Thursday Watch

Evening Headlines

Bloomberg:

• Australia's Jobless Rate Falls to Lowest in More Than Four Years. Australia’s jobless rate unexpectedly fell in October as fewer people sought work, while full-time positions that have driven hiring this year extended their surge.

• 3 Charts to Know: Time to Buy the Dip in Stocks? (video)

• Stock Slide Pauses in Asia; Aussie Bonds Advance. (video) Benchmarks in Japan fluctuated after the Topix index on Wednesday recorded its biggest drop since March. Australia’s benchmark opened little changed. The S&P 500 Index pared the worst of Wednesday’s losses as bank shares rallied, but that wasn’t enough to overcome the biggest drop in two months for U.S. equities. The gap between two-year and 10-year U.S. yields shrank to a fresh low for 2017, a potential concern given how a flattening in the yield curve has sometimes served as a precursor to an economic downturn. The Topix index swung between gains and losses as of 9:11 a.m. in Tokyo. The Nikkei 225 Stock Average added 0.4 percent. Australia’s S&P/ASX 200 Index was flat. South Korea’s markets will open an hour later because of national exam day. Hong Kong’s Hang Seng Index futures climbed 0.4 percent.

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

• S&P 500 Bears Are Back. (graph)

• Cisco(CSCO) Sees First Revenue Growth in Eight Quarters; Shares Up.

• Twitter Cracks Down on Verified Accounts With New Policy. (video) Twitter Inc. updated its policies for removing the verification of a user’s identity, saying it can pull the blue check mark at any time without notice for behavior including promoting hate or inciting harassment of others.

Wall Street Journal:

• Republican Sen. Ron Johnson Opposes GOP Senate Tax Package. Wisconsin Republican says plan unfairly benefits corporations over other businesses, says he finds bill’s process ‘offensive’.

• Activist Peltz Narrowly Wins P&G Board Seat, New Count Shows. Investor won proxy fight by slim 43,000 vote margin, according to preliminary report, weeks after P&G had declared victory.

• A Litigious Climate Threatens Scientific Norms. An energy researcher sues another over a critical paper. It’s the wrong way to resolve such disputes.

MarketWatch.com:

• Stock market ‘not even close’ to pricing in tax cuts, says UBS.

• A selloff in junk bonds may not spark a crash, or a recession, says Deutsche Bank.

Fox News:

• Fusion GPS told media of Trump-Russia claims, but did not verify dossier: source. (video)

CNBC:

• Keep bitcoin away from the real economy, says billionaire 'father of high speed trading'. (video)

Zero Hedge:

• Musk Fires Back: Blasts "Hotbed Of MISinformation" In Racial Discrimination Lawsuit.

• Times Square Losing Marquee Office Tenants As Wading Through "Desnudas" To Get To Work Grows Old.

• The Complete Idiot's Guide To The Biggest Risks In China.

• Foreigners Splurge On US Stocks: Buy Second-Most US Equities In 8 Years.

• House Democrats Introduce Five Articles Of Impeachment Against Trump.

• Judge Moore Doubles Down On Denial; Alleges That Gloria Allred's Yearbook Message Is A "Fraud".

• S&P Breaks Longest Period Of Calm In 52 Years As Yield Curve Carnage Continues. (graph)

Business Insider:

• Hackers pose an increasingly dire threat to the power grid.

• Rare Leonardo da Vinci painting sells for record $450 million.

• America's debt is surging, and some of the riskiest borrowers are struggling to pay back.

• BuzzFeed posted a bizarre theory that Starbucks'(SBUX) holiday cups 'might have a gay agenda'.

Night Trading 

• Asian equity indices are unch. to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 81.25 +1.25 basis points. 

• Asia Pacific Sovereign CDS Index 16.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 72.34 +.03%.

• S&P 500 futures +.17%.

• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BBY)/.78

• (SJM)/1.90

• (SSI)/-.71

• (VIAB)/.86

• (WMT)/.97

• (CRMT)/.75

• (AMAT)/.90

• (GPS)/.54

• (POST)/.93

• (ROST)/.67

• (SCVL)/.62

• (SPLK)/.14

• (WSM)/.84

Economic Releases 

8:30 am EST

• Initial Jobless Claims are estimated to fall to 235K versus 239K the prior week.

• Continuing Claims are estimated to fall to 1900K versus 1901K prior.

• Philly Fed Business Outlook Index for November is estimated to fall to 24.6 versus 27.9 in October.

• The Import Price Index MoM for October is estimated to rise +.4% versu a +.8% gain in September.

• The Export Price Index MoM for October is estimated to  rise +.4% versus a +.8% gain in September. 

9:15 am EST

• Industrial Production MoM for October is estimated to rise +.5% versus a +.3% gain in September. 

• Capacity Utilization for October is estimated to rise to 76.3% versus 76.0% in September.

• Manufacturing Production for October is estimated to rise +.5% versus a +.1% gain in September.
  

10:00 am EST

• The NAHB Housing Market Index for November is estimated to fall to 67.0 versus 68.0 in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Mester speaking, House vote on tax bill, Bloomberg Economic Expectations Index for November, weekly Bloomberg Consumer Comfort Index, (KO) investor day, Eurozone CPI report, FCC November meeting, weekly EIA natural gas inventory report, (CMI) analyst day, (OC) investor day, (RH) investor day, (ROK) investor meeting, (HAIN) general meeting and the BofA Merrill Energy Conference 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 Lower into Final Hour on Tax Reform Worries, Less Economic Optimism, Yen Strength, Energy/Gaming Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.89 +11.2%

• Euro/Yen Carry Return Index 138.77 -.54%

• Emerging Markets Currency Volatility(VXY) 8.11 -.12%

• S&P 500 Implied Correlation 21.91 +18.7%

• ISE Sentiment Index 165.0 +65.0%
  

• Total Put/Call 1.04 +17.0%

• NYSE Arms .73 -47.53%

Credit Investor Angst:

• North American Investment Grade CDS Index 56.96 -.15%
  

• America Energy Sector High-Yield CDS Index 395.0 +6.18%

• European Financial Sector CDS Index 53.28 +.63%

• Western Europe Sovereign Debt CDS Index 3.95 +2.07%

• Asia Pacific Sovereign Debt CDS Index 15.93 +.38%

• Emerging Market CDS Index 193.90 +.01%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.33 -.01%

• 2-Year Swap Spread 17.75 -.75 basis point

• TED Spread 15.5 -3.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -47.75 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.32 unch.
• 3-Month T-Bill Yield 1.25% +1.0 basis point
  

• Yield Curve 64.75 -4.25 basis points

• China Import Iron Ore Spot $61.84/Metric Tonne -2.11%

• Citi US Economic Surprise Index 35.50 -1.9 points

• Citi Eurozone Economic Surprise Index 60.30 -.6 basis point

• Citi Emerging Markets Economic Surprise Index 12.80 +.5 point

• 10-Year TIPS Spread 1.88 -2.0 basis points
  
• 100.0% chance of Fed rate hike at Jan. 31 meeting, 100.0% chance at March 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +88 open in Japan 
• China A50 Futures: Indicating -37 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Lower: On losses in my medical/tech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• China Sustainability Drive Gives Bulls Hope, Morgan Stanley Says. Morgan Stanley’s top China analysts are "still bullish" on the economy, citing progress on defusing the debt bomb and the surprising speed of its shift to a high-income economy. Economists, analysts and strategists said in a 61-page report that they expect Beijing to tame borrowing and achieve a "near-stabilization" of its debt-to-gross domestic product ratio by late 2019. Incomes are expected to cross the $13,700 threshold to attain high-income status by 2025, two years earlier than they’d initially forecast. President Xi Jinping put new emphasis on the sustainability, quality and efficiency of economic growth at a twice-a-decade Communist Party conclave last month, but risks remain.

• The High-Yield Selloff Has Largely Passed by China. The slump in high-yield debt hasn’t pulled the plug on Chinese property bonds. While last week saw more than $2 billion pulled from global exchange-traded funds tracking speculative-grade bonds, the country that was warned of over-leveraging by its own central bank and the International Monetary Fund has escaped relatively unscathed.

• A Top Asia Fund Manager Says This Stock Selloff Is a Time to Buy. (video)

• Your Evening Briefing.

• Greenlight's Einhorn Says Issues That Caused the Crisis Are Not Solved. Hedge-fund manager David Einhorn said the problems that caused the global financial crisis a decade ago still haven’t been resolved. “Have we learned our lesson? It depends what the lesson was,” Einhorn, the co-founder of New York-based Greenlight Capital LLC, said at the Oxford Union in England on Wednesday. Einhorn said he identified “three, four or five obvious problems” at the time of the crisis. These included the structural issues that were exposed in the market; the fact that institutions that could have gone under were deemed too big to fail; and the structured-credit market, where risks were not properly evaluated.

• U.S. Inflation, Retail Data Show Economy Ready for Fed Rate Hike. (video)

Wall Street Journal:

• The Democrats’ Kansas Distraction. They’re trying to make my state’s 2012 tax cuts into a cautionary tale, but there’s no comparison.

• Zimbabwe’s Military Asserts Control; President Mugabe Confined to His Home. Military says longtime leader is safe and denies he is being ousted; U.S. Embassy urges Americans in Harare to ‘shelter in place’.

• CFPB Head Cordray to Step Down, Paving Way for Change at Watchdog. Regulator says he will leave this month, without giving a reason. 

• Target’s(TGT) Sales Rise but Spending Pinches Profits. Retailer gives lackluster earnings outlook for holiday period; quarterly earnings fall 21%.

• Impeach Tom Steyer. The ultraliberal billionaire is the enemy of every cause he promotes.

Fox News:

• UCLA basketball players thank Trump for 'helping us out' after tweet. (video)

CNBC:

• The Senate GOP bill would double the child tax credit, which pleases two skeptical senators. (video)

• Why a so-called bad omen for stocks is nothing more than ‘fake news,’ says technician. (video)

• Obamacare repeal tax plan could hand GOP a double victory.

• Amazon(AMZN) set for 'record-breaking' holiday season with nearly half of online sales: Analyst.

• Three stocks to buy on recent weakness: Technician. (video)

• Restaurant M&A is making a comeback. Here are some potential targets.

Zero Hedge:

• Puerto Rico Bond Prices Plunge Below Venezuela's On Moratorium Fears. (graph)

• European Stocks Suffer Longest Losing Streak In Over A Year (As EU Credit Crashes).

• FDA Approves New Digital Sensor To Ensure "Patients With Mental Health Issues" Take Their Meds.

• Treasury Curve Collapses To Fresh 10-Year Lows After Data Dump. (graph)

• Is This Why Productivity Has Tanked And Wealth Inequality Has Soared?

• WTI/RBOB Slide On Surprise Build As US Crude Production Hits New Record High. (graph)

• Americans' Real Wage Growth Contracts For 3rd Straight Month - First Time Since 2012. (graph)

• Empire Fed Tumbles Most In 7 Months, But 'Hope' Surges To 5 Year Highs. (graph)

• Retail Sales Growth Slows In October As Storm Surge Fades. (graph)

• Bitcoin Surges Back Above $7200 As Square(SQ) Tests Crypto Payments. (graph)

• Core Consumer Prices Come In Hot - Rise At Fastest Rate In 6 Months. (graph)

• North Korea Says Donald Trump "Deserves The Death Penalty".

Bear Radar

Style Underperformer:

• Large-Cap Growth -.5%

Sector Underperformers:

• 1) Oil Service -1.3% 2) Alt Energy -1.2% 3) Gaming -.9%

Stocks Falling on Unusual Volume: 

• SD, ACOR, MTSI, TGT, EBS, KLIC, DBD, VERI, LOXO and YRCW

Stocks With Unusual Put Option Activity:

• 1) MTZ 2) KR 3) TGT 4) CBS 5) DG

Stocks With Most Negative News Mentions:

• 1) XOM 2) WU 3) PZZA 4) JCI 5) MPC

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value unch.

Sector Outperformers:

• 1) Airlines +1.0% 2) Retail +.9% 3) Banks +.6%

Stocks Rising on Unusual Volume:

• BCEI, YY, PLCE, ALTR, ARA, BOOT, TPRE, CALA, SQ, CDK, WIFI, BZH, ATUS, CYD, SGMO, FANH, DKS, CNCE, BOLD, TEO, AXDX, INGR, GNK, INCR, CIFS, LXRX, CARG, KBR and ROKU

Stocks With Unusual Call Option Activity:

• 1) HPE 2) SIG 3) COF 4) SQ 5) BK

Stocks With Most Positive News Mentions:

• 1) YY 2) SORL 3) SGMO 4) ALKS 5) INGR

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +17.3% Above 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 35.7% of Issues Advancing, 61.0% Declining
• 60 New 52-Week Highs, 134 New Lows
• 59.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.0%
• Vix 12.5 +7.6%
• Total Put/Call 1.0 +15.7%
• TRIN/Arms .67 -52.3%