Stocks Falling Substantially into Final Hour on China Bubble-Bursting Fears, Asian Currency Worries, Surging European/Emerging Markets/US High-Yield Debt Angst, Hombuilding/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 23.59 +17.08%

• Euro/Yen Carry Return Index 139.64 -.92%

• Emerging Markets Currency Volatility(VXY) 12.22 +3.21%

• S&P 500 Implied Correlation 65.81 +3.36%

• ISE Sentiment Index 75.0 -46.81%

• Total Put/Call 1.21 +19.8%

• NYSE Arms 1.86 +85.56% 

Credit Investor Angst:

• North American Investment Grade CDS Index 83.15 +2.20%

• America Energy Sector High-Yield CDS Index 946.0 +2.62%

• European Financial Sector CDS Index 88.88 +4.64%

• Western Europe Sovereign Debt CDS Index 21.10 +4.12%

• Asia Pacific Sovereign Debt CDS Index 81.04 +5.97%

• Emerging Market CDS Index 364.43 +4.62%
  

• iBoxx Offshore RMB China Corporates High Yield Index 119.57 +.13%

• 2-Year Swap Spread 11.75 unch.

• TED Spread 31.50 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -24.25 +1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.72 -.85% 
• 3-Month T-Bill Yield -.01% +1.0 basis point

• Yield Curve 146.0 -3.0 basis points

• China Import Iron Ore Spot $56.21/Metric Tonne -1.90%

• Citi US Economic Surprise Index -28.3 -.6 point

• Citi Eurozone Economic Surprise Index 12.4 +.7 point

• Citi Emerging Markets Economic Surprise Index -21.6 +1.0 point

• 10-Year TIPS Spread 1.52 -4.0 basis points
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 5.04 -.5

Overseas Futures:

• Nikkei 225 Futures: Indicating -455 open in Japan 
• China A50 Futures: Indicating -159 open in China

• DAX Futures: Indicating +28 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:  

• China Investors Shun World's Wildest Stocks as Trading Dries Up. Plunging turnover and the world’s wildest price swings mean that China’s stock market just keeps getting uglier for investors. The value of shares traded on mainland bourses has fallen to $90 billion a day from about $380 billion on May 28, with the difference being equivalent to the average daily trading in the U.S. The Shanghai Composite Index’s volatility over the past 30 days was twice as extreme as the average for the biggest global markets. That’s bad news for government efforts to stabilize equities, according to IG Asia Pte. "For long-term investors, high volume and low volatility is preferred," said Bernard Aw, a strategist at IG in Singapore. "Should liquidity in Chinese stock markets continue to fall, as indicated by falling volume, then we could see greater price swings."

• Asia Is in the Midst of a Trade Recession: ANZ. (video)

• The Factors Affecting Asia's Growth. (video)

• Bad-Loan Hiatus Ending for Canada Banks as Oil and Economy Slump. Soured loans from slumping oil prices and a weakened economy are likely to push Canada’s banks next year to set aside the most money since 2009. Toronto-Dominion Bank, Royal Bank of Canada and four other large lenders are forecast to allocate 27 percent more money for bad debt next year, according to estimates of analysts surveyed by Bloomberg, adding further pressure to earnings as lending slows. “This is what may create some significant headwinds in 2016,” John Aiken, a Barclays Plc analyst, said in an interview. “The biggest villain is low oil prices and what that’s doing to the Alberta economy. However, broadly speaking, the Canadian economy is not doing well.”

• GM May Need to Cut Capacity in South Korea as Exports Slow. General Motors Co. may need to cut production capacity in its South Korean operations if the company can’t increase sales of the vehicles built there, the president of the GM International division said. The automaker sold 113,000 vehicles from its Korean operations last year and is running its plants at only about 60 percent of their capacity, Stefan Jacoby told reporters Monday. Automakers generally need to run plants at more than 80 percent to make a profit.

• Glencore Slumps to Record Low as Mining Losses Pick Up Speed. The rout across metals and mining shares accelerated as evidence of China’s slowdown renewed investor worries and analysts said prices are heading lower. Glencore tumbled as much as 16 percent, the most ever, and slid below 100 pence for the first time since it began trading in 2011. Anglo American Plc touched a 15-year low and Antofagasta Plc sank 7.3 percent. KAZ Minerals Plc, a small copper miner in Kazakhstan, lost 25 percent.

• EU Spars Over Refugees as OECD Predicts Years-Long Influx. (video) European leaders sparred over border management and the sheltering of refugees, as a study predicted an unabated influx of people fleeing persecution and poverty. Southeast European states continued to object to mandatory quotas for spreading 120,000 refugees around the continent, setting up testy meetings in Brussels of national ministers on Tuesday and of European Union leaders on Wednesday. Those numbers were dwarfed by an Organisation for Economic Cooperation and Development forecast that the tide of migrants into Europe will rise to 1 million in 2015 from 630,000 last year and will remain around that level for most of the decade.

• Volkswagen emission scandal widens: 11 million cars affected. (video) Volkswagen could be facing a criminal investigation by the U.S. Department of Justice and further probes at home and abroad after admitting to cheating on emissions tests. Bloomberg's Hans Nichols reports on "Countdown." Bloomberg.

• How Low Oil Prices, Sanctions Impact Russia's Economy. (video)

• Islamic State Threatens Cyber-Attack Against U.K., SITE Says. Islamic State threatened to carry out a cyber-attack against the U.K. on Wednesday, according to SITE Intel Group, which monitors jihadist social media. The group made its threat in a video posted on the Internet that opens with images of militants picking up long knives as they forced a group of Western hostages to march forward and kneel in the dirt. The video goes on to make the cyber-attack threat.  

• In Top-Secret Brazil Vaults, Diamonds Are Evidence of a Downturn. Scattered across southern Brazil, three clandestine buildings brimming with gold and diamonds are a testament to the nation’s troubled times. Business at the government-run pawnshops that feed the secret vaults is booming as Brazil’s economy is forecast to contract this year and next, its longest recession in eight decades. The pawnshops -- different from U.S. storefronts that hawk everything from used guitars to leather jackets -- are operated exclusively by state-owned bank Caixa Economica Federal and take mainly rare stones and jewelry.

• Brazilian Real Drops to Record Low Against U.S. Dollar. Brazil’s real fell to its lowest level since its introduction two decades ago and stocks dropped a fourth day on concern that President Dilma Rousseff won’t be able to shore up the country’s budget and avoid further credit-rating cuts. The currency sank to as low as 4.0519 per dollar, the weakest intraday level since it was created in 1994, and traded 1.6 percent lower as of 11:56 a.m. in Sao Paulo. The MSCI Brazil Index of stocks dropped 4 percent to a three-month low, led by a rout in companies that depend on consumer demand.

• Dollar Climbs as Fed Speakers Revive 2015 Rate-Rise Speculation. The dollar reached its strongest level in almost two weeks against the euro after Federal Reserve officials said the U.S. economy is strong enough to withstand an interest-rate increase this year. The greenback climbed versus all but two of its 16 major peers. Futures traders saw 47 percent odds of a Fed move in December, up from 44 percent on Sept. 17. Fed Bank of Atlanta President Dennis Lockhart said he remains confident the U.S. will tighten policy this year, even as recent market volatility raised risks to the economic and inflation outlook. European Central Bank Executive Board member Peter Praet said in Geneva on Monday that policy makers “would forcefully react” if the ECB’s inflation goal is at risk.  

• Europe Stocks Slide as Carmakers Head for Biggest Drop Since '11. Volkswagen AG’s unfolding emission-test scandal and worries about global growth weighed on investor sentiment in Europe, sending the region’s stocks lower. Volkswagen tumbled 20 percent, dragging a measure of carmakers to its biggest two-day slump since 2008, after saying irregularities on diesel-output readings extend to 11 million vehicles around the world, and it has set aside 6.5 billion euros ($7.3 billion) in an initial tally of the costs. Shares have lost 35 percent since its admission of cheating on U.S. air-pollution tests. PSA Peugeot Citroen SA fell 8.8 percent after France’s finance minister called for a European investigation of the industry. “The extremely negative thing about it is that you cannot quantify the overall costs and penalties for VW that will occur,” said Matthias Jasper, head of equities at WGZ Bank in Dusseldorf. “It may take years to come and people are getting really nervous about it. I’m completely unable to give a time horizon when this may end; it’s a pretty scary picture. This is also the reason why even long-term oriented investors are dumping the shares.” The Stoxx Europe 600 Index dropped 3.1 percent to 346.67 at the close of trading, its lowest since Aug. 24.

• Copper Leads Metals Slump as Zinc Falls to Lowest in Five Years. Copper led losses in industrial metals and zinc fell to a five-year low on concern that a weakening economy will reduce demand in China, the world’s biggest metals user. The Asian Development Bank cut its growth forecasts for China, and said ebbing consumption of raw materials in the nation would hurt commodity-focused exporters like Mongolia and Indonesia. Production will exceed demand by 598,000 tons by 2017, double the surplus this year, and prices are expected to decline, Nomura Holdings Inc. said in a report dated Monday. Copper for delivery in three months dropped 3.6 percent to settle at $5,078 a metric ton ($2.30 a pound) at 5:51 p.m in London, after touching $5,036, the lowest since Aug. 27. Zinc fell as much as 2.1 percent to the lowest since June 2010. Aluminum, nickel, lead and tin also fell.

• Burned by Oil Trade, Debt Investors Think Twice This Time Around. When banks began to scale back financing for energy companies earlier this year amid the slump in oil prices, some of Wall Street’s savviest asset managers sought to capitalize by lending at high rates. That didn’t work out so well, as crude continued to plunge and lenders were stuck with losing positions. Now, banks are again contemplating credit cuts. But this time hedge funds and private-equity firms are showing more reluctance to step in. “Those so-called lenders of last resort are not out there this time around,” said John Castellano, a managing director at the consulting firm AlixPartners LLP who focuses on advising energy companies. “Many were burned and are staying away.”  

• European Coal Prices Slump to a Record Low. European coal for 2016 dropped below $50 a metric ton for the first time amid slumping demand from China, the biggest consumer. Prices have declined 26 percent so far in 2015, heading for a fifth straight year of drops in the benchmark year-ahead contract, according to broker data compiled by Bloomberg. The slump came as lackluster global demand with diminished prospects for growth, including a 35 percent drop in Chinese coal imports from January to July, combined with plenty of available low-cost supply, according to Societe Generale SA.

• The Surprisingly Big Market for Sand Just Collapsed. In New Auburn, Wisconsin, a desolate, little outpost carved from the rolling pine-tree forests that run into Lake Superior, the collapse in oil is wreaking havoc on every aspect of the economy. It’s not that there’s any oil here. None in fact for hundreds of miles around. What they’ve got is sand. Real good sand, piled high in giant mounds. 

• Interpreting the Dow's Head and Shoulders Pattern. (video)

• Chart-Watchers Zero In on More Warning Signals for U.S. Equities. (video) Equity investors rattled by last month’s correction, the prospects for the global economy and the Federal Reserve’s interest rate policy can add a few more reasons to worry. Several technical charts are sounding warning signals that the worst of equities turmoil may not be over. So is the market headed toward another selloff? It may depend on how much stock you put into such omens. The latest signals come after Wall Street early last month was fixated on another chart -- the “death cross,” in which the 50-day moving average of the Dow Jones Industrial Average fell below the 200-day average. The two lines crossed on Aug. 11, and less than two weeks later the gauge dropped 10 percent in four days for its first correction since 2011. With that in mind, here’s what the chartists are seeing in the latest batch of data: 

• Goldman(GS) Chief Blankfein Discloses Curable Lymphoma Disease. Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., said he has a “highly curable” form of lymphoma and will undergo chemotherapy over the next several months. “My doctors have advised me that during the treatment, I will be able to work substantially as normal, leading the firm,” Blankfein, 61, said Tuesday in a statement. “My doctors’ and my own expectation is that I will be cured.”

Wall Street Journal:

• U.S. Presses Firms to Raise China Complaints. Obama administration enlists business community to raise China issues as Xi Jinping arrives for state visit.

CNBC:

• Look out below—where stocks could bottom: Paulsen. (video) Stocks appear vulnerable to test and maybe even break the lows seen toward the end of August, closely followed market watcher Jim Paulsen said Tuesday, as the Dow Jones industrial average plunged about 200 points on the open. "I think at a minimum we go challenge the old lows we had set on the initial crash," the chief investment strategist at Wells Capital Management told CNBC, referring to Aug. 25 when the Dow sunk to 15,666 and the S&P 500 fell to 1,867. "My best guess is we break those maybe and head down towards 1,800-ish [on the S&P] or that level before we finally scare everyone entirely, and maybe finally find a bottom in this correction," Paulsen said on "Squawk Box." The S&P at 1,800 would represent a nearly 8.5 percent drop from where the index closed Monday at 1,966.

Zero Hedge:

• PIMCO's Balls On The Fed: There Will Be No Escape From ZIRP.

• The Market's Other "Panic Indicator" Just Went Vertical (Again). (graph)

• Europe's "Heading For Disaster"; Nigel Farage Warns Immigrant Flood "Threatens Our Civilization". (video)

• "Doomsday" Cometh For Glencore: Mining Giant's Default Risk Just Exploded Higher. (graph)

• Richmond Fed Manufacturing Survey Collapses, Workweek Crashes To 6 Year Lows. (graph)

• Fed Facade Fails: Everything Suddenly Questioned.

• 2,000 Russian Troops Head To Syria For "First Phase" Of Mission To Support Assad.

• Clinton Takes Aim At Soaring Drug Costs, Proposes $250 Monthly Cap.

Business Insider:

• MORGAN STANLEY(MS) WARNS: Americans are starting to do 'dumb things' with their money. In a press briefing on Tuesday, Mike Wilson, chief investment officer of Morgan Stanley wealth management, said consumer behavior was starting to show signs of excess as the economic recovery reaches its later stages.

• Obama's hand-picked ISIS war czar is resigning.

• Elizabeth Warren is going after private equity's golden goose.

• There are 2 major complaints with the new iPhone (AAPL).

• 5 of the richest countries on Earth are in the Middle East, and they won't take any refugees from their war-torn neighbors. (video)

• Russia appears to be building 2 more military bases in Syria.

• THE MID-YEAR SMARTPHONE UPDATE REPORT: Power struggles between the biggest platforms and the underdogs that are gaining ground.

Financial Times:

• Canada’s troubles are also the Fed’s. The US does not directly trade significantly with China. But it does trade heavily with neighbours Canada and Mexico (which are more prominent in Steinberg’s cover than those faraway countries). As Ms Yellen implied, if China’s economic slowdown hurts America’s neighbours, then it hurts the US.

• Biotech stocks fall further as Hillary Clinton unveils drug policy.

Telegraph:

• Analysts warn of "another crash" as FTSE hits lowest level since Black Monday. Almost £44bn has been wiped off the value of Britain's biggest companies as copper prices hit a two-week low. 

• 'Made in Germany' lies in the 'gutter' after Volkswagen caught cheating. VW's conspiracy to rig emissions exposes it as the 'Lance Armstrong' of the car industry, once again revealing corrupt reflexes in German boardrooms.  

• As George Osborne kowtows, the world sinks beneath a sea of Chinese overcapacity. Britain was a pioneer in steel and nuclear. Now it must jump to China's tune on both.

Xinhua:

• China to use less power in 2015. China's electricity consumption, a key indicator of economic activity, is expected to climb 2 percent this year from 2014, the slowest pace in 17 years, an official said on Tuesday. The slowdown is related to China's economic slowdown, as well as the rapid growth of power demand in past years, Wang Zhixuan, secretary-general of China Electricity Council, told Tuesday's Economic Information Daily. China's power use grew 11.9 percent in 2011, 5.6 percent in 2012, 7.5 percent in 2013 and 3.8 percent in 2014. In the first half of 2015, power use rose only 1.3 percent.

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.13%

Sector Underperformers:

• 1) Coal -8.51% 2) Homebuilders -3.78% 3) Biotech -3.35%

Stocks Falling on Unusual Volume:

• IBB, LAKE, ST, BPMC, THO, HZNP, KMX, RTRX, HQY, SJM, TEN, AGU, DPLO, BWA, RHT, WBMD, ANIP, IHG, CCL, NRG, AGTC, MRTX, POT, FCAM, FCAU, CAG, TSCO, LRCX, KBH, SJM, AEIS, BMRN, ZAYO, ALSN, CLVS, WGO, VRTX, SWFT, CAG, THO, MOS, NRG, SPLS, DYN and ANIP

Stocks With Unusual Put Option Activity:

• 1) AMD 2) X 3) MOS 4) FFIV 5) ATML
  

Stocks With Most Negative News Mentions:

• 1) FFIV 2) MOS 3) CMI 4) MDC 5) BIIB
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -1.61%

Sector Outperformers:

• 1) Hospitals -.61% 2) Oil Service -.63% 3) HMOs -.82%
  

Stocks Rising on Unusual Volume:

• BIS

Stocks With Unusual Call Option Activity:

• 1) ODP 2) HZNP 3) SLH 4) SO 5) DUST
  

Stocks With Most Positive News Mentions:

• 1) JACK 2) WFT 3) AZO 4) FENX 5) GCO
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 9.0% Above 100-Day Average
• 0 Sectors Rising, 10 Sectors Declining
• 15.5% of Issues Advancing, 82.1% Declining
• 2 New 52-Week Highs, 162 New Lows
• 25.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.8
• Vix 23.4
• Total Put/Call 1.16
• TRIN/Arms 3.41

Tuesday Watch

Evening Headlines 

Bloomberg:

• China Effect Seen as ADB Cuts Asian Growth Forecasts Again. China’s declining appetite for energy, metals and other commodities will hurt commodity-focused export economies, including Mongolia, Indonesia, Azerbaijan, and Kazakhstan, the Asian Development Bank said. For the second time in just over two months, the ADB cut China’s economic growth forecasts -- to 6.8 percent in 2015 and 6.7 percent in 2016 -- it said in its Asian Development Outlook 2015 Update report released Tuesday. In July, it estimated a 7 percent expansion for this year and 6.8 percent for next. Mongolia, which exports copper, will suffer an estimated 2.7 percentage-point decline in gross domestic product growth for every 0.2 percentage-point drop in China’s expansion, the ADB said. Kazakhstan, which sells piping oil, will lose about 0.5 percentage point, it said.

• Five Things on the Agenda When China's Xi Goes to Washington. Pollution, cyber threats and human rights are on the list. Xi Jinping is coming to America. The Chinese leader will land in Seattle, visit the White House and address the United Nations for the first time. His words will be parsed by economists, activists and politicians seeking answers from the world's second-biggest economy on where it stands on climate change, monetary policy and cyber espionage to name but a few hot-button issues. Here is a quick ranking of what Americans are most worried about when it comes to China:

• China could dodge Fed bullet, but Malaysia in the firing line. Malaysia needs to braced for a hit to growth. When the U.S. Federal Reserve last week opted against its first rate hike in nine years, governments around Asia breathed a sigh of relief. But that relief could be short lived. While the region's biggest economy, China, can likely withstand any negative flow through whenever the Fed does eventually move, others, like Malaysia are braced for a hit to growth. That's because a U.S. rate hike could accelerate declines in developing Asian currencies and in the process raise funding costs for firms and consumers, constraining demand and disrupting growth, according to HSBC Holdings Plc. The relationship is particularly dangerous in economies where consumption and investment is driven by debt and may be exacerbated when U.S. dollar interest rates begin to rise, it said.

• Barclays: These Advanced Economies Need More Currency Depreciation to Offset the Commodities Crash. Competitiveness is just a crashing currency away. The hangover from the end of the commodity supercycle has wreaked havoc on a number of advanced economies. Barclays’s foreign exchange research team found that Australia, Canada, Norway, and New Zealand have been victims of a “Dutch Disease pandemic during the recent commodity boom.” What’s Dutch Disease, you ask? Dutch Disease refers to the process by which an increase in commodity prices exerts upward pressure on the currency of a nation that exports that natural resource, and causes a decline in the country’s manufacturing sector, which loses competitiveness as the exchange rate rises.

• Volatility Sets in for Currencies as Fed Leaves Traders Hanging. Foreign-exchange volatility, already the highest in four years, looks set for an extended stay after the Federal Reserve rattled markets last week by not raising interest rates. With the central bank leaving the question of when it will move hanging over markets, its focus on economic data and international circumstances means every report will stir more volatility, according to Morgan Stanley. Fed Chair Janet Yellen says she’s monitoring risks from China, while central banks in Europe and Japan weigh further stimulus as the Fed looks to raise U.S. rates for the first time since 2006.

• Most Asian Stocks Advance as Consumer, Material Companies Rally. Most Asian stocks rose, following a rebound in U.S. equities. Consumer and material shares led gains. Four shares climbed for each that fell on the MSCI Asia Pacific Excluding Japan Index, which was little changed as of 8:04 a.m. in Hong Kong. Japanese markets are closed for a holiday.

• Scott Walker Exits the Republican Presidential Race. The Wisconsin governor took a parting shot at front-runner Donald Trump, urging remaining candidates to "offer a positive, conservative alternative to the current front-runner." "Today, I believe that I am being called to lead by helping to clear the field in this race, so that a positive, conservative message to rise to the top of the field," Walker said. "I encourage other Republican presidential candidates to consider doing the same, so that the voters can focus on a limited number of candidates who can offer a positive, conservative alternative to the current front-runner." He described the appeal as "fundamentally important to the future of party, and more importantly to the future of our country," though Walker did not call out Trump by name.

• Chicago Plans $543 Million Property Tax Hike Over Four Years. Chicago Mayor Rahm Emanuel will propose raising property taxes by $543 million over the next four years to help cover soaring pension-fund costs that have triggred downgrades to the city’s bond rating. Emanuel, a Democrat who won re-election this year, will propose an increase of $318 million for 2015, his office said in a statement Monday. That will be followed by an additional $109 million in 2016, $53 million in 2017 and $63 million in 2018. 

Wall Street Journal:

• Russia, Iran Seen Coordinating on Defense of Assad Regime in Syria. U.S., regional officials say military buildup in coastal base aimed at safeguarding regime’s stronghold.
  Russia and Iran have stepped up coordination inside Syria as they move to safeguard President Bashar al-Assad’s control over his coastal stronghold, according to officials in the U.S. and Middle East, creating a new complication for Washington’s diplomatic goals.

• For Multinational Firms, Brazil Becomes a Pain in the Wallet. Weak currency, recession keep recent investments in once-hot market from paying off. As many multinational companies close their third-quarter books in coming weeks, their finance chiefs are likely to face a stark reality: the weakest results coming out of Brazil in over a decade.

• The Politics of Pope Francis. Perhaps America and this pope can learn from each other. The pope will also visit the White House and speak to Congress, and this is where his tour takes on an extra-religious resonance. Pope Francis has overtly embraced the contemporary progressive political agenda of income redistribution and government economic control to reduce climate change. 

• How to Lower U.S. Living Standards. The drastic ‘80 by 50’ goal would reduce the energy use of Californians to that of North Koreans today. 

Fox News:

• Defense Department under fire for handling of child abuse claims in Afghanistan. (video) The Defense Department is facing mounting criticism for its handling of child abuse allegations involving Afghan commanders, including revived claims that U.S. soldiers were instructed to look the other way when Afghan troops and officers were sexually abusing boys.

MarketWatch.com:

• Tax-loss selling could prolong this stock-market correction.

CNBC: 

• Apple(AAPL) car could lose big money: Former GM exec. (video) Apple would burn through cash if it enters the electric car business, with little hope of turning a profit, former General Motors Vice Chairman Bob Lutz contended Monday.

Zero Hedge: 

• PBOC Devalues Yuan, Injects More Liquidity As China's Banking Regulator Admits "Bad Loan Situation Is More Severe Than 2008". (graph)

• "Emerging Markets Are On The Verge Of Liquidation" Top Performing Hedge Fund Manager Warns; "QE4 Is Coming".

• The Truth About S&P 500 Earnings: No Growth For 7 Quarters, With A Revenue Recession On Top.

• Bonds Baumgartner'd As Bullard Bounce Bruised By Hillary Bursting Biotech Bubble. (graph)

• The "Economissed" Track Record Revisited: Last Month, 82% Of "Experts" Expected A September Fed Hike.

• What The Charts Say: BofA's Three Most Bullish And Bearish Stock Charts. (graph)

Business Insider:

• Another sign that things are going wrong in 3 of the world's largest economies. UK construction machinery firm JCB has said it will cut 400 jobs around the world, mostly due to a massive slowdown in business in Russia, China, and Brazil. This is a horrible sign for three of the biggest economies in the world. "In the first six months of the year, the market in Russia has dropped by 70%, Brazil by 36% and China by 47%," said JCB CEO Graeme Macdonald in a press release. "Parts of Europe are also struggling, with France down by 26%," he added.

• Scott Walker unloads on Donald Trump while exiting the race.

• White House: There has been a ‘surprising uptick’ in US border crossings.

• Syrians say there are 'imposters' among them on the migrant trail.

• The latest margin debt data. (graph)

• VW is trapped.

• Things are so bad in Chile they're giving away cash to help out the copper miners.

• Oil companies are running out of options.

Financial Times:

• Russia to deploy 2,000 in Syria air base mission’s ‘first phase’. Russia is to deploy 2,000 military personnel to its new air base near the Syrian port city of Latakia, signalling the scale of Moscow’s involvement in the war-torn country. The deployment “forms the first phase of the mission there”, according to an adviser on Syria policy in Moscow.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are unch. to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 147.0 -1.25 basis points.

• Asia Pacific Sovereign CDS Index 76.50 -1.75 basis points.

• S&P 500 futures -.22%.

• NASDAQ 100 futures -.21%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AZO)/12.69

• (KMX)/.76

• (CCL)/1.62

• (CAG)/.40

• (DRI)/.57

• (FDS)/1.61

• (GIS)/.69

• (CPRT)/.39

Economic Releases

9:00 am EST

• The FHFA House Price Index for July is estimated to rise +.4% versus a +.2% gain in June.

10:00 am EST

• The Richmond Fed Manufacturing Index for September is estimated to rise to 2.0 versus 0.0 in August.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lockhart speaking, China Manufacturing PMI, $26B 2Y Note auction, weekly US retail sales reports, Raymond James Equity Conference, (PH) investor meeting and the (SPLK) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.