Stocks Rising Slightly into Final Hour on Economic Optimism, Yen Weakness, Short-Covering, Biotech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.86 +3.4%

• Euro/Yen Carry Return Index 124.72 +.84%

• Emerging Markets Currency Volatility(VXY) 9.57 -.73%

• S&P 500 Implied Correlation 45.12 -2.06%

• ISE Sentiment Index 83.0 -9.78%
  

• Total Put/Call .79 -4.82%

• NYSE Arms .79 -53.31%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.33 -1.48%
  

• America Energy Sector High-Yield CDS Index 355.0 -.48%

• European Financial Sector CDS Index 93.48 -1.48%

• Western Europe Sovereign Debt CDS Index 22.17 -2.89%

• Asia Pacific Sovereign Debt CDS Index 25.40 +.45%

• Emerging Market CDS Index 214.94 +.14%
  

• iBoxx Offshore RMB China Corporate High Yield Index 135.06 +.11%

• 2-Year Swap Spread 35.75 -.5 basis point

• TED Spread 55.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -26.5 +1.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.60 +.06%
• 3-Month T-Bill Yield .50% unch.

• Yield Curve 116.0 -1.0 basis point
  

• China Import Iron Ore Spot $92.33/Metric Tonne +2.02%

• Citi US Economic Surprise Index 37.10 -8.6 points

• Citi Eurozone Economic Surprise Index 72.30 +2.1 points

• Citi Emerging Markets Economic Surprise Index 42.90 -3.4 points

• 10-Year TIPS Spread 2.03 +1.0 basis point
• 66.6% chance of Fed rate hike at May 3 meeting, 78.4% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +127 open in Japan 
• China A50 Futures: Indicating +52 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

• Higher: On gains in my in my retail/biotech sector longs and emerging market shorts

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.1%

Sector Underperformers:

• 1) Gold & Silver -1.5% 2) Foods -1.5% 3) Restaurants -.7%

Stocks Falling on Unusual Volume: 

• SSTK, AFSI, NOW, HZNP, TDS, TSLA, AES, ZOES and HMSY

Stocks With Unusual Put Option Activity:

• 1) USM 2) TSLA 3) TDS 4) HB 5) HMSY

Stocks With Most Negative News Mentions:

• 1) ACIA 2) HPE 3) JACK 4) HGG 5) CRK

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.9%

Sector Outperformers:

• 1) Oil Service +2.3% 2) Steel +1.9% 3) Biotech +1.6%

Stocks Rising on Unusual Volume:

• LJPC, GOGO, DGI, BID, ENB, AMWD, IBP, TELL, JKS, OLED, CSII, BWR, AWI, CBPX, AAOI, VSAR, VRTU, SQ, SGMS, BAS, JWN, RNG, PGNX, SSP, NCMI, LGND, TGNA, HCLP and BNFT

Stocks With Unusual Call Option Activity:

• 1) PAH 2) PAH 3) HCA 4) OLED 5) LEN

Stocks With Most Positive News Mentions:

• 1) RLGT 2) ILMN 3) FL 4) CEMP 5) VRX

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +20.0% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 62.3% of Issues Advancing, 33.6% Declining
• 114 New 52-Week Highs, 12 New Lows
• 61.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.6%
• Vix 11.7 +2.2%
• Total Put/Call .75 -9.64%
• TRIN/Arms .73 -56.9%

Monday Watch

Today's Headlines

Bloomberg:

• U.K.'s May Said to Be Ready for Lords to Rewrite Brexit Bill. U.K. Prime Minister Theresa May’s government is setting aside time for a Parliamentary battle to overturn changes she fears could be made to her draft Brexit law when it’s debated in the House of Lords this week. May and her team demand that unelected legislators in the upper house of Parliament not rewrite the 137-word European Union withdrawal bill while scrutinizing it. The premier needs Parliament to approve the law so she can start the formal Brexit process by invoking Article 50 of the EU treaty by the end of March.

• China to Allow More Listings on Its Stock Market. (video)

• Deutsche Bank Cuts 2016 Bonus Pool by Almost 80%, FAS Reports. Deutsche Bank AG cut its bonus pool for 2016 by almost 80 percent, Frankfurter Allgemeine Sonntagszeitung reported, a figure unmatched in the bank’s recent history as it tries to counteract the impact of low interest rates and legal expenses. Germany’s largest lender is reducing the payments with an eye toward shareholders and is aware it will be “frustrating” for employees, Chief Administrative Officer Karl von Rohr told the German Sunday newspaper. The measures will affect about a quarter of the 100,000 staff. Some workers in key positions -- about 5,000 in all -- will get a special long-term incentive tied to the bank’s performance and paid out after as long as six years, von Rohr said.

• Asian Stocks Drop, Yen Advances Before Trump Speech. The MSCI Asia Pacific Index slipped 0.4 percent, after advancing 0.5 percent last week. Japan’s Topix dropped 0.9 percent, retreating for a third day. The S&P/ASX 200 Index fell 0.3 percent in Sydney while the S&P/NZX 50 rose 0.1 percent.

Wall Street Journal: 

• GOP’s New Plan to Repeal Obamacare: Dare Fellow Republicans to Block Effort. GOP lawmakers gamble that setting bill in motion to strike Affordable Care Act will help break through intraparty disagreements.

• Facing Criticism, Drug Makers Keep Lid On Price Increases. Pharmaceutical companies held most January list-price increases to under 10%, although the median boost was little-changed from 2016.

• Bond Market Is Flashing Warning Signal on Trump Reflation Trade. Rising bond market seen indicating that valuations of riskier assets may be stretched.

• Populist Energy Threatens to Roil Democratic Party as Tom Perez Takes Helm. Activists threaten primary challenges to elected Democrats seen as not sufficiently attuned to liberal base.

• Egyptian Christians Fearing Terror Flee Sinai for Fourth Day. More than 100 families leave el-Arish after series of killings.

Fox News:

• Spicer checks WH staffers' phones for leaks, vows more searches coming. (video)

CNBC:

• Hedge fund hate: More cash likely to flow out again this year. (video)

• Appealing to millenials, Las Vegas gets a new e-sports arena.

Zero Hedge:

• "It Was A Pretty Disturbing Briefing”: Why State Governors Suddenly Got Cold Feet About Obamacare Repeal.

• Majority Finds Media Coverage Of Trump Is "Too Critical, Exaggerated": WSJ/NBC Poll.

• America's Border Patrol Budget: Spot The Obama Difference. (graph)

• #DemExit: Perez Vote Sparks Progressive Panic Within Divided Democratic Party.

• "There Must Not Be A Bail In": Germany Vows "No Debt Relief For Greece".

• Iran Holds Massive Naval Drill Over 2 Million Sq. Kilometer Area.

• Pound Tumbles On Report Scotland May Hold Second Independence Referendum. (graph)

• The European Debt Bomb Fuse Is Lit! Target2 Imbalances Hit Crisis Levels. (graph)

• Frexit Fears Mount As European 'VIX' Spike Signals No 'Pre-Brexit Complacency'. (graph)

• Gundlach: Ignore Stocks, "There Is A Stealth Flight To Safety Going On". (graph)

• Intellectual Intolerance - Stunning Speech From Stanford University Provost Exposes "The Threat From Within".

• Is The US Restaurant Recession Becoming Structural? (video)

• Hillary Clinton Calls For 'Resistance': "We Need To Stay Engaged... I'll Be With You Every Step Of The Way". (video)

• Vehicle Plows Into New Orleans Mardi Gras Parade, Injuring 28; Driver In Custody. (video)

• America's Fentanyl Crisis "Is Surging, With No End In Sight".

Telegraph:

• The anti-EU revolt is fast gaining impetus.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 95.5 unch.

• Asia Pacific Sovereign CDS Index 25.25 unch.

• Bloomberg Emerging Markets Currency Index 71.58 +.04%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AMT)/1.34

• (JKS)/.52

• (BID)/1.17

• (ESV)/.06

• (HTZ)/-.47

• (PCLN)/14.17

• (THC)/.22

• (WDAY)/-.01 

Economic Releases 
8:30 am EST

• Preliminary Durable Goods Orders for January are estimated to rise +1.6% versus a -.5% decline in December. 

• Durables Ex Transports for January are estimated to rise +.5% versus a +.5% gain in December.

• Cap Goods Orders Non-Defense Ex-Air for January is estimated to rise +.5% versus a +.7% gain in December.  

10:00 am EST

• Pending Home Sales MoM for January are estimated to rise +1.0% versus a +1.6% gain in December.

10:30 am EST

• Dallas Fed Manufacturing Activity for February is estimated to rise to 19.4 versus 22.1 in January.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Industrial Production report, Eurozone Consumer Confidence report, German Retail Sales report, Morgan Stanley Tech/Media/Telecom conference, Mobile World Congress and the JMP Securities Tech conference 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 mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.