Thursday, October 31, 2013

Stocks Slightly Higher into Final Hour on US Economic Data, Short-Covering, Investor Performance Angst, Healthcare/Tech Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 13.34 -2.27%
  • Euro/Yen Carry Return Index 139.38 -1.22%
  • Emerging Markets Currency Volatility(VXY) 8.11 +3.97%
  • S&P 500 Implied Correlation 39.26 -3.71%
  • ISE Sentiment Index 142.0 +56.04%
  • Total Put/Call .89 -8.25%
  • NYSE Arms .98 +26.11% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 72.85 -.29%
  • European Financial Sector CDS Index 117.94 -2.40%
  • Western Europe Sovereign Debt CDS Index 70.0 +1.45%
  • Emerging Market CDS Index 270.21 +.06%
  • 2-Year Swap Spread 12.0 +.25 basis point
  • TED Spread 20.5 -.75 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -4.0 -1.0 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .04% +1 basis point
  • Yield Curve 224.0 +3 basis points
  • China Import Iron Ore Spot $131.90/Metric Tonne +.53%
  • Citi US Economic Surprise Index 3.80 +5.9 points
  • Citi Emerging Markets Economic Surprise Index -11.10 -2.0 points
  • 10-Year TIPS Spread 2.17 -1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +128 open in Japan
  • DAX Futures: Indicating +7 open in Germany
  • Slightly Higher: On gains in my tech sector longs and emerging markets shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  • Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:
  • Mid-Cap Value -.28%
Sector Underperformers:
  • 1) Education -5.30% 2) Gold & Silver -3.61% 3) Homebuilders -1.63%
Stocks Falling on Unusual Volume:
Stocks With Unusual Put Option Activity:
  • 1) BYD 2) CIEN 3) WTW 4) JDSU 5) MGM
Stocks With Most Negative News Mentions:
  • 1) AVP 2) JDSU 3) HLF 4) V 5) C

Bull Radar

Style Outperformer:
  • Mid-Cap Growth -.02%
Sector Outperformers:
  • 1) Hospitals +2.08% 2) Networking +1.43% 3) HMOs +1.17%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) APO 2) TWM 3) ACHN 4) WTW 5) BYD
Stocks With Most Positive News Mentions:
  • 1) EL 2) EXPE 3) YHOO 4) CLX 5) AMZN

Thursday Watch

Evening Headlines 
  • Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages. Japan’s salaries extended the longest slide since 2010, even as Prime Minister Shinzo Abe urges companies to raise workers’ wages as part of his bid to reflate the world’s third-largest economy. Regular wages excluding overtime and bonuses fell 0.3 percent in September from a year earlier, marking a 16th straight month of decline, according to labor ministry data released today.
  • China’s Stocks Decline as Earnings Drag on Banks to Drugmakers. China’s stocks fell, heading for the first monthly loss since June, as earnings (SHCOMP) at banks and consumer staple producers disappointed investors. Developers rallied. China Minsheng Banking Corp. slid 2.3 percent after net income trailed estimates. Inner Mongolia Yili Industrial Group Co. and Guangzhou Baiyunshan Pharmaceutical Holdings Co. both slumped by the daily 10 percent limit after posting earnings. Poly Real Estate Group Co. led a gauge of property stocks to its biggest gain in three weeks after President Xi Jinping said the government will accelerate building public housing. The Shanghai Composite Index retreated 0.7 percent to 2,145.72 at 11:30 a.m. local-time break.
  • Asian Stocks Pare Monthly Gain as Fed Fuels Tapering Bets. Asian stocks fell, trimming the best two-month rally for the regional benchmark gauge since the start of 2012, after the Federal Reserve fueled bets it may start paring stimulus sooner than previously forecast. Alacer Gold Corp. sank 3.5 percent in Sydney as the price of the precious metal declined. Honda Motor Co. (7267) lost 1.8 percent after Japan’s third-largest carmaker reported second-quarter profit that missed analysts’ estimates amid slowing motorcycle sales in Southeast Asia. National Australia Bank Ltd. (NAB) retreated 2.3 percent as expenses climbed at the country’s largest lender by assets. The MSCI Asia Pacific Index dropped 0.4 percent to 142.70 as of 9:37 a.m. in Hong Kong, with eight of the 10 industry groups on the measure retreating.
  • Rubber Poised for Second Monthly Drop Amid Fed Tapering Bets. Rubber declined for the first time in four days as speculation the Federal Reserve may cut stimulus sooner than previously expected weighed on investor sentiment. The contract for delivery in April, the most active by volume on the Tokyo Commodity Exchange, lost as much as 1.3 percent to 261 yen a kilogram ($2,651 a metric ton) and was at 261.3 yen at 11:34 a.m. local time. Futures fallen 1.7 percent this month
  • Rebar Set for Monthly Loss on China’s Weak Winter Demand Outlook. Steel reinforcement-bar futures in Shanghai headed for a monthly loss amid concern that demand for the building material will be weak in winter ahead. Rebar for delivery in May, the most-active contract by volume on the Shanghai Futures Exchange, fell as much as 0.4 percent to 3,630 yuan ($596) a metric ton, before trading at 3,638 yuan at 10:16 a.m. local time. The contract lost 1.4 percent this month.
  • Spying Disclosures Seen Undermining Exports of U.S. Technology. The disclosure of U.S. spying on allies may temporarily undercut efforts by American companies to sell technology overseas, according to a former official with the Department of Homeland Security. “We are going to go through a period of substantial skepticism abroad about any technology we’re selling people,” Stewart Baker, a Washington lawyer who headed the department’s policy directorate, said today at a forum on cybersecurity hosted by Bloomberg Government and Symantec Corp. 
  • U.S. Weighs Scanning Social Media for Clues to Rogue Workers. The U.S. government is studying whether it can scour social-media websites for clues about potential threats from workers such as Edward Snowden and the Washington Navy Yard shooter. Both Snowden, a former National Security Agency contractor who leaked government secrets, and Aaron Alexis, who shot and killed 12 people, had security clearances. The cases have exposed a flawed system of vetting such employees, some of whom are slipping through the cracks. The pilot studies, which looked at the feasibility of using automated records checks as well as social-media websites, have turned up “actionable information,” Brian Prioletti, an assistant director in the Office of the National Counterintelligence Executive, said in testimony prepared for a congressional hearing tomorrow.
  • BofA(BAC) Warns of More Legal Disputes Ahead as Potential Costs Surge. Bank of America Corp., the second-biggest U.S. lender, said the Department of Justice may file another suit tied to mortgage bonds and raised its estimate of possible added losses from legal and regulatory matters by 82 percent to $5.1 billion. A U.S. Attorney’s office intends to recommend civil action against the Charlotte, North Carolina-based lender tied to the bundling of home loans into securities, the firm said today in its quarterly regulatory filing. The bank also said its eventual legal costs could exceed even its revised estimates.
Wall Street Journal:
  • McCain Threatens to Delay Confirmation of Yellen as Fed Chief. Republican Senator to Use Delaying Tactic in Bid to Obtain Information on Benghazi Attacks from Obama Administration. GOP Sens. John McCain and Lindsey Graham will attempt to delay confirmation of Janet Yellen to lead the Federal Reserve in a bid to obtain information from the Obama administration about the attacks on U.S. facilities in Benghazi, Libya, Mr. McCain said Wednesday. Ms. Yellen, Mr. Obama's pick to become the first chairwoman of the central bank, is expected to secure the support of nearly all Democrats, but a handful of opponents among Senate Republicans have surfaced recently. Sens. Graham, of South Carolina, and McCain, of Arizona, threatened this week to put a "hold" on Ms. Yellen's nomination in an effort to press the White House to release more information about the Benghazi attacks on Sept. 11, 2012. "That's the only way we get their attention," Mr. McCain said in an interview Wednesday evening. "It's the only way we get any response." Mr. Graham's office confirmed he would also hold up Ms. Yellen's nomination to press for more information about the Benghazi attacks.
  • U.S. Seeks Chinese Coordination on Oil Reserves. Over the past five years, China has amassed hundreds of millions of barrels in strategic petroleum reserves. Now the U.S. wants China to work with it to coordinate releases of those barrels when needed to help ensure oil market stability.
  • U.S. General Decries Spiraling Iraq Violence. The top U.S. military commander in the Middle East said Iraq has entered a downward spiral of violence that threatens to drive the country's prime minister further into the hands of Iran.  
  • U.S. Blasts Germany's Economic Policies. Employing unusually sharp language, the U.S. on Wednesday openly criticized Germany's economic policies and blamed the euro-zone powerhouse for dragging down its neighbors and the rest of the global economy. In its semiannual currency report, the Treasury Department identified Germany's export-led growth model as a major factor responsible for the 17-nation currency bloc's weak recovery. The U.S. identified Germany ahead of its traditional target, China, and the most-recent perceived problem country, Japan, in the "key findings" section of the report.
Fox News:
  • Bankrupt solar panel firm took stimulus money, left a toxic mess, says report. A Colorado-based solar company that got hundreds of millions of dollars in federal loan guarantees before going belly-up didn't just empty taxpayers' wallets - it left behind a toxic mess of carcinogens, broken glass and contaminated water, according to a new report.  The Abound Solar plant, which got $400 million in federal loan guarantees in 2010, when the Obama administration sought to use stimulus funds to promote green energy, filed for bankruptcy two years later. Now its Longmont, Colo., facility sits unoccupied, its 37,000 square feet littered with hazardous waste, broken glass and contaminated water. The Northern Colorado Business Report estimates it will cost up to $3.7 million to clean and repair the building so it can again be leased.
  • Obamacare, shutdown hurt Obama's standing: NBC News/WSJ poll. The troubled rollout of the new health-care law and recent government shutdown have exacted a major toll on President Barack Obama's standing, a new NBC News/Wall Street Journal poll has found. Obama's job approval rating has tumbled by 5 percentage points in less than three weeks, the survey showed. In the weakest showing of his five-year tenure, just 42 percent of Americans approve of the president's job performance, while 51 disapprove.
Zero Hedge:
Business Insider:
The Blaze:
  • Sins of past, present and future haunt banks. The cost to banks of cleaning up past misdeeds has soared over $100 billion and is leaving lenders running scared from areas that put them in potential danger of upsetting regulators. This week alone, Deutsche Bank, UBS and Lloyds revealed mounting legal bills and Dutch agricultural specialist Rabobank became the latest lender to be fined in a global scandal over interest rate rigging with a $1.1 billion penalty. Bankers fear that paying for the sins of the past and preventing future misdemeanours could be the biggest headache yet for an industry still trying to bulk up on capital and liquidity reserves in the wake of the 2007-09 financial crisis.
  • Starbucks(SBUX) 2014 profit forecast falls short, shares drop. Starbucks Corp conservatively forecast 2014 profit below Wall Street's view, despite fourth quarter profits that jumped 34 percent on strong traffic gains and an increase in spending by its customers. Shares in the world's biggest coffee chain, one of the economy-defying growth companies such as burrito chain Chipotle Mexican Grill and upscale grocer Whole Foods Market Inc , fell 2.5 percent after hours to $78.80.
  • Visa(V) profit falls as U.S. consumer spending weakens. Visa Inc, the world's largest credit and debit card company, reported a 28 percent fall in quarterly profit due to a higher income tax provision and was slightly pessimistic about its outlook in the face of soft U.S. consumer spending. Visa shares fell 3.1 percent to $197.50 in after-hours trade while those of rival MasterCard Inc fell 1 percent, ahead of its results on Thursday.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.75% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 131.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 99.0 -.25 basis point. 
  • FTSE-100 futures -.18%.
  • S&P 500 futures -.34%.
  • NASDAQ 100 futures -.55%.
Morning Preview Links

Earnings of Note

  • (EL)/.73
  • (ABC)/.74
  • (STRA)/.04
  • (MA)/6.94
  • (PWR)/.43
  • (AVP)/.19
  • (CAH)/.85
  • (COP)/1.45
  • (XOM)/1.76
  • (CLX)/1.00 
  • (AAP)/1.42
  • (ZEUS)/.38
  • (CI)/1.62
  • (DISCA)/.73
  • (SPF)/.12
  • (NEM)/.32
  • (FLR)/1.03
  • (MTZ)/.60
  • (FSLR)/.94
  • (MHK)/1.90
  • (PZZA)/.65
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 338K versus 350K the prior week.
  • Continuing Claims are estimated to fall to 2870K versus 2874K prior.
9:00 am EST
  • ISM Milwaukee for October is estimated to fall to 53.0 versus 55.0 in September.
9:45 pm EST
  • Chicago Purchasing Manager for October is estimated to fall to 55.0 versus 55.7 in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The BoJ rate decision, German Retail Sales, Eurozone Unemployment/CPI, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, RBC Consumer Outlook Index for November and the (EW) analyst meeting 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 50% net long heading into the day.

Wednesday, October 30, 2013

Stocks Falling into Final Hour on Rising Global Growth Fears, Emerging Markets Debt Angst, Technical Selling, Biotech/Homebuilding Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 13.79 +2.76%
  • Euro/Yen Carry Return Index 141.15 +.31%
  • Emerging Markets Currency Volatility(VXY) 7.82 +.77%
  • S&P 500 Implied Correlation 41.84 +3.65%
  • ISE Sentiment Index 87.0 -28.69%
  • Total Put/Call .98 +36.1%
  • NYSE Arms .77 -13.22% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 72.93 +2.48%
  • European Financial Sector CDS Index 120.85 +2.45%
  • Western Europe Sovereign Debt CDS Index 69.0 -1.43%
  • Emerging Market CDS Index 270.53 +2.50%
  • 2-Year Swap Spread 11.75 unch.
  • TED Spread 21.25 +1.0 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -3.0 +.75 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .03% -1 basis point
  • Yield Curve 221.0 +1 basis point
  • China Import Iron Ore Spot $131.20/Metric Tonne -.08%
  • Citi US Economic Surprise Index -2.1 -7.1 points
  • Citi Emerging Markets Economic Surprise Index -9.10 -4.7 points
  • 10-Year TIPS Spread 2.18 -1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +68 open in Japan
  • DAX Futures: Indicating -12 open in Germany
  • Slightly Higher: On gains in my index hedges 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

  • China’s Largest Banks Post Biggest Surge in Bad Loans Since 2010. China’s top four banks posted their biggest increase in soured loans since at least 2010 as a five-year credit spree left companies with excess manufacturing capacity and slower profit growth amid an economic slowdown. The rise in defaults adds to concerns bank profitability may decline as policy makers seek to trim production at cement makers to paper manufacturers that have gorged on credit since 2008, while urging lenders to build buffers to cover loan losses. China’s biggest state-run banks are trading near record-low valuations as investors brace for a surge in bad debts and slower credit growth. “Against the backdrop of a slowing economy and overcapacity problems in some industries, some loans are gradually going bad,” said May Yan, a Hong Kong-based analyst at Barclays Plc. “We will see more bad loans forming because of the legacy of over expansion."   
  • European Stocks Are Little Changed as Volkswagen Advances. European stocks were little changed at a one-week high as companies from Eni SpA (ENI) to Volkswagen AG posted profit that exceeded estimates, while a gauge of telecommunications companies retreated. Eni, Italy’s biggest oil company, climbed 1.3 percent. Volkswagen posted its biggest gain in 15 months as Europe’s largest carmaker said cost cutting contributed to higher earnings. TomTom NV added 3.4 percent after the Dutch maker of navigation systems raised its forecast for 2013. Belgacom SA dropped 5.3 percent as a competitor cut the price of its mobile-phone plans. The Stoxx Europe 600 Index added less than 0.1 percent to 320.8 at the close of trading, after earlier climbing as much as 0.7 percent
  • WTI Crude Decreases as U.S. Stockpiles Climb. WTI for December delivery declined $1.18, or 1.2 percent, to $97.02 a barrel at 1:31 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 5.2 percent lower than the 100-day average. Prices are down 5.2 percent this month after losing 4.9 percent in September.
  • Obama Health Vow Won’t Shield Millions From Cancellation. Obama administration officials knew by June 2010 that as many as 10 million people with individual insurance probably would be thrown off existing plans. That didn’t stop Obama from coming back to the line over and over, saying as recently as June 2012, “If you’re one of the more than 250 million Americans who already have health insurance, you will keep your health insurance.” Republican congressional leaders yesterday seized on reports that hundreds of thousands of Americans received insurance cancellation notices, questioning the president’s credibility and renewing calls to delay provisions of the health-care law. As many as 80 percent of people currently on individual health plans may have to find new health insurance for next year, said Robert Laszewski, an insurance-industry consultant in Arlington, Virginia. He estimates that 19 million people currently hold such policies. “If the president knew that these letters were coming and still indicated that you could keep your health care plan if you liked it, now that raises some serious questions about the sales job of Obamacare,” Cantor said as he emerged from a party leadership meeting. Obama has been using the line about people keeping their insurance for years, dating back to his 2008 campaign for president, including at a presidential debate with Republican John McCain, an Arizona senator. 
  • Options Market Hit With Data Disruptions as VIX Lurches. Data transmission was snarled in parts of the options market today as one of the biggest U.S. venues, International Securities Exchange LLC, reported issues disseminating prices and the industry’s benchmark gauge twice swung erratically.
Wall Street Journal: 
  • Federal Reserve Holds Bond Purchases Steady. The Federal Reserve on Wednesday held steady on its signature $85 billion per-month bond-buying program and gave very few new signals on when officials expect to pull back on the program or how they see the economic outlook changing. The Fed's policy-making committee showed itself to be effectively in a wait-and-see mode on the bond program, leaving investors in a continued guessing game about the path of a Fed policy which has been an important driver of asset prices and interest rates. In June Fed chairman Ben Bernanke said he expected the Fed to start pulling back this year, but with only one more Fed policy meeting in December before year-end, that now looks less certain. "[T]he Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," the Fed said in its statement Wednesday, repeating language it used in September. The Fed made very few changes to its description of current economic conditions. It said that the economy "continued to expand at a moderate pace," and labor markets "have shown some further improvement." The Fed acknowledged that the "recovery in the housing sector slowed somewhat in recent months," one of the most notables change it made in its statement. 
  • Three Takeaways on the Fed’s Policy Statement – December Taper Not Off the Table by Jon Hilsenrath.
  • The Outrage Arrives. You can't keep your insurance because Democrats don't want you to control your own health-care spending. The White House has issued a clarification. When the president said if you like your insurance plan you can keep it, what he meant was you can keep it if he likes it. Hundreds of thousands of Americans who are getting policy cancellation notices this month can't be as surprised as they pretend to be. President Obama made it clear at his 2010 health care summit what he thought of their taste in insurance. "It's the equivalent of Acme Insurance that I had for my car. . . . It's basically not health insurance," he explained. "It's house insurance. . . .
Fox News:
Zero Hedge: 
Business Insider: 
The Star Online:
  • China GDP figures wrong by US$610bil: report. China's economy would be at least 3.7 trillion yuan (US$610bil) bigger than Beijing thinks if the country's local government statistics were to be believed, state media reported Wednesday. The Economic Information Daily tallied up gross domestic product (GDP) data from 28 of mainland China's 31 provincial-level authorities, and arrived at 42.4 trillion yuan for the first nine months of the year. But the figure for the whole country, already announced by Beijing, is 3.7 trillion yuan lower. The discrepancy – which has been in place for more than two decades – has been widening rapidly in recent years, the Economic Information Daily said. The reliability of Chinese economic data has long been in doubt as local officials tend to massage the figures upwards in pursuit of promotion and the newspaper, which is run by the official Xinhua news agency, pointed to the same problem. "Some regions may have inflated the statistics due to their distorted perception of achievements, given the fact that the performance assessment of local governments is often linked with GDP growth," the report quoted an unnamed National Bureau of Statistics official as saying.

Bear Radar

Style Underperformer:
  • Small-Cap Growth -1.33%
Sector Underperformers:
  • 1) Alternative Energy -1.84% 2) Biotech -1.52% 3) Airlines -1.44%
Stocks Falling on Unusual Volume:
Stocks With Unusual Put Option Activity:
  • 1) EXC 2) GRA 3) HES 4) ETFC 5) WU
Stocks With Most Negative News Mentions:
  • 1) CBG 2) IACI 3) JPM 4) SOHU 5) CRUS

Bull Radar

Style Outperformer:
  • Large-Cap Growth -.14%
Sector Outperformers:
  • 1) Gold & Silver +1.39% 2) HMOs +.64% 3) Restaurants +.44%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) IACI 2) WU 3) BWLD 4) AOL 5) TASR
Stocks With Most Positive News Mentions:
  • 1) BA 2) CCJ 3) GOOG 4) GRMN 5) LNKD

Wednesday Watch

Evening Headlines 
  • Moody’s Discussed Stripping New Zealand of Its Last AAA Rating. Moody’s Investors Service considered stripping New Zealand of its sole remaining top credit rating amid concern the nation’s current-account deficit is exacerbating its vulnerability to external shocks. New Zealand’s reliance on overseas investors means it can face difficulties when crises such as the Christchurch earthquakes and Fonterra Cooperative Group Ltd.’s contaminated milk scare occur, Steven Hess, Senior Vice President at Moody’s in New York, said in an interview in Wellington today. Moody’s confirmed its stable Aaa rating for the nation on Sept. 2.
  • Japan Regulator Widens Probe Into Crime Loans by Big Banks. Japan’s financial regulator plans to inspect the nation’s three largest lenders, widening a probe into credit given to gangsters to include Mitsubishi UFJ Financial Group Inc. (8306) and Sumitomo Mitsui Financial Group Inc. (8316) The inspections are to determine whether their banking units are complying with rules including those meant to curb transactions with criminal organizations, Hiroki Kato, an official at the Financial Services Agency, said by telephone yesterday. The reviews will start Nov. 5, another FSA official said, declining to be identified because of the agency’s policy. 
  • Japan Industrial Output Rises Less Than Forecast in September. Japan’s industrial output rose less than forecast in September, underlining the challenge for Prime Minister Shinzo Abe as he tries to stoke a sustained expansion in the world’s third-biggest economy. Production increased 1.5 percent from the previous month, the trade ministry said in Tokyo today, below the median estimate for a gain of 1.8 percent in a Bloomberg News survey of 30 economists.
  • Japan Tobacco to Cut Workers and Shut Four Plants, NHK Reports. Japan Tobacco Inc. (2914)’s parent company plans to cut 1,600 workers, or about 20 percent of its workforce, and close four of its nine plants in the country, NHK reported, citing people familiar with the situation. Japan Tobacco, seller of the Mevius brand, faces a decline in demand in its home market amid a shrinking population.
  • Asian Stocks Climb While Silver Slips as Oil Extends Drop. Asian stocks rose, with the benchmark index heading for a monthly gain, and bond risk fell before the conclusion of the Federal Reserve’s two-day policy meeting. Emerging currencies weakened and oil dropped. The MSCI Asia Pacific Index advanced 0.6 percent at 1 p.m. in Tokyo
  • Rebar Advances as Concern China Will Tighten Policy Dissipates. Steel reinforcement-bar futures in Shanghai climbed as concern that China’s central bank would start tightening monetary policy abated. Rebar for delivery in May, the most-active contract by volume on the Shanghai Futures Exchange, rose as much as 0.4 percent to 3,622 yuan ($595) a metric ton and was at 3,614 yuan at 10:41 a.m. local time
  • Rubber Climbs for Third Day on Weaker Yen Before Fed Decision. Rubber advanced for a third day as Japan’s currency weakened against the dollar, raising the appeal of yen-denominated futures, amid expectations the Federal Reserve will maintain economic stimulus. The contract for delivery in April, the most active by volume on the Tokyo Commodity Exchange, advanced as much as 1.4 percent to 264.8 yen a kilogram ($2,697 a metric ton) and traded at 263.8 yen at 10:20 a.m. The yen weakened to 98.27 per dollar today before trading little changed. It dropped the previous three sessions.
  • Italian Bank Foundations Under Siege as Visco Seeks Overhaul. Italy’s banking foundations, the biggest shareholders in the country’s financial industry, are under siege as their leaders gather in Rome today. Bank of Italy Governor Ignazio Visco wants them to loosen their grip on management. The International Monetary Fund has urged an overhaul of an ownership structure vulnerable to cronyism. In the last 12 months, their appointees at the banks were ousted in Genoa and probed by prosecutors in Siena.
Wall Street Journal: 
  • Canceled Policies Heat Up Health Fight. Concerns Extend Beyond Troubled Insurance Website. Problems surrounding the launch of the federal health-care law broadened, as concerns that thousands of Americans are getting insurance-cancellation notices bubbled over at a hearing on Capitol Hill.
  • IMF Asia Head: Don't See Need for Further BOJ Easing. The International Monetary Fund doesn't think the Bank of Japan needs to expand its already ultra-loose monetary policy, the multilateral lender's Asia head said Wednesday, calling instead for concrete action on Prime Minister Shinzo Abe's much-touted growth strategy. "We currently don't see a need for further monetary easing," said Anoop Singh, director of the IMF's Asia and Pacific Department, in a media roundtable. "Rather, the priority now is to advance growth reforms. For Abenomics to work, Japan's long-term economic problems need to be tackled."
  • The ObamaCare Awakening. Americans are losing their coverage by political design. For all of the Affordable Care Act's technical problems, at least one part is working on schedule. The law is systematically dismantling the individual insurance market, as its architects intended from the start. The millions of Americans who are receiving termination notices because their current coverage does not conform to Health and Human Services Department rules may not realize this is by design. Maybe they trusted President Obama's repeated falsehood that people who liked their health plans could keep them. But Americans should understand that this month's mass cancellation wave has been the President's political goal since 2008. Liberals believe they must destroy the market in order to save it.
  • A Negative View From The 'Skew'. The latest record run for U.S. stocks is sending up caution flags in two corners of the options market that rack investor sentiment. The latest record run for U.S. stocks is sending up caution flags in two corners of the options market that track investor sentiment. Hefty demand for options that would benefit from a further rise in stock prices recently sent a measure called "skew" to its fifth-lowest reading of 2013. A lower skew ratio shows relatively high prices for calls, options that convey the right to buy shares at a certain price. Some investors say the reading, which reflects the ratio of bearish option prices to bullish ones, points to excessive optimism in the market. The move put the gauge on the brink of crossing a level that twice this year has preceded stock-market declines of at least 4%, options watchers said. At the same time, the markets' fear gauge rose Tuesday even as the S&P 500-stock index rallied to its third consecutive record close, rising 9.84 to 1771.95. The Chicago Board Options Exchange's Volatility Index typically falls when stocks rise and vice versa. The divergence is unusual and shows that new highs aren't being met with the typical investor calm, investors said. While the options readings alone are hardly enough to provoke worry among stock-market strategists, skeptical investors are picking up on numerous signs of what they term froth in the stock market.
Fox News:
  • Exec at contractor went to school with first lady, donated to Obama campaign. As the problems pile up for, attention is now turning to the relationship between the Canadian company largely responsible for the website and the Obama administration. Top officials at CGI Federal, a lead contractor tasked with developing the site, have a three-decade link to the Obamas. Toni Townes-Whitley, a senior vice president at CGI Federal, is also a Princeton University classmate of first lady Michelle Obama -- and a political donor.
  • Reid: No budget deal without new revenues. President Barack Obama's top ally on Capitol Hill says he won't support any attempt this year to ease across-the-board spending cuts hitting the Pentagon and domestic agencies if it fails to include new revenues. 
  • Aetna(AET) CEO: Why insurance will be costing more. (video) The fact that many current health-care plans do not offer all the benefits required under Obamacare means that many premiums are likely to jump dramatically, Aetna CEO Mark Bertolini told CNBC.
Zero Hedge: 
Business Insider: 
Pittsburgh Business Times: 
  • U.S. Steel(X) to close Hamilton iron and steel operations. United States Steel Corp. will permanently discontinue its iron and steel making at Hamilton Works in Ontario, Canada, on Dec. 31, CEO Mario Longhi said Tuesday in a conference call. "Decisions like this are always difficult, but they are necessary to improve the cost structure of our Canadian operations," he said.
The Blaze:
China Daily:
  • China Needs More Local AMCs to Handle Growing Bad Assets. China needs more asset management companies at the provincial level to help handle their growing non-performing assets, citing Zhao Quanhou, a researcher at the Fiscal Science Research Center affiliated with the finance ministry.
  • Shanghai Party Chief Han Says City Should Slow GDP.
China Securities Journal:
  • China 4Q Liquidity May Be 'Tight, Balanced'. Liquidity may remain "tight, balanced" in 4Q and the nation may mainly adopt short-term adjustments in its monetary policy, according to a front page commentary.
  • China Wenzhou Home Prices May Continue Fall. Home prices in the eastern Chinese city of Wenzhou may continue to fall, citing local real estate agents. Housing prices in the city are now more than 50% lower than they were in 2012, the agents said. Continued increasing pressure from inventories and a deleveraging of small and medium-sized developers have pushed down prices, which have dropped for 25 straight months, the report said.
  • CDB Researcher Says Local Debt Growing Fast. Problems shown in China's economy in the first 9 months of 2013 include a "relatively fast" increase in local government debt, and that the economic recovery was driven mainly by government-led investment and state-owned enterprises, according to a commentary published by Guo Lian from the research institute at China Development Bank.
China Business News:
  • China May Expand Property Tax Reform at Plenum. China includes expansion of property tax trial in draft of a statement to be submitted to the third plenum of the Communist Party's 18th Central Committee, which will be held Nov. 9-12, citing a person familiar with the matter.
Evening Recommendations 
  • Raised (FB) to Buy, target $68.
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 133.0 unch.
  • Asia Pacific Sovereign CDS Index 99.25 -1.0 basis point. 
  • FTSE-100 futures +.23%.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.17%.
Morning Preview Links

Earnings of Note

  • (PX)/1.51
  • (BWA)/1.34
  • (GLW)/.32
  • (H)/.21
  • (EXC)/.66
  • (DBD)/.42
  • (STE)/.54
  • (SPW)/1.25
  • (CMCSA)/.61
  • (AMT)/.91
  • (ADP)/.66
  • (GM)/.94
  • (HES)/1.44
  • (SEE)/.33
  • (PSX)/.93
  • (EXPE)/1.36
  • (ALL)/1.44
  • (CSC)/.83
  • (MAR)/.45
  • (V)/1.85
  • (FB)/.18
  • (OI)/.77
  • (SBUX)/.60
  • (CYH)/.68
  • (MET)/1.36
  • (MCHP)/.60
  • (WMB)/.14
  • (IPI)/.07
  • (CAR)/1.51
  • (BYI)/.90
  • (EQR)/.73
  • (JNY)/.42
Economic Releases
8:15am EST
  • The ADP Employment Change for October is estimated to fall to 150K versus 166K in September.
8:30 am EST
  • The Consumer Price Index for September is estimated to rise +.2% versus a +.1% gain in August.
  • The CPI Ex Food and Energy for September is estimated to rise +.2% versus a +.1% gain in August.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,995,000 barrels versus a +5,246,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +23,000 barrels versus a -1,805,000 barrel decline the prior week. Distillate supplies are estimated to fall by -545,000 barrels versus a +1,537,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.27% versus a -.3% decline the prior week.
2:00 pm EST
  • The FOMC is expected to leave the benchmark fed funds rate at .25%.
  • The Fed Pace of MBS Purchases for October is estimated at $40B versus $40B prior.
  • The Fed pace of Treasury purchases for October is estimated at $45B versus $45B prior.
Upcoming Splits
  • (NEOG) 3-for-2
Other Potential Market Movers
  • The German Unemployment rate, Spain GDP, German CPI, Eurozone Industrial Confidence, 7-Year T-Note auction, weekly MBA mortgage applications report, (JBL) analyst meeting and the (TGT) Financial Community Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.