Wednesday Watch

Evening Headlines

Bloomberg:   

• U.S. Planning Actions Targeting Chinese Hackers, Spies, Sources Say.    

• Trump Says He Would Meet Xi Again, Hails China Soybean Purchases.

• Trump Says He'd Intervene in Huawei CFO's Case for Trade Deal.

• U.K.’s May Faces Biggest Crisis as Confidence Vote Reports Swirl.

• Asian Stocks Head Higher, Treasuries Hold Drop. Asian equities advanced after a volatile U.S. session with investors continuing to assess the prospect for a trade deal and averting another American-government shutdown. The yield on 10-year Treasuries held steady. Japanese and Australian stocks rose and futures indicated gains in Hong Kong and China, while contracts on the S&P 500 Index edged lower. Wednesday began with news that Huawei Technologies Co. Chief Financial Officer Meng Wanzhou was granted bail by a Canadian court. U.S. President Donald Trump said he could intervene in the case if it aids the China trade deal. A rally in U.S. stocks was snuffed out and the S&P 500 ended Tuesday flat. Japan’s Topix index added 0.9 percent as of 9:03 a.m. in Tokyo. Hong Kong’s Hang Seng Index futures rose 0.7 percent. FTSE China A50 futures gained 0.8 percent. Australia’s S&P/ASX 200 Index gained 0.3 percent. Futures on the S&P 500 slid 0.2 percent.    

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

• New RBI Governor, China Tariff Hope, Gen Z's Big Spend: Eco Day.

• Violent Stock Reversals Are Coming Faster Than Any Time Since 2011.  

• Gundlach Says the Bond Market Thinks Rate Hikes Are Unlikely in 2019-2020.

Wall St. Journal:

• Europe’s Divisions Pose Rising Threat to Governments.

• The Road to a Bad Brexit. 

• Market Volatility Leads to Fresh Focus on Machinery Beneath Trading.

• China Moves to Address U.S. Economic Concerns.

• Trump, Top Democrats Clash Over Spending Bill.

MarketWatch.com:  

• Your apps are tracking you — here’s how to stop them.

• Bitcoin moves lower as retail investors increase their bets against the cryptocurrency.

• A ‘violent’ and ‘crushing’ stock move higher is taking shape this month, analyst says.

Fox News:

• Trump, Dems play possible Scrooges as WH clash ratchets up concerns on budget deadlock.

• Gunman on the run after 4 killed, several wounded, officials say.

CNBC:       

• Trade deal with China could be elusive until bitter end of negotiating period

• House Democrats prepare to push for $15 federal minimum wage, setting up clash with big business

• White House delays new farm aid payments on hopes of a China trade deal, sources say.

• China reportedly plans to slash auto tariffs — a huge win for Trump — and auto stocks are moving.

• Cuomo preparing recreational marijuana plan for New York in 2019.

Zero Hedge:  

• Mueller's Investigation Is Missing One Thing: A Crime. 

• Stocks, Yuan Rally On Meng Bail, Trump Trade Comments.

• Huawei CFO Granted Bail, Must Post C$10MM Bond And Submit To 24-7 Surveillance.

• What Do The Paris Riots & Japan's Lack Of Sex Have In Common?

• 4 Dead, 11 Wounded In Strasbourg "Terrorist Attack"; Shooter Identified As "Extremist".

• US Phone Carriers Warn FCC Of "Prohibitive" Costs To Replace Huawei, ZTE Gear.

• HSBC: These Are The Top 10 Risks For 2019.

• The World's Biggest Hedge Fund Is Getting Whacked, And Why "Moneyness" Matters.

• Facebook Files Patent To Calculate Your Location - In The Future.

• WTI Jumps Above $52 After Huge Crude Draw.

• Stormy Daniels Ordered To Pay Trump $293,000 In Legal Fees And Sanctions.

• 'Rumble In The Oval' Sparks Shutdown Fears, Market Mayhem.

Telegraph:

• Macron's credibility shattered as France joins Italy in budget disgrace.

• Comment: China stands ready to make trade open and inclusive.

Night Trading 

• Asian equity indices are +.5% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 95.0 -3.0 basis points. 

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

• Bloomberg Emerging Markets Currency Index 66.83 +.09%.

• FTSE 100 futures +.20%.

• S&P 500 futures +.26%.

• NASDAQ 100 futures +.29%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (PLAB)/.17

• (VRA)/.16

After the Close:

• (NDSN)/1.47

• (OXM)/.17

• (TLRD).94

Economic Releases

8:30 am EST

• The CPI MoM for November is estimated unch. versus a +.3% gain in October.

• The CPI Ex Food and Energy MoM for November is estimated to rise +.2% versus a +.2% gain in October. 

• Real Avg. Weekly Earnings YoY for November.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,167,910 barrels versus a -7,323,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,932,500 barrels versus a +1,699,000 barrel gain the prior week. Distillate inventories are estimated to rise +1,471,800 barrels versus a +3,811,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.41% versus a -.1% decline prior.

2:00 pm EST

• The Monthly Budget Deficit for November is estimated to widen to -$198.0B versus -$100.5B in October.
  

Upcoming Splits

• (EBIX) 5-for-1

Other Potential Market Movers

• The Eurozone Industrial Production report, monthly OPEC Oil Market Report, weekly MBA Mortgage Applications report, BMO Healthcare Conference, (CS) investor day, (LOW) analyst meeting, (HES) investor day, (BF/A) investor day, (UA) investor day and the (DOX) investor day could also impact trading today.

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

Stocks Higher into Final Hour on China Trade Deal Optimism, Less US High-Yield Debt Angst, Oil Gain, Tech/Biotech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 22.3 -1.7%

• Euro/Yen Carry Return Index 133.49 -.08%

• Emerging Markets Currency Volatility(VXY) 10.12 -.69%

• S&P 500 Implied Correlation 47.24 +.66%

• ISE Sentiment Index 92.0 -15.6%
  

• Total Put/Call .98 -8.4%

• NYSE Arms .98 -24.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 79.80 -2.42%
  

• America Energy Sector High-Yield CDS Index 685.0 +1.09%

• European Financial Sector CDS Index 108.77 -2.42%

• Italian/German 10Y Yld Spread 289.0 +3.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.79 -1.9%

• Emerging Market CDS Index 206.42 -.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.56 +1.18%

• 2-Year Swap Spread 11.5 -1.25 basis points

• TED Spread 39.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -15.75 +3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.81 -.05%
• 3-Month T-Bill Yield 2.40% +2.0 basis points

• Yield Curve 11.0 -2.5 basis points

• China Iron Ore Spot 65.3 USD/Metric Tonne +.59%

• Citi US Economic Surprise Index -7.1 -.6 point

• Citi Eurozone Economic Surprise Index -45.60 +3.3 points

• Citi Emerging Markets Economic Surprise Index -5.8 +.9 point

• 10-Year TIPS Spread 1.83 -4.0 basis points
• 75.1% chance of Fed rate hike at Jan. 30th meeting, 83.5% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +247 open in Japan 
• China A50 Futures: Indicating +80 open in China

• DAX Futures: Indicating +58 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +9.9% Above 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 80.8% of Issues Advancing, 17.2% Declining
• 25 New 52-Week Highs, 51 New Lows
• 22.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.9%
• Vix 21.9 -3.0%
• Total Put/Call .90 -15.9%
• TRIN/Arms .92 -28.7%

Tuesday Watch

Evening Headlines

Bloomberg:

• Judge in Huawei Hearing Not Satisfied With Meng Bail Conditions.

• Phone Carriers Fear Possible Order to Rip Out Huawei Equipment.  

• The Pros and Cons of a PBOC Rate Cut as China's Economy Slows.  

• Senate Drive to Punish Saudi Prince Over Khashoggi Death Delayed.

• Stocks Mixed as U.S. Rebounds, Pound Holds Losses. Asian stocks opened mixed as investors shrugged off a rebound in their U.S. counterparts from sharp losses, with trade and U.K. political concerns lingering. The pound held onto a slump after U.K. Prime Minister Theresa May delayed a critical vote on a Brexit deal. Benchmarks in Japan nudged lower, while stocks rose in Australia from a two-year low and South Korean shares were little changed. U.S. futures declined even after the S&P 500 Index recovered from the lowest intraday level since April to finish higher, buoyed by rallies in Facebook Inc. and Microsoft Corp. The dollar maintained gains and Treasuries were little changed. In Asia, Indian assets face pressure after the surprise resignation of the central bank’s governor. Derivatives tipped a rupee plunge. Japan’s Topix index fell 0.3 percent as of 9:13 a.m. in Tokyo. Australia’s S&P/ASX 200 Index gained 0.4 percent after reaching a two-year low. Hong Kong’s Hang Seng Index contracts fell 0.8 percent overnight. S&P 500 futures fell 0.3 percent.  

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

• Patel's Shock Exit, New Brexit Chaos, China Rate Debate: Eco Day.

• Where's the Bottom? Valuation Cases for an Unstable Stock Market.   

• Goldman Says Selling Volatility Is More Attractive as the Year Ends.   

• U.S. Factories Are Posting Job Openings Like Never Before.

Wall St. Journal:

• U.K.’s May Delays Brexit Vote in Face of Broad Opposition.

• The Road to a Bad Brexit.

• The Debt Threat to the Economy.

• Cheaper Oil Ripples Through the Global Economy.

• Arrest of Huawei CFO Hinges on an Offshore Puzzle.

• Macron Pledges Tax Cuts, Minimum-Wage Boost to Placate Protesters.

• House Republicans Recast Tax Bill, Seeking New Momentum.

Fox News:

• Sentencing memo hints at damaging Russia info from Trump’s former personal attorney Cohen.

• High court scraps review of Medicaid funding for Planned Parenthood.

CNBC:       

• Apple files appeal to overturn iPhone sales ban in China.

• Cramer: Fed didn't do 'its homework' and is now forced to hike rates this month.

• This year's losers will be next year's winners, Goldman's Kostin says.

• Popular apps like WeatherBug and GasBuddy are tracking your location with incredible detail: NYT. 

• Small-business optimism dips over fears of an economic slowdown: Survey.

• Job openings back over 7 million and near a record high.

Zero Hedge:   

• This is What The "Trade" War With China Is Really All About.

• Judge Raises "Flight Risk" Concerns In Huawei CFO Bail Hearing.

• Quant Who Predicted Last Week's Carnage Now Sees Risk Of Explosive "Blast To The Upside".

• How Government Bureaucrats & The NYTimes Are Misleading The Public About Climate Change.

• 6 Contrarian/Bullish Points For US Stocks.

• Kavanaugh Sides With Supreme Court Liberals In Planned Parenthood Funding Fight.

• Meanwhile In Brexit... Total Chaos.

• Breakevening Bad: Stocks Dump-n-Pump As Crude Crashes, Pound Plunges.

Night Trading 

• Asian equity indices are -.5% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 98.0 +.25 basis point. 

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

• Bloomberg Emerging Markets Currency Index 66.83 -.01%.

• FTSE 100 futures +.35%.

• S&P 500 futures -.43%.

• NASDAQ 100 futures -.54%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (DSW)/.51

• (FRAN)/-.18

After the Close:

• (AEO)/.48

• (PLAY)/.24

• (PVTL)/0-.08

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for November is estimated to fall to 107.0 versus 107.4 in October.
  

8:30 am EST

• The PPI Final Demand MoM for November is estimated unch. versus a +.6% gain in October.

• The PPI Ex Food and Energy MoM for November is estimated to rise +.1% versus a +.5% gain in October.

Upcoming Splits

• (EBIX) 5-for-1

Other Potential Market Movers

• The UK GDP report, Australia Home Price report, WasDe Crop report, US weekly retail sales reports, Cowen Networking/Cybersecurity Summit, (FSLR) financial guidance/outlook conference call, (URI) investor day and (THS) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly 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.