Morning Market Internals

NYSE Composite Index:

• Volume Running -3.9% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 49.8% of Issues Advancing, 46.1% Declining
• 13 New 52-Week Highs, 7 New Lows
• 24.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.0%
• Vix 19.0 -.5%
• Total Put/Call 1.02 -4.7%
• TRIN/Arms 1.34 +26.4%

Thursday Watch

Evening Headlines

Bloomberg:        

• May Faces Tough Talks With Opponents to Get a New Brexit Deal.

• U.S. Calls Canadian’s Death Sentence in China ‘Politically Motivated’.

• Huawei Is Target of U.S. Criminal Probe for Trade Secrets Theft. 

• What to Watch in China GDP Report: Tariffs, Consumption, Babies.

• Asian Stocks Climb Following U.S. Earnings Boost. Asian stocks rose to their highest since early December following gains in U.S. equities as signs of a better-than-expected start to the earnings season countered concerns about rising U.S.-China tensions. The dollar steadied. Shares in Tokyo led gains after an overnight decline in the yen, with advances more muted in Sydney and Seoul and futures signaling modest gains in Hong Kong equities. Earlier, strong profits at Goldman Sachs and Bank of America buoyed the S&P 500 Index, and the 10-year Treasury yield rose to 2.72 percent. Yet the tech-heavy Nasdaq 100 erased gains as news broke that U.S. prosecutors are investigating Huawei Technologies for allegedly stealing trade secrets. The pound was steady after Prime Minister Theresa May’s government won a no-confidence vote, as widely expected. Japan’s Topix index rose 0.5 percent as of 9:07 a.m. in Tokyo. Futures on the S&P 500 were flat. The S&P 500 Index climbed 0.2 percent Wednesday. Australia’s S&P/ASX 200 Index added 0.2 percent. South Korea’s Kospi advanced 0.1 percent. FTSE China A50 futures gained 0.3 percent. Hang Seng futures added 0.4 percent.   

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

• The Stock Melt-Up Explained in Three Easy Pieces.   

• Goldman Says Rich People Will Drag Down the U.S. Economy by Spending Less.

Wall St. Journal: 

• Fed Says Student Debt Has Hurt the U.S. Housing Market.

• WeWork’s CEO Makes Millions as Landlord to WeWork.

• The Best and Worst U.S. Airlines of 2018.

• Masculinity Isn’t a Sickness.

• Pelosi Asks Trump to Delay State of the Union Address.

• Former Fed Leaders, Economists Rally Around Carbon Tax.

MarketWatch.com:

• Head of world’s largest asset manager says stock market has hit a bottom — but this would make it surge.

Fox News:

• House speaker bashed by Republicans for her bid to delay Trump address.

CNBC:

• The winners and losers of the Detroit auto show.

• The Apple TV can do so much more than stream Netflix: Impress your friends with these tricks.

• Stocks making the biggest moves after hours: CSX, PG&E and more.

Zero Hedge:

• For The First Time Ever, Wall Street Banks Top $100 Billion In Profit.

• The Average Adult In The US "Logs 6 Hours, 43 Minutes Of Total Screen Time Daily".

• Vanguard Founder Jack Bogle Dead At 89 Jefferies Sues Cantor For Stealing Dozens Of Employees.

• "It's Worse Than It Has Ever Been": Venice Beach Residents Rebel As Homeless Crisis Intensifies.  

• US Pursuing Criminal Investigation Of Huawei; Stocks Slide.

• AG Nominee Barr May Swing Anti-Trust Hammer At Amazon, Facebook And Google.

• Are You Suffering From Toxic Masculinity? Know The Warning Signs.

• "It Was Just Not Fun Anymore": Why One Hedge Funder Is Calling It Quits.

• Small Caps Surge To Best Start In 30 Years After Record China Liquidity Injection.

Telegraph:

• Europe is in no fit state to handle the risks of its own Brexit brinkmanship.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 87.50 -1.0 basis point. 

• China Sovereign CDS 59.75 -1.75 basis points.

• Bloomberg Emerging Markets Currency Index 68.12 unch.

• FTSE 100 futures -.23%.

• S&P 500 futures -.26%.

• NASDAQ 100 futures -.27%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (BBT)/1.04

• (CBSH)/.94

• (FAST)/.60

• (KEY)/.47

• (MTB)/3.49

• (MS)/.89

• (PPG)/1.10

• (TSM)/3.82

After the Close:

• (AXP)/1.79

• (OZK)/.83

• (JBHT)/1.48

• (NFLX)/.24

• (PRGS)/.73

Economic Releases

8:30 am EST

• The Philly Fed Business Outlook Index for January is estimated to rise to 9.5 versus 9.4 in Dec.

• Initial Jobless Claims for last week are estimated to rise to 220K versus 216K the prior week.

• Continuing Claims are estimated to rise to 1734K versus 1722K prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI report, Bloomberg Economic Expectations Index for Jan., weekly Bloomberg Consumer Comfort Index and the (MNST) business update could also impact trading today.

BOTTOM LINE:  Asian indices are slightly higher, boosted by financial and healthcare shares in the region. I expect US stocks to open modestly lower and to strengthen into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Earnings Optimism, Dovish FOMC Commentary, Less European/Emerging Markets/US High-Yield Debt Angst, Financial/Transport Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 18.4 -1.3%

• Euro/Yen Carry Return Index 129.08 +.14%

• Emerging Markets Currency Volatility(VXY) 9.36 -.21%

• S&P 500 Implied Correlation 45.5 -1.79%

• ISE Sentiment Index 95.0 +26.7%
  

• Total Put/Call 1.16 +14.9%

• NYSE Arms 1.10 -.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 75.73 -2.5%
  

• America Energy Sector High-Yield CDS Index 734.0 -.76%

• European Financial Sector CDS Index 96.61 -5.5%

• Italian/German 10Y Yld Spread 253.0 -13.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 88.37 -1.07%
  

• Emerging Market CDS Index 189.38 -2.0%
  

• iBoxx Offshore RMB China Corporate High Yield Index 153.96 +.38%

• 2-Year Swap Spread 16.0 -.25 basis point

• TED Spread 35.5 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -.5 +2.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.14 +.40%
• 3-Month T-Bill Yield 2.41% -2.0 basis points

• Yield Curve 18.0 unch.

• China Iron Ore Spot 73.05 USD/Metric Tonne +2.3%

• Citi US Economic Surprise Index -6.0 +1.8 points

• Citi Eurozone Economic Surprise Index -84.5 +1.2 points

• Citi Emerging Markets Economic Surprise Index -17.4 +1.3 points

• 10-Year TIPS Spread 1.82 +2.0 basis point
• 0.0% chance of Fed rate hike at March 20th meeting, 4.1% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +123 open in Japan 
• China A50 Futures: Indicating +90 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some

• Market Exposure: 100% Net Long