Evening Headlines
Bloomberg:
- Spanish Banks Need More Capital Than Tests Find, Moody’s Says. Spain’s
banks face a capital shortfall that could climb to 105 billion euros
($135 billion), almost double the estimate the government provided last
week, according to Moody’s Investors Service. The nation’s lenders
may need infusions of 70 billion euros to 105 billion euros to absorb
losses and still keep capital ratios above thresholds outlined in
legislation last year, Moody’s analysts wrote yesterday in a report.
That compares with the 53.7 billion euro shortfall found last week after
officials commissioned a stress test designed to lift doubts about the
financial industry’s ability to withstand losses.
- Portugal
Tolerance for Higher Taxes Reaching Limit: Euro Credit. Prime Minister
Pedro Passos Coelho's tax increases during Portugal's two-year recession
may be about to backfire. The CGTP labor group said Sept 29 at a
demonstration against austerity policies in central Lisbon that it may
call a general strike. Portugal already has Western Europe's poorest
population in terms of output per capita.
- JPMorgan(JPM) Sued by N.Y. for Fraud Over Mortgage Securities. JPMorgan
Chase & Co. (JPM), the biggest U.S. bank, was sued by New York
Attorney General Eric Schneiderman over claims that the Bear Stearns
business the bank took over in 2008 defrauded mortgage-bond investors.
Investors were deceived about the defective loans backing
securities they bought, leading to “monumental losses,”
Schneiderman said in a complaint filed today in New York State
Supreme Court.
- Investors Doubt QE3 Lift to U.S. Discretionary Spending. Investors
are proving skeptical that
the Federal Reserve’s announcement of additional quantitative
easing will get Americans to spend more. The Consumer Discretionary
Select Sector SPDR Fund -- which includes Amazon.com Inc. (AMZN) and
Macy’s Inc. (M) --has lagged behind the Consumer Staples Select Sector
SPDR Fund by 2.8 percent since Sept. 14, the day after the Fed unveiled plans to buy mortgage-
backed securities at a pace of $40 billion a month until the
labor market improves.
- Hunt for Obama’s Middle East Policy Comes Up Empty. Like many
observers of the Obama administration, I’ve been confused by its
unwillingness to take even the relatively modest steps required
to bring about a decisive end to the regime of Bashar al-Assad.
More than 30,000 people have been killed since the beginning of the
uprising against him, according to the Syrian Observatory for Human
Rights, and untold numbers have been wounded, tortured
or raped.
Wall Street Journal:
- Militant Link to Libya Attack. U.S. Tracks Egyptian Operative Freed From Prison in Wake of Arab Spring. The revolutions that swept the Middle East and North Africa also
emptied prisons of militants, a problem now emerging as a potential new
terrorist threat. Fighters linked to one freed militant, Muhammad Jamal Abu Ahmad, took
part in the Sept. 11 attack on U.S. diplomatic outposts in Libya that
killed four Americans, U.S. officials believe based on initial reports.
Intelligence reports suggest that some of the attackers trained at camps
he established in the Libyan Desert, a former U.S. official said. Western
officials say Mr. Ahmad has petitioned the chief of al Qaeda,
to whom he has long ties, for permission to launch an al Qaeda
affiliate and has secured financing from al Qaeda's Yemeni wing. U.S.
spy agencies have been tracking Mr. Ahmad's activities for
several months. The Benghazi attacks gave a major boost to his
prominence in their eyes.
- Strike Looms at ABC Ahead of Presidential Debate. As media outlets prepare for Wednesday’s first presidential debate,
the specter of strike action is looming at ABC, which is providing
broadcast coverage for all networks. The membership of the National Association of Broadcast Employees and Technicians
has authorized its negotiation committee to call a strike, if
necessary, among its members employed by ABC, which include camera
operators. The Walt Disney Co.-owned network and the
union have been in negotiations since the union’s labor contract ended
in early 2011. The talks have been tense and have lately required the
addition of a federal mediator.
- Greece's Creditors Look Askance at Cutbacks. Greece's international lenders cast doubt on parts of Athens' plans to
save billions of euros through new cutbacks and tax measures, throwing a
potential wrench in the government's efforts to reach a quick deal to
unlock new aid for the country.
- Earnings Wizardry. CFOs around the nation have been busy closing their books and
preparing for yet another earnings season. (It kicks off in earnest on
Oct. 9, as always, with Alcoa Inc.) But what exactly have they been busy with? If you believe a recent
academic study, one out of five U.S. finance chiefs have been scrambling
to fiddle with their companies' earnings. Not Enron-style, fraudulent fiddles, mind you. More like clever—and
legal—exploitations of accounting standards that "manage earnings to
misrepresent [the company's] economic performance," according to the
study's authors, Ilia Dichev and Shiva Rajgopal of Emory University and
John Graham of Duke University. Lightly searing the books rather than
cooking them, if you like.
- Property Owners Face a New Surtax.
Passed in 2010 to help fund the health-care overhaul, this 3.8% surtax
kicks in next year on many forms of investment income—including some
interest, dividends, rents and capital gains.
- Stephens: Benghazi Was Obama's 3 a.m. Call. Libya was a failure of policy and worldview, not intelligence. Why won't the Libya story go away? Why can't the memory of U.S.
Ambassador Chris Stevens and his staff be consigned to the same
sad-and-sealed file of Americans killed abroad in dangerous line of
duty? How has an episode that seemed at first to have been mishandled by
the Romney camp become an emblem of a feckless and deluded foreign
policy? The story-switching and stonewalling haven't helped. But let's start a little earlier.
MarketWatch.com:
- The fault lines of Anti-Japan fury in China. Police did little to calm unrest and looters of stores were organized. Recent anti-Japan fury spurred angry crowds to march through streets in
cities across China. The protests sometimes turned violent, as when a
vicious rampage in Xi’an, in the northern province of Shaanxi, left a
father paralyzed.
CNBC:
- After 'Fiscal Cliff,' 90% of Americans' Taxes Would Rise. In the latest forecast of trouble ahead if Capitol Hill cannot overcome
its fiscal paralysis, the Tax Policy Center, a Washington think tank,
predicted taxes would rise by $500 billion in 2013, or an average of
almost $3,500 per household.
Zero Hedge:
Business Insider:
- Mexican Diplomat Says America Pretty Much Invited The Sinaloa Drug Cartel Across The Border. Leaked emails from the private U.S. security firm Stratfor cite a Mexican diplomat who says the
U.S. government works with Mexican cartels to traffic drugs into the
United States and has sided with the Sinaloa cartel in an attempt to
limit the violence in Mexico. Most notably, the reports from MX1
line up with assertions by a Sinaloa cartel insider that cartel boss
Joaquin Guzman is a U.S. informant, the Sinaloa cartel was
"given carte blanche to continue to smuggle tons of illicit drugs into
Chicago," and Operation Fast and Furious was part of an agreement to
finance and arm the Sinaloa cartel in exchange for information used to take down rival cartels.
- Student Loan Default Rates Are Getting Real Ugly. (graph)
Rasmussen Reports:
Reuters:
- Exclusive: Spain ready for bailout, Germany signals "wait"- sources. Spain is ready to request a euro zone bailout for its public finances as early as next weekend but Germany has signaled that it should hold off, European officials said on Monday.
- Samsung allowed to sell Galaxy Tab in US as court lifts ban. A U.S. court removed a temporary sales ban
against Samsung Electronics Co Ltd's Galaxy Tab 10.1
won by Apple Inc(AAPL) in a patent dispute, allowing the
South Korean company to sell the product in the United States.
- Lockheed(LMT) won't issue notices on job cuts after US government guidance. The White House got some good
news on Monday when Lockheed Martin said it would not issue
notices of possible job reductions before the Nov. 6 election. With numerous defense industry jobs on the line in critical
states including Virginia, a wave of job cuts could embarrass
Democratic President Barack Obama's administration.
- Brazil car sales plunge in Sept as tax breaks lose punch. Brazilian auto sales plunged 31
percent in September from a record-breaking August, an industry
group said on Monday, as the effect of extended tax breaks waned
on consumers. Sales of cars and light trucks were also down 8 percent
compared with September of last year, according to data from
dealer association Fenabrave.
Financial Times:
- Call for bank bonuses to be paid in debt. Banks
should pay bonuses in debt, which would be wiped out if a bank failed,
an EU banking report will suggest as Europe attempts to step up the
fight against bankers’ pay. The Liikanen commission, an independent
review set up almost a year
ago by EU commissioner Michel Barnier, will on Tuesday recommend reforms
for long-term pay incentives as well as advocating ringfencing trading
activities to make big banks safer.
- Banks reap profits on mortgages after QE3. Although the average rate on a fixed 30-year mortgage reached 3.4 per cent this week – a record low – mortgage rates could be lower if banks passed on the full drop in their funding costs. “For banks which are mortgage originators this [QE3] was some of the
best news they could possibly have heard,” said Steven Abrahams,
mortgage strategist at Deutsche. “They will continue originating loans
and selling them into the market at a significant premium.”
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 136.50 unch.
- Asia Pacific Sovereign CDS Index 114.25 -1.0 basis point.
- FTSE-100 futures -.60%.
- S&P 500 futures +.06%.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Afternoon:
- Total Vehicle Sales for September are estimated to rise to 14.5M versus 14.46M in August.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone inflation data, Brazil industrial production report, China's
Non-Manufacturing PMI, Australia trade figures, ISM New York for
September, weekly retail sales reports, RBA rate decision, (PVH) analyst
day and the (ATU) investor day could also impact trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by commodity and financial
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing modestly lower. The
Portfolio is 25% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- VIX 16.41 +4.32%
- ISE Sentiment Index 110.0 +10.0%
- Total Put/Call .87 -12.12%
- NYSE Arms .93 -45.16%
Credit Investor Angst:
- North American Investment Grade CDS Index 98.98 bps -.17%
- European Financial Sector CDS Index 200.81 bps -1.34%
- Western Europe Sovereign Debt CDS Index 145.61 -1.53%
- Emerging Market CDS Index 219.22 -1.82%
- 2-Year Swap Spread 13.25 -.25 basis point
- TED Spread 27.5 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -27.25 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .08% -1 basis point
- Yield Curve 138.0 -1 basis point
- China Import Iron Ore Spot $104.20/Metric Tonne unch.
- Citi US Economic Surprise Index 11.0 +5.2 points
- 10-Year TIPS Spread 2.42 unch.
Overseas Futures:
- Nikkei Futures: Indicating +21 open in Japan
- DAX Futures: Indicating -44 open in Germany
Portfolio:
- Slightly Higher: On gains in my Biotech/Medical/Retail sector longs
- Disclosed Trades: None
- Market Exposure: 25% Net Long
Bloomberg:
- Greek Budget Predicts Economy Will Shrink for Sixth Year. Greece’s economy will contract for a
sixth year in 2013 as the government prepares further cuts to
pensions, wages and social benefits to meet the terms of its
bailout packages. Gross domestic product will shrink 3.8 percent next year
after contracting 6.5 percent in 2012, according to the 2013 draft budget, e-mailed by the Finance Ministry in Athens and submitted to parliament today. This compares with a prediction in Greece’s March rescue agreement with the European Union and
the International Monetary Fund that the economy would contract
4.8 percent this year before stabilizing in 2013.
- Analysts Cut Profit 52% as Europe Valuations Hit 2-Year High. Analysts are lowering estimates for
European earnings growth by 52 percent, clashing with investors
whose confidence in the European Central Bank helped send equity
valuations to a 2 1/2-year high.
- Global Factory Weakness Spreads as Debt Crisis Persists. Manufacturing
from Europe to China contracted in September as the euro region’s
fiscal crisis eroded investor confidence and clouded global growth
prospects. A gauge of manufacturing in the 17-nation euro region was
at 46.1, above an initial estimate of 46 on Sept. 20, Markit Economics
in London said today. A reading below 50 indicates contraction. A Chinese factory index was at 49.8 for September,
a statistics bureau report showed.
- U.S. Households Face Tax Increase From 2013 Fiscal Cliff.
U.S. households are facing an average tax increase of $3,446 in 2013 if
Congress doesn’t avert the so- called fiscal cliff, the nonpartisan Tax
Policy Center said in a study released today. The top 1 percent of
households face some of the largest tax increases in 2013 and would see
their after-tax incomes fall by 10.5 percent if Congress does nothing.
That would translate to an average tax increase of $120,537 for that
group. A typical middle-income household earning between about $40,000 and $60,000 would face a tax increase of about $2,000. “This is a very large tax increase,” Donald Marron, the center’s director, told reporters in Washington today. If
Congress does nothing, tax rates on income, capital gains, dividends
and estates would increase, and the alternative minimum tax would spread
to 21.7 million households, up from 4 million this year. The
top statutory tax rate on ordinary income would reach 39.6 percent, up
from 35 percent, and the top rate on capital gains would be 23.8
percent, up from 15 percent. A 2 percentage point payroll tax cut is set
to expire at the end of 2012.
- Jobs Outlook Seen Weak as U.S. Companies Reporting Cost Cuts. Weakening
demand is forcing new and accelerated cost reductions at companies from
Bank of America Corp. and Hewlett-Packard Co. (HPQ) to Staples Inc.
(SPLS) and Eastman Kodak Co. (EKDKQ), dimming the outlook for an already
struggling U.S. labor market. Sales for businesses in the Standard & Poor’s 500 Index fell 0.9 percent from a year earlier in July through
September, the second consecutive quarterly drop and biggest
decline since 2009, according to analyst forecasts compiled by
Bloomberg. A 1.2 percent gain projected for October-December
still is smaller than the 5.4 percent rise in this year’s first
three months.
- Manufacturing in U.S. Expands Unexpectedly as Orders Rise. The Institute for Supply Management’s factory index rose to 51.5 last month from 49.6 in August, the Tempe, Arizona-based
group said today. Readings above 50 show expansion, and the September
measure exceeded the most optimistic forecast in a Bloomberg survey.
- Bernanke Says Fed to Keep Rates Low Even as Growth Rises. “We expect that a highly accommodative stance of monetary policy will
remain appropriate for a considerable time after the economy
strengthens,” Bernanke said today in a speech in Indianapolis. Policy
makers’ forecast to hold the main interest rate near zero until at least
mid-2015 “doesn’t mean that we expect the economy to be weak through”
that year.
- Google(GOOG) Passes Microsoft’s(MSFT) Market Value as PC Loses to Web. Google Inc. has surpassed Microsoft Corp. to become the world’s second-largest technology company as computing
over the Internet reduces demand for software installed on desktop
machines.
Wall St. Journal:
CNBC:
- Euro Zone Factory Data Flag ‘New Recession’. Euro zone manufacturing put in its worst performance in the three months
to September since the depths of the Great Recession, with factories
hit by falling demand despite cutting prices, a business survey showed
on Monday — pointing to a new recession. Factories helped lift the
17-nation bloc out of its last recession, but the survey suggests a
downturn that began in smaller periphery
countries has taken root in core members Germany and France. "Despite
seeing some easing in the rate of decline last month, manufacturers
across the euro area suffered the worst quarter for three years in the
three months to September," said Chris Williamson, chief economist at
data collator Markit. "The sector will act as a severe drag on economic
growth. It therefore seems inevitable that the region will have fallen
back into a new recession in the third quarter."
- 'Disappointing Earnings' Season Ahead: Pro.
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
- Spanish banks will need up to €105bn, warns Moody's. Fears for Spain escalated after rating agency Moody’s warned that the
country’s stricken banks may need almost twice as much capital as the
official estimate and Catalan’s separatists stepped up their rhetoric
against Madrid.
- G7: Europe will tell US to deal with 'fiscal cliff'. Europe will tell the US, Japan and Canada next week that it is acting to
resolve its sovereign debt crisis, but that US fiscal policy and slowing
growth in Japan and China also pose risks to the global economy, according
to reports.
El Mundo:
-
Spain
Considers Tax on Stock Market Trades, Energy. Spain's Budget Minister
Cristobal Montoro considers in 2013 introduction of tax on stock market
trades, new "green" taxes on energy and reform of corporate tax.
Style Underperformer:
Sector Underperformer:
- 1) REITs -1.40% 2) Networking -1.23% 3) Disk Drives -1.11%
Stocks Faling on Unusual Volume:
- EDR,
CLI, PNR, JDSU, TM, AZN, GMAN, JAKK, SPLK, TAP, RTN, MSM, AMAP, GPN,
LECO, MKTX, SAM, EAT, CBT, FET, SYNA, AVT, NOW, AZZ, NOW, FTNT, AME,
CASC, PCL, LXU, COR, ACTV and PNR
Stocks With Unusual Put Option Activity:
- 1) UA 2) SAP 3) XLV 4) MDR 5) NSM
Stocks With Most Negative News Mentions:
- 1) WEN 2) KNX 3) PCL 4) JAKK 5) CAT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +1.37% 2) Banks +1.35% 3) Steel +1.33%
Stocks Rising on Unusual Volume:
- SNTA, MDRX, CRDN, TRW, NSM, GNRC, BTH and SRPT
Stocks With Unusual Call Option Activity:
- 1) NSM 2) THLD 3) OCN 4) LVLT 5) CVC
Stocks With Most Positive News Mentions:
- 1) GILD 2) RIG 3) SYK 4) TRW 5)THC
Charts:
Weekend Headlines
Bloomberg:
- Euro Leaders Face October of Unrest After ECB’s September Rally. Europe
faces a month that may decide the success of the European Central
Bank’s bid to end the debt crisis as leaders navigate a tougher approach
from creditor countries, unrest in Spain and a looming report on
Greece. With the first of three summit meetings that European Union
President Herman Van Rompuy has called “crucial” taking place in
Brussels on Oct. 18-19, investor sentiment toward the euro area that
surged in September is on the wane. “People are beginning to look at
this in a more sober way” after the ECB bond-buying plan and a
German high-court decision releasing bailout financing spurred optimism
over the past month, Clemens Fuest, an economist at Oxford University’s
Said Business School, said in an interview yesterday. October, which marks the third anniversary of the debt crisis, will showcase euro-area leaders fighting out their differences.
The discord underscores the inadequacy so far of ECB President Mario
Draghi’s bid to calm the crisis through a pledge on sovereign-debt
purchases. Spain’s 10-year bonds fell last week, with the yield
rising 18 basis points, amid turmoil in the country. The euro, which
surged 4.4 percent in the first two weeks of September, had its second
weekly decline against the U.S. dollar last week, sliding 0.4 percent to
$1.2860 on Sept. 28. Spanish Prime Minister Mariano Rajoy, under
pressure to trigger the ECB’s new financial weaponry by requesting
assistance, pleaded over the weekend for national unity as he
hit out at nationalists for hampering crisis-fighting efforts.
- As Europe’s South Spirals, North Fiddles and Chaos Looms. Anyone who thought the euro crisis was coming under control might want to think again.
Only three weeks after the European Central Bank calmed markets with
its open-ended promise to support sovereign bonds and hold down
borrowing rates throughout the euro area, harsh reality is reasserting
itself: Greece, Spain and other struggling governments are being
compelled to stick to austerity
measures that are thwarting their economies, while Germany and
other core euro countries remain unwilling to do what’s needed
to prevent the euro area from breaking up.
- Spain to Borrow $267 Billion of Debt Amid Rescue Pressure. Spain
plans to borrow 207.2 billion
euros ($266.5 billion) next year, the Budget Ministry said
today, as pressure builds for Prime Minister Mariano Rajoy to
tap the European rescue fund instead of financial markets. Spain’s debt
will widen to 90.5 percent of gross domestic product in 2013 as the
state absorbs the cost of bailing out its banks, the power system and
euro-region partners Greece, Ireland and Portugal. This year’s budget deficit will be 7.4 percent of economic output, Budget Minister Cristobal Montoro said at a
press conference. Spain’s 6.3 percent target will be met because
it can exclude the cost of the bank rescue, he said. Spain’s borrowing plans may test investors’ willingness to
continue financing the government with the European Central Bank
waiting to buy the country’s debt should Rajoy agree to
conditions.
- Spain's
debt-to-GDP ratio will reach 85.3% this year as the government takes
power system debt, townhall bailout fund, rescues of Greece, Ireland,
Portugal and the bailout of the banking system onto its book, the Budget
Ministry said. Debt-to-GDP jumped 16.8 percentage points from last year.
- China’s Manufacturing Shrinks for 11th Month, HSBC PMI Shows. The purchasing managers’ index from HSBC Holdings Plc (HSBA) and
Markit Economics had a final reading of 47.9 for September,
compared with 47.6 in August and a preliminary level of 47.8
released Sept. 20. New export orders declined in September at
the fastest pace in 42 months and purchasing activity in
manufacturing fell for a fifth consecutive month. “The failure of both external and internal demand is
weighing heavily on Chinese manufacturing,” said Glenn Maguire,
principal at consultant Asia Sentry Advisory Pty and former
Societe Generale SA chief Asia economist. “External demand
recovery requires a stronger U.S., Japan and Europe - a highly
unlikely dynamic in the near term. Internal demand recovery
requires greater policy support.” Yesterday’s data also showed that manufacturing output and
input prices continued to decline and that employee numbers
decreased a seventh straight month. The HSBC and Markit
Economics PMI hasn’t had a monthly reading above 50, which would
indicate expansion, since October 2011.
- Japan Tankan Sentiment Worsens as Slowdown Hurts Exports.
Big Japanese manufacturers became more pessimistic as slowdowns in
China and Europe sapped export demand and pushed the nation closer to an
economic contraction. The quarterly Tankan index for large
manufacturers fell in September to minus 3 from minus 1, the fourth
negative reading, the Bank of Japan said today in Tokyo. The median
estimate of 18 economists surveyed by Bloomberg News was for minus 4. A
negative figure means pessimists outnumber optimists.
- Korea’s Exports Fall for 3rd Month as Global Demand Wane.
South Korea’s exports fell for a third month as Europe’s debt crisis
and gains in the won damped demand, keeping pressure on the central bank
to cut interest rates this month. Overseas shipments fell 1.8 percent in September from a year earlier, after a 6.2 percent decline in August, the Ministry of Knowledge Economy said in a statement today. The
median estimate in a Bloomberg News survey of 12 economists was
for a 5.5 percent decline.
- Aleppo World Heritage Site in Flames in Syria Fighting. Syrian troops loyal to President Bashar al-Assad fought with rebels
in the commercial hub of Aleppo in a deadly battle that set fire to an
ancient marketplace that was once a tourist attraction. Fighting
in the country’s largest city continued for the third day in what insurgents said would be a “decisive battle” to control Aleppo.
Rebels captured four neighborhoods, Al Jazeera reported, citing an
interview with a local activist. Syrian government troops killed 104
people yesterday across the country, including 61 in
or around the capital Damascus, the opposition Local Coordination
Committees said in an e-mailed statement. International efforts
to end the 18-month conflict have failed to stop the violence as rebels
continue the fight, begun in March 2011, to overthrow Assad. The
conflict has killed 30,000 people, according to estimates by the Syrian
Observatory for Human Rights, an opposition group.
- US military deaths in Afghanistan hit 2,000. The killing of an American serviceman in an exchange of fire
with allied Afghan soldiers pushed U.S. military deaths in the war to
2,000, a cold reminder of the perils that remain after an 11-year
conflict that now garners little public interest at home. The toll
has climbed steadily in recent months with a spate of attacks by Afghan
army and police — supposed allies — against American and NATO troops.
That has raised troubling questions about whether countries in the
U.S.-led coalition in Afghanistan will achieve their aim of helping the
government in Kabul and its forces stand on their own after most foreign
troops depart in little more than two years.
- S&P 500 Posts Biggest Weekly Drop Since June on Economy. U.S.
stocks fell for the week, as the Standard & Poor’s 500 Index
posted its biggest drop since June, on concern Europe’s debt crisis is
worsening and stimulus measures may not be enough to boost economic
growth. The S&P Supercomposite Homebuilding Index (S15HOME) slid 7.3
percent for the first drop in five weeks amid worse-than-expected
housing data. Technology stocks and commodity producers led declines
as investors sold shares of companies most tied to economic swings.
Apple (AAPL) Inc. posted its biggest drop since May after the release of
its iPhone 5. Caterpillar Inc. (CAT) slid 6.2 percent as it cut its
earnings forecast (CAT). The S&P 500 erased 1.3 percent to
1,440.67, the biggest weekly slump since June 1.
- U.S. Urged by Advocacy Group to Weigh Drones’ Harm to Civilians. The Obama administration should
establish a special task force to evaluate the impact of covert drone
operations on civilian communities, a report from the Center for
Civilians in Conflict, a Washington-based advocacy group dedicated to
protecting civilians, urged.
Wall Street Journal:
- Odd Debt Rule to Lose Bite. Adjustments That Whipsaw Bank Earnings Won't Affect Bottom Lines in Future.
- GOP Again Slams Obama on Libyan Attacks. Allies of Republican presidential candidate Mitt Romney intensified
charges Sunday that the Obama administration botched its response to the
deadly Sept. 11 attacks on a U.S. diplomatic post and a second
facility in Libya, fueling domestic political tension around a
foreign-policy crisis. Just a month ahead of the presidential
election, Republicans accused Mr. Obama and his team of providing
muddled explanations of the events and intentionally playing down al
Qaeda's role in the attacks, which resulted in the deaths of U.S.
Ambassador Chris Stevens and three other Americans.
- Mitt Romney: A New Course for the Middle East. Restore the three sinews of American influence: our economic strength, our military strength and the strength of our values.
Fox News:
-
The Myriad Broken Promises of Obamanomics. *The stimulus will prevent unemployment from rising above 8%, and will fall to 5.6% by 2012. *Solyndra, “leading the way toward a brighter and more prosperous future.” *”I’m committed to an all-of-the-above energy program." * Obamacare, which “…won’t add another dime to the deficit.” *”Health premiums will go down $2,500 by the end of my first term.” *Under Obamacare “you will keep your health insurance. This law will only make it more secure and more affordable.” *My goal is to strengthen and preserve Medicare.” *"Since my election…you're starting to see some restoration of America's standing in the world." *”If I don’t fix the economy in three years, then I’ll be a one-term president. " To which Mr. Romney can say: “Mr. President, this is one promise I’m determined to help you keep.”
Business Insider:
Zero Hedge:
CNBC:
Wall Street All-Stars:
New York Times:
- Payroll Tax Cut Unlikely to Survive Into Next Year.
Regardless of who wins the presidential election in November or what
compromises Congress strikes in the lame-duck session to keep the
economy from automatic tax increases and spending cuts, 160 million
American wage earners will probably see their tax bills jump after Jan.
1. That is when the temporary payroll tax holiday ends. Its expiration means less income in families’ pocketbooks — the tax increase would be about $95 billion in 2013 alone.
US News:
- Media Ignore Romney's Strength With Independents. Here's one statistic we don't hear much about: Gallup reports that 22 percent of swing-state voters say they may still change their minds. Those one-in-five who say they might change their minds
includes 10 percent who currently say they support Obama and 7 percent
who support Romney. In swing states that are within the margin of
error, that's huge. And we're not hearing much about that at all.
hedgetracker.com:
- Top 300 Hedge Funds see assets jump by 12% year-to-date – Big Gainers Lead the Charge. The Top 300 US Equity Hedge Funds have seen their assets increase by
more than $76 billion, or 12%, since the beginning of 2012. Overall,
the top U.S. equity hedge funds manage a combined $712 billion in equity
assets. On an absolute basis, 49 hedge fund managers on the list have
seen their US equity assets surge by more than $500 Million since the
beginning of the year. The biggest YTD gainers include Renaissance
Technologies Corporation, Citadel Investment Group, D.E. Shaw & Co
and Two Sigma Investments.
Reuters:
- U.S. group urges $2 trillion alternative to fiscal cliff "time bomb". The independent
watchdog group Taxpayers for Common Sense will unveil a $2 trillion
deficit-reduction proposal in hopes of averting an economic debacle at
year's end known as the fiscal cliff. On Monday, the group plans to
detail about 130 specific deficit-reduction steps the U.S. Congress
could take to replace across-the-board spending cuts of $1.2 trillion
that are scheduled to take effect on January 2. These would occur just
as tax increases for all income groups are due to kick in.
- Analysis: They're back! Yield hunt pushes funds into CLOs, CDOs. Fund managers are
increasingly eyeing riskier exotic assets, some of which haven't been
in fashion since the financial crisis, as yields on traditional
investments get close to rock bottom. In
particular, the Federal Reserve's latest move to juice the U.S. economy
by purchasing $40 billion of agency mortgage-backed securities every
month is forcing some money managers who had previously been feasting on
those securities to get more creative. The only problem is they may be
getting out of their comfort zones and taking on too much risk. Returns from investments in
"junk" bonds, government guaranteed mortgage securities and even some
battered euro-zone debt are plunging in the wake of global central bank
policies intended to suppress borrowing costs. "I
would not be surprised if some managers are reaching outside of their
expertise for a few extra basis points," said Bonnie Baha, a portfolio
manager for DoubleLine's Global Developed Credit strategy. To
keep performance high, credit-focused managers are moving back into
some of the risky assets that got tarnished during the financial crisis
like collateralized loan obligations, or CLOs, securities cobbled
together from pools of corporate loans.
AFP:
-
Venezuela's Chavez would 'vote for Obama'. Venezuelan President Hugo Chavez says that if he were a US citizen, he
would vote for President Barack Obama in the November 6 presidential
election -- and if Obama were Venezuelan, he'd vote for Chavez. If Obama came from a working-class Caracas neighborhood, he would "vote for Chavez," the Venezuelan president claimed. "Obama
recently said something very rational and just: Venezuela is not a
threat to the interests of the United States," Chavez said, calling the
US president a "nice guy."
Financial Times:
Telegraph:
Die Welt:
- Merkel
to Propose Common EU Budget at October Summit. The proposal would
replace existing structural cohesion funds with a common budget to
enable aid to stricken member states, citing European Union sources. The
budget is the first priority for Chancellor Angela Merkel at Oct. 18-19
EU summit in Brussels. Funds could flow from national budgets and
transaction taxes. France and Spain may see the proposal as a diversion
tactic. Germany wants to end the debate over common euro bonds with the
proposal.
Der Spiegel:
- ECB
Acting Outside Mandate, Says Ex-Board Member Stark. Former European
Central Bank Executive Board member Juergen Stark said the ECB is acting
beyond its mandate in its new bond-purchase program, citing an
interview. Stark said the conditionality attached to the bond-purchase
program has undermined the independence of the ECB's monetary policy.
La Vanguardia:
- Poll
Shows 55% of Catalans Back Independence. Opinion poll shows 55% support
for Catalan independence. Poll shows 84% backing for referendum on
independence. Poll shows 43% support for CiU party vs 38.4% won in 2010
regional elections.
Les Echos:
- France
to Propose EU4b-EU5b in Tax Increases Tomorrow. Proposed increases to
be disclosed include doubling levy on beer and raising tax on bank
salaries.
Nikkei:
- Japanese
domestic sales of new automobiles probably fell in September, the first
decline in the past 12 months, and are expected to fall through the
rest of the year.
Weekend Recommendations
Barron's:
- Made positive comments on (SCS), (AIG), (DLPH), (DVN) and (GS).
- Made negative comments on (OPK).
Night Trading
- Asian indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 136.50 -.5 basis point.
- Asia Pacific Sovereign CDS Index 115.25 +.5 basis point.
- FTSE-100 futures -.21%.
- S&P 500 futures -.40%.
- NASDAQ 100 futures -.41%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- ISM Manufacturing for September is estimated to rise to 49.8 versus 49.6 in August.
- ISM Prices Pad for September is estimated to rise to 55.8 versus 54.0 in August.
- Construction Spending for August is estimated to rise +.5% versus a -.9% decline in July.
Upcoming Splits
- (PAA) 2-for-1
- (CTRX) 2-for-1
- (PZE) 2-for-1
Other Potential Market Movers
- The
Fed's Bernanke speaking, Fed's Evans speaking, Fed's Williams speaking,
Eurozone Manufacturing PMI, Spain Manufacturing PMI, Eurozone
Unemployment, India Manufacturing PMI, Johnson Rice Energy Conference
and the (SIG) investor day could also impact trading today.
BOTTOM LINE: Asian
indices are 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.
