Stocks Rising into Final Hour on Economic Optimism, Oil Gain, Yen Weakness, Financial/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.15 unch.

• Euro/Yen Carry Return Index 141.85 +.69%

• Emerging Markets Currency Volatility(VXY) 7.72 -2.15%

• S&P 500 Implied Correlation 33.67 -2.89%

• ISE Sentiment Index 104.0 -7.14%
  

• Total Put/Call .83 -4.6%

• NYSE Arms 1.10 +22.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 46.04 -3.49%
  

• America Energy Sector High-Yield CDS Index 356.0 -.66%

• European Financial Sector CDS Index 42.04 -2.50%

• Western Europe Sovereign Debt CDS Index 3.96 n/a

• Asia Pacific Sovereign Debt CDS Index 12.08 -4.96%

• Emerging Market CDS Index 112.55 -2.13%
  

• iBoxx Offshore RMB China Corporate High Yield Index 146.30 +.04%

• 2-Year Swap Spread 18.5 +.25 basis point

• TED Spread 29.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -21.50 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.22 +.38%
• 3-Month T-Bill Yield 1.39% unch.
  

• Yield Curve 50.0 -1.5 basis points

• China Iron Ore Spot 507.50 CNY/100 Metric Tonnes unch.

• Citi US Economic Surprise Index 80.70 +2.5 points

• Citi Eurozone Economic Surprise Index 46.80 unch.

• Citi Emerging Markets Economic Surprise Index -1.2 -.3 point

• 10-Year TIPS Spread 2.01 +1.0 basis point
  
• 81.5% chance of Fed rate hike at March 21 meeting, 82.7% chance at May 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +173 open in Japan 
• China A50 Futures: Indicating +80 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.3%

Sector Underperformers:

• 1) Homebuilders -1.1% 2) Retail -.8% 3) REITs -.8%

Stocks Falling on Unusual Volume: 

• RENN, ATRA, PEN, LB, INSY, UNFI, DXCM, CATO, BKE, PCRX, INSM and WATT

Stocks With Unusual Put Option Activity:

• 1) LB 2) FITB 3) PH 4) RSX 5) JCP

Stocks With Most Negative News Mentions:

• 1) SNAP 2) ROKU 3) DXCM 4) BKE 5) CPE

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.6%

Sector Outperformers:

• 1) Computer Services +1.9% 2) Shipping +1.7% 3) Banks +1.4%

Stocks Rising on Unusual Volume:

• CAF, IEFA, OMF, BOLD CRH, CMCM, PKE, ZUMZ, LW, IFN, NLNK, EFG, FCAU, HHC, CORE, STC, APPN, EC, ITCI, CHRS, CNXM, TOT, D, ADNT, ENR, AMD and AMKR

Stocks With Unusual Call Option Activity:

• 1) MAR 2) USB 3) HOG 4) VMC 5) NBR

Stocks With Most Positive News Mentions:

• 1) ZUMZ 2) DPZ 3) VNTV 4) ENR 5) NUVA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +24.5% Above 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 56.4% of Issues Advancing, 39.8% Declining
• 251 New 52-Week Highs, 11 New Lows
• 64.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.5%
• Vix 9.08 -.77%
• Total Put/Call .89 +2.3%
• TRIN/Arms 1.0 +11.06%

Thursday Watch

Evening Headlines

Bloomberg:

• China's Growth May Surprise Again This Year. (video) From the strength of global trade to the resilience of domestic consumption, reasons to think China’s economy won’t slow as much as expected this year are gathering. The consensus among economists is that expansion in the world’s second-largest economy will slip to 6.5 percent in 2018 from 6.8 percent last year, according to Bloomberg surveys. Yet as the latest data show that the official manufacturing gaugeremains robust, and offshore shares had their best start to a year since 2009, there are voices predicting a better performance than that. JPMorgan Chase & Co. economists on Wednesday raised their 2018 growth forecast to 6.7 percent from 6.5 percent, citing the "upbeat external outlook." 

• Asia Stocks Set to Open Higher After U.S. Records. Futures contracts on equity indexes in Tokyo, Seoul and Sydney advanced after the U.S. S&P 500 Index jumped more than half a percent, as Japanese markets prepared for the first session of 2018. Most Fed policy makers reiterated support for “continuing a gradual approach to raising” the key rate, minutes of last month’s meeting showed. Yields on longer-term U.S. Treasuries showed little reaction, as indeed they did for most of 2017 to prospects for Fed tightening. The dollar rose for the first time in six days. Futures on the Nikkei 225 Stock Average indicated that the benchmark will open up by about 1.9 percent off of last month’s close. Those on Australia’s S&P/ASX 200 gained 0.5 percent. Contracts on South Korea’s Kospi Index rose 0.6 percent.

• Five Things You Need to Know to Start Your Day. 

• Trump to Seek Biggest Offshore Drilling Increase in Decades. The Trump administration is poised to open the door to selling new offshore drilling rights from the Atlantic Ocean to the Arctic Sea, igniting a fight with coastal residents worried about oil spills befouling beaches and jeopardizing tourism dollars. The proposal -- set to be the most expansive such offering in decades -- is a response to President Donald Trump’s April order encouraging the Interior Department to auction drilling rights in Atlantic waters that former President Barack Obama ultimately ruledout after a backlash from communities up and down the U.S. East Coast.

• Massive Winter Storm Threatens Snow, Flooding for New York. (video)

• Intel(INTC), Microsoft(MSFT) Deal With Widespread Computer-Chip Weakness. The world’s biggest chipmakers and software companies, including Intel Corp. and Microsoft Corp., are coming to grips with a vulnerability that leaves vast numbers of computers and smartphones susceptible to hacking and performance slowdowns.

• California Bill Seeks Ban on Fossil-Fueled Vehicles by 2040.

Wall Street Journal:

• Merrill Lynch Bars Trading of Bitcoin Fund, Futures. Firm has already denied clients access to the bitcoin futures markets.

MarketWatch.com:

• Stock-market investors should ‘brace for a possible near-term melt-up’: Jeremy Grantham.

• A record amount was spent on S&P 500 dividends over 2017, and 2018 could break that record.

Fox News:

• Ex-Trump campaign manager Manafort sues Mueller, Rosenstein, claims Russia probe has gone too far. (video)

CNBC:

• Stocks in new year upswing sending positive signal, as Dow nears 25,000.

• Tax cuts pushed Fed to raise economic forecast, meeting minutes show. (video)

• Icy rivers, frozen fountains and treacherous roads: Stunning photos of the bitter US cold snap. (pic)

• Southwest Airlines(LUV) to Boeing(BA): We'll take the large.

• Netflix(NFLX) starts 2018 off with a bang—and one technician sees the stock surging even higher. (video)

• Macy's(M) is about to close more stores.

Zero Hedge:

• Auto Sales Post Strong December On Massive 19% Spike In GM Incentive Spending. (graph)

• New Pipeline Doubles Russian Crude Oil Supply To China.

• Turkish Religious Authority Says Girls As Young As 9 Can Marry.

• Children Forced To Freeze, As Baltimore Schools Open With No Heat.

• Six Things That Offended Students In 2017.

• Tesla(TSLA) Misses Model 3 Deliveries By 50%, Delays Production Goal.

• WTI/RBOB Extend Gains After 7th Straight Week Of Crude Draws. (graph)

• Paul Manafort Sues DOJ, Robert Mueller And Rod Rosenstein: Full Lawsuit.

• VIX Crashes To Record Low Close, Gold Win Streak Longest Since 2011, Crypto Tops $700bn. (graph)

Business Insider:

• A crisis in Iran could send oil to $100.

Telegraph:

• Eurozone’s fleeting boom is an illusion - Britain won't remain the sick man of Europe for long.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 65.75 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 12.75 unch.

• Bloomberg Emerging Markets Currency Index 74.88 -.08%.

• S&P 500 futures +.04%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ANGO)/.16

• (MON)/.42

• (WBA)/1.26

• (FC)/-.32

• (PSMT)/.87

• (SONC)/.25

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for December.
  

8:15 am EST

• The ADP Employment Change for December is estimated at 190K versus 190K in November.
  

8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 241K versus 245K the prior week.

• Continuing Claims are estimated to fall to 1925K versus 1943K prior. 

Upcoming Splits

• (UNG) 1-for-4

Other Potential Market Movers

• The Fed's Bullard speaking, Eurozone Services PMI, China Services PMI, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, Jefferies Data Center/Telecom/Tech REIT conference, (LB) Q4 update and the (BKE)/(FRED) monthly sales reports could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and industrial 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 Economic Optimism, Oil Gain, Technical Buying, Energy/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.06 -7.3%

• Euro/Yen Carry Return Index 140.88 -.22%

• Emerging Markets Currency Volatility(VXY) 7.86 -1.01%

• S&P 500 Implied Correlation 34.38 -3.59%

• ISE Sentiment Index 111.0 +3.74%
  

• Total Put/Call .86 +.1%

• NYSE Arms .88 +52.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 47.24 -2.68%
  

• America Energy Sector High-Yield CDS Index 359.0 -4.05%

• European Financial Sector CDS Index 43.07 -2.91%

• Western Europe Sovereign Debt CDS Index 3.96 n/a

• Asia Pacific Sovereign Debt CDS Index 12.70 -.35%

• Emerging Market CDS Index 115.21 -1.50%
  

• iBoxx Offshore RMB China Corporate High Yield Index 146.23 +.04%

• 2-Year Swap Spread 18.25 +.25 basis point

• TED Spread 29.0 +1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.0 -2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 74.92 +.21%
• 3-Month T-Bill Yield 1.39% -1.0 basis point
  

• Yield Curve 51.5 -2.25 basis points

• China Iron Ore Spot 507.50 CNY/100 Metric Tonnes unch.

• Citi US Economic Surprise Index 78.20 +6.3 points

• Citi Eurozone Economic Surprise Index 46.80 +1.0 basis point

• Citi Emerging Markets Economic Surprise Index -.9 +1.7 points

• 10-Year TIPS Spread 2.0 -1.0 basis point
  
• 76.5% chance of Fed rate hike at March 21 meeting, 78.0% chance at May 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +421 open in Japan 
• China A50 Futures: Indicating +115 open in China

• DAX Futures: Indicating +22 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long