Stocks Slightly Lower into Final Hour on Russia-Ukraine Tensions, Global Growth Fears, Eurozone Debt Angst, Financial/Gaming Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 11.86 +1.98%

• Euro/Yen Carry Return Index 143.12 +.03%

• Emerging Markets Currency Volatility(VXY) 6.42 -1.83%

• S&P 500 Implied Correlation 51.33 +2.97%

• ISE Sentiment Index 106.0 +20.45%

• Total Put/Call .92 +!6.46%

• NYSE Arms .94 -4.76% 

Credit Investor Angst:

• North American Investment Grade CDS Index 56.02 +.35%

• European Financial Sector CDS Index 59.52 +1.99%

• Western Europe Sovereign Debt CDS Index 29.47 +2.13%
• Asia Pacific Sovereign Debt CDS Index 66.05 +.17%

• Emerging Market CDS Index 271.80 -1.44%

• China Blended Corporate Spread Index 311.46 +.58%
• 2-Year Swap Spread 20.25 -2.0 basis points

• TED Spread 21.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.50 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 185.0 -4.0 basis points

• China Import Iron Ore Spot $88.20/Metric Tonne -.79%

• Citi US Economic Surprise Index 27.80 +.5 point

• Citi Emerging Markets Economic Surprise Index -13.70 -.3 point

• 10-Year TIPS Spread 2.14 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -60 open in Japan

• DAX Futures: Indicating -17 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail/biotech sector longs and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Putin’s Good Cop Claim Hollow in Kiev as Rebels Widen War. Hours after Vladimir Putin hailed “positive” talks over the war in Ukraine, new accusations of Russian aggression were already being voiced in Kiev. While the Russian president reiterated a pledge early today to do all he can to bring peace to the war-torn Donetsk and Luhansk regions, officials in Ukraine said he was doing just the opposite. Russian soldiers have joined rebel fighters in mounting a counterattack, opening a new front against Ukrainian troops who are being shelled “intensively” from across the border, military spokesman Andriy Lysenko said. The pattern has become a familiar one: Putin annexed the Black Sea peninsula of Crimea after saying he had no intension of doing so; a promise in Switzerland to help bring the separatists to heel preceded more intense fighting. The aim is to muddy the waters and reduce the risk of more penalties from the U.S. and Europe, according to Otilia Dhand, an analyst at Teneo Intelligence in London who specializes in eastern Europe.
• French Manufacturing Confidence Falls to 13-Month Low. French factory confidence fell to the lowest in 13 months in August, adding to signs that the economy may struggle to grow after a stagnant first half. A manufacturing-sentiment index slipped to 96, the lowest since July 2013, from 97 the previous month, the French national statistics office INSEE said today in Paris. That matched the median forecast of economists in a Bloomberg News survey. A separate business-confidence index also declined. 
• European Stocks Little Changed as Telecom Italia Gains. European stocks were little changed, following their biggest two-day advance since April, as signs of progress in talks between Russia and Ukraine offset worse-than-projected German confidence data. Telecom Italia SpA gained 3.2 percent after Brazil’s Oi SA said it may buy an $8 billion stake in Tim Participacoes SA, a group company of Telecom Italia. Portugal Telecom SGPS SA, which is merging with Oi, jumped 6.3 percent. Asos Plc rallied the most in a decade amid takeover speculation. Marine Harvest ASA (MHG) dropped 2.7 percent after posting an unexpected quarterly loss. United Utilities Group Plc fell 1.3 percent after analysts downgraded the U.K.’s largest publicly traded water company. The Stoxx Europe 600 Index added 0.1 percent to 343.33 at close of trading, reaching a one-month high.
• Nickel Retreats as European Growth Concerns Dim Outlook. Nickel for delivery in three months declined 0.5 percent to settle at $18,850 a metric ton at 5:50 p.m. on the London Metal Exchange.

CNBC:

• VCs 'partying like it's 1999,' says McNamee. (video)

ZeroHedge:

• Feeling Worthless? The 10 Majors Most Likely To Lead To Underemployment. (table)
• No Bubble At All: Jessica Alba's Diaper-Delivery Startup Is Valued At $1 Billion, Prepares For IPO.
• Get Back To Work Mr. Hollande; French Jobseekers Surge To Record High. (graph)
• Art Cashin Warns Bulls: "History" Not On Their Side. (graph)
• CBO "Revises" Its 2014 GDP Forecast, Hilarity Ensues (As Always). (graph)
• ECB Hires Blackrock For ABS-Buying Advice; Crushes Idea Of Upcoming QE.
• The DSKing Of Christine Lagarde: IMF Head Formally Charged In Fraud Probe.

Business Insider:

• Apple's(AAPL) Smartwatch Will Debut On September 9.
• Warren Buffett Singlehandedly Undermined Democrats' Main Argument Against Inversions.
• Government Bond Yields Around The World Are Making New Lows Day In And Day Out.
• Ukraine Says More Tanks Roll In From Russia Despite Talks.
• Obama Is Pursuing A 'Sweeping' International Climate Agreement — And He's Doing It Without Congress.

Telegraph:

• France continues to struggle as German confidence erased in 'one fell swoop'. (graph) Outlook for French business remains bleak, while a key consumer gauge in Germany suggests Europe's biggest economy will "shift down a gear or two at least".

Bear Radar

Style Underperformer:

• Small-Cap Growth -.32%

Sector Underperformers:

• 1) I-Banks -1.01% 2) Gaming -.73% 3) Banks -.64%

Stocks Falling on Unusual Volume:

• THI, BKW, SWHC, SLH, ATHM, TITN, BWS, RGR, DGLY, BITA, ADI, AMWD, HAL, CHS, QIHU, ICE, BOBE, SDRL, LEJU, SUSP, MOV, HTWR, EFC, EJ and HUBG

Stocks With Unusual Put Option Activity:

• 1) CIEN 2) BKW 3) TIF 4) BX 5) MGM
  

Stocks With Most Negative News Mentions:

• 1) CCJ 2) SWHC 3) SLH 4) CHS 5) BKW
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.04%

Sector Outperformers:

• 1) Utilities +.43% 2) Telecom +.41% 3) Foods +.31%
  

Stocks Rising on Unusual Volume:

• MPAA, ARUN, EXPR, BDSI, BBY, TSU, CZZ, PEIX, RCII and AEGR

Stocks With Unusual Call Option Activity:

• 1) INFN 2) ARUN 3) ATVI 4) GALE 5) EXPR
  

Stocks With Most Positive News Mentions:

• 1) TIF 2) EXPR 3) AMZN 4) SSYS 5) HLF
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

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.