Stocks Falling Sharply into Final Hour on Earnings Outlook Jitters, US Election Credibility Concerns, Higher Long-Term Rates, Tech/Consumer Discretionary Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 17.5 +18.6%
• DJIA Intraday % Swing .77 +53.3%
  
• Bloomberg Global Risk On/Risk Off Index 53.6 -3.0%

• Euro/Yen Carry Return Index 183.5 -1.2%

• Emerging Markets Currency Volatility(VXY) 7.5 +1.9%

• CBOE S&P 500 Implied Correlation Index 15.4 +33.2% 

• ISE Sentiment Index 146.0 +12.0
  

• Total Put/Call .95 unch.

• NYSE Arms .82 -31.7%
  
• NYSE Non-Block Money Flow -$320.8M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 51.3 +3.3%
  

• US Energy High-Yield OAS 270.7 +3.2%
• Bloomberg TRACE # Distressed Bonds Traded 247 +6
  

• European Financial Sector CDS Index 62.3 +1.8%
  
• Deutsche Bank Subordinated 5Y Credit Default Swap 161.4 +4.6%
  

• Italian/German 10Y Yld Spread 135.0 basis points +7.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 95.4 +1.5%
  

• Emerging Market CDS Index 169.0 +3.2%
  
• Israel Sovereign CDS 128.0 unch.
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.0 unch.

• 2-Year SOFR Swap Spread -14.75 basis points +4.0 basis points
  

• Treasury Repo 3M T-Bill Spread -1.25 basis points -1.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -1.0 -.25 basis point
  
• MBS  5/10 Treasury Spread 146.0 +2.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 688.0 -2.0 basis points
  
• Avg. Auto ABS OAS 61.0 +1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 39.1 -.1%
• 3-Month T-Bill Yield 5.31% +1.0 basis point
  

• China Iron Ore Spot 100.0 USD/Metric Tonne -.9%
• Dutch TTF Nat Gas(European benchmark) 32.6 euros/megawatt-hour +3.2%

• Citi US Economic Surprise Index -35.1 -4.0 points

• Citi Eurozone Economic Surprise Index -45.7 -19.0 points

• Citi Emerging Markets Economic Surprise Index -.5 +.3 point
• S&P 500 Current Quarter EPS Growth Rate YoY(133 of 500 reporting) +7.6% +.6 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 262.34 +.07:  Growth Rate +14.9% unch., P/E 20.8 -.5
  
• S&P 500 Current Year Estimated Profit Margin 12.80% +1.0 basis point
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(3 of 10 reporting) +19.8% -14.0 percentage points
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 335.52 +.21: Growth Rate +25.1% +.1 percentage point, P/E 32.8 -1.8
  
• Bloomberg US Financial Conditions Index .93 +10.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .82 +10.0 basis points
  
• US Yield Curve -14.0 basis points (2s/10s) +10.5 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +2.73% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 60.3% +2.3 percentage points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.39% unch.: CPI YoY +3.01% unch.
  
• 10-Year TIPS Spread 2.28 unch.
  
• Highest target rate probability for Sept. 18th FOMC meeting: 91.4%(-.8 percentage point) chance of 5.0%-5.25%. Highest target rate probability for Nov. 7th meeting: 56.5%(+1.6 percentage points) chance of 4.75%-5.0%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -915 open in Japan 
• China A50 Futures: Indicating -36 open in China

• DAX Futures: Indicating -58 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Value -.1%
  

Sector Underperformers:

• 1) Semis -4.2% 2) Gambling -3.0% 3) Software -2.9%

Stocks Falling on Unusual Volume: 

• TLN, GD, ZGN, RRC, MXL, CNI, BLCO, RRR, APH, GOOG, PII, ULTA, DAVE, OTIS, WMG, PMT, ROP, WNC, HCSG, DB, WFRD, ALGM, ROKU, HA, TTD, VRT, BZ, TSLA, BXMT, SFL, SAGE and LW
  

Stocks With Unusual Put Option Activity:

• 1) BHC 2) AVTR 3) HA 4) ACI 5) STLA
  

Stocks With Most Negative News Mentions:

• 1) VWE 2) CONN 3) LW 4) AMC 5) LYFT
  

Sector ETFs With Most Negative Money Flow:

• 1) XLE 2) XLK 3) SMH 4) IGV 5) KWEB

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -3.0%
  

Sector Outperformers:

• 1) Utilities +1.7% 2) Healthcare Providers +1.0% 3) Medical Equipment +.7%

Stocks Rising on Unusual Volume:

• PRG, ENPH, MAT, NBR, MANH, FLEX, CHKP, ALKS, AMN, APEI, AVTR, QDEL, MEDP, CSGP, THC, TSEM, SGRY, STX, T, XNCR, ENVA, PB, LPLA, SF, TDY, TEL, FCF, UPBD, CALM, FTAI, SEDG, BMY, LMT, SNDR, TMO and HIW
  

Stocks With Unusual Call Option Activity:

• 1) UWMC 2) BHC 3) LMT 4) STX 5) ABT

Stocks With Most Positive News Mentions:

• 1) PRG 2) THC 3) GPI 4) EHC 5) ALLE
  

Sector ETFs With Most Positive Money Flow:

• 1) KRE 2) XLF 3) IYW 4) MLPX 5) XLB
  

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:

• (ABBV)/2.57
• (AAL)/1.06
• (AZN)/.99
• (BC)/1.89
• (CRS)/1.51
• (CBRE)/.70
• (DOW)/.71
• (EME)/3.76
• (FSS)/.84
• (HOG)/1.40
• (HON)/2.42
• (LEA)/3.39
• (NDAQ)/.64
• (NOC)/5.93
• (POOL)/4.91
• (RS)/4.73
• (RCL)/4.76
• (RTX)/1.30
• (R)/2.87
• (LUV)/.52
• (STM)/.35
• (TSCO)/3.92
• (UNP)/2.71
• (VLO)/2.60
• (VC)/1.98
• (WEX)/3.81
  

After the Close: 

• (AEM)/.91
• (APPF)/.96
• (BYD)/1.49
• (FIX)/3.14
• (CUZ)/.66
• (DECK)/3.49
• (DLR)/1.63
• (JNPR)/.44
• (LHX)/3.18
• (MHK)/2.75
• (SKYW)/1.73
• (TXRH)/1.64
• (WY)/.22 
• (FWRD)/-.18
• (COOP)/2.36
• (NSC)/2.86
• (SAH)/1.38
  

Economic Releases

8:30 am EST

• 2Q GDP Annualized QoQ is estimated to rise +2.0% versus a +1.4% gain in 1Q.  
• 2Q Personal Consumption is estimated to rise +2.0% versus a +1.5% gain in 1Q.
• 2Q GDP Price Index is estimated to rise +2.6% versus a +3.1% gain in 1Q.
• Initial Jobless Claims for last week is estimated to fall to 238K versus 243K the prior week.
• Continuing Claims is estimated to rise to 1868K versus 1867K prior.
• Durable Goods Orders for June is estimated to is estimated to rise +.3% versus a +.1% gain in May.
• Durables Ex Transports for June is estimated to rise +.2% versus a -.1% decline in May.
• Cap Goods Orders Non-Defense Ex-Air for June is estimated to rise +.2% versus a -.1% decline in May.
  

11:00 am EST

• The Kansas City Fed Manufacturing Index for July is estimated to rise to -5 versus -8 in June.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The 7Y T-Note auction, weekly Fed Balance Sheet report, weekly EIA natural gas inventory report, (HAE) annual meeting and the (BF/B) annual meeting 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 -.8% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 15.9 +4.0
  
• 8 Sectors Declining, 3 Sectors Rising
• 39.1% of Issues Advancing, 58.3% Declining 
• TRIN/Arms .99 -17.5%
  
• Non-Block Money Flow -$157.7M
  
• 90 New 52-Week Highs, 23 New Lows
• 64.8% (-1.0%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 55.0 -2.0
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 54.1 -2.1%
• Bloomberg Cyclicals/Defensives Index 233.5 -1.7%
  
• Russell 1000: Growth/Value 19,866.1 -2.8%
• CNN Fear & Greed Index 47.0 (NEUTRAL) -7
  
• 1-Day Vix 12.4 +3.1%
  
• Vix 16.9 +14.8%
  
• Total Put/Call .98 +3.2%

Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 94.5 -.75 basis point.

• China Sovereign CDS 62.25 -.75 basis point.
  
• China Iron Ore Spot 101.6 USD/Metric Tonne +1.0%

• Bloomberg Emerging Markets Currency Index 39.1 unch.
• Bloomberg Global Risk-On/Risk Off Index 56.8 +2.7%.
• Volatility Index(VIX) futures 15.1 +.8%.
• Euro Stoxx 50 futures unch.

• S&P 500 futures -.39%.

• NASDAQ 100 futures -.60%.  

Morning Preview Links

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