Stocks Higher into Final Hour on Vaccine Hopes, Better Economic Data, Short-Covering, Airline/Gaming Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 28.4 -3.8%

• Euro/Yen Carry Return Index 126.44 -.22%

• Emerging Markets Currency Volatility(VXY) 9.75 -.61%

• S&P 500 Implied Correlation 56.3 -1.7%

• ISE Sentiment Index 83.0 -22.0 points

• Total Put/Call .60 -28.6%

• NYSE Arms 1.6 +68.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 72.79 -2.09%
  

• US Energy High-Yield OAS 896.20 -1.34%

• European Financial Sector CDS Index 71.75 -3.12%

• Italian/German 10Y Yld Spread 163.5 -2.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index  79.20 -1.41%
  

• Emerging Market CDS Index 191.87 -2.27%
  

• iBoxx Offshore RMB China Corporate High Yield Index 174.85 +.07%

• 2-Year Swap Spread 6.75 unch.

• TED Spread 14.0 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.0 +1.75 basis points
• MBS  5/10 Treasury Spread  97.0 -2.0 basis points
• IHS Markit CMBX BBB- 6 67.75 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.83 +.13%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 48.0 +2.0 basis points

• China Iron Ore Spot 108.36 USD/Metric Tonne -.68%

• Citi US Economic Surprise Index 256.9 +13.5 points

• Citi Eurozone Economic Surprise Index -20.0 +5.3 points

• Citi Emerging Markets Economic Surprise Index -16.70 +5.4 points

• 10-Year TIPS Spread 1.41 +1.0 basis point
• 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 +5 open in Japan 
• China A50 Futures: Indicating +26 open in China

• DAX Futures: Indicating -10 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +12.7% Above 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 84.5% of Issues Advancing, 12.9% Declining
• 62 New 52-Week Highs, 0 New Lows
• 28.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.0%
• Vix 28.4 -3.7%
• Total Put/Call .84 unch.
• TRIN/Arms .91 +44.4%

Wednesday Watch

Night Trading 

• Asian equity indices are +.5%  to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 79.25 -1.0 basis point.

• China Sovereign CDS 44.25 -1.5 basis points.

• Bloomberg Emerging Markets Currency Index 60.83 +.12%.

• FTSE 100 futures +1.08%.

• S&P 500 futures +.82%.

• NASDAQ 100 futures +.64%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ASML)/2.06

• (BK)/.92

• (GS)/3.91

• (OMC)/.80

• (PNC)/.75

• (PGR)/1.36

• (USB)/.38

• (UNH)/4.04

After the Close:

• (ADTN)/.01

• (AA)/-.26

• (CNS)/.52

• (SNBR)/-.75

Economic Releases

8:30 am EST

• Empire Manufacturing for July is estimated to rise to 10.0 versus -.2 in June.

• The Import Price Index MoM for June is estimated to rise +1.0% versus a +1.0% gain in May.

• The Import Price Index ex Petro for June is estimated to rise +.1% versus a +.1% gain in May. 

• The Export Price Index MoM for June is estimated to rise +.8% versus a +.5% gain in May.
  

9:15 am EST

• Industrial Production MoM for June is estimated to rise +4.4% versus a +1.4% gain in May.

• Capacity Utilization for June is estimated to rise to 67.8% versus 64.8% in May.

• Manufacturing Production for June is estimated to rise +5.6% versus a +3.8% gain in May.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -88,090 barrels versus a +5,654,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,080,090 barrels versus a -4,839,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,384,360 barrels versus a +3,135,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.45% versus a +2.0% gain prior.

2:00 pm EST

• US Fed Beige Book release.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Harker speaking, the China CPI report and the weekly MBA Mortgage Applications report could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are higher, boosted by financial and commodity 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 Mostly Higher into Final Hour on Global Stimulus Hopes, Short-Covering, Technical Buying, Commodity/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 30.3 -5.8%

• Euro/Yen Carry Return Index 126.65 +.39%

• Emerging Markets Currency Volatility(VXY) 9.87 +1.65%

• S&P 500 Implied Correlation 59.4 -7.8%

• ISE Sentiment Index 105.0 -9.0 points

• Total Put/Call .88 +14.3%

• NYSE Arms .80 -31.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 74.77 -.12%
  

• US Energy High-Yield OAS 910.61 +.16%

• European Financial Sector CDS Index 74.06 +1.09%

• Italian/German 10Y Yld Spread 165.75 +.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index  80.5 +.17%
  

• Emerging Market CDS Index 197.43 -.09%
  

• iBoxx Offshore RMB China Corporate High Yield Index 174.73 +.30%

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

• TED Spread 14.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -8.75 +3.0 basis points
• MBS  5/10 Treasury Spread  99.0 +3.0 basis points
• IHS Markit CMBX BBB- 6 68.25 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.78 +.24%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 46.0 -2.0 basis points

• China Iron Ore Spot 106.41 USD/Metric Tonne +-2.53%

• Citi US Economic Surprise Index 243.4 +7.1 points

• Citi Eurozone Economic Surprise Index -25.30 +1.9 points

• Citi Emerging Markets Economic Surprise Index -22.10 -1.9 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 +78 open in Japan 
• China A50 Futures: Indicating +20 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio:

• Higher: On gains in my industrial/consumer staple/biotech/medical sector longs

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

• Market Exposure: Moved to 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.9% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 57.1% of Issues Advancing, 40.2% Declining
• 6 New 52-Week Highs, 10 New Lows
• 25.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.9%
• Vix 32.3 +.4%
• Total Put/Call 1.02 +32.5%
• TRIN/Arms .95 -18.8%

Tuesday Watch

Evening Headlines

Bloomberg:   

• U.S. Denounces China’s Claims to South China Sea as Unlawful.  

• China’s Stock Market Closes In on $10 Trillion Milestone After Its Biggest Crash.  

• Singapore Slumps Into Recession With 41.2% Fall in Quarterly GDP.
• WHO Says Pandemic to Linger; Cases Pass 13 Million: Virus Update.

• Asian Stocks Look Set to Follow U.S. Shares Lower: Markets Wrap. Asian stocks slipped Tuesday, following their U.S. peers lower amid fresh Sino-American tensions and concern over the economic impact of rising coronavirus cases. Crude oil fell. Shares in Tokyo, Sydney and Seoul saw modest declines. S&P 500 Index futures edged up after the benchmark briefly touched its highest since the pandemic sell-off in March, before closing lower. The Nasdaq hit another record before finishing in the red. Sentiment was hit on signs the virus is throttling reopening plans in states like California, and on news the Trump administration rejected China’s expansive claims in the South China Sea. Treasuries and the dollar were little changed. S&P 500 futures rose 0.1% as of 9:07 a.m. in Tokyo. The S&P 500 Index dipped 0.9%. Topix index fell 0.4%. Australia’s S&P/ASX 200 Index declined 0.5%. Kospi index fell 0.5%. Hong  Kong’s Hang Seng Index futures earlier rose 0.4%.  

• Oil Extends Slide on Signs OPEC+ Will Begin to Taper Output Cuts.  

• Wary China Consumer, U.S. Recovery Hit, Global Outlook: Eco Day.
• McConnell Says GOP Will Pitch Its Own Stimulus Plan Next Week.
• Ten Thousand Day Traders an Hour Are Buying Tesla Shares.
• Amateur J.C. Penney Traders Beg Judge to Save Them From Wipeout.

Wall Street Journal:

• Jumbled Covid-19 Border Rules Baffle Companies, Stymie Tourism.

• The Case for Reopening Schools.

• Blank-Check Boom Gets Boost From Coronavirus.

• SoftBank Explores Sale or IPO for Chip Designer Arm Holdings.

• U.S. 12-Month Deficit Tops $3 Trillion as Virus Stimulus Spending Soars.

• U.S. Rejects Most Chinese Maritime Claims in South China Sea.

MarketWatch.com:     

• Online food prices jump as food companies struggle to meet demand.

• Big Tech’s latest reckoning is coming as it continues to rack up record valuations.

Zero Hedge:    

• New Court Filing: Ghislaine Maxwell 'Fled' Across House During Raid; FBI Found Tin Foil-Wrapped Cell Phone.

• California Orders Bars, Gyms & Indoor Dining To Close In Biggest COVID-19 Reopening Rollback Yet: Live Updates.

• The Left's "Boycott" Of Goya Has Backfired Spectacularly As Conservative Customers Clean Out Store Shelves.

• Save America From Cancel Culture.

• Demographics, Debt, & Disappointment - The Japanifation Of America's Economy.

• Mobile Trading Surges In India As Retail Joins Stock Market Party.

• COVID-19's "Inconsistent Nature" Confuses Us All.

• Parents Are Paying $50,000 To Reserve Spots At NYC Private Schools Even Though Kids May Never Attend.

• Scientists Discover That One Big Assumption That Everyone Has Been Making About COVID-19 May Be Dead Wrong.

• How Do We Change The Leadership Of Our Quasi-Sovereign Big-Tech Neofeudal Nobility?

• Kaplan Spoils Big-Tech Buying-Bonanza As Pandemic Gets "Worse & Worse & Worse".

The Epoch Times:

• Chinese Economy Faces ‘Unprecedented’ Challenges Amid Pandemic, Top Official Admits.

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 -.5%  to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 80.25 +1.0 basis point.

• China Sovereign CDS 45.75 -1.5 basis points.

• Bloomberg Emerging Markets Currency Index 60.63 -.01%.

• FTSE 100 futures -.98%.

• S&P 500 futures +.24%.

• NASDAQ 100 futures +.41%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (C)/.27

• (DAL)/-4.15

• (FAST)/.36

• (JPM)/1.23

• (WFC)/-.10

After the Close:

• None of note

Economic Releases
6:00 am EST

• The NFIB Small Business Optimism Index for June is estimated to rise to 97.8 versus 94.4 in May.

8:30 am EST

• Real Avg. Weekly Earnings YoY for June.   

• The CPI MoM for June is estimated to rise +.5% versus a -.1% decline in May.

• The CPI Ex Food and Energy MoM for June is estimated to rise +.1% versus a -.1% decline in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, Germany CPI report, UK GDP report and the US week retail sales reports could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.