Thursday Watch

Evening Headlines

Bloomberg:            

• China Outlines Possible Trade Concessions to U.S. Ahead of G20 Talks, Sources Say.  

• Why Hedging Credit Risk Is Getting Easier in China.

• Theresa May Is on the Brink as Tories Plot to Kill Her Brexit Deal.

• Asia Stocks Face Mixed Start; Oil Declines Again. Asian stocks headed for a mixed start after U.S. equities declined and Treasuries rose amid a renewed bout of risk aversion in American markets. Oil fell after briefly snapping its record losing streak. Equity futures slipped in Japan, while they climbed in China and Hong Kong. Australian stocks ticked higher at the open. Financial and technology shares led the S&P 500 Index lower, while Treasuries rose with gold and the yen held onto gains as investors sought out havens. The pound climbed after U.K. Prime Minister Theresa May secured backing from her cabinet for a withdrawal agreement with the EU, though doubts on the U.K.’s path out of Europe saw the advance being unwound. West Texas Intermediate crude traded around $56 a barrel after plunging for a record 12 straight days. Futures on Japan’s Nikkei 225 slid 0.2 percent in Singapore. FTSE A50 Index futures rose 0.5 percent. Australia’s S&P/ASX 200 Index rose 0.2 percent. Futures on Hong Kong’s Hang Seng Index advanced 0.9 percent. S&P 500 futures rose 0.2 percent.  

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

• China Engine Sputters, Greenspan on CPI, Japan Revival: Eco Day.

• Conservative Euroskeptics Have Reason to Hate May’s Brexit Plan.  

• Powell Says Fed Paying Close Attention to Rate Cycle Impact.  

• Here’s What Funds Piled Into or Exited Last Quarter.

Wall St. Journal:

• Global Economic Slowdown Deepens.

• California’s Largest Utility Pummeled by Wildfire Risks.

• GE Credit Crunch Ripples Across Wall Street.

• ‘It’s a Crisis of Civilization in Mexico.’ 250,000 Dead. 37,400 Missing.

• Best of the Biggest U.S. Airports.

• Voter Turnout Hit Records, and Where It Surged Matters.

• Macy’s(M) Reports Strong Sales Growth, Raises Guidance.

Fox News:   

• Democrats use legal action when losing races, but keep quiet when they lead.

CNBC:        

• David Tepper's Appaloosa takes new stake in Apple, cuts Facebook and Alibaba.

• Powell credits Fed policy for the US economy being 'in a good place'.

• Bitcoin plummets under $6,000 to a new low for the year after months of stability.

• Watch: Fed Chairman Jerome Powell answers questions in Dallas.

• Flake vows not to back Trump's judicial nominees until Senate votes on Mueller protection bill. 

• Trump announces his support for criminal justice reform legislation, saying it's 'the right thing to do'.

• Stocks making the biggest moves after hours: JP Morgan, Cisco and more.

• Natural gas jumps to 4-year high in panicky trading as snow, cold push across US.

• Cisco(CSCO) beats first-quarter estimates, meets guidance expectations. 

• Short seller Andrew Left has his doubts about Canadian pot stocks, says he's betting against Canopy.

Zero Hedge:

• In Much-Anticipated Speech, Powell Gives Optimistic View Of Economy, Keeps Hawkish Outlook.

• Michael Avenatti Arrested For Allegedly Beating His Wife.

• A $30 Billion Computer Is About To Start Selling Stocks.

• Buffett Adds To Bank Holdings With New Stakes In JPMorgan, PNC; Boosts Apple: Full 13-F.

• The Implicit Desperation Of China's "Social Credit" System.

• Mattis Tells Army Troops On Border: Ignore Media Hype Over The Mission, "You'll Go Nuts".

• The Fed Will Continue Tightening Until Everything Breaks.

• White House Muzzles Peter Navarro After Larry Kudlow Smackdown.

• Tiananmen 2.0? China Denies Guardian Report Of Student Uprising Over Workers' Rights.

• Palm Beach County's Voting Machines Overheat, Forcing Another Recount Of 175,000 Votess.

• WTI Tumbles Back Below $56 After Bigger Than Expected Crude Build.

• Brexit Withdrawal Agreement Published: Here Are The Highlights.

• Sorry Stiglitz, It's Socialism That's Rigged, Not Capitalism.

• 11 Signs That The US Economy Is Starting To Slow Down Dramatically.

• Bonds & Bullion Bid, Banks & Bitcoin Battered, But Black-Gold Bounced.

Business Insider:

• 'Utterly unbecoming': Jeff Bezos is getting slammed by tech leaders for how Amazon HQ2 sites were selected.

• Sheryl Sandberg repeatedly tried to downplay Russia's involvement in misinformation on Facebook, report says.

Telegraph:

• Comment: A rejection of the Barnier Brexit plan would hurl all Europe into existential crisis.

Night Trading 

• Asian equity indices are -.5% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 92.0 +3.5 basis points. 

• Asia Pacific Sovereign CDS Index 10.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.58 +.03%.

• FTSE 100 futures -.09%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.25%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (BERY)/.87

• (CSIQ)/.45

• (JCP)/-.56

• (TK)/.00

• (WMT)/1.01

After the Close:

• (CRMT)/1.18

• (AMAT)/.97

• (JWN)/.65

• (NVDA)/1.92

• (POST)/1.19

• (SCVL)/.59

• (WSM)/.94

Economic Releases

8:30 am EST

• Empire Manufacturing for November is estimated to fall to 20.0 versus 21.1 in October. 

• The Philly Fed Business Outlook Index for November is estimated to fall to 20.0 versus 22.2 in October.

• Retail Sales Advance MoM for October is estimated to rise +.5% versus a +.1% gain in September.

• Retail Sales Ex Autos MoM for October are estimated to rise +.5% versus a -.1% decline in September. 

• Retail Sales Ex Auto and Gas for October is estimated to rise +.4% versus unch. in September.

• The Import Price Index MoM for October is estimated to rise +.1% versus a +.5% gain in September.

• The Import Price Index ex Petro for October is estimated unch. versus unch. in September.

• The Export Price Index MoM for October is estimated to rise +.1% versus unch. in September.

• Initial Jobless Claims for last week are estimated to fall to 213K versus 214K the prior week.

• Continuing Claims are estimated to rise to 1625K versus 1623K prior.
  

10:00 am EST

• Business Inventories for September are estimated to rise +.3% versus a +.5% gain in August.
  

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory inventory gain of +2,914,270 barrels versus a +5,783,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -940,400 barrels versus a +1,852,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,781,400 barrels versus a -3,465,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.96% versus a +.6% gain prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Quarles speaking, Eurozone Retail Trade report, Australia Unemployment Rate, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, CSFB Housing Conference and the (ROK) investor meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 50% net long heading into the day.

Stocks Lower into Final Hour on Fed Rate-Hike Fears, Global Growth Worries, European/US High-Yield Debt Angst, Biotech/Utility Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 20.55 +2.7%

• Euro/Yen Carry Return Index 133.85 +.19%

• Emerging Markets Currency Volatility(VXY) 10.12 -.30%

• S&P 500 Implied Correlation 42.55 +.05%

• ISE Sentiment Index 77.0 -2.53%
  

• Total Put/Call 1.24 +26.5%

• NYSE Arms .84 -13.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 71.15 +3.13%
  

• America Energy Sector High-Yield CDS Index 638.0 +4.68%

• European Financial Sector CDS Index 91.43 +2.72%

• Italian/German 10Y Yld Spread 309.25 +5.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 10.04 +2.76%

• Emerging Market CDS Index 198.54 -.29%
  

• iBoxx Offshore RMB China Corporate High Yield Index 146.53 -1.07%

• 2-Year Swap Spread 19.0 +.5 basis point

• TED Spread 25.25 -3.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -44.5 +3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.60 +.36%
• 3-Month T-Bill Yield 2.37% +3.0 basis points

• Yield Curve 25.75 +.75 basis point

• China Iron Ore Spot 71.40 USD/Metric Tonne -.46%

• Citi US Economic Surprise Index 10.60 +.2 point

• Citi Eurozone Economic Surprise Index -56.0 -.8 point

• Citi Emerging Markets Economic Surprise Index -5.10 +1.1 points

• 10-Year TIPS Spread 2.02 +1.0 basis point
• 74.6% chance of Fed rate hike at Jan. 30th meeting, 91.1% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +4 open in Japan 
• China A50 Futures: Indicating +41 open in China

• DAX Futures: Indicating +41 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +25.7% Above 100-Day Average
• 4 Sectors Rising, 7 Sectors Declining
• 49.7% of Issues Advancing, 47.4% Declining
• 20 New 52-Week Highs, 89 New Lows
• 28.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.3%
• Vix 20.9 +4.3%
• Total Put/Call 1.08 +10.2%
• TRIN/Arms 1.37 +41.2%