Weekly Outlook

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

BOTTOM LINE: I expect US stocks to finish the week modestly higher on yen weakness, oil strength, less European/Emerging Markets/US High-Yield Debt Angst, economic optimism, technical buying and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.

Today's Headlines

Bloomberg:

• Early China Data Shows Slowdown Biting Amid Credit Tightening. The first hints of China’s economic performance this month suggest that a slowdown in growth is taking hold, as policy makers beef up efforts to clamp down on financial risks. The international-investor optimism that dominated in the earlier part of the year is now souring, as curbs on leverage push up the cost of domestic borrowing. Small and medium-sized companies are also reporting dented confidence, and sentiment among sales managers and in the steel market worsened. A surprise cut in China’s debt rating by Moody’s Investors Service last week may mark a turning point for the world’s second-largest economy, as momentum weakens following a better-than-expected expansion in the first quarter. Yet the gloom shouldn’t spread too far, with consumers still spending, factory-gate prices gaining and home prices defying predictions of a hard landing.

• Merkel Tells Beer Tent Rally That Europe Must Plot Own Course. German Chancellor Angela Merkel said Europe must plot its own course as she plunged back onto the campaign trail 17 weeks ahead of national elections. Fresh from a Group of Seven summit marked by a recalcitrant U.S. President Donald Trump, Merkel sought to shore up support in her bid for a fourth term on Sunday in a Bavarian beer tent, speaking to supporters of her Christian Social Union sister party, which has been hostile to her refugee policy.

• Mattis Says U.S. Plans to ‘Take Apart’ Islamic State Caliphate. The fight against Islamic State has shifted to “annihilation tactics” to stop potential terrorists who’ve flocked to places such as Iraq and Syria from returning to their home countries to wreak havoc, Defense Secretary James Mattis said Sunday. In his first interview on a Sunday talk show since joining the Trump administration in January, Mattis provided details of the tactical shift he announced at the Pentagon on May 19. “We have already shifted from attrition tactics where we shove them from one position to another in Iraq and Syria,” Mattis said on “Face the Nation” on CBS. “Our intention is that the foreign fighters do not survive the fight to return home to North Africa, to Europe, to America, to Asia, to Africa.”

• BMW to Stop Production in China, South Africa on Supply Shortage. BMW AG is set to extend production halts in Germany to China and South Africa on Monday as the luxury-car maker grapples with a shortage of steering parts. Production at the factories in Shenyang and Rosslyn is likely to stop for a day, while its plant in Leipzig, Germany, is expected to be partially shuttered, spokesman Michael Rebstock said. The Leipzig site has been closed since Friday, and another facility in Munich was affected last week as an unidentified Italian car-parts supplier has been unable to make the required deliveries, magazine Focus reported earlier Sunday.

• Stocks Mixed as Yen Rises; Rand Pares Gain on Zuma. The yen rose 0.1 percent to 111.22 per dollar as of 9:12 a.m. in Tokyo. The Topix index fell 0.1 percent. The Kospi added 0.4 percent and Australia’s S&P/ASX 200 Index fell 0.3 percent. The yield on 10-year Treasuries was 2.25 percent at the end of last week. The rand rose 0.4 percent to 12.821 per dollar. The decision increases the chances that Zuma will survive a no-confidence motion called by opposition parties in parliament, whether or not the Constitutional Court orders a secret ballot for the vote. ANC lawmakers occupy 62 percent of the 400 seats in the National Assembly. The Aussie slid 0.1 percent to 74.39 U.S. cents.

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

Wall Street Journal:

• How Banks Have Escaped the Worst of the Retailing Meltdown. Lenders such as Wells Fargo, Bank of America avoid losses as retailers struggle.

• Homeowners Are Again Pocketing Cash as They Refinance Properties. Nearly half of borrowers recently chose cash-out option.

• Health-Care Groups Weigh Involvement in GOP Overhaul Push. Lobbies are split on whether to shape a new measure or try to kill it.

Fox News:

• US national security adviser 'not concerned' with Kushner, Russia back-channel allegations. (video)

• Merkel urges EU to control their own destiny, after Trump visit, climate change decision. (video)

CNBC:

• Silicon Valley is trumpeting A.I. as the cure for the medical industry, but doctors are skeptical.

• PM Abe: Japan will take steps with U.S. to deter N.Korea.

Zero Hedge:

• In "Watershed Moment" Merkel Says Germany Can No Longer Rely On America.

• "It Wasn't Innocent": Macron Says Famous Trump Handshake "Was About Getting Respect".

• North Korea Launches Another Ballistic Missile.

• Is CarMax Inventory The Canary In The Coalmine Of The Slumping Auto Industry?

• "We Have Only Seen This Market Anomaly Twice Before: In 1999 And 2006". (graph)

• Chicago Population Shrinks Most Of Any City In US. (video)

• Trump Returns, Unleashes Tweetstorm.

• Kushner Role In White House Suddenly Unclear; May "Return To Private Life".

• Visualizing The Expanding Universe Of Cryptocurrencies.

• Fed Fail? Traders Cut Rate-Hike Bets By The Most In History Last Week. (graph)

• Carson Block Says "Laws Of Economics" Dictate China Will Face "Day Of Reckoning".

• Saudi Arabia To Trim Oil Exports To US To Force Inventories Lower.

Business Insider:

• The Bank of Canada is worried about home prices.

• British minister says some of the Manchester bomber's network are 'potentially' still at large.

Today's Headlines

Bloomberg:

• Trump Goes His Own Way as G-7 Cobbles Together a Form of Unity. U.S. President Donald Trump showed his determination to break the global mold as he refused to follow the Group of Seven line on climate change and forced a more skeptical approach to free trade. A summit of G-7 leaders in Sicily wrapped up on Saturday with a fragile truce on the two most contentious topics on the table. The U.S. pushed back on worldwide efforts to curb global warming that Trump’s predecessor had signed up to and won a reference in the final statement on the need for trade to be “free, fair and mutually beneficial.”

• Macron Erupts On World Stage With Trump Snub and a Bromance. On a sun-kissed terrace overlooking the sea, the image of Emmanuel Macron and Justin Trudeau staring into each other’s eyes had social media swooning over the budding bromance between the two young leaders at the Group of Seven in Sicily. But just 24 hours earlier in Brussels, Macron had crushed Donald Trump’s hand until his knuckles turned white and walked past the U.S. president to embrace German Chancellor Angela Merkel on the blue NATO welcome carpet.

• China's Industrial Profits Rise 14% as Global Trade Improves. Chinese industrial profits rose 14 percent in April from a year earlier as global trade increased. Industrial profits climbed to 572.8 billion yuan ($83.6 billion) last month, the National Bureau of Statistics said Saturday. That compares with a jump of 23.8 percent in March, and an 8.5 percent increase last year. Output in the world’s largest manufacturing nation is booming on the back of stronger global trade and investment, handing producers better pricing power. China’s exporters are capitalizing on the improved demand amid concern that the global economy may slow in the longer term.

• U.K. Lowers Threat Level as May Urges Public to Remain Vigilant. Prime Minister Theresa May said the U.K. terror threat has been lowered to "severe" from "critical" following a number of arrests related to Monday’s terrorist attack in Manchester. May led a meeting of the government’s emergency committee Saturday morning, during which she was updated by police and security services on the investigation into the suicide bombing at a pop concert that killed 22 people. The threat level had been raised to the highest category on Tuesday.

• Trump to Decide Next Week Whether to Quit Paris Climate Accord.

• Pope Denounces Speculators in Visit to Industrial Workers. Pope Francis highlighted the struggles workers face in a globalizing economy with a visit Saturday to a troubled steel factory in Genoa, where he stressed the importance of work in giving people a sense of human dignity and denounced those who exploit workers. The visit puts a focus on the plight of workers whose lives have been made precarious by years of economic crisis, including in Italy where a high jobless rate, especially among young adults, drives many to leave the country.

Wall Street Journal: 

• What We Remember on Memorial Day. From the Civil War to Vietnam and beyond, Americans have struggled to reconcile the duty to honor the war dead with the need to pass historical judgment.

• GOP Governors at Odds Over Medicaid Expansion’s Fate. Four Republicans discuss their priorities in shaping a health-care bill after Obamacare.

• Rural America Is the New ‘Inner City’. A Wall Street Journal analysis shows that since the 1990s, sparsely populated counties have replaced large cities as America’s most troubled areas by key measures of socioeconomic well-being—a decline that’s accelerating.

Barron's:

• Had bullish commentary on (IP), (F), (YHOO), (BIDU) and (LVS).

Fox News:

• Trump wraps overseas trip with thanks to US troops, standing firm on terrorism, climate change concerns. (video)

• Coptic Christian attack: ISIS claims its 'soldiers' opened fire on bus killing 29 in Egypt. (video)

CNBC:

• Debt ceiling could be hit late this summer: Sources. (video)

Zero Hedge:

• Merkel Furious With Trump After "Unprecedented" G-7 Failure To Reach Consensus On Climate Change.

• Intelligence Agencies Admit 23,000 Jihadis Live In Britain; 3,000 Pose "Imminent Threat".

• Mortgage Rates Tumble To 6-Month Lows. (graph)

• Bitcoin 'Crashes' To 1-Week Lows - The Difference Between Fear And Concern. (graph)

• Amid Russia Crisis, Trump Prepares "War Room", "Big White House Changes", Loss Of Twitter.

• Global Pension Underfunding Will Hit Nearly Half A Quadrillion Dollars In 2050.

• All Hell Breaks Loose In Toronto's House Price Bubble.

• Connecticut Credit Risk Soars To Record High As Tax Receipts Tumble.

• Trump Defies G7, Refuses To Back Climate Deal After "Controversial" Debate.

• Egyptian Warplanes Bomb Terrorist Camps In Libya After Attack On Coptic Christians.

• Weekend Reading: Correction Over As "Trump Hope" Remains.

• Stocks Surge For 7th Straight Day As US Macro Data Hits 15-Month Lows. (graph)

Business Insider:

• Russia is planning to build an Arctic military research center to further its polar buildup.

• 5 reasons why oil could be headed higher.

The Telegraph:

• War is brewing in the Balkans again –the West can't afford to turn a blind eye any longer.

Market Week in Review

• S&P 500 2,415.83 +1.42%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,415.83 +1.42%

• DJIA 21,078.90 +1.34%

• NASDAQ 6,207.85 +2.03%

• Russell 2000 1,381.85 +1.03%

• S&P 500 High Beta 36.86 +.19%

• Goldman 50 Most Shorted 128.61 +.76%

• Wilshire 5000 24,984.70 +1.35%

• Russell 1000 Growth 1,195.77 +1.87%

• Russell 1000 Value 1,128.59 +.89%

• S&P 500 Consumer Staples 579.71 +2.13%

• Vanda Cyclicals-Defensives 1.3196 +.15%
  

• Morgan Stanley Technology 1,476.68 +2.20%

• Transports 9,165.79 +3.26%

• Utilities 719.81 +2.35%

• Bloomberg European Bank/Financial Services 99.8 -.60%

• MSCI Emerging Markets 41.64 +1.78%

• HFRX Equity Hedge 1,188.32 -.09%

• HFRX Equity Market Neutral 994.49 -.59%

Sentiment/Internals

• NYSE Cumulative A/D Line 290,331 +.78%

• Bloomberg New Highs-Lows Index 676 +755

• Bloomberg Crude Oil % Bulls 52.2 +18.6%

• CFTC Oil Net Speculative Position 328,952 +.06%

• CFTC Oil Total Open Interest 2,337,124 +2.67%

• Total Put/Call .90 +7.1%

• OEX Put/Call .19 -85.18%

• ISE Sentiment 128.0 +50.60%

• NYSE Arms .93 -33.99%

• Volatility(VIX) 9.83 -1.60%

• S&P 500 Implied Correlation 39.58 -6.26%

• G7 Currency Volatility (VXY) 7.63 -3.17%

• Emerging Markets Currency Volatility (EM-VXY) 8.08 -6.16%

• Smart Money Flow Index 19,481.62 +.66%

• ICI Money Mkt Mutual Fund Assets $2.649 Trillion +.14%

• ICI US Equity Weekly Net New Cash Flow -$1.689 Billion

• AAII % Bulls 32.9 +37.8%

• AAII % Bears 30.0 -12.4%

Futures Spot Prices

• CRB Index 181.92 -1.75%

• Crude Oil 49.69 -1.68%

• Reformulated Gasoline 163.50 -.89%

• Natural Gas 3.24 -.62%

• Heating Oil 156.29 -1.42%

• Gold 1,267.80 +.95%

• Bloomberg Base Metals Index 174.21 +.86%

• Copper 256.85 -.79%

• US No. 1 Heavy Melt Scrap Steel 266.67 USD/Ton unch.

• China Iron Ore Spot 57.91 USD/Ton -7.62%

• Lumber 353.10 -2.46%

• UBS-Bloomberg Agriculture 1,063.56 -2.28%

Economy

• Atlanta Fed GDPNow Forecast +4.1% unch.
• ECRI Weekly Leading Economic Index Growth Rate +5.1% +10.0 basis points
  

• Philly Fed ADS Real-Time Business Conditions Index .4829 -5.72% 
• US Economic Policy Uncertainty Index 62.18 -37.68%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 136.85 +.26%

• Citi US Economic Surprise Index -36.20 -2.8 points

• Citi Eurozone Economic Surprise Index 56.0 +3.5 points

• Citi Emerging Markets Economic Surprise Index 19.70 -8.1 points

• Fed Fund Futures imply 0.0% chance of no change 100.0% chance of 25 basis point hike on 6/14

• US Dollar Index 97.49 +.29%
• MSCI Emerging Markets Currency Index 1,597.82 +.76%

• Euro/Yen Carry Return Index 129.84 -.16%

• Yield Curve 95.0 -2.0 basis points

• 10-Year US Treasury Yield 2.24% unch.

• Federal Reserve's Balance Sheet $4.432 Trillion +.09%

• U.S. Sovereign Debt Credit Default Swap 21.75 unch.

• Illinois Municipal Debt Credit Default Swap 393.0 -.05%

• Western Europe Sovereign Debt Credit Default Swap Index 8.72 -5.22%

• Asia Pacific Sovereign Debt Credit Default Swap Index 19.42 -3.89%
  

• Emerging Markets Sovereign Debt CDS Index 42.57 -9.73%
  

• Israel Sovereign Debt Credit Default Swap 65.23 -4.94%

• South Korea Sovereign Debt Credit Default Swap 55.95 -.66%

• Russia Sovereign Debt Credit Default Swap 148.45 -2.87%

• iBoxx Offshore RMB China Corporate High Yield Index 138.59 +.17%

• 10-Year TIPS Spread 1.83% -2.0 basis points

• TED Spread 27.75 +1.0 basis point

• 2-Year Swap Spread 23.5 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -35.25 -4.5 basis points

• N. America Investment Grade Credit Default Swap Index 62.06 -3.11%

• America Energy Sector High-Yield Credit Default Swap Index 370.0 +.64%

• European Financial Sector Credit Default Swap Index 66.63 -4.17%
  

• Emerging Markets Credit Default Swap Index 193.15 -1.91%
  

• CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 145.50 unch.
  

• M1 Money Supply $3.519 Trillion +1.53%

• Commercial Paper Outstanding 987.3 +.1%

• 4-Week Moving Average of Jobless Claims 235,250 -5,550

• Continuing Claims Unemployment Rate 1.4% unch.
  

• Average 30-Year Mortgage Rate 3.95% -7.0 basis points

• Weekly Mortgage Applications 416.20 +4.36%

• Bloomberg Consumer Comfort 50.90 +.7 point

• Weekly Retail Sales +1.9% +10.0 basis points

• Nationwide Gas $2.37/gallon +.02/gallon

• Baltic Dry Index 918.0 -3.98%

• China (Export) Containerized Freight Index 846.27 -.24%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 27.50 -8.33%

• Rail Freight Carloads 274,807 +1.18%

Best Performing Style

•  Large-Cap Growth +1.9%

Worst Performing Style

•  Small-Cap Value +.5%

Leading Sectors

• Road & Rail +4.7%

• Disk Drives +4.5%

• Software +3.4%

• Defense +3.3%

• Airlines +3.0%

Lagging Sectors

• Energy -2.3% 

• Hospitals -2.5%

• Coal -2.5%

• Oil Tankers -2.8%

• Oil Service -6.9%

Weekly High-Volume Stock Gainers (24)

• PBYI, TGI, NUTR, GLYC, AERI, BBY, BG, TLYS, GES, XBKS, MCK, PSTG, TTWO, CALA, RAVN, INTU, BL, FGL, CRMT, PVH, UBSH, REXR, VSAT and CBRL

Weekly High-Volume Stock Losers (14)

• UVV, NDSN, TIF, CWH, ZOES, AZO, HALO, AAP, THR, SIG, FL, ALXN, DY and GCO

Weekly Charts

ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change