Stocks Reversing Lower into Final Hour on Global Recession Fears, Coronavirus 2nd Wave Concerns, Technical Selling, Energy/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 26.3 -4.5%

• Euro/Yen Carry Return Index 126.65 -.02%

• Emerging Markets Currency Volatility(VXY) 9.65 +1.15%

• S&P 500 Implied Correlation 57.25 -7.6%

• ISE Sentiment Index 86.0 -62.0 points

• Total Put/Call .69 unch.

• NYSE Arms 1.69 -36.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 71.85 +1.24%
  

• US Energy High-Yield OAS 894.30 +1.29%

• European Financial Sector CDS Index 77.63 +2.68%

• Italian/German 10Y Yld Spread 188.25 +7.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 84.52 +2.08%
  

• Emerging Market CDS Index 235.59 +.25%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.16 -.22%

• 2-Year Swap Spread 8.5 -.25 basis point

• TED Spread 14.5 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.5 unch.
• MBS  5/10 Treasury Spread  106.0 -1.0 basis point
• IHS Markit CMBX BBB- 6 74.25 -1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 62.01 +.35%
• 3-Month T-Bill Yield .17% +1.0 basis point

• Yield Curve 57.75 -4.75 basis points

• China Iron Ore Spot 100.41 USD/Metric Tonne -.08%

• Citi US Economic Surprise Index 65.10 -4.5 points

• Citi Eurozone Economic Surprise Index -213.20 -1.0 point

• Citi Emerging Markets Economic Surprise Index 40.5 -1.0 point

• 10-Year TIPS Spread 1.27 +1.0 basis point
• 85.9% chance of no change at Sept. 16 meeting, 86.2% chance of no change at Nov. 5th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -285 open in Japan 
• China A50 Futures: Indicating -122 open in China

• DAX Futures: Indicating +25 open in Germany

Portfolio:

• Higher: On gains in my biotech/tech 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 -3.0%

Sector Underperformers:

• 1) Coal -9.1% 2) Airlines -8.1% 3) Oil Service -5.7%

Stocks Falling on Unusual Volume: 

• GRUB, SWBI, SPG, GIII, SRG, SPR, NLTX, ERI, FITB, ENPH, MGM, RQI, BA, REAL, AAL, WFC, PLAY, DAL, DENN, SONO, CUK, AYI, RUTH, MAC, PK, UAL, AKCA, CSII, ALK, WOR, JBLU, VRNT, NCLH, NKLA, SAVE, TGI, GCO, GES, EB, UNFI and TCO

Stocks With Unusual Put Option Activity:

• 1) MTDR 2) KBE 3) JBLU 4) FIVE 5) SCHW

Stocks With Most Negative News Mentions:

• 1) GES 2) JBLU 3) UAL 4) VRS  5) BA

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.5%

Sector Outperformers:

• 1) Software +1.9% 2) Video Gaming +1.6% 3) Pharma +.7%

Stocks Rising on Unusual Volume:

• CCH, FIVE, TDC, FEAC and LVGO

Stocks With Unusual Call Option Activity:

• 1) FIVE 2) DFS 3) CNP 4) WATT 5) HCA

Stocks With Most Positive News Mentions:

• 1) FIVE 2) TRUE 3) DAKT 4) ABBV 5) VRTX

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +30.0% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 22.3% of Issues Advancing, 75.6% Declining
• 26 New 52-Week Highs, 0 New Lows
• 32.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 60.7%
• Vix 27.1 -1.6%
• Total Put/Call .74 +7.3%
• TRIN/Arms 2.42 -8.3%

Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 84.25 +3.0 basis points.

• China Sovereign CDS 48.75 +3.75 points.

• Bloomberg Emerging Markets Currency Index 61.82 +.05%.
• FTSE 100 futures +.29%

• S&P 500 futures +.41%.

• NASDAQ 100 futures +.38%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (CHS)/-.12
• (GES)/-.91
• (RRGB)/-1.55
• (UNFI)/1.41

After the Close:

• (OXM)/-.10

Economic Releases 
8:30 am EST

• The CPI MoM for May is estimated unch. versus a -.8% decline in April.
• The CPI Ex Food and Energy MoM for May is estimated unch. versus a -.4% decline in April.
• Real Avg. Weekly Earnings YoY for May.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,012,830 barrels versus a -2,077,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -318,730 barrels versus a +2,795,000 barrel gain the prior week. Distillate inventories are estimated to rise by +3,408,640 barrels versus a +9,934,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.43% versus a +.5% gain prior.
  

2:00 pm EST

• The Monthly Budget Statement for May is estimated at -$585.0B versus -$207.8B in April.
• The FOMC is expected to leave the benchmark Fed Funds rate at 0.0-.25%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Mexican Industrial Production report, weekly MBA Mortgage Applications report and the Deutsche Bank Auto Industry Conference could also impact trading today.

Market Hours

Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer 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 Lower into Final Hour on Global Recession Fears, European/Emerging Markets/US High-Yld Debt Angst, Technical Selling, Energy/Airline Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 26.8 +3.8%

• Euro/Yen Carry Return Index 126.68 -.25%

• Emerging Markets Currency Volatility(VXY) 9.56 +1.27%

• S&P 500 Implied Correlation 60.05 +4.25%

• ISE Sentiment Index 148.0 +18.0 points

• Total Put/Call .66 +10.0%

• NYSE Arms 2.22 +384.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.74 +6.73%
  

• US Energy High-Yield OAS 878.27 +1.15%

• European Financial Sector CDS Index 75.60 +8.67%

• Italian/German 10Y Yld Spread 181.0 +8.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 83.76 +2.42%
  

• Emerging Market CDS Index 235.06 +4.94%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.52 +.19%

• 2-Year Swap Spread 8.75 +1.0 basis point

• TED Spread 15.25 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.5 -.5 basis point
• MBS  5/10 Treasury Spread  107.0 -1.0 basis point
• IHS Markit CMBX BBB- 6 75.25 +3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 61.81 -.30%
• 3-Month T-Bill Yield .16% unch.

• Yield Curve 62.25 -3.75 basis points

• China Iron Ore Spot 100.75 USD/Metric Tonne -.32%

• Citi US Economic Surprise Index 69.60 -.1 point

• Citi Eurozone Economic Surprise Index -214.20 -.4 point

• Citi Emerging Markets Economic Surprise Index 41.5 -.2 point

• 10-Year TIPS Spread 1.26 -1.0 basis point
• 85.0% chance of no change at July 29th meeting, 85.9% chance of no change at Sept. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -206 open in Japan 
• China A50 Futures: Indicating -138 open in China

• DAX Futures: Indicating +14 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long