Tuesday Watch

Evening Headlines

Bloomberg:         

• China's Government Has More Room to Leverage Up as Growth Slows.

• Asia Stocks Slide After U.S. Sell-off; Yields Drop. Asian stocks tumbled at the open on Tuesday, with Japanese benchmarks sliding more than 3 percent, following a tech-led slump on Wall Street overnight thanks to a deteriorating outlook for iPhone sales. Treasury yields dropped and the yen headed higher. Key indexes slid from Tokyo and Seoul to Sydney, and futures in Hong Kong pointed to a significant drop. Apple Inc. suppliers are under pressure after the iPhone maker faltered on signs of a deteriorating sales outlook. S&P 500 Index futures dipped. The Nasdaq 100 Index dropped for a third day and the Russell 2000 small-cap benchmark erased its gains for the year. Oil fell for a record 12th straight day. The dollar traded at 18-month highs. Japan’s Topix index slumped 3 percent as of 9:23 a.m. in Tokyo. Australia’s S&P/ASX 200 Index dropped 1.7 percent. South Korea’s Kospi index fell 2 percent. Hong Kong Hang Seng Index futures lost 1.1 percent. S&P 500 futures rose 0.1 percent.  

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

• Trump Car Tariffs, New FOMC Voter, Japan GDP Disasters: Eco Day.

• WTI Slides for 11th Straight Day.  

• Sell-Off Becomes Roughest Since 2011 on Third Leg of Nasdaq Drop.

• Funds Keep Dumping Blocks of GE Shares at an Exceedingly Rapid Pace.  

• Robots Are Coming for Europe’s Jobs.  

• Hedge Funds Turn Short on Nasdaq Futures While ETFs See Outflows.

• Coal Demand Bounced Back in 2017 After Two Years of Decline: IEA.

Wall St. Journal:

• Broward’s Ballots.

• Vatican Bars U.S. Bishops’ Action on Sex Abuse.

• Record Biotech IPO May Be Worth the $7 Billion.

• U.S., China Resume Talks to Cool Trade Tensions.

MarketWatch.com:

• These S&P 500 companies increased quarterly sales the most while expanding margins. 

• One stat reveals the absurdity of San Francisco’s pricey housing market.

Fox News:   

• Dozens of Dems mulling White House campaigns, as wide-open 2020 contest ramps up.

CNBC:        

• There's something behind this market sell-off that no one is talking about: The strong dollar.

• Kellogg exploring sale of Keebler, Famous Amos and fruit snacks business.

• Facebook(FB) shares close at lowest price since April 2017 as tech stocks plunge.

• Mnuchin and top Chinese official are reportedly talking trade ahead of Trump-Xi meeting. 

• Trump to meet with White House trade team to discuss tariffs on European automakers: Report.

• Goldman shares drop the most in 7 years as Malaysia seeks refunds on doomed deal.

• Trump warns OPEC against cutting oil production: 'Prices should be much lower based on supply'.  

• Stocks making the biggest moves after hours: PG&E, Eventbrite and more.

• Tariffs are having a negative impact for only about 9 percent of companies, earnings calls show.

Zero Hedge:

• Here Is How Walmart Plans To Seize Further Control Of Your Community.

• Foreign Investors Reduce Chinese Bond Holdings For The First Time Since Feb 2017: Why This Matters.

• Provisional Ballot Boxes Discovered Inside AVIS Rental Car At Ft. Lauderdale Airport.

• Auto Stocks Slide On Reports US Car-Import Probe Is Advancing.

• The Economic Consequences Of Debt. 

• North Korea Expands "Secret" Missile Bases As Peace Talks Stall.

• Nomura: This Was "Death By Papercuts" Mixed With Hedge Fund Redemption Panic.

• Facebook(FB) Fired Oculus Founder For His Political Beliefs And Pro-Trump Donations.

• Dollar Jumps, Stocks Dump As Crude Carnage Continues.

Telegraph:

• Comment: China’s government talks about reform – while it tightens its grip.

• France calls for EU 'empire' and warns of euro break-up in next crisis.

Night Trading 

• Asian equity indices are -2.0% to -1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 88.50 +2.25 basis points. 

• Asia Pacific Sovereign CDS Index 9.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.37 unch.

• FTSE 100 futures -.26%.

• S&P 500 futures -.04%.

• NASDAQ 100 futures -.18%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (AAP)/1.76

• (BZH)/.97

• (HD)/2.27

• (TSN)/1.38

After the Close:

• (CWK)/.18

• (HI)/.67

• (PETQ)/.27

• (TLRY)/-.12

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for October is estimated to rise to 108.0 versus 107.9 in September.
  

2:00 pm EST

• The Monthly Budget Statement for October is estimated at -$100.0B versus -$63.2B in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan GDP report, Germany ZEW Index, monthly OPEC oil market report, weekly US retail sales reports, Morgan Stanley Chem/Ag Conference, RBC Midstream Conference, Stifel Healthcare Conference, Morgan Stanley Consumer/Retail Conference, Needham Networking/Communications/Security Conference, Scotiabank Transport/Industrials Conference, (SFLY) analyst meeting, (ZEN) analyst briefing and the (OSTK) analysts day could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 25% net long heading into the day.

Stocks Falling Substantially into Final Hour on Fed Rate-Hike Fears, Gobal Growth Worries, Earnings Jitters, Tech/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.55 +12.8%

• Euro/Yen Carry Return Index 133.13 -.74%

• Emerging Markets Currency Volatility(VXY) 10.09 +1.0%

• S&P 500 Implied Correlation 41.06 +6.06%

• ISE Sentiment Index 61.0 -15.3%
  

• Total Put/Call 1.10 +.92%

• NYSE Arms 1.61 +50.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.83 +1.43%
  

• America Energy Sector High-Yield CDS Index 591.0 +4.07%

• European Financial Sector CDS Index 90.49 +2.77%

• Italian/German 10Y Yld Spread 304.0 +5.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.64 +.83%

• Emerging Market CDS Index 192.77 -.2%
  

• iBoxx Offshore RMB China Corporate High Yield Index 147.71 -.41%

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

• TED Spread 27.25 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -48.5 -3.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.43 -.43%
• 3-Month T-Bill Yield 2.34% -1.0 basis point

• Yield Curve 25.75 -.5 basis point

• China Iron Ore Spot 70.09 USD/Metric Tonne +.13%

• Citi US Economic Surprise Index 9.90 -.1 point

• Citi Eurozone Economic Surprise Index -56.6 -.8 point

• Citi Emerging Markets Economic Surprise Index -4.40 +1.8 points

• 10-Year TIPS Spread 2.05 unch.
• 76.0% chance of Fed rate hike at Jan. 30th meeting, 91.8% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -365 open in Japan 
• China A50 Futures: Indicating -87 open in China

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.1%

Sector Underperformers:

• 1) Disk Drives -4.2% 2) Semis -3.6% 3) Construction -2.5%

Stocks Falling on Unusual Volume: 

• LITE, PCG, EIX, IIVI, BZUN, BTI, TWLO, AIMT, ASML, GS, RPD, KN, TSEM, CRUS, SWKS, TTWO, QRVO, RPD, PLT, EAF, RNG, ACM, TTD, PCG and ABMD

Stocks With Unusual Put Option Activity:

• 1) KSS 2) NYT 3) VLY 4) ATHN 5) USO

Stocks With Most Negative News Mentions:

• 1) INFI 2) LITE 3) AKAO 4) EIX 5) PCG

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.5%

Sector Outperformers:

• 1) Education +1.1% 2) Coal +1.0% 3) REITs +.6%

Stocks Rising on Unusual Volume:

• APTI, ATHN, EIDX, ISCA, YELP, CCRC, KOP, NKTR, WPC, NRG, SATS, PRTY, SCVL, ADNT, TSRO, DCPH, FSS, MDGL, VRCA, Z, JAZZ, SSP, CTB, SHPG and CNDT

Stocks With Unusual Call Option Activity:

• 1) RAMP 2) XLU 3) FAST 4) ATHN 5) YELP

Stocks With Most Positive News Mentions:

• 1) ATHN 2) KODK 3) COTY 4) LB 5) KORS

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +11.4% Above 100-Day Average
• 2 Sectors Rising, 9 Sectors Declining
• 36.4% of Issues Advancing, 59.9% Declining
• 47 New 52-Week Highs, 69 New Lows
• 31.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.2%
• Vix 18.7 +7.4%
• Total Put/Call 1.42 +30.3%
• TRIN/Arms 1.30 +21.5%

Monday Watch

Today's Headlines

Bloomberg:              

• China Says Lending Targets Shouldn't Override Due Diligence.

• Wall Street's $45 Trillion China Dream Inches Toward Reality.

• Asian Stocks Mixed as Investors Pause; Pound Slips. Stocks were mixed in Asia and futures pointed to higher starts for equity markets in London and New York as investors assessed whether the recent rallies can endure. The pound slipped as U.K. Prime Minister Theresa May fought to keep her Brexit divorce plan alive. Shares barely budged in Japan, Hong Kong and China, while they dipped in Australia. Asian equities shrugged off leads from a weak U.S. session on Friday when large-cap tech stocks dragged the Nasdaq 100 Index to a loss of more than 1.5 percent. Oil prices snapped a 10-day sell-off after the bear market for crude spurred OPEC and its allies to start laying the groundworkto cut supply in 2019. Yields on 10-year Treasuries, which don’t trade Monday thanks to a U.S. holiday, ended just below 3.2 percent on Friday. Japan’s Topix index was flat as of 11:27 a.m. in Tokyo. Hong Kong’s Hang Seng Index rose 0.3 percent. Australia’s S&P/ASX 200 Index was little changed. Shanghai Composite Index rose 0.4 percent. S&P 500 Index futures rose 0.3 percent. The S&P 500 fell 0.9 percent. FTSE 100 index futures gained 0.7 percent.  

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

• OPEC, Allies Move Closer to Oil Cuts as Bear Market Adds Urgency.  

• Even Dollar Bears Are Wary of Betting Against Greenback Just Yet.

• Bullish Path for Stocks Paved on Midterms, Janus Henderson Says.

Wall Street Journal:

• Veterans Day: Stories of Those Who Served.

• Why Did Facebook Fire a Top Executive? Hint: It Had Something to Do With Trump.

• P&G, McDonald’s Power Dow Rebound as Investors Play Defense.

• With Retail Earnings on Tap, Investors Expect a Tale of Two Worlds.

• Congress Gears for Fight Over Border Wall, Mueller Probe. 

• Vista Nears Deal to Buy Software Firm Apptio for $1.9 Billion.

• SAP to Buy Enterprise-Software Company Qualtrics.

Fox News:

• Trump faces subpoena on Amazon, two media rivals, House Intel chairman says.

CNBC: 

• Veritas Capital, Elliott clinch $5.5 billion acquisition of Athenahealth: Reuters. 

• Mayflower's $3 billion money manager says don't rule out Dow 30,000 next year.

Zero Hedge:       

• Death Toll In CA Wildfires At 25; New "Devil Winds" Expected; Choking Air Quality; 250,000 Evacuated.

• Massive Florida Recount Begins Despite Questions Over Mystery Ballots.

• Scott Files Lawsuits Asking Police To Seize Ballots In Broward, Palm Beach Counties.

• San Francisco Forces Large Corporations To Pay "Homeless Tax".

• WSJ Calls It: Hillary Will Run Again In 2020.

• Avenatti To Sue Tucker Carlson After Man Claims Assault; Tucker Says Daughter Called "Whore, C*nt".

• Foreign Capital Has Been Propping Up China’s Currency. Here’s What Happens When It Leaves.

• All The Democrats' Investigations: House Ready To "Let The Subpoenas Fly" Early Next Year.

• Macron Blasts Nationalism As "Betrayal Of Patriotism" While Trump Speaks With Putin.

• OPEC+ Floats 1 Million Barrel Production Cut After Oil Price Tumbles Into Bear Market.

• Democratic Lawyers Object To 'Non-Citizen' Florida Ballot Being Thrown Out.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 86.25 +2.25 basis points.

• Asia Pacific Sovereign CDS Index 9.5 unch.

• Bloomberg Emerging Markets Currency Index 66.72 +.01%.

• FTSE 100 futures +.70%.

• S&P 500 futures +.35%.

• NASDAQ 100 futures +.55%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• None of note

After the Close:

• (TDW)/-.32

• (YY)/1.63

• (EQH)/.91

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Japan Machine Orders report, UBS Global Tech Conference and the CSFB Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by consumer and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon.  The Portfolio is 50% net long heading into the week.