Stocks Surging into Final Hour on Healthcare/Tax Reform Hopes, Subsiding European Election Fears, Earnings Optimism, Financial/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.93 -6.7%

• Euro/Yen Carry Return Index 122.35 +.53%

• Emerging Markets Currency Volatility(VXY) 9.02 -1.53%

• S&P 500 Implied Correlation 45.35 -4.41%

• ISE Sentiment Index 87.0 +14.47%
  

• Total Put/Call .88 +18.92%

• NYSE Arms .92 -36.51%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.74 -1.82%
  

• America Energy Sector High-Yield CDS Index 373.0 +.99%

• European Financial Sector CDS Index 90.82 -1.01%

• Western Europe Sovereign Debt CDS Index 11.92 +.46%

• Asia Pacific Sovereign Debt CDS Index 24.60 -.32%

• Emerging Market CDS Index 209.39 -1.23%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.02 +.08%

• 2-Year Swap Spread 33.5 +.75 basis point

• TED Spread 35.75 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -30.0 -1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.24 +.24%
• 3-Month T-Bill Yield .78% -2.0 basis points
  

• Yield Curve 104.0 +1.0 basis point
  

• China Import Iron Ore Spot $65.36/Metric Tonne +1.18%

• Citi US Economic Surprise Index 6.30 -.1 point

• Citi Eurozone Economic Surprise Index 38.50 +.2 point

• Citi Emerging Markets Economic Surprise Index 40.2 +1.1 points

• 10-Year TIPS Spread 1.87 +1.0 basis point
  
• 59.3% chance of Fed rate hike at June 14 meeting, 62.0% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +205 open in Japan 
• China A50 Futures: Indicating +4 open in China

• DAX Futures: Indicating +50 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 100% Net Long

Today's Headlines

Bloomberg:

• Kuroda Says Current Purchase Pace to Continue for Some Time. (video) The Bank of Japan will continue with very accommodative monetary policy and maintain the current pace of asset purchases for some time, Governor Haruhiko Kuroda said in an interview. While Japan’s economy is doing better than thought a few months ago, the inflation rate is still quite sluggish, Kuroda said in New York on Thursday. Speaking a week before the BOJ’s next policy meeting, when the board will also update its estimates for growth and consumer prices, he said the exchange rate could affect inflation in the short term and that if the yen appreciates, there is a chance of a delay in hitting Japan’s 2 percent price goal. He added that depreciation would have the opposite effect.

• Treasuries Fall as Haven Bid Ebbs Ahead of French Election. (video) Treasuries fell, lifting yields further off year-to-date lows reached on Tuesday, amid steeper declines for most European government bond markets ahead of the French election on Sunday. Yields were higher by two to three basis points at 10:30 a.m. in New York, with the 10-year at 2.24 percent. Most of the move off session lows occurred during European trading hours, concurrently with the move in European yields led by Spain, where demand was soft for a multi-part debt auction. U.S. yields extended their climb during U.S. trading, tracking the dollar-yen rate after Bank of Japan Governor Haruhiko Kuroda said the current pace of bond purchases would continue for some time.

• Major Oil Producers Reach Initial Deal to Extend Output Cuts. (video)

• Subway Shuts Hundreds of U.S. Stores. The company lost 359 U.S. locations in 2016, the first time that Subway had a net reduction. The store count dropped 1.3 percent to 26,744 from 27,103 in 2015, but Subway remains the nation’s most ubiquitous eatery.

Wall Street Journal:

• U.S. Farmers, Who Once Fed the World, Are Overtaken by New Powers. Bumper soybean and wheat harvests in Brazil and Russia push down global prices, imperiling America’s growers; ‘hard for our psyche’.

CNBC:

• Treasury's Mnuchin: We're 'pretty close' to bringing forward 'major tax reform'. (video)

• Hedge fund assets reach new high of $3.1 trillion as positive returns trump outflows.

• Full interview with former Fed Chairman Greenspan on stagflation, Trump's deregulation.

• The pause in the Trump rally should end soon, says strategist who recently sold his short-term positions.

• US steel stocks skyrocket as Trump launches probe on foreign products. (video)

Zero Hedge:

• China Puts Bombers On High Alert.

• The Best 'Unknown' Indicator. (graph)

• Record Buyside Takedown In TIPS Auction Breathes New Life In Reflation Trade. (graph)

• Tesla(TSLA) Tumbles After Recalling Over 50,000 Vehicles; Faces "Demonstrably Dangerous" Autopilot Lawsuit.

• China Escalates Pressure On North Korea: Crude Oil Supply Halt On The Table.

• Bill O'Reilly Gets $25 Million From Fox News As Final Payout.

• Trump Signs Order Granting Steel Import Sanctions On "National Security" Grounds.

• French Stocks Surge Off Technical Support After Overnight Poll. (graph)

• Republicans Said To Near New Healthcare Deal.

• Continuing Jobless Claims Collapse. (graph)

• 'Soft' Data Slumps - Philly Fed Plunges Most In Over 2 Years As Trumphoria Fades.

• Oil Stumbles Back To $50 Handle As Saudi/OPEC Jawboning Fails. (graph)

The Telegraph:

• Theresa May's Britain will become Europe's haven of order and calm.

• Euro hits three-week high against dollar and French stocks rally as presidential election looms.

Bear Radar

Style Underperformer:

• Large-Cap Value +.9%

Sector Underperformers:

• 1) Hospitals -1.4% 2) Homebuilders -1.0% 3) Utilities -.6%

Stocks Falling on Unusual Volume: 

• WSR, WR, MD, PFPT, URI, PLXS, AQMS, TSRO, IDTI, TCBI, EVHC, ASPS, SYNT and INVA

Stocks With Unusual Put Option Activity:

• 1) OCN 2) URI 3) EBAY 4) GE 5) PXD

Stocks With Most Negative News Mentions:

• 1) PFPT 2) TCBI 3) NSTG 4) RTK 5) WINS

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.1%

Sector Outperformers:

• 1) Steel +3.4% 2) Road & Rail +3.1% 3) Retail +2.1%

Stocks Rising on Unusual Volume:

• KCG, SCSS, MZOR, VIRT, GBNK, FL, IEX, SPA, DGX, SXCP, HTHT, APFH, SNA, SLM, CSX, KALU, ALOG, POOL, PERY, BATRK, EWBC, FNX, BX, LTXB, HMHC, GCO, SC, AXP, BWLD, APTI, SHW and GPS

Stocks With Unusual Call Option Activity:

• 1) VHC 2) OCN 3) FL 4) DRI 5) DHI

Stocks With Most Positive News Mentions:

• 1) OLED 2) GPS 3) AXP 4) SCSS 5) LEA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +6.2% Above 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 62.5% of Issues Advancing, 32.8% Declining
• 73 New 52-Week Highs, 14 New Lows
• 53.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.0%
• Vix 14.7 -1.6%
• Total Put/Call .95 +28.4%
• TRIN/Arms .78 -46.2%

Thursday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 103.0 unch. 

• Asia Pacific Sovereign CDS Index 24.75 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 72.07 +.01%.

• S&P 500 futures +.06%. 

• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ABB)/.27

• (ADS)/3.86

• (BBT)/.73

• (BX)/.68

• (BK)/.80

• (DHR)/.84

• (DHI)/.59

• (KEY)/.28

• (NUE)/1.13

• (NVR)/20.81

• (PPG)/1.32

• (DGX)/1.18

• (SHW)/2.07

• (SNA)/2.34

• (TRV)/2.38

• (VZ)/.96

• (BGG)/.82

• (MAT)/-.17

• (MXIM)/.52

• (NCR)/.46

• (RHI)/.58

• (V)/.79

• (WERN)/.20

Economic Releases

8:30 am EST 

• Initial Jobless Claims for last week are estimated to rise to 240K versis 234K the prior week.

• Continuing Claims are estimated to fall to 2024K versus 2028K prior.

• The Philly Fed Business Outlook Index for April is estimated to fall to 25.5 versus 32.8 in March. 
  

10:00 am EST

• The Leading Index for March is estimated to rise +.2% versus a +.6% gain in February. 
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, German PPI report, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for April, weekly EIA natural gas inventory report, (VALE) general meeting and the (IRM) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology 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.