Stocks Falling Substantially into Final Hour on Coronavirus 2nd Wave Fears, Rising Biden Presidency Odds, Global Recession Worries, Financial/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 34.4 +6.8%

• Euro/Yen Carry Return Index 124.83 +.09%

• Emerging Markets Currency Volatility(VXY) 10.7 +1.32%

• S&P 500 Implied Correlation 69.3 +7.4%

• ISE Sentiment Index 92.0 -32.0 points

• Total Put/Call .99 +11.2%

• NYSE Arms 1.02 +88.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 80.82 +3.5%
  

• US Energy High-Yield OAS 967.33 +1.54%

• European Financial Sector CDS Index 85.15 +4.4%

• Italian/German 10Y Yld Spread 177.5 +.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 87.34 +.64%
  

• Emerging Market CDS Index 204.47 -.94%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.26 -.19%

• 2-Year Swap Spread 7.0 +.25 basis point

• TED Spread 17.0 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -9.0 +1.0 basis point
• MBS  5/10 Treasury Spread  111.0 -2.0 basis points
• IHS Markit CMBX BBB- 6 68.25 -2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.21 -.43%
• 3-Month T-Bill Yield .14% unch.

• Yield Curve 49.25 +1.25 basis points

• China Iron Ore Spot 99.65 USD/Metric Tonne -1.24%

• Citi US Economic Surprise Index 162.10 -6.1 points

• Citi Eurozone Economic Surprise Index -81.80 +3.7 points

• Citi Emerging Markets Economic Surprise Index -18.3 -2.0 points

• 10-Year TIPS Spread 1.32 unch.
• 100.0% chance of no change at Sept. 16 meeting, 100.0% chance of no change at Nov. 5th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -217 open in Japan 
• China A50 Futures: Indicating -291 open in China

• DAX Futures: Indicating -41 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 25% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running -17.6% Below 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 23.8% of Issues Advancing, 73.6% Declining
• 18 New 52-Week Highs, 5 New Lows
• 21.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.4%
• Vix 33.3 +3.2%
• Total Put/Call .89%
• TRIN/Arms 172 +218.5%

Friday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 86.5 +1.25 basis points.

• China Sovereign CDS 50.25 -1.75 basis points.

• Bloomberg Emerging Markets Currency Index 60.48 -.01%.
• FTSE 100 futures +.85%.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.16%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (APOG)/.19

After the Close:

• (FIZZ)/.60

Economic Releases 
8:30 am EST

• Personal Income for May is estimated to fall -6.0% versus a +10.5% gain in April.
• Personal Spending for May is estimated to rise +9.0% versus a -13.6% decline in April.
• The PCE Core MoM for May is estimated unch. versus a -.5% decline in April.
  

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for June is estimated to rise to 79.2 versus 78.9 in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Mexico trade balance report could also impact trading today.

Market Hours

Normal:

• 9:30 am - 4:00 pm EST
  

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

Stocks Modestly Higher into Afternoon on Volcker Rule Change, Oil Gain, Short-Covering, Financial/Energy Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 33.5 -.9%

• Euro/Yen Carry Return Index 124.80 -.1%

• Emerging Markets Currency Volatility(VXY) 10.5 unch.

• S&P 500 Implied Correlation 68.3 -2.6%

• ISE Sentiment Index 125.0 -20.0 points

• Total Put/Call .85 -13.3%

• NYSE Arms .75 -65.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 79.01 +1.22%
  

• US Energy High-Yield OAS 948.40 +1.07%

• European Financial Sector CDS Index 81.73 +2.59%

• Italian/German 10Y Yld Spread 177.25 +6.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 87.1 +2.13%
  

• Emerging Market CDS Index 201.82 -3.58%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.59 +.02%

• 2-Year Swap Spread 6.75+.5 basis point

• TED Spread 16.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 +1.5 basis points
• MBS  5/10 Treasury Spread  113.0 -1.0 basis point
• IHS Markit CMBX BBB- 6 70.75 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.43 +.01%
• 3-Month T-Bill Yield .14% unch.

• Yield Curve 48.0 -1.0 basis point

• China Iron Ore Spot 100.65 USD/Metric Tonne -.5%

• Citi US Economic Surprise Index 168.20 +11.1 points

• Citi Eurozone Economic Surprise Index -85.50 +2.0 points

• Citi Emerging Markets Economic Surprise Index -16.3 -2.9 points

• 10-Year TIPS Spread 1.32 unch.
• 100.0% chance of no change at Sept. 16 meeting, 100.0% chance of no change at Nov. 5th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +129 open in Japan 
• China A50 Futures: Indicating -143 open in China

• DAX Futures: Indicating +49 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long