Stocks Slightly Lower into Final Hour on Earnings Concerns, Oil Decline, Profit-Taking, Retail/Oil Service Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.96 +1.12%

• Euro/Yen Carry Return Index 138.48 -.47%

• Emerging Markets Currency Volatility(VXY) 8.16 -.73%

• S&P 500 Implied Correlation 17.0 +1.74%

• ISE Sentiment Index 76.0 -2.56%
  

• Total Put/Call 1.02 +14.61%

• NYSE Arms 1.84 +40.69%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.40 +1.39%
  

• America Energy Sector High-Yield CDS Index 401.0 -.01%

• European Financial Sector CDS Index 59.20 +.39%

• Western Europe Sovereign Debt CDS Index 4.88 -.81%

• Asia Pacific Sovereign Debt CDS Index 16.26 -.98%

• Emerging Market CDS Index 177.18 -1.43%
  

• iBoxx Offshore RMB China Corporate High Yield Index 142.24 -.05%

• 2-Year Swap Spread 25.75 -2.0 basis points

• TED Spread 28.75 +1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -41.50 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.72 +.08%

• 3-Month T-Bill Yield 1.07% -2.0 basis points
  

• Yield Curve 81.0 -1.5 basis points

• China Import Iron Ore Spot $60.09/Metric Tonne +.74%

• Citi US Economic Surprise Index 7.20 +.8 point

• Citi Eurozone Economic Surprise Index 55.80 +2.2 points

• Citi Emerging Markets Economic Surprise Index 23.40 +4.5 basis points

• 10-Year TIPS Spread 1.89 unch.
  

• 78.6% chance of Fed rate hike at Dec. 13 meeting, 79.9% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +76 open in Japan 

• China A50 Futures: Indicating +38 open in China

• DAX Futures: Indicating -4 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +5.9% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 47.3% of Issues Advancing, 48.8% Declining
• 110 New 52-Week Highs, 18 New Lows
• 48.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.9%
• Vix 10.0 +1.1%
• Total Put/Call 1.08 +21.4%
• TRIN/Arms 1.48 +11.1%

Thursday Watch

Evening Headlines

Bloomberg:

• Asia Stocks to Nudge Higher as Fed Seen Dovish. Investors still expect borrowing costs to rise this year, with market-implied odds of a U.S. rate hike by year-end remaining at about 75 percent, based on January 2018 fed fund futures, after the release of the minutes from the Sept. 20 policy meeting. Futures for Japanese and Hong Kong equities climbed following a fresh S&P 500 Index record. Treasuries were steady. The euro remains on course for a strong week as the immediate threat of Spain’s breakup over Catalonia’s independence bid receded. Investors will be monitoring President Trump’s speech on tax reform. Futures on the Nikkei 225 advanced 0.6 percent. Contract on Australia’s S&P/ASX 200 Index were flat, while Hang Seng Index futures rose 0.2 percent.

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

• Trump Promises Benefits for Millions of Americans From Tax Plan. (video)

• Goldman(GS) Has a New Way for You to Bet on the Next Banking Crisis. Less than a decade after the last major banking crisis, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are offering investors a new way to bet on the next one. The two financial giants are now offering trades in derivatives that enable investors to bet on or against high-risk bank bonds that financial regulators can wipe out if a lender runs into trouble. Others are also planning to start making markets in the contracts, known as total-return swaps, in the coming weeks, according to Max Ruscher, the London-based director of credit indexes at IHS Markit Ltd., which administers the benchmarks that the swaps are linked to.

• The Daily Prophet: Rejoice, the 'Market of Stocks' Has Returned. According to the strategists at DataTrek, the correlation between the S&P 500 Index and the 10 market sectors outside of tech has dropped to 37 percent, which is a decade low. To DataTrek, that means it's gone back to being a more healthy "market of stocks" instead of simply "a stock market."

Wall Street Journal:

• Trump Says Separate Trade Pacts With Canada, Mexico Could Replace Nafta. U.S. president says his administration wants to remake the accord but will terminate it if that’s not possible.

• Beijing Pushes for a Direct Hand in China’s Big Tech Firms. Government regulators have discussed stakes in Tencent, Weibo and an Alibaba subsidiary.

Fox News:

• Cara Delevingne: Harvey Weinstein wanted a three-way in hotel room, tried to kiss me.

• Trump and Mattis team up to refute NBC nuke report, blast 'disgusting' press. (video)

CNBC:

• Why Amazon's(AMZN) No. 1 rival, Wal-Mart(WMT), isn't done going higher.

• Here comes earnings season: These 10 stocks are going to beat the Street, investors say.

• Brace for higher orange prices as USDA expected to forecast smallest crop since 1940s.

• Wilbur Ross says Trump administration does not want to walk away from NAFTA.

Zero Hedge: 

• It's Not Just The Markets: Economic Volatility Tumbles To 50 Year Lows. (graph)

• Soda Tax Fizzles In Chicago As Cook County Officials Cast Decisive 15-1 Repeal Vote.

• Illinois Debt Crisis Deepens As Comptroller Admits No Idea What True Balance Of Outstanding Bills Is.

• Would You Pay $2,500 For One Hour With An Equity Analyst? This I-Bank Seems To Think So...

• Millennials Have Never Been More In Debt, And It Is Creating A Major Risk For The Economy. (graph)

• O'Keefe Drops Part 2: NYT Editor Brags About Colluding With YouTube To Push Political Agenda.

• WTI/RBOB Slide After Surprise Crude Build. (graph)

• Is Bridgewater A Fraud? Here Are The Troubling Questions Posed By Jim Grant.

• Powell Fed Chair Odds Surge After Politico Doubles Down On "Mnuchin Support" Report.

• Stocks Up, Bonds Up, Gold Up, & Dollar Down But Tax-Hope Tumbles. (graph)

Business Insider: 

• The NFL anthem protests are at a tipping point, and their legacy is riding on what happens next.

• Harvey Weinstein is reportedly going to rehab for sex addiction — here's what that means.

Night Trading 

• Asian equity indices are +.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.0 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 16.25 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.69 +.04%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (C)/1.29

• (DPZ)/1.23

• (JPM)/1.66

• (LNN)/.62

• (EXFO)/.05

Economic Releases 
8:30 am EST

• PPI Final Demand MoM for September is estimated to rise +.4% versus a +.2% gain in August.

• PPI Ex Food & Energy MoM for September is estimated to rise +.2% versus a +.2% gain in August.

• Initial Jobless Claims for last week are estimated to fall to 250K versus 260K the prior week. 

• Continuing Claims are estimated to fall to 1930K versus 1938K prior.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,041,900 barrels versus a -6,023,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -172,600 barrels versus a +1,644,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,713,9000 barrels versus a -2,606,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.14% versus a -.5% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Australia Home Loan data, Eurozone Industrial Production report, $12B 30Y T-Bond auction, Wasde Crop report, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are 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 Tax Reform Hopes, Less Eurozone Debt Angst, Oil Strength, Restaurant/Road & Rail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.02 -.6%

• Euro/Yen Carry Return Index 138.94 +.35%

• Emerging Markets Currency Volatility(VXY) 8.23 -1.2%

• S&P 500 Implied Correlation 17.16 -5.1%

• ISE Sentiment Index 80.0 -29.82%
  

• Total Put/Call .86 +17.81%

• NYSE Arms 1.52 +35.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.64 +.72%
  

• America Energy Sector High-Yield CDS Index 399.0 +.93%

• European Financial Sector CDS Index 58.97 -1.04%

• Western Europe Sovereign Debt CDS Index 4.93 -2.38%

• Asia Pacific Sovereign Debt CDS Index 16.26 -2.22%

• Emerging Market CDS Index 177.18 -1.43%
  

• iBoxx Offshore RMB China Corporate High Yield Index 142.31 +.03%

• 2-Year Swap Spread 27.75 unch.

• TED Spread 27.0 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -42.0 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.65 +.44%
• 3-Month T-Bill Yield 1.09% +2.0 basis points
  

• Yield Curve 82.50 -2.25 basis points

• China Import Iron Ore Spot $59.65/Metric Tonne -2.23%

• Citi US Economic Surprise Index 6.40 +1.9 points

• Citi Eurozone Economic Surprise Index 53.60 -.1 point

• Citi Emerging Markets Economic Surprise Index 18.90 -1.5 basis points

• 10-Year TIPS Spread 1.89 +1.0 basis point
  
• 78.6% chance of Fed rate hike at Dec. 13 meeting, 79.9% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +120 open in Japan 
• China A50 Futures: Indicating +30 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long