Stocks Reversing Lower into Afternoon on US Stimulus Uncertainty, China Tensions, Technical Selling, Healthcare/Retail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 28.6 -3.8%
• Bloomberg Global Risk On/Risk Off Index 92.0 +48.0 points

• Euro/Yen Carry Return Index 130.04 +.1%

• Emerging Markets Currency Volatility(VXY) 11.27 -.62%

• S&P 500 Implied Correlation 56.65 +5.99%

• ISE Sentiment Index 100.0 +20.0 points

• Total Put/Call .88 +8.64%

• NYSE Arms .94 -56.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 69.63 +1.83%
  

• US Energy High-Yield OAS 804.67 -.25%

• European Financial Sector CDS Index 65.66 +2.91%

• Italian/German 10Y Yld Spread 142.5 -5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index  59.28 +.94%
  

• Emerging Market CDS Index 171.70 -.46%
  

• iBoxx Offshore RMB China Corporate High Yield Index 177.88 +.01%

• 2-Year Swap Spread 8.25 unch.

• TED Spread 14.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -5.5 -.25 basis point
  
• MBS  5/10 Treasury Spread  90.25 +.25 basis point
  
• IHS Markit CMBX BBB- 6 66.75 -.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.50 +.02%
• 3-Month T-Bill Yield .11% unch.

• Yield Curve 53.75 -.25 basis point
  

• China Iron Ore Spot 123.51 USD/Metric Tonne +.15%

• Citi US Economic Surprise Index 188.0 +8.1 points

• Citi Eurozone Economic Surprise Index 90.40 -2.2 points

• Citi Emerging Markets Economic Surprise Index 43.0 +6.6 points

• 10-Year TIPS Spread 1.67 -3.0 basis points
• 100.0% chance of no change at Nov. 5th meeting, 100.0% chance of no change at Dec. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -156 open in Japan 
• China A50 Futures: Indicating -124 open in China

• DAX Futures: Indicating -57 open in Germany

Portfolio:

• Higher: On gains in my industrial/biotech/consumer staples sector longs and index hedges
  

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

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.9%

Sector Underperformers:

• 1) Gaming -2.4% 2) Software -1.9% 3) Internet -1.6%

Stocks Falling on Unusual Volume: 

• GCP, NTRA, NBIX, CRY, MTN, BILL, STAY, RH, VRNT, DOCU, STRO, SFIX, APPS, JACK, ARWR, TRHC, COUP, CNK, BXMT, ATGE, W, PENN, SDC, NLS, PENN, NLOK, NLS, RNG, BJRI, CHWY, MMSI, VRM, TVTY, FOUR, GRAF, FRGI, HQY, RVLV, PLAY, OSTK, ITCI, NFE and NKLA
  

Stocks With Unusual Put Option Activity:

• 1) CLVS 2) DVA 3) F 4) RH 5) USB
  

Stocks With Most Negative News Mentions:

• 1) STSA 2) EXPE 3) AMC 4) POR  5) BCC
  

Charts:

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

 

Bull Radar

Style Outperformer:

• Large-Cap Value +.5%

Sector Outperformers:

• 1) Steel +1.4% 2) Defense +1.1% 3) Industrials +1.0%

Stocks Rising on Unusual Volume:

• CODX, ZUMZ, LAUR, FRTA, OSUR, DPHC, ACMR, CROX, TXG, HCAC, VRS, ATRA, TRNE and RYTM
  

Stocks With Unusual Call Option Activity:

• 1) AES 2) DVA 3) NLOK 4) PAGP 5) IRBT

Stocks With Most Positive News Mentions:

• 1) FRTA 2) DQ 3) HOLX 4) LYB 5) CROX

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -30.2% Below 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 59.5% of Issues Advancing, 37.8% Declining
• 20 New 52-Week Highs, 17 New Lows
• 45.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.2% 
• Bloomberg Global Risk-On/Risk-Off Index 141.0 +97.0 points
• Vix 28.2 -4.9%
• Total Put/Call .81 unch.
• TRIN/Arms .89 -59.2%

Friday Watch

Evening Headlines

Bloomberg:              

• Europe Passes U.S. in New Covid Cases, Returning as Hot Spot.
• Rio CEO Will Step Down After Pressure Over Heritage Site Blasts.
• Asia Stocks to Drop After U.S. Retreat; Dollar Up: Markets Wrap. Asian stocks headed for a second week of losses as a fresh selloff in U.S. megacap technology shares highlighted the lingering concern over valuations in certain pockets of the market. Treasuries and the dollar were steady. Japanese shares opened modestly lower along with those in South Korea and Australia. S&P 500 contracts nudged higher. In a topsy-turvy U.S. session, the Nasdaq lost more than 2% amid lingering worries that ma five-month rally stretched valuations too far. Crude dropped back toward $37 a barrel in New York. S&P 500 futures added 0.4% as of 9:18 a.m. in Tokyo. The index fell 1.8% on Thursday. Japan’s Topix index declined 0.1%. South Korea’s Kospi index slid 0.1%. Australia’s S&P/ASX 200 Index dropped 1%.
• Five Things You Need to Know to Start Your Day.
• Economic Rebound Becomes More Fragile With U.S. Aid on Brink.
• Fiscal Stimulus Chances Fade, With Republican Bill Blocked.  
• Smithfield's $13,000 Fine in Deadly Covid Outbreak Called ‘Paltry’ by Critics.
• Gundlach Says High-Yield Bond Defaults May Almost Double.  
• Hedge Funds Bought the Dip as Nasdaq Tumbled Into a Correction.  
• Options Mania and Real-World Risk Mean Volatility Here to Stay.

Wall Street Journal:

• Citi’s Fraser to Be First Woman CEO of Big Wall Street Bank.
• What’s Biden’s New China Policy? It Looks a Lot Like Trump’s.
• Several Covid-19 Vaccines Could Join Winner’s Circle.
• Democrats Filibuster Covid Relief.
• What Islamists and ‘Wokeists’ Have in Common.
• Rubio Seeks Security Review of Chinese Bid for GNC.
• EU Demands U.K. Scrap Proposal That Would Breach Brexit Deal.
  

Fox News:

• Cell phones of members of Robert Mueller's team were purged during Trump probe, DOJ records show.
• Trump again suggests on drugs involved in Biden primary debate.
• CEOs urge de Blasio to crack down on crime, clean up streets.
  

CNBC.com:

• Jim Cramer says ‘It’s good to have some cash’ as markets face a rough month.
• Peloton crushes estimates as sales surge 172%, expects strong demand to continue into 2021. 
• How Trump v. Biden could be Bush v. Gore ‘on steroids’.
• Stocks making the biggest moves after hours: Peloton, Oracle, Chewy & more.

MarketWatch.com:       

• Fiscal stimulus prospects at dead end after Senate vote, a top Republican says. 
• Oracle stock rallies as results top Wall Street estimates.

Zero Hedge:

• Mueller's 'Angry Democrats' Scrubbed Cell Phones After Russia Investigation.
• Trump Insists TikTok Sale Deadline Won't Be Extended.
• Our System Is Crumbling Right In Front Of Our Eyes.
• What Possible Disruption Is Coming That Requires China To Start Massive Stockpiling Of All Possible Commodities.
• Jets Wide Receiver Charged With Stealing $1.2MM In PPP Funds, Blowing It On Jewelry And Gambling.
• NYTimes' 1619 Project Author Says Founding Fathers "Did Not Believe In Democracy", America Is "Not An Exceptional Nation".
• JPM Becomes First Wall Street Bank To Demand Traders Return To The Office.
• Brexit Butterflies & Bailout Bill Breakdown Crush Cable, Bust Big-Tech Bounce.

The Epoch Times:

• National Security Advisor: China Actively Interferes in US.
  

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 -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 59.5 +.75 basis point.

• China Sovereign CDS 37.25 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 60.51 +.03%.
• Bloomberg Global Risk-On/Risk Off Index 51.0.0 +7.0 points.
• Volatility Index(VIX) futures 32.80 +.38%
• FTSE 100 futures -.46%.

• S&P 500 futures +.44%.

• NASDAQ 100 futures +.55%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (KR)/.54
  

After the Close:

• None of note
  

Economic Releases

8:30 am EST:

• The CPI MoM for August is estimated to rise +.3% versus a +.6% gain in July.
• The CPI Ex Food and Energy MoM for August is estimated to rise +.2% versus a +.6% gain in July.
• Real Avg. Weekly Earnings YoY for August.
  

2:00 pm EST

• Monthly Budget Statement for Aug. is estimated to widen to -$235.4B versus -$200.3B in July.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Money Supply report, Goldman Biotech Symposium, Bloomberg Sept. US Economic Survey and the UBS Covid-19 Vaccine Symposium could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly lower, weighed down by technology and commodity 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 Sharply Lower into Final Hour on Global Recession Fears, Oil Decline, Technical Selling, Energy/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 28.6 -.8%
• Bloomberg Global Risk On/Risk Off Index 138.0 +31.0 points

• Euro/Yen Carry Return Index 130.35 +.39%

• Emerging Markets Currency Volatility(VXY) 11.33 -1.13%

• S&P 500 Implied Correlation 52.9 +7.0%

• ISE Sentiment Index 80.0 -32.0 points

• Total Put/Call .73 -12.0%

• NYSE Arms 1.58 +46.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.87 +1.89%
  

• US Energy High-Yield OAS 802.58 +.92%

• European Financial Sector CDS Index 63.81 +3.44%

• Italian/German 10Y Yld Spread 147.5 -3.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index  58.83 -2.36%
  

• Emerging Market CDS Index 170.50 +1.16%
  

• iBoxx Offshore RMB China Corporate High Yield Index 177.86 unch.

• 2-Year Swap Spread 8.25 -.25 basis point

• TED Spread 13.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -5.5 -.25 basis point
  
• MBS  5/10 Treasury Spread  90.0 +.75 basis point
  
• IHS Markit CMBX BBB- 6 67.0 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.50 -.10%
• 3-Month T-Bill Yield .11% unch.

• Yield Curve 54.0 +1.25 basis points
  

• China Iron Ore Spot 120.31 USD/Metric Tonne -.47%

• Citi US Economic Surprise Index 179.90 -3.2 points

• Citi Eurozone Economic Surprise Index 92.60 -1.1 points

• Citi Emerging Markets Economic Surprise Index 35.4 +6.1 points

• 10-Year TIPS Spread 1.70 -1.0 basis point
• 100.0% chance of no change at Nov. 5th meeting, 100.0% chance of no change at Dec. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +59 open in Japan 
• China A50 Futures: Indicating -127 open in China

• DAX Futures: Indicating -104 open in Germany

Portfolio:

• Slightly Higher: On gains in my index hedges and emerging market shorts
  

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

• Market Exposure: Moved to 25% Net Long