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Monday Market Miracles – Do You Believe in the Fed? GDP? Santa Rallies?

What's it going to take to stop the bleeding?

NOW we have a bit of a correction going on as the S&P 500 closes the week at 2,600, more than 10% off the 2,940 high it posted in September, when Shanghai stocks were already down 20% and we were ignoring them and I said:

When people tell you that what happens to the second largest economy in the World doesn't effect the largest economy in the World, those people are idiots and you should never listen to anything they say to you – ever again.  Jamie Dimon of JP Morgan, for his part, is doing his best to minimize the concerns of retail investors so he can keep dumping stocks on them:

"If you look at tariffs on $200 billion (worth of Chinese goods), and this may all get passed on to American consumers and they have to pay another $20 billion (on Chinese imports), it's a $20 trillion economy, so the actual economic effect is not dramatic," Dimon said.

"We can add tariffs to more things and the Chinese can retaliate in other ways and I don't think all that's good. It's not a devastating thing, it's not a war, it's a trade skirmish that can have negative economic effects."

Dimon is not going to say what happens in China has no effect but he's mimizing the impact and misleading traders by using the 10% figure that costs $20Bn but that 10% tariff escalates to 25% at the end of the year ($50Bn) and then Trump plans to double the number of goods that are taxed ($100Bn) so a smart reporter would ask Dimon – does $100Bn matter then?

You can nod your head and agree with Dimon (after all, he's a rich guy, so he must know stuff and he would never lie to you, right?) because $20Bn is only 0.1% of our GDP, though that's still enough to knock growth down from 4% to 3.9%.  $100Bn, on the other hand, is 0.5% of our entire GDP – it's really kind of hard to find any justifcation to minimize the impact of that other than – "Because I'm an investment banker and my wealthy clients need greater fools to sell their ridiculously over-priced equities too."

This is what "THEY" do to retail investors at the tail end of the rally, they herd all the sheeple into the markets at the WORST possible time, cranking up the propaganda machine and doing whatever it takes to pretty up the indexes to draw as many people as they can into the markets – providing fresh buyers so they can cash out of the stuff they bought when they were telling consumers to stay out of equities.

It didn't take long for us to see the effects of those initial tariffs begin to wreck havoc with the Global Economy and now the sentiment has turned completely negative, lower now than it was in 2007, before the great crash so I think we have to move forward very carefully here and that's what we did last week with our Portfolio Reviews – resisting the temptation to BUYBUYBUY at the "bottom" until we can get a bit more evidence confirming that this is, indeed, the bottom.   

At the moment, the Fundamentals are ugly and the technicals are ugly and Trump is still President and it's anybody's guess which of those 3 conditions is cured first.  For now, we're simply continuing last week's slide lower and there haven't been any more BS trade announcements or Fed predictions to tip the scales bullish and Monday volume is notoriously low (and meaningless) so we'll simply have to sit back and see if the 1,400 line holds on the Russell (/TF) but, if it doesn't – we could be looking at a test of the 10% line on the Dow (/YM) at 23,100 and that's still 750 points down from here so a cross below 23,850 could give us a short play (with tight stops above) that pays $3,750 per contract!  

Of course, I've said this before, our call to short the Nasdaq (/NQ) below 7,000 has been good for over 400 points, which is $8,000 per contract and our call to short the S&P (/ES) below 2,800 has been good for over 300 points and that's a whopping $15,000 per contract on that index.  Using the futures to enhance our hedges is a very good way to stay balanced if we're not sure it's time to add more hedges – yet.  

The Fed will be silent this week other than Powell's press conference on Wednesday after what is now a toss-up meeting as to whether or not the Fed hikes rates.  I was leaning they would but, if the markets stay this low – I doubt they have the balls to do what's needed to stabilize things as lower and stable would be better than boosted and shakey.  

Other than that, we have GDP Friday and a few Fed Reports scattered through the week but nothing more market-moving than the Fed Announcement itself on Wednesday so, until then, "nothing really matters…."


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  1. World stocks mixed ahead of Brexit address; Fed in focus

  2. $SPX vs Pundits

  3. Brussels Edition: Swiss Clock Ticking

  4. Futures looked flat earlier but turning down!

  5. Good Morning.

  6. You have to love these guys:

    “Nobody got killed, nobody got robbed… This was not a big crime,” Giuliani told The Daily Beast in a wide-ranging story Friday about how Jared Kushner became the White House’s point person with American Media Inc.

    Tell that to all the people Giuliani sent to jail for having a couple of ounces of MJ!

  7. In France for 2 weeks and I have not seen any Yellow Vests yet! But there are issues in many places. It's a complex situation as some people really have to make do with little but income inequality is lower here than in the USA. We really need to find solutions quickly because things will take a turn for the worse….

  8. Hi Phil, Hope you still remember your remark on CZR " you can also wait with yodi until the reach bottom!"

    I am Old but still remember!

  9. Good morning! 

    Since I wasn't going to be surprised if we gapped down 2.5% this morning, being down just 1% seems like we may be turning a corner.  A quick dip below 1,400 on /RTY, which is more psychological than technical but, if the psychological lines hold – the technicals are likely to as well and you can see /YM turning right at 23,800 and /ES 2,570 and /NQ 6,525 (below 6,500 would be tragic).

    Big Chart – And the Dow still hasn't death-crossed but no way to avoid it now as the end of the week should do it so we'd have to be as far above as we've been below for the rest of the week so about 25,750, which is almost 2,000 points away – not going to happen – even with a doveish Fed. 

    Giuliani/StJ – I wonder if you can use his court transcripts as sworn testimony?  He spent years as a prosecutor, you could practically cut and past Giuliani's Mob Trials to make the case against Trump and his "organization" or, I guess "family."  

    Image result for mob chart godfather

      Image result for trump crime  chart

    Turn/StJ – That was my prediction for the 2010 decade – I'm surprised things aren't worse already. 

    CZR/Yodi – We'll see old man!  

  10. Phil / CPB-

    Good morning.  What are your thoughts on CPB?  Im looking at selling 2020 or 2021 puts.

    Also, where do you generally source your fundamental data?  The tables Ive seen you post in chat with EPS, revenue, etc going back a few years are very useful.  Thanks!

  11. The Bulls Versus Bears Guide to the World Economy in 2019

  12. email CPC Perfect for an armchair trade sell 40/38 strangle Feb for 3.07 and buy the stock, gives you a combined monthly return of 5.4%

  13. Sorry print mistake it IS CPB !!!

  14. email Just sold the CPB Feb strangle for 3.05

  15. Nice comeback – almost green now.

    CPB/EMike, Yodi – I like them just like KFT and GIS, but neither is doing well in this environment though all 3 are bargains at the price.  

    The data I use is from but you have to subscribe.  

    Year End 29th Jul 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 8,052 8,268 8,082 7,961 7,890 8,685 9,218 9,934 9,944 +1.5%
    Operating Profit $m 1,083 1,268 1,060 948 1,400 473 414     -15.3%
    Net Profit $m 458 866 666 563 887 261 180 741.9 789.1 -10.6%
    EPS Reported $ 2.17 2.48 2.13 1.81 2.89 0.45 0.18     -27.1%
    EPS Normalised $ 2.31 2.60 2.42 2.22 3.49 2.09 2.50 2.46 2.61 -2.0%
    EPS Growth % -0.03 +12.6 -7.0 -8.1 +56.9 -40.2 -26.1 +17.6 +6.42  
    PE Ratio x           18.8 15.7 15.9 15.0  
    PEG x           1.06 0.89 2.48 4.82

    This goes back to what I keep saying about companies that are making money but getting no respect.  CPB went through some restructuring but that's over and last Q they made $194,000 on $2.7Bn worth of sales so on pace to hit their numbers next year but $39.29 is just $11.3Bn to buy the whole company.  In fact, Italy's Ferrero (Nutella) is likely to offer $2Bn for CPB's international snack sector and they are also shopping their refrigerated items, which have struggled to get shelf space.  I think, on the whole, soup is not the thing it once was, especially canned soup.  

    Anyway, so for a put, I want to look at a price I'd absolutely pay and clearly we can count on CPB to deliver $500M in profits but I don't know about $1Bn so call it $700M and call 15x a fair price and we're right where we are at $11.3Bn so $40 a share is "fair" until they prove they can do better.  So I think, for a short put target, I'd look at the 2021 $35 puts at $4.50 or the $38 puts for $5.50 but I wouldn't be too ambitious until we see how things shake out with the sales.

  16. Phil Thanks on CPB  Did well with the stock in Dec with 38/39 stangle and a stock price of 38.87. Yield a steady 3.5%

  17. Hello Phil and the gang.  

    Yodi, do you have a spreadsheet you use to calculate your return?  Your CPB trade looks interesting.  Thanks for sharing!

  18. Yodi & Phil- Thank you for the info & ideas!

  19. So we're still sort of drifting back towards this spot (2,600 on /ES, 24,000 on /YM) in absence of new news…

    VIX is still worried"

    /NG with a nice round trip:

    /KC testing $100

  20. Phil, what are your thoughts on the volume for today?  We are breaking down below S&P 2600 and I wondered if it is a breakdown with volume or no volume breakdown.  It looks bad if they cannot retake 2600.  Thanks.

  21. I looked at the /ES volume after the first 15 minutes and saw 500k and we're currently at about 1.7M – should be a good volume day, but it's a triple witching week with rolls etc.

    Short a little around 2595.

  22. Comment content omitted because it is too long.

  23. Wow, that was a pathetic attempt at a recovery. 

    Volume/Robert – Well, it's low but that's to be expected but this is some very ugly action.

    Date Open High Low Close* Adj Close** Volume
    Dec 17, 2018 259.40 260.64 257.08 257.29 257.29 64,360,702
    Dec 14, 2018 262.96 264.03 259.85 260.47 260.47 116,852,900
    Dec 13, 2018 266.52 267.49 264.12 265.37 265.37 96,662,700
    Dec 12, 2018 267.47 269.00 265.37 265.46 265.46 97,976,700
    Dec 11, 2018 267.66 267.87 262.48 264.13 264.13 121,504,400
    Dec 10, 2018 263.37 265.16 258.62 264.07 264.07 151,445,900
    Dec 07, 2018 269.46 271.22 262.63 263.57 263.57 161,018,900
    Dec 06, 2018 265.92 269.97 262.44 269.84 269.84 204,185,400
    Dec 04, 2018 278.37 278.85 269.90 270.25 270.25 177,986,000
    Dec 03, 2018 280.28 280.40 277.51 279.30 279.30 103,176,300

    Gundlach just had a whole hour on CNBC talking about a 30% S&P correction coming.

    Finally, some action on CDE:

    Short Put 2020 17-JAN 7.00 PUT [CDE @ $4.40 $0.58] -30 1/9/2018 (396) $-4,350 $1.45 $1.38 $-0.92     $2.83 $-0.48 $-4,125 -94.8% $-8,475
    Long Call 2021 15-JAN 3.00 CALL [CDE @ $4.40 $0.58] 50 9/24/2018 (760) $16,000 $3.20 $-1.23     $1.98 $0.08 $-6,125 -38.3% $9,875
    Short Call 2021 15-JAN 7.00 CALL [CDE @ $4.40 $0.58] -50 9/25/2018 (760) $-6,750 $1.35 $-0.63     $0.73 - $3,125 46.3% $-3,625
    • DoubleLine Capital founder and CEO Jeffrey Gundlach says the Fed shouldn't raise interest rates when it meets Tuesday and Wednesday, he tells CNBC.
    • "The bond market is basically saying, `Fed, you've got no way you should be raising interest rates.' Look at the twos, threes, five-year part of the yield curve, which are flat at 2.7%," Gundlach said.
    • U.S. 2-year Treasury note yield falls almost 3 basis points to 2.712%, while the 5-year yield sinks 3 bps to 2.703%.
    • The problem stems from the fact that the Fed kept rates low for so long, he said. Also, Europe shouldn't have resorted to negative interest rates, and "we shouldn't have done quantitative easing, which is a circular financing scheme," he added.
    • As for the stock market, Gundlach sees the S&P 500 falling below the lows the index hit early in 2018. "I'm pretty sure this is a bear market," he said.
    • In early afternoon trading, the S&P 500 falls 0.7%, the Nasdaq, which briefly had turned positive, slips 0.5% and the Dow declines 0.7%.
    • Previously: Gundlach: Yield curve signals weakening economy (Dec. 4)

    • Most homebuilders are in the green in early afternoon as President Trump, his trade adviser Peter Navarro, and investor Jeffrey Gundlach agree that the Fed's FOMC shouldn't increase interest rates when they meet later this week.
    • iShares Dow Jones US Home Construction ETF (BATS:ITBrises 0.1% compared with the S&P 500 declining 1.0%.
    • Among individual homebuilding names: NVR (NVR +1.3%), Toll Brothers (TOL +0.7%), PulteGroup (PHM +0.9%), Lennar (LEN +0.3%), and TRI Pointe Homes (TPH +2.3%).
    • Earlier today, NAHB Housing Market Index of 56 falls short of consensus of 61 and slips from November's reading of 60.

    • Wells Fargo checks in on the retail sector amid the "wall of worry" that seems to be piling up.
    • "While there are many potential reasons for the sell-off (concerns about potentially slowing growth/tough compares, uncertainty around China, the never-ending e-commerce threat, etc.) – we think it’s interesting that recent fundamentals have actually been decent," writes the WF analyst team.
    • "Basically, 3Q comps on average across our space were in the +2-3% range (for the 4th quarter in a row), and early reads on Holiday gave actually been relatively solid (especially Black Friday)."
    • After a tactical look at retail stocks by Wells – Tapestry (TPR +0.9%), Lululemon (LULU +1.1%), Carter's (CRI -0.7%), L Brands (LB -2.3%) and Foot Locker (FL -1.2%) emerge as interesting picks amid the weakness.
    • Some of today's largest decliners are Farfetch (FTCH -10.8%), Stitch Fix (SFIX -5.8%), Duluth Holdings (DLTH -4.8%), Tailored Brands (TLRD -4.3%), Shoe Carnival (SCVL -3.4%), Boot Barn (BOOT -3.6%), Williams-Sonoma (WSM -2.6%) and Target (TGT -2.6%).
    • Holiday traffic to J.C. Penney (JCP -2.9%) stores increased 10% Y/Y from Black Friday through December 10, according to data from Orbital Insight.
    • Traffic was 7% higher at Target (TGT -2.1%) stores for the period, while Kohl's (KSS -1.5%) saw a 6% increase and Walmart (WMT -0.8%) store traffic was up 5%.
    • A wave of retail sector bankruptcies (Toys 'R' Us, Sports Authority, RadioShack, The Bon-Ton, Payless Shoes, H.H. Gregg, The Limited, Gymboree and Gander Mountain) is a factor in some of the chain snapping up extra customers.

    • American Express (AXP -2.4%) November U.S. consumer card member delinquency rate stays steady at 1.4%, the same as October.
    • U.S. consumer card net write-off rate also unchanged M/M at 2.0%.
    • AXP credit account master trust delinquency rate increases to 0.3% in November from 0.2% in October, while annualized default rate net of recoveries rises to 1.1% from 1.0%.
    • Previously: American Express October delinquency rate improves M/M (Nov. 15)
    • Google (GOOG -0.5%)(GOOGL -0.6%) has "effectively ended" its work on a censored search engine for China, according to The Intercept sources.
    • Google shut down the data analysis system it was using to create the engine after internal protests from its privacy team, which said the work was kept secret from them.
    • The privacy team safeguard's user rights and only found out that Google engineers were using Chinese search data from after The Intercept's initial report.
    • Access to the data is now suspended, and that has "stopped progress" on the overall project.
    • Real estate investment trusts may post returns of about 5% next year, compared with an expected 4% return from the S&P 500, Morgan Stanley analyst Richard Hill writes in a note upgrading the sector to in-line from cautious.
    • Follows three years of underperformance.
    • REITs may benefit as slow growth stabilizes, investors turn to defensive sectors.
    • Hill sees REITs' 2019 same-store NOI growth about 3%, down about 150 bps peak and not much different than last year.
    • LG Display (NYSE:LPL) will boost its total OLED output by 4M units (+40% Y/Y) next year, according to Nikkei Asian Review

      • The company wants to sell 850K panels to Sony and 300K to Panasonic versus the estimated 500K and 200K, respectively, this year.
    • France will impose a new tech tax worth $570M annually starting the first of the year.
    • The country failed to get support for an EU-wide levy and will now move forward alone on the GAFA tax, named for Google (GOOGL +0.1%), Apple (AAPL +1.4%), Facebook (FB), and Amazon (AMZN -1.4%).
    • France is also working with Germany on plans for a 3% tax on EU ad sales that would begin in 2021.
    • Madison Square Garden (MSG +4.9%) pops after New York Knicks owner James Dolan tells ESPN that he isn't ruling out selling the NBA team.
    • Dolan mentioned $5B as a "feeler" number on the Knicks.
    • The Knicks have languished on the court under Dolan's tenure as chairman of MSG, diminishing the star power of the Knicks franchise.
    • President Donald Trump continues his crusade against the Fed's pace of hiking interest rates in a morning tweet: It's "incredible" that "the Fed is even considering yet another interest rate hike," given that the dollar is strong and that there is "virtually no inflation."
    • He also cites turmoil in the rest of the world--"the outside world is blowing up arounds us, Paris is burning, and China way down"--as reason to keep interest rates where they are.
    • The Fed will announce on Dec. 19 whether it raises interest rates again.
    • U.S. 10-year Treasury note price rises slightly, pushing yield up less than 1 basis point to 2.888%.
    • U.S. dollar index slips 0.3% to 97.18.
    • S&P Futures -0.4%, Nasdaq futures -0.3%, and Dow futures fall 0.5% ahead of the market open.
    • Previously: Atlanta Fed's Bostic: Rates are `within shouting range of neutral' (Dec. 6)
    • Tilray (NASDAQ:TLRY) is up 2% premarket on light volume in reaction to its announcement that it has inked a binding letter of intent with LiveWell Canada for hemp-derived cannabidiol (CBD) isolate processed from hemp in the U.S. and Canada. The first shipment should happen in February 2019.
    • The company plans to use the CBD isolate to process finished cannabis products for distribution in Canada and the U.S.
    • Bank of America Merrill Lynch lowers Best Buy (NYSE:BBY) to an Underperform rating from Neutral amid concerns on sales of TVs, gaming products and the Apple business.
    • Overall, the BAML analyst team thinks "slowing industry growth, tough compares in key products and cost inflation" hurts the upside case on BBY.
    • "BBY may see an outright comp miss in 4Q and we believe Street 2019/20 EPS ests are too high," warns the firm.
    • The price objective on BBY is dropped all the way to $50 from $70.
    • Shares of Best Buy are down 5.91% premarket to $52.10.
    • RBC Capital maintains an Outperform rating on IBM (NYSE:IBM) and lowers the price target from $175 to $167.
    • The firm is lowering its CY19 and CY20 revenue and EPS estimates to reflect software asset sales and FX headwinds.
    • IBM shares closed Friday down 0.7% to $119.90.
    • With seven spending bills set to expire at the weekend, Republicans and White House officials are reportedly discussing a two-week spending measure that would push the fight into next year.
    • It's not clear whether they will pursue that route, however, given that Democrats will gain more leverage when they take control of the House in January.
    • President Trump has previously threatened to trigger a shutdown if Congress refuses to pass a spending bill that allocates $5B for border wall funding.


  24. Wow, another 2% down day after all.  

    Good for the /YM shorts, at least, 150 points is $750 per contract on day one and it's not an overnight hold – just a nice addition to the hedges.

    Still 1,390 on /TF is not a tragedy and it's Monday, so we'll see how the overnights go.  VIX way up at 23.50 – that usually doesn't last.

    • Gold futures settle at their highest level in more than a week, helped by weakness in the dollar and losses in the stock market; Comex February gold settles +0.8% at $1,251.80/oz.
    • "One of the drivers that is pushing gold higher right now is the flight to safety [due to lower equities], along with the dollar being sold off a bit," says Michael Matousek, head trader at U.S. Global Investors.
    • Investor sentiment toward gold is showing signs of optimism, as speculators switched to a net long position in gold of 10,252 contracts, adding 11,791 contracts in the week to Dec. 11, the first time gold speculators have held a net long position since July.
    • Many precious metals miners post large gains in a sea of red for most stocks: CDE +13%EGO+9.6%PVG +9.6%AGI +9.3%AUY +7.5%HL +7.4%BVN +7.2%IAG +5.5%EXK +5%KGC +3.8%.
    • In a video statement, Johnson & Johnson (JNJ -3.9%) Chairman & CEO Alex Gorsky reiterates the company's position that its talc powder is pure, free of contaminants and has not caused cancer or asbestos-related disease. He cites repeated testing over many years by global authorities that has always confirmed the product's integrity and lack of asbestos, adding that the company would have immediately withdrawn the product from the market if it was found to contain such contaminants.
    • Previously: Johnson & Johnson down 4% on reports of prior knowledge of asbestos in baby powder (Dec. 14)

  25. UGLY!!!!

  26. Another 500 points down day on the Dow! How many this year? This quarter?

  27. Amazingly enough, the Russell is close to giving back the entire Trump presidency move! NYSE is not far behind.

  28. Down 25% since August!

  29. Terrible, ugly day and much more terrible if not reversed tomorrow, when we'll have to start considering a 20% drop (another 10%) may be in our future.  

  30. This article made a lot of sense. Maybe wishful thinking, but would be curious to hear any thoughts on the subject

  31. StJeanLuc.  That is a great chart.  Do you have it for the S&P500?  Thanks!

  32. Awesome! Thanks my friend!

  33. Asia stocks slide as global growth worries deepen

  34. May Says Brexit Talks Will Go Into 2019 as She Fights for Deal

  35. Little if any progress as partial government shutdown looms

  36. Rudy Giuliani’s truly remarkable answer on Donald Trump’s lying

  37. Menu

  38. Warren bill would get feds into generic drug manufacturing

  39. Donald Trump’s constant, escalating test to the rule of law

  40. Good morning.

    Futures with the smallest of bounces (0.33%) but energy down 2.5% so we're not going to get much traction if that persists.  

    Not much going on ahead of the Fed tomorrow.

    • U.S. futures are pointing to a slight recovery for Wall Street with the stock market on pace for its worst December since the Great Depression. Dow and S&P 500 +0.3%; Nasdaq +0.4%.
    • Aside from signs of slowing economic growth around the world, worries are setting in as the Fed begins its two-day meeting on interest rate policy.
    • President Trump again took aim at the Fed yesterday, stating it was "incredible that with a very strong dollar and virtually no inflation… and the outside world blowing up around us… the Fed is even considering yet another rate hike."
    • Oil is down 3.2% at $48.62/bbl, gold is 0.1% higher at $1253/ounce and the 10-year Treasury yield is down 2 bps to 2.83%.
    • The Journal's call for the Fed not to raise rates this week is notable because that paper's editorial board is a big fan of paying attention to real-time market signals.
    • What the board is seeing: Gold at $1,250 an ounce vs. $1,300 six months ago; prices of other commodities like oil and farm products also lower; a strong dollar; a sinking PCE deflator. In short: Inflation is heading lower – a sharp contrast to 2003-05, says the paper, when The Maestro and Ben Bernanke were too slow to hike when those indicators (and housing) were all headed sharply higher.
    • Yes, wages are on the rise now, they acknowledge, but so is productivity. Thus, there's so far no spillover into the general price level.
    • And don't forget the unwind of QE, not just here, but globally. If asset purchases were great for risk-asset prices, then the opposite of that is a cause for concern.
    • Stocks suffered a broad-based rout, as the S&P 500 fell to its lowest close of the year and all 11 industry groups ended in the red, with losses ranging from 1% (financials) to 3.7% (real estate).
    • The tech-sensitive Nasdaq is now negative for the year, and the small-cap Russell 2000 has fallen more than 20% from its yearly high.
    • Weakening economic data added to recent worries about the growth outlook and exacerbated the market's negative sentiment; the NAHB Housing Market Index for December fell from 60 to 56, its lowest level in nearly four years.
    • Fund manager Jeffrey Gundlach contributed to today's bearish action, telling CNBC interview that stocks are in a bear market, expressing concern about the rising U.S. budget deficit and saying his best investment idea for 2019 is "capital preservation."
    • It’s a treacherous market right now,” says Paul Brigandi, managing director and head of trading at Direxion, who added investor sentiment has shifted. “The ‘buy-the-dip’ mentality used to work really well, and prior downturns were short lived. This time it hasn’t happened.”
    • Mounting stock market losses have raised tension ahead of Wednesday's FOMC announcement, which many believe will produce another rate hike and perhaps see the Fed temper its rate-hike projections for 2019; Pres. Trump again questioned again why the Fed would raise rates at this time.
    • U.S. Treasury prices edged higher, sending yields lower across the curve; the two-year yield slipped 3 bps to 2.70% while the 10-year yield also shed 3 bps to 2.86%.
    • Also, U.S. crude oil settled below $50/bbl for the first time since October 2017, down 35% from its year high hit on Oct. 3 and more than 5% lower since OPEC and its allies agreed to cut output to prop up the market.
    • This post is brought to you by our PRO+ Live analysts. Click here to find out more about PRO+ »
    • Sentiment deteriorated rapidly on Monday afternoon following Jeff Gundlach's appearance on CNBC.
    • There is little question that his "bear market" remarks – coming as they did just after the European close – were the proximate cause of the midday swoon, and once things started moving in the wrong direction, it appears to have snowballed.
    • We are now down more than 9% off the post-G20 highs hit on December 3 when equities gapped higher following the trade truce struck in Argentina.
    • Dow futs are now -900 from Wednesday evening (i.e., the following visual captures the entirety of what, as of 2:30 PM in New York, is an egregious two-day rout).
    • Also worth noting, the NYSE Uptick-Downtick index printed -1,561 at one point on Monday afternoon. That is one of the lowest readings of the year (and the lowest since late October).
    • If you're looking for evidence of angst in put/call OI ratios or other similar "fear" measures, you should remember that put demand falls when investors have nothing left to hedge. In other words: Lack of exposure to cash equities probably explains what might otherwise be described as "under-hedging" from market participants.
    • One final note (and this is a reiteration of a point we've made over and over again): When you see the bottom fall out abruptly on negative headlines emanating from, for instance, a Jeff Gundlach interview, do bear in mind that liquidity is non-existent these days. On these sudden downdrafts, that lack of market depth exacerbates things.

    • "Pre-Christmas delights are not to be expected," declared Ifo chief Clemens Fuest, as German business morale fell in December for the fourth straight month.
    • The Munich-based institute said its business climate index slipped to 101.0, the lowest level in more than two years.
    • Trade frictions, risks linked to Brexit, anti-government protests in France and weaker growth in emerging markets are all putting the brakes on a nine-year upswing in Europe’s economic powerhouse.
    • Oil tumbled another 4% overnight, dropping for a third consecutive session, as reports of swelling inventories and forecasts of record U.S. and Russian output combined with a sharp selloff in global equity markets.
    • OPEC and other oil producers agreed this month to curb production by 1.2M barrels per day, but those cuts won't happen until next month and the amount only represents about 1% of global demand.
    • Crude futures -4.1% to $47.84/bbl
    • China cut its holdings of U.S. Treasurys – by $12.5B in October – for a fifth consecutive month, amid a broader decline in foreign demand for U.S. government debt due to a strong dollar.
    • Beijing's Treasury appetite has garnered attention due to its continued trade dispute with Washington, which has contributed to the renminbi falling toward the RMB7 threshold vs. the greenback for the first time since the financial crisis.
    • "No one is in a position to dictate to the Chinese people what should or should not be done," President Xi Jinping said in an address commemorating the 40th anniversary of the opening up of the Chinese economy.
    • While he didn't mention trade tensions, he touched on the rapid growth of coastal cities, joining the WTO, the Belt and Road initiative, establishment of free trade zones and the country’s first import expo in November.
    • Shanghai -0.8% to 2,577.
    • Coal consumption is expanding after two years of decline, but miners should brace for another period of sluggish growth.
    • According to the IEA, global coal demand will inch up by just over 1% between 2017 and 2023, as growth in India and other Asian countries offset a decline in Europe and the U.S.
    • While developed nations are ditching the fossil fuel, emerging economies are using coal to quickly scale up electric power generation.
    • Private bankers at Credit Suisse are advising clients to consider moving assets out of the U.K. before a rescheduled Brexit deal vote takes place in parliament, FT reports.
    • There are fears of both a no-deal Brexit and the possibility of a leftwing party being elected. Labour leader Jeremy Corbyn has floated a "wealth tax" in a previous manifesto.
    • Qualcomm (NASDAQ:QCOM) believes Apple (NASDAQ:AAPL) remains in violation of a Chinese court's orders to stop selling older iPhones despite a software update that the tech giant pushed on Monday.
    • "They are legally obligated to immediately cease sales… and prove compliance in court,” saidDon Rosenberg, Qualcomm’s general counsel.
    • The case centers around patents on software features for switching between smartphone apps and resizing pictures before setting them as a wallpaper.
    • It's official! T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) have won backing for their $26B merger from CFIUS, as well as the Justice Department, Department of Homeland Security, and Defense Department – collectively referred to as Team Telecom.
    • Sources said the deal was cleared after the firms' respective foreign owners, Deutsche Telekom (OTCQX:DTEGY) and Japan's SoftBank (OTCPK:SFTBY), offered to stop using Huawei Technologies equipment.
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    • Japan plans to spend ~$10B to become the largest customer outside the U.S. for Lockheed Martin’s (NYSE:LMT) F-35 jet fighters, after Prime Minister Abe's cabinet approves raising Japan’s existing order for 42 F-35s to 147 in response to China's increasing military strength and pressure from Pres. Trump to buy more U.S. weapons.
    • Around 40 of the jets will be the F-35B version, which can take off and land vertically and will be used on two flat-top destroyers that will be refitted to carry aircraft.
    • The F-35B is nearly 20% more expensive than the conventional F-35A, with a $115M average unit cost in the latest sale concluded earlier this year; Japan currently has 10 F-35As, which take off and land like conventional jets.
    • General Dynamics (NYSE:GD) warns Canada's government would incur “billions of dollars of liability” by unilaterally scrapping a deal of armored vehicles to Saudi Arabia, after Prime Minister Trudeau said for the first time that he was looking for a way out of the deal.
    • “Were Canada to unilaterally terminate the contract, Canada would incur billions of dollars of liability to General Dynamics Land Systems-Canada,” the company says.
    • Abandoning the deal could kill thousands of jobs in the struggling city of London, Ontario, where Trudeau's Liberal Party will need to do well in a federal election next October.

    • Xerox (NYSE:XRX) plunged 13% in today's trade to its lowest level since early 2013 after Moody’s downgraded its senior unsecured debt ratings to Ba1 from Baa3 with a negative outlook.
    • In its late Friday move, Moody's cited uncertainty over XRX's revenue base amid a decline in demand for copy and printing services as well as intense global competition.
    • According to Bloomberg, XRX's notes due in 2021 widened 56 bps to 300 above Treasurys, and the cost to protect against losses on the company's debt also jumped, reaching the highest level since 2009.
    • Royal Dutch Shell (RDS.ARDS.B) is in talks to buy Endeavor Energy Resources for ~$8B, or roughly half as much as the Texas oil producer was expected to fetch when it put itself on the block this year, Bloomberg reports.
    • Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) also considered making bids for Endeavor but their interest has waned, according to the report.
    • Discussions reportedly have been complicated by Endeavor founder Autry Stephens' desire to retain a large quantity of the company's mineral rights, which has made the company less valuable than the $15B it was initially expected to bring in a sale.
    • Endeavor controls drilling rights on more than 300K acres of mostly undeveloped land in the Permian Basin, making it one of the play's largest closely held companies in the U.S.
    • Barrick Gold (NYSE:ABX) says all conditions for its planned takeover of Randgold Resources (NASDAQ:GOLDhave been satisfied after the Royal Court of Jersey sanctioned the scheme of arrangement by which the merger is being implemented.
    • The merger is expected to close on Jan. 1, and Barrick says it will change its NYSE ticker symbol from ABX to GOLD starting on Jan. 2, the merged company’s first day of trading.
    • ABX also declares a Q4 dividend of $0.07/share, payable on Jan. 14, resulting in an annual dividend of $0.16/share.
    • Boeing (NYSE:BA+1.4% after-hours as it announces plans to raise its dividend by 20% to $2.055/share and replace its existing share repurchase program with a new $20B authorization, up from the $18B approved last December.
    • With the latest dividend increase, BA says it has increased its dividend nearly 325% over the past six years and repurchased more than 230M shares over the same time period.
    • This year, the company repurchased $9B worth of its shares from the $18B authorization approved in December 2017.
    • A group of longtime investors in SpaceX (SPACE) that includes Peter Thiel are questioning the use of the company's employees and resources for Elon Musk's Boring company project in Hawthorne, California, sources tell The Wall Street Journal.
    • The report come against a backdrop of Musk and few other investors owning more than 90% of the equity in Boring. Also, years ago, Musk borrowed about $20M from SpaceX to help keep Tesla (NASDAQ:TSLA) rolling along and more recently (2015-2016) SpaceX purchased more than $250M worth of bonds from Tesla-owned SolarCity.