Stocks Surging into Final Hour on Earnings Optimism, Less European Debt Angst, Bargain-Hunting, Tech/Financial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 21.11 -9.6%

• Euro/Yen Carry Return Index 133.05 -.25%

• Emerging Markets Currency Volatility(VXY) 10.27 +2.8%

• S&P 500 Implied Correlation 42.0 -7.9%

• ISE Sentiment Index 72.0 -35.1%
  

• Total Put/Call 1.13 -5.1%

• NYSE Arms .95 +58.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.99 -2.28%
  

• America Energy Sector High-Yield CDS Index 5219.0 +1.33%

• European Financial Sector CDS Index 91.86 -2.01%

• Italian/German 10Y Yld Spread 304.25 -5.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 10.39 -1.38%

• Emerging Market CDS Index 206.78 +.87%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.15 +.10%

• 2-Year Swap Spread 20.0 +.5 basis point

• TED Spread 20.25 +1.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -44.50 +3.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.18 -.46%
• 3-Month T-Bill Yield 2.32% unch.

• Yield Curve 28.25 +1.5 basis points

• China Iron Ore Spot 71.90 USD/Metric Tonne -.69%

• Citi US Economic Surprise Index 5.4 +6.4 points

• Citi Eurozone Economic Surprise Index -57.6 -3.3 points

• Citi Emerging Markets Economic Surprise Index -8.80 -5.9 points

• 10-Year TIPS Spread 2.06 unch.
• 74.2% chance of Fed rate hike at Dec. 19th meeting, 75.3% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -10 open in Japan 
• China A50 Futures: Indicating +146 open in China

• DAX Futures: Indicating +20 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +43.4% Above 100-Day Average
• 8 Sectors Rising, 3 Sector Declining
• 65.1% of Issues Advancing, 32.8% Declining
• 20 New 52-Week Highs, 104 New Lows
• 25.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.4%
• Vix 21.3 -8.7%
• Total Put/Call 1.19 +.85%
• TRIN/Arms 1.05 +75.0%

Wednesday Watch

Evening Headlines

Bloomberg:              

• Bond-Fund Giant Is Wary on Adding China Debt to Global Portfolios.

• Baidu(BIDU) Sales Forecast Misses Estimates as China’s Economy Slows.

• Samsung Scales Back Capital Spending as Earnings Top Estimates.

• Brexit Worry Drags U.K. Business Optimism to Lowest in a Year.

• Asia Stocks to End Torrid Month Mixed; Bonds Slip. Asian stocks looked set to end a bruising month in mixed fashion following a topsy-turvy U.S. session that eventually saw equities close higher. Treasuries fell and the dollar climbed. Shares in Australia and New Zealand climbed and futures pointed to a higher start for stocks in Japan, with Hong Kong looking modestly lower. The S&P 500 Index twice erased gains that topped 1 percent before finally securing a rebound in the final hour of trading. Chinese markets will be in focus after calls from authorities to encourage funds to invest spurred a rally Tuesday, while the yuan held near the weakest level in a decade against the greenback. Futures on Japan’s Nikkei 225 added 0.9 percent in Singapore. FTSE China A50 futures rose 0.4 percent. Australia’s S&P/ASX 200 index added 0.3 percent. Futures on Hong Kong’s Hang Seng declined 0.1 percent. The S&P 500 Index rose 1.6 percent. Futures on the S&P 500 were little changed.  

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

• How Low Can the FANG Stocks Go? Traders Search for a Bottom.

Wall St. Journal:

• Apple(AAPL) Raises Prices on New MacBook Air, iPad Pro.

• GE(GE) Slashes Payout, Discloses Criminal Probe as Shares Sink.

• Trump Seeks to Curb Birthright Citizenship, a Move Scholars Dismiss.

• The Yawning Divide That Explains American Politics.

Fox News:   

• Liberal network slammed for star’s silence after guest lobs outlandish anti-Trump claim.

CNBC:       

• The best thing for this market would be more bad economic news: Cramer.

• Southern California suffers its worst housing slump in over a decade.

• JP Morgan strategist: We are not panicking,' US is best bet in this environment. 

• Stocks making the biggest moves after hours: Facebook, Electronic Arts, T-Mobile and more.

• Nothing should derail consumer confidence this holiday season, says CEO behind survey.

• The world's first humanless warehouse is run only by robots and is a model for the future.

• Raymond James' Jeff Saut: 'A major bottom' is approaching in the market.

Zero Hedge:

• "Self Segregation" - Niall Ferguson Exposes The Destructive Power Of Social Networks.

• DOJ Indicts Two Chinese Intelligence Operatives In Corporate Hacking Scheme.

• Facebook(FB) Slides After Revenue, Daily Users Miss As Operating Costs Soar; Zuck Warns Of "Stories" Troubles.

• Energy Junk Bonds Tumble, Dragging High Yield Spreads To 2018 Wides.

• "We Can't Be Talking About Gun Bans": Project Veritas Catches Another Dem Candidate Hiding Their Progressivism.

• Successful Hedge Funds Are Extending Lock Ups Periods To Avoid Forced Sales.

• Princeton Issues Checklist For "Inclusive" Halloween.

• "Organized Busing Operation" Exposed, Moving Migrants Closer To US Border.

• WTI Pops Despite Sixth Weekly Crude Build In A Row.

• Stocks Bounce In 'Pause That Refreshes' For Bears As Systemic Risk Surges.

Business Insider:

• Taliban says 5 former detainees who were exchanged for Sgt. Bowe Bergdahl have re-joined its ranks.

Telegraph:

• ECB heading for 'Titanic iceberg' as Italy crumbles and eurozone slows to five-year low.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 91.5 -1.25 basis points. 

• Asia Pacific Sovereign CDS Index 10.5 unch.

• Bloomberg Emerging Markets Currency Index 66.45 -.05%.

• FTSE 100 futures +.22%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (APTV)/1.20

• (ADP)/1.11

• (BAX)/.74

• (BG)/2.40

• (CLX)/1.59

• (EL)/1.23

• (GM)/1.25

• (HES)/-.04

• (ICE)/.80

• (IGT)/.31

• (K)/1.07

• (TAP)/1.59

• (S)/-.01

• (YUM)/.83

After the Close:

• (ALL)/2.25

• (AIG)/.17

• (APA)/.47

• (CF)/.13

• (ESRX)/2.42

• (NXPI)/1.90

• (RGLD)/.38

• (RGR)/.92

• (XPO)/.99

Economic Releases

8:15 am EST

• The ADP Employment Change for October is estimated to fall to 187K versus 230K in September. 

8:30 am EST

• The 3Q Employment Cost Index is estimated to rise +.7% versus a +.6% gain in 2Q.

9:45 am EST

• The Chicago Purchasing Manager Index for October is estimated to fall to 60.0 versus 60.4 in September.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +3,014,730 barrels versus a +6,346,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,777,000 barrels versus a -4,826,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,398,820 barrels versus a -2,262,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.46% versus a +.4% gain prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Manufacturing PMI report, Eurozone CPI report, weekly MBA Mortgage Applications report and the (HLF) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 50% net long heading into the day.

Stocks Higher into Final Hour on Short-Coverig, Technical Buying, Yen Weakness, Retail/Energy Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 23.6 -4.2%

• Euro/Yen Carry Return Index 133.29 +.30%

• Emerging Markets Currency Volatility(VXY) 9.94 -1.19%

• S&P 500 Implied Correlation 44.33 +8.25%

• ISE Sentiment Index 100.0 +31.5%
  

• Total Put/Call 1.17 -7.1%

• NYSE Arms .62 -38.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 69.98 -.93%
  

• America Energy Sector High-Yield CDS Index 520.0 +4.29%

• European Financial Sector CDS Index 93.75 +.61%

• Italian/German 10Y Yld Spread 310.0 +14.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 10.55 +1.05%

• Emerging Market CDS Index 205.97 -.98%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.0 -.16%

• 2-Year Swap Spread 19.5 -1.0 basis point

• TED Spread 19.25 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -48.0 +1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.49 +.14%
• 3-Month T-Bill Yield 2.32% +2.0 basis points

• Yield Curve 26.75 -.25 basis point

• China Iron Ore Spot 74.14 USD/Metric Tonne -1.15%

• Citi US Economic Surprise Index -1.0 +.9 point

• Citi Eurozone Economic Surprise Index -54.3 -14.7 points

• Citi Emerging Markets Economic Surprise Index -2.90 +1.6 points

• 10-Year TIPS Spread 2.06 unch.
• 71.8% chance of Fed rate hike at Dec. 19th meeting, 72.3% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +160 open in Japan 
• China A50 Futures: Indicating +2 open in China

• DAX Futures: Indicating +36 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.1%

Sector Underperformers:

• 1) Computer Services -1.6% 2) Shipping -.5% 3) Software -.3%

Stocks Falling on Unusual Volume: 

• AQUA, CMTA, TXRH, APTI, ARLP, NLS, PX, WAB, FLIR, GE, IRWD, UVE, SSTK, RDY APPF, EGRX, IBM, OMAB, AGN, WSO, AMSF, CSGP, RGS, PACW, CVLT, AN, REV, QTS, CTSH, RCKT, SCI, AEIS, INCY, FGEN, UVE, WAB, SSTK, APTI and IRWD

Stocks With Unusual Put Option Activity:

• 1) IMMU 2) ESRX 3) UA 4) XPO 5) GE

Stocks With Most Negative News Mentions:

• 1) GE 2) HOG 3) LL 4) IRWD 5) WFT

Charts:

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