Stocks Reversing Lower into Afternoon on Election Uncertainty, Oil Decline, Earnings Outlook Worries, Healthcare/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 16.28 +5.99%

• Euro/Yen Carry Return Index 120.03 +.17%

• Emerging Markets Currency Volatility(VXY) 9.62 +1.58%

• S&P 500 Implied Correlation 55.47 +7.56%

• ISE Sentiment Index 56.0 -42.27%
  

• Total Put/Call 1.03 +19.77%

• NYSE Arms 1.03 +85.81% 

Credit Investor Angst:

• North American Investment Grade CDS Index 77.01 +1.75%
  

• America Energy Sector High-Yield CDS Index 575.0 +2.27%

• European Financial Sector CDS Index 96.0 +.72%

• Western Europe Sovereign Debt CDS Index 18.60 +4.73%

• Asia Pacific Sovereign Debt CDS Index 33.83 +.58%

• Emerging Market CDS Index 238.45 +1.03%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.55 +.03%

• 2-Year Swap Spread 22.75 +.5 basis point

• TED Spread 61.0 +4.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -45.5 +.5 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.09 -.08%
• 3-Month T-Bill Yield .28% unch.

• Yield Curve 99.0 +3.0 basis points
  

• China Import Iron Ore Spot $63.96/Metric Tonne +1.46%

• Citi US Economic Surprise Index -9.1 +3.5 points

• Citi Eurozone Economic Surprise Index 43.5 +7.6 points

• Citi Emerging Markets Economic Surprise Index -14.10 +1.0 point

• 10-Year TIPS Spread 1.73% unch.
• 67.6% chance of Fed rate hike at Dec. 14 meeting, 68.9% chance at Feb. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -63 open in Japan 
• China A50 Futures: Indicating +16 open in China

• DAX Futures: Indicating -56 open in Germany

Portfolio: 

• Higher: On gains in my medical/retail sector longs, index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.3%

Sector Underperformers:

• 1) Oil Tankers -3.5% 2) Drugs -1.9% 3) Oil Service -1.6%

Stocks Falling on Unusual Volume: 

• STON, MCK, VAL, TBPH, SYNA, INT, CEMP, YRCW, NSR, GNC, AMGN, CAH, ASGN, BBH, BGS, ABC, TEAM, BOFI, NVO, GT, AMZN, DPLO, ABBV, BUD, ALDR, FLS, LM, CVS, EA, AN, MOH, COG, FET, PRLB, WWE, NEWM, ESRX, TYPE and OII

Stocks With Unusual Put Option Activity:

• 1) XLF 2) CVX 3) MA 4) JWN 5) ESRX

Stocks With Most Negative News Mentions:

• 1) SNMX 2) EHTH 3) MCK 4) JNJ 5) EA

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.8%

Sector Outperformers:

• 1) Homebuilders +1.5% 2) Computer Hardware +1.5% 3) Networking +1.3%

Stocks Rising on Unusual Volume:

• DF, VCRA, GIMO, ATRC, AMX, IART, SMCI, SRCL, HBI, DECK, TRNC, BHI, ELLI, ITGR, ATRC, CYTK, DF, RCL, GVA, CRUS and RCL

Stocks With Unusual Call Option Activity:

• 1) CEMP 2) AMGN 3) ABBV 4) GNC 5) CVS

Stocks With Most Positive News Mentions:

• 1) RCL 2) CVX 3) MA 4) PSX 5) HUN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +7.9% Above 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 55.4% of Issues Advancing, 41.7% Declining
• 39 New 52-Week Highs, 50 New Lows
• 49.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.1%
• Vix 14.9 -2.9%
• Total Put/Call 1.03 +19.8%
• TRIN/Arms 1.04 +86.9%

Friday Watch

Evening Headlines
Bloomberg:

• Crisis Gauge Flags China Cash Squeeze Followed by Growth Hit. Traders in China’s interest-rate swap market are bracing for a cash shortage as the central bank cools an overheated property market. Bond investors are preparing to benefit from the slower economic growth that may result. That’s how strategists are interpreting a blowout in the premium for the one-year swap rate over the similar-maturity sovereign bond yield to 50 basis points, the widest since July 2015. China’s version of the so-called TED spread, a gauge of financial stress that compares funding costs for banks and the government, is well below the 140 basis points reached during the trust finance crackdown of early 2014.
• Japan’s Consumer Prices Keep Falling, Household Spending Slips. Japan’s consumer prices fell for a seventh straight month and household spending slumped in September, underscoring the challenges Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda face in trying to revive the world’s third-largest economy. The jobless rate was at the lowest since 1995.
• Bonds Selloff Deepens as Japanese Stocks Buoyed by Weaker Yen. 

Wall Street Journal:

• Chip Makers Cut Deals as Cars Get Smarter. Automotive industry is becoming more attractive as companies differentiate offerings.

Fox News:

• Podesta relative earned six-figure fees lobbying Clinton's State Dept. during his tenure there. Amid the tumult of the 2016 presidential campaign, John Podesta is best known as Hillary Clinton’s campaign chairman and the individual from whose private account WikiLeaks is presently publishing some 50,000 hacked emails.

CNBC:

• Baker Hughes(BHI) spikes on report that GE(GE) in talks to acquire it.
• Google(GOOG) parent Alphabet sees earnings, revenue beat and announces $7 billion buyback.

Zero Hedge:

• Jared Dillian: "The Fed Is More Hawkish Than You Think".
• Slumping Used Car Prices Spell Disaster For Subprime Auto Securitizations.
• Waking Up In Hillary Clinton's America.
• Caught On Tape: How Russian Soldiers Prepare For Nuclear War. (video)
• US Taxpayers Pay AT&T Millions A Year For The Privilege Of Being Spied Upon.
• Amazon(AMZN) Plunges After Missing Earnings, Guides Below Expectations.
• KKR Calls The Top: PE Giant Selling Distressed Debt It Bought Earlier This Year.
• Bond Bloodbath Sinks Stocks As Dollar Spikes To 9-Month Highs. (graph)

Telegraph:

• China capital flight flashes warning as authorities forced to prick property bubble.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 115.5 +.75 basis point.

• Asia Pacific Sovereign CDS Index 33.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 72.15 +.01%.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.18%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

• (BUD)/.90
• (AN)/1.15
• (B)/.67
• (CBOE)/.56
• (CVX)/.39
• (XOM)/.60
• (GT)/1.16
• (HSY)/1.19
• (MA)/.98
• (PSX)/.88
• (RCL)/3.10
• (WY)/.22

Economic Releases

8:30 am EST

• The 3Q Employment Cost Index is estimated to rise +.6% versus a +.6% gain in 2Q.
• 3Q GDP is estimated to rise +2.5% versus a +1.4% gain in 2Q.
• 3Q Personal Consumption is estimated to rise +2.6% versus a +4.3% gain in 2Q.
• The 3Q GDP Price Index is estimated to rise +1.4% versus a +2.3% gain in 2Q.
• The 3Q Core PCE is estimated to rise +1.6% versus a +1.8% gain in 2Q.

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for October is estimated to rise to 88.2 versus 87.9 in September.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurzone GDP report could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.