Stocks Lower into Final Hour on Global Growth Worries, Oil Decline, Profit-Taking, Gaming/Utility Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors declining
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 18.9 +4.0%

• Euro/Yen Carry Return Index 128.94 -.32%

• Emerging Markets Currency Volatility(VXY) 9.49 -.63%

• S&P 500 Implied Correlation 47.51 -1.78%

• ISE Sentiment Index 72.0 -35.7%
  

• Total Put/Call 1.05 -1.87%

• NYSE Arms .66 -28.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 78.30 +1.10%
  

• America Energy Sector High-Yield CDS Index 735.0 +3.61%

• European Financial Sector CDS Index 104.63 +.03%

• Italian/German 10Y Yld Spread 261.25 -.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 90.0 +.65%
  

• Emerging Market CDS Index 195.0 -.54%
  

• iBoxx Offshore RMB China Corporate High Yield Index 153.32 -.13%

• 2-Year Swap Spread 16.0 +.25 basis point

• TED Spread 37.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap 1.5 +1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.95 +.06%

• 3-Month T-Bill Yield 2.41% unch.

• Yield Curve 17.25 +1.5 basis point

• China Iron Ore Spot 70.72 USD/Metric Tonne -1.08%

• Citi US Economic Surprise Index -5.50 +.6 point

• Citi Eurozone Economic Surprise Index -86.7 +1.9 points

• Citi Emerging Markets Economic Surprise Index -19.7 +.6 point

• 10-Year TIPS Spread 1.82 unch.

• .5% chance of Fed rate hike at March 20th meeting, 8.7% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -179 open in Japan 

• China A50 Futures: Indicating +12 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.5%

Sector Underperformers:

• 1) Utilities -2.9% 2) Gaming -2.2% 3) Disk Drives -1.7%

Stocks Falling on Unusual Volume: 

• NEM, PBH, CWEN, VCRA, NEP, ATHM, WDC, SNX, TLRD, SGH and CVNA

Stocks With Unusual Put Option Activity:

• 1) AET 2) RRC 3) ADNT 4) NEM 5) PCG

Stocks With Most Negative News Mentions:

• 1) PCG 2) XPO 3) PPDF 4) VCRA 5) PPL

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.2%

Sector Outperformers:

• 1) Banks +1.5% 2) Oil Service +1.0% 3) Construction +.4%

Stocks Rising on Unusual Volume:

• GCI, GG, BOOT, SJR, FBNC, LULU, BPT, OMER, SBS, CNOB, LBTYK, BBT, INSP, C, PARR, WRLD, MTN, RDC, PTLA, THO, WGO, DXR, SSB, ROKU and YETI

Stocks With Unusual Call Option Activity:

• 1) KEY 2) GRPN 3) EQT 4) HAS 5) SYMC

Stocks With Most Positive News Mentions:

• 1) LULU 2) HRS 3) GCI 4) YETI 5) NOC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -3.2% Below 100-Day Average
• 2 Sectors Rising, 9 Sectors Declining
• 37.7% of Issues Advancing, 59.2% Declining
• 6 New 52-Week Highs, 17 New Lows
• 24.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.5%
• Vix 19.4 +6.8%
• Total Put/Call 1.14 +6.5%
• TRIN/Arms .69 -25.0%

Monday Watch

Today's Headlines

Bloomberg:   

• Xi’s Leading China Toward Stagnation.  

• Visa(V) and Mastercard’s(MA) Chinese Entry Delayed by Central Bank: FT.

• Labour Vows Confidence Vote as May Faces Defeat on Brexit Deal.

• Italy Finance Minister Sees Economy in Stagnation, Not Recession.   

• ECB's Nowotny Urges Caution on Rate Increases as Growth Slows.

• Viacom in Talks to Sell Majority Stake in China Operations: WSJ.

• Traders Suddenly Dare to Believe in an Emerging-Market Rally.

• Asian Stocks to Start Mixed With Earnings in Focus. Asian stocks were poised for a mixed start on Monday, following the best week for regional stocks since the start of November, as investors awaited a raft of earnings and trade data from China. The yuan held recent gains. Futures indicated a small decline when equity trading begins in Hong Kong and Australia’s main index fluctuated at the open. Japan is closed for a holiday, so Treasuries won’t trade until the London open. U.S. equity futures slipped after the S&P 500 on Friday closed flat and the yield on 10-year Treasuries declined. Futures on Hong Kong’s Hang Seng slid 0.2 percent. Australia’s S&P/ASX 200 Index added 0.1 percent. Futures on the S&P 500 slid 0.3 percent.

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

• U.S. Recession Warning Signs, China's 2019 To-Do List: Eco Day.

• Saudis Say OPEC+ Oil Cuts on ‘Right Track’ to Balance the Market.

• Bill Gross's Bond-Fund Assets Decline Below $1 Billion.

• FedEx(FDX) Tests Adding Full-Service Home Delivery of Bulky Goods.

Wall Street Journal: 

• GOP Senator Pushes Temporary Deal to Open Government.

• White House Sought Options to Strike Iran.

• Border Wall Impasse Frustrates Many New House Democrats.

• Slow Earnings Growth, Dim Forecasts Weigh on Stocks.

• California’s Next Ban: Paper Receipts.

MarketWatch.com:

• Tech finds a middle lane for autonomous cars at CES.

• This popular stock-market checklist from Citi says the bull is alive and well.

Fox News:

• Sarah Sanders, RNC chair McDaniel slam lawmakers for Puerto Rico trip as shutdown rolls on.

• FOX NEWS EXCLUSIVE: Trump says he did not hide details of Putin talk.

• Republican says his Comey questions uncovered FBI investigation of Trump.

CNBC:

• Currency chart points to bullish activity in stocks, oil.

• The ten hottest cars debuting at the Detroit auto show.

• Early research on Apple’s Health Records service suggests patients generally like it. 

• Saudi energy minister: Russia moving ‘slower than I’d like’ on oil cuts.

Zero Hedge:  

• Trump "Couldn't Care Less" If Putin Conversation Becomes Public; Slams "Most Insulting Article" By NYT.

• As FBI Ramped Up "Witch Hunt" When Trump Fired Comey, Strzok Admitted Collusion Investigation A Joke.

• Trump Threatens To "Devastate Turkey Economically" If Kurds Attacked, Sends Lira Sliding.

• Illinois Is "National Outlier" When It Comes To Losing Residents.   

• The Shutdown Is Providing Evidence Of Private Businesses Making Government Obsolete.

• Fake News? How About No News?

• US Electric Grid Hacked: Perpetrators Could Have Shut Down The System.

• Theresa May Could Be Removed As Soon As Wednesday If Vote On Brexit Deal Fails.

• Real Tax Rates In The 60s Were Much Lower Than Ocasio-Cortez Thinks.

• Trump: "I Haven't Left The White House Since The Shutdown Began".

• Furloughed Federal Employees Are Still Paid More Than You.

• "China's Nightmare": B-2 Stealth Bombers Deployed To Hawaii, "On Watch" 24/7.

• Political Nightmares Multiply For Europe Ahead Of Davos.

• Model Reveals Diet Secrets Of The Insta-Fabulous: "Tapas And Cocaine".

• Chinese Super Soldiers Are Using These Futuristic Weapons. 

Business Insider:

• Pakistan abruptly stopped calling out China's mass oppression of Muslims. Critics say Beijing bought its silence.

• Bed Bath & Beyond's(BBBY) stores have been called 'a mess,' but the chain might be starting to turn that around. 

• Microsoft President Brad Smith says these are the 10 biggest challenges facing tech in 2019.  

• A drug that works differently from all existing depression drugs just got a big boost.

• The future of artificial intelligence in retail.

Telegraph:

• Germany flirts with recession, but Italy and France will bear the brunt.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 89.50 +.25 basis point.

• China Sovereign CDS 61.5 -1.75 basis points.

• Bloomberg Emerging Markets Currency Index 67.88 -.05%.

• FTSE 100 futures -.22%.

• S&P 500 futures -.45%.

• NASDAQ 100 futures -.49%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• (C)/1.55

• (SJR)/.31

After the Close:

• None of note

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Trade Balance report, Deutsche Bank China Conference and the (AEO) business update could also impact trading today.

BOTTOM LINE: Asian indices are slightly lower, weighed down by financial and consumer shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% 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 China trade deal optimism, dovish FOMC commentary and oil strength offset earnings outlook worries, technical selling and government shutdown concerns. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.