Stocks Reversing Lower into Final Hour on China Bubble-Bursting Fears, Rising European/Emerging Markets/US High-Yield Debt Angst, Technical Selling, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 27.38 -.90%

• Euro/Yen Carry Return Index 140.72 +.06%

• Emerging Markets Currency Volatility(VXY) 12.96 +.15%

• S&P 500 Implied Correlation 66.38 -.42%

• ISE Sentiment Index 77.0 +45.28%

• Total Put/Call 1.41 -1.40%

• NYSE Arms .75 -66.73% 

Credit Investor Angst:

• North American Investment Grade CDS Index 92.93 +.42%

• America Energy Sector High-Yield CDS Index 1,098.0 +.02%

• European Financial Sector CDS Index 96.75 +.12%

• Western Europe Sovereign Debt CDS Index 22.22 +3.88%

• Asia Pacific Sovereign Debt CDS Index 92.56 +1.07%

• Emerging Market CDS Index 404.08 +1.28%
  

• iBoxx Offshore RMB China Corporates High Yield Index 119.60 -.18%

• 2-Year Swap Spread 10.5 +.5 basis point

• TED Spread 32.0 -1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -25.75 -4.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.31 +.27%
• 3-Month T-Bill Yield .00 +1.0 basis point

• Yield Curve 141.0 -2.0 basis points

• China Import Iron Ore Spot $56.05/Metric Tonne -1.42%

• Citi US Economic Surprise Index -20.40 +3.4 points

• Citi Eurozone Economic Surprise Index 35.80 +14.6 points

• Citi Emerging Markets Economic Surprise Index -25.6 -.3 point

• 10-Year TIPS Spread 1.40 +1.0 basis point
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 5.59 +.17

Overseas Futures:

• Nikkei 225 Futures: Indicating +245 open in Japan 
• China A50 Futures: Indicating -55 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/tech sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:    

• Traders Flee Emerging Markets at Fastest Pace Since 2008 Crisis. Investors have pulled $40 billion out of developing economies in the third quarter, fleeing emerging markets at the fastest pace since the height of the global financial crisis. The quarterly outflow was the first since 2009 and the biggest since the final three months of 2008, when traders sold $105 billion of assets, according to the Institute of International Finance. The retreat came as data signaled faltering Chinese economic growth, commodity prices slumped and the Federal Reserve moved closer to an increase in the near-zero U.S. interest rates that have supported demand for riskier assets in developing nations. About $19 billion of the selloff was equities, with the remaining $21 billion in debt, the IIF said in a report Tuesday. There were outflows in all three months this quarter. 
• Glencore Must Stem Rumors, Stop Lehman-Like Moment, L&G Says. (video) Glencore Plc faces a “quasi-Lehman moment,” where rumors about the company’s viability hurt the stock amid a lack of information from its leadership, Legal & General Group Plc Chief Executive Officer Nigel Wilson said. “There’s a lot of noise and there’s not enough signalling,” Wilson said on Bloomberg Television’s “Countdown” on Tuesday. “That lack of information causes a huge amount of uncertainty at Glencore, which is having a massive contagion effect across the world,” he said, commenting before the market opened.

• Japan's Economy Suffers the Shortfalls of Abenomics. (video)  
• Rajan Surprises Again With Bigger-Than-Forecast India Rate Cut. (video)
  India central bank Governor Raghuram Rajan built on his record of surprises with policy decisions Tuesday, taking advantage of a rout in commodity prices to lower borrowing costs by more than forecast. Rajan, who unleashed emergency measures to prop up the rupee days after he took office and began this year with two unscheduled interest-rate cuts, lowered the benchmark repurchase rate by half a percentage point, to 6.75 percent. Most of the 52 economists surveyed by Bloomberg had predicted a quarter-point move, and just one made the right call.
• German Stock Investors See $400 Billion Vanish as DAX Slumps. German stocks are falling at a rate not seen since Europe’s sovereign debt crisis. The nation’s equity market has lost almost $400 billion in value from a high in April as the DAX Index heads for its first back-to-back quarterly declines since the start of 2009. Hit first by a rebounding euro and the Greek crisis, the losses accelerated in recent weeks as concern over a Chinese slowdown escalated and automakers tumbled after Volkswagen AG admitted cheating on emissions tests in some of its diesel cars. 
• European Dark Pools Brace for Continent-Wide Limits on Trading. The European Union is going ahead with new regulations that could stop many of the continent’s largest companies from trading on dark pools, even though a senior lawmaker has denounced the rules as unworkable and exchanges have said they will impact trading in unpredictable ways. The European Securities and Markets Authority made one concession to its critics when it published the final version of the rules on Monday. The EU’s markets regulator changed an existing exemption to the trading limits, so that stakes in thinly traded companies can more easily change hands on dark pools once the new rules come into force in January 2017.  
• European Stocks Fall for Second Day as Growth Concern Persists. European stocks deepened losses today, signaling investor worry over global growth hasn’t abated. Concern over a slowdown in Asia and uncertainty over the Federal Reserve’s actions is weighing on shares, boosting volatility. A gauge measuring swings on euro-area stocks is at its highest level since 2011 on a monthly basis, data compiled by Bloomberg show. The Stoxx Europe 600 Index dropped 0.7 percent to 339.23 at the close of trading, after briefly reversing a decline of as much as 1.8 percent earlier.
• The Real Estate Crisis in North Dakota's Man Camps. Chain saws and staple guns echo across a $40 million residential complex under construction in Williston, North Dakota, a few miles from almost-empty camps once filled with oil workers. After struggling to house thousands of migrant roughnecks during the boom, the state faces a new real-estate crisis: The frenzied drilling that made it No. 1 in personal-income growth and job creation for five consecutive years hasn’t lasted long enough to support the oil-fueled building explosion. 
• BofA(BAC) Sees Junk-Bond Train Wreck as Pain Spreads Across Market. Junk-bond investors reeling from a brutal month of losses had better get ready for more pain. What started out as weakness in commodities-related debt has quickly spread to other areas of the market, with lackluster earnings, heavily indebted companies, slow global growth and “appalling bond market liquidity” signaling the end of the credit boom, Bank of America Corp. analysts led by Michael Contopoulos wrote in a report Tuesday. “The malaise is spreading, albeit slowly,” Contopoulos wrote. “We suspect that this is the start of a long, slow and painful unwind of the excesses of the last five years.” 
• Goldman Sachs(GS) Slashes S&P 500 Price Target, Sees Negative Return for U.S. Stocks. Goldman Sachs now expects the S&P 500-stock index to finish in the red in 2015. Chief U.S. equity strategist David Kostin lowered his year-end price target for the S&P 500 to 2,000, from 2,100, citing slower than anticipated growth from the world's two biggest economies and lower-than-expected oil prices. This drop of nearly 3 percent would be the benchmark index's first negative year since 2011, though this level also represents upside of more than 6 percent from where the S&P 500 closed on Monday. 
• Credit Suisse: There's a Growing Threat of a Major Top in the S&P 500. Another technical indicator flashes a warning signal. Sorry bulls, technical analysis isn't looking so hot for U.S. equities at the moment, and Credit Suisse is piling onto your pain. In a new note, Ric Deverell and his team at Credit Suisse point to some technical levels worth watching, one of which could be a big signal that the top is in for the S&P 500-stock index. The index is currently trading around 1,890.  
• U.S. Inflation Outlook Slumps to Six-Year Low as Fed Sees Pickup. The Treasury market is signaling inflation expectations in the U.S. are tumbling, even as Federal Reserve officials stick to forecasts for a pickup. The difference between yields on five-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices, fell below 1 percentage point Tuesday. The so-called break-even rate is the lowest in six years, after dropping the most in more than eight months on Monday.  Hillary Clinton Fixes Sights on Ripe Target: Prescription Drug Prices. It's a calculated risk by the front-runner, who has steered clear of other corporate targets pursued by rival Bernie Sanders. Hillary Clinton may have found the perfect target to show that she'll be as tough on corporations as her Democratic presidential rival, Bernie Sanders: Big Pharma. Following up on her tweet last week against “price-gouging” by Turing Pharmaceuticals that sent biotech stocks plummeting, the Democratic front-runner released a hard-hitting television ad on Monday suggesting that CEO Martin Shkreli decided to lower prices after she went after him. In between, she unveiled a proposal to cap out-of-pocket drug expenses, offer tax credits to help families deal with soaring costs, force drug manufacturers to invest more on research and development, and oblige companies to invest in the production of generics. 
• Biotech dread is like nothing in four years. Following a week-long rout that has lopped 20 percent off share prices, investors are bidding up contracts that protect against declines in the iShares Nasdaq Biotechnology ETF in the next 30 days, driving the price to the highest since 2011 compared with contracts expiring in three months. The difference in implied volatility shows trader obsession with the prospect of losses in the here and now, rather than months in the future. Implied volatility for 30-day contracts on the iShares Nasdaq Biotech ETF is 51.93, compared with 42.93 for options that expire in three months, according to data compiled by Bloomberg. That gap of 9 is the most since August 2011. Meanwhile, 30-day historical volatility spiked to a four-year high on Monday. 
• Bespoke: Biotech Stocks Could Fall Another 10 Percent. A short history of biotech bears and bulls. What goes up must come down? The S&P Biotechnology Select Industry Index fell nearly 5 percent to start the week, as drug price increases undergo major scrutiny. The downward move follows a runup that has seen the index jump, from 1,040 back in September 2011, to 4,110 at the end of June this year—an astonishing 295 percent increase.  
• BofA(BAC) Said to Cut Dozens of Traders, Bankers as Revenue Drops. Bank of America Corp. is cutting dozens of jobs across the firm’s trading and banking divisions after Chief Executive Officer Brian Moynihan pledged to trim expenses amid a decline in trading revenue, according to two people with knowledge of the plans. 
• Pimco Sees Fed 'Phantom Rate Hike' at Root of Market Volatility. Financial-market volatility has climbed as investors wait for a Federal Reserve shift that policy makers have signaled yet failed to deliver, according to Tony Crescenzi at Pacific Investment Management Co. With Fed officials indicating they will probably raise the central bank’s target interest rate from near zero this year, investors have moved to get ahead of the policy change, Crescenzi, an executive vice president at the money manager, wrote in a note published Tuesday. Pimco, based in Newport Beach, California, oversaw about $1.52 trillion as of June 30.  
• Google Unveils Nexus Phones by LG, Huawei to Challenge IPhone. Google Inc. unveiled its newest Nexus smartphones with Huawei and LG Electronics Inc. as it looks to blunt the growth of Apple Inc.’s iPhone.

Fox News:

• Planned Parenthood boss clashes with lawmakers over taxpayer $$, videos. (video)

CNBC:

• As Banks Retreat, Private Equity Rushes to Buy Troubled Home Mortgages.

Zero Hedge:

• Forget Glencore: This Is The Real "Systemic Risk" Among The Commodity Traders. (graph)
• Bull Retest Or Bear Failure? (graph)
• This Bear Is Just Waking From Hibernation. (graph)
• Carl Icahn Says Market "Way Overpriced", Warns "God Knows Where This Is Going".
• Yuan Liquidity Dries Up In Hong Kong After Dramatic PBoC Offshore FX Intervention. (graph)
• Consumer Confidence Spikes Near 8-Year High Amid Global Turmoil But "Hope" Fades. (graph)
• Cacophony Of The Clueless - FedSpeak Reaches Peak Confusion.
• Case-Shiller Home Prices Disappoint (Again), Tumble Most In 13 Months. (graph)
• Glencore CDS Rout Continues, Curve Remains Inverted Even As Stock Rebounds On Sellside "Defense". (graph)
• Axel Springer Buys Business Insider For $443 Million, Paying 9x Projected Revenues.

Business Insider: 

• Brace for market turbulence.

Reuters:

• Delayed rate hike 'risk management' says Fed's Mester: Nikkei. The Federal Reserve delayed an interest rate hike this month as a "risk management" measure in the face of global growth concerns and financial market volatility, Cleveland Fed President Loretta Mester was quoted on Tuesday as saying. Mester, interviewed by Nikkei, repeated that she believes the U.S. economy is strong enough for an initial rate hike. "The decision not to raise rates in September was really a decision about risk management," she was quoted as saying, citing risks to U.S. economic forecasts from a "reassessment of global growth" and renewed questions about China's economy and those of emerging markets.

News9:

• Chesapeake Energy(CHK) Said to Be Laying Off Up to 1,000. Up to 1,000 employees could be let go at Chesapeake Energy; layoffs said to be underway.

Telegraph: 

• World set for emerging market mass default, warns IMF. Higher US interest rates will expose weaknesses in emerging market corporations which have gorged themselves on cheap debt, IMF warns. 
• Oil exporters face years of pain from tumbling prices, says IMF. Saudi Arabia, Russia and Brazil among others need to brace themselves for a large fallout from the end of a China-fuelled commodity boom. 

Bear Radar

Style Underperformer:

• Small-Cap Growth -.31%

Sector Underperformers:

• 1) Gaming -3.52% 2) Coal -1.75% 3) Hospitals -.85%

Stocks Falling on Unusual Volume:

• TISI, GLPG, VRX, ESPR, FCAM, NEP, SWNC, CMTL, CXRX, BIS, HZNP, ETE, CSL, CLB, MCRB, WCC, VSTO, UHS, LBTYK, NS, IPXL, DISCA, MNK, FGP, COG, WWAV, DYAX, XON, AKRX, AHS, EQM, POST, IPXL, DEPO, CSL, FLXN, FNFV, MCRB and ADXS

Stocks With Unusual Put Option Activity:

• 1) BZH 2) APA 3) EWC 4) SMH 5) LOW
  

Stocks With Most Negative News Mentions:

• 1) ESPR 2) RRC 3) BAC 4) XOM 5) RYL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.03%

Sector Outperformers:

• 1) Biotech +1.51% 2) Medical +1.47% 3) Gold & Silver +1.33%
  

Stocks Rising on Unusual Volume:

• PCRX, INCY, RDUS, NBIX, XENT, IHS, NXST and PZZA

Stocks With Unusual Call Option Activity:

• 1) SGMS 2) ZTS 3) EPD 4) BAX 5) VRX
  

Stocks With Most Positive News Mentions:

• 1) MCD 2) BMY 3) RTN 4) MU 5) CHK
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 12.7% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 48.3% of Issues Advancing, 49.2% Declining
• 2 New 52-Week Highs, 360 New Lows
• 17.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 33.4
• Vix 26.8
• Total Put/Call 1.31
• TRIN/Arms .66

Tuesday Watch

Evening Headlines 

Bloomberg: 

• China's Bond Market Is `Overheating' After Stocks, Survey Says. The bursting of China’s stock-market bubble has scattered money into corporate bonds, causing them to overheat, financial companies surveyed by Bloomberg say. Nineteen of 21 respondents said the credit market is “overheating,” according to the survey sent to onshore analysts, traders and fund managers. Some 60 percent forecast corporate bond yield premiums will widen in the fourth quarter. That would mark a shift after the difference between five-year AAA company securities and government notes dropped to a six-year low of 83.6 basis points on Sept. 7. “The stock rout has driven a lot of capital into the bond market,” said Shi Lei, the head of fixed income research in Beijing at Ping An Securities Co., a unit of China’s second-biggest insurance company. “Even though there’s no such sign at the moment, I’m concerned what will happen if there is a shift in central bank monetary policy or a rebound in stocks.

• China Stocks Head for Worst Quarter Since '08 on Economy Concern. China’s stocks fell, sending the benchmark index toward its steepest quarterly loss since 2008, as concern about the nation’s economy deepened ahead of the start of a week-long holiday this week. The Shanghai Composite Index slid 1.6 percent to 3,052.56 at 9:31 a.m. local time, extending losses in the last three months to 28 percent. Material companies led declines, with Jiangxi Copper Co. slumping 2.2 percent. Trading volumes in Shanghai plunged 46 percent before the National Day holiday that starts on Oct. 1. The Shanghai gauge has fallen 41 percent since the June peak as leveraged investors fled the stock market amid concerns valuations weren’t justified amid a weakening economy. 

• China’s Market Slump Is Claiming More Hedge-Fund Victims. (video)  

• Hong Kong's Property Boom at Risk With Stocks Flashing Warning Signs. Hong Kong home prices are the highest relative to shares of the city’s publicly-traded developers in almost two decades. For Bocom International Holdings Co. analyst Alfred Lau, that’s a sign that the property market’s about to drop as much as 20 percent. The Hang Seng Properties Index slumped 15 percent this quarter, even as a gauge of Hong Kong housing prices compiled by Centaline Property Agency Ltd. rose to a record. The stock gauge is at the lowest compared with the real estate measure since 1998, when the city’s last property bubble was bursting. “We’re just at the beginning of the correction cycle for physical property prices,” Bocom’s Lau said. “We expect a 10 to 20 percent decline in prices. Shares are already pricing in a 10 to 15 percent decline."

• Glencore Slump Continues in Hong Kong After Record London Slide. Glencore Plc slumped by the most ever in Hong Kong pre-market trading following a record collapse in its London shares, as the company is roiled by sliding commodities prices amid China’s economic slowdown. Shares in the Zug, Switzerland-based company fell 26.7 percent to HK$9 on the Hong Kong Stock Exchange on Tuesday. That followed an almost 30 percent drop in the commodity trader’s London-listed stock on Monday. 

• Glencore Fear Trade Grips Debt Market Amid Commodity Pain. Glencore Plc just gave credit traders another reason to reach for the antacid. Fears the commodities house won’t be able to get a grip on its $30 billion debt load triggered a global selloff Monday, sending junk-bond yields over 8 percent for the first time in three years, a Bank of America Merrill Lynch index shows. The concern is tied to the reduced demand for metals and minerals from China amid the country’s economic slowdown.

• Glencore's Trading `Black Box' Leaves Analysts Split on Future. Glencore Plc, the commodity trader that lost about a third of its value Monday, is worth either $98 billion or $26 billion, depending on which analyst you ask. At Sanford C. Bernstein, price targets published by Paul Gait suggest the Baar, Switzerland-based resource company can rally sevenfold to 450 pence, the top end of predictions tracked by Bloomberg. At the bottom, Nomura Holdings Inc.’s 120-pence forecast implies a market value that is $72 billion lower. The dispersion shows the difficulty in valuing a company caught between China’s slowing economy and mounting concerns about its debt load. In addition to diverging views on copper prices, questions about how to evaluate Glencore’s trading business, unique among big mining companies, are muddling the equation, according to Clarksons Platou Securities’ Jeremy Sussman.

• With Glencore, Commodity Rout Beginning to Look Like a Crisis. The 15-month commodities free-fall is starting to resemble a full-blown crisis. Investors are reacting to diminished demand from China and an end to the cheap-money era provided by the Federal Reserve. A Bloomberg index of commodity futures has fallen 50 percent since a 2011 high, and eight of the 10 worst performers in the Standard & Poor’s 500 Index this year are commodities-related businesses. Now it all seems to be coming apart at once. 

• Glencore Gloom Spreads to Australia as Biggest Miners Tumble. Shares in the biggest mining companies in Australia tumbled as the collapse in Glencore Plc’s stock highlighted the threat of sliding commodities prices amid China’s economic slowdown. BHP Billiton Ltd. fell as much as 6.4 percent in Sydney while Rio Tinto Group lost 5.8 percent and Fortescue Metals Group Ltd. dropped 5.3 percent.  

• Asia Stocks Head for Lowest Since 2012 as Material Shares Slump. Asian stocks fell, with the benchmark index heading for the lowest close since November 2012, as a selloff in U.S. and European markets spread to the region and material shares led losses. The MSCI Asia Pacific Index retreated 1.4 percent to 122.96 as of 9:10 a.m. in Tokyo, on course to slide 16 percent this quarter.

• Copper Extends Losses as Metals Trade Near Lowest in Six Years. Copper extended a decline as metals traded near their lowest level in six years. Glencore Plc, the Swiss commodities trader and miner, lost almost a third of its value on Monday and the rout in mining shares continued in Asia. The metal used in pipes and wires declined for a sixth day, falling as much as 0.3 percent to $4,950 a metric ton. Prices slid to $4,925 on Monday, the lowest intraday level in more than a month. The London Metal Exchange index of six metals is trading near its lowest since 2009.

• Clinton Proposes Drugmakers Fund Their Own Generic Competition. Drugmakers would fund their generic competitors under a proposal by Democratic presidential candidate Hillary Clinton designed to curb consumers’ medication costs by redistributing profits from high-priced drugs. Under the plan, the government would gather money from drug companies that don’t hit a minimum threshold on research spending. The resulting public fund would then provide grants to generics makers to make low-cost versions when none are available on the market, a campaign spokesman, Jesse Ferguson, said in an e-mail. “A new idea to chew on - let’s explore using some of these new research funds to invest directly in producing generic competitors where none exists," Clinton wrote on Facebook in a question-and-answer session. The presidential candidate caused biotech shares to slide last week.

• Fed Officials See Interest-Rate Increase on Track for 2015. (video) The Federal Reserve will probably raise interest rates later this year and tighten policy gradually thereafter, New York Fed President William C. Dudley said, echoing the sentiment of Chair Janet Yellen that an uncertain global outlook won’t postpone liftoff into 2016. “The economy is doing pretty well,” Dudley said Monday at an event hosted by the Wall Street Journal in New York. “My expectation is that we probably will raise interest rates later this year.” Dudley said he expected growth in the second half will be a little bit weaker than in the first half, when the U.S. grew around 2.25 percent on an annualized basis. 

Wall Street Journal: 

• Investors Fall Out of Love With Deals. The stocks of a number of acquirers have suffered big losses following the announcement of a takeover. Corporate executives earlier this year were feeling the love from investors when they announced acquisitions. Now, they are getting the cold shoulder.

• WSJ Poll Shows Risks for GOP; Clinton Support Wanes. Democrats head into the 2016 election in the precarious position of backing a presidential front-runner who is losing steam with the broader electorate, a new Wall Street Journal/NBC News poll finds.

• Lid on Oil Prices Refuses to Budge. Muted price reaction to declining U.S. oil output underscores how the market’s focus has shifted to production gains elsewhere.

• Glencore Shares Plunge as Debt Fears Rattle Investors. Shares are down nearly 90% since their listing in 2011. An accelerating collapse in the shares of Glencore PLC is casting a long shadow on the unique corporate structure engineered by its chief executive, Ivan Glasenberg: a heady mix of fast-moving traders and old-economy mining assets.

• Debt-Market Tumult Hits Corporate-Bond Sales. Three companies reduced or put off planned bond sales in response to soft investor demand. Bond-market turmoil mounted Monday, as three companies reduced or put off planned bond sales in response to soft investor demand, damped by concerns that a global economic slowdown is taking shape.

• Lawmakers Seek Answers on Valeant’s(VRX) Price Increases. Drug maker’s stock price falls 17% after Democrats request subpoena. Democrats on the House oversight committee are trying to force Valeant Pharmaceuticals International Inc. to provide documents explaining hefty price increases for two heart drugs. Valeant shares fell 16.5% to $166.50 Monday following news of the request for a subpoena. The stock had fallen more than 12% over the previous several days amid increasing criticism from law makers about drug-price increases.

Fox News: 

• Obama, Putin discuss possible Russian involvement in fight against ISIS. (video) President Obama and Russia’s Vladmir Putin wrapped up their first face-to-face meeting in nearly a year late Monday following dueling speeches on the crisis in Syria at the United Nations summit. Putin said the meeting, which lasted a little over 90 minutes, was “very constructive, business-like and frank” and the two world leaders discussed Russia’s involvement in a military campaign against Islamic State militants in Syria.

• Saudi VIP$ use wealth, diplomatic immunity to run amok in the US. The Saudi Arabian prince arrested last week for allegedly sexually assaulting a woman at the Beverly Hills mansion he was renting is just the latest rich and well-connected Kingdom VIP accused of running amok in America – and around the world.

MarketWatch.com: 

• 10 stocks leading today’s S&P 500 decline.

CNBC: 

• Fed's Williams calls for rate hike this year. (video) A top U.S. central banker on Monday renewed his call for an interest rate hike "sometime later this year," citing near-full employment and rapidly rising house prices that may be a sign of excessive economic optimism. "I don't think we are at a tipping point yet — but I am looking at the path we're on and looking out for potential potholes," John Williams, president of the San Francisco Federal Reserve Bank, said in remarks prepared for delivery to the UCLA Anderson School of Management. "I am starting to see signs of imbalances emerge in the form of high asset prices, especially in real estate, and that trips the alert system."

Zero Hedge: 

• "Turmoil" - Aussie Miners Mauled, Baht Battered, Japan Jolted, & Asia's "Glencore" Crashes. (graph)

• Fukushima Reactor No.2 May Have Suffered Total Meltdown.

• Bubble Burst? IPOs Are Having Their Worst Year Since Lehman. (graph)

• The Market In Pictures - The Aging Bull.

• "Minority Report" Is 40 Years Ahead of Schedule: The Fictional World Has Become Reality.

• Fourth Turning: Crisis Of Trust, Part 3.

• Liquid Alts - The World's Most Popular Hedge Fund Strategy Explained.

• Stocks Battered To Black Monday Lows Amid Credit Crash, Biotech Bloodbath, & Commodity Carnage. (graph)

Business Insider: 

• The US program to train Syrian rebels is nearing a meltdown.

• Greece's debt is still unsustainable.

• There's more pain to come for emerging markets. (graph)

• Yahoo(YHOO) says it will go forward with Alibaba spinoff even if IRS doesn't give approval.

• Over 2 million Audis used software to cheat emissions tests.

• Microsoft(MSFT) will now report its finances in three business segments with kind-of-silly names.

• Donald Trump is starting to sound like a Democrat. (video)

• Distressed debt is flashing some warning signs.

• A short-selling firm just kicked Valeant(VRX) while it's down with a brutal note.

• Iran's president bashed the 'inhumane Zionist entity’ at the UN in New York.

NASDAQ:

• Takata Air-Bag Recalls Could Expand to Seven More Companies. Seven more companies including electric-car maker Tesla Motors Inc.(TSLA) could be facing recalls because they use air-bag inflaters made by Takata Corp., according to letters they received last week from U.S. safety regulators.

Reuters:

• Yen firms on heightened risk aversion, commodity currencies sag. The yen was broadly firmer early on Tuesday, underpinned by safety flows stemming from a selloff in global equities, a risk-off mood that took a heavy toll on commodity currencies. Worries about the health of the Chinese economy grew after industrial firms suffered their biggest profit drop in four years, while mixed messages from Federal Reserve officials about the likely timing of a hike in interest rate didn't help. The dollar was back below 120.00 yen, having slid from Monday's high of 120.60. The euro had a quick look under 134.00 yen, but has since drifted back to 134.63. Against the greenback, the common currency climbed above $1.1200, pulling further away from a recent trough of $1.1116. As a result, the dollar index was struggling to hold 96.000, nursing a 0.4 percent fall on Monday.

• Brazil's Vale cuts dividend in face of iron ore rout. Brazil's Vale SA said on Monday it plans to cut its dividend for the year by $500 million in order to help shore up the miner's balance sheet in the face of weaker commodity prices, especially iron ore. 

• Some big hedge funds' top 10 lists look a lot alike -data. Hedge funds often promise unusual portfolios that beat the market, but new data shows that some of the industry's biggest firms' top 10 stock picks bear striking resemblances to each other. The same four holdings appear on the top 10 lists of John Paulson's Paulson & Co and Nehal Chopra's Ratan Capital, according to a report Symmetric IO released on Monday. The data also showed Coatue Management had five of the same top 10 picks as Whale Rock Capital Management, and four listings in the top 10 list of Stephen Mandel's Lone Pine were also on Chase Coleman's Tiger Global chart.

Yahoo:

• EXCLUSIVE: Here are the ideas Icahn sent to Trump and others. Yahoo Finance has obtained a policy paper written by Carl Icahn on income inequality that the billionaire financier recently sent to Donald Trump and others on Wall Street and in Washington. In the paper, Icahn warns of “dangerous systemic problems that will affect each and every American in the coming years.” In the paper, Icahn takes a decidedly egalitarian tone, writing: “The average worker makes approximately $50,000 per year. The average annual compensation of the thirty highest paid CEOs is approximately $47 million per year.

Financial Times:

• Cargill to wind down $7bn hedge fund arm. Cargill plans to part ways with most of its hedge fund business as it grapples with tough conditions in markets and flagging investor interest. The world’s biggest agricultural trading house said on Monday that it would spin off to employees three fund businesses in its Black River Asset Management division, while two remaining funds that trade agriculture and energy will be folded into Cargill. Black River had $7.4bn under management as of June.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -2.75% to -1.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 163.5 +12.25 basis points.

• Asia Pacific Sovereign CDS Index 91.5 +5.25 basis points.

• S&P 500 futures +.06%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AZZ)/.69

• (IHS)/1.47

• (CUDA)/.09

• (COST)/1.66

• (DMND)/.21

Economic Releases

9:00 am EST

• The S&P/CS 20 City MoM for July is estimated to rise +.1% versus a -.12% decline in June.

10:00 am EST

• Consumer Confidence for September is estimated to fall to 97.0 versus 101.5 in August.

Upcoming Splits

• (BTU) 1-for-15

Other Potential Market Movers

• The German CPI report, weekly US retail sales reports, BofA Merrill Banking/Insurance Conference, Ladenburg Thalmann Health Care Conference, (TSLA) Model X launch, (CMI) analyst day, (WDAY) analyst day, (ADSK) investor day, (KMX) analyst day, (NVAX) investor meeting and the (DISCA) investor day could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by industrial and commodity 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.