Bull Radar

Style Outperformer:

• Mid-Cap Growth +.36%

Sector Outperformers:

• 1) Computer Hardware +1.76% 2) Retail +1.27% 3) Networking +1.36%
  

Stocks Rising on Unusual Volume:

• QRE, LOGI, VDSI, FFIV, CRI, UIS, SKX, FTNT, FB, RCL, UA, TSCO, VDSI, CSGP, HWAY, ETH, OSTK, PLCM, CSH, SXC, GRUB, GPK, FLS, EQT, JAH, RKUS, MKTX, BC, ORLY, HNT, CTXS, DPS and CHE

Stocks With Unusual Call Option Activity:

• 1) FFIV 2) MMM 3) INO 4) IP 5) XLNX
  

Stocks With Most Positive News Mentions:

• 1) FFIV 2) IP 3) CTXS 4) XLNX 5) DHI
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• U.S. Weighs New Russia Sanctions as Putin Isolated. The U.S. is debating a new round of sanctions on Russia and pressing the European Union to follow up with its own penalties, Deputy National Security Adviser Ben Rhodes said. Russian President Vladimir Putin’s government is increasingly isolated for his support of the separatists in Ukraine, Rhodes told reporters at the White House today. “It has badly backfired on them because it’s earning him complete international isolation and condemnation,” Rhodes said. He gave no timetable for U.S. action.
• Kerry’s Gaza Truce Bid Undercut by Rifts in Region. As U.S. Secretary of State John Kerry labors to end the violence in Gaza and Israel, he’s confronting hostility and suspicion among Egypt, Qatar and Turkey, whose rival agendas and diplomatic jockeying bring new difficulty to the negotiations. The top U.S. diplomat hurriedly departed for the Middle East this week with his customary eagerness to tackle complex international issues. “We’ve got to get over there,” Kerry told an aide in a phone call picked by Fox News microphones as he made the rounds of Sunday talk shows. “It’s crazy to be sitting around.” 
• Skyscraper Mania Grips China as Ambitions Trump Economy. The eastern Chinese city of Suzhou isn’t even the biggest in Jiangsu province, yet it’s joining a national rush for the sky with what’s slated to become the world’s third-tallest building. By 2020, China may be home to six of the world’s 10 highest skyscrapers, including Suzhou’s 700-meter (2,297-foot) Zhongnan Center. Developers finished 37 structures higher than 200 meters, or about 50 stories, in China last year, the most in the world, according to the Chicago-based Council on Tall Buildings and Urban Habitat, a non-profit organization that maintains the world’s largest free database on tall buildings.
• Asian Stocks Climb for Fourth Day on China Manufacturing. Asian stocks rose for a fourth day, with the regional benchmark index extending a six-year high, after a Chinese manufacturing gauge rose to its strongest reading in 18 months. LG Display Co. (034220) climbed 2.5 percent in Seoul after the supplier of panels for Apple Inc. devices posted second-quarter profit that beat analyst estimates. Fujifilm Holdings Corp. rose 2.1 percent in Tokyo after a report that sales of high-end cameras boosted the company’s first-quarter operating profit. Newcrest Mining Ltd. sank 4 percent as Australia’s biggest gold producer said it may write down the value of its assets by as much as A$2.5 billion ($2.4 billion). The MSCI Asia Pacific Index added 0.2 percent to 148.76 as of 10:03 a.m. in Hong Kong as seven of its 10 industry groups rose.
• Record Student-Loan Debt Prompts Treasury Push to Stem Defaults. The U.S. Treasury, which finances more than 90 percent of new student loans, is exploring ways to make repayment more affordable as defaults by almost 7 million Americans and other strapped borrowers restrain economic growth. Leading the effort is Deputy Secretary Sarah Bloom Raskin, who became the department’s No. 2 official in March after more than three years as a Federal Reserve governor. As higher-education debt swells to a record $1.2 trillion, Raskin, 53, is alert to parallels to the mortgage crisis.

Wall Street Journal: 

• Tragedy Fails to Quiet Ukraine. Two Fighter Jets Shot Down Over Separatist Territory as Kiev Presses Offensive. Two Ukrainian fighter jets were shot down Wednesday over separatist-held territory not far from the site of the Malaysia Airlines crash as international outrage over the tragedy has done little to slow the fierce fighting in eastern Ukraine. While Kiev made significant advances against rebels in the country's east in recent days, Ukrainian and U.S. officials say Russian weapons are continuing to pour over the border. The escalation in fighting suggests Russian President Vladimir Putin has no intention of dialing back his support for the separatists, denting Western hopes that international attention from the airliner crash would force him to change course.
• Calpers Pulls Back From Hedge Funds. California Pension Fund to Cut Investments by 40%. Public pensions from California to Ohio are backing away from hedge funds because of concerns about high fees and lackluster returns. Those having second thoughts include officials at the largest public pension fund in the U.S., the California Public Employees' Retirement System, or Calpers. Its hedge-fund investment is expected to drop this year by 40%, to $3 billion, amid a review of that part of the portfolio, said a person familiar with the changes. A spokesman declined to comment on the size of the reduction but said... 
• Obama to World: Drop Dead. The most provincial U.S. president in at least a century.  

Fox News:

• Fox News Poll: 58 percent say Obama administration incompetent at managing gov't. A 58-percent majority says the White House has not been competent at managing the federal government. Some 32 percent of Democrats join 67 percent of independents and 84 percent of Republicans in holding that view.

CNBC: 

• S&P faces fraud charges over mortgage ratings. Standard & Poor's may face securities fraud charges for ratings given to six commercial mortgage-backed securities issued in 2011, the credit rating company said.
• Facebook(FB) earnings: 42 cents per share, ex-items, vs. expected EPS of 32 cents.
• Mars, maker of M&M's, to raise prices 7%. Mars Chocolate North America, the maker of M&M's and Snickers, said on Wednesday that it will raise its prices by an average of 7 percent "to offset rising costs," its first increase in three years.

Zero Hedge:

• High-Yield Bonds "Extremely Overvalued" For Longest Period Ever. (graph)
• 5 Reasons Why The Market Won't Crash Or Will. (graph)
• Where Facebook's(FB) Second Quarter User Growth And Revenue Generation Was In Charts. (graph)
• Chart Of The Day: For Caterpillar The "Great Recovery" Is Just As Bad As The Great Financial Crisis. (graph)
• Why "The US Should Have Already Panicked," The Sectarian Divide Mapped Out.
• Congress Brings Socialism To America With This Proposed Law.
• David Stockman On The Real Evil Of Monetary Central Planning.
• Japanese Exports Tumble For 2nd Month In A Row, Worst Since Abenomics Began. (graph)

Business Insider:

• Michael Bloomberg Accuses Wolf Blitzer Of Insulting America.
• Qatar's Purchase Of Billions Of US Weaponry — And Support For Hamas — Shows How Awkward Foreign Policy Can Be.
• Senator Sounds Alarm Over 'Excruciating' Virus Spreading In US.

Reuters:

• Japan July flash manufacturing PMI falls to 50.8 from final 51.5 in June. Japanese manufacturing activity expanded at a slower pace in July than in the previous month, a preliminary survey showed on Thursday, as companies continued to adjust to fluctuations in demand after a sales tax increase in April. The Markit/JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 50.8 in July from a final reading of 51.5 in June.
• Qualcomm(QCOM) struggles to collect royalties in China, stock falls. Qualcomm Inc's outlook for the September quarter was below Wall Street's expectations and its shares fell on Wednesday after the leading mobile chipmaker said it was having trouble collecting royalties in China. 
• F5 Networks(FFIV) third-quarter revenue rises 19 pct.

Telegraph:

• Stalled recovery leaves Europe defenceless against economic shock from Russia. Stagnation is automatically causing debt ratios to spiral upwards yet again across a large part of the currency bloc.
• Get ready for the big one as toppy markets ride for a fall.

The Australian:

• Financial markets are playing down risks: Geithner. FORMER US Treasury Secretary Timothy Geithner has warned investors that financial markets are underpricing risks but he defended vigorously the Obama administration’s record of huge deficit spending and ­unprecedented money creation.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 101.75 -1.25 basis points.

• Asia Pacific Sovereign CDS Index 70.0 -1.5 basis points.

• FTSE-100 futures -.07%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures  +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DPS)/.91
• (PTEN)/.32
• (DO)/.56
• (PHM)/.25
• (ABC)/.92
• (DHI)/.49
• (HSY)/.76
• (CELG)/.89
• (GM)/.59
• (RCL)/.53
• (CLF)/-.09
• (BSX)/.19
• (PCP)/3.35
• (LLY)/.66
• (LUV)/.61
• (ALXN)/1.07
• (F)/.36
• (UA)/.07
• (ZMH)/1.49
• (RTN)/1.59
• (MMM)/1.91
• (CAT)/1.52
• (BMY)/.44
• (UNP)/1.43
• (ALTR)/.37
• (SBUX)/.66
• (CERN)/.40
• (V)/2.10
• (AMZN)/-.14
• (CB)/1.91
• (KLAC)/.86
• (FLEX)/.22
• (DECK)/-1.29
• (AAL)/1.96

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 307K versus 302K the prior week.
• Continuing Claims are estimated to rise to 2510K versus 2507K prior.

9:45 am EST

• Preliminary Markit US Manufacturing PMI for July is estimated to rise to 57.5 versus 57.3 in June.

10:00 am EST

• New Home Sales for June are estimated to fall to 475K versus 504K in May.

11:00 am EST

• The Kansas City Fed Manufacturing Index for July is estimated at 6.0 versus 6.0 in June.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan CPI, Eurozone PMI, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

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

Stocks Slightly Higher into Final Hour on Earnings Optimism, Less Emerging Markets Debt Angst, Short-Covering, Biotech/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 11.74 -4.08%

• Euro/Yen Carry Return Index 142.70 +.06%

• Emerging Markets Currency Volatility(VXY) 5.78 -.86%

• S&P 500 Implied Correlation 52.98 +.74%

• ISE Sentiment Index 152.0 +3.4%

• Total Put/Call .72 -20.88%

• NYSE Arms 1.17 +24.0% 

Credit Investor Angst:

• North American Investment Grade CDS Index 58.43 -.64%

• European Financial Sector CDS Index 66.53 -1.16%

• Western Europe Sovereign Debt CDS Index 35.35 +1.38%

• Asia Pacific Sovereign Debt CDS Index 70.11 -2.01%

• Emerging Market CDS Index 239.15 -.84%

• China Blended Corporate Spread Index 303.80 -.87%

• 2-Year Swap Spread 19.50 -.5 basis point

• TED Spread 21.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.25 +1.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 199.0 unch.

• China Import Iron Ore Spot $94.30/Metric Tonne -1.15%

• Citi US Economic Surprise Index -23.30 +.1 point

• Citi Emerging Markets Economic Surprise Index -4.0 +.3 point

• 10-Year TIPS Spread 2.21 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +48 open in Japan

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg: 

• Rebels Down Two Ukrainian Fighter Jets Near MH17 Site. Pro-Russian separatists shot down two Ukrainian fighter jets in the same eastern region where Malaysian Air Flight MH17 was destroyed, the government said. Rebels downed two Su-25s today over the village of Dmytrivka in the Donetsk region, a Defense Ministry spokesman, Oleksiy Dmytrashkovsky, said by phone. Another ministry spokesman, Andriy Lysenko, told reporters in Kiev the planes were at an altitude of 5,200 meters (17,000 feet) when they were brought down by a “powerful” anti-aircraft missile. The pilots ejected and their whereabouts are unknown, the ministry said on Facebook. 

• Israel Says Offensive to Continue as Kerry Seeks Truce. Israel doesn’t plan to stop its Gaza Strip offensive as long as the Palestinian territory’s Hamas rulers continue to pose a threat, Justice Minister Tzipi Livni said, as U.S. Secretary of State John Kerry flew to Israel in pursuit of an elusive truce deal. “There is no reason to stop here if Hamas continues to threaten, continues to fire,” Livni, her country’s former chief negotiator with the Palestinians, told Israel Radio. She said Israel may be headed toward an ongoing offensive “whose objective is not to contain the threat, but to disarm terror organizations, including Hamas.” Defense Minister Moshe Ya’alon told soldiers to prepare for a broader ground war.  

• Europe Stocks Little Changed as Investors Weigh Earnings. 

• Junk-Bond Indigestion Burns Buyers Gorged on Record Sales. Junk-bond buyers are showing signs of indigestion after snapping up a record $361 billion of the debt at the lowest yields on record. Speculative-grade bonds from the U.S. to Europe and Asia are set to post losses this month for the first time since last August after high-yield debt funds suffered the biggest weekly withdrawal of 2014. Winoa SA, the French producer of abrasives for metalworking, scrapped a bond offering in Europe yesterday amid the turmoil. The pushback is stifling junk-bond issuance in July after an unprecedented first half of sales. Investors who piled into the debt amid extraordinary central bank stimulus and a sixth year of near-zero interest rates in the U.S. are being jolted out of complacency by intensifying risks from Ukraine to Gaza. “People who were complacent before are going to have their finger on the sell button pretty quickly if some of these situations escalate,” Marc Gross, a money manager at RS Investments in New York, which oversees $5.8 billion in fixed-income assets, said in a telephone interview.

ZeroHedge: 

• The "Gates" Are Closing: SEC Votes Through Money Market Reform.

• GM Announces Another 718K Recalls, Bringing 2014 Total To Nearly 30 Million.

• Treasury Yields Near 2014 Lows As S&P Hits Record Highs. (graph)

• IMF Cuts US GDP From 2.0% To 1.7% As US Retail Sales Forecast Slashed From 4.1% To 3.6%: Winter Blamed. (graph)

• Putin Recalls State Duma From Vacation, "Planning Something" On Ukraine Situation.

• 51 Dead As TransAsia Flight Makes Forced Landing In South China Sea.

Macro Business:

• The Chinese Overbuild is Massive. (graph)

meps: 

• STEEL PRICES UNDER NEGATIVE PRESSURE IN NORTHERN EUROPE – MEPS INTERNATIONAL LTD.

Bear Radar

Style Underperformer:

• Small-Cap Value -.31%

Sector Underperformers:

• 1) Semis -2.1% 2) Networking -2.02% 3) Oil Tankers -1.61%

Stocks Falling on Unusual Volume:

• XLNX, ROYT, UIS, CNMD, TUP, CBST, WHR, JNPR, ICE, GSK, XOOM, OII, DRC, BA, TEL, LAYN, EA, ALTR, IRBT, LLTC, HLF, HXL, ATI, BEAV, MCD, JDSU, HXL, FULT, ENPH, FSL, IDTI, THRX and XLNX

Stocks With Unusual Put Option Activity:

• 1) JNPR 2) TRIP 3) UTX 4) MDT 5) FFIV
  

Stocks With Most Negative News Mentions:

• 1) THC 2) GM 3) XLNX 4) UIS 5) HXL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume