Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, China Hard-Landing Worries, Technical Selling, Transport/Commodity 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) 22.8 +2.6%
• DJIA Intraday % Swing .81%
  
• Bloomberg Global Risk On/Risk Off Index 45.6 -3.4%

• Euro/Yen Carry Return Index 148.22 -.07%

• Emerging Markets Currency Volatility(VXY) 11.6 -.1%

• CBOE S&P 500 Implied Correlation Index 44.5 +3.7% 

• ISE Sentiment Index 107.0 +10.0 points
  

• Total Put/Call 1.27 +22.1%

• NYSE Arms 1.95 +111.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 82.7 +.4%
  

• US Energy High-Yield OAS 395.60 +3.0%
• Bloomberg TRACE # Distressed Bonds Traded 438.0 +10.0
  

• European Financial Sector CDS Index 101.22 +.09% 
• Credit Suisse Subordinated 5Y Credit Default Swap 431.5 unch.
  

• Italian/German 10Y Yld Spread 182.0 basis points -3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 133.4 +4.2%
  

• Emerging Market CDS Index 240.0 -1.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.3 -.03%

• 2-Year Swap Spread 32.25 basis points +.75 basis point
  

• TED Spread 43.0 basis points -2.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -33.5 basis points -.75 basis point
  
• MBS  5/10 Treasury Spread  144.0 -6.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 124.0 unch.
  
• Avg. Auto ABS OAS 1.19 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.78 +.29%
• 3-Month T-Bill Yield 4.27% +1.0 basis point
  

• China Iron Ore Spot 106.50 USD/Metric Tonne -2.1%
• Dutch TTF Nat Gas(European benchmark) 149.6 euros/megawatt-hour +8.0%

• Citi US Economic Surprise Index 18.2 -.6 point

• Citi Eurozone Economic Surprise Index 37.7 +4.6 points
  

• Citi Emerging Markets Economic Surprise Index -3.5 -3.8 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.24 -.01:  Growth Rate +11.3% unch, P/E 17.1 unch.
  
• Bloomberg US Financial Conditions Index -.67 -8.0 basis points 
• Yield Curve -84.25 basis points (2s/10s) -1.25 basis points
• US Atlanta Fed GDPNow Forecast +3.37% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.87% unch.: CPI YoY +7.49% unch.
  
• 10-Year TIPS Spread 2.26 -8.0 basis points
  
• Highest target rate probability for Feb. 1st FOMC meeting: 46.1%(-5.1 percentage points) chance of 4.75%-5.0%. Highest target rate probability for March 22nd meeting: 44.3%(+2.4 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 91 new infections/100K people(last 7 days total). 5.2%(+.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 -77.2%(+2.2 percentage points) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -116 open in Japan 
• China A50 Futures: Indicating -18 open in China

• DAX Futures: Indicating +28 open in Germany

Portfolio:

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

• Disclosed Trades:  None
  

• Market Exposure: 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -.3%
  

Sector Underperformers:

• 1) Shipping -2.7% 2) Oil Service -2.4% 3) Airlines -2.4%

Stocks Falling on Unusual Volume: 

• RVMD, SHLS, TSLA, ADNT, HTHT, DAL, PBF, VCTR, NDAQ, LUV, TSLA, HLF, LNTH, GME, PLAY, AFRM, SI, PUBM, LNC, QFIN, STNE, INSW, AGTI, VTYX, EXPE, MNSO, WELL, SG, TRIP, CLFD, MSGE, TNK, MTB, BEKE, SNDX, UNFI, CDMO, ZIM, EURN, ASC, FRO, XPEV, BF/B, OLLI, LOVE and MRTX
  

Stocks With Unusual Put Option Activity:

• 1) BXMT 2) ATUS 3) EWC 4) BX 5) D
  

Stocks With Most Negative News Mentions:

• 1) CVNA 2) ZUO 3) SNDX 4) LOVE 5) MTB
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.2%

Sector Outperformers:

• 1) Homebuilding +2.7% 2) Gold & Silver +2.1% 3) Digital Health +1.0%

Stocks Rising on Unusual Volume:

• RXDX, MDB, REPL, ASO, STT, TOL, CPB and SIVB
  

Stocks With Unusual Call Option Activity:

• 1) CPB 2) ESPR 3) PLAY 4) TPX 5) SFIX

Stocks With Most Positive News Mentions:

• 1) RXDX 2) ASO 3) MDB 4) HTOO 5) VRA
  

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -5.9% Below 100-Day Average 
• 4 Sectors Declining, 7 Sectors Rising
• 61.0% of Issues Advancing, 35.8% Declining
• 21 New 52-Week Highs, 62 New Lows
• 42.6%(+.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 55.0 unch.
  
• Bloomberg Global Risk-On/Risk-Off Index 46.4 -1.7%
  
• Russell 1000: Growth/Value 14,494.8 -.38%
  
• Vix 22.3 +.5%
• Total Put/Call .90 -13.5%
• TRIN/Arms 1.71 +85.9% 

Wednesday Watch

Evening Headlines

Bloomberg:           

• World Economy Heads for One of Its Worst Years in Three Decades.
• China’s Reopening Rally May Be Smoother Than Actual Covid Exit. 
• China’s Factories Struggle With Slow Dismantling of Covid Curbs
• Australia Economy Slows Even as Households Absorb Rate Rises.   
• Here’s How Korea Responded to Worst Credit Crisis in Over Decade.  
• Nigeria Caps ATM Cash Withdrawals at $45 Daily to Push Digital Payments. 
• Asia Stocks Mirror US Declines, Dollar Holds Gains: Markets Wrap.  
• Oil Steadies After Three-Day Drop as Demand Concerns Multiply.
• Incoming Kraken CEO David Ripley Blasts Jamie Dimon, Alleges Fraud at FTX.  
• Activist Bluebell Urges BlackRock to Oust Fink as CEO Over ESG. Bluebell Capital Partners is calling on BlackRock Inc. to replace Chief Executive Officer Larry Fink over what it says are his failures to move the world’s largest money manager beyond investments in fossil fuels. The criticism by the small activist investor comes as BlackRock and Fink face attacks by Republican politicians in the US for pursuing sustainability goals and a “woke” agenda at the expense of returns. Bluebell, on the flip side of that argument, warns that Fink, despite his high-profile role in advocating for so-called ESG investing, is undermining BlackRock’s credibility by continuing to invest in fossil fuels including coal.
• Adobe Cuts 100 Jobs Concentrated in Sales as Tech Tightens Belt.  
• Wall Street Chorus Grows Louder Warning That 2023 Will Be Ugly.  
• Apple Scales Back Self-Driving Car and Delays Debut Until 2026.
• Megacap Earnings to See ‘Rude Awakening’ in 2023, Morgan Stanley’s Shalett Says.  
• Apollo, Pimco Sign Pact to Prevent Creditor Brawl Over Carvana.

Wall Street Journal:

• Commercial-Property Funds Face Withdrawals.
• TikTok National-Security Deal Faces More Delays.
• CEOs Say Demand Is Strong for Now, but Caution Abounds.
• McCarthy Allies Implore GOP Holdouts to Back Him for Speaker.
• Australia Stays the Course Against Chinese Aggression. The new Labor government isn’t going soft on Beijing.

Fox News:

• Bill Maher skewers young environmentalists blaming elders for climate change.
• IRS issues warning for anyone that uses Venmo app as a side-hustle.

CNBC.com:

• Here’s what America’s top CEOs are saying about a possible recession in 2023.
• Tim Cook says Apple will use chips built in the U.S. at Arizona factory.
• Jamie Dimon says inflation eroding consumer wealth may cause recession next year.
• Jim Cramer says he expects ‘many layoffs’ at companies after Christmas.
• How the U.S. became a global corn superpower.
• Stocks making the biggest moves after hours: MongoDB, Toll Brothers, Dave & Buster’s and more.
• House Ethics Committee admonishes Cawthorn over crypto promotion, failure to disclose stake.

MarketWatch:                 

• Jamie Dimon slams cryptocurrencies as ‘pet rocks’, says they’re ‘not a real market’.
  
• Interactive: Here are the politicians who received money from FTX’s Sam Bankman-Fried.
  
• Bank of America stock plunges, leading selloff in shares of largest U.S. banks.
  
• MongoDB stock rockets more than 25% on profit surprises.  
• Okta and Atlassian added to ‘zombie’ stocks list by equity research firm New Constructs.  
• Sam Bankman-Fried is ‘one of the greatest fraudsters in history.’ Binance CEO Zhao takes aim on Twitter.  
• Goldman Sachs CEO says recession is likely, with 35% chance of a soft landing.

Zero Hedge:

• "My Jaw Hit The Floor" - Musk Fires Twitter's 'FBI-Russiagate' Lawyer Over Vetting Debacle.
• Josh Hawley Is Imploring White House To Prioritize Arming Taiwan Over Ukraine.
• Top Marine Corps General Admits COVID-19 Vaccine Mandate Has Led To Decline In Military Recruitment.
• US Nuclear Submarine 'Buzzed By Underwater Object' Traveling 'Faster Than Speed Of Sound': Scientist.
• Musk's Neuralink Suddenly Under Investigation Over Animal Testing.
• FTX's Bankman-Fried Hires Ghislaine Maxwell's Defense Attorney.
• 'January 6' Trials Remind Us Why We Must Abolish Seditious Conspiracy Laws.
• US Secretly Modified Rocket Launchers For Ukraine To Hinder Strikes On Russia.
• And it's gone.
• Another Blackstone Fund Just Hit Redemption Limits.
• US stocks weakened amid tech-led selling - Newsquawk Asia-Pac Market Open.
• "Like We Just Split The Atom": ChatGPT AI Shakes Up Tech.
• WTI Holds Losses Despite Another Huge Crude Draw.
• Stocks slump on tech-rout after Meta woes - Newsquawk US Market Wrap.
• No, America Does Not Owe The World Climate 'Reparations'.
• Stocks Puke Back All Post-Powell Gains As Yield Curve Inversion Deepens.

Newsmax:  

• Congress Set to End Military Vax Mandate, in Win for GOP and Setback for Biden.
• Warnock Gets Ad Boost From Soros-Backed PAC.
• New Black Panther Party Sends Armed Guards to Polls.

TheGatewayPundit.com:

• Family Blames Pfizer Shot After Their 18-Year-Old Healthy Daughter Dies Suddenly From Unknown Cause.
• Brazil: Jake Sullivan Invites Communist Lula to USA as Indios Protest, Chile Threatens to Invade.
• DISGUSTING: “I Didn’t Pay Attention” – Katie Hobbs Giggles, Looks Clueless While Certifying Her Election For Governor (VIDEO).
• New York Democrats Demand Reparations for Black Residents, Say $223,000 Per Person Not Enough.
• Biden at Phoenix Computer Chip Plant: “Three Nano Chips, Three Nano Chip, Chips That Are Three Nano… Anyway, Nano Nono, I Don’t Know” (VIDEO).
• Elon Musk Slams Far-Left Wikipedia for Its “Non-Trivial Left-Wing Bias”.
• Stacey Abrams’s Nonprofit “In Gross Violation of Many State Laws,” Says Attorney – Could Face Thousands in Fines.
• Biden Economy Woes: Far-Left Media Buzzfeed to Cut Workforce by 12% Due to “Worsening Macroeconomic Conditions” – Trading Now at $1.
• “There’s More Important Things Going On” – Joe Biden When Asked Why He Won’t Visit the Border (VIDEO).

The Epoch Times:

• China’s Military Seeks to ‘Dominate’ American Systems, Displace US Internationally: Pentagon Report.
• Biden Admin’s Solar Funding Fuels China Human Rights Abuses: GOP Letter.
• Carnegie Mellon Students Rally Against Chinese Communist Regime.

Twitter: 

• @WallStreetSilv - JUST IN: Chinese government is still welding apartment building gates to lock citizens inside. This was in Yushan city, Jiangxi province last night. (video)

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 903,327 Reports(+2,295 from prior week) Through November 25th, 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 -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 131.5 +4.75 basis points. 

• China Sovereign CDS 80.25 +5.75 basis points. 
• China Iron Ore Spot 108.2 USD/Metric Tonne unch.

• Bloomberg Emerging Markets Currency Index 47.7 +.13%.
• Bloomberg Global Risk-On/Risk Off Index  47.2 +.03%. 
• Bloomberg US Financial Conditions Index -.59 unch.
  
• Volatility Index(VIX) futures 24.8 -.12%.
• Euro Stoxx 50 futures +.1%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.07%  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (ASO)/1.59
• (BF/B)/.55
• (CPB)/.87
• (OLLI)/.40
• (THO)/1.70
• (UNFI)/1.15
• (WEBR)/-.35
  

After the Close:

• (AI)/-.16
• (GME)/-.28
• (OXM)/1.22
• (VRNT)/.61
  

Economic Releases

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,989,330 barrels versus a -1,259,100 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,774,500 barrels versus a +2,770,000 barrel gain the prior week. Distillate inventories are estimated to rie by +1,654,670 barrels versus a +3,547,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.18% verus a +1.3% gain prior.

3:00 pm EST

• Consumer Credit for Oct. is estimated to rise to $28.0B versus $24.976B in Sept.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Trade Data report, weekly MBA Mortgage Applications report, Barclays Tech/Media/Telecom Conference, BofA SMID Cap Conference, (LUV) investor day and the (LOW) analyst conference could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Stocks Falling Substantially into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, Technical Selling, Tech/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume:  Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 21.9 +5.5%
• DJIA Intraday % Swing 1.54%
  
• Bloomberg Global Risk On/Risk Off Index 47.6 -4.4%

• Euro/Yen Carry Return Index 148.25 -.08%

• Emerging Markets Currency Volatility(VXY) 11.7 +1.0%

• CBOE S&P 500 Implied Correlation Index 42.8 +3.9% 

• ISE Sentiment Index 99.0 -6.0 points
  

• Total Put/Call 1.02 +9.7%

• NYSE Arms .94 -61.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 83.0 +4.0%
  

• US Energy High-Yield OAS 381.7 +3.1%
• Bloomberg TRACE # Distressed Bonds Traded 428.0 +19.0
  

• European Financial Sector CDS Index 101.1 +1.7% 
• Credit Suisse Subordinated 5Y Credit Default Swap 431.5 -1.7%
  

• Italian/German 10Y Yld Spread 185.0 basis points -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 128.0 +1.0%
  

• Emerging Market CDS Index 244.1 +1.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.3 +.42%

• 2-Year Swap Spread 31.5 basis points +.25 basis point
  

• TED Spread 45.0 basis points -3.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -32.25 basis points +1.0 basis point
  
• MBS  5/10 Treasury Spread  150.0 +8.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 124.0 unch.
  
• Avg. Auto ABS OAS 1.19 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.7 -.06%
• 3-Month T-Bill Yield 4.26% -2.0 basis points
  

• Yield Curve -83.0 basis points (2s/10s) -4.0 basis points
  

• China Iron Ore Spot 108.60 USD/Metric Tonne +.4%
• Dutch TTF Nat Gas(European benchmark) 141.3 euros/megawatt-hour +4.9%

• Citi US Economic Surprise Index 18.8 -.9 point

• Citi Eurozone Economic Surprise Index 33.1 +1.6 points
  

• Citi Emerging Markets Economic Surprise Index .3 -.3 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.25 +.11:  Growth Rate +11.3% unch, P/E 17.1 -.2
  
• Bloomberg US Financial Conditions Index -.52 -3.0 basis points
  
• US Atlanta Fed GDPNow Forecast +3.37% +53.0 bps

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.87% unch.: CPI YoY +7.49% unch.
  
• 10-Year TIPS Spread 2.34 -5.0 basis points
  
• Highest target rate probability for Feb. 1st FOMC meeting: 50.6%(-.5 percentage point) chance of 4.75%-5.0%. Highest target rate probability for March 22nd meeting: 41.4%(+1.2 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 91 new infections/100K people(last 7 days total). 5.2%(+.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 -79.4%(+1.1 percentage points) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -340 open in Japan 
• China A50 Futures: Indicating -24 open in China

• DAX Futures: Indicating -77 open in Germany

Portfolio:

• Slightly Higher:  On gains in my utility longs, index hedges and emerging market shorts
  

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges, then covered some of them
  

• Market Exposure: 25% Net Long