Wednesday Watch

Evening Headlines
Bloomberg: 

• Turkey-Risk Model Shows Nation’s Markets Going From Bad to Worse. Turkey’s failed coup and President Recep Tayyip Erdogan’s crackdown could hardly have come at a worse time for investors worried about the riskiness of the country’s bonds. Now they may get even dicier. Even before rogue generals tried to seize control on July 15, the country had a relatively high default probability. It was greater than about 80 percent of nations, according to Bloomberg’s sovereign risk model, which uses debt, currency reserves and political instability metrics to calculate such odds. “There’s nothing in these factors that will not get worse,” said Salman Ahmed, the London-based chief strategist at Lombard Odier Asset Management, which uses similar gauges to assess government bonds and is staying underweight on Turkey’s debt. “Political risk is going to go up, growth will go down and external debt will go up as a percent of GDP.”
• Yen Traders Signal Risk Kuroda Falls Short as Volatility Jumps. (video) Bank of Japan Governor Haruhiko Kuroda has never been one to be swayed by market expectation. But this week, investors are leaving him very little room for maneuver. Four in five economists predict additional stimulus Friday -- the most since Kuroda presided over his first policy meeting in April 2013 -- with an increase in purchases of exchange-traded funds the most likely option, followed by a deeper cut in the negative deposit rate. After inaction at the previous two policy meetings sparked yen rallies, Citigroup Inc. warns the currency could surge about 5 percent toward the 2 1/2-year high of 99.02 per dollar it hit after the U.K. voted to leave the European Union.
• End of an Era as China’s Love Affair With U.S. Real Estate Fades. (video) For David Wong, the business of selling homes isn’t as good this year as it was in 2015, and he’s blaming that on a decline in customers from China. “The residential-property market here, especially for those priced between $2.5 million to $3 million, has been affected by China’s measures to control capital flight,” said the New York City-based Keller Williams Realty Landmark broker. “You need to cut the price, or it may take a real long time.” Wong is not the only one who has felt the cooling in the U.S. real estate market for foreign buyers. Total sales to Chinese buyers in the 12 months through March fell for the first time since 2011, to $27.3 billion from $28.6 billion a year earlier, according to an annual research report released by the National Association of Realtors. The number of properties purchased by Chinese also declined to 29,195 units from 34,327 units.
• Asia Stocks Rise Amid Japan Rebound as Yen Pulls Back; Oil Sinks. Shares in Tokyo snapped a three-day slide, driving gains in Asia as the yen retreated amid speculation over the outlook for Japanese stimulus. Gold fell ahead of the Federal Reserve’s interest-rate review, while crude oil extended its slump. The MSCI Asia Pacific Index added 0.2 percent as of 10:01 a.m. Tokyo time, headed for its highest close since Nov. 5 as the Topix gained 0.7 percent.
• Oil Majors Lost One Engine; Now the Second One Is Sputtering. If Big Oil was a two-engine airplane, you could say it’s been flying on a single engine since energy prices crashed in 2014. Now, the second motor is sputtering. The major integrated oil companies, including Exxon Mobil Corp., Total SA and BP Plc, have relied on their so-called downstream businesses, which include refining crude into gasoline, oil trading and gas stations, to cushion the losses on their upstream units, which pump crude and natural gas.

Wall Street Journal: 

• At Democratic Convention, Economic Messages Reveal Tensions. As Hillary Clinton trumpets gains and policy proposals, progressives emphasize shortcomings.
• Akamai(AKAM) Stumbles as Silicon Valley Giants Wean Themselves Off Network. Company still counts on traditional media outlets to shore up its video business.
• Treasury Yield Curve Near Flattest Since 2007. Traders and investors await the Fed’s message following this week’s policy meeting. The yield premium investors charged to hold the benchmark 10-year Treasury note relative to the two-year note fell to near a nine-year low ahead of the latest interest-rate decision by the Federal Reserve.
• Apple’s(AAPL) Earnings in Five Charts. (graph)
• Europe’s Terror Storm. François Hollande declares war on Islamic State. Does he mean it? Two terrorists entered a village church in Normandy at morning Mass on Tuesday, slit the throat of an elderly priest and critically wounded another person before police shot the pair dead. Islamic State claimed credit, adding to a list of recent atrocities that includes a suicide bombing and knife attack in Germany and the Bastille Day murder of 84 people in Nice. President François Hollande says France is at “war” with Islamic State, and we’d like to believe he means it.

Fox News:

• DNC Convention: Live Blog.

MarketWatch: 

• The villain of both conventions: Goldman Sachs(GS).

CNBC:

• This chart spells trouble for stocks: Technical analyst. (video)
• Oil market disaster: This is a glut without end in sight, expert says. (video) The oil industry is still "a disaster," with an oversupply issue that doesn't appear to be balancing out anytime soon, John Kidluff, partner at Again Capital, said Tuesday. Kilduff, who has been bearish on crude, pointed out that refiners are soon going to go into their seasonal maintenance.

Zero Hedge:

• Why Hillary Is Nervous: "More Leaks May Be Coming".
• Dead 'Market' Walking: Chinese Stock Volatility Crashes Near Record Lows. (graph)
• What The Sudden Spike In The TED-Spread Really Means. (graph)
• "An Extraordinary Development": Record Swiss Gold Flow Into The United States.
• "I'm (Not) With Her" - Clinton's Image Lowest In 24 Years. (graph)
• Twitter(TWTR) Plummets After Slashing Q3 Outlook.
• Apple(AAPL) Surges After Beating Expectations, Despite Forecasting Third Straight Revenue Decline.
• Peak Hubris.
• Global Central Banks Are All-In: QE Running At Record $180 Billion Per Month (And Rising). (graph)
• Oil Extends Losses After Surprisingly Large Cushing Build. (graph)
• Manic Day Leaves S&P, Bonds, Gold, Crude, Dollar Unchanged. (graph)

Business Insider:

• The worst might be yet to come with the DNC email hack.
• The mayor of New York City is reportedly under federal investigation.
• It's time to take a serious look at Tim Cook's leadership of Apple(AAPL).
• Donald Trump says he wants to raise the federal minimum wage to $10 an hour.
• Trump is doubling down on taxing companies that manufacture overseas.

Financial Times:

• Apple(AAPL) passes ‘low point’ on iPhone sales. Sales for device fall 15% in second quarter as Chinese revenues hit hard. Apple assured investors that demand for the iPhone was getting stronger and the worst of the decline in sales of its flagship device was behind it, as it reported third-quarter results just ahead of Wall Street expectations.

Night Trading 

• Asian equity indices are unch. to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 120.75 +.75 basis point.
• Asia Pacific Sovereign CDS Index 48.75 unch.
• Bloomberg Emerging Markets Currency Index 71.80 +.03%. 
• S&P 500 futures +.12%. 
• NASDAQ 100 futures +.62%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (MO)/.80
• (ANTM)/3.23
• (ARMH)/.08
• (BA)/2.27
• (KO)/.58
• (CMCSA)/.81
• (GLW)/.32
• (FCAU)/.47
• (GD)/2.31
• (GT)/1.02
• (HES)/-1.24
• (HLT)/.26
• (IR)/1.30
• (MDLZ)/.40
• (NDAQ)/.88
• (NSC)/1.35
• (NOC)/2.53
• (OC)/.85
• (R)/1.53
• (STRA)/1.06
• (WYN)/1.37
• (AMGN)/2.74
• (ABX)/.15
• (CAKE)/.71
• (ESV)/.51
• (FB)/.82
• (GPRO)/-.58
• (iac)/.51
• (LRCX)/1.64
• (MAR)/.98
• (MCK)/3.34
• (MUR)/-.39
• (ORLY)/2.67
• (OI)/.63
• (WFM)/.37
• (XLNX)/.56 
  

Economic Releases 
8:30 am EST

• Preliminary Durable Goods Orders for June are estimated to fall -1.4% versus a -2.3% decline in May.
• Preliminary Durables Ex Transports for June are estimated to rise +.3% versus a -.3% decline in May.
• Preliminary Cap Goods Orders Non-Defense Ex Air for June are estimated to rise +.2% versus a -.4% decline in May. 

10:00 am EST

• Pending Home Sales MoM for June are estimated to rise +1.2% versus a -3.7% decline in May.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,077,780 barrels versus a -2,342,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +5,560 barrels versus a +911,000 barrel gain the prior week. Distillate supplies are estimated to rise by +677,780 barrels versus a -214,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.23% versus a +.9% gain prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25%-.5%.

Upcoming Splits 

• (EBIX) 3-for-1

Other Potential Market Movers

• The German GFK Consumer Confidence report, $28B 7Y T-Note auction and the weekly MBA mortgage applications report 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 modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.