Question to subs and contributors: Does anyone know why ViacomCBS (VIAC) is trading higher in the after market? I don't see anything. If you know, please comment in our comments section.

I have been asked by a number of subscribers about my European bank holdings.
Some of the names I own include UniCredit (UNCRY) ; Barclays (JO) ; Commerzbank (CRZBY) ; Societe Generale  (SCGLY) ; Nordea Bank  (NRDBY) , Lloyds Banking (LYG) , UBS (UBS) and the European financial sector exchange-traded fund EUFN  (EUFN) .
I would not chase the recent strength.

The aggressive and steady rally since the coronavirus scare continued today -- as stocks flatlined (for the last several hours) after the initial morning climb:

* Market breadth was even -- after several days of large imbalances of advancers over decliners.
* Bonds were unchanged.
* Gold moved +$7.50, and crude oil was unchanged.
* FANG was stellar -- led by Alphabet (GOOGL) .
* Banks were mixed.
* Retail sold off after Wednesday's strength.
* Deeper cyclicals were lower on the day.
* Cannabis stocks can't find a buyer.
* Boeing (BA) buoyed the averages (especially the Dow Jones industrial average).
* Twitter (TWTR) was the standout on the heels of a strong rebound in users and engagement. (I moved from very large-sized to medium-sized on the gap higher.)

After my initial shorting activity I was very quiet from a trading standpoint.

I ended the day medium sized net short.

Just watchin' after my earlier episode on the short side.

I still see chance of a double top.

Off to a working lunch.

As mentioned in my Diary, if liquidity (of a central bankers kind) is the straw that stirs the market's drink - investors may be off sides in not weighing some (gaining) evidence that both the Federal Reserve and the ECB might be more hawkish than the consensus expectations.
This coupled with the market's recent ramp (which has altered the ratio of reward to risk) makes me move from small-sized to medium-sized net short this morning.
I am now large short in both Apple (AAPL) and Spyders (SPY) .

This should concern growth stock investors:

This  a.m. Twitter's (TWTR) shares are +16% (a gain of $5.40 to $38.76).
Reflecting the changing reward vs. risk (after a +$10/share move in the shares from the recent lows), I have reduced my Twitter position from very large to medium-sized this morning.

* Also the domestic kind!
As previously mentioned, I am long a basket of speculative, large cap European bank stocks.
The space is stronger this morning on some good news on Deutsche Bank (DB) today.
From my 15 Surprises for 2020:Surprise #5 WithDraghi Gone, ECB Monetary Policy Abruptly Changes and Interest Rates Are Increased

With no more Draghi, the ECB figures out negative rates are a hindrance to growth and has gutted the European banking industry - it normalizes policy. While long term positive, it ends up creating a major disruption in the global bond markets and yields around the world spike. Most European government debt returns to a positive yield. European equity markets rise +20% (compared to a -20% drop in the U.S. indices) European bank stocks rise by +30% to +40%.

I have added to my net short exposure today:

* Shorted  (SPY) at $334.25 in pre-market.

* Shorted (AAPL) at $323.27 in pre-market.

* Will retiring baby boomers crash the markets?
* Asset managers in the doghouse.
* Argue Zell.

Tariffs, ECB, inflation, Germany manufacturing and more from Peter:

As expected and part of the trade deal, the Chinese are following the US move of cutting the tariff rate in half on some imports by doing the same on our exports to them. While this was part of the deal, it's not all out of the goodness of the Chinese heart as its reducing import tariffs on crude oil, soybeans, pork, beef and chicken. Everything they desperately need. Stocks are of course up but because this was expected, Treasury yields are actually lower.

There was self reflection from some ECB members (and an ex one too) today on the limits they now face because they've already spent so much emergency policy over the years on nonsensically wanting to generate higher inflation. The previous chief economist Peter Praet said "What worries me probably more, the sort of perception you know especially in financial markets, that central banks always have to react. Every time you get a shock in the system you get high expectations of a reaction of the central bank that's quickly incorporated in market expectations. But there's only so much a central bank can do."

With respect to the damage done to bank profitability from NIRP, ECB Vice President Luis de Guindos today said that the negative side effects of NIRP and QE are becoming "more tangible" and that "These weak profitability prospects represent a significant vulnerability for the euro area banking system, which is operating with significant overcapacity." So at least some recognition that maybe current policy is restrictive rather than accommodative.

Lastly, from the President herself, Lagarde said "This low interest rate and low inflation environment has significantly reduced the scope for the ECB and other central banks worldwide to ease monetary policy in the face of an economic downturn."

I've argued a million times that central bankers are tone deaf in thinking that a higher inflation rate is a good thing because I believe it slows economic growth, reduces real wages and would raise interest rates in a debt dependent economy. To those Fed members in particular that want it, please read this, here. It is TD Ameritrade's Financial Disruptions Survey and to the question "Which of the following disruptors do you consider a threat to your financial security and long term investing?" the NUMBER ONE worry is an INCREASED COST OF LIVING where 47% cited that.

While hopes have grown that the global manufacturing sector is showing signs of stabilization (but with now the unknown impact of the virus), the December German factory orders number said the hard data evidence will have to come in 2020. Orders fell 2.1% m/o/m rather than rising .6% as expected, partially offset by a 5 tenths upward revision to November. Orders were particularly weak within the Eurozone, falling by 14% while domestic orders and non Eurozone orders rose. The Economy Ministry said simply "Overall, the outlook for the industrial economy remains subdued." While the virus will go away in a few months hopefully, supply chains are getting shut down in the meantime and China is Germany's largest trading partner and the source of many parts for their auto factories. Notwithstanding the weakness, the euro is unchanged at exactly $1.10 while the 10 yr bund yield is unchanged but the DAX is rallying with every other equity market.

And back to the data:

Initial jobless claims totaled 202k, 13k less than expected and down from 217k last week. This lowers the 4 week average to 212k from 215k and that is the least since last April. Continuing claims, delayed by a week, did lift to a 3 week high.

The bottom line with claims pretty much is still the same for years now in that the pace of firing's is benign. At least for now with hopes that growth will inflect higher with a tempering of tensions with China, employers are holding on tight to their employees, especially with the difficulty in finding good help.

4 WEEK AVG in CLAIMS

Productivity in Q4 was a touch light relative to expectations rising 1.4% q/o/q annualized vs the estimate of up 1.6%. I like looking at the y/o/y figure and that was up 1.8% and 2019 averaged 1.7%, the best since 2010. We need strong productivity in order to offset the slowing pace in the growth in the labor force. The 25 yr average in productivity is 2%.

What's also happening here though is the rise in unit labor costs which are clearly trimming corporate profit margins. In Q4, unit labor costs rose 2.4% y/o/y vs 2.2% in Q3, 2% in Q2, 1.6% in Q1 and 1% in Q4 2018. Notice a trend? Q4 was the highest since Q1 2018.

25 yr look at PRODUCTIVITY

* Markets continue to rally overnight
* Investors are currently unconcerned that the world's central bankers are out of ammunition to halt slowing global economic growth
* My contention is that their disinterest is unjustified

Stock futures continue strong overnight.

Nevertheless, fundamental to my ursine market view is that the central bankers around the world have run out of effective ways to stimulate global economic growth (if and when it slows down to a crawl) - they are "pushing on a string."

In my 15 Surprises for 2020 I focused my attention on this issue as it relates to the ECB:

Surprise #5 WithDraghi Gone, ECB Monetary Policy Abruptly Changes and Interest Rates Are Increased
With no more Draghi, the ECB figures out negative rates are a hindrance to growth and has gutted the European banking industry - it normalizes policy. While long term positive, it ends up creating a major disruption in the global bond markets and yields around the world spike. Most European government debt returns to a positive yield. European equity markets rise +20% (compared to a -20% drop in the U.S. indices)
European bank stocks rise by +30% to +40%.

And, as it relates to the Federal Reserve:

Surprise:Despite Weakening Economic and Profit Growth the Federal Reserve Does Not Lower Interest Rates This Year
Instead of waiting until the end of the second quarter as they currently have planned, the Fed ends the expansion in their balance sheet by February or March. The liquidity spark helping stocks thus ends early. Foreigners lose their appetite for U.S. corporate debt and government securities and, despite disappointing U.S. economic growth, the 10-year U.S. note yield climbs to over 2.50%.

Bloomberg's Lisa Abramowicz focuses on the ECB in this tweet a few minutes ago:

"(I'll) be back like beforeI will fight the fight and win the warFor your love, for your praiseAnd I'll love you till my dying daysWhen (I'm) gone, I'll go madSo don't throw away this thing we had'Cause when push comes to shoveI will kill your friends and family to remind you of my love"
- Hamilton,You'll Be Back
I just found out that I have to take a business trip - leaving this evening.
So I won't be writing tomorrow."You say our love is draining and you can't go on(I'll) be the one complaining when I am gone...And no, don't change the subject'Cause you're my favorite subjectMy sweet, submissive subjectMy loyal, royal subjectForever and ever and ever and ever and ever..."
Yes, I saw Hamilton last weekend!

* Beats on revenues and engagement
* I expect a +10% to +15% rise in the shares today

I have been a steady buyer of Twitter (TWTR) for the last few months in the belief that the third quarter "bugs" would be resolved sooner than many expected. And, that usage and engagement would beat expectations.

Indeed, this is exactly what has happened - revenue growth was a beat, but, more importantly, average daily users rose by over +20%.  

As cited in "Twitter's Shares Represent Value," early January: 

* Critics may be wrong about TWTR's investment appeal

Over the last several years I have traded and invested in Twitter (TWTR) on the long side on multiple occasions (at least ten!). These forays have resulted in accumulated share price gains of well over $60/share on a cost basis of about $20/share.

Recently, at a time in which the shares of other social media and other internet based stocks (e.g., Facebook (FB) , Alphabet (GOOGL) and Amazon (AMZN) ) experienced meaningful upward price moves, Twitter's shares have languished after laying a third quarter egg (owing to some really stupid technical issues that I expect to be resolved sooner than expected).

In December, 2019, the shares were blasted by a panelist on CNBC.

By contrast, I recently argued (in early December, 2019), that despite poor price momentum and an ugly chart the upside reward vastly exceeded downside risk - and I moved to a large long position at around $31/share:

While I recognize what a bad actor Twitter's (TWTR) shares have been and what a poor technical setup the charts indicate (as to the future price action) - I am nonetheless aggressively buying the shares at $30 today.

The resurgence of FANG stocks (coincident with Senator Warren's fall in the polls) gives me renewed courage and so does my primary analysis (over the last two weeks) that the "glitches" that led to the 3Q disappointment may be more quickly resolved than the consensus (and the company in its conference call) had suggested.

And, remember the optionality of a takeover. As the share prices of potential acquirers rise, so does their currency for a possible takeover of Twitter.

Here is my investment thesis on Twitter.

More, here.

Morning commentary from Danielle DiMartino Booth:

• Utilizing key data from monthly data supplied by NACM, Markit and ISM, QI created composites to explain the year-over-year trends in real GDP; these indicators are especially effective when the consensus is too bullish or bearish
• All three GDP forecasts from NACM, Markit and ISM are marginally higher than consensus and Fed estimates based on January data; there are greater opportunities to position for upside surprises based upon beaten-down numbers driven by the coronavirus
• Since last week's peak coronavirus fever, market rate-cut expectations have improved from two in 2020 to one-plus come December; the v-shaped move in expectations is a product of hopes for a speedy resolution to the coronavirus rather than improved U.S. growth prospects

Most of the time you hear a song, you're inclined to envision the singer in your mind, which is easier said than done if you know the artist. But what if it's someone new who bursts onto the scene? For those of you of the true MTV generation, we're talking about Rick Astley and his worldwide number one smash hit, "Never Gonna Give You Up." Back in 1987, it was hard to square that soulful voice with the 5'9" frame of this British singer/songwriter. Stereotypes be damned, belt it out Astley did.

The title of Astley's song reminds us of how economists approach their published projections. Before we continue, we assure you this isn't a dig at the forecasting community. We understand it's their job to take a stand and make a call down to the decimal point. But we know most forecasts eventually turn out to be wrong. Maybe it has to do with holding on too long to a view, like you're never gonna give it up.

Prescient prognosticators are nimble with their forward guidance. They've been humbled by the vagaries of the data in the past and aren't wedded to their views. As such, they constantly test their forecasts' accuracy and validity? Or perhaps they're more willing to adjust their outlooks when new and compelling information presents itself. We like to think that we fit this mold.

Such intellectual flexibility brings us to the chart of the day. Each month, there are fundamental reads on the pulse of the U.S. economy. The first up is the National Association of Credit Management's (NACM) Credit Managers' Index. The second comes from the two IHS Markit reports on manufacturing and services that poll C-suite executives. And the third arrives care of the Institute for Supply Management (ISM), compiled via procurement professionals queried in its manufacturing and non-manufacturing surveys.

From each report, we repackage key indicators that mirror top-line activity into projections for GDP. From NACM, we tap sales indices for manufacturing and services. Markit gives us manufacturing output and service business activity. And ISM proffers manufacturing production and non-manufacturing business activity. After applying appropriate industry weights to form a composite indicator, these metrics then stand as the inputs in simple regression models to explain the year-over-year trend in real GDP.

We're wise to none of these models being perfect. What model is? But we find value in them as guides for triangulating the ups and downs of the economy's growth path. They have particular utility when the consensus of economists and the Fed are either too bullish or bearish relative to the near real-time guidance communicated by our trifecta.

For the January channel checks, all three GDP projections - NACM (2.3%), Markit (2.1%) and ISM (2.8%) are running hotter than the consensus (1.9%) and the Fed's expectations (2.0%). We'd be disappointed if you didn't push back given these measurements were taken prior to the escalation of coronavirus. The health scare dials up the downside risk for near-term growth prospects. You have a point. And we're mindful that these soft-data readings could surprise to the downside next month.

For the moment, that sounds like a crowded asymmetry. The surprise factor for the U.S. growth outlook will not be if NACM, Markit and ISM all report cleaner post-coronavirus data and disappoint market expectations. The surprise will manifest in their beating the beaten down consensus instead. If you're a betting soul, there's more opportunity to position for upside surprises vs. the alternative come February releases.

What's depicted in the background of today's chart? That would be the U.S. real 10-year yield on inflation indexed securities (TIPS). Real rates are an expression of real activity and expectations for future central bank actions. With the Fed desperate to pause and higher stated hurdles for moves in either direction, indicators that inform about the growth outlook could have more explanatory power for movements in TIPS yields for the time being.

After trading as low as -0.14 last Friday concurrent with peak coronavirus fear, the real 10-year yield closed at 0.00% yesterday. Viewed through a different prism, rate cut odds have cooled from two in 2020 to one-plus come December. We don't believe that this v-shaped slingshot move (not illustrated above) has anything to do with stronger U.S. growth prospects. It's more about hopes for a speedy resolution to the health situation in China.

"How are you pricing coronavirus risk?" will be the key question for sell-side economists in coming days and weeks. But this is no easy task with anything but forthright data on the true scope of the outbreak. With that as a given, expect the consensus to not give up on its forecast. In the interim, watch real rates which will act as the pivot for the nominal 10-year Treasury.