Wednesday Watch

Evening Headlines

Bloomberg:   

• A Brexit Deal Is So Close But It Could All Still Go Belly Up.     

• What to Watch in China GDP Report: Investment, Trade and Savings.

• Catalan Separatists to Intensify Protests in Run-Up to Election.  

• Mexico Elite Tremble From Threat of Tax Crackdown Under New Law. 

• Asian Stocks Look Mixed; Treasuries Advance. Asian stocks were set for a mixed start Thursday as investors mulled a weak U.S. consumer report that triggered a rally in Treasuries. U.S. equities edged lower. Shares in Sydney opened little changed, while futures were flat in Japan, and rose in Hong Kong. The S&P 500 Index closed lower as energy and technology shares retreated. The dollar and Treasury yields slipped after an unexpected drop in retail sales boosted market pricing for an October rate cut by the Federal Reserve. Oil fell after a report showed a sharp increase in U.S. crude stockpiles last week. Futures on the S&P 500 dipped 0.1% as of 8 a.m. in Tokyo. The underlying gauge slid 0.2% on Wednesday. Futures on Japan’s Nikkei 225 added 0.1%. Hang Seng Index futures earlier advanced 0.4%. Australia’s S&P/ASX 200 Index fell 0.1%.

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

• RBA’s New Warning, Hong Kong Failing, China GDP Preview: Eco Day.

• Ken Fisher Client Exodus Nears $1 Billion as Boston Divests.

• Democratic Debate Draws Smallest Audience: Campaign Update. 

• Fear Gauge at 11-Week Low May Give Stocks the ‘All Clear’.

Wall Street Journal:

• Inside Facebook’s Botched Attempt to Start a New Cryptocurrency.

• Warren’s Middle-Class Tax Dodge.

• Doctors Urge Flu Shots Amid Fears Over Deadly Flu Strain.

• How One Tweet Turned Pro-China Trolls Against the NBA.

• Alcoa Plans Up to $1 Billion in Asset Sales Amid Growth Fears.

• U.S. Unfreezes Some Aid to Central America.

Fox News:

• Trump team blasts Dems' 'baffling' decision to storm out of Syria meeting as Pelosi hits back.

MarketWatch.com:  

• Cronos shares surge roughly 33% in after hours.

• Here’s what a positive yield curve may mean for the U.S. economy.  

• Marijuana stocks, after declines of over 50%, are now only ludicrously overpriced.

CNBC:

• Netflix(NFLX) to competition: Welcome! Your success will be our success.

• The big banks have become the ideal stocks for this market, Jim Cramer says.

• Stocks making the biggest moves after hours: Netflix, IBM, Alcoa and more.

• GM, UAW reach tentative pact that could end monthlong strike by 48,000 workers.

• The technology sector could be headed for new all-time highs by the end of 2019, trader says.

• IBM(IBM) stock falls on revenue miss.

Zero Hedge:

• Pelosi Storms Out Of Oval Office After Trump "Meltdown".

• "Just F**king Nail Her": CNN Employee Recounts Jeff Zucker Control Room Meltdown During Kellyanne Conway Interview.

• Feds Bust World's 'Largest Dark Web Child Porn Marketplace' By Following A Bitcoin Trail.

• Tulsi Gabbard Calls CNN & NY Times "Completely Despicable" On Debate Stage For Their "Smears".

• WTI Tumbles After Huge Crude Inventory Build. 

• Japan Buys Most Treasuries Since 2013 In August, China Dump Continues.

• Trump Said "Markets Will Go Up Big Today"... They Didn't!

Business Insider:

• The Kabbalah Connection: Insiders say a celebrity-centered religious sect deeply influenced how Adam Neumann ran WeWork before its spectacular collapse.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 72.5 -.75 basis point.

• China Sovereign CDS 43.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index  65.55 +.03%.

• FTSE 100 futures -.10%.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (BMI)/.43

• (BBT)/1.03

• (GPC)/1.47

• (HON)/2.01

• (KEY)/.46

• (MS)/1.12

• (PM)/1.36

• (PPG)/1.61

• (SNA)/2.94

• (STI)/1.40

• (TSM)/3.70

• (UNP)/2.32

After the Close:

• (ETFC)/1.02

• (ISRG)/2.99

• (MRTN)/.28

• (WDFC)/.62

Economic Releases
8:30 am EST

• Housing Starts for Sept. is estimated to fall to 1320K versus 1364K in Aug.

• Building Permits for Sept. is estimated to fall to 1350K versus 1419K in Aug.

• The Philly Fed Business Outlook Index for Oct. is estimated to fall to 7.6 versus 12.0 in Sept.

• Initial Jobless Claims for last week are estimated to rise to 215K versus 210K the prior week.

• Continuing Claims are estimated to fall to 1675K versus 1684K prior.

9:15 am EST

• Industrial Production MoM for Sept. is estimated to fall -.2% versus a +.6% gain in Aug.

• Manufacturing Production for Sept. is estimated to fall -.3% versus a +.5% gain in Aug.

• Capacity Utilization for Sept. is estimated to fall to 77.7% versus 77.9% in Aug.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan CPI report, Bloomberg Economic Expectations for Oct., weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (SAFM) investor day could also impact trading today.

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

Stocks Slightly Lower into Final Hour on Brexit Deal Concerns, Earnings Jitters, Profit-Taking, Tech/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.0 +3.0%

• Euro/Yen Carry Return Index 124.93 +.2%

• Emerging Markets Currency Volatility(VXY) 7.94 unch.

• S&P 500 Implied Correlation 33.33 +4.4%

• ISE Sentiment Index 119.0 -5.74%
  

• Total Put/Call .90 -11.8%

• NYSE Arms .86 +30.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 56.42 -.03%
  

• America Energy Sector High-Yield CDS Index 483.0 -2.64%

• European Financial Sector CDS Index 58.55 -2.82%

• Italian/German 10Y Yld Spread 131.50 -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 72.83 -1.73%
  

• Emerging Market CDS Index 204.55 +1.55%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.59 +.03%

• 2-Year Swap Spread 4.25 unch.

• TED Spread 35.0 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.5-.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.52 +.15%
• 3-Month T-Bill Yield 1.66% +1.0 basis point

• Yield Curve .16 +1.0 basis point

• China Iron Ore Spot 83.0 USD/Metric Tonne -4.23%

• Citi US Economic Surprise Index 13.60 -2.3 points

• Citi Eurozone Economic Surprise Index -70.3 +1.3 points

• Citi Emerging Markets Economic Surprise Index -19.80 -.2 point

• 10-Year TIPS Spread 1.57 unch.
• 90.6% chance of Fed rate cut at Dec. 11th meeting, 93.8% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +101 open in Japan 
• China A50 Futures: Indicating +15 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio:

• Slightly Higher: On losses in my retail/industrial/biotech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.6%

Sector Underperformers:

• 1) Steel -1.9% 2) Software -1.8% 3) Semis -1.3%

Stocks Falling on Unusual Volume: 

• PGR, ZM, IONS, WORK, PLAN, ATNX, NOW, COUP and WDAY

Stocks With Unusual Put Option Activity:

• 1) WDAY 2) EXC 3) VSLR 4) WORK 5) NOW

Stocks With Most Negative News Mentions:

• 1) WLL 2) YUM 3) BLMN 4) ATI 5) USAT

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.4%

Sector Outperformers:

• 1) Homebuilders +1.4% 2) Gold & Silver +1.2% 3) Retail +.7%

Stocks Rising on Unusual Volume:

• TECD, CUB, GVA, MCK, RETA, TW, ABC, JBHT, BLDR, BMCH, PE, LPX, CCS, APLS, SFIX and IAA

Stocks With Unusual Call Option Activity:

• 1) SIG 2) MIK 3) IP 4) NBEV 5) UAL

Stocks With Most Positive News Mentions:

• 1) ACHN 2) ASMB 3) USB 4) PAG 5) BAC

Charts:

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