Stocks Falling into Final Hour on China Trade Deal Worries, Global Growth Fears, European Debt Angst, Tech/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.95 +10.21%

• Euro/Yen Carry Return Index 129.53 -.26%

• Emerging Markets Currency Volatility(VXY) 8.97 +.79%

• S&P 500 Implied Correlation 43.18 -1.82%

• ISE Sentiment Index 78.0 -22.0%
  

• Total Put/Call .99 +3.1%

• NYSE Arms 1.32 -2.22%

Credit Investor Angst:

• North American Investment Grade CDS Index 68.28 +4.08%
  

• America Energy Sector High-Yield CDS Index 658.0 -.06%

• European Financial Sector CDS Index 91.49 +5.23%

• Italian/German 10Y Yld Spread 283.5 +14.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 77.83 +.32%
  

• Emerging Market CDS Index 173.39 +2.12%
  

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

• 2-Year Swap Spread 14.25 -.25 basis point

• TED Spread 33.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -6.5 -3.5 basis points.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.35 -.26%
• 3-Month T-Bill Yield 2.40% -1.0 basis point

• Yield Curve 17.25 -.5 basis point

• China Iron Ore Spot 91.02 USD/Metric Tonne +2.41%

• Citi US Economic Surprise Index 17.0 -2.0 points

• Citi Eurozone Economic Surprise Index -79.1 -4.7 points

• Citi Emerging Markets Economic Surprise Index -10.2 +.4 point

• 10-Year TIPS Spread 1.84 -2.0 basis points
• 0.0% chance of Fed rate hike at May 1st meeting, 1.1% chance at June 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -221 open in Japan 
• China A50 Futures: Indicating -21 open in China

• DAX Futures: Indicating +16 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.6%

Sector Underperformers:

• 1) Oil Service -5.1% 2) Gaming -2.2% 3) Disk Drives -3.0%

Stocks Falling on Unusual Volume: 

• GRUB, SONO, PRLB, TPR, VVV, HAIN, CENT, FCAU, ENS, FEYE, MGNX, CENTA, HLF, TWTR, ADS, K, DNKN, FANH, ELY, VNDA, NEWR, WPP, NOV, RYN, TRHC, PAG, BR, SNA, CUB and SPB

Stocks With Unusual Put Option Activity:

• 1) PSTG 2) GRUB 3) ITW 4) AET 5) TPR

Stocks With Most Negative News Mentions:

• 1) USAT 2) FCAU 3) TSLA 4) MRVL 5) BABY

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.9%

Sector Outperformers:

• 1) Homebuilders +.6% 2) Utilities +.5% 3) REITs +.4%

Stocks Rising on Unusual Volume:

• CMG, IRBT, STI, MTCH, BBT, PSDO, EOLS, BPY, HBI, BLKB, AHL, BPR, PCMI, WERN, TTWO, ARRY, EPC, SNN, CMA, CRON, HCSG, EA, SFLY, UFI, TTGT, ENSG, CAH, TTGT, HQY, SEE, MAS, MC, VIRT, HBAN and PDM

Stocks With Unusual Call Option Activity:

• 1) HAIN 2) XLRE 3) FHN 4) RF 5) CMG

Stocks With Most Positive News Mentions:

• 1) HBI 2) CMG 3) MAS 4) CAH 5) LH

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +19.8% Above 100-Day Average
• 2 Sectors Rising, 9 Sectors Declining
• 21.0% of Issues Advancing, 76.4% Declining
• 42 New 52-Week Highs, 22 New Lows
• 39.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 55.6%
• Vix 17.5 +13.9%
• Total Put/Call 1.14 +18.8%
• TRIN/Arms 1.09 -19.3%

Thursday Watch

Evening Headlines

Bloomberg:  

• U.S. Erupts in Fury as Germany Extradites Terrorist to Turkey.

• Asia Stocks Mixed Amid Earnings; Dollar Holds Gain. Stocks in Asia traded mixed Thursday after U.S. shares slipped amid disappointing earnings in the technology sector. The dollar built on its recent rally and Treasuries ticked higher. Japanese shares fell amid a raft of corporate earnings, while Australian shares rose for a fourth day, pushing the benchmark index further into technically overbought territory. U.S. futures were little changed. The New Zealand dollar extended a decline after weaker-than-expected jobs data, while its Australian counterpart remained lower following Wednesday’s central bank shift to a neutral policy stance. Crude oil steadied just below $54 a barrel. Japan’s Topix index slid 0.5 percent as of 9:08 a.m. in Tokyo. Australia’s S&P/ASX 200 Index added 0.9 percent. S&P 500 Index futures were flat.   

• Your Evening Briefing.

• Democrats Target Wall Street With Financial Trade Tax Proposal     

• Senators Try to Limit Trump’s Tariff Power While He Seeks More.

Wall St. Journal:

• Virginia Leadership in Crisis as Attorney General Apologizes for Using Blackface.

• The Democrats’ 10 Dreadful Days.

• Who’s Afraid of Socialism?

• Spending by SoftBank Vision Fund Raises Need for More Cash.

• GM Leans on U.S. Truck Buyers to Counter Weakness in China.

• A Common Foe as Videogame Stocks Stumble: ‘Fortnite’. 

• Democratic Presidential Hopefuls Embrace Cash Aid for the Poor.

MarketWatch.com:

• IRobot(IRBT) stock surges 13% after earnings beat, strong guidance.

• Match Group(MTCH) earnings beat expectations as Tinder drives further growth.

• Ivan Martchev: The U.S. stock rally could accelerate on the Fed’s U-turn, a China deal and tax cuts.

Fox News:

• Trump slams Schiff as Democrats open new Russia probe, send docs to Mueller.

CNBC:

• Janet Yellen: Possible next Fed move is a cut if global growth continues to slow.

• These 2 telecom stocks could be major winners from US-China trade war, Cramer says.

• Chipotle(CMG) shares jump after company crushes earnings estimates, as turnaround pace picks up.

• Here are the 5 biggest beneficiaries of the 5G rollout: Jim Cramer.

Zero Hedge:

• Adam Schiff Showboats, Republicans Call His Bluff On Russia Probe.

• 2 Million Syringes Still Missing As San Francisco's Drug Addicts Outnumber High-School Students.

• Another Top Ranking Virginia Democrat Admits To Wearing Blackface At Party.

• Risk Parity Funds Are Once Again Buying Stocks.

• Fairfax Accuser: "What Started As Consensual Kissing Quickly Turned Into A Sexual Assault".

• S&P Stalls At Key Technical Level As Earnings Expectations Crash To 6-Month Lows.

Business Insider:

• How the 15 richest members of Congress made their money.

• These are the hottest fashion brands in the world right now.

• 57 startups that will boom in 2019, according to VCs.

• Elizabeth Warren called herself 'American Indian' on her 1986 bar registration card, heightening scrutiny of her race claims.

• Forget about 'Fortnite': A new, free game makes 9 brilliant changes to the battle-royal formula.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 76.5 -1.0 basis point. 

• China Sovereign CDS 54.0 unch.

• Bloomberg Emerging Markets Currency Index 68.50 -.36%.

• FTSE 100 futures -.15%.

• S&P 500 futures -.19%.

• NASDAQ 100 futures -.23%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ADS)/6.95

• (CAH)/1.11

• (FCAU)/.79

• (HAIN)/.26

• (ICE)/.92

• (K)/.89

• (LH)/2.49

• (ODFL)/1.75

• (PENN)/-.41

• (PM)/1.16

• (SEE)/.67

• (SNA)/3.01

• (TWTR)/.24

• (TSN)/1.55

• (YUM)/.97

After the Close:

• (MT)/.70

• (CSL)/1.27

• (EXPE)/1.06

• (IAC)/1.88

• (LGND)/1.22

• (MAT)/-.18

• (MHK)/2.49

• (NCR)/.82

• (NWSA)/.12

• (SYNA)/1.35

Economic Releases

8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 221K versus 253K the prior week.

• Continuing Claims are estimated to fall to 1733K versus 1782K prior.

3:00 pm EST

• Consumer Credit for Dec. is estimated at $17.0B versus $22.149B in Nov.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China reserves report, BoE meeting, $19B 30Y T-Note auction, Bloomberg Jan. US Economic Survey, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (LB)/(BKE)/(CATO) preliminary Q4 sales releases could also impact trading today.

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