>>> US Close Dow-0.38% S&P-0.41% Nasdaq-0.34% Russell-0.37%

Closing Market Summary: Stocks Retreat on Light Volume

The stock market began the week on a lower note with the S&P 500 surrendering 0.4% while the Nasdaq Composite (-0.3%) outperformed slightly.

Overall, the Monday affair was very quiet with many investors sticking to the sidelines ahead of Thursday's FOMC policy announcement, which could feature a fed funds rate hike. To that point, fewer than 800 million shares changed hands at the NYSE floor versus a 20-day average of 984 million.

A cautious tone was set during overnight action after China and Japan both released disappointing industrial production reports. Equity bulls attempted to turn the tide during European action, but their efforts were not successful with the selling spilling into the U.S. session.

The key indices hit their lows shortly after 13:00 ET and remained near those levels until the close. Nine sectors registered losses while the utilities space (+0.3%) eked out a slim gain, which was aided by strength in Treasuries that sent the 10-yr yield lower by two basis points to 2.17%.

On the downside, energy (-0.8%) and materials (-1.3%) spent the day behind the remaining sectors, responding to general weakness in the commodity market. To that point, crude oil gave up 1.5%, sliding to $44.07/bbl while copper (-1.6% to $2.41/lb) and silver (-1.0% to $14.36/ozt) also posted losses. Gold was an outlier, climbing 0.4% to $1107.70/ozt. Mining stocks saw some intraday strength in response, but the Market Vectors Gold Miners ETF (GDX 13.12, -0.09) lost 0.7%.

Elsewhere among influential sectors, financials (-0.3%), health care (-0.4%), and technology (-0.3%) settled near the broader market.

The top-weighted tech sector spent the day just ahead of the benchmark index thanks to a 1.0% spike in the shares of Apple (AAPL 115.30, +1.09) after the company's spokesman said iPhone pre-orders are on pace to top last year's weekend sales record. However, it is worth noting that the forecast presented by Apple includes sales from China while last year's iPhone release was not available in China during the first weekend.

Unlike Apple, most of the remaining large cap tech components registered losses while high-beta chipmakers outperformed. The PHLX Semiconductor Index added 0.3% with roughly 2/3 of its components ending in the green.

On a separate note, Solera (SLH 53.66, +4.21) spiked 8.5% after agreeing to be acquired by Vista Equity Partners for $55.85/share in cash, which translates to roughly $6.50 billion. Investors did not receive any economic data today.

Tomorrow, August Retail Sales (consensus 0.3%) and the September Empire Manufacturing Index (consensus 0.3) will be reported at 8:30 ET while August Industrial Production (consensus -0.2%) and Capacity Utilization (expected 77.8%) will cross the wires at 9:15 ET. The day's data will be topped off with the 10:00 ET release of the Business Inventories report for July (expected 0.1%).

  • Nasdaq Composite +1.5% YTD
  • Russell 2000 -4.3% YTD
  • S&P 500 -5.1% YTD
  • Dow Jones Industrial Average -8.2% YTD

>>> What’s Next in the Greek Crisis Saga

Greek voters will cast ballots for third time this year on Sept. 20, with polls showing that Alexis Tsipras’s Syriza party enjoys a narrow lead over main opposition New Democracy.
  • Greek election poll of polls here
  • Here’s a list of key dates ahead for Europe’s most indebted state:
  • Sept. 14: Tsipras, Meimarakis face off in television debate
  • Sept. 16: European Central Bank Governing Council non- monetary policy meeting in Frankfurt; governors to review Emergency Liquidity Assistance ceiling for Greek lenders
    • Greece needs to repay ~EU560m in IMF loans
    • Greece to auction EU1b in 13-week t-bills
  • Sept. 17: General Council meeting of the ECB in Frankfurt
    • Hellenic Statistical Authority releases 2Q unemployment figures
  • Sept. 18: EU1.6b t-bills redemption
    • Greece needs to service ~EU14m in interest on bonds issued by the sovereign and the Athens Urban Transportation Organization
    • Greek election campaign ends; cut-off day for last opinion polls, party rallies
  • Sept. 20: Greek parliamentary elections; polls open at 7am and close at 7pm; exit polls to be broadcast at 7pm; Greek interior ministry expected to release first result projection by 9:30pm
    • Sept. 21: Bank of Greece releases July current account balance reading
  • Greece needs to repay ~EU335m in IMF loans
  • Sept. 30: Hellenic Statistical Authority releases July retail sales reading
  • End-Sept: Greek authorities are required to finalize a medium-term technical assistance plan with the European Commission for the implementation of structural reforms included in its bailout. For a full list of conditions Greece needs to fulfill by end-Sept, see here
  • Oct. 1: Markit releases Sept. Manufacturing PMI reading
  • Oct. 5: Eurogroup meeting in Brussels
  • Oct. 6: EU finance ministers meet
  • Oct. 7: ECB Governing Council non-monetary policy meeting in Frankfurt
  • Oct. 8: Hellenic Statistical Authority releases July unemployment reading
  • Oct. 9: Aug. industrial production, Sept. inflation data released
    • EU1.4b in t-bills comes due
  • Oct. 13: Greece needs to repay ~EU447m in IMF loans
  • Oct. 15-16: EU leaders summit in Brussels
  • Mid-Oct: Greece needs to agree with its creditors on a supplementary 2015 budget, the draft 2016 budget and a 2016–19 Medium-Term Fiscal Strategy, which will include pension and benefits cuts, income tax overhaul, defense spending cuts, and news taxes, including on gambling and television adverts
  • Oct. 16: EU1b in t-bills come due
  • Oct. 21: Bank of Greece releases Aug. current account reading
  • Oct. 22: ECB Governing Council monetary policy meeting in Malta followed by Draghi press conference
    • Greece needs to service ~EU210m in interest
  • Oct. 29: Greece needs to service ~EU180m in principal and interest for Hellenic Railways Organization bonds coming due
  • Oct. 30: Hellenic Statistical Authority releases Aug. retail sales reading
  • End-Oct: Bank of Greece must deliver a report on the segmentation of NPLs on banks’ balance sheets and an assessment of banks’ capacity to deal with each NPL segment
  • Nov. 1: Greece needs to service ~EU155m in interest on IMF loans
  • Nov. 2: Markit releases Oct. manufacturing PMI
  • Nov. 4: ECB Governing Council non-monetary policy meeting in Frankfurt
  • Nov. 6: Greece needs to roll over EU1.4b in t-bills
  • Nov. 9: Eurogroup meeting in Brussels
    • Hellenic Statistical Authority releases Sept. industrial production reading
  • Nov. 10: Ecofin meeting in Brussels
    • Hellenic Statistical Authority releases Oct. inflation reading
  • Nov. 12: Hellenic Statistical Authority releases Aug. unemployment rate reading
  • Nov. 13: Hellenic Statistical Authority to release 3Q GDP flash estimate
    • Greek sovereign debt rating published by Fitch
    • Greece needs to roll over EU1.4b in t-bills
  • Nov. 18: ECB Governing Council non-monetary policy meeting in Frankfurt
  • Nov. 20: Greek debt rating may be published by Moody’s
    • Bank of Greece releases Sept. current account balance reading
  • Nov. 27: Hellenic Statistical Authority to release 3Q GDP final estimate
  • Nov. 30: Hellenic Statistical Authority releases Sept. retail sales
  • Dec. 1: Markit releases Nov. manufacturing PMI
  • Dec. 3: ECB Governing Council monetary policy meeting in Frankfurt followed by Mario Draghi press conference
  • Dec. 7: Eurogroup meeting in Brussels
    • Greece needs to repay ~EU298m in IMF loans
  • Dec. 8: Ecofin meeting in Brussels
  • Dec. 10: Hellenic Statistical Authority releases Sept. unemployment rate, Oct. industrial production, Nov. inflation readings
  • Dec. 11: Greece needs to roll over EU3.6b in t-bills
  • Dec. 16: ECB Governing Council non-monetary policy meeting in Frankfurt
    • Greece needs to repay ~EU560m in IMF loans
  • Dec. 17: EU leaders begin summit in Brussels
    • Hellenic Statistical Authority releases 3Q unemployment data
    • General Council meeting of the ECB in Frankfurt
  • Dec. 18: Second day of EU leaders meeting in Brussels
  • Dec. 21: Bank of Greece releases Oct. current account balance reading
    • Greece needs to repay ~EU335m in IMF loans
  • Dec. 31: Hellenic Statistical Authority releases Oct. retail sales reading
    • Deadline set in the country’s bailout for addressing capital shortfalls in Greek banks, following a stress test by the ECB which will have been completed by end- Oct.

>>> NY Fed issues Aug survey of consumer expectations;

NY Fed issues Aug survey of consumer expectations


The Federal Reserve Bank of New York today released results from its July 2015 Survey of Consumer Expectations (SCE) results suggest relatively stable expectations about the economy. The median one-year and three-year ahead expected rates of inflation remained unchanged at 3.0%. While earnings and household income growth expectations were largely unchanged, median household spending growth expectations retreated substantially to their lowest level since the inception of the survey in 2013. Relative to the prior month, year-ahead credit availability expectations became slightly more pessimistic.

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: CGA +1%, SYNA +0.5%

M&A news: SLH +9.5% (to be acquired by Vista Equity Partners for $55.85 per share in cash), CHS +7.8% (considering sale following private equity interest, according to Bloomberg), NOK +1.7% (Nokia receives CFIUS clearance for proposed acquisition of Alcatel-Lucent; added to Conviction Buy list at Goldman), ALU +1.7%

Other news: COLL +37.5% (reports FDA unanimous recommendation for approval of Xtampza ER), AQXP +24.3% ( Baker Bros discloses purchase of ~2.48 mln shares of common stock at $15.50 per share; Purchase was part of the previously announced offering of 5.5 mln shares; Baker Bros maintains ~40% stake in the company), GERN +5.7% (cont strength coming out of Friday), ACTS +3.1% (amends Dutch Auction tender offer; reaffirms guidance for Q3 revs of $13-14 mln, but expects FY15 revs to growth at a slower pace than previously expected), PIRS +2.3% (Global Life Bioventure discloses 6.25% passive stake in 13G filing), MBLY +2% (rebounding modestly following last weeks selloff), AN +1.3% (authorizes additional $250 mln for share repurchase), WMB +0.7% (increases quarterly dividend 8.5% QoQ to $0.64 per share)

Analyst comments: VRTX +1.5% (upgraded to Overweight from Equal Weight at Barclays ), AAPL +1.3% (positive commets from FBR; iPhone 6s pre-orders off to a strong start led by China), GPRO +0.8% (positive comments at Northland), AZN +0.6% (upgraded to Buy from Hold at Deutsche Bank)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: TMST -10%

Select financial related names showing weakness: RBS -2.2%, BCS -1.1%, SAN -1%, DB -0.9%

Select China related names showing early weakness: JMEI -5.3%, TOUR -3.9%, JD -2.3%, QIHU -1.1%, SOHU -0.9%

Other news: RPTP -33.9% (announces topline results from the Phase 2b CyNCh study, which did not meet its primary endpoint of improving nonalcoholic steatohepatitis in children), BABA -3.7% (Barron's profiles cautious view on Alibaba), AMD -2.5% (following late day spike on Friday), YHOO -2% (in symp with BABA), MT -2% (weakness stemming from concerns of growth in China), GOLD -1.9% (still checking), FCX -1.1% (copper down 1% in pre-mkt)

Analyst comments: HRB -1.5% (downgraded to Neutral from Buy at BTIG Research), GFI -1.1% (downgraded to Neutral from Overweight at JP Morgan
)

(JPM) Equity Strategy : closing our bearish commodities view – upgrading Mining

Fed: a case of “travel and arrive” - tactically closing our bearish commodities view – upgrading Mining

* The eagerly awaited Fed meeting is upon us. Regardless of the actual decision,
we suggest that the market impact could end up being positive. If the Fed
does raise rates, but at the same time reassures the market that this will be a
gradual process, it would be received well. If, on the other hand, the Fed delays
the move, this could be interpreted as a signal that the Fed is aware of and is
responding to recent market concerns. A delay could dampen the link between
the DXY and commodity prices.

* Even though inaction might be seen as prolonging market anxiety, the key in
our view is that investors get to know what the new Fed’s reaction function is.
One of the main current investor concerns is over the lack of clarity from
central banks. We believe that the policymakers are still on the side of the
risky assets and will act supportively; the ECB opening the doors to QE2 is a
case in point.

* We have been cautious on commodity equities for a while, but are now advising
to tactically add exposure – upgrading Mining to OW and upgrading Energy
to Neutral.

* Specifically for Mining, we highlight the following:
1) Risk-reward is improving as the sector is by far the worst performer ytd,
down almost 30% in absolute terms.
2) Iron ore price has picked up since July, now up 30%+ from lows. From
current spot levels, JPM projections are for broadly range-bound commodity
prices next year. EPS downgrades have already been severe, with the Mining
EPS integer down 80% from highs. Unless commodity prices fall significantly
further, downside is likely limited from here.
3) Bearishness on China is omnipresent these days, but we note some improving
datapoints: Auto sales were up 12% mom for August; steel PMI is up from 37
at the lows to 45 currently; infrastructure orders appear to be bottoming out to
meet annual budget plans; and property transactions are stabilizing.
4) The Fed event could act as a positive catalyst, offering clarity. A case of
"travel and arrive".
5) The sector is clearly doing self-help. Major Miners’ capex spend has
halved over the past three years. Companies are working to improve their
balance sheet health.
6) Mining valuations have improved, with P/B relative at its lowest since 2001.

* We reiterate our call from 1st September that recent market weakness is
unlikely to be a start of a prolonged fall, but a correction which one should
use to add exposure. Regionally, we remain OW Japan and Eurozone, and stay
UW the US. We are bullish on Eurozone recovery plays – Banks, Construction
Materials, Travel & Leisure, Media and Retail. We find global consumer plays,
such as Autos, as attractive. In addition to our Mining upgrade, we close the
Energy short as the sector has performed poorly and valuations are improving.
We fund the move into commodities by downgrading Capital Goods to Neutral.
Capital Goods have held up surprisingly well ytd, to be 2% above the market.
The sector valuations are unexciting, and global capex concerns remain.