Stocks Lower into Final Hour on Mideast War Resumption Fears, Higher Long-Term Rates, Profit-Taking, Tech/Alt Energy Sector Weakness

Economic/Market Gauges:

• North American Investment Grade CDS Index 51.0 +1.0%
• BofA Private Credit Proxy Index 70.6 -3.3% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .25 +1.0 basis point
• BofA Global Financial Stress Indicator -.34 +1.0 basis point
• European Financial Sector CDS Index 56.5 +1.9%
• Emerging Market CDS Index 150.4 +1.3%
• Israel Sovereign CDS 54.3 +1.0% 
• Bloomberg Global Trade Policy Uncertainty Index .7 +.1
• US Morning Consult Daily Consume Sentiment Index 89.8 +3.2

• Citi US Economic Surprise Index 62.1 +5.1

• Citi Eurozone Economic Surprise Index -45.20 +14.3

• Citi Emerging Markets Economic Surprise Index 37.0 +1.5
• S&P 500 Current Quarter EPS Growth Rate YoY(488 of 500 reporting) +27.6% -.1 percentage point
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 361.72 +.37:  Growth Rate +23.2% +.1 percentage point, P/E 21.0 -.1
• S&P 500 Current Year Estimated Profit Margin 15.48% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(9 of 10 reporting) +67.2% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 890.79 +.84: Growth Rate +125.0% +.2 percentage point, P/E 20.6 -.3 
• Bloomberg US Financial Conditions Index 1.19 +2.0 basis points
• US Yield Curve 40.5 basis points (2s/10s) unch.
• Bloomberg Industrial Metal Index 187.7 -1.9%
• Dutch TTF Nat Gas(European benchmark) 49.3 euros/megawatt-hour +3.5%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 14.3% -1.2 percentage points
• US Atlanta Fed GDPNow Q2 Forecast +3.0% unch.
• US 10-Year T-Note Yield 4.49% +5.0 basis points
• 1-Year TIPS Spread 2.80 +8.0 basis points

• Highest target rate probability for July 29th FOMC meeting: 90.2% (-1.3 percentage points) chance of 3.5%-3.75%. Highest target rate probability for Sept. 16th meeting: 72.2%(-2.8 percentage points) chance of 3.5%-3.75%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -115 open in Japan 
• China A50 Futures: Indicating -150 open in China

• DAX Futures: Indicating +16 open in Germany

Portfolio:

• Higher: On gains in my energy/biotech sector longs, index hedges and emerging market shorts
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and emerging market shorts
• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.2%

Sector Underperformers:

• 1) Computer Services -5.9% 2) Software -4.0% 3) Telecom -2.7%

Stocks Falling on Unusual Volume: 

• NU, TSCO, HLIT, MH, ULTA, PANW, CELC, ORLA, WSE, AI, LOGI, HLNE, TSAT, IBM, ZS, EQX, VSXY, KRUS, CHA, STEP, KRUS, AMBA, USAR, GPN, FLNC, RGTI, INFQ, APPN, OKLO, SMR, DXYZ, NNE, DSP, MLYS and GRRR

Stocks With Unusual Put Option Activity:

• 1) PRA 2) GTES 3) BIRK 4) FPS 5) CMG

Stocks With Most Negative News Mentions:

• 1) CGNT 2) COMP 3) MLYS 4) FNMA 5) VIRC

Sector ETFs With Most Negative Money Flow:

• 1) PSI 2) IGV 3) XLP 4) SMH 5) XLC

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.3%

Sector Outperformers:

• 1) Biotech +1.8% 2) Energy +1.7% 3) Semis +1.6%

Stocks Rising on Unusual Volume:

• NVTS, ABVX, MMED, ALOY, DRTS, GMTL, TGTX, POET, BOT, STRL, PAHC, BRUN, PVLA, WOLF, SVCO, UTI, ODD, GME, PCT, BRKR, BTDR, TBN, KMX, NN, TATT, INCY, PRAX, STRO, APTV, CYRX, BWA, ALHC, MDT, QUIK, RIVN, MEI, BLLN, HMC, MRVL, SYRE, TTMI, OCS, ILMN, MXL, META, DIOD, LPLA, PHVS, LMB, ADEA, NTSK, PLXS, FLEX, ELAN and WMT

Stocks With Unusual Call Option Activity:

• 1) PPL 2) DRTS 3) ST 4) LASE 5) PRMW 

Stocks With Most Positive News Mentions:

• 1) MMED 2) MRVL 3) LASE 4) NVTS 5) MAIA 

Sector ETFs With Most Positive Money Flow:

• 1) XLV 2) DRAM 3) XLB 4) SOXX 5) KRE

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:

• (BF/B)/.32
• (CIEN)/1.46
• (TTC)/1.51 

After the Close: 

• (AGX)/2.31
• (COO)/1.10
• (DOCU)/.99
• (GWRE)/.74
• (LULU)/1.68
• (PL)/-.04
• (RBRK)/-.03
• (ZUMZ)/-.81 

Economic Releases 

5:30 am EST

• Challenger Job Cuts YoY for May. 

8:30 am EST

• 1Q Final Non-Farm Productivity/Unit Labor Cost readings. 
• Initial Jobless Claims for last week is estimated at 215K versus 215K the prior week.
• Continuing Claims is estimated to fall to 1780K versus 1786K prior. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Daly speaking, weekly EIA natural gas inventory report, Jefferies Healthcare Conference, (ASO) annual meeting, (FLY) annual meeting, (TT) annual meeting, (MYGN) annual meeting, (EME) annual meeting, (LUNR) annual meeting, (AAOI) annual meeting, (WMT) annual meeting, (ALAB) annual meeting, (DVA) annual meeting, (SMTC) annual meeting, (RRR) annual meeting and the Deutsche Bank Consumer Conference 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 +6.1% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 13.0 -.2
• 8 Sectors Rising, 4 Sectors Declining
• 29.2% of Issues Advancing, 68.9% Declining 
• TRIN/Arms 1.07 -22.5%
• Non-Block Money Flow -$238.5M
  
• 85 New 52-Week Highs, 90 New Lows
• 52.5% (-3.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 59.9 -4.0

Polymarket: 

• Will China invade Taiwan by end of 2026? 6.0% unch.
• Trump announces US blockade of Hormuz lifted by June 30th 54.0% -3.0 percentage points
• US x Iran permanent peace deal by June 30th 23.0% -2.0 percentage points 
• US announces new Iran agreement/ceasefire extension by June 30th 57.0% -2.0 percentage points
• US Invades Iran before 2027 18.0% +1.0 percentage point

Other:

• Bloomberg Global Risk-On/Risk-Off Index 125.1 +1.9%
• Global Monitor Iran Instability Index 86.0 +6.0
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 83.0% -13.0 percentage points
• US High-Yield Tech Sector OAS Index 431.0 +7.5 basis points
• Bloomberg Cyclicals/Defensives Index 261.5 -1.3%
• Morgan Stanley Growth vs Value Index 161.8 -.5%
• CNN Fear & Greed Index 54.0 (Moved to NEUTRAL from GREED) -3.0
• 1-Day Vix 10.4 +17.5%
• Vix 16.3 +3.4%
  
• Total Put/Call .79 +9.7%

Wednesday Watch

Around X:

• @Business  

• AI is upending law firms' billing, hiring and even their legal products.
• Fed Chairman Kevin Warsh has hired conservative policy analysts Paul Winfree and Daniel Heil as temporary advisers, according to sources. 
• Get up to speed on what's moving global markets.
• Here’s what you need to know to start your day.     

• @ZeroHedge

• *SPACEX TARGETS SALE OF 555.6M SHRS AT $135 EACH IN IPO: REUTERS.
• I don't know if market cares about renewed Iran sit. But I do know that market is very long calls. and not long downside hedges (puts). this makes the put call open interest ratios near their ~10 year lows. that transition could be violent.
• US Treasury Sanctions Iran's Largest Crypto Exchange.
• Trump Signs AI 'Cyber Defense' Executive Order.
• BREAKING! Iran just struck US targets in Kuwait after the US struck Qeshm today. Also, alarms just went off in Bahrain, seems Iran is striking there too. Iranian source tells me Iran has stopped playing the tit-for-tat game. Instead, it's now striking back "at least 1.5x as hard" for every attack the US against Iran.
• US, China Militaries Hold 'Candid' Deconfliction Talks In Hawaii As Trump Goes Quiet On Taiwan.
• and UAE too. 
• The Islamic Revolutionary Guard Corps (IRGC) said on Tuesday it carried out “precise and concentrated missile strikes” targeting US military bases in Kuwait in response to what it described as a US attack on Iran’s Qeshm Island, according to a statement. "Any new folly, any further aggression, or any move that even touches an inch of our borders and sovereignty will be met with a seismic, crushing, and decisive response that will go beyond the usual rules and boundaries, and our brave forces will not hesitate to turn all aggressors’ bases and their interests in the region into ashes," the statement said. "The time of “hit and run” is over, and the oppressive forces must accept the grave consequences of their ignorance and reckless adventurism."          
• AIR RAID SIRENS ACTIVATED AT US BASES IN SAUDI ARABIA: FARS.
• US Bill Would Prevent Chinese Connected Cars In Canada From Entering United States.
• Iran Sends Missiles, Drones Targeting Airbases In Kuwait After US Nighttime Attack On Qeshm Island.
• Dems Have A Voter Problem. Gerrymandering Was Never Going To Fix It.
• *KUWAIT SAYS CURRENTLY INTERCEPTING DRONE, MISSILE ATTACKS.
• Permadrought: 75% Of Global Population Lives In A Country Affected By 'The Great Drying'.
• Bamboozled Once Again....
• Bitcoin Battered, Black Gold Bid As Job Openings Battle Hormuz Closings.      

• @CNBC

• Asia-Pacific markets set to open mixed as concerns over Middle East conflict rise.
• Wednesday's big stock stories: What’s likely to move the market in the next trading session.
• Palo Alto CEO says customer meeting requests have surged amid AI security concerns.
• Iran has mined 'large segments' of Hormuz Strait, Secretary of State Rubio says.
• Stock futures are little changed after S&P 500 closes at another record: Live updates.

• @TheTranscript

• $NVDA CEO: "I have a very exciting announcement that today we are announcing that we plan to return 50% or more of free cash flow to our shareholders this year, next year, and beyond. To infinity and beyond...We plan to increase our stock repurchases and our dividend over time."
• Palo Alto CEO: "Q3 was a standout quarter for Palo Alto Networks, with accelerating organic bookings growth as customers turn to us to secure their AI deployments at scale," $PANW: +11% AH.
• Ulta Beauty CEO: "Fiscal 2026 is off to a strong start driven by broad-based growth across all channels and major categories" $ULTA: +5% AH. 

• @WallStEngine

• $PANW Q3’26 EARNINGS HIGHLIGHTS. Revenue: $3.0B (Est. $2.94B) ; +31% YoY. Adj. EPS: $0.85 (Est. $0.80). NGS ARR: $8.1B; +60% YoY. RPO: $18.4B; +36% YoY. FY Guide: Revenue: $11.42B-$11.43B (Est. $11.29B). Adj. EPS: $3.77-$3.79 (Est. $3.70). NGS ARR: $8.90B-$8.95B; +59% to +60% YoY. RPO: $20.9B-$21.0B; +32% to +33% YoY. Non-GAAP Operating Margin: 28.9% to 29.2%. Adjusted FCF Margin: 37.5%. 

Night Trading 

• Asian equity indices are +.25% to +1.25% on average. 
• Asia Ex-Japan Investment Grade CDS Index 70.5 -75 basis point. 
• China Sovereign CDS 40.0 -.25 basis point.
• China Iron Ore Spot 104.0 USD/Metric Tonne -1.2%. 
• Crude Oil 94.84/bbl. +1.2% 
• Gold 4,502.8 USD/t oz. -.4%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.59 -.02%.
• Bloomberg Emerging Markets Currency Index 35.28 -.04%.
• Bloomberg Global Risk-On/Risk Off Index 124.0 +1.0%.
• US 10-Year Yield 4.45% +1.0 basis point.
• Japan 30-Year Yield 3.86% -1.0 basis point. 
• Volatility Index(VIX) futures 20.2 -.4 %.
• Euro Stoxx 50 futures -.20%. 
• S&P 500 futures -.03%.
• NASDAQ 100 futures -.17%.

Morning Preview Links

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