Bull Radar

Style Outperformer:

• Small-Cap Growth +1.8%

Sector Outperformers:

• 1) Steel +3.0% 2) Oil Service 2.2% 3) Homebuilders +2.0%

Stocks Rising on Unusual Volume:

• SPNC, AVAV, HAIN, NTNX, BLUE, KBH, CAMP, ESPR, UBIO, CARA, BPI, FARO, CARO, CY, SGEN, ARNC, FDS, FOXF, ASR, KBWB, JBHT, NSP, KOP, CSII and KTOS

Stocks With Unusual Call Option Activity:

• 1) MBI 2) KBH 3) BBT 4) EXPE 5) TER

Stocks With Most Positive News Mentions:

• 1) LNGG 2) SPNC 3) NTNX 4) GBT 5) KBH

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -2.7% Below 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 78.4% of Issues Advancing, 18.7% Declining
• 79 New 52-Week Highs, 13 New Lows
• 46.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.8%
• Vix 10.24 -7.4%
• Total Put/Call .91 +16.67%
• TRIN/Arms .52 -45.4%

Wednesday Watch

Evening Headlines

Bloomberg: 

• Cyberattack Reaches Asia as New Targets Hit by Ransomware Demand. (video) A new cyberattack similar to WannaCry has reached Asia after spreading from Europe to the U.S. overnight, hitting businesses, port operators and government systems. The Jawaharlal Nehru Port Trust, the facility near Mumbai which is operated by A.P. Moller-Maersk and is India’s largest container operation, was affected, according to a report by the Press Trust of India. One of the three terminals is now at a standstill because the computer systems were disabled. The attack is being carried out by the Petya virus, with users being told to pay $300 in cryptocurrency per infected computer to unlock their systems.

• Higher Pay Could Mean 'Made in China' Equals 'Made By Robots'. In the Pearl River Delta, factory owners are being forced to invest for the future. The heartland of Chinese manufacturing is currently facing surging wages and labor shortages, two things that threaten its role as workshop to the world. Rather than succumbing to cheaper competitors though, factory owners in the Pearl River Delta are rising to the challenge.

• Stocks Flat, Bonds Drop Amid Central Bank Comments. Stocks in Japan and Australia fluctuated after the S&P 500 Index posted its biggest loss in more than a month. Yields on 10-year debt in Australia soared the most since November. The euro held at the highest level in 10 months as ECB chief Mario Draghi offered upbeat remarks. That weighed on the dollar, while Yellen did little to support the U.S. currency. Chinese markets remain in focus after the yuan surged both onshore and overseas on Tuesday amid speculation of central bank intervention. Oil resumed its decline on signs of a supply glut. Japan’s Topix index was little changed, with a rally in banks offset by declines in technology companies. Australia’s S&P/ASX 200 index was flat. South Korea’s Kospi index lost 0.2 percent, with Samsung Electronics Co. down 1 percent.

• UPS(UPS) to Freeze Pensions for 70,000 Workers to Reduce Costs. United Parcel Service Inc. will freeze a pension plan for about 70,000 nonunion U.S. employees because of escalating costs and volatility in determining future payments, replacing it with a different retirement benefit. UPS joins companies including DuPont Co. and Lockheed Martin Corp. in freezing pensions, which means that some or all participants may stop accumulating benefits. UPS’s retirement obligations are on top of a $1 billion jump in capital spending being planned for this year to handle a surge in e-commerce shipments.

• Yellen Fed Ramps Up Attention Over `Somewhat Rich' Asset Prices. It’s not an alarm bell, but Federal Reserve officials are suddenly talking more about rising asset prices. Fed Chair Janet Yellen, Vice Chair Stanley Fischer and San Francisco Fed President John Williams on Tuesday all acknowledged that valuations in equity and other asset markets had risen noticeably in recent weeks. “Financial arguments are starting to take more life,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “While you will never hear the Fed say they have lifted rates because of this, it is certainly weighing on the decision calculus in a way it wasn’t six or nine months ago.”

Wall Street Journal:

• Short on Backers, GOP Delays Vote on Health Bill. Senate Majority Leader McConnell tells lawmakers vote wouldn’t happen until July 4 recess.

• This Shipping Magnate Is Calling a Bottom in the Oil Rout. John Fredriksen wants to double down on the battered oil tanker business, even as his offshore drilling business sinks in debt.

Fox News: 

• Sarah Palin sues NY Times over editorial tying her to Giffords shooting.

CNBC: 

• Trump tells GOP senators: 'We're getting very close' on passing health-care plan. (video)

• Barbarians are back: Wall Street just created the largest buyout fund ever.

• More Americans will be without Obamacare insurance options next year as more carriers pull out.

• FDA aims to curb price gouging with list of off-patent medicines without generic competition.

Zero Hedge:

• Illinois Policymaker: "We Are About To Become The Financial Deadbeat Of The Nation".

• China Suspends Fuel Sales To North Korea.

• The Federal Government Owns 61% Of Idaho, 64% Of Utah, And 84% Of Nevada.

• 2 Out Of 3 Patients Can't Afford Their Hospital Bills Thanks To Obamacare's Soaring Deductibles. (graph)

• Yellen: "I Don't Believe We Will See Another Crisis In Our Lifetime".

• WTI/RBOB Tumble After Unexpected Inventory Builds. (graph)

• Peter Schiff Warns: "They're Not Afraid Of Collapsing The Bubble On Trump's Watch". (video)

• California To Add Monsanto's RoundUp To List Of "Cancer-Causing" Herbicides.

• Fed Alert & TrumpCare Turmoil Slams Tech Stocks, Bonds, & Dollar. (graph)

Night Trading 

• Asian equity indices are -.50% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 86.0 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 19.25 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 72.88 +.02%.

• S&P 500 futures -.04%.

• NASDAQ 100 futures -.18%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GIS)/.71

• (MON)/1.74

• (PAYX)/.53

• (PIR)/-.05

• (PRGS)/.37

• (WOR)/.80

Economic Releases 
8:30 am EST

• Advance Goods Trade Balance for May is estimated at -$66.0B versus -$67.1B in April.

• Preliminary Wholesale Inventories MoM for May is estimated to rise +.2% versus a -.5% decline in April.

10:00 am EST

• Pending Home Sales MoM for May is estimated to rise +1.0% versus a -1.3% decline in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,154,600 barrels versus a -2,451,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -288,600 barrels versus a -578,000 barrel decline the prior week. Distillate inventories are estimated to rise by +595,200 barrels versus a +1,079,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.07% versus a -.4% decline prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, Japan Retail Trade report, $28B 7Y T-Note auction, banks releasing of CCAR results, weekly MBA Mortgage Applications report and the (MCK) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 50% net long heading into the day.

Stocks Lower into Final Hour on More Hawkish Central Bank Commentary, Diminishing Healthcare/Tax Reform Hopes, Cyber-Terrorism Fears, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.85 +9.6%

• Euro/Yen Carry Return Index 132.81 +1.73%

• Emerging Markets Currency Volatility(VXY) 7.41 +.41%

• S&P 500 Implied Correlation 33.90 +2.4%

• ISE Sentiment Index 86.0 -11.3%
  

• Total Put/Call .74 -6.33%

• NYSE Arms .79 -1.56%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.32 +2.46%
  

• America Energy Sector High-Yield CDS Index 473.0 -1.81%

• European Financial Sector CDS Index 52.65 +2.76%

• Western Europe Sovereign Debt CDS Index 6.02 -15.2%

• Asia Pacific Sovereign Debt CDS Index 19.09 -.86%

• Emerging Market CDS Index 199.61 +1.71%
  

• iBoxx Offshore RMB China Corporate High Yield Index 139.57 +.06%

• 2-Year Swap Spread 20.0 -1.5 basis points

• TED Spread 29.75 -4.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -01.5 +.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.89 -.05%
• 3-Month T-Bill Yield 1.0% +4.0 basis points
  

• Yield Curve 83.0 +3.0 basis points

• China Import Iron Ore Spot $59.70/Metric Tonne +5.2%

• Citi US Economic Surprise Index -77.50 +1.0 point

• Citi Eurozone Economic Surprise Index 9.20 +2.6 points

• Citi Emerging Markets Economic Surprise Index 10.40 +.4 point

• 10-Year TIPS Spread 1.72 unch.
  
• 26.1% chance of Fed rate hike at Sept. 20 meeting, 27.6% chance at Nov. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -25 open in Japan 
• China A50 Futures: Indicating -29 open in China

• DAX Futures: Indicating -57 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• New Cyberattack Goes Global, Hits WPP, Rosneft, Maers. (video) A new cyberattack similar to WannaCry is spreading from Europe to the U.S., hitting port operators in New York and Rotterdam, disrupting government systems in Kiev, and disabling operations at companies including Rosneft PJSC, advertiser WPP Plc. and the Chernobyl nuclear facility. More than 80 companies in Russia and Ukraine were initially affected by the Petya virus that disabled computers Tuesday and told users to pay $300 in cryptocurrency to unlock them, Moscow-based cybersecurity company Group-IB said. About 2,000 usershave been attacked so far, according to Kaspersky Lab analysts, with organizations in Russia and the Ukraine the most affected.

• Google(GOOGL) Gets Record $2.7 Billion EU Fine for Skewing Searches. 

• European Stocks Decline as Draghi Sees Room to Tweak Stimulus. (video) European stocks tumbled as investors assessed Mario Draghi’s comments indicating he sees room for paring monetary stimulus without tightening policy. The Stoxx Europe 600 Index retreated 0.8 percent at the close. Banks bucked the trend, following bond yields higher after comments by the European Central Bank President, while miners saw their best jump in a week. Shares of automakers were among the biggest losers, led by Schaeffler AG, which tumbled after cutting its 2017 profitability forecast.

• Your Evening Briefing. (video)

• Pharma's Big Bounceback.

Fox News:

• McConnell delays vote on Senate's ObamaCare overhaul bill. (video)

CNBC:

• Yellen: Banks 'very much stronger'; another financial crisis not likely 'in our lifetime'.

• Nvidia(NVDA) to launch graphics cards specifically designed for digital currency mining.

• Here's why businesses in the South are more optimistic.

• The car will be the '4th screen' so Tesla(TSLA) should become a media company, Morgan Stanley says.

• Steel stocks rise on speculation Trump administration's industry report will lead to China tariff.

• 2 billion people now use Facebook(FB) each month, CEO Mark Zuckerberg says.

Zero Hedge:

• "CNN Caught Cold" In Undercover Sting - Producer Admits Russia Fake News Story Pushed For Ratings.

• GOP Folds: Senate To Delay Healthcare Vote Until After July 4.

• "Petya" Ransomware Cyber Attack Goes Global.

• Stocks Slammed After Fed Williams Warns "Market Rally Running On Fumes".

• EUR Spikes To 9 Month Highs After Harker Says US "May Be Entering Low Inflation World. (graph)

• Warren Buffett Says America Is "So Rich" It Can Afford Single Payer.

• Trump "Increasingly Frustrated With China" Over North Korea, Trade: Reuters.

• Conference Board Consumer 'Hope' Stumbles To 5-Month Lows. (graph)

• IMF Slashes US GDP Forecast, Says Trump's Growth Target Is "Unrealistic".

• Case-Shiller Home Price Growth Slows As San Francisco Bubble Continues To Deflate. (graph)

• Euro, Bund Yields Extend Spike After Hawkish Draghi Shocks Markets. (graph)

• Bank Of England Orders Banks To Boost Capital To "Protect From Rising Risks".

The Telegraph:

• ‘Merkron’ axis is likely to leave the European economy in worse shape.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.5%

Sector Underperformers:

• 1) Semis -1.3% 2) Utilities -1.1% 3) Biotech -.9%

Stocks Falling on Unusual Volume: 

• ARR, ARNC, CAR, IRBT, OMER, PI, ALDR, RARX and STX

Stocks With Unusual Put Option Activity:

• 1) DRI 2) URBN 3) EPI 4) VIAB 5) RAD

Stocks With Most Negative News Mentions:

• 1) PI 2) CAMT 3) STX 4) SYX 5) CTAS

Charts:

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