Wednesday Watch

Night Trading

• Asian equity indices are -.50% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 100.5 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 72.75 -.75 basis point.

• FTSE-100 futures -.59%.

• S&P 500 futures -.12%.

• NASDAQ 100 futures  -.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GIS)/.72
• (MON)/1.5
• (BKS)/-.49
• (LNN)/1.40
• (APOL)/.66
• (BBBY)/.95
• (MLHR)/.46
• (FUL)/.78

Economic Releases
8:30 am EST

• 1Q GDP is estimated to fall -1.8% versus a -1.0% decline the prior week.
• 1Q Personal Consumption is estimated to rise +2.4% versus a +3.1% gain the prior week.
• 1Q GDP Price Index is estimated to rise +1.3% versus a +1.3% gain the prior week.
• 1Q Core PCE is estimated to rise +1.2% versus a +1.2% gain the prior week.
• Durable Goods Orders for May are estimated unch. versus a +.8% gain in April.
• Durables Ex Transports for May are estimated to rise +.3% versus a +.1% gain in April.
• Cap Goods Orders Non-Defense Ex Air for May are estimated to rise +.5% versus a -1.2% decline in April.

9:45 am EST

• Preliminary Markit US Services PMI for June is estimated to fall to 58.0 versus 58.1 in May.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,212,500 barrels versus a -579,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,025,000 barrels versus a +785,000 barrel gain the prior week. Distillate supplies are estimated to rise by +775,000 barrels versus a +436,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.64% versus a -.8% decline the prior week.

Upcoming Splits

• (CELG) 2-for-1
• (CORE) 2-for-1
• (MIDD) 3-for-1

Other Potential Market Movers

• The German GFK Confidence Index, $35B 5Y T-Note auction, weekly MBA mortgage applications report, (CIT) investor day, (AAP) investor conference, (WDR) investor day, (MCK) investor day, (EQIX) investor day, (IM) investor day, (MCP) annual meeting and the (TAP) analyst meeting could impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Tuesday Watch

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 99.5 -1.25 basis points.

• Asia Pacific Sovereign CDS Index 73.50 -2.0 basis points.

• FTSE-100 futures +.04%.

• S&P 500 futures -.11%.

• NASDAQ 100 futures  -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WAG)/.94

• (APOG)/.26

• (CCL)/.02

Economic Releases
9:00 am EST

• The FHFA House Price Index for April is estimated to rise +.5% versus a +.7% gain in March.

10:00 am EST

• Consumer Confidence for June is estimated to rise to 83.5 versus 83.0 in May.

• The Richmond Fed Manufacturing Index for June is estimated at 7.0 versus 7.0 in May.

• New Home Sales for May are estimated to rise to 439K versus 433K in April.
  

Upcoming Splits

• (CELG) 2-for-1

• (CORE) 2-for-1

• (MIDD) 3-for-1

Other Potential Market Movers

• The Fed's Plosser speaking, Fed's Dudley speaking, Fed's Williams speaking, $25B 2Y Treasury auction, US weekly retail sales reports, (NTAP) analyst day and the (DHR) analyst event could 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 50% net long heading into the day.

Stocks Slightly Lower on Iraq Turmoil/Russia-Ukraine Tensions, Yen Strength, Technical Selling, Biotech/Transport Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 10.98 +1.2%

• Euro/Yen Carry Return Index 144.71 -.10%

• Emerging Markets Currency Volatility(VXY) 5.93 -.67%

• S&P 500 Implied Correlation 50.33 +4.51%

• ISE Sentiment Index 87.0 +1.16%

• Total Put/Call .82 +6.49%

• NYSE Arms .97 -8.20% 

Credit Investor Angst:

• North American Investment Grade CDS Index 55.93 -1.83%

• European Financial Sector CDS Index 59.44 +.16%

• Western Europe Sovereign Debt CDS Index 28.37 -2.81%
• Asia Pacific Sovereign Debt CDS Index 74.65 unch.

• Emerging Market CDS Index 231.76 -1.68%

• China Blended Corporate Spread Index 308.97 -.74%
• 2-Year Swap Spread 15.75 +1.0 basis point

• TED Spread 22.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -8.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 216.0 unch.

• China Import Iron Ore Spot $93.40/Metric Tonne +1.41%

• Citi US Economic Surprise Index -9.0 +1.2 points

• Citi Emerging Markets Economic Surprise Index -3.40 +4.9 points

• 10-Year TIPS Spread 2.26 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -7 open in Japan

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail/tech sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bull Radar

Style Outperformer:

• Mid-Cap Value +.09%

Sector Outperformers:

• 1) Hospitals +1.65% 2) Gold & Silver +1.53% 3) Homebuilders +1.12%
  

Stocks Rising on Unusual Volume:

• TEG, CTRL, INVN, RMTI, EMES and BWLD

Stocks With Unusual Call Option Activity:

• 1) MTOR 2) RLGY 3) LNCO 4) VRTX 5) TWX

Stocks With Most Positive News Mentions:

• 1) ORCL 2) HSNI 3) LULU 4) BWLD 5) MCRS
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg: 

• Militants Seize Iraqi Town Near Border With Jordan. Gunmen fighting Iraqi forces seized more territory along the country’s borders with Jordan and Syria, as President Barack Obama warned that advances by militants could spill over into neighboring countries. Fighters from the Islamic State in Iraq and the Levant, an al-Qaeda breakaway group, took all the border crossings with Jordan and Syria, Hameed Ahmed Hashim, a member of the Anbar provincial council, said by telephone yesterday. Militants took Rutba, about 145 kilometers (90 miles) east of the Jordanian border, Faleh al-Issawi, the deputy chief of the council, said by phone. Anbar province in western Iraq borders both countries. The Jordanian army didn’t immediately respond to a request for information about the situation on the border. 

• Israel Strikes Syrian Military After Teen Killed in Golan Blast. Israel attacked Syrian military posts after a teenager became Israel’s first fatality from more than three years of Syrian conflict, in a response that drags Israel deeper into its northern neighbor’s fighting.

• Putin Backs Cease-Fire in Ukraine Amid Russia Army Drills. Russian President Vladimir Putin voiced support for a cease-fire in Ukraine declared by his counterpart, calling for all sides to halt military activities even as he put more than 65,000 troops on combat alert. Putin said that while he supports the week-long truce that President Petro Poroshenko announced on June 20, the move shouldn’t be an ultimatum to militia groups and won’t be “viable or realistic” without “constructive steps” to start negotiations with rebel leaders in southeast regions. The statement, issued late yesterday by the Kremlin, came after the Defense Ministry in Moscow announced snap military drills across central Russia, the biggest since the country annexed Ukraine’s Black Sea peninsula of Crimea in March. Poroshenko, in office two weeks, is seeking to quell violence in the Luhansk and Donetsk regions that’s left hundreds dead. 

• China Beige Book Shows Economy Slowing on Investment. China’s economic slowdown deepened this quarter, as capital spending showed weakness and fewer companies applied for credit, a private survey showed. Half of businesses reported higher investment, the smallest proportion and the sharpest drop since the survey began 10 quarters ago, according to the China Beige Book, a report published quarterly by New York-based China Beige Book International. The slowdown hurt hiring and wages, and interest rates offered by shadow lenders fell below levels offered by banks, it said. “Since investment has been the engine of the economy for the past seven years, this weakness has sweeping effects on sectors, regions and gauges of firm performance,” Leland Miller, president of China Beige Book International, said in a statement with Craig Charney, director of research and polling. “Overinvestment has been an addiction and withdrawal symptoms will not be pretty.” 

• Abe’s Support Drops to Lowest Since He Took Office in Asahi Poll. Support for Japanese Prime Minister Shinzo Abe fell to 43 percent in an opinion poll published today, with more than half the respondents opposing his push to broaden the role of Japan’s defense forces. Backing for Abe was down 6 percentage points from a month earlier in the Asahi newspaper poll, the lowest reading in an Asahi survey since he took office in December 2012.

• Asian Stocks Advance With Aussie, Copper After China PMI. Asian stocks jumped, with the regional index extending a six-week rally, the Australian dollar rose and copper gained as a measure of Chinese manufacturing unexpectedly signaled expansion. Crude oil rose as Iraqi insurgents seized more territory, while gold fell. The MSCI Asia Pacific Index gained 0.5 percent by 10:58 a.m. in Tokyo, following a 0.4 percent advance last week.

• Oil Gains on Escalating Iraq Violence as U.S. Warns of Spillover. Brent for August settlement gained as much as 34 cents to $115.15 a barrel on the London-based ICE Futures Europe exchange.

• Hedge Funds Bet on Sugar as Dryness Threatens Crops: Commodities. Hedge funds got more bullish on sugar before prices climbed to the highest since October as dry weather threatened supply from India to Brazil. Money managers raised their net-long position for the first time in four weeks. A lack of rain in Brazil is compounding damage from the first-quarter drought and will cut yields, says Job Economia & Planejamento, a researcher in Sao Paulo.

• Google’s(GOOG) Nest to Buy Security Startup Dropcam for $555 Million.

Wall Street Journal:

• Secret U.S. Plan to Aid Iraq Fizzled Amid Mutual Distrust. The Obama's Administration Devoted Only a Handful of U.S. Specialists to the Task. Amid growing signs of instability in Iraq, President Barack Obama authorized a secret plan late last year to aid Iraqi troops in their fight against Sunni extremists by sharing intelligence on the militants' desert encampments, but devoted only a handful of U.S. specialists to the task. So few aircraft were dedicated to the program, which also faced restrictions by the Iraqis, that U.S. surveillance flights usually took... 

• Inflation Is Back on Wall Street Agenda. For years, critics have warned that the Federal Reserve’s easy-money policies would produce massive inflation. So far, they have been wrong. Last week, however, the Labor Department released the strongest inflation numbers since 2012, and now Wall Street is debating what it means for investments. Stock and bond investors are split.

• China Metal Probe Weighs on Copper Outlook. Hedge funds and other money managers are building up short positions in the global copper market, according to U.S. data, riding on allegations of fraudulent metal-backed financing in China to amplify pressure on prices of one of the world's most heavily traded metals. These positions are likely to further weigh on the outlook for the red metal, as the effects of an official probe on metal stockpiles in the eastern Chinese port of Qingdao continue to ripple across global markets. The port's operator has confirmed... 

• About Those Missing Emails. The fact that they are "lost" at all suggests Congress is looking in the right direction.  

• BNP Near Settlement With U.S. for Up to $9 Billion. Investigators Say Evidence Indicates French Bank Hid $30 Billion of Transactions in Violation. 

• Presbyterians Join the Anti-Israel Choir. Divesting from companies likeMotorola Solutions to show solidarity with the Palestinians. The Presbyterian Church (U.S.A.) is bleeding members. Between 2000 and 2013, almost 765,000 members left the organization, a loss of nearly 30%. Last week the church's leadership met in Detroit for crisis talks. No, not about the emptying-pews crisis. The Israel-Palestinian crisis. With a dwindling membership, the Presbyterian Church (U.S.A.) clearly needs new friends, but the church does itself no favors by courting Israel's enemies.

MarketWatch.com:

• Stocks are ‘dangerously overvalued,’ M&A deals suggest. Analysis: Every big wave of mergers has ended with a drop in equities.

• GoPro to highlight busy week of IPOs.

Zero Hedge:

• Russia Puts Troops In Central Region On Combat-Ready Alert After Launch Of Massive Surprise Drill - Video.

• Inflation? Only If You Look At Food, Water, Gas, Electricity And Everything Else.

• Russia Reignites The Proxy War: Putin Offers "Complete Support" To Iraq Prime Minister Scorned By Obama.

• Global Drag Threatens Worst U.S. Export Performance In Over 60 Years. (graph)

• 5 Things To Ponder: Things Bulls Should Consider.

• The Great Medication: Sri-Kumar Blasts, "The Fed Has Been Wrong Everytime!".

• Even ISIS Mocks Obama's "Hashtag Diplomacy" With #BringBackOurHumvee.

• No Alpha, All Beta, & Consensus Contagion. (graph)

• Immigration Control? Hundreds Of Bodies Found In Mass Grave In Texas.

• Judge Who Sentenced Saddam Hussein To Death Has Been Executed By ISIS, Local Media Reports.

• China Builds World's Most Powerful Nuclear Reactor; Regulators "Overwhelmed".

• Iraq Update: Air Force Runs Out Of Missiles, ISIS Controls The Border; Shiite Clerics Threaten US Troops.

• This Time Is Different,; But The Ending Will Be The Same.

• China Beige Book, HSBC Manufacturing PMI Paint Diametrically Opposing Pictures Of China's Economy. (graph)

• What The $1+ Trillion Student Debt Bubble Is Being Spent On. (graph)

Business Insider:

• There's A Big Disagreement Between Wall Street And The Fed — And It Will Be The Story Of The Summer.

• A Showdown Is Looming Between Hong Kong And China.

• Pro-Russian Rebels Are Ignoring A Ceasefire In Ukraine.

• Police Kill 13 After Another Mysterious ‘Terrorist’ Attack In China.

• The Sunni Rebellion In Iraq.

• The Risk Of A Major Oil Price Spike Is Now The Highest Since The Financial Crisis.

• Militants Turn Back The Clock In Iraq's Second City.

• A Top GM Quality Manager Warned The Board Of 'Unsafe Vehicles' In 2002.

• Extremist Militants Overran An Iraq-Jordan Border Post Near Saudi Arabia.

• Hillary Clinton Says She Isn't 'Truly Well Off'. Clinton responded to criticism of her wealth in an interview with the Guardian newspaper published Saturday night by suggesting Americans won't be concerned about the more than $100 million her family has reportedly earned in recent years because they're not "truly well off." "They don't see me as part of the problem," Clinton said of Americans who are upset about income inequality, adding, "Because we pay ordinary income tax, unlike a lot of people who are truly well off, not to name names; and we've done it through dint of hard work."

• Here's Why The Middle East Will Be 'On Fire' For The Foreseeable Future.

Wall Street All-Stars:

• Indicator Update: The Fed Behind the Curve?

Washington Post:

• Embattled Iraqi Prime Minister Nouri al-Maliki ‘will not go quietly,’ foes and friends say. Prime Minister Nouri al-Maliki will not readily surrender power and is unlikely to do so unless chief ally Iran insists that he go, Maliki’s foes and supporters are warning as pressure mounts on the embattled Iraqi leader to make concessions to rivals or step aside.

Reuters:

• After port fraud, China's vast warehouse sector under scrutiny. Shaken by a fraud investigation into metal financing in the world's seventh-busiest port, banks and trading houses have been made painfully aware of the risks they face storing commodities in China's sprawling warehouse sector.

Financial Times: 

• Central banks set to cut debt holdings. Central banks are planning to cut their exposure to longer-term debt to protect themselves from losses when the Federal Reserve ends its bond-buying this autumn, increasing the risk of instability in global markets.

Telegraph:

• Rates need to go up, says Bank 'dove’ David Miles. David Miles says increasingly likely he would vote to raise rates from a record low of 0.5pc before leaving the committee next May.

RIA Novosti:

• Putin Says Military Action in Ukraine Hasn't Stopped Yet. Russia observed "rather active" artillery shelling from Ukrainian side overnight, citing Russian President Vladimir Putin.

Kathimerini:

• Bank of China's Wellink Sees Global Economic Danger. "Global Economy is susceptible to external shocks," Nout Wellink, independent director at Bank of China, is cited as saying in an interview. Market conditions globally don't reflect fundamentals of real economy. Central banks will find it difficult to taper unconventional monetary policies. European Central Bank may proceed to purchase asset-backed securities in future, thus exhausting its means to intervene in economy.

Night Trading

• Asian indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.0 -.75 basis point.

• Asia Pacific Sovereign CDS Index 74.50 -1.0 basis point.

• FTSE-100 futures +.10%.

• S&P 500 futures +.24%.

• NASDAQ 100 futures +.27%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SONC)/.29

• (MU)/.72

• (HTZ)/.08

Economic Releases
8:30 am EST

• Chicago Fed Nat Activity Index for May is estimated to rise to .2 versus -.32 in April.

9:45 am EST

• Preliminary June Markit US Manufacturing PMI is estimated to fall to 56.0 versus 56.4 in May.

10:00 am EST

• Existing Home Sales for May are estimated to fall to 4.74M versus 4.65M in April.

Upcoming Splits

• (OZRK) 2-for-1

• (CELG) 2-for-1

• (CORE) 2-for-1

• (MIDD) 3-for-1

Other Potential Market Movers

• The Eurozone Manufacturing PMI and the Morgan Stanley REIT Summit could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on Iraq turmoil, Ukraine/Russia tensions, global growth fears, emerging markets debt angst, yen strength, technical selling and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.