Wednesday Watch

Night Trading 

• Asian equity indices are -.5% to unch. on average. 
• Asia Ex-Japan Investment Grade CDS Index 65.75 +.75 basis point.
• China Sovereign CDS 43.75 +.75 basis points.
• China Iron Ore Spot 102.5 USD/Metric Tonne +.7%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.76 -.02%.
• Bloomberg Emerging Markets Currency Index 36.1 unch.
• Bloomberg Global Risk-On/Risk Off Index 95.3 -.4%.
• US 10-Year Yield 4.18% -1.0 basis point.
• Japan 30-Year Yield 3.38% -1.0 basis point. 
• Volatility Index(VIX) futures 19.5 unch.
• Euro Stoxx 50 futures -.28%. 
• S&P 500 futures -.05%.
• NASDAQ 100 futures -.18%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Higher Long-Term Rates, Pre-Fed Uncertainty, Technical Selling, Biotech/Telecom Sector Weakness

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 36.1 -.06%
• US 10-Year T-Note Yield 4.18% +2.0 basis points
• 3-Month T-Bill Yield 3.70% unch.

• China Iron Ore Spot 101.9 USD/Metric Tonne +.1%
• Dutch TTF Nat Gas(European benchmark) 27.5 euros/megawatt-hour +2.3%

• Citi US Economic Surprise Index 21.8 +8.8 points

• Citi Eurozone Economic Surprise Index 32.1 -.2 point

• Citi Emerging Markets Economic Surprise Index 31.6 +1.9 points
• S&P 500 Current Quarter EPS Growth Rate YoY(496 of 500 reporting) +12.9% unch.
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 306.18 +.15:  Growth Rate +13.8% +.1 percentage point, P/E 22.4 unch.
• S&P 500 Current Year Estimated Profit Margin 13.48% -1.0 basis point
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(9 of 10 reporting) +17.5% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 510.79 +.31: Growth Rate +24.4% unch., P/E 32.6 +.1
• Bloomberg US Financial Conditions Index .68 -5.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index 1.41 -5.0 basis points
• Bloomberg Global Trade Policy Uncertainty Index 2.2 unch.
• US Yield Curve 57.25 basis points (2s/10s) -1.75 basis points
• US Atlanta Fed GDPNow Q2 Forecast +3.5% unch.
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 28.2% -.3 percentage point

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.76% unch.: CPI YoY +2.96% unch.
• 1-Year TIPS Spread 2.56 -6.0 basis points
• 10-Year TIPS Spread 2.27 unch.
• Highest target rate probability for Jan. 28th FOMC meeting: 67.5% (-.5 percentage point) chance of 3.5%-3.75%. Highest target rate probability for March 18th meeting: 52.7%(+4.5 percentage points) chance of 3.5%-3.75%. (current target rate is 3.75-4.0%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +420 open in Japan 
• China A50 Futures: Indicating -90 open in China

• DAX Futures: Indicating -14 open in Germany

Portfolio:

• Higher: On gains in my consumer discretionary/financial/utility/tech sector longs and emerging market shorts 
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth unch.

Sector Underperformers:

• 1) Road & Rail -1.4% 2) Biotech -1.1% 3) Telecom -1.0%

Stocks Falling on Unusual Volume: 

• OLLI, CPB, ELAN, CWT, JPM, ELVN, FERG, WAY, LEGN, KYMR, CAL, GPK, CMP, SLM, DYN and PHR

Stocks With Unusual Put Option Activity:

• 1) FEZ 2) FITB 3) NTR 4) INFY 5) FLG

Stocks With Most Negative News Mentions:

• 1) SLM 2) CMP 3) GAUZ 4) AAP 5) CAL

Sector ETFs With Most Negative Money Flow:

• 1) XLK 2) XLV 3) ARKK 4) MAGS 5) ITB

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.6%

Sector Outperformers:

• 1) Gold & Silver +3.2% 2) Alt Energy +1.5% 3) I-Banking +1.3%

Stocks Rising on Unusual Volume:

• ALEX, MAMA, AXTI, WVE, SGML, TFX, YOU, BMNR, PAAS, TERN, ARES, FULC, AAOI, STAA, WRBY, CRMD, ASO, XMTR, CRCL, DOCU, FROG, APO, CBLL, NGVT, CRWV, MSTR, LITE, OPCH, RELY, DXC, SYM, MESO, AIP, AS, SKE, SDRL, ILMN, KFY, IIIV, ABVX, KNSL, FLEX, DBVT, KEY, FFIV, SHAK, SPOT, CHOW, BX, GIII, WBD, APLD, ASAN, UL, STEP, INR and VITL 

Stocks With Unusual Call Option Activity:

• 1) RVPH 2) LION 3) CRON 4) MUB 5) FLEX 

Stocks With Most Positive News Mentions:

• 1) DBI 2) MAMA 3) DGNX 4) NXXT 5) WVE

Sector ETFs With Most Positive Money Flow:

• 1) KRE 2) SMH 3) IGV 4) XBI 5) XLU

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:

• (CHWY)/.12
• (PLAB)/.45
• (REVG)/.78 

After the Close: 

• (ADBE)/5.40
• (NNE)/-.50
• (NDSN)/2.93
• (ORCL)/1.64
• (OXM)/-.95
• (PL)/-.03
• (SNPS)/2.78
• (MTN)/-5.22 

Economic Release 

8:30 am EST

• The Employment Cost Index for 3Q is estimated to rise +.9% versus a +.9% gain in 2Q.

10:30 am EST

• Bloomberg consensus estimates call weekly crude oil inventory decline of -2,155,830 barrels versus a +574,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +2,069,000  barrels versus a +4,518,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,421,330 barrels versus a +2,059,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.17% versus a +1.8% gain prior. 

2:00 pm EST

• The FOMC is expected to cut the benchmark Fed Funds rate by -25.0 basis points to 3.5-3.75%.
• The Federal Budget Deficit is estimated at -$195.0B versus -$366.8B in Oct. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The FOMC presser, weekly MBA Mortgage Applications report, Thomson Reuters IPSOS PCSI for Dec., Goldman Sachs Financial Services Conference, Barclays Tech Conference, San Antonio Breast Cancer Symposium, Keybanc Consumer Conference, (CGNX) investor meeting and the (UNFI) investor day could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Afternoon Market Internals

NYSE Composite Index:

• Volume Running -18.2% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 12.3 -3.3
• 3 Sectors Declining, 8 Sectors Rising
• 61.0% of Issues Advancing, 36.0% Declining 
• TRIN/Arms 1.41 +76.3%
• Non-Block Money Flow -$109.6M
  
• 74 New 52-Week Highs, 20 New Lows
• 61.2% (+1.8%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 55.4 +.4

Polymarket:

• Supreme Court Rules in Favor of Trump's Tariffs? 26.0% -1.0 percentage point
• Will there be another US government shutdown by January 31st? 32.0% -1.0 percentage point
• Will China invade Taiwan by end of 2026? 14.0% -1.0 percentage point
• US-Venezuela military engagement by Dec. 31st 26.0% -4.0 percentage points

Other:

• Bloomberg Global Risk-On/Risk-Off Index 95.8 +.5%
• US High-Yield Tech Sector OAS Index 419.0 -1.25 basis points
• Bloomberg Cyclicals/Defensives Index 260.3 +.1%
  
• Morgan Stanley Growth vs Value Index 164.3 -.01%
• CNN Fear & Greed Index 34.0 (FEAR) unch.
• 1-Day Vix 11.4 +21.0%
  
• Vix 16.7 +.4%
  
• Total Put/Call .88 +4.8%