Stocks Lower into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, Technical Selling, Technology/Consumer Discretionary Sector Weakness

 

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume:  Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 20.5 +.7%
• DJIA Intraday % Swing .71%
  
• Bloomberg Global Risk On/Risk Off Index 53.1 -.1%

• Euro/Yen Carry Return Index 144.2 -.1%

• Emerging Markets Currency Volatility(VXY) 10.7 +.7%

• CBOE S&P 500 Implied Correlation Index 38.5 -1.4% 

• ISE Sentiment Index 99.0 +1.0
  

• Total Put/Call .99 -19.5%

• NYSE Arms 1.21 -57.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 74.85 +1.8%
  

• US Energy High-Yield OAS 368.39 +2.6%
• Bloomberg TRACE # Distressed Bonds Traded 328.0 unch.
  

• European Financial Sector CDS Index 91.03 +4.69% 
• Credit Suisse Subordinated 5Y Credit Default Swap 371.43 +2.7%
  

• Italian/German 10Y Yld Spread 171.0 basis points -3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 105.2 +.8%
  

• Emerging Market CDS Index 230.9 +.50%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.98 +.05%

• 2-Year Swap Spread 26.5 basis points -1.0 basis point
  

• TED Spread 16.0 basis points +1.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -13.5 +1.25 basis points
  
• MBS  5/10 Treasury Spread  136.0 +2.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 111.0 +1.0 basis point
  
• Avg. Auto ABS OAS .77 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.4 -.06%
• 3-Month T-Bill Yield 4.64% +1.0 basis point
  

• China Iron Ore Spot 125.6 USD/Metric Tonne +1.5%
• Dutch TTF Nat Gas(European benchmark) 60.7 euros/megawatt-hour -1.6%

• Citi US Economic Surprise Index -19.0 +5.7 points

• Citi Eurozone Economic Surprise Index 87.9 -.3 point
  

• Citi Emerging Markets Economic Surprise Index 7.8 unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 228.44 -.12:  Growth Rate +10.8% -.1 percentage point, P/E 17.2 -.1
  
• Bloomberg US Financial Conditions Index .17 +4.0 basis points
  
• Yield Curve -72.5 basis points (2s/10s) -2.0 basis points
• US Atlanta Fed GDPNow Forecast +3.53% +4.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.45% unch.: CPI YoY +6.34% unch.
  
• 10-Year TIPS Spread 2.23 +10.0 basis points
  
• Highest target rate probability for March 22nd FOMC meeting: 74.8%(+3.5 percentage points) chance of 4.75%-5.0%. Highest target rate probability for May 3rd meeting: 55.4%(-3.1 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 126 new infections/100K people(last 7 days total). 7.2%(-.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 -77.5%(+.5 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +3 open in Japan 
• China A50 Futures: Indicating +56 open in China

• DAX Futures: Indicating +118 open in Germany

Portfolio:

• Slightly Higher:  On gains in my commodity/medical sector longs and index hedges
  

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

• Market Exposure: Moved to 50% Net Long
  

Thursday Watch

Evening Headlines

Bloomberg:          

• New Zealand Prime Minister Ardern Announces Shock Resignation.
• New Zealand Business Confidence Slumps to Worst Since 1970s.
• New Zealand Housing Slump May Be Harbinger of What's to Come Elsewhere.  
• Japan’s Trade Gap Narrows as Yen Gains, Energy Costs Fall.
• Australia Jobs Surprisingly Fall, Easing Case for Rate Hike.  
• Asian Stocks Decline on Deepening Growth Concerns: Markets Wrap.
• Oil Extends Decline on US Recession Concern, Inventory Build.
• What Tech Job Cuts Say About Silicon Valley — and the Economy.  
• Crypto Firm Genesis Is Preparing to File for Bankruptcy Protection.  
• Job Market’s 2.6 Million Missing People Unnerves Star Harvard Economist. 
  
• Regional Banks Drop as Uncertainty, Inverted Yield Curve Dim Outlook.
  
• Microsoft, Amazon Are Set to Erase 28,000 Jobs as Tech Slump Deepens.  
• Oaktree’s Marks Sees End to Junk-Bond Rally With Defaults Rising.
  
• Here’s a Running List of Tech Companies Planning Job Cuts.  
• Wall Street Struggles to Contain Costs as Pay Pressures Escalate.  
• ChatGPT Will Be the Calculator for Writing, Top Economist Says.
  
• Apple to Expand Smart-Home Lineup, Taking On Amazon and Google.

Wall Street Journal:

• Russian Spy or Ukrainian Hero? The Strange Death of Denys Kiryeyev.
• The Best and Worst U.S. Airlines of 2022.
• Surveillance Program on Money Transfers Raises Privacy Concerns.
• Mexico Bans California Startup’s Experiments to Cool Atmosphere.
• Microsoft to Lay Off 10,000 Employees.
• Berlin Won’t Allow Exports of German Tanks to Ukraine Unless U.S. Sends Its Own.
• In Davos, Leaders Fret Over Fragmenting Global Economy.
• Nursing Homes’ Use of Schizophrenia Drugs to Be Audited by U.S. Government.

Fox News:

• Supreme Court deals major blow to Second Amendment for millions of Americans.

CNBC.com:

• Crypto publication CoinDesk hires Lazard to explore sale as crisis deepens at parent company DCG.
• Bed Bath & Beyond looks for capital infusion, buyer ahead of likely bankruptcy filing.
• Apple is the only tech giant that still hasn’t announced layoffs — these charts may explain why.
• Microsoft, Amazon and other tech companies have laid off more than 60,000 employees in the last year.

MarketWatch:           

• Allstate tells Wall Street to brace for higher catastrophe losses in Q4, thanks to December winter storm.
  
• Netflix’s unpredictable finale: With no more subscription guidance, the focus is on financial estimates.
  
• Shoppers are ditching jeans for cargo pants and chinos, retail execs say.  
• Wall Street’s ‘fear gauge’ flashes warning that stocks might be headed off a cliff.  
• Opinion: This perfect storm of megathreats is even more dangerous than the 1970s or the 1930s, Roubini says.

Zero Hedge:

• A "Corrupt Circle-Jerk..." Of "Select Human Beings" - Did Davos Just Reach 'Peak Creepy'?
• Classified Docs Were At Biden House While Hunter Took Millions For "Representing F**king Spy Chief Of China".
• Buyer Cancellation Rate At Top US Homebuilder Surpasses 2008 Levels.
• Why A Shocking Number Of Crazy-Sounding Right-Wing Conspiracy Theories Turned Out To Be True.
• BofA Freezes Hiring On Downturn Risk; Credit Suisse To Pay Bonuses Upfront To Prevent Exodus.
• Secretive Surveillance Program Captured 150 Million International Money Transfers Spanning 20 Countries: Sen. Wyden.
• Poszar Was Right: Saudis Confirm Non-Dollar Oil Trade Plans In Davos.
• China Outpacing US In AI Research Production.
• McCarthy Rejects White House Demand For "Clean" Debt-Ceiling Hike.
• Reps. Marjorie Taylor Greene, Paul Gosar Back On Committee Assignments.
• Illinois' Newest Suicide Attempt: Wealth-Tax Legislation To Be Introduced This Week.
• US stocks declined after weak data and hawkish Fed rhetoric thwarted the BoJ rally - Newsquawk Asia-Pac Market Open.
• Want To Know Where The Economy Is Going? Watch The Top 10%.
• WTI Extends Losses After API Reports Big Crude Build.
• Stocks reversed BoJ rally after dismal data and hawkish Fed Speak - Newsquawk US Market Wrap.
• Man Discovers Brand New EV Hummer Will Take Five Days To Fully Charge.
• China Cut Treasury Holdings Again In November As World Piled Into US Stocks.
• Stocks & Bond Yields Slump As 'Soft Landing' Story Crashes.

Newsmax:

• DeSantis: 'Hypocrisy,' Hunter Security Risk in Biden Docs.
• House Repubs Countering Activist Onslaught Against Mt. Rushmore.

TheGatewayPundit.com:

• Project Veritas’ Latest on Teaching Lab: ‘Evil Salesman’ Dr. Quintin Bostic Claims His Employer is ‘Running a Non-Profit But It’s For Profit’ (VIDEO).
• MUST WATCH: Rebel News Reporters Confront Pfizer CEO Albert Bourla on His Unsafe and Ineffective mRNA Shots.
• Nutjobs at the World Economic Forum Declare New Crises Facing the World.
• America Is Getting Played by the Deep State and Biden Administration – the Most Important Questions Remain Unanswered.
• St. Louis Woman Arrested after Firing Several Rounds at Police – Is Released from Jail the Next Morning Without Any Charges.
• A Sign? Karine Jean-Pierre Refers to Kamala Harris as “the President” Amid Biden Documents Scandal (VIDEO).
• President Trump to Attend Saturday Memorial for Lynette “Diamond” Hardaway in North Carolina.
• As Bed, Bath & Beyond Closes Stores, Conservatives Reveal They Boycotted After MyPillow Was Canceled.
• Ukrainian Troops Land on US Soil Will Start Training at Military Base in Oklahoma (VIDEO).
• FTX Detailed Recovery Plan Released – Executives Could Borrow Billions from Customers with No Collateral – $250 Million in Bahamas Property Purchased.
• Democrat Minnesota Lawmaker Wants Menstrual Products in Boys Bathrooms in Every School (VIDEO).
• MORE EVIDENCE: FOIA Requests Reveal There Were No DOJ Investigations on Election Fraud After 2020 Election as Bill Barr Claimed.
• Ohio School District Sued By 18 Parents for Allowing Transgender Student Into Girls Bathrooms.

The Epoch Times:   

• Trump Vows to Ban Chinese Investment in US Farmland if Re-elected.
• China Local Government Debts Grow Faster Than GDP.
• University of Kansas Researcher Sentenced to Time Served for Hiding China Ties.

Twitter: 

• @JackPosobiec - Here is the result you get when you check how many sessions the World Economic Forum is holding on Taiwan this year in Davos. Are you paying attention yet?
• @TPostMillennial - George Soros is responsible for funding some of the most influential media figures in the world via donations to liberal groups affiliated with them.
• @zerohedge - Mapping Out All The Key Revelations From The 'Twitter Files' So Far...
• @akheriaty - Tucker covers @StKirsch’s bombshell finding about the FAA loosening its EKG range for pilots while offering no explanation as to why to the public. Guest: @LTCTheresaLong. (video)
• @DrAseemMalhotra - I REPEAT ‘Post covid vaccine myocarditis is 28 TIMES MORE common than post covid myocarditis’ The fact that most people don’t know this is because of Big Pharma’s successful PR machinery (capture of institutions, medical journals & media) to deflect away from the ugly truth.
• @theinformantofc - #JoeManchin, Democrat and former governor of #Virginia, argues against the #FirstAmendment at the #WorldEconomicForum meeting in #Davos: "The problem we have is the open press system and basically all platforms." (video)
• @JamesOKeefeIII - Part 2 coming tomorrow @TeachingLabHQ. (video)
• @KatieDaviscourt - HOLY SH*T: CEO of Pfizer gets DESTROYED in Davos at the World Economic Forum. @RebelNewsOnline #WEF. (video)
• @NationalFile - Davos: WEF Congratulates Brian Kemp on Failing to Secure Georgia’s Elections.
• @TPostMillennial - WEF is “predicting” a “catastrophic cyber event likely in the next years”. (video)
  

 OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 918,508 Reports(+3,097 from prior week) Through December 30th, 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 -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 104.5 -2.0 basis points. 

• China Sovereign CDS 51.0 -2.0 basis points. 
• China Iron Ore Spot 124.0 USD/Metric Tonne +1.9%.

• Bloomberg Emerging Markets Currency Index 48.3 -.15%.
• Bloomberg Global Risk-On/Risk Off Index  52.9 -.6%. 
• Bloomberg US Financial Conditions Index .12 -3.0 basis points.
  
• Volatility Index(VIX) futures 21.7 +.06%.
• Euro Stoxx 50 futures -.55%.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.12%.  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (BKU)/1.10
• (CMA)/2.56
• (CBSH)/1.03
• (FAST)/.42
• (FITB)/1.00
• (HTLD)/.30
• ((KEY)/.55
• (MTB)/4.44
• (NTRS)/1.81
• (PG)/1.59
• (TFC)/1.28
  

After the Close:

• (NFLX)/.54
• (PPG)/1.13
• (SIVB)/5.26
  

Economic Releases

8:30 am EST

•  Housing Starts for Dec. is estimated to fall to 1358K versus 1427K in Nov.
• Building Permits for Dec. is estimated to rise to 1365K versus 1342K in Nov.
• The Philly Fed for Jan. is estimated to rise to -11.0 versus -13.8 in Dec.
• Initial Jobless Claims for last week is estimated to rise to 214K versus 205K the prior week.
• Continuing Claims is estimated to rise to 1655K versus 1634K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Brainard speaking, Australia Unemployment Rate and the weekly EIA natural gas inventory report could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, Technical Selling, Financial/Utility Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume:  Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 20.0 +3.5%
• DJIA Intraday % Swing 1.77%
  
• Bloomberg Global Risk On/Risk Off Index 53.7 -4.0%

• Euro/Yen Carry Return Index 144.2 +.62%

• Emerging Markets Currency Volatility(VXY) 10.6 -.5%

• CBOE S&P 500 Implied Correlation Index 38.7 +6.2% 

• ISE Sentiment Index 92.0 -21.0
  

• Total Put/Call 1.29 +30.3%

• NYSE Arms 1.97 +37.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 72.57 +1.1%
  

• US Energy High-Yield OAS 357.24 +2.2%
• Bloomberg TRACE # Distressed Bonds Traded 328.0 -9.0
  

• European Financial Sector CDS Index 87.0 -.24% 
• Credit Suisse Subordinated 5Y Credit Default Swap 361.62 -5.0%
  

• Italian/German 10Y Yld Spread 174.0 basis points -6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 104.3 -1.7%
  

• Emerging Market CDS Index 227.8 -.86%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.95 +.24%

• 2-Year Swap Spread 27.5 basis points +2.0 basis points
  

• TED Spread 14.5 basis points -5.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +1.0 basis point
  
• MBS  5/10 Treasury Spread  134.0 -1.0 basis point
  
• Bloomberg US Agg CMBS Avg OAS 110.0 -2.0 basis points
  
• Avg. Auto ABS OAS .77 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.40 -.13%
• 3-Month T-Bill Yield 4.63% +5.0 basis points
  

• China Iron Ore Spot 123.5 USD/Metric Tonne +1.5%
• Dutch TTF Nat Gas(European benchmark) 61.71 euros/megawatt-hour +2.7%

• Citi US Economic Surprise Index -24.7 -11.4 points

• Citi Eurozone Economic Surprise Index 88.2 -.7 point
  

• Citi Emerging Markets Economic Surprise Index 7.8 -4.0 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 228.56 -.27:  Growth Rate +10.9% unch., P/E 17.3 -.2
  
• Bloomberg US Financial Conditions Index .17 +1.0 basis point
  
• Yield Curve -70.5 basis points (2s/10s) -3.75 basis points
• US Atlanta Fed GDPNow Forecast +3.49% -58.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.45% unch.: CPI YoY +6.34% +3.0 basis points
  
• 10-Year TIPS Spread 2.13 -4.0 basis points
  
• Highest target rate probability for March 22nd FOMC meeting: 70.6%(-6.0 percentage points) chance of 4.75%-5.0%. Highest target rate probability for May 3rd meeting: 55.7%(-0.0 percentage points) chance of 4.75%-5.0%.
  

US Covid-19:

• 126 new infections/100K people(last 7 days total). 7.2%(-.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 -78.0%(-0.0 percentage points) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -226 open in Japan 
• China A50 Futures: Indicating +19 open in China

• DAX Futures: Indicating +48 open in Germany

Portfolio:

• Slightly Higher:  On gains in my index hedges and emerging market shorts
  

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 25% Net Long
  

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +4.9% Above 100-Day Average 
• 11 Sectors Declining, 0 Sectors Rising
• 41.1% of Issues Advancing, 56.0% Declining
• 86 New 52-Week Highs, 7 New Lows
• 51.8%(-2.6%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 59.0 -6.0
  
• Bloomberg Global Risk-On/Risk-Off Index 53.5 -4.3%
  
• Russell 1000: Growth/Value 14,268.9 +.45%
  
• Vix 20.1 +3.8%
• Total Put/Call 1.34 +35.4%
• TRIN/Arms 2.14 +49.7%