Stocks Falling into Afternoon on Geopolitical Tensions, Less Economic Optimism, Oil Decline, Transport/Metals & Mining Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 15.75 +4.51%

• Euro/Yen Carry Return Index 121.49 +.12%

• Emerging Markets Currency Volatility(VXY) 9.31 -.21%

• S&P 500 Implied Correlation 46.40 -.49%

• ISE Sentiment Index 133.0 +87.32%
  

• Total Put/Call .87 -4.4%

• NYSE Arms 1.08 -11.91%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.79 +1.32%
  

• America Energy Sector High-Yield CDS Index 351.0 +.38%

• European Financial Sector CDS Index 92.60 -1.07%

• Western Europe Sovereign Debt CDS Index 12.54 -2.75%

• Asia Pacific Sovereign Debt CDS Index 22.50 +2.02%

• Emerging Market CDS Index 213.86 +.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 136.69 -.05%

• 2-Year Swap Spread 32.0 -.25 basis point

• TED Spread 34.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -29.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.85 +.20%

• 3-Month T-Bill Yield .81% unch.
  

• Yield Curve 106.0 -1.0 basis point
  

• China Import Iron Ore Spot $68.04/Metric Tonne -8.52%

• Citi US Economic Surprise Index 36.70 +.3 point

• Citi Eurozone Economic Surprise Index 39.10 -.1 point

• Citi Emerging Markets Economic Surprise Index 19.3 -1.7 points

• 10-Year TIPS Spread 1.92 +1.0 basis point
  

• 60.0% chance of Fed rate hike at June 14 meeting, 62.7% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +67 open in Japan 

• China A50 Futures: Indicating -13 open in China

• DAX Futures: Indicating +29 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech sector longs and index hedges

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -1.1%

Sector Underperformers:

• 1) Steel -4.2% 2) Coal -2.1% 3) Construction -2.0%

Stocks Falling on Unusual Volume: 

• NS, TIME, FAST, MYCC, TSCO, KNX, AVGO, X, SWFT, TS, BHP, BZUN, AGX, PLSE, BPT, ROK and BBL

Stocks With Unusual Put Option Activity:

• 1) SMH 2) FAST 3) LNG 4) VGK 5) CIT

Stocks With Most Negative News Mentions:

• 1) TSCO 2) SWFT 3) FCX 4) TESO 5) BA

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.3%

Sector Outperformers:

• 1) Utilities +.4% 2) Foods +.3% 3) Airlines +.2%

Stocks Rising on Unusual Volume:

• COUP, NBIX, SYT, MZOR, HCSG, SJR, HTHT, TGS, APOG, DAL, WYN, WFM, PEP, MOMO, MMYT, SHEN and AFSI

Stocks With Unusual Call Option Activity:

• 1) LNG 2) SQ 3) AKRX 4) FAST 5) CIEN

Stocks With Most Positive News Mentions:

• 1) NOVN 2) AB 3) PEP 4) ALGT 5) HPQ

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -14.6% Below 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 36.6% of Issues Advancing, 58.0% Declining
• 50 New 52-Week Highs, 3 New Lows
• 58.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.1%
• Vix 15.8 +4.8%
• Total Put/Call .96 +5.5%
• TRIN/Arms .86 -29.2%

Wednesday Watch

Evening Headlines

Bloomberg:

• It's Mission Half Accomplished as Kuroda Eyes Last Year at BOJ. As Bank of Japan Governor Haruhiko Kuroda enters what may be his final year in office, it’s looking unlikely he’ll achieve what he set out to -- end deflation once and for all. Continuing the bank’s history of radical policy measures, there were initial signs that prices were responding to the shock-and-awe of Abenomics in Kuroda’s early days in the job. But that was undercut by a collapse in oil prices and a fall in consumption after a tax hike pushed the nation into recession. While prices look to be rising again, Kuroda’s 2 percent inflation target looks a bridge too far in his final year: economists forecast prices will rise 0.6 percent this year and 0.9 percent in 2018. Unless he agrees to stay on for another five-year term, success or failure of the current policy will come in the term of his successor.

• Asia Set for Mixed Open as Tension Spurs Haven Bid. The Japanese currency breached 110 yen per dollar for the first time since November, and its strength is helping push down Nikkei 225 index contracts. Stock futures for Australia, South Korea and Taiwan foreshadow gains. The yield on 10-year U.S. notes closed below 2.3 percent for the first time since November and gold is near its highest level this year as North Korea and Syria tensions ramped up. Oil was steady after rising for a sixth day on Tuesday. The yen was steady against the dollar after jumping 1.2 percent on Tuesday, the biggest jump since January. Futures on the Nikkei 225 traded in Singapore fell 0.4 percent, while contracts on Sydney’s S&P/ASX 200 climbed 0.3 percent. Futures on South Korea’s Kospi were up 0.2 percent, while those on the Hang Seng were down 0.3 percent.

• Your Evening Briefing.

• Apple(AAPL)-Qualcomm(QCOM) Billions Put at Risk as Phone Alliance Frays. (video)

Wall Street Journal:

• U.S. Says Russia Tried to Cover Up Syria Sarin Attack. White House officials suggest Moscow knew sarin would be used.

• Trump Issues New Warning to North Korea. President wants to put more economic and political pressure on Pyongyang, with military options under consideration long-term. 

Barron's:

• PCs: Q1 Shipments a Bit Better, Says IDC; Actually, A Bit Worse, Says Gartner. Q1 personal computer sales are in from the two main keepers of data, research firms Gartner and IDC, and whether you believe things are getting better or getting worse depends on whom you believe. IDC said sales rose 0.6% from the first quarter of last year, the first growth for the market in five years, at 60.3 million. Gartner said sales fell 2.4%, and that shipments fell below 63 million for the first time since 2007, at 62.2 million.

MarketWatch: 

• Warren Buffett’s big bet on United Airlines(UAL) could be costing him millions.

CNBC:

• An NYU student spent 6 weeks working undercover in an iPhone factory -- here's what he learned.

Zero Hedge:

• Tony Robbins, Pitbull And 5 Other Signs That Toronto Real Estate Is About To Crash.

• WTI/RBOB Extend Gains After Biggest Crude Inventory Draw Of 2017. (graph)

• "I'm Sorry, We'll Fix This": United CEO Issues Apology To Passenger And Everyone Else.

• Commercial Property Lending Tumbles As Retail / Hotel Originations Plunge.

• Yellen's Self-Serving Assessment: Fed Is "Doing Pretty Well".

• Trump: "We're Sending A Very Powerful Armada" To North Korea.

• Bullion Jumps To Post-Election Highs As Banks Give Up 2017 Gains.  (graph)

Business Insider:

• Some prominent Mexicans are calling for Mexico to take back Texas and the Southern US desert region.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 99.0 +3.0 basis points. 

• Asia Pacific Sovereign CDS Index 22.0 +.75 basis point.

• Bloomberg Emerging Markets Currency Index 71.69 -.02%.

• S&P 500 futures -.14%. 

• NASDAQ 100 futures -.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DAL)/.74

• (FAST)/.46

• (PIR)/.33

Economic Releases
8:30 am EST 

• The Import Price Index MoM for March is estimated to fall by -.2% versus a +.2% gain in February.  

• The Export Price Index MoM for March is estimated unch. versus a +.3% gain in February. 

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -$981,250 barrels versus a +1,566,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,343,750 barrels versus a -618,000 barrel decline the prior week. Distillate inventories are estimated to fall by -975,000 barrels versus a -536,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.37% versus a +1.5% gain prior.
  

2:00 pm EST

• The Monthly Budget Deficit for March is estimated to widen to -$169.0B versus -$108.0B in February.   

Upcoming Splits

• None of note

Other Potential Market Movers

• The China CPI report, $12B 30Y T-Bond auction, weekly MBA Mortgage Applications report, BofA Merrill Auto Summit, (JBLU) monthly traffic and the (MOS) analyst 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 modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on Geopolitical Tensions, Rising Eurozone Debt Angst, Yen Strength, Financial/Road & Rail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 15.17 +7.9%

• Euro/Yen Carry Return Index 121.48 -1.02%

• Emerging Markets Currency Volatility(VXY) 9.33 -.64%

• S&P 500 Implied Correlation 46.14 -2.33%

• ISE Sentiment Index 61.0 -29.89%
  

• Total Put/Call .87 -18.69%

• NYSE Arms 1.28 +9.99%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.42 +1.22%
  

• America Energy Sector High-Yield CDS Index 348.0 +.07%

• European Financial Sector CDS Index 93.25 +1.89%

• Western Europe Sovereign Debt CDS Index 12.90 +.43%

• Asia Pacific Sovereign Debt CDS Index 22.06 +3.47%

• Emerging Market CDS Index 212.02 +.49%
  

• iBoxx Offshore RMB China Corporate High Yield Index 136.76 +.22%

• 2-Year Swap Spread 32.25 +.25 basis point

• TED Spread 34.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -29.75 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.70 +.02%
• 3-Month T-Bill Yield .81% unch.
  

• Yield Curve 107.0 -2.0 basis points
  

• China Import Iron Ore Spot $74.38/Metric Tonne -.44%

• Citi US Economic Surprise Index 36.40 +.8 point

• Citi Eurozone Economic Surprise Index 39.20 +.3 point

• Citi Emerging Markets Economic Surprise Index 21.0 -3.7 points

• 10-Year TIPS Spread 1.91 -2.0 basis points
  
• 59.3% chance of Fed rate hike at June 14 meeting, 62.8% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -73 open in Japan 
• China A50 Futures: Indicating -23 open in China

• DAX Futures: Indicating +39 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long