Friday Watch

Evening Headlines

Bloomberg:

• Saudi Arabia Says OPEC Should Extend Cuts in Meeting This Month. (video) Saudi Arabia’s Energy Minister said OPEC and its allies should announce an extension of their output curbs when they gather at the end of this month. The Organization of Petroleum Exporting Countries is unlikely to reduce excess oil inventories to average levels by the time the current deal expires in late March, said Minister Khalid Al-Falih, speaking at the United Nations climate talks in Bonn, Germany. Russia, allied with OPEC in the deal, isn’t convincedit’s necessary to make a decision when the producers meet on Nov. 30, people familiar with the matter said this week.

• India's Credit Rating Upgraded by Moody's in Boost for Modi. Moody’s Investors Service raised India’s sovereign bond rating for the first time since 2004, citing continued progress in economic and institutional reforms. The ratings firm upgraded India to Baa2 from Baa3 and said reforms being pushed through by Prime Minister Narendra Modi’s government will help stabilize rising levels of debt. That’s a shift from Moody’s lowest investment-grade ranking to the second lowest. The surprise move comes even as India surrendered its status as the world’s fastest-growing major economy amid sweeping policy change. Growth slipped below 6 percent in the April-June quarter, sparking expectations that the government will need to unleash fiscal stimulus. Markets welcomed the move, even as some cautioned the response will be limited given the ongoing challenges that the economy faces.

• Block Porn or Be Blocked, Indonesia Warns Google(GOOGL), Twitter(TWTR). (video) Indonesia has threatened to bar the world’s biggest social-media providers from operating in the country unless they comply with stringent demands to filter pornography and other content deemed obscene.

• Stocks Climb After Tumultuous Week; Dollar Falls. (video) Shares in Japan jumped for a second day as technology companies gave the biggest boost to the Topix index. Equity gauges in Hong Kong, Australia and South Korea also rose. The dollar declined for a fourth day and the Korean won added to a rally that has taken it to the strongest in more than a year, prompting officials to caution about the pace of the gain. Indian stock futures gained after Moody’s Investors Service raised the nation’s credit rating, citing progress on economic and institutional reforms. The Topix climbed 0.8 percent as of 10:59 a.m. in Tokyo. The Nikkei 225 Stock Average rose 1.3 percent. Australia’s S&P/ASX 200 Index added 0.3 percent and the Kospi index in Seoul was up 0.8 percent. Hong Kong’s Hang Seng Index jumped 0.9 percent. The Shanghai Composite Index was down 0.3 percent.

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

• Lynn Tilton Accused of Withholding Funds After Portfolio Defaults. After being cleared of wrongdoing in a case by the U.S. Securities and Exchange Commission, New York financier Lynn Tilton faces new claims over how she ran her distressed companies in a lawsuit by three funds she once created and managed to raise money for her portfolio.

Wall Street Journal:

• GOP Tax Plan: Live Coverage.

• How to Invent A Middle-Class Tax Hike. A case study in how Washington math distorts reality.

• Judge Declares a Mistrial in Sen. Bob Menendez Corruption Trial. A federal jury said it couldn’t reach a verdict in the New Jersey Democrat’s case.

MarketWatch.com:

• Fund manager looks beyond ‘FAANG’ stocks and finds even bigger winners for 2018.

• This one chart sums up what’s happening to America’s ‘good’ jobs.

Fox News:

• 'Unacceptable': Democrats turn on Franken over groping allegations. (video)

• Roy Moore goes on offense against McConnell, as state party backs bid. (video)

CNBC:

• Small-caps rally with House vote on tax bill and look to Washington for even more juice.

• Comcast(CMCSA) is in talks with 21st Century Fox(FOXA) about buying major assets, sources say. (video)

• Gap(GPS) shares jump as same-store sales top Street estimates. (video)

• Republicans have 70% chance of passing final tax reform: Former Bush aide. (video)

• Caesars Entertainment(CZR) acquires Centaur Holdings for $1.7 billion.

• These stocks are trading at extremes, and they could go even higher. (video)

• As shares hit record highs, Wall Street suddenly thinks Wal-Mart(WMT) is 'playing offense' against Amazon(AMZN).

• This chart shows why the stock market can stop freaking out about high yield — for now. (video)

• Amazon(AMZN) should be worried about Walmart(WMT), former JC Penney CEO says.

• Stocks making the biggest moves after hours: FOXA, ROST, GPS & more.

Zero Hedge:

• Why America's Retail Apocalypse Could Accelerate Even More In 2018.

• Fed Hints During Next Recession It Will Roll Out Income Targeting, NIRP.

• Russia Names The 9 US News Outlets It Will Retaliate Against.

• You'll Never Guess What Happened To BuzzFeed's IPO Chances After It Missed Revenue By 20%.

• Majority Of Millennials Say They're Having A "Quarter-Life Crisis".

• Yale's Endowment CIO Has Some Really Bad News For Public Pensions...

• Former Playboy Model Accuses Senator Al Franken Of "Kissing And Groping" Her Without Consent.

• Venezuela, PDVSA CDS Triggered: ISDA Says Credit Event Has Occured.

• Nasdaq, Bitcoin Surge To Record Highs As China Saves The World. (graph)

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 79.0 -2.25 basis points. 

• Asia Pacific Sovereign CDS Index 16.0 unch.

• Bloomberg Emerging Markets Currency Index 72.79 +.15%.

• S&P 500 futures -.10%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ANF)/.21

• (BKE)/.38

• (FL)/.80

• (HIBB)/.22

Economic Releases 

8:30 am EST

• Housing Starts for October are estimated to rise to 1190K versus 1127K in September.

• Building Permits for October are estimated to rise to 1250K versus 1215K in September.

11:00 am EST

• Kansas City Fed Manufacturing Activity for November is estimated to fall to 21.0 versus 23.0 in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, 3Q MBA Mortgage Foreclosures/Delinquencies and the BoJ Bond Purchase Update 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 Surging into Final Hour on Tax Reform Hopes, Earnings Outlooks, Economic Optimism, Retail/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.72 -10.74%

• Euro/Yen Carry Return Index 138.56 -.14%

• Emerging Markets Currency Volatility(VXY) 8.10 unch.

• S&P 500 Implied Correlation 17.52 -24.19%

• ISE Sentiment Index 97.0 -33.56%
  

• Total Put/Call .90 -11.76%

• NYSE Arms 1.24 +40.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.50 -2.94%
  

• America Energy Sector High-Yield CDS Index 388.0 -1.86%

• European Financial Sector CDS Index 52.27 -1.95%

• Western Europe Sovereign Debt CDS Index 3.98 +.76%

• Asia Pacific Sovereign Debt CDS Index 16.09 +.75%

• Emerging Market CDS Index 186.32 -3.74%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.36 +.02%

• 2-Year Swap Spread 18.0 +.25 basis point

• TED Spread 16.25 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -49.0 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.67 +.48%
• 3-Month T-Bill Yield 1.26% +1.0 basis point
  

• Yield Curve 65.25 -.5 basis point

• China Import Iron Ore Spot $61.57/Metric Tonne -.44%

• Citi US Economic Surprise Index 44.20 +8.7 points

• Citi Eurozone Economic Surprise Index 59.60 -.7 basis point

• Citi Emerging Markets Economic Surprise Index 12.90 +.1 point

• 10-Year TIPS Spread 1.89 +1.0 basis point
  
• 100.0% chance of Fed rate hike at Jan. 31 meeting, 100.0% chance at March 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +265 open in Japan 
• China A50 Futures: Indicating +58 open in China

• DAX Futures: Indicating +45 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.6%

Sector Underperformers:

• 1) Utilities -.3% 2) Energy -.3% 3) Insurance -.3%

Stocks Falling on Unusual Volume: 

• CHFS, APPN, AXGN, DPLO, BBY, BITA, VIAB, BZH and MTOR

Stocks With Unusual Put Option Activity:

• 1) ARNC 2) TWX 3) COP 4) HRB 5) ANF

Stocks With Most Negative News Mentions:

• 1) DPLO 2) PAY 3) OII 4) GE 5) UA

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.9%

Sector Outperformers:

• 1) Computer Hardware +3.6% 2) Disk Drives +3.1% 3) Airlines +2.2%

Stocks Rising on Unusual Volume:

• GDI, AMWD, IEFA, JELD, FND, TIME, GTHX, CBS, XNET, AFAM, NTAP, RH, SPB, SHPG, LHCG, MANU, WMT, HCM, MD, CNCE, ROK, HRG, ASML, CSCO, NTES, SGH, MRTX, DBD, MDP, COLL, SJM, MD, GOGO, EZPW, BOOT, BL, XON, EXTR, OSTK, AYX, CALA, ESIO, VREX, HRC, FRPT, TMUS, ROK, BERY, INCR, IGT, NKTR, MTSI and HRTX

Stocks With Unusual Call Option Activity:

• 1) NTAP 2) XLP 3) WMT 4) FXI 5) RH

Stocks With Most Positive News Mentions:

• 1) NTAP 2) SPTN 3) WMT 4) CSCO 5) NTES

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.2% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 78.7% of Issues Advancing, 18.8% Declining
• 77 New 52-Week Highs, 31 New Lows
• 55.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.3%
• Vix 11.5 -12.1%
• Total Put/Call .93 -8.8%
• TRIN/Arms 1.13 +28.8%