Wednesday Watch

Evening Headlines

Bloomberg:

• Stock Rally Extends in Asia as U.S. Hits New Highs. Equities in Asia extended gains seen around the world and Treasuries held on to declines on bets economic growth is strong enough to withstand heightened geopolitical tensions. Benchmarks advanced in Tokyo and Sydney after the S&P 500 Index, the Dow Jones Industrial Average and the Nasdaq Composite Index all closed at fresh record highs on Tuesday. The dollar held onto gains ahead of U.S. inflation data later this week that could impact the timing of the next Federal Reserve interest-rate hike. Oil rose as OPEC and its allies are discussing an extension of output curbs. The Topix index rose 0.5 percent of 9:16 a.m. Tokyo time. Australia’s S&P/ASX 200 Index added 0.4 percent and the Kospi index in Seoul was little changed. Futures on Hong Kong’s Hang Seng Index rose 0.1 percent.

• Five Things You Need to Know to Start Your Day.

• Bond Market's Hot Trade Is Betting a 2017 Fed Hike Still in Play. Bets on another Federal Reserve rate hike this year are gaining favor after being all but abandoned a few days ago. Eurodollar futures, among the most sensitive financial instruments to Fed speculation, show some traders have concluded that wagers on additional tightening in 2017 are too cheap to pass up. Last week, the market-implied odds of another rate increase by year-end plunged below 25 percent, and at one point fed funds futures didn’t fully price in another hike until 2019.

• Dozens of Senators Seek Probe of Equifax(EFX) Executives' Stock Sales. (video)

Wall Street Journal:

• U.S. Threatens China Over North Korea Sanctions. Treasury officials warn of measures if Beijing doesn’t do more to isolate Pyongyang.

• Goldman’s(GS) New Obsession: Adding $5 Billion in Revenue. But big questions remain over the future of its debt-trading arm.

• U.S. Household Incomes Rose in 2016 to New Record. The median household income last year was $59,039. 

• Democrats Endorse Single-Payer Health Plan. Odds of Sen. Bernie Sanders’s bill becoming law remain remote; Republicans are quick to criticize.

• Why the Most-Hated Stock Rally Won’t Die. Even with major indexes at records, many are finding reasons why the eight-year bull market will end.

• Trump Administration to Tread Lightly on Autonomous-Vehicles Rules. Announcement comes as U.S. probe places some blame on Tesla for fatal crash.

• Herculean Task as Crews Race to Restore Power Cut by Irma. Almost 60,000 utility workers from the U.S. and Canada work to fix downed lines and flooded substations.

Fox News:

• White House: DOJ 'should certainly look at' prosecuting James Comey. (video)

• Irma left its mark on 'every' house in Florida Keys, FEMA says. (video)

CNBC:

• Here are all the big products Apple announced on Tuesday. (video)

• Stocks could see more new highs before a significant pull back.

• Nordstrom(JWN) family nears deal with Leonard Green in bid to take department store private. (video)

• Centene in a $3.75 billion deal for New York Medicaid leader Fidelis Care.

• After Buffalo Wild Wings fight, activist fund sets eyes on construction equipment maker.

• Analyst insists hurricanes 'insufficient to derail strong trends' in cruise industry.

• JPMorgan(JPM) CEO Jamie Dimon says bitcoin is a 'fraud' that will eventually blow up. (video)

Zero Hedge: 

• Dimon Doubles Down: "My Daughter Bought Bitcoin. It Went Up, Now She Thinks She Is A Genius".

• What Fiduciary Duty? San Fran Politicians Try To Force Pension To Dump $470MM Of "Fossil Fuel" Stocks.

• Calls To Imprison "Climate Change Deniers" Grow In The Wake Of Hurricane Irma. When retired Georgia Tech professor Judith Curry penned a blog post on her "Climate Etc." website suggesting that it was scientifically irresponsible to tie the intensity of Hurricanes Harvey and Irma directly to climate change, she probably didn't expect that she might trigger 1,000's of progressives to call for her immediate imprisonment. Unfortunately, for both Curry and society at large, that is exactly what happened. 

• Duke Recruits Men For Program To Fight "Toxic Masculinity".

• Facebook(FB) Believes That $50,000 Changed The Election; Senator Warner Agrees.

• The Real Story Behind America's New $20 Trillion Debt.

• WTI/RBOB Extend Gains After Biggest Gasoline Draw On Record. (graph)

• Julian Robertson: "There's A Bubble" And "It's The Federal Reserve's Fault".

• Stocks, Dollar Extend "Not-The-End-Of-The-World" Gains; Bitcoin, Apple Drop. (graph)

Business Insider:

• China, Russia, and the US are in an artificial-intelligence arms race.

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 74.50 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 18.0 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 74.91 +.02%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CBRL)/2.19

• (UNFI)/.70

Economic Releases 
8:30 am EST

• PPI Final Demand MoM for August is estimated to rise +.3% versus a -.1% decline in July.

• PPI Ex Food and Energy MoM for August is estimated to rise +.2% versus a -.1% decline in July.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +4,392,100 barrels versus a +4,580,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,941,700 barrels versus a -3,199,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,499,2000 barrels versus a -1,396,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +3.1% versus a -16.9% decline prior.
  

2:00 pm EST

• The Monthly Budget Statement for August is estimated at -$119.0B versus -$107.1B in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German CPI report, $12B 30Y T-Bond Auction, weekly MBA Mortgage Applications report, RBC Industrials Conference, BofA Merrill Healthcare Conference and the (EFX) investor meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly mixed.  The Portfolio is 75% net long heading into the day.

Stocks Surging into Afternoon on Diminished Hurricane Irma Concerns, Less Geopolitical Fear, Yen Weakness, Financial/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.8 -11.1%

• Euro/Yen Carry Return Index 136.43 +.81%

• Emerging Markets Currency Volatility(VXY) 7.7 -4.42%

• S&P 500 Implied Correlation 29.23 -12.5%

• ISE Sentiment Index 270.0 +241.8%
  

• Total Put/Call .94 -13.0%

• NYSE Arms 1.0 -24.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.77 -3.76%
  

• America Energy Sector High-Yield CDS Index 444.0 -.25%

• European Financial Sector CDS Index 50.32 -2.67%

• Western Europe Sovereign Debt CDS Index 5.40 -1.8%

• Asia Pacific Sovereign Debt CDS Index 18.89 -2.95%

• Emerging Market CDS Index 174.33 -1.36%
  

• iBoxx Offshore RMB China Corporate High Yield Index 141.63 +.09%

• 2-Year Swap Spread 22.0 -2.0 basis points

• TED Spread 27.0 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -23.25 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.11 -.15%
• 3-Month T-Bill Yield 1.04% unch.
  

• Yield Curve 81.0 +2.0 basis points

• China Import Iron Ore Spot $74.49/Metric Tonne -4.98%

• Citi US Economic Surprise Index -16.10 +7.7 points

• Citi Eurozone Economic Surprise Index 19.30 -.3 point

• Citi Emerging Markets Economic Surprise Index 21.20 -4.3 basis points

• 10-Year TIPS Spread 1.84 +3.0 basis points
  
• 13.8% chance of Fed rate hike at Nov. 1 meeting, 41.3% chance at Dec. 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +60 open in Japan 
• China A50 Futures: Indicating +66 open in China

• DAX Futures: Indicating +25 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Irma Weakens to Tropical Storm as Florida Damage Forecast Is Cut. (video) Florida is drenched, tattered -- but fortunate. Hurricane Irma weakened as it moved past Tampa on Monday, leaving in its wake a state that avoided the worst predictions of its destruction by sea and storm. By one estimate, the cost of total damages dropped to $49 billion from $200 billion earlier. Still, at least 5.6 million were without power, millions displaced and as much as 15 inches of rain were forecast in what may yet go down as one of the worst storms in Florida’s history. The center of the system, America’s second major hurricane in a week, was expected to soften to a tropical storm Monday morning and a tropical depression by afternoon, the National Hurricane center said in an advisory. As the storm headed north, threatening torrential rains in Atlanta, a storm-surge warning was discontinued for parts of southern Florida.

• China Set to Unveil Cap-And-Trade Auto Emission, Mileage Rules. China will soon unveil a mandatory cap-and-trade credit program for electric cars, starting the countdown for carmakers to be in compliance with stricter rules on emissions and fuel economy, according to the country’s state-backed auto association.

• VW to Build Electric Versions of All 300 Models by 2030. Volkswagen AG Chief Executive Officer Matthias Mueller announced sweeping plans to build electric versions of all 300 models in the group’s lineup as the world’s largest automaker accelerates the shift away from combustion engines and tries to draw a line under the emissions-cheating scandal. Speaking on the eve of the Frankfurt auto show, the CEO laid out the enormity of the task ahead, vowing to spend 20 billion euros ($24 billion) to develop and bring the models to market by 2030 and promising to plow another 50 billion euros into the batteries needed to power the cars.

• Your Evening Briefing.

• Florida Resorts, Cruise Operators Aim to Restart Tuesday.

• Forget Equifax. Facebook(FB) and Google(GOOG) Have the Data That Should Worry You.

• Irma's Path of Destruction in Photos.

Wall Street Journal:

• Hurricane Irma: Live Coverage.

• Home-Improvement Retailers Scramble to Restock in Florida. Big-box retailers are increasingly intertwined with recovery efforts after natural disasters.

• Hurricanes Add to Problems for Oil Bulls. Harvey and Irma will hurt energy demand in large areas of the South, even as drilling continues and crude in storage is abundant.

MarketWatch.com: 

• European stocks jump by most in 4 weeks as North Korea, Irma fears recede. The Stoxx Europe 600 index SXXP, +1.04% jumped 1% to close at 379.43, posting its biggest gain since Aug. 14.

Fox News: 

• Hurricane Irma: Cops warn looters they're making 'fairly bad life choice'. (video)

CNBC:

• Watch: The National September 11 Memorial & Museum observes the 16th anniversary of the terrorist attacks. (video)

• As Amazon(AMZN) Pushes Forward With Robots, Workers Find New Roles.

• Here's everything to expect from Apple's(AAPL) iPhone event on Tuesday.

• Two factors will prevent a stock market correction, Goldman Sachs(GS) says.

• Harvey and Irma economic hit could total $200 billion: Moody's. (video)

• Apple(AAPL) iPhone X will be in 'severe short supply,' KGI says.

• Irma leaves 6.2 million Florida homes in the dark — over 60% of the entire state. (video)

• Tesla(TSLA) opens its first two 'city center' Supercharger stations in Chicago and Boston.

Zero Hedge: 

• Breaking News of Saudi Crown Prince's "Secret" Visit To Israel Brings Embassy Scramble.

• 11 Surreal Scenes From Downtown Miami Last Night That Look Like A Real-Life Disaster Movie. (pic)

• "They Dodged A Bullet": Why Insurer Stocks Are Soaring.

• Whole Foods(WFM) Price Cut Leads To 25% Surge In Customers, Channel Checks Reveal.

• Fed Vice Chair, Stanley Fischer...Exit Stage Left: "This One's Gonna Hurt".

• Crackdown Begins: Chinese Banks Are Suspending North Korean Transactions.

• Confusion Grows Over China "Bitcoin Exchange Ban": 3 Largest Exchanges Have Not Received Any Official Notice.

• Surveying Irma's Caribbean Devastation: "It Was End-Of-World Times...People Are Roaming Like Zombies".

• Catastrophe Bonds Suffer Biggest Crash In History.

• Remember Houston? On Repairing/Rebuilding 100,000+ Damaged Houses.

• Over Half Of Florida Without Power As State Braces For "Lengthiest Restoration In US History".

• Citi Warns Trading Revenue To Tumble 15% In Q3 Due To "Subdued Volatility".

Business Insider:

• 23 haunting photos from the September 11 attacks that Americans will never forget. (pic)

• Dramatic photos show the trail of destruction Hurricane Irma is carving through Florida.

Bear Radar

Style Underperformer:

• Small-Cap Growth +.9%

Sector Underperformers:

• 1) Gold & Silver -1.3% 2) Biotech unch. 3) Oil Tankers +.1%

Stocks Falling on Unusual Volume: 

• HIIQ, KURA, EFX, PLSE, NLNK, USG, WATT, OC, REGN, LL, JWN, ZAGG, ZGNX and CLDR

Stocks With Unusual Put Option Activity:

• 1) EFX 2) CBS 3) SIRI 4) USG 5) DECK

Stocks With Most Negative News Mentions:

• 1) HIIQ 2) OC 3) NEO 4) ICPW 5) EFX

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.5%

Sector Outperformers:

• 1) Hospitals +2.5% 2) Banks +2.2% 3) Semis +2.1%

Stocks Rising on Unusual Volume:

• GDS, UVE, HCI, CASH, TEVA, HRTG, VR, FNHC, ARR, IEFA, DM, BIP, HEP, GPRO, XL, CB, AHL, RNR, RE, AXS, AZN, IBTX, SNP, VERI, NEXT, ATI, PAY, CG, STRL, CNK, CPE, EVBG, DLR, AIZ, JBLU and CCL

Stocks With Unusual Call Option Activity:

• 1) TRN 2) LC 3) DWDP 4) SPLK 5) XLF

Stocks With Most Positive News Mentions:

• 1) ATI 2) MBWM 3) MA 4) FEYE 5) TXT

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.9% Above 100-Day Average
• 10 Sectors Rising, 0 Sectors Declining
• 78.7% of Issues Advancing, 18.3% Declining
• 153 New 52-Week Highs, 7 New Lows
• 40.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.2%
• Vix 10.8 -11.0%
• Total Put/Call .88 -18.5%
• TRIN/Arms 1.46 +13.6%