Stocks Modestly Lower into Final Hour on European/Emerging Markets Debt Angst, Trade War Worries, Profit-Taking, Tech/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.5 +7.3%

• Euro/Yen Carry Return Index 134.80 -.2%

• Emerging Markets Currency Volatility(VXY) 9.40 +2.29%

• S&P 500 Implied Correlation 34.1 +5.4%

• ISE Sentiment Index 88.0 -31.3%
  

• Total Put/Call .92 +13.6%

• NYSE Arms 1.07 +54.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.45 +4.2%
  

• America Energy Sector High-Yield CDS Index 374.0 +.95%

• European Financial Sector CDS Index 86.64 +5.24%

• Italian/German 10Y Yld Spread 257.75 +10.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.86 -.85%

• Emerging Market CDS Index 176.87 +3.19%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.57 -.09%

• 2-Year Swap Spread 27.50 +.5 basis point

• TED Spread 38.25 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -11.50 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.89 -.38%
• 3-Month T-Bill Yield 1.92% -2.0 basis points
  

• Yield Curve 43.75 -1.75 basis points

• China Iron Ore Spot 65.02 USD/Metric Tonne -.55%

• Citi US Economic Surprise Index 10.50 -.5 point

• Citi Eurozone Economic Surprise Index -95.50 -7.6 points

• Citi Emerging Markets Economic Surprise Index -15.80 unch.

• 10-Year TIPS Spread 2.14 -2.0 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 -128 open in Japan 
• China A50 Futures: Indicating -109 open in China

• DAX Futures: Indicating -93 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

•   Small-Cap Growth -1.0%

Sector Underperformers:

• 1) Steel -3.9% 2) Computer Hardware -1.5% 3) Internet -1.4%

Stocks Falling on Unusual Volume: 

• DCPH, ZYME, REVG, UNFI, SJM, OKTA, AZUL, IMGN, LRCX, MDGL, FSLR, PAGS, ICHR, NKTR, CLDR, IOVA, HIIQ, UCTT, GEF and FMI

Stocks With Unusual Put Option Activity:

• 1) MDXG 2) ILF 3) SJM 4) BURL 5) K

Stocks With Most Negative News Mentions:

• 1) PTI 2) REVG 3) ANW 4) PAH 5) AAXN

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.3%

Sector Outperformers:

• 1) Oil Service +2.1% 2) Restaurants +2.0% 3) Energy +1.3%

Stocks Rising on Unusual Volume:

• AVHI, ZS, BHLB, VSH, CARG, FIVE, MRTX, CONN, THO, SONC, CWH, ADNT, ABM, NXPI, DCUD, CRTO, CEQP, BSM, SCWX, WTTR, GNK, NCS, DFIN, HOME, SSTI, NCS, DFIN and SBH

Stocks With Unusual Call Option Activity:

• 1) THO 2) PII 3) XHB 4) FIVE 5) OKTA

Stocks With Most Positive News Mentions:

• 1) COP 2) ADXS 3) VRTX 4) TWX 5) THO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +5.4% Above 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 52.9% of Issues Advancing, 43.0% Declining
• 147 New 52-Week Highs, 41 New Lows
• 50.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.7%
• Vix 12.1 +3.9%
• Total Put/Call .74 -8.6%
• TRIN/Arms 1.05 +52.1%

Thursday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 77.25 +.25 basis point. 

• Asia Pacific Sovereign CDS Index 13.0 +.25 basis point

• Bloomberg Emerging Markets Currency Index 71.15 -.02%.

• FTSE 100 futures +.31%.

• S&P 500 futures unch.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (HOV)/-.05

• (SJM)/2.19

• (MTN)/6.10

After the Close:

• (HOME)/.27

• (AVGO)/4.74

• (COO)/2.84

• (PAY)/.28

• (ZUMZ)/-.12

Economic Releases

8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 220K versus 221K the prior week.

• Continuing Claims are estimated to rise to 1738K versus 1726K prior.

12:00 pm EST

• 1Q Household Change in Net Worth.
  

3:00 pm EST

• Consumer Credit for April is estimated at $14.0B versus $11.622B in March.

Upcoming Splits

• (PFBI) 5-for-4

Other Potential Market Movers

• The Japan GDP report, German Factory Orders report, Eurozone GDP report, Bloomberg June US Economic Survey, weekly Bloomberg Consumer Comfort Index, RBC Capital Mining/Materials Conference, Piper Jaffray Consumer Conference, Credit Suisse Chemical/Ag Conference, (RL) investor day and the (AIG) investor meeting could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and financial 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 Economic Optimism, Short-Covering, Yen Weakness, Biotech/Financial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.9 -4.1%

• Euro/Yen Carry Return Index 134.93 +.74%

• Emerging Markets Currency Volatility(VXY) 9.21 -.32%

• S&P 500 Implied Correlation 33.92 -2.67%

• ISE Sentiment Index 120.0 +21.21%
  

• Total Put/Call .82 +6.49%

• NYSE Arms .73 -45.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.88 -.32%
  

• America Energy Sector High-Yield CDS Index 373.0 -.46%

• European Financial Sector CDS Index 82.33 +3.53%

• Italian/German 10Y Yld Spread 247.50 +5.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.97 +2.49%

• Emerging Market CDS Index 173.44 +1.09%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.70 -.09%

• 2-Year Swap Spread 27.0 +.75 basis point

• TED Spread 36.75 -2.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -11.0 -3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.19 +.32%
• 3-Month T-Bill Yield 1.94% +1.0 basis point
  

• Yield Curve 45.50 +3.0 basis points

• China Iron Ore Spot 65.65 USD/Metric Tonne +.49%

• Citi US Economic Surprise Index 11.0 -.7 point

• Citi Eurozone Economic Surprise Index -87.90 +2.1 points

• Citi Emerging Markets Economic Surprise Index -15.80 -1.0 point

• 10-Year TIPS Spread 2.16 +2.0 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 +105 open in Japan 
• China A50 Futures: Indicating -6 open in China

• DAX Futures: Indicating +63 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long