Wednesday Watch

Evening Headlines

Bloomberg:          

• Italy Stands Firm on Budget Presenting EU With Dilemma.     

• Europe Is Ground Zero for Global Credit Fears.

• May Puts Brexit Deal to Cabinet as Political Peril Ramps Up.   

• UBS Says Markets Poised for a Positive 2019, But Risks Abound.

• Asia Stocks Set for Mixed Start; Crude Slumps. Asian stocks headed for a mixed start ahead of key data on China’s economy, following a topsy-turvy session for U.S. equities that saw tech shares rally and energy shares slide. Oil’s unprecedented slump deepened. Futures pointed to a dip in Japanese stocks, while shares in Hong Kong were indicated higher. Australia shares opened flat. The S&P 500 Index finished Tuesday lower as a surge in optimism over trade talks with China was offset by the plunging crude price, with U.S. oil sliding more than 7 percent. Treasuries climbed and the dollar fell from an 18-month high. The pound extended gains amid optimism the U.K. and the European Union have agreed on a draft Brexit divorce deal. Futures on Japan’s Nikkei 225 Stock Average fell 0.2 percent in Singapore. FTSE China A50 futures slid 0.2 percent. Hang Seng Index futures climbed 0.5 percent. Australia’s S&P/ASX 200 Index opened flat. The S&P 500 Index fell 0.2 percent. Futures on the S&P 500 were little changed.  

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

• Fed Reassurance, U.S.-China Talks, Draft Brexit Deal: Eco Day.

• Semiconductor Investors See Cause for Optimism After Recent Rout.

• 50 Companies to Watch in 2019.  

• Curve Inversion May Lead U.S. Banks to Tighten Lending Standards.

Wall St. Journal:

• McCarthy Is Likely Victor in GOP House Leadership Contest.

• The False Promise of ‘Medicare for All’.

• CNN’s Acosta Privilege.

• California’s Paradise Lost.

• Smarter Cameras Are Poised to Transform Everyday Life.

• U.S. Fights China for Influence in Asia, One Project at a Time.

• The iPhone Slump Is Rumbling Through Tech.

MarketWatch.com:

• 5 reasons oil prices are in a history-setting tailspin.

• These big tech stocks may rise at least 30%, analysts predict.

• Small-cap index perilously close to death cross — and that’s bad news for the broader stock market.

• Sears customers could soon be taking their business to Home Depot(HD).

• Ivan Martchev: China’s coming recession has pushed oil below $60.

Fox News:   

• Merkel calls for creation of ‘European army,' sparking boos and cheers.

CNBC:        

• Dallas mayor says Amazon officials ultimately had 'an East Coast bias' for HQ2.

• Why oil prices went from four-year highs to bear market in just six weeks.

• 'It would be crazy' for the Fed to ignore these key slowdown signals: Cramer.

• Juul halts flavored e-cigarette sales to retailers — for now.

• Stocks making the biggest moves after hours: Blue Apron, Tilray and more.

• Dunkin' says its new espresso is so good, 'you don't have to go to Starbucks'.

• If Trump and Democrats get serious about an infrastructure bill, these stocks should benefit.

• Hedge funds are now negative for the year following stock market sell-off.

Zero Hedge:

• Malaysian Prime Minister Fumes "Obviously We Have Been Cheated By Goldman Sachs".

• NY Taxpayers To Pay $61,000 Per Amazon HQ2 Job.

• Progressives Zero-In On Exit-Tax On Illinois Wealth.

• Silver Cheapest To Gold In 25 Years - Watch China.

• Euro Slides After Italy's Salvini Says No Change To Budget Proposal; Midnight Deadline Looms.

• In Latest Shock To Beijing, Chinese Credit Growth Is Lowest On Record.

• Crude Carnage Kills Equity Dead-Cat-Bounce, Bond Yields Tumble.

Business Insider:

• California's Camp Fire has melted cars and reduced bodies to bone — these images show the horror of the state's deadliest fire ever.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 88.25 -.25 basis point. 

• Asia Pacific Sovereign CDS Index 9.75 unch.

• Bloomberg Emerging Markets Currency Index 66.41 +.07%.

• FTSE 100 futures -.07%.

• S&P 500 futures +.38%.

• NASDAQ 100 futures +.51%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (GOOS)/.26

• (M)/.14

• (SINA)/.73

• (WB)/.72

After the Close:

• (CSCO)/.72

• (NTAP)/.99

• (NTES)/2.48

Economic Releases

8:30 am EST

• The CPI MoM for October is estimated to rise +.3% versus a +.1% gain in September.

• The CPI Ex Food and Energy MoM for October is estimated to rise +.2% versus a +.1% gain in September.

• Real Avg. Hourly Earnings YoY for October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Quarles speaking, China Retail Sales/Industrial Production reports, Eurozone Industrial Production report, weekly MBA Mortgage Applications report, Jefferies Healthcare Conference, Barclays Automotive Conference, BofA Merrill Energy Conference, Scotiabank Energy Infrastructure Conference, JPMorgan TMT Conference, Morgan Stanley TMT Conference, (AVID) Investor Day, (OI) Investor Day, (WEX) Investor Day and the (MMM) Investor Day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed.  The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Fed Rate-Hikes Fears, Global Growth Worries, Oil Plunge, Energy/Healthcare Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 20.5 +.15%

• Euro/Yen Carry Return Index 133.45 +.49%

• Emerging Markets Currency Volatility(VXY) 10.17 +.59%

• S&P 500 Implied Correlation 42.14 +2.96%

• ISE Sentiment Index 61.0 -4.7%
  

• Total Put/Call .96 -18.6%

• NYSE Arms .95 -46.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 69.03 +3.28%
  

• America Energy Sector High-Yield CDS Index 602.0 +1.98%

• European Financial Sector CDS Index 89.0 -1.64%

• Italian/German 10Y Yld Spread 303.75 -.25 basis point
  

• Asia Pacific Sovereign Debt CDS Index 9.78 +1.40%

• Emerging Market CDS Index 199.17 +3.32%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.12 +.28%

• 2-Year Swap Spread 18.50 -.5 basis point

• TED Spread 28.25 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -47.75 +.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.32 -.08%

• 3-Month T-Bill Yield 2.34% unch.

• Yield Curve 25.0 -.75 basis point

• China Iron Ore Spot 69.0 USD/Metric Tonne -.20%

• Citi US Economic Surprise Index 10.40 +.5 point

• Citi Eurozone Economic Surprise Index -55.2 +1.4 points

• Citi Emerging Markets Economic Surprise Index -6.20 -1.8 points

• 10-Year TIPS Spread 2.03 -2.0 basis points

• 75.5% chance of Fed rate hike at Jan. 30th meeting, 91.4% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -105 open in Japan 

• China A50 Futures: Indicating +51 open in China

• DAX Futures: Indicating -68 open in Germany

Portfolio: 

• Slightly Lower: On losses in my medical/biotech sector longs and emerging market shorts

• Disclosed Trades: Covered some of my (IWM)/QQQ hedges, then added them back

• Market Exposure: 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.3%

Sector Underperformers:

• 1) Oil Service -4.0% 2) Energy -2.3% 3) Healthcare Providers -1.5%

Stocks Falling on Unusual Volume: 

• ACHC, FOCS, TDW, TSE, ROAN, BPT, TSN, DQ, EPC, CRC, MGLN, WLL, FIZZ, MDGL and EQT

Stocks With Unusual Put Option Activity:

• 1) KSS 2) NYT 3) VLY 4) ATHN 5) USO

Stocks With Most Negative News Mentions:

• 1) ACHC 2) DQ 3) INFN 4) LNN 5) CTV

Charts:

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