Today's Headlines

Bloomberg:

• Tillerson Condemns North Korea Test as U.S. Policies Take Shape. U.S. Secretary of State Rex Tillerson vowed that North Korea’s violations of United Nations Security Council resolutions will bring an “even stronger international response,” using a Group of 20 meeting in Germany to reiterate the U.S. stance on the North’s nuclear program and other top foreign-policy challenges. The statement, issued jointly with the foreign ministers of Japan and South Korea after Tillerson met with his counterparts on the sidelines of the G-20 meeting in Bonn, condemned “in the strongest terms” a Feb. 12 ballistic missile test and noting the North’s “flagrant disregard” for UN Security Council resolutions.
• European Stocks Decline to End Seven-Day Rally. (video)
• Frenzied Betting, Sleeping Market: Something Must Give in Oil. (video) As hedge funds and money managers place record trades on a rally in oil, the price itself has fallen asleep. Logic dictates that something should give. Here are five charts examining the unprecedented speculative build-up and what the market’s next turn might be.
• Goldman(GS) Sees Metal Rally in Sight on Rerun of '08 China Stimulus. A rerun of China’s massive stimulus during the financial crisis is set to offer another boost to global metals prices, according to Goldman Sachs Group Inc. Strong credit expansion has “remarkably bullish” implications for the nation’s metals-intensive industries as fixed-asset investment and manufacturing are poised to accelerate, the bank said in a report. New lending to the so-called old economy in December and January jumped by 1.1 trillion yuan ($160 billion) from a year earlier, equivalent to more than one and a half years of U.S. President Donald Trump’s mooted infrastructure package, it said.
• These Are the Stocks That Have Lagged Under Trump. For clues on the strength of the current rally in developed-market equities, take a look at stocks that have trailed since Donald Trump was elected. They’re in sectors such as real estate, utilities, consumer staples and telecommunications which underperformed cyclical stocks in the aftermath of the presidential vote. Although they lagged behind as investors preferred shares tied to the economic growth, they are now joining the party.
• Tesla(TSLA) Workers' Union Push Gets UAW Support at California Plant.

Wall Street Journal:

• Falling Correlations Spell Opportunity for Investors. With stocks, bonds, and commodities no longer rising together, asset allocation suddenly matters again.
• Trump Picks Alexander Acosta to Serve as Labor Secretary. Acosta has served under George W. Bush, nomination comes after Andrew Puzder withdrew. 
• Bombings Kill Dozens in the Iraqi Capital. At least 45 people are killed and nearly 50 wounded in largest blast.

CNBC:

• Here's what Snap will tell investors ahead of setting its IPO price on March 1.
• McDonald's(MCD) chains shutter across US in support of 'A Day Without Immigrants' protest. 
• China's economy doesn't look so wonderful when you look at the really big numbers. (video)
• NY Fed: US household debt at highest level since 2008. (video)
• House Financial Services chair: CFPB is an unelected 'dictator' that must be stopped. (video)
• Snapchat parent Snap sees up to $22.2 billion valuation after pricing IPO at $14 and $16 per share. (video)

Zero Hedge:

• "Wake Up America" Dennis Kucinich Defends Trump, Issues Dire Warning About "Deep State".
• Putin Orders Russian Media To "Cut Back" On Positive Trump Coverage.
• "Market Players No Longer Trust The BOJ": Why Kuroda Is Suddenly Facing Market Mutiny.
• Greek Bank Run Re-accelerates: Massive Deposit Withdrawals Despite Capital Controls.
• Pentagon Chief Rejects Military Cooperation With Russia.
• In Angry Tweetstorm, Trump Accuses Fabricated "Sources", Democrats Of "Making Up Russia Story".
• Top Spy Agency Denies Withholding Secrets From Trump.
• Philly Fed Explodes To 33-Year Highs - A 10-Standard-Deviation Beat. (graph)
• Housing Starts Disappoint As Building Permits Surge, Driven By Rentals. (graph)
• Initial Jobless Claims Divergence Of The Week. (graph)
• Spanish, French Bonds Jump After ECB Sees "Room For Trade Off On Capital Key". (graph)

Bear Radar

Style Underperformer:

• Small-Cap Growth -.6%

Sector Underperformers:

• 1) Gaming -3.8% 2) Foods -1.5% 3) Oil Service -1.5%

Stocks Falling on Unusual Volume: 

• MOH, ASPS, SYNT, HAWK, CRY, MGM, CAR, PHH, TRIP, LTRPA, DF, COWN, GEL, NGL, WST, VDSI, GDDY, BYD, NMIH, WMS, HTZ, CAB and OIS

Stocks With Unusual Put Option Activity:

• 1) AVP 2) CY 3) MGM 4) TRIP 5) GIS

Stocks With Most Negative News Mentions:

• 1) CFMS 2) MOH 3) HAWK 4) OIS 5) REGN

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.2%

Sector Outperformers:

• 1) Social Media +1.3% 2) Gold & Silver +1.2% 3) REITs +.6%

Stocks Rising on Unusual Volume:

• SSNC, EDIT, DENN, LILA, SFLY, PGNX, SRCL, KATE, TAST, CIR, NTES, CRSP, LILAK, RAVN, QTWO, ESPR, FOSL, NTAP, BRG, TIVO, TPX, SRCLP, PBA, YNDX, CVI, SNPS, CHH, PTCT, EPAM, IFF and TEP

Stocks With Unusual Call Option Activity:

• 1) XLV 2) DG 3) MGM 4) NTAP 5) CSCO

Stocks With Most Positive News Mentions:

• 1) NTES 2) NTAP 3) CMTL 4) SKIS 5) KO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.1% Above 100-Day Average
• 4 Sectors Rising, 6 Sector Declining
• 41.0% of Issues Advancing, 54.3% Declining
• 160 New 52-Week Highs, 7 New Lows
• 61.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.4%
• Vix 12.3 +2.4%
• Total Put/Call .71 -14.5%
• TRIN/Arms 1.11 +26.5%

Thursday Watch

Evening Headlines

Bloomberg: 

• Aussie Unemployment Rate Falls Despite Full-Time Jobs Plunge. (video) Australia’s unemployment rate unexpectedly fell in January, despite a plunge in full-time jobs, underscoring the mixed picture of the country’s labor market.
• Asia Stocks Rally Fizzles, Dollar and Bonds Steady. Stocks in Tokyo fluctuated while those in Sydney slipped after the MSCI All-Country World Index closed at a record high. Evidence of firming U.S. inflation had spurred bets that the economy can withstand higher interest rates as it waits for stimulus from the Trump administration, boosting American equities. Treasuries were flat on Thursday after falling for five straight days, while the Bloomberg Dollar Spot Index held Wednesday’s losses. Japan’s Topix swung between gains and losses, while Australia’s S&P/ASX 200 Index fell 0.1 percent. FTSE China A50 Index and Hang Seng futures both added 0.1 percent.
• Here's Why the World of Copper Is Transfixed by Strike in Chile.
• Yellen Says Trump Budget Won't Necessarily Prompt Higher Rates. Federal Reserve Chair Janet Yellen rejected suggestions that the central bank would respond willy-nilly to any changes in tax and spending plans by President Donald Trump with stepped-up increases in interest rates. That’s “not quite accurate,” she told lawmakers on Wednesday when asked about a media report that the central bank would seek to offset changes in fiscal policy with alterations in its own stance.
• Five Reasons to Be Constructive on U.S. Stocks. (video)
• Another Health Insurer Threatens to Quit Obamacare After Losses. Another U.S. health insurer is threatening to drop out of Obamacare after posting massive financial losses related to the program. Molina Healthcare Inc., which had been one of the Affordable Care Act’s financial success stories, on Wednesday said that its health insurance plans under Obamacare had lost $110 million last year.
• Anthem(ANTM) Wins Bid to Block Cigna(CI) From Dumping $48 Billion Deal.
• Toll Brothers(TOL) to Pay Taxes on Manhattan Condos to Lure in Buyers. Luxury developer Toll Brothers Inc. has a deal for those shopping for a condo in Manhattan: buy something soon, and we’ll pay the taxes on your purchase. The publicly traded homebuilder is offering to pay the city transfer tax and the New York state “mansion tax” -- an effective discount totaling almost 2.5 percent -- on deals made at three of its developments by Feb. 20, the company said in a statement Wednesday. The closing incentives apply to any apartment bought at Toll’s under-construction projects at 100 Barrow St., in the West Village, and 55 West 17th St., in Chelsea. The deal is also being offered at the Sutton, a development in the East 50s, where sales began in early 2015.
• Pharma Lobby May Boot Company That Introduced High-Priced Drug.
  

Wall Street Journal:

• Global Risks Begin to Recede. It isn’t just the Trump effect; from oil prices to Chinese outflows, the world is looking up.
• Latest Data Signal Solid Momentum for U.S. Economy. Stronger consumer spending, rising factory production and firming inflation boost odds the Fed will increase rates again soon. 
• Trump Drops Push for Two-State Solution in Mideast. President and Israeli Prime Minister Benjamin Netanyahu hint at broader regional approach.

Fox News:

• Russia and Assad bombing of civilians continues as UN peace process staggers on. (video)
• Fox News Poll: Nearly half of voters would confirm Gorsuch. (video)

CNBC:

• After hours buzz: TRIP, MOH, CSCO & more.
• Trump plans executive orders to scale back EPA's climate change work, Beltway newsletter reports.
• Top Wall Street strategist Tom Lee says he's been 'too cautious' on the market. (video)
• U.S. shale producers export record 1 million barrels of oil per day to world market as OPEC cuts back. (video)

Zero Hedge:

• The Latest Trump Casualty: Labor Pick Puzder Withdraws.
• Aetna(AET) CEO Says Obamacare In "Death Spiral" And "It's Getting Worse".
• IRS Deals Major Blow To Obamacare Mandate.
• The Globalists Strike Back With A Major Push Toward A Cashless Society.
• The Selling Ends: Foreign Central Banks Buy The Most Treasuries In Over Two Years. (graph)
• "Without Us, Your Country Is Paralyzed" - Undocumented Workers Plan Boycott "Day Without Immigrants".
• FBI Reportedly Will Not Pursue Charges Against "Cooperative And Truthful" Mike Flynn.
• Pentagon Chief's Ultimatum To NATO: "Boost Military Spending Or The U.S. Will Cut Its Support".
• Nigel Farage Warns European Parliament: "You're In For A Bigger Shock In 2017".
• Trump Utters The Magic Word (Again) And The Dow Surges Above 20,600 (Despite VIX Spike). (graph)

Busines Insider:

• 'God willing we will eliminate them': ISIS still poses an insidious threat in liberated parts of Iraq.

Telegraph:

• France's Marine Le Pen explains how she aims to smash the European order.

Night Trading 

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 101.0 +.75 basis point.
• Asia Pacific Sovereign CDS Index 27.0 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 71.64 +.05%. 
• S&P 500 futures -.12%. 
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALXN)/1.24
• (AVP)/.10
• (CAB)/1.22
• (DF)/.41
• (DUK)/.83
• (H)/.27
• (LH)/2.15
• (MGM)/.18
• (RS)/.74
• (SHPG)/1.08
• (WEN)/.09
• (ZTS)/.46
• (FLS)/.65
• (WBMD)/.67

Economic Releases
8:30 am EST

• Housing Starts for January are estimated at 1226K versus 1226K in December.
• Building Permits for January are estimated to rise to 1230K versus 1210K in December. 
• Initial Jobless Claims for last week are estimated to rise to 245K versus 234K the pior week.
• Continuing Claims are estimated to fall to 2050K versus 2078K prior.  
• Philly Fed Business Outlook for February is estimated to fall to 18.0 versus 23.6 in January. 
  

Upcoming Splits

• (CMCSA) 2-for-1

Other Potential Market Movers

• The Eurozone Car Registrations, Bloomberg Economic Expectations Index for February, weekly Bloomberg Consumer Comfort Index, (WEN) investor day, (EMR) investor conference, the weekly EIA natural gas inventory report and the (MOH) investor meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by consumer and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Rising into Afternoon on Economic Optimism, Tax Reform Hopes, Earnings Outlooks, Financial/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.73 +9.22%

• Euro/Yen Carry Return Index 126.23 +.03%

• Emerging Markets Currency Volatility(VXY) 9.79 -.81%

• S&P 500 Implied Correlation 43.13 -4.81%

• ISE Sentiment Index 108.0 +17.4%
  

• Total Put/Call .90 +30.4%

• NYSE Arms .74 +23.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.87 -.22%
  

• America Energy Sector High-Yield CDS Index 374.0 -.19%

• European Financial Sector CDS Index 90.20 -2.33%

• Western Europe Sovereign Debt CDS Index 23.55 -.51%

• Asia Pacific Sovereign Debt CDS Index 27.0 -.79%

• Emerging Market CDS Index 215.24 +1.90%
  

• iBoxx Offshore RMB China Corporate High Yield Index 134.44 +.01%

• 2-Year Swap Spread 33.25 +1.25 basis points

• TED Spread 50.0 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -27.0 +.75 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.55 +.07%
• 3-Month T-Bill Yield .53% -1.0 basis point

• Yield Curve 125.0 +1.0 basis point
  

• China Import Iron Ore Spot $91.05/Metric Tonne -.72%

• Citi US Economic Surprise Index 44.60 +8.5 points

• Citi Eurozone Economic Surprise Index 43.20 -.7 point

• Citi Emerging Markets Economic Surprise Index 39.80 +.4 point

• 10-Year TIPS Spread 2.05 +3.0 basis points
• 61.4% chance of Fed rate hike at May 3 meeting, 78.0% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -7 open in Japan 
• China A50 Futures: Indicating +20 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long