Thursday Watch

Evening Headlines

Bloomberg:

• China Vows Not to Fire the First Shot in Trade War.  

• China Hints at Pullback From Debt Crackdown as Markets Slide.

• China Property Flashes Fresh Warning With Bad-Loan Jump Forecast.

• Equity Bulls Are Abandoning Hong Kong as China Turmoil Mounts.  

• The China-U.S. Power Struggle Is Just Beginning.

• Merkel Pledges to Get `Back to Work' After Coalition Rift Eases.  

• Asia Stocks to Start Mixed; Euro Erases Decline. Stocks headed for a muted start in Asia, with closures to U.S. equity and bond markets meaning there were few leads for traders. The euro erased losses as bets on the timing for an interest rate hike by the European Central Bank were brought forward. Futures signaled small gains for equities in Hong Kong and Australia, while Japanese contracts were little changed. European stocks ended fractionally higher and the pound rose on positive data from the U.K.’s services sector. The euro got a lift and market pricing for a September 2019 rate hike jumped as some ECB policy makers were said to be uneasy that investors aren’t betting on an interest-rate hike until December next year. The start of trading in China will grab attention again amid signs that some stability is returning to the yuan after its sharpest decline since policy makers devalued the currency in 2015. Futures on Japan’s Nikkei 225 slid less than 0.1 percent in Chicago. Futures on Australia’s S&P/ASX 200 Index rose 0.2 percent. Futures on the Hang Seng added 0.2 percent.  

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

• Trump Ups Pressure on OPEC to Boost Supply.

• Money Managers Want to Bypass Banks.

• Rife With Anxiety, Markets Are Churning at the Fastest Rate Since 2008.

Wall Street Journal:

• China Pulls Back From Striking First in U.S. Trade Fight.

• For Supreme Court Nominee, Trump Weighs Personal Chemistry, Record.

• Trade Slowdown Investors Fear Has Already Arrived.

• In This Economy, Quitters Are Winning.

• Platinum Sinks to Near-Decade Low After Threat of Auto Tariffs.

• ‘This Is Unbelievable’: A Hedge-Fund Star Dims, and Investors Flee.

MarketWatch.com:

• Netflix(NFLX) is trouncing the competition and it should stay on top—younger viewers love it

• Americans are taking more vacation time—why that’s a good sign for the economy.

Fox News:

• Court tosses suit claiming Trump campaign conspired with Russia in hack.

• British government reportedly tells Trump he cannot meet with Brexit architect during visit this month.

CNBC:

• The EU is reportedly considering international talks to cut car tariffs.

• Poor wage growth down to ‘superstar’ tech firms, OECD says.

• Trump’s right on trade — Europe has been ‘free-riding for too long,’ fund manager says.

• India's massive state banks are in trouble. That's great news for some.

• Alibaba’s new A.I. tool can produce thousands of ads a second but it says it won’t replace humans.

• China's big bond experiment is about to go through a rough patch. 

• Germany’s massive trade surplus ‘is becoming toxic,’ economist says.

Zero Hedge:

• US Futures Rebound Even As Chinese Stocks Resume Slump.

• UK Police Confirm 2nd Critically Ill Couple Poisoned With Novichok Nerve Agent.

• Europe Turns Down Chinese Offer For Grand Alliance Against The US.

• Trump To OPEC 'Allies': "Reduce Oil Prices Now" Or Lose US Defense Shield.

• Mall Vacancies Hits 6-Year High.

• Charles Hugh Smith: We Desperately Need Shared Values, Connection, & Positive Social Roles.

• EURUSD Spikes After Report ECB Members "Uneasy" With Market's Dovish View On Rate-Hikes.

• Merkel's "Common Goal" Hypocrisy Exposed: Deal With CSU Still Not Final.

• Chairman Of Chinese Conglomerate HNA Dies In Accident In France.

• Graduating "With Honors" Becomes Meaningless As Colleges Hand Them Out Like Candy.

• The Institutions Americans Trust Most And Least.

• Meet Hadrian, The Brick Laying Robot That Will Make Construction Workers Obsolete.

• Trump Reverses Obama-Era Policies On Affirmative Action.

• Imran Awan Gets Sweetheart Plea Deal; DOJ Won't Prosecute Alleged Spy Ring, Cybercrimes.

• Step Aside Millennials: Here Comes Generation Z.

• DNC Chair Tom Perez Declares Socialist Ocasio-Cortez "The Future Of Our Party".

• Tesla(TSLA) Compared To Theranos After Musk Halted Critical Brake Test To Boost Output.

Business Insider:

• The EU is reportedly plotting a major international effort to defuse Trump's trade war — but the US isn't buying it.

• Google says it's not reading your Gmail, except when it is...

• Photos show how Americans across the country are celebrating the Fourth of July.

• JPMorgan's ultimate guide to markets and the economy.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 92.5 -1.5 basis points. 

• Asia Pacific Sovereign CDS Index 15.0 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 69.41 -.02%.

• FTSE 100 futures +.20%.

• S&P 500 futures +.29%.

• NASDAQ 100 futures +.26%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ISCA)/.36

After the Close:

• (PSMT)/.60
  

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for June.
  

8:15 am EST

• The ADP Employment Change for June is estimated to rise to 190K versus 178K in May.
  

8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 225K versus 227K the prior week.

• Continuing Claims are estimated to rise to 1718K versus 1705K prior.
  

10:00 am EST

• The ISM Non-Manufacturing Composite for June is estimated to fall to 58.3 versus 58.6 in May.
  

2:00 pm EST

• FOMC Meeting Minutes for June 13.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The German Factory Orders report, weekly Bloomberg Consumer Comfort Index and the weekly EIA Natural Gas Inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the close.  The Portfolio is 75% net long heading into the day.

Stocks Slightly Higher into Final Hour on US Economic Optimism, Less European/Emerging Markets Debt Angst, Stable Long-Term Rates, Commodity/Retail Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.9 -4.2%

• Euro/Yen Carry Return Index 134.06 -.17%

• Emerging Markets Currency Volatility(VXY) 9.86 unch.

• S&P 500 Implied Correlation 37.45 -3.2%

• ISE Sentiment Index 136.0 +86.3%
  

• Total Put/Call 1.09 +2.83%

• NYSE Arms 1.12 -5.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.37 -.72%
  

• America Energy Sector High-Yield CDS Index 400.0 -.14%

• European Financial Sector CDS Index 89.92 -2.43%

• Italian/German 10Y Yld Spread 233.0 -1.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 15.19 -1.97%

• Emerging Market CDS Index 185.99 -2.36%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.07 +.13%

• 2-Year Swap Spread 25.5 -.75 basis point

• TED Spread 36.0 -5.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 +1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.40 +.36%
• 3-Month T-Bill Yield 1.97% +5.0 basis points
  

• Yield Curve 30.5 -1.25 basis points

• China Iron Ore Spot 64.12 USD/Metric Tonne +.11%

• Citi US Economic Surprise Index 8.90 +3.4 points

• Citi Eurozone Economic Surprise Index -51.10 +1.3 points

• Citi Emerging Markets Economic Surprise Index -8.40 +2.6 points

• 10-Year TIPS Spread 2.13 -1.0 basis point
  
• 77.3% chance of Fed rate hike at Sept. 26th meeting, 77.9% chance at November 8th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +20 open in Japan 
• China A50 Futures: Indicating -111 open in China

• DAX Futures: Indicating -18 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech sector longs and emerging market shorts

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

•   Large-Cap Growth unch.

Sector Underperformers:

• 1) Banks -.4% 2) Computer Hardware -.3 3) Internet -.4%

Stocks Falling on Unusual Volume: 

• SELB, EPZM, LITE, TSLA and MFGP

Stocks With Unusual Put Option Activity:

• 1) WPX 2) AABA 3) HLT 4) ADP 5) NRG

Stocks With Most Negative News Mentions:

• 1) EPZM  2) BEL 3) DAL 4) RSYS 5) GWW

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.8%

Sector Outperformers:

• 1) Gold & Silver +2.9% 2) Energy +1.5% 3) Retail +1.3%

Stocks Rising on Unusual Volume:

• JNP, MLHR, ACXM, ZFGN, AZZ, AYI, KKR, BLFS, PFBC, DVMT, YPF, MDSO, EBF, RDVT, ROKU, AMED, ROK, ZAYO, ANDV, CPB, BFR, MPC, WLDN, NBL, APO, OSTK, FTSI, REN, RES, ALB and ANDV

Stocks With Unusual Call Option Activity:

• 1) BX 2) AABA 3) DUST 4) EMB 5) XLNX

Stocks With Most Positive News Mentions:

• 1) VEON 2) JNP 3) AYI 4) ROKU 5) NEM

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -12.9% Below 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 72.7% of Issues Advancing, 23.5% Declining
• 45 New 52-Week Highs, 13 New Lows
• 44.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.2%
• Vix 15.2 -2.3%
• Total Put/Call 1.09 +2.83%
• TRIN/Arms 1.09 -9.07%

Tuesday Watch

Evening Headlines

Bloomberg:

• Merkel Defuses Coalition Clash Over Migration With Compromise. 

• ECB Faces Ghost of Rate Hikes Past a Decade After 2008 Misstep.

• U.K. Lawmakers Ask BOE, Treasury for Assessment of Brexit Deal.

• Asia Stocks Recover From Selloff; Crude Oil Gains. Stocks in Japan, South Korea and Australia recouped some of yesterday’s declines as investors continue to weigh the impact of potential global trade restrictions on economic growth. The dollar held on to gains, while Chinese assets remain in focus following another battering for stocks. Share indexes in Tokyo, Sydney and Seoul climbed. Hong Kong returns after Monday’s holiday when pronounced moves lower were seen across Asian equity markets. In the U.S., the S&P 500 Index recovered its early losses to end the day higher as technology shares rose. Treasuries were steady, alongside gold and the yen. Japan’s Topix index rose 0.3 percent as of 9:07 a.m. in Tokyo. Australia’s S&P/ASX 200 Index added 0.1 percent. South Korea’s Kospi advanced 0.6 percent. Futures on S&P 500 were flat.  

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

Wall Street Journal:

• Fed Gave Wall Street Titans Path Around Stress-Test Failure.

• Tech’s ‘Dirty Secret’: App Developers Scanning Gmail.

• The Abortion Scare Campaign. 

• Vote Resets U.S.-Mexico Relations.

• IPO Market Posts Blistering First Half.

• Democrats Weigh Politics of Calls to Eliminate ICE.

MarketWatch.com:

• Stick with U.S. stocks — and avoid these 7 emerging-market traps.

• ‘It’s hard to be bearish stocks’ after looking at this chart, says veteran trader.

• Avi Gilburt: The S&P 500 still has two bullish paths.

Fox News:

• Bid to split California into 3 states gains traction – could it really happen?

• Cleric: Obama naturalized thousands of Iranian VIPs during nuke talks.

CNBC:      

• Virtual doctor start-up American Well is raising over $300 million and Philips is a new investor.

• After-hours buzz: MLHR, ACXM & more.

• Goldman: The second half is going to be difficult, but these stocks with strong balance sheets should thrive.

Zero Hedge:

• Democratic Socialists Openly Calling For Communism After Ocasio-Cortez Win.

• SEC Joins Federal Facebook Probe As Scope Broadens.

• Trump To Block Chinese Telecom Giant From Entering US Market.

• "Monetizing Poor People": Obama Treasury Secretary Tim Geithner Is Now A Predatory Lender.

• 7 Months After Fake Flynn Story "Epic Mistake", ABC Quietly Lets Brian Ross Go.

• Euro Jumps After CSU Leader Says Migration Clash With Merkel Resolved.

• Tesla(TSLA) Confirms Chief Engineer Has Left.

• Chamber Of Commerce Turns On Trump With Campaign To Oppose Tariffs.

• Jim Kunstler Fears The Democrats' "Turn For The Worse".

• Bitcoin Bounced, Tesla Trounced, Platinum Pummelled, Yield Curve Crushed.

Business Insider:

• The US is pumping out more oil than 12 of 14 OPEC members.

• Rental prices are soaring around the US.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 94.5 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 15.5 +.75 basis point.

• Bloomberg Emerging Markets Currency Index 69.16 +.02%.

• FTSE 100 futures +.17%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (AYI)/2.17

• (AZZ)/.48

Economic Releases
10:00 am EST

• Factory Orders for May are estimated unch. versus a -.8% decline in April.
  

Afternoon

• Wards Total Vehicle Sales for June is estimated to rise to 17.0M versus 16.81M in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Retail Sales report and the US Weekly Retail Sales report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the close, finishing mixed.  The Portfolio is 75% net long heading into the day.