Stocks Falling Slightly into Final Hour on Less Economic Optimism, Profit-Taking, Geopolitical Concerns, Homebuilding/REIT Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 11.06 +6.76%

• Euro/Yen Carry Return Index 126.77 +.39%

• Emerging Markets Currency Volatility(VXY) 8.65 -1.03%

• S&P 500 Implied Correlation 43.54 +3.10%

• ISE Sentiment Index 81.0 -42.96%
  

• Total Put/Call .89 -2.2%

• NYSE Arms .89 -43.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.20 +.90%
  

• America Energy Sector High-Yield CDS Index 367.0 -.90%

• European Financial Sector CDS Index 74.22 -1.38%

• Western Europe Sovereign Debt CDS Index 9.17 -2.96%

• Asia Pacific Sovereign Debt CDS Index 22.26 -1.24%

• Emerging Market CDS Index 198.95 +.43%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.16 unch.

• 2-Year Swap Spread 31.25 +.75 basis point

• TED Spread 37.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -33.5 -2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.27 +.04%
• 3-Month T-Bill Yield .80% unch.
  

• Yield Curve 102.0 -2.0 basis opints
  

• China Import Iron Ore Spot $68.80/Metric Tonne +3.58%

• Citi US Economic Surprise Index -4.80 -8.7 points

• Citi Eurozone Economic Surprise Index 70.40 +9.2 points

• Citi Emerging Markets Economic Surprise Index 39.5 +.4 point

• 10-Year TIPS Spread 1.94 +1.0 basis point
  
• 69.7% chance of Fed rate hike at June 14 meeting, 72.0% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +52 open in Japan 
• China A50 Futures: Indicating +6 open in China

• DAX Futures: Indicating +15 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.9%

Sector Underperformers:

• 1) Semis -1.6% 2) Alt Energy -1.4% 3) Homebuilders -1.4%

Stocks Falling on Unusual Volume: 

• ATHN, SYF, TIME, GIMO, KBR, ALV, ELLI, RMD, MDP, MWA, CSL, GHL, BIDU, ADS and KLAC

Stocks With Unusual Put Option Activity:

• 1) SYF 2) BKD 3) K 4) HTZ 5) ZIOP

Stocks With Most Negative News Mentions:

• 1) GIMO 2) COLM 3) ATHN 4) PDFS 5) AVT

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.1%

Sector Outperformers:

• 1) Gold & Silver +2.3% 2) Internet +1.4% 3) Disk Drives +1.3%

Stocks Rising on Unusual Volume:

• SNCR, ALGN, NTRP, EHTH, SRPT, WDC, AAN, TVTY, TRVG, ZEUS, HLS, CERN, COWN, SYNA, IVC, BNFT, RCL, CBD, EEQ, SIMO, GRUB, TRMB, LPLA, IDXX, GNBC, LPLA, SKYW, MMSI, REGN, BJRI, GOOGL, HRC, EEP, NCLH, TRI and GRUB

Stocks With Unusual Call Option Activity:

• 1) SYF 2) BSX 3) HST 4) COG 5) RCL

Stocks With Most Positive News Mentions:

• 1) RCL 2) TRMB 3) SRPT 4) WDC 5) GOOGL

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -.1% Below 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 37.5% of Issues Advancing, 58.3% Declining
• 132 New 52-Week Highs, 18 New Lows
• 56.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.1%
• Vix 10.8 +3.9%
• Total Put/Call .68 -25.3%
• TRIN/Arms .87 -44.5%

Friday Watch

Evening Headlines

Bloomberg: 

• Japan Data Deluge Points to Economic Growth, Weak Inflation. (video) A flood of data the day after the Bank of Japan held its monetary policy unchanged indicates that the modest recovery in the world’s third-largest economy is continuing for a fifth quarter, yet inflation largely refuses to budge. Consumer prices excluding fresh food, the core measure for inflation, increased 0.2 percent in March from a year earlier (forecast 0.2 percent). The unemployment rate for March was 2.8 percent (forecast 2.9 percent). Industrial production fell 2.1 percent in March from the previous month (forecast -0.8 percent). Retail sales climbed 2.1 percent from a year ago (forecast 1.5 percent).

• China's Enrichment Spawns Mature Problem -- Middle Class Angst. China’s industrial revolution may soon hand authorities a problem more typical in mature economies: how to appease the growing discontent of the middle class. The rapid march from poverty to economic superpower gifted China’s middle class explosive income growth. Yet the image of affluent Chinese scouring the globe for luxury brands belies an insecure middle class as anxious as their counterparts anywhere. Recent data on compensation underscores their feeling of being left behind. Growth in China’s median income dropped below the rate of economic expansion in the first quarter for the first time since the data was first released in 2014. Back then, the median grew at almost double the pace of total output.

• Baidu(BIDU) Projects Sales That Miss Estimates on Struggles With Ads.

• Asian Stocks Mixed on Earnings; Dollar Strengthens. Asian equities were mixed, with the regional benchmark gauge poised for the biggest weekly gain in more than a month, as investors assessed corporate earnings from around the globe and awaited a report on growth in the world’s largest economy. The MSCI Asia Pacific Index was little changed after climbing for six straight sessions. Results at Amazon.com Inc. and Alphabet Inc. buoyed Nasdaq futures. Crude climbed back above $49 a barrel after tumbling on concern over a supply glut. The euro held losses after the European Central Bank signaled its commitment to stimulus even as the region’s economy firms.

• Five Things You Need to Know to Start Your Day.

Wall Street Journal:

• Tech Giants Alphabet(GOOGL) and Amazon(AMZN) Extend Earnings Boom. Google parent posts growth despite ad backlash, while Amazon marks eighth straight quarter in black.

• Next Tax Battle: Trump’s Bid to Ax a Favorite Blue State Deduction. White House blueprint proposes repealing deduction for state and local taxes.

• Pentagon Opens Probe Into Michael Flynn’s Foreign Payments. Documents show former national security adviser was warned not to take foreign money without approval.

• Trump’s Finest Moment (So Far). His tax-reform plan is smart policy, but even better politics: It’s a challenge to Congress.

• Trump’s Monumental Task. A review of federal land grabs, especially in the West, is long overdue.

Fox News:

• Fox News Poll: 53 percent favor military action to stop North Korea nukes program. (video)

CNBC:

• Third Point's Dan Loeb says 'animal spirits matter' in super bullish letter about the Trump trade.

• China warned N.Korea of sanctions after any nuclear test: Tillerson.

• Global crude oil discoveries plunge to record low, and it's gonna get worse.

• Intel(INTC) shares fall 3% after missing expectations for key segment.

• Honeywell(HON) stock jumps more than 4 percent on news of Third Point stake.

• Domino's Pizza(DPZ) CEO says Trump tax cuts would help business, 'no question'.

Zero Hedge: 

• Trump's Second Obamacare Repeal Attempt On The Edge Of Collapse.

• Trump Warns There Is A Chance Of "A Major, Major Conflict" With North Korea.

• Will Trump Spark An Offshore Drilling Boom?

• Home Prices Continue To Surge Sparking Fears Of Bubble 2.0. (graph)

• United Passenger Who Was Dragged Off Plane Settles With Airline.

• Visualizing The Epic Collapse Of Obamacare.

• Congress Refers Hillary's Private Server Company To DOJ For Prosecution.

• Democrats Take Government Hostage: Threaten To Shut It Down If GOP Repeals Obamacare.

• Third Point Made 5.9% In Q1, Expects "Favorable Investing Environment To Continue": Full Letter.

• Canada Hit By Countrywide Internet, TV And Phone Outage As Shaw Goes Dark.

• Amazon(AMZN) Soars To New All Time High After Smashing Expectations.

• VIX Crush Saves Stocks As Crude Drops, GDP Flops, & US Credit Risk Pops. (graph)

Business Insider: 

• Online ad revenues are surging, but 2 companies are getting most of the spoils.

• Instagram is on pace to be Facebook’s next billion-user app.

• One of Canada's largest mortgage lenders just imploded.

• Google(GOOGL) beats earnings, stock up 4%.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 93.75 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 22.5 unch.

• Bloomberg Emerging Markets Currency Index 72.21 -.03%.

• S&P 500 futures unch. 

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AGCO)/-.18

• (ALV)/1.56

• (B)/.60

• (CVX)/.87

• (CL)/.66

• (XOM)/.87

• (GM)/1.47

• (GT)/.63

• (IDXX)/.61

• (LYB)/2.36

• (PSX)/.06

• (RCL)/.92

• (VFC)/.55

• (WY)/.19

Economic Releases  
8:30 am EST

• 1Q Employment Cost Index is estimated to rise +.6% versus a +.5% gain in 4Q. 

• Advance 1Q GDP is estimated to rise  +1.0% versus a +2.0% gain in 4Q.

• Advance 1Q Personal Consumption is estimated to rise +.9% versus a +3.5% gain in 4Q

• Advance 1Q GDP Price Index is estimated to rise +2.0% versus a +2.1% gain in 4Q. 

• Advance 1Q Core PCE is estimated to rise +2.0% versus a +1.3% gain in 4Q.

9:45 am EST

• Chicago Purchasing Manager for April is estimated to fall to 56.3 versus 57.7 in March.
  

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for April is estimated at 98.0 versus 98.0 in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, Fed's Harker speaking and the government funding deadline could also impact trading today.

BOTTOM LINE:  Asian indices are slightly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.