Today's Headlines

Bloomberg:

• China Stock Trading Most Muted Since 1992 as State Tightens Grip. Chinese stocks haven’t been so subdued since 1992 as government efforts to maintain stability as well as tightening liquidity deter traders. A gauge of 90-day volatility on the Shanghai Composite Index fell to a 24-year low at the end of December and has barely budged since, while turnover on the nation’s equity exchanges slumped to the lowest in two years last week. The benchmark measure added 0.4 percent to 3,136.78 at the close. China’s markets will be shut for a week-long holiday from Friday.
• Russia Wrests Crown of Top China Oil Supplier From Saudi Arabia. Russia overtook Saudi Arabia as China’s top oil supplier last year for the first time ever amid the ongoing battle for market share in the world’s biggest energy market. Russia boosted crude supply to the Asian nation by 24 percent from 2015 to 52.5 million metric tons, or 1.05 million barrels per day, according to data released Monday by the General Administration of Customs. The Middle Eastern kingdom became the second-biggest supplier, shipping 51 million tons, or 1.02 million barrels per day, little changed from a year earlier.
• Mexican Peso Leads Emerging-Market Gains as Dollar Dips on Trump. (video) The MSCI Emerging Markets Currency Index advanced 0.4 percent to the highest level on a closing basis since Nov. 9, the day after the U.S. election.
• European Stocks Slide to 3-Week Low as Trump Spurs Trade Angst. (video) European stocks declined, while volatility surged, as Donald Trump ordered the U.S. to withdraw from the Trans-Pacific Partnership trade deal. The Stoxx Europe 600 Index lost 0.4 percent at the close, after retreating as much as 0.7 percent. Banks and energy shares fell the most, while gains in miners tempered the benchmark’s declines. Trump also prepared to sign executive orders to renegotiate the North American Free Trade Agreement, according to an official familiar with the plans.
• Aetna’s(AET) $37 Billion Humana Takeover Blocked by Judge.
• Blue States Are Joining Forces in Court to Protect Obama's Legacy. Attorneys general from 16 states banded together to join a federal appeals court battle in defense of the 5 1/2-year-old Consumer Financial Protection Bureau, the latest sign of state-level Democrats combining resources to shield former President Barack Obama’s legacy.

CNBC:

• Supermarket chain Kroger(KR) to fill 10,000 permanent positions.
• Hedge fund assets top $3 trillion for the first time after boost from the Trump post-election rally.

Zero Hedge:

• Trump Signs 3 Executive Orders: Withdraws From TPP, Freezes Federal Hiring, Limits Overseas Abortion Funding.
• El-Erian Warns "Investors Are Underestimating Sudden Policy Shifts".
• Options Traders Are Pricing In The 3rd Highest Chance Of A 'Black Swan' Crash In History. (graph)
• Peso Tumbles As Mexican President Warns "Will Take Immediate Actions To Defend Interests... Doesn't Believe In Walls". (graph)
• Aetna's(AET) Takeover Of Humana Blocked As Anticompetitive.
• The Smoothest Transition Ever (For Markets).
• Trump Warns "We Are Going To Be Imposing A Very Major Border Tax", Will "Cut Regulations By 75%".
• Goldman(GS) Warns The Following Assets Are "Most Vulnerable To Substantial Repricing".
• Europe's "VIX" Spikes Most In 4 Months. (graph)
• Carl Icahn Praises Trump Speech: "Our Dangerous Slide Towards Socialism Is Over".
• The Collapse Of The Left's Great Con. (graph)

Business Insider:

• America's millennials stuck in their parents' basement may finally be able to move out.

Bear Radar

Style Underperformer:

• Large-Cap Value -.6%

Sector Underperformers:

• 1) Oil Service -2.3% 2) Airlines -2.3% 3) Hospitals -1.6%

Stocks Falling on Unusual Volume: 

• QCOM, BANC, FNSR, KRNT, TRGP, WBAI, WATT, SFM, AZO, EMES, TERP and HAL

Stocks With Unusual Put Option Activity:

• 1) EPD 2) QCOM 3) RSX 4) RCII 5) DUST

Stocks With Most Negative News Mentions:

• 1) RCII 2) HSTM 3) FNSR 4) AZO 5) QCOM

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.2%

Sector Outperformers:

• 1) Gold & Silver +2.4% 2) Steel +.9% 3) Telecom +.6%

Stocks Rising on Unusual Volume:

• CYNO, GLBS, TCX, SWIR, SWKS, TGH, LPL, WAT, OLED, CSX, SSL, DISH, GNK, KATE and TGP

Stocks With Unusual Call Option Activity:

• 1) UNXL 2) OAS 3) LC 4) HD 5) PHM

Stocks With Most Positive News Mentions:

• 1) TK 2) CSX 3) MCD 4) F 5) COG

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -18.0% Below 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 46.1% of Issues Advancing, 51.6% Declining
• 62 New 52-Week Highs, 10 New Lows
• 59.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.9%
• Vix 12.1 +5.1%
• Total Put/Call .96 -3.0%
• TRIN/Arms 1.65 +107.8%

Monday Watch

Today's Headlines

Bloomberg:

• China Slams Western Democracy as Flawed. China’s state media used Donald Trump’s inauguration as U.S. president to warn about the perils of democracy, touting the relative stability of the Communist system as President Xi Jinping heads toward a twice-a-decade reshuffle of senior leadership posts. With ministries and senior officials stressing unity as a priority for China, smoothing the path for the party’s congress in the fourth quarter, state media were quick to highlight divisions within America shown by Trump’s elevation, without necessarily directly referencing the new president.
• PBOC Conducts 60 Billion Yuan China Open-Market Operations. China’s central bank added funds to the financial system through open-market operations on Sunday, after injecting a record amount of cash last week and offering liquidity support to some lenders. The monetary authority added a net 60 billion yuan ($8.7 billion) using 14-day and 28-day reverse-repurchase agreements. There are no contracts maturing Sunday. The People’s Bank of China pumped in a net 1.13 trillion yuan last week.
• These Companies Are at Risk in a U.S.-China Trade War. With the arrival of China-bashing Donald Trump as president in the White House, analysts are drawing up shortlists of winners and losers from any eruption of tensions between the world’s top two economies. It’s still far from clear how plans will shape up under Trump, who on the campaign trail blasted trade deals with China that generated record U.S. deficits. What is clear: China will retaliate against any protectionist steps -- not only are there reported contingency plans, but the historical example of measures against Japan when tensions flared in 2012.
• Theresa May Gets Another Brexit Headache Amid Brussels Upheaval. U.K. Prime Minister Theresa May’s path to leave the European Union just got a little bit more complicated. The Socialist party, already struggling in France, Italy and the Netherlands, lost control of the European Parliament, which must approve any Brexit deal. The election last week signaled the end of a long-standing power-sharing agreement in the assembly, creating the possibility of division that could encumber May’s departure preparations.
• Yen Weighs on Japan Shares; Asia Stocks Tip Gains. The yen strengthened in early trading, likely weighing on shares in Tokyo when Japan’s market opens. Asian equities elsewhere were poised for gains. Stock-index futures in China, Australia, and Hong Kong pointed to a higher open for cash markets. Australian bonds declined. The dollar fell against Japan’s currency as Asian traders reacted for the first time to Donald Trump’s inauguration and comments by Bank of Japan Governor Haruhiko Kuroda that the greenback could strengthen.
• OPEC and Friends Agree on a Way to Monitor Oil-Output Cuts. OPEC and other oil producers agreed on a way to monitor their compliance with last month’s historic supply deal, putting global markets on track to re-balance after more than two years of oversupply. The countries have already cut oil supply by 1.5 million barrels a day, more than 80 percent of their collective target, since the deal took effect on Jan. 1, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih told reporters in Vienna. “Compliance is great -- it’s been really fantastic,” Al-Falih said Sunday. “Based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.”
• Medical-Laser Maker Cynosure Said to Eye Sale in Strategy Review. Cynosure Inc., the maker of lasers for medical and cosmetic treatments, is exploring strategic options including a sale, according to people familiar with the matter, amid increasing interest in the technology from larger global companies.
• Foxconn Weighs $7 Billion U.S. Factory With Apple(AAPL), Nikkei Says. Foxconn Technology Group Chairman Terry Gou told reporters in Taipei the company is considering a joint investment with Apple Inc. for a display manufacturing facility in the U.S., according to a report by the Nikkei Asian Review. The facility would cost more than $7 billion and may create an eventual 30,000 to 50,000 jobs, the publication cited Gou as saying.

Wall Street Journal:

• Global Uncertainty Gets Brushed Off in the U.S. and Europe. Consumers and businesses appear undaunted by the prospect of profound political change. Economists warned for months that the U.K.’s vote to leave the European Union could shake household and business confidence and hurt the economy, but it hasn’t played out that way.
• Trump Poised to Wield Executive Power to Make Immigration Changes. President can act on his own to deport more people, jump-start the border wall or restrict immigration from Syria.
• Investors Taper Bullish Bets as Trump Takes Office. Investors increase cash holdings, turn defensive as a hedge against possible rise in volatility.

MarketWatch.com: 

• Trump will not release tax returns, aide says, despite earlier promise to do so.

Fox News:

• Priebus defends Trump, top aide; says media has 'obsession' to 'delegitimize' president. (video)

CNBC:

• Trump rally isn't over, it just suffers from 'indigestion': PNC's Bill Stone. (video)

Zero Hedge:

• In Blistering Interview, Conway Tells Chuck Todd "We Are Going To Have To Rethink Our Relationship With The Press".
• Mass Exodus From High-Taxes - Which States Did Americans Leave In 2016?
• A Preview Of Trump's Seven Imminent Executive Orders.
• Trump May "Stop Enforcing Obamacare's Individual Mandate".
• Earnings Season So Far: 27 Of 42 Reporting Companies Cite "Trump" Or "Administration".
• Goldman(GS): "All Our Clients Are Confused And Unsettled".
• Ex-WSJ Reporter Finds George Soros Has Ties To More Than 50 "Partners" Of The Women’s March.
• The Last Time Oil Speculators Were This 'Long', Crude Collapsed. (graph)
• Nomi Prins Warns Financial Crash From Epic Debt, Asset Bubbles "Possible In Last Quarter 2017".
• Raoul Pal Warns The Day Of Reckoning Looms For VIX Shorts: "Reminds Me Of Portfolio Insurance In 1987". (graph)

Business Insider:

• Trump says he will begin renegotiating NAFTA pact soon with Mexico and Canada.
• Here is the stunning $1.5 billion stadium being built for the Atlanta Falcons.

Politico:

• Trump Seen Announcing Federal Workforce Freeze. President Trump in coming days is expected to announce a federal workforce freeze.

Bild am Sonntag:

• Le Pen Says Trump Speech Shows His Proximity to Her Views. President Donald Trump's inauguration speech "showed lots of similarities with our own views," Marine Le Pen, head of the National Front in France, says in an interview. Says EU has failed when it comes to economic growth, border protection, fighting poverty; says "the EU is dead but doesn't know it yet."
  

Night Trading

• Asian indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 114.50 -1.5 basis points.
• Asia Pacific Sovereign CDS Index 34.5 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 70.36 +.11%.
• S&P 500 futures -.29%.
• NASDAQ 100 futures -.34%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (HAL)/.02
• (MCD)/1.41
• (PETS)/.25
• (BRO)/.41
• (YHOO)/.21
• (ZION)/.52

Economic Releases

• None of note

Upcoming Splits

• (OTEX) 2-for-1

Other Potential Market Movers

• The Eurozone Consumer Confidence report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighted down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as rising European/Emerging Markets/US high-yield debt angst, earnings outlook worries and rising long-term rates offset oil strength, economic optimism and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.