Stocks Rising into Final Hour on Earnings Outlooks, Economic Optimism, Oil Gain, Road & Rail/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Heavy

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 11.24 +.09%

• Euro/Yen Carry Return Index 138.48 -1.16%

• Emerging Markets Currency Volatility(VXY) 8.16 +1.24%

• S&P 500 Implied Correlation 18.67 -3.62%

• ISE Sentiment Index 101.0 +46.38%
  

• Total Put/Call .85 -26.72%

• NYSE Arms .99 -.75%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.21 +.83%
  

• America Energy Sector High-Yield CDS Index 391.0 +.36%

• European Financial Sector CDS Index 55.67 -3.08%

• Western Europe Sovereign Debt CDS Index 4.68 +3.08%

• Asia Pacific Sovereign Debt CDS Index 15.92 +.44%

• Emerging Market CDS Index 179.50 +1.52%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.60 +.02%

• 2-Year Swap Spread 22.25 -.25 basis points

• TED Spread 27.75 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -42.0 -2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.50 -.72%

• 3-Month T-Bill Yield 1.10% -1.0 basis point
  

• Yield Curve 84.0 unch.

• China Import Iron Ore Spot $61.47/Metric Tonne -1.24%

• Citi US Economic Surprise Index 30.60 +.1 point

• Citi Eurozone Economic Surprise Index 60.10 +4.2 basis points

• Citi Emerging Markets Economic Surprise Index 21.30 +4.4 basis points

• 10-Year TIPS Spread 1.90 +2.0 basis points
  

• 85.9% chance of Fed rate hike at Dec. 13 meeting, 86.5% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +131 open in Japan 

• China A50 Futures: Indicating +44 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +34.2% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 55.8% of Issues Advancing, 40.4% Declining
• 131 New 52-Week Highs, 51 New Lows
• 46.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.4%
• Vix 11.0 -2.0%
• Total Put/Call .97 -16.4%
• TRIN/Arms 1.58 +59.2%

Thursday Watch

Evening Headlines

Bloomberg:

• Exports Drive Fastest Growth in South Korean Economy Since 2010. Gross domestic product expanded 1.4 percent in the three months through September from the previous quarter, when it grew 0.6 percent, the Bank of Korea said on Thursday. The median estimate of economists surveyed by Bloomberg was for 0.9 percent expansion. From a year earlier, the economy expanded 3.6 percent, far exceeding the 3 percent estimate by economists.

• Kyle Bass Says History Will Remember Xi for Reckless Policies. Hedge fund manager Kyle Bass, who has been warning of a collapse in China’s banking system, said the nation will one day come to regret handing Xi Jinping more power than any leader in decades. “Today Xi is celebrated in media reports, but when future historians look back, he will be blamed for recklessly building the Chinese economy on a foundation of sand,” Bass, founder of Hayman Capital Management, said in an email Wednesday. “Xi desperately seeks credibility, but true developed economies do not impose severe capital controls or move short-term rates hundreds of basis points overnight in attempts to manipulate their own currency.”

• Stocks in Asia Fluctuate on Earnings Jitters. Stocks in Asia were mixed at the open following the biggest declines in seven weeks on Wall Street as uneven corporate earnings keep traders on edge ahead of reports from technology giants, banks and a European Central Bank meeting. Equity benchmarks in Tokyo and Seoul fluctuated. Mexico’s peso declined after comments from U.S. President Donald Trump on terminating Nafta. Ten-year Treasury yields were steady after reaching their highest since March, and gold rose as investors sought havens from slumping equity markets. The dollar extended losses. Japan’s Topix index was up 0.2 percent as of 9:25 a.m. in Tokyo, while the Nikkei 225 Stock Average rose 0.3 percent. Australia’s S&P/ASX 200 Index fell 0.2 percent and South Korea’s Kospi index was flat. Hang Seng Index futures declined 0.8 percent.

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

• The Bond-Market Doomsday Is a Dud to Traders Eyeing Opportunity to Buy. After 10-year Treasury yields broke through 2.4 percent, then 2.42 percent, then 2.45 percent on Tuesday and Wednesday, it looked like the market was buckling under the weight of what DoubleLine Capital LP’s Jeffrey Gundlach called “the moment of truth” for its three-decade bull run. Yet, as has happened time and again, investors saw a buying opportunity, pushing yields back down and leaving traders to assess the damage.

Wall Street Journal:

• FCC to Ease Limits on Local Media Ownership. Agency to vote to lower barriers to controlling multiple outlets in same market.

• The Morningstar Mirage. Investors everywhere think a 5-star rating from Morningstar means a mutual fund will be a top performer—it doesn’t.

Fox News:

• Trump’s Senate critics see support collapse – who’s next? (video)

• Stephen Paddock removed hard drive from laptop found in Las Vegas hotel room, report says. (video)

CNBC:

• Commerce Sec. Ross explains how GOP could strike a deal on taxes. (video)

• The S&P is about to do something it hasn’t done since Lyndon Johnson was in the White House. (video)

• Billionaire CEO of SoftBank: Robots will have an IQ of 10,000 in 30 years.

• Top White House economic advisor Gary Cohn reportedly revives idea of hiking gas tax.

• Overstock.com(OSTK) goes for largest digital coin offering ever at $500 million.

• Most popular Obamacare plans cost average of 34 percent more for 2018.

Zero Hedge:

• DOJ Clears FBI Informant In Clinton-Era Russian Bribery Scandal To Testify.

• FEC Complaint Alleges Hillary, DNC Broke Election Law By Not Disclosing Trump-Russia Dossier Funding.

• ECB Preview: Here's What Draghi Will Announce On Thursday.

• "Cloak Of Darkness" Grows As US Widens Surveillance Dragnet To 'Homegrown Violent Extremists'.

• The Time Has Come: Venezuela May Be In Default In Under 48 Hours.

• Japan Is Booming! (Except It's Not).

• "The Hoax Turned Around": Trump Responds To News Hillary Funded "Fake Dossier". (video)

• US Deploys Third Aircraft Carrier To Western Pacific Ahead Of Trump's Visit.

• Muni Investors Celebrate "Juicy" 3.74% Yield On New Illinois Bonds As State Hurdles Toward Bankruptcy.

• Stocks, Bonds, Dollar, & Credit Dump As VIX Jumps To 6-Week High. (graph)

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 74.0 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 15.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.1 +.12%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (APD)/1.68

• (ABB)/.34

• (ALXN)/1.32

• (MO)/.88

• (BUD)/1.25

• (BWA)/.88

• (BSX)/.31

• (BMY)/.77

• (CELG)/1.87

• (CME)/1.16

• (CMCSA)/.49

• (COP)/.08

• (F)/.33

• (HSY)/1.29

• (LLL)/1.92

• (MCK)/2.79

• (NEM)/.33

• (POT)/.12

• (RTN)/1.90

• (LUV)/.87

• (TWX)/1.59

• (TWTR)/.06

• (UNP)/1.49

• (UPS)/1.45

• (VLO)/1.83

• (VC)/1.27

• (GOOG)/8.40

• (AMZN)/-.01

• (BIDU)/2.05

• (CERN)/.62

• (CB)/-.24

• (DECK)/1.02

• (EXPE)/2.61

• (FSLR)/.84

• (GILD)/2.13

• (INTC)/.80

• (KLAC)/1.64

• (MAT)/.58

• (MSFT)/.72

• (MHK)/3.73

• (PSMT)/.73

• (WDC)/3.31

• (WYNN)/1.41

Economic Releases 

8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 235K versus 222K the prior week.

• Continuing Claims are estimated to rise to 1890K versus 1888K prior.

• Advance Goods Trade Balance for Sept. is estimated at -$64.0B versus -$63.3B in August.

• Preliminary Wholesale Inventories MoM for Sept. are estimated to rise +.4% versus a +.9% gain in August.
  

10:00 am EST

• Pending Home Sales MoM for September is estimated to rise +.3% versus a -2.6% decline in August.
  

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for October is estimated at 17.0 versus 17.0 in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The ECB rate decision, ECB press conference, Fed's Kashkari speaking, Japan CPI report, House vote on budget resolution, $28B 7Y T-Bond auction, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are slightly lower, weighed down by industrial and commodity 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 Lower into Final Hour on Rate-Hike Worries, Earnings Outlooks, Profit-Taking, Alt Energy/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.13 +8.69%

• Euro/Yen Carry Return Index 139.99 +.32%

• Emerging Markets Currency Volatility(VXY) 8.03 -2.07%

• S&P 500 Implied Correlation 22.31 +58.3%

• ISE Sentiment Index 67.0 -33.7%
  

• Total Put/Call 1.17 +50.0%

• NYSE Arms 1.26 +43.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 53.94 +1.76%
  

• America Energy Sector High-Yield CDS Index 390.0 +.87%

• European Financial Sector CDS Index 57.47 -.24%

• Western Europe Sovereign Debt CDS Index 4.55 -3.30%

• Asia Pacific Sovereign Debt CDS Index 15.85 +2.79%

• Emerging Market CDS Index 177.30 +1.23%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.58 -.06%

• 2-Year Swap Spread 22.5 -1.25 basis points

• TED Spread 25.5 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -40.0 +.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.0 -.14%
• 3-Month T-Bill Yield 1.11% unch.
  

• Yield Curve 84.0 +1.0 basis point

• China Import Iron Ore Spot $62.24/Metric Tonne -.29%

• Citi US Economic Surprise Index 30.50 +23.5 points

• Citi Eurozone Economic Surprise Index 56.90 +5.1 basis points

• Citi Emerging Markets Economic Surprise Index 16.90 -.1 basis point

• 10-Year TIPS Spread 1.88 unch.
  
• 84.2% chance of Fed rate hike at Dec. 13 meeting, 85.1% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +33 open in Japan 
• China A50 Futures: Indicating -6 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

• Lower: On losses in my tech/retail/biotech sector longs

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value -1.0%

Sector Underperformers:

• 1) Alt Energy -1.7% 2) Road & Rail -1.7% 3) Semis -1.3%

Stocks Falling on Unusual Volume: 

• ACHC, QURE, IRBT, CMG, GSK, AI, EW, MANH, SFLY, OC, JP, ZAGG, AMD, INVA, ALK, JNPR, ENLK, OMER, ILMN, HES, EXP and DPS

Stocks With Unusual Put Option Activity:

• 1) CTSH 2) JNPR 3) RCII 4) TRIP 5) BK

Stocks With Most Negative News Mentions:

• 1) ACHC 2) CMG 3) RCII 4) HSTM 5) GM

Charts:

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