Thursday Watch

Evening Headlines

Bloomberg:       

• Australian Unemployment Drops to Lowest in More Than Six Years.

• U.S. to Triple Emergency Swap Line for Mexico to $9 Billion.

• Asia Stocks Look Mixed; Yuan Steady on FX Report. Stocks in Asia are set for a muted start, mirroring their U.S. counterparts, after a mixed bag of earnings and concerns over rising rates weighed on investor confidence. Treasuries fell and the dollar jumped as Federal Reserve minutes appeared to lean toward more interest-rate increases. The yuan was steady after the U.S. Treasury refrained from naming China a currency manipulator in its semi-annual report on foreign-exchange rates, averting an escalation of a trade war. Japanese equity-index futures were little changed and they fell in Australia. Hong Kong is poised for gains after traders return from a holiday, while Chinese futures indicate losses. In the U.S., the S&P 500 Index failed to extend the biggest rally since March, closing flat. The 10-year Treasury yield rose to 3.21 percent after minutes showed Fed officials appeared to favor an eventual move in rates above the level they see as neutral for the economy. The dollar rose the most in two weeks. Oil fell below $70 a barrel after American stockpiles swelled for the fourth straight week. Futures on the Nikkei 225 Stock Average ticked higher in Singapore. Futures on Australia’s S&P/ASX 200 Index fell 0.4 percent. Hong Kong’s Hang Seng Index futures rose 1.5 percent as stocks are seen making up for Wednesday’s rally. FTSE China A50 futures fell 0.3 percent.    

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

• Fed Rate Debate, China Dodges FX Tag, Rustbelt Braces: Eco Day.

• 2018 Midterms Projected to Be Most Expensive on Record.  

• Mueller Ready to Deliver Key Findings in His Trump Probe, Sources Say.

Wall St. Journal:

• Growth Is on the Ballot.

• Turkey Probes Home of Envoy as U.S. Affirms Saudi Ties.

• Fed Minutes Point to Continued, Gradual Interest-Rate Increases.

• Investors Change Tack as Rates Rise.

• Funds Back Proposal to Remove Zuckerberg as Facebook Chairman.

• Alcoa(AA) Raises Profit Outlook as Tariffs Lift Aluminum Prices.

• Army Veteran Wages War on Social-Media Disinformation.

Fox News: 

• Treasury employee charged with leaking financial info on Trump team arrested with flash drive in hand.

CNBC:         

• Cramer: The Fed may already be winning the war against inflation and needs to pause the rate hikes. 

• Stocks making the biggest moves after hours: Constellation Brands, Alcoa and more.

• Here's what Wall Street isn't paying attention to from the Fed.

• Fed indicates it's staying the course on rate hikes despite growing criticism from Trump.

• Amazon(AMZN), Illumina(ILMN) among Wall Street analysts' favorite stocks to buy on this market dip.

• Trump says each Cabinet secretary should slash 5% of their budgets after he pledges to cut spending.

Zero Hedge: 

• Affordable Migration: Goodbye Chicago, New York, LA - Hello 5 Cities In Texas.

• Minority Of Radical Leftists Dominate Democratic Party Agenda, Study Finds.

• "Why Don't You Go Kill Yourself?" - Two GOP Candidates Assaulted In Minnesota.

• China Changes Definition Of Aggregate Financing To Disguise Sharp Credit Slowdown.

• Yuan Pops As Treasury Confirms China Not A Currency Manipulator, Will Monitor.

• Treasury Official Arrested, Charged With Leaking Confidential Info On Ex-Trump Advisers; BuzzFeed Implicated.

• Two Deutsche Bank Traders Found Guilty Of Rigging Libor.

• Americans' Assessment Of The Economy Is Highest Since The Dot Com Bubble.

• Party-Pooper Powell Ends Short-Squeeze, Stocks Stall.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 86.5 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 9.75 unch.

• Bloomberg Emerging Markets Currency Index 67.29 -.06%.

• FTSE 100 futures +.33%.

• S&P 500 futures -.28%.

• NASDAQ 100 futures -.37%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ADS)/6.21

• (BBT)/1.0

• (BK)/1.04

• (DHR)/1.07

• (GPC)/1.48

• (KEY)/.45

• (NUE)/2.34

• (NVR)/50.94

• (PM)/1.28

• (PPG)/1.46

• (SAP)/1.09

• (TSM)/3.42

• (TXT)/.76

• (TRV)/2.26

After the Close:

• (AXP)/1.77

• (CP)/4.10

• (ISRG)/2.66

• (PYPL)/.54

• (WERN)/.60

Economic Releases

8:30 am EST

• The Philly Fed Business Outlook Index for October is estimated to fall to 20.0 versus 22.9 in September.

• Initial Jobless Claims for last week are estimated to fall to 212K versus 214K the prior week.

• Continuing Claims are estimated to rise to 1665K versus 1660K prior.
  

10:00 am EST

• The Leading Index for September is estimated to rise +.5% versus a +.4% gain in August.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Unemployment report, Japan CPI report, Bloomberg Economic Expectations Index for October, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and pharmaceutical shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Lower into Final Hour on Trade War Fears, Fed Rate-Hike Concerns, Oil Decline, Homebuilding/Road & Rail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 18.25 +3.6%

• Euro/Yen Carry Return Index 134.63 -.37%

• Emerging Markets Currency Volatility(VXY) 9.49 -1.96%

• S&P 500 Implied Correlation 39.68 +2.77%

• ISE Sentiment Index 97.0 +14.1%
  

• Total Put/Call 1.11 +7.8%

• NYSE Arms .74 -16.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.17 +.14%
  

• America Energy Sector High-Yield CDS Index 407.0 +.32%

• European Financial Sector CDS Index 89.75 +.83%

• Italian/German 10Y Yld Spread 308.75 +12.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.71 -.51%

• Emerging Market CDS Index 198.14 +.49%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.11 -.02%

• 2-Year Swap Spread 19.0 -.25 basis point

• TED Spread 15.5 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -46.25 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.38 +.08%

• 3-Month T-Bill Yield 2.30% +1.0 basis point

• Yield Curve 29.75 +.5 basis point

• China Iron Ore Spot 72.02 USD/Metric Tonne -.69%

• Citi US Economic Surprise Index -2.6 -2.1 points

• Citi Eurozone Economic Surprise Index -29.8 +.3 point

• Citi Emerging Markets Economic Surprise Index -1.8 +.8 point

• 10-Year TIPS Spread 2.13 unch.

• 80.7% chance of Fed rate hike at Dec. 19th meeting, 81.3% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +69 open in Japan 

• China A50 Futures: Indicating -36 open in China

• DAX Futures: Indicating +21 open in Germany

Portfolio: 

• Slightly Lower: On losses in my industrial/retail/tech  sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.6%

Sector Underperformers:

• 1) Computer Services -3.1% 2) Homebuilders -2.6% 3) Road & Rail -2.1%

Stocks Falling on Unusual Volume: 

• TACO, FMS, ADTN, UFPI, PVTL, IBM, AZO, YGYI, WBC, MRCY, SHOP and MRTN

Stocks With Unusual Put Option Activity:

• 1) M 2) JWN 3) BKLN 4) PCG 5) MDLZ

Stocks With Most Negative News Mentions:

• 1) WBC 2) TACO 3) IBP 4) CNHI 5) PHM

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.4%

Sector Outperformers:

• 1) Gaming +1.9% 2) Steel +1.9% 3) Restaurants +1.6%

Stocks Rising on Unusual Volume:

• YECO, WGO, CZR, PNFP, EIGR, VICR, PYX, NFLX, LRCX, HLF, FULT, HCSG, UAL, BTI, CREE, IPHS, ASML, BLK, CHFC, VICI, UCTT, AAL, MS, STI, QNST and XPER

Stocks With Unusual Call Option Activity:

• 1) WGO 2) ITB 3) M 4) KBE 5) HYG

Stocks With Most Positive News Mentions:

• 1) NFLX 2) WGO 3) CREE 4) DPZ 5) LRCX

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +3.5% Above 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 35.6% of Issues Advancing, 60.5% Declining
• 13 New 52-Week Highs, 94 New Lows
• 35.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.3%
• Vix 17.5 -1.0%
• Total Put/Call 1.18 +14.6%
• TRIN/Arms .65 -26.9%