Stocks Sharply Lower into Final Hour on Coronavirus Fears, European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Metals & Mining/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Every Sector Declining
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 48.2 +23.0%

• Euro/Yen Carry Return Index 123.20 -1.5%

• Emerging Markets Currency Volatility(VXY) 8.10 +8.7%

• S&P 500 Implied Correlation 61.4 +25.0%

• ISE Sentiment Index 89.0 +3
  

• Total Put/Call 1.33 -.75%

• NYSE Arms .73 -.56%

Credit Investor Angst:

• North American Investment Grade CDS Index 68.30 +8.2%
  

• America Energy Sector High-Yield CDS Index 607.0 n/a

• European Financial Sector CDS Index 75.38 +11.89%

• Italian/German 10Y Yld Spread 174.25 +24.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 71.25 +23.7%
  

• Emerging Market CDS Index 246.03 +8.30%
  

• iBoxx Offshore RMB China Corporate High Yield Index 171.21 +.06%

• 2-Year Swap Spread 5.75 +1.25 basis points

• TED Spread 29.25 +16.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -15.25 -5.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 63.30 -.58%
• 3-Month T-Bill Yield 1.27% -24.0 basis points

• Yield Curve .24 +9.0 basis points

• China Iron Ore Spot 82.0 USD/Metric Tonne -3.45%

• Citi US Economic Surprise Index 56.20 +6.9 points

• Citi Eurozone Economic Surprise Index .4 +4.0 points

• Citi Emerging Markets Economic Surprise Index 15.4 -2.0 points

• 10-Year TIPS Spread 1.46 -8.0 basis points
• 51.5% chance of 75.0 basis point Fed rate cut at April 29th meeting, 46.2% chance of 75.0 basis point cut at June 10th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -522 open in Japan 
• China A50 Futures: Indicating -143 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech sector longs, index hedges and emerging market shorts

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

• Market Exposure: Moved to 50% Net Long

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +147.1% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 12.8% of Issues Advancing, 86.2% Declining
• 3 New 52-Week Highs, 891 New Lows
• 28.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 30.2%
• Vix 46.1 +17.7%
• Total Put/Call 1.31 -2.24%
• TRIN/Arms .85 -48.8%

Friday Watch

Night Trading 

• Asian equity indices are -3.0% to -2.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 61.75 +5.25 basis points.

• China Sovereign CDS 46.5 +5.5 basis points.

• Bloomberg Emerging Markets Currency Index  63.68 +.02%.

• FTSE 100 futures n/a.

• S&P 500 futures +.22%.

• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note 

Company/Estimate

Before the Open:

• (AES)/.33

• (CYOU)/.58

• (FL)/1.58

• (SOHU)/-.40

• (SUP)/-.29

• (W)/-2.62

After the Close:

• None of note

Economic Releases 

8:30 am EST

• Advance Goods Trade Balance for Jan. is estimated at -$68.5B versus -$68.3B in Dec.

• Wholesale Inventories MoM for Jan. is estimated to rise +.1% versus a -.2% decline in Dec. 

• Retail Inventories MoM for Jan. is estimated to rise +.2% versus unch. in Dec.

• Personal Income for Jan. is estimated to rise +.4% versus a +.2% gain in Dec.

• Personal Spending for Jan. is estimated to rise +.3% versus a +.3% gain in Dec.

• The PCE Core MoM for Jan. is estimated to rise +.2% versus a +.2% gain in Dec.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The German Unemployment Rate report could also impact trading today.

Market Hours

Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are sharply lower, weighed down by technology and commodity shares in the region. I expect US stocks to open lower and to rally into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Morning Market Internals

NYSE Composite Index:

• Volume Running +107.4% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 7.5% of Issues Advancing, 91.6% Declining
• 9 New 52-Week Highs, 626 New Lows
• 41.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 34.9%
• Vix 33.4 +21.4%
• Total Put/Call 1.35 +12.5%
• TRIN/Arms 1.36 -25.4%

Thursday Watch

Night Trading 

• Asian equity indices are -1.75% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 56.5 +3.0 basis points.

• China Sovereign CDS 41.25 +.75 basis point.

• Bloomberg Emerging Markets Currency Index  63.89 +.03%.
• FTSE 100 futures -1.72%.

• S&P 500 futures -.80%.

• NASDAQ 100 futures -.73%.

Morning Preview Links

Earnings of Note 

Company/Estimate

Before the Open:

• (PLAN)/-.10
• (BUD)/.81
• (BBY)/2.67
• (CHS)/-.06
• (CROX)/.08
• (DISCA)/.92
• (FSS)/.42
• (FLIR)/.62
• (FRO)/.68
• (JCP)/-.08
• (KDP)/.35
• (NVCR)/.00
• (PDCO)/.37
• (PWR)/.83
• (SAGE)/-3.63
• (SAFM)-1.06
• (TD)/1.69

After the Close:

• (AMC)/.14
• (ADSK)/.90
• (BIDU)/25.85
• (BYND)/.00
• (DELL)/2.00
• (EIX)/.97
• (EOG)/1.19
• (MTZ)/1.26
• (MNST)/.47
• (MYL)/1.28
• (OXY)/-.14
• (TTD)/1.16
• (TDW)/-.27
• (VMW)/2.14
• (WDAY)/.40

Economic Releases 

8:30 am EST

• 4Q GDP is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.
• 4Q Personal Consumption is estimated to rise +1.7% versus a prior estimate of a +1.% gain. 
• 4Q GDP Price Index is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.
• Core PCE QoQ is estimated to rise +1.3% versus a prior estimate of a +1.3% gain.
• Durable Goods Orders for Jan. is estimated to fall -1.5% versus a +2.4% gain in Dec.
• Durables Ex Transports for Jan. is estimated to rise +.2% versus a -.1% decline in Dec.
• Cap Goods Orders Non-Defense Ex-Air for Jan. is estimated to rise +.1% versus a -.8% decline in Dec.
• Initial Jobless Claims for last week are estimated to rise to 212K versus 210K the prior week.
• Continuing Claims are estimated to fall to 1722K versus 1726K prior.
  

10:00 am EST

• Pending Home Sales MoM for Jan. is estimated to rise +3.0% versus a -4.9% decline in Dec.
  

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for Feb. is estimated at -1 versus -1 in Jan.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan jobless rate, Eurozone Consumer Confidence report, weekly MBA Mortgage Applications report, $32B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the (CR) investor day could also impact trading today.

Market Hours

Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.

Stocks Finish Mostly Lower on Coronavirus Fears, European/Emerging Markets/US High Yield Debt Angst, Oil Decline, Energy/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Heavy

• Market Leading Stocks: Underperforming 

Equity Investor Angst:

• Volatility(VIX) 28.3 +1.5%

• Euro/Yen Carry Return Index 124.63 +.18%

• Emerging Markets Currency Volatility(VXY) 7.21 +.84%

• S&P 500 Implied Correlation 52.7 -5.19%

• ISE Sentiment Index 86.0 +7
  

• Total Put/Call 1.14 -14.9%

• NYSE Arms 1.42 +24.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.23 +4.17%
  

• America Energy Sector High-Yield CDS Index 732.0 +4.56%

• European Financial Sector CDS Index 59.44 +1.47%

• Italian/German 10Y Yld Spread 150.0 unch.
  

• Asia Ex-Japan Investment Grade CDS Index 54.50 +3.18%
  

• Emerging Market CDS Index 214.04 +1.27%
  

• iBoxx Offshore RMB China Corporate High Yield Index 171.0 -.02%

• 2-Year Swap Spread 4.5 +3.0 basis points

• TED Spread 12.5 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 64.05 -.26%
• 3-Month T-Bill Yield 1.51% -2.0 basis points

• Yield Curve .15 +3.0 basis points

• China Iron Ore Spot 85.0 USD/Metric Tonne -.25%

• Citi US Economic Surprise Index 49.30 +4.5 points

• Citi Eurozone Economic Surprise Index -3.60 -1.3 point

• Citi Emerging Markets Economic Surprise Index 17.4 +1.2 points

• 10-Year TIPS Spread 1.54 +1.0 basis point
• 52.0% chance of 25.0 basis point Fed rate cut at April 29th meeting, 40.7% chance of 25.0 basis point cut at June 10th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -176 open in Japan 
• China A50 Futures: Indicating -31 open in China

• DAX Futures: Indicating -159 open in Germany

Portfolio:

• Slightly Higher: On gains in my biotech longs, index hedges and emerging market shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long