Stocks Lower into Afternoon on Trade War Fears, Rising Long-Term Rates, Emerging Markets Debt Angst, Transport/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 16.7 +4.9%

• Euro/Yen Carry Return Index 137.69 -.23%

• Emerging Markets Currency Volatility(VXY) 8.18 +1.61%

• S&P 500 Implied Correlation 38.42 +.29%

• ISE Sentiment Index 89.0 -4.3%
  

• Total Put/Call 1.01 +4.1%

• NYSE Arms .72 +4.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.26 +.56%
  

• America Energy Sector High-Yield CDS Index 413.0 +1.18%

• European Financial Sector CDS Index 57.03 -.03%

• Italian/German 10Y Yld Spread 118.75 +.75 basis point
  

• Asia Pacific Sovereign Debt CDS Index 11.94 +.67%

• Emerging Market CDS Index 140.20 +2.1%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.14 -.1%

• 2-Year Swap Spread 28.50 unch.

• TED Spread 55.5 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.75 -4.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 74.40 -.48%
• 3-Month T-Bill Yield 1.80% -1.0 basis point
  

• Yield Curve 49.75 +5.75 basis points

• China Iron Ore Spot 67.39 USD/Metric Tonne +.61%

• Citi US Economic Surprise Index 29.20 -.2 point

• Citi Eurozone Economic Surprise Index -90.90 +.6 point

• Citi Emerging Markets Economic Surprise Index 6.1 -.1 point

• 10-Year TIPS Spread 2.18 +2.0 basis points
  
• 90.2% chance of Fed rate hike at June 13 meeting, 90.8% chance at August 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -38 open in Japan 
• China A50 Futures: Indicating -58 open in China

• DAX Futures: Indicating +12 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them

• Market Exposure: 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.1% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 33.1% of Issues Advancing, 62.4% Declining
• 36 New 52-Week Highs, 70 New Lows
• 44.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.8%
• Vix 16.6 +4.2%
• Total Put/Call .97 +1.0%
• TRIN/Arms .82 +19.0%

Friday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 73.5 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 12.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 74.74 -.03%.

• FTSE 100 futures +.21%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BHGE)/.06

• (CLF)/-.18

• (ERIC)/-.19

• (GE)/.11

• (GNTX)/.40

• (HTLD)/.12

• (HON)/1.90

• (KSU)/1.33

• (MAN)/1.63

• (MINI)/.34

• (RF)/.31

• (SLB)/.37

• (SWK)/1.36

• (STT)/1.59

• (SHOO)/.51

• (STI)/1.10

• (WM)/.83

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking and the European CPI report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.1%

Sector Underperformers:

• 1) Tobacco -5.1% 2) Semis -4.4% 3) Homebuilders -3.6%

Stocks Falling on Unusual Volume: 

• APLS, SFL, PM, SNBR, PRTK, BTI, TUSK, AGN, LRCX, TSM, URI, CLX, MO, ALGN and ASML

Stocks With Unusual Put Option Activity:

• 1) PM 2) STI 3) AXP 4) SKX 5) BSX

Stocks With Most Negative News Mentions:

• 1) ACET 2) SNBR 3) ALGN 4) MO 5) MED

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.4%

Sector Outperformers:

• 1) Coal +2.9% 2) Banks +2.1% 3) Shipping +.6%

Stocks Rising on Unusual Volume:

• SIEN, ARMO, KBWB, GPRK, ACH, GWW, SNA, TCBI, AA, USAK, AXP, WBS, ECOM, ZYNE, MDSO, ACIA, IRBT, NVCR, SYBT, GOOS, ADMS, LTXB, CRSP, CIFS and TXT

Stocks With Unusual Call Option Activity:

• 1) PM 2) ZNGA 3) COG 4) AXP 5) URI

Stocks With Most Positive News Mentions:

• 1) AXP 2) GWW 3) TCBI 4) BK 5) BXS

Charts:

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

Market Internals

NYSE Composite Index:

• Volume Running +2.5% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 24.1% of Issues Advancing, 73.4% Declining
• 75 New 52-Week Highs, 84 New Lows
• 46.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.7%
• Vix 16.7 +7.2%
• Total Put/Call .97 +1.0%
• TRIN/Arms .71 -14.5%