Morning Call: U.S. stocks give back some of Wednesday's sharp rally; Mar E-mini S&Ps down -1.52%; Euro Stoxx 50 down -0.69% at a fresh 2-year low.
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 ESH19 - S&P 500 E-Mini
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ESH192,611.75-1.50-0.06%
DXY0096.045-0.014-0.01%
ZNH19121-255+0-025+0.06%
GCG191,294.3+0.5+0.04%
SIH1915.635-0.003-0.02%
HGH192.6745+0.0010+0.04%
CLG1952.12-0.19-0.36%
RBG191.4127-0.0032-0.23%
ASH76.04+1.50+2.01%
GD163.60+0.46+0.28%
HII195.57-1.92-0.97%
OII15.39-0.40-2.53%
ROKU39.89-0.60-1.48%
PSEC6.77+0.09+1.35%
TXMD5.18+0.05+0.97%
AVID4.78+0.01+0.21%

Overnight Markets and News

Mar E-mini S&Ps (ESH19 -1.75%) this morning are down -1.52% as markets give back some of Wednesday's sharp rally. European stocks are down -0.69% at a new 2-year low as markets there reopen after the 2-day Christmas holiday. Economic growth fears along with Brexit concerns continue to weigh on European equity markets. The European volatility gauge, the VSTOXX Index, jumped to a 10-1/2 month high today as growth concerns weigh on bank stocks and trade concerns undercut auto makers. On the positive side, China's Ministry of Commerce said today that U.S. and China trade negotiators have been in close contact and the U.S. will sent its negotiating team to Beijing the week of Jan 7. Asian stocks settled mixed: Japan +3.88%, Hong Kong -0.67%, China -0.61%, Taiwan +1.72%, Australia +1.88%, Singapore +1.12%, South Korea -0.16%, India +0.44%. Chinese stocks moved lower on concern the ongoing U.S.-China trade war is hurting the profitability of Chinese companies after China Nov industrial profits fell for the first time in nearly 3 years. The Chinese yuan climbed to a 2-week high against the dollar today after the PBOC said in a statement about its Q4 policy meeting that it will keep prudent monetary policy and strike a balance between tightening and easing.

The dollar index (DXY00 -0.33%) is down -0.25%. EUR/USD (^EURUSD -0.39%) is up +0.35%. USD/JPY (^USDJPY +0.72%) is down -0.48%.

Mar 10-year T-note prices (ZNH19 +0-065) are up +7 ticks.

The ECB said in its monthly economic bulletin that "looking ahead, the incoming information remains overall consistent with an ongoing economic expansion, albeit with increased downside risks."

China Nov industrial profits fell -1.8% y/y, the first decline in nearly 3 years.

Japan Nov construction orders fell -10.7% y/y, the second straight month orders have declined.

Japan Nov annualized housing starts fell -0.6% y/y to 957,000 annualized, right on expectations.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly initial unemployment claims (expected +2,000 to 216,000, previous +8,000 to 214,000) and continuing claims (expected -15,000 to 1.673 million, previous +27,000 to 1.688 million), (2) Oct FHFA house price index (expected +0.2% m/m, Sep +0.2% m/m), (3) Nov new home sales (expected +4.4% to 568,000, Oct -8.9% to 544,000), (4) Conference Board U.S. Dec consumer confidence index (expected -2.2 to 133.5, Nov -2.2 to 135.7), (5) EIA weekly Petroleum Status Report, and (6) Treasury auctions $32 billion of 7-year T-notes.

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: none.

Market Comments

Mar S&P 500 E-minis (ESH19 -1.75%) this morning are down -37.50 points (-1.52%). Wednesday's closes: S&P 500 +4.96%, Dow Jones +4.98%, Nasdaq 100 +6.16%. The S&P 500 on Wednesday closed sharply higher on short-covering fueled by comments from Keven Hasett, chairman of the White House Council of Economic Advisers, who said Fed Chair Powell's job is "100 percent" safe. There was strength in home builders after the U.S. Oct S&P CoreLogic composite-20 home price index rose +0.41% m/m and +5.03% y/y, slightly stronger than expectations of +0.30% m/m and +4.86% y/y. There was a rally in retailers on signs of a strong holiday shopping season after Mastercard said U.S. retail sales grew 5.1% this holiday season. Energy stocks rallied sharply after crude oil prices surged +8.68%.

Mar 10-year T-notes (ZNH19 +0-065) this morning are up +7 ticks. Wednesday's closes: TYH9 -12.00, FVH9 -6.50. Mar 10-year T-notes on Wednesday fell back from a contract high and closed lower on the sharp rally in the S&P 500, which curbed safe-haven demand for T-notes. T-note prices were also undercut by weak demand for the Treasury’s $41 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.09, well below the 12-auction average of 2.47 and the lowest in more than 9 years.

The dollar index (DXY00 -0.33%) this morning is down -0.245 (-0.25%). EUR/USD (^EURUSD -0.39%) is up +0.0040 (+0.35%). USD/JPY (^USDJPY +0.72%) is down -0.53 (-0.48%). Wednesday's closes: Dollar Index +0.469 (-0.49%), EUR/USD -0.0039 (-0.34%), USD/JPY +1.06 (+0.96%). The dollar index on Wednesday closed higher on support from higher T-note yields, which improved the dollar's interest rate differentials. USD/JPY was boosted by reduced safe-haven demand for the yen after the sharp rally in stocks.

Metals prices this morning are mixed. Feb gold (GCG19 +0.11%) is +0.6 (+0.05%), Mar silver (SIH19 +0.18%) is +0.037 (+0.24%) and Mar copper (HGH19 -0.69%) is -0.017 (-0.63%). Wednesday's closes: Feb Comex gold (GCG19) on Wednesday closed up +1.2 (+0.09%) and March silver closed up +0.303 (+2.42%). Precious metals moved higher Wednesday with Feb gold at a 6-1/4 month high and Mar silver at a 4-1/4 month high as global stock market turmoil boosted safe-haven demand for precious metals. Also, U.S. political risks are boosting demand for gold as store of wealth as the partial shutdown of the U.S. government enters its fifth day with no prospect for a resolution until at least Thursday when Congress returns to session. The recent turmoil in global equity markets increased demand for gold as a store of wealth as long gold positions in ETFs rose to a 5-3/4 month high on Tuesday. A stronger dollar Wednesday was negative for metals prices. A sharp rebound in U.S. stock prices Wednesday was negative for gold but supportive for silver prices since that improves confidence in the economic outlook and in industrial metals demand. Also, Wednesday's stronger-than-expected U.S. Oct S&P CoreLogic composite-20 home price index report of +0.41% m/m and +5.03% y/y (vs expectations of +0.30% m/m and +4.86% y/y) gave industrial metals a lift on hopes for improved U.S. home building demand. A negative for silver prices is ongoing fund selling as long silver positions in ETFs fell for a sixth consecutive session to a 10-1/2 month low on Tuesday.

Feb crude oil prices (CLG19 -1.69%) this morning are down -75 cents (-1.62%) and Feb gasoline (RBG19 -2.17%) is -2.92 (-2.21%). Wednesday's closes: Feb WTI crude oil (CLF19) on Wednesday closed up by +3.69 (+8.68%) and Feb Brent crude (CBG19) closed up +4.00 (+7.93%). Feb RBOB gasoline (RBF19) closed up +8.10 cents per gallon (+6.54%). The energy complex rallied sharply Wednesday, as Feb Brent crude rebounded from a 17-month low in overnight trade and settled higher. Crude oil followed the sharp rally in U.S. stock indexes Wednesday, as the higher equity prices improved confidence about the economy and energy demand. Comments from Russian Energy Minister Novak also gave crude prices a boost Wednesday when said OPEC+ can quickly take other decisions and can hold an emergency meeting at any time if the market situation changes.

Overnight U.S. Stock Movers

Ashland Global Holdings (ASH +4.50%) was upgraded to 'Overweight' from 'Neutral' by JPMorgan Chase with a price target of $86.

General Dynamics (GD +2.67%) was awarded a $1.11 billion contract from the U.S. Navy for engineering and technical services on submarines.

Huntington Ingalls Industries (HII +3.80%) was awarded a $874 million contract from the U.S. Navy for engineering and technical services on submarines.

Oceaneering International (OII +7.66%) was awarded a $828 million contract from the U.S. Navy for engineering and technical services on submarines.

Roku (ROKU +11.70%) rose 2% on top of Wednesday's 11.7% gain after it was named a "Top Pick" by Needham & Co for 2019.

Prospect Capital (PSEC +4.81%) gained almost 2% in after-hours trading after CEO John Barry disclosed he bought 1 million shares of the company's stock at $5.87 per share.

TherapeuticsMD (TXMD +4.36%) climbed nearly 4% in after-hours trading as it extended Wednesday's 4.4% rally.

Avid Technology (AVID +1.46%) was upgraded to 'Hold' from 'Sell' at BWS Financial with a price target of $5.