BETWEEN THE HEDGES

Monday, July 31, 2017

Tuesday Watch

Posted by Gary .....at 9:26 PM

Night Trading

Asian equity indices are unch. to +.5% on average.
Asia Ex-Japan Investment Grade CDS Index 82.25 -.5 basis point.
Asia Pacific Sovereign CDS Index 19.0 -1.0 basis point.
Bloomberg Emerging Markets Currency Index 74.02 +.02%.
S&P 500 futures +.07%.
NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

(APD)/1.59
(ADM)/.52
(BZH)/.18
(BP)/.05
(CME)/1.21
(CMI)/2.56
(HCP)/.47
(HMC)/88.87
(IGT)/.32
(IDXX)/.85
(LPX)/.58
(LL)/-.08
(MLM)/2.35
(MDC)/.61
(MOS)/.23
(BTU)/1.09
(PFE)/.66
(PSX)/1.01
(RCL)/1.67
(SMG)/2.51
(SPG)/2.44
(SNE)/56.17
(S)/-.05
(UAA)/-.06
(ALL)/.92
(AAPL)/1.57
(COHR)/3.45
(ILMN)/.69
(PZZA)/.64
(TRUP)/-.02

Economic Releases

8:30 am EST

Personal Income for June is estimated to rise +.4% versus a +.4% gain in May.
Personal Spending for June is estimated to rise +.1% versus a +.1% gain in May.
The PCE Core MoM for June is estimated to rise +.1% versus a +.1% gain in May.

10:00 am EST

ISM Manufacturing for July is estimated to fall to 56.5 versus 57.8 in June.
ISM Prices Paid for July is estimated to rise to 55.6 versus 55.0 in June.
Construction Spending MoM for June is estimated to rise +.4% versus unch. in May.

Afternoon:

Wards Total Vehicle Sales for July are estimated to rise to 16.8M versus 16.41M in June.

Upcoming Splits

None of note

Other Potential Market Movers

The Eurozone GDP report, Eurozone Manufacturing PMI report, weekly US retail sales reports, Keefe Bruyette Woods Community Bank Conference, (F) July sales conference call and (SQM) Non-deal Roadshow could also impact trading today.

BOTTOM LINE: Asian indices are modestly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Slightly Higher into Final Hour on Oil Gain, Deregulation Hopes, Economic Optimism, Financial/Energy Sector Strength

Posted by Gary .....at 3:20 PM

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) 10.56 +2.62%

Euro/Yen Carry Return Index 136.07 +.26%

Emerging Markets Currency Volatility(VXY) 7.53 +.4%

S&P 500 Implied Correlation 30.0 +5.86%

ISE Sentiment Index 76.0 unch.

Total Put/Call .89 +8.54%

NYSE Arms .91 -35.77%

Credit Investor Angst:

North American Investment Grade CDS Index 57.37 -.35%

America Energy Sector High-Yield CDS Index 436.0 +.61%

European Financial Sector CDS Index 50.33 +.39%

Western Europe Sovereign Debt CDS Index 4.90 +8.53%

Asia Pacific Sovereign Debt CDS Index 19.04 -4.61%

Emerging Market CDS Index 190.80 -.15%

iBoxx Offshore RMB China Corporate High Yield Index 140.55 +.04%

2-Year Swap Spread 24.75 +.25 basis point

TED Spread 23.75 +.25 basis point

3-Month EUR/USD Cross-Currency Basis Swap -27.50 +1.0 basis point

Economic Gauges:

Bloomberg Emerging Markets Currency Index 74.02 +.16%
3-Month T-Bill Yield 1.07% -1.0 basis point

Yield Curve 94.0 unch.

China Import Iron Ore Spot $73.70/Metric Tonne +7.23%

Citi US Economic Surprise Index -43.10 +1.4 points

Citi Eurozone Economic Surprise Index 19.10 +3.0 basis points

Citi Emerging Markets Economic Surprise Index 16.30 +.5 basis point

10-Year TIPS Spread 1.82 unch.
19.5% chance of Fed rate hike at Nov. 1 meeting, 48.4% chance at Dec. 13 meeting

Overseas Futures:

Nikkei 225 Futures: Indicating +10 open in Japan
China A50 Futures: Indicating +46 open in China

DAX Futures: Indicating -25 open in Germany

Portfolio:

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

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

Market Exposure: Moved to 50% Net Long

Today's Headlines

Posted by Gary .....at 2:58 PM

Bloomberg:

Smaller Companies Feel the Chill of China's Great Deleveraging. As China’s great deleveraging kicks in, smaller companies appear to be already feeling the squeeze, judging by the latest factory gauge. The manufacturing purchasing managers index pulled back slightly to 51.4 in July, propped up by improved sentiment among large firms. That masked a marked deterioration among small companies, with a sub gauge for them slumping to 48.9 from 50.1 in June, and a drop in mid-sized firms back below 50. Numbers under 50 indicate conditions are deteriorating.

Potential U.S. Oil Sanctions Increase Risk of Venezuelan Default. (video) The specter of tighter U.S. sanctions is pushing up the perception that Venezuela is getting closer to defaulting on its bonds. Venezuela is awaiting possible further restrictions from the U.S., its largest trading partner, after President Nicolas Maduro held elections Sunday for a new assembly that will rewrite the constitution. The implied probability of Venezuela missing a payment over the next 12 months rose to 62 percent Monday, according to credit-default swaps data compiled by Bloomberg. That’s the highest level since March 2016. The odds of a credit event over the next five years increased to 95 percent.

Your Evening Briefing.

Investors Are Ditching Tech Stocks at the Fastest Pace Since November 2007. (video) Pigs get fat, hogs get slaughtered. Such a risk-averse adage appears to be front of mind for investors, who fled high-flying technology names at the fastest pace in nearly a decade last week. Outflows from PowerShares QQQ Trust Series 1, which tracks the Nasdaq 100 Index topped $3.7 billion for the five sessions ending July 28, the most since early November 2007.

Discovery(DISCA) Buys Scripps for $11.9 Billion to Form Cable Giant. (video)

Wall Street Journal:

Pentagon Offers Plan to Arm Ukraine. U.S. officials say proposal, which needs White House approval, is meant to deter Moscow aggression.

The Regime Change Solution in Korea. The CIA director talks about separating Kim from his missiles.

Late Credit-Card Payments Stoke Fears for Banks. Average net charge-off rate for large U.S. card issuers increased to 3.29% in the second quarter, its highest level in four years.

Supermarkets Face a Growing Problem: Too Much Space. A massive retail build-out has taken a toll on earnings, leaving the industry vulnerable to closures; ‘There’s only so much food we can buy’.