Stocks Surging into Final Hour on Diminished Trade War Fears, Economic Optimism, Less Emerging Markets Currency/Debt Angst, Biotech/Road&Rail Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.84 -6.1%

• Euro/Yen Carry Return Index 136.32 +.25%

• Emerging Markets Currency Volatility(VXY) 11.77 -.93%

• S&P 500 Implied Correlation 34.76 -.03%

• ISE Sentiment Index 120.0 +50.0%
  

• Total Put/Call .81 -.10%

• NYSE Arms .66 +.35%

Credit Investor Angst:

• North American Investment Grade CDS Index 56.28 -.51%
  

• America Energy Sector High-Yield CDS Index 400.0 +.01%

• European Financial Sector CDS Index 67.91 -.12%

• Italian/German 10Y Yld Spread 231.0 -7.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.11 +1.10%

• Emerging Market CDS Index 205.49 +.02%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.77 -.25%

• 2-Year Swap Spread 16.0 -.75 basis point

• TED Spread 17.50 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.90 +.07%
• 3-Month T-Bill Yield 2.16% +1.0 basis point

• Yield Curve 24.75 +3.0 basis points

• China Iron Ore Spot 68.72 USD/Metric Tonne -.09%

• Citi US Economic Surprise Index -6.7 +9.6 points

• Citi Eurozone Economic Surprise Index -17.90 -8.7 points

• Citi Emerging Markets Economic Surprise Index -9.70 +6.6 points

• 10-Year TIPS Spread 2.13+2.0 basis points
• 98.7% chance of Fed rate hike at Nov. 8th meeting, 99.7% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +305 open in Japan 
• China A50 Futures: Indicating +63 open in China

• DAX Futures: Indicating +11 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value +.3%

Sector Underperformers:

• 1) Paper -1.7% 2) Foods -.8% 3) REITs -.3%

Stocks Falling on Unusual Volume: 

• APOG, PSDO, GOV, CBRL, MDGL, WK, SIR, PRI, GIS, PVTL and TSLA

Stocks With Unusual Put Option Activity:

• 1) SEAS 2) CBRL 3) GIS 4) FTV 5) TGTX

Stocks With Most Negative News Mentions:

• 1) TSLA 2) ATHN 3) WK 4) DISCA 5) BRC

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.0%

Sector Outperformers:

• 1) Road & Rail +2.8% 2) Steel +2.7% 3) Homebuilders +1.7%

Stocks Rising on Unusual Volume:

• VKTX, NXEO, RDCM, EEQ, IEFA, QTRX, CSBR, IGV, EPM, TNDM, AIMC, UNVR, AMGP, NERV, THO, CGC, MRSN, NVTA, CENX, DNLI, RDNT, CRON, PYX, NTNX, EFAV, CCXI, FWONK, YELP, SGMS, SGRY, UNM, AIR, LGND, UNP, NSC, AFIN, XLRN and FNKO

Stocks With Unusual Call Option Activity:

• 1) DXJ 2) IEF 3) VKTX 4) NSC 5) AZO

Stocks With Most Positive News Mentions:

• 1) VKTX 2) MU 3) NSC 4) UNP 5) OXY

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
• 8 Sectors Rising, 3 Sectors Declining
• 49.9% of Issues Advancing, 46.0% Declining
• 52 New 52-Week Highs, 81 New Lows
• 50.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.2%
• Vix 13.0 -4.8%
• Total Put/Call .74 -17.8%
• TRIN/Arms .82 +25.5%

Tuesday Watch

Evening Headlines

Bloomberg:  

• Trump Tariffs to Hit $200 Billion of China Goods on Sept. 24. 

• U.S. Stock Futures Drop as Trump Readies Tariffs. U.S. stock futures fell and Asian stocks are set to decline after the Trump administration’s latest barrage of tariffs against China. The dollar ticked higher. The largest exchange-traded fund that tracks the S&P 500 Index retreated after hours following Trump’s announcement that a fresh $200 billion in Chinese goods are subject to levies of 10 percent, rising to 25 percent in 2019. Japanese futures declined as the market readied to return from a holiday. Chinese futures suggested stocks will extended a decline after ending at a four-year low Monday. U.S. stocks ended the regular session down the most in a month, with technology companies leading decliners, as investors braced for the move. The dollar fell versus major peers ahead of the announcement. Beijing has already said it will retaliate. Futures on the Nikkei 225 Stock Average fell 0.4 percent in Singapore. Futures on Australia’s S&P/ASX 200 Index were steady. Futures on Hong Kong’s Hang Seng Index rose 0.2 percent. S&P 500 futures dropped 0.2 percent as of 7:44 a.m. in Tokyo.

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

• Why Coca-Cola May Add a Cannabis Component to Drinks.   

• FedEx(FDX) Raises Annual Profit Forecast With Surging E-Commerce Demand.

Wall St. Journal:

• The #MeToo Kavanaugh Ambush.

• U.S. to Cap Refugee Admissions at 30,000 in 2019.

• Florence Pushes Some North Carolina Dams to the Brink.

• Out of Stock in Retail Stores This Holiday Season: Workers.

• Wall Street Salaries Continue to Soar.

• Election Uncertainty Spurs Investors to Hedge.

Fox News:

• Senate Judiciary calls Kavanaugh, accuser to speak out at public hearing.

CNBC:   

• After-hours buzz: ORCL, FDX & more.

• Trump will slap 10% tariffs on $200 billion in Chinese goods — and they will go to 25% at year end.

• Hurricane Florence damage estimated at $17 billion to $22 billion — Moody's Analytics.

• Oracle shares fall after revenue misses analyst estimates.

• DOJ clears Cigna's acquisition of Express Scripts.

Zero Hedge: 

• Trump Imposes Tariffs On $200BN In China Imports; Will Add Another $267BN If China Retaliates.

• Trump Orders Immediate Release Of All Text Messages, Carter Page FISA Application From Russia Investigation.

• Massive Sustained Attack On Syria: Russian S-400 Defenses Possibly Active In Huge Escalation.

• Crypto Tumbles As Mysterious $720 Million Bitcoin Wallet Wakes Up And Starts Dumping Coins.

• 40% Of Venezuela Stores Go Bust After 3,000% Minimum Wage Hike.

• Tariff Tantrum Sparks Tech Wreck, Dollar Dump, Bonds & Bullion Bid.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 78.0 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 12.25 unch.

• Bloomberg Emerging Markets Currency Index 65.81 -.09%.

• FTSE 100 futures -.10%.

• S&P 500 futures -.35%.

• NASDAQ 100 futures -.47%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (APOG)/.82

• (AZO)/17.91

• (CBRL)/2.69

• (GIS)/.64

After the Close:

• None of note

Economic Releases

10:00 am EST

• The NAHB Housing Market Index for September is estimated to fall to 66.0 versus 67.0 in August.
  

4:00 pm EST

• Net Long-Term TIC Flows for July.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Housing Price report, Japan Trade Balance report, weekly US retail sales reports and the (BWA) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 50% net long heading into the day.

Stocks Lower into Final Hour on Trade War Fears, Emerging Markets Currency/Debt Angst, Profit-Taking, Tech/Biotech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.91 +7.0%

• Euro/Yen Carry Return Index 136.15 +.51%

• Emerging Markets Currency Volatility(VXY) 11.94 +.42%

• S&P 500 Implied Correlation 34.87 +.96%

• ISE Sentiment Index 83.0 -28.45%
  

• Total Put/Call .89 +8.54%

• NYSE Arms .66 -27.77%

Credit Investor Angst:

• North American Investment Grade CDS Index 56.14 +.71%
  

• America Energy Sector High-Yield CDS Index 400.0 -.35%

• European Financial Sector CDS Index 67.99 -.79%

• Italian/German 10Y Yld Spread 238.75 -14.5 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.24 +1.16%

• Emerging Market CDS Index 204.54 -.82%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.14 -.03%

• 2-Year Swap Spread 16.75 -1.0 basis point

• TED Spread 19.0 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.25 +1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.90 -.14%
• 3-Month T-Bill Yield 2.15% unch.

• Yield Curve 21.75 +.75 basis point

• China Iron Ore Spot 68.72 USD/Metric Tonne -.09%

• Citi US Economic Surprise Index -16.3 -8.0 points

• Citi Eurozone Economic Surprise Index -9.40 +4.2 points

• Citi Emerging Markets Economic Surprise Index -16.30 -8.0 points

• 10-Year TIPS Spread 2.11 unch.
• 99.8% chance of Fed rate hike at Nov. 8th meeting, 100.0% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +101 open in Japan 
• China A50 Futures: Indicating +28 open in China

• DAX Futures: Indicating -89 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long