Wednesday, January 17, 2018

Stocks Surging into Close on Earnings Optimism, Diminishing Govt Shutdown Worries, Yen Weakness, Tech/Homebuilding Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 11.55 -.94%
  • Euro/Yen Carry Return Index 141.50 +.28%
  • Emerging Markets Currency Volatility(VXY) 7.89 +1.15%
  • S&P 500 Implied Correlation 32.92 -1.11%
  • ISE Sentiment Index 85.0 -15.84%
  • Total Put/Call .81 +16.37%
  • NYSE Arms .98 -.56%
Credit Investor Angst:
  • North American Investment Grade CDS Index 47.77 +.18%
  • America Energy Sector High-Yield CDS Index 320.0 +.15%
  • European Financial Sector CDS Index 43.09 +1.0%
  • Italian/German 10Y Yld Spread 143.75 +3.0 basis points
  • Asia Pacific Sovereign Debt CDS Index 10.37 +4.54%
  • Emerging Market CDS Index 110.29 +.12%
  • iBoxx Offshore RMB China Corporate High Yield Index 146.78 unch.
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 29.75 +2.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -25.5 -1.75 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 75.48 -.07%
  • 3-Month T-Bill Yield 1.44% +2.0 basis points
  • Yield Curve 53.25 +.5 basis point
  • China Iron Ore Spot 516.0 CNY/100 Metric Tonnes +2.18%
  • Citi US Economic Surprise Index 70.0 +4.4 points
  • Citi Eurozone Economic Surprise Index 56.0 -.6 basis point
  • Citi Emerging Markets Economic Surprise Index 5.3 +.2 basis point
  • 10-Year TIPS Spread 2.06 +2.0 basis points
  • 86.9% chance of Fed rate hike at March 21 meeting, 87.2% chance at May 2 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +132 open in Japan 
  • China A50 Futures: Indicating +92 open in China
  • DAX Futures: Indicating +53 open in Germany
Portfolio: 
  • Higher: On gains in my biotech/retail/tech/medical sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved 100% Net Long

Bear Radar

Style Underperformer:
  • Mid-Cap Value +1.0%
Sector Underperformers:
  • 1) Gold & Silver -.5% 2) Shipping -.5% 3) Agriculture -.3%
Stocks Falling on Unusual Volume: 
  • ADNT, EXAS, NEWA, ETH, HALO, FAST, F, PNFP, FORM, ACLS, EXEL, DISH, BOOT, QTS, GE and ASIX
Stocks With Unusual Put Option Activity:
  • 1) EXAS 2) JNPR 3) WTW 4) TBT 5) FOSL
Stocks With Most Negative News Mentions:
  • 1) HALO 2) HIVE 3) EXAS 4) DISH 5) ADNT
Charts:

Bull Radar

Style Outperformer:
  • Mid-Cap Growth +1.0%
Sector Outperformers:
  • 1) Semis +2.5% 2) Homebuilding +2.2% 3) Disk Drives +2.1%
Stocks Rising on Unusual Volume:
  • BLUE, JUNO, VVI, PCOM, BXC, USAC, ECH, UL, SIMO, IHG, TSG, EHTH, ATRA, SUPN, COHR, RLH, ICHR, ASML, MOMO, PSTG, SHPG, BA, RYB, CORT, ZAGG, LQ, LRCX, RTEC, AXL, XOG, YEXT and GT
Stocks With Unusual Call Option Activity:
  • 1) JUNO 2) BLUE 3) FAST 4) NBR 5) JCI
Stocks With Most Positive News Mentions:
  • 1) TIF 2) UNH 3) BYD 4) NCLH 5) DAN
Charts:

Morning Market Internals

NYSE Composite Index:

Tuesday, January 16, 2018

Wednesday Watch

Evening Headlines
Bloomberg:
  • Japan's Budget Goal Is Being Deferred Again. One of Japan’s key targets for addressing its ballooning debt is set to be pushed further into the future when the Cabinet Office updates economic forecasts next week. The primary balance, which measures the government’s fiscal position excluding interest payments on its borrowings, was meant to come out of the red in fiscal 2020. Reaching the goal was seen as a first step for Prime Minister Shinzo Abe’s administration to arrest debt growth, so the country could then begin to whittle it down.
  • Crypto Junkies’ Favorite Messaging App Is Planning the Biggest ICO Ever. Encrypted messaging service Telegram Inc. is planning the largest, and by some measures most ambitious, initial coin offering ever. Telegram, which last year became the main hub for cryptocurrency watchers and investors, is planning to raise $600 million in a private sale of tokens to use in its Telegram Open Network blockchain before February 2018 and an additional $600 million in a public sale of tokens starting march, according to an investor proposal seen by Bloomberg News.
  • Asian Stocks Retreat From Highs, Dollar Dips Again. (video) The dollar declined against most major currencies while Treasuries steadied amid congressional talks to avert a U.S. government shutdown Friday. Asian stocks pulled back from record highs, following declines in U.S. counterparts. The MSCI Asia Pacific Index retreated as materials and healthcare stocks weighed. Benchmark indexes from Sydney to Tokyo and Hong Kong were also lower. The euro strengthened close to a three-year high against the greenback and sterling rose. The yen steadied after a six-day streak of gains. Bitcoin rebounded above $11,000 after slumping 23 percent Tuesday. The MSCI Asia Pacific Index declined 0.2 percent as of 10:30 a.m. Tokyo time. Topix index decreased 0.2 percent. Kospi index dipped 0.5 percent and Hong Kong’s Hang Seng was down 0.4 percent. Australia’s S&P/ASX 200 Index declined 0.5 percent to the lowest in a month. Futures on the S&P 500 Index rose 0.1 percent after the underlying gauge dropped 0.4 percent Tuesday. 
  • Behind Roaring Stocks Are Profit Upgrades of Unprecedented Size. (video) The rally in the equity market is running hot by almost every standard, from sentiment to momentum signals. Yet anyone worrying about a meltdown can take comfort in an equally strong trend in corporate earnings. Thanks to the tax cut passed into law in December, analysts have been raising their estimates at a rate not seen in at least six years. Forecasts for 2018 profit from companies in the S&P 500 Index increased 3.5 percent over the past four weeks to $151 a share, the fastest pace over comparable periods in Bloomberg data that go back to 2012.
  • Juno Therapeutics(JUNO) Surges on Report of Celgene(CELG) Deal Talks. Juno Therapeutics Inc. surged in after-hours trading after the Wall Street Journal reported that Celgene Corp. was in talks to buy the Seattle-based drugmaker. Shares of Juno, a leader in the effort to use the immune system to treat cancer, rose more than 44 percent to $65.72 a share at 6:04 p.m. The company had a market value of roughly $5.2 billion as of the close of regular trading on Tuesday. Analysts and investors have speculated that changes to the tax code will entice U.S.-based companies to bring back cash from abroad and spur merger and acquisition activity in 2018. Last year was the slowest since 2013 in terms of biopharmaceutical merger volume. Shares of Bluebird Bio Inc.(BLUE), another firm researching so-called CAR-T treatments that use the immune system to fight cancer, rose 7.7 percent late Tuesday, on speculation that the Cambridge, Massachusetts-based firm could also be a potential takeover target. Celgene and Bluebird Bio also have a partnership agreement to develop therapies that target proteins linked to blood cancers like multiple myeloma.
Wall Street Journal:
MarketWatch.com
CNBC:
Zero Hedge:
Business Insider:
 Night Trading 
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 60.75 +.75 basis point
  • Asia Pacific Sovereign CDS Index 10.0 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 75.54 +.01%.
  • S&P 500 futures +.07%.
  • NASDAQ 100 futures +.06%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (ASML)/1.06
  • (BAC)/.45
  • (SCHW)/.42
  • (FAST)/.45
  • (GS)/4.95
  • (USB)/.87
  • (AA)/1.25
  • (KMI)/.18
  • (RMAX)/.51
  • (SLM)/.19
Economic Releases
9:15 am EST
  • Industrial Production MoM for December is estimated to rise +.5% versus a +.2% gain in November. 
  • Capacity Utilization for December is estimated to rise to 77.4% versus 77.1% in November. 
  • Manufacturing Production for December is estimated to rise +.3% versus a +.2% gain in November.
10:00 am EST
  • The NAHB Housing Market Index for January is estimated to fall to 72 versus 74 in December.
2:00 pm EST
  • US Fed Beige Book release.
4:00 pm EST
  • Net Long-Term TIC Flows.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Senate Finance Committee's vote on Jerome Powell for Fed Chair, Fed's Mester speaking, Eurozone Construction Output report, weekly US retail sales reports, weekly MBA mortgage applications report, (TIF) holiday sales update, Needham Growth Conference, TD Securities Mining Conference,  could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and retail shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 75% net long heading into the day.