Stocks Lower into Final Hour on US Policy-Induced Stagflation Fears, Technical Selling, Profit-Taking, Financial/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 18.3 +6.0%
• Bloomberg Global Risk On/Risk Off Index 3,762.0 -334.0 points

• Euro/Yen Carry Return Index 134.89 -.29%

• Emerging Markets Currency Volatility(VXY) 8.92 unch.

• S&P 500 Implied Correlation 49.0 +1.7%

• ISE Sentiment Index 94.0  -63.0 points
  

• Total Put/Call .70 +6.1%

• NYSE Arms 1.2 +24.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 50.23 +1.55%
  

• US Energy High-Yield OAS 378.46 -.06%

• European Financial Sector CDS Index 55.77 +2.3%

• Italian/German 10Y Yld Spread 114.0 unch.
  

• Asia Ex-Japan Investment Grade CDS Index 92.87 +2.2%
  

• Emerging Market CDS Index 176.45 +.7%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 32.32 -.80%

• 2-Year Swap Spread 20.75 +1.25 basis points
  

• TED Spread 10.5 unch.
  

• 3-Month EUR/USD Cross-Currency Basis Swap -20.75 -1.25 basis points
  
• MBS  5/10 Treasury Spread  64.5 -1.75 basis points
  
• IHS Markit CMBX BBB- 6 72.75 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.30 +.15%
• 3-Month T-Bill Yield .04% unch.
  

• Yield Curve 105.0 unch.
  

• China Iron Ore Spot 86.60 USD/Metric Tonne -5.1%

• Citi US Economic Surprise Index 4.9 +1.1 points

• Citi Eurozone Economic Surprise Index -51.5 +5.1 points
  

• Citi Emerging Markets Economic Surprise Index -20.9 +1.0 points

• 10-Year TIPS Spread 2.63 +2.0 basis points
• 100.0% chance of no change at Jan. 26th meeting, 88.4% chance of no change at March 16th meeting

US Covid-19:

• 156 new infections/100K people(last 7 days total) +1/100K people
• 29% of Jan. 7th, 2021 peak(highest daily avg. new infections) unch.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +5 open in Japan 
• China A50 Futures: Indicating -58 open in China

• DAX Futures: Indicating -13 open in Germany

Portfolio:

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

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges
  

• Market Exposure:  Moved to 75% Net Long
  

Bear Radar

 Style Underperformer:

• Small-Cap Value -.8%

Sector Underperformers:

• 1) Alt Energy -4.1% 2) Steel -2.3% 3) Gambling -1.6%

Stocks Falling on Unusual Volume: 

• PTON, PING, VCEL, NVRO, LCID, SQSP, SWAV, TRIP, FA, SANM, PLTR, BEEM, LMND, TSLA, NEGG, PYPL, MWA, BLNK, BHVN, NEWT, TALO, KD, DDD, FRPT, TPIC, HAE, OSH, NVTA and ALXO
  

Stocks With Unusual Put Option Activity:

• 1) NVTA 2) DISCK 3) SEAS 4) ELY 5) PYPL
  

Stocks With Most Negative News Mentions:

• 1) SDC 2) DDD 3) TCMD 4) AMC 5) TPIC
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.1%

Sector Outperformers:

• 1) Homebuilding +3.1% 2) Video Gaming +1.8% 3) Retail +.7%

Stocks Rising on Unusual Volume:

• NEWR, RBLX, AGC, LAZR, REAL, ROVR, FIVN, TREX, VUZI, VGR, ADT, RCUS, APLS, ACAD, VITL, CANO, APTS, EVGO, SGRY, TTD, ALHC, SPCE, ECVT, BALY, ESTC, RUBY, GEL, AI, BGFV, THC, SATS, LWLG, DHI, XPEL, ASTS, MRTX, BIGC, AZEK, LWLG, EBS, COR, CHRS, SPT, PCG, KNBE, POSH, NHI, ACIW, IFF, XPRO, ALEC, BAND, EVER, MHO, KDNY and RIOT
  

Stocks With Unusual Call Option Activity:

• 1) EGHT 2) ECH 3) TTD 4) WEN 5) VUZI

Stocks With Most Positive News Mentions:

• 1) RBLX 2) TREX 3) ZNGA 4) DVD 5) REAL
  

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +8.5% Above 100-Day Average 
• 5 Sectors Rising, 6 Sectors Declining
• 54.1% of Issues Advancing, 41.6% Declining
• 230 New 52-Week Highs, 9 New Lows
• 42.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.6%
• Bloomberg Global Risk-On/Risk-Off Index 2,842.0 -256.0 points
• Russell 1000: Growth/Value 18,235 -.20%
  
• Vix 18.2 +5.8%
• Total Put/Call .69 +4.55%
• TRIN/Arms 1.27 +33.7%

Tuesday Watch

Evening Headlines

Bloomberg:            

• Goldman Snaps Up China Property Debt as Others Back Away.  
• Mobius Bets on ‘50-Year Rally’ in Indian Stocks as China Slows.
• Asian Stocks Rise After U.S. Streak; Bonds Steady: Markets Wrap.
• Oil Rally Slows as U.S. Hints at Actions to Quell Rising Prices.
• S&P 500’s Record High Fueled by a Few, With Most Still Below Peak.
• Buttigieg Says U.S. Will Use Infrastructure Bill to Address Racist Highway Design.
• Large Methane Plume Spotted Near China Natural Gas Pipeline.  
• Biden Faces a Political Risk in Rising Gas Prices, With Few Options to Respond.  
• Fed Warns of Peril in Run-Up of Risky Asset Prices, Stablecoins.  
• All Major Chipmakers Pledge to Give U.S. Requested Data.  
• After Deadly Travis Scott Concert Crush, a Fight Over Who's to Blame.  
• Macy’s Boosts Its Hourly Wage to $15 Amid U.S. Labor Crunch.

Wall Street Journal:

• Germany’s Economy, Once Europe’s Engine, Is Holding It Back.
• Rich Millennials Would Rather Manage Their Own Money.
• Probe of Concert Disaster Looks at Role of Illegal Drugs.
• Infrastructure Projects to Boost Sales and Prices, Industry Executives Say.
• Chinese Junk Bond Yields Top 25% as Property-Market Strains Intensify.
• China Has Built Mock-Up of U.S. Aircraft Carrier, Warships in the Desert.

Fox News:   

• Biden's trillion dollar plan funded with YOUR money includes tearing down 'racist' bridge.
  
• Nearly half of voters say Biden worse president than expected, most don't want to see him run again: poll.
  

CNBC.com:

• Investors are piling into infrastructure stocks after House passes Biden plan.
• More Goodyear workers than expected retired during Covid, adding to labor challenges: CEO.
• PayPal issues disappointing revenue forecast for next year; announces Venmo deal with Amazon.
• AMC posts narrower-than-expected loss, but CEO says there are still pandemic challenges ahead.
• White House tells businesses to proceed with vaccine mandate despite court-ordered pause.
• McDonald’s CEO apologizes after texts about Chicago shooting deaths surface.
• Randal Quarles to resign at year-end, paving way for Biden to further remake the Federal Reserve.

MarketWatch    

• 5 infrastructure stocks to buy now that Biden’s bill has been passed, according to Jefferies.
  
• ‘Risks of a market bubble are growing,’ warns Morgan Stanley.
  
• Ford kicks off $2.5 billion green-bond financing on heels of infrastructure deal.
  
• Meme stocks like GameStop, AMC pose risks to financial stability, Fed says.  
• Roblox stock soars more than 30% as Halloween outage fails to stop October growth.

Zero Hedge:  

• Fed Issues Market Red Alert: Warns Stocks Vulnerable To "Significant Declines".
• Rittenhouse Witness Blows Case For Prosecution, Admits He Pointed Gun, Advanced First.
• MSNBC Goes Full Clowntard: Gaslights That Inflation Is A "Good Thing", Deletes Tweet After Angry Backlash.
• CNN Airs "Town Hall" With Sesame Street Puppets Encouraging Kids To Get Vaccinated.
• 'Roads Are Racist' - Buttigieg Debates CNN On Deconstructing America's Bigotted Highway System.
• Xi Prepares To Rule For Life With Rare 'Historical Resolution'.
• So Now Most Truck Drivers Will Be Exempt From Vaccine Mandates.
• At Least 50 Shot & 10 Killed In Chicago As Police Stalemate Over City Vax Mandate Drags On.
• For Whom Do The COVID "Fact-Checkers" Really Work? 
• Something Really Strange Is Happening At Hospitals All Over America. Emergency rooms are filled to overflowing all over America, and nobody can seem to explain why this is happening. With less people catching the virus, you would think that would mean that our emergency rooms should be emptying out, but the opposite is actually happening. If the number of COVID cases was starting to spike again, it would make sense for emergency rooms to be overflowing. But at this particular hospital in Michigan, we are being told that some of the main things that are being treated include “abdominal pain”, “respiratory problems”, “blood clots” and “heart conditions”…
• Why Kolanovic Expects Stocks To "Continue To Climb The Wall Of Worry".
• Robinhood Admits 'Data Security Incident': 5 Million Users Affected.
• Hundreds Of Thousands To Go On Four-Day Nationwide Strike Over Vaccine Mandates.
• Gold & Crypto Jump As Dollar Dumps After FedSpeak-Fest.

Newsmax:

• Rep. Tenney: 'Unfortunate' Repubs Backed Infrastructure Bill.

TheGatewayPundit.com:

• Woke U.S Navy Names Ship After Gay Rights Leader Harvey Milk and Christened by Transgender Veteran (VIDEO).
• “It Was Demonic” – AstroWorld Concert-Goers Claim Show That Killed 8 People Was Like a Satanic Ritual (Video).
• New Poll Shows Kamala Harris Has Lowest Approval Rating In Recorded History.
• Thanks to New Diversity Policy Managers at One of the World’s Largest Investment Firms, State Street Global Advisors, Will Need Permission to Hire White Males.
• Woman Wearing ‘Let’s Go Brandon’ Shirt Kicked Out of Hockey Game for ‘Inappropriate Language and Gestures’ (Video).
• WAYNE ROOT: Vaccine Mandate is Cloward-Piven Plan to Destroy USA and End Capitalism.
• Barack Obama Travels to Glasgow to Lecture the World on Climate Change After Purchasing Waterfront Estate on Martha’s Vineyard (VIDEO).
• First the Airline Industry Now Individuals Reportedly from Proctor and Gamble Warn About Company’s Vaccine Mandate (VIDEO).
• Biden Gang Threatens to Shut Down Another Gas Pipeline – May Result in Some Americans Without Heat this Winter.
• Florian Dagoury, the World’s Top Static Freediver, Is Diagnosed with Myocarditis After Taking Pfizer Vax – May End His Career.
• Angry Joe Biden Backtracks, Argues that Illegal Aliens Need to Be Compensated (VIDEO).
• Globalists and Those Pushing the COVID-19 Vaccine on Children Are Now Using Big Bird to Entice Little Kids into Taking Experimental Vaccine.

The Epoch Times:

• CCP’s Political Warfare Left Unchecked in US, Experts Warn.
• Spy Campaign Targeting US Defense Sector Possibly Linked to China: Report.

Covid-19(Data, Maps, Graphs):

• Our World in Data:  New Global Covid-19 Cases(7-day rolling average graphs). New US Covid Hospital Admissions/ICU Admissions/Deaths
  
• FT.com:  Fully Vaccinated by Country(graph). Global Lockdown Stringency Index(map).
• Bloomberg.com:  International Travel Restrictions.  Case Graphs by State.
  
• NYTimes.com:  County Trends and Clusters. Local ICU Occupancy.
  
• Brown School of Public Health:  Covid Severity by State/County(map).  US Hospital Capacity(region).
  
• CovidActNow:  Covid Severity/Infection Rate by Metro Area.
  
• KFF:  US Vaccinations by Race/Ethnicity.
  
• Carnegie Mellon: Covid-Like Symptoms in Community. Covid Symptom Searches on Google. Covid-Related Dr.Visits.  Restaurant Visits. Wearing Masks. (graphs)
  
• Safegraph.com:  Commerce Patterns(graphs).

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 90.0 +4.5 basis points.

• China Sovereign CDS 55.0 +5.5 basis points.
  

• Bloomberg Emerging Markets Currency Index 58.21 -.01%. 
• Bloomberg Global Risk-On/Risk Off Index 3,157.0 +57.0 points.
• Volatility Index(VIX) futures 20.66 +.78%.
• Euro Stoxx 50 futures -.25%.

• S&P 500 futures -.22%

• NASDAQ 100 futures -.19%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (CAH)/1.35
• (DHI)/3.39
• (EBIX)/.50
• (FSS)/.46
• (HAIN)/.25
• (IGT)/.24
• (J)/1.56
• (STWD)/.51
• (SYY)/.87
• (WKHS)/-.21
  

After the Close:

• (COHR)/2.11
• (COIN)/1.72
• (DASH)/.11
• (DOCS)/.21
• (FLGT)/3.25
• (TWNK)/.20
• (JAZZ)/3.31
• (DNUT)/.06
• (PAAS)/.34
• (RNG)/.33
• (SGMS)/.39
• (UPST)/.33
• (WYNN)/-1.29
  

Economic Releases

8:30 am EST:

• The NFIB Small Business Optimism Index for Oct. is estimated to rise to 99.5 versus 99.1 in Sept.
• PPI Final Demand MoM for Oct. is estimated to rise +.6% versus a +.5% gain in Sept.
• PPI Ex Food & Energy MoM for Oct. is estimated to rise +.5% versus a +.2% gain in Sept.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Powell speaking, Eurozone Trade Balance report, $39B 10Y T-Note auction, weekly US retail sales reports, Raymond James Insurance Conference, Berenberg US CEO Conference, Baird Industrial Conference, (HUN) investor day, (AVGO) investor day, (AA) investor day and the Bank of America Banking/Financials Conference could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Slightly Higher into Final Hour on More US Deficit Spending, Earnings Optimism, Short-Covering, Alt Energy/Commodity Sector Strength

 

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 17.3 +5.2%
• Bloomberg Global Risk On/Risk Off Index 3,056.0 -29.0 points

• Euro/Yen Carry Return Index 135.30 +.04%

• Emerging Markets Currency Volatility(VXY) 8.88 -.22%

• S&P 500 Implied Correlation 49.9 -.3%

• ISE Sentiment Index 161.0  +34.0 points
  

• Total Put/Call .63 -19.2%

• NYSE Arms .70 -.32%

Credit Investor Angst:

• North American Investment Grade CDS Index 49.57 -.02%
  

• US Energy High-Yield OAS 378.67 +6.6%

• European Financial Sector CDS Index 54.53 -.65%

• Italian/German 10Y Yld Spread 114.0 -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 91.19 +6.4%
  

• Emerging Market CDS Index 174.36 -1.06%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 32.6 -1.2%

• 2-Year Swap Spread 19.5 -.5 basis point
  

• TED Spread 10.5 +.5 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -19.5 +.25 basis point
  
• MBS  5/10 Treasury Spread  62.75 -1.5 basis points
  
• IHS Markit CMBX BBB- 6 72.75 +.25 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.22 +.27%
• 3-Month T-Bill Yield .04% unch.
  

• Yield Curve 105.0 -7.0 basis points
  

• China Iron Ore Spot 93.80 USD/Metric Tonne +1.1%

• Citi US Economic Surprise Index 3.8 +5.6 points

• Citi Eurozone Economic Surprise Index -56.6 +4.7 points
  

• Citi Emerging Markets Economic Surprise Index -21.9 +3.3 points

• 10-Year TIPS Spread 2.61 +4.0 basis points
• 97.5% chance of no change at Jan. 26th meeting, 88.1% chance of no change at March 16th meeting

US Covid-19:

• 155 new infections/100K people(last 7 days total) +3/100K people
• 29% of Jan. 7th, 2021 peak(highest daily avg. new infections) unch.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +163 open in Japan 
• China A50 Futures: Indicating +48 open in China

• DAX Futures: Indicating -13 open in Germany

Portfolio:

• Higher: On gains in my tech/industrial/consumer discretionary/commodity/medical sector longs
  

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

• Market Exposure:  Moved to 100% Net Long