Friday Watch

Evening Headlines
Bloomberg:

• Who is Most Dependent on China? (graph) If (or when) China sneezes -- ranging from a sharp devaluation of its currency or protectionist measures to defend local industries -- Singapore, Taiwan, Vietnam, South Korea and Malaysia would be first to feel the chill, according to analysis from Natixis SA. By contrast, Indonesia, India and the Philippines are rather more immune, based on trade, tourism and investment links that were collated by the French Bank's Hong Kong-based economists Alicia Garcia Herrero and Trinh Nguyen.
• U.S. Derivatives Regulator Again Delays Curbs on Overseas Trades. Wall Street banks got a one-year reprieve from rules that would subject derivatives trades held overseas to tough U.S. oversight. The delay announced Thursday by the Commodity Futures Trading Commission exempts some transactions set up in the U.S. to Dodd-Frank Act regulations until Sept. 30, 2017, as long as the trades are held in foreign affiliates.
• Asian Stocks Rise After BOE Cut as Investors Await U.S. Payrolls. Asian stocks rose, paring their first drop in four weeks, after the Bank of England eased policy and as investors looked to Friday’s U.S. jobs report for hints as to the Federal Reserve’s next steps. The MSCI Asia Pacific Index edged up 0.1 percent to 135.46 as of 9:01 a.m. in Tokyo, heading for a 0.7 percent decline this week. Japan’s Topix index added 0.2 percent after the Bank of Japan boosted daily exchange-traded fund purchases.
• Priceline(PCLN) Beats Profit Estimates as Room Night Bookings Grow. Priceline Group Inc. topped profit estimates as the number of hotel rooms booked through its websites increased and the impact of terrorism on tourism to Europe was muted. Shares jumped as much as 6.2 percent in extended trading after the results were released.

Wall Street Journal:

• Bank of England’s Juggling Act Gets Ever Riskier. The length of time monetary policy is spending at emergency settings raises concern. No disappointment. Unlike other central banks, the Bank of England on Thursday overwhelmed markets by pulling every stimulus lever available to counteract the shock of Brexit—and making clear they could yet be pulled harder. This effort, while prudent for now, is further exposing the risks of aggressive monetary policy.
• Hillary Clinton’s Lead Over Donald Trump Widens to 9 Points, Poll Shows. Support for Republican nominee falling after series of missteps since convention.
• Terrorist Suspects in Europe Got Welfare Benefits While Plotting Attacks. Some of those involved in Paris and Brussels attacks were collecting unemployment in Belgium.

Fox News:

• Report: Hillary Clinton would hike taxes by $1.3 trillion. (video) Hillary Clinton comes up $2.2 trillion short in paying for her policy agenda, despite hiking taxes by $1.3 trillion, according to a new analysis of the Democratic nominee’s campaign platform.
• Rep for federal prosecutors blasts Obama over mass commutations. The head of the association representing career federal prosecutors unloaded Thursday on President Obama's decision to cut short the sentences of 214 prisoners, accusing the administration of violating its own clemency guidelines. Obama's was the most commutations ever issued on a single day, according to political scientist P.S. Ruckman Jr., who tracks presidential commutations. His total now stands at 562, more than the previous nine presidents combined. "These aren't little, nonviolent offenders."

MarketWatch:

• FireEye(FEYE) plans layoffs as new CEO takes the helm, stock plunges.

CNBC:

• Brazil's politics, economy are huge messes as Olympics begin. (video) A president impeached. Another former president facing trial. An economy in shambles. These are tough times for Brazil.

Zero Hedge:

• As Obama Slams Iran "Ransom" Allegations, He Refuses To Answer One Simple Question.
• Behind the scenes of the monetary agency that is just as powerful as the military and CIA.
• Why Wall Street Loved What The Bank of England Announced Today.
• "Fab 5" US Tech Firms Now Rule Global Stocks. (graph)
• MetLife(MET) Misses Big, Blames Fed Policy For Massive Job Cuts.
• Dr. Tim Ball: How The World Was Deceived About Global Warming & Climate Change. (graph)
• Europe's 10-Step Terrorist Attack Emergency Response Plan.
• The Stock Market's Big Lie: "I'll Take The Under". (graph)
• Why Is High-Yield Energy Debt Decoupling From Oil? (graph)
• Commuter-In-Chief: Obama Cuts Sentences Of Most Federal Inmates In History (Then Brags About It On Twitter). (graph)
• Stocks Shrug At Carney Chaos; Bonds, Gold, & Oil Surge. (graph)

Business Insider:

• Real estate prices could drop by 5%.
• Some American voting machines might be vulnerable to hacking.
• POLL: Hillary Clinton soars to 15-point lead over Donald Trump.
• Hampton Creek reportedly hired people to secretly buy jars of its eggless mayo from stores. 
• Vancouver might have just burst it's own housing bubble.
• Besieged Syrians in Aleppo are burning tires in a desperate attempt to blind Russian and Syrian bombers.

Night Trading 

• Asian equity indices are unch. to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 119.5 -2.0 basis points.
• Asia Pacific Sovereign CDS Index 46.5 -1.25 basis points.
• Bloomberg Emerging Markets Currency Index 72.59 +.04%. 
• S&P 500 futures +.10%. 
• NASDAQ 100 futures +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (CTSH)/.82
• (MGA)/1.34
• (BRK/B)/2910.79

Economic Releases 
8:30 am EST

• The Trade Deficit for June is estimated to widen to -$43.0B versus -$41.1B in May.
• The Change in Non-Farm Payrolls for July is estimated to fall to 180K versus 287K in June.  
• The Unemployment Rate for July is estimated to fall to 4.8% versus 4.9% in June.
• Average Hourly Earnings MoM for July is estimated to rise +.2% versus a +.1% gain in June. 

3:00 pm EST

• Consumer Credit for June is estimated to fall to $16.0B versus $18.558B in May.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The German Factory Orders report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Short-Covering, Tech/Metals & Mining Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.52 -2.64%

• Euro/Yen Carry Return Index 117.59 -.28%

• Emerging Markets Currency Volatility(VXY) 9.67 -.41%

• S&P 500 Implied Correlation 47.05 -2.65%

• ISE Sentiment Index 117.0 -7.14%
  

• Total Put/Call .90 -4.26%

• NYSE Arms .98 +26.81% 

Credit Investor Angst:

• North American Investment Grade CDS Index 73.31 -2.18%
  

• America Energy Sector High-Yield CDS Index 770.0 -2.72%

• European Financial Sector CDS Index 91.95 -4.69%

• Western Europe Sovereign Debt CDS Index 23.94 -.5%

• Asia Pacific Sovereign Debt CDS Index 47.44 -.85%

• Emerging Market CDS Index 256.63 -1.18%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.47 +.07%

• 2-Year Swap Spread 26.75 +.75 basis point
  

• TED Spread 50.25 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -44.75 +4.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.54 +.25%
• 3-Month T-Bill Yield .26% -1.0 basis point

• Yield Curve 85.5 -1.75 basis points

• China Import Iron Ore Spot $59.50/Metric Tonne -3.52%

• Citi US Economic Surprise Index 17.80 +1.7 points

• Citi Eurozone Economic Surprise Index 31.7 -.1 point

• Citi Emerging Markets Economic Surprise Index -1.70 -.7 point

• 10-Year TIPS Spread 1.47% +1.0 basis point
• 19.8% chance of Fed rate hike at Nov. 2 meeting, 37.3% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -34 open in Japan 
• China A50 Futures: Indicating +1 open in China

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

• Lower: On losses in my biotech/retail sector longs and emerging market shorts
  

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• For Europe's Elite the Party Lives On After Brexit. Europe’s political elite may have missed the Brexit memo. Six weeks since U.K. voters rebuked the ruling class by choosing to leave the European Union, the region’s establishment has reacted by carrying on as before. The revolving door of former policy makers joining the finance industry has spun again, with European Commission President Jose Manuel Barroso signing up with Goldman Sachs Group Inc. and former Bank of England Governor Mervyn King joining Citigroup Inc. Meanwhile departed Prime Minister David Cameron is facing criticism for nominating numerous aides for honors, including his wife’s stylist. The perception of elite coziness risks further disenfranchising those backing Brexit, and peers across the continent who share the feeling of being left behind by the powerful and wealthy in the era of globalization and financial crises. A potential upshot is more support for populist parties that tap into alienation such as the U.K. Independence Party or France’s National Front. 
• Politics May Have Helped Create Europe's Sovereign-Bank Loop of Doom. "Correlation does not imply causation, but it does waggle its eyebrows suggestively and gesture furtively while mouthing 'look over there,'" quipped the comic xkcd. A new working paper by Filippo De Marco and Marco Macchiavelli is likely to raise many eyebrows as it makes the case that political suasion may have created the very thing that helped plunge the eurozone into crisis, using stress test data to argue that higher state ownership and the presence of politicians on bank boards are linked to lenders' penchant for snapping up domestic government debt.
• Carney Scorns Negative Rate Path Trodden Across World Economy. Mark Carney has looked at the road his most adventurous -- or desperate -- peers have taken, and decided it’s not for him. While unveiling a multi-pronged stimulus package aimed at staving off a post-Brexit U.K. slump on Thursday, the Bank of England governor also drew a line splitting the world into monetary jurisdictions that will cut interest rates below zero, and those that won’t. “I’m not a fan of negative interest rates,” Carney said after the BOE lowered its key rate to 0.25 percent and boosted quantitative easing. “We see the negative consequences of them through the financial system, we’ve seen that in other jurisdictions, we see the issues with savers.”
• Goldman Sachs(GS) Joins Chorus Saying BOJ Easing Is Nearing Limits. (video) Goldman Sachs Group Inc. is the latest to join a chorus reasoning the Bank of Japan is reaching the limits of its stimulus program, just as nation’s bonds tumbled the most in more than three years. Governor Haruhiko Kuroda has struggled to get insurers and pension funds to cut their holdings of longer-dated Japanese government bonds, and speculation about the sustainability of the central bank’s debt purchases is unlikely to die down unless investors are convinced prices of the notes will decline, Rohan Khanna, a London-based interest-rates strategist, wrote in a research note. Goldman follows Pacific Investment Management Co. and former Ministry of Finance official Eisuke Sakakibara in saying Kuroda is running out of room to expand the BOJ’s record stimulus. 
• Treasuries Rally, Pound Drops on BOE as Stocks Mixed Before Jobs. (video) The Stoxx 600 advanced 0.7 percent in London, after falling 1.9 percent in the first three days of the week. A gauge of lenders jumped 1.3 percent, for the best performance among the benchmark index’s 19 industry groups. The U.K.’s FTSE 100 Index soared 1.3 percent.
• Greenspan Put Gone Wild as Critics See Markets Hamstringing Fed. It’s the Greenspan put gone wild. Or so the Federal Reserve’s critics would have it. No longer is the Fed just waiting for financial markets to be hit by a bout of turbulence and then lowering interest rates in response -- as former Chairman Alan Greenspan did. Instead, the critics contend, it’s become so sensitive to the risk of sharp market moves in the future that it’s pulling its policy punches now by repeatedly holding off on raising rates. “They used to respond, I think excessively, to what financial markets did,” said Willem Buiter, chief economist at Citigroup Inc. and a former policy maker at the Bank of England. “Now they don’t act in response to the fear that they have of how the market might respond to their actions.”
• Manhattan Luxury-Condo Glut Ends Developer Rush for Land Deals. New York’s condo slowdown is upending the market for one of the most coveted assets in tightly packed Manhattan: land. Sales of parcels for development are plummeting as builders, seeing signs that a once-hot property market is cooling, offer prices that sellers won’t agree to. Just 48 land deals were completed in the first half of 2016, compared with 79 in the year-earlier period and 73 in 2014, according to brokerage Ariel Property Advisors. That may be a sign of a broader real estate slowdown to come, since land is often a leading indicator for the rest of the market.
• Realogy Tumbles Most Ever as U.S. Luxury-Home Slump Hits Profit. Realogy Holdings Corp., owner of brokerage brands Coldwell Banker and Century 21, dropped to a record low as sluggish luxury home sales hurt the firm’s earnings. Shares of Realogy fell 13 percent to $26.62 at 12:47 p.m. in New York, after earlier slumping 15 percent, the biggest decline since the company’s October 2012 initial public offering at $27 a share. Realogy had second-quarter net income of $92 million, or 63 cents a share, down from $97 million, or 66 cents, a year earlier, according to a statement Thursday.  

Wall Street Journal:

• Companies Routinely Steer Analysts to Deliver Earnings Surprises. With nudges and phone calls, analysts are urged to lower their estimates, making it easier for companies to beat them; ‘a rigged race,’ says Barry Diller.

Fox News:

• Battle of the Billionaires: Clinton’s uber-rich backers pour money into Trump fight. Donald Trump has his billions, but Hillary Clinton has her billionaires. As the candidates formally enter the general election season after their conventions, the former secretary of state’s wealthiest backers are pouring money into political groups opposing Trump. Within the past year, according to a review by FoxNews.com, a total of 24 billionaires have donated more than $42.5 million to two Clinton campaign arms and three allied super PACs. All this is in preparation for a blitz of advertising and other efforts to defeat Trump over the next three months – as some big-money Republicans stay on the sidelines.
• Report: Hillary Clinton would hike taxes by $1.3 trillion. (video)
• Top GOP lawmaker: Cash payment to Iran enabled terror funding. (video) Republicans have a problem with more than just the timing of the Obama administration's controversial $400 million payment to Iran earlier this year -- one top GOP lawmaker says the fact the payment was made in hard currency is another big red flag. According to House Foreign Affairs Committee Chairman Ed Royce, R-Calif., this could enable Iran to more easily fund groups like Hezbollah since hard cash is the regime's preferred way of financing terrorism. “If you’re going to have a transaction, the last thing you want to do with Iran … is to give that to them in unmarked bills, in hard currency, in Swiss francs,” Royce told Fox News on Thursday.

CNBC:

• Wall Street wealth managers face growing competition. (video) One of Wall Street banks' biggest businesses is taking heat from competitors old and new. Many big banks are seeing fees from wealth and investment management divisions fall, putting a crimp in critical revenue at a time when Wall Street is having an increasingly tough time matching their return on equity targets.

Zero Hedge:

• Iran Is Cheating On The Nuclear Deal, Now What?
• Deja-Vu(lnerable): Oil Spikes 6% On Contango-Crush As "Violent Reversal" Higher Looms. (graph)
• What Do Inventories Suggest About Q3 GDP? Can Drones Cure The "Inventory Crisis"? (graph)
• "Mystery" Buyer Revealed: Swiss National Bank's US Stock Holdings Rose 50% In First Half, To Record $62BN. (graph)
• Student Body Vice President Suspended After Saying "#ForgetBlackLivesMatter, More Like AllLivesMatter".
• Brits Are Hoarding Cash Post-Brexit At Fastest Rate Since 2009. (graph)
• Riots In Rio: Police Unleash Tear-Gas, Rubber Bullets As Poor Brazilians Block Olympic Torch Route.
• Factory Orders Plunge For 20th Month In A Row - Longest Streak In US History. (graph)
• Debt-To-EBITDA Ratios Are Now The Highest In History. (graph)
• Initial Jobless Claims Hover At 43 Year Lows, Diverge From Challenger Layoffs. (graph)
• Armed Police Fill London Streets Morning After "Deranged" Knife Attacker Kills US Woman. (pic)
• What Happens When Rampant Asset Inflation Ends? (graph)
• Bank Of England Stock Bounce Fizzles, Bonds & Bullion Bid.
• Japan Proposes "Wage Controls" As Abenomics' Desperation Measure.
• BOE Cuts By 25 bps To Record Low 0.25%, Boosts QE By £60 BN Including Corporate Bonds; Gilt Yields Crash.

Business Insider:

• Carl Icahn is getting stomped by sticking to one of his deepest convictions. Carl Icahn still believes the market is going to crash.
• The chain that serves America's best burger thinks consumers are in a bad place right now.
• In an ominous sign, Italy has suddenly stopped shopping. (graph)
• Donald Trump's support collapses in 3 of the most important major battlegrounds.

Bear Radar

Style Underperformer:

• Large-Cap Value -.1%

Sector Underperformers:

• 1) Insurance -1.4% 2) Alt Energy -1.1% 3) Retail -.7%

Stocks Falling on Unusual Volume: 

• INOV, TDOC, FSLR, SEAS, CCRN, RLGY, PRFT, RYAM, USAK, CF, HABT, CHEF, CP, FOXA, SBH, INST, USCR, TRIP, TPVG, ADXS, HSNI, PGTI, CXW, SUN, HMHC, REGN, ADXS, GEO, DYN, BYD, CBPX, SSYS, LGIH, AKRX, QRVO, TSCO, THS, PEGA, SUM, CLDT, FOX, AMCX, GPOR, AAWW, BLD, BLUE, HSIC, PWR, SUN, PGTI, PMT, MET, HABT, CCOI and HSNI

Stocks With Unusual Put Option Activity:

• 1) SEAS 2) DE 3) SMH 4) MON 5) FSLR

Stocks With Most Negative News Mentions:

• 1) SUN 2) FRED 3) CF 4) SEAS 5) GRMN

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.2%

Sector Outperformers:

• 1) Gold & Silver +.8% 2) Semis +.6% 3) Gaming +.5%

Stocks Rising on Unusual Volume:

• SQ, PODD, TSEM, XPO, GDDY, AHP, JACK, ELY, HUBS, PCRX, AIP, PRTY, CSII, EXEL, DEPO, COT, CTB, PE, HUBS, CTB, HAR, RCL, ELY, ITT, MWA and DW

Stocks With Unusual Call Option Activity:

• 1) SYMC 2) DK 3) EXEL 4) SQ 5) RSX

Stocks With Most Positive News Mentions:

• 1) CWEI 2) JACK 3) TRGP 4) CSII 5) SMG

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.0% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 54.8% of Issues Advancing, 41.4% Declining
• 109 New 52-Week Highs, 3 New Lows
• 59.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.5%
• Vix 12.7 -1.6%
• Total Put/Call .89 -5.3%
• TRIN/Arms 1.29 +67.5%