Stocks Surging into Final Hour on China Trade Deal Hopes, Less Emerging Markets Debt Angst, Oil Gain, Tech/Transport Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 18.0 -12.7%

• Euro/Yen Carry Return Index 127.70 +.18%

• Emerging Markets Currency Volatility(VXY) 8.99 -1.86%

• S&P 500 Implied Correlation 40.96 -4.12%

• ISE Sentiment Index 64.0 +1.59%
  

• Total Put/Call 1.05 -2.78%

• NYSE Arms .67 -63.59%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.26 -2.23%
  

• America Energy Sector High-Yield CDS Index 571.0 +6.02%

• European Financial Sector CDS Index 79.91 -3.2%

• Italian/German 10Y Yld Spread 279.75 +2.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 72.08 +.38%
  

• Emerging Market CDS Index 202.18 -3.19%
  

• iBoxx Offshore RMB China Corporate High Yield Index 162.76 -.01%

• 2-Year Swap Spread 7.75 -.75 basis point

• TED Spread 14.5 +2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.08 +.22%
• 3-Month T-Bill Yield 2.39% -1.0 basis point

• Yield Curve 21.75 unch.

• China Iron Ore Spot 91.06 USD/Metric Tonne +.25%

• Citi US Economic Surprise Index -30.80 +7.5 points

• Citi Eurozone Economic Surprise Index -19.50 -3.9 points

• Citi Emerging Markets Economic Surprise Index -19.50 unch.

• 10-Year TIPS Spread 1.87 +2.0 basis points
• 24.9% chance of Fed rate cut at July 31st meeting, 48.0% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +103 open in Japan 
• China A50 Futures: Indicating +30 open in China

• DAX Futures: Indicating +1 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +1.2%

Sector Underperformers:

• 1) Gold & Silver -.7% 2) Utilities -.3% 3) Healthcare Providers +.4%

Stocks Falling on Unusual Volume: 

• MYOV, TME, BILI, RL, TAK and GIII

Stocks With Unusual Put Option Activity:

• 1) RF 2) AET 3) JWN 4) RHT 5) CIEN

Stocks With Most Negative News Mentions:

• 1) SLDB 2) ICON 3) ARA 4) GIII 5) FIZZ

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.6%

Sector Outperformers:

• 1) Oil Service +4.1% 2) Semis +2.6% 3) Road & Rail +2.4%

Stocks Rising on Unusual Volume:

• NOBL, CYBR, NAV, TTWO, EXPI, AXNX, MGTX, STM, KRYS, CVET, URGN, ROAD, PAR, AXSM, LEXEA, HOME, ZBRA, CODA, FINX, ARNA, ENR and STE

Stocks With Unusual Call Option Activity:

• 1) WPX 2) CMI 3) AMAT 4) TBT 5) GPS

Stocks With Most Positive News Mentions:

• 1) MGTX 2) RIG 3) JMIA 4) DWDP 5) COP

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.1% Above 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 75.5% of Issues Advancing, 22.4% Declining
• 50 New 52-Week Highs, 77 New Lows
• 48.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.6%
• Vix 18.2 -11.5%
• Total Put/Call 1.0 -7.4%
• TRIN/Arms .79 -56.5%

Tuesday Watch

Evening Headlines
Bloomberg:

• U.S. Readies New Tariffs as Trump Says He'll Meet China's Xi. 

• Rosengren Says Fed Needs More Time to Weigh Trade War Impact   

• MSCI Adds Saudi, Argentine Stocks to Emerging-Market Index. Stocks Sell-Off to Hit Asia as China Strikes Back. The sell-off that sank U.S. stocks and global commodities is set to spill into Asia after China retaliated with higher tariffs on a range of American goods. Treasuries jumped with the yen on demand for haven assets. Futures flagged shares will fall when markets open in Tokyo and Sydney. All three major U.S. benchmarks ended more than 2 percent lower, only the second time this year that’s happened, after China targeted some of the biggest U.S. exporters in response to American tariffs. The new penalties also took aim at American farmers, driving down soybean and cotton prices. The dollar rallied and the 10-year Treasury yield fell to the lowest level since late March. U.S. equity futures steadied in early Asia trading. Futures on the Nikkei 225 slid 1.9% in Singapore. Australia’s S&P/ASX 200 Index futures dropped 0.9 percent. Hong Kong’s Hang Seng Index futures fell 0.5%. The market was closed for a holiday Monday. S&P 500 futures fell 0.1 percent.

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

• Oil Retreats as Chinese Tariffs Escalate Trade Battle With U.S.

Wall Street Journal:

• Voters Prepare to Punish U.K. Leader in European Vote Over Brexit Delay.

• Fresh Tariffs Heighten Standoff.

• In Latest Roundup Defeat for Bayer, Couple Awarded $2 Billion.

• Boomer Bequest Is Millennial Misery.

• Bernie Sanders Railed Against the Campaign-Finance System. Now, He’s Benefiting From It.

• Uber Stock’s Plunge Is Blemish on IPO Market.

Fox News:

• Ex-DOJ official quotes special counsel in college commencement address.

MarketWatch.com:

• The dark reason so many millennials are miserable and broke.

CNBC:

• China’s ‘self-destructive nuclear option’ in trade war: Selling US Treasury bonds.
  

• From tequila to TV cameras — here is a list of US goods China is targeting with a 25% tariff.
  

• Stocks making the biggest moves after hours: Take-Two, StoneCo and Tencent Music.

• Dow losers since the trade war escalated show investors fleeing companies with Chinabusiness.

Zero Hedge:

• Not Just Ukraine; Biden May Have A Serious China Problem As Schweizer Exposes Hunter's $1bn Deal.

• Charlie McElligott Explains How CTA Deleveraging Caused Last Week's Selloff.

• Felicity Huffman Pleads Guilty In College Admission Scandal, Faces Jail Time.

• Academic Study Exposes Google's Left-Leaning Media Bias.

• Junk-Bond Issuance Soars As Companies Scramble To Lock In Lowest-Possible Rates.

• US Posts Full Details Of Tariffs On Remaining $300 Billion In Chinese Trade.

• Bitcoin, Bonds, & Bullion Bid As Trade Turmoil Trounces Stocks.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 71.75 +1.5 basis points.

• China Sovereign CDS 51.25 +5.75 basis points.

• Bloomberg Emerging Markets Currency Index 65.92 -.02%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.03%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (AZZ)/.46

• (RL)/.89

After the Close:

• (A)/.72

• (DOX)/1.03

• (TCS)/.30

• (TLRY)/-.30

Economic Releases
6:00 am EST

• The NFIB Small Business Optimism Index for April is estimated to rise to 102.0 versus 101.8 in March.

8:30 am EST

• The Import Price Index MoM for April is estimated to rise +.7% versus a +.6% gain in March.

• The Import Price Index ex Petro MoM for April is estimated to rise +.2% versus a +.2% gain in March.

• The Export Price Index MoM for April is estimated to rise +.6% versus a +.7% gain in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, Eurozone Industrial Production report, China CPI report, weekly US retail sales reports, Oppenheimer Emerging Growth Conference, JPMorgan Consumer/Retail Conference, BofA Merrill Transport Conference, JPMorgan Tech/Media/Communications Conference, Deutsche Bank Utilities/Power/Clean Tech Conference, BofA Merrill Metals/Mining/Steel Conference, Wells Fargo Gaming/Hospitality/Leisure Conference, BofA Merrill Healthcare Conference, Citi Energy/Utilities Conference, (XLNX) investor day and the (HON) investor conference 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Substantially Lower into Final Hour on China Trade Deal Worries, Global Growth Fears, European/Emerging Markets/US High-Yield Debt Angst, Tech/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 20.6 +28.2%

• Euro/Yen Carry Return Index 127.58 -.6%

• Emerging Markets Currency Volatility(VXY) 9.22 +5.61%

• S&P 500 Implied Correlation 42.78 +13.1%

• ISE Sentiment Index 59.0 unch.
  

• Total Put/Call 1.10 -9.84%

• NYSE Arms 1.65 +61.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.29 +5.11%
  

• America Energy Sector High-Yield CDS Index 535.0 +15.9%

• European Financial Sector CDS Index 82.57 +4.39%

• Italian/German 10Y Yld Spread 277.0 +4.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 72.35 +2.93%
  

• Emerging Market CDS Index 207.58 +5.33%
  

• iBoxx Offshore RMB China Corporate High Yield Index 162.77 +.05%

• 2-Year Swap Spread 8.50 -1.5 basis points

• TED Spread 11.75 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -18.75 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.95 -.62%
• 3-Month T-Bill Yield 2.40% -2.0 basis points

• Yield Curve 21.50 +1.0 basis point

• China Iron Ore Spot 91.90 USD/Metric Tonne -3.26%

• Citi US Economic Surprise Index -38.30 +9.7 points

• Citi Eurozone Economic Surprise Index -15.60 +1.1 points

• Citi Emerging Markets Economic Surprise Index -19.50 -.2 point

• 10-Year TIPS Spread 1.85 -2.0 basis points
• 24.9% chance of Fed rate cut at July 31st meeting, 49.6% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -326 open in Japan 
• China A50 Futures: Indicating -421 open in China

• DAX Futures: Indicating +23 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long