Wednesday Watch

Evening Headlines

Bloomberg:        

• China Makes Life Max Term for Security Crimes: Hong Kong Update. 

• Australia House Prices Fall for Second Month as Shutdowns Bite.

• Airlines Risk Extinction as India Refuses to Rescue Billionaires.

• Trump Angry at China; Australia House Prices Fall: Virus Update.

• Asia Stocks Set for Muted Start; S&P 500 Climbs: Markets Wrap. Asian stocks started a new quarter in a muted fashion, as investors assessed mixed data on the global economy amid concern over the coronavirus spread and Sino-American tensions. Shares were little changed in Japan, with sentiment capped as confidence among large manufacturers in the country fell to the lowest since 2009. Stocks ticked higher in Australia, while South Korea saw a bigger advance. Hong Kong is closed for a holiday. S&P 500 futures slipped after the gauge rounded out a 20% second-quarter surge with U.S. consumer confidence posting its biggest increase since 2011. Treasuries were little changed and the dollar edged higher. Gold traded near $1,800 an ounce. Traders also weighed a new national security law for Hong Kong, where China asserted broad new powers to rein in those who criticize its rule. Futures on the S&P 500 fell 0.3% as of 9:01 a.m. in Tokyo. The gauge jumped 1.5% on Tuesday. Japan’s Topix index was little changed. Australia’s S&P/ASX 200 Index added 0.3%. South Korea’s Kospi rose 0.8%.

• Goodbye ‘V,’ Hello ‘W,’ Fed Warning, Labor Destruction: Eco Day.

• Trump’s Surgeon General Says ‘Please, Please, Please’ Wear Mask.

• Texas Cases Hit Record; Fauci Gives Grim Warning: Virus Update.

• Stock Bulls Need Proof They Were Right to Go All In on Recovery.  

• Hedge Funds, Banks Picked Up the Phone While Pandemic Raged.

• Facebook Bans ‘Boogaloo’ Groups Seeking to Commit Violence.  

• Minor League Baseball Cancels Season for First Time in History.  

• Fed Officials Commit to Fighting Racism as an ‘Economic Issue’.

Wall Street Journal:

• Under 25 and Working? Social Distancing Might Not Be Possible.

• Companies Hit by Covid-19 Want Insurance Payouts. Insurers Say No.

• One Man’s Supreme Court.

• NSA Differed From CIA, Others on Russia Bounty Intelligence.

• China Punctures Hong Kong’s Autonomy.

Fox News:

• Biden, at rare news conference, says he's eager to compare 'cognitive ability' against Trump's.

• How much of the United States does China really own?

• Crews start clearing Seattle CHOP barriers as protesters battle back.

CNBC.com:

• Fauci says U.S. coronavirus outbreak is ‘going to be very disturbing,’ could top 100,000 cases a day.

• Stocks making the biggest moves after hours: FedEx, Facebook, Virgin Galactic and more.

• Dr. Anthony Fauci says new virus in China has traits of 2009 swine flu and 1918 pandemic flu.

MarketWatch.com:     

• FedEx stock rallies 9% as online shopping sprees boost company’s quarterly results.

• It’s a reality: New Yorkers brace for a whole new COVID wave .

• Sales of ‘junk’ bonds hit record in June as debt-saddled corporations rush to raise cash.

Zero Hedge:        

• Gordon Johnson: Warranty Accounting Impropriety At Tesla Similar To Accounting At Wirecard.

• General Flynn To The 'Silent Majority': "Wake Up! America's At Risk Of Being Lost".

• India Sends Tanks Along Border To Prevent China "Redefining" Line Of Actual Control.

• The Real Pandemic Was A Nursing Home Problem.

• Under This New Law, Cryptocurrency Could Become Illegal.

• Texas Suffers Record Jump In New COVID-19 Infections; Deaths Tick Higher: Live Updates.

• Matt Taibbi On "White Fragility".

• Seattle Police Chief Asks Why Black People Keep Dying In The 'Black Lives Matter' CHOP Zone.

• The Fed Is Now A Top 5 Holder Of The Biggest Corporate Bond ETFs.

• 13 Dead After Mysterious Explosion In Northern Tehran. 

• Spoos Explode Higher At 350PM On Massive Buy Imbalance To End The Quarter.

• Close To Half Of All Working Age Adults In The US Do Not Have A Job Right Now.

• Dow Soars To Best Quarter Since '87 As Fed Balance Sheet Explodes.

The Epoch Times:

• FCC Formally Declares Huawei, ZTE as National Security Threats.

Digital Blackboard:

• Daily New Cases by Region.

Worldometer:

• New Cases/Deaths by state.

Rt Covid-19:

• How fast virus is growing by state.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 86.75 unch.

• China Sovereign CDS 48.75 -2.25 basis points.

• Bloomberg Emerging Markets Currency Index 60.07 unch.

• FTSE 100 futures -.21%.

• S&P 500 futures -.28%.

• NASDAQ 100 futures -.17%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (STZ)/2.04

• (GIS)/.88

After the Close:

• (FIZZ)/.60

Economic Releases 
7:30 am EST

• The Challenger Jobs report YoY for June.
  

8:15 am EST

• The ADP Employment Change for June is estimated to rise to 2850K versus -2760K in May.
  

10:00 am EST

• The ISM Manufacturing for June is estimated to rise to 49.8 versus 43.1 in May.

• The ISM Prices Paid for June is estimated to rise to 44.6 versus 40.8 in May.

• Construction Spending MoM for May is estimated to rise +1.0% versus a -2.9% decline in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +289,360 barrels versus a +1,442,000 barrel gain the prior week. Gasoline inventories are estimated to fall by -1,272,090 barrels versus a -1,673,000 barrel decline the prior week. Distillate inventories are estimated to rise by +36,730 barrels versus a +249,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.35% versus a +.8% gain prior.
  

2:00 pm EST

• The June 10 FOMC Meeting Minutes.
  

Afternoon

• Wards Total Vehicle Sales for June is estimated to rise to 13.0M versus 12.21M in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI report, Germany Unemployment report and the weekly MBA Mortgage Applications report could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer 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 50% net long heading into the day.

Stocks Rising into Afternoon on End of Quarter Window Dressing, Oil Gain, Short-Covering, Tech/Financial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 30.97 -2.6%

• Euro/Yen Carry Return Index 125.70 +.24%

• Emerging Markets Currency Volatility(VXY) 10.62 -.38%

• S&P 500 Implied Correlation 64.2 +.58%

• ISE Sentiment Index 105.0 -14.0 points

• Total Put/Call .80 -16.7%

• NYSE Arms 1.26 +193.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 77.01 -3.25%
  

• US Energy High-Yield OAS 1,002.55 +1.03%

• European Financial Sector CDS Index 79.76 -5.95%

• Italian/German 10Y Yld Spread 177.5 unch.
  

• Asia Ex-Japan Investment Grade CDS Index 86.53 -.81%
  

• Emerging Market CDS Index 197.15 -3.17%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.58 +.12%

• 2-Year Swap Spread 7.5 +.75 basis point

• TED Spread 17.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.5 +.75 basis point
• MBS  5/10 Treasury Spread  109.0 -2.0 basis points
• IHS Markit CMBX BBB- 6 68.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.06 -.25%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 48.5 +.75 basis point

• China Iron Ore Spot 95.69 USD/Metric Tonne -2.84%

• Citi US Economic Surprise Index 181.20 +13.8 points

• Citi Eurozone Economic Surprise Index -90.20 +9.6 points

• Citi Emerging Markets Economic Surprise Index -25.50 +.5 point

• 10-Year TIPS Spread 1.34 +1.0 basis point
• 100.0% chance of no change at Sept. 16 meeting, 100.0% chance of no change at Nov. 5th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +22 open in Japan 
• China A50 Futures: Indicating -259 open in China

• DAX Futures: Indicating -41 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.5%

Sector Underperformers:

• 1) Airlines -1.7% 2) Coal -1.2% 3) Paper -1.2%

Stocks Falling on Unusual Volume: 

• IIVI, GRPN, RVNC, EXPI, TAP, IIPR, MINI, WSC, CVM, ARCH, NOVA, BA, VERI, JCOM, MNTA, MLHR, SPR, INO and SHLL

Stocks With Unusual Put Option Activity:

• 1) ZYNE 2) CAG 3) STZ 4) FDX 5) PXD

Stocks With Most Negative News Mentions:

• 1) ERII 2) LNDC 3) OCX 4) BA  5) KGJI

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.4%

Sector Outperformers:

• 1) Alt Energy +2.7% 2) Gold & Silver +2.7% 3) Disk Drives +2.1%

Stocks Rising on Unusual Volume:

• BE, WKHS, FRTA, CATS, NK, LCA, FOCS, TNDM, AYI, XLNX, FSLY, WRTC, ICHR, ECOM, MU, CAG, SWBI, GLIBA, NFIN, COO and SCHN

Stocks With Unusual Call Option Activity:

• 1) INVH 2) BLNK 3) XLNX 4) WKHS 5) ODP

Stocks With Most Positive News Mentions:

• 1) ELAN 2) CHGG 3) IDEX 4) FSCT 5) PRA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -27.3% Below 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 49.2% of Issues Advancing, 47.0% Declining
• 25 New 52-Week Highs, 1 New Low
• 21.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.7%
• Vix 31.8 +.03%
• Total Put/Call .81 -15.6%
• TRIN/Arms 1.43 +232.5%

Tuesday Watch

Evening Headlines

Bloomberg:      

• U.S. Suspends Some Trade Benefits to Hong Kong, Ross Says.    

• China Halts Meat Imports From More Plants Amid Virus Confusion.

• Japanese Factory Output Drops Again Even as Emergency Ends.

• Asia Stocks Set to Track U.S. Gains on Better Data: Markets Wrap. Asian stocks looked set to track gains in U.S. counterparts Tuesday after better-than-estimated economic data overshadowed concern over an increase in coronavirus cases. The dollar and Treasuries advanced. Futures in Japan and Australia pointed higher. Hong Kong assets will be closely watched after the Trump administration suspended some trade benefits for the city. S&P 500 futures edged higher after the benchmark erased its June decline as a report showed U.S. pending home sales posted a record gain, exceeding all forecasts. The tech-heavy Nasdaq extended gains as Facebook Inc. wiped out its losses. Oil held gains. S&P 500 futures rose 0.3% as of 7:40 a.m. in Tokyo. The S&P 500 Index rose 1.5%. Nikkei 225 futures rose 1.1%. Australia’s S&P/ASX 200 Index futures climbed 1.2%. Hong Kong’s Hang Seng Index futures rose 0.6% earlier.

• In Hot-Spot States, Virus Testing Means Long Lines, Delays.

• Worst Yet to Come, WHO Says; Record Iran Deaths: Virus Update.

• Powell Warns of Extraordinary Uncertainty, Urgency to Curb Virus.  

• Telehealth’s Long-Term Staying Power.  

• Fed Becomes No. 3 Holder of World’s Biggest Corporate-Bond ETF.

Wall Street Journal:

• Las Vegas Workers Sue Casinos Over Covid-19 Safety.

• Woke Capital Targets Free Speech.

• Capitalism After the Coronavirus.

• Speak Up, Mr. Biden.

• Supreme Court Overturns Louisiana Abortion Law.

• India Blocks Chinese Apps, Including TikTok, After Border Clash.

• Covid-19 Drug Remdesivir to Cost $3,120 for Typical Patient.

Fox News:

• Backlash against Los Angeles' plan to slash $145 million from police, cut Special Victims Bureau.

• Protesters broke gate before homeowners drew weapons: lawyer.

CNBC.com:

• JPMorgan, Bank of America, Citi and Goldman maintain dividends post-stress tests, Wells Fargo to cut.

• Biden tells donors he will end most of Trump’s tax cuts ‘and a lot of you may not like that’.

• Nearly half the U.S. population is without a job, showing how far the labor recovery has to go.

MarketWatch.com:   

• Micron earnings show spike in memory sales, forecast suggests more of the same as stock pushes higher.

• Lululemon to acquire interactive fitness company Mirror for $500 million.

Zero Hedge:        

• "This Is Not Just Accidental": How One Coronavirus Mutation Helped The Virus Conquer The Globe.

• Cops Side With Armed St. Louis Homeowners, Investigate Protesters For 'Assault By Intimidation'.

• Forbes Censors Award-Winning Environmentalist's Apology Over Three-Decade 'Climate Scare' - So Here It Is.

• Three Ideas To End The Rot On College Campuses.

• Arizona Closes Bars, Gyms & Movie Theaters For 30 Days As COVID-19 Cases, Hospitalizations Climb: Live Updates.

• "Look Out Below": Why The Economy Is About To Fly Off A Fiscal Cliff.

• YouTube Bans Richard Spencer, Stefan Molyneux & Others As "White Supremacist" Crackdown Continues.

• US Officially Revokes Hong Kong's Special Status.

• "Over-Policing Didn't Cause This, Under-Policing Did," Andy Ngo Briefs US Reps On Riots.

• Fed Chair Powell Says "Full Recovery Unlikely Until People Feel Safe".

• Bonds, Stocks, Dollar, & Gold All Bid As COVID Chaos Continues.

The Epoch Times:

• US Ramps Up Unprecedented Effort to Counter China.

Digital Blackboard:

• Daily New Cases by Region.

Worldometer:

• New Cases/Deaths by state.

Rt Covid-19:

• How fast virus is growing by state.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading 

• Asian equity indices are +.5% to +1.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 86.75 +.25 basis point.

• China Sovereign CDS 51.0 +.75 basis point.

• Bloomberg Emerging Markets Currency Index 60.24 +.06%.

• FTSE 100 futures +.21%.

• S&P 500 futures +.28%.

• NASDAQ 100 futures +.44%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AYI)/1.27

• (CAG)/.51

After the Close:

• (FDX)/1.62

• (SCS)/-.14

Economic Releases 
9:00 am EST

• The S&P CoreLogic CS 20-City MoM for April is estimated to rise +.5% versus a +.47% gain in March.
  

9:45 am EST

• The MNI Chicago PMI for June is estimated to rise to 90.5 versus a reading of 86.6 in May.
  

10:00 am EST

• The Conference Board Consumer Confidence Index for June is estimated to rise to 90.5 versus 86.6 in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell/Treasury's Mnuchin testifying to House, UK GDP report and the US weekly retail sales reports could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly higher, boosted by industrial and commodity 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.