Stocks Lower into Final Hour on Fed Rate-Hike Worries, Emerging Market Currency/Debt Angst, Oil Decline, Tech/Biotech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.65 +34.8%

• Euro/Yen Carry Return Index 136.23 -.35%

• Emerging Markets Currency Volatility(VXY) 10.73 +4.17%

• S&P 500 Implied Correlation 35.39 +2.9%

• ISE Sentiment Index 59.0 -42.72%
  

• Total Put/Call 1.07 +27.4%

• NYSE Arms .59 -6.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 59.02 +.06%
  

• America Energy Sector High-Yield CDS Index 381.0 +.97%

• European Financial Sector CDS Index 85.32 +.5%

• Italian/German 10Y Yld Spread 279.75 -4.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.69 +5.21%

• Emerging Market CDS Index 208.05 +6.46%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.57 -.09%

• 2-Year Swap Spread 17.25 +1.0 basis point

• TED Spread 19.0 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -39.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.94 -.78%
• 3-Month T-Bill Yield 2.21% -1.0 basis point

• Yield Curve 31.75 +2.25 basis points

• China Iron Ore Spot 68.25 USD/Metric Tonne -.19%

• Citi US Economic Surprise Index 11.1 +2.3 points

• Citi Eurozone Economic Surprise Index -33.6 +.4 point

• Citi Emerging Markets Economic Surprise Index -10.3 -.4 point

• 10-Year TIPS Spread 2.17 unch.
• 77.1% chance of Fed rate hike at Dec. 19th meeting, 78.7% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -230 open in Japan 
• China A50 Futures: Indicating -533 open in China

• DAX Futures: Indicating -33 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.9%

Sector Underperformers:

• 1) Biotech -3.2% 2) Social Media -2.8% 3) Alt Energy -2.7%

Stocks Falling on Unusual Volume: 

• MNR, ARWR, RTEC, NVO, LGIH, VNET, MNK, LYV, MCHP, AMCX, INGN, SLDB, LGIH, ASMB and SMCI

Stocks With Unusual Put Option Activity:

• 1) EMB 2) S 3) NOV 4) ADI 5) TPR

Stocks With Most Negative News Mentions:

• 1) RTEC 2) TEAM 3) AMRC 4) GPN 5) BID

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.5%

Sector Outperformers:

• 1) I-Banking +1.7% 2) Restaurants +.3% 3) Utilities +.3%

Stocks Rising on Unusual Volume:

• HDP, ITG, BREW, PRTK, RECN, SNX, AMRN, STZ, MERC, VIRT, LLY, ACHC, AYI, CP, WBS, NVTR, MKTX, STMP, NOV, CSBR, UPLD and CLDR

Stocks With Unusual Call Option Activity:

• 1) ZNGA 2) EMB 3) CME 4) JNPR 5) LOW

Stocks With Most Positive News Mentions:

• 1) CLDR 2) HDP 3) MERC 4) CP 5) LLY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +8.75% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 24.3% of Issues Advancing, 73.3% Declining
• 25 New 52-Week Highs, 288 New Lows
• 47.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.0%
• Vix 13.5 +16.5%
• Total Put/Call .92 +9.5%
• TRIN/Arms .60 -4.98%

Thursday Watch

Evening Headlines

Bloomberg:              

• Singapore Companies Are on a Global Acquisition Spree.

• Treasuries Slide, Asia Stocks Set to Nudge Higher. Treasuries sank amid optimism on the U.S. economy, with Asian stocks set for small gains after U.S. equities edged higher. The dollar surged pushing the yen to its lowest in over a year. Stronger-than-anticipated reports on U.S. services and private payrolls helped drive up the yield on 10-year Treasuries more than 10 basis points Wednesday to 3.18 percent. Futures indicated modest gains for stocks in Japan, Hong Kong and Australia. The S&P 500 Index eked out an advance after climbing to within a whisker of a fresh all-time high, though finished off the session highs as higher bond yields tested equity valuations. The rise in the greenback hit the Australian and New Zealand dollars. Futures on Japan’s Nikkei 225 rose 0.6 percent in Singapore. Futures on Hong Kong’s Hang Seng added 0.1 percent. Futures on Australia’s S&P/ASX 200 Index gained 0.1 percent.

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

• Walmart(WMT) May Rise Over 3% on Investor Day, Morgan Stanley Says.

• Investors Hone in on U.S. Data as Yields Surge Most Since 2016.

Wall St. Journal:

• Live Coverage: Kavanaugh Nomination.

• Fake News Comes to Academia. 

• Bond Yields Surge, Signaling Growth Hopes.

• Mall Vacancies Are Highest in 7 Years After Big-Box Closings.

• Honda to Invest $2.75 Billion in GM’s Self-Driving Car Unit.

• Employer-Provided Health Insurance Nears $20,000 a Year.

• Hedge Fund Highfields to Return Client Money.

• China to Raise Billions in U.S. Dollar Debt.

• Don’t Be Surprised by Good News at Banks.

MarketWatch.com:

• Economic growth could face pressure from the record number of ‘zombie’ stocks.

• Child advocates: ‘Keep young kids away from Facebook’.

Fox News:

• Capitol atmosphere supercharged as mounting Kavanaugh protests target GOP ahead of FBI report.

• Republicans trending up in Senate races amid pro-Trump sentiment: Fox Polls.

• Five law enforcement officers shot in South Carolina, reports say.

CNBC:       

• Supreme Court, missing a justice, considers a trucking case that could rattle the economy.

• Fed Chair Powell's remarks this year have cost the stock market $1.5 trillion, JP Morgan says.

• Powell says we're 'a long way' from neutral on interest rates, indicating more hikes are coming.

• Cloudera and Hortonworks shares skyrocket as rivals merge.

• There's a massive bull market that no one is talking about.

• After-hours buzz: CLDR, TLRY & more.

• These Dow stocks — including Goldman Sachs — win big when rates are rising like they are now.

• Rates are surging with 10-year, 30-year Treasury yields touching multiyear highs.

• This start-up created the first farm in America run entirely by robots.

Zero Hedge:

• After 17 Months, The Mueller Probe Is Finally Winding Down. 

• GOP Senator: Democratic Activists Participating In 'Paid Soros Conspiracy'.

• Euro Tumbles In Late Trading As Hawkish Powell Sends Dollar, Yields Soaring.

• Tilray Tumbles After Announcing Convertible Note Offering.

• Stocks Pump'n'Dump After Bonds Biggest Bloodbath Since Trump's Election.

Business Insider:

• Facebook(FB) is now making users wait twice as long to delete their accounts.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 80.0 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 9.25 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.46 +.01%.

• FTSE 100 futures +.5%.

• S&P 500 futures -.24%.

• NASDAQ 100 futures -.26%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (STZ)/2.61

• (ISCA)/.21

After the Close:

• (COST)/2.34

Economic Releases

7:30 am EST

• Challenger Job Cuts YoY for September.
  

8:30 am EST

• Initial Jobless Claims for last week is estimated to rise to 215K versus 214K the prior week.

• Continuing Claims are estimated to rise to 1665K versus 1661K prior.
  

10:00 am EST

• Factory Orders for August are estimated to rise +2.1% versus a -.8% decline in July.
  

Upcoming Splits

• (CASH) 3-for-1

Other Potential Market Movers

• The Fed's Quarles speaking, German Construction PMI report, weekly Bloomberg Consumer Comfort Index, B. Riley Consumer/Media Conference, (TRN) investor day, (CCOI) investor day and the (JEF) investor meeting could also impact trading today.

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