Today's Headlines

Bloomberg:

• China's Debt-to-GDP Ratio 260%. (video)

• Steelmakers Surge on `Precedent-Setting' U.S. Import Ruling. U.S. Steel Corp. led gains among major American producers of the metal after the U.S. slapped duties on some Vietnamese alloys made with China imports. In a preliminary ruling, the Commerce Department found that corrosion-resistant steel and some cold-rolled metal from Vietnam made from products originating in China circumvented duty orders on those imports from China. The decision could pave the way for the U.S. to place duties on other countries that use Chinese steel.

• Copper Flashes Red as Stockpiles and Spreads Point Bearish. (video)

• Here’s Where the GOP Tax Plan Stands Right Now. (video)

• Retail Investors Just Made a Historic Move Into U.S. Stocks. Clients at TD Ameritrade added to stock holdings for a 10th straight month in November, driving a gauge of retail investor sentiment 15 percent higher to a record, according to the online brokerage’s website. That was the “largest single-month increase ever” in the firm’s IMX measure, as investors piled into an equity market that’s on pace for its best year since 2013.

• Investors Down in December Are Still Up Big For the Year. (video)

Wall Street Journal:

• Trump Says U.S. Recognizes Jerusalem as Israel’s Capital. President says the move will advance the peace process; others have warned of the opposite effect.

• Socialism, Capitalism Seen in New Light by Younger Americans. Surveys show a leftward tilt, and pessimism about the future, among millennials.

• North Koreans Get Smartphones, and the Regime Keeps Tabs. Dictatorship allows wider use of mobile devices and embeds technology to limit and monitor their use.

• Home Depot(HD) to Launch $15 Billion Share Buyback Program. Home-improvement retailer also vowed to step up investments in its business.

Fox News:

• Trump officially recognizes Jerusalem as Israel's capital, orders US embassy move. (video)

CNBC:

• Trump: Government shutdown 'could happen' Saturday. (video)

• They're watching you: Malls tap new tech to track shoppers.

• Wal-Mart Stores(WMT) to change name to Walmart, as it shifts its focus to e-commerce.

• Greenspan compares bitcoin to Colonial America currency that eventually became worthless. (video)

• Meet CryptoKitties, the $100,000 digital beanie babies epitomizing the cryptocurrency mania.

• Stocks are off their highs, but BofA says keep buying. (video)

Zero Hedge:

• ECB Caught In Sprawling Scandal After Bonds It Owns Implode.

• Trump Recognizes Jerusalem As Israel's Capital As Middle East Prepares For Violence.

• Al Franken To Make An Announcement Tomorrow After 11 Democratic Senators Demand Resignation.

• "Declaration Of War": Trump Jerusalem Decision Sparks Outrage, Warning Of "A Fire With No End In Sight".

• Chuck Grassley Demands FBI Produce All Strzok Text Messages As Part Of Trump Anti-Bias Probe.

• "Like Driving Into Hell" - Los Angeles' 405 Freeway Shutdown As Wildfires Spread. (pic)

• Arizona Citizens Tracked In Facial Recognition Database In First Step For 'REAL ID' Implementation.

• WTI/RBOB Extend Losses On Biggest Gasoline Build In 11 Months, Record Crude Production.

• BofA: "In Every Market Shock Since 2013 Central Banks Have Stepped In To Protect Markets".

• Higher Wage Hope Hammered As American Worker Compensation Slumps. (graph)

• Zandi Warns "Job Market Feels Like It Might Overheat" As Manufacturing Jobs Grow At Fastest Pace On Record.

• "The Silence Breakers" - Time Reveals "Person Of The Year" 2017.

• World's Third Largest Shipbuilder Crashes 29% Amid Asian Equity Carnage.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.4%

Sector Underperformers:

• 1) Oil Service -2.5% 2) Shipping -1.5% 3) Gaming -1.1%

Stocks Falling on Unusual Volume: 

• OSIS, TROX, IDT, TMST, HQY, VEEV, CNTR, KRO, EDIT, ESPR, HIMX, TWLO and CC

Stocks With Unusual Put Option Activity:

• 1) IMMU 2) PCG 3) CLF 4) TROX 5) PSTG

Stocks With Most Negative News Mentions:

• 1) TROX 2) OSIS 3) NAVG 4) CC 5) VNTR

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.1%

Sector Outperformers:

• 1) Defense +1.4% 2) Software +1.0% 3) Retail +.3%

Stocks Rising on Unusual Volume:

• MDGL, AVAV, VRA, SCMP, PLAY, DVA, KLXI, IMMU, NOAH, OXM, AYX, TPX, PFGC, FSLR, GIII, PHI, WIRE, TITN, ITRI, CR, NEP, BMO, LULU, X and OAK

Stocks With Unusual Call Option Activity:

• 1) RCII 2) VWO 3) LOW 4) CCL 5) CIEN

Stocks With Most Positive News Mentions:

• 1) AVAV 2) MDGL 3) FSLR 4) PLAY 5)RH

Charts:

• ETFs Rising on Unusual Volume

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.7% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 44.2% of Issues Advancing, 52.3% Declining
• 37 New 52-Week Highs, 32 New Lows
• 61.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.9%
• Vix 11.1 -2.5%
• Total Put/Call .75 -10.7%
• TRIN/Arms 1.73 +12.8%

Wednesday Watch

Evening Headlines

Bloomberg:

• Australia's Economy Grows Slower Than Forecast on Households. Australia’s economy expanded slower than forecast in the three months through September, underscoring the likelihood of the central bank remaining on the sidelines for much of next year.

• Lithium Giant Eyes New Project to Tackle Electric-Car Boom. Soc. Quimica & Minera de Chile SA(SQM) is considering opportunities to establish a foothold in a fourth country, according to company officials, who asked not be named because the matter hasn’t been made public.

• Asian Stocks Fall as Miners Decline; Pound Drops. A subindex of mining companies weighed the most on the MSCI Asia Pacific Index. Shares fell in Japan, Australia and South Korea. American shares dropped, with an afternoon swoon wiping out early gains for a second straight day, as investors assessed the impact of proposed tax cuts. Copper plunged the most in almost three years. Ten-year Treasury yields maintained a slide to 2.35 percent, while the dollar held onto gains. The pound extended declines amid stalled Brexit negotiations. The Topix index fell 0.3 percent as of 9:25 a.m. in Tokyo, with mining sub-measures the biggest decliners. The Nikkei 225 Stock Average lost 0.4 percent. Australia’s S&P/ASX 200 Index declined 0.2 percent. South Korea’s Kospi index fell 0.3 percent.

• Five Things You Need to Know to Start Your Day.

• Bipartisan Bank-Relief Bill Wins Approval From Senate Panel. A key U.S. Senate panel has cleared a bill that could bring financial firms a significant chunk of the regulatory relief they’ve sought since the Dodd-Frank Act became law in 2010. Bipartisan legislation advanced Tuesday by the Senate Banking Committee would revise many parts of the sweeping 2010 overhaul, particularly those pertaining to small and regional banks. It would free midsize lenders from some of the strictest post-crisis oversight and cut compliance costs for community banks. It also includes some tweaks that Wall Street has sought, including a change to how banks classify municipal bonds.

Wall Street Journal:

• Russia Barred From 2018 Winter Olympics Due to Doping. Some Russian athletes will be able to compete at the 2018 Pyeongchang Winter Olympics but by invitation only.

• No Alternative, No Tax Problem. The AMT deserves to die in the House-Senate tax conference.

• UPS(UPS), Overwhelmed by Online Orders, Warns of Delivery Delays. Delivery networks are still trying to cope with the busiest shopping periods despite big investments in operations and capacity.

• San Francisco Wasn’t a Sanctuary for Kate Steinle. Did the jurors acquit her killer to send a message of disapproval to President Trump?

• John Conyers to Leave Congress After He Was Accused of Sexual Misconduct. Faced calls to resign after being accused of inappropriate behavior toward female staff members. 

• Trucking Companies Boost Big-Rig Orders on Rising Shipping Demand. Trucking fleets adding capacity for long-haul routes in anticipation of industry boom into 2018.

MarketWatch.com:

• Here’s how violent the stock-market rotation out of tech has been. 

• Charting a bull-trend breakout, S&P 500 clears the 20-day volatility bands. Healthy sector rotation persists: Transports and financials take flight amid technology sector weakness, IYT XLF, XRT, QQQ, SMH.

• Here are Wall Street’s 19 favorite mid-cap stocks for 2018.

Fox News:

• Mueller deputy praised DOJ official after she defied Trump travel ban order: 'I am so proud'. (video)

• 'They all knew': Media elites roared in laughter at obscene 2008 'roast' sending up Matt Lauer's office sexcapades.

CNBC:

• Trump's Jerusalem recognition would speed path to peace. (video)

• Tax overhaul not perfect for everybody but it's good for the economy, says BB&T CEO. (video)

• Blackstone's Schwarzman on tax reform: 'This is a whopper'. (video)

• Stock market ETFs are attracting a record-setting level of investor cash.

Zero Hedge:

• "Astonishing And Disturbing" Email Exposes Mueller Deputy As Anti-Trumper.

• Nearly Insolvent Illinois Just Issued AAA-Rated Bonds Via This Shady Goldman Sachs Financing Structure.

• In Dramatic Reversal, Top Senate Republicans Now Want To Repeal AMT They Passed Just Days Ago.

• How "Ghost Collateral" And "Yin-Yang" Property Deals Will Collapse China's Credit Bubble.

• More Anti-Trump Messages Reportedly Sent By Members Of Mueller's Team: "A Lot More Is Going To Come Out".

• The Cost Basis Of Our Economy Is Spiraling Out Of Control. (graph)

• One-Time Hedge Fund Whiz-Kid And Julian Robertson Protege Busted By The SEC.

• Moody's Warns U.S. Office Real Estate At "Cyclical Tipping Point" That Will Devastate CMBS Market.

• WTI/RBOB Sink On Massive Product Inventory Builds. (graph)

• Live: Jeff Gundlach's Latest Webcast "So Far So Good".

• Copper Crash And Yield Curve Carnage As Tech, Trannies, & TBTFs All Tumble. (graph)

Sky News:

• Islamist suicide plot to assassinate Prime Minister Theresa May foiled. Sky's Crime Correspondent Martin Brunt said: "It's the latest in a number of terror plots that police and MI5 believe they've foiled this year. "I understand that the head of MI5, Andrew Parker, briefed Cabinet ministers today, such is the seriousness of what they believed they have uncovered. "It is in essence an extreme Islamist suicide plot against Downing Street. Essentially police believe that the plan was to launch some sort of improvised explosive device at Downing Street and in the ensuing chaos attack and kill Theresa May, the Prime Minister. "This is something which has been pursued over several weeks at least by Scotland Yard, MI5 and West Midlands Police. "It came to a head last week with the arrest of two men, by armed police, who were charged with preparing acts of terrorism." Naa'imur Zakariyah Rahman, 20, from north London and Mohammed Aqib Imran, 21, from south-east Birmingham are due to appear at Westminster Magistrates' Court on terror charges on Wednesday morning.

Night Trading 

• Asian equity indices are -.75% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 73.0 unch. 

• Asia Pacific Sovereign CDS Index 14.0 unch.

• Bloomberg Emerging Markets Currency Index 73.33 -.03%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AEO)/.38

• (BF/B)/.53

• (FRED)/-.13

• (HRB)/-.72

• (JW/A)/.82

• (AVGO)/4.51

• (KFY)/.64

• (LULU)/.52

• (RMAX)/.51

Economic Releases

8:15 am EST

• The November ADP Employment Change is estimated to fall to 190K versus 235K in October.

8:30 am EST:

• Final 3Q Non-Farm Productivity is estimated to rise +3.3% versus a prior estimate of a +3.0% gain.

• Final 3Q Unit Labor Costs are estimated to rise +.2% versus a prior estimate of a +.5% gain.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,780,630 barrels versus a -3,429,000 barrel decline the prior week. Gasoline Supplies are estimated to rise by +1,894,000 barrels versus a +3,627,000 barrel gain the prior week. Distillate inventories are estimated to rise by 994,380 barrels versus a +2,747,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.37% versus a +1.3% gain prior.
  

Upcoming Splits

• (PATK) 3-for-2

Other Potential Market Movers

• The Australia GDP report, German Factory Orders report, Japan Trade Balance report, weekly MBA Mortgage Applications report, (FAST) November Sales report, (NEM) Investor Day, (HD) Analyst Conference, Citi Healthcare Conference, Barclays Tech/Media/Telecom Conference and the Barclays Gaming/Lodging/Leisure/Restaurant/Food Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by financial and mining shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Reversing Lower into Final Hour on Profit-Taking, Technical Selling, Sector Rotation, Metals & Mining/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.24 -3.77%

• Euro/Yen Carry Return Index 138.68 -.27%

• Emerging Markets Currency Volatility(VXY) 7.97 +1.14%

• S&P 500 Implied Correlation 37.21 +3.39%

• ISE Sentiment Index 127.0 +.79%
  

• Total Put/Call .85 +2.41%

• NYSE Arms 1.32 +82.47%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.54 -.43%
  

• America Energy Sector High-Yield CDS Index 365.0 +.05%

• European Financial Sector CDS Index 45.99 -.31%

• Western Europe Sovereign Debt CDS Index 3.59 +4.06%

• Asia Pacific Sovereign Debt CDS Index 13.97 -.07%

• Emerging Market CDS Index 176.09 -1.02%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.69 -.01%

• 2-Year Swap Spread 17.25 -.75 basis point

• TED Spread 21.25 -1.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -52.75 3.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.32 -.09%
• 3-Month T-Bill Yield 1.30% +3.0 basis points
  

• Yield Curve 54.0 -3.0 basis points

• China Import Iron Ore Spot $72.68/Metric Tonne unch.

• Citi US Economic Surprise Index 63.10 -2.2 points

• Citi Eurozone Economic Surprise Index 66.40 -2.9 basis points

• Citi Emerging Markets Economic Surprise Index 1.80 +.7 point

• 10-Year TIPS Spread 1.88 -2.0 bassis 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 -42 open in Japan 
• China A50 Futures: Indicating -18 open in China

• DAX Futures: Indicating -36 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long