Evening Headlines
Bloomberg:
- Russia Can’t Be Blackmailed Over Ukraine, Putin Says. It’s
futile for the U.S. and its
allies to “blackmail” Russia over the Ukraine crisis, President Vladimir
Putin said in a newspaper interview. Russia’s partners should remember
the risks involved in disputes between nuclear powers, Putin said. He
accused Barack Obama of adopting a “hostile” approach in naming Russia
as a threat to the world in the U.S. president’s speech to the United
Nations General Assembly on Sept. 24. “We hope that our partners
will realize the futility of attempts to blackmail Russia and remember
what consequences discord between major nuclear powers could bring for
strategic stability,” Putin told Serbia’s Politika newspaper on the eve
of his visit to the Balkan nation today.
- Obama Confronts Slippery Slope as Islamic State Advances. President
Barack Obama is facing the slippery-slope problem in Iraq and Syria that
he’s sought to avoid, with some advisers concluding that limited
airstrikes are insufficient to break Islamic State’s momentum. As
airpower has failed to dislodge the extremists from the
Syrian border town of Kobani or halt their offensive in Iraq,
Obama’s appeals for strategic patience are being challenged by
some U.S. military and intelligence officers and diplomats who
say more needs to be done.
- Second Ebola Worker’s Flight Adds to Safety Questions. A
second Texas health worker who tested positive for Ebola after caring
for a man killed by the virus in Dallas flew to Cleveland and back
before reporting she had symptoms of the deadly disease. U.S. officials are now tracking 132 others who were on the the Frontier Airlines flight used by the woman.
The flight and the back-to-back caregiver infections, the second of
which was reported this morning, open new questions about oversight
lapses by the Centers for Disease Control and
Prevention and bring new emphasis to criticisms by a nurses’ group about
the safety precautions in use.
- Dallas County Considers Declaring State of Disaster From Ebola. Dallas County Commissioners will vote tomorrow to declare a local state of disaster caused by the
Ebola virus. The county “has the potential to suffer widespread or
severe damage, injury, loss or threat of life resulting from the
Ebola virus,” according to a proposed draft of the declaration.
- EU Starts Two-Week Austerity Scrutiny as Crisis Reawakens. The European Union started a two-week probe of euro-area governments’
draft budgets as a re-emergence of the bloc’s debt-crisis nightmare
risked undoing its
economic recovery. As yields on 10-year securities from Europe’s
most-indebted nations surged yesterday, led by Greece and sweeping up
Portugal, Ireland and Italy, the European Commission started a process
of picking apart nations’ 2015 spending plans, seeking
to defuse potential fiscal timebombs.
- Greek Bailout Exit Plan at Risk Amid Bond, Stock Selloff. Greece’s plan to escape the shackles
of the biggest bailout in history is at risk of falling apart. A monthlong market selloff in stocks and bonds has pushed
yields to a level that investors say threatens once again to cut
Greece off from markets.
- Putin Allies Said Angling to Wrest Paper From WSJ, FT. Businessmen close to President Vladimir Putin are preparing to
acquire Vedomosti, the largest newspaper outside the Kremlin’s control,
three people familiar with the matter said. Putin signed a law
yesterday capping foreign ownership in media at 20 percent, meaning the
Wall Street Journal and the Financial Times, co-founders of the
newspaper, must cut or sell their 33 percent stakes by the end of 2016.
The third owner, Sanoma Oyj (SAA1V), is already in talks to sell its
Russian holdings.
- Brazil Vote in Dead Heat as Neves, Rousseff Tie in Poll. Brazilian opposition candidate Aecio Neves is statistically tied with President Dilma Rousseff 11
days before a runoff election, a Datafolha poll showed today. Neves garnered 45 percent support, compared with 43 percent
for Rousseff in the Oct. 14-15 poll of 9,081 people that has a
margin of error of plus or minus two percentage points. Rousseff
of the Workers’ Party, known as the PT, won 42 percent in the
first round on Oct. 5, compared to 34 percent for Neves of the
Brazilian Social Democracy Party, or PSDB.
- Asian Stocks Head to Six-Month Low; Bonds Rise, Oil Drops. Asian stocks slid toward a six-month low and average bond yields for the biggest developed economies fell to a record on concerns that global growth is at risk. Crude oil extended declines as South Korea’s won led emerging-market currencies higher.
The MSCI Asia Pacific Index sank 1.1 percent by 10:47 a.m.
in Tokyo, as every major Asian benchmark gauge retreated.
- Commodities Sink to Five-Year Low Led by Metals Declines. Commodities dropped to a five-year
low on growing concern that slower economic growth will cool
demand in China, the world’s top consumer of metals, grains and energy. The
Bloomberg Commodity Index (BCOM) of 22 raw materials fell as much as
much as 1.3 percent yesterday to the lowest since July 2009. Copper
futures dropped by the most since March on the Comex, while hog prices
posted the biggest loss in 25 months. Raw materials slumped 7 percent
this year, headed for a fourth annual decline and the longest slump
since at least 1991, amid concern that economic growth is weakening as global equity markets lost $1.5 trillion last week. A stronger dollar has
curbed demand for commodities as alternative assets.
- Dark Pools Said to Rebuff Orders Amid U.S. Volume Surge.
Three of the largest dark pools told
customers to trade elsewhere during at least part of today’s
session as concern about Ebola and global economic growth spurred the busiest day for U.S. stocks in three years. Goldman
Sachs Group Inc. (GS), Credit Suisse Group AG (CSGN) and UBS AG (UBSN)
told some clients to temporarily stop sending orders as volume surged,
according to five people with knowledge of the matter who spoke on
condition of anonymity. The instructions came as the broader market processed 11.9 billion shares, the most since
Oct. 27, 2011, according to data compiled by Bloomberg.
Wall Street Journal:
- Risk of Deflation Feeds Global Fears. Falling Commodities Prices Pressures Central Banks. Behind the spate of market turmoil lurks a worry that top policy
makers thought they had beaten back a few years ago: the specter of
deflation. A general fall in consumer prices emerged as a big
concern after the 2008 financial crisis because it summoned memories of
deep and lingering downturns like the Great Depression and two decades
of lost growth in Japan. The world’s central banks in recent years have
used a variety of...
- New Push to Check Spread of Ebola. Infected Nurse’s Trip on Airplane Raises Concerns. Concerns grew about containing the spread of
Ebola in the U.S. after federal health officials disclosed Wednesday
that the second Texas nurse infected with the virus flew from Dallas to
Cleveland and back in the days before reporting her symptoms. Amber
Joy Vinson, a nurse at Texas Health Presbyterian Hospital Dallas who
provided extensive medical care to a Liberian man with Ebola who died,
shouldn’t have been allowed to travel on a commercial flight, said the
director of the Centers for Disease Control and Prevention,
Tom Frieden.
“She should not have been on that plane,” he told reporters.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- EBay(EBAY), Wal-Mart(WMT) warnings stir holiday sales concerns. EBay
Inc on
Wednesday joined Wal-Mart Stores Inc in cutting its outlook for the
all-important holiday season, suggesting that the fourth quarter may
turn out to be weaker than some analysts predicted as recently as last
week. The warnings from two of the retail industry's most
influential players comes as investors re-assess the state of the global
economy after weak data this week from the two largest countries, the
United States and China.
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 -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 128.0 +7.25 basis points.
- Asia Pacific Sovereign CDS Index 73.75 +.5 basis point.
- NASDAQ 100 futures +.21%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 290K versus 287K the prior week.
- Continuing Claims are estimated to fall to 2380K versus 2381K prior.
9:15 am EST
- Industrial Production for September is estimated to rise +.4% versus a -.1% decline in August.
- Capacity Utilization for September is estimated to rise to 79.0% versus 78.8% in August.
- Manufacturing Production for September is estimated to rise +.3% versus a -.4% decline in August.
10:00 am EST
- Philly Fed Business Outlook Index for October is estimated to fall to 19.8 versus 22.5 in September.
- The NAHB Housing Market Index for October is estimated at 59.0 versus 59.0 in September.
4:00 pm EST
- Net Long-Term TIC Flows for August.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Plosser speaking, Fed's Lockhart speaking, Fed's Kocherlakota
speaking, Fed's Bullard speaking, Fed's George speaking, Eurozone Trade
Balance, weekly EIA natural gas inventory report, Bloomberg Economic
Expectations Index for October, weekly Bloomberg Consumer Comfort Index
and (AAPL) iPad event 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: 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
