Friday Watch

Night Trading 

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 112.0 -1.25 basis points.
• Asia Pacific Sovereign CDS Index 32.25 unch.
• Bloomberg Emerging Markets Currency Index 71.14 -.03%. 
• S&P 500 futures -.19%. 
• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AN)/.95
• (CLX)/1.22
• (HSY)/1.08
• (HMC)/60.41
• (LYB)/2.20
• (PSX)/.46
• (TUES)/.38
• (WY)/.16 

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for January is estimated to rise to 175K versus 156K in December.
• The Unemployment Rate for January is estimated at 4.7% versus 4.7% in December.
• Average Hourly Earnings MoM for January is estimated to rise +.3% versus +.4% gain in December. 
  

10:00 am EST

• The ISM Non-Manufacturing Composite for January is estimated to fall to 57.0 versus 57.2 in December.
• Factory Orders for December are estimated to rise +.7% versus a -2.4% decline in November. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, Eurozone Services PMI report and President Trump's meeting with business execs(BX)/(JPM)/(DIS)/(IBM) could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Sightly Lower into Final Hour on Earnings Outlooks, Yen Strength, Profit-Taking, Telecom/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.0 +1.61%

• Euro/Yen Carry Return Index 126.71 -.53%

• Emerging Markets Currency Volatility(VXY) 10.42 -1.51%

• S&P 500 Implied Correlation 46.05 +.99%

• ISE Sentiment Index 87.0 +10.13%
  

• Total Put/Call .99 +7.61%

• NYSE Arms 1.07 -6.79%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.73 -.26%
  

• America Energy Sector High-Yield CDS Index 393.0 -2.64%

• European Financial Sector CDS Index 88.87 -1.65%

• Western Europe Sovereign Debt CDS Index 22.89 +1.96%

• Asia Pacific Sovereign Debt CDS Index 32.20 -.32%

• Emerging Market CDS Index 229.17 -2.58%
  

• iBoxx Offshore RMB China Corporate High Yield Index 133.49 +.10%

• 2-Year Swap Spread 30.0 +.5 basis point

• TED Spread 53.75 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -29.25 +.75 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.16 +.45%
• 3-Month T-Bill Yield .50% unch.

• Yield Curve 127.0 +1.0 basis point
  

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

• Citi US Economic Surprise Index 39.40 unch.

• Citi Eurozone Economic Surprise Index 57.30 -.3 point

• Citi Emerging Markets Economic Surprise Index 43.70 +6.6 points

• 10-Year TIPS Spread 2.05 -1.0 basis point
• 48.6% chance of Fed rate hike at May 3 meeting, 71.4% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +130 open in Japan 
• China A50 Futures: Indicating +109 open in China

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Bank of America Says European Credit Is ‘Mispricing’ Inflation. Buckle up, bond investors. Global reflation and fading central-bank stimulus herald a new dawn for the European corporate debt market that will buoy high-yield paper at the expense of high-grade, according to analysts at Bank of America Corp., citing an upcoming portfolio shift among investors. " In 2016 we saw the lowest in yields and spreads," strategists at the U.S. bank led by Ioannis Angelakis, wrote in a report this week. "We doubt that we will see these levels again, especially post the recent strengthening of economic data across the globe."
• European Stocks Slide as Deutsche Bank, Daimler Drop on Earnings. (video) European stocks fell for the fourth time in five days as a slew of worse-than-forecast results and tepid forecasts damped the outlook for corporate health. The Stoxx Europe 600 Index fell 0.3 percent at the close. Drugmakers led declines as Novo Nordisk A/S slid 7.3 percent after trimming its 2017 sales projection. Daimler AG dropped 2.7 percent after saying profit will rise only “slightly” this year, while Deutsche Bank AG tumbled 5.2 percent after its quarterly trading revenue missed analysts’ estimates.
• Surging Business Sentiment May Actually Matter This Time Around. Animal spirits are about to get physical, kicking off the next phase of the U.S. expansion. Business investment and productivity growth typically go hand in hand -- and they’ve both been largely absent during the nation’s economic recovery from the financial crisis. Residential and non-residential investment both made positive contributions to GDP growth in the fourth quarter -- the first time that’s happened in more than a year -- but Federal Reserve policy makers judged there to be more room to run for business fixed investment in Wednesday’s statement.
• Trump Welcomes Harley-Davidson(HOG) CEO in Latest White House Session.

Fox News: 

• Democrats fuming over Gorsuch backed him in 2006. (video)

Zero Hedge:

• Trump Threatens To Pull U.C. Berkeley Funds After Violent Protesters Cancel Yiannopoulos Speech. (video)
• The Central Banks Pull Back: Now It's Up To Fiscal Policy To "Save The World".
• Trump: "I Haven't Eased Anything On Russia".
• Democrats Plot Protests At Trump's Speech To Congress; Will "Refuse To Shake Hands".
• Defiant Iran Slams Trump: We Won't Yield To "Useless" Threats, Will Conduct More Ballistic Missile Tests.
• Bullish Sentiment Nears 3-Year Highs. (graph)
• Here Is The "Open Letter" Google(GOOGL), Apple(AAPL), Facebook(FB) And Others Are Sending To Donald Trump.
• Post-Election, Continuing Jobless Claims Are Soaring Most Since 2008. (graph)
• US Productivity Growth Has Never Been This Low For This Long. (graph)
• Dan Loeb's Q4 Letter: Trump Will Make Investing Great Again.

Business Insider:

• ConocoPhillips(COP) reports a smaller than expected loss.

The Telegraph:

• The cost of leaving the euro is rising every month for Italy. It lays out in minute detail why Italy is finally running out of road after eighteen years of economic depression and eurozone mismanagement. The awful possibility of a full-blown debt crisis in a country that is too big to save - and by now too angry to bully - must be faced head on.
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -.3%

Sector Underperformers:

• 1) Road & Rail -1.0% 2) HMOs -1.0% 3) Telecom -.9%

Stocks Falling on Unusual Volume: 

• RL, SFLY, CSGS, CRUS, MLNX, PMF, SBH, AMTD, ETFC, ALV, SNA, EW, EGOV, R, CARA, INGR, IP, PRXL and AMAG

Stocks With Unusual Put Option Activity:

• 1) RL 2) TLRD 3) ARNC 4) EL 5) CRUS

Stocks With Most Negative News Mentions:

• 1) EW 2) ETFC 3) SFLY 4) CVS 5) EGOV

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value +.3%

Sector Outperformers:

• 1) Steel +1.2% 2) REITs +.9% 3) Restaurants +.7%

Stocks Rising on Unusual Volume:

• MJN, CDNS, BRKS, UTEK, MUSA, KLIC, EPAY, BKFS, ACLS, IAC, SGMS, OKS, HLI, NVRO, CTXS, LCI, PENN, MSCI, AXS, AMP, TUP, IDXX, X, CRS, M, CTXS, MSCI, EQT, BSX, AMD, MTCH, COST, CBT and EL

Stocks With Unusual Call Option Activity:

• 1) MJN 2) AA 3) RH 4) CRUS 5) TSCO

Stocks With Most Positive News Mentions:

• 1) URBN 2) JWN 3) ANF 4) CATB 5) ATI

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +11.7% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 54.3% of Issues Advancing, 41.7% Declining
• 94 New 52-Week Highs, 18 New Lows
• 58.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.7%
• Vix 11.8 -.3%
• Total Put/Call 1.03 +12.0%
• TRIN/Arms 1.03 -10.8%