Wednesday Watch

Evening Headlines

Bloomberg:                

• Millions of Newly Jobless in China Pose a Looming Threat to Xi.  

• Kudlow Says Nobody Can Confidently Invest in Chinese Companies. 

• Republicans Demand Testimony of WHO Director, Chinese Ambassador.

• Trump Considers Brazil Travel Ban in Latest Sign of Virus Woes.  

• South Korea Starts Reopening Schools After Virus Spread Slows.

• Australia Goes Back to the 1980s With Its Economy Closed to World.

• Stocks in Asia to Slip After Vaccine Study Doubts: Markets Wrap. Stocks in Asia looked poised to track their U.S. peers lower after reports circulated that Moderna Inc.’s vaccine study, which was credited in part for Monday’s rally, didn’t produce enough critical data to assess its success. Treasuries gained. Futures dropped in Japan, Hong Kong and Australia. Contracts on the S&P 500 edged higher after the U.S. gauge lost ground in the final hour of trading to end about 1% lower. Riskier assets had started the week on the front foot after the Moderna news fueled hopes for a coronavirus vaccine, but investors are struggling to maintain the optimism as they continue to monitor efforts to both contain the pandemic and restart economies. Crude oil slipped below $32 a barrel in New York, while the dollar edged lower. “We are being fairly cautious,” Shawn Matthews, founder and chief investment officer at Hondius Capital Management LP, said on Bloomberg TV. “If you look at the economy, it feels like it’s the summer of hope right now, where everyone is hoping it’s going to turn around.” Futures on the S&P 500 rose 0.2% as of 8:15 a.m. in Tokyo. The gauge fell 1.1% on Tuesday. Futures on Japan’s Nikkei 225 slid 0.9%. Hang Seng futures earlier retreated 0.2%. Futures on Australia’s S&P/ASX 200 Index declined 1.5%.

• Oil Rally Pauses on Caution Over Prospects for a Demand Rebound.  

• Neutral Powell, Closed Australia, G7’s $2.5 Trillion QE: Eco Day.

• NYC’s Progress Against Virus Misses State’s Goals and Its Own.

• Extreme Behavior Is on Display Everywhere in the Stock Market. Tiny investors are historically bullish. Last week, the smallest of options traders (those who trade 10 contracts or fewer at a time) positioned themselves to bet on a rally, buying bullish calls and selling bearish puts at a record pace, according to Sundial Capital Research. “When we look at a group of traders who tend to be wrong at emotional extremes, the warning sign is clear,” said Jason Goepfert, the president of Sundial. “There is no data we follow that is more worrying than this.”  

• New York MTA Buys UV-Light Devices to Kill Coronavirus.

• Eleven Hedge Fund Traders Scored Big During Worst of the Crisis.

Wall Street Journal:

• Landlords Fume as Starbucks, Other Chains Seek Extended Rent Cuts.

• Boy Scouts Set November Deadline for Sexual-Abuse Claims.

• Powell and Mnuchin Outline Contrasting Visions on Economy.

• Treasury Secretary Warren.

• China’s ‘Wolf Warrior’ Diplomats Are Ready to Fight.

 Fox News:

• Some states warn no full-scale reopening until these conditions met.

• US takes precautions as Beijing targets American spy planes, warships.

CNBC.com:

• Government predicts GDP will tumble by 38%, the greatest single drop in history.

• Coronavirus live updates: Gov. Newsom makes case for more federal aid; Trump says WHO must ‘clean up’ its act.

• Johnson & Johnson discontinues talc-based baby powder in US and Canada.

• FDA appears to soften stance on hydroxychloroquine after Trump says he takes malaria drug.

• Stocks making the biggest moves after hours: Urban Outfitters, Moderna, Johnson & Johnson and more.

• Vaccine experts say Moderna didn’t produce data critical to assessing Covid-19 vaccine.

MarketWatch.com:           

• Senate may vote on bill that could delist Chinese companies from U.S. stock exchanges.

Zero Hedge:

• Phone Calls Between Biden And Ukraine's Poroshenko Leaked; Details $1 Billion "Quid Pro Quo" To Fire Burisma Prosecutor.

• Stage Set For Intifada: PA's Abbas Ends All Agreements & Security Cooperation With Israel & US.

• The Shutdown May Soon Collapse In Pennsylvania Thanks To Local Resistance.

• "This Was Some Shady Stuff": Treasury Department Spied On Flynn, Manafort And Trump Family.

• "Creative Destruction Is Dead": Powell Has Spawned An Army Of Zombies.

• Gov Newsom Calls For $1 Trillion In Federal Aid For California As LA Drags Feet On Reopening: Live Updates.

• "They Were Way Too Late" - Amazon Skimped On Safety At PA Warehouse Where 1,000 Workers Fell Ill: NYT.

• "Toto, We Ain't In 'Flatten The Curve'-Land Anymore...".

• Declassified Rice Email Confirms Obama, Biden And Comey Targeted Flynn.

• WTI Extends Gains After Large Surprise Crude Draw.

• Trump Orders "Sweeping Emergency Deregulation Effort" To Loosen Restrictions On Telemedicine, Small Business.

• Silver Soars, Stocks Slammed After Vaccine Vicissitudes.

Business Insider:   

• Almost half of all Americans have been ordered to stay at home. This map shows which cities and states are under lockdown.

• Treasury Secretary Mnuchin said employees who turn down their old jobs can lose unemployment benefits under small business aid program.

• A month after Wuhan's 76-day lockdown ended, stores in the wedding industry are still struggling to stay open.

The Epoch Times:

• Beijing Enters ‘Wartime’ Preparations to Prevent Virus Spread Ahead of Key Political Meeting.

• China Angle: Has the Outbreak Woken Up the Europeans?

John Hopkins University:

• Coronavirus Global Cases. (map)

BNO News:

• Tracking Coronavirus: Map, data and timeline.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 112.25 -3.25 basis points.

• China Sovereign CDS 50.0 unch.

• Bloomberg Emerging Markets Currency Index 58.82 +.07%.

• FTSE 100 futures -.74%.

• S&P 500 futures +.23%.

• NASDAQ 100 futures +.26%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ADI)/1.06

• (EV)/.74

• (FRO)/.99

• (LOW)/1.33

• (MCK)/4.09

• (RCL)/-.55

• (TGT)/.430

• (VIPS)/.75

After the Close:

• (BOOT)/.26

• (CPRT)/.63

• (EXPE)/-1.29

• (LB)/-.69

• (SCVL)/-.97

• (SNPS)/.99

• (TTWO)/.89

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,808,500 barrels versus a -745,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -2,736,000 barrels versus a -3,513,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,711,640 barrels versus a +3,511,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +1.0% versus a -2.6% decline prior.

2:00 pm EST

• The April 29th FOMC Minutes.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bostic speaking, Fed's Bullard speaking, weekly MBA Mortgage Applications report, UK inflation Data report, Wells Fargo Virtual Financial Services Forum and the (OMI) investor day could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by transport and financial 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 Reversing Lower into Final Hour on Global Recession Fears, Escalating China Tensions, Diminished Coronavirus Vaccine Hopes, Energy/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 28.5 -2.7%

• Euro/Yen Carry Return Index 122.37 +.73%

• Emerging Markets Currency Volatility(VXY) 11.25 -1.7%

• S&P 500 Implied Correlation 61.2 -4.4%

• ISE Sentiment Index 175.0 +59.0 points

• Total Put/Call .68 -5.56%

• NYSE Arms 1.15 +59.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 87.98 -3.4%
  

• US Energy High-Yield OAS 1,135.52 -.17%

• European Financial Sector CDS Index 98.72 -3.85%

• Italian/German 10Y Yld Spread 210.0 -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 112.33 -4.01%
  

• Emerging Market CDS Index 318.68 -.81%
  

• iBoxx Offshore RMB China Corporate High Yield Index 165.08 +.18%

• 2-Year Swap Spread 8.5 -1.0 basis point

• TED Spread 27.0 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -10.75 -1.25 basis points
• MBS  5/10 Treasury Spread  105.0 -1.0 basis point
• IHS Markit CMBX BBB- 6 63.5 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.85 +.47%
• 3-Month T-Bill Yield .11% unch.

• Yield Curve 53.0 -1.0 basis point

• China Iron Ore Spot 94.61 USD/Metric Tonne +.31%

• Citi US Economic Surprise Index -94.20 +3.1 points

• Citi Eurozone Economic Surprise Index -292.20 +7.5 points

• Citi Emerging Markets Economic Surprise Index 2.9 -5.4 points

• 10-Year TIPS Spread 1.15 -1.0 basis point
• 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 +52 open in Japan 
• China A50 Futures: Indicating -82 open in China

• DAX Futures: Indicating -45 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech/industrial sector longs, index hedges and emerging market shorts

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.4%

Sector Underperformers:

• 1) Oil Service -1.8% 2) Banks -1.5% 3) Energy -.7%

Stocks Falling on Unusual Volume: 

• WST, SNDX, RP, HLI, FSCT, KSS, TPTX, MRNA, GOSS, CVNA, MODN, VIR and TCDA

Stocks With Unusual Put Option Activity:

• 1) TRGP 2) ECL 3) SRNE 4) WMT 5) FSCT

Stocks With Most Negative News Mentions:

• 1) KSS 2) PIR 3) MRO 4) XP 5) TXMD

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.8%

Sector Outperformers:

• 1) Gold & Silver +4.2% 2) Hombuilding +3.2% 3) Gaming +2.7%

Stocks Rising on Unusual Volume:

• DY, OSTK, VTIQ, FLXN, PENN, RRR, BYD, ERI, ARCT, TBIO, NVST, BYND, AAP, LUV, DOC, CRNC, AXNX and PINS

Stocks With Unusual Call Option Activity:

• 1) FSCT 2) BHC 3) AAP 4) TTWO 5) DVAX

Stocks With Most Positive News Mentions:

• 1) DY 2) WYND 3) AAP 4) EB 5) SE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +8.7% Above 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 56.2% of Issues Advancing, 41.2% Declining
• 18 New 52-Week Highs, 5 New Lows
• 15.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.0%
• Vix 28.8 -1.8%
• Total Put/Call .74 +2.78%
• TRIN/Arms 1.04 +46.5%