Thursday Watch

Night Trading 

• Asian equity indices are +.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 71.0 -2.25 basis points. 

• Asia Pacific Sovereign CDS Index 13.25 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 75.88 +.12%.

• FTSE 100 futures +.54%.

• S&P 500 futures +.25%.

• NASDAQ 100 futures +.32%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AAN)/.56

• (AVP)/.07

• (GPN)/1.06

• (ECA)/.11

• (OMC)/1.54

• (RS)/1.00

• (ZTS)/.66

• (ANET)/1.42

• (CBS)/1.14

• (CGNX)/.25

• (OSTK)/-.03

• (SHAK)/.06

Economic Releases

8:30 am EST

• Empire Manufacturing for February is estimated to rise to 18.0 versus 17.7 in January. 

• Initial Jobless Claims for last week are estimated to rise to 228K versus 221K the prior week.

• Continuing Claims are estimated to rise to 1925K versus 1923K prior.

• PPI Final Demand MoM for January is estimated to rise +.4% versus a -.1% decline in December.

• PPI Ex Food and Energy MoM for January is estimated to rise +.2% versus a +.1% gain in December.

• Philly Fed Business Outlook Index for February is estimated to fall to 21.6 versus 22.2 in January.

9:15 am EST

• Industrial Production MoM for January is estimated to rise +.2% versus a +.9% gain in December.

• Manufacturing Production for January is estimated to rise +.3% versus a +.1% gain in December.

• Capacity Utilization is estimated to rise to 78.0% versus 77.9% in December.

10:00 am EST

• The NAHB Housing Market Index for February is estimated at 72.0 versus 72.0 in January.

4:00 pm EST

• Net Long-Term TIC Flows for December.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Employment report, Eurozone Trade Balance report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (EMR) investor conference 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 Less US/European/Emerging Markets Debt Angst, Oil Gain, Short-Covering, Metals & Mining/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 19.44 -22.2%

• Euro/Yen Carry Return Index 138.77 +.02%

• Emerging Markets Currency Volatility(VXY) 8.78 +1.27%

• S&P 500 Implied Correlation 42.09 -8.0%

• ISE Sentiment Index 95.0 +39.71%
  

• Total Put/Call 1.18 +21.65%

• NYSE Arms .40 -63.48%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.46 -1.73%
  

• America Energy Sector High-Yield CDS Index 403.0 -.46%

• European Financial Sector CDS Index 55.74 -1.42%

• Italian/German 10Y Yld Spread 130.75 -2.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 13.16 -3.83%

• Emerging Market CDS Index 129.32 -4.1%
  

• iBoxx Offshore RMB China Corporate High Yield Index 147.46 +.03%

• 2-Year Swap Spread 27.5 +2.0 basis points

• TED Spread 23.50 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -31.50 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.80 +.88%
• 3-Month T-Bill Yield 1.58% -1.0 basis point
  

• Yield Curve 74.50 +1.0 basis point

• China Iron Ore Spot 76.60 USD/Metric Tonne -.14%

• Citi US Economic Surprise Index 40.50 -2.8 points

• Citi Eurozone Economic Surprise Index 38.30 -.3 point

• Citi Emerging Markets Economic Surprise Index 1.0 +.6 point

• 10-Year TIPS Spread 2.11 +5.0 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 +311 open in Japan 
• China A50 Futures: Indicating +117 open in China

• DAX Futures: Indicating +87 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• Euro-Area Economy Keeps Cruising Speed as Outlook Improves. The euro-area economy maintained its robust growth pace at the end of last year, setting the stage for another solid performance in 2018 that may sway European Central Bank policy makers into winding down unprecedented stimulus.

• Tech Stocks, Leading Market Bounce, Just Made Up Half Their Loss. It’s too early to sound the all clear after the worst equity selloff in two years. But if you take a look at tech stocks, things are heading in the right direction. Not only is the biggest industry in the U.S. market is leading the four-day bounce from the bottom. The S&P 500 Information Technology index also just passed 1,131, marking a 50 percent retracement of the slump from Jan. 26 to Feb. 8, using intraday extremes. That’s bullish for chart watchers.

• CPI, Retail Data Not Pretty But May Overstate U.S. Economic Pain. (video) Faster-than-projected U.S. inflation and an unexpected decline in retail sales at the start of the year may cause some indigestion on Wall Street, but probably don’t mean much pain for the economy.

• Why Surging Clothing Prices Won't Drive U.S. Inflation for Long. (video)

• Oil Rebounds as Crude Accumulation Slows in U.S. Storage Tanks. (video) At the nation’s biggest pipeline hub, stockpiles have fallen for eight straight weeks, the longest streak for this time of year since 2014.

• Shorts in SPDR Junk Bond ETF Surge to Highest Level Since 2010. Short interest as a percentage of shares outstanding on the SPDR Bloomberg Barclays High Yield Bond ETF, ticker JNK, surged to more than 30 percent Wednesday, according to data from IHS Markit Ltd. That’s about a threefold increase from January and the largest short position in the fund since 2010.

Wall Street Journal:

• AT&T(T) Targets DOJ Antitrust Chief in Time Warner Fight. Company lays the groundwork to challenge the legitimacy of government’s antitrust suit.

• Why You Should Cut Cable—and What You’ll Miss. YouTube TV is now the top internet-TV contender—but how does it stack up to your cable bundle?

• Can the Nordstrom(JWN) Family Outrun Retail’s Woes? Nordstrom’s founding family hopes heavy investing in stores and ecommerce will help the department-store chain reinvent itself for the next 50 years.

• Goldman Sachs(GS) Bolsters M&A Leadership. Dusty Philip will be to co-head of M&A alongside Michael Carr and Gilberto Pozzi.

• U.S. to Block Tax-Law Loophole on ‘Carried Interest’. Treasury to act within two weeks to block a hedge-fund maneuver to avoid paying higher tax rates.

MarketWatch.com:

• Universal Display(OLED) stock soars on announcement of long-term agreement wtih Samsung Display.

• The ultimate buy and hold strategy: 2018 edition.

• This might be the time when you can finally get quality stocks on sale.

• Buy these 5 undervalued stocks on this market pullback.

• Don’t be scared by weak retail sales and rising inflation.

• 70% of fund managers see danger ahead—the highest percentage since the financial crisis.

• Five economic reasons not to panic over the stock-market roller coaster.

• Out of 250,000 cryptocurrency traders, less than 100 paid taxes, according to survey.

Fox News:

• Warren accuses Trump of 'disrespect' to Native Americans for 'Pocahontas' nickname.

CNBC:

• Home Depot(HD) shares are having their worst month in 8 years. But here's why some traders are getting bullish. (video)

• Trump’s budget could let those on Medicare use this tax-favored account.

• The most important chart in the market that everyone on Wall Street needs to see, according to analyst Acampora. (video)

• Six top US intelligence chiefs caution against buying Huawei phones.

• Republicans just got some good news for the 2018 midterm elections: A new poll shows them leading in the race for Congress.

Zero Hedge:

• Mortgage Apps Tumble As Rates Spike To 4-Year Highs. (graph)

• US Slaps China With Antidumping Duty On Cast Iron Soil Pipe Fittings.

• VIX Crashes Back Below 20 After Futures Expiration. (graph)

• "Fading Ray" - Why One Trader Is Buying What Bridgewater's Selling. (graph)

• A 'Currency' Shouldn't Be That Volatile? Gold Spikes To $1350 As Dollar Plunges. (graph)

• WTI/RBOB Spike After Smaller Than Expected Crude Build, New Record High Production. (graph)

• Arizona, Colorado, & Wyoming Push Legislation Supporting Cryptocurrency.

• Stocks Shrug Off Inflation Scare But Bond Yields Extend Spike. (graph)

• Goldman's(GS) Buyback Desk Has Busiest Week Ever, But "It's Not Going To Be Enough".

• Stagflation: Retail Sales Tumble Just As Inflation Spikes. (graph)

• Wage Growth? Real Hourly Earnings Are Slowing Notably. (graph) 

• Three People Shot After Intruders Try To Ram NSA Compound Gate.

• Macron Vows To Reform Islam In France: "It Is Time To Bring In A New Generation".

• BIS Chief Fears "Systemic Threat" Of Bitcoin, Urges "Pre-emptive Action" From Authorities.

Bear Radar

Style Underperformer:

• Large-Cap Value +1.2%

Sector Underperformers:

• 1) Utilities -.5% 2) REITs -.5% 3) Tobacco unch.

Stocks Falling on Unusual Volume: 

• OMER, TRUP, LXFT, KMPR, SKT, MXL, GVA, BG, OHI and LAD

Stocks With Unusual Put Option Activity:

• 1) GRPN 2) FOSL 3) MNKD 4) OMER 5) AMJ

Stocks With Most Negative News Mentions:

• 1) TTPH 2) GLMD 3) OMER 4) CAR 5) CSRA

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +1.5%

Sector Outperformers:

• 1) Steel +6.1% 2) Social Media +3.0% 3) Road & Rail +2.5%

Stocks Rising on Unusual Volume:

• IEFA, DBVT, LAYN, FOSL, TWLO, CARB, WIX, SODA, CMG, SUM, YIN, CRTO, KBWB, NKTR, EFAV, MTCH, UGLD, BUFF, BIDU, OLED, BAND, ABMD, ZLAB, TLND, MOV, ACCO, IPG, PBYI, DBD, ABMD, SUM, OKTA, TRHC, DENN, UAA, FANG, BUFF, TAP, IO, HUBS and ZG

Stocks With Unusual Call Option Activity:

• 1) CREE 2) WSM 3) TWLO 4) TIF 5) NTAP

Stocks With Most Positive News Mentions:

• 1) BIDU 2) TGT 3) IPG 4) VIPS 5) KLAC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +20.7% Above 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 60.3% of Issues Advancing, 36.9% Declining
• 21 New 52-Week Highs, 58 New Lows
• 43.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.9%
• Vix 19.7 -21.0%
• Total Put/Call 1.15 +18.6%
• TRIN/Arms .57 -47.7%