Stocks Surging into Final Hour on More Dovish FOMC Commentary, Diminished Tariff Fears, Short-Covering, Retail/Tech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 17.5 -7.4%

• Euro/Yen Carry Return Index 126.41 +.16%

• Emerging Markets Currency Volatility(VXY) 8.57 -.23%

• S&P 500 Implied Correlation 42.0 -5.3%

• ISE Sentiment Index 82.0 +20.6%
  

• Total Put/Call .96 -13.5%

• NYSE Arms .64 unch.

Credit Investor Angst:

• North American Investment Grade CDS Index 66.12 -5.5%
  

• America Energy Sector High-Yield CDS Index 618.0 -1.33%

• European Financial Sector CDS Index 83.58 -6.34%

• Italian/German 10Y Yld Spread 272.0 -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 79.39 -2.24%
  

• Emerging Market CDS Index 202.0 -3.95%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.30 -.03%

• 2-Year Swap Spread 4.0 -1.0 basis point

• TED Spread 17.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -13.75 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.53 +.38%
• 3-Month T-Bill Yield 2.32% -1.0 basis point

• Yield Curve 24.75 +1.5 basis points

• China Iron Ore Spot 98.46 USD/Metric Tonne +.20%

• Citi US Economic Surprise Index -34.0 +1.9 points

• Citi Eurozone Economic Surprise Index -24.40 +1.9 points

• Citi Emerging Markets Economic Surprise Index -31.30 -5.0 points

• 10-Year TIPS Spread 1.76 +2.0 basis points
• 64.5% chance of Fed rate cut at July 31st meeting, 92.7% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +257 open in Japan 
• China A50 Futures: Indicating +18 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +1.0%

Sector Underperformers:

• 1) Utilities -.9% 2) REITs -.8% 3) Gold & Silver +.1%

Stocks Falling on Unusual Volume: 

• BOX, MGNX, LXFR, ORTX, DQ and VRRM

Stocks With Unusual Put Option Activity:

• 1) QEP 2) TLRD 3) DISH 4) CLDR 5) RCL

Stocks With Most Negative News Mentions:

• 1) MELI 2) KSS 3) RCL 4) BSX 5) ADT

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.9%

Sector Outperformers:

• 1) Gaming +3.9% 2) Disk Drives +3.1% 3) Semis +3.0%

Stocks Rising on Unusual Volume:

• QURE, CODI, MRTX, TIF, COUP, SOLY, LE, CLR, SPNS, VNE, NAV, TTGT, MAT, LYB, DLPH, JKS, CBRL, TTD, LTRPA, ASGN, CONN, YELP, PFPT, ESI and CPB

Stocks With Unusual Call Option Activity:

• 1) CPB 2) LEVI 3) LYB 4) BOX 5) PAYC

Stocks With Most Positive News Mentions:

• 1) X 2) KSHB 3) WDC 4) CETX 5) NKE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +7.1% Above 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 71.7% of Issues Advancing, 26.0% Declining
• 90 New 52-Week Highs, 28 New Lows
• 42.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.3%
• Vix 17.7 -5.9%
• Total Put/Call .89 -19.8%
• TRIN/Arms .92 +43.8%

Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 80.75 -.25 basis point.

• China Sovereign CDS 59.50 -1.75 basis points.

• Bloomberg Emerging Markets Currency Index 66.25 -.04%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.07%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

Before the Open:

• (CBRL)/2.11

• (DCI)/.63

• (LE)/-.31

• (NAV)/.88

• (TIF)/1.01 

After the Close:

• (GME)/-.03

• (HQY)/.34

• (NX)/.12

• (CRM)/.61

Economic Releases

10:00 am EST

• Factory Orders for April is estimated to fall -1.0% versus a +1.9% rise in March.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Retail Sales report, weekly US retail sales reports, (CVS) analyst day, RBC Energy/Power Conference, Macquarie Metals/Mining/Materials Conference, CSFB Communications Conference, Jefferies Healthcare Conference, CSFB Chem/Ag Conference, NAREIT Investor Conference, BofA Merrill Tech Conference, Baird Consumer Tech/Services Conference, (GPC) investor day and the Needham Automotive Tech Day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology 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 Reversing Lower into Final Hour on Tech Sector Antitrust Fears, China/Mexico Tariff Worries, Global Growth Concerns, Tech/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.1 +2.1%

• Euro/Yen Carry Return Index 126.29 +.52%

• Emerging Markets Currency Volatility(VXY) 8.52 +.12%

• S&P 500 Implied Correlation 43.92 -1.39%

• ISE Sentiment Index 64.0 -9.86%
  

• Total Put/Call 1.16 -.85%

• NYSE Arms .68 -43.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 69.34 -.07%
  

• America Energy Sector High-Yield CDS Index 626.0 +4.0%

• European Financial Sector CDS Index 89.24 -2.65%

• Italian/German 10Y Yld Spread 276.0 -11.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 81.19 +3.41%
  

• Emerging Market CDS Index 210.17 -.76%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.34 +.07%

• 2-Year Swap Spread 5.0 unch.

• TED Spread 17.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 +1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.27 +.59%
• 3-Month T-Bill Yield 2.33% -1.0 basis point

• Yield Curve 23.25 +3.75 basis points

• China Iron Ore Spot 96.05 USD/Metric Tonne -.46%

• Citi US Economic Surprise Index -35.9 -3.6 points

• Citi Eurozone Economic Surprise Index -26.30 -6.0 points

• Citi Emerging Markets Economic Surprise Index -26.30 +.2 point

• 10-Year TIPS Spread 1.74 -1.0 basis point
• 60.7% chance of Fed rate cut at July 31st meeting, 90.5% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +10 open in Japan 
• China A50 Futures: Indicating -69 open in China

• DAX Futures: Indicating -62 open in Germany

Portfolio:

• Slightly Higher: On gains in my index hedges

• Disclosed Trades: None

• Market Exposure: 25% Net Long