Stocks Surging into Final Hour on Tax Reform Hopes, Earnings Outlooks, Economic Optimism, Retail/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.72 -10.74%

• Euro/Yen Carry Return Index 138.56 -.14%

• Emerging Markets Currency Volatility(VXY) 8.10 unch.

• S&P 500 Implied Correlation 17.52 -24.19%

• ISE Sentiment Index 97.0 -33.56%
  

• Total Put/Call .90 -11.76%

• NYSE Arms 1.24 +40.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.50 -2.94%
  

• America Energy Sector High-Yield CDS Index 388.0 -1.86%

• European Financial Sector CDS Index 52.27 -1.95%

• Western Europe Sovereign Debt CDS Index 3.98 +.76%

• Asia Pacific Sovereign Debt CDS Index 16.09 +.75%

• Emerging Market CDS Index 186.32 -3.74%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.36 +.02%

• 2-Year Swap Spread 18.0 +.25 basis point

• TED Spread 16.25 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -49.0 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.67 +.48%
• 3-Month T-Bill Yield 1.26% +1.0 basis point
  

• Yield Curve 65.25 -.5 basis point

• China Import Iron Ore Spot $61.57/Metric Tonne -.44%

• Citi US Economic Surprise Index 44.20 +8.7 points

• Citi Eurozone Economic Surprise Index 59.60 -.7 basis point

• Citi Emerging Markets Economic Surprise Index 12.90 +.1 point

• 10-Year TIPS Spread 1.89 +1.0 basis point
  
• 100.0% chance of Fed rate hike at Jan. 31 meeting, 100.0% chance at March 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +265 open in Japan 
• China A50 Futures: Indicating +58 open in China

• DAX Futures: Indicating +45 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.6%

Sector Underperformers:

• 1) Utilities -.3% 2) Energy -.3% 3) Insurance -.3%

Stocks Falling on Unusual Volume: 

• CHFS, APPN, AXGN, DPLO, BBY, BITA, VIAB, BZH and MTOR

Stocks With Unusual Put Option Activity:

• 1) ARNC 2) TWX 3) COP 4) HRB 5) ANF

Stocks With Most Negative News Mentions:

• 1) DPLO 2) PAY 3) OII 4) GE 5) UA

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.9%

Sector Outperformers:

• 1) Computer Hardware +3.6% 2) Disk Drives +3.1% 3) Airlines +2.2%

Stocks Rising on Unusual Volume:

• GDI, AMWD, IEFA, JELD, FND, TIME, GTHX, CBS, XNET, AFAM, NTAP, RH, SPB, SHPG, LHCG, MANU, WMT, HCM, MD, CNCE, ROK, HRG, ASML, CSCO, NTES, SGH, MRTX, DBD, MDP, COLL, SJM, MD, GOGO, EZPW, BOOT, BL, XON, EXTR, OSTK, AYX, CALA, ESIO, VREX, HRC, FRPT, TMUS, ROK, BERY, INCR, IGT, NKTR, MTSI and HRTX

Stocks With Unusual Call Option Activity:

• 1) NTAP 2) XLP 3) WMT 4) FXI 5) RH

Stocks With Most Positive News Mentions:

• 1) NTAP 2) SPTN 3) WMT 4) CSCO 5) NTES

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.2% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 78.7% of Issues Advancing, 18.8% Declining
• 77 New 52-Week Highs, 31 New Lows
• 55.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.3%
• Vix 11.5 -12.1%
• Total Put/Call .93 -8.8%
• TRIN/Arms 1.13 +28.8%

Thursday Watch

Evening Headlines

Bloomberg:

• Australia's Jobless Rate Falls to Lowest in More Than Four Years. Australia’s jobless rate unexpectedly fell in October as fewer people sought work, while full-time positions that have driven hiring this year extended their surge.

• 3 Charts to Know: Time to Buy the Dip in Stocks? (video)

• Stock Slide Pauses in Asia; Aussie Bonds Advance. (video) Benchmarks in Japan fluctuated after the Topix index on Wednesday recorded its biggest drop since March. Australia’s benchmark opened little changed. The S&P 500 Index pared the worst of Wednesday’s losses as bank shares rallied, but that wasn’t enough to overcome the biggest drop in two months for U.S. equities. The gap between two-year and 10-year U.S. yields shrank to a fresh low for 2017, a potential concern given how a flattening in the yield curve has sometimes served as a precursor to an economic downturn. The Topix index swung between gains and losses as of 9:11 a.m. in Tokyo. The Nikkei 225 Stock Average added 0.4 percent. Australia’s S&P/ASX 200 Index was flat. South Korea’s markets will open an hour later because of national exam day. Hong Kong’s Hang Seng Index futures climbed 0.4 percent.

• Five Things You Need to Know to Start Your Day. (video)

• S&P 500 Bears Are Back. (graph)

• Cisco(CSCO) Sees First Revenue Growth in Eight Quarters; Shares Up.

• Twitter Cracks Down on Verified Accounts With New Policy. (video) Twitter Inc. updated its policies for removing the verification of a user’s identity, saying it can pull the blue check mark at any time without notice for behavior including promoting hate or inciting harassment of others.

Wall Street Journal:

• Republican Sen. Ron Johnson Opposes GOP Senate Tax Package. Wisconsin Republican says plan unfairly benefits corporations over other businesses, says he finds bill’s process ‘offensive’.

• Activist Peltz Narrowly Wins P&G Board Seat, New Count Shows. Investor won proxy fight by slim 43,000 vote margin, according to preliminary report, weeks after P&G had declared victory.

• A Litigious Climate Threatens Scientific Norms. An energy researcher sues another over a critical paper. It’s the wrong way to resolve such disputes.

MarketWatch.com:

• Stock market ‘not even close’ to pricing in tax cuts, says UBS.

• A selloff in junk bonds may not spark a crash, or a recession, says Deutsche Bank.

Fox News:

• Fusion GPS told media of Trump-Russia claims, but did not verify dossier: source. (video)

CNBC:

• Keep bitcoin away from the real economy, says billionaire 'father of high speed trading'. (video)

Zero Hedge:

• Musk Fires Back: Blasts "Hotbed Of MISinformation" In Racial Discrimination Lawsuit.

• Times Square Losing Marquee Office Tenants As Wading Through "Desnudas" To Get To Work Grows Old.

• The Complete Idiot's Guide To The Biggest Risks In China.

• Foreigners Splurge On US Stocks: Buy Second-Most US Equities In 8 Years.

• House Democrats Introduce Five Articles Of Impeachment Against Trump.

• Judge Moore Doubles Down On Denial; Alleges That Gloria Allred's Yearbook Message Is A "Fraud".

• S&P Breaks Longest Period Of Calm In 52 Years As Yield Curve Carnage Continues. (graph)

Business Insider:

• Hackers pose an increasingly dire threat to the power grid.

• Rare Leonardo da Vinci painting sells for record $450 million.

• America's debt is surging, and some of the riskiest borrowers are struggling to pay back.

• BuzzFeed posted a bizarre theory that Starbucks'(SBUX) holiday cups 'might have a gay agenda'.

Night Trading 

• Asian equity indices are unch. to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 81.25 +1.25 basis points. 

• Asia Pacific Sovereign CDS Index 16.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 72.34 +.03%.

• S&P 500 futures +.17%.

• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BBY)/.78

• (SJM)/1.90

• (SSI)/-.71

• (VIAB)/.86

• (WMT)/.97

• (CRMT)/.75

• (AMAT)/.90

• (GPS)/.54

• (POST)/.93

• (ROST)/.67

• (SCVL)/.62

• (SPLK)/.14

• (WSM)/.84

Economic Releases 

8:30 am EST

• Initial Jobless Claims are estimated to fall to 235K versus 239K the prior week.

• Continuing Claims are estimated to fall to 1900K versus 1901K prior.

• Philly Fed Business Outlook Index for November is estimated to fall to 24.6 versus 27.9 in October.

• The Import Price Index MoM for October is estimated to rise +.4% versu a +.8% gain in September.

• The Export Price Index MoM for October is estimated to  rise +.4% versus a +.8% gain in September. 

9:15 am EST

• Industrial Production MoM for October is estimated to rise +.5% versus a +.3% gain in September. 

• Capacity Utilization for October is estimated to rise to 76.3% versus 76.0% in September.

• Manufacturing Production for October is estimated to rise +.5% versus a +.1% gain in September.
  

10:00 am EST

• The NAHB Housing Market Index for November is estimated to fall to 67.0 versus 68.0 in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Mester speaking, House vote on tax bill, Bloomberg Economic Expectations Index for November, weekly Bloomberg Consumer Comfort Index, (KO) investor day, Eurozone CPI report, FCC November meeting, weekly EIA natural gas inventory report, (CMI) analyst day, (OC) investor day, (RH) investor day, (ROK) investor meeting, (HAIN) general meeting and the BofA Merrill Energy Conference could also impact trading today.

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

Stocks Lower into Final Hour on Tax Reform Worries, Less Economic Optimism, Yen Strength, Energy/Gaming Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.89 +11.2%

• Euro/Yen Carry Return Index 138.77 -.54%

• Emerging Markets Currency Volatility(VXY) 8.11 -.12%

• S&P 500 Implied Correlation 21.91 +18.7%

• ISE Sentiment Index 165.0 +65.0%
  

• Total Put/Call 1.04 +17.0%

• NYSE Arms .73 -47.53%

Credit Investor Angst:

• North American Investment Grade CDS Index 56.96 -.15%
  

• America Energy Sector High-Yield CDS Index 395.0 +6.18%

• European Financial Sector CDS Index 53.28 +.63%

• Western Europe Sovereign Debt CDS Index 3.95 +2.07%

• Asia Pacific Sovereign Debt CDS Index 15.93 +.38%

• Emerging Market CDS Index 193.90 +.01%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.33 -.01%

• 2-Year Swap Spread 17.75 -.75 basis point

• TED Spread 15.5 -3.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -47.75 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.32 unch.
• 3-Month T-Bill Yield 1.25% +1.0 basis point
  

• Yield Curve 64.75 -4.25 basis points

• China Import Iron Ore Spot $61.84/Metric Tonne -2.11%

• Citi US Economic Surprise Index 35.50 -1.9 points

• Citi Eurozone Economic Surprise Index 60.30 -.6 basis point

• Citi Emerging Markets Economic Surprise Index 12.80 +.5 point

• 10-Year TIPS Spread 1.88 -2.0 basis points
  
• 100.0% chance of Fed rate hike at Jan. 31 meeting, 100.0% chance at March 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +88 open in Japan 
• China A50 Futures: Indicating -37 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Lower: On losses in my medical/tech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long