Wednesday Watch

Evening Headlines

Bloomberg:     

• U.K. Parliament Moves Closer to Stopping a No-Deal Brexit.

• Kudlow Says China Deal Hinges on Enforcement, Structural Issues.

• Asia Stocks Follow U.S. Drop; Treasuries Hold Gain. Asian stocks followed their U.S. counterparts lower as rising pessimism that trade tensions with China will persist helped send technology and multinational companies tumbling. Treasuries held gains, oil fell and the dollar steadied. Japanese and Australian shares slipped and futures in Hong Kong pointed to losses after all major U.S. benchmarks declined. Chipmakers dropped more than 3 percent, with every member of the Philadelphia Semiconductor Index in the red. The S&P 500 briefly pared losses after presidential adviser Lawrence Kudlow said a Financial Times report that the U.S. canceled a preliminary meeting with Chinese officials was untrue. After the close of U.S. trading, Senate Majority Leader Mitch McConnell scheduled a vote for Thursday on Democratic-backed legislation to reopen the government, the first sign of a possible way out of the shutdown. Japan’s Topix Index fell 0.7 percent. S&P/ASX 200 fell 0.2 percent. S&P 500 futures were little changed.  

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

• China Consumer Crunch, Trust But Verify, Fed Board Seat: Eco Day.

• Oil Slumps Most in a Month as IMF, Trade Dispute Darken Outlook.

• McConnell to Allow Votes on Competing Bills to End Shutdown.  

• Newark Airport Flights Are Halted After Reports of Drones.

Wall St. Journal: 

• How Companies Secretly Boost Their Glassdoor Ratings.

• The Women’s March Follows Farrakhan off a Cliff.

• Supreme Court to Examine New York Gun Restrictions.

• Business Groups: China’s Plan for Tech Dominance Is Advancing.  
  

• Wall Street Backlash Sinks Plan to Transform Swaps Market.

MarketWatch.com:

• Shawn Snyder: These 3 leading economic indicators show no recession is coming.

• Here’s what really worries investors about China’s slowdown.

Fox News:

• Hoyer’s one-word answer when asked about Trump giving State of the Union address to House.

CNBC:

• China’s slowing growth improves the chances for an ‘advantageous’ trade deal: Jim Cramer.

• Stocks making the biggest moves after hours: IBM, Capital One and more.

• Economy may be at slowest pace of Trump term, but recession is not likely this year, economists say.

Zero Hedge:

• The First 'iPhone Bailout' Is Now A Reality.

• China's Military Cuts Ground Force By Half In Major "Transformation" To Boost Navy, Air Force.

• IBM Jumps On Guidance Boost Despite Revenue Slide, Massive Addbacks, Bizarre Tax Rate.

• USDJPY, Stocks Fade As McConnell Denies NYTimes 'Shutdown Deal' Report.

• Stocks Jump On Kudlow Denial: "There Is No Cancellation. None. Zero.".

• Ocasio-Cortez Gives "Zero F*cks"; Claims World Will End In 12 Years, US Should Pay Reparations To "Heal".

• Stocks Suffer Most Since Xmas Eve As 'Big Trouble' In China Spreads.

Telegraph:

• Eurozone faces risky game of 'political chicken' as debt fears rise.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 87.0 +1.25 basis points. 

• China Sovereign CDS 61.50 +1.5 basis points.

• Bloomberg Emerging Markets Currency Index 67.69 -.33%.

• FTSE 100 futures -1.3%.

• S&P 500 futures +.08%.

• NASDAQ 100 futures +.16%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ABT)/.81

• (ASML)/1.78

• (CMCSA)/.63

• (PG)/1.21

• (PGR)/1.01

• (UTX)/1.53

• (WAT)/2.64

After the Close:

• (BXS)/.54

• (CP)/4.25

• (FFIV)/2.53

• (F)/.30

• (LRCX)/3.68

• (LVS)/.84

• (RJF)/1.73

• (SLG)/1.60

• (TXN)/1.28

• (URI)/4.87

• (VAR)/1.07

• (XLNX)/.86

Economic Releases

9:00 am EST

• The FHFA House Price Index MoM for Nov. is estimated to rise +.3% versus a +.3% gain in Oct.
  

10:00 am EST

• The Richmond Fed Manufacturing Index for Jan. is estimated to rise to -1 versus -8 in Dec.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Consumer Confidence report, weekly US retail sales reports, weekly MBA Mortgage Applications report and the (KMI) investor day could also impact trading today.

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

Stocks Sharply Lower into Final Hour on Global Growth Fears, China Trade War Worries, Technical Selling, Tech/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 20.0 +12.1%

• Euro/Yen Carry Return Index 129.02 -.43%

• Emerging Markets Currency Volatility(VXY) 9.07 -1.09%

• S&P 500 Implied Correlation 47.96 +1.74%

• ISE Sentiment Index 69.0 +6.15%
  

• Total Put/Call .91 +9.64%

• NYSE Arms 1.56 +178.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 75.02 +3.72%
  

• America Energy Sector High-Yield CDS Index 711.0 +.21%

• European Financial Sector CDS Index 95.82 +4.94%

• Italian/German 10Y Yld Spread 250.5 +3.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 86.83 +1.12%
  

• Emerging Market CDS Index 184.75 +2.63%
  

• iBoxx Offshore RMB China Corporate High Yield Index 154.40 +.02%

• 2-Year Swap Spread 15.25 -.25 basis point

• TED Spread 36.75 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -1.0 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.67 -.36%
• 3-Month T-Bill Yield 2.40% +1.0 basis point

• Yield Curve 15.5 -1.75 basis points

• China Iron Ore Spot 72.41 USD/Metric Tonne +.15%

• Citi US Economic Surprise Index -5.80 +1.1 points

• Citi Eurozone Economic Surprise Index -71.0 +10.7 points

• Citi Emerging Markets Economic Surprise Index -10.6 +6.2 points

• 10-Year TIPS Spread 1.79 -3.0 basis points
• .5% chance of Fed rate hike at March 20th meeting, 4.6% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -217 open in Japan 
• China A50 Futures: Indicating -53 open in China

• DAX Futures: Indicating -64 open in Germany

Portfolio: 

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

• Small-Cap Growth -1.7%

Sector Underperformers:

• 1) Oil Service -3.7% 2) Disk Drives -3.5% 3) Semis -2.8%

Stocks Falling on Unusual Volume: 

• ARNC, PETS, EDIT, ATTU, SWK, WB, CRSP, HTHT, PAAS, BIDU, OSTK, ATI and DLTH

Stocks With Unusual Put Option Activity:

• 1) S 2) AET 3) AFL 4) CSX 5) OSTK

Stocks With Most Negative News Mentions:

• 1) SDLP 2) CRSP 3) WB 4) TPC 5) SDRL

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -1.4%

Sector Outperformers:

• 1) Restaurants +.4% 2) Gold & Silver +.3% 3) Utilities +.3%

Stocks Rising on Unusual Volume:

• CLAR, RYAAY, EBAY, EDU, PODD, BAK, ALLK, DQ, WNS, TEAM, WD, WING, QTNA, NVRO, PFBC, URGN, EE, EFSC, TAL, FITB, BIS, VGLT, APTS, FBC, ROAD and SE

Stocks With Unusual Call Option Activity:

• 1) EWJ 2) AFL 3) AMTD 4) SYMC 5) COF

Stocks With Most Positive News Mentions:

• 1) FITB 2) EDU 3) BJ 4) UAA 5) MBWM

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +13.0% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 21.9% of Issues Advancing, 75.5% Declining
• 13 New 52-Week Highs, 24 New Lows
• 28.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 55.3%
• Vix 19.0 +6.9%
• Total Put/Call .89 +7.2%
• TRIN/Arms 1.31 +132.2%