Evening Headlines
Bloomberg:
- In North America's Costliest City, Rich Chinese Take the Blame. Despite British Columbia’s aversion to pipelines and affection for
pot, housing affordability has pushed both aside as the number one issue
raised by area residents in the run-up to Canada’s election this month.
It’s not completely surprising given that Vancouver has become North
America’s most expensive city. Surging purchase prices have
triggered protest movements like #donthave1million, started by a group
of young professionals frustrated at being shut out of home ownership.
They complain of having to delay starting families as they remain bunked
in with roommates, often into their 30s and beyond. The
affordability issue speaks to broader campaign themes: the difficulty
young people face getting established in the labor market, the economic
anxieties of the middle class, growing concerns about income inequality,
support for families with children. Residents also increasingly point
fingers at wealthy Chinese immigrants and investors whose lavish embrace
of the Pacific metropolis of 2.5 million has inspired reality TV shows
with such gaudy names as “Ultra Rich Asian Girls in Vancouver.”
- Asian Stocks Advance Sixth Day as Samsung Jumps on Profit Report. Asian stocks climbed, building on their biggest five-day advance in
almost four years, as Samsung Electronics Co. jumped after quarterly
profit topped estimates and investors awaited a Bank of Japan decision
on monetary policy. The MSCI Asia Pacific Index rose 0.2 percent
to 129.23 as of 9:03 a.m. in Tokyo, as Samsung rallied 3.8 percent to
provide the biggest boost to the regional gauge.
- Canada Oil Patch on Downgrade Alert as Credit Raters Take Stock. As
the world’s biggest credit raters review their assessment of Canada’s
energy companies, the bond market has already made up its mind. Bonds
of almost 80 percent of Canadian energy companies are trading at levels
that imply credit ratings lower than those assigned by Moody’s
Investors Service as crude prices remain near six-year lows. Of the 37
Canadian oil and gas companies whose bond prices are followed by Moody’s
Analytics, the credit rater’s market-tracking unit, 29 are trading as
if they’ve already been downgraded.
- Cures-for-Dollars Model Comes Undone as Biotech Sinks. For the last five years, biotechnology and pharmaceutical stocks have
surged on an assumption about the companies that invent and sell drugs
for American patients: Invent amazing treatments that save lives and
cure the sick, and you can charge pretty much what you want. That
thesis is under more pressure than any time in recent history, in part
because of increasing scrutiny of how some drugmakers price their
medicine. In the last month, media reports about price increases for
therapies that have been on the market for years have caused Democratic
presidential candidates to call for regulating the sector’s business
practices, including what companies spend on research and how much they
can charge. Much of the criticism has focused on a few companies
-- like Valeant Pharmaceuticals International Inc. and Turing
Pharmaceuticals AG -- that have bought old drugs and raised prices to
increase profits. But the pressure on stocks has spread far wider. The
Nasdaq Biotechnology Index -- a 143-company barometer of the industry --
fell 3.8 percent Tuesday, and has been down 11 of the last 15 trading
days, wiping out $150 billion in value.
- Nu Skin(NUS) Plunges After Cutting Forecast, Citing Currency Effects. Nu Skin Enterprises Inc. plummeted as much as 18 percent in late
trading after foreign-currency headwinds forced the cosmetics maker to
slash its sales forecast. The company now expects third-quarter revenue of $570 million to $573 million, according to a
statement on Tuesday. Nu Skin, based in Provo, Utah, previously
projected sales of as much as $620 million. Analysts had been predicting
an even higher number, with their average estimate coming in at $622.6
million.
Wall Street Journal:
- A Shift in Risk Pinches Banks. Goldman Sachs and J.P. Morgan Chase run up against wary investors in an attempt to shed leveraged loans. Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. are struggling
to sell $1.2 billion of loans backing the leveraged buyout of online
clothing retailer FullBeauty Brands, investors said, the latest sign
that global economic turmoil has forced a broad reassessment of risk.
- The Pacific Trade Stakes. The pact would do much good but the IP details are worrying. The pact would do much good but the IP details are worrying. A dozen Pacific Rim nations—two-fifths of the global economy—closed a
new free-trade agreement on Monday, some six to 10 years of negotiation
and debate in the making. Congratulations to all involved, though the
next step may be even harder: selling the pact in Congress.
Fox News:
- Ukraine parallels seen in Russia's Syria push, Obama under pressure to do more. (video) Russia's continuing military buildup and ongoing airstrikes in Syria
are raising concerns that President Obama is "flummoxed" by an
intervention reminiscent, analysts say, of the incursion into eastern
Ukraine. “They are almost sibling interventions,” Joerg Forbrig, Transatlantic
Fellow for Central and Eastern Europe at the German Marshall Fund of
the United States, told FoxNews.com.
- Justice Department to release 6,000 inmates from federal prisons beginning Oct. 30. (video) The Justice Department will release some 6,000 inmates from federal
prisons beginning at the end of the month as part of new sentencing
guidelines for drug crimes established last year, a federal law
enforcement official confirmed Tuesday to Fox News.
The new drug sentencing guidelines from U.S. Sentencing Commission,
which are intended to reduce penalties on certain nonviolent drug
offenders, also applies to any future offenders.
CNBC:
- KFC parent plunges 18% after key China metric miss. (video) KFC parent Yum Brands stock plunged Tuesday after it missed Wall
Street's earnings and revenue estimates. A key China metric also
disappointed.
Yum Brands last dropped 18 percent in after-hours trade.
- Cliff Asness has seriously bad news for investors. Investors don't have a lot to look forward to in the years ahead if Cliff Asness is correct. The head of AQR Capital said Tuesday that looking at basic market valuations shows that stocks are expensive. Compounding the issue is that an analysis
of bonds indicates they, too, are not cheap, particularly if inflation
picks up and interest rates rise.
Business Insider:
- This is the most embarrassing part of Yum Brands'(YUM) earnings report.
Yum Brands is crashing. After reporting earnings Tuesday that were a
miss and giving a downbeat outlook on China — where the company records
54% of its sales — shares of the fast-food giant were down as much as
19%. And while the disappointing operating results were obviously a huge
disappointment to investors, the timing of its stock buybacks might be
worse. In its earnings announcement, the company disclosed that "Year-to-date through October 5, 2015, we repurchased 4.5 million shares totaling $370 million at an average price of $82."
Reuters:
- Adobe(ADBE) 2016 forecast disappoints, shares slump. Adobe
Systems Inc lowered its profit forecast for 2016 below analyst
estimates partly due to a strong dollar, sending its shares down as much
as 13 percent in extended trading. The Photoshop maker said it expects full-year revenue of about $5.7 billion and an adjusted profit of $2.70 per share. Analysts
on average were expecting revenue of $5.93 billion and earnings of
$3.19 per share, according to Thomson Reuters I/B/E/S. In 2013, Adobe
forecast an adjusted profit of $3 per share for 2016.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.0 -.25 basis point.
- Asia Pacific Sovereign CDS Index 84.0 unch.
- NASDAQ 100 futures -.09%.
Earnings of Note
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory gain of
+2,505,000 barrels versus a +3,955,000 gain the prior week. Gasoline
supplies are estimated to rise by +470,000 barrels versus a +3,254,000
barrel gain the prior week. Distillate supplies are estimated to fall by -677,050 barrels versus a -267,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.28% versus a -1.1% decline prior.
3:00 pm EST
- Consumer Credit for August is estimated at $19.5B versus $19.097B in July.
Upcoming Splits
Other Potential Market Movers
- The $21B 10Y T-Note auction, weekly MBA mortgage applications report, (ACN) investor conference and the (IHS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial
shares in the region. I expect US stocks to open mixed and to
weaken into the afternoon, finishing modestly lower. The Portfolio is
50% net long heading into the day.
