Stocks Falling into Afternoon on US Policy-Induced Stagflation Fears, Diminished US Debt Ceiling Deal Optimism, European/US High-Yield Debt Angst, Tech/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 20.4 +9.9%
• DJIA Intraday % Swing .85%
  
• Bloomberg Global Risk On/Risk Off Index 55.9 -2.6%

• Euro/Yen Carry Return Index 157.1 +.41%

• Emerging Markets Currency Volatility(VXY) 9.5 -.6%

• CBOE S&P 500 Implied Correlation Index 32.8 +5.3% 

• ISE Sentiment Index 137.0 +40.0 points
  

• Total Put/Call .97 -1.0%

• NYSE Arms 1.03 +25.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 79.3 +1.6%
  

• US Energy High-Yield OAS 404.5 +1.6%
• Bloomberg TRACE # Distressed Bonds Traded 424.0 -3.0
  

• European Financial Sector CDS Index 97.3 +3.9% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 325.69 +4.3%
  

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

• Asia Ex-Japan Investment Grade CDS Index 125.6 +1.0%
  

• Emerging Market CDS Index 257.3 +.49%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.8 unch.

• 2-Year Swap Spread 22.0 basis points +3.75 basis pionts
  

• TED Spread 6.0 basis points -5.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -20.75 -2.0 basis points
  
• MBS  5/10 Treasury Spread 181.0 +4.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 718.0 unch.
  
• Avg. Auto ABS OAS 94.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.1 -.07%
• 3-Month T-Bill Yield 5.33% +6.0 basis points
  

• China Iron Ore Spot 96.0 USD/Metric Tonne +.6%
• Dutch TTF Nat Gas(European benchmark) 27.8 euros/megawatt-hour  -4.6%

• Citi US Economic Surprise Index .5 -1.1 points

• Citi Eurozone Economic Surprise Index -40.4 -4.5 points

• Citi Emerging Markets Economic Surprise Index 13.6 -.3 point
• S&P 500 Current Quarter EPS Growth Rate YoY(477 of 500 reporting) -3.3% +.1 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 228.63 +.06:  Growth Rate +2.3% -.1 percentage point, P/E 18.0 -.3
  
• S&P 500 Current Year Estimated Profit Margin 12.24% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(8 of 10 reporting) -2.1% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 199.96 +.14: Growth Rate +29.1% +.1 percentage point, P/E 33.4 -.7
  
• Bloomberg US Financial Conditions Index -.06 +3.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index -4.70 -11.0 basis points
  
• US Yield Curve -61.75 basis points (2s/10s) +2.25 basis points
• US Atlanta Fed 2Q GDPNow Forecast +2.89% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.65% unch.: CPI YoY +4.12% unch.
  
• 10-Year TIPS Spread 2.26 unch.
  
• Highest target rate probability for July 26th FOMC meeting: 50.4%(-7.3 percentage points) chance of 5.0%-5.25%. Highest target rate probability for Sept. 20th meeting: 47.5%(-2.6 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -173 open in Japan 
• China A50 Futures: Indicating -84 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio:

• Higher:  On gains in my index hedges and emerging market shorts
  

• Disclosed Trades:  None
  

• Market Exposure: 25% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.6%
  

Sector Underperformers:

• 1) Alt Energy -3.2% 2) Semis -2.4% 3) Airlines -2.4%

Stocks Falling on Unusual Volume: 

• GIL, LAC, AAL, MSTR, ARRY, LAMR, VIR, OPRA, WAT, IGMS, SNBR, UPST, PARA, BRKR, BHP, F, AFRM, SDGR, TSEM, AXSM, BALY, FCX, TERN, ZM, CHWY, INMD, CLF, NEWR, WOLF, BILI, CVAC, CCL, BMO, MRNA, NXPI, UHAL/B, HLF, STM, PAGS, DY, PUK, DIOD, SITE, SCVL, TGLS, JBGS, PETS, LSCC, FYBR, MCHP, AUPH, HTHT, PSFE, CVNA, PACB, EH, LMND, HASI, NVGS, BE, ECVBT, A, INTU, ADI, BZ, SRPT, PHAT, IEP, PLCE and PTCT
  

Stocks With Unusual Put Option Activity:

• 1) NU 2) SIMO 3) XHB 4) ADI 5) APTV
  

Stocks With Most Negative News Mentions:

• 1) PLCE 2) NIO 3) IEP 4) HSAI 5) XPEV
  

Charts:

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

Bull Radar

 Style Outperformer:

• Large-Cap Growth -.9%
  

Sector Outperformers:

• Homebuilders +.5% 2) Energy +.2% 3) Cyber Security unch.

Stocks Rising on Unusual Volume:

• ANF, URBN, RETA, PLAB, PANW, KSS, SOVO, PRO, VYGR, AVID and TWLO
  

Stocks With Unusual Call Option Activity:

• 1) ETRN 2) AEO 3) OPCH 4) SU 5) PANW

Stocks With Most Positive News Mentions:

• 1) UTRS 2) APGN 3) GCT 4) ANF 5) PANW
  

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:

• (AMWD)/1.50
• (BBY)/1.10
• (BURL)/.92
• (DLTR)/1.54
• (GCO)/-1.10
• (MDT)/1.55
• (NTES)/8.59
• (RL)/.60
• (TITN)/1.02
• (TD)/2.09
• (WB)/.45

After the Close: 

• (ADSK)/1.56
• (COST)/3.31
• (DECK)/2.69
• (GPS)/-.16
• (MRVL)/.29
• (RH)/2.07
• (ULTA)/6.83
• (WDAY)/1.12
  

Economic Releases 

8:30 am EST

• The Chicago Fed National Activity Index for April is estimated to fall to -.2 versus -.19 in March.
• Initial Jobless Claims for last week are estimated to rise to 245K versus 242K the prior week.
• Continuing Claims are estimated to rise to 1800K versus 1799K prior.
• 1Q GDP revisions.
  

10:00 am EST

• Pending Home Sales MoM for April is estimated to rise +1.0% versus a -5.2% decline in March.
  

11:00 am EST

• The Kansas City Fed Manufacturing Activity for May is estimated to rise to -9.0 versus -10.0 in April.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The German GDP report, 7Y T-Note auction, weekly EIA natural gas inventory report, (ZTS) investor day and the (RJF) 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 +5.5% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 8.2 +.5
  
• 10 Sectors Declining, 1 Sector Rising
• 20.5% of Issues Advancing, 76.1% Declining
• 9 New 52-Week Highs, 51 New Lows
• 42.4%(+.4%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.0 -7.0
  
• Bloomberg Global Risk-On/Risk-Off Index 55.4 -3.5%
  
• Russell 1000: Growth/Value 16,704.3 +.09%
• 1-Day Vix 13.6 +1.4%
  
• Vix 20.5 +10.5% 
  
• Total Put/Call .98 +10.3%
• TRIN/Arms 1.15 +40.2%
  

Wednesday Watch

Evening Headlines

Bloomberg:

• Why China’s Reopening Isn’t Providing Enough Jobs for Its Young.
• Lula Lashes Out and Sends Warning to Central Bankers Everywhere.
• World’s Richest Man Loses $11 Billion After LVMH Stock Rout.
• Britons Pay for Their Own Health Care as Waiting Lists Spiral.
• Asian Equities Fall as Debt Impasse Fuels Caution: Markets Wrap.
• Oil Rises for Third Day as Saudis Tell Short Sellers ‘Watch Out’.
• McCarthy, Graves Signal Impasse in White House Debt Talks.
• Netflix Tells US Consumers to Stop Sharing Accounts.
• Microsoft to Add Bing Search to OpenAI’s ChatGPT in Battle With Google.
• Comcast Wants to Attract Customers With a New, $20 Cable Bundle. 
• Fed Tracks Market Sentiment With New Index Built from 4.4 Million Tweets.
• Intuit Drops After Tax Season Sales Fall Short of Estimates. 
• There Is ‘More Room’ for Dollar Strength, Goldman Sachs Says.
• Company Earnings Guidance Is Wrong About 70% of the Time.
• Cut Stocks, Buy Gold, Hold Your Cash, JPMorgan’s Kolanovic Says.

Zero Hedge:

• Chicago Carnival Invaded By "Flash Mob" Of Over 400 Teenagers.
• TikTok Sues Montana Over Ban.
• US, Papua New Guinea Military Pact Will See Steady Increase Of US Troops.
• Satellite Image Reveals Supersonic Drone At Chinese Military Base.
• Is AI Going To Be Just Another Protected Bubble For The Elite?
• 'Draft Tucker' PAC Shuts Down Following Legal Threat From Carlson.
• The Western Media Disinformation Campaign: Fall Of Bakhmut, A Case In Point.
• "Disruption In DC Is Not Going Away Anytime Soon" - Trillion-Dollar Fund Already Betting On 'Another' Debt-Ceiling Debacle.
• US stocks declined amid debt limit impasse, US-China frictions and mixed data - Newsquawk Asia-Pac Market Open.
• New York Democrats Urge Biden To Fast-Track Illegal Alien Work Permits.
• Former Deputy Nat'l Security Adviser: FBI, CIA & DOJ Will Rig 2024 Election
• The Absurdities Of Our Age.
• The Biggest Revelation From The Durham Report.
• Confirmed: Militants Used American Armored Vehicles To Attack Inside Russia.
• Judge Tosses Kari Lake's Latest Legal Challenge Despite "Inconsistencies".
• Stocks hit on debt ceiling impasse and US-China trade dispute - Newsquawk US Market Wrap.
• WTI Extends Saudi-Driven Gains After Big Surprise Crude, Gasoline Draws.
• Cracks beneath the surface.
• Hunter Biden IRS Whistleblower Alleges Retaliation After He Made Protected Disclosures. 
• Debt-Ceiling Doubts Finally Weigh On Stocks; Bonds & Gold Bid.

Wall Street Journal:

• Musk Wants to Challenge Google and Microsoft in AI.
• A Lawsuit to Protect Pensions From Climate Politics. Workers say New York pension funds can’t use their savings to serve Bill de Blasio’s policy goals.
• Fighting in Russian Border Region Enters Second Day.
• A Housing Bust Comes for Thousands of Small-Time Investors.
• Retailers Clamp Down on Returns.
• Biden Has No Good Options in Debt-Ceiling Fight.
• Target to Pull Some LGBT-Themed Merchandise After Customer Backlash.
• PacWest Sells Real-Estate Lending Unit.

CNBC.com:

• Ron DeSantis lines up business leaders to raise money for 2024 presidential run.
• ‘Hurricane has landed:’ Activist investor doubles down on office space short.
• Republicans question June 1 debt ceiling deadline as talks zero in on potential trade-offs.
• HBO Max is just ‘Max’ now—the 4 things to know about the new service.

MarketWatch:

• Organized retail crime is definitely a thing, says BJ’s CEO: ‘We see it, and it is material’.
• A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?
• Palo Alto Networks, software industry to undergo AI ‘transformation’ over next 12 months, CEO says.
• Investors should put more money in gold and cash as rally in stocks won’t last, top JPMorgan analyst says.
• Goldman Sachs says weak investment flows suggest limited upside for the S&P 500. 
• U.S. surgeon general warns that social-media use poses a ‘profound risk of harm’ to children.

Newsmax:

• Rep. Comer: FBI Doesn't 'Respect Anyone in Congress'.
• FBI Whistleblower: Upper Echelon Must Go.
• Montana 1st to Ban Drag Readings at Schools, Libraries.

Fox News:

• Target CEO said woke capitalism 'great' for brand days before LGBTQ merch debacle
• Professor holds machete to New York Post reporter's neck after destroying pro-life display
• House votes to end Biden’s crackdown on gas-powered trucks, four Dems join GOP 

TheGatewayPundit.com:

• O’Keefe Media Group: Special Assistant to John Fetterman Says the Democrat Senator is ‘Okay with Overturning the Second Amendment’ (VIDEO).
• AWFUL: Leftist Reporter Starts Swearing at Press Conference After Kari Lake Shoves the Truth in His Face (VIDEO).
• Gateway Pundit Exclusive: MAJOR FRAUD EXPOSED – Democrat Donations Harvesting Operation Confirmed in Missouri – With Video Proof.
• UPDATE: 19-Year-Old Man ‘Sai Varshith Kandula’ From St. Louis Suburb Was Driving U-Haul that Rammed Into White House House Barriers with “Nazi Flag”.
• Target Execs Hold EMERGENCY MEETING to Avoid a “Bud Light Situation” After Hiring Trans Satanist to Design Satanic Kids Pride Clothing.
• Beef Company CEO: “I’ll Shut Down the Company Before We Ship a Single Bag With mRNA-Injected Meat”.
• Howard Graduates Trash Joe Biden During Commencement Speech with Honest Feedback: “This is the Worst Graduation of My Life… Howard, You Disappointed Us Tremendously” (VIDEO).
• Dem Strategist Says Florida is Becoming a ‘Terrorist State’ But That Didn’t Stop Her From Spending Spring Break There (Video).
• Democrat Rep. Jayapal Says There Will be “A Huge Backlash…in the Streets” if White House Caves to McCarthy and Agrees to Spending Cuts (VIDEO).
• Leaked Memo Shows Biden Regime is Ending DNA Testing of Children at The Border to Stop Child Trafficking.

 The Epoch Times:

• World’s Largest Real Estate Market on the Brink of Collapse: Experts
• Chinese Banks See Surge in Bad Loans Amid Real Estate Woes.

Twitter: 

• @45LVNancy - 2024 will be another disastrous election unless the @GOP makes some moves. (cartoon)
• @SpeechUnion - "People have publicly 'cancelled' their closest friends. Nothing is off limits. Family issues, mental health, relationships — all of it can and will be used against you." An anonymous student reveals what it’s like to be an Oxford University student.
• @DrLoupis - Climate Scam: Scotland’s wind turbines have been secretly using diesel generators. (video)
• @Liz_Wheeler - Tag ⁦@Target⁩. Make them answer: Do you stand by the Satanist you hired to design your Pride merchandise for children??
• @WallStreetSilv - Rent Inflation Re-Accelerates to Red-Hot. This is bad news on the inflation front. (graph)
• @disclosetv - JUST IN - German Economics Minister Habeck (Green Party) now wants to screen the heat and electricity consumption of all citizens over the last three years, according to a "decarbonization" draft law — BILD.
• @LeadingReport - BREAKING: Mike Tyson confirms that Jamie Foxx suffered massive stroke following COVID vaccine.

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 equity indices are unch. to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 124.75 -1.0 basis points. 

• China Sovereign CDS 69.25 +2.0 basis points.
  
• China Iron Ore Spot 99.5 USD/Metric Tonne -.5%.

• Bloomberg Emerging Markets Currency Index 47.1 -.05%.
• Bloomberg Global Risk-On/Risk Off Index 57.8 +.7%. 
• Bloomberg US Financial Conditions Index -.12 -2.0 basis points.
  
• Volatility Index(VIX) futures 19.95 -.48%.
• Euro Stoxx 50 futures -.41%.

• S&P 500 futures +.15%.

• NASDAQ 100 futures +.17%.  

Morning Preview Links

BOTTOM LINE: Asian indices are modestly lower, weighed down by industrial and tech 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.