Stocks Reversing Higher into Final Hour on Stable Long-Term Rates, Earnings Outlook Optimism, Short-Covering, Tech/Pharma Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.0 -2.6%
• DJIA Intraday % Swing 1.0 +6.8%
  
• Bloomberg Global Risk On/Risk Off Index 56.8 -1.2%

• Euro/Yen Carry Return Index 187.5 -.1%

• Emerging Markets Currency Volatility(VXY) 7.6 +.4%

• CBOE S&P 500 Implied Correlation Index 10.8 -6.0% 

• ISE Sentiment Index 149.0 +6.0
  

• Total Put/Call .90 -6.3%

• NYSE Arms 1.24 +47.6%
  
• NYSE Non-Block Money Flow -$232.7M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 53.8 +1.2%
  

• US Energy High-Yield OAS 275.2 -.3%
• Bloomberg TRACE # Distressed Bonds Traded 259 +1
  

• European Financial Sector CDS Index 70.97 +1.2%
  
• Deutsche Bank Subordinated 5Y Credit Default Swap 183.6 +.17%
  

• Italian/German 10Y Yld Spread 152.0 basis points +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 101.0 +.9%
  

• Emerging Market CDS Index 171.9 +.1%
  
• Israel Sovereign CDS 133.6 +1.1%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.9 +.08%

• 2-Year SOFR Swap Spread -18.0 basis points -.25 basis point
  

• Treasury Repo 3M T-Bill Spread 5.75 basis points +.75 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -4.25 +.75 basis point
  
• MBS  5/10 Treasury Spread 147.0 +3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 721.0 +4.0 basis points
  
• Avg. Auto ABS OAS 63.0 +2.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 39.0 -.2%
• 3-Month T-Bill Yield 5.36% +1.0 basis point
  

• China Iron Ore Spot 103.5 USD/Metric Tonne +.2%
• Dutch TTF Nat Gas(European benchmark) 34.9 euros/megawatt-hour +2.3%

• Citi US Economic Surprise Index -26.0 +.7 point

• Citi Eurozone Economic Surprise Index -13.4 +.8 point

• Citi Emerging Markets Economic Surprise Index 10.8 +.5 point
• S&P 500 Current Quarter EPS Growth Rate YoY(10 of 500 reporting) +7.0% +5.0 percentage points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 260.59 +.38:  Growth Rate +14.2% +.2 percentage point, P/E 21.0 -.1
  
• S&P 500 Current Year Estimated Profit Margin 12.86% +3.0 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 328.35 -7.80: Growth Rate +22.4% -2.9 percentage points, P/E 33.9 +.9
  
• Bloomberg US Financial Conditions Index .94 -3.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .59 +5.0 basis points
  
• US Yield Curve -50.25 basis points (2s/10s) -1.25 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +3.0% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 53.7% +.8 percentage point
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.56% unch.: CPI YoY +3.12% -1.0 basis point
  
• 10-Year TIPS Spread 2.22 -1.0 basis point
  
• Highest target rate probability for Sept. 18th FOMC meeting: 61.1%(+.6 percentage point) chance of 5.0%-5.25%. Highest target rate probability for Nov. 7th meeting: 50.9%(+.6 percentage point) chance of 5.0%-5.25%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +182 open in Japan 
• China A50 Futures: Indicating +40 open in China

• DAX Futures: Indicating +213 open in Germany

Portfolio:

• Slightly Higher:  On gains in my tech sector longs and emerging market shorts
  

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

• Market Exposure: Moved to 100% Net Long
  

Bear Radar

Style Underperformer:

• Mid-Cap Value -.8%
  

Sector Underperformers:

• 1) Gambling -1.9% 2) Homebuilding -1.9% 3) Steel -1.5%

Stocks Falling on Unusual Volume: 

• BIRK, FDMT, SGRY, VRNA, NVST, TSCO, EPAC, TREX, OMI, CERE, PRAX, PNR, FND, CELH, JKS, POOL, AZEK, GPCR, HAYW, MAX, SNX, TROX, EC and SEDG
  

Stocks With Unusual Put Option Activity:

• 1) WMG 2) PTEN 3) BMBL 4) ENVX 5) ITB
  

Stocks With Most Negative News Mentions:

• 1) SEDG 2) POOL 3) HAYW 4) GRTS 5) HD
  

Sector ETFs With Most Negative Money Flow:

• 1) HACK 2) IGV 3) AMLP 4) FDN 5) VGT

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +1.1%
  

Sector Outperformers:

• 1) Semis +1.7% 2) Internet +1.1% 3) Pharma +.6%

Stocks Rising on Unusual Volume:

• ENVX, NNE, ZIMV, HUT, SMR, FTAI, CUK, DJT, CCL, RIVN, GRND, ALNY, CHWY, IONS, NCLH, ASND, ZI, CVNA, NU, ILMN, RCL, BBIO, BROS, NVGS, IREN, TM and NVO
  

Stocks With Unusual Call Option Activity:

• 1) XLC 2) HA 3) DNA 4) BTBT 5) FTAI

Stocks With Most Positive News Mentions:

• 1) ZIMV 2) CCL 3) ALNY 4) ENVX 5) CORZ
  

Sector ETFs With Most Positive Money Flow:

• 1) XLF 2) XBI 3) XLU 4) XLE 5) XLV
  

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)/.99
• (PAYX)/1.10
• (UNF)/1.86
  

After the Close: 

• (AVAV)/.21
• (FUL)/1.03
• (JEF)/.63
• (LEVI)/.11
• (MU)/.48
• (MLKN)/.54
• (WS)/.76
  

Economic Releases

10:00 am EST

• New Home Sales for May is estimated to fall to 633K versus 644K in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,381,140 barrels versus a -2,547,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,298,860 barrels versus a -2,280,000 barrel decline the prior week. Distillate inventories are estimated to fall by -620,430 barrels versus a -1,726,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.01% versus a -1.5% decline prior.
  

Upcoming Splits

• (CMG) 50-for-1
  

Other Potential Market Movers

• The Bank Stress Test results, 5Y T-Note auction, weekly MBA Mortgage Applications report, Oppenheimer Consumer Growth/E-Commerce Conference, (NVDA) annual meeting, (HOOD) annual meeting and the (TDG) investor day could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -18.7% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.1 -1.3
  
• 9 Sectors Declining, 2 Sectors Rising
• 27.8% of Issues Advancing, 69.6% Declining 
• TRIN/Arms 1.29 +53.7%
  
• Non-Block Money Flow -$287.1M
  
• 41 New 52-Week Highs, 51 New Lows
• 51.1% (-2.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.0 -7.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 56.6 -1.6%
• Bloomberg Cyclicals/Defensives Index 238.0 +.4%
  
• Russell 1000: Growth/Value 20,809.4 +1.8%
• CNN Fear & Greed Index 39.0 (FEAR) -3.0
  
• 1-Day Vix 8.2 -6.2%
  
• Vix 13.4 +.2%
  
• Total Put/Call .90 -6.3%

Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 100.0 +.5 basis point.

• China Sovereign CDS 68.0 +.75 basis point.
  
• China Iron Ore Spot 103.3 USD/Metric Tonne +.7%.

• Bloomberg Emerging Markets Currency Index 39.1 unch.
• Bloomberg Global Risk-On/Risk Off Index 56.6 -.9%.
• Volatility Index(VIX) futures 14.5 +.4%.
• Euro Stoxx 50 futures -.56%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures +.04%.  

Morning Preview Links

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