Bull Radar

Style Outperformer:

• Small-Cap Value -1.76%

Sector Outperformers:

• 1) Utilities -.54% 2) Road & Rail -.81% 3) Tobacco -1.62%
  

Stocks Rising on Unusual Volume:

• MEG, BIS and KN

Stocks With Unusual Call Option Activity:

• 1) EUO 2) BKD 3) HZNP 4) SKX 5) NEM
  

Stocks With Most Positive News Mentions:

• 1) KN 2) AA 3) INTC 4) MNRK 5) JACK
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 10.0% Above 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 13.1% of Issues Advancing, 84.7% Declining
• 4 New 52-Week Highs, 320 New Lows
• 21.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.3
• Vix 25.8
• Total Put/Call 1.28
• TRIN/Arms 1.45

Monday Watch

Today's Headlines 

Bloomberg:

• China Industrial Profits Fall Most Since 2011 as Economy Slumps. Chinese industrial companies’ profits declined the most in at least four years, the latest sign that the nation’s old growth drivers are faltering. Industrial profits tumbled 8.8 percent in August from a year earlier, the National Bureau of Statistics said Monday in Beijing. It was the biggest drop since the government began releasing monthly data October 2011, according to data compiled by Bloomberg. Profits in coal mining plunged 64.9 percent, while oil and gas profits tumbled 67.3 percent, according to the report. The drop was attributed to falling product prices, lower investment returns and foreign exchange losses contributed, He Ping, an official at the National Bureau of Statistics, said in an analysis on the agency’s website.

• Worst Quarter in Four Years for Global Stocks. (video)

• Catalan Separatism Refuses to Die as Mas Claims Mandate With 48%. Artur Mas refuses to quit. The Catalan president has already ruptured his party in his bid to secede from Spain. On Sunday, voters in the region narrowly rejected his plan to build an independent state and left him needing a deal with an anti-capitalist party that rejects the rule of law if he wants to govern. He’s still not giving up. Before the vote, Mas had said the regional ballot was effectively a referendum on independence. Afterwards, he said 48 percent support is enough. “We have a strong mandate to push ahead with this project,” Mas said, declaring victory at a post-election rally in Barcelona.

• Zero Inflation Looms Again for ECB as Oil Drop Counters Stimulus. If the euro area is about to run out of inflation -- again -- it won’t shock Mario Draghi. The European Central Bank president said more than three weeks ago that the inflation rate could turn negative this year because of the renewed decline in oil prices. The 19-nation region is set to take a step in that direction on Wednesday, when data will show consumer prices stagnated in September for the first time in five months, according to a Bloomberg survey of economists.

• China Stocks Fall to Two-Week Low on Slumping Industrial Profits. China’s benchmark stock index fell for a second day after a report showing industrial companies’ profits dropped the most in at least four years added to concern the economic slowdown is deepening. The Shanghai Composite Index slid 1 percent to 3,060.74 at 9:49 a.m. local time, heading for the lowest level since Sept. 15. Industrial companies’ profits plunged 8.8 percent in August from a year earlier, compared with a 2.9 percent drop in July. China Shipbuilding Industry Co. tumbled 4 percent to lead declines for industrial shares.“The industrial profit figure was well below the market consensus figure and is likely to add some downward pressure to today’s session,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai.

• Asian Stocks Swing Before China Data; Japanese Shares Retreat. Asian stocks fluctuated, with the regional benchmark index on course for its worst quarter in four years, as investors awaited data on Chinese industrial profits. Shares in Japan slid. The MSCI Asia Pacific Index added less than 0.1 percent to 125.08 as of 9:04 a.m. in Tokyo after slipping as much as 0.1 percent.

• China's Baoshan Steel Starts Zhanjiang Mill Amid Falling Prices. Baoshan Iron & Steel Co. started production at its new project in China’s southern port city of Zhanjiang even as steel prices plunge amid sluggish demand in the country, which is facing its slowest pace of economic growth in 25 years. The No. 1 blast furnace of the project, designed to have an annual capacity of 4.1 million metric tons of melted iron, was ignited Sept. 25, the company, China’s biggest publicly traded steelmaker, said in a filing to the Shanghai Stock Exchange on Sunday. The project will be fully operational a year later with an expected annual crude steel production of 8.75 million tons, it said. It usually takes three to six months of trial production before a new steel mill begins commercial operation. Chinese mills face declining domestic demand for the first time in a generation amid a property slump, which crushed prices in the nation that produces more than half of world output. Steel reinforced bar, which is used in construction, almost halved in the past two years on the Shanghai Futures Exchange while hot-rolled coil, used in automobile and machinery, dropped 42 percent since its debut in March 2014.

• Profit Pessimism Rivaling Crisis Days as Stocks Support Erodes. (graph) Any hopes that investors had of earnings growth salvaging what is poised to be the first down year for stocks worldwide since 2011 are quickly fading. Cuts to profit estimates outnumber increases by the most in three years, and the pessimism could reach levels last seen during the financial crisis, based on an index tracking the changes compiled by Citigroup Inc. China’s slowdown, a fragile recovery in Europe, and disappointing U.S. economic reports are combining to jeopardize one of the key drivers of a bull market that saw stocks rise as much as 156 percent since 2009. “Fundamentals aren’t great anywhere,” said Peter Dixon, a global equities economist at Commerzbank AG in London, who recommends trimming allocation to stocks. “It has become a fairly difficult background for corporates to operate. Valuations will start looking more stretched, and a lot of people are beginning to wonder whether we’re nearing a wider correction.”

Wall Street Journal:

• Deal With Iraq to Fight Islamic State Extends Russia’s Reach in Middle East. Kremlin rivals U.S. for influence in region. Iraq joined Russia, Iran and Syria in a new agreement to strengthen cooperation against extremist group Islamic State, extending the Kremlin’s reach in the Middle East as it rivals Washington for influence.

• Legendary Investor Richard Rainwater Dies. Master deal maker helped turn Bass brothers of Texas into billionaires. Richard Rainwater was a legendary deal maker who helped turn the Bass brothers of Texas into billionaires and later became one himself, while serving as a mentor to a new generation of investment wizards.

• The Obama-Xi Cyber Mirage. A digital arms deal that is full of promises but no enforcement.

Zero Hedge:

• Chinese GDP Propaganda Full Frontal: Plunge In Key Data Points Pitched As Bullish.

• "Nothing's Safe" Passport's Burbank Warns "The Liquidity Of Everything Is Being Taken Down".

• Wholesale Money Markets Are Broken: Ignore "Perverted" Swap Spreads At Your Own Peril. (graph)

• The Fed's Troubling Clarity Of Confusion.

• What Recovery? 9.4 Million More Americans Below Poverty Line Than Pre-Crisis.

• Dear Janet Yellen, Here Is All You Need To Know About The US Economy: True Unemployment Is Over 12%. (graph)

• The Bull/Bear 'High Stakes Poker' Game Is Down To The Final Table. (graph)

• Catalan Separatists Win Close To 50% Of Votes: Exit Poll.

• US On The Ropes: China To Join Russian Military In Syria While Iraq Strikes Intel Deal With Moscow, Tehran.

• The "Hard-Landing" Has Arrived: Chinese Coal Company Fires 100,000.

• Reflexivity Wrecks Fed Credibility, Crushes 2016 Rate Hike Hopes.

• Hillarinochio 2.0 - More Clinton Lies Exposed As Hidden Petraeus Emails Come To Light.

• "Risky Business": Companies Are Now Funding Share Buybacks By Selling Bonds To Other Companies. (graph)

• China Cannot Let This Happen.

• As A Very "Grim" Earnings Season Unfolds, All Eyes Will Be On This Company.

Business Insider:

• Barron's: Volkswagen's stock could tank even further.

• Russia and Iran are declaring victory over the West in Syria.

• Hillary Clinton just had her toughest grilling yet. Former Secretary of State Hillary Clinton's Sunday "Meet the Press" interview featured question after question on her email use at the State Department. Host Chuck Todd asked the Democratic presidential front-runner roughly a dozen inquiries about the controversy — before moving on to questions about her sinking poll numbers and policy flip-flops over the years. Todd began the interview by playing a seven-year-old clip of Clinton saying she wants "a much more transparent government."

• Donald Trump's front-runner status has virtually evaporated.

• GOLDMAN SACHS: 'Peak coal' is coming. Goldman Sachs released a September 22 research note that predicted that coal will decline and never come back. “Peak coal is coming sooner than expected,” the investment bank concluded. “The industry does not require new investment given the ability of existing assets to satisfy flat demand, so prices will remain under pressure as the deflationary cycle continues.”

• Facebook(FB) is losing its grip on teens as visual social networks gain popularity.

• The next big China worry on Wall Street.

Reuters:

• Asset managers slap health warnings on China funds in risk rethink. Fund managers are adding new warnings to China investment products in a bid to reduce their legal liability if regulators repeat the heavy-handed intervention in financial markets that rattled investors globally.

Les Echos: 

• IMF Set to Cut Global Growth Forecasts, Lagarde Says. A growth rate of 3.3% for this year is no longer realistic, nor is 3.8% next year, IMF Chief Christine Lagarde said.

Night Trading

• Asian indices are -1.25% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 151.25 -.5 basis point.

• Asia Pacific Sovereign CDS Index 86.25 +.5 basis point.

• S&P 500 futures -.40%.

• NASDAQ 100 futures -.42%.

Morning Preview Links

Earnings of Note

Company/Estimate 

• (CALM)/3.14

• (MTN)/-1.82

• (CMTL)/.37

• (SNX)/1.44

Economic Releases
8:30 am EST

• Personal Income for August is estimated to rise +.4% versus a +.4% gain in July.

• Personal Spending for August is estimated to rise +.3% versus a +.3% gain in July. 

• PCE Core for August is estimated to rise +.1% versus a +.1% gain in July.

10:00 am EST

• Pending Home Sales for August are estimated to rise +.4% versus a +.5% gain in July.

10:30 am EST

• Dallas Fed Manufacturing Activity for September is estimated to rise to -10.0 versus -15.8 in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, Fed's Evans speaking, Fed's Williams speaking, German retail sales report, Johnson Rice Energy Conference and the (DTE) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

Week Ahead by Bloomberg. 

Wall St. Week Ahead by Reuters.

Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as quarter-end window-dressing, short-covering and bargain-hunting offset China bubble-bursting fears, US Fed rate-hike worries and rising European/Emerging Markets/US High-Yield debt angst. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg:    

• Stocks Slump Toward Worst Quarter in 4 Years Amid Fed Confusion. A sales warning from Caterpillar Inc. showed the risks of slowing global growth, while Nike Inc. provided a more upbeat view of demand overseas. Investors weighed a slip in equipment orders against a pickup in gross domestic product. A tweet by Hillary Clinton roiled the biotechnology industry, highlighting the volatility facing markets. And above it all loomed the Federal Reserve, whose officials fueled the debate over whether the American economy is robust enough to withstand higher interest rates amid the recent turmoil. The Standard & Poor’s 500 Index finished the five days with a loss of 1.4 percent. The gauge has tumbled 6.4 percent in the quarter, headed for its worst slide in four years.

• Volkswagen Scandal Spreads Trouble From IPOs to Credit Markets. A week after it admitted to cheating on U.S. emissions tests for years, Volkswagen AG’s pain is beginning to spread throughout Europe’s credit markets. The Bank of France stopped trading two securities backed by Volkswagen auto loans on Friday, while executives of parts supplier Schaeffler AG find themselves fielding questions about their biggest customer as they drum up support for an initial public offering, according to people familiar with the matters. Since Volkswagen admitted Sept. 18 that it had cheated on U.S. air pollution tests since 2009, the chief executive officer resigned, the company became the target of a joint investigation by 27 U.S. states and the stock price tumbled 28 percent.

• Catalans Vote on Independence as World Leaders Warn of the Risk. Catalans head to the polls on Sunday to decide whether to try and create a new European state with the international community telling them they could be making a costly mistake. While Catalans are officially choosing lawmakers for the 135-seat regional assembly, their president, Artur Mas, has formed a pro-independence alliance with his traditional rivals within the separatist camp in a bid to win a clear mandate for breaking away from Spain. The legal barriers to a breakaway remain high, but many Catalans are determined to push forward regardless. The campaign risks seeing their region excluded from the European Union and its single currency, roiling the market for Spain’s 1 trillion euros ($1.1 trillion) of sovereign debt and wrenching the industrial links that tie Catalan manufacturers to clients and supplies across the continent.   

• Shop Rents Tumble on H.K. Street That Was World's Priciest. Cosmetics retailer Colourmix will soon move to Hong Kong’s Russell Street, once the world’s most expensive shopping strip, and pay almost 40 percent less than the former tenant as China’s economic slowdown rattles the city. “Landlords have to face the reality, no matter how reluctant they are,” Lawrence Wong, a director at property agent Sheraton Valuers Ltd., said in a telephone interview Saturday. “It’s still better than leaving their property empty.” Russell Street has lost its claim as the most expensive shopping street on the planet to New York’s Fifth Avenue, according to broker Cushman & Wakefield Inc. in November. A July research report by Jones Lang LaSalle Inc. predicted prices for space in prime locations will drop 15 percent to 20 percent in Hong Kong this year. Retail rents were down 12 percent in Causeway Bay and 3 percent in Central at the end of June, Oriental Daily reported earlier this month, citing data from CBRE Group Inc.

• Xi, Putin Stay at Chinese-Owned Waldorf Obama Snubbed. Chinese President Xi Jinping leaves the White House, where he discussed the theft of commercial secrets, and heads to New York to check in tonight at the Waldorf Astoria, where his privacy is sure to be guaranteed by the hotel’s new Chinese owners. On Sunday, Xi will be joined by Russia’s Vladimir Putin, who also picked the Waldorf for his first stay in Manhattan in a decade, according to diplomats preparing for the Eurasian leaders’ address to the annual seven-day session of the United Nations General Assembly.  

• Dollar Ready to Ride Jobs Gain After Yellen Clarifies Rate Plans. If employment forecasts are any indication, the dollar is about to have another good week. A gauge of the greenback rose the most in two months after Federal Reserve Chair Janet Yellen clarified that she was one of the policy makers who believe an interest-rate rise would likely be appropriate this year. The prospect of higher U.S. rates raises the appeal of dollar-denominated holdings. An Oct. 2 jobs report is projected to add to the central bank’s case for reducing monetary stimulus.

• Junk-Debt Investors Fight for Scraps as U.S. Shale Rout Deepens. It’s every U.S. shale investor for himself as the worst oil rout in almost 30 years drags down its latest victims. Investors in $158.2 million of Goodrich Petroleum Corp.’s debt agreed to take 47 cents on the dollar in exchange for stock warrants for some note holders and a lien on Goodrich’s oil acreage, according to a company statement today. That puts them second in line if the Houston-based company liquidates its assets in bankruptcy and pushes the remaining holders of $116.8 million in original bonds to the back of the pack. "In the industry it’s called ‘getting primed,’" said Spencer Cutter, a credit analyst with Bloomberg Intelligence. "It’s every man for himself. They’re trying to get in and get exchanged, and if you can’t you’re getting left out in the cold."

• Oil's Killing U.S. Power Generators, And They Don't Even Burn It. The slide in global oil prices helped send shares of America’s power generators to their worst weekly decline in more than six years. And they don’t even burn the stuff. The glut of crude pooling up around the world has cut oil prices 23 percent in three months, and overseas natural gas supplies linked to crude are so cheap that America’s gas exports can’t compete. Traders speculating that more of the power-plant fuel will just remain in the U.S. have sent gas futures to the lowest seasonal level in 14 years. And power generators’ stocks followed suit, with a Bloomberg Intelligence index of generators sliding 12.9 percent, touching a low on Thursday not seen since July 2012.

• N.Y. to Shut Obamacare Insurer With $265 Million in Loans. Health Republic Insurance of New York, the Affordable Care Act insurer that got $265 million in U.S. loans, will stop selling policies and eventually cease operations under orders from New York and federal regulators.The insurer will be wound down because regulators found that it was likely to become financially insolvent, according to an e-mailed statement Friday from New York’s Department of Financial Services. Health Republic, the No. 2 provider of health coverage to individuals on the state’s Affordable Care Act marketplace, is the latest insurer created under the ACA to face financial trouble.

Barron's:

• Had bullish comments on (BWA), (DLPH), (HAR), (ADSK), (EPC), (PANW) and (FTNT).

• Had bearish comments on (JBLU).

Fox News:

• Race to replace Boehner expected to be another leadership vs. conservative caucus showdown. (video) The battle among Capitol Hill Republicans to replace House Speaker John Boehner will likely unfold like the one that led to Boehner's resignation: GOP leadership vs. the party's most conservative caucus.

Zero Hedge:

• China's "Credit Mystery" Deepens, As Moody's Warns On Shadow Financing. (graph)

• Goldman Strikes Again: Did A Probe Into "Global Warming" Fraud Cost A Prime Minister's Job.

• The UN Unveils Plan Pushing For Worldwide Internet Censorship.

• Japan's Abe Unveils New 'Arrows' Wish List: 20% GDP Growth, Higher Birth Rate, & Flying Pig. (graph)

• The Table Is Set For The Next Financial Crisis. (graph)

• Why US Rates Can Never Rise: In 1 Awkward Chart.

• Watch The Latest Russian War Preparations In Syria: Satellite Imagery Update. (pic)

• Climate Fanatics Run Into Public Relations Snag.

• Why Brazil Is Not Coming Back Anytime Soon (In 1 Depressing Chart). (graph)

• From ZIRP To NIRP - Accelerating The End Of Fiat Currencies.

• "Pet Rocks" Are Booming In Brazil. (graph)

• Migrant Crisis Sparks Balkan Border Battles As EU Buckles Under Overwhelming Refugee Flow. (pic)

• Shorting The Federal Reserve. 

• Margin Debt Drops: Healthy Pullback, Or Budding Headwind? (graph)

• Who Calls The Shots In China.

• "Everyone's Praying But No One's Believing" - The 'Fed Put' Is Dead.

• The Bear Market Catalysts.

• Weekend Reading: Fed Confusion.

• Stocks Give Up "Yellen's Alive" Gain Amid Biotech & Junk Bond Bloodbath. (graph)

Business Insider:

• 101 Iranian-American scholars just sent an ominous letter to the White House. In a letter to President Obama, 101 Iranian-American scholars outlined various abuses committed by Rouhani and his closest advisers in the government. According to the scholars, Rouhani represents less of a change in Iranian policy, and more of a continuation of the same policies pushed by the country's hard-lined clerics since they gained power. Perhaps the most damning criticism, one made by Amnesty International and echoed by the scholars, is the “unprecedented” killing spree that the Iranian government is currently on.

• 'It's classic Putin': Russia's big move in the Middle East goes beyond Syria.

• The Obama administration found Hillary Clinton emails that she failed to turn over.

• Boaz Weinstein's fund is being sued for 'manipulating the value' of its assets.

• Kyle Bass scored a huge win in his big short strategy.

• If oil is below $50 a barrel, $1.5 trillion worth of oil projects will lose money.

• The bull market is broken.

• Iran may take legal action against Saudi rulers for Hajj stampede.

• The S&P 500 bought $134 billion worth of itself in Q2. One of the big drivers of earnings per share growth has been stock buybacks. The math is relatively straight forward: companies use cash to buy their own stock, allowing net earnings to be divvied up among a smaller number of shares. While buybacks have been booming since the financial crisis, they've leveled off lately. "Dollar-value share repurchases amounted to $134.4 billion over the second quarter (July), which represented a 6.9% decline from the first quarter (April) and a 0.4% decline year-over-year," FactSet's Andrew Birstingl notes. "On a trailing twelve-month basis (TTM), dollar-value share repurchases totaled $555.5 billion, which was approximately flat with the first quarter."

• The ISIS intel scandal is 'directly at the heart of Central Command'.

• Jindal: Trump is a narcissist, not a conservative.

Market Week in Review

• S&P 500 1,931.34 -1.36%*

The Weekly Wrap by Briefing.com.

*5-Day Change