Stocks Higher into Final Hour on Global Stimulus Hopes, Oil Gain, Short-Covering, Airline/Energy Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 27.2 -3.5%

• Euro/Yen Carry Return Index 125.86 +1.35%

• Emerging Markets Currency Volatility(VXY) 10.36 -3.5%

• S&P 500 Implied Correlation 61.20 -1.6%

• ISE Sentiment Index 124.0 +15.0 points

• Total Put/Call .76 -8.4%

• NYSE Arms .76 -1.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 75.88 -3.58%
  

• US Energy High-Yield OAS 999.84 -1.68%

• European Financial Sector CDS Index 78.51 -3.32%

• Italian/German 10Y Yld Spread 191.75 +2.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 98.21 -2.86%
  

• Emerging Market CDS Index 258.22 -7.8%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.50 +.11%

• 2-Year Swap Spread 8.25 -.75 basis point

• TED Spread 21.25 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.75 -2.25 basis points
• MBS  5/10 Treasury Spread  114.0 unch.
• IHS Markit CMBX BBB- 6 66.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 61.14 +1.13%
• 3-Month T-Bill Yield .14% +1.0 basis point

• Yield Curve 49.0 -1.0 basis point

• China Iron Ore Spot 96.33 USD/Metric Tonne +1.12%

• Citi US Economic Surprise Index -53.90 +.8 point

• Citi Eurozone Economic Surprise Index -262.10 +3.6 points

• Citi Emerging Markets Economic Surprise Index 29.6 +1.1 points

• 10-Year TIPS Spread 1.16 -2.0 basis points
• 99.3% chance of no change at July 29th meeting, 99.3% chance of no change at Sept. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +325 open in Japan 
• China A50 Futures: Indicating -37 open in China

• DAX Futures: Indicating +2 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +5.9% Above 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 73.0% of Issues Advancing, 24.4% Declining
• 37 New 52-Week Highs, 2 New Lows
• 22.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 56.5%
• Vix 27.5 -2.7%
• Total Put/Call .67 -19.3%
• TRIN/Arms .91 +18.2%

Tuesday Watch

Evening Headlines

Bloomberg:      

• Pentagon Says Up to 800 National Guard Heading to Washington.

• Twelve Million More Mexicans Out of Work After April Devastation.  

• Indonesia Pushes to Reopen Economy to Curb Mounting Job Losses.

• Singapore Returns to Work, Hong Kong Cluster Grows: Virus Update.

• U.S. Equity Futures Slip After Trump Address: Markets Wrap. Asian stocks opened in mixed fashion, while U.S. futures slipped as investors assessed prospects for the deployment of the U.S. military to quell social unrest. Benchmarks in Tokyo and Seoul climbed, while Sydney fluctuated. S&P 500 contracts dipped after President Donald Trump promised to deploy large numbers of troops if cities and states don’t act to contain violence from protests over police brutality. Earlier, the S&P 500 posted a modest advance. The tech-heavy Nasdaq Composite outperformed as a closely watched measure of U.S. manufacturing rose in May for the first time in four months, suggesting stabilization after a pandemic-driven plunge. The dollar stabilized early Tuesday. S&P 500 futures fell 0.4% as of 9:08 a.m. in Tokyo. The S&P 500 rose 0.4% at the close of trading in New York. Topix index rose 0.5%. Australia’s S&P/ASX 200 Index fell 0.2%. South Korea’s Kospi index rose 0.5%. Hong Kong’s Hang Seng Index futures earlier rose 0.8%.

• Oil Holds Above $35 on Demand Hopes as OPEC Mulls Cut Extension.

• McConnell Seeks Fast Track to Ease PPP Rules for Small Business.

• Facebook Worker Unrest Rises With Walkout, Criticism of CEO.  

• Nasdaq 100 Is One Big Rally From Putting the Selloff Behind It.

• Western Union Makes an Offer to Buy MoneyGram.

Wall Street Journal:

• Trump Pushes Governors to Get Tough on Violent Protesters.

• Good Policing Saves Black Lives.

• When Shocks Multiply, the Effects Usually Last.

• ‘Bankrupt in Just Two Weeks’—Individual Investors Get Burned by Collapse of Complex Securities.

• Chicken Soup, Remdesivir and Deep Breaths: How Older Patients Survived Covid-19.

• Nearly 26,000 Nursing-Home Residents Died of Covid-19, Federal Tally Shows.

• Voting by Mail Faces Biggest Test Since Pandemic Started.

• Warnings Surface About System to Disinfect N95 Masks.

• Coronavirus Patients Lose Senses of Taste, Smell—and Haven’t Gotten Them Back.

Fox News:

• President walks to DC church burned in riots after vowing tough response to looters, criminals.

• How riot groups come together to loot, destroy.

CNBC.com:

• Apple cuts iPhone prices in China to keep post-lockdown momentum going.

• First the pandemic hit them. Now retailers and restaurants have to rebuild after protests.

• Chipotle CEO discusses impact of George Floyd protests on restaurants.

MarketWatch.com:        

• Opinion: A semiconductor ‘cold war’ is heating up between the U.S. and China.  

• Here are the 10 most under and overbought S&P 500 stocks, according to Goldman.  

• Here’s why the ‘unloved but welcome’ U.S. stock market rally from March lows won’t last, Goldman says.

Zero Hedge: 

• Trump To Deploy "1000s Of Heavily-Armed Soldiers" If States, Cities Fail To Act.

• Budget Office Finds US Economy Won't Return To Normal Until 2030.

• Watch: Hundreds Of Handcuffed Perps Lined Up Outside NYC Bookings.

• Greenfield: How To Make Your Own Race Riot.

• India's Electricity Generation Plunges As Worst Economic Downturn In Decades Unfolds.

• Note To Rioting Americans: Why Looting A Rolex Store Isn't Such A Great Idea.

• Trump: "I Am Your President Of Law And Order".

• That's One Way To End A Lockdown.

• White House Says Trump Will Deploy "Federal Assets" To Restore Order.

• More Bricks Appear In Advance Of Monday Demonstrations In Baltimore, Texas.

• May Firearm Background Checks Third-Highest On Record.

• Pandering Biden Stumbles Again; Says Cops Could Shoot 'Unarmed People With Knives' In Leg Instead Of Heart.

• Here Are The Best And Worst Performing Assets In May And 2020.

• The George Floyd Protests – 20 Unanswered Questions.

• Small-Cap Stocks & Silver Soar As Social Unrest Rages, Nation Burns.

The Epoch Times:

• Watchdog Group Calls on President Trump and Congress to Impede ‘Organ Genocide’ in China.

• Beijing Exploiting Floyd Protests to Stoke Tensions, Undermine US, Experts Say.

John Hopkins University:

• Coronavirus Global Cases. (map)

BNO News:

• Tracking Coronavirus: Map, data and timeline.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.5 +.25 basis point.

• China Sovereign CDS 54.5 +1.75 basis points.

• Bloomberg Emerging Markets Currency Index 60.50 +.06%.

• FTSE 100 futures +.05%

• S&P 500 futures -.33%.

• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (CBRL)/-1.23

• (DKS)/-.83

• (DCI)/.38 

After the Close:

• (AMBA)/-.01

• (CRWD)/-.06

• (ZM)/.10

Economic Releases
Afternoon

• Wards Total Vehicle Sales for May are estimated to rise to 11.0M versus 8.58M in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The weekly US retail sales reports, RBC Energy/Power Conference, UBS Virtual Industrials/Transports Conference, Jefferies Virtual Healthcare Conference, BofA Merrill Virtual Tech Conference, Credit Suisse Energy Conference, (MRNA) science day and the Baird Virtual Consumer/Tech/Services Conference could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

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

Stocks Higher into Final Hour on Global Stimulus Hopes, Economy Re-Opening Optimism, Short-Covering, Airline/REIT Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 28.4 +3.2%

• Euro/Yen Carry Return Index 124.15 +.03%

• Emerging Markets Currency Volatility(VXY) 10.77 -.65%

• S&P 500 Implied Correlation 62.3 +2.8%

• ISE Sentiment Index 109.0 +10.0 points

• Total Put/Call .80 -13.0%

• NYSE Arms .79 -53.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 78.4 +.81%
  

• US Energy High-Yield OAS 1,021.43 -.51%

• European Financial Sector CDS Index 81.19 -4.67%

• Italian/German 10Y Yld Spread 189.0 -3.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 101.21 -.23%
  

• Emerging Market CDS Index 279.97 -3.17%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.32 +.25%

• 2-Year Swap Spread 9.0 -.25 basis point

• TED Spread 22.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +.25 basis point
• MBS  5/10 Treasury Spread  114.0 -2.0 basis points
• IHS Markit CMBX BBB- 6 66.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.43 +.46%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 50.0 -.5 basis point

• China Iron Ore Spot 95.40 USD/Metric Tonne -1.92%

• Citi US Economic Surprise Index -54.70 +.4 point

• Citi Eurozone Economic Surprise Index -265.70 +9.1 points

• Citi Emerging Markets Economic Surprise Index 28.5 +8.9 points

• 10-Year TIPS Spread 1.18 +1.0 basis point
• 99.3% chance of no change at July 29th meeting, 99.3% chance of no change at Sept. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +128 open in Japan 
• China A50 Futures: Indicating -128 open in China

• DAX Futures: Indicating +303 open in Germany

Portfolio:

• Higher: On gains in my industrial/tech/consumer staple sector longs 

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

• Market Exposure: Moved to 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +.1% Above 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 71.6% of Issues Advancing, 26.4% Declining
• 34 New 52-Week Highs, 1 New Low
• 21.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 54.9%
• Vix 28.8 +4.8%
• Total Put/Call .74 -19.6%
• TRIN/Arms .69 -59.7%