Thursday Watch

Evening Headlines

Bloomberg:      

• Trump, in Praising Xi, Links Hong Kong Protests to Trade War.

• Here’s How Hard the Protests Are Slamming Hong Kong’s Economy.

• RBA's Debelle Warns World at Risk of ‘Self-Fulfilling Downturn’.

• The World’s Gadget Makers Are Splitting Along U.S.-Chinese Lines.

• Stock Sell-Off Deepens in Asia on Recession Fears. A sell-off in global stocks continued in Asia after U.S. equities tumbled as a closely watched part of the Treasury yield curve inverted Wednesday, raising recession fears. Treasuries steadied. Japan’s Topix index opened about 2% lower, less than the nearly 3% tumble seen in the S&P 500 Index Wednesday. Treasuries stabilized after the 10-year rate slid below the two-year for the first time since 2007. Bonds also climbed in Australia and New Zealand, following gains across Europe, with the U.K. yield curve inverting for the first time since the financial crisis and Bund yields sliding to a fresh record low. Crude oil extended losses. Japan’s Topix index fell 1.9% as of 9:16 a.m. in Tokyo. Futures on the S&P 500 Index added 0.2%. The underlying gauge fell 2.9% Wednesday. Australia’s S&P/ASX 200 Index lost 0.8%.  

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

• RBA Warns on World, Hong Kong Fallout, Ban ‘Down Under’: Eco Day

• Yield Curve Drama No Reason to Lose Your Mind, Stock Pickers Say.

• Warren Buffett’s Berkshire Makes Bigger Amazon Bet, Boosting Stake 11%.  

• States Sue Trump Over Plan to Deny Status to Poorer Immigrants.

Wall Street Journal:

• Are You Ready for Facial Recognition at the Airport?

• The Navarro Recession, II.

• WeWork IPO Filing Shows Revenue Growth, Wide Losses.

• Warning Signs Point to a Global Slowdown.

• Italy’s Rival Parties Look to Block Salvini’s Bid for Power.

Fox News:

• At least 6 Philadelphia officers reportedly wounded as bullets fly in active scene.

MarketWatch.com:  

• Canopy Growth(CGC), world’s largest pot company, lost $1 billion in three months.

• Check out the only S&P 500 companies trading higher in Wednesday’s ugly selloff. 

• The $4 billion time bomb ticking away inside the biggest marijuana companies.

CNBC:

• Dow tanks 800 points in worst day of 2019 after bond market sends recession warning.

• ‘CRAZY INVERTED YIELD CURVE!’ — Trump rips ‘clueless Jay Powell’ and the Fed as the market slides

• Cisco(CSCO) drops on poor guidance, says China business dropped 25%.

• Trump suggests ‘personal meeting’ with China’s Xi over Hong Kong crisis.

• Pivotal surges 60% after VMware says it’s in talks to acquire the company.

• Stocks making the biggest moves after hours: Cisco, NetApp and Vipshop.

• Global firms are sounding the alarm as escalating Hong Kong protests deal a ‘serious blow’ to the city’s outlook.

Zero Hedge:    

• Huawei Bombshell: Extensive Cyber Spying On Beijing's Political Opponents In Africa Revealed.

• China Curbs Private Gold Imports As It Adds 10 More Tons To Its Own Hoard.

• Amazon Facial Recognition Can Now Detect Fear.

• Trump Bashes "Clueless" Jay Powell And "CRAZY" Inverted Yield Curve

• Rickards: China Is A Paper Tiger.

• One Trader Stands To Make $3.5 Billion If Powell Launches QE In The Next 2 Months.

• 5 Things Every Trader Needs To Know About Rates.

• "He's Doing The Right Thing": Iowa Farmers Back Trump, Brush Off Trade War.

• Markets In Turmoil: "Clubbed Like A Baby Seal!".

Business Insider:

• Hong Kong will become another Tiananmen Square if China's army comes, a protest leader warns.

NY Daily News:

• NYPD officer shoots self in head in Queens home, ninth suicide of city cop this year.

Night Trading 

• Asian equity indices are -2.0% to -1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 70.0 +1.75 basis points.

• China Sovereign CDS 55.25 +5.0 basis points.

• Bloomberg Emerging Markets Currency Index  65.55 +.02%.

• FTSE 100 futures -.04%.

• S&P 500 futures +.25%.

• NASDAQ 100 futures +.18%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (BABA)/10.46

• (BGG)/.45

• (CSIQ)/.35

• (JCP)/-.31

• (TPR)/.61

• (WMT)/1.22

After the Close:

• (CRMT)/1.74

• (AMAT)/.70

• (DDS)/-.72

• (NVDA)/1.15

Economic Releases
8:30 am EST

• Empire Manufacturing for August is estimated fall to 2.0 versus 4.3 in July.

• Preliminary 2Q Non-Farm Productivity is estimated to rise +1.4% versus a +3.4% gain in 1Q.

• Preliminary 2Q Unit Labor Costs is estimated to rise +2.0% versus a -1.6% decline in 1Q.

• Philly Fed Business Outlook for August is estimated to fall to 9.5 versus 21.8 in July.

• Retail Sales Advance MoM for July is estimated to rise +.3% versus a +.4% gain in June.

• Retail Sales Ex Autos MoM for July is estimated to rise +.4% versus a +.4% gain in June. 

• Retail Sales Ex Auto and Gas for July is estimated to rise +.5% versus a +.7% gain in June. 

• Initial Jobless Claims for last week are estimated to rise to 212K versus 209K the prior week.

• Continuing Claims are estimated to rise to 1685K versus 1684K prior.

9:15 am EST

• Industrial Production MoM for July is estimated to rise +.1% versus unch. in June.

• Manufacturing Production for July is estimated to fall -.3% versus a +.4% gain in June.

• Capacity Utilization for July is estimated to fall to 77.8% versus 77.9% in June.
  

10:00 am EST

• The NAHB Housing Market Index for August is estimated at 65 versus 65 in July.

• Business Inventories for June is estimated to rise +.1% versus a +.3% gain in May.
  

4:00 pm EST

• Total Net TIC Flows for June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan Industrial Production report, Australia Employment Change report, weekly EIA natural gas inventory report and the (EAT) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Falling Substantially into Afternoon on Global Growth Fears, European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Retail/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 21.6 +23.5%

• Euro/Yen Carry Return Index 122.51 -1.1%

• Emerging Markets Currency Volatility(VXY) 8.9 +2.1%

• S&P 500 Implied Correlation 50.3 +4.1%

• ISE Sentiment Index 74.0 -11.9%
  

• Total Put/Call 1.23 +33.7%

• NYSE Arms 1.95 +126.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.14 +5.5%
  

• America Energy Sector High-Yield CDS Index 401.0 +.22%

• European Financial Sector CDS Index 74.55 +6.1%

• Italian/German 10Y Yld Spread 215.75 -7.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 70.25 unch.
  

• Emerging Market CDS Index 218.45 +5.9%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.66 -.12%

• 2-Year Swap Spread .75 +1.75 basis points

• TED Spread 17.0 -2.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +5.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.59 -.73%
• 3-Month T-Bill Yield 1.95% -4.0 basis points

• Yield Curve .75 -1.25 basis points

• China Iron Ore Spot 88.35 USD/Metric Tonne -1.32%

• Citi US Economic Surprise Index -19.9 -.1 point

• Citi Eurozone Economic Surprise Index -64.50 -1.6 points

• Citi Emerging Markets Economic Surprise Index -22.4 -6.5 points

• 10-Year TIPS Spread 1.58 -6.0 basis points
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -485 open in Japan 
• China A50 Futures: Indicating -180 open in China

• DAX Futures: Indicating -22 open in Germany

Portfolio:

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -2.6%

Sector Underperformers:

• 1) Oil Service -6.0% 2) Retail -3.8% 3) Banks -3.7%

Stocks Falling on Unusual Volume: 

• IVR, MYGN, M, WK, HSBC, AKAM, VIAB, G, GOOS, CAE, VIA, LK, PCI, BCO, WES, NSIT, CLM, KBR, PTY, EAT, IOTS, CBS, RUN, UBER, W, CDK, HSC, CVET, REAL, OSTK and KSS

Stocks With Unusual Put Option Activity:

• 1) DELL 2) AGNC 3) IYT 4) M 5) XRT

Stocks With Most Negative News Mentions:

• 1) LB 2) M 3) MYGN 4) LYFT 5) CVET

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -2.2%

Sector Outperformers:

• 1) Gold & Silver +.7% 2) Utilities unch. 3) REITs -.8%

Stocks Rising on Unusual Volume:

• PSDO, CHNG, DCPH, AMEH, PFGC, UGLD, ZLAB, RING, USLV, APPN, CTRA, AEM, D, ANAB, AU, MNRO, ADVM, INMD and GO

Stocks With Unusual Call Option Activity:

• 1) JCI 2) XON 3) CHGG 4) ADS 5) MET

Stocks With Most Positive News Mentions:

• 1) GO 2) PFGC 3) NVAX 4) LMT 5) UNH

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +25.5% Above 100-Day Average
• 1 Sector Rising, 10 Sector Declining
• 16.8% of Issues Advancing, 82.0% Declining
• 102 New 52-Week Highs, 289 New Lows
• 50.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.8%
• Vix 21.8 +24.0%
• Total Put/Call 1.11 +20.7%
• TRIN/Arms 1.90 +115.1%

Wednesday Watch

Evening Headlines

Bloomberg:  

• Trump Bows to Economic Fears in Move to Delay China Tariffs.

• Stocks to Rally in Asia on Tariff-Delay Relief. Asian stocks were primed to rally after the Trump administration de-escalated its trade war with China, providing relief to risk assets that had been under pressure earlier in the week. Treasuries retreated. Japanese futures were more than 2% higher after the S&P 500 Index had its biggest intraday gain in more than two months. Washington said it was delaying until mid-December the 10% tariff on some Chinese-made products that are high on many holiday-shopping lists such as phones, laptops and toys. A stronger-than-expected CPI data and easing in trade tensions sent 10-year yields higher. The dollar strengthened. The S&P 500 Index rose 1.5% on Tuesday. Futures were little changed. Futures on Japan’s Nikkei 225 climbed 2.2%. Hang Seng Index futures earlier advanced 1.6%. Futures on Australia’s S&P/ASX 200 Index added 0.7%.   

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

• Trump Flinches, U.S. Inflation Quickens, Somber Merkel: Eco Day.

• Jeffrey Epstein Asset Forfeitures Wouldn’t Guarantee Payout for Accusers.

Wall Street Journal:

• U.S. Retreats on Chinese Tariff Threats, Stocks Soar.

• Hong Kong Protesters and Police Clash at Airport.

• Mortgage Debt Hits Record, Eclipsing 2008 Peak.

• States Sue Trump Administration Over Rollback of Power-Plant Rules.

• San Francisco, Santa Clara County File Suit to Block Rule on Green Cards.

• Russia Urges Villagers to Leave Radioactive Blast Site.

Fox News:

• Royal's link to Jeffrey Epstein draws new scrutiny after suicide, document dump.

• Harris, Warren take heat for claim Michael Brown was murdered.

CNBC:

• CBS and Viacom have finally agreed to merge — here’s what they could buy next.

• Trump just blinked, giving China a possible edge in trade war, some big Wall Street names say.

• A $1 trillion US budget deficit is one big reason the Fed may have to cut rates.

• Cramer breaks down the biggest winning stocks from Trump’s tariff delay.

• Why activist investor Carl Icahn is taking a big stake in 11-year-old ‘big data’ company Cloudera.

• Main yield curve nearly inverts as 10-year yield tops 2-year rate by just 2 basis points.

• Stocks making the biggest moves after hours: RealReal, Tilray, and Myriad.

Zero Hedge:

• Tesla(TSLA) Stock-Sellers Bank $2.75 Billion As Carmaker Is Now The Most Profitable US Short This Year.

• San Francisco Fentanyl-Related Deaths Spiked 150% Last Year.

• India's Car Market Just Crashed, Had Its Worst Month In 18 Years.

• WTI Slides After 2nd Surprise Crude Build In A Row.

• Facebook(FB) Is Collecting User Audio, Paying Contractors To Transcribe It.

• Beijing Refuses American Warships Entry To Hong Kong Ports.

• Trump Trade Blink Sparks Stock, Yuan Spike But Treasury Curve Collapses To 12-Year Lows.

Night Trading 

• Asian equity indices are +.75% to +1.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 68.25 -1.75 basis points.

• China Sovereign CDS 50.25 -3.25 basis points.

• Bloomberg Emerging Markets Currency Index  66.12 +.01%.

• FTSE 100 futures +.19%.

• S&P 500 futures -.13%.

• NASDAQ 100 futures -.11%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (GOOS)/-.24

• (LK)/-.45

• (M)/.45

After the Close:

• (A)/.72

• (CACI)/2.17

• (CGC)/-.41

• (CSCO)/.82

• (NTAP)/.58

• (VIPS)/1.04

Economic Releases
8:30 am EST

• The Import Price Index MoM for July is estimated to fall -.1% versus a -.9% decline in June.

• The Import Price Index ex Petrol MoM for July is estimated to fall -.1% versus a -.4% decline in June. 

• The Export Price Index MoM for July is estimated to fall -.1% versus a -.7% decline in June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Retail Sales/Industrial Production reports, Eurozone Industrial Production/GDP reports,  weekly MBA Mortgage Applications report and the (IDXX) investor day 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 mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.