Stocks Surging into Afternoon on Diminished China Debt Bubble Bursting Fears, Declining US Covid Cases, Dovish FOMC Commentary, Energy/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 18.7 -10.6%
• Bloomberg Global Risk On/Risk Off Index 3,094.0 +360.0 points

• Euro/Yen Carry Return Index 133.53 +.87%

• Emerging Markets Currency Volatility(VXY) 8.8 -1.2%.

• S&P 500 Implied Correlation 54.7 -2.6%

• ISE Sentiment Index 92.0  -30.0 points
  

• Total Put/Call .83 -14.4%

• NYSE Arms .48 -30.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 50.62 -1.7%
  

• US Energy High-Yield OAS 376.91 -1.67%

• European Financial Sector CDS Index 55.08 -2.1%

• Italian/German 10Y Yld Spread 98.0 -1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 83.0 -3.6%
  

• Emerging Market CDS Index 168.30 +.17%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 37.34 +.04%

• 2-Year Swap Spread 12.0 +1.0 basis point
  

• TED Spread 10.5 unch.
  

• 3-Month EUR/USD Cross-Currency Basis Swap -3.0 -.25 basis point
  
• MBS  5/10 Treasury Spread  74.85 -.25 basis point
  
• IHS Markit CMBX BBB- 6 71.75 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 59.44 +.01%
• 3-Month T-Bill Yield .03% +1.0 basis piont
  

• Yield Curve 111.0 unch.
  

• China Iron Ore Spot 110.35 USD/Metric Tonne +.3%

• Citi US Economic Surprise Index -32.4 -3.2 points

• Citi Eurozone Economic Surprise Index -66.5 -41.0 points
  

• Citi Emerging Markets Economic Surprise Index 2.9 -.7 point

• 10-Year TIPS Spread 2.34 +4.0 basis points
• 100.0% chance of no change at Dec. 15th meeting, 100.0% chance of no change at Jan. 26th meeting

US Covid-19:

• 282 new infections/100K people(last 7 days total) -8/100K people
• 53% of Jan. 7th, 2021 peak(highest daily avg. new infections) -1.0 percentage points
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +501 open in Japan 
• China A50 Futures: Indicating -76 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 100% Net Long
  

Bear Radar

 Style Underperformer:

• Large-Cap Growth +1.3%

Sector Underperformers:

• 1) Steel -2.9% 2) Gold & Silver -1.1% 3) Digital Health unch.

Stocks Falling on Unusual Volume: 

• SCS, HLBZ, GOF, SGFY, BLI, AGIL, RAD, ATUS and PTCT
  

Stocks With Unusual Put Option Activity:

• 1) RAD 2) DRI 3) IGT 4) UAA 5) ATUS
  

Stocks With Most Negative News Mentions:

• 1) EAR 2) SCS 3) RAD 4) IDYA 5) RKLY
  

Charts:

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

Bull Radar

 Style Outperformer:

• Small-Cap Value +2.1%

Sector Outperformers:

• 1) Oil Service +5.6% 2) Banks +4.0% 3) Airlines +3.6%

Stocks Rising on Unusual Volume:

• SAVA, VERI, QS, ENVX, NVAX, PTGX, JOBY, FUL, REKR, HRI, ANGI, ATKR, APA, CUE, AFRM, FSR, CRM, DRI, VLY, ACM, AKTS, NCLH, CF, CCL, RF, MTTR, PAG, NTNX, NWS, SLGC, VMW, LNTH, AAWW, DELL, SKIN, MGM, AMTI, BKU, EXPE, U, NWSA, SAH, ROKU, ALLO, WYNN, AIMC, SNCY, XLRN and DOW
  

Stocks With Unusual Call Option Activity:

• 1) DRI 2) IGT 3) UA 4) WKSP 5) OEG

Stocks With Most Positive News Mentions:

• 1) FEDU 2) JOBY 3) SPT 4) ROLL 5) DRI
  

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -2.7% Below 100-Day Average 
• 10 Sectors Rising, 1 Sector Declining
• 63.8% of Issues Advancing, 32.8% Declining
• 77 New 52-Week Highs, 22 New Lows
• 57.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.4%
  
• Bloomberg Global Risk-On/Risk-Off Index ,085.0 +349.0 points
• Russell 1000: Growth/Value 17,847 -.69%
  
• Vix 19.0 -9.2%
• Total Put/Call .83 -14.4%
• TRIN/Arms .53 -24.3%

Thursday Watch

Evening Headlines

Bloomberg:           

• Evergrande Debt Crisis Is Financial Stress Test No One Wanted.  
• Understanding Evergrande, the Chinese Real Estate Conglomerate That’s Nearing Collapse.
• China’s Fledgling Cross-Border Payments System Grows Its Reach.  
• Brazil Pledges Third 100 Basis-Point Hike as Inflation Soars.
  
• Asia Set for Steady Open, Curve Flatter After Fed: Markets Wrap.  
• Commodities Rebound Amid Oil Gains and Easing China Concerns.
• Fed Rate Rise, Yellen Debt Appeal, Hyperinflation Worry: Eco Day.
• Jerome Powell Says Fed Can’t Protect Markets If U.S. Defaults.
• Powell Says Fed Taper Could Start ‘Soon’ and End Around Mid-2022.
  
• Biden to Tap Crypto, Big-Bank Critic to Run Wall Street Watchdog.  
• High U.S. Meat Prices Are Here to Stay Amid Depleted Reserves.  
• House GOP Squeezes Pelosi on Bipartisan Infrastructure Bill.
• Automakers Look to Hedge Against China’s Rare Earth Dominance.

Wall Street Journal:    

• Inside Amazon’s Department Store Plans: High-Tech Dressing Rooms.  
• For Auto Makers, the Chip Famine Will Persist.
• The New Government Basic Income.  
• Xi Jinping Makes China a Dangerous Place for Investment.  
• Selling Access Is a Scandal About Joe Biden, Not Hunter.
• Latin American Migration, Once Limited to a Few Countries, Turns Into a Mass Exodus.
  

Fox News:  

• Biden’s appeal plummets with key voting group in latest poll.

CNBC.com:

• Half of the Fed members now see the central bank hiking rates next year.
• Federal Reserve holds interest rates steady, says tapering of bond buying coming ‘soon’.
• FDA authorizes Pfizer’s Covid booster shots for people 65 and older and other vulnerable Americans.
• Toast’s three co-founders are all billionaires after company’s IPO.
• Biden meets with more than a dozen key Democrats as his economic agenda hangs in the balance.
• The Fed is evaluating whether to launch a digital currency and in what form, Powell says.
• Stitch Fix pivoted to sell more clothes directly to customers. CEO’s next step is to spread the word.

Zero Hedge:

• Wuhan Scientists Planned To Release 'Chimeric Covid Spike Proteins' Into Bat Populations Using 'Skin-Penetrating Nanoparticles'.
• FDA Agrees Awith Advisors, Limits Booster Jabs To Older & Immunocompromised Americans
• Biden's Debt Limit Game Of Chicken.
• China's Xi Jinping Promises No New Coal Plants Abroad As It Ramps Up Domestic Production.
• Space Force Unveils Prototypes Of Uniform For Guardians.
• Three Key Takeaways From The Fed Meeting.
• De Blasio Whines As Brazil's Bolsonaro Brazenly Defies UN's Vaccine "Mandate".
• Sen. Johnson: Health Agencies Are "Ignoring Natural Immunity".
• Facebook CTO To Step Down After 13 Years.
• CCP Dissident Claims China Released COVID At Military World Games In October 2019.
• 'He Raped Me Every Morning': Snopes Co-Founder Accused Of Sexual Abuse By Most Recent Wife.
• Goldman Warns Of Oil Spike To $90 If Winter Is Colder Than Usual.
• FOMC Signals Rate-Hike In 2022, Sees Taper Ending Mid-2022.
  

 Jerusalem Post:

• COVID-19: New 'Mu variant' from Colombia could be vaccine resistant - WHO.

NBC News: 

• More than 20,000 Haitians are gathered in Colombia for possible migration to U.S.

Newsmax:

• Murders Up 29% in 2020, Biggest Bump Since Record-Keeping Began.

TheGatewayPundit.com:

• BREAKING – LEAKED AUDIO: Maricopa County Supervisor Steve Chucri Admits: “I DON’T FEEL COMFORTABLE WITH DOMINION” – And County Recorder Stephen Richer AGREES!
• This is What Tyranny Looks Like: Absolute Mayhem in Australia; Covid-Police Ambush Crowds and Shoot Protesters In the Back With ‘Non-lethals’ As They Run Away – (Video).
• Biden Admin Suspends Border Agents on Horseback Who Were Doing Their Job — Preventing Illegal Aliens from Entering US.
• ‘Violates Civil Rights Act of 1964’ – United Airlines Employees Sue Over Company’s Covid Vaccine Mandate.
• VoterGA Founder Favorito Agrees that Ballots Missing Chain of Custody Documentation Are Invalid and Should Not Have Been Certified.

The Epoch Times:

• Quad Leaders to Meet Amid Mounting CCP Aggression.

Covid-19(Data, Maps, Graphs):

• Our World in Data:  New Global Covid-19 Cases(7-day rolling average graphs). New US Covid Hospital Admissions/ICU Admissions/Deaths
  
• FT.com:  Fully Vaccinated by Country(graph). Global Lockdown Stringency Index(map).
• Bloomberg.com:  International Travel Restrictions.  Case Graphs by State.
  
• NYTimes.com:  County Trends and Clusters. Local ICU Occupancy.
  
• Brown School of Public Health:  Covid Severity by State/County(map).  US Hospital Capacity(region).
  
• CovidActNow:  Covid Severity/Infection Rate by Metro Area.
  
• KFF:  US Vaccinations by Race/Ethnicity.
  
• Carnegie Mellon: Covid-Like Symptoms in Community. Covid Symptom Searches on Google. Covid-Related Dr.Visits.  Restaurant Visits. Wearing Masks. (graphs)
  
• Safegraph.com:  Commerce Patterns(graphs).

Night Trading 

• Asian equity indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 84.75 -3.0 basis points.

• China Sovereign CDS 43.0 -2.25 basis points.
  

• Bloomberg Emerging Markets Currency Index 59.42 -.02%.
• Bloomberg Global Risk-On/Risk Off Index 2,735.0 +2.0 points.
• Volatility Index(VIX) futures 21.8 -1.4%.
• FTSE 100 futures +.13%.

• S&P 500 futures +.24%

• NASDAQ 100 futures +.22%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (ACN)/2.19
• (DRI)/1.65
• (RAD)/-.42
  

After the Close:

• (AIR)/.49
• (COST)/3.54
• (NKE)/1.12
• (PRGS)/.82
• (MTN)/-3.5
  

Economic Releases

10:00 am EST

• The Chicago Fed National Activity Index for Aug. is estimated to fall to .5 versus .53 in July.
• Initial Jobless Claims for last week are estimated to fall to 320K versus 332K the prior week.
• Continuing Claims are estimated to fall to 2600K versus 2665K prior.
  

9:45 am EST

• Markit US Manufacturing PMI for Sept. is estimated to fall to 61.0 versus 61.1 in Aug. 
• Markit US Services PMI for Sept. is estimated to fall to 54.9 versus 55.1 in Aug.
  

10:00 am EST

• The Leading Index for Aug. is estimated to rise +.7% versus a +.9% gain in July.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for Sept. is estimated to fall to 25.0 versus 29.0 in Aug.

12:00 pm EST

• Household Change in Net Worth for 2Q.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone Services PMI report, BofE decision, (DELL) financial analysts day and the (CRM) investor day could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer 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 Surging into Afternoon on Diminished China Debt Bubble Bursting Fears, Declining US Covid Cases, Dovish FOMC Commentary, Commodity/Consumer Discretionary Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 21.7 -10.9%
• Bloomberg Global Risk On/Risk Off Index 2,701.0 +188.0 points

• Euro/Yen Carry Return Index 132.59 +.37%

• Emerging Markets Currency Volatility(VXY) 8.9 -.33%.

• S&P 500 Implied Correlation 56.5 -2.4%

• ISE Sentiment Index 143.0  +18.0 points
  

• Total Put/Call .89 unch.

• NYSE Arms .47 -64.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.75 -2.5%
  

• US Energy High-Yield OAS 384.71 -1.22%

• European Financial Sector CDS Index 56.29 -3.4%

• Italian/German 10Y Yld Spread 199.0 -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 85.75 -2.4%
  

• Emerging Market CDS Index 166.77 -.84%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 37.33 +.54%

• 2-Year Swap Spread 11.0 -.5 basis point
  

• TED Spread 10.5 unch.
  

• 3-Month EUR/USD Cross-Currency Basis Swap -2.75 +.25 basis point
  
• MBS  5/10 Treasury Spread  75.0 -.5 basis point
  
• IHS Markit CMBX BBB- 6 71.75 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 59.60 +.13%
• 3-Month T-Bill Yield .02% unch.
  

• Yield Curve 111.0 unch.
  

• China Iron Ore Spot 109.80 USD/Metric Tonne +11.5%

• Citi US Economic Surprise Index -29.2 +.3 point

• Citi Eurozone Economic Surprise Index -25.5 -1.0 points
  

• Citi Emerging Markets Economic Surprise Index 3.6 +.2 point

• 10-Year TIPS Spread 2.30 -1.0 basis point
• 100.0% chance of no change at Dec. 15th meeting, 100.0% chance of no change at Jan. 26th meeting

US Covid-19:

• 290 new infections/100K people(last 7 days total) -4/100K people
• 54% of Jan. 7th, 2021 peak(highest daily avg. new infections) -1.0 percentage points
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +281 open in Japan 
• China A50 Futures: Indicating +70 open in China

• DAX Futures: Indicating +11 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long