Stocks Falling Substantially into Final Hour on Global Growth Fears, Oil Decline, Technical Selling, Healthcare/Tech 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) 24.6 +13.7%

• Euro/Yen Carry Return Index 133.02 -.22%

• Emerging Markets Currency Volatility(VXY) 9.82 -1.41%

• S&P 500 Implied Correlation 50.57 -.37%

• ISE Sentiment Index 71.0 -23.7%
  

• Total Put/Call 1.33 +17.7%

• NYSE Arms .82 -35.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 81.11 +3.2%
  

• America Energy Sector High-Yield CDS Index 678.0 +.88%

• European Financial Sector CDS Index 104.10 +1.32%

• Italian/German 10Y Yld Spread 270.5 +1.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.22 -5.1%

• Emerging Market CDS Index 198.05 -.47%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.85 -.51%

• 2-Year Swap Spread 14.25 -.5 basis point

• TED Spread 39.75 +2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -6.5 +3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.81 +.18%

• 3-Month T-Bill Yield 2.39% -3.0 basis points

• Yield Curve 16.0 +.5 basis point

• China Iron Ore Spot 68.42 USD/Metric Tonne -.44%

• Citi US Economic Surprise Index -14.3 -7.0 points

• Citi Eurozone Economic Surprise Index -74.20 +2.0 points

• Citi Emerging Markets Economic Surprise Index -4.4 -2.9 points

• 10-Year TIPS Spread 1.81 -2.0 basis points

• 72.0% chance of Fed rate hike at Jan. 30th meeting, 79.3% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -436 open in Japan 

• China A50 Futures: Indicating -133 open in China

• DAX Futures: Indicating -70 open in Germany

Portfolio: 

• Slightly Higher: On gains in my emerging market shorts and index hedges

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

• Market Exposure: Moved to 25% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +7.0% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 30.6% of Issues Advancing, 66.7% Declining
• 4 New 52-Week Highs, 573 New Lows
• 19.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.5%
• Vix 23.1 +6.8%
• Total Put/Call 1.16 +2.7%
• TRIN/Arms .75 -41.4%

Monday Watch

Today's Headlines

Bloomberg:    

• May's Team Rejects New Brexit Referendum After Week of Crisis.  

• North Korea Tells U.S. That Sanctions, Pressure ‘Won’t Work’.   

• China Sees Bankruptcies Surge; Bondholders May Get Less Back.

• Russia Threat High With Troops at Border, Ukraine President Says.

• The Bulls Versus Bears Guide to the World Economy in 2019. 

• Asian Stocks Mixed as Sell-off Eases; Yuan Steady. Stocks in Asia opened mixed, following two weeks of losses driven by a backdrop of uncertain trade conditions and signs that some key economies are slowing. Treasury yields steadied just below 2.90 percent. U.S. equity futures edged up with stocks in Japan, Australia and Hong Kong, while shares in Shanghai fluctuated. Treasuries held last week’s gains and the yen was steady after a bout of risk aversion that hammered global equities in recent sessions. The dollar is coming off the back of a strong week that took it to the highest in a month. Oil remains below $52 in New York. The yuan is little changed offshore. Japanese bonds are in focus as a recent slide in yields threatens to push the benchmark 10-year bond yield below zero percent. Japan’s Topix index added 0.2 percent as of 10:31 a.m. in Tokyo. Shanghai Composite Index was down 0.1 percent. Hang Seng Index up 0.1 percent. Australia’s S&P/ASX 200 Index rose 0.2 percent. Futures on the S&P 500 rose 0.2 percent.     

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

• U.S. Pessimism, Australia Sees Surplus, New China Plan: Eco Day.

• Ghosting and Social Stalking: Modern Signs of a Hot Jobs Market.

• BIS Tells Recession Hunters It Can Top the Yield Curve Indicator.

• U.S. B-Schools Take Nine of Top 10 Spots in Global Ranking.

• This Killer Opioid Could Become a Weapon of Mass Destruction.  

• Meet ‘Millie’ the Avatar. She’d Like to Sell You a Pair of Sunglasses.  

• Bitcoin Investors Lied to Themselves to Justify Mania’s Prices.

Wall Street Journal:   

• Higher Interest Rates Pinch Small Banks.

• Leaders at Impasse on Border Wall as Shutdown Nears.

• Robot Vacuums Are Finally Good—Now Which One to Buy?

• Did Chivalry Go Down With the Titanic?

• Blue-Collar Voters Are Up for Grabs in 2020.

• To Expand Access to Emergency Contraception, Colleges Try Vending Machines.

• California’s New Tax on Texting.

• Amazon Targets Unprofitable Items, With a Sharper Focus on the Bottom Line.

• With Migrants Stalled at U.S. Doorstep, Mexico Offers Fresh Start.

• Health-Law Ruling Puts Political Divide In Stark Relief.

• State and Local Investment Gets Lift From Rising Revenues.

• Germany Tightens Acquisition Rules Amid China’s Push for Tech Deals.

Fox News:

• Trump attorney Giuliani says president will not sit down with Mueller, rips Cohen as liar. 

• DEROY MURDOCK: Dems and the border – What they don’t want you to know. 

CNBC:

• Google CEO Sundar Pichai had a tough and terrible year — but it was still better than Facebook's.

• Virtual reality start-ups offer a VR experience that's part movie theater, part theme park.

• How air carriers are experimenting with biometric scanning to speed up lines. 

Zero Hedge:     

• "No Wall In Any Form": Govt Shutdown Odds Explode Amid Trump-Schumer Standoff.

• Mapping America's Most-Distressed Communities.

• 76-Year-Old Joe Biden Is Officially The Frontrunner For 2020 Democratic Nomination.

• May's Cabinet Denies "Second Referendum" Rumors As MPs And Traders Wonder: "What On Earth Do We Do Next?"

• China Press Warns To "Prepare For Escalation Of Conflict With Canada".

• "It May Get Even Uglier": Hedge Fund Armageddon.

• Illinois Pension Shortfall Worsens To $134 Billion Despite Strong Markets, Increased Contribs.

• The Charts Bulls And Bears Are Obsessing Over For 2019.

• Just One Misplaced Dot By The Fed, And Expect Curve Inversion "Within Weeks".

• Belgium Police Fire Tear Gas, Water Cannon As Anti-Migration Protests Turn Violent.

• "I Wouldn't Touch Them With A 10 Foot Pole": Why Bears Think Gundlach Is Dead Wrong On Emerging Markets.

• Stunning Images Emerge After Massive Restaurant Explosion In Japan; Dozens Injured.

• Robot Trucks Coming To US Army in 2019 

• Former FBI SSA Exposes McCabe & Mueller's "Unethtical, Target & Destroy Coercion" Tactics, Defends Flynn.

• "Peak TV": Streaming Originals Overtake Basic Cable.

• US Medicare-For-All & Big-Tech: The Future Of Mass Patient Surveillance.

Business Insider:

• Amazon is building an air hub in Texas — and that means more bad news for FedEx and UPS, Morgan Stanley says.

• DC is literally overrun with rats.

Telegraph:

• Plunge in Bitcoin value hits $262bn since peak of its craze.

Night Trading

• Asian indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 93.0 +.5 basis point.

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

• Bloomberg Emerging Markets Currency Index 66.70 +.01%.

• FTSE 100 futures -.01%.

• S&P 500 futures +.16%.

• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• None of note

After the Close:

• (HEI)/.48

• (ORCL)/.78

• (RHT)/.87

Economic Releases
8:30 am EST

• Empire Manufacturing for Dec. is estimated to fall to 20.0 versus 23.3 in Nov.
  

10:00 am EST

• The NAHB Housing Market Index for December is estimated to rise to 61.0 versus 60.0 in November.
  

4:00 pm EST

• Net Long-Term TIC Flows for October.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The EU trade data and the RBA Minutes could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed.  The Portfolio is 50% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters. 

• Weekly Market Outlook by Yahoo. (video)

• Stocks to Watch Next Week by Seeking Alpha.

• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as technical buying, more dovish FOMC commentary and seasonal strength offset global growth fears, trade war worries and government shutdown threats. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Today's Headlines

Bloomberg:        

• China Seeks to Defuse Trade War With Reversals on Cars, Corn.   

• Huawei Hemorrhages Allies in Europe on Growing Security Concerns.   

• China’s Home-Price Growth Eases Amid Lackluster Buyer Demand.

• May Said to Warn Merkel, Macron Their Brexit Deal Is Almost Dead.

• Ruling Striking Down Obamacare Won’t Affect Health Coverage, Yet.  

• Bitcoin Set for Longest Weekly Losing Streak Since 2011: Chart.

• Stock Sell-Off Takes Key Sectors Into or Near Bear Markets.  

• The Stock Market Is the Most Divorced It’s Been From the Economy Since 2010.

• ‘Historic’ Tax Refunds Will Extend Retail Boom Into 2019.

Wall Street Journal:

• Paris Sees Fifth Weekend of ‘Yellow Vest’ Protests.

• Slower Overseas Growth Fans Worries On U.S. Expansion.

• Investors Turn Focus to Fed’s 2019 Rate Path.

• Facebook Bug Exposed Users’ Unshared Photos.

• Fight Over Voter Data Roils Democrats Ahead of 2020 Election.

• How Many More Tears at Johnson & Johnson?

Barron's:

• Had bullish commentary on (CAT), (PYPL), (TWNK), (LABL), (PLNT), (FSCT), (QYLS), (VRNS), (GOOGL), (AAPL), (INTC), (AMD), (GRUB) and (AMAT).

MarketWatch.com

• Individual stock investors are the most bearish since 2013: survey.

• Investors flee U.S. stock funds at record pace: Lipper.

• These are the U.S. stock market’s biggest losers this week.

• Bitcoin is pretty much dead, says teenage crypto phenom.

• Cryptos slide further as bitcoin nears crucial $3,000 mark.

Fox News:

• FOX News Special Report: Patients driven to despair, suicide after doctors cut off opioid prescriptions.

CNBC:   

• The S&P 500 and Dow are back in a correction. Here's what experts are watching for next week. 

• Federated Investors' top fund manager thinks the market is wrongly pricing in a 2019 recession.

• Goodbye to bidding wars: Some of the hottest housing markets are falling the hardest.

• Intel and TPG in talks to sell McAfee to Thoma Bravo for significantly more than $4.2 billion.

• Mueller investigation cost $25 million in first 16 months, report shows.

Zero Hedge:

• Obamacare Gutted: Core Provisions Ruled Unconstitutional By Texas Judge.

• Interior Secretary Zinke Stepping Down Amid Ethics Inquiry.

• European Auto Registrations Plunge Third Month In A Row, Down 8.1% In November.

• Skyscraper Construction: Nobody Comes Close To China In 2018.

• Scientists Will Begin Geoengineering Experiment And Try To Block The Sun.

• "If This Continues, We’re Going To Start Hearing Some Fund Liquidity Issues".

• Seattle Home Prices Plunge Again, Down 11% In Six Months.

• Hopkins: "Nothing Scares The Identity Politics Left Like An Actual Working-Class Uprising".

• "Unconstitutional Disaster!": Trump Celebrates After Judge Strikes Down Obamacare.

• Mueller Destroyed Messages From Peter Strzok's iPhone; OIG Recovers 19,000 New "FBI Lovebird" Texts.

• FBI Docs Reveal: "Flynn Was Not Lying Or Did Not Think He Was Lying".

• Bare-Breasted 'Mariannes' Face Off With French Police; Tear Gas, Pepper Spray Used On Protesting Yellow Vests.

• More Than 150 People Are Moving Out Of Chicago Every Day.

• Clinton Foundation Whistleblowers Testify: "It Operated As An Unregistered Foreign Agent".

• "Absolute Mayhem" In DC Court As Mueller May Have Made A Move. 

• "Inclusive" Hillary Tells Americans: "If You Don't Support Democrats, Go Somewhere Else".

• Billionaire Tom Steyer Urges Tiny Crowd To Rise Up And "Crush" Republicans.

• Trump Picks Mick Mulvaney As Acting Chief Of Staff.

• Credit On Verge Of Crisis: $176 Billion A-Rated Bonds Downgraded To BBB In Q4.

• Weekend Reading: Did The Grinch Steal Christmas?

• Meltdown: Traders Tremble As Trump, Trade & Talc Trigger Turmoil.

Business Insider:

• Almost $40 billion has been erased from Johnson & Johnson's market value, but JPMorgan says the selling is overdone.

The Telegraph:

• World economy faces slowdown as eurozone stagnates, China stimulus struggles and US growth peaks.