Stocks Slightly Higher into Afternoon on Less Emerging Markets Debt Angst, Stable Long-Term Rates, Earnings Optimism, Financial/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.0 -.8%

• Euro/Yen Carry Return Index 136.15 -.12%

• Emerging Markets Currency Volatility(VXY) 8.95 -1.9%

• S&P 500 Implied Correlation 34.15 -.99%

• ISE Sentiment Index 117.0 -1.68%
  

• Total Put/Call .77 -6.1%

• NYSE Arms .69 -29.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.33 -.83%
  

• America Energy Sector High-Yield CDS Index 349.0 -1.31%

• European Financial Sector CDS Index 67.78 -.21%

• Italian/German 10Y Yld Spread 176.75 -10.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.38 -.80%

• Emerging Market CDS Index 161.29 -2.94%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.54 +.02%

• 2-Year Swap Spread 23.5 +.25 basis point

• TED Spread 40.25 -2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -10.75 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.37 +.29%
• 3-Month T-Bill Yield 1.93% +3.0 basis points
  

• Yield Curve 49.75 -.75 basis point

• China Iron Ore Spot 64.35 USD/Metric Tonne +.36%

• Citi US Economic Surprise Index 10.90 -.4 point

• Citi Eurozone Economic Surprise Index -79.80 +1.6 points

• Citi Emerging Markets Economic Surprise Index -5.60 -.1 point

• 10-Year TIPS Spread 2.18 +1.0 basis point
  
• 100.0% chance of Fed rate hike at August 1 meeting, 100.0% chance at September 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +20  open in Japan 
• China A50 Futures: Indicating +19 open in China

• DAX Futures: Indicating +16 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

•   Small-Cap Growth -.2%

Sector Underperformers:

• 1) Homebuilding -1.7% 2) Retail -1.2% 3) Construction -.8%

Stocks Falling on Unusual Volume: 

• DY, BNFT, KSS, NDSN, PSTG, IGT, AZO, TOL, MNRO, CHRS, BPT, SAIL and CCJ

Stocks With Unusual Put Option Activity:

• 1) CIT 2) ATUS 3) TJX 4) DNR 5)KSS

Stocks With Most Negative News Mentions:

• 1) SHOP 2) MANU 3) RTN 4) NTFU 5) HD

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.5%

Sector Outperformers:

• 1) Banks +1.5% 2) Shipping +1.3% 3) Semis +.9%

Stocks Rising on Unusual Volume:

• MBFI, BAND, GBNK, TSRO, AZUL, IRDM, WHR, CBPO, EOLS, CPB, DOVA, FITB, GSM, BIDU, CEQP, MU, DQ, XEC, TJX, NXPI, NICE, SRG, CVRR, TTM, KEG, ONE, DOVA and GSM

Stocks With Unusual Call Option Activity:

• 1) CIT 2) RCII 3) IGT 4) ATUS 5) AZO

Stocks With Most Positive News Mentions:

• 1) MU 2) FITB 3) TJX 4) SMAR 5) ADBE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -4.4% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 52.7% of Issues Advancing, 42.6% Declining
• 106 New 52-Week Highs, 24 New Lows
• 49.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.4%
• Vix 13.1 -.1%
• Total Put/Call .80 -2.4%
• TRIN/Arms .66 -32.5%

Tuesday Watch

Night Trading 

• Asian equity indices are -.5% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 75.5 -.25 basis point. 
• Asia Pacific Sovereign CDS Index 12.5 -.5 basis point.
• Bloomberg Emerging Markets Currency Index 71.16 unch.
• FTSE 100 futures -.18%.
• S&P 500 futures -.05%.
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (AAP)/1.97
• (AZO)/12.99
• (CBRL)/1.95
• (EV)/.78
• (IGT)/.27
• (KSS)/.50
• (PLAB)/.07
• (TJX)/1.02
• (TOL)/.76

After the Close:

• (TCS)/.23
• (CTRP)/.16
• (HPE)/.31
• (INTU)/4.67
• (RRGB)/.76
• (URBN)/.31 

Economic Releases
10:00 am EST

• The Richmond Fed Manufacturing Activity Index for May is estimated to rise to 10.0 versus -3.0 in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The House vote on financial regulation reform bill, Canadian Wholesale Trade report, $33B 2Y T-Note auction, weekly US retail sales report, JPMorgan Tech/Media/Telecom Conference, Suntrust Financial Services Conference, Wolfe Transport Conference, RBC Datacenter/Connectivity Conference, (XLNX) analyst meeting and the (BRKS) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and financial 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 Rising into Afternoon on Diminishing Trade War Tensions, Less Mueller Probe Angst, Oil Gain, Industrial/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.29 -.97%

• Euro/Yen Carry Return Index 136.1 +.26%

• Emerging Markets Currency Volatility(VXY) 9.18 +.44%

• S&P 500 Implied Correlation 34.39 -4.31%

• ISE Sentiment Index 123.0 +24.24%
  

• Total Put/Call .83 -.17%

• NYSE Arms 1.16 -26.86%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.88 +.28%
  

• America Energy Sector High-Yield CDS Index 355.0 -1.02%

• European Financial Sector CDS Index 67.77 +3.47%

• Italian/German 10Y Yld Spread 186.75 +21.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.49 -3.67%

• Emerging Market CDS Index 167.91 -1.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.51 +.21%

• 2-Year Swap Spread 23.25 -.75 basis point

• TED Spread 43.0 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.0 +.03%
• 3-Month T-Bill Yield 1.90% +1.0 basis point
  

• Yield Curve 50.50 -1.5 basis points

• China Iron Ore Spot 65.45 USD/Metric Tonne +.26%

• Citi US Economic Surprise Index 11.30 -1.0 point

• Citi Eurozone Economic Surprise Index -81.40 +10.3 points

• Citi Emerging Markets Economic Surprise Index -5.50 -.8 point

• 10-Year TIPS Spread 2.17 unch.
  
• 100.0% chance of Fed rate hike at August 1 meeting, 100.0% chance at September 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +30  open in Japan 
• China A50 Futures: Indicating +16 open in China

• DAX Futures: Indicating n/a open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long