Weekly Outlook

• Week Ahead by Bloomberg.
• Wall St. Week Ahead by Reuters.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising European/Emerging Markets/US High-Yield debt angst, global growth concerns, commodity weakness, yen strength, Fed rate-hike fears and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Today's Headlines

Bloomberg:      

• China Default Chain Reaction Threatens Products Worth 35% of GDP. The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China. WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other. Such holdings may have swelled to as much as 2.6 trillion yuan ($396 billion) last year, based on estimates from Autonomous Research this month. The trend has China watchers worried. For starters, it means that bad investments by one WMP could infect others, causing a loss of confidence in products that play an important role in bank funding. It also suggests WMPs are struggling to find enough good assets to meet their return targets. In the event of widespread losses, cross-ownership will create more uncertainty over who’s vulnerable -- a key source of panic in 2008 when soured U.S. mortgage securities triggered a global financial crisis.
• Goldman Sees End of Yuan ‘Sweet Spot’ Spurring Capital Outflows. The end of a temporary sweet spot that China enjoyed with its exchange rate -- strength versus the dollar and weakness against trading partners -- will spur renewed capital outflows, Goldman Sachs/Gao Hua Securities Co. said. With the U.S. poised to raise interest rates and pressure building on China to ease monetary policy, cash outflows will accelerate, said Song Yu, China economist for Goldman Sachs/Gao Hua. The yuan is down 1.3 percent this month against the greenback, with policy makers last week setting the currency’s daily fixing at the weakest level in five years, and is little changed against a basket of peers.
• Yen’s Yellen Slump Fuels Japan Stock Gains as Gold Extends Slide. Japanese shares drove gains in Asia as the yen extended its slump against the dollar, amid confidence the global economy can withstand an interest-rate hike that the Federal Reserve chief said could be warranted in the next few months. Gold and bonds retreated. The dollar climbed to a one-month high against the yen and rallied versus emerging-market currencies in Asia after Fed Chair Janet Yellen said late Friday that the improving economy meant another rate hike would probably be in order “in the coming months.” Australian government debt paced last session’s decline in Treasuries, with American and U.K. markets closed for a holiday. Gold fell a ninth day, set for its longest slump in more than a year as the U.S. rate outlook damped its appeal versus interest-bearing assets. While the dollar-denominated MSCI Asia Pacific Index lost 0.4 percent as of 9:35 a.m. Tokyo time, about 300 stocks climbed as around 180 declined.

Wall Street Journal:

• Suncor Starts to Bring Canadian Oil Sands Back Online. The oil producer expects initial output by the end of the week.
• Robots for Trump (and Clinton). The robotic revolution will upend society even more than the information revolution. No matter what happens in November, one big winner has already emerged from the ruins of America’s 2016 election: the robot. Both major candidates have embraced policies that will ensure the accelerating replacement of low-wage workers with no-wage workers.

Fox News:

• 2 killed, 6 wounded, including 2 officers, in wild shooting in Houston.

Zero Hedge: 

• Senators Slam Loretta Lynch: End The Climate Change Witch Hunt.
• Over 40 Shot As Violence Erupts In Chicago During Memorial Day Weekend.
• "Here We Go Again" - A List Of Monthly Highs Above 2,100 In The S&P500. (graph)
• Unintended Consequences: Easy Money = Overcapacity = Trade Wars.
• Losing Ground In Flyover America, Part 3. (graph)

Business Insider:

• Donald Trump keeps giving Republicans major cause for alarm — because he's still attacking them. He said he wouldn't say it. But Donald Trump seemingly couldn't resist. "I wonder if I could say — you know, remember lyin'. Lyin'. I won’t say ‘Lyin' Ted' — I refuse to say it," he told a crowd during a Friday rally in Fresno, California. “Lyin’ Ted!" Trump then exclaimed. "Holds that Bible high, puts it down, and then he lies.
• This one sentence sums up why Britain's housing market is going to crash.
• SAM ZELL: It's really hard not to be a seller in real estate right now.

Financial Times:

• Big oil groups raise net debt by a third to cope with low prices. The net debts of the largest Western oil companies have surged by a third over the past year, increasing their vulnerability to another fall in oil prices. The aggregate net debt of the 15 largest North American and European oil groups rose to $383bn at the end of March, up $97bn from 12 months ago, according to company reports compiled by Bloomberg.

The Telegraph:

• Why France must accept reform or face disaster.

Today's Headlines

Bloomberg:      

• Currency Tranquility Is Calm Before Storm as Risks Taunt Traders. It’s all quiet in currency markets, a little too quiet for some traders who warn that an uptick in volatility is just around the corner. Price swings in global exchange rates slid to the lowest since January this week, according to a JPMorgan Chase & Co. index. A three-month measure of dollar volatility versus the euro tumbled to the least since December 2014 while a gauge against the yen fell to a two-month low. That tranquility, which comes before holiday weekends in the U.S. and U.K., isn’t likely to persist. Event risk stemming from Britain’s vote on EU membership to Federal Reserve meetings to the U.S. presidential election threaten to roil currencies around the world. Increasing correlation between gauges of risk has meant that when one measure falls, others also tend to do so too, according to Kit Juckes, a London-based strategist at Societe Generale SA. “There’s a very fine line for this calm period in markets that you see with low volatility, a slightly softer dollar and everything’s OK,” Juckes said in an interview on Bloomberg Television. “A bumpy summer seems to me to be quite a high risk still.”
• Bond Traders Say Don’t Count Out June Hike After Yellen Remarks. Treasuries traders who delayed holiday getaway plans on Friday took away a clear message from Federal Reserve Chair Janet Yellen -- a mid-year interest-rate hike may be on the way. Yellen’s remark that the Fed will raise rates "probably in the coming months" drove benchmark two-year note yields higher for a third consecutive week. The comments at an afternoon appearance at Harvard University followed those from other Fed officials who signaled that the Federal Open Market Committee’s June 14-15 meeting is "live.” The market-implied probability of a rate increase next month has risen to 30 percent, from 12 percent at the end of April. For the following meeting, in July, the chances exceed 50 percent. The shift in sentiment shows traders may be giving more credence to the Fed’s projection of two more rate boosts this year, after policy makers lifted their overnight benchmark from near zero in December. “June is certainly still live,” said Aaron Kohli, a fixed-income strategist in New York at BMO Capital Markets, one of 23 primary dealers that trade with the Fed. "She’s joining the rest of the FOMC -- ready to go in the coming months. Yields really do need to reprice higher materially."
• Sanders in California Says Clinton E-Mail Situation Has Changed. The Senator demands Barney Frank, Dannel Malloy be removed from key Democratic committee roles.

Wall Street Journal:

• The Senate GOP’s Trump Survival Plan. The challenge: Distancing themselves from Trump without alienating voters who like or despise him. One offsetting advantage: the Hillary effect.

Barron's:

• Had bullish commentary on (CAG), (JLL) and (AMGN).
• Had bearish commentary on (BF/B).

Fox News:

• California Vietnam War memorial to the missing vandalized.

CNBC:

• Inside Wealth: A Worrisome Pileup of $100 Million Homes.
• Fade the oil bounce — here's why: Technician.
• Bridgewater secures $22m in state aid. The world’s biggest hedge fund has secured $22 million of financial assistance from the government of Connecticut, in the latest sign of stretched US states vying to retain their wealthiest taxpayers and prevent jobs moving elsewhere.

Zero Hedge: 

• Former Morgan Stanley Chief Asia Economist: "Don't Listen To The Ruling Elite, The World Economy Is In Real Trouble".
• US Default Risk Hits 8-Month Highs. (graph)
• Goldman Sachs(GS) Is The Gift That Keeps On Giving... To The Clintons.
• "The Stock Market Won't Crash, Yet" - The Barron's Cover Strikes Again. 
• Martin Armstrong Warns The Rise Of Nationalism Throughout Europe Is Inevitable.
• Obama Steps In To Defend Hillary: DOJ Fights To Block Clinton Deposition.
• Here Are BofA's "Trades Of The Unexpected" For June, The "Event Risk Month".
• First "Shocking" Deposition In Clinton Email Case Reveals She Did Not Use A Password.
• Another Bubble Has Burst: The Miami Luxury Condo Market Is A "Ticking Timebomb".
• Weekend Reading: Are The Bulls Back?
• What Killed The US Consumer, In One Chart.
• Forget Chinese Commodity Speculators, Meet North America's "Moms-and-Millennials" Oil Day-Traders.
• Oregon Senator Warns - Government Is Dramatically Expanding Its Hacking & Surveillance Authority.
• In Stunning Reversal, IMF Blames Globalization For Spreading Inequality, Causing Market Crashes.
• Stocks Soar On Hawkish Fed As Gold Suffers Worst Week In 6 Months. (graph)

Business Insider:

• Report: Trump campaign indicates it's 'not going to have enough money' to fight Hillary Clinton before the convention.
• Saudi Arabia is 'backing away from OPEC'.
• 'The new gasoline' could be in an epic bubble. Lithium might be the energy of the future. And lithium might be in the midst of an epic price bubble. Or, both of these might be true.
• China's richest just declared war on Disney with giant theme park.
• PICTURES: France is being brought to a stand still by mass protests against labour reforms.
• How non-Facebook users can stop Facebook from tracking them around the web.
• The horror story of the US housing market is far from over.
• It sounds like a dispute is taking place at the highest levels of China's government — and it could have big implications for the economy.
• YELLEN: We didn't see the financial crisis coming.

Reuters:

• WHO rejects call for Olympics to be moved due to Zika.

The Telegraph:

• Crisis-ridden eurozone matters less and less to UK. 
• Italy’s broken banks show the dangers behind the euro. 

Daily Mail:

• Japan's Abe to delay sales tax hike until 2019 - government source.

Market Week in Review

• S&P 500 2,094.27 +2.04%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,094.27 +2.04%

• DJIA 17,839.39 +1.97%

• NASDAQ 4,922.32 +3.24%

• Russell 2000 1,148.15 +3.18%

• S&P 500 High Beta 30.43 +3.22%

• Goldman 50 Most Shorted 101.59 +3.23% 

• Wilshire 5000 21,578.23 +2.16%

• Russell 1000 Growth 1,009.58 +2.19%

• Russell 1000 Value 1,004.30 +1.88%

• S&P 500 Consumer Staples 540.53 +1.39%

• Solactive US Cyclical 133.20 +2.66%

• Morgan Stanley Technology 1,080.26 +2.70%

• Transports 7,762.47 +1.22%

• Utilities 654.23 +.79%

• Bloomberg European Bank/Financial Services 83.28 +5.6%

• MSCI Emerging Markets 33.15 +2.79%

• HFRX Equity Hedge 1,120.96 +.95%

• HFRX Equity Market Neutral 999.98 -.14%

Sentiment/Internals

• NYSE Cumulative A/D Line 250,754 +1.87%

• Bloomberg New Highs-Lows Index 42 +287

• Bloomberg Crude Oil % Bulls 37.50 +181.32%

• CFTC Oil Net Speculative Position 368,769 +26.31%

• CFTC Oil Total Open Interest 1,698.980 -1.51%

• Total Put/Call .88 -12.75%

• OEX Put/Call 1.56 +89.02%

• ISE Sentiment 87.0 +10.0%

• NYSE Arms 1.25 -15.22%

• Volatility(VIX) 13.50 -10.85%

• S&P 500 Implied Correlation 52.81 -7.87%

• G7 Currency Volatility (VXY) 9.80 -9.0%

• Emerging Markets Currency Volatility (EM-VXY) 10.30 -4.45%

• Smart Money Flow Index 19,120.56 -.10%

• ICI Money Mkt Mutual Fund Assets $2.733 Trillion +.52%

• ICI US Equity Weekly Net New Cash Flow -$2.013 Billion

• AAII % Bulls 17.8 -8.2%

• AAII % Bears 29.4 -13.8%

Futures Spot Prices

• CRB Index 185.98 +1.03%

• Crude Oil 49.30 +3.33%

• Reformulated Gasoline 163.29 -.61%

• Natural Gas 2.17 +6.35%

• Heating Oil 149.16 +.48%

• Gold 1,208.80 -3.26%

• Bloomberg Base Metals Index 141.42 +.72%

• Copper 211.0 +2.60%

• US No. 1 Heavy Melt Scrap Steel 246.67 USD/Ton unch.

• China Iron Ore Spot 51.15 USD/Ton -6.81%

• Lumber 309.30 +1.60%

• UBS-Bloomberg Agriculture 1,177.59 +1.66%

Economy

• Atlanta Fed GDPNow Forecast +2.9% +40.0 basis points
• ECRI Weekly Leading Economic Index Growth Rate +6.1% +80.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index .0533 +8.77%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.49 +.25%

• Citi US Economic Surprise Index -22.80 +8.0 points

• Citi Eurozone Economic Surprise Index 5.3 +4.5 points

• Citi Emerging Markets Economic Surprise Index 0.0 +1.8 points

• Fed Fund Futures imply 72.0% chance of no change, 30.0% chance of 25 basis point hike on 6/15

• US Dollar Index 95.65 +.40%
• MSCI Emerging Markets Currency Index 1,487.75 +.27%

• Euro/Yen Carry Return Index 128.07 -.88%

• Yield Curve 94.0 -2.0 basis points

• 10-Year US Treasury Yield 1.85% +1.0 basis point

• Federal Reserve's Balance Sheet $4.422 Trillion -.28%

• U.S. Sovereign Debt Credit Default Swap 22.28 +5.62%

• Illinois Municipal Debt Credit Default Swap 352.0 -14.1%

• Western Europe Sovereign Debt Credit Default Swap Index 25.63 -1.83%

• Asia Pacific Sovereign Debt Credit Default Swap Index 52.53 -2.0%
  

• Emerging Markets Sovereign Debt CDS Index 138.77 -1.37%
  

• Israel Sovereign Debt Credit Default Swap 75.0 +.68%

• Iraq Sovereign Debt Credit Default Swap 910.20 -7.42% 

• Russia Sovereign Debt Credit Default Swap 262.82 -1.80%

• iBoxx Offshore RMB China Corporate High Yield Index 128.65 +.48%

• 10-Year TIPS Spread 1.62% +2.0 basis points

• TED Spread 37.50 +3.5 basis points

• 2-Year Swap Spread 14.0 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -29.5 -3.25 basis points

• N. America Investment Grade Credit Default Swap Index 76.65 -8.62%

• America Energy Sector High-Yield Credit Default Swap Index 886.0 -11.73%

• European Financial Sector Credit Default Swap Index 88.50 -8.65%
  

• Emerging Markets Credit Default Swap Index 298.47 -1.75%
  

• CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 142.50 unch.
  

• M1 Money Supply $3.245 Trillion +.01%

• Commercial Paper Outstanding 1,079.40 -1.8%

• 4-Week Moving Average of Jobless Claims 278,500 +2,750

• Continuing Claims Unemployment Rate 1.6% unch.

• Average 30-Year Mortgage Rate 3.64% +6.0 basis points

• Weekly Mortgage Applications 496.50 +2.27%

• Bloomberg Consumer Comfort 42.0 -.6 point

• Weekly Retail Sales +.7% -10.0 basis points

• Nationwide Gas $2.32/gallon +.05/gallon

• Baltic Dry Index 601.0 -3.84%

• China (Export) Containerized Freight Index 665.44 +.73%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 -20.0%

• Rail Freight Carloads 262,293 +1.03%

Best Performing Style

• Small-Cap Growth +.%

Worst Performing Style

• Large-Cap Growth -.%

Leading Sectors

• Computer Hardware +5.7%

• Gaming +4.7%

• Semis +4.5%

• Biotech +4.1%

• I-Banks +4.1%

Lagging Sectors

• HMOs unch. 

• Education -.2%

• Airlines -.4%

• Tobacco -1.0%

• Gold & Silver -5.2%

Weekly High-Volume Stock Gainers (18)

• NERV, FLXN, CSC, BBSI, OLED, DY, MESG, NDSN, THR, MENT, HPE, LGF, BETR, PDCO, ALG, INTU, SNDX and MPW

Weekly High-Volume Stock Losers (6)

• SIG, EXPR, ANF, PSTG, BRS and IONS

Weekly Charts

ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Rising into Afternoon on Central Bank Hopes, Yen Weakness, Technical Buying, Gaming/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Light

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.34 -.82%

• Euro/Yen Carry Return Index 127.84 -.42%

• Emerging Markets Currency Volatility(VXY) 10.44 unch.

• S&P 500 Implied Correlation 52.62 -1.11%

• ISE Sentiment Index 77.0 +14.93%

• Total Put/Call .89 -2.2%

• NYSE Arms 1.29 -.47% 

Credit Investor Angst:

• North American Investment Grade CDS Index 76.65 -.48%
  

• America Energy Sector High-Yield CDS Index 887.0 -2.80%

• European Financial Sector CDS Index 88.50 -.70%

• Western Europe Sovereign Debt CDS Index 25.75 -.04%

• Asia Pacific Sovereign Debt CDS Index 52.70 -.57%

• Emerging Market CDS Index 298.69 -.44%
  

• iBoxx Offshore RMB China Corporate High Yield Index 128.65 +.03%

• 2-Year Swap Spread 13.75 unch.
  

• TED Spread 37.75 +4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -29.5 -2.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.79 -.27%
• 3-Month T-Bill Yield .30% +2.0 basis points

• Yield Curve 94.0 -2.0 basis points
  

• China Import Iron Ore Spot $51.15/Metric Tonne +3.38%

• Citi US Economic Surprise Index -22.80 -2.4 points

• Citi Eurozone Economic Surprise Index 5.30 -2.7 points

• Citi Emerging Markets Economic Surprise Index 0.0 +.7 point

• 10-Year TIPS Spread 1.62% unch.
  
• 52.4% chance of Fed rate hike at July 27 meeting, 61.0% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +25 open in Japan 
• China A50 Futures: Indicating +49 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

• Higher: On gains in my tech/retail/medical/biotech sector longs
  

• Disclosed Trades: None

• Market Exposure: 50% Net Long