Bear Radar

Style Underperformer:

• Mid-Cap Growth +.4%

Sector Underperformers:

• 1) Education -3.9% 2) Tobacco -1.2% 3) Utilities -.5%

Stocks Falling on Unusual Volume:

• EXPR, GBAB, DV, INTU, VNET, AVXS, PAYC, BABA, VSAT, DL, PEG, PCRX, SNDX, NSP, CTXS, CIB, CACC, NHTC, YHOO, DYN, HNP, TLN, STRZA, TWOU and JD

Stocks With Unusual Put Option Activity:

• 1) XBI 2) HUM 3) CERN 4) COST 5) MMM

Stocks With Most Negative News Mentions:

• 1) PEG 2) TSS 3) UAL 4) TIF 5) CHD

Charts:

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

Bull Radar

Style Outperformer: 

• Large-Cap Value +.9%

Sector Outperformers:

• 1) Oil Service +3.7% 2) Disk Drives +2.7% 3) Hospitals +2.0% 

Stocks Rising on Unusual Volume: 

• CSC, DY, DSW, HPE, SRPT, JACK, AXL, RXN, SHLD and RYI

Stocks With Unusual Call Option Activity: 

• 1) IMMU 2) GME 3) VER 4) EXPR 5) YHOO

Stocks With Most Positive News Mentions: 

• 1) WDC 2) DY 3) CHK 4) NBL 5) HPQ

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +12.5% Above 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 70.5% of Issues Advancing, 26.6% Declining
• 76 New 52-Week Highs, 8 New Lows
• 53.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.0%
• Vix 13.9 -3.7%
• Total Put/Call .79 -21.8%
• TRIN/Arms .64 -43.7%

Wednesday Watch

Evening Headlines
Bloomberg: 

• China Early Economy Indicators Show Little Cheer, Little Change. After something of a roller-coaster ride in March and April, China settled into sluggish growth in May, according to the earliest batch of private indicators tracking the world’s second-largest economy. The Minxin manufacturing index from the China Academy of New Supply-side Economics, Market News International’s business confidence indicator and Standard Chartered Plc’s small-business gauge all retreated. The key May indicators for new credit, industrial production, fixed-asset investment and retail sales are expected in mid-June, after the official purchasing managers index for manufacturing on June 1. That PMI probably fell to 50 for May from 50.1 the prior month, according to a Bloomberg survey of economists. The tepid signs thus far for May activity coincide with signals from policy makers that they want to keep a lid on rising debt, even if such restraint caps an economic rebound. Here’s what the earliest economic data show for this month:
• Asia Stocks Rise as U.S. Home Sales Surge, Rate-Hike Bets Climb. Asian stocks rose, with the regional equities benchmark gauge rebounding from a seven-week low, after a surge in U.S. home sales fueled speculation the world’s biggest economy can withstand higher interest rates. The MSCI Asia Pacific Index climbed 0.8 percent to 125.95 as of 9:03 a.m. in Tokyo after closing on Tuesday at the lowest level since April 6. Japan’s Topix index added 1.6 percent as the yen traded at 110.15 per dollar after falling 0.7 percent Tuesday.
• The Outlook for Copper Amid Weak Prices and Demand. (video)
• Banks Said to Devise Plans for Cutting Back Online Lending Risk. Some of Wall Street’s biggest banks are making contingency plans to cut their exposure to online consumer loans if the market deteriorates further after the recent crisis at LendingClub Corp., people with knowledge of the reviews said. While firms including Credit Suisse Group AG and Deutsche Bank AG haven’t scaled back exposure, they’re concerned about financing they provide to institutional investors that buy loans from companies like LendingClub and Prosper Marketplace Inc., the people said. Industry lawyers estimate that banks have funded a few billion dollars of online loans for investors through these credit lines. Wall Street lenders are looking to avoid making the same mistakes they made in the subprime crisis, when they were late to limit their exposure to bad mortgage loans.
• Apple(AAPL) Said to Hit Setback in Push to Open Stores in India. (video) Apple Inc. Chief Executive Officer Tim Cook went to India last week to push his bestselling iPhones. The trip may not have paid off. India’s Foreign Investment Promotion Board ruled Apple must comply with regulations to procure 30 percent of components locally if it wants to sell through its own retail stores, according to people with direct knowledge of matter. The company makes most of its products in China and doesn’t currently meet that criteria. While India can provide waivers for cutting-edge technology companies, the panel decided it can’t certify Apple for that exception, the people said, asking not to be identified as the decision isn’t public. The FIPB decision needs to be ratified by the government and it could still be overruled.

Wall Street Journal:

• U.S. Probes Real-Estate Firm With Ties to Sen. Bob Corker. Investigators are focused on accounting questions at CBL & Associates but also are reviewing the senator’s stock trades in the REIT.
• Signals from the U.S. Yield Curve: World Can’t Handle Fed Rate Hikes. The yield curve, long seen as a soothsayer for the health of the economy, may be sending us a new signal: The world can’t handle a rise in U.S. interest rates, even if America can.
• Terror Attacks, Air Crashes Weaken Appetite for European Travel. Strong dollar buoys bookings by American tourists, but Brussels, Istanbul suffer major declines.
• The Nationwide Crime Wave Is Building. As the homicide rate keeps rising in many cities, even some who dismissed the ‘Ferguson effect’ admit the phenomenon is real.

Fox News:

• Kasich joins Cruz, Rubio in keeping delegates as campaign leverage. (video) Ohio Gov. John Kasich has become the latest Donald Trump rival to take a clenched-fist approach to the delegates he won during the primary season, moving this week to keep those delegates as bargaining chips going into the party's July nominating convention.

CNBC:

• Strong Treasury auction could be signaling something darker on horizon. (video) Buyers swarmed the two-year Treasury auction, at the same time market expectations for a Fed rate hike were building.
• Hewlett Packard Enterprise(HPE) announces spinoff as earnings meet Street. (video) Hewlett Packard Enterprise on Tuesday reported earnings that met Wall Street's expectations and announced a spinoff of its enterprise services unit, which will merge with Computer Sciences. 
• Gundlach: US stocks are 'dead money;' rally feels like short squeeze.

Zero Hedge:

• Why China Is Being Flooded With Oil: Billions In Underwater OPEC Loans Repayable In Crude.
• Japan's Broken Economy - 25 Years Of Failed "Stimulus" & "Temporary Illusions". (graph)
• Shootings In Chicago Are Up An Astonishing 50% From This Time Last Year. (graph)
• Eurogroup Agrees To Disburse €7.5BN To Greece Which Will Be Used To Repay Creditors.
• Warning Signs Everywhere. (graph)
• With The Lowest Volume Since Q1 2014, The Global M&A Boom May Be Over. (graph)
• Iran's Ayatollah: "The US Can't Do A Damn Thing About Our Missile Program".
• ObamaCare Isn't Working - These Five Charts Show Why.
• More Young Americans Live With Their Parents Than At Any Time Since The Great Depression. (graph)
• Crude Spikes Above $49 After Biggest Inventory Draw Since 2015. (graph)
• Clinton Adviser, Nobel Prize Winning Economist Endorsed Venezuelan Socialism.
• Gold Drops, Oil Pops As Another Volumeless Buying-Frenzy Strikes Stocks. (graph)

Business Insider:

• Toyota is investing in Uber.
• Things have gotten so bad in the oil industry that workers have stopped paying their car loans.
• HERE IT IS: One brutal chart shows death is imminent for America's department stores.
• Stock market euphoria might be at an all-time high. (graph)

Reuters:

• China's wary lenders force rust-belt country to take expensive shadow bank loans. Mainstream lenders in China are squeezing borrowers in the country's rust-belt provinces, forcing firms to take on higher interest-rate loans from so-called shadow banks, a Reuters analysis of central bank figures shows.

Night Trading 

• Asian equity indices are +.75% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 143.75 -2.5 basis points. 
• Asia Pacific Sovereign CDS Index 53.25 -2.25 basis points.
• Bloomberg Emerging Markets Currency Index 70.61 unch. 
• S&P 500 futures +.14%. 
• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (EV)/.48
• (TIF)/.68
• (UHAL)/3.14
• (CPRT)/.54
• (COST)/1.22
• (GES)/-.19
• (HPQ)/.38
• (NTAP)/.58
• (PVH)/1.43
• (TDW)/-.54
• (WSM)/.50

Economic Releases 
8:30 am EST

• Advance Goods Trade Balance for April is estimated at -$60.0B versus -$56.9B in March. 

9:00 am EST

• The FHFA House Price Index MoM for March is estimated to rise +.5% versus a +.4% gain in February. 

9:45 am EST

• The Preliminary US Services PMI for May is estimated to rise to 53.0 versus 52.8 in April.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,660,000 barrels versus a +1,310,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,380,000 barrels versus a -2,496,000 barrel decline the prior week. Distillate supplies are estimated to fall by -963,000 barrels versus a -3,170,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.47% versus a +1.4% gain prior.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Kaplan speaking, Bank of Canada rate decision, $34B 5Y T-Note auction, weekly MBA mortgage applications report, 1Q House Price Purchase Index, (JACK) analyst meeting, (PLCE) annual meeting, (AFL) analyst briefing and the (A) analyst meeting could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and commodity 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 Surging into Afternoon on Diminished Global Growth Fears, Oil Bounce, Yen Weakness, Homebuilding/Technology Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.69 -7.08%

• Euro/Yen Carry Return Index 128.15 +.08%

• Emerging Markets Currency Volatility(VXY) 10.67 -.74%

• S&P 500 Implied Correlation 55.33 -4.36%

• ISE Sentiment Index 73.0 -3.0%

• Total Put/Call 1.0 +1.01%

• NYSE Arms 1.27 -12.79% 

Credit Investor Angst:

• North American Investment Grade CDS Index 81.20 -2.77%
  

• America Energy Sector High-Yield CDS Index 960.0 -3.80%

• European Financial Sector CDS Index 93.25 -4.27%

• Western Europe Sovereign Debt CDS Index 26.13 +1.28%

• Asia Pacific Sovereign Debt CDS Index 53.66 -.19%

• Emerging Market CDS Index 307.82 -1.33%
  

• iBoxx Offshore RMB China Corporate High Yield Index 128.42 +.16%

• 2-Year Swap Spread 14.25 +.5 basis point
  

• TED Spread 32.50 -3.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -28.5 -1.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.55 -.10%
• 3-Month T-Bill Yield .34% +2.0 basis points

• Yield Curve 95.0 unch.
  

• China Import Iron Ore Spot $51.36/Metric Tonne +.27%

• Citi US Economic Surprise Index -22.0 +10.8 points

• Citi Eurozone Economic Surprise Index 2.6 -2.2 points

• Citi Emerging Markets Economic Surprise Index -1.8 unch.

• 10-Year TIPS Spread 1.60% +1.0 basis point
  
• 53.9% chance of Fed rate hike at July 27 meeting, 64.1% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +260 open in Japan 
• China A50 Futures: Indicating +68 open in China

• DAX Futures: Indicating +4 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +1.0%

Sector Underperformers:

• 1) Gold & Silver -4.1% 2) Steel -.7% 3) Oil Tankers -.7%

Stocks Falling on Unusual Volume:

• SSW, ANTX, DSW, CRMT, BAH, BBY, BOBE, GDOT, SAGE, CI, TEP, ANTM, ONCE, CAL, CF, W, GCO, AMCX, IOC, LITE, SA, CBI, AG, PKX and BHI

Stocks With Unusual Put Option Activity:

• 1) TDW 2) NAV 3) TIF 4) SMH 5) EWG

Stocks With Most Negative News Mentions:

• 1) BCEI 2) GCO 3) CRMT 4) ETE 5) FIT

Charts:

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