Stocks Slightly Lower into Afternoon on Profit-Taking, Oil Decline, Yen Strength, Energy/Healthcare Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.56 -1.7%

• Euro/Yen Carry Return Index 125.07 -.95%

• Emerging Markets Currency Volatility(VXY) 9.80 +.51%

• S&P 500 Implied Correlation 43.97 -3.95%

• ISE Sentiment Index 86.0 -10.42%
  

• Total Put/Call 1.01 +13.48%

• NYSE Arms 1.12 -13.59%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.76 +.56%
  

• America Energy Sector High-Yield CDS Index 378.0 +.58%

• European Financial Sector CDS Index 92.82 +1.39%

• Western Europe Sovereign Debt CDS Index 22.0 -2.85%

• Asia Pacific Sovereign Debt CDS Index 27.07 +.15%

• Emerging Market CDS Index 222.54 +1.09%
  

• iBoxx Offshore RMB China Corporate High Yield Index 134.60 +.08%

• 2-Year Swap Spread 36.25 +.5 basis point

• TED Spread 53.75 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -25.75 -.75 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.33 -.32%
• 3-Month T-Bill Yield .52% unch.

• Yield Curve 122.0 -2.0 basis points
  

• China Import Iron Ore Spot $90.37/Metric Tonne +.34%

• Citi US Economic Surprise Index 53.10 -.5 point

• Citi Eurozone Economic Surprise Index 41.50 -.9 point

• Citi Emerging Markets Economic Surprise Index 42.10 +1.5 points

• 10-Year TIPS Spread 2.02 -1.0 basis point
• 56.1% chance of Fed rate hike at May 3 meeting, 74.7% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -89 open in Japan 
• China A50 Futures: Indicating +2 open in China

• DAX Futures: Indicating +13 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value -.4%

Sector Underperformers:

• 1) HMOs -2.3% 2) Gold & Silver -1.6% 3) Gaming -1.2%

Stocks Falling on Unusual Volume: 

• ORC, NUS, AAN, DIN, PI, GVA, FNSR, SJM, CPB, H, BKD, HTZ, WATT and ROCK

Stocks With Unusual Put Option Activity:

• 1) ACWI 2) MPLX 3) DVA 4) CTSH 5) BSX

Stocks With Most Negative News Mentions:

• 1) CIR 2) HTZ 3) BBW 4) CACC 5) TTMI

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth unch.

Sector Outperformers:

• 1) Retail +.5% 2) Alt Energy +.5% 3) Restaurants +.3%

Stocks Rising on Unusual Volume:

• UL, UN, COHU, ANET, KHC, TRUE, HAWK, CPG, AIRG, CL, RAVN, CGNX, CAI, KMB, WIRE, TMST, EDIT, ESPR, KATE, CRY, LOPE, CTB, UEIC, RPXC, GOL, DVA, TRN, VNDA, VFC, SWKS, BCOR, XRAY and FOSL

Stocks With Unusual Call Option Activity:

• 1) SYF 2) DE 3) AKS 4) MAT 5) LOW

Stocks With Most Positive News Mentions:

• 1) ANET 2) CC 3) WDAY 4) CRY 5) AIRG

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.2% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 35.8% of Issues Advancing, 60.1% Declining
• 58 New 52-Week Highs, 7 New Lows
• 61.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.2%
• Vix 12.0 +2.3%
• Total Put/Call 1.01 +13.5%
• TRIN/Arms 1.05 -18.9%

Friday Watch

Evening Headlines

Bloomberg:  

• Japan Is Quietly Reflating, Buying Time for Reckoning With Debt. Hidden beneath the headlines about Japan’s continual failure to reach its inflation target is a quiet reflation of its economy. It took almost two decades, but Japan finally notched a record for the size of its economy in 2016, one of the most significant signs yet that Prime Minister Shinzo Abe’s reflation policies have had an impact on underlying fundamentals. Despite population declines on the order of more than a quarter million people a year, and in face of muted productivity gains, Japan’s nominal gross domestic product totaled 537 trillion yen ($6.1 trillion) last year, government data showed Monday. Last year was the first time that nominal GDP, which is unadjusted for price changes, hit a record since 1997.

• Goldman's Yu Sees Risk of Overheating Chinese Economy. (video)

• Asian Stocks Drop After Reflation Trade Pullback. Shares in Tokyo were weighed down by Thursday’s gains in the yen. A decline in the S&P 500 Index put a dampener on equities from Sydney to Seoul. Treasuries rose for the first time in six days on Thursday. Gold headed for its seventh weekly gain in eight weeks. Investors have pulled back after a weeklong rekindling of reflation trades that had been fueled by optimism that the U.S. economy can withstand higher interest rates. The yen slipped 0.1 percent to 113.39 per dollar as of 9:28 a.m. in Tokyo, after rising 0.8 percent on Thursday. The MSCI Asia Pacific Index lost 0.4 percent, after closing Thursday at the highest level since July 2015. Japan’s Topix declined 0.7 percent, poised for a weekly loss. Australia’s S&P/ASX 200 Index lost 0.3 percent, and New Zealand’s S&P/NZX 50 Index fell 0.1 percent. South Korea’s Kospi was down 0.4 percent.

Wall Street Journal:

• Trump Administration Backs Away From Russian Reset. ‘No collaboration on a military level,’ Defense Secretary Jim Mattis tells NATO counterparts.

• Don’t Wimp Out on Climate. If Trump doesn’t dump the Paris accord, his economic agenda is in jeopardy.

• Islamic State Claims Southern Pakistan Bombing That Killed at Least 70. Hundreds wounded in suicide blast at Sufi Muslim shrine.

• House Republicans Lay Out Health-Care Plan. Proposal offers policy specifics but shows party has yet to bridge divisions over many of its components.

Fox News:

• Conservative activists to mobilize amid anti-Trump protests. (video)

CNBC:

• Goldman Sachs(GS) says stock picking is back and this is how to play it.

Zero Hedge:

• Robert Harward Rejects Trump's Offer To Become Next National Security Advisor.

• Catalyst Capital CEO Speaks Out, Claims "Our Exposure Was Greatly Exaggerated".

• Mark Zuckerberg Rejects "America First", Calls For Global Community.

• Mike Flynn Faces "Legal Jeopardy" For Reportedly Lying To FBI.

• Auto Bubble Burst Begins As Subprime Delinquencies Soar To 2009 Levels. (graph)

• Fed President Admits US Banks Have Only "Half The Equity They Need".

• Stock Dip Kills Longest Win Streak In 4 Years As Catalyst-Crusher Comes To An End. (graph)

Night Trading 

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 101.50 +.5 basis point.

• Asia Pacific Sovereign CDS Index 27.0 unch.

• Bloomberg Emerging Markets Currency Index 71.55 -.01%. 

• S&P 500 futures +.04%. 

• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (B)/.64

• (CPB)/.89

• (DE)/.51

• (FLR)/.79

• (SJM)/2.02

• (MCO)/1.13

• (RUTH)/.29

• (VFC)/.99

Economic Releases
10:00 am EST

• The Leading Index for January is estimated to rise +.5% versus a +.5% gain in December. 
  

Upcoming Splits

• (CMCSA) 2-for-1

Other Potential Market Movers

• The UK Retail Sales report, (HAS) investor update and the (MAT) annual investor update could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by financial 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 100% net long heading into the day.

Stocks Slightly Lower into Final Hour on Border Tax Speculation, Profit-Taking, Yen Strength, Energy/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.09 +1.0%

• Euro/Yen Carry Return Index 126.08 -.23%

• Emerging Markets Currency Volatility(VXY) 9.73 -.82%

• S&P 500 Implied Correlation 45.19 +4.97%

• ISE Sentiment Index 100.0 +17.7%
  

• Total Put/Call .86 +3.61%

• NYSE Arms 1.33 +53.31%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.86 +1.33%
  

• America Energy Sector High-Yield CDS Index 373.0 -.25%

• European Financial Sector CDS Index 91.55 +1.76%

• Western Europe Sovereign Debt CDS Index 22.65 -5.66%

• Asia Pacific Sovereign Debt CDS Index 27.04 -.04%

• Emerging Market CDS Index 220.16 +2.23%
  

• iBoxx Offshore RMB China Corporate High Yield Index 134.50 +.05%

• 2-Year Swap Spread 35.75 +2.5 basis points

• TED Spread 51.50 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -25.0 +2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.59 -.03%
• 3-Month T-Bill Yield .52% -1.0 basis point

• Yield Curve 124.0 -1.0 basis point
  

• China Import Iron Ore Spot $90.06/Metric Tonne -1.09%

• Citi US Economic Surprise Index 53.60 +9.0 points

• Citi Eurozone Economic Surprise Index 42.40 -.8 point

• Citi Emerging Markets Economic Surprise Index 40.60 +.8 point

• 10-Year TIPS Spread 2.03 -2.0 basis points
• 57.3% chance of Fed rate hike at May 3 meeting, 77.1% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -122 open in Japan 
• China A50 Futures: Indicating +34 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Lower: On losses in my in my biotech/retail sector longs 

• Disclosed Trades: None

• Market Exposure: 100% Net Long