Stocks Lower into Afternoon on Trade War Fears, Emerging Markets Debt Angst, Oil Decline, Retail/Telecom Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 15.3 +2.5%

• Euro/Yen Carry Return Index 132.01 -.17%

• Emerging Markets Currency Volatility(VXY) 9.29 unch.

• S&P 500 Implied Correlation 39.34 +.28%

• ISE Sentiment Index 80.0 -37.5%
  

• Total Put/Call 1.13 +15.3%

• NYSE Arms 1.14 +120.60%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.55 +1.17%
  

• America Energy Sector High-Yield CDS Index 377.0 -.05%

• European Financial Sector CDS Index 86.61 +.38%

• Italian/German 10Y Yld Spread 245.25 -9.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.07 -2.78%

• Emerging Market CDS Index 172.13 +3.65%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.11 +.09%

• 2-Year Swap Spread 26.0 +1.5 basis points

• TED Spread 39.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -11.75 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.98 -.34%

• 3-Month T-Bill Yield 1.91% unch.
  

• Yield Curve 41.75 -2.0 basis points

• China Iron Ore Spot 65.0 USD/Metric Tonne +.70%

• Citi US Economic Surprise Index 11.10 +3.2 points

• Citi Eurozone Economic Surprise Index -91.40 +4.2 points

• Citi Emerging Markets Economic Surprise Index -6.1 +5.2 points

• 10-Year TIPS Spread 2.09 +1.0 basis point
  

• 100.0% chance of Fed rate hike at August 1 meeting, 100.0% chance at September 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -99  open in Japan 

• China A50 Futures: Indicating -31 open in China

• DAX Futures: Indicating +21 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/tech/medical sector longs

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

•   Large-Cap Value -.5%

Sector Underperformers:

• 1) Oil Service -2.3% 2) Foods -1.6% 3) Telecom -1.4%

Stocks Falling on Unusual Volume: 

• CHMI, GLNG, DLTR, CLSD, BOX, DB, MMSI, GMLP, SWIR, DG, CRSP, CARS, GES, KORS, ICPT, CMCM, MU, THO and CMD

Stocks With Unusual Put Option Activity:

• 1) DLTR 2) PVH 3) CIEN 4) ANF 5) EXPR

Stocks With Most Negative News Mentions:

• 1) QTM 2) SHLD 3) ICPT 4) CORT 5) MU

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.2%

Sector Outperformers:

• 1) Social Media +1.2% 2) Software +.9% 3) Education +.8%

Stocks Rising on Unusual Volume:

• MDGL, KEYS, TLYS, NGL, BCO, GM, KIRK, BURL, QSII, CBAY, AAOI, TECD, LIVN, CBPO, LXRX, STAY, IRWD, TSRO, SNP, CRH, I, MOMO, RYTM, PVH, SPTN, NGL, IMGN, QSII, SMTC, SNAP, CDNA, X, TSRO, ADI, IMMR and ENLK

Stocks With Unusual Call Option Activity:

• 1) RUN 2) XLNX 3) AKS 4) GM 5)GM

Stocks With Most Positive News Mentions:

• 1) GM 2) TECD 3) BURL 4) ADI 5) SMTC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.6% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 38.0% of Issues Advancing, 57.8% Declining
• 70 New 52-Week Highs, 31 New Lows
• 48.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.9%
• Vix 15.3 +2.1%
• Total Put/Call .92 -6.1%
• TRIN/Arms .84 +62.4%

Thursday Watch

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 76.75 +1.25 basis points. 

• Asia Pacific Sovereign CDS Index 12.5 unch.

• Bloomberg Emerging Markets Currency Index 71.21 -.02%.

• FTSE 100 futures +.37%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (AEO)/.22

• (BURL)/1.09

• (CIEN)/.30

• (DG)/1.39

• (DLTR)/1.23

• (DCI)/.52

• (PERY)/.69

• (SHLD)/-1.51

• (TECD)/1.47

After the Close:

• (COST)/1.68

• (GME)/1.37

• (LULU)/.46

• (ULTA)/2.48

• (VMW)/1.15

• (WDAY)/.26

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for May. 

8:30 am EST

• Personal Income for April is estimated to rise +.3% versus a +.3% gain in March.

• Personal Spending for April is estimated to rise +.4% versus a +.4% gain in March. 

• The PCE Core MoM for April is estimated to rise +.1% versus a +.2% gain in March.

• Initial Jobless Claims for last week are estimated to fall to 228K versus 234K the prior week.

• Continuing Claims are estimated to fall to 1733K versus 1741K the prior week.

9:45 am EST

• Chicago Purchasing Manager for May is estimated to rise to 58.3 versus 57.6 in April.

10:00 am EST

• Pending Home Sales MoM for April is estimated to rise +.4% versus a +.4% gain in March.
  

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -137,200 barrels versus a +5,778,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -870,800 barrels versus a +1,883,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,192,300 barrels versus a -951,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.74% versus a +.7% gain prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China PMI report, Eurozone CPI report, weekly Bloomberg Consumer Comfort Index, RBC Auto Tech: Connected/Autonomous/Shared/Electric Conference, Keefe Bruyette Woods Mortgage Finance/Asset Mgmt Conference, Ladenburg Thalmann Tech Forum and the (UNP) investor day 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 modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Surging into Afternoon on Less European/Emerging Market/US High-Yield Debt Angst, Oil Gain, Economic Optimism, Energy/Financial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 14.9 -12.4%

• Euro/Yen Carry Return Index 132.19 +1.16%

• Emerging Markets Currency Volatility(VXY) 9.38 -.21%

• S&P 500 Implied Correlation 38.31 -3.26%

• ISE Sentiment Index 164.0 +56.2%
  

• Total Put/Call 1.02 -5.56%

• NYSE Arms .50 -73.61%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.13 -2.58%
  

• America Energy Sector High-Yield CDS Index 380.0 +.41%

• European Financial Sector CDS Index 87.54 -3.5%

• Italian/German 10Y Yld Spread 254.5 -36.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.39 unch.

• Emerging Market CDS Index 164.17 -2.76%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.0 -.07%

• 2-Year Swap Spread 24.50 +.5 basis point

• TED Spread 39.25 -3.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -12.75 +6.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.17 +.71%
• 3-Month T-Bill Yield 1.91% +3.0 basis points
  

• Yield Curve 43.75 -.25 basis point

• China Iron Ore Spot 64.30 USD/Metric Tonne -.58%

• Citi US Economic Surprise Index 7.90 -3.3 points

• Citi Eurozone Economic Surprise Index -95.60 -2.5 points

• Citi Emerging Markets Economic Surprise Index -11.3 -1.3 points

• 10-Year TIPS Spread 2.08 +2.0 basis points
  
• 100.0% chance of Fed rate hike at August 1 meeting, 100.0% chance at September 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +252  open in Japan 
• China A50 Futures: Indicating +49 open in China

• DAX Futures: Indicating +31 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/tech/medical/industrial/retail sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 75% Net Long