Tuesday, October 17, 2017

Wednesday Watch

Evening Headlines
  • Xi Jinping Poised to Put His Stamp on Chinese History. (video) President Xi Jinping kicks off China’s most important political event on Wednesday, a twice-a-decade meeting of party leaders that may signal if Xi will appoint a successor to rule after 2022. Xi will start the weeklong event this morning with what’s known as the work report, seen as the ruling Communist Party’s most significant policy document. It will cover achievements since Xi took power in 2012, and lay out his vision for everything from party building to the economy to the military.
  • U.S. Softens China FX Criticism, Cuts Taiwan From Watch List. The U.S. Treasury said no major trading partner is manipulating its currency to gain an advantage in trade, while lauding China for acting to avoid a “disorderly” depreciation and then allowing the yuan to rise against the dollar this year. “The Chinese currency has moved recently in a direction that would help correct the bilateral trade imbalance with the United States,” according to the Treasury’s twice-yearly foreign currency report released Tuesday in Washington. “But on a trade-weighted basis, the currency has become more competitive globally” amid a weakening greenback.
  • Caution Prevails as China Party Congress Begins. Asian equities were mixed at the start, despite fresh records for U.S. stocks, while the dollar reversed its rally from the start of the week. While analysts expect little in the way of substantial reforms to emerge from the twice-a-decade congress in Beijing, which begins Wednesday, investors will focus on comments about deleveraging, capacity reduction and the global belt-and-road infrastructure plan. Japan’s Topix index was slightly higher as of 9:17 a.m. in Tokyo along with Australia’s S&P/ASX 500 Index and South Korea’s Kospi index. Hong Kong’s Hang Seng Index futures contracts were 0.3 percent lower.
  • Trump Pitches Tax Plan to Policy Group That Helped Write It. (video) President Donald Trump sought to rally support for his effort to overhaul the nation’s tax code on Tuesday at a conservative policy group that helped write the plan. Trump made his argument for a dramatic cut in tax rates for corporations and many individual Americans at the Heritage Foundation’s annual President’s Club meeting -- and asked for the group’s help in getting legislation passed by year’s end. “So let’s give our country the best Christmas present of all -- massive tax relief,” Trump said.
Wall Street Journal:
Zero Hedge:
 Night Trading 
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 77.25 unch
  • Asia Pacific Sovereign CDS Index 16.25 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 73.75 +.02%.
  • S&P 500 futures +.02%.
  • NASDAQ 100 futures +.04%.
Morning Preview Links

Earnings of Note

  • (ABT)/.65
  • (ASML)/1.10
  • (MTB)/2.40
  • (USB)/.88
  • (AA)/.79
  • (AXP)/1.48
  • (CCI)/1.04
  • (EBAY)/.48
  • (KMI)/.14
  • (STLD)/.66
  • (UAL)/2.12
  • (URI)/3.03
  • (VMI)/1.60
Economic Releases 
8:30 am EST
  • Housing Starts for September are estimated to fall to 1175K versus 1180K in August.
  • Building Permits for September are estimated to fall to 1245K versus 1300K in August.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,850,000 barrels versus a -2,747,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +775,000 barrels versus a +2,490,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,300,000 barrels versus a -1,480,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.24% versus a +1.1% gain the prior week.
2:00 pm EST
  • Fed's Beige Book report.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Dudley speaking, Fed's Kaplan speaking, UK Jobless Claims, weekly MBA Mortgage Applications report, (HPE) analyst meeting and the (ECA) investor day could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Slightly Higher into Final Hour on Earnings Optimism, Healthcare/Tax Reform Hopes, Oil Gain, Healthcare/Retail Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 10.28 +3.73%
  • Euro/Yen Carry Return Index 137.70 -.19%
  • Emerging Markets Currency Volatility(VXY) 8.21 +8.98%
  • S&P 500 Implied Correlation 15.32 +6.11%
  • ISE Sentiment Index 125.0 +52.4%
  • Total Put/Call .84 -28.81%
  • NYSE Arms .99 -1.96%
Credit Investor Angst:
  • North American Investment Grade CDS Index 54.09 -.54%
  • America Energy Sector High-Yield CDS Index 391.0 -1.11%
  • European Financial Sector CDS Index 58.57 -.33%
  • Western Europe Sovereign Debt CDS Index 5.12 +2.61%
  • Asia Pacific Sovereign Debt CDS Index 16.24 +.93%
  • Emerging Market CDS Index 175.94 -.96%
  • iBoxx Offshore RMB China Corporate High Yield Index 144.41 -.01%
  • 2-Year Swap Spread 25.50 -.5 basis point
  • TED Spread 26.75 -1.25 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -39.0 +1.75 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 73.875 -.17%
  • 3-Month T-Bill Yield 1.08% +1.0 basis point
  • Yield Curve 75.0 -2.0 basis points
  • China Import Iron Ore Spot $62.72/Metric Tonne -.35%%
  • Citi US Economic Surprise Index 6.30 +3.8 points
  • Citi Eurozone Economic Surprise Index 54.0 -1.4 points
  • Citi Emerging Markets Economic Surprise Index 17.90 -2.2 basis points
  • 10-Year TIPS Spread 1.83 -2.0 basis points
  • 83.9% chance of Fed rate hike at Dec. 13 meeting, 84.5% chance at Jan. 31 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +64 open in Japan 
  • China A50 Futures: Indicating +10 open in China
  • DAX Futures: Indicating +9 open in Germany
  • Higher: On gains in my retail/biotech/medical sector longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long

Today's Headlines

Wall Street Journal:

Bear Radar

Style Underperformer:
  • Mid-Cap Value -.2%
Sector Underperformers:
  • 1) Oil Service -1.0% 2) I-Banks -.9% 3) Gold and Silver -.8%
Stocks Falling on Unusual Volume: 
Stocks With Unusual Put Option Activity:
  • 1) GIMO 2) HOG 3) NTNX 4) JNJ 5) IBM
Stocks With Most Negative News Mentions:
  • 1) IMDZ 2) BUFF 3) DYN 4) FCX 5) ETN

Bull Radar

Style Outperformer:
  • Large-Cap Growth +.1%
Sector Outperformers:
  • 1) Biotech +.7% 2) Retail +.7% 3) Alt Energy +.7%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) HES 2) XLV 3) TRXC 4) HUN 5) SAVE
Stocks With Most Positive News Mentions:
  • 1) HK 2) RXDX 3) UNH 4) OMC 5) CELG