Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.89% 2) Airlines +1.27% 3) Oil Tankers +1.12%
Stocks Rising on Unusual Volume:
- KNDI, RGEN, CBEY, TSU, PAM, GWAY, AMAT, DQ, BOBE, LRCX, KMX, BNNY, ABMD, TSU, CNC, TTWO, BEAT, CLDX, LEN, JNY, FB, KBH and CBST
Stocks With Unusual Call Option Activity:
- 1) ABBV 2) VRNG 3) IRM 4) CCL 5) RCL
Stocks With Most Positive News Mentions:
- 1) LMT 2) MSFT 3) NEOG 4) RGEN 5) GLD
Charts:
Evening Headlines
Bloomberg:
- Bernanke Taper Delay Clouds Kuroda Inflation Fight: Japan Credit. The
Federal Reserve’s surprise
decision to delay tapering stimulus as inflation remains subdued
suggests Bank of Japan Governor Haruhiko Kuroda faces an uphill battle
to stoke price increases with quantitative easing. Japan’s implied forward yield, which indicates bond investor expectations of the two-year note rate in 2015, has
fallen to the lowest since April 4 when Kuroda began
unprecedented stimulus, at 0.24 percent last week. That suggests
the market doesn’t expect inflation pressure to push up yields
for at least two years. The equivalent rate in the U.S. declined
to a month low of 1.8 percent on Sept. 18.
- Rupiah Falls to Lowest Since April 2009 as Companies Buy Dollars. Indonesia’s rupiah weakened to the lowest level since April 2009 on
speculation local companies increased dollar purchases after the
currency had its best week since November 2012. Government bonds
fell. The
rupiah advanced 0.5 percent last week as the Federal Reserve refrained
from reducing the stimulus that has spurred demand for emerging-market
assets. Indonesia’s trade shortfall surged to a record $2.3 billion in
July, weighing on the current account that has remained in deficit for a
seventh straight quarter through June. The government will release
trade data for August on Oct. 1.
- China Reforms Face Headwinds at Home and Abroad. Rapid growth has come at the expense of significant distortions in
interest rates, wages, currency and legal structures, along with
political capture of the benefits of growth. An almost inevitable result
has been a very distorted national balance sheet, marked by burgeoning
debt and decreasing ability to finance that debt. It is now clear that
China must come to terms with these distortions and reverse them, and
that this task will prove difficult.
- China’s Stocks Drop After Biggest Gain in Two Weeks; Vanke Falls.
China’s stocks fell after the benchmark index climbed the most in two
weeks yesterday. China Vanke Co. and Poly Real Estate Group Co. dropped
more than 2 percent after the China Securities Journal reported the
government is accelerating a property-tax trial expansion. Ping An Bank
Co. paced declines among lenders, losing 4.5 percent. Apple Inc.
suppliers, including GoerTek Inc., jumped after a record number of
iPhones were sold in the week-end debut. The Shanghai Composite Index slipped 0.8 percent to 2,203.25 as of 10:04 a.m. local time.
- Asia Stocks Fall as Copper to Aussie Drop; Gold Rebounds. Asian stocks dropped, dragging down
the benchmark gauge from a four-month high, as Japanese
exporters retreated on a stronger yen. Australia’s dollar
declined with copper prices, while precious metals rebounded. The MSCI Asia Pacific Index lost 0.8 percent at 11:44 a.m. in Tokyo. Japan’s Topix Index dropped 0.9 percent, the most this
month.
- Rubber Declines for Second Day as Oil Extends Losses, Yen Gains. Rubber fell for a second day as
weakening crude oil prices and a stronger yen cut its appeal. The contract for February delivery on the Tokyo Commodity
Exchange lost as much as 2.3 percent to 277.3 yen a kilogram
($2,825 a metric ton) and traded at 278.80 yen at 11:18 a.m.
- Rebar Falls as Li Says China Has Chosen Steady Monetary Policy. Steel reinforcement-bar futures
fell in Shanghai after Premier Li Keqiang said the government
has chosen steady monetary policy, damping speculation for more
economic stimulus. Rebar for delivery in January on the Shanghai Futures
Exchange fell 0.4 percent to 3,641 yuan ($595) a metric ton at
10:49 a.m. local time. Futures have lost 2.9 percent this month.
- Citigroup(C) to Cut 1,000 Jobs in Mortgage Business.
Citigroup Inc. (C), the fifth-biggest U.S. mortgage originator last
year, is cutting about 1,000 jobs in its home-lending business. The job
reductions will come in mortgage sales,
underwriting, fulfillment and default roles, primarily in Las
Vegas and Irving, Texas, the New York-based company said today
in an e-mailed statement.
- Fisher Says White House Mishandled Fed Chairman Succession. Richard Fisher, president of the
Federal Reserve Bank of Dallas, said the White House botched the
nomination for Chairman Ben S. Bernanke’s successor by allowing
an unprecedented public debate over who would be the best
choice. “The White House has mishandled this terribly,” Fisher
said today in response to a question from the audience after
giving a speech in San Antonio, Texas. “This should not be a
public debate,” he said, adding that the Fed “must never be a
political instrument.”
Wall Street Journal:
- U.S. Readies Civil Suit Against J.P. Morgan on Mortgages. Flurry of Negotiations Take Place.
Justice Department officials are preparing to file a civil lawsuit
against J.P. Morgan Chase & Co. over the bank's handling of
residential mortgage-backed securities before the financial crisis,
according to people familiar
with the matter. Government lawyers had notified the bank that
they planned to file the lawsuit as early as Tuesday, but a flurry of
renewed discussions Monday could change that schedule, according to a
person familiar with the talks. Even as they prepare a civil case
against the bank, federal
prosecutors are weighing whether to bring any criminal charges stemming
from the case, according to a person familiar with the case.
- Kenya Says It Believes All Hostages Are Free. Security Forces Comb Through Upscale Mall to Search for Any Remaining Survivors, Attackers After Raid. The remaining hostages held by Islamic militants in an upscale
Nairobi mall during a three-day siege appeared to have been freed,
Kenyan officials said early on Tuesday, as security forces continued to
conduct operations in the building. The declaration came after the security forces mounted a major
assault on Monday afternoon in an effort to free the remaining people
Kenyan officials still believed to be inside. Gunfire and explosions
erupted as the operation started, accompanied by a black plume of smoke
billowing into the air.
Fox News:
- One man's ObamaCare nightmare. Andy and Amy Mangione of Louisville, Ky. and their two boys are just the
kind of people who should be helped by ObamaCare. But they recently got
a nasty surprise in the mail.
Zero Hedge:
NY Times:
- Asia at Risk as Economies Put Off the Inevitable. Economists say the Federal Reserve’s decision to keep pumping money into
the American economy is only a temporary reprieve for Asia — one that
could tempt policy makers in the region to put off the structural
changes they believe are essential to improve long-term growth prospects
across the region.
Reuters:
Telegraph:
China Daily:
- Some China Local Govts Overuse Finance Vehicles. Some local Chinese governments overused financing vehicles to borrow money for city construction and created "relatively large scale" of debt, according to an article written by Wang Baoan. China should change the model that residents can only buy properties from developers, Wang wrote.
China Securities Journal:
- China to Start New Round of Property Tax Training. China will start 2nd round of property tax training for those working in taxation system next month, signaling acceleration of property tax trial expansion, citing people familiar with the matter.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.50 +8.5 basis points.
- Asia Pacific Sovereign CDS Index 100.25 +2.0 basis points.
- NASDAQ 100 futures -.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The S&P/CS 20 City MoM SA for July is estimated to rise +.8% versus a +.89% gain in June.
- The House Price Index for July is estimated to rise +.8% versus a +.7% gain in June.
10:00 am EST
- The Richmond Fed Manufacturing Index for Sept. is estimated to fall to 12.0 versus 14.0 in August.
- Consumer Confidence for September is estimated to fall to 80.0 versus 81.5 in August.
Upcoming Splits
Other Potential Market Movers
- The Fed's George speaking, Fed's Pianalto speaking, weekly retail sales reports, Goldman Sachs Communacopia Conference, BofA Merrill Power/Gas Conference, (VAR) investor meeting, (PDCO) investor day, (MCO) investor day and the (INTU) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.24 +8.54%
- Euro/Yen Carry Return Index 139.10 -.76%
- Emerging Markets Currency Volatility(VXY) 9.72 -1.12%
- S&P 500 Implied Correlation 49.36 +4.47%
- ISE Sentiment Index 72.0 -15.29%
- Total Put/Call .96 -8.57%
Credit Investor Angst:
- North American Investment Grade CDS Index 80.35 +.57%
- European Financial Sector CDS Index 139.82 -.38%
- Western Europe Sovereign Debt CDS Index 87.0 +.10%
- Emerging Market CDS Index 266.20 +1.45%
- 2-Year Swap Spread 14.50 -1.0 basis point
- TED Spread 24.50 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -5.5 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .00% -1 basis point
- Yield Curve 237.0 -3 basis points
- China Import Iron Ore Spot $132.40/Metric Tonne +.46%
- Citi US Economic Surprise Index 45.90 +1.5 points
- Citi Emerging Markets Economic Surprise Index 3.60 +1.5 points
- 10-Year TIPS Spread 2.26 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating -63 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -1.94% 2) Banks -1.91% 3) Internet -1.60%
Stocks Falling on Unusual Volume:
- P, YELP, VNDA, GHDX, C, BCS, KO, ANW, CFNL, E, FST, CRAY, SWIR, DQ, LGND, ABMD, SEE, FLTX, BIOS, CTRX, CYD, TGI, XOOM, NDLS, COL, INVN, GRPN, YY, CSII, ANW, TW, DRI, GHDX, XONE, CVRR, CFNL, AFOP and UBNT
Stocks With Unusual Put Option Activity:
- 1) NVDA 2) GPS 3) SMH 4) XLNX 5) BBBY
Stocks With Most Negative News Mentions:
- 1) GMCR 2) BBRY 3) TSLA 4) NFLX 5) FB
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +.89% 2) Utilities +.87% 3) Gold & Silver +.67%
Stocks Rising on Unusual Volume:
- AAPL, SRPT, SIR, ISIS and CRUS
Stocks With Unusual Call Option Activity:
- 1) BA 2) ACHN 3) FXY 4) VHC 5) SWN
Stocks With Most Positive News Mentions:
- 1) LMT 2) TGT 3) FSLR 4) GM 5) GRPN
Charts:
Weekend Headlines
Bloomberg:
- Merkel Gets Biggest Victory Since Kohl’s Reunification Vote. Angela Merkel won an overwhelming endorsement from German voters,
putting the country’s first female chancellor on course for the biggest
election tally since Helmut Kohl’s post-reunification victory of 1990.
Merkel’s Christian Democratic bloc took 41.5 percent to 25.7 percent for
the Social Democrats of Peer Steinbrueck in yesterday’s election,
according to results from all 299 districts. That leaves her short of a
majority and needing
a coalition partner to govern Europe’s biggest economy.
- Bears Retreating as European Shorts Drop $80 Billion to 2006 Low. The retreat by European bears is
turning into a rout as equity traders reduce bets against the
region’s stocks by about $80 billion to the lowest level in at least seven years.
Borrowed shares of Euro Stoxx 50 Index (SX5E) companies, an indication
of wagers against equities, have fallen to 1.7 percent of the total
outstanding from 3.2 percent two years ago
and 24 percent at the height of the financial crisis, according
to data from Markit, the London-based research firm. Bullish
bets on Europe have reached the most since 2007 in a Bank of
America Corp. survey of money managers who oversee $518 billion.
- Asia Stocks Rise After China Manufacturing Tops Estimates.
Asian stocks rose, with a regional benchmark index trading near a
four-month high, after a private measure of Chinese manufacturing jumped
more than forecast. Trading on Hong Kong markets was delayed due to a
storm. Delta Electronics Inc. a maker of power-supply packs for notebook
computers, surged 6.3 percent, leading technology shares higher. Woori
Finance Holdings Co. gained 2.4 percent in Seoul amid speculation sales
of its regional bank units will succeed. Newcrest Mining Ltd.,
Australia’s largest gold producer, dropped 6.4 percent after the price
of the precious metal slumped on Sept. 20. The MSCI Asia Pacific excluding Japan Index climbed 0.2
percent to 470.35 as of 12:41 p.m. in Sydney.
- Copper Leads Industrial Metals Lower After Chinese Imports Fall. Copper led declines in industrial
metals, falling by most in more than a week as lower imports by
China suggested demand by the largest consumer may be weaker
than estimated. The metal for delivery in three months on the London Metal
Exchange dropped 1.3 percent to $7,188.50 a metric ton at 10:09
a.m. in Singapore, the biggest drop since Sept. 12. Nickel slid
1.3 percent and tin fell 1.2 percent.
- Gold Extends Biggest Decline in a Week on Outlook for Fed Taper. Gold extended the biggest drop in
more than a week as investors weighed the outlook for stimulus
in the U.S. after a Federal Reserve policy maker said a “small
taper” may occur next month. Markets in China reopened today
after a two-day holiday. Bullion for immediate delivery dropped as much as 0.9
percent to $1,313.69 an ounce and traded at $1,320.33 at 9:56
a.m. in Singapore after climbing as much as 0.5 percent. Prices
slumped 3 percent to $1,326.05 on Sept. 20, the most since Sept.
12. Gold for December delivery lost 0.9 percent to $1,320 on the
Comex in New York.
Wall Street Journal:
- Assault on Mall Stuns Kenya. Death Toll Rises to at Least 68, With Dozens Believed Trapped. Kenyan police late Sunday struck to end a two-day terrorist attack at
an upscale mall after the death toll rose to 68, with some 40 people
believed trapped inside the complex while armed militants remained at
large. An explosion and new volleys of gunfire were heard as the sun set.
Kenyan police said they had begun a final push aimed at ending the
terrorist attack on the Westgate mall. But after the initial explosions
the area quieted down and it was difficult to tell as the night wore on
whether an operation was under way or not. Early Monday, heavy gunfire was heard from the shopping mall, according to Reuters. The Kenyan military on Sunday said it had freed "most" of those inside but didn't give a figure.
- Yellen Would Bring Tougher Tone to Fed. Some Say Potential Chairwoman's Leadership Style Would Contrast With Bernanke's.
Janet Yellen, the lead candidate to succeed Federal Reserve Chairman
Ben Bernanke, brings a demanding and harder-driving leadership style to
the central
bank, in contrast to Mr. Bernanke's low-key and often understated
approach. Ms. Yellen, the Fed vice chairwoman, is highly regarded by
many central
bank staff members, who call her an effective leader with a sharp mind.
But she has clashed with others and left some hard feelings in the wake
of those confrontations, according to interviews with more than a dozen
current and former staff members and officials who worked with her
directly in recent years.
- Open-Government Laws Fuel Hedge-Fund Profits. Hedge Funds Are Using FOIA Requests to Obtain Nonpublic Information From Federal Agencies.
When SAC Capital Advisors LP was weighing an investment in Vertex
Pharmaceuticals Inc., VRTX -0.18% the hedge-fund firm contacted a source
it knew would provide nonpublic information without blinking: the
federal government.
Marketwatch.com:
- Obama Repeats Vow Not To Make Deals On Debt Limit. President Barack Obama on Saturday insisted that he won’t negotiate with House Republicans over the debt ceiling, accusing them of threatening to plunge the U.S. into default and back into recession by tying the debt limit to their
effort to defund his health-care law.
Fox News:
CNBC:
- GM(GM) planning 200-mile battery car.
General Motors plans to more than double the range of the typical
electric vehicle—while also sharply driving down the cost, according to a
senior official.
- The aging in Asia face a new decade like no other. Asia is expected to see one clear demographic trend emerge in the next
decade: a widening divide between the southeast, where the working-age
population is growing at a strong pace, and the northeast, where the
labor force is forecast to shrink.
Business Insider:
Wall Street All-Stars:
CNN:
- Obama's big debt limit deception. As a historian and a former speaker of the House who negotiated
successfully through two government shutdowns, a successful welfare
reform bill, the first tax cut in 16 years and four balanced budgets, I
am offended and a little frightened by President Barack Obama's
deliberate dishonesty about the debt ceiling. On Wednesday, speaking to the Business Roundtable, Obama said:
Reuters:
- China's Xi stamps authority on party with Bo verdict. With ousted senior politician
Bo Xilai jailed for life, Chinese President Xi Jinping has
stamped his authority on the Communist Party by effectively
warning he will not tolerate dissent as he seeks to push through
tough economic reforms.
- German eurosceptics on the rise, liberals in decline. A new anti-euro party narrowly
missed entering parliament in a German election on Sunday,
drawing millions of voters with a eurosceptic message that may
have laid the foundations for a strong challenge in a European
Parliament vote next year.
- U.S. Fed gives Indonesia a brief respite from debt pain.
The U.S. Federal Reserve has given Indonesian companies an unexpected
window of opportunity to refinance a foreign debt burden that has nearly
doubled to $134 billion since 2008. The borrowing binge was a product
of Indonesia's strong economic growth and record-low global interest
rates. But Southeast Asia's largest economy was hit hard in an emerging
market selloff this year as investors prepared for a slowdown in the
U.S. central bank's purchases of government debt.
- Suicide bombers kill 78 Christians outside Pakistani church. A pair of suicide bombers blew themselves up
outside a 130-year-old Anglican church in Pakistan after Sunday Mass,
killing at least 78 people in the deadliest attack on Christians in the
predominantly Muslim country. Islamist violence has been on the rise in Pakistan in past
months, undermining Prime Minister Nawaz Sharif's efforts to
tame the insurgency by launching peace talks with the Pakistani
Taliban.
Financial Times:
- The Fed is wrong to put off the return to normality. The
US Federal Reserve’s decision last week to delay the start of its
so-called “tapering” has confused investors about the reliability of its
forward guidance.
It has also created a trap that will make it difficult to start the
tapering programme in the future unless the Fed changes its basic
approach.
Telegraph:
Weekend Recommendations
Night Trading
- Asian indices are -.75% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 141.0 +23.0 basis points. (new series)
- Asia Pacific Sovereign CDS Index 98.25 +.75 basis point.
- NASDAQ 100 futures +.19%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Chicago Fed National Activity Index for August is estimated to rise to -.05 versus -.15 in July.
8:58 am EST
- Preliminary Markit US PMI for September is estimated at 54.0.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lockhart speaking, Fed's Dudley speaking, Fed's Fisher speaking, Eurozone PMI data and the (TOT) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by Metals & Mining and financial shares in the region. I expect US stocks to open higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.
