Thursday Watch

Evening Headlines

Bloomberg:

• BOJ Announces First Unlimited Bond Purchases After Yields Jumped. The Bank of Japan announced its first operations to purchase bonds at a fixed rate, a tool it introduced when deciding in September it would seek to control the yield curve. The central bank said on Thursday in statements it will carry out two operations, one to buy securities maturing in one to three years, and another for debt of three to five years maturity. A selloff in Japanese bonds had threatened to test Governor Haruhiko Kuroda’s determination to keep yields stable with unlimited debt purchases -- a weapon he had so far kept in reserve. He had said in September that the bank would hold unlimited purchases as needed, setting a fixed rate, in order to control yields.
• Most Asian Stocks Fall as Dollar Retreats Amid Rebound in Bonds. Most Asian stocks fell and the dollar weakened versus most peers as investors mulled the outlook for Donald Trump’s presidency amid expectations that the Federal Reserve will raise interest rates next month. About five shares declined for every three that advanced on the MSCI Asia Pacific Index in early trading in the region as futures foreshadowed losses in Hong Kong, Taiwan and South Korea, where markets are opening an hour late owing to national exams. Bloomberg’s dollar index retreated from a nine-month high and benchmark U.S. Treasuries rise before American inflation data and testimony from Fed Chair Janet Yellen. 
• Cisco(CSCO) Sales Forecast Points to Slower Technology Spending. 

Wall Street Journal:

• Trump’s Team Makes Overtures to Democrats as Transition Push Ramps Up. President-elect meets with New York Mayor Bill de Blasio; support for public-works program signaled.

Fox News:

• Cuban-American leaders, dissidents urge Trump to get tough with Castro regime. Cuban-American leaders and human rights activists within the island nation are hoping that the incoming Trump administration will scale back President Obama’s efforts to restore relations between the two countries, measures they say emboldened the communist regime and brought the U.S. little in return.

Zero Hedge:

• Zero Hedge Targeted On Liberal Professor's List of "Fake News" Sources.
• Saudis, China Dump Treasuries; Foreign Central Banks Liquidate A Record $375 Billion In US Paper. (graph)
• Two-Thirds Of Workers In Developing Nations To Be Replaced by Robots, Report Warns.
• Mike Krieger Rages At The 'Fake News' Debacle: "It's An All Out Media War".
• Facebook(FB) Admits To Another "Glitch", More Overstated Ad Metrics.
• Bond Vigilantes Stir As Trump Team Hints At "Infrastructure Bank".
• Ford(F) CEO Blasts "Huge Impact" Of Automotive Import Tariffs.
• 11 Very Depressing Economic Realities That Donald Trump Will Inherit From Barack Obama.
• Illinois Capital Flight Explained (In 4 Simple Charts). (graph)
• Obama, Clinton, And Sanders Could Stop The Riots But They Just Watch.
• Dow Suffers First Post-Trump Loss As Cratering Bond Curve Bruises Banks.

Business Insider:

• The oil bust will drag on for a lot longer than big oil says.
• Fed tightening could lead to a dollar shortage and a new financial crisis.
• Cisco's(CSCO) Q1 earnings is a beat but the company warns that Q2 will be soft, stock drops.

Economic Information Daily:

• China to Add 4 More Cities to Property Tightening List. China will add Chijiazhuang, Qingdao, Nanchang and Changsha to the key property control list, wihch will have 20 cities in total, citing a person familiar with the matter.

China Securities Journal:

• China Probes Developers' Holding of Bank Stakes. China is investigating a rise of smaller developers' holdings of local bank stakes, citing people at local bank regulators. Growth in lending to property development will slow in medium- to long-term due to government guidance and risk control, citing a person familiar with the matter.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 128.25 +2.5 basis points. 
• Asia Pacific Sovereign CDS Index 44.0 +1.25 basis points.
• Bloomberg Emerging Markets Currency Index 69.72 unch. 
• S&P 500 futures +.12%. 
• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BBY)/.47
• (SJM)/1.93
• (JASO)/.06
• (PERY)/.16
• (SSI)/-.35
• (SPLS)/.34
• (SMRT)/-.15
• (PLCE)/2.02
• (WMT)/.96
• (CRMT)/.52
• (AMAT)/.66
• (GPS)/.60
• (INTU)/.03
• (MRVL)/.12
• (NUAN)/.39
• (POST)/.44
• (ROST)/.56
• (CRM)/.21
• (WSM)/.77

Economic Releases 
8:30 am EST

• Housing Starts for October are estimated to rise to 1159K versus 1047K in September.
• Building Permits for October are estimated to fall to 1195K versus 1225K in September.
• The CPI MoM for October is estimated to rise +.4% versus a +.3% gain in September.
• The CPI Ex Food & Energy MoM for October is estimated to rise +.2% versus a +.1% gain in September.
• Initial Jobless Claims are estimated to rise to 257K versus 254K the prior week.
• Continuing Claims are estimated to fall to 2030K versus 2041K prior.
• The Philly Fed Business Outlook Index for November is estimated to fall to 7.6 versus 9.7 in October.     

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Yellen testifying before Congress, Fed's Brainard speaking, Fed's Dudley speaking, Fed's Evans speaking, China House Price report, UK Retail Sales report, Eurozone CPI report, Bloomberg Nov. US Economic Survey, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (FFIV) Analyst Meeting, (BDX) Analyst Day, (TSLA) Special Shareholders Meeting and the (TDC) Analyst Day could also impact trading today.

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

Stocks Slightly Lower into Final Hour on European/US High-Yield Debt Angst, Oil Decline, Profit-Taking, Metals & Mining/Bank Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.77 +2.99%

• Euro/Yen Carry Return Index 121.72 -.47%

• Emerging Markets Currency Volatility(VXY) 11.03 -11.09%

• S&P 500 Implied Correlation 31.40 +9.26%

• ISE Sentiment Index 63.0 -42.20%
  

• Total Put/Call .89 -1.11%

• NYSE Arms 2.08 +95.51% 

Credit Investor Angst:

• North American Investment Grade CDS Index 75.19 +.57%
  

• America Energy Sector High-Yield CDS Index 634.0 -2.88%

• European Financial Sector CDS Index 102.44 +1.80%

• Western Europe Sovereign Debt CDS Index 21.06 +1.57%

• Asia Pacific Sovereign Debt CDS Index 43.94 +2.66%

• Emerging Market CDS Index 271.95 +1.63%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.75 +.02%

• 2-Year Swap Spread 23.50 -.5 basis point

• TED Spread 43.5 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -48.25 -.75 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.65 -.39%
• 3-Month T-Bill Yield .46% -3.0 basis points

• Yield Curve 122.0 -2.0 basis points
  

• China Import Iron Ore Spot $72.42/Metric Tonne -.36%

• Citi US Economic Surprise Index -4.40 -2.2 points

• Citi Eurozone Economic Surprise Index 39.7 +.4 point

• Citi Emerging Markets Economic Surprise Index -4.10 +.3 point

• 10-Year TIPS Spread 1.87% unch.
• 94.4% chance of Fed rate hike at Feb. 1 meeting, 95.0% chance at March 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -12 open in Japan 
• China A50 Futures: Indicating -12 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

• Higher: On gains in my medical/tech sector longs and emerging market shorts

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Wealthiest Nations See Terror Attacks Creep to 11-Year High. For the world’s wealthiest nations, it’s been their worst year in over a decade. Organization for Economic Co-operation and Development countries suffered 731 attacks, a 23 percent increase from its previous high in 2004 after a steady rise over the past six years, according a new report by the Institute for Economics and Peace, which has been collecting data since 1997. Meanwhile Iraq, Nigeria, and Pakistan -- which account for a third of total incidents worldwide -- each declined by more than 20 percent.
• China’s Yuan Tumbles to Eight-Year Low as Banks Weaken Forecasts. (video) The currency fell to 6.8729 against the greenback, the weakest level since December 2008 and beyond a Bloomberg survey’s year-end median estimate of 6.8. A gauge of dollar strength posted the biggest four-day rally in seven years following Donald Trump’s surprise win in last week’s presidential election. The Republican has promised to label China a currency manipulator and slap tariffs on the nation’s exports.
• Apparent Calm in European Stocks Masks Wildest Days of the Year. (video) An early rally in European shares deflated, leaving the market little changed. That’s been the state of play for investors in recent days. While Donald Trump’s election last week dominated market moves and created a rift among industries, it has left the region’s equities largely flat. Intraday, though, investors have had to contend with the wildest swings since last December, with the Stoxx Europe 600 Index alternating between gains and losses for seven straight days. The gauge slipped 0.2 percent at the close after jumping 0.6 percent and falling as much.
• OPEC Reopens Talks on Oil Cuts Without Iran, Iraq Ministers. (video) OPEC and Russia will meet in Doha on Thursday for another round of talks without ministers from Iran and Iraq, the two countries that pose the biggest obstacle to a deal to cut production. Members of the Organization of Petroleum Exporting Countries are “all hands on deck” to reach an agreement by the group’s Nov. 30 meeting in Vienna, Secretary-General Mohammed Barkindo said in an interview in Marrakech, Morocco on Tuesday. Saudi Arabia, Iraq and Iran remain at odds over how to share output cuts, said an OPEC delegate, who asked not to be identified because the information isn’t public.
• Libya to Nearly Double Oil Output as OPEC’s Task Gets Harder. (video) OPEC’s Libya plans to almost double crude production next year even as the producer group tries to implement a deal to trim production and ease a global supply glut. The country with Africa’s largest crude reserves currently produces 600,000 barrels a day, state-run National Oil Corp. Chairman Mustafa Sanalla said in a statement posted on the company’s website. It’s seeking to boost output to 900,000 barrels a day by the end of 2016 and about 1.1 million barrels next year, he said.
• Fed’s Bullard Sees Medium-Term Boost From Trump Spending. Federal Reserve Bank of St. Louis President James Bullard said there’s a chance the U.S. economy could get a medium-term boost if President-elect Donald Trump boosts infrastructure spending and reforms taxes. While Bullard offered that possibility, he said it’s still too soon to say how the economy may be affected by the election and he hasn’t changed his near-term outlook for growth or monetary policy. A “single policy-rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting,” he said, according to slides released by his office for a speech in London Wednesday.
• Trump’s Cabinet Picks May Not Get Rubber-Stamped in GOP Senate. (video)
• Traders Embracing Riskier Bets Push Value Stocks to ’09 High. Investors in the U.S. and Europe are warming again to a portion of the stock market that they’ve shunned since the financial crisis. Value shares, those trading at lower multiples to earnings and asset value, have rallied three times as much as growth stocks in the U.S. this year, heading for their biggest outperformance in a decade. Cheap companies are getting expensive: the group’s valuation is the highest since 2009 versus growth, data compiled by Bloomberg show. In Europe, value shares have become the costliest since May.
• Investors Just Flooded Into Financials at the Fastest Weekly Pace Ever. Nearly $5 billion in inflows to the most popular financial ETF.
• Best Business Schools 2016.

Wall Street Journal:

• Donald Trump vs. AT&T: A Signal Test of How Business Will Fare in New Washington. Other businesses watch to see if the phone giant can push its planned merger with Time Warner through a still-undefined presidency.
• In Trump’s China, Industrial Subsidies Loom Large. President-elect has pilloried Beijing for taking unfair trade advantages—a key issue may be subsidies.
• Facebook(FB) Says It Found More Miscalculated Metrics.

Fox News:

• Report: Medicaid enrollment, costs swell under ObamaCare expansion. (video) Adult enrollment in ObamaCare’s Medicaid expansion has more than doubled expectations in states across the country -- pointing to ballooning costs that threaten budget dollars for priorities like education and infrastructure, according to a report released Wednesday by The Foundation for Government Accountability. Newly obtained data from 24 of the 29 states with Medicaid expansions show at least 11.5 million able-bodied adults have enrolled. The FGA says adult enrollment for all these states exceeds projections, by an average of 110 percent. Some states have signed up more than four times as many able-bodied adults as they expected would enroll.

CNBC:

• Obscure part of law could let Yellen, Fischer thwart Trump on reshaping the Fed.
• Inflation expectations 'soar,' and Trump's win is 'unambiguously positive' for GDP, says BofAML.

Zero Hedge:

• Scenes Of Panic In India As Gold Price Skyrockets After Currency Ban.
• BofA Survey Reveals The Biggest Market Risk: A "Stagflationary Bond Crash".
• 2012 Redux - Liberal News Site Slate Defends Electoral College: "The Argument That It Is Undemocratic Falls Flat".
• Mortgage Applications Crash 30% As Borrowing Rates Surge. (graph)
• Did "Smart Money" Just Put A Roof On Copper's Speculative Bubble?
• Fed's Kashkari Releases Plan To End "Too Big To Fail", Compares Banks To Terrorists.
• What Happens Next? (graph)
• Twitter(TWTR) Purges Dozens Of "Alt-Right" Accounts.
• Industrial Production Contracts For 14th Straight Month - Longest Non-Recessionary Streak In 96 Years. (graph)
• Producer Price Rise Disappoints As Asset Management Fees Collapse Most Since 2001. (graph)
• The US Dollar Index Spikes To 13-Year Highs. (graph)

Business Insider:

• Some in Congress want to ban Chinese state-owned companies from buying American businesses.

The Telegraph:

• Global dollar shock threatens fresh financial storm, warns watchdog.

Passauer Neue Presse:

• Germany's Schaeuble Rejects Debt Cut for Greece. German Finance Minister Wolfgang Schaeuble said offering Greece a debt cut would do the country a "disservice," citing an interview. Says Greece urgently needs more reforms to become competitive. Debt cut would reduce incentive for Greek budget consolidation.

Bear Radar

Style Underperformer:

• Mid-Cap Value -.8%

Sector Underperformers:

• 1) Steel -2.7% 2) Gold & Silver -2.4% 3) Banks -1.8%

Stocks Falling on Unusual Volume: 

• ACRS, FLXN, VSAT, TPC, GLOB, MNK, SLGN, AIRG, LOW, ZBRA, RF, EXAS, CRH, MBLY, WBS, TTMI, YRCW, SXCP and VSAT

Stocks With Unusual Put Option Activity:

• 1) CL 2) BX 3) BBY 4) OPK 5) LOW

Stocks With Most Negative News Mentions:

• 1) VSAT 2) HRB 3) ROG 4) ZION 5) MLM

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.2%

Sector Outperformers:

• 1) Semis +1.1% 2) Software +.6% 3) Restaurants +.6%

Stocks Rising on Unusual Volume:

• DCIX, GLBS, GNK, SAEX, TGT, HIIQ, CARA, JKS, MTSI, EVH, DKS, SBH, POST, GSM, A, SMTC, FOSL, DBD, NVDA, EVH, MDCO, ALR, BZH and DKS

Stocks With Unusual Call Option Activity:

• 1) DLTR 2) HLT 3) TGT 4) LOW 5) LNKD

Stocks With Most Positive News Mentions:

• 1) FOSL 2) TJX 3) NTWK 4) CACI 5) CMCSA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.0% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 48.5% of Issues Advancing, 49.0% Declining
• 85 New 52-Week Highs, 15 New Lows
• 55.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.9%
• Vix 14.2 +6.5%
• Total Put/Call .91 +1.11%
• TRIN/Arms 1.8 +66.0%