Stocks Slightly Lower into Close on Diminished Fed Rate-Cut Odds, Earnings Outlook Worries, Technical Selling, Tech/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.4 -1.7%
• DJIA Intraday % Swing .57% +45.4%
  
• Bloomberg Global Risk On/Risk Off Index 60.2 -.70%

• Euro/Yen Carry Return Index 172.69 +.22%

• Emerging Markets Currency Volatility(VXY) 7.3 -.41%

• CBOE S&P 500 Implied Correlation Index 16.8 -3.9% 

• ISE Sentiment Index 132.0 -3.0
  

• Total Put/Call .88 -4.4%

• NYSE Arms 1.13 -8.1% 
• NYSE Non-Block Money Flow +$13.8M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 54.02 +.03%
  

• US Energy High-Yield OAS 317.46 +.57%
• Bloomberg TRACE # Distressed Bonds Traded 307 +3
  

• European Financial Sector CDS Index 67.46 +1.0% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 191.86 -1.8%
  

• Italian/German 10Y Yld Spread 153.0 basis points +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 101.5 +.5%
  

• Emerging Market CDS Index 177.69 +.51%
• Israel Sovereign CDS 129.7 -.7%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.4 +.26%

• 2-Year SOFR Swap Spread -14.0 basis points +1.0 basis point
  

• Treasury Repo 3M T-Bill Spread 5.0 basis points +.25 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -4.5 -.25 basis point
  
• MBS  5/10 Treasury Spread 143.0 -3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 909.0 -1.0 basis point
  
• Avg. Auto ABS OAS 71.0 +1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 40.8 +.09%
• 3-Month T-Bill Yield 5.35% -1.0 basis point
  

• China Iron Ore Spot 131.5 USD/Metric Tonne -1.0%
• Dutch TTF Nat Gas(European benchmark) 29.4 euros/megawatt-hour +4.3%

• Citi US Economic Surprise Index 27.8 -2.2 points

• Citi Eurozone Economic Surprise Index -1.3 +7.9 points

• Citi Emerging Markets Economic Surprise Index -3.6 -4.1 points
• S&P 500 Current Quarter EPS Growth Rate YoY(144 of 500 reporting) -7.3% -5.7 percentage points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 243.72 +.17:  Growth Rate +10.1% +.1 percentage point, P/E 20.2 +.1
  
• S&P 500 Current Year Estimated Profit Margin 11.54% +2.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(2 of 10 reporting) -16.6% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 294.60 +.26: Growth Rate +38.1% +.1 percentage point, P/E 31.7 +.2
  
• Bloomberg US Financial Conditions Index .94 -3.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .73 -10.0 basis points
  
• US Yield Curve -30.25 basis points (2s/10s) -5.25 basis points
  
• US Atlanta Fed 1Q GDPNow Forecast +3.0% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 64.7% +.7 percentage point
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.66% unch.: CPI YoY +2.96% unch.
  
• 10-Year TIPS Spread 2.26 -3.0 basis points
  
• Highest target rate probability for March 20th FOMC meeting: 58.3%(+5.4 percentage points) chance of 5.25%-5.5%. Highest target rate probability for May 1st meeting: 54.5%(+3.1 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -85 open in Japan 
• China A50 Futures: Indicating -66 open in China

• DAX Futures: Indicating +101 open in Germany

Portfolio:

• Higher:  On gains in my consumer discretionary/industrial sector longs, index hedges and emerging market shorts
  

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 75% Net Long
  

Tomorrow's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open:

• (APTV)/1.33
• (ADP)/2.10
• (BA)/-.78
• (BSX)/.51
• (EAT)/.96
• (GSK)/.74
• (GPI)/10.44
• (HES)/1.45
• (MA)/3.08
• (ODFL)/2.85
• (PSX)/2.35
• (ROK)/2.64
• (TMO)/5.64
• (TRI)/.91
  

After the Close: 

• (AFL)/1.45
• (AEM)/.46
• (ALGN)/2.16
• (AVB)/2.74
• (BOOT)/1.79
• (CHRW)/.80
• (CP)/1.11
• (CNMD)/1.11
• (FLEX)/.45
• (KLIC)/.26
• (LSTR)/1.62
• (MET)/1.92
• (QCOM)/2.37
• (PGR)/2.34
• (OTIS)/.86
• (VSTO)/.81
  

Economic Releases

8:15 am EST

• The ADP Employment Change for Jan. is estimated to fall to 150K versus 164K in Dec.
• The Employment Cost Index for 4Q is estimated to rise +1.0% versus a +1.1% gain in 3Q.
  

9:45 am EST

• The MNI Chicago PMI for Jan. is estimated to rise to 48.0 versus 47.2 in Dec.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -225,200 barrels versus a -9,233,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,339,600 barrels versus a +4,912,000 barrel gain the prior week. Distillate inventories are estimated to fall by -347,200 barrels versus a -1,417,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +1.5% versus a -7.1% decline prior.

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at 5.25-5.5%.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The FOMC Press Conference, weekly MBA Mortgage Applications report, Texas Service Sector Outlook for Jan., (SAGE) shareholders meeting and the (ACN) general meeting could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• Volume Running +12.9% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 9.8 -2.3
  
• 7 Sectors Declining, 4 Sectors Rising
• 35.1% of Issues Advancing, 61.8% Declining 
• TRIN/Arms 1.08 -12.2% 
• Non-Block Money Flow -$99.7M
  
• 139 New 52-Week Highs, 11 New Lows
• 62.5%(-2.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 65.0 +3.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 60.4 -.4%
• Bloomberg Cyclicals/Defensives Pair Index 138.5 -.01%
  
• Russell 1000: Growth/Value 19,096.9 -.16%
• CNN Fear & Greed Index 74.0 (Greed) -2.0
• 1-Day Vix 9.8 +4.6%
  
• Vix 13.5 -.4%
  
• Total Put/Call .89 -3.3%

Tuesday Watch

Evening Headlines

Bloomberg: 

• China’s 10-Year Yield Falls to Two-Decade Low on Easing Hopes.
• Evergrande Set for Liquidation as China Property Crisis Drags On.
• US Seeks Just-Tough-Enough Response to Middle East Attack. 
• Treasuries Steady After Rally, Asia Stocks Gain: Markets Wrap.
• Deadly Attack Near Syria Renews Focus on US Bases in Middle East.
• IBM to Managers: Move Near an Office or Leave Company.
• JPMorgan’s Kolanovic Sees Tech Earnings Testing Rich Valuations.
• Las Vegas Super Bowl Is Most-Expensive Ever at $9,800 a Seat.
  
• AI Officer Is the Hot New Job That Pays Over $1 Million.
• US Corporate Bond Sales Hit $188 Billion in Record January.
• Whirlpool Warns of Softness in 2024 as Consumers Pull Back on Spending.

Zero Hedge:

• White House Spox Called Out For Odd Condolence Statement: 3 US Troops Died Fighting For 'This Administration'.
• Yields Tumble, Futures Soar After Treasury Unexpectedly Slashes Borrowing Estimates.
• Rumors Swirl That Top Ukraine General Zaluzhny Has Been Sacked.
• Drought Hits Canada's Hydropower Sector.
• "What The Hell?": Europe Enraged As Biden Trade Policy Risks Maximum Malarkey.
• Biden To Renew Venezuela Oil Sanctions If Maduro Continues Barring US-Backed Oppo Candidate.
• How Courts Are Reshaping 2024 Congressional Races.
• Republican Senator Launches Thread To Track Violent Crime By Illegal Aliens.
• Spending On Natural Gas To Top $1 Trillion Over the Next Decade.
• Trump Has Reason To Rage... But Needs To Stay Calm And Get Even Rather Than Mad; VDH.
• Attention Gen-Zers: No College Needed! This $400,000 Retail Job Might Be Perfect.
• White Minnesota Farmer Sues State Over Discriminatory Program.
• US stocks gained in quiet trade amid lower yields and after the US Treasury cut is quarterly funding estimates - Newsquawk Asia-Pac Market Open.
• Trump Judge To Decide On $370 Million In Penalties In NY Real Estate Trial.
• "Off-The-Rails Psychologically" - The Democratic Party Will Do Anything To Avert Losing Control Of Govt.
• Stocks and bonds extend gains after Treasury slashes financing estimates - Newsquawk US Market Wrap.
• Stocks, Bonds, Bullion, & Bitcoin All Rip As Catalyst-Heavy Week Begins.
• The Blowoff!
• Nomura: The 'Murder' Of US Equity Vol Continues, Until...

Wall Street Journal:

• U.S. Failed to Stop Attack in Jordan After Mix-Up Over Drone Identity
• GM Went All In on EVs. Dealers Say Buyers Want Hybrids.
• Alaska Airlines Plane Appears to Have Left Factory Without Critical Bolts.
• Elizabeth Warren’s iRobot Gift to China. Antitrust regulators kill the iRobot-Amazon tie, and job losses ensue.
• Top Goldman Sachs Executive to Depart.
• Watching Ads on Amazon Video Is a Deal Breaker for Some.

CNBC.com:

• Amazon terminates iRobot deal, Roomba maker to lay off 31% of staff.
• FanDuel parent Flutter lists on the NYSE, challenging DraftKings as sports-betting pure play.
• Stocks making the biggest moves after hours: Whirlpool, F5, Cleveland-Cliffs and more.
• Sen. Elizabeth Warren pushes Fed Chair Powell to cut ‘astronomical’ rates, ease housing pressure.
• DOJ and SEC unveil charges in $1.9 billion HyperFund cryptocurrency fraud.
• Elon Musk’s Neuralink implants brain tech in human patient for the first time.

MarketWatch.com:

• Big Tech stocks look ‘exhausted,’ analyst warns. But these 100 ‘next-gen’ Nasdaq names appear poised to take off.
• Falling mortgage rates boost home buyers’ purchasing power by almost $40,000 — but also bring back bidding wars.
• BlackRock upgrades U.S. stocks to overweight, says AI-driven rally could broaden in next 6 to 12 months.
• Super Micro’s monster earnings forecast sends stock soaring yet again.
• Is Nvidia today’s Cisco? Here’s what Ed Yardeni thinks. 
• Tesla expects to spend over $10 billion on next-gen vehicles, AI products and other projects this year.

Fox News:

• School board ignites firestorm after removing Veterans Day and Columbus Day holidays.
• Bill Maher knocks the left as 'different kind of nuts' for thinking 'men can have babies'.

TheGatewayPundit.com:

• Venezuelan Communist Dictator Prevents Top Opposition Candidate from Running in Election – Just Like the Democrats.
• Archbishop Viganò Denounces Globalist Elite’s ‘Coup d’état’ at National Congress: A Call for Resistance Against New World Order.
• UFC Veteran Paige VanZant Claims Taylor Swift and Travis Kelce’s Romance as “100% Fake” — Recounts Her Own Experience with NFL Player (VIDEO).
• Texas Meteorologists Believe Mysterious Blob Spotted on Radar Was Military “Chaff”
• Bill Melugin: Illegals from China, Turkey and India Cross Border in San Diego County (VIDEO).
• Italy’s PM Meloni Unveils Her ‘Africa Plan’ To Create an Energy Hub and Curb Illegal Immigration.
• Woke DEI-Lover Mark Cuban Posts Message Allegedly Admitting to an Illegal Hiring Practice and Gets Schooled by EEOC Commissioner.
• Three US Servicemembers Killed in Jordan UAS Attack Identified – All From Reserve Unit Out of Fort Moore, Georgia.
• WATCH: America-First Protester Explodes on NeoCon Warmonger Nikki Haley During Campaign Event in South Carolina and Rips Up One of Her Campaign Signs.
• JUST IN: Former IRS Consultant Who Leaked Trump’s Taxes Sentenced to Only 5 Years in Prison in ‘Sweetheart Deal’ with Biden DOJ.
• SICK: Texas Democrat Posts Tweet Seemingly Calling for Bombing American Citizens Who Support Texas Against the Biden Regime Over the Border – Conservatives Respond. 
• Missouri Attorney General Threatens to File Suit Against Biden Regime After Al-Shabab Terrorist Is Caught and Released at US Border and Roams Free in US for Nearly a Year.
• Con-Woman Who Bilked US Army Out of $100 Million Meant for Military Families and Kids Will Keep Her Military Retirement Benefits. 
• Inside the Democrats “Deep State” Plan to Oust Joe and Insert Michelle Obama (Video). 
• Eight Ways Chris Wray and Bill Barr Destroyed Free and Fair Elections in America.

The Epoch Times:

• Biden Administration’s China Fantasy Puts US at Risk.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 1,000,725 Reports(+2,808 from prior report) Through December 29th, 2023.

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 101.25 +.5 basis point.

• China Sovereign CDS 64.75 -.5 basis point.
  
• China Iron Ore Spot 135.0 USD/Metric Tonne -.32%.

• Bloomberg Emerging Markets Currency Index 40.8 +.03%.
• Bloomberg Global Risk-On/Risk Off Index 60.4 -.35%.
• Volatility Index(VIX) futures 14.2 -.36%.
• Euro Stoxx 50 futures +.43%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures +.03%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer 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 Surging into Final Hour on Lower Long-Term Rates, Earnings Outlook Optimism, Short-Covering, Biotech/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.7 +3.1%
• DJIA Intraday % Swing .29% -77.8%
  
• Bloomberg Global Risk On/Risk Off Index 61.2 -.32%

• Euro/Yen Carry Return Index 172.2 -.7%

• Emerging Markets Currency Volatility(VXY) 7.4 unch.

• CBOE S&P 500 Implied Correlation Index 17.5 -.6% 

• ISE Sentiment Index 135.0 -17.0
  

• Total Put/Call .95 +5.6%

• NYSE Arms 1.44 +65.5% 
• NYSE Non-Block Money Flow +$42.0M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 54.4 -.12%
  

• US Energy High-Yield OAS 319.0 +1.3%
• Bloomberg TRACE # Distressed Bonds Traded 304 -11
  

• European Financial Sector CDS Index 66.79 -.17% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 195.34 -.72%
  

• Italian/German 10Y Yld Spread 150.0 basis points -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 101.31 +1.0%
  

• Emerging Market CDS Index 177.27 +.25%
• Israel Sovereign CDS 130.60 +6.3%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.35 -.15%

• 2-Year SOFR Swap Spread -15.0 basis points -.5 basis point
  

• Treasury Repo 3M T-Bill Spread 4.75 basis points +.75 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -4.25 unch.
  
• MBS  5/10 Treasury Spread 146.0 +2.0 basis point
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 910.0 +1.0 basis point
  
• Avg. Auto ABS OAS 70.0 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 40.8 -.17%
• 3-Month T-Bill Yield 5.36% +1.0 basis point
  

• China Iron Ore Spot 135.1 USD/Metric Tonne -.24%
• Dutch TTF Nat Gas(European benchmark) 28.2 euros/megawatt-hour +.34%

• Citi US Economic Surprise Index 30.0 +2.7 points

• Citi Eurozone Economic Surprise Index -9.2 +.9 point

• Citi Emerging Markets Economic Surprise Index 1.5 +.5 point
• S&P 500 Current Quarter EPS Growth Rate YoY(125 of 500 reporting) -1.6% unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 243.55 -.21:  Growth Rate +10.0% -.1 percentage point, P/E 20.1 unch.
  
• S&P 500 Current Year Estimated Profit Margin 11.52% -5.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(2 of 10 reporting) -16.6% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 294.34 +.61: Growth Rate +38.0% +.3 percentage point, P/E 31.5 +.1
  
• Bloomberg US Financial Conditions Index .97 +2.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .83 +12.0 basis points
  
• US Yield Curve -25.0 basis points (2s/10s) -4.75 basis points
  
• US Atlanta Fed 1Q GDPNow Forecast +3.0% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 64.0% -.5 percentage point
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.66% unch.: CPI YoY +2.96% unch.
  
• 10-Year TIPS Spread 2.29 -1.0 basis point
  
• Highest target rate probability for March 20th FOMC meeting: 52.6%(+.3 percentage point) chance of 5.25%-5.5%. Highest target rate probability for May 1st meeting: 51.4%(+.5 percentage point) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +85 open in Japan 
• China A50 Futures: Indicating -65 open in China

• DAX Futures: Indicating +132 open in Germany

Portfolio:

• Higher:  On gains in my biotech/tech/consumer discretionary/utility/industrial sector longs

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

• Market Exposure: Moved to 100% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Value -.1%
  

Sector Underperformers:

• 1) Airlines -1.4% 2) Telecom -1.2% 3) Oil Service -.7%

Stocks Falling on Unusual Volume: 

• SNX, UTI, PRVA, ARLP, IRBT and GCT
  

Stocks With Unusual Put Option Activity:

• 1) BBD 2) JCI 3) SATS 4) PZZA 5) BKR
  

Stocks With Most Negative News Mentions:

• 1) BE 2) PDD 3) MBLY 4) DADA 5) ALVR
  

Charts:

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