Wednesday Watch

Evening Headlines

Bloomberg:       

• More Protests Planned After Demonstrator Shot: Hong Kong Update.

• Hong Kong Protests Bring More Pain as Chinese Shoppers Stay Away.

• North Korea Fires Ballistic Missiles After Setting U.S. Talks.

• Boris Johnson to Make His ‘Final’ Brexit Offer: My Deal or No Deal.

• Stocks in Asia Drop After U.S. Data Disappoints. Asian stocks tracked losses in U.S. equities after a weak reading on American manufacturing added to concern about the global economy. Treasuries retained gains. Japan and South Korea bore the brunt of declines, with Australian equities also lower. Earlier, the S&P 500 fell the most in five weeks and pushed through a key support level after the Institute for Supply Management’s factory index slipped to the lowest since June 2009. The yield on 10-year Treasuries was at 1.64%. Hong Kong securities will also be in focus after further clashes between protesters and police. Japan’s Topix index dropped 0.8% as of 9:03 a.m. in Tokyo. Futures on the S&P 500 Index rose 0.3%. The underlying gauge fell 1.2% on Tuesday. Australia’s S&P/ASX 200 Index lost 0.5%. South Korea’s Kospi declined 0.8%.  

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

• Hong Kong Economic Toll, U.S. Slowdown, EU Recession: Eco Day.

• Are Russia and Saudi Arabia Still Pumping Too Much Oil?  

• Trump to Unveil Medicare Plan in Bid to Contrast Democrat Rivals.

• BMW Beats Mercedes by Just 34 Cars in Tight U.S. Sales Race.

• Einhorn's Greenlight Jumps 8% as Factor Reversal Proves Boon.

• With $0 Fees, Schwab Risks Blowing Up Brokerage Model It Built.

Wall Street Journal:

• Trump Impeachment Defense Complicated by Tense Giuliani-Barr Relationship.

• The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Their Cars.

• Escalation From Beijing on Its National Day.

• Ringmaster Rashida Tlaib Introduces the Impeachment Circus.

• Slowing Trade Hits Global Manufacturing.

• Judge Rules Harvard’s Race-Conscious Admissions Constitutional.

• One Hong Kong District Becomes a Combat Zone.

Fox News:

• Obama AG Holder lobs chilling warning to Barr in Fox News interview.

• Virginia officer suspended after turning in suspected illegal immigrant to ICE.

MarketWatch.com:   

• Here are the stocks that have soared and sunk the most in 2019.

CNBC:

• Silicon Valley donors starting to back Elizabeth Warren despite her pledge to break up Big Tech.

• Jim Cramer: It should be harder for Chinese companies to go public in the US.

• Trump, RNC blow away top Dems with $125 million raised in the third quarter.

• Boris Johnson will unveil final Brexit offer to the European Union on Wednesday.

Zero Hedge:

• Dead Deutsche Banker's Son Peddled Trump Financial "Dirt" To The Highest Bidder - Which Adam Schiff Promptly Subpoenaed.

• Global Warming Fraud Exposed In Pictures.

• "History In The Making:" UPS Attains FAA's First Full Approval For Drone Airline. 

• DOJ To Declassify 'The Backbone' Of Mueller Investigation With Monthly Document Dumps.  

• What Exactly Is Trump's Impeachable Offense?

• The Myth Of Imminent Environmental Collapse.

• DOJ To Declassify 'The Backbone' Of Mueller Investigation With Monthly Document Dumps.

• These Were The Best And Worst Performing Assets In September, Q3 And YTD.

• Could Pricey Urban Meccas Become Crime-Ridden Ghost Towns?

• VC Veterans Host Emergency Meeting Of Unicorns As IPO 'Bubble' Implodes.

• Oil Prices Rebound After Ugly Day On Big Surprise Crude Draw.

• Global Growth Scare Sparks Safe-Haven Surge, Slam Stocks.

Business Insider:

• A glimpse into the subculture of e-girls and e-boys, the teen gamers who are the radical antithesis of the Instagram influencer.

Night Trading 

• Asian equity indices are -1.25% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 77.0 +.5 basis point.

• China Sovereign CDS 49.0 +1.75 basis points.

• Bloomberg Emerging Markets Currency Index  65.04 +.01%.

• FTSE 100 futures -.53%.

• S&P 500 futures +.16%.

• NASDAQ 100 futures +.16%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (AYI)/2.83

• (LEN)/1.32

• (PAYX)/.69

After the Close:

• (BBBY)/.31

• (RECN)/.14

Economic Releases
8:15 am EST

• The ADP Employment Change for Sept. is estimated to fall to 140K versus 195K in Aug.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,497,450 barrels versus a +2,412,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +12,000 barrels versus a +519,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,932,180 barrels versus a -2,978,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.26% versus a -1.4% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China National Day 2, weekly MBA Mortgage Applications report, Cantor Healthcare Conference, (TK) investor day, (CLX) analyst day, (MSFT) product event and the (F) 3Q sales call could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial 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 Reversing Sharply Lower into Final Hour on Global Growth Fears, Impeachment Talk, European/Emerging Markets/US High-Yield Debt Angst, Road & Rail/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 18.5 +13.9%

• Euro/Yen Carry Return Index 122.25 -.04%

• Emerging Markets Currency Volatility(VXY) 8.16 +.12%

• S&P 500 Implied Correlation 45.10 +11.0%

• ISE Sentiment Index 68.0 -12.3%
  

• Total Put/Call 1.10 -4.4%

• NYSE Arms 1.76 +45.45%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.56 +.5%
  

• America Energy Sector High-Yield CDS Index 464.0 +5.84%

• European Financial Sector CDS Index 63.87 -.96%

• Italian/German 10Y Yld Spread 142.25 +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 76.49 +.07%
  

• Emerging Market CDS Index 210.28 +1.55%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.0 -.01%

• 2-Year Swap Spread 2.5 +1.75 basis points

• TED Spread 30.0 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -32.25 +4.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.0 -.36%
• 3-Month T-Bill Yield 1.77% -4.0 basis points

• Yield Curve .09 +4.0 basis points

• China Iron Ore Spot 89.70 USD/Metric Tonne +.40%

• Citi US Economic Surprise Index 35.0 -8.0 points

• Citi Eurozone Economic Surprise Index -70.40 +1.6 points

• Citi Emerging Markets Economic Surprise Index -7.5 -1.0 point

• 10-Year TIPS Spread 1.52 +3.0 basis points
• 82.6% chance of Fed rate cut at Dec. 11th meeting, 91.0% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -185 open in Japan 
• China A50 Futures: Indicating -74 open in China

• DAX Futures: Indicating -37 open in Germany

Portfolio:

• Slightly Lower: On losses in my biotech/industrial/medical/retail/tech sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.7%

Sector Underperformers:

• 1) I-Banks -6.0% 2) Oil Service -3.6% 3) Road & Rail -3.2%

Stocks Falling on Unusual Volume: 

• HRTX, DD, IBKR, AMTB, NVT, VCEL, GSHD, THOR, LMAT, TGH, PTCT, BMRN, ARLP, LYFT, GO, SLG, FANG, VIRT, XLNX, KFY, UBER, HEES, LPLA, AAWW, CHWY, URGN, IIVI, USCR, CIEN, HXL, VCEL, ANAB, SCHW, ENSG, AXSM, ETFC and AMTD

Stocks With Unusual Put Option Activity:

• 1) AMTD 2) IYT 3) OIH 4) XLI 5) JWN

Stocks With Most Negative News Mentions:

• 1) AMTD 2) ETFC 3) CIEN 4) NVT 5) OSTK

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth -.7%

Sector Outperformers:

• 1) Gold & Silver +1.4% 2) Retail -.1% 3) Steel -.2%

Stocks Rising on Unusual Volume:

• MKC, ULTA, X, TW and COUP

Stocks With Unusual Call Option Activity:

• 1) SCHW 2) ETFC 3) ETFC 4) HAL 5) DG

Stocks With Most Positive News Mentions:

• 1) UPLD 2) GPRO 3) MKC 4) ADT 5) BBBY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +6.7% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 35.7% of Issues Advancing, 61.4% Declining
• 73 New 52-Week Highs, 33 New Lows
• 57.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.4%
• Vix 17.9 +10.1%
• Total Put/Call 1.04 -9.6%
• TRIN/Arms 1.75 +44.6%