Stocks Surging into Final Hour on Central Bank Hopes, Less European/US High-Yield Debt Angst, Bargain-Hunting, Tech/Oil Service Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 33.77 -6.25%

• Euro/Yen Carry Return Index 141.88 -.81%

• Emerging Markets Currency Volatility(VXY) 12.51 +2.54%

• S&P 500 Implied Correlation 57.54 +.26%

• ISE Sentiment Index 69.0 -10.39%

• Total Put/Call 1.03 -18.9%

• NYSE Arms .52 -83.12% 

Credit Investor Angst:

• North American Investment Grade CDS Index 84.47 -3.22%

• America Energy Sector High-Yield CDS Index 1,930.0 -1.06%

• European Financial Sector CDS Index 84.66 -.31%

• Western Europe Sovereign Debt CDS Index 23.82 -3.31%

• Asia Pacific Sovereign Debt CDS Index 80.78 -2.17%

• Emerging Market CDS Index 375.58 +1.0%
  

• iBoxx Offshore RMB China Corporates High Yield Index 117.15 -.14%

• 2-Year Swap Spread 14.0 -5.75 basis points

• TED Spread 26.50 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.25 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .05% +1.0 basis point

• Yield Curve 150.0 +1.0 basis point

• China Import Iron Ore Spot $53.67/Metric Tonne +.41%

• Citi US Economic Surprise Index -9.3 +6.0 points

• Citi Eurozone Economic Surprise Index 17.4 -.5 point

• Citi Emerging Markets Economic Surprise Index -7.9 +.1 point

• 10-Year TIPS Spread 1.54 +1.0 basis point

• # of Months to 1st Fed Rate Hike(Morgan Stanley) 6.55 unch.

Overseas Futures:

• Nikkei 225 Futures: Indicating +4 open in Japan 

• China A50 Futures: Indicating -76 open in China

• DAX Futures: Indicating unch. open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging markets shorts

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• Chinese Margin Debts Shrink by $156 Billion as Trades Unwind. China’s margin debt has plunged by 1 trillion yuan ($156 billion) from its June peak as stock traders close out bets using borrowed money amid a $5 trillion rout. Outstanding margin loans on the Shanghai and Shenzhen exchanges fell to about 1.25 trillion yuan on Monday from a record high of 2.27 trillion yuan on June 18. The Shanghai Composite Index has plunged 45 percent from its June peak amid concern that the highest valuations among major world markets are unjustified given the outlook for slowing economic growth. While KGI Securities Co. and Shenwan Hongyuan Group Co. say the slump in margin lending will help reduce volatility from the highest level in almost two decades, CIMB Securities Ltd.’s Scott Hong sees little chance of a sustained rally without a rebound in leverage. “The bull run was driven by leveraged funds, and the bull will cease to exist when leverage fades,” Hong, an analyst at CIMB Securities in Hong Kong, wrote in an e-mail. “Range-bound consolidation would be the best-case scenario.” 

• China's Stunning Stock Market Moves in One Huge, Annotated Chart. Bloomberg Intelligence economist Tom Orlik has put together a fantastic, annotated chart that shows both the market's huge upswing and subsequent crash. As he notes, "Along the way there have been five rate cuts, a raft of interventions from the government aimed at stabilizing the market and a global stock correction with China at its core."

• Hong Kong Dollar Options Suggest Peg Is Most at Risk in a Decade. Options traders are betting the Hong Kong dollar’s peg is the most vulnerable it’s been in a decade as China’s shift to a freer exchange rate prompts speculation the city’s link will come under pressure. The currency’s one-year implied volatility, a gauge of expected price swings used to price options, has more than tripled to 3.2 percent since a surprise yuan devaluation on Aug. 11. That’s near the yuan’s reading on the day before it was weakened in a move that ended China’s de facto peg of more than four months. Hong Kong’s currency has been kept at about HK$7.80 per U.S. dollar since 1983. 

• Emerging Companies With $23 Billion to Repay Show Risks of Rout. A $23 billion pile of debt is stifling emerging-market companies already strained by the tumble in commodity prices to 16-year lows and weaker currencies. The bonds in U.S. dollars, which come due before the end of 2016, have become more expensive to roll over or repay after the selloff triggered by China’s yuan devaluation this month sent yields soaring to close to the highest levels in four years. Brazil’s Petroleo Brasileiro SA and billionaire Carlos Slim’s Mexican wireless company America Movil SAB are among the 10 most-burdened borrowers, according to data compiled by Bloomberg.

• The Hardest-Hit Bond in All of Emerging Markets Just Plunged 43%. Bond investors in Mexico’s largest construction company are starting to sense desperation. Empresas ICA SAB’s debt due 2021 has lost 43 percent this month, the most in emerging markets. The decline to a record low is remarkable even by the standards of developing nations, which are suffering one of the worst selloffs since the financial crisis.

• Petrobras(PBR) Taps Brazil Bond Market as Dollar Borrowing Costs Soar. Petroleo Brasileiro SA is seeking refuge in Brazil’s domestic bond market as overseas borrowing costs surge amid a plunge in the local currency has exposed a mismatch between its real-based revenues and dollar debt payments. The world’s most-indebted oil producer said it’s planning to sell 3 billion reais ($830 million) in local bonds. The move from the state-controlled company comes as crude prices trade near the lowest in a decade and after Brazil’s currency tumbled 27 percent this year, pushing up the cost of its debt. Yields on benchmark dollar bonds due in 2024 jumped to a record 8.71 percent this week amid a global selloff in emerging markets and heightened concern that Brazil won’t be able to maintain its investment-grade credit rating.  

• Stocks in Europe Resume Retreat as Rebound Proves Temporary. Even the best day since 2011 wasn’t enough to reverse fortunes for European stocks, which resumed declines on Wednesday. Investors have dealt with zigzags this week, as European stocks first slid the most since the financial crisis, before rallying yesterday after China cut interest rates. A late-day announcement that Monsanto Co. abandoned efforts to acquire Syngenta AG sent shares of the Swiss company down 18 percent, the most on the Stoxx Europe 600 Index. The benchmark gauge for European equities lost 1.8 percent at the close of trading.

• The Stock Market Hasn't Had a Selloff Like This One in Over 75 Years. (graph) By one metric, investors would have to go back 75 years to find the last time the S&P 500's losses were this abrupt. Bespoke Investment Group observed that the S&P 500 has closed more than four standard deviations below its 50-day moving average for the third consecutive session. That's only the second time this has happened in the history of the index. Indexing the S&P 500 to five sessions prior to the tumult shows that a replication of the mid-1940 plunge could see equities run much further to the downside and into a bear market:

• Levered ETF Bets on U.S. Stocks Go Bananas After Drop. “Go big or go home” is what the cool kids say, and yesterday exchange-traded fund investors did the former: they went big on tripled-leveraged bets that stocks will rebound and other bets that short-term Treasuries will gain.

• The U.S. Is Short on Options to Confront Next Crisis. Lawmakers seemingly averse to fiscal stimulus while Fed rates already near zero.

MarketWatch.com: 

• High-yield-bond market is under an August curse. (graph)

CNBC:

• New radical Greek leftist leader calls for Grexit. 

Zero Hedge:

• Full Witch Hunt: Chinese Police Probe Securities Regulator While Securities Regulator Probes Brokers.

• When The FOMC Completely Loses The 'Inflation' Argument. (graph)

• Iran Prepared To Defend Old Market Share "At Any Cost".

• Dudley Says "We Are A Long Way From Additional QE".

• Dudley Sends Rate-Hike Odds Plunging, Hammers USDJPY, Slams Stocks. (graph)

• "Central Bankers Look Naked... & Investors Have Nothing Else To Believe In".

• DOE Confirms Major Inventory Draw, Crude Production Slowest In 3 Months. (graph)

• AAPL(AAPL) Suffers First Death Cross Since 2012.

• Recession Watch - Durable Goods Growth Slows In July, Core Capex Orders Decline 6 Straight Months. (graph)

• Time To Pull Out The Nasdaq/China Comparison Chart. (graph)

• Virginia Reporter, Photographer Killed During Live TV Report; "Disgruntled Employee" Gunman Tweets Attack, Shoots Himself. (video)

Business Insider:

• 'She was the most radiant woman I ever met': Boyfriend of reporter killed during broadcast posts touching tribute.

• These are the 10 cities where living standards have gone through the floor in the last 5 years.

• There has been nowhere to hide during the market selloff.

• Americans haven't been this worried about a stock market crash since the last one. (graph)

Reuters:

• Monsanto(MON) drops pursuit of Swiss agribusiness rival Syngenta. U.S. agribusiness leader Monsanto Co. (MON.N) on Wednesday abandoned efforts to acquire Swiss rival Syngenta AG (SYNN.VX), which has rejected a recently sweetened offer. Syngenta shares fell more than 18 percent after the announcement while Monsanto shares jumped more than 7 percent.

• Schlumberger(SLB) to buy oilfield gear maker Cameron in $14.8 billion deal. Cameron's shares rose nearly 44 percent to $63.14, below Schlumberger's $66.36 per share cash-and-stock offer, in early trading on Wednesday. Schlumberger's shares fell 3.5 percent to $70.02.

Telegraph:

• China cracks down on 'rogue' traders after Black Monday fears come back to spook investors. Beijing launches criminal pursuit of banks and brokers to stop money bleeding from the country after markets sell-off resumes. 

Vedomosti:

• Russian Ministry Sees Recession in 2016 If Oil at $40. Conservative economic forecast assumes oil at $40/bbl in 2016-2018, citing person familiar with the estimates made by Economy Ministry. GDP -.9%, Ruble seen at 75/USD, inflation at 8.8%, Fixed Capital Investment -6.3% in 2016, according to the estimates.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.08%

Sector Underperformers:

• 1) Gaming -2.73% 2) Airlines -1.70% 3) Alt Energy +1.41%

Stocks Falling on Unusual Volume:

• TOT, SLB, SYT, SIAL, TIER, VMW, WPPGY, MSG, ATO, GAS, HEI, TOL, RIG, DPS, SBGI, USLV, UVE, RY, JLL, CSTE, WETF, AEM, VVC, LEG, BF/B, VMW, GRUB and SCTY

Stocks With Unusual Put Option Activity:

• 1) AVP 2) TXN 3) EWG 4) PHM 5) AA
  

Stocks With Most Negative News Mentions:

• 1) SUNE 2) SAFM 3) CSTE 4) WETF 5) CENX
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +1.08%

Sector Outperformers:

• 1) Oil Service +4.26% 2) Internet +1.62% 3) Networking +1.49%
  

Stocks Rising on Unusual Volume:

• CAM, EXPR, OSK, ANF, MON, EFOI, FTI, MNK, NMBL, OII and CHS

Stocks With Unusual Call Option Activity:

• 1) PTCT 2) WLL 3) WY 4) RJET 5) SYY
  

Stocks With Most Positive News Mentions:

• 1) OSK 2) BBY 3) RTN 4) SRPT 5) EXPR
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 55.7% Above 100-day average
• 10 Sectors Rising, 0 Sectors Declining
• 66.2% of Issues Advancing, 30.6% Declining
• 2 New 52-Week Highs, 151 New Lows
• 16.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 25.9
• Vix 33.8
• Total Put/Call 1.33
• TRIN/Arms .55

Wednesday Watch

Evening Headlines 

Bloomberg: 

• China’s Stocks Slump as Rate Cut Fails to Stop $5 Trillion Rout. China’s stocks extended the steepest five-day drop since 1996 as an interest-rate cut by the central bank failed to stop a $5 trillion rout. The Shanghai Composite Index sank 3.8 percent to 2,852.21 at 10:42 a.m. local time, rising as much as 1.2 percent earlier. About eight stocks fell more each that rose on the gauge. The fifth interest-rate cut since November was announced hours after the benchmark measure closed with a 7.6 percent drop on Tuesday. Chinese equities have lost at least $5 trillion, or half their value, since mid-June as margin traders closed out bullish bets and concern deepened that valuations are unjustified by the weak economic outlook. The government has halted intervention in the equity market this week as policy makers debate the merits of an unprecedented rescue, according to people familiar with the situation. “The prevailing sentiment is still that investors want to cash out, whatever the government does,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong. “Confidence is already damaged. Doubts over the effectiveness of policies are getting bigger. The market will remain under selling pressure for a while.” The Hang Seng China Enterprises Index dropped 0.7 percent. Hong Kong’s Hang Seng Index fell 1.2 percent as the value of shares traded reached double the 30-day average for this time of day.

• China's 'Traditional' Monetary Policy Moves Not Enough. (video)

• Volkswagen Auto Sales Slid in July as Emerging Markets Stumble. Volkswagen AG, aiming to become the world’s largest automaker by 2018, said Tuesday that global sales slipped 3.7 percent in July amid turmoil in key markets. Volkswagen delivered 792,100 vehicles last month, bringing the 2015 total to 5.83 million, 1 percent less than the Wolfsburg, Germany-based company sold in the same period a year earlier. “The overall economic situations in China, Russia and Brazil continue to be tense,” Christian Klinger, VW’s sales chief, said in a press release. “In the second half of the year, we expect the patchy development of markets to remain a key factor in the various regions.” In China, Volkswagen’s biggest market, sales for the first seven months of the year declined about 5 percent to 1.99 million vehicles. 

• Danger Signs That Made Fund Quit 25% of Assets Say Worst to Come. John Lekas’s “sell” triggers helped the bond fund manager dodge some losses amid the worst month this year for distressed debt from emerging markets. They’re now warning of more pain to come. Lekas, who oversees $1.4 billion at Leader Capital Corp. in Portland, Oregon, trimmed about a quarter of his holdings in the past two months based on his modeling’s signals. That included Noble Group Ltd.’s 2020 notes before they fell almost 20 percent. He’s now buying short-term U.S. Treasuries and predicting a deeper fallout in emerging markets. “We sold about 25 percent of our portfolio because things are not working out, it got too risky,” said Lekas. “I would have sold more -- the liquidity in the market has become more problematic.” Lekas’s modeling uses components such as interest rates, market volatility and risk-reward scenarios.

• GM Moves to Cut Jobs at Brazil Factory Amid Economic Turmoil. General Motors Co. plans to cut 800 jobs in Brazil, after announcing less than a month ago that it will invest another $1.9 billion in the South American nation. The automaker reached an agreement with a union at a plant near Sao Paulo to put the reductions on hold, after a two-week strike. The 800 workers will be on paid leave for five months, with GM and the government each paying half of their wages, company spokesman Nelson Silveria said. They probably will be released after that period because of weak demand, he said.

• China's Yuan Shock Gives Carry-Trade Crowd Worst Year Since '08. China just gave investors one more reason to shun the most popular trading strategy in the $5.3 trillion-a-day currency market. Carry trades, or borrowing one currency cheaply to invest in a higher-yielding asset elsewhere, were already suffering the biggest losses since 2008 as the rout in emerging markets sent potential purchases tumbling. By cutting interest rates two weeks after its shock devaluation, China effectively crossed the yuan off investors’ shopping lists, too. Add to this a surge in volatility -- which is kryptonite for these transactions because it can wipe out the profit from the interest-rate differential -- and carry traders are finding fewer and fewer ways to make money. JPMorgan Private Bank and the asset-management unit of Bank of China both say the strategy’s best days are behind it.

• Ringgit Slumps to 17-Year Low on Emerging-Market Jitters, Oil. Malaysia’s ringgit plunged to a 17-year low, leading losses among Asian currencies, on concern about the outlook for emerging markets and lower energy prices. The ringgit depreciated 1.7 percent to 4.2838 a dollar as of 8:47 a.m. in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It reached 4.2990, the lowest since July 1998, and has weakened more than 18 percent in 2015.

• Asian Stocks Rise After China Cuts Rates, Reserve Requirements. Asian stocks rose, with Japanese shares rebounding from the biggest two-day plunge since 2011, as investors awaited the opening of mainland Chinese markets following Tuesday’s cut in interest rates. The MSCI Asia Pacific Index advanced 0.7 percent to 125.75 as of 9:07 a.m. in Tokyo, after capping an eighth straight decline Tuesday to enter a bear market.

• Bank of Montreal CEO Sees Further Loan Losses If Oil Prices Drop. Bank of Montreal, Canada’s fourth-largest lender, will see further loan losses from oil-and-gas firms if energy prices remain low, Chief Executive Officer William Downe said. “If oil prices stay down, we will have provisions for credit loss that we otherwise wouldn’t have,” Downe said Tuesday in a phone interview. “They’re not a good thing, but with respect to potential losses relative to the size of the bank or our total overall portfolio, they remain manageable.”

• Blame Oil Glut on Investors Who Still Love Drilling Over Profits. Investors sent a surprising message to U.S. shale producers as crude fell almost 20 percent in August: keep calm and drill on. While most oil stocks have fallen sharply this month, the least affected by the slump share one thing in common: they don’t plan to slow down, even though a glut of supply is forcing prices down. Cimarex Energy Co. jumped more than 8 percent in two days after executives said Aug. 5 that their rig count would more than double next year. Pioneer Natural Resources Co. rallied for three days when it disclosed a similar increase.

• El-Erian: Today's Late-Day Selloff Is Worrisome. (video)

• Merger Bubble May Burst as Record Goodwill Piles Up: Real M&A. The biggest threat to U.S. stocks right now may not be China, currencies or commodities prices. It might be American companies’ own merger appetite. Acquirers worldwide have already spent $2.2 trillion on transactions in 2015, putting the year on track for a record. The buying spree has been particularly audacious in the U.S., where acquirers are offering record prices relative to the revenue and profit they’re gaining from the deals.

Wall Street Journal:

• Stock-Market Tumult Exposes Flaws in Modern Markets. Exchange-traded funds became hard to price as stocks tied to them cratered. Monday’s mayhem exposed significant flaws in the new architecture of Wall Street, where stock-linked funds—as much as shares themselves—now trade en masse on U.S. markets. Many traders reported difficulty buying and selling exchange-traded funds, a popular... 

• Glut of Chinese Steel Looms Large. China is increasingly using recycled steel, pressuring iron-ore prices and global miners. The world’s biggest producers of iron ore have a problem, and it lies in the steel that has already gone into China’s cars, bridges and skyscrapers.

• Closing the Planned Parenthood Loophole. Whatever your stance on abortion, it’s clear the laws governing fetal tissue don’t work—and should be fixed. Disturbing videos that show Planned Parenthood personnel casually discussing the sale of fetal organs from abortions have caused widespread outrage. As each new video is released, the calls for Congress to cut Planned Parenthood’s federal funding grow stronger. No matter where you stand in that debate, the videos provide unarguable proof that current laws governing the fetal-tissue trade don’t work. Congress must tighten them.

Fox News:

• Exclusive: State Dept.-released Clinton email had classified intel from 3 agencies, possibly violating Obama order. (video) One of the emails that triggered the FBI probe into Hillary Clinton’s server contained classified intelligence from three different agencies, Fox News has learned – which could mean the State Department violated a President Obama-signed executive order by authorizing its release.

MarketWatch.com: 

• Transocean(RIG) seeks to cancel two dividend payments. Transocean Ltd. is seeking to cancel the third and fourth installments of its dollar-denominated dividend this year, which the company had already approved in May. Shares dropped 12% to $10.75 in after-hours trading. Through Tuesday's close, they had fallen 67% in the past 12 months. The offshore driller said in February that it planned four installments of 15 cents each, which represented an 80% reduction from the previous payout rate, citing its "cyclical and capital-intensive industry."

• Oshkosh(OSK) wins $6.7 billion military contract to replace Humvee. Oshkosh Corp. was awarded a $6.7 billion contract to build the first batch of as many as 55,000 light trucks to replace the aging Humvees used by the U.S. Army and Marine Corps, the Pentagon said Tuesday.

CNBC:

• Stocks in early stages of bear market: Ned Davis. 

• 'Weeks or months' before volatility settles: Expert. (video)

Zero Hedge:

• Chinese Stocks Tumble Despite Rate Cut; PBOC Devalues Yuan To Fresh 4-Year Lows, Restricts Futures Trading. (graph)

• Is China Quietly Targeting A 20% Devaluation? 

• Devaluation Stunner: China Has Dumped $100 Billion In Treasurys In The Past Two Weeks.

• "It's Not The US Economy, It's Just Stocks Stupid!!" (graph)

• The Latest Currency War Entrant: India Warns May Retaliate To Chinese Devaluation.

• This Could Be Very Bad News Ahead Of China's Open Tonight. 

• Is Asia Set For Another Financial Crisis? Here's Goldman's Take.

• So This Is Why The "Smart Money" Was Selling The Most Stocks In History. (graph)

• 1929 And Its Aftermath - A Contra-Keynesian View Of What Really Happened.

• Dollar Depeg Du Jour: 32-Year Old Hong Kong FX Regime In The Crosshairs. 

• Cutting Through The HFT Lies: What Really Happened During The Flash Crash Of August 24, 2015. (graph)

• The August 2015 Flash Crash Through The Eyes Of Retail Investors.

• Is This The Stock That Set-Off Today's Collapse? (graph)

• Global Stocks Break Multi-Year Neckline, What Happens Next? (graph)

• "Biggest Rally Of 2015" Crashes Into Biggest Reversal Since Lehman. (graph)

Business Insider:

• EL-ERIAN: Here's why Tuesday's stock market action was 'particularly worrisome'.

• Donald Trump just stunned political observers by ejecting a prominent Univision anchor from his press conference.

• Explosive accusations against Turkey are exposing a major problem for Obama.

• The collateral damage from the currency wars.

• Why the next bear market is different from 2008.

• The problem now is the overhead supply.

• The Single Most Important Risk To Stock Market Investors.

• The job market in India is so bad that the government received 75,000 applications for 30 low level jobs.

Reuters:

• Century Aluminum to idle Kentucky smelter due to weak prices. Century Aluminum Co, which is owned by Glencore PLC, said on Tuesday it will idle its Hawesville, Kentucky, smelter, the first aluminum plant to shut in years as sinking prices and increased Chinese exports harm producers. Century said in a statement it would begin curtailing capacity on Oct. 24, blaming weak metal prices caused by low-priced exports from China. It will "completely idle the plant" on Oct. 31, a spokesman said.

• U.S. slashes forecast for 2015 farm incomes. U.S. farm incomes will drop by more than half from their peak two years ago, according to U.S. Department of Agriculture estimates issued on Tuesday that signal deeper pain for sellers of agricultural equipment and land. The USDA projected farm incomes this year will drop by 36 percent from 2014 to $58.3 billion due to declining crop and livestock prices. The forecast is down 20 percent from the USDA's February estimate of $73.6 billion.

• BHP Billiton(BHP) expects China's growth to "drift down" in coming years. China's economic growth will cool from the 7 percent forecast for 2015, curbing demand for some commodities as the country completes investments in major construction projects, BHP Billiton chief Andrew Mackenzie said on Tuesday. The mining group's underlying net profit was more than halved in the year to June, part of a succession of bad numbers from a sector feeling the down-draft of plunging prices for iron ore, copper, coal and oil.

• Brazil real weakens to 3.6 per dollar for 1st time in 12 years. The Brazilian real slid 1.5 percent late on Tuesday and crossed the psychologically important level of 3.6 per dollar for the first time in more than 12 years as traders worried about a growing political crisis in Latin America's largest economy. The Brazilian currency extended losses even as other emerging market currencies steadied following a decision by the Chinese central bank to cut interest rates.

Financial Times:

• Gloomy reality dawns on Brazil. Roberto Setubal, the head of Brazil’s biggest private bank, sees a long period of gloom for Brazil’s economy as unemployment rises and Congress is roiled by corruption scandals. However, he does not believe Dilma Rousseff, the president, will be impeached.

Telegraph:

• Chinese alarm over? No, this is merely a pause in an ongoing debt crisis. Six years after the global financial crisis, the world economy still looks as unstable, unbalanced, uncoordinated and ultimately unsustainable as ever. 

• China cuts rates to stem crisis, but doubts grow on foreign reserve buffer. 'There are reasons to question the robustness of China’s reserves,' said Citigroup. Contrary to general belief, China has one of the lowest reserve ratios among emerging markets. 

China Daily:

• China Rate Cuts Don't Signal Monetary Policy Shifts: PBOC's Ma. The recent interest rate and reserve requirement ratio cuts don't represent a shift in China's prudent monetary policy, citing Ma Jun, the chief economist with PBOC's research bureau.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 138.5 +2.5 basis points.

• Asia Pacific Sovereign CDS Index 82.5 -4.5 basis points.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.24%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (ANF)/-.04

• (BF/B)/.75

• (CHS)/.22

• (FRO)/.19

• (GES)/.15

• (PVH)/1.29

• (WSM)/.58

• (WDAY)/-.06

Economic Releases

8:30 am EST

• Durable Goods Orders for July are estimated to fall -.4% versus a +3.4% gain in June.

• Durables Ex Transports for July are estimated to rise +.3% versus a +.8% gain in June.

• Cap Goods Orders Non-Defense Ex Air for July are estimated to rise +.4% versus a -.1% decline in June.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +944,440 barrels versus a +2,630,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -611,110 barrels versus a -2,708,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,343,330 barrels versus a +594,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.48% versus a -1.0% decline prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, $35B 5Y T-Note auction, Japan Foreign Buyers data and the weekly MBA Mortgage Applications report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.