Friday Watch

Evening Headlines

Bloomberg:

• Japan’s Inflation Edges Higher But Remains Far From Target. (video) Japanese inflation sped up in October but price rises are still less than half the central bank’s target, despite the tightest labor market in decades.

• Korea's Inflation Slips to 1-Year Low While GDP Strengthens. (video) South Korea’s inflation unexpectedly slowed to a one-year low as the government lowered city gas charges and vegetable prices stabilized on higher farm output. Economic growth was slightly stronger than the central bank’s initial estimate and exports expanded close to 10 percent.

• Asia Stocks Pare Gains as U.S. Equity Futures Drop. (video) Japanese shares gave up an advance that briefly helped the Nikkei 225 Stock Average reclaim a 25-year high reached in November. Shares rose in Australia and fell in Hong Kong. The Dow Jones Industrial Average climbed past 24,000 after John McCain backed the Senate tax bill, and the S&P 500 Index capped its longest monthly winning streak since 2007 as technology stocks rebounded. Treasuries held a slide, with the 10-year yield breaking above 2.4 percent. The dollar came under pressure after the U.S. Senate suspended votes on the bill until Friday as it emerged a key compromise to help its passage collapsed. The Topix index was down 0.2 percent as of 10:50 a.m. in Tokyo and the Nikkei 225 Stock Average fell 0.1 percent after earlier jumping as much as 1.2 percent to touch the highest since 1992. Australia’s S&P/ASX 200 Index advanced 0.4 percent. The Kospi index was down 0.1 percent. Hong Kong’s Hang Seng Index lost 0.3 percent. The Shanghai Composite Index was down 0.4 percent.

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

• Uber Investor Shervin Pishevar Accused of Sexual Misconduct by Multiple Women. Five women tell Bloomberg the venture capitalist used his position of power to pursue romantic relationships and unwanted sexual encounters.

• Bristol-Myers(BMY) Cancer Drug Opdivo Shows Surprising HIV Impact. Bristol-Myers Squibb Co.’s blockbuster drug Opdivo had a stunning effect on a lung-cancer patient treated at a Paris hospital: it drained hard-to-reach reservoirs of his HIV infection, too.

Wall Street Journal:

• Dow Industrials Climb 332 Points to Finish Above 24000. Blue-chip index hits fifth thousand-point milestone this year as hopes grow for a tax bill.

• Senate Bill Hits Obstacle Over Deficit Concern. ‘It doesn’t look like the trigger’s going to work,’ Sen. John Cornyn says.

• When Democrats Backed Tax Cuts. In 2001, Bush won support from a dozen of them in the Senate and 28 in the House.

• Electricity Prices Plummet as Gas, Wind Gain Traction and Demand Stalls. Texas is a microcosm of pressures facing power generators; ‘It’s too late’ for coal.

• China’s Tech Giants Have a Second Job: Helping Beijing Spy on Its People. Tencent and Alibaba are among the firms that assist authorities in hunting down criminal suspects, silencing dissent and creating surveillance cities. 

• CVS Health(CVS) Closes In on Deal to Buy Aetna(AET). Deal would likely be valued at between $200 and $205 per Aetna share, sources say.

• FDA to Allow Quicker Approval of Some Promising Cancer Drugs. Commissioner Scott Gottlieb says there will be more cases of drugs that show early and large potential.

MarketWatch.com:

• Republican tax plan heads for Senate vote: live updates.

Fox News:

• Senate Ethics Committee opens 'preliminary inquiry' into Al Franken allegations. (video)

CNBC:

• Bitcoin is already dwarfing some of the largest financial market bubbles of all time. (video)

• Amazon(AMZN) is in exploratory talks with generic-drug makers. (video)

• GM thinks it can make billions in the ride-hailing business with its self-driving cars. (video)

• US formally opposes China market economy status at WTO.

• Apple(AAPL) COO Jeff Williams on Apple's next steps in health.

• Robots may replace 800 million workers by 2030. These skills will keep you employed.

• Stocks could surge by 17 percent — if tax reform passes. (video)

Zero Hedge:

• "We Fought Hard But Did Not Deliver": $2.2BN Hutchin Hill Is Shutting Down.

• Obese Millennials Jeopardize America's Future: Study.

• Satellite Photos Show North Korea Preparing Another Missile Launch.

• Russian Marines Deploy To North Korean Border After ICBM Launch.

• Senate Bill Nearly Killed By Deficit Hawks: Will Include $350 Billion In New Tax Hikes.

• "Huge Bag Of Sex Toys": At Least 8 Women Now Accuse Lauer Of Harassment.

• McCain Mania Sends Dow Soaring To Record Highs As Yield Curve Collapse Continues. (graph)

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 73.25 +.5 basis point. 

• Asia Pacific Sovereign CDS Index 13.75 unch.

• Bloomberg Emerging Markets Currency Index 73.32 +.02%.

• S&P 500 futures -.33%.

• NASDAQ 100 futures -.40%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AMWD)/1.22

• (BIG)/.04

• (GCO)/1.12

Economic Releases

10:00 am EST

• ISM Manufacturing for November is estimated to fall to 58.3 versus 58.7 in October. 

• ISM Prices Paid for November is estimated to fall to 67.0 versus 68.5 in October.

• Construction Spending for October is estimated to rise +.5% versus a +.3% gain in September.

Afternoon:

• Wards Total Vehicle Sales for November are estimated to fall to 17.5M versus 18.0M in October.
  

Upcoming Splits

• (CGNX) 2-for-1

Other Potential Market Movers

• The Senate vote on tax reform, Fed's Bullard speaking, Fed's Kaplan speaking, China Manufacturing PMI report and the Eurozone GDP report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by transport and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Surging into Final Hour on Tax Reform Hopes, Economic Optimism, Yen Weakness, Energy/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.0 +2.8%

• Euro/Yen Carry Return Index 139.48 +.88%

• Emerging Markets Currency Volatility(VXY) 7.98 +.38%

• S&P 500 Implied Correlation n/a

• ISE Sentiment Index 110.0 +32.5%
  

• Total Put/Call .76 +8.57%

• NYSE Arms .97 +64.98%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.28 -1.12%
  

• America Energy Sector High-Yield CDS Index 386.0 -.86%

• European Financial Sector CDS Index 46.84 +1.05%

• Western Europe Sovereign Debt CDS Index 3.49 -.57%

• Asia Pacific Sovereign Debt CDS Index 13.77 -1.33%

• Emerging Market CDS Index 181.52 -.31%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.60 +.04%

• 2-Year Swap Spread 18.5 +.75 basis point

• TED Spread 19.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -47.25 +1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.24 -.08%
• 3-Month T-Bill Yield 1.26% -2.0 basis points
  

• Yield Curve 62.75 +1.25 basis points

• China Import Iron Ore Spot $68.13/Metric Tonne +.31%

• Citi US Economic Surprise Index 59.40 +.5 point

• Citi Eurozone Economic Surprise Index 71.30 -10.6 basis points

• Citi Emerging Markets Economic Surprise Index 1.60 -8.0 points

• 10-Year TIPS Spread 1.88 +1.0 basis point
  
• 100.0% chance of Fed rate hike at Jan. 31 meeting, 100.0% chance at March 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +204 open in Japan 
• China A50 Futures: Indicating +77 open in China

• DAX Futures: Indicating +26 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.1%

Sector Underperformers:

• 1) Steel -.8% 2) Gold & Silver -.5% 3) REITs -.3%

Stocks Falling on Unusual Volume: 

• CPL, UVSP, SGH, GTN, AXTA, JNPR, SMTC, NUAN, AZUL, BOX, OSTK, STMP, MOMO, JNPR and BKE

Stocks With Unusual Put Option Activity:

• 1) AET 2) HCA 3) OCN 4) SFM 5) S

Stocks With Most Negative News Mentions:

• 1) CATO 2) BKE 3) GNC 4) PFS 5) FFIC

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.0%

Sector Outperformers:

• 1) Road & Rail +2.4% 2) Oil Service +2.1% 3) Healthcare Providers +1.9%

Stocks Rising on Unusual Volume:

• TV, TLYS, HOME, TITN, JACK, AET, ASMB, EEQ, SYRS, XNET, MIK, KR, SEP, SCMP, ACRS, HCA, SOXX, RVNC, BEAT, ENB, NTG, FIVE, TDOC, XOMA, ZUMZ, EEP, LB, DERM, SNPS, SHLX, LUV, CVS, COST, GEL, KYN and GS

Stocks With Unusual Call Option Activity:

• 1) AET 2) FDX 3) XLB 4) AXP 5) SMH

Stocks With Most Positive News Mentions:

• 1) FDX 2) DLPH 3) KR 4) COST 5) CVS

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +34.9% Above 100-Day Average
• 10 Sectors Rising, 0 Sectors Declining
• 64.5% of Issues Advancing, 32.1% Declining
• 224 New 52-Week Highs, 15 New Lows
• 61.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.8%
• Vix 11.0 +2.9%
• Total Put/Call .78 +11.4%
• TRIN/Arms .86 +46.3%

Thursday Watch

Evening Headlines

Bloomberg:

• China Factory Gauge Unexpectedly Rises as Global Demand Firms Up. The manufacturing purchasing managers index rose to 51.8 in November, compared with the 51.4 forecast in a Bloomberg survey of economists and 51.6 the previous month. The non-manufacturing PMI climbed to 54.8 from 54.3 in October, the National Bureau of Statistics said on Thursday.

• Australian Banks Face Wide-Ranging Probe Amid String of Scandals. (video)

• Asia Stocks to Open Mixed as Tech Rout Roils U.S. Technology shares in the U.S. tumbled, while the S&P 500 Index ended the day flat, amid signs of a rotation away from the year’s leaders into financial stocks as tax legislation proceeded through the Senate. Futures on equity gauges in Japan were flat, while Hong Kong contracts were down. Australian shares opened lower with banks declining after the government announced an inquiry into the industry. Treasuries dropped after Federal Reserve Chair Janet Yellen called economic growth “increasingly broad based.” Futures on Japan’s Nikkei 225 Stock Average were flat, while contracts on Hong Kong’s Hang Seng Index slid 0.7 percent. Australia’s S&P/ASX 200 Index declined 0.7 percent. The nation’s big four banks were the main drag on the benchmark after Prime Minister Malcolm Turnbull said he would hold a wide-ranging public inquiry into the banks.

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

• OPEC and Russia Ready to Extend Oil-Supply Cuts Until End-2018. OPEC and Russia are ready to extend their oil production cuts until the end of next year to ensure global stockpiles keep falling and prices maintain recent gains. All OPEC members and Russia, the biggest producer outside the group to join the deal, agree the cuts should last until the end of 2018, according to delegates in Vienna to attend Thursday’s meeting. On Wednesday, a committee charged with overseeing the agreement on behalf of the whole group also recommended extending until the end of next year, two delegates said.

• EPA to Reward Iowa by Holding the Biofuel Mandate Steady.

• Marvin Goodfriend Is Nominated to Be a Fed Governor.

• Flattening Curve Aside, Bonds Haven't Been This Calm Since 1979. For all the hullabaloo around the flattening U.S. yield curve in November, the 10-year yield is still on track for its least turbulent month in almost four decades. The note’s yield, which serves as a benchmark for everything from U.S. mortgages to borrowing costs for municipalities, fell in November to as low as 2.3 percent and topped out at 2.41 percent. That’s the narrowest range since 1979. Even with volatility largely suppressed, the rate has swung about 32 basis points on average every month over the past five years. 

• This Is What Could Pop the Bitcoin Bubble.

Wall Street Journal:

• Bitcoin Mania: Even Grandma Wants In on the Action. The digital currency has gone from tech curiosity to mainstream topic, leading its value to jump more than 10-fold in 2017.

• Corporate Tax Rate in Flux as Senate Votes to Open Debate. Deficit hawks want tax triggers in case economic growth is slower than forecast.

• U.S. Economy Reaches Its Potential Output for First Time in Decade. U.S. GDP growth revised up to 3.3% rate for third quarter, with more business investment in equipment and software, and heftier government spending.

MarketWatch.com:

• Automation could impact 375 million jobs by 2030, new study suggests.

Fox News:

• Matt Lauer sexual harassment allegations include exposing himself, gifting a sex toy. (video)

CNBC:

• Nokia prepares offer to buy Juniper(JNPR); shares skyrocket nearly 20%.

• Yellen: $20 trillion national debt 'should keep people awake at night'.

• OPEC meeting becomes 'Russian psycho-drama' but deal still expected.

Zero Hedge:

• Sex Toys, Penis Shots, & Sexting: Details Emerge About Matt Lauer's Sexual Harassment.

• Kellyanne Conway Will Be White House Opioid Czar.

• In Critical Test Of Tax Reform Bill, Senate Narrowly Approves Motion To Start Debate With 52-48 Vote.

• WaPo Reporter Caught On Hidden Camera Being A Bit Too Honest; Admits "No Evidence" Of Trump-Russia Collusion. (video)

• Christmas Crisis: 15,000 American Air Flights Without Pilots Over Holidays Due To "Glitch".

• Turmoil... (graph)

Business Insider:

• The bitcoin exchange Coinbase has been ordered to hand the IRS info on 14,355 of its highest-rolling customers.

• 'We're dragging our heels, protecting our colleagues': Younger Democrats are fed up with slow-moving sexual harassment investigation into Rep. John Conyers.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 72.75 - basis points. 

• Asia Pacific Sovereign CDS Index 13.75 -. basis point.

• Bloomberg Emerging Markets Currency Index 73.32 -.%.

• S&P 500 futures -.%.

• NASDAQ 100 futures -.%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BKS)/-.26

• (DCI)/.42

• (KR)/.40

• (MIK)/.43

• (PERY)/.22

• (SHLD)/-4.46

• (TITN)/.08

• (TD)/1.38

• (AMBA)/.67

• (ULTA)/1.66

• (VMW)/1.28

• (ZUMZ)/.48

Economic Releases 

8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 240K versus 239K the prior week.

• Continuing Claims are estimated to fall to 1890K versus 1904K prior.

• Personal Income for October is estimated to rise +.3% versus a +.4% gain in September.

• Personal Spending for October is estimated to rise +.3% versus a +1.0% gain in September.

• The PCE Core MoM for October is estimated to rise +.2% versus a +.1% gain in September.

9:45 am EST

• The Chicago Purchasing Manager for November is estimated to fall to 63.0 versus 66.2 in October.

Upcoming Splits

• (CGNX) 2-for-1

Other Potential Market Movers

• The Senate vote on tax reform, Fed's Quarles speaking, Fed's Kaplan speaking, OPEC meeting, Japan Jobless Rate/CPI reports, China Manufacturing PMI report, Eurozone Unemployment Rate, French GDP report, weekly EIA natural gas inventory report, (ZUMZ)/(LB)/(BKE) monthly sales reports, Goldman Sachs Automotive Conference, (SKX) investor meeting and the (GM) self-driving future event could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and financial shares in the region. I expect US stocks to open mixed and to rally into the close, finishing modestly higher.  The Portfolio is 100% net long heading into the day.