Stocks Slightly Lower into Final Hour on Trade War Worries, Long-Term Rates, Profit-Taking, Utility/Alt Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.58 +3.11%

• Euro/Yen Carry Return Index 138.23 +.29%

• Emerging Markets Currency Volatility(VXY) 11.64 +.09%

• S&P 500 Implied Correlation 35.16 +4.0%

• ISE Sentiment Index 116.0 +24.7%
  

• Total Put/Call .87 -10.3%

• NYSE Arms .87 -33.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.70 -.19%
  

• America Energy Sector High-Yield CDS Index 396.0 -.63%

• European Financial Sector CDS Index 80.72 +.22%

• Italian/German 10Y Yld Spread 233.5 -10.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.67 +1.63%

• Emerging Market CDS Index 199.06 +1.06%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.69 +.02%

• 2-Year Swap Spread 17.0 +.25 basis point

• TED Spread 16.75 -3.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.61 -.02%
• 3-Month T-Bill Yield 2.20% +3.0 basis points

• Yield Curve 25.75 -1.0 basis point

• China Iron Ore Spot 68.25 USD/Metric Tonne +.38%

• Citi US Economic Surprise Index -.2 +1.7 points

• Citi Eurozone Economic Surprise Index -25.30 -.1 point

• Citi Emerging Markets Economic Surprise Index -9.1 +.8 point

• 10-Year TIPS Spread 2.16 unch.
• 100.0% chance of Fed rate hike at Nov. 8th meeting, 100.0% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -80 open in Japan 
• China A50 Futures: Indicating +9 open in China

• DAX Futures: Indicating -19 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.2%

Sector Underperformers:

• 1) Semis -1.4% 2) Utilities -1.0% 3) Alt Energy -1.0%

Stocks Falling on Unusual Volume: 

• NEOG, JBL, PYX, XON, CTL, DFIN, CY, FND, CLVS, FATE, AOS, LEA and AVLR

Stocks With Unusual Put Option Activity:

• 1) JBL 2) ADI 3) TTWO 4) SYMC 5) SO

Stocks With Most Negative News Mentions:

• 1) CY 2) SBOW 3) GE 4) VNTR 5) DTEA

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.6%

Sector Outperformers:

• 1) Steel +2.1% 2) Restaurants +1.5% 3) Defense +1.4%

Stocks Rising on Unusual Volume:

• SONC, XOXO, OXFD, GOLD, SPPI, SA, SKY, PLNT, MEOH, HRTX, SQ, BOJA, SAP, KIRK, DMLP, TNDM, TOT, EW, GGAL, ACAD, I, KORS, BP, INSY and ABMD

Stocks With Unusual Call Option Activity:

• 1) CARS 2) GPOR 3) KMX 4) BSX 5) TTD

Stocks With Most Positive News Mentions:

• 1) SQ 2) TNDM 3) AMRN 4) LMT 5) COP

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -1.38% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 50.9% of Issues Advancing, 44.7% Declining
• 60 New 52-Week Highs, 75 New Lows
• 49.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.02%
• Vix 12.2 +.3%
• Total Put/Call .95 -2.1%
• TRIN/Arms .79 -38.3%

Tuesday Watch

Evening Headlines

Bloomberg:       

• Trump Clinches His First Trade Deal With Revamped South Korea Pact.

• New U.S.-South Korea Pact Spurs Hopes for Nafta, China Deals.

• Asia Stocks Look Mixed as Politics, Trade Dominate: Markets Wrap. Asian futures point to a muted start to trading Tuesday after U.S. stocks slipped on growing concern
  about the outlook for global trade and domestic politics. Oil rallied toward a four-year high. Futures in Australia edged lower, while Japan’s and China’s markets will resume trading today after holidays. Hong Kong and South Korea are shut Tuesday. Industrial shares led the S&P 500 Index lower after China warned it won’t meet with American officials unless they stop threatening to expand tariffs, while reports that Deputy Attorney General Rod Rosenstein will leave his post also weighed on stocks. The dollar advanced alongside Treasury yields. Futures on Australia’s S&P/ASX 200 Index fell 0.1 percent. FTSE China A50 futures lost 0.2 percent.  

• Fed Hawkish Tilt, Trump's Trade Leverage, EU Inflation: Eco Day.

• Apple(AAPL), Salesforce(CRM) Join Forces to Boost Mobile Business Apps.

Wall St. Journal:

• Republicans Vow to Back Kavanaugh Amid New Allegation.

• Rosenstein Will Meet Trump to Consider His Future at DOJ.

• Trump Pursues Trade Deals in Asia, Europe Amid Frostiness With China.

• Brent Crude Tops $80, Closes at Highest Level Since 2014.

• Michael Kors Nears Deal to Buy Versace for Around $2.4 Billion.

MarketWatch.com:

• A new S&P 500 sector is set to debut: Here’s what investors need to know.

• Fast-growing chip makers are selling for a discount after Trump tariff announcement.

Fox News:

• Brett Kavanaugh denies sexual misconduct in Fox News exclusive: 'I know I'm telling the truth'.

CNBC:     

• Navarro: China's 'egregious practices' make it tougher to get a trade deal.

• After-hours buzz: CTL, ARNA & more.

• First-weekend demand for the new Apple Watch was 'much higher than expected,' says analyst Kuo.

• Navarro says Trump's trade strategy may create market volatility, but will be bullish long term.

• Netflix(NFLX) shares rise as it appears Apple's original content won't be a serious threat to streamer.

Zero Hedge:

• Dems Ignore Keith Ellison Abuse Claims Despite Actual Evidence From Female Accuser.

• The Real Wave Is Red : Republican Sentiment Soars To Record High.

• Kavanaugh: "I Will Not Be Intimidated Into Withdrawing" By "Smears" And "Vile Threats".

• Iran Vows "Crushing And Devastating" Revenge On US, Israel For Deadly Attack.

• US Bonds, Stocks Slump On China Trade Tensions & Trump Turmoil.

Business Insider:

• 'It's a nightmare scenario': A radioactive object was found in San Francisco's new $8 billion neighborhood.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 82.5 +1.75 basis points. 

• Asia Pacific Sovereign CDS Index 9.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.60 -.02%.

• FTSE 100 futures -.18%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (FDS)/2.21

• (JBL)/.68

After the Close:

• (CTAS)/1.80

• (KBH)/.77

• (NKE)/.63

• (AIR)/.52

Economic Releases

9:00 am EST

• The FHFA House Price Index MoM for July is estimated to rise +.3% versus a +.2% gain in June.

• The S&P CoreLogic CS 20-City MoM for July is estimated to rise +.1% versus a +.11% gain in June.
  

10:00 am EST

• The Richmond Fed Manufacturing Index for September is estimated to fall to 20.0 versus 24.0 in August.

• The Conference Board Consumer Confidence Index for September is estimated to fall to 132.o versus 133.4 in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ Minutes, DoJ's meeting with state AG's on social media, $35B 5Y T-Note auction, weekly US retail sales reports, BofA Merrill Financials/Banking/Insurance Conference, Oppenheimer Specialty Pharma/Rare Disease Summit,   could also impact trading today.

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

Stocks Mostly Lower into Final Hour on Trade War Fears, Long-Term Rates, Profit-Taking, Financial/Transport 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) 12.42 +6.34%

• Euro/Yen Carry Return Index 137.83 +.17%

• Emerging Markets Currency Volatility(VXY) 11.60 +.26%

• S&P 500 Implied Correlation 34.73 +3.92%

• ISE Sentiment Index 92.0 +15.0%
  

• Total Put/Call .93 -5.1%

• NYSE Arms 1.10 +30.44%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.54 +1.59%
  

• America Energy Sector High-Yield CDS Index 398.0 -1.53%

• European Financial Sector CDS Index 80.53 +2.55%

• Italian/German 10Y Yld Spread 243.75 +7.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.51 +2.09%

• Emerging Market CDS Index 196.0 -1.58%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.66 +.03%

• 2-Year Swap Spread 16.75 -.5 basis point

• TED Spread 19.75 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -13.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.66 +.22%
• 3-Month T-Bill Yield 2.17% +1.0 basis point

• Yield Curve 26.75 +.5 basis point

• China Iron Ore Spot 68.90 USD/Metric Tonne -.66%

• Citi US Economic Surprise Index -1.9 +.9 point

• Citi Eurozone Economic Surprise Index -25.20 +3.3 points

• Citi Emerging Markets Economic Surprise Index -9.9 -.1 point

• 10-Year TIPS Spread 2.16+1.0 basis point
• 100.0% chance of Fed rate hike at Nov. 8th meeting, 100.0% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -151 open in Japan 
• China A50 Futures: Indicating -95 open in China

• DAX Futures: Indicating -10 open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/medical sector long, index hedges and emerging market shorts

• Disclosed Trades: None

• Market Exposure: 75% Net Long