Stocks Reversing Higher into Final Hour on FOMC Commentary, Earnings Optimism, US Economic Data, Tech/Healthcare Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.3 +.5%

• Euro/Yen Carry Return Index 125.58 -.02%

• Emerging Markets Currency Volatility(VXY) 7.19 +.56%

• S&P 500 Implied Correlation 32.1 +.6%

• ISE Sentiment Index 93.0 -5.0
  

• Total Put/Call 1.11 +26.1%

• NYSE Arms .98 +3.16%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.71 +1.09%
  

• America Energy Sector High-Yield CDS Index 488.0 +.25%

• European Financial Sector CDS Index 59.52 +1.61%

• Italian/German 10Y Yld Spread 134.5 +.75 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 66.79 +1.0%
  

• Emerging Market CDS Index 197.51 +2.29%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.12 +.01%

• 2-Year Swap Spread 2.25 -.5 basis point

• TED Spread 33.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 +3.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.02 -.47%
• 3-Month T-Bill Yield 1.60% unch.

• Yield Curve .19 -1.0 basis point

• China Iron Ore Spot 80.39 USD/Metric Tonne -.59%

• Citi US Economic Surprise Index 7.8 +6.4 points

• Citi Eurozone Economic Surprise Index -52.20 +.1 point

• Citi Emerging Markets Economic Surprise Index -20.80 -3.8 basis points

• 10-Year TIPS Spread 1.60 -2.0 basis points
• 37.2% chance of Fed rate cut at Jan. 29th meeting, 45.6% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +53 open in Japan 
• China A50 Futures: Indicating -45 open in China

• DAX Futures: Indicating -9 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech/biotech sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +17.8% Above 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 38.8% of Issues Advancing, 58.0% Declining
• 83 New 52-Week Highs, 35 New Lows
• 57.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.0%
• Vix 13.1 -.5%
• Total Put/Call 1.05 +19.3%
• TRIN/Arms .87 -8.4%

Wednesday Watch

Evening Headlines

Bloomberg:  

• U.S.-Led Nations Criticize China at UN for Treatment of Uighurs.  

• China Finds Solace in Wine From Australia as Economic Slowdown Hits.   

• Worst Isn’t Over for China Sovereign Bonds as Supply Surge Looms.

• Asia Stock Futures Mixed Before Fed Decision. Stocks in Asia were poised for a mixed start Wednesday after a lackluster session for U.S. equities left markets in a holding pattern awaiting the Federal Reserve’s policy decision. Treasuries and the dollar were flat. Shares in Sydney opened modestly lower, while equity futures earlier dipped in Japan and nudged higher in Hong Kong. The S&P 500 Index edged back from a record high amid a raft of earnings. A report that China and the U.S. might not sign a partial deal next month, a day after President Donald Trump’s assertion that negotiations were ahead of schedule, dented stocks exposed to the battle. Lenders got a lift after Treasury Secretary Steven Mnuchin said he’d be open to looser bank rules. Futures on the S&P 500 Index were little changed as of 8 a.m. in Tokyo. The underlying gauge slipped 0.1% on Tuesday. Australia’s S&P/ASX 200 Index dropped 0.2%. Futures on Japan’s Nikkei 225 slid 0.2%. Hang Seng Index futures earlier rose 0.1%.

• Five Things You Need to Know to Start Your Day.

• Fed Needs Insurance, Robots and Strongmen, Canada Rises: Eco Day.

• Yum China Reports Pizza Hut Growth Falls Short, KFC Stays Strong.

Wall Street Journal:

• U.K. Parliament Authorizes December General Election.

• Teens Explain Their YouTube Obsession.

• Futures Exchange Reins In Runaway Trading Algorithms.

• Arrests at U.S. Southern Border Hit Highest Level in More Than a Decade.

Fox News:

• House Dems' resolution formalizing impeachment inquiry blasted by WH as GOP claims it's unfair.

MarketWatch.com:   

• Here’s how stocks tend to perform after the Fed cuts interest rates 3 times in a row

• AMD reports highest revenue in more than a decade, but slightly light forecast makes stock volatile.  

• Two more billionaires say the 2020 election could trigger a market plunge.

CNBC:

• The NCAA will allow athletes to profit from their name, image and likeness

• Juul names new CFO amid management shake-up, several top executives are out

• WarnerMedia’s HBO Max will launch in the U.S. in May of 2020.

• Stocks making the biggest moves after hours: Mattel, Johnson & Johnson, Edison International and more.

Zero Hedge:   

• BOJ To Start Lending ETF Shares To Prevent Market Freeze.

• Is California's Second Biggest Utility On Verge Of Collapse Next: Edison Plummets After Saying It May Be Responsible For Deadly 2018 Fire.

• WTI Unimpressed By Small Crude Build, Cushing Draw.

• Majority Of American Students Want Wearing "Offensive" Halloween Costumes To Be Punished.

• JPMorgan Is Now Giving Its Coders Licenses To Deal In Equities.

• Stocks Slide Ahead Of Fed Amid Trade-Fade, Brextension Bounce.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 66.0 -.5 basis point.

• China Sovereign CDS 38.75 +.5 basis point.

• Bloomberg Emerging Markets Currency Index  66.30 -.05%.

• FTSE 100 futures -.52%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (APTV)/1.26

• (AAWW)/1.02

• (ADP)/1.33

• (EAT)/.42

• (BG)/.40

• (CME)/1.75

• (GE)/.12

• (HES)/-.30

• (MCK)/3.59

• (TAP)/1.51

• (MCO)/1.99

• (OSK)/1.88

• (RCL)/4.32

• (SNE)/122.16

• (WING)/.17

• (YUM)/.94

After the Close:

• (DDD)/-.05

• (AKS)/.05

• (APA)/-.19

• (AAPL)/2.83

• (CF)/.37

• (CRUS)/.94

• (FB)/1.86

• (HCP)/.43

• (H)/.33

• (KLAC)/2.20

• (LYFT)/-.74

• (MET)/1.40

• (MGM)/.32

• (OII)/-.22

• (SKYW)/1.74

• (SFM)/.19

• (SBUX)/.70

• (TDOC)/-.39

• (TWLO)/.01

• (OLED)/.61

• (WDC)/.29

• (WMB)/.25

Economic Releases
8:15 am EST

• The ADP Employment Change for Oct. is estimated to fall to 110K versus 135K in Sept.
  

8:30 am EST

• 3Q GDP is estimated to rise +1.6% versus a +2.0% gain in 2Q.

• 3Q Personal Consumption is estimated to rise +2.6% versus a +4.6% gain in 2Q.

• 3Q GDP Price Index is estimated to rise +1.9% versus a +2.4% gain in 2Q.

• Core PCE QoQ is estimated to rise +2.2% versus a +1.9% gain in 2Q.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -104,000 barrels versus a -1,699,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -2,040,170 barrels versus a -3,107,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,277,080 barrels versus a -2,715,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.72% versus a +2.1% gain prior.
  

2:00 pm EST

• The FOMC is expect to lower the benchmark Fed Funds Rate 25.0 basis points to 1.5-1.75%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's press conference, Eurozone Unemployment Rate report, BoJ forecasts, weekly MBA Mortgage Applications report and the (BA) CEO's testimony to House could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity 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 China Trade Deal Jitters, Oil Decline, Profit-Taking, Tech/Retail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.2 +.8%

• Euro/Yen Carry Return Index 125.59 +.02%

• Emerging Markets Currency Volatility(VXY) 7.11 -.56%

• S&P 500 Implied Correlation 31.16 +3.73%

• ISE Sentiment Index 98.0 -7.0
  

• Total Put/Call .92 +13.6%

• NYSE Arms .76 -24.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.0 +1.21%
  

• America Energy Sector High-Yield CDS Index 492.0 -1.68%

• European Financial Sector CDS Index 58.58 +2.06%

• Italian/German 10Y Yld Spread 133.75 unch.
  

• Asia Ex-Japan Investment Grade CDS Index 66.13 -1.69%
  

• Emerging Market CDS Index 192.88 +.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.11 +.02%

• 2-Year Swap Spread 2.75 -.25 basis point

• TED Spread 33.25 +6.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -21.5 +1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.34 -.05%
• 3-Month T-Bill Yield 1.60% -4.0 basis points

• Yield Curve .20 +2.0 basis points

• China Iron Ore Spot 83.15 USD/Metric Tonne -.81%

• Citi US Economic Surprise Index 1.4 -1.6 points

• Citi Eurozone Economic Surprise Index -52.30 +.2 point

• Citi Emerging Markets Economic Surprise Index -17.0 -.4 basis point

• 10-Year TIPS Spread 1.62 -3.0 basis points
• 95.6% chance of Fed rate cut at Dec. 11th meeting, 96.6% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -29 open in Japan 
• China A50 Futures: Indicating -8 open in China

• DAX Futures: Indicating -13 open in Germany

Portfolio:

• Slightly Lower: On losses in my tech/retail sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long