Stocks Lower into Final Hour on Global Growth Fears, Trade War Worries, Oil Decline, Energy/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Heavy

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 23.5 +13.1%

• Euro/Yen Carry Return Index 133.14 -.26%

• Emerging Markets Currency Volatility(VXY) 10.19 +2.0%

• S&P 500 Implied Correlation 47.17 +3.37%

• ISE Sentiment Index 74.0 +8.82%
  

• Total Put/Call 1.18 +26.9%

• NYSE Arms 1.12 -66.47%

Credit Investor Angst:

• North American Investment Grade CDS Index 80.92 +2.23%
  

• America Energy Sector High-Yield CDS Index 681.0 +1.92%

• European Financial Sector CDS Index 111.05 +512%

• Italian/German 10Y Yld Spread 296.75 +7.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.85 +.1%

• Emerging Market CDS Index 210.36 +1.38%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.96 +1.14%

• 2-Year Swap Spread 17.25 +1.0 basis point

• TED Spread 33.5 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -15.50 +7.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.04 -.31%

• 3-Month T-Bill Yield 2.40% -1.0 basis point

• Yield Curve 12.0 +1.0 basis point

• China Iron Ore Spot 64.05 USD/Metric Tonne -.14%

• Citi US Economic Surprise Index -2.8 +.3 point

• Citi Eurozone Economic Surprise Index -48.70 +7.2 points

• Citi Emerging Markets Economic Surprise Index -3.5 +2.0 points

• 10-Year TIPS Spread 1.91 -3.0 basis points

• 70.4% chance of Fed rate hike at Jan. 30th meeting, 83.5% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -46 open in Japan 

• China A50 Futures: Indicating +14 open in China

• DAX Futures: Indicating +81 open in Germany

Portfolio: 

• Higher: On gains in my tech sector longs, index hedges and emerging market shorts

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

• Market Exposure: Moved to 75% Net Long

Thursday Watch

Night Trading 

• Asian equity indices are -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 93.75 +3.75 basis points. 

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

• Bloomberg Emerging Markets Currency Index 67.21 -.06%.

• FTSE 100 futures -.71%.

• S&P 500 futures -.82%.

• NASDAQ 100 futures -1.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (HOME)/.15

• (DLTH)/-.10

• (GCO)/.86

• (GIII)/1.81

• (HRB)/-.93

• (HOV)/.19

• (KFY)/.80

• (KR)/.43

• (LE)/.10

• (MIK)/.44

• (PDCO)/.37

• (SIG)/-1.10

• (PLCE)/3.07

• (TTC)/.33

After the Close:

• (AVGO)/5.58

• (COO)/2.96

• (LULU)/.70

• (ULTA)/2.16

• (UNFI)/.73

• (ZUMZ)/.49

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for November.
  

8:15 am EST

• The ADP Employment Change report for November is estimated to fall to 195K versus 227K in October.

8:30 am EST

• The Trade Deficit for October is estimated to widen to -$55.0B versus -$54.0B in September.

• Initial Jobless Claims for last week are estimated to fall to 225K versus 234K the prior week.

• Continuing Claims are estimated to fall to 1695K versus 1710K prior.
  

10:00 am EST

• The ISM Non-Manufacturing report for November is estimated to fall to 59.0 versus 60.3 in October. 

• Factory Orders for October are estimated to fall -2.0% versus a +.7% gain in September.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,961,110 barrels versus a +3,577,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +912,500 barrels versus a -764,000 barrels the prior week. Distillate inventories are estimated to rise by +962,500 barrels versus a +2,610,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.45% versus a +2.9% gain prior.

12:00 pm EST

• 3Q Household Change in Net Worth. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell House Testimony, Fed's Williams speaking, Fed's Bostic speaking, OPEC meeting, Australia Retail Sales report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (BKE)/(CATO)/(LB) monthly sales reports could also impact trading today.

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

Today's Headlines

Bloomberg:      

• Trump Sees ‘Strong Signals’ as China Swings Into Action on Trade.

• May's Enemies Step Up Attacks Over Legal Advice: Brexit Update.       

• Suddenly Brexit Outlook Is Starting to Look Brighter in Markets.    

• Italian Bond Yields Fall to Five-Month Low as Budget Hopes Grow.

• Emmanuel Macron Still Has No Good Answer for Angry French Voters.   

• Bank of Canada Pares Back Optimism as It Holds Rates Steady.

• Boom Has Turned to Bust for Asia Hedge Funds.

• Trade Pledge Slows Stock Rout; Pound Erases Gain. European and Asian stocks dropped on Wednesday following the rout on Wall Street, though declines were contained and U.S. equity futures rose after China pledged to start delivering on trade agreements reached with America. The pound erased a gain as the U.K. government published legal advice relating to its proposed Brexit deal. Global markets were left reeling following Tuesday’s steep sell-off in New York, but nerves appeared to steady after China’s Commerce Ministry said Beijing will start to quickly implement specific items where there’s consensus with the U.S. and will push forward on trade negotiations within the 90-day “timetable and road map.” While the Stoxx Europe 600 Index slumped as much as 1.2 percent, that was far less than the 3.2 percent plunge recorded by the S&P 500 a day earlier. Futures for America’s benchmark gauge advanced, though the U.S. market is closed on Wednesday to mark the death of President George H. W. Bush. Futures on the S&P 500 Index gained 0.6 percent as of 2:29 p.m. London time. The Stoxx Europe 600 Index sank 0.9 percent to the lowest in more than a week on the biggest dip in more than two weeks. The U.K.’s FTSE 100 Index sank 1.1 percent to the lowest in almost six weeks on the largest tumble in almost two weeks. Germany’s DAX Index decreased 0.9 percent to the lowest in more than a week. The MSCI Asia Pacific Index sank 1 percent, the largest tumble in more than two weeks. The MSCI Emerging Market Index sank 1.3 percent, the biggest tumble in more than two weeks.  

• China Trade Action, Fed Dilemma, Italy Recession Risk: Eco Day.

• Traders Look to Proxies During U.S. Market Closing for Bush.  

• U.S. Job Market’s Strength May Surprise Investors on Friday.

Wall Street Journal:   

• President George H.W. Bush Remembered at State Funeral.

• China Says There Is ‘Clear Timeline’ on Trade Negotiations.

• Putin Threatens Arms Race as U.S. Prepares to Exit Nuclear Treaty.

• Reading the Tea Leaves on Trade With China.

• China Maneuvers to Snag Top-Secret Boeing Satellite Technology.

• Italy Tries to End Budget Fight With EU as Economy Teeters.

MarketWatch.com:

• Proposed U.S. Postal Service price hikes could hurt Amazon earnings.

Fox News:

• Trump's numbers tower over European counterparts despite overwhelmingly negative coverage.

• The incredible gesture George H.W. Bush made to support a sick child.

CNBC:   

• 'Not to sound naive or anything': Trump says he believes 'every word' from China's Xi on trade truce.

• Trump says he hopes OPEC will be keeping oil flows 'as is'.

• George HW Bush's funeral: Here's a rundown of the financial markets that are open and closed.

• A flattening yield curve means it's time to worry, but not panic, top economist says.

• No deal on car tariffs as White House backpedals, Volvo threatens to move jobs overseas. 

• These are the 10 best places to work in 2019, according to Glassdoor—and Facebook is no longer No. 1.

• Mortgage applications rise 2%, but buyers seem unimpressed by lower rates.

• The 'yield curve' explained and whether it really is a barometer for the economy and markets.

• 'We've got a path to finding an exit on the trade war highway,' Wall Street bull Art Hogan says.

• US is well on its way to Trump's goal of 'energy dominance,' says Marathon Petroleum CEO.

• This sell-off was caused by a computer-driven 'footrace,' Jim Cramer says. 

• Stocks making the biggest moves after hours: Hewlett Packard Enterprise, Marvell Technology and more.

• The economy will surprise to the high next year, predicts investment advisor. 

• Don't raise the 'white flag' on Apple, this is a 'golden buying opportunity': Analyst.

Zero Hedge:   

• US Equity Futures Rebound As Trump Notes "Very Strong Signals" From China.

• China Dismisses Confusion Claims, Says Will Quickly Implement Trade Agreement With US.

• Trump Mocks Macron: Glad "Yellow Vest" Protesters Agree With Me.

• Qatar's OPEC Exit May Just Be The Beginning.

• After Historic Commons Contempt Vote, JPM Raises Odds Of 'No Brexit' To 40%.

• Italian Economy Minister Said Close To Resigning Over Rift With PM.

• No Jail Time For Flynn; Mueller Says Former Trump Official Provided "Substantial" Assistance.

• France Is Becoming More Violent.

• "The Worst Deal in History?": Theresa May's Surrender.

• The Real Significance Of The French Tax Revolt.

• This Anti-Gun Bill Requires Access To Social Media & Internet Search History Of Prospective Buyers.

• What America Has Done To Its Young People Is Appalling.

• Nearly Two-Thirds Of Non-Citizen Households In America Are On Welfare.

• Four Out Of Five Racist Notes Were Fake At An Iowa University: School Officials.

• WTI Extends Loss After Surprise Crude Build.

• "Everybody's Miserable": Why Hedge Fund Analysts Suddenly Find Themselves In An Existential Crisis.

• Gundlach: Yield Curve Inversion Shows "Total Market Disbelief" In The Fed's Hiking Plans.

• Here Is What Triggered Today's Sudden Stock Liquidation.

• Macron Blinks: France Suspends Fuel Tax Hike After "Yellow Vest" Riots... But It's Not Enough.

• Bloodbath - From Triumphant Truce To Deal Dysphoria In 36 Hours.

The Telegraph:

• Growth slumps to lowest in two years as businesses panic over Brexit.