Stocks Slightly Higher into Final Hour on Less Hawkish Fed Hopes, Dollar Weakness, Short-Covering, Biotech/Pharma Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume:  Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 22.5 -.4%
• DJIA Intraday % Swing 1.38%
  
• Bloomberg Global Risk On/Risk Off Index 48.5 +.3%

• Euro/Yen Carry Return Index 149.4 +.21%

• Emerging Markets Currency Volatility(VXY) 10.5 -3.2%

• CBOE S&P 500 Implied Correlation Index 42.2 -1.4% 

• ISE Sentiment Index 95.0 -3.0 points
  

• Total Put/Call 1.44 +54.8%

• NYSE Arms 1.28 -14.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 76.22 +.06%
  

• US Energy High-Yield OAS 371.07 +.90%
• Bloomberg TRACE # Distressed Bonds Traded 430.0 -2.0
  

• European Financial Sector CDS Index 92.3 -.5% 
• Credit Suisse Subordinated 5Y Credit Default Swap 428.91 -2.6%
  

• Italian/German 10Y Yld Spread 193.0 basis points +5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 125.3 -2.9%
  

• Emerging Market CDS Index 229.49 +3.3%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.4 -.26%

• 2-Year Swap Spread 29.25 basis points -1.0 basis point
  

• TED Spread 42.25 basis points -8.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -34.25 basis points unch.
  
• MBS  5/10 Treasury Spread  142.0 unch.
  
• Bloomberg US Agg CMBS Avg OAS 123.0 -2.0 basis points
  
• Avg. Auto ABS OAS 1.14 -2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.9 -.08%
• 3-Month T-Bill Yield 4.34% +7.0 basis points
  

• China Iron Ore Spot 108.90 USD/Metric Tonne +.2%
• Dutch TTF Nat Gas(European benchmark) 131.75 euros/megawatt-hour -4.0%

• Citi US Economic Surprise Index 9.9 -3.3 points

• Citi Eurozone Economic Surprise Index 42.1 +.3 point
  

• Citi Emerging Markets Economic Surprise Index -10.6 +1.6 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.12 -.12:  Growth Rate +11.3% +.1 percentage point, P/E 17.4 unch.
  
• Bloomberg US Financial Conditions Index -.53 +16.0.0 basis points
  
• Yield Curve -75.75 basis points (2s/10s) -3.0 basis points
• US Atlanta Fed GDPNow Forecast +3.19% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.72% -15.0 basis points: CPI YoY +6.77% -72.0 basis points
  
• 10-Year TIPS Spread 2.20 -7.0 basis points
  
• Highest target rate probability for March 22nd FOMC meeting: 46.5%(+7.2 percentage points) chance of 4.75%-5.0%. Highest target rate probability for May 3rd meeting: 42.8%(+11.4 percentage point) chance of 4.75%-5.0%.
  

US Covid-19:

• 140 new infections/100K people(last 7 days total). 8.0%(+0.0 percentage points) of 1/14/22 peak(1,740) +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -76.5%(+1.7 percentage points) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -246 open in Japan 
• China A50 Futures: Indicating +28 open in China

• DAX Futures: Indicating -71 open in Germany

Portfolio:

• Slightly Higher:  On gains in my medical/utility sector longs and index hedges
  

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

• Market Exposure: 50% Net Long
  

Bear Radar

Style Underperformer:

• Mid-Cap Growth +.2%
  

Sector Underperformers:

• 1) Digital Health -1.5% 2) Gambling -.6% 3) I-Banks -.4%

Stocks Falling on Unusual Volume: 

• FATE, BLFS, SQM, XP, LTHM, ABM, TPVG, MDGL, CSWC, NTRA, BAM, STAA, CNM, VIRT, XMTR, PLAB, GH, PSFE, LBRDK, LBRDA, CHTR  and ON
  

Stocks With Unusual Put Option Activity:

• 1) STWD 2) EWJ 3) JBLU 4) EWC 5) SCHW
  

Stocks With Most Negative News Mentions:

• 1) CHTR 2) QS 3) PBR 4) NCPL 5) PRTA
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.4%

Sector Outperformers:

• 1) Road & Rail +1.3% 2) Defense +1.1% 3) Pharma +1.1%

Stocks Rising on Unusual Volume:

• RNA, HROW, BIVI, KYMR, DYN, MRNA, HLIT, CYTK, REPL, HLF, QDEL and PBT
  

Stocks With Unusual Call Option Activity:

• 1) AVYA 2) D 3) CHTR 4) NWL 5) ADMA

Stocks With Most Positive News Mentions:

• 1) VLON 2) DYN 3) KYMR 4) REVG 5) RNA
  

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -17.1% Below 100-Day Average 
• 2 Sectors Declining, 9 Sectors Rising
• 65.5% of Issues Advancing, 31.2% Declining
• 29 New 52-Week Highs, 53 New Lows
• 45.5%(+1.2%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 60.0 +7.0
  
• Bloomberg Global Risk-On/Risk-Off Index 48.5 +.2%
  
• Russell 1000: Growth/Value 14,701.8 +.01%
  
• Vix 22.4 -.8%
• Total Put/Call .87 -6.5%
• TRIN/Arms 1.30 -12.8% 

Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 125.0 -7.0 basis points. 

• China Sovereign CDS 69.0 -5.0 basis points. 
• China Iron Ore Spot 107.5 USD/Metric Tonne -1.2%.

• Bloomberg Emerging Markets Currency Index 47.9 unch.
• Bloomberg Global Risk-On/Risk Off Index  48.2 -.4%. 
• Bloomberg US Financial Conditions Index -.67 +1.0 basis point.
  
• Volatility Index(VIX) futures 24.0 +.22%.
• Euro Stoxx 50 futures -.08%.

• S&P 500 futures +.20%.

• NASDAQ 100 futures +.24%.  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (WEBR)/-.35
  

After the Close:

• (LEN)/4.90
• (NDSN)/2.33
  

Economic Releases

8:30 am EST

• Import Price Index MoM for Nov. is estimated to fall -.5% versus a -.2% decline in Oct.
• Import Price Index YoY for Nov. is estimated to rise +3.2% versus a +4.2% gain in Oct.
• Export Price Index MoM for Nov. is estimated to fall -.5% versus a -.3% decline in Oct.
• Export Price Index YoY for Nov. is estimated to rise +5.7% versus a +6.9% gain in Oct.
  

10:30 am EST

• Bloomberg  consensus estimates call for a weekly crude oil inventory decline of -3,409,140 barrels versus a -5,186,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,783,140 barrels versus a +5,319,000 barrel gain the prior week. Distillate inventories are estimated to rise by +2,747,710 barrels versus a +6,159,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.03% versus a +.3% gain prior.
  

2:00 pm EST

• The FOMC is expected to raise the benchmark Fed Funds Rate +50.0 bps to 4.25% to 4.5%.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed Rate Conference, UK CPI report, Senate hearing on FTX, weekly MBA Mortgage Applications report, (SJM) investor day, Roth Capital Consumer Conference and the (MKSI) analyst day 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 healthcare and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Higher into Final Hour on Less Hawkish Fed Hopes, China Re-Opening Optimism, Dollar Weakness, Commodity/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume:  Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 23.4 -6.3%
• DJIA Intraday % Swing 2.41%
  
• Bloomberg Global Risk On/Risk Off Index 48.1 +2.1%

• Euro/Yen Carry Return Index 148.9 -.8%

• Emerging Markets Currency Volatility(VXY) 10.8 -1.0%

• CBOE S&P 500 Implied Correlation Index 44.4 -2.5% 

• ISE Sentiment Index 95.0 +7.0 points
  

• Total Put/Call .91 -10.8%

• NYSE Arms 1.50 +200.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 76.94 -1.8%
  

• US Energy High-Yield OAS 369.17 -.11%
• Bloomberg TRACE # Distressed Bonds Traded 432.0 +1.0
  

• European Financial Sector CDS Index 92.8 -4.9% 
• Credit Suisse Subordinated 5Y Credit Default Swap 440.49 -2.9%
  

• Italian/German 10Y Yld Spread 188.0 basis points -1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 128.19 -2.7%
  

• Emerging Market CDS Index 223.80 -4.9%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.5 +.95%

• 2-Year Swap Spread 30.25 basis points +.25 basis point
  

• TED Spread 50.25 basis points +3.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -34.25 basis points -4.25 basis points
  
• MBS  5/10 Treasury Spread  142.0 -8.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 125.0 unch.
  
• Avg. Auto ABS OAS 1.16 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.89 +.49%
• 3-Month T-Bill Yield 4.27% +2.0 basis points
  

• China Iron Ore Spot 108.20 USD/Metric Tonne -.62%
• Dutch TTF Nat Gas(European benchmark) 137.5 euros/megawatt-hour +.7%

• Citi US Economic Surprise Index 13.2 -2.8 points

• Citi Eurozone Economic Surprise Index 41.8 +1.4 points
  

• Citi Emerging Markets Economic Surprise Index -9.0 +1.4 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.24 +.04:  Growth Rate +11.2% unch., P/E 17.4 +.2
  
• Bloomberg US Financial Conditions Index -.68 +2.0.0 basis points
  
• Yield Curve -72.75 basis points (2s/10s) +7.25 basis points
• US Atlanta Fed GDPNow Forecast +3.19% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.87% unch.: CPI YoY +7.49% unch.
  
• 10-Year TIPS Spread 2.27 -2.0 basis points
  
• Highest target rate probability for Feb. 1st FOMC meeting: 54.1%(+19.0 percentage points) chance of 4.5%-4.75%. Highest target rate probability for March 22nd meeting: 47.6%(+8.3 percentage point) chance of 4.75%-5.0%.
  

US Covid-19:

• 140 new infections/100K people(last 7 days total). 8.0%(+0.0 percentage points) of 1/14/22 peak(1,740) +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -78.2%(-.8 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +65 open in Japan 
• China A50 Futures: Indicating +6 open in China

• DAX Futures: Indicating -32 open in Germany

Portfolio:

• Higher:  On gains in my tech/commodity/medical/utility sector longs
  

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

• Market Exposure: Moved to 25% Net Long