Wednesday Watch

Evening Headlines

Bloomberg:

• China's Credit Surges to Record High. (video) 

• Asia Extends Global Gain as Yellen Buoys Stocks. A global equity rally built momentum in Asia after Janet Yellen said the Federal Reserve doesn’t need to wait for the Trump’s administration’s plans on fiscal stimulus to hike rates. Bonds fell and the dollar rose. Stocks in Sydney and Tokyo rose after four major American equity benchmarks closed at unprecedented levels for a second day. The yield on the 10-year Treasury note is up for a fifth day and the dollar is strengthening against most major currencies after the Federal Reserve chair said waiting too long to raise rates could disrupt financial markets. The Topix index rose 1.1 percent and Australia’s S&P/ASX 200 Index added 0.9 percent. South Korea’s Kospi was flat. New Zealand’s S&P/NZX 50 Index added 0.4 percent.

• Icahn Raises Stakes in Herbalife(HLF), Hertz(HTZ), Reduces PayPal(PYPL).

• Jana Partners Adds Stakes in Salesforce(CRM), Aetna(AET), Sells Twitter(TWTR).

Wall Street Journal:

• It’s Boom Time Again for America’s Largest Banks. Goldman Sachs(GS) shares hit all-time high.

Fox News:

• Fox News Poll: Sharp division along political lines on Trump's travel ban. (video)

CNBC:

• Humana(HUM) says it plans to pull out of Obamacare exchanges in 2018.

• Nelson Peltz's Trian Fund takes $3.5 billion stake in Procter & Gamble: Sources. (video)

Zero Hedge:

• Mike Flynn May Face Felony Charges For Lying To The FBI. 

• Passing On The Permian: Has The Bubble Grown Too Big? (graph)

• Multiple Russian Jets Buzz US Destroyer In "Unsafe" Encounter.

• RBC: "This Is The $1 Trillion Question On Our Clients' Minds".

• Buffett Becomes Top 10 Shareholder Of AAPL After Boosting Holdings To $7.7 Billion. (graph)

• Fossil(FOSL) Shares Plunge On Poor Results, Ugly Guidance; Strong Dollar Blamed.

• WTI/RBOB Tumble As US Crude Inventory Hits Record High. (graph)

• Dow Hits 20,500 - Hawkish Yellen Sparks (Another) Buying Panic In Banks, Batters Bonds. (graph)

Busines Insider:

• SoftBank is buying Fortress for $3.3 billion — and Fortress is soaring.

• Trump to meet with CEOs of Target(T), Best Buy(BBY) and JCPenney(JCP).

Night Trading 

• Asian equity indices are +.25 to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.25 -4.0 basis points.

• Asia Pacific Sovereign CDS Index 27.25 -2.0 basis points.

• Bloomberg Emerging Markets Currency Index 71.50 unch. 

• S&P 500 futures -.05%. 

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ADI)/.74

• (BG)/1.59

• (HAIN)/.56

• (HLT)/.66

• (IPI)/-.12

• (PEP)/1.16

• (SODA)/.30

• (WYN)/1.30

• (AMAT)/.66

• (CAR)/.18

• (ABX)/.19

• (CBS)/1.11

• (CF)/-.09

• (CSCO)/.56

• (MRO)/-.15

• (MAR)/.84

• (NTAP)/.74

• (NTES)/3.57

• (SNPS)/.78

• (WMB)/.19

Economic Releases
8:30 am EST

• Empire Manufacturing for February is estimated to rise to 7.0 versus 6.5 in January.

• The CPI MoM for January is estimated to rise +.3% versus a +.3% gain in December.

• The CPI Ex Food and Energy MoM for January is estimated to rise +.2% versus a +.2% gain in December.

• Real Avg Weekly Earnings YoY for January.

• Advance Retail Sales MoM for January are estimated to rise +.1% versus a +.6% gain in December.

• Retail Sales Ex Autos MoM for January are estimated to rise +.4% versus a +.2% gain in December.

• Retail Sales Ex Autos and Gas for January  are estimated to rise +.3% versus unch. in December.
  

9:15 am EST

• Industrial Production MoM for January is estimated unch. versus a +.8% gain in December.

• Capacity Utilization for January is estimated to fall to 75.4% versus 75/5% in December.

• Manufacturing Production for January is estimated to rise +.2% versus a +.2% gain in December. 

10:00 am EST

• The NAHB Housing Market Index for February is estimated at 67.0 versus 67.0 in January.

• Business Inventories for December are estimated to rise +.4% versus a +.7% gain in November.   

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +3,491,200 barrels versus a +1,383,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,699,100 barrels versus a -869,000 barrel decline the prior week. Distillate inventories are estimated to fall by -432,800 barrels versus a +29,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.14% versus a -.5% decline prior.

4:00 pm EST

• Net Long-Term TIC Flows for December. 

Upcoming Splits

• (CMCSA) 2-for-1

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Harker speaking, Fed's Rosengren speaking, Eurozone Trade Balance report, Australia Employment Change report, weekly MBA mortgage applications report, Leerink Healthcare Conference and the BofA Merrill Insurance Conference could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and metals/mining shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Reversing Higher into Final Hour on Economic Optimism, Yen Weakness, Short-Covering, Financial/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.03 -.36%

• Euro/Yen Carry Return Index 126.11 +.17%

• Emerging Markets Currency Volatility(VXY) 9.97 -1.29%

• S&P 500 Implied Correlation 43.74 -3.1%

• ISE Sentiment Index 96.0 +33.3%
  

• Total Put/Call .67 +3.08%

• NYSE Arms .58 -15.58%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.16 -.56%
  

• America Energy Sector High-Yield CDS Index 376.0 +.24%

• European Financial Sector CDS Index 92.36 +.36%

• Western Europe Sovereign Debt CDS Index 23.67 +.98%

• Asia Pacific Sovereign Debt CDS Index 27.2 -.91%

• Emerging Market CDS Index 209.20 -1.33%
  

• iBoxx Offshore RMB China Corporate High Yield Index 134.43 -.04%

• 2-Year Swap Spread 32.0 +.75 basis point

• TED Spread 50.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -27.75 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.47 +.32%
• 3-Month T-Bill Yield .54% +1.0 basis point

• Yield Curve 124.0 +1.0 basis point
  

• China Import Iron Ore Spot $91.71/Metric Tonne -.56%

• Citi US Economic Surprise Index 36.10 -.9 point

• Citi Eurozone Economic Surprise Index 43.90 -5.7 points

• Citi Emerging Markets Economic Surprise Index 39.40 +.2 point

• 10-Year TIPS Spread 2.02 +1.0 basis point
• 53.0% chance of Fed rate hike at May 3 meeting, 73.5% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +136 open in Japan 
• China A50 Futures: Indicating +54 open in China

• DAX Futures: Indicating +12 open in Germany

Portfolio: 

• Higher: On gains in my in my biotech/medical/retail sector longs 

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• China Credit Surging to Record Underscores PBOC Shift to Tighten. China added more credit last month than the equivalent of Swedish or Polish economic output, revving up growth and supporting prices but also fueling concerns about the sustainability of such a spree. Aggregate financing, the broadest measure of new credit, climbed to a record 3.74 trillion yuan ($545 billion) in January, exceeding the median estimate of 3 trillion yuan in a Bloomberg survey. New yuan loans rose to a one-year high of 2.03 trillion yuan, less than the 2.44 trillion yuan estimate.
• China Factory Prices Surge Most Since 2011, Boosting Reflation. Producer price index rose 6.9 percent in January from a year earlier, compared with a median estimate of 6.5 percent in a Bloomberg survey and a 5.5 percent December gain. Consumer-price index climbed 2.5 percent, boosted by the week-long Lunar New Year holiday beginning in January this year, versus a 2.4 percent rise forecast by analysts. Producer prices for mining products surged 31 percent year-on-year while those for raw materials climbed 12.9 percent, the National Bureau of Statistics said Tuesday. 
• Wholesale Inflation Soars as Economists Call End to India Easing. India’s wholesale inflation surged more than estimated to the highest since July 2014, supporting the central bank’s shift to a "neutral" monetary stance. Wholesale prices rose 5.25 percent in January from a year earlier, the Commerce Ministry said in a statement on Tuesday. That’s faster than the 4.35 percent median estimate in a Bloomberg survey of 25 economists..  
• Europe Stocks Close at One-Year High; Carmakers Gain on Peugeot. (video) European stocks edged higher, completing the longest streak of increases since October, as gains in automakers offset a drop in construction and materials stocks. The Stoxx Europe 600 Index closed up less than 0.1 percent. Carmakers climbed 1.1 percent, with Peugeot SA among the biggest advancers after the firm’s owner was said to be exploring an acquisition of General Motors Co.’s European business. The FTSE 250 Index of U.K. midcaps rose 0.2 percent to its sixth consecutive record close.
• OPEC Wins Plaudits for Oil Recovery, Yet Economy Lends a Hand. (video) OPEC may be getting all the credit for reviving the oil market, but it had a little help. While the Organization of Petroleum Exporting Countries did spur a 28 percent recovery late last year by announcing production cuts, supply isn’t the only factor buoying the market: demand repeatedly beat expectations in 2016, and is set to surprise again. Global oil consumption will surpass average growth rates for a third year in 2017 amid continued economic expansion in China and India, according to data from the International Energy Agency. With all the attention on OPEC, the role of demand in keeping crude prices above $50 a barrel has been overlooked, according to consultants Energy Aspects Ltd.
• Investors' Economic Optimism Surges to Level Not Seen Since 2011. (video) Investors haven’t been this optimistic on the global economy since 2011, joining small businesses in taking a glass-half-full outlook as a new administration takes over in Washington. A full 23 percent of investors expect an outright “boom,” according to a survey released Tuesday by Bank of America Merrill Lynch, while the number predicting negligible growth over the next 12 months has fallen by more than half to 43 percent. The optimism comes amid forecasts global growth will pick up and as Donald Trump promises to cut taxes, boost fiscal spending and loosen regulations in moves that could boost corporate earnings.

Wall Street Journal:

• Ditching Opel Is Next Step in GM CEO’s Profit Drive. Mary Barra, unlike many of her predecessors and industry peers, has prized profits over size.
• Trump Puts NATO Allies in the Crosshairs Over Military Spending. Germany, long criticized by U.S. administrations as a reluctant warrior, starts to ramp up its defense budget.
• Why Stop at Dodd-Frank? Some Want Trump’s Regulatory Overhaul to Go Further. Companies target long-contested auditor provision in the Sarbanes-Oxley Act.

Fox News: 

• Bill O'Reilly: A stunning display of dishonesty from the national press and radical left. (video)

CNBC:

• Here are 7 tech stocks that will benefit if Trump cuts tax on overseas profits, Goldman says.
• Fed Chair Yellen: 'Unwise' to wait too long to hike interest rates. (video)
• Surprise! Airlines are canceling fewer flights, losing fewer bags than they have in decades.
• Facebook(FB) is making its biggest push yet to grab ad dollars from TV.

Zero Hedge:

• Brother Of Kim Jong Un Assassinated In Malaysia; US "Strong Believes" North Korea Behind The Murder.
• Russia "Secretly" Deploys Banned Cruise Missile In "Latest Challenge To Trump".
• What Catalyst Will Start The Next Bear Market: Here Is Wall Street's Response.
• "Euro May Already Be Lost" - Vice-Chairman Of EuroThinkTank Warns "No Way To Avert Break-Up".
• Russian Spy Ship Spotted Off US East Coast.
• America's CEOs Have Never Been More "Optimistic". (graph)
• Goldman(GS) Raises March Rate Hike Odds, Sees "Strong Support For Near-Term Policy Action".
• China Just Created A Record $540 Billion In Debt In One Month. (graph)
• Trump Responds To Flynn Resignation: "The Real Story" Here Are The Illegal Leaks.
• The Chart That Should Worry Janet Yellen The Most. (graph)
• US Producer Prices Spike Most Since September 2012 As Energy Costs Soar. (graph)

Business Insider:

• Morgan Stanley's(MS) global head of stock trading just quit to join a $35 billion hedge fund.
• Yellen says reducing the regulatory burden is a 'legitimate and important goal' and bank stocks are rising.

Bear Radar

Style Underperformer:

• Mid-Cap Value unch.

Sector Underperformers:

• 1) Airlines -1.3% 2) Steel -1.1% 3) Utilities -.8%

Stocks Falling on Unusual Volume: 

• HIBB, TTM, PLKI, TTS, CTRL, RNG, BGFV, WBAI, AQMS, APA, FLO, LOGM, SCG and TTS

Stocks With Unusual Put Option Activity:

• 1) CTSH 2) TAP 3) SHLD 4) BKD 5) GRPN

Stocks With Most Negative News Mentions:

• 1) HIBB 2) PLKI 3) NYT 4) CVX 5) SO

Charts:

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