Stocks Falling Substantially into Final Hour on Trade War Fears, Mueller Probe Worries, US/European/Emerging Markets Debt Angst, Financial/Commodity Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 20.3 +13.9%

• Euro/Yen Carry Return Index 135.40 -.67%

• Emerging Markets Currency Volatility(VXY) 7.85 +.90%

• S&P 500 Implied Correlation 43.96 +1.31%

• ISE Sentiment Index 100.0 +13.64%
  

• Total Put/Call 1.26 +8.6%

• NYSE Arms 1.76 +93.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.18 +3.77%
  

• America Energy Sector High-Yield CDS Index 430.0 +.96%

• European Financial Sector CDS Index 65.57 +3.69%

• Italian/German 10Y Yld Spread 134.0 +2.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 13.02 +1.24%

• Emerging Market CDS Index 142.28 +2.43%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.55 -.03%

• 2-Year Swap Spread 32.0 -.75 basis point

• TED Spread 54.75 +8.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.06 -.25%
• 3-Month T-Bill Yield 1.71% -3.0 basis points
  

• Yield Curve 54.5 -3.75 basis points

• China Iron Ore Spot 65.27 USD/Metric Tonne -2.84%

• Citi US Economic Surprise Index 39.4 unch.

• Citi Eurozone Economic Surprise Index -57.90 -19.3 points

• Citi Emerging Markets Economic Surprise Index 37.20 -.4 point

• 10-Year TIPS Spread 2.08 -2.0 basis points
  
• 79.0% chance of Fed rate hike at June 13 meeting, 79.9% chance at August 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -471 open in Japan 
• China A50 Futures: Indicating -178 open in China

• DAX Futures: Indicating -14 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging markets shorts

• Market Exposure: Moved to 25% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running -14.1% Below 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 34.0% of Issues Advancing, 62.2% Declining
• 10 New 52-Week Highs, 66 New Lows
• 46.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.1%
• Vix 19.5 +9.4%
• Total Put/Call 1.21 +4.3%
• TRIN/Arms 1.68 +86.2%

Thursday Watch

Evening Headlines

Bloomberg:

• China’s Central Bank Raises Rates in Open-Market Operations.

• Australia Jobless Rate Edges Higher, Employment Misses Estimates. Australia added fewer jobs than forecast in February and unemployment edged higher as more people sought work, suggesting the central bank is likely to keep interest rates unchanged.

• Saudis Hunting for Deals Plan to Meet Amazon(AMZN), Apple(AAPL), Google(GOOGL).

• Dollar Down, Asia Stocks Mixed on Less Hawkish Fed. Stock benchmarks inched higher in Japan, rose in South Korea, and edged lower in Australia. The greenback sank as the Fed did not suggest that it was leaning to ward four rate hikes this year, as some had expected, and it kept its inflation forecasts little changed. The yen was the strongest of the Group-of-10 currencies. The U.S. 10-year yield maintained losses while yields on two-year U.S. Treasuries, which are more sensitive to changes in Fed policy than longer-debt, dropped the most since early February. Japan’s Topix index rose 0.1 percent and the Nikkei 225 Stock Average added 0.3 percent as of 9:46 a.m. Tokyo time.Australia’s S&P/ASX 200 Index slid 0.3 percent. South Korea’s Kospi index rose 0.7 percent.Futures on the Hong Kong Hang Seng Index climbed 0.3 percent.Futures on the S&P 500 Index added less than 0.1 percent after the underlying gauge fell 0.2 percent.

• Five Things You Need to Know to Start Your Day. (video)

Wall Street Journal:

• Europe’s Tax War on U.S. Tech. It won’t raise much revenue but it will hurt EU tax competition.

• Yes, Shut Down Mueller. Donald Trump is right about the special prosecutor, but for the wrong reason.

• Congressional Leaders Finalize Spending Deal. Lawmakers have two days to consider and pass bill before government’s current funding expires.

• U.S., China Sharpen Trade Swords. As China braces for U.S. trade action on aluminum, steel and intellectual property, it is drawing up tariffs for U.S. farm products.

• Median CEO Pay Hit Record of Nearly $12 Million in 2017, Juiced by Markets. Most S&P 500 chiefs got raises of 10% or more and median pay rose to $11.6 million, as stock awards swelled.

MarketWatch.com:

• Fed hawks and doves send different signals on rates and inflation, but doves rule roost.

• Why the Facebook controversy could be good for Apple(AAPL).

• These 40 companies have had the biggest earnings-estimate increases in 2018.

• FedEx(FDX)-Walmart(WMT) partnership could create ‘mini-fulfillment centers’ in the future.

• The Dead End of Identity Politics. To expand the base is almost inevitably to shrink it equally.

Fox News: 

• Austin bomber recorded 25-minute 'confession' to his deadly crimes, police say. (video)

CNBC:

• UK launches task force to scrutinize cryptocurrency risks and benefits.

• Russia and China are 'aggressively developing' hypersonic weapons — here's what they are and why the US can't defend against them. (video)

• Salesforce's(CRM) pricey MuleSoft(MULE) deal could force rivals to pay up for cloud software companies. (video) 

• Stocks making the biggest moves after hours: Five Below, Herman Miller & more.

Zero Hedge:   

• Zuckerberg To Appear On CNN At 9PM; Is Summoned By UK Over Growing Scandal.

• Andrew McCabe Ordered FBI To Investigate Jeff Sessions.

• Zuckerberg Issues Statement On Cambridge Analytica: "We Made Mistakes".

• Congress Just Quietly Formed A Committee To Bail-Out 200 Pension Funds.

• Steve Cohen's Point72 Posts Loss During First Month Managing Outside Money.

• Gold Spikes As Hawkish Powell Sends Dollar, Bond Yields, & Stocks Lower. (graph)

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 75.75 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 13.0 unch.

• Bloomberg Emerging Markets Currency Index 75.30 +.06%.

• FTSE 100 futures -.08%.

• S&P 500 futures +.17%.

• NASDAQ 100 futures +.25%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ACN)/1.49

• (CCL)/.43

• (CMC)/.29

• (CAG)/.57

• (DRI)/1.64

• (GIII)/.17

• (JKS)/.17

• (HOME)/.35

• (CTAS)/1.27

• (KBH)/.29

• (MU)/2.74

• (NKE)/.53

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 225K versus 226K the prior week. 

• Continuing Claims are estimated to fall to 1870K versus 1879K prior.

9:00 am EST

• The FHFA House Price Index for January is estimated to rise +.4% versus a +.3% gain in December.

9:45 am EST

• The Preliminary Markit US Manufacturing PMI for March is estimated to rise to 55.5 versus 55.3 in February.

10:00 am EST

• The Leading Index for February is estimated to rise +.5% versus a +1.0% gain in January.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for March is estimated at 17.0 versus 17.0 in February.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kashkari speaking, Bank of England rate decision, Eurozone Manufacturing PMI report, Australia Employment Change report, UK CPI report, Bloomberg Economic Expectations Index for March, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by financial and commodity 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 Rising into Final Hour on Economic Optimism, Diminishing Trade War Fears, Oil Gain, Commodity/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 17.56 -3.46%

• Euro/Yen Carry Return Index 136.22 +.30%

• Emerging Markets Currency Volatility(VXY) 7.85 -.51%

• S&P 500 Implied Correlation 42.11 -4.73%

• ISE Sentiment Index 99.0 +12.5%
  

• Total Put/Call 1.19 +43.4%

• NYSE Arms .65 -29.61%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.84 -1.67%
  

• America Energy Sector High-Yield CDS Index 426.0 +1.82%

• European Financial Sector CDS Index 63.23 +.49%

• Italian/German 10Y Yld Spread 131.25 unch.
  

• Asia Pacific Sovereign Debt CDS Index 12.86 -.46%

• Emerging Market CDS Index 139.14 -2.27%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.58 +.03%

• 2-Year Swap Spread 32.75 +2.75 basis points

• TED Spread 45.25 +4.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -6.25 +11.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 75.22 +.58%
• 3-Month T-Bill Yield 1.74% -5.0 basis points
  

• Yield Curve 58.25 +3.5 basis points

• China Iron Ore Spot 66.55 USD/Metric Tonne +.39%

• Citi US Economic Surprise Index 39.4 -2.0 points

• Citi Eurozone Economic Surprise Index -38.60 -.7 points

• Citi Emerging Markets Economic Surprise Index 37.60 -.9 point

• 10-Year TIPS Spread 2.10 +1.0 basis point
  
• 78.5% chance of Fed rate hike at June 13 meeting, 80.7% chance at August 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -95 open in Japan 
• China A50 Futures: Indicating -49 open in China

• DAX Futures: Indicating -29 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.7%

Sector Underperformers:

• 1) Gaming -1.6% 2) Foods -1.2% 3) Tobacco -1.0%

Stocks Falling on Unusual Volume: 

• XNCR, GIS, MFGP, DB, ALDR, LUV and GTN

Stocks With Unusual Put Option Activity:

• 1) TNTR 2) K 3) GME 4) SPWR 5) GIS

Stocks With Most Negative News Mentions:

• 1) OCX 2) K 3) LUV 4) GBT 5) CPB

Charts:

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