Wednesday Watch

Evening Headlines

Bloomberg:    

• Russia to Seek Oil-Cuts Rollback for Most OPEC+ Nations.  

• Bitcoin’s Collapse Accelerates, Falls to Lowest Since February.

• Asian Stocks Set to Slip as Central Banks Meet: Markets Wrap. Asian stocks are poised to open in the red following a lackluster session in the U.S. as investors turn their attention to the major central bank meetings this week after shrugging off Tuesday’s North Korea summit. The dollar gained alongside Treasury yields. Futures were lower in Japan, Australia and Hong Kong. Though the S&P 500 Index recovered from session lows, volumes were below average. Safe-haven assets including the yen and gold edged lower amid the prospects of diminishing geopolitical risks after President Donald Trump and Kim Jong Un pledged to work toward peace on the Korean Peninsula. The British pound rose after Prime Minister Theresa May fended off a rebellion by pro-EU Conservatives and won a key Brexit vote, only to give up most of that gain. Futures on the Nikkei 225 Stock Average fell 0.3 percent in Singapore.
  Australia’s S&P/ASX 200 Index futures lost 0.1 percent. Hang Seng Index futures declined 0.4 percent. S&P 500 futures rose 0.1 percent as of 7:04 a.m. in Tokyo.

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

• U.S. Government Lowers Domestic, World 2019 Oil Output Forecasts.

• Gundlach Says Rising Rates and Deficits Like ‘Suicide Mission’.

• Apple(AAPL) Tries to Stop Developers Sharing Data on Users' Friends.

Wall Street Journal:

• Trump, Kim in New Phase of Diplomacy.

• Starting Gun Fired in Battle Against Big Tech.

• Five Takeaways From AT&T’s Victory.

• Experts React to the Ruling.  

• Tech Companies to Watch 2018.

• Wall Street Investment Banks Face New Hurdle in China.

• Seattle Reverses New Tax.

MarketWatch.com:

• Used-car prices rise to a record, and sedans are partly to blame.

CNBC:    

• AT&T(T) wins: Judge clears $85 billion bid for Time Warner with no condition.

• Time Warner(TWX) shares shoot higher after judge rules in favor of merger with AT&T; other media stocks gain.

• Comcast(CMCSA) preparing to announce bid for Fox(FOXA) on Wednesday if AT&T-Time Warner is approved, sources say.  

• Now that AT&T has been cleared to buy Time Warner, here's what happens next. 

• After-hours buzz: TWX, HRB and more.

• Brazil's record murder rate has taken a huge toll on its economy.

Zero Hedge:    

• Mueller Scrambles To Limit Evidence After Indicted Russians Actually Show Up In Court.

• Trump Says "Got Along Great" With Kim; Kim Praises End Of "Antagonization", Seeks Guarantees.

• "Downright Chilling": Rosenstein "Threatened" To Subpoena Congressmen In Closed-Door Meeting.

• Kim Agrees To Visit US, Confirms Inviting Trump To Pyongyang.

• This Is What Paul Tudor Jones Does When He Wakes Up At 3am Every Morning.

• "What About The Girls You Molested On C-SPAN?" Heckler Asks Biden.

• Judge Approves AT&T's $85BN Takeover Of Time Warner.

• US Budget Deficit Hits $530 Billion In 8 Months, As Spending On Interest Explodes.

• Bitcoin Tumbles Below $6500 As Cryptos Suddenly Plunge.

• WTI/RBOB Slide On Russia Oil-Cut Rollbacks, Surprise Inventory Builds.

• Stocks & Bonds Shrug At Historic Summit, Surging Inflation, Sky-High Optimism.

Business Insider:

• A judge just approved the $85 billion merger between AT&T(T) and Time Warner(TWX) — and it will affect the future of media M&A for decades to come.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 77.75 -1.0 basis point 

• Asia Pacific Sovereign CDS Index 12.5 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 70.59 +.01%.

• FTSE 100 futures -.03%.

• S&P 500 futures +.22%.

• NASDAQ 100 futures +.36%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (KFY)/.70

After the Close:

• (TLRD)/.48

Economic Releases

8:30 am EST

• The PPI Final Demand MoM for May is estimated to rise +.3% versus a +.1% gain in April.

• PPI Ex Food and Energy MoM for May is estimated to rise +.2% versus a +.2% gain in April. 

• PPI Final Demand YoY for May is estimated to rise +2.8% versus a +2.6% gain in April.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,086,830 barrels versus a +2,072,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +907,640 barrels versus a +4,603,000 barrel gain the prior week. Distillate supplies are estimated to rise by +373,640 barrels versus a +2,165,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.04% versus a +1.5% gain the prior week.
  

2:00 pm EST

• The FOMC is expected to raise the benchmark Fed Funds Rate to 1.75%-2.0%.
  

Upcoming Splits

• (TREX) 2-for-1

• (HBNC) 3-for-2

Other Potential Market Movers

• The Fed Press Conference, UK CPI report, weekly MBA Mortgage Applications report, JP Morgan Materials conference, UBS Industrials/Transport Conference and the (CUB) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are slightly higher, boosted by technology and biotech 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 Slightly Higher into Final Hour on Diminishing Geopolitical Concerns, Stable Long-Term Rates, Yen Weakness, Biotech/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.0 -2.4%

• Euro/Yen Carry Return Index 134.90 -.06%

• Emerging Markets Currency Volatility(VXY) 9.56 -.31%

• S&P 500 Implied Correlation 34.08 +.47%

• ISE Sentiment Index 155.0 +53.5%
  

• Total Put/Call .68 -6.9%

• NYSE Arms .86 +7.21%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.08 -1.1%
  

• America Energy Sector High-Yield CDS Index 378.0 +.04%

• European Financial Sector CDS Index 84.17 +.7%

• Italian/German 10Y Yld Spread 237.0 +2.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.60 -2.74%

• Emerging Market CDS Index 182.40 +1.87%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.81 +.04%

• 2-Year Swap Spread 26.5 -.75 basis point

• TED Spread 39.75 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 +2.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.59 -.42%
• 3-Month T-Bill Yield 1.92% +2.0 basis points
  

• Yield Curve 42.0 -1.0 basis point

• China Iron Ore Spot 65.41 USD/Metric Tonne -.67%

• Citi US Economic Surprise Index 11.20 +2.0 points

• Citi Eurozone Economic Surprise Index -99.80 -1.8 points

• Citi Emerging Markets Economic Surprise Index -17.70 -1.5 points

• 10-Year TIPS Spread 2.14 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 -48 open in Japan 
• China A50 Futures: Indicating -90 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

•   Large-Cap Value unch.

Sector Underperformers:

• 1) Energy -1.3% 2) Oil Service -1.0% 3) Defense -.7%

Stocks Falling on Unusual Volume: 

• JCAP, HMI, XNET, VIPS and HA

Stocks With Unusual Put Option Activity:

• 1) SIRI 2) RH 3) HRB 4) K 5) FIT

Stocks With Most Negative News Mentions:

• 1) UFCS 2) MOV 3) TRGP 4) SRE 5) CVS

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.1%

Sector Outperformers:

• 1) Social Media +1.7% 2) Alt Energy +1.5% 3) Homebuilders +1.3%

Stocks Rising on Unusual Volume:

• GLMD, TH, FBC, RCII, LE, PLAY, KMG, SOGO, I, SAGE, RVNC, ADNT, QCP, ELOX, FSLR, SFIX, GPRK, HRI, IRBT, NNBR, NTNX, REVG, ERI, ZGNX, SE, RH, RDUS, HTZ, WTW, TSLA, TERP, IMMU, LL, EVBG, QCP, FIZZ, FDC and WDAY

Stocks With Unusual Call Option Activity:

• 1) AMLP 2) STZ 3) PLAY 4) WDAY 5) SYK

Stocks With Most Positive News Mentions:

• 1) GLMD 2) RH 3) PLAY 4) TWTR 5) LE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -3.4% Below 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 54.8% of Issues Advancing, 40.5% Declining
• 97 New 52-Week Highs, 19 New Lows
• 52.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.7%
• Vix 12.3 -.8%
• Total Put/Call .55 -24.7%
• TRIN/Arms .66 -17.9%