Thursday Watch

Evening Headlines
Bloomberg:    

• Trump Says ‘Not Nearly Enough’ Progress in Talks With Mexico.

• Mexico Peso Tanks on Double Whammy From Ratings, Trade Talks.

• ECB Watched as Central Banks Shift Gears: Decision Day Guide.

• Biden Breaks With Rivals by Opposing Federal Funds for Abortions.

• The Trade War Could Pop Hong Kong's Property Bubble.    

• Stocks Mixed as Mexico Tensions Sap Risk Appetite. Stocks opened mixed in Asia and U.S. futures slipped as discussions between the Trump administration and Mexican officials on tariffs ended Wednesday without agreement, putting a dampener on the week’s rally in risk assets. Japanese shares dipped, while Australian shares opened flat and S&P 500 contracts retreated. U.S. shares had closed higher as President Donald Trump said Mexico wanted to make a deal, before later reports showed that no accommodation had been reached. Trump said talks will resume tomorrow. The peso sank. Treasuries steadied after mixed economic data, while the yen edged up. Oil dipped. Japan’s Topix index fell 0.3% as of 9:03 a.m. in Tokyo. Australia’s S&P/ASX 200 Index rose 0.1%. S&P 500 futures fell 0.3%. The S&P 500 gained 0.8% Wednesday.

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

• Fed Beige Book, Hong Kong Housing Hit, Third RBI Cut: Eco Day.

• U.S. Stocks Still Look Better Than Anywhere Else.

Wall Street Journal:

• Fiat Pulls Renault Merger Offer After Nissan Balks at Deal.

• Inside the Effort to Fix the Boeing 737 MAX.

• Border Arrests Climb Amid Threat of Tariffs on Mexico.

• Democrats and the Border Children.

• More Universities Shut Down Traditional M.B.A. Programs.

Fox News:

• Ilhan Omar has bizarre response to 2020 Dem's request to debate AOC.

• Gutfeld on Elizabeth Warren's apocalyptic climate change rhetoric.

MarketWatch.com:

• Cloudera stock drops more than 25% on exiting CEO, revenue weakness.

• Not so fast — interest-rate cuts are not a done deal, experts at Fed conference say.

• Oil just fell into a bear market — here’s why.

• High-yield canary soothes fears around bond-market recession signal.

CNBC: 

• This statistic is a key reason why Walmart, Target and Costco are thriving.

• Stocks making the biggest moves after hours: Cloudera, Stitch Fix, Five Below and more.

• Facebook, Amazon, Netflix and Google are flashing a warning signal for the entire stock market.

Zero Hedge:

• CNN Panel Slams 'Arrogant, Lazy Biden' Over Latest Example Of Plagiarism.

• Illinois Turns To Gambling And Weed Amid Hopeless Financial Picture.

• US-Mexico End Tariff Meeting Without Breakthough; Peso, US Futures Plunge.

• The Hidden Problem Looming Over The Cannabis Edibles Market.

• Huawei Slashing "As Much As 30%" Of Orders To Key Suppliers Amidst US Product Ban.

• Former Chicago Mayor Rahm Emanuel To Join Centerview Partners.

• Crude Crashes, Gold Gains As Defensives Dominate Stocks.

Telegraph:

• Italian markets wobble as EU takes first step towards fining Rome ahead of budget battle.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 77.25 unch.

• China Sovereign CDS 56.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.46 unch.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.06%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (HOME)/.04

• (CIEN)/.41

• (SJM)/1.94

• (MIK)/.31

• (SIG)/-.24

After the Close:

• (BYND)/-.15

• (GES)/-.26

• (OLLI)/.44

• (ZUMZ)/-.09

Economic Releases
7:30 am EST

• Challenger Job Cuts for May.

8:30 am EST

• Initial Jobless Claims for last week are estimated at 215K versus 215K the prior week. 

• Continuing Claims are estimated to rise to 1660K versus 1657K prior.

• The Trade Balance for April is estimated at -$50.7B versus -$50.0B in March.
  

12:00 pm EST

• Household Change in Net Worth for 1Q.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The ECB Rate Decision/Press Conference, Eurozone GDP report, weekly EIA natural gas inventory report, week Bloomberg Consumer Comfort Index, (BKE)/(FAST)/(CATO) Monthly Sales Updates, Gabelli Entertainment/Broadcasting Conference, Piper Jaffray Consumer Conference and the RBC Mining/Materials Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial 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 50% net long heading into the day.

Stocks Higher into Final Hour on Diminished Mexico Tariff Worries, Fed Rate Cut Hopes, Technical Buying, Medical/Utility Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.5 -2.5%

• Euro/Yen Carry Return Index 126.44 +.03%

• Emerging Markets Currency Volatility(VXY) 8.67 +.46%

• S&P 500 Implied Correlation 40.11 -2.95%

• ISE Sentiment Index 71.0 -6.58%
  

• Total Put/Call 1.02 +7.4%

• NYSE Arms 1.73 +220.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.93 -2.33%
  

• America Energy Sector High-Yield CDS Index 613.0 -.42%

• European Financial Sector CDS Index 82.10 -1.77%

• Italian/German 10Y Yld Spread 269.50 -2.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 77.94 -2.20%
  

• Emerging Market CDS Index 201.21 +.1%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.26 -.03%

• 2-Year Swap Spread 4.75 +.75 basis point

• TED Spread 15.25 -2.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.46 -.08%
• 3-Month T-Bill Yield 2.34% +2.0 basis points

• Yield Curve 28.0 +3.25 basis points

• China Iron Ore Spot 95.81 USD/Metric Tonne -.48%

• Citi US Economic Surprise Index -46.80 -12.8 points

• Citi Eurozone Economic Surprise Index -19.80 +4.6 points

• Citi Emerging Markets Economic Surprise Index -30.90 +.4 point

• 10-Year TIPS Spread 1.77 +1.0 basis point
• 68.5% chance of Fed rate cut at July 31st meeting, 94.4% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -36 open in Japan 
• China A50 Futures: Indicating -77 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.3%

Sector Underperformers:

• 1) Oil Service -2.5% 2) Steel -1.2% 3) Retail -1.1%

Stocks Falling on Unusual Volume: 

• PVTL, NWN, ALTR, MRNA, GWRE, GIII, QFIN, NCLH, IFF, CLR, AMC, QTWO, VRRM, SFIX, INS, OXY and DELL

Stocks With Unusual Put Option Activity:

• 1) GME 2) GNW 3) AET 4) BBBY 5) SOXX

Stocks With Most Negative News Mentions:

• 1) GME 2) PVTL 3) RLGY 4) NCLH 5) GRUB

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.5%

Sector Outperformers:

• 1) Utilities +1.6% 2) Medical Equipment +1.5% 3) REITs +1.4%

Stocks Rising on Unusual Volume:

• ROAD, VRA, SAH, CPB, CRON, CRTO, CHDN, NSSC, FANH, TTD, AEO, QTRX, ROKU, RGEN, IMMU and CRM

Stocks With Unusual Call Option Activity:

• 1) AMBC 2) GNW 3) DBX 4) GME 5) CPB

Stocks With Most Positive News Mentions:

• 1) CPB 2) KRON 3) VRA 4) SAH 5) SIEN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.2% Above 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 40.9% of Issues Advancing, 55.9% Declining
• 127 New 52-Week Highs, 37 New Lows
• 46.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.1%
• Vix 17.3 +2.1%
• Total Put/Call .91 -4.2%
• TRIN/Arms 1.56 +185.1%

Wednesday Watch

Evening Headlines
Bloomberg:    

• Senate Republicans Hint at Overriding Any Trump Veto on Tariffs.

• Asia Stocks Rally as Fed Signals It's Ready to Act. Stocks in Asia rose after Federal Reserve Chairman Jerome Powell signaled an openness to rate cuts, giving a kicker to risk appetite that remains fragile amid trade-war tensions. Treasuries steadied after Tuesday’s drop. Japan led the charge, with the Topix index up more than 1.5%. Gains were more modest in Korea and Australia. The S&P 500 Index rose over 2% and Treasury yields climbed from multi-year lows Tuesday as Powell said the central bank is monitoring the impact of the trade war and would act as appropriate to sustain the U.S. expansion. Japan’s Topix index rose 1.6% as of 9:05 a.m. in Tokyo. Futures on the S&P 500 edged 0.2% higher. The underlying gauge surged 2.1% Tuesday. Australia’s S&P/ASX 200 Index advanced 0.5%. South Korea’s Kospi index added 0.5%.  

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

• Powell Opens Door to Cut, Central Banks Poised to Act: Eco Day.  

• Oil Slides as Rising U.S. Stockpiles Stoke Fears of Supply Glut.

• Big Tech Could Get Subpoenas in House Probe, Top Democrat Says.

• Short-Seller Pain That Began Monday Just Became a Bloodbath.

• Central Banks Are Poised to Act as World Economic Warnings Flash.  

• Bitcoin Indicator Flashes a Sell Signal as Slump Accelerates.

Wall Street Journal:

• Square(SQ) Sends Millions of Digital Receipts, Sometimes to the Wrong Person.

• Fed Puts Interest Rate Cut in Play.

• Justice Thomas on Abortion and Eugenics.

• Washington’s Anti-Growth Turn.

• Safe Space or Police State? Monitoring Your Kids Online.

• Hong Kong Remembers Tiananmen Square Victims 30 Years On.

• China Warns Its Citizens About Visiting or Studying in the U.S.

• Senate Republicans Threaten to Block Trump on Mexico Tariffs. 

• House Passes Bill Aimed at Protecting Immigrants Brought Illegally to U.S. as Children.

Fox News:

• Hours after DOJ slammed House Dems over Barr treatment, Nadler offers to negotiate.

CNBC: 

• Stocks making the biggest moves after hours: Salesforce, GameStop, Skyworks and more.

• One FANG stock is about to break out, chart suggests.

• Tiffany(TIF) says sales to Chinese tourists are plummeting because of the trade war.

• Salesforce(CRM) shares rise on earnings beat.

Zero Hedge: 

• Bloomberg Rival Refinitiv Censors Reuters Story About Censorship Of Tiananmen Square Anniversary Coverage.

• US Auto Sales Pause Plunge In May, Helped By Bloated Inventories And Fleet Sales.

• 'Coward Of Broward' Arrested: Former Sheriff's Deputy Who Ran From Mass Shooting Faces 11 Counts.

• WTI Erases Day's Gains After API Reports Major Inventory Builds.

• Due To Cataclysmic Flooding, Millions Of Acres Of US Farmland Will Not Be Planted With Crops This Year.

• Trump Threatens New National Emergency To Enact Mexico Tariffs.

• CNN, Maddow Ratings In Absolute Freefall After Russia Narrative Collapses.

• Dollar Dumps, Yields Jump On Biggest Stock Short-Squeeze In 5 Months.

Business Insider:

• In a major reversal, California says coffee 'does not pose a significant cancer risk' and may even help protect against some cancers.

• 34 photos of Melania and Donald Trump's historic state visit with the Queen.

Night Trading 

• Asian equity indices are +.5% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 77.25 -3.5 basis points.

• China Sovereign CDS 56.50 -3.0 basis points.

• Bloomberg Emerging Markets Currency Index 66.54 +.04%.

• S&P 500 futures +.32%.

• NASDAQ 100 futures +.47%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (AEO)/.21

• (BF/B)/.30

• (CPB)/.47

• (GIII)/.22

• (VRA)/-.07

After the Close:

• (FIVE)/.35

• (SFIX)/-.03

• (UNFI)/.52

• (CLDR)/-.23

• (CMTL)/.26

• (ABM)/.42

Economic Releases
8:15 am EST

• The ADP Employment Change for May is estimated at 185K versus 275K in April.

10:00 am EST

• The ISM Non-Manufacturing Index for May is estimated to fall to 55.4 versus 55.5 in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,433,450 barrels versus a -282,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +354,300 barrels versus a +2,204,000 barrel gain the prior week. Distillate inventories are estimated to fall by -55,100 barrels versus a -1,615,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.63% versus a +1.3% gain the prior week.
  

2:00 pm EST

• Fed's Beige Book report.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Services PMI report, Eurozone PPI report, Eurozone PMI Services report, weekly MBA Mortgage Applications report, Deutsche Bank Industrials Conference, CSFB Energy Conference, William Blair Growth Stock Conference, (IFF) investor day, UBS Industrials/Transport Conference, (PRU) investor day, (PLXS) analyst day and the (COST) May sales results could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.