Morning Market Internals

NYSE Composite Index:

• Volume Running +10.5% Above 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 32.9% of Issues Advancing, 64.0% Declining
• 14 New 52-Week Highs, 109 New Lows
• 41.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.8%
• Vix 18.6 +3.4%
• Total Put/Call 1.06 +2.9%
• TRIN/Arms .83 -9.8%

Wednesday Watch

Evening Headlines

Bloomberg:     

• North Korea Would Benefit Most, by Far, From Peace on Peninsula.  

• Euro Area's Growth Picture Shows Why ECB Unfazed by Slowdown.

• The $7 Trillion Debt Pile Looming Large Over Chinese Households.

• Asia Stocks Follow U.S. Lower; Bonds Pare Losses: Markets Wrap. Asian stocks followed their U.S. counterparts lower with industrial shares leading the decline. The 10-year Treasury yield pared gains after piercing the 3 percent level for the first time in four years. Shares in Japan and Korea opened lower. The S&P 500 closed down 1.3 percent weighed by stocks including industrial bellwether Caterpillar Inc. and the Nasdaq 100 Index fell 2.1 percent. The dollar steadied after coming off its highest since January, while crude climbed back toward $68 a barrel. Australian equity and bond markets are shut for a holiday. The MSCI Asia Pacific fell 0.2 percent as of 9:43 a.m. Tokyo time. Topix Index fell 0.5 percent. Kospi Index dropped 0.7 percent.  

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

• Treasuries’ March Above 3% Faces Challenge From Slumping Stocks. (video)

• Texas Instruments(TXN) Gives Rosy Sales Forecast; Shares Jump.

Wall Street Journal:

• Ontario Man Charged With 10 Murder Counts in Van Attack.

• Caterpillar, Industrial Shares Slump as Investors Weigh Rising Costs.

• Trump Warns Iran on Nuclear Deal, but Will Weigh Beefed-Up Accord.

MarketWatch.com:

• Get ready to pay more for wine, as global production hits 60-year low.

• ‘OK, I’ll say it: Bitcoin is a scam,’ says former CEO of PayPal and Intuit.    

• 7 reasons stocks are better than real estate.

Fox News:

• Golden State movement to secede from US cleared to gather signatures.

CNBC:  

• After-hours buzz: TXN, WYNN, EW & more. 

• Treasury Secretary Mnuchin to visit China in 'a few days,' Trump says.

Zero Hedge:       

•  "Very Pissed Off" Obama DOJ Made "Dramatic" Call To McCabe To Quash Clinton Probe.

• Censorship And Suppression Of Free Speech Online Is A "War Against Ideas".

• China Prepares To Mass Produce Hypersonic Vehicles.

• Democrats Slapped With Demand To Preserve Evidence As Roger Stone Goes After DNC Servers.

• The Fed Is Wrong: "There Is Everything Unusual About The Current Treasury Curve".

• Finland Abandons Universal Basic Income Experiment After Two Years.

• WTI/RBOB Extend Losses After Surprise Crude Build.

• Tech Wrecked, Banks Battered, & CAT Crushed As Rates Rout Spooks Stocks. (graph)

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 77.0 unch. 

• Asia Pacific Sovereign CDS Index 12.0 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.79 -.04%.

• FTSE 100 futures -.57%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BA)/2.59

• (BSX)/.32

• (CHKP)/1.28

• (CMCSA)/.59

• (DPS)/1.06

• (FLIR)/.42

• (GD)/2.48

• (GT)/.46

• (HES)/-.51

• (IR)/.62

• (LH)/2.63

• (NSC)/1.77

• (NOC)/3.62

• (SOHU)/-2.36

• (TUP)/.89

• (TWTR)/.11

• (VIAB)/.79

• (AMD)/.09

• (AFL)/.97

• (T)/.88

• (BGG)/.82

• (CAKE)/.68

• (CMG)/1.56

• (EBAY)/.53

• (FFIV)/2.27

• (FB)/1.38

• (F)/.41

• (KNX)/.40

• (LVS)/.85

• (OII)/-.33

• (PYPL)/.54

• (QCOM)/.71

• (RJF)/1.63

• (VAR)/1.04

• (V)/1.01

• (XLNX)/.71

Economic Releases

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,544,500 barrels versus a -1,071,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,417,900 barrels versus a -2,968,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,241,300 barrels versus a -3,107,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.01% versus a -1.1% decline the prior week.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The $35B 5Y T-Note auction, Japan Bond Purchases, weekly MBA Mortgage Applications report, (ACN) analyst conference and the (ANF) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 25% net long heading into the day.

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