Wednesday Watch

Evening Headlines

Bloomberg:            

• India’s Ailing Credit Market Shows the Limits of Central Bankers.

• New Zealand’s Jobless Rate Rises As Virus Starts to Impede Economy.

• Asia Stocks Face Mixed Start; U.S. Shares Gain: Markets Wrap. Stocks in Asia looked on course for a mixed start Wednesday, following a late-day swoon for U.S. equities, as investors weighed optimism that more economies are moving toward easing lockdowns against cautionary comments from Federal Reserve officials. Oil extended its rebound. Equity futures were modestly higher in Hong Kong, while contracts slipped in Australia. The S&P 500 earlier rose for a second day, though a gain of almost 2% was cut in half in the last hour of trading after Fed Vice Chairman Richard Clarida warned the economy will need more government support. Walt Disney Co. fell in after-hours trading, becoming the latest firm to detail the severity of the pandemic’s impact on its entertainment business. President Donald Trump continued to blame China for the global pandemic, stoking fears the trade war will reignite. Treasuries dipped. Futures on the S&P 500 rose 0.3% as of 7:23 a.m. in Tokyo. The gauge added 0.9% on Tuesday. Futures on Australia’s S&P/ASX 200 Index fell 0.2%. Hang Seng Index futures earlier added 0.3%.

• Fed Is Propping Up Companies It Had Warned Banks Not to Touch.

• Positive Tests at Some Meat Plants Top 50%, Driving Grocery Shortages.

• First U.S. Fraud Charges Over PPP Cash Accuse New Englanders.

• Dentists Face Another Hurdle Before Reopening: Too Few Masks.

• Shale Producers Hint at Possible Fracking Revival at $30 Oil. 

• Farms Are Turning to Waiters and Convicts to Harvest Fruit.

Wall Street Journal:

• U.S. Urges EU to Back China Probe.

• A Young Doctor Photographs the Pandemic.

• Should Colleges Reopen in the Fall?

• Welcome Back to the Office. Your Every Move Will Be Watched.

• Tricky Math Is Behind Coronavirus Death Predictions.

• U.S. Factories Face a Hitch in Reopening: Mexico’s Shutdown.

• Occidental Seeks to Lessen Roughly $40 Billion Debt Load.

CNBC.com:

• Jim Cramer: Many restaurants will close under Tennessee’s reopening guidelines.

• Hospitals are losing millions of dollars per day in Covid-19 pandemic — and recovery may take years.

• Texas hair, nail and tanning salons to reopen this week, gyms next, governor says.

• Stocks making the biggest moves after hours: Pinterest, Mattel, Virgin Galactic and more.

Fox News:

• States rebuked by feds, courts for coronavirus lockdown measures.

• Numerous reports of this symptom linked to coronavirus emerge.

MarketWatch.com:           

• Activision Blizzard stock rises after earnings beat, as player engagement rises amid coronavirus.

• Disney is in ‘the eye of the storm’ — analyst warns parks may not open until January.

• Your genes could determine whether coronavirus puts you in the hospital — and we’re starting to unravel which ones matter.  

• These 10 S&P 500 companies increased sales faster than Amazon in a coronavirus-tainted quarter.

Zero Hedge:     

• Coronavirus Mutates Into Now-Dominant, More Contagious Form As Doctors Ponder 'East Coast vs. West Coast' Strains.

• Scientist Whose Doomsday Models Sparked Global Lockdown Resigns After Breaking Quarantine To Bang Married Lover.

• Sam Zell: Fallout From Coronavirus Will Be "Worse Than The Great Depression".

• It's Now Virtually Impossible To Get Bank Credit As Lending Standards Soar.

• Florida Suffers Deadliest Day Yet As Reopening Begins; Whistleblower Accuses DHHS Of Ignoring Coronavirus Threat: Live Updates.

• Tempers Flare Over Lockdown, Masks, & Money: Is All-Out Civil Unrest About To Erupt?

• Illinois' True Retirement Costs Surge Near 60% Of The Budget.

• Lazard Warns Of "Cascading" Bankruptcies Without More Stimulus.

• Disney Suspends Dividend After Earnings Plunge 63% As Theme Parks Close.

• WTI Extends Huge Gains Despite Bigger-Than-Expected Crude Build.

• The Feds Are Already Investigating Wells Fargo For Botching Small Business Relief Program.

• Oil Soars 20%, Hits Goldman's Q3 Target 4 Months Early, But Here Comes June Maturity.

• How Long Can Biden Stay In His Basement?

• Junk Bond Leverage Hits Record High As "Fed Rewards The Worst Abusers".

• Airbnb To Lay Off 1,900 Employees As Tourism Industry Collapses.

• "We're In A Global Recession" - Fed's Clarida Spoils Today's Economy-Ignoring Surge In Stocks.

Business Insider:   

• McDonald's is giving employees in corporate stores a 10% bonus in May as a reward for working during the coronavirus pandemic

• US consumer debt hit a record $14.3 trillion in the first quarter.

The Epoch Times:

• Lawmaker to Introduce Bill to Help US Manufacturers Move Out of China.

John Hopkins University:

• Coronavirus Global Cases. (map)

BNO News:

• Tracking Coronavirus: Map, data and timeline.

Google Docs:

• Coronavirus Testing by State.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 119.5 -.5 basis point.

• China Sovereign CDS 48.25 -4.0 basis points.

• Bloomberg Emerging Markets Currency Index 58.30 -.06%.

• FTSE 100 futures -.81%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ALXN)/2.71

• (GOLD)/.16

• (BWA)/.49

• (BG)/.67

• (CCL)/-1.66

• (CVS)/1.63

• (DISCA)/.84

• (FLIR)/.42

• (GM)/.34

• (PZZA)/.35

• (RGEN)/.22

• (SMG)/3.58

• (SHOP)/-.17

• (VMC)/.43

• (WEN)/.09

• (WING)/.24

• (ZTS)/.87

After the Close:

• (DDD)/-.06

• (ALB)/.84

• (AMED)/.97

• (APA)/-.33

• (AVB)/2.41

• (CVNA)/-.65

• (CF)/.26

• (FTNT)/.50

• (FOXA)/.70

• (GRUB)/-.03

• (H)/-.18

• (IAC)/.81

• (LYFT)/-.63

• (CLI)/.36

• (MRO)/-.15

• (MET)/1.44

• (PYPL)/.75

• (PTON)/-.15

• (PXD)/.97

• (QDEL)/.96

• (RMAX)/.39

• (RCII)/.57

• (RNG)/.18

• (RGLD)/.67

• (SAVE)/-.62

• (SQ)/.13

• (TWLO)/-.11 

• (WYNN)/-1.69

Economic Releases
8:15 am EST

• The ADP Employment Change report for April is estimated at -21000K versus -27K in March.
  

10:30 am EST:

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +8,666,670 barrels versus a +8,991,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +495,640 barrels versus a -3,669,000 barrel decline the prior week. Distillate inventories are estimated to rise by +2,880,550 barrels versus a +5,092,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.57% versus a +2.0% gain prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Services PMI report, weekly MBA Mortgage Applications report, DA Davidson Financial Institutions Conference, (STM) capital markets day and the (COST) April sales results could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by tech and industrial 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 Surging into Final Hour on Economy Re-Opening Hopes, Oil Gain, Less European/Emerging Markets/US High-Yield Debt Angst, Tech/Medical Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 32.5 -9.7%

• Euro/Yen Carry Return Index 119.83 -.7%

• Emerging Markets Currency Volatility(VXY) 11.91 -.58%

• S&P 500 Implied Correlation 72.1 -2.7%

• ISE Sentiment Index 81.0 +4.0 points

• Total Put/Call .90 -6.3%

• NYSE Arms 1.50 +37.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 88.60 -2.26%
  

• US Energy High-Yield OAS 1,313.05 -2.94%

• European Financial Sector CDS Index 104.22 -3.88%

• Italian/German 10Y Yld Spread 244.5 +11.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 119.36 -.02%
  

• Emerging Market CDS Index 335.33 -3.27%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.61 +.04%

• 2-Year Swap Spread 12.75 -.25 basis point

• TED Spread 43.25 -1.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 1.25 -2.75 basis points
• MBS  5/10 Treasury Spread  109.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.38 +.25%
• 3-Month T-Bill Yield .10%+1.0 basis point

• Yield Curve 44.0 unch.

• China Iron Ore Spot 80.65 USD/Metric Tonne +.19%

• Citi US Economic Surprise Index -130.80 +9.7 points

• Citi Eurozone Economic Surprise Index -264.20 +3.2 points

• Citi Emerging Markets Economic Surprise Index 11.20 +1.3 points

• 10-Year TIPS Spread 1.10 +2.0 basis points
• 99.3% chance of no change at July 29th meeting, 99.3% chance of no change at Sept. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +96 open in Japan 
• China A50 Futures: Indicating -453 open in China

• DAX Futures: Indicating -17 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value +1.1%

Sector Underperformers:

• 1) Coal -5.2% 2) Shipping -1.8% 3) Airlines -1.0%

Stocks Falling on Unusual Volume: 

• GNMK, CATM, BA, INSM, MCY, CHEF, PFGC, SYY, SPR, MDC, SHAK, MLM, XYL, USFD, DLB, ALXN, PRIM, TDG, UNM, CCL, RCL, HRI, INSW, LEG, DSSI, CODI, FLGT, BHLB, ITRI, WRK and NCLH

Stocks With Unusual Put Option Activity:

• 1) STWD 2) NYT 3) W 4) FXI 5) SHAK

Stocks With Most Negative News Mentions:

• 1) FNKO 2) LUV 3) ARNC 4) ATUS 5) AAL

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +2.7%

Sector Outperformers:

• 1) Disk Drives +4.2% 2) Medical +3.2% 3) Healthcare +2.8%

Stocks Rising on Unusual Volume:

• PTLA, CHGG, ADVM, AKBA, TGTX, W, EVER, IPGP, RMBS, CEQP, HTGC, ETSY, OSTK, VRNS, TWOU, TREX, LMNX, CALX, PTON, SWKS and CHWY

Stocks With Unusual Call Option Activity:

• 1) CHGG 2) MVIS 3) TGTX 4) STWD 5) WEN

Stocks With Most Positive News Mentions:

• 1) HOG 2) CHGG 3) W 4) IPGP 5) AKBA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +21.9% Above 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 78.9% of Issues Advancing, 19.4% Declining
• 15 New 52-Week Highs, 2 New Lows
• 10.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.2%
• Vix 32.6 -9.4%
• Total Put/Call .88 -8.3%
• TRIN/Arms 1.33 +22.0%