Today's Headlines

Bloomberg:

• Spain’s on Edge Over Catalonia’s Rebellion — So Are Investors. (video) As Spain confronts its Catalonian rebellion, investors are staring down a decision on whether to bet on a peaceful resolution to the secession upheaval or prepare for the consequences if the region splits off. For some, it’s reminiscent of the early stages of the euro-zone debt crisis, when investors found themselves reading up on the ins and outs of Greek politics and EU treaty articles to gauge the probability of a political and economic shake-up and its likely effects.
• Dark Trading Could Triple in Europe Under New Market Rules. (video) Trading of European stocks on dark markets will probably triple as a result of the MiFID II overhaul, the opposite of what the architects of the law intended, as the new rules give some venues flexibility in how they price shares. That’s according to Alex Gerko, co-chief executive officer of XTX Markets Ltd., an algorithmic trading firm that’s one of the region’s largest traders. He predicts that dark trading will become as significant in Europe as it is in the U.S., where more than one-third of stock trades happen on dark markets. As much as 10 percent of European equity trading currently takes place on dark pools, including invisible over-the-counter trades.
• Here Are the Top-Eight Holders of Puerto Rican Debt.
• Your Evening Briefing.

Wall Street Journal:

• Spain Tense as Catalan Separatist Leaders Called to Testify in Sedition Investigation. Region’s leaders have warned that they could declare independence as soon as this weekend.
• Senators Rip Credit-Reporting Model in Wake of Equifax(EFX) Breach. Ex-Equifax CEO faces questions about how the company handled the breach and whether an industry overhaul is needed.
• Another Thing Amazon Is Disrupting: Business-School Recruiting. Amazon has hired some 1,000 newly minted M.B.A.s in the past year.

MarketWatch.com:

• Spanish stocks lead Europe to lower close as Catalonia dispute intensifies. The Stoxx Europe 600 index SXXP, -0.08% fell 0.1% to end at 390.40, breaking a nine-day winning streak, the benchmark’s longest since July 2015.

Fox News:

• Tillerson blasts report of rift with Trump, as president rips 'fake news'. (video)
• Las Vegas shooter's girlfriend had 'clean conscience,' citizenship questions emerge. (video)
• Corporate Donors to anti-Trump 'resistance' group revealed.

CNBC:

• EU cash grab is a huge boost to Trump's tax-reform effort. (video)
• Google(GOOGL) Pixel 2 phones, Google Home Max and more announced — here's a rundown.
• Homeland Security report cited lone offenders as threat to large events in the South, weeks before Las Vegas massacre.
• Facebook(FB) is about to get slammed by US populist backlash, says early Uber investor Calacanis.
• Tropical depression forms in Caribbean; likely to impact Gulf Coast this weekend as a hurricane.
• Buy Netflix(NFLX) before earnings because subscriber growth will top Street: UBS. (video)
• American optimism about the economy hits an all-time high in new CNBC survey. (video)

Zero Hedge:

• 16 Unanswered Questions About The Las Vegas Shooting That Mainstream Media Doesn't Want To Talk About.
• Meet The Next Fed Chair: The Definitive Cheat Sheet.
• Study Of 10-Year State Pension Returns Highlight Full Extent Of Public Pension Ponzi.
• Tillerson Vows To Stay On, Slams NBC 'Moron' Report.
• Robots To Replace All Human Cashiers At New York Shake Shack(SHAK).
• WTI/RBOB Jump After Big Crude Inventory Draw, Exports Hit Record High.
• Nigel Farage Blasts EU, Juncker Over Catalonia: Spain Violates Article 2 Of Lisbon Treaty.
• ISM Services Spikes To 12-Year Highs - Beats Expectations By 5 Standard Deviations (As PMI Slides). (graph)
• Puerto Rico Bonds Crash To Record Low After Trump Says Debt May Need To Be "Wiped Out". (graph)
• Catalonia To Declare Independence From Spain On Monday.
• ADP Employment Grows At Slowest Pace In 11 Months As Small Business Slumps.
• Angry Trump Blasts "Fake News Media" For Puerto Rico Coverage.

The Telegraph:

• Spanish stocks plunge and bonds yields soar as Catalonia crisis intensifies.

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Education -.7% 2) Road & Rail -.6% 3) Coal -.5%

Stocks Falling on Unusual Volume: 

• SHOP, MNTA, AMBC, TEVA, RSG, PRAA, PLAY and CWST

Stocks With Unusual Put Option Activity:

• 1) PEP 2) MYL 3) XME 4) MNKD 5) SEAS

Stocks With Most Negative News Mentions:

• 1) MNTA 2) WGO 3) PRAA 4) RSG 5) AMBC

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.3%

Sector Outperformers:

• 1) Homebuilders +.8% 2) Utilities +.8% 3) Biotech +.7%

Stocks Rising on Unusual Volume:

• CTMX, THR, MYL, AYI, WPPGY, NLNK, FOLD, GBT, FIZZ, FANH, PEP, MCFT, SHLM, SEAS, BSFT, TROX, CBPO, OFIX, LW, SPOK, FOXF, DBVT, SHEN, NFLX, CUDA, ITCI, UNIT, ORBC and SEAS

Stocks With Unusual Call Option Activity:

• 1) MAC 2) ALLY 3) XBI 4) FOLD 5) XHB

Stocks With Most Positive News Mentions:

• 1) CATB 2) FCEL 3) CTMX 4) CPST 5) FOLD

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -4.5% Below 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 50.1% of Issues Advancing, 454% Declining
• 170 New 52-Week Highs, 5 New Lows
• 48.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.4%
• Vix 9.8 +2.6%
• Total Put/Call .73 unch.
• TRIN/Arms .78 +14.8%

Wednesday Watch

Evening Headlines

Bloomberg:

• U.S. Missile Defense Gets $400 Million After North Korea Threats. Congressional defense committees have approved shifting more than $400 million from other accounts into missile defense programs to clear the way for more ground-based interceptors, sensors and upgrades to Navy anti-missile vessels in the face of threats led by North Korea. Boeing Co., Raytheon Co. and Orbital ATK Inc. are likely to be the top beneficiaries. Defense Secretary Jim Mattis disclosed the approval Tuesday during a Senate hearing on Afghanistan. He said he requested approval to shift, or “reprogram,” unspent funds for fiscal 2017 totaling $440 million from accounts such as Army wartime operations and maintenance. A formal six-page request listed $416 million of the total.

• Dollar Slips, Stocks Mixed as Fed Chief Pick Looms. (video) The rally in the dollar petered out as investors awaited fresh triggers for trades from President Donald Trump’s pending decision on the leadership of the Federal Reserve, along with upcoming policy maker speeches and U.S. economic data. Asian stocks were mixed after American benchmarks closed at record highs. The Bloomberg dollar index retreated from recent highs and Treasury yields edged lower as news emerged that Trump has been presented with a shortlist of Fed chair candidates with a spectrum of views on policy. Ex Fed board member Kevin Warsh had been seen as a potential pick who would favor more aggressive monetary tightening, while current board member Jerome Powell is considered in sync with current Chair Janet Yellen’s gradualist approach. Japan’s Topix index was little changed at 1,683.82. Australia’s S&P/ASX 200 Index fell 0.7 percent. Futures on Hong Kong’s Hang Seng index added 0.3 percent.

• Five Things You Need to Know to Start Your Day. (video)

• U.S. Tax Reforms Would Leave Renewable Energy Out in the Cold. The prospects for a broad tax reform with lower corporate rates has excited business leaders and boosted the stock market -- except for renewable energy. Tax reform “will make renewables more expensive,” Keith Martin, a partner at law firm Norton Rose Fulbright, said in an interview Tuesday at Infocast’s Solar Connect conference in San Diego.

• Trump to Seek $29 Billion in Disaster, Flood Funding. The Trump administration will ask Congress to provide $29 billion in disaster aid and national flood insurance for hurricane-recovery efforts, a Republican lawmaker said Tuesday. Of that amount, $16 billion would be used for loan forgiveness under the National Flood Insurance Program and a little more than $12 billion would go for federal disaster relief operations, said the lawmaker, who spoke on condition of anonymity. The funding is in response to Hurricane Maria, which hit Puerto Rico, as well as Harvey and Irma, which struck the Gulf Coast.

• Office Depot(ODP) to Buy CompuCom for $1 Billion.

Wall Street Journal:

• Senate Republicans Signal Support for ‘Dreamers,’ With Conditions. Democrats oppose tying program to tighter immigration enforcement within U.S.

• Warren Buffett’s Berkshire Bets Big on America’s Truckers, Buys Stake in Pilot Flying J. Billionaire’s conglomerate takes initial 38.6% interest in truck-stop operator. 

• Spanish King Says Catalan Leaders Have ‘Undermined Harmony’ as Protests Swell in Restive Region. Tensions flare over continued presence of national police after crackdown on independence referendum.

• Trump and the Fed. Will he embrace the monetary policy that he campaigned against?

Fox News:

• Las Vegas shooter installed cameras in and out of hotel room ahead of 'premeditated' attack. (video)

• Las Vegas shooting: From ISIS to gambling debts, theories abound for shooter's motive. (video)

CNBC:

• JPMorgan's(JPM) top quant says tax reform will boost the stock market. (video)

• House tax plan 'highly likely' to include fourth rate on wealthy, likely not higher than 39.6%, source says. (video)

• Ford(F) CEO outlines plan to aggressively cut costs, funneling savings to electric, self-driving cars. (video)

Zero Hedge:

• Vegas Shooter Filmed Himself During Slaughter, May Have Left A Note; Suicide Photo Emerges.

• Spanish Showdown: Catalonia To Declare Independence "In Days" Puidgemont Says Despite King's Condemnation.

• Trump Gets Final List Of Fed Candidates, Yellen Gets The Cold Shoulder.

• Was There A Second Shooter In Vegas? (video)

• Three Straight Weeks Of This Can't Be Ignored.

• Second Company Decides To Pull NFL Ads Over Continued Protests.

• WTI/RBOB Extend Losses After Another Big Gasoline Inventory Build. (graph)

• Spain's King Felipe Condemns Catalan "Disloyalty" As Rajoy Mulls "Nuclear Option".

• Spain's, Planes, & Automobiles Soar As Small Caps Rebound To Another New High. (graph)

Business Insider:

• Uber will IPO by 2019 and let Softbank buy a huge stake, following a big board meeting.

• Every single Yahoo account was compromised by hackers.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.5 -2.0 basis points. 

• Asia Pacific Sovereign CDS Index 17.0 -1.75 basis points.

• Bloomberg Emerging Markets Currency Index 73.63 +.15%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AYI)/2.43

• (MON)/-.39

• (PEP)/1.43

• (RECN)/.13

Economic Releases 
8:15 am EST:

• The ADP Employment Change for September is estimated to fall to 135K versus 237K in August.

10:00 am EST:

• The ISM Non-Manufacturing Composite for September is estimated to rise to 55.5 versus 55.3 in August.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -466,110 barrels versus a -1,846,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,038,330 barrels versus a +1,107,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,272,670 barrels versus a -814,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.93% versus a +5.4% gain prior.

Upcoming Splits

• (ISRG) 3-for-1

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Bullard speaking, Eurozone Services PMI/Retail Sales reports, weekly MBA Mortgage Applications report and the (ZUMZ) monthly sales report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 100% net long heading into the day.

Stocks Higher into Final Hour on Tax Reform Hopes, Economic Optimism, Technical Buying, Homebuilding/Airline Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.62 +1.8%

• Euro/Yen Carry Return Index 138.36 +.32%

• Emerging Markets Currency Volatility(VXY) 7.81 -.38%

• S&P 500 Implied Correlation 19.87 +1.6%

• ISE Sentiment Index 75.0 -61.1%
  

• Total Put/Call .74 -20.43%

• NYSE Arms .68 -23.61%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.18 -1.17%
  

• America Energy Sector High-Yield CDS Index 405.0 -.33%

• European Financial Sector CDS Index 58.86 -.63%

• Western Europe Sovereign Debt CDS Index 5.32 -.47%

• Asia Pacific Sovereign Debt CDS Index 17.03 -9.73%

• Emerging Market CDS Index 178.76 -1.64%
  

• iBoxx Offshore RMB China Corporate High Yield Index 142.16 +.03%

• 2-Year Swap Spread 26.5 +1.25 basis points

• TED Spread 29.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -36.5 +4.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.53 +.05%
• 3-Month T-Bill Yield 1.05% +4.0 basis points
  

• Yield Curve 86.0 +1.0 basis point

• China Import Iron Ore Spot $62.05/Metric Tonne unch.

• Citi US Economic Surprise Index 1.70 +.2 point

• Citi Eurozone Economic Surprise Index 45.30 -.3 point

• Citi Emerging Markets Economic Surprise Index 17.10 -1.8 basis points

• 10-Year TIPS Spread 1.85 +1.0 basis point
  
• 71.6% chance of Fed rate hike at Dec. 13 meeting, 72.7% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +66 open in Japan 
• China A50 Futures: Indicating +393 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long