Morning Market Internals

NYSE Composite Index:

• Volume Running +2.4% Above 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 47.3% of Issues Advancing, 49.2% Declining
• 119 New 52-Week Highs, 5 New Lows
• 63.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.8%
• Vix 12.3 +2.7%
• Total Put/Call 1.0 +14.9%
• TRIN/Arms .71 -41.3%

Thursday Watch

Night Trading 

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 107.25 -1.75 basis points.
• Asia Pacific Sovereign CDS Index 35.5 -1.75 basis points.
• Bloomberg Emerging Markets Currency Index 73.43 +.03%. 
• S&P 500 futures -.01%. 
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BKS)/-.18
• (CONN)/-.12
• (DCI)/.49
• (HAIN)/.57
• (NAV)/-.21
• (FNSR)/.30
• (KFY)/.53
• (RH)/.29
• (VNCE)/-.06
• (ZUMZ)/-.08 

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 265K versus 264K the prior week.
• Continuing Claims are estimated to fall to 2151K versus 2159K prior. 

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of  +631,000 barrels versus a +2,276,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -737,700 barrels versus a -691,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,199,800 barrels versus a +1,496,000 gain the prior week. Finally, Refinery Utilization is estimated to fall by -.26% versus a +.3% gain prior.
  

3:00 pm EST

• Consumer Credit for July is estimated to rise to $16.0B versus $12.32BN in June.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The ECB rate decision/press conference, China inflation data, Bloomberg US Economic Survey for Sept., weekly Bloomberg Consumer Comfort Index and the EIA natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Global Growth Fears, Yen Strength, US High-Yield Debt Angst, Food/Semi Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.99 -.25%

• Euro/Yen Carry Return Index 119.51 -.38%

• Emerging Markets Currency Volatility(VXY) 9.53 -.21%

• S&P 500 Implied Correlation 42.01 -.64%

• ISE Sentiment Index 107.0 +2.88%
  

• Total Put/Call .90 +4.65%

• NYSE Arms 1.33 +75.21% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.82 +1.0%
  

• America Energy Sector High-Yield CDS Index 676.0 -1.62%

• European Financial Sector CDS Index 83.30 -1.34%

• Western Europe Sovereign Debt CDS Index 24.51 +.14%

• Asia Pacific Sovereign Debt CDS Index 35.46 -4.70%

• Emerging Market CDS Index 231.55 -1.88%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.64 +.01%

• 2-Year Swap Spread 25.25 +.25 basis point

• TED Spread 50.25 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -32.25 +2.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.38 +.06%
• 3-Month T-Bill Yield .34% +3.0 basis points

• Yield Curve 80.0 -1.0 basis point
  

• China Import Iron Ore Spot $58.46/Metric Tonne -1.18%

• Citi US Economic Surprise Index -5.7 +1.3 points

• Citi Eurozone Economic Surprise Index -13.9 -5.3 points

• Citi Emerging Markets Economic Surprise Index -7.5 -.3 point

• 10-Year TIPS Spread 1.51% +1.0 basis point
• 27.0% chance of Fed rate hike at Nov. 2 meeting, 51.5% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -82 open in Japan 
• China A50 Futures: Indicating -6 open in China

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• Four Fresh Worries About China's Shadow Banking System. (video) Draft rules seeking to shore up the $3.9 trillion market for wealth management products underscore a bunch of new worries. The tangled web of Chinese banks and the investment products they sell is growing more muddled as analysts attempt to gauge the impact of new rules unveiled by the country's authorities. The proposed new rules would require some banks to provision for losses against wealth management products (WMPs), which funnel money from retail investors into securities ranging from stocks to corporate bonds and real estate, in an effort to insulate the lenders from future losses. The 26.3 trillion yuan ($3.9 trillion) worth of WMPs outstanding have emerged as key cog in China's so-called shadow banking system as investors often expect to be reimbursed for on any losses on the WMPs banks manage — an expectation that could weigh on the lenders if the products begin to sour. But with analysts scrambling to digest the impact of the draft rules on banks, fresh concerns are emerging including: the degree to which banks have been using WMPs to repackage and invest in other such products, their use as a way for to gain exposure to riskier corporate securities, banks' tendency to borrow money to boost returns on WMPs, and the potential for the new WMP rules to impact other assets. 
• China Reserves at Lowest Since 2011 as PBOC Supports Yuan. China’s foreign-exchange reserves, the world’s largest foreign currency hoard, slipped to the lowest level since 2011 as the central bank continued its defense of the currency. The reserves fell by $15.9 billion to $3.19 trillion in August, the People’s Bank of China said in a statement Wednesday. That level, down slightly but still in line with most of the readings this year, matched the median estimate in a Bloomberg survey of economists.
• German Industrial Output Unexpectedly Falls Most Since 2014. German industrial production fell by the most in almost two years in July as manufacturing suffered from subdued global trade. Production, adjusted for seasonal swings, fell 1.5 percent from the previous month, when it rose a revised 1.1 percent, data from the Economy Ministry in Berlin showed on Wednesday. That’s the lowest since August 2014. The reading, which is typically volatile, compares with a median estimate for a 0.1 percent gain in a Bloomberg survey. Output was down 1.2 percent from a year earlier.
• Automakers Lead Europe Stocks Higher as DAX Erases Annual Drop. (video) A rally among exporters amid a weaker euro pushed European equities near their highest prices since April, while Germany’s DAX Index erased its annual decline. Automakers led the advance in the Stoxx Europe 600 Index, which gained 0.3 percent at the close, rising for a fourth time in five days. The DAX climbed 0.6 percent, with steelmaker ThyssenKrupp AG, chemical company BASF SE and Daimler AG advancing the most. The German index came close to erasing its 2016 loss last month, though it failed to hold its gain through the close.
• OPEC Risks ‘Crying Wolf’ as Oil Trader Gunvor Doubts Accord. (video) One of the world’s biggest commodities traders doubts oil producers will be able to agree on curbing output to pull up prices. While it’s “easier” to have talks on freezing supplies now than it was at a meeting in Doha earlier this year, a deal is unlikely at a gathering in Algiers later this month, said David Fyfe, Gunvor Group Ltd.’s head of market research and analysis. Producers have pledged to discuss measures to help the market, but Saudi Arabia has said it sees no need to limit oil output and Russia expressed doubt that a cap is needed. “There won’t be an agreement but it does no harm to keep talking about this because that itself is price supportive,” Fyfe said at the Asia Pacific Petroleum Conference in Singapore on Wednesday. “Of course, there’s a risk of crying wolf. But at some stage it’s the law of diminishing returns when you keep talking about a production agreement and not actually reach one.”
• Manhattan's Luxury Real Estate Slowdown Is Spreading to Other Price Tiers. There are more signs of a slowdown in New York City real estate. According to new data from listings website StreetEasy.com, the luxury market still has some adjusting to do with price cuts now spreading from just the most expensive apartments to other price tiers. "Most of the increase in price cuts for the luxury tier is in the smaller price cuts bucket (5 percent)," said Krishna Rao, StreetEasy's economist. "While sellers aren’t going for aspirational prices, they haven’t fully adjusted to reality at the top end of the market." 
• Live Now: Apple Product Event in San Francisco.

Fox News:

• Russian jet flies within 10 feet of US Navy spy plane, defense official says. (video)

CNBC:

• Fed's Beige Book: Moderate wage growth seen in coming months.
• Here's a major red flag in the oil market.

Zero Hedge:

• Assange: New Clinton Revelations Coming As Soon As Next Week, Says Clinton Knew Meaning Of "C".
• Election "Rigging" Tensions Rise With Questions On Reliability Of Paperless Voting Machines.
• Millennials Horrified As Facebook(FB) Algo Accident Exposes Millions To New Ideas.
• GDP - Less Than Meets The Eye. (graph)
• JPM's(JPM) Head Quant Is Back With A Stark Warning: Volatility Is About To Surge; Here's Why.
• "It's Worse Than The Great Depression" - One In Six Prime-Aged Men Has No Job.
• "It Won't Be Long Now" David Stockman Warns "The End Game Of Central Banking Is Nigh".
• Job Openings In The US Unexpectedly Jump To Record High, As Pace Of Hiring Fails To Keep Up. (graph)
• "Segregation" Is Now Progressive? Cal State LA Offers Black-Only 'Safe-Space' Housing.
• DOJ Threatens To Rip Up HSBC's "Get Out Of Jail Free" Card.
• BofA: "Bad News Is Good News Has Played Out", Any More Weak Data "Will Be Met With Market Skepticism".
• Goldman(GS) Cuts September Rate Hike Odds To 40%, Just Days After Raising Them To 55%.
• Stocks' Trading Range Now Beyond Compare. (graph)

Business Insider: 

• LIVE: Apple unveils the new iPhone.
• This is the dongle you'll need if you want to connect your old headphones to the iPhone 7.

Reuters:

• Iraq sees steady growth in oil output, exports in 2017: official. Iraq's crude oil production and exports are expected to grow at a steady pace in 2017 from current levels, a senior Iraqi oil official said on Wednesday‎, adding the OPEC member supports a global freeze initiative if it will help stabilize the market. "There will be a steady growth in production and exports next year," Falah Alamri, the head of Iraq's State Oil Marketing Co. (SOMO) told ‎Reuters in Singapore, adding "it was not clear by how much."Iraq's production was at 4.638 million barrels per day in August, the highest since January.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Coal -2.3% 2) Gold & Silve -1.7% 3) Foods -1.6%

Stocks Falling on Unusual Volume: 

• HDS, SMLP, CLCD, HCSG, OLLI, WATT, SFM, CASY, ADPT, CTLT, RMBS, CCU, NX, CTRP, KWEB, PLAY, DVAX, PTI, NAV, WFM, UNFI, COTY, THG, VMW, SINA, OLN, MJN, JW/A, HOME and HDS

Stocks With Unusual Put Option Activity:

• 1) XLI 2) APA 3) HOG 4) WFM 5) SMH

Stocks With Most Negative News Mentions:

• 1) CASY 2) HCSG 3) RCL 4) OLN 5) KR

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.30%

Sector Outperformers:

• 1) Hospitals +2.7% 2) Airlines +2.5% 3) Disk Drives +2.1%

Stocks Rising on Unusual Volume:

• RTRX, CVGW, AGIO, FRAN, SGMS, AAOI, APA, WDC, CRY, TGNA, CMG and BZH

Stocks With Unusual Call Option Activity:

• 1) MSTX 2) TRGP 3) COTY 4) TMUS 5) RTRX

Stocks With Most Positive News Mentions:

• 1) AAOI 2) LGND 3) BCRX 4) NEWT 5) RTRX

Charts:

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