Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, Surging Long-Term Rates, Technical Selling, Homebuilding/Regional Bank Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 14.3 +4.2%
• DJIA Intraday % Swing .77 +30.3%
  
• Bloomberg Global Risk On/Risk Off Index 69.0 +1.8%

• Euro/Yen Carry Return Index 175.0 -.2%

• Emerging Markets Currency Volatility(VXY) 6.2 unch.

• CBOE S&P 500 Implied Correlation Index 12.9 +9.5% 

• ISE Sentiment Index 128.0 -23.0
  

• Total Put/Call .88 +2.3%

• NYSE Arms .97 +10.2%
  
• NYSE Non-Block Money Flow -$331.5M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 49.2 +2.1%
  

• US Energy High-Yield OAS 291.1 +1.1%
• Bloomberg TRACE # Distressed Bonds Traded 271 unch.
  

• European Financial Sector CDS Index 59.5 +1.3% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 178.7 -1.6%
  

• Italian/German 10Y Yld Spread 128.0 basis points +5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 98.7 -.6%
  

• Emerging Market CDS Index 164.1 +2.7%
• Israel Sovereign CDS 115.1 +.93%
  

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

• 2-Year SOFR Swap Spread -11.0 basis points unch.
  

• Treasury Repo 3M T-Bill Spread 9.0 basis points unch.
  

• 3-Month EUR/USD Cross-Currency Basis Swap -4.25 +.75 basis point
  
• MBS  5/10 Treasury Spread 148.0 +6.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 814.0 -2.0 basis points
  
• Avg. Auto ABS OAS 62.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 39.9 -.22%
• 3-Month T-Bill Yield 5.39% unch.
  

• China Iron Ore Spot 101.9 USD/Metric Tonne -1.3%
• Dutch TTF Nat Gas(European benchmark) 26.0 euros/megawatt-hour +4.6%

• Citi US Economic Surprise Index 29.2 -.5 point

• Citi Eurozone Economic Surprise Index 51.2 -.2 point

• Citi Emerging Markets Economic Surprise Index 19.4 +2.1 points
• S&P 500 Current Quarter EPS Growth Rate YoY(498 of 500 reporting) +7.9% unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 248.22 +.05:  Growth Rate +11.2% unch., P/E 20.7 -.1
  
• S&P 500 Current Year Estimated Profit Margin 12.82% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(10 of 10 reporting) +55.2% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 316.65 +.38: Growth Rate +31.8% +.2 percentage point, P/E 31.0 unch.
  
• Bloomberg US Financial Conditions Index 1.17 +5.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index 1.12 +1.0 basis points
  
• US Yield Curve -39.5 basis points (2s/10s) +3.5 basis points
  
• US Atlanta Fed 1Q GDPNow Forecast +2.3% -20.0 basis points
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 56.5% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.78% unch.: CPI YoY +3.33% unch.
  
• 10-Year TIPS Spread 2.30 unch.
  
• Highest target rate probability for May 1st FOMC meeting: 95.7%(+7.0 percentage points) chance of 5.25%-5.5%. Highest target rate probability for June 12th meeting: 60.1%(+1.9 percentage points) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -633 open in Japan 
• China A50 Futures: Indicating -30 open in China

• DAX Futures: Indicating -55 open in Germany

Portfolio:

• Lower:  On losses in my industrial/transport/consumer discretionary/biotech/tech sector longs
  

• Disclosed Trades: Added to (IWM)/(QQQ) hedges, added to emerging market shorts  and took profits in biotech longs
  

• Market Exposure: Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -.1%
  

Sector Underperformers:

• 1) Homebuilding -3.7% 2) Alt Energy -2.8% 3) Regional Banks -2.6%

Stocks Falling on Unusual Volume: 

• OMC, KVYO, SNDR, KNTK, SLN, ARCH, OPRA, ODD, MSTR, CPNG, IGT, GMED, BZ, PAY, LEN, EH, PATH, MDGL, BILI, CDRE, X, ASPN, GIII, FUTU, S and PGY
  

Stocks With Unusual Put Option Activity:

• 1) EVA 2) DLTR 3) DG 4) DKS 5) LEN
  

Stocks With Most Negative News Mentions:

• 1) FSR 2) SPRB 3) S 4) X 5) RILY
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.1%
  

Sector Outperformers:

• 1) Software +1.2% 2) Oil Service +1.0% 3) Energy +.4%

Stocks Rising on Unusual Volume:

• BBW, DKS, PI, ERJ, HOOD, BUR and NNOX
  

Stocks With Unusual Call Option Activity:

• 1) DKS 2) LAC 3) UA 4) IGT 5) ERJ

Stocks With Most Positive News Mentions:

• 1) HEAR 2) DKS 3) BBW 4) HOOD 5) EB
  

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:

• (BKE)/1.44
• (HIBB)/2.56
• (JBL)/1.66
  

After the Close: 

• None of note
  

Economic Releases

8:30 am EST

• Empire Manufacturing for March is estimated to fall to -7.0 versus -2.4 in Feb.
• The Import Price Index MoM for Feb. is estimated to rise +.3% versus a +.8% gain in Jan.
• The Import Price Index Ex Petrol MoM for Feb. is estimated to fall -.2% versus a +.6% gain in Jan.
• The Export Price Index MoM for Feb. is estimated to rise +.4% versus a +.8% gain in Jan.

9:15 am EST

• Industrial Production MoM for Feb. is estimated unch. versus a -.1% decline in Jan.
• Capacity Utilization for Feb. is estimated at 78.5% versus 78.5% in Jan.
• Manufacturing Production for Feb. is estimated to rise +.3% versus a -.5% decline in Jan.
  

10:00 am EST

• The Univ. of Mich. Consumer Confidence Index for March is estimated to rise to 77.2 versus 76.9 in Feb.
• Univ. of Mich. 1Y inflation Expectations Index for March is estimated to rise to 3.1% versus 3.0% in Feb.

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The US Baker Hughes Rig Count, CFTC speculative net positioning report, Roth Conference and the (HEI) annual meeting could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Afternoon Market Internals

NYSE Composite Index:

• Volume Running +16.2% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 8.4 -.2
  
• 9 Sectors Declining, 2 Sectors Rising
• 20.7% of Issues Advancing, 77.9% Declining 
• TRIN/Arms .94 +6.8%
  
• Non-Block Money Flow -$288.2M
  
• 116 New 52-Week Highs, 48 New Lows
• 58.9% (-4.0%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 64.0 -9.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 69.0 +1.8%
• Bloomberg Cyclicals/Defensives Pair Index 141.8 -.04%
  
• Russell 1000: Growth/Value 19,170.8 +.8%
• CNN Fear & Greed Index 72.0 (Greed) +3.0
  
• 1-Day Vix 12.7 +7.1%
  
• Vix 14.6 +6.3%
  
• Total Put/Call .85 -1.2%

Thursday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 98.5 -1.0 basis point.

• China Sovereign CDS 66.0 +.75 basis point.
  
• China Iron Ore Spot 106.5 USD/Metric Tonne +.9%.

• Bloomberg Emerging Markets Currency Index 40.0 -.06%.
• Bloomberg Global Risk-On/Risk Off Index 68.4 +.9%.
• Volatility Index(VIX) futures 15.0 -.24%.
• Euro Stoxx 50 futures -.1%

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.19%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by healthcare and industrial 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.