Bear Radar

Style Underperformer:

• Small-Cap Value -.33%

Sector Underperformers:

• 1) Internet -1.42% 2) HMOs -1.24% 3) Networking -1.20%

Stocks Falling on Unusual Volume:

• IMS, SYNA, AMZN, HUBG, PGI, P, QIWI, DECK, LOGM, FTK, EGOV, FWRD, JNPR, NLNK, HTLD, LAKE, NPSP, CFX, LPNT, AEO, F, GRUB, TCB, VMI, SWN, SIVB, F and BAS

Stocks With Unusual Put Option Activity:

• 1) CTXS 2) XLU 3) DECK 4) MTW 5) XLE

Stocks With Most Negative News Mentions:

• 1) GM 2) DDD 3) STE 4) ANF 5) AEO
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.14%

Sector Outperformers:

• 1) Steel +2.46% 2) Biotech +1.29% 3) Software +1.14%
  

Stocks Rising on Unusual Volume:

• DRIV, QLIK, GIMO, RUBI, BJRI, KLAC, AGU, LGF, MXIM, EW, N, MXWL, RMD, IDXX, AVY, SPNC, SHLD, BMRN, SWFT, IM, LEA, WOOF and FLIR

Stocks With Unusual Call Option Activity:

• 1) VRX 2) P 3) AMZN 4) NTAP 5) SYNA

Stocks With Most Positive News Mentions:

• 1) STT  2) CWEI 3) UPS 4) MSFT 5) PG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• New York Gets First Ebola Case as Man Brought to Hospital. A New York City doctor has tested positive for Ebola after returning from work in West Africa with an aid agency, the first case of the deadly disease diagnosed in the most populous U.S. city. The doctor, Craig Spencer, 33, is being treated in an isolation unit at Bellevue Hospital Center in midtown Manhattan. The diagnosis was made by the New York City Department of Health & Mental Hygiene and announced by New York City Mayor Bill de Blasio at a news conference. Samples of Spencer’s blood will be sent to the U.S. Centers for Disease Control and Prevention in Atlanta for confirmation, the CDC said. A CDC team will help health workers at Bellevue safely care for him while trying to track down anybody he may have had close contact with while he was sick.

• CDC’s Ebola ‘Go’ Team Sprints to New York. Start packing for New York, the “go” team from the U.S. Centers for Disease Control and Prevention was told. A doctor there was back from a West African hot zone with Ebola-like symptoms, and was in a city hospital.The disease experts traveling tonight are Pierre Rollin, who the CDC calls the world’s top expert on viral hemorrhagic fevers, Rima Khabbaz, the team’s leader, who led the agency’s Washington field response during the 2001 anthrax attacks, and David Daigle, a communications officer.

• Lone-Wolf Attacks Duel With Airstrikes in New Warfare Era. Six needle-nosed CF-18 fighter jets took off from the Canadian Forces base in Cold Lake, Alberta, Oct. 21 to join the coalition fighting Islamic State. The next day, a convert to Islam attacked symbols of the Canadian state, killing a soldier and riddling the parliament with bullets. As the U.S., Canada and their allies armed with supersonic fighters, laser-guided bombs and unmanned aircraft strike the extremist group in Iraq and Syria, the terrorists are urging individual Muslims worldwide to kill non-believers with guns and knives. 

• Escalation Likely If Iran Talks Fail, U.S. Official Says. The alternatives to an international accord preventing Iran from producing nuclear weapons are “quite terrible,” the chief U.S. negotiator in talks with Iran said. Even so, Under Secretary of State for Political Affairs Wendy Sherman said today, the U.S. won’t accept “a bad deal or even a half-bad deal” to avoid failure.

• China Home-Price Drop Spreads as Easing Fails to Halt Downturn. China’s new-home prices fell in all but one city monitored by the government last month as easings of property curbs failed to stem a market downturn amid tight credit. Prices dropped in 69 of the 70 cities in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the data. Prices fell in 68 cities in August. 

• Iron Ore Glut Spurs Drop in China Output, Goldman Sachs Says. Iron ore production in China has probably been contracting since April and further mine shutdowns in the largest importer are forecast as a global seaborne glut expands, according to Goldman Sachs Group Inc. Monthly output from mines in the country may have dropped about 20 percent from a year earlier, analysts Christian Lelong and Amber Cai wrote in an e-mailed report, citing an implied figure from the bank’s in-house analysis. That estimate may overstate the actual drop, Lelong and Cai added.

• Rousseff or Neves? Brazilians Await Bad News Whoever Wins. Whoever wins Brazil’s presidential runoff election this Sunday won’t have much good news to deliver on the outlook for the world’s second-largest emerging market. Brazil is in recession, and annual inflation is above the ceiling of its target range. A widening budget deficit threatens the country’s investment-grade status, and business confidence hovering around five-year lows has driven investment to the lowest rate among the BRICS nations, which include Russia, India, China and South Africa.

• Asian Stocks Extends Weekly Gain on U.S. Earnings, Europe. Asian stocks rose, with the regional benchmark index extending its first weekly gain in seven weeks, after U.S. earnings beat estimates and data signaled stronger European growth. The MSCI Asia Pacific Index (MXAP) advanced 0.5 percent to 137.72 as of 9:01 a.m. in Tokyo. 

• Nickel Heads for Longest Losing Streak in 13 Years on Stockpiles. Nickel is poised for the longest run of weekly losses since 2001 as stockpiles surge to a record amid concern that demand is slowing in China, the world’s biggest user of industrial metals. The metal in London gained for the first time in five days, paring its seventh weekly loss. Stockpiles tracked by the London Metal Exchange have jumped 44 percent this year to 377,538 metric tons, rising for a third year, according to bourse data. China’s September imports of nickel, including alloys, fell 28 percent from the same month last year while exports more than tripled, according to customs data this week. “Huge LME inventories, especially in Asia, have worsened nickel’s fundamentals,” said Hwang Il Doo, a senior metals trader at Korea Exchange Bank Futures Co. in Seoul. “Without a recovery in China’s consumption, it won’t be easy to rebound to levels seen earlier this year.”

• Fed to Stress-Test Banks for Dire Stock, Housing Scenarios. The Federal Reserve said it will scrutinize how 31 large U.S. banks, including JPMorgan Chase & Co. and Citigroup Inc., would respond to a plunge in equity and housing prices and a sharp downturn in the global economy. The annual tests, using hypothetical scenarios that are not forecasts, are the cornerstone of the Fed’s efforts to prevent a repeat of the 2008 financial crisis and to gauge the ability of banks to withstand economic turmoil. The Fed uses the exams to prod lenders into building up capital buffers. Firms that fail may have to forgo stock buybacks and higher dividends. In the Fed’s “severely adverse” scenario, stocks fall by 60 percent by the fourth quarter of 2015 and housing prices drop by about 25 percent. Unemployment peaks at 10 percent, gross domestic product declines by 4.5 percent and the price of oil rises to $110 per barrel. Long-term Treasury yields fall to 1 percent. Jaret Seiberg, an analyst at Guggenheim Securities LLC, wrote in a research note today about the scenarios that they will “limit the ability of banks to get aggressive in returning capital to shareholders.”

• ‘Humongous’ Treasury Future Surge Suggests Math Error. It looks like a Treasury futures trader failed to do his or her homework. The price of 30-year Treasury futures expiring in June traded for less than 145 for about two hours yesterday before shooting up to more than 150. The 7.3 percent surge in their price yesterday, on the first day these particular contracts were traded, was unprecedented for 30-year Treasury futures, according to data compiled by Bloomberg. Volume amounted to 1,639 contracts with a notional value of $164 million. 

• Wall Street Dealers Slash Holdings of Junk Bonds by 68 Percent. Wall Street bond dealers cut their net high-yield bond holdings by 68 percent in the week ended Oct. 15 amid the biggest surge in volatility in more than a year. The 22 primary dealers that trade with the Federal Reserve reduced their positions by about $4.3 billion to a net $2 billion, according to Fed data released today. The debt lost 1.5 percent in the week ended Oct. 15 as concern mounted that a global slowdown would hamper U.S. central-bank efforts to stimulate economic growth. 

• Investors Pull $1.7 Billion From U.S. Loan Funds: Lipper. Investors pulled $1.7 billion from U.S. funds that buy leveraged loans in the past week, the most since August 2011, according to Lipper. The withdrawal extends the longest stretch of outflows since 2008 to 15 straight weeks, bringing the net amount pulled for the year to $13.1 billion. Investors added $1.7 billion to from U.S. funds that buy high-yield bonds, paring net outflows in 2014 to $17.5 billion, Lipper data show.

Wall Street Journal: 

• New York Doctor Tests Positive for Ebola. Craig Spencer Recently Returned to New York After Treating Ebola Patients in West Africa. A physician who had returned to New York City 10 days ago after treating Ebola patients in West Africa has tested positive for the disease, according to an official familiar with the findings. Craig Spencer, a 33-year-old physician who worked with Doctors Without Borders and lives in Upper Manhattan, is the fourth person to be diagnosed with the deadly disease in the U.S.

CNBC:

• Wall Street may finally be giving up on Amazon(AMZN). (video) The company posted a huge earnings miss for its third quarter on Thursday, reporting a loss of 95 cents a share versus the street's estimate of 74 cents. And that big miss may be the last straw for investors, analysts said. 

• Microsoft(MSFT) earnings beat, cloud business soars. (video) The tech firm handed in earnings of 54 cents per share on revenue of $23.20 billion, beating Wall Street estimates of 49 cents per share on revenue of $22.02 billion, according to a consensus estimate from Thomson Reuters.

Zero Hedge:

• NYC Doctor Confirmed Positive For Ebola; Contact With Girlfriend (Quarantine) & 3 Others; "Unlikely" Contagious On Subway.

• A Furious Albert Edwards Lashes Out At Central Bankers: "Will These Morons Ever Learn?"

• Despite WHO's Confidence, Mali Becomes 6th West African Nation With Ebola.

• 3 Things Worth Thinking About.

• Why Amazon Is Crashing: Jeff Bezos' Nightmare Quarters In Charts.

• 40% Of Eurozone Banks Are In Bad Shape.

• Van Hoisington And The Fed's Bubble: "Overtrading" And "Discredit" Always End In "Revulsion".

Business Insider:

• Obama Is Trying To Impose A Radical New Order On The US's Middle Eastern Allies.

• Real Estate Insiders Think NYC's Luxury Housing Bubble Is Going To Pop.

• Pfizer(PFE) Announces Eye-Popping $11 Billion Share Buyback Plan.

• The US Strategy Against ISIS May Be Imploding.

PIX11.com: 

• NYPD concerned hatchet attack may be linked to terrorism. (video) Four police officers and a woman were injured, and a hatchet-wielding man was fatally shot during a bloody altercation Thursday in Queens and now officials are looking to see if the attack was prompted by terrorism.

Reuters:

• China local debt fix hangs on Beijing's wishful thinking. China is asserting control over once-chaotic local government financing by banning the use of opaque funding vehicles, but filling the gap with a huge expansion of the fledgling municipal bond market will raise a whole new set of problems. 

• GM Financial receives second subpoena into subprime auto lending. GM Financial, the in-house financing arm of General Motors Co, said on Thursday it received subpoenas in September from state attorneys general and other authorities over its subprime auto lending and securitization practices.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goaFed's Williams: Can't wait too long to raise rates

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 115.0 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 68.0 +.25 basis point.

• FTSE-100 futures -.43%.

• S&P 500 futures -.42%.

• NASDAQ 100 futures  -.50%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AVY)/.74

• (B)/.58

• (BMY)/.42

• (CL)/.75

• (F)/.19

• (LEA)/1.88

• (LYB)2.31

• (MCO)/.90

• (PG)/1.08

• (STT)/1.21

• (UPS)/1.28

• (WYN)/1.63

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK gdp report and Baker Hughes US Rig Count could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Surging into Final Hour on Diminished Global Growth Fears, Earnings Optimism, Yen Weakness, Tech/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Every Sector Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 16.99 -4.92%

• Euro/Yen Carry Return Index 142.93 +1.01%

• Emerging Markets Currency Volatility(VXY) 7.97 -2.45%

• S&P 500 Implied Correlation 67.28 +4.02%

• ISE Sentiment Index 138.0 +84.0%

• Total Put/Call .78 -33.33%

• NYSE Arms 1.17 -30.45% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.21 -2.80%

• European Financial Sector CDS Index 68.45 -.45%

• Western Europe Sovereign Debt CDS Index 32.29 -.32%

• Asia Pacific Sovereign Debt CDS Index 68.56 +1.22%

• Emerging Market CDS Index 263.28 +.58%

• China Blended Corporate Spread Index 334.79 -.46%

• 2-Year Swap Spread 25.5 +.25 basis point

• TED Spread 21.5 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -8.25 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .00% -2.0 basis poins

• Yield Curve 189.0 +3.0 basis points

• China Import Iron Ore Spot $80.29/Metric Tonne -1.88%

• Citi US Economic Surprise Index 19.40 +.5 point

• Citi Eurozone Economic Surprise Index -38.9 +14.6 points

• Citi Emerging Markets Economic Surprise Index -17.0 +2.6 points

• 10-Year TIPS Spread 1.91 unch.

Overseas Futures:

• Nikkei Futures: Indicating +265 open in Japan

• DAX Futures: Indicating -20 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech/medical/retail/biotech sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added some back

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:   

• Ukraine Rebels Vow to Retake Cities as Vote Nears. Pro-Russian insurgents vowed to keep battling Ukrainian forces and retake eastern cities, including the port of Mariupol as general elections near. Ukrainian Prime Minister Arseniy Yatsenyuk warned today of Russian provocations ahead of the Oct. 26 ballot. Ukraine, the European Union and the U.S. say President Vladimir Putin has backed the rebels with arms and troops, charges Russia denies. Ensuring security for Ukraine’s more than 40 million citizens is the government’s main concern before the vote, the first time lawmakers will be picked since Russia annexed Crimea in March. The fighting in eastern Ukraine has left at least 3,660 dead, according to United Nations estimates. A Sept. 5 truce has been violated almost daily.

• Russia Reserves Fall $7.9 Billion, Biggest Drop Since May. Russia’s international reserves tumbled $7.9 billion in the biggest drop in more than five months as the central bank sold foreign currency to arrest the ruble’s decline to a record. The value of the stockpile, the second-biggest in Europe after Switzerland’s, shrank for a ninth week to $443.8 billion in the seven days through Oct. 17, the central bank said on its website today. It dropped $3 billion a week earlier. “So far this level isn’t critical, although the trend of falling reserves isn’t optimistic,” Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow, said by phone. “The drop in reserves is largely due to the central bank’s more active interventions and revaluation of the euro exchange rate over the past week.”

• Ruble Drops as S&P Junk Concern Fuels Worst Emerging-Market Rout. The ruble slid to a record, crossing the threshold that triggers central-bank currency interventions, and bonds fell on concern that Standard & Poor’s will lower Russia’s credit-rating to junk. The ruble lost 0.7 percent to 46.6592 versus the central bank’s target dollar-euro basket at 6 p.m. in Moscow, declining past the 46.30 lower limit of the trading band. The monetary authority has spent more than $15 billion this month to slow the world’s worst depreciation since June. The currency fell the most among 24 emerging nations today, while 10-year bonds had their worst day in two weeks and stocks slipped. 

• Corporate Europe Fails to Reverse Drop as Asia Compounds Gloom. European companies failed to shake off this quarter’s trend of disappointing earnings, with consumer-oriented businesses taking the biggest hit as a spending slowdown in Asia compounds stagnant growth at home. Unilever (UNA), the maker of Lipton ice tea and Knorr soups, posted its worst quarterly sales growth today since 2009 because of slowing demand for personal-care products. Pernod Ricard SA (RI) predicted full-year earnings growth that may fall short of analyst estimates, joining companies from Michelin & Cie. to Finnish mining-equipment maker Metso Oyj (MEO1V) in reporting disappointing profit on one of the busiest days this quarter.

• China’s Stocks Fall Most in Month as IPOs Hurt Small-Cap Shares. China’s benchmark stock index fell the most in a month on concern new share offerings will divert funds from existing shares. Wuhu Token Science Co. and Beijing E-Hualu Information Technology Co. (300212) slumped more than 5 percent, dragging the ChiNext index of small-cap companies down the most since mid-September. Pangang Group Vanadium Titanium and Resources Co. plunged 10 percent after the company said it has no plan to sell its non-mining assets. Trainmakers China CNR Corp. and CSR Corp. jumped at least 3.7 percent after the government approved railway investment worth 97.4 billion yuan ($15.9 billion). The Shanghai Composite Index (SHCOMP) slid 1 percent to 2,302.42 at the close. The gauge has lost 3.6 percent since this year’s high on Oct. 9 as nine companies market IPO shares and uncertainty grows over the start of a trading link with Hong Kong.

• Saudi Arabia’s Crude Oil Supply Said to Fall in September. The amount of oil Saudi Arabia supplied to markets fell last month, according to a person familiar with the country’s oil policy. Its production climbed. The world’s biggest crude exporter supplied 9.36 million barrels a day last month, a reduction of 328,000 barrels daily from August, according to the person, who asked not to be identified, citing policy. The supply figure excludes what’s stored. Saudi Arabia produced about 100,000 barrels a day more than in August, the person said. 

• The Democrats' Coming Blame Game. Less than two weeks before Election Day, Democrats are bracing for losses — and are already quietly trying to shift the blame.

 ZeroHedge:

• "Real" Stock Volatility In October Highest Since Lehman. (graph)

• The Market Says Markit Is Full Of It: Global PMIs Are Painting An Unrealistically Rosy Picture. (graph)

• Goldman Sachs(GS) Is Buying Carl Icahn's "High Yield Bond Bubble".

• "Warning Signs" & The Fed's Grand Illusion.

• US Manufacturing PMI Tumbles, Biggest Miss In 14 Months. (graph)

• Futures Bounce On Stronger Europe Headline PMIs Despite Markit's Warning Of "Darker Picture" In "Anaemic" Internals. (graph)

iStockAnalyst:

• Investors Are Even More Euphoric And Confident. After the market's four straight up days, this week's poll, released last night, showed another big jump. Bullish percentage: +7 to 49.7%. Bearish percentage : –11.2 to 22.5%.

New York Review of Books:

• Wake Up, Europe by George Soros. Europe is facing a challenge from Russia to its very existence. Neither the European leaders nor their citizens are fully aware of this challenge or know how best to deal with it. I attribute this mainly to the fact that the European Union in general and the eurozone in particular lost their way after the financial crisis of 2008.

NY Post:

• Dr. Who Treated Ebola Patients Rushed to NYC Hospital.

Telegraph: 

• Oil slump leaves Russia even weaker than decaying Soviet Union. Russia had the chance at the end of the Cold War to build a modern, diversified economy, with the enthusiastic help of the West. That chance has been squandered.

Nikkei:

• Toyota Motor Has Sold Some Shares of Tesla(TSLA). Toyota Motor has sold some shares of Tesla.