Stocks Reversing Slightly Higher into Afternoon on Stable Long-Term Rates, Loosening US Financial Conditions, Short-Covering, Retail/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.7 -4.2%
• DJIA Intraday % Swing .42% -26.6%
  
• Bloomberg Global Risk On/Risk Off Index 65.8 -.3%

• Euro/Yen Carry Return Index 174.4 -.31%

• Emerging Markets Currency Volatility(VXY) 7.7 unch.

• CBOE S&P 500 Implied Correlation Index 19.1 -1.2% 

• ISE Sentiment Index 147.0 +40.0
  

• Total Put/Call .84 -13.4%

• NYSE Arms 1.05 -37.5% 
• NYSE Non-Block Money Flow +$161.1M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 65.0 -.41%
  

• US Energy High-Yield OAS 346.28 -1.3%
• Bloomberg TRACE # Distressed Bonds Traded 344 -2
  

• European Financial Sector CDS Index 81.1 -1.9% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 251.8 -1.0%
  

• Italian/German 10Y Yld Spread 177.0 basis points +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 106.9 -.06%
  

• Emerging Market CDS Index 194.03 -2.3%
• Israel Sovereign CDS 127.4 +1.5%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.26 +.24%

• 2-Year SOFR Swap Spread -18.5 basis points -1.25 basis points
  

• TED Spread 23.75 basis points +.25 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -14.5 +1.75 basis points
  
• MBS  5/10 Treasury Spread 158.0 unch.
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 943.0 +1.0 basis point
  
• Avg. Auto ABS OAS 96.0 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 41.8 -.03%
• 3-Month T-Bill Yield 5.39% -1.0 basis point
  

• China Iron Ore Spot 129.1 USD/Metric Tonne +.46%
• Dutch TTF Nat Gas(European benchmark) 45.06 euros/megawatt-hour -1.7%

• Citi US Economic Surprise Index 37.4 +3.2 points

• Citi Eurozone Economic Surprise Index -39.0 +1.5 points

• Citi Emerging Markets Economic Surprise Index 22.4 +.1 point
• S&P 500 Current Quarter EPS Growth Rate YoY(471 of 500 reporting) +2.6% -.3 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 240.92 +.13:  Growth Rate +9.1% +.1 percentage point, P/E 18.7 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.15% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(7 of 10 reporting) +38.4% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 276.62 +.77: Growth Rate +63.2% +.5 percentage point, P/E 29.6 +.1
  
• Bloomberg US Financial Conditions Index .27 +6.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .21 -7.0 basis points
  
• US Yield Curve -46.25 basis points (2s/10s) -7.0 basis points
  
• US Atlanta Fed 4Q GDPNow Forecast +1.97% -23.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.55% unch.: CPI YoY +3.10% unch.
  
• 10-Year TIPS Spread 2.30 +1.0 basis point
  
• Highest target rate probability for Jan. 31st FOMC meeting: 100.0%(+2.2 percentage points) chance of 5.25%-5.5%. Highest target rate probability for March 20th meeting: 72.0%(+5.5 percentage point) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -30 open in Japan 
• China A50 Futures: Indicating +53 open in China

• DAX Futures: Indicating +70 open in Germany

Portfolio:

• Higher:  On gains in my tech/transport/industrial sector longs
  

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 100% Net Long
  

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

Earnings of Note 
Company/Estimate 

Before the Open:

• None of note
  

After the Close: 

• (A)/1.35
• (KEYS)/1.87
• (ZM)/1.08
  

Economic Releases

10:00 am EST

• The Leading Index for Oct. is estimated to fall -.7% versus a -.7% decline in Sept.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The 20Y Bond auction, Needham Consumer Tech E-Commerce Conference and the Barclays Automotive/Mobility Tech Conference 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 +.1% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 7.3 -1.5
  
• 5 Sectors Declining, 6 Sectors Rising
• 71.0% of Issues Advancing, 26.4% Declining 
• TRIN/Arms 1.18 -29.8% 
• Non-Block Money Flow +$167.6M
  
• 39 New 52-Week Highs, 10 New Lows
• 43.8%(+6.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 64.0 +4.0

Other:

• Bloomberg Global Risk-On/Risk-Off Index 65.7 -.4%
  
• Russell 1000: Growth/Value 18,593.3 -.65%
  
• 1-Day Vix 8.7 -24.2%
  
• Vix 13.8 -3.6%
  
• Total Put/Call .88 -9.3%

Friday Watch

Night Trading 

• Asian equity indices are -.5% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 106.75 +.25 basis point.

• China Sovereign CDS 65.25 -.25 basis point.
  
• China Iron Ore Spot 130.3 USD/Metric Tonne -.5%.

• Bloomberg Emerging Markets Currency Index 41.8 -.03%.
• Bloomberg Global Risk-On/Risk Off Index 66.9 +1.3%
  
• Bloomberg US Financial Conditions Index .29 -1.0 basis point.
  
• Volatility Index(VIX) futures 15.2 +.4%.
• Euro Stoxx 50 futures +.39%.

• S&P 500 futures +.08%.

• NASDAQ 100 futures -.03%.  

Morning Preview Links

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 rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, Technical Selling, Retail/Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 14.1 -.71%
• DJIA Intraday % Swing .57% +53.7%
  
• Bloomberg Global Risk On/Risk Off Index 65.8 -3.5%

• Euro/Yen Carry Return Index 174.9 -.4%

• Emerging Markets Currency Volatility(VXY) 7.76 +.91%

• CBOE S&P 500 Implied Correlation Index 19.4 -7.2% 

• ISE Sentiment Index 107.0 -24.0
  

• Total Put/Call .93 +9.4%

• NYSE Arms 1.54 +126.4% 
• NYSE Non-Block Money Flow -$110.7M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 65.53 +.54%
  

• US Energy High-Yield OAS 350.9 +3.98%
• Bloomberg TRACE # Distressed Bonds Traded 346 -14
  

• European Financial Sector CDS Index 82.64 +1.4% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 254.41 +1.2%
  

• Italian/German 10Y Yld Spread 176.0 basis points -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 106.8 -.44%
  

• Emerging Market CDS Index 198.26 -.45%
• Israel Sovereign CDS 125.60 -.88%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.0 unch.

• 2-Year SOFR Swap Spread -17.25 basis points -.5 basis point
  

• TED Spread 23.5 basis points -.5 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -16.25 +1.75 basis points
  
• MBS  5/10 Treasury Spread 158.0 -5.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 942.0 +9.0 basis points
  
• Avg. Auto ABS OAS 97.0 -2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 41.8 +.02%
• 3-Month T-Bill Yield 5.40% -1.0 basis point
  

• China Iron Ore Spot 131.0 USD/Metric Tonne +.03%
• Dutch TTF Nat Gas(European benchmark) 45.84 euros/megawatt-hour -2.5%

• Citi US Economic Surprise Index 34.2 -7.4 points

• Citi Eurozone Economic Surprise Index -40.5 +1.2 points

• Citi Emerging Markets Economic Surprise Index 22.3 -.4 point
• S&P 500 Current Quarter EPS Growth Rate YoY(468 of 500 reporting) +2.9% +.4 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 240.79 +.76:  Growth Rate +9.0% +.3 percentage point, P/E 18.7 -.1
  
• S&P 500 Current Year Estimated Profit Margin 12.15% +4.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(7 of 10 reporting) +38.4% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 275.85 +.23: Growth Rate +62.7% +.1 percentage point, P/E 29.5 -.2
  
• Bloomberg US Financial Conditions Index .21 -2.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .28 +3.0 basis points
  
• US Yield Curve -39.25 basis points (2s/10s) unch.
  
• US Atlanta Fed 4Q GDPNow Forecast +2.20% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.55% unch.: CPI YoY +3.10% unch.
  
• 10-Year TIPS Spread 2.29 -3.0 basis points
  
• Highest target rate probability for Jan. 31st FOMC meeting: 97.8%(-2.2 percentage points) chance of 5.25%-5.5%. Highest target rate probability for March 20th meeting: 66.5%(-9.5 percentage point) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -40 open in Japan 
• China A50 Futures: Indicating -66 open in China

• DAX Futures: Indicating +70 open in Germany

Portfolio:

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

• Disclosed Trades: None
  

• Market Exposure: 75% Net Long
  

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

Earnings of Note 
Company/Estimate 

Before the Open:

• (BJ)/.95
• (BKE)/.95
• (SPB)/1.03
  

After the Close: 

• None of note
  

Economic Releases

8:30 am EST

• Housing Starts for Oct. is estimated to fall to 1350K versus 1358K in Sept.
• Building Permits for Oct. is estimated to fall to 1450K versus 1471K in Sept.
  

11:00 am EST

• Kansas City Fed Services Activity Index for Nov.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Fed's Goolsbee speaking, Fed's Daly speaking, Atlanta Fed GDPNow 4Q Update, US Baker Hughes Rig Count, (FOXA) annual meeting, (LITE) annual meeting, (APD) fireside chat and the (EL) annual meeting could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST