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) 28.68 +26.15%
- Euro/Yen Carry Return Index 141.40 -.07%
- Emerging Markets Currency Volatility(VXY) 8.66 +3.84%
- S&P 500 Implied Correlation 71.57 +10.67%
- ISE Sentiment Index 99.0 +59.68%
- Total Put/Call 1.33 +26.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 75.17 +3.29%
- European Financial Sector CDS Index 74.85 +9.79%
- Western Europe Sovereign Debt CDS Index 30.91 +14.58%
- Asia Pacific Sovereign Debt CDS Index 73.58 +.28%
- Emerging Market CDS Index 290.99 +7.72%
- China Blended Corporate Spread Index 340.95 +3.20%
- 2-Year Swap Spread 27.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.25 -.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 178.0 -5.0 basis points
- China Import Iron Ore Spot $82.55/Metric Tonne -1.52%
- Citi US Economic Surprise Index 12.30 -7.1 points
- Citi Eurozone Economic Surprise Index -57.1 +.2 point
- Citi Emerging Markets Economic Surprise Index -23.90 +1.4 points
- 10-Year TIPS Spread 1.85 -7 basis points
Overseas Futures:
- Nikkei Futures: Indicating -401 open in Japan
- DAX Futures: Indicating -21 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -5.61% 2) Banks -4.62% 3) Medical Equipment -3.71%
Stocks Falling on Unusual Volume:
- SHPG, QQEW, ABBV, GOF, NGG, STAG, EXCU, QEP, CUK, XIV, DCUB, CHY, LLTC, IEP, KEY, NUS, THS, TDIV, CHI, GDV, TWC, MAIN, DOW, CCL, COV, TRN, SSE, ROSE, LMNX, SIVB, EVEP, HLT, AMG, HCA, RCL, JPM, VOYA, OAS, CMA, LINE, BX, BAC, LGCY, C, UAL, NFBK, APA, THS, AGN, PEGI, OXY, OGE, CBSH, BBT, LVNTA, STJ, WLL, KKR, AAL, CNP, LNCO, MAS, ACT, WYN, PNC, LEA, AMTD, FRGI, MTB, PPL, DAL, DIS, FLS, AB, EXPE, OIS, IGTE, MCK and AEL
Stocks With Unusual Put Option Activity:
- 1) SD 2) ITB 3) KEY 4) LLTC 5)XLY
Stocks With Most Negative News Mentions:
- 1) WYNN 2) CAT 3) JPM 4) AGN 5) OXY
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.57% 2) Homebuilders -.03% 3) REITs -.82%
Stocks Rising on Unusual Volume:
- PENX, LAKE, AGIO, NOG, NLNK, MTDR, BCRX, CMRX, AGIO, SXL, ANN, MTDR and NRP
Stocks With Unusual Call Option Activity:
- 1) NLNK 2) INFN 3) MNKD 4) ARIA 5) RRC
Stocks With Most Positive News Mentions:
- 1) NRP 2) VSR 3) TLT 4) TWX 5) UNFI
Charts:
Evening Headlines
Bloomberg:
- Airstrikes Fail to Stop Gains by Islamist Terrorists. President Barack Obama will try to shore up a coalition against Islamic State forces today as
airstrikes have failed to stop the extremist Sunni group from gaining
territory in Iraq and Syria. With questions growing about a plan
that lacks effective ground forces, Obama and the top U.S. military
officer will meet with defense ministers from more than 20 allied
countries to bolster support for a strategy that even former
administration officials say is foundering.
- Ebola Outbreak Boosts Odds of Mutation Helping It Spread. The Ebola virus circulating in West
Africa is already different from previous strains. While scientists don’t fully understand what the changes
mean, some are concerned that alterations in the virus that
occur as that pathogen continues to evolve could pose new
dangers. Researchers have identified more than 300 new viral
mutations in the latest strain of Ebola, according to research
published in the journal Science last month. They are rushing to
investigate if this strain of the disease produces higher virus
levels -- which could increase its infectiousness.
- China’s NDRC Said to Suspend Company Bond Assents Amid Probe. China’s top economic planning agency is said to have suspended approvals this week for the sale of corporate bonds, deepening a crackdown on corruption and irregularities in the bond market. It’s not clear when approvals will resume as the National
Development and Reform Commission may issue stricter regulations
for corporate bond sales, according to people familiar with the
matter. They asked not to be identified because the suspension
hasn’t been made public. The 21st Century Business Herald also
reported the suspension yesterday.
- China Factory-Gate Price Drop Ties Asian-Crisis Record.
China’s factory-gate prices fell in September for a record-tying 31st
month while consumer inflation eased to the slowest since January 2010,
adding to signs of tepid demand in the world’s second-largest economy. The
producer-price index dropped 1.8 percent from a year earlier, the
National Bureau of Statistics said in Beijing today, compared with the
median projection of a 1.6 percent decline in a survey of analysts by
Bloomberg News. The consumer-price index rose 1.6 percent, below
estimates for a 1.7 percent
gain, after August’s 2 percent increase.
- Bank of Korea Cuts Rate to 4-Year Low to Bolster Demand.
The Bank of Korea cut its benchmark interest rate to the lowest level
since 2010 to bolster demand and price gains in Asia’s fourth-largest
economy. Governor Lee Ju Yeol and his board lowered the seven-day
repurchase rate to 2 percent from 2.25 percent, the central bank said in
a statement in Seoul today. Twelve of 22 economists surveyed by
Bloomberg News forecast the move, while nine
projected no change.
- Rio Tinto(RTP) Iron Ore Output Climbs 13% Into Price Slump.
Rio Tinto Group(RIO), the world's second-biggest iron ore exporter said third-quarter production rose 13
percent, adding to a global glut of the steelmaking material
that’s pushed prices to five-year lows. Output was 60.4 million
metric tons in the three months to
Sept. 30, compared with 53.4 million tons a year earlier,
London-based Rio said today in a statement. That’s put it on track to
produce a total of 300 million tons, including third party tons, this
year, close to 2013 output at Vale SA (VALE), the biggest exporter.
- Treasury Yield Gap Narrowest in 16 Months on Global Growth Woes. The
extra yield on Treasury 10-year notes over two-year securities shrank
to the narrowest in 16 months amid concern global growth and inflation
are slowing. Treasuries have returned 1.7 percent this month, set for
the biggest gain since January, amid speculation the Federal Reserve
will delay interest-rate increases. Thirty-year yields were near the
least since May 2013 after China’s data showed inflation in the world’s
second-largest economy moderated in September and before a U.S. report
that economists said will show retail sales fell for the first time in
eight months. U.S. inflation expectations were the lowest in more than a
year.
- Dollar Rises Amid Signs of Global Weakness; Won Slips.
The dollar gained as signs of global
weakness drove investors toward the relative strength of the U.S.
economy, while West Texas Intermediate oil was little changed following
its biggest drop in two years. The won weakened after the Bank of Korea
cut key interest rates. The Bloomberg Dollar Spot Index climbed 0.2
percent by 10:41 a.m. in Tokyo as the slowest inflation in four years in
China sent commodity currencies lower and the euro weakened. Japan’s
Topix (TPX) gauge increased 0.2 percent.
- Oil and Junk Don’t Mix as Worst Bonds Sink as Much as 19%.
If you’re wondering why junk bonds keep selling off, consider this: Oil
prices are tanking and energy companies now account for a record
proportion of the below investment-grade market. Debt
of high-yield energy companies has tumbled 4.6 percent since August,
leading the market down as the price of Brent crude futures plummeted to
the lowest in about four years. Some securities have fared much worse,
like the 19 percent plunge in oil and gas producer Samson Investment
Co.’s bonds.
Wall Street Journal:
- European Policy Makers At Odds As Eurozone’s Economic Woes Deepen. ECB Concerned Bolder Monetary Policy Won’t Work Without Government Moves to Revive Recovery. A standoff among the European Central Bank, Germany and other
eurozone governments is holding back Europe’s quest to revive its
flagging economic recovery.
The tensions, brewing for months,
have sharpened this month as eurozone economic data have deteriorated
and threaten to prevent a coherent policy response as Europe’s economy
slides toward a third recession in six years. A growing number of policy makers and advisers...
- Hong Kong Clashes Erupt as Police Clear Protesters. Democracy Movement
Dealt Setback as Police Take Down Barricades. Protests here reached a
new phase of
conflict as police and students clashed over territory in districts that
have been paralyzed by pro-democracy rallies for more than 2½ weeks.
Students
and police clashed overnight in a confrontation over a tunnel near the
city’s government headquarters after police demolished barricades that
had blocked a key road in the city’s main business district.
- Global Oil Glut Sends Prices Plunging. U.S.-Led Wave of Crude Threatens Stability of Some Countries While Providing Lift to Others. Oil prices posted their biggest one-day drop in nearly two years
Tuesday as a U.S.-led wave of crude has crashed into weak global demand,
threatening the stability of some countries and providing an economic
lifeline to others. Tuesday’s slide of 4.5% by U.S. crude oil to
$81.84 a barrel on the New York Mercantile Exchange left the price down
20% since the start of June. That was the lowest closing price since
June 2012, and some...
Fox News:
- Feds warn of possible ISIS-inspired attacks on police, government officials, media. (video) Federal officials are warning U.S. law enforcement about the threat
of Islamic State-inspired terror attacks against police officers,
government workers and “media figures” in the U.S. In a joint intelligence bulletin sent to law enforcement and
confirmed by Fox News, the FBI and Department of Homeland Security
warned about the Islamic State's calls on social media forums for
violence.
CNBC:
- Hedge funds feel the pain, particularly in energy. There is a lot of pain in hedge-fund land. Imagine how these guys
feel. First, they have underperformed all year because most funds
run a book of long stocks versus a book of short stocks. Because shorts
have underperformed most of the year, they have underperformed the
market. Again. Now, they are getting killed because of how they are
positioned: 1) long U.S. market, and 2) long growth stocks. Growth has gotten hit hard: Semis (XSD) down 15 percent this month, Internet (FDN) and Biotech (IBB) down 7 percent.
But a particularly painful example is energy. The Street has been
heavily involved in exploration and production stocks, particularly
smaller-cap shale plays, which have been dramatically growing earnings. The SPDR Oil & Gas Exploration ETF (XOP), a basket of E&P stocks, is down 20 percent this month.
Zero Hedge:
Business Insider:
Reuters:
- U.S. TIPS breakeven rates fall on oil market selloff. U.S. bond market gauges on
inflation expectations fell sharply on Tuesday as tumbling oil
prices stoked worries about flagging domestic price growth that would hurt the U.S. economy. Oil prices in London ended near $85 a barrel, falling nearly
$4, which was its biggest single-day decline in more than two
years.
The yield spread between five-year Treasury
Inflation-Protected Securities and regular five-year Treasuries
or five-year TIPS breakeven rate fell to 1.52 percent late
Tuesday, down 8 basis points from late on Friday. The breakeven rate on 10-year TIPS and 10-year nominal
Treasuries fell 5 basis points to 1.92 percent, near a 16-month
low set recently.
Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goaFed's Williams: Can't wait too long to raise rates
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.75 unch.
- Asia Pacific Sovereign CDS Index 73.25 +.25 basis point.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Empire Manufacturing for October is estimated to fall to 20.25 versus 27.54 in September.
- Retail Sales Advance for September are estimated to fall -.1% versus a +.6% gain in August.
- Retail Sales Ex Autos and Gas for September is estimated to rise +.4% versus a +.5% gain in August.
- PPI Final Demand for September is estimated to rise +.1% versus unch. in August.
- PPI Ex Food and Energy for September is estimated to rise +.1% versus a +.1% gain in August.
10:00 am EST
- Business Inventories for August are estimated to rise +.4% versus a +.4% gain in July.
11:00 am EST
- The Monthly Budget Statement for September is estimated at $90.0B versus $75.1B in August.
2:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The
weekly MBA mortgage applications report, Canaccord Resources
Conference, (MELI) investor day and the (SFE) investor day could also
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted
by industrial and commodity 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.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 23.25 -5.64%
- Euro/Yen Carry Return Index 141.33 -.65%
- Emerging Markets Currency Volatility(VXY) 8.35 +.72%
- S&P 500 Implied Correlation 70.48 -2.36%
- ISE Sentiment Index 71.0 +31.48%
- Total Put/Call 1.0 -35.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.85 +1.65%
- European Financial Sector CDS Index 68.18 -.70%
- Western Europe Sovereign Debt CDS Index 26.98 +1.79%
- Asia Pacific Sovereign Debt CDS Index 73.59 +.92%
- Emerging Market CDS Index 269.44 +.90%
- China Blended Corporate Spread Index 330.37 +.51%
- 2-Year Swap Spread 27.75 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.50 unch.
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 183.0 -2.0 basis points
- China Import Iron Ore Spot $83.82/Metric Tonne -.42%
- Citi US Economic Surprise Index 19.40 +.3 point
- Citi Emerging Markets Economic Surprise Index -25.30 -.5 point
- 10-Year TIPS Spread 1.92 -4 basis points
Overseas Futures:
- Nikkei Futures: Indicating +3 open in Japan
- DAX Futures: Indicating -11 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/medical/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Style Underperformer:
Sector Underperformers:
- 1) HMOs -1.76% 2) Oil Tankers -1.52% 3) Construction -.07%
Stocks Falling on Unusual Volume:
- NTCT, PAA, CQP, LAKE, BBEP, TK, WHZ, MMP, STE, KING, TOO, OKE, SXL, BPL, SRE, MCEP, DPM, CAPL, TRP, DYN, JNJ, ARLP, QRE, SIG, EXPE, NGL, QRE, AXDX and ENOC
Stocks With Unusual Put Option Activity:
- 1) AMJ 2) CSX 3) WMB 4) PRU 5) FLEX
Stocks With Most Negative News Mentions:
- 1) VMW 2) AIRM 3) ENOC 4) VOXX 5) CI
Charts:
