Thursday Watch

Night Trading 

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 70.25 +1.0 basis point. 
• Asia Pacific Sovereign CDS Index 12.0 -.75 basis point.
• Bloomberg Emerging Markets Currency Index 75.30 +.04%.
• FTSE 100 futures -.86%.
• S&P 500 futures -.23%.
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALXN)/1.27
• (BWA)/1.01
• (GOOS)/.47
• (CAH)/1.16
• (CBG)/.92
• (CVS)/1.88
• (GT)/.78
• (HBI)/.52
• (K)/.96
• (MAS)/.43
• (PTEN)/-.08
• (PENN)/.17
• (PM)/1.35
• (REN)/4.60
• (SEE)/.57
• (SNA)/2.66
• (TWTR)/.14
• (TSN)/1.49
• (VIAB)/.95
• (WWE)/.19
• (YUM)/.80
• (ATVI)/.93
• (AIG)/.75
• (EXPE)/1.15
• (HIG)/.78
• (MHK)/3.32
• (NWSA)/.19
• (NVDA)/1.32
• (OSTK)/.03
• (SKX)/.13
• (ZG)/.19

Economic Releases

8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 232K versus 230K the prior week.
• Continuing Claims are estimated to fall to 1940K versus 1953K the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kashkari speaking, Fed's George speaking, Govt funding deadline, China Trade report, $16B 30Y T-Note auction, WASDE crop report, Bloomberg Economic Survey for Feb., weekly Bloomberg Consumer Comfort Index, 4Q Mortgage Delinquencies/Foreclosures reports, weekly EIA natural gas inventory report, (BKE)/(LB) sales update and the (DNKN) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by financial 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 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Earnings Optimism, Yen Weakness, Short-Covering, Defense/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 24.55 -19.3%

• Euro/Yen Carry Return Index 140.17 -.81%

• Emerging Markets Currency Volatility(VXY) 8.85 +.57%

• S&P 500 Implied Correlation 43.49 -3.29%

• ISE Sentiment Index 130.0 +5.7%
  

• Total Put/Call .85 -14.14%

• NYSE Arms 1.23 +100.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 53.72 +.39%
  

• America Energy Sector High-Yield CDS Index 353.0 -1.08%

• European Financial Sector CDS Index 45.91 -5.59%

• Italian/German 10Y Yld Spread 120.50 -9.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.0 -4.95%

• Emerging Market CDS Index 119.23 -.38%
  

• iBoxx Offshore RMB China Corporate High Yield Index 147.50 +.11%

• 2-Year Swap Spread 22.5 -1.25 basis points

• TED Spread 26.75 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -29.75 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.36 -.53%
• 3-Month T-Bill Yield 1.54% +3.0 basis points
  

• Yield Curve 71.75 +3.5 basis points

• China Iron Ore Spot 74.45 USD/Metric Tonne -.43%

• Citi US Economic Surprise Index 47.50 -.6 point

• Citi Eurozone Economic Surprise Index 41.70 -.2 basis point

• Citi Emerging Markets Economic Surprise Index -1.0 -2.1 basis points

• 10-Year TIPS Spread 2.12 +2.0 basis points
  
• 100.0% chance of Fed rate hike at May 2 meeting, 100.0% chance at June 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +415 open in Japan 
• China A50 Futures: Indicating -62 open in China

• DAX Futures: Indicating -29 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Yuan Nears Strongest Level Since 2015 Devaluation. The onshore yuan rose 0.3 percent to 6.2620 per dollar as of 5:10 p.m. local time, its third day of gains. The currency is at its strongest since Aug. 11, 2015. Wednesday’s increase came after the People’s Bank of China set the daily reference rate 75 pips weaker than the average estimate in a Bloomberg survey, the biggest discrepancy in four months. A Bloomberg replica of the CFETS RMB Index climbed above 97 for the first time.

• European Stocks Rise, Ending Worst Seven-Day Selloff Since 2016. The Stoxx 600 Index rose 2 percent at the close, the biggest jump in nine months. All industry groups ended the session in the green, as financial services stocks led the advance with a 3.4 percent gain. Stocks in France and Germany rallied at least 1.6 percent, while the euro slid for the second time this week.

• Goldman’s Schwartz Says Investors See Buying Opportunity After Stock Rout. (video)

• A Map to the Underworld: $2 Trillion of Volatility Trades Here. (video)

• Trump Has a Clear Path to Refuse Mueller.

• Bitcoin May Evolve Into What Everyone Fears, Mathematicians Say. (video) Prices of cryptocurrencies such as Bitcoin may never stabilize, and digital tokens risk simply ending up being the equivalent of Ponzi schemes. Using mathematical modeling and experimental economics, two University of Pittsburgh researchers tried to determine Bitcoin’s value, and concluded that it’s "an asset which has no value by traditional measures" and may be in a bubble. Its price is largely driven by the opinion of fringe buyers, often holding erroneous views. As these fringe buyers run for cover, worried that their investment is not as secure as they thought, the price plummets.

• Bitcoin on Credit? For 20 Percent of Owners, That's a Yes. (video) Nearly 20 percent of people who own cryptocurrencies such as Bitcoin went into debt to buy it, or bought it on margin. That’s the finding of a survey of more than 3,000 people conducted in mid-January by CoinDesk, a New York-based provider of price data, information and news about digital tokens.

• Stock Pickers Cheer Volatility's Return as Sign of Normal Times.

Wall Street Journal:

• How YouTube Drives People to the Internet’s Darkest Corners. Google’s(GOOG) video site often recommends divisive or misleading material, despite recent changes designed to fix the problem.

• Should Markets Be Worried About Inflation? What to Know, in 9 Charts.

• Vice Just Had a Big Revenue Miss, and Investors Are Getting Antsy. Setback is largely due to the struggling Viceland cable-TV channel.

MarketWatch.com:

• This is why the stock market is wrong to fear rising wages.

Fox News:

• Bitcoin, other cryptocurrencies headed to zero: Goldman(GS). (video) “Most, if not all, of today's digital coins will find a final resting place at zero,” Steve Strongin, the firm’s global head of investment research, said in a report published Feb. 5.

• Senate leaders announce budget agreement, hike in Pentagon spending. (video)

• Post-bankruptcy California city tests ‘universal’ income for residents.

CNBC:

• Investor Cooperman: 'Crazy' securities are destroying the best capital market in the world. (video)

• Billionaire investor Cooperman says US crude can hit $70, names energy stock picks.

• McConnell-Schumer budget deal just keeps the spending going.

• US will be a net energy exporter by 2022, four years sooner than expected: Dept of Energy.

• Cooperman: United Continental(UAL) shares to ‘double’ in the next 2 to 3 years.

• Investor Cooperman says he bought during the market sell-off. (video)

• Microsoft(MSFT) CEO Satya Nadella: The technology industry can't shrug off possible job losses from A.I.

Zero Hedge:

• FBI 'Lovers' New Texts Expose Obama Complicity: He "Wants To Know Everything We're Doing". New text messages between FBI lovers Peter Strzok and Lisa Page have now been made public, and, as The Duran's Alex Christoforou notes, the big reveal is that then-POTUS Barack Obama appears to be in the loop, on the whole ‘destroy Trump’ insurance plan hatched by upper management at the FBI.

• "Risks Is More Severe Than We Previously Expected": S&P Downgrades Wells Fargo, Full Report.

• EURUSD Tumbles After ECB Accuses US Of Manipulating Currency. (graph)

• "Make Volatility Your Asset", Until You Get A Letter Like This. (graph)

•  Dow Surges Above Key Technical Level, VIX Nears 20. (graph)

•  Bonds, Stocks Slammed, Dollar Jumps After Budget Deal, Bad Auction. (graph)

•  Deutsche Bank Tumbles To 2016 Lows Amid Reports Of HNA Technical Default.

•  "Big Mistake": Trump Slams Market For Going Down On "Good News".

•  WTI/RBOB Sink After US Oil Production Hits Record High, Surpassing Saudis.

•  Goldman(GS) Will Soon Finance Your iPhone Purchase.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.1%

Sector Underperformers:

• 1) Oil Service -2.6% 2) Coal -1.8% 3) Gold & Silver -1.5%

Stocks Falling on Unusual Volume: 

• MTSI, MANH, JKS, MX, MCHP, CDW, EXTR, NTGR, CMG, HCSG, HQY, SIMO, APTI, BERY, TGTX, IPHI, OLN and BCO

Stocks With Unusual Put Option Activity:

• 1) BGS 2) SPB 3) PCG 4) YELP 5) PCG

Stocks With Most Negative News Mentions:

• 1) MTSI 2) ICPT 3) HQY 4) ERI 5) CBOE

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.7%

Sector Outperformers:

• 1) Defense +1.4% 2) Social Media +1.3% 3) Gaming +1.3%

Stocks Rising on Unusual Volume:

• MODN, BLUE, LULU, SNAP, NOBL, REI, TRNC, AQ, JRVR, RDWR, TBPH, ZEN, HAS, WYNN, PERY, WTW, RDFN, PRO, OMAB, ULTI, CRSP, ABEO, MTCH, KORS, GAIN, USNA, ARRY, BLL, TERP, GHL, BLKB, NEWR, FLOW, REI, EVTC, JEC, WD, AKAM, CNC, OI, AGCO, TMHC and GILD

Stocks With Unusual Call Option Activity:

• 1) EL 2) HAIN 3) CHRW 4) OCLR 5) DHI

Stocks With Most Positive News Mentions:

• 1) SNAP 2) DRYS 3) BLUE 4) ZEN 5) KORS

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +41.2% Above 100-Day Average
• 10 Sectors Rising, 0 Sectors Declining
• 66.9% of Issues Advancing, 31.9% Declining
• 16 New 52-Week Highs, 21 New Lows
• 46.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.4%
• Vix 21.4 -28.8%
• Total Put/Call .78 -21.2%
• TRIN/Arms .97 +56.6%