Stocks Reversing Slightly Higher into Final Hour on Tax Reform Hopes, Earnings Outlooks, Oil Gain, Energy/Hospital Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mostly Higher
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.51 -6.7%

• Euro/Yen Carry Return Index 134.04 +.04%

• Emerging Markets Currency Volatility(VXY) 7.41 -.54%

• S&P 500 Implied Correlation 40.7 +12.4%

• ISE Sentiment Index 66.0 -8.3%
  

• Total Put/Call 1.02 -4.7%

• NYSE Arms 1.06 -38.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.49 +3.55%
  

• America Energy Sector High-Yield CDS Index 459.0 +.15%

• European Financial Sector CDS Index 55.93 +2.9%

• Western Europe Sovereign Debt CDS Index 5.58 +1.0%

• Asia Pacific Sovereign Debt CDS Index 21.54 +.09%

• Emerging Market CDS Index 190.38 -1.42%
  

• iBoxx Offshore RMB China Corporate High Yield Index 141.16 +.10%

• 2-Year Swap Spread 26.5 +.5 basis point

• TED Spread 31.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -27.0 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.80 +.23%
• 3-Month T-Bill Yield 1.0% unch.
  

• Yield Curve 89.0 -1.0 basis point

• China Import Iron Ore Spot $77.94/Metric Tonne +6.81%

• Citi US Economic Surprise Index -29.40 -3.3 points

• Citi Eurozone Economic Surprise Index 9.90 -.6 point

• Citi Emerging Markets Economic Surprise Index 18.30 +1.4 basis points

• 10-Year TIPS Spread 1.77 -1.0 basis point
  
• 15.6% chance of Fed rate hike at Nov. 1 meeting, 42.5% chance at Dec. 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +15 open in Japan 
• China A50 Futures: Indicating +19 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech sector longs 

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.1%

Sector Underperformers:

• 1) Homebuilders -.6% 2) Agriculture -.5% 3) REITs -.5%

Stocks Falling on Unusual Volume: 

• MATX, FL, INFY, HIBB, DE, ZOES, AXDX, QCP, NKE, AMC and CVNA

Stocks With Unusual Put Option Activity:

• 1) LAMR 2) NBL 3) URBN 4) EPD 5) GPS

Stocks With Most Negative News Mentions:

• 1) HIBB 2) FINL 3) KFT 4) SPLS 5) ESRX

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.3%

Sector Outperformers:

• 1) Hospitals +2.8% 2) Oil Service +1.8% 3) Steel +1.5%

Stocks Rising on Unusual Volume:

• CPN, JP, CTRL, EL, ROST, THC, LTM, CBPO, AMAT, CMCM, BABA, ATGE, JKHY, BURL, AAXN, APPF, CGTRP, MDXG, TARO, AAP, YY, SNAP and ADMS

Stocks With Unusual Call Option Activity:

• 1) CPN 2) ROST 3) PVH 4) HES 5) IYR

Stocks With Most Positive News Mentions:

• 1) ROST 2) AMAT 3) SPWH 4) MYGN 5) OPK

Charts:

• ETFs Rising on Unusual Volume

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +23.5% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 35.2% of Issues Advancing, 60.5% Declining
• 12 New 52-Week Highs, 146 New Lows
• 37.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 31.1%
• Vix 14.8 -4.8%
• Total Put/Call 1.05 -1.9%
• TRIN/Arms .84 -53.1%

Friday Watch

Evening Headlines

Bloomberg:

• Asia Stocks to Drop on Spain Attack, Trump Turmoil. Asian stocks are poised to extend a global rout after terrorists struck a crowded street in Barcelona, exacerbating the unease that was already infecting markets amid rumors that President Donald Trump’s top economic adviser would quit. Japanese, South Korean and Australian equity index futures all dropped 0.9 percent or more after the the S&P 500 Index tumbled 1.5 percent, its second-biggest drop for 2017. A measure of market volatility spiked higher, whiled Treasuries rose with the yen as investors sought havens. Gold jumped. Nikkei 225 Stock Average futures slid more than 1 percent, while contracts on the Kospi index retreated 1.1 percent and those on Australia’s main gauge were 0.9 percent lower.

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

• Fed's Yellen to Headline Annual Jackson Hole Policy Conference. Federal Reserve Chair Janet Yellen will join European Central Bank President Mario Draghi in Jackson Hole, Wyoming next week, setting the stage for a potentially revealing debate over the common challenges facing the world’s two most powerful central banks.

Wall Street Journal:

• Dow Falls 274 Points in Biggest Decline in Three Months. Disappointing earnings, political jitters drag down U.S. stocks.

• Steve Bannon Interview Raises New Questions About His Standing at White House. Less than three weeks ago, a similar interview with Anthony Scaramucci resulted in his ouster.

• Mattis, Tillerson Say North Korea Could Still Face U.S. Military Response. Remarks come amid rising tension between national security team and White House strategist Bannon.

Barron's:

• Applied Materials(AMAT) Jumps 4% on FYQ3 Beat, Higher Q4 View.

Fox News:

• Barcelona terror attack: At least 13 dead after van plows into crowd; 2 suspects arrested. (video)

• Wasserman Schultz' ex-IT aide indicted on 4 counts. (video)

CNBC:

• After-hours buzz: ROST, GPS, AMAT & more.

• Cramer reveals the one retailer going after Amazon's(AMZN) Achilles heel. As of Thursday, one company stood out to Cramer as the competitor Amazon should worry most about: Wal-Mart(WMT). The discount retailer's second-quarter earnings report not only beat the Street's estimates on earnings per share and revenue, but also saw a 60 percent boost in online sales.

• Bitcoin bond launch brings digital currency step closer to 'world of high finance'. (video)

• Trump scraps plan for infrastructure council after 2 other panels dissolve. (video)

• Gap(GPS) soars after better-than-expected profit forecast, same-store sales.

Zero Hedge:

• Republican Senator Corker Calls For "Radical Change" In The White House.

• How Welfare States Make Us Less Civilized.

• 13 Killed After Van Plows Into Barcelona Crowd; Driver Still At Large, ISIS Claims Responsibility.

• Baltimore's Homeless Erect Modern Day 'Hooverville' Tent City On Front Lawn Of City Hall.

• Barcelona Terrorism Suspect Named As Morocco-Born Driss Oukabir.

• White House Confirms "Cohn Intends To Remain In Position". (graph)

• Carmageddon: Deep Subprime Auto Delinquencies Spike To 10-Year Highs. (graph)

• Stocks Slammed Amid 'Cohn Of Uncertainty' As Hindenburg Omen Cluster Nears Record. (graph)

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 82.25 unch. 

• Asia Pacific Sovereign CDS Index 21.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.59 -.06%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DE)/1.95

• (EL)/.43

• (FL)/.90

• (HIBB)/-.20

Economic Releases 
10:00 am EST

• Preliminary Univ. of Mich. Consumer Sentiment for August is estimated to rise to 94.0 versus 93.4 in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Chin Property Price report could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by financial and technology 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.

Bear Radar

Style Underperformer:

• Large-Cap Value -.5%

Sector Underperformers:

• 1) Steel -1.2% 2) Internet -1.2% 3) I-Banks -1.0%

Stocks Falling on Unusual Volume: 

• LAKE, FNGN, LB, VIPS, ACHC, BGG, NTAP, JD, EDIT, TNET, SPTN and CATO

Stocks With Unusual Put Option Activity:

• 1) ZOES 2) NTAP 3) DLTR 4) DDS 5) AMJ

Stocks With Most Negative News Mentions:

• 1) LB 2) NUE 3) KMI 4) EOG 5) WFC

Charts:

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