Thursday Watch

Evening Headlines

Bloomberg:

• Chinese Traders Return to More Bullish Markets After Holiday. The world is looking a better place for China’s investors as the nation’s financial markets reopen following a week-long break. Global equities have rebounded during the Lunar New Year holidays as the fear of faster inflation ebbed. Hong Kong stock gauges are among the world’s best performers, with the Hang Seng Index rallying 3 percent. The offshore yuan -- which traded during the break -- strengthened past the onshore rate.

• Italy Has Built a Buffer to Shield Debt From Higher Rates.

• Asia Stocks Slip With U.S. Futures, Dollar Gains. (video) Asian stocks declined with U.S. equity index futures as investors adjust to the Federal Reserve’s latest comments on the economy. The dollar jumped alongside Treasury yields. Futures on the S&P 500 Index slipped after a rally fizzled Wednesday following minutes from the Fed’s January meeting showing increasing confidence that economic growth will pick up steam despite its concerns around inflation. Stocks opened lower in Japan and South Korea, with traders in Chinese markets due to return after a holiday. Japan’s Topix index fell 0.8 percent as of 9:24 a.m. in Tokyo and South Korea’s Kospi index retreated 0.7 percent. Australia’s S&P/ASX 200 Index was little changed. Futures on the S&P 500 slid 0.2 percent. The gauge lost 0.6 percent on Wednesday. The MSCI Asia Pacific Index declined 0.5 percent.

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

• Hedge Fund Manager Palomba Leaves Citadel After Losses.

• Bond Market Guide to Trading When 10-Year Treasury Yields Hit 3%.

Wall Street Journal:

• The FBI’s Parkland Fail. The list of fatal mistakes by federal agencies in recent years is staggering.

• Iran’s Syrian Front. Assad’s atrocities grow as Tehran builds a new anti-Israel satellite.

• Fed Gives Bullish Signals on Economy. Economic data bolsters central bank officials’ plans to keep raising short-term interest rates this year.

• Toys “R” Us Plans to Close Another 200 Stores. Retailer’s corporate staff would also suffer layoffs following a disappointing holiday season.

• Boko Haram Kidnaps More Schoolgirls in Nigeria. Raid by Islamist militants at technical college leaves scores missing, echoing seizures in Chibok that sparked global outcry in 2014.

MarketWatch.com: 

• Why the stock market’s highs and lows are nothing to fear.

• Venture capitalist to tech leaders: Stop pretending AI won’t destroy jobs.

Fox News:

• Trump on preventing mass shootings: 'we're going to get it done'. (video)

• Iran could soon be spying on smartphones worldwide, report claims.

CNBC:

• US is looking at potential new sanctions against Russia.

• British lawmakers are launching an inquiry into cryptocurrencies. (video)

• Stocks making the biggest moves after hours: Roku, Pandora & more.

• Telegram is holding a secretive second pre-ICO sale.

• Malicious use of A.I. could turn self-driving cars and drones into weapons, top researchers warn.

• SEC charges former bitcoin exchange and its founder with fraud.

Zero Hedge: 

• Broward Sheriff: Deputies Will Now Carry Rifles On School Grounds.

• 'Crumbs' Crushed - Soaring Economic Optimism Could Ruin Dems' "Blue Wave" Midterms.

• WTI/RBOB Rebound After Surprise Crude Draw. (graph)

• Why Are The Taxpayer-Funded Salaries Of A Quarter-Million Federal Employees, A State Secret?

• "They Had More Information Than Us" - Sanders Blames Clinton For Not Exposing Russian Meddling.

• Watch The Boston Dynamics Robot Dog Fight Back Against A Human. (video)

• Libor-OIS Blowing Out On Rising Repatriation Concerns, Collapsing Front-End Funding. (graph)

• CNN Doxxes Elderly Woman, Badgers At House Over Russian Trolls.

• Dow Plunges 500 Points As Bond Yields, Dollar Spike. (graph)

Business Insider:

• Amid controversy over Intel CEO's stock sale, SEC warns executives about trading shares before disclosing security breaches.

• A fracking sand shortage could put a pause on the US shale boom.

Night Trading 

• Asian equity indices are -1.0% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 70.50 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 12.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 75.37 -.05%.

• FTSE 100 futures -.97%.

• S&P 500 futures -.48%.

• NASDAQ 100 futures -.71%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (APA)/.25

• (AAWW)/2.15

• (BLMN)/.39

• (CHK)/.25

• (HRL)/.44

• (MGA)/1.56

• (NEM)/.37

• (PWR)/.44

• (SAGE)/-2.01

• (SAFM)/1.17

• (SFM)/.15

• (TK)/-.24

• (TTC)/.44

• (VC)/1.69

• (CTRP)/.16

• (FSLR)/-.30

• (HLF)/.98

• (HPQ)/.42

• (INTU)/.34

• (MELI)/.55

• (RRGB)/.54

• (RDFN)/-.05

• (RH)/1.54

• (OLED)/.84

• (WING)/.16

• (ZOES)/-.12

Economic Releases

8:30 am EST

• Initial Jobless Claims for last week are estimated at 230K versus 230K the prior week.

• Continuing Claims are estimated to fall to 1935K versus 1942K the prior week.

10:00 am EST

• The Leading Index for January is estimated to rise +.7% versus a +.6% gain in December.

11:00 am EST

• Kansas City Fed Manufacturing Activity for February is estimated to rise to 18.0 versus 16.0 in January.

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,354,700 barrels versus a +1,841,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +742,200 barrels versus a +3,599,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,093,600 barrels versus a -459,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.8% versus a -2.7% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Quarles speaking, Fed's Dudley speaking, Fed's Bostic speaking, Japan CPI report, Germany IFO Business Climate Index, weekly EIA natural gas inventory report and the $29B 7Y T-Note auction could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Rising Long-Term Rates, US/European/Emerging Markets Debt Angst, Oil Decline, Food/REIT Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 18.52 -10.10%

• Euro/Yen Carry Return Index 137.98 +.05%

• Emerging Markets Currency Volatility(VXY) 8.48 -.24%

• S&P 500 Implied Correlation 41.44 -1.1%

• ISE Sentiment Index 131.0 +37.9%
  

• Total Put/Call 1.02 +18.6%

• NYSE Arms 1.75 +40.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.70 +1.25%
  

• America Energy Sector High-Yield CDS Index 372.0 -2.14%

• European Financial Sector CDS Index 52.84 -4.12%

• Italian/German 10Y Yld Spread 132.75 -.75 basis point
  

• Asia Pacific Sovereign Debt CDS Index 12.74 +1.15%

• Emerging Market CDS Index 123.29 -.86%
  

• iBoxx Offshore RMB China Corporate High Yield Index 147.37 +.09%

• 2-Year Swap Spread 26.75 unch.

• TED Spread 25.0-2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -34.25 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.45 -.17%
• 3-Month T-Bill Yield 1.64% +4.0 basis points
  

• Yield Curve 67.5 +1.25 basis points

• China Iron Ore Spot 76.35 USD/Metric Tonne n/a

• Citi US Economic Surprise Index 50.0 +1.2 points

• Citi Eurozone Economic Surprise Index -.2 -23.8 points

• Citi Emerging Markets Economic Surprise Index 5.30 +1.1 points

• 10-Year TIPS Spread 2.13 +2.0 basis points
  
• 100.0% chance of Fed rate hike at May 2 meeting, 100.0% chance at June 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +40 open in Japan 
• China A50 Futures: Indicating +337 open in China

• DAX Futures: Indicating -33 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Americans' Economic Expectations Reach Second-Highest Since 2002. Americans’ outlook for the U.S. economy improved in February to the second-highest level since March 2002, indicating lower taxes are resonating, the Bloomberg Consumer Comfort Index showed Wednesday.

• Wall Street Overreacts to Data But Fed Shouldn't, Kashkari Says. (video)

• Soybeans Could Dethrone Corn as U.S. Crop King After 35 Years.

• Bank of America(BAC) Says FX Traders May Be Off on Dollar Bearishness. (video)

• Four Charts: Home Depot(HD) Benefits From the Housing Market Rebound

Wall Street Journal:

• Fed Officials Marked Up Growth, Inflation Outlook in January. Economic data bolsters central bank officials’ plans to keep raising short-term interest rates this year.

• China Humiliates Another Western Company. Beijing increasingly demands corporate self-censorship. 

• Amazon(AMZN) Is Taking Over the Stock Market, Too. The online retail giant has accounted for 27% of the S&P 500’s gains this year, followed by Microsoft and Netflix.

• Trump Economic Report Blames Obama Policies for Slow Growth. The nearly-600 page report is the most detailed analysis of the economy and economic policy by President Donald Trump’

MarketWatch.com:

• Why the worst may be over in the stock-market correction.

Fox News:

• Maryland police officer shot and killed is second cop murdered in 12 hours.

CNBC:

• Fed minutes: All signs pointing to more rate hikes ahead. (video)

• Here are 3 key Senate races that show why Democrats are at risk of losing seats in 2018.

• Trump administration may make it easier to wipe out student debt in bankruptcy. (video)

• JP Morgan’s(JPM) ‘branch warfare’ to beat up on Wells, support 19% stock surge: Morgan Stanley.

• Trump signals open to mileage tax with praise of Oregon program.

• Don't worry about higher interest rates for now, JP Morgan says. (video)

Zero Hedge:

• In Unexpected Twist, Judge In Flynn Case Asks Mueller For "Exculpatory Evidence".

• Exchange Glitch Allows Traders To "Buy" $20 Trillion In Bitcoin For Free.

• BofA: Clients Sold Bond ETFs For The Longest Streak On Record.

• Conservatives Furious After Twitter(TWTR) Purges Thousands Of Accounts.

• Who Got Hit: Here Are The Best And Worst Performing Hedge Funds Of 2018.

• Fed President Sounds Panic Over Level Of US Debt.

• "We've Never Underperformed Like This": Einhorn Has Worst Month Since March 2000.

• Amid Soaring Cobalt Prices, Apple Will Buy Direct From Miners. (graph)

• Existing Home Sales Extend Plunge, Biggest Annual Drop Since 2014. (graph)

• As Europe Slumps, US PMIs Signal GDP Growth Above 3.00%. (graph)

• Mortgage Applications Plunge Most Since 2015 As Rates Soar. (graph)

• Judicial Watch Asks "What Is The FBI Hiding In Its War To Protect Comey?