Stocks Slightly Lower into Final Hour on Earnings Concerns, Technical Selling, Profit-Taking, Financial/Tech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.4 +1.3%

• Euro/Yen Carry Return Index 134.57 -.11%

• Emerging Markets Currency Volatility(VXY) 12.42 -2.59%

• S&P 500 Implied Correlation 26.36 -4.5%

• ISE Sentiment Index 143.0 +15.3%
  

• Total Put/Call .79 -9.2%

• NYSE Arms .67 -23.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.49 -.68%
  

• America Energy Sector High-Yield CDS Index 408.0 -1.12%

• European Financial Sector CDS Index 70.02 +.60%

• Italian/German 10Y Yld Spread 254.0 +2.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.62 -1.10%

• Emerging Market CDS Index 221.29 -3.44%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.56 +.03%

• 2-Year Swap Spread 18.0 -.25 basis point

• TED Spread 19.50 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 12.42 -2.59%
• 3-Month T-Bill Yield 2.14% -1.0 basis point

• Yield Curve 21.0 -2.25 basis points

• China Iron Ore Spot 68.0 USD/Metric Tonne +.97%

• Citi US Economic Surprise Index -4.2 +.4 point

• Citi Eurozone Economic Surprise Index -12.5 -5.8 points

• Citi Emerging Markets Economic Surprise Index -5.10 -1.2 points

• 10-Year TIPS Spread 2.12 unch.
• 97.5% chance of Fed rate hike at Nov. 8th meeting, 99.4% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -110 open in Japan 
• China A50 Futures: Indicating +172 open in China

• DAX Futures: Indicating -28 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +3.2% Above 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 47.9% of Issues Advancing, 47.6% Declining
• 58 New 52-Week Highs, 44 New Lows
• 51.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.9%
• Vix 13.7 +3.6%
• Total Put/Call .82 -5.8%
• TRIN/Arms .86 -2.2%

Wednesday Watch

Evening Headlines

Bloomberg: 

• Asian Stocks Open Mixed; Oil Jumps on Hurricane. Asian stocks were off to a muted start Wednesday as investors assessed how cementing expectations for more Federal Reserve interest-rate increaseswill affect emerging markets. Ten-year Treasury yields headed back towards 3 percent. Oil prices jumped as a potentially devastating hurricane headed for the American east coast. Equity benchmarks in Japan and South Korea were little changed as trading began, while Australian stocks declined. Futures indicated Hong Kong shares would nudge higher after sliding into a bear market. U.S. stocks rose as the surge in crude buoyed energy shares. Two-year Treasury yields pulled back after hitting a decade high, as the U.S. sold debt and fed funds futures showed investors increasingly expecting two more rate hikes by year-end. Japan’s Topix index was little changed as of 9:10 a.m. in Tokyo. Australia’s S&P/ASX 200 index slid 0.4 percent. South Korea’s Kospi index rose 0.2 percent. Futures on Hong Kong’s Hang Seng index added 0.1 percent. S&P 500 Index futures were little changed.  

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

• China-EM Crisis Risk, Brexit Summit, Two More Fed Hikes: Eco Day.   

• Markets See Highest Chance Yet of Two More Fed Hikes in 2018.

• Apple(AAPL) Advances Most in Five Weeks Ahead of Annual Product Launch.

• Sessions Open to Probe of Social Media Giants. 

• The Incredible Shrinking Hedge Fund.

Wall St. Journal:

• China Woos U.S. Companies Again, Curbs Trade Threats.

• U.S. Business Creation Hits Record High.

• Olaf Carlson-Wee Rode the Bitcoin Boom to Riches. Can He Survive the Crash?

• Steel Workers Demand Higher Pay as Tariffs Lift Profits.

• Hong Kong’s $2.1 Trillion Benchmark Stock Index Enters Bear Market.

• Trump Associates Push Back on Woodward Book.

MarketWatch.com:

• 5 things about a U.S.-China trade war that might surprise investors.

• AMD’s(AMD) stock tops $30 for first time in more than 12 years while chips slip on memory woes.

Fox News:

• Meadows dukes it out with Strzok lawyer over 'media leak strategy' texts as new timeline emerges.

• Florence charges toward East Coast as officials warn of ‘devastating’ effects.

CNBC: 

• US-China trade war could cause a bear market, stress test shows.

• Buy energy stocks now to take advantage of the coming rally, technical analyst says.

• After-hours buzz: S, GILD & more.   

• Wall Street's Jeff Saut: Bull market should have another 7 to 8 years left.  

• Job openings hit record high and more people than ever are confident enough to quit.  

• Cryptocurrency ether hits lowest point of the year, extending its 2018 nosedive.

• Alphabet's(GOOGL) plan to beam internet to Earth from balloons just passed a big milestone.

Zero Hedge: 

• "Worst Storm In US History" Florence Set To Break All-Time Records; Forecasters Fear Harvey Flood Redux.

• Trump Insiders Blocking Executive Action On Big Tech Censorship: Report.

• Nuclear Power Plants At Risk Of Direct Hit By Hurricane Florence 

• 4 Simple Reasons Why Socialism Fails.

• WTI Spikes Above $70 After Huge Crude Draw.

• Budget Deficit Soars To $895 Billion; Will Hit $1 Trillion One Year Ahead Of Plan.

• Stocks Pop As Beijing Backs Off, But Hindenburg Cluster Hovers.

Business Insider:

• 'If you've been asked to leave, get out': Hurricane Florence could get stronger as it barrels toward North Carolina.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 78.75 -2.5 basis points. 

• Asia Pacific Sovereign CDS Index 12.75 unch.

• Bloomberg Emerging Markets Currency Index 65.25 -.02%.

• FTSE 100 futures -.05%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• None of note

After the Close:

• (OXM)/1.83

• (PVTL)/-.09

• (TLRD)/1.07

Economic Releases

8:30 am EST

• PPI Final Demand MoM for August is estimated to rise +.2% versus unch. in July.

• PPI Ex Food and Energy MoM for August is estimated to rise +.2% versus a +.1% gain in July.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,694,910 barrels versus a -4,302,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +358,820 barrels versus a +1,845,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,660,640 barrels versus a +3,119,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.45% versus a +.3% gain prior.

2:00 pm EST

• U.S. Fed releases Beige Book report.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, Eurozone Industrial Production report, (AAPL) Special Event, $23B 10Y T-Note auction, weekly MBA Mortgage Applications report, OPEC Monthly Oil Market Report, CSFB Basic Materials Conference, Morgan Stanley Healthcare Conference, BofA Merrill Healthcare Conference, Morgan Stanley Healthcare Conference, Goldman Sachs Communacopia Conference, Barclays Financial Services Conference, Morgan Stanley Laguna Conference, Deutsche Bank Tech Conference, Mobile World Congress and the (VFC) investor meeting could also impact trading today.

BOTTOM LINE:  Asian indices are modestly lower, weighed down by consumer and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 75% net long heading into the day.

Stocks Reversing Higher into Final Hour on Less Eurozone Debt Angst, Economic Optimism, Oil Gain, Energy/Telecom Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.3 -5.79%

• Euro/Yen Carry Return Index 134.49 +.34%

• Emerging Markets Currency Volatility(VXY) 12.93 unch.

• S&P 500 Implied Correlation 27.40 -4.56%

• ISE Sentiment Index 126.0 +14.55%
  

• Total Put/Call .87 -24.35%

• NYSE Arms .96 -26.86%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.83 -.74%
  

• America Energy Sector High-Yield CDS Index 413.0 -1.12%

• European Financial Sector CDS Index 69.68 -1.91%

• Italian/German 10Y Yld Spread 251.25 -13.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.76 +.16%

• Emerging Market CDS Index 229.17 +.39%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.52 +.07%

• 2-Year Swap Spread 18.25 -.5 basis point

• TED Spread 19.0 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.21 +.09%
• 3-Month T-Bill Yield 2.15% +3.0 basis points

• Yield Curve 23.25 +.75 basis point

• China Iron Ore Spot 66.68 USD/Metric Tonne -.99%

• Citi US Economic Surprise Index -4.6 +.2 point

• Citi Eurozone Economic Surprise Index -6.7 -2.4 points

• Citi Emerging Markets Economic Surprise Index -3.90 +.5 point

• 10-Year TIPS Spread 2.12 +2.0 basis points
• 96.4% chance of Fed rate hike at Nov. 8th meeting, 99.3% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -89 open in Japan 
• China A50 Futures: Indicating -106 open in China

• DAX Futures: Indicating +17 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth +.1%

Sector Underperformers:

• 1) Steel -1.8% 2) Gaming -1.2% 3) Disk Drives -1.1%

Stocks Falling on Unusual Volume: 

• USAT, SD, YUMC, FNKO, LMNR, CC, IIN, ACOR, KRO, CDNA, CORE, RPD and SONO

Stocks With Unusual Put Option Activity:

• 1) RLGY 2) AIG 3) AABA 4) CY 5) ALL

Stocks With Most Negative News Mentions:

• 1) USAT 2) FRAN 3) SONO 4) AIR 5) YUMC

Charts:

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