Stocks Surging into Afternoon on US Economic Data, Rising Fed Rate-Cut Odds, Earnings Outlook Optimism, Tech/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 14.9 -8.9%
• S&P 500 Intraday % Swing .70 +90.6%
• Bloomberg Global Risk On/Risk Off Index 78.4 +3.1% 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.9 +.45%

• Euro/Yen Carry Return Index 194.6 +.3%

• Emerging Markets Currency Volatility(VXY) 7.1 -.3%

• CBOE S&P 500 Implied Correlation Index 15.4 -.7% 

• ISE Sentiment Index 177.0 +15.0

• Total Put/Call 1.0 +20.5%

• NYSE Arms 1.27 unch.
• NYSE Non-Block Money Flow +$295.0M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 50.3 -2.3%
  

• US Energy High-Yield OAS 359.2 -.6%
• Bloomberg TRACE # Distressed Bonds Traded 211.0 +10.0

• European Financial Sector CDS Index 54.7 -1.4%
  
• Deutsche Bank Subordinated 5Y Credit Default Swap 120.1 -.7%
  

• Italian/German 10Y Yld Spread 79.0 unch.

• Asia Ex-Japan Investment Grade CDS Index 68.7 -.3%
  

• Emerging Market CDS Index 148.3 -1.4%
• Israel Sovereign CDS 74.3 +2.2%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.3 +.3%

• 2-Year SOFR Swap Spread -24.5 basis points +.25 basis point

• 3M T-Bill Treasury Repo Spread -10.5 basis points -1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 2.5 -.5 basis point
• MBS  5/10 Treasury Spread 140.0 unch.
• Bloomberg CMBS Investment Grade Bbb Average OAS 583.0 +1.0 basis point
• Avg. Auto ABS OAS 52.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 36.7 +.12%
• US 10-Year T-Note Yield 4.29% +1.0 basis point
• 3-Month T-Bill Yield 4.22% -2.0 basis points

• China Iron Ore Spot 104.6 USD/Metric Tonne +.2%
• Dutch TTF Nat Gas(European benchmark) 32.4 euros/megawatt-hour -1.8%

• Citi US Economic Surprise Index 7.9 +1.0 point

• Citi Eurozone Economic Surprise Index 25.0 -2.0 points

• Citi Emerging Markets Economic Surprise Index 11.6 -.3 point
• S&P 500 Current Quarter EPS Growth Rate YoY(454 of 500 reporting) +11.4% +n/a percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 287.17 +n/a:  Growth Rate +12.4% n/a, P/E 22.4 n/a
• S&P 500 Current Year Estimated Profit Margin 13.45% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(7 of 10 reporting) +23.6% +n/a percentage points
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 468.41 +n/a: Growth Rate +24.2% +n/a percentage points, P/E 32.9 n/a
• Bloomberg US Financial Conditions Index .58 -4.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index 1.37 -15.0 basis points
• Bloomberg Global Trade Policy Uncertainty Index 6.4 unch.
• US Yield Curve 40.5 basis points (2s/10s) -2.75 basis points
• US Atlanta Fed GDPNow Q2 Forecast +2.5% unch.
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 42.5% -.5 percentage point

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.89% +4.0 basis points: CPI YoY +2.85% +13.0 basis points
• 1-Year TIPS Spread 2.68 -9.0 basis points
• 10-Year TIPS Spread 2.40 unch.
• Highest target rate probability for Oct. 29th FOMC meeting: 62.4% (+6.5 percentage points) chance of 3.75%-4.0%. Highest target rate probability for Dec. 10th meeting: 49.3%(+4.3 percentage points) chance of 3.5%-3.75%. (current target rate is 4.25-4.5%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +620 open in Japan 
• China A50 Futures: Indicating +62 open in China

• DAX Futures: Indicating +150 open in Germany

Portfolio:

• Higher: On gains in my tech/industrial/financial/consumer discretionary/utility sector longs
• Disclosed Trades: None
• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +1.1%
  

Sector Underperformers:

• 1) Computer Services -.7% 2) Education -.5% 3) Insurance -.1%

Stocks Falling on Unusual Volume: 

• PSIX, HROW, DUOL, PONY, GIL, SAP, SKYT, CAH, LENZ, HNRG, ETOR, SMMT, CE, TATT and ACVA

Stocks With Unusual Put Option Activity:

• 1) AI 2) SYF 3) OHI 4) FBTC 5) WEN

Stocks With Most Negative News Mentions:

• 1) EK 2) BBAI 3) PUBM 4) FLNC 5) BWEN

Sector ETFs With Most Negative Money Flow:

• 1) XLC 2) SMH 3) VOX 4) IGV 5) XLY

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +2.5%

Sector Outperformers:

• 1) Airlines +8.3% 2) Semis +2.7% 3) Regional Banks +2.5%

Stocks Rising on Unusual Volume:

• GDOT, ARCT, TNXP, LTBR, MRCY, USAR, ICHR, CRNC, SBGI, HI, REZI, ALGT, AAOI, SONO, LQDA, CLDX, LIF, ASTS, SNCY, AAL, CRMD, UAL, AAON, DAL, AMPH, RH, BE, PSKY, VREX, ON, PGY, AMN, GRDN, RKT, MCHP, AEIS, ALAB, TNDM, MBC, VSH, PDFS, SHEN, ETSY, RPD, AMR, ARLO, LPX, IIPR, CDRE, ARLO, OFIX, IIPR, DFIN, METC, ELF, FTNT, BLFS, MIDD, THS, SLVM, ACHR, THS, OKLO, FORM, ECPG, TXN, CVLT, SSYS, INSM, FOUR, POWI, RIGL, LITE, FND, GPCR, THO, ACAD, PANW, ACIW, GFS, DAN, MRTN, CWAN, BMNR, PATK, MDB, AEVA, SPHR, CBU, RDNT, ASPI, WLDN, TEM, META, LRCX, SAIL, GS, BRDG, INOD, FUN, TWLO, COHR, WT, ISSC, BG, LNW, ESAB, INTA, INTC, FUL, MELI and PAR

Stocks With Unusual Call Option Activity:

• 1) EQX 2) CIVI 3) HBI 4) OLN 5) ALTS

Stocks With Most Positive News Mentions:

• 1) MRCY 2) TLS 3) ARCT 4) HBI 5) SE

Sector ETFs With Most Positive Money Flow:

• 1) ARKK 2) XLI 3) KRE 4) XLU 5) XLF

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:

• (EAT)/2.47
• (PFGC)/1.46
• (SSYS)/.03 
• (CRMT)/.83
• (BBWI)/.38 

After the Close: 

• (CSCO)/.98
• (COHR)/.92 

Economic Releases 

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,062,000 barrels versus a -3,029,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -648,200 barrels versus a -1,323,000 barrel decline the prior week. Distillate inventories are estimated to rise by +454,600 barrels versus a -565,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall -.24% versus a +1.5% gain prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bostic speaking, Fed's Goolsbee speaking, weekly MBA Mortgage Applications, (MELI) investor meeting with Morgan Stanley, JPMorgan Hardware/Semis Access Forum, Needham FinTech & Digital Transformation Conference report and the Oppenheimer Tech/Internet/Communications Virtual Conference could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• Volume Running +11.3% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 13.8 -3.2
• 1 Sector Declining, 10 Sectors Rising
• 74.4% of Issues Advancing, 23.2% Declining 
• TRIN/Arms 1.26 -.79% 
  
• Non-Block Money Flow +$305.2M
  
• 95 New 52-Week Highs, 18 New Lows
• 50.7% (+5.2%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 55.7 +1.0

Other:

• Bloomberg Global Risk-On/Risk-Off Index 78.4% +3.0%
• Bloomberg Cyclicals/Defensives Index 248.2 +.9%
  
• Morgan Stanley Growth vs Value Index 164.9 -1.4%
• CNN Fear & Greed Index 63.0 (GREED) +6.0
• 1-Day Vix 8.4 -47.5%
  
• Vix 15.0 -7.5%
  
• Total Put/Call .93 +12.0%

Tuesday Watch

 Night Trading 

• Asian equity indices are -.25% to +.75% on average. 
• Asia Ex-Japan Investment Grade CDS Index 68.75 -1.0 basis point.
• China Sovereign CDS 44.75 +.25 basis point.
• China Iron Ore Spot 103.8 USD/Metric Tonne +.29%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.86 +.03%.
• Bloomberg Emerging Markets Currency Index 36.6 -.1%.
• Bloomberg Global Risk-On/Risk Off Index 76.7 +.8%.
• US 10-Year Yield 4.28% unch.
• Volatility Index(VIX) futures 19.32 +.12%.
• Euro Stoxx 50 futures +.28%. 
• S&P 500 futures +.07%. 
• NASDAQ 100 futures +.08%.

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 rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.