Stocks Close Modestly Lower on Emerging Markets Debt Angst, Oil Decline, Profit-Taking, Energy/Biotech Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 12.7 +3.2%

• Euro/Yen Carry Return Index 130.09 -.31%

• Emerging Markets Currency Volatility(VXY) 8.24 +.61%

• S&P 500 Implied Correlation 34.78 -.71%

• ISE Sentiment Index 63.0 -42.7%
  

• Total Put/Call .86 +8.9%

• NYSE Arms 1.49 +43.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.71 +1.06%
  

• America Energy Sector High-Yield CDS Index 443.0 -.76%

• European Financial Sector CDS Index 71.0 +2.24%

• Italian/German 10Y Yld Spread 264.75 +1.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 63.74 -.01%
  

• Emerging Market CDS Index 196.92 +9.48%
  

• iBoxx Offshore RMB China Corporate High Yield Index 161.69 -.03%

• 2-Year Swap Spread 9.25 +.75 basis point

• TED Spread 16.0 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -16.0 +2.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.58 -.72%
• 3-Month T-Bill Yield 2.42% -1.0 basis point

• Yield Curve 20.25 -.5 basis point

• China Iron Ore Spot 88.02 USD/Metric Tonne +.02%

• Citi US Economic Surprise Index -65.80 unch.

• Citi Eurozone Economic Surprise Index -38.80 -2.2 points

• Citi Emerging Markets Economic Surprise Index .9 -.7 point

• 10-Year TIPS Spread 1.96 unch.
• 26.7% chance of Fed rate cut at June 19th meeting, 31.4% chance of cut at July 31st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +30 open in Japan 
• China A50 Futures: Indicating -123 open in China

• DAX Futures: Indicating +27 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.2%

Sector Underperformers:

• 1) Steel -2.6% 2) Oil Service -2.4% 3) Computer Hardware -1.6%

Stocks Falling on Unusual Volume: 

• IRBT, LRN, HMI, LTXB, SNAP, RES, MTSI, GGAL, RHI, ROL, LBRT, OC and PAM

Stocks With Unusual Put Option Activity:

• 1) IRBT 2) OXY 3) LB 4) PHM 5) CCI

Stocks With Most Negative News Mentions:

• 1) RES 2) HOG 3) SIRI 4) IRDM 5) RBB

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.3%

Sector Outperformers:

• 1) Gold & Silver +1.3% 2) Retail +1.3% 3) Semis +1.1%

Stocks Rising on Unusual Volume:

• GES, SAP, APC, SLAB, TER, DPZ, MANH, VICR, BURL, CSL, SIMO, ASTE, CHDN, CATS, VFF, STNE, TXN, FLIR, DOMO, FCFS, VMI, HAS, BCO, STM, LAD, LAD, OSPN, ABMD and USAC

Stocks With Unusual Call Option Activity:

• 1) OXY 2) LB 3) PHM 4) JNPR 5) CVNA

Stocks With Most Positive News Mentions:

• 1) FLIR 2) TSC 3) DPZ 4) EBAY 5) NSC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.3% Above 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 56.7% of Issues Advancing, 40.7% Declining
• 130 New 52-Week Highs, 19 New Lows
• 58.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.3%
• Vix 12.6 +2.2%
• Total Put/Call .79 unch.
• TRIN/Arms 2.03 +95.2%

Wednesday Watch

Evening Headlines
Bloomberg:  

• U.S., China to Resume Trade Talks Tuesday in Beijing.

• Easter Massacre Opens Door for Strongman to Return in Sri Lanka.  

• U.S. Oil Is Flowing Freely to China Again After Slowing to Trickle.

• Asian Stocks See Modest Gains After U.S. Record: Markets Wrap. Asian stocks saw modest gains Wednesday after their U.S. counterparts closed at record highs on the back of better-than-forecast earnings. The dollar strengthened and Treasuries steadied. Shares pushed slightly higher in Japan and Hong Kong, and fluctuated in China and South Korea. Earlier, the S&P 500 Index and the Nasdaq Composite marked new milestones as Twitter Inc., Lockheed Martin Corp. and Hasbro Inc. climbed following favorable first-quarter reports, adding to a rally led by the biggest technology stocks. Treasury yields were little changed after retreating on Tuesday. The Australian dollar slumped after weaker-than-expected inflation data. The MSCI Asia Pacific rose 0.2 percent as of 10:33 a.m. Tokyo time. The Topix Index climbed 0.1 percent. The S&P/ASX 200 Index rose 0.9 percent. The Shanghai Composite Index rose 0.3 percent. The Hang Seng Index rose 0.4 percent. The Kospi Index was little changed. S&P 500 futures were little changed after the benchmark rose 0.9 percent.   

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

• Trump's Fed Gambit, Epic Era Closing, Neutral Rate Hit: Eco Day.

• Supreme Court Signals Support for Trump’s Census Citizenship Question.  

• Trump Considering Waiving Jones Act Mandate for Natural Gas, Sources Say.  

• Texas Instruments' Forecast Stokes Optimism for a Chip Revival.

Wall Street Journal:

• S&P 500 and Nasdaq Climb to Records.

• P&G’s(PG) Sales Growth Shows Consumers Will Pay More.

• Lululemon(LULU) Chief: ‘No Need’ to Discount $100 Yoga Pants.

• What Your College Isn’t Teaching.

• China Exploits U.S. Satellites to Bolster Police and Military Power.

• ISIS Claims Responsibility for Sri Lanka Bombings.

• Mexico Begins Detaining Migrants in Caravans.

Fox News:

• Trump faces off with CEO of Twitter(TWTR) after claiming it's 'discriminatory,' anti-GOP.

CNBC:

• Boeing(BA) sees FAA approving software fix in May, Max ungrounding in July.

• Stocks making the biggest moves after hours: Snap, eBay, Texas Instruments and more.

• S&P 500 and Nasdaq rally to record closing highs after strong earnings from broad range of companies.

Zero Hedge:

• 1,600 Migrants Dumped In New Mexico; City Forced To Spend $75K For "Humanitarian Assistance".

• Top 51 Fake News Russiagate 'Bombshells' Spread By The MSM.

• Saudis Conduct Mass Beheadings Of 37, Mostly Shiites, With Two Crucified.

• Microsoft Discovers Huawei Driver Allowing Backdoor Hack Into Laptops.

• Trump And Twitter's Jack Dorsey Hold Unannounced Meeting In Oval Office.

• Fifty Years Of Apocalyptic Global Warming Predictions And Why People Believe Them.

• Chicago's Pension Funds Looking More Like A Collapsing Ponzi Scheme.

• WTI Slides After Bigger Than Expected Crude Build.

• Stocks Soar To Record Highs As Earnings, Macro, Risk-Aversion Plunge.

Business Insider:

• Major Wall Street analysts are all bulled up on Lyft, but investors don't seem to care.

• Samsung reportedly rushed the $2,000 Galaxy Fold foldable smartphone to market after being accused of copying Apple, and it may have contributed to the fiasco that led to its delay.

• Alphabet's drone delivery company just received FAA approval to start dropping packages on customer's front doorsteps in Virginia.

• US soldiers will soon deploy with game-changing night vision that lets them shoot around corners.

Night Trading 

• Asian equity indices are unch. to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 63.25 -.5 basis point.

• China Sovereign CDS 40.25 -1.75 basis points.

• Bloomberg Emerging Markets Currency Index 67.02 -.08%.

• S&P 500 futures unch.

• NASDAQ 100 futures -.04%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (APD)

• (ANTM)/5.95

• (T)/.87

• (AVY)/1.45

• (BKU)/.64

• (BIIB)/6.81

• (BA)/3.19

• (BSX)/.36

• (CAT)/2.87

• (DPZ)/2.10

• (FLIR)/.48

• (GD)/2.45

• (GNTX)/.40

• (KNX)/.52

•  (NSC)/2.18

• (NOC)/4.60

• (OC)/.58

• (SAP)/.84

• (SWK)/1.11

• (TUP)/.91

After the Close:

• (AVB)/2.28

• (CMG)/3.03

• (CTXS)/1.17

• (CUZ)/.19

• (FFIV)/2.54

• (FB)/1.63

• (LRCX)/3.39

• (LSTR)/1.51

• (ORLY)/4.05

• (PYPL)/.68

• (RJF)/1.63

• (NOW)/.54

• (TSLA)/-.81

• (VAR)/1.15

• (V)/1.24

• (WYNN)/1.57

• (XLNX)/.96

Economic Releases 
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +810,670 barrels versus a -1,396,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,253,580 barrels versus a -1,174,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,335,250 barrels versus a -362,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.76% versus a +.2% gain prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia CPI report, $41B 5Y T-Note auction, weekly MBA Mortgage Applications report and the (LULU) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly lower and to strengthen into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.