Tuesday Watch

Night Trading 

• Asian equity indices are unch. to +.75% on average. 
• Asia Ex-Japan Investment Grade CDS Index 64.5 -.5 basis point.
• China Sovereign CDS 43.25 -.25 basis point.
• China Iron Ore Spot 104.2 USD/Metric Tonne -.6%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.89 +.15%.
• Bloomberg Emerging Markets Currency Index 36.09 -.06%.
• Bloomberg Global Risk-On/Risk Off Index 97.9 -.7%.
• US 10-Year Yield 4.16% -1.0 basis point.
• Japan 30-Year Yield 3.42% -2.0 basis points. 
• Volatility Index(VIX) futures 17.0 +.6%.
• Euro Stoxx 50 futures +.09%. 
• S&P 500 futures +.04%.
• NASDAQ 100 futures +.09%.

Morning Preview Links

BOTTOM LINE: Asian indices are modestly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Rising into Final Hour on Diminishing AI Infrastructure Build Out Worries, Earnings Outlook Optimism, Short-Covering, Alt Energy/Defense Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising

• Volume: Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 14.3 -4.2%
• S&P 500 Intraday % Swing .34 -50.7%
• Bloomberg Global Risk On/Risk Off Index 98.3 +1.4% 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.88 -.4%

• Euro/Yen Carry Return Index 209.2 -.2%

• Emerging Markets Currency Volatility(VXY) 6.5 +.6%

• CBOE S&P 500 Implied Correlation Index 12.3 -7.3% 

• ISE Sentiment Index 163.0 +23.0

• Total Put/Call .80 -5.9%

• NYSE Arms .93 -25.0%
• NYSE Non-Block Money Flow +$108.4M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 50.4 -.7%
  

• US Energy Sector High-Yield OAS Index 329.5 -2.7%
• US Tech Sector High-Yield OAS Index 429.5 -1.0%
• Bloomberg TRACE # Distressed Bonds Traded 226.0 -9.0

• European Financial Sector CDS Index 54.5 -.5%
  

• Italian/German 10Y Yld Spread 70.0 +1.0 basis point

• Asia Ex-Japan Investment Grade CDS Index 64.6 -1.1%
  

• Emerging Market CDS Index 124.9 -.7%

• China Corp. High-Yield Bond USD ETF(KHYB) 24.51 +.08%

• 2-Year SOFR Swap Spread -18.0 basis points unch.

• 3M T-Bill Treasury Repo Spread -2.25 basis points +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap .5 +.75 basis point
• MBS  5/10 Treasury Spread 115.0 unch.
• Bloomberg CMBS Investment Grade Bbb Average OAS 591.0 unch.
• Avg. Auto ABS OAS 55.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 36.09 +.05%
• US 10-Year T-Note Yield 4.17% +2.0 basis points
• 3-Month T-Bill Yield 3.61% +1.0 basis point

• China Iron Ore Spot 104.8 USD/Metric Tonne -.01%
• Dutch TTF Nat Gas(European benchmark) 27.7 euros/megawatt-hour -1.7%

• Citi US Economic Surprise Index -4.6 -4.1 points

• Citi Eurozone Economic Surprise Index 33.4 +3.0 points

• Citi Emerging Markets Economic Surprise Index 30.0 -.8 point
• S&P 500 Current Quarter EPS Growth Rate YoY(16 of 500 reporting) +32.8% -8.1 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 309.38 +1.89:  Growth Rate +14.9% +.7 percentage point, P/E 22.2 +.1
• S&P 500 Current Year Estimated Profit Margin 13.51% +1.0 basis point
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) +n/a +n/a
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 518.64 +1.54: Growth Rate +26.2% +.4 percentage point, P/E 30.7 +.3
• Bloomberg US Financial Conditions Index .74 +26.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index 1.65 +21.0 basis points
• Bloomberg Global Trade Policy Uncertainty Index 1.7 +.2
• US Yield Curve 66.0 basis points (2s/10s) +.5 basis point
• US Atlanta Fed GDPNow Q2 Forecast +3.5% unch.
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 27.9% -1.3 percentage points

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.75% -1.0 basis point: CPI YoY +2.62% -34.0 basis points
• 1-Year TIPS Spread 2.31 +4.0 basis points
• 10-Year TIPS Spread 2.23 -1.0 basis points
• Highest target rate probability for March 18th FOMC meeting: 47.1% (+2.9 percentage points) chance of 3.5%-3.75%. Highest target rate probability for April 29th meeting: 45.3%(-.4 percentage point) chance of 3.25%-3.5%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +60 open in Japan 
• China A50 Futures: Indicating +41 open in China

• DAX Futures: Indicating +180 open in Germany

Portfolio:

• Higher: On gains in my tech/utility/industrial/financial sector longs
• Disclosed Trades: None
• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.6%

Sector Underperformers:

• 1) Foods -.4% 2) Homebuilding -.4% 3) Retail -.3%

Stocks Falling on Unusual Volume: 

• TIMB, WGO, FDP, D, NKTR, DJT, AVO, DBVT and EWTX

Stocks With Unusual Put Option Activity:

• 1) DJT 2) CL 3) PEP 4) AR 5) CSIQ

Stocks With Most Negative News Mentions:

• 1) D 2) GAUZ 3) BYND 4) FUN 5) CPNG

Sector ETFs With Most Negative Money Flow:

• 1) SMH 2) XLC 3) CIBR 4) KOMP 5) TDIV

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.9%

Sector Outperformers:

• 1) Gold & Silver +3.1% 2) Alt Energy +2.9% 3) Defense +2.6%

Stocks Rising on Unusual Volume:

• HYMC, ADEA, QBTS, AAOI, HUT, ABVX, UMAC, FLY, BKSY, ASTS, IONQ, PVLA, CSIQ, WYFI, PSNY, KOD, RKLB, FEIM, CYTK, SGML, SDGR, ARRY, CWAN, SUPX, RUN, PRCT, OPFI, AAUC, PL, LUNR, BBNX, BRCB, ISSC, MRNA, SBSW, VICR, STZ, OWLT, MIAX, DXYZ, AVAV, AG, HII, AGCC, OMDA, VOYG, SKE, NXT, OSIS, PSKY, MIRM, RARE, HNRG, ANAB, JHL, KDK, IMNM, AA, PAAS, HTFL, PDD, CCL, ATEC, JHG, AEM, WBD, PSLV, CDE, DOCS, UNFI and ORCL

Stocks With Unusual Call Option Activity:

• 1) XP 2) FFAI 3) DPRO 4) TMF 5) OKE 

Stocks With Most Positive News Mentions:

• 1) HYMC 2) RKLB 3) ADEA 4) CYTK 5) CWAN

Sector ETFs With Most Positive Money Flow:

• 1) XLB 2) HACK 3) QTUM 4) ITB 5) XRT

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:

• None of note

After the Close: 

• None of note

Economic Release 

8:15 am EST

• The ADP Weekly Employment Change. 
• 3Q GDP revisions.
• Philly Fed Non-Manufacturing Activity for Dec.
• Durable Goods Orders for Oct. is estimated to fall -1.5% versus a +.5% gain in Sept.
• Durables Ex Transports for Oct. is estimated to rise +.3% versus a +.6% gain in Sept.
• Cap Goods Orders Non-Defense Ex-Air for Oct. is estimated to rise +.3% versus a +.9% gain in Sept.
• Industrial Production MoM for Nov. is estimated to rise +.1% versus a +.1% gain in Oct. 
• Manufacturing Production for Nov. is estimated to rise +.1% versus unch. in Oct.
• Capacity Utilization for Nov. is estimated at 75.9% versus 75.9% in Oct. 

10:00 am EST

• The Richmond Fed Manufacturing Index for Dec. is estimated to rise to -10.0 versus -15.0 in Nov.
• The Conference Board Consumer Confidence Index for Dec. is estimated to rise to 91.0 versus 88.7 in Nov. 

Upcoming Splits

• (TPL) 3-for-1

Other Potential Market Movers

• The Atlanta Fed GDPNow Q4 update, 5Y T-Note auction, weekly US retail sales reports, API weekly crude oil stock report and the CFTC weekly net positioning reports could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm ES

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -13.9% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 12.7 +.2
• 1 Sector Declining, 10 Sectors Rising
• 68.0% of Issues Advancing, 29.9% Declining 
• TRIN/Arms .99 -20.2%
• Non-Block Money Flow +$152.0M
  
• 124 New 52-Week Highs, 28 New Lows
• 62.7% (+1.6%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 61.2 +2.3

Polymarket:

• Supreme Court Rules in Favor of Trump's Tariffs? 28.0% +1.0 percentage point
• Will there be another US government shutdown by January 31st? 30.0% +2.0 percentage points
• Will China invade Taiwan by end of 2026? 13.0% unch.
• US-Venezuela military engagement by Jan. 31st 33.0% -3.0 percentage points

Other:

• Bloomberg Global Risk-On/Risk-Off Index 98.0 +1.0%
• US High-Yield Tech Sector OAS Index 430.50 -3.0 basis points
• Bloomberg Cyclicals/Defensives Index 268.9 +1.0%
• Morgan Stanley Growth vs Value Index 161.8 +.6%
• CNN Fear & Greed Index 56.0 (Moved to GREED from NEUTRAL) +11.0
• 1-Day Vix 6.9 -33.1%
  
• Vix 14.5 -3.0%
  
• Total Put/Call .78 -8.2%