Stocks Reversing Lower into Final Hour on Coronavirus Fears, Biden Presidency Worries, Rising China Tensions, Energy/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 29.9 +6.4%

• Euro/Yen Carry Return Index 125.60 -.34%

• Emerging Markets Currency Volatility(VXY) 9.98 +.5%

• S&P 500 Implied Correlation 61.93 +2.06%

• ISE Sentiment Index 133.0 +9.0 points

• Total Put/Call .75 -1.32%

• NYSE Arms 1.09 +1.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 74.87 +2.62%
  

• US Energy High-Yield OAS 974.15.0 +.79%

• European Financial Sector CDS Index 75.47 +3.95%

• Italian/German 10Y Yld Spread 165.75 +1.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index  79.34 -1.47%
  

• Emerging Market CDS Index 193.66 +4.75%
  

• iBoxx Offshore RMB China Corporate High Yield Index 173.74 +.86%

• 2-Year Swap Spread 6.25 -.5 basis point

• TED Spread 13.75 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -8.75 unch.
• MBS  5/10 Treasury Spread  95.0 -4.0 basis points
• IHS Markit CMBX BBB- 6 69.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.71 +.05%
• 3-Month T-Bill Yield .13% -1.0 basis point

• Yield Curve 49.75 +1.25 basis points

• China Iron Ore Spot 102.90 USD/Metric Tonne -.25%

• Citi US Economic Surprise Index 224.1 +2.1 points

• Citi Eurozone Economic Surprise Index -49.70 -1.8 points

• Citi Emerging Markets Economic Surprise Index -18.50 +1.3 points

• 10-Year TIPS Spread 1.38 -2.0 basis points
• 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 -109 open in Japan 
• China A50 Futures: Indicating -160 open in China

• DAX Futures: Indicating +39 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech/medical sector longs and index hedges

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -2.4%

Sector Underperformers:

• 1) Oil Service -4.0% 2) Airlines -3.7% 3) Banks -3.5%

Stocks Falling on Unusual Volume: 

• CI, SHLX, AUB, BKE, HR, VSLR, CHNG, PRO, TBIO, KMI, NOC, ALL, WYNN, EXPE, MAIN, GRPN, ULTA, VLO, CUK, WKHS, EFX, TRU, RUN, WSC, LRN, MSM, CUB, GM, PPL, OLN, MTEM, ELF, PSX, AIMT, DLX, HQY, NMIH, SWAV, KSS, LYFT, SPG, AMBC, ODP, HES, WBA, AZZ and MHK

Stocks With Unusual Put Option Activity:

• 1) SPWR 2) XHB 3) WBA 4) BBBY 5)  OIH

Stocks With Most Negative News Mentions:

• 1) IDXX 2) PLUG 3) MHK 4) UAL  5) STT

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth -.1%

Sector Outperformers:

• 1) Social Media +1.3% 2) Semis +1.2% 3) Video Gaming +1.0%

Stocks Rising on Unusual Volume:

• ALT, VERI, SPAQ, GRAF, UPWK, SPCE, ROKU, LVGO, PI, PTC, LCA and RCKT

Stocks With Unusual Call Option Activity:

• 1) GLUU 2) ELF 3) MGI 4) ERX 5) TUP

Stocks With Most Positive News Mentions:

• 1) ALT 2) CDXC 3) NVDA 4) COST 5) DOCU

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -5.6% Below 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 16.8% of Issues Advancing, 81.1% Declining
• 70 New 52-Week Highs, 10 New Lows
• 25.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.1%
• Vix 30.5 +8.6%
• Total Put/Call .60 -21.0%
• TRIN/Arms 1.01 +9.8%

Thursday Watch

Evening Headlines

Bloomberg:    

• ‘There’s No Way I Can Lose’: Inside China’s Stock-Market Frenzy.

•  The U.S.-China Rivalry Is Broadening From Trade to Everything.

• Asian Stocks Look Set for Gains; Dollar Slides: Markets Wrap. Asian stocks saw a muted open on Thursday as investors mulled continued U.S. equity gains amid simmering tensions between Washington and Beijing. The dollar extended its decline. Shares saw modest gains in Sydney and Seoul, and dipped in Tokyo. Futures on the S&P 500 Index ticked higher after the gauge climbed to a one-month high on Wednesday, when advances in high-flying megacaps like Apple Inc. and Amazon.com Inc. sent the Nasdaq Composite to a record. Gold held above $1,800 an ounce. The offshore yuan rose above 7 per dollar, while Treasuries were steady. Futures on the S&P 500 Index added 0.1% as of 9:13 a.m. in Tokyo. The gauge rose 0.8% on Wednesday. Japan’s Topix index dipped 0.1%. South Korea’s Kospi index gained 0.6%. Australia’s S&P/ASX 200 Index rose 0.7%.

• U.K. Survival Blueprint, Trade Cost, India Virus Battle: Eco Day.

• U.S. Cases Top 3 Million; Tokyo to Support Bars: Virus Update.

• Biden to Map Economic Path Delaying Progressives’ Biggest Plans.

• Fed’s Bostic Says Softening U.S. Data May Call for More Action.  

• Ghislaine Maxwell Taps Broad Range of Legal Talent for Defense.  

• NYC Rental Market Pushed to Breaking Point by Tenant Debts.

• Hedge Funds Lost a Record 7.9% in Pandemic-Plagued First Half.  

• Health Insurers Could Post Record Profit as Patients Stay Home.

Wall Street Journal:

• TikTok, Once an Oasis of Inoffensive Fun, Ventures Warily Into Politics.

• As Chinese Trade Surpluses Persist, So Will Risk of Trade Wars.

• Bonfire of the Liberals.

• Ivy League Says No Sports Until 2021.

• United Explores 45% Cut to U.S. Staff as Travel Slumps.

• Gold ETF Inflows Hit Record as Bullion Rally Continues.

Fox News:

• City of Seattle instructed White employees to forgo jobs, promotions, safety in interest of racial justice.

• Shapiro says NFLer's anti-Semitism shows hypocrisy of 'cancel culture' mob.

CNBC.com:

• Taylor Morrison CEO: Home sales are ‘strongest’ in Texas, Arizona and other coronavirus hot spots.

• Stocks making the biggest moves after hours: Bed Bath & Beyond, NIO, Costco and more.

• Amazon pulls Washington Redskins merchandise amid calls for the team to change its name.

• Coronavirus cases surge among younger Californians.

MarketWatch.com: 

• Why gold has become a ‘weapon of choice’ for investors.

• Bed Bath & Beyond to close 200 stores, stock falls on wider-than-expected loss.

• Nvidia surpasses Intel as largest U.S. chip maker by market cap.

Zero Hedge:     

• California, Texas, Arizona Shatter COVID-19 Records As Global Case Total Nears 12 Million: Live Updates.

• Biden Embraces 'Green New Deal' In Newly Released "Biden-Sanders" Policy Platform.

• Cancel Culture Targets Broadway Hit 'Hamilton' As Racial Politics Grow More Uncompromising.

• Google Abandons Another Shady China Venture.

• In An Insane World, Madness Looks Moderate And Sanity Looks Radical.

• CENTCOM Chief Is Latest To Deny NY Times Russian Bounties "Bombshell".

• US Budget Deficit Hits A Record $863 Billion In June, A 100X Increase.

• Retail Apocalypse Accelerates - 8,700 Stores Closing, Number Set To Rise.

• Plunge In Consumer Credit Continues As Americans Repay Record Amounts Of Credit Card Debt.

• Bullion, Bitcoin, & Big-Tech Bid As Dollar Dumped.

The Epoch Times:

• Internal Documents Expose the True Intentions Behind China’s Virus Mobile App System.

• Beijing Proposes Youth Work in Countryside to Ease China’s Unemployment Crisis.

Digital Blackboard:

• Daily New Cases by Region.

Worldometer:

• New Cases/Deaths by state.

Rt Covid-19:

• How fast virus is growing by state.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 79.75 -1.0 basis point.

• China Sovereign CDS 45.0 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 60.70 +.04%.

• FTSE 100 futures +.57%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures +.08%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AZZ)/.47

• (HELE)/1.49

• (WBA)/1.23

After the Close:

• (PSMT)/.22

• (WDFC)/.95

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 1375K versus 1427K the prior week.

• Continuing Claims are estimated to fall to 18750K versus 19290K prior. 
  

10:00 am EST

• Wholesale Trade Sales MoM for May is estimated to rise +4.5% versus a -16.9% decline in April.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan PPI report, weekly Bloomberg Consumer Comfort Index, $19B 30Y T-Bond auction and the weekly EIA natural gas inventory report 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 Higher into Final Hour on Global Stimulus Hopes, Oil Gain, Short-Covering, Tech/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 29.3 -.3%

• Euro/Yen Carry Return Index 126.06 +.26%

• Emerging Markets Currency Volatility(VXY) 9.98 +.4%

• S&P 500 Implied Correlation 63.82 -.87%

• ISE Sentiment Index 124.0 +4.0 points

• Total Put/Call .77 -6.1%

• NYSE Arms .64 -32.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 72.33 +.16%
  

• US Energy High-Yield OAS 1,092.0 -.06%

• European Financial Sector CDS Index 72.60 +.61%

• Italian/German 10Y Yld Spread 164.25 +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 80.46 +.96%
  

• Emerging Market CDS Index 187.0 +2.12%
  

• iBoxx Offshore RMB China Corporate High Yield Index 172.26 +.02%

• 2-Year Swap Spread 6.75 +1.25 basis points

• TED Spread 12.75 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -8.75 +1.75 basis points
• MBS  5/10 Treasury Spread  99.0 -1.0 basis point
• IHS Markit CMBX BBB- 6 69.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.65 +.34%
• 3-Month T-Bill Yield .14% unch.

• Yield Curve 48.5 -3.25 basis points

• China Iron Ore Spot 103.33 USD/Metric Tonne +.60%

• Citi US Economic Surprise Index 222.0 +.7 point

• Citi Eurozone Economic Surprise Index -47.90 +2.9 points

• Citi Emerging Markets Economic Surprise Index -19.80 +4.6 points

• 10-Year TIPS Spread 1.40 -2.0 basis points
• 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 +7 open in Japan 
• China A50 Futures: Indicating +28 open in China

• DAX Futures: Indicating +23 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long