Thursday Watch

Evening Headlines

Bloomberg: 

• Vancouver Home Sales Fall 39% as New Rules Chill Market. Vancouver home sales plunged 39 percent in October from a year earlier, the biggest drop since 2010, as new regulations chill Canada’s most expensive property market. Sales in the Pacific coast city fell to 2,233 in the month, from 3,646 a year earlier, the Real Estate Board of Greater Vancouver said Wednesday. That was 15 percent below the 10-year average for October.
• Stock Slump Deepens in Asia Amid Election Angst as Bonds Advance. The selloff in equities continued in Asia after the Federal Reserve standing pat on monetary policy did little to ease market angst ahead of next week’s U.S. presidential election. New Zealand’s benchmark entered a correction, while shares in Sydney sank for a third day. Futures on equity gauges in South Korea and Hong Kong tracked a slump in U.S. stocks with Japanese markets closed Thursday. Haven assets maintained gains, with the yen near a two-week high versus the dollar, gold rising for a sixth straight session and government debt in Australia and New Zealand advancing as well. Copper futures retreated, while oil was below $46 a barrel after a record jump in U.S. stockpiles fueled concerns over the glut.
• December Fed hike odds approach 80 percent as traders pivot to payrolls. The 78 percent probability traders are assigning to a rate hike is up from 68 percent on Tuesday, according to data compiled by Bloomberg, as policy makers noted growing confidence that inflation is on track to reach their 2 percent target.

Fox News:

• Iran claims it's sending elite fighters to infiltrate US, Europe. (video)

CNBC:

• Mohamed El-Erian: Time to reduce exposure to the public market. (video)
• Facebook(FB) has bad news for the markets, traders say.

Zero Hedge:

• Wikileaks Exposes Collusion Between Clinton Campaign, State Department, And New York Times.
• Obama "Meddles", Slams FBI Director: "We Don’t Operate On Leaks".
• Facebook(FB) Reports 1.8 Billion Monthly Users, Beats Across The Board; Tumbles After Guiding Revenue Growth Rates Lower.
• FitBit(FIT) Crashes 31% To Record Lows After Missing Revenues, Slashing Guidance.
• Fed Fails To Save Stocks From Worst Losing Streak In 5 Years. (graph)

Business Insider:

• The SEC is now looking into Wells Fargo(WFC).
• Oil could collapse back to $40 if the OPEC deal fails.
• America's luxury housing market is headed for a correction.

Night Trading 

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 118.5 +.75 basis point. 
• Asia Pacific Sovereign CDS Index 36.25 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 72.19 +.05%. 
• S&P 500 futures +.01%. 
• NASDAQ 100 futures -.20%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (DDD)/.09
• (APA)/-.14
• (BDX)/2.08
• (CHK)/-.04
• (CI)/1.90
• (H)/.29
• (ICPT)/3.64
• (IGT)/.44
• (PWR)/.55
• (SFM)/.17
• (TK)/-.37
• (CBS)/.98
• (CSC)/.47
• (LOCO)/.19
• (FEYE)/-.31
• (FOSL)/.31
• (GPRO)/-.34
• (FLR)/.88
• (LVS)/.60
• (MHK)/3.45
• (MNST)/1.12
• (SWKS)/1.43
• (SBUX)/.55
• (TWLO)/-.08
• (WTW)/.45

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for October.

8:30 am EST

• Preliminary 3Q Non-Farm Productivity is estimated to rise +2.1% versus a -.6% decline in 2Q.
• Preliminary 3Q Unit Labor Costs are estimated to rise +1.2% versus a +4.3% gain in 2Q.
• Initial Jobless Claims for last week are estimated to fall to 256K versus 258K the prior week.
• Continuing Claims are estimated to rise to 2043K versus 2039K prior.   

9:45 am EST

• Final Markit US Services PMI for October is estimated at 54.8 versus a 54.8  prior estimate.

10:00 am EST

• ISM Non-Manufacturing Composite for October is estimated to fall to 56.0 versus 57.1 in September.
• Factory Orders for September are estimated to rise +.2% versus a +.2% gain in August.
• Final Durable Goods Orders for September are estimated to fall -.1% versus a prior estimate of a -.1% decline. 
  

Upcoming Splits 

• (ICE) 5-for-1

Other Potential Market Movers

• The weekly Bloomberg Consumer Comfort Index, (LB) October Sales report and the (MAT) analyst day could also impact trading today.

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

Stocks Falling into Final Hour on Election Uncertainty, European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Telecom/Gaming Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Slightly Above Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 19.2 +3.5%

• Euro/Yen Carry Return Index 119.72 -.46%

• Emerging Markets Currency Volatility(VXY) 10.54 +3.43%

• S&P 500 Implied Correlation 62.55 +2.05%

• ISE Sentiment Index 52.o unch.
  

• Total Put/Call 1.35 -6.25%

• NYSE Arms 1.04 +47.3% 

Credit Investor Angst:

• North American Investment Grade CDS Index 80.2 +1.16%
  

• America Energy Sector High-Yield CDS Index 614.76 +2.69%

• European Financial Sector CDS Index 101.19 +1.56%

• Western Europe Sovereign Debt CDS Index 19.36 +2.22%

• Asia Pacific Sovereign Debt CDS Index 36.08 +.64%

• Emerging Market CDS Index 253.72 +2.89%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.52 unch.

• 2-Year Swap Spread 23.25 -1.0 basis point

• TED Spread 53.25 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -45.25 +1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.11 -.12%
• 3-Month T-Bill Yield .36% +1.0 basis point

• Yield Curve 98.0 -2.0 basis points
  

• China Import Iron Ore Spot $65.31/Metric Tonne -.03%

• Citi US Economic Surprise Index -10.0 -1.7 points

• Citi Eurozone Economic Surprise Index 45.4 +4.2 points

• Citi Emerging Markets Economic Surprise Index -4.90 -.9 point

• 10-Year TIPS Spread 1.71% -2.0 basis points
• 80.0% chance of Fed rate hike at Dec. 14 meeting, 80.8% chance at Feb. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -104 open in Japan 
• China A50 Futures: Indicating +13 open in China

• DAX Futures: Indicating +12 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail/medical sector longs, index hedges and emerging markets shorts

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Drops Worsen for Europe Stocks in Longest Losing Run Since ’14. (video) European shares fell for an eighth day, following a global selloff amid growing nervousness as polls indicated a tightening race between Hillary Clinton and Donald Trump for the U.S. presidency. The Stoxx Europe 600 Index sank to its lowest level in almost four months, led by plunges in banks, automakers and energy producers amid a flight to safety. The U.S. presidential election is increasing anxiety in a market that’s already suffering from skepticism about the economic recovery and concern about the path of central-bank stimulus. A gauge tracking volatility expectations for euro-area shares rose for an eighth day, its longest streak since 2011. “From a European perspective, people are afraid that a Trump presidency may mean even more protectionism and for a region that’s dependent on exports and global trade, that’s something we don’t like,” said Michael Woischneck, who manages about $180 million as a senior equities manager at Lampe Asset Management in Dusseldorf, Germany. “This nervousness is likely short term. Once that and the Fed meeting is out of the way the market should start to stabilize.” The Stoxx 600 fell 1.1 percent, taking its eight-day plunge to 3.7 percent.
• Emerging Stocks Slide to Two-Week Low as U.S. Race Tightens. Declines in developing-nation assets reflected concern that Trump as president would scrap trade deals and penalize U.S. companies that manufacture products overseas. A Bloomberg poll on Wednesday showed Clinton holding a slim advantage over Trump among independents, a day after an ABC News/Washington Post tracking poll gave the Republican nominee a one-percentage point lead over his Democrat rival. The MSCI Emerging Markets Index of shares dropped 1.3 percent to 890.98 as of 1:14 p.m. in New York, the lowest since Oct. 13.
• Oil Market Turns Skeptical About OPEC’s Ability to Deliver Cuts. Oil bulls struck gold in late September, when prices surged due to an unexpected OPEC agreement in Algiers to cut crude production in an effort to steady global markets. Now the bulls are looking for more help from the producer club as prices slide. Here are signs of the market’s growing skepticism that a meaningful accord can be achieved.
• Fed Sets Up Possible December Move While Leaving Rates on Hold. Federal Reserve policy makers left interest rates unchanged while saying the argument for higher borrowing costs strengthened further amid accelerating inflation, reinforcing expectations for a hike next month. “The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. The decision was 8-2.
• Maersk Shares Sink as Shipping Industry Woes Hurt Profits. A.P. Moller-Maersk A/S, owner of the world’s largest container line, reported a 43 percent decline in third-quarter profit as the shipping industry continues to suffer from overcapacity. Net income fell to $429 million last quarter compared with $755 million a year earlier, the Copenhagen-based company said on Wednesday. That missed the average estimate of $501 million in a Bloomberg survey of 15 analysts. The shares fell as much as 9 percent, the most in four months.
• Anthem(ANTH) Threatens Obamacare Retreat If Results Don’t Improve. Health insurer Anthem Inc., which has so far stuck with the Obamacare markets as rivals pulled back, said it may retreat in 2018 if its financial results under the program don’t improve next year. Anthem’s comments up the stakes for the Obama administration as the enrollment season for 2017 Affordable Care Act plans begins, with consumers already facing fewer choices and higher premiums in many markets.
• Eisman of ‘Big Short’ Sees Massive Changes for Hedge Funds. (video) 
• Hedge Fund Clients Dump Humans for Computers and Still Lose. (video)

Zero Hedge:

• DOJ's Peter Kadzik Exposed Colluding With Clinton Campaign.
• 91% Of All Paddy Power Bets In Past Two Days Have Been For Trump.
• Peso Protection Panic - "Trump Hedge" Spikes To Highest In 5 Years. (graph)
• These Were The Best And Worst Performing Assets In October And YTD.
• "Nobody Is Above The Law. Guaranteed. Full Stop." - Meltdown At The Justice Department Exposes Obama's Lies.
• Deutsche Bank(DB) Accuses ECB Of "Creating Asset Bubbles, Expropriating Savers And Backdoor Socialization".
• Don't Look Now But The Most Systemically Dangerous Bank In The World Is Tumbling Again. (graph)
• US Economy Continues to Weaken As Warning Signs Flash Recession Ahead.
• Glaxo Slides After Bernie Sanders Tweets Company "Put Patients At Risk To Increase Profits".
• Oil Tanks After Biggest Inventory Build In 34-Year History. (graph)
• New York ISM Contracts For 3rd Month, Worst Streak In 7 Years. (graph)
• Podesta Part 26: Wikileaks Releases Another 1,135 Emails, Total Is Now 43,104.
• ADP Employment Report Sinks To Weakest Since April 2013. (graph)
• Citi(C): "A Clinton Presidency Will Be Marked By Near-Continuous Investigations, Impeachment Risk".

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.3%

Sector Underperformers:

• 1) Steel -8.5% 2) Telecom -2.3% 3) Gaming -2.3%

Stocks Falling on Unusual Volume: 

• STON, CSTE, PAYC, DXCM, HRZN, UIHC, ZEN, LIVN, CERN, HURN, BFAM, DATA, FLT, GME, CSU, PODD, HLF, ABCO, CACC, SABR, SBAC, PCTY, MTCH, MYGN, AGN, TSE, QUOT, KTWO, AIRM, SLCA, CRL, OKE, SRE, PENN, CSOD, PXD, MPW, EL, FLOW, TGNA, CPN, CAVM, JLL, EMES, CALD, BLKB, KATE, ETSY, FLT, GME, DNOW and HWAY

Stocks With Unusual Put Option Activity:

• 1) DXJ 2) Z 3) MRO 4) KSS 5) YELP

Stocks With Most Negative News Mentions:

• 1) WFT 2) ADPT 3) CPN 4) F 5) KSS

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.3%

Sector Outperformers:

• 1) Gold & Silver +1.9% 2) HMOs +1.7% 3) Networking +1.1%

Stocks Rising on Unusual Volume:

• CPPL, BRCD, WING, HLS, TNET, CRTO, BGFV, YELP, ZG, EGRX, HSIC, AVXS, Z, PZZA, IPHI, MGPI, DENN, HZN, TPC, BG, AMSG, CNO, XXIA, ZTS, VECO and ABC

Stocks With Unusual Call Option Activity:

• 1) CEMP 2) CERN 3) SQ 4) AGN 5) DYN

Stocks With Most Positive News Mentions:

• 1) MOS 2) EVHC 3) CME 4) AMSG 5) CI

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +15.6% Above 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 32.1% of Issues Advancing, 64.2% Declining
• 10 New 52-Week Highs, 63 New Lows
• 48.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 33.9%
• Vix 19.3 +3.9%
• Total Put/Call 1.33 -7.64%
• TRIN/Arms 1.06 +50.0%