Wednesday Watch

Evening Headlines

Bloomberg:        

• U.S. Beats Singapore to Top of Global Competitiveness Rankings.

• One of the World’s Top 15 Fund Managers Reveals His Next Picks.

• Asia Stocks Set to Follow U.S. Rally, Bonds Steady. Stocks in Asia looked set to follow the lead from a strong U.S. session after earnings handed investors a welcome distraction from trade tensions and rising yields. The dollar slipped and Treasuries were steady. Futures in all major markets in the region pointed to gains when trading begins Wednesday, and Australia’s shares advanced at the open. Nasdaq futures pulled back from an initial climb after profit at Netflix Inc. trounced estimates. Earlier, the U.S. equities rally was led by technology shares. The dollar held near a two-week low and the 10-year Treasury yield traded around 3.16 percent after data showed U.S. factory production expanded in September. Oil edged higher amid tensions between the Saudi Arabia and the U.S. over the disappearance of a prominent journalist. Futures on Japan’s Nikkei 225 rose 2 percent in Singapore. Contracts on Hong Kong’s Hang Seng index advanced 1.5 percent. FTSE China A50 index futures rose 1.2 percent. Australia’s S&P/ASX 200 Index gained 1 percent. S&P 500 futures slipped 0.1 percent and Nasdaq 100 contracts were down 0.2 percent.  

• San Francisco Fed's Daly Favors Gradual Hikes in First Speech.

• Five Key Takeaways From the Biggest U.S. Banks' Earnings Reports.

• Netflix(NFLX), Lam Research(LRCX) Deliver Just What FAANGs and Semis Needed.

• Netflix(NFLX) Bears Take a $687 Million Beating in Post-Earnings Surge.  

• CSX's(CSX) Higher-Than-Expected Profit Shows Turnaround Success.

Wall St. Journal:

• Big Bank Earnings Show Wall Street Charging Ahead.

• Cases of Rare Neurological Condition Rise in U.S.

MarketWatch.com:

• Another report shows worker pay is accelerating.

Fox News: 

• Liberal professors push to pack Supreme Court after Kavanaugh confirmation.

CNBC:       

• Dow jumps more than 500 points, posts best day since March as earnings fuel rally.

• Netflix(NFLX) surges after crushing earnings.

• Cramer: As long as the Fed doesn't keep pushing rate hikes, stocks can keep rallying.

• Trump slams mounting criticism of Saudi Arabia as a case of 'guilty until proven innocent'.

• United Airlines shares rise after 30 percent profit jump and rosier outlook despite higher fuel bill.

• The Supreme Court will hear a case that could decide whether Facebook, Twitter can censor users.  

• Cramer reveals 5 health-care stocks he likes right now, including UnitedHealth and HCA.  

• After-hours buzz: NFLX, IBM, UAL & more.

• Wall Street's 'dean of valuation' says pot stocks are too pricey.

• The stock market wants a Republican wave but expects to see two-party control of Congress.

Zero Hedge: 

• "I Think I Can Beat Her": Lindsey Graham Taking DNA Test To Challenge Elizabeth Warren.

• 4Chan Sparks Mass Triggering With NPC Meme; Twitter Responds With Ban Hammer.

• NYT Identifies Four Suspected Saudi Hit Squad Members As 'Close Associates' Of Crown Prince.

• The "Red Scare" Redux: Understanding Brazil's Bolsonaro.

• S&P Reveals $5.8 Trillion In "Hidden" Chinese Debt With "Titanic Credit Risks".

• IBM(IBM) Tumbles After Revenue Resumes Slide, EPS "Beats" On Ridiculous Tax Rate.

• #MeSioux Movement Mourns - When Warren Woke Up To A World Without Her.

• "My Biggest Threat Is The Fed" Says Trump, Citing Aggressive Rate Hikes.

• Boston Dynamics Tries To Calm Fears Over Robot Uprising With Twerking Robo-Dog.

• WTI Jumps Above $72 After Surprise Crude Draw.

• China & Japan Dump Treasuries As Dollar's Reserve Status Slumps To 5 Year Lows.

• Stocks Soar On Biggest Short-Squeeze Since Trump's Election.

Business Insider:

• A group of marketers is suing Facebook(FB) alleging ad fraud, after digging through 80,000 pages of internal documents. 

• New USA Gymnastics interim president resigns after being called out by Simone Biles for anti-Nike(NKE) tweet.

Telegraph:       

• Comment: Political disdain for business will make us all poorer.

Night Trading 

• Asian equity indices are +1.0% to +1.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 87.25 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 9.75 unch.

• Bloomberg Emerging Markets Currency Index 67.33 +.57%.

• FTSE 100 futures +.66%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.15%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ABT)/.75

• (ASML)/1.58

• (BMI)/.41

• (MTB)/3.35

• (USB)/1.04

• (WGO)/.91

After the Close:

• (AA)/.34

• (BXS)/.56

• (CCI)/1.20

• (KMI)/.21

• (SLG)/1.69

• (STLD)/1.66

• (URI)/4.62

Economic Releases

8:30 am EST

• Housing Starts for September MoM are estimated to fall to 1210K versus 1282K in August.

• Building Permits MoM for September are estimated to rise to 1274K versus 1229K in August.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +580,800 barrels versus a +5,987,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +883,000 barrels versus a +951,000 barrel gain the prior week. Distillate inventories are estimated to fall by -969,6000 barrels versus a -2,666,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.36% versus a -1.6% decline prior.
  

2:00 pm EST

• FOMC Meeting Minutes.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Quarles speaking, Eurozone CPI report, UK Retail Sales report, weekly MBA Mortgage Applications report and the BIO Investor Forum could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and pharmaceutical 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 Soaring into Final Hour on Earnings Optimism, Less European/Emerging Market/US High-Hield Debt Angst, Stable Long-Term Rates, Biotech/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) 18.0 -15.5%

• Euro/Yen Carry Return Index 135.11 +.38%

• Emerging Markets Currency Volatility(VXY) 9.70 -3.77%

• S&P 500 Implied Correlation 39.38 -7.4%

• ISE Sentiment Index 91.0 +9.64%
  

• Total Put/Call 1.02 +7.37%

• NYSE Arms 1.35 +32.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.11 -2.39%
  

• America Energy Sector High-Yield CDS Index 406.0 +.10%

• European Financial Sector CDS Index 89.01 -3.84%

• Italian/German 10Y Yld Spread 296.25 -8.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.77 -.91%

• Emerging Market CDS Index 197.70 -2.90%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.07 -.22%

• 2-Year Swap Spread 19.25 -.75 basis point

• TED Spread 16.25 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -45.75 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.34 +.57%

• 3-Month T-Bill Yield 2.29% +2.0 basis points

• Yield Curve 29.25 -1.0 basis point

• China Iron Ore Spot 69.89 USD/Metric Tonne +.04%

• Citi US Economic Surprise Index -.5 +4.9 points

• Citi Eurozone Economic Surprise Index -30.1 -7.5 points

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

• 10-Year TIPS Spread 2.13 unch.

• 75.9% chance of Fed rate hike at Dec. 19th meeting, 76.9% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +259 open in Japan 

• China A50 Futures: Indicating +137 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +1.5%

Sector Underperformers:

• 1) Tobacco -1.9% 2) Gold & Silver -.4% 3) Steel -.3%

Stocks Falling on Unusual Volume: 

• JELD, GWW, CGC, MNTA, DPZ, YGYI and PYX

Stocks With Unusual Put Option Activity:

• 1) SPWR 2) SHPG 3) DLTR 4) SGYP 5) DVMT

Stocks With Most Negative News Mentions:

• 1) JELD 2) SPRO 3) SCCO 4) COCP 5) SBUX

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +2.8%

Sector Outperformers:

• 1) Biotech +3.7% 2) Software +3.3% 3) Internet +3.1%

Stocks Rising on Unusual Volume:

• IEFA, NCSM, SEND, IGV, USMV, CREE, NOBL, EFAV, NDLS, OMC, GLOG, FDT, USAK, ZIV, CAJ, SAP, EFV, LAD, PSMT, KALA, ACWX, ADBE, PKG, BCPC, IGT, DLTR, EXPI, MS, UNH and CCS

Stocks With Unusual Call Option Activity:

• 1) TPR 2) OCN 3) FDC 4) RL 5) BSX

Stocks With Most Positive News Mentions:

• 1) NDLS 2) OMC 3) ADBE 4) MS 5) CGNX

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +5.6% Above 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 78.5% of Issues Advancing, 19.1% Declining
• 8 New 52-Week Highs, 62 New Lows
• 29.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.5%
• Vix 19.0 -11.0%
• Total Put/Call .89 -6.3%
• TRIN/Arms 1.23 +20.6%