Wednesday Watch

Evening Headlines

Bloomberg:   

• EU Set to Force U.K. Into Long Brexit Delay in Danger for Theresa May.  

• Europe Is Sinking the Global Economy While Juicing U.S. Stocks.

• Israel's Netanyahu Edges Toward Victory in Close-Fought Election.

• Stocks Drop as Growth Woes Resurface; Dollar Flat. Asian stocks declined Wednesday after renewed concern about a global economic slowdown and an escalation in trade tensions. Treasury yields steadied alongside the dollar. Shares in Japan bore the brunt of losses, with equities seeing modest declines in Seoul and Sydney. The S&P 500 Index fell for the first time in nine sessions as the Trump administration threatened tariffs on the European Union and the International Monetary. Fund cut its global growth outlook to the lowest since the financial crisis. Australian bonds climbed, tracking overnight moves that saw the 10-year Treasury yield fall to 2.50 percent. The pound fluctuated as the European Union looked set to force the U.K to delay Brexit for as long as a year. Japan’s Topix index lost 0.9 percent as of 9:02 a.m. in Tokyo. Hang Seng Index futures earlier declined 0.4 percent. South Korea’s Kospi slid 0.3 percent. Australia’s S&P/ASX 200 Index dropped 0.1 percent. The S&P 500 Index fell 0.6 percent. Futures were little changed.  

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

• Trump Trade Warning, IMF Cuts Outlook, Aussie Wage Rage: Eco Day.

• Lori Loughlin, Ex-TPG Leader Among 16 Indicted in College Scandal.

• Hoisington Wades Into MMT Debate, Sounds Alarm on U.S. Borrowing.

Wall St. Journal:

• Barr Says Release of Mueller Report Can Come Within a Week.

• Socialism Fails Every Time.

• Languishing Wells Fargo Struggles to Boost Its Businesses.

• U.S. Requires Texas Tech Med School to End Use of Race in Admissions.

• Italy Warns of Bigger Budget Deficit.

• New World Bank Head Vows to Uphold Climate-Change Policies.

Fox News:

• Comey memos contained far more sensitive info than previously known, FBI filing shows.

• Elder Democrats reject open borders, defend assimilation.

CNBC:

• A new scam targets your direct deposit info and sends your paycheck to a criminal’s account.

• Investors may think the market is reaching a top, but I’m not buying it, Jim Cramer say.

• Charts show a double-digit rally could be in store for tech and oil stocks, Jim Cramer says.

Zero Hedge:

• Watch As A Flustered Steve Mnuchin Erupts At Maxine Waters In Chaotic Hearing.

• Leaked Google Memos Reveal Aggressive "News Blacklist" Used Against Conservative Sites.

• Barr Reviewing FBI Conduct During 2016 Election In Separate, Wide-Ranging Probe.

• California's Climate-Change-Driven-"Never-Ending Drought" Is Over.

• Oil Algos ConfusedAs Huge Gasoline Draw Trumps Crude Build.

• Exit Polls Show Netanyahu Expected To Win Unprecedented Fifth Term As Israeli Prime Minister.

• The Joys Of Socialism: Venezuelans Are Looting Corpses For Jewelry And Bones.

• IMF'd: Stocks Skid, Bonds & Bullion Bid As Lagarde Guts Global Growth Guesses.

Business Insider:

• JetBlue stock is soaring after a report that it seems to be gearing up to launch European flights.

• Donald Tusk asks the EU to approve a Brexit extension of up to a year.

• Democratic voters overwhelmingly think the accusations of Joe Biden's inappropriate touching are not disqualifying.

• Bernie Sanders announces a timeline for releasing his tax returns after weeks of delays, admits that he’s now a millionaire.

Night Trading 

• Asian equity indices are -.5% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 67.75 +.75 basis point. 

• China Sovereign CDS 43.25 -.25 basis points.
  

• Bloomberg Emerging Markets Currency Index 67.52 unch.

• FTSE 100 futures -.05%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (DAL)/.91

After the Close:

• (BBBY)/1.10

Economic Releases
8:30 am EST

• The CPI MoM for March is estimated to rise +.4% versus a +.2% gain in Feb.

• The CPI Ex Food and Energy MoM for March is estimated to rise +.2% versus a +.1% gain in Feb.

• Real Avg. Hourly Earnings YoY for March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +2,386,640 barrels versus a +7,238,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -2,188,090 barrels versus a -1,781,00 barrel decline the prior week. Distillate inventories are estimated to fall by -1,295,820 barrels versus a -1,998,ooo barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.93% versus a -.2% decline prior.
  

2:00 pm EST

• FOMC Meeting Minutes.

• The Monthly Budget Statement for March is estimated at -$181.0B versus -$234.0B in Feb.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Quarles speaking, ECB rate decision/press conference, UK Manufacturing/Trade Data reports, China Money Supply report, weekly MBA Mortgage Applications report, $24B 10Y T-Note auction, (FB)/(GOOGL)/(TWTR) testifying to Senate on censorship, (COST)/(ZUMZ) monthly sales reports and the (CRM) investor meeting could also impact trading today.

BOTTOM LINE:  Asian indices are modestly lower, weighed down by financial 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 Falling into Final Hour on Global Growth Worries, Profit-Taking, Technical Selling, Energy/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.01 +6.3%

• Euro/Yen Carry Return Index 130.04 -.31%

• Emerging Markets Currency Volatility(VXY) 8.16 -1.45%

• S&P 500 Implied Correlation 36.48 +4.26%

• ISE Sentiment Index 137.0 +101.40%
  

• Total Put/Call .84 +.12%

• NYSE Arms 1.26 +48.24%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.31 +.09%
  

• America Energy Sector High-Yield CDS Index 509.0 -2.92%

• European Financial Sector CDS Index 75.92 +2.13%

• Italian/German 10Y Yld Spread 243.50 -4.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 67.30 +.64%
  

• Emerging Market CDS Index 175.75 +.40%
  

• iBoxx Offshore RMB China Corporate High Yield Index 161.16 +.01%

• 2-Year Swap Spread 8.75 -.5 basis point

• TED Spread 18.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -17.5 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.53 +.10%
• 3-Month T-Bill Yield 2.40% -2.0 basis points

• Yield Curve 15.5 +.25 basis point

• China Iron Ore Spot 91.70 USD/Metric Tonne +.39%

• Citi US Economic Surprise Index -55.70 -2.8 points

• Citi Eurozone Economic Surprise Index -51.80 +2.9 points

• Citi Emerging Markets Economic Surprise Index -6.90 +1.5 points

• 10-Year TIPS Spread 1.91 -1.0 basis point
• 13.6% chance of Fed rate cut at June 19th meeting, 19.3% chance of cut at July 31st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -142 open in Japan 
• China A50 Futures: Indicating -20 open in China

• DAX Futures: Indicating +32 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value -.6%

Sector Underperformers:

• 1) Gaming -2.2% 2) Steel -2.0% 3) Oil Service -1.2%

Stocks Falling on Unusual Volume: 

• HOLI, ZGNX, PNR, X, NVS, AGRD and POOL

Stocks With Unusual Put Option Activity:

• 1) AET 2) OKTA 3) GPRO 4) SLV 5) NBEV

Stocks With Most Negative News Mentions:

• 1) PNR 2) ZGNX 3) X 4) MNI 5) AMD

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.3%

Sector Outperformers:

• 1) Education +1.0% 2) Social Media +.4% 3) Computer Services +.3%

Stocks Rising on Unusual Volume:

• PHAS, CERN, FARO, AVYA, TWST, IFRX, GSHD, NLSN, OKTA, PKI, CPB, INSW, DIS, CNC, LM, SWI, RH, GLOB, CBPO, ENTG, QTS, INSM, GWPH, WWE, COG, GSKY and SWI

Stocks With Unusual Call Option Activity:

• 1) AVYA 2) ZGNX 3) PZZA 4) ITB 5) OIH

Stocks With Most Positive News Mentions:

• 1) DIS 2) GOOS 3) CERN 4) ZS 5) MSI

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -16.1% Below 100-Day Average
• 2 Sectors Rising, 9 Sectors Declining
• 30.0% of Issues Advancing, 66.6% Declining
• 72 New 52-Week Highs, 12 New Lows
• 57.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 54.3%
• Vix 13.8 +4.9%
• Total Put/Call .91 +21.3%
• TRIN/Arms 1.49 +72.9%

Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 67.0 +. basis point. 

• China Sovereign CDS 43.5 +1.25 basis points.
  

• Bloomberg Emerging Markets Currency Index 67.48 +.02%.

• FTSE 100 futures +.18%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (LNN)/.55
• (SJR)/.30

After the Close:

• (PSMT)/.79
• (WDFC)/1.12

Economic Releases
6:00 am EST

• The NFIB Small Business Optimism Index for March is estimated to rise to 102.0 versus 101.7 in Feb.

10:00 am EST

• JOLTS Job Openings for Feb. are estimated to fall to 7550 versus 7581 in Jan.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Clarida speaking, Australia Home Sales report, $38B 3Y T-Note auction, weekly US retail sales reports, Needham Healthcare Conference, (DCI) investor day and the (PSMT) monthly sales report 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 strengthen into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.