Stocks Slightly Higher into Afternoon on Lower Long-Term Rates, Less Eurozone Debt Angst, Oil Gain, Energy/Restaurant Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.0 +2.2%

• Euro/Yen Carry Return Index 135.08 -.20%

• Emerging Markets Currency Volatility(VXY) 10.55 +.29%

• S&P 500 Implied Correlation 36.28 +.5%

• ISE Sentiment Index 100.0 +.19%
  

• Total Put/Call .96 -.18%

• NYSE Arms 1.20 +157.27%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.77 +.27%
  

• America Energy Sector High-Yield CDS Index 388.0 -.34%

• European Financial Sector CDS Index 88.02 -1.67%

• Italian/German 10Y Yld Spread 292.75 -11.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.96 +1.17%

• Emerging Market CDS Index 207.06 -2.41%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.39 -.16%

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

• TED Spread 19.50 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -40.75 -.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.27 +.23%

• 3-Month T-Bill Yield 2.23% +2.0 basis points

• Yield Curve 32.75 -2.0 basis points

• China Iron Ore Spot 69.50 USD/Metric Tonne +.55%

• Citi US Economic Surprise Index 6.6 -.3 point

• Citi Eurozone Economic Surprise Index -29.5 -.3 point

• Citi Emerging Markets Economic Surprise Index -10.8 +.4 point

• 10-Year TIPS Spread 2.17 unch.

• 80.7% chance of Fed rate hike at Dec. 19th meeting, 81.3% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +56 open in Japan 

• China A50 Futures: Indicating -25 open in China

• DAX Futures: Indicating -12 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.4%

Sector Underperformers:

• 1) Papers -3.1% 2) Homebuilders -2.3% 3) Airlines -1.4%

Stocks Falling on Unusual Volume: 

• NOA, BLKB, PPG, AXTA, WRK, PKG, AMCX, TTM, AAL, ZUO, CBLK, IP, SGH, AMRN and AAL

Stocks With Unusual Put Option Activity:

• 1) CC 2) COL 3) UTX 4) MYL 5)  NRG

Stocks With Most Negative News Mentions:

• 1) BLKB 2) PKG 3) AFMD 4) WRK 5) ABUS

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.1%

Sector Outperformers:

• 1) Restaurants +1.7% 2) Oil Service +1.6% 3) Gaming +1.3%

Stocks Rising on Unusual Volume:

• PYX, AMGP, AM, REV, EBIX, HELE, SBPH, IIPR, TOCA, TDW, KZR, EBAY, WAAS, RDC, WLDN, BPT, ALLK, PZZA, IGT, XERS, SAP, NSTG, AR, ISCA, AKCA, ACHC and SBUX

Stocks With Unusual Call Option Activity:

• 1) ETR 2) D 3) EXAS 4) TPX 5) FAST

Stocks With Most Positive News Mentions:

• 1) PYX 2) EBIX 3) ESV 4) GCAP 5) BHGE

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +8.6% Above 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 49.5% of Issues Advancing, 47.9% Declining
• 40 New 52-Week Highs, 190 New Lows
• 42.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.2%
• Vix 16.0 +2.0%
• Total Put/Call .90 -23.1%
• TRIN/Arms 1.05 +125.3%

Tuesday Watch

Evening Headlines

Bloomberg:     

• U.S. Concerned About Chinese Yuan’s Recent Drop, Official Says.

• Italy's Tria Faces Off Against Opposition Lawmakers Over Budget.

• IMF Cuts Forecast for Global Growth as Trade War Takes Its Toll.

• Asian Stocks Decline; U.S. Yields Hold Above 3.2%. Asian stocks opened lower on Tuesday following a mixed U.S. session as investors took stock of a friction-filled visit by the American secretary of state to Beijing. Ten-year Treasury yields were steady around seven-year highs as they resumed trading after a holiday. Japanese shares declined as traders came back after a long weekend, hurt by a strengthening in the yen. Australian stocks dropped, while Hong Kong futures were also lower. China’s markets remain a focal point after stocks slumped on Monday and the yuan weakened past 6.9 per dollar in onshore trading. Overseas investors dumped $1.4 billion of domestic Chinese shares through exchange links with Hong Kong Monday. “China has been selling off because of dollar strength but also because of the weak data” showing the economy in a slowdown, David Hauner, a cross-asset strategist at Bank of America Merrill Lynch, said in an interview with Bloomberg Television. “For China to rally you really need the domestic picture to improve. The external picture is unlikely to help much.” Japan’s Topix index fell 1.3 percent as of 9:40 a.m. in Tokyo. Australia’s S&P/ASX 200 Index fell 0.9 percent. Hang Seng Index futures lost 0.6 percent. S&P 500 Index futures fell 0.1 percent.  

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

• Trump's Yuan Worries, Nobel Winners, Jokowi's Jobs Woe: Eco Day.

• Fear Gauge’s 58% Surge Leaves Stock Strategists Asking What Next.  

• Tesla's(TSLA) Value Sinks by $10 Billion in a Week.

• Morgan Stanley Says It Was Wrong About Treasury Yields, Scraps Call on Curve Flattening.

• The Most Popular Hedge Fund Stocks Are Getting Hit the Hardest.

Wall St. Journal:

• Democrats, Try Some Self-Restraint.

• Trump Says He Has No Plans to Fire Rosenstein.

• Hedge Funds Retreat as Markets Advance.

• Emerging Markets Look to Contain Damage.

• Chinese Exporters Find 18,927 Ways to Avoid U.S. Trade Tariffs.

• Elliott Management, in a Shift, Goes on the Charm Offensive.

• Netflix(NFLX) to Open New Production Hub in New Mexico.

• Traders Bet on Oil Prices Rallying Back to $100.

Fox News:

• Trump apologizes to justice, family for campaign of 'destruction' resulting from misconduct claims.

• Hurricane Michael charges toward coast as Alabama declares state of emergency.

CNBC:       

• These are the areas of the stock market where investors should be when interest rates are rising.

• These ETFs are the biggest winners when interest rates are climbing. 

• Papa John's soars on report Wendy's stakeholder Trian interested in buying pizza chain.

• After-hours buzz: TSLA, EW & more.

• BlackRock's $2 trillion bond king: The recent spike in Treasury yields is almost done, as is the Fed.  

• Morgan Stanley: Belief in 'American exceptionalism' among global investors has never been higher.

Zero Hedge:

• Investigative Journalist Probing EU Corruption Found Brutally Raped And Murdered.

• Democrats Vow To Launch Post-Midterm Kavanaugh Investigation; Booker Floats Impeachment.

• "Unraveling Of A Cover-Up" - California DMV Admits 100s Of Non-Citizens Added To Voter Rolls.

• French PM Resignation Imminent As Macron Approval Hits All Time Low.

• The Global Doom Distortions, Part 1: Hyper-Indebted Zombie Corporations.

• Fifth Bond Sale Pulled As Europe's Junk Bond Market Cracks.

• Dow Trumps Tech For 7th Straight Day Despite Beijing, Brussels Bloodbath.

Business Insider:

• Google(GOOGL) shutters the Google+ social network after Wall Street Journal reports a huge security lapse.

• Google(GOOGL) drops out of contention for a $10 billion defense contract because it could conflict with its corporate values.

Telegraph:       

• Italian banks caught in vicious circle as bond spreads hit danger threshold.

Night Trading 

• Asian equity indices are -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 85.25 +3.5 basis points. 

• Asia Pacific Sovereign CDS Index 9.75 unch.

• Bloomberg Emerging Markets Currency Index 66.12 -.01%.

• FTSE 100 futures -.01%.

• S&P 500 futures -.14%.

• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (AZZ)/.47

• (HELE)/1.59

After the Close:

• None of note

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for September is estimated to fall to 108.3 versus 108.8 in August.
  

Upcoming Splits

• (SHOO) 3-for-2

Other Potential Market Movers

• The Fed's Evans speaking, German Trade Balance report, weekly US retail sales reports, (GOOGL) new product event and the (OKTA) investor day could also impact trading today.

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

Stocks Slightly Lower into Final Hour on European/Emerging Market/US High-Yield Debt Angst, Yen Strength, Technical Selling, Tech/Medical 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) 16.6 +11.9%

• Euro/Yen Carry Return Index 135.01 -.92%

• Emerging Markets Currency Volatility(VXY) 10.56 -3.91%

• S&P 500 Implied Correlation 37.08 -.93%

• ISE Sentiment Index 75.0 -2.6%
  

• Total Put/Call 1.20 +.84%

• NYSE Arms .48 -39.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.61 +.60%
  

• America Energy Sector High-Yield CDS Index 389.0 +.55%

• European Financial Sector CDS Index 89.51 +2.83%

• Italian/German 10Y Yld Spread 304.0 +19.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.85 +1.08%

• Emerging Market CDS Index 212.18 unch.
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.63 -.04%

• 2-Year Swap Spread 17.75 unch.

• TED Spread 20.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -40.0 -.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.16 +.04%
• 3-Month T-Bill Yield 2.21% unch.

• Yield Curve 34.75 unch.

• China Iron Ore Spot 68.84 USD/Metric Tonne +1.16%

• Citi US Economic Surprise Index 6.9 +.5 point

• Citi Eurozone Economic Surprise Index -29.2 +.1 point

• Citi Emerging Markets Economic Surprise Index -11.2 +.9 point

• 10-Year TIPS Spread 2.17 unch.
• 76.5% chance of Fed rate hike at Dec. 19th meeting, 78.3% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -190 open in Japan 
• China A50 Futures: Indicating -57 open in China

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 75% Net Long