Stocks Slightly Lower into Afternoon on US Policy-Induced Stagflation Fears, Fed "Higher for Longer" Worries, Earnings Outlook Concerns, Financial/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 16.8 +1.9%
• DJIA Intraday % Swing .53%
  
• Bloomberg Global Risk On/Risk Off Index 57.1 -2.3%

• Euro/Yen Carry Return Index 153.7 -.33%

• Emerging Markets Currency Volatility(VXY) 9.9 -1.9%

• CBOE S&P 500 Implied Correlation Index 32.3 +2.6% 

• ISE Sentiment Index 72.0 -29.0 points
  

• Total Put/Call .85 -14.1%

• NYSE Arms 1.69 +77.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 76.4 +2.23%
  

• US Energy High-Yield OAS 380.2 +3.7%
• Bloomberg TRACE # Distressed Bonds Traded 412.0 +19
  

• European Financial Sector CDS Index 95.75 +3.30% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 349.08 +.32%
  

• Italian/German 10Y Yld Spread 187.0 basis basis points +2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 126.4 +1.8%
  

• Emerging Market CDS Index 241.81 +1.5%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.9 -.04%

• 2-Year Swap Spread 28.5 basis points -.75 basis point
  

• TED Spread 20.0 basis points +8.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +.75 basis point
  
• MBS  5/10 Treasury Spread 165.0 -4.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 694.0 unch.
  
• Avg. Auto ABS OAS 95.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.7 +.21%
• 3-Month T-Bill Yield 5.07% -5.0 basis points
  

• China Iron Ore Spot 112.8 USD/Metric Tonne -2.3%
• Dutch TTF Nat Gas(European benchmark) 40.6 euros/megawatt-hour +.7%

• Citi US Economic Surprise Index 26.4 -8.5 points

• Citi Eurozone Economic Surprise Index 37.0 -.5 point
  

• Citi Emerging Markets Economic Surprise Index 31.8 -.9 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 226.08 unch.:  Growth Rate +1.6% unch., P/E 18.4 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.26% unch.
  
• Bloomberg US Financial Conditions Index .11 -9.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index -4.18 -14.0 basis points
  
• US Yield Curve -63.75 basis points (2s/10s) +2.0 basis points
• US Atlanta Fed 1Q GDPNow Forecast +2.48% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.58% unch.: CPI YoY +5.17% unch.
  
• 10-Year TIPS Spread 2.29 unch.
  
• Highest target rate probability for June 14th FOMC meeting: 66.1%(+7.1 percentage points) chance of 5.0%-5.25%. Highest target rate probability for July 26th meeting: 55.2%(+1.9 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -1 open in Japan 
• China A50 Futures: Indicating -13 open in China

• DAX Futures: Indicating +152 open in Germany

Portfolio:

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

• Disclosed Trades:  Covered some of my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 75% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -.9%
  

Sector Underperformers:

• 1) Electric Vehicles -2.9% 2) Regional Banks -2.1% 3) Telecom -2.0%

Stocks Falling on Unusual Volume: 

• UAL, HRI, GT, KEY, WAL, TECH, NTAP, MP, PERI, RGLD, AMR, FFIV, CMA, SGML, IBKR, GM, VZ, F, ALGM, STM, USB, ACLX, RGEN, VIRT, WTFC, AMRC, RGEN, RIVN, CCI, CLFD, MSTR, ACHC, PM, ALLY, ZION, CFG, SNAP, STX, STLA, SLG, CPE, LI, RIOT, TALO, MAN, LUNR, TSLA, GFF, NRIX, BANL, NVRO, EGBN and T
  

Stocks With Unusual Put Option Activity:

• 1) PTEN 2) FFIV 3) HUN 4) SNPS 5) TSEM
  

Stocks With Most Negative News Mentions:

• 1) BBBY 2) TSLA 3) STX 4) VERI 5) FRC
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.4%
  

Sector Outperformers:

• Homebuilding +3.6% 2) Steel +2.3% 3) Gambling +1.4%

Stocks Rising on Unusual Volume:

• XPO, NOVA, MATX, SNA, LRCX, IRDM, STLD, DHI, RLI, LVS, RRR and WSO
  

Stocks With Unusual Call Option Activity:

• 1) ARQT 2) SYNH 3) UIHC 4) PE 5) BSN

Stocks With Most Positive News Mentions:

• 1) BMI 2) SNA 3) LRCX 4) DHI 5) RLI
  

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: 

• (ALV)/.88
• (FCX)/.45
• (HCA)/3.92
• (PG)/1.32
• (RF)/.64
• (SAP)/1.12
• (SLB)/.61
  

After the Close: 

• None of note
  

Economic Releases

9:45 am EST

• The S&P Global US Manufacturing PMI report for April is estimated to fall to 49.0 versus 49.2 in March.
• The S&P Global US Services PMI for April is estimated to fall to 51.5 versus 52.6 in March.
• The S&P Global US Composite PMI for April is estimated to fall to 51.2 versus 52.3 in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Cook speaking, Bloomberg April US Economic Survey and the UK retail sales 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 -7.3% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 8.8 -1.9
  
• 10 Sectors Declining, 1 Sector Rising
• 39.5% of Issues Advancing, 57.3% Declining
• 51 New 52-Week Highs, 19 New Lows
• 44.8%(-.5%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 60.0 -1
  
• Bloomberg Global Risk-On/Risk-Off Index 57.7 -1.4%
  
• Russell 1000: Growth/Value 15,828.3 +.14%
  
• Vix 16.9 +2.6%
• Total Put/Call .93 -6.1%
• TRIN/Arms 1.54 +62.1%
  

Thursday Watch

Night Trading 

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 125.25 +3.75 basis points 

• China Sovereign CDS 71.25 +4.25 basis points
  
• China Iron Ore Spot 116.0 USD/Metric Tonne -1.2%.

• Bloomberg Emerging Markets Currency Index 47.6 +-.01%.
• Bloomberg Global Risk-On/Risk Off Index 59.0 +.9%. 
• Bloomberg US Financial Conditions Index .14 -7.0 basis points.
  
• Volatility Index(VIX) futures 19.5 +.8%.
• Euro Stoxx 50 futures +.05%.

• S&P 500 futures -.24%.

• NASDAQ 100 futures -.39%.  

Morning Preview Links

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