Today's Headlines

Bloomberg: 

• BMW Denied in China Seen Signaling Outlook Dimming for Carmakers. Bayerische Motoren Werke AG (BMW)’s failure to win government approval to expand a factory in China is fueling concern global automakers could find it increasingly difficult to win regulatory approval on projects in the country. Shares of BMW partner Brilliance China Automotive Holdings Ltd. (1114) fell the most in almost four weeks in Hong Kong yesterday after China’s Ministry of Environmental Protection said it sent back an application, citing inadequate wastewater analysis and the plan’s failure to meet government anti-pollution targets.

• China Iron-Pore Production Jumps 10.7% in June, Near Record.

• Brazilian Real Falls to Four-Year Low, Stoking Inflation Concern. Brazil’s real dropped to a four-year low, adding to concern accelerating inflation will undermine efforts to stimulate Latin America’s largest economy. Swap rates rose on speculation the central bank will maintain the pace of increases in borrowing costs even as a report showed inflation slowed. The real has tumbled 11 percent in the past three months, the biggest drop among 24 emerging-market dollar counterparts tracked by Bloomberg. The depreciation pushes up the price of imports and threatens to further fuel inflation, which helped spark nationwide street protests last month. “The central bank seems to have a blank check to combat inflation,” Daniel Cunha, the chief economist at XP Investimentos in Sao Paulo, said in a telephone interview. “The fight against inflation seems to have greater weight than economic growth.”    

• What Happens If the BRICs Sink Like One? In the case of India and Brazil, I think the answer is “sad, with regional implications.” Growth in those countries has pulled millions of people out of dire poverty, but many remain. And solid economic growth in any large country has regional spillover effects through migration and trade. But these are still economies where agriculture plays an outsized role. Brazil’s growth has been driven by agricultural exports such as soy and beef, while India’s GDP is still measurably affected by the monsoon, which drives crop yields. A growth slowdown in an agricultural economy may play havoc with individual commodity prices, but it doesn't have, say, the enormous impact on global manufacturing networks that a Chinese slowdown would have.

• Deutsche Bank(DB) to Cut Assets $332 Billion as Profit Slides. Deutsche Bank AG (DBK), continental Europe’s biggest bank, said it will shrink its balance sheet by 250 billion euros ($332 billion), joining Barclays Plc (BARC) and UBS AG (UBSN) in seeking to comply with stricter capital rules. Deutsche Bank will reduce leverage by changing the way it accounts for derivatives and by winding down a 73 billion-euro portfolio of assets, Chief Financial Officer Stefan Krause told investors on a conference call today. Krause announced the plan after the bank said net income slid 49 percent to 334 million euros, missing the average 767.6 million-euro estimate of nine analysts.

• VW First-Half Profit Drops on Weak European Car Demand. Volkswagen AG (VOW) reported a 12 percent decline in first-half profit as Europe’s biggest automaker spends money to roll out new models and the economic slump in its home region saps demand for new cars. 

• European Stocks Advance as EDF, Alcatel-Lucent Rally. European stocks advanced as investors weighed corporate earnings from Electricite de France SA to Barclays Plc and the Federal Reserve began a two-day policy meeting. EDF, Europe’s biggest power generator, and Alcatel-Lucent (ALU) SA, a French maker of phone equipment, jumped more than 7 percent as profit beat analysts’ estimates. Barclays sank the most in 13 months after announcing a rights offering and saying income fell. K+S AG, Europe’s largest potash producer, plunged 24 percent as OAO Uralkali ended a deal that controlled supplies of the fertilizer ingredient from the former Soviet Union. The Stoxx Europe 600 Index added 0.1 percent to 299.43 at the close of trading, as two stocks rose for every one that fell.

• Crude Drops to Three-Week Low as U.S. Growth May Slow. WTI for September delivery declined $1.46, or 1.4 percent, to $103.09 a barrel at 12:57 p.m. on the New York Mercantile Exchange. It fell to $102.78 in intraday trading, the lowest price since July 9. The volume of all futures traded was 3.8 percent below the 100-day average for the time of day. Prices are up 6.8 percent in July, set for a second monthly gain.

• Fed Decision-Day Guide From QE Tapering Guidance to Dissents. Here’s what to look for when the Federal Open Market Committee releases a statement at 2 p.m. tomorrow after a two-day meeting in Washington. Unlike last month, the policy-making panel will not release economic forecasts, and Chairman Ben S. Bernanke will not be briefing the press afterwards.

• Achuthan Says U.S. Economy Has Faltered Since Last Recession. U.S. economic growth has been lacking since the last recession, said Lakshman Achuthan, the Economic Cycle Research Institute co-founder who maintains that the U.S. reverted to a slump last year. “Growth is not there,” Achuthan said, speaking on Bloomberg Television with Tom Keene and Sara Eisen. The section of the population aged 35 to 54 “has lost almost 1 million jobs since the recovery began,” he said. Achuthan today reiterated his view that a recession began last year and that data will eventually show this. In a previous interview with Bloomberg Television on March 7 he said he was basing his opinion on the “stall speed” in gross domestic income in 2012, and on the weakness in indicators such as output and income.

Wall Street Journal: 

• Home Prices Jump, but Headwinds Build. Rising Mortgage Rates, Potential for More Supply Threaten Pace of Gains Shown in Two Indexes. Home prices during the first half of 2013 posted their largest gain since the housing boom peaked seven years ago, but rising mortgage rates and the potential for more supply could eventually slow the run-up. Nationally, home values rose by 5.8% in June from one year ago, according to Zillow Inc., the real-estate website, the largest gain since 2006. So far this year, prices are up 2.7%, the strongest year-to-date gain in June since 2005.

• Goodyear's(GT) Net More Than Doubles. Goodyear Tire & Rubber Co.'s GT +9.45% second-quarter net income more than doubled on higher profit in all of its regions, including Europe where many auto-related companies continue to struggle. The largest U.S.-based tire maker also slightly raised its full-year outlook, now expecting operating profit on the higher end of its forecast of $1.4 billion to $1.5 billion. 

Barron's:

• U.S. Steel(X) Q2 EPS Beats, Revenue Misses.

Fox News:

• Gov't Knows Best? White House creates 'nudge squad' to shape behavior. The federal government is hiring what it calls a "Behavioral Insights Team" that will look for ways to subtly influence people's behavior, according to a document describing the program obtained by FoxNews.com. Critics warn there could be unintended consequences to such policies, while supporters say the team could make government and society more efficient. While the program is still in its early stages, the document shows the White House is already working on such projects with almost a dozen federal departments and agencies including the Department of Health and Human Services and the Department of Agriculture.

• Appeals court rules against NYC soda ban. Another court ruling has taken the fizz out of New York City's ban on big, sugary sodas. A New York appeals court on Tuesday ruled that the city Board of Health exceeded its legal authority and acted unconstitutionally when it tried to put a size limit on soft drinks served in city restaurants.

CNBC:

• Look out below! Work more, get less in Obamacare 'cliff'. Be careful you don't fall off the Obamacare "cliff" when the boss asks you to put in some overtime. Working more could ultimately mean thousands of dollars less for you under a quirk in the new health-care law going into effect this fall. This could prompt some people to cut back on their hours to avoid losing money. "Working more can actually leave you worse off," the price-comparison site ValuePenguin.com notes in a new analysis. "It's sort of an absurd scenario," said Jonathan Wu, ValuePenguin.com's co-founder. "It's something for people to be aware of."

• Shares in fertilizer makers plunge on price shock. Russia's Uralkali has dismantled one of the world's largest potash partnerships by pulling out of a venture with its partner in Belarus, a move it expects will cause global prices to plunge by 25 percent.

• What earnings season is saying about road ahead. Were it not for a robust financial sector, profit on the S&P 500 would be tracking negative 1.6 percent, according to Bank of America Merrill Lynch consensus estimates. 

Zero Hedge: 

• Spain: Fiesta or Siesta? (graph)

• Consumer Confidence Slips Most In 4 Months, Outlook Tumbles. (graph)

• JPMorgan(JPM): $7 Billion In "Fines" In Just The Past Two Years.

• Greece Has Already Spent 75% Of Its Bank Bailout Cash.

• Everything's Great! Except... (graphs)

• US Rents Hit Record Highs As Homeownership Plunges To 18 Year Lows. (graphs)

Business Insider: 

• Bradley Manning Acquitted Of 'Aiding The Enemy,' Convicted Of 19 Counts Including Espionage.

• The Next Few Months Will See An Extraordinary Confluence Of Rare And Significant Economic Events.

• Obama's Latest 'Grand Bargain' Proposal Isn't Much Of A Bargain At All.

• RESERVE BANK OF INDIA: 'India Is Currently Caught In A Classic 'Impossible Trinity' Trilemma'.

IBD:

• Detroit Is Patient Zero In High-Tax, Sluggish America.

alpha:

• Hedge Fund Ads May Have to Wait to Advertise. Despite the passage of the JOBS Act, hedge funds who trade commodities or derivatives may not be able to market to the public yet.

Reuters:

• Coach Inc(COH) sees weakness in North America; two more executives leave. Coach Inc on Tuesday again reported soft sales at its North American stores as it continued to face tough competition for handbag shoppers, and the leather goods maker announced the departures of two more executives. Shares of New York-based Coach, which is known for its Poppy handbags, fell 6.2 percent to $54.25 in premarket trading.

• METALS-Copper falls to 3-week low on fears of gloomy China data. Copper slid to its weakest in nearly three weeks on Tuesday as expectations of weak manufacturing data from top consumer China dimmed prospects for growth in metals demand. Benchmark copper on the London Metal Exchange (LME) lost 2.1 percent to close at $6,735 a tonne, the lowest since July 10.

• EMERGING MARKETS-Brazil stocks fall on weak commodities shares.

Financial Times:

• US biotech stocks ride wave of investor euphoria. Biotechnology companies are raising money at the fastest rate since the dotcom boom, underscoring the renewed appetite for one of Wall Street’s riskiest bets despite the high chance that the investments will turn sour.

Telegraph:

• Swedish warning. (graph) The hard data is in. Sweden's GDP fell by 0.1pc in the second quarter, astonishing everybody who relies on soft PMI confidence surveys. Year-on-year growth has been just 0.6pc, half the level expected, and Sweden is supposed to be a star performer in Europe. By the way, this is what Sweden's manufacturing PMI has been doing:

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.

Vedomosti:

• Russia Has 70,000 Railcars Idled as Cargoes Drop. The country's largest railcar operators asked Russian Railways to limit supply of idled railcars making them available at certain stations only, citing letter from operators.

Xinhua:

• China May Adjust Consumption Taxes This Year. China is studying a reform plan for consumption taxes and may introduce measures geared towards energy-saving consumption this year, citing Jia Kang, director of the Finance Ministry's fiscal science research center.

• China Listed Bank Profit Growth May Slow. Chinese listed banks may see net income growth slowing to around 8% this year, citing a report released by the China Banking Association today.

Bear Radar

Style Underperformer:

• Large-Cap Value -.41%

Sector Underperformers:

• 1) Agriculture -5.25% 2) Steel -1.74% 3) Hospitals -1.47%

Stocks Falling on Unusual Volume:

• POT, CMP, BCS, DB, BP, SCCO, PMCS, CRK, INT, HIMX, HDB, SBGI, NXST, IPI, MOS, USU, HMA, SQM, XYL, OFIX, SAVE, AGU, CF, NATI, INT, COH, DDD, SNDK, MLM, EXLS, CRK, BP, AIR, ASGN, NOV, EOC, BAS, ASGN, AFOP, VSH, X and LMNX

Stocks With Unusual Put Option Activity:

• 1) TIF 2) COH 3) FIO 4) MMM 5) KRE
  

Stocks With Most Negative News Mentions:

• 1) NDAQ 2) SNDK 3) SOHU 4) POT 5) MOS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.56%

Sector Outperformers:

• Networking +2.28% 2) Gaming +1.39% 3) Semis +.88%
  

Stocks Rising on Unusual Volume:

• SIMO, VNDA, RATE, HLF, AEGR, OSK, RRD, PBI, HRS, CVLT, BYD, GT, GNRC, ROK and VRTX

Stocks With Unusual Call Option Activity:

• 1) OIS 2) VNDA 3) TIBX 4) DDD 5) BYD
  

Stocks With Most Positive News Mentions:

• 1) MAS 2) PRGO 3) RATE 4) ARO 5) FWLT
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:

• China Cities May Tighten Property Curbs as Slowdown Lifts Target. Chinese cities seeking to cap home-price gains below income growth may need to tighten property curbs as the nation’s slowing economic expansion makes their targets more difficult to meet. Hangzhou, the capital city of the eastern province of Zhejiang, will tighten approvals of pre-sale permits in the second half and may raise down payments for second homes to make sure its price-control target is met, according to a July 27 report by Today Morning Express, a Chinese-language newspaper affiliated with the provincial government. “The home-price problem facing the Hangzhou government in the second half isn’t an isolated case, and therefore we expect more second- and third-tier cities to tighten price controls,” Luo Yu, a Shanghai-based analyst at advisory firm CEBM Group, wrote in an e-mailed report. “The use of administrative measures such as pre-sale permits and price registration will have a negative impact on housing supply and sales.”   

• China Is Set to Suffer the Skyscraper Curse. Auditors seeking to head off a Chinese crash are rushing to scrutinize the debt-swollen books of the country’s local governments. Economists are poring over statistics, bond spreads, electricity gauges and stock valuations. They might all have more luck if they got their noses out of the books and looked up. 

• China’s Provinces Trail Growth Targets in Slowdown Signal. Most Chinese provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals, underscoring the breadth of the nation’s slowdown. Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg News. Inner Mongolia, Jilin and Ningxia had the widest gaps, each at 3 percentage points below a 12 percent target. One province, Qinghai, has yet to release its latest figures.

• Europe’s Biggest Solar Projects Threatened by China Deal. Europe’s decision to curb imports of Chinese solar panels threatens to limit the biggest projects using the technology in the 28-nation bloc while having little impact on the manufacturers accused of dumping their products. The agreement to set a minimum price of 56 euro cents ($0.74) a watt for panels until the end of 2015, reached this weekend, will hurt developers of ground-mounted plants and reduce installations, said Bloomberg New Energy Finance, IHS Inc. (IHS) and the U.K. Solar Trade Association. Developers were already buying Chinese panels cheaper, they said. 

• Stevens Says Inflation Data Hasn’t Shifted RBA Scope to Ease. Australia’s central bank Governor Glenn Stevens said second-quarter inflation data suggests there’s still room to lower interest rates if required and that he wouldn’t be surprised if the currency dropped further. “Recent inflation data do not appear to have shifted” the RBA’s assessment that the outlook for prices may “afford some scope to ease policy further if needed to support demand,” he said today in the text of a speech in Sydney. “The recent decline in the exchange rate seems to make sense from a macroeconomic perspective. It would not be a major surprise if a further decline occurred over time.” 

• RBI Says Restoring India Rupee Stability Is Key Policy Objective. The Reserve Bank of India said steadying the rupee to help preserve economic stability has become the priority for monetary policy and that more steps are needed to curb the nation’s current-account deficit. “The priority for monetary policy now is to restore stability in the currency market so that macro-financial conditions remain supportive of growth,” the Reserve Bank said in an economic review before today’s rate decision in Mumbai. Such a strategy will work only if reinforced by “structural reforms” to reduce the deficit and spur investment, it said. 

• PBOC Conducts First Reverse Repos Since February; Swaps Decline. China’s central bank conducted reverse-repurchase operations for the first time in five months, helping alleviate a cash squeeze that drove the benchmark interbank lending rate to a four-week high.

• Most Asian Stocks Rise as Japanese Exporters Gain on Yen. Most Asian stocks rose as Japanese exporters advanced after the yen weakened, offsetting a bigger-than-estimated decline in Japanese factory output. Toyota Motor Corp. (7203) climbed 2.2 percent in Tokyo as the yen’s weakness boosted the outlook for export income. Daiwa Securities Group Inc., Japan’s second-largest brokerage, jumped 3.6 percent after posting earnings that beat analyst estimates. Jiangxi Copper Co., China’s biggest producer of the metal, dropped 0.9 percent in Hong Kong after copper futures declined. The MSCI Asia Pacific Index added 0.2 percent to 133.42 as of 12:10 p.m. Tokyo time, with more than two shares rising for each that fell. 

• Copper Declines After China Provinces’ Growth Trails Targets. Copper dropped after data showed that first-half expansions in most provinces in China missed targets, reinforcing concern that demand growth may slow in the world’s largest consumer. Metal for delivery in three months fell as much as 0.6 percent to $6,840 a metric ton on the London Metal Exchange and was at $6,845 at 10:11 a.m. in Shanghai. The price declined to $6,820 yesterday, the lowest since July 10.

• JPMorgan(JPM) Accused of Energy-Market Manipulation by U.S. Agency. JPMorgan Chase & Co. (JPM) manipulated power markets in California and the Midwest from September 2010 to June 2011, obtaining tens of millions of dollars in overpayments from grid operators, the U.S. Federal Energy Regulatory Commission alleged today. The agency said in a Notice of Alleged Violations that it had preliminarily determined a JPMorgan trading unit had engaged in eight manipulative bidding strategies. The New York-based bank has agreed to sanctions including a fine of about $400 million in a settlement that may be announced as early as tomorrow, according to a person familiar with the case who asked not to be identified because the terms aren’t yet public. Other sanctions may include forfeiting profits, this person said.

• Regulators Face Scrutiny on Banks’ Commodities at Senate Hearing. U.S. banks’ ownership and trading of physical commodities will face further scrutiny tomorrow when the heads of the Commodity Futures Trading Commission and Securities and Exchange Commission testify before lawmakers. Senator Sherrod Brown, the Ohio Democrat who led a hearing on the issue last week, said he plans to question the CFTC’s Gary Gensler and the SEC’s Mary Jo White on their oversight when the two chairman appear before the chamber’s Banking Committee on implementation of Dodd-Frank Act reforms.

• Wynn Resorts’(WYNN) Profit Lags Estimates on Weaker Macau Sales. Wynn Resorts Ltd. (WYNN), the casino company run by Steve Wynn, reported profit that trailed analysts’ estimates amid a slowing of Macau revenue and ongoing hotel renovations by the company there. Excluding items, profit totaled $1.51 a share, Las Vegas-based Wynn said today in a statement. Analysts had projected $1.57 a share, the average of 23 estimates compiled by Bloomberg. Property Ebitda -- earnings before interest, taxes, depreciation and amortization -- in Macau fell 4 percent. “Overall, the results in Macau were below our fairly low expectations,” wrote Joseph Greff, an analyst with JPMorgan Chase & Co., in an investor note today. “Ebitda margins were 210 basis points below our estimate, reflective of a tough June on the mass table side and, to some degree, room renovation disruption,” wrote Greff, who rates the shares the equivalent of buy.

Wall Street Journal:

• U.S. Funds Buy No Love at Afghan College. Nangarhar University is a symbol of American largess: U.S. taxpayers foot the bill for dormitories, classrooms and computer labs. Increasingly dominating the campus of Afghanistan's second largest university, however, are Islamist activists who openly sympathize with the Taliban. "The Taliban are the people who are defending this country," said Hamad, a leader of the self-appointed Nangarhar University student council that organizes regular demonstrations against the U.S. and President Hamid Karzai's government. "The foreign troops are invaders."

• White House's Egypt Debate Heralds Shift. In Skirting Declaration on Whether Morsi's Overthrow Was a Coup, U.S. Seeks to Guard Its Limited Leverage Over Generals. When Obama administration lawyers told top policy makers that they had come up with a way to avoid designating Egypt's military takeover a coup—a decision that would obligate the U.S. to freeze aid to the country—some senior White House staffers voiced reservations about the message that would send. But the plan was embraced by members of President Barack Obama's national security cabinet, who concluded unanimously that there was no other way to maintain limited U.S. leverage with Egypt's generals and avoid fueling further violence, said U.S. officials.

• Big Question Hangs Over Small-Caps. Some Investors Say Sector Has Run Its Course as They Pare Holdings; Others See Some Room to Run.

• Bill Nojay: Lessons From a Front-Row Seat for Detroit's Dysfunction. Running the city's transportation department was like being in the boiler room of the Titanic.

Fox News:

• Obama comments on Keystone spark ire, more concerns about project’s future. President Obama’s latest comments on the Keystone XL oil pipeline -- including an attempt to downplay the number of jobs it would create -- are re-igniting concerns that the administration may not approve the project.

CNBC:

• Could Japan fall back into recession next year? Even before Japan can stage a convincing growth rebound, fears are already building over a sharp slowdown in the world's third largest economy, with one analyst warning of a possible recession next year.

Zero Hedge:

• Jim Rogers: "The Whole 'Economic' World Is Artificial... It's Going To End Very Badly". (video)

• Detroit's Bailout "Plan B": Obamacare.

• "Get Back To Work Mr. Kuroda" Japanese Stocks Surge On Japanese Data Plunge. (graphs)

• 7 Charts Of The Market's Complete Divorce From Reality. (graphs)

• Faith, Hope, And P/E Multiple Expansion. (graphs)

Business Insider:

• New York Times Slams Larry Summers, And Comes Out Hard In Favor Of Janet Yellen For Fed Chair.

• Herbalife(HLF) Beats On Earnings And The Stock Is Soaring.

• A Close Examination Of The Labor Market's Entrails Reveals A Deeply Sick Economy.

Reuters:

• China risks following Japan into economic coma. After decades of emulating Japan's export-driven economic miracle, China appears in danger of following it into the same kind of economic coma that Japan is trying to wake up from 20 years later. China is struggling to wean itself off a habit picked up from its more advanced neighbour: relying for growth on exports and credit-fuelled investment. That has left its economy lopsided, economists say, with massive over investment in property and industries rapidly losing their cost advantage, from mining and electronics to cars and textiles. Wages are rising, the return on investments falling.

• Fed's Yellen to moderate panel at Jackson Hole conference. Federal Reserve Vice Chair Janet Yellen plans to moderate one of the panels at the annual monetary policy conference in Jackson Hole, Wyoming, next month, a Fed spokeswoman said on Monday. 

• EMERGING MARKETS-Latam stocks wilt ahead of Fed meeting.

CaixinOnline:

• GDP Figures of Local Gov'ts Soar Past Beijing's Yet Again. Every reporting area claims a growth rate for first half that is higher than the 7.6 percent figure for the country.

China Securities Journal:

• China Finishes Draft to Remove Overcapacity. China has finished draft on resolving overcapacity problem in steel, cement, electrolytic aluminum, plate glass and shipbuilding industries, citing a person familiar with the matter.

Securities Daily:

• Property Restrains Upgrade of Chinese Economy. Property has become the biggest issue holding back the upgrade of China's economy, according to a front-page commentary written by Li Fan. Risks are increasing that real estate may "kidnap" the banking system, according to the commentary. China should loosen limits on transaction of existing homes to increase supply and curb prices, the commentary said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 142.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 108.75 +2.25 basis points.

• FTSE-100 futures +.54%.

• S&P 500 futures +.14%.

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NYX)/.58

• (ODP)/-.10

• (ADS)/2.29

• (ROK)/1.38

• (GLW)/.31

• (OXY)/1.60

• (JBLU)/.14

• (NOV)/1.33

• (GT)/.48

• (PFE)/.55

• (PBI)/.44

• (CMI)/1.98

• (HCP)/.74

• (DDD)/.24

• (FDP)/.81

• (MRK)/.82

• (MDC)/.58

• (AET)/1.40

• (COH)/.89

• (TRW)/1.69

• (DISCA)/.90

• (AFL)/1.51

• (BXP)/1.27

• (AMGN)/1.74

• (BWLD)/.79

• (RVBD)/.22

• (IACI)/.94

• (JLL)/1.42

• (CVD)/.77

• (SYMC)/.36

• (MSTR)/.32

Economic Releases
9:00 am EST

• The S&P/CS 20 City MoM SA for May is estimated to rise +1.4% versus a +1.72% gain in April.

10:00 am EST

• Consumer Confidence for July is estimated to fall to 81.3 versus 81.4 in June.

Upcoming Splits

• (CSWC) 4-for-1

Other Potential Market Movers

• The Japan Manufacturing PMI report, Eurozone Consumer Confidence/CPI data, Spain gdp report, India rate decision, weekly retail sales reports and the Keefe Bruyette Woods Community Bank Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate 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 Lower into Final Hour on Rising Asian Debt Angst, Rate Worries, Rising Global Growth Fears, Energy/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.42 +5.5%
• Euro/Yen Carry Return Index 135.28 -.59%
• Emerging Markets Currency Volatility(VXY) 9.25 +1.54%
• S&P 500 Implied Correlation 50.40 +.98%

• ISE Sentiment Index 109.0 +12.37%

• Total Put/Call .81 -19.0%

• NYSE Arms .92 -16.11% 

Credit Investor Angst:

• North American Investment Grade CDS Index 76.11 +2.60%

• European Financial Sector CDS Index 148.46 +.87%

• Western Europe Sovereign Debt CDS Index 88.15 -.96%

• Emerging Market CDS Index 308.76 +2.33%

• 2-Year Swap Spread 16.25 unch.

• TED Spread 25.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.75 bp

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 227.0 +2 bps

• China Import Iron Ore Spot $131.70/Metric Tonne -.68%

• Citi US Economic Surprise Index -5.50 -2.1 points
• Citi Emerging Markets Economic Surprise Index -27.10 +2.9 points

• 10-Year TIPS Spread 2.14 unch.

Overseas Futures:

• Nikkei Futures: Indicating -103 open in Japan

• DAX Futures: Indicating +14 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/tech sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:  

• China’s Provinces Trail Growth Targets in Slowdown Signal. Most Chinese provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals, underscoring the breadth of the nation’s slowdown. Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg News. Inner Mongolia, Jilin and Ningxia had the widest gaps, each at 3 percentage points below a 12 percent target. One province, Qinghai, has yet to release its latest figures.

• Bad-Loan Risk Puts Bank Yield Gap at 17-Month High: China Credit. Chinese policy banks' borrowing costs are the highest in more than a year relative to the government's as a slowdown in the world's second-largest economy fans concern bad loans will climb. The average yield on one-year debt sold by the three lenders - China Development Bank Corp., Export-Import Bank of China and Agricultural Development Bank of China - was 74 basis points higher than comparable sovereign notes on July 25, the biggest gap since March 2012, ChinaBond data show. That compares with this month's low of 41 basis points on July 10 and precedes $8.5 billion of debt sales by China Development Bank and Exim Bank today and tomorrow. "Loan default is something we are worried about," said Wee-Khoon Chong, a Societe Generale SA strategist in Hong Kong. "The rise in bank bond yields is also driven by a liquidity squeeze as well. Money is at a premium and investors demand higher yields." 

• Brazil Swap Rates Rise on Inflation Outlook; Real Little Changed. Brazil’s swap rates climbed after economists raised their 12-month inflation forecast for a fourth straight week, adding to speculation that the central bank will step up increases in borrowing costs. Swap rates due in January 2015 rose five basis points, or 0.05 percentage point, to 9.45 percent at 10:04 a.m. in Sao Paulo. “You need to tighten more on the monetary side unless there’s room to let inflation accelerate, and I don’t think there is,” Eduardo Suarez, a Latin America foreign-exchange strategist at Bank of Nova Scotia, said in a telephone interview from Toronto. 

• S&P Sees Downgrade Risk Rising as Debt Costs Climb: India Credit. India's attempt to buoy the rupee by creating a cash crunch has driven corporate debt costs to a 2009 high, threatening the creditworthiness of businesses already battling the worst economic slowdown in a decade. The extra yield on three-year company bonds over government notes surged 113 basis points in July to 211, data compiled by Bloomberg show. 

• European Stocks Are Little Changed. Banca Popolare di Milano Scrl led financial companies lower, retreating 5.9 percent. The Stoxx Europe 600 Index added less than 0.1 percent to 299.06 at the close of trading, having earlier climbed as much as 0.7 percent.

• Dollar Strengthens Versus Euro Before Fed Meeting; Yen Gains. The dollar strengthened versus the majority of its most-traded peers amid expectations the Federal Reserve will reiterate plans this week to reduce stimulus if economic performance continues to show signs of improvement. Japan’s currency advanced against all of its 16 major peers after Japanese retail sales fell and Chinese industrial companies reported slowing profits, boosting demand for haven assets.

• Egypt Warns Against Unrest as Brotherhood Presses Protest. Egypt’s interior minister, speaking after dozens of people died in protests, said security forces are determined to bring about stability, a veiled warning to Islamists who want President Mohamed Mursi reinstated. Interior Minister Mohamed Ibrahim’s comments signaled impatience with demonstrations that have roiled the country since the military deposed Mursi on July 3 after mass rallies seeking his ouster. The pro-Mursi protests have led to fatal clashes, undercutting hopes for national reconciliation.

• Corn Extends Drop to 33-Month Low on U.S. Crop; Soybeans Decline. Corn extended declines to a 33-month low and soybeans fell on speculation that U.S. crops will benefit from cooler weather and rain in the next two weeks. Wheat rose. Temperatures will average below normal over much of the Midwest in the next two weeks, helping to boost yields in areas with adequate soil moisture and reducing stress on crops that have not received significant rain this month, World Weather Inc. said in a report today. Fields from Kansas to Kentucky will get rain during the next two days and some crops in Nebraska and Iowa will benefit from moisture beginning Aug. 1, the private forecaster said.

Wall Street Journal: 

• Bank of Italy Inspecting Top Lenders' Books. Rise in Bad Loans Prompts Quiet Inspections. The Bank of Italy is quietly inspecting the finances of some of the country's top lenders, which could push some Italian banks to sell assets or take other major steps, according to a central-bank document reviewed by The Wall Street Journal. The central bank's examinations, which were previously undisclosed, come against a backdrop of increasing worry about the health of some of the country's lenders amid a rising tide of souring loans. The current inspections are a follow-up to a previous round last fall that resulted in the Bank of Italy ordering banks to set aside a total of about €3.4 billion ($4.5 billion) more to guard against losses on bad loans. Those results haven't previously been made public. Now, the Bank of Italy is digging even deeper into the loan portfolios of some top banks, according to the document, while launching on-site inspections of an additional 20 lenders.

• Big Hedge Funds to Swoop on Start-Up Talent. Some of the world’s biggest hedge funds, including Marshall Wace, Millennium Management, CQS and BlueCrest Capital Management, are among firms that are capitalizing on a difficult environment for start-ups, hiring potential managers who might once have considered setting up on their own.

• Pope Signals Openness to Gay Priests. Pontiff's Comments Suggest Greater Acceptance of Homosexuality Among Clerics.

• Many Dead in Baghdad Bombings. At Least 47 Killed in Coordinated Attacks. A dozen car bombings hit in and around the Iraqi capital during morning rush hour on Monday, officials said, killing at least 47 people in the latest coordinated attack by insurgents determined to undermine the government. The blasts, which wounded scores more, are part of a monthslong surge of attacks that is reviving fears of a return to the widespread sectarian bloodshed that pushed the country to the brink of civil war after the 2003 U.S.-led invasion. Suicide attacks, car bombings and other violence have killed more than 3,000 people since April, including more than 500 since the start of July, according to an Associated Press count.

CNBC:

• Rising rates zap pending US home sales momentum. Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high touched the prior month, suggesting rising mortgage rates were starting to dampen home sales. The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, decreased 0.4 percent to 110.9. May's index was revised down to 111.3 from a previously reported 112.3. 

• The new American poor: 4 in 5 live in danger of it. Four out of five U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream. Survey data exclusive to The Associated Press points to an increasingly globalized U.S. economy, the widening gap between rich and poor, and the loss of good-paying manufacturing jobs as reasons for the trend. 

• 'Rally has gone too far,' Citi strategist says. Investors are getting a little too comfortable these days with unspectacular earnings and weak economic growth, suggesting to one otherwise-bullish Wall Street analyst that some pain is ahead.

• Forget growth, China is contracting, experts say. (video) Many China bears, including closely watched short-seller Jim Chanos, have warned that economic numbers from the Chinese government dramatically overestimate growth. But Robert Barbera, co-director of Johns Hopkins Center for Financial Economics, argued on CNBC on Monday that China's economy is actually contracting.

Zero Hedge: 

• European Earnings: Bad And Getting Worse, As Majority Of Companies Miss EPS. (table)

• The Government "Revises" 84 Years Of Economic History This Week.

• Chart Of The Day: Monthly Home Payment Soars 40% To 2008 Levels.

• The Muni Market's Shifting Sands.

• Bernanke To Be Deposed In Court Over AIG Bailout.

• Santelli Destroys The 'Yellen Is A Great Forecaster' Meme. (video)

Business Insider: 

• The Most Amazing Economics Website In The World Just Got So Much Better.

• 15 Charts That Should Terrify Saudi Arabia.

• Apple(AAPL) Says It Will Audit One Of Its Chinese Production Facilities Following Report On Horrible Working Conditions.

• STEVE WYNN: Inflation Is Surging, Living Standards Are Falling, And The Economy Is In A Limp-Wristed Crawl Out Of A Hole.

• Michael Pettis: Chinese GDP Has To Drop Even More. "If China is to rebalance meaningfully, GDP must grow by “only” 3-4 per cent." 

• DALLAS FED: Texas Manufacturing Activity Unexpectedly Slows In July. The headline index fell to 4.4 in July from 6.5 in June. Economists were looking for an advance to 7.5.

Reuters:

• Copper steady near 3-week low, China growth worries weigh.

Financial Times: 

• US money market funds return to EU banks. In the first half of the year, the 10 biggest US money market funds allocated about 15 per cent of their $652bn in assets to short-term deposits and debt securities with eurozone banks, according to Fitch, the credit rating agency. That represents an increase of nearly 90 per cent since June 2012, when fears over a eurozone break-up were at their peak.

Telegraph: 

• Lingering Eurozone crisis dampens SME optimism. Fears over continuing economic weakness in the eurozone are dampening small companies’ enthusiasm about an improving domestic economy, research has revealed. 

European Central Bank:

• Joint interview with Benoît Cœuré and Jörg Asmussen, Members of the Executive Board of the ECB, Conducted by Andrea Rexer (SZ) and Jean-Pierre Robin (Le Figaro) on 23 July 2013 and published on 29 July 2013.

Economic Information Daily:

• China Should Start Probe of Imported Car Prices. China should start an investigation on imported car prices, citing industry people. Profit from selling imported luxury cars in China was 30% higher than global average, citing China Automobile Dealers Assoc. executive vice president and secretary general Shen Jianjun.