Stocks Substantially Higher into Afternoon on Diminished Earnings Outlook Fears, Flight to Safety from Emerging Markets, Short-Covering, Insurance/Telecom Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume:  Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 26.2 -4.5%
• DJIA Intraday % Swing 2.0%
  
• Bloomberg Global Risk On/Risk Off Index 45.6 +3.9%

• Euro/Yen Carry Return Index 151.77 +.78%

• Emerging Markets Currency Volatility(VXY) 12.8 +.16%

• CBOE S&P 500 Implied Correlation Index 53.4 +4.2% 

• ISE Sentiment Index 99.0 -8.0 points
  

• Total Put/Call .99 -6.6%%

• NYSE Arms 1.32 +36.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 88.79 -4.7%
  

• US Energy High-Yield OAS 352.4 -6.6%
• Bloomberg TRACE # Distressed Bonds Traded 455.0 +5.0
  

• European Financial Sector CDS Index 121.91 -.6% 
• Credit Suisse Subordinated 5Y Credit Default Swap 331.9 +.2%
  

• Italian/German 10Y Yld Spread 207.0 basis points +2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 222.84 +2.0%
  

• Emerging Market CDS Index 284.44 -.31%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 23.96 -.79%

• 2-Year Swap Spread 38.0 basis points +3.25 basis points
  

• TED Spread 37.0 basis points +1.0 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -51.75 basis points -5.0 basis points
  
• MBS  5/10 Treasury Spread  166.0 unch.
  
• Bloomberg US Agg CMBS Avg OAS 129.0 +2.0 basis points
  
• Avg. Auto ABS OAS 1.09 +2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 46.54 -.20%
• 3-Month T-Bill Yield 4.03% +2.0 basis points
  

• Yield Curve -39.5 basis points (2s/10s) -1.75 basis points
  

• China Iron Ore Spot 77.5 USD/Metric Tonne -4.5%
• Dutch TTF Nat Gas(European benchmark) 109.50 euros/megawatt-hour +2.0%

• Citi US Economic Surprise Index 14.5 +.8 point

• Citi Eurozone Economic Surprise Index 9.0 +5.5 points
  

• Citi Emerging Markets Economic Surprise Index 8.3 +1.8 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 232.87 -.46:  Growth Rate +14.5% -.1 percentage point, P/E 16.7 +.3
  
• Bloomberg US Financial Conditions Index -1.04 +12.0 basis points
  
• US Atlanta Fed GDPNow Forecast +3.07% -2.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.16% unch.: CPI YoY +8.11% unch.
  
• 10-Year TIPS Spread 2.51 +4.0 basis points
  
• Highest target rate probability for December 14th FOMC meeting: 48.1%(-10.8 percentage points) chance of 4.25%-4.5%. Highest target rate probability for February 1st meeting: 45.5%(+5.1 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 77 new infections/100K people(last 7 days total). 4.4%(+1.6 percentage points) of 1/14/22 peak(1,740) +28/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.9%(-.0 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +360 open in Japan 
• China A50 Futures: Indicating +28 open in China

• DAX Futures: Indicating +86 open in Germany

Portfolio:

• Slightly Higher:  On gains in my industrial/tech/medical sector longs and emerging market shorts
  

• Disclosed Trades:  Covered some of  my (IWM)/(QQQ) hedges and then added some back
  

• Market Exposure:  Moved to 50% Net Long
  

Morning Market Internals

NYSE Composite Index:

• Volume Running +15.0% Above 100-Day Average 
• 3 Sectors Declining, 8 Sectors Rising
• 55.3% of Issues Advancing, 40.4% Declining
• 44 New 52-Week Highs, 64 New Lows
• 33.3%(+3.2%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 60.0 -1.0
  
• Bloomberg Global Risk-On/Risk-Off Index 45.6 +3.2%
  
• Russell 1000: Growth/Value 14,858.5 -.23%
  
• Vix 26.6 -2.9%
• Total Put/Call .93 -12.3%
• TRIN/Arms 1.61 +67.7% 

Friday Watch

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 217.75 -2.5 basis points. 

• China Sovereign CDS 116.50 -1.0 basis point.
  

• Bloomberg Emerging Markets Currency Index 46.6 -.07%.  
• Bloomberg Global Risk-On/Risk Off Index 44.3 +.1%. 
• Bloomberg US Financial Conditions Index -1.12 +4.0 basis point.
  
• Volatility Index(VIX) futures 27.4 +1.8%
• Euro Stoxx 50 futures -.78%.

• S&P 500 futures -.67%.

• NASDAQ 100 futures -.92%  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (ABBV)/3.56
• (AB)/.58
• (AON)/1.99
• (B)/.49
• (BLMN)/.34
• (BAH)/1.13
• (CRI)/1.71
• (CHTR)/8.39
• (CVX)/4.85
• (CHD)/.65
• (CL)/.73
• (XOM)/3.80
• (GNTX)/.38
• (JKS)/.71
• (LYB)/2.95
• (NWL)/.47
  

After the Close:

• None of note
  

Economic Releases

8:30 am EST

• The 3Q Employment Cost Index is estimated to rise +1.2% versus a +1.3% gain in 2Q. 
• Personal Income for Sept. is estimated to rise +.4% versus a +.3% gain in Aug.
• Personal Spending for Sept. is estimated to rise +.4% versus a +.4% gain in Aug.
• Real Personal Spending for Sept. is estimated to rise +.2% versus a +.1% gain in Aug.
• The PCE Core MoM for Sept. is estimated to rise +.5% versus a +.6% gain in Aug.
  

10:00 am EST

• Pending Home Sales MoM for Sept. is estimated to fall -4.0% versus a -2.0% decline in Aug.
• Final Univ. of Mich. Consumer Sentiment readings.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The German GDP report could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and transport shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% Net Long heading into the day.

Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, China Hard-Landing Concerns, Tech/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume:  Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 27.01 -.99%
• DJIA Intraday % Swing 1.0%
  
• Bloomberg Global Risk On/Risk Off Index 44.5 -5.9%

• Euro/Yen Carry Return Index 150.6 -1.2%

• Emerging Markets Currency Volatility(VXY) 13.0 +.54%

• CBOE S&P 500 Implied Correlation Index 50.3 -1.7% 

• ISE Sentiment Index 98.0 -3.0 points
  

• Total Put/Call .97 +4.3%

• NYSE Arms 1.02 +3.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 90.94 -1.6%
  

• US Energy High-Yield OAS 374.74 -.61%
• Bloomberg TRACE # Distressed Bonds Traded 450.0 -4.0
  

• European Financial Sector CDS Index 124.03 -.5% 
• Credit Suisse Subordinated 5Y Credit Default Swap 335.0 -3.0%
  

• Italian/German 10Y Yld Spread 205.0 basis points -17.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 218.5 -2.6%
  

• Emerging Market CDS Index 288.57 -2.1%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.20 +.53%

• 2-Year Swap Spread 34.75 basis points +.5 basis point
  

• TED Spread 36.0 basis points -1.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -46.75 basis points +4.0 basis points
  
• MBS  5/10 Treasury Spread  166.0 -5.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 127.0 unch.
  
• Avg. Auto ABS OAS 1.07 +4.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 46.7 +.11%
• 3-Month T-Bill Yield 4.01% +1.0 bps
  

• Yield Curve -37.75 basis points (2s/10s) +3.0 basis points
  

• China Iron Ore Spot 81.55 USD/Metric Tonne -2.3%
• Dutch TTF Nat Gas(European benchmark) 108.50 euros/megawatt-hour +4.0%

• Citi US Economic Surprise Index 13.7 -2.7 points

• Citi Eurozone Economic Surprise Index 3.5 -2.0 points
  

• Citi Emerging Markets Economic Surprise Index 6.5 +2.9 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 233.33 -.10:  Growth Rate +14.6% -.1 percentage point, P/E 16.4 +.1
  
• Bloomberg US Financial Conditions Index -1.17 -3.0 basis points
  
• US Atlanta Fed GDPNow Forecast +3.09% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.16% unch.: CPI YoY +8.11% unch.
  
• 10-Year TIPS Spread 2.47 +4.0 basis points
  
• Highest target rate probability for December 14th FOMC meeting: 57.0%(-2.8 percentage points) chance of 4.25%-4.5%. Highest target rate probability for February 1st meeting: 47.0%(+5.7 percentage points) chance of 4.5%-4.75%.
  

US Covid-19:

• 49 new infections/100K people(last 7 days total). 2.8%(-.4 percentage point) of 1/14/22 peak(1,740) -4/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.9%(-.1 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -230 open in Japan 
• China A50 Futures: Indicating -35 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio:

• Higher:  On gains in my industrial/commodity sector longs, index hedges and emerging market shorts
  

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges
  

• Market Exposure:  Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -.6%
  

Sector Underperformers:

• 1) Social Media -3.2% 2) Steel -1.1% 3) Biotech -.9%

Stocks Falling on Unusual Volume: 

• SLAB, TYL, BKI, COLM, LII, WMG, INFA, AMH, CNX, RILY, SIVB, CCS, AEHR, CLF, MEDP, CTLT, OSTK, NXGN, SRG, LH, CNMD, ASGN, BAX, INVH, SWAV, BMRN, LC, OPCH, RRX, TRIN, WST, AMED, FCN, ALGN, FORM, SNBR, WOLF and META
  

Stocks With Unusual Put Option Activity:

• 1) RITM 2) VNQ 3) INVH 4) TEN 5) TDOC
  

Stocks With Most Negative News Mentions:

• 1) META 2) BAX 3) LH 4) AMED 5) VRTX
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.4%

Sector Outperformers:

• 1) Airlines +3.0% 2) Homebuilding +1.9% 3) Defense +1.8%

Stocks Rising on Unusual Volume:

• PI, OII, HZO, NOW, ASPN, PRG, ETD, OMF, UCTT, ANET, FCFS, CAT, TDOC, PTEN, NOVA, MUSA, BA and MDC
  

Stocks With Unusual Call Option Activity:

• 1) R 2) PARR 3) WOLF 4) CAG 5) META

Stocks With Most Positive News Mentions:

• 1) PI 2) ARCH 3) OII 4) CHKP 5) CAT
  

Charts:

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