Thursday Watch

Night Trading 

• Asian equity indices are -.75% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 75.75 +.75 basis point. 

• Asia Pacific Sovereign CDS Index 12.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 71.29 -.06%.

• FTSE 100 futures +.12%.

• S&P 500 futures -.18%.

• NASDAQ 100 futures -.23%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (BBY)/.74

• (HRL)/.45

• (MCK)/3.57

• (MDT)/1.39

• (SAFM)/2.31

• (TTC)/1.18

• (TD)/1.50

After the Close:

• (ADSK)/.03

• (DECK)/.19

• (GPS)/.46

• (NTNX)/-.19

• (QSII)/.13

• (ROST)/1.07

• (SCVL)/.71

• (SPLK)/-.09

• (ZOES)/-.02

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 220K versus 222K the prior week.

• Continuing Claims are estimated to rise to 1746K versus 1707K the prior week.

9:00 am EST

• The 1Q House Price Purchase Index is estimated to rise +.7% versus a +1.6% gain in 4Q.

• The FHFA House Price Index MoM for March is estimated to rise +.6% versus a +.6% gain in 4Q.
  

10:00 am EST

• Existing Home Sales for April are estimated to fall to 5.55M versus 5.6M in March.
  

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for May is estimated to fall to 20.0 versus 26.0 in April.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Harker speaking, $20B 7Y T-Note auction, German GDP report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (DB) annual meeting, (PYPL) investor day, (CBT) investor day and the HSBC Luxury Goods Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by consumer 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 Reversing Slightly Higher into Final Hour on Lower Long-Term Rates, Earnings Optimism, Technical Buying, Homebuilding/REIT 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) 12.9 -2.8%

• Euro/Yen Carry Return Index 134.1 -1.4%

• Emerging Markets Currency Volatility(VXY) 9.3 +4.3%

• S&P 500 Implied Correlation 35.45 -.51%

• ISE Sentiment Index 92.0 -32.1%
  

• Total Put/Call .97 +16.9%

• NYSE Arms 1.28 +26.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.73 +.13%
  

• America Energy Sector High-Yield CDS Index 354.0 +1.42%

• European Financial Sector CDS Index 69.46 +2.74%

• Italian/German 10Y Yld Spread 189.25 +12.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.45 +1.26%

• Emerging Market CDS Index 156.65 -4.46%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.55 +.01%

• 2-Year Swap Spread 22.5 -1.0 basis point

• TED Spread 40.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -13.25 -2.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.35 +.07%
• 3-Month T-Bill Yield 1.91% -2.0 basis points
  

• Yield Curve 47.75 -2.0 basis points

• China Iron Ore Spot 63.85 USD/Metric Tonne -.13%

• Citi US Economic Surprise Index 9.80 -1.1 points

• Citi Eurozone Economic Surprise Index -98.80 -19.0 points

• Citi Emerging Markets Economic Surprise Index -6.0 -.4 point

• 10-Year TIPS Spread 2.15 -3.0 basis points
  
• 100.0% chance of Fed rate hike at August 1 meeting, 100.0% chance at September 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -89  open in Japan 
• China A50 Futures: Indicating +14 open in China

• DAX Futures: Indicating +32 open in Germany

Portfolio: 

• Higher: On gains in my medical/retail/biotech/tech sector longs and my emerging market shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

•   Large-Cap Value -.5%

Sector Underperformers:

• 1) Telecom -1.6% 2) Alt Energy -1.6% 3) Steel -1.3%

Stocks Falling on Unusual Volume: 

• RRGB, CWH, HPE, SEDG, TGT, LOMA, ESPR, WGO and THO

Stocks With Unusual Put Option Activity:

• 1) TIF 2) VNQ 3) URBN 4) CIT 5) GT

Stocks With Most Negative News Mentions:

• 1) RRGB 2) CWH 3) WGO 4) THO 5) DSW

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.1%

Sector Outperformers:

• 1) REITs +.9% 2) Retail +.6% 3) Medical Equipment +.6%

Stocks Rising on Unusual Volume:

• CADE, CARA, USAT, TUR, TIF, RL, STBZ, LOW, AEL, EXPI, CTRP, VCLT, PZZA, PGC, OMAB, AZO, RETA, I, QURE, SAIL, FENC, BPT, HNP, IRDM, BCEI, ONE, AGIO and AHH

Stocks With Unusual Call Option Activity:

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

Stocks With Most Positive News Mentions:

• 1) TIF 2) RL 3) CARA 4) JWN 5) AZO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -2.4% Below 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 44.5% of Issues Advancing, 51.8% Declining
• 25 New 52-Week Highs, 44 New Lows
• 48.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.5%
• Vix 13.8 +4.0%
• Total Put/Call .93 +12.0%
• TRIN/Arms 1.62 +58.3%

Wednesday Watch

Night Trading 

• Asian equity indices are -1.0% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 75.0 -.5 basis point. 
• Asia Pacific Sovereign CDS Index 12.25 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 71.05 -.35%.
• FTSE 100 futures -.52%.
• S&P 500 futures -.25%.
• NASDAQ 100 futures -.50%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (CTRN)/.90
• (LOW)/1.21
• (RL)/.83
• (TGT)/1.39
• (TIF)/.83

After the Close:

• (CPRT)/.49
• (LB)/.15
• (NTAP)/1.01
• (SNPS)/1.08
• (WSM)/.58

Economic Releases
9:45 am EST

• The Preliminary Markit US Manufacturing PMI report for May is estimated at 56.5 versus 56.5 in April.
• The Preliminary Markit US Services PMI report for May is estimated to rise to 55.0 versus 54.6 in April.

10:00 am EST

• New Home Sales for April is estimated to fall to 679K versus 694K in March.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,908,100 barrels versus a -1,404,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,451,000 barrels versus a -3,790,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,186,110 barrels versus a -92,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.48% versus a +.7% gain the prior week.
  

2:00 pm EST

• The May 2 FOMC Meeting Minutes.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI report, UK Retail Sales/Inflation Data report, $36B 5Y T-Note auction, weekly MBA Mortgage Applications report, Barclays Construction/Infrastructure Conference, Jefferies Automotive Aftermarket Conference, (HUN) investor day, (PCAR) investor conference, (TMO) analyst meeting, (PLAB) investor event and the (WFC) Financial Services Forum could also impact trading today.

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