Stocks Higher into Afternoon on Diminished China Hard-Landing Fears, Dollar Weakness, Short-Covering, Commodity/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume:  Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 22.6 -4.0%
• DJIA Intraday % Swing 1.2%
  
• Bloomberg Global Risk On/Risk Off Index 49.1 +7.2%

• Euro/Yen Carry Return Index 148.1 -.27%

• Emerging Markets Currency Volatility(VXY) 12.4 +.6%

• CBOE S&P 500 Implied Correlation Index 46.6 -5.1% 

• ISE Sentiment Index 126.0 +19.0 points
  

• Total Put/Call .77 -10.5%

• NYSE Arms .72 -16.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 83.33 +.27%
  

• US Energy High-Yield OAS 378.05 n/a
• Bloomberg TRACE # Distressed Bonds Traded 477.0 -17.0
  

• European Financial Sector CDS Index 107.3 -1.0% 
• Credit Suisse Subordinated 5Y Credit Default Swap 337.7 -.9%
  

• Italian/German 10Y Yld Spread 205.0 basis points +6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 158.24 -14.0%
  

• Emerging Market CDS Index 246.79 unch.
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.9 +1.4%

• 2-Year Swap Spread 37.0 basis points -1.0 basis point
  

• TED Spread 49.25 basis points -1.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -51.0 basis points -.75 basis point
  
• MBS  5/10 Treasury Spread  141.0 -2.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 132.0 +2.0 basis points
  
• Avg. Auto ABS OAS 1.22 +4.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.62 +.59%
• 3-Month T-Bill Yield 4.16% +2.0 basis points
  

• Yield Curve -52.5 basis points (2s/10s) -4.0 basis points
  

• China Iron Ore Spot 92.5 USD/Metric Tonne +3.1%
• Dutch TTF Nat Gas(European benchmark) 98.5 euros/megawatt-hour -13.2%

• Citi US Economic Surprise Index 8.9 -4.3 points

• Citi Eurozone Economic Surprise Index 8.9 -.1 point
  

• Citi Emerging Markets Economic Surprise Index 4.0 +2.3 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.90 -.16:  Growth Rate +11.6% -.1 percentage point, P/E 17.3 +.3
  
• Bloomberg US Financial Conditions Index -.94 +6.0 basis points
  
• US Atlanta Fed GDPNow Forecast +4.0% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.02% unch.: CPI YoY +7.62% unch.
  
• 10-Year TIPS Spread 2.41 +1.0 basis point
  
• Highest target rate probability for Feb. 1st FOMC meeting: 50.8%(-3.0 percentage points) chance of 4.5%-4.75%. Highest target rate probability for March 22nd meeting: 47.2%(-1.3 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(+.0 percentage point) of 1/14/22 peak(1,740) +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.3%(-.6 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -153 open in Japan 
• China A50 Futures: Indicating +114 open in China

• DAX Futures: Indicating +100 open in Germany

Portfolio:

• Higher:  On gains in my tech/commodity/medical sector longs
  

• Disclosed Trades:  Covered some of my (IWM)/(QQQ) hedges
  

• Market Exposure:  Moved to 75% Net Long
  

Morning Market Internals

NYSE Composite Index:

• Volume Running +39.7% Above 100-Day Average 
• 3 Sectors Declining, 8 Sectors Rising
• 73.6% of Issues Advancing, 23.8% Declining
• 60 New 52-Week Highs, 16 New Lows
• 43.7%(+3.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 65.0 +2.0
  
• Bloomberg Global Risk-On/Risk-Off Index 48.5 +5.9%
  
• Russell 1000: Growth/Value 14,648.6 +.59%
  
• Vix 23.0 -2.3%
• Total Put/Call .77 -10.5%
• TRIN/Arms .81 -5.8% 

Friday Watch

Evening Headlines

Bloomberg:               

• China’s Bank Loans Lowest Since 2017 as Economy Slows.  
• ‘Value Annihilation’ Haunts Investors in China Property Bonds.
• Asian Equities, US Futures Extend Post-CPI Rally: Markets Wrap.
• FTX’s Sam Bankman-Fried Faces SEC Probe as His Empire Crumbles.
  
• FTX Implosion Rattles Retail Investors Who Fear Their Money Is Gone.
  
• FTX Latest: SEC Probes Bankman-Fried as Bahamas Freezes Assets.
• Twitter’s Cybersecurity Chief Is Leaving the Social-Media Company.  
• Apple’s $191 Billion Single-Day Surge Sets Stock-Market Record.
  
• US Inflation Finally Offers Relief, But There’s Still a Long Way to Go.

Wall Street Journal:

• Rise in Consumer Prices Slowed to 7.7% in October.
  
• Before the Midterms, Biden Abused the Strategic Petroleum Reserve. Its purpose was to protect national security, not to reduce gasoline prices in a political campaign.
• The FTX Crypto Fiasco. Another lesson in the risks of joining a mania in speculative assets.
• Amazon Launches Cost-Cuts Review.
• Juul Secures Financing to Avoid Bankruptcy, Plans to Cut 30% of Jobs.
• Home-Price Growth Slows Under Tide of Rising Mortgage Rates.
• FTX Tapped Into Customer Accounts to Fund Risky Bets.
• Biden, Xi to Meet Monday in Indonesia.
• Silicon Valley Poured Money Into FTX, With Few Strings Attached.
• Apple Supply Crunch on Premium iPhone Threatens to Derail Record Sales Run.

Fox News:

• EXCLUSIVE:Kari Lake lays out odds of being Arizona's governor as vote count continues.
• 4 key races still in limbo that will decide balance of power in Senate.
• Biden's student loan handout dealt major legal blow.

CNBC.com:

• Fed officials welcome inflation news but still see tighter policy ahead.
• Elon Musk tells Twitter staff he sold Tesla stock to save the social network.
• Carl Icahn says he still thinks we are in a bear market despite Thursday’s rally.
• Nearly 2% of healthy infants hospitalized with RSV before first birthday, study finds.
• United gives pilots 5% raises early, citing return to profitability.
  

MarketWatch:              

• Curb your enthusiasm — Thursday’s explosive rally in stocks likely means the bear market is alive and well.
  
• ‘Bedazzled by money’: Democratic ties to Sam Bankman-Fried under scrutiny after FTX collapse.
  
• The rise in food prices slowed in October, but some items increased by up to 43%. So what’s going on?

Zero Hedge:

• Bankman-Fried Faces SEC Probe, FTX Assets Frozen By Bahamas Regulator.
• Loan Demand For Mortgage Loans Crashes To Depression Levels.
• The Election Won't Change Much In DC. The Real Battle Is Now In The States.
• Lawyer For Canadian Commission Investigating Trucker Protests Collapses During Proceedings.
• Conservative Candidates Take Note – DeSantis Dominated In Florida For These Reasons.
• Blizzard Pounds Plains, Midwest; "Polar Vortex" To Unleash Chill Nationwide.
• "Difficult Times Ahead": Musk Says Twitter Bankruptcy Possible As FTC Expresses "Deep Concern".
• Max pain market can't get enough.
• JPMorgan Warns FTX Collapse Will Spark "Cascade Of Margin Calls".
• LA's 'Soros DA' Gets Charges Dropped Against Election Software CEO. 
• SBF Issues Mea Culpa: "I'm Sorry... I F**ked Up" As Alameda Research Winds Down Trading.
• Biden Boasts Ukraine Aid To Keep Flowing Even Through GOP-Led House.
• US stocks rocketed and yields dropped by the most since 2009 after softer-than-expected US CPI data - Newsquawk Asia-Pac Market Open.
• Arizona's Maricopa County To Take Until "Early Next Week" To Process 400,000 Ballots.
• US Consumers Will Be Spending Much Less This Holiday Season Because Many Of Them Are Already Tapped-Out.
• CPI Miss Sparks 3rd Biggest Short Squeeze Ever: Stocks, Bonds, Gold Soar As Dollar Crashes.

Newsmax:  

• Warnock, Walker Pivot to Overtime in Georgia's Vital Senate Contest.

TheGatewayPundit.com:

• Brazil’s Ministry of Defense Twitter Issues Statement on Audit Report: “It is not possible to guarantee that the programs that were executed in the electronic voting machines are free from malicious insertions”.
• Maricopa County Now Admits That Over 30% Of Polling Locations Were Affected By Machine Failures, NOT 20% As Previously Stated – But They Want Us To Believe Only 17,000 Ballots Transported For Tabulation.
• EXCLUSIVE: Interview with Dr. Shiva Ayyadurai on Social Media Censorship and the Deep State’s “Limited Hangout” Response and Cover Up.
• That Was Quick… PA Governor-Elect Josh Shapiro Vows to Crackdown on Fracking and Energy Sector in State – Affecting Thousands of PA Jobs (VIDEO).
• Bolton Mocks the First Amendment While Having Reporter Dragged From Event for Questioning Him on WikiLeaks, Iraq, Afghanistan (VIDEO).
• Breaking: Maricopa County Begins Processing Election Day Drop-off Ballots… Still Slow-Walking Ballots – Like a Banana Republic.
• WTH? Sheriff’s Deputies Surround Maricopa County Tabulation Center, Perched On Roof, Barricades and Fence Set Up Around Perimeter.
• Supreme Court Justice Sotomayor Rejects Emergency Appeal From NYC Workers Who Lost Their Jobs Due to Mayor Adams’ Covid Vaccine Mandate.
• RAV’s Ben Bergquam Banned from Maricopa County Press Room After TGP’s Conradson Was Banned from Room – Real News Not Allowed! (VIDEO).
• Emerald Robinson and Mike Lindell Show More “Drop and Roll” Activities in Key 2022 Races.

The Epoch Times:

• Book Review: ‘Spies and Lies: How China’s Greatest Covert Operations Fooled the World’: Unmasking China’s Secret Intent.
• CCP’s Budget Deficit Reaches Nearly $1 Trillion.

Twitter: 

• @songpinganq - Thread - Chinese government spending billions of US dollars to continuously build massive quarantine camps all over the country. Here are some: 1st Shangdong province. (video)
  

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 891,607 Reports(+4,043 from prior week) Through October 28th, 2022.

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

Covid-19(Data, Maps, Graphs):

• Our World in Data:  New Global Covid-19 Cases(7-day rolling average graphs). New US Covid Hospital Admissions/ICU Admissions/Deaths
  
• FT.com:  Fully Vaccinated by Country(graph). Global Lockdown Stringency Index(map).
• Bloomberg.com:  International Travel Restrictions.  Case Graphs by State.
  
• NYTimes.com:  County Trends and Clusters. Local ICU Occupancy.
  
• Brown School of Public Health:  Covid Severity by State/County(map).  US Hospital Capacity(region).
  
• CovidActNow:  Covid Severity/Infection Rate by Metro Area.
  
• KFF:  US Vaccinations by Race/Ethnicity.
  
• Carnegie Mellon: Covid-Like Symptoms in Community. Covid Symptom Searches on Google. Covid-Related Dr.Visits.  Restaurant Visits. Wearing Masks. (graphs)
  
• Safegraph.com:  Commerce Patterns(graphs).

Night Trading 

• Asian equity indices are +1.75% to +2.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 165.0 -22.5 basis points. 

• China Sovereign CDS 80.0 -16.0 basis points.
  

• Bloomberg Emerging Markets Currency Index 47.37 +.06%.  
• Bloomberg Global Risk-On/Risk Off Index 46.9 +2.33%. 
• Bloomberg US Financial Conditions Index -.87 +13.0 basis points.
  
• Volatility Index(VIX) futures 26.0 +1.3%.
• Euro Stoxx 50 futures +.03%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.05%  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (AQN)/.16
  

After the Close:

• (SJR)/.36

Economic Releases

10:00 am EST

• The Univ. of Mich. Consumer Sentiment Index for Nov. is estimated to fall to 59.5 versus 59.9 in Oct.
• Univ. of Mich. 1Y Inflation Expectations for Nov. is estimated at +5.1% versus a +5.0% gain in Oct.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (ASML) investor day could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

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

Stocks Surging into Afternoon on Less Hawkish Fed Hopes, Dollar Decline, Short-Covering, Tech/Consumer Discretionary Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume:  Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 23.6 -9.7%
• DJIA Intraday % Swing 1.1%
  
• Bloomberg Global Risk On/Risk Off Index 45.8 -2.5%

• Euro/Yen Carry Return Index 148.9 -1.6%

• Emerging Markets Currency Volatility(VXY) 12.1 +.3%

• CBOE S&P 500 Implied Correlation Index 47.6 -4.8% 

• ISE Sentiment Index 105.0 +18.0 points
  

• Total Put/Call .88 -12.9%

• NYSE Arms 1.32 -45.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 83.72 -8.8%
  

• US Energy High-Yield OAS 378.05 -1.0%
• Bloomberg TRACE # Distressed Bonds Traded 494.0 +20.0
  

• European Financial Sector CDS Index 108.4 -7.4% 
• Credit Suisse Subordinated 5Y Credit Default Swap 347.2 -8.0%
  

• Italian/German 10Y Yld Spread 199.0 basis points -13.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 184.0 +.1%
  

• Emerging Market CDS Index 248.75 -10.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.5 +1.11%

• 2-Year Swap Spread 38.0 basis points +2.75 basis points
  

• TED Spread 50.5 basis points +11.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -50.25 basis points +7.0 basis points
  
• MBS  5/10 Treasury Spread  143.0 -22.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 130.0 umch.
  
• Avg. Auto ABS OAS 1.18 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.30 +.60%
• 3-Month T-Bill Yield 4.14% -5.0 basis points
  

• Yield Curve -48.5 basis points (2s/10s) -.25 basis point
  

• China Iron Ore Spot 88.3 USD/Metric Tonne +2.3%
• Dutch TTF Nat Gas(European benchmark) 109.0 euros/megawatt-hour -3.6%

• Citi US Economic Surprise Index 13.2 -8.3 points

• Citi Eurozone Economic Surprise Index 9.0 -1.0 point
  

• Citi Emerging Markets Economic Surprise Index 1.7 -1.7 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 231.06 -.26:  Growth Rate +11.7% -.2 percentage point, P/E 17.0 +.7
  
• Bloomberg US Financial Conditions Index -1.02 -10.0 basis points
  
• US Atlanta Fed GDPNow Forecast +4.0% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.02% -14.0 basis points: CPI YoY +7.62% -47.0 basis points
  
• 10-Year TIPS Spread 2.40 -4.0 basis points
  
• Highest target rate probability for Feb. 1st FOMC meeting: 55.5%(+30.1 percentage points) chance of 4.5%-4.75%. Highest target rate probability for March 22nd meeting: 48.9%(+17.6 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(+.0 percentage point) of 1/14/22 peak(1,740) +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -83.7%(+0.0 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +464 open in Japan 
• China A50 Futures: Indicating +273 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio:

• Slightly Higher:  On gains in my industrial/tech/commodity/medical sector longs
  

• Disclosed Trades:  Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts
  

• Market Exposure:  Moved to 75% Net Long