Monday Watch

Today's Headlines

Bloomberg: 

• Renzi Resigns After Populists Defeat Italy Reforms in Referendum. (video) Prime Minister Matteo Renzi resigned in the early hours of Monday after accepting defeat in a constitutional referendum he’d staked his job on. With exit polls showing about 59 percent of Italians had voted against his plans to rein in the power of the Italian Senate, the prime minister said he will hand his resignations to President Sergio Mattarella. The euro fell to a 20-month low as he spoke. “I have lost,” Renzi said in a televised statement. “We gave the Italians an opportunity to change, but we didn’t succeed.”
• Italy's Constitutional Referendum: Live Results.
• Trump Takes on China in Tweets About Currency, South China Sea. Donald Trump took on the Chinese government via social media on Sunday, rejecting criticism of his decision to take a phone call from Taiwan’s president at the risk of triggering backlash from Beijing. The U.S. president-elect told his 16.6 million Twitter followers that he wouldn’t be told by China who he should or shouldn’t talk to, and reiterated some of the grievances about China used in his winning presidential campaign. “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn’t tax them) or to build a massive military complex in the middle of the South China Sea? I don’t think so!” Trump tweeted.
• Euro Slips With Asian Stocks While Bonds Rise as Italy Votes No. The euro retreated with riskier assets, while bonds rose, amid concern the failure of Italy’s referendum on constitutional reform will destabilize the country, emboldening anti-Europe and nationalist forces. The common currency touched its weakest point in 20 months as Prime Minister Matteo Renzi conceded defeat and said he’ll quit as results showed his bid to overhaul legislative decision-making in Italy had been voted down. Stocks from Tokyo to Sydney declined as the surprise resignation of New Zealand’s premier exacerbated pressure on the local currency. Government debt tracked a rebound in Treasuries from Friday, when mixed U.S. jobs data weighed on the dollar and stocks. Gold fluctuated, while oil fell with copper. The MSCI Asia Pacific Index declined .4%, with Japan's Topix index retreating .6%, Australia's S&P/ASX 200 Index down .7%, the Kospi losing .1% in Seoul and New Zealand's S&P/NZX50 Index dropping .4%. 
• Oil Market’s New Engine Losing Steam on Modi’s Cash Crackdown. Oil demand growth in the world’s fastest-growing crude market may weaken as the government’s cash crackdown slows the economy. Diesel and gasoline use, which account for more than half of India’s oil demand, will slow or contract this month and possibly early next year, according to Ivy Global Energy Pte., FGE and Centrum Broking Ltd. Expansion in the world’s fastest-growing major economy is widely expected to ease temporarily after Prime Minister Narendra Modi last month withdrew high-value currency notes in a country where almost all consumer payments are in cash.

Wall Street Journal:

• Italy Votes ‘No’ in Referendum, Projections Indicate. Between 57% and 61% of voters opposed constitutional changes sought by Prime Minister Matteo Renzi, according to Istituto Piepoli projections.
• Italy’s ‘No’ Poses Trouble for Eurozone. Populist win marks sobering start for what could be defining year for European Union.
• Italian Referendum: Live Coverage. 
• Obama Administration Moves to Deny Easement for Dakota Pipeline. Standing rock protesters celebrate move by administration; fate of pipeline in doubt, as Donald Trump has indicated support.
• Donald Trump’s Economic Team Set to Come Into Clearer Focus. Top contenders for a Fed bank-oversight post hold different outlooks on financial regulation.

Fox News:

• After Carrier deal, Trump vows tax of 35 percent for US business going overseas. (video) President-elect Donald Trump said Sunday that he’ll slap a 35 percent tax on U.S. companies that move jobs or operations to other countries -- days after announcing a controversial deal with Carrier to keep roughly 1,100 manufacturing jobs in the United States.

Zero Hedge:

• "My Government Ends Here" Renzi Loses Italian Referendum, Will Offer Resignation.
• Matteo Renzi Says He Will Resign After Losing Referendum.
• All Eyes On Monte Paschi, Whose Bailout Is Now In Doubt, And Italian Bank Sector Contagion.
• North Dakota Tribes, Activists Win After US Denies Permit Needed To Complete Dakota Access Pipeline.
• Something Strange Is Taking Place In The Mediterranean.
• Communism Again Gets A Free Pass - Setting The Record Straight On Castro.
• Turkey Proposes Trade With China, Russia And Iran In Local Currencies.
• Treasury Shorts At 6 Year Highs; Hedge Funds Quietly Exit Stocks As Oil Shorts Crushed Again. (graph)
• After ISIS Machete Attack, Ohio Students Still Unable To Say The Word "Terrorist". (video)
• Freedom Party's Hofer Defeated By Greens' Van der Bellen In Austria's Presidential Election.
• Angry Dems Play The Blame Game Over Hillary Loss As the Infighting Escalates.
• In Tweetstorm, Trump Threatens "Retribution" For Companies That Leave The US.
• Jill Stein Drops PA Recount, Blames Lack Of Funds, Slams System That's "Stacked Against Voters".

Business Insider:

• Donald Trump could erase Obama's legacy almost as soon as he takes office.
• A showdown between Trump and the Fed is looming.
• 'We're in despair': Fierce ISIS counterattacks have slowed the fight to recapture Iraq's 2nd-largest city.
• 'THE UNITED STATES IS OPEN FOR BUSINESS': Trump warns that companies leaving the US will face 'retribution'.
• There could be an unexpected side effect of Trump’s infrastructure spending.

Telegraph:

• Live. Italian referendum: Exit polls show 'No' vote ahead by clear margin as markets and Renzi brace for the worst.

Night Trading

• Asian indices are -1.0% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 126.0 unch.
• Asia Pacific Sovereign CDS Index 41.5 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 69.13 +.17%.
• S&P 500 futures -.19%.
• NASDAQ 100 futures -.24%.

Morning Preview Links

Earnings of Note

Company/Estimate

• None of note

Economic Releases
10:00 am EST

• The ISM Non-Manufacturing Composite for November is estimated to rise to 55.3 versus 54.8 in October.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, Fed's Bullard speaking, Eurozone Services PMI report, UK Services PMI report, RBA Meeting, Raymond James Tech Conference, UBS Media/Communications Conference and the (TYC) Analyst Day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity 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 week.

Weekly Outlook

• Wall St. Week Ahead by Reuters.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on commodity weakness, rising European/Emerging Markets/US High-Yield Debt Angst, yen strength, technical selling, profit-taking and rising long-term rates. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg:

• Erdogan Says Turkey Faces ‘Economic Sabotage’ as Lira Plunges. Turkish President Recep Tayyip Erdogan on Saturday said his political enemies are trying to sabotage the economy by speculating on the stock market, foreign exchange rate and interest rates after failing to overthrow his administration in July. The lira plunged to record lows over the past week even as Erdogan urged Turks to convert their foreign currency savings into liras and gold while vowing to keep up his fight against high interest rates.
• Italy Referendum: What to Watch Into the Night on Sunday.
• Electric Cars Could Take an OPEC-Sized Bite From Oil Demand.
• Summers Slams Trump’s Carrier Move as Threat to Capitalism. Former U.S. Treasury Secretary Lawrence Summers blasted Donald Trump’s deal with United Technologies Corp. to keep factory jobs in Indianapolis, labeling the president-elect’s intervention as a dangerous shift away from American capitalism. Summers, a Democrat who was Treasury chief under then-President Bill Clinton, argued that rich and successful countries have a strong foundation of rules-based capitalism. He said Trump skirted that tradition when he used a “combination of carrots and sticks” to prevent United Technologies from sending jobs at its Carrier plant to Mexico. He called that “an act of ad hoc deal capitalism.”

Wall Street Journal:

• Regulator Will Start Issuing Bank Charters for Fintech Firms. Office of the Comptroller of the Currency will allow upstarts to become ‘special purpose national banks’.

Fox News:

• Officials say 9 dead in Oakland warehouse party fire, death toll could rise to 40. (video)

CNBC:

• Rent prices show signs of calming down, with NYC, San Francisco and DC sliding.
• Russia bets on Trump as gateway to eased sanctions.
• Italy's referendum explained: What you need to know. (video)

Zero Hedge:

• Trump's Lead in PA Shrinks By 22,000 Votes As Stein Seeks Statewide Recount.
• The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy.
• Ford CEO Expresses Interest In Working With Trump; Says Less Regulation Is Key To Saving U.S. Jobs. 
• Michigan Recount Devolves Into Chaos As Multiple Federal Lawsuits Filed.
• Trump Risks Major Diplomatic Scandal With China Following Taiwan Phone Call.
• Buyers Remorse? Trump Supporter Was Foreclosed On By Treasury Pick Steve Mnuchin.
• Chinese Developers Rethink U.S. Real Estate Projects: "I See Danger...U.S. Real Estate Is Peaking".
• Trump Targets Second Indiana Company Planning To Outsource Jobs To Mexico.
• Jill Stein Raises Fundraising Goal Again To $9.5MM - Almost 4 Times Her Initial Target.
• This Is The "Most Dangerous Moment In Human History," Stephen Hawking Warns.
• The New American Dream - A Life In Hock.
• Michigan Rejects Trump's Objection - Recounts Are Cleared To Start Next Week.
• Sudden Scramble For Gold In China Sends Premiums To 3 Year High.
• Weekend Reading: Trumponomics.
• Tech, Small Caps Suffer Worst Week In 10 Months As Trump Hangover Hits.

Business Insider:

• Sears(SHLD) is on the brink of catastrophe as stores closures loom and top execs flee the company.
• Bowe Bergdahl has asked Obama for a pardon before Trump takes office.
• Walmart's(WMT) new gas-and-grocery hybrids could become a major threat to Amazon and Kroger.
• CNN apologizes, disciplines producer after employee was caught on hot mic joking about Trump's plane crashing.

The Telegraph:

• Renzi defeat won't break the euro, but a Le Pen victory most certainly will.
• Europe holds its breath as Italy heads to the polls for critical referendum.
• Italian referendum result could shake the rest of Europe into a worryingly volatile 2017.

Weekly Scoreboard*

Indices

• S&P 500 2,191.73 -1.05%

• DJIA 19,172.0 +.03%

• NASDAQ 5,255.43 -2.78%

• Russell 2000 1,314.76 -2.46%

• S&P 500 High Beta 36.52 +1.42%

• Goldman 50 Most Shorted 119.80 -1.98%

• Wilshire 5000 22,787.90 -1.23%

• Russell 1000 Growth 1,032.33 -2.04%

• Russell 1000 Value 1,078.85 -.18%

• S&P 500 Consumer Staples 516.36 -1.67%

• Vanda Cyclicals-Defensives 1.3137 -.008%
  

• Morgan Stanley Technology 1,182.85 -3.50%

• Transports 9,050.91 -.09%

• Utilities 633.61 -1.31%

• Bloomberg European Bank/Financial Services 85.17 -.1%

• MSCI Emerging Markets 35.20 -.24%

• HFRX Equity Hedge 1,153.39 +.38%

• HFRX Equity Market Neutral 997.98 -.17%

Sentiment/Internals

• NYSE Cumulative A/D Line 268,516 -.64%

• Bloomberg New Highs-Lows Index 240-400

• Bloomberg Crude Oil % Bulls 56.41 +26.94%

• CFTC Oil Net Speculative Position 276,320 unch.

• CFTC Oil Total Open Interest 1,995,504 -1.58%

• Total Put/Call .95 +24.05%

• OEX Put/Call 1.21 -83.57%

• ISE Sentiment 93.0 -21.74%

• NYSE Arms .88 -15.53%

• Volatility(VIX) 14.12 +14.83%

• S&P 500 Implied Correlation 52.96 -.8%

• G7 Currency Volatility (VXY) 10.67 +1.52%

• Emerging Markets Currency Volatility (EM-VXY) 10.95 -2.41%

• Smart Money Flow Index 19,137.31 -.5%

• ICI Money Mkt Mutual Fund Assets $2.719 Trillion +.51%

• ICI US Equity Weekly Net New Cash Flow -$.844 Billion

• AAII % Bulls 43.8 -12.3%

• AAII % Bears 25.1 +13.7%

Futures Spot Prices

• CRB Index 191.69 +3.21%

• Crude Oil 51.66 +12.38%

• Reformulated Gasoline 155.99 +13.66%

• Natural Gas 3.45 +12.44%

• Heating Oil 166.28 +13.17%

• Gold 1,176.30 -.59%

• Bloomberg Base Metals Index 173.62 -1.88%

• Copper 262.70 -1.92%

• US No. 1 Heavy Melt Scrap Steel 207.0 USD/Ton unch.

• China Iron Ore Spot 77.79 USD/Ton -2.29%

• Lumber 336.90 +.75%

• UBS-Bloomberg Agriculture 1,134.20 -2.5%

Economy

• Atlanta Fed GDPNow Forecast +2.9% -70.0 basis points
• ECRI Weekly Leading Economic Index Growth Rate +8.3% +210.0 basis points
  

• Philly Fed ADS Real-Time Business Conditions Index -.1274 +6.05%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 130.29 +.29%

• Citi US Economic Surprise Index 24.70 +15.4 points

• Citi Eurozone Economic Surprise Index 61.40 -1.9 points

• Citi Emerging Markets Economic Surprise Index 1.5 +7.1 points

• Fed Fund Futures imply 0.0% chance of no change 100.0% chance of 25 basis point hike on 12/14

• US Dollar Index 100.78 -.76%
• MSCI Emerging Markets Currency Index 1,500.32 +.27%

• Euro/Yen Carry Return Index 126.67 +1.03%

• Yield Curve 128.0 +4.0 basis points

• 10-Year US Treasury Yield 2.39% +3.0 basis points

• Federal Reserve's Balance Sheet $4.407 Trillion -.46%

• U.S. Sovereign Debt Credit Default Swap 29.9 +3.45%

• Illinois Municipal Debt Credit Default Swap 358.0 -.02%

• Western Europe Sovereign Debt Credit Default Swap Index 23.19 -1.23%

• Asia Pacific Sovereign Debt Credit Default Swap Index 41.47 -6.38%
  

• Emerging Markets Sovereign Debt CDS Index 99.97 -1.23%
  

• Israel Sovereign Debt Credit Default Swap 71.09 -3.41%

• Iraq Sovereign Debt Credit Default Swap 760.05 +1.38%

• Russia Sovereign Debt Credit Default Swap 222.33 -3.29%

• iBoxx Offshore RMB China Corporate High Yield Index 132.95 +.05%

• 10-Year TIPS Spread 1.95% +2.0 basis points
  

• TED Spread 47.0 +2.5 basis points

• 2-Year Swap Spread 20.5 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap 615.0 -5.75 basis points

• N. America Investment Grade Credit Default Swap Index 72.83 -.44%

• America Energy Sector High-Yield Credit Default Swap Index 551.0 -10.26%

• European Financial Sector Credit Default Swap Index 104.75 -3.6%
  

• Emerging Markets Credit Default Swap Index 272.82 +.69%
  

• CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 135.0 -2.5 basis points
  

• M1 Money Supply $3.404 Trillion +.64%

• Commercial Paper Outstanding 923.8 +.2%

• 4-Week Moving Average of Jobless Claims 251,500 +500

• Continuing Claims Unemployment Rate 1.5% unch.

• Average 30-Year Mortgage Rate 4.08% +5.0 basis points

• Weekly Mortgage Applications 417.20 -9.4%

• Bloomberg Consumer Comfort 44.9 +.1 point

• Weekly Retail Sales +1.20% +30.0 basis points

• Nationwide Gas $2.16/gallon +.03/gallon

• Baltic Dry Index 1,196.0 +1.27%

• China (Export) Containerized Freight Index 774.05 -.40%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 unch.

• Rail Freight Carloads 222,893 -19.35%

Best Performing Style

• Large-Cap Value -.2%

Worst Performing Style

• Small-Cap Growth -3.8%

Leading Sectors

• Oil Service +7.3%

• Coal +4.9%

• Gold & Silver +4.2%

• Energy +3.4%

• Banks +1.4%

Lagging Sectors

• Hospitals -3.5% 

• Software -3.5%

• Alt Energy -4.6%

• Biotech -4.7%

• Semis -5.0%

Weekly High-Volume Stock Gainers (10)

• TLYS, CLC, NOVN, SKX, TIME, THO, PKY, WGL, IIIN and UA/C

Weekly High-Volume Stock Losers (8)

• GOOD, KNSL, SNBC, SSNC, BOJA, SITE, SCVL and GES

Weekly Charts

ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change