Wednesday Watch

Evening Headlines
Bloomberg:             

• U.S., China's Top Trade Officials Make First Contact Since Truce.   

• Trade War Threatens Chinese Factories’ Existence, Supplier Says. 

• U.K. Parliament Flexes Muscle as Johnson Doubles Down on No-Deal.

• Investors Might Be Underpricing Draghi’s Desire for a July Move.

• Asian Stocks Set for Mixed Trading Ahead of Powell. Stocks in Asia looked set to trade mixed after U.S. equities made little headway and investors awaited clues on policy from Federal Reserve Chair Jerome Powell. The dollar strengthened to its highest since mid-June and Treasuries slipped. Futures in Japan pointed to a flat start, while contracts rose in Hong Kong and Australia. The S&P 500 Index edged higher as technology shares climbed. The yield on 10-year Treasuries nudged up to 2.06%. The Mexican peso dropped after that country’s finance minister quit. Futures on the S&P 500 Index were flat as of 7:47 a.m. in Tokyo. The underlying gauge gained 0.1% Tuesday. Futures on Japan’s Nikkei 225 were little changed in Singapore. Hang Seng futures earlier added 0.5%. Futures on Australia’s S&P/ASX 200 Index advanced 0.5%.  

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

• Traders Are Certain the Fed Will Cut in July, But Unsure What’s Next.

• DNA-Testing Service Exposed Thousands of Customer Records Online.

Wall Street Journal:

• Virgin Galactic to Go Public.

• Judge Rejects Trump Plan to Swap Legal Team in Census Case.

• Powell’s Approach to Interest Rates Wins Bipartisan Backing.

• Mexico Finance Minister Resigns in Surprise Move; Peso Falls. 
  

• Border Apprehensions Decline for First Time Since January.

Fox News: 

• Epstein booted from Mar-a-Lago in case more sickening than Weinstein, Cosby: best-selling author.

• JASON CHAFFETZ: Will IG report on FBI surveillance be classification cover-up?

CNBC:

• Fed chief faces tough task in Congressional testimony: ‘Walking a tightrope over Niagara Falls’.

• Lighthizer, Mnuchin spoke with Chinese Vice Premier Liu He on Tuesday.

• Stocks making the biggest moves after hours: Levi Strauss, T-Mobile, Facebook.

Zero Hedge: 

• Italy's 50 Year Bonds Are 6x Oversubscribed As Investors Lose Their Minds.

• Bidens Earned More Than $15 Million In The Past Two Years.

• Ship Seized In Record $1.3 Billion Cocaine Bust Belongs To JPMorgan.

• Snyder: Epstein Case Has The Potential To Be The Biggest Scandal In American History.

• Class 8 Truck Orders Crash 70% In June After A 71% Drop In May .

• AOC 'Womansplains' Sexism To Kellyanne Conway After 'Catfight' Comment.

• Jeffrey Epstein's Wikipedia Page Stealth-Edited To Remove Ties To Democrats.

• WTI Spikes After Huge Crude Draw.

• Despite Late-Day Panic-Buying, Dow Suffers Longest Losing Streak In 4 Months.

Business Insider:  

• The UK is running out of time to prepare for a no-deal Brexit as work is 'not happening quickly enough'.

• From Bill Clinton to Naomi Campbell: Here are some of the famous people who have flown on Jeffrey Epstein's private plane, which has been dubbed the 'Lolita Express'.

• A new quote from Steve Jobs reveals what the late Apple cofounder really thought of Tim Cook: 'Tim's not a product guy'.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 64.50 +2.5 basis points.

• China Sovereign CDS 42.5 +1.75 basis points.

• Bloomberg Emerging Markets Currency Index  67.25 unch.

• S&P 500 futures +.08%.

• NASDAQ 100 futures +.13%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (ANGO)/.26

• (KHC)/.61

• (MSM)/1.49

After the Close:

• (AIR)/.63

• (BBBY)/.08

• (PSMT)/.50

Economic Releases 
10:00 am EST

• Wholesale Trade Sales MoM for May is estimated to rise +.3% versus a -.4% decline in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,692,170 barrels versus a -1,085,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,825,270 barrels versus a -1,583,000 barrel decline the prior week. Distillate inventories are estimated to rise by +641,180 barrels versus a +1,408,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.06% versus unch. prior.
  

2:00 pm EST

• FOMC June 19 Meeting Minutes.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell testimony to Congress, Fed's Bullard speaking, China CPI report, UK industrial production report, $24B 10Y T-Note auction, weekly MBA Mortgage Applications report, (WYNN) investor day and the (COST) June sales results could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Slightly Higher on Fed Rate-Cut Hopes, Oil Gain, Technical Buying, Technology/Biotech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.1 +1.1%

• Euro/Yen Carry Return Index 126.68 +.04%

• Emerging Markets Currency Volatility(VXY) 7.57 -1.7%

• S&P 500 Implied Correlation 34.8 -1.3%

• ISE Sentiment Index 86.0 +41.0%
  

• Total Put/Call 1.01 +7.5%

• NYSE Arms .93 -29.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 53.83 -1.03%
  

• America Energy Sector High-Yield CDS Index 610.0 +.3%

• European Financial Sector CDS Index 63.11 +1.11%

• Italian/German 10Y Yld Spread 208.75 -6.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 65.48 +2.18%
  

• Emerging Market CDS Index 165.69 -.85%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.81 +.1%

• 2-Year Swap Spread 2.5 -.75 basis point

• TED Spread 13.0 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -15.5 +3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.27 -.12%

• 3-Month T-Bill Yield 2.22% -1.0 basis point

• Yield Curve 15.75 +.25 basis point

• China Iron Ore Spot 116.0 USD/Metric Tonne -.62%

• Citi US Economic Surprise Index -56.80 -1.0 point

• Citi Eurozone Economic Surprise Index -13.10 -.1 point

• Citi Emerging Markets Economic Surprise Index -35.0 -.3 point

• 10-Year TIPS Spread 1.72 +2.0 basis points

• 99.8% chance of Fed rate cut at Sept. 18th meeting, 99.9% chance of cut at October 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -55 open in Japan 

• China A50 Futures: Indicating -23 open in China

• DAX Futures: Indicating +8 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.5%

Sector Underperformers:

• 1) Healthcare Providers -1.3% 2) Tobacco -1.2% 3) Agriculture -1.1%

Stocks Falling on Unusual Volume: 

• WAAS, DVA, BJ, FMS, GTX, LBRT, COHU, MFGP, TUP, POOL and GTT

Stocks With Unusual Put Option Activity:

• 1) AET 2) LNG 3) ONCE 4) QEP 5) PEP

Stocks With Most Negative News Mentions:

• 1) TUSK 2) MOS 3) PII 4) MMM 5) MYGN

Charts:

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

Bull Radar

Style Outperformer:

• Lrage-Cap Growth +.3%

Sector Outperformers:

• 1) Internet +1.1% 2) Networking +1.0% 3) Biotech +.9%

Stocks Rising on Unusual Volume:

• ACIA, LNN, OSTK, AUTL, AAOI, ELF, HCM, LOOP, XBIO, CTMX, CUTR, SQ, EIDX, CG, MTSI, PAYS, IPHI, AUDC, LC, SSYS, CDNA, SGEN, NFLX, ELAN and LHX

Stocks With Unusual Call Option Activity:

• 1) HES 2) NSC 3) SPLK 4) SQ 5) NSC

Stocks With Most Positive News Mentions:

• 1) LNN 2) AIR 3) NOW 4) CSCO 5) MA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -15.7% Below 100-Day Average
• 4 Sectors Rising, 7 Sectors Declining
• 37.3% of Issues Advancing, 57.8% Declining
• 94 New 52-Week Highs, 39 New Lows
• 60.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.3%
• Vix 14.3 +2.4%
• Total Put/Call .95 +1.1%
• TRIN/Arms .72 -45.0%

Tuesday Watch

Evening Headlines
Bloomberg:           

• Hong Kong Protests Revive a Demand That China Hates: Real Elections.

• Japan’s Wages Fall Again, Adding to Concerns Over Tax Hike.  

• Facebook’s Libra Must Be Under Central Bank Oversight, PBOC Says.

• Hedge Funds Post Best First Half in Decade.

• Wall Street Dons a ‘Tinfoil Hat' to Ponder U.S. Currency Intervention.

• U.S. May Top Debt Limit Sooner Than Forecast, Forcing Congress’s Hand    

• Asia Stocks See Mixed Start; Yen Near 4-Week Low. Asian stocks saw a muted start to trading Tuesday after their U.S. counterparts slipped overnight. The yen held near a four-week low. Stocks in Japan and South Korea clawed back some of Monday’s losses while Australian shares drifted. Earlier, U.S. equities fell for a second day as investors took a cautious approach in a week full of central bank activity. Treasury yields ticked lower while the dollar was flat. S&P 500 futures were little changed. Trading may continue to be muted ahead of key testimony this week from Federal Reserve Chairman Jerome Powell, as investors assess prospects for monetary easing following some conflicting signals on the U.S. economy. Topix Index rose 0.4% as of 9:05 am in Tokyo. Kospi Index climbed 0.3%. S&P/ASX 200 was flat. S&P 500 futures fell 0.1%.

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

• Supply Chain Disruption, Gold Rush, Malaysia Rates: Eco Day.

Wall Street Journal:

• Iran Threatens to Extend Breaches of Nuclear Agreement.

• SoftBank Unit Yet to Conquer Internet of Things.

• Heavy Debt Humbles China’s Business Champions, Including the Jewelry Queen.

• U.S., China Tentatively Move to Revive Trade Talks.

• Barr Sees Path to Legally Add Census Citizenship Question.

• Instagram Introduces New Anti-Bullying Features.

• Piper Jaffray Nearing Deal to Buy Sandler O'Neill for $485 Million.

Fox News:

• Former president 'knows nothing' about 'terrible' Epstein crimes amid new sex-trafficking charges.

• AOC uses Pelosi's own words against her after being accused of insulting her.

CNBC:

• Amazon Prime Day could be the ‘record-breaking event’ to boost consumer stocks next week.

• Apartment rental demand soars as more millennials believe it’s cheaper than owning a home.

• Apple’s iPhones coming in 2020 could spark sales growth as 5G excitement builds: JPMorgan.

• US judge halts Trump administration rule requiring drug prices in TV ads.

Zero Hedge: 

• Majority Of Americans Want Citizenship Question Included On 2020 Census. 

• Before SHTF, Let's Revisit Jeffrey Epstein's Little Black Book.

• Barr Weighs In On 2020 Citizenship Question, Recuses Self From Epstein Case.

• Snyder: The Latest Large Quakes Should Be Taken As A Warning By Everyone Still Living In California.  

• CBO Destroys Democrat Dreams Of Utopia; Almost 4 Million Jobs Lost Under $15 Minimum Wage. 

• Consumer Credit Hits All Time High As Credit Card Debt Surges.

• Just What Was That Stricken Russian Submarine Carrying?

• iDowngrade Sparks Tech-Stock Slide As Dollar, Gold, Bonds Flatline. 

Business Insider:

• We stood outside Deutsche Bank's New York office as staff who'd just been laid off walked out. Here's what we saw..

• A new poll shows Trump has a major shot at being reelected in 2020. 

• These are the top five trends shaping the future of digital health.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 62.0 -. basis point.

• China Sovereign CDS 40.75 - basis points.

• Bloomberg Emerging Markets Currency Index  67.79 -.%.

• S&P 500 futures +.%.

• NASDAQ 100 futures +.%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (LNN)/.76

• (PEP)/1.51

After the Close:

• (HELE)/1.69

• (WDFC)/1.22

Economic Releases
6:00 am EST

• The NFIB Small Business Optimism Index for June is estimated to fall to 103.1 versus 105.0 in May.

10:00 am EST

• JOLTS Job Openings for May are estimated to fall to 7473 versus 7449 in April.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Bostick speaking, Fed's Quarles speaking, Fed's Bullard speaking, China money supply report, $38B 3Y T-Note auction and the weekly US retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are modestly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.