Tuesday Watch

Evening Headlines
Bloomberg:

• European Chipmakers to Keep on Supplying Huawei After Trump Ban.    

• Singapore's Economy Gains 3.8% as Construction Rebounds.

• Defiant Macron Won't Give Up Plans for Greater European Unity.  

• Sniffer Drones Will Start Patrolling the World's Busiest Shipping Ports.

• Asia Stocks Drop as U.S.-China Tech Tensions Rise. Asian stocks opened to modest losses Tuesday as investors digested moves by the U.S. against Huawei Technologies Co. that sank U.S. technology shares overnight. The yuan continued to trade near a six-month low. Stocks dipped in Tokyo and Sydney, and were little changed in early trading in Seoul. Futures pointed to losses in Hong Kong and China. Companies crucial to the global supply chain will be closely watched after the White House blacklisted China’s top telecom company. S&P 500 Index futures edged up after the benchmark dropped Monday, with semiconductor stocks among the biggest laggards. Ten-year Treasury yields rose before a slew of U.S. data and minutes on the Federal Reserve’s most recent policy meeting in coming days. Japan’s Topix index fell 0.5% as of 9:14 a.m. in Tokyo. Australia’s S&P/ASX 200 Index fell 0.4%. South Korea’s Kospi index added 0.2%. FTSE China A50 futures dropped 0.8% earlier. Hong Kong’s Hang Seng Index futures lost 0.6% overnight. S&P 500 futures rose 0.2%.  

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

• Fed on Interest Rates, U.S. Jobs Market, Israel Window: Eco Day.

• Tesla(TSLA) in ‘Code Red Situation’ as Sell-Off Exceeds 20%.

Wall Street Journal:

• T-Mobile, Sprint Get Key FCC Backing, but Hurdles Remain.

• Negative Rates Have Become an Addiction.

• Ford to Cut Salaried Jobs by 10% Amid Global Restructuring.

• U.S. Fines Billions for Wall Street Fraud. Nearly Half the Time It Doesn’t Collect.

• Barr Says He Is Fighting for the Presidency, Not Trump.

Fox News:

• Trump slams Scranton-born Joe at raucous Penn. rally: ‘He left you folks. He left you for another state’.

MarketWatch.com:

• Trump’s Huawei ban is hurting tech stocks — here’s what money flows are showing.

CNBC:

• Good food is bringing people to the mall. And they’re spending more money when they get there.

• Hedge funds bet the sell-off is over: ‘Correction has run its course’.

• Stocks making the biggest moves after hours: GM, Snap, Merck and more.

• Iran ramps up uranium production, throwing ‘a brick on the accelerator’ to nuclear threshold.

• Jim Cramer: ‘Your portfolio should have as little exposure to China as possible’.

Zero Hedge:

• Fed Chair Powell Flags Financial Stability Risks: Record Debt, High Valuations, Leverage, & CLO Liquidity.

• "The Markets Implications Are Enormous": Trade War With China Is Not About Trade But About Geopolitics.

• NYC Schools Chief Accused Of Creating Environment "Hostile" To White People.

• New York Bank Stocks Under Pressure From New Democrat-Backed Rent Legislation.

• Tech Wrecks, Semis Slammed As Trump's Trade Turmoil Hammers Huawei.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 71.50 +.5 basis point.

• China Sovereign CDS 49.25 unch.

• Bloomberg Emerging Markets Currency Index 65.74 -.02%.

• S&P 500 futures +.28%.

• NASDAQ 100 futures +.44%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (AZO)/15.09

• (CBRL)/2.10

• (EV)/.76

• (HD)/2.19

• (JCP)/-.39

• (KSS)/.67

• (TJX)/.55

• (MNRO)/.51

After the Close:

• (CRMT)/1.82

• (JWN)/.43

• (TOL)/.75

• (URBN)/.25

Economic Releases
10:00 am EST

• Existing Home Sales for April are estimated to rise to 5.35M versus 5.21M in March.
  

Upcoming Splits

• (FAST) 2-for-1

Other Potential Market Movers

• The Eurozone Consumer Confidence report, Japan Trade Balance report, weekly US retail sales reports, RBC Healthcare Conference, Suntrust Robinson Humphrey Internet/Digital Media Conference, Credit Suisse Mortgage REIT Conference, Suntrust Robinson Humphrey Financial Services Conference, Wolfe Research Transport Conference and the Needham Emerging Tech Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on China Trade Deal Worries, Rising Mid-East Tensions, Technical Selling, Tech/Homebuilding Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 17.1 +7.0%

• Euro/Yen Carry Return Index 127.61 +.04%

• Emerging Markets Currency Volatility(VXY) 9.05 -1.2%

• S&P 500 Implied Correlation 40.0 +3.2%

• ISE Sentiment Index 70.0 -13.8%
  

• Total Put/Call .85 -22.0%

• NYSE Arms .84 -15.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.32 +1.92%
  

• America Energy Sector High-Yield CDS Index 525.0 +.57%

• European Financial Sector CDS Index 83.13 +2.1%

• Italian/German 10Y Yld Spread 278.75 +2.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 72.10 +1.45%
  

• Emerging Market CDS Index 205.55 -.43%
  

• iBoxx Offshore RMB China Corporate High Yield Index 162.89 +.03%

• 2-Year Swap Spread 6.25 -.5 basis point

• TED Spread 15.25 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -16.25+.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.71 +.03%
• 3-Month T-Bill Yield 2.37% -1.0 basis point

• Yield Curve 19.5 +.25 basis point

• China Iron Ore Spot 98.40 USD/Metric Tonne +.32%

• Citi US Economic Surprise Index -29.90 +1.2 points

• Citi Eurozone Economic Surprise Index -15.70 -1.1 points

• Citi Emerging Markets Economic Surprise Index -33.10 -.2 point

• 10-Year TIPS Spread 1.82 -1.0 basis point
• 19.4% chance of Fed rate cut at July 31st meeting, 44.6% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -171 open in Japan 
• China A50 Futures: Indicating -174 open in China

• DAX Futures: Indicating -25 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.2%

Sector Underperformers:

• 1) Semis -4.6% 2) Disk Drives -3.7% 3) Papers -2.7%

Stocks Falling on Unusual Volume: 

• BIDU, FTCH, DISH, PDD, LSCC, KEYS, AMAT, BABA and AVLR

Stocks With Unusual Put Option Activity:

• 1) INDA 2) TMUS 3) AET 4) SOXX 5) KR

Stocks With Most Negative News Mentions:

• 1) FCAU 2) KEYS 3) BIDU 4) AVGO 5) GME

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.2%

Sector Outperformers:

• 1) Telecom +1.2% 2) Healthcare Providers +.9% 3) I-Banks +.6%

Stocks Rising on Unusual Volume:

• TMUS, MDCO, INDY, FLY, SATS, QIWI, WBK, CATS, HDB, CYNC, IOVA, EOLS, IIIV, GSHD, ERJ, BOOT, IBN, BAP, CHRS, IIVI, NHTC, MCK, NFE, IFN, TTM, SATS and BZH

Stocks With Unusual Call Option Activity:

• 1) EMB 2) JCP 3) ON 4) MNKD 5) ANF

Stocks With Most Positive News Mentions:

• 1) S 2) IHTM 3) MDCO 4) HPE 5) LMT

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -1.3% Below 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 40.6% of Issues Advancing, 55.7% Declining
• 59 New 52-Week Highs, 88 New Lows
• 50.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.2%
• Vix 16.5 +3.7%
• Total Put/Call 1.05 -3.7%
• TRIN/Arms .82 -17.2%

Monday Watch

Today's Headlines

Bloomberg:   

• Trump Warns Iran It Faces Ruin If It ‘Wants to Fight’ With U.S.  

• A $19 Billion Test Is Coming Straight for China's Battered Yuan.

• India Exit Polls Show Modi’s Coalition Set to Return to Power.

• Polarized Europe Faces Elections After Merkel Slap at Populists.  

• Google(GOOGL) Suspends Some Business With Huawei, Reuters Reports.

• Trade War Sets Tone for Global Outlook: World Economy Week.

• Switzerland Votes ‘Yes’ to Being Tax Home for Big Business. 

• Asian Stocks Set for Mixed Open; Aussie Jumps. Asian equities looked poised for a mixed start as U.S.-China trade tensions simmered with little in the way of weekend catalysts. The Australian dollar climbed after a surprise election victory for Prime Minister Scott Morrison. Futures pointed lower in Tokyo, with a flat start seen in Hong Kong. Late Friday, the S&P 500 Index fell to round out a second straight weekly loss, while the dollar ended the week stronger. China’s offshore yuan remained near a five-month low. Crude gained after Saudi Arabia and other key producers in OPEC signaled their intention to keep oil supplies constrained for the rest of the year, while pledging to prevent any genuine shortages. Japan’s Topix index rose 0.4% as of 9:05 a.m. in Tokyo. South Korea’s Kospi index advanced 0.8%. Australia’s S&P/ASX 200 Index gained 1.4%. Futures on the S&P 500 Index rose 0.3%.

• Novak Says too Soon to Discuss Oil-Cut Options: OPEC+ Update.

Wall Street Journal:

• Trump and 2020 Democrats Stake Out Dueling Views on China Trade.

• Spending Slowed as Companies Weighed Trade Concerns. 

• Meat Prices Are Set to Climb as Swine Fever Claims China’s Hogs.

• Economic Fears Drove Australia’s Surprise Election Result.

• Indian Leader Likely to Keep Power, Exit Polls Suggest.

• AI Chip Boom Lifts, Tests Nvidia(NVDA).

MarketWatch.com:

• Crowd psychology says this ‘fool’s rally’ in stocks could fool bears.

Fox News:

• White fire department lieutenant sues over racial discrimination.

CNBC:

• Amazon(AMZN) is spending billions on internet satellites, electric cars and more as revenue growth slows.

Zero Hedge:      

• China State Run Media Broadcasts Anti-American Movies To Millions Amid Deepening Trade War.

• "Parking Lots Full Of Mercedes SUVs" - All Eyes Now On The U.S. Truck Market.

• Rapid DNA-Testing Reveals Third Of Migrants Lying About Family Relationship To Children.

• Al Gore Forecast There Would Be No Ice At The North Pole By 2013.

• America's Top Cities Swamped In Debt, Chicago Leads The Way.

• Watch Air Taxi Aimed At Revolutionizing City Travel Lift Off For First Time.

• Republican Congressman Justin Amash Says Trump Should Be Impeached.

• Visualizing The 150 Apps That Power The Gig Economy.

• Exposing The Regulatory-Industrial Complex.

• Prescription For Violence: The Corresponding Rise Of Antidepressants, SSRIs & Mass Shootings.

• Impossible Foods, Now Valued At $2 Billion, Is The New Beyond Meat.

• Why An Economic War With The US Blows China Up.

• Ohio Suicide Rate Jumps 24% From 2008 To 2017 Amid Deindustrialization Wave.

• Fund Managers Now Offering To Pay Investors To Manage Their Money.

Night Trading

• Asian indices are unch. to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 71.0 +1.0 basis point.

• China Sovereign CDS 49.25 +1.75 basis points.

• Bloomberg Emerging Markets Currency Index 65.70 +.01%.

• FTSE 100 futures +.28%.

• S&P 500 futures +.38%.

• NASDAQ 100 futures +.48%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (AZZ)/.46

• (IGT)/.22

After the Close:

• None of note

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for April.

Upcoming Splits

• (FAST) 2-for-1
  

Other Potential Market Movers

• The Eurozone PPI report, UBS Global Healthcare Conference, UBS Oil/Gas Conference and the (LSCC) investor day could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon.  The Portfolio is 75% net long heading into the week.