Stocks Falling into Final Hour on Fed Rate-Hike Fears, Trade War Worries, European/Emerging Markets/US High-Yield Debt Angst, Tech/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 18.14 +8.5%

• Euro/Yen Carry Return Index 134.03 -.52%

• Emerging Markets Currency Volatility(VXY) 10.0 +1.01%

• S&P 500 Implied Correlation 40.05 +5.1%

• ISE Sentiment Index 61.0 -31.5%
  

• Total Put/Call 1.03 +5.1%

• NYSE Arms 1.20 -20.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.43 +5.02%
  

• America Energy Sector High-Yield CDS Index 564.0 +3.54%

• European Financial Sector CDS Index 88.06 +2.14%

• Italian/German 10Y Yld Spread 299.75 +10.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.54 +.63%

• Emerging Market CDS Index 195.30 +1.66%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.32 +.40%

• 2-Year Swap Spread 19.25 -1.25 basis point

• TED Spread 25.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -44.75 -3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.71 -.46%
• 3-Month T-Bill Yield 2.35% unch.

• Yield Curve 26.25 -.5 basis point

• China Iron Ore Spot 72.65 USD/Metric Tonne -1.02%

• Citi US Economic Surprise Index 10.0 +.3 point

• Citi Eurozone Economic Surprise Index -55.8 -6.4 points

• Citi Emerging Markets Economic Surprise Index -6.20 +3.1 points

• 10-Year TIPS Spread 2.05 -3.0 basis points
• 78.1% chance of Fed rate hike at Jan. 30th meeting, 92.8% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -170 open in Japan 
• China A50 Futures: Indicating -95 open in China

• DAX Futures: Indicating -40 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.3%

Sector Underperformers:

• 1) Video Gaming -3.7% 2) Social Media -3.5% 3) Steel -3.4%

Stocks Falling on Unusual Volume: 

• YELP, MPAA, IIVI, SWIR, OMER, NTRA, EPAY, ADNT, SATS, ATVI, PBPB, SWKS, MCFT, PRAA, LOPE, GDEN, TLND, PCG, DATA, BPT, TTWO, ERI, PLT, RRR, GDOT, LPSN, DERM, IGT, GMED, HDP, CTL, EIX, UIS, FOSL, AGS, ANAB, SGMS, CHRS, SGMO, AMC and FNKO

Stocks With Unusual Put Option Activity:

• 1) PCG 2) NKTR 3) RDFN 4) ANF 5) YELP

Stocks With Most Negative News Mentions:

• 1) APEN 2) EPAY 3) YELP 4) AKAO 5) GE

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.8%

Sector Outperformers:

• 1) Pharma +.1% 2) Restaurants unch. 3) Networking -.1%

Stocks Rising on Unusual Volume:

• FNSR, HTZ, TTD, REV, SYNA, UEIC, DBX, WSC, UBNT, EQT, VCTR, DIS, TWLO, FSCT, MIME, MTD, KAR, CDNA, RBA, TRUP, CNNE, DOX, SPSC, NRG, APA, SCOR, NSTG, LGF/B, TIVO, VRRM, FOE, ACIW and CALX

Stocks With Unusual Call Option Activity:

• 1) ENT 2) HTZ 3) FNSR 4) KBH 5) LOW

Stocks With Most Positive News Mentions:

• 1) REV 2) UBNT 3) ULTA 4) DBX 5) MNST

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +30.0% Above 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 31.4% of Issues Advancing, 66.6% Declining
• 48 New 52-Week Highs, 80 New Lows
• 33.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.3%
• Vix 17.6 +5.4%
• Total Put/Call 1.17 +19.4%
• TRIN/Arms 1.07 -28.7%

Friday Watch

Evening Headlines

Bloomberg:       

• A Fifth of China's Housing Is Empty. That's 50 Million Homes.

• Asian Stocks Decline; Dollar Holds Gain on Fed. Stocks in Asia retreated Friday after three days of gains and an overnight decline in their U.S. counterparts. The dollar strengthened after the Federal Reserve stayed on course to hike interest rates again in December and maintained its gradual tightening path. Benchmarks fell across the region with the deepest losses seen in Hong Kong, while moves in U.S. futures were muted. Energy shares underperformed after oil entered a bear market, and crude prices fell for a tenth day. Treasury yields ticked lower. The offshore yuan held this week’s drop as Friday’s inflation data was in line with expectations. Emerging market currencies slid, with the Korean won, Indonesian rupiah and Philippine peso all lower amid strength in the greenback. The MSCI Asia Pacific Index fell 0.8 percent as of 10:30 a.m. Tokyo time. Topix index slid 0.2 percent. Hang Seng declines 1.5 percent. Australia’s S&P/ASX 200 Index declined 0.4 percent. Futures on the S&P 500 Index fell 0.1 percent.    

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

• Fed Decision Takeaways, China Expo, Draghi on Brexit: Eco Day.

• Acosta, Christie on Short List for Attorney General. 

• Sessions’ Ouster Won’t Affect Mueller Probe, Trump Lawyer Says.  

• Quants Are Facing a Crisis of Confidence.

Wall St. Journal:

• Tesla(TSLA) Taps Boss to Oversee Musk.

• The Democrats’ Cash Tsunami.  

• America Could Use Some Deals.

• Chevron(CVX) Stayed in Venezuela Long After Rivals Quit. Then It Had Second Thoughts.

• U.S. Hits Russians, Ukrainians With Sanctions Over Crimea.

• Saudis Ponder a World Without OPEC.

• House Republicans Jockey for Power Posts in New Role.

• Pelosi’s Speaker Bid Isn’t Quite a Done Deal.

• Fed Holds Rates Steady, Signals More Rate Increases Ahead.

• Washington Prepares for Whitaker at Justice Department.

MarketWatch.com:

• The oil rout just became a bear market for U.S. crude.

• Protesters to Tucker Carlson: ‘We know where you sleep at night’.

Fox News:   

• A heroic officer, niece of actress, aspiring Army service member among those killed in bar shooting.

CNBC:       

• Cramer Remix: Why ETFs can be dangerous for stocks and investors.

• Alibaba(BABA) aims to make cloud computing its 'main business'.

• Fed unwavering in message that interest rates will keep going higher.

• The bull market's biggest buyer is back — companies are buying back stock at a record pace.  

• JP Morgan retail analyst: We could see the 'best back-to-back' holiday season in more than 5 years.

• Dropbox(DBOX) rises after beating estimates on revenue and earnings. 

• Yelp(YELP) tanks more than 28% after announcing third quarter earnings. 

• Activision(ATVI) Blizzard falls 10 percent after reporting decline in monthly active users.

Zero Hedge:

• Larry King: "CNN Stopped Doing News A Long Time Ago".

• China's (Not) SAFE.

• Recount Looms In Florida Republican Victories As Suspicions About Possible Vote-Tampering Emerge.

• Tverberg: "The World Economy Seems To Be Seriously Ill...".

• Trump Proposes Ending Asylum For Illegal Immigrants.

• Why The Hawkish Spin: Wall Street Reacts To The FOMC Statement.

• Wynn Plunges After CEO Sees Similarities With Recession Of 2008.

• Crude Carnage Continues As Fed Sparks Dollar Pop, Stock Drop.

Business Insider:

• China is said to be recruiting an elite group of 'patriotic' kids to help develop AI weapons.

Night Trading 

• Asian equity indices are -1.25% to -.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 84.0 -.25 basis point. 

• Asia Pacific Sovereign CDS Index 9.5 unch.

• Bloomberg Emerging Markets Currency Index 66.96 -.09%.

• FTSE 100 futures -.25%.

• S&P 500 futures -.06%.

• NASDAQ 100 futures -.13%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (COL)/2.03

• (SUP)/-.31

After the Close:

• (ATHN)/.99

• (GNC)/.09

Economic Releases

8:30 am EST

• PPI Final Demand MoM for October is estimated to rise +.2% versus a +.2% gain in September.

• PPI Ex Food and Energy MoM for October is estimated to rise +.2% versus a +.2% gain in September.
  

10:00 am EST

• Wholesale Trade Sales MoM for September is estimated to rise +.4% versus a +.8% gain in August.

• Preliminary Univ. of Mich. Consumer Sentiment for November is estimated to fall to 98.0 versus 98.6 in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Harker speaking, Fed's Williams speaking, China PPI report, (JNPR) investor day and the (DCO) investor day 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 modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 50% net long heading into the day.