Stocks Falling Substantially into Afternoon on Global Growth Fears, Fed Rate Hike Worries, Oil Decline, Commodity/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 28.92 +12.92%

• Euro/Yen Carry Return Index 138.57 -.68%

• Emerging Markets Currency Volatility(VXY) 12.26 n/a

• S&P 500 Implied Correlation 65.56 +1.83%

• ISE Sentiment Index 83.0 +5.0%

• Total Put/Call 1.44 +28.57%

• NYSE Arms 2.71 +284.26% 

Credit Investor Angst:

• North American Investment Grade CDS Index 83.53 +1.93%

• America Energy Sector High-Yield CDS Index 1,802.0 -3.34%

• European Financial Sector CDS Index 84.05 +2.70%

• Western Europe Sovereign Debt CDS Index 21.87 +2.80%

• Asia Pacific Sovereign Debt CDS Index 83.42 +2.49%

• Emerging Market CDS Index 360.77 +3.13%
  

• iBoxx Offshore RMB China Corporates High Yield Index 116.86 +.02%

• 2-Year Swap Spread 13.25 -1.0 basis point

• TED Spread 31.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -23.75 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% +1.0 basis point

• Yield Curve 143.0 -4.0 basis points

• China Import Iron Ore Spot $56.50/Metric Tonne n/a

• Citi US Economic Surprise Index -15.6 -.9 point

• Citi Eurozone Economic Surprise Index 25.4 -1.5 points

• Citi Emerging Markets Economic Surprise Index -23.8 -.6 point

• 10-Year TIPS Spread 1.51 -3.0 basis points

• # of Months to 1st Fed Rate Hike(Morgan Stanley) 4.39 n/a

Overseas Futures:

• Nikkei 225 Futures: Indicating -283 open in Japan 

• China A50 Futures: Indicating n/a open in China

• DAX Futures: Indicating -61 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:   

• China Stocks Sink in Hong Kong to Two-Year Low on Mainland Risks. China’s stocks slumped in Hong Kong to a two-year low amid speculation mainland shares will decline when trading resumes on Monday after holidays. The Hang Seng China Enterprises Index lost 1.4 percent to 9,169.59 at the close as developer China Vanke Co. and bad-loan manager China Cinda Asset Management Co. led declines. The measure tumbled 6 percent this week to its lowest level since July 2013. Hong Kong financial markets were shut on Thursday for a holiday. The Hang Seng Index dropped 0.5 percent. The gauge of Chinese stocks in Hong Kong has tumbled 23 percent this year, the worst performing index in the world after Peru.
• Hong Kong Home Sales to Slide as Stocks Tank, Centaline Says. Home sales in Hong Kong, where prices have surged to a record, are set to extend declines as buying interest slumped with a stock rout, according to one of the city’s two largest property brokers. Transactions of properties valued from HK$10 million ($1.3 million) to HK$20 million may shrink 20 percent in September from August, Louis Chan, chief executive officer of the residential unit of Centaline Property Agency Ltd., said in a phone interview. Sales of all existing homes done by the closely held real estate agency fell as much as 30 percent in August, Chan said. Hong Kong’s benchmark Hang Seng Index tumbled 12 percent last month, with the gauge slumping 5.2 percent, or more than 1,000 points on Aug. 24, as concerns about a slowdown in China sent equities worldwide into a tailspin. The index is down another 4 percent so far this month. “We got quite nervous on the day when the HSI dropped 1,000 points, because our daily revenue vanished 50 to 60 percent in a single day,” Chan said. “Nobody was in the mood to buy an apartment.”
• China: What are the Global Concerns? (video).
• Linking China Dependence, Suffering Commodity Economies. (video)
• German Factory Orders Fell in July in Sign of Bumpy Recovery. German factory orders fell more than expected in July, signaling that growth in Europe’s largest economy may yet be bumpy. Orders, adjusted for seasonal swings and inflation, dropped 1.4 percent after increasing a revised 1.8 percent in June, data from the Economy Ministry in Berlin showed on Friday. The typically volatile number compares with a median estimate of a 0.6 percent decline in a Bloomberg survey. Orders unexpectedly slid 0.6 percent from a year earlier. German exporters are exposed to a potential cooling of global trade as China’s economy slows, meaning companies may have to rely more on domestic demand. Export orders dropped 5.2 percent in July as domestic demand climbed 4.1 percent, the Economy Ministry report showed. Orders from outside the 19-nation euro area slumped 9.5 percent, and orders from within the currency bloc rose 2.2 percent. Orders for consumer goods fell 6.3 percent, investment goods orders shrank 1.6 percent, and basic goods orders slid 0.2 percent. 
• Germany's Stocks Capitulate as Decline Triggers DAX Death Cross. German equities, which have already lost most of their gains for the year, have now fallen into a bearish chart pattern known as a death cross. The DAX Index’s 50-day moving average dropped below its 200-day mean for the first time in a year. For technical analysts, that’s a sign that price momentum is fading. The gauge has fallen 18 percent since reaching a record in April, leaving it up only 3.5 percent for the year.“It’s the market saying we want to see a retest of the August low and touching even a new low,” said Jean-Charles Gand, a senior market strategist at BBSP SAS in Paris. 
• Russia Bows to Cheap Oil as Putin Aide Sees $50 Price for Budget. Russia will assume that crude prices will stay near their present level in calculating next year’s budget as the world’s largest energy exporter adjusts to a downturn on the oil market, according to President Vladimir Putin’s top economic aide. The budget will be based on an average oil price of $50 a barrel, Andrey Belousov told reporters in Vladivostok on Friday. Putin said he’s asking parliament to support a shift to a one-year fiscal plan in 2016 because it’s “impossible” to predict the direction of global markets. Non-OPEC member Russia, whose currency has plunged 45 percent in the past 12 months, is growing resigned to slumping oil, which together with gas accounts for about half of budget revenue. 
• VW, Ford(F) Open Engine Plants in Russia Amid Car Market Plunge. Volkswagen AG and Ford Motor Co. are sticking with long-planned investments in Russian engine factories even as car sales there head toward a six-year low. Volkswagen opened a 250 million-euro ($279 million) plant on Friday, with Russian Prime Minister Dmitry Medvedev attending the inaugural ceremony. The factory near Kaluga, an industrial city southwest of Moscow where Volkswagen already produces vehicles, will have capacity to make 150,000 engines a year for Russian-made VW-brand and Skoda cars, helping reduce prices, Marcus Osegowitsch, head of the carmaker’s Russian unit, said at the event.
• Emerging Markets Quiver as U.S. `Full Employment' Backs Fed Move. Emerging-market stocks and currencies headed for weekly declines as the U.S. jobless rate dropped to a level the Federal Reserve considers to be full employment, bolstering the case for an interest-rate increase. The MSCI Emerging Markets Index slumped 1.7 percent to 787.85 at 11:29 a.m. in New York. The gauge has dropped 4 percent in the last five days, poised for its 15th decline in the 19 weeks since April. Stocks have tumbled 10 percent since Aug. 11, when China unexpectedly devalued the yuan, deepening a rout amid concern that the slowdown in the second-biggest economy will damp global demand. A gauge of 20 developing-nation currencies is heading for a 1.6 percent weekly decline, extending a record low.
• European Stocks Snap Winning Streak, Traders Wait on Fed. (video)
• Lacker Says It’s Time for Fed to End Era of Zero Rates. Federal Reserve Bank of Richmond President Jeffrey Lacker said it’s time for the central bank to end the era of record-low interest rates, now that the impacts from winter weather and energy prices have passed. The Richmond Fed president, who’s historically been more inclined toward tighter policy than most of his colleagues, said Friday that labor-market slack has been reduced to pre-recession levels, and shorter-term inflation measures are tracking the U.S. central bank’s 2 percent target. “I am not arguing that the economy is perfect, but nor is it on the ropes, requiring zero interest rates to get it back into the ring,” Lacker said in the text of a speech in Richmond. “It’s time to align our monetary policy with the significant progress we have made.”
• Glencore Posts Worst Week Ever as Mining Shares Extend Slump. Glencore Plc shares posted the biggest weekly decline since the company went public in 2011 as the selloff in mining shares showed no signs of slowing. The commodities producer and trader slid 6 percent by the London close on Friday, bringing losses for the week to 17 percent. Vedanta Resources Plc, an Indian miner of copper, aluminum and zinc, dropped 12 percent for the biggest retreat in the FTSE 350 Mining Index. Anglo American Plc and Antofagasta Plc sank more than 5 percent.
• Wheat Glut Erodes U.S. Exports as Cheap Russia Grain Wins Buyers. Oil isn’t the only commodity where the largest producers are fighting for market share in a world awash with supply. Russia and the U.S., two of the biggest wheat exporters, are going head-to-head in a battle for customers. Russian shippers, with the advantage of a weak currency and falling freight rates, can undercut most competitors, selling their grain about 16 percent cheaper than cargoes from the U.S.
• Caterpillar(CAT) Downgraded to Neutral at Baird. (video)

CNBC: 

• Europe markets close sharply lower after US jobs report. (video) European stocks closed sharply lower on Friday, as the latest U.S. non-farm payrolls report boosted investors' fears that the Federal Reserve could raise interest rates at its meeting later this month. The pan-European STOXX 600 closed around 2.5 percent lower, extending losses after the jobs report, with all major bourses and down more than 2 percent. The French CAC 40 closed down 2.8 percent, the British FTSE 100 was down 2.4 percent and the German DAX closed unofficially 2.5 percent lower.
• This obscure market is pointing to more pain for stocks. (video) According to McDonald, deterioration in the Asian credit markets actually started before the recent bout of selling in U.S. equities, and has been a reliable indicator for where they are heading. "We actually saw Asian credits significantly deteriorate almost a week before we had the big selloff here," he said. 
• Obamacare's many double-digit price hikes for next year.

Zero Hedge

•  Dow Dumps 600 Points From Last Friday's Panic-Buying Ramp, Drops 10% Year-To-Date. (graph)
• "We've Run Out Of Buyers" - Half Of Homes In New York Are Now Losing Value.
•  Bull Or Bear? (graph)
• Must Be The Weather? (graph) Thomson Reuters Same Store Sales.
• Why Capital Is Fleeing China: The Crushing Costs Of Systemic Corruption.
• Lira Plunges To Record Lows As Turkish Minister Addresses G20. (graph)
• New Record In Waiters And Bartenders Masks First Manufacturing Drop In Over 2 Years. (graph)
• NFLX(NFLX) Down 25% From Highs, Tumbles To June Stock Split Levels. (graph)
• Goldman(GS): "No Rate Hike In September". 
• Is This Why Copper Is Collapsing?
• Record 94 Million Americans Not In The Labor Force; Participation Rate Lowest Since 1977. (graph)
• August Payrolls Miss, Rise Only 173K, Even As Prior Revised Higher; Hourly Earnings Rise More Than Expected. (graph)
• Chinese Warships Came Within 12 Miles Of U.S. Coast.

CNN:

• Biden: I 'would not hesitate' to run in 2016 if family can handle race.

Bear Radar

Style Underperformer:

• Large-Cap Value -1.83%

Sector Underperformers:

• 1) Coal -6.31% 2) Steel -3.21% 3) Energy -2.21%

Stocks Falling on Unusual Volume:

• ESL, BLOX, AVHI, ABM, COO, N, BP, MTCN, TOT, LAZ, TCAP, DXJS, MPG, IEP, SAP, PX, ABY, PSB, MDT, CAT, HSBC, RDY, XIV, PTR, MTB and TDOC

Stocks With Unusual Put Option Activity:

• 1) EWH 2) JOY 3) LB 4) COP 5) MSFT
  

Stocks With Most Negative News Mentions:

• 1) CAT 2) BABA 3) FCX 4) PBR 5) AGCO
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth -.51%

Sector Outperformers:

• 1) Airlines +1.08% 2) Biotech -.32% 3) Gaming -.46%
  

Stocks Rising on Unusual Volume:

• AVOL and TRVN

Stocks With Unusual Call Option Activity:

• 1) NBL 2) FNF 3) MSI 4) OLN 5) TAP
  

Stocks With Most Positive News Mentions:

• 1) DLTR 2) CVGW 3) SKYW 4) DIOD 5) GILD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 12.9% Below 100-day average
• 0 Sectors Rising, 10 Sectors Declining
• 20.5% of Issues Advancing, 77.3% Declining
• 5 New 52-Week Highs, 76 New Lows
• 22.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.5
• Vix 27.3
• Total Put/Call 1.53
• TRIN/Arms 2.55

Friday Watch

Evening Headlines 

Bloomberg:    

• China Stocks Too Far Gone to Save for Magnus Seeing Deeper Rout. Chinese stocks are nowhere near bottoming out, said George Magnus, a senior independent economic adviser to UBS Group AG, who correctly predicted in July the rout would deepen. Policy makers should stop intervening in the market and allow the Shanghai Composite Index fall to between 2,500 and 2,800, in line with its long-run average, Magnus said. For equities to rally from there, investors need to see improving company profits and evidence that the government is committed to reform, he said. The Shanghai gauge slipped to 3,160.17 on Wednesday, before markets shut for a two-day holiday. “When the equity market was falling in August, some people said this is a buying opportunity, that this is a multi-year bull market," said Magnus. “I don’t think we will see that unless there is a very significant change in the politics of China. We need to see significant change in the way in which the economy is working and in the way in which the reform is working and both of these things are on the rack at the moment."

• China Prods Industry to Make a Great Leap. A new plan favors enterprises that are green and less labor-intensive. China’s addiction to coal doesn’t just foul its air. It pollutes the ground, too, because power plants often dump leftover ash in landfills. Yulong Eco-Materials has found a use for that plentiful waste. The company, based in the central Chinese province of Henan, uses the ash to make bricks. “The material is easy to get,” says Sam Wu, chief financial officer of Yulong, which had sales of $44.5 million in the fiscal year ended June 2014.

• Emerging Markets Approach 1998 Lows, Not Yet Oversold. (video)

• Emerging Markets Bring Woes to G-20 as Fed Ponders Rate Increase. Emerging-market policy makers are set to confront their twin fears in person. The prospect of higher U.S. interest rates alongside the deepening slowdown and devaluation in China are chilling investor sentiment toward the onetime powerhouses of global growth, roiling currencies and leaving the MSCI emerging market index down more than 16 percent so far this year.

• Why Is Foreign Money Fleeing Japanese Equities? (video)

• Korean Bond Yield Drops to Record on Rate-Cut Bets as Won Falls. South Korea’s bonds rose, pushing the three-year yield to a record low, and the won fell for a third day as a deteriorating outlook for the economy spurred speculation interest rates will be cut. Gross domestic product rose in the second quarter at the slowest pace in two years, data showed Thursday, and Finance Minister Choi Kyung Hwan was cited by the Wall Street Journal as saying the government lowered its 2016 growth forecast to 3.3 percent from 3.5 percent. Exports dropped in August by the most since 2009, the government reported this week. The Bank of Korea reduced its benchmark interest rate to an unprecedented 1.5 percent in June and next meets to review borrowing costs on Sept. 11.

• Japan's Topix Heads for Longest Weekly Loss Streak in 19 Months. Japan’s Topix index headed for its longest losing weekly streak since February 2014 as investors await a U.S. jobs report to provide the last major clue on the state of the world’s biggest economy before the Federal Reserve next meets. The Topix slipped 0.7 percent to 1,464.21 as of 9:25 a.m. in Tokyo, swinging from an early gain of 0.7 percent. The measure is on course for a 5.6 percent drop this week, its fourth straight weekly loss. Two shares fell for each that rose on the gauge, with volume 10 percent below the 30-day intraday average. The Nikkei 225 Stocks Average lost 0.7 percent to 18,055.65. The yen rose 0.2 percent to 119.89 per dollar, strengthening for a second day.

• Asian Stocks Resume Retreat Amid Jitters Ahead of Payrolls Data.The MSCI Asia Pacific Index dropped for the fourth time in five days, losing 0.3 percent by 10:10 a.m. in Tokyo as Japan’s Topix index declined 0.8 percent. The Asia-Pacific benchmark has fallen 4 percent this week, on track for its longest run of weekly losses since June 2011.

• Forced Asset Sales Seen as Banks Squeeze Canada Oil Companies. It’s crunch time on asset sales for Canada’s struggling oil producers. Starting in earnest after Labor Day, oil and natural gas companies will begin the twice-yearly pilgrimage to their banks to discuss funding. It’s not going to be easy, with companies including Penn West Petroleum Ltd. under pressure to sell assets to keep the money flowing. With no relief from the price of oil, which has tumbled under $50 a barrel, companies are cutting more staff, reducing dividends and even selling hedging positions on commodities and currencies to boost cash flow. Banks will next likely force some producers to sell their best assets to avert bankruptcy, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP in Calgary.

• Energy Creditors Balk at Deals Aimed at Saving Miners, Drillers. Creditors of drillers and miners are getting fed up with depressed commodities prices and are clamping down on bond deals that would help heavily indebted companies to ride out the slump. The arrangements, called debt exchanges, are designed to help borrowers cut their obligations and buy time by swapping old securities for fresh ones with longer maturities. In most cases, lenders accept upfront losses based on the expectations that they’ll eventually recuperate their investments, and more, when the companies start to grow again.

• U.S. CLOs Have Material Exposure to Commodities, Moody's Says. Collateralized loan obligations that were created after the financial crisis in the U.S. have material exposure to the commodities sector, which poses an increased risk to investors due to the plunge in crude prices. That’s the finding of a report published yesterday by Moody’s Investors Service, which shows that as of June the top 20 individual CLOs with the largest exposures to companies in the commodities-related sector ranged from 14.4 percent to 21.3 percent of their holdings. A fund managed by GoldenTree Asset Management LP had the biggest exposure followed by two CLOs issued by Halcyon Asset Management LLC, the report shows. "We are increasingly concerned about default risks among borrowers affected by commodity markets," Ramon Torres, a Moody’s analyst, said in the report. "Market signals also suggest increased defaults in the future." 

• The U.S. Dollar Is Stronger Than Steel. The U.S. industry is battling a tide of cheap imports. The recent devaluation of the yuan could make Chinese steel even more attractive to U.S. buyers. Exports from Brazil and Russia have also jumped as the real and ruble have fallen sharply against the greenback.U.S. producers have had no choice but to pull back. 

• The Oil-Sands Glut Is About to Get a Lot Bigger. The last place oil producers want to be when prices plummet to profit-demolishing lows is midstream on a billion-dollar project in one of the costliest parts of the planet to extract crude. Yet that’s exactly where half a dozen oil sands operators from Suncor Energy Inc. to Brion Energy Corp. find themselves with prices for Canadian oil now hovering around $30 a barrel. While all around them projects have been postponed or canceled, their investments were judged too far along when the oil game suddenly moved from offense to defense. These projects will add at least another 500,000 barrels a day -- roughly a 25 percent increase from Alberta -- to an oversupplied North American market by 2017. For companies stuck spending billions in a downturn, the time required to earn back their investments will lengthen considerably, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP.

• Treasuries Are the Worst Investment, Except for All the Others. Treasuries are cementing their status as the world’s market oasis of choice -- at least for investors who aren’t stashing their money under the mattress. Even though the Federal Reserve may be on the cusp of raising interest rates, 10-year Treasuries outpaced their Group of Seven peers during the August equities swoon. The U.S. notes started last month yielding one percentage point above the average of the six other G-7 members. The gap shrank to 0.83 percentage point at the height of the market tumult, and remains narrower than it was on July 31, even after the European Central Bank signaled Thursday that it may expand its bond buying. 

• The Cheap Phones Quietly Winning the U.S. China’s once-embattled ZTE almost doubled its share in 15 months.

Wall Street Journal:

• South Korea Cuts Growth Forecast on Chinese Slowdown Risk. The Asian nation’s finance minister says a sharp deterioration of the Chinese economy would have an ‘extremely huge impact’. South Korea’s government has cut its forecast for the nation’s economic growth next year because of the risks from China’s slowdown, Seoul’s finance minister said. Close economic interlinkage between China and South Korea also means a sharp deterioration of the Chinese economy would have a “extremely huge impact” on South Korea, although a so-called hard landing for China is unlikely, South Korean Finance Minister Choi Kyung-hwan said in an interview. Concerns about the Chinese economy are particularly acute in South Korea, an export-dependent nation that sends around a quarter of its overseas shipments to China. South Korean exports fell 14.7% from a year earlier in August—the sharpest drop in six years—as exports to China slid 8.8%.

• Migrant Crisis Divides Europe. Germany and France press to end squabble over refugee flow as Hungarian leader says his country doesn’t want ‘a large number of Muslim people’.

• Highmark Is Latest to Trim Offerings Under Health Law. Insurer retrenches amid losses, focusing on plans that have more limited choices of providers. Highmark Health said it would reduce its range of offerings on the Affordable Care Act marketplaces, becoming the latest insurer to retrench amid steep financial losses. 

• Ben Carson Wins in Matchup With Donald Trump, Poll Shows. If Donald Trump has an Achilles’ heel in the Republican presidential nominating contest, it just might be the candidate who is least like him: soft-spoken retired neurosurgeon Ben Carson. In a matchup with Mr. Carson, Mr. Trump didn’t even come close. He lost with 36% of GOP voters’ support, compared with 55% for Mr. Carson. Neither candidate has ever held elected office.

• What Jeb and Hillary Have in Common. Neither party is in the mood to continue a dynasty.

• The Department of Hillary. How it is that the nation’s diplomatic corps has become an arm of the Clinton presidential campaign? 

Fox News:

• US under new pressure to absorb Syrian refugees as Europe faces crisis. (video) The surge of refugees fleeing Syria and other war-torn regions is putting immense pressure not only on Europe but also the United States, as the Obama administration faces calls to take a more active role in the humanitarian crisis. At the same time, some lawmakers on Capitol Hill are warning that loosening immigration rules to take them in would pose a serious security risk. For the Obama administration – and the one that succeeds it – there are no easy answers.

MarketWatch.com: 

• What to watch in the critical August jobs report. (graph)

• Sizeable capital outflow from China adds another layer of worry. BAML estimates as much as $700 billion could exit China.

CNBC:

• US to hit China hackers before Xi’s Washington visit. The White House is preparing to slap sanctions as early as next week on Chinese companies connected to the cyber theft of US intellectual property.

Zero Hedge:

• As China Parks Its Ships Next To Alaska, Here's Obama. (pic)

• Europe's Refugee Crisis "Out Of Control", Hungary PM Rages "This Is A German Problem, Not An EU Problem".

• Why China Liquidations May Not Spike US Treasury Yields.

• US Equity Futures Mini-Flash-Crash As Japanese Econ Minister Opens Mouth. (graph)

• Turkey Arrests Journalists, Sets Up Terrorist "Tip Line" As Currency Plunges, Violence Escalates.(graph)

• FX Traders Fear "Worst Case Scenario" For Brazil As FinMin Cancels Travel Plans, Rousseff Meets With Lula.

• Is This Where The US Recession Is Hiding? (graph)

• Is It Over Yet?

• "JPM(JPM) Omen 2.0" Sparks Stock Pump'n'Dump After Crude Surges'n'Purges. (graph)

• JPM Head Quant Is Back With New Warning: "Only Half The Selling Is Done; Expect More Downside". (graph)

Business Insider:

• Kyle Bass is slamming the group blocking his new, big short strategy.

• Obama’s Iran deal leaves Democrats holding the bag.

• Harvard will now allow students to choose to be referred to as 'he,' 'she,' 'ze,' 'hir,' or 'they'.

• A market crash is a bigger economic risk to San Francisco than an earthquake.

• Donald Trump just had an awkward foreign-policy interview where he admitted he didn't know many of the answers.

Reuters:

• Bridgewater's 'All Weather Fund' slumps amid market storm. An $80 billion portfolio managed by hedge fund titan Ray Dalio's Bridgewater Associates and widely held by many pension funds slumped in August and some investors blame the strategy of such funds for the eruption in volatility that slammed stocks and commodities. Bridgewater's "All Weather Fund" fell 4.2 percent in August and is down 3.76 percent so far this year, according to three people familiar with the fund's performance on Thursday.

• IIF warns of emerging market sell-off of crisis proportions. The current slump in emerging market stocks and currencies has reached "crisis proportions" the Institute of International Finance warned on Thursday. The Washington-based finance industry body said China's woes had been a key catalyst in the fast-moving rout, which has seen MSCI's global emerging market stocks index slump 40 percent. Vast swathes of emerging market currencies have also taken a battering, but rather than just making countries more competitive, for some it has created terms of trade and inflation problems. "The decline in equity and currency values across a range of emerging markets has reached crisis proportions," the IIF said, adding that emerging market bond markets could also soon come under pressure.

Telegraph:

• China has created a monster it can’t control. Beijing is desperate for further growth – but that would involve loosening the power of the state.

Evening Recommendations 

Robert Baird:

• Rated (VC) Outperform, target $123.

Night Trading

• Asian equity indices are -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 138.5 -.25 basis point.

• Asia Pacific Sovereign CDS Index 81.5 -1.5 basis points.

• S&P 500 futures -.42%.

• NASDAQ 100 futures -.48%.

Morning Preview Links

Earnings of Note

Company/Estimate

• None of note

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for August is estimated to rise to 218K versus 215K in July.

• The Unemployment Rate for August is estimated to fall to 5.2% versus 5.3% in July.

• Average Hourly Earnings for August are estimated to rise +.2% versus a +.2% gain in July.

• The Labor Force Participation Rate for August is estimated to rise to 62.7% versus 62.6% in July.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lacker speaking and the German Factory Orders report could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology 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.