Thursday Watch

Night Trading 

• Asian equity indices are -.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 90.75 unch. 
• Asia Pacific Sovereign CDS Index 19.75 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 73.17 -.01%.
• S&P 500 futures +.07%.
• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CIEN)/.37
• (DG)/1.00
• (MBLY)/.24
• (TECD)/1.33
• (ACGO)/3.50
• (COO)/2.25
• (LULU)/.28
• (RH)/.05
• (VMW)/.95
• (WDAY)/.16
• (ZUMZ)/-.21

Economic Releases 

7:30 am 

• Challenger Job Cuts YoY for May.

8:15 am EST

• The ADP Employment Change for May is estimated to rise to 180K versus 177K in April.
  

8:30 am EST

• Initial Jobless Claims are estimated to rise to 238K versus 234K the prior week.
• Continuing Claims are estimated to fall to 1920K versus 1923K prior.
  

10:00 am EST

• ISM Manufacturing for May is estimated to fall to 54.6 versus 54.8 in April.
• ISM Prices Paid for May is estimated to fall to 67.0 versus 68.5 in April. 
• Construction Spending MoM for April is estimated to rise +.5% versus a -.2% decline in March.
  

Afternoon:

• Wards Total Vehicle Sales for May are estimated to rise to 16.9M versus 16.81M in April.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Eurozone Manufacturing PMI report, weekly Bloomberg Consumer Comfort Index, Keefe Bruyette Woods Asset Management Conference, (F) Sales Call, (SKX) annual meeting, (FEYE) annual meeting and the (BKE)/(CATO)/(FRED)/(LB) monthly results could also impact trading today.

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

Stocks Modestly Lower into Final Hour on less Economic Optimism, Oil Decline, Yen Strength, Financial/Healthcare 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) 11.28 +8.67%

• Euro/Yen Carry Return Index 129.81 +.31%

• Emerging Markets Currency Volatility(VXY) 8.31 +2.09%

• S&P 500 Implied Correlation 41.86 +2.67%

• ISE Sentiment Index 71.0 +4.41%
  

• Total Put/Call 1.0 +8.70%

• NYSE Arms 1.58 +53.98%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.21 -.01%
  

• America Energy Sector High-Yield CDS Index 372.0 +1.91%

• European Financial Sector CDS Index 69.68 +1.35%

• Western Europe Sovereign Debt CDS Index 8.16 -8.78%

• Asia Pacific Sovereign Debt CDS Index 19.66 +2.05%

• Emerging Market CDS Index 195.23 +.85%
  

• iBoxx Offshore RMB China Corporate High Yield Index 138.56 -.06%

• 2-Year Swap Spread 23.25 +.25 basis point

• TED Spread 23.25 -4.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -34.50 +2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.14 +.28%

• 3-Month T-Bill Yield .97% +5.0 basis points
  

• Yield Curve 92.0 -1.0 basis point
  

• China Import Iron Ore Spot $57.02/Metric Tonne -2.53%

• Citi US Economic Surprise Index -38.20 -.7 point

• Citi Eurozone Economic Surprise Index 40.60 -8.3 points

• Citi Emerging Markets Economic Surprise Index 7.40 -8.2 points

• 10-Year TIPS Spread 1.83 -1.0 basis point
  

• 92.3% chance of Fed rate hike at July 26 meeting, 94.4% chance at Sept. 20 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +10 open in Japan 

• China A50 Futures: Indicating -40 open in China

• DAX Futures: Indicating +13 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail/tech sector longs 

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

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• OPEC and Russia Outline Vision for Permanent Oil Alliance. OPEC and Russia added more detail to their vision for a permanent alliance between oil producers currently working to clear a global surplus. When the 24-nation coalition agreed last week to persevere with output cuts until March, officials from the Organization of Petroleum Exporting Countries and Russia spoke of continuing to co-operate beyond that point. OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak said in Moscow on Wednesday they’re considering how to formalize the partnership.
• Your Evening Briefing.

Wall Street Journal:

• Though Outnumbered, Female CEOs Earn More Than Male Chiefs. Female chiefs are outearning their male counterparts at S&P 500 companies, but women still make up only 5% of CEOs running those firms.
• Top to Bottom: Pay for 500 CEOs. The chiefs of the biggest U.S. companies made anywhere from $100 million to just $1. Once again, pay didn't always match performance.
• At Least 80 Killed in Blast Near Embassies in Afghan Capital. Explosion strikes near U.S. military headquarters in Kabul’s Green Zone.

CNBC:

• Why the red-hot semiconductor stocks could rally on. (video)
• Netflix(NFLX) is spending $6 billion on content this year and 'a lot more' in future, CEO says.
• 2 tech stocks could reach $1 trillion, and Apple(AAPL) isn't one of them, analyst says. (video)
• Here are the most interesting factoids from Mary Meeker's annual state of the internet presentation.

Zero Hedge:

• Trump Rages At "Sick" Kathy Griffin.
• Stocks Rebound As Chicago PMI Changes Its Mind, "Corrects" Earlier Dismal Data To Highest Since 2014. (graph)
• Mauldin Warns The Next Recession May Be A Complete Reset Of All Asset Valuations.
• WTI Crude Tumbles To $47 Handle As OPEC-Compliance Drops. (graph)
• "Painstakingly Detailed" EU Brexit Document Demands UK Payment For Everything.
• Pending Home Sales Crash Most In 3 Years, Hit By "Double Whammy" Of Price, Inventory. (graph)
• Banks Tumble After BofA, JPM Warn Revenue Will Be Down As Much As 15%.
• Fitch Warns Baidu(BIDU) Faces "Default Risk" Due To Growing Shadow Banking Business.

Business Insider:

• One of the most anticipated hedge fund launches of 2017 keeps raising money.
• Michael Kors(KORS) is shutting down at least 100 stores following 'catastrophic' sales declines.
• Walmart(WMT) remodeling hundreds of US stores.

Washington Examiner:

• Barron Trump thought Kathy Griffin actually beheaded his father: Report.

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Hospitals -2.4% 2) Steel -2.2% 3) Banks -1.4%

Stocks Falling on Unusual Volume: 

• JRVR, KORS, GLNG, NVRO, HDP, BITA, IRBT, ENS and IMAX

Stocks With Unusual Put Option Activity:

• 1) AMJ 2) ADP 3) HPE 4) HON 5) SCHW

Stocks With Most Negative News Mentions:

• 1) IRBT 2) KOP 3) MOH 4) ZBRA 5) COF

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth unch.

Sector Outperformers:

• 1) Oil Tankers +1.1% 2) Drugs +1.0% 3) Defense +.4%

Stocks Rising on Unusual Volume:

• MRAM, CMCO, FWONK, CLDT, ADTI, TCMD, CTRL, PF, EXAS, NDRM, NXPI, GLPG, CALD, NX, GSK, PBPB, REX, LABL, NTNX, SKX, TSLA, EGN, SUPN, DCI and JLL

Stocks With Unusual Call Option Activity:

• 1) NBR 2) CIEN 3) ADI 4) PANW 5) LITE

Stocks With Most Positive News Mentions:

• 1) PBPB 2) ADI 3) RAD 4) NBLX 5) HRS

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +16.3% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 35.1% of Issues Advancing, 61.5% Declining
• 121 New 52-Week Highs, 87 New Lows
• 44.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.9%
• Vix 10.9 +5.3%
• Total Put/Call 1.22 +32.6%
• TRIN/Arms 1.26 +22.1%

Wednesday Watch

Evening Headlines

Bloomberg:

• China Manufacturing Gauge Exceeds Estimates as Growth Holds Up. China’s official factory gauge held up and exceeded estimates, adding to signs the world’s second-largest economy has maintained some of its first-quarter momentum. The manufacturing purchasing managers index remained at 51.2 for a second straight month in May, compared with a median estimate of 51 in a Bloomberg survey of economists. The non-manufacturing PMI rose to 54.5 after matching a six-month low of 54 a month earlier. Numbers higher than 50 indicate improving conditions.
• Zhou Says China's Investment Growth Likely to Moderate. (video)
• Japan's Industrial Production Hits Highest Level Since 2008. Japan’s industrial output rebounded in April, hitting the highest level since 2008, as overseas demand continued to support the nation’s economic recovery.
• Asian Stocks Retreat; Pound Drops After U.K. Poll. Asian equities slipped as investors assessed the strength of global economic growth and the path for U.S. monetary policy. The British pound dropped amid election concerns. Stocks in Japan led declines in Asia as energy shares retreated with oil prices. The British pound dropped for the first time this week as a poll showed Theresa May’s Conservative Party may miss a majority. The yen was steady after three days of gains. The yield on 10-year Treasuries edged higher after Tuesday’s declines. Japan’s Topix fell 0.3 percent, after two days of gains. Australia’s S&P/ASX 200 was little changed, while South Korea’s Kospi swung between gains and losses.
• Once Costly Deep-Sea Oil Turns Cheap, to OPEC's Dismay. Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie Ltd. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates.
• Another Warning Sign Flashes for Subprime Auto Loans. Fewer subprime borrowers are paying off their auto loans early, a possible sign that consumers with weaker credit scores are struggling more, according to a report by Wells Fargo & Co. researchers.

Wall Street Journal:

• Donald Trump Confronts New, Harsher Realities at Home. Russia probe expands to president’s inner circle, a staffer exits, and decisions loom on a new FBI director and Paris climate accord.
• Doubts Cloud Fed’s Rate Increase Plans Beyond June. A potential political fight over the U.S. budget could cause the Fed to rethink its plans for later in the year.

Fox News:

• US conducts successful missile intercept test, Pentagon says. (video)
• Kathy Griffin holds bloodied Trump mask in photo shoot with Tyler Shields.

CNBC: 

• Wilbur Ross says he's 'open to resuming' talks on mega-trade deal with Europe.

Zero Hedge:

• "An Incredible Accomplishment": Pentagon Successfully Shoots Down Simulated ICBM Attack.
• The Internet Helped Kill Inflation In America, Says Credit Suisse.
• How Debt-Asset Bubbles Implode: The Supernova Model Of Financial Collapse.
• Is This Saudi Arabia's Newest Strategy To Boost Oil Prices? (graph)
• Cable Tumbles After New Poll Shows Tories Falling Short Of Majority By 16 Seats.
• In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt.
• The Next Stock Market Crash Will Be Blamed On Trump But It's The Fed's Fault.
• VIX Jumps As Yield Curve Dumps To 7-Month Lows. (graph)

Business Insider: 

• Manhattan retail rents are falling and it's not a good sign.
• A Wall Street bank just issued the most dire prediction yet about US shopping malls.

Night Trading 

• Asian equity indices are unch. to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 90.75 +.25 basis point. 
• Asia Pacific Sovereign CDS Index 19.25 unch.
• Bloomberg Emerging Markets Currency Index 72.93 unch.
• S&P 500 futures +.03%.
• NASDAQ 100 futures +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ADI)/.84
• (KORS)/.70
• (VRA)/-.13
• (PANW)/.55
• (SMTC)/.41

Economic Releases 
9:45 am 

• The Chicago Purchasing Manager for May is estimated to fall to 57.0 versus 58.3 in April.

10:00 am EST

• Pending Home Sales MoM for April are estimated to rise +.5% versus a -.8% decline in March.
  

2:00 pm EST

• US Fed Beige Book Report.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, China Manufacturing PMI report, German Unemployment Rate, weekly MBA mortgage applications report, weekly US retail sales reports, Bernstein Strategic Decisions Conference, RBC Consumer/Retail Conference, Cowen Tech/Media/Telecom Conference, (HTZ) annual meeting, (MRO) annual meeting and the (CVX) annual meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, weighed down by commodity and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.