Stocks Modestly Lower into Final Hour on Earnings Outlook Worries, Bank Credit Downgrades, Technical Selling, Financial/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 17.3 +.7%
• DJIA Intraday % Swing .83%
  
• Bloomberg Global Risk On/Risk Off Index 69.6 -.98%

• Euro/Yen Carry Return Index 167.5 -.66%

• Emerging Markets Currency Volatility(VXY) 9.0 -1.6%

• CBOE S&P 500 Implied Correlation Index 23.4 -1.6% 

• ISE Sentiment Index 114.0 +12.0 points
  

• Total Put/Call .97 +6.6%

• NYSE Arms 1.29 +67.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 69.45 -.42%
  

• US Energy High-Yield OAS 332.13 -.88%
• Bloomberg TRACE # Distressed Bonds Traded 363.0 +6.0
  

• European Financial Sector CDS Index 87.56 -1.84% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 263.17 -1.39%
  

• Italian/German 10Y Yld Spread 166.0 basis points -3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 132.0 -3.31%
  

• Emerging Market CDS Index 217.79 -1.6%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.6 unch.

• 2-Year SOFR Swap Spread -12.5 basis points -.75 basis point
  

• TED Spread 23.0 basis points +1.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -13.5 -.75 basis point
  
• MBS  5/10 Treasury Spread 183.0 -1.0 basis point
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 748.0 unch.
  
• Avg. Auto ABS OAS 70.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 42.37 +.01%
• 3-Month T-Bill Yield 5.41% -3.0 basis points
  

• China Iron Ore Spot 110.8 USD/Metric Tonne +.11%
• Dutch TTF Nat Gas(European benchmark) 42.9 euros/megawatt-hour +5.2%

• Citi US Economic Surprise Index 69.2 -3.2 points

• Citi Eurozone Economic Surprise Index -52.2 -2.4 points

• Citi Emerging Markets Economic Surprise Index 3.0 -.1 point
• S&P 500 Current Quarter EPS Growth Rate YoY(475 of 500 reporting) -7.3%  unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 235.53 +.77:  Growth Rate +7.3% +.4 percentage point, P/E 18.7 +.1
  
• S&P 500 Current Year Estimated Profit Margin 12.18% +8.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(8 of 10 reporting) +17.0% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 234.10 +.51: Growth Rate +42.7% +.3 percentage point, P/E 32.0 +.3
  
• Bloomberg US Financial Conditions Index .22 -4.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index -.02 +15.0 basis points
  
• US Yield Curve -70.5 basis points (2s/10s) -4.75 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +5.76% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.23% unch.: CPI YoY +3.83% +1.0 basis point
  
• 10-Year TIPS Spread 2.35 +1.0 basis point
  
• Highest target rate probability for Nov. 1st FOMC meeting: 54.6%(-.8 percentage point) chance of 5.25%-5.5%. Highest target rate probability for Dec. 13th meeting: 53.3%(-2.4 percentage points) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -52 open in Japan 
• China A50 Futures: Indicating -107 open in China

• DAX Futures: Indicating +41 open in Germany

Portfolio:

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

• Disclosed Trades: None
  

• Market Exposure: 75% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Value -.6%
  

Sector Underperformers:

• 1) Retail -2.8% 2) Regional Banks -2.7% 3) Alt Energy -1.2%

Stocks Falling on Unusual Volume: 

• BJ, S, ZBH, CLDX, SE, FWRD, ASO, CSIQ, M and DKS
  

Stocks With Unusual Put Option Activity:

• 1) VLY 2) DKS 3) TAL 4) JCI 5) FL
  

Stocks With Most Negative News Mentions:

• 1) DKS 2) SE 3) IEP 4) M 5) SCHW
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth unch.
  

Sector Outperformers:

• Steel +1.0% 2) Homebuilding +.8% 3) Gambling +.4%

Stocks Rising on Unusual Volume:

• NSSC, ASLE, AGTI, HDSN, HASI, HAS, ASAN, SPHR, SLRN, FORG, ACMR, AXSM, MTSI, QDEL, SPR, MRVI, CRNX, LOW, KVUE, MRNA, TASK, PAR and ALKT
  

Stocks With Unusual Call Option Activity:

• 1) DKS 2) PCT 3) PR 4) WYNN 5) LOW

Stocks With Most Positive News Mentions:

• 1) VFS 2) FN 3) NVAX 4) CSTF 5) RVIV
  

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:

• (AAP)/1.69
• (BBWI)/.33
• (DY)/1.66
• (PTON)/-.40
• (WSM)/2.71 
• (FL)/.04
• (ADI)/2.52
• (KSS)/.23
• (ANF)/.17

After the Close: 

• (SNOW)/.10
• (ZUO)/.04
• (ADSK)/1.73
• (SPLK)/.46
• (GES)/.40
• (NVDA)/2.08
  

Economic Releases   

9:45 am EST

• The S&P Global US Manufacturing PMI for Aug. is estimated at 49.0 versus 49.0 in July.
• The S&P Global US Services PMI for Aug. is estimated to fall to 52.0 versus 52.3 in July.
• The S&P Global US Composite PMI for Aug. is estimated to fall to 51.5 versus 52.0 in July.
  

10:00 am EST

• New Home Sales for July is estimated to rise to 704K versus 697K in June.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,873,000 barrels versus a -5,960,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -715,500 barrels versus a -262,000 barrel decline the prior week. Distillate inventories are estimated to rise by +566,500 barrels versus a +296,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.38% versus a +.9% gain prior.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Eurozone Services PMI report, 20Y T-Bond auction and weekly MBA Mortgage Applications report could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• NYSE Volume Running -9.8% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 10.2 +.7
  
• 5 Sectors Declining, 6 Sectors Rising
• 48.1% of Issues Advancing, 48.3% Declining
• 26 New 52-Week Highs, 65 New Lows
• 45.0%(+.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 34.0 +1.0
  
• Bloomberg Global Risk-On/Risk-Off Index 69.8 -.6%
  
• Russell 1000: Growth/Value 17,418.2 +.56%
• 1-Day Vix 12.6 -21.9%
  
• Vix 17.1 -.06%
  
• Total Put/Call .95 +4.4%
• TRIN/Arms 1.48 +92.2%
  

Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 135.75 -.25 basis point. 

• China Sovereign CDS 84.0 +.25 basis point.
  
• China Iron Ore Spot 108.2 USD/Metric Tonne +.73%.

• Bloomberg Emerging Markets Currency Index 42.4 -.04%.
• Bloomberg Global Risk-On/Risk Off Index 71.5 +1.6%. 
• Bloomberg US Financial Conditions Index 19.0 -7.0 basis points.
  
• Volatility Index(VIX) futures 18.1 +1.1%.
• Euro Stoxx 50 futures +.38%.

• S&P 500 futures -.17%.

• NASDAQ 100 futures -.20%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by tech and consumer shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.