Stocks Reversing Lower into Afternoon on US Policy-Induced Stagflation Fears, Fed Credibility Worries, Earnings Outlook Concerns, Transport/Medical 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) 20.0 +1.8%
• DJIA Intraday % Swing 1.28%
  
• Bloomberg Global Risk On/Risk Off Index 59.1 -1.8%

• Euro/Yen Carry Return Index 146.7 +.3%

• Emerging Markets Currency Volatility(VXY) 10.5 -.1%

• CBOE S&P 500 Implied Correlation Index 33.5 -.8% 

• ISE Sentiment Index 111.0 -14.0 points
  

• Total Put/Call .79 -12.2%

• NYSE Arms 1.19 -2.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.5 +1.1%
  

• US Energy High-Yield OAS 350.13 -.88%
• Bloomberg TRACE # Distressed Bonds Traded 309.0 -4.0
  

• European Financial Sector CDS Index 83.4 -1.23% 
• Credit Suisse Subordinated 5Y Credit Default Swap 351.63 -.78%
  

• Italian/German 10Y Yld Spread 182.0 basis points -5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 103.8 -.54%
  

• Emerging Market CDS Index 230.77 +.88%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.88 +.09%

• 2-Year Swap Spread 29.0 basis points +.75 basis point
  

• TED Spread 15.25 basis points -.25 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 +.5 basis point
  
• MBS  5/10 Treasury Spread  135.0 unch.
  
• Bloomberg US Agg CMBS Avg OAS 104.0 unch.
  
• Avg. Auto ABS OAS .70 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.0 unch.
• 3-Month T-Bill Yield 4.72% +3.0 basis points
  

• China Iron Ore Spot 124.0 USD/Metric Tonne +.1%
• Dutch TTF Nat Gas(European benchmark) 52.7 euros/megawatt-hour -1.8%

• Citi US Economic Surprise Index 22.8 -1.4 points

• Citi Eurozone Economic Surprise Index 93.0 -1.4 points
  

• Citi Emerging Markets Economic Surprise Index 3.7 -2.2 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 223.94 -.17:  Growth Rate +.3% -.1 percentage point, P/E 18.4 unch.
• S&P 500 Current Year Estimated Profit Margin 12.07% -1.0 basis point
  
• Bloomberg US Financial Conditions Index .42 -1.0 basis point
  
• Yield Curve -83.0 basis points (2s/10s) -2.0 basis points
• US Atlanta Fed 1Q GDPNow Forecast +2.16% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.30% unch.: CPI YoY +6.44% unch.
  
• 10-Year TIPS Spread 2.34 -2.0 basis points
  
• Highest target rate probability for May 3rd FOMC meeting: 68.8%(-1.7 percentage points) chance of 5.0%-5.25%. Highest target rate probability for June 14th meeting: 49.3%(-.1 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%(+.0 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 +11 open in China

• DAX Futures: Indicating -21 open in Germany

Portfolio:

• Slightly Lower:  On losses in my medical/industrial/commodity sector longs
  

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

• Market Exposure: Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -.9%
  

Sector Underperformers:

• 1) Oil Service -2.7% 2) Airlines -2.6% 3) Road & Rail -2.0%

Stocks Falling on Unusual Volume: 

• FMS, XPOF, KIM, TRI, TU, NLY, SYM, FROG, SWAV, IPG, POST, FRSH, ARI, HI, SAIA, WMG, WTW, SQ, GOOG, ENPH, VFC, HP, BLNK, HP, SEE, MC, SEDG, APO, NSSC, CABA, STE, TSE, MAT, AI, UPST, PTEN, COIN, XPO, BAX, GTLB, TTMI, STC, TTGT, ULCC, AZTA, IFF, GMED, AFRM and APPS
  

Stocks With Unusual Put Option Activity:

• 1) BAX 2) DXCM 3) SAVE 4) TROW 5) DIS
  

Stocks With Most Negative News Mentions:

• 1) APPS 2) FWRD 3) IFF 4) VERU 5) GTLB
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.1%

Sector Outperformers:

• Gambling +1.9% 2) Video Gaming +1.4% 3) Shipping +1.1%

Stocks Rising on Unusual Volume:

• CSII, APP, QNST, SONO, FLNC, CXW, U, GTES, MPWR, EVER, ATEC, MGM, BWA, PWP, WEX, SSTK, PPC, TREX, CDAY, WYNN, ACLS, AZEK, THC, SMCI, CRNC and ABBV
  

Stocks With Unusual Call Option Activity:

• 1) MARK 2) FOXA 3) BAX 4) THC 5) MGM

Stocks With Most Positive News Mentions:

• 1) APP 2) CSII 3) BLBD 4) FORM 5) MPWR
  

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: 

• (AXL)/.01
• (FTS)/.53
• (GPN)/2.42
• (MGA)/1.08
• (NWL)/.11
• (SPB)/.39
  

After the Close:

• None of note
  

Economic Releases

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. 1Y Inflation Expectations is estimated to rise to +4.0% versus a +3.9% increase prior.
  

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 Fed's Waller speaking and the China CPI 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% Above 100-Day Average 
• 8 Sectors Declining, 3 Sectors Rising
• 37.7% of Issues Advancing, 59.1% Declining
• 58 New 52-Week Highs, 5 New Lows
• 61.8%(+1.7%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 57.0 unch.
  
• Bloomberg Global Risk-On/Risk-Off Index 59.3 -1.5%
  
• Russell 1000: Growth/Value 15,003.1 +.6%
  
• Vix 21.0 -.6%
• Total Put/Call .73 -18.9%
• TRIN/Arms 1.47 +20.5%
  

Thursday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 104.5 +.5 basis point. 

• China Sovereign CDS 56.5 +.5 basis point. 
• China Iron Ore Spot 121.9 USD/Metric Tonne +.4%.

• Bloomberg Emerging Markets Currency Index 48.02 -.02%.
• Bloomberg Global Risk-On/Risk Off Index  58.8 -.8%. 
• Bloomberg US Financial Conditions Index .39 -3.0 basis points.
  
• Volatility Index(VIX) futures 21.2 +.23%.
• Euro Stoxx 50 futures +.24%.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.19%.  

Morning Preview Links

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