Monday, September 30, 2013

Stocks Falling into Final Hour on US Debt Ceiling/Govt Shutdown Worries, Rising European/Emerging Markets Debt Angst, Technical Selling, Energy/REIT Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 16.59 +7.31%
  • Euro/Yen Carry Return Index 138.50 -.02%
  • Emerging Markets Currency Volatility(VXY) 10.10 +.10%
  • S&P 500 Implied Correlation 50.0 +5.46%
  • ISE Sentiment Index 63.0 -18.18%
  • Total Put/Call 1.09 +15.96%
  • NYSE Arms 1.39 +10.78% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 81.98 +1.11%
  • European Financial Sector CDS Index 147.59 +1.62%
  • Western Europe Sovereign Debt CDS Index 87.93 +3.56%
  • Emerging Market CDS Index 292.98 -.33%
  • 2-Year Swap Spread 13.25 -.75 basis point
  • TED Spread 24.25 +.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -7.0 -.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .00% -1 basis point
  • Yield Curve 230.0 +1 basis point
  • China Import Iron Ore Spot $131.40/Metric Tonne -.38%
  • Citi US Economic Surprise Index 50.5 +4.0 points
  • Citi Emerging Markets Economic Surprise Index 6.20 +2.0 points
  • 10-Year TIPS Spread 2.19 +1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +125 open in Japan
  • DAX Futures: Indicating +9 open in Germany
  • Slightly Higher: On gains in my medical sector longs, index hedges and emerging markets shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  • Market Exposure: 25% Net Long

Today's Headlines

  • Banks’ Off-Balance-Sheet Risks Come Under Basel Scrutiny. Banks are set to face a broad international leverage limit that will catch off-balance sheet risks and prevent them from hiding their debt, according to the head of the Basel Committee on Banking Supervision. The Basel group is seeking to put a ceiling on indebtedness that will prove robust no matter how complicated a bank’s business model, Stefan Ingves, its chairman, said in an interview. 
  • European Stocks Retreat as U.S. Government Shutdown Looms. European stocks declined the most in a month, trimming the best quarter in four years, as the U.S. faced the first government shutdown in 17 years and Italian Prime Minister Enrico Letta fought to save his administration. UniCredit SpA and Intesa Sanpaolo SpA (ISP), Italy’s biggest banks, dropped more than 1 percent as the nation’s benchmark FTSE MIB Index slid 1.2 percent. Rio Tinto Group led mining companies lower after a measure of Chinese manufacturing missed a preliminary estimate. Aryzta AG rallied the most in six months as the Swiss supplier of bakery products reported results that topped projections. The Stoxx Europe 600 Index fell 0.6 percent to 310.46 at the close of trading, the biggest drop since Aug. 30.
  • Abe Bets It’s Different This Time With Sales Tax Rise. It’s different this time. The four most dangerous words in markets, according to former U.S. Treasury Secretary Larry Summers. With Japan set to raise its sales tax for the first time since 1997, Prime Minister Shinzo Abe’s political future rides on a different outcome than last time -- when the nation slid into a recession and the premier lost his job.
Wall Street Journal: 
Fox News:
  • When clock strikes midnight, does the government really shut down? Maybe not. Washington is bracing for the clock to strike midnight, with a government shutdown expected if Congress cannot strike a budget deal -- but despite the frenzy, the government might not turn into a pumpkin right away. Everybody is talking about a midnight deadline, because that is the official time that all discretionary spending (which is the portion that Congress controls) halts as the federal government rolls over from fiscal 2013 to fiscal 2014 on Oct. 1. That doesn't mean that everything stops immediately, however.
  • Market has more to worry about than the shutdown. The U.S. government can't stay closed forever, so by definition its threat to financial markets is temporary. Other headwinds, though, could present more lasting damage. At least three and as many as five challenges face investors once the smoke clears from the bruising Washington battle over funding the government.
Zero Hedge: 
  • Unilever warns slowdown in emerging markets has accelerated. Anglo-Dutch consumer goods company Unilever warned on Monday that a slowdown in its emerging markets had accelerated in the third quarter and it now expects underlying sales growth of 3 to 3.5 percent in the period. Developed markets remained flat to down, it said, and overall Unilever said it was on track to meet its 2013 priorities. It attributed the emerging markets slowdown to a significant currency weakening. "We continue to grow ahead of our markets and expect underlying sales growth to improve in quarter four," Chief Executive Paul Polman said.
  • Brazil central bank sees inflation high despite weak growth. Inflation in Brazil will remain stubbornly high well into 2015 even as the economy struggles to gain steam, the central bank said on Monday, raising market bets for higher borrowing costs in the future. In its quarterly inflation report, the bank lowered its 2013 inflation forecast to 5.8 percent from 6 percent previously. However, it revised its inflation view for 2014 to 5.7 percent from 5.4 percent previously and said it expects inflation at 5.5 percent in the third quarter of 2015. The bank also revised down its estimate for economic growth to 2.5 percent for this year from a previous 2.7 percent forecast. The bank sees growth keeping that pace until the second quarter of 2014.
Valor Economico:
Restructuring: Flowers slams Europe over inaction

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  • Brazil to See Credit Squeeze as Public Banks Retreat.
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.

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The Daily Reckoning:

Bear Radar

Style Underperformer:
  • Large-Cap Value -.54%
Sector Underperformers:
  • 1) Energy -1.22% 2) REITs -1.03% 3) Agriculture -.88%
Stocks Falling on Unusual Volume:
Stocks With Unusual Put Option Activity:
  • 1) ACHN 2) MPC 3) CAR 4) FDO 5) XLB
Stocks With Most Negative News Mentions:
  • 1) APC 2) XOM 3) MON 4) ORCL 5) DAL

Bull Radar

Style Outperformer:
  • Large-Cap Growth -.62%
Sector Outperformers:
  • 1) Medical Equipment +.14% 2) Oil Tankers +.09% 3) Hospitals +.06%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) ZIOP 2) FDO 3) IP 4) SH 5) NFX
Stocks With Most Positive News Mentions:
  • 1) INTC 2) JCP 3) AAPL 4) M 5) FB

Monday Watch

Weekend Headlines 
  • Government Shutdown 1 Day Away as Deal Evades Lawmakers. The Senate will reconvene tomorrow afternoon, when it will reject a House plan passed early today to delay and limit President Barack Obama’s Affordable Care Act. In response, the House would add “another provision” to the spending measure and send it back to the Senate, said Representative Kevin McCarthy, the top House Republican vote counter. The provision would “reflect the House” and would be one “the Senate can accept,” McCarthy of California said on “Fox News Sunday” without offering details. A likely option would end the government’s contribution to the health insurance of members of Congress and their staffs, as a way of testing Democrats’ willingness to make any changes to the health law, according to a leadership aide who spoke on condition of anonymity to discuss party strategy
  • China Factory Gauge Unexpectedly Misses Preliminary Estimate. A Chinese manufacturing index (EC11CHPM) rose less than analysts forecast in September, unexpectedly weakening from a preliminary estimate in a result that casts doubt on the strength of the economy’s rebound. The Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics rose to 50.2 in September from 50.1 in August. The final number was less than last week’s 51.2 preliminary reading and the 51.2 median estimate in a Bloomberg News survey. A similar gauge from the government is due tomorrow.
  • Rupiah Leads Emerging-Market Losses in Worst Quarter Since 2008. Indonesia’s rupiah is leading declines in emerging markets this quarter as the currency headed for its worst three-month performance since 2008 due to a record current-account deficit. Government bonds fell. The currency weakened 14.9 percent since the end of June to 11,658 per dollar as of 10 a.m. in Jakarta, the biggest loss among 24 developing-nation exchange rates tracked by Bloomberg. It fell 6.3 percent in September, the most since April 2009
  • Asian Stocks Fall, Paring Monthly Gain, Over U.S. Budget. Asian stocks fell, with the benchmark index paring its biggest monthly gain since 2012, on concern the U.S. government is headed for a shutdown amid a budget stalemate. Toyota Motor Corp., which gets 31 percent of its revenue in North America, declined 2.6 percent. BHP Billiton Ltd., Australia’s biggest oil producer, dropped 1.4 percent as crude fell. Mizuho Financial Group Inc., Japan’s third-largest bank, lost 3.6 percent after its lending unit was penalized by Japan’s banking regulator for failing to end transactions with “anti-social” groups. The MSCI Asia Pacific Index dropped 1.4 percent to 138.87 as of 11:01 a.m. in Tokyo, with all 10 industry groups falling.
  • Rubber Drops to 1-Month Low as Yen Gains on U.S. Budget Concern. Rubber dropped to the lowest level in more than a month as the Japanese currency climbed against the dollar, cutting the appeal of yen-denominated futures, amid concern the U.S. government is headed for a partial shutdown. The contract for March delivery on the Tokyo Commodity Exchange lost as much as 1.7 percent to 265.6 yen a kilogram ($2,717 a metric ton), the lowest level since Aug. 23, and was at 267 yen at 10:23 a.m. The drop pared gains for a most-active contract to 13 percent this quarter, the best rally since the three months through Dec. 31.
  • Gold Bulls Raise Wagers Most in Month on Stimulus: Commodities. Hedge funds’ combined holdings in gold futures rose the most this month as continued U.S. monetary stimulus spurred investors to sell short contracts and sent prices toward the first quarterly advance in a year. The net-long position in bullion jumped 12 percent to 78,654 futures and options in the week ended Sept. 24, the most since Aug. 27, U.S. Commodity Futures Trading Commission data show. Long wagers gained 1.8 percent and short bets fell 17 percent, the biggest drop in four weeks. Combined net-long holdings across 18 U.S.-traded commodities climbed 1.7 percent, the first gain in September.
  • Europe’s Record Jobless Rate Seen Resisting Recovery. Europe’s nascent economic recovery is too green to make any impact on the region’s jobs market yet, according to economists. Unemployment in the 17-nation euro area remained at a record high of 12.1 percent in August, according to the median estimate of 30 economists in a Bloomberg News survey. The European Union’s statistics office is due to publish the jobless numbers at 11 a.m. tomorrow in Luxembourg. “Europe is faced with a high level of structural unemployment and this is not going to change any time soon,” said Annamaria Grimaldi, an economist at Intesa Sanpaolo SpA in Milan. “The recovery is happening painfully slowly and that’s another reason why we’ll see jobless rates far above 11 percent well into 2015.”
Wall Street Journal:
  • Government Heads Toward Shutdown. Senate Doesn't Reconvene Until Monday Afternoon, Hours Before Deadline. The nation braced for a partial shutdown of the federal government, as time for Congress to pass a budget before a Monday midnight deadline grew perilously short and lawmakers gave no signs Sunday they were moving toward a resolution. Leaders of both parties said they wanted to avoid the first federal closure since 1996, but their public appearances seemed aimed more at affixing blame for the impasse. 
  • Health Law Hits Late Snags as Rollout Approaches. Technical Problems Remain as Oct. 1 Deadline Nears. Obama administration officials scrambling to get the health law's insurance marketplaces ready to open on Tuesday keep hitting technical problems, while government-funded field workers across the country say they aren't fully prepared to help Americans enroll in the program. 
  • Signs Raise Threat of a Red October. In the coming month, markets face four huge tests: the Washington debt crisis, the release of September employment data, third-quarter earnings releases and the Federal Reserve’s next policy meeting. All four of these horsemen could disrupt investments and some could tank the market. Money managers hope all will be nonevents and stocks will finish the year higher. But there are no guarantees.
Fox News:
  • Israel's Netanyahu to warn US, UN about Iran's 'smiley campaign'. Just days after the first conversation between the leaders of the U.S. and Iran in 34 years was hailed as a “breakthrough” in relations between the two countries, Israeli Prime Minister Benjamin Netanyahu is taking an unpopular message to the White House and the United Nations: Don't be fooled by Tehran's “sweet talk.” Netanyahu, who contends Iran is using conciliatory gestures as a smoke screen to conceal an unabated march toward a nuclear bomb, will meet with President Obama Monday to deliver strong words of caution to the U.S.
  • With shutdown just hours away, Republicans say Democrat-led Senate a no-show. The countdown to a government shutdown is now marked by hours as the Senate returns Monday afternoon to decide before midnight whether to accept the Republican House’s weekend spending-bill offer, make a counter-proposal or let the clock expire. House Republican leaders on Sunday chided Senate Majority Leader Harry Reid and others in the Democrat-led chamber for not hustling back to Capitol Hill to negotiate, after the lower chamber early Sunday morning passed its proposal, which includes a one-year delay on ObamaCare. “O Senate, where art thou,” said Tennessee Rep. Marsha Blackburn, riffing on the movie “O Brother, Where Art Thou.”
Zero Hedge:
Business Insider:
New York Times: 
  • Obamacare Is a Gigantic Shell Game. Here's where the shell game comes in: the administration says that the actual numbers of the insurance aren't important and what really matters is how much people will pay after the subsidies. But subsidies aren't free. They are paid for through higher taxes or greater deficit spending. And these taxes are a dead weight on the economy that impede economic growth. The dislocations are cascading through our economy. Millions of hourly workers are having their full-time jobs cut to part time, businesses are freezing hiring, spouses are losing coverage, major labor unions are calling for repeal and Obamacare's premium taxes and other costs are driving up the cost of insurance for everyone. This law is not ready for prime time. Congress should delay the law for a year and put together what both sides now know must be a bipartisan effort at reform that works with, rather than against, our economy.
LA Times:
  • 52% of Californians want $68-billion bullet train stopped, poll finds. A majority of voters want the California bullet train project stopped and consider it a waste of money, even as state political leaders have struggled to bolster public support and make key compromises to satisfy critics, a USC Dornsife/Los Angeles Times poll found. Statewide, 52% of the respondents said the $68-billion project to link Los Angeles and San Francisco by trains traveling up to 220 mph should be halted. Just 43% said it should go forward. The poll also shows that cracks in voter support are extending to some traditional allies, such as Los Angeles-area Democrats, who have embraced the concept of high-speed rail as a solution to the state's transportation problems.
The Daily Beast:
  • No. 2 nuke commander suspended amid casino probe. The No. 2 officer at the military command in charge of all U.S. nuclear war-fighting forces is suspected in a case involving counterfeit gambling chips at a western Iowa casino and has been suspended from his duties, officials said.
Der Spiegel: 
  • Schaeuble Prepares Rich Tax to Woo SPD in Coalition. Germany's Finance Minister Wolfgang Schaeuble is preparing a proposal to increase maximum income tax rate to 46% to 48%.
Weekend Recommendations
  • Bullish commentary on (MSFT), (BCO), (AMC) and (NOV).
  • Bearish commentary on (SFM). 
Night Trading
  • Asian indices are -1.25% to -.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 155.50 +5.5 basis points.
  • Asia Pacific Sovereign CDS Index 119.25 +3.0 basis points.
  • FTSE-100 futures -.83%.
  • S&P 500 futures -.62%.
  • NASDAQ 100 futures -.43%.
Morning Preview Links

Earnings of Note

  • (CALM)/.49
  • (DMND)/-.03
  • (PAYX)/.43
Economic Releases
9:00 am EST
  • ISM Milwaukee for September is estimated to rise to 50.0 versus 48.21 in August.
9:45 am EST
  • Chicago Purchasing Manager for September is estimated to rise to 54.0 versus 53.0 in August.
10:30 am EST
  • Dallas Fed Manufacturing for September is estimated at 5.0 versus 5.0 in August.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone CPI report, Canadian GDP report, China Manufacturing PMI, RBA rate decision and the Johnson Rice Energy Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

Sunday, September 29, 2013

Weekly Outlook

Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by

BOTTOM LINE: I expect US stocks to finish the week modestly lower on US debt ceiling/govt shutdown worries, rising European/Emerging Markets debt angst, more Mideast unrest, technical selling, earnings concerns and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Friday, September 27, 2013

Market Week in Review

S&P 500 1,691.75 -1.06%*

 photo noo_zps977105b7.png

The Weekly Wrap by

*5-Day Change

Weekly Scoreboard*

  • S&P 500 1,691.75 -1.06%
  • DJIA 15,258.20 -1.25%
  • NASDAQ 3,781.59 +.18%
  • Russell 2000 1,074.19 +.13%
  • S&P 500 High Beta 27.14 -.84%
  • Wilshire 5000 17,809 -.82%
  • Russell 1000 Growth 789.34 -.64%
  • Russell 1000 Value 853.61 -1.17%
  • Morgan Stanley Consumer 1,021.51 -1.77%
  • Morgan Stanley Cyclical 1,318.53 -.90%
  • Morgan Stanley Technology 826.03 -.43%
  • Transports 6,597.59 -1.42%
  • Utilities 482.19 -.65%
  • Bloomberg European Bank/Financial Services 101.57 -1.74%
  • MSCI Emerging Markets 41.44 -1.32%
  • HFRX Equity Hedge 1,120.94 -.25%
  • HFRX Equity Market Neutral 933.63 -.03%
  • NYSE Cumulative A/D Line 190,844 -.25%
  • Bloomberg New Highs-Lows Index 200 -755
  • Bloomberg Crude Oil % Bulls 24.14 -36.87%
  • CFTC Oil Net Speculative Position 320,758 -1.86%
  • CFTC Oil Total Open Interest 1,881,081 -2.35%
  • Total Put/Call .94 -10.48%
  • OEX Put/Call 10.89 +1,296.1%
  • ISE Sentiment 77.0 -9.41%
  • NYSE Arms 1.25 -21.38%
  • Volatility(VIX) 15.46 +17.83%
  • S&P 500 Implied Correlation 47.41 +.38%
  • G7 Currency Volatility (VXY) 8.65 -3.35%
  • Emerging Markets Currency Volatility (EM-VXY) 10.07 +2.44%
  • Smart Money Flow Index 11,327.80 -2.79%
  • Money Mkt Mutual Fund Assets $2.693 Trillion +1.35%
  • AAII % Bulls 36.0 -20.1%
  • AAII % Bears 30.6 +3.1%
Futures Spot Prices
  • CRB Index 286.98 -.16%
  • Crude Oil 102.87 -1.75%
  • Reformulated Gasoline 267.62 -.42%
  • Natural Gas 3.59 -2.66%
  • Heating Oil 299.01 -.56%
  • Gold 1,338.40 +.90%
  • Bloomberg Base Metals Index 191.94 -.04%
  • Copper 332.95 +.67%
  • US No. 1 Heavy Melt Scrap Steel 335.67 USD/Ton -2.04%
  • China Iron Ore Spot 131.90 USD/Ton +.08%
  • Lumber 341.80 -4.10%
  • UBS-Bloomberg Agriculture 1,428.38 +.76%
  • ECRI Weekly Leading Economic Index Growth Rate 4.9% +40 basis points
  • Philly Fed ADS Real-Time Business Conditions Index .0888 unch.
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 118.64 -.07%
  • Citi US Economic Surprise Index 46.50 +2.1 points
  • Citi Emerging Markets Economic Surprise Index 4.20 +2.1 points
  • Fed Fund Futures imply 42.0% chance of no change, 58.0% chance of 25 basis point cut on 10/30
  • US Dollar Index 80.52 +.12%
  • Euro/Yen Carry Return Index 138.52 -1.12%
  • Yield Curve 229.0 -11 basis points
  • 10-Year US Treasury Yield 2.62% -11 basis points
  • Federal Reserve's Balance Sheet $3.691 Trillion +.32%
  • U.S. Sovereign Debt Credit Default Swap 31.0 +38.5%
  • Illinois Municipal Debt Credit Default Swap 173.0 +.39%
  • Western Europe Sovereign Debt Credit Default Swap Index 84.91 -2.30%
  • Asia Pacific Sovereign Debt Credit Default Swap Index 119.19 +21.4%
  • Emerging Markets Sovereign Debt CDS Index 247.50 +20.6%
  • Israel Sovereign Debt Credit Default Swap 120.54 +3.03%
  • Egypt Sovereign Debt Credit Default Swap 650.0 unch.
  • China Blended Corporate Spread Index 378.0 +13 basis points
  • 10-Year TIPS Spread 2.18% -6 basis points
  • TED Spread 23.75 -.25 basis point
  • 2-Year Swap Spread 14.0 -1.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -6.5 -.25 basis point
  • N. America Investment Grade Credit Default Swap Index 80.56 +2.04%
  • European Financial Sector Credit Default Swap Index 145.23 +3.47%
  • Emerging Markets Credit Default Swap Index 293.95 +12.03%
  • CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 110.0 -1.5 basis points
  • M1 Money Supply $2.554 Trillion -.11%
  • Commercial Paper Outstanding 1,064.0 +1.70%
  • 4-Week Moving Average of Jobless Claims 308,000 -6,800
  • Continuing Claims Unemployment Rate 2.2% +10 basis points
  • Average 30-Year Mortgage Rate 4.32% -18 basis points
  • Weekly Mortgage Applications 451.90 +5.53%
  • Bloomberg Consumer Comfort -28.10 +1.3 points
  • Weekly Retail Sales +3.90% -10 basis points
  • Nationwide Gas $3.42/gallon -.07/gallon
  • Baltic Dry Index 2,046 +7.5%
  • China (Export) Containerized Freight Index 1,090.62 -1.30%
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 25.0 +11.11%
  • Rail Freight Carloads 262,897 -1.12%
Best Performing Style
  • Small-Cap Growth +.33%
Worst Performing Style
  • Large-Cap Value -1.17%
Leading Sectors
  • Computer Hardware +1.1%
  • HMOs +1.0%
  • Telecom +.5%
  • Restaurants +.4%
  • Gaming +.2%
Lagging Sectors
  • Road & Rail -1.7% 
  • Networking -1.9%
  • Steel -2.1%
  • Medical Equipment -3.1%
  • Coal -3.9%
Weekly High-Volume Stock Gainers (27)
Weekly High-Volume Stock Losers (16)
Weekly Charts
*5-Day Change

Stocks Falling into Final Hour on European/Emerging Markets Debt Angst, US Debt Ceiling Worries, Technical Selling, Homebuilding/Tech Sector Weakness

Click Here for Today's Market Take.

Broad Equity Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 15.77 +12.16%
  • Euro/Yen Carry Return Index 138.60 -.44%
  • Emerging Markets Currency Volatility(VXY) 10.09 +1.61%
  • S&P 500 Implied Correlation 47.85 +6.73%
  • ISE Sentiment Index 79.0 -11.24%
  • Total Put/Call .95 +35.71%
  • NYSE Arms 1.13 +1.85% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 80.97 +1.54%
  • European Financial Sector CDS Index 145.23 +3.21%
  • Western Europe Sovereign Debt CDS Index 84.91 -.11%
  • Emerging Market CDS Index 293.88 +3.78%
  • 2-Year Swap Spread 14.0 +.75 basis point
  • TED Spread 23.75 -1.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -6.5 -.25 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .01% +1 basis point
  • Yield Curve 229.0 -1 basis point
  • China Import Iron Ore Spot $131.90/Metric Tonne -1.42%
  • Citi US Economic Surprise Index 46.5 -1.3 points
  • Citi Emerging Markets Economic Surprise Index 4.20 +.3 point
  • 10-Year TIPS Spread 2.18 -2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating -25 open in Japan
  • DAX Futures: Indicating +12 open in Germany
  • Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  • Market Exposure: 25% Net Long

Today's Headlines

  • Osborne Increases BOE Home-Plan Checks as Bubble Fears Rise. Chancellor of the Exchequer George Osborne will introduce annual checks with the Bank of England over his Help-to-Buy program as he responds to mounting concerns that the plan may fuel excessive house-price increases. Osborne and the BOE’s Financial Policy Committee will reassess the program, which helps buyers purchase homes with as little as a 5 percent deposit, every September starting next year, the Treasury in London said. The FPC will advise Osborne on whether key parameters, such as the price cap and the fee charged to lenders, remain appropriate. The chancellor’s plan has drawn criticism from the International Monetary Fund and Business Secretary Vince Cable who say it may spark a property bubble.
  • European Stocks Fall on Italy Auction, U.S. Budget Woes. European stocks declined as Italian bonds fell after a debt auction and concern grew that budget wrangling in Washington will lead to a government shutdown. Vallourec (VK) SA plunged 8.2 percent after warning that slower drilling in Brazil and a weak real may hurt profit. Vestas Wind Systems A/S (VWS) rose to its highest price since June 2011 after Mitsubishi Heavy Industries Ltd. and the Danish turbine maker agreed to form a venture to develop offshore wind energy. The Stoxx Europe 600 Index fell 0.3 percent to 312.18 at the close of trading.
  • Rubber Falls to One-Month Low as Stronger Yen Reduces Appeal. Rubber declined to the lowest level in a month, paring a quarterly advance, as a strengthening Japanese currency cut the appeal of the commodity used in tires. The contract for March delivery on the Tokyo Commodity Exchange lost 2.7 percent to end at 270.2 yen a kilogram ($2,741 a metric ton), the lowest settlement since Aug. 30. Futures have gained 14 percent this quarter, the first such climb this year, paring losses to 11 percent for the year.
  • Goldman Sachs(GS), Morgan Stanley(MS) Estimates Lowered by Hintz. Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) had their earnings estimates lowered by Brad Hintz, a Sanford C. Bernstein & Co. analyst, amid a decline in trading he called “a full-scale rout.” Hintz cut Goldman Sachs’s third-quarter per-share earnings estimate by 15 percent to $2.62 and the full-year estimate by 8.6 percent to $15.59 per share, according to a note today about the two New York-based banks. Morgan Stanley’s per-share third-quarter estimate was decreased 20 percent to 41 cents, and the 2013 figure dropped 4.8 percent to $1.98. “While the third quarter is typically seasonally soft, Q3 2013 appears to be turning into a full-scale rout in trading as weak activity and limited risk-taking constrained performance,” Hintz wrote. Fixed-income trading volume could decline 20 percent to 25 percent on average in the three months ended Sept. 30, he wrote.
Wall Street Journal:
Fox News:
  • Blackstone(BX): We're in an 'epic credit bubble'. One of the world's largest investment firms believes the financial system is overly leveraged. "We are in the middle of an epic credit bubble, in my opinion, the likes of which I haven't seen in my career in private equity," Joseph Baratta, The Blackstone Group's global head of private equity, said Thursday night at the Dow Jones Private Equity Analyst Conference in New York City. "The cost of a high yield bond on an absolute coupon basis is as low as it's ever been."
Zero Hedge:
Business Insider:
Washington Times:
Real Clear Politics:
  • Japan could face debt downgrade if budget deficit doesn't shrink: S&PJapan could face a debt downgrade if it does not shrink its budget deficit, which is unlikely to return to primary balance by a targeted date of fiscal 2020, even if the prime minister's policies go well, a senior official of Standard & Poor's said. Japan's outstanding debt burden is the highest in the world at 1,000 trillion yen, or more than twice the size of its economy. Standard & Poor's remains doubtful about the scale of Japanese welfare reform and how much spending can be cut, Takahira Ogawa, director of sovereign ratings at the agency, told reporters on Friday.
  • Brazil sees private banks slowing loan disbursements pace. Brazil's private-sector banks will keep slowing the pace of new loan disbursements through the end of the year, the central bank said on Friday, a sign that an approach to avoiding risky lending will stretch for a longer period than previously thought. The central bank cut the estimate for loan book growth among domestic non-government lenders to 6 percent from a prior 10 percent forecast. Likewise, it lowered the same estimate for foreign lenders operating in the country to 7 percent from 8 percent previously.
  • BlackBerry(BBRY) confirms deep loss and revenue drop. BlackBerry Ltd reported a quarterly loss of nearly $1 billion on Friday, in line with a warning it gave last week, just days after the smartphone maker accepted its largest shareholder's tentative $4.7 billion bid to take it private. The report showed Blackberry turned in a particularly limp performance in Latin America, a region it recently touted as a enthusiastic supporter of its devices.
Financial Times:
  • Obama and Republicans remain poles apart as twin crises loom. Days from the first deadline in a series of cascading budget crises, President Barack Obama and his Republican opponents remain far apart on resolving their latest stand-off over the reach of government, symbolised by his health reforms.