Wednesday Watch

Evening Headlines

Bloomberg:  

• As Coronavirus Spreads, Economists Run the Numbers on China.

• New Virus Spreads to U.S., Sparking Rush to Contain Outbreak.

• ‘Sharp and Short-Lived’: The Impact of Health Scares on Markets.    

• S. Korean Economy Grows at Fastest Quarterly Pace Since 2017.   

• Apple(AAPL) Is Raising TSMC Chip Orders to Meet Strong iPhone Demand.

• New Low-Cost iPhone to Enter Mass Production in February.

• China Is the Emissions Behemoth. Can It Change Fast Enough?  

• Saudi Crown Prince Hacked Jeff Bezos’s Phone, Analysis Suggests.

• Asia Stocks Edge Up After Virus-Triggered Sell-Off. Asian stocks rallied, recovering a fraction of Tuesday’s sell-off triggered by evidence of the contagiousness of China’s coronavirus and concern with the potential economic implications. Haven assets steadied after gains and U.S. equity futures ticked higher. Shares from Sydney to Hong Kong edged up after heavy losses in the prior session, though Chinese shares dropped for a second day. Treasuries and the yen were flat after gaining Tuesday on news of the contagion, which also hit luxury stocks on concern about disruption to spending during China’s weeklong Lunar New Year holiday. The yuan was steady in offshore trading after tumbling Tuesday. Futures on the S&P 500 Index rose 0.2% as of 9:30 a.m. in Tokyo. The underlying gauge fell 0.3% on Tuesday. Japan’s Topix index rose 0.2%. Hang Seng gained 0.5%. Shanghai Composite fell 0.5%. Australia’s S&P/ASX 200 Index advanced 0.7%. South Korea’s Kospi index added 0.%.  

• Trump Victory Lap, China Soothes, U.S. Innovation Fears: Eco Day.  

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

• Bernie Sanders Fans Slam Hillary Clinton After She Says ‘Nobody Likes Him’.

• Starbucks Taking Aim at Milk Is Latest Blow to Beaten-up Dairy.

• Cold Front Could Bring Falling Iguanas to South Florida.

Wall Street Journal:

• Impeachment Trial Begins With Debate Over Rules.

• The Second Amendment Sanctuary Movement Isn’t Going Away.

• China’s Slowdown Bodes Costly Cleanup for Banks.

• Boeing Pushes Back Expected MAX Return.

• U.S. Plans to Expand Travel Restrictions to Seven Countries.

• When Social Media Is Too Much, Some Teens Tune Out.

Fox News:

• FOLLOW LIVE: Senate sets aside 3rd Schumer amendment; now he wants Mulvaney subpoena.

MarketWatch.com: 

• Another reason why the middle-aged ‘dad bod’ could be deadly instead of sexy.  

• 7 rules to reduce your risk of Alzheimer’s and keep your brain healthy.  

• Here’s the 10 macro themes investors need to watch, says Guggenheim’s Minerd.  

• How the mysterious coronavirus from China has spread so quickly.

CNBC:

• Netflix paints a happy face on growing threat of U.S. competition.

• CDC confirms first US case of coronavirus that has killed 6 in China.

• IBM rises as much as 5% on strong earnings report.

• Housing market falling short by nearly 4 million homes as demand grows.

• Coronavirus may induce a chance to ‘buy unrelated stocks at a discount,’ Jim Cramer says.

• Stocks making the biggest moves after hours: IBM, Netflix, TD Ameritrade & more.

• Industrials at record highs, and four stocks could be best chance to play catch-up.

Zero Hedge:

• Global Health Officials On High Alert As Virus's Rapid Spread Confounds Expectations.

• Trump Slams Impeachment "Hoax" & Climate Change "Prophets Of Doom" During Davos Address.

• Actual Drag Queen Slams "Woke" Parents For Allowing Their Kids To Be Around Drag Queens.

• "I'll Straight Up Get Armed": Second Bernie Organizer Loves Gulags And Is "Ready For The F**king Revolution".

• McConnell Blinks, Grants Impeachment Trial Rule Changes Sought By Democrats, GOP Moderates.

• CVS, Walgreens Shares Slide As Amazon Files International Trademarks For Pharmacy Business.

• Global Stocks Sink On Wuhan Worries, Bonds Bid Back To 2020 Highs.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 52.0 +1.5 basis points.

• China Sovereign CDS 32.75  +3.25 basis points.

• Bloomberg Emerging Markets Currency Index  66.11 unch.

• FTSE 100 futures -.01%.

• S&P 500 futures +.15%.

• NASDAQ 100 futures +.22%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ABT)/.95

• (ASML)/2.71

• (FITB)/.73

• (HTLD)/.23

• (JNJ)/1.87

• (NTRS)/1.74

After the Close:

• (BXS)/.60

• (CTXS)/1.68

• (KMI)/.27

• (LVS)/.79

• (RJF)/1.93

• (SLM)/.33

• (SLG)/1.75

• (STLD)/.58

• (TER)/.79

• (TXN)/1.05

Economic Releases 
8:30 am EST

• The Chicago Fed National Activity Index for Dec. is estimated to fall to .13 versus .56 in Nov.

9:00 am EST

• The FHFA House Price Index MoM for Dec. is estimated to rise +.3% versus a +.2% decline in Nov.
  

10:00 am EST

• Existing Home Sales for Dec. is estimated to rise to 5.43M versus 5.35M in Nov.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan Trade Balance report, weekly US retail sales reports, weekly MBA Mortgage Applications report and the TD Securities Mining Conference could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

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

Stocks Lower into Final Hour on China Virus Concerns, Technical Selling, Profit-Taking, Transport/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 12.76 +5.5%

• Euro/Yen Carry Return Index 126.40 -.37%

• Emerging Markets Currency Volatility(VXY) 6.05 +1.85%

• S&P 500 Implied Correlation 40.0 +3.8%

• ISE Sentiment Index 57.0 -42
  

• Total Put/Call .83 +25.8%

• NYSE Arms 1.14 +.88%

Credit Investor Angst:

• North American Investment Grade CDS Index 44.84 +1.94%
  

• America Energy Sector High-Yield CDS Index 563.0 +1.35%

• European Financial Sector CDS Index 52.43 +1.59%

• Italian/German 10Y Yld Spread 162.0 +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 51.69 +2.12%
  

• Emerging Market CDS Index 184.30 +3.21%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.37 +.07%

• 2-Year Swap Spread 7.5 -.75 basis point

• TED Spread 26.75 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.35 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.13 -.25%
• 3-Month T-Bill Yield 1.53% +3.0 basis points

• Yield Curve .25 -2.0 basis points

• China Iron Ore Spot 93.11 USD/Metric Tonne -.27%

• Citi US Economic Surprise Index 10.2 -.2 point

• Citi Eurozone Economic Surprise Index 45.10 +5.4 points

• Citi Emerging Markets Economic Surprise Index 5.2 +3.0 basis points

• 10-Year TIPS Spread 1.74 -1.0 basis point
• 1.6% chance of Fed rate cut at March 18th meeting, 10.3% chance of cut at April 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -80 open in Japan 
• China A50 Futures: Indicating -115 open in China

• DAX Futures: Indicating -42 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.8%

Sector Underperformers:

• 1) Gaming -4.3% 2) Airlines -3.2% 3) Steel -2.4%

Stocks Falling on Unusual Volume: 

• WYNN, PRGS, APPN, XBIT, PFNX, WW and ARWR

Stocks With Unusual Put Option Activity:

• 1) CNX 2) YETI 3) MAS 4) HPE 5) SPCE

Stocks With Most Negative News Mentions:

• 1) LVS 2) EXPD 3) WYNN 4) TAL 5) ACB

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.1%

Sector Outperformers:

• 1) Homebuilding +1.6% 2) Alt Energy +.8% 3) REITs +.8%

Stocks Rising on Unusual Volume:

• BYND, CVM, ACMR, SPCE, MTEM, AVYA, EVER, PRVB, TSLA, YETI, SDC, ABMD, SBNY, CMD, CDLX, UBER, HCAT, SAFE, NVCR, TDOC, MAG, BBBY, TPTX, TXG, LYFT, TGTX, MRNA, FOCS, JELD, INMD and SILK

Stocks With Unusual Call Option Activity:

• 1) EAF 2) YETI 3) EWC 4) HSY 5) IGT

Stocks With Most Positive News Mentions:

• 1) OMI 2) INTC 3) HAL 4) COST 5) LB

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +18.5% Above 100-Day Average
• 4 Sectors Rising, 7 Sectors Declining
• 35.1% of Issues Advancing, 61.7% Declining
• 178 New 52-Week Highs, 21 New Lows
• 68.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.2%
• Vix 12.6 +3.9%
• Total Put/Call .76 +15.2%
• TRIN/Arms 1.32 +16.8%