Friday Watch

Evening Headlines

Bloomberg:     

• Japan’s Inflation Slows Again as Cheaper Oil Undermines the BOJ.

• Asia Stocks Advance as Trade Optimism Aids Rally. Stocks in Asia gained Friday, building on the recent rally in risk assets, amid optimism for progress in U.S.-China trade talks that earlier lifted U.S. equities and Treasury yields. Shares in Japan, Australia and South Korea rose and futures pointed to gains in Hong Kong. The S&P 500 Index exceeded its 50-day average for the first time since December after the Wall Street Journal reported Treasury Secretary Steven Mnuchin proposed easing China tariffs. While the Treasury denied that reporting, the story reinforced previous signs the administration is more eager for a deal to help support financial markets. The dollar was little changed, while oil continues to trade around $52 a barrel in New York. Japan’s Topix index rose 0.5 percent as of 9:14 a.m. in Tokyo. Hang Seng futures added 0.4 percent earlier. Australia’s S&P/ASX 200 Index gained 0.4 percent. Futures on the S&P 500 were flat.    

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

• Elizabeth Warren Demands Wells Fargo Be Kicked Off College Campuses.

• Trump Administration Appeals Ruling Blocking Census Question.  

• Evans Says Fed Can Easily Be Patient and Assess Economic Outlook.

Wall St. Journal: 

• Be Careful What You Wish For: Wall Street Hit by 4th Quarter Volatility.

• ‘Unbearable’: European Firms Face Brexit Uncertainty.

• U.S. Debates Lifting China Tariffs to Hasten Trade Deal.

• As Americans Drink Less Alcohol, Booze Makers Look Beyond the Barrel.

• China Offers Iran $3 Billion Oil Deal.

Fox News:

• Trump’s cancellation of Dems’ overseas trip sparks anger, confusion on Capitol Hill.

CNBC:

• Netflix(NFLX) says it has 10% of all TV time in the US and discloses some colossal numbers for its shows.

• Stocks making the biggest moves after hours: Netflix, American Express, Atlassian and more.

• Here’s the real reason why stocks popped on China trade reports: Cramer.

• Investors pulled a record $143 billion out of active funds during December’s plunge.

• American Express(AXP) drops after missing Wall Street’s fourth-quarter expectations.

Zero Hedge:

• Trump Tells Pelosi Her Trips Are Postponed Due To Shutdown Unless She Flies Commercial.

• Trump Cancels Davos Delegation Amid Shutdown.

• Crispin Odey Warns Of "Revolution" If Brexit Fails.

• "It's A Reunion For People Who Broke The World": Author Explains Why Davos Should Be Cancelled.

• Largest Cache Of Hacked Data In History Discovered: Over 770 Million Email Addresses, 21 Million Passwords.

• LA Teachers Strike: 73K Is Not Enough.

• "Buy Guns, Drink Beer, Eat Ribs" - We Need To Retoxify Masculinity.

• China Drops, US Pops After Trillion Yuan Pump Trumps Morgan Stanley Dump.

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 87.0 -.5 basis point. 

• China Sovereign CDS 60.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 68.05 +.05%.

• FTSE 100 futures +.44%.

• S&P 500 futures +.21%.

• NASDAQ 100 futures +.22%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (KSU)/1.55

• (RF)/.38

• (SLB)/.38

• (STT)/1.69

• (STI/1.43)

• (VFC)/1.10

After the Close:

• None of note

Economic Releases

9:15 am EST

• Industrial Production MoM for Dec. is estimated to rise +.2% versus a +.6% gain in Nov.

• Capacity Utilization for Dec. is estimated at 78.5% versus 78.5% in Nov.

• Manufacturing Production for Dec. is estimated to rise +.3% versus unch. in Nov.
  

10:00 am EST

• Preliminary Univ. of Mich. Consumer Confidence for  January is estimated to fall to 96.8 versus 98.3 in Dec.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan Industrial Production report and the (GME) holiday sales update could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to strengthen into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Surging into Final Hour on China Trade Deal Hopes, Earnings Optimism, Less European/Emerging Market/US High-Yield Debt Angst, Transport/Industrial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 18.1 -4.9%

• Euro/Yen Carry Return Index 129.29 +.08%

• Emerging Markets Currency Volatility(VXY) 9.37 +.11%

• S&P 500 Implied Correlation 45.59 +.02%

• ISE Sentiment Index 106.0 +20.5%
  

• Total Put/Call .84 -21.5%

• NYSE Arms .62 -42.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 75.25 -1.42%
  

• America Energy Sector High-Yield CDS Index 730.0 -.63%

• European Financial Sector CDS Index 96.13 -.5%

• Italian/German 10Y Yld Spread 252.25 -.75 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 88.52 +.18%
  

• Emerging Market CDS Index 185.99 -2.08%
  

• iBoxx Offshore RMB China Corporate High Yield Index 154.23 +.17%

• 2-Year Swap Spread 16.0 unch.

• TED Spread 37.75 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 0.0 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.03 -.13%
• 3-Month T-Bill Yield 2.40% -1.0 basis point

• Yield Curve 18.0 unch.

• China Iron Ore Spot 73.5 USD/Metric Tonne +.45%

• Citi US Economic Surprise Index -3.20 +2.8 points

• Citi Eurozone Economic Surprise Index -83.2 +1.3 points

• Citi Emerging Markets Economic Surprise Index -18.6 -1.2 points

• 10-Year TIPS Spread 1.82 unch.
• .5% chance of Fed rate hike at March 20th meeting, 4.6% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +113 open in Japan 
• China A50 Futures: Indicating +120 open in China

• DAX Futures: Indicating +25 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.3%

Sector Underperformers:

• 1) Homebuilders -.7% 2) Computer Hardware -.5% 3) Telecom -.4%

Stocks Falling on Unusual Volume: 

• FANH, SIG, RVNC, QTNA, UNFI, MS, HOMB, CCJ, WDC and PLXS

Stocks With Unusual Put Option Activity:

• 1) SKX 2) AET 3) QEP 4) SIG 5) IMMU

Stocks With Most Negative News Mentions:

• 1) ESTE 2) FANH 3) UNFI 4) SIG 5)WDC

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.7%

Sector Outperformers:

• 1) Steel +1.5% 2) Biotech +1.1% 3) Medical Equipment +1.1%

Stocks Rising on Unusual Volume:

• NEXA, SKX, FISV, MERC, OZM, ATTU, CSV, FDC, FUL, GNE, CARS, MRTX, AA, SBNY, INSP, DNB, WNS, IGV, HAFC, LIVN, NTB, LGND, KNX, COUP, FAST, EFII, MTB, HWC, DPZ, FISV and TPX

Stocks With Unusual Call Option Activity:

• 1) SIG 2) SCHW 3) REGN 4) COUP 5) VRTX

Stocks With Most Positive News Mentions:

• 1) LPCN 2) FAST 3) SBNY 4) CARS 5) PPG

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume