Bear Radar

Style Underperformer:

• Small-Cap Growth -1.3%

Sector Underperformers:

• 1) Oil Tankers -4.7% 2) Oil Service -2.4% 3) Airlines -2.1%

Stocks Falling on Unusual Volume:

• HASI, CAVM, WGP, KFY, EVHC, AEUA, PXD, MIDD, DSSLV, BMRN, SYT, WATT, TEAM, HUBB, WBS, XIV, ACAT, SYF, BOBE, CRC, GBT, URI, OLLI, DFS, CACC, AAL, CDW, HCLP, FIT and AMID

Stocks With Unusual Put Option Activity:

• 1) XLF 2) MGM 3) XOP 4) GS 5) USB

Stocks With Most Negative News Mentions:

• 1) CAVM 2) ACAT 3) URI 4) CIE 5) KFY

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.9%

Sector Outperformers:

• 1) Gold & Silver +.8% 2) Utilities +.5% 3) HMOs +.4%

Stocks Rising on Unusual Volume:

• QLGC, EXAS and NUS

Stocks With Unusual Call Option Activity:

• 1) TJX 2) TLT 3) MRK 4) KR 5) LOCK

Stocks With Most Positive News Mentions:

• 1) NUS 2) EXAS 3) CENT 4) CALM 5) BCOV

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.6% Below 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 18.2% of Issues Advancing, 79.5% Declining
• 33 New 52-Week Highs, 38 New Lows
• 53.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.0%
• Vix 22.4 +11.3%
• Total Put/Call 1.33 +13.7%
• TRIN/Arms .96 -2.1%

Thursday Watch

Night Trading 

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 148.5 -1.0 basis point. 
• Asia Pacific Sovereign CDS Index 54.0 -1.5 basis points.
• Bloomberg Emerging Markets Currency Index 71.50 -.01%. 
• S&P 500 futures -.07%. 
• NASDAQ 100 futures -.11%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (KR)/.69
• (RAD)/.04
• (FNSR).,25
• (MRVL)/.09
• (ORCL)/.82
• (SWHC)/.54

Economic Releases  
8:30 am EST

• The Current Account Balance for 1Q is estimated at -$125.0B versus -$125.3B in 4Q.
• Initial Jobless Claims are estimated to rise to 270K versus 264K the prior week.
• Continuing Claims are estimated to rise to 2140K versus 2095K prior.
• Philly Fed Business Outlook for June is estimated to rise to 1.0 versus -1.8 in May.
• The CPI MoM for May is estimated to rise +.3% versus a +.4% gain in April.
• The CPI Ex Food and Energy MoM for May is estimated to rise +.2% versus a +.2% gain in April.    
• Real Avg Weekly Earnings YoY for May. 

10:00 am EST

• The NAHB Housing Market Index for June is estimated to rise to 59.0 versus 58.0 in May.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Swiss rate decision, Bloomberg Economic Expectations Index for June, weekly Bloomberg Consumer Comfort Index and the (MGM) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and technology 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.

Stocks Modestly Higher into Final Hour on Central Bank Hopes, Less European/Emerging Markets/US High-Yield Debt Angst, Short-Covering, Retail/Metals & Mining Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 19.44 -5.17%

• Euro/Yen Carry Return Index 124.169 +.37%

• Emerging Markets Currency Volatility(VXY) 10.97 -1.53%

• S&P 500 Implied Correlation 57.62 -3.18%

• ISE Sentiment Index 97.0 unch,
  

• Total Put/Call 1.17 +13.59%

• NYSE Arms .69 -49.8% 

Credit Investor Angst:

• North American Investment Grade CDS Index 84.39 +.26%
  

• America Energy Sector High-Yield CDS Index 774.0 +1.20%

• European Financial Sector CDS Index 115.25 +.55%

• Western Europe Sovereign Debt CDS Index 28.95 -3.39%

• Asia Pacific Sovereign Debt CDS Index 54.19 -2.19%

• Emerging Market CDS Index 300.26 -2.08%
  

• iBoxx Offshore RMB China Corporate High Yield Index 129.33 +.04%

• 2-Year Swap Spread 15.5 +.25 basis point
  

• TED Spread 37.75 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -35.50 +1.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.57 +.51%
• 3-Month T-Bill Yield .25% -2.0 basis points

• Yield Curve 91.0 +2.0 basis points
  

• China Import Iron Ore Spot $50.65/Metric Tonne +.16%

• Citi US Economic Surprise Index -22.90 -.6 point

• Citi Eurozone Economic Surprise Index -4.60 -.4 point

• Citi Emerging Markets Economic Surprise Index -2.4 -.7 point

• 10-Year TIPS Spread 1.50% +2.0 basis points
  
• 7.7% chance of Fed rate hike at July 27 meeting, 23.6% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +120 open in Japan 
• China A50 Futures: Indicating -333 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

• Lower: On losses in my index hedges and emerging market shorts
  

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• Brexit Woe Splits Europe’s Bond Market in Recall of Debt Crisis. Britain’s European Union referendum is redrawing old lines in the European bond market. As demand for safety in the run-up to the vote pushed Germany’s 10-year yields below zero for the first time on record on Tuesday, those on Spanish two-year notes were turning positive. Meanwhile the yield difference between Italian and German 10-year bonds reached the highest since February. For much of Wednesday the reverse was true. Spanish and Italian bonds initially climbed, while German bunds fell, before the securities pared their moves.
• Japan Traders Risk Brexit Pain in Record Pound Bullish Bets. Japan’s retail investors look to have bought the dip in the pound just in time for the currency to fall off a cliff as polls showed Britons may vote to leave the European Union. Wagers from individuals for sterling to gain against Japan’s currency outnumbered bets it would drop by 314,616 contracts as of June 7, the biggest net longs since Tokyo Financial Exchange Inc.’s Click 365 began collecting the data in 2006. That contrasts with global options markets, where the amount wagered on the pound falling to the lowest since the 1980s more than doubled over the past three months.
• China’s Bank Lending Rebounds; Good for Growth, Bad for Risk. China’s banks turned on the lending spigot again last month -- a boost for the near-term economic outlook, but a longer-term drag as the nation’s debt pile keeps on swelling. New yuan loans rebounded to 985.5 billion yuan ($150 billion) in May, the People’s Bank of China said, ahead of all 35 economists estimates and beating the median for 750 billion yuan in a Bloomberg survey. Aggregate financing was 659.9 billion yuan last month, missing all but one of 28 forecasts and below the median for 1 trillion yuan, as short-term bill financing slumped and net issuance of corporate bonds turned negative.
• There Has Almost Never Been This Many Global Stocks in Decline. (graph) Breadth is brutal. Fear of a possible Brexit is being manifested in equities around the world. The Bloomberg composite referendum poll tracker shows that in recent days, the share of the electorate who would vote to leave the E.U. has pulled ahead of the percentage who would vote to remain. Amid the evidence that the "Leave" camp is gaining support, global equities have come under acute pressure, with the MSCI All World Index giving back more than 4 percent over the four sessions through Tuesday. What's startling about this particular pullback is how the number of stocks that are rising was, at the time of yesterday's close, absolutely dwarfed by the amount in decline, observe analysts at Bespoke Investment Group. That means Bespoke's International Benchmark Breadth Indicator, which tracks the number of stocks that are advancing or declining in 25 major markets around the world, tumbled on Tuesday to levels rarely seen in the past decade:
• Sub-Zero German Yields Risk Creating Vicious Cycle for Investors. The rally in Germany’s bonds is creating a headache for investors. The yield on the nation’s 10-year bund dropped below zero for the first time on record on Tuesday, leaving some investors balking at the lack of return on offer for holding Europe’s benchmark securities. Meanwhile, the surge in bunds has pushed yields on more than half of the $1.13 trillion Bloomberg German Sovereign Bond Index below the European Central Bank’s minus 0.4 percent deposit rate, making almost $626 billion of the bonds ineligible for its quantitative easing plan.
• European Stocks Rebound as Miners Rise, Inditex Buoys Retailers. A rally in miners and retailers lifted European stocks after a five-day rout, while traders speculated that the Federal Reserve’s latest policy review will offer encouragement to beleaguered markets. Glencore Plc climbed 6.5 percent, helping commodity producers post the biggest increase of the 19 industry groups on the Stoxx Europe 600 Index, as metals advanced. Inditex SA pushed retailers ahead with a 5.5 percent rise after the maker of Zara clothing reported better-than-expected first-quarter profit. Banks in peripheral nations led gains on a gauge of lenders. The Stoxx 600 added 1 percent to 323.63 at the close, rebounding from its lowest level in almost four months.
• Oil, Gas Drillers Said Facing $2 Trillion Funding Gap. (video) Drillers forced to slash spending during the oil slump may soon be facing another hurdle: a funding shortfall to the tune of $2 trillion over the next five years. That capital crunch creates the risk for underinvestment, perhaps affecting the availability of reserves in the longer term, according to a study published Wednesday by the Deloitte Center for Energy Solutions. The global oil and natural gas industry has curbed capital spending "to a point below the minimum required levels to replace reserves," the Deloitte report said. "That is quite unusual," Andrew Slaughter, executive director at the Center, said of the funding gap in an interview. "You’ve got to spend a lot of capital just to stand still, even without growth."
• Treasuries Have Best Start Since ’03 as Growth, Brexit Curb Fed. (video) Treasuries are in the midst of their best start to a year in more than a decade as flagging global economic growth and the prospect of Britain exiting the European Union boost demand for haven investments. Benchmark 10-year note yields fell Wednesday before the Federal Reserve concludes a policy meeting. Treasuries have returned 4.8 percent in 2016, the most at this stage of the year since 2003, based on Bank of America Corp.’s U.S. Treasury Index. Futures prices showed zero chance of a Fed interest-rate increase this week, and the probability of a move this year has declined to about 49 percent, from 74 percent at the end of May.
• Chanos: Easier to Find Short Ideas as Bull Market Goes On. (video)
• Michael Milken Family Office Becoming a Hedge Fund, Journal Says. Executives who have been managing the personal wealth of Michael Milken at his family office Silver Rock Financial LLC have transformed the firm into a hedge fund and are seeking outside money, the Wall Street Journal reported, citing regulatory filings and people familiar with the matter.

CNBC:

• Fed leaves rates unchanged in June meeting. Amid worries about slowing job growth, Federal Reserve officials remain only tentatively committed to two more rate hikes this year, and provided indications Wednesday that there might be only one. As widely expected, the Federal Open Market Committee on Wednesday declined to raise its interest rate target at this week's two-day meeting from the current 0.5 percent. While the so-called dot plot of future rate projections indicates there still is a greater likelihood of two moves before the end of 2016, doubts are increasing. At the April meeting, just one member indicated that the year would end with only one hike. That number jumped to six, or more than half of the 10 voting members, at the June session. 
• Here's what changed in the new Fed statement.
• It doesn't even seem like Trump wants to be president: WSJ op-ed columnist.
• US bond yields could soon go negative: Strategist.

Zero Hedge:

• New Orlando Shooter Eyewitness Emerges: Testifies That 5 People Were Involved In Pulse Attack.
• An Unprecedented Jump In The VIX. (graph)
• Violent, Bloody Scenes From Tuesday's Massive Protests In Paris. (pic)
• Something Unexpected Emerges In China's Latest Money And Credit Data.
• Oil Spikes After DOE Inventories Data Refutes API For 3rd Week In A Row, Production Drops. (graph)
• Bubble News From The Nosebleed Section.
• Industrial Production Plunges For 9th Straight Month - Longest Non-Recession Streak In 100 Years. (graph)
• Gundlach: "Central Banks Are Losing Control" - His Latest Presentation.
• Empire Fed Rises Above Highest Estimte On Jump In New Order As Employment Conditions Deteriorate. (graph)
• Core Producer Prices Surge Most Since Jan 2015, Gasoline Prices Soar. (graph)
• 16% Of Europe's IG Corporate Bonds Now Yield Below 0%.

Business Insider:

• US companies have spent $2 trillion doing something that has absolutely no impact on their business.
• Boeing(BA) has reportedly agreed to a historic multibillion-dollar deal with Iran.
• The Fed just slashed its US growth outlook.
• 'I have never faced a crisis like this': Rio's problems are growing worse as the Olympics get closer.
• There's a 'storm brewing' in the US economy.
• China is using manufacturing robots because it's getting too expensive to pay people.
• Jim Chanos has a new thing that should 'scare the heck out of everybody'.

The Telegraph:

• Oil price retreats from $50 - and will stay lower ‘for months’, says Goldman Sachs.