Wednesday Watch

Evening Headlines

Bloomberg:     

• Life in China Is Getting Harder, and Xi Jinping Should Worry.

• China’s Economy Struggling Across All Sectors, Beige Book Says.

• U.S. Considers Way to Heighten Airbus Tariff Pain for the EU.

• A Record $85 Billion Japan Bond Frenzy Is About to Reverse.

• Asia Stock Futures Drop Amid U.S. Political Risk. Stocks in Asia looked set to fall after U.S. equities dropped and Treasuries rose on political turmoil in Washington. Futures pointed to losses in Tokyo, Sydney and Hong Kong after the S&P 500 fell the most in a month. Speaker Nancy Pelosi said the House is opening a formal impeachment inquiry of President Donald Trump. The benchmark cut losses earlier in the day after Trump said he would release a complete transcript on Wednesday of his phone call with the Ukrainian president, which is the subject of a congressional investigation and a whistle-blower complaint from an unidentified intelligence official. The 10-year Treasury yield hit a two-week low, while the dollar fell to session lows and yen strengthened. Futures on the S&P 500 Index added 0.1% as of 7:52 a.m. in Tokyo. The underlying gauge fell 0.8% on Tuesday. Futures on Japan’s Nikkei 225 slid 1%. Hang Seng futures earlier lost 0.6%. Futures on Australia’s S&P/ASX 200 Index declined 1.1%. 

• Oil Falls as Report Signals U.S. Crude Stockpiles on the Rise.

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

• College-Scandal Punishment Gets Harsher With Richer Bribes.

Wall Street Journal:

•   Trump Authorizes Release of Ukraine Call Transcript.

•   The Biden-Clinton Method.

•   California’s Hobo Paradise.

•   WeWork’s Neumann Steps Down as CEO.

•   Saudi Arabia Considers Doubling Stakes in Aramco Public Offering.

Fox News:

• Pelosi announces formal impeachment inquiry into Trump as outcry from Dems hits fever pitch.

• Iranian President Rouhani bashes Trump in sit-down with Chris Wallace.

• Trump slams Pelosi after she announces impeachment inquiry.

CNBC:

• S&P 500 drops the most in a month on Trump impeachment concerns.

• Nike shares hit all-time high as new products drive sales, earnings top expectations.

• Bitcoin crashes 15% to below $8,000 for first time since June.

• Vaping giant Juul is cutting staff in corporate restructuring as scrutiny intensifies.
  

Zero Hedge:

• Trump Slams Democrats' "Witch Hunt Garbage" After Pelosi Launches Impeachment Probes.

• Macron Slams Greta Thunberg After Teenage Activist Sues France Over Climate - But Leaves Out China.

• The Disturbing Cult Of Greta Thunberg.

• "Terribly Divisive": Tulsi Gabbard Refuses To Join Fellow Democrats' Calls For Impeachment.

• Cryptos Are Collapsing Led By Altcoin Bloodbath.

• "Billionaires Shouldn't Exist": Bernie Proposes Tax To Cut Billionaire Wealth In Half.

• The Latest Numbers Tell Us That The Global Economic Slowdown Is Accelerating Dramatically.

• WTI Extends Losses After Second Weekly Surprise Crude Build.

• Stocks Slammed On Sentiment Slump, Trade Turmoil, & Impeachment Anxiety.

Business Insider:

• WeWork could cause a disaster for New York City's real-estate market.

• Elon Musk is doubling down on China as car sales plummet and electric-vehicle subsidies are slashed.

• The top 10 toys of the holiday season sold at Walmart, Amazon, and Target according to experts.

Telegraph:

• Tone deaf Fed will soon slash rates to near zero and relaunch quantitative easing.

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 74.75 +1.5 basis points.

• China Sovereign CDS 48.25 +2.75 basis points.

• Bloomberg Emerging Markets Currency Index  65.59 unch.

• FTSE 100 futures -.56%.

• S&P 500 futures +.18%.

• NASDAQ 100 futures +.20%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (WOR)/.75

After the Close:

• (AIR)/.51

• (FUL)/.90

• (KBH)/.66

Economic Releases
10:00 am EST

• New Home Sales for August are estimated to rise to 658K versus 635K in July.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +37,360 barrels versus a +1,058,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -192,700 barrels versus a +781,000 barrel gain the prior week. Distillate inventories are estimated to fall by -622,7000 barrels versus a +437,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.63% versus a -3.9% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The GfK Consumer Confidence report, $41B 5Y T-Note auction, weekly MBA Mortgage Applications report, Sidoti Investor Conference, Wells Fargo Consumer/Beauty Conference, (VFC) investor day and the (BBY) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by energy and industrial 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 Reversing Lower into Final Hour on Impeachment Talk, China Trade Tensions, Global Growth Worries, Energy/Tech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.9 +13.5%

• Euro/Yen Carry Return Index 122.45 -.23%

• Emerging Markets Currency Volatility(VXY) 8.17 -.97%

• S&P 500 Implied Correlation 41.67 +1.49%

• ISE Sentiment Index 84.0 -5.34%
  

• Total Put/Call 1.18 +14.6%

• NYSE Arms 1.78 +10.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.60 +2.44%
  

• America Energy Sector High-Yield CDS Index 401.0 +1.78%

• European Financial Sector CDS Index 65.38 +.90%

• Italian/German 10Y Yld Spread 143.25 +2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 74.70 +2.35%
  

• Emerging Market CDS Index 214.08 +3.0%
  

• iBoxx Offshore RMB China Corporate High Yield Index 165.87 +.05%

• 2-Year Swap Spread -2.25 -2.0 basis points

• TED Spread 22.25 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 -9.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.59 +.09%
• 3-Month T-Bill Yield 1.90% +1.0 basis point

• Yield Curve .03 -1.0 basis point

• China Iron Ore Spot 88.09 USD/Metric Tonne -3.1%

• Citi US Economic Surprise Index 40.90 -3.8 points

• Citi Eurozone Economic Surprise Index -64.90 +2.4 points

• Citi Emerging Markets Economic Surprise Index -7.8 +.1 point

• 10-Year TIPS Spread 1.58 -3.0 basis points
• 84.6% chance of Fed rate cut at Dec. 11th meeting, 92.4% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -323 open in Japan 
• China A50 Futures: Indicating -50 open in China

• DAX Futures: Indicating -68 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 25% Net Long

Afternoon Market Internals

NYSE Composite Index:

• Volume Running +13.1% Above 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 34.2% of Issues Advancing, 62.6% Declining
• 132 New 52-Week Highs, 28 New Lows
• 60.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.0%
• Vix 17.0 +14.1%
• Total Put/Call 1.17 +13.6%
• TRIN/Arms 1.88 +77.4%

Tuesday Watch

Evening Headlines

Bloomberg:    

• Trump Asks Mnuchin Why U.S. Canceled Chinese Farm Visits 

• Johnson Urges EU Leaders to See He Has Compromised on Brexit  

• Europeans Side With U.S. Over Iran on Saudi Strikes, New Deal.

• Asia Stocks Set for Mixed Start; Treasuries Steady. Asian stocks are set for a muted open on Tuesday after U.S. shares ended flat on a mixed day for global economic data. Treasuries were steady. Futures edged lower in Japan and Australia, and rose in Hong Kong. U.S. contracts climbed in early Asia trading after the benchmark was little changed on below average volume Monday. Economic data was largely in line in the U.S. though far short of estimates in Germany and France, sending stocks in Europe down. American money-market interest rates held steady. Futures on the Nikkei 225 fell 0.5%. Australia’s S&P/ASX 200 Index futures were down 0.1%. Hong Kong’s Hang Seng Index futures rose 0.5%. S&P 500 futures rose 0.4% as of 8:04 a.m. in Tokyo.

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

• Oil Declines as Market Awaits Further Cues on Saudi Production.

• Investors Should Be Worried About a Warren Presidency, Analyst Warns.

• Fed Dove Bullard Says May Need More Rate Cuts to Offset Risks.

Wall Street Journal:

• What Drove SoftBank’s Vision Fund Up Is Dragging It Down.

• Snap Detailed Facebook’s Aggressive Tactics in ‘Project Voldemort’ Dossier.

• GM Furloughs More Workers as UAW Strike Continues.

• ‘The Bells Start Going Off.’ How Doctors Uncovered the Vaping Crisis.

• Lower-Income Americans Increasingly Job Hopping.

Fox News:

• Senate leaders trade barbs on floor over Trump-Ukraine phone call as Dems threaten subpoenas.

• Kidnapped police commander found beheaded in vacation hub.

MarketWatch.com:   

• Why a sideways stock market could indicate the highs are yet to come.

• As the market appears stuck in a rut — here are 5 stocks poised to rise.

CNBC:

• Trump surprised when Mnuchin says he asked China trade delegation to cancel farm tour.

• Tesla and Musk hid facts about SolarCity deal and SpaceX involvement, shareholders claim.

• Stocks may be poised for dramatic surge, if they can break out of their current range, analysts say.

• Stocks making the biggest moves after hours: VEREIT, Transocean and Univar Solutions.

• China to place government officials inside 100 private companies, including Alibaba.

Zero Hedge:

• "You've Stolen My Childhood" - 16-Year-Old Girl Throws Tearful Climate Tantrum At UN.

• "A Glimpse Of Government's Ability To Totally Control Our Lives".

• Juul Under Criminal Investigation By Feds Amid FTC, FDA Probes.

• CNN Deems It A "Conspiracy Theory" To Question Biden Ties To Ukraine.

• Stocks Slip, Silver Rips, Yield Curve Dips After Global Macro Data Dumps.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 73.25 +2.75 basis points.

• China Sovereign CDS 45.5 +1.0 basis point.

• Bloomberg Emerging Markets Currency Index  65.53 +.01%.

• FTSE 100 futures n/a.

• S&P 500 futures +.38%.

• NASDAQ 100 futures +.51%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (AZO)/21.79

• (BB)/-.01

• (KMX)/1.33

• (JBL)/.87

After the Close:

• (CTAS)/2.15

• (CMTL)/.17

• (NKE)/.71

Economic Releases
9:00 am EST

• The FHFA House Price Index MoM for July is estimated to rise +.3% versus a +.2% gain in June.

• The CoreLogic CS 20-City MoM for July is estimated to rise +.1% versus a +.04% gain in June.

10:00 am EST

• The Richmond Fed Manufacturing Index for Sept. is estimated at 1.0 versus 1.0 in August.

• The Conference Board Consumer Confidence Index for Sept. is estimated to fall to 133.0 versus 135.1 in August.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ minutes, $40B 2Y T-Note auction, weekly US retail sales reports, BofA Merrill Financials/Banking/Insurance conference, Goldman ESports/Video Games conference,   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 mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.