Tuesday Watch

Evening Headlines

Bloomberg:

• Apple(AAPL), Samsung Open Their Wallets, Boosting World's Economy. (video) Companies across the developing world are stepping up investment to meet rising demand from industrial economies in what’s shaping up as a further spur to already buoyant global growth. Big industrial economies including the U.S. and Japan led the recent recovery in capital expenditure. Now, such investment is broadening to emerging countries with Morgan Stanley’s tracker of economies not including China now at its highest level since 2011. "It is going from synchronized growth to synchronized capex," said Chetan Ahya, co-head of global economics at Morgan Stanley in Hong Kong.

• Bank of Korea Keeps Rate Unchanged in Lee’s Final Policy Meeting. With only modest inflationary pressure, the BOK will continue to move cautiously in coming quarters, given external risks related to trade, monetary policy and geopolitics, Tuuli McCully, head of Asia-Pacific Economics at Scotiabank, said before the decision. “We expect the next rate hike to take place closer to mid-2018,” McCully said.

• Global FANG Index Just Hit a Record High.

• Alibaba(BABA) to Buy Out Baidu(BIDU) in China’s Top Food Takeout App. (video)

• Global Equity Rally Extends in Asia Before Powell. Asian stocks built on the recent rally after U.S. shares reached a four-week high and investors bet monetary policy tightening won’t be too severe to derail the bull run in equities. Shares rose in Tokyo, Seoul and Sydney after the S&P 500 recovered most of the losses emanating from the slump that hit global stock markets at the start of the month. The 10-year Treasury yield was steady after falling to a two-week low as investors await the first public comments from Federal Reserve Chairman Jerome Powell on Tuesday. Oil extended its recent rebound. Japan’s Topix index climbed 0.7 percent as of 9:35 a.m. in Tokyo. The Nikkei 225 Stock Average gained 0.8 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent. South Korea’s Kospi index added 0.3 percent. Futures on Hong Kong’s Hang Seng Index added 0.2 percent. Futures on the S&P 500 fell less than 0.1 percent. The S&P 500 rose 1.2 percent Monday.

• Five Things You Need to Know to Start Your Day. (video)

• U.S. Wireless Carriers Plan to Launch 5G With ‘Pucks’ Not Phones. AT&T Inc. and Verizon Communications Inc., conceding that phones won’t be available in time for the launch of fifth-generation mobile service this year, plan instead to offer 5G through portable hotspots called pucks.

Wall Street Journal: 

• Don’t Misjudge Trump’s Trade Tirade. The president may be shifting the discussion more than GOP elites think is possible.

• Blessed by Xi Jinping: The New Captain of China’s Economy. President to hand reins to former schoolmate, party loyalist Liu He.

MarketWatch.com: 

• Cloud-based software stocks including Salesforce.com(CRM) still have a long runway of growth.

Fox News: 

• Bernie Sanders struggles to address Russian support after Mueller indictment.

CNBC: 

• Dow rallies nearly 400 points, major averages down just 3% from all-time highs. (video)

• World's largest asset manager says get ready to 'stomach complete losses' in cryptocurrencies.

• Stocks making the biggest moves after hours: Fitbit, Nutrisystem, Palo Alto & more.

• Saudi king shakes up military leadership; names new generation to economic, security roles.

• Not interested in ‘your boycott war,’ HotelPlanner CEO says to companies cutting ties with NRA. (video)

• Apple(AAPL) just misses a new all-time high after Buffett boasts a big stake.

Zero Hedge:  

• Georgia Senate Effectively Blocks Delta Tax Break Bill After NRA Rejection.

• Fedex(FDX) Refuses To Bow To Pressure, Won't Discriminate Against NRA Members.

• Morgan Stanley Says The Great Bond Selloff Is Over. (graph)

• JPMorgan Warns Of "Extinction Level Event" For CTAs After Worst Month On Record. 

• Meet The California Special Agents Who Are "Coming For Your Guns".

• The 'Resistance' "Spectacle Of Roaring Dishonesty" Is A Disgrace.

• Stocks, Bonds, Bitcoin, Dollar, & Gold Rise (As Housing Collapses). (graph)

Night Trading 

• Asian equity indices are +.5% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 66.75 -2.75 basis points. 

• Asia Pacific Sovereign CDS Index 12.75 unch.

• Bloomberg Emerging Markets Currency Index 75.91 +.04%.

• FTSE 100 futures +.41%.

• S&P 500 futures unch.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AMT)/1.53

• (AZO)/8.85

• (CRI)/2.20

• (DISCA)/.43

• (EV)/.75

• (LL)/.08

• (M)/2.68

• (TOL)/.54

• (ALB)/1.21

• (EOG)/.53

• (ESRX)/2.09

• (HTZ)/-.59

• (JAZZ)/2.99

• (NBR)/-.34

• (PZZA)/.67

• (PCLN)/14.12

• (SQ)/.07

• (TDW)/-.72

• (WTW)/.31

• (WDAY)/.21

Economic Releases
8:30 am EST

• Advance Goods Trade Deficit for January is estimated at -$72.3B versus -$72.3B in December.

• Wholesale Inventories MoM for January are estimated to rise +.4% versus a +.4% gain in December.  

• Durable Goods Orders for January are estimated to fall -2.0% versus a +2.8% gain in December.

• Durables Ex Transports for January is estimated to rise +.5% versus a +.7% gain in December.

• Cap Goods Orders Non-Defense Ex-Air for January is estimated to rise +.5% versus a -.6% decline in December.
  

9:00 am EST

• The FHFA House Price Index MoM for December is estimated to rise +.4% versus a +.4% gain in November.

• The S&P CoreLogic CS 20-City MoM for December is estimated to rise +.6% versus a +.75% gain in November.
  

10:00 am EST

• The Richmond Fed Manufacturing Index for February is estimated to rise to 15.0 versus a reading of 14.0 in January.

• The Conference Board Consumer Confidence Index for February is estimated to rise to 126.4 versus 125.4 in January.
  

Upcoming Splits

• (BF/A) 5-for-4

Other Potential Market Movers

• The Eurozone Retail Sales/Industrial Production reports, US weekly retail sales reports, (JPM) investor day, (MINI) investor day and the (LH) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Surging into Final Hour on Lower Long-Term Rates, Less US/European/Emerging Markets Debt Angst, Technical Buying, Tech/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 16.66 +1.0%

• Euro/Yen Carry Return Index 137.10 +.19%

• Emerging Markets Currency Volatility(VXY) 8.16 -.97%

• S&P 500 Implied Correlation 36.70 -1.13%

• ISE Sentiment Index 88.0 -5.4%
  

• Total Put/Call .91 -6.19%

• NYSE Arms .82 -1.58%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.0 -3.0%
  

• America Energy Sector High-Yield CDS Index 364.0 -1.1%

• European Financial Sector CDS Index 54.52 -6.66%

• Italian/German 10Y Yld Spread 136.5 -5.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.69 +.25%

• Emerging Market CDS Index 116.84 -3.48%
  

• iBoxx Offshore RMB China Corporate High Yield Index 147.87 -.04%

• 2-Year Swap Spread 26.75 +1.75 basis points

• TED Spread 32.25 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -31.0 +.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.87 +.21%
• 3-Month T-Bill Yield 1.64% unch.
  

• Yield Curve 63.0 unch.

• China Iron Ore Spot 78.35 USD/Metric Tonne -.41%

• Citi US Economic Surprise Index 37.70 -12.4 points

• Citi Eurozone Economic Surprise Index -.3 +3.8 points

• Citi Emerging Markets Economic Surprise Index 7.20 +2.8 points

• 10-Year TIPS Spread 2.14 +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 +236 open in Japan 
• China A50 Futures: Indicating +125 open in China

• DAX Futures: Indicating +38 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• Draghi Focuses on ECB Stimulus as Latvia Sidelined in Brussels. (video) Mario Draghi largely skirted the Latvia crisis affecting the European Central Bank and stuck to his plans to keep adding stimulus as he addressed European Parliament lawmakers on Monday.The ECB president said he’s not yet ready to pare back support for the euro area despite increasing confidence that inflation will pick up. Economic slack may be bigger than thought, and policy makers must remain persistent in providing monetary accommodation, he said, adding that they must also recognize the support comes from the full suite of measures and not just bond purchases.

• Iceland Among Warmest Places as Big Chill Hits Europe.

• A Third of U.S. Homebuyers Are Bidding Sight Unseen.

• Here's One Sign the Selloff Pressure for Risk Parity Is No More. (video) The worst may be over for a popular volatility-linked trading strategy blamed by somefor exacerbating the recent global rout. Risk-parity funds -- which apply leverage to fixed-income holdings in a bid to spread risk equally across asset classes -- are within striking distance of their target level of volatility, suggesting they are under less pressure to lighten up on risk.

• Treasuries Are on Knife-Edge But Big Funds Ready to Add Risk. (video) Not everyone shares Bill Gross’s conviction the bond bear market has started. His former colleagues at Pimco are tiptoeing back toward securities most exposed to interest-rate risk, even as the psychologically key 3 percent threshold looms large for 10-year Treasury yields. And they’re not alone -- Nomura Asset Management is also rekindling duration bets.

Wall Street Journal:

• Trump Sees Role for Mental Institutions in Stopping Mass Shootings. President says bump stocks will be banned whether Congress acts or not.

• Trump’s Task: Bridge Cultural Divide on Guns. A president known more for dividing than uniting has an opening this week.

• Choppy Markets Grant Hedge Funds Their Wish. Caxton, Graham Capital and other funds post gains this year after losses in 2017.

• Qualcomm(QCOM) Warms to Broadcom Bid, but Price Is Sticking Point. The two companies have made progress on many fronts, but are still split on a price.

• What the Hospitals of the Future Look Like. The sprawling institutions we know are radically changing—becoming smaller, more digital, or disappearing completely. The result should be cheaper and better care.

Fox News:

• Florida deputy who didn't enter school during mass shooting is not 'a coward,' lawyer says. (video)

CNBC:

• Warren Buffett says he has $116 billion to spend. Here are five companies he should buy. (video)

• While everyone else was selling stocks this month, companies were buying heavily.

• Wall Street's 'dean of valuation' says Apple(AAPL) is a 'cash machine'. (video)

• Airstream to expand production to meet booming RV demand.

• SoftBank $100 billion Vision Fund will invest in 70 to 100 tech companies, says fund CEO. (video)

• Soaring earnings to overtake inflation as big story of year, Federated's Steve Chiavarone says.

• Think twice before buying Samsung's new smartphone.

• Tech giants could be taxed up to 5 percent of total revenue under new EU plan.

• General Electric(GE) shares fall below $14 after Justice probe revealed; taps accounting, turnaround experts for board.

• Hedge funds rake in $14 billion from investors in best start to a year since the financial crisis.

Zero Hedge:

• Euro Drops After EU Plans Tax-Hikes On Tech Firms.

• Questions Emerge Over Florida Shooter's "Full Metal Garb".

• Dallas Fed Bucks Survey Trend - Soars To 13 Year High. (graph)

• MiMedx Slammed on Bloomberg Report of DOJ Probe.

• Goldman's(GS) Trading Desk Had Its Worst Year Since 2004: Here's Why.

• January New Home Sales Crash As Rates Spike. (graph)

• Supreme Court Rebuffs Trump's DACA Challenge.

• "Never Seen Such A Large Crowd": Record Numbers Flock To Florida Gun Show After Shooting.

Business Insider:

• Netflix(NFLX) hits a record high — and it's the best performing FAANG stock this year.