Wednesday Watch

Evening Headlines 
Bloomberg: 

• Putin Says Ukraine Talks Positive, Political Deal Mulled. Russian President Vladimir Putin said talks with his Ukrainian counterpart over separatist fighting that’s killed more than 2,000 people were “positive” as the parties began discussions for a political resolution. “Russia, for its part, will do everything for this peace process,” Putin said today after meeting Ukrainian President Petro Poroshenko at a summit of the Customs Union trading bloc in Minsk that also included the leaders of Kazakhstan and Belarus and European Union foreign-policy chief Catherine Ashton. “In our opinion, it should start as soon as possible.” Poroshenko said on Twitter after the talks that Russia, Belarus and Kazakhstan backed a Ukrainian peace strategy to stem battles between the army and pro-Russian insurgents who have sought to break off the Donetsk and Luhansk regions in the nation’s east. He didn’t elaborate on what the plan entailed and Putin didn’t mention it as he addressed reporters.

• Asian Stocks Climb on U.S. Confidence, Durable Goods Data. Asian stocks rose after U.S. data on durable goods and consumer confidence boosted optimism in the strength of the world’s largest economy. Boral Ltd. (BLD) surged 6.2 percent as profit at the Australian producer of building materials topped estimates. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipper, rose 3.7 percent on a report it will target a return on equity of 10 percent in five years. Flight Centre Travel Group Ltd. sank 2.7 percent in Sydney after reporting profit in line with its target. The MSCI Asia Pacific Index (MXAP) gained 0.2 percent to 148.69 as of 9:39 a.m. in Hong Kong, with the gauge trading within 1 percent of a six-year high.

• Apple(AAPL) Said to Prepare New 12.9-Inch IPad for Early 2015. 

Wall Street Journal: 

• Russia-Ukraine Talks Yield Little Progress on Ending Conflict. Putin Promises Support but Focuses on Trade Issues in Peace Talks With Poroshenko. Face-to-face talks between the Russian and Ukrainian presidents failed to produce a breakthrough for ending the conflict over eastern Ukraine, as Kiev released videos of captured Russian soldiers and rebels pushed toward a government-held city. The one-on-one session, which Ukraine's President Petro Poroshenko described as "tough and complex," ended early Wednesday after a day of talks on the crisis in the Belarusian...

• Islamists in Iraq Rely on Mines, Booby Traps in Battlefield Strategy. Opposing Kurdish Forces Say Islamic State Militants Patient, Willing to Take Losses. Islamic State insurgents have planted land mines and other explosives to stall a Kurdish push to retake this town, an unfolding battlefield strategy that foes describe as built on patience, the element of surprise and a willingness to take losses. The fighters borrowed the tactic from their predecessors, al Qaeda in Iraq, who used improvised explosive devices, or IEDs, to prevent U.S. forces from retaking ground during...

• Warren Buffett's Tax Whopper. Obama's business front man finances 'corporate deserters.' 

• Helping Ukraine Is a U.S. Imperative. A good relationship with Russia is important, but not if it can break solemn promises with impunity. 
  

Fox News:

• Lawmakers demand vote on US military action against ISIS. President Obama and military leaders are weighing a host of factors as they consider expanding airstrikes into Syria, including the Assad regime’s demand to seek permission first and warnings that the strikes could trigger ISIS retaliation. But they soon could face another complication: Congress.

CNBC: 

• What's worrying millionaire investors? The Middle East. (video)

Zero Hedge:

• China Industrial Commodities Collapse As Sentiment Tumbles To 15-Month Lows. (graph)

• Treasury Curve Collapse Signals Multiple Expansion Exuberance Is Over. (graph)

• Europe: Stagnation, Default, Or Devaluation. (graph)

• Investor Net Worth Drops To New All Time Low, NYSE Reveals. (graph)

• Why Isn't Monetary Pumping Helping the Economy? (graph)

• The Retail Trader Lockout - Today's 'Market' "Issues" Were Worse Than The Flash Crash.

• Forget Geopolitical De-Escalation - Here's The Real Reason Why Oil Is Tumbling. (graph)

Business Insider: 

• Just 6% Of Stocks On The S&P Have 'Sell' Ratings.

• Snapchat Is Now A $10 Billion Dollar Company.

• Dozens Of 'Men In Green' With Russian Accents Have Showed Up In East Ukraine.

Financial Times:

• Evidence of direct Moscow military involvement in Ukraine grows. Kiev published videos on Tuesday of what it said were 10 Russian paratroopers captured inside Ukraine, in the strongest evidence yet of the increasingly overt presence of Russian forces in the east of the country.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 97.50 -1.5 basis points.

• Asia Pacific Sovereign CDS Index 65.0 -1.5 basis points.

• FTSE-100 futures -.20%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures  +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DCI)/.47

• (TIF)/.85

• (BWS)/.35

• (CHS)/.26

• (BF/B)/.72

• (WDAY)/-.14

• (GES)/.29

• (BYI)/1.12

• (WSM)/.53

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -944,440 barrels versus a -4,474,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,435,000 barrels versus a +585,000 barrel gain the prior week. Distillate supplies are estimated to fall by -343,100 barrels versus a -960,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.49% versus a +1.8% gain the prior week.

Upcoming Splits

• (RKT) 2-for-1

Other Potential Market Movers

• The 5Y $35B T-Note auction, German GFK Confidence report, weekly MBA Mortgage Applications report and the (HMY) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial 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, Less Eurozone Debt Angst, Buyout Speculation, Biotech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 11.58 -1.20%

• Euro/Yen Carry Return Index 143.16 -.12%

• Emerging Markets Currency Volatility(VXY) 6.56 -2.24%

• S&P 500 Implied Correlation 49.46 +1.39%

• ISE Sentiment Index 86.0 -9.47%

• Total Put/Call .76 -13.64%

• NYSE Arms .81 +16.94% 

Credit Investor Angst:

• North American Investment Grade CDS Index 56.19 unch.

• European Financial Sector CDS Index 58.63 -7.49%

• Western Europe Sovereign Debt CDS Index 28.85 -7.16%
• Asia Pacific Sovereign Debt CDS Index 66.04 -1.94%

• Emerging Market CDS Index 275.54 -.90%

• China Blended Corporate Spread Index 309.67 -.22%
• 2-Year Swap Spread 22.25 unch.

• TED Spread 21.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% +1.0 basis point

• Yield Curve 189.0 unch.

• China Import Iron Ore Spot $88.90/Metric Tonne -.34%

• Citi US Economic Surprise Index 27.30 +22.1 points

• Citi Emerging Markets Economic Surprise Index -13.40 +.8 point

• 10-Year TIPS Spread 2.15 unch.

Overseas Futures:

• Nikkei Futures: Indicating +35 open in Japan

• DAX Futures: Indicating -12 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Putin Holds Poroshenko Talks as Ukraine Tension Grows. Russian President Vladimir Putin began talks with his Ukrainian counterpart, Petro Poroshenko, as tensions flared on the two nations’ border. Putin said he’s ready for an exchange of opinions on Ukraine as he addressed a summit of the Russian-led Customs Union in Minsk, Belarus. Poroshenko said he’s optimistic about the meeting, which includes European Union foreign-policy chief Catherine Ashton and the presidents of Belarus and Kazakhstan. “I understand that all players who’ve been drawn into the situation would like to exit with dignity,” Poroshenko said in Russian. “I’m ready to discuss different options that would allow such an exit strategy -- an exit to a peaceful future for Ukraine, an exit to a peaceful future for Europe.”
• Agricultural Bank Braces for More Bad Loans Amid Slowdown. Agricultural Bank of China Ltd., the lender with more retail customers than the population of the euro zone, set aside more money for future bad loans amid the nation’s economic slowdown. The bank boosted provisions for potential soured credit by 56 percent to 15.6 billion yuan ($2.5 billion) in the three months ended June 30 from a year earlier, according to a Hong Kong exchange filing yesterday. Net income rose 12 percent, the weakest pace in five quarters, to 50.6 billion yuan.
• European Stocks Climb for a Second Day as Lenders Advance. European stocks climbed, completing their biggest two-day gain in four months, as banks advanced on further speculation that the euro area will introduce an asset-purchase program. BNP Paribas SA and Societe Generale SA both gained more than 1.5 percent. WPP Plc (WPP) added 1.4 percent as the advertising agency posted sales that beat projections. Telecity Group Plc (TCY) declined the most in six months after the operator of data centers said its chief executive officer will step down. The Stoxx Europe 600 Index rose 0.7 percent to 342.96 at the close of trading.
• Iron Ore Risks Extending Drop to Lowest Since 2009. Iron ore prices are at risk of slumping to the lowest level since 2009 as increased supplies from Australia and Brazil boost a global surplus and prompt the closure of some higher-cost Chinese suppliers. The commodity may retreat to $80 a metric ton this year, according to Helen Lau, an analyst at UOB Kay Hian Ltd. in Hong Kong, who’s tracked the market for seven years. Ore with 62 percent content at Qingdao, China, fell 1.2 percent to $89.02 a ton today, according to Metal Bulletin Ltd.’s website. That’s the lowest since September 2012, when it bottomed at $88.08. A price below $88.08 would be the lowest since October 2009. Prices tumbled 34 percent this year as mining companies from BHP Billiton Ltd. (BHP) to Rio Tinto (RIO) Group increased output, pushing the global seaborne market into a glut. Major producers in Australia, which have average costs of about $40 to $50 a ton, are continuing to increase supplies even with prices near the lowest level in five years, Australia & New Zealand Banking Group Ltd. said in a report today.
• S&P 500 P/E Reversal Seen as Yield Gap Narrows: Chart of the Day. 

ZeroHedge: 

• It Begins: Council On Foreign Relations Proposes That "Central Banks Should Hand Consumers Cash Directly".
• JPMorgan(JPM) Sees 50% Chance Of ECB QE By Year-End, Will Ease More Next Week.
• (Un)Comfortable Myths About High Yield Debt. (graph)
• Doctor Fed, You Are Wanted In The San Francisco Housing Ward, Stat. (graph)
• Government Confidence Survey Spikes To 7-Year Highs, Near Record Divergence From UMich Sentiment. (graph)
• "Widespread Slowdown In Home Price Gains": Case-Shiller Misses, Rises By Slowest Since 2012. (graph)
• "Tax Me More" Buffett To Finance Burger King's Tax Inversion Deal.
• Durables Goods, Excluding Bumper Boeing Orders, Suffer Biggest Drop Of 2014. (graph)

Business Insider:

• Russian Economy Nears Recession Amid Ukraine Sanctions.
• Israel And Hamas Just Reached Long-Term Ceasefire In Gaza.
• Angry Home Owners Protest In China As Property Prices Fall.

Washington Free Beacon:

• Sad Morning Joe Panel Doesn’t Get Why Warren Buffett Doesn’t Want To Pay Higher Taxes. (video)

Reuters:

• Islamic State turns radical Islam on Syria Muslims. As Islamic State militants advanced in the Syrian province of Deir al-Zor last month, those who had held out against them faced a simple choice: beg for mercy or face certain death. Their options were laid out in stark religious terms by the militant Islamists who are trying to carve out their own state in Syria and Iraq. Defeated fighters were required to "atone" or die, a choice set out in Islamic terms and implying that resisting Islamic State rule amounted to a sin against God.

Bear Radar

Style Underperformer:

• Mid-Cap Value +.08%

Sector Underperformers:

• 1) Gaming -.75% 2) Utilities -.74% 3) Airlines -.56%

Stocks Falling on Unusual Volume:

• BKW, SAFM, BBY, QUNR, RGS, KANG, QIHU, BNS, TSL, MOV, VMW, AMBA, GILD, NUS, CPA, GRUB, DSLV, LTM, ECOL, TRUE, IRBT, RIO, TOUR, LO, LRN, TA and PSEC

Stocks With Unusual Put Option Activity:

• 1) JNS 2) BBY 3) LEN 4) EWW 5) OIH
  

Stocks With Most Negative News Mentions:

• 1) NWL 2) CGI 3) SAVE 4) QIHU 5) UPS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.89%

Sector Outperformers:

• 1) HMOs +1.39% 2) Oil Service +1.32% 3) Gold & Silver +1.28%
  

Stocks Rising on Unusual Volume:

• THI, DGLY, JRJC, DSW, ARWR, ISIS, VLCCF, KNDI, KERX, KITE, ENPH, CLDX, DYAX and MOBL

Stocks With Unusual Call Option Activity:

• 1) LNG 2) DSW 3) UUP 4) ISIS 5) END
  

Stocks With Most Positive News Mentions:

• 1) JAH 2) AMZN 3) CELG 4) TWTR 5) ANF
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume