Friday Watch

Evening Headlines

Bloomberg:

• China’s Army of Global Homebuyers Is Suddenly Short on Cash. China’s escalating crackdown on capital outflows is sending shudders through property markets around the world. In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.

• Why China's 'Creative' Way to Fight Capital Outflows Won't Be Sustainable". Same result, different mechanism." Beijing's bid to rope banks into its quest to stem capital outflows wins top marks for creativity, but it won't stem the tide in the long term, says Paul Gruenwald, the chief Asia Pacific economist at S&P Global Ratings. The People's Bank of China is said to have urged lenders earlier this month to issue more dollar-dominated debt offshore, in the hope that the repatriation of proceeds back to the mainland would help stanch declines in the country's foreign-exchange reserves.

• Japan’s Consumer Price Declines Ease as Oil Costs Take Hold. (video) Consumer prices in Japan dropped for a 10th straight month, though the pace of decline eased as oil costs rose, supporting expectations for a return to inflation later this year.

• Japan Stocks Approach One-Year High After Yen Fall. Japanese shares advanced after the yen posted its biggest one-day drop versus the dollar in a week. Trading may be thin across Asia with a slew of markets closed, or open for only part of the day, because of Lunar New Year celebrations. The Topix Index rose to within 6 points of the highest since December 2015, while Australian shares also climbed. That came after the S&P 500 Index slipped Thursday from an all-time high, while the Dow Jones Industrial Average notched another record. Mexico’s peso held declines after the country’s president canceled a meeting with Donald Trump. Oil was above $53 a barrel, while gold was heading for its longest slump in three months. The Topix rose 0.4 percent as of 9:41 a.m. in Tokyo, with the Nikkei 225 Stock Average gaining 0.2 percent.

• Microsoft(MSFT) Exceeds Sales, Profit Estimates on Cloud Gains. Microsoft Corp.’s second-quarter sales and profit exceeded analysts’ projections, bolstered by rising customer sign-ups for cloud-based services and a stabilizing personal-computer market. Profit excluding certain items, such as a few weeks of results from newly acquired LinkedIn Corp., was 84 cents a share on adjusted sales of $25.8 billion, the software maker said Thursday in a statement. Analysts on average had estimated profit would be 79 cents on revenue of $25.3 billion in the period ended Dec. 31, according to data compiled by Bloomberg.

• Starbucks(SBUX) Blames Restaurant Slump as It Reins in Sales Forecast. Starbucks Corp. isn’t immune from the slump plaguing the restaurant industry. The coffee giant cited a “challenging environment” as it posted disappointing quarterly growth and cut its annual sales forecast Thursday. Starbucks now expects revenue to rise between 8 percent and 10 percent this fiscal year. It previously had predicted a double-digit increase.

• Intel(INTC) Projects Sales Growth on Data Centers, PC Demand. Intel Corp, the biggest maker of semiconductors, predicted first-quarter sales that will meet analysts’ estimates on improvements in the personal computer market and continued growth in orders from data center owners. Revenue will be $14.8 billion, plus or minus $500 million, the Santa Clara, California-based company said Thursday in a statement. Analysts had projected $14.5 billion, the average of estimates compiled by Bloomberg.

• Trump’s Got a Point: Mexico Trade Edge Over U.S. Is Huge. (graph)

Wall Street Journal:

• U.S.-Mexico Rift Deepens Over Trade Threat, Canceled Meeting. Donald Trump’s White House proposes tax on imports as presidents abandon meeting amid trade, border wall tensions.

• Google(GOOGL) Parent Alphabet Finds New Growth Beyond Search.

• Fed to Align Itself With Government Hiring Freeze. Trump asks for plan to reduce number of employees through attrition.

Fox News:

• Texas Gov. Abbott threatens to oust officials who promote sanctuary cities. (video)

CNBC:

• White House softens 20% border tax idea, calling it part of a 'buffet of options'. (video)

• Trump is Wall Street’s $2.2 trillion man. The paper gains are piling up since the stock market rally began the day after Donald Trump was elected president. Not only is the Dow Jones industrial average sitting atop the 20,000 mountain for the first time ever, and both the large-company Standard & Poor's 500 and tech-dominated Nasdaq sitting at fresh record highs, the real story is the $2.2 trillion in paper wealth created in the Wilshire 5000 Total Market Index since the close on Nov. 8.

• Wynn Resorts(WYNN) shares surge 7 percent after revenue beats on new Macau casino.

Zero Hedge:

• White House Reveals How Mexico May Pay For The Wall: A 20% Border Tax.

• "When Will It End?" BofAML's 10-Point Checklist.

• Who's Right? Bonds Or Stocks. (graph)

• Bannon Declares War On The Media: "You Are The Opposition; Keep Your Mouth Shut".

• Yen Tumbles After BOJ Boosts Bond Buying. (graph)

• Miami-Dade County Is First To Terminate Sanctuary Status.

• Grantham's GMO Asks: "What If Trump Succeeds?"

• U.S. Wage Disparity Rises To New Multi-Decade High During Obama's Last Year In Office. (graph)

• Former CNN Reporter: "CNN Is All About One Thing... And It's Not Journalism".

• Bonds, Dow, & Dollar Rise As Peso & VIX Protection Pounded. (graph)

Busines Insider:

• Haunting photos from inside former strongholds of the Islamic State.

• 'A horrible year': Mexico has few answers for shrinking budgets and soaring crime.

Fortune: 

• Alphabet’s(GOOGL) Other Bets Hold the Key to a Future Beyond the Web. Google's overall revenue climbed 25% in the most recent quarter to $25.8 billion. However, the company also noted that revenues from things other than advertising—a category that includes the YouTube Red video-subscription service, Google Play, Google's cloud services and the new Pixel smartphones—climbed 62% in the latest quarter. For Alphabet itself, revenue for the "Other Bets" category, which includes Nest, Google Fiber and the life-sciences unit Verily, climbed 82% to $809 million, although the group had an operating loss of $3.6 billion.

Night Trading 

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 111.75 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 32.75 unch.

• Bloomberg Emerging Markets Currency Index 70.23 -.08%. 

• S&P 500 futures -.03%. 

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ABBV)/1.20

• (APD)/1.48

• (AAL)/.91

• (CVX)/.68

• (CL)/.75

• (GD)/2.54

• (GNTX)/.32

• (HON)/1.74   

Economic Releases 
8:30 am EST

• Advance 4Q GDP is estimated to rise +2.2% versus a +3.5% gain in 3Q.   

• Advance 4Q Personal Consumption is estimated to rise +2.5% versus a +3.0% gain in 3Q.

• Advance 4Q GDP Price Index is estimated to rise +2.1% versus a +1.4% gain in 3Q.

• Advance 4Q Core PCE QoQ is estimated to rise +1.4% versus a +1.7% rise in 3Q.

• Preliminary Durable Goods Orders for December is estimated to rise +2.6% versus a -4.5% decline in November.

• Preliminary Durables Ex Transports for December is estimated to rise +.5% versus a +.6% gain in November.

• Preliminary Cap Goods Orders Non-Defense Ex-Air for December is estimated to rise +.2% versus a +.9% gain in November.  

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for January is estimated at 98.1 versus a prior estimate of 98.1.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The German retail sales report 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.