Stocks Slightly Higher into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Earnings Optimism, Oil Gain, Biotech/REIT Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.39 -.42%

• Euro/Yen Carry Return Index 135.98 +.03%

• Emerging Markets Currency Volatility(VXY) 7.51 -.40%

• S&P 500 Implied Correlation 27.82 +8.1%

• ISE Sentiment Index 62.0 -40.95%
  

• Total Put/Call .70 -12.5%

• NYSE Arms 1.13 +95.72%

Credit Investor Angst:

• North American Investment Grade CDS Index 56.21 +.08%
  

• America Energy Sector High-Yield CDS Index 431.0 -2.32%

• European Financial Sector CDS Index 50.14 -.37%

• Western Europe Sovereign Debt CDS Index 4.93 +16.71%

• Asia Pacific Sovereign Debt CDS Index 20.36 -1.62%

• Emerging Market CDS Index 192.11 -1.6%
  

• iBoxx Offshore RMB China Corporate High Yield Index 140.38 -.05%

• 2-Year Swap Spread 23.75 -.25 basis point

• TED Spread 19.25 +5.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -27.0 +2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.94 +.53%
• 3-Month T-Bill Yield 1.12% -3.0 basis points
  

• Yield Curve 93.0 -1.0 basis point

• China Import Iron Ore Spot $70.43/Metric Tonne +1.37%

• Citi US Economic Surprise Index -44.40 +1.1 points

• Citi Eurozone Economic Surprise Index 13.60 +.7 point

• Citi Emerging Markets Economic Surprise Index 15.60 +.5 basis point

• 10-Year TIPS Spread 1.80 -1.0 basis points
  
• 19.7% chance of Fed rate hike at Nov. 1 meeting, 48.6% chance at Dec. 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -20 open in Japan 
• China A50 Futures: Indicating +8 open in China

• DAX Futures: Indicating -39 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• Russia Warns of ‘Painful’ Response If Trump Backs U.S. Sanctions. (video) Russia threatened to retaliate against new sanctions passed by the U.S. House of Representatives, saying they made it all but impossible to achieve the Trump administration’s goal of improved relations. The measures push U.S.-Russia ties into uncharted territory and “don’t leave room for the normalization of relations” in the foreseeable future, Deputy Foreign Minister Sergei Ryabkov said Wednesday, according to the Interfax news service. Hope “is dying” for improved relations because the scale of “the anti-Russian consensus in Congress makes dialogue impossible and for a long time,” Konstantin Kosachyov, chairman of the international affairs committee in Russia’s upper house of parliament, said on Facebook. Russia should prepare a response to the sanctions that’s “painful for the Americans,” he said.
• Your Evening Briefing. 
• Tax Overhaul Framework May Go Public This Week. A set of broad guidelines on a tax overhaul bill could be released as early as this week, according to people familiar with ongoing tax discussions between congressional leaders and White House officials.

Wall Street Journal:

• Health-Care Bill: What’s Next? Senators begin debate to overturn the Affordable Care Act. Here’s an overview of what’s afoot.
• Fed Leaves Rates Unchanged; Likely to Act Soon on Portfolio Cuts. Fed statement doesn’t deviate significantly from the statement released after June’s policy meeting.
• Passive Migration: Denver Wins Big as Financial Firms Relocate to Cut Costs.
• James Comey Is Maxwell Smart. How Comey’s botched mission to safeguard a Hillary presidency elected Trump.

MarketWatch.com:

• European stocks close with gains as earnings roll in. The Stoxx Europe 600 SXXP, +0.52% gained 0.5% to end at 382.74, after the benchmark on Tuesday advanced 0.4%.
• 3 reasons so many Americans are getting the hell out of the Northeast. 
• Ignore the Obamacare fight in Congress and buy these 5 health-care stocks.
• Boeing(BA) shares soar to record after ‘close to perfect’ earnings report.

Fox News:

• Trump’s not alone: Congress digging into DNC-Ukraine connection. (video)
• Trump announces ban on transgender individuals serving in military. (video)

CNBC:

• Fed says stimulus wind down to begin 'relatively soon,' leaves rates unchanged. (video)
• Here's what changed in the new Fed statement.
• How stock investors are cashing in on the red-hot ‘sharing economy’ trend. (video)
• Jeremy Siegel says the market will surge 'another 10%' this year on tax reform.
• Whole Foods(WFM) profit falls as same-store sales drop 1.9%. (video)
• Billionaire hedge fund manager beating the market is giving up on 'fading Trump Trade'. (video)
• White House to announce Apple-supplier Foxconn manufacturing plant in Wisconsin on Wednesday: Source. (video)
• Wall Street stunned over AMD’s blowout results due to cryptocurrency mining demand. (video)

Zero Hedge:

• Sessions To Announce Leak Investigations Following Several Trump Outbursts.
• Scaramucci Singles Out Obama's "Political Holdovers" As White House Leakers.
• Trump Relentlessly Blasts Attorney General Sessions Yet Again In Fiery Tweet Storm.
• Seattle's Minimum Wage Supporters Continue To Ignore The Facts.
• Howard Marks Sounds The Alarm On ETFs And Passive Investing, Again.
• North Korea ICBM Launch Expected "As Soon As Tonight".
• WTI Pops'n'Drops As Inventory Draws Battle Surging Production. (graph)
• New Home Sales Disappoint As Median Price Drops Year-Over-Year. (graph)
• Declassified Memos Show Obama's NSA Spied On Americans Way More Than You Thought.

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Hospitals -2.8% 2) Steel -2.5% 3) Gaming -1.6%

Stocks Falling on Unusual Volume: 

• OEC, TISI, MC, AMED, FFBC, AKAM, WYNN, RHI, JNPR, GLW, IART, UHS, WNC, TUP, USG, VLY, GD, CLS, HA and BLMN

Stocks With Unusual Put Option Activity:

• 1) XLE 2) AKAM 3) TWX 4) CAB 5) CVS

Stocks With Most Negative News Mentions:

• 1) AKAM 2) KND 3) AMED 4) HLS 5) LHCG

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.2%

Sector Outperformers:

• 1) Gold & Silver +1.0% 2) Semis +.8% 3) Biotech +.7%

Stocks Rising on Unusual Volume:

• SNC, MSFG, IRBT, SERV, DVAX, SIX, BA, T, SGH, LOGI, CHGG, AMD, BCO, SFLY, X, EXAS, HZO, MORN, PPC, AMP, SNI, OC, SGMS, CHE, SLAB, CHGG, SERV, TTS, BIIB, ESRX and LEA

Stocks With Unusual Call Option Activity:

• 1) DVAX 2) ADP 3) BA 4) BBBY 5) ADI

Stocks With Most Positive News Mentions:

• 1) TTPH 2) T 3) BIIB 4) EXAS 5) AMD

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +16.4% Above 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 49.6% of Issues Advancing, 45.7% Declining
• 114 New 52-Week Highs, 6 New Lows
• 49.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.6%
• Vix 9.4 unch.
• Total Put/Call .57 -28.8%
• TRIN/Arms 1.16 +101.5%

Wednesday Watch

Evening Headlines

Bloomberg:

• China Early Data Show Resilient Economy. Earliest indicators show that China’s economic engine is humming this summer. Confidence of small- and medium-sized companies rebounded in July, satellites are picking up increasing activity on the ground, sentiment of steel traders and producers has improved, while that of sales managers is at the highest level in more than two years. This buoyancy helps offset concern from wary financial investors.

• It's Five Years Since Draghi's 'Whatever It Takes'. Five years ago today, Mario Draghi was talking about bumblebees. The European Central Bank president’s speech in London on July 26, 2012, became instantly famous because of his pledge to do “whatever it takes” to save the euro. But for all the power and clarity of that phrase, he started his remarks more obliquely.

• Stocks Extend Global Rally on Earnings, Bonds Fall. Positive corporate earnings and improving business confidence in Germany, Europe’s largest economy, spurred a rally in global equities and dragged bonds lower as the Federal Reserve prepares to conclude its policy meeting. Equity-index futures indicated an advance in U.S. and European stocks will extend to Asia on Wednesday after earnings from Caterpillar Inc. and McDonald’s Corp. led to outsize gains in the Dow Jones Industrial Average. The euro held near the highest in almost two years after German business confidence data beat expectations. Oil rose above $48 a barrel for the first time since early June. Futures on Japan’s Nikkei 225 Stock Average rose 0.5 percent. Contracts on Australia’s S&P/ASX 200 Index added 0.7 percent and those on Hong Kong’s Hang Seng Index advanced 0.2 percent.

• Big Oil Bosses Are Learning to Live With $50 Crude. Big Oil is starting to beat the crude-market slump as the industry rediscovers how to make money at lower prices. Exxon Mobil Corp. and Royal Dutch Shell Plc are forecast to more than double second-quarter profit from a year earlier, far outstripping the 8 percent gain in benchmark Brent crude, according to analyst estimates compiled by Bloomberg. Chevron Corp. will return to profit, while France’s Total SA is expected to report a third consecutive quarter of higher year-on-year earnings.

• Your Evening Briefing.

• U.S. Signals Clampdown on Red-Hot Digital Coin Offerings. U.S. regulators said they have jurisdiction over one of the hottest new areas of finance: initial coin offerings of digital currencies. Companies that raise money through the sale of digital assets must adhere to federal securities laws, the Securities and Exchange Commission said Tuesday. Issuers must register the deals with the government unless they have a valid excuse, as should exchanges that offer trading of cryptocurrencies like bitcoin and ether, the regulator said.

• Uber’s New CEO Short List Is Said to Include HPE’s Meg Whitman.

• Texas Instruments(TXN) Signals Growing Demand in Chips for Cars. Texas Instruments Inc., the largest maker of analog semiconductors that are the basic building blocks of every electronic device, gave a forecast that indicated steady demand from the automotive industry. Third-quarter profit will be $1.04 to $1.18 a share, the Dallas-based company said Tuesday in a statement. Revenue will be $3.74 billion to $4.06 billion. Analysts on average projected profit of $1.05 a share on sales of $3.8 billion, according to data compiled by Bloomberg.

• SoftBank Takes Stake in Roomba-Maker iRobot(IRBT). SoftBank Group Corp. has taken a stake in Roomba vacuum-cleaner maker IRobot Corp., people familiar with the matter said, as the Japanese company builds its holdings in robotics firms. SoftBank has built a less than 5 percent stake in IRobot, below the amount that would require a regulatory disclosure in the U.S., the people said, asking not to be identified because the purchase was private. The Bedford, Massachusetts-based technology company has a market value of $2.4 billion. Shares in IRobot rose 22 percent in late trading in New York.

• First Facebook(FB) TV Episodes Are Said to Be Ready for Mid-August. Facebook Inc.’s version of television is coming online in mid-August after several false starts, according to people familiar with the matter. The company has been asking its partners to turn in the first episodes of their spotlight shows, the people said. Some already have finished these short-form, inexpensive programs. Facebook is also funding higher-end TV-style shows, which will be launched later on the site, said the people, who asked not to be identified because the plans aren’t public.

Wall Street Journal:

• Senate Votes to Begin Debate on Health-Care Bill With Pence Breaking Tie. Series of amendments will now be offered with final vote possible this week.

• California Governor Signs Cap-and-Trade Legislation. State’s program, considered a global model, aims to cut greenhouse-gas emissions to 40% below 1990 levels by 2030.

• Caterpillar(CAT) Boosts Outlook Signaling Cautious Optimism in Recovery. Equipment sales grew in many of the manufacturing company’s construction markets.

• Europe’s Next Crisis: The Balkans. Russia and Turkey stir up trouble, while the EU focuses on its own problems first.

Fox News:

• Trump holds 'Make America Great Again' rally in Ohio -- live blog. (video)

CNBC:

• The good news about this earnings season. (video)

• Steve Wynn cautions against 'short-term myopia' in defending Macau mass-market softness.

• Trump administration may freeze fuel economy standards.

• Bitcoin slammed by more than 10% to below $2,500; Ethereum down big too.

• AMD(AMD) stock soars after strong guidance, earnings beat. (video)

• Facebook's(FB) three-pronged plan to get businesses to use Messenger more.

Zero Hedge:

• Wasserman-Schultz IT Aide Arrested While Attempting To Flee Country, Charged With Bank Fraud.

• "If The VIX Goes Bananas", Morgan Stanley Shows What It Would Look Like.

• House Overwhelmingly Passes Veto-Proof Russia Sanctions Deal.

• The Death Cross Of Central Bank Credibility. (graph)

• Business Customers Are Tired Of Being Bilked Of Billions; Demand Rate Increases On Their Bank Deposits.

• Politics Of The Next 4 Years: Part 2 (Last Chance For The Democrats).

• WTI Jumps Above $48 After API Inventory Report Shows Huge Crude Draw. (graph)

• Trump: Cohn, Yellen Are Top Fed Chair Contenders, "Two Or Three Other Candidates".

• Central Bankers 'Are' The Crisis.

• Senate Passes Critical Motion To Advance Obamacare Repeal Efforts.

• Stocks Scramble To 4th Longest Stretch Of 'Dip-less' Gains In 90 Years.

Business Insider:

• The Trump administration just toughened its crackdown on 'sanctuary cities'.

• Here are the 3 sectors that could benefit from the Fed’s great balance-sheet unwind.

• Canada is uniquely primed for a housing bust.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 84.0 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 20.75 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.52 -.04%.

• S&P 500 futures +.04%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALK)/2.51

• (BAX)/.57

• (BA)/2.31

• (KO)/.57

• (GLW)/.40

• (DHI)/.75

• (F)/.43

• (GD)/2.43

• (HES)/-1.29

• (HLT)/.50

• (IR)/1.46

• (LH)/2.41

• (LEA)/4.11

• (R)/.95

• (STT)/1.58

• (WHR)/3.53

• (ABX)/.17

• (BWLD)/1.05

• (ESZ)/-.11

• (FFIV)/2.03

• (FB)/1.11

• (GILD)/2.17

• (LRCX)/3.01

• (LVS)/.59

• (PYPL)/.43

• (TER)/.86

• (TSCO)/1.27

• (WFM)/.33

• (XLNX)/.60

• (VAR)/.94

Economic Releases  
10:00 am EST

• New Home Sales for June are estimated to rise to 615K versus 610K in May.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,125,000 barrels versus a -4,727,000 barrel decline prior. Gasoline supplies are estimated to fall by -1,766,670 barrels versus a -4,445,000 barrel decline the prior week. Distillate supplies are estimated to fall by -461,330 barrels versus a -2,137,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.11% versus a -.5% decline prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at 1.0-1.25%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed Policy Update, UK GDP report, $34B 5Y T-Note auction, weekly MBA Mortgage Applications report and the (PII) investor meeting could also impact trading today.

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