Stocks Falling into Final Hour on Surging Long-Term Rates, Mideast War-Induced Inflation Fears, Rising Fed Rate-Hike Odds, Consumer Discretionary/Biotech Sector Weakness

Economic/Market Gauges:

• North American Investment Grade CDS Index 57.2 +2.3% 
• BofA Private Credit Proxy Index 70.1 -.9% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .36 +1.0 basis point
• BofA Global Financial Stress Indicator -.14 unch.
• European Financial Sector CDS Index 63.4 +2.3% 
• Emerging Market CDS Index 147.1 +3.0% 
• Israel Sovereign CDS 57.7 +2.6% 
• Bloomberg Global Trade Policy Uncertainty Index .9 +.1
• US Morning Consult Daily Consume Sentiment Index 87.6 +2.6

• Citi US Economic Surprise Index 40.3 +16.1

• Citi Eurozone Economic Surprise Index 82.1 +19.5

• Citi Emerging Markets Economic Surprise Index 17.7 -1.1
• S&P 500 Current Quarter EPS Growth Rate YoY(7 of 500 reporting) +16.5% -2.5 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 402.90 +.29:  Growth Rate +22.8% +.1 percentage point, P/E 19.3 unch.
• S&P 500 Current Year Estimated Profit Margin 16.29% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) n/a
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 1,047.25 +.52: Growth Rate +56.0% +.1 percentage point, P/E 18.4 -.1
• Bloomberg US Financial Conditions Index 1.30 +4.0 basis points
• US Yield Curve 21.75 basis points (2s/10s) +1.25 basis points
• Bloomberg Industrial Metal Index 180.9 -.7%
• Dutch TTF Nat Gas(European benchmark) 74.1 euros/megawatt-hour +1.1%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 8.5% -.9 percentage point
• US Atlanta Fed GDPNow Q3 Forecast +5.1% unch.
• US 10-Year T-Note Yield 5.11% +14.0 basis points
• 1-Year TIPS Spread 2.42 +10.0 basis points

• Highest target rate probability for Dec. 9th FOMC meeting: 53.2% (+10.9 percentage points) chance of 4.25%-4.5%. Highest target rate probability for Jan. 27th meeting: 46.4%(+2.0 percentage points) chance of 4.25%-4.5%. (current target rate is 3.75-4.0%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +915 open in Japan 
• China A50 Futures: Indicating -67 open in China
• KOSPI 200 Futures: Indicating +1 open in South Korea 

• DAX Futures: Indicating +140 open in Germany

Portfolio:

• Modestly Lower: On losses in my consumer discretionary/biotech sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts
• Market Exposure: Moved to 50% net long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.8%

Sector Underperformers:

• 1) Gold & Silver -3.8% 2) Space -3.1% 3) Biotech -2.3%

Stocks Falling on Unusual Volume: 

• CHWY, RKT, BSP, NYT, PRG, BKNG, NKTR, APP, LMRI, PESI, UPST, IMXI, TNGX, LFST, KLAR, RARE, RELY, ARIS, CARG, MCD, CDE, EQX, CTNM, PAR, ABVX, CTNM, PRCH, AFRM, MGTX, QNST, SCTX, DSP, MLTX, NVRI, RSI, CLMT, EXPE, TLX, ABNB, CRSP, IMNM, YELP, PRAX, KURA, Z, AYA, LMND, IDYA, ORKA, ASND, PAY, OXM, XENE, AUGO, W, SDGR, IMVT, W, IMVT, TREE, DAVE, SBSW, PAYX, KOD, CLDX, EVER, MLYS, SSMR, BCAX, KNF, EWTX, BOBS, RLAY, PGY, VOR, PBLS, CLYM, CBIO, RAPP, VOYG, ALKT and CGEM

Stocks With Unusual Put Option Activity:

• 1) FEZ 2) UMC 3) ABUS 4) EXPE 5) XLU

Stocks With Most Negative News Mentions:

• 1) CAPR 2) SPRY 3) BETR 4) ARDX 5) HYLN

Sector ETFs With Most Negative Money Flow:

• 1) IGV 2) IDEF 3) KRE 4) XLI 5) ITA

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.2%

Sector Outperformers:

• 1) Computer Services +1.5% 2) Cyber Security +1.3% 3) Software +1.2%

Stocks Rising on Unusual Volume:

• FSLY,. QMCO, SECZ, MAAS, CBRL, ACMR, IONQ, CRWD, AAON, AR, ONON, IRTC, VG, LKFT, SSL, AVT, DVN, INOD, OKTA, VICR and IR

Stocks With Unusual Call Option Activity:

• 1) EXPE 2) U 3) SG 4) JETS 5) ABUS 

Stocks With Most Positive News Mentions:

• 1) IONQ 2) SECZ 3) NNBR 4) TLSI 5) CBRL

Sector ETFs With Most Positive Money Flow:

• 1) SMH 2) XBI 3) MAGS 4) XLF 5) XLV

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:

• (DRI)/2.05
• (SNX)/4.70 

After the Close: 

• (BB)/.04
• (COST)/6.54
• (FDXF)/1.39 

Economic Releases 

8:30 am EST

• The 2Q Current Account Deficit is estimated at -258.1B versus -$226.8B in 1Q.
• Initial Jobless Claims are estimated to rise to 200K versus 196K the prior week.
• Continuing Claims is estimated to rise to 1740K versus 1730K prior. 

10:00 am EST

• New Home Sales for Aug. is estimated to rise to 615K versus 607K prior. 

11:00 am EST

• Kansas City Fed Manufacturing Activity for Sept. is estimated to fall to 8.0 versus 10.0 in Aug. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Trump/Xi meeting, Fed's Barkin speaking, Fed's Williams speaking, 7Y T-Note auction, weekly EIA natural gas inventory report, Fed's weekly balance sheet report, (SHW) investor meeting, (AVAV) annual meeting, (KFY) annual meeting and the Davidson Industrials/Services Conference could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -3.8% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 17.2 +.1
• 3 Sectors Rising, 8 Sectors Declining
• 24.3% of Issues Advancing, 74.4% Declining 
• TRIN/Arms .88 -26.7%
• Non-Block Money Flow -$262.6M
  
• 23 New 52-Week Highs, 318 New Lows
• 44.1% (-3.4%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.5 -3.5

Polymarket: 

• Will China invade Taiwan by June 30th 2027? 9.0% unch.
• Strait of Hormuz traffic returns to normal by October 31st 8.0% -1.0 percentage point
• Iran agrees to end enrichment of uranium by Dec. 31st 13.0% unch.
• Israel withdraws from Lebanon by December 31st 5.0% unch.
• US Invades Iran before 2027 15.0% -1.0 percentage point
• US announces end of Iranian blockade by October 31st 33.0% -32.0 percentage points

Other

• Bloomberg Global Risk-On/Risk-Off Index 134.1 +.8%
• Global Monitor Iran Instability Index 60.0 -4.0
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 90.0% unch.
• US High-Yield Tech Sector OAS Index 403.25 +4.5 basis points
• Bloomberg Cyclicals/Defensives Index 271.7 +.4%
• Morgan Stanley Growth vs Value Index 153.6 -1.0%
• CNN Fear & Greed Index 35.0 (FEAR) -1.0
• 1-Day Vix 10.0 +14.0%
• Vix 15.3 +8.0%
• Total Put/Call .89 +15.6%

Wednesday Watch

Night Trading 

• Asian equity indices are unch. to +1.5% on average. 
• Asia Ex-Japan Investment Grade CDS Index 68.75 -.75 basis point. 
• China Sovereign CDS 33.25 unch.
• China Iron Ore Spot 96.90 USD/Metric Tonne +.8%. 
• Crude Oil 94.59/bbl. -1.2%. 
• Gold 4,384.0 USD/t oz. +.19%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.16 -.04%.
• Bloomberg Emerging Markets Currency Index 34.01 -.06%.
• Bloomberg Global Risk-On/Risk Off Index 133.1 +.1%.
• US 10-Year Yield 4.96% unch.
• Japan 30-Year Yield 4.08% n/a.
• Volatility Index(VIX) futures 17.4 +.2%.
• Euro Stoxx 50 futures +.24%. 
• S&P 500 futures -.04%.
• NASDAQ 100 futures -.04%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and metals & mining 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.