Thursday, August 20, 2015

Today's Headlines

Bloomberg: 
  • Chinese Stocks Resume Rout on Economy, Capital Outflow Concerns. China’s stocks slumped to a two-week low as concern a slowing economy and weaker currency will spur capital outflows outweighed prospects for more state support. The Shanghai Composite Index dropped 3.4 percent to 3,664.29 at the close, the lowest level since Aug. 6. About 17 percent of mainland-listed shares remain halted. The Hang Seng China Enterprises Index sank 2.3 percent to a 10-month low, while the Hang Seng Index closed within three points of entering a bear market. “The market will trade between 3,500 to 3,900 in the short term as market sentiment is still weak,” said Zhang Yanbing, a Shanghai-based analyst at Zheshang Securities Co. “Whether China’s stock market stabilizes will depend on future economic data and further easing policies.” 
  • Greek PM Tsipras to Propose Elections for Sept. 20, Official Says. Greek Prime Minister Alexis Tsipras is set to propose snap elections for next month in a bid to strengthen his authority after a party mutiny over his agreement to a third bailout. Greek stocks and bonds dropped on Thursday as Tsipras met with members of his cabinet in Athens to discuss his next moves after the approval of a bailout of 86 billion euros ($96 billion) from the European Stability Mechanism rescue fund. He’ll ask for elections to be held Sept. 20, according to a Greek government official. An announcement is due this evening, a second official said. Both asked not to be named as the information is not yet public. 
  • Greek Bonds Fall With Italy’s as Tsipras Said to Plan Elections. (video) Greek bonds declined as a government official said Prime Minister Alexis Tsipras was set to propose snap elections. Italian bonds also fell. Tsipras, who was elected in January on an anti-austerity platform, approved sweeping economic reforms attached to an international bailout at the cost of seeing his own party split. He’ll ask for elections to be held Sept. 20, according to a Greek government official who asked not to be named because there’s been no announcement.
  • Merkel Dubbed Cowardly on Greece by Biggest German Daily. (video)
  • The Asian Century Hits a Speed Bump. With trade slowing, currencies weakening and growth waning, this is turning out to be a very bumpy year. Trade slowing, currencies weakening, stocks falling, economic growth waning and political wobbles emerging. 2015 is proving a bumpy year in what's meant to be the Asian century. The confluence of stresses -- from China's slowdown, the fallout from the yuan's devaluation, doubts over Abenomics, disappointment with Modi and Jokowi, and deepening vulnerabilities among smaller economies -- comes as the Federal Reserve contemplates raising interest rates for the first time in almost a decade. The following charts illustrate the malaise:
  • China’s Wind and Solar Developers Hit by Subsidies Short of Plan. China’s wind and solar developers are getting much less than they anticipated in handouts from the government because of a quirk in subsidy policies, threatening to stymie growth in the world’s biggest market for clean energy. The issue relates to the support China pays power suppliers as enticement to develop clean energy projects. Surcharges slapped onto electricity bills to fund the subsidies are too low, leaving a gap between what was promised and what’s being paid out, said Meng Xiangan, vice chairman of the China Renewable Energy Society, an industry group. Left to continue, the trend may foreshadow a reckoning for what has become the engine of growth in the global renewables industry. 
  • North, South Korea Trade Fire Along Border as Tensions Worsen. North and South Korea exchanged fire across the demilitarized zone between the two countries in one of the worst incidents since 2010, sparking fears that hostilities will worsen. The incident started when North Korea fired a rocket at a South Korean border area, prompting Seoul’s forces to reply with an artillery barrage. It was unclear whether there were any casualties. 
  • Russia, China Start Joint Naval Drills of ‘Unprecedented’ Scale. Russian and Chinese warships gathered for the start of joint naval exercises, seeking to extend their military sway in a region torn by territorial disputes between Asian countries. Seven Chinese vessels including the Shenyang destroyer arrived at Vladivostok in Russia’s Far East, the state-run Tass news service reported Thursday, citing Vice Admiral Alexander Fedotenkov, deputy commander of the Russian Navy. The “scope of the exercise is unprecedented,” with 22 Russian and Chinese combat ships, 20 aircraft, 40 armored vehicles and 500 troops taking part, Fedotenkov said. The drills, conducted in the waters off Russia’s Pacific coast, will conclude Aug. 28 and feature simulated anti-aircraft and anti-submarine warfare.
  • Li & Fung Profit Falls 20% Amid Weak Demand in U.S., Europe. Li & Fung Ltd., the world’s largest supplier of clothes and toys to retailers, reported first-half core operating profit slumped 20 percent amid weak demand from its customers in the U.S. and Europe. Core operating profit fell to $182 million for the six months ended June from $227 million a year earlier, the company led by billionaire Chairman William Fung said in a statement Thursday. That compared with the $200 million average estimate of two analysts surveyed by Bloomberg. “While we expect the macroeconomic environment to remain challenging for the rest of the year, our order book remains solid and in line with our expectations,” said Chief Executive Officer Spencer Fung in the statement. Li & Fung gets about 60 percent of its revenue from the U.S., where consumer confidence fell in July as a stock market slump amid weakness in China may have damped Americans’ views of the domestic economy. The rapid decline in the euro due to political uncertainty around Greece, and the slowing Chinese economy also affected the company’s business, it said Thursday. The Hong Kong-based company, whose customers include Wal-Mart Stores Inc.(WMT) and Target Corp.(TGT), reported net income rose 33 percent to $149 million, while sales climbed 1 percent to $8.63 billion.
  • Swiss Watch Exports Decline Most Since 2009 as Asia Plunges. Swiss watch exports slid the most in more than five years in July amid plunging shipments to Asia as Chinese tourists stayed away from Hong Kong and avoided South Korea following the outbreak of a deadly virus. Exports fell 9.3 percent to 1.9 billion Swiss francs ($2 billion), the steepest monthly decline since November 2009, according to figures released Thursday by the Federation of the Swiss Watch Industry. Sales to China tumbled 40 percent, compared with a 49 percent increase in July 2014. Shipments were down 20 percent to South Korea and 29 percent to Hong Kong, offset partly by higher exports to Europe.  
  • Credit Traders Gird for the Worst as Fed Loses Its Grip on Debt. What happens when the Federal Reserve loses its stranglehold over debt markets? Investors are finding out. The selloff in corporate bonds is deepening and investors are seeking safety in the longest-dated government debt, which does best when the economy does worst. Defaults are rising as oil tumbles and investors are looking for the best ways to hedge against credit losses. All this comes as the Fed does, well, nothing much. Instead, it’s China that’s taken the lead with new rounds of financial stimulus in the face of slowing growth. But some days it’s a free for all, with even Kazakhstan wielding its influence. “Financial markets are desperate for the Fed to drive trading themes, but the ‘world’s central bank’ has fallen to the second rank this summer,” or sometimes third, Jim Vogel, an interest-rate strategist at FTN Financial in Memphis, Tennessee, wrote in a note Thursday.
  • 10 Currencies That May Follow Tenge in Tumble Triggered by China. On most days, Kazakhstan finds itself in the backwaters of financial markets. Yet, it’s this central Asian nation that has delivered the latest shock to global currency trading. Thursday’s 23 percent plunge in the tenge after Kazakhstan abandoned control of its exchange rate revealed a sense of urgency among policy makers: they had tried a managed depreciation just a day earlier. The escalation signaled to investors that it has become too costly for developing nations to defend their currencies. Vietnam also devalued the dong, while freely traded currencies such the South African rand and Turkey’s lira extended losses. The trigger for the wave of depreciations was China’s decision to weaken the yuan on Aug. 11, leaving countries competing with the world’s second-largest economy in export markets and those selling goods to it at a disadvantage.
  • Kazakhstan Tenge Slides 23% as Emerging-Market Rout Strains Pegs. Kazakhstan relinquished control of its exchange rate in the latest sign emerging nations will stop defending their currencies after China roiled global markets by devaluing the yuan. The central Asian nation, which counts Russia and China as its top trading partners, said it was switching to a free float, triggering a 23 percent slide in the tenge to a record 257.21 per dollar. Since the shock yuan devaluation last week, a gauge of 20 developing-nation exchange rates capped its longest slump since 2000, Vietnam devalued the dong and currencies from Russia to Turkey and Malaysia slid at least 4.6 percent. 
  • Brazil Traders Unnerved by Prospect of Impeachment and Aftermath. As talk of impeaching President Dilma Rousseff has ratcheted up this month, investors have made one thing clear: they’d rather see her stay in office. The nation’s benchmark Ibovespa stock index has tumbled 8.4 percent in August on concern her ouster would only exacerbate what analysts now forecast will be Brazil’s longest recession since 1931. “The actual process of how Dilma could be replaced -- if she were to be impeached or resigned -- would be politically messy and divisive for the country,” Geoffrey Dennis, the head of global emerging-market strategy at UBS Securities, said by phone from Boston. “Even if you have a straightforward transition, there is no guarantee it would make things better.”
  • Emerging Stocks Head for Six-Year Low as Currency Rout Deepens. (video) The rout in emerging-market assets deepened as stocks sank to the lowest level since 2009 and Kazakhstan abandoned its currency peg. The tenge plunged by a record and the South African rand breached 13 per dollar for the first time since December 2001 before rebounding. Russia’s ruble was poised for its longest losing streak since December. The Shanghai Composite Index fell to a two-week low as PetroChina Co. led energy companies lower. Exchange-traded funds tracking stocks from China to Indonesia declined in U.S. trading. The MSCI Emerging Markets Index lost 1.2 percent to 830.55 at 1:15 p.m. in New York, set for the lowest close since August 2009.
  • U.K.'s FTSE 100 Stock Index Falls 10% From Record, Entering Correction. (video) Falling health stocks sent U.K. stocks down for an eighth day amid global growth concerns that have been rattling markets. The FTSE 100 Index has now dropped more than 10 percent from its high in April -- typically known as a correction.
  • European Stock Selloff Intensifies Amid Global Growth Concern. (video) Mounting concern that global growth is weakening and uncertainty about the timing of a U.S. rate increase fueled a second day of losses for European stocks. A respite for the region’s equities at the start of the week was short lived, as a rout in emerging markets spread. Kazakhstan was the latest to devalue its currency, following a similar move by China last week. The U.K.’s FTSE 100 Index fell for an eighth day, dragging it 10 percent below its April peak, a level known as a correction. “It’s a combination of factors that are taking down stocks: Chinese growth slowing down, China’s market crash, the oil selloff and fears of all this spreading to the U.S. and Europe,” said Ion-Marc Valahu, co-founder and fund manager at Clairinvest in Geneva. The Stoxx Europe 600 Index lost 2.1 percent to 373.44 at the close of trading, taking its decline since China’s currency move to 6.6 percent.
  • BHP(BHP), PetroChina Slip as Commodity Rout Deepens on China Concern. BHP Billiton Ltd. and Glencore Plc drove declines among global mining and energy companies as commodity prices plunged on raised concern of a sharp slowdown in China. BHP, the world’s biggest miner, closed near a seven-year-low in Sydney, while Glencore slumped to a record low and PetroChina Co. dropped to a six-year low in Hong Kong. Gold producers bucked the trend, notching gains on strength in the price of the metal. Copper and oil prices hit six-year lows amid concern over the weakest growth for 25 years in China, the biggest consumer of metals to energy. Glencore Chief Executive Officer Ivan Glasenberg said Wednesday the world’s leading commodity trader was wrong-footed by the sharp slowdown in China. “Everyone knows about oversupply, the biggest thing that’s hitting right now is the concern about China.” IG Ltd. market analyst Angus Nicholson said by phone from Melbourne. The copper price decline is another driver, he said.
  • A Funny Thing Happened on the Way to $80 Oil by A. Gary Shilling. In February, I predicted that crude oil prices would drop to $10 to $20 a barrel. At the time, the price of West Texas Intermediate was $54, down from $74 in November, when OPEC decided not to cut production in order to forestall further price erosion. And that was way down from the June 2014 price of $107. I'm sticking with my forecast of $10 to $20 a barrel. The logic behind that February projection still seems valid.
  • September or December Is Near-Irrelevant for Fragile Currencies. Whether the Federal Reserve raises interest rates in September or December is turning out to be almost irrelevant for emerging-market currencies and those from nations that export minerals to China. Rather than being dominated by prospects for U.S. policy, they’re falling as commodity prices tumble for a seventh week. South Africa’s rand dropped to a 13 1/2-year low against the dollar, even after minutes of the Fed’s July meeting prompted traders to pare bets on a rate increase next month. Kazakhstan’s tenge plunged a record 23 percent after the country relinquished control of its exchange rate. 
  • Fed Must be Mindful of Risks It's Creating, Roach Says. (video)
  • Goldman(GS) Sees Hedge Funds Playing Defense in Stock Market. The collective wisdom of the hedge-fund industry, if you believe in such a thing, is flashing a troubling sign for the global economy. The funds' top stock picks are leaning toward defensive rather than cyclical industries for the first time since 2011, according to Goldman Sachs Group Inc.'s latest assessment of holdings. Funds added to positions in the health-care, utility, consumer-staples and telephone industries, the type of companies considered less at risk to an economic slowdown, while trimming positions in energy, technology, financial, consumer-discretionary and commodity companies.
  • Netflix(NFLX) Joins Media Stock Retreat With Biggest Drop in 10 Months. Netflix Inc., the best performer in the Standard & Poor’s 500 Index this year, joined a decline in media stocks, falling the most since October after bucking the selloff that hit Walt Disney Co., CBS Corp. and others.
Zero Hedge:
Telegraph:

Bear Radar

Style Underperformer:
  • Small-Cap Growth -1.72%
Sector Underperformers:
  • 1) Social Media -2.75% 2) Gaming -2.71% 3) Networking -2.62%
Stocks Falling on Unusual Volume:
  • SSI, NFLX, ENT, RPXC, INFN, TIER, PLKI, JMEI, DIS, KIRK, MSG, TWX, CNK, CSTE, STR, LOCO, DXGE, MOMO, ALDW, JKS, QUNR, MRK, CTRN, AAXJ, VXUS, VNQI, BKE, ACAT, TRGP, BAC, EWBC, XPO, MRK, TRCO, Z, SWFT, SNDK, SUNE, ADI, DIS, PANW, STR, PANW, SBGI and KN
Stocks With Unusual Put Option Activity:
  • 1) GS 2) IWO 3) ADI 4) INTC 5) CRM
Stocks With Most Negative News Mentions:
  • 1) DIS 2) TWX 3) MU 4) AAL 5) BAC
Charts:

Bull Radar

Style Outperformer:
  • Mid-Cap Value -.92%
Sector Outperformers:
  • 1) Gold & Silver +3.52% 2) Utilities +.02% 3) REITs -.29%
Stocks Rising on Unusual Volume:
  • TECD, NTAP, KEYS, LL, UNFI, LXRX, KCG, GOLD and LLY
Stocks With Unusual Call Option Activity:
  • 1) BTU 2) RMD 3) DISH 4) LLY 5) TMUS
Stocks With Most Positive News Mentions:
  • 1) LL 2) HRL 3) NTAP 4) UNFI 5) LLY
Charts:

Morning Market Internals

NYSE Composite Index:

Thursday Watch

Evening Headlines 
Bloomberg: 
  • China’s Newest Make-or-Break Level for Stocks Is Shanghai 3,500. In a Chinese stock market obsessed with round numbers, 3,500 has emerged as the latest make-or-break level for traders trying to gauge the staying power of state support. Signs of government buying have appeared at that level on the Shanghai Composite Index at least four times over the past six weeks.  
  • Bear Market Looms for Hong Kong Stocks as Index Sinks With China. Hong Kong stocks are poised to enter a bear market as declines in mainland markets and the devaluation of the yuan erode support for the city’s shares. The Hang Seng Index lost 1.8 percent to 22,743.54 as of 10:16 a.m. in Hong Kong on Thursday, bringing its decline from a seven-year high on April 28 to 20 percent. The Hang Seng China Enterprises Index of Chinese equities listed in the city, which entered a bear market last month, fell 2.5 percent on Thursday. Shares in the former British colony have been buffeted by a rout in China that destroyed about $4 trillion in market value. The Shanghai Composite Index fell by almost a third from its peak in mid-June, prompting the government to step in with unprecedented measures to support the market. “People are scared,” said Rahul Chadha, co-chief investment officer at Mirae Asset Global Investments in Hong Kong. “It’s the fear factor.”
  • China’s Stocks Resume Declines Amid Economy, Outflow Concerns. China’s stocks fell to a two-week low as traders gauged government support for the equity market amid concern a slowing economy and weaker yuan will spur capital outflows. The Shanghai Composite Index lost 1.4 percent to 3,743.77 at 9:59 a.m. local time, led by health-care and energy companies. Hong Kong’s Hang Seng Index lost 1.1 percent, taking its decline from its April 28 high to 19.5 percent, approaching the 20 percent decline that some traders consider the start of a bear market.
  • Asian Stocks Fall Fifth Day on Fed Minutes, China Slowdown Fears. Asian stocks fell for a fifth day after Federal Reserve minutes showed U.S. officials sought more progress on inflation and investors watched China as concerns heighted over the nation’s slowdown. The MSCI Asia-Pacific Index slid 0.1 percent to 135.87 as of 9:05 a.m.
  • Junk-Bond Risk Gauge Surges to '15 High Amid Escalating Oil Rout. Junk-bond investors are getting fidgety amid a renewed plunge in the energy market. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, surged 6.3 basis points to 394 basis points, the highest level this year. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, extended its slump this month trading near a four-year low. Oil prices that have dropped below $41 are rattling investors in the high-yield bond market. The debt is poised to post a third straight month of losses -- something that has never happened since 2008. “The best of times for high-yield are behind us and we are now witnessing the beginning of the end of the credit cycle,” Bank of America Corp. strategists wrote in a report Monday.
  • One-year oil at 10-year low with no respite in sight. Oil is already trading at the lowest level in a decade in New York, as far as one-year contracts go, signalling traders don't expect much reprieve from the current rout. West Texas Intermediate oil for delivery in September 2016 touched $US47.90 a barrel on the New York Mercantile Exchange Wednesday, the lowest intraday price for a contract out 12 months since February 2005. "This says that the price prospects for 12 months from now are bleak as we speak," John Kilduff, a partner at Again Capital, a New York-based hedge fund, said by phone. "The curve is a representation of the collective wisdom of the market. It's a best guess of market conditions 12 months from now."
  • Cheap Oil’s Making It Tough for Ethanol to Pay the Bills. Cheap crude oil may make it hard for ethanol companies to pay their bills on time. The lowest oil prices in six years are hitting biofuel producers two ways: They’re making ethanol less attractive as a blend for gasoline, and emboldening the arguments of petroleum backers who say the U.S. law mandating consumption of the fuel alternative is obsolete, Standard & Poor’s Rating Services Inc. said in a report Wednesday.
  • Cliffs CEO Takes Aim at Crazy China Steel Exports as Glut Grows. Steel exports from China will surge to more than 100 million metric tons this year as local mills benefit from a rising tide of cheap iron ore to produce more than Asia’s top economy needs, according to Cliffs Natural Resources Inc. “It’s like a bad virus,” Lourenco Goncalves, chief executive officer of the largest U.S. iron ore producer, said in a phone interview from the company’s headquarters in Cleveland, Ohio. “Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”
  • So Long September: Bond Traders Defer Their Date With the Fed. So much for September. Traders gearing up for the Federal Reserve to raise interest-rates next month reversed course Wednesday after minutes from the central bank’s July meeting showed policy makers were still waffling on whether the economy is strong enough to warrant higher borrowing costs. That's far short of the confidence they expected to see from a central bank supposedly just weeks away from what would be the first increase in almost a decade. The probability that futures traders assign to a rate boost next month slid to 36 percent, the lowest since July, from about 50 percent earlier in the day. The levels assume that the Fed’s target will average 0.375 percent after the first move. The chance of an increase at or before the Fed's December meeting dropped as well, to 65 percent from 73 percent Tuesday.
  • GE(GE) Said to Mull Atlanta Site Among Possible Headquarters Options. General Electric Co. has held exploratory talks about relocating its headquarters to Atlanta from Connecticut as part of a review of possible new homes, according to people familiar with the matter. GE may meet with developer Tishman Speyer Properties in the coming weeks to discuss space at Three Alliance Center, a 30-story building going up in Atlanta’s Buckhead neighborhood, said the people, who asked not to be identified because details aren’t public.
Wall Street Journal:
  • Divided Fed Puts Yellen on Hot Seat. Central bank chief faces cliffhanger decision as rate call comes down to wire. The Federal Reserve faces a potential cliffhanger about whether to raise interest rates at its September meeting, a decision that will test Chairwoman Janet Yellen’s ability to lead an uncertain policy-making committee.
  • Time to End Quarterly Reports, Law Firm Says. Wachtell Lipton argues the ritual distracts companies from long-term results. Influential law firm Wachtell, Lipton, Rosen & Katz has an idea that may be music to the ears of its big corporate clients and a nightmare for some investors and analysts: end quarterly earnings reports.
Fox News:
  • Dangerous farce’: Lawmakers rip Iran deal over report Tehran can use own nuke inspectors. (video) Capitol Hill opposition to the Iranian nuclear deal was stoked Wednesday by a bombshell report that Tehran will be allowed to use its own experts to inspect one of the country's most controversial nuclear sites. "Allowing the Iranians to inspect their own nuclear sites, particularly a notorious military site, is like allowing the inmates to run the jail," Sen. Lindsey Graham, R-S.C., a presidential candidate, said in a statement.
Zero Hedge:
Reuters:
  • Hacker's Ashley Madison data dump threatens marriages, reputations. Love lives and reputations may be at risk after the release of customer data from infidelity website Ashley Madison, an unprecedented breach of privacy likely to rattle users' attitudes towards the Internet. Hackers dumped a big cache of data containing millions of email addresses for U.S. government officials, UK civil servants and high-level executives at European and North America corporations late on Tuesday, the latest cyber attack to raise concerns about Internet security and data protection. The hacker attack has been a big blow to Toronto-based assignation website firm Avid Life Media, which owns Ashley Madison and has indefinitely postponed the adultery site's IPO plans.
  • LatAm credits wider on commodity concerns. LatAm credits took another beating on Wednesday, as a rally in US Treasuries after the Fed's minutes failed to offset concerns about growth in China as well as sputtering commodity prices. Ten-year US Treasury yields fell back to around 2.12% after the minutes suggested the FOMC wanted more data on US growth and inflation before an "approaching" hike in rates. The possibility of a delay in monetary tightening in the US, however, brought little comfort to investors looking at EM assets in Latin America.
npr:
  • Government Inquiry Into Clinton Emails Likely To Widen. "I think that the FBI will be moving with all deliberate speed to determine whether there were serious breaches of national security here," said Ron Hosko, who used to lead the FBI's criminal investigative division.
Economic Information Daily:
  • China May Increase Direct Taxes in Next 5-Yr Plan. China may increase direct taxes including property and land taxes in the 2016-2020 period and cut indirect taxes, citing Gao Peiyong, head of National Academy of Economic Strategy under the Chinese Academy of Social Sciences.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.25% to -.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 124.0 +3.5 basis points.
  • Asia Pacific Sovereign CDS Index 74.75 +3.75 basis points.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.09%.

Earnings of Note
Company/Estimate
  • (AMWD)/.69
  • (BKE)/.47
  • (JKS)/.88
  • (PERY)/.00
  • (SHLD)/-2.50
  • (SSI)/.34
  • (SMRT)/.05
  • (TECD)/.97
  • (TTC)/.91
  • (CRMT)/.86
  • (GPS)/.65
  • (HPQ)/.85
  • (INTU)/-.11
  • (MRVL)/.11
  • (ROST)/.62
  • (CRM)/.17
  • (TFM)/.40
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 271K versus 274K the prior week.
  • Continuing Claims are estimated to fall to 2265K versus 2273K prior.
10:00 am EST
  • Existing Home Sales for July are estimated to fall to 5.43M versus 5.49M in June.
  • Philly Fed Business Outlook for August is estimated to rise to 6.8 versus 5.7 in July.
  • The Leading Index for July is estimated to rise +.2% versus a +.6% gain in June.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Williams speaking, UK retail sales report, Bloomberg Economic Expectations Index for August, weekly Bloomberg Consumer Comfort Index,  and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Wednesday, August 19, 2015

Stocks Lower into Final Hour on China Bubble-Bursting Fears, Rising European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Commodity/Financial Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 14.71 +6.60%
  • Euro/Yen Carry Return Index 143.79 +.34%
  • Emerging Markets Currency Volatility(VXY) 10.69 unch.
  • S&P 500 Implied Correlation 56.18 -.51%
  • ISE Sentiment Index 61.0 +5.17%
  • Total Put/Call 1.09 +14.74%
  • NYSE Arms 1.76 +103.25% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 78.79 +1.14%
  • America Energy Sector High-Yield CDS Index 1,922 +1.15%
  • European Financial Sector CDS Index 78.48 +3.60%
  • Western Europe Sovereign Debt CDS Index 22.09 -1.78%
  • Asia Pacific Sovereign Debt CDS Index 74.19 +4.40%
  • Emerging Market CDS Index 353.66 +2.87%
  • iBoxx Offshore RMB China Corporates High Yield Index 119.05 -.01%
  • 2-Year Swap Spread 23.5 -.25 basis point
  • TED Spread 26.75 +1.0 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -18.25 +1.75 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .04% -3.0 basis points
  • Yield Curve 147.0 unch.
  • China Import Iron Ore Spot $56.41/Metric Tonne -.90%
  • Citi US Economic Surprise Index -15.8 -7.6 points
  • Citi Eurozone Economic Surprise Index 10.4 -.4 point
  • Citi Emerging Markets Economic Surprise Index -5.5 +.7 point
  • 10-Year TIPS Spread 1.58 -2.0 basis points
  • # of Months to 1st Fed Rate Hike(Morgan Stanley) 3.50 -.04
Overseas Futures:
  • Nikkei 225 Futures: Indicating -122 open in Japan 
  • China A50 Futures: Indicating -340 open in China
  • DAX Futures: Indicating +2 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my index hedges and emerging markets shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long