Stocks Falling into Final Hour on China Bubble-Bursting Fears, Global Growth Worries, Surging Emerging Markets/US High-Yield Debt Angst, Commodity/Technology Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Slightly Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.01 +14.55%

• Euro/Yen Carry Return Index 144.14 +.50%

• Emerging Markets Currency Volatility(VXY) 10.73 +15.4%

• S&P 500 Implied Correlation 55.05 +2.59%

• ISE Sentiment Index 54.0 -34.94%

• Total Put/Call 1.10 +96.43%

• NYSE Arms 1.50 +256.41% 

Credit Investor Angst:

• North American Investment Grade CDS Index 75.55 +2.58%

• America Energy Sector High-Yield CDS Index 1,852.0 -1.76%

• European Financial Sector CDS Index 77.16 +4.12%

• Western Europe Sovereign Debt CDS Index 21.79 -3.11%

• Asia Pacific Sovereign Debt CDS Index 68.59 +6.10%

• Emerging Market CDS Index 335.94 +2.02%
  

• iBoxx Offshore RMB China Corporates High Yield Index 121.09 -.12%

• 2-Year Swap Spread 25.0 -.25 basis point

• TED Spread 20.75 -4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -19.25 unch.

Economic Gauges:

• 3-Month T-Bill Yield .10% +3.0 basis points

• Yield Curve 146.0 -5.0 basis points

• China Import Iron Ore Spot $56.22/Metric Tonne -.32%

• Citi US Economic Surprise Index -5.94 +.5 point

• Citi Eurozone Economic Surprise Index 11.9 -4.0 points

• Citi Emerging Markets Economic Surprise Index -4.8 +1.0 point

• 10-Year TIPS Spread 1.66 -4.0 basis points
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 4.29 -.10

Overseas Futures:

• Nikkei 225 Futures: Indicating -85 open in Japan 
• China A50 Futures: Indicating -168 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• It’s End of Era for Yuan Appreciation, Says Ex-PBOC Adviser Yu. The era of yuan appreciation has come to an end with China’s move to lower the daily reference rate by 1.9 percent, said Yu Yongding, a member of China’s monetary policy committee when the currency was revalued in July 2005. The yuan exchange rate will enter “a period of stabilization or even depreciation,” said Yu, now a researcher with the Chinese Academy of Social Sciences. The People’s Bank of China’s reduction to the daily fixing was a “symbol” for the change, although signs of yuan depreciation were evident before Tuesday’s move, he said. 
• China Resorts to Old Growth Drivers as New Engines Struggle. China has stepped up efforts to boost old growth drivers as new ones fail to offset slowing investment and trade with the steepest yuan devaluation in two decades. A record 1.9 percent cut in the People’s Bank of China’s daily yuan reference rate Tuesday followed an 8.3 percent fall in July’s exports. To bolster sluggish investment, China had this year already expanded a debt swap program to ease financing pressure on local governments and injected funds into policy banks so they can channel more credit to the real economy.
• Yuan Devaluation Points to Growing China Risk for LVMH, BMW. For companies from LVMH Moet Hennessy Louis Vuitton SE to BMW AG to Kone Oyj, China is delivering a one-two punch. Years of surging economic growth that spurred sales of Louis Vuitton handbags, BMW 5-Series cars and Kone elevators already had given way to the deepest slowdown since 1990. Chinese policy makers on Tuesday added to the pain for international companies by devaluing the yuan by the most in two decades, sending shares of European automakers, luxury manufacturers and industrial companies slumping. The devaluation of the currency in the short term reduces the value of their sales in the country and makes Chinese producers more competitive. While in the longer term it will help revive growth in China, for now it signals just how concerned the authorities are about the slowdown, and that there may be further pain ahead for companies operating there.
• China Auto Sales Fall to 17-Month Low Despite Price Cuts. Chinese consumers bought the fewest passenger vehicles in 17 months in July, extending a slump in the world’s largest auto market as deeper discounts failed to revive demand. Retail deliveries fell 2.5 percent to 1.3 million units, the lowest level since February 2014, according to the China Passenger Car Association. A separate set of figures from the China Association of Automobile Manufacturers showed passenger-vehicle sales declined 6.6 percent, also to a 17-month low. The Stoxx 600 Automobiles & Parts Index of European manufacturers dropped the most in six weeks. Foreign automakers are facing slumping demand in China because of a slowing economy and resurgent competition from lower-priced local offerings. The move on Tuesday to devalue its currency by the most in two decades adds to the challenges by reducing the value of repatriated profits for multinational carmakers. “International automakers’ cash flow will be impacted, no doubt about it,” said Janet Lewis, an auto analyst at Macquarie Group Ltd. “The U.S. automakers would stand to lose the most, because they’re the strong currency.” Daimler AG, the German parent of luxury-car maker Mercedes-Benz, was the biggest decliner in the European car- and component-makers’ index, dropping 4.3 percent to 80.66 euros at 12:14 p.m. in Frankfurt.   
• China's Yuan Devaluation Is Great News for U.S. Dollar. The move cast doubt on the health of the world’s second-largest economy, weighing on the currencies of its trading partners and competitors. The dollar was already supported by speculation the Federal Reserve will increase interest-rates as early as next month. “The dollar story continues to look in almost splendid isolation compared to pretty much everywhere else,” said Jeremy Stretch, a foreign-exchange strategist at Canadian Imperial Bank of Commerce in London. “It just adds to the impetus” for a currency that’s rising because “the growth story is allied to the prospect of Fed tightening upcoming.”
• Roach Sees Currency Wars Just Getting Worse After Yuan Decision. China’s shock move to devalue the yuan risks opening a new front in a currency war that stretches from the euro zone to Japan as nations look to energize their economies. It triggered the steepest selloff among Asian currencies in almost seven years, led by slides in South Korea’s won and the Taiwan and Singapore dollars. The euro and the yen tumbled 18 percent against the greenback in the past 12 months as monetary policies diverged in the U.S., Europe and Japan. “In a weak global economy, it will take a lot more than a 1.9 percent devaluation to jump-start Chinese exports,” said Stephen Roach, a senior fellow at Yale University and former Morgan Stanley non-executive chairman in Asia. “That raises the distinct possibility of a new and increasingly destabilizing skirmish in the ever-widening global currency war. The race to the bottom just became a good deal more treacherous.” 
• German Investor Confidence Unexpectedly Drops Amid Risks. German investor confidence unexpectedly fell, signaling concern that a global slowdown could weigh on Europe’s powerhouse economy. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, slid to 25 in August from 29.7 in July. The reading is the lowest since November and compares with a median estimate of 31.9 in a Bloomberg survey of economists.  
• Ukraine Returns Artillery to Front Line as OSCE Warns on Unrest. Ukraine returned heavy artillery to the front line of its more-than-yearlong conflict with pro-Russian rebels after reporting shelling at levels not seen in weeks. Weapons, pulled out as part of a February truce, were sent back to a village in the Donetsk region on Monday after separatists stormed it, the military said Tuesday from the eastern combat zone. While the rebels denied attacking, the Organization for Security and Cooperation in Europe said it had seen a significant increase in cease-fire violations.
• Which Puerto Rico Bond Defaults Next? 46% Yields Provide a Clue. Puerto Rico defaulted for the first time on Aug. 3, when a little-known agency, the Public Finance Corp., paid investors just $628,000 of the $58 million they were owed. The Finance Corp. is only one of the 17 arms of the U.S. territory that have sold tax-exempt bonds, according to the Government Development Bank. Unlike debt typically issued by countries, the securities carry varying degrees of risk because they’re backed by different sources of funds and legal safeguards. 
• Ruble Leads Currency Slide as Yuan Risks Denting Russian Exports. The ruble slid the most in emerging markets as the biggest drop in China’s yuan in two decades drove down oil prices and sparked concern Russia’s exports to its largest trading partner will be curtailed. The currency weakened 2.1 percent to 64.1810 by 4:26 p.m. in Moscow, its sharpest decline on a closing basis since Aug. 3.
• Brazil’s Real Leads Global Declines as Stocks Retreat on China. Brazil’s real led world losses and the Ibovespa slid as China’s currency devaluation fueled concern that demand from the nation’s top trading partner will falter. The real dropped 1.9 percent, the most among 16 major currencies, on speculation that trade inflows from the Asian nation will slump and as Goldman Sachs Group Inc. said it may weaken to 4 per dollar in the next 12 months. Vale SA, which gets a third of its revenue from China, extended this year’s plunge to 24 percent. Commodity companies in the MSCI Brazil fell at least 4.1 percent, the most among 10 industries.
• Europe Stocks Fall Most in Two Weeks as Exporters Slide on China. Carmakers, miners and luxury-goods shares led a drop in European stocks after China devalued its currency by the most in two decades. BMW AG and Daimler AG slid 4.3 percent or more, while LVMH Moet Hennessy Louis Vuitton SE and Swatch Group AG slipped at least 5.1 percent amid concern the yuan’s drop will hurt sales from China. Pernod Ricard SA and Remy Cointreau SA led losses in food-and-beverage shares. BHP Billiton Ltd. and Rio Tinto Group, the world’s biggest miners, fell more than 3 percent. The Stoxx Europe 600 Index slid 1.6 percent to 393.61 at the close of trading, taking its decline since an Aug. 5 peak to 2.6 percent.
• Yuan Cut Blunts Commodity Rebound as China Faces Pricier Imports. Commodity investors betting on a sustained recovery in prices probably didn’t count on China devaluing its currency by the most in two decades. The world’s biggest user of energy, metals and grains surprised markets by cutting the daily reference rate for the yuan on Tuesday by a record in an attempt to bolster its economy. Prices of oil and industrial metals fell amid speculation the weaker currency will make dollar-denominated imports more expensive and slow demand. 
• Mining Stocks Are Taking a Beating. The devaluation raises the risk that exports from China will increase, adding more metal to markets that are already oversupplied. A weaker yuan may also make imports for Chinese businesses more expensive and cut demand for raw materials in the world’s biggest consumer of commodities.
• OPEC Supply Reaches 3-Year High as Iran Pumps Most Since ’12. OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The Organization of Petroleum Exporting Countries, responsible for 40 percent of world oil supplies, raised output by 100,700 barrels a day to 31.5 million last month, the group said in its monthly market report, citing external sources. This increase came even as Saudi Arabia, which often curbs output toward the end of peak summer demand, told OPEC it cut production by the most in almost a year.
• Fed Weighing Liftoff May See Yuan Devaluation as Minor Headwind. Federal Reserve officials won’t delay raising interest rates because of the surprise devaluation of China’s currency, economists said, even though the move could prove a headwind for U.S. growth if it drives up the dollar. “I wouldn’t see this as a big game-changer on the medium-term outlook” for the U.S. economy, said Roger Aliaga-Diaz, a senior economist at Vanguard Group Inc. in Valley Forge, Pennsylvania, noting the People’s Bank of China had described it as a one-time realignment.
• U.S. Identifies Insider Trading Ring With Ukraine Hackers. (video) Exposing a new front in cybercrime, U.S. authorities broke up an alleged insider trading ring that relied on computer hackers to pilfer corporate press announcements and then profited by trading on the sensitive information before it became public. In morning raids in Georgia and Pennsylvania, federal agents arrested five of nine men accused in the insider trading plot. Four others were indicted on hacking and securities fraud charges but remain at large.
• Here's One Sign of Trouble in the Subprime Auto Lending Market
  
  Hitting a speed bump. Subprime auto lending has attracted a lot of attention in recent years. New data out this month may show why regulators and investors remain concerned. Losses on car loans taken out by bad-credit borrowers are continuing to climb, thanks in part to the flood of rookie auto finance companies that have entered the market in recent years. You can see the rise in subprime borrowers struggling to make car payments in monthly data on bond deals sold on Wall Street. So-called subprime auto asset-backed securities (ABS) bundle together car loans and then sell them to big investors. July reports show that annualized net losses on such bonds—a measure of the cost of bad debt—rose 1.45 percentage points over the past year to reach 6.6 percent last month, according to Nomura analysts.

CNBC:

• This is 'more damaging...than the Great Recession'. (video)

Zero Hedge: 

• This Is Not A Drill: India, Russia And Thailand Prepare For Currency War.
• There's Hope America: Anchor Walks Off Live TV, Refuses To Report On Kardashians. (video)
• Americans Who See Economic Deterioration Outnumber Optimists By 50%. (graph)
• Small Caps Tumble Back Into The Red For 2015. (graph)
• Demand For Credit Plunges 55% In China As Slump Deepens. (graph)
• September Rate-Hike Odds Plunge. (graph)
• Rand Paul Blasts Donald Trump, Calls Him A "Fake Conservative" & Wannabe "King".
• Why "The Fed Is In A Bind" - Scotiabank Explains. (graph)
• 10Y, 30Y Treasury Yields Break Below Crucial Technical Support. (graph)
• Now The Bad News: This Is How Much More Downside Is Left For China's Currency. (graph)
• Dow "Death Cross"-es For First Time In 4 Years. (graph)
• Recession Imminent As Wholesale Inventories Surge, Sales Disappoint; Autos Worst Since 2009. (graph)
• Markets Turmoil After China Devaluation - Surveying The Damage. (graph)
• Wage Growth Meme In Tatters As Unit Labor Cost Growth Tumbles, Huge Downward Revisions. (graph)
• A Stunned Wall Street Reacts To China's Currency Devaluation.

Business Insider: 

• This is just the beginning of a dangerous game in China.
• These are the biggest losers from China's currency devaluation. (graph)
• China is about to absolutely hammer some of the weakest economies in the world.
• Google(GOOG) has a new corporate homepage, a new typeface, and new branding — take a look.
• 3 reasons why China’s historic currency move is deflationary to the world.
• Sexting is shockingly common, and the places people do it will surprise you.
• People are getting more worried about what's going on inside the stock market.
• Uh oh, Apple analysts are predicting zero growth for the iPhone at the end of the year.
• China is a mess. (graph)

Telegraph: 

• Greece reaches new debt deal but critics brand targets 'utterly unachievable'. Broad terms of a third bail-out deal for Greece agreed after marathon talks, but economists say fiscal targets are "fantasy" and will not be met.

RIA:

• Yuan Devaluation Puts Pressure on RUB, Other EM Currencies. Russian Economy Ministry sees no domestic factors for ruble devaluation. Crude prices to stay under pressure in 2015; short-term oil supply to remain excessive, he said.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.35%

Sector Underperformers:

• 1) Coal -5.6% 2) Steel -4.9% 3) Gaming -4.3%

Stocks Falling on Unusual Volume:

• ENV, ZBRA, WRLD, APEI, RRGB, CLDX, RENT, BSTC, QTS, NHI, FMS, NCLH, ASCMA, LOPE, HIBB, RAX, PRAA, ICPT, BID, KPTI, XON, KWEB, SHG, DTSI, FOE, ACM, IFF, VSAR, CVT, SYMC, FRPT, ICON, YUM, SEM, KMT, SLH, SUNE, RLYP, FIX, HIBB, MXL, OCUL, NEWR, ENVA, PTCT, FCX and FRSH

Stocks With Unusual Put Option Activity:

• 1) GPS 2) HYG 3) FOSL 4) HEDJ 5) RL
  

Stocks With Most Negative News Mentions:

• 1) FCX 2) BXLT 3) XON 4) ORCL 5) XOM
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -.82%

Sector Outperformers:

• 1) REITs +.63% 2) Utilities +.36% 3) Homebuilders +.19%
  

Stocks Rising on Unusual Volume:

• SYA, AMID, YDLE, RNF, TEX, NVAX, AQXP, TUBE, HALO, MACK, IGT, AMBC and HRTG

Stocks With Unusual Call Option Activity:

• 1) BK 2) EMES 3) TTWO 4) SGMS 5) RAX
  

Stocks With Most Positive News Mentions:

• 1) PDCE 2) RESI 3) AAL 4) ALGT 5) TEX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 12.8% Above 100-day average
• 2 Sectors Rising, 8 Sectors Declining
• 29.7% of Issues Advancing, 68.1% Declining
• 20 New 52-Week Highs, 104 New Lows
• 40.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.7
• Vix 13.2
• Total Put/Call .98
• TRIN/Arms 1.58

Tuesday Watch

Evening Headlines 

Bloomberg:

• China Weakens Yuan Reference Rate by Record 1.9% Amid Slowdown. China devalued the yuan by the most in two decades, ending a de facto peg to the dollar that’s been in place since March and battered exports. The People’s Bank of China cut its daily reference rate for the currency by a record 1.9 percent, triggering the yuan’s biggest one-day loss since China unified official and market exchange rates in January 1994. The change was a one-time adjustment, the central bank said in a statement, adding that it plans to keep the yuan stable at a “reasonable” level and will strengthen the market’s role in determining the fixing. “It looks like this is the end of the fixing as we know it,” said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd. “The one-off devaluation of the fix and allowing more market-based determination takes us into a new currency regime.”

• China’s Credit Slumps as Funds Used to Prop Up Stock Market. (graph) China’s efforts to halt a stock market rout spurred a surge in new lending to financial institutions last month, while credit to the real economy weakened. Aggregate financing slumped to 718.8 billion yuan ($116 billion) in July, from 1.86 trillion originally reported for June, according to the People’s Bank of China, missing the estimate for 1 trillion yuan in a survey of economists. New yuan loans jumped to 1.48 trillion yuan, almost double economists’ estimate, with 891 billion yuan going to financial institutions as the central bank backed stock rescue efforts.

• China Slows Down, and the Pain Is Felt All Over the Place. (video) Check out the Peruvian sol.   

• With Sales Slowing, Luxury Brands Are Finding Hong Kong Rent Too High. Landlords on Hong Kong’s Russell Street a year ago could boast the highest retail rents in the world. Now they are adjusting to a new reality. Burberry Group Plc, Kering SA and jewelry retailer Chow Tai Fook Jewellery Group Ltd. are pushing landlords to lower rents on existing properties as luxury brands are scaling back amid plummeting sales. TAG Heuer closed its Russell Street store last week, citing high rents and declining traffic.

• Aussie Firms on Alert as Confidence Slides Over China Slowdown. Australian business confidence fell in July, led by mining and construction firms as concerns mount about resource demand in response to China’s faltering growth outlook. National Australia Bank Ltd.’s sentiment index slumped to 4 from a revised 8 in June, a survey taken July 27-July 31 showed. The business conditions gauge, a measure of hiring, sales and profits, slid to 6 from a revised 10.

• Aussie Drops 1% as China’s Record Yuan Cut Fractures Confidence. The Australian and New Zealand dollars tumbled after China, the South Pacific nations’ key trading partner, cut the yuan reference rate by the most on record. The Aussie and the kiwi are each down more than 10 percent this year against the greenback as weakening Chinese demand drives down prices for the commodity exports on which the Antipodean nations’ economies depend.

• Ringgit Tracks Asia Currency Losses as China Slashes Yuan Fixing. Malaysia’s ringgit fell along with other Asian currencies as China’s record weakening in its daily reference rate spurred the biggest decline in the yuan since a dollar peg ended a decade ago. China took the unprecedented step just days after data showed exports contracted in July for a fifth month this year, underscoring concern that the region’s largest economy is slowing. Malaysia’s currency is Asia’s worst performer in 2015 as a slump in Brent crude weighs on the oil exporter’s earnings. A political scandal involving the prime minister and a looming U.S. interest-rate increase have sent the ringgit to a 17-year low, triggering capital outflows.

• Chinese Airlines Tumble Most in Six Years on Slump in Currency. China Southern Airlines Co. led a plunge by the nation’s carriers on concern a weaker yuan will increase the size of their dollar-denominated debt and hurt earnings. China Southern sank 14 percent in Hong Kong trading at 10:23 a.m. local time, set for its biggest loss since April 2009. Air China Ltd. dropped 13 percent and China Eastern Airlines Corp. declined 10 percent.  

• Asian Stocks Gain a Third Day as U.S. Shares Jump, Oil Rebounds. Asian stocks rose for a third day after U.S. equities jumped by the most since May and commodities maintained their rebound from a 13-year low. The MSCI Asia Pacific Index gained 0.4 percent to 141.99 as of 9:02 a.m. in Tokyo.

• Goldman Sachs Cuts Aluminum Outlook Predicting Glut Through ’19. Goldman Sachs Group Inc. reduced its aluminum price forecasts by at least 21 percent from 2016 through 2018 because of a global surplus. The bank cuts its predictions to $1,525 a metric ton in 2016, to $1,625 in 2017 and to $1,700 in 2018 from $1,925, $2,100 and $2,200 as it projected a glut of about 2.5 million tons to 3 million tons from 2016 to 2019. Prices fell to a six-year low on the London Metal Exchange this month as exports from China surged. While shipments from the country, the world’s biggest producer, fell in July from the highest level this year, they have still increased 28 percent in the first seven months from a year earlier, customs figures showed on Saturday.  

• JPMorgan(JPM) Chart Gurus Say Don't Get Too Excited About This Rally. Open up your umbrellas, because JPMorgan Chase & Co.'s technical analysts are raining all over today's stock-market parade.

Wall Street Journal: 

• Officials Declare State of Emergency in Ferguson. Peaceful protest marking anniversary of Michael Brown’s fatal shooting turn violent; 18-year-old in critical condition.

• M&A Deal Activity on Pace for Record Year. Companies hunting for growth drive volume.

• Clinton Takes Taxpayers to School. To adapt BuzzFeed, 10 ways Hillary tried to buy young voters. 

• The World-Wide Undermining of Free Markets. China’s interference in its stock markets reflects a global trend of states trying to govern economic activity. Chinese authorities have gotten creative in their efforts to control the fall in the Shanghai and Shenzhen stock markets, which recently experienced their steepest one-day plunge in more than eight years. Prohibiting large shareholders and executives from selling their stocks, as announced last month, was a bold step, as was providing central-bank money to brokerage firms for equity purchases. Shutting down a large part of the markets was...

• Another Minimum Wage Backfire. Wendy’s explains what mandated wage hikes do to jobs at burger joints.

MarketWatch.com: 

• Here’s why Hillary Clinton says she went to Donald Trump’s wedding. With just a few words to reporters, Clinton dismissed Trump’s statement she attended the event because he’d donated to the Clinton Foundation.

CNBC: 

• Shake Shack(SHAK) jumps 10% after topping estimates. (video)

• Australia’s CSL warns of biotech bubble. CSL, the Australian company that recently bought Novartis' influenza business, has warned of a "biotech bubble" amid a frenzy of mergers and acquisition activity across the healthcare sector.

Zero Hedge:

• China Devalues Yuan Fix By Most On Record, Plunges To 28-Month Lows Against The Dollar. (graph)

• Trainwreck? US Freight Carloads Collapse, Flash Recession Warning. (graph)

• A Message From Generation Z: Thanks For Nothing.

• New Study Exposes The "Dark Side" Of ETFs

• This Wasn't Supposed To Happen: Household Spending Expectations Crash. (graph)

• Why China Can't Unleash Major Stimulus (In 3 Simple Charts).

• The US Economy Continues Its Collapse.

• The Destruction Of Real Estate Fundamentals.

• All The S&P 500 Support And Resistance Levels That Matter. (graph)

• Stocks Volumelessly Surge On Biggest Short Squeeze Of The Year. (graph)

Business Insider:

• Google(GOOG) just announced a massive overhaul of its business structure.

• China's government is absolutely lying about its economy.

• Things are falling apart in China.

• State of emergency called in Ferguson, Missouri.

• CITI: We've identified 'the most important consequence' of China's stock market crash. "The diminished credibility of policymakers may be the most important consequence of the crisis," a team of Citi Research economists said in a note to clients. The way they see it, officials were in charge of pumping up the stock market in an attempt to move the economy from one based on investment to based on consumption. The stock market's crash highlighted their inability to do so.

• The next nightmare decision for the Chinese economy is here.

• The great unwind has begun.

• Mexico's businesses are on the edge of a debt crisis.

• 'It only takes one email': 3 reasons why China reading Obama administration private emails is even worse than it seems.

• Singapore's economic growth is at a 3-year low.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.75% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 114.25 +.5 basis point.

• Asia Pacific Sovereign CDS Index 64.5 -.75 basis point.

• S&P 500 futures -.39%.

• NASDAQ 100 futures -.11%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (JASO)/.15

• (ZBRA)/1.18

• (CSC)/1.02

• (CREE)/-.03

• (FOGO)/.22

• (FOSL)/.82

• (MTGN)/.41

• (SLW)/.13

• (SYMC)/.43

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for July is estimated to rise to 95.4 versus 94.1 in June.

8:30 am EST

• Preliminary 2Q Non-Farm Productivity is estimated to rise +1.6% versus a -3.1% decline in 1Q.

• Preliminary 2Q Unit Labor Costs are estimated unch. versus a +6.7% gain in 1Q.
  

10:00 am EST

• Wholesale Inventories for June are estimated to rise +.4% versus a +.8% gain in May.

• Wholesale Trade Sales for June are estimated to rise +.5% versus a +.3% gain in May.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German ZEW Index, $23B 3Y T-Note auction, weekly US retail sales reports, JPMorgan Auto conference, Wedbush PacGrow Healthcare conference, Goldman Power/Utilities/MLP/Pipeline conference, Oppenheimer Tech/Internet/Communications conference and the (ORLY) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.