Stocks Lower into Close on China Economy Worries, Escalating Geopolitical Tensions, Emerging Markets/European/US High-Yield Debt Angst, Tech/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.3 +6.5%
• DJIA Intraday % Swing .74% +208.3%
  
• Bloomberg Global Risk On/Risk Off Index 55.4 -1.3%

• Euro/Yen Carry Return Index 167.0 -.13%

• Emerging Markets Currency Volatility(VXY) 8.2 -.24%

• CBOE S&P 500 Implied Correlation Index 19.4 +.6% 

• ISE Sentiment Index 137.0 -1.0
  

• Total Put/Call .97 unch.

• NYSE Arms .93 -33.6% 
• NYSE Non-Block Money Flow -$115.7M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 58.5 +3.4%
  

• US Energy High-Yield OAS 351.4 +3.6%
• Bloomberg TRACE # Distressed Bonds Traded 253 -8
  

• European Financial Sector CDS Index 70.5 +4.4% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 212.60 +3.8%
  

• Italian/German 10Y Yld Spread 165.0 basis points -1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 90.3 -.06%
  

• Emerging Market CDS Index 176.3 +5.3%
• Israel Sovereign CDS 111.5 +1.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.1 +.4%

• 2-Year SOFR Swap Spread -18.25 basis points unch.
  

• TED Spread 22.0 basis points -1.0 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 -.5 basis point
  
• MBS  5/10 Treasury Spread 149.0 +6.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 966.0 -1.0 basis point
  
• Avg. Auto ABS OAS 76.0 -2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 41.4 -.70%
• 3-Month T-Bill Yield 5.37% -1.0 basis point
  

• China Iron Ore Spot 140.7 USD/Metric Tonne -.75%
• Dutch TTF Nat Gas(European benchmark) 30.60 euros/megawatt-hour -5.5%

• Citi US Economic Surprise Index 1.1 -9.3 points

• Citi Eurozone Economic Surprise Index -40.5 +.1 point

• Citi Emerging Markets Economic Surprise Index 13.8 -1.6 points
• S&P 500 Current Quarter EPS Growth Rate YoY(17 of 500 reporting) +13.5% unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 243.36 +.12:  Growth Rate +11.8% +.1 percentage point, P/E 19.5 -.2
  
• S&P 500 Current Year Estimated Profit Margin 12.04% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) +0.0% -0.0 percentage points
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 289.55 +.62: Growth Rate +35.7% +.2 percentage point, P/E 29.5 -.9
  
• Bloomberg US Financial Conditions Index n/a
  
• Bloomberg Euro-Zone Financial Conditions Index .74 +38.0 basis points
  
• US Yield Curve -39.25 basis points (2s/10s) +.75 basis point
  
• US Atlanta Fed 4Q GDPNow Forecast +2.03% -23.0 basis points
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 67.0% -.8 percentage point
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.02% unch.: CPI YoY +3.32% unch.
  
• 10-Year TIPS Spread 2.21 +3.0 basis points
  
• Highest target rate probability for March 20th FOMC meeting: 71.9%(-1.5 percentage points) chance of 5.0%-5.25%. Highest target rate probability for May 1st meeting: 69.2%(-2.7 percentage points) chance of 4.75%-5.0%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -279 open in Japan 
• China A50 Futures: Indicating -18 open in China

• DAX Futures: Indicating +111 open in Germany

Portfolio:

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts
  

• Market Exposure: Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.5%
  

Sector Underperformers:

• 1) Semis -3.0% 2) Cyber Security -2.6% 3) Internet -2.3%

Stocks Falling on Unusual Volume: 

• RTO, SEMR, LQDA, VRNA, COIN, LSPD, PNM, ARM, LI, YY and CORT
  

Stocks With Unusual Put Option Activity:

• 1) ALGM 2) TPR 3) EOSE 4) AYX 5) MBLY
  

Stocks With Most Negative News Mentions:

• 1) CORT 2) AAPL 3) RIVN 4) GDRX 5) FSR
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.6%
  

Sector Outperformers:

• 1) Biotech +2.1% 2) Energy +1.8% 3) Healthcare Providers +1.8%

Stocks Rising on Unusual Volume:

• MRNA, RILY, KROS, GCT, MSTR, HE, LMND, KNSA, XNCR, HGV, IONS, PTVE and BOWL
  

Stocks With Unusual Call Option Activity:

• 1) THC 2) AEO 3) Z 4) BOWL 5) ETRN

Stocks With Most Positive News Mentions:

• 1) LBPH 2) MSTR 3) XOMA 4) APWC 5) SNES
  

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:

• (UNF)/2.18
  

After the Close: 

• (CALM)/.83
• (RGP)/.17
• (SLP)/.10
  

Economic Releases

10:00 am EST

• The ISM Manufacturing Index for Dec. is estimated to rise to 47.2 versus 46.7 in Nov.
• The ISM Prices Paid Index for Dec. is estimated to fall to 49.5 versus 49.9 in Nov.
• JOLTS Job Openings for Nov. is estimated to rise to 8850K versus 8733K in Oct.
  

2:00 pm EST

• The Dec. 13 FOMC Meeting Minutes.
  

Afternoon

• Wards Total Vehicles Sales for Dec. is estimated to rise to 15.5M versus 15.32M in Nov.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Fed's Barkin speaking, weekly US retail sales reports, weekly MBA Mortgage Applications report, weekly API Crude Oil Stock report and the Goldman Energy/Clean Tech/Utilities 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 -+1.0% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.8 -4.3
  
• 5 Sectors Declining, 6 Sectors Rising
• 56.0% of Issues Advancing, 42.2% Declining 
• TRIN/Arms .84 -40.0% 
• Non-Block Money Flow -$3.1M
  
• 37 New 52-Week Highs, 8 New Lows
• 66.2%(+.6%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 69.0 +1.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 55.1 -1.7%
• Bloomberg Cyclicals/Defensives Pair Index 139.6 -1.0%
  
• Russell 1000: Growth/Value 18,001.1 -1.9%
• CNN Fear & Greed Index 76.0 (Extreme Greed) unch.
• 1-Day Vix 8.7 -8.1%
  
• Vix 13.4 +7.6%
  
• Total Put/Call .89 -8.3%

Tuesday Watch

Today's Headlines

Bloomberg:

• Iran Sends Warship to Red Sea After US Sinks Houthi Boats.
• Maersk Halts Red Sea Shipping as US Navy Sinks Houthi Boats.
• South Korea Opposition Leader Stabbed in Neck, Taken to Hospital.
• China Secretly Transforms Huawei Into Most Powerful Chip War Weapon.
• China’s Patchy Recovery Keeps Asia’s Factories in a Slump.
• China Home Sales Fall Again as Policy Shifts Fail to Stem Decline.
• US Pushed Dutch Maker of Chip Equipment to Block Chinese Sales Before Deadline.
• Deadly Earthquake in Japan Sends Spot Power Rates Up 15%.
• China Stocks Drag Down Asia as New Year Begins: Markets Wrap.
• Oil Advances as Iran Warship Entering Red Sea Increases Tensions.
• Here’s (Almost) Everything Wall Street Expects in 2024.
• Charting the Global Economy: Maritime Attacks Drive Up Costs.

Zero Hedge:

• 2023 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead.
• Iran Dispatches Warship To Red Sea, Houthis Warn Of "Repercussions" After US Forces Kill Rebels During Maersk Ship Attack.
• South Korea Opposition Leader Stabbed In Neck, Attacker Arrested.
• Student Loan Borrowers Stage A "Massive Student Debt Strike".
• These Are The 20 Most Popular Neighborhoods For Potential US Homebuyers.
• Ex-CIA Officer Says Ukraine A 'Sinking Ship' After NYT Highlights Recruitment Crisis.
• The Year That Expertise Collapsed.
• USS Ford Aircraft Carrier Returning Home After Extended Deployment Protecting Israel.
• Dangerously bullish: No caution signs.
• Supreme Court's John Roberts Urges "Caution" On Using Artificial Intelligence.
• We Did It, Joe! Monthly Migrant Encounters Exceed 300,000 For First Time In US History.
• Corruption, Chaos, & Conflict - The Fourth Turning Erupts In 2024.
• "Massive" NYPD Mobilization At JFK Airport To Protect Travelers From Pro-Palestinian Mob.
• The Wuhan Cover-Up: RFK Jr. Has The Receipts.
• Bedlam In Berlin As Immigrants Bring In The New Year.
• Rome Was Eternal, Until It Wasn't: Imperial Analogs Of Decay.
• Hamas Fired New Year's Eve Rocket Barrage At Tel Aviv, Timed For Midnight.
• Secretary Of State That Kicked Trump From Maine Ballot Wants 'Better Leaders' In Power To Prevent 'Election Sabotage'.
• Corn, Wheat Prices Post Largest Yearly Decline In Decade As Hope For Easing Food Inflation Rises.
• California To Give Illegals Free (Taxpayer-Funded) Healthcare.
• A 2024 Wish List: Sanity At Home And Stability Abroad.
• 2024: Where Does The Pendulum Swing?
• America's Top New Year's Resolutions For 2024.
• Has Feminism And 'Hoeflation' Destroyed Dating In The West?
• DeSantis Promises 'Day One' Firing Of Special Counsel Jack Smith If Elected.
• Schwarzenegger Interview Explains California’s Decline.
• A Clue As To Why AI Is So Dumb.
• 'Incompetence Has Consequences' & Other Lessons From 2023.
• Repeat Influenza Vaccination Linked To Higher Risk Of Infection: CDC Preprint.
• Vivek Slams CNN For 'Egregious Interference' After Town Hall Answers Go Viral. 
• "We Are Going To See 'Collisions' All Over The Planet" - Pushback Against Tyranny & Control Will Accelerate In 2024.

Wall Street Journal:

• Beijing Is on a Wartime Footing. Biden needs to rebuild America’s ‘arsenal of democracy’ or risk being unprepared.
• Claudine Gay and Why Academic Honesty Matters. Politicization and lower standards jeopardize Harvard’s standing as a great research institution. 
• Israel Reshuffles Forces, Prepares for Long-Term Conflict in Gaza.
• Covid Slashed Consumer Choices. This Is Why They Aren’t Coming Back.
• A Real-Estate Juggernaut Ran Off the Rails in 2023.
• You’re Probably Still Eating Too Much Sugar.
• Xi Resurrects Mao’s ‘Continuous Revolution’ With a Twist.
• Shale Is Keeping the World Awash With Oil as Conflicts Abound.
• For Happiness in the New Year, Stop Overdoing Everything.

CNBC:

• Powerful quake rocks Japan, nearly 100,000 residents ordered to evacuate.
• China’s Xi says ‘reunification’ with Taiwan is inevitable.
• Singapore’s economy surged 2.8% in the fourth quarter, its highest quarterly growth in 2023.
• New FAFSA launches after a long delay, but with ‘issues,’ leaving millions of students in limbo.
• Iranian warship Alborz enters the Red Sea — Tasnim.

Reuters:

• More EVs lose US tax credits including Tesla, Nissan, GM vehicles.

MarketWatch.com:

• So much for ‘the January effect’: These 5 things could interrupt the U.S. stock market rally in early 2024.
• 20 midcap stocks with 2024 upside ranging up to 62%, according to analysts.

NewsMax:

• Hamas Fights Israel With Chinese Weapons.
• Illegal, Experimental: Biden Military Slammed Over COVID Vax Mandate.

Fox News:

• Israel confirms troops killed Hamas leader involved in terror group's Oct. 7 massacre.
• Elon Musk pokes fun at Green Day after anti-Trump 'American Idiot' performance.

TheGatewayPundit.com:

• Tucker Carlson Releases Video of Jeffery Epstein’s Brother Mark Epstein Attempting to Obtain Jeffery’s Prehospital Records, Anounces Big Interview With Mark Coming Soon (VIDEO).
• 231 Current and Former U.S. Service Members Demand Military Leaders Be Court-Martialed Over Forced COVID Vaccines: “Service Members Were Significantly Harmed by These Actions”.
• This is CNN: Anderson Cooper Does Shots of Tequila and Gets Hammered on Air Again (VIDEO).
• Ohio Governor Who Vetoed Bill Blocking Protecting Minors and Girl’s Sports Took $40K From Pro-Trans Hospitals.
• Powder Keg Europe: Dutch Army Commander Urges Preparation for War With Russia, as Netherlands Get Ready To Send F-16 Fighters to Ukraine.
• Peter Sweden: IT’S SPREADING – Massive Farmers Protest in Germany (Video).
• Harvard Honor Council Member Who Votes on Plagiarism Cases Says University President Claudine Gay Got By on ‘Lower Standard’-Calls for Her Resignation.
• ‘Friends’ Actor David Schwimmer Blasts Hypocrites for Ignoring Hamas’ Sexual Violence-‘Where is Their Outrage?’
• ‘Batman Begins,’ ‘The Full Monty,’ and ‘Rush Hour’ Actor ‘Suddenly’ Dies.
• Hundreds of Pro-Palestinian Protesters Take Over Historic Boston Common, Crash New Year’s Eve Celebration.
• Watch: Fauci’s Former NIH Boss Finally Admits COVID Lockdown Was ‘Another Mistake We Made’.

The Epoch Times:

• Xi Emphasis of Mao Shows His Determination to Take an Authoritarian Path: Analysts.
• Large Numbers of China’s Foreclosed Homes Fail Auction Despite Price Cuts.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 997,917 Reports(+9,212 from prior week) Through November 3rd, 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 -.5% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 90.25 -.25 basis point.
  
• China Sovereign CDS 60.25 +.5 basis point.
• China Iron Ore Spot 142.6 USD/Metric Tonne +1.8%.
  
• Bloomberg Emerging Markets Currency Index 41.69 -.07%.
• Bloomberg Global Risk-On/Risk Off Index 56.0 -.2%.
• Bloomberg US Financial Conditions Index n/a. 
  
• Volatility Index(VIX) futures 15.2 -.4%. 
• Euro Stoxx 50 futures +.53%.
• S&P 500 futures -.01%.
• NASDAQ 100 futures -.07%.

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 50% net long heading into the week.