Thursday Watch

Night Trading 

• Asian equity indices are unch. to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 138.25 -.75 basis point. 
• Asia Pacific Sovereign CDS Index 56.275 +.5 basis point. 
• Bloomberg Emerging Markets Currency Index 73.32 -.09%. 
• S&P 500 futures -.02%. 
• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ALK)/1.42
• (ADS)/3.81
• (AZZ)/.67
• (BBT)/.65
• (BIIB)/4.47
• (BX)/.39
• (BK)/.68
• (DHR)/1.03
• (DHI)/.46
• (FCS)/.14
• (FITB)/.35
• (GM)/1.00
• (JCI)/.82
• (MAN)/.93
• (NUE)/.27
• (NVR)/14.96
• (PJC)/.86
• (PPG)/1.30
• (PHM)/.20
• (DGX)/1.12
• (RS)/.88
• (SHW)/1.62
• (LUV)/.84
• (UA)/.02
• (UNP)/1.10
• (VZ)/1.06
• (GOOG)/7.96
• (BGG)/.89
• (CCI)/1.04
• (MXIM)/.42
• (MSFT)/.64
• (NSC)/.98
• (SLB)/.39
• (SBUX)/.39
• (SWFT)/.21
• (V)/.66 

Economic Releases  
8:30 am EST

• The Chicago Fed National Activity Index for March is estimated to rise to -.15 versus -.29 in February.
• Initial Jobless Claims for last week are estimated to rise to 265K versus 253K the prior week.
• Continuing Claims are estimated at 2171K versus 2171K prior.  
• Philly Fed Business Outlook Index for April is estimated to fall to 9.0 versus 12.4 in March. 
  

9:00 am EST

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

10:00 am EST

• The Leading Index for March is estimated to rise +.4% versus a +.1% gain in February.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The ECB rate decision, ECB press conference, BOJ rate decision, UK retail sales report, Eurozone Business Climate Index, German CPI, Bloomberg Economic Expectations Index for April, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (RF) annual meeting and (TXN) general meeting could also impact trading today.

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

Stocks Rising into Final Hour on Central Bank Hopes, Oil Reversal, Yen Weakness, Healthcare/Commodity Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.65 -4.46%

• Euro/Yen Carry Return Index 129.69 +.06%

• Emerging Markets Currency Volatility(VXY) 10.73 -4.59%

• S&P 500 Implied Correlation 53.49 -3.35%

• ISE Sentiment Index 72.0 -29.41%

• Total Put/Call .87 +42.6%

• NYSE Arms .54 -29.0% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.03 -4.91%
  

• America Energy Sector High-Yield CDS Index 1,109.0 -.87%

• European Financial Sector CDS Index 86.50 -1.14%

• Western Europe Sovereign Debt CDS Index 27.32 +1.0%

• Asia Pacific Sovereign Debt CDS Index 56.97 +1.31%

• Emerging Market CDS Index 270.80 -.90%
  

• iBoxx Offshore RMB China Corporate High Yield Index 127.36 -.07%

• 2-Year Swap Spread 14.0 +.5 basis point
  

• TED Spread 42.0 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -23.0 -.75 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.42 +.17%
• 3-Month T-Bill Yield .22% +1.0 basis point
  

• Yield Curve 104.0 +2.0 basis points
  

• China Import Iron Ore Spot $64.77/Metric Tonne +3.05%

• Citi US Economic Surprise Index -21.80 +.1 point

• Citi Eurozone Economic Surprise Index -14.50 +3.3 points

• Citi Emerging Markets Economic Surprise Index 15.3 -.3 point

• 10-Year TIPS Spread 1.64% +2.0 basis points
  
• 19.6% chance of Fed rate hike at June 15 meeting, 32.2% chance at July 27 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +424 open in Japan 
• China A50 Futures: Indicating -14 open in China

• DAX Futures: Indicating +64 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:    

• China Faces Make-or-Break Moment, Says Forecaster of Japan Slide. (video) China’s decades of rapid development under tight Communist Party control may be coming to an end, according to Roy Smith, the New York University academic who as a banker in 1990 anticipated Japan’s decline. "China has now arrived at an existential moment after nearly 40 years of extraordinary economic progress," said Smith, who also warned about budding Japan-like financial strains ahead of the Chinese stock rout in 2015. The country’s "increasingly complex and troubled economic and social system with all its scarcities" will make it tougher for Communist cadres to manage, he said.
• Shanghai Composite Falls Below 3,000. (video) 
• Chinese Shares Tumble With Oil While Early Rally in Japan Fades. The Shanghai Composite dropped as much as 4.5 percent as traders struggled to explain the reason behind the sudden selloff, which isn’t an unusual occurrence in a market dominated by individual investors. Interest in mainland equities has been fading this month after March’s 12 percent surge amid concern that improving economic data will prevent the government from adding stimulus. Hong Kong’s Hang Seng Index slipped 0.9 percent, while the Hang Seng China Enterprises Index of mainland stocks traded in the city dropped 1.2 percent.
• European Stocks Advance as Crude Reverses Loss, Miners Climb. European stocks advanced in late trading, extending a three-month high, as a rebound in oil spurred energy stocks, and miners climbed. Total SA led energy companies higher as crude recovered following data that showed a drop in U.S. output. BHP Billiton Ltd. paced gains in resource-related shares as metals rose after it cut its iron ore production forecast. ABB Ltd added 3.8 percent after the world’s largest maker of power grids posted profit that beat estimates. Volkswagen AG jumped 6.6 percent after saying it expects no need for a U.S. trial in mid-2016 over damages related to rigging diesel-engine control software to dupe emission tests. The Stoxx 600 rose 0.4 percent to 350.74 at the close of trading, after earlier falling as much as 0.5 percent.
• Steel-Glut Challenge Shown as China Shuns Global Statement. China declined to sign up to an international statement on actions needed to tackle the steel glut in a sign of the obstacles to balancing a market dominated by Chinese mills. Representatives of the European Union, the U.S., Japan, Canada, Mexico, South Korea, Switzerland and Turkey issued a statement on steel-market overcapacity after meeting this week in Brussels. China, which is the world’s No. 1 steel-producing country and took part in the April 18 gathering, isn’t among the signatories, according to the European Commission, the 28-nation EU’s executive arm.
• Templeton's $38 Billion CEO: Stocks May Be Set for a ‘Sharp Correction’. A penchant for safety in global stock markets is about to blow up in investors’ faces, says Norm Boersma, the $38 billion money manager who runs Templeton Global Advisors Ltd. Bond defectors seeking better returns have pushed up valuations in equities less sensitive to the economy, creating the potential for a “sharp correction,” according to Boersma. Templeton’s approach of picking beaten-down companies will recover after one of the worst periods of underperformance for value investing in a century, he said, noting he sees opportunities in financial and energy shares.
• Hedge Funds Suffer Worst Outflows Since Financial Crisis Era. Hedge funds suffered the worst withdrawals last quarter since the tail-end of the financial crisis as wild swings in stocks and commodities caused losses at some of the best-known firms. Investors pulled a net $15 billion between January and March, reducing assets under management to $2.86 trillion from $2.9 trillion, Chicago-based Hedge Fund Research Inc. said Wednesday. The last time outflows were higher was in the second quarter of 2009, when $43 billion was redeemed. Clients are redeeming after many hedge funds failed to protect them during market turmoil in the second half of last year and again at the start of 2016. Managers including John Paulson, Chase Coleman, Andreas Halvorsen, Ray Dalio and Bill Ackman posted losses in some of their funds last quarter, even as global stocks edged out a small gain with dividends reinvested.

Wall Street Journal:

• China Stock Markets Tumble. Shanghai shares suffer worst day since late February. The Shanghai Composite Index closed down 2.3%, marking its biggest daily percentage drop since late February. It is now down 16% since the beginning of the year. Meanwhile, China’s smaller Shenzhen Composite Index plunged 4.4%. The Nasdaq -style ChiNext benchmark dropped 5.6%.
• Russia Moves Artillery to Northern Syria, U.S. Officials Say. Deployment is a sign Moscow and the Assad government are preparing for a return to full-scale fighting. Russia has been moving artillery units to areas of northern Syria where government forces have massed, raising U.S. concern the two allies may be preparing for a return to full-scale fighting as the current cease-fire falters, U.S. officials said. The recent Russian redeployments of the units and the forces that operate them have been accompanied by the return of some Iranian army forces to government-controlled areas close to the front lines, according to officials briefed on the intelligence. Russia, Iran and the...
• Q&A: Harriet Tubman, Alexander Hamilton and the Currency Redesign.

Fox News:

• Change for a $20: Tubman to replace Jackson on new bills. The Treasury Department plans to announce Wednesday that the new $20 bill will feature abolitionist Harriet Tubman, replacing former President Andrew Jackson. A Treasury official confirmed the planned announcement to Fox Business Network. It would make Tubman the first woman on U.S. paper currency in 100 years. Politico also reported that Alexander Hamilton will remain on the front of the $10 bill, and other design changes are also being rolled out.

CNBC:

• Don't trust the Dow's 'golden cross': Belski. (video)
• Energy M&A stalls as buyers see little they want. "The market for sub-performing or poor-quality assets is really not there," an expert says.

Zero Hedge: 

• Fed Inspector General: "We Discovered Issues That Warrant Immediate Attention".
• Stocks, Oil Continue Soaring On Fake OPEC Meeting "Headline" That Was Just Denied. (graph)
• "Why Stocks Need More Really Bad News".
• WTI Crude Spikes Above $42 As US Production Drops To 18-Month Lows. (graph)
• Low- And High-End Existing Home Sales Disappoint - Supply & Stock Market Blamed. (graph)
• VIX Crashes To 12 Handle - Term Structure Steepest Since Dec 2014. (graph)
• Why Stocks Rebounded Overnight: Goldman Expects BOJ To Double Its Equity Purchases As Soon As Next Week. (graph)
• Crude Slides After Russia Warns Of Production Increase: "Was Never Ready To Cut Output". (graph)
• "We Express Deep Apologies" - Mitsubishi Admits Rigging Emissions Test Data.

Business Insider:

• A mass murderer responsible for killing 77 people in Norway just won part of a human-rights case against the government.
• You can now have your weed legally delivered in 60 minutes or less with this new app.
• Target(TGT) just took a big step for transgender customers. "We welcome transgender team members and guests to use the restroom or fitting room facility that corresponds with their gender identity," the retailer said in a statement. "Everyone deserves to feel like they belong. And you’ll always be accepted, respected and welcomed at Target."
• American high school students took SATs with questions that were online before they took the exam.
• Apple(AAPL) may have a major iPhone problem on its hands.
• Russia warns US over Baltic maneuvers and says it is willing to take 'necessary' action.

The Telegraph:

• Economic threat of Brexit is being 'exaggerated', says former Bank of England chief.
• Google(GOOG) accused of abusing Android smartphone monopoly in new battle with Brussels.

Bear Radar

Style Underperformer:

• Small-Cap Value -.1%

Sector Underperformers:

• 1) Education -1.1% 2) Utilities -.9% 3) Biotech -.5%

Stocks Falling on Unusual Volume:

• CAMP, ALR, OMI, CHKP, KO, ASML, LB, GLPI, BMI, CP, OKSB, TUP, PNK, MSEX, BKU, NSTG, FMBI, GKOS, SPG, GPN, SRPT, RS, BLUE, NWE, DV and TLN

Stocks With Unusual Put Option Activity:

• 1) DHR 2) XHB 3) AXP 4) INTC 5) HPQ

Stocks With Most Negative News Mentions:

• 1) DV 2) CAMP 3) REGN 4) AMTD 5) HSY

Charts:

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

Bull Radar

Style Outperformer: 

• Large-Cap Value +.3%

Sector Outperformers:

• 1) Computer Hardware +2.2% 2) Alt Energy +1.9% 3) Gold & Silver +1.8% 
  

Stocks Rising on Unusual Volume: 

• LXK, KKD, VMW, WWD, LTXB, CHUY, MANH, ADPT, TCK, WB, MXL, DFS, TXT, BMRN and SCTY

Stocks With Unusual Call Option Activity: 

• 1) SKX 2) DUST 3) DFS 4) KO 5) HL

Stocks With Most Positive News Mentions: 

• 1) ISRG 2) VMW 3) CRAY 4) MTW 5) VIA/B

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.1% Above 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 54.2% of Issues Advancing, 42.8% Declining
• 99 New 52-Week Highs, 2 New Lows
• 57.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.6%
• Vix 12.8 -3.5%
• Total Put/Call .75 +22.9%
• TRIN/Arms .56 -9.1%