Stocks Modestly Higher into Final Hour on Earnings Outlook Optimism, Diminishing AI Infrastructure Build-Out Angst, Short-Covering, Tech/Alt Energy Sector Strength

Economic/Market Gauges:

• North American Investment Grade CDS Index 50.2 +.4%
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .25 -1.0 basis point
• BofA Global Financial Stress Indicator -.29 -1.0 basis point
• European Financial Sector CDS Index 54.0 -.4%
• Emerging Market CDS Index 123.9 -.3%
• Bloomberg Global Trade Policy Uncertainty Index 2.4 +.2

• Citi US Economic Surprise Index 14.2 -.2 point

• Citi Eurozone Economic Surprise Index 26.2 -6.4 points

• Citi Emerging Markets Economic Surprise Index 32.1 +1.5 points 
• S&P 500 Current Quarter EPS Growth Rate YoY(16 of 500 reporting) +32.8% unch.
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 310.58 +.22:  Growth Rate +15.4% +.1 percentage point, P/E 22.0 -.2
• 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 485.22 +.57: Growth Rate +18.1% +.1 percentage point, P/E 32.1 -.7
• Bloomberg US Financial Conditions Index .77 unch.
• US Yield Curve 71.0 basis points (2s/10s) +2.0 basis points 
• Bloomberg Industrial Metal Index 164.05 +.4% 
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 29.1% +.3 percentage point
• US Atlanta Fed GDPNow Q4 Forecast +3.0% unch. 
• US 10-Year T-Note Yield 4.18% +2.0 basis points
• 1-Year TIPS Spread 2.36 +7.0 basis points

• Highest target rate probability for March 18th FOMC meeting: 50.3% (-1.0 percentage point) chance of 3.5%-3.75%. Highest target rate probability for April 29th meeting: 44.6%(unch.) chance of 3.25%-3.5%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +796 open in Japan 
• China A50 Futures: Indicating +143 open in China

• DAX Futures: Indicating +160 open in Germany

Portfolio:

• Higher: On gains in my consumer discretionary/tech/industrial/financial/utility sector longs
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts
• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.5%

Sector Underperformers:

• 1) Software -3.2% 2) Computer Services -2.4% 3) Gold & Silver -2.1%

Stocks Falling on Unusual Volume: 

• PATH, ISSC, AXSM, NTSK, LBRX, WDAY, AXTI, PSNY, FROG, RGNX, HCSG and CTEV

Stocks With Unusual Put Option Activity:

• 1) LQDA 2) SU 3) BIDU 4) CONL 5) CCIR

Stocks With Most Negative News Mentions:

• 1) WDAY 2) APP 3) INBS 4) RUBI 5) CRM

Sector ETFs With Most Negative Money Flow:

• 1) XLK 2) XME 3) XLU 4) IBB 5) XLP

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value +.8%

Sector Outperformers:

• 1) Alt Energy +4.7% 2) Semis +3.8% 3) Oil Service +3.3

Stocks Rising on Unusual Volume:

•  SOC, SKYT, APLD, AAOI, SMR, BIDU, BMNR, SNDK, VELO, SERV, CRWV, NXE, GDS, RH, LUNR, POWL, MU, ASML, ASTS, VICR, VRT, FUTU, EH, ONDS, CCJ, NTES, BILI, TIGR, INTC, BABA, SMCI, DJT, W, AMKR, CORT, AAON, STM, AAON, TSM, CHA, WSM, FTAI, QBTS, YMM, IIPR, RKLB, IBKR, MSTR, UMAC, EQNR, HALO, WRBY, BA, OXLC and WB

Stocks With Unusual Call Option Activity:

• 1) VTYX 2) MET 3) EU 4) IQ 5) MT 

Stocks With Most Positive News Mentions:

• 1) MU 2) RH 3) SOC 4) VRT 5) LRCX

Sector ETFs With Most Positive Money Flow:

• 1) URA 2) COPX 3) SIL 4) MAGS 5) KRE

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Monday'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 

10:00 am EST

• The ISM Manufacturing Index for Dec. is estimated to rise to 48.3 versus 48.2 in Nov.
• ISM Prices Paid for Dec. is estimated to rise to 59.0 versus 58.5 in Nov. 

Afternoon

• Wards Total Vehicle Sales for Dec. is estimated to rise to 15.7M versus 15.6M in Nov. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kashkari speaking, Atlanta Fed GDPNow Q4 update, Consumer Electronics Show and the Goldman Sachs Energy/CleanTech/Utilities Conference could also impact trading on Monday.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -15.2% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.4 -3.0
• 5 Sectors Declining, 6 Sectors Rising
• 59.6% of Issues Advancing, 38.7% Declining 
• TRIN/Arms .82 -41.0%
• Non-Block Money Flow +$47.2M
  
• 55 New 52-Week Highs, 36 New Lows
• 61.1% (+2.0%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 59.3 +2.1

Polymarket:

• Supreme Court Rules in Favor of Trump's Tariffs? 26.0% -4.0 percentage points
• Will there be another US government shutdown by January 31st? 27.0% -1.0 percentage point
• Will China invade Taiwan by end of 2026? 10.0% -2.0 percentage points
• US-Venezuela military engagement by Jan. 31st 18.0% -6.0 percentage points

Other:

• Bloomberg Global Risk-On/Risk-Off Index 98.9 +1.3%
• US High-Yield Tech Sector OAS Index 421.75 -2.0 basis points
• Bloomberg Cyclicals/Defensives Index 264.4 -.1%
• Morgan Stanley Growth vs Value Index 158.9 -.2%
• CNN Fear & Greed Index 44.0 (Moved to FEAR from NEUTRAL) -3.0
• 1-Day Vix 8.6 -20.0%
  
• Vix 14.6 -2.3%
  
• Total Put/Call .82 -24.1%

Friday Watch

Night Trading 

• Asian equity indices are unch. to +.5% on average. 
• Asia Ex-Japan Investment Grade CDS Index 64.75 +.25 basis point.
• China Sovereign CDS 43.75 +.25 basis point.
• China Iron Ore Spot 104.75 USD/Metric Tonne -.34%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.81 -.16%.
• Bloomberg Emerging Markets Currency Index 36.13 -.01%.
• Bloomberg Global Risk-On/Risk Off Index 97.5 -.2%.
• US 10-Year Yield 4.17% n/a.
• Japan 30-Year Yield 3.40% n/a. 
• Volatility Index(VIX) futures 18.34 -1.1%.
• Euro Stoxx 50 futures -.53%. 
• S&P 500 futures +.23%.
• NASDAQ 100 futures +.25%.

Morning Preview Links

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