Stocks Reversing Slightly Lower into Afternoon on Rising US High-Yield Debt Angst, Oil Decline, Yen Strength, Energy/Biotech 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) 13.49 -.44%

• Euro/Yen Carry Return Index 12-.96 -.01%

• Emerging Markets Currency Volatility(VXY) 9.89 -.30%

• S&P 500 Implied Correlation 47.24 -.32%

• ISE Sentiment Index 51.0 -51.78%
  

• Total Put/Call .88 +11.39%

• NYSE Arms 1.39 +116.37% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.74 +1.28%
  

• America Energy Sector High-Yield CDS Index 713.0 -2.85%

• European Financial Sector CDS Index 98.25 +1.10%

• Western Europe Sovereign Debt CDS Index 30.54 -.31%

• Asia Pacific Sovereign Debt CDS Index 48.55 +.80%

• Emerging Market CDS Index 248.58 +.40%
  

• iBoxx Offshore RMB China Corporate High Yield Index 130.54 -.3%

• 2-Year Swap Spread 15.75 -.75 basis point
  

• TED Spread 37.0 -1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -42.25 +1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.67 +.03%
• 3-Month T-Bill Yield .30% +2.0 basis points

• Yield Curve 80.0 -3.0 basis points
  

• China Import Iron Ore Spot $59.15/Metric Tonne -.39%

• Citi US Economic Surprise Index 13.0 +2.5 points

• Citi Eurozone Economic Surprise Index 4.4 -1.9 points

• Citi Emerging Markets Economic Surprise Index -16.70 unch.

• 10-Year TIPS Spread 1.47% -2.0 basis points
• 13.6% chance of Fed rate hike at Sept. 21 meeting, 13.6% chance at Nov. 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +174 open in Japan 
• China A50 Futures: Indicating +2 open in China

• DAX Futures: Indicating -17 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/retail sector longs
  

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running -4.6% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 54.0% of Issues Advancing, 42.8% Declining
• 163 New 52-Week Highs, 2 New Lows
• 60.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.5%
• Vix 13.5 -.4%
• Total Put/Call .93 +17.7%
• TRIN/Arms 1.35 +110.3%

Wednesday Watch

Night Trading 

• Asian equity indices are unch. to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 124.0 -5.75 basis points.
• Asia Pacific Sovereign CDS Index 48.50 -2.0 basis points.
• Bloomberg Emerging Markets Currency Index 72.55 -.13%. 
• S&P 500 futures -.10%. 
• NASDAQ 100 futures -.14%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ANGO)/.16
• (CBSH)/.68
• (CSX)/.44
• (YUM)/.73

Economic Releases  
8:30 am EST

• The Import Price Index MoM for June is estimated to rise +.5% versus a +1.4% gain in May. 

10:30 am EST:

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,250,090 barrels versus a -2,223,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,046,550 barrels versus a -122,000 barrel decline the prior week. Distillate supplies are estimated to fall by -118,180 barrels versus a -1,574,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.27% versus a -.5% decline prior.

2:00 pm EST

• The Monthly Budget Statement for June is estimated at $23.0B.
• US Fed Beige Book report. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Kaplan speaking, Fed's Harker speaking, Eurozone Industrial Production report, Australia Unemployment report, $12B 30Y T-Bond auction and the weekly MBA mortgage applications report 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Higher into Afternoon on Less European/Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Yen Weakness, Energy/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.75 +1.55%

• Euro/Yen Carry Return Index 121.23 +2.03%

• Emerging Markets Currency Volatility(VXY) 9.89 -1.0%

• S&P 500 Implied Correlation 49.06 -1.60%

• ISE Sentiment Index 125.0 +3.31%
  

• Total Put/Call .71 -6.58%

• NYSE Arms .68 -12.15% 

Credit Investor Angst:

• North American Investment Grade CDS Index 70.27 -2.70%
  

• America Energy Sector High-Yield CDS Index 720.0 -2.51%

• European Financial Sector CDS Index 97.18 -7.67%

• Western Europe Sovereign Debt CDS Index 30.64 -3.45%

• Asia Pacific Sovereign Debt CDS Index 48.55 -3.96%

• Emerging Market CDS Index 246.33 -3.24%
  

• iBoxx Offshore RMB China Corporate High Yield Index 130.59 +.03%

• 2-Year Swap Spread 16.55 +.25 basis point
  

• TED Spread 38.75 +1.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -43.25 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.65 +.34%
• 3-Month T-Bill Yield .28% unch.

• Yield Curve 83.0 +6.0 basis points
  

• China Import Iron Ore Spot $59.38/Metric Tonne +6.65%

• Citi US Economic Surprise Index 11.5 +1.9 points

• Citi Eurozone Economic Surprise Index 6.3 unch.

• Citi Emerging Markets Economic Surprise Index -16.70 -.3 point

• 10-Year TIPS Spread 1.49% +3.0 basis points
• 19.2% chance of Fed rate hike at Sept. 21 meeting, 19.2% chance at Nov. 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +520 open in Japan 
• China A50 Futures: Indicating +38 open in China

• DAX Futures: Indicating -9 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.1% Below 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 73.2% of Issues Advancing, 24.6% Declining
• 225 New 52-Week Highs, 1 New Lows
• 58.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.8%
• Vix 13.6 +.2%
• Total Put/Call .57 -.25%
• TRIN/Arms .62 -19.1%

Tuesday Watch

Night Trading 

• Asian equity indices are unch. to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 129.75 -3.75 basis points.
• Asia Pacific Sovereign CDS Index 50.50 -2.5 basis points.
• Bloomberg Emerging Markets Currency Index 72.46 +.08%. 
• S&P 500 futures +.08%. 
• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (FAST)/.48
• (AIR)/.43
• (ADTN)/.23

Economic Releases  
6:00 am EST

• The NFIB Small Business Optimism Index for June is estimated to rise to 93.9 versus 93.8 in May. 

10:00 am EST:

• Wholesale Inventories MoM for May are estimated to rise +.2% versus a +.6% gain in April.
• Wholesale Trade Sales MoM for May are estimated to rise +.5% versus a +1.0% gain in April.
• JOLTS Job Openings for May are estimated to fall to 5650 versus 5788 in April. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Tarullo speaking, Fed's Mester speaking, Fed's Kashkari speaking, German CPI report, Japan Industrial Production report, OPEC monthly update, weekly US retail sales reports, $20B 10Y T-Note auction, Semicon West, USDA WASDA report, Cantor Healthcare Conference and the (ENTG) analyst 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.