Stocks Falling into Afternoon on US Policy-Induced Stagflation Fears, Fed Credibility Worries, Earnings Outlook Concerns, Tech/Homebuilding 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) 20.0 +7.2%
• DJIA Intraday % Swing .72%
  
• Bloomberg Global Risk On/Risk Off Index 59.9 -1.5%

• Euro/Yen Carry Return Index 146.3 +.21%

• Emerging Markets Currency Volatility(VXY) 10.4 -.4%

• CBOE S&P 500 Implied Correlation Index 34.1 +3.6% 

• ISE Sentiment Index 130.0 +16.0 points
  

• Total Put/Call .85 -5.6%

• NYSE Arms .93 +5.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.0 +1.5%
  

• US Energy High-Yield OAS 349.7 +1.1%
• Bloomberg TRACE # Distressed Bonds Traded 313.0 -1.0
  

• European Financial Sector CDS Index 84.4 +.2% 
• Credit Suisse Subordinated 5Y Credit Default Swap 354.4 +1.7%
  

• Italian/German 10Y Yld Spread 187.0 basis points -1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 103.8 -.68%
  

• Emerging Market CDS Index 228.5 +2.9%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.7 unch.

• 2-Year Swap Spread 28.25 basis points +.75 basis point
  

• TED Spread 15.5 basis points -9.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -.25 basis point
  
• MBS  5/10 Treasury Spread  135.0 -2.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 104.0 unch.
  
• Avg. Auto ABS OAS .70 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.0 -.24%
• 3-Month T-Bill Yield 4.69% +5.0 basis points
  

• China Iron Ore Spot 121.0 USD/Metric Tonne -.3%
• Dutch TTF Nat Gas(European benchmark) 53.7 euros/megawatt-hour -3.1%

• Citi US Economic Surprise Index 24.2 +.6 point

• Citi Eurozone Economic Surprise Index 94.4 -1.2 points
  

• Citi Emerging Markets Economic Surprise Index 5.9 +.2 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 224.11 -.14:  Growth Rate +.4% unch., P/E 18.4 unch.
• S&P 500 Current Year Estimated Profit Margin 12.08% -1.0 basis point
  
• Bloomberg US Financial Conditions Index .44 unch.
  
• Yield Curve -81.0 basis points (2s/10s) -1.75 basis points
• US Atlanta Fed 1Q GDPNow Forecast +2.16% +7.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.30% unch.: CPI YoY +6.44% unch.
  
• 10-Year TIPS Spread 2.36 +4.0 basis points
  
• Highest target rate probability for May 3rd FOMC meeting: 70.2%(+.6 percentage point) chance of 5.0%-5.25%. Highest target rate probability for June 14th meeting: 48.3%(-.7 percentage point) 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 -83.0%(+.5 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -200 open in Japan 
• China A50 Futures: Indicating -32 open in China

• DAX Futures: Indicating +53 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 25% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.1%
  

Sector Underperformers:

• 1) Homebuilding -2.6% 2) Internet -2.5% 3) Utilities -1.8%

Stocks Falling on Unusual Volume: 

• ATEN, IMXI, ARMK, COLL, ARHS, SDRL, DQ, CMRE, ATVI, GOOS, BXMT, SPWR, BIDU, RL, KREF, EMR, REYN, TPR, TEVA, ENPH, CMG, AEHR, EEFT, DY, TMCI, IMLN, BTU, SHOO, PAYC, GOOG, DT, UAA, JKHY, PVH, PERI, CEIX, RILY, BKH, RAMP, VSAT, XPOF, VSH, MODN, CMP and CPRI
  

Stocks With Unusual Put Option Activity:

• 1) LUMN 2) TPR 3) RCL 4) EQT 5) ARKG
  

Stocks With Most Negative News Mentions:

• 1) SINT 2) LUMN 3) COIN 4) GOOG 5) CMG
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.7%

Sector Outperformers:

• Oil Service +1.4% 2) Healthcare Providers +1.1% 3) Shipping +1.1%

Stocks Rising on Unusual Volume:

• NEWR, KD, SCLX, FTNT, VOYA, GPRE, SYM, BTAI, CVNA, FOXA, AI, CVS, OSH, TRIP, FRSH, OMC, DASH, TENB and EHC
  

Stocks With Unusual Call Option Activity:

• 1) FRPT 2) TRIP 3) FTNT 4) LUMN 5) CXW

Stocks With Most Positive News Mentions:

• 1) NEWR 2) FTNT 3) CVS 4) INSP 5) MCFT
  

Charts:

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

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

Earnings of Note 
Company/Estimate 

Before the Open: 

• (ABBV)/3.58
• (MT)/.12
• (AZN)/1.33
• (BAX)/.94
• (BWA)/1.08
• (CCJ)/.05
• (DBD)/.39
• (DUK)/1.07
• (HLT)/1.22
• (ITT)/1.24
• (K)/.85
• (MAS)/.68
• (PEP)/1.65
• (PM)/1.28
• (RL)/2.93
• (SEE)/.98
• (SWI)/.21
• (TPR)/1.27
• (TPX)/.62
  

After the Close:

• (NET)/.04
• (CUZ)/.65
• (EQR)/.95
• (EXPE)/1.68
• (FLO)/.23
• (LYFT)/.13
• (MHK)/1.29
• (NWSA)/.18
• (PYPL)/1.20
• (RBC)/1.66
• (TEX)/1.12
• (VRSN)/1.61
• (YELL)/-.10
• (YELP)/.67
  

Economic Releases

8:30 am EST

• Initial Jobless Claims for last week is estimated to rise to 190K versus 183K the prior week.
• Continuing Claims is estimated to rise to 1660K versus 1655K prior.
  

10:00 am EST

• Univ. of Mich. Consumer Sentiment for Feb. is estimated to rise to 65.0 versus 64.9 in Jan.
• Univ. of Mich 1-Year Inflation Expectations for Feb. is estimated to rise to +4.0% versus +3.9% in Jan.
  

2:00 pm EST

• The Monthly Budget Deficit for Jan. is estimated at -$55.0B versus -$85.0B in Dec.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Japan inflation data report, 30Y T-Bond auction and the weekly EIA natural gas inventory report could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +2.4% Above 100-Day Average 
• 11 Sectors Declining, 0 Sectors Rising
• 25.6% of Issues Advancing, 71.2% Declining
• 57 New 52-Week Highs, 10 New Lows
• 62.7%(-.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 57.0 +4.0
  
• Bloomberg Global Risk-On/Risk-Off Index 59.8 -1.6%
  
• Russell 1000: Growth/Value 14,913.1 -.40%
  
• Vix 19.9 +6.9%
• Total Put/Call .88 -2.2
• TRIN/Arms .85 -3.4%
  

Wednesday Watch

Evening Headlines

Bloomberg:                        

• Pentagon Says China Refused to Take Call Over Balloon Uproar.  
• Hong Kong Targets Prized Aramco Listing With Xi’s Backing.  
• China’s Oil Market Makes Comeback on Covid Zero Exit and Exports.
• North Korea Readies Military Parade as Kim Boosts Nuclear Arms.  
• Volkswagen Misses Full-Year Cash Target After Supply Chain Woes.  
• Arm’s CEO Says New Markets and Improved Chips Are Key to Sustained Growth.
• Credit Suisse Dials Back Asia Risk Controls After Bankers Revolt.  
• Credit Suisse Tells Some Bankers Bonuses Will Be in Installments.
  
• Asia Stocks Rise as US Shares Climb, Dollar Falls: Markets Wrap.
• Meta to Ask Managers to Become Individual Contributors or Leave.  
• Quant Funds Shed Billions as Wall Street’s Hottest Trends Falter.
• Opinion: Big Tech Is Moving Fast and Breaking Your Job.
• Microsoft’s New AI Search Adept at Restaurant Recommendations, Backs Away From Politics.  
• Powell Says Further Rate Hikes Needed and Bonds Take Heed.

Wall Street Journal: 

• Powell Braces for Longer Inflation Fight as Hiring Remains Strong.
• The State of the Union Contradiction. If Biden is such a success, why aren’t Americans pleased?
• Death Toll From Quakes in Turkey, Syria Passes 7,500.
• U.S. Trade Deficit Hit Record in 2022.
• Bed Bath & Beyond Slides 49% After Financing Deal.
• U.S. Businesses Pay a Premium to Hire Migrant Workers in Extremely Tight Labor Market.
• Home-Buying Companies Stuck With Hundreds of Houses as Demand Slows.
• U.S. Agencies Seek Tougher Rules, Internal Probes on Stock Trading by Federal Officials.
• Boeing to Cut 2,000 Finance and HR Jobs.

Fox News:

• What Biden is expected to say during State of the Union address. 

CNBC.com:

• Nadella calls A.I.-powered search biggest thing for company since cloud.
• Fed Chair Powell says inflation is starting to ease, but interest rates still likely to rise.
• Chipotle Mexican Grill misses expectations for earnings, revenue and same-store sales.
• Zoom to lay off 1,300 employees, or about 15% of its workforce.
• Stocks making the biggest moves after hours: Chipotle, Enphase Energy, Fortinet and more.

MarketWatch:          

• The bond market is flashing a warning that U.S. stocks could be headed lower.
  
• EBay to lay off 500 employees, about 4% of its workforce.
  
• Chipotle stock falls after ‘tightening’ consumer spending leads to second earnings miss in five years.  
• Bed Bath & Beyond making ‘last gasp’ to survive before filing for bankruptcy, says analyst, warning that the equity will eventually be wiped out.

Zero Hedge:

• US Consumers Hit A Brick Wall: December Credit Growth Craters As Interest Rates Soar.
• Metaverse: The Land Of Opportunity?
• Denialism: A Woke Way To Stifle Dissent.
• Miami Black Leaders Apologize To Gov. DeSantis After Member Called Him Racist.
• Disney Bows To Beijing, Removes 'Forced Labor Camps' Episode From Hong Kong.
• Powell Post-Mortem: "Volcker Has Left The Building" And "We're Not In Wyoming Anymore".
• Union Membership Reaches New Low, Big Labor To Blame.
• Doctor Warns Against 'Gas Station Heroin' That Mimics Opioid Effects.
• Transurrection? Protestors Storm State Legislators Over Ban On Child 'Gender Transition' Surgery.
• US stocks ultimately finished higher after whipsawing on Powell's remarks - Newsquawk Asia-Pac Market Open.
• California Governor Urges Federal Inquiry Into Surging Natural Gas Prices.
• China Refused US Request For Phone Call After Spy Balloon Shot Down.
• WTI Extends Gains After Surprise Crude Draw, Despite Huge Gasoline Build.
• Food Shortages Are Starting To Become Quite Serious All Over The Planet.
• Used-Car Prices See Largest Monthly Increase Since Late 2021.
• Jay's Jawboning Jolts Bonds, Triggers 'Golden Crosses' In Stocks & Bitcoin.
• Markets dance to the sound of Powell - Newsquawk US Market Wrap.

Newsmax:    

• Sen. Markwayne Mullin: ‘I Canceled DirecTV’.
• Rep. Mary Miller: Hearings on DirecTV Will Be 'Aggressive'.
• Sen. Lankford: DirecTV Shouldn't Repeat Disney's Mistakes.

TheGatewayPundit.com:

• “We Don’t Expect a Single Honest Word. We Hope We’re Surprised But We Don’t Expect To Be” – Tucker on Biden’s Upcoming SOTU (VIDEO).
• Here We Go: IRS Proposes New Program to Crack Down on Waiters’ Tips and other Service Industries.
• GOP Rep. Marjorie Taylor Greene Plans to Bring White Balloon to SOTU Address to Troll Joe Biden (VIDEO).
• Biden’s Polls Are So Bad, Even CNN Is Talking About Them: “41% Of Americans Say They’re Worse Off”.
• New Zealand’s Largest Egg Producer Goes Up in Flames Killing 50,000 Hens Amid Nationwide Shortage (VIDEO).
• FLASHBACK: President Trump Created Highly Successful Program Meant To Protect America From Chinese Espionage And Biden Shut It Down.

The Epoch Times:

• Chinese Spy Balloon Spotlights CCP’s Brazen Plot Against US.

Twitter: 

• @Project_Veritas - BREAKING: Leaked document shows @pfizer admitting Dr. Jordon Walker works at the company and warns staff to beware of Project Veritas.The Project Veritas undercover video of a Pfizer Director of Research has been viewed 30,000,000 times. (video)
  
• @News_All_Time - A video at the Turkish border published by the Humanitarian Aid Fund. (video)
• @Mayhem4Markets - Large bankruptcies are surging at the fastest rate since 2010. (graph) Housing availability is at *worse* levels than before the Great Financial Crisis. An entire generation of people are being priced out of the American Dream. (graph) Global input and output prices rose in January. Not what we want to see if we're hoping that inflationary pressure will be durably subdued. (graph)
  

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 931,816 Reports(+2,590 from prior week) Through January 27th, 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.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 104.0 unch. 

• China Sovereign CDS 56.0 -.5 basis point. 
• China Iron Ore Spot 120.0 USD/Metric Tonne -.8%.

• Bloomberg Emerging Markets Currency Index 48.13 -.02%.
• Bloomberg Global Risk-On/Risk Off Index  60.8 -.05%. 
• Bloomberg US Financial Conditions Index .40 -4.0 basis points.
  
• Volatility Index(VIX) futures 20.5 +.6%.
• Euro Stoxx 50 futures +.93%.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.09%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by energy and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 50% net long heading into the day.