Stocks Modestly Higher into Final Hour on Falling Fed Rate-Hike Odds, Lower Long-Term Rates, Earnings Outlook Optimism, Financial/Consumer Discretionary Sector Strength

Economic/Market Gauges:

• North American Investment Grade CDS Index 51.0 -1.1%
• BofA Private Credit Proxy Index 70.90 +1.1% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .27 -3.0 basis points
• BofA Global Financial Stress Indicator -.15 +1.0 basis point
• European Financial Sector CDS Index 54.83 -.6%
• Emerging Market CDS Index 141.1 -.5%
• Israel Sovereign CDS 62.6 +1.9% 
• Bloomberg Global Trade Policy Uncertainty Index .6 +.1
• US Morning Consult Daily Consume Sentiment Index 91.3 +2.3

• Citi US Economic Surprise Index 47.4 +.7

• Citi Eurozone Economic Surprise Index 6.3 unch.

• Citi Emerging Markets Economic Surprise Index 31.5 -4.6
• S&P 500 Current Quarter EPS Growth Rate YoY(32 of 500 reporting) +60.6% -76.2 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 373.54 -.01:  Growth Rate +26.4% -.4 percentage point, P/E 20.2 unch.
• S&P 500 Current Year Estimated Profit Margin 15.63% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(1 of 10 reporting) +1,226.6% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 905.06 +1.91: Growth Rate +74.5% +.3 percentage point, P/E 19.6 +.2 
• Bloomberg US Financial Conditions Index 1.16 unch.
• US Yield Curve 41.75 basis points (2s/10s) +2.75 basis points
• Bloomberg Industrial Metal Index 173.3 -.7%
• Dutch TTF Nat Gas(European benchmark) 54.61 euros/megawatt-hour +3.1%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 14.6% +.9 percentage point
• US Atlanta Fed GDPNow Q2 Forecast +1.3% unch.
• US 10-Year T-Note Yield 4.54% -5.0 basis points
• 1-Year TIPS Spread 1.10 -1.0 basis point

• Highest target rate probability for September 29th FOMC meeting: 51.9% (+10.0 percentage points) chance of 3.5%-3.75%. Highest target rate probability for Oct. 28th meeting: 45.3%(-3.1 percentage points) chance of 3.75%-4.0%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -971 open in Japan 
• China A50 Futures: Indicating -140 open in China
• KOSPI 200 Futures: Indicating -56 open in South Korea 

• DAX Futures: Indicating +115 open in Germany

Portfolio:

• Slightly Higher: On gains in my financial/biotech/consumer discretionary sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 75% net long

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.7%

Sector Underperformers:

• 1) Computer Hardware -4.6% 2) Semis -2.9% 3) Networking -2.5%

Stocks Falling on Unusual Volume: 

• WYFI, LOPE, HAYW, PENG, ELV, STRA, WNC, ANAB, PGR, LEGN, PRDO, QTTB, CVSA, ERIE, APEI, ADUR, PNR, LINC, PRE, CELC and GRRR

Stocks With Unusual Put Option Activity:

• 1) BNY 2) EQT 3) SOUN 4) WRBY 5) NLY

Stocks With Most Negative News Mentions:

• 1) PNR 2) CELC 3) ELV 4) DELL 5) MOH

Sector ETFs With Most Negative Money Flow:

• 1) SOXX 2) ARKK 3) VGT 4) IGV 5) XOP

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.8%

Sector Outperformers:

• 1) I-Banking +1.9% 2) Retail +1.8% 3) Airlines +1.8%

Stocks Rising on Unusual Volume:

• ELVA, AEHR, CHRN, PYPL, MANE, ANGO, MNSO, RH, MAGN, ROAD, COMP, MD, KRMN, BILL, SLN, LION, MWH, BEKE, CLSK, BLK, SHLS, MBX, BABA, BNY, ORCL, RYAAY, XPEV, IDXX, SHIP, UFPT, CTAS, KKR, NXST, NDAQ, AEBI, DRUG, SNN, ACIW, QMCO, RCI and ADPT

Stocks With Unusual Call Option Activity:

• 1) FHN 2) BUG 3) TRVI 4) BN 5) HPP 

Stocks With Most Positive News Mentions:

• 1) AEHR 2) PYPL 3) ANGO 4) VTAK 5) MANE

Sector ETFs With Most Positive Money Flow:

• 1) XLF 2) RAAX 3) XLE 4) FWD 5) XLI

Charts: 

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

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

Earnings of Note 
Company/Estimate 

Before the Open:

• (ABT)/1.28
• (CFG)/1.24
• (GE)/1.86
• (MAN)/.95
• (PLD)/1.55
• (STT)/3.34
• (USB)/1.28
• (UNH)/4.88 
• (TSM)/3.81 

After the Close: 

• (AA)/2.25
• (CNS)/.85
• (ISRG)/2.51
• (NFLX)/.79 

Economic Releases 

 

8:30 am EST

• NY Fed Services Business Activity Index.
• Philly Fed Business Outlook Index for July is estimated to rise to 13.0 versus 10.3 in June.
• Initial Jobless Claims for last week is estimated to rise to 217K versus 215K the prior week.
• Continuing Claims is estimated to rise to 1820K versus 1814K prior.
• Retail Sales Ex Autos MoM for June is estimated to fall -.1% versus a +.8% gain in May. 

10:00 am EST

• The NAHB Housing Market Index for July is estimated at 35.0 versus 35.0 in June.
• Business Inventories for May is estimated to rise +.3% versus a +.5% gain in April.
• Pending Home Sales MoM for June is estimated to fall -.5% versus a +3.8% gain in May. 

Upcoming Splits

• (SNEX) 3-for-2

Other Potential Market Movers

• The President Trump speech to nation, Fed's Jefferson speaking, Fed's Logan speaking, Fed's schmid speaking, Atlanta Fed GDPNow Q2 update and the weekly EIA natural gas inventory report could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Afternoon Market Internals

NYSE Composite Index:

• Volume Running -2.6% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.9 +1.0
• 6 Sectors Rising, 5 Sectors Declining
• 59.7% of Issues Advancing, 38.1% Declining 
• TRIN/Arms .98 -30.6%
• Non-Block Money Flow +$70.5M
  
• 96 New 52-Week Highs, 27 New Lows
• 59.2% (+2.7%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 56.2 -1.0

Polymarket: 

• Will China invade Taiwan by end of 2026? 4.0% unch.
• Strait of Hormuz traffic returns to normal by July 31st 2.0% -2.0 percentage points
• Iran agrees to end enrichment of uranium by Sept. 30th 7.0% unch.
• Israel withdraws from Lebanon by August 31st 2.0% unch.
• US Invades Iran before 2027 18.0% -2.0 percentage points

Other:

• Bloomberg Global Risk-On/Risk-Off Index 126.4 +.1%
• Global Monitor Iran Instability Index 56.0 unch.
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 83.0% +8.0 percentage points
• US High-Yield Tech Sector OAS Index 453.5 -1.75 basis points
• Bloomberg Cyclicals/Defensives Index 262.5 +.1%
• Morgan Stanley Growth vs Value Index 155.0 -1.7%
• CNN Fear & Greed Index 45.0 (Moved to NEUTRAL from FEAR) +2.0
• 1-Day Vix 9.22 -12.8%
• Vix 16.2 -1.9%
  
• Total Put/Call .83 -3.5%

Wednesday Watch

Around X:

• @Business  

• President Trump backed away from his plan to impose a 20% charge on cargo shipments through the Strait of Hormuz after US allies in the Gulf urged him to drop it.  
• President Trump welcomed Iraqi Prime Minister Ali al-Zaidi to the White House Tuesday after strongly backing the businessman and former banker to lead the country. 
• Fed Chair Kevin Warsh said Tuesday the drop in US consumer prices in June does not mean "mission accomplished" on inflation. He promised Congress the central bank will deliver price stability and said policymakers have no tolerance for high inflation.  
• A small number of Nvidia Corp.’s H200 artificial intelligence chips have been shipped to customers in China after winning US approval, the Trump administration official who oversees export control programs confirmed.

• @ZeroHedge

• Israeli Officials Try To Push US Refueling Tankers Out Of Ben Gurion Airport Amid Disruptions. 
• The Lockdown Disaster Must Not Be Forgiven. 
• So here's what we're learning from all these declassified materials: The US Intelligence Community *juiced* intel to make it seem like Moscow interfered in the 2016 election to help Trump, but then *buried* intel indicating Beijing interfered in the election to help Biden in 2020.               
• Mineral water plant in Iran's Deloran hit by three projectiles: Fars.
• Great Rewiring: US Supports Iraq-Syria Oil Pipeline To Erode Tehran's Hormuz Leverage.
• Why Digital ID Is The Hill To Die On: The Authentication Layer.
• Jack Smith's Team Spied On 44 Lawmakers' Texts, Built A Case On Them, And Misled Congress: Grassley.
• FULL STATEMENT on Jack Smith’s Illegal Weaponization Spying on Congress and Subsequent Perjury.
• @POTUS on Iran: "We're going to hit them very hard tonight. We're going to hit them very hard tomorrow night. We're going to hit them very hard the night after... We're going to knock out all their power plants, we're going to knock out all their bridges, unless they get to the table and negotiate." (video)    
• *TRUMP REPEATS HORMUZ HAS TO REMAIN FREE.         
• I asked Senator Thom Tillis about his vote against the Save America act and whether it has anything to do with the money he’s receiving from industries who profit off of cheap illegal labor. He was VERY mad about the question. We deserve better than these America Last losers! -@SaraGonzalesTX (video)
• New York's Millionaire Exodus Is Costing Billions In Lost Revenue.
• Star performer YTD. An AI winner. But positioning at multi-year lows. Who am I?
• Healthcare Stocks Ready To Star In Rotation Trade.
• Largest US Power Grid Is 6.8 Gigawatts Short To Ensure Reliability On Data Center Demand.
• *LIONSGATE STUDIOS EXPLORES SALE: REUTERS.
• Rubio Pledges To Dismantle International Criminal Court's Threat To US Sovereignty.
• Looks like perjury.     
• *US SAYS IT RESUMED ITS NAVAL BLOCKADE OF IRANIAN PORTS, COAST.
• Big-Banks Good, Breadth Bad, Big-Blue Ugly; Bitcoin, Bullion, & Bonds Bid On Benign-Flation.  

• @CNBC 

• The AI boom just found two new winners: Goldman Sachs and JPMorgan Chase. 
• The consumer price index, a broad measure of costs for goods and services across the U.S. economy, was lower than expected across the board. The CPI fell a seasonally adjusted 0.4% for the month, bringing the annual inflation rate down to 3.5%. Economists surveyed by Dow Jones had been looking for a drop of 0.2% and an inflation rate of 3.8%, following the 4.2% reading in May. The monthly decline in headline inflation was the biggest since April 2020. 
• Stock futures are flat after soft inflation reading lifts market: Live updates. 
• Wednesday's big stock stories: What’s likely to move the market in the next trading session.

• @TheTranscript

• Aehr Test Systems CEO: ". Record quarterly bookings, a very strong backlog, and growing demand across AI processors, silicon photonics, and power semiconductors for our wafer-level and package-level burn-in solutions..." $AEHR: +26% AH.

• @WallStEngine

• OpenAI reportedly plans to unveil a home speaker this year as its first hardware product, with release planned for 2027. OpenAI believes the device does not violate Apple’s trade secrets, despite Apple’s lawsuit around OpenAI’s consumer hardware push.
• White House launched GOLD EAGLE, a new cybersecurity vulnerability coordination initiative focused on AI and critical infrastructure. 

Night Trading 

• Asian equity indices are +.75% to +1.75% on average. 
• Asia Ex-Japan Investment Grade CDS Index 70.0 -.25 basis point. 
• China Sovereign CDS 37.0 unch.
• China Iron Ore Spot 100.60 USD/Metric Tonne +.5%. 
• Crude Oil 80.12/bbl. +.98% 
• Gold 4,043.50 USD/t oz. -.66%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.37 +.05%.
• Bloomberg Emerging Markets Currency Index 34.67 +.03%.
• Bloomberg Global Risk-On/Risk Off Index 127.0 +.7%.
• US 10-Year Yield 4.59% unch.
• Japan 30-Year Yield 3.76% +1.0 basis point. 
• Volatility Index(VIX) futures 18.4 -.6%.
• Euro Stoxx 50 futures -.24%. 
• S&P 500 futures +.17%.
• NASDAQ 100 futures +.59%.

Morning Preview Links

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