Stocks Higher into Final Hour on Lower Long-Term Rates, Less Emerging Market/US High-Yield Debt Angst, Bargain-Hunting, Tech/Biotech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly HIgher
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 25.4 +1.9%

• Euro/Yen Carry Return Index 134.63 -.45%

• Emerging Markets Currency Volatility(VXY) 10.49 -2.15%

• S&P 500 Implied Correlation 44.07 +9.17%

• ISE Sentiment Index 84.0 +35.5%
  

• Total Put/Call 1.16 -4.1%

• NYSE Arms .98 -29.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.64 -2.24%
  

• America Energy Sector High-Yield CDS Index 402.0 -.57%

• European Financial Sector CDS Index 92.87 +.01%

• Italian/German 10Y Yld Spread 308.0 +3.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.80 -3.11%

• Emerging Market CDS Index 206.54 -.44%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.32 -.15%

• 2-Year Swap Spread 19.0 -.5 basis point

• TED Spread 17.0 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -47.25 -4.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.56 +.12%
• 3-Month T-Bill Yield 2.26% unch.

• Yield Curve 30.0 +.25 basis point

• China Iron Ore Spot 69.75 USD/Metric Tonne -.14%

• Citi US Economic Surprise Index -1.9 -1.2 points

• Citi Eurozone Economic Surprise Index -24.8 +3.0 points

• Citi Emerging Markets Economic Surprise Index -2.0 +6.1 points

• 10-Year TIPS Spread 2.12 unch.
• 76.2% chance of Fed rate hike at Dec. 19th meeting, 77.1% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -314 open in Japan 
• China A50 Futures: Indicating -29 open in China

• DAX Futures: Indicating -62 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -1.1%

Sector Underperformers:

• 1) Banks -2.0% 2) Insurance -1.4% 3) Gold & Silver -1.3%

Stocks Falling on Unusual Volume: 

• WNC, PNC, MNTA, VNE, PETS and KMPR

Stocks With Unusual Put Option Activity:

• 1) NKTR 2) SGYP 3) GME 4) LVS 5) XOP

Stocks With Most Negative News Mentions:

• 1) IMDZ 2) VNE 3) TRVN 4) MYL 5) F

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.9%

Sector Outperformers:

• 1) Social Media +1.9% 2) Software +1.7% 3) Semis +1.1%

Stocks Rising on Unusual Volume:

• CORI, YGYI, IOVA, IGV, PYX, KIN, EEMV, BOLD, SSRM, ATHN, SQ, JOBS, NEWT, CBLK, CLLS, MTN, SKYY, LBRDA, FRC, SITE, GWR, LBRDK, BPT, TCX, IBUY, SMAR, DOCU, SGH, ROKU, ATVI, LJPC and BL

Stocks With Unusual Call Option Activity:

• 1) PENN 2) KEY 3) CRMD 4) ZION 5) DHI

Stocks With Most Positive News Mentions:

• 1) IOVA 2) SQ 3) PYPL 4) MA 5) ALK

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +28.7% Above 100-Day Average
• 10 Sectors Rising, 1 Sectors Declining
• 75.9% of Issues Advancing, 22.2% Declining
• 5 New 52-Week Highs, 152 New Lows
• 26.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 32.6%
• Vix 21.3 -14.6%
• Total Put/Call 1.16 -4.1%
• TRIN/Arms 1.41 +2.2%

Friday Watch

Evening Headlines

Bloomberg:       

• U.S. Treasury Staff Finds China Isn’t Manipulating Yuan.  

• Singapore Tightens Monetary Policy Amid Steady Growth Outlook.

• Australia’s Central Bank Warns of Heightened Trade-War Risk to Economy.

• Asia Stocks Start Friday Mixed, U.S. Futures Rise. Asian equity markets looked set for a mixed end to the worst week since February, with some signs that China and Hong Kong could steady after the recent slump. In another indication that sentiment might be shifting, U.S. stock futures rose. While stocks in Japan and Australia added to this week’s losses, South Korean equities rose and futures signaled gains for China, after the Shanghai Composite slumped to a four-year low. Futures on the S&P 500 Index were up 0.5 percent after the benchmark on Thursday dropped more than 2 percent. Tech shares, which bore the brunt of the selling Wednesday, fared less badly. The offshore yuan traded stronger than 6.9 per dollar. Treasuries were little changed. Singapore’s dollar was steady after the central bank tightened its stance, as anticipated by many, in its policy decision Friday. Japan’s Topix index fell 0.4 percent, bringing this week’s slide to 5.5 percent. Futures on the FTSE China A50 Index rose 0.6 percent. Futures on Hong Kong’s Hang Seng Index advanced 1.1 percent earlier. Australia’s S&P/ASX 200 Index lost 0.3 percent. South Korea’s Kospi index gained 0.7 percent. The S&P 500 fell 2.1 percent Thursday. Futures were up 0.5 percent.

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

• Sell Orders in Stocks Surge to Highest Level Since ‘Flash Crash’.  

• Junk-Bond Buyers Head for Hills, Pulling $4.9 Billion From Funds.

Wall St. Journal: 

• The Price of BernieCare.

• Big Lenders Push to Liquidate Sears Rather Than Save It.

• Turkey Is Expected to Release American Pastor on Friday.

• Saudi Journalist’s Disappearance Sends Chill Into Business Community.

• U.S. Strengthens Controls on Nuclear Tech Exports to China.

MarketWatch.com:

• Trump’s ex-lawyer Michael Cohen now reportedly a Democrat.

• Blackstone’s Byron Wien says S&P 500 on track for year-end rally to 3,000 despite stock-market wreckage. 

• Why U.S. investors should be buying this stock market pullback ‘with both arms’.

Fox News: 

• Herschel Walker calls for CNN to fire Don Lemon over ‘racist’ Kanye criticism.

• CHRIS SCALIA: What my father would've thought about Kavanaugh confirmation.

CNBC:        

• White House no longer considering Dina Powell for UN ambassador.

• Early trading in Dow futures indicate 200-point surge as stocks try to rebound from this week's rout.

• Oil prices shed more than 5% during two-day stock market sell-off.

• Rising prices and interest rates are a 'one-two punch' to homebuyers, Lennar chairman says.

• Secular trends haven't changed overnight, so don't fear tech stocks, portfolio manager says.

• After-hours buzz: SQ, URBN & more.

• Bitcoin is the 'mother of all scams' and blockchain is most hyped tech ever, Roubini tells Congress.

• Stocks are getting caught up in 'Octoberphobia' but could see a turnaround.

Zero Hedge: 

• "I Have No Words": Aerial Footage Shows Trail Of Devastation Left By Hurricane Michael.

• Facebook Purges Over 800 Accounts With Millions Of Followers; Prominent Conservatives Vanish.

• Stocks Rip Higher On WaPo Report Trump, Xi Agree To Meet At G-20.

• ECB Hands Italy An Ultimatum: 'Obey EU Budget Rules Or We Won't Save You'.

• What Do The Worst-Run States Have In Common?

• "This Week Will Be Bad" - Margin Calls Mean More Pain To Come.

• Treasury Staff Confirm China Is Not A "Currency Manipulator".

• Shocktober Day 2: Stock Rout Accelerates As Bonds, Bullion Surge.

Business Insider:

• Trump is reportedly floating 5 different names to replace Attorney General Jeff Sessions, who he expects to resign before the end of this year.

• 15 photos show Hurricane Michael's destruction from the sky.

Night Trading 

• Asian equity indices are -.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 87.25 +.5 basis point. 

• Asia Pacific Sovereign CDS Index 10.25 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.56 +.12%.

• FTSE 100 futures +.02%.

• S&P 500 futures +.56%.

• NASDAQ 100 futures +.67%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (C)/1.67

• (JPM)/2.26

• (PNC)/2.72

• (WFC)/1.17

After the Close:

• None of note

Economic Releases

8:30 am EST

• The Import Price Index MoM for September is estimated to rise +.2% versus a -.6% decline in August.

• The Import Price Index ex Petroleum MoM for September is estimated to fall -.1% versus a -.2% decline in August.

• The Export Price Index MoM for September is estimated to rise +.2% versus a -.1% decline in August.
  

10:00 am EST

• Preliminary Univ. of Mich. Consumer Sentiment for October is estimated to rise to 100.5 versus 100.1 in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bostic speaking, Fed's Evans speaking, Eurozone Industrial Production report and the China Trade Balance report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 50% net long heading into the day.