Stocks Lower into Close on Declining Fed Rate-Cut Odds, China Economy Worries, Earnings Outlook Jitters, Alt Energy/REIT Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 15.0 +8.5%
• DJIA Intraday % Swing .49% -26.6%
  
• Bloomberg Global Risk On/Risk Off Index 57.4 -.9%

• Euro/Yen Carry Return Index 173.7 +.7%

• Emerging Markets Currency Volatility(VXY) 7.6 +1.1%

• CBOE S&P 500 Implied Correlation Index 21.2 +8.6% 

• ISE Sentiment Index 114.0 -7.0
  

• Total Put/Call .94 -7.8%

• NYSE Arms 1.45 +6.6% 
• NYSE Non-Block Money Flow -$293.3M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 57.0 +2.0%
  

• US Energy High-Yield OAS 338.65 +1.6%
• Bloomberg TRACE # Distressed Bonds Traded 313 -15
  

• European Financial Sector CDS Index 72.96 +1.9% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 218.87 +1.6%
  

• Italian/German 10Y Yld Spread 160.0 basis points +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 103.6 +3.9%
  

• Emerging Market CDS Index 181.8 +1.7%
• Israel Sovereign CDS 120.12 +.04%
  

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

• 2-Year SOFR Swap Spread -16.0 basis points +.25 basis point
  

• TED Spread 21.75 basis points n/a
  

• 3-Month EUR/USD Cross-Currency Basis Swap -5.0 -.75 basis point
  
• MBS  5/10 Treasury Spread 147.0 +4.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 950.0 -6.0 basis points
  
• Avg. Auto ABS OAS 76.0 +1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 40.91 -.19%
• 3-Month T-Bill Yield 5.37% +1.0 basis point
  

• China Iron Ore Spot 125.4 USD/Metric Tonne -.30%
• Dutch TTF Nat Gas(European benchmark) 27.7 euros/megawatt-hour -6.6%

• Citi US Economic Surprise Index 1.4 +3.8 points

• Citi Eurozone Economic Surprise Index -13.9 +.45 point

• Citi Emerging Markets Economic Surprise Index 6.4 +2.1 points
• S&P 500 Current Quarter EPS Growth Rate YoY(36 of 500 reporting) -1.1% -1.3 percentage points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 243.84 +.14:  Growth Rate +11.9% unch., P/E 19.4 -.2
  
• S&P 500 Current Year Estimated Profit Margin 11.76% -4.0 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 292.03 +.49: Growth Rate +36.9% +.2 percentage point, P/E 29.6 -.3
  
• Bloomberg US Financial Conditions Index .91 -5.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .80 +49.0 basis points
  
• US Yield Curve -25.0 basis points (2s/10s) -8.5 basis points
  
• US Atlanta Fed 4Q GDPNow Forecast +2.21% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 67.1% -2.1 percentage points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.02% unch.: CPI YoY +2.96% -1.0 basis point
  
• 10-Year TIPS Spread 2.30 -1.0 basis point
  
• Highest target rate probability for March 20th FOMC meeting: 57.6%(-5.5 percentage points) chance of 5.0%-5.25%. Highest target rate probability for May 1st meeting: 45.9%(-12.8 percentage points) chance of 4.75%-5.0%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -32 open in Japan 
• China A50 Futures: Indicating -51 open in China

• DAX Futures: Indicating +81 open in Germany

Portfolio:

• Slightly Lower:  On losses in my tech/biotech/consumer discretionary/utility/industrial sector longs
  

• Disclosed Trades: None
  

• Market Exposure: 50% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.3%
  

Sector Underperformers:

• 1) Electric Vehicles -3.5% 2) Airlines -3.2% 3) REITs -2.5%

Stocks Falling on Unusual Volume: 

• CVE, VRE, UTF, PUK, LI, CLS, OMF, JD, XPEV, XPO, NEOG, MANU, PAAS, IRBT, TXG and HDB
  

Stocks With Unusual Put Option Activity:

• 1) ACWI 2) DFS 3) ICLN 4) XLC 5) CRON
  

Stocks With Most Negative News Mentions:

• 1) SAVE 2) FSR 3) RIVN 4) DH 5) PAAS
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.9%
  

Sector Outperformers:

• 1) Healthcare Providers +.2% 2) Insurance +.2% 3) Restaurants -.2%

Stocks Rising on Unusual Volume:

• EOLS, ACIC, SBGI, DWAC, LQDA, PI, AMSC, TNGX, CART, DOOR, ANAB, NTRA, MOR, UTI, IRON, PRGS, DV, GCT, HUM, TRMD, JCI and STNG
  

Stocks With Unusual Call Option Activity:

• 1) DWAC 2) ACWI 3) DNN 4) RIO 5) MUB

Stocks With Most Positive News Mentions:

• 1) PRGS 2) CB 3) NTNX 4) SKX 5) GMGI
  

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:

• (FAST)/.45
• (FHN)/.27
• (KEY)/.23
• (MTB)/3.10
• (NTRS)/1.35
  

After the Close: 

• (OZK)/1.46
• (JBHT)/1.74
• (PPG)/1.49
• (TSM)
• (TFC)/.68
  

Economic Releases

8:30 am EST 

• Housing Starts for Dec. is estimated to fall to 1425K versus 1560K in Nov.
• Building Permits for Dec. is estimated to rise to 1476K versus 1467K in Nov. 
• The Philly Fed Business Outlook for Jan. is estimated to rise to -6.7 versus -12.8 in Dec.
• Initial Jobless Claims for last week are estimated to rise to 205K versus 202K the prior week.
• Continuing Claims are estimated to rise to 1843K versus 1834K prior.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Fed's Bostic speaking, Atlanta Fed 4Q GDPNow Update, Fed's weekly Balance Sheet report, weekly EIA natural gas inventory, (COST) annual meeting, (MU) annual meeting, (INTU) annual meeting, (AES) business update, CIBC Western Investor Conference and the B. Riley Oncology Conference report could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• Volume Running +13.6% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 10.1 -.8
  
• 8 Sectors Declining, 3 Sectors Rising
• 27.2% of Issues Advancing, 70.5% Declining 
• TRIN/Arms 1.28 -5.9% 
• Non-Block Money Flow -$178.9M
  
• 35 New 52-Week Highs, 70 New Lows
• 57.4%(-2.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.0 -5.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 58.9 +1.8%
• Bloomberg Cyclicals/Defensives Pair Index 135.8 -.62%
  
• Russell 1000: Growth/Value 18,699.5 -.15%
• CNN Fear & Greed Index 61.0 (Greed) -10.0
• 1-Day Vix 9.5 -4.3%
  
• Vix 14.7 +6.1%
  
• Total Put/Call 1.07 +4.9%

Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 100.25 +2.5 basis points.

• China Sovereign CDS 64.0 unch.
  
• China Iron Ore Spot 128.2 USD/Metric Tonne -.9%.

• Bloomberg Emerging Markets Currency Index 40.96 -.05%.
• Bloomberg Global Risk-On/Risk Off Index 58.3 +.7%.
• Volatility Index(VIX) futures 14.9 -.9%.
• Euro Stoxx 50 futures -.36%.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.08%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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.