Stocks Lower into Final Hour on Declining Fed Rate-Cut Odds, US Policy-Induced Stagflation Fears, China/Taiwan Tensions, Alt Energy/Airline Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.0 +6.0%
• DJIA Intraday % Swing .66% -29.7%
  
• Bloomberg Global Risk On/Risk Off Index 57.9 -.08%

• Euro/Yen Carry Return Index 172.5 +.4%

• Emerging Markets Currency Volatility(VXY) 7.5 +2.3%

• CBOE S&P 500 Implied Correlation Index 19.7 +7.0% 

• ISE Sentiment Index 127.0 +14.0
  

• Total Put/Call .92 +2.2%

• NYSE Arms 1.44 -4.0% 
• NYSE Non-Block Money Flow -$302.0M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 55.90 +1.9%
  

• US Energy High-Yield OAS 334.02 -.78%
• Bloomberg TRACE # Distressed Bonds Traded 328 -21
  

• European Financial Sector CDS Index 71.58 +.69% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 215.36 +.80%
  

• Italian/German 10Y Yld Spread 157.0 basis points +2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 99.7 +3.9%
  

• Emerging Market CDS Index 178.8 +2.8%
• Israel Sovereign CDS 120.08 +.33%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.4 -.01%

• 2-Year SOFR Swap Spread -16.25 basis points +.25 basis point
  

• TED Spread 21.75 basis points n/a
  

• 3-Month EUR/USD Cross-Currency Basis Swap -4.25 unch.
  
• MBS  5/10 Treasury Spread 143.0 +4.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 956.0 -2.0 basis points
  
• Avg. Auto ABS OAS 75.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 40.98 -.60%
• 3-Month T-Bill Yield 5.36% +1.0 basis point
  

• China Iron Ore Spot 128.6 USD/Metric Tonne -.59%
• Dutch TTF Nat Gas(European benchmark) 29.7 euros/megawatt-hour -.9%

• Citi US Economic Surprise Index -2.4 -9.9 points

• Citi Eurozone Economic Surprise Index -14.4 +.4 point

• Citi Emerging Markets Economic Surprise Index 8.5 -1.4 points
• S&P 500 Current Quarter EPS Growth Rate YoY(32 of 500 reporting) +.2% +7.4 percentage points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 243.70 +.18:  Growth Rate +11.9% unch., P/E 19.6 unch.
  
• S&P 500 Current Year Estimated Profit Margin 11.80% -24.0 basis points
  
• 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 291.54 +.70: Growth Rate +36.7% +.4 percentage point, P/E 29.9 -.2
  
• Bloomberg US Financial Conditions Index .96 unch.
  
• Bloomberg Euro-Zone Financial Conditions Index .31 -25.0 basis points
  
• US Yield Curve -16.5 basis points (2s/10s) +3.5 basis points
  
• US Atlanta Fed 4Q GDPNow Forecast +2.21% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 69.2% +2.1 percentage points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.02% unch.: CPI YoY +2.97% unch.
  
• 10-Year TIPS Spread 2.31 +4.0 basis points
  
• Highest target rate probability for March 20th FOMC meeting: 63.3%(-13.6 percentage points) chance of 5.0%-5.25%. Highest target rate probability for May 1st meeting: 60.9%(-10.1 percentage points) chance of 4.75%-5.0%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +236 open in Japan 
• China A50 Futures: Indicating -74 open in China

• DAX Futures: Indicating +71 open in Germany

Portfolio:

• Slightly Higher:  On gains in my tech 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 50% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.6%
  

Sector Underperformers:

• 1) Alt Energy -4.4% 2) Gold & Silver -3.7% 3) Energy -2.3%

Stocks Falling on Unusual Volume: 

• HA, DAL, ANSS, HRZN, MED, BA, CPNG, LEG, BIDU, HDB, YUMC, MS, CHK, LI, SPR, ZTO, JCI, VET, ACMR, MARA, BKE, AA and GOLD
  

Stocks With Unusual Put Option Activity:

• 1) GRAB 2) IAU 3) BKLN 4) NTR 5) APLD
  

Stocks With Most Negative News Mentions:

• 1) SAVE 2) NKE 3) BA 4) BNTX 5) SPR
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.5%
  

Sector Outperformers:

• 1) Semis +.7% 2) Disk Drives +.3% 3) Software -.2%

Stocks Rising on Unusual Volume:

• MOR, SATS, COHR, CORT, AMD, HALO, CAMT, RMBS, ACLS, WDC, VERX, ORLY, VECO, IEP and WING
  

Stocks With Unusual Call Option Activity:

• 1) GRAB 2) DWAC 3) ACN 4) SAVE 5) DISH

Stocks With Most Positive News Mentions:

• 1) DWAC 2) AMD 3) VERX 4) WDC 5) SOTK
  

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:

• (SCHW)/.64
• (CFG)/.60
• (PLD)/1.26
• (USB)/.71
  

After the Close: 

• (AA)/-.89
• (DFS)/2.51
• (FUL)/1.27
• (KMI)/.30
• (SNV)/.95
• (WTFC)/2.42
  

Economic Releases

8:30 am EST 

• Retail Sales Advance MoM for Dec. is estimated to rise +.4% versus a +.3% gain in Nov.
• Retail Sales Ex Autos MoM for Dec. is estimated to rise +.2% versus a +.2% gain in Nov.
• Retail Sales Ex Autos and Gas for Dec. is estimated to rise +.3% versus a +.6% gain in Nov.
• The Import Price Index MoM for Dec. is estimated to fall -.5% versus a -.4% decline in Nov.
• The Export Price Index MoM for Dec. is estimated to fall -.7% versus a -.9% decline in Nov.
• The NY Fed Services Business Activity Index for Jan. 
  

9:15 am EST

• Industrial Production MoM for Dec. is estimated to fall -.1% versus a -.1% decline in Nov.
• Capacity Utilization for Dec. is estimated to fall to 78.7% versus 78.8% in Nov.
• Manufacturing Production for Dec. is estimated unch. versus a +.3% gain in Nov.

10:00 am EST

• Business Inventories for Nov. is estimated to fall -.1% versus a -.1% decline in Oct.
• The NAHB Housing Market Index for Jan. is estimated to rise to 39.0 versus 37.0 in Dec.

2:00 pm EST

• Fed's Beige Book release.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Fed's Williams speaking, Fed's Barr speaking, Fed's Bowman speaking, Atlanta Fed Q4 GDPNow update, 20Y T-Bond auction, OPEC Monthly report, API Weekly Crude Oil Stock report, weekly MBA Mortgage Applications report, weekly US retail sales reports, (SCHW) business update, (RHP) investor day and the (DHI) annual meeting 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 +17.4% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 10.9 -.2
  
• 10 Sectors Declining, 1 Sector Rising
• 21.7% of Issues Advancing, 76.3% Declining 
• TRIN/Arms 1.57 +3.97% 
• Non-Block Money Flow -$260.4M
  
• 43 New 52-Week Highs, 48 New Lows
• 59.9%(-3.5%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.0 -7.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 58.4 +.9%
• Bloomberg Cyclicals/Defensives Pair Index 136.52 -.18%
  
• Russell 1000: Growth/Value 18,716.4 +.52%
• CNN Fear & Greed Index 71.0 (Greed) unch.
• 1-Day Vix 9.65 -17.3%
  
• Vix 13.9 +5.1%
  
• Total Put/Call .97 +7.8%

Tuesday Watch

Today's Headlines

Bloomberg:

• China Keeps Weighing on World in View of Economists at Davos.
• US Merchant Vessel Struck as Shippers Told to Avoid Red Sea.
• Japan’s Input Inflation Flatlines for Weakest Result Since 2021.
• Australia’s Consumer Sentiment Extends Pessimism Into 2024.
• Ukraine Peace Plan Talks in Davos End With No Clear Path Forward.
• Asia Stocks Lower; Oil Steady After Monday Decline: Markets Wrap.
• Oil Edges Higher as Red Sea Tensions Elevate Crude Market Risks.
• Add Soaring Insurance Bills to Mounting Red Sea Trade Chaos.
• Republicans Battle for Runner-Up as Trump Leads Iowa Caucuses.
• Iowa Republicans Rank Immigration as Top Issue Ahead of Economy.
• Elon Musk Wants Greater Control of Tesla Before Building Its AI.
• A Pessimist’s Guide to Global Economic Risks in 2024.
• AI Can Convincingly Mimic A Person's Handwriting Style, Researchers Say. 
• Retirement Savers Are Putting More Money Into Stocks, Survey Shows.

Zero Hedge:

• "It's All Over": Powell's WSJ Mouthpiece And JPMorgan Confirm Imminent End Of QT.
• When DEI Becomes DIE: FAA Now Hiring People With "Severe Intellectual And Psychiatric Disability".
• Fani Opens Up: Fulton County DA Says 'You Cannot Expect Black Women To Be Perfect And Save The World'.
• Americans Divided On Progress Made Since 'I Have A Dream' Speech.
• Pro-Palestinian Rioters Nearly Breach White House Gate In Clash With Police.
• Iran Launches Ballistic Missiles Against Foreign 'Espionage Centers' In Iraq's Erbil.
• Defense Secretary Austin Finally Leaves Hospital After 2 Weeks, Refuses To Resign.
• Martin Luther King Jr Day News Round Up - Newsquawk Asia-Pac Market Open.
• FDA Launches Fresh Bid To Toss Out High-Profile Ivermectin Case.
• Lawfare Against Trump Is Running Out Of Gas: VDH.
• Houthi Militants Attack US Container Ship With Ballistic Missiles Days After Biden Attack On Yemen.
• Death, 'Disease X', & "Rebuilding Trust" With The Denizens Of Davos.
• UC Davis Brags About "Advancing MLK's Legacy" Through DEI Programs. Still Employs Prof After Homicidal, Anti-Semitic Rant.
• S&P Bulls 'Be Careful What You Wish For': Goldman Exposes The 'Casualty' Of The Fed's Pivot.
• Biden Angry With Republicans Trying To Stop Kids Seeing Gay Porn.
• Secret German MoD Document Lays Out Path To World War III.
• China Sidesteps Nvidia Chip Ban As Military, Government Acquire Powerful H100s.
• Goldman: We Are Priced For Perfect Disinflation, Which Is Not A Comfortable Place To Be.
• Price Wars Spark Rout In China's Consumer Sector.
• Qatar Pauses LNG Shipments In Red Sea After US Bombs Houthis.
• Massive Money-Printing Will Accelerate As Debt Soars.
• Illinois Governor Complains About Migrant Buses - Blames Republicans For Border Crisis.
• Eroding Europe Profit Forecasts Are Risk For Stocks. 
• NBC News Admits 'Deep State' Exists... To Save Us From Trump's Return.
• GS bankers see a strong pick up in M&A interest YTD.
• Which Jobs Have A Future?
• "It's The Economy, Stupid!" - The Real Reason So Many Young People Are Living With Their Parents. 
• Fed's Bostic believes rates need to stay on hold until at least the summer - Newsquawk Europe Market Open.

Wall Street Journal:

• Trump Seeks Big Win in Iowa Caucuses as Voting Begins.
• How Trump Became Unstoppable in Iowa.
• Medicare Patients on Pricey Drugs Are Saving Big This Year.
• Forget the Meme Stocks, Investors Hunt for Quality.
• Shoppers Prefer Staying Outdoors. That’s More Trouble for Malls.
• Boeing’s Pile of Problems Gets Bigger as a Crucial Buyer Hesitates.
• The Humiliation of Davos Man. He isn’t taking over the world. He’s pleading with the world to trust him.
• Crash Parties, Escape Dull Chitchat and Make Powerful Friends: What Davos Elites Know6 min read.
• Robots Are Looking Better to Detroit as Labor Costs Rise.

CNBC:

• AI fever takes over Davos pushing crypto aside as the new cool kid on the block.
• Redesigned Apple Watches not subject to import ban, U.S. Customs says.
• NYSE vice-chair sees ‘robust’ pipeline of potential IPOs in 2024.

Reuters:

• 'Precarious' year ahead for world economy, Davos survey predicts.
• Microsoft offers $20 consumer AI subscription to boost business.
• Toy manufacturers' shift from China is no child's play.
• Bank valuations could rise by $7 trillion in five years, study finds.
• Apple offers iPhone 15 at rare discount in China as competition intensifies.

MarketWatch.com:

• Baidu denies Chinese military link after report sent stock tumbling.
• Goldman Sachs lists 10 reasons it’s more confident about the U.S. economy.

NewsMax:

• 'MAGA' Strong Among Likely Iowa GOP Caucus Voters.

Fox News:

• Fauci’s former boss who downplayed COVID lab leak theory now says it was credible.
• Former Biden aide shreds 'Bidenomics' message in blunt message to White House.
• Texas university mocked for woke science course with no final exam.
• Dr. Drew sounds alarm over ‘extremely worrisome’ findings on pot.

TheGatewayPundit.com:

• Woke Mark Cuban Gets O’Keefed, Goes on Nasty X Rant Calling James O’Keefe a “Mother***ing P*ssy” for Questioning His DEI Stances at the Gym, Asking Why he Won’t Let Short Asian Women on his Basketball Team.
• Explosions Rock US Consulate in Erbil, Iraq – Iran Claims Responsibility – Feeble Joe Biden Calls an Early Lid.
• Biden Hammered for His ‘Unconscionable War’ on Faith.
• Texas Attorney General Ken Paxton Addresses Blank Ballot Adjudication Concerns, Demands Release of Machine Audit Logs.
• REPORT: Iranian IRGC Commanders and Advisers ON THE GROUND in Yemen Directing the Attack on Ships.
• Fully Vaxxed and Boosted “All My Children” Actor Dies Suddenly at Age 50 – COVID Suspected as Cause of Death.
• WATCH: Junk Scientist and Serial Liar Al Gore Makes Absurd Global Warming Prediction “Once We Get to True Net Zero”.
• DEVELOPING: Texas Grid Operator Asks Residents to Conserve Energy, Unplug Appliances, Amid Bitter Cold Snap Due to Issues with Solar, Wind Generation.
• BREAKING: Houthi Missile Hits a US-Owned Cargo Ship in the Red Sea.
• Thousands of German Farmers and Truckers Paralyze Berlin, Calling for Radical Left Wing Government to Step Down.
• Nikki Haley Donor Reveals Where Her Money is Coming From During Interview with Never-Trump Fox News Host Neil Cavuto (VIDEO).
• Rand Paul Fires Off on What He Really Thinks Fauci Deserves: ‘Frankly, He Should Go to Prison’.

The Epoch Times:

• The Corruption of the CCP’s Satellite Launch Center Deserves Attention.
• Taiwan Loses Nauru as Ally Days After Elections Amid Tension With China.

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 -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 98.0 +1.0 basis point.
  
• China Sovereign CDS 64.0 +2.75 basis points.
• China Iron Ore Spot 127.5 USD/Metric Tonne +.03%.
  
• Bloomberg Emerging Markets Currency Index 41.2 -.12%.
• Bloomberg Global Risk-On/Risk Off Index 57.4 -.9%.
• Bloomberg US Financial Conditions Index .96 unch. 
  
• Volatility Index(VIX) futures 14.9 +2.8%. 
• Euro Stoxx 50 futures -.31%.
• S&P 500 futures -.28%.
• NASDAQ 100 futures -.37%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by consumer 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 75% net long heading into the week.