Stocks Surging into Final Hour on Economic Optimism, Earnings Outlooks, Oil Gain, Tech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.93 -12.1%

• Euro/Yen Carry Return Index 137.63 -.64%

• Emerging Markets Currency Volatility(VXY) 8.32 +1.71%

• S&P 500 Implied Correlation 16.47 -7.1%

• ISE Sentiment Index 147.0 +68.97%
  

• Total Put/Call .84 -3.45%

• NYSE Arms 1.12 +15.65%

Credit Investor Angst:

• North American Investment Grade CDS Index 53.03 -1.71%
  

• America Energy Sector High-Yield CDS Index 397.0 +1.27%

• European Financial Sector CDS Index 53.96 -3.75%

• Western Europe Sovereign Debt CDS Index 4.72 +.85%

• Asia Pacific Sovereign Debt CDS Index 15.57 -2.17%

• Emerging Market CDS Index 174.02 -3.34%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.76 +.11%

• 2-Year Swap Spread 22.75 +.5 basis point

• TED Spread 28.5 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -42.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.51 +.04%
• 3-Month T-Bill Yield 1.09% -1.0 basis point
  

• Yield Curve 83.0-1.0 basis point

• China Import Iron Ore Spot $60.08/Metric Tonne -2.26%

• Citi US Economic Surprise Index 38.20 +7.6 points

• Citi Eurozone Economic Surprise Index 59.50 -.6 basis point

• Citi Emerging Markets Economic Surprise Index 21.30 unch.

• 10-Year TIPS Spread 1.90 unch.
  
• 85.9% chance of Fed rate hike at Dec. 13 meeting, 86.5% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +77 open in Japan 
• China A50 Futures: Indicating +78 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value unch.

Sector Underperformers:

• 1) Disk Drives -1.7% 2) Retail -1.5% 3) Gaming -1.3%

Stocks Falling on Unusual Volume: 

• EFII, EXPE, LMAT, CYOU, MAT, LEXEA, CLS, SMCI, CVS, CIB, GT, ELLI, BIDU, TEN, OSTK, INT, UCTT, NSM, MRK, MCK, PDCO, GT, HTLD, M, TEN, LPNT and EFII

Stocks With Unusual Put Option Activity:

• 1) SFLY 2) GNC 3) BSX 4) CYH 5) FSLR

Stocks With Most Negative News Mentions:

• 1) EFII 2) JCP 3) EXPE 4) LMAT 5) CERN

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +1.6%

Sector Outperformers:

• 1) Software +3.2% 2) Internet +2.0% 3) Healthcare Providers +1.6%

Stocks Rising on Unusual Volume:

• DAIO, GIMO, FSLR, AMZN, FARO, MULE, HUN, SIVB, CARO, MSFT, GOOG, PICO, INTC, POWI, CIFS, LOGM, CIFS, LOGM, TWTR, MB, GOOGL, ALGN, TAL, TVTY, DECK, ENTA, IMO, MB, HUBG, GVA, HESS, W, WWE, RMD, OMER, COG, FLXN, CVA, SC, ESRX, SYK, IRBT, LEG, BWLD, BYD, BLKB, TRU, ERI, TRMB, NVCR, FB, ETE, EGHT, HLS, TILE, NATI, CWH, NRZ, BC, TRGP, HUM, GDI, CUBE and NEP

Stocks With Unusual Call Option Activity:

• 1) MAT 2) FDX 3) FSLR 4) AET 5) GT

Stocks With Most Positive News Mentions:

• 1) FSLR 2) ALGN 3) AMZN 4) GOOGL 5) RMD

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +39.2% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 51.7% of Issues Advancing, 44.9% Declining
• 111 New 52-Week Highs, 67 New Lows
• 46.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.1%
• Vix 10.4 -7.8%
• Total Put/Call .84 -3.5%
• TRIN/Arms .97 +.84%

Friday Watch

Evening Headlines

Bloomberg:

• Economists See China Keeping GDP Target Even Though It Shouldn't. Xi Jinping has signaled a move away from China’s growth-at-all-costs approach, even eschewing repetition of a key expansion goal when he outlined his vision for the future last week. But old habits die hard. China should scrap annual gross domestic product growth targets altogether, according to all but three economists of 17 who responded to that question in a survey by Bloomberg News Oct. 19 to 25. Yet none forecast leaders will do so. Instead, they bet China will set a target for GDP growth of "about 6.5 percent" or "6.5 percent" in 2018, according to 12 of 18 analysts polled. Five project a range of 6 percent to 6.5 percent, and one sees 6.5 percent to 7 percent.
• Stock Gains Extend to Asia on Profit, U.S. Tax. Equity benchmarks rose in Tokyo, Seoul and Sydney as technology shares rallied following stellar profit at Amazon.com Inc. and Alphabet Inc. that buoyed futures on the Nasdaq 100 Stock Index. The S&P 500 Index climbed as results from Twitter Inc. and Ford Motor Co. topped estimates, showing strength in the American economy ahead of the first reading on gross domestic product for the third quarter. The dollar maintained gains after rallying to its highest since July after the U.S. House passed a budget resolution seen as advancing the prospects for tax reform. The British pound declined on the prospect of a hard Brexit. The MSCI Asia Pacific Index advanced, though its set to finish its first down week in four, amid record low volatility. Volatility in the last 60 trading days has dropped below 6 percent to the lowest since Bloomberg started compiling the data in 1988. Japan’s Topix index rose 0.4 percent as of 9:23 a.m. in Tokyo, heading for its seventh weekly advance. The Nikkei 225 Stock Average added 0.5 percent. Australia’s S&P/ASX 200 Index added 0.1 percent. Macquarie Group Ltd. was largely behind the gain, up 3.3 percent, the most in almost a year to a record high, after forecasting full-year earnings to rise. South Korea’s Kospi index climbed 0.2 percent. Hong Kong’s Hang Seng Index futures rose 0.2 percent.
• Five Things You Need to Know to Start Your Day.
• Soaring Premiums Mean Soaring Risks for Obamacare. Anyone healthy is going to think twice before paying premiums that are up, say, 70 percent. So the exchanges will be left with the very ill.
• The Fast-Food Price Wars Are About to Get Ugly. (video)

Wall Street Journal:

• The Coming Russia Bombshells. A judge may order Fusion GPS to give House investigators its bank records.
• Seoul Presses U.S. to Hand Over Wartime Command of South Korean Military. President Moon Jae-in’s push to undo 1950s agreement sets up rift between allies.

Fox News:

• Fox News Poll: Positive views of NFL down 18 points since 2013.
• About 2,800 JFK records released, others withheld. (video)

CNBC:

• Paul Ryan is confident he can sweeten tax reform to win over GOP holdouts. (video)
• Big tech crushes earnings.
• Google(GOOGL) parent Alphabet sees shares pop after earnings beat. (video)
• Aetna(AET) shares jump 12% on DJ report that CVS Health(CVS) is in talks to buy big health insurer for $200 or more per share.
• Mattel(MAT) shares tumble as Toys R Us bankruptcy eats into sales. (video)
• Baidu(BIDU) shares down 14 percent after lower-than-expected Q4 revenue projection. (video)
• Microsoft(MSFT) earnings: 84 cents a share vs 72 cents EPS expected. (video)
• Intel(INTC) earnings: $1.01 a share vs 80 cents EPS expected.
• Luxury homes can't keep up with high demand.

Zero Hedge:

• Trump Blocks Full Release Of JFK Assassination Records After Last Minute CIA Push.
• National Archives Releases Another 2,891 JFK Assassination Records.
• 24,000 Homicides: Mexico On Pace For Most Violent Year In History As Drug Wars Spiral Out Of Control.
• Kyle Bass Warns: Xi Has "Built The Chinese Economy On A Foundation Of Sand".
• Paul Ryan Says FBI Will Turn Over Long-Sought 'Trump Dossier' Documents.
• Amazon(AMZN) Soars Above $1,000 After Smashing Expectations.
• 'All Drugged Up And Nowhere To Go' - S&P Flatlines As Bond Yields, Dollar Surge. (graph)

Business Insider:

• A key indicator of home sales in San Francisco is plunging.

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 73.75 -.25 basis point. 

• Asia Pacific Sovereign CDS Index 16.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 72.40 -.1%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (B)/.69
• (COG)/.08
• (CVX)/.97
• (CL)/.73
• (XOM)/.86
• (GT)/.67
• (LYB)/2.47
• (MRK)/1.03
• (PSX)/1.57
• (COL)/1.80
• (SPG)/2.87
• (SOHU)/-1.12
• (WY)/.32

Economic Releases 

8:30 am EST

• 3Q GDP is estimated to rise +2.6% versus a +3.1% gain in 2Q.
• 3Q Personal Consumption is estimated to rise +2.1% versus a +3.3% gain in 2Q.
• The 3Q GDP Price Index is estimated to rise +1.7% versus a +1.0% gain in 2Q.
• 3Q Core PCE is estimated to rise +1.3% versus a +.9% gain in 2Q.
  

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for October is estimated to fall to 100.7 versus a prior estimate of 101.1.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Industrial Production report could also impact trading today.

BOTTOM LINE:  Asian indices are 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 75% net long heading into the day.

Stocks Rising into Final Hour on Earnings Outlooks, Economic Optimism, Oil Gain, Road & Rail/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Heavy

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 11.24 +.09%

• Euro/Yen Carry Return Index 138.48 -1.16%

• Emerging Markets Currency Volatility(VXY) 8.16 +1.24%

• S&P 500 Implied Correlation 18.67 -3.62%

• ISE Sentiment Index 101.0 +46.38%
  

• Total Put/Call .85 -26.72%

• NYSE Arms .99 -.75%

Credit Investor Angst:

• North American Investment Grade CDS Index 54.21 +.83%
  

• America Energy Sector High-Yield CDS Index 391.0 +.36%

• European Financial Sector CDS Index 55.67 -3.08%

• Western Europe Sovereign Debt CDS Index 4.68 +3.08%

• Asia Pacific Sovereign Debt CDS Index 15.92 +.44%

• Emerging Market CDS Index 179.50 +1.52%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.60 +.02%

• 2-Year Swap Spread 22.25 -.25 basis points

• TED Spread 27.75 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -42.0 -2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.50 -.72%

• 3-Month T-Bill Yield 1.10% -1.0 basis point
  

• Yield Curve 84.0 unch.

• China Import Iron Ore Spot $61.47/Metric Tonne -1.24%

• Citi US Economic Surprise Index 30.60 +.1 point

• Citi Eurozone Economic Surprise Index 60.10 +4.2 basis points

• Citi Emerging Markets Economic Surprise Index 21.30 +4.4 basis points

• 10-Year TIPS Spread 1.90 +2.0 basis points
  

• 85.9% chance of Fed rate hike at Dec. 13 meeting, 86.5% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +131 open in Japan 

• China A50 Futures: Indicating +44 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long