Stocks Slightly Lower into Final Hour on European Election Concerns, Less Economic Optimism, Oil Decline, Biotech/Oil Service Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: About Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 15.04 +6.3%

• Euro/Yen Carry Return Index 121.98 -.26%

• Emerging Markets Currency Volatility(VXY) 9.02 -.33%

• S&P 500 Implied Correlation 45.44 -.59%

• ISE Sentiment Index 69.0 -25.8%
  

• Total Put/Call 1.04 +15.6%

• NYSE Arms 1.38 +45.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.30 -1.26%
  

• America Energy Sector High-Yield CDS Index 373.0 +.48%

• European Financial Sector CDS Index 90.82 -1.01%

• Western Europe Sovereign Debt CDS Index 11.75 -1.38%

• Asia Pacific Sovereign Debt CDS Index 24.0 -3.28%

• Emerging Market CDS Index 206.60 -1.41%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.02 unch.

• 2-Year Swap Spread 34.75 +1.25 basis points

• TED Spread 37.75 +2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -33.25 -3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.13 -.15%
• 3-Month T-Bill Yield .78% unch.
  

• Yield Curve 105.0 +1.0 basis point
  

• China Import Iron Ore Spot $68.22/Metric Tonne +4.38%

• Citi US Economic Surprise Index 2.80 -3.5 points

• Citi Eurozone Economic Surprise Index 49.30 +10.8 points

• Citi Emerging Markets Economic Surprise Index 39.8 -.4 point

• 10-Year TIPS Spread 1.86 -1.0 basis point
  
• 50.2% chance of Fed rate hike at June 14 meeting, 54.3% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +45 open in Japan 
• China A50 Futures: Indicating -40 open in China

• DAX Futures: Indicating +55 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/retail/tech sector longs 

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.3%

Sector Underperformers:

• 1) Oil Service -1.6% 2) Computer Hardware -1.5% 3) Gaming -1.0%

Stocks Falling on Unusual Volume: 

• XBIT, EFII, MAT, MANH, ACRS, MXIM, FIZZ, SLCA, NCR and AQMS

Stocks With Unusual Put Option Activity:

• 1) NBR 2) EXPE 3) RSX 4) MAT 5) YELP

Stocks With Most Negative News Mentions:

• 1) MAT 2) FIZZ 3) MANH 4) VREX 5) FMSA

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth unch.

Sector Outperformers:

• 1) Utilities +.8% 2) Road & Rail +.7% 3) Software +.6%

Stocks Rising on Unusual Volume:

• CAI, BGG, PFPT, ASPS, PPC, MZOR, BITA, TSC, HA, LION, LSXMA, WERN, RHI, SWK, COL, HON, EWBC, STS, MRTN, AAOI, CYOU, CVTI, SNE and SOHU

Stocks With Unusual Call Option Activity:

• 1) V 2) BHI 3) MDCO 4) UTX 5) HD

Stocks With Most Positive News Mentions:

• 1) PPC 2) GIMO 3) HA 4) SWK 5) FTNT

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.1% Above 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 43.3% of Issues Advancing, 52.0% Declining
• 71 New 52-Week Highs, 13 New Lows
• 55.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.9%
• Vix 14.5 +2.5%
• Total Put/Call 1.04 +15.6%
• TRIN/Arms 1.37 +45.1%

Friday Watch

Evening Headlines

Bloomberg:

• Ignore China's Credit Risks at Your Peril, Says Top Bond Manager. Investors in Chinese debt aren’t paying enough attention to rising credit risks, according to a top bond fund manager. Some market participants have focused on the impact of an improving economy and rising money-market rates, while overlooking the possibility that defaults will increase, said He Qian, manager of Fortis Haitong Pure Bond Fund at HFT Investment Management Co. "It’s interesting that investors were paying more attention to credit risks this time last year, when there were not as many credit events," said He, whose $895 million fund has beaten 99 percent of its competitors since 2014, data compiled by Bloomberg show. "Such risks seem to have faded from investors’ memories.”

• Asian Stocks Gain on Kuroda, U.S. Tax Reform Hopes. Asian stocks climbed on optimism for a U.S. tax overhaul. Weakness in the yen pushed Tokyo shares higher after Bank of Japan Governor Haruhiko Kuroda said he will keep accommodative policy in place. Japanese and Australian shares climbed, while futures contracts in Hong Kong were flat. The S&P 500 Index had its second best day since March as U.S. Treasury Secretary Steven Mnuchin said plans to reform taxes have progressed. The euro was steady after a police officer was shot in Paris just days before France’s presidential election starts. The yen traded at 109.35 per dollar as of 9:08 a.m. in Tokyo after dropping 0.4 percent on Thursday. Japan’s Topix index rose 0.8 percent, heading for its first weekly gain in more than a month. Australia’s S&P/ASX 200 Index climbed 0.6 percent. South Korea’s Kospi index added 0.5 percent. Hang Seng futures were up less than 0.1 percent.

• Your Evening Briefing.

• Drinking Too Much Soda May Be Linked to Alzheimer’s. Two new scientific studies raise questions about whether both regular and diet drinks cause brain disease.

Wall Street Journal:

• Trump Administration Launches National-Security Probe on Steel Imports. President unveils broad investigation that could lead to new tariffs.

Fox News:

• Paris attack: 1 police officer killed, 2 seriously injured in shooting on Champs-Élysées‬‬; ISIS claims responsibility. (video)

MarketWatch: 

• Apple(AAPL) expected to ship 250 million phones in 2018.

CNBC: 

• Trump to sign 'financial-related' executive actions on Friday: Sources.

• Trump: 'I think we'll get both' a vote on health care and keeping government open next week. (video)

• Trades to make as the retail sector pops. (video)

• Senate may ‘jam’ health-care bill through really fast after House passage: Kudlow. (video)

• JPMorgan(JPM) believes a $100 billion deal may happen

• After-hours buzz: V, MAT, OCN & more.

Zero Hedge:

• Police Officer, Kalashinikov-Yielding Shooter Killed In Paris "Terrorist" Attack; ISIS Claims Responsibility.

• OMB Director Mulvaney Budgets "Leveraged" $200 Billion For Trump Infrastructure Plan.

• U.S. Preparing Charges To Arrest Julian Assange.

• Deutsche Bank(DB) Fined $157MM After Its Traders Were Found To Still Use Chat Rooms To Rig FX Trading.

• Goldman(GS) Begs Clients To BTF Oil Dip.

• Shorts Smoked - Stocks End 'High' As Dollar Dumps'n'Pumps. (graph)

Business Insider:

• Visa's(V) adjusted profit soars 27%.

Telegraph: 

• Options market shows insider alarm on 'Frexit' upset.

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.50 -2.5 basis points. 

• Asia Pacific Sovereign CDS Index 24.75 unch.

• Bloomberg Emerging Markets Currency Index 72.24 unch.

• S&P 500 futures +.02%. 

• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GE)/.17

• (GNTX)/.31

• (HON)/1.62

• (IPG)/.03

• (KSU)/1.16

• (MAN)/1.11

• (COL)/1.30

• (SLB)/.25

• (SWK)/1.19

• (SHOO)/.43

• (STI)/.84

Economic Releases
9:45 am EST 

• Preliminary Markit US Manufacturing PMI for April is estimated to rise to 53.8 versus 53.3 in March.

• Preliminary Markit US Service PMI for April is estimated to rise to 53.2 versus 52.8 in March.  
  

10:00 am EST

• Existing Home Sales for March are estimated to rise to 5.6M versus 5.48M in February. 
  

Upcoming Splits

• (GEO) 3-for-2

Other Potential Market Movers

• The Fed's Kashkari speaking, Eurozone Services PMI report, UK Retail Sales report, (WYNN) annual meeting and the (SCHW) business update could also impact trading today.

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