Stocks Higher into Afternoon on Central Bank Hopes, Short-Covering, Investor Performance Angst, Tech/Telecom Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.29 -.15%

• Euro/Yen Carry Return Index 140.73 +.24%

• Emerging Markets Currency Volatility(VXY) 7.70 -1.28%

• S&P 500 Implied Correlation 38.86 +3.41%

• ISE Sentiment Index 142.0 -17.44%

• Total Put/Call .66 -16.38%

• NYSE Arms .80 -22.13% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.56 -.36%

• European Financial Sector CDS Index 117.85 -3.69%

• Western Europe Sovereign Debt CDS Index 70.0 +.97%

• Emerging Market CDS Index 263.70 +1.24%

• 2-Year Swap Spread 11.75 -1.0 basis point

• TED Spread 20.25 -1.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.75 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .04% +2 basis points

• Yield Curve 220.0 -1 basis point

• China Import Iron Ore Spot $131.30/Metric Tonne -.38%

• Citi US Economic Surprise Index 5.4 -6.0 points

• Citi Emerging Markets Economic Surprise Index -4.40 +.3 point

• 10-Year TIPS Spread 2.19 unch.

Overseas Futures:

• Nikkei Futures: Indicating +148 open in Japan

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.40%

Sector Underperformers:

• 1) Papers -1.84% 2) Coal -1.52% 3) REITs -1.0%

Stocks Falling on Unusual Volume:

• BKU, VOLC, CLNY, IPHS, FNB, DAN, CVLT, BTH, SANM, DCO, CHE, CMI, ISSI, AGNC, WPP, CYNO, UBS, GT, MWV, SLG, ALSN, N, TNGO, ST, MR, TXRH, ATVI, PCAR, SHO, HTS, PAG, ALSN, NLY, SCHN, OFG, VSH, AGCO, N, IVR and DAN

Stocks With Unusual Put Option Activity:

• 1) PLCM 2) S 3) DELL 4) AEO 5) JOY
  

Stocks With Most Negative News Mentions:

• 1) CMI 2) ACI 3) YELP 4) VOLC 5) YRCW
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.39%

Sector Outperformers:

• 1) Semis +1.03% 2) Networking +.72% 3) Telecom +.49%
  

Stocks Rising on Unusual Volume:

• NTRI, XYL, DATA, ALLT, IDTI, BP, CIE, OLN, GDOT, PBI, PRE, JLL, CGNX, TWI, SHLD, ALR, ACT, LINE, CBG and ADM

Stocks With Unusual Call Option Activity:

• 1) SCHW 2) FE 3) KSS 4) NTRI 5) PLCM

Stocks With Most Positive News Mentions:

• 1) PFE 2) CMI 3) DFS 4) IBM 5) SHLD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Night Trading

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 133.0 unch.

• Asia Pacific Sovereign CDS Index 100.25 unch. 

• FTSE-100 futures +.06%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LYB)/1.59

• (JCI)/.95

• (VLO)/.43

• (LLL)/1.95

• (X)/-.43

• (PFE)/.56

• (MDC)/.65

• (OXY)/1.60

• (PBI)/.40

• (CMI)/2.11

• (GT)/.66

• (HCP)/.77

• (DDD)/.26

• (ADM)/.48

• (AET)/1.53

• (AMTD)/.37

• (CBG)/.33

• (PCAR)/.85

• (GILD)/.48

• (AFL)/1.48

• (BXP)/1.28

• (RYL)/.90

• (EA)/.12

• (BWLD)/.85

• (IACI)/.94

• (DWA)/.00

• (YELP)/-.01

• (TRLA)/.08

• (LNKD)/.32

Economic Releases
8:30 am EST

• The Producer Price Index for September is estimated to rise +.2% versus a +.3% gain in August.

• The PPI Ex Food and Energy for September is estimated to rise +.1% versus unch. in August.

• Advance Retail Sales for September are estimated unch. versus a +.2% gain in August.

• Retail Sales Ex Autos for September are estimated to rise +.4% versus a +.1% gain in August.

• Retail Sales Ex Autos and Gas for September are estimated to rise +.5% versus a +.1% gain in August.

9:00 am EST

• S&P/CS 20 City MoM for August is estimated to rise +.7% versus a +.62% gain in July.

10:00 am EST

• Business Inventories for August are estimated to rise +.3% versus a +.4% gain in July.

• Consumer Confidence for October is estimated to fall to 75.0 versus 79.7 in September.

Upcoming Splits

• (NEOG) 3-for-2

Other Potential Market Movers

• The German Export/Import Prices report, Japan Industrial Production, 5-Y T-Note auction and the weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and financial 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 Higher into Final Hour on Central Bank Hopes, Short-Covering, Commodity/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.29 +1.53%

• Euro/Yen Carry Return Index 140.51 +.22%

• Emerging Markets Currency Volatility(VXY) 7.83 -2.37%

• S&P 500 Implied Correlation 38.45 +3.31%

• ISE Sentiment Index 182.0 +102.22%

• Total Put/Call .77 -16.30%

• NYSE Arms .71 -9.38% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.84 +.15%

• European Financial Sector CDS Index 122.37 -2.40%

• Western Europe Sovereign Debt CDS Index 69.33 +.48%

• Emerging Market CDS Index 260.25 -.54%

• 2-Year Swap Spread 12.75 -.25 basis point

• TED Spread 21.5 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -4.0 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% -1 basis point

• Yield Curve 221.0 +1 basis point

• China Import Iron Ore Spot $131.80/Metric Tonne -1.13%

• Citi US Economic Surprise Index 11.4 -5.6 points

• Citi Emerging Markets Economic Surprise Index -4.70 +.9 point

• 10-Year TIPS Spread 2.19 unch.

Overseas Futures:

• Nikkei Futures: Indicating -71 open in Japan

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical/retail sector longs and index hedges

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• European Stocks Fall After Three-Week Rally as Fiat Drops. European stocks declined, snapping a three-week rally for the Stoxx Europe 600 Index, as U.S. factory production and home sales missed economists’ forecasts. Fiat SpA (F) retreated 3.2 percent as JPMorgan Chase & Co. downgraded automakers. Volvo AB slid 4.3 percent as Natixis SA cut its rating on the Swedish truck producer. TNT Express NV, the Dutch package-delivery company, rallied 4.3 percent after releasing results. Mediobanca SpA (MB) climbed 3.3 percent as the Italian investment bank reported increased profit. The Stoxx 600 slipped 0.2 percent to 319.49 at the close of trading, erasing an earlier gain of 0.3 percent.

• Five Killed as Jeep Rams Into Crowd at Beijing’s Tiananmen. A Jeep crashed into a crowd by Beijing’s Tiananmen Square close to where the portrait of Mao Zedong hangs, killing five people and injuring 38. Three people in the vehicle were killed, along with tourists from the Philippines and Guangdong province, the official Xinhua News Agency said, citing the police. The injured included tourists from Japan and the Philippines, it said. 

• WTI Crude Rises for Third Day as Libyan Production Falls. WTI for December delivery gained 40 cents, or 0.4 percent, to $98.25 a barrel at 12:47 p.m. on the New York Mercantile Exchange. Futures touched $95.95 on Oct. 24, the lowest intraday level since June 27. The volume of all futures traded was 25 percent below the 100-day average. 

• Gold Swings Near 5-Week High Before Fed Policy Meeting. Gold for immediate delivery gained 0.3 percent to $1,354.50 an ounce at 1:52 p.m. in New York. Bullion climbed 2.6 percent last week, the second straight advance.

• Corn Drops to Three-Year Low on Beneficial U.S. Weather. Corn futures fell to the lowest in more than three years as dry weather improved harvest prospects for a U.S. crop that the government estimates will be the world’s biggest ever. Farmers probably have completed 50 percent of the harvest as of yesterday, up from 39 percent a week earlier, according Prime Agricultural Consultants Inc. The U.S. Department of Agriculture will issue its update on crop conditions later today. The agency has forecast that output will increase 28 percent this season from last year, when drought damaged fields across the Midwest.

MarketWatch:

• The Mother Of All Surprises. By not addressing the pace of stock-market gains, falling inflation expectations, and the growing disconnect between asset markets and the economy, the Fed is risking the embarrassment of potentially causing another bubble.

CNBC: 

• It's crisis time for Obamacare. (video)

• Audi surges, Ford struggles in latest Consumer Reports survey. (video)

Zero Hedge: 

• Manufacturing Production Disappoints As Utilization Rises To 5-Year High. (graph)

• Home Sales Collapse At Fastest Rate In 40 Months; Stocks Spike. (graph)

• Dallas Fed Dumps From 19-Month High; Misses By Most In 6 Months. (graph)

• What Spanish Recovery? (graph)

• Big Brother Is Coming To Your Car.

• The Google(GOOG) Unemployment Index. (graph)

• Second Tesla Goes Down In Flames Following Mexico City Crash.

Business Insider: 

• APPLE(AAPL) EARNINGS PREVIEW: The Most Exciting Earnings Report Of The Year.

• Penn State Will Pay $59.7 Million To 26 People Over Claims Of Sexual Abuse.

Forbes:

• In China There's Not One City Sans Terrifying Stretches Of Empty Houses. Over the last two years of traveling constantly in China, I can say that I have not seen a single city, town, or hamlet without massive empty housing stock. A colleague, on two trips crossing about 1,500 kilometers overland, said that he was not out of sight of empty buildings even once. Up by the Siberian border, the town of Manzhouli has decided to become a tourist resort and built thousands of empty “villa” developments. In the southern mountains of Yunnan, a colleague took video footage of 15 kilometers unbroken of empty highrises. The ghost developments stretch along Beijing’s southern Fourth Ring and through Shanghai’s Pudong and Xuhui. The East District Zhengzhou looks like a post-apocalyptic landscape. The new districts of Harbin could earn some revenue as sets for a remake of I Am Legend.

TheStreet.com:

• Netflix(NFLX) Is Not Coming to Comcast, TWC.

Powerline:

• The Truth of Obamacare. Hundreds of thousands of Americans have already lost their health insurance due to Obamacare, and soon millions will have lost it. Conservative commentators have noted that, from all that appears, more people have lost their health insurance than have signed up for plans in health insurance exchanges.

Reuters:

• Fed may outline commodity policy for banks early 2014 -source. The U.S. Federal Reserve may not unveil its plans for regulating Wall Street's commodity trading business until early next year, a person briefed on the matter said, deferring a decision on the politically fraught debate into 2014.

Financial Times:

• China-Japan relations take turn for worse. When Prime Minister Shinzo Abe told Japanese troops on Sunday that Tokyo opposed the use of force to change the status quo in Asia, his real audience was in Beijing. The Chinese foreign ministry responded on Monday by accusing Japan’s leaders of “repeatedly making provocative remarks” and displaying “wild arrogance”. The Global Times, a nationalistic Communist party mouthpiece, said the chance that friction between the powers would “escalate into military clashes is growing”.

Telegraph:

• BIS sees risk of 1998-style Asian crisis as Chinese dollar debt soars. The world's banking watchdog warns that foreign loans to companies and banks in China has tripled over the last five years and may be large enough to set off financial tremors in the West.