Friday Watch

Evening Headlines

Bloomberg:

• Crypto Stock Fever Misses China as Investors Sour on Small Caps. Chinese stock investors don’t seem to share the global enthusiasm for companies jumping on the cryptocurrency bandwagon. Shenzhen Forms Syntron Information Co. has fallen 22 percent since announcing in March an agreement to promote blockchain in Hong Kong and the banking industry. Easysight Supply Chain Management Co. has lost 18 percent since saying in April it will work with IBM to use blockchain. Compare that with the U.S., where companies making everything from juice to sports bras have seen their shares surge after announcing cryptocurrency ventures.

• Asia Stocks Extend Strong 2018 Start; Dollar Slips. Asian stocks are on the cusp of their best week in almost six months as investors around the world pile into equities at the start of 2018 amid robust economic data from the U.S. to Europe to China. Benchmark indexes in Tokyo and Sydney are in the green after U.S. shares surged to fresh records Thursday. The dollar is headed for a fourth straight week of losses as the global economic expansion spurs investors to look at markets with lower valuations and better risk-return prospects. Commodities steadied after a record run of gains, with oil trading close to its highest in three years. Japan’s Topix Index rose 0.6 percent as of 9:06 a.m. in Tokyo, and the Nikkei 225 Stock Average was up 0.5 percent. Futures on the S&P 500 Index were little changed after the underlying gauge gained 0.4 percent Thursday to a record close. Futures on Hong Kong’s Hang Seng Index rallied 0.4 percent. Australia’s S&P/ASX 200 Index gained 0.6 percent.

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

• Warren Buffett Says Years of U.S. Growth ‘Certainly Lie Ahead’. Billionaire Warren Buffett remains optimistic about the U.S. economy and the nation's prospects for the future. Buffett wrote an essay for Time magazine that appeared online Thursday, part of an issue edited by Bill Gates that was dedicated to "The Optimists." In his essay, Buffett explained why he often says that most American children will live better than their parents. Buffett said that even if the economy continues to grow at a modest pace of about 2 percent a year, the next generation of Americans will fare better because the economy will still grow faster than the U.S. population does. Buffett said American businesses will also continue to innovate. "This game of economic miracles is in its early innings. Americans will benefit from far more and better 'stuff' in the future," Buffett wrote.

• Peter Thiel Is Reportedly Exploring Launching Conservative News Outlet.

• Apple(AAPL) Says All Macs, iPhones and iPads Exposed to Chip Security Flaws.

Wall Street Journal:

• As Dow Tops 25000, Individual Investors Sit It Out. Since 2012, $1 trillion has been pulled from retail-investor mutual funds that target U.S. stocks.

• Make Iran Great Again. Like Barack Obama, Iran’s leaders don’t know how a real economy works.

• Trump Administration Proposes Massive Expansion of Oil Drilling. Plan would open 90% of offshore areas for drilling starting in 2019.

• Weinstein Co. Close to Sale for Less Than $500 Million. Bidders include private investors, entertainment companies, investment firms.

• Blizzard Conditions Slam East Coast. Snow fell along the Mid-Atlantic coast, closing schools, workplaces and airports and making roads treacherous.

• NFL Ratings Fall at Faster Pace. Average audience for a game fell 9.7% to 14.9 million, but league says NFL programming still accounted for 33 of top 50 programs on TV in 2017.

MarketWatch.com:

• 10 favorite stocks for 2018 from top-ranked stock newsletter writers.

• New tax laws will boost stock markets, Wells Fargo(WFC) says.

• SEC, CFTC warn of risk of virtual currencies and initial coin offerings.

Fox News:

• DOJ deal gives Nunes access to 'all' documents, witnesses sought in Russia probe, letter says. (video)

CNBC: 

• Dow closes above 25,000 for the first time after strong jobs data. (video)

• Stocks making the biggest moves after hours: SHLD, SONC & more.

• Stunning images of the 'bomb cyclone'. (pic)

• Investor who called last two major market crashes says bitcoin is a bubble.

• Trump aims to open nearly all federal waters to offshore drilling in biggest lease sale ever. (video)

• David Tepper says market is as 'cheap’ as a year ago, bullish on Trump’s tax cuts. (video)

• Former Walmart.com CEO says Walmart store closures are a good sign for e-commerce. (video)

Zero Hedge:

• Global Commodities Surge To Longest Win Streak In History. (graph)

• Republican Senator Releases Full Unedited Comey Memo Showing Clinton "Grossly Negligent".

• The Debt Beneath.

• These Are The 103 Stores That Sears Announced It Will Be Closing.

• Homeland Security Data Breach Exposed Over 240,000 DHS Employees In "Unauthorized Exfiltration".

• Pot Stocks Tumble After Jeff Sessions Rescinds Policies Allowing States To Legalize Pot.

• Tesla(TSLA) Bonds Tumble - Now 'Riskier' Than Indonesia.

• Dow Tops 25k As Gold Surges To All-Time Record Win Streak. (graph)

Business Insider:

• Top conservative megadonor cuts ties with Bannon as pressure grows to oust him from Breitbart News.

• Apple(AAPL) just shared some staggering statistics about how well the App Store is doing.

• JetBlue(JBLU) is giving all of its crew members a $1,000 bonus.

Night Trading 

• Asian equity indices are .unch  to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 64.75 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 12.0 -.75 basis point.

• Bloomberg Emerging Markets Currency Index 75.21 +.03%.

• S&P 500 futures +.06%.

• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AZZ)/.58

• (CALM)/.70

• (STZ)/1.89

Economic Releases

8:30 am EST

• Change in Non-Farm Payrolls for December is estimated to fall to 190K versus 228K in November.

• The Unemployment Rate for December is estimated at 4.1% versus 4.1% in November.

• Average Hourly Earnings MoM for December are estimated to rise +.3% versus a +.2% gain in November.

• The Trade Deficit for November is estimated at -$50.0B versus -$48.7B in October.

10:00 am EST

• ISM Non-Manufacturing for December is estimated to rise to 57.5 versus 57.4 in November. 

• Factory Orders for November are estimated to rise +1.1% versus a -.1% decline in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Mester speaking, Fed's Harker speaking and the Eurozone Retail Sales/CPI reports could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology 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 100% net long heading into the day.

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.