Stocks Reversing Slightly Higher into Final Hour on Earnings Outlook Optimism, Sector Rotation, Technical Buying, Financial/Pharma Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.9 +2.8%
• S&P 500 Intraday % Swing .51 -6.8%
• Bloomberg Global Risk On/Risk Off Index 79.9 +1.6% 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.88 -.37%

• Euro/Yen Carry Return Index 194.2 -.23%

• Emerging Markets Currency Volatility(VXY) 7.18 unch.

• CBOE S&P 500 Implied Correlation Index 14.9 +2.4% 

• ISE Sentiment Index 138.0 -27.0

• Total Put/Call .79 +6.8%

• NYSE Arms .90 -25.0%
• NYSE Non-Block Money Flow -$358.0M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 50.1 +.9%
  

• US Energy High-Yield OAS 353.6 -.7%
• Bloomberg TRACE # Distressed Bonds Traded 215.0 +9.0

• European Financial Sector CDS Index 53.9 +.2%
  
• Deutsche Bank Subordinated 5Y Credit Default Swap 117.6 -.6%
  

• Italian/German 10Y Yld Spread 78.0 +1.0 basis point

• Asia Ex-Japan Investment Grade CDS Index 67.1 -.5%
  

• Emerging Market CDS Index 145.7 +.14%
• Israel Sovereign CDS 76.4 -1.9%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.3 unch.

• 2-Year SOFR Swap Spread -24.75 basis points -.25 basis point

• 3M T-Bill Treasury Repo Spread -10.5 basis points +2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 2.5 unch.
• MBS  5/10 Treasury Spread 138.0 unch.
• Bloomberg CMBS Investment Grade Bbb Average OAS 583.0 -1.0 basis point
• Avg. Auto ABS OAS 53.0 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 36.6 -.3%
• US 10-Year T-Note Yield 4.29% +5.0 basis points
• 3-Month T-Bill Yield 4.22% +1.0 basis point

• China Iron Ore Spot 102.5 USD/Metric Tonne +.4%
• Dutch TTF Nat Gas(European benchmark) 32.1 euros/megawatt-hour -1.4%

• Citi US Economic Surprise Index 8.0 unch.

• Citi Eurozone Economic Surprise Index 22.3 -1.6 points

• Citi Emerging Markets Economic Surprise Index 7.9 -1.7 points
• S&P 500 Current Quarter EPS Growth Rate YoY(458 of 500 reporting) +11.3% -.1 percentage point
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 287.40 +.11:  Growth Rate +12.5% unch., P/E 22.5 unch.
• S&P 500 Current Year Estimated Profit Margin 13.44% -1.0 basis point
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(7 of 10 reporting) +23.6% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 469.24 +.18: Growth Rate +24.4% +.1 percentage point, P/E 32.9 unch.
• Bloomberg US Financial Conditions Index .66 unch.
• Bloomberg Euro-Zone Financial Conditions Index 1.56 +10.0 basis points
• Bloomberg Global Trade Policy Uncertainty Index 5.5 -.6
• US Yield Curve 55.25 basis points (2s/10s) unch.
• US Atlanta Fed GDPNow Q2 Forecast +2.5% unch.
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 44.6% +.9 percentage point

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.89% unch.: CPI YoY +2.84% unch.
• 1-Year TIPS Spread 2.69 +2.0 basis points
• 10-Year TIPS Spread 2.40 +2.0 basis points
• Highest target rate probability for Oct. 29th FOMC meeting: 53.6% (-10.8 percentage points) chance of 3.75%-4.0%. Highest target rate probability for Dec. 10th meeting: 45.9%(+8.7 percentage points) chance of 3.75%-4.0%. (current target rate is 4.25-4.5%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +185 open in Japan 
• China A50 Futures: Indicating -39 open in China

• DAX Futures: Indicating +93 open in Germany

Portfolio:

• Slightly Lower: On losses in my consumer discretionary/industrial sector longs
• Disclosed Trades: None
• Market Exposure: 100% Net Long