Wednesday Watch

Evening Headlines

Bloomberg:

•  Japan's Core Machine Orders Unexpectedly Surge in November. Japan’s core machine orders unexpectedly rose in November, driven by demand from the nation’s non-manufacturing sector, the latest sign of strengthening capital investment.

• Japan's Budget Goal Is Being Deferred Again. One of Japan’s key targets for addressing its ballooning debt is set to be pushed further into the future when the Cabinet Office updates economic forecasts next week. The primary balance, which measures the government’s fiscal position excluding interest payments on its borrowings, was meant to come out of the red in fiscal 2020. Reaching the goal was seen as a first step for Prime Minister Shinzo Abe’s administration to arrest debt growth, so the country could then begin to whittle it down.

• A Steelmaker’s Plan to Win Back the Car of the Future. ArcelorMittal(MT) believes electric vehicles could favor the stronger, cheaper metal.

• Crypto Junkies’ Favorite Messaging App Is Planning the Biggest ICO Ever. Encrypted messaging service Telegram Inc. is planning the largest, and by some measures most ambitious, initial coin offering ever. Telegram, which last year became the main hub for cryptocurrency watchers and investors, is planning to raise $600 million in a private sale of tokens to use in its Telegram Open Network blockchain before February 2018 and an additional $600 million in a public sale of tokens starting march, according to an investor proposal seen by Bloomberg News.

• Asian Stocks Retreat From Highs, Dollar Dips Again. (video) The dollar declined against most major currencies while Treasuries steadied amid congressional talks to avert a U.S. government shutdown Friday. Asian stocks pulled back from record highs, following declines in U.S. counterparts. The MSCI Asia Pacific Index retreated as materials and healthcare stocks weighed. Benchmark indexes from Sydney to Tokyo and Hong Kong were also lower. The euro strengthened close to a three-year high against the greenback and sterling rose. The yen steadied after a six-day streak of gains. Bitcoin rebounded above $11,000 after slumping 23 percent Tuesday. The MSCI Asia Pacific Index declined 0.2 percent as of 10:30 a.m. Tokyo time. Topix index decreased 0.2 percent. Kospi index dipped 0.5 percent and Hong Kong’s Hang Seng was down 0.4 percent. Australia’s S&P/ASX 200 Index declined 0.5 percent to the lowest in a month. Futures on the S&P 500 Index rose 0.1 percent after the underlying gauge dropped 0.4 percent Tuesday. 

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

• Behind Roaring Stocks Are Profit Upgrades of Unprecedented Size. (video) The rally in the equity market is running hot by almost every standard, from sentiment to momentum signals. Yet anyone worrying about a meltdown can take comfort in an equally strong trend in corporate earnings. Thanks to the tax cut passed into law in December, analysts have been raising their estimates at a rate not seen in at least six years. Forecasts for 2018 profit from companies in the S&P 500 Index increased 3.5 percent over the past four weeks to $151 a share, the fastest pace over comparable periods in Bloomberg data that go back to 2012.

• Juno Therapeutics(JUNO) Surges on Report of Celgene(CELG) Deal Talks. Juno Therapeutics Inc. surged in after-hours trading after the Wall Street Journal reported that Celgene Corp. was in talks to buy the Seattle-based drugmaker. Shares of Juno, a leader in the effort to use the immune system to treat cancer, rose more than 44 percent to $65.72 a share at 6:04 p.m. The company had a market value of roughly $5.2 billion as of the close of regular trading on Tuesday. Analysts and investors have speculated that changes to the tax code will entice U.S.-based companies to bring back cash from abroad and spur merger and acquisition activity in 2018. Last year was the slowest since 2013 in terms of biopharmaceutical merger volume. Shares of Bluebird Bio Inc.(BLUE), another firm researching so-called CAR-T treatments that use the immune system to fight cancer, rose 7.7 percent late Tuesday, on speculation that the Cambridge, Massachusetts-based firm could also be a potential takeover target. Celgene and Bluebird Bio also have a partnership agreement to develop therapies that target proteins linked to blood cancers like multiple myeloma.

Wall Street Journal:

• Disputes Threaten ‘Dreamer’ Deal and a Government Shutdown. Fireworks over Donald Trump’s crude remarks last week upend negotiations on immigration and spending.

• The Tax-Reform Stock Rally. Animal spirits are unleashed, but watch the Fed’s great unwinding.

• Troubles Push GE to Consider a Breakup. Major problems in GE Capital are prompting a re-evaluation of strategy.

• U.S. Freezes $65 Million in Funding for U.N. Palestinian Refugee Agency. The agency’s biggest contributor presses for a ‘re-examination’ of operations and financing.

• How the Tax Law Will Affect U.S. Firms Bringing Overseas Money Home. Companies have long sheltered foreign profits offshore. Now the tax bill is coming due. How much will they pay?

MarketWatch.com

• The average investor is making a classic mistake as the Dow marches to 30,000.

• The stock market is posting the best start to a year since 2003.

Fox News:

• White House doctor peppered with questions as reporters hunt for evidence of a Trump illness.

CNBC:

• Ford(F) shares drop after 2017 profit falls short, issues disappointing 2018 earnings forecast.

• Mueller's subpoena could give Bannon some cover in Trump probe, legal experts say.

• Kudlow: Trump not inclined to pull out of NAFTA, but status 'is subject to daily change'.

• Shares of H&R Block(HRB) jump after it announces an exclusive partnership with Walmart(WMT).

• Airlines ground more than 800 flights as winter storm hits Texas.

• US shale oil output poised to surge above 6.5 million barrels a day in February.

• YouTube is trying to clean itself up by making it much harder for small video makers to make money.

• Initial coin offerings are the 'Wild West' of start-up land — here's how one investor spots a scam. (video)

• Ulta Beauty(ULTA) is among the retailers poised to benefit from tax cuts, Wells Fargo analyst says.

• Ferrari plans an electric supercar that would compete with Tesla(TSLA).

Zero Hedge:

• Crypto Dip-Buyers Appear But Bloodbath Remains. (graph)

• Ripple Routed Under $1 As Bitcoin Briefly Tumbles Below $10,000.

• China's 'Nasdaq' Tumbles To 6-Month Lows As Crypto-Related Stocks Crash.

• "Out": Trump Expels CNN's Jim Acosta From Oval Office.

• BitConnect Closes Exchange After State Crackdown Over Unregulated Sales.

• DHS Is Planning To Arrest Sanctuary City Leaders.

• Former CIA Officer Warns: Deep State Is "Terrified" Of Trump, "Want Him Taken Out".

• New Charges Possible In Mandalay Bay Shooting While Mystery Shrouds Broken CCTV.

• China Downgrades US Credit Rating From A- To BBB+, Warns US Insolvency Would "Detonate Next Crisis".

• White House Doctor: Trump In Excellent Cognitive Health, Has "Incredibly Good Genes".

• There's Just One Thing Missing From Dr.Copper's Exuberance...Real Buyers. (graph)

• Investors 'Stunned' As Stocks Suffer Biggest Reversal In 10 Months; Cryptos Crash. (graph)

Business Insider:

• The bill to avoid a government shutdown could include a slew of changes to Obamacare's taxes.

• Litecoin has lost half its value since the creator sold all of his stake. (graph)

• Bitcoin crashes 25% to below $11,000 during 'cryptocurrency bloodbath'. (graph)

 Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 60.75 +.75 basis point. 

• Asia Pacific Sovereign CDS Index 10.0 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 75.54 +.01%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ASML)/1.06

• (BAC)/.45

• (SCHW)/.42

• (FAST)/.45

• (GS)/4.95

• (USB)/.87

• (AA)/1.25

• (KMI)/.18

• (RMAX)/.51

• (SLM)/.19

Economic Releases

9:15 am EST

• Industrial Production MoM for December is estimated to rise +.5% versus a +.2% gain in November. 

• Capacity Utilization for December is estimated to rise to 77.4% versus 77.1% in November. 

• Manufacturing Production for December is estimated to rise +.3% versus a +.2% gain in November.

10:00 am EST

• The NAHB Housing Market Index for January is estimated to fall to 72 versus 74 in December.

2:00 pm EST

• US Fed Beige Book release.
  

4:00 pm EST

• Net Long-Term TIC Flows.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Senate Finance Committee's vote on Jerome Powell for Fed Chair, Fed's Mester speaking, Eurozone Construction Output report, weekly US retail sales reports, weekly MBA mortgage applications report, (TIF) holiday sales update, Needham Growth Conference, TD Securities Mining Conference,  could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and retail shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 75% net long heading into the day.