Friday Watch

Evening Headlines

Bloomberg:   

• Trump Says China Soybean Purchase Is a ‘Fantastic Sign of Faith’.  

• Australia’s Housing Downturn Deepens as Prices Hit 2016 Levels.

• Stocks Edge Higher in Asia; Treasuries Pare Gains. Asian stocks pushed higher Friday, extending the rally in risk assets into February, though gains were modest following last month’s stellar run. Treasuries gave back some of their recent advance. Japanese, Australian and South Korean stocks all edged higher. While technology shares led gains in the U.S. overnight, Nasdaq futures pointed lower following a tepid sales forecast from Amazon.com Inc. Treasury yields gave up some of their post-Federal Reserve meeting declines as traders adjusted to a more neutral stance in monetary policy. Meantime, President Donald Trump said trade negotiations in Washington were making progress but that no deal will be final until he meets with Chinese President Xi Jinping “in the near future.” The S&P 500 Index rose 0.9 percent. Futures slipped 0.1 percent. Japan’s Topix index gained 0.3 percent. Australia’s S&P/ASX 200 Index edged up 0.2 percent. Hang Seng futures earlier added 0.3 percent.   

• Five Things You Need to Know to Start Your Day.     

• China's Treasuries Tumble, Trump Trade Gain, U.S. Jobs: Eco Day.

• Fed Blink Resets 2019 With Powell’s New Dovish Tone: Eco Week.

Wall St. Journal: 

• Solid U.S. Economy Drives Stocks to Best January in 30 Years.

• Trump Gives Upbeat Assessment of Trade Talks With China.

• U.S. Moves to Curb Drug Rebates in Medicare, Medicaid.

MarketWatch.com:

• Here’s the No. 1 state for jobs in the U.S. — and it’s not California or New York.

Fox News:

• Dem co-sponsor of late-term abortion bill sorry, says she did not read text; gov fights back.

• What ‘democratic socialism’ means: The movement reshaping the left.

CNBC:

• Apple(AAPL) brings the hammer down on Google for app that broke its rules, just like it did with Facebook.

• S&P 500 rises on strong earnings, closing out the best January since 1987.

• Job market was strong in January, but government shutdown may have played havoc with the numbers.

• Stocks making the biggest moves after hours: Amazon, Yum China, Cypress and more.

Zero Hedge:

• Howard Schultz Lobs Patriotic Microaggressions After Savage Attack By Liz Warren.

• US Suspends Nuclear Arms Treaty Compliance. 

• Venezuela Central Bank Begins Shipping 18 Tons Of Gold To UAE.

• Amazon(AMZN) Drops After Guiding To Worst Revenue Growth Since 2001, Slowing Prime Subscriptions.

• Biggest Fentanyl Bust in History: Border Patrol Seizes Enough Drugs "To Kill 57 Million People".

• More Alarm Bells As 440 Chinese Companies Issue Profit Warnings In One Day.

• China Dumps Treasuries For 6th Straight Month, France Hits Record Exposure.

• Venezuela's Citgo, Which Refines 5% Of US Gasoline, Is Weighing Bankruptcy.

• After Worst December In A Century, Stocks Soar To Best January In 32 Years.

Business Insider:

• UPS(UPS) said robots will help sort almost 80% of its packages this year.

Telegraph:

• Comment: German anger builds over dangerous handling of Brexit by EU ideologues.

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.5 -2.0 basis points. 

• China Sovereign CDS 53.75 -1.25 basis points.

• Bloomberg Emerging Markets Currency Index 68.86 -.14%.

• FTSE 100 futures +.17%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures -.41%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (AON)/2.13

• (BAH)/.59

• (CVX)/1.89

• (CI)/2.49

• (D)/.91

• (XOM)/1.09

• (HMC)/98.83

• (HON)/1.89

• (IDXX)/.91

• (ITW)/1.82

• (JCI)/.25

• (LYB)/2.30

• (MRK)/1.03

• (SPG)/3.23

• (SOHU)/-1.27

• (SNE)/191.14

• (WY)/.12

• (ZBH)/2.17

After the Close:

• None of note

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for January is estimated to fall to 165K versus 312K in Dec.

• The Unemployment Rate for January is estimated at 3.9% versus 3.9% in Dec.

• Average Hourly Earnings MoM for January is estimated to rise +.3% versus a +.4% gain in Dec.

10:00 am EST

• Construction Spending MoM for Nov. is estimated to rise +.2% versus a -.1% decline in Oct.

• Wholesale Trade Sales MoM for Nov.

• ISM Manufacturing for Jan. is estimated to fall to 54.0 versus 54.1 in Dec.  

• ISM Prices Paid for Jan. is estimated to fall to 54.4 versus 54.9 in Dec.

Afternoon

• Wards Total Vehicle Sales for Jan. are estimated to fall to 17.2M versus 17.5M in Dec.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The European Manufacturing PMI report 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 modestly lower and to strengthen into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on China Trade Deal Hopes, Earnings Optimism, Less European/Emerging Markets/US High-Yield Debt Angst, Healthcare/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.83 -4.7%

• Euro/Yen Carry Return Index 129.50 -.46%

• Emerging Markets Currency Volatility(VXY) 8.84 -1.34%

• S&P 500 Implied Correlation 43.49 -.96%

• ISE Sentiment Index 121.0 +39.1%
  

• Total Put/Call .82 -6.82%

• NYSE Arms 1.41 +50.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.71 -4.30%
  

• America Energy Sector High-Yield CDS Index 677.0 -2.35%

• European Financial Sector CDS Index 84.32 -4.75%

• Italian/German 10Y Yld Spread 244.0 -3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 80.0 -3.95%
  

• Emerging Market CDS Index 171.16 -2.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 155.92 +.16%

• 2-Year Swap Spread 14.5 +.25 basis point

• TED Spread 35.0-1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -5.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.92 +.53%

• 3-Month T-Bill Yield 2.39% -2.0 basis points

• Yield Curve 16.75 -1.0 basis point

• China Iron Ore Spot 82.55 USD/Metric Tonne +.36%

• Citi US Economic Surprise Index 4.50 +1.9 points

• Citi Eurozone Economic Surprise Index -82.6 -.3 point

• Citi Emerging Markets Economic Surprise Index -12.4 -.1 point

• 10-Year TIPS Spread 1.85 +1.0 basis point

• 0.0% chance of Fed rate hike at May 1st meeting, .2% chance at June 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -28 open in Japan 

• China A50 Futures: Indicating +99 open in China

• DAX Futures: Indicating +1 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long