Friday Watch

Evening Headlines

Bloomberg:         

• China Bets Vast Supply Chain Can Swallow Trump's Tariff Pain.

• Draghi Says Stimulus Withdrawal on Track Despite Growth Wobble.

• Asia Stocks Set to Rally on U.S. Gains; Bonds Slip. Asian stocks looked set to end a torrid week with gains following a rally in U.S. equities, despite falling deeper into a bear market Thursday. Yields on Treasuries rose and the dollar strengthened to the highest level this year. Futures pointed higher for equity markets from Sydney to Hong Kong after the S&P 500 Index rose for the first time in seven days, lifted by strong earnings from Twitter, Microsoft and Tesla. The optimism for technology firms was quickly dented after Amazon and Alphabet reported disappointing results and Nasdaq futures dipped in late trading. Futures on Japan’s Nikkei 225 rose 1 percent in Singapore trading. FTSE China A50 index futures added 0.8 percent. Futures on Australia’s S&P/ASX 200 Index gained 1.3 percent. Futures on Hong Kong’s Hang Seng rose 1 percent.  

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

• Two Fed Officials Remain Unfazed by October Global Stock Rout.

• Fed Fires Warning Shot at Wall Street's Riskier Loan Deals.

• Sell-Offs Are Normal, But This Week Is Shocking the Pros.

Wall St. Journal:

• America’s Midterm Referendum.

• U.S. Won’t Resume Trade Talks Without Firm Plan From China.

• At Netflix(NFLX), Radical Transparency and Blunt Firings Unsettle the Ranks.

• Saudi Arabia Says Evidence Points to Premeditated Killing of Khashoggi.

• Altria Will Pull Its E-Cigarette Pods From the Market.

• Stock-Picking Hedge Funds Are Having a Rough October.

• Trump Offers Test Plan to Lower Medicare Drug Costs.

MarketWatch.com:

• Copper weakness hints at economic woes ahead.

Fox News: 

• Sources: State identified as 'region of interest' in package bomb probe. 

• NEWT GINGRICH: What we must do if (or when) the caravan arrives at our border.

CNBC:          

• Alphabet(GOOG) stock sinks on revenue miss.     

• Intel(INTC) up slightly on big earnings beat. 

• A lot just happened in markets over the last 24 hours: Here's what you should know.

• Cities are clamoring to offer Amazon tax incentives for HQ2 — that may be a bad idea.

• Stocks making the biggest moves after hours: Amazon, Alphabet, Snap, Intel and more.

• The sharp decline in housing stocks on higher rates is way overdone, top analyst says.

• Billionaire Democrat Tom Steyer preparing to unleash $16 million in final 11 days of midterms.

Zero Hedge: 

• Amazon(AMZN) Plunges After Missing On Revenue, Poor Guidance.

• Mail Bomb Design Likely Sourced From Internet As Manhunt For Culprit Targets Florida.

• Robinhood Is Said To Get 40% Revenue From HFT Firms Like Citadel.

• Megyn Kelly Out At NBC; $69 Million Contract Will Be Paid 'In Full'.

• NBC Admits "Blue Wave Turning Purple" As Republicans Outnumber Dems In Early Voting.

• Brexit Talks On Hold As "May's Team Can't Agree", Cable Slides.

• $5 Billion Hedge Fund SPO Shutters: "We Find It Exceedingly Difficult To Deploy Capital".

• US Markets 'Dead-Cat-Bounce' As 'Smart Money' Collapses To Lehman Lows.

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 91.25 -.25 basis point. 

• Asia Pacific Sovereign CDS Index 10.0 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.57 -.02%.

• FTSE 100 futures -.77%.

• S&P 500 futures -.67%.

• NASDAQ 100 futures -.87%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (B)/.81

• (COG)/.27

• (CL)/.72

• (GT)/.75

• (LPNT)/.99

• (MCO)/1.78 

• (psx)/2.46

• (col)/2.02

• (r)/1.65

• (wy)/.38

• (ZBH)/1.60

After the Close:

• None of note

Economic Releases

8:30 am EST

• Advance 3Q GDP is estimated to rise +3.3% versus a +4.2% gain in 2Q.

• Advance 3Q Personal Consumption is estimated to rise +3.3% versus a +3.8% gain in 2Q.

• Advance 3Q GDP Price Index is estimated to rise +2.1% versus a +3.0% gain in 2Q.

• Advance 3Q Core PCE QoQ is estimated to rise +1.8% versus a +2.1% gain in 2Q. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ Bond purchases could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 50% net long heading into the day.

Stocks Soaring into Final Hour on Earnings Optimism, Less European/Emerging Markets/US High-Yield Debt Angst, Stable Long-Term Rates, Tech/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 22.3 -11.8%

• Euro/Yen Carry Return Index 133.07 +.08%

• Emerging Markets Currency Volatility(VXY) 10.03 +1.11%

• S&P 500 Implied Correlation 43.79 +6.0%

• ISE Sentiment Index 122.0 +106.7%
  

• Total Put/Call 1.01 -20.47%

• NYSE Arms .98 -47.59%

Credit Investor Angst:

• North American Investment Grade CDS Index 68.36 -1.32%
  

• America Energy Sector High-Yield CDS Index 460.0 +3.0%

• European Financial Sector CDS Index 94.60 -2.64%

• Italian/German 10Y Yld Spread 309.5 -11.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.95 -2.12%

• Emerging Market CDS Index 202.07 -1.96%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.25 +.15%

• 2-Year Swap Spread 20.75 +.5 basis point

• TED Spread 17.0 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -44.25 -4.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.59 +.11%

• 3-Month T-Bill Yield 2.32% -1.0 basis point

• Yield Curve 28.0 +1.25 basis points

• China Iron Ore Spot 72.80 USD/Metric Tonne -.21%

• Citi US Economic Surprise Index -4.7 -.4 point

• Citi Eurozone Economic Surprise Index -43.3 unch.

• Citi Emerging Markets Economic Surprise Index -6.0 -2.2 points

• 10-Year TIPS Spread 2.05 -2.0 basis points

• 74.7% chance of Fed rate hike at Dec. 19th meeting, 75.5% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +521 open in Japan 

• China A50 Futures: Indicating +148 open in China

• DAX Futures: Indicating +51 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +1.7%

Sector Underperformers:

• 1) Gold & Silver -4.3% 2) Utilities -1.3% 3) Foods +.1%

Stocks Falling on Unusual Volume: 

• CURO, EFX, ALGN, WPP, BLX, GWB, BUD, TRN, GRUB, KRA, VET, LUV, BANC, NVCR, EQT, VNE, CLGX, GHL, WST, ESPR and DLX

Stocks With Unusual Put Option Activity:

• 1) BHGE 2) HUN 3) NOC 4) ALGN 5) LUV

Stocks With Most Negative News Mentions:

• 1) TXN 2) NEE 3) DTE 4) VEP 5) MGTI

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +2.7%

Sector Outperformers:

• 1) Papers +5.5% 2) Software +4.8% 3) Homebuilders +4.3%

Stocks Rising on Unusual Volume:

• SNBR, WLH, IPHS, NOBL, MLNX, HAFC, MTH, HEES, KN, AUDC, TWTR, SAVE, PTEN, MSA, LJPC, CMC, GLIBA, XLNX, CVI, TAL, CCMP, THRM, MTH, TER, AAL, HA, GGG, WHR, EME, TSCO, LAD, HLT, MSFT, TMO, HAFC, GLIBA, LKQ, SEIC, CVBF, NVDA, SLCA and CAT

Stocks With Unusual Call Option Activity:

• 1) QEP 2) EQT 3) NOC 4) LUV 5) EMB

Stocks With Most Positive News Mentions:

• 1) F 2) LVS 3) USAT 4) ITW 5) CVX

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +50.8% Above 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 69.4% of Issues Advancing, 27.6% Declining
• 2 New 52-Week Highs, 198 New Lows
• 22.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 33.6%
• Vix 23.0 -8.8%
• Total Put/Call 1.24 -2.4%
• TRIN/Arms 1.23 -34.2%