Wednesday Watch

Evening Headlines

Bloomberg:  

• U.S. Senate Unanimously Passes Measure Backing Hong Kong.  

• U.S., China to Tie Tariff Relief to Failed Deal From May.

• Even Hong Kong’s Homegrown Bankers Are Considering Moving Away.

• Hong Kong’s Next Flashpoint: The First Vote Since Unrest Began.    

• Emerging Markets Have Monetary Firepower to Drive World Economy.

• Optimistic Strategists Switch to Riskier Stocks in Asia.

• Corbyn Catches Up With Johnson in Dramatic U.K. Election Debate.  

• Chicago Tribune’s New Investor Is Hedge Fund Known for Layoffs.  

• Chinese Parents Test DNA to Check If Kids Will Become Prodigies.   

• Japan Export Slump Deepens as Shipments Drop Most Since 2016.

• Stocks Drop With U.S. Yields on U.S.-China Tension. Asian stocks and American equity futures retreated after the U.S. Senate passed legislation supporting Hong Kong protesters, triggering a renewed warning of retaliation from China and potentially complicating U.S.-China trade talks. Treasuries climbed and the offshore yuan hit session lows after China’s unspecified warning. Hong Kong shares fell along with Japanese and South Korean benchmarks. Australian equities saw the biggest declines, after allegations of financial crimes at Westpac Banking Corp. hit financial stocks. The S&P 500 Index ended Tuesday flat amid disappointing reports at some American retailers, though the Nasdaq Composite eked out a fresh high. Oil steadied after sliding more than 3%. Japan’s Topix index fell 0.6% as of 10:32 a.m. in Tokyo. Hong Kong’s Hang Seng declined 0.9%. The Shanghai Composite lost 0.2%. Futures on the S&P 500 Index fell 0.3%. The underlying index slid 0.1% on Tuesday. Australia’s S&P/ASX 200 Index lost 1.2%. South Korea’s Kospi index dropped 0.7%.

• Five Things You Need to Know to Start Your Day  

• ‘Giant Risk Event,’ Fed’s Williams Worries, Inside PBOC: Eco Day.  

• Oil Holds Near Lows as U.S. Supplies Swell, Trade Talks Stutter.  

• Exxon’s Credit Rating Outlook Lowered by Moody’s on Cash Burn.  

• Fed Minutes Seen Reinforcing Message of Rates on Prolonged Hold.

Wall Street Journal:

• Technology Stocks Head Toward Best Year in a Decade.

• Impeachment in the Shadow of the Constitution.

• Blue Jeans vs. Red Jeans: Retail’s Partisan Divide.

• Retail Results Send Mixed Signals on Consumer Spending.

• Stalled U.S.-China Trade Talks Raise Threat of Impasse.

• Carl Icahn Placing a Big Bet Against Mall Owners.

Fox News:

• House witnesses undercut Dems' claims of 'quid pro quo,' 'bribery' and 'cover-up'.

MarketWatch.com:  

• AMD(AMD) stock closes at highest in 13 years.

CNBC:

• Trump threatens higher tariffs if China doesn’t make a trade deal.

• Walmart CEO Doug McMillon: ‘We could go away at any minute’.

• FBI probing if Jeffrey Epstein’s death was the result of a ‘criminal enterprise,’ prisons chief says.

• FBI probing if Jeffrey Epstein’s death was the result of a ‘criminal enterprise,’ prisons chief says.

• ‘Do you think television reporters make too much money? I do’ — Lloyd Blankfein defends CEO pay.

• Stocks making the biggest moves after hours: Urban Outfitters, Amarin, Endo International & more.

Zero Hedge:

• Snyder: Over The Last 3 Years, American Culture Has Gone Even Deeper Down The Toilet.

• China "Discreetly" De-Dollarizing Amid Ongoing Trade Tensions.

• China's Annual Aluminum Consumption To Decline For First Time In 30 Years.

• WTI Holds Worst Loss In 7 Weeks After Bigger Than Expected Crude Build.

• Vindman Admits To Violating Chain Of Command, Says Trump Within Rights To Request Foreign Investigation.

• Political And Social Conflict Is Accelerating: Here's Why...

• Retail Rout Dings Dow, Bond Yields Tumble To 2-Week Lows.

Night Trading 

• Asian equity indices are -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 64.75 +.75 basis point.

• China Sovereign CDS 38.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index  65.58 -.07%.

• FTSE 100 futures -.05%.

• S&P 500 futures -.26%.

• NASDAQ 100 futures -.39%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AVYA)/.82

• (LOW)/1.35

• (TGT)/1.18

After the Close:

• (CPRT)/.59

• (JACK)/.96

• (LB)/.02

• (LZB)/.55

• (NTES)/3.10

• (SQM)/.27

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,328,300 barrels versus a +2,219,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,014,600 barrels versus a +1,861,000 barrel gain the prior week. Distillate inventories are estimated to fall by -810,700 barrels versus a -2,477,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +1.1% versus a +1.8% gain prior.

2:00 pm EST

• FOMC Oct. 30th Meeting Minutes.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The weekly MBA Mortgage Applications report, BofA Merrill Consumer/Retail Conference, Goldman Metals and Mining Conference, Jefferies Healthcare Conference, (CRM) investor day, (ROK) automation fair, (OSTK) analyst day, (NTGR) analyst day, (PLT) investor day and the (CREE) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Reversing Slightly Higher into Final Hour on US Economic Data, Technical Buying, Short-Covering, Biotech/Tech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 12.6 +1.3%

• Euro/Yen Carry Return Index 124.83 -.08%

• Emerging Markets Currency Volatility(VXY) 7.16 -.69%

• S&P 500 Implied Correlation 41.92 -5.0%

• ISE Sentiment Index 95.0 +15
  

• Total Put/Call 1.05 +25.0%

• NYSE Arms 1.48 +16.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.03 +1.48%
  

• America Energy Sector High-Yield CDS Index 550.0 +1.93%

• European Financial Sector CDS Index 59.20 +.91%

• Italian/German 10Y Yld Spread 158.50 +4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 64.13 +.52%
  

• Emerging Market CDS Index 203.63 +.84%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.88 -.02%

• 2-Year Swap Spread -1.0 -2.0 basis points

• TED Spread 34.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.25 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.63 +.04%
• 3-Month T-Bill Yield 1.55% -1.0 basis point

• Yield Curve .19 -3.0 basis points

• China Iron Ore Spot 84.20 USD/Metric Tonne +.06%

• Citi US Economic Surprise Index -1.4 +4.3 basis points

• Citi Eurozone Economic Surprise Index -16.30 -2.5 points

• Citi Emerging Markets Economic Surprise Index -27.30 -.1 basis point

• 10-Year TIPS Spread 1.64 -1.0 basis point
• 21.7% chance of Fed rate cut at Jan. 29th meeting, 36.7% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -12 open in Japan 
• China A50 Futures: Indicating -44 open in China

• DAX Futures: Indicating -13 open in Germany

Portfolio:

• Higher: On gains in my tech/biotech/medical sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value unch.

Sector Underperformers:

• 1) Retail -1.8% 2) Energy -1.3% 3) Telecom -.9%

Stocks Falling on Unusual Volume: 

• ECC, HD, CHEF, M and KSS

Stocks With Unusual Put Option Activity:

• 1) URBN 2) JWN 3) BKLN 4) TJX 5) BBBY

Stocks With Most Negative News Mentions:

• 1) I 2) M 3) KSS 4) CPE 5) WORK

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.1%

Sector Outperformers:

• 1) Biotech +2.2% 2) Gold & Silver +1.4% 3) Banks +1.0%

Stocks Rising on Unusual Volume:

• ATNX, KRTX, MDCO, LVGO, PGNY, DRNA, NTLA, EDIT, TBIO, AXSM, TCDA, ALLK, MED, CDLX, NVTA, ACIW, REZI, ARVN, GBT, GOSS, EVER, OKTA, ARWR, ALNY, CHWY, FSCT, BBIO, NOW, NJR, PLAN, WW, PFSI, INMD, DNLI, CSII, RPD, ABMD, AMD, EAF, OPTN, ARMK, EAF, OPTN, THC, QTWO, ELF, AQUA, NTRA, AVGO and APAM

Stocks With Unusual Call Option Activity:

• 1) MDCO 2) CCXI 3) LQD 4) DHR 5) GT

Stocks With Most Positive News Mentions:

• 1) MYOV 2) MDCO 3) CRSP 4) CREE 5) AVGO

Charts:

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

Afternoon Market Internals

NYSE Composite Index:

• Volume Running +6.8% Above 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 48.2% of Issues Advancing, 48.7% Declining
• 106 New 52-Week Highs, 82 New Lows
• 57.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.8%
• Vix 12.7 +1.6%
• Total Put/Call 1.09 +29.8%
• TRIN/Arms 1.44 +13.4%