Morning Market Internals

NYSE Composite Index:

• Volume Running -6.1% Below 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 32.3% of Issues Advancing, 63.4% Declining
• 40 New 52-Week Highs, 90 New Lows
• 40.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 33.8%
• Vix 13.2 +12.3%
• Total Put/Call .95 -1.04%
• TRIN/Arms 1.01 -4.8%

Thursday Watch

Evening Headlines

Bloomberg:

• Fed Supports Bonds, Dollar Weakens on Inflation. The dollar dropped and Treasuries climbed after odds of another U.S. interest-rate increase this year declined with Federal Reserve meeting minutes showing concern about inflation remaining persistently low. Stock-index futures point to a mixed start for Asian trading. A majority of Fed officials stuck with a forecast that inflation would gradually rise to a 2 percent target over the medium term, according to minutes from the July meeting. However, “many” saw some “likelihood” that it would remain below that level for longer than expected. The minutes didn’t specify when the Fed would begin shrinking its balance sheet this year. Futures on Japan’s Nikkei 225 Stock Average slipped 0.1 percent. Contracts on Australia’s S&P/ASX 200 Index added 0.2 percent, while futures on Hong Kong’s Hang Seng Index added 0.6 percent. Kospi contracts were up 0.3 percent. 

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

• Fed Starts to Wonder If Cornerstone Inflation Model Still Works. (video) Federal Reserve officials are looking under the hood of their most basic inflation models and starting to ask if something is wrong. Minutes from the July 25-26 Federal Open Market Committee meeting showed a revealing debate over why the economy isn’t producing more inflation in a time of easy financial conditions, tight labor markets and solid economic growth. The central bank has missed its 2 percent price goal for most of the past five years. Still, a majority of FOMC participants favor further rate increases. The July minutes showedan intensifying debate over whether that is the right policy response.

• Victoria's Secret Owner Plunges After Delivering Weak Forecast. L Brands Inc.(LB) tumbled as much as 10 percent in late trading after disappointing investors with its profit forecast, a sign that the company’s comeback is still a ways off.

Wall Street Journal:

• Fed Officials Split Over Timing of Next Rate Increase. Minutes from July’s policy meeting show officials agreed to soon start drawing down the central bank’s holdings.

• Baltimore Removes Confederate Statues Overnight. City officials didn’t announce the removal ahead of time to avoid demonstrations.

• Apple(AAPL) Readies $1 Billion War Chest for Hollywood Programming. Company immediately becomes a considerable competitor in crowded market for original shows.

Fox News:

• North Korea's nukes are not the only weapon in its arsenal. (video)

• More arrested in toppling of Confederate statue in North Carolina. (video)

CNBC:

• Here's how the Fed's decisions will begin impacting the market. (video)

• Facebook(FB) shut down an internal pro-Trump discussion group because of harassment, says report.

• Traders are getting excited about Alibaba(BABA) earnings.

• Aetna CEO says 'I am ashamed' of President Trump's 'behavior and comments'. (video)

• Key Obamacare subsidies will continue being paid to insurers despite Trump threats to end them.

• US comes out swinging at NAFTA renegotiations, lists reform demands. (video)

Zero Hedge:

• Why Was This 'Crowd Hire' Company Recruiting $25 An Hour 'Political Activists' In Charlotte Last Week? 

• FBI 'Reopens' FOIA Case On Lynch-Clinton Tarmac Meeting After Getting Caught In Lie.

• FBI Investigator Who Led Hillary Email Case Suddenly Resigns From Mueller's Team.

• Gold Gains As Stocks Sink After Trump Turmoil, Fed Fearmongering. (graph)

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 82.25 -1.5 basis points. 

• Asia Pacific Sovereign CDS Index 21.25 -1.0 basis point.

• Bloomberg Emerging Markets Currency Index 73.81 +.01%.

• S&P 500 futures -.12%.

• NASDAQ 100 futures -.17%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BABA)/.93

• (BKE)/.23

• (WMT)/1.07

• (CRMT)/.97

• (AMAT)/.83

• (GPS)/.53

• (ROST)/.77

• (ZOES)/.02

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 240K versus 244K the prior week.

• Continuing Claims are estimated to rise to 1955K versus 1951K prior.

•  Philly Fed Business Outlook for August is estimated to fall to 18.0 versus 19.5 in July.

9:15 am EST

• Industrial Production MoM for July is estimated to rise +.3% versus a +.4% gain in June.

• Capacity Utilization for July is estimated to rise to 76.7% versus 76.6% in June.

• Manufacturing Production for July is estimated to rise +.2% versus a +.2% gain in June. 

10:00 am EST

• The Leading Index for July is estimated to rise +.3% versus a +.6% gain in June.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI report, Australia Unemployment report Bloomberg Economic Expectations Index for August and weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by metals/mining 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 75% net long heading into the day.

Stocks Slighly Higher into Final Hour on Diminished Rate-Hike Fears, Technical Buying, Bargain-Hunting, Metal & Mining/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.87 -1.41%

• Euro/Yen Carry Return Index 135.21 -.21%

• Emerging Markets Currency Volatility(VXY) 7.59 -.39%

• S&P 500 Implied Correlation 32.76 -1.21%

• ISE Sentiment Index 91.0 +21.3%
  

• Total Put/Call .97 +2.11%

• NYSE Arms 1.09 +28.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 59.59 -.04%
  

• America Energy Sector High-Yield CDS Index 447.0 +.11%

• European Financial Sector CDS Index 52.88 -1.42%

• Western Europe Sovereign Debt CDS Index 5.51 +.27%

• Asia Pacific Sovereign Debt CDS Index 21.31 -4.1%

• Emerging Market CDS Index 188.88 -.1%
  

• iBoxx Offshore RMB China Corporate High Yield Index 141.01 +.05%

• 2-Year Swap Spread 26.0 +.5 basis point

• TED Spread 31.0 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -25.50 +2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.79 +.29%

• 3-Month T-Bill Yield 1.0% -2.0 basis points
  

• Yield Curve 90.0 -2.0 basis points

• China Import Iron Ore Spot $72.97/Metric Tonne -.96%

• Citi US Economic Surprise Index -32.70 -6.9 points

• Citi Eurozone Economic Surprise Index 10.50 +.4 point

• Citi Emerging Markets Economic Surprise Index 16.90 +1.6 basis points

• 10-Year TIPS Spread 1.78 -1.0 basis point
  

• 17.5% chance of Fed rate hike at Nov. 1 meeting, 43.7% chance at Dec. 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -4 open in Japan 

• China A50 Futures: Indicating +47 open in China

• DAX Futures: Indicating -37 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.3%

Sector Underperformers:

• 1) Oil Service -1.2% 2) Energy -.7% 3) Gaming -.1%

Stocks Falling on Unusual Volume: 

• NEFF, DORM, PAGP, CBI and SGMO

Stocks With Unusual Put Option Activity:

• 1) UNIT 2) NWL 3) DG 4) URBN 5) CHS

Stocks With Most Negative News Mentions:

• 1) CBI 2) DNR 3) DO 4) KOS 5) FE

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.8%

Sector Outperformers:

• 1) Steel +2.3% 2) Social Media +2.0% 3) Retail +1.6%

Stocks Rising on Unusual Volume:

• URBN, CHU, FGEN, DKS, LPLA, JNCE, TGT, SBLK, ZIV, A, SBRA, AAP, LRCX, LE, COOL, CCP, FBR, CTRN, LXFT, FUN, DEO, PRAA, MCHI, CORT, HTHT and SNAP

Stocks With Unusual Call Option Activity:

• 1) COTY 2) CNP 3) XLB 4) RHT 5) MOS

Stocks With Most Positive News Mentions:

• 1) URBN 2) RADA 3) BIIB 4) TGT 5) A

Charts:

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