Morning Market Internals

NYSE Composite Index:

• Volume Running -1.3% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 47.9% of Issues Advancing, 47.9% Declining
• 103 New 52-Week Highs, 9 New Lows
• 47.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.6%
• Vix 10.0 -2.6%
• Total Put/Call .95 +13.1%
• TRIN/Arms .97 +5.8%

Wednesday Watch

Evening Headlines

Bloomberg:

• Xi Jinping Poised to Put His Stamp on Chinese History. (video) President Xi Jinping kicks off China’s most important political event on Wednesday, a twice-a-decade meeting of party leaders that may signal if Xi will appoint a successor to rule after 2022. Xi will start the weeklong event this morning with what’s known as the work report, seen as the ruling Communist Party’s most significant policy document. It will cover achievements since Xi took power in 2012, and lay out his vision for everything from party building to the economy to the military.

• U.S. Softens China FX Criticism, Cuts Taiwan From Watch List. The U.S. Treasury said no major trading partner is manipulating its currency to gain an advantage in trade, while lauding China for acting to avoid a “disorderly” depreciation and then allowing the yuan to rise against the dollar this year. “The Chinese currency has moved recently in a direction that would help correct the bilateral trade imbalance with the United States,” according to the Treasury’s twice-yearly foreign currency report released Tuesday in Washington. “But on a trade-weighted basis, the currency has become more competitive globally” amid a weakening greenback.

• Watch These 11 China Activity Measures to Predict Global Trade.

• Caution Prevails as China Party Congress Begins. Asian equities were mixed at the start, despite fresh records for U.S. stocks, while the dollar reversed its rally from the start of the week. While analysts expect little in the way of substantial reforms to emerge from the twice-a-decade congress in Beijing, which begins Wednesday, investors will focus on comments about deleveraging, capacity reduction and the global belt-and-road infrastructure plan. Japan’s Topix index was slightly higher as of 9:17 a.m. in Tokyo along with Australia’s S&P/ASX 500 Index and South Korea’s Kospi index. Hong Kong’s Hang Seng Index futures contracts were 0.3 percent lower.

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

• Luxembourg's Gramegna Sees European Growth Strengthening. (video)

• Trump Pitches Tax Plan to Policy Group That Helped Write It. (video) President Donald Trump sought to rally support for his effort to overhaul the nation’s tax code on Tuesday at a conservative policy group that helped write the plan. Trump made his argument for a dramatic cut in tax rates for corporations and many individual Americans at the Heritage Foundation’s annual President’s Club meeting -- and asked for the group’s help in getting legislation passed by year’s end. “So let’s give our country the best Christmas present of all -- massive tax relief,” Trump said.

Wall Street Journal:

• U.S.-Backed Forces Say They Have Taken Raqqa, Islamic State’s Last Urban Stronghold. Syrian Democratic Forces say four-month battle for de facto capital is over.

• Future of Tech and Media: Waging a War for People’s Time. Activate co-founder Michael Wolf says the battle of internet giants will enter new technologies and take them deeper into each other’s turf.

Fox News:

• Trump dossier firm's 'smear' tactics unveiled: Fusion GPS labeled critic a 'pedophile,' 'extortionist' and 'drug trafficker'. (video)

CNBC:

• IBM(IBM) shares up after earnings beat. (video)

• It sounds like a 'Goldilocks' market to me: Expert.

• PG&E(PGE) shares spike after suspected wildfires arsonist is arrested in Northern California.

Zero Hedge:

• CIA Urges Trump To Delay Release Of 3,000 Never-Before-Seen Documents On JFK Assassination.

• Amazon(AMZN) Strikes Deal With Landlords To Install Lockers In Apartment Buildings.

• George Soros Donates $18 Billion To His 'Open Society' Foundation.

• "No Devilishly Effective Plot" - Clinton Chief Strategist Admits "You Can't Buy The Presidency For $100,000".

• John McCain Says He Will Vote 'Yes' On Crucial Budget Bill.

• Look Out, New Yorkers: GM To Begin Testing Driverless Cars In The Big Apple(AAPL).

• Trump Meets Tsipras, "Evil" Awkwardness Follows.

• WTI Shrugs Despite Huge Crude Draw. (graph)

• Dow Fails To Hold 23,000 As Yield Curve Carnage Continues. (graph)

 Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 77.25 unch. 

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

• Bloomberg Emerging Markets Currency Index 73.75 +.02%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ABT)/.65

• (ASML)/1.10

• (MTB)/2.40

• (USB)/.88

• (AA)/.79

• (AXP)/1.48

• (CCI)/1.04

• (EBAY)/.48

• (KMI)/.14

• (STLD)/.66

• (UAL)/2.12

• (URI)/3.03

• (VMI)/1.60

Economic Releases 
8:30 am EST

• Housing Starts for September are estimated to fall to 1175K versus 1180K in August.

• Building Permits for September are estimated to fall to 1245K versus 1300K in August.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,850,000 barrels versus a -2,747,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +775,000 barrels versus a +2,490,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,300,000 barrels versus a -1,480,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.24% versus a +1.1% gain the prior week.
  

2:00 pm EST

• Fed's Beige Book report.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, Fed's Kaplan speaking, UK Jobless Claims, weekly MBA Mortgage Applications report, (HPE) analyst meeting and the (ECA) investor 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 Slightly Higher into Final Hour on Earnings Optimism, Healthcare/Tax Reform Hopes, Oil Gain, Healthcare/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 10.28 +3.73%

• Euro/Yen Carry Return Index 137.70 -.19%

• Emerging Markets Currency Volatility(VXY) 8.21 +8.98%

• S&P 500 Implied Correlation 15.32 +6.11%

• ISE Sentiment Index 125.0 +52.4%
  

• Total Put/Call .84 -28.81%

• NYSE Arms .99 -1.96%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.09 -.54%
  

• America Energy Sector High-Yield CDS Index 391.0 -1.11%

• European Financial Sector CDS Index 58.57 -.33%

• Western Europe Sovereign Debt CDS Index 5.12 +2.61%

• Asia Pacific Sovereign Debt CDS Index 16.24 +.93%

• Emerging Market CDS Index 175.94 -.96%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.41 -.01%

• 2-Year Swap Spread 25.50 -.5 basis point

• TED Spread 26.75 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -39.0 +1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.875 -.17%
• 3-Month T-Bill Yield 1.08% +1.0 basis point
  

• Yield Curve 75.0 -2.0 basis points

• China Import Iron Ore Spot $62.72/Metric Tonne -.35%%

• Citi US Economic Surprise Index 6.30 +3.8 points

• Citi Eurozone Economic Surprise Index 54.0 -1.4 points

• Citi Emerging Markets Economic Surprise Index 17.90 -2.2 basis points

• 10-Year TIPS Spread 1.83 -2.0 basis points
  
• 83.9% chance of Fed rate hike at Dec. 13 meeting, 84.5% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +64 open in Japan 
• China A50 Futures: Indicating +10 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• Skeptics Question Abe Election Elation as Topix Hits Decade High. As Prime Minister Shinzo Abe’s ruling party heads for what polls suggest will be its best national election result in more than three decades, Japan’s stock market has surged to heights not seen since before the financial crisis. Some investors and analysts are asking whether the optimism is overdone. Jonathan Allum, a strategist at SMBC Nikko Capital Markets Ltd. in London, says he’s puzzled by the bullish view that a resounding Abe victory will revamp the premier’s program to revive the economy. In his opinion, nothing substantial will have changed: Abe will have the same ability to pursue his policy agenda as he had before the vote.
• Iran Official Backs Extension of OPEC Cuts, Dismisses Trump Risk. (video)
• Here Are Key Takeaways From Wall Street's Third-Quarter Earnings. (video)

Wall Street Journal:

• George Soros Transfers $18 Billion to His Foundation, Creating an Instant Giant. The pioneer of hedge-fund investing has transferred the bulk of his wealth to Open Society Foundations.
• U.S.-Backed Forces Say They Have Taken Raqqa, Islamic State’s Last Urban Stronghold. Syrian Democratic Forces say four-month battle for de facto capital is over.
• Xi Jinping’s Power Plays Set the Stage for a Long Encore. China’s president is likely to emerge from a Communist Party congress with enhanced powers—but will he step down in 2022?
• Morgan Stanley’s(MS) Earnings Rise on Strength in Wealth Management. The bank’s return on equity stood at 9.6% in the quarter, versus a year-end target for a minimum of 9%.
• UnitedHealth(UNH) Revenue Grows Despite ACA Exit. Health insurer expands in employer insurance programs and delivery of care.
• British Intelligence Chief Notes Quickening Pace of Terror Threats. The U.K. is seeing more plots coming at a faster tempo, says MI5 head Andrew Parker.

Fox News:

• Report: Russians used bribes, sought to pad Clinton charity amid Obama-era push to expand US nuclear footprint.
• ESPN's Sam Ponder calls out sexist history of network's new partner, Barstool Sports.

CNBC:

• Dow hits 23,000 for the first time. (video)
• Senators have 'short-term plan' to stabilize Obamacare markets, as Trump's decision to kill crucial subsidies is raising health insurance rates.
• Europe markets close lower; Airbus shares rise; Merlin tumbles 15%.

Zero Hedge:

• FBI Uncovered Russian Bribery Plot Before Obama Approved Uranium One Deal, Netting Clintons Millions.
• Marc Faber Racist Diatribe Costs Him CNBC, Fox Slots; Sprott Board Seat.
• Trump Expected To Announce His Pick For Fed Chair In Next Two Weeks.
• Iraqi Kurd Army Agrees To Return To 2003 Border, Oil Slides.
• Is The Aramco IPO On The Brink Of Collapse?
• Mexico, Canada Said To "Firmly Reject" US NAFTA Proposals.
• US Industrial Production Data Dashes 'Survey-Driven' Hopes Of Manufacturing Renaissance. (graph)
• NYT Editor Slams Pence As "F**king Horrible", Admits Reporters Tried To Sway Voters Against Trump.
• Import & Export Prices Jump As Fuel Costs Spike. (graph)

TheStreet.com:

• Study: Atlanta notched second-highest boom rate among big-city economies. IT sector dominated 2016 growth in Atlanta, per the Bureau of Economic Analysis. A good sign for fetching Amazon(AMZN)?

Bear Radar

Style Underperformer:

• Mid-Cap Value -.2%

Sector Underperformers:

• 1) Oil Service -1.0% 2) I-Banks -.9% 3) Gold and Silver -.8%

Stocks Falling on Unusual Volume: 

• IPXL, OSUR, JP, ERJ, TCAP, RGEN, FIZZ, XYL and BGG

Stocks With Unusual Put Option Activity:

• 1) GIMO 2) HOG 3) NTNX 4) JNJ 5) IBM

Stocks With Most Negative News Mentions:

• 1) IMDZ 2) BUFF 3) DYN 4) FCX 5) ETN

Charts:

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