than two years threaten to tilt the $2 trillion economy toward recession, according to a Bloomberg survey of analysts. Russia needs Urals, its main export crude blend, to trade at $100 per barrel or higher to avoid a recession, according to 58 percent of respondents in a survey of 19 economists. Given the level of U.S. and European sanctions over Ukraine, at least 19 percent of analysts said the current price is sufficiently low to put Russia’s financial stability at risk.

• Inflation Slowing More Than Forecast Shows Risk for BOJ: Economy. Japan’s inflation slowed more than expected in August, highlighting the risks facing Bank of Japan Governor Haruhiko Kuroda in his push for prices to rise 2 percent. Consumer prices excluding fresh food rose 3.1 percent from a year earlier, the statistics bureau said today in Tokyo, undershooting the median projection for a 3.2 percent increase in a Bloomberg News survey of 31 economists. Stripped of the effect of April’s sales tax increase, inflation was 1.1 percent, according to the BOJ’s estimates. 

• Yen Drop Erodes Japan Banks’ Advantage on Overseas Risks. The yen’s 20 percent depreciation since the end of 2012 has seen Japanese banks’ balance-sheet superiority against overseas competitors vanish. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest lender, has an adjusted core capital ratio of 9.4 percent, as the size of its overseas risk assets swelled, below the 11.5 percent for Deutsche Bank AG and 10.5 percent for Citigroup Inc., according to Bank of America Merrill Lynch calculations. The prices of subordinated U.S. dollar bonds sold by Sumitomo Mitsui Financial Group Inc. (8316) and Mizuho Financial Group Inc. that count as capital fell to three-month lows last week. 

• China Raises Death Toll From Xinjiang Bombs, Riots to 50. The death toll from violence that erupted in China’s turbulent far western region of Xinjiang last weekend was raised to 50 from two, state media reported, saying most of the dead were either killed by suicide bombs or shot by police. Forty “rioters,” six civilians and four police personnel died when several bombs exploded at places including a farmers’ market, two police stations and a shop in Luntai county at 5 p.m. on Sept. 21, news website Tianshannet reported. Another 54 people were injured, with 32 belonging to the Uighur ethnic minority and 22 Han Chinese, it said, citing the Xinjiang police investigation. The jump in confirmed casualties comes after Radio Free Asia yesterday reported that the original death toll of two given by authorities was too low, citing interviews with local officials and eyewitnesses.

• Alibaba(BABA) Bears Emerge to Short 8.9 Million Shares. Short sellers are making their first bets on a retreat in Alibaba Group Holding Ltd. (BABA) a week after the company priced the world’s biggest-ever initial public offering. Bears who profit from price declines have sold short 8.9 million shares, or about 2.4 percent of Alibaba’s listed stock, according to data compiled by Bloomberg and Markit, a London-based provider of financial information. The Hangzhou-based company, China’s biggest e-commerce operator, sold 368.1 million shares in the IPO. The stock fell 1.8 percent to $88.92 in New York yesterday. 

• China’s H Shares Drop to Lowest in Two Months as ICBC Retreats. Chinese stocks slumped in Hong Kong, dragging the benchmark index down to its lowest level since July 21, as banks and energy producers declined. Industrial & Commercial Bank of China Ltd. (601398), the nation’s largest lender, headed for a third straight weekly loss. PetroChina Co.,the country’s largest oil and natural gas producer, slid 1.2 percent. Tencent Holdings Ltd. (700) led declines by Chinese technology shares. The Hang Seng China Enterprises Index (HSCEI) fell 0.8 percent to 10,553.89 at 9:46 a.m. local time, taking its decline for the week to 2 percent. The gauge has lost 7.4 percent from this year’s Sept. 8 high on concern the government will refrain from major stimulus to spur growth.

• Asian Stocks Drop After U.S. Tumble as Aussie Bonds Rally. Asian stocks fell, with Japanese shares retreating from a six-year high, after the Standard & Poor’s 500 Index dropped the most in almost two months. Gold rallied with sovereign bonds as the cost of insuring debt against default climbed. The MSCI Asia Pacific Index (MXAP) lost 1 percent by 12:38 p.m. in Tokyo, as the Topix index dropped 1.1 percent from its highest close since June 2008. Indonesian stocks plunged the most in four months after the country scrapped direct regional elections.

• Brent Crude Heads for Weekly Decline on Ample Supply; WTI Steady. WTI for November delivery was 2 cents higher at $92.55 a barrel in electronic trading on the New York Mercantile Exchange. It fell 27 cents to $92.53 yesterday. The U.S. benchmark crude was at a discount of $4.47 to Brent, compared with $6.74 at the end of last week.

Wall Street Journal: 

• U.S. Turns Up the Heat on Turkey Over Islamic State. Obama, Biden, Arab Officials Push Ankara to Join Campaign Against Extremists. Turkey is showing signs of shifting to a more active role in the campaign against extremist group Islamic State as the government faces pressure from impatient U.S. and Arab officials. President Barack Obama called Turkish President Recep Tayyip Erdogan from Air Force One on Thursday and the two leaders agreed to consult more closely on the Islamic State threat. Vice President Joe Biden met Mr. Erdogan in New York on...

• Junkets That Fuel Macau Casinos Are on a Losing Streak. Businesses That Bring Affluent Chinese Gamblers to Macau and Provide Credit Face Growing Pressure.

• FDIC's Hoenig Keeps Wall Street on Edge. Straight-Talking Bank Regulator Leads Crusade to Ensure No Institution Is Too Big to Fail.

MarketWatch.com:

• This stock selloff has everyone talking about ‘divergence’.

CNBC: 

• Nike(NKE) earnings: $1.09 per share, vs. expected EPS of 88 cents. Nike shares spiked after the sports apparel maker easily blew past expectations. The company reported earnings of $1.09 a share versus estimates of 88 cents a share, on revenue of $7.98 billion, exceeding expectations of $7.84 billion.

Zero Hedge: 

• Gavekal Warns Of "Clear And Present Danger" For Stocks. (graph)

• Central Banking Is The Problem, Not The Solution.

• "The Gig Is Up". (graph)

•  Future Bull. (graph)

•  5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives.

Business Insider: 

• The US Is Concerned About Russian Cold War-Style Bomber Flights.

NY Times:

• Military Path Opened for Young Immigrants. A small number of young immigrants who grew up in the United States without legal status will be allowed to join the military and have a fast-track pathway to citizenship, Pentagon officials announced Thursday, the first time those young people have been able to enlist.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 94.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 65.25 +1.5 basis points.

• FTSE-100 futures -.02%.

• S&P 500 futures +.10%.

• NASDAQ 100 futures  +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BBRY)/-.17

• (FINL)/.60

Economic Releases
8:30 am EST

• 2Q GDP is estimated to rise +4.6% versus a prior estimate of a +4.2% gain.

• 2Q Personal Consumption is estimated to rise +2.9% versus a prior estimate of a +2.5% gain.

• 2Q GDP Price Index is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.

• 2Q Core PCE is estimated to rise +2.0% versus a prior estimate of a +2.0% gain.

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for September is estimated to rise to 84.8 versus a prior estimate of 84.6.

Upcoming Splits

• (COLM) 2-for-1

Other Potential Market Movers

• The German Consumer Climate Index could also impact trading today.

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

Stocks Falling into Final Hour on Russia Sanction Concerns, Global Growth Fears, Terrorism Worries, Healthcare/Tech Sector Weakness

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%

• NYSE Arms 1.54 +110.31% 

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

Today's Headlines

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:

• Holder resigning as attorney general, officials say. (video)

CNBC: 

• Fund flows flashing that there's danger ahead.

ZeroHedge:

• What Wall Street Thinks About Today's Selloff. (graph)
• Why Blackrock (And Every Other Bondholder) Is Freaking Out (In 1 Simple Chart). (graph)
• Global Bellwether: Japan's Social Depression.
• Record Durables Drop Follows Record Boeing-Driven Surge; Ex-Transports In Line. (graph)

Business Insider: 

• INFOGRAPHIC: How The Hedge Fund Industry Has Exploded Since 2008.
• The Economist's New Cover Says What Everyone Is Thinking About Obama Now.

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.

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.52%

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:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -1.15%

Sector Outperformers:

• 1) Utilities -.57% 2) REITs -.65% 3) Gold & Silver -.70%
  

Stocks Rising on Unusual Volume:

• HAWK, SKX, SQQQ and SWFT

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:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume