Stocks Slightly Lower into Final Hour on US Policy-Induced Stagflation Fears, European/Emerging Markets/US High-Yield Debt Angst, Dollar Strength, Telecom/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume:  About Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 29.0 -.1%
• DJIA Intraday % Swing 1.52%
  
• Bloomberg Global Risk On/Risk Off Index 48.0 +9.2%

• Euro/Yen Carry Return Index 147.29 -.72%

• Emerging Markets Currency Volatility(VXY) 12.3 +1.3%

• CBOE S&P 500 Implied Correlation Index 49.2 +.16% 

• ISE Sentiment Index 87.0 -8.0 points
  

• Total Put/Call .91 -5.2%

• NYSE Arms .74 +131.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 97.84 -.96%
  

• US Energy High-Yield OAS 415.89 -2.44%
• Bloomberg TRACE # Distressed Bonds Traded 464.0 -2.0
  

• European Financial Sector CDS Index 142.41 +2.57% 
• Credit Suisse Subordinated 5Y Credit Default Swap 477.61 +16.1%
  

• Italian/German 10Y Yld Spread 244.0 basis points +13.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 172.55 -3.99%
  

• Emerging Market CDS Index 305.22 +2.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.63 -.06%

• 2-Year Swap Spread 29.5 basis points +1.0 basis point
  

• TED Spread 36.75 basis points -4.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -63.5 basis points +3.25 basis points
  
• MBS  5/10 Treasury Spread  167.0 unch.
  
• iShares CMBS ETF 45.99 -.22%
• Avg. Auto ABS OAS .71 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.40 -.57%
• 3-Month T-Bill Yield 3.37% +2.0 basis points
  

• Yield Curve -39.5 basis points (2s/10s) +8.5 basis points
  

• China Iron Ore Spot 93.50 USD/Metric Tonne -.3%
• Dutch TTF Nat Gas(European benchmark) 175.40 euros/megawatt-hour +8.31%

• Citi US Economic Surprise Index 7.50 +1.2 points

• Citi Eurozone Economic Surprise Index 2.8 +3.0 points
  

• Citi Emerging Markets Economic Surprise Index -3.9 +.5 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 236.25 -.11:  Growth Rate +15.8% unch., P/E 16.0 unch.
  
• Bloomberg US Financial Conditions Index -.96 +20.0 basis points
  
• US Atlanta Fed GDPNow Forecast +2.70% +42.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.11% unch.: CPI YoY +8.20% unch.
  
• 10-Year TIPS Spread 2.21 -3.0 basis points
  
• Highest target rate probability for December 14th FOMC meeting: 67.5%(+2.9 percentage points) chance of 4.25%-4.5%. Highest target rate probability for February 1st meeting: 54.2%(+2.4 percentage points) chance of 4.5%-4.75%.
  

US Covid-19:

• 91 new infections/100K people(last 7 days total). 5.2%(-.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 -83.9%(unch.) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -50 open in Japan 
• China A50 Futures: Indicating +465 open in China

• DAX Futures: Indicating +92 open in Germany

Portfolio:

• Higher:  On gains in my tech/medical/commodity sector longs and index hedges
  

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

• Market Exposure:  50% net long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.7%
  

Sector Underperformers:

• 1) Alt Energy -3.8% 2) Telecom -3.1% 3) REITs -2.6%

Stocks Falling on Unusual Volume: 

• RQI, HTZ, HOG, STWD, EPAM, CUZ, LOVE, SGH, RC, CCRN, BXMT, EFC, MPW, OPI, SLG, IVR, PDM, KRTX, NLY, SQSP and BLNK
  

Stocks With Unusual Put Option Activity:

• 1) PTEN 2) COF 3) CAR 4) EWT 5) SWK
  

Stocks With Most Negative News Mentions:

• 1) SHC 2) ENPH 3) VNO 4) CCL 5) BBBY
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.7%

Sector Outperformers:

• 1) Oil Service +2.7% 2) Energy +1.54% 3) Computer Hardware +.6%

Stocks Rising on Unusual Volume:

• BHVN, CHWY, SLB and LW
  

Stocks With Unusual Call Option Activity:

• 1) PR 2) TWTR 3) RITM 4) PBF 5) DRIP

Stocks With Most Positive News Mentions:

• 1) XCPL 2) TOPS 3) BHVN 4) BBRW 5) ABOS
  

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +.1% Above 100-Day Average 
• 10 Sectors Declining, 1 Sector Rising
• 13.5% of Issues Advancing, 84.1% Declining
• 19 New 52-Week Highs, 75 New Lows
• 23.0%(-9.0%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.0 -3.0
  
• Bloomberg Global Risk-On/Risk-Off Index 47.0 +7.0%
  
• Russell 1000: Growth/Value 15,366.44 -.27%
  
• Vix 30.0 +3.2%
• Total Put/Call 1.14 +18.8%
• TRIN/Arms 1.09 +240.6% 

Wednesday Watch

Evening Headlines

Bloomberg:          

• Japan LDP Aims to Aid Sickly Firms as Covid-Era Free Credit Ends.  
• South Korea’s Inflation Edges Down as Rate Hikes Cool Demand.
  
• Asian Stocks Set to Rise After US Equities Rally: Markets Wrap.  
• Oil Steady as OPEC+ Mulls Biggest Cut to Production Since 2020.
  
• Musk Says Twitter Deal Paves Way for ‘X, the Everything App’.
  
• Juul Moves to Enter Financing Talks for Potential Bankruptcy.  
• Amazon Freezes Corporate Hiring in Retail Business With Slowing Sales.  
• Pfizer’s Unthinkable Boom Now Leaves Investors Anxious.
• Wall Street Sees S&P 500 Falling Further After Bear-Market Bounce.  
• White Collar Workers May Finally Be Getting Anxious About the Job Market.

Wall Street Journal:

• Iran’s Crippled Economy Sustains Protests After Religious Police Lit Flame.
• Illinois’s Shocking Report Card. The Land of Lincoln is failing its children and covering it up.
• Racial Preferences Harm Their Beneficiaries, Too. Favored minorities struggle when they might have thrived at less-selective schools. 
• Dalio Hands Over Control of Bridgewater.
• U.K. Leader Faces Backlash After Market Turmoil.
• Retail Real Estate Enjoying Biggest Revival in Years.
• OPEC+ Girds for Contentious Meeting Over Oil-Production Cuts.
• Micron to Spend Up to $100 Billion on Chip Factory in New York.

Fox News:

• IRS employees stole COVID relief funds to bankroll lavish lifestyles, DOJ reveals.

CNBC.com:

• Twitter shares surge 22% after Elon Musk revives deal to buy company at original price.
• Treasury Secretary Yellen says ‘there is no truth’ to report she’ll leave agency after election. 
  

MarketWatch:             

• History shows S&P 500’s bounce from 2022 low may not signal bear market’s end, cautions Bespoke.
  
• ‘This is not healthy’: The latest advance for stocks could signal more pain ahead for markets. Here’s why.  
• Visa ‘stands to lose the most’ from Fed’s new debit-card rules, analyst says.
  
• Average CEO pay is now 399 times more than a typical worker’s wage — and one-third of that rise happened in the last three years.  
• ‘The mood is dark’ — More than half of Silicon Valley residents still want to move away, poll finds.  
• Over 50% of CEOs say they’re considering cutting jobs over the next 6 months — and remote workers may be the first go to.

Zero Hedge:

• Now That Twitter Belongs To Elon, Here Is What He Will Do To The Platform In His Own Words.
• Amazon Reportedly Halts Corporate Hiring For Retail Business.
• Nearly Half Of Americans Making Six-Figures Living Paycheck To Paycheck.
• Is Canada On The Verge Of A Political Revolution?
• Former NSA Staffer Charged With Espionage After Trying To Sell Information To Undercover FBI Agent.
• D.E. Shaw Hiking Some Hedge Fund Fees To As High As 3.5%-And-40%.
• Trump Asks Supreme Court To Block FBI From Using Seized Documents.
• South Korea & US Fire 4 Surface-To-Surface Missiles In Rare Response To North's Launch.
• Restoring Free Speech At Our Universities.
• Roubini: The Stagflationary Debt Crisis Is Here.
• US stocks continued to rally and the dollar pullback persisted amid soft data releases - Newsquawk Asia-Pac Market Open.
• Beijing Will Know More About You Than You Do: Gettr CEO.
• WTI Extends Gains After API Reports Significant Draws.
• Stocks and bonds continue ascent with cracks in US data testing Fed resolve - Newsquawk US Market Wrap.
• Trump Asks Supreme Court To Block FBI From Using Seized Documents.
• Stocks, Bonds, Bitcoin, & Bullion Jump As Dollar Dumps.

 Newsmax:   

• Conservative Group Sues FBI Over Alleged Big Tech Collusion.

TheGatewayPundit.com:

• Biden to Attend Democrat Fundraiser at the Home of Fox News Owner Rupert Murdoch’s Son James.
• FLASHBACK: CIA Sabotaged Soviet Pipeline to Europe in 1982 – US Software Caused Massive Explosion in Siberian Pipeline Seen From Space.
• Outrageous! Tarrant County Texas Sheriff Won’t Investigate Police Body Cam Footage of Ballot Harvesting “Confession”.
• HUGE! Election Company Konnech CEO Eugene Yu Arrested in Los Angeles for Theft of Personal Data of Election Workers – Sent to China!
• Reporter Confronts Karine Jean-Pierre Over Biden’s Praise of Coast Guard Rescue Swimmer Facing Termination Because He’s Not Vaccinated (VIDEO).
• Disney Cancels Its New Release of “Little Demon” About a Woman Impregnated by Satan and Her Antichrist Daughter.
• Another Biden Record – US Debt Surpasses $31 Trillion for First Time Ever.
  

The Epoch Times:

• CCP Opens Police Departments in the US; COVID-19 Vaccine Autopsy Reports Hidden From Public.
• Fauci Defends Funding Group That’s Collaborated With Wuhan Facility at Center of Lab Leak Theory.
• ‘Summoning the Devil:’ Chinese Economist’s Call for ‘People’s Economy’ Triggers Backlash.

Twitter:

• @Robber_Baron_ - Just as a new study shows myocarditis risk rises with EACH ADDITIONAL Covid shot, the CDC changes it's definition of "fully vaccinated" to include more boosters.
• @TomFitton - NEW: Records show a disturbing and massive campaign by the Biden administration to propagandize and politicize the controversial COVID vaccine.
• @disclosetv - NOW - China starts enforcing its zero-COVID policy with machine guns at Xishuangbanna Airport in Yunnan. People screaming "are you gonna kill us all?". (video)
  

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 871,837 Reports(+4,210 from prior week) Through September 23rd, 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 +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 169.5 -17.0 basis points. 

• China Sovereign CDS 95.25 -9.75 basis points.
  

• Bloomberg Emerging Markets Currency Index 47.66 -.03%   
• Bloomberg Global Risk-On/Risk Off Index 44.66 +1.6%. 
• Bloomberg US Financial Conditions Index -1.10 +7.0 basis points
  
• Volatility Index(VIX) futures 29.0 +.5%
• Euro Stoxx 50 futures -.43%.

• S&P 500 futures -.32%.

• NASDAQ 100 futures -.40%  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (HELE)/2.21
• (RPM)/1.33
  

After the Close:

• (RGP)/.49
  

Economic Releases

8:15 am EST

• The ADP Employment Change for Sept. is estimated to rise to 200K versus 132K in Aug.
  

8:30 am EST

• The Trade Balance for Aug. is estimated at -$67.7B versus $70.7B in July.

10:00 am EST

• The ISM Services Index for Sept. is estimated to fall to 56.0 versus 56.9 in Aug.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,609,000 barrels versus a -215,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,384,140 barrels versus a -2,422,000 barrel decline the prior week. Distillate inventories are estimated at -1,465,000 barrels versus -2,891,000 barres the prior week. Finally, Refinery Utilization is estimated to fall by -.43% versus a -3.0% decline prior.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone Services PMI report 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 modestly higher, boosted by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% Net Long heading into the day.

Stocks Substantially Higher into Afternoon on Less Hawkish Fed Hopes, Dollar Weakness, Less European/Emerging Markets/US High-Yield Debt Angst, Commodity/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Every Sector Rising
  

• Volume:  Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 29.2 -3.0%
• DJIA Intraday % Swing 1.60%
  
• Bloomberg Global Risk On/Risk Off Index 43.8 +1.5%

• Euro/Yen Carry Return Index 148.17 +1.24%

• Emerging Markets Currency Volatility(VXY) 12.2 -.81%

• CBOE S&P 500 Implied Correlation Index 48.4 -1.0% 

• ISE Sentiment Index 81.0 -27.0 points
  

• Total Put/Call .95 -1.0%

• NYSE Arms .55 +14.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 99.79 -4.67%
  

• US Energy High-Yield OAS 429.56 -4.8%
• Bloomberg TRACE # Distressed Bonds Traded 465.0 +15.0
  

• European Financial Sector CDS Index 138.0 -5.4%
  

• Italian/German 10Y Yld Spread 231.0 basis points -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 179.73 -3.8%
  

• Emerging Market CDS Index 302.20 -4.3%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.62 +.02%

• 2-Year Swap Spread 28.5 basis points -1.5 basis points
  

• TED Spread 41.25 basis points -9.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -66.75 basis points +1.0 basis point
  
• MBS  5/10 Treasury Spread  167.0 -3.0 basis points
  
• iShares CMBS ETF 45.97 +.14%
• Avg. Auto ABS OAS .71 +5.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.64 +.42%
• 3-Month T-Bill Yield 3.35% +13.0 basis points
  

• Yield Curve -48.0 basis points (2s/10s) -3.25 basis points
  

• China Iron Ore Spot 94.60 USD/Metric Tonne +2.7%
• Dutch TTF Nat Gas(European benchmark) 169.50 euros/megawatt-hour -.24%

• Citi US Economic Surprise Index 6.30 -3.1 points

• Citi Eurozone Economic Surprise Index -.2 +.4 point
  

• Citi Emerging Markets Economic Surprise Index -4.4 -.1 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 236.36 +.36:  Growth Rate +15.8% +.1 percentage point, P/E 16.0 +.4
  
• Bloomberg US Financial Conditions Index -1.13 +33.0 basis points
  
• US Atlanta Fed GDPNow Forecast +2.28% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.11% unch.: CPI YoY +8.20% unch.
  
• 10-Year TIPS Spread 2.24 +4.0 basis points
  
• Highest target rate probability for December 14th FOMC meeting: 67.1%(+10.3 percentage points) chance of 4.25%-4.5%. Highest target rate probability for February 1st meeting: 52.9%(+9.1 percentage points) chance of 4.5%-4.75%.
  

US Covid-19:

• 98 new infections/100K people(last 7 days total). 5.6%(-.0 percentage point) of 1/14/22 peak(1,740) -0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -83.9%(-.2 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +108 open in Japan 
• China A50 Futures: Indicating +288 open in China

• DAX Futures: Indicating -58 open in Germany

Portfolio:

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

• Disclosed Trades:  None
  

• Market Exposure:  75% net long