Stocks Slightly Lower into Final Hour on Global Growth Fears, Russia/Ukraine Tensions, Rising Eurozone/Emerging Markets Debt Angst, Healthcare/Defense Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.42 -1.83%

• Euro/Yen Carry Return Index 148.8 +.05%

• Emerging Markets Currency Volatility(VXY) 8.52 -.12%

• S&P 500 Implied Correlation 43.60 -4.70%

• ISE Sentiment Index 117.0 +19.39%

• Total Put/Call .96 +5.49%

• NYSE Arms .83 -4.83% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.60 +1.03%

• European Financial Sector CDS Index 67.28 +.57%

• Western Europe Sovereign Debt CDS Index 31.89 +2.11%
• Asia Pacific Sovereign Debt CDS Index 64.47 +.65%

• Emerging Market CDS Index 269.53 +1.48%

• China Blended Corporate Spread Index 323.42 +.40%
• 2-Year Swap Spread 21.75 +.25 basis point

• TED Spread 21.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -11.0 +1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 181.0 -3.0 basis points

• China Import Iron Ore Spot $75.84/Metric Tonne +.61%

• Citi US Economic Surprise Index 15.0 -1.20 point
• Citi Eurozone Economic Surprise Index -32.40 -1.0 point

• Citi Emerging Markets Economic Surprise Index -13.30 -.2 point

• 10-Year TIPS Spread 1.94 unch.

Overseas Futures:

• Nikkei Futures: Indicating -150 open in Japan

• DAX Futures: Indicating -26 open in Germany

Portfolio: 

• Lower: On losses in my biotech/medical sector longs and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Ukraine Cease-Fire Evaporates as Government Says 200 Rebels Dead. (video) Ukraine’s military said it killed as many as 200 rebels in an attack in Donetsk, inflicting the biggest blow from either side in the conflict in more than two months and removing pretense that a Sept. 5 truce is holding. Accusing Russia of sending dozens of tanks and other military vehicles across its border yesterday into separatist-held areas in eastern Ukraine, military spokesman Andriy Lysenko said Ukraine’s army was preparing for “an adequate reaction.” Lysenko said artillery strikes had killed the rebels and destroyed tanks and other armored vehicles after Ukrainian forces took fire at the Donetsk airport, where they have faced almost daily attacks. 

• Russia Signals Ruble Defense ‘Any Time’ Amid Currency Rout. Russia’s central bank said it’s ready to step in at any time to prop up the ruble as the world’s worst-performing currency over the past three months extended declines. The demand for dollars is creating conditions for risks to financial stability to emerge, the Bank of Russia in Moscow said in a statement on its website today. The monetary authority said it’s also ready to “use its other financial-market tools.” 

• German Industrial Production Rises Less Than Economists Forecast. German industrial production (GRIPIMOM) rebounded less than analysts forecast in September, signaling that Europe’s largest economy is struggling to recover. Production, adjusted for seasonal swings, rose 1.4 percent from August, when it contracted a revised 3.1 percent, the biggest decline since January 2009, the Economy Ministry in Berlin said today. Economists surveyed by Bloomberg News predicted a 2 percent increase in output. Production declined 0.4 percent in the third quarter. 

• European Stocks Decline, Erasing Gains, as Banks Retreat. European stocks fell from a five-week high, posting a weekly drop, as bank shares slumped amid signs the region’s common supervisor is tightening scrutiny. The Stoxx Europe 600 Index slid 0.5 percent to 335.25 at the close. Sixteen of the 19 industry groups on the benchmark gauge dropped, led by technology companies and Greek banks.

• Gold Climbs Most Since June as U.S. Jobs Trail Forecast. Gold futures headed for the biggest gain since June after U.S. employers added fewer jobs than forecast last month, reviving demand for a haven. Trading in New York was more than double the 100-day average for this time of day, data compiled by Bloomberg show.

• Obama to Move on Immigration Even With Warning, Aide Says. President Barack Obama won’t scale back plans for unilateral action on immigration and will press forward with his agenda even as Republican leaders warned of a poisoned relationship, a top aide said today. “We’re going to do what we think is best for the country,” senior Obama adviser Dan Pfeiffer told reporters and editors at a Bloomberg breakfast in Washington. “If they have disagreements about the things we do, they have the capacity to legislate.”

• Treasuries Rise as Dollar Falls on Payrolls Report. Treasuries climbed with gold while the dollar slid as weaker-than-forecast payrolls data spurred speculation the Federal Reserve will keep interest rates low for longer. U.S. stocks fluctuated near record levels while European equities slumped. The yield on 10-year Treasuries fell 6 basis points to 2.33 percent at 1:27 p.m. in New York. The Bloomberg Dollar Spot Index slid 0.5 percent.

• Iron Ore Has Biggest Weekly Loss Since May on Supply Glut. Iron ore capped the biggest weekly decline in more than five months amid expanding global surplus, with Vale SA’s opening of a port in Malaysia highlighting rising supplies and investments by the world’s largest shippers.

ZeroHedge:

• Why Matt Taibbi Thinks This Woman Is JPMorgan's "Worst Nightmare".

• Obama's Week Just Got Worse: Supreme Court To Rule On ObamaCare Subsidies.

• Meet The (First) Seven Banks Who Rigged The FX Market.

• "It's Different This Time" Japanese Stock Market Swing Is Fastest Ever.

• Yellen Supports Draghi's QE, Warns Of Heightened Volatility.

• America Will Soon Have More Waiters And Bartenders Than Manufacturing Workers. (graph)

• The Petrodollar Dominoes: How The Strong Dollar Is Slamming Oil Exporters (And Other BRICs). (graph)

• US Adds 214K Jobs In October, Below Expectations, Unemployment Rate Drops To 5.8%.

Business Insider:

• That Colossal Miscalculation Of Obama's Letter To Iran's Supreme Leader.

• A Disease Doctors Call A 'Silent Killer' Is Spread By Bugs That Bite Your Face In The Night — And It's Emerging In The US. The Washington Post reports that health officials found 17 Houston residents who had been infected with Chagas, a disease native to Latin America that is spread to humans through contact with the parasitic triatomine bug, or so-called kissing bug.

• Obamacare Is Headed For Another Supreme Court Showdown, And It Puts The Law In 'Dangerous Territory'.

• Russia Is Facing A 'Full-Blown Currency Crisis'.

• Russian Tanks Are Rolling Into Ukraine Again ...

Bear Radar

Style Underperformer:

• Small-Cap Growth -.24%

Sector Underperformers:

• 1) Semis -1.20% 2) I-Banks -1.13% 3) HMOs -1.12%

Stocks Falling on Unusual Volume:

• SLXP,. AMBR, STAY, ICPT, FNGN, BRKR, MDRX, DVA, HCI, ADVS, ANF, UBNT, FSLR, BBRG, ANET, HUM, OLED, PBH, PNK, BNFT, VIVO, SWKS, AIRM, GRUB, NDLS, ISIS, AKRX, RXN, SWKS, BNFT, AEO, VIVO, AGIO, ABCO and HGR

Stocks With Unusual Put Option Activity:

• 1) GNW 2) HON 3) MDR 4) EWJ 5) XLV

Stocks With Most Negative News Mentions:

• 1) ICPT 2) FSLR 3) GNW 4) ANF 5) BRKR
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.19%

Sector Outperformers:

• 1) Gold & Silver +5.83% 2) Steel +1.86% 3) Homebuilders +1.18%
  

Stocks Rising on Unusual Volume:

• RMTI, SHLD, EV, KING, ECOM, PGEM, DXCM, MRC, AVG, WFM, LGF, ECOM, SSE, RICE, GPOR, MNST, CXO and MDVN

Stocks With Unusual Call Option Activity:

• 1) NBL 2) GNC 3) EPI 4) RMTI 5) WU

Stocks With Most Positive News Mentions:

• 1) WMT  2) SHLD 3) ZNGA 4) MNST 5) YHOO
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:

• EU Dream Ebbs Amid Weak Growth, Putin's Jets, 25 Years After Wall Came Down. Europe’s post-Cold War order is fraying and there’s no consensus over how to stitch it back together. Some blame the European debt crisis for exposing the folly of the drive for economic unification. Some point to Vladimir Putin for redrawing the map by force and sending his warplanes to buzz NATO borders. For others, the vision of a peaceful, post-national Europe died off with the World War II generation. The makers of European memory will ponder those questions this weekend, marking on Sunday the anniversary of the fall of the Berlin Wall in 1989 and the ensuing euro-euphoria. The lessons of the intervening quarter-century are more sobering.

• China’s Trust Assets Expand Least Since 2010. China’s trust assets grew the least since 2010 in the third quarter as regulators tried to limit shadow banking risks and investors grew more wary of defaults. Trust companies’ assets under management climbed 3.8 percent to 12.9 trillion yuan ($2.1 trillion) as of Sept. 30 from three months earlier, the China Trustee Association said in a statement today. Government efforts to control shadow banking are sapping momentum from an economy that expanded in the third quarter at the slowest pace since 2009. China had 397 “risky” trust products valued at 82.4 billion yuan as of September, today’s report said, down from 91.7 billion yuan three months earlier.

• Most Asian Stocks Advance, Paring Weekly Loss, Before U.S. Jobs. Most Asian stocks rose, paring a weekly decline on the regional index, after a drop in American jobless claims bolstered optimism in the world’s largest economy before a government report on employment. More than three shares climbed for each that retreated on the MSCI Asia Pacific Index (MXAP), which gained 0.1 percent to 140.18 as of 9:03 a.m. in Tokyo, before markets opened in Hong Kong and China. The measure is headed for a 1.2 percent decline this week.

• Brent Crude Poised for Seventh Weekly Drop as OPEC Cuts Outlook. Brent headed for a seventh weekly drop as the Organization of Petroleum Exporting Countries predicted it will need to supply less crude amid the U.S. shale boom. West Texas Intermediate fell in New York. Futures slid as much as 0.7 percent in London and are down 4 percent this week. OPEC reduced every forecast for its crude through 2035 except next year, according to the group’s annual World Oil Outlook. Libya plans to resume production from its biggest field that was halted after an attack, an official said.

• Nickel, Copper Head for Weekly Declines Before China Export Data. Nickel and copper headed for weekly losses before China, the world’s biggest consumer of industrial metals, may report a slowdown in export growth. China’s overseas shipments in October grew 10.7 percent from a year earlier, down from 15.3 percent in September, according to Bloomberg survey before data tomorrow. Imports probably rose 5 percent after gaining 7 percent the previous month. The U.S., the second-biggest metals user, added 235,000 jobs in October, falling from the previous month, according to a separate survey before data today.

• U.S. Commercial-Property Prices Pass Peak, Moody’s Says. U.S. commercial-property prices have surpassed the peak reached seven years ago, before the financial crisis sent real estate values plunging, Moody’s Investors Service Inc. said today. The Moody’s/RCA Commercial Property Price Indices national all-property composite index rose in September to 0.2 percent higher than its November 2007 level, Moody’s said. The gauge has recovered a loss of more than 40 percent since its January 2010 trough, according to the New York-based company.

Wall Street Journal:

• Obama Wrote Secret Letter to Iran’s Khamenei About Fighting Islamic State. Presidential Correspondence With Ayatollah Stresses Shared U.S.-Iranian Interests in Combating Insurgents, Urges Progress on Nuclear Talks.

• New SEC Chief Accountant Weighing Switch to Global Accounting Rules. Schnurr Hopes to Make Recommendation on Whether U.S. Companies Should Adopt International Financial Reporting Standards.

Fox News:

• Boehner warns Obama will ‘burn himself’ with exec action on immigration. House Speaker John Boehner issued a stern warning to President Obama not to use executive action to bypass Congress on immigration, telling the president on Thursday "he's going to burn himself" and "poison the well" if he goes down that path.

MarketWatch.com:

• Buyer beware? Investor sentiment at highest level of 2014. (graph) Eyeballing the most recent investor-sentiment survey from The American Association of Individual Investors indicates that optimism is at its highest level since Dec. 26, 2013, while pessimism fell to a nine-year low. More than half of people surveyed are optimistic that markets will rise over the next six months, while only 15% expect markets to fall, as the chart included shows. It’s important to note that many market watchers use the AAII survey as a contrarian indicator.

• Five things to watch in the October jobs report.

• Gap(GPS) reports lower-than-expected October sales. Gap Inc. reported disappointing October sales results, hurt particularly by sales at its namesake stores. The October figures bring the company's third-quarter sales down to $3.97 billion, below the Wall Street consensus of $4.05 billion.

Zero Hedge:

• Why Treasury Yields Have Further To Fall (In 1 Simple Chart).

• Marching In The Wrong Direction.

• Bank Of America Finds It Did Some More Crime In Q3, Revises Previously Released Earnings Lower By $400 Million.

• While Brussels Burns In "Anti-Austerity" Riots, Here Is The Real Reason For Europe's Depression. (pics)

• Saudi Cut In Oil Price For US May Lead To Price War.

• The Bipolar Market - Extreme Greed & Fear Schizophrenia. (graph)

• PBOC Dashes Hope/Hype For System-Wide Chinese Rate Cuts. (graph)

Business Insider:

• Saudi Arabia Won't Win This Oil-Price Standoff. 

• One Of Latin America's Bright Spots Is Dimming. Mexico's economy is one of the bright spots in Latin America right now, but recent forecasts continue to revise down just how much it is growing.

NY Times:

• More Than 600 Reported Chemical Exposure in Iraq, Pentagon Acknowledges.

Reuters:

• Fed's Mester sees 2015 rate rise, confident on inflation. The U.S. Federal Reserve will likely raise interest rates next year since inflation, while a bit low now, remains stable and should rise to target by the end of 2016, a top Fed official said on Thursday. Loretta Mester, head of the Cleveland Fed, told reporters the central bank needs to be "forward looking" in deciding when to tighten policy based on inflation. She added that market volatility is to be expected as a rate-rise approaches.

• U.S.-based stock funds attract $15.4 bln net inflows this week - Lipper.

• Salix(SLXP) Pharmaceuticals profit, revenue miss estimates. Salix Pharmaceuticals Ltd. reported a lower-than-expected quarterly profit and revenue. Salix shares were down 35 percent in after-market trading.

• Nvidia(NVDA) quarterly revenue tops Wall Street expectations. Nvidia on Thursday posted higher fiscal third-quarter revenue that was above Wall Street's expectations, fueled by the company's latest graphics chips for personal computers as well as processors for data centers and cars. 

• First Solar(FSLR) third-quarter earnings, sales fall. U.S. solar panel maker First Solar Inc on Thursday posted third-quarter earnings and sales that were lower than the same quarter a year ago when it benefited from the sale of three projects and began recognizing revenue from a major project in California.

Telegraph:

• Apparently, Europe's economic malaise has got nothing to do with the euro. A 'structural compact' is not enough to save the euro.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 107.0 unch.

• Asia Pacific Sovereign CDS Index 63.5 -. basis point.

• FTSE-100 futures +.23%.

• S&P 500 futures +.14%.

• NASDAQ 100 futures  +.22%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MT)/.18

• (CTB)/.72

• (EBIX)/.38

• (HUM)/2.00

• (WLH)/.32

• (BRK/B)/2593.85

• (DRC)/.64

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for October is estimated to fall to 235K versus 248K in September.

• The Unemployment Rate for October is estimated at 5.9% versus 5.9% in September.

• Average Hourly Earnings for October are estimated to rise +.2% versus unch. in September.

3:00 pm EST

• Consumer Credit for September is estimated to rise to $16.0B versus $13.525B in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Evans speaking, Fed's Tarullo speaking and the German trade balance report 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 mixed. The Portfolio is 50% net long heading into the day.

Stocks Rising Slightly into Final Hour on Central Bank Hopes, Yen Weakness, Short-Covering, Road&Rail/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.19 +.14%

• Euro/Yen Carry Return Index 148.67 -.54%

• Emerging Markets Currency Volatility(VXY) 8.41 +2.94%

• S&P 500 Implied Correlation 47.04 -3.61%

• ISE Sentiment Index 104.0 +20.93%

• Total Put/Call .89 +1.14%

• NYSE Arms .89 +17.40% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.02 +.29%

• European Financial Sector CDS Index 66.50 -2.42%

• Western Europe Sovereign Debt CDS Index 31.23 -3.31%
• Asia Pacific Sovereign Debt CDS Index 64.05 +.83%

• Emerging Market CDS Index 266.80 +3.46%

• China Blended Corporate Spread Index 322.12 -.26%
• 2-Year Swap Spread 21.5 +.25 basis point

• TED Spread 21.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -12.0 -1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 184.0 +2.0 basis points

• China Import Iron Ore Spot $75.38/Metric Tonne -1.41%

• Citi US Economic Surprise Index 16.20 +1.0 point
• Citi Eurozone Economic Surprise Index -31.40 -2.0 points

• Citi Emerging Markets Economic Surprise Index -13.10 +1.8 points

• 10-Year TIPS Spread 1.94 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +168 open in Japan

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

• Higher: On gains in my retail/biotech sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long