Stocks Substantially Higher into Final Hour on US Economic "Soft-Landing" Hopes, Less European/Emerging Markets/US High-Yield Debt Angst, Short-Covering, Tech/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance:  Most Sectors Rising
  

• Volume:  Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 21.9 -8.4%
• DJIA Intraday % Swing .97% -15.5%
  
• Bloomberg Global Risk On/Risk Off Index 3,478.0 +198.0 points

• Euro/Yen Carry Return Index 140.05 +.61%

• Emerging Markets Currency Volatility(VXY) 12.4 -.7%

• CBOE S&P 500 Implied Correlation Index 43.1 -6.3% 

• ISE Sentiment Index 111.0 +13.0 points
  

• Total Put/Call .87 -13.0%

• NYSE Arms 1.06 -14.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 81.9 -2.9%
  

• US Energy High-Yield OAS 415.85 -1.9%
• Bloomberg TRACE # Distressed Bonds Traded 434.0 +1.0
  

• European Financial Sector CDS Index 109.52 -3.8%

• Italian/German 10Y Yld Spread 214.0 basis points -11.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 151.35 -1.5%
  

• Emerging Market CDS Index 324.65 -3.5%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.7 -.1%
  
• Ukraine Sovereign Debt Credit Default Swap 13,467.1 +9.3%
  

• 2-Year Swap Spread 28.75 basis points +2.25 basis points
  

• TED Spread 30.75 basis points -1.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -15.75 basis points +1.5 basis points
  
• MBS  5/10 Treasury Spread  116.0 -7.0 basis points
  
• iShares CMBS ETF 48.37 -.12%
• Avg. Auto ABS OAS 1.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 49.0 +.03%
• 3-Month T-Bill Yield 2.46% -2.0 basis points
  

• Yield Curve -36.0 basis points (2s/10s) -2.5 basis points
  

• China Iron Ore Spot 109.0 USD/Metric Tonne -2.1%

• Citi US Economic Surprise Index -43.9 +13.0 points

• Citi Eurozone Economic Surprise Index -54.5 +6.2 points
  

• Citi Emerging Markets Economic Surprise Index 21.2 +.7 point 
• S&P 500 Blended Forward 12 Months Mean EPS Estimate Growth Rate +15.9% n/a

• 10-Year TIPS Spread 2.50 +2.0 basis points
  
• Highest target rate probability for November 2nd FOMC meeting: 46.3%(+1.7 percentage points) chance of 3.25%-3.5%. Highest target rate probability for December 14th meeting: 45.8%(-.4 percentage point) chance of 3.25%-3.5%.
  

US Covid-19:

• 280 new infections/100K people(last 7 days total). 16.1%(+.4 percentage point) of 1/14/22 peak(1,740) +7/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -70.6%(+.2 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +254 open in Japan 
• China A50 Futures: Indicating -9 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio:

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

• Disclosed Trades:  Covered some of my (IWM)/(QQQ) hedges, then added some back
  

• Market Exposure:  Moved to 50% net long
  

Morning Market Internals

NYSE Composite Index:

• Volume Running -2.0% Below 100-Day Average 
• 4 Sectors Declining, 7 Sectors Rising
• 57.3% of Issues Advancing, 38.3% Declining
• 16 New 52-Week Highs, 24 New Lows
• 30.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.0% 
• Bloomberg Global Risk-On/Risk-Off Index 3,479.0 +200.0 points
• Russell 1000: Growth/Value 16,014.0 +.6%
  
• Vix 22.4 -6.4%
• Total Put/Call .73 -27.0%
• TRIN/Arms 1.0 -19.0%

Wednesday Watch

Evening Headlines

Bloomberg:        

• Taiwan Braces for China Drills With Pelosi Set to Meet Tsai.  
• China's Covid Zero Could Last for Years Because It Works For Xi. What if the country stays closed indefinitely to keep the virus out?
• Opinion: Pelosi’s Taiwan Trip Is Only the Start of US Headaches.
• House Speaker's Roundabout Flight to Taiwan Shows China’s Long Reach.  
• This Is How China Could Hit Back Over Pelosi’s Taiwan Visit.  
• Alibaba and Tencent Face End of an Era as Sales Start to Shrink.
• Ripples From Pelosi Trip May Take Time to Impact Global Markets.  
• UK Already in Recession With Outlook for Stagflation.
• World's Food Supply Faces New Threat From Lack of Rain in India.  
• US Warns of Possible Retaliation After Killing of Al-Qaeda Chief.  
• Fed Views Boost Yields, Dollar as Haven Bid Ebbs: Markets Wrap.  
• Bullard Says Fed Can Slow Inflation Without Sparking Recession.  
• OPEC+ Watchers Don’t See Biden’s Call for Oil Heeded.
• Microsoft Donations to Anti-Abortion Groups Targeted by Activist.  
• Automakers Blitz Congress to Fix an EV Tax Credit They Can’t Use.
• Fed ‘Nowhere Near’ Finished With Inflation Fight, Daly Says.
  
• Obscure US-Listed China Stock Soars 520% as Retail Army Piles In. Company was the most-bought stock on Fidelity’s trading platform Tuesday.  Hong Kong-based financial services provider AMTD Idea Group surged as much as 520% Tuesday, triggering multiple trading halts, as small-time traders piled into the latest retail craze. The move follows a mega rally from its subsidiary AMTD Digital, which is up more than 21,000% from its mid-July initial public offering price of $7.80. At one point Tuesday, its market value rose above $400 billion, with the bulk of that coming from its Class B shares, which aren’t publicly traded. That’s bigger than Exxon Mobil Corp. and Walmart Inc., and comes from a company that reported $25 million in revenue last year. 
• It’s Far Too Risky to Assume That the Bottom Is In.

Wall Street Journal:    

• Arizona, Michigan, Missouri Primaries Headline Aug. 2 Contests.
• SoftBank Emerges as a Big Loser of the Tech Downturn. Again.
• Strike That Killed al Qaeda Chief Raises Tactical Questions.
• Pelosi Arrives in Taiwan, Defying China Warnings.
• The Schumer-Manchin Double Tax. The 15% minimum tax risks piling onto other global tax changes.
• The IRS Is About to Go Beast Mode. The Schumer-Manchin bill has $45.6 billion to audit the middle class. 
• Low-Income Nations Turn to Risky Bank Loans.
• Banks Spend Big to Boost Credit-Card Sign-Ups.

Fox News:

• Pelosi's husband had 'drug' in system, handed officers courtesy card after DUI crash: court records.
• Democrats confronted over Nancy's Taiwan trip after stoking war tensions.

CNBC.com:

• Rent prices are soaring in these 5 U.S. metros. Here’s what to know before moving to a cheaper area.
• China ratchets up military and economic pressure on Taiwan as Pelosi begins her visit.
• Stocks making the biggest moves after hours: PayPal, Airbnb, Match Group, Caesars and more.
• Match shares plunge more than 20% after online dating company misses on revenue and forecast.
• Homeless, suicidal, down to last $1,000: Celsius investors beg bankruptcy judge for help.

MarketWatch:          

• Financial markets may see a 3-month string of 8.8% inflation readings starting next week, adding up to ‘bad news’.
  
• AMD stock slips as revenue forecast dips below Street consensus.  
• PayPal stock jumps 9% as company confirms Elliott stake and names EA exec as new CFO amid earnings beat.  
• MicroStrategy racks up $1 billion loss, says CEO will leave that post.  
• Airbnb stock falls sharply despite earnings beat, plan to repurchase $2 billion in stock.  
• Starbucks earnings beat expectations despite continued weakness in China.  
• Beyond Meat’s cash burn is putting the stock at risk of falling to $0, warns New Constructs.

Zero Hedge:

• China Summons US Ambassador Overnight, Says Washington "Must Pay The Price". 
• COVID Vaccine Injuries Quietly Being Compensated Around The World.
• Zoltan Pozsar: Powell Will Push The Economy Into A "Depression" To Curb Inflation
• Lot of moving parts....
• Oregonians To Vote On Gun Control Measure Opponent Calls "Strictest" In The Nation
• US Hits Iran With New Sanctions Targeting Oil Sales To East Asia.
• US stocks declined amid tensions surrounding Pelosi's visit to Taiwan and hawkish Fed rhetoric - Newsquawk Asia-Pac Market Open.
• Beijing Looking To Buy Deep Water Port, WWII Airstrip In Solomon Islands.
• Robinhood Fires A Quarter Of Employees Via Slack; Reports Dismal Earnings One Day Early.
• The CBO Projects That By 2043, US Deaths Will Exceed Births.
• Stocks hit on US/China tensions and hawkish Fed speak - Newsquawk US Market Wrap.
• The market doesn’t think much about this…
• WTI Dips After Unexpectedly Large Crude Build.
• Navigating The Fourth Turning.
• It's Worse Than Anyone Wants To Admit.
•  "The Blood Is On His Hands": Giuliani Slams Soros After Billionaire Claims DAs Aren't To Blame For Crime Wave.
• Pelosi Plane & Powell's Pals Prompt More Market Mayhem.

Newsmax:

• China Vows 'Targeted Military Actions' as Pelosi Visits Taiwan.  
• House Repubs Who Voted to Impeach Trump Face Primaries.

TheGatewayPundit.com: 

• Here We Go Again: Machine Failures Being Reported In Michigan.
• Teenage Pro-Life Activist Brutally Attacked While Knocking on Doors to Talk to Kansas Voters (VIDEO).
• Karine Jean-Pierre Has No Answer When Asked if Companies will Pass Cost of Biden’s Tax-and-Spend Bill to Consumer in Form of Higher Prices (VIDEO).
• EXCLUSIVE | Gen. Mike Flynn: ‘The Constitution Itself Is At Risk’, The Patriot Act Must Be ‘Constantly Reviewed’ Or ‘Removed’.
• FOX News Joins the Anti-Trump Uniparty Elites – A Case Study of How to Destroy Your Business.
• Biden Tested Positive For Covid Again— And His Cough is Back: White House Doctor.
• WHAT?! “Anyone Questioning, Challenging, PHOTOGRAPHING, Or RECORDING At Polling Places May Violate Federal Voting Rights Law” – Undercover Sheriff’s Deputies and Federal Thugs To Watch Arizona Primary Election For “Voter Intimidation”.
  

The Epoch Times:

• China Has ‘Positioned Itself to Take Further Steps’ Targeting Taiwan Amid Pelosi Visit, White House Warns.

USA Today:

• AMTD Digital stock, HKD, is the new GameStop thanks to Reddit's Wallstreetbets. 21,426% - that's how much AMTD Digital stock, traded under the ticker symbol "HKD", is up since its July 15 IPO.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 848,091 Reports(+2,483 from prior week) Through July 22nd, 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 -.5% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 152.25 +5.25 basis points. 

• China Sovereign CDS 88.25 +5.0 basis points.
  

• Bloomberg Emerging Markets Currency Index 48.98 -.01%.  
• Bloomberg Global Risk-On/Risk Off Index 3,386.0 +108.0 points.
• Volatility Index(VIX) futures 26.4 +.2%
• Euro Stoxx 50 futures -.49%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.21%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (ABC)/2.58
• (BWA)/.86
• (BCO)/1.19
• (CVS)/2.18
• (DISH)/.66
• (EXC)/.46
• (FDP)/.74
• (GNRC)/2.63
• (JLL)/4.30
• (MRNA)/4.49
• (REGN)/8.75
• (SMG)/1.72
• (TUP)/.22
• (UTHR)/4.54
• (YUM)/1.09
  

After the Close:

• ((ADTN)/.13
• (ALB)/3.21
• (ALL)/-1.15
• (BKNG)/17.59
• (WHD)/.36
• (CLX)/.93
• (EBAY)/.89
• (ETD)/.80
• (FTNT)/.22
• (IR)/.52
• (KLIC)/1.59
• (MRO)/1.28
• (MCK)/5.30
• (MELI)/1.85
• (MET)/1.45
• (MGM)/.33
• (PTEN)/.17
• (RCII)/.99
• (HOOD)/-.34
• (SFM)/.51
• (RGR)/1.50
• (TRUP)/-.03
• (WERN)/1.03

Economic Releases

10:00 am EST

• Factory Orders for June is estimated to rise +1.2% versus a +1.6% gain in May.
• ISM Services Index for July is estimated to fall to 53.5 versus 55.3 in June.
  

10:30 am EST:

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -797,860 barrels versus a -4,523,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,013,570 barrels versus a -3,304,000 barrel decline the prior week. Distillate inventories are estimated to rise by +739,860 barrels versus a -784,000 decline the prior week. Finally, Refinery Utilization is estimated to rise by +.43% versus a -1.5% decline prior.  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone Services PMI report, weekly MBA Mortgage Applications report and the (PGR) investor event 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 industrial and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Lower into Final Hour on Escalating China Tensions, US Policy-Induced Stagflation Fears, Asian Debt Angst, Transport/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance:  Mixed
  

• Volume:  Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 23.2 +8.8%
• DJIA Intraday % Swing 1.04% +2.8%
  
• Bloomberg Global Risk On/Risk Off Index 3,318.0 +16.0 points

• Euro/Yen Carry Return Index 139.22 +.22%

• Emerging Markets Currency Volatility(VXY) 12.3 +.2%

• CBOE S&P 500 Implied Correlation Index 45.2 +2.1% 

• ISE Sentiment Index 102.0 -4.0 points
  

• Total Put/Call 1.0 -1.0%

• NYSE Arms .84 -40.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 83.45 +.74%
  

• US Energy High-Yield OAS 424.28 -7.0%
• Bloomberg TRACE # Distressed Bonds Traded 433.0 -3.0
  

• European Financial Sector CDS Index 113.90 +2.9%

• Italian/German 10Y Yld Spread 225.0 basis points +14.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 154.23 +7.0%
  

• Emerging Market CDS Index 334.78 +2.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.78 -.2%
  
• Ukraine Sovereign Debt Credit Default Swap 12,320.1 +5.0%
  

• 2-Year Swap Spread 26.5 basis points +.25 basis point
  

• TED Spread 32.25 basis points -15.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -17.25 basis points +.25 basis point
  
• MBS  5/10 Treasury Spread  123.0 +11.0 basis points
  
• iShares CMBS ETF 48.59 -.39%
• Avg. Auto ABS OAS 1.0 -2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 49.01 -.53%
• 3-Month T-Bill Yield 2.48% +16.0 basis points
  

• Yield Curve -33.5 basis points (2s/10s) -3.0 basis points
  

• China Iron Ore Spot 113.5 USD/Metric Tonne -2.6%

• Citi US Economic Surprise Index -56.9 -.4 point

• Citi Eurozone Economic Surprise Index -60.7 +1.7 points
  

• Citi Emerging Markets Economic Surprise Index 20.5 -1.8 points

• 10-Year TIPS Spread 2.48 -3.0 basis points
  
• Highest target rate probability for November 2nd FOMC meeting: 47.6%(-19.9 percentage points) chance of 3.0%-3.25%. Highest target rate probability for December 14th meeting: 46.4%(-1.9 percentage points) chance of 3.25%-3.5%.
  

US Covid-19:

• 273 new infections/100K people(last 7 days total). 15.7%(+.4 percentage points) of 1/14/22 peak(1,740) +7/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -70.8%(+1.9 percentage points) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +229 open in Japan 
• China A50 Futures: Indicating -12 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio:

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

Bear Radar

Style Underperformer:

• Mid-Cap Value -.5%

Sector Underperformers:

• 1) Homebuiding -3.5% 2) Road & Rail -2.0% 3) Airlines -1.8%

Stocks Falling on Unusual Volume: 

• CHH, SSRM, BLD, FAZE, FUN, ARQT, EQC, PKI, AMED, EXPED, WMB, KKR, LDOS, CAT, HSIC, LGIH, SMTC, LCII, MIRM, UNVR, BERY, WAT, ZBRA, ATKR, INCY, SGRY, ABR, CAR, SEE, KMPR, MATX, OM, ARNC, EBS, TAP, WIRE, WWD, SYM, TMDX, TWI, EHAB, TMST, SYNH, EOLS, FTAI and GLDD
  

Stocks With Unusual Put Option Activity:

• 1) MCHI 2) JBLU 3) ANET 4) KWEB 5) CAR
  

Stocks With Most Negative News Mentions:

• 1) TMST 2) KOPN 3) ASTE 4) JBLU 5) WWD
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.6%

Sector Outperformers:

• 1) Alt Energy +2.8% 2) Gambling +2.2% 3) Oil Service +2.0%

Stocks Rising on Unusual Volume:

• HKD, RYTM, UBER, LYFT, SPWR, HRMY, PINS, RGEN, ARIS, MPWR, AHCO, ROKU, AEHR, CELH, GETY, SAVA, CRDO and AXNX
  

Stocks With Unusual Call Option Activity:

• 1) REV 2) ANET 3) CAR 4) KODK 5) ACAD

Stocks With Most Positive News Mentions:

• 1) LYFT 2) PINS 3) UBER 4) ZI 5) UFPT
  

Charts:

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