Tuesday Watch

Evening Headlines

Bloomberg:

• Macquarie's Lakos: Global Growth Outlook Improving. (video)

• Asian Stocks Fall, Dollar Holds Losses. The Topix index dropped before a Bank of Japan policy decision. The S&P 500 Index registered its biggest loss of the year as Trump’s order on immigration drew a rebuke from some Republican lawmakers, raising the specter of a rift between the executive and legislative branches. The dollar maintained losses and gold advanced for a third day. Oil was steady after two days of declines. Japan’s Topix slumped 0.8 percent as of 9:51 a.m. in Tokyo, with banks and exporters leading declines for a second day. NEC Corp. tumbled 15 percent after cutting its full-year profit forecast. Australia’s S&P/ASX 200 Index lost 0.7 percent, led by energy shares.

• Fed Gives Break to Regional Banks in Annual Stress-Test Demands. Large regional banks and some foreign lenders will get a big break in the Federal Reserve’s annual stress tests as the regulator said Monday it would no longer evaluate their plans for managing capital and risk. Letting banks with less than $250 billion in assets out of the so-called qualitative side of the stress tests is a particularly welcome move for the industry, because that part of the test has often proved to be a stumbling block for the companies. In issuing the new rule, the Fed decided that regional banks such as BB&T Corp., Fifth Third Bancorp and Zions Bancorporation don’t pose the kind of threat to the financial system the tests are meant to curtail.

• Google(GOOGL) Employees Rally in Thousands Against Trump Immigration Ban. Sergey Brin and Sundar Pichai speak on the issue "at the core of the founding of this company."

Wall Street Journal:

• Corporate Criticism of Trump’s Travel Ban Moves Beyond Tech. Chiefs of Ford, Coke, Goldman among those condemning new immigration restrictions.

• Robot Baristas Serve Up the Future of Coffee at Cafe X. Automation is eliminating jobs for factory workers and Uber drivers—will your morning fix soon come from a precision caffeine machine?

• Facebook(FB) Is Trying Everything to Re-Enter China—and It’s Not Working. Since regulators blocked the service in 2009, CEO Mark Zuckerberg has hired well-connected executives, developed censorship tools and taken a ‘smog jog’ in Beijing—but the company has made no visible headway.

• Trump Dams the Regulatory Flood. His executive order should change the bureaucratic incentives.

Fox News:

• Acting AG tells Justice Department staff not to defend Trump's refugee order. (video)

CNBC:

• After-hours buzz: SANM, AEIS, ODP, RMBS.

Zero Hedge:

• Trump Fires Acting Attorney General Yates Following "Betrayal".

• Mutiny? Acting Attorney General Orders Justice Department Not To Defend Trump Executive Order.

• Seven Charts To Watch In 2017. (graph)

• Is A Constitutional Crisis Imminent In The Wake Of Trump's Immigration Ban?

• Chicago Police Suicides Soar As Impact Of City's "War Zone" Takes Its Toll.

• RBC: "It Is Crazy What Is Going On 'Under The Hood' When On The Surface It’s So Optically Calm".

• Obama Oversaw The Weakest Growth In American's Personal Income On Record. (graph)

• Squeeze Over? Short-Interest Plunges To 3-Year Lows. (graph)

• In Major Intel Overhaul, Trump Adds CIA Director Back To National Security Council.

• Hungarian Foreign Minister Accuses Soros Of Seeking To Bring Down His Government.

• Trump Slump Begins? Dow Loses 20k As Stocks Suffer Biggest Drop Of 2017. (graph)

Busines Insider:

• Miami condo flippers are getting hit hard and this is just the beginning.

• A lawsuit against Coca-Cola sets a dangerous precedent for food and beverage companies.

Night Trading 

• Asian equity indices are -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 114.75 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 32.75 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 70.62 +.03%. 

• S&P 500 futures -.04%. 

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AET)/1.44

• (ABC)/1.23

• (CIT)/.76

• (COH)/.75

• (LLY)/.98

• (XOM)/.71

• (HOG)/.31

• (HCA)/1.79

• (MAN)/1.71

• (MA)/.85

• (NUE)/.34

• (PCAR)/.87

• (PFE)/.51

• (SMG)/-1.25

• (SPG)/2.57

• (S)/-.10

• (UPS)/1.69

• (VLO)/.78

• (ZBH)/2.11

• (AFL)/1.63

• (APC)/-.50

• (AAPL)/3.23

• (CB)/2.41

• (EA)/2.29

• (ILMN)/.83

• (MSTR)/2.72

• (X)/-.02 

Economic Releases 
8:30 am EST

• The 4Q Employment Cost Index is estimated to rise +.6% versus a +.6% gain in 3Q.

9:00 am EST

• The S&P CoreLogic CS 20-City MoM for November is estimated to rise +.7% verssu a +.7% gain in October.
  

9:45 am EST

• The Chicago Purchasing Manager Index for January is estimated to rise to 55.0 versus 54.6 in December. 

10:00 am EST

• Consumer Confidence for January is estimated to fall to 112.8 versus 113.7 in December.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Bank of Japan rate decision, German Unemployment rate, Eurozone GDP report, China Manufacturing PMI report and the weekly US retail sales reports could also impact trading today.

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

Stocks Falling into Final Hour on Protectionism Fears, European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Energy/Hospital Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.2 +15.5%

• Euro/Yen Carry Return Index 126.91 -1.32%

• Emerging Markets Currency Volatility(VXY) 10.75 -.28%

• S&P 500 Implied Correlation 47.73 +12.3%

• ISE Sentiment Index 91.0 +9.6%
  

• Total Put/Call 1.07 +8.1%

• NYSE Arms 1.79 +76.19%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.84 +2.60%
  

• America Energy Sector High-Yield CDS Index 414.0 +2.93%

• European Financial Sector CDS Index 89.54 +2.75%

• Western Europe Sovereign Debt CDS Index 23.06 +5.68%

• Asia Pacific Sovereign Debt CDS Index 32.79 +1.82%

• Emerging Market CDS Index 237.43 +1.11%
  

• iBoxx Offshore RMB China Corporate High Yield Index 133.47 +.05%

• 2-Year Swap Spread 30.0 +.25 basis point

• TED Spread 52.75 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -33.0 +4.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.59 +.23%
• 3-Month T-Bill Yield .50% unch.

• Yield Curve 128.0 +1.0 basis point
  

• China Import Iron Ore Spot $83.34/Metric Tonne n/a

• Citi US Economic Surprise Index 31.60 -4.2 points

• Citi Eurozone Economic Surprise Index 55.0 +4.0 points

• Citi Emerging Markets Economic Surprise Index 36.70 -2.8 points

• 10-Year TIPS Spread 2.07 unch.
• 32.9% chance of Fed rate hike at March 15 meeting, 47.7% chance at May 3 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -193 open in Japan 
• China A50 Futures: Indicating n/a open in China

• DAX Futures: Indicating +15 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Netanyahu to Discuss Renewed Sanctions Against Iran With Trump. Israeli Prime Minister Benjamin Netanyahu said he will bring up renewed sanctions on Iran when he meets with U.S. President Donald Trump at the White House next month, citing Iran’s testing of a ballistic missile. Netanyahu will visit the U.S. Feb. 15 for talks with the president, White House Press Secretary Sean Spicer said at his daily briefing Monday.
• Greek Markets Tumble as EU Holds Up Payment Amid IMF Doubts. Greek stocks and bonds fell on Monday after the government in Athens failed to bridge differences with European creditors over the conditions attached to the country’s latest bailout review and the International Monetary Fund warned that its debt is on an unsustainable path. Almost two-thirds of the actions creditors have demanded for the disbursement of the next tranche of emergency loans have yet to be completed, the government conceded in a memo discussed between Finance Minister Euclid Tsakalotos and bailout auditors last week in Brussels, a person familiar with the matter said. Greek stocks fell 3.5 percent to their lowest since Dec. 15 at the close in Athens, while yields on 10 year-notes rose 48 basis points to 7.66 percent, amid renewed doubts about the prospects for completing the review before national elections in the Netherlands, France and Germany later this year.
• Europe Stocks Slump Most Since U.S. Vote as Trump Trades Unravel. (video)  European equities fell, with the winners in a rally spurred by Donald Trump’s U.S. victory turning losers on Monday, as investors assessed the potential for political fallout from his order halting some immigration. Miners, energy producers, banks and insurers -- the best performers in the final quarter of 2016 -- led losses in the Stoxx Europe 600 Index. The benchmark slid 1.1 percent, the most since Nov. 2. Greek stocks fell the most among western-European markets on concern over the country’s bailout payment.

Fox News:

• Suspect in Quebec mosque terror attack was of Moroccan origin, reports show. (video) One of two gunmen who shouted 'Allahu akbar!' as they opened fire at a mosque in Quebec City was of Moroccan origin, a witness and local media reported Monday, revealing the first details about the attackers in the massacre that killed six men. The terror suspects were identified as Mohamed Khadir and Alexandre Bissonnette, the CBC reported. The two men were arrested soon after the shooting at the Quebec Islamic Cultural Centre Sunday night and were expected to appear in court later Monday, police told reporters.

CNBC:

• Goldman: Trump rally has another 5% to go before political uncertainty sinks it later this year.
• Apple's(AAPL) earnings to miss Wall Street expectations on weak iPhone demand, JPMorgan says.

Zero Hedge:

• Why The Cold War Between Tech CEOs and Trump Is About To Go Nuclear.
• Kellyanne Conway Rages Against "Misinformation" Over Trump's Immigration Order.
• ECB Assets Rise Above 36% Of Eurozone GDP; Draghi Now Owns 10.2% Of European Corporate Bonds.
• Why Our System Is Broken: Cheap Credit Is King.
• Trump Signs Executive Order On Regulation: "For Every New Regulation, Two Regulations Must Be Revoked".
• Speculation Grows That Bashar Assad Has "Suffered A Stroke" As Syria Slams Trump's "Safe Zone" Proposal.
• Did Iran Just Break Nuclear Deal (Again) With Ballistic Missile Test-Launch?
• How Steve Bannon Rose To The Top Of Trump's Power Structure.
• Russia Launches Biggest Arctic Military Expansion Since Fall Of USSR.
• Dallas Fed Manufacturing Survey Soars To Highest Since 2010. (graph)
• Trump Will Announce Supreme Court Pick On Tuesday At 8:PM.
• Americans Spend More Than They Earn For 9th Straight Month As Savings Rate Tumbles To 2015 Lows. (graph)
• French Bond Risk Spikes To 3-Year High After Radical Left Cheers Hamon's Win In Socialist Primary. (graph)
• ECB Under Pressure As German Inflation Spikes To Highest Since 2013.

Reuters:

• Keysight Technologies(KEYS) to buy Ixia(XXIA) for $1.6 billion.

The Telegraph: 

• Eurozone 'destruction' necessary if countries are to thrive again, warns former ECB hawk.

Bear Radar

Style Underperformer:

• Small-Cap Value -1.4%

Sector Underperformers:

• 1) Oil Service -2.9% 2) Steel -2.8% 3) Hospitals -2.3%

Stocks Falling on Unusual Volume: 

• TPX, EEP, OPB, EEQ, BAH, FGEN, SRG, SMCI, AAL, SNE and VAR

Stocks With Unusual Put Option Activity:

• 1) ACWI 2) RICE 3) HPE 4) GD 5) NBR

Stocks With Most Negative News Mentions:

• 1) ARRY 2) PBR 3) SEM 4) MDC 5) TPX

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.8%

Sector Outperformers:

• 1) Oil Tankers -.1% 2) Networking -.3% 3) Restaurants -.3%

Stocks Rising on Unusual Volume:

• XXIA, NEP, IPGP, HTLD, LRN, TLRD, LOGM, AMG, BANC, SYNA, ENLC, HIBB, BGG and DDS

Stocks With Unusual Call Option Activity:

• 1) ACWI 2) OLN 3) COH 4) UNP 5) NOV

Stocks With Most Positive News Mentions:

• 1) MOV 2) RIGL 3) CBAY 4) HDP 5) NEP

Charts:

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