Market Week in Review

• S&P 500 1,964.58 +4.13%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Stocks Rising into Final Hour on Central Bank Hopes, Earnings Optimism, Short-Covering, Transport/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.53 unch.

• Euro/Yen Carry Return Index 142.88 -.06%

• Emerging Markets Currency Volatility(VXY) 7.91 +.13%

• S&P 500 Implied Correlation 66.88 +5.44%

• ISE Sentiment Index 95.0 -31.16%

• Total Put/Call .86 +4.88%

• NYSE Arms .79 -19.76% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.20 -1.17%

• European Financial Sector CDS Index 67.32 -1.08%

• Western Europe Sovereign Debt CDS Index 32.0 -.90%
• Asia Pacific Sovereign Debt CDS Index 67.85 -.15%

• Emerging Market CDS Index 255.34 -2.72%

• China Blended Corporate Spread Index 329.72 -1.52%
• 2-Year Swap Spread 26.25 +.75 basis point

• TED Spread 22.25 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -7.75 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 189.0 unch.

• China Import Iron Ore Spot $80.48/Metric Tonne +.24%

• Citi US Economic Surprise Index 17.20 -2.0 points
• Citi Eurozone Economic Surprise Index -36.8 +2.1 points

• Citi Emerging Markets Economic Surprise Index -17.60 -.6 point

• 10-Year TIPS Spread 1.90 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +144 open in Japan

• DAX Futures: Indicating +6 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech/medical/biotech sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:  

• Ebola Patient’s Home Decontaminated as Officials Reassure Public. (video) New York City authorities began decontaminating the apartment of the doctor who tested positive for Ebola as questions mounted over whether health-care workers caring for patients should be isolated. As officials fanned out today to reassure the public, the doctor, Craig Spencer, 33, was being treated in an isolation unit at Bellevue Hospital Center in Manhattan. Officials are tracing his contacts and monitoring those who have been with him since his return from West Africa. He traveled on the subway, went bowling and had close contact with several people in the days before developing an elevated temperature and alerting authorities. 

• N.Y. Ebola Case Shows Doctor Quarantine Needed: Lawmaker. (video) Doctors returning from treating Ebola patients in West Africa should be quarantined for at least three weeks, Representative Jason Chaffetz said today as Congress held a second hearing on the response to the virus’ outbreak. Chaffetz, a Utah Republican, said a New York City doctor’s self-monitoring for Ebola symptoms after he returned to the U.S. “didn’t work.” Doctors should be in “some sort of quarantine or isolation” for 21 to 42 days, he said. “He went into West Africa to help people who have Ebola,” Chaffetz said in an interview today on Bloomberg Television before the hearing. “You gotta love a person like that, but for them to come back, and then be out in the public in such a populous city like New York City. I think that scares a lot of people.”

• Putin Accuses U.S. of Blackmail, Weakening Global Order. The U.S. is behaving like “Big Brother” and blackmailing world leaders, while making imbalances in global relations worse, Russia’s president said. Current conflicts risk bringing world order to collapse, Vladimir Putin told the annual Valdai Club in the Black Sea resort of Sochi. The Cold War’s “victors” are dismantling established international laws and relations, while the global security system has become weak and deformed, with the U.S. acting like the “nouveau riche” as global leader, he said.

• Merkel Says Ukraine May Lose EU Gas Without Russia Deal. German Chancellor Angela Merkel said Ukraine risks losing gas supplied by its European supporters if it doesn’t reach an agreement on payments to Russia. The European Union is showing solidarity with Ukraine through reverse flow gas deliveries in its conflict with Russia, Merkel said at an EU summit in Brussels. She urged negotiators to come up with a financing agreement before the turmoil disrupts gas supplies to Europe in the winter.

• China Stocks Post Biggest Weekly Loss in 4 Months on IPO Concern. China’s benchmark stock index posted its biggest weekly loss in four months amid concerns new share sales are diverting funds from existing equities and a slowing economy is hurting profits. Great Wall Motor Co., the biggest Chinese maker of SUVs, slid 6.7 percent in Shanghai after third-quarter profit dropped 22 percent. China Construction Bank Corp. (601939) retreated to a one-week low after earnings trailed estimates. Anhui Conch Cement Co., the largest producer of building materials, slumped 2.4 percent in Hong Kong after new-home prices in China fell in all but one city monitored by the government last month. The Shanghai Composite Index (SHCOMP) dropped 1.7 percent this week, the most since the five-day period ended June 20. 

• European Stocks Decline as Stoxx 600 Trims Weekly Advance. European stocks fell, paring their biggest weekly jump of the year, after a report on U.S. new-home sales, and as a draft communique showed 25 lenders are set to fail the European Central Bank’s euro-area bank health check. The Stoxx Europe 600 Index slipped 0.3 percent to 327.17 at the close, after briefly extending its decline to 0.7 percent following the U.S. report. Commodity producers and oil and gas companies retreated the most among the 19 industry groups on the gauge as Brent dropped. CaixaBank SA slid 3.4 percent and Royal Bank of Scotland Group Plc lost 0.9 percent.

• Aluminum Caps Biggest Two-Day Slide in Three Weeks. Aluminum capped the biggest two-day loss in three weeks as signs of a weaker housing market raised concern that demand will slow in China, the world’s top metals consumer. New-home prices fell in all but one Chinese city monitored by the government in September, the nation’s statistics bureau said today. Aluminum’s uses in construction include sheet products for roofing and wall cladding, according to Rio Tinto Group, which produces the lightweight metal. 

• WTI Heads for Weekly Drop as Saudi Policy Seen Unchanged. West Texas Intermediate retreated from the biggest gain since September amid speculation a drop in Saudi Arabian oil supplies isn’t a signal that OPEC’s largest producer has decided to cut production. Brent slid in London. Futures fell as much as 1.3 percent in New York and are poised for a fourth weekly decline.

Wall Street Journal:

• Pentagon Believes North Korea Has Made Advance in Nuclear Weapons.

• Islamic State Targets Town as Iraq Army Musters for Defense of Baghdad. Weakness of Iraq’s U.S.-Trained Military Raises Concerns as Islamic State Threatens Baghdad.

ZeroHedge:

• NYPD Stunner: Cops Exit Ebola Victim Apartment, Dump Gloves, Masks In Sidewalk Trash Can. (video)

• Market Liquidity Is Back Near Record Lows. (graph)

• French Unemployed Hits Record High, Hollande Demands EU Budget "Must Be Adapted". (graph)

• The Housing Recovery Has Been Canceled Due To Data Revisions. (graph)

• 25 Banks Said To Fail European Stress Test, 10 In Talks On Capital Shortfall.

• Burst Chinese Housing Bubble Leads To First Annual Price Decline Since 2012; Prices Drop In Record 69 Cities. (graph)

• Forget "Lower For Longer", The Fed's New Message Is "Sooner But Slower".

Business Insider:

• Sears(SHLD) Has Passed The Point Of No Return.

• Several Reported Injured After A Shooting At A High School In Washington.

• Putin Just Gave One Of The Most Anti-American Speeches Of His Career.

Reuters:

• Russia still has troops in Ukraine, NATO says. Russia still has troops in eastern Ukraine and retains a very capable force on the border despite a partial withdrawal, NATO's military commander said on Friday. "We've seen a pretty good withdrawal of the Russian forces from inside Ukraine but, make no mistake, there remain Russian forces inside eastern Ukraine," U.S. Air Force General Philip Breedlove told reporters at NATO's military headquarters near Mons in Belgium. Some Russian troops stationed near the Ukraine border had left and others appeared to be preparing to leave. "But the force that remains and shows no indications of leaving is still a very, very capable force," said Breedlove, NATO's supreme allied commander Europe.

Mirror:

• Ebola virus: Death toll could top 90,000 by December as world's deadliest outbreak continues.

Daily Times:

• Leaflet drop ‘catastrophic’ to inter-Korean relations: DPRK. White paper says leaflet distribution part of psychological warfare against DPRK by US, S Korea.

Bear Radar

Style Underperformer:

• Small-Cap Value -.33%

Sector Underperformers:

• 1) Internet -1.42% 2) HMOs -1.24% 3) Networking -1.20%

Stocks Falling on Unusual Volume:

• IMS, SYNA, AMZN, HUBG, PGI, P, QIWI, DECK, LOGM, FTK, EGOV, FWRD, JNPR, NLNK, HTLD, LAKE, NPSP, CFX, LPNT, AEO, F, GRUB, TCB, VMI, SWN, SIVB, F and BAS

Stocks With Unusual Put Option Activity:

• 1) CTXS 2) XLU 3) DECK 4) MTW 5) XLE

Stocks With Most Negative News Mentions:

• 1) GM 2) DDD 3) STE 4) ANF 5) AEO
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.14%

Sector Outperformers:

• 1) Steel +2.46% 2) Biotech +1.29% 3) Software +1.14%
  

Stocks Rising on Unusual Volume:

• DRIV, QLIK, GIMO, RUBI, BJRI, KLAC, AGU, LGF, MXIM, EW, N, MXWL, RMD, IDXX, AVY, SPNC, SHLD, BMRN, SWFT, IM, LEA, WOOF and FLIR

Stocks With Unusual Call Option Activity:

• 1) VRX 2) P 3) AMZN 4) NTAP 5) SYNA

Stocks With Most Positive News Mentions:

• 1) STT  2) CWEI 3) UPS 4) MSFT 5) PG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• New York Gets First Ebola Case as Man Brought to Hospital. A New York City doctor has tested positive for Ebola after returning from work in West Africa with an aid agency, the first case of the deadly disease diagnosed in the most populous U.S. city. The doctor, Craig Spencer, 33, is being treated in an isolation unit at Bellevue Hospital Center in midtown Manhattan. The diagnosis was made by the New York City Department of Health & Mental Hygiene and announced by New York City Mayor Bill de Blasio at a news conference. Samples of Spencer’s blood will be sent to the U.S. Centers for Disease Control and Prevention in Atlanta for confirmation, the CDC said. A CDC team will help health workers at Bellevue safely care for him while trying to track down anybody he may have had close contact with while he was sick.

• CDC’s Ebola ‘Go’ Team Sprints to New York. Start packing for New York, the “go” team from the U.S. Centers for Disease Control and Prevention was told. A doctor there was back from a West African hot zone with Ebola-like symptoms, and was in a city hospital.The disease experts traveling tonight are Pierre Rollin, who the CDC calls the world’s top expert on viral hemorrhagic fevers, Rima Khabbaz, the team’s leader, who led the agency’s Washington field response during the 2001 anthrax attacks, and David Daigle, a communications officer.

• Lone-Wolf Attacks Duel With Airstrikes in New Warfare Era. Six needle-nosed CF-18 fighter jets took off from the Canadian Forces base in Cold Lake, Alberta, Oct. 21 to join the coalition fighting Islamic State. The next day, a convert to Islam attacked symbols of the Canadian state, killing a soldier and riddling the parliament with bullets. As the U.S., Canada and their allies armed with supersonic fighters, laser-guided bombs and unmanned aircraft strike the extremist group in Iraq and Syria, the terrorists are urging individual Muslims worldwide to kill non-believers with guns and knives. 

• Escalation Likely If Iran Talks Fail, U.S. Official Says. The alternatives to an international accord preventing Iran from producing nuclear weapons are “quite terrible,” the chief U.S. negotiator in talks with Iran said. Even so, Under Secretary of State for Political Affairs Wendy Sherman said today, the U.S. won’t accept “a bad deal or even a half-bad deal” to avoid failure.

• China Home-Price Drop Spreads as Easing Fails to Halt Downturn. China’s new-home prices fell in all but one city monitored by the government last month as easings of property curbs failed to stem a market downturn amid tight credit. Prices dropped in 69 of the 70 cities in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the data. Prices fell in 68 cities in August. 

• Iron Ore Glut Spurs Drop in China Output, Goldman Sachs Says. Iron ore production in China has probably been contracting since April and further mine shutdowns in the largest importer are forecast as a global seaborne glut expands, according to Goldman Sachs Group Inc. Monthly output from mines in the country may have dropped about 20 percent from a year earlier, analysts Christian Lelong and Amber Cai wrote in an e-mailed report, citing an implied figure from the bank’s in-house analysis. That estimate may overstate the actual drop, Lelong and Cai added.

• Rousseff or Neves? Brazilians Await Bad News Whoever Wins. Whoever wins Brazil’s presidential runoff election this Sunday won’t have much good news to deliver on the outlook for the world’s second-largest emerging market. Brazil is in recession, and annual inflation is above the ceiling of its target range. A widening budget deficit threatens the country’s investment-grade status, and business confidence hovering around five-year lows has driven investment to the lowest rate among the BRICS nations, which include Russia, India, China and South Africa.

• Asian Stocks Extends Weekly Gain on U.S. Earnings, Europe. Asian stocks rose, with the regional benchmark index extending its first weekly gain in seven weeks, after U.S. earnings beat estimates and data signaled stronger European growth. The MSCI Asia Pacific Index (MXAP) advanced 0.5 percent to 137.72 as of 9:01 a.m. in Tokyo. 

• Nickel Heads for Longest Losing Streak in 13 Years on Stockpiles. Nickel is poised for the longest run of weekly losses since 2001 as stockpiles surge to a record amid concern that demand is slowing in China, the world’s biggest user of industrial metals. The metal in London gained for the first time in five days, paring its seventh weekly loss. Stockpiles tracked by the London Metal Exchange have jumped 44 percent this year to 377,538 metric tons, rising for a third year, according to bourse data. China’s September imports of nickel, including alloys, fell 28 percent from the same month last year while exports more than tripled, according to customs data this week. “Huge LME inventories, especially in Asia, have worsened nickel’s fundamentals,” said Hwang Il Doo, a senior metals trader at Korea Exchange Bank Futures Co. in Seoul. “Without a recovery in China’s consumption, it won’t be easy to rebound to levels seen earlier this year.”

• Fed to Stress-Test Banks for Dire Stock, Housing Scenarios. The Federal Reserve said it will scrutinize how 31 large U.S. banks, including JPMorgan Chase & Co. and Citigroup Inc., would respond to a plunge in equity and housing prices and a sharp downturn in the global economy. The annual tests, using hypothetical scenarios that are not forecasts, are the cornerstone of the Fed’s efforts to prevent a repeat of the 2008 financial crisis and to gauge the ability of banks to withstand economic turmoil. The Fed uses the exams to prod lenders into building up capital buffers. Firms that fail may have to forgo stock buybacks and higher dividends. In the Fed’s “severely adverse” scenario, stocks fall by 60 percent by the fourth quarter of 2015 and housing prices drop by about 25 percent. Unemployment peaks at 10 percent, gross domestic product declines by 4.5 percent and the price of oil rises to $110 per barrel. Long-term Treasury yields fall to 1 percent. Jaret Seiberg, an analyst at Guggenheim Securities LLC, wrote in a research note today about the scenarios that they will “limit the ability of banks to get aggressive in returning capital to shareholders.”

• ‘Humongous’ Treasury Future Surge Suggests Math Error. It looks like a Treasury futures trader failed to do his or her homework. The price of 30-year Treasury futures expiring in June traded for less than 145 for about two hours yesterday before shooting up to more than 150. The 7.3 percent surge in their price yesterday, on the first day these particular contracts were traded, was unprecedented for 30-year Treasury futures, according to data compiled by Bloomberg. Volume amounted to 1,639 contracts with a notional value of $164 million. 

• Wall Street Dealers Slash Holdings of Junk Bonds by 68 Percent. Wall Street bond dealers cut their net high-yield bond holdings by 68 percent in the week ended Oct. 15 amid the biggest surge in volatility in more than a year. The 22 primary dealers that trade with the Federal Reserve reduced their positions by about $4.3 billion to a net $2 billion, according to Fed data released today. The debt lost 1.5 percent in the week ended Oct. 15 as concern mounted that a global slowdown would hamper U.S. central-bank efforts to stimulate economic growth. 

• Investors Pull $1.7 Billion From U.S. Loan Funds: Lipper. Investors pulled $1.7 billion from U.S. funds that buy leveraged loans in the past week, the most since August 2011, according to Lipper. The withdrawal extends the longest stretch of outflows since 2008 to 15 straight weeks, bringing the net amount pulled for the year to $13.1 billion. Investors added $1.7 billion to from U.S. funds that buy high-yield bonds, paring net outflows in 2014 to $17.5 billion, Lipper data show.

Wall Street Journal: 

• New York Doctor Tests Positive for Ebola. Craig Spencer Recently Returned to New York After Treating Ebola Patients in West Africa. A physician who had returned to New York City 10 days ago after treating Ebola patients in West Africa has tested positive for the disease, according to an official familiar with the findings. Craig Spencer, a 33-year-old physician who worked with Doctors Without Borders and lives in Upper Manhattan, is the fourth person to be diagnosed with the deadly disease in the U.S.

CNBC:

• Wall Street may finally be giving up on Amazon(AMZN). (video) The company posted a huge earnings miss for its third quarter on Thursday, reporting a loss of 95 cents a share versus the street's estimate of 74 cents. And that big miss may be the last straw for investors, analysts said. 

• Microsoft(MSFT) earnings beat, cloud business soars. (video) The tech firm handed in earnings of 54 cents per share on revenue of $23.20 billion, beating Wall Street estimates of 49 cents per share on revenue of $22.02 billion, according to a consensus estimate from Thomson Reuters.

Zero Hedge:

• NYC Doctor Confirmed Positive For Ebola; Contact With Girlfriend (Quarantine) & 3 Others; "Unlikely" Contagious On Subway.

• A Furious Albert Edwards Lashes Out At Central Bankers: "Will These Morons Ever Learn?"

• Despite WHO's Confidence, Mali Becomes 6th West African Nation With Ebola.

• 3 Things Worth Thinking About.

• Why Amazon Is Crashing: Jeff Bezos' Nightmare Quarters In Charts.

• 40% Of Eurozone Banks Are In Bad Shape.

• Van Hoisington And The Fed's Bubble: "Overtrading" And "Discredit" Always End In "Revulsion".

Business Insider:

• Obama Is Trying To Impose A Radical New Order On The US's Middle Eastern Allies.

• Real Estate Insiders Think NYC's Luxury Housing Bubble Is Going To Pop.

• Pfizer(PFE) Announces Eye-Popping $11 Billion Share Buyback Plan.

• The US Strategy Against ISIS May Be Imploding.

PIX11.com: 

• NYPD concerned hatchet attack may be linked to terrorism. (video) Four police officers and a woman were injured, and a hatchet-wielding man was fatally shot during a bloody altercation Thursday in Queens and now officials are looking to see if the attack was prompted by terrorism.

Reuters:

• China local debt fix hangs on Beijing's wishful thinking. China is asserting control over once-chaotic local government financing by banning the use of opaque funding vehicles, but filling the gap with a huge expansion of the fledgling municipal bond market will raise a whole new set of problems. 

• GM Financial receives second subpoena into subprime auto lending. GM Financial, the in-house financing arm of General Motors Co, said on Thursday it received subpoenas in September from state attorneys general and other authorities over its subprime auto lending and securitization practices.

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

• None of note

Night Trading

• Asian equity indices are -.50% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 115.0 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 68.0 +.25 basis point.

• FTSE-100 futures -.43%.

• S&P 500 futures -.42%.

• NASDAQ 100 futures  -.50%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AVY)/.74

• (B)/.58

• (BMY)/.42

• (CL)/.75

• (F)/.19

• (LEA)/1.88

• (LYB)2.31

• (MCO)/.90

• (PG)/1.08

• (STT)/1.21

• (UPS)/1.28

• (WYN)/1.63

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK gdp report and Baker Hughes US Rig Count 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 lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.