Morning Market Internals

NYSE Composite Index:

• Volume Running -9.3% Below 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 38.1% of Issues Advancing, 58.4% Declining
• 51 New 52-Week Highs, 3 New Lows
• 63.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.4%
• Vix 12.0 +.17%
• Total Put/Call .85 -11.5%
• TRIN/Arms .69 -51.8%

Friday Watch

Evening Headlines

Bloomberg:

• China to Rein in Green Growth for First Time After Record Boom. After installing more wind and solar farms than anywhere else on the planet, China is ratcheting back the pace of growth in an industry that’s helped lower the costs of green energy worldwide. Installations of new wind and solar farms in China is expected to drop 11 percent in 2017 from a record high this year, according to Bloomberg New Energy Finance. That would be the first decline in the history of the modern renewables business, now a little more than a decade old, for a nation that has provided about a third the investment for the industry. After five years of breakneck growth in the supply, China’s electricity demand is stagnating along with a pause in the nation’s economic expansion. President Xi Jinping’s government has started re-calibrating subsidies for the business, a move that’s likely to hit the industry’s leading manufacturers, Xinjiang Goldwind Science & Technology Co. and Trina Solar Ltd.
• The China Property Companies That Look Like Shadow Banks. (video) Oil Pares Gains as Saudi, Iran Said to Meet Again Before Algiers. Oil pared gains as rival OPEC members Saudi Arabia and Iran met in Vienna for a second day before the wider group gathers in Algiers to discuss action to stabilize the market. Futures dropped as much as 1 percent in New York after rising 2.2 percent Thursday. Officials from the two countries, whose rivalry derailed an oil supply accord earlier this year, are yet to reach an agreement, a person who was briefed on the discussions said. Now is the right time for a deal, according to Falah Al-Amri, Iraq’s governor to OPEC. Prices are unlikely to climb above $50 a barrel unless the group reduces production, he said. 
• Kuroda’s Steep Yield Curve Quest Undermined as Long Bonds Surge. Japanese bonds rose, sending 30-year yields to a two-week low, as the central bank’s pledge to control yields spurs speculation the authority will keep prices from falling. The 30-year yield slid 5 1/2 basis points to 0.46 percent, as of 10:17 a.m. in Tokyo according to Japan Bond Trading Co. It was as low as 0.45 percent, a level not seen since Sept. 8. The Bank of Japan announced this week it plans to shift monetary policy to controlling yields in the government debt market. Long-term bonds are leading the advance, luring investors with higher yields than those offered by shorter maturities. The spread between two- and 30-year yields narrowed to about 68 basis points, also a two-week low. “I expect yield curves in Japan and the U.S. to flatten further,” said Eiji Dohke, the chief bond strategist at SBI Securities Co. in Tokyo. The BOJ “will be controlling the yield curve.”
• Analysts Are Trying to Persuade Traders That the Bank of Japan's Plan Will Fail. Yield-curve targeting could further fuel deflation, analysts fear. When you try to say "Don't fight the Fed" in Japanese, something gets lost in translation. In a quest to vanquish deflation, the Bank of Japan has unleashed billions in asset purchases including everything from sovereign debt to exchange-traded funds and moved its policy rate into negative territory. Nothing has worked. Now, the central bank is testing out a new approach: targeting the yield curve, with a promise to keep 10-year yields around zero and avoid excessive flattening, which hurts banks' profitability.
• Lowe Stamps Asset-Bubble Policy on RBA After 25 Years in Waiting. For a quarter-century, Philip Lowe and a small band of like-minded peers pressed the need to manage credit growth and asset prices, sometimes to incredulous colleagues. Now, as Reserve Bank of Australia’s new governor, his theory has more sway. In his first testimony to a parliamentary committee Thursday, Lowe emphasized the signature issue he’s developed since the early 1990s, which has found a more receptive audience in the wake of the 2008 financial crisis. Sure, the RBA could probably return inflation to target faster with looser policy, Lowe acknowledged, but doing so would risk igniting a new round of borrowing among already debt-laden households. “We have considered that a very quick return of inflation to the 2 to 3 percent range, at the cost of a material deterioration in the health of private-sector balance sheets, was unlikely to be in the public interest,” Lowe said in Sydney. Just three days earlier, hereleased an accord with the government that made an explicit link between monetary policy and financial stability. 
• U.S. Abandons Syria Truce Efforts and Lays The Blame With Russia. U.S. Secretary of State John Kerry abandoned his bid to salvage a cease-fire aimed at easing Syria’s 5 1/2-year civil war, saying it was pointless to press ahead without a “major gesture” from Russia to end the violence. Kerry spoke to reporters after the U.S., Russia, Iran and other members of the International Syria Support Group met in New York on Thursday to discuss a truce that went into effect Sept. 12 but quickly unraveled. The U.S. says Russia has failed to use its influence over President Bashar al-Assad to stop the violence, or to ground its own jets, which entered the conflict on Assad’s behalf a year ago.
• Asian Stocks Pare Weekly Gain as Bonds Extend Rally; Oil Falls. A rebound in global equities sputtered in early Asian trading as oil retreated from a two-week high. Bonds extended gains, buoyed by central bank commitments to keep monetary policies loose. The MSCI Asia Pacific Index pared its biggest weekly rally in two months as Japanese shares retreated following a holiday. Equity index futures foreshadowed gains in China, Hong Kong and Taiwan following gains in U.S. stocks. South Korea’s won and the yen fell, trimming this week’s gains versus the dollar. Benchmark bonds rallied in Australia, Japan and New Zealand, while gold was little changed. Oil fell with investors counting down the days until major producers meet to discuss limiting output at talks next week in Algiers. The MSCI Asia Pacific Index was down 0.3 percent as of 9:27 a.m. Tokyo time, trimming its weekly gain to 3.5 percent. Japan’s Topix index fell 0.5 percent, while Australia’s S&P/ASX 200 Index added 0.4 percent.
• Goldman(GS) Stays on Top for Commodities Amid Diminishing Revenues. Goldman Sachs Group Inc. retained its crown as the bank with the largest commodities revenue in the first half, while lenders saw their worst income from natural resources in at least a decade. The New York-based firm made the most money from raw materials among the top 12 investment banks after coming top in the past two years, according to Coalition Development Ltd., a London-based business analytics company. JPMorgan Chase & Co. came second and Citigroup Inc. dropped to third, Coalition said in a report Friday. Revenue at the 12 banks fell by a quarter to $2.2 billion from a year earlier on weak performances in energy and industrial metals, it said earlier this month. That was the worst first half in at least a decade, Coalition estimated.

Wall Street Journal:

• Turkey’s Battle With Muslim Cleric Careens Through U.S. Classrooms. American charter schools have become embroiled in a proxy fight between Turkish President Recep Tayyip Erdogan and Fethullah Gulen.
• Facebook(FB) Overestimated Key Video Metric For Two Years. Social network miscalculated the average time users spent watching videos on its platform.
• Clinton’s 65% Killer Death Tax. The Democrat heads further toward Bernie Sanders Nirvana.
• Wall Street’s IPO Business: The Worst in 20 Years. So far this year, banks have taken in just $3.7 billion in fees from U.S.-listed equity deals.

Fox News:

• Email shows federal immigration bosses in OT push to swear in new citizens 'due to election'. (video) An internal Obama administration email shows immigration officials may be literally working overtime to swear in as many new “citizen voters” as possible before the Nov. 8 presidential election, a powerful lawmaker charged Thursday.

MarketWatch:

• Why the Fed is losing credibility.

CNBC:

• Yahoo(YHOO) confirms huge data breach, affecting at least 500 million accounts. (video)

Zero Hedge:

• Doctor: Hillary's "Abnormal Eye Movements" Hint At Serious Health Issues. (video)
• Living In A Van Down By The River – Time To Face The True State Of The Middle Class In America.
• Bill Fleckenstein Slams CNBC "Jerk" - "Don't Get In My Face Because I Won't Join Your Party". (video)
• Who Is Behind The Riots? Charlotte Police Says 70% Of Arrested Protesters Had Out Of State IDs.
• Spot The Odd (Hedge Fund Strategy) Out. (graph)
• Horseman Capital Reveals The "Best Short In The World At The Moment".
• Wells(WFC) CEO Resigns From Fed Advisory Council As Pressure Mounts. (video)
• Why The Coming Wave Of Defaults Will Be Devastating. (graph)
• Guns Sell Out In Charlotte As Local Police Refuses To Release Shooting Video.
• The Fed's Missed Window & Failed Realizations.
• Fed Inaction Sparks Biggest Stock-Buying-Spree Since Brexit Bounce. (graph)

Business Insider:

• Putin is taking Russia into a new and more sinister phase.

Telegraph:

• Fitch reveals the $2trillion black hole in China's economy that heralds a lost decade.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 115.75 -1.25 basis points. 
• Asia Pacific Sovereign CDS Index 31.0 unch.
• Bloomberg Emerging Markets Currency Index 73.06 -.09%. 
• S&P 500 futures -.07%. 
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (FINL)/.54

Economic Releases
9:45 am EST

• The Preliminary Markit US Manufacturing PMI for September is estimated at 52.0 versus 52.0 in August. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Rosengren speaking, Fed's Harker speaking, Fed's Mester speaking, Fed's Lockhart speaking and the (OSK) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly 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 50% net long heading into the day.

Stocks Surging into Final Hour on Central Bank Hopes, Oil Bounce, Yen Weakness, Telecom/REIT Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.87%

• Euro/Yen Carry Return Index 117.98 +.63%

• Emerging Markets Currency Volatility(VXY) 10.36 -2.17%

• S&P 500 Implied Correlation 43.77 -7.85%

• ISE Sentiment Index 100.0 +58.73%
  

• Total Put/Call .92 -8.0%

• NYSE Arms 1.43 +122.77% 

Credit Investor Angst:

• North American Investment Grade CDS Index 76.22 -3.92%
  

• America Energy Sector High-Yield CDS Index 684.0 -2.12%

• European Financial Sector CDS Index 97.67 -2.34%

• Western Europe Sovereign Debt CDS Index 23.60 +.51%

• Asia Pacific Sovereign Debt CDS Index 30.82 -.34%

• Emerging Market CDS Index 227.07 -1.34%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.90 +.05%

• 2-Year Swap Spread 25.50 -1.0 basis point

• TED Spread 65.25 +8.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -34.25 -3.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.12 +.33%
• 3-Month T-Bill Yield .16% -6.0 basis points

• Yield Curve 85.0 -3.0 basis points
  

• China Import Iron Ore Spot $56.34/Metric Tonne +.84%

• Citi US Economic Surprise Index -5.90 -4.5 point

• Citi Eurozone Economic Surprise Index -25.70 -.1 point

• Citi Emerging Markets Economic Surprise Index -14.7 +.2 point

• 10-Year TIPS Spread 1.56% +3.0 basis points
• 58.6% chance of Fed rate hike at Dec. 14 meeting, 61.2% chance at Feb. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +33 open in Japan 
• China A50 Futures: Indicating +13 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.4%

Sector Underperformers:

• 1) Gold & Silver -1.1% 2) Papers -.9% 3) Computer Hardware -.6%

Stocks Falling on Unusual Volume: 

• AXON, VA, CPK, MLHR, LVLT, FUL, JBL, RETA, AZO, FTK, COO, ASH, LCI, CYBE, LMAT, NTLA, CTMX, TCK, FDX, TEAM, AMPH, WAGE, AAOI  and HSKA

Stocks With Unusual Put Option Activity:

• 1) ETFC 2) RHT 3) USO 4) HYG 5) HOG

Stocks With Most Negative News Mentions:

• 1) JBL 2) NRG 3) PBR 4) CALM 5) VA

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.2%

Sector Outperformers:

• 1) Telecom +1.6% 2) Alt Energy +1.6% 3) REITs +1.5%

Stocks Rising on Unusual Volume:

• WCIC, COLL, PMC, AQXP, SCS, LL, FORM, SRPT, GPRO, WLH, SEAS, CLVS and MTCH
  

Stocks With Unusual Call Option Activity:

• 1) RHT 2) HIG 3) MPLX 4) COG 5) P

Stocks With Most Positive News Mentions:

• 1) ESV 2) SEAS 3) BABA 4) EMR 5) LEA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.4% Above 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 82.3% of Issues Advancing, 15.5% Declining
• 124 New 52-Week Highs, 0 New Lows
• 61.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.7%
• Vix 12.3 -7.5%
• Total Put/Call .80 -20.0%
• TRIN/Arms 1.47 +131.4%