Stocks Falling Substantially into Final Hour on Higher Long-Term Rates, Earnings Outlooks, Geopolitical Concerns, Industrial/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 19.0 +16.3%

• Euro/Yen Carry Return Index 138.46 +.23%

• Emerging Markets Currency Volatility(VXY) 8.47 +.95%

• S&P 500 Implied Correlation 41.97 +7.3%

• ISE Sentiment Index 84.0 +29.23%
  

• Total Put/Call 1.07 +15.1%

• NYSE Arms .87 +6.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.38 +1.54%
  

• America Energy Sector High-Yield CDS Index 416.0 -1.75%

• European Financial Sector CDS Index 56.94 +.06%

• Italian/German 10Y Yld Spread 113.5 -2.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.22 +2.26%

• Emerging Market CDS Index 141.89 +.97%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.34 +.01%

• 2-Year Swap Spread 27.25 unch.

• TED Spread 50.25 -5.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -8.0 +3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.82 +.25%

• 3-Month T-Bill Yield 1.84% +2.0 basis points
  

• Yield Curve 52.50 +2.5 basis points

• China Iron Ore Spot 67.68 USD/Metric Tonne -.15%

• Citi US Economic Surprise Index 41.80 +8.7 points

• Citi Eurozone Economic Surprise Index -85.80 -2.5 points

• Citi Emerging Markets Economic Surprise Index 8.4 +.1 point

• 10-Year TIPS Spread 2.17 -2.0 basis points
  

• 91.8% chance of Fed rate hike at June 13 meeting, 92.3% chance at August 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -193  open in Japan 

• China A50 Futures: Indicating +2 open in China

• DAX Futures: Indicating -102 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -2.3%

Sector Underperformers:

• 1) Industrials -3.4% 2) Internet -2.7% 3) Road & Rail -2.6%

Stocks Falling on Unusual Volume: 

• JOE, EPZM, PRTA, WAT, TVTY, MMM, CAT, SHW, FCX, CVNA, IGV, SCL, MAS, CIFS, ABCD, CASA, INCY, PII, CYBE, HMST, WSO, ENB, GOOGL, R, AMTD, LMT, CR, HUBB and MAS

Stocks With Unusual Put Option Activity:

• 1) CL 2) ESRX 3) PEP 4) KMB 5) AA

Stocks With Most Negative News Mentions:

• 1) EPZM 2) DPZ 3) ITW 4) AA 5) TRMB

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.3%

Sector Outperformers:

• 1) Utilities +.9% 2) REITs +.2% 3) Telecom -.1%

Stocks Rising on Unusual Volume:

• CHEK, MITL, HSII, SANM, SC, CBI, QSR, WHR, EDU, CDNS, SAP, ATI, IBCP, SAIL, HOG, NOAH, TOT, HFC, AGO, KMB, HXL, FMS, WAB, GWPH, FITB, DRNA, WHR and FITB

Stocks With Unusual Call Option Activity:

• 1) TRN 2) SC 3) HTZ 4) MDR 5) BOX

Stocks With Most Positive News Mentions:

• 1) SANM 2) BIIB 3) VZ 4) FCF 5) INTC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +.8% Above 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 58.6% of Issues Advancing, 38.6% Declining
• 68 New 52-Week Highs, 66 New Lows
• 43.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.8%
• Vix 16.4 +.4%
• Total Put/Call .91 -2.2%
• TRIN/Arms .7 -24.1%

Tuesday Watch

Evening Headlines

Bloomberg:

• The Chinese Car Invasion Is Coming.

• Mnuchin Gives Rusal Sanctions Escape Route After Market Tumult. 

• Yen Drop Buoys Japan Stocks as Dollar Holds Gain: Markets Wrap. The greenback held on to gains, with the 10-year Treasury yield remaining just below its highest level since 2014. As the yen retreated, equities in Japan climbed. Stocks nudged higher in Australia and in South Korea, despite SK Hynix Inc. continuing a pattern seen from a string of semiconductor makers where earnings disappointed investors. Aluminum prices plunged after the U.S. softened its position on sanctions against Russia’s United Co. Rusal. Japan’s Topix index added 0.8 percent as of 9:01 a.m. in Tokyo. Australia’s S&P/ASX 200 Index advanced 0.1 percent. South Korea’s Kospi rose 0.2 percent. Futures on Hong Kong’s Hang Seng Index climbed 0.1 percent. Futures on the S&P 500 Index rose 0.2 percent after the underlying gauge closed little changed on Monday.

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

• Yields Approaching 3% Are Good News for Dollar Bulls.

Wall Street Journal:

• If GDP Lags, Watch the Economy GO. ‘Gross output’ reflects the full value of the supply chain, and it portends much faster growth.

• Sers(SHLD) CEO Pushes Board to Sell Units, and Offers to Buy Them.

• The Next Winners From the Oil Rally.

MarketWatch.com: 

• Hedge-fund managers offer their top stock-market picks: Sohn live blog.

• Google(GOOGL) earnings boosted to big beat by Uber stake: live blog recap.

Fox News:

• Pompeo secures Senate panel's OK after Republican can't make it to the Hill.

CNBC:

• Why Amazon(AMZN) is obsessed with getting inside our homes.

• Gundlach says he's long energy stocks, short Facebook(FB) at Sohn Conference.

• Glenview's Larry Robbins is hot on health care stocks again.

• Hedge fund manager David Einhorn is betting against Assured Guaranty.

• Google(GOOGL) CEO tells investors not to worry about Europe's upcoming privacy rules.

• Tech hedge fund manager Palihapitiya says Box(BOX) is his favorite A.I. stock idea.

Zero Hedge:       

• Toronto Killer Van Attack Suspect Named As Alek Minassian.  

• AI-Operated Health Pods To Be Introduced In Dubai.

• Saudi Media Claims Houthis Are Holding 19 Oil Tankers Hostage Off Yemeni Coast.

• Ex-Facebook Executive: "You Don't Realize It But You Are Being Programmed".

• Desperate John Paulson Partners With "First Loss" Funds To Unlock 10x Leverage.

• Narco-Politics: 7,667 Mexicans Killed In 3 Months As Drug Cartels Unleash Hell Before Elections.   

• Dollar Soars To 3-Month Highs As Bonds Spook Stocks, China Blamed. (graph)

Business Insider:

• Alphabet(GOOGL) tops Wall Street's Q1 revenue target.

Night Trading 

• Asian equity indices are -.5% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 77.25 +1.75 basis points. 

• Asia Pacific Sovereign CDS Index 12.25 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.61 -.97%.

• FTSE 100 futures +.60%.

• S&P 500 futures +.08%.

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MMM)/2.48

• (ATI)/.24

• (BIIB)/5.94

• (CAT)/2.10

• (CIT)/.94

• (KO)/.46

• (GLW)/.29

• (LLY)/1.13

• (FITB)/.48

• (FCX)/.56

• (HOG)/1.08

• (JBLU)/.22

• (LMT)/3.36

• (MDR)/.16

• (PCAR)/1.31

• (PII)/.87

• (PHM)/.45

• (R)/.87

• (SAP)/.73

• (SHW)/3.16

• (TRV)/2.69

• (UTX)/1.51

• (VZ)/1.11

• (AMGN)/3.25

• (COF)/2.34

• (CB)/2.26

• (ILMN)/1.02

• (RHI)/.74

• (TER)/.42

• (TXN)/1.16

• (WYNN)/2.00

Economic Releases
9:00 am EST

• The FHFA House Price Index MoM for February is estimated to rise +.6% versus a +.8% gain in January.

• S&P CoreLogic CS 20-City  MoM SA for February is estimated to rise +.68% versus a +.75% gain in January.
  

10:00 am EST

• New Home Sales for March is estimated to rise to 630K versus 618K in February. 

• The Richmond Fed Manufacturing Index for April is estimated to rise to 16.0 versus 15.0 in March.

• The Conference Board Consumer Confidence Index for April is estimated to fall to 126.0 versus 127.7 in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia CPI report, German IFO Expectations Index, $32B 2Y T-Note auction, weekly US retail sales report and the Arizona House Special Election could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by consumer 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 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Rising Long-Term Rates, European/Emerging Markets/US High-Yield Debt Angst, Technical Selling, Tech/Metals & Mining Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 17.1 +1.4%

• Euro/Yen Carry Return Index 138.08 +.25%

• Emerging Markets Currency Volatility(VXY) 8.40 +2.82%

• S&P 500 Implied Correlation 40.45 +2.4%

• ISE Sentiment Index 77.0 -9.4%
  

• Total Put/Call .95 -3.1%

• NYSE Arms 1.0 -4.57%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.77 +2.05%
  

• America Energy Sector High-Yield CDS Index 422.0 +2.18%

• European Financial Sector CDS Index 56.90 -.23%

• Italian/German 10Y Yld Spread 115.75 -3.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.22 +2.26%

• Emerging Market CDS Index 140.40 -.17%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.31 +.12%

• 2-Year Swap Spread 27.25 -1.25 basis points

• TED Spread 55.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.0 -3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.65 -.92%
• 3-Month T-Bill Yield 1.82% +2.0 basis points
  

• Yield Curve 50.0 +.25 basis point

• China Iron Ore Spot 68.05 USD/Metric Tonne +.07%

• Citi US Economic Surprise Index 33.10 +3.9 points

• Citi Eurozone Economic Surprise Index -83.30 +7.6 points

• Citi Emerging Markets Economic Surprise Index 8.3 +2.2 points

• 10-Year TIPS Spread 2.19 +1.0 basis point
  
• 91.8% chance of Fed rate hike at June 13 meeting, 92.3% chance at August 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +93  open in Japan 
• China A50 Futures: Indicating -25 open in China

• DAX Futures: Indicating +1 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long