Stocks Falling into Afternoon on Fed Credibility Concerns, Rapidly Falling Earnings Estimates, Emerging Markets Debt Angst, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume:  Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 18.8 +.4%
• DJIA Intraday % Swing 1.02%
  
• Bloomberg Global Risk On/Risk Off Index 57.1 +3.1%

• Euro/Yen Carry Return Index 147.2 +.97%

• Emerging Markets Currency Volatility(VXY) 10.2 +.1%

• CBOE S&P 500 Implied Correlation Index 34.2 +9.2% 

• ISE Sentiment Index 114.0 -13.0 point
  

• Total Put/Call .83 +5.1%

• NYSE Arms 1.14 -9.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 68.12 +.75%
  

• US Energy High-Yield OAS 342.97 -.48%
• Bloomberg TRACE # Distressed Bonds Traded 316.0 +2.0
  

• European Financial Sector CDS Index 80.88 -.03% 
• Credit Suisse Subordinated 5Y Credit Default Swap 348.44 unch.
  

• Italian/German 10Y Yld Spread 183.0 basis points +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 97.54 -3.0%
  

• Emerging Market CDS Index 218.8 +3.90%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.93 +.05%

• 2-Year Swap Spread 27.75 basis points -1.75 basis points
  

• TED Spread 16.5 basis points -2.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 +.75 basis point
  
• MBS  5/10 Treasury Spread  127.0 +5.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 105.0 -1.0 basis point
  
• Avg. Auto ABS OAS .70 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.5 -.7%
• 3-Month T-Bill Yield 4.64% +2.0 basis points
  

• China Iron Ore Spot 123.2 USD/Metric Tonne -1.3%
• Dutch TTF Nat Gas(European benchmark) 57.9 euros/megawatt-hour +1.5%

• Citi US Economic Surprise Index 19.70 +30.7 points

• Citi Eurozone Economic Surprise Index 100.1 +2.4 points
  

• Citi Emerging Markets Economic Surprise Index 3.3 +.9 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 224.80 -.01:  Growth Rate +.6% unch., P/E 18.5 -.1
• S&P 500 Current Year Estimated Profit Margin 12.23% unch.
  
• Bloomberg US Financial Conditions Index .49 +15.0 basis points
  
• Yield Curve -77.25 basis points (2s/10s) -7.75 basis points
• US Atlanta Fed 1Q GDPNow Forecast +.67% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.30% unch.: CPI YoY +6.44% unch.
  
• 10-Year TIPS Spread 2.23 unch.
  
• Highest target rate probability for May 3rd FOMC meeting: 58.3%(+28.3 percentage points) chance of 5.0%-5.25%. Highest target rate probability for June 14th meeting: 54.3%(+22.4 percentage points) chance of 5.0%-5.25%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(-.4 percentage point) of 1/14/22 peak(1,740) -7/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -82.4%(-.6 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +66 open in Japan 
• China A50 Futures: Indicating -94 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio:

• Slightly Higher:  On gains in my index hedges and emerging market shorts
  

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

• Market Exposure: Moved to Market Neutral
  

Morning Market Internals

NYSE Composite Index:

• Volume Running +18.1% Above 100-Day Average 
• 6 Sectors Declining, 5 Sectors Rising
• 37.0% of Issues Advancing, 60.0% Declining
• 78 New 52-Week Highs, 1 New Low
• 65.2%(-1.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 64.0 -1.0
  
• Bloomberg Global Risk-On/Risk-Off Index 57.5 +3.8%
  
• Russell 1000: Growth/Value 15,004.3 +.23%
  
• Vix 18.5 -1.1%
• Total Put/Call .77 -2.5%
• TRIN/Arms .82 -34.9%
  

Friday Watch

Evening Headlines

Bloomberg:                  

• Adani Backers From New York to Tokyo Dissect and Limit Exposure.
• Adani’s $108 Billion Crisis Shakes Investors’ Faith in India.
• Adani’s $52 Billion Wealth Wipeout in Six Days Has Few Parallels.  
• Ukraine Latest: Putin Vows Victory as Zelenskiy Urges Pressure.
• Asia Stock Outlook Dented as Tech Results in Focus: Markets Wrap.
• Oil Set for Weekly Loss as China Optimism Frays, Stockpiles Rise.  
• Stock Bull Pain Threshold Swells to Pandemic Size in New Market Run-Up.
• Apple Blames Rotten Holiday Quarter on Supply Chain, Economy.  
• Amazon’s Slowing Cloud-Computing Sales Expected to Linger.
  
• Alphabet to ‘Meaningfully’ Reduce Hiring Pace This Year.  
• Google Workers Stage Rallies Against Job Cuts, Low Wages.  
• Amazon Halted Fresh Grocery Store Rollout for Review, CEO Says.  
• Cyberattack Sends Derivatives Trading Back to the 1980s.

Wall Street Journal:

• Apple, Other Tech Giants Pressured as Demand Cools.
• Russia Claims Gains in Battle for Bakhmut.
• Ryan Cohen Takes Stake in Nordstrom.
• The Fed Has ‘More Work to Do’ on Inflation. Powell says the right things, but markets don’t seem so sure.
• Why America Should Ban Crypto. It isn’t currency. It’s a gambling contract with a nearly 100% edge for the house.
• The Bosses Are Back in Charge. 

Fox News:

• Suspected Chinese spy balloon flying over US states.
• Hunter Biden’s laptop admission lands legacy media in hot water.
• 'IS HE A BIOLOGIST?':Biden mocked for bizarre boast that 'more than half the women' on his team 'are women'.

CNBC.com:

• Stocks making the biggest moves after hours: Apple, Amazon, Ford and more.

MarketWatch:                       

• Apple earnings show steepest sales decline in more than 6 years.
  
• Starbucks stock falls as results — weighed down by China sales — miss estimates.
  
• Many companies try to blame their poor earnings on the U.S. dollar. Don’t believe it.  
• Ford reports $2 billion loss in 2022, says profit was left ‘on the table’.  
• Cash is no longer trash, says Ray Dalio, who calls it more attractive than stocks and bonds.  
• Qualcomm stock turns around after forecast misses, CEO says inventory issues will persist.

Zero Hedge:

• 'The Scandal Would Be Enormous': Pfizer Director Worried About Vax-Induced Menstrual Irregularities.
• Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots.
• "All Clear": How The FBI Handling Of The Biden Investigation Could Make Things Difficult For The Special Counsel.
• Adani Races To Restore Confidence With Lender Talks As Corporate Empire Falters.
• DHS Will Allow Border Agents To Testify On Border Crisis After Subpoena Threats.
• Princeton Ban On Cheating 'Unfairly Targets' Minorities, According To Student Op-Ed.
• US stocks mostly gained with tech boosted after Meta's surge despite central bank rate hikes - Newsquawk Asia-Pac Market Open.
• Ohio Man Who Identifies As Female Faces Charges For Being Naked In Locker Room While Young Girls Were Present.
• Max frustration market on steroids.
• Hunter Biden $55,000 Offer For Russian Oligarch Info Falls Under Fresh Scrutiny.
• Banks Tightening Consumer Credit May Be What Triggers Recession.
• Amazon Slides After Disappointing AWS Results, Sloppy Guidance.
• META-led stock surge with assistance from central banks - Newsquawk US Market Wrap.
• Alphabet Shares Slide After Top- & Bottom-Line Miss, Ad Revenue Disappointment.
• Central Bank 'Pause' Panacea Prompts Massive Stock Short-Squeeze, Buying-Panic In Bonds.

Newsmax:

•   Texas AG Paxton: AT&T May Regret Viewer Discrimination Against Newsmax.
•   Dennis Prager: 'Just Cancel DirecTV'.
•   Op-Ed: Why Deplatforming Matters.

TheGatewayPundit.com:

• Biden Refuses To Shoot Down Suspected Chinese Spy Balloon Hovering Over Montana for Days.
• Project Veritas: Pfizer Director Concerned Over Women’s Reproductive Health After Covid Vax, ‘There is Something Irregular About Menstrual Cycles’ (VIDEO).
• OH NO – FBI Agent Recently Arrested for Receiving Bribes from Russian Oligarch Also Ran Unit that May Have Investigated Hunter Biden’s Activities with Chinese Spy Patrick Ho.
• Department of Energy Proposes Limits on Energy Consumption For Gas Stoves.
• Brazilian Senator Proposes Legislation that Criminalizes Those Who Refuse to Take the “Mandatory” COVID-19 Shot.
• MUST WATCH: House Democrats Get Triggered By Matt Gaetz Proposing Members Of The Judiciary Committee Recite Pledge Of Allegiance Before Meetings (VIDEO).
• HUGE! House Oversight Investigating John Kerry for His Private Meetings with Communist China on Deals that Undermined US Economy.
• WTH? Maricopa County Assistant Election Director Disappeared After Deposition Request Regarding Fraudulent Signature Verification – Special Action Filing Included (VIDEO).
• HORROR: Researchers Discover COVID Drug Created By Merck Is Causing Virus Mutations In Patients.
• “They are Killing Us All With This Now” – Argentinian Mother Outraged After Losing Her 8-Year-Old Daughter After Receiving COVID Vaccine.

The Epoch Times:

• US Firms Investing Billions of Dollars in China’s AI Sector: Report.

Twitter: 

• @Project_Veritas - BREAKING: @Pfizer Director Concerned Over Women's Reproductive Heath After COVID-19 Vaccinations "There is something irregular about their menstrual cycles...concerning...The vaccine shouldn't be interfering with that...It has to be affecting something hormonal..." (video)
• @Mayhem4Markets -  Developers have suspended construction on an unprecedented scale. (graph)
• @goddeketal - DEATHS FROM VACCINATION - The story changes dramatically when you overlook the first 14 days. This is why people who died in the first 14 days after getting vaccinated were counted as unvaccinated. It's time to clear things up! (graph)
• @MarketRebels - Retail market orders as % of market volume surpasses previous record numbers. (graph)
• @Breaking911 - REPORTER: "Do you think Ashli Babbit was murdered, or do you think the police officer who shot her was doing his job?" SPEAKER MCCARTHY: "I think the police officer did his job." (video)
• @theinformantofc - The #US military is currently tracking a "massive" high-altitude Chinese surveillance balloon over the continental US and is weighing options per officials. The balloon contains "large technology bay," a media report says. (video)
  

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 929,226 Reports(+7,206 from prior week) Through January 20th, 2022.

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 -.25% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 97.75 -3.75 basis points. 

• China Sovereign CDS 48.25 -1.25 basis points. 
• China Iron Ore Spot 122.9 USD/Metric Tonne -1.0%.

• Bloomberg Emerging Markets Currency Index 48.8 -.03%.
• Bloomberg Global Risk-On/Risk Off Index  55.6 +.2%. 
• Bloomberg US Financial Conditions Index .35 +1.0 basis point.
  
• Volatility Index(VIX) futures 20.6 +1.0%.
• Euro Stoxx 50 futures -.09%.

• S&P 500 futures -.45%.

• NASDAQ 100 futures -1.36%.  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (AON)/3.66
• (ARCB)/2.53
• (CBOE)/1.76
• (CHD)/.60
• (CI)/4.87
• (LYB)/1.27
• (PIPR)/2.54
• (REGN)/10.01
• (SAIA)/2.81
• (SNY)/1.71
• (ZBH)/1.83
  

After the Close:

• None of note
  

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for Jan. is estimated to fall to 190K versus 223K in Dec.
• The Unemployment Rate for Jan. is estimated to rise to 3.6% versus 3.5% in Dec.
• Average Hourly Earnings MoM for Jan. is estimated to rise +.3% versus a +.3% gain in Dec.
• Average Hourly Earnings YoY for Jan. is estimated to rise +4.3% versus a +4.6% gain in Dec.
• The Labor Force Participation rate for Jan. is estimated at 62.3% versus 62.3% in Dec.
  

10:00 am EST

• ISM Services for Jan. is estimated to rise to 50.5 versus 49.6 in Dec.
• ISM Services Prices Paid, Employment and New Orders.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone PMI report, (CHD) analyst day and the (DB) fixed income conference call 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 industrial and consumer shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 25% net long heading into the day.

Stocks Higher into Final Hour on Loose US Financial Conditions, Meme Stock Frenzy, Short-Covering, Tech/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume:  Heavy

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 18.8 +5.1%
• DJIA Intraday % Swing .87%
  
• Bloomberg Global Risk On/Risk Off Index 55.5 -6.5%

• Euro/Yen Carry Return Index 145.73 -.97%

• Emerging Markets Currency Volatility(VXY) 10.2 +.1%

• CBOE S&P 500 Implied Correlation Index 31.5 -3.6% 

• ISE Sentiment Index 129.0 +39.0 point
  

• Total Put/Call .76 -14.6%

• NYSE Arms 1.23 -8.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.76 -3.4%
  

• US Energy High-Yield OAS 345.47 -3.4%
• Bloomberg TRACE # Distressed Bonds Traded 314.0 -3.0
  

• European Financial Sector CDS Index 80.91 -6.7% 
• Credit Suisse Subordinated 5Y Credit Default Swap 348.44 -2.0%
  

• Italian/German 10Y Yld Spread 182.0 basis points -19.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 100.77 -4.3%
  

• Emerging Market CDS Index 208.8 -2.2%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.93 -.43%

• 2-Year Swap Spread 29.5 basis points +1.75 basis points
  

• TED Spread 18.5 basis points +3.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +.75 basis point
  
• MBS  5/10 Treasury Spread  122.0 -8.0 basis points
  
• Bloomberg US Agg CMBS Avg OAS 106.0 -1.0 basis point
  
• Avg. Auto ABS OAS .71 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 48.8 +.06%
• 3-Month T-Bill Yield 4.62% -3.0 basis points
  

• China Iron Ore Spot 123.0 USD/Metric Tonne -.8%
• Dutch TTF Nat Gas(European benchmark) 57.0 euros/megawatt-hour -4.2%

• Citi US Economic Surprise Index -11.0- -.2 point

• Citi Eurozone Economic Surprise Index 97.7 -3.6 points
  

• Citi Emerging Markets Economic Surprise Index 2.4 -.3 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 224.81 -.20:  Growth Rate +.6% -.3 percentage point, P/E 18.6 +.5
• S&P 500 Current Year Estimated Profit Margin 12.23% -5.0 basis points
  
• Bloomberg US Financial Conditions Index .36 +2.0 basis points
  
• Yield Curve -69.5 basis points (2s/10s) +4.0 basis points
• US Atlanta Fed 1Q GDPNow Forecast +.67% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.30% unch.: CPI YoY +6.44% unch.
  
• 10-Year TIPS Spread 2.23 unch.
  
• Highest target rate probability for May 3rd FOMC meeting: 59.7%(+3.8 percentage points) chance of 4.75%-5.0%. Highest target rate probability for June 14th meeting: 56.5%(+3.6 percentage point) chance of 4.75%-5.0%.
  

US Covid-19:

• 91 new infections/100K people(last 7 days total). 5.2%(-0.0 percentage points) of 1/14/22 peak(1,740) -0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -81.8%(-.1 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +53 open in Japan 
• China A50 Futures: Indicating -69 open in China

• DAX Futures: Indicating +21 open in Germany

Portfolio:

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

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 50% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Value +.9%
  

Sector Underperformers:

• 1) Oil Service -3.7% 2) Energy -2.6% 3) Healthcare Providers -2.0%

Stocks Falling on Unusual Volume: 

• EL, AIG, GIS, CNC, ACHC, MET, BP, HES, ATKR, WRB, BHP, PENN, MRK, TS, CTVA, QRVO, PTC, RIO, COP, HUM, AGCO, UNH, LSPD, DE, UNH, LSXMK, NVO, LLY, FLNC, DB, APD, ARRY, MOD, CNHI, PBH, CHX, ARIS, WMS, XLM, GOOS and MSGM
  

Stocks With Unusual Put Option Activity:

• 1) APLS 2) BHI 3) AIG 4) CAH 5) FLEX
  

Stocks With Most Negative News Mentions:

• 1) GOOS 2) UNH 3) HBI 4) AFL 5) FSLR
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +2.3%

Sector Outperformers:

• Internet +7.2% 2) Airlines +6.4% 3) Retail +4.3%

Stocks Rising on Unusual Volume:

• SI, ALGN, CVNA, META, FLWS, AFRM, COIN, UPST, BYND, ALGT, RDFN, LMND, ELF, NET, QS, SPT, GWW, SAVA, RKT, SNAP, SNDR, LPSN, ACCD, IAS, HOG, CFLT, BEAM, FOCS, PINS, SIVB, ALTR, SITM, CNMD, TWST, DUOL, PRG, APLS, DOCS, PFSI, AI, WNC, HA, PD, NVRO, MHO, LCID and PTON
  

Stocks With Unusual Call Option Activity:

• 1) DLTR 2) IGT 3) FE 4) APLS 5) ALGN

Stocks With Most Positive News Mentions:

• 1) COIN 2) META 3) ALGN 4) ELF 5) ALGT
  

Charts:

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