Stocks Slightly Higher into Afternoon on Diminished Earnings Outlook Worries, Seasonality, Bargain Hunting, Utility/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume:  Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 23.5 -1.9%
• DJIA Intraday % Swing .85%
  
• Bloomberg Global Risk On/Risk Off Index 47.8 +1.0%

• Euro/Yen Carry Return Index 149.9 -.25%

• Emerging Markets Currency Volatility(VXY) 12.1 -.66%

• CBOE S&P 500 Implied Correlation Index 46.9 +.8% 

• ISE Sentiment Index 124.0 +12.0 points
  

• Total Put/Call .84 -12.5%

• NYSE Arms 1.40 +79.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 82.18 -1.2%
  

• US Energy High-Yield OAS 366.70 -.98%
• Bloomberg TRACE # Distressed Bonds Traded 421.0 +7.0
  

• European Financial Sector CDS Index 103.65 -4.5% 
• Credit Suisse Subordinated 5Y Credit Default Swap 362.84 -1.69%
  

• Italian/German 10Y Yld Spread 188.0 basis points -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 151.31 +.39%
  

• Emerging Market CDS Index 255.19 +.48%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.73 +.14%

• 2-Year Swap Spread 32.5 basis points +.5 basis point
  

• TED Spread 44.25 basis points unch.
  

• 3-Month EUR/USD Cross-Currency Basis Swap -52.0 basis points -.25 basis point
  
• MBS  5/10 Treasury Spread  140.0 -2.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 130.0 -1.0 basis point
  
• Avg. Auto ABS OAS 1.19 -4.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.27 -.07%
• 3-Month T-Bill Yield 4.23% +2.0 basis points
  

• Yield Curve -68.75 basis points (2s/10s) -.5 basis point
  

• China Iron Ore Spot 97.4 USD/Metric Tonne -.3%
• Dutch TTF Nat Gas(European benchmark) 109.0 euros/megawatt-hour -3.2%

• Citi US Economic Surprise Index 11.3 -.9 point

• Citi Eurozone Economic Surprise Index 15.5 -.8 point
  

• Citi Emerging Markets Economic Surprise Index .7 +1.0 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 229.97 -.19:  Growth Rate +11.3% unch., P/E 17.2 +.1
  
• Bloomberg US Financial Conditions Index -.73 +8.0 basis points
  
• US Atlanta Fed GDPNow Forecast +4.18% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.02% unch.: CPI YoY +7.60% unch.
  
• 10-Year TIPS Spread 2.26 -3.0 basis points
  
• Highest target rate probability for Feb. 1st FOMC meeting: 48.1%(+5.2 percentage points) chance of 4.75%-5.0%. Highest target rate probability for March 22nd meeting: 42.2%(-5.9 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(+.0 percentage point) of 1/14/22 peak(1,740) +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.6%(-.4 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +1 open in Japan 
• China A50 Futures: Indicating +12 open in China

• DAX Futures: Indicating -21 open in Germany

Portfolio:

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

• Disclosed Trades:  None
  

• Market Exposure:  50% Net Long
  

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.5% Below 100-Day Average 
• 3 Sectors Declining, 8 Sectors Rising
• 64.0% of Issues Advancing, 31.9% Declining
• 43 New 52-Week Highs, 11 New Lows
• 43.1%(+5.1%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 62.0 +3.0
  
• Bloomberg Global Risk-On/Risk-Off Index 47.5 +.51%
  
• Russell 1000: Growth/Value 14,603.9 -.31%
  
• Vix 23.6 -1.4%
• Total Put/Call .93 -3.1%
• TRIN/Arms 1.42 +82.0% 

Friday Watch

Evening Headlines

Bloomberg:                       

• COP27 Gets Chaotic With Mysterious Draft Text, Elusive President.
• Asian Stocks Edge Higher Amid Hawkish Fed Rhetoric: Markets Wrap.
• Oil Poised for Second Weekly Decline on Gloomy Demand Outlook.
• FTX Latest: Bankman-Fried Faces Grilling by Lawmakers He Backed.
  
• Bankman-Fried Turns Toxic in Congress Even Among Those He Backed.
• Musk ‘Hardcore’ Ultimatum Sparks Exodus, Leaving Twitter at Risk.
  
• Mortgage Market Upheaval Spurs $17 Billion in Paper Losses for Banks.
• Elizabeth Holmes Faces Years in Prison for Her Crimes in Theranos Collapse.  
• Record Options Trading Shows Jitters Before $2 Trillion ‘OpEx’.  
• Farmers Face Worry With Risk of US Rail Strike If Deal Fails.  
• Dollar Has Room to Strengthen in Bumpy Ride Ahead, Goldman Says.
• Bullard Sets Tone for Fed Officials Signaling Hikes Will Roll On.

Wall Street Journal:

• U.K. Unveils Largest Tax Increases and Spending Cuts in a Decade
• Sam Bankman-Fried Becomes an ESG Truth-Teller. The fallen wizard of crypto confesses to phony virtue-signaling.
• The Best and Worst Airports.
• FTX Auditors Doubled as Crypto Industry Cheerleaders.

Fox News:

• Reactions pour in after Pelosi says she is stepping down from leadership role.
• Musk triggers liberals with email urging employees to 'work'.

CNBC.com:

• The most damning details in the new FTX report.
• Binance exec says ‘it was like a bomb went off’ at FTX, compares Bankman-Fried to Madoff and Holmes.
• Never seen ‘such a complete failure’ of corporate controls, says new FTX CEO who also oversaw Enron bankruptcy.
• Stocks making the biggest moves after hours: Live Nation, Gap, Ross Stores, Palo Alto and more.
  

MarketWatch:                 

• 10 crazy things detailed in FTX’s bankruptcy filing: ‘This situation is unprecedented’.  
• This is the chart that rattled U.S. financial markets Thursday.
  
• Fed must keep raising rates until it is certain inflation has stopped climbing, Kashkari says.
  
• Amazon CEO says more layoffs are coming in 2023.  
• AT&T exec says ‘it’s only a matter of time’ before people ‘really’ feel inflation.  
• A meltdown in crypto is taking shape and it’s not just FTX’s fault.  
• Black Friday surprise: Jeff Bezos tells people not to buy cars, refrigerators and other big-ticket items. Critics call him out.

Zero Hedge:

• "This Is Unprecedented": Enron Liquidator Overseeing FTX Bankruptcy Speechless: "I Have Never Seen Anything Like This".
• "Oops": Fired Facebook Employees Took Bribes To Hijack User Accounts.
• PA House Judiciary Committee Moved To Impeach Philadelphia District Attorney Larry Krasner.
• Dwindling US Cattle Herd Implies Supermarket Beef Prices May Rise Even More.
• NYC Taxi Bust Over? Drivers Get First Price Hike Since 2012, Medallion Values Bottom.
• "Red Cup Rebellion" To Disrupt Starbucks Stores As Baristas Go On Strike.
• The Mid-Terms: The Hunger Gaming Of America.
• Japan Weighs Raising Taxes On EVs With "Higher Output Motors".
• Democrats' Mail-In Voting Strategy Outmaneuvered Republicans In Every Pennsylvania County.
• COP27 Climate Virtue-Signaling Boondoggle Ends In Failure, Leaves Out Fossil Fuel Pledge.
• Peter Schiff: We're In The Eye Of The Inflation Hurricane.
• Potential Nationwide US Rail Strike May Spark Chaos Ahead Of Christmas.
• Things to ponder as we wait for direction.
• Pentagon Fails 5th Consecutive Audit Amid Ukraine Oversight Concerns.
• US stocks were ultimately lower on Thursday alongside Treasuries which both supported the dollar - Newsquawk Asia-Pac Market Open. 
• Crypto Fraud Exposes Woke Capitalism As A Scam.
• Stocks and Bonds fall while Dollar prospers amid flurry of Fed speak - Newsquawk US Market Wrap.
• New York Declares State Of Emergency Ahead Of Snowmageddon.
• Stocks & Bonds Sink As Fed's Bullard Hammers "Pivot" Hopes.

Newsmax: 

• Judge Blocks DeSantis' 'Stop Woke' Law to Curb College CRT.
• Arizona's Kari Lake: 'I'm Still in This Fight'.
  
• Sen. Cruz: Biden's Role in Son's Actions Must be Probed.

TheGatewayPundit.com:

• Jon Voight’s Post-Midterm Message: “Wake Up America”.
• Disgraced FTX Founder Donated To Six RINOs Who Voted To Impeach Trump.
• MUST SEE: Man Unloads on Maricopa County Board of Supervisors ‘You Are the Cancer Tearing This Nation Apart’.
• Sen. Hawley Criticizes Sec. Mayorkas for Colluding with Big Tech to Treat Americans as if They’re Threats to Homeland Security (VIDEO).
• Mar-a-Lago Raid Story Falls Apart After Midterms, New Leak to WaPo Reveals Trump Took White House Records as ‘Mementos’.
• Corrupt Wisconsin Republican Assembly Majority Caucus Kicks out Election Integrity Champion Janel Brandtjen.
• UK Economy in Freefall, Highest Taxes Since WWII, Chancellor Jeremy Hunt Delivers Somber Economic Speech.
• Don’t Be Impressed by This: PA AG Josh Shapiro Arrests Democrat Political Consultant For Voter Fraud in City Elections in 2019 – Ignores 2020 and 2022.
• Jim Jordan Says House Republicans Will Expose Biden’s Corrupt DOJ/FBI’s Involvement in Covering Up Hunter Biden’s Laptop From Hell (VIDEO).
• Researchers In Swing States Secretly Monitored What Big Tech Showed Voters – “Blatant Manipulation”.

DefenseNews:

• White House requests $38 billion more in Ukraine aid.

The Blaze:

• Collapsed cryptocurrency exchange FTX had ties to Ukrainian government, WEF, and top Biden adviser. Curiously, the Ukrainian government launched a cryptocurrency donation website in March that was backed by FTX. CoinDesk reported in March, "'Aid for Ukraine,' which has the backing of crypto exchange FTX, staking platform Everstake, and Ukraine’s Kuna exchange, will route donated crypto to the National Bank of Ukraine, Everstake’s Head of Growth Vlad Likhuta told CoinDesk. Ukraine’s crypto-savvy Ministry of Digital Transformation is also involved."

Axios:

• Bankman-Fried spent millions on Dem campaigns. It's unclear where Bankman-Fried's money came from. Forensic accountants and bankruptcy courts are on the case, but it could take months to untangle FTX's web of comingled funds. Bankman-Fried spent around $37 million during the last election cycle, almost all of which went to boosting Democratic candidates and causes. That made him the party's second-largest donor, according to OpenSecrets, and the sixth largest overall.

The Epoch Times:

• Lawmakers Want to Ban Chinese Companies From Buying US Farmland Due to ‘National Security’ Threat. 
  
• ‘This Is an Investigation of Joe Biden’: House Republicans Allege Biden Was Involved in Hunter’s Business Dealings.
• China’s Secret Police Station in NYC ‘Violates Sovereignty’ of US: FBI Director.

Twitter: 

• @JackPosobiec - Top Maricopa County election official is donor to far-left ‘resistance group’ PatriotTakes.
  

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 894,850 Reports(+3,243 from prior week) Through November 4th, 2022.

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

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 146.25 +6.5 basis points. 

• China Sovereign CDS 84.0 +5.5 basis points.
  

• Bloomberg Emerging Markets Currency Index 47.3 -.02%.
• Bloomberg Global Risk-On/Risk Off Index 47.7 +.8%. 
• Bloomberg US Financial Conditions Index -.82 -1.0 basis point.
  
• Volatility Index(VIX) futures 24.8 +.18%.
• Euro Stoxx 50 futures +.75%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.29%  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (BKE)/1.19
• (FL)/1.12
• (JD)/4.46
• (SPB)/.34
  

After the Close:

• None of note
  

Economic Releases

10:00 am EST

• Existing Home Sales for Oct. is estimated to fall to 4.4M versus 4.71M in Sept.
• The Leading Index for Oct. is estimated to fall -.4% versus a -.4% decline in Sept.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• 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 modestly higher, boosted by financial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

Stocks Lower into Final Hour on US Policy-Induced Stagflation Fears, Diminished Fed Pivot Hopes, Earnings Outlook Jitters, Homebuilding/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume:  Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 24.0 -.7%
• DJIA Intraday % Swing 1.12%
  
• Bloomberg Global Risk On/Risk Off Index 47.3 -.2%

• Euro/Yen Carry Return Index 150.19 +.21%

• Emerging Markets Currency Volatility(VXY) 12.5 +2.7%

• CBOE S&P 500 Implied Correlation Index 46.8 +3.6% 

• ISE Sentiment Index 120.0 +28.0 points
  

• Total Put/Call .91 -24.2%

• NYSE Arms .84 -60.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 83.45 +.63%
  

• US Energy High-Yield OAS 369.40 +.08%
• Bloomberg TRACE # Distressed Bonds Traded 414.0 +2.0
  

• European Financial Sector CDS Index 105.69 +2.7% 
• Credit Suisse Subordinated 5Y Credit Default Swap 367.55 +2.6%
  

• Italian/German 10Y Yld Spread 192.0 basis points -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 151.04 +6.8%
  

• Emerging Market CDS Index 254.0 +1.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.7 -.4%

• 2-Year Swap Spread 32.0 basis points -.25 basis point
  

• TED Spread 44.25 basis points +.75 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -51.75 basis points -1.5 basis points
  
• MBS  5/10 Treasury Spread  142.0 unch.
  
• Bloomberg US Agg CMBS Avg OAS 131.0 unch.
  
• Avg. Auto ABS OAS 1.23 +2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.26 -.38%
• 3-Month T-Bill Yield 4.21% +1.0 basis point
  

• Yield Curve -68.25 basis points (2s/10s) -1.0 basis points
  

• China Iron Ore Spot 97.7 USD/Metric Tonne +.7%
• Dutch TTF Nat Gas(European benchmark) 115.5 euros/megawatt-hour +3.4%

• Citi US Economic Surprise Index 12.2 -2.2 points

• Citi Eurozone Economic Surprise Index 16.3 unch.
  

• Citi Emerging Markets Economic Surprise Index -.3 +.2 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.16 -.54:  Growth Rate +11.3% -.2 percentage point, P/E 17.1 -.1
  
• Bloomberg US Financial Conditions Index -.82 +3.0 basis points
  
• US Atlanta Fed GDPNow Forecast +4.18% -20.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.02% unch.: CPI YoY +7.60% unch.
  
• 10-Year TIPS Spread 2.29 -2.0 basis points
  
• Highest target rate probability for Feb. 1st FOMC meeting: 45.9%(+3.0 percentage points) chance of 4.75%-5.0%. Highest target rate probability for March 22nd meeting: 45.8%(-2.3 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(+.0 percentage point) of 1/14/22 peak(1,740) +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.6%(-.4 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -5 open in Japan 
• China A50 Futures: Indicating +48 open in China

• DAX Futures: Indicating +42 open in Germany

Portfolio:

• Slightly Higher:  On gains in my tech sector longs and index hedges
  

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

• Market Exposure:  Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.2%
  

Sector Underperformers:

• 1) Electric Vehicles -2.5% 2) Hombuilding -2.3% 3) Road & Rail -2.0%

Stocks Falling on Unusual Volume: 

• IEP, WWW, AAP, PTC, LH, STT, ZI, NET, WST, FLYW, XP, BJ, SQM, BOWL, SDGR, TDCX, ORA, SI, TWST, INBX, EDIT and GLBE
  

Stocks With Unusual Put Option Activity:

• 1) INDA 2) VRAY 3) AAP 4) URA 5) JNK
  

Stocks With Most Negative News Mentions:

• 1) CRCW 2) ORA 3) BOWL 4) NCLH 5) CRM
  

Charts:

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