Stocks Reversing Slightly Lower into Final Hour on Earnings Outlook Jitters, Yen Strength, Technical Selling, Transport/Healthcare Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average
  

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 20.0 -6.0%
• DJIA Intraday % Swing 1.38 +88.1%
  
• Bloomberg Global Risk On/Risk Off Index 50.3 +1.7%

• Euro/Yen Carry Return Index 175.6 -.08%

• Emerging Markets Currency Volatility(VXY) 8.9 unch.

• CBOE S&P 500 Implied Correlation Index 21.5 -5.3% 

• ISE Sentiment Index 140.0 +22.0
  

• Total Put/Call .65 -33.7%

• NYSE Arms 1.05 -18.0%
  
• NYSE Non-Block Money Flow -$66.5M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 51.51 -.98%
  

• US Energy High-Yield OAS 316.43 -.07%
• Bloomberg TRACE # Distressed Bonds Traded 249 -9
  

• European Financial Sector CDS Index 62.3 +.2%
  
• Deutsche Bank Subordinated 5Y Credit Default Swap 166.3 -.83%
  

• Italian/German 10Y Yld Spread 143.0 basis points -4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 95.5 -1.1%
  

• Emerging Market CDS Index 166.0 -.51%
  
• Israel Sovereign CDS 135.1 +.17%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.82 +.11%

• 2-Year SOFR Swap Spread -20.25 basis points -.5 basis point
  

• Treasury Repo 3M T-Bill Spread -25.75 basis points -5.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -2.0 -.75 basis point
  
• MBS  5/10 Treasury Spread 133.0 -3.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 699.0 +4.0 basis points
  
• Avg. Auto ABS OAS 67.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 39.0 +.3%
• 3-Month T-Bill Yield 5.06% -2.0 basis points
  

• China Iron Ore Spot 92.4 USD/Metric Tonne +1.5%
• Dutch TTF Nat Gas(European benchmark) 36.2 euros/megawatt-hour +1.1%

• Citi US Economic Surprise Index -29.5 -.6 point

• Citi Eurozone Economic Surprise Index -36.4 +5.9 points

• Citi Emerging Markets Economic Surprise Index -8.0 unch.
• S&P 500 Current Quarter EPS Growth Rate YoY(497 of 500 reporting) +11.4% unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 266.07 +.11:  Growth Rate +13.9% +.1 percentage point, P/E 20.6 -.2
  
• S&P 500 Current Year Estimated Profit Margin 12.69% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(9 of 10 reporting) +36.3% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 346.91 +.24: Growth Rate +22.7% +.1 percentage point, P/E 31.2 +.1
  
• Bloomberg US Financial Conditions Index .46 -8.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .70 -7.0 basis points
  
• US Yield Curve -2.25 basis point (2s/10s) -1.75 basis points
  
• US Atlanta Fed 3Q GDPNow Forecast +2.09% +5.0 basis points
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 72.3% +.4 percentage point
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.74% unch.: CPI YoY +2.56% unch.
  
• 10-Year TIPS Spread 2.04 -2.0 basis points
  
• Highest target rate probability for Nov. 7th FOMC meeting: 48.8%(-.6 percentage point) chance of 4.5%-4.75%. Highest target rate probability for Dec. 18th meeting: 40.5%(+1.3 percentage points) chance of 4.25%-4.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +333 open in Japan 
• China A50 Futures: Indicating -24 open in China

• DAX Futures: Indicating +70 open in Germany

Portfolio:

• Slightly Lower:  On losses in my industrial/biotech sector longs
  

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

• Market Exposure: Moved to 50% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Value -.7%
  

Sector Underperformers:

• 1) Road & Rail -1.9% 2) Pharma -1.7% 3) Industrials -1.2%

Stocks Falling on Unusual Volume: 

• AZN, GPC, ULS, REVG, ASPN, ZIM, CLF, CI, AAP, IRTC, SAIA, EW, CLW, COR, AAOI, AVAV, CVI, ODFL, EMBC, CHWY, HPE, WLY, VRNS, STNE, SG, TMDX, CPRT, IEP, CHCT, ZBH, VRNT, FYBR, XPO, MCK, TTC, AI, BASE, CRDO, ASTS and NSS
  

Stocks With Unusual Put Option Activity:

• 1) APA 2) GXO 3) ASHR 4) MBLY 5) AI
  

Stocks With Most Negative News Mentions:

• 1) AI 2) NSSC 3) HPE 4) CVS 5) SMCI
  

Sector ETFs With Most Negative Money Flow:

• 1) XLY 2) SMH 3) FHLC 4) FIDU 5) FENY

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth unch.
  

Sector Outperformers:

• 1) Airlines +2.9% 2) Gold & Silver +1.4% 3) Electric Vehicles +1.0%

Stocks Rising on Unusual Volume:

• GIII, SATS, VSTS, KLG, SCVL, PRMW, ZETA, SHC, CASY, ALK, OLMA, EXAS, DLTR, ZK, KREF, IMVT, X, SMAR, TNGX, ARGX, TSLA, GATO, AMRK, DB, SILA, SAIC, AAL, ATHM, GTLB, ZS, BBIO, UAL and CATX
  

Stocks With Unusual Call Option Activity:

• 1) APLD 2) APA 3) ALK 4) FYBR 5) VSTS

Stocks With Most Positive News Mentions:

• 1) MODD 2) YEXT 3) CASY 4) SCVL 5) NIO
  

Sector ETFs With Most Positive Money Flow:

• 1) XLP 2) XLU 3) XLV 4) XOP 5) XLF
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -2.7% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 12.1 +.2
  
• 8 Sectors Declining, 3 Sectors Rising
• 42.3% of Issues Advancing, 55.1% Declining 
• TRIN/Arms 1.13 -11.7%
  
• Non-Block Money Flow -$124.3M
  
• 178 New 52-Week Highs, 54 New Lows
• 55.4% (-2.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 62.0 unch.
  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 49.5 +.2%
• Bloomberg Cyclicals/Defensives Index 221.5 +.05%
  
• Russell 1000: Growth/Value 19,205.9 +.92%
• CNN Fear & Greed Index 47.0 (NEUTRAL) -5.0
  
• 1-Day Vix 17.3 +6.5%
  
• Vix 21.0 -1.6%
  
• Total Put/Call .61 -37.8%

Thursday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 95.5 +.25 basis point.

• China Sovereign CDS 59.5 -1.0 basis point.
  
• China Iron Ore Spot 92.0 USD/Metric Tonne -.6%

• Bloomberg Emerging Markets Currency Index 38.9 -.02%.
• Bloomberg Global Risk-On/Risk Off Index 50.1 +1.2%.
• Volatility Index(VIX) futures 20.3 -1.3%.
• Euro Stoxx 50 futures +.04%.

• S&P 500 futures +.08%.

• NASDAQ 100 futures +.17%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on US Economic Data, Yen Strength, Earnings Outlook Jitters, Regional Bank/Retail Sector Weakness

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 38.9 unch.
• 3-Month T-Bill Yield 5.07% -5.0 basis points
  

• China Iron Ore Spot 92.9 USD/Metric Tonne +.4%
• Dutch TTF Nat Gas(European benchmark) 35.8 euros/megawatt-hour -3.8%

• Citi US Economic Surprise Index -28.9 -3.8 points

• Citi Eurozone Economic Surprise Index -43.3 -3.8 points

• Citi Emerging Markets Economic Surprise Index -8.0 +3.4 points
• S&P 500 Current Quarter EPS Growth Rate YoY(495 of 500 reporting) +11.4% unch.
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 265.96 +.12:  Growth Rate +13.8% unch., P/E 20.8 -.5
  
• S&P 500 Current Year Estimated Profit Margin 12.69% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(9 of 10 reporting) +36.3% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 346.67 +.27: Growth Rate +22.6% +.1 percentage point, P/E 31.1 -.1
  
• Bloomberg US Financial Conditions Index .54 -31.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .77 -7.0 basis points
  
• US Yield Curve -.5 basis point (2s/10s) +3.0 basis points
  
• US Atlanta Fed 3Q GDPNow Forecast +2.04% unch.
  
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 71.9% +2.8 percentage points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.74% unch.: CPI YoY +2.56% unch.
  
• 10-Year TIPS Spread 2.06 -6.0 basis points
  
• Highest target rate probability for Nov. 7th FOMC meeting: 49.7%(+5.0 percentage points) chance of 4.5%-4.75%. Highest target rate probability for Dec. 18th meeting: 39.3%(-5.4 percentage points) chance of 4.25%-4.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -377 open in Japan 
• China A50 Futures: Indicating -25 open in China

• DAX Futures: Indicating -7 open in Germany

Portfolio:

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

• Disclosed Trades: None
  

• Market Exposure: 25% Net Long