Stocks Reversing Lower into Afternoon on Escalating Mid-East Regional War Fears, US Policy-Induced Stagflation Concerns, Earnings Outlook Worries, Regional Bank/Alt Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 21.1 +2.0%
• DJIA Intraday % Swing .73% -20.9%
  
• Bloomberg Global Risk On/Risk Off Index 62.2 -3.7%

• Euro/Yen Carry Return Index 168.6 -.51%

• Emerging Markets Currency Volatility(VXY) 8.26 -1.3%

• CBOE S&P 500 Implied Correlation Index 34.6 +9.5% 

• ISE Sentiment Index 108.0 -6.0
  

• Total Put/Call 1.16 +2.7%

• NYSE Arms 1.22 +45.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 82.0 +2.0%
  

• US Energy High-Yield OAS 374.28 +.55%
• Bloomberg TRACE # Distressed Bonds Traded 346 +4
  

• European Financial Sector CDS Index 102.1 -.95% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 293.08 -1.5%
  

• Italian/German 10Y Yld Spread 197.0 basis points -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 138.2 -.14%
  

• Emerging Market CDS Index 239.76 +.4%
• Israel Sovereign CDS 144.08 -.11%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.7 unch.

• 2-Year SOFR Swap Spread -11.5 basis points -.5 basis point
  

• TED Spread 20.25 basis points -1.0 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -25.5 -1.0 basis point
  
• MBS  5/10 Treasury Spread 187.0 -1.0 basis point
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 926.0 -6.0 basis points
  
• Avg. Auto ABS OAS 93.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 41.2 +.09%
• 3-Month T-Bill Yield 5.45% -1.0 basis point
  

• China Iron Ore Spot 119.2 USD/Metric Tonne -.43%
• Dutch TTF Nat Gas(European benchmark) 50.5 euros/megawatt-hour -.6%

• Citi US Economic Surprise Index 63.7 +2.5 points

• Citi Eurozone Economic Surprise Index -44.1 -1.5 points

• Citi Emerging Markets Economic Surprise Index 26.4 -1.0 point
• S&P 500 Current Quarter EPS Growth Rate YoY(246 of 500 reporting) +5.8% -5.3 percentage points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 240.15 +.06:  Growth Rate +9.2% unch., P/E 17.3 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.11% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(6 of 10 reporting) +51.9% +16.9 percentage points
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 269.87 +1.48: Growth Rate +59.2% +.9 percentage point, P/E 26.7 -.7
  
• Bloomberg US Financial Conditions Index -.30 -1.0 basis point
  
• Bloomberg Euro-Zone Financial Conditions Index -.11 -7.0 basis points
  
• US Yield Curve -17.0 basis points (2s/10s) -.5 basis point
  
• US Atlanta Fed 3Q GDPNow Forecast +2.26% n/a
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.63% -7.0 basis points: CPI YoY +3.32% unch.
  
• 10-Year TIPS Spread 2.43 +1.0 basis point
  
• Highest target rate probability for Dec. 13th FOMC meeting: 72.1%(-8.0 percentage points) chance of 5.25%-5.5%. Highest target rate probability for Jan. 31st meeting: 65.1%(-6.7 percentage points) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -432 open in Japan 
• China A50 Futures: Indicating -73 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio:

• Higher:  On gains in my tech sector longs and index hedges
  

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

• Market Exposure: Moved to Market Neutral
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.1%
  

Sector Underperformers:

• 1) Pharma -2.9% 2) Alt Energy -2.4% 3) Biotech -2.1%

Stocks Falling on Unusual Volume: 

• AON, SQ, BIPC, WHR, BWA, BAH, PK, TROW, LEA, HUBG, HAS, NXT, CPT, ABBV, HTLD, HES, UDR, CVX, GNTX, SAIA, TROX, OLN, AVTR, SEDG, VRSN, PEB, CHTR, LBRDK, AX, F, CPRX, SAVA, EXPO, ENPH, ACMR, PTCT, GTLS and B
  

Stocks With Unusual Put Option Activity:

• 1) EDR 2) JBLU 3) OIH 4) IBB 5) F
  

Stocks With Most Negative News Mentions:

• 1) ENPH 2) PTCT 3) KNSL 4) GSIT 5) B
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.7%
  

Sector Outperformers:

• 1) Education +3.0% 2) Disk Drives +2.3% 3) Shipping +1.8%

Stocks Rising on Unusual Volume:

• DECK, ARCB, DXCM, PMT, FIX, COF, INTC, AMZN, SWK, BJRI, CMG, PFSI, JNPR, EDR, LECO and TXRH
  

Stocks With Unusual Call Option Activity:

• 1) EDR 2) NWL 3) WPM 4) WHR 5) F

Stocks With Most Positive News Mentions:

• 1) DECK 2) DXCM 3) INTC 4) COF 5) CUBI
  

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:

• (CHKP)/2.02
• (JKS)/10.51
• (MCD)/3.00
• (ON)/1.34
• (WDC)/-1.91
• (XPO)/.64
  

After the Close: 

• (ANET)/1.58
• (BCC)/3.42
• (CHGG)/.17
• (CWK)/.21
• (FWRD)/1.12
• (LSCC)/.52
• (PSMT)/.85
• (PSA)/4.19
• (QGEN)/.48
• (SPG)/2.97
• (THC)/1.20
• (RIG)/-.24
• (TREX)/.50
• (VFC)/.65
• (AMG)/3.74
• (SANM)/1.45
  

Economic Releases

10:30 am EST

• Dallas Fed Manufacturing Activity for Oct. is estimated to rise to -16.1 versus -18.1 in Sept.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The 3/6 Month T-Bill auctions and the Gabelli Funds Auto Symposium could also impact global trading on Monday.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• NYSE Volume Running +.6% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 7.6 -.8
  
• 7 Sectors Declining, 4 Sectors Rising
• 40.4% of Issues Advancing, 56.5% Declining
• 16 New 52-Week Highs, 201 New Lows
• 25.5%(-1.1%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 31.0 -5.0
  
• Bloomberg Global Risk-On/Risk-Off Index 64.3 -.5%
  
• Russell 1000: Growth/Value 17,860.4 +1.3%
  
• 1-Day Vix 15.5 -17.0%
  
• Vix 20.9 -2.9%
  
• Total Put/Call .93 -17.7%
• TRIN/Arms 1.34 +59.5%
  

Friday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 138.75 +2.25 basis points.

• China Sovereign CDS 84.25 +.5 basis point.
  
• China Iron Ore Spot 116.2 USD/Metric Tonne -.77%.

• Bloomberg Emerging Markets Currency Index 41.22 +.01%
• Bloomberg Global Risk-On/Risk Off Index 66.3 +2.60%. 
• Bloomberg US Financial Conditions Index -.30 +1.0 basis point.
  
• Volatility Index(VIX) futures 20.2 -1.9%.
• Euro Stoxx 50 futures +.07%.

• S&P 500 futures +.41%.

• NASDAQ 100 futures +.61%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed.  The Portfolio is 50% net long heading into the day.