Stocks Rising into Final Hour on China Trade Deal Optimism, Buyout Speculation, Less European/US High-Yield Debt Angst, Tech/Biotech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 11.9 -3.5%

• Euro/Yen Carry Return Index 124.52 +.19%

• Emerging Markets Currency Volatility(VXY) 7.04 -.14%

• S&P 500 Implied Correlation 42.4 -5.0%

• ISE Sentiment Index 160.0 +45
  

• Total Put/Call .93 -2.11%

• NYSE Arms .99 +28.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 50.53 -2.45%
  

• America Energy Sector High-Yield CDS Index 615.0 +2.14%

• European Financial Sector CDS Index 57.94 -3.63%

• Italian/German 10Y Yld Spread 151.25 -2.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 65.29 -1.19%
  

• Emerging Market CDS Index 203.92 +.59%
  

• iBoxx Offshore RMB China Corporate High Yield Index 168.40 +.08%

• 2-Year Swap Spread -1.25 +1.25 basis points

• TED Spread 33.25 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -13.75 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.37 -.15%
• 3-Month T-Bill Yield 1.58% unch.

• Yield Curve .15 unch.

• China Iron Ore Spot 86.71 USD/Metric Tonne -.57%

• Citi US Economic Surprise Index .2 -3.1 basis points

• Citi Eurozone Economic Surprise Index -15.40 +.7 point

• Citi Emerging Markets Economic Surprise Index -27.80 +.4 basis point

• 10-Year TIPS Spread 1.64 unch.
• 13.0% chance of Fed rate cut at Jan. 29th meeting, 23.5% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +138 open in Japan 
• China A50 Futures: Indicating -1 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio:

• Higher: On gains in my biotech/industrial/retail/tech/medical sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bull Radar

Style Outperformer:

• Small-Cap Growth +2.5%

Sector Outperformers:

• 1) Biotech +2.5% 2) Semis +2.4% 3) Gaming +2.3%

Stocks Rising on Unusual Volume:

• MDCO, ARWR, FOE, INMD, EDIT, ZS, NXTC, DTIL, MNTA, ICPT, BIG, JELD, DRNA, AMTD, TIF, LB, ALNY, INCY, SFNC, SPLK, POST, TPTX, PTCT, GBT, ZGNX, NXST, ESPR, AQUA, AXNX, CFX, EVRI, GSX, ETFC, DLTR and SERV

Stocks With Unusual Call Option Activity:

• 1) BURL 2) MDCO 3) DLTR 4) PANW 5) ICPT

Stocks With Most Positive News Mentions:

• 1) SRNE 2) MDCO 3) TIF 4) NVDA 5) ALNY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +5.0% Above 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 74.2% of Issues Advancing, 22.8% Declining
• 102 New 52-Week Highs, 10 New Lows
• 56.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.0%
• Vix 12.1 -1.9%
• Total Put/Call .90 -5.3%
• TRIN/Arms 1.13 +49.4%

Monday Watch

Today's Headlines

Bloomberg:   

• China to Raise Penalties on IP Theft in Trade War Compromise.  

• Hong Kong’s Pro-Democracy Candidates Poised to Win Majority.

• Boris Johnson Plays Safe With ‘Sensible’ Manifesto for U.K. Vote. 

• Stocks Rise as China Offers Compromise on Trade. Stocks in Asia rose along with American equity futures as investors monitored the latest move by China to ease trade tensions. Currencies saw muted reactions. Equities in Japan, South Korea and Australia advanced and S&P 500 futures edged up. In the latest on trade: China said over the weekend it will raise penalties on intellectual property violations as it tries to smooth over one of the sticking points in discussions with the U.S. The S&P 500 Index nudged up Friday after President Donald Trump said he was “very close” to a trade pact with China. Japan’s Topix index advanced 0.7% as of 9:05 a.m. in Tokyo. South Korea’s Kospi index added 1%. Futures on the S&P 500 Index rose 0.2%. Australia’s S&P/ASX 200 Index rose 0.7%.    

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

• China Theft Crackdown, Fed Inequality, Negative Rates: Eco Day.

• Oil Resumes Gain as Investors Monitor Back-and-Forth Trade Talks.

• Nunes Defiant as Giuliani Associate Connects Him With Biden Dirt.

Wall Street Journal:

• LVMH Nears Deal to Acquire Tiffany for $16.3 Billion.

• The Mythology of Voter Suppression.

• Winning Was Trump’s High Crime and Misdemeanor.

• Hong Kong Takes a Pause From Protests to Vote in Record Numbers.

• Stocks Run Gantlet of Bad News to Record Highs.

• Utilities Targeted in Cyberattacks Identified.

• Iran Restores Internet Access, but Threatens More Arrests of Protesters.

• Exporting the Nile: Outsiders Buy Up Vital Water Supply.

• Navy Secretary Richard Spencer Resigns Amid Controversy Over Navy SEAL.

• The Climate-Change Game.

• The Left Shrugs at Impeachment.

• ‘Idea Laundering’ in Academia.

MarketWatch.com:

• Opinion: ‘Performance chasing’ and Trump’s impeachment process could push the Dow to 30,000.

Fox News: 

• Republican on Intel Committee says chairman 'really does think that many Americans are idiots'.

• Kennedy slams Democrats, says Pelosi using impeachment inquiry as 'political weapon'.

• Nunes vows lawsuit to hold ‘corrupt’ media accountable after Ukraine report.

CNBC:

• A Bloomberg 2020 run could take big donors off the board for Biden, other Dems.

• Hong Kong vote hits record amid calls for democracy.

• Doctors are turning to YouTube to learn how to do surgical procedures, but there’s no quality control.

• ‘Frozen II’ nabs $127 million in its debut, becomes third-highest animated opening of all time.

• Bloomberg News will not investigate Mike Bloomberg or his Democratic rivals during primary.

• Top economist lowers recession risk for 2020 but says hurdles remain.

Zero Hedge:           

• Hong Kong Election: Pro-Democracy Candidates Surge Amid Record Turnout; Protest Organizer Wins Seat.

• Navy Secretary Fired Over SEAL Controversy.

• China Today Is Like Japan In 1989.

• Thanks To Trump, The Mullahs Are Going Bankrupt.

• Bloomberg Officially Enters 2020 Presidential Race To "Defeat Trump And Rebuild America".

• State Department Releases Detailed Accounts Of Biden-Ukraine Corruption.

• Democrats Getting 'Cold Feet' As Impeachment Support Evaporates.

• Negative-Rates Bite: Bundesbank Fears Financial Stability Risks, Moody's Downgrades Outlook For German Banks.

• China's Skyscraper Boom Comes Crashing Down Amid Developer Default.

• 6 Reasons Why The 'Most-Hated Politician' In Latin America Became President Of Brazil.

• China Would Pay A Catastrophic Price Should There Be A Hong Kong Massacre.

• Republicans & Democrats Agree: Give Vast Snooping Powers To The US Government.

• Japanese Hotel Offers $1 Stay If Guests Livestream Their Every Moment.

Business Insider:

• Medical experts say China is falsifying organ donation data, after it was accused of harvesting body parts from Uighur Muslims in prison camps.

Night Trading

• Asian indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 65.0 -.25 basis point.

• China Sovereign CDS 39.50 unch.

• Bloomberg Emerging Markets Currency Index 65.49 +.03%.

• FTSE 100 futures +.36%.

• S&P 500 futures +.30%.

• NASDAQ 100 futures +.40%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (JEC)/1.31

After the Close:

• (A)/.86

• (AMBA)/.21

• (HPE)/.46

• (NTNX)/-.75

• (PANW)/1.04

• (PVH)/2.99

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for Oct. is estimated to rise to -.2 versus -.45 in Sept.

10:30 am EST

• The Dallas Fed National Activity Index for Nov. is estimated to rise to -3.5 versus -5.1 in Oct.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The $40B 2Y T-Note auction, German IFO report and the (PTC) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon.  The Portfolio is 100% net long heading into the week.