Morning Market Internals

NYSE Composite Index:

• Volume Running +.8% Above 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 67.5% of Issues Advancing, 29.3% Declining
• 71 New 52-Week Highs, 9 New Lows
• 59.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.5%
• Vix 12.2 -4.2%
• Total Put/Call 1.0 +7.5%
• TRIN/Arms .82 +2.2%

Friday Watch

Evening Headlines

Bloomberg: 

• Mnuchin Says He’ll Tag China an FX-Manipulator If Warranted. U.S. Treasury Secretary nominee Steven Mnuchin said during his Senate confirmation hearing he’s willing to label China as a currency manipulator if warranted, after President-elect Donald Trump backed away from his pledge to do so immediately. Mnuchin said “I would” when asked by Senator Robert Casey on Thursday whether he would recommend naming the Asian country a manipulator if it deserved that label. Trump had already softened his stance on China’s currency policy, saying in an interview this month with the Wall Street Journal that he wouldn’t name the country a manipulator on his first day in office, as previously promised. “I would talk to them first,” Trump was cited as saying by the Journal. “Certainly they are manipulators. But I’m not looking to do that.”
• China Ends Year of Stabilization on a High as Consumers Splurge. China’s economy accelerated for the first time in two years in the final quarter of 2016, cementing an economic stabilization that’s giving leaders a buffer as they transition to neutral policy and prepare for potential trade tensions with Donald Trump. Gross domestic product increased 6.8 percent in the three months through December from a year earlier, compared with a 6.7 percent median estimate in a Bloomberg survey. The full-year expansion of 6.7 percent was the slowest since 1990, but still landed right in the middle of the 6.5 percent to 7 percent official target.
• Davos Set Learns to Love Donald Trump on Eve of Inauguration. The investors and executives who throng Davos every January are many things. But above all, they’re rich. And they’re starting to see plenty of opportunities to stay that way under Donald Trump. At coffee bars and cocktail parties in the Swiss town, which hosts the World Economic Forum’s annual meeting this week, conversation has often turned to how money can be made from the rise of a populist firebrand. Amid all the panel-talk of reducing inequality and re-invigorating the middle class, the Davos set is hard at work looking for ways to safeguard and expand its wealth even as anti-establishment movements roil global politics. That means enjoying the benefits of a Trump-driven boom in the U.S., where the business world is celebrating his pledges to slash taxes and loosen regulations. Stock markets have surged to near record highs, and banks like Goldman Sachs Group Inc. and Citigroup Inc. have reported strong earnings.
• Yellen Says Fed Not Behind the Curve, Backs Gradual Rate Rises. (video) Federal Reserve Chair Janet Yellen backed a strategy for gradually raising interest rates, arguing that the central bank wasn’t behind the curve in containing inflation pressures but nevertheless can’t afford to allow the economy to run too hot. “I consider it prudent to adjust the stance of monetary policy gradually over time,” she said Thursday in the text of remarks to the Stanford Institute for Economic Policy Research in California, while stressing the considerable doubt surrounding that outlook.

Wall Street Journal:

• New Wall Street Conflict: Analysts Say ‘Buy’ to Win Special Access for Their Clients. Securing face time for investors with top executives has become a vital revenue source for securities firms; ‘brand ambassadors’ at Coach.
• Donald Trump Seen Bringing ‘Deliberate Chaos’ to the White House. Observers don’t foresee a change in the unorthodox style he used to win the presidential race.
• Mnuchin Defends Investments in Senate Confirmation Hearing. Donald Trump’s pick for Treasury secretary faces scrutiny of panel’s Democrats.

Fox News:

• Fox News Poll: A divided, yet optimistic country awaits Trump. (video)

CNBC:

• China is working hard to support its currency — it sold US government bonds for six straight months.
• Many Obamacare customers will be paying more for less this year, study shows.

Zero Hedge:

• China Grows At Slowest Pace In 26 Years Despite Record Debt, Currency Devaluation. (graph)
• Commuter-In-Chief: Obama Sets New Single-Day Clemency Record On Last Day In Office.
• Obama Fails To Breach $20 Trillion. (graph)
• What Steve Mnuchin Thinks About The "Strong Dollar".
• Jamie Dimon's 2016 Pay: $28,000,000.
• "He Is Going To Fail": Georges Soros Slams "Would Be Dictator" Trump.
• Just 3 Things: Stocks "Are Not Magical Lottery Tickets".
• Nobel Prize Winner Tells Davos' Elite, US Should "Get Rid Of Currency".
• IBM "Beats" Thanks To Record Low Effective Tax Rate; Posts 19th Consecutive Revenue Drop.
• Just 3 Things: Stocks "Are Not Magical Lottery Tickets".
• Trumphoria Fades - Dollar Down, Stocks Down, Bonds Down, Banks Down, Oil Down, Gold Up. (graph)

Busines Insider:

• BREMMER: 'The Pax Americana, as of tomorrow, is over'.
• 'This is the seventh time I've asked': Republican senator grills Trump Treasury pick over foreclosure profits.
• Governments have declared a war on cash.
• A manager at a one-time $8 billion hedge fund has been reportedly found guilty of securities fraud.

Telegraph:

• Europe's ideological civil war laid bare in Davos.

Night Trading 

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 116.0 -.25 basis point.
• Asia Pacific Sovereign CDS Index 34.75 +.75 basis point.
• Bloomberg Emerging Markets Currency Index 70.01 +.13%. 
• S&P 500 futures +.09%. 
• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CFG)/.52
• (GE)/.46
• (KSU)/1.16
• (PG)/1.06
• (RF)/.23
• (COL)/1.14
• (SLB)/.27
• (STI)/.88

Economic Releases

• None of note

Upcoming Splits

• (OTEX) 2-for-1

Other Potential Market Movers

• The Presidential Inauguration, Fed's Harker speaking and the UK retail sales report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on Earnings Ouutlook Concerns, Rising Long-Term Rates, Profit-Taking, Retail/Drug Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.79 +2.48%

• Euro/Yen Carry Return Index 127.89 +.46%

• Emerging Markets Currency Volatility(VXY) 11.01 +1.10%

• S&P 500 Implied Correlation 46.98 -.23%

• ISE Sentiment Index 67.0 +91.2%
  

• Total Put/Call .88 -18.52%

• NYSE Arms .77 -30.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.11 +.32%
  

• America Energy Sector High-Yield CDS Index 434.0 -7.57%

• European Financial Sector CDS Index 86.27 +.22%

• Western Europe Sovereign Debt CDS Index 20.87 -1.0%

• Asia Pacific Sovereign Debt CDS Index 34.71 +2.06%

• Emerging Market CDS Index 240.12 +.99%
  

• iBoxx Offshore RMB China Corporate High Yield Index 133.01 +.04%

• 2-Year Swap Spread 31.0 +1.5 basis points

• TED Spread 52.25 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -42.25 +.25 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.62 -.09%
• 3-Month T-Bill Yield .51% -1.0 basis point

• Yield Curve 124.0 +4.0 basis points
  

• China Import Iron Ore Spot $80.99/Metric Tonne -1.29%

• Citi US Economic Surprise Index 45.20 +5.7 points

• Citi Eurozone Economic Surprise Index 66.10 -1.9 basis points

• Citi Emerging Markets Economic Surprise Index 38.30 -.1 point

• 10-Year TIPS Spread 2.06 +4.0 basis points
• 36.6% chance of Fed rate hike at March 15 meeting, 52.0% chance at May 3 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +3 open in Japan 
• China A50 Futures: Indicating +25 open in China

• DAX Futures: Indicating -27 open in Germany

Portfolio: 

• Lower: On losses in my in my retail/biotech/medical sector longs 

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.3%

Sector Underperformers:

• 1) Steel -2.5% 2) Biotech -.9% 3) REITs -.9%

Stocks Falling on Unusual Volume: 

• VNOM, ZYNE, APO, MPET, AAN, ALGN, GNMK, DF, BBT, FUL, NXTM, LMCK and VSI

Stocks With Unusual Put Option Activity:

• 1) RCII 2) DDD 3) BK 4) DISH 5) RSX

Stocks With Most Negative News Mentions:

• 1) AKS 2) AAN 3) VSI 4) DF 5) GNC

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth unch.

Sector Outperformers:

• 1) Road & Rail +4.9% 2) Oil Tankers +1.4% 3) HMOs +.6%

Stocks Rising on Unusual Volume:

• TDOC, CSX, CP, CHKP, PTC, TAL, NFLX, MNK, NSC, DDD, GIMO, FN, EMES, UNP, GATX, CCJ, TSLA, FNSR, MBLY, LPG, HRTX, EROS, CLVS, EMR and CENX

Stocks With Unusual Call Option Activity:

• 1) APO 2) OCN 3) UNP 4) HPE 5) COL

Stocks With Most Positive News Mentions:

• 1) MBLY 2) NFLX 3) EMR 4) TSLA 5) HPQ

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -17.4% Below 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 28.7% of Issues Advancing, 67.7% Declining
• 47 New 52-Week Highs, 5 New Lows
• 59.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.5%
• Vix 12.3 -1.7%
• Total Put/Call .80 -25.9%
• TRIN/Arms 1.11 unch.