Stocks Lower into Final Hour on China Trade Deal Worries, Earnings Jitters, Technical Selling, Tech/Retail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 19.14 +1.43%

• Euro/Yen Carry Return Index 129.92 +.08%

• Emerging Markets Currency Volatility(VXY) 9.0 -.66%

• S&P 500 Implied Correlation 46.57 -1.59%

• ISE Sentiment Index 88.0 +14.3%
  

• Total Put/Call .85 -17.5%

• NYSE Arms .96 -19.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 72.96 +.06%
  

• America Energy Sector High-Yield CDS Index 705.0 +.56%

• European Financial Sector CDS Index 89.82 -1.96%

• Italian/German 10Y Yld Spread 243.25 -2.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 84.63 +.50%
  

• Emerging Market CDS Index 180.99 +.64%
  

• iBoxx Offshore RMB China Corporate High Yield Index 155.62 +.18%

• 2-Year Swap Spread 13.50 unch.

• TED Spread 36.25 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -4.75 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.18 +.20%

• 3-Month T-Bill Yield 2.41% +3.0 basis points

• Yield Curve 14.25 -1.0 basis point

• China Iron Ore Spot 82.80 USD/Metric Tonne +5.28%

• Citi US Economic Surprise Index .2 -.8 point

• Citi Eurozone Economic Surprise Index -81.5 +.3 point

• Citi Emerging Markets Economic Surprise Index -11.6 +.1 point

• 10-Year TIPS Spread 1.77 unch.

• 1.0% chance of Fed rate hike at March 20th meeting, 5.0% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -19 open in Japan 

• China A50 Futures: Indicating -47 open in China

• DAX Futures: Indicating -2 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.4% Above 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 54.7% of Issues Advancing, 41.9% Declining
• 33 New 52-Week Highs, 6 New Lows
• 30.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.1%
• Vix 18.8 -.4%
• Total Put/Call .86 -16.5%
• TRIN/Arms .82 -30.2%

Tuesday Watch

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 85.50 +.5 basis point. 

• China Sovereign CDS 59.50 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 68.0 -.04%.

• FTSE 100 futures +.06%.

• S&P 500 futures -.39%.

• NASDAQ 100 futures -.49%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (MMM)/2.28

• (ALV)/1.72

• (BIIB)/6.72

• (EAT)/.90

• (CIT)/1.11

• (GLW)/.58

• (DHR)/1.27

• (HOG)/.30

• (HCA)/2.58

• (KNX)/.92

• (LLL)/2.68

• (LMT)/4.41

• (NUE)/1.94

• (PCAR)/1.53

• (PFE)/.63

• (PII)/1.82

• (PHM)/1.10

• (SAP)/1.55

• (VZ)/1.08

After the Close:

• (AMD)/.09

• (AAPL)/4.17

• (CHRW)/1.21

• (COHR)/2.07

• (EBAY)/.68

• (ILMN)/1.36

• (KLAC)/2.21

• (MXIM)/.62

• (MSTR)/1.01

• (RHI)/.91

• (SYK)/2.15

Economic Releases

9:00 am EST

• The S&P CoreLogic CS 20-City YoY for November is estimated to rise +4.88% versus a +5.03% in October.
  

10:00 am EST

• The Conference Board Consumer Confidence Index for January is estimated to fall to 124.0 versus 128.1 in Dec.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Brexit amendment vote, Japan retail sales report, $32B 7Y T-Note auction and the weekly US retail sales reports could also impact trading today.

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

Stocks Falling into Final Hour on Earnings Jitters, Oil Decline, Technical Selling, Energy/Biotech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 19.1 +9.6%

• Euro/Yen Carry Return Index 129.89 +.03%

• Emerging Markets Currency Volatility(VXY) 9.11 +1.56%

• S&P 500 Implied Correlation 47.37 +2.36%

• ISE Sentiment Index 80.0 -45.2%
  

• Total Put/Call 1.03 +41.1%

• NYSE Arms 1.19 +24.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 73.11 +.82%
  

• America Energy Sector High-Yield CDS Index 701.0 -3.63%

• European Financial Sector CDS Index 91.62 +2.75%

• Italian/German 10Y Yld Spread 246.0 +.5 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 84.25 +.12%
  

• Emerging Market CDS Index 180.06 +1.97%
  

• iBoxx Offshore RMB China Corporate High Yield Index 155.34 +.13%

• 2-Year Swap Spread 13.50 -1.0 basis point

• TED Spread 37.5 -3.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -3.0 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.02 -.21%
• 3-Month T-Bill Yield 2.38% +1.0 basis point

• Yield Curve 15.25 -.25 basis point

• China Iron Ore Spot 78.15 USD/Metric Tonne +.03%

• Citi US Economic Surprise Index 1.0 -1.3 points

• Citi Eurozone Economic Surprise Index -81.8 +6.2 points

• Citi Emerging Markets Economic Surprise Index -11.7 +.7 point

• 10-Year TIPS Spread 1.77 -2.0 basis points
• 1.0% chance of Fed rate hike at March 20th meeting, 5.0% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -39 open in Japan 
• China A50 Futures: Indicating -12 open in China

• DAX Futures: Indicating +33 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long