Wednesday, January 10, 2018

Thursday Watch

Evening Headlines
Bloomberg:
  • Nafta Nations Plan More Talks for Mexico in February. The U.S., Canada and Mexico plan a seventh round of negotiations for a new Nafta deal for February in Mexico City even as they focus on preparations for talks in Montreal in two weeks, according to two people familiar with the plans. Negotiations to update the accord have been organized into rounds, or week-long sessions where groups meet to hammer out the details of about 30 chapters under discussion. The talks began in Washington in August and have rotated between the three nations every few weeks since. The Jan. 23-28 round taking place in Quebec will be the first held outside a capital city, and the talks will then return to Mexico the next month, according to the people, who asked not to be named discussing plans that haven’t been announced publicly.
  • Stocks Fall as Rally Loses Steam, Yen Strengthens. The stellar run for equities that ushered in the new year showed signs of waning in Asia on Thursday as the yen strengthened to a six-week high and traders dialed back their appetite for risky assets amid a jump in government bond yields. The yen held gains against all its G-10 peers, dragging down shares in Tokyo. Equities in Seoul and Sydney also fell after the S&P 500 Index slipped overnight. The Canadian dollar and Mexican peso maintained losses triggered by a report that Canadian officials see rising odds the Trump administration will leave Nafta. Japan’s Topix index slid 0.4 percent as of 9:43 a.m. in Tokyo. Australia’s S&P/ASX 200 Index fell 0.4 percent and South Korea’s Kospi declined 0.3 percent. Futures on Hong Kong’s Hang Seng Index lost 0.1 percent. Futures on the S&P 500 were little changed after the underlying gauge slipped 0.1 percent Wednesday, paring losses of as much as 0.6 percent earlier in the session. The MSCI Asia Pacific Index lost 0.3 percent, having climbed 4.1 percent from the start of the year through Wednesday.
Wall Street Journal:
MarketWatch.com
CNBC:
Business Insider:
Night Trading 
  • Asian equity indices are -.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 60.0 +.25 basis point
  • Asia Pacific Sovereign CDS Index 10.5 +.75 basis point.
  • Bloomberg Emerging Markets Currency Index 74.84 +.08%.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures -.03%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (DAL)/.89
  • (FCEL)/-.20
  • (SJR)/.29
Economic Releases
8:30 am EST
  • PPI Final Demand MoM for December is estimated to rise +.2% versus a +.4% gain in November. 
  • PPI Ex Food and Energy MoM for December is estimated to rise +.2% versus a +.3% gain in November.
  • Initial Jobless Claims for last week are estimated to fall to 245K versus 250K the prior week.
  • Continuing Claims are estimated to rise to 1920K versus 1914K prior.
2:00 pm EST
  • Monthly Budget Statement for December is estimated at -$26.0B versus -$138.5B in November.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Australian Retail Sales report, Eurozone Industrial Production report, $12B 30Y 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 mostly lower, weighed down by consumer and industrial 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 Modestly Lower into Final Hour on Profit-Taking, Yen Strength, Technical Selling, REIT/Utility Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Mixed
  • Volume: Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • Volatility(VIX) 9.98 -.99%
  • Euro/Yen Carry Return Index 138.78 -.96%
  • Emerging Markets Currency Volatility(VXY) 7.56 +.27%
  • S&P 500 Implied Correlation 33.53 -4.0%
  • ISE Sentiment Index 96.0 -9.4%
  • Total Put/Call .63 -21.3%
  • NYSE Arms .52 -39.5%
Credit Investor Angst:
  • North American Investment Grade CDS Index 46.41 +.42%
  • America Energy Sector High-Yield CDS Index 339.0 -.70%
  • European Financial Sector CDS Index 44.0 +1.44%
  • Italian/German 10Y Yld Spread 149.50 -7.5 basis points
  • Asia Pacific Sovereign Debt CDS Index 10.4 +6.72%
  • Emerging Market CDS Index 113.76 +2.01%
  • iBoxx Offshore RMB China Corporate High Yield Index 146.57 +.02%
  • 2-Year Swap Spread 19.50 unch.
  • TED Spread 27.25 -1.75 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -25.0 -.5 basis point
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 74.76 -.03%
  • 3-Month T-Bill Yield 1.42% -1.0 basis point
  • Yield Curve 57.75 -.5 basis point
  • China Iron Ore Spot 520.0 CNY/100 Metric Tonnes unch.
  • Citi US Economic Surprise Index 66.50 -.5 point
  • Citi Eurozone Economic Surprise Index 58.30 -.5 basis point
  • Citi Emerging Markets Economic Surprise Index 0.0 unch.
  • 10-Year TIPS Spread 2.04 unch.
  • 80.3% chance of Fed rate hike at March 21 meeting, 80.7% chance at May 2 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating -163 open in Japan 
  • China A50 Futures: Indicating -9 open in China
  • DAX Futures: Indicating -33 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my medical/biotech/retail sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 100% Net Long

Today's Headlines

Bloomberg:
  • World Bank Raises Outlook as Growth Hits Fastest Pace Since 2011. The World Bank lifted its forecast for global growth, predicting the global recovery will continue to gain steam after reaching the fastest clip in six years. The development lender raised its estimate for global economic growth for this year to 3.1 percent, up 0.2 percentage point from an estimate in June, it said Tuesday in its latest Global Economic Prospects report. The world economy probably expanded 3 percent last year, which would be the fastest pace since 2011. Global growth is expected to last for at least the next couple of years, as conditions improve for commodity exporters hurt by the oil crash, said the Washington-based lender. Increased investment and manufacturing activity is driving a broad cyclical recovery, aided by benign financial conditions, loose monetary policy and improved confidence, it said.
  • Bitcoin Could End Up Using More Power Than Electric Cars. The global power needed to create cryptocurrencies this year could rival the entire electricity consumption of Argentina and be a growth driver for renewable energy producers from the U.S. to China. Miners of bitcoin and other cryptocurrencies could require up to 140 terawatt-hours of electricity in 2018, about 0.6 percent of the global total, Morgan Stanley analysts led by Nicholas Ashworth wrote in a note Wednesday. That’s more than expected power demand from electric vehicles in 2025.
Wall Street Journal:

Bear Radar

Style Underperformer:
  • Mid-Cap Growth -.5%
Sector Underperformers:
  • 1) REITs -1.2% 2) Semis -1.0% 3) Foods -1.0%
Stocks Falling on Unusual Volume: 
  • SIMO, SVU, NTCT, MSM, SIG, AMBA, PCRX, RES and BB
Stocks With Unusual Put Option Activity:
  • 1) LQD 2) S 3) SIG 4) F 5) O
Stocks With Most Negative News Mentions:
  • 1) SIMO 2) HSY 3) GXDX 4) IMAX 5) BIG
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Value +.5%
Sector Outperformers:
  • 1) Banks +2.1% 2) Airlines +1.8% 3) Retail +1.0%
Stocks Rising on Unusual Volume:
  • ARES, KODK, AFSI, AIMC, GBT, TRCO, PUK, PAH, SCHN, BX, AIG, CASH, PLAY, SBGI, LEN, FTXO, CLDR, NYCB, USAK, CUK, ANAB, MFGP, CHDN, BHLB, CMCM, APPN, FOLD, AAWW, UAL, SBGI, PAH, ISRG, NYCB and BOFI
Stocks With Unusual Call Option Activity:
  • 1) NVAX 2) RCL 3) NKTR 4) MON 5) XME
Stocks With Most Positive News Mentions:
  • 1) TGT 2) UAL 3) MS 4) ISRG 5) AAWW
Charts:

Morning Market Internals

NYSE Composite Index: