Morning Market Internals

NYSE Composite Index:

• Volume Running -.7% Below 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 39.5% of Issues Advancing, 56.5% Declining
• 82 New 52-Week Highs, 10 New Lows
• 47.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.9%
• Vix 10.0 +1.32%
• Total Put/Call .90 +8.43%
• TRIN/Arms .77 -9.15%

Thursday Watch

Evening Headlines

Bloomberg:

• China's Great Wealth Transfer Falls to Reluctant Heirs. Liu Chang, the daughter of a billionaire industrialist, went to boarding school in the U.S., traveled the world, and married a hip Chinese film director. Next move in her charmed life: Running one of China’s largest pig feed and dairy companies. “With my background, I am almost an outsider to the family business. Once I step in, I can bring new perspectives, new thoughts, fresh ideas,” says the 37-year-old, now being groomed to take over New Hope Group, the $15 billion agribusiness company founded by her father, 66-year-old Liu Yonghao.

• U.K. Consumer Confidence Rises to Highest Level in Six Months.

• Bonds Slide as Dollar Climbs on Tax Plan, Economy. Australian bonds joined a global sell-off and Treasury yields reached the highest levels in two months as investors raised their expectations for the Federal Reserve to raise rates one more time this year despite some of Chair Janet Yellen’s colleagues continuing to push back at her contention more hikes are on the way. Bitcoin extended its rally this week to 15 percent as Morgan Stanley CEO James Gorman said it’s "certainly something more than just a fad." Japan’s Topix index advanced 0.4 percent as of 9:15 a.m. Tokyo time. Australia’s S&P/ASX 200 Index gained 0.3 percent, while South Korea’s Kospi index was 0.2 percent lower. Hang Seng Index futures slid 0.5 percent.

• Five Things You Need to Know to Start Your Day. (video)

• Fed's Rosengren Says `Regular and Gradual' Tightening Warranted. Federal Reserve Bank of Boston President Eric Rosengren said the central bank should raise rates in a “regular and gradual” way despite low inflation, because weak price pressures appear temporary and a tight labor market risks overheating the economy. “Appropriate risk mitigation would argue for continued gradual removal of monetary accommodation, even though we are currently below the inflation target,” Rosengren said in prepared remarks for a speech Wednesday in New York. “I believe policy makers should not overreact to low current inflation readings that are widely expected to be temporary.”

• Stocks Catch Tax Cut Fever. (video) As they have done repeatedly, investors used the public unveiling of details on Donald Trump’s tax overhaul as an occasion to celebrate in the stock market. Whether Wednesday’s plan ends up being a net positive for equities is something they’ll worry about later.

• FDA Approves First Finger Prick-Free Device for Diabetics. 

Wall Street Journal:

• GOP Tax Overhaul Aims for Corporate Cuts, Simpler Code. Plan would lower corporate tax rate to 20%, end state and local tax deductions for individuals.

• 5 Takeaways From the GOP Tax Framework. What we know so far about the effect on households’ tax burdens, budget deficits, business, and more.

• Trump Weighs Waiving Law Barring Foreign Ships From Delivering Aid to Puerto Rico. The Jones Act has been waived following past natural disasters.

• In Vetting Refugees, U.S. Plans to Assess Ability to Assimilate. Officials say government would still consider need for protection; policy change driven by White House adviser Stephen Miller.

• Tax Reform, If You Can Keep It. The GOP outline is a pro-growth boon, but rates can’t rise further.

Fox News:

• Fox News Poll: Fifty-five percent of voters in the latest Fox News poll see kneeling during the national anthem as an inappropriate form of protest.

CNBC:

• Trump has a much better shot with tax reform than health care, ex-legislators from both parties say. (video)

• Trump says GOP tax reform plan will create 'revolutionary change'.

• Stocks that get this specific tax break under GOP plan helped lead the market higher Wednesday.

Zero Hedge:

• The “Trump Tax Plan” - Details & Analysis.

• Stephen Roach Warns: Central Bankers' Broken Models Are "Today's Biggest Risks".

• Zuckerberg Fires Back At Trump, Admits "Russian Ads" Were Meaningless.

• S&P Wants You To Know They "Stress Tested" Subprime Auto ABS Structures And They're "Very Stable".

• How Much Longer Can NFL Owners Afford To Sanction Anthem Protests?

• "Fake News" Writer Who "Felt Responsible For Trump's Election" Found Dead In Phoenix.

• Teachers Demand $3,200 From Each Kentucky Household To Fund Pension Ponzi For 2 Years.

• Six-Figure Pensions For University Of California Teachers Surge 60% Since 2012.

• NFL Viewership Is Down 11% This Season As Fans "Take A Knee".

• Small Caps Surge Most Since Election As Bonds Suffer Worst Rut In Over 50 Years. (graph)

Business Insider: 

• FBI report: Murder, violent crime increased significantly in 2016.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 83.0 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 17.25 +.75 basis point.

• Bloomberg Emerging Markets Currency Index 73.41 -.08%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ACN)/1.46

• (ANGO)/.16

• (BBRY)/.00

• (CAG)/.40

• (MKC)/1.06

• (RAD)/-.01 

• (MTN)/-1.85

• (KBH)/.47

Economic Releases 
8:30 am EST

• 2Q GDP is estimated to rise +3.0% versus a prior estimate of a +3.0% gain.

• 2Q Personal Consumption is estimated to rise +3.3% versus a prior estimate of a +3.3%.

• The GDP Price Index is estimated to rise +1.0% versus a prior estimate of a +1.0% gain.

• The Core PCE is estimated to rise +.9% versus a prior estimate of a +.9% gain.

• Initial Jobless Claims for last week are estimated to rise to 270K versus 259K the prior week.

• Continuing Claims are estimated to rise to 1993K versus 1980K prior.

• Advance Goods Trade Balance for August is estimated at -$65.1B versus -$63.9B in July.

• Wholesale Inventories MoM for August are estimated to rise +.4% versus a +.6% gain in July.
  

11:00 am EST

• The Kansas City Fed Manufacturing Activity for September is estimated to fall to 15.0 versus 16.0 in August.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's George speaking, German CPI report, $28B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, Sidoti Conference, B. Riley Consumer Conference, JPMorgan Investor Forum, (AFL) analyst briefing and the (AAL) investor day could also impact trading today.

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

Stocks Surging into Final Hour on Tax/Healthcare Reform Hopes, Economic Optimism, Yen Weakness, Tech/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 9.69 -4.7%

• Euro/Yen Carry Return Index 138.15 +.15%

• Emerging Markets Currency Volatility(VXY) 8.27 +2.35%

• S&P 500 Implied Correlation 22.47 -3.51%

• ISE Sentiment Index 110.0 +4.76%
  

• Total Put/Call .80 -15.79%

• NYSE Arms .91 -25.49%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.63 -2.16%
  

• America Energy Sector High-Yield CDS Index 417.0 -3.55%

• European Financial Sector CDS Index 59.57 -1.46%

• Western Europe Sovereign Debt CDS Index 4.98 -2.74%

• Asia Pacific Sovereign Debt CDS Index 17.13 +3.79%

• Emerging Market CDS Index 189.69 +.12%
  

• iBoxx Offshore RMB China Corporate High Yield Index 141.99 +.08%

• 2-Year Swap Spread 25.25 -1.5 basis points

• TED Spread 26.75 -2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -32.75 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.50 -.59%
• 3-Month T-Bill Yield 1.05% unch.
  

• Yield Curve 83.0 +3.0 basis points

• China Import Iron Ore Spot $64.15/Metric Tonne -1.23%

• Citi US Economic Surprise Index -9.30 +3.8 points

• Citi Eurozone Economic Surprise Index 45.70 +8.0 points

• Citi Emerging Markets Economic Surprise Index 13.80 -.8 basis point

• 10-Year TIPS Spread 1.87 +2.0 basis points
  
• 73.4% chance of Fed rate hike at Dec. 13 meeting, 74.4% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +163 open in Japan 
• China A50 Futures: Indicating +28 open in China

• DAX Futures: Indicating +24 open in Germany

Portfolio: 

• Higher: On gains in my retail/tech/biotech sector longs and emerging markets shorts

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

• Market Exposure: Moved to 100% Net Long

Today's Headlines

Bloomberg:

• S&P Warns of Correction as Asia Bond Spreads Hit Decade Low. The trend of falling premiums on Asian bonds amid abundant liquidity may not last for long, as global monetary stimulus will inevitably fade, according to S&P Global Ratings. “A significant correction in prices of assets such as bonds, equity, and real property, is likely,” the ratings firm said in a note dated Sept. 26. “Abundant liquidity and steady yields have desensitized markets to tail risks, which could shock markets if they were to occur.”
• Iraqi Kurds Choose Independence in Face of Regional Backlash. Iraqi Kurds voted overwhelmingly in favor of independence, risking retaliation from neighbors as well as the government in Baghdad who have pledged to do whatever it takes to prevent secession. Almost 93 percent of 3.3 million eligible ballots backed statehood, the Kurdistan High Election Committee said in a press conference in Erbil on Wednesday. Results will be considered final after approval from Kurdistan’s Court of Appeal, according to a report by the Kurdish Rudaw news service.
• Your Evening Briefing.
• Trump Tax Cut Odds Start to Make Waves Again in the Stock Market. (video) Amid FANG flu and another trash rally, a trade tied to Donald Trump has come quietly back into vogue with U.S. equity investors. It’s buying stocks seen benefiting the most from the president’s promised tax cuts. A Goldman Sachs basket of companies that pay the highest rates just beat the market for a fifth straight day.
• JPMorgan(JPM) Suggests Bet Against CBS(CBS) Amid NFL Anthem Controversy. JPMorgan Chase & Co.’s Shawn Quigg is encouraging investors to bet against CBS Corp.stock ahead of this weekend’s NFL broadcasts. The bank recommends buying an option that gives you the right to sell the shares at $57.50 on the likelihood that the stock will fall below that price after the company discloses ratings for the games. CBS closed at $58 on Tuesday.

Wall Street Journal:

• U.S. Families’ Wealth, Incomes Rose, Fed Survey Says. Minority households and families with less education had larger proportional gains in income than other families between 2013 and 2016.
• Chinese Developers Face Debt Reckoning After Boom. A surge of obligations comes due starting next year, posing a risk to builders—and to China’s economy.

MarketWatch.com:

• European stocks jump to 10-week high as banks rally.The Stoxx Europe Index SXXP, +0.41% added 0.4% to end at 385.62, marking its highest close since July 17, according to FactSet data.

Fox News:

• Republicans unveil tax plan, call for doubling deduction and cutting rates. (video)

CNBC:

• Trump's tax reform plan would dramatically lower rates for businesses, some individuals. (video)
• Amazon(AMZN) announced a bunch of new hardware products today -- here's a rundown.
• We now know that Apple(AAPL), Alphabet(GOOGL) and Samsung are making long-term bets on health care.
• Anthem(ANtH) won't sell new Obamacare plans in most of Maine, current customers to lose subsidies.
• Read the full GOP tax proposal here.

Zero Hedge:

• Here Is The Leaked Trump Tax Plan.
• JPMorgan(JPM) Ordered To Pay Over $4 Billion To Widow And Family.
• Catalan Police Ordered To Close And Occupy Polling Stations To Stop Vote Going Ahead.
• Durable Goods Orders Bounce After July Collapse, Aircraft Orders To The Rescue Again. (graph)
• 2018 Obamacare Premiums Surge 45% In Key Swing State Of Florida.
• Angry Trump Lashes Out At MSM: "Facebook, Networks, NYTimes, WaPo Were Always Anti-Trump. Collusion?".
• WTI/RBOB Sink After Surprise Gasoline Build, Crude Production Rise. (graph)
• The Illusion Of Prosperity. (graph)

The Telegraph:

• Rather than taxing robots, we should be redesigning jobs.

Bear Radar

Style Underperformer:

• Mid-Cap Value +.3%

Sector Underperformers:

• 1) Utilities -1.1% 2) Gold & Silver -1.0% 3) REITs -.8%

Stocks Falling on Unusual Volume: 

• VERI, ASND, SYRS, EVTC, BPOP, REGI, TTS, DAR, AWR, WTTR, WOR, SCG, RLGY and ITCI

Stocks With Unusual Put Option Activity:

• 1) GGP 2) RAD 3) SCHW 4) NKE 5) TWX

Stocks With Most Negative News Mentions:

• 1) VERI 2) KRNT 3) TTS 4) SCG 5) GAR

Charts:

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