Wednesday Watch

Evening Headlines

Bloomberg:     

• Japan Export Growth Stalls as Trade-War Risks Cloud Outlook.

• Asian Stocks Mixed After Choppy U.S. Session. Asian stocks traded mixed Wednesday following a volatile U.S. session that saw stocks end the day flat and crude oil slump more than 7 percent. Treasuries extended gains and the yen climbed. Stocks in Japan fared worst as telecom giant SoftBank Corp. fell as much as 10 percent in its IPO debut. Shares in Australia also slipped while those in South Korea outperformed. Earlier, the S&P 500 Index ended virtually unchanged as investors braced for Wednesday’s Federal Reserve policy decision against the backdrop of recent turmoil in global markets that’s put equities on course for the worst year since 2008. Earnings after hours from FedEx stoked doubts about the strength of global trade, with the shares dropping almost 5 percent after a lower profit forecast -- just three months after raising it. Japan’s Topix index fell 0.7 percent as of 9:35 a.m. Tokyo time. South Korea’s Kospi rose 0.4 percent. Australia’s S&P/ASX 200 Index fell 0.3 percent. Hong Kong’s Hang Seng Index futures added 0.4 percent. S&P 500 futures rose 0.2 percent.  

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

• Fed Rate Call, Mnuchin Interview, RBA's Sydney Worries: Eco Day.

• Stan Druckenmiller Says Algos Are Robbing Markets of Trade Signals.  

• Here Are All the Headlines From Mnuchin’s Bloomberg Interview.  

• Trader's Guide to Getting Ready for Fed in `Really Tough Corner'.  

• Rethink Holiday Plans and Buy U.S. Stocks Now, Citigroup Says.

Wall St. Journal:

• Crude Down Almost 40% From October.

• ‘It’s Been a Rout’: Apple’s iPhones Fall Flat in World’s Largest Untapped Market.

• White House Signals Flexibility on Wall Funding.

• Tech Unicorns Are Going Public at Near-Record Pace.

• Italy Says It Struck Deficit Compromise With EU.

• Teen Vaping Has Created Addicts With Few Treatment Options.

MarketWatch.com:

• Caroline Baum: How the idea of the Fed ‘stockpiling ammunition’ could blow up the economy.

• Micron(MU) shares drop as sales outlook falls $1 billion short of Wall Street target. 

• Nigam Arora: This positive data point says Santa may arrive at the stock market after all.

Fox News:

• Comey reveals agents knew 'exactly' what Flynn told Russian ambassador before fateful interview.

• Comey asked what former president knew about Clinton's missing emails.

CNBC:       

• FedEx(FDX) tumbles after lowering earnings guidance, cites global trade slowdown.

• Fed needs to take ‘wait-and-see’ approach to rate hikes for stocks to get a ‘sustained’ rally: Cramer.

• Top Amazon(AMZN) exec who was large shareholder is leaving after two-year hiatus, adding to exodus.

• Fed expected to move forward with rate hike, despite Trump’s scolding.

• US crude plunges 7.3% to $46.24, lowest settle since August 2017, on oversupply concerns.

• Stocks making the biggest moves after hours: FedEx, Micron and more.

Zero Hedge:

• US Sends $10 Billion To Mexico, Central America To Improve "Security Conditions And Job Opportunities".

• Incoming Democrats Ready Bill That Will Criminalize Private Gun Sales.

• BIS Fears "Bulge Of BBB Debt" and "Financial Cycle" Default Waves.

• Corporate Buybacks Surpass $200 Billion In Q3, Hit All Time High.

• As Markets Brace For Recession, Illinois Is Nation’s Least Prepared.

• Mass Media's Russia Hysteria Is Openly Acknowledging The Power Of Propaganda.

• WTI Extends Losses After Surprise Crude Build.

• Citi Facing $180 Million Loss On Loan To Asian Hedge Fund.

• Shutdown? Dems Balk At GOP Budget Over $1 Billion Border Security "Slush Fund".

• Fed 'Drift' Fails To Rescue Worst December In 87 Years As Crude, Credit Crash.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 91.0 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 9.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.94 +.1%.

• FTSE 100 futures -.29%.

• S&P 500 futures +.36%.

• NASDAQ 100 futures +.34%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (GIS)/.81

• (NCS)/.53

• (PAYX)/.63

• (WGO)/.67

After the Close:

• (MLHR)/.72

• (PIR)/-.01

• (RAD)/-.01

Economic Releases

8:30 am EST

• The 3Q Current Account Balance is estimated at -$125.0B versus -$101.5B in 2Q.

10:00 am EST

• Existing Home Sales for November are estimated to fall to 5.2M versus 5.22M in October.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,155,560 barrels versus a -1,208,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,166,670 barrels versus a +2,087,000 barrel gain the prior week. Distillate inventories are estimated to fall by -33,330 barrels versus a -1,475,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.24% versus a -.4% decline the prior week.
  

2:00 pm EST

• The FOMC is expected to raise the benchmark Fed Funds rate 25.0 basis points to 2.25-2.5%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The German/UK PPI reports, FOMC Economic Projections/Press Conference, weekly MBA Mortgage Applications report and the (LLY) investor update 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 mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 50% net long heading into the day.

Stocks Reversing Lower into Final Hour on Fed Rate-Hike Fears, Global Growth Worries, Oil Plunge, Energy/Biotech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 25.0 +2.2%

• Euro/Yen Carry Return Index 133.03 -.05%

• Emerging Markets Currency Volatility(VXY) 9.67 -.72%

• S&P 500 Implied Correlation 50.98 +3.62%

• ISE Sentiment Index 79.0 +27.4%
  

• Total Put/Call 1.11 -17.8%

• NYSE Arms .87 -24.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 81.51 -.09%
  

• America Energy Sector High-Yield CDS Index 700.0 +2.70%

• European Financial Sector CDS Index 104.77 +.65%

• Italian/German 10Y Yld Spread 269.25 -1.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.22 +2.82%

• Emerging Market CDS Index 198.14 -.31%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.88 +1.37%

• 2-Year Swap Spread 13.0 -1.25 basis points

• TED Spread 40.25 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.25 -.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.90 +.13%

• 3-Month T-Bill Yield 2.37% -2.0 basis points

• Yield Curve 17.0 +1.0 basis point

• China Iron Ore Spot 68.50 USD/Metric Tonne +.78%

• Citi US Economic Surprise Index -9.4 +3.9 points

• Citi Eurozone Economic Surprise Index -76.20 -2.0 points

• Citi Emerging Markets Economic Surprise Index -4.4 unch.

• 10-Year TIPS Spread 1.82 +1.0 basis point

• 69.4% chance of Fed rate hike at Jan. 30th meeting, 75.3% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -5 open in Japan 

• China A50 Futures: Indicating +47 open in China

• DAX Futures: Indicating +27 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.3%

Sector Underperformers:

• 1) Oil Service -1.4% 2) Shipping -1.3% 3) Biotech -1.3%

Stocks Falling on Unusual Volume: 

• PPL, WOR, BANC, HIIQ, RCII, BPT, AXGN, LXFR, NGG and OSTK

Stocks With Unusual Put Option Activity:

• 1) RCII 2) NYCB 3) HES 4) CMCSA 5) NEM

Stocks With Most Negative News Mentions:

• 1) PM 2) HLTH 3) BIIB 4) FLS 5) NAVI

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +1.4%

Sector Outperformers:

• 1) Homebuilders +3.2% 2) Semis +2.5% 3) Internet +2.3%

Stocks Rising on Unusual Volume:

• MTLS, NAV, IUSG, ABCB, FANH, LOVE, XPO, LION, CLXT, IGV, HEI, DRI, JNJ, RYTM, IJT, VTWO, CVTI, BHP, ENVA, USAP, ARGO, AAXJ, VIGI, TLK, SHOP and EPRT

Stocks With Unusual Call Option Activity:

• 1) KWEB 2) PAYX 3) SIG 4) ITB 5) BIIB

Stocks With Most Positive News Mentions:

• 1) MEET 2) NAV 3) DRI 4) PBYI 5) JNJ

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +16.5% Above 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 55.2% of Issues Advancing, 42.7% Declining
• 3 New 52-Week Highs, 504 New Lows
• 15.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.1%
• Vix 24.9 +1.4%
• Total Put/Call 1.20 -11.1%
• TRIN/Arms .91 -22.2%