Tuesday Watch

Evening Headlines

Bloomberg:

• Emerging Market Crisis Echoes Grow Louder. Everyone who covers emerging markets has heard the mantra: Yes, there's a lot of debt but, unlike the late 1990s, sovereign balance sheets are fine. Corporations are the ones to worry about, and they are hardly ever sources of systemic risk. That may have been true five years ago. It isn't any longer, if the companies that specialize in assessing credit strength are to be believed.
• Asian Stocks Join Italy Relief Rally as Swings Ease; Crude Drops. Asian stocks joined the global relief rally, as investors switched their focus back to the outlook for U.S. monetary policy following the defeat of Italy’s constitutional referendum. The Korean won climbed, while bonds and crude oil retreated. Mining and bank shares led the Asian equity benchmark higher, with Japanese stocks rising for the first time in three days following the Dow Jones Industrial Average’s return to a record. The won increased for the first time in three days, and the euro was near its strongest level since mid-November after wiping out an initial slump Monday on the Italian premier’s resignation. The Australian dollar was close to a more than two-week high, while the nation’s bonds fell with debt in the region amid expectations interest rates will be held in a review. Oil snapped a four-day climb as the yen and gold tried to rally. The MSCI Asia Pacific Index jumped .9% as of 9:57 a.m. Tokyo time, with Japan's Topix index rising .9% as well.
• Trump’s ‘Retribution’ Tax Stirs Questions, GOP Resistance. Donald Trump’s threats to use taxes as “retribution” against U.S. companies that move jobs overseas are legally dubious, tax specialists say -- and they’re prompting resistance from some Republican leaders who fear a coming era of economic protectionism or international trade wars. “There’s other ways to achieve what the president-elect is talking about,” House Majority Leader Kevin McCarthy told reporters Monday, arguing that changing the tax code is the way to entice companies to create jobs and keep them in the U.S. “I don’t want to get into some type of trade war,” McCarthy said. Implementing large tariffs like those Trump proposed had little apparent support in the Senate either, where most Republicans have long backed deals lowering trade barriers, not raising them.
• The Pessimist's Guide to 2017. 
• Why U.S. Stocks May Be Poised for a Correction. (video) 

Wall Street Journal:

• For Europe’s Unity, 2017 Will Be a Year of Reckoning. Mainstream parties are feeling pressure from populist politicians, setting up votes next year in several core European nations that will help determine fate of open borders and the euro.
• Italian Prime Minister Matteo Renzi Resigns, Ushering in Period of Uncertainty. President accepts resignation but asks premier to stay until 2017 budget gets Senate approval.
• Harsh Political Winds Test Euro’s Stability and Future. Some question how long the common currency can survive amid repeated tests, political and economic, across the Continent.
• Donald Trump Picks Ben Carson to Head Housing Agency. The one-time political rival would be the first African-American appointed to a senior position so far during the transition.
• Donald Trump Shuffles the Ideological Deck. The president-elect’s moves so far don’t adhere to strict conservative or outsider themes.

Fox News:

• Ellison's bid to lead DNC complicated by calls to relinquish House seat. (video)

CNBC:

• Five tools that would let Trump follow through on his tariff threats. (video)
• Amazon Go is the first of 3 or more new Amazon food store formats, reports say. (video)
• Tech giants to cooperate on removal of extremist content.
• Apple(AAPL) Watch shipments plunge 70% as consumers favor simpler wearables, IDC says.
• Pacific Crest says don't expect year-end Apple(AAPL) rally, seeing weaker-than-expected iPhone 7 demand.

Zero Hedge:

• The First Defection: Republican Elector Writes In NYT Op-Ed Why He Won't Be Voting For Trump.
• Website Raising Money To Fund Assassinations Of Trump, Pence Uncovered On "Dark Web".
• Mark Carney Defends The Bank of England: "We Are Not Robbing The Poor To Pay The Rich".
• Morgan Stanley(MS) Set To Slash 2017 Broker Bonuses With 10% Increase In "Pay Grid" Thresholds.
• Carrier & The Slippery Slope.
• What Happens Next? (graph)
• As Rome Burns... Investors Dump Gold, Send US Equity Markets To Record Highs.

Business Insider:

• The manufacturer that Trump convinced to keep 1,000 jobs in the US is raising prices.
• A second major drugmaker just committed to limiting price increases.
• The market may have shrugged at Italy's 'No' vote, but the drama is just getting started.
• NY TIMES PUBLIC EDITOR: Some tweets from our politics reporters 'outrageous' and there 'ought to be some kind of consequence'.
• Al Gore just had an 'extremely interesting conversation' with Trump on global warming. "I had a lengthy and very productive session with the President-elect," Gore said, according to a pool report. "It was a sincere search for areas of common ground. I had a meeting beforehand with Ivanka Trump," he added. "The bulk of the time was with the President-elect, Donald Trump. I found it an extremely interesting conversation, and to be continued, and I'm just going to leave it at that." 
• Apple(AAPL) is urging the US government to speed up self-driving cars.

Telegraph:

• Italy's ailing banks now have to wade through the referendum quagmire to secure a rescue.

Night Trading 

• Asian equity indices are +.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 124.50 -1.5 basis points.
• Asia Pacific Sovereign CDS Index 40.5 -1.0 basis point.
• Bloomberg Emerging Markets Currency Index 69.69 +.03%. 
• S&P 500 futures unch. 
• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (AZO)/9.32
• (BOBE)/.45
• (MIK)/.43
• (TOL)/.99
• (AVAV)/-.08

Economic Releases 
8:30 am EST

• The Trade Deficit for October is estimated to widen to -$42.0B versus -$36.4B in September.
• Final 3Q Non-Farm Productivity is estimated to rise +3.3% versus a prior estimate of a +3.1% gain.
• Final 3Q Unit Labor Costs are estimated to rise +.3% versus a prior estimate of a +.3% gain.

10:00 am EST

• Factory Orders for October are estimated to rise +2.6% versus a +.3% gain in September.
• IBD/TIPP Economic Optimism for December is estimated to rise to 52.0 versus 51.4 in November.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Australia GDP report, German Factory Orders report, US weekly retail sales reports, Goldman Financial Services Conference, (PBI) Analyst Day, (ADSK) Investor Day and the Cowen Energy/Natural Resources Conference could also impact trading today.

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