Stocks Surging into Final Hour on Economic Optimism, Oil Gain, Technical Buying, Energy/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.06 -7.3%

• Euro/Yen Carry Return Index 140.88 -.22%

• Emerging Markets Currency Volatility(VXY) 7.86 -1.01%

• S&P 500 Implied Correlation 34.38 -3.59%

• ISE Sentiment Index 111.0 +3.74%
  

• Total Put/Call .86 +.1%

• NYSE Arms .88 +52.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 47.24 -2.68%
  

• America Energy Sector High-Yield CDS Index 359.0 -4.05%

• European Financial Sector CDS Index 43.07 -2.91%

• Western Europe Sovereign Debt CDS Index 3.96 n/a

• Asia Pacific Sovereign Debt CDS Index 12.70 -.35%

• Emerging Market CDS Index 115.21 -1.50%
  

• iBoxx Offshore RMB China Corporate High Yield Index 146.23 +.04%

• 2-Year Swap Spread 18.25 +.25 basis point

• TED Spread 29.0 +1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.0 -2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 74.92 +.21%
• 3-Month T-Bill Yield 1.39% -1.0 basis point
  

• Yield Curve 51.5 -2.25 basis points

• China Iron Ore Spot 507.50 CNY/100 Metric Tonnes unch.

• Citi US Economic Surprise Index 78.20 +6.3 points

• Citi Eurozone Economic Surprise Index 46.80 +1.0 basis point

• Citi Emerging Markets Economic Surprise Index -.9 +1.7 points

• 10-Year TIPS Spread 2.0 -1.0 basis point
  
• 76.5% chance of Fed rate hike at March 21 meeting, 78.0% chance at May 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +421 open in Japan 
• China A50 Futures: Indicating +115 open in China

• DAX Futures: Indicating +22 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• S&P 500 Crosses 2,700. (graph) U.S. stocks plowed into the new year in much the same way they performed throughout 2017: breaking records and passing milestones. The S&P 500 Index pushed its two-day gain to as much as 1.3 percent, surpassing 2,700 for the first time Wednesday as technology companies added to last year’s 37 percent rally and analyst upgrades stoked gains in consumer-discretionary shares. The latest 100-point surge is the fifth in less than 12 months.

• Inside the Fed’s December Meeting: The Annotated Minutes. Are concerns about low inflation approaching a tipping point?

• Las Vegas's Economy Is on the Brink of a Boom. That housing-bust hangover couldn't last forever.

• How Much Can Buybacks Rise on Tax Cuts? This Estimate Says 70%. (video)

• Shake Shack(SHAK) Gains on Hopes That Tax Overhaul Will Bring Windfall.

• Here Are the Stocks to Watch as a Major Snowstorm Hits the East Coast. (video)

Wall Street Journal: 

• North and South Korea Test Revived Hotline, Signaling Tentative Thaw in Tensions. Move highlights differences between Seoul and Washington over how to deal with Pyongyang.

• Busting Illusions About Iran. Trump puts America on the side of the people, not the Ayatollahs.

• Top Lawmakers to Meet With White House Officials to Tackle Spending Talks. Republicans push for military boost; Democrats want an equal increase in spending on nondefense agencies.

• U.S. Car Sales Are Set for Their First Annual Decline Since Financial Crisis. The auto industry’s 2017 tally fell short of the record set in 2016.

• A Hedge-Fund Titan Puts Away the Punch Bowl. Ray Dalio of Bridgewater sees Americans’ debt as a coming drag on growth and markets.

Fox News: 

• Trump slams Bannon after criticism, says ex-chief strategist 'lost his mind'. (video)

CNBC:

• Hurricane force winds and snow to head up East Coast in rapidly intensifying 'bomb cyclone'. (video)

• Read President Donald Trump's full statement on Steve Bannon — 'he lost his mind'.

• New York real estate has its worst quarter in 6 years. (video)

• Spotify files to go public.

• Microsoft(MSFT) buys Avere to boost its hybrid cloud strategy; start-up counted Google among investors.

• Here are some ways to curb your smartphone addiction this year.

• The strong economy could be your ticket to a new job. (video)

• Buy Wells Fargo(WFC) on potential for big boost from tax reform, Bernstein says.

Zero Hedge:

• World Stocks Smash New Records; Europe Rebounds As Dollar Slide Ends, MiFID Begins.

• Bannon Goes Nuclear: Calls Don Jr. Meeting In Trump Tower "Treasonous".

• Manufacturing Rebounds In December As New Orders Hit 13 Year High. (graph)

• Even The Penguins Are Panicking: North America Is Entering A Record-Setting Deep Freeze.

• Intel(INTC) Slides After Revealing Major Processor Flaw, AMD(AMD) Surges.

• Trump Tweets Support For People Of Iran As Revolutionary Guard Declares Protests Over.

• China Central Bank Prepares To Regulate Bitcoin Mining

Bear Radar

Style Underperformer:

• Small-Cap Value -.1%

Sector Underperformers:

• 1) Utilities -1.5% 2) Airlines -1.2% 3) Gaming -1.2%

Stocks Falling on Unusual Volume: 

• MGI, D, CRSP, AKAO, VRS, INTC, HTHT, CNSL and AOBC

Stocks With Unusual Put Option Activity:

• 1) A 2) LC 3) HAS 4) RCII 5) ETSY

Stocks With Most Negative News Mentions:

• 1) W 2) HOG 3) TJX 4) FCX 5) CPE

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.8%

Sector Outperformers:

• 1) Oil Service +3.1% 2) Homebuilders +2.7% 3) Biotech +1.7%

Stocks Rising on Unusual Volume:

• RENN, INSY, SCG, EFG, ARNA, WATT, BB, EME, BITA, CMC, EIGR, DORM, EEFT, SPB, TIF, CARA, FCAU, ZYNE, SRE, AMD, TTP, AMBA, CASY, URGN, SMG, CHRS, BJRI, HRG, XON, CRAY, TREX, GOOS, LOCO and IBM

Stocks With Unusual Call Option Activity:

• 1) HST 2) ETP 3) TXN 4) VMC 5) XLE

Stocks With Most Positive News Mentions:

• 1) ULTA 2) ANGI 3) ROKU 4) AMBA 5) ARNA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +14.9% Above 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 53.3% of Issues Advancing, 44.1% Declining
• 183 New 52-Week Highs, 19 New Lows
• 63.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.2%
• Vix 9.17 -6.1%
• Total Put/Call .82 -4.7%
• TRIN/Arms .78 +35.4%

Wednesday Watch

Evening Headlines

Bloomberg:

• Asia Stocks to Extend Gains After U.S. Tech Surge. Equity gauges in Australia and New Zealand advanced Wednesday, while futures for mainland China, South Korea and Taiwan all rose. Japanese markets remain closed and U.S. index futures were steady after the Nasdaq 100 Index climbed 1.8 percent, the biggest gain since Oct. 27. The S&P 500 Index also finished at an all-time high. Most European stock markets started the year in the red, as the euro’s strength weighed on exporters. Australia’s S&P/ASX 200 Index rose 0.2 percent as of 8:14 a.m. in Singapore, while New Zealand’s benchmark gauge climbed 0.3 percent. Futures on Seoul’s Kospi Index advanced 0.3 percent, while contracts for Taiwan’s main gauge were up 0.3 percent in the most recent trading.

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

• Airlines Join Banks in Dishing Out $1,000 Tax Bill Bonuses. Two U.S. airlines -- American and Southwest -- joined the tide of companies offering employees $1,000 bonuses to mark the tax overhaul Congress put in place for 2018. American Airlines Group Inc. and Southwest Airlines Co. announced the bonuses after the close of business Tuesday. AAON, U.S. Bancorp, Commerce Bancshares Inc.and Zions Bancorporation were among the companies touting similar moves.

• Why Inflation Stays Low Even Though Unemployment Is Down.

Wall Street Journal: 

• Nasdaq Crests 7000 as Tech Giants Roar Into 2018. Tech-focused index jumped 28% in 2017, beating the Dow Jones Industrial Average’s 25% gain and S&P 500’s 19% rise.

• Iran’s Spending on Foreign Conflicts Raises Protesters’ Ire. Demonstrators resent Tehran’s outlays to support militant groups in Lebanon, Syria, Yemen, and Gaza.

• ‘White-Informed Civility’ Is the Latest Target in the Campus Wars. The rules of collegiate debate are also coming under attack as racist and patriarchal. 

• Peak Commercial Real-Estate Prices Force Investors to Get Creative. Brookfield, Blackstone and others opt for eclectic approach involving many geographies, asset classes.

MarketWatch.com:

• Apple(AAPL) stock will move higher in ‘super-long cycle,’ says longtime bull Piper Jaffray.

• McDonald’s(MCD) super-sized growth potential spells trouble for competing fast-food chains.

Fox News: 

• 'Mapping the Swamp' report finds 30,000 feds earn more than any governor.

CNBC: 

• This simple chart shows stocks could have another big gain this year.

• CEO of soaring 'blockchain' stock sells about $870,000 worth of the shares.

• Expect more incentives on SUVs and trucks in 2018. (video)

• Internet giants fuel warehouse demand as land prices surge.

• Let it snow — maybe even in Florida as cold wave tightens grip on USA. (video)

• As market hits new highs, experts predict the momentum will continue. (video)

• Stocks making the biggest moves after hours: MGI, TTPH & more.

• Byron Wien sees market correction, bitcoin crackdown and no proof of Trump-Russia collusion in 2018.

• Home prices are set to soar in 2018. (video)

Zero Hedge:

• Probe Uncovers 'Irregularities' In FBI Handling of Clinton Emails: “Laws Broken, False Statements”.

• "Felons, Illegals And MS13 Welcome" Reads "Official Sanctuary State" Sign At California Border.

• Nomi Prins: The Next Financial Crisis Will Be Worse Than the Last One.

• Trump Warns Kim: "I've Got A Bigger Nuclear Button Than Yours".

• As Dossier Scandal Looms, The New York Times Struggles To Save Its Collusion Tale.

• MoneyGram Plunges After US Govt Blocks Merger With Alibaba-Backed Bank.

• "#FrozenAmerica": Locals Panic As 92% Of US Below Freezing.

• Orrin Hatch To Retire, Opening Door For Romney Senate Bid.

• Happy New Year: S&P Just Did Something For The First Time Since 1992.

Business Insider:

• A 'cold-weather bomb' is bearing down on the East Coast — and it could deliver lots of snow and record-low temperatures.

• Nearly 200,000 people have started collecting Ethereum 'CryptoKitties' — which could very well become Beanie Babies of blockchain.

• Report: China secretly offered missiles and aid to North Korea.

Night Trading 

• Asian equity indices are +.25%  to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 66.75 unch. 

• Asia Pacific Sovereign CDS Index 12.75 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 74.72 -.06%.

• S&P 500 futures +.11%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CMC)/.18

• (NEOG)/.34

• (RMAX)/.51

• (RECN)/.24

• (RAD)/-.02

Economic Releases
10:00 am EST

• Construction Spending MoM for November is estimated to rise +.5% versus a +1.4% gain in October.

• ISM Manufacturing for December is estimated at 58.2 versus 58.2 in November.

• ISM Prices Paid for December is estimated to fall to 64.5 versus 65.5 in November.
  

2:00 pm EST

• FOMC Dec. 13 Meeting Minutes.
  

Afternoon:

• Wards Total Vehicle Sales for December are estimated to rise to 17.5M versus 17.35M in November.
  

Upcoming Splits

• (UNG) 1-for-4

Other Potential Market Movers

• The German Unemployment Rate report, weekly US retail sales reports, weekly MBA Mortgage Applications report, (ZUMZ) Q4 update, (COST) monthly sales report and the (F) December Sales Conference Call could also impact trading today.

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