Stocks Modestly Lower into Final Hour on Rising Long-Term Rates, Escalating US Government Shutdown Concerns, Technical Selling, Energy/Gambling Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.2 +1.4%
• DJIA Intraday % Swing .75%
  
• Bloomberg Global Risk On/Risk Off Index 73.4 +.6%

• Euro/Yen Carry Return Index 167.7 -1.1%

• Emerging Markets Currency Volatility(VXY) 8.3 -1.1%

• CBOE S&P 500 Implied Correlation Index 21.3 +1.1% 

• ISE Sentiment Index 102.0 +12.0 points
  

• Total Put/Call .91 -16.5%

• NYSE Arms 1.06 -31.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.3 +.32%
  

• US Energy High-Yield OAS 310.48 -.01%
• Bloomberg TRACE # Distressed Bonds Traded 337.0 -18
  

• European Financial Sector CDS Index 69.66 +.57% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 264.2 -.85%
  

• Italian/German 10Y Yld Spread 178.0 basis points -2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 116.7 -.4%
  

• Emerging Market CDS Index 199.8 -2.6%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.0 +.12%

• 2-Year SOFR Swap Spread -10.5 basis points +.25 basis point
  

• TED Spread 21.25 basis points +.25 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.5 basis point
  
• MBS  5/10 Treasury Spread 163.0 -1.0 basis point
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 906.0 -3.0 basis points
  
• Avg. Auto ABS OAS 77.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 42.2 -.14%
• 3-Month T-Bill Yield 5.45% -1.0 basis point
  

• China Iron Ore Spot 121.2 USD/Metric Tonne +.81%
• Dutch TTF Nat Gas(European benchmark) 36.8 euros/megawatt-hour +6.7%

• Citi US Economic Surprise Index 57.5 -2.1 points

• Citi Eurozone Economic Surprise Index -58.0 +3.8 points

• Citi Emerging Markets Economic Surprise Index 12.6 -.6 point
• S&P 500 Current Quarter EPS Growth Rate YoY(4 of 500 reporting) +7.2% unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 239.40 +.27:  Growth Rate +8.9% +.1 percentage point, P/E 18.5 -.2
  
• S&P 500 Current Year Estimated Profit Margin 12.15% +2.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) n/a
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 262.21 +14.67: Growth Rate +58.1% +8.8 percentage points, P/E 29.0 -2.1
  
• Bloomberg US Financial Conditions Index .50 +1.0 basis point
  
• Bloomberg Euro-Zone Financial Conditions Index .34 -12.0 basis points
  
• US Yield Curve -74.25 basis points (2s/10s) +.25 basis point
  
• US Atlanta Fed 2Q GDPNow Forecast +4.86% -8.0 basis pionts
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.95% unch.: CPI YoY +3.69% +3.0 basis points
  
• 10-Year TIPS Spread 2.37 +1.0 basis point
  
• Highest target rate probability for Nov. 1st FOMC meeting: 70.8%(+5.6 percentage points) chance of 5.25%-5.5%. Highest target rate probability for Dec. 13th meeting: 59.8%(+1.5 percentage points) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -117 open in Japan 
• China A50 Futures: Indicating -18 open in China

• DAX Futures: Indicating +190 open in Germany

Portfolio:

• Slightly Higher:  On gains in my tech/medical sector longs, index hedges and emerging market shorts
  

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

• Market Exposure: Moved to 75% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -.5%
  

Sector Underperformers:

• 1) Oil Service -2.1% 2) Energy -1.4% 3) Gambling -1.4%

Stocks Falling on Unusual Volume: 

• CBAY, BASE, CCJ, DIS, MELI, IOT, OTEX, CAVA, ASAN, AFRM, PLNT, CNHI, CDLX, MEDP, LAC, CABA, PHAT, CHEF, ELF, APP, SFWL, EBIX and RVNC
  

Stocks With Unusual Put Option Activity:

• 1) UEC 2) IBB 3) ARM 4) SPR 5) AZN
  

Stocks With Most Negative News Mentions:

• 1) NIO 2) SQ 3) RKLB 4) DE 5) PLNT
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.4%
  

Sector Outperformers:

• 1) Shipping +.8% 2) Telecom +.7% 3) Computer Hardware +.6%

Stocks Rising on Unusual Volume:

• DAVA, AMAM, SMTC, ACLX, MSGE, ARRY, MEOH, ENPH, MLKN, PLCE, HNRG, APLS, ARCT, HMC, TARS, TDS, CBOE, PINS, OMCL, IRBT, FLR, GCT, VITL, HRMY, MDGL, CRNC, TM and X
  

Stocks With Unusual Call Option Activity:

• 1) ARM 2) SOVO 3) NYCB 4) CLX 5) NCR

Stocks With Most Positive News Mentions:

• 1) RXT 2) ENPH 3) APLS 4) IRWD 5) SMCI
  

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:

• (GIS)/1.08

After the Close: 

• (FDX)/3.72
• (KBH)/1.43
  

Economic Releases  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -718,170 barrels versus a +3,955,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +667,500 barrels versus a +5,561,000 barrel gain the prior week. Distillate inventories are estimated to rise by +177,670 barrels versus a +3,931,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.7% versus a +.6% gain prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds Rate at 5.25-5.5%.
  

Upcoming Splits 

• (NVO) 2-for-1
  

Other Potential Market Movers

• The Fed Press Conference, PBOC rate decision, weekly MBA Mortgage Applications report, DA Davidson Industrials/Services Conference, Wells Fargo Consumer Conference, (BSX) investor day and the (CRWD) investor briefing 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 -14.8% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.0 -.9
  
• 11 Sectors Declining, 0 Sectors Rising
• 38.4% of Issues Advancing, 58.7% Declining
• 38 New 52-Week Highs, 76 New Lows
• 42.7%(-1.2%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.0 -4.0
  
• Bloomberg Global Risk-On/Risk-Off Index 72.8 -.3%
  
• Russell 1000: Growth/Value 17,4245.4 -.38%
• 1-Day Vix 11.0 +15.2%
  
• Vix 14.8 +5.4%
  
• Total Put/Call .92 -15.6%
• TRIN/Arms 1.19 -23.2%
  

Tuesday Watch

Evening Headlines

Bloomberg:

• China Sets Cornerstone Rules to Scale Up National Power Trading. 
• China’s Equity Rout Puts at Risk $5 Billion Worth of Derivatives Held by Koreans.
• China’s Copper Industry Is Struggling When It Should Be Booming.
• Trudeau Accuses India of Involvement in Sikh Leader’s Murder.
• Roubini Says BOE, ECB Must Raise Rates to Avoid Stagflation,
• World Disappointed by the UN Now Looks Elsewhere for Answers.
• Asia Stocks Face Mixed Open With Focus on Rates: Markets Wrap. 
• Surging Physical Oil Market Brings $100 Crude Back in Sight.
• Corporations Are Picking Sides in the New Era of Economic Upheaval.
• What ‘Friend-Shoring’ Means for the Future of Trade. 
• How Auto Executives Misread the UAW Ahead of Historic Strike.
• US Steel Blast Furnace ‘Saved’ by Trump Now Idled on UAW Strike. 
• Carrier Explores Listing Commercial, Home-Fire Units. 
• Trillion-Dollar Industry Powering Chicago at Risk of Leaving.
• Americans Can Barely Afford Homes — and That’s a Problem for Biden. 
• Microsoft AI Researchers Accidentally Exposed Big Cache of Data. 
• Oaktree's Wayne Dahl on Risks in the Credit Market.
• Walmart, Costco to Work on Plan to Curb Food Inflation, Canada Minister Says.

Zero Hedge:

• Military Finds F-35 Debris 80 Miles From Pilot's Ejection Area.
• California Gov. Newsom Boosts AI "Misinformation" Fears, Complains Of "Micro-Cults" Around Jordan Peterson, Joe Rogan.
• "They Were Laughing": Rogue Gang Of Teens Brutally Beat Gas Station Clerk In Lawless Seattle.
• US Debt Rises Above $33 Trillion For The First Time, Soars By $1 Trillion In 3 Months.
• Sullivan's 'Secret Talks' With China Were Set Against Backdrop Of Turnover, Upheaval In Xi's Cabinet.
• How Far Are We From Revolution?
• Your WiFi Can See You.
• US stocks finished flat as participants await a profusion of central bank activity - Newsquawk Asia-Pac Market Open.
• $250 Million NYC Condo Sees Price Slashed To $195 Million After A Year Without Selling.
• Schumer Blasts House GOP Stopgap As "Hard-Right Screed" That Won't Pass Senate.
• High conviction neutral.
• Illinois, Chicago Set To Become More Dangerous As Cash Bail Ends.
• Here's How The Market Will React To Next Week's Government Shutdown: Lessons From The Past.
• Markets chop in the calm before the central bank storm - Newsquawk US Market Wrap.
• Kunstler: Party Of Chaos Is "Certainly Trying To Provoke Something Like Civil War".
• Bitcoin & Big-Tech Pump-And-Dump; Gold Gains As Yield-Curve Crushed.

Wall Street Journal:

• An Even Bigger Housing Crisis Threatens China’s Economy.
• The U.S. Colleges Offering the Best Value.
• Fed Isn’t Getting the Economy It Expected.
• Iran Releases U.S. Prisoners in Deal for Frozen Energy Revenue.
• Clorox Says Cyberattack Hurt Product Availability, Will Weigh on Quarter.

CNBC.com:

• Instacart prices IPO at $30 a share, valuing grocery-delivery company at about $10 billion.
• Oracle CEO touts demand for cloud business after the company’s stock tumbled.
• Striking unions are impacting the economy at level not seen in decades.
• Salesforce turns to ‘boomerangs,’ luring back former execs to help reignite growth.
• Stellantis could close 18 facilities under UAW deal — here are the full details of its latest offer.
• FBI director urges private sector to lend government more support in cyber intelligence.
• Ford could face strike in Canada, adding to U.S. labor pressure.

MarketWatch.com:

• What the ‘mysterious shrinking’ of Wall Street’s fear gauge means for stocks, according to DataTrek.
• Tesla’s stock turns lower again as UAW strike fails to provide support.
• Investors should stick to the ‘late cycle playbook’ and buy these sectors, says Morgan Stanley’s Mike Wilson.
• Will Nvidia’s stock follow the path of Apple or Cisco as the AI era for tech begins?
• U.S. News adds economics degree programs to its college rankings — and these 7 schools tied for No. 1.

Newsmax:

• Trump to Skip 2nd Debate, Give Detroit Speech on Auto Issues.

Fox News:

• Biden unleashes 50-year mining, oil drilling ban across thousands of acres.
• Debris reportedly found in hunt for $80M F-35 that crashed in unknown depths of US.

TheGatewayPundit.com:

• Massive Win for Criminals: Illinois Sets Risky Precedent by Becoming First State to Abolish Cash Bail.
• EXCLUSIVE: Washington University Exploits Divorcing Families by Mining Public Records for Child Study Involving MRI Scans and Blood Sample Collection.
• Victor Reacts: 70+ Year-Old Pro-Life Advocates Face up to 11 Years in Prison, Antifa Rioters Walk Free (VIDEO).
• Marine Corps Issues 2-Day Stand Down Order for All Jets After F-35 Mysteriously Goes Missing.
• ‘Paws Patrol’ Snacks Recalled After Parents Discover Website on Packaging Sent Kids to Porn Site.
• OUTRAGEOUS! Two 70+ Year-Old Pro-Life Activists Convicted for Blocking Entrance to Abortion Clinic – Now Face 11 Years in Prison.
• HERE WE GO: Clinton Global Initiative to Launch Network to Provide ‘Humanitarian Aid’ to War-Torn Ukraine.
• “I’m Going to Die”- Virginia Democratic Congresswoman Won’t Seek Re-Election After Being Diagnosed with Rare, Fatal Neurological Disorder.
• Pelosi Refused to Hand Over Communications Surrounding Jan. 6, Democrats Destroyed Evidence from Jan. 6 Committee, Refused to Call in National Guard, and Pelosi Hired Camera Crew to Follow Her That Day.
• BORDER INVASION UPDATE: Record Crowds of Illegal Migrants Flood Across Open Border in Eagle Pass, Texas as Thousands Stream Through Panama on Way to US (VIDEO).
• It Begins: Australia’s Fifth-Largest Bank Announces Digital-Only Transactions – Will Phase Out Cash, Cheque, and Phone Payments in All 80 Branches Starting Next Year.
• Murdoch Happens to Run Disgusting Hit Piece on Russell Brand as RFK Tells Brand: “Covid was a Military Project from the Beginning”.

The Epoch Times:

• The CCP’s Political Struggles Destabilize China’s Foreign Policy: Experts.
• Robots From China Don’t Strike.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 985,418 Reports(+1,625 from prior week) Through September 8th, 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 -.75% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 117.75 +2.0 basis points. 

• China Sovereign CDS 70.0 unch.
  
• China Iron Ore Spot 122.0 USD/Metric Tonne +.24%.

• Bloomberg Emerging Markets Currency Index 42.3 +.07%.
• Bloomberg Global Risk-On/Risk Off Index 74.3 +1.7%. 
• Bloomberg US Financial Conditions Index 46.0 -3.0 basis points.
  
• Volatility Index(VIX) futures 15.6 -.7%.
• Euro Stoxx 50 futures +.14%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.06%.  

Morning Preview Links

BOTTOM LINE: Asian indices are modestly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 50% net long heading into the day.