Friday Watch

Evening Headlines

Bloomberg:

• Emerging Asia Currencies Drop as Fed Rate-Hike Bets Sink Bonds. South Korea’s won tumbled with the Malaysian ringgit and a global bonds selloff extended into Asian trading amid speculation the Federal Reserve will boost interest rates to cap inflation as a Donald Trump-led administration steps up spending. The won sank to a four-month low and the ringgit slipped to levels last seen in January as Bloomberg’s dollar index held near an eight-month high. Australia’s 10-year bonds fell to their lowest since April, sliding with notes in New Zealand and South Korea. Most Asian stocks gained, led by a rally among banks. Technology shares tracked losses in Apple Inc. and Microsoft Inc. as the winners and losers of Trump’s victory become clearer. Crude oil was headed for its lowest close of the week, weighed down by glut concerns.
• Trump Crushes China M&A.
• China’s Tech Giants Are Cloning the Apple Store. With e-commerce growth slowing, tech leaders such as Alibaba and DJI push harder into local brick-and-mortar.
• Bank of Korea Keeps Rate Unchanged as Political Storm Rages. South Korea’s central bank held its key rate at a record low as policy makers seek to calm markets amid uncertainty caused by the U.S. presidential election and a home-grown crisis that’s shaken President Park Geun-hye. The decision to keep the seven-day repurchase rate at 1.25 percent was projected by all but one of 19 economists surveyed by Bloomberg. Royal Bank of Scotland was the sole forecaster for a cut to 1 percent.

Wall Street Journal:

• Trump’s Transition Team Works to Form Cabinet. Jeb Hensarling, a foe of financial regulation is floated as a candidate for powerful Treasury secretary role, as process heats up.
• Trump and the Democrats. The lesson: Progressive government can’t be imposed from the top.

Fox News:

• Boss says employees who agree with Trump's rhetoric should resign. (video)

CNBC:

• Donald Trump recognizes the energy renaissance, ConocoPhillips(COP) CEO says. (video) Michael Kors' streak has ended. Shares of Michael Kors dipped more than 4 percent in after-hours trading Thursday, after the handbag maker reported its first quarterly revenue decline since going public five years ago.
• Nvidia(NVDA) shares spike after reporting earnings, revenue beat; firm raises dividend, buyback.

Zero Hedge:

• China 'Devalues' Yuan To Weakest Since Breaking The Peg In 2010. (graph)
• HFT Legend Exits The Business: "It's Harder To Make Money".
• Russell Napier Interviewed: Fiscal Stimulus Comes With Dangerous Baggage – Financial Repression.
• The Unbearable Smugness Of The American Media.
• Calexit - California Secession Petition Gaining Strength After Trump Win.
• Disney(DIS) Misses As ESPN's Subscriber Losses Take A Toll.
• 3 Things: Distortions, Earnings Missed, You're Crazy.
• The Trump Triumph: Dow Hits Record High Amid Bond Bloodbath, Currency Carnage, And Tech Turmoil. (graph)

Business Insider:

• Trump's win has shattered the Democratic Party.
• Donald Trump wins Arizona — two days after the election.

Politico:

• Trump will quit TPP in first days. Within first 200 days his administration could also withdraw from NAFTA unless certain demands are met.

Night Trading 

• Asian equity indices are -2.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 118.0 +.5 basis point. 
• Asia Pacific Sovereign CDS Index 39.0 +2.25 basis points.
• Bloomberg Emerging Markets Currency Index 70.21 -.21%. 
• S&P 500 futures -.20%. 
• NASDAQ 100 futures -.56%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BAM)/.51
• (JCP)/-.20
• (ATW)/.60

Economic Releases 
10:00 am EST

• Preliminary Univ. of Mich. Consumer Sentiment for November is estimated to rise to 87.9 versus 87.2 in October.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Fischer speaking, German Trade Balance report, OPEC Monthly Update, (DGX) investor day and the (GWW) analyst meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and consumer shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Higher into Final Hour on Deregulation Hopes, Earnings Outlook Optimism, Yen Weakness, Financial/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.87 +3.41%

• Euro/Yen Carry Return Index 121.47 +.87%

• Emerging Markets Currency Volatility(VXY) 10.43 +4.82%

• S&P 500 Implied Correlation 37.19 -9.46%

• ISE Sentiment Index 94.0 +38.2%
  

• Total Put/Call .89 -17.59%

• NYSE Arms .60 +29.25% 

Credit Investor Angst:

• North American Investment Grade CDS Index 74.42 -.26%
  

• America Energy Sector High-Yield CDS Index 640.0 -2.49%

• European Financial Sector CDS Index 96.70 -.02%

• Western Europe Sovereign Debt CDS Index 19.47 -1.39%

• Asia Pacific Sovereign Debt CDS Index 38.97 +5.90%

• Emerging Market CDS Index 269.54 +10.82%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.75 +.03%

• 2-Year Swap Spread 25.5 unch.

• TED Spread 43.0 -5.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -40.75 +3.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.49 -1.67%
• 3-Month T-Bill Yield .47% +4.0 basis points

• Yield Curve 121.0 +4.0 basis points
  

• China Import Iron Ore Spot $74.12/Metric Tonne +4.42%

• Citi US Economic Surprise Index -7.90 +1.1 points

• Citi Eurozone Economic Surprise Index 34.6 +1.2 points

• Citi Emerging Markets Economic Surprise Index -4.60 +.3 point

• 10-Year TIPS Spread 1.90% +4.0 basis points
• 81.2% chance of Fed rate hike at Feb. 1 meeting, 83.8% chance at March 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +191 open in Japan 
• China A50 Futures: Indicating -18 open in China

• DAX Futures: Indicating +52 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Dow Average Rallies to Record as Treasuries Slide on Trump Bets. (video) Donald Trump’s unlikely rise to power is providing a shot in the arm for global financial markets, with stocks and metals rallying on optimism that his fiscal-stimulus plans will boost the economy. Bonds tumbled. The MSCI All Country World Index erased its monthly drop and the Dow Jones Industrial Average climbed to a record high. Copper posted its biggest back-to-back surge in three years, gaining alongside lead, zinc and aluminum. The dollar rose against most peers, while government bonds extended their selloff as Trump’s win bolstered bets on faster inflation. Latin American assets from stocks to debt and currencies plunged on speculation that higher U.S. interest rates would damp the appeal of riskier emerging-market securities.
• Trump's Win May Be Asia's Loss. (video) Just when China's economy seemed to be stabilizing, Donald Trump's election as U.S. president poses significant new risks. Not just for Chinese growth, but the entire Asia region. That's because the president-elect campaigned on a policy platform with protectionism at its center. Trump wants to slap punitive tariffs on Chinese goods and label the world's No. 2 economy a currency manipulator. Such a move would hurt Chinese exports. But it could also trigger a trade war if Beijing retaliates, catching other Asian economies in the crossfire.
• London’s Property Market Is ‘Tanking,’ Green’s Vernon Says. London’s real estate market, hurt by the Brexit vote, is “tanking by the day,” Green Property Chairman Stephen Vernon said. The firm, which has closed its London office, is waiting for an opportunity to buy into the market at lower values, the 66-year-old said at a conference in Dublin. Vernon would consider buying a real estate company, raising a fund or buying a portfolio of assets in London, he said. 
• Italian, French Bonds Feel Pain in Europe as Rout Spreads: Chart.
• Trump’s Win Boosts Europe Banks as Broader Market Erases Advance. (video) European lenders got a second-day boost after Donald Trump’s presidential win on speculation his term will lead to increased inflation and an easing of financial rules. UBS Group AG and Credit Suisse Group AG, which get more than 35 percent of their revenues from the Americas, helped lead the rally that pushed Europe’s banks to their best four-day jump since July. The biggest Swiss lender surged the most since 2011, while Credit Suisse climbed 4.9 percent. A gauge tracking the industry reached its highest level since March, maintaining gains even as a slump in bond proxies such as utilities an real estate companies dragged the benchmark Stoxx Europe 600 Index lower. While the benchmark Stoxx 600 erased an advance of as much as 1.3 percent to end the day 0.3 percent lower, the Stoxx 600 Banks Index rallied 2.3 percent.
• Oil Output Surge Puts Pressure on OPEC as IEA Warns on Price. (video) The cost of failing to reach a deal this month is rising for OPEC as rival producers are set to revive production in 2017, the International Energy Agency predicted. Crude prices may retreat again amid “relentless global supply growth” unless the Organization of Petroleum Exporting Countries enacts “significant” output cuts, the IEA said in its monthly report on Thursday. Non-members such as Brazil, Canada, Kazakhstan and Russia will raise output by 500,000 barrels a day in 2017, after enduring their biggest slump in more than two decades, the agency said.
• Tech Stocks Are Getting Crushed. (video)

Wall Street Journal:

• Donald Trump’s Transition Team: We Will ‘Dismantle’ Dodd-Frank. The 2010 law will be replaced ‘with new policies to encourage economic growth and job creation,’ website statement says.
• Which Trump Will Americans Get? The economy depends on whether the protectionist or the tax-cutter shows up.

Fox News:

• Obama, Trump meet at White House, discuss transition of power. (video) President Obama met with Donald Trump at the White House on Thursday -- calling the meeting “excellent” and saying his number one priority was to help facilitate a peaceful transition of power in January. Trump, who said he looks forward to dealing with Obama in the future, called the meeting a “great honor” and said he looked forward to talking with Obama “many, many more times.” “I could have gone a lot longer,” Trump told reporters of the 90-minute meeting. “We discussed a lot of different situations – some wonderful and some difficulties.”

CNBC:

• Credit Suisse: 'Toned down' Trump to spark growth, lift bond yields; what to own.
• What’s behind a sudden foreclosure spike.

Zero Hedge:

• "Democrats Failed Us Miserably" Michael Moore Unleashes Post-Election "To-Do" List.
• Trump Said To Consider Jamie Dimon For Treasury Secretary; Dimon Not Interested.
• Anti-Trump Protests Continue Across The US Overnight: Burn American Flags, Smash Windows.
• Rudy Giuliani Addresses Hillary Pardon - "President Obama Should Leave It To The System".
• Bond Bloodbath Continues: Soaring Inflation Expectations Spark Curve Carnage As Yuan Plunges. (graph)

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Coal -5.3% 2) Gold & Silver -4.0% 3) Utilities -1.9%

Stocks Falling on Unusual Volume: 

• WK, QTEC, RRR, BTI, RPD, WUBA, RGR, ZBIO, SLCA, STZ, EFX, TLK, IFV, NTES, BTT, PAM, INXN, AMT, IFF, MUI, FB, UHAL, AMZN, BUD, GOOGL, VWO, HYD, PXH, ECON, ECH, TWM, GDX, EIDO, EMLC, YINN, ILF, LABD, SRTY and EDC

Stocks With Unusual Put Option Activity:

• 1) EMB 2) KBH 3) KRE 4) DXJ 5) EMR

Stocks With Most Negative News Mentions:

• 1) AGFS 2) QCOM 3) VSLR 4) THC 5) HL

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +2.2%

Sector Outperformers:

• 1) I-Banks +3.6% 2) Road & Rail +3.2% 3) Retail +3.0%

Stocks Rising on Unusual Volume:

• TUBE, SODA, MMS, SUM, ECPG, ZLTQ, TASR, SHAK, PRI, KSS, GSM, SCCO, SLF, AMP, PRAA, CSRA, OMER, GSM, MRC, MMS, JWN, TPC, HALO, DDS, FCX, GBT, YRCW, KMT, HZO, BW, SC, DV, WFC, SKYW, GM, MTZ, TWI, ABC, KBR and ITG

Stocks With Unusual Call Option Activity:

• 1) HUM 2) POST 3) CIT 4) USB 5) LYB

Stocks With Most Positive News Mentions:

• 1) CSX 2) WCG 3) ACAT 4) JMP 5) CMA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +110.6% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 41.4% of Issues Advancing, 57.0% Declining
• 247 New 52-Week Highs, 117 New Lows
• 52.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.1%
• Vix 15.7 +9.1%
• Total Put/Call .82 -24.1%
• TRIN/Arms .50 +8.5%