Morning Market Internals

NYSE Composite Index:

• Volume Running +.1% Above 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 40.4% of Issues Advancing, 55.7% Declining
• 102 New 52-Week Highs, 11 New Lows
• 62.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.4%
• Vix 12.2 +1.24%
• Total Put/Call .95 +14.5%
• TRIN/Arms 1.10 +49.6%

Tuesday Watch

Evening Headlines

Bloomberg:

• China Will Rein in Growth, Credit Targets in 2017 Master Plan: Economists. China will set lower economic growth and monetary expansion targets this year as policy makers switch gears to curb excessive credit growth and reduce financial risks, according to economists surveyed by Bloomberg News. Premier Li Keqiang will set the 2017 gross domestic product growth goal at "about 6.5 percent," versus a range of 6.5 to 7 percent in 2016, according to the median of 20 responses in a Feb. 17-23 survey of analysts. The target for M2 money supply expansion will be 11.5 percent from 13 percent in 2016, according to the median of estimates.

• In China, Public-Private Partnerships Are Really Public-Public. China’s effort to promote public-private partnerships to fund roads, bridges and railways and keep a lid on rampant debt growth is succeeding in luring companies to the projects. Problem is, they’re mainly state-owned. Two years into the PPP push, the majority of partners in the projects have turned out to be state-owned enterprises, according to analysts at Fitch Ratings Ltd., Bank of America Corp. and Oxford Economics Ltd. The upshot: while debt pressure will be relieved for local governments, it’ll just end up on the books of another arm of the state.

• Japan’s Industrial Output Falls for First Time in Six Months. Japan’s industrial production fell for the first time in six months in January, raising questions about the sustainability of Japan’s export-driven growth in the second half of 2016. Retail sales rose. Industrial production fell 0.8 percent in January from a month earlier (forecast +0.4 percent).

• Yen Drop Buoys Japan Stocks as Dow Streak Hits 12. A weaker yen lent support to Japanese stocks as the dollar nudged higher ahead of Donald Trump’s address to Congress. Japan’s Topix index climbed with Australian equities after the Dow Jones Industrial Average pushed its winning streak to 12 sessions, the longest in 30 years. The dollar strengthened as the Trump administration began outlining spending priorities ahead of the president’s speech Tuesday. The yen fell less than 0.1 percent to 112.70 per dollar as of 9:27 a.m. in Tokyo, after sliding 0.5 percent to end a three-day winning streak. The Topix index rose 0.8 percent, rebounding from Monday’s 1 percent decline, and Australia’s S&P/ASX 200 Index added 0.4 percent. New Zealand’s S&P/NZX 50 Index gained 0.3 percent.

• Senate Confirms Wilbur Ross as Trump's Commerce Secretary.

Wall Street Journal:

• As Donald Trump Heads to Congress, a New Polarization Is Hardening. An inability to find common ground could test the president’s agenda.

• Paul Tudor Jones’ New Hedge Fund Pitch: Low, Low Prices. Tudor’s flagship fund ended 2016 roughly flat despite a run-up in the U.S. stock market.

• College Faculty’s New Focus: Don’t Offend. Professors across the country are adapting to an environment in which a word or turn of phrase has the power to derail a career.

• AT&T(T) Lowers Price of Unlimited Data Plans. Smaller rivals T-Mobile and Sprint have been taking market share from AT&T and Verizon by pushing lower prices and plans without data caps.

Fox News:

• Fox News Poll: Confidence in military remains high, in media low. (video)

CNBC:

• After-hours buzz: PCLN, FTR, PRGO & more.

Zero Hedge: 

• Minimum Wage Massacre: Wendy's Unleashes 1,000 Robots To Counter Higher Labor Costs.

• GM(GM) Pickup Incentives Surge Over 80% As Auto Bubble Continues To Show Signs Of An Imminent Bust.

• Second House Conservative Won't Back Trump's Obamacare Replacement.

• Ethereum Soars After JPMorgan, Intel, Microsoft And Others Form Blockchain Alliance.

• New Rules Force Banks To Charge For Research; Hedge Funds Push Back: "We Won't Pay For Crap".

• Gas Taxes Set To Surge In Roughly A Dozen States.

• China Accounts For Half Of All Global Debt Created Since 2005: Here Are The Implications.

• Boston Dynamics Unveils Its Latest "Nightmare-Inducing" Robot. (video)

• 'Out Of The Blue', March Rate Hike Odds Soar To Cycle Highs.

• Deep State War? Russian Officials Keep Dying Unexpectedly.

• Oscars Viewership Tumbles To Second Lowest In History.

• Guess 'Who' Just Figured Out The Fed Is Behind The Curve.

• Wal-Mart(WMT) Is Quietly Cutting Prices, Squeezing Vendors In Deflationary Supply-Chain Shock.

• The Dow Has Never Had A Longer Streak Of Record Closes... Ever. (graph)

Busines Insider:

• The world's biggest drugmaker just pulled back the curtain on drug pricing.

• One of the top hedge fund launches of the year has landed a big-name backer.

• Jewish community centers all over the US report receiving bomb threats.

StreetInsider.com:

• Cowen Upgrades US Steel (X) to Outperform. Cowen upgraded US Steel (NYSE: X) from Market Perform to Outperform with a price target of $60.00 (from $36.00).

Reuters:

• Japan Jan industrial output falls 0.8 pct mth/mth -govt.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 96.0 +.5 basis point.

• Asia Pacific Sovereign CDS Index 25.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 71.58 -.02%. 

• S&P 500 futures -.05%. 

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDD)/.13

• (AZO)/8.19

• (DPZ)/1.44

• (FSS)/.16

• (FCN)/.27

• (IPI)/-.12

• (TGT)/1.52

• (VRX)/1.21

• (AIRM)/.58

• (JAZZ)/2.66

• (PANW)/.62

• (ROST)/.75

• (CRM)/.25

• (TSRO)/-1.89

Economic Releases
8:30 am EST

• 4Q GDP QoQ is estimated to rise +2.1% versus a prior estimate of a +1.9% gain.

• 4Q Personal Consumption is estimated to rise +2.6% versus a prior estimate of a +2.5% gain.

• 4Q GDP Price Index is estimated to rise +2.1% versus a prior estimate of a +1.9% gain.

• Core PCE QoQ is estimated to rise +1.3% versus a prior estimate of a +1.3% gain.

• Wholesale Inventories MoM for January are estimated to rise +.5% versus a +1.0% gain in December.

9:00 am EST

• S&P CoreLogic CS 20-City MoM for December is estimated to rise +.7% versus a +.88% gain in November.

9:45 am EST

• Chicago Purchasing Manager for February is estimated to rise to 53.3 versus 50.3 in January.
  

10:00 am EST

• Consumer Confidence for February is estimated to fall to 111.0 versus 111.8 in January.

• The Richmond Fed Manufacturing Index for February is estimated to fall to 10.0 versus 12.0 in January.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's George speaking, Fed's Williams speaking, Fed's Bullard speaking, President Trump's address to Congress, China Manufacturing PMI report, Eurozone GDP report, weekly US retail sales report, (JPM) investor day and the CSFB Healthcare Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted 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 75% net long heading into the day.

Stocks Rising Slightly into Final Hour on Economic Optimism, Yen Weakness, Short-Covering, Biotech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.86 +3.4%

• Euro/Yen Carry Return Index 124.72 +.84%

• Emerging Markets Currency Volatility(VXY) 9.57 -.73%

• S&P 500 Implied Correlation 45.12 -2.06%

• ISE Sentiment Index 83.0 -9.78%
  

• Total Put/Call .79 -4.82%

• NYSE Arms .79 -53.31%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.33 -1.48%
  

• America Energy Sector High-Yield CDS Index 355.0 -.48%

• European Financial Sector CDS Index 93.48 -1.48%

• Western Europe Sovereign Debt CDS Index 22.17 -2.89%

• Asia Pacific Sovereign Debt CDS Index 25.40 +.45%

• Emerging Market CDS Index 214.94 +.14%
  

• iBoxx Offshore RMB China Corporate High Yield Index 135.06 +.11%

• 2-Year Swap Spread 35.75 -.5 basis point

• TED Spread 55.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -26.5 +1.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.60 +.06%
• 3-Month T-Bill Yield .50% unch.

• Yield Curve 116.0 -1.0 basis point
  

• China Import Iron Ore Spot $92.33/Metric Tonne +2.02%

• Citi US Economic Surprise Index 37.10 -8.6 points

• Citi Eurozone Economic Surprise Index 72.30 +2.1 points

• Citi Emerging Markets Economic Surprise Index 42.90 -3.4 points

• 10-Year TIPS Spread 2.03 +1.0 basis point
• 66.6% chance of Fed rate hike at May 3 meeting, 78.4% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +127 open in Japan 
• China A50 Futures: Indicating +52 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

• Higher: On gains in my in my retail/biotech sector longs and emerging market shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.1%

Sector Underperformers:

• 1) Gold & Silver -1.5% 2) Foods -1.5% 3) Restaurants -.7%

Stocks Falling on Unusual Volume: 

• SSTK, AFSI, NOW, HZNP, TDS, TSLA, AES, ZOES and HMSY

Stocks With Unusual Put Option Activity:

• 1) USM 2) TSLA 3) TDS 4) HB 5) HMSY

Stocks With Most Negative News Mentions:

• 1) ACIA 2) HPE 3) JACK 4) HGG 5) CRK

Charts:

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