Stocks Higher into Final Hour on Deregulation Hopes, Earnings Outlook Optimism, Yen Weakness, Financial/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.87 +3.41%

• Euro/Yen Carry Return Index 121.47 +.87%

• Emerging Markets Currency Volatility(VXY) 10.43 +4.82%

• S&P 500 Implied Correlation 37.19 -9.46%

• ISE Sentiment Index 94.0 +38.2%
  

• Total Put/Call .89 -17.59%

• NYSE Arms .60 +29.25% 

Credit Investor Angst:

• North American Investment Grade CDS Index 74.42 -.26%
  

• America Energy Sector High-Yield CDS Index 640.0 -2.49%

• European Financial Sector CDS Index 96.70 -.02%

• Western Europe Sovereign Debt CDS Index 19.47 -1.39%

• Asia Pacific Sovereign Debt CDS Index 38.97 +5.90%

• Emerging Market CDS Index 269.54 +10.82%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.75 +.03%

• 2-Year Swap Spread 25.5 unch.

• TED Spread 43.0 -5.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -40.75 +3.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.49 -1.67%
• 3-Month T-Bill Yield .47% +4.0 basis points

• Yield Curve 121.0 +4.0 basis points
  

• China Import Iron Ore Spot $74.12/Metric Tonne +4.42%

• Citi US Economic Surprise Index -7.90 +1.1 points

• Citi Eurozone Economic Surprise Index 34.6 +1.2 points

• Citi Emerging Markets Economic Surprise Index -4.60 +.3 point

• 10-Year TIPS Spread 1.90% +4.0 basis points
• 81.2% chance of Fed rate hike at Feb. 1 meeting, 83.8% chance at March 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +191 open in Japan 
• China A50 Futures: Indicating -18 open in China

• DAX Futures: Indicating +52 open in Germany

Portfolio: 

• Higher: On gains in my medical/biotech/retail sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Dow Average Rallies to Record as Treasuries Slide on Trump Bets. (video) Donald Trump’s unlikely rise to power is providing a shot in the arm for global financial markets, with stocks and metals rallying on optimism that his fiscal-stimulus plans will boost the economy. Bonds tumbled. The MSCI All Country World Index erased its monthly drop and the Dow Jones Industrial Average climbed to a record high. Copper posted its biggest back-to-back surge in three years, gaining alongside lead, zinc and aluminum. The dollar rose against most peers, while government bonds extended their selloff as Trump’s win bolstered bets on faster inflation. Latin American assets from stocks to debt and currencies plunged on speculation that higher U.S. interest rates would damp the appeal of riskier emerging-market securities.
• Trump's Win May Be Asia's Loss. (video) Just when China's economy seemed to be stabilizing, Donald Trump's election as U.S. president poses significant new risks. Not just for Chinese growth, but the entire Asia region. That's because the president-elect campaigned on a policy platform with protectionism at its center. Trump wants to slap punitive tariffs on Chinese goods and label the world's No. 2 economy a currency manipulator. Such a move would hurt Chinese exports. But it could also trigger a trade war if Beijing retaliates, catching other Asian economies in the crossfire.
• London’s Property Market Is ‘Tanking,’ Green’s Vernon Says. London’s real estate market, hurt by the Brexit vote, is “tanking by the day,” Green Property Chairman Stephen Vernon said. The firm, which has closed its London office, is waiting for an opportunity to buy into the market at lower values, the 66-year-old said at a conference in Dublin. Vernon would consider buying a real estate company, raising a fund or buying a portfolio of assets in London, he said. 
• Italian, French Bonds Feel Pain in Europe as Rout Spreads: Chart.
• Trump’s Win Boosts Europe Banks as Broader Market Erases Advance. (video) European lenders got a second-day boost after Donald Trump’s presidential win on speculation his term will lead to increased inflation and an easing of financial rules. UBS Group AG and Credit Suisse Group AG, which get more than 35 percent of their revenues from the Americas, helped lead the rally that pushed Europe’s banks to their best four-day jump since July. The biggest Swiss lender surged the most since 2011, while Credit Suisse climbed 4.9 percent. A gauge tracking the industry reached its highest level since March, maintaining gains even as a slump in bond proxies such as utilities an real estate companies dragged the benchmark Stoxx Europe 600 Index lower. While the benchmark Stoxx 600 erased an advance of as much as 1.3 percent to end the day 0.3 percent lower, the Stoxx 600 Banks Index rallied 2.3 percent.
• Oil Output Surge Puts Pressure on OPEC as IEA Warns on Price. (video) The cost of failing to reach a deal this month is rising for OPEC as rival producers are set to revive production in 2017, the International Energy Agency predicted. Crude prices may retreat again amid “relentless global supply growth” unless the Organization of Petroleum Exporting Countries enacts “significant” output cuts, the IEA said in its monthly report on Thursday. Non-members such as Brazil, Canada, Kazakhstan and Russia will raise output by 500,000 barrels a day in 2017, after enduring their biggest slump in more than two decades, the agency said.
• Tech Stocks Are Getting Crushed. (video)

Wall Street Journal:

• Donald Trump’s Transition Team: We Will ‘Dismantle’ Dodd-Frank. The 2010 law will be replaced ‘with new policies to encourage economic growth and job creation,’ website statement says.
• Which Trump Will Americans Get? The economy depends on whether the protectionist or the tax-cutter shows up.

Fox News:

• Obama, Trump meet at White House, discuss transition of power. (video) President Obama met with Donald Trump at the White House on Thursday -- calling the meeting “excellent” and saying his number one priority was to help facilitate a peaceful transition of power in January. Trump, who said he looks forward to dealing with Obama in the future, called the meeting a “great honor” and said he looked forward to talking with Obama “many, many more times.” “I could have gone a lot longer,” Trump told reporters of the 90-minute meeting. “We discussed a lot of different situations – some wonderful and some difficulties.”

CNBC:

• Credit Suisse: 'Toned down' Trump to spark growth, lift bond yields; what to own.
• What’s behind a sudden foreclosure spike.

Zero Hedge:

• "Democrats Failed Us Miserably" Michael Moore Unleashes Post-Election "To-Do" List.
• Trump Said To Consider Jamie Dimon For Treasury Secretary; Dimon Not Interested.
• Anti-Trump Protests Continue Across The US Overnight: Burn American Flags, Smash Windows.
• Rudy Giuliani Addresses Hillary Pardon - "President Obama Should Leave It To The System".
• Bond Bloodbath Continues: Soaring Inflation Expectations Spark Curve Carnage As Yuan Plunges. (graph)

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Coal -5.3% 2) Gold & Silver -4.0% 3) Utilities -1.9%

Stocks Falling on Unusual Volume: 

• WK, QTEC, RRR, BTI, RPD, WUBA, RGR, ZBIO, SLCA, STZ, EFX, TLK, IFV, NTES, BTT, PAM, INXN, AMT, IFF, MUI, FB, UHAL, AMZN, BUD, GOOGL, VWO, HYD, PXH, ECON, ECH, TWM, GDX, EIDO, EMLC, YINN, ILF, LABD, SRTY and EDC

Stocks With Unusual Put Option Activity:

• 1) EMB 2) KBH 3) KRE 4) DXJ 5) EMR

Stocks With Most Negative News Mentions:

• 1) AGFS 2) QCOM 3) VSLR 4) THC 5) HL

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +2.2%

Sector Outperformers:

• 1) I-Banks +3.6% 2) Road & Rail +3.2% 3) Retail +3.0%

Stocks Rising on Unusual Volume:

• TUBE, SODA, MMS, SUM, ECPG, ZLTQ, TASR, SHAK, PRI, KSS, GSM, SCCO, SLF, AMP, PRAA, CSRA, OMER, GSM, MRC, MMS, JWN, TPC, HALO, DDS, FCX, GBT, YRCW, KMT, HZO, BW, SC, DV, WFC, SKYW, GM, MTZ, TWI, ABC, KBR and ITG

Stocks With Unusual Call Option Activity:

• 1) HUM 2) POST 3) CIT 4) USB 5) LYB

Stocks With Most Positive News Mentions:

• 1) CSX 2) WCG 3) ACAT 4) JMP 5) CMA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +110.6% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 41.4% of Issues Advancing, 57.0% Declining
• 247 New 52-Week Highs, 117 New Lows
• 52.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.1%
• Vix 15.7 +9.1%
• Total Put/Call .82 -24.1%
• TRIN/Arms .50 +8.5%

Thursday Watch

Evening Headlines

Bloomberg:

• After Brexit and Trump, Populists Target Next Dominoes in Europe. After success in Britain and the U.S., populists are setting their sights on the next five dominoes at risk. Votes are looming within less than a year in Italy, Austria, the Netherlands, France and then Germany. Exasperation with the political and business establishment over a raft of grievances from inequality to immigration will likely shape all of these votes, with the outcome increasingly hard to predict.
• Yuan Falls to Six-Year Low Amid Concern Trump Will Target China. The yuan slipped to a six-year low as concern about China’s trade relationship with a more protectionist U.S. provided a new reason to sell the currency that’s heading for a third annual loss. The yuan fell 0.2 percent to 6.7907 per dollar at 11:35 a.m. in Shanghai, its lowest level since September 2010, and extending its drop this year to 4.4 percent. Declines versus the greenback were minor compared with peers after the central bank barely weakened the fixing, following a 1.4 percent surge by the Bloomberg Dollar Index on Wednesday. Trump has called China a "grand master" at currency manipulation and has threatened tariffs of up to 45 percent on the country’s imports, a step that Commonwealth Bank of Australia estimated would cut China’s shipments to the the U.S. by 25 percent in the first year.
• A Different China Awaits Trump. (video)
• Asian Stocks Rebound After Selloff as Markets Reassess Trump Win. Asian stocks jumped the most in almost eight months to join a global rebound on speculation Donald Trump will pursue business-friendly policies. Japanese shares surged as the yen slumped. The MSCI Asia Pacific Index added 2.3 percent to 136.49 as of 10 a.m. in Tokyo, heading for the biggest increase since March 2. The measure tumbled 3.2 percent on Wednesday, the most since Brexit roiled global markets, after Trump shocked investors by winning the U.S. presidential race against opponent Hillary Clinton.
• SolarCity(SCTY) Heads Quietly Into the Sunset.
• Twitter(TWTR) Names Anthony Noto COO, Initiates CFO Search. (video)

Wall Street Journal:

• Donald Trump’s Win Hailed by Europe’s Populists as Proof of Anti-Establishment Momentum. A ‘victory of freedom,’ says National Front’s Marine Le Pen.
• Donald Trump Poised to Tilt Supreme Court. President-elect will have chance to fill Scalia’s vacancy; as nominee, he said Second Amendment was ‘under siege’.
• Thousands Protest Outside Trump Tower in Midtown Manhattan. Demonstrators chant slogans against President-elect Donald Trump; protests held in other cities around U.S.

Fox News:

• Trump election raises big questions for ObamaCare, immigration, Supreme Court. (video) President-elect Donald Trump hasn’t minced words about what legacy legislation would be on the chopping block from President Obama's administration. From the start, Trump has vowed to repeal ObamaCare within his first 100 days in office. His upset victory early Wednesday immediately raises thorny questions about what’s next for a range of hot-button issues – from the vacancy on the Supreme Court to pending trade deals to immigration policy to health care.

CNBC:

• Despite Trump rally, market direction will hinge on interest rates: Analyst Peter Boockvar. (video)
• We need to get Obamacare disaster behind us, Trump economic advisor says. (video)

Zero Hedge:

• Democrats "Extremely Disappointed" As Chaffetz Confirms "Duty" To Continue Clinton Probe.
• Rioting Snowflakes: Hillary Fanatics Burn Flag, Threaten To Kill "Not My President" Trump.
• GM(GM) Slashes 2000 Jobs, Suspends 3rd Shift On Bloated Inventories, Slowing Sales. (graph) 
• 5 Shot, 2 Life-Threatening Injuries During Anti-Trump Protest In Seattle.
• The Source Of Our Rage: The Ruling Elite Is Protected For The Consequences Of Its Dominance.
• How Did The Media Pollsters Get The Election So Wrong?
• European Politicians Terrified By "Horror Scenario" After Brexit, Trump.
• David Stockman: "The Jig Is Up: America’s Voters Just Fired Their Ruling Elites".
• The Fed Has Failed: Business Investment Efficiency Is "Worst Since The Great Depression". (graph)
• Trump Campaign Does Not Rule Out Special Prosecutor For Hillary Clinton - "All In Good Time".
• Trump Is Not Seeking Yellen's Resignation, But Won't Nominate Her For A Second Term.
• Trumpnado Sparks Bond Bloodbath & Greatest Stock Market Rebound Since 2008 PPT Intervention. (graph)

Business Insider:

• Exit polls show Clinton underperformed with black and Hispanic voters.
• Californians are calling for a 'Calexit' from the US — here's how a secession could work.
• The Obama administration has been quietly rewriting the US Arctic policy.

Feedspot.com:

• Top 25 Hedge Fund Blogs For Hedge Fund Managers and Investors.

Night Trading 

• Asian equity indices are +1.0% to +3.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 117.5 -1.25 basis points. 
• Asia Pacific Sovereign CDS Index 36.75 +1.5 basis points.
• Bloomberg Emerging Markets Currency Index 71.72 +.04%. 
• S&P 500 futures -.02%. 
• NASDAQ 100 futures +.32%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (AZN)/.96
• (KSS)/.70
• (M)/.41
• (NAT)/-.15
• (PRTY)/.12
• (RL)/1.71
• (SODA)/.23
• (KORS)/.88
• (MSCC)/.90
• (JWN)/.52
• (NVDA)/.68
• (DIS)/1.16

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 260K versus 265K the prior week.
• Continuing Claims are estimated to fall to 2025K versus 2026K prior.    

2:00 pm EST

• The Monthly Budget Deficit for October is estimated at -$75.0B versus -$136.6B in September.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, $15B 30Y T-Bond auction, Canadian Home Price report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, Suntrust Robinson Humphrey Financial Tech/Business/Government Services Conference, (SRCL) investor day, (MET) investor day, (SCSS) investor meeting, (ROK) investor meeting, (IRBT) analyst day and the (COP) analyst meeting could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by metals/mining and financial shares in the region. I expect US stocks to open higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.