Wednesday Watch

Night Trading 

• Asian equity indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 74.75 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 15.75 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 72.53 -.03%.

• S&P 500 futures +.14%.

• NASDAQ 100 futures +.25%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AGN)/4.04

• (EAT)/.43

• (BG)/.74

• (CLX)/1.42

• (CTSH)/.95

• (EL)/.97

• (HMC)/64.41

• (GRMN)/.66

• (ICPT)/-3.41

• (TAP)/1.87

• (PBI)/.43

• (RDC)/-.40

• (STE)/.94

• (ZBH)/1.74

• (ALL)/.83

• (BOJA)/.17

• (CZR)/1.75

• (CF)/-.54

• (CAKE)/.60

• (EFX)/1.49

• (FB)/1.28

• (FLS)/.34

• (GPRO)/.02

• (HBI)/.60

• (KHC)/.82

• (MET)/.92

• (PRU)/2.71

• (QCOM)/.81

• (RGLD)/.37

• (SHAK)/.15

• (SYMC)/.43

• (TSLA)/-2.30

• (RIG)/-.06

• (WMB)/.19

• (YELP)/.22

Economic Releases 

8:15 am EST

• The ADP Employment Change for October is estimated to rise to 196K versus 135K in September.

10:00 am EST

• The ISM Manufacturing Index for October is estimated to fall to 59.4 versus 60.8 in September.

• The ISM Prices Paid for October is estimated to fall to 67.8 versus 71.5 in September.

• Construction Spending MoM for September is estimated to fall -.2% versus a +.5% gain in August.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -877,250 barrels versus a +856,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,315,500 barrels versus a -5,465,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,130,140 barrels versus a -5,246,000 barrel decline prior. Finally, Refinery Utilization is estimated to rise by +.86% versus a +3.3% gain prior.

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at 1.0-1.25%.
  

Afternoon

• Wards Total Vehicle Sales for October are estimated to fall to 17.5M versus 18.47M in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The FOMC policy update, China Manufacturing PMI report, Full Tax Bill released by Congress, weekly MBA Mortgage Applications report, (COST)/(ZUMZ) monthly sales results, (F) October sales conference call, (FB)/(TWTR) testimony to Congress on Russia and the (BGG) 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 Higher into Final Hour on Economic Optimism, Earnings Outlooks, Oil Gain, Tech/Gaming Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 10.2 -2.9%

• Euro/Yen Carry Return Index 138.48 +.45%

• Emerging Markets Currency Volatility(VXY) 8.09 -.86%

• S&P 500 Implied Correlation 15.37 +17.3%

• ISE Sentiment Index 130.0 +35.4%
  

• Total Put/Call .82 -12.8%

• NYSE Arms 1.42 +28.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.37 -1.04%
  

• America Energy Sector High-Yield CDS Index 387.0 -1.39%

• European Financial Sector CDS Index 51.18 -3.21%

• Western Europe Sovereign Debt CDS Index 4.21 -2.55%

• Asia Pacific Sovereign Debt CDS Index 15.63 +2.36%

• Emerging Market CDS Index 174.33 +.12%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.79 unch.

• 2-Year Swap Spread 22.5 unch.

• TED Spread 28.75 -4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -42.0 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.55 -.03%
• 3-Month T-Bill Yield 1.13% +3.0 basis points
  

• Yield Curve 78.0 -1.0 basis point

• China Import Iron Ore Spot $58.52/Metric Tonne -.39%

• Citi US Economic Surprise Index 40.20 -.3 point

• Citi Eurozone Economic Surprise Index 59.0 -7.4 basis points

• Citi Emerging Markets Economic Surprise Index 23.50 +2.8 points

• 10-Year TIPS Spread 1.88 unch.
  
• 86.6% chance of Fed rate hike at Dec. 13 meeting, 87.2% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +14 open in Japan 
• China A50 Futures: Indicating +34 open in China

• DAX Futures: Indicating -7 open in Germany

Portfolio: 

• Higher: On gains in my tech/retail/medical sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.1%

Sector Underperformers:

• 1) Gold & Silver -1.3% 2) Biotech -.8% 3) REITs -.2%

Stocks Falling on Unusual Volume: 

• NLS, OHI, UA, SHOP, LL, AEIS, FDP, BHVN, SANM, QCOM, CSTM, CHGG, SHOO, FSLR, MYL, ADM, ALXN, FSLR, MAT and NLS

Stocks With Unusual Put Option Activity:

• 1) EXAS 2) FL 3) RCII 4) NBR 5) UA

Stocks With Most Negative News Mentions:

• 1) UAA 2) NTLS 3) SANM 4) JBSS 5) MAT

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.0%

Sector Outperformers:

• 1) Gaming +3.1% 2) Computer Hardware +2.8% 3) Disk Drives +2.3%

Stocks Rising on Unusual Volume:

• STML, AAAP, APTI, SSTK, SNE, SSD, DAIO, ROK, TREX, CNHI, CREE, CMCO, HZO, EXAS, OFIX, CIFS, K, IDTI, ASND, CGNX, VST, TUSK, IPGP, WLH, LMNX, TREX, STRL, SSTK, EXAS, TBI, CRAY, WCG, MOS, BPOP, OLED, COHR, KBR, MU, ARCH, WYNN, DYN, IIVI, SMPL, ASIX and EXPE

Stocks With Unusual Call Option Activity:

• 1) DFS 2) PXD 3) DHR 4) RDC 5) CCL

Stocks With Most Positive News Mentions:

• 1) IDTI 2) SSD 3) TREX 4) KBR 5) CERN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.2% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 60.0% of Issues Advancing, 36.8% Declining
• 114 New 52-Week Highs, 43 New Lows
• 45.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.6%
• Vix 10.2 -3.1%
• Total Put/Call .77 -18.1%
• TRIN/Arms 1.27 +15.8%

Tuesday Watch

Evening Headlines

Bloomberg:

• China Factory PMI Falls From Five-Year High on Pollution Cleanup. China’s official factory gauge fell this month, with new orders and prices leading the decline, as officials increasingly prioritize a campaign to clamp down on polluting industries and rein in debt.

• Japan’s Industrial Production Declines 1.1% in September. (video) Japan’s industrial production declined in September from the previous month, while the labor market remained the tightest in decades and household spending fell modestly.

• Stocks in Asia Track U.S. Losses as Bonds Climb. Most equities in Asia declined as bonds added to gains, showing caution is creeping into markets with investors assessing developments on tax reform and ahead of key monetary policy decisions, economic data and earnings reports. Japan’s stocks fell, with SoftBank Group Corp. tumbling the most in almost a year on news that a deal to merge its Sprint Corp. unit with T-Mobile US Inc. may be in jeopardy. The Bloomberg dollar index maintained losses, though it remains on track for its best month since the election of Donald Trump as U.S. president. Ten-year Treasury yields held below 2.4 percent, with Trump’s choice to lead the Federal Reserve due by the end of the week. The yen was steady as the Bank of Japan meets to set policy. Japan’s Topix index declined 0.6 percent as of 9:24 a.m. in Tokyo, while the Nikkei 225 Stock Average fell 0.7 percent. SoftBank declined as much as 5.8 percent. Talks with Sprint, whose shares plunged in U.S. trading, have hit a serious snag over valuation, according to people familiar with the matter. Australia’s S&P/ASX 200 Index climbed 0.2 percent. South Korea’s Kospi index was little changed. Contracts on Hong Kong’s Hang Seng Index dropped 0.3 percent.

• Five Things You Need to Know to Start Your Day. (video)

• Apple(AAPL) Designing iPhones, iPads Without Qualcomm(QCOM) Parts, WSJ Says.

Wall Street Journal: 

• Colleges Should Protect Speech—or Lose Funds. Withhold federal research dollars from institutions that practice viewpoint discrimination.

• Lennar(LEN), CalAtlantic Strike Deal to Create Largest U.S. Home Builder. Combined company will be one of the top three home builders in 24 of the top 30 U.S. markets.

MarketWatch.com:

• EarningsWatch: Apple(AAPL), Tesla(TSLA) and Facebook(FB) are post-Halloween treats.

• What a Jerome Powell-led Fed may look like.

Fox News:

• Manafort, Gates plead not guilty in grand jury indictment. (video)

• Gregg Jarrett: Still no evidence of Trump-Russia 'collusion' - but Hillary is a different matter. (video)

Zero Hedge:

• China PMIs Disappoint, Tumble In October. (graph)

• The US Government Quietly Added $200 Billion To The National Debt This Month Alone.

• Russian Content May Have Reached 126 Million Facebook Users, There Is Just One Catch.

• Steve Bannon Declares War On Republican Mega Donor Paul Singer.

• China's Record Yield Curve Inversion "Spells Disaster". (graph)

• Chris Whalen: "Glad I Am On A George Soros-Funded Blacklist Of Journalists".

• US Special Forces Capture Militant Who Was Instrumental In 2012 Benghazi Attack.

• Tax Turmoil & China Contagion Slam US Stocks, Treasury Yields Tumble. (graph)

Business Insider: 

• Here's everything you need to know about Jerome Powell, Trump's likely pick to lead the Federal Reserve.

• Millennials shouldn't bank on clean energy jobs.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 75.5 +.75 basis point. 

• Asia Pacific Sovereign CDS Index 15.25 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 72.57 -.01%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AET)/2.10

• (AGCO)/.73

• (AKS)/.04

• (AMT)/1.64

• (ADM)/.55

• (BP)/.08

• (CMI)/2.46

• (ETN)/1.25

• (HCA)/1.21

• (IDXX)/.74

• (K)/.94

• (MA)/1.23

• (MOS)/.21

• (PFE)/.65

• (SNE)/50.75

• (DDD)/.11

• (CHRW)/.82

• (EA)/.54

• (PZZA)/.60

• (RGR)/.60

• (X)/.70

Economic Releases 

8:30 am EST

• The Employment Cost Index for 3Q is estimated to rise +.7% versus a +.5% gain in 2Q.

9:00 am EST

• S&P CoreLogic CS 20-City Home Price Index MoM for August is estimated to rise +.4% versus a +.35% gain in July.

9:45 am EST

• The Chicago Purchasing Manager Index for October is estimated to fall to 60.0 versus 65.2 in September.

10:00 am EST

• The Conference Board Consumer Confidence Index for October is estiamted to rise to 121.2 versus 119.8 in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ decision, China Industrial Production report, Eurozone GDP report, weekly US retail sales reports and the (FB)/(TWTR) testimony to Congress on Russia 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.