Stocks Rising into Final Hour on Earnings Optimism, Oil Gain, Short-Covering, Biotech/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.10 -1.94%

• Euro/Yen Carry Return Index 134.73 -.01%

• Emerging Markets Currency Volatility(VXY) 7.76 +.13%

• S&P 500 Implied Correlation 32.09 +3.45%

• ISE Sentiment Index 94.0 +6.82%
  

• Total Put/Call .84 +20.0%

• NYSE Arms .64 -43.78%

Credit Investor Angst:

• North American Investment Grade CDS Index 58.93 -2.61%
  

• America Energy Sector High-Yield CDS Index 461.0 -1.92%

• European Financial Sector CDS Index 50.90 -2.75%

• Western Europe Sovereign Debt CDS Index 6.12 -.57%

• Asia Pacific Sovereign Debt CDS Index 21.76 -1.02%

• Emerging Market CDS Index 196.86 -.61%
  

• iBoxx Offshore RMB China Corporate High Yield Index 140.04 -.02%

• 2-Year Swap Spread 24.0 -1.0 basis point

• TED Spread 26.25 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -26.25 +.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.03 +.11%
• 3-Month T-Bill Yield 1.03% -1.0 basis point
  

• Yield Curve 98.0 +1.0 basis point

• China Import Iron Ore Spot $65.91/Metric Tonne +2.9%

• Citi US Economic Surprise Index -54.70 +1.9 points

• Citi Eurozone Economic Surprise Index 37.20 -.8 point

• Citi Emerging Markets Economic Surprise Index 13.60 +.5 point

• 10-Year TIPS Spread 1.78 +3.0 basis points
  
• 24.3% chance of Fed rate hike at Sept. 20 meeting, 25.9% chance at Nov. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +36 open in Japan 
• China A50 Futures: Indicating -15 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running -11.6% Below 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 42.2% of Issues Advancing, 52.7% Declining
• 83 New 52-Week Highs, 6 New Lows
• 46.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.2%
• Vix 10.3 unch.
• Total Put/Call .92 +31.4%
• TRIN/Arms .70 -39.0%

Thursday Watch

Evening Headlines

Bloomberg:

• Trump and Macron Get to Push Reset on Their Awkward Relationship. The awkward relationship between Donald Trump and Emmanuel Macron that began with a white-knuckle handshake and the U.S. president’s repudiation of the Paris climate accords gets a chance for a reset with Trump’s two-day visit to France. For Trump, a businessman who first rose to prominence with a book celebrating deal-making, the meeting with the new French president offers an opportunity for the type of face-to-face transactional diplomacy he relishes.

• Workers of the Euro Area Rise Up and Ask for More Pay, Maybe. Euro-area labor representatives are about to test whether the broadest economic growth in years can finally deliver a decent pay rise. Unions in the currency bloc’s largest nations, interviewed by Bloomberg this month, blame lackluster pay gains on dampened expectations among workers since the region’s financial crises, and reforms that have weakened their negotiating power. Now they can point to four years of economic recovery and the return of inflation as they urge employers to countenance bigger increases in collective-bargaining agreements.

• Bank of Korea Holds Key Rate Steady, to Review Economic Outlook. South Korea’s central bank held its benchmark rate on Thursday as export growth and planned fiscal stimulus add to optimism about the economy. The decision to keep the seven-day repurchase rate at a record-low 1.25 percent was forecast by all 20 economists surveyed by Bloomberg. The Bank of Korea will also update its quarterly outlooks for gross domestic product and inflation later Thursday, having previously forecast 2.6 percent and 1.9 percent, respectively, for this year.

• Asian Stocks to Gain as Yellen Spurs U.S. Rally. Futures on the Nikkei 225 Stock Average in Chicago were trading 0.4 percent higher than the index’s Wednesday close. Contracts on equities in Australia rose 0.5 percent, while those on the Kospi were up 0.6 percent and FTSE A50 China futures gained 0.3 percent. The yen was at 113.22 per dollar as of 7:16 a.m. in Tokyo, after climbing 0.7 percent Wednesday in its biggest gain for more than a month.

• Nigeria Signals Willingness to Cap Oil Production. (video)

• Five Things You Need to Know to Start Your Day.

• MacroPolicy Perspectives Says Yellen was a Bit Dovish. (video)

• NFL Teams Split Record $7.8 Billion in 2016, Up 10 Percent.

Wall Street Journal:

• China’s Booming Housing Market Proves Impossible to Tame. Beijing’s efforts to curb speculation have only made buyers more determined; many believe the government won’t allow a market collapse.

• McConnell Faces Increasing Pressure Over Health Bill as Timetable Tightens. Senate GOP to unveil latest draft on Thursday as internal squabbling imperils path forward.

• FBI Nominee Christopher Wray Promises to Remain Independent of White House. Senators focus on autonomy in wake of Trump’s firing of ex-Director James Comey.

Fox News:

• Shadowy company tied to Russia meeting linked to Trump Jr. troubles. (video)

• White House goes on offense, slams DNC, Clintons for ‘collusion’. (video)

CNBC:

• A big deal in nonprime mortgages proves leery investors are finally hungry again.

• Major defense stocks reach all-time highs as investors see weapons spending boost.

• Machines taking over hedge funds despite lack of evidence they outperform humans. (video)

Zero Hedge:

• "Canada Is In Serious Trouble" Again, And This Time It's For Real. (graph)

• Trump: "I Think Many People Would Have Held That Meeting".

• Wal-Mart(WMT) Threatens To Fine Suppliers For Delivering Goods Early.

• China Deploys Troops To Its First Overseas Military Base In Africa.  

• New Op-Ed From Senator Rand Paul Blasts GOP Decision To "Keep Obamacare".

• "Buy All The Things" - Yellen's Dovish Flip Sparks Bid In Stocks, Bonds, Bullion, & Bitcoin. (graph)

Business Insider:

• Jared Kushner is under fire as all eyes turn to the only White House adviser in on the Don Jr. meeting with a Russian lawyer.

• Central banks could be moving us closer to the next financial crisis.

Night Trading 

• Asian equity indices are +.5% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 86.25 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 22.0 unch.

• Bloomberg Emerging Markets Currency Index 72.96 +.66%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CBSH)/.70

• (DAL)/1.66

• (TSM)/2.63

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 245K versus 248K the prior week.

• Continuing Claims are estimated to fall to 1950K versus 1956K prior.

• The PPI Final Demand MoM for June is estimated unch. versus unch. in May.

• The PPI Ex Food and Energy MoM for June is estimated to rise +.2% versus a +.3% gain in May.
  

2:00 pm EST

• The Monthly Budget Deficit for June is estimated at -$38.0B.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen testifying to Senate, Fed's Evans speaking, CBO analysis of 2018 budget, China Trade Balance report, Eurozone CPI report, weekly Bloomberg Consumer Comfort Index and the $12B 30Y bond auction could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and industrial 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 Surging into Final Hour on More Dovish Fed Commentary, Earnings Optimism, Oil Gain, Tech/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 10.25 -5.88%

• Euro/Yen Carry Return Index 134.89 -1.05%

• Emerging Markets Currency Volatility(VXY) 7.76 +.13%

• S&P 500 Implied Correlation 32.35 -4.35%

• ISE Sentiment Index 89.0 -58.8%
  

• Total Put/Call .66 -37.74%

• NYSE Arms 1.23 +40.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.20 -2.62%
  

• America Energy Sector High-Yield CDS Index 469.0 -2.35%

• European Financial Sector CDS Index 52.35 -2.37%

• Western Europe Sovereign Debt CDS Index 6.15 -1.13%

• Asia Pacific Sovereign Debt CDS Index 21.98 +.25%

• Emerging Market CDS Index 197.68 -2.73%
  

• iBoxx Offshore RMB China Corporate High Yield Index 140.08 unch.

• 2-Year Swap Spread 25.0 -1.0 basis point

• TED Spread 25.75-.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -27.0 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.91 +.59%
• 3-Month T-Bill Yield 1.04% unch.
  

• Yield Curve 97.0-2.0 basis points

• China Import Iron Ore Spot $64.05/Metric Tonne -2.06%

• Citi US Economic Surprise Index -56.60 +1.8 points

• Citi Eurozone Economic Surprise Index 38.0 +.2 point

• Citi Emerging Markets Economic Surprise Index 13.10 -.6 point

• 10-Year TIPS Spread 1.75 +2.0 basis points
  
• 24.3% chance of Fed rate hike at Sept. 20 meeting, 25.9% chance at Nov. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +97 open in Japan 
• China A50 Futures: Indicating -7 open in China

• DAX Futures: Indicating +20 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• EU’s Barnier Has ‘Trust’ Issue With U.K. Over Unclear Brexit. (video) The European Union’s chief Brexit negotiator, Michel Barnier, issued his second stern warning to the U.K. in the space of a week, demanding Theresa May’s government make its positions clear so talks on its withdrawal from the bloc can start making progress. “We can’t remain idle as the clock’s ticking,” said an exasperated-sounding Barnier, when he briefed journalists in Brussels on Wednesday. “We need to know on which points we agree and on which points we disagree so that we can negotiate in earnest.”
• Latin America's Scandals Burn Emerging-Market Bond Funds. While emerging-market bonds extended an 18-month rally through June, money managers at some of the world’s largest debt funds were left in the dust. Developing-nation funds from Pictet Asset Management Ltd., Neuberger Berman Group LLC and RBC Global Asset Management Ltd. ended the first half of 2017 as the worst performers in their class, according to data compiled by Bloomberg. Portfolios managed by BlackRock Inc. and JPMorgan Chase & Co.’s asset-management unit also finished in the bottom quartile.
• European Stocks Rally Most in 11 Weeks on Yellen's Comments. (video) European stocks extended gains as Federal Reserve Chair Janet Yellen signaled that the U.S. central bank won’t rush to tighten monetary policy as inflation remains below target. The Stoxx Europe 600 Index rose 1.5 percent at the close, the most since April. All 19 sectors advanced. The European benchmark yesterday fell to its lowest level since April after Donald Trump Jr. released emails suggesting Russia’s government backed his father’s presidential campaign.
• Your Evening Briefing. 
• Yellen's Take on Inflation Shifts Subtly in Remarks to Congress. (video) Federal Reserve Chair Janet Yellen on Wednesday altered the language she used to describe recent softness in inflation, expressing deeper concerns over how persistent that weakness may prove. In written testimony to lawmakers, Yellen noted declines in “certain categories of prices,” in a reference to drops in prices for mobile telecommunications services and pharmaceuticals. However, she called lower inflation “partly the result” of those factors. In June, her take was subtly, but importantly, different. At the beginning of a June 14 press conference after a Fed meeting at which officials voted to raise interest rates, Yellen said recent lower inflation was driven “significantly by what appear to be oneoff reductions in certain categories of prices.”
• Bernanke and Other Heavyweights Warn Trump Against Steel Tariffs. Former Federal Reserve chairmen Ben Bernanke and Alan Greenspan and other leading economists are warning President Donald Trump that new tariffs on foreign steel would raise costs for U.S. manufacturers, increase prices for consumers and harm relations with allies.
• Senators Explore Bipartisan ‘Plan B’ to Troubled GOP Health Bill. (video) More than half a dozen Republican and Democratic senators have discussed alternatives to the embattled GOP health-care bill, even as Majority Leader Mitch McConnell said he plans a vote next week to muscle the Obamacare repeal measure through the Senate. Talks about a bipartisan fallback are based on the idea that Obamacare insurance markets have problems and would need to be fixed if the health-care bill dies. For Democrats, it would avert a repeal of a signature achievement that they admit needs improvement. For some GOP moderates, it would be a concrete act that would help their constituents amid a maelstrom of partisan bickering.
• Bitcoin Acceptance Among Retailers Is Low and Getting Lower. Retailers were already skeptical about letting customers pay with bitcoin before the cryptocurrency’s price underwent an astronomical rally this year. That rapid surge hasn’t made them any more accepting. In fact, it may have done the opposite.
• Paul Singer Made $57.6 Million in One Day on This Bet.

Wall Street Journal:

• Visa(V) Takes War on Cash to Restaurants. Company offers up to 50 merchants $10,000 apiece to upgrade payment technology and stop taking cash.
• China’s Bid to Curb Its Booming Housing Market Has Only Made It Hotter. Higher rates and larger down payments don’t deter buyers, who don’t believe the government will allow a market collapse.
• Morning After Email Release, Trump Declares Son’s Innocence, Attacks News Media. ‘This is the greatest witch hunt in political history. Sad,’ the president writes on Twitter.
• Apple(AAPL) to Build China Data Center to Meet New Cybersecurity Law. The iPhone maker’s compliance comes as it faces increasing regulatory headwinds in China.
• Sign of the Bottom? New ETFs Will Bet Against Beaten-Down Retail Stocks. Planned ETFs to bet against brick-and-mortar retailers could prove a contrarian signal.
• Enlisting Virtual Reality to Ease Real Pain. Putting on VR goggles and virtually swimming with dolphins can ease some patients’ pain, new research shows. Hospitals across the country are giving VR a try.

Fox News:

• Trump unloads on Hillary over double standard, amid reports Dems also got foreign help. (video)

CNBC:

• Insana: Nominating ex-commodity trader Cohn to lead Fed like letting 'gambling addict run a casino'.
• A surprising stock is leading the Dow this year. (video) Far from being a hot tech stock, the best-performing stock in the Dow Jones industrial average this year is a stalwart that action-seeking traders may not think about too much: Boeing.
• Amazon(AMZN) Prime Day breaks record; sales grew by more than 60 percent.

Zero Hedge:

• How Hermitage Capital, Ziff Brothers And The Clinton Global Initiative Prompted The Trump Jr. Meeting.
• Watch Live: Janet Yellen Testifies Why The Fed Is Once Again "Uncertain".
• The "News" Is Content-Free.
• Fed Chair Janet Yellen Warns Congress: US Debt Trajectory Is Unsustainable.
• China Creates A Quarter Trillion In New Loans But Analysts Are Worried: "It's Not Enough". (graph)
• Loonie Spikes After Bank Of Canada Raises Rates For The First Time Since 2010... As Expected. (graph)
• Brazilian Real Surges After Ex-President Lula Found Guilty Of Corruption, Faces 9 Years In Prison. (graph)
• Fed's Beige Book Warns Of Declining Auto Sales, Sees Rising Benefit Costs Limiting Wages.
• BART Withholds Video Of Attacks Over Concern About "Stereotypes".
• Trump Rages: "Look What Hillary Clinton May Have Gotten Away With. Disgraceful".
• Yellen's Dovish Turn: Concerned About Inflation, Sees Little Room For Rate Increases.
• Mortgage Applications Plunge As Rate-Hike Craters Refis. (graph)
• Gary Cohn As Next Fed Chairman?

Business Insider: 

• Nvidia's secret weapon just led to an upgrade from Wall Street (NVDA). The company is well known by PC gamers for its graphics processing units, and Nvidia has gained a recent foothold in the data center and driverless-car sectors. But these are just symptoms of Nvidia's biggest weapon: a company culture of innovation. That's according to a note to clients from SunTrust Robert Humphrey, who upgraded Nvidia to a Buy and raised the price target on the stock to $177, 12% higher than the current share price.
• Trump's personal attorneys are reportedly fed up with Jared Kushner.

PredictIt:

• The odds that Donald Trump will remain president at year-end 2018 are rising from 67% to 68%.

TheStreet.com: 

• Why Apple(AAPL) Investors Shouldn't Worry Too Much About Reports of iPhone 8 Delays -- For Now. (video)