Stocks Slightly Lower into Afternoon on Earnings Outlooks, Yen Strength, Profit-Taking, Retail/Telecom Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.61 +3.92%

• Euro/Yen Carry Return Index 129.26 -.29%

• Emerging Markets Currency Volatility(VXY) 8.25 -1.55%

• S&P 500 Implied Correlation 41.70 +4.62%

• ISE Sentiment Index 89.0 -8.25%
  

• Total Put/Call .91 -2.15%

• NYSE Arms 1.08 +77.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.10 +.29%
  

• America Energy Sector High-Yield CDS Index 372.0 -.58%

• European Financial Sector CDS Index 67.33 +1.68%

• Western Europe Sovereign Debt CDS Index 7.45 -3.99%

• Asia Pacific Sovereign Debt CDS Index 20.47 -.05%

• Emerging Market CDS Index 195.12 +.02%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.72 +.15%

• 2-Year Swap Spread 26.0 +1.0 basis point

• TED Spread 30.25 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -31.75 -1.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.26 +.32%

• 3-Month T-Bill Yield .88% -1.0 basis point
  

• Yield Curve 106.0 unch.
  

• China Import Iron Ore Spot $60.38/Metric Tonne -.61%

• Citi US Economic Surprise Index -19.20 +.8 point

• Citi Eurozone Economic Surprise Index 69.60 +.6 point

• Citi Emerging Markets Economic Surprise Index 29.6 -1.7 points

• 10-Year TIPS Spread 1.91 +4.0 basis points
  

• 93.4% chance of Fed rate hike at July 26 meeting, 96.5% chance at Sept. 20 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -51 open in Japan 

• China A50 Futures: Indicating -12 open in China

• DAX Futures: Indicating +23 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail sector longs 

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Thursday Watch

Evening Headlines

Bloomberg: 

• Six Canadian Banks Cut by Moody's on Consumers' Debt Burden. Six of Canada’s largest banks had credit ratings downgraded by Moody’s Investors Service on concern that over-indebted consumers and high housing prices have left lenders vulnerable to potential losses on assets. Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada had their long-term debt and deposit ratings lowered one level, Moody’s said Wednesday in a statement. It also cut its counterparty risk assessment for the firms, excluding Toronto-Dominion.
• China Metals Bulls Aren't Panicking Just Yet as Rally Fades. China’s metals bulls are taking a pause rather than sounding the retreat. A gauge of six metals on the London Metal Exchange slumped Monday to its lowest in four months amid a collapse in copper and aluminum prices. As industry participants gather in Hong Kong for the LME’s annual Asia event this week, the hope for some is that a market that hit the skids in April is experiencing a blip and not a retreat to its 2016 lows.
• Asian Stocks Edge Higher, Kiwi Slides on Outlook. Stocks in Asia were mostly higher with global equities remaining near record levels, while oil rebounded. The New Zealand dollar declined after the nation’s central bank said it will keep rates at a record low for an extended period. Shares in Australia, New Zealand and South Korea advanced. Japan’s Topix index was little changed, trading near the highest since December 2015. The S&P 500 Index edged higher to claim a second closing record this week. Gold extended declines to a seventh day. Snap
  Inc. shares tumbled in after-hours trading after the social network added fewer users than forecast. Japan’s Topix index was flat, trading near the highest level since December 2015. South Korea’s Kospi advanced 0.3 percent and New Zealand’s S&P/NZX 50 increased 0.7 percent. Australia’s S&P/ASX 200 Index added 0.6 percent.
• Goldman(GS) to IEA See Oil Bulls Back on Top as Cuts Dent Stockpiles. Oil is trading near $50 again, OPEC seems to be losing its ability to influence prices and a wave of new supply is hitting the market from Texas to Libya. For some, there’s never been a better time to buy. Despite last week’s selloff, the global oil market is rebalancing rapidly, said Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc. If the Organization of Petroleum Exporting Countries extends its cuts into the second half -- as the group has signaled -- demand will significantly exceed production, according to the IEA’s Head of Oil Industry and Markets Neil Atkinson.
• Your Evening Briefing. (video)

Wall Street Journal:

• Comey’s Firing Came As Investigators Stepped Up Russia Probe. FBI director had been providing updates to top members of the Senate Intelligence Committee.
• Aetna(AET) to Pull Out of Current Affordable Care Act Exchanges. It will exit from Delaware and Nebraska next year.

Fox News:

• Comey tossed 'stick of dynamite' into the DOJ, says White House. (video)

CNBC:

• Whole Foods(WFM) taps new CFO, chairman in big board shake-up.
• Abercrombie & Fitch(ANF) confirms it is in talks with several interested buyers.
• Nvidia(NVDA) announced a plan to go up against Amazon(AMZN), Google(GOOG) and Microsoft(MSFT).
• US Steel's(X) CEO steps down as the company's challenges pile up; COO David Burritt takes over the top job.

Zero Hedge:

• James Comey Releases Farewell Letter, After Calling Trump "Crazy".
• Trump Tantrum: "Democrats Should Be Ashamed".
• Obama Takes Private Jet, 14-Car Convoy To His $3.2MM Climate Change Speech.
• 25% Of Snapchat's(SNAP) Market Cap Just Disappeared On Whopping $2.2 Billion Loss.
• Equity Traders 'Buy The F**king Comey Dip' As Treasury 'VIX' Tumbles. (graph)

Night Trading 

• Asian equity indices are unch. to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 88.5 -1.2 basis points. 
• Asia Pacific Sovereign CDS Index 20.5 unch.
• Bloomberg Emerging Markets Currency Index 72.02 -.02%.
• S&P 500 futures -.03%. 
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDS)/2.02
• (KSS)/.29
• (M)/.36
• (MGA)/1.34
• (CA)/.49
• (JWN)/.27

Economic Releases  
8:30 am EST

• PPI Final Demand MoM for April is estimated to rise +.2% versus a -.1% decline in March.  
• PPI Ex Food and Energy MoM for April is estimated to rise +.2% versus unch. in March.
• Initial Jobless Claims for last week are estimated to rise to 245K versus 238K the prior week.
• Continuing Claims are estimated to rise to 1980K versus 1964K prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, $15B 30Y T-Bond auction, (DAL) analyst meeting, (WFC) investor day, (RIG) annual meeting, (ZTS) annual meeting, (WMB) analyst day and the (STM) Capital Markets Day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Slightly Higher into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Oil Gain, Yen Weakness, Tech/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 9.97 +.1%

• Euro/Yen Carry Return Index 129.63 +.19%

• Emerging Markets Currency Volatility(VXY) 8.39 -.24%

• S&P 500 Implied Correlation 41.04 +2.42%

• ISE Sentiment Index 112.0 +10.9%
  

• Total Put/Call .84 +13.51%

• NYSE Arms .57 -40.75%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.80 -.94%
  

• America Energy Sector High-Yield CDS Index 374.0 -2.01%

• European Financial Sector CDS Index 66.23 +.93%

• Western Europe Sovereign Debt CDS Index 7.76 +.58%

• Asia Pacific Sovereign Debt CDS Index 20.53 -.22%

• Emerging Market CDS Index 195.78 -1.42%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.50 -.01%

• 2-Year Swap Spread 25.0 -2.0 basis points

• TED Spread 29.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -30.5 -1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.04 +.49%
• 3-Month T-Bill Yield .89% unch.
  

• Yield Curve 106.0 +1.0 basis point
  

• China Import Iron Ore Spot $60.75/Metric Tonne unch.

• Citi US Economic Surprise Index -20.0 -.5 point

• Citi Eurozone Economic Surprise Index 70.20 -.4 point

• Citi Emerging Markets Economic Surprise Index 31.3 +.4 point

• 10-Year TIPS Spread 1.87 +1.0 basis point
  
• 97.2% chance of Fed rate hike at July 26 meeting, 98.5% chance at Sept. 20 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +80 open in Japan 
• China A50 Futures: Indicating +8 open in China

• DAX Futures: Indicating +15 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long