Thursday Watch

Evening Headlines

Bloomberg:                  

• China-U.S. Set to Talk With Global Economy Facing Trade Crucible.

• Erdogan Says Syria Airspace Doesn’t Belong to U.S.: Syria Update. 

• Graham Offers Turkey Sanctions After Trump Reversal on Syria.   

• Hong Kong Is Sinking Into a Recession With No Recovery in Sight.   

• Endless Wrangling Over Brexit Depresses U.K. Housing Market.

• A Third of the World’s Consumers Are Suddenly Nervous to Spend.  

• U.S. Stock Futures Slide, Yen Rises, Yuan Drops. U.S. and Japanese stock futures slumped, China’s yuan dropped and the yen climbed in early trading Thursday after a report cast a cloud over recent optimism that at least a limited U.S.-China trade deal could come from high-level talks. Contracts on the S&P 500 Index tumbled as much as 1.3% after the South China Morning Post reported that no progress was made in deputy-level negotiations that precede the meeting of principals scheduled for Thursday. That’s a sharp reversal from the positive sentiment on Wall Street, where the S&P 500 closed up 0.9% on signs China was open to a partial deal. Crude oil fell below $52 a barrel and gold ticked higher on the newfound doubts about progress. Futures on the S&P 500 Index fell 1.2% as of 8:01 a.m. in Tokyo. The underlying gauge had risen 0.9% Wednesday. Futures on the Nikkei 225 Stock Average slid 1% in Chicago.

• Oil Gives Up Early Rally as Focus Returns to Rising Oil Stocks.

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

• Hong Kong Recession, Fed Gets Serious, U.S.-China Talks: Eco Day.

• Fed Officials Getting Serious About Strategies for Low Inflation. 

Wall Street Journal:

• Trade Talks Resume at Pivotal Moment in U.S.-China Relations.

• Turkey Begins Offensive Against U.S. Ally in Syria.

• A Disney Story for Young Socialists.

• Elizabeth Warren Vows to Remake Capitalism. Businesses Are Bracing.

• Two Killed in Germany Shooting After Failed Attack on Synagogue.

• Squeeze on U.S. Companies May Be Worse Than It Seems.

Fox News:

• Whistleblower lawyer acknowledges client had 'contact' with WH candidates.

CNBC:

• Dow futures drop 300 points after Chinese media reports that trade talks have made no progress.

• Bed Bath & Beyond taps former Target exec Mark Tritton as president, CEO, stock soars 21%.

• Trump rips NBA players, officials for ‘pandering to China,’ but says league has to work out dispute on its own.

• Nearly all of the NBA’s Chinese partners have cut ties with the league.

• Stocks making the biggest moves after hours: Bed Bath & Beyond, PG&E, Sprint and more.

• Cambridge Analytica whistleblower: US heading in ‘same direction as China’ with online privacy.

Zero Hedge: 

• Futures Crash After US-China Make "No Progress" On Trade Talks; China Delegation To Depart One Day Early: SCMP.

• Joe Biden 'Personally Paid $900,000 By Burisma' According To Ukrainian MP In Bombshell Admission.

• Investigation Of Biden-Enriching Burisma Opened Months Before Zelensky Even Elected: Report.

• Shocking Video Shows Tesla Run Stop Sign And Slam Into Pedestrian In Atlanta Parking Lot.

• "This Is The Third World": Up To 3 Million Californians To Lose Power As PG&E Begins "Unprecedented" Blackouts.

• Epstein Co-Conspirators Named By Accuser; Alleged Pedo Scout Ready To Spill The Beans.

• AOC Vs PRC: US Lawmakers Demand NBA Sever Ties With "Concentration-Camp"-Running Communist China.

• Elizabeth Warren Whips Out "Environmental Justice" Plan For Poor Communities.

• No, The Poor Don't Pay Higher Taxes Than The Rich.

• Idiotic Environmental Predictions.

• Late-Day China Trade Headline Spoils Low-Volume Stock Market Party.

Night Trading 

• Asian equity indices are -1.25% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.75 -.75 basis point.

• China Sovereign CDS 48.0 -1.5 basis points.

• Bloomberg Emerging Markets Currency Index  65.19 -.04%.

• FTSE 100 futures n/a.

• S&P 500 futures -1.07%.

• NASDAQ 100 futures -1.25%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AZZ)/.56

• (DAL)/2.26

After the Close:

• None of note

Economic Releases
8:30 am EST

• The CPI MoM for Sept. is estimated to rise +.1% versus a +.1% gain in Aug.

• The CPI Ex Food and Energy MoM for Sept. is estimated to rise +.2% versus a +.3% gain in Aug.

• Real Average Weekly Earnings YoY for Sept.

• Initial Jobless Claims for last week are estimated to rise to 220K versus 219K the prior week. 

• Continuing Claims are estimated at 1651K versus 1651K prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Trade Talks, UK Industrial Production report, $16B 30Y T-Bond auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (HRL) investor day and the (BKE) monthly sales update 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 lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Rising into Final Hour on China Trade Deal Hopes, FOMC Commentary, Yen Weakness, Tech/Transport Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 18.8 -7.4%

• Euro/Yen Carry Return Index 122.51 +.58%

• Emerging Markets Currency Volatility(VXY) 8.27 +.85%

• S&P 500 Implied Correlation 46.29 -6.3%

• ISE Sentiment Index 115.0 +53.1%
  

• Total Put/Call 1.09 +11.2%

• NYSE Arms 1.09 -44.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.84 -1.14%
  

• America Energy Sector High-Yield CDS Index 525.0 +3.84%

• European Financial Sector CDS Index 68.21 -1.85%

• Italian/German 10Y Yld Spread 141.75 -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 78.27 -.99%
  

• Emerging Market CDS Index 213.72 -1.04%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.36 +.05%

• 2-Year Swap Spread 2.5 -.5 basis point

• TED Spread 34.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -25.25 -.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.24 +.05%
• 3-Month T-Bill Yield 1.67% -1.0 basis point

• Yield Curve .11 +2.0 basis points

• China Iron Ore Spot 86.80 USD/Metric Tonne -3.7%

• Citi US Economic Surprise Index 17.70 -1.3 points

• Citi Eurozone Economic Surprise Index -76.70 -.6 point

• Citi Emerging Markets Economic Surprise Index -11.20 -.2 point

• 10-Year TIPS Spread 1.49 +1.0 basis point
• 91.6% chance of Fed rate cut at Dec. 11th meeting, 95.1% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +149 open in Japan 
• China A50 Futures: Indicating +30 open in China

• DAX Futures: Indicating +2 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value +.2%

Sector Underperformers:

• 1) Gold & Silver -.5% 2) Oil Service unch. 3) Social Media +.1%

Stocks Falling on Unusual Volume: 

• KURA, MPWR, IRBT, X, ALLO, NTLA, DIN, XLRN, ANDE, WORK, PSNL, CHRS and LEVI

Stocks With Unusual Put Option Activity:

• 1) LEVI 2) MET 3) IRBT 4) AVYA 5) NWL

Stocks With Most Negative News Mentions:

• 1) JRVR 2) IRBT 3) OSTK 4) RUHN 5) GTES

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.1%

Sector Outperformers:

• 1) Disk Drives +2.0% 2) Semis +1.9% 3) Airlines +1.6%

Stocks Rising on Unusual Volume:

• GNRC, ROKU, IRDM, SNBR, CYRX, AVNS, FEYE, DOCU, LILA, ANF, SPTN and SMPL

Stocks With Unusual Call Option Activity:

• 1) ANF 2) LEVI 3) ITCI 4) UAA 5) HIIQ

Stocks With Most Positive News Mentions:

• 1) OCGN 2) ROKU 3) AOBC 4) CYRX 5)COP

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -20.8% Below 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 65.8% of Issues Advancing, 31.0% Declining
• 63 New 52-Week Highs, 72 New Lows
• 47.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.99%
• Vix 19.4 -4.5%
• Total Put/Call 1.17 +19.4%
• TRIN/Arms 1.30 -34.0%