Today's Headlines

Bloomberg:

• Tax Cuts Are the Dream Pushing a Market That Won't Stop Climbing. (video) Market pessimists are warning investors to temper their exuberance over President Donald Trump’s proposed tax cuts. Stocks raced to records last week, the dollar hit a two-month high and 10-year Treasury yields rose to a three-month peak after the administration and congressional leaders announced a framework that would lower the corporate tax rate. Now, a growing chorus of analysts sees a tax trade that’s gotten ahead of itself. And they’re voicing skepticism on whether the plan will become law anytime soon.
• GOP Leaders Consider Changing State and Local Tax Deduction Instead of Ending It. Republican leaders are considering putting limits on the $1.3 trillion state and local tax deduction -- instead of eliminating it -- in order to secure votes from members in the hardest-hit states. House Ways and Means Chairman Kevin Brady discussed options at a dinner Monday night with several GOP members who have defended the break, known as the SALT deduction. They talked about measures including capping the deduction for top earners, and allowing individuals to choose between deducting mortgage interest or property taxes -- but not both -- when calculating their taxes, according to several dinner attendees.
• Tech Sentiment Hits a 16-Month Low. Skeptical the rotation is real? Looking at proxies for demand in tech stocks, a case can be made that it is. With the Nasdaq 100 repeatedly failing to push past 6,000, large speculators last week reduced their net long positions in mini futures tracking the gauge to the lowest level since May 2016, Commodity Futures Trading Commission data show. ETF investors pulled almost $900 million from tech-focused funds over the past five days, more than any other sector tracked by Bloomberg.
• Storms Unleash $22 Billion in Spending for Battery-Backed Grids. Growing demand for more resilient power supplies will spur $22.3 billion of global investment in battery-backed solar systems over the next decade, according to Navigant Research. Villages and homes in far-flung places will drive the expansion of microgrids, small-scale solar systems with batteries that can retain power until it’s needed. Navigant expects 14.9 gigawatts to be in operation in 2026, up from 238 megawatts this year, according to a report Tuesday.

Wall Street Journal:

• Investigators Probe Las Vegas Shooter’s Motive. Hunt continues for clues about why a gunman opened fire late Sunday.
• Catalans Take to Streets to Protest Spanish Police. Tensions have flared over continued presence of national police after crackdown on independence referendum.
• U.S. Orders Cuba to Cut Embassy Staff in Washington. Move stems from mysterious health problems of U.S. diplomats in Havana. 
• GM, Ford, Toyota Post Sharply Higher Sales in September. Heavier consumer discounts and surging demand to replace hurricane-damaged vehicles gives auto makers momentum.

MarketWatch.com:

• European stocks end slightly higher, stretch winning run to 9 sessions. The Stoxx Europe 600 index SXXP, +0.15% rose 0.2% to end at 390.72, holding near its highest level since mid-June and rising for a ninth straight session.

Fox News:

• Trump surveys hurricane-ravaged Puerto Rico, meets San Juan mayor after feud. (video)
• Las Vegas shooter sent tens of thousands of dollars 'overseas,' officials say. (video)

CNBC:

• Consumers face $4.1 billion tab to freeze credit reports after Equifax breach. (video)
• One of the bears’ biggest talking points is getting torn apart. (video)
• Fears of hurricane hit ease after Delta's forecast, airline stocks surge.
• The biggest movers in the stock market today are all votes for an accelerating economy.

Zero Hedge: 

• Vegas Killer Used "Bump-Stock" To Create Automatic Fire, Purchased Guns Legally.
• Warren Slams Wells CEO "You Should Be Fired" As Buffett Counters "He Has My Faith".
• "We Have No Idea" Police Struggle With Motive Behind Vegas Shooting.
• US Expels 15 Cuban Diplomats In Retaliation For Mystery "Health Attack".
• Active Bond Traders Have Never Been More Short Treasurys: Is A Squeeze Imminent?
• Meet The Iraq War Veteran Who Led Police To The Vegas Shooter.

The Telegraph:

• Our default position must not include state bail-outs of banks.

Bear Radar

Style Underperformer:

• Smal-Cap Value -.3%

Sector Underperformers:

• 1) Oil Service -.8% 2) Road & Rail -.6% 3) Utilities -.4%

Stocks Falling on Unusual Volume: 

• NVMI, PTCT, LL, DXCM, SCMP, MDXG, HEI, FIZZ and AEGN

Stocks With Unusual Put Option Activity:

• 1) VRX 2) TWX 3) BBT 4) MNKD 5) BRK/B

Stocks With Most Negative News Mentions:

• 1) TTS 2) SCMP 3) AEGN 4) URBN 5) FFIV

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.2%

Sector Outperformers:

• 1) Airlines +3.5% 2) Social Media +1.4% 3) Homebuilders +1.3%

Stocks Rising on Unusual Volume:

• SSTI, LEN, PAYX, MANH, CALM, JP, SHW, NTLA, GM, MYOV, ICPT, PINC, EFX, FWONK, JBLU, BMA, CCU, SGH, DAL, TSLA, HLNE, MHK, EXAS, UNIT, RGR, SHW, ESIO, MTCH, EXTR, KR and MCRB

Stocks With Unusual Call Option Activity:

• 1) JBLU 2) MGM 3) COF 4) LEN 5) LUV

Stocks With Most Positive News Mentions:

• 1) ECYT 2) MANH 3) GM 4) PAYX 5) LEN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -6.7% Below 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 47.2% of Issues Advancing, 48.9% Declining
• 223 New 52-Week Highs, 9 New Lows
• 48.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.8%
• Vix 9.6 +2.0%
• Total Put/Call .76 -18.0%
• TRIN/Arms .73 -18.8%

Tuesday Watch

Evening Headlines

Bloomberg:

• Here Are Five Tailwinds Set to Boost the Global Market Rally. (video) Financial markets are dancing again to the risk-on beat, with the latest upswing in global manufacturing the latest reason to boogie. With the threat of higher interest rates, geopolitical shocks, and rich valuations, for now, seemingly powerless to unhinge stocks and bonds from their bullish foundations, there could be even more pain in store for naysayers. Here are five forces that may fan the flames of the risk rally. This is the season for investors to be jolly. Discretionary macro hedge-fund managers and active mutual-fund managers are likely to chase markets since they are flat or have lagged benchmarks for the first three quarters, according to JPMorgan Chase & Co. Add outflows spurred by the boom in passive investing -- estimated to hit $254 billion this year, matching 2008 levels -- and active equity mutual funds are under strong pressure to chase performance, the bank reckons.

• Why an Enigmatic Chinese Company Just Spent $9 Billion on a Stake in Rosneft. While there’s a risk of crude sliding below $30 as demand is displaced by alternative energy, it’ll still be needed for making petrochemicals, said the head of the enigmatic Chinese company that last month bought a $9 billion stake in Rosneft Oil Co.

• India's Central Bank Seen Holding Rates Lower as Slowdown Bites. India’s central bank is expected to keep its benchmark rate at a seven-year low this week amid slowing growth in Asia’s third-largest economy. With inflation climbing fast toward the Reserve Bank of India’s medium term target, the Federal Reserve starting to shrink its balance sheet and growing speculation the government may loosen purse strings to bolster the economy, the room for lowering rates in the coming months is narrowing.

• Stocks Add Gains, Dollar Climbs on Economic Cheer. Strong factory data and the prospect for American tax cuts boosted confidence in the global economy, lifting the dollar and emboldening bulls who drove U.S. equities to fresh record highs and pushed up shares in Asia. The Bloomberg dollar index was near strongest since mid-August, and the S&P 500 Index closed at an all-time high after data showed U.S. manufacturing expanded at the fastest pace in 13 years. That comes on the back of an unexpectedly strong factory gauge out of China over the weekend and the Bank of Japan’s quarterly Tankan survey showing the country’s big manufacturers are the most confident in a decade. Japanese shares rose, Aussie stocks gave back some yesterday’s gains and oil fell closer to $50 a barrel. Japan’s Topix index added 0.3 percent. Australia’s S&P/ASX 200 Index slid 0.3 percent. Hang Seng futures were up 0.2 percent with traders returning after a long weekend. Indian markets also reopen after a holiday, while those in China and South Korea remain shut.

• Five Things You Need to Know to Start Your Day. (video)

Wall Street Journal:

• Shooting Suspect Was a Gambler, Property Investor; Brother Is ‘Horrified’. Stephen Paddock, accused of killing at least 59 people, lived in several retirement communities where he kept to himself.

Fox News:

• Las Vegas police, feds race to uncover what drove 'aggressively unfriendly' gunman with weapons arsenal to kill. (video)

CNBC:

• Mass shooting may have little impact on Las Vegas tourism. (video)

• Art Cashin on markets: 'It looks like the last quarter is going to be good'.

• After hours buzz: TSLA, GS, GE & more.

Zero Hedge:

• "Innovative Mortgages": Lennar Lures Millennials With Offer To Repay Student Loans.

• Trump To Seek Additional $10-$15 Billion In Disaster Funds Amid Puerto Rico Fallout.

• The Globalists Are Systematically Destroying America's Middle Class.

• Bernie Sanders' "Medicare for All" Is 'Good For None'.

• CBS Fires Exec Who Slammed Vegas Dead As "Country Music Fans Who're Often Gun-Toting Republicans".

• Tesla(TSLA) Slumps As Model 3 Disappoints Despite "All-Time Best Quarter" For Model S, X Deliveries.

• Small Cap Stocks Surge To 'Most Overbought' In 20 Years, Bonds Shrug. (graph)

Business Insider: 

• Chiefs Charcandrick West tried to shield a sitting teammate from cameras during anthem prior to 'Monday Night Football'.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 80.5 -1.25 basis points. 

• Asia Pacific Sovereign CDS Index 18.75 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.39 -.14%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AZZ)/.44

• (LEN)/1.01

• (PAYX)/.60

Economic Releases 
Afternoon:

• Total Vehicle Sales for September are estimated to rise to 17.1M versus 16.0M in August.

Upcoming Splits

• (ISRG) 3-for-1

Other Potential Market Movers

• The Eurozone PPI report, Australian Central Bank decision, weekly US retail sales reports, (F) Strategic Update, BofA Building/Infrastructure Conference and the (INTU) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Higher into Final Hour on Tax Reform Hopes, Economic Optimism, Short-Covering, Biotech/Defense Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.51 unch.

• Euro/Yen Carry Return Index 137.95 -.49%

• Emerging Markets Currency Volatility(VXY) 7.85 -.76%

• S&P 500 Implied Correlation 20.09 -9.38%

• ISE Sentiment Index 200.0 +132.5%
  

• Total Put/Call .90 -12.6%

• NYSE Arms 1.03 -14.87%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.02 -1.46%
  

• America Energy Sector High-Yield CDS Index 406.0 +.55%

• European Financial Sector CDS Index 59.28 -.39%

• Western Europe Sovereign Debt CDS Index 5.33 +6.81%

• Asia Pacific Sovereign Debt CDS Index 18.88 -.68%

• Emerging Market CDS Index 182.05 -1.59%
  

• iBoxx Offshore RMB China Corporate High Yield Index 142.12 +.04%

• 2-Year Swap Spread 25.25 -.5 basis point

• TED Spread 29.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -40.75 -.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.51 -.24%
• 3-Month T-Bill Yield 1.01% -3.0 basis points
  

• Yield Curve 85.0 unch.

• China Import Iron Ore Spot $62.05/Metric Tonne unch.

• Citi US Economic Surprise Index 1.50 +9.4 points

• Citi Eurozone Economic Surprise Index 45.60 -4.6 points

• Citi Emerging Markets Economic Surprise Index 18.90 +3.9 basis points

• 10-Year TIPS Spread 1.84 -2.0 basis points
  
• 70.5% chance of Fed rate hike at Dec. 13 meeting, 71.7% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +95 open in Japan 
• China A50 Futures: Indicating +153 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long