Stocks Reversing Sharply Lower into Final Hour on Global Growth Fears, Trade War Worries, Earnings Jitters, Tech/Retail 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) 23.5 +11.0%

• Euro/Yen Carry Return Index 133.62 +.26%

• Emerging Markets Currency Volatility(VXY) 10.13 unch.

• S&P 500 Implied Correlation 49.3 +12.6%

• ISE Sentiment Index 88.0 unch.
  

• Total Put/Call 1.07 -4.46%

• NYSE Arms 1.57 +48.11%

Credit Investor Angst:

• North American Investment Grade CDS Index 81.22 +2.61%
  

• America Energy Sector High-Yield CDS Index 691.0 +1.23%

• European Financial Sector CDS Index 107.84 -2.9%

• Italian/German 10Y Yld Spread 288.25 -8.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.85 +.31%

• Emerging Market CDS Index 205.62 -1.49%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.13 -.56%

• 2-Year Swap Spread 16.0 -1.25 basis points

• TED Spread 37.25 +3.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -15.25 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.22 +.27%

• 3-Month T-Bill Yield 2.39% -1.0 basis point

• Yield Curve 14.0 +2.0 basis points

• China Iron Ore Spot 65.26 USD/Metric Tonne +.46%

• Citi US Economic Surprise Index -6.5 -3.8 points

• Citi Eurozone Economic Surprise Index -49.20 -.5 point

• Citi Emerging Markets Economic Surprise Index -4.6 -1.1 points

• 10-Year TIPS Spread 1.90 -1.0 basis point

• 70.4% chance of Fed rate hike at Jan. 30th meeting, 79.3% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -373 open in Japan 

• China A50 Futures: Indicating -96 open in China

• DAX Futures: Indicating -80 open in Germany

Portfolio: 

• Lower: On losses in my tech/biotech/medical/retail/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:

• Large-Cap Growth -2.0%

Sector Underperformers:

• 1) Airlines -4.4% 2) Gaming -3.7% 3) Retail -3.0%

Stocks Falling on Unusual Volume: 

• BIG, INSP, UNFI, RAMP, SMAR, SHG, MTN, ULTA, LULU, MEI, FMS, COO, GBT, HA, MOV, OLLI, HQY, HUD, MOMO, ZUMZ, DOCU, GBT, HOME, SUPN and LE

Stocks With Unusual Put Option Activity:

• 1) RAMP 2) RHT 3) AET 4) HIIQ 5) ULTA

Stocks With Most Negative News Mentions:

• 1) AKRX 2) AAL 3) PSMT 4) ADBE 5) SCWX

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.5%

Sector Outperformers:

• 1) Oil Service +1.4% 2) Gold & Silver +1.4% 3) Energy +1.1%

Stocks Rising on Unusual Volume:

• AOBC, CRON, DOMO, PFSI, NFEC, E, ATTU, AMOT, OSIR, WLL, SNN, SAIC, YELP, TLND, CMTL, EGL, GHL, MGLN, CLR, CLVS and MNTA

Stocks With Unusual Call Option Activity:

• 1) KRE 2) RAMP 3) BBBY 4) HPE 5) COL

Stocks With Most Positive News Mentions:

• 1) AOBC 2) AVGO 3) PNM 4) MO 5) COP

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +6.7% Above 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 43.1% of Issues Advancing, 54.7% Declining
• 22 New 52-Week Highs, 62 New Lows
• 24.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.8%
• Vix 21.7 +2.4%
• Total Put/Call 1.23 +9.8%
• TRIN/Arms 1.25 +17.9%

Friday Watch

Evening Headlines

Bloomberg:

• Asia Stocks Rise After U.S. Rebound; Yields Steady. Asian stocks advanced following an afternoon rally in the U.S. that erased most of the day’s losses. Equities are still headed for a weekly slide in a volatile period for markets, with investors grappling with shifting indications on U.S.-China trade talks and prospects for a pause in Federal Reserve tightening. Japanese shares climbed with those in South Korea and Australia. Futures on the S&P 500 Index were little changed after the U.S. equity market recovered the bulk of the day’s declines on Thursday, though still ended lower. Ten-year Treasury yields stayed near 2.90 percent. The dollar was mixed overnight, rising against the Aussie and kiwi while dropping versus the yen and Swiss franc on haven demand. Next up for embattled traders: the monthly U.S. payrolls report Friday. Japan’s Topix index added 0.9 percent as of 9:05 a.m. in Tokyo. Hang Seng futures fell 0.9 percent overnight. FTSE China A50 Index futures rose 0.3 percent. Australia’s S&P/ASX 200 Index gained 0.8 percent. Futures on the S&P 500 were little changed.  

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

• Fed Showdown, Trump Weaponizes Uncertainty, ECB Errors: Eco Day.

• Pause or Press On? Wall Street and Economists Drift Apart on Fed.

• Powell Says U.S. Labor Market ‘Very Strong’ by Many Measures.  

• Record-Breaking Day in Front-End Rates as Fed-Hike Bets Crumble.

• What Economists Are Saying Before the November U.S. Jobs Report.  

• Broadcom's(AVGO) Forecast Gives Weary Chip Investors Reason to Cheer.  

• The Bloomberg 50: The People Who Defined Global Business in 2018.   

• Here Are the Momentum Tech Stocks That Defied Market’s Sell-Off.   

• Bitcoin Falls as Technical Indicators Point to More Pain in 2019.

Wall St. Journal:

• In Latin America, Awash in Crime, Citizens Impose Their Own Brutal Justice.

• Fed Weighs Wait-And-See Approach on Future Rate Rises.

• HSBC Monitor Flagged Suspicious Huawei Transactions to Prosecutors.

• Fiat Chrysler to Open New Assembly Factory in Detroit.

• Afraid of the Yield Curve? You’re Eyeing the Wrong One.

MarketWatch.com:

• These 12 industrial stocks in the S&P 500 are down 20% or more, but Wall Street analysts still love them.

• Here are the S&P 500’s best and worst stock performers of 2018.

Fox News:

• Supreme Court’s double-jeopardy case could leave impact on Mueller probe.

CNBC:        

• Job market is strong and hiring robust, in contrast to market fears.

• Dow rebounds from 780-point plunge, ends day just slightly lower on report Fed may pause hikes.

• Huawei is one of China's most important tech companies — here's what it does and why the US is wary.

• Walmart(WMT) to acquire home decor site Art.com, further extending its e-commerce push.

• Major CEOs don't see this 'economic slowdown' everyone's talking about.

• Tech IPO candidates for 2019 aren't yet deterred by market volatility, JPMorgan vice chairman says.

• Stocks making the biggest moves after hours: Broadcom, American Outdoor Brands and more.  

• A new bill would block lawmakers from buying and selling individual stocks while in office.

Zero Hedge:         

• MSM Is Getting Weirder, More Frantic, And More Desperate By The Day. 

• France Deploys 89,000 Cops Amid Fears Of Yellow Vest Rebellion On Saturday. 

• "Historic Storm" To Bury Southern Appalachians In Snow; Expect Massive Travel Disruptions.

• North Carolina Election Thrown Into Chaos As Investigators Target "Vote Harvesting" Scheme.

• Trump Reportedly Unaware Of Huawei Extradition Request Before Xi Dinner While Trudeau Knew.

• The US Achieves Energy Independence, Becomes Net Oil Exporter For First Time.

• Stocks Blast Higher On WSJ Report Fed May Signal "Wait And See" Approach.

• Former Attorney General And Ex-CIA Employee Top Trump Pick To Replace Sessions. 

• Plunge Protection Team Saves Stocks But Credit, Crude, Cryptos Collapse.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 94.75 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 9.75 unch.

• Bloomberg Emerging Markets Currency Index 67.06 +.03%.

• FTSE 100 futures +1.78%.

• S&P 500 futures +.06%.

• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (BIG)/0.00

• (MTN)/-2.43

After the Close:

• None of note

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for November is estimated to fall to 199K versus 250K in October.

• The Unemployment Rate for November is estimated at 3.7% versus 3.7% in October.

• Average Hourly Earnings MoM for November is estimated to rise +.3% versus a +.2% gain in October.
  

10:00 am EST

• Wholesale Trade Sales MoM for October.

• Preliminary Univ. of Mich. Consumer Sentiment for December is estimated to fall to 97.0 versus 97.5 in November.

3:00 pm EST

• Consumer Credit for October is estimated to rise to $15.0B versus $10.923B in September.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, Eurozone GDP/Industrial Production reports, Huawei Technologies CFO bail hearing, (PSMT) monthly sales report and the (ITW) investor day could also impact trading today.

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