Stocks Falling into Afternoon on Fed Rate Hike Fears, European/Emerging Markets/US High-Yield Debt Angst, Earnings Outlook Worries, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.34 +3.35%

• Euro/Yen Carry Return Index 120.37 +.77%

• Emerging Markets Currency Volatility(VXY) 9.58 +.21%

• S&P 500 Implied Correlation 43.52 +4.99%

• ISE Sentiment Index 97.0 -10.19%
  

• Total Put/Call .98 +12.64%

• NYSE Arms .75 -36.33% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.02 +.54%
  

• America Energy Sector High-Yield CDS Index 680.0 +1.34%

• European Financial Sector CDS Index 85.05 +2.19%

• Western Europe Sovereign Debt CDS Index 24.41 -.43%

• Asia Pacific Sovereign Debt CDS Index 35.75 +.82%

• Emerging Market CDS Index 233.11 +.82%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.62 -.02%

• 2-Year Swap Spread 26.0 -.25 basis point

• TED Spread 51.0 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -28.0 +4.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.34 -.10%
• 3-Month T-Bill Yield .34% unch.

• Yield Curve 84.0 +4.0 basis points
  

• China Import Iron Ore Spot $58.14/Metric Tonne -.55%

• Citi US Economic Surprise Index -4.8 +.9 point

• Citi Eurozone Economic Surprise Index -14.1 -.2 point

• Citi Emerging Markets Economic Surprise Index -10.0 -2.5 points

• 10-Year TIPS Spread 1.54% +3.0 basis points
• 32.6% chance of Fed rate hike at Nov. 2 meeting, 57.9% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -38 open in Japan 
• China A50 Futures: Indicating +21 open in China

• DAX Futures: Indicating -23 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech longs, index hedges and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Computer Hardware -1.7% 2) Steel -1.6% 3) Computer Services -1.3%

Stocks Falling on Unusual Volume: 

• WNRL, TSCO, ECHO, AMH, WATT, QVCA, CVGW, EVH, LSI, HPE, FNSR, GWRE, PSO, AIRM, LOXO, BNED, TWTR, LPL, CHTR, HUN, LULU, FCFS, OMCL, AAPL, KWR, HUN, DVAX, ECHO and BNED

Stocks With Unusual Put Option Activity:

• 1) MJN 2) XLI 3) LQD 4) ETE 5) RH

Stocks With Most Negative News Mentions:

• 1) TSCO 2) PIR 3) AIRM 4) MDRX 5) LULU

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value unch.

Sector Outperformers:

• 1) Oil Service +1.7% 2) Energy +1.2% 3) Gaming +1.0%

Stocks Rising on Unusual Volume:

• APIC, VRNT, TLRD, CLVS, TOUR, TREE, APA, BLUE, TLRD, TSRO, FRAN, CRC and MRC

Stocks With Unusual Call Option Activity:

• 1) MSTX 2) RAD 3) PRU 4) PSX 5) BRCD

Stocks With Most Positive News Mentions:

• 1) VMW 2) LLY 3) ICLD 4) GPX 5) SYNL

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.4% Above 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 47.3% of Issues Advancing, 49.2% Declining
• 119 New 52-Week Highs, 5 New Lows
• 63.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.8%
• Vix 12.3 +2.7%
• Total Put/Call 1.0 +14.9%
• TRIN/Arms .71 -41.3%

Thursday Watch

Night Trading 

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 107.25 -1.75 basis points.
• Asia Pacific Sovereign CDS Index 35.5 -1.75 basis points.
• Bloomberg Emerging Markets Currency Index 73.43 +.03%. 
• S&P 500 futures -.01%. 
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BKS)/-.18
• (CONN)/-.12
• (DCI)/.49
• (HAIN)/.57
• (NAV)/-.21
• (FNSR)/.30
• (KFY)/.53
• (RH)/.29
• (VNCE)/-.06
• (ZUMZ)/-.08 

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 265K versus 264K the prior week.
• Continuing Claims are estimated to fall to 2151K versus 2159K prior. 

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of  +631,000 barrels versus a +2,276,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -737,700 barrels versus a -691,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,199,800 barrels versus a +1,496,000 gain the prior week. Finally, Refinery Utilization is estimated to fall by -.26% versus a +.3% gain prior.
  

3:00 pm EST

• Consumer Credit for July is estimated to rise to $16.0B versus $12.32BN in June.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The ECB rate decision/press conference, China inflation data, Bloomberg US Economic Survey for Sept., weekly Bloomberg Consumer Comfort Index and the EIA natural gas inventory report could also 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 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Global Growth Fears, Yen Strength, US High-Yield Debt Angst, Food/Semi Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.99 -.25%

• Euro/Yen Carry Return Index 119.51 -.38%

• Emerging Markets Currency Volatility(VXY) 9.53 -.21%

• S&P 500 Implied Correlation 42.01 -.64%

• ISE Sentiment Index 107.0 +2.88%
  

• Total Put/Call .90 +4.65%

• NYSE Arms 1.33 +75.21% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.82 +1.0%
  

• America Energy Sector High-Yield CDS Index 676.0 -1.62%

• European Financial Sector CDS Index 83.30 -1.34%

• Western Europe Sovereign Debt CDS Index 24.51 +.14%

• Asia Pacific Sovereign Debt CDS Index 35.46 -4.70%

• Emerging Market CDS Index 231.55 -1.88%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.64 +.01%

• 2-Year Swap Spread 25.25 +.25 basis point

• TED Spread 50.25 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -32.25 +2.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.38 +.06%
• 3-Month T-Bill Yield .34% +3.0 basis points

• Yield Curve 80.0 -1.0 basis point
  

• China Import Iron Ore Spot $58.46/Metric Tonne -1.18%

• Citi US Economic Surprise Index -5.7 +1.3 points

• Citi Eurozone Economic Surprise Index -13.9 -5.3 points

• Citi Emerging Markets Economic Surprise Index -7.5 -.3 point

• 10-Year TIPS Spread 1.51% +1.0 basis point
• 27.0% chance of Fed rate hike at Nov. 2 meeting, 51.5% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -82 open in Japan 
• China A50 Futures: Indicating -6 open in China

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long