Wednesday Watch

Night Trading 

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 113.5 -1.25 basis points.
• Asia Pacific Sovereign CDS Index 32.0 -.75 basis point.
• Bloomberg Emerging Markets Currency Index 70.79 unch. 
• S&P 500 futures +.05%. 
• NASDAQ 100 futures +.24%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MO)/.67
• (ANTM)/1.67
• (ADP)/,81
• (AVY)/.93
• (BAX)/.52
• (IR)/.92
• (JCI)/.52
• (MDC)/.67
• (PBI)/.57
• (TUP)/1.37
• (ALL)/1.60
• (CRUS)/1.62
• (FB)/1.31
• (IAC)/.95
• (LSTR)/.87
• (LM)/.65
• (MET)/1.34
• (OI)/.48
• (RGLD)/.38
• (SYMC)/.28
• (TSCO)/.91
• (WFT)/-.33 

Economic Releases 
8:15 am EST

• The ADP Employment Change for January is estimated to rise to 168K versus 153K in December.

9:45 am EST

• Final Markit US Manufacturing PMI for January is estimated at 55.1 versus a prior estimate of 55.1.
  

10:00 am EST

• ISM Manufacturing for January is estimated to rise to 55.0 versus 54.7 in December.
• ISM Prices Paid for January is estimated at 65.5 versus 65.5 in December.
• Construction Spending MoM for December is estimated to rise +.2% versus a +.9% gain in November.   

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,550,090 barrels versus a +2,840,000 barrel gain the prior week.  Gasoline supplies are estimated to rise by +1,363,640 barrels versus a +6,796,000 barrel gain the prior week. Distillate supplies are estimated to fall by -336,000 barrels versus a +76,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall -.11% versus a -2.4% decline prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .5-.75%.

Afternoon:

• Total Vehicle Sales for January are estimated to fall to 17.5M versus 18.29M in December.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI report, weekly MBA mortgage applications report and the (F) sales conference call could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity 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 75% net long heading into the day.

Stocks Lower into Final Hour on Earnings Outlook Concerns, Yen Strength, Profit-Taking, Homebuilding/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.88 +8.4%

• Euro/Yen Carry Return Index 127.02 +.09%

• Emerging Markets Currency Volatility(VXY) 10.74 unch.

• S&P 500 Implied Correlation 47.95 -.27%

• ISE Sentiment Index 76.0 -15.6%
  

• Total Put/Call 1.07 -.93%

• NYSE Arms 1.37 -6.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.50 +1.60%
  

• America Energy Sector High-Yield CDS Index 413.0 -.45%

• European Financial Sector CDS Index 90.32 +.88%

• Western Europe Sovereign Debt CDS Index 21.67 -6.03%

• Asia Pacific Sovereign Debt CDS Index 31.91 -2.76%

• Emerging Market CDS Index 236.83 +.06%
  

• iBoxx Offshore RMB China Corporate High Yield Index 133.50 +.02%

• 2-Year Swap Spread 29.50 -.5 basis point

• TED Spread 52.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -29.25 +3.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.78 +.25%
• 3-Month T-Bill Yield .51% +1.0 basis point

• Yield Curve 124.0 -4.0 basis points
  

• China Import Iron Ore Spot $83.34/Metric Tonne n/a

• Citi US Economic Surprise Index 31.80 +.2 point

• Citi Eurozone Economic Surprise Index 55.30 +.3 point

• Citi Emerging Markets Economic Surprise Index 37.10 +.4 point

• 10-Year TIPS Spread 2.06 -1.0 basis point
• 32.9% chance of Fed rate hike at March 15 meeting, 46.3% chance at May 3 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -59 open in Japan 
• China A50 Futures: Indicating n/a open in China

• DAX Futures: Indicating +56 open in Germany

Portfolio: 

• Slightly Higher: On gains in my in my biotech/medical sector longs 

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.5%

Sector Underperformers:

• 1) Steel -1.9% 2) Semis -1.7% 3) Homebuilders -1.6%

Stocks Falling on Unusual Volume: 

• UA, NRZ, SMLP, ESTE, TMHC, UPS, RMBS, CR, TPX, AEIS, TEVA, HOG, UVV, IDTI, GBX, SM, CNX, ARRS, SFL, VLO, LPG and RYAM

Stocks With Unusual Put Option Activity:

• 1) EA 2) CNX 3) ETP 4) UPS 5)ATVI

Stocks With Most Negative News Mentions:

• 1) UA 2) RRTS 3) BWLD 4) AAL 5) TPX

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth unch.

Sector Outperformers:

• 1) Gold & Silver +2.5% 2) Utilities +1.4% 3) Biotech +1.2%

Stocks Rising on Unusual Volume:

• MNTA, SANM, NTCT, CYNO, SFR, CLH, COH, ALLY, TMO, GKOS, AXE, USLV, CARA, HUBB, PEI, AOBC, TLYS, TUP, ABC, UDR, RGR and CBL

Stocks With Unusual Call Option Activity:

• 1) ILG 2) NBR 3) ETN 4) UPS 5) BAX

Stocks With Most Positive News Mentions:

• 1) TLYS 2) CLH 3) SHOO 4) EXC 5) CBOE

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +8.9% Above 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 46.1% of Issues Advancing, 50.4% Declining
• 47 New 52-Week Highs, 18 New Lows
• 57.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.8%
• Vix 12.9 +8.7%
• Total Put/Call 1.12 +3.7%
• TRIN/Arms 1.33 -9.2%

Tuesday Watch

Evening Headlines

Bloomberg:

• Macquarie's Lakos: Global Growth Outlook Improving. (video)

• Asian Stocks Fall, Dollar Holds Losses. The Topix index dropped before a Bank of Japan policy decision. The S&P 500 Index registered its biggest loss of the year as Trump’s order on immigration drew a rebuke from some Republican lawmakers, raising the specter of a rift between the executive and legislative branches. The dollar maintained losses and gold advanced for a third day. Oil was steady after two days of declines. Japan’s Topix slumped 0.8 percent as of 9:51 a.m. in Tokyo, with banks and exporters leading declines for a second day. NEC Corp. tumbled 15 percent after cutting its full-year profit forecast. Australia’s S&P/ASX 200 Index lost 0.7 percent, led by energy shares.

• Fed Gives Break to Regional Banks in Annual Stress-Test Demands. Large regional banks and some foreign lenders will get a big break in the Federal Reserve’s annual stress tests as the regulator said Monday it would no longer evaluate their plans for managing capital and risk. Letting banks with less than $250 billion in assets out of the so-called qualitative side of the stress tests is a particularly welcome move for the industry, because that part of the test has often proved to be a stumbling block for the companies. In issuing the new rule, the Fed decided that regional banks such as BB&T Corp., Fifth Third Bancorp and Zions Bancorporation don’t pose the kind of threat to the financial system the tests are meant to curtail.

• Google(GOOGL) Employees Rally in Thousands Against Trump Immigration Ban. Sergey Brin and Sundar Pichai speak on the issue "at the core of the founding of this company."

Wall Street Journal:

• Corporate Criticism of Trump’s Travel Ban Moves Beyond Tech. Chiefs of Ford, Coke, Goldman among those condemning new immigration restrictions.

• Robot Baristas Serve Up the Future of Coffee at Cafe X. Automation is eliminating jobs for factory workers and Uber drivers—will your morning fix soon come from a precision caffeine machine?

• Facebook(FB) Is Trying Everything to Re-Enter China—and It’s Not Working. Since regulators blocked the service in 2009, CEO Mark Zuckerberg has hired well-connected executives, developed censorship tools and taken a ‘smog jog’ in Beijing—but the company has made no visible headway.

• Trump Dams the Regulatory Flood. His executive order should change the bureaucratic incentives.

Fox News:

• Acting AG tells Justice Department staff not to defend Trump's refugee order. (video)

CNBC:

• After-hours buzz: SANM, AEIS, ODP, RMBS.

Zero Hedge:

• Trump Fires Acting Attorney General Yates Following "Betrayal".

• Mutiny? Acting Attorney General Orders Justice Department Not To Defend Trump Executive Order.

• Seven Charts To Watch In 2017. (graph)

• Is A Constitutional Crisis Imminent In The Wake Of Trump's Immigration Ban?

• Chicago Police Suicides Soar As Impact Of City's "War Zone" Takes Its Toll.

• RBC: "It Is Crazy What Is Going On 'Under The Hood' When On The Surface It’s So Optically Calm".

• Obama Oversaw The Weakest Growth In American's Personal Income On Record. (graph)

• Squeeze Over? Short-Interest Plunges To 3-Year Lows. (graph)

• In Major Intel Overhaul, Trump Adds CIA Director Back To National Security Council.

• Hungarian Foreign Minister Accuses Soros Of Seeking To Bring Down His Government.

• Trump Slump Begins? Dow Loses 20k As Stocks Suffer Biggest Drop Of 2017. (graph)

Busines Insider:

• Miami condo flippers are getting hit hard and this is just the beginning.

• A lawsuit against Coca-Cola sets a dangerous precedent for food and beverage companies.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 114.75 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 32.75 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 70.62 +.03%. 

• S&P 500 futures -.04%. 

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AET)/1.44

• (ABC)/1.23

• (CIT)/.76

• (COH)/.75

• (LLY)/.98

• (XOM)/.71

• (HOG)/.31

• (HCA)/1.79

• (MAN)/1.71

• (MA)/.85

• (NUE)/.34

• (PCAR)/.87

• (PFE)/.51

• (SMG)/-1.25

• (SPG)/2.57

• (S)/-.10

• (UPS)/1.69

• (VLO)/.78

• (ZBH)/2.11

• (AFL)/1.63

• (APC)/-.50

• (AAPL)/3.23

• (CB)/2.41

• (EA)/2.29

• (ILMN)/.83

• (MSTR)/2.72

• (X)/-.02 

Economic Releases 
8:30 am EST

• The 4Q Employment Cost Index is estimated to rise +.6% versus a +.6% gain in 3Q.

9:00 am EST

• The S&P CoreLogic CS 20-City MoM for November is estimated to rise +.7% verssu a +.7% gain in October.
  

9:45 am EST

• The Chicago Purchasing Manager Index for January is estimated to rise to 55.0 versus 54.6 in December. 

10:00 am EST

• Consumer Confidence for January is estimated to fall to 112.8 versus 113.7 in December.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Bank of Japan rate decision, German Unemployment rate, Eurozone GDP report, China Manufacturing PMI report and the weekly US retail sales reports could also impact trading today.

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