Stocks Slightly Higher into Final Hour on Central Bank Hopes, Less European Debt Angst, Yen Weakness, Retail/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 12.56 -2.64%

• Euro/Yen Carry Return Index 153.62 +.77%

• Emerging Markets Currency Volatility(VXY) 7.66 -1.42%

• S&P 500 Implied Correlation 30.38 +.3%

• ISE Sentiment Index 121.0 +45.78%

• Total Put/Call .74 unch.

• NYSE Arms 1.50 +172.33% 

Credit Investor Angst:

• North American Investment Grade CDS Index 61.74 -3.16%

• European Financial Sector CDS Index 62.50 -2.85%

• Western Europe Sovereign Debt CDS Index 28.55 -7.0%
• Asia Pacific Sovereign Debt CDS Index 62.61 -2.0%

• Emerging Market CDS Index 270.80 +.32%

• China Blended Corporate Spread Index 324.71 -.75%
• 2-Year Swap Spread 22.25 +.5 basis point

• TED Spread 23.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% +1 basis point

• Yield Curve 181.0 unch.

• China Import Iron Ore Spot $70.42/Metric Tonne +.16%

• Citi US Economic Surprise Index 13.40 -6.5 points
• Citi Eurozone Economic Surprise Index -25.30 +10.7 points

• Citi Emerging Markets Economic Surprise Index 0.0 +1 point

• 10-Year TIPS Spread 1.88 unch.

Overseas Futures:

• Nikkei Futures: Indicating +158 open in Japan

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

• Higher: On gains in my tech/retail/biotech/medical sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.08%

Sector Underperformers:

• 1) Coal -2.15% 2) Oil Service -1.31% 3) Construction -1.30%

Stocks Falling on Unusual Volume:

• RNR, MCEP, OCR, POT, CPA, LRE, CBI, EXCU, CSH, TCP, QTWO, EQM, KEP, OPWR, JAH, TSL, MOS, T, KMT, UTX, SEP, ASML, JEC, CRM and NSLP

Stocks With Unusual Put Option Activity:

• 1) UTX 2) TIF 3) C 4) SNDK 5) WMT

Stocks With Most Negative News Mentions:

• 1) SPF 2) TYC 3) XOM 4) BG 5) GM
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.85%

Sector Outperformers:

• 1) Biotech +1.39% 2) Airlines +1.04% 3) Semis +.87%
  

Stocks Rising on Unusual Volume:

• PTP, RNA, TSEM, TTPH, OUTR, SRPT, URBN, LCI and DDD

Stocks With Unusual Call Option Activity:

• 1) SNSS 2) TMUS 3) BKS 4) ARIA 5) AVP
  

Stocks With Most Positive News Mentions:

• 1) KATE 2) BERY 3) DENN 4) STX 5) HLS
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg:

• Ukrainian Leader Evokes Stalin's Famine as Fight With Pro-Putin Rebels Intensifies. President Petro Poroshenko evoked memories of the 1930s famine that killed as many as 10 million Ukrainians under Soviet leader Joseph Stalin to rally citizens as pro-Russian separatists intensified fighting in the east. Poroshenko, flanked by his wife and administration officials, laid a jar filled with grains in front of a candle-shaped obelisk beside the Dnieper River in Kiev yesterday to commemorate the famine, which was declared a genocide in Nov. 28, 2006 by Ukrainian lawmakers. Russia has long rejected the claim of genocide, calling it a “one-sided falsification of history.” 

• PBOC Bounce Seen Short Lived as History Defies Bulls. China’s benchmark stock index rose to a three-year high after the central bank’s surprise interest rate cut late last week. Recent history suggests the gains won’t last long. While the Shanghai Composite Index (SHCOMP) climbed 2 percent today, six of the past seven cuts to interest rates and reserve requirements have been followed by declines in stock prices over the next two months. The last time the PBOC lowered lending and deposit rates, in July 2012, the benchmark index fell 7.4 percent, according to data compiled by Bloomberg.

• OPEC Underestimated Resiliency of U.S. Oil Output: Yergin. OPEC was mistaken in thinking that U.S. shale oil production would be unprofitable once crude prices slipped below $90 a barrel, according to Pulitzer Prize-winning author Daniel Yergin. The Organization of Petroleum Exporting Countries will have a tough time coming to an agreement about production when ministers gather Nov. 27 in Vienna, said the vice-chairman of IHS Inc., an Englewood, Colorado-based consultant. Oil prices plunged into a bear market last month, the result of a surge in shale drilling that lifted U.S. output to a three-decade high, as OPEC output rose and there were increasing signs of slower demand growth.

• Asian Stocks Advance as China Rate Cut Boosts Optimism. Asian stocks rose, with a regional gauge heading for its biggest advance this month, after U.S. indexes reached another record as China’s unexpected interest-rate cut stoked optimism in the global economy. In Sydney, BHP Billiton Ltd. (BHP), the world’s biggest mining company that gets about 35 percent of revenue from China, jumped 3.9 percent and Fortescue Metals Group Ltd. climbed 8.9 percent, rebounding from losses the past two weeks. China Vanke Co., the nation’s biggest homebuilder by sales, surged 6.8 percent in Hong Kong, pacing gains among mainland developers. China Railway Construction Corp. gained 1.7 percent after winning $1.98 billion worth of contracts in Saudi Arabia. The MSCI Asia Pacific excluding Japan Index climbed 1.2 percent to 479.04 as of 9:48 a.m. in Hong Kong, heading for its biggest advance since Oct. 29.

• Gold Wagers Gain as China Rate Reduction Stems Rout. Hedge funds added bullish gold wagers at the fastest pace since June as central bank action from China to Japan and Europe helped stem the rout in prices. The net-long position in New York futures and options expanded 56 percent, U.S. government data show. Short holdings fell to a two-month low and long wagers climbed for the first time in four weeks. 

• BHP(BHP) Targets Further Spending Cuts as Iron Prices Tumble. BHP Billiton Ltd. (BHP) plans to take a scalpel to capital spending and costs to bolster cashflows as plunging iron ore and crude oil prices heighten investor concerns over returns. Capital expenditure will be cut to $13 billion in fiscal 2016, downmore than 40 percent from 2012. The world’s biggest mining company also increased its annual target for productivity gains by 2017 by $500 million. 

Wall Street Journal: 

• No Iran Nuclear Deal Seen by Monday Deadline. U.S., Other World Powers Want to Extend Talks. The U.S. and other world powers said it will be virtually impossible to reach a comprehensive deal to curb Iran’s nuclear activities by the Monday night deadline, and they would favor extending the talks. U.S. officials are arguing that preserving improved relations with Tehran is preferable to a breakdown in more than a year of direct negotiations and a potential escalation of tensions in an already-fractious Middle East.

• Loan ‘Guarantee Chains’ in China Prove Flimsy. Companies Renege on Promises to Pay Up in a Default. When a fabric company called Jiangyin Xueyuan Textile Co. collapsed, the troubles soon cascaded through other firms in this mill town. A machinery maker, paper producer, manufacturer of faux-wood flooring and textile maker had one thing in common. They had promised, in the event of default, to repay the loans taken on by Xueyuan. Court documents say the fabric company can’t pay what it owes.

• More Redistribution, Less Income. Obama has spread the wealth, but the poor and middle class haven’t benefited.  

• Obama Is Damaging Hillary’s Chances. Mrs. Clinton’s popularity has plunged, and she is increasingly trapped by her former boss’s record.

Fox News:

• GOP, Democrats spar over legality of executive orders, as lawsuits begin. Democrats and Republicans sparred Sunday over whether President Obama violated the Constitution by using his executive power to change U.S. immigration law, with Texas GOP Sen. Ted Cruz calling the president’s actions “stunning and sad.”

MarketWatch.com:

• U.S., global business confidence slumps. U.S. and global business confidence slumped in the third quarter, according to a survey of business executives released Sunday. Markit said its U.S. business outlook survey showed that a net 31.2% of executives saw growing activity for the next 12 months in October, down from a net 51.4% when they were surveyed in June. That’s the lowest reading since the survey started in 2009. A global survey conducted by Markit saw a net 28% expecting higher activity, down from 39% in June, to mark a five-year low. Optimism in the eurozone was the weakest since June 2013, and Russian confidence fell to a survey low. In the U.S., hiring intentions fell to a new survey low, as did investment intentions.

CNBC:

• China said to be building airstrip-capable area in disputed waters. A major reclamation project by the Chinese government on a tiny reef 500 miles from the mainland would enable China to land military aircraft there, expanding China's reach into the contested South China Sea, analysts have said.

Zero Hedge:

• 5 Things To Ponder: Rising Risk.

• What Record Stock Buybacks Say About Economic Growth. (graph)

• Veteran S&P Futures Trader: "I Am 100% Confident That Central Banks Are Buying S&P Futures".

• On The Looming Wall Of Chinese Defaults, Restructuring Firm Warns "You Know It's Coming".

• Sell, Sell, Sell... The Central Bank Madmen Are Raging.

• Summing It All Up In 1 Surreal Chart. (graph)

• One Of The Most Striking Equity Market Anomalies Explained.

• The Astonishing Rise of Central Bank Fear. (graph)

• With A Hard-Landing Imminent, China Reminds Residents It Is Illegal To Jump Off Tops Of Buildings.

• Why Monetizing Debt Could End In Revolutions.

• Fear Of "Surge In Debt Defaults, Business Failures And Job Losses" Means Many More Chinese Rate Cuts. (graph)

• NATO Jets Surrounding Russia: Before And After.

• The Japanization Of Europe In 9 "Different This Time" Charts. (graph)

• American CEOs Sum Up The Economic Outlook: "Softness, Stagnant, Cautious, Challenging". (graph)

• Pressures On The US Economy Just Increased. (graph)

• The Massively Crowded 'Long-USD, Short-Treasuries' Trade Just Got Crowded-er. (graph)

• There Goes The Shopping Spree: Nor'easter May Hit East Coast For Thanksgiving. (map)

Business Insider:

• Stocks Are Now So Fantastically Expensive That They Will Likely Have Negative Returns For Years. (graph)

• Teens Are Tweeting Unappealing Photos Of Their School Lunches With The Hashtag #ThanksMichelleObama.

• The Israeli-Palestinian Conflict Is Drifting Dangerously Towards Religious War.

• Russia's Wounded Economy Is On The Verge Of A Crisis.

• China Just Made An Interest-Rate Cut That Could Screw Its Mid-Size Banks.

• ISIS Has An Important Iraqi City Surrounded.

• Merkel Is Toughening Up Against Putin — And That Could Be Huge.

• Obama's Immigration Order Is Unprecedented In Its Radicalism And Scope.

• Here's What Chinese Hackers Can Actually Do To The US Power Grid.

• Why I Don't Post Any Photos Of My Kid Online — And You Shouldn't, Either.

• Suicide Bomber Kills 45 At Volleyball Match In Afghanistan.

• Russia Is Losing The Currency Wars.

• No Country Comes Close To Buying Back Stock Like The US. (graph) One important reason earnings per share growth has been strong in the US is that American corporations have been spending trillions of dollars buying back the outstanding shares of their companies. 

• No One Expected Latin America To Slow Down Like This.

• The Performance Of State-Owned Enterprises Has Been Shockingly Bad.

• PUTIN: We're Stronger Than Everybody.

• Russia Is Overstating The Funds At Its Disposal.

Reuters:

• Mexico cuts 2014 growth forecast after surprisingly weak 3rd qtr. Mexico's finance ministry cut its 2014 growth forecast on Friday after the economy grew unexpectedly slowly in the third quarter in a modest recovery that is now also threatened by rising social unrest. Mexican gross domestic product expanded 0.5 percent in the third quarter from the second, the national statistics agency said on Friday, slowing from a downwardly revised 0.9 percent growth in the April-to-June period. A Reuters poll had projected 0.7 percent growth.

Financial Times:

• US oil imports from Opec at 30-year low. US imports of crude oil from Opec nations is at its lowest level in almost 30 years, underlining the impact of the shale revolution on global trade flows.

Telegraph:

• Sun sets on Opec dominance in new era of lower oil prices. Flood of new oil supply coming onstream from outside Opec and weakening demand makes the group's role in energy markets less relevant, writes Andrew Critchlow.

• China blinks as economic downturn deepens. "China is not safe until they put the credit genie back in the bottle but that is going to be very difficult to do,” warns UBS. 

Spiegel:

• Germany Sees Danger of Separation of East Ukraine. Reality in eastern Ukraine isn't in line w/Russia's promise not to destroy country's unity, citing interview w/German Foreign Minister Frank-Walter Steinmeier.

Night Trading

• Asian indices are +.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 105.0 -1.5 basis points.

• Asia Pacific Sovereign CDS Index 64.0 -1.75 basis points.

• FTSE-100 futures n/a.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NUAN)/.28

• (WDAY)/-.09

• (PANW)/.12

• (CPRT)/.37

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for October is estimated to fall to .4 versus .47 in September.

9:45 am EST

• The Preliminary Markit US Services PMI for November is estimated to rise to 57.3 versus 57.1 in October.  

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for November is estimated to fall to 9.0 versus 10.5 in October.

Upcoming Splits

• (JAH) 3-for-2

Other Potential Market Movers

• The $28B 2Y T-Note auction and the (ASML) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

Week Ahead (audio) by Bloomberg. 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as global growth worries, Russia/Ukraine tensions and rising European/Emerging Markets debt angst offset central bank hopes, seasonal strength and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.