Stocks Slightly Higher into Afternoon on US Debt Ceiling Agreement Hopes, Diminishing Regional Bank Contagion Fears, Short-Covering, Alt Energy/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 17.1 +1.7%
• DJIA Intraday % Swing .91%
  
• Bloomberg Global Risk On/Risk Off Index 58.0 +.7%

• Euro/Yen Carry Return Index 157.0 +.56%

• Emerging Markets Currency Volatility(VXY) 9.6 +.9%

• CBOE S&P 500 Implied Correlation Index 29.4 -2.4% 

• ISE Sentiment Index 105.0 +15.0 points
  

• Total Put/Call .76 -16.5%

• NYSE Arms .77 -31.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 77.40 -2.7%
  

• US Energy High-Yield OAS 395.66 -2.6%
• Bloomberg TRACE # Distressed Bonds Traded 427.0 -11.0
  

• European Financial Sector CDS Index 94.2 -2.0% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 316.5 -.5%
  

• Italian/German 10Y Yld Spread 186.0 basis points +2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 126.3 -.8%
  

• Emerging Market CDS Index 259.09 +.65%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.9 unch.

• 2-Year Swap Spread 18.25 basis points -1.0 basis point
  

• TED Spread 17.5 basis points +.2 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -18.55 -.25 basis point
  
• MBS  5/10 Treasury Spread 176.0 +3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 716.0 unch.
  
• Avg. Auto ABS OAS 93.0 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.2 +.1%
• 3-Month T-Bill Yield 5.23% -1.0 basis point
  

• China Iron Ore Spot 101.8 USD/Metric Tonne -.33%
• Dutch TTF Nat Gas(European benchmark) 29.7 euros/megawatt-hour  -1.5%

• Citi US Economic Surprise Index 3.0 -2.5 points

• Citi Eurozone Economic Surprise Index -28.7 -1.2 points
  

• Citi Emerging Markets Economic Surprise Index 16.7 -.3 point
• S&P 500 Current Quarter EPS Growth Rate YoY(471 of 500 reporting) -3.4% -.6 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 228.54 +.30:  Growth Rate +2.4% +.1 percentage point, P/E 18.3 -.1
  
• S&P 500 Current Year Estimated Profit Margin 12.24% +2.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(8 of 10 reporting) -2.1% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 199.76 +.02: Growth Rate +29.0% unch., P/E 34.1 unch.
  
• Bloomberg US Financial Conditions Index .04 +1.0 basis point
• Bloomberg Euro-Zone Financial Conditions Index -4.52 +2.0 basis points
  
• US Yield Curve -61.5 basis points (2s/10s) -2.5 basis points
• US Atlanta Fed 2Q GDPNow Forecast +2.89% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.65% unch.: CPI YoY +4.13% unch.
  
• 10-Year TIPS Spread 2.25 unch.
  
• Highest target rate probability for July 26th FOMC meeting: 61.7%(-18.9 percentage points) chance of 5.0%-5.25%. Highest target rate probability for Sept. 20th meeting: 51.9%(-6.6 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +184 open in Japan 
• China A50 Futures: Indicating -13 open in China

• DAX Futures: Indicating +29 open in Germany

Portfolio:

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

• Disclosed Trades:  None
  

• Market Exposure: 50% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth unch.
  

Sector Underperformers:

• 1) Homebuilding -1.6% 2) Foods -1.2% 3) Restaurants -1.1%

Stocks Falling on Unusual Volume: 

• NKE, HIBB, ASO, AEO, BRC, RE, GLBE, SCPH, TRMD, FL, RNR, COCO, IEP and ZIM
  

Stocks With Unusual Put Option Activity:

• 1) GPN 2) SBGI 3) ZIM 4) IVZ 5) DKS
  

Stocks With Most Negative News Mentions:

• 1) NSTG 2) GRAB 3) ICPT 4) TGT 5) WE
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.2%
  

Sector Outperformers:

• Alt Energy +3.5% 2) Regional Banks +2.3% 3) Digital Health +1.8%

Stocks Rising on Unusual Volume:

• IONQ, KRYS, UPST, SDGR, IMVT, TERN, PDCE, TWLO, DKNG, VYGR, VRT, WK, PFE, CVGI and ZNTL
  

Stocks With Unusual Call Option Activity:

• 1) GPN 2) NAT 3) JMIA 4) CTRA 5) PATH

Stocks With Most Positive News Mentions:

• 1) VSAT 2) DKNG 3) SQL 4) AI 5) NIO
  

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:

• (AZO)/31.47
• (BJ)/.85
• (DKS)/3.22
• (LOW)/3.45
• (VIPS)/2.67
• (WSM)/2.39
  

After the Close: 

• (A)/1.26
• (INTU)/8.49
• (PANW)/.93
• (TOL)/1.92
• (URBN)/.36
• (VFC)/.14
  

Economic Releases 

8:30 am EST

• The Philly Fed Non-Manufacturing Activity Index for May.
  

9:45 am EST

• The S&P Global US Manufacturing PMI for May is estimated to fall to 50.0 versus 50.2 in April.
• The S&P Global US Services PMI for May is estimated to fall to 52.5 versus 53.6 in April.
• The S&P Global US Composite PMI for May is estimated to fall to 53.0 versus 53.4 in April.
  

10:00 am EST

• New Home Sales for April is estimated to fall to 665K versus 683K in March. 
• The Richmond Fed Manufacturing Index for May is estimated to rise to -8.0 versus -10.0 in April.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone Current Account report, 2Y T-Note auction, US weekly retail sales reports, Wolfe Research Transport/Industrials Conference, (VMI) investor day and the (HST) investor day could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• NYSE Volume Running -7.6% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 8.8 +3.0
  
• 4 Sectors Declining, 7 Sectors Rising
• 57.7% of Issues Advancing, 39.1% Declining
• 29 New 52-Week Highs, 22 New Lows
• 42.8%(+1.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.0 -3.0
  
• Bloomberg Global Risk-On/Risk-Off Index 58.3 +1.0%
  
• Russell 1000: Growth/Value 16,805.2 +.05%
• 1-Day Vix 10.8 -24.1%
  
• Vix 17.3 +2.8% 
  
• Total Put/Call .70 -23.1%
• TRIN/Arms .84 -26.3%
  

Monday Watch

Today's Headlines

Bloomberg:

• G-7 Struggles to Win Over Swing Nations Courted by China, Russia. 
• China’s $23 Trillion Local Debt Mess Is About to Get Worse.
• Missing Recovery Leaves China’s Metals Bears In Charge.
• ECB Has More Ground to Cover to Tame Inflation, Lagarde Says.
• US-China Relations Set to Improve ‘Very Shortly,’ Biden Says.
• Rigging of Libor During 2008 Crisis Was ‘State-Led,’ Times Says.
• Investors in Asia’s Worst-Performing Market on Edge After Poll. 
• Stocks, Currencies in Tight Ranges Amid Debt Talks: Markets Wrap.
• Oil Steadies After Loss as US Debt Talks Take Center Stage.
• Biden, McCarthy to Meet Monday as Staff Debt Talks Resume.
• Traders Brace for Volatility With US Debt Deal Still Elusive.
• NYC’s Adams Calls on US to Direct Migrants Around the Country.
• SpaceX Launches Crew of Private Astronauts to Space Station.

Zero Hedge: 

• Bill Gates 'Blackmailed' By Jeffrey Epstein Over Affair With Russian Bridge Player.
• Debt Ceiling Negotiations Crumble, McCarthy And Biden To Hold Sunday Call As Impasse Intensifies.
• Is Self-Defense Becoming Illegal?
• "Not Our Beliefs" - Bud Light Distributor Sends Out Public Plea to Bring Back Customers.
• First Sentiment Shift Of 2023: S&P Breakout Sparks FOMO Frenzy, Hedge Fund Buying.
• "Isolated Event" Again? All Voters Of New York County Falsely Identified As Democrats In Voter IDs.
• Gun Industry Writes To Congress As Imminent Ban Threatens 40 Million Firearms.
• The Five Stages Of Bank Failure Grief.
• The Truth About Randi Weingarten And The School Closures.
• GOP Pushes Back Against WHO Plans For 'Global Governance' On Emergencies.
• These Are The World's Top 50 Endowment Funds.
• "It's Criminal": Central Wisconsin Communities Unite To Stave Off Looming Wind Turbine Industry.
• Despite Denials, Experts Say Fentanyl-Laced Marijuana Is A Growing Problem.
• China Bans Micron As Supplier Over 'Major National Security Risk'.
• Weekend News Round Up - Newsquawk Asia-Pac Market Open.
• The End Game For The Debt Ceiling.
• Hartnett: AI = Universal Basic Income = Fed Yield Curve Control To Fund Bigger Deficits.
• The Durham Report Indicts The Deep State... And The Media.
• Signs of exuberance: we had a few but....
• TME Weekend: Lowest in 20 years.
• Pelosi Daughter Carts Failing Feinstein Around In Scheme To Hold Seat For Schiff.
• Supreme Court: IRS Can Obtain Bank Records Of 3rd Parties Not Under Investigation.
• Looking Back On The Sadism Of The COVID-19 Shaming Campaign.
• FDA Advisers Back Maternal RSV Vaccine As Pfizer Says Safety Concerns Can Be Studied Post-Approval.
• Biden Taunts Russia At G7 When Asked About "Colossal Risk" Of Escalation.
• Mike Wilson Cranks Up The Doom And Gloom To 11: "Our Model Now Projects A Much More Dire Outcome".

Wall Street Journal:

• Epstein Appeared to Threaten Bill Gates Over Microsoft Founder’s Affair.
• Bakhmut Largely Under Russian Control: Ukrainian General.
• Here’s What It Looks Like When Americans Retire Overseas.
• Elon Musk Is Right About George Soros—and Not Anti-Semitic. The Hungarian-born billionaire has done more than anyone to turn Americans against Israel.
• The Target of Runaway Theft. The CEO says thievery will cost the giant retailer $500 million. 
• How America’s Largest Restaurant Franchisee Decides When to Raise Prices.
• Fed Official Is Open to Forgoing June Rate Hike.

CNBC:

• Biden and McCarthy to meet on Monday to try to avoid looming debt default.
• Monday is Ford’s chance to convince Wall Street skeptics of its EV plans.

MarketWatch.com:

• Americans are not paying off their credit-card debt. We should be concerned.
• After the pause: This is how borrowers are preparing for resumption of student-debt payments.
• Olive-oil prices hit record high on severe shortage.
• Most stocks end up losing you money. So what’s a stock-market investor to do?

NewsMax:

•   Yellen: June 1 'Hard Deadline' for Raising Debt Ceiling.

Fox News:

• Trans high school runner's state championship qualifying finish in girls' race draws backlash
  

TheGatewayPundit.com: 

• Robert Kennedy Jr. on Durham Report: “That Report Is Appalling – You Have 50 Top Level CIA Agents Who Agree to Collaborate in a Project to Fix Election”.
• “Of Course No One Will Blame Me!” – Joe Biden Blasts Peter Doocy on Debt Ceiling Talks and Looming Default (VIDEO).
• Jeffrey Epstein Allegedly Threatened Bill Gates Over 2010 Affair With Russian Bridge Player.
• Native American Man Killed By Border Patrol Shortly After Calling Border Patrol On Trespassing Migrants.
• Devin Nunes: Obama Knew… Obama Was Directly Involved – He Got All the Intelligence Agencies Involved in Trump-Russia Hoax But Knew It was a Lie Back in August 2016 (VIDEO)
• Beyoncé Labeling Venue Bathrooms as ‘Gender Neutral’ For ‘Renaissance’ World Tour.
• Target Under Fire for Selling Clothing Made By Creepy Satanic Transgender Designer That Promotes Drugs and Violence.
• America First Legal Launches Investigation into Microsoft Prioritizing Hiring H-1B Visa Holders Over American Workers.
• WATCH: Democrat Georgia Representative Blasts Her Own Party for Prioritizing Migrants Over Inner-City American Kids.

The Epoch Times:

• ANALYSIS: TikTok Faces Escalated Restrictions Worldwide; Harms on Children a Main Concern.
• ‘Smoke and Mirrors’: Congressman Unconvinced by TikTok’s Remedial Plan to Stay in US.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 961,352 Reports(+1,715 from prior week) Through May 12th, 2023.
  

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.

Night Trading

• Asian indices are -.5% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 126.75 -2.0 basis points
  
• China Sovereign CDS 68.25 -1.5 basis points.
• China Iron Ore Spot 102.9 USD/Metric Tonne -2.4%
  
• Bloomberg Emerging Markets Currency Index 47.1 -.01%.
• Bloomberg Global Risk-On/Risk Off Index 58.3 +1.1%.
• Bloomberg US Financial Conditions Index -.08 -12.0 basis points. 
  
• Volatility Index(VIX) futures 20.0 +1.9%. 
• Euro Stoxx 50 futures -.02%.
• S&P 500 futures -.13%.
• NASDAQ 100 futures -.03%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial 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 week.