Bear Radar

Style Underperformer:

• Mid-Cap Value -.53%

Sector Underperformers:

• 1) Coal -8.41% 2) Gold & Silver -3.76% 3) Oil Service -3.28%

Stocks Falling on Unusual Volume:

• CTRE, SHAK, CPA, RLYP, KSS, LDRH, MIDD, PAH, RMTI, IMDZ, PODD, ASND, PNRA, VIA, CYNO, IOC, ICPT, FANG, VRTV, SSI, NEOG, NHI, EGRX, GMCR, ENV and NTRA

Stocks With Unusual Put Option Activity:

• 1) KSS 2) XLK 3) JNK 4) GM 5) CAT
  

Stocks With Most Negative News Mentions:

• 1) OKE 2) ATW 3) UNP 4) GMCR 5) DF
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.02%

Sector Outperformers:

• 1) Homebuilders +1.49% 2) Restaurants +1.09% 3) Internet +.79%
  

Stocks Rising on Unusual Volume:

• BGG, W, FLO, SUNE, GWPH, BERY, AAP, ITEK, AQXP, NWSA, COTY, ADXS, GPRE and MNST

Stocks With Unusual Call Option Activity:

• 1) MDCO 2) ASNA 3) JCI 4) HIG 5) KSS
  

Stocks With Most Positive News Mentions:

• 1) FLO 2) CSCO 3) COTY 4) MNST 5) HIG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 2.2% Below 100-day average
• 1 Sector Rising, 9 Sector Declining
• 29.3% of Issues Advancing, 67.6% Declining
• 45 New 52-Week Highs, 194 New Lows
• 38.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.7
• Vix 14.3
• Total Put/Call 1.08
• TRIN/Arms 1.21

Thursday Watch

Evening Headlines 

Bloomberg: 

• Yuan Drops for Third Day After PBOC Reference Rate Declines 1.1%. China’s yuan fell in a third day of losses since Tuesday’s devaluation as the central bank’s reference rate dropped 1.1 percent. The onshore spot rate weakened 0.5 percent to 6.42 per dollar as of 9:35 a.m. in Shanghai, after a two-day loss of 2.8 percent. The freely traded offshore yuan rebounded 0.6 percent on Thursday after losing at least 2 percent on each of the last two days. The onshore spot rate is allowed to diverge a maximum 2 percent from the reference rate, which was set at 6.4010. The yuan fell Wednesday to as much as 1.9 percent weaker than the official rate, near the limit of its permitted trading range, before paring losses as the PBOC intervened to support the currency via state-owned banks. 

• China Black Swans Not So Rare Anymore as PBOC Shocks Markets. Investors should prepare for more surprises out of China after the yuan’s devaluation became the country’s latest unexpected policy move to roil global markets. That’s the advice from Fraser Howie, co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.” He says Chinese policy decisions are becoming “erratic” as authorities struggle to combat the nation’s deepest economic slowdown in more than two decades. “This complete lack of signaling has investors, both foreign and domestic, completely spooked about what’s going on,” Howie, a former managing director at CLSA Asia-Pacific Markets, said in a phone interview from Singapore. “China has a huge influence globally and markets don’t like shocks.”

• Global Chinese Consumer Leaves No Winners in Luxury Stocks Rout. The rout in European luxury-goods makers is sparing nobody -- regardless of how much they sell in China. Burberry Group Plc and Hugo Boss AG plunged more than 7 percent in two days after China devalued its currency, even though the companies have some of the smallest sales exposure to the yuan among luxury makers, according to Credit Suisse Group AG. That’s because when taking into account purchases by Chinese travelers abroad, most of the companies are just as reliant on the nation, Sanford C. Bernstein says. “It’s at these times that you understand the extent to which the market of luxury goods is exposed to China and how much it depends on the decisions of the Chinese government,” said Mario Ortelli, an analyst at Bernstein in London. 

• Yuan Devaluation Sustains Euro Advance as Carry Trade Unwinds. The euro held a six-day gain versus the dollar amid speculation China’s devaluation caused investors to unwind trades that used the single currency to buy the yuan. The 19-nation euro was the best performer over the past week among major currencies as it overtook the greenback as the refuge of choice on concern Chinese policy imperils the timing of rate increases from the Federal Reserve. The dollars of Australia, New Zealand and Canada rallied Wednesday after the People’s Bank of China intervened to stem the yuan’s rout.

• Tianjin, China, Blast Affects Port Handling Coal, Metal Ore, Oil. China’s Tianjin port, where multiple explosions late Wednesday killed at least 13 people and injured hundreds, is the biggest port in the northern part of the country, handling shipments of metal ore, coal, automobiles and crude oil. The port, located about 160 kilometers southeast of Beijing in Tianjin municipality, has a container terminal and is near China National Offshore Oil Corp.’s Tianjin FLNG, China’s first floating liquefied natural-gas terminal. The LNG plant has a capacity of 1.059 trillion cubic feet a year, according to Bloomberg data. Total throughput at Tianjin rose 10 percent in 2014 to 445.8 million metric tons, according to Hong Kong-listed Tianjin Port Development Holdings Ltd. The port handled 110.5 million tons of metal ore, 88.9 million tons of coal and 18.7 million tons of crude oil, the equivalent of 375,000 barrels a day.

• Yuan-Spurred Drop in Chinese Junk Debt Not a Buy for Nikko Yet. Chinese junk dollar bonds haven’t fallen far enough to make them a buy after the nation’s currency slumped this week by the most in two decades, according to Nikko Asset Management Co. The extra premium over Treasuries investors demand to own such securities climbed four basis points to 755 basis points, a Bank of America Merrill Lynch index shows, after the central bank allowed the yuan to depreciate by a record. Yields on notes sold by Agile Property Holdings Ltd. and Evergrande Real Estate Group Ltd. climbed more than 25 basis points Wednesday as the currency recorded its steepest two-day loss since 1994.  

• Lenovo Hits 18-Month Low as Slowing Sales Highlight Weaker China. Lenovo Group Ltd. fell to an 18-month low in Hong Kong after posting first-quarter sales that trailed analyst estimates amid concern about growth in China. Shares declined as much as 5.4 percent to HK$8.01, the lowest since February 2014. The shares are down 21 percent this year. Revenue for the quarter was $10.7 billion, compared with the $11.5 billion average of analyst estimates. Lenovo is cutting 5 percent of its workforce and reducing its reliance on China as the world’s second-biggest economy slows. The company is trying to turn around its mobile phones and servers after $5 billion of acquisitions last year, while battling a shrinking market for the personal computers that generate 68 percent of its sales.

• Deflation Ice Age Looms After Yuan Move, Albert Edwards Says. China’s currency devaluation took Albert Edwards a step closer to realizing his doomsday prediction: deflation spreading from Asia to the U.S. and Europe and sending economies crashing. Tumbling emerging-market currencies will now accelerate their declines, curbing import costs in developed nations and triggering a broad drop in prices that will undermine economic growth, according to Edwards, the top-ranked global strategist at Societe Generale SA.

• Singapore Dollar Pays Liquidity Price as Yuan Move Shocks Asia. Singapore’s dollar is paying the price for being easy to sell. It’s tumbling at the fastest pace since 2001 following China’s shock devaluation as traders use it as a proxy for less-liquid currencies such as Thailand’s baht and Indonesia’s rupiah. The island state’s dollar dropped below the S$1.39 year-end estimate in a Bloomberg survey, leaving banks including Commerzbank AG, the most-accurate forecaster, and HSBC Holdings Plc rushing to review predictions. There are domestic concerns, too, as investors speculate whether Singapore will ease policy after China’s shock move, just as it did in January when the Swiss National Bank scrapped its exchange-rate peg. The Monetary Authority of Singapore issued a statement Wednesday saying it stands ready to curb excessive volatility in the city-state’s currency. 

• Asian Stocks Fall for a Third Day as Investors Weigh Yuan Impact. Asian stocks fell for a third day, with the regional benchmark index extending a seven-month low, as investors continued to weigh the impact of China’s shock currency devaluation. The MSCI Asia Pacific Index dropped 0.2 percent to 138.05 as of 9:02 a.m. in Tokyo.

• Emerging-Markets Veteran Sees Oil Falling to $30 by December. Robert Lloyd George, who at one time oversaw $17.7 billion in Asia emerging-markets assets, sees oil falling as much as another 30 percent this year and hitting $30 per barrel by December. Oil will stay down as last month’s deal curbing Iran’s nuclear program in return for easing sanctions could expand supplies by as much as two million barrels a day at a time demand from China is slowing, Lloyd George said in an interview in Hong Kong. West Texas Intermediate for September delivery traded at around $43 a barrel on the New York Mercantile Exchange on Wednesday.

• China’s Gargantuan Aluminum Exports Poised to Get Even Bigger. China’s ballooning exports of aluminum will probably get even bigger because of the surprise yuan devaluation. The country is the world’s biggest producer of the metal, which is used in everything from beverage cans to airplanes. Many Chinese producers haven’t cut output even amid slumping prices, partly because of government subsidies, according to Goldman Sachs Group Inc. Domestic demand has weakened at the same time, spurring a flood of aluminum to the global market.

Wall Street Journal:

• Yuan Devaluation Boosts Investors Betting Against Asia. Malaysian ringgit, Singapore dollar and Indonesian rupiah are hammered. China’s currency devaluation is delivering a windfall to investors that anticipated a slowdown in the second-largest economy and then bet against the free-floating currencies of China’s regional trading partners.

• Warehouse Explosions Kill at Least 17 in Tianjin, China. Fiery explosions in port city injure more than 300 as debris rains down. Explosions at a warehouse rocked the northern Chinese port city of Tianjin late Wednesday, killing at least 17 people and injuring more than 300 others, local authorities and state media said.

• Surge in Commercial Real-Estate Prices Stirs Bubble Worries. Soaring demand for commercial property has drawn comparisons to delirious boom of the mid-2000s. Investors are pushing commercial real-estate prices to record levels in cities around the world, fueling concerns that the global property market is overheating. The valuations of office buildings sold in London, Hong Kong, Osaka and Chicago hit record highs in the second quarter of this year, on a price per square foot basis, and reached post-2009 highs in New York, Los Angeles, Berlin and Sydney, according to industry tracker Real...

• Obama’s Climate Plan and Poverty. The EPA’s new anticarbon rule is full of redistribution to offset its harm to the poor. President Obama says that critics of his plan to decarbonize the economy are “the special interests and their allies in Congress” repeating “the same stale arguments” about “killing jobs and businesses and freedom.” He adds that “even more cynical, we’ve got critics of this plan who are actually claiming that this will harm minority and low-income communities.”

• Hillary Plays Dirty as Her Numbers Drop. The candidate has taken to maligning opponents’ motives—but 57% of voters don’t trust her. President Obama came into office promising to unify America, but he has made political discourse meaner and more cynical. Whenever Mr. Obama is playing a weak hand, he questions the motivations of those who disagree with him and mangles the truth to undermine any criticism. Take the president’s recent statement that Republican opponents of his nuclear deal with...

• Joe Biden Is Sounding Out Allies About a 2016 Bid. Some Democrats press the vice president to run as an alternative to Hillary Clinton. Vice President Joe Biden is using part of his vacation in South Carolina this week to sound out friends and family about a presidential bid, as some Democrats press him to enter the race and give the party another option in the face of lingering controversies involving Hillary Clinton. From his vacation spot on Kiawah Island, Mr. Biden is giving the strongest signal yet that... 

CNBC:

• Market indicating Fed won't raise rates in September. (video) A week ago, the CME Group FedWatch tool had assigned a better than 50 percent chance of a rate hike next month. However, the latest wagering has the probability down to 39 percent, with the strongest chance of liftoff in 2015 not coming until December, which now has a 66 percent chance.

Zero Hedge:

• Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low, Japan Escalates Currency Race-To-The-Bottom Rhetoric.

• Mysterious Dip Buyer Found - Goldman Buyback Desk Has Busiest Day Since 2011.

• Why More Conflict Is Inevitable In The Middle East.

• Why Credit Market Moves Are Now "Hyperbolic," Citi Explains.

• 12 Signs That An Imminent Global Financial Crash Has Become Even More Likely.

• "Severe Correction Or Cyclical Bear" Ahead: Leuthold Major Trend Index Turns Negative. (graph)

• Understanding Why The Clinton Emails Matter.

• Asset-Price Inflation Enters Its Dangerous Late Phase.

• Solyndra 2.0 Nears Bankruptcy As Bonds Collapse To Record Lows.

• Schizo Stocks Shrug Off China, Europe Fears As Dow Roundtrips 700 Points In Giant Stop Hunt. (graph)

Business Insider:

• At least 17 killed after huge explosion rocks a major city in China.

• This housing bubble is ready to pop.

• Natural gas companies are tumbling, and taking private equity firms with them.

• The race to the bottom. (graph)

• One of the world's largest buyers of stocks could be forced into selling.

• ISIS is ramping up its state-building project in its Libyan 'capital'.

• Cisco(CSCO) beats, stock ticks up.

• China's next move could tie its own hands behind its back.

• Emerging markets are in trouble. (graph)

• Illinois just passed a sweeping police reform law aimed at curbing excessive force.

Reuters:

• China lets yuan fall further, fuels fears of "currency war". China's currency fell to a four-year low on Wednesday, slumping for a second day, after a central bank devaluation on Tuesday, and government sources believe the yuan may be allowed to slide even further to help the country's exporters. 

• U.S. warns states against defunding Planned Parenthood.

• U.S. steelmakers, politicians denounce China steel price cuts. Moves by Chinese steel exporters Wednesday to cut prices provoked cries of foul from the U.S. steel industry, and gave politicians skeptical of the pending Trans Pacific Partnership trade agreement new ammunition. 

• Brazil fertilizer sales expected to fall in 2015 -Mosaic(MOS). Fertilizer sales in Brazil will likely be between 30 million and 31 million tonnes in 2015, down from 32.2 million tonnes in 2014 due to market uncertainty, the head of U.S. fertilizer company Mosaic Co in Brazil, Floris Bielders, said on Wednesday. Bielders said farmers were not booking sales as far in advance as usual, which could result in a crunch at Brazilian ports when the imported products finally arrive, potentially resulting in delayed delivery.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 115.75 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 70.75 +2.0 basis points.

• S&P 500 futures +.11%.

• NASDAQ 100 futures +.16%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AAP)/2.25

• (DDS)/.72

• (KSS)/1.16

• (AMAT)/.33

• (JWN)/.90

• (SINA)/.07

Economic Releases

8:30 am EST

• Retail Sales Advance for July are estimated to rise +.6% versus a -.3% decline in June.

• Retail Sales Ex Autos for July are estimated to rise +.4% versus a -.1% decline in June.

• Retail Sales Ex Autos and Gas for July are estimated to rise +.4% versus a -.2% decline in June.

• Import Price Index for July is estimated to fall -1.2% versus a -.1% decline in June.

• Initial Jobless Claims are estimated at 270K versus 270K the prior week. 

• Continuing Claims are estimated to fall to 2245K versus 2255K prior.

10:00 am EST

• Business Inventories for June are estimated to rise +.3% versus a +.3% gain in May.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI, ECB Meeting minutes, $16B 30Y T-Bond auction, weekly Bloomberg Consumer Comfort Index, Bloomberg US Economic Survey for August, weekly EIA natural gas inventory report, Canaccord Growth Conference, (GWW) July sales and the (TTM) annual meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Reversing Slightly Higher into Final Hour on Central Bank Hopes, Short-Covering, Technical Buying, Energy/Utility Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.99 +2.04%

• Euro/Yen Carry Return Index 144.84 +.37%

• Emerging Markets Currency Volatility(VXY) 11.75 +8.29%

• S&P 500 Implied Correlation 54.98 -1.75%

• ISE Sentiment Index 50.0 -10.71%

• Total Put/Call 1.04 -5.45%

• NYSE Arms .80 -48.18% 

Credit Investor Angst:

• North American Investment Grade CDS Index 76.29 +1.27%

• America Energy Sector High-Yield CDS Index 1,887.0 +1.93%

• European Financial Sector CDS Index 79.03 +2.27%

• Western Europe Sovereign Debt CDS Index 22.77 +4.50%

• Asia Pacific Sovereign Debt CDS Index 70.58 +2.59%

• Emerging Market CDS Index 335.06 +.76%
  

• iBoxx Offshore RMB China Corporates High Yield Index 120.81 -.23%

• 2-Year Swap Spread 25.0 unch.

• TED Spread 21.75 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -20.0 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .10% unch.

• Yield Curve 148.0 +2.0 basis points

• China Import Iron Ore Spot $56.31/Metric Tonne +.16%

• Citi US Economic Surprise Index -4.1 +1.8 points

• Citi Eurozone Economic Surprise Index 12.0 +.1 point

• Citi Emerging Markets Economic Surprise Index -7.7 -2.9 points

• 10-Year TIPS Spread 1.64 -2.0 basis points
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 4.80 +.51

Overseas Futures:

• Nikkei 225 Futures: Indicating -82 open in Japan 
• China A50 Futures: Indicating -156 open in China

• DAX Futures: Indicating +113 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:  

• Yuan Bear in Wilderness in 2014 Now Warns of China Credit Crisis. In a March 2014 report, Daiwa Securities Co. senior economist Kevin Lai forecast a 10 percent drop in the yuan by the end of 2015 and warned China needed “very delicate” policy to avert a crisis. He’s still worried, and no longer so alone. The currency has devalued 3.7 percent since Tuesday morning, when the People’s Bank of China cut its daily reference rate by a record and said it would let the market play a greater role in the fixing. Lai, whose uber-bearish prediction is now halfway to fulfillment, estimates China has some $3 trillion of dollar-denominated debt outstanding which has suddenly become more expensive. “The PBOC is telling people that if they want to take their money out, please do,” Lai said in an interview Wednesday. “As the selling pressure increases, this could spin into a currency and a credit crisis. They’re exporting the crisis.” Chinese corporations have sold bonds and gotten bank loans offshore at a record pace in the past three years and now are the biggest component of major fixed-income indexes in the region. These issuers will buy dollars as they seek to protect themselves from the currency move, Lai said, increasing the pressure on the yuan and making it even more difficult to pay back their foreign dues. Already there are signs of cash draining from the country. The one-year sovereign yield jumped 20 basis points in two days and the similar interest-rate swap rose nine basis points.

• Schork Concerned on 'Orwellian' China Market Manipulation. (video)

• China’s Ailing Growth Fuels Surge in Emerging-Market ETF Hedges. (video) Emerging-market equities’ descent into a bear market amid a slowdown in China’s economy has ignited hedging in a popular exchange-traded fund. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, which tracks hedging costs on the iShares MSCI Emerging Markets fund, jumped to the highest level in 18 months versus a similar gauge for the Standard & Poor’s 500 Index. Investors in the ETF are bracing for more swings as they watch China’s deteriorating economy drag down developing markets amid the Federal Reserve’s intentions to tighten monetary policy for the first time in more than nine years.  

• Ukraine Says Attacks on Troops Intensify as Unrest Worsens. Ukraine said pro-Russian militants intensified attacks on government troops overnight in a bid to win ground, a sign the recent surge in fighting is worsening. Tensions in the 16-month conflict rose this week as the army reported renewed assaults on a village in the Donetsk region, an accusation the separatists deny. That prompted Ukraine to redeploy heavy artillery there that was removed under a February peace accord. The rebels, who control large swathes of the former Soviet republic’s easternmost regions, are trying to advance again toward the village, located near the port of Mariupol, military spokesman Andriy Lysenko said.

• Germany Says It Can’t Back Greek Bailout Plan Yet. Germany’s government withheld approval of the draft bailout plan for Greece, saying a bridge loan remains an option if a full aid program isn’t agreed in time for a payment to the European Central Bank due next week. Euro-area governments need time to assess the preliminary accord between Greece, its international creditors and the European Stability Mechanism before possible approval of a proposed 85 billion euros ($95 billion) in aid, Finance Ministry spokesman Juerg Weissgerber said Wednesday. The ministry expects to have a position on the draft memorandum of understanding by the end of the week, he said.

• Market's Partying Like It's 1998, VAR Models Need a Xanax. Take a quick gander at the analysis below and see if you don't agree it's a pretty good summary of the recent state of play in financial markets as China launched the latest salvo in the global currency wars by devaluing the yuan. 

• China Sends Ominous Message to Junk Bond Buyers Already on Edge. China just darkened the future for riskier corporate credit around the world. The world’s second-biggest economy shocked markets this week by depreciating its currency by the most in two decades, with the goal of aligning the yuan more closely to the market rate. In response, the average price of dollar-denominated junk bonds plunged to its lowest level since 2011. Debt of some energy companies, including Energy XXI Gulf Coast Inc. and Sandridge Energy Inc., fell more than 5 percent on Tuesday alone, Bank of America Merrill Lynch index data show. And China’s move deepened losses on obligations issued by U.S. metals and mining companies, which are already suffering their highest default rate since 2003. Why is a cut in the yuan’s value such a huge deal for U.S. corporate credit? Because it indicates that China’s growth is slowing down, perhaps more than analysts expected, which directly affects industrial companies that rely on continual demand from the $10.4 trillion economy. The problem is particularly acute for commodity producers that have already been struggling to meet their bills in the face of lower natural-resources values.

• Bearish Wagers on Brazil Stocks Rise to Record as Ibovespa Falls. Bets on further declines in Brazilian shares climbed to a record amid forecasts Latin America’s largest economy is heading toward the worst contraction in 25 years. The Ibovespa led losses in the Americas. Short interest in the iShares MSCI Brazil Capped exchange-traded fund was at 34.3 percent of shares outstanding as of Tuesday, according to data compiled by London-based Markit and Bloomberg. That’s the highest since at least 2006. The benchmark stock gauge slumped to a six-month low.

• Brazil’s Plummeting Currency Forces Wall Street to Play Catch-Up. The selloff in Brazil’s currency is getting so bad that strategists can’t keep up. Even after cutting their forecasts by 20 percent this year, the most for any major currency, the estimates still trail the real’s current trading level. Banco Bilbao Vizcaya Argentaria analysts are revising their forecasts for the third time in less than six weeks after the real’s descent to a 12-year low Thursday. Nine banks including Credit Suisse Group AG and Societe Generale SA already cut projections this month after the swoon rendered earlier calls obsolete. 

• First Blood to Ruble in New Currency War as Decline Exceeds Yuan. If China’s devaluation is going to set off a currency war, Russia will be pretty hard to beat. The yuan’s 1.8 percent plunge on Tuesday was topped by the 2.3 percent slide in the ruble, the largest of any major currency. Even before China’s announcement on Tuesday, most international futures traders were betting on further declines for the ruble, this quarter’s worst-performing major currency with a drop of 15 percent.

• German Economy Adds China Concerns to Greek Worries. (video)

• Europe Industrial-Output Slump Puts Damper on Short-Term Outlook. Industrial production in the euro area fell more than economists forecast in June, raising some questions about the state of the region’s recovery. After Eurostat reported a 0.4 percent slump on the month, leaving production down 0.3 percent over the quarter, Credit Suisse Group AG said the number “implies downside risks” to its forecast for gross domestic product. For economists at ING Groep NV, the report “sheds a concerning light on the manufacturing recovery in 2015.”

• Honeymoon Over for Renzi as Italian Reality Confounds Ambitions. The political honeymoon is long over for Italian Prime Minister Matteo Renzi, and it will be tough to square his latest vote-catching plan with the debt-plagued economy. The timid exit from a record-long recession has left many Italians frustrated, with youth unemployment at 44.2 percent in June. His popularity at a record low in public opinion polls, 40-year-old Renzi has pledged three years of tax cuts worth 35 billion euros ($39 billion) from 2016 to 2018 to regain momentum.   

• Emerging Bear-Market Slump Deepens as Yuan Pummels Currencies. Emerging-market stocks sank to the lowest level since 2011, extending declines in a bear market, and currencies slid as China’s falling yuan spurred bets developing nations will weaken their currencies to stay competitive. Investors exiting riskier assets drove stocks from Indonesia to South Africa and Turkey down at least 1.4 percent. Malaysia’s ringgit sank beyond 4 per dollar for the first time since 1998 as currencies in South Korea and Indonesia lost at least 1 percent. Eastern European currencies, regarded as haven investments amid central bank stimulus in the euro area, outperformed peers. Brazil’s real weakened for a second day and the Ibovespa dropped to the lowest level since March.

• China Spurs Rout in Europe Stocks Eclipsing Worst of Greece Saga. “Euro stocks have two strong winds pushing against them: the Chinese consumer is going to be hiding behind the weaker yuan, and stocks are selling in sympathy to the expected lack of exports,” said Daniel Weston, chief investment officer of Aimed Capital in Munich, Germany. “The demand expectation from China is having a big rethink.” Today’s selloff, led by automakers and consumer companies, was worse than the biggest one-day slides that accompanied Greek’s impasse with creditors in June and July. Losses in companies BMW AG and Daimler AG pushed the Stoxx 600 Auto & Parts gauge down 7.9 percent in two days, the most since 2011.

• Oil at $30 Is No Problem for Some Cost-Cutting Bakken Drillers. The lowest crude prices since 2009 might still not be enough to end the U.S. energy renaissance. Some parts of North Dakota’s Bakken shale play are profitable at less than $30 a barrel as companies tap bigger wells and benefit from lower drilling costs, according to a Bloomberg Intelligence analysis. That’s less than half the level of some estimates when the oil rout began last year. The lower bar for profitability is one reason why U.S. oil production has remained near a 40-year high even as crude prices fell more than 50 percent over the past year to the lowest level since March 2009.

• IEA Sees Oil Glut Through 2016 After Reaching 17-Year High. The global oil glut will last through 2016 as the strongest demand growth in five years and faltering supply fail to clear the surplus, according to the International Energy Agency. Record inventories will expand further even as consumption growth doubles in 2015 and supplies outside OPEC contract next year for the first time since 2008, the IEA predicted. Stockpiles won’t be diminished until the fourth quarter of next year, or even later if sanctions on Iranian crude are lifted, the agency said.

• Corn Futures Plunge as U.S. Unexpectedly Raises Forecast. Corn and soybeans slumped in Chicago by the maximum daily limit after the U.S. unexpectedly raised its crop forecasts from last month’s predictions, citing better yields than previously anticipated. The corn harvest will total 13.686 billion bushels, compared with 13.53 billion projected in July, the U.S. Department of Agriculture said Wednesday in its first survey-based estimate for the 2015-16 crop. That’s also higher than the 13.332 billion-bushel average of 31 analysts surveyed by Bloomberg News. Last year’s crop was a record 14.216 billion bushels. 

• Dudley Says He’s Hopeful for Fed Rate Liftoff in ‘Near Future’. The Federal Reserve is approaching the moment when it can start raising interest rates and the exact timing will be dictated by incoming economic data, said New York Fed President William C. Dudley. “Hopefully, we’re going to make progress in terms of our goals” for maximum sustainable employment and inflation of around 2 percent, Dudley told an audience on Wednesday after delivering a speech in Rochester, New York. “And so hopefully, in the near future, we’ll be able to actually begin to raise interest rates. When that is precisely, depends on the data.”

• Biotech on the Brink of Joining Half the S&P 500 Down 10% From High. The bull run in biotechnology is having its worst month in more than a year. Down in four of the last five days, companies tracked by the Nasdaq Biotechnology Index have fallen about 8 percent since July 20. They’re in danger of joining more than half the stocks in the Standard & Poor’s 500 Index nursing losses that meet the definition of a correction. Like cable television and movie stocks that plunged last week, biotech shares have been almost completely immune to weakness for more than six years, rising more than sixfold since March 2009. Weakness in the groups has been a troubling sign in an equity market where the Dow Jones Industrial Average has dropped in nine of the last 10 days.

• John Paulson Is Starting to Cash In on His Big Land Grab. Hedge-fund manager John Paulson, who made billions wagering against subprime mortgages, has started to profit from a U.S. housing bet that took longer to ripen: owning land. After acquiring about 35,000 lots since 2009, Paulson & Co. shifted toward selling last year and is accelerating its disposition pace, according to Michael Barr, who manages the firm’s real estate. Paulson’s funds had invested $770 million, mostly in lots bought out of bankruptcies or other distressed sales, and acquired two dozen communities in Arizona, California, Colorado, Florida and Nevada.

 Wall Street Journal:

• Goldman Sachs(GS) to Give Out ‘Secret Sauce’ on Trading. New open source platform is an attempt by Goldman to bolster its technology bona fides.

CNBC: 

• Cashin: These are the Street's real China concerns. (video)

• $30 oil coming sooner than you think: Kilduff. (video)

• Strategist: Financial market rout like 2008's is ahead.

Zero Hedge:

• 8 Capital Markets 'Threats' To The Central Bank Narrative.

• Caught On Tape: Mushroom Cloud Forms After Massive Explosion Rocks Chinese Port City. (pic)

• Greece Isn't Fixed... By A Long Way.

• "This Will End Badly" High Yield Bonds Tumble To Worst Since 2011. (graph)

• Italian Bond Futures Flash-Crash Into Close. (graph)

• Blood On The European Streets As EUR-Yuan Carry Unwinds Crush Stocks. (graph)

• Dow Gives Up Post-QE3 Gains, S&P Breaks Below Key Technical Support. (graph)

• BABA Battered To Record Lows. (graph)

• 10 Year Yields Plunge: A Very Confused Wall Street Tries To Predict What Happens Next. (graph)

• Hillary Clinton Turns Over E-mail Server To Feds As Bernie Sanders Surges Ahead In New Poll.

Business Insider: 

• This brokerage set up a secret team that traded against its own clients.

• Twitter(TWTR) is a messaging app now that it's finally removed the 140 character limit on direct messages.

• ALBERT EDWARDS WARNS: Prepare for overwhelming 'waves of deflation' to suck us into recession.

• Frugal customers are becoming an ominous threat to Macy's(M).

• China released 3 big economic stats and they were all bad.

Reuters:

• China central bank under pressure to weaken yuan further. China's move to devalue its currency reflects a growing clamor within government circles for a weaker yuan to help struggling exporters, ensuring the central bank remains under pressure to drag it down further in the months ahead, sources said. The yuan has fallen almost 4 percent in two days since the central bank announced the devaluation on Tuesday, but sources involved in the policy-making process said powerful voices inside the government were pushing for it to go still lower.

• Chinese Steel Exporters Cut Prices on Weaker Yuan. Chinese steelmakers cut prices $5-$10/t on rebar, billet, citing people familiar with the matter.