Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Concerns, Forced Selling, Tech/Consumer Discretionary Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance:  Most Sectors Declining
  

• Volume:  Above Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 33.0 +.2%
• Bloomberg Global Risk On/Risk Off Index 3,733.0 -74.0 points

• Euro/Yen Carry Return Index 140.72 -.52%

• Emerging Markets Currency Volatility(VXY) 12.6 +.1%

• CBOE S&P 500 Implied Correlation Index 50.7 -2.0% 

• ISE Sentiment Index 112.0 +11.0 points
  

• Total Put/Call 1.08 +9.1%

• NYSE Arms .97 -6.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 87.39 -.03%
  

• US Energy High-Yield OAS 418.28 +.06%

• European Financial Sector CDS Index 103.43 -3.0%

• Italian/German 10Y Yld Spread 191.0 basis points -9.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 128.04 -2.4%
  

• Emerging Market CDS Index 295.23 -.6%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 28.89 -.48%
• Russia Sovereign Debt Credit Default Swap 4,703.27 -1.9%
  

• 2-Year Swap Spread 28.25 basis points +.25 basis point
  

• TED Spread 51.25 basis points -1.0 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 basis points unch.
  
• MBS  5/10 Treasury Spread  123.0 +3.0 basis points
  
• iShares CMBS ETF 48.42 +.07%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 51.86 +.29%
• 3-Month T-Bill Yield .88% unch.
  

• Yield Curve 28.25 basis points (2s/10s) -7.75 basis points
  

• China Iron Ore Spot 131.90 USD/Metric Tonne +.09%

• Citi US Economic Surprise Index 21.1 +6.6 points

• Citi Eurozone Economic Surprise Index 28.3 -1.7 points
  

• Citi Emerging Markets Economic Surprise Index 38.5 -3.0 points

• 10-Year TIPS Spread 2.72 +6.0 basis points
  
• 0.0%(unch.) chance of no change at July 27th FOMC meeting, 0.0%(unch.) chance of no change at September 21st meeting

US Covid-19:

• 164 new infections/100K people(last 7 days total). 10.0%(unch.) of 1/14 peak +8/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -87.9%(+1.4 percentage points) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -203 open in Japan 
• China A50 Futures: Indicating -133 open in China

• DAX Futures: Indicating -172 open in Germany

Portfolio:

• Slightly Lower: On losses in my tech/consumer discretionary sector longs
  

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

• Market Exposure:  Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.5%

Sector Underperformers:

• 1) Alt Energy -6.7% 2) Homebuilding -3.8% 3) Retail -3.1%

Stocks Falling on Unusual Volume: 

• PTON, LYFT, WCC, TREX, RPD, CUTR, SKT, GH, MIDD, GFS, ISEE, GRPN, ECOM, SSYS, WWW, AB, FLYW, RNG, HR, EYE, PEGA, LAND, KYMR, OM, SBNY, INBX, PFGC, RVNC, MCW, ASPN, WEN, BRZE, COCO, ACET MARA, ARWR, DOCS, UPWK, APPN, RIVN, ICHR, BEAM, PLUG, BROS, LCID, RPAY, SG, SI, RLAY, BSY, SQ, SKIN, RYI, CVNA, JXN, DISH, AFRM, NVAX, UPST, BRP, MSTR, COIN, RCUS, ITOS and U
  

Stocks With Unusual Put Option Activity:

• 1) EWC 2) EA 3) ATUS 4) ROST 5) ABR
  

Stocks With Most Negative News Mentions:

• 1) U 2) COIN 3) ITOS 4) RCUS 5) INO
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.2%

Sector Outperformers:

• 1) Oil Service +1.8% 2) Utilities +1.5% 3) Energy +1.4%

Stocks Rising on Unusual Volume:

• HRB, CELH, GO, ELY, VTNR, PAR, EA, SWCH, EOLS, DRE, RAPT, VECO, SCPL, RBLX, HTZ, XRAY, KNBE, NE, TNDM and DV
  

Stocks With Unusual Call Option Activity:

• 1) EA 2) IP 3) NEO 4) BOX 5) DISH

Stocks With Most Positive News Mentions:

• 1) HRB 2) RGLS 3) GO 4) PAR 5) ELY
  

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +19.6% Above 100-Day Average 
• 2 Sectors Declining, 9 Sectors Rising
• 71.4% of Issues Advancing, 25.3% Declining
• 10 New 52-Week Highs, 356 New Lows
• 23.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.8% 
• Bloomberg Global Risk-On/Risk-Off Index 3,895.0 +87.0 points
• Russell 1000: Growth/Value 14,942 -1.7%
  
• Vix 30.9 -6.6%
• Total Put/Call 1.02 +3.0%
• TRIN/Arms .26 -26.9%

Wednesday Watch

Evening Headlines

Bloomberg:       

• Russia Trains Missiles on Ukraine’s Quiet Zone to Target Trade.
• Ukraine, Russia Gas Clash Raises Threat to Europe’s Supply.  
• China’s Dollar-Bond Misery Is Set to Deepen With Fed Tightening.
  
• Don’t Expect Chinese Stimulus to Save the Global Economy.
• Stocks Steady in Asia Ahead of Key Inflation Data: Markets Wrap.
• Oil Extends Losses Below $100 Ahead of US Inflation Figures.  
• US Crude Output Growth Expected to Slow Amid Soaring Costs.
• Wall Street Is Trying Desperately to Catch Up With Stock Rout.
• House Set to Vote on $40 Billion Ukraine Aid Bill Tuesday.  
• BlackRock’s Star Trader Goes Net Short as Hedge Fund Loss Mounts.  
• Disney’s Copyright Protections Are Latest Target of Republicans.  
• Apollo Plans to Lead $1 Billion Financing for Musk’s Twitter Bid.  
• SEC Chief Gensler Worries Crypto Exchanges Bet Against Clients. 
• The Bubble Portfolio Is Getting Absolutely Crushed.  
• Meme Stock Euphoria Goes Bust as Group Drops to All-Time Low.
• Fed Officials Back Half-Point Hikes, Mester Open to Doing More.  
• SPAC Retreat Shows Wall Street Awakens to Risk, Gensler Says.

Wall Street Journal:

• Senate Confirms Lisa Cook to Federal Reserve Board.
• ‘Buy the Dip’ Believers Tested by Market’s Steep Drops.
• President Costanza Takes On Inflation. Biden lays out his plan on prices, but he’d do better if he did the opposite.
• Taliban Afghanistan Keeps Getting Worse. Americans still can’t get out as restrictions on women increase.
• Latest Updates: Ukraine Ambassador Nominee Vows to Help Thwart Russia’s Efforts.
• The 477 Price Checkers Who Determine Inflation.
• Shanghai’s Lockdown Leaves Thousands Sleeping in Its Streets.
• Some Covid Patients Relapse After Taking Paxlovid, Puzzling Doctors.

Fox News:     

• Leftists explode after Elon Musk says Twitter ban on Trump 'alienated large part of the country'.
• Pelosi may get unwanted house guests as SCOTUS protesters shift focus.

CNBC.com:

• Tesla production lags in Shanghai due to parts shortages, Covid restrictions.
• Peloton CEO says he was surprised by how deep some issues ran at the company.
• Roblox shares sink on disappointing revenue and wider-than-expected loss.
• Fed’s Waller promises to tackle inflation, says mistakes of the ’70s won’t be repeated. 

MarketWatch:      

• Coinbase stock slides toward all-time low as crypto trading falls off.  
• Investors haven’t begun to price in recession: Here’s how far the S&P 500 could fall.  
• Unity Software's stock plunges 38% on weak revenue guidance.  
• These charts warn the Dow’s new lower low won’t be the lowest.  
• American household debt continues to march higher, driven by one major factor, New York Fed says.

Zero Hedge:

• New DOJ Notes Reveal FBI Panic After Trump Tweeted He Knew He Was Being Spied On.
• Actual Insurrection: Chicago Mayor Urges 'Call To Arms' Over Supreme Court.
• Russian Forces Unlikely To Stop After Capturing Donbas - Expect Prolonged War: Top US Intel Chief.
• Taco Bell Goes Woke: Launches 'Drag Brunch' Events At US Locations.
• The Six Most Common Financial Myths People Believe.
• Ransomware Attack Drives US College To Close Doors For Good After 157 Years.
• Gavin Newsom Is Blaming Climate Change For The Blackouts He Is Creating.
• Unchanged...
• Newsquawk Asia-Pac Market Open - Mixed trade on Wall Street ahead of US CPI.
• How Governments Expropriate Wealth With Inflation And Taxes.
• Nonprofit Watchdog Uncovers $350 Million In Secret Payments To Fauci, Collins, Others At NIH.
• Newsquawk US Market Wrap: Tech and bonds firmer amid ambiguous Fed Speak and calls for a market reprieve.
• Naomi Wolf Is Angry... "It's Not Over. It's Just Begun".
• Hispanic Voters Are Losing Faith In The Democratic Party: Poll.
• WTI Holds Below $100 After API Signals Crude/Product Inventory Builds.
• FedSpeak Saves Stocks Ahead Of CPI Scare, Bond Yields Tumble.

TheGatewayPundit.com: 

• Psaki Says Biden White House Continues to Encourage ‘Peaceful’ Protests Outside of SCOTUS Judges’ Homes (VIDEO).
• PURE EVIL: Biden DOJ Is Threatening Jan. 6 Defendants With Life in Prison after Walking Inside US Capitol and Taking Pictures.
• 26-Year-Old Transgender Child Molester Given Light Sentence Thanks to Marxist DA George Gascón Now Charged with First-Degree Murder.
• New Mexico Audit Identifies Feature in Dominion Voting Machines that Allows Ballots to be Filled Out by Machine Itself.
• So Who Did Democrat Non-Profits Use as Their Ballot Traffickers to Steal the Election? In Georgia and Wisconsin Many Traffickers Were Also BLM-Antifa Rioters.
• Vaxxed and Boosted Bill Gates Tests Positive for COVID, Previously Claimed COVID Vaccines Would Stop Transmission.
• Horror: Atrium Health Levine Children’s Hospital to Launch Pfizer Covid-19 Vaccine Trial for Young Children Ages 6 Months to 5 Years.
• Joe Biden Asked If He Will Resign Over Record Inflation Rate: “Resign. That’s a Good Idea” (VIDEO).
• Joe Biden Accidentally Admits Democrats Have “No Plan” to Reduce Energy Prices (VIDEO).
• Insane Clown and Disinformation Czar Nina Jankowicz Wants “Trustworthy People” Like Herself to be Able to Add Context to Other People’s Tweets..
• Gas Prices Reach a NEW ALL-TIME HIGH Under Joe Biden at $4.37 per Gallon — Second All-Time High in Two Months!

The Epoch Times:

• China’s ‘Zero-COVID’ Controls Prompt EU Firms to Consider Moving Investments Elsewhere.
• US Needs to Decouple From China to Counter Its Unrestricted Warfare: Robert Spalding.

Twitter: 

• @kylenabecker - The Covid pandemic cannot end in America without any public health experts being held accountable for fraud. It has been the greatest disinformation campaign in U.S. history. There should be a tribunal followed by people going to prison. Bill Maher’s ‘Finally Had Enough’ of the Covid BS: The Experts Were ‘Just Wrong, Wrong A Lot’. Vaccines don't help others 'stay safe.' This is verifiably false. In fact, the most vaccinated places in America currently have the highest Covid case rates. Enough. "[The] positive correlation between mask usage and deaths... suggests that the universal use of masks may have had harmful unintended consequences." New peer-reviewed journal article shows high mask compliance areas had higher case rates.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 813,020 Reports(+2,850 from prior week) Through April 29th, 2022.
  

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

Covid-19(Data, Maps, Graphs):

• Our World in Data:  New Global Covid-19 Cases(7-day rolling average graphs). New US Covid Hospital Admissions/ICU Admissions/Deaths
  
• FT.com:  Fully Vaccinated by Country(graph). Global Lockdown Stringency Index(map).
• Bloomberg.com:  International Travel Restrictions.  Case Graphs by State.
  
• NYTimes.com:  County Trends and Clusters. Local ICU Occupancy.
  
• Brown School of Public Health:  Covid Severity by State/County(map).  US Hospital Capacity(region).
  
• CovidActNow:  Covid Severity/Infection Rate by Metro Area.
  
• KFF:  US Vaccinations by Race/Ethnicity.
  
• Carnegie Mellon: Covid-Like Symptoms in Community. Covid Symptom Searches on Google. Covid-Related Dr.Visits.  Restaurant Visits. Wearing Masks. (graphs)
  
• Safegraph.com:  Commerce Patterns(graphs).

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 131.25 +1.75 basis points. 

• China Sovereign CDS  85.0 -2.0 basis points.
  

• Bloomberg Emerging Markets Currency Index 51.7 -.03%. 
• Bloomberg Global Risk-On/Risk Off Index 3,843.0 +35.0 points.
• Volatility Index(VIX) futures 31.9 -.19%.
• Euro Stoxx 50 futures +.51%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.33%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (DNUT)/.07
• (WEBR)/.19
• (WEN)/.18
• (WWW)/.39
• (YETI)/.32
  

After the Close:

• (DOX)/1.24
• (BYND)/-.98
• (COHR)/2.32
• (PAAS)/.21
• (RIVN)/-1.66
• (DIS)/1.19
  

Economic Releases

8:30 am EST

• The CPI MoM for April is estimated to rise +.2% versus a +1.2% gain in March.
• The CPI Ex Food and Energy MoM for April is estimated to rise +.4% versus a +.3% gain in March.
• Real Avg. Weekly Earnings YoY for April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -760,500 barrels versus a +1,303,000 barrel gain the prior week. Gasoline inventories are estimated to fall by -1,521,220 barrels versus a -2,230,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,465,220 barrels versus a -2,344,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.48% versus a -1.9% decline prior. 

2:00 pm EST

• The Monthly Budget Statement for April is estimated at $260.0B versus -$225.6B in March.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China CPI report, 10Y T-Note auction and the weekly MBA Mortgage Applications report could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

Stocks Reversing Higher into Afternoon on Lower Long-Term Rates, Bargain-Hunting, Technical Buying, Tech/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance:  Mixed
  

• Volume:  Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 33.1 -4.8%
• Bloomberg Global Risk On/Risk Off Index 3,801.0 +35.0 points

• Euro/Yen Carry Return Index 141.46 -.16%

• Emerging Markets Currency Volatility(VXY) 12.7 -.24%

• CBOE S&P 500 Implied Correlation Index 51.9 -1.4% 

• ISE Sentiment Index 100.0 +21.0 points
  

• Total Put/Call 1.06 -15.2%

• NYSE Arms 1.11 -31.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 86.94 -2.2%
  

• US Energy High-Yield OAS 419.53 +.77%

• European Financial Sector CDS Index 106.52 -1.8%

• Italian/German 10Y Yld Spread 200.0 basis points -6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 131.22 +2.2%
  

• Emerging Market CDS Index 297.28 -1.7%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 28.99 -.22%
• Russia Sovereign Debt Credit Default Swap 4,794.51 -1.1%
  

• 2-Year Swap Spread 28.0 basis points unch.
  

• TED Spread 52.25 basis points -7.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 +1.0 basis point
  
• MBS  5/10 Treasury Spread  120.0 -5.0 basis points
  
• iShares CMBS ETF 48.35 -.59%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 51.75 -.16%
• 3-Month T-Bill Yield .88% +8.0 basis points
  

• Yield Curve 36.0 (2s/10s) -7.75 basis points
  

• China Iron Ore Spot 127.85 USD/Metric Tonne +1.1%

• Citi US Economic Surprise Index 14.5 -1.8 points

• Citi Eurozone Economic Surprise Index 29.1 +3.8 points
  

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

• 10-Year TIPS Spread 2.66 -8.0 basis points
  
• 0.0%(unch.) chance of no change at July 27th FOMC meeting, 0.0%(unch.) chance of no change at September 21st meeting

US Covid-19:

• 156 new infections/100K people(last 7 days total). 9.0%(unch.) of 1/14 peak na/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -89.3%(unch.) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +43 open in Japan 
• China A50 Futures: Indicating -111 open in China

• DAX Futures: Indicating +91 open in Germany

Portfolio:

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

• Disclosed Trades:  Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts
  

• Market Exposure:  Moved to 75% Net Long