Bear Radar

Style Underperformer:

• Small-Cap Value -1.35%

Sector Underperformers:

• 1) Steel -3.03% 2) Coal -2.85% 3) Airlines -2.50%

Stocks Falling on Unusual Volume:

• BIDU, HPQ, GES, BIG, DLLR, UPL, QSII, SWN, SAM, GFI, AU, FRED, PDCO, HCII, ADTN, SOHU, BEAV, RUE, ANDE, DNKN, VRA, SLRC, GLNG, INTU, CROX, BRLI, GIII, TITN, HSIC, FGP, SWY, MAIN, TCAP, GDOT and CAS
  

Stocks With Unusual Put Option Activity:

• 1) GES 2) RCL 3) BIDU 4) INTC 5) VALE
  

Stocks With Most Negative News Mentions:

• 1) AKS 2) GM 3) ADTN 4) BIG 5) HPQ
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth -.16%

Sector Outperformers:

• 1) Gold & Silver +.79% 2) Biotech +.15% 3) Tobacco +.13%

Stocks Rising on Unusual Volume:

• HAIN, SSRI, GOLD, SNPS, FWLT, MCP and FII
  

Stocks With Unusual Call Option Activity:

• 1) SSRI 2) CS 3) SCCO 4) GES 5) NLY
  

Stocks With Most Positive News Mentions:

• 1) PSUN 2) PBR 3) STLD 4) NOC 5) NUE
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Greek Crisis Evasion to Fore as Merkel Hosts Hollande in Berlin. Chancellor Angela Merkel hosts President Francois Hollande today as officials look for ways to stave off an immediate crisis after a report due next month from Greece’s international creditors on the health of its finances. Options raised in Germany in recent days include front- loading aid payments to Greece to help it over liquidity hurdles; lowering the interest rate or extending maturities on loans; and pushing for a second debt writedown, this time focusing on bonds held by public institutions, notably the European Central Bank. With the leaders of Europe’s two biggest economies still at the confidence-building stage, Merkel and Hollande are seeking common ground on Greece and the wider euro-area debt crisis almost three years after its inception. While Merkel publicly stresses meeting targets, France sees them as too harsh given the state of the Greek economy, a French government official said on condition of anonymity because the talks are private. Merkel and Hollande will give statements at 7 p.m. in Berlin.
• China’s Stocks Reverse Earlier Gains on Manufacturing Concerns. China’s stocks fell, wiping out the benchmark index’s gains, after a report showed the nation’s manufacturing may contract at a faster pace this month. China Vanke Co. led declines for property developers after Vice Premier Li Keqiang called for local governments to continue property-market tightening measures. Shandong Gold Mining Co. paced gains for bullion producers as gold prices surged to a 16- week high after minutes from a U.S. Federal Reserve meeting showed many policy makers favored more monetary easing. The preliminary reading of 47.8 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compares with a final 49.3 for July. A number below 50 indicates contraction.
• Beef Herd Tumbles to 40-Year Low on Feed Cost Surge: Commodities. The worst U.S. drought in a half century and record feed prices are spurring farmers to shrink cattle herds to the smallest in two generations, driving beef prices higher. Beef output will slump to a nine-year low in 2013 after drought damaged pastures from Missouri to Montana, the U.S. Department of Agriculture estimates. The domestic herd is now the smallest since at least 1973, and retail prices reached a record last month, USDA data show. Cattle futures may rise 8.5 percent to an all-time high of $1.35 a pound in Chicago in the next 12 months, said Rich Nelson, the chief strategist at Allendale Inc. who has tracked the market for 15 years.
• Oil Gains a Third Day on Falling U.S. Stockpiles, Fed Stimulus Hopes. Oil rose for a third day in New York after U.S. stockpiles declined more than analysts projected and minutes from the Federal Reserve showed many policy makers backed more monetary easing. “We had pretty supportive news for commodity markets from the Fed,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The wording was explicit and it seems likely that there is going to be easing. Oil for October delivery gained as much as 67 cents to $97.93 a barrel in electronic trading on the New York Mercantile Exchange and was at $97.90 at 11:36 a.m. Sydney time. The contract yesterday climbed 0.4 percent to $97.26, the highest close since May 7. Prices are 1 percent lower this year. Brent oil for October settlement gained 77 cents, or 0.7 percent, to $115.68 a barrel on the London-based ICE Futures Europe exchange.
• Gold Climbs to 16-Week High on U.S. Stimulus Bets.
• U.S. Budget Deficit to Reach $1.1 Trillion in 2012, CBO Says.

Wall Street Journal:

• The Cliff the Keynesians Built. Temporary tax cuts created the fiscal threat to growth.
• U.S. Plans New Asia Missile Defenses. The U.S. is planning a major expansion of missile defenses in Asia, a move American officials say is designed to contain threats from North Korea, but one that could also be used to counter China's military. The planned buildup is part of a defensive array that could cover large swaths of Asia, with a new radar in southern Japan and possibly another in Southeast Asia tied to missile-defense ships and land-based interceptors.

MarketWatch:

• DRAM chip prices reported falling faster in August. Prices for DRAM chips are falling at a faster rate amid a lack of recovery for personal-computer sales, with Japan's Nikkei business daily Thursday quoting an unnamed official at a major DRAM maker as saying buyers drastically cut their procurement plans this month. Prices for mainline 2-gigabit DRAMs hit a five-month low in the first half of August, dropping 9% from their recent late-June high, the report said. While DRAM demand usually picks up in September ahead of the year-end shopping season, some major PC makers are apparently holding back on their purchases due to large inventory levels, prompting the price cuts, the report said.

Business Insider:

• The 45 Stocks That Big Hedge Funds Love The Most.
• Coal-Fired Power Plants Are Shutting Down In Record Numbers.
• CITI: 5 Reasons India's GDP Growth Is Heading To A 10-Year Low.
• There Are Signs India's State-Owned Banks Are In Trouble.

Zero Hedge:

• Citi Sees Greek Exit As Soon As September.
• Marc Faber On Keynesian Folly, The 'Missing' Inflation, And Bubble-Blowing.
• China Flash PMI Plummets As New Export Orders Collapse To Lehman Lows. (graph)
  

CNBC:

• Chinese Acquisitions in US Near Record. Chinese acquisitions of US assets and businesses are running at record levels this year, bucking the trend of a generally tough mergers and acquisitions market and a sign that it is easier than many think for Chinese companies to attain approval for deals in America.
• Hewlett-Packard(HPQ) Earnings Beat but Revenue Is Light. Hewlett-Packard reported quarterly earnings that beat Wall Street's expectations, but its revenue came in below estimates on Wednesday.
• Citigroup(C) Slams Nasdaq's(NDAQ) Facebook(FB) Compensation Plan.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows Mitt Romney attracting support from 46% of voters nationwide, while President Obama earns the vote from 44%. Five percent (5%) prefer some other candidate, and five percent (5%) are undecided.

Reuters:

• Australia declares resources boom has peaked. Australia declared the top of the resources boom, which had cushioned the country against the global financial crisis, a day after the world's biggest miner BHP Billiton shelved two major expansion plans worth at least $40 billion. One minister went as far as calling the end of the resources boom, but later rowed back to say commodity prices had peaked while investments in multi-billion dollar projects would continue, especially in the energy sector.
• International Rectifier(IRF) sees weak 1st-qtr revenue, shares fall. Semiconductor maker International Rectifier Corp posted a quarterly loss and forecast first-quarter revenue well below analysts' expectations on slowing demand for its power management chips.
• US, Pakistan must 'divorce' as allies, ex-Pakistan envoy says. The United States and Pakistan should stop pretending they are allies and amicably "divorce," Pakistan's former ambassador to Washington said on Wednesday, citing unrealistic expectations in both countries that include U.S. hopes Islamabad will sever its links to extremists. "If in 65 years, you haven't been able to find sufficient common ground to live together, and you had three separations and four reaffirmations of marriage, then maybe the better way is to find friendship outside of the marital bond," Husain Haqqani said, addressing the Center for the National Interest, a Washington think tank.

Financial Times:

• Moore Capital echoes macro funds’ woes. When Greg Coffey goes on holiday, the 42-year-old Australian trading star at hedge fund Moore Capital Management takes his work with him – in a very literal sense. Once he checks out of Moore’s offices in the posh Mayfair district of London, a team of technicians starts to dismantle his workstation.

Xinhua:

• Chinese Vice Premier Li Keqiang called for local governments to continue property market tightening measures and speculation curbs, citing the official.

Evening Recommendations
Wells Fargo:

• Rated (GNC) and (WFM) Outperform.

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 147.0 +1.0 basis point.
• Asia Pacific Sovereign CDS Index 127.5 +4.75 basis points.
  
• FTSE-100 futures +.39%.
  
• S&P 500 futures +.32%.
  
• NASDAQ 100 futures +.32%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HRL)/.41
• (FRED)/.17
• (PDCO)/.49
• (BIG)/.42
• (TTC)/.62
• (MCRS)/.60
• (ADSK)/.49
• (ARUN)/.17
• (SCVL)/.11
• (CRM)/.39
• (RUE)/.34

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 365K versus 366K the prior week.
• Continuing Claims are estimated to fall to 3300K versus 3305K prior.
  

8:58 am EST

• Preliminary Markit US PMI for August is estimated at 51.5.
  

10:00 am EST

• New Home Sales for July are estimated to rise to 365K versus 350K in June.
• The 2Q House Price Index is estimated to rise +2.6% versus a +.6% gain in 1Q.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Merkel/Hollande meeting, German GDP data, Eurozone PMI data, 10Y TIPS auction, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Slightly HIgher into Final Hour on Global Central Bank Stimulus Hopes, Short-Covering, Homebuilder/Heatlhcare Sector Strength

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 15.10 +.53%
  
• ISE Sentiment Index 115.0 +16.16%
  
• Total Put/Call .93 +4.49%
  
• NYSE Arms .66 -27.84%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 99.20 bps +.58%
  
• European Financial Sector CDS Index 236.04 bps +3.96%
  
• Western Europe Sovereign Debt CDS Index 229.08 +1.27%
  
• Emerging Market CDS Index 244.63 -.03%
  
• 2-Year Swap Spread 19.75 -1.25 basis points
  
• TED Spread 33.0 -.25 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -33.25 +.5 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .10% unch.
  
• Yield Curve 144.0 -7 basis points
  
• China Import Iron Ore Spot $104.70/Metric Tonne -1.60%
  
• Citi US Economic Surprise Index -14.60 +.7 point
  
• 10-Year TIPS Spread 2.27 +1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating -73 open in Japan
• DAX Futures: Indicating +29 open in Germany
  

Portfolio:

• Slightly Higher: On gains in my Retail/Biotech/Tech sector longs and emerging markets shorts
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Merkel Signals She’ll Hear Samaras Request for More Time. German Chancellor Angela Merkel signaled that she’s willing to discuss a Greek request for more time to meet the terms of its international rescue, leaving the door open to potential concessions. Merkel, responding to a reporter’s question in the Moldovan capital Chisinau today, declined to discuss the request publicly before meeting with Greek Prime Minister Antonis Samaras in Berlin on Aug. 24, saying she’d “have the opportunity to communicate directly” with him on the matter then. We won’t find solutions on Friday,” Merkel said, reiterating that leaders must await a report being drawn up by the so-called troika of Greece’s international creditors: the European Central Bank, the European Commission and the International Monetary Fund. “We will wait for the troika’s report and then we’ll take decisions,” she said.
• Spain Deficit Goals at Risk as Cuts Consensus Fades: Euro Credit. Quarrels over who bears the brunt of cuts worth more than 10 percent of Spain’s annual gross domestic product threaten Prime Minister Mariano Rajoy’s plan to tackle the euro area’s third-largest deficit as a second bailout looms. A seven-day rally that has driven Spain’s 10-year yield to 6.2 percent at 9:05 a.m. in Madrid from 6.9 percent may falter as squabbles between the government, regions and towns about spending and tax receipt allocations hobble deficit reduction. Spain will miss its targets for budget gaps of 6.3 percent of GDP this year and 4.5 percent in 2013 as the nation’s recession worsens, according to the median forecast of 12 analysts surveyed by Bloomberg News. “As budget deficit targets look unachievable, the risk of a potential full bailout of the Spanish economy is still there,” Jaime Becerril and Axel J. Finsterbusch, analysts at JPMorgan Chase & Co. in London, wrote in a note. “Further measures must be taken to restore market confidence.”
• European Stocks Fall on Japan Trade Deficit. European stocks slid the most in almost three weeks as Japan reported a wider-than-expected trade deficit and investors awaited the outcome of meetings between the leaders of countries in the euro area. BHP Billiton Ltd. (BHP) slid 1.7 percent after the world’s biggest mining company put $68 billion of projects on hold. Heineken NV (HEIA), which last week increased its offer to gain control of Asia Pacific Breweries Ltd., lost 1.1 percent after posting first-half earnings that missed analysts’ estimates because of higher costs. Man Group Plc (EMG) sank 4.4 percent as the hedge-fund manager reported a drop in assets at its flagship fund. The Stoxx Europe 600 Index (SXXP) declined 1.2 percent to 269.27 at the close, its biggest retreat since Aug. 2.
• BHP(BHP) Delays $68 Billion of Project Approvals as Net Plunges. BHP Billiton Ltd. (BHP), the world’s biggest mining company, put approvals for about $68 billion of projects on hold after second-half profit plunged 58 percent as metal prices declined and costs rose.
• Many on FOMC Favored Easing Soon if No Pickup in Growth. Many Federal Reserve policy makers said additional stimulus would probably be needed soon unless the economy shows signs of a durable pickup, according to minutes of their most recent meeting. “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” according to the record of the Federal Open Market Committee’s July 31- Aug. 1 gathering released today in Washington.
• Sales of U.S. Existing Homes Increase From Eight-Month Low. Purchases of previously owned houses, tabulated when a contract closes, increased 2.3 percent to a 4.47 million annual rate, figures from the National Association of Realtors showed today in Washington. The data were posted on the group’s website ahead of the usual 10 a.m. release time. The median forecast of 73 economists surveyed by Bloomberg called for a rise to a 4.51 million rate.
• Oil Advances After Inventories Decline More Than Expected. Crude rose for a second day after U.S. inventories dropped to a five-month low and on concern that storms would move into the Gulf of Mexico and disrupt supplies. Oil for October delivery rose 39 cents, or 0.4 percent, to $97.23 at 12:15 p.m. on the New York Mercantile Exchange. The price was $96.75 before the report was released. The September contract expired yesterday at $96.68, the highest close for a front-month contract since May 10. Brent crude for October settlement gained 14 cents to $114.78 a barrel on the London-based ICE Futures Europe exchange. Total petroleum demand decreased 6.4 percent to 18.7 million barrels a day. Gasoline consumption slid 2.4 percent to 9.08 million.

Wall Street Journal:

• Fiscal Cliff Watch: Markets Ignore CBO’s Recession Warning. Investor complacency surrounding the fiscal cliff is bubbling up. But analysts, economists and now a government agency are warning about the grave dangers should Congress fail to act. The Congressional Budget Office on Wednesday said the U.S. economy will tumble into recession in 2013 if Congress fails to maintain current tax rates and avert deep cuts to federal spending. In its latest budgetary outlook, the non-partisan agency forecasted U.S. economic growth will drop by 0.5% next year, while the unemployment rate will jump back up to around 9%. Such warnings underscore the deep-seated concerns that the market appears to be ignoring, at least for the moment.

MarketWatch:

• Spain vs. ECB: Who will blink first? In paradox, falling Spain, Italy yields could complicate resolution.
  

CNBC.com:

• China Easing Moves ‘A Mistake’: Jim Rogers. China may be under pressure to cut interest rates and boost a slowing economy, but further monetary tightening would be unwise and China should keep credit tight in order to keep a lid on house prices, says billionaire investor Jim Rogers.
• Barofsky on the Hotseat: 'TARP Was a Failure'. (video)
• The Ultimate Risk of Giving Greece More Time. As the Greek Prime Minister Antonis Samaras prepares to meet euro zone leaders to request a two-year extension to bailout terms, both Greece and the euro zone should be prepared to not get what they expect, according to analysts.

Business Insider:

• A Traveler In Greece Sent Us These Depressing Pictures, And Explained Why The Economy Is A Wreck.
• Chinese Steel Mills Are Delaying The Inevitable.
• A Terrifying New Poll Of Young Voters On The Economy.
• The Iron Ore Futures Collapse Chart That Everyone Is Talking About It.

Zero Hedge:

• Europe's Inverted Rally.
• The Eurhopium Runs Out As Spain Has Biggest Drop In 3 Weeks.

Reuters:

• S&P says a possible bailout for Spain has no rtg impact. We are of the view that an exit from the European Economic and Monetary Union (EMU or eurozone) of a member such as Greece could raise significant investor doubts about the future eurozone membership of Spain and that of other peripheral sovereigns. In our view, a eurozone exit by any member sovereign would implicitly reintroduce currency risk in cross-border financial transactions.
• Italy's Monti to meet Merkel in Berlin on Aug 29.
• IAEA head "not optimistic" on access to Iran military site.
• Greek extension depends on troika findings:Eurogroup chief. A decision on whether to grant Greece additional time to meet budget targets will be based on a review by lenders on the country's progress in meeting the terms of its latest bailout, Eurogroup chief Jean-Claude Juncker said on Wednesday.
• UN points finger at Iran over arms supply to Syria. Iran appears to be supplying Syria with weapons, the United Nations said on Wednesday, as the 17-month conflict that began as a popular uprising against Syrian President Bashar al-Assad slides deeper into civil war. The U.N. accusation backs charges by Western officials that Iran is providing funds, weapons and intelligence support to Assad in his bid to crush the opposition. Syrian rebels also say Tehran has sent Revolutionary Guards and Hezbollah fighters.

AFP:

• At least 48 Kenyans hacked to death in ethnic clash. At least 48 Kenyans were hacked or burnt to death in ethnic clashes between two rival groups, the worst single attack since deadly post-election violence four years ago, police said Wednesday. "It is a very bad incident.... They include 31 women, 11 children and six men," regional deputy police chief Joseph Kitur said of the attack, which took place late Tuesday between the Pokomo and Orma peoples in the rural Tana River district. Kitur said "34 were hacked to death and 14 others were burnt to death," while several huts were torched after a gang of men launched the attack, the latest in a long history of bitter clashes between the rival groups in the remote area of Kenya.

Xinhua:

• China should prevent speculation causing chaos in the property market, according to Du Yu, a reporter at the agency.
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.01%

Sector Underperformers:

• 1) Computer Hardware -1.60% 2) Telecom -1.43% 3) Construction -1.23%

Stocks Falling on Unusual Volume:

• YELP, GPI, BKS, WMGI, DELL, TITN, INTX, BIDU, NXPI, HMSY, DNKN, BSFT, RAVN, PLXS, VPRT, FSLR, RRD, GLPW, DMND, SSYS, HCN, EV, BV, ET and EXPR
  

Stocks With Unusual Put Option Activity:

• 1) WCRX 2) LYV 3) KORS 4) TOL 5) BAC
  

Stocks With Most Negative News Mentions:

• 1) TSL 2) OXY 3) BBY 4) DELL 5) MS
  

Charts:

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