Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, European/Emerging Markets/US High-Yield Debt Angst, Earnings Outlook Worries, Transport/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 18.6 -.8%
• DJIA Intraday % Swing .85%
  
• Bloomberg Global Risk On/Risk Off Index 54.5 +1.9%

• Euro/Yen Carry Return Index 154.4 +.6%

• Emerging Markets Currency Volatility(VXY) 10.0 +.2%

• CBOE S&P 500 Implied Correlation Index 36.3 +1.5% 

• ISE Sentiment Index 86.0 +13.0 points
  

• Total Put/Call .98 -3.0%

• NYSE Arms 1.19 -17.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 79.0 +2.1%
  

• US Energy High-Yield OAS 395.95 -.06%
• Bloomberg TRACE # Distressed Bonds Traded 413.0 +7
  

• European Financial Sector CDS Index 101.3 +2.9% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 368.25 +4.5%
  

• Italian/German 10Y Yld Spread 188.0 basis points +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 132.4 +2.2%
  

• Emerging Market CDS Index 247.6 +2.5%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.8 unch.

• 2-Year Swap Spread 31.75 basis points +5.5 basis points
  

• TED Spread 19.75 basis points -2.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -22.75 -2.75 basis points
  
• MBS  5/10 Treasury Spread 170.0 +4.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 693.0 unch.
  
• Avg. Auto ABS OAS 94.0 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.6 +.12%
• 3-Month T-Bill Yield 5.13% +11.0 basis points
  

• China Iron Ore Spot 105.0 USD/Metric Tonne -.17%
• Dutch TTF Nat Gas(European benchmark) 38.6 euros/megawatt-hour -3.2%

• Citi US Economic Surprise Index 26.2 +1.1 points

• Citi Eurozone Economic Surprise Index 29.1 -.9 point
  

• Citi Emerging Markets Economic Surprise Index 31.2 +1.8 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 225.94 +.02:  Growth Rate +1.5% unch., P/E 18.1 -.1
  
• S&P 500 Current Year Estimated Profit Margin 12.26% +1.0 basis point
  
• Bloomberg US Financial Conditions Index -.06 +15.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index -4.43 -4.0 basis points
  
• US Yield Curve -51.75 basis points (2s/10s) +4.25 basis points
• US Atlanta Fed 1Q GDPNow Forecast +1.13% -135.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.58% unch.: CPI YoY +5.19% unch.
  
• 10-Year TIPS Spread 2.25 unch.
  
• Highest target rate probability for June 14th FOMC meeting: 67.6%(-2.6 percentage points) chance of 5.0%-5.25%. Highest target rate probability for July 26th meeting: 50.6%(+1.9 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -101 open in Japan 
• China A50 Futures: Indicating -8 open in China

• DAX Futures: Indicating +64 open in Germany

Portfolio:

• Lower:  On losses in my utility/industrial/medical sector longs and emerging market shorts
  

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

• Market Exposure: Moved to Market Neutral