Stocks Slightly Lower into Final Hour on Less Dovish Fed Commentary, Policy-Induced Labor/Product Shortages, Emerging Markets Debt Angst, Alt Energy/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 15.6 +3.7%
• Bloomberg Global Risk On/Risk Off Index 3,601.0 +61.0 points

• Euro/Yen Carry Return Index 136.18 -.41%

• Emerging Markets Currency Volatility(VXY) 9.11 +1.2%

• S&P 500 Implied Correlation 52.8 +3.6%

• ISE Sentiment Index 84.0  -35.0 points
  

• Total Put/Call .81 +9.5%

• NYSE Arms 1.21 -13.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.69 +.84%
  

• US Energy High-Yield OAS 348.04 -.09%

• European Financial Sector CDS Index 56.88 +.45%

• Italian/German 10Y Yld Spread 110.0 +6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 83.55 -.69%
  

• Emerging Market CDS Index 184.82 +2.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 34.55 +.03%

• 2-Year Swap Spread 17.25 +.5 basis point
  

• TED Spread 7.25 -1.0 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -22.5 -1.0 basis point
  
• MBS  5/10 Treasury Spread  70.5 +2.75 basis points
  
• IHS Markit CMBX BBB- 6 71.75 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.23 -.10%
• 3-Month T-Bill Yield .05% unch.
  

• Yield Curve 123.0 -4.0 basis points
  

• China Iron Ore Spot 119.95 USD/Metric Tonne +1.1%

• Citi US Economic Surprise Index -32.6 +1.8 points

• Citi Eurozone Economic Surprise Index -68.5 +4.3 points
  

• Citi Emerging Markets Economic Surprise Index -3.7 unch.

• 10-Year TIPS Spread 2.64 -2.0 basis points
• 97.8% chance of no change at Dec. 15th meeting, 90.6% chance of no change at Jan. 26th meeting

US Covid-19:

• 161 new infections/100K people(last 7 days total) -2/100K people
• 30% of Jan. 7th, 2021 peak(highest daily avg. new infections) -1.0 percentage point
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -14 open in Japan 
• China A50 Futures: Indicating -27 open in China

• DAX Futures: Indicating +7 open in Germany

Portfolio:

• Higher: On gains in my medical/commodity/industrial sector longs, index hedges and emerging market shorts
  

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

• Market Exposure:  Moved to 100% Net Long
  

Morning Market Internals

NYSE Composite Index:

• Volume Running -7.2% Below 100-Day Average 
• 9 Sectors Rising, 2 Sector Declining
• 59.3% of Issues Advancing, 36.5% Declining
• 158 New 52-Week Highs, 17 New Lows
• 61.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 54.3%
  
• Bloomberg Global Risk-On/Risk-Off Index 3,612.0 +69.0 points
• Russell 1000: Growth/Value 17,609 -.49%
  
• Vix 15.1 +.9%
• Total Put/Call .73 -1.4%
• TRIN/Arms 1.5 +6.4%

Friday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 84.5 +2.0 basis points.

• China Sovereign CDS 48.0 +1.25 basis points.
  

• Bloomberg Emerging Markets Currency Index 58.28 -.02%. 
• Bloomberg Global Risk-On/Risk Off Index 3,493.0 -44.0 points.
• Volatility Index(VIX) futures 19.1 +2.0%.
• FTSE 100 futures +.15%.

• S&P 500 futures -.23%

• NASDAQ 100 futures -.54%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (AXP)/1.75
• (ALV)/.89
• (CLF)/2.23
• (GNTX)/.37
• (HCA)/4.01
• (HON)/2.00
• (RF)/.53
• (SLB)/.36
• (STX)/2.21
• (VFC)/1.16
  

After the Close:

• None of note
  

Economic Releases

9:45 am EST

• Markit US Manufacturing PMI for Oct. is estimated to fall to 60.5 versus 60.7 in Sept. 
• Markit US Services PMI for Oct. is estimated to rise to 55.2 versus 54.9 in Sept.
• The Monthly Budget Deficit for Sept. is estimated at -$59.0B versus -$124.6B in Aug.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Powell speaking and the UK Retail Sales report could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 Earnings Optimism, Short-Covering, Technical Buying, Consumer Discretionary/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 15.5 -.3%
• Bloomberg Global Risk On/Risk Off Index 3,581.0 -40.0 points

• Euro/Yen Carry Return Index 136.62 -.59%

• Emerging Markets Currency Volatility(VXY) 9.07 +1.9%

• S&P 500 Implied Correlation 51.4 +.19%

• ISE Sentiment Index 128.0  +38.0 points
  

• Total Put/Call .75 -2.6%

• NYSE Arms 1.39 +76.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.69 +.84%
  

• US Energy High-Yield OAS 348.85 -.66%

• European Financial Sector CDS Index 56.62 +.87%

• Italian/German 10Y Yld Spread 104.0 unch.
  

• Asia Ex-Japan Investment Grade CDS Index 84.1 +1.4%
  

• Emerging Market CDS Index 180.99 +2.9%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 34.42 -1.3%

• 2-Year Swap Spread 16.75 +.25 basis point
  

• TED Spread 8.25 -.5 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -21.5 -1.5 basis points
  
• MBS  5/10 Treasury Spread  67.75 +.5 basis point
  
• IHS Markit CMBX BBB- 6 71.75 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.30 -.92%
• 3-Month T-Bill Yield .05% unch.
  

• Yield Curve 127.0 +2.0 basis points
  

• China Iron Ore Spot 117.15 USD/Metric Tonne -4.3%

• Citi US Economic Surprise Index -34.4 +2.4 points

• Citi Eurozone Economic Surprise Index -72.8 +1.6 points
  

• Citi Emerging Markets Economic Surprise Index -3.7 +.9 point

• 10-Year TIPS Spread 2.66 +7.0 basis points
• 100.0% chance of no change at Dec. 15th meeting, 92.6% chance of no change at Jan. 26th meeting

US Covid-19:

• 163 new infections/100K people(last 7 days total) -6/100K people
• 31% of Jan. 7th, 2021 peak(highest daily avg. new infections) -1.0 percentage point
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -98 open in Japan 
• China A50 Futures: Indicating -19 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio:

• Higher: On gains in my medical/consumer discretionary/tech sector longs and emerging market shorts
  

• Disclosed Trades:  None
  

• Market Exposure:  100% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Steel -4.8% 2) Oil Service -2.9% 3) Computer Services -2.9%

Stocks Falling on Unusual Volume: 

• PYPL, EEFT, DFS, AVIR, KMI, OMF, LPSN and GTLS
  

Stocks With Unusual Put Option Activity:

• 1) URA 2) IBM 3) VFC 4) WHR 5) PYPL
  

Stocks With Most Negative News Mentions:

• 1) IBM 2) FVVR 3) KALU 4) GL 5) VALE
  

Charts:

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

Bull Radar

 Style Outperformer:

• Mid-Cap Growth +.1.1%

Sector Outperformers:

• 1) Retail +1.7% 2) Road & Rail +1.2% 3) Video Gaming +1.0%

Stocks Rising on Unusual Volume:

• BMBL, SKLZ, MTCH, CROX, AN, CGEM, UNIT, INDI, DNMR, THC, POOL, VERI, EXPI, HPQ, DENN, RBLX, RDUS, BOOT, TSCO, UFPI, ZG, DECK, ASAN, UAA, ETWO, UAA, OLO, XM, CURV, NFLX, CHPT, CYH, EL, OSCR, ZEN, SLM, VUZI, AGC, PLAY, COMP, GPC, SRG, NVCR, NEWR, KKR, MAT, EPAY, BX, APO, PLUG, DOCU, COMP, BV and TSLA
  

Stocks With Unusual Call Option Activity:

• 1) GCI 2) NKTR 3) CSX 4) VRTX 5) WW

Stocks With Most Positive News Mentions:

• 1) TSCO 2) PTLO 3) ASAN 4) HPQ 5) AN
  

Charts:

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