Stocks Close Modestly Lower on Eurozone Debt Angst, Profit-Taking, Technical Selling, Metals&Mining/Homebuilding Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.45 -.77%

• Euro/Yen Carry Return Index 129.89 -.35%

• Emerging Markets Currency Volatility(VXY) 8.85 +.8%

• S&P 500 Implied Correlation 42.34 -.56%

• ISE Sentiment Index 96.0 +7.9%
  

• Total Put/Call .94 +8.05%

• NYSE Arms 1.25 +3.31%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.37 +1.34%
  

• America Energy Sector High-Yield CDS Index 658.0 -.69%

• European Financial Sector CDS Index 86.94 +1.42%

• Italian/German 10Y Yld Spread 269.25 +7.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 77.58 -.38%
  

• Emerging Market CDS Index 169.31 +1.92%
  

• iBoxx Offshore RMB China Corporate High Yield Index 156.23 +.02%

• 2-Year Swap Spread 14.5 +.25 basis point

• TED Spread 33.25 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.54 -.31%
• 3-Month T-Bill Yield 2.41% +1.0 basis point

• Yield Curve 17.25 -.5 basis point

• China Iron Ore Spot 87.37 USD/Metric Tonne +.43%

• Citi US Economic Surprise Index 19.0 +2.0 points

• Citi Eurozone Economic Surprise Index -74.4 -2.9 points

• Citi Emerging Markets Economic Surprise Index -10.6 -2.6 points

• 10-Year TIPS Spread 1.86-1.0 basis point
• 0.9% chance of Fed rate hike at May 1st meeting, 5.6% chance at June 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -4 open in Japan 
• China A50 Futures: Indicating +94 open in China

• DAX Futures: Indicating -16 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Video Gaming -3.4% 2) Steel -2.6% 3) Homebuilding -2.1%

Stocks Falling on Unusual Volume: 

• TTWO, EA, BABY, SFLY, MTSI, SPOT, HCSG, TENB, SONO, VNDA, ELAN, DATA, ATVI, USNA, ETSY, LMNX, CRON, MANH, IPG, APC, BTU and FOSL

Stocks With Unusual Put Option Activity:

• 1) AET 2) EA 3) TTWO 4) CC 5) ZNGA

Stocks With Most Negative News Mentions:

• 1) VNDA 2) TCS 3) EA 4) SFLY 5) ARLO

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.1%

Sector Outperformers:

• 1) Semis +3.1% 2) Disk Drives +1.9% 3) Alt Energy +1.5%

Stocks Rising on Unusual Volume:

• MGNX, SKY, ZEN, SWKS, ZLAB, NYT, PAYC, VIAV, CTRL, APAM, PCMI, MCHP, ING, CSIQ, BOOT, TSEM, CPRI, SMAR, MXL, ON, PLT, TZOO, VREX, CAI, NXPI, PFGC, UPWK, MYGN, SLAB, BRKS and ALRM

Stocks With Unusual Call Option Activity:

• 1) SNAP 2) EA 3) ZEN 4) SWKS 5) CERN

Stocks With Most Positive News Mentions:

• 1) ZEN 2) SWKS 3) SNAP 4) BSX 5) CTSH

Charts:

• ETFs Rising on Unusual Volume

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.1% Above 100-Day Average
• 4 Sectors Rising, 7 Sectors Declining
• 37.6% of Issues Advancing, 58.6% Declining
• 49 New 52-Week Highs, 8 New Lows
• 40.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 56.5%
• Vix 15.19 -2.44%
• Total Put/Call .96 +10.3%
• TRIN/Arms .88 -27.3%

Wednesday Watch

Evening Headlines

Bloomberg:  

• Asian Stocks Trade Flat; Dollar Holds Advance. Asian stocks opened mixed Wednesday as an extension of the post-Christmas advance in U.S. equities overnight failed to give any impetus to a regional trading session hit by Lunar New Year closures. Treasuries held steady and the dollar retained its gains. Japanese shares eked out small gains, while stocks in Sydney were little changed. The S&P 500 Index posted a fifth day of gains on Tuesday as technology shares offset a decline for financials. Earnings and economic data were mixed, giving investors little to trade on ahead of President Donald Trump’s address to the nation. Oil held losses below $54 a barrel. Japan’s Topix index was up 0.2 percent as of 9:08 a.m. in Tokyo. Australia’s S&P/ASX 200 Index were flat. Futures on the S&P 500 were little changed. 

• OPEC's Oil Exports to U.S. Fell to Five-Year Low in January.

Wall St. Journal:

• Apple’s(AAPL) Retail Chief to Depart.

• Mission Impossible: World Bank.

• OPEC Pursues Formal Pact Between Cartel and Russia.

• Goldman Plans Cuts In Commodities Unit As New CEO Digs In.

• Flip the Script: Drugmakers Blame Middlemen for Price Increases.

• Fed to Include High Unemployment in 2019 Stress Test Scenario.

• Macron Pushes Antiriot Bill to Quell Protests.

Fox News:

• Trump’s State of the Union address to call for easing partisan rancor, avoiding ‘endless wars’.

CNBC:

• Trump will urge bipartisan cooperation to realize his policy goals in State of the Union address.

• Facebook(FB) will now evaluate employees on whether they help solve ‘social issues’.

• Trump reportedly plans to meet North Korea’s Kim Jong Un in Vietnam this month.

• Stocks making the biggest moves after hours: Snap, Disney, Electronic Arts and more.

• Disney(DIS) beats on earnings and revenue, reports streaming subscriber growth.

• Cramer: You can make a ton of money over the long term with these ‘prestige’ stocks.

Zero Hedge:

• WTI Holds Losses After Inventory Builds Across The Board.

• The Truth About What's Happening In Venezuela Right Now Is Not What The Media Is Reporting.

• "It's Like A Kid Designed It": 1000s Of Model 3s Need Paint Fixes, Industry Expert Slams Tesla's Manufacturing Quality.

• Illinois Democrats' Astounding Reversal On Pensions.

• Watch Jimmy Dore Dismantle NYT Journo After Failed Tulsi Gabbard Hit-Job.

• LA Goes 'Medieval', Suffers Outbreak Of Flea-Borne Disease Typhus.

• Stocks Continue To Soar But Bonds, Bullion, & The Greenback Ain't Buying It.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 77.5 -.5 basis point. 

• China Sovereign CDS 54.0 unch..

• Bloomberg Emerging Markets Currency Index 68.74 -.01%.

• FTSE 100 futures -.04%.

• S&P 500 futures +.06%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (BSX)/.36

• (CTSH)/1.06

• (CMI)/3.81

• (LLY)/1.33

• (GM)/1.21

• (HUM)/2.53

• (JEC)/1.04

• (REGN)/5.60

• (TTWO)/2.80

After the Close:

• (CMG)/1.41

• (FEYE)/.05

• (FLO)/.15

• (IRBT)/.58

• (MET)/1.29

• (NOV)/.09

• (ORLY)/3.75

• (PRU)/2.79

• (RGLD)/.32

• (WERN)/.69

Economic Releases

8:30 am EST

• The Trade Deficit for Nov. is estimated at -$54.0B versus -$55.5B in Oct.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,069,890 barrels versus a 919,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +930,220 barrels versus a -2,235,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,097,440 barrels versus a -1,122,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.37% versus a -2.8% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Quarles speaking, German Factory Orders report, $27B 10Y T-Note auction, weekly MBA Mortgage Applications report, Cowen Aerospace/Defense/Industrials Conference, (ZUMZ) Q4 sales release and the (COST) sales results could also impact trading today.

BOTTOM LINE:  Asian indices are 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 100% net long heading into the day.