Stocks Surging into Afternoon on Russia/Ukraine Dialogue Hopes, Weak Sanctions on Russia, Declining European/Emerging Markets Debt Angst, Financial/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line:  Substantially Higher
  

• Sector Performance: Every Sector Rising
  

• Volume:  Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 26.96 -11.0%
• Bloomberg Global Risk On/Risk Off Index 3,244.0 +422.0 points

• Euro/Yen Carry Return Index 134.02 +.63%

• Emerging Markets Currency Volatility(VXY) 10.1 -4.3%

• CBOE S&P 500 Implied Correlation Index 44.9 -6.4% 

• ISE Sentiment Index 89.0 unch.
  

• Total Put/Call 1.0 -.99%

• NYSE Arms 1.10 +1.85%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.54 -4.7%
  

• US Energy High-Yield OAS 410.48 -4.2%

• European Financial Sector CDS Index 77.38 -7.7%

• Italian/German 10Y Yld Spread 160.0 -5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 110.41 +1.6%
  

• Emerging Market CDS Index 246.31 -8.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 30.79 -.06% 
• Ukraine Sovereign Debt Credit Default Swap 1,041.31 +15.5%
  

• 2-Year Swap Spread 18.75 +.25 basis point
  

• TED Spread 18.75 -3.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -23.5 +.25 basis point
  
• MBS  5/10 Treasury Spread  102.0 -5.0 basis points
  
• iShares CMBS ETF 51.03 -.47%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 53.40 -1.63%
• 3-Month T-Bill Yield .30% +2.0 basis points
  

• Yield Curve 37.75 +.75 basis point
  

• China Iron Ore Spot 137.0 USD/Metric Tonne -.3%

• Citi US Economic Surprise Index 41.8 +10.7 points

• Citi Eurozone Economic Surprise Index 72.6 +8.5 points
  

• Citi Emerging Markets Economic Surprise Index 36.5 -.7 point

• 10-Year TIPS Spread 2.56 -4.0 basis points
  
• 0.0%(unch.) chance of no change at May 4th FOMC meeting, 0.0%(unch.) chance of no change at June 15th meeting

US Covid-19:

• 159 new infections/100K people(last 7 days total). 9.0%(-1.0 percentage point) of 1/14 peak -11/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -72.0%(unch.) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +390 open in Japan 
• China A50 Futures: Indicating +83 open in China

• DAX Futures: Indicating -9 open in Germany

Portfolio:

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

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

• Market Exposure:  Moved to 100% Net Long
  

Morning Market Internals

NYSE Composite Index:

• Volume Running +26.8% Above 100-Day Average 
• 11 Sectors Rising, 0 Sectors Declining
• 72.7% of Issues Advancing, 24.1% Declining
• 22 New 52-Week Highs, 50 New Lows
• 32.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.0% 
• Bloomberg Global Risk-On/Risk-Off Index 3,144.0 +322.0 points
• Russell 1000: Growth/Value 16,366.0 -1.2%
  
• Vix 28.1 -7.3%
• Total Put/Call .95 -5.9%
• TRIN/Arms 1.20 +11.1%

Friday Watch

Night Trading 

• Asian equity indices are +.75% to +1.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 106.5 +2.25 basis points. 

• China Sovereign CDS 59.75 +4.0 basis points.
  

• Bloomberg Emerging Markets Currency Index 53.38 -.10%. 
• Bloomberg Global Risk-On/Risk Off Index 2,870.0 +47.0 points.
• Volatility Index(VIX) futures 29.4 +2.9%.
• Euro Stoxx 50 futures +1.65%.

• S&P 500 futures -.74%.

• NASDAQ 100 futures -1.1%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (CRI)/2.06
• (FL)/1.46 
• (STWD)/.52
• (STRA)/.95
  

After the Close:

• None of note
  

Economic Releases

8:30 am EST

• Personal Income for Jan. is estimated to fall -.3% versus a +.3% gain in Dec.
• Personal Spending for Jan. is estimated to rise +1.6% versus a -.6% decline in Dec. 
• The PCE Core MoM for Jan. is estimated to rise +.5% versus a +.5% gain in Dec.
• Durable Goods Orders for Jan. is estimated to rise +1.0% versus a -.7% gain in Dec.
• Durables Ex Transports for Jan. is estimated to rise +1.0% versus a -.7% decline in Dec.
• Cap Goods Orders Non-Defense Ex-Air for Jan. is estimated to rise +.3% versus a +.3% gain in Dec.
  

10:00 am EST

• Pending Home Sales MoM for Jan. is estimated to fall -.5% versus a -3.8% decline in Dec.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The France PPI report, BMO Metals&Mining Conference, (BIO) investor day and the (UNM) investor day could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Reversing Higher into Final Hour on Weak Sanctions on Russia, Lower Long-Term Rates, Short-Covering, Tech/Consumer Discretionary Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line:  Lower
  

• Sector Performance: Mixed
  

• Volume:  Heavy

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 32.9 +6.1%
• Bloomberg Global Risk On/Risk Off Index 2,619.0 -260.0 points

• Euro/Yen Carry Return Index 133.14 -.57%

• Emerging Markets Currency Volatility(VXY) 10.6 +17.2%

• CBOE S&P 500 Implied Correlation Index 49.6 -1.8% 

• ISE Sentiment Index 93.0 +2.0 points
  

• Total Put/Call .99 +4.2%

• NYSE Arms 1.05 +6.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.10 -.40%
  

• US Energy High-Yield OAS 434.19 +2.3%

• European Financial Sector CDS Index 83.83 +3.5%

• Italian/German 10Y Yld Spread 165.0 -6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 108.50 +6.0%
  

• Emerging Market CDS Index 263.67 +6.9%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 30.77 -1.0% 
• Ukraine Sovereign Debt Credit Default Swap 1,041.31 +15.5%
  

• 2-Year Swap Spread 18.5 -1.5 basis points
  

• TED Spread 20.75 +6.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -23.75 -5.25 basis points
  
• MBS  5/10 Treasury Spread  107.0 +1.0 basis point
  
• iShares CMBS ETF 51.24 +.12%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 53.40 -1.63%
• 3-Month T-Bill Yield .28% -7.0 basis points
  

• Yield Curve 37.0 -4.0 basis points
  

• China Iron Ore Spot 137.70 USD/Metric Tonne +.3%

• Citi US Economic Surprise Index 31.1 -.3 point

• Citi Eurozone Economic Surprise Index 64.1 -1.1 points
  

• Citi Emerging Markets Economic Surprise Index 37.2 -.9 point

• 10-Year TIPS Spread 2.60 +6.0 basis points
  
• 0.0%(unch.) chance of no change at May 4th FOMC meeting, 0.0%(unch.) chance of no change at June 15th meeting

US Covid-19:

• 170 new infections/100K people(last 7 days total). 10.0%(-1.0 percentage point) of 1/14 peak -16/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -72.0%(-1.4 percentage points) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +120 open in Japan 
• China A50 Futures: Indicating +16 open in China

• DAX Futures: Indicating +157 open in Germany

Portfolio:

• Higher: On gains in my tech/consumer discretionary/industrial/medical sector longs and emerging market shorts
  

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

• Market Exposure:  Moved to 75% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Value -1.7%

Sector Underperformers:

• 1) Banks -4.7% 2) Airlines -3.2% 3) Computer Hardware -3.0%

Stocks Falling on Unusual Volume: 

• GNK, PZZA, SIL, TFSL, CPE, SSB, SNBR, ZD, AHCO, FLO, MO, EXPE, CC, RILY, LUNG, BPMP, SUM, NTAP, BMRN, BKNG, EPAM, UTHR, HLF, METC, BTU, SATS, RCII, HSC, GDYN and BAND
  

Stocks With Unusual Put Option Activity:

• 1) BLL 2) JNK 3) CEI 4) ESI 5) RF
  

Stocks With Most Negative News Mentions:

• 1) YNDX 2) UTHR 3) BKNG 4) BABA 5) KDP
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.6%

Sector Outperformers:

• 1) Alt Energy +4.2% 2) Software +3.0% 3) Defense +2.0%

Stocks Rising on Unusual Volume:

• SJI, LNTH, TLS, EVH, KTOS, OLED, ZETA, RXT, OSTK, EXPI, MGNI, LXU, STAA, OPEN, CSGP, PANW, DOCN, NARI, GFS, CRWD, PWR, BCC, STEM, PLTR, ELAN, OUT, NRGV, AMED, LYV, ETD, UA, INSW, ANSS, LNG, CF, FRG, ETSY, CFLT, DH, BBWI, WLL, CHNG, VNOM, REGI and LASR
  

Stocks With Unusual Call Option Activity:

• 1) NTAP 2) WEAT 3) PHM 4) CEI 5) BNO

Stocks With Most Positive News Mentions:

• 1) MAPS 2) EXPI 3) LYV 4) EVH 5) BLEG
  

Charts:

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