Wednesday Watch

Night Trading 

• Asian equity indices are -.25% to +.25% on average. 
• Asia Ex-Japan Investment Grade CDS Index 67.75 +.5 basis point. 
• China Sovereign CDS 34.75 unch.
• China Iron Ore Spot 95.3 USD/Metric Tonne -.1%. 
• Crude Oil 104.93/bbl. -.9%. 
• Gold 4,329.8 USD/t oz. -.1%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.19 -.08%.
• Bloomberg Emerging Markets Currency Index 34.07 -.05%.
• Bloomberg Global Risk-On/Risk Off Index 132.4 +.2%.
• US 10-Year Yield 5.0% unch.
• Japan 30-Year Yield 4.18% +2.0 basis points.
• Volatility Index(VIX) futures 18.5 -.4%.
• Euro Stoxx 50 futures +.19%. 
• S&P 500 futures +.12%.
• NASDAQ 100 futures +.1%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by energy and consumer 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 Rising Global Sovereign Debt Angst, Mideast War-Induced Inflation Fears, Fed Rate-Hike Concerns, Biotech/Consumer Discretionary Sector Weakness

Economic/Market Gauges:

• North American Investment Grade CDS Index 52.3 +.6%
• BofA Private Credit Proxy Index 70.9 -1.1% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .37 unch.
• BofA Global Financial Stress Indicator .00 +4.0 basis points
• European Financial Sector CDS Index 56.6 +2.4%
• Emerging Market CDS Index 142.7 +.9%
• Israel Sovereign CDS 53.0 -1.1%
• Bloomberg Global Trade Policy Uncertainty Index 1.3 unch.
• US Morning Consult Daily Consume Sentiment Index 87.0 unch.

• Citi US Economic Surprise Index 24.1 -2.4

• Citi Eurozone Economic Surprise Index 67.6 -2.7

• Citi Emerging Markets Economic Surprise Index 15.8 -1.8
• S&P 500 Current Quarter EPS Growth Rate YoY(2 of 500 reporting) +24.9% n/a
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 401.05 +.38:  Growth Rate +22.3% +.2 percentage point, P/E 18.9 -.2
• S&P 500 Current Year Estimated Profit Margin 16.27% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) n/a
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 979.87 +.71: Growth Rate +45.9% +.1 percentage point, P/E 18.9 -.1
• Bloomberg US Financial Conditions Index 1.23 -11.0 basis points
• US Yield Curve 32.75 basis points (2s/10s) unch.
• Bloomberg Industrial Metal Index 175.8 +.2%
• Dutch TTF Nat Gas(European benchmark) 80.3 euros/megawatt-hour -2.8%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 9.9 +.3 percentage point
• US Atlanta Fed GDPNow Q3 Forecast +4.4% unch.
• US 10-Year T-Note Yield 5.0% +1.0 basis point
• 1-Year TIPS Spread 2.50 +5.0 basis points

• Highest target rate probability for Oct. 28th FOMC meeting: 53.1% (+.1 percentage point) chance of 3.75%-4.0%. Highest target rate probability for Dec. 9th meeting: 50.3%(+.6 percentage point) chance of 4.0%-4.25%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -70 open in Japan 
• China A50 Futures: Indicating -6 open in China
• KOSPI 200 Futures: Indicating -6 open in South Korea 

• DAX Futures: Indicating +38 open in Germany

Portfolio:

• Higher: On gains in my tech/energy sector longs, index hedges and emerging market shorts
• Disclosed Trades: None
• Market Exposure: 50% net long

Tomorrow's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open:

• None of note

After the Close: 

• (LEN)/1.28

Economic Releases 

8:30 am EST

• NY Fed Services Business Activity for Sept. is estimated to fall to -2.1 versus .5 in Aug.
• Retail Sales Advance MoM for Aug. is estimated to rise +.8% versus a -.6% decline in July.
• Retail Sales Ex Autos MoM for Aug. is estimated to rise +.5% versus a -.3% decline in July.
• Retail Sales Ex Autos and Gas MoM for Aug. is estimated to rise +.4% versus a -.2% decline in July.
• The Import Price Index MoM for Aug. is estimated to rise +.5% versus a -.4% decline in July.
• The Import Price Index ex Petrol MoM for Aug. is estimated to rise +.3% versus a +.3% gain in July.
• The Export Price Index MoM for Aug. is estimated to rise +.5% versus a -1.3% decline in July. 

10:00 am EST

• Business Inventories for July is estimated to rise +.8% versus unch. in June.
• The NAHB Housing Market Index for Sept. is estimated to fall to 34.0 versus 35.0 in Aug.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,550,000 barrels versus a -391,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -600,000 barrels versus a +1,269,000 barrel gain the prior week. Distillate inventories are estimated to fall by -10,000 barrels versus a +2,087,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.74% versus a -.2% decline prior.

2:00 pm EST

• The FOMC is expected to raise the benchmark Fed Funds Rate +25.0 basis points to 3.75-4.0%. 

4:00 pm EST

• Net Long-Term TIC Flows for July. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The FOMC presser/projections, Atlanta Fed GDPNow Q3 update, weekly MBA Mortgage Applications report, StoneX Tech/Media/Telecom Conference, KeyBanc Taking Charge Energy Transition Symposium, (ON) analyst day, (CRM) investor day and the BTIG Consumer Finance Conference could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -11.1% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 14.4 +3.0
• 1 Sector Rising, 10 Sectors Declining
• 29.8% of Issues Advancing, 68.0% Declining 
• TRIN/Arms .73 +4.3%
• Non-Block Money Flow -$78.1M
  
• 48 New 52-Week Highs, 286 New Lows
• 48.0% (-3.5%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.6 -5.4

Polymarket: 

• Will China invade Taiwan by June 30th 2027? 8.0% +1.0 percentage point
• Strait of Hormuz traffic returns to normal by October 31st 8.0% +2.0 percentage points
• Iran agrees to end enrichment of uranium by Dec. 31st 13.0% -1.0 percentage point
• Israel withdraws from Lebanon by December 31st 7.0% unch.
• US Invades Iran before 2027 17.0% unch.
• US announces end of Iranian blockade by October 31st 39.0% +3.0 percentage points

Other

• Bloomberg Global Risk-On/Risk-Off Index 132.5 -.07%
• Global Monitor Iran Instability Index 60.0 -5.0
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 90.0% unch.
• US High-Yield Tech Sector OAS Index 415.0 -23.5 basis points
• Bloomberg Cyclicals/Defensives Index 269.3 +.2%
• Morgan Stanley Growth vs Value Index 144.8 -.8%
• CNN Fear & Greed Index 29.0 (FEAR) -2.0
• 1-Day Vix 12.4 +2.8%
• Vix 17.6% +2.9%
• Total Put/Call .87 -2.3%

Tuesday Watch

Around X:

• @ZeroHedge

• Supreme Court Block President Trump's Mail-In Ballot Order.       
• Indian Refineries Run At Up To 108% Capacity On Soaring Diesel Demand.
• "I'd Be Okay With That": Trump Says He's Open To Chinese Automakers Building Cars In US.
• John Brennan Subpoenaed As Part Of DOJ Investigation.
• US Data Centers To Burn More Natural Gas Than Most Nations.
• The Oil Tail Is Re-Fattening Beyond Hormuz And Ahead Of The Fed.
• Just a couple months out of beta, Polymarket is already at 43.8% of Kalshi’s football volume despite being live since just this summer. That’s including all the brokerage flow routed to Kalshi through Robinhood, Coinbase, PrizePicks, etc..
• Paramount Threatens California Exit That Could Cost State Billions.
• Grok, was this written by an AI chatbot?
• Court Rejects DOE Order To Delay Michigan Coal Plant Retirement.
• State Seizes Girl After Catholic Parents Refuse To Call Her A Boy.
• Lindsay Clancy Juror Admits To Feminist Motives Behind Trial.
• and another post.
• Supertanker Explodes After Hitting Mine, IRGC Says, & Asserts 'Strait Of Hormuz Is Closed'.
• Crypto Clarity Booms, AI Dooms, Banks Gloom, Oil Zooms, As Fed Looms.                        

• @CNBC  

• Tuesday's big stock stories: What’s likely to move the market in the next trading session.
• CrowdStrike CEO George Kurtz said Monday that slowing the development of increasingly powerful artificial intelligence models won’t eliminate their security risks. “The genie’s out of the bottle,” Kurtz said on CNBC’s “Mad Money.” “There’s plenty of models that are already out there, both frontier as well as open-weight models, that can already be dangerous.”
• "Mitch McConnell" returns to Senate after three-month health absence.
• Stock futures are little changed as traders eye rising oil prices and rates: Live updates.
• Costco hikes motor oil prices and puts limits on how much members can buy.
• Trump phones Nvidia’s Huang at All-In Summit, calls data center opposition a ‘hoax’.

Night Trading 

• Asian equity indices are -.5% to +.25% on average. 
• Asia Ex-Japan Investment Grade CDS Index 67.25 +.5 basis point. 
• China Sovereign CDS 34.75 -.25 basis point.
• China Iron Ore Spot 95.5 USD/Metric Tonne -.09%. 
• Crude Oil 102.84/bbl. +1.4%. 
• Gold 4,348.4 USD/t oz. -.08%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.20 -.05%.
• Bloomberg Emerging Markets Currency Index 34.09 -.07%.
• Bloomberg Global Risk-On/Risk Off Index 133.1 +.4%.
• US 10-Year Yield 5.0% +1.0 basis point.
• Japan 30-Year Yield 4.11% +3.0 basis points.
• Volatility Index(VIX) futures 18.5 -.3%.
• Euro Stoxx 50 futures +.26%. 
• S&P 500 futures unch.
• NASDAQ 100 futures +.04%.

Morning Preview Links

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

Stocks Modestly Lower into Afternoon on AI Regulation Concerns, Mideast War-Induced Inflation Fears, Technical Selling, Tech/Financial Sector Weakness

Economic/Market Gauges:

• North American Investment Grade CDS Index 51.7 +.6%
• BofA Private Credit Proxy Index 71.5 -.1% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .37 +2.0 basis points
• BofA Global Financial Stress Indicator -.04 unch.
• European Financial Sector CDS Index 56.6 +2.4%
• Emerging Market CDS Index 141.2 +1.3%
• Israel Sovereign CDS 53.6 -.3%
• Bloomberg Global Trade Policy Uncertainty Index 1.3 unch.
• US Morning Consult Daily Consume Sentiment Index 87.0 -2.2

• Citi US Economic Surprise Index 26.5 -.5

• Citi Eurozone Economic Surprise Index 70.3 -4.2

• Citi Emerging Markets Economic Surprise Index 17.6 -2.8
• S&P 500 Current Quarter EPS Growth Rate YoY(497 of 500 reporting) +53.0% -.2 percentage point
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 400.67 +.04:  Growth Rate +22.1% unch., P/E 19.1 +.1
• S&P 500 Current Year Estimated Profit Margin 16.27% -3.0 basis points
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(10 of 10 reporting) +131.6% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 979.16 +2.07: Growth Rate +45.8% +.3 percentage point, P/E 19.0 +.1
• Bloomberg US Financial Conditions Index 1.34 +17.0 basis points
• US Yield Curve 32.75 basis points (2s/10s) -1.25 basis points
• Bloomberg Industrial Metal Index 175.5 -1.5%
• Dutch TTF Nat Gas(European benchmark) 81.3 euros/megawatt-hour +2.2%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 9.6 -.1 percentage point
• US Atlanta Fed GDPNow Q3 Forecast +4.4% unch.
• US 10-Year T-Note Yield 4.96% -1.0 basis point
• 1-Year TIPS Spread 2.47 +2.0 basis points

• Highest target rate probability for Oct. 28th FOMC meeting: 53.0% (+2.0 percentage points) chance of 3.75%-4.0%. Highest target rate probability for Dec. 9th meeting: 49.4%(+1.4 percentage points) chance of 4.0%-4.25%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -7 open in Japan 
• China A50 Futures: Indicating -17 open in China
• KOSPI 200 Futures: Indicating -14 open in South Korea 

• DAX Futures: Indicating +120 open in Germany

Portfolio:

• Slightly Higher: On gains in my consumer discretionary/biotech sector longs, index hedges and emerging market shorts
• Disclosed Trades: None
• Market Exposure: 50% net long