Friday Watch

Evening Headlines
Bloomberg:      

• U.S. Blames Iran for Oil Tanker Attacks as Gulf Tensions Climb.

• Gulf Tanker Attacks: Who’s Behind Them and Could War Be Near?    

• As Oil Tankers Burn in the Gulf, Investors Focus on Trade War.

• Xi Assailed on All Fronts as Hong Kong Adds to Trump Pressure.

• China's Hard Line in Hong Kong Boosts Beijing Critics in Taiwan.  

• Hong Kong's Long-Term Economic Role Is at Stake Amid Demonstrations.

• Wal-Mart and Hundreds of Other Companies Call on Trump to Drop China Tariffs. 

• Asia Stocks Head for Mixed Start; Yields Retreat. Stocks in Asia faced a muted start Friday after U.S. equities eked out gains and the global bond rally extended. Oil steadied following an escalation in Middle East tensions. Futures pointed to modest gains for shares in Tokyo and Sydney, while Hong Kong contracts dipped. The S&P 500 Index reached a five-week high as a surprise increase in U.S. jobless claims supported the idea the Federal Reserve may cut rates, with the yield on 10-year Treasuries falling to 2.09%. The surge eased for oil after two tankers were damaged in suspected attacks near the Persian Gulf. The U.S. blamed Iran. The dollar was flat, remaining in a tight range. Futures on Japan’s Nikkei 225 rose 0.3% in Singapore. Hang Seng futures slipped 0.2%. Futures on Australia’s S&P/ASX 200 Index added 0.1%. Futures on the S&P 500 Index were flat.  

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

• Broadcom(AVGO) Retreats From Annual Forecast, Citing Trade Concern.  

• Chip Stocks Slip as Broadcom Sees ‘Broad’ Slowdown in Reversal.

• Bloomberg’s Week in Pictures.

Wall Street Journal:

• Pompeo Says Iran Is Responsible for the Attacks on Tankers.

• Facebook’s New Cryptocurrency Gets Big Backers.

• How Washington Learned to Love Debt and Deficits.

• Huawei’s Booming Smartphone Business Hits U.S. Roadblock.

• Trump Could Retaliate if Xi Balks at Trade Meeting, Kudlow Says.

• Hong Kong Protesters Adjust Tactics With Lessons From 2014.

Fox News:

• DOJ lost track of foreign nationals with criminal histories after bringing them to US: audit.

MarketWatch.com:

• Amazon’s(AMZN) Alexa is illegally recording kids, lawsuits claim.

CNBC:

• A Morgan Stanley economic indicator just suffered a record collapse.

• Stocks making the biggest moves after hours: Chip stocks fall, Fiverr climbs.

• DNC names 20 candidates who will appear on stage for first Democratic debate.

• Bond king Jeffrey Gundlach: ‘I am certainly long gold’.

• PetSmart’s online business, Chewy.com, prices IPO at $22 a share, above expected range.

Zero Hedge:

• New Report Shows Plane-Sized Drones Are Coming To Skies Across America.

• US Blames Iran For Tanker Attacks, Says Tehran "Trying To Interrupt Flow Of Oil".

• Propaganda Is The Root Of All Our Problems.

• Paraplegic Allegedly Defrauded By Avenatti Now Suing 'Creepy Porn Lawyer' For $10 Million.

• Consensus, Convergence, & A Cornucopia Of Curious Charts.

• Jordan Peterson Close To Launching "Anti-Censorship" Social Media Platform.

• Trump Says Sarah Sanders To Leave White House, "Done Incredible Job".

• Traders Buy Stocks, Bonds, Bitcoin, Bullion, & Black Gold After Tanker Attacks.

Business Insider:

• Inside the Alphabet empire: Here are the most important people and teams in Google's vast power structure.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 72.75 +.5 basis point.

• China Sovereign CDS 50.75 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.57 -.01%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.29%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• None of note

After the Close:

• None of note

Economic Releases
8:30 am EST

• Retail Sales Advance MoM for May is estimated to rise +.6% versus a -.2% decline in April.

• Retail Sales Ex Autos MoM for May is estimated to rise +.4% versus a +.1% gain in April.

• Retail Sales Ex Autos and Gas for May is estimated to rise +.4% versus a -.2% decline in April.

9:15 am EST

• Industrial Production MoM for May is estimated to rise +.2% versus a -.5% decline in April.

• Capacity Utilization for May is estimated to rise to 78.0% versus 77.9% in April.
  

10:00 am EST

• Preliminary Univ. of Mich. Consumer Confidence for June is estimated to fall to 98.0 versus 100.0 in May.

• Business Inventories for April is estimated to rise +.5% versus unch. in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Retail Sales/Industrial Production reports, Eurozone Trade Data report, (GLW) investor day and the (CNC) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial 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 Modestly Higher into Final Hour on Less Eurozone Debt Angst, Short-Covering, Oil Gain, Commodity/Retail Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.9 -.4%

• Euro/Yen Carry Return Index 126.91 -.25%

• Emerging Markets Currency Volatility(VXY) 8.41 +.48%

• S&P 500 Implied Correlation 38.87 -2.19%

• ISE Sentiment Index 79.0 -10.2%
  

• Total Put/Call .87 -9.38%

• NYSE Arms .89 -30.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.59 -1.26%
  

• America Energy Sector High-Yield CDS Index 628.0 +1.77%

• European Financial Sector CDS Index 78.79 -.32%

• Italian/German 10Y Yld Spread 259.75 -7.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 72.56 +.42%
  

• Emerging Market CDS Index 191.16 -.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.58 -.02%

• 2-Year Swap Spread 2.75 -2.25 basis pionts

• TED Spread 25.0 +5.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -13.75 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.58 -.07%
• 3-Month T-Bill Yield 2.18% -4.0 basis points

• Yield Curve 26.25 +2.25 basis points

• China Iron Ore Spot 106.20 USD/Metric Tonne +2.17%

• Citi US Economic Surprise Index -59.70 -7.5 points

• Citi Eurozone Economic Surprise Index -20.4 +5.1 points

• Citi Emerging Markets Economic Surprise Index -23.70 +4.3 points

• 10-Year TIPS Spread 1.69 -2.0 basis points
• 87.0% chance of Fed rate cut at July 31st meeting, 97.8% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -52 open in Japan 
• China A50 Futures: Indicating -60 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.4%

Sector Underperformers:

• 1) Road & Rail -1.2% 2) Drugs -.6% 3) Telecom -.3%

Stocks Falling on Unusual Volume: 

• SHSP, LAUR, PRVB, ESTC, TU, SNY, BMA, RTN, PAM, TRHC, RCI, CPS, GGAL, LECO, BOOM, NVO, GRVY, DATA, SFIX, TMUS, CRON, TWTR, ACMR and QTWO

Stocks With Unusual Put Option Activity:

• 1) CBS 2) CHK 3) NOC 4) LYB 5) RLGY

Stocks With Most Negative News Mentions:

• 1) SVRA 2) UNP 3) JNJ 4) PLAY 5) BV

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.1%

Sector Outperformers:

• 1) Oil Service +3.1% 2) Papers +2.2% 3) Airlines +2.1%

Stocks Rising on Unusual Volume:

• CODA, RRGB, RH, SUM, PAYS, CNCE, OXM, SSRM, ELY, GNRC, ITCI, NX, PTEN, AERI, CAR, DBX, ZS, GNRC and GOLF

Stocks With Unusual Call Option Activity:

• 1) RH 2) TAP 3) WDC 4) SWN 5) DIS

Stocks With Most Positive News Mentions:

• 1) FVRR 2) ELY 3) RH 4) LULU 5) AVGO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -19.8% Below 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 66.9% of Issues Advancing, 30.3% Declining
• 90 New 52-Week Highs, 64 New Lows
• 51.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.1%
• Vix 15.6 -1.8%
• Total Put/Call .69 -28.1%
• TRIN/Arms .80 -37.5%