Stocks Slightly Lower into Final Hour on Trade War Fears, Emerging Markets Currency/Debt Angst, Profit-Taking, Utility/REIT Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.12 -2.02%

• Euro/Yen Carry Return Index 135.50 -.44%

• Emerging Markets Currency Volatility(VXY) 11.97 -1.4%

• S&P 500 Implied Correlation 34.81 -1.89%

• ISE Sentiment Index 116.0 +18.4%
  

• Total Put/Call .77 -8.3%

• NYSE Arms .91 -15.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.58 -.53%
  

• America Energy Sector High-Yield CDS Index 400.0 -.41%

• European Financial Sector CDS Index 68.53 +.81%

• Italian/German 10Y Yld Spread 253.25 +.5 basis point
  

• Asia Pacific Sovereign Debt CDS Index 12.1 -.90%

• Emerging Market CDS Index 206.66 -2.0%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.18 -.11%

• 2-Year Swap Spread 17.75 -.25 basis point

• TED Spread 20.0 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.0 -.23%
• 3-Month T-Bill Yield 2.15% +1.0 basis point

• Yield Curve 21.0 -.25 basis point

• China Iron Ore Spot 68.92 USD/Metric Tonne +.39%

• Citi US Economic Surprise Index -8.5 +1.6 points

• Citi Eurozone Economic Surprise Index -13.60 -.6 point

• Citi Emerging Markets Economic Surprise Index -10.60 -2.9 points

• 10-Year TIPS Spread 2.11 +1.0 basis point
• 97.6% chance of Fed rate hike at Nov. 8th meeting, 99.4% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +16 open in Japan 
• China A50 Futures: Indicating -109 open in China

• DAX Futures: Indicating -17 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.2%

Sector Underperformers:

• 1) Tobacco -1.1% 2) REITs -.9% 3) Utilities -.8%

Stocks Falling on Unusual Volume: 

• NI, PGTI, VVV, WAB, TNDM, DDR and NVRO

Stocks With Unusual Put Option Activity:

• 1) DVMT 2) FIT 3) FTV 4) TBT 5) MDLZ

Stocks With Most Negative News Mentions:

• 1) VVV 2) NI 3) UPL 4) FIZZ 5) TNDM

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.3%

Sector Outperformers:

• 1) I-Banks +1.3% 2) Steel +1.2% 3) Insurance +.9%

Stocks Rising on Unusual Volume:

• UBX, BLBD, PLAY, RLGY, CIFS, AIMC, PI, CGC, SHPG, IGV, AVAV, CDLX, MASI, ESL, WCG, ZLAB, NVTA, ADBE, PRQR, RGNX, BRC, HDP, MPWR, CNXN, AMD, OI, KEX, DNLI and LBRT

Stocks With Unusual Call Option Activity:

• 1) IEF 2) OLN 3) EXTR 4) RSX 5) BAX

Stocks With Most Positive News Mentions:

• 1) LB 2) ADBE 3) AMD 4) PLAY 5) RLGY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -.3% Below 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 48.1% of Issues Advancing, 48.1% Declining
• 82 New 52-Week Highs, 51 New Lows
• 51.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.5%
• Vix 12.1 -2.3%
• Total Put/Call .78 -7.1%
• TRIN/Arms .63 -41.4%

Friday Watch

Evening Headlines

Bloomberg:   

• Traders Ease Back on Short Yuan Bets to Gauge U.S.-China Dispute.

• Asia Stock Rally Set to Extend; Dollar Slips. Asian stocks looked set to extend a rally after technology shares drove U.S. equities higher. The dollar fell after data showed a gauge of underlying U.S. inflation unexpectedly cooled in August. Futures signaled equities in Japan, Hong Kong and China will start Friday higher, building on Thursday’s rally as investors assess whether trade frictions between the world’s two biggest economies are easing. U.S. stocks pulled back from the day’s highs after President Donald Trump tweeted that the U.S. isn’t under pressure to reach a trade agreement with China. Emerging-market currencies climbed, with the lira surging after Turkey’s central bank defied the country’s president and hiked rates by a larger than expected amount. Futures on Japan’s Nikkei 225 rose 0.7 percent in Singapore. Futures on Hong Kong’s Hang Seng gained 1 percent. FTSE China A50 futures climbed 0.6 percent. Futures on Australia’s S&P/ASX 200 Index rose 0.4 percent.  

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

• Panicked Neighborhoods Evacuate as Gas Blasts Destroy Homes. 

• Adobe(ADBE) Sales Forecast Beats Estimates With Creative Products Leading.

Wall St. Journal:

• Lawmakers Reach Deal to Avoid Shutdown Drama Before Midterms.

• Boeing(BA) Shores Up Its Defenses.

• Facebook(FB) to Start Fact-Checking Photos and Videos.

• Despite Pledges, Smartphones Keep Miners Digging by Hand in Congo.

• Storm Edges Near Coast With Catastrophic Threat.

• Founders of Shuttered $6 Billion Hedge Fund Planning a Comeback.

MarketWatch.com:

• Pot stocks drop after report that Canadian marijuana investors may be barred from U.S.

• Nvidia(NVDA) outlines how the company will grow for the next 10 years.

Fox News:

• Senator throws Kavanaugh confirmation into chaos with vague accusation, call for probe.

• WATCH LIVE: Surf cams show hurricane bearing down on Carolina coast.

CNBC: 

• After-hours buzz: SHLD, ADBE & more.

• Sears slows same-store sales decline, but losses double with more closures ahead.

• WATCH LIVE: Multiple explosions, fires reported in Massachusetts' Merrimack Valley region.

• The Apple(AAPL) Watch is like 'the gateway drug' to Apple's whole ecosystem.

• House panel advances tax-cut bills.

• A 'super cell tower' in the stratosphere: AeroVironment(AVAV) and SoftBank's 5G vision.

• Tepper says he's still 'very, very long' 

• Investors shouldn't let trade tensions scare them out of US equities, investment expert says  

• Tepper says he's still 'very, very long' Micron's(MU) stock.

Zero Hedge: 

• Bank Of England Warns "No Deal" Brexit Would Lead To Chaos, Crisis "As Bad As 2008 Crash".

• Alex Jones Was Banned By Twitter For Mean Words, Yet Antifa Groups Calling For Assassination Thrive.

• Bill Gross Used Massive Amounts Of Leverage To Double Down On Losing Interest-Rate Bet.

• Stocks Face Swarm Of Hindenburg Omens As Treasury Vol Nears Record Low.

Business Insider:

• Goldman Sachs(GS) announces major leadership shakeup as incoming CEO David Solomon picks his team.

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.5 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 12.25 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 65.09 -.09%.

• FTSE 100 futures -.42%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• PLAY/(.67)

After the Close:

• None of note

Economic Releases

8:30 am EST

• Retail Sales Advance MoM for August are estimated to rise +.4% versus a +.5% gain in July.

• Retail Sales Ex Autos MoM for August are estimated to rise +.5% versus a +.6% gain in July.

• Retail Sales Ex Autos and Gas for August are estimated to rise +.5% versus a +.6% gain in July.

• The Import Price Index MoM for August is estimated to fall -.2% versus unch. in July.

• The Export Price Index MoM for August is estimated unch. versus a -.5% decline in July.

9:15 am EST

• Industrial Production MoM for August is estimated to rise +.3% versus a +.1% gain in July.

• Capacity Utilization for August is estimated to rise to 78.2% versus 78.1% in July.

• Manufacturing Production for August is estimated to rise +.3% versus a +.3% gain in July.
  

10:00 am EST

• Business Inventories for July are estimated to rise +.6% versus a +.1% gain in June. 

• Preliminary Univ. of Mich. Consumer Sentiment for September is estimated to rise to 96.6 versus 96.2 in August.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, China GDP/Industrial Production/Retail Sales reports and the Eurozone Trade Balance report could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.