Stocks Reversing Sharply Lower into Final Hour on Coronavirus Fears, Gobal Growth Worries, Emerging Markets/US High-Yield Debt Angst, Energy/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 15.4 +19.0%

• Euro/Yen Carry Return Index 125.07 -.47%

• Emerging Markets Currency Volatility(VXY) 6.08 +.33%

• S&P 500 Implied Correlation 42.02 +9.5%

• ISE Sentiment Index 67.0 -37
  

• Total Put/Call 1.0 +29.9%

• NYSE Arms 2.21 97.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 47.0 +2.71%
  

• America Energy Sector High-Yield CDS Index 608.0 +3.53%

• European Financial Sector CDS Index 53.60 +1.02%

• Italian/German 10Y Yld Spread 156.75 +.5 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 53.64 +.81%
  

• Emerging Market CDS Index 193.29 +2.50%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.65 +.02%

• 2-Year Swap Spread 5.75 -.75 basis point

• TED Spread 27.0 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -4.75-.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.0 -.12%
• 3-Month T-Bill Yield 1.53%-2.0 basis points

• Yield Curve .23 -1.0 basis point

• China Iron Ore Spot 89.70 USD/Metric Tonne -1.46%

• Citi US Economic Surprise Index 9.0 -1.2 points

• Citi Eurozone Economic Surprise Index 50.80 +8.0 points

• Citi Emerging Markets Economic Surprise Index 9.3 +.2 basis point

• 10-Year TIPS Spread 1.67 -5.0 basis points
• 4.6% chance of Fed rate cut at March 18th meeting, 13.6% chance of cut at April 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -257 open in Japan 
• China A50 Futures: Indicating -151 open in China

• DAX Futures: Indicating -70 open in Germany

Portfolio:

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

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

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -1.3%

Sector Underperformers:

• 1) Oil Service -2.8% 2) Gaming -2.4% 3) Healthcare -2.1%

Stocks Falling on Unusual Volume: 

• HOPE, SAFM, ZGNX, AERI, DOW, CLR, STLD, CCL, RCL, ADS, ABCB, SLM, VIAC, ISRG, CVS, HRC, AMGN, MDP, AAL, HA, FSLY, UAL, AAL, MDP, QRVO, WYNN, XNCR, SWKS, AA, USAC, TER, CRWD, INMD, AKCA, BANC, ARCH, NXGN, TWOU, OIS, SNV, ACMR, DFS, SPCE, SYF, AMAG, EPZM and HSC

Stocks With Unusual Put Option Activity:

• 1) CHK 2) DFS 3) CNX 4) JNPR 5) CCL

Stocks With Most Negative News Mentions:

• 1) HSC 2) LK 3) CXO 4) DOW 5) ALV

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.5%

Sector Outperformers:

• 1) Gold & Silver +1.4% 2) Networking +.5% 3) Utilities +.4%

Stocks Rising on Unusual Volume:

• EHTH, CBB, ADPT, INTC, GNRC, WEX, ANET, ORI, ALEC and HZO

Stocks With Unusual Call Option Activity:

• 1) CHK 2) DFS 3) CNX 4) JNPR 5) CCL

Stocks With Most Positive News Mentions:

• 1) INTC 2) TNXP 3) TEAM 4) AXP 5) AVGO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.3% Above 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 37.6% of Issues Advancing, 58.9% Declining
• 199 New 52-Week Highs, 40 New Lows
• 66.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.0%
• Vix 13.7 +5.5%
• Total Put/Call .77 unch.
• TRIN/Arms 2.10 +86.6%

Friday Watch

Evening Headlines

Bloomberg:  

• China Expands Travel Restrictions as Number of Cases Grows.  

• China’s Economy Was Brightening This Month Before Virus Fear Hit.

• Trump Says Mideast Peace Plan to Be Unveiled Before Tuesday. 

• Asian Stocks Edge Higher; Treasuries, Yen Dip: Markets Wrap. Asian stocks edged higher as investors mulled updates on the deadly coronavirus outbreak. Treasuries and the yen dipped, while oil steadied after its recent slide. Shares saw modest gains in Japan and Australia. U.S. stock futures were steady after the S&P 500 eked out a small advance helped by gains for big tech companies. As officials in China widened their travel ban beyond the epicenter of the outbreak, the World Health Organization stopped short of calling the virus a global health emergency, saying it remains a local crisis. The yuan edged up and the yen pared some of Thursday’s rise. Markets in mainland China and South Korea are shut, and Hong Kong closes early, for lunar new year holidays. Futures on the S&P 500 Index added 0.1% as of 9:07 a.m. in Tokyo. The underlying gauge rose 0.1% on Thursday. Japan’s Topix index added 0.1%. Australia’s S&P/ASX 200 Index gained 0.3%.   

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

• Oil Set for Third Weekly Decline Amid Persistent Virus Concerns.

• Jamie Dimon Gets $31.5 Million for JPMorgan’s Knockout Year.

• Actress Annabella Sciorra Testifies She Was Raped by Harvey Weinstein.

• NYC Moves to Ban Cashless Stores in Blow to Visa, Mastercard.   

• Intel Gains as Data Center Revival Fuels Revenue Growth.

• Cboe Chief Says Early Hedging of U.S. Election Is ‘Unprecedented’.

Wall Street Journal:

• Quarantined in Wuhan.

• U.S. Moves to Curb E-Commerce Counterfeiting.

• Would Democrats Impeach Obama?

• George Soros Commits $1 Billion to Educational Initiative.

Fox News:

• Informant may have received taxpayer funds to spy on Trump camp: Grassley.

MarketWatch.com: 

• Mortgage rates fall to the lowest level in three months — but this is a double-edged sword for home buyers.

CNBC:

• Intel’s(INTC) stock jumps 7% on better-than-expected earnings and revenue.

• History shows China’s coronavirus impact on markets likely to be short-lived.

• Stocks making the biggest move after the bell: Intel, Broadcom, Skyworks & more.

Zero Hedge:

• Worldwide Searches For 'Virus Mask' Erupt Amid Deadly Outbreak .

• Quarantine Expanded To 8 Cities As Coronavirus Kills First Victim Outside Wuhan.

• The Real Umbrella Corp: Wuhan Ultra Biohazard Lab Was Studying "The World's Most Dangerous Pathogens".

• DOJ: Surveillance Of Carter Page Based On Insufficient Evidence, No Probable Cause.

• Russiagate Spy Paid $1 Million By Obama Was WaPo Deep Throat.

• Sanders Targets 'Black Voter-Betraying' Biden As CNN Poll Shows Democratic Socialist Leading Pack.

• Stocks Surge Intraday 'Despite' Global Virus-nado & Plunging US Data.

Business Insider:

• Everything we know about the Wuhan coronavirus, which has killed 18 people and infected more than 630.

• Broadcom will supply wireless components to Apple in a deal valued at $15 billion.

• Goldman Sachs CEO says no IPOs for companies without at least one 'diverse' board member starting in July.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 53.5 +.75 basis point.

• China Sovereign CDS 36.5  +2.0 basis points.

• Bloomberg Emerging Markets Currency Index  66.10 +.02%.

• FTSE 100 futures n/a.

• S&P 500 futures +.11%.

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (APD)/2.08

• (AXP)/2.01 

After the Close:

• None of note

Economic Releases 
9:45 am EST

• The Markit US Services PMI report for Jan. is estimated to rise to 53.0 versus 52.8 in Dec.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Services report could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly higher, boosted by technology and consumer 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.