Stocks Falling Substantially into Afternoon on US Policy-Induced Stagflation Fears, Fed "Behind the Curve" Worries, Technical Selling, Tech/Alt Energy 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) 25.3 +2.2%
• Bloomberg Global Risk On/Risk Off Index 4,771.0 +62.0 points

• Euro/Yen Carry Return Index 144.45 +.5%

• Emerging Markets Currency Volatility(VXY) 12.0 -.33%

• CBOE S&P 500 Implied Correlation Index 44.3 +1.5% 

• ISE Sentiment Index 73.0 +5.0 points
  

• Total Put/Call 1.0 +12.0%

• NYSE Arms 1.03 +49.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 81.3 +1.9%
  

• US Energy High-Yield OAS 369.20 +.07%
• Bloomberg TRACE # Distressed Bonds Traded 292.0 -44.0
  

• European Financial Sector CDS Index 98.32 +.11%

• Italian/German 10Y Yld Spread 213.0 basis points +11.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 111.59 +.03%
  

• Emerging Market CDS Index 271.42 +.57%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 28.75 unch.
  
• Russia Sovereign Debt Credit Default Swap 10,195.4 n/a
  

• 2-Year Swap Spread 37.75 basis points +3.0 basis points
  

• TED Spread 48.5 basis points +1.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -15.0 basis points -.25 basis point
  
• MBS  5/10 Treasury Spread  111.0 -9.0 basis points
  
• iShares CMBS ETF 48.32 -.16%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 52.15 -.09%
• 3-Month T-Bill Yield 1.15% +3.0 basis points
  

• Yield Curve 29.5 basis points (2s/10s) +2.5 basis points
  

• China Iron Ore Spot 144.30 USD/Metric Tonne +2.1%

• Citi US Economic Surprise Index -45.6 -7.8 points

• Citi Eurozone Economic Surprise Index 14.9 -6.2 points
  

• Citi Emerging Markets Economic Surprise Index 18.3 -2.3 points

• 10-Year TIPS Spread 2.75 +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:

• 220 new infections/100K people(last 7 days total). 13.0%(unch.) of 1/14 peak +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -82.4%(+1.4 percentage points) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -201 open in Japan 
• China A50 Futures: Indicating +21 open in China

• DAX Futures: Indicating +7 open in Germany

Portfolio:

• Higher:  On gains in my commodity sector longs, index hedges and emerging market shorts
  

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

• Market Exposure:  Moved to Market Neutral
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -2.0%

Sector Underperformers:

• 1) Semis -2.6% 2) Alt Energy -2.3% 3) Internet -2.3%

Stocks Falling on Unusual Volume: 

• NVDA, VRDN, VSTO, CNMD, LTHM, FORM, CIEN, DDOG, PD, VRT, ICPT, ECOM, FRG, SNCY, MDB, TNDM, APPS, ZUMZ, CRWD, KREF, W, AAL, MU, COIN, KD, LE, TSLA, ROKU, RBLX, DKNG, CVNA, ASAN, SIGA, CSTL, HCP and NVAX
  

Stocks With Unusual Put Option Activity:

• 1) MPW 2) NCR 3) NVAX 4) RH 5) JNK
  

Stocks With Most Negative News Mentions:

• 1) NVAX 2) JOAN 3) COIN 4) MU 5) TSLA
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.8%

Sector Outperformers:

• 1) Oil Service +1.5% 2) Energy +1.1% 3) Biotech +.2%

Stocks Rising on Unusual Volume:

• TPTX, AMLX, RETA, AI, MRTX, OKTA, DBX, NAPA and REPL
  

Stocks With Unusual Call Option Activity:

• 1) DBX 2) ACAD 3) BOX 4) UCO 5) AMT

Stocks With Most Positive News Mentions:

• 1) DBX 2) AMT 3) REV 4) OKTA 5) ALK
  

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -24.1% Below 100-Day Average 
• 10 Sectors Declining, 1 Sector Rising
• 17.8% of Issues Advancing, 78.9% Declining
• 34 New 52-Week Highs, 17 New Lows
• 31.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.6% 
• Bloomberg Global Risk-On/Risk-Off Index 4,726.0 +23.0 points
• Russell 1000: Growth/Value 14,933.0 -1.6%
  
• Vix 25.7 +4.0%
• Total Put/Call 1.0 +10.9%
• TRIN/Arms 1.09 +53.5%

Friday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 112.25 +1.0 basis point. 

• China Sovereign CDS  71.0 -.25 basis point.
  

• Bloomberg Emerging Markets Currency Index 52.21 +.01%.  
• Bloomberg Global Risk-On/Risk Off Index 4,555.0 -115.0 points.
• Volatility Index(VIX) futures 27.0 -.3%.
• Euro Stoxx 50 futures n/a.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.29%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• None of note
  

After the Close:

• None of note
  

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for May is estimated to fall to 320K versus 428K in April.
• The Unemployment Rate for May is estimated to fall to 3.5% versus 3.6% in April.
• Average Hourly Earnings MoM for May is estimated to rise +.4% versus a +.3% gain in April. 
  

10:00 am EST

• The ISM Services Index for May is estimated to fall to 56.5 versus 57.1 in April.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Brainard speaking, Eurozone Services PMI report, (CI) investor day, (R) investor day and the ASCO annual meeting could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly higher, boosted by commodity and technology 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.

Morning Market Internals

NYSE Composite Index:

• Volume Running -8.9% Below 100-Day Average 
• 5 Sectors Declining, 6 Sector Rising
• 60.0% of Issues Advancing, 36.1% Declining
• 34 New 52-Week Highs, 29 New Lows
• 31.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.6% 
• Bloomberg Global Risk-On/Risk-Off Index 4,638.0 +81.0 points
• Russell 1000: Growth/Value 15,081.0 +1.1%
  
• Vix 24.9 -3.0%
• Total Put/Call .96 -5.9%
• TRIN/Arms .68 -47.3%