Stocks Falling into Afternoon on Rising Long-Term Rates, Earnings Outlook Worries, Technical Selling, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.8 +7.3%
• DJIA Intraday % Swing .95%
  
• Bloomberg Global Risk On/Risk Off Index 73.2 +.6%

• Euro/Yen Carry Return Index 167.5 +.5%

• Emerging Markets Currency Volatility(VXY) 8.5 -.7%

• CBOE S&P 500 Implied Correlation Index 20.1 +10.0% 

• ISE Sentiment Index 98.0 +4.0 points
  

• Total Put/Call .93 -17.0%

• NYSE Arms .94 +28.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.4 +1.3%
  

• US Energy High-Yield OAS 309.9 +1.47%
• Bloomberg TRACE # Distressed Bonds Traded 362.0 -12
  

• European Financial Sector CDS Index 79.5 +.51% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 262.5 -2.8%
  

• Italian/German 10Y Yld Spread 179.0 basis points +4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 115.5 -.03%
  

• Emerging Market CDS Index 203.6 +1.3%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.0 -.08%

• 2-Year SOFR Swap Spread -10.0 basis points +.75 basis point
  

• TED Spread 22.5 basis points +1.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -10.25 unch.
  
• MBS  5/10 Treasury Spread 166.0 +3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 922.0 -1.0 basis point
  
• Avg. Auto ABS OAS 78.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 42.3 -.01%
• 3-Month T-Bill Yield 5.45% -1.0 basis point
  

• China Iron Ore Spot 120.5 USD/Metric Tonne -2.0%
• Dutch TTF Nat Gas(European benchmark) 36.5 euros/megawatt-hour +2.7%

• Citi US Economic Surprise Index 64.8 +3.4 points

• Citi Eurozone Economic Surprise Index -68.9 +1.7 points

• Citi Emerging Markets Economic Surprise Index 15.2 +4.4 points
• S&P 500 Current Quarter EPS Growth Rate YoY(3 of 500 reporting) +7.2% n/a
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 239.0 +.07:  Growth Rate +8.7% unch., P/E 18.9 +.1
  
• S&P 500 Current Year Estimated Profit Margin 12.14% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) n/a
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 247.29 +.16: Growth Rate +49.1% +.1 percentage point, P/E 31.3 -.6
  
• Bloomberg US Financial Conditions Index .50 -6.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .47 +21.0 basis points
  
• US Yield Curve -71.5 basis points (2s/10s) +1.5 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +4.94% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.95% unch.: CPI YoY +3.66% unch.
  
• 10-Year TIPS Spread 2.35 +1.0 basis point
  
• Highest target rate probability for Nov. 1st FOMC meeting: 68.5%(+5.5 percentage points) chance of 5.25%-5.5%. Highest target rate probability for Dec. 13th meeting: 61.1%(+1.8 percentage points) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -458 open in Japan 
• China A50 Futures: Indicating -38 open in China

• DAX Futures: Indicating +136 open in Germany

Portfolio:

• Lower:  On losses in my tech/medical/transport/industrial/commodity sector longs
  

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts
  

• Market Exposure: Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.6%
  

Sector Underperformers:

• 1) Homebuilding -3.2% 2) Semis -3.0% 3) Software -2.0%

Stocks Falling on Unusual Volume: 

• LEN, PHAT, TTMI, CNM, CHWY, ADBE, NUE, DNB, IOT, KMPR, MITK, PLNT and PTCT
  

Stocks With Unusual Put Option Activity:

• 1) EWW 2) IGT 3) ADBE 4) AG 5) ACB
  

Stocks With Most Negative News Mentions:

• 1) NUE 2) LEN 3) KLAC 4) LRCX 5) DASH
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap -.7%
  

Sector Outperformers:

• 1) Gold & Silver +1.7% 2) Shipping +.8% 3) Electric Vehicles +.2%

Stocks Rising on Unusual Volume:

• VSCO, USFD, GPS, WAT, PLTK and GPRK
  

Stocks With Unusual Call Option Activity:

• 1) IGT 2) NAK 3) AXL 4) DHT 5) JETS

Stocks With Most Positive News Mentions:

• 1) A 2) WAT 3) SLNO 4) MYTE 5) U
  

Charts:

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

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

Earnings of Note 
Company/Estimate 

Before the Open:

• None of note
  

After the Close: 

• (SFIX)/-.21
  

Economic Releases  

8:30 am EST

• The NY Fed Services Business Activity Index for Sept.
  

10:00 am EST

• The NAHB Housing Market Index for Sept. is estimated at 50.0 versus 50.0 in Aug. 
  

4:00 pm EST

• Net Long-Term TIC Flows for July.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Australia Consumer Sentiment 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 +6.2% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 5.8 -4.8
  
• 10 Sectors Declining, 1 Sector Rising
• 32.1% of Issues Advancing, 64.8% Declining
• 30 New 52-Week Highs, 48 New Lows
• 44.6%(-.7%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.0 -5.0
  
• Bloomberg Global Risk-On/Risk-Off Index 73.0 +.6%
  
• Russell 1000: Growth/Value 17,476.7 -.72%
• 1-Day Vix 9.9 -17.1%
  
• Vix 13.5 +5.1%
  
• Total Put/Call .91 -18.8%
• TRIN/Arms 1.03 +42.5%
  

Friday Watch

Evening Headlines

Bloomberg:

• China’s Property Market Crisis Is Trouble for the Whole World.
• US Believes China Defense Minister Faces Inquiry, FT Reports.
• Xi’s Corruption Crackdown Rocks $1 Trillion Health Care Industry.
• China May Get Caught in an Oil-Price Crossfire.
• Kim Jong Un to Tour Russian Jet Plant as US Warns on Arms Deals.
• Asia Stocks to Track US Rally as Soft Landing Seen: Markets Wrap.
• Oil Heads for Third Weekly Advance With Tighter Markets in View.
• Chip Designer Arm Jumps 25% in Debut Win for Owner SoftBank.
• Arm IPO Lures in Retail Traders Seeking Exposure to AI Trend. 
• Disney to Cut Target for Disney+ Streaming Subscribers.
• Fed Is Likely to Shy Away From Calling Interest-Rate Peak Next Week.
• UAW Prepares Targeted Strike to Maximize Automakers’ Pain.
• T-Mobile in Talks to Make Big Broadband Bet With Move Into Fiber.
• Texas Moved to Protect its Fragile Grid. Then Prices Skyrocketed. 
• How Sam Bankman-Fried’s Elite Parents Enabled His Crypto Empire.

Zero Hedge:

• Hunter Biden Indicted On Federal Firearms Charge.
• $3.4 Trillion: Tomorrow's Triple-Witch Is The Biggest September Op-Ex On Record.
• New Bill Combats Tyrannical Democrats From Declaring Nationwide Public Health Emergency To Enforce Gun Control.
• Baltimore City Official Blames Cars, Not Crime, For Population Collapse. 
• Truckload Carriers See Market Moving Toward Equilibrium.
• "This Seems Flawed" - 0-DTE Options ETF Launch Sparks Debate.
• Why Is Rhode Island Still Irrationally Targeting School Children With "Masking And Testing" Policies?
• Mr. Zelensky Goes To Washington, Again.
• Threads Blocks Search Results For 'COVID' And 'Vaccines', Upsetting Users.
• US stocks gained after firm data, dovish ECB rate hike and PBoC RRR cut - Newsquawk Asia-Pac Market Open.
• The E In EPA Certainly Isn't For 'Ethics'.
• Fear in freefall.
• The Walls Are Closing In On Joe Biden.
• Japanese Panic Buy Gold As Yen Implodes And Inflation Soars.
• Money-Market Inflows Hit New High As Banks Demand More From Fed's Emergency Fund.
• Stocks rally after ECB signals no more hikes and hot US data - Newsquawk US Market Wrap.
• The Middle Class Is Increasingly Becoming "The Impoverished Class", And The Poor Are Increasingly Being Pushed Into The Streets.
• Bears disARM'd: Stocks, Yields, Crypto, & Crude Jump As Inflation Expectations Soar.

Wall Street Journal:

• America’s Battle With Shoplifting Is Getting Dangerous for Workers.
• J.B. Hunt Transport Will Acquire BNSF Brokerage Business.
• UAW Poised for Unusual Strike—Multiple Companies and Specific Plants.
• Wisconsin Lawmakers Fire Top State Election Official.
• The Cyberattack That Sent Las Vegas Back in Time.
• Fuel Prices Are Soaring: Who Is Feeling the Pinch?

CNBC.com:

• Arm debut will help jump-start IPOs, Airbnb investor Rick Heitzmann suggests.
• Arm is trading at a premium to Nvidia after IPO pop even though it’s a ‘no-growth company’.
• More companies, especially airlines, warn higher costs will eat into profits.
• Everything you need to know about UAW’s targeted strike plans — and possible lockouts.
• JPMorgan Chase to offer online payroll services as it steps up fight with Square, PayPal.

MarketWatch.com:

• Tesla may be the winner of Big Three-UAW labor talks.
• Opinion: Stocks are trapped in a trading range. Something’s got to give.
• Adobe hopes to acquire new users, firm up margins as it lets Firefly AI out of its jar.
• Here’s everything we know about zero-day options, the risky stock-market ‘lottery tickets’ captivating Wall Street and Reddit.

Newsmax:

• Sen. Johnson: If Media Did Job, Biden Wouldn't Be President.
• Hanson: Dems Destroy US Image With Trump Attacks.
• Amid Divisions, Plurality of Americans Favor Biden Impeachment Probe: Poll.
• Rep. Babin: Blame Bidenomics for Gas Prices.

Fox News:

• Trump comes out swinging against DOJ following Hunter Biden indictment.
• Dems, Republicans join forces to strike down California electric vehicle mandate.
• India racing to contain deadly virus outbreak as hundreds are tested.

TheGatewayPundit.com:

• WATCH: Nancy Pelosi Hedges on Joe Biden Continuing Re-Election Bid – Smiles While Undermining Kamala Harris.
• Explosion of Train Car Carrying Perchloric Acid Triggers Four-Mile Evacuation Zone in Nebraska, Sky Filled with Toxic Smoke (VIDEO).
• Top Doctor Explains Why “Turbo Cancer” Rates Are Likely to Get Even Worse (VIDEO).
• WOW! Joe Biden Says Black and Hispanic Workers Don’t Have High School Diplomas (VIDEO).
• “Gloves Are Off, Families Are On” – David Brock Threatens to Target the Children of GOP Members Investigating Hunter Biden.
• “File The F*cking Motion”: Kevin McCarthy Melts Down and Throws a Fit Amid Threats from GOP Members to Remove Him as House Speaker.
• FDA Approves “Emergency Use” Of Experimental Vaccines – Is It Time To Stockpile Critical Medications Before The Government Restricts Them Again?
• Eco-Terrorists Shut Down Entrance to Citigroup’s Headquarters In NYC; Female Employee Met with Physical Force and Intimidation (VIDEO).
• Brutal Marijuana Studies Now Emerging – It Should Never Have Been Fully Legalized.
• IT’S BACK! Providence Hospital System Imposes Draconian Mandatory COVID Vaccine for Healthcare Workers – Non-Compliance Results in Unpaid Leave and Potential Termination.
• Max Blumenthal: SecState Tony Blinken Stands to “Make a Lot of Money” Off Ukraine war.
• Torture and Abuse: DC Officials Place Jan. 6 Prisoners in DC Gulag Back on COVID Lockdown, Solitary Confinement Starting Today!

The Epoch Times:

• Why Foreign Investment Is Leaving China and What It Means

Twitter:

• @KobeissiLetter - JUST IN: US National Debt is now up a massive $1.5 trillion since the debt ceiling “crisis.” Over the last 3 months alone, the US has added $500 billion PER MONTH to the national debt, on average. Over the last 5 years, US debt is up a whopping 54%. Meanwhile, YTD interest expense just passed $800 BILLION. These numbers are so large it’s hard to believe. This is a crisis.
• @alifarhat79  - Elizabeth Warren’s salary is $193,000 a year. She has served 10 years in Congress. Her net worth is $73,000,000.
• @Breaking911 - TRUMP ON HUNTER BIDEN INDICTMENT: "This, the gun charge, is the only crime that Hunter Biden committed that does not implicate Crooked Joe Biden. [...] They have opened the proverbial Pandora’s Box, and it is possible that the USA will never be the same again..."

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 983,973 Reports(+1,886 from prior week) Through August 25th, 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 +.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 115.25 -.75 basis point. 

• China Sovereign CDS 69.5 -.25 basis point.
  
• China Iron Ore Spot 121.5 USD/Metric Tonne +.8%.

• Bloomberg Emerging Markets Currency Index 42.2 -.07%.
• Bloomberg Global Risk-On/Risk Off Index 74.2 +2.1%. 
• Bloomberg US Financial Conditions Index 54.0 -2.0 basis points.
  
• Volatility Index(VIX) futures 15.2 -.18%.
• Euro Stoxx 50 futures +.42%.

• S&P 500 futures +.08%.

• NASDAQ 100 futures +.06%.  

Morning Preview Links

BOTTOM LINE: Asian indices are modestly higher, boosted by technology and commodity 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.