Morning Market Internals

NYSE Composite Index:

• Volume Running -7.2% Below 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 63.5% of Issues Advancing, 31.0% Declining
• 168 New 52-Week Highs, 4 New Lows
• 48.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.0%
• Vix 9.4 -2.9%
• Total Put/Call .80 -3.6%
• TRIN/Arms .90 -12.1%

Thursday Watch

Evening Headlines

Bloomberg:

• Catalan Leader Keeps Spain Guessing on Independence Declaration. Catalan President Carles Puigdemont kept the rest of Spain guessing on if and when he will declare independence, prolonging the uncertainty over the breakaway region’s ultimate card in its confrontation with the government in Madrid. Speaking in a televised statement on Wednesday night, Puigdemont reiterated an offer for mediated talks while attacking King Felipe VI’s condemnation 24 hours earlier of Catalonia’s illegal referendum on Sunday. The regional government in Barcelona will soon apply the results of its makeshift vote, Puigdemont said, though he stopped short of saying how or when he would trigger the process to leave Spain.

• Puerto Rico Is Running Out of Money.

• Dollar, Bonds Are Listless as Oil Drops Below $50. Asian equities began the session with a muted start, with markets in Hong Kong, China, and South Korea all closed for holidays. The S&P 500 Index got a slight boost overnight from data showing American services industries climbed at the fastest pace in 12 years, while private jobs numbers met expectations. The dollar was little changed, below the recent 11-week high. Ten-year Treasury yields held at 2.33 percent as markets assessed the Trump administration’s shortlist of candidates to helm the Federal Reserve. Japan’s Topix index was little changed. Australia’s S&P/ASX 200 Index added 0.1 percent.

Wall Street Journal:

• The Gun Control Mirage. More gun laws won’t stop mass shootings by determined killers.

• GOP Lawmakers Consider Gun-Control Measure. Trump travels to Las Vegas amid calls on Capitol Hill for new regulations in the wake of mass shooting.

MarketWatch.com:

• Some investors see signs stock market ‘on verge’ of a melt-up.

Fox News:

• Las Vegas shooter's girlfriend denies prior knowledge of attack. (video)

• Trump praises ‘bravery’ of first responders in Las Vegas, consoles shooting survivors. (video)

CNBC:

• House vote should keep the Trump trade on the front burner for markets.

• 3 Equifax(EFX) executives should be investigated for insider trading.

• Cigna(CI) won't cover OxyContin prescriptions for 2018, as health insurer targets opioid abuse.

• Auto companies scrambling to catch up with Tesla and tech firms, Morgan Stanley analyst says.

• Google(GOOGL) shows off wireless headphones that it says can translate languages on the fly. (video)

Zero Hedge:

• De-Dollarization & Disintermediation - Russian Mobile Phone Operator Issues First Blockchain-Backed Bond.

• Mueller Takes Over "Trump Dossier" Probe After Intel Committee "Hits A Wall".

• 3 Green Berets Killed In Al Qaeda Ambush Near Mali-Niger Border.

• Soros, Kellogg, Ford: Donor List Of Anti-Trump 'Resistance' Group Revealed.

• 5 Heroes That Risked Everything To Save Lives During The Las Vegas Shooting.

• This Isn't A Joke! The IRS Just Hired Equifax(EFX) To Safeguard Taxpayer Data.

• Credit Spreads Collapse To Post-Crisis Lows As Stock Market 'Greed' Nears 1998 Highs. (graph)

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 78.25 -.25 basis point. 

• Asia Pacific Sovereign CDS Index 18.25 +1.25 basis points.

• Bloomberg Emerging Markets Currency Index 73.72 -.04%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STZ)/2.17

• (ISCA)/.03

• (COST)/2.02

• (YUMC)/.56

Economic Releases 
7:30 am EST:

• Challenger Job Cuts YoY for September.

8:30 am EST:

• Initial Jobless Claims for last week are estimated to fall to 265K versus 272K the prior week.

• Continuing Claims are estimated to rise to 1950K versus 1934K prior.

• The Trade Deficit for August is estimated at -$42.7B versus -$43.7B in July.
  

10:00 am EST

• Factory Orders for August are estimated to rise +1.0% versus a -3.3% decline in July.

Upcoming Splits

• (ISRG) 3-for-1

Other Potential Market Movers

• The Fed's George speaking, Fed's Harker speaking, Fed's Williams speaking, Fed's Powell speaking, Eurozone Retail Sales report, (COST)/(FRED)/(LB)/(BKE) monthly sales reports, Bloomberg weekly Consumer Comfort Index, (CLX) investor day and the (ORCL) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology 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 Reversing Slightly Higher into Final Hour on Economic Optimism, Technical Buying, Short-Covering, Biotech/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.62 +1.16%

• Euro/Yen Carry Return Index 138.29 +.07%

• Emerging Markets Currency Volatility(VXY) 7.83 +.13%

• S&P 500 Implied Correlation 19.32 -2.13%

• ISE Sentiment Index 92.0 +8.24%
  

• Total Put/Call .81 +11.0%

• NYSE Arms 1.15 +68.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.32 +.12%
  

• America Energy Sector High-Yield CDS Index 402.0 -.50%

• European Financial Sector CDS Index 60.43 +2.68%

• Western Europe Sovereign Debt CDS Index 5.43 +2.07%

• Asia Pacific Sovereign Debt CDS Index 18.22 +6.89%

• Emerging Market CDS Index 177.69 -.41%
  

• iBoxx Offshore RMB China Corporate High Yield Index 142.22 +.04%

• 2-Year Swap Spread 27.35 +.75 basis point

• TED Spread 27.75 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -36.25 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.77 +.35%
• 3-Month T-Bill Yield 1.06% +1.0 basis point
  

• Yield Curve 86.0 unch.

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

• Citi US Economic Surprise Index 9.70 +8.0 points

• Citi Eurozone Economic Surprise Index 41.70 -3.6 points

• Citi Emerging Markets Economic Surprise Index 16.50 -.6 basis point

• 10-Year TIPS Spread 1.86 +1.0 basis point
  
• 73.4% chance of Fed rate hike at Dec. 13 meeting, 74.4% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +81 open in Japan 
• China A50 Futures: Indicating +429 open in China

• DAX Futures: Indicating -27 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• Spain’s on Edge Over Catalonia’s Rebellion — So Are Investors. (video) As Spain confronts its Catalonian rebellion, investors are staring down a decision on whether to bet on a peaceful resolution to the secession upheaval or prepare for the consequences if the region splits off. For some, it’s reminiscent of the early stages of the euro-zone debt crisis, when investors found themselves reading up on the ins and outs of Greek politics and EU treaty articles to gauge the probability of a political and economic shake-up and its likely effects.
• Dark Trading Could Triple in Europe Under New Market Rules. (video) Trading of European stocks on dark markets will probably triple as a result of the MiFID II overhaul, the opposite of what the architects of the law intended, as the new rules give some venues flexibility in how they price shares. That’s according to Alex Gerko, co-chief executive officer of XTX Markets Ltd., an algorithmic trading firm that’s one of the region’s largest traders. He predicts that dark trading will become as significant in Europe as it is in the U.S., where more than one-third of stock trades happen on dark markets. As much as 10 percent of European equity trading currently takes place on dark pools, including invisible over-the-counter trades.
• Here Are the Top-Eight Holders of Puerto Rican Debt.
• Your Evening Briefing.

Wall Street Journal:

• Spain Tense as Catalan Separatist Leaders Called to Testify in Sedition Investigation. Region’s leaders have warned that they could declare independence as soon as this weekend.
• Senators Rip Credit-Reporting Model in Wake of Equifax(EFX) Breach. Ex-Equifax CEO faces questions about how the company handled the breach and whether an industry overhaul is needed.
• Another Thing Amazon Is Disrupting: Business-School Recruiting. Amazon has hired some 1,000 newly minted M.B.A.s in the past year.

MarketWatch.com:

• Spanish stocks lead Europe to lower close as Catalonia dispute intensifies. The Stoxx Europe 600 index SXXP, -0.08% fell 0.1% to end at 390.40, breaking a nine-day winning streak, the benchmark’s longest since July 2015.

Fox News:

• Tillerson blasts report of rift with Trump, as president rips 'fake news'. (video)
• Las Vegas shooter's girlfriend had 'clean conscience,' citizenship questions emerge. (video)
• Corporate Donors to anti-Trump 'resistance' group revealed.

CNBC:

• EU cash grab is a huge boost to Trump's tax-reform effort. (video)
• Google(GOOGL) Pixel 2 phones, Google Home Max and more announced — here's a rundown.
• Homeland Security report cited lone offenders as threat to large events in the South, weeks before Las Vegas massacre.
• Facebook(FB) is about to get slammed by US populist backlash, says early Uber investor Calacanis.
• Tropical depression forms in Caribbean; likely to impact Gulf Coast this weekend as a hurricane.
• Buy Netflix(NFLX) before earnings because subscriber growth will top Street: UBS. (video)
• American optimism about the economy hits an all-time high in new CNBC survey. (video)

Zero Hedge:

• 16 Unanswered Questions About The Las Vegas Shooting That Mainstream Media Doesn't Want To Talk About.
• Meet The Next Fed Chair: The Definitive Cheat Sheet.
• Study Of 10-Year State Pension Returns Highlight Full Extent Of Public Pension Ponzi.
• Tillerson Vows To Stay On, Slams NBC 'Moron' Report.
• Robots To Replace All Human Cashiers At New York Shake Shack(SHAK).
• WTI/RBOB Jump After Big Crude Inventory Draw, Exports Hit Record High.
• Nigel Farage Blasts EU, Juncker Over Catalonia: Spain Violates Article 2 Of Lisbon Treaty.
• ISM Services Spikes To 12-Year Highs - Beats Expectations By 5 Standard Deviations (As PMI Slides). (graph)
• Puerto Rico Bonds Crash To Record Low After Trump Says Debt May Need To Be "Wiped Out". (graph)
• Catalonia To Declare Independence From Spain On Monday.
• ADP Employment Grows At Slowest Pace In 11 Months As Small Business Slumps.
• Angry Trump Blasts "Fake News Media" For Puerto Rico Coverage.

The Telegraph:

• Spanish stocks plunge and bonds yields soar as Catalonia crisis intensifies.

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Education -.7% 2) Road & Rail -.6% 3) Coal -.5%

Stocks Falling on Unusual Volume: 

• SHOP, MNTA, AMBC, TEVA, RSG, PRAA, PLAY and CWST

Stocks With Unusual Put Option Activity:

• 1) PEP 2) MYL 3) XME 4) MNKD 5) SEAS

Stocks With Most Negative News Mentions:

• 1) MNTA 2) WGO 3) PRAA 4) RSG 5) AMBC

Charts:

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