Today's Headlines

Bloomberg:

• Ukraine Leader Says Rebel Vote Plan a Threat to Peace. Ukrainian President Petro Poroshenko, in talks to form a coalition government after weekend elections, said Russia-backed rebels are threatening a fragile truce by planning to hold their own polls. “The quasi-elections announced by the Donetsk and Luhansk People’s Republics don’t comply with the Minsk protocol and contradict its spirit,” Poroshenko said in a statement on his website today. “They’re threatening the entire peace process.”
• Ruble Weakens to Record on Concern Russia to Expedite Free Float. The ruble weakened to a record for the fifth day on concern Russia will quicken its move to a free float after more than $20 billion of interventions this month failed to halt the depreciation. The currency slid 0.6 percent to 47.7112 against the central bank’s target dollar-euro basket by 6 p.m. in Moscow, bringing this year’s decline to 19 percent. Ten-year government bond yields approached five-year highs as the Finance Ministry said it was scrapping its third straight debt auction.
• Goldman Sachs Says China Developers Still ‘Riskiest'. Goldman Sachs Group Inc. says investors should avoid Chinese developer notes because they’re still the riskiest part of Asia’s bond market even as the debt recovers from the biggest selloff in 15 months.
• Euro Outflows at Record Pace as ECB Promotes Exodus. For European Central Bank President Mario Draghi, the price of a weaker euro to boost the economy and stave off deflation is a record exodus from the continent’s financial assets. Domestic and foreign investors spurred 187.7 billion euros ($239 billion) of fixed-income outflows from the euro area in the six months through August, the most in ECB data going back to the currency’s debut in 1999. That’s helped push the euro down 2.6 percent versus a basket of nine developed-market peers tracked by Bloomberg Correlation-Weighted Indexes this year, the biggest decline since 2010, when the euro-region debt crisis was taking hold. 
• Europe’s Glacial Growth Lowers Prospects for Job Seekers. Unemployment across the 18-nation region has barely budged from its high as companies questioning the durability of the recovery now find themselves hitting headwinds from weakening global trade. Confidence (EUESEMU) in the economy slipped to the lowest in almost a year this month and the unemployment rate remained at 11.5 percent in September, economists said before data due later this week.
• Honda Cuts Profit Forecasts as Japan, China Demand Slumps. Honda Motor Co. (7267), Japan’s third-largest automaker, forecast its first profit decline in three years as deliveries to China and Japan weakened. Net income will drop 1.6 percent in the year ending in March to 565 billion yen ($5.2 billion), the Tokyo-based company said in a statement today. That compares with the 600 billion yen the automaker forecast in April and would mark the first annual profit decline since the fiscal year ended March 2012.
• Europe Stocks Gain First Time in Three Days as UBS Jumps. European stocks rose, snapping a two-day drop, as Novartis AG and UBS (UBSN) AG rallied after posting financial updates and as U.S. consumer confidence surged to a seven-year high. The benchmark Stoxx Europe 600 Index gained 1 percent to 328.25 at the close of trading as 18 of its 19 industry groups rose.

Wall Street Journal:

• YouTube Considers Paid, Ad-Free Subscriptions. YouTube Seeks to Generate More Revenue.
• Fed Set to End QE3, but Not the QE Concept. Bond Buying Will Remain a Tool in the Central Bank’s Monetary-Policy Arsenal. Federal Reserve officials meeting Tuesday and Wednesday are virtually certain to end their latest bond-buying program, but they won’t be retiring the policy for good.
• Christie Calls Obama Administration’s Ebola Guidelines ‘Incredibly Confusing’. New Jersey Governor Says, ‘Our Policy Hasn’t Changed and It Will Not Change’.

MarketWatch.com:

• The biggest risk for U.S. investors is a China crash. 
• Here’s what the medical bills for Ebola look like.

CNBC: 

• FTC sues AT&T(T) for 'deceptive' and 'unfair' data throttling.
• The EU is one big welfare Ponzi scheme.
• Middle class feels worse off and pessimistic. (video)

ZeroHedge:

• US Homeownership Rate Drops To 1983 Levels: Here's Why. (graph)
• The Buyback Of Things: IBM(IBM) To Repurchase Another $5 Billion In Stock In Next Two Quarters.
• Spot The Odd "Market" Out (Again). (graph)
• The Stunning Difference Between "Income Expectations" And Reality. (graph)
• China "Ghost Town Index" - Here Are China's 10 "Ghastliest" Cities.
• California Leads Housing Slowdown As Case-Shiller Home Prices Decline For 4 Months In A Row. (graph)
• Core Capex Drops Most Since January; Durable Goods Orders Slide, Miss By Most In 2014. (graph)

Business Insider:

• A 160-Year-Old Bank Crashes, Warning That A New Economic Regime Is Here To Stay.
• Meet Lowe's(LOW) New Robot Retail Workers.
• 12 Big Cities Where Home Prices Are Sliding.
• All Of The Reasons Obama's Current ISIS Plan Is Doomed To Fail.

Interpreter Magazine:

• Putin’s Next Moves in Ukraine Won’t Be Pretty. Having failed to disrupt the Ukrainian elections, to gain support for pro-Russian candidates, or to provoke Ukrainians into voting for national extremists that Moscow could use to discredit Ukraine in the West, Vladimir Putin will be tempted to stir up more violence in Ukraine to keep that country from pursuing its European course.

Financial Times:

• China’s ‘new normal’ for consumption. While multinationals have been bleating about tumbling sales in China, official retail data from the world’s second-biggest economy tells a more robust story. What gives?

RIA Novosti:

• Russia to Build 13 Airfields, 10 Radars in Arctic. "Russia will build 13 airfields and 10 radars in Arctic to safeguard national security in the region," Russian military comments in Twitter post.

Austrian Press Agency:

• Nowotny Says Europe Should Prepare for 'Japanese Scenario'. ECB Governing Council Member Ewald Nowotny doesn't see growth rates of 3%-4% soon, citing comments. One should probably prepare for "Japanese scenario" with longer-term stagnation, Nowotny said. It's not exactly foreseeable when there'll be normal times for European economy again.

Bear Radar

Style Underperformer:

• Large-Cap Value +.48%

Sector Underperformers:

• 1) Gaming -1.33% 2) Drugs -1.01% 3) Hospitals -.63%

Stocks Falling on Unusual Volume:

• HASI, WMGI, SNY, STCK, CVLT, PEB, LMNX, MDSO, MSM, NVO, DCO, SAIA, APAM, CROX, RGLS, TWTR, AKBA, KSS, COH, HLS, HOT, DORM, MLM, PCL, MAS, PCL, LLY, AWI, HLS, SRPT, MAS, FCX, CGNX,  BAS and UTHR

Stocks With Unusual Put Option Activity:

• 1) SMH 2) HCA 3) XLV 4) JWN 5) TIF

Stocks With Most Negative News Mentions:

• 1) LLY 2) CROX 3) RAI 4) SRPT 5) AWI
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.89%

Sector Outperformers:

• 1) Airlines +2.47% 2) I-Banks +1.95% 3) Steel +1.54%
  

Stocks Rising on Unusual Volume:

• TRNX, MSG, RGC, RCPT, VDSI, MDCO, BWLD, AMGN, IDTI, CLF, SNCR, SANM, VNDA, ALSN, ALR, MSG, CLDX, CLDX, MTW, WHR, TSLA, ALSN, ALR, ICON, CMI, SAVE, AN and PCYC

Stocks With Unusual Call Option Activity:

• 1) BWLD 2) AMGN 3) MRK 4) COH 5) CNX

Stocks With Most Positive News Mentions:

• 1) SAVE  2) TMUS 3) GMCR 4) BBRY 5) AAPL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:

• Putin Narrative of Abandoned Ukraine East Fueled by Vote. Vladimir Putin may have more ammunition to extend his influence over the Ukraine’s war-torn east after the country’s parliamentary election. A surge in support for pro-European parties leaves the area, the bedrock of ousted leader Viktor Yanukovych’s popularity, with less of a say in the nation’s future. Parties backing President Petro Poroshenko’s bid to steer Ukraine away from its Soviet past are set to form a coalition, a move that may make reconciliation in the east more difficult and fuel complaints from Putin that Russian speakers are being trampled. 

• WHO Said to Track 111 People in Mali After Ebola Death. Health officials in Mali have identified 111 people who came into contact with the nation’s first Ebola patient last week, according to an internal World Health Organization document. Workers have been unable to find at least 40 of those people who may have been exposed to the toddler, the Geneva-based WHO said in the document, seen by Bloomberg News. The two-year-old girl contracted the disease in Guinea and died on Oct. 25 in Mali.

• Asian Stocks Fall Before Fed as U.S. Data Disappoint Investors. Asian stocks fell, following U.S. shares lower, after American data from home sales to manufacturing fell short of estimates and investors awaited a Federal Reserve decision on its stimulus program. The MSCI Asia Pacific Index (MXAP) dropped 0.1 percent to 138.22 as of 9:02 a.m. in Tokyo, before markets opened in Hong Kong and China.

• Oil Drops as Asia Shares Fluctuate With Dollar Before Fed. Oil fell for a third day as U.S. supplies were estimated to be near a four-month high. Asian stocks fluctuated and the dollar held losses as investors await a Federal Reserve decision on its stimulus program. West Texas Intermediate oil slid 0.5 percent as of 10:54 a.m. in Tokyo, taking its decline since June to 25 percent.

Wall Street Journal:

• CDC Rejects Mandatory Ebola Quarantines. Federal Officials Push for Voluntary Isolation of Those at High Risk. The Obama administration laid out new guidelines Monday calling for voluntary isolation and monitoring of travelers exposed to Ebola, to counter a proliferation of divergent state rules over how to contain the outbreak.

• Here Comes the 2014 Voter Fraud. Progressives and the Justice Department are doing all they can to stop improvements in election integrity.

CNBC:

• Twitter(TWTR) shares fall over 10% on earnings report. (video) Twitter reported quarterly earnings that met analysts' expectations on Monday, but the stock abruptly fell in after-hours trading after the company issued guidance that disappointed investors.

• Why OPEC's losing its ability to set oil prices. (video) U.S. shale oil will replace the Organization of the Petroleum Exporting Countries as the first-mover "swing producer," according to a Goldman Sachs report from the weekend—meaning OPEC is losing its power to set global prices for crude.

Zero Hedge:

• Sterne Agee Warns, The Correction Hasn't "Fixed" Anything. (graph)

• Errors Found In The ECB's "Confidence-Boosting" Stress Test.

• Quantitative Easing Is Like "Treating Cancer With Aspirin".

• A Chinese Soft-Landing Will Inevitably Lead To A "Very Brutal Hard Landing", Pettis Warns.

• Kuroda Comedy Hour (Or Has The World Gone Mad... Again?). (graph)

Business Insider:

• CDC Rejects Mandatory Isolation For Doctors Who Treat Ebola Patients.

• Crashing Oil Prices Are Spilling Into Other Markets In A Bad Way.

• ISIS Reportedly Beheaded The 'Poster Child' For Kurdish Female Fighters.

• WALL STREET'S BRIGHTEST MINDS REVEAL THE MOST IMPORTANT CHARTS IN THE WORLD.

Washington Times: 

• Reinflating the housing bubble. The feds are pushing the same lax rules that triggered the crash. The headline in newspapers one recent weekend read like an April Fool’s joke, but it wasn’t April 1. The Obama administration announced it wants to provide a little more juice to the now-lackluster housing market by bending the home lending rules to make it easier for banks to make loans and marginal buyers to take on a mortgage.

Reuters: 

• Miner Cliffs(CLF) posts loss on $5.7-billion asset writedown. Cliffs Natural Resources Inc reported a third-quarter loss, hurt by a $5.7 billion writedown of its coal and iron ore assets amidst declining prices. 

• Amgen(AMGN) profit tops Wall Street expectations; raises 2014 outlook. Amgen Inc on Monday reported higher-than-expected third quarter earnings and revenue, even as net profit fell due to a hefty restructuring charge, and the company raised its full-year forecast and the number of job cuts it expects to make.

Telegraph:

• ECB stress tests vastly understate risk of deflation and leverage. Ignoring the deflation danger for the banking systems of southern Europe has reduced the latest stress test to another 'farce', says EU economist Philippe Legrain.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 114.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 67.0 -.75 basis point.

• FTSE-100 futures +.25%.

• S&P 500 futures +.04%.

• NASDAQ 100 futures  +.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHN)/.31

• (CMI)/2.28

• (NBL)/.36

• (AN)/.86

• (CPLA)/.55

• (GLW)/.38

• (ACI)/-.41

• (PCAR)/.96

• (HCA)/1.17

• (AET)/1.58

• (DD)/.53

• (WHR)/3.13

• (COH)/.45

• (SHW)/3.22

• (TRW)/1.69

• (PFE)/.55

• (AMTD)/.36

• (FCX)/.61

• (AGCO)/.63

• (MCK)/2.73

• (GILD)/1.93

• (AFL)/1.43

• (EA)/.53

• (FB)/.40

• (WYNN)/1.82

• (OI)/.73

• (PNRA)/1.43

• (APC)/1.27

• (ESRX)/1.29

• (X)/1.20

• (BXP)/1.37

• (WDC)/2.04

Economic Releases
8:30 am EST

• Durable Goods Orders for September are estimated to rise +.5% versus a -18.2% decline in August.

• Durables Ex Transports for September are estimated to rise +.5% versus a +.7% gain in August.

• Cap Goods Orders Non-Defense Ex Air for September are estimated to rise +.7% versus a +.6% gain in August.

9:00 am EST

• The S&P/CS 20 City MoM SA for August is estimated to rise +.18% versus a -.5% decline in July. 

10:00 am EST

• Consumer Confidence for October is estimated to rise to 87.0 versus 86.0 in September.

• The Richmond Fed Manufacturing Index for October is estimated to fall to 11.0 versus 14.0 in September.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Industrial Profits report, $29B 2Y T-Note auction,  weekly US retail sales reports, (KR) investor conference and (AMGN) business review could also impact trading today.

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

Stocks Slightly Lower into Final Hour on Rising Emerging Markets/Eurozone Debt Angst, Global Growth Fears, Technical Selling, Commodity/Construction Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.40 +1.74%

• Euro/Yen Carry Return Index 142.96 -.05%

• Emerging Markets Currency Volatility(VXY) 7.31 -6.32%

• S&P 500 Implied Correlation 65.17 +1.86%

• ISE Sentiment Index 126.0 unch.

• Total Put/Call .97 +10.23%

• NYSE Arms 1.70 +111.13% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.45 +.85%

• European Financial Sector CDS Index 67.58 +.71%

• Western Europe Sovereign Debt CDS Index 32.70 +2.16%
• Asia Pacific Sovereign Debt CDS Index 67.24 -.90%

• Emerging Market CDS Index 259.94 +1.82%

• China Blended Corporate Spread Index 331.86 +.65%
• 2-Year Swap Spread 26.25 unch.

• TED Spread 22.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.0 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 188.0 -1.0 basis point

• China Import Iron Ore Spot $79.52/Metric Tonne -1.19%

• Citi US Economic Surprise Index 12.0 -5.2 points
• Citi Eurozone Economic Surprise Index -40.50 -3.7 points

• Citi Emerging Markets Economic Surprise Index -17.30 +.3 point

• 10-Year TIPS Spread 1.90 unch.

Overseas Futures:

• Nikkei Futures: Indicating -49 open in Japan

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

• Higher: On gains in my tech/retail/biotech sector longs, index hedges and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long