Friday Watch

Evening Headlines
Bloomberg:

• China Is Armed With Powerful Market Weapons in Duel With Trump

• U.S., China Begin Crucial Trade Talks as Tariff Clock Ticks  

• China's Electric-Car Mania Draws Parallels to the Dot-Com Bubble.

• Stocks Edge Up in Asia as Tariff Deadline Nears: Markets Wrap. Asian shares climbed with U.S. equity futures as the U.S. and China continued a pivotal round of trade negotiations. The yuan remains near its weakest since January. Shares in Japan and South Korea rose, while futures indicated a rebound in China, with hours to go before Washington ratchets up tariffs. Contracts on the S&P 500 Index ticked up after the benchmark pared losses on Wall Street into the close on Thursday. President Donald Trump said he received a “beautiful letter” from President Xi Jinping and the two leaders would probably speak by phone. Sentiment remains fragile, though, and the gap between 3-month and 10-year Treasury yields briefly turned negative, traditionally a recession warning. Elsewhere, crude oil rose. Japan’s Topix index rose 0.3% as of 9:18 a.m. in Tokyo. Australia’s S&P/ASX 200 Index added 0.1%. South Korea’s Kospi rose 0.8%. Hang Seng futures earlier rose 0.3%. FTSE China A50 futures earlier advanced 1.3%. Futures on the S&P 500 Index added 0.3%.  

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

• New York to Kill Its Last Coal Plants With Emissions Rule.

• Netflix Signs Deal With Alibaba to Add Chinese-Language TV Show.

Wall Street Journal:

• Uber Prices IPO at $45 a Share, Near Low End of Range.

• Occidental Wins Battle for Anadarko as Chevron Exits Bidding.

• Can This Marriage Be Saved? Chinese-U.S. Integration Frays as Trade Talks Stumble.

• Symantec Plunges After CEO Exit, Tepid Outlook.

• News Corp Revenue Up Sharply.

Fox News:

• Inspector general probing role of sketchy anti-Trump dossier in securing surveillance warrant for aide.

MarketWatch.com:

• Here are the stocks to buy if an all-out U.S.-China trade war erupts, says Goldman.

• How U.S.-China trade uncertainty could trigger a stock-market buy signal.

• These 15 tech stocks are backed by the quarter’s best sales figures.

CNBC:

• US companies are preparing for pain ahead of tariff hike: ‘I can’t sit here and cry’.

• Stocks making the biggest moves after hours: Dropbox, Zillow, Symantec and more.

• Boston Beer to acquire Dogfish Head Brewery in a $300 million deal.

Zero Hedge:

• FBI's Steele Story Unravels - Claims Debunked, Leaks Suspected Before FISA Application.

• Trump 2020: The Real Reason For Impeachment.

• Foreigners Are Dumping Chinese Stocks At A Record Pace Ahead Of Tariffs.

• Chinese Treasuries, FOMC Policies, & The Big Number That Just Turned Against Jay Powell.

• US Seizes North Korean Ship Suspected Of Violating International Sanctions.

• Chinese New Credit Unexpectedly Grows Far Less Than Expected, Raising Many Questions.

• Uber Prices IPO At $45, Becomes Most Money Losing Company To Ever Go Public.

• The Most Medicated Country In The World: 46% Of Americans Have Taken A Pharma Drug Within The Last 30 Days.

• Headline-Chaos Sparks Stock Dump'n'Pump; Dollar & Bond Yields Slide.

Telegraph:

• Germany's budget black hole even bigger than feared, Merkel's government admits.

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 70.75 unch.

• China Sovereign CDS 46.75 unch.

• Bloomberg Emerging Markets Currency Index 66.06 +.09%.

• S&P 500 futures +.28%.

• NASDAQ 100 futures +.44%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (JD)/.83

• (MAR)/1.34

• (VIAB)/.81

After the Close:

• None of note

Economic Releases
8:30 am EST

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

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

• Real Avg. Weekly Earnings YoY for April.

2:00 pm EST

• Monthly Budget Statement for April is estimated to fall to $160.5B versus $214.3B in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, Fed's Williams speaking, Fed's Bostic speaking, China tariff increase and the Eurozone Trade Balance report could also impact trading today.

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

Stocks Falling into Final Hour on China Trade Deal Worries, Global Growth Fears, European Debt Angst, Tech/Retail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.1 -1.3%

• Euro/Yen Carry Return Index 127.84 -.12%

• Emerging Markets Currency Volatility(VXY) 9.63 +7.7%

• S&P 500 Implied Correlation 40.6 +3.7%

• ISE Sentiment Index 59.0 -22.0%
  

• Total Put/Call 1.27 +6.7%

• NYSE Arms 1.37 +30.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.07 +1.85%
  

• America Energy Sector High-Yield CDS Index 449.0 -1.32%

• European Financial Sector CDS Index 79.47 +5.52%

• Italian/German 10Y Yld Spread 273.0 +7.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 70.80 +1.97%
  

• Emerging Market CDS Index 200.79 +1.83%
  

• iBoxx Offshore RMB China Corporate High Yield Index 162.64 +.06%

• 2-Year Swap Spread 10.0 -.25 basis point

• TED Spread 14.5 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -16.75 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.0 -.14%
• 3-Month T-Bill Yield 2.41% -1.0 basis point

• Yield Curve 18.50 -.5 basis point

• China Iron Ore Spot 89.43 USD/Metric Tonne -3.75%

• Citi US Economic Surprise Index -42.90 -.3 point

• Citi Eurozone Economic Surprise Index -16.90 -.2 point

• Citi Emerging Markets Economic Surprise Index -17.70 -1.8 points

• 10-Year TIPS Spread 1.86 -1.0 basis point
• 16.7% chance of Fed rate cut at July 31st meeting, 34.5% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -92 open in Japan 
• China A50 Futures: Indicating +53 open in China

• DAX Futures: Indicating +99 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Networking -2.0% 2) Shipping -1.6% 3) Social Media -1.1%

Stocks Falling on Unusual Volume: 

• STMP, SAIL, EPC, TEN, PFLT, GDOT, TTD, CWH, OXY, RDFN, COMM, ETSY, CBD, AVYA, ANGI, AMC, GKOS, UPWK, WWW, AGS, SCOR, ELF, GTT and TVTY

Stocks With Unusual Put Option Activity:

• 1) ODP 2) AET 3) ETSY 4) JCI 5) STMP

Stocks With Most Negative News Mentions:

• 1) STMP 2) GDOT 3) CNDT 4) ODP 5) CHKE

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value unch.

Sector Outperformers:

• 1) Coal +2.9% 2) Papers +2.2% 3) Education +2.1%

Stocks Rising on Unusual Volume:

• CTRL, UPLD, TSG, TTGT, AXNX, TPR, ROKU, CPA, NUAN, ECPG, FOSL, HSC, RCM, GTLS, TZOO, TWNK, FLXN, NVEE, CECO, ATRO, CDNA, TEAM, AERI, OSTK, HLI, SWAV, KTOS, AXGN, PETQ, MYL and CVX

Stocks With Unusual Call Option Activity:

• 1) STMP 2) CC 3) NRG 4) JCI 5) ETSY

Stocks With Most Positive News Mentions:

• 1) ROKU 2) TPR 3) TSCO 4) NCLH 5) CAH

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +7.2% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 21.7% of Issues Advancing, 75.7% Declining
• 57 New 52-Week Highs, 90 New Lows
• 54.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.1%
• Vix 21.9 +12.8%
• Total Put/Call 1.45 +21.9%
• TRIN/Arms 1.49 +40.6%

Thursday Watch

Night Trading 

• Asian equity indices are -1.5% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 70.75 +2.25 basis points.

• China Sovereign CDS 46.75 +1.5 basis points.

• Bloomberg Emerging Markets Currency Index 66.04 -.08%.

• S&P 500 futures -.55%.

• NASDAQ 100 futures -.62%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

Before the Open:

• (BDX)/2.59
• (CAH)/1.42
• (CHH)/.75
• (DUK)/1.25
• (ELAN)/.23
• (HAIN)/.21
• (OSTK)/-.75
• (SUP)/-.14
• (TTD)/.24
• (WWW)/.47

After the Close:

• (DBX)/.06
• (NWSA)/.00
• (SYMC)/.39
• (WYNN)/1.58
• (YELP)/.28
• (ZG)/-.19

Economic Releases

8:30 am EST

• PPI Final Demand MoM for April is estimated to rise +.3% versus a +.6% gain in March.
• PPI Ex Food and Energy MoM for April is estimated to rise +.2% versus a +.3% gain in March.
• The Trade Deficit for March is estimated at -$50.1B versus -$49.4B in February.
• Initial Jobless Claims for last week are estimated to fall to 220K versus 230K the prior week.
• Continuing Claims are estimated to fall to 1670K versus 1671K prior.

10:00 am EST

• Wholesale Trade Sales MoM for March is estimated to rise +.6% versus a +.3% gain in February.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The trade talks with Chinese Vice Premier Liu, Fed's Powell speaking, Fed's Evans speaking, Fed's Bostic speaking, China CPI report, House Hearing on drug pricing, 30Y T-Note auction, Bloomberg May US Economic Survey, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory data, Citi Car of the Future Symposium, (PRGO) investor day and the (FOXA) investor day could also impact trading today.

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