Wednesday Watch

Evening Headlines

Bloomberg:  

• China Sees U.S. Delaying Dec. 15 Tariffs as Talks Continue.    

• Jitters Over China’s Local Defaults Start to Spread Offshore.

• South Korea Unemployment Unexpectedly Edges Up For a Third Month.

• The Emerging Market Rebound Looks Set to Stretch Into 2020. 

• Trump’s Nafta Rewrite Gets Signoffs; Senate to Vote in 2020.

• Stocks Dip in Asia on U.S. Tariff-Hike Concern: Markets Wrap. Asian stocks dipped along with U.S. futures amid concern that an American tariff hike on Chinese imports scheduled for Sunday could still go ahead, despite reports on progress in trade talks. After another lackluster open for trading Wednesday, benchmarks in Tokyo and Seoul saw modest declines after White House adviser Peter Navarro cited no indication that the tariff hike will be averted. The yuan edged lower in offshore trading, though moves remain muted as traders await decisive signs on the U.S.-China trade front. Treasuries ticked higher, with investors also awaiting the Federal Reserve’s final policy decision of the year. Crude oil retreated. Topix index fell 0.2% as of 9:55 a.m. in Tokyo. Australia’s S&P/ASX 200 Index rose 0.2%. South Korea’s Kospi index was down 0.1%. S&P 500 futures dipped 0.1%. The S&P 500 Index fell 0.2%.

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

• Soft Landing, China Growth Target, Tariff Deal Close: Eco Day.

• Traders Buy Hedges ‘Like World Is About to End’.

• Trump Barred From Building Border Wall With Military Funds.

Wall Street Journal:

• New York Life in Talks to Buy Cigna Unit for Up to $6 Billion.

• FBI Spying Ruined My Good Name.

• Students, Community Groups Sue University of California to Drop SAT, ACT.

• Chevron, Facing Fossil Fuels Glut, Takes $10 Billion Charge.

• U.S. and Chinese Negotiators Planning for Delay of Tariffs.

• Health Care Joins Brexit as Big Issue in U.K. Election.

Fox News:

• WATCH LIVE: Trump, at Pennsylvania rally, says 'stupid' impeachment indirectly led to USMCA deal.

• Ex-independent counsel 'aghast' to learn extent of Obama AG's involvement.

• Shootout in Jersey City leaves 6 dead, including police officer; others hurt.

MarketWatch.com:  

• The stock market will ‘breathe a sigh of relief’ if Trump is re-elected, says billionaire Howard Marks.

• Top stock picks for 2020: The best of the biggest.

• S&P 500 earnings upside in 2020 will ‘primarily depend’ on U.S.-China trade deal, says JP Morgan.

CNBC:

• Goldman Sachs(GS) president says US economy could be ‘accelerating again’ after 2019 lull.

• Google(GOOG) snaps up chief medical officer of health device maker AliveCor, weeks after buying Fitbit.

• Jeffrey Gundlach says long-term rates headed higher as recession risks recede.

• The Fed is expected to hold rates steady and vow to keep short-term lending markets stable.

• Americans spend more than $72 billion on pets—here’s how dogs and cats became big business.

• Stocks making the biggest moves after hours: GameStop, Dropbox, Ollie’s Bargain Outlet & more.

• Wall Street bull Tony Dwyer boosts 2020 forecast, cites Fed policy as major driver.

Zero Hedge:

• "Unprecedented" China Auto Market Collapse Heads Into Third Year After November Sales Drop 4.2%.

• University Departments Ditch Genderless-Term "Alumni"... For Genderless-Term "Alumnx".

• Yuan Tumbles After Navarro Warns "No Indication That Tariffs Will Be Delayed".

• Meat Prices Spike 8% In Brazil, Threatening A Holiday-Gathering Mainstay For Many.

• Exposing The Promoters Of Climate Anxiety.

• 'Schiff Memo' Debunked By IG Report; Nunes Vindicated.

• Traders On Tenterhooks As Banks Delay Bonus Decisions Into New Year.

• WTI Slips From 12-Week Highs After Surprise Crude Inventory Build.

• Stocks, Bonds, & Dollar Stumble As Traders Reach 'Peak FOMO'.

Business Insider:

• A look at the most valuable tech companies from 10 years ago shows how much has changed — and that Microsoft and Apple still dominate.

• The 11 most shocking retail acquisitions of the last decade.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 64.0 unch.

• China Sovereign CDS 38.5 -.25 basis point.

• Bloomberg Emerging Markets Currency Index  65.67 -.01%.

• FTSE 100 futures -.01%.

• S&P 500 futures -.15%.

• NASDAQ 100 futures -.18%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AEO)/.48

• (PLCE)/3.02

• (UNFI)/.27

• (VRA)/.18

After the Close:

• (LULU)/.93

• (OXM)/.08

• (NX)/.38

Economic Releases 
8:30 am EST

• The CPI MoM for Nov. is estimated to rise +.2% versus a +.4% gain in Oct.

• The CPI Ex Food & Energy MoM for Nov. is estimated to rise +.2% versus a +.2% gain in Oct. 

• Real Avg. Weekly Earnings YoY for Nov.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,924,180 barrels versus a -4,856,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,534,900 barrels versus a +3,385,000 barrel gain the prior week.  Distillate inventories are estimated to rise by +1,563,600 barrels versus a +3,063,000 barrel gain the prior week.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds Rate at 1.5-1.75%.

•  The Monthly Budget Deficit for Nov. is estimated at -$206.2B versus -$134.5B in Oct.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The FOMC press conference, UK elections, weekly MBA Mortgage Applications report, Barclays Tech/Media/Telecom Conference, (AWK) investor day, (HD) investor conference, (SWI) investor day and the (CS) investor day could also impact trading today.

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

Stocks Reversing Slightly Higher into Final Hour on China Trade Deal Optimism, Global Growth Hopes, Oil Gain, Biotech/Construction Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.7 -1.0%

• Euro/Yen Carry Return Index 125.18 +.23%

• Emerging Markets Currency Volatility(VXY) 6.80 +.15%

• S&P 500 Implied Correlation 44.4 +3.4%

• ISE Sentiment Index 99.0 -12
  

• Total Put/Call .92 -9.8%

• NYSE Arms .95 -7.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 49.88 -.24%
  

• America Energy Sector High-Yield CDS Index 643.0 -.78%

• European Financial Sector CDS Index 55.15 -.36%

• Italian/German 10Y Yld Spread 153.75 45.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 63.75 +.1%
  

• Emerging Market CDS Index 198.27 -.82%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.07 -.25%

• 2-Year Swap Spread .5 -1.0 basis point

• TED Spread 35.0 -3.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 -17.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.69 -.02%
• 3-Month T-Bill Yield 1.55% +1.0 basis point

• Yield Curve .19 -2.0 basis points

• China Iron Ore Spot 92.27 USD/Metric Tonne +.13%

• Citi US Economic Surprise Index 4.7 -.2 basis point

• Citi Eurozone Economic Surprise Index 7.1 +6.8 points

• Citi Emerging Markets Economic Surprise Index -23.6 unch.

• 10-Year TIPS Spread 1.71 +1.0 basis point
• 6.6% chance of Fed rate cut at Jan. 29th meeting, 20.6% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +35 open in Japan 
• China A50 Futures: Indicating +43 open in China

• DAX Futures: Indicating +13 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value unch.

Sector Underperformers:

• 1) Telecom -.5% 2) Oil Service -.4% 3) REITs -.4%

Stocks Falling on Unusual Volume: 

• RHP, UPWK, CMD, PTON, CASY, DBI, ROAD and CONN

Stocks With Unusual Put Option Activity:

• 1) FIZZ 2) AMLP 3) SFIX 4) TOL 5) AZO

Stocks With Most Negative News Mentions:

• 1) CF 2) CVS 3) MNK 4) IP 5) XOM

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.2%

Sector Outperformers:

• 1) Disk Drives +1.2% 2) Biotech +.9% 3) Semis +.8%

Stocks Rising on Unusual Volume:

• PRNB, CLVS, RUBY, BLUE, PCG, FTSV, TEN, SFIX, AXSM, AZO, GTT, APLS, RCKT, NGL, PRVB, IPHI, DOMO, AGIO, DCP, EXEL, EQM, ARWR, NBLX, KYN, ETRN, TNDM, ENBL, CHWY, PVAC, WES, EVRI, THO, INMD, GSAH, NTG, GEL, AXNX, BLOK, PENN, GNK, EXPE and TYG

Stocks With Unusual Call Option Activity:

• 1) ARQL 2) CL 3) A 4) TOL 5) MDB

Stocks With Most Positive News Mentions:

• 1) SFIX 2) AZO 3) CHWY 4) FTSV 5) THO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -7.0% Below 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 52.5% of Issues Advancing, 43.6% Declining
• 79 New 52-Week Highs, 15 New Lows
• 59.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.0%
• Vix 15.6 -1.4%
• Total Put/Call .99 -2.9%
• TRIN/Arms .85 -17.5

Tuesday Watch

Evening Headlines

Bloomberg:

• ‘Fangirls’ Defend China From Hong Kong Protesters and the World.

• Asia Stocks in Holding Pattern Ahead of Fed, Trade. Asian stocks saw muted trading Tuesday as investors turned cautious ahead of the week’s potential catalysts, from central bank meetings to a looming tariff deadline. Treasuries and the dollar were little changed. Equities were flat-to-lower in Tokyo and Sydney, little changed in Seoul and dropped at the open in Hong Kong, as investors awaited news on whether Washington will go ahead with a planned Dec. 15 tariff hike. Trading volumes were below average. S&P 500 futures were flat after the benchmark ended at session lows in thin trading. Oil edged down. Topix index edged down 0.1% as of 10:23 a.m. in Tokyo. S&P/ASX 200 Index was down 0.2%. Kospi index was flat. Hang Seng Index fell 0.4%. Shanghai Composite index was flat. S&P 500 futures were little changed. The S&P 500 Index declined 0.2%.

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

• Tariff Pause, Saudis See Brent at $65, Coming Capex Cut: Eco Day. 

• Oil Holds Steady As Investors Watch for Trade War Developments.

• Morgan Stanley Eliminates About 1,500 Jobs in Year-End Cuts.

• Don’t Look Now, But Things Are Getting Brighter for Trump.

• Toll Brothers(TOL) Posts Quarterly Home Orders Beating Estimates.

Wall Street Journal:

• McAfee Considers Making Bid for Rival NortonLifeLock.

• American Factories Demand White-Collar Education for Blue-Collar Work.

• Big Drugmakers Push Deeper Into Cancer Treatment.

• Congress Wants to Ban Chinese Buses, Railcars in Defense Bill. 

• Trump Upbeat on Trade Deal With Mexico, Canada.

Fox News:

• DOJ watchdog's Russia probe review finds 'significant' errors, omissions, as Durham objects.

CNBC:

• Stocks making the biggest moves after hours: Stitch Fix, Agilent, Toll Brothers and more.

Zero Hedge:

• 'A Clear Abuse': Barr, Durham Object To IG FISA Probe Findings In Stunning Statements.

• DOJ Inspector General Releases Report On FBI Conduct, Finds "Clear Abuse" Of FISA Process.

• China Launches 'Competitor' Pipeline Mega-Company In Gambit To Double Oil & Gas Infrastructure.

• Apple "Deeply Concerned" That Chinese-Born Staff Who Allegedly Stole Trade Secrets Will Try To Flee.

• Morgan Stanley: Central Banks Are Injecting $100 Billion Per Month To Crush Vol And Spike Markets.

• Israel Threatens Iran With "Own Vietnam" In Syria, Hints At Major Pre-Emptive Strike.

• The Comey FBI's 17 Worst Failures, Inaccuracies, & Omissions Flagged In The FISA Report: Solomon.

• IG Report Confirms Brennan Lied Through His Teeth About Steele Dossier.

• Joe Biden's 'Temper Was Overflowing' After Ukrainian Prosecutor Seized Burisma Assets: Report.

• Stocks Slide As Bond Yields, Dollar Erase Friday Jobs Spike.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 64.0 unch.

• China Sovereign CDS 38.75 +1.0 basis point.

• Bloomberg Emerging Markets Currency Index  65.71 +.01%.

• FTSE 100 futures +.08%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.02%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AZO)/13.74

• (CONN)/.54

• (HDS)/1.00

After the Close:

• (PLAY)/.07

• (GME)/.17

• (OLLI)/.38

Economic Releases 
6:00 am EST

• The NFIB Small Business Optimism Index for Nov. is estimated to rise to 103.0 versus 102.4 in Oct.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German ZEW Index, $24B 10Y T-Note auction, US weekly retail sales reports, Goldman Sachs Financial Services Conference, SunTrust Robinson Humphrey Industrials/Services Conference, Citi Consumer Conference, (NUAN) investor day, (THS) investor meeting, (OMCL) analyst day and the Cowen Networking/Cybersecurity Summit could also impact trading today.

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