Stocks Higher into Afternoon on Seasonal Strength, Bargain-Hunting, Short-Covering, Healthcare/Gaming Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.31 -6.76%

• Euro/Yen Carry Return Index 138.17 +.41%

• Emerging Markets Currency Volatility(VXY) 11.46 +.35%

• S&P 500 Implied Correlation 60.53 -1.0%

• ISE Sentiment Index 43.0 -34.85%

• Total Put/Call .78 -22.77%

• NYSE Arms .97 -40.62% 

Credit Investor Angst:

• North American Investment Grade CDS Index 95.06 -.25%

• America Energy Sector High-Yield CDS Index 1,792.0 -.49%

• European Financial Sector CDS Index 78.20 +2.24%

• Western Europe Sovereign Debt CDS Index 17.97 +3.75%

• Asia Pacific Sovereign Debt CDS Index 74.58 +.17%

• Emerging Market CDS Index 360.18 +1.0%
  

• iBoxx Offshore RMB China Corporate High Yield Index 123.54 unch.

• 2-Year Swap Spread 14.5 +1.0 basis point

• TED Spread 42.0 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -29.0 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.34 +.1%
• 3-Month T-Bill Yield .16% -2.0 basis points

• Yield Curve 124.0 +1.0 basis point

• China Import Iron Ore Spot $40.46/Metric Tonne +.9%

• Citi US Economic Surprise Index -30.4 -6.5 points

• Citi Eurozone Economic Surprise Index 17.6 -1.1 points

• Citi Emerging Markets Economic Surprise Index 18.10 unch.

• 10-Year TIPS Spread 1.48 -2.0 basis points
• 69.4% chance of next Fed rate hike at June 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -76 open in Japan 
• China A50 Futures: Indicating -106 open in China

• DAX Futures: Indicating +39 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail sector longs and index hedges

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer: 

• Small-Cap Value -.16%

Sector Underperformers: 

• 1) Energy -1.2% 2) Social Media -.7% 3) Utilities -.7%

Stocks Falling on Unusual Volume:

• FXCM, MNRO, WMC, TRGP, DIS, KMX, ENLC, XEC, RRMS, DXPE, NSH, INOV, BPT, NGLS, AVG, JNPR, CLR, FNHC, CXO, WTR, IMAX, LGIH, NWPX, SOHU, SNN, INOV, LGIH, TRGP and ENLC

Stocks With Unusual Put Option Activity: 

• 1) CPN 2) BTU 3) VFC 4) CELG 5) ALTR

Stocks With Most Negative News Mentions: 

• 1) MNRO 2) COP 3) TRGP 4) ATW 5) TOO

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.03%

Sector Outperformers: 

• 1) Hospitals +4.9% 2) Gold & Silver +2.8% 3) Airlines +1.8%

Stocks Rising on Unusual Volume: 

• RWLK, TGP, GMLP, OKE, OKS, THC, AEGR, CYH and DYN

Stocks With Unusual Call Option Activity: 

• 1) SVU 2) BAX 3) CREE 4) FAS 5) VIXY

Stocks With Most Positive News Mentions: 

• 1) MU 2) TIF 3) FITB 4) CIEN 5) GILD

Charts: 

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

Monday Watch

Today's Headlines 
Bloomberg: 

• Spain's Socialists Say Rajoy Has First Chance to Form Government. Spain’s Socialist Party handed Prime Minister Mariano Rajoy the first chance to form a coalition after an indecisive election that saw voters shift allegiance to new political blocs at the expense of the two main parties. While Rajoy’s People’s Party placed first in Sunday’s election to earn the right to try and forge a government, it did so with the loss of more than a third of its parliamentary members. The PP returned 123 lawmakers to 90 for the Socialists, as anti-austerity party Podemos placed third on 69 seats. The liberal Ciudadanos party, a potential coalition ally for Rajoy, took 40 seats, leaving the prime minister with limited options to forge a majority in the 350-member parliament. “We are heading for very long negotiations since the two blocs are virtually tied,” said Pablo Simon, a political science professor at Carlos III University in Madrid. “The field is really open.”
• Yuan Crunch Spurs Banks to Hoard Abroad as China Curbs Outflows. Chinese banks from Hong Kong to London are selling a record amount of yuan-denominated certificates of deposit as China takes steps to curb outflows of the currency. Sales jumped to an unprecedented 66.1 billion yuan ($10.2 billion) this month, data compiled by Bloomberg show. That comes after Hong Kong’s pool of offshore yuan savings, the world’s largest, shrank to the smallest in two years, and Deutsche Bank AG said the currency’s depreciation pressures are weighing on deposits. 

• Alibaba(BABA) Heads Into 2016 Struggling With Knock-Off Reputation. Cash-strapped Star Wars fans can pick up Darth Vader figurines and light sabers for as little as $4.59. Tom Brady jerseys go for about a 10th of those on the National Football League’s store. A pair of red Beats Solo headphones can be had for just $107 -- about half its official price.
• IMF Changes Give China and India More Say. (video)
• Toshiba Plunges on Reports It Will Post $4 Billion 2015 Loss. Toshiba Corp. slumped the most in seven months after reports it would post a record 500 billion yen ($4 billion) loss in the current fiscal year on costs related to an accounting scandal, layoffs and sales of business units. Shares of the industrial conglomerate fellas much as 9.5 percent, the most since May 11, as of 9:06 a.m. in Tokyo trading. Toshiba will discuss the impact on earnings of plans it will announce as early as Monday, it said in a statement after media including the Nikkei newspaper reported it would post a loss that includes 200 billion yen in restructuring costs.   
• Hyundai Set to Miss Sales Target for First Time Since 2008. Hyundai Motor Co. is poised to sell fewer vehicles than it projected for the first time since the global financial crisis, after an economic slowdown sapped demand in China and emerging-market earnings slumped due to unfavorable exchange rates. South Korea’s largest automaker will have to sell at least 50 percent more than its monthly average this year in December to reach its full-year target of 5.05 million vehicles. Such a feat is unlikely, according to five analysts surveyed by Bloomberg. They also predict that Hyundai’s 2016 sales will be lower than the target set for this year given the absence of new best-selling models and continued weakness in Russia and Brazil.
• Rupiah Set to Reclaim Worst Asian Currency Mantle From Ringgit. Indonesia’s rupiah is forecast to reclaim its position as Asia’s worst-performing currency on shrinking foreign-exchange reserves and the risk of capital outflows. After two years in which Malaysia’s ringgit weakened the most out of the region’s major currencies, the rupiah is seen dropping 6.2 percent against the dollar from Nov. 30 to the end of 2016, twice as much as the ringgit, according to a Bloomberg survey of strategists. Indonesia’s currency declined the most among Asian emerging markets in 2012 and 2013, weakening 5.9 percent and 21 percent respectively, as commodity prices fell and tighter U.S. monetary policy triggered a flight from developing nations.
• Mideast Stocks Decline After Oil Sinks to Seven-Year Low. Almost every Middle Eastern stock index declined after oil, the region’s main source of income, sank to the lowest in seven years, damping the outlook for government spending. Dubai’s DFM General Index ended its longest winning streak in almost three months, sliding 1.5 percent, the most in a week, to close at 3,026.05. Emirates NBD PJSC’s 4 percent retreat was the biggest contributor. The Tadawul All Share Index in Saudi Arabia lost 1.6 percent, also the most in seven days.
• Asian Stocks Retreat as Yen Weighs on Japan, Toshiba Tumbles. Asian stocks fell as a stronger yen weighed on Japanese exporters and Toshiba Corp. tumbled on reports it would post a record loss. The MSCI Asia Pacific Index declined 0.4 percent to 129.24 as of 9:21 a.m. in Tokyo. Japan’s Topix index dropped 0.9 percent after the yen strengthened 1.1 percent against the dollar on Friday. The regional benchmark gauge is down 6.3 percent this year, on course for its first back-to-back annual declines since 2002, as a commodity rout deepened and investors speculated Chinese authorities will need to increase stimulus to support economic growth. The loss would be more than twice that for the Standard & Poor’s 500 Index, which has dropped 2.6 percent in 2015.
• Brent Trades Near 7-Year Low as U.S. Drillers Boost Rig Count. Brent oil traded near the lowest level in almost seven years as a rebound in U.S. drilling added to signs producers will keep pumping crude amid a global glut. Futures fell as much as 1.5 percent in London, extending declines for a fourth day after dropping 2.8 percent last week. Drillers put the most rigs back to work since July, adding 17 machines, according to data from Baker Hughes Inc. Saudi Arabia boosted crude exports in October to the highest level in four months, the latest figures from the Joint Organisations Data Initiative showed.
• Bad Energy: the Implications of Oil's Slide. (video)
• Fiorina Says Clinton Dying for Beatable Trump as Republican Pick. Republican Donald Trump is “a big Christmas gift wrapped up under the tree” for Hillary Clinton because he couldn’t beat the 2016 Democratic presidential front-runner in a general election, Carly Fiorina said on Sunday. “I am the lump of coal in Mrs. Clinton’s stocking,” Fiorina, said in an interview on “Fox News Sunday.” “She can beat Donald Trump. Donald Trump can’t beat Hillary Clinton.” Clinton desperately hopes she can run against Trump, Fiorina said, because “I will reveal to the American people again and again the ‘Clinton way.’ ”

Wall Street Journal:

• Gas Windfall Fails to Stoke Consumers. Stronger savings, global worries curtail outlays​despite cheaper fuel. American consumers are getting a windfall of billions of dollars a week thanks to low fuel prices. The U.S. economy has little to show for it.
• Cheer Up, Obama’s Legacy Can Be Erased. The White House rammed through an agenda that could be quickly undone by a Republican president.
• Cuba One Year After Obama’s Overtures. Thousands of political arrests, migrants flee, and Russia wants in. Sound familiar? This month marks the first anniversary of President Obama’s unilateral rapprochement with Cuba. Upon making the Dec. 17 announcement, the Obama administration immediately moved to ease restrictions on American travel to the island and, by extension, boost revenues for the owners of its tourist industry: the Cuban military.

Fox News:

• Paul slams Congress over trillion-dollar spending bill he claims no one read. A fired-up Sen. Rand Paul said Sunday he voted against the massive $1.1 trillion spending bill because not only was it rushed through Congress -- but no one had a chance to read it. “It was over a trillion dollars, it was all lumped together, 2,242 pages, nobody read it, so frankly my biggest complaint is that I have no idea what kind of things they stuck in that bill in the middle of the night,” Paul, R-Ky., said on “The Cats Roundtable,” a New York-based radio talk show.

CNBC: 

• 'Star Wars' blows past records, hauls in $250 million domestic, $517M global.

Zero Hedge:

• After Record 10-Day Devaluation Streak China Fixes Yuan Stronger. (graph)
• The Great Disconnect Is Palpable. (graph)
• False Premises: The Biggest Myths About The Fed's Rate Hike.
• Market Figures Out Fed No Longer Has Its Back.
• Hedge Fund AUM Falls By Most Since Crisis As Desperate Managers Cut Fees To Keep Clients. (graph)
• Paul Craig Roberts Warns "Everything Is Disintegrating". 
• Huge Fukushima Cover-Up Exposed, Government Scientists In Meltdown.
• The Fed's "Alarm Clock" Went Off 6 Hours Too Late: What This Means For Stocks And Bonds. (graph)
• Matt King:"The Risk Is That Central Banks Created A Monster That Drives The Economy On The Way Down.
• Peak "Office Space". (graph)
• The Fed Has Delivered Far More Than Just A Lump Of Coal This Time.
• Here's What Spain's Messy Election Result Looks Like Right Now.
• An Xmas Message From Satan - "Ignorance, My Poor Dear Americans, Will Not Save You". (video)
• Spain Votes In "Watershed" Election As Three Decade "Duopoly" Falls: Full Election Preview. (graph)
• Obama Abruptly Waives 1980 Foreign Investment in Real Property Tax Act.

Business Insider: 

• OPEC's in jeopardy, and its members can't hold on forever.
• Here's what you need to know about high-yield bonds – and why they're freaking everyone out. (graph)
• ABC's George Stephanopoulos confronts Donald Trump over his praise for Vladimir Putin.
• These 6 compelling charts make the case for a stock market correction in 2016. (graph)
• Europe just had a year from hell — and next year could be worse.
• ABC moderator confronts Hillary Clinton over Libya: 'How much responsibility do you bear?'

Financial Times:

• Spain heads for political instability after voting, exit poll shows. Spain was heading for political uncertainty on Sunday night, after a general election that produced a deeply fragmented parliament with little chance of a stable government majority over the next four years.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 142.25 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 74.5 +1.0 basis point.
• Bloomberg Emerging Markets Currency Index 69.28 +.02%.  

• S&P 500 futures +.36%.

• NASDAQ 100 futures +.37%.

Morning Preview Links 

Earnings of Note

Company/Estimate 

• (CTAS)/1.00
• (SCS)/.33
• (NEOG)/.26

Economic Releases 
8:30 am EST

• Chicago Fed National Activity Index for November is estimated to rise to .1 versus -.04 in October.
  

Upcoming Splits

• (NKE) 2-for-1
• (ENSG) 2-for-1

Other Potential Market Movers

• The BoJ inflation report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 

Wall St. Week Ahead by Reuters.

Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as commodity weakness, rising European/Emerging Markets/US High-Yield debt angst and global growth concerns offset bargain-hunting, short-covering and seasonal strength. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg: 

• U.S. Stocks Tumble With Crude as Bonds Rise, Dollar Weakens. (video) U.S. stocks tumbled to their lowest level in two months, while the dollar trimmed a weekly gain as investors focused on prospects for a slowdown in global growth and continued to adjust to the end of near-zero interest rates in America. The Standard & Poor’s 500 Index pushed its worst two-day slide since Sept. 1 to 3.3 percent and erased its gain for the week. The Dow Jones Industrial Average tumbled more than 350 points Friday. Government bonds rallied as West Texas Intermediate crude traded near a six-year low, damping inflation expectations. Brazil’s real and stocks fell amid speculation that the president will name a new finance minister. The S&P 500 extended declines in the final 15 minutes of trading and volume soared Friday because of a quarterly event known as quadruple witching, when futures and options contracts on indexes and individual stocks expire. More than 12.5 billion shares changed hands across American exchanges, 71 percent above the three-month average and the most since the height of the summer selloff on Aug. 24.
• Spain Election Quandary Tests Sovereign-Bond Investors' Resolve. It’s an anxious wait for bond markets as Spaniards head to the voting booths on Sunday in general elections that may redefine the nation’s political landscape. Spanish 10-year government bonds rose for a third day on Friday, pushing yields to a five-day low. That’s an indication investors anticipate a result that maintains policies that have cut budget deficits and trimmed unemployment from one of the highest levels in the developed world, even as the Catalan separatist movement threatens to fracture the country. No party will win a majority in the election, according to most polls.
• U.S. Eases 35-Year-Old Real Estate Tax on Foreign Investors. President Barack Obama signed into law a measure easing a 35-year-old tax on foreign investment in U.S. real estate, potentially opening the door to greater purchases by overseas investors, a major source of capital since the financial crisis. Contained in the $1.1 trillion spending measure that was passed to avoid a government shutdown is a provision that treats foreign pension funds the same as their U.S. counterparts for real estate investments. The provision waives the tax imposed on such investors under the 1980 Foreign Investment in Real Property Tax Act, known as FIRPTA.   
• Goldman Sachs: 21 of the World's Most Interesting Charts. 
• Oil Drops to 6-Year Low as Rising Rig Count Seen Adding to Glut. (video) Crude slid to the lowest level in more than six years in New York as a rising number of oil rigs in the U.S. signaled the supply glut will be prolonged. Futures capped a third weekly drop after Baker Hughes Inc. reported that the number of active oil rigs in the U.S. climbed by 17 this week to 541. U.S. crude supplies surged to 490.7 million barrels, the most for this time of year since 1930, according to the Energy Information Administration. Goldman Sachs Group Inc. warned of “high risks” that prices may sink further as stockpiles swell.
• This Is the Fed's Hawk-to-Dove Scorecard. (video) Who's itching for a rate increase, and who wants to wait. 
• Hedge Funds Just Had Their Worst Quarter Since the Crisis. The number of funds liquidated climbed to 257, up from 200 in the previous three months, according to a report from Hedge Fund Research Inc. on Friday, and taking total closures in the first nine months to 674, compared with 661 during the same period last year. The HFRI Fund Weighted Composite Index declined by more than 4 percent in the three months through September, its biggest quarterly drop in four years, as money managers were caught out by the devaluation of the Chinese yuan in August, which pummeled markets, and as oil and gold prices slumped. Hedge-fund assets contracted by $95 billion to $2.87 trillion during the quarter, HFR data showed, the most since the fourth quarter of 2008, when the industry lost $314.4 billion amid the global financial crisis.
• Self-Assured Obama Will Leave It on the Field for Gun Control. President Barack Obama can look back on 2015 and take credit for landmark deals over Republican objections on climate, Iran and government spending. The year 2016 may be a tougher stretch, because he’s promising action on another thorny issue: gun control.

 Wall Street Journal:

• Democratic Presidential Debate — Live Blog.
• ‘Super Saturday’: Holiday Shoppers Wait Until the Last Minute for Deals. The week before Christmas is as crucial as ever for retailers.
• The EPA’s Secret Staff. Emails show the agency took dictation from green lobbies in possible violation of the law. States and businesses are suing to stop the Obama Administration’s anticarbon Clean Power Plan, and now they have new evidence to seek a preliminary injunction. The Energy & Environment Legal Institute has obtained government emails that show the EPA secretly worked with environmental lobbyists to craft its Clean Power Plan regulating greenhouse gases. The emails show this secret alliance designed a standard that would be...

Barron's:

• Had bullish commentary on (MSFT), (SNA), (MON), (BLK), (IVZ), (BEN), (PTEN) and (TLT).
• Had bearish commentary on .

Fox News:

• State Dept. issues 'urgent' message to Americans about possible terror attack in Pakistan capital. The State Department on Saturday issued an "urgent message" warning about a possible terror attack in the Pakistan capital of Islamabad during the holiday season. The agency said the message to Americans in the region was issued as a result of “threat information” and that possible targets include places of worship and shopping centers.

CNBC:

• Iran ready to ship enriched uranium stockpile to Russia. Iran will export most of its enriched uranium stockpile to Russia in the coming days as it rushes to implement a nuclear deal and secure relief from international sanctions, Tehran's nuclear chief was quoted as saying on Saturday.

Zero Hedge: 

• The New York Times Just Memory-Holed This Devastating Obama Admission. "Obama indicated that he did not see enough cable television to fully appreciate the anxiety after the attacks in Paris and San Bernardino." 
• China Now Has So Much Bad Debt, It's Selling Soured Loans On Alibaba(BABA). (graph)
• 2015 Year In Review - Scenic Vistas From Mount Stupid. (graph)
• Global Trade Snapshot - "The Pain Is Getting Worse". (graph)
• "Most Liberal" US College Unleashes Demands For "Deconstructing The White Supremacist, Capitalist System".   
• Despite Lifting Of Export Ban, Moody's "Bombshell" Sparks Panic In Energy Credit Markets. (graph)
• As Wall Street Vultures Circle The Next Junk Bond Fund Casualty, A Familiar Name Emerges. (graph)
• Market Shudders As Brazil Risks "Succumbing To Fiscal Populism" With New FinMin. (graph)
• On "Average", Stocks Are Testing The Post-2009 Uptrend. (graph)
• Hedge Fund Gold Positioning Has Never Been This Extreme. (graph)
• The Market Has Spoken: The Fed Made A Policy Mistake And "Quantitative Failure" Looms - What Comes Next. (graph)
• The Market’s Gamblers Are Pumping Air.
• Weekend Reading: All About Janet. (graph)
• "It's Hot Out There" - Here's Why In One Visualization.
• Islamic Blitzkrieg Coming To Germany, Arrested Jihadist Warns. (pic)
• 'Twas The Hike Before Christmas.
• Stocks Crash On OpEx. (graph)

Business Insider:

• ISIS is expanding its 'caliphate' to Afghanistan.
• The economy is weaker than the Fed thinks.
• The biggest names on Wall Street are weighing in on the big recession question.
• The warm weather is terrible news for retailers.
• STRATEGIST: 'The Fed is flying this plane and ... the people at the controls don't know how to fly'. 
• NEW UNICORNS: The 42 startups that grew to be worth billions in 2015.
• Tim Cook says charges of Apple tax avoidance are 'total political crap'. 
• The US and China just had a revealing diplomatic row over military flights in the South China Sea.
• Bernie Sanders campaign goes nuclear, files lawsuit against national Democratic party.
• A majority of Americans favor a path to citizenship for immigrants living in the US illegally.
• Obama's former defense secretary says people in the administration tried to 'destroy' him.

Reuters:

• Fed's Williams wants low rates, hot economy in 2016. (video) The Federal Reserve aims to keep the U.S. economy running hot next year to boost the job market and inflation, a top central banker said, and to achieve that goal interest-rate hikes will be slow but will not follow any predictable pattern. "Every meeting will truly be live in terms of adjusting policy one way or the other," San Francisco Federal Reserve Bank President John Williams told Reuters in an interview, referring to the Fed's policy-setting meetings. 
• Hedge funds raise bullish bets on U.S. crude from record lows. Hedge funds have raised their bullish wagers on U.S. crude from a record low, data showed on Friday, adding positive positions for the first time in six weeks on expectations that oil prices could be bottoming. U.S. crude's West Texas Intermediate (WTI) futures have plumbed 2009 lows since Dec. 7 after the biggest oil producers in OPEC refused to cut output in a bloated market. Government data showing a big build in U.S. crude inventories last week added to worries about oversupply. The CFTC data showed that money managers boosted their net longs in WTI by 21,847 contracts to 68,766 during the week to Dec. 15. A week ago, the net long position was at 46,919 contracts, the lowest since the CFTC created the managed money category for oil in 2009.
• 'Star Wars' movie's global sales reach massive $250 mln.

Financial Times:

• No easy way for the Fed to reverse course. The Federal Reserve has just embarked on its first interest rate-raising cycle for a decade, but that does not mean it is too soon to think about how it would resuscitate the economy if a new recession unexpectedly struck.

Telegraph:

• Oil price rout sends inflation to lowest levels witnessed since Great Depression. Falling commodity prices will mean that global inflation is weaker than at any time since before World War Two.