Stocks Lower into Afternoon on Fed Credibility Concerns, Escalating US/China Tensions, Earnings Outlook Worries, Tech/Consumer Discretionary Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume:  Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 19.7 +7.3%
• DJIA Intraday % Swing .69%
  
• Bloomberg Global Risk On/Risk Off Index 58.3 +.7%

• Euro/Yen Carry Return Index 147.67 +.39%

• Emerging Markets Currency Volatility(VXY) 10.6 +3.7%

• CBOE S&P 500 Implied Correlation Index 34.7 +4.3% 

• ISE Sentiment Index 103.0 +5.0 points
  

• Total Put/Call .79 -12.2%

• NYSE Arms .85 -26.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 69.72 +1.5%
  

• US Energy High-Yield OAS 346.97 +.67%
• Bloomberg TRACE # Distressed Bonds Traded 307.0 -9.0
  

• European Financial Sector CDS Index 84.3 +4.2% 
• Credit Suisse Subordinated 5Y Credit Default Swap 360.8 +3.6%
  

• Italian/German 10Y Yld Spread 186.0 basis points +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 103.0 +5.6%
  

• Emerging Market CDS Index 224.72 +2.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.8 -.22%

• 2-Year Swap Spread 25.75 basis points -2.0 basis points
  

• TED Spread 20.0 basis points +3.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -9.0 +1.0 basis point
  
• MBS  5/10 Treasury Spread  138.0 +11.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 104.0 -1.0 basis point
  
• Avg. Auto ABS OAS .69 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.0 -.69%
• 3-Month T-Bill Yield 4.64% unch.
  

• China Iron Ore Spot 122.0 USD/Metric Tonne -1.1%
• Dutch TTF Nat Gas(European benchmark) 58.1 euros/megawatt-hour +.4%

• Citi US Economic Surprise Index 21.90 +2.2 points

• Citi Eurozone Economic Surprise Index 100.6 +.5 point
  

• Citi Emerging Markets Economic Surprise Index 3.3 unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 224.23 -.57:  Growth Rate +.4% -.2 percentage point, P/E 18.3 -.2
• S&P 500 Current Year Estimated Profit Margin 12.03% -20.0 basis points
  
• Bloomberg US Financial Conditions Index .41 -8.0 basis points
  
• Yield Curve -82.5 basis points (2s/10s) -5.25 basis points
• US Atlanta Fed 1Q GDPNow Forecast +.67% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.30% unch.: CPI YoY +6.44% unch.
  
• 10-Year TIPS Spread 2.26 +3.0 basis points
  
• Highest target rate probability for May 3rd FOMC meeting: 70.3%(+10.8 percentage points) chance of 5.0%-5.25%. Highest target rate probability for June 14th meeting: 54.9%(+0.0 percentage points) chance of 5.0%-5.25%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(-0.0 percentage point) of 1/14/22 peak(1,740) -0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.9%(-2.5 percentage points) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +26 open in Japan 
• China A50 Futures: Indicating -2 open in China

• DAX Futures: Indicating +53 open in Germany

Portfolio:

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

• Disclosed Trades:  None
  

• Market Exposure: 25% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.5%
  

Sector Underperformers:

• 1) Steel -2.5% 2) Computer Hardware -2.4% 3) Alt Energy -2.1%

Stocks Falling on Unusual Volume: 

• SD, CENX, ENFN, MT, FNV, ATVI, FROG, HAYW, TTWO, PUK, NBIX, PLCE, TSN, NEM, PLTK, AHCO, TKR, CSTM, ENR, ATSG, RH, ARWR, BYND, TWOU and JWN
  

Stocks With Unusual Put Option Activity:

• 1) CAR 2) TSN 3) X 4) TTWO 5) JWN
  

Stocks With Most Negative News Mentions:

• 1) AEI 2) SI 3) RH 4) POOL 5) PLCE
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.7%

Sector Outperformers:

• Restaurants +.7% 2) Insurance .6% 3) Foods +.2%

Stocks Rising on Unusual Volume:

• CTLT, LSI, VERI, CELH, ETNB and AI
  

Stocks With Unusual Call Option Activity:

• 1) IEI 2) CHGG 3) DD 4) IRBT 5) TSN

Stocks With Most Positive News Mentions:

• 1) CTLT 2) OMER 3) SOUN 4) DSKE 5) LSI
  

Charts:

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

Tomorrow's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open: 

• (ANF)/.86
• (DLTR)/2.00
• (DCI)/.68
• (DY)/.14
• (FSS)/.56
• (HGV)/.77
• (JACK)/1.74
• (KSS)/.97
• (LOW)/2.21
• (RY)/2.93
• (TUP)/.29
• (WB)/.53
• (WEN)/.21
  

After the Close:

• (BOX)/.34
• (JAZZ)/1.12
• (OKTA)/.09
• (PLUG)/-.25
• (MDRX)/.28
• (AAN)/.01
• (SNOW)/.05
  
• (CRM)/1.36
• (SPLK)/1.15

Economic Releases 

10:00 am EST

• Construction Spending MoM for Jan. is estimated to rise +.2% versus a -.4% decline in Dec.
• ISM Manufacturing for Feb. is estimated to rise to 48.0 versus 47.4 in Dec.
• ISM Prices Paid for Feb. is estimated to rise to 45.0 versus 44.5 in Dec.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory  gain of +1,351,570 barrels versus a +7,647,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -207,140 barrels versus a -1,856,000 barrel decline the prior week. Distillate inventories are estimated to fall by -68,140 barrels versus a +2,698,000 barrel gain the prior week.  Finally, Refinery Utilization is estimated to fall by -.14% versus a -.6% decline prior.
  

Afternoon

• Wards Total Vehicle Sales for Feb. is estimated to fall to 14.7M versus 15.74M in Jan.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Kashkari speaking, China Services PMI report, weekly MBA mortgage applications report, (TSLA) investor day, Bernstein Tech/Media/Telecom/Consumer Conference, Citi Healthcare Services/Medtech/Tools/HCIT Conference and the BofA Ag/Materials Conference could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• Volume Running -3.0% Below 100-Day Average 
• 11 Sectors Declining, 0 Sectors Rising
• 20.5% of Issues Advancing, 77.0% Declining
• 33 New 52-Week Highs, 9 New Lows
• 62.1%(-2.7%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 54.0 -9.0
  
• Bloomberg Global Risk-On/Risk-Off Index 58.5 +1.1%
  
• Russell 1000: Growth/Value 14,907.2 +.12%
  
• Vix 19.4 +5.7%
• Total Put/Call .74 -17.8%
• TRIN/Arms .80 -30.4%
  

Monday Watch

Today's Headlines

Bloomberg:                                

• China Swings From Contrite to Confrontational in US Balloon Saga.    
• China Traders Sell Most HK Stocks in 17 Months Amid Pullback.
• Ukraine Latest: Defense Minister Address Reports He’ll be Ousted.  
• Europe’s Bond Recovery Falls at First Hurdle After ECB High.  
• German Postal Workers to Strike on Monday, Tuesday in Wage Push.
  
• The Year’s Emerging-Market Rally Is Already in Danger of Slowing.   
• UK Grid Asks Coal Reserve to Prepare as Cold Snap Looms.
  
• Adani Saga Enters Third Week as Officials Jump in to Calm Nerves.  
• BNP Reaps Reward of $20 Billion ESG Fund Call With New Dominance.
• Traders Face Geopolitical, Jobs Hurdles; Yen Drops: Markets Wrap.  
• Oil Steadies After Slump as IEA Points to Rising China Demand.
• Oil’s New Map: How India Turns Russia Crude Into the West’s Fuel.
  
• Oil Market Faces Production Issue in 2024, Goldman’s Currie Says.
  
• There Are Signs a Stronger China Rebound Will Boost Oil: IEA. 
• ChatGPT Will Replace Some Jobs, But Traders Say Not Theirs.  
• Newmont Bids $17 Billion for Australian Gold Miner Newcrest.
• Summers Sees US Soft Landing More Possible Than Few Months Ago.  
• Apple Talks Up High-End iPhones in Sign Ultra Model May Be Coming.  
• Biden Aide Says Negotiation Over Debt Ceiling Is a ‘Nonstarter’.  
• Southwest to Halve Flying Time Needed for Prospective Pilots.

Wall Street Journal:

• Biden and the Chinese Spy Balloon. Why did he wait so long to order the airspace intruder shot down?
• Why Vaccine Skepticism Is Growing on the Right. Public-health officials imposed mandates and kept news of potential side effects under wraps.
• Can the Power Grid Handle a Wave of New Electric Vehicles?
• Upbeat Economic Data Keep Investors on Edge About Fed.
• Ukraine War Makes Unexpected Winner of Turkey’s Erdogan.
• Public Storage Bids for Rival in Unsolicited $11 Billion Offer.
• Beijing Signals Desire to Move On From Balloon Incident.
• Oil Industry’s Windfall Fails to Excite Wall Street.
• Banks Borrow Unsecured Cash at Record Clip.
• Koch-Backed Group Will Push GOP to Move Past Trump.
• Sam Bankman-Fried’s Psychiatrist Became Key Player at FTX.
• Amid Gas-Stove Debate, Some Makers Bet on Induction. 
• Property Taxes Are Going Up; Here’s How to Lower Your Bill.

Fox News:

• EXCLUSIVE:Trump responds to Biden admin claims that Chinese spy balloons flew over US on his watch.
• Ex-homeless people give their take on Newsom's 'investment' in homelessness.

CNBC:

• Top Wall Street analysts find these stocks compelling.
• Putin promised not to kill Zelenskyy, former Israeli prime minister says. 
• Amid high food prices, dollar stores give supermarkets a run for the money.
• Elon Musk says Twitter is ‘trending to breakeven’ after near bankruptcy.

Zero Hedge:    

• The Chinese 'Spy Balloon' Story As Manufactured Crisis: An Alternative Reading. 
• "It's Disinformation": Trump, Former Officials Slam Anonymous Report Of Chinese Spy Balloons Under Their Watch.
• Why 0DTE Is So Important, And Why The VIX Is Now Meaningless.
• "Confidential Letters": FTX Demands Politicians Return Millions In SBF Donations.
• Mission Accomplished!
• Morgan Stanley: Which Of These Three Recovery Stories Should One Believe.
• Fake Meat Fail: Sales Collapse At Beyond Meat, Impossible Foods As 20% Of Staff Laid Off.
• Weekend News Round Up - Newsquawk Asia-Pac Market Open.
• Update To 'Sims' Video Game Features Teen Trans Characters With Chestbinders, Breast Removal Scars.
• A Return To 'Head-Smacking Craziness'? Hedge Fund Billionaire Singer Warns 'Bear Market Is Not Over Yet'.
• Italy's Internet Restored After Nationwide Outage; Reports Of Global Ransomware Attack.
• The Long-Term Negative Effects Of ESG Will Be Catastrophic.
• Netflix Strikes Partnership With GM To Feature EVs On Its Titles.
• Facebook, Instagram Threaten To Restrict Or Ban Project Veritas.
• Biden Administration's Climate Agenda Will Damage Two-Thirds Of US Retirement Accounts: Kobach.
• Ford Sold Almost All Of Its Stake In Rivian Last Year.
• Seven Points On Investing In Treacherous Waters.
• Watch: Thieves Drive Through Mall In Stolen Black Audi After Robbing Electronics Store.
• Italy Hit With Nationwide Internet Outage, Reports Say.
• EU Agrees To $100 Russian Diesel Price Cap.
• UK's "Nudge Unit" Pushes Various Online PsyOps When People Shop To Build "Net Zero Society".
• Prepping For War? Chinese Spy Balloon Belies Much Larger Economic Warning Signs.
• Everything You Need To Know About The Lab Leak (But Were Not Allowed To Ask).
• Australia Becomes 1st Country To Legalize Therapeutic Use Of MDMA & Psilocybin.
• DeSantis Admin Revoking Liquor License From Orlando Venue For Allowing Children At 'Drag Queen Christmas'.

MarketWatch.com:           

• Why the stock market rally may face a big test from the U.S. dollar.  
• ‘It’s insulting. It’s sacrilege’: Asian Americans react to possible federal ban on gas stoves due to health risks and emissions.

NewsMax:

• Rep. Ryan Zinke to Newsmax: China's Spy Balloon 'Poke in Eye' to US, Biden.
• Ric Grenell to Newsmax: Biden Wants to Keep CCP 'Happy'. 
• Jeffrey Lord: I'd Cancel DirecTV in a 'Nanosecond'.

TheGatewayPundit.com:  

• Disney Releases Woke “Proud Family” Kids Show – Radical Children’s Show Pushes BLM Marxism, Anti-White Racism and Reparations (VIDEO).
• Prostitutes Solicit Sex Next to Catholic Elementary School in Oakland After Newsom Signs Law Ending Loitering Arrests For Prostitution (VIDEO).
• Angry Citizens Post Thousands of Notes for Every COVID Vaccine Death in the Netherlands’ Largest News Agency (VIDEO). 
• Here is a List of the US Military Bases in the Path of the China Spy Balloon As it Traversed Across the Continental United States.
• Vladimir Putin Condemns Western Tank Supply to Ukraine, Threatens a Response that Goes Beyond Armored Vehicles (VIDEO).
• “The Proposal is a Dystopian Nightmare” – Australian Senator Drops Truth Bomb on WHO’s “Dictator-Style Power Grab” Pandemic Treaty (VIDEO).
• Injuries from the COVID-19 Vaccine Are Now Being Publicly Displayed in Canada Using Trucks Driving Down the Street – Join the Campaign!
• Red-Pilled Bill Maher Compares Woke American Left To Mao’s Cultural Revolution (VIDEO).
• 23-Year-Old Athlete, Dancer, and Gamer Dies Suddenly of an Unknown Cause.
• Biden Regime Quietly Frees One of 9/11 Terrorist Planners from Gitmo as the Whole Country Watches the Chinese Spy Balloon.
• “That is Well Outside of My Lane” – Buttigieg When Asked If Chinese Were Able to Gather Intelligence Hovering Over Nuclear Silos (VIDEO).
• GOP Rep Mike Gallagher: Biden Dropped Trump Rule That Revealed $6.1 Billion in Chinese Donations to Universities -Why Is That? (VIDEO).
• Oh Good Grief. US Military Fears China May Reach Balloon Wreckage Before They Can Get There – Proper Salvage Vessel Won’t Be There For Days.
• Why Obama, the FBI, and the CIA Orchestrated the Takedown of General Michael Flynn – Part 1 (by Dr. Jerome Corsi).
• Study Reveals: Several Chicago Neighborhoods Riskier for Young Men Than What U.S. Troops Faced in Iraq and Afghanistan… And It’s Not Just Chicago.

The Epoch Times: 

• Companies Continue to Exit China Despite CCP’s Overture of Strengthening Economy: Observers.
• China Deploys War-Oriented ‘Defence Mobilization Offices’ Nationwide Amid Communist Ruling Crisis: Analysis.
• Repression of Uyghurs in China’s Xinjiang Continues Unabated: Advocate.

Twitter:

• @TPostMillennial - Massachusetts mother who strangled her 3 children to death was on a dozen prescription drugs.
• @BillFOXLA - BREAKING: A huge migrant caravan of over 1,000 people crossed illegally into El Paso, TX last night, making it the largest single group we have ever seen. The city of El Paso reports Border Patrol now has over 5,000 in custody & has released hundreds to city streets. (video)
• @unusual_whales - Egg prices have soared, in some places up 550%. This is why I made the Breakfast Index. It is an index composed of the costs of bacon, bread, coffee, orange juice, eggs, milk and sugar. It's never been higher. (graph)
  
• @KLVeritas - State of emergency/pandemic has been used to empower governments, elites and WHO to take control over people’s lives, economy, way of life, social issues through fear and coercion. This chart shows top 20 donors to WHO. It’s time for the world to look deeper into WHO and all. (graph)
• @acemaxx - The #profit #outlook for companies in the S&P 500 Index is rapidly deteriorating - yet analysts can’t raise their stock-price targets fast enough.
• @HumanDilemma_ - #Trump warns of Chinese spies everywhere. (video)
• @Breaking911 - SEN. COTTON: "I gotta tell your viewers, if they're worried about a spy balloon flying across middle America, let me tell them about the TikTok app that they may have on their phone..."
• @ichudov - Our authorities told us that Covid causes much more myocarditis than vaccines. That was a lie! In the Nordic countries, there was FIVE TIMES more myocarditis after vaccines than after Covid-19.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 929,226 Reports(+2,685 from prior week) Through January 20th, 2023.
  

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.

Night Trading

• Asian indices are -1.25% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 99.5  +1.75 basis points.
• China Sovereign CDS 50.75 +2.5 basis points.
• China Iron Ore Spot 121.7 USD/Metric Tonne -2.53%
  
• Bloomberg Emerging Markets Currency Index 48.33 -.15%.
• Bloomberg Global Risk-On/Risk Off Index 58.2 +.54%.
• Bloomberg US Financial Conditions Index .43 -5.0 basis points. 
  
• Volatility Index(VIX) futures 20.6 +.26%. 
• Euro Stoxx 50 futures -.49%.
• S&P 500 futures -.27%.
• NASDAQ 100 futures -.35%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (AMG)/6.95)
• (CNA)/.94
• (CMI)/4.52
• (ENR)/.76
• (IDXX)/1.94
• (NBIX)/1.44
• (ON)/1.26
• (TSN)/1.39
  

After the Close:

• (ATVI)/1.51
• (CHGG)/.38
• (FN)/1.87
• (LEG)/.48
• (PINS)/.27
• (POWI)/.46
• (RMBS)/.47
• (SPG)/3.13
• (SWKS)/2.60
• (SAVE)/.03
• (TTWO)/.88
  

Economic Releases

8:30 am EST

• The Trade Deficit for Dec. is estimated to widen to -$68.5B versus -$61.5B in Nov.

3:00 pm EST

• Consumer Credit for Dec. is estimated to fall to $25.0B versus $27.962B in Nov.

Upcoming Splits

• (PCAR) 3-for-2
  

Other Potential Market Movers

• The German Factory Orders report could also impact trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

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