Stocks Surging into Afternoon on Central Bank Hopes, Yen Plunge, Short-Covering, Tech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 20.28 -9.68%

• Euro/Yen Carry Return Index 137.10 +.92%

• Emerging Markets Currency Volatility(VXY) 12.06 +1.43%

• S&P 500 Implied Correlation 61.0 -2.99%

• ISE Sentiment Index 126.0 +9.57%

• Total Put/Call .84 -3.45%

• NYSE Arms .83 -44.52% 

Credit Investor Angst:

• North American Investment Grade CDS Index 101.06 -2.55%

• America Energy Sector High-Yield CDS Index 1,925.0 +2.09%

• European Financial Sector CDS Index 91.62 -.68%

• Western Europe Sovereign Debt CDS Index 19.68 +3.85%

• Asia Pacific Sovereign Debt CDS Index 76.82 +5.07%

• Emerging Market CDS Index 370.54 +.11%
  

• iBoxx Offshore RMB China Corporate High Yield Index 122.42 +.22%

• 2-Year Swap Spread 6.75 -.25 basis point

• TED Spread 29.75 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -22.5 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.14 +.44%
• 3-Month T-Bill Yield .31% -1.0 basis points

• Yield Curve 115.0 -2.0 basis points

• China Import Iron Ore Spot $41.72/Metric Tonne -.48%

• Citi US Economic Surprise Index -47.1 +.2 point

• Citi Eurozone Economic Surprise Index -25.10 +1.4 points

• Citi Emerging Markets Economic Surprise Index -3.8 +2.8 points

• 10-Year TIPS Spread 1.42% +1.0 basis point
• 19.4% chance of Fed rate hike at April 27 meeting, 30.6% chance at June 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +298 open in Japan 
• China A50 Futures: Indicating -50 open in China

• DAX Futures: Indicating +6 open in Germany

Portfolio: 

• Slightly Lower: On losses in my index hedges and emerging markets shorts

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +1.6%

Sector Underperformers:

• 1) Internet -1.6% 2) Oil Tankers -.7% 3) Biotech -.2%

Stocks Falling on Unusual Volume:

• NGVC, MNST, QSII, ABAX, PFPT, MTSI, ALV, WLK, FFIN, EA, GILD, LANC, AMZN, PNFP, NOW, BOFI, TGI, MDVN, RARE, BC, COBZ, EFII, HMC, EPAY, SC, ACAD, CHUY, ALDR, TGI, SGEN, XON and EMN

Stocks With Unusual Put Option Activity:

• 1) LC 2) MNST 3) AMZN 4) XLP 5) STLD

Stocks With Most Negative News Mentions:

• 1) VALE 2) NTCT 3) AAL 4) MNST 5) LZB

Charts:

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

Bull Radar

Style Outperformer: 

• Small-Cap Growth +1.8% 

Sector Outperformers:

• 1) Computer Hardware +4.9% 2) Disk Drives +4.5% 3) Gaming +3.6% 
  

Stocks Rising on Unusual Volume: 

• AXLL, COHR, SMCI, GIMO, ALGN, N, QLGC, MA, SNE, MTW, UIS, WDC, EXP, OLN, SYNA, USG, HAR, IDXX, V, MSFT, SNDK and CRUS

Stocks With Unusual Call Option Activity: 

• 1) EPI 2) KR 3) EA 4) FXY 5) KO

Stocks With Most Positive News Mentions: 

• 1) JCP 2) SNDK 3) MSFT 4) FLEX 5) MSCC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +20.0% Above 100-Day Average
• 10 Sectors Rising, 0 Sectors Declining
• 83.8% of Issues Advancing, 14.3% Declining
• 38 New 52-Week Highs, 34 New Lows
• 17.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.7%
• Vix 20.8 -7.4%
• Total Put/Call .72 -17.2%
• TRIN/Arms 1.24 -16.9%

Weekday Watch

Evening Headlines

Bloomberg:

• U.S. Plans to Sanction More Venezuelans Tied to Maduro. The U.S. is preparing to expand sanctions against Venezuela by freezing assets of 10 to 20 additional people tied to the government of President Nicolas Maduro, according to two people familiar with the matter. The action could come as soon as Tuesday, though it may be delayed as the Trump administration seeks a coordinated international response in imposing penalties on the Maduro regime for undermining democracy in the South American country, the people said. The U.S. is pressing to enlist European and South American countries -- including neighboring Colombia -- to match the sanctions and may hold off taking unilateral action if necessary for a coordinated announcement.
• Japan Posts Current Account Surplus as Trade Turns Positive. Japan recorded a 36th consecutive current account surplus in June, supported by returns on overseas investments and a trade balance that returned to positive territory.
• Investors Jump Back Into the Euro as Going Short Proves 'Lethal'. Hedge funds. Asset managers. Central banks. These are just some of the players in the $5.1 trillion-a-day currency market who are buying the euro after shunning it over the past three years.
• Asia Stocks Nudge Higher Before China Trade Data. It’s been a relatively quiet start to the week for markets ahead of Friday’s U.S. inflation data that may give clues on the path of U.S. monetary policy. Gains in Japan and South Korean equities follow a muted U.S. session which saw the dollar extend its advance and gains in technology stocks offset a slide in energy producers as crude declined. West Texas Intermediate crude sat below $50 a barrel. Japan’s Topix index rose less than 0.1 percent, while Australia’s S&P/ASX 200 Index added 0.2 percent. South Korea’s Kospi index advanced 0.3 percent. Hang Seng Index futures slipped 0.2 percent.
• Your Evening Briefing.
• Fannie-Freddie Might Need $100 Billion in New Crisis, FHFA Says.

Wall Street Journal:

• North Korea Says ‘Under No Circumstances’ Will It Negotiate Over Nuclear Weapons. Pyongyang threatened it will use its nuclear weapons against U.S. if provoked militarily.
• Tesla(TSLA) to Sell $1.5 Billion in Debt to Fuel Aggressive Expansion. The Silicon Valley auto maker taps debt market to push broader sales of its lower-price Model 3 sedan.
• Rates Shmates: Banks Poised to Boost Buybacks and Dividends. Financial stocks have been strongly correlated to the yield on 10-year Treasurys.
• EPA Resignation Facts. The rest of the story behind those loud civil-servant protests.

Fox News:

• US spy satellites detect North Korea moving anti-ship cruise missiles to patrol boat. (video)
• Sessions: Sanctuary city Chicago's hostility to law-enforcement protection 'astounding'. (video)

CNBC:

• These Chinese tech stocks are even hotter than FANG. (video)
• Twilio(TWLO) soars after revenue jumps nearly 50%. (video)
• Allergan CEO sees more millennials and men turning to aesthetic medical treatments. (video)

Zero Hedge:

• Trump - Blumenthal Twitter War Goes Nuclear As Trump Fires Back.
• Debt Ceiling Deal Doubts Rise - USA Default Risk Hasn't Done This Since Lehman. (graph)
• The Uber Effect: Avis Plunges On Huge Miss, Margin Collapse, Guidance Cut, "Over-Fleeting".
• US Credit Card Debt Surpasses Financial Crisis Record, As Student And Auto Loans Hit New All Time High. (graph)
• Sessions Humiliates Rahm: "No Amount Of Federal Funds Will Help A City That Refuses To Help Its Own Residents".
• Russia To Cut Dependence On U.S. Dollar, Payment Systems.
• Dow Rises To 9th Straight Record Close On Lowest Volume In Years. (graph)

Business Insider:

• This chart helps explain why financial markets are so quiet, and why they could stay that way.
• Apple's(AAPL) earnings call revealed 3 key things about iPad sales.

Telegraph:

• Rip up London’s green belt and the whole country will benefit. House prices are way too high. The transport system is creaking. The schools are impossible to get into, and if you want to get a doctor’s appointment this side of 2020, good luck. We all know the reasons why people leave London for somewhere with a better quality of life. Only this month, it was reported that numbers quitting the capital had hit fresh records, up by 80pc over the last five years.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 79.25 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 19.25 +.5%.

• Bloomberg Emerging Markets Currency Index 73.84 +.02%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CVS)/1.31
• (DF)/.32
• (EXPD)/.59
• (FSS)/.22
• (IT)/.84
• (JEC)/.79
• )KORS)/.62
• (RL)/.95
• (SEE)/.36
• (STE)/.80
• (VRX)/.96
• (ZTS)/.53
• (FOSL)/-.40
• (HTZ)/-.22
• (JAZZ)/2.75
• (MBI)/.01
• (MNST)/.40
• (MYGN)/.26
• (PHH)/-.91
• (PCLN)/14.22
• (RRGB)/.52
• (TRIP)/.31
• (DIS)/1.55
• (WBMD)/.52
• (ZG)/-.01

Economic Releases 
6:00 am EST

• The NFIB Small Business Optimism Index for July is estimated to fall to 103.5 versus 103.6 in June.

10:00 am EST

• JOLTS Job Openings for June are estimated to rise to 5700 versus 5666 in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Trade Balance report, German Trade Balance report, $24B 3Y T-Note auction, US weekly retail sales reports, Oppenheimer Tech/Internet/Communications Conference, UBS Financial Services Conference, JPMorgan Auto Conference and the Needham MedTech Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by energy and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Higher into Final Hour on Central Bank Hopes, Less Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Energy/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 22.30 -3.46%

• Euro/Yen Carry Return Index 135.98 +.64%

• Emerging Markets Currency Volatility(VXY) 11.91 +.34%

• S&P 500 Implied Correlation 62.67 -3.68%

• ISE Sentiment Index 114.0 -17.99%

• Total Put/Call .83 -11.70%

• NYSE Arms 1.32 +83.41% 

Credit Investor Angst:

• North American Investment Grade CDS Index 102.92 -1.92%

• America Energy Sector High-Yield CDS Index 1,765.0 -4.59%

• European Financial Sector CDS Index 92.25 +5.34%

• Western Europe Sovereign Debt CDS Index 18.95 -3.17%

• Asia Pacific Sovereign Debt CDS Index 73.11 -1.22%

• Emerging Market CDS Index 370.47 -1.61%
  

• iBoxx Offshore RMB China Corporate High Yield Index 122.14 +.05%

• 2-Year Swap Spread 7.0 unch.

• TED Spread 31.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -20.75 +1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.86 +.8%
• 3-Month T-Bill Yield .32% unch.

• Yield Curve 117.0 unch.

• China Import Iron Ore Spot $41.92/Metric Tonne -1.20%

• Citi US Economic Surprise Index -47.3 -14.0 points

• Citi Eurozone Economic Surprise Index -26.50 -9.2 points

• Citi Emerging Markets Economic Surprise Index -6.6 +.8 point

• 10-Year TIPS Spread 1.41% +1.0 basis point
• 14.0% chance of Fed rate hike at March 16 meeting, 20.9% chance at April 27 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +109 open in Japan 
• China A50 Futures: Indicating -11 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Lower: On losses in my biotech/medical sector longs, index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long