Stocks Rising into Final Hour on AI Infrastructure Build-Out Optimism, Short-Covering, Technical Buying, Tech/Alt Energy Sector Strength

Economic/Market Gauges:

• North American Investment Grade CDS Index 51.8 -.7%
• BofA Private Credit Proxy Index 69.7 +.8% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .30 +1.0 basis point
• BofA Global Financial Stress Indicator -.10 +1.0 basis point
• European Financial Sector CDS Index 55.2 -.5%
• Emerging Market CDS Index 143.9 -.8%
• Israel Sovereign CDS 65.8 +3.8% 
• Bloomberg Global Trade Policy Uncertainty Index .7 unch.
• US Morning Consult Daily Consume Sentiment Index 88.3 -1.5

• Citi US Economic Surprise Index 48.6 -1.7

• Citi Eurozone Economic Surprise Index 20.5 +6.6

• Citi Emerging Markets Economic Surprise Index 21.3 -2.2
• S&P 500 Current Quarter EPS Growth Rate YoY(64 of 500 reporting) +47.4% -4.9 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 376.21 +.37:  Growth Rate +27.5% +.2 percentage point, P/E 20.0 +.1
• S&P 500 Current Year Estimated Profit Margin 15.69% +3.0 basis points
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(2 of 10 reporting) +510.0% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 909.01 +.36: Growth Rate +75.3% +.1 percentage point, P/E 19.2 +.1 
• Bloomberg US Financial Conditions Index 1.06 unch.
• US Yield Curve 36.5 basis points (2s/10s) -1.5 basis points
• Bloomberg Industrial Metal Index 176.3 +1.8%
• Dutch TTF Nat Gas(European benchmark) 59.83 euros/megawatt-hour +1.8%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 14.1% +.1 percentage point
• US Atlanta Fed GDPNow Q2 Forecast +1.7% unch.
• US 10-Year T-Note Yield 4.63% +3.0 basis points
• 1-Year TIPS Spread 1.17 +2.0 basis points

• Highest target rate probability for September 29th FOMC meeting: 55.3% (+.3 percentage point) chance of 3.75%-4.0%. Highest target rate probability for Oct. 28th meeting: 47.1%(-2.8 percentage points) chance of 3.75%-4.0%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +1,030 open in Japan 
• China A50 Futures: Indicating -155 open in China
• KOSPI 200 Futures: Indicating +54 open in South Korea 

• DAX Futures: Indicating +141 open in Germany

Portfolio:

• Higher: On gains in my tech/industrial/biotech/financial sector longs
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and emerging market shorts 
• Market Exposure: Moved to 100% net long

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

Earnings of Note 
Company/Estimate 

Before the Open:

• (T)/.59
• (BMI)/1.01
• (CALM)/.08
• (CME)/2.91
• (GEV)/3.17
• (MCO)/4.26
• (NTRS)/2.71
• (PM)/2.03
• (PHM)/2.36
• (SF)/1.33
• (TEL)/2.84
• (TDY)/5.79 
• (MRTN)/.08
• (LUV)/.51 

After the Close: 

• (GOOG)/2.88
• (AVB)/2.81
• (CSX)/.52
• (EQR)/1.01
• (GGG)/.81
• (IBM)/2.87
• (KALU)/2.66
• (KMI)/.32
• (KNX)/.51
• (LVS)/.76
• (MEDP)/3.98
• (OII)/.46
• (RJF)/2.93
• (RS)/5.47
• (NOW)/.86
• (SLG)/1.21
• (TSLA)/.53
• (TXN)/1.94
• (WEX)/5.07
• (WH)/1.41 

Economic Releases 

 10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -879,670 barrels versus a -1,692,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,383,330 barrels versus a -1,533,000 barrel decline the prior week. Distillate inventories are estimated to rise by +312,170 barrels versus a +4,556,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.29% versus a +.4% gain prior. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The 20Y T-Bond auction, weekly MBA Mortgage Applications report, (MCK) annual meeting, (BAH) annual meeting and the (STZ) annual meeting 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 -5.7% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 14.9 +2.9
• 8 Sectors Rising, 3 Sectors Declining
• 54.8% of Issues Advancing, 43.0% Declining 
• TRIN/Arms .82 -13.7%
• Non-Block Money Flow +$70.8M
  
• 48 New 52-Week Highs, 37 New Lows
• 57.8% (+.1%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 56.1 -1.8

Polymarket: 

• Will China invade Taiwan by June 30th 2027? 10.0% unch.
• Strait of Hormuz traffic returns to normal by August 31st 14.0% -1.0 percentage point
• Iran agrees to end enrichment of uranium by Sept. 30th 6.0% unch.
• Israel withdraws from Lebanon by August 31st 3.0% -1.0 percentage point
• US Invades Iran before 2027 28.0% +1.0 percentage point
• US announces halt in Iran offensive operations by August 15th 53.0% -1.0 percentage point  

Other:

• Bloomberg Global Risk-On/Risk-Off Index 126.2 +2.8%
• Global Monitor Iran Instability Index 54.0 -11.0
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 88.0% -3.0 percentage points
• US High-Yield Tech Sector OAS Index 462.75 -9.5 basis points
• Bloomberg Cyclicals/Defensives Index 261.1 +1.0%
• Morgan Stanley Growth vs Value Index 152.4 +2.1%
• CNN Fear & Greed Index 41.0 (FEAR) +2.0
• 1-Day Vix 9.0 -33.0%
• Vix 17.1 -8.2%
  
• Total Put/Call .89 -3.3%

Tuesday Watch

Night Trading 

• Asian equity indices are +.5% to +2.25% on average. 
• Asia Ex-Japan Investment Grade CDS Index 70.5 -1.0 basis point. 
• China Sovereign CDS 37.75 unch.
• China Iron Ore Spot 98.50 USD/Metric Tonne -1.1%. 
• Crude Oil 83.0/bbl. -.3% 
• Gold 4,034.20 USD/t oz. +.45%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.35 -.07%.
• Bloomberg Emerging Markets Currency Index 34.55 unch.
• Bloomberg Global Risk-On/Risk Off Index 123.9 +1.0%.
• US 10-Year Yield 4.59% unch.
• Japan 30-Year Yield 3.90% +3.0 basis points 
• Volatility Index(VIX) futures 19.0 +.2%.
• Euro Stoxx 50 futures -.50%. 
• S&P 500 futures +.15%.
• NASDAQ 100 futures +.37%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and energy 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 Reversing Modestly Lower into Final Hour on Mideast War Escalation, Global Supply Chain Disruption Fears, Rising Long-Term Rates, Pharma/Homebuilding Sector Weakness

Economic/Market Gauges:

• North American Investment Grade CDS Index 52.3 -.1%
• BofA Private Credit Proxy Index 68.8 -2.1% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .29 +2.0 basis point
• BofA Global Financial Stress Indicator -.11 +4.0 basis points
• European Financial Sector CDS Index 55.5 -.6%
• Emerging Market CDS Index 145.0 -.1%
• Israel Sovereign CDS 63.4 +2.8% 
• Bloomberg Global Trade Policy Uncertainty Index .7 +.1
• US Morning Consult Daily Consume Sentiment Index 89.8 +.7

• Citi US Economic Surprise Index 50.3 -3.4

• Citi Eurozone Economic Surprise Index 13.9 +6.6

• Citi Emerging Markets Economic Surprise Index 23.5 -5.8
• S&P 500 Current Quarter EPS Growth Rate YoY(48 of 500 reporting) +52.3% -2.5 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 375.84 +1.43:  Growth Rate +27.3% +.5 percentage point, P/E 19.9 -.3
• S&P 500 Current Year Estimated Profit Margin 15.66% +2.0 basis points
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(2 of 10 reporting) +510.0% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 908.65 +2.38: Growth Rate +75.2% +.4 percentage point, P/E 19.1 -.4 
• Bloomberg US Financial Conditions Index 1.06 -10.0 basis points
• US Yield Curve 38.0 basis points (2s/10s) +1.75 basis points
• Bloomberg Industrial Metal Index 173.24 +.33%
• Dutch TTF Nat Gas(European benchmark) 58.7 euros/megawatt-hour +2.2%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 14.0% -.4 percentage point
• US Atlanta Fed GDPNow Q2 Forecast +1.7% unch.
• US 10-Year T-Note Yield 4.60% +5.0 basis points
• 1-Year TIPS Spread 1.15 -1.0 basis point

• Highest target rate probability for September 29th FOMC meeting: 53.6% (+2.4 percentage points) chance of 3.75%-4.0%. Highest target rate probability for Oct. 28th meeting: 49.3%(+.3 percentage point) chance of 3.75%-4.0%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +1,080 open in Japan 
• China A50 Futures: Indicating -140 open in China
• KOSPI 200 Futures: Indicating +22 open in South Korea 

• DAX Futures: Indicating -12 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech sector longs and index hedges
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges 
• Market Exposure: Moved to 25% net long

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Homebuilding -2.1% 2) Pharma -1.3% 3) Regional Banks -1.2%

Stocks Falling on Unusual Volume: 

• CDNA, FNB, ABG, HROW, ANL, ETON, QXO, SHAZ, TARS, MESO, FDUS, MGY, ANRO, CMPS, MEC, RYAAY, AEHR, BE, SION, TEM, PESI, AAON, TRVI, AVEX, AVBP, STAA, HDB, PSNL, PENG and PVLA

Stocks With Unusual Put Option Activity:

• 1) CARR 2) AR 3) DHI 4) CF 5) EXE

Stocks With Most Negative News Mentions:

• 1) GRAIL 2) HUBG 3) SG 4) WGS 5) CLOV

Sector ETFs With Most Negative Money Flow:

• 1) AIRR 2) XLF 3) FBT 4) XBI 5) XLI

Charts:

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