Wednesday Watch

Evening Headlines

Bloomberg:                

• China’s Disinformation Campaign Targets Virus, Researcher Says.

• U.K. Lockdown Sent Retail Sales Plunging Almost 20% in April.  

• South Korea Sees Second Month of Job Losses Amid Virus.

• Japanese Banks Set to Face Highest Bad-Loan Costs Since Crisis.

• Indian Companies Are Getting Downgraded Like Never Before.  

• Workers at Latin America’s Biggest Port Are Starting to Fall Ill.

• RBA Owns Nearly 7% of Australian Government Bond Market.

• World’s Biggest Wealth Fund Faces Record $37 Billion Withdrawal.

• Asia Stocks to Open Lower; U.S. Futures Retreat: Markets Wrap. The risk-off sentiment that’s crept back into global markets took hold further on Wednesday as Asian stocks opened lower with U.S. equity futures following warnings on the fragility of the economic recovery. Treasuries held on to gains. S&P 500 futures fell about 0.8%. The benchmark U.S. equities gauge earlier closed down about 2% after downbeat comments from regional Federal Reserve chiefs and as Anthony Fauci, the nation’s top infectious disease official, said states reopening too quickly could set back the recovery process. Losses in Asia in early trading were more modest than in the Wall Street session, as Japanese shares fell along with those in Sydney and Seoul. The yen retained its overnight advance. Futures on the S&P 500 fell 0.8% as of 9:01 a.m. in Tokyo. The gauge decreased 2.1%. Japan’s Topix index fell 0.9%. South Korea’s Kospi dropped 1.3%. Australia’s S&P/ASX 200 Index slipped 0.3%.

• Oil Eases on Weak Demand Outlook as U.S. Debates Lockdown Exit.

• U.S. Cases Increase 1.4%; Fauci Warns on Reopening: Virus Update.

• Druckenmiller Says Risk-Reward in Stocks Is Worst He’s Seen.

• Apple Plans to Return More Staff to Offices in Break From Rivals.

• Virus Survivors Could Suffer Severe Health Effects for Years.  

• Fed’s Powell to Address Dire Outlook, Need for Stronger Support.  

• NJ Transit Seeking $1.2 Billion as Train Ridership Falls to Near Zero.

Wall Street Journal:

• China Stalls Global Hunt for Origins of Virus in Wuhan.

• Fauci, Other Health Officials Emphasize Testing Before Easing Lockdowns.

• South Korea’s Coronavirus Efforts Spark LGBT Privacy Concerns.

• All the Adam Schiff Transcripts.

• Coronavirus Could Force Colleges to Trim Some Fat.

• Big Advertisers Set to Cancel Commitments to TV Networks.

• House Races in California and Nebraska Test Mail-in Voting.

• U.S. Budget Deficit Widened to $1.935 Trillion in 12 Months Through April.

• Justice Department Will Assess Flynn’s ‘Unmasking’.

 Fox News:

• Some illegal immigrants would get stimulus checks under new $3T coronavirus relief bill in House.

CNBC.com:

• Dow drops more than 400 points, Nasdaq snaps 6-day winning streak on reopening jitters.

• Cramer’s lightning round: Dow Inc is ‘not doing well’.

• JC Penney in talks for $450 million loan as it eyes Friday bankruptcy filing.

• House Dems unveil $3 trillion coronavirus relief bill.

• Coronavirus live updates: Fauci delivers somber warnings, California sets new rules for reopening restaurants.

• Uber makes takeover offer for GrubHub, but both sides remain at odds on price.

• Tock raises $10 million to help fancy restaurants do takeout.

• We’re in the second inning of coronavirus epidemic and will face ‘different threat’ in the fall.

• Moderna CEO says no single drugmaker can produce enough coronavirus vaccine doses for the planet.

• Gilead strikes deal to make remdesivir coronavirus treatment in 127 countries.

MarketWatch.com:            

• Why the Dow’s drop was scarier than it looked.  

• Airline stocks take a hit after Boeing CEO warns of possible industry bankruptcy.

Zero Hedge:

• China: Coexistence Or Cold War II?

• In Unprecedented Move, Two Fund Giants Liquidate CLO Warehouses.

• Is This A Bear Market Rally Or A New Bull? BofA Has The Answer... And What Happens Next.

• Seattle Cop Prepares To Be Fired After Refusing To Remove Viral Video Reminding Officers Not To Obey 'Tyrannical Orders'.

• LA County Will "With All Certainty" Extend 'Stay At Home Order' For 3 Months: Live Updates.

• YouTube CEO Admits Users Don't Like Boosting Of "Authoritative" Mainstream Channels, But They Do It Anyway.

• WTI Holds Big Gains Despite Bigger-Than-Expected Crude Build.

• You're Being Conditioned To Live In A "Smart City" – Resist It!

• The Stealth Trump Voter: The President's Secret Weapon?

• "The Financial System Will Have To Be Reset": How The World's Most Powerful And Influential People See The World After The Pandemic.

• Billionaire VC Warns Fed Stimulus Risks Triggering "Deflationary Supercycle" That Could Crush Main Street.

• Bitcoin, Bonds, & Bullion Bid As LA's Extended-Lockdown Slams Stocks.

The Epoch Times:

• Trump ‘Not Interested’ in Reopening Trade Talks With China.

• Harassment of China Human Rights Defenders in Canada Ramping Up: Report.

• US Move to Block Spy Planes From UK Over Huawei Plans Could Be ‘Warning Shot’ to Other Countries: Defence Expert.

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 -1.75% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 118.0 +1.0 basis point.

• China Sovereign CDS 50.25 +1.25 basis points.

• Bloomberg Emerging Markets Currency Index 58.14 -.04%.

• FTSE 100 futures -2.0%.

• S&P 500 futures -.9%.

• NASDAQ 100 futures -.8%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (CYBR)/.37

• (DDS)/-.97

• (TSEM)/.19

• (TGI)/.59

After the Close:

• (CSCO)/.71

• (FLO)/.33

• (JACK)/.70

• (OII)/-.19

• (SDC)/-.18

• (STE)/1.58

• (VRTU)/.56

Economic Releases
8:30 am EST

• The PPI Final Demand MoM for April is estimated to fall -.5% versus a -.2% decline in March.

• PPI Ex Food and Energy MoM for April is estimated to fall -.1% versus a +.2% gain in March.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +4,320,090 barrels versus a +4,590,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -2,809,180 barrels versus a -3,158,000 barrel decline the prior week. Distillate inventories are estimated to rise by +3,679,550 barrels versus a +9,518,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.61% versus a +.9% gain prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, UK GDP report, Australia Unemployment Rate report, weekly MBA Mortgage Applications report, Goldman Sachs Industrials and Materials Conference, (RCII) investor call and the (AVY) analyst meeting could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are lower, weighed down by transportation and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Escalating China Tensions, Global Recession Fears, Ongoing Coronavirus Worries, Transport/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 28.4 +2.9%

• Euro/Yen Carry Return Index 120.74 +.07%

• Emerging Markets Currency Volatility(VXY) 11.5 -1.3%

• S&P 500 Implied Correlation 66.1 +2.16%

• ISE Sentiment Index 90.0 -7.0 points

• Total Put/Call .82 -3.5%

• NYSE Arms .98 -44.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 91.16 -1.33%
  

• US Energy High-Yield OAS 1,254.80 -.37%

• European Financial Sector CDS Index 102.02 -1.33%

• Italian/German 10Y Yld Spread 239.50 +.5 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 116.34 -.84%
  

• Emerging Market CDS Index 322.37 -1.95%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.47 +.20%

• 2-Year Swap Spread 8.75 +.25 basis point

• TED Spread 33.25 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.0 -1.75 basis points
• MBS  5/10 Treasury Spread  114.0 +6.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.25 +.15%
• 3-Month T-Bill Yield .11% unch.

• Yield Curve 52.25 -1.25 basis points

• China Iron Ore Spot 88.0 USD/Metric Tonne +2.87%

• Citi US Economic Surprise Index -60.80 -6.5 points

• Citi Eurozone Economic Surprise Index -303.70 +.9 point

• Citi Emerging Markets Economic Surprise Index -2.0 -16.0 points

• 10-Year TIPS Spread 1.09 -4.0 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 +19 open in Japan 
• China A50 Futures: Indicating -58 open in China

• DAX Futures: Indicating -61 open in Germany

Portfolio:

• Higher: On gains in my tech/biotech/consumer staple sector longs and index hedges

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -2.1%

Sector Underperformers:

• 1) REITs -3.4% 2) Airlines -3.2% 3) I-Banking -2.6%

Stocks Falling on Unusual Volume: 

• TTC, MRNA, PRA, AWI, AMPH, PAR, NCLH, KNL, CAR, UAL, FSCT, KAMN, BXP, NSA, AVLR, BHLB, PLAY, CHEF, PING, PEN, VIVO, RL, TCO, FCPT, WELL, JCOM, AKBA, STMP, HHC, OMER, BCSF, QDEL, BLK, PLNT, FLOW, ZG, Z, SLG, BLMN, HCSG, MAXR, DIOD, AFG, OUT, ROAD, ZYXI, CMD, AMN, AMBC, KOP and CVLT

Stocks With Unusual Put Option Activity:

• 1) EWC 2) APO 3) SFIX 4) XHB 5) HES

Stocks With Most Negative News Mentions:

• 1) CHK 2) AMN 3) UAA 4) QDEL 5) ALB

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth -.2%

Sector Outperformers:

• 1) Gold & Silver +1.6% 2) Video Gaming +1.1% 3) Biotech +1.1%

Stocks Rising on Unusual Volume:

• NVAX, GRUB, CDLX, IIVI, ERI, VTIQ, DDOG, UPWK, MYOK, OSTK, DKNG, MDGL, FSLY, MGNX, PTON, CLVS, PRPL, ONEM, BYND, UBER, CYRX, CTMX, SGRY and ACMR

Stocks With Unusual Call Option Activity:

• 1) TCO 2) SABR 3) MARK 4) EGHT 5) LITE

Stocks With Most Positive News Mentions:

• 1) PRPL 2) NOVT 3) CBAY 4) IIVI 5) DDOG

Charts:

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