Stocks Slightly Lower into Final Hour on China Trade Deal Concerns, Profit-Taking, Oil Decline, Energy/Telecom Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.0 -1.0%

• Euro/Yen Carry Return Index 125.18 -.25%

• Emerging Markets Currency Volatility(VXY) 7.35 +.14%

• S&P 500 Implied Correlation 29.68 +1.4%

• ISE Sentiment Index 89.0 -23
  

• Total Put/Call .96 +12.9%

• NYSE Arms 1.52 +82.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.82 +.16%
  

• America Energy Sector High-Yield CDS Index 506.0 -8.4%

• European Financial Sector CDS Index 58.09 +4.51%

• Italian/German 10Y Yld Spread 133.5 -.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 63.94 +.67%
  

• Emerging Market CDS Index 193.75 +.67%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.36 +.01%

• 2-Year Swap Spread 4.0 -.25 basis point

• TED Spread 36.0 -1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -12.0 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.17 -.31%
• 3-Month T-Bill Yield 1.55% +1.0 basis point

• Yield Curve .23 +2.0 basis points

• China Iron Ore Spot 80.52 USD/Metric Tonne +.35%

• Citi US Economic Surprise Index 7.10 -.4 point

• Citi Eurozone Economic Surprise Index -27.70 +8.8 points

• Citi Emerging Markets Economic Surprise Index -23.70 +1.8 basis points

• 10-Year TIPS Spread 1.68 unch.
• 29.2% chance of Fed rate cut at Jan. 29th meeting, 41.3% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +7 open in Japan 
• China A50 Futures: Indicating +6 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio:

• Slightly Higher: On gains in my medical sector longs and index hedges

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

• Market Exposure: Moved to 100% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +46.2% Above 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 47.5% of Issues Advancing, 49.4% Declining
• 67 New 52-Week Highs, 23 New Lows
• 60.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.4%
• Vix 13.1 -.4%
• Total Put/Call .71 -16.5%
• TRIN/Arms 1.5 +75.3%

Wednesday Watch

Evening Headlines

Bloomberg:

• Millions in Hong Kong Have Been Exposed to Tear Gas Since June.

• China Insists Trump Give Up His Favorite Trade Weapon—Tariffs.  

• China Tried to Curb Criticism in British Universities, Times Reports.

• Stocks in Asia Trade Mixed; Yuan Holds Gains. Stocks in Asia traded mixed as investors weighed signs of improvement in U.S. economic data against conflicting news flow on Sino-American trade discussions. The yuan held Tuesday’s gain. Stocks were little changed in Tokyo, Seoul and Sydney. News that U.S. service industries expanded more than forecast in October triggered a brief equity rally on Wall Street, but pushed market pricing for another rate cut from the Federal Reserve further out. The S&P 500 Index closed marginally lower. Ten-year Treasury yields slipped. The MSCI Asia Pacific Index fell 0.1% as of 10:12 a.m. in Tokyo. Japan’s Topix index fell 0.1%. South Korea’s Kospi index added 0.1%. Australia’s S&P/ASX 200 Index fell 0.1%. The S&P 500 dipped 0.1% on Tuesday. Futures were little changed.

• Oil Holds Near Highest Since September on Trade Pact Optimism.  

• China Demands Trump Disarm, Global Recovery, Delhi Smog: Eco Day.  

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

• U.S. Recession Chances Inch Down to 26% Within Next 12 Months: Tracker.

• Walgreens Boots Is Exploring a Potential Take-Private Deal.

• Influencer Nation: 86% of Young Americans Want to Become One.

• Every MBA Needs Tech Skills—Not Just Those Headed for Silicon Valley.

• Stanford Tops Ranking of U.S. B-Schools, Dartmouth Hurtles to Second Spot.

• Biden Accuses Warren of ‘Condescending’ to Democratic Voters.

Wall Street Journal:

• For Sale: SAT-Takers’ Names. Colleges Buy Student Data and Boost Exclusivity

• Elizabeth Warren’s Health-Care Hara-Kiri.

• The Cartelization of Mexico.

• At China Trade Expo, Xi Touts an Appetite for Imports.

• In Major Nuclear Step, Iran to Resume Enrichment.

• Investors’ Multitrillion Dollar Cash Hoard Could Push Stocks Higher.

Fox News:

• Polls close in Kentucky governor's race, as president calls for 'angry majority' to rise.

• Ex-ambassador offers solution after murders of 9 Americans in massacre.

MarketWatch.com:  

• Icahn hedge-fund protégé says these have been the 2 biggest ‘pain trades’ lately.

• 5 things to watch for the 2020 election from today’s races in Virginia, Kentucky and elsewhere.

CNBC:

• Effort in US Congress to rein in China on Hong Kong protests faces obstacles.

• Interest rates suddenly entered a new phase and they are moving higher thanks to possible trade deal.

• Jamie Dimon says Sen. Elizabeth Warren ‘vilifies successful people’.

• Match stock slides 16% after disappointing guidance.

• Jim Cramer: These are the 3 high-yield stocks that could drive the Dow higher.

• Stocks making the biggest moves after hours: Match Group, WW International, Plantronics and more.

Zero Hedge:   

• Most Americans Have 'Little To No Trust' In Impeachment Process, Would Rather Let Voters Decide In 2020.

• US Army Purchases 624 Robotic Mules For Combat Use.

• "Bathroom Big Brother": Schools Are Using Apps To Track Students' Restroom Time.

• 11,000 Experts Propose Final Solution To Global Warming: Just Kill Billions Of People.

• All US Intel Agencies Confirm No Evidence Of Meddling In Election, Urge Everyone To Panic Nonetheless.

• Does Entire "Success" Of Democrats Depend On Keeping The American People Wildly Ignorant Of Reality?

• Obama Admin Coached Anti-Trump Ukraine Ambassador On Biden Scandal.

• WTI Slides After Bigger-Than-Expected Crude Build.

• "Good News" Sparks Equity Algo Chaos But Batters Bonds & Bullion.

Business Insider:

• An ABC News anchor was caught on a hot mic saying the network killed her Epstein exposé in 2015 and that she thinks the sex offender was '100%' murdered.

• Siri, Google Assistant, and Amazon Alexa can be hijacked with a $14 laser pointer to open garage doors, start cars, and shop online.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 64.25 unch.

• China Sovereign CDS 37.0 -.5 basis point.

• Bloomberg Emerging Markets Currency Index  66.37 unch.

• FTSE 100 futures -.24%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (GOLD)/.12

• (BLMN)/.10

• (CARS)/.36

• (CBRE)/.78

• (CVS)/1.77

• (ELAN)/.26

• (HUM)/4.57

• (LL)/.23

• (ODP)/.14

• (PZZA)/.22

• (SMG)/-.85

• (SEE)/.62

• (VMC)/1.72 

• (WEN)/.15

• (WLH)/.30

After the Close:

• (ALB)/1.49

• (UHAL)8.94

• (BIDU)/1.17

• (BRKS)/.23

• (CVNA)/-.39

• (EOG)/1.15

• (EXPE)/3.82

• (FIT)/-.10

• (FLO)/.22

• (FOSL)/.04

• (LOPE)/1.15

• (IAC)/1.84

• (MRO)/.06

• (NKTR)/-.72

• (QCOM)/.71

• (RDFN)/.04

• (RCII)/.50

• (ROKU)/-.25

• (SQ)/.20

• (TRIP)/.69

• (WYNN)/.90

Economic Releases
8:30 am EST

• Preliminary 3Q Non-Farm Productivity is estimated to rise +.9% versus a +2.3% gain in 2Q.

• Preliminary 3Q Unit Labor Costs is estimated to rise +2.3% versus a +2.6% gain in 2Q.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +801,830 barrels versus a +5,702,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,842,550 barrels versus a -3,037,000 barrel decline the prior week. Distillate inventories are estimated to fall by -921,090 barrels versus a -1,032,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.77% versus a +2.5% gain prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, Fed's Williams speaking, Eurozone Services PMI report, weekly MBA Mortgage Applications report, Bernstein Tech Innovation Summit, Society for Immunotherapy of Cancer Meeting, (WGO) investor day and the (PSX) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by consumer and industrial shares in the region. I expect US stocks to open modestly lower and rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.