Tuesday Watch

Evening Headlines

Bloomberg:     

• Australia May Follow Trump in Moving Israel Embassy to Jerusalem.

• Asian Stocks Set for Mixed Open; Dollar Declines. Asian stocks were poised for a muted start to trading after a decline in their U.S. counterparts Monday with technology shares underperforming. The dollar touched a two-week low against peers, while Treasury yields steadied amid a backdrop of ongoing global tensions. Japanese futures were little changed, while they ticked higher in China and Hong Kong. The tech-heavy Nasdaq indexes led losses and the S&P 500 Index slipped, holding near the key 200-day moving average. The dollar’s slide came ahead of a U.S. Treasury currency manipulation report that’s expected this week. The 10-year Treasury yield traded around 3.15 percent after U.S. retail sales fell short of estimates. Oil advanced for a second day amid tensions between Saudi Arabia and the U.S. over the disappearance of a prominent journalist. Gold and the yen extended gains amid the risk-off tone. Futures on the Nikkei 225 Stock Average were little changed in Singapore. Futures on Australia’s S&P/ASX 200 Index were flat. Futures on the FTSE China A50 rose 0.2 percent. Futures on Hong Kong’s Hang Seng Index climbed 0.5 percent.  

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

• Trump's Yuan Claim, U.S. Deficit Spirals, Yen Supremacy: Eco Day.

• Hedge Funds at the ‘Core’ of Stock Slump May Be Done Offloading.

• The Suspense Builds for Goldman and Morgan Stanley Results.  

• Adobe(ADBE) Gives Rosy 2019 Forecast on Proliferating Product Lineup.

Wall St. Journal:

• Sears, a Onetime Retail Giant, Now Banks on Bankruptcy.

• An Asian-American Dissident at Harvard. 

• Saudis Weigh Saying Journalist Was Killed by Mistake.

• Emerging-Markets Selloffs: This One Is Different. 

• Italy’s Draft Budget Would Widen Deficit.

Fox News: 

• JASON CHAFFETZ: Here's why Trump needs to show Jeff Sessions the door.

• Ex-Obama staffer rips Warren for releasing DNA test close to midterms.

CNBC:       

• Twilio(TWLO) just spent $2 billion on a company that helps send mass emails.

• Don't expect a big Democratic wave this fall, a new CNBC poll says.

• After-hours buzz: ADBE, JBHT & more.

• Goldman says the sell-off is just about over and tells investors to get back into growth stocks.

• Facebook(FB) will ban "misinformation" around voting during the midterm elections.

Zero Hedge: 

• Saudi Arabia To Admit Khashoggi Killed During "Botched Interrogation".

• Elizabeth Warren Savaged On Social Media As DNA Gambit Backfires; Cherokee Nation Furious.

• Facebook(FB) Purged Pages Based On 'PropOrNot' Blacklist Promoted By Washington Post.

• The People "Stopping Election Interference" Are The Ones Actually Rigging The Election.

• Stormy Daniels Lawsuit Dismissed, Trump Entitled To Legal Fees.

• Surveillance Capitalism: Monetizing The Smartphone User.

• Microsoft Co-Founder Paul Allen Dies Of Cancer At Age 65.

• Who Was Hit The Hardest During Last Week's Market Rout?

• Students "Feel Unsafe" - Start Petition To Rename 'Clarence Thomas' Building.

• Democrats Told To Spend "As Little Time As Possible" Campaigning On Open-Border Immigration.

• Italian Cabinet Approves 2019 Budget, Sends Plan To Brussels.

• Gold Extends Gains As Bonds, Stocks, Dollar Slide.

Business Insider:

• 'Inappropriate and wrong': Cherokee Nation official throws ice-cold water on Elizabeth Warren's DNA test of Native American heritage.

• The 50 Starbucks orders that may be most damaging to your health.

Telegraph:          

• Italians shift money to Swiss safe-haven on fears of euro rupture.

Night Trading 

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 88.25 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 9.75 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 66.98 +.03%.

• FTSE 100 futures -.04%.

• S&P 500 futures +.25%.

• NASDAQ 100 futures +.42%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (BLK)/6.86

• (CMA)/1.78

• (DPZ)/1.75

• (GS)/5.34

• (JNJ)/2.03

• (MS)/1.01

• (PGR)/1.11

• (UNH)/3.30

After the Close:

• (CSX)/.94

• (IBM)/3.40

• (LRCX)/3.21

• (NFLX)/.68

• (UAL)/3.07

Economic Releases

9:15 am EST

• Industrial Production MoM for September is estimated to rise +.2% versus a +.4% gain in August.

• Capacity Utilization for September is estimated to rise to 78.2% versus 78.1% in August.

• Manufacturing Production for September is estimated to rise +.2% versus a +.2% gain in August.
  

10:00 am EST

• The NAHB Housing Market Index for October is estimated to fall to 66.0 versus 67.0 in September.

• JOLTS Job Openings for August are estimated to fall to 6900 versus 6939 in September.
  

4:00 pm EST

• Total Net TIC Flows for August are estimated to rise to $60.3B versus $52.2B in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The German ZEW Index, weekly US retail sales reports and the (MRVL) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly 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 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Geopolitical Concerns, Yen Strength, Earnings Jitters, Tech/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 20.01 -6.1%

• Euro/Yen Carry Return Index 134.79 -.09%

• Emerging Markets Currency Volatility(VXY) 10.23 -2.48%

• S&P 500 Implied Correlation 39.21 -.76%

• ISE Sentiment Index 79.0 -7.06%
  

• Total Put/Call .94 -19.66%

• NYSE Arms .83 +10.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.10 +.90%
  

• America Energy Sector High-Yield CDS Index 404.0 +.40%

• European Financial Sector CDS Index 92.57 -.33%

• Italian/German 10Y Yld Spread 304.25 -3.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.85 +.41%

• Emerging Market CDS Index 201.91 -2.08%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.41 +.06%

• 2-Year Swap Spread 20.0 +1.0 basis point

• TED Spread 17.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -46.75 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.93 +.43%
• 3-Month T-Bill Yield 2.27% +1.0 basis point

• Yield Curve 30.25 +.25 basis point

• China Iron Ore Spot 69.04 USD/Metric Tonne -.04%

• Citi US Economic Surprise Index -5.4 -3.5 points

• Citi Eurozone Economic Surprise Index -22.6 +2.2 points

• Citi Emerging Markets Economic Surprise Index -2.6 -.6 point

• 10-Year TIPS Spread 2.13 +1.0 basis point
• 77.2% chance of Fed rate hike at Dec. 19th meeting, 78.3% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +134 open in Japan 
• China A50 Futures: Indicating +83 open in China

• DAX Futures: Indicating +23 open in Germany

Portfolio: 

• Slightly Higher: On gains in my industrial/retail sector longs and emerging market shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.1%

Sector Underperformers:

• 1) Software -.7% 2) Energy -.4% 3) Medical Equipment -.3%

Stocks Falling on Unusual Volume: 

• NTRI, PYX, IOVA, OXY, CTRP and BPT

Stocks With Unusual Put Option Activity:

• 1) RRC 2) CL 3) NUE 4) FITB 5) NRG

Stocks With Most Negative News Mentions:

• 1) SRTS 2) NTRI 3) STLD 4) PH 5) NUE

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.8%

Sector Outperformers:

• 1) Gold & Silver +2.4% 2) Steel +2.2% 3) Defense +1.4%

Stocks Rising on Unusual Volume:

• ABCD, YGYI, LLL, HRS, WNC, SRG, SITE, MANU, NINE, AEGN, ESL, NGG, ACHC, SCWX, GOLD, BMO, ZAYO, UNF, FNV, STRL, ZUO, AEM, GWW and DIN

Stocks With Unusual Call Option Activity:

• 1) S 2) BG 3) ACRX 4) SHLD 5) SCHW

Stocks With Most Positive News Mentions:

• 1) KRYS 2) HRS 3) ACRX 4) MCD 5) EB

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -3.8% Below 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 57.4% of Issues Advancing, 40.0% Declining
• 3 New 52-Week Highs, 157 New Lows
• 28.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 34.0%
• Vix 20.5 -4.1%
• Total Put/Call .82 -29.9%
• TRIN/Arms .72 -2.7%