Stocks Reverse Lower into Close on Surging Long-Term Rates, Rising Fed Rate-Hike Odds, Technical Selling, Consumer Discretionary/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) 18.0 +12.1%
• DJIA Intraday % Swing .62% -9.5%
  
• Bloomberg Global Risk On/Risk Off Index 70.5 -.14%

• Euro/Yen Carry Return Index 167.9 -.4%

• Emerging Markets Currency Volatility(VXY) 8.6 -1.2%

• CBOE S&P 500 Implied Correlation Index 246.2 +15.0% 

• ISE Sentiment Index 81.0 -37.0 points
  

• Total Put/Call 1.01 -19.8%

• NYSE Arms 1.39 +13.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 74.5 +1.1%
  

• US Energy High-Yield OAS 356.41 +.72%
• Bloomberg TRACE # Distressed Bonds Traded 338 unch.
  

• European Financial Sector CDS Index 94.4 -1.4% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 298.1 -1.2%
  

• Italian/German 10Y Yld Spread 198.0 basis points +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 124.5 -2.9%
  

• Emerging Market CDS Index 231.3 +2.6%
• Israel Sovereign CDS 111.0 +10.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.89 unch.

• 2-Year SOFR Swap Spread -10.75 basis points -.25 basis point
  

• TED Spread 16.0 basis points -2.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -26.5 unch.
  
• MBS  5/10 Treasury Spread 182.0 +3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 914.0 +1.0 basis point
  
• Avg. Auto ABS OAS 87.0 +1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 41.3 -.3%
• 3-Month T-Bill Yield 5.50% unch.
  

• China Iron Ore Spot 113.1 USD/Metric Tonne  -1.3%
• Dutch TTF Nat Gas(European benchmark) 53.0 euros/megawatt-hour +15.0%

• Citi US Economic Surprise Index 55.9 +.5 point

• Citi Eurozone Economic Surprise Index -38.7 +.3 point

• Citi Emerging Markets Economic Surprise Index 16.9 +3.4 points
• S&P 500 Current Quarter EPS Growth Rate YoY(25 of 500 reporting) +5.8% +.9 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 240.02 -.02:  Growth Rate +9.2% unch., P/E 18.2 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.18% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) n/a
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 266.96 +.20: Growth Rate +57.5% +.1 percentage point, P/E 29.3 +.4
  
• Bloomberg US Financial Conditions Index .18 +5.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index -.07 +13.0 basis points
  
• US Yield Curve -37.0 basis points (2s/10s) +4.75 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +5.15% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.70% -3.0 basis points: CPI YoY +3.42% -27.0 basis points
  
• 10-Year TIPS Spread 2.34 +2.0 basis points
  
• Highest target rate probability for Dec. 13th FOMC meeting: 65.6%(-6.2 percentage points) chance of 5.25%-5.5%. Highest target rate probability for Jan. 31st meeting: 64.2%(-5.7 percentage points) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -204 open in Japan 
• China A50 Futures: Indicating -115 open in China

• DAX Futures: Indicating +69 open in Germany

Portfolio:

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 50% Net Long
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.6%
  

Sector Underperformers:

• 1) Homebuilding -5.7% 2) Digital Health -4.2% 3) Gambling -3.8%

Stocks Falling on Unusual Volume: 

• CSGS, AES, DVA, BSX, DAVA, DXCM, OCSL, FR, RCM, AAL, BTI, MKC, FLO, PETQ, KDP, COLD, MDGL, JELD, TEAM, UFPI, CYTK, NARI, VTYX, INFY, GMAB, QDEL, PEN, ES, THC, NEP, LW, INSP, JD, QTRX, UTZ, CMC, HRL, AMR, NTRA and INMD
  

Stocks With Unusual Put Option Activity:

• 1) BAX 2) XME 3) DVA 4) MANU 5) MUB
  

Stocks With Most Negative News Mentions:

• 1) TPST 2) HRL 3) INMD 4) EVA 5) BIRK
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.6%
  

Sector Outperformers:

• 1) Homebuilding -5.4% 2) Digital Health -3.8% 3) Alt Energy -3.3%

Stocks Rising on Unusual Volume:

• AMAM, VSAT, FAST, WBA, ACHC and VMW
  

Stocks With Unusual Call Option Activity:

• 1) BAX 2) LYV 3) THC 4) MASI 5) PRGO

Stocks With Most Positive News Mentions:

• 1) FAST 2) TUP 3) LL 4) OPRX 5) SRRK
  

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:

• (BLK)/8.34
• (C)/1.23
• (JPM)/3.95
• (PNC)/3.10
• (UNH)6.33
• (PGR)/1.72
• (WFC)/1.24
  

After the Close: 

• None of note
  

Economic Releases  

8:30 am EST:

• The Import Price Index MoM for Sept. is estimated to rise +.5% versus a +.5% gain in Aug.
• The Import Price Index ex Petrol MoM for Sept. is estimated to fall -.1% versus unch. in Aug.
• The Export Price Index MoM for Sept. is estimated to rise +.5% versus a +1.3% gain in Aug.
  

10:00 am EST

• Univ. of Mich. Consumer Sentiment for Oct. is estimated to fall to 67.0 versus 68.1 in Sept.
• Univ. of Mich. 1-Y Inflation Expectations for Oct. is estimated at +3.2% versus +3.2% in Sept.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Eurozone CPI 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 +4.0% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 9.4 +.8
  
• 9 Sectors Declining, 2 Sectors Rising
• 23.2% of Issues Advancing, 74.1% Declining
• 30 New 52-Week Highs, 92 New Lows
• 34.6%(-5.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.0 unch.
  
• Bloomberg Global Risk-On/Risk-Off Index 72.1 +2.1%
  
• Russell 1000: Growth/Value 18,398.2 +1.0%
  
• 1-Day Vix 11.7 -251%
  
• Vix 15.8 -2.0%
  
• Total Put/Call .92 -27.0%
• TRIN/Arms .97 -20.5%
  

Thursday Watch

Night Trading 

• Asian equity indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 127.0 -.75 basis point.

• China Sovereign CDS 83.0 +.25 basis point.
  
• China Iron Ore Spot 112.8 USD/Metric Tonne +.27%.

• Bloomberg Emerging Markets Currency Index 41.30 -.02%
• Bloomberg Global Risk-On/Risk Off Index 72.1 +2.1%. 
• Bloomberg US Financial Conditions Index .15 +2.0 basis points.
  
• Volatility Index(VIX) futures 17.2 -1.1%.
• Euro Stoxx 50 futures +.24%.

• S&P 500 futures +.20%.

• NASDAQ 100 futures +.22%.  

Morning Preview Links

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