Thursday Watch

Evening Headlines

Bloomberg:

• Japanese Shares to Fall as Yen, Treasuries Advance. Political uncertainty continues to infect markets, as gains for Treasuries and the yen underpin expectations that Japanese stocks will fall, with other Asian bourses poised to open little changed. Nikkei 225 Stock Average futures fell with the yen gaining for the third day this week and after Treasuries posted their first four-day rally since the leadup to June’s Brexit vote. The S&P 500 Index was little changed for the eighth time in the past 10 sessions, erasing losses after crude rebounded above $52 a barrel. Gold reached a three-month high and euro-dollar volatility surged as investors assess political risks in Europe and the U.S. The New Zealand dollar fell after the central bank held interest rates at a record low. Contracts on the Nikkei 225 Stock Average fell in Osaka and Singapore. Futures on South Korea’s Kospi Index rose while those on Hong Kong’s Hang Seng Index retreated. Australia’s S&P/ASX 200 Index climbed 0.3 percent. New Zealand’s main benchmark climbed 0.6 percent.
• Anthem’s(ANTM) Bid for Cigna(CI) Blocked by Judge as Anticompetitive.
• Big Pharma Is Pointing Fingers, and Hoping Trump Will Listen. In the fast-moving Washington game of who’s to blame for high U.S. drug prices, an often-overlooked industry is readying its defenses against pharmaceutical companies that fault other parts of the health sector for the costs faced by patients. Known as pharmacy benefits managers, or PBMs, the industry includes giants such as Express Scripts Holding Co. and CVS Health Corp., which negotiate prices with drugmakers, work with pharmacies and help set the co-pays patients pay out of pocket. Now these middlemen are now taking it from all sides.

Wall Street Journal:

• Senate Is Poised to Confirm Sessions Along Party Lines. Vote will elevate a close Trump ally to powerful post.
• Whole Foods(WFM) to Close Nine Stores, Cuts Its Outlook. Retailer struggling amid growing competition in sector.

Fox News:

• Military brass sound alarm about 'insidious decline' in readiness. (video)

CNBC:

• Winter storm could drop a foot of snow on northeast US.

Zero Hedge:

• Trump's Supreme Court Pick Gorsuch "Disheartened, Demoralized" By President's Comments.
• Iran Launches Another Ballistic Missile.
• Small Cap Stocks 'Relative Risk' Soars Near 11-Year Highs. (graph)
• Hedge Funds Sell Near-Record Amount Of Stock (Follow 'Insiders' & Bank Execs). (graph) 
• Students From 26 New York City High Schools And Colleges Skip Class To Protest Trump.
• Here Are The 7 Rules Bank Of America Uses To Decide When It Is Time To Sell The Market.
• Nigel Farage Delighted After UK Parliament Overwhelmingly Votes To Trigger Brexit.
• Germany Rules Out Greek Debt Cut: "For That It Would Have To Exit The Currency Area".
• Banks Bruised As Bond Yields Crash To 2017 Lows; Dollar Drops, Gold Pops. (graph)

Telegraph:

• Madame 'Frexit' looms large as the French political centre disintegrates.

Night Trading 

• Asian equity indices are -.5% to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 108.5 -.75 basis point.
• Asia Pacific Sovereign CDS Index 29.75 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 71.08 -.04%. 
• S&P 500 futures -.05%. 
• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BZH)
• (BWA)/.84
• (CLF)/.26
• (KO)/.37
• (CMI)/2.00
• (CVS)/1.67
• (DNKN)/.61
• (K)/.85
• (OXY)/-.02
• (PTEN)/-.55
• (REGN)/3.08
• (SEE)/.74
• (TWTR)/.12
• (VIAB)/.84
• (YUM)/.73
• (AGU)/.67
• (CERN)/.61
• (EXPE)/1.37
• (MHK)/3.22
• (NWSA)/.19
• (NVDA)/.98
• (YELP)/.26

Economic Releases 
8:30 am EST

• Initial Jobless Claims are estimated to rise to 249K versus 246K the prior week.
• Continuing Claims are estimated to fall to 2058K versus 2064K prior. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Evans speaking, Pres. Trump meeting with airline CEOs, German exports report, $15B 30Y Y-Bond auction, weekly Bloomberg US Consumer Comfort, weekly EIA natural gas inventory report, WASDE Crop report, (INTC) investor meeting, (TSN) annual meeting, (KO) Investor conference call and the Keefe Bruyette Woods Financial Services Symposium could also impact trading today.

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

Stocks Reversing Slightly Higher into Final Hour on Earnings Optimism, Oil Reversal, Short-Covering, Retail/Metals & Mining Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.27 -.18%

• Euro/Yen Carry Return Index 125.05 -.25%

• Emerging Markets Currency Volatility(VXY) 10.33 -.10%

• S&P 500 Implied Correlation 46.19 +.48%

• ISE Sentiment Index 57.0 unch.
  

• Total Put/Call .94 -14.6%

• NYSE Arms .94 -38.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.65 +1.23%
  

• America Energy Sector High-Yield CDS Index 381.0 +1.23%

• European Financial Sector CDS Index 94.57 +1.43%

• Western Europe Sovereign Debt CDS Index 24.28 +2.95%

• Asia Pacific Sovereign Debt CDS Index 29.68 +1.68%

• Emerging Market CDS Index 230.20 +.96%
  

• iBoxx Offshore RMB China Corporate High Yield Index 134.17 +.11%

• 2-Year Swap Spread 30.5 -.75 basis point

• TED Spread 50.5 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -26.75 +2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.08 +.07%
• 3-Month T-Bill Yield .53% +1.0 basis point

• Yield Curve 120.0 -2.0 basis points
  

• China Import Iron Ore Spot $83.53/Metric Tonne +.29%

• Citi US Economic Surprise Index 40.90 -1.0 point

• Citi Eurozone Economic Surprise Index 51.0 -1.6 points

• Citi Emerging Markets Economic Surprise Index 36.80 -.6 point

• 10-Year TIPS Spread 1.97 -3.0 basis points
• 39.1% chance of Fed rate hike at May 3 meeting, 64.3% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -19 open in Japan 
• China A50 Futures: Indicating +20 open in China

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

• Slightly Higher: On gains in my in my retail/tech sector longs 

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Trump Threatens Hollywood’s Growth in China. “There is a disconnect between what Trump ... might want to do and what Hollywood wants”. The Trump administration is creating uncertainty and “making everybody very, very nervous,” says Geetha Ranganathan, an analyst at Bloomberg Intelligence. The renegotiation “could be a casualty if he really wants to come down hard on it.”
• Supply Is the Technical Factor Behind Global Rally in Markets. (video) Rising political risks. A fading era of central-bank stimulus. The potential end of a multi-decade bull run in U.S. government debt. Markets have so far this year shrugged off a laundry list of looming headwinds, with U.S. equities scaling new heights and sales of corporate bonds reaching record levels. What gives?
• Bonds Face Worst Loss Since 2013 as India Signals End to Easing. Indian sovereign bonds headed for their biggest loss since 2013 after the nation’s monetary policy panel unexpectedly kept interest rates on hold and changed its stance to neutral from accommodative. The committee led by Reserve Bank of India Governor Urjit Patel held the benchmark repurchase rate at 6.25 percent for a second straight meeting, according to a central bank statement in Mumbai on Wednesday. The move was predicted by just five of 39 economists surveyed by Bloomberg, with the rest forecasting a cut to 6 percent. 
• This Is Why Investors Are Suddenly Worrying About Greece Again.
• European Stocks Move Higher on Push From Earnings. (video)
• OPEC Ministers Say the Market Might Need More Oil Cuts. (video) OPEC and other major crude-producing nations may need to extend output cuts into the second half of the year to re-balance the market, oil ministers for Iran and fellow group member Qatar said. Global oil supplies have decreased as the Organization of Petroleum Exporting Countries and producers outside the group comply with a six-month deal to curb output that took effect on Jan. 1, Qatar’s Energy Minister Mohammed Al Sada said Wednesday at a news briefing in Doha. “It’s too early to make a judgement,” he said, adding that markets may re-balance in the third quarter. “We kept it open to reconsider the rollover, and rollover is an option if needed,” Al Sada told Bloomberg TV in Qatar’s capital.
• Copper Jolted Higher as Threatened Disruptions Point to Deficit. Copper rallied with other metals as strengthening prospects of disruptions at the world’s two largest mines threatened to send the market into a global shortage. “We expect copper will move into deficit in the coming months, driving the next leg higher in prices,” Goldman Sachs Group Inc. analysts including Max Layton and Jeff Currie said in a report Wednesday. While the bank’s six-month target remains at $6,200 a metric ton, risks surrounding the forecast are skewed to the upside, they said.
• Low VIX Masks Insurance Markup Options Traders Are Paying. (video) Here’s another sign that beneath the surface of placid stock markets, investors aren’t exactly sound asleep. It’s the persistently high premium traders are paying for equity options, visible in the difference between implied and realized volatility in the S&P 500 Index. The gap, definable as the intangible cost of stock insurance over and above what is accounted for by the market’s swings, has now lingered for 51 trading days. That’s the longest streak in almost a year and one of the longest in the past decade, data compiled by Bloomberg show.
• Trump’s Plan to Tap Offshore Profit for Infrastructure Gains an Ally. (video) President Donald Trump’s plan to use corporate profits returned from overseas to help finance nationwide improvements to roads, bridges, airports and other public works picked up an important supporter in the U.S. House: Representative Bill Shuster. “The dollars are out there, so we get a piece of that,” Shuster, a Pennsylvania Republican who chairs the House Transportation and Infrastructure Committee, said in an interview. The process of returning corporate profit to the U.S., known as repatriation, can be one of the sources that helps generate funding for repairs and new construction, he said. 
• Netflix(NFLX) Plans New Toys, Merchandise Based on Hit TV Shows.
• Tesaro Shares Jump on Report of Takeover Interest. (video)

Wall Street Journal:

• Companies Plow Ahead With Moves to Mexico, Despite Trump’s Pressure. Rexnord, others press on with relocations, underscoring challenges to president’s vow to revive U.S. manufacturing.
• The Next American Farm Bust Is Upon Us. Shrinking role in global grain market coupled with a strong dollar and higher costs for seeds drives U.S. farmers out of business; overflowing bunkers.
• Intel Corp. Announces $7 Billion Investment in Arizona Plant. Company says Chandler facility will employ 3,000 at White House meeting.

Fox News:

• Trump facing historic delays in confirmation push. (video)
• Incredibly high radiation levels discovered at crippled Fukushima plant. (video)

CNBC:

• Strategist Tom Lee: Here is investors' 'biggest lever to pull' this year. (video)
• As Apple(AAPL) and Facebook(FB) lead Nasdaq to a record, here are the next potential winners in the index.
• Expect permanent revenue-neutral tax reform by summer, Sen. Rob Portman says. (video)
• If Trump and Congress 'botch' tax cuts, GOP could lose House, Republican Steve Forbes warns. (video)
• Panera Bread(PNRA) shares hit all-time high on optimistic outlook.
• Stage is set for sold retail sales growth, but border tax threatens outlook.

Zero Hedge:

• Gold & Yen Tumble After Ugly Treasury Auction. (graph)
• "Danger" - Matt Drudge Warns: "Republicans Only Know How To Be Opposition, Not Lead!"
• 16 Fake News Stories Reporters Have Run Since Trump Won.
• Outraged Bill Gross Tweets "Incredible" That "Bankers Want Regulation Reduced To Increase Leverage".
• Trump Rips Into "Political" Judges Deciding Fate Of Travel Ban.
• In New Executive Order, Trump Plans To Send ISIS Detainees To Guantanamo.
• Crude Algos Go Wild Again Despite 2nd Biggest Inventory Build In History, Production At New Cycle Highs. (graph)
• Bank Stocks Are Sliding... Testing Key Technical Support. (graph)
• China Foreign Minister: "I Have Suggestion For My American Friends: Brush Up On The History Of World War Two".
• Peak Kool Aid? "Bulls" Surge To Highest Since 2004. (graph)

The Telegraph:

• EU faces crisis as IMF warns Greek debts are on ‘explosive’ path.

Bear Radar

Style Underperformer:

• Small-Cap Value -.60%

Sector Underperformers:

• 1) Banks -.9% 2) Oil Service -.7% 3) Networking -.7%

Stocks Falling on Unusual Volume: 

• AMC, SPSC, CHRS, GMLP, ORBK, PE, AKAM, GILD, CSRA, WAIR, Z, NTGR, CG and LOGM

Stocks With Unusual Put Option Activity:

• 1) GRUB 2) OAS 3) SIG 4) AKAM 5) LPX

Stocks With Most Negative News Mentions:

• 1) SPSC 2) NTGR 3) FXCM 4) STRP 5) RRTS

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.2%

Sector Outperformers:

• 1) Papers +1.7% 2) Hospitals +.9% 3) Utilities +.9%

Stocks Rising on Unusual Volume:

• NUAN, BWLD, CTB, FMI, COHR, MYGN, CSTE, MCHP, HT, KFRC, PNRA, UVV, LITE, ESPR, WD, RDWR, PFGC, CALD, CTSH, TSRO, EEFT, PXD, ORLY, BCO, VNDA, CLVS, IIVI, LPX, ESPR, GRA, PFGC, GPK and FIS

Stocks With Unusual Call Option Activity:

• 1) CTSH 2) AKAM 3) WFM 4) MNST 5) EOG

Stocks With Most Positive News Mentions:

• 1) COHR 2) KFRC 3) MCHP 4) THO 5) CTRN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +6.6% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 37.1% of Issues Advancing, 58.7% Declining
• 36 New 52-Week Highs, 21 New Lows
• 58.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.2%
• Vix 11.6 +2.5%
• Total Put/Call 1.08 -1.8%
• TRIN/Arms 1.06 -30.0%