Stocks Reversing Slightly Lower into Afternoon on Rising Fed Rate-Hike Odds, Regional Bank Contagion Worries, Earnings Outlook Jitters, Regional Bank/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 16.7 -1.5%
• DJIA Intraday % Swing .60%
  
• Bloomberg Global Risk On/Risk Off Index 58.3 +.24%

• Euro/Yen Carry Return Index 153.7 +.08%

• Emerging Markets Currency Volatility(VXY) 10.0 unch.

• CBOE S&P 500 Implied Correlation Index 30.9 +.8% 

• ISE Sentiment Index 115.0 +20.0 points
  

• Total Put/Call .90 -11.8%

• NYSE Arms .93 +31.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 73.5 -.25%
  

• US Energy High-Yield OAS 360.7 +.1%
• Bloomberg TRACE # Distressed Bonds Traded 386.0 +20
  

• European Financial Sector CDS Index 92.4 -2.2% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 340.40 -4.0%
  

• Italian/German 10Y Yld Spread 182.0 basis basis points -1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 121.7 +.13%
  

• Emerging Market CDS Index 233.19 +.80%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.97 -.06%

• 2-Year Swap Spread 30.5 basis points +.5 basis point
  

• TED Spread 18.0 basis points -8.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -16.25 -.75 basis point
  
• MBS  5/10 Treasury Spread 167.0 +3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 693.0 unch.
  
• Avg. Auto ABS OAS 95.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.7 unch.
• 3-Month T-Bill Yield 5.12% +7.0 basis points
  

• China Iron Ore Spot 118.5 USD/Metric Tonne +.6%
• Dutch TTF Nat Gas(European benchmark) 42.7 euros/megawatt-hour +3.9%

• Citi US Economic Surprise Index 36.9 -2.2 points

• Citi Eurozone Economic Surprise Index 38.1 -5.7 points
  

• Citi Emerging Markets Economic Surprise Index 32.7 +9.2 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 226.08 +.10:  Growth Rate +1.6% unch., P/E 18.4 +.1
  
• S&P 500 Current Year Estimated Profit Margin 12.26% unch.
  
• Bloomberg US Financial Conditions Index .29 +10.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index -4.06 +7.0 basis points
  
• US Yield Curve -63.75 basis points (2s/10s) -2.75 basis points
• US Atlanta Fed 1Q GDPNow Forecast +2.48% +1.0 basis point
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.58% unch.: CPI YoY +5.17% +5.0 basis points
  
• 10-Year TIPS Spread 2.28 -3.0 basis points
  
• Highest target rate probability for June 14th FOMC meeting: 71.1%(+4.2 percentage points) chance of 5.0%-5.25%. Highest target rate probability for July 26th meeting: 61.0%(+6.3 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -13 open in Japan 
• China A50 Futures: Indicating -19 open in China

• DAX Futures: Indicating +134 open in Germany

Portfolio:

• Higher:  On gains in my tech/industrial sector longs and emerging market shorts
  

• Disclosed Trades:  None
  

• Market Exposure: 50% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.0%
  

Sector Underperformers:

• 1) Regional Banks -2.5% 2) Alt Energy -1.5% 3) Networking -1.5%

Stocks Falling on Unusual Volume: 

• BE, ZI, CBSH, GMAB, IIPR, TRUP, ATXS, SFBS, BOH, MP, INVA, CTLT, NRIX, MRUS and RLAY
  

Stocks With Unusual Put Option Activity:

• 1) GPN 2) VWO 3) LUV 4) RCUS 5) DV
  

Stocks With Most Negative News Mentions:

• 1) PLUG 2) GS 3) BUD 4) CVS 5) CGNT
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth unch.
  

Sector Outperformers:

• Homebuilders +2.3% 2) Gambling +1.6% 3) Gold & Silver +.7%

Stocks Rising on Unusual Volume:

• MDGL, TDOC, SPR, HIMS, UVE, BJRI, RRR, BX and DELL
  

Stocks With Unusual Call Option Activity:

• 1) LBTYA 2) GMDA 3) VIPS 4) GPN 5) GDS

Stocks With Most Positive News Mentions:

• 1) GMDA 2) CLWT 3) MDGL 4) YS 5) BBBY
  

Charts:

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

Tomorrow's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open: 

• (ABT)/.98
• (ALLY)/.87
• (ASML)/4.16
• (BKR)/.26
• (BBBY)/-1.77
• (LAD)/8.87
• (MS)/1.66
• (NDAQ)/.66
• (EDU)/.26
• (TRV)/3.59
• (USB)/1.12
  

After the Close: 

• (AA)/.00
• (CALX)/.26
• (CCI)/1.89
• (DFS)/3.91
• (EFX)/1.36
• (FFIV)/2.43
• (IBM)/1.24
• (KMI)/.29
• (LRCX)/6.53
• (;VS)/.18
• (RLI)/1.24
• (SLG)/1.41
• (STLD)/.360
• (TSLA)/.85
• (MDRX)/.27
• (WTFC)/2.53
• (ZION)/1.54
  

Economic Releases

10:30 am EST

• Bloomberg consensus estimates call for an EIA weekly crude oil inventory decline of -621,330 barrels versus a +597,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,523,170 barrels versus a -330,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,075,670 barrels versus a -606,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.55% versus a -.3% decline prior.
  

2:00 pm EST

• Federal Reserve's Beige Book release.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Williams speaking, UK CPI report, 20Y T-Bond auction and the weekly MBA Mortgage Applications report could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• Volume Running -13.7% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.1 +1.3
  
• 8 Sectors Declining, 3 Sectors Rising
• 46.0% of Issues Advancing, 56.0% Declining
• 53 New 52-Week Highs, 18 New Lows
• 47.1%(+2.0%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 62.0 +1
  
• Bloomberg Global Risk-On/Risk-Off Index 58.0 -.2%
  
• Russell 1000: Growth/Value 15,809.6 +.19%
  
• Vix 17.1 +1.0%
• Total Put/Call .90 -11.8%
• TRIN/Arms 1.44 +102.8%
  

Tuesday Watch

Night Trading 

• Asian equity indices are -.5% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 121.5 -2.75 basis points. 

• China Sovereign CDS 67.0 -.25 basis point. 
• China Iron Ore Spot 117.0 USD/Metric Tonne +.2%.

• Bloomberg Emerging Markets Currency Index 47.7 -.03%.
• Bloomberg Global Risk-On/Risk Off Index 58.7 +.9%. 
• Bloomberg US Financial Conditions Index .25 +6.0 basis points.
  
• Volatility Index(VIX) futures 19.7 +.63%.
• Euro Stoxx 50 futures +.19%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.11%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and consumer 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.