Wednesday, February 21, 2018

Thursday Watch

Evening Headlines
  • Chinese Traders Return to More Bullish Markets After Holiday. The world is looking a better place for China’s investors as the nation’s financial markets reopen following a week-long break. Global equities have rebounded during the Lunar New Year holidays as the fear of faster inflation ebbed. Hong Kong stock gauges are among the world’s best performers, with the Hang Seng Index rallying 3 percent. The offshore yuan -- which traded during the break -- strengthened past the onshore rate.
  • Asia Stocks Slip With U.S. Futures, Dollar Gains. (video) Asian stocks declined with U.S. equity index futures as investors adjust to the Federal Reserve’s latest comments on the economy. The dollar jumped alongside Treasury yields. Futures on the S&P 500 Index slipped after a rally fizzled Wednesday following minutes from the Fed’s January meeting showing increasing confidence that economic growth will pick up steam despite its concerns around inflation. Stocks opened lower in Japan and South Korea, with traders in Chinese markets due to return after a holiday. Japan’s Topix index fell 0.8 percent as of 9:24 a.m. in Tokyo and South Korea’s Kospi index retreated 0.7 percent. Australia’s S&P/ASX 200 Index was little changed. Futures on the S&P 500 slid 0.2 percent. The gauge lost 0.6 percent on Wednesday. The MSCI Asia Pacific Index declined 0.5 percent.
Wall Street Journal: 
Business Insider:
Night Trading 
  • Asian equity indices are -1.0% to +.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 70.50 +1.0 basis point
  • Asia Pacific Sovereign CDS Index 12.75 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 75.37 -.05%.
  • FTSE 100 futures -.97%.
  • S&P 500 futures -.48%.
  • NASDAQ 100 futures -.71%.
Morning Preview Links

Earnings of Note

  • (APA)/.25
  • (AAWW)/2.15
  • (BLMN)/.39
  • (CHK)/.25
  • (HRL)/.44
  • (MGA)/1.56
  • (NEM)/.37
  • (PWR)/.44
  • (SAGE)/-2.01
  • (SAFM)/1.17
  • (SFM)/.15
  • (TK)/-.24
  • (TTC)/.44
  • (VC)/1.69
  • (CTRP)/.16
  • (FSLR)/-.30
  • (HLF)/.98
  • (HPQ)/.42
  • (INTU)/.34
  • (MELI)/.55
  • (RRGB)/.54
  • (RDFN)/-.05
  • (RH)/1.54
  • (OLED)/.84
  • (WING)/.16
  • (ZOES)/-.12
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated at 230K versus 230K the prior week.
  • Continuing Claims are estimated to fall to 1935K versus 1942K the prior week.
10:00 am EST
  • The Leading Index for January is estimated to rise +.7% versus a +.6% gain in December.
11:00 am EST
  • Kansas City Fed Manufacturing Activity for February is estimated to rise to 18.0 versus 16.0 in January.
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,354,700 barrels versus a +1,841,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +742,200 barrels versus a +3,599,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,093,600 barrels versus a -459,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.8% versus a -2.7% decline prior.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Quarles speaking, Fed's Dudley speaking, Fed's Bostic speaking, Japan CPI report, Germany IFO Business Climate Index, weekly EIA natural gas inventory report and the $29B 7Y T-Note auction could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Rising Long-Term Rates, US/European/Emerging Markets Debt Angst, Oil Decline, Food/REIT Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • Volatility(VIX) 18.52 -10.10%
  • Euro/Yen Carry Return Index 137.98 +.05%
  • Emerging Markets Currency Volatility(VXY) 8.48 -.24%
  • S&P 500 Implied Correlation 41.44 -1.1%
  • ISE Sentiment Index 131.0 +37.9%
  • Total Put/Call 1.02 +18.6%
  • NYSE Arms 1.75 +40.7%
Credit Investor Angst:
  • North American Investment Grade CDS Index 54.70 +1.25%
  • America Energy Sector High-Yield CDS Index 372.0 -2.14%
  • European Financial Sector CDS Index 52.84 -4.12%
  • Italian/German 10Y Yld Spread 132.75 -.75 basis point
  • Asia Pacific Sovereign Debt CDS Index 12.74 +1.15%
  • Emerging Market CDS Index 123.29 -.86%
  • iBoxx Offshore RMB China Corporate High Yield Index 147.37 +.09%
  • 2-Year Swap Spread 26.75 unch.
  • TED Spread 25.0-2.75 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -34.25 -1.25 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 75.45 -.17%
  • 3-Month T-Bill Yield 1.64% +4.0 basis points
  • Yield Curve 67.5 +1.25 basis points
  • China Iron Ore Spot 76.35 USD/Metric Tonne n/a
  • Citi US Economic Surprise Index 50.0 +1.2 points
  • Citi Eurozone Economic Surprise Index -.2 -23.8 points
  • Citi Emerging Markets Economic Surprise Index 5.30 +1.1 points
  • 10-Year TIPS Spread 2.13 +2.0 basis points
  • 100.0% chance of Fed rate hike at May 2 meeting, 100.0% chance at June 13 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +40 open in Japan 
  • China A50 Futures: Indicating +337 open in China
  • DAX Futures: Indicating -33 open in Germany
  • Slightly Higher: On gains in my retail/medical/biotech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  • Market Exposure: Moved to 50% Net Long

Today's Headlines

Wall Street Journal:
Zero Hedge: