Stocks Higher into Afternoon on China Trade Deal Hopes, US Economic Data, Earnings Optimism, Biotech/Retail 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) 12.7 -3.2%

• Euro/Yen Carry Return Index 124.32 -.31%

• Emerging Markets Currency Volatility(VXY) 7.08 -1.5%

• S&P 500 Implied Correlation 44.7 -3.08%

• ISE Sentiment Index 115.0 +54
  

• Total Put/Call 1.0 -13.8%

• NYSE Arms .82 +45.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.19 -1.36%
  

• America Energy Sector High-Yield CDS Index 602.0 +2.68%

• European Financial Sector CDS Index 60.13 +2.0%

• Italian/German 10Y Yld Spread 154.0 +3.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 65.97 +.18%
  

• Emerging Market CDS Index 202.79 -.62%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.90 +.09%

• 2-Year Swap Spread -2.5 -.75 basis point

• TED Spread 33.25 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.25 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.48 -.16%
• 3-Month T-Bill Yield 1.58% +2.0 basis points

• Yield Curve .15 -2.0 basis points

• China Iron Ore Spot 86.80 USD/Metric Tonne +.4%

• Citi US Economic Surprise Index 3.3 +5.3 basis points

• Citi Eurozone Economic Surprise Index -16.10 -.6 point

• Citi Emerging Markets Economic Surprise Index -28.20 -1.2 basis points

• 10-Year TIPS Spread 1.64 unch.
• 17.3% chance of Fed rate cut at Jan. 29th meeting, 27.8% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +48 open in Japan 
• China A50 Futures: Indicating +19 open in China

• DAX Futures: Indicating +21 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth unch.

Sector Underperformers:

• 1) Computer Hardware -1.4% 2) Shipping -.6% 3) Defense -.4%

Stocks Falling on Unusual Volume: 

• ASH, MGP, ATNX, WWD, ALC, T, SR, DRNA, AXNX, LB, MTZ, AVYA, URBN and KRTX

Stocks With Unusual Put Option Activity:

• 1) URBN 2) ACHN 3) SPWR 4) CRC 5) GUSH

Stocks With Most Negative News Mentions:

• 1) BRY 2) QD 3) RES 4) FCAU 5) GM

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.4%

Sector Outperformers:

• 1) Steel +2.7% 2) Retail +1.3% 3) Banks +.9%

Stocks Rising on Unusual Volume:

• BIIB, BKE, HIBB, GSX, JWN, KRTX, ATKR, FNKO, SPLK, AQUA, DTIL, X, SONO, SJM, FLWS, TPIC, M, FCX, ZM, CARA, AVTR, HMSY, FLOW, SERV, GPS and COMM

Stocks With Unusual Call Option Activity:

• 1) PSTG 2) SPLK 3) JWN 4) ALLY 5) BOX

Stocks With Most Positive News Mentions:

• 1) JWN 2) BIIB 3) BKE 4) HIBB 5) JWN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +3.4% Above 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 54.5% of Issues Advancing, 41.8% Declining
• 37 New 52-Week Highs, 26 New Lows
• 55.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.4%
• Vix 12.9 -1.9%
• Total Put/Call 1.15 -.86%
• TRIN/Arms .91 +59.7%

Friday Watch

Evening Headlines

Bloomberg:    

• Citi Tells U.K. to Make a Decision on Brexit as Jobs Are Pondered.

• Stocks in Asia Edge Up as Trade Outcome Mulled. Asia stocks saw modest gains Friday amid muted volumes, as investors awaited further details on U.S.-China trade discussions. Treasuries held Thursday’s losses. Japanese shares recovered after three days of declines, though volumes were down about a fifth. Stocks climbed in Hong Kong, South Korea, Australia and China. U.S. futures were flat. Earlier, the S&P 500 Index fell for a third day but remained within 1% of a record high. The yield on 10-year Treasuries edged up while the dollar held firm. Japan’s Topix index rose 0.4% as of 10:25 a.m. in Tokyo. Hong Kong’s Hang Seng added 0.4%. The Shanghai Composite rose 0.1%. Futures on the S&P 500 Index were little changed. The underlying gauge fell 0.2% on Thursday. Australia’s S&P/ASX 200 Index added 0.5%. South Korea’s Kospi index rose 0.2%.      

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

• Stuck in Global Rut, Inequality Capital, China Optimism: Eco Day

• Oil Set for Third Weekly Advance as Trade Optimism Returns.

• Oracle’s(ORCL) Largely White Board Attracts Congressional Scrutiny.  

• Splunk Gains After Third Quarter Sales Beat Highest Estimate.

Wall Street Journal:

• Charles Schwab Holds Talks to Buy TD Ameritrade.

• Robocall Scams Exist Because They Work—One Woman’s Story Shows How.

• Latin American Protests Spread to Colombia.

• Facebook Weighs Steps to Curb Narrowly Targeted Political Ads.

• Fiona Hill Calls Theories About Election Interference by Ukraine False.

• China Invited U.S. Trade Negotiators for Direct Talks.

• Pelosi Skeptical U.S.-Canada-Mexico Trade Deal Will Pass This Year.

Fox News:

• Democrats could draft 4 articles of impeachment, GOP plans for full Senate trial, sources say.

MarketWatch.com:     

• WeWork's cutting of 2,400 jobs continues in the U.S. this week: CNBC.

CNBC:

• Schwab’s zero-fee trading kicked off a price war and could pay off with the deal of a lifetime.

• Millions head to Hong Kong’s polls, in what could be a ‘barometer’ of public sentiment.

• Nordstrom shares jump after earnings beat estimates.

• Drones are growing into a $100 billion industry.

• Stocks making the biggest moves after hours: Nordstrom, Williams-Sonoma, Pure Storage and more.

• Gap(GPS) shares rise on earnings, sales beat; retailer says making ‘progress’ on split.

Zero Hedge:

• FBI Official Under Criminal Investigation For Fabricating Evidence In Russiagate Probe.

• The Origins Of Thought Police... And Why They Should Scare Us.

• Amid Impeachment Circus, Dems Sneak PATRIOT Act Renewal Past The American People.

• Demands Grow For FBI To Interview Prince Andrew Over Friendship With Jeffrey Epstein.

• Obama Warns Tech Firms Fueling Wealth Inequality, Fears Polarization Could Lead To Social Unrest.

• Are Journalists Creating Drama So They Can Report It?

• 15 US Senators Demand President Trump To Halt Huawei License Approvals.

• Lindsay Graham Requests Full Transcripts Of Joe Biden's Calls With Ukrainian President.

• Bonds, Stocks, Bitcoin, & Bullion All Drop As Trade-Deal Hope Tumbles.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 65.25 -.75 basis point.

• China Sovereign CDS 39.5 -2.25 basis points.

• Bloomberg Emerging Markets Currency Index  65.60 +.02%.

• FTSE 100 futures +.34%.

• S&P 500 futures +.14%.

• NASDAQ 100 futures +.27%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (BKE)/.43

• (FL)/1.08

• (HIBB)/.15

• (SJM)/2.14

After the Close:

• None of note

Economic Releases
9:45 am EST

• The Preliminary Markit Services PMI for Nov. is estimated to rise to 51.0 versus 50.6 in Oct.

• The Preliminary Markit Manufacturing PMI for Nov. is estimated to rise to 51.4 versus 51.3 in Oct.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for Nov. is estimated to rise to -2 versus -3 in Oct.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone GDP report and the LA auto show could also impact trading today.

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

Stocks Slightly Lower into Final Hour on China Trade Deal Concerns, Profit-Taking, Technical Selling, Airline/Defense Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.2 +3.1%

• Euro/Yen Carry Return Index 124.76 -.08%

• Emerging Markets Currency Volatility(VXY) 7.21 -.55%

• S&P 500 Implied Correlation 43.91 +3.37%

• ISE Sentiment Index 61.0 -24
  

• Total Put/Call 1.19 +17.8%

• NYSE Arms .49 -57.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.85 +.36%
  

• America Energy Sector High-Yield CDS Index 585.0 +1.49%

• European Financial Sector CDS Index 58.95 -1.37%

• Italian/German 10Y Yld Spread 150.25 -4.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 65.86 +.77%
  

• Emerging Market CDS Index 203.95 -.91%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.75 +.01%

• 2-Year Swap Spread -1.75 -.75 basis point

• TED Spread 34.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -11.75 -2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.51 -.18%
• 3-Month T-Bill Yield 1.56% +1.0 basis point

• Yield Curve .17 unch.

• China Iron Ore Spot 85.13 USD/Metric Tonne +3.05%

• Citi US Economic Surprise Index -2.0 -.9 basis point

• Citi Eurozone Economic Surprise Index -15.50 +.4 point

• Citi Emerging Markets Economic Surprise Index -27.0 -.1 basis point

• 10-Year TIPS Spread 1.64 +2.0 basis points
• 19.3% chance of Fed rate cut at Jan. 29th meeting, 31.1% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +77 open in Japan 
• China A50 Futures: Indicating +19 open in China

• DAX Futures: Indicating +34 open in Germany

Portfolio:

• Slightly Higher: On gains in my biotech/industrial sector longs and index hedges

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

• Market Exposure: Moved to 100% Net Long