Stocks Surging into Final Hour on More Dovish Fed Commentary, Stable Long-Term Rates, Diminished US Virus Mandate/Lockdown Fears, Tech/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line:  Substantially Higher
  

• Sector Performance:  Most Sectors Rising
  

• Volume:  Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 18.7 -3.9%
• Bloomberg Global Risk On/Risk Off Index 3,575.0 +85.0 points

• Euro/Yen Carry Return Index 135.14 +.51%

• Emerging Markets Currency Volatility(VXY) 10.1 -1.7%

• CBOE S&P 500 Implied Correlation Index 30.0 +1.7% 

• ISE Sentiment Index 146.0  +53.0 points
  

• Total Put/Call .72 -28.7%

• NYSE Arms .72 -8.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.73 -1.8%
  

• US Energy High-Yield OAS 385.89 -1.5%

• European Financial Sector CDS Index 58.69 -1.6%

• Italian/German 10Y Yld Spread 133.0 +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 79.83 -.74%
  

• Emerging Market CDS Index 198.35 -.28%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 32.2 -1.08%

• 2-Year Swap Spread 20.75 +1.25 basis points
  

• TED Spread 12.75 -1.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap 2.0 unch.
  
• MBS  5/10 Treasury Spread  77.75 +.25 basis point
  
• IHS Markit CMBX BBB- 6 72.25 +.25 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 53.94 +.54%
• 3-Month T-Bill Yield .11% +2.0 basis points
  

• Yield Curve 85.5 +.75 basis point
  

• China Iron Ore Spot 129.45 USD/Metric Tonne +1.7%

• Citi US Economic Surprise Index 6.0 +.9 point

• Citi Eurozone Economic Surprise Index 39.5 -.9 point
  

• Citi Emerging Markets Economic Surprise Index 3.1 -.2 points

• 10-Year TIPS Spread 2.57 +6.0 basis points
  
• 21.2%(-2.7 percentage points) chance of no change at March 16th FOMC meeting, 12.5%(-1.9 percentage points) chance of no change at May 4th meeting

US Covid-19:

• 1,618 new infections/100K people(last 7 days total) at new record high +117/100K people from prior report
  
• New Covid-19 patient hospital admissions per 100K population at new record high +32.5%(-.2 percentage point) from prior 7-day avg. of 12/26/21 - 1/1/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +268 open in Japan 
• China A50 Futures: Indicating +45 open in China

• DAX Futures: Indicating +33 open in Germany

Portfolio:

• Higher: On gains in my transport/industrial/tech/medical/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 Value +.5%

Sector Underperformers:

• 1) Utilities -1.2% 2) Road & Rail -1.2% 3) Foods -.5%

Stocks Falling on Unusual Volume: 

• PKI, ACI, SWTX and PACB
  

Stocks With Unusual Put Option Activity:

• 1) ACI 2) BLL 3) TTWO 4) PACB 5) BCRX
  

Stocks With Most Negative News Mentions:

• 1) AMC 2) UHS 3) AA 4) IHC 5) APR
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.4%

Sector Outperformers:

• 1) Oil Service +4.5% 2) Alt Energy +3.1% 3) Gambling +3.1%

Stocks Rising on Unusual Volume:

• ACCD, SHAK, ILMN, ICPT, FUBO, BCRX, FXLV, OSH, SGHT, EXPI, UPLD, BEAM, FRPT, WLL, IRTC, NKLA, CELH, LVS, DASH, ANF, HOOD, CRL, NVRO, TSP, EVH, BLI, RRC, AVLR, DKNG, NARI, AMD, ABMD, MRVL, VIR, BROS, OC, DISH, ENVX and TTWO
  

Stocks With Unusual Call Option Activity:

• 1) TTWO 2) DISH 3) REI 4) ILMN 5) CF

Stocks With Most Positive News Mentions:

• 1) SHAK 2) JNPR 3) ILMN 4) ACCD 5) TSRI
  

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +5.2% Above 100-Day Average 
• 7 Sectors Rising, 4 Sectors Declining
• 63.7% of Issues Advancing, 32.7% Declining
• 63 New 52-Week Highs, 43 New Lows
• 53.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.7% 
• Bloomberg Global Risk-On/Risk-Off Index 3,550.0 +61.0 points
• Russell 1000: Growth/Value 17,294 +.55%
  
• Vix 19.0 -1.8%
• Total Put/Call .69 -31.7%
• TRIN/Arms .81 +2.5%

Tuesday Watch

Evening Headlines

Bloomberg:           

• China Buys More Sanctioned Oil From Iran, Venezuela at a Bargain.  
• Airbus CEO Sounds Alarm Over China Market as Omicron Wave Hits Country.
• China Tightens in Tech Hub; Mexico’s AMLO Infected: Virus Update.  
• Hong Kong’s Brain Drain Worsens as Expats, Locals Flee City.
  
• North Korea Fires Second Ballistic Missile in Less Than a Week.
• Asia Stocks Trade Lower; Treasuries, Dollar Steady: Markets Wrap.
  
• Biden Seeks Chicago Schools Opening as Democrats See Risk.
• Powell Says Fed to Ensure Inflation Doesn’t Take Root in Economy.  
• The Cryptocurrency Behind the Popular (3, 3) Meme Is Getting Clobbered.  
• Tiger Global Lost 7% Last Year, First Annual Drop Since 2016.  
• How NYC Is Opening the Voting Booth to Non-U.S. Citizens.
• Bitcoin Is Off to Its Worst Annual Start Since the Dawn of Crypto.

Wall Street Journal:

• SEC Pushes for More Transparency From Big Private Companies.
• Space Heater, Faulty Door Played Roles in Deadly Bronx Fire.
• Microsoft Hit by Defections as Tech Giants Seek Talent to Build Metaverse.
• McConnell Issues Threat to Democrats on Filibuster Changes.
• Workers Sick With Omicron Add to Manufacturing Woes. ‘The Hope Was That 2022 Would Get Better.’
• Biden Has Met the Enemy, and He Is Us. What if Kamala Harris believed it when she likened the Capitol riot to Pearl Harbor and 9/11?

Fox News:

• Viewers demand apology from MSNBC, Rachel Maddow for previous COVID vaccine comments.
• DeSantis campaign cashes in on liberal lawmakers fleeing to freedom.
  

CNBC.com:

• Rivian shares decline on 2021 production and executive departure.
• Abercrombie & Fitch shares rise despite retailer trimming holiday-quarter outlook.
• Stocks making the biggest moves after hours: Intel, Micron, Wynn Resorts and more.
• Bitcoin briefly tumbles below $40,000 to the lowest since September as investors shed risk.

MarketWatch: 

• Buy the dip, says JPMorgan. ‘Markets can handle higher yields’.

Zero Hedge:

• New York Port Hit With Rare Vessel Congestion Amid COVID-Induced Labor Shortage.
• Rep. Jordan Indicates He Won't Cooperate With Jan. 6 Committee As It Is Not "Fair-Minded And Objective".
• Australian Police Tear-Gas Angry Crowd Of Djokovic Supporters.
• It's Time To Drop The Hysteria And Learn To Live With COVID.
• 100 "Fringe" Predictions For 2022.
• California Law Enforcement Continues To Fight Against Early Release For Violent Criminals.
• American Airlines Investigates Pilot With "Let's Go Brandon" Sticker.
• NASDAQ - enough is enough?
• Will Justice Sotomayor Be Banned On Twitter? Don't Bet On It.
• NASDAQ survived (again)...
• Real Wages Plummet As Inflation Hits The US Recovery.
• Jamie Dimon One-Ups Goldman: Says He Would Be "Surprised" With Just 4 Rate-Hikes.
• Fed Vice Chair Clarida Abandons Ship Two Weeks Early.
• Citius, Altius, Debilius: Dip-Buyers Rescue Tech-Wreck As Rate-Hike-Odds Soar.

Newsmax:

• Italy Bans Unvaxxed From Public Transit, Hotels, Outdoor Dining and More. 
  
• #BareShelvesBiden Trending on Twitter as Economic Worries Surge.

TheGatewayPundit.com:  

• White House Refuses to Criticize Justice Sotomayor For Spreading Covid Misinformation (VIDEO).
• “It’s RINOs Like This That Are Allowing Democrats to Destroy Our Nation” – President Trump Blasts RINO Mike Rounds on His Pathetic Sunday Show Display.
• California Governor Newsom Wants Health Coverage For All Illegal Aliens.
• New York Times Blocks Ad for “The Real Anthony Fauci” Book — Says It’s ‘Misinformation’ Because It Opposes Their Leftist Dogma (VIDEO).
• Pfizer CEO: Omicron Specific Covid Vaccine will be Ready by March (VIDEO).
• They’re Just Ignoring Everything and Living Their Lives’ – CNN Worried People Are Tuning Out Covid Fear Porn Being Churned Out by Fake News (VIDEO).
• BREAKING…Recent Podcast Shows Bob Saget Telling Fan: “I went to the pharmacy the other day and I got my booster shot” [VIDEO].
• FINALLY: CDC Director Walensky Admits the Vast Majority of COVID Deaths Had Not One, Not Two, Not Three – But “At Least FOUR” Comorbidities.

The Epoch Times:

• Another ‘Affront Against Universal Rights’: Blinken Criticizes Beijing for Using Sanctions to ‘Intimidate’ US Critics
• Omicron Spreads to Another Region in China, Raising Fears for Beijing Olympics.
• All Countries Need to Rethink Their Relationship With China: Canadian Foreign Affairs Minister.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 715,856 Reports(+6,773 from prior week) Through December 31, 2021.

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

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 -.5% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 80.25 +.25 basis point. 

• China Sovereign CDS 44.0 +1.5 basis points.
  

• Bloomberg Emerging Markets Currency Index 53.64 -.01%. 
• Bloomberg Global Risk-On/Risk Off Index 3,434.0 -55.0 points.
• Volatility Index(VIX) futures 21.8 +.44%.
• Euro Stoxx 50 futures +.59%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.04%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (ACI)/.59
• (INFO)/.84
• (SNX)/2.68
  

After the Close:

• None of note
  

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for Dec. is estimated to rise to 98.7 versus 98.4 in Nov.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Powell confirmation hearings, Australia retail sales report, 3Y T-Note auction and the weekly US retail sales reports could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly lower, weighed down by consumer and transport 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 Lower into Final Hour on US Policy-Induced Stagflation Fears, Global Virus Mandate/Lockdown Worries, Dollar Strength, Consumer Discretionary/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line:  Substantially Lower
  

• Sector Performance:  Most Sectors Declining
  

• Volume:  Above Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 20.6 +9.8%
• Bloomberg Global Risk On/Risk Off Index 3,400.0 -38.0 points

• Euro/Yen Carry Return Index 134.40 -.65%

• Emerging Markets Currency Volatility(VXY) 10.4 +.2%

• CBOE S&P 500 Implied Correlation Index 31.7 +2.9% 

• ISE Sentiment Index 91.0  -9.0 points
  

• Total Put/Call 1.03 +8.4%

• NYSE Arms .73 +17.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.98 +.88%
  

• US Energy High-Yield OAS 391.28 +.81%

• European Financial Sector CDS Index 59.66 +1.9%

• Italian/German 10Y Yld Spread 132.0 -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 80.68 +1.42%
  

• Emerging Market CDS Index 198.44 +1.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 32.59 -.17%

• 2-Year Swap Spread 20.75 +1.25 basis points
  

• TED Spread 14.5 +.5 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap 2.0 unch.
  
• MBS  5/10 Treasury Spread  79.5 +6.25 basis points
  
• IHS Markit CMBX BBB- 6 72.25 +.25 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 53.63 -.08%
• 3-Month T-Bill Yield .09% unch.
  

• Yield Curve 84.75 unch.
  

• China Iron Ore Spot 125.50 USD/Metric Tonne -.3%

• Citi US Economic Surprise Index 5.1 +1.5 points

• Citi Eurozone Economic Surprise Index 40.4 -.1 point
  

• Citi Emerging Markets Economic Surprise Index 3.3 -.3 points

• 10-Year TIPS Spread 2.51 unch.
  
• 23.9%(-.3 basis point) chance of no change at March 16th FOMC meeting, 14.4%(-1.3 percentage points) chance of no change at May 4th meeting

US Covid-19:

• 1,501 new infections/100K people(last 7 days total) at new record high +232/100K people
• New Covid-19 patient hospital admissions per 100K population at new record high +32.7% from prior 7-day avg. of 12/26/21 - 1/1/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -323 open in Japan 
• China A50 Futures: Indicating -35 open in China

• DAX Futures: Indicating +59 open in Germany

Portfolio:

• Slightly Lower: On losses in my transport/industrial/tech/medical/consumer discretionary sector longs

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges, then covered some
  

• Market Exposure:  50% Net Long