Stocks Falling into Final Hour on Mideast War Escalation Fears, Surging Long-Term Rates, Fed Rate-Hike Worries, Tech/Defense Sector Weakness

Economic/Market Gauges:

• North American Investment Grade CDS Index 53.8 +1.1%
• BofA Private Credit Proxy Index 69.2 -.6% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .29 unch.
• BofA Global Financial Stress Indicator -.05 unch.
• European Financial Sector CDS Index 57.2 +2.3%
• Emerging Market CDS Index 147.0 +1.0%
• Israel Sovereign CDS 62.5 -4.4% 
• Bloomberg Global Trade Policy Uncertainty Index 1.6 +.1
• US Morning Consult Daily Consume Sentiment Index 90.4 -.2

• Citi US Economic Surprise Index 45.4 -.9

• Citi Eurozone Economic Surprise Index 49.1 -.5

• Citi Emerging Markets Economic Surprise Index 20.2 -.8
• S&P 500 Current Quarter EPS Growth Rate YoY(214 of 500 reporting) +59.5% -6.0 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 380.98 +.34:  Growth Rate +29.5% +.1 percentage point, P/E 19.3 -.3
• S&P 500 Current Year Estimated Profit Margin 15.94% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(3 of 10 reporting) +329.2% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 921.09 +.81: Growth Rate +77.6% +.1 percentage point, P/E 18.0 -.3 
• Bloomberg US Financial Conditions Index 1.02 -7.0 basis points
• US Yield Curve 41.5 basis points (2s/10s) +9.0 basis point
• Bloomberg Industrial Metal Index 174.3 +.1%
• Dutch TTF Nat Gas(European benchmark) 60.6 euros/megawatt-hour +5.0%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 13.9% -.2 percentage point
• US Atlanta Fed GDPNow Q2 Forecast +1.5% unch.
• US 10-Year T-Note Yield 4.66% +6.0 basis points
• 1-Year TIPS Spread 1.83 +8.0 basis points

• Highest target rate probability for September 29th FOMC meeting: 53.3% (-2.5 percentage points) chance of 3.75%-4.0%. Highest target rate probability for Oct. 28th meeting: 51.3%(+4.7 percentage points) chance of 3.75%-4.0%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +700 open in Japan 
• China A50 Futures: Indicating -70 open in China
• KOSPI 200 Futures: Indicating +27 open in South Korea 

• DAX Futures: Indicating +107 open in Germany

Portfolio:

• Lower: On losses in my tech/financial/biotech/industrial sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and emerging market shorts
• Market Exposure: Moved to 50% net long

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.7%

Sector Outperformers:

• 1) Video Gaming +3.5% 2) Energy +2.9% 3) Software +2.6%

Stocks Rising on Unusual Volume:

• HURN, MPLT, CLW, MANH, LAD, BLKB, GRMN, EXLS, CBZ, NEO, AVTR, CAKE, EDU, CTSH, GEHC, LBRX, YOU, TEVA, CHEF, QURE, SHEN, CLH, AMBA, ASH, SHEN, TER, CGAU, STX, E, SAH, LFUS, STRA, LIFE, NP, AN, NVST, MGY, BXP, APPN, ETON, WING, ABG, SGRY, ZWS, ADBE, PI, NOW, LINE, MNSO, PI, SKHY, WDAY, MTDR, EXPE, HSAI, TM, TAL, GIB, PEGA, ALGN, SLDE, SAP, F, EXE, NOMD, RUSHA, AXGN, ACI, DSGX, MDLZ, RKT, HIW, MEDP, OMF, UMC, CHE, RIO, QTWO, RIO, ZG, SONY, PSLV, UMBF, LBRDA, TU, GEF, FCF, VNO, GFL and BUSE

Stocks With Unusual Call Option Activity:

• 1) PAGP 2) DLLL 3) AVTR 4) NEM 5) CAR 

Stocks With Most Positive News Mentions:

• 1) HURN 2) MANH 3) CAKE 4) GRMN 5) GEHC

Sector ETFs With Most Positive Money Flow:

• 1) SOXX 2) IWM 3) SMH 4) CSPX 5) XLP

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:

• (AMG)/7.90
• (AGCO)/1.47
• (ALGM)/.21
• (MO)/1.50
• (AEP)/1.48
• (MT)/1.04
• (BAX)/.37
• (BMY)/1.60
• (BC)/1.19
• (CRS)/3.09
• (CHKP)/2.45
• (CROX)/4.35
• (EME)/7.23
• (EXC)/.44
• (HSY)/1.43
• (H)/.91
• (ICE)/1.84
• (JLL)/4.56
• (LH)/4.78
• (LTH)/.37
• (MLM)/4.76
• (MA)/4.77
• (NCLH)/.39
• (PIPR)/.88
• (PWR)/3.31
• (REGN)/10.16
• (SAIA)/3.38
• (SAH)/1.75
• (SO)/1.01
• (CI)/7.60
• (TT)/4.27
• (VLO)/10.13
• (XPO)/1.48
• (YUM)/1.58
• (MNST)/.58
• (NTRA)/-.49 

After the Close: 

• (AMZN)/1.82
• (AAPL)/1.89
• (BJRI)/.90
• (COHU)/.14
• (COIN)/-.41
• (CUZ)/.74
• (FSLR)/2.99
• (GH)/-.76
• (ILMN)/1.23
• (IR)/.83
• (LYV)/.66
• (MTZ)/2.23
• (MHK)/2.58
• (NBIX)/1.66
• (RDDT)/.95
• (RBLX)/-.34
• (SPXC)/1.85
• (MSTR)/-2.19
• (SYK)/3.49
• (WY)/.08 

Economic Releases 

8:30 am EST

• Personal Income for June is estimated to rise +.3% versus a +.7% gain in May.
• Personal Spending for June is estimated to rise +.4% versus  a +.7% gain in May.
• The Core PCE Price Index MoM for June is estimated to rise +.2% versus a +.3% gain in May.  
• Initial Jobless Claims for last week are estimated to rise to 200K versus 187K the prior week.
• Continuing Claims is estimated to fall to 1795K versus 1796K prior.
• 2Q GDP Annualized  QoQ is estimated to rise +2.0% versus a +2.1% gain in 1Q.
• 2Q Personal Consumption is estimated to rise +2.3% versus a +.5% gain in 1Q.
• 2Q GDP Price Index is estimated to rise +4.0% versus a +3.6% rise in 1Q. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Atlanta Fed GDPNow Q3 update, Fed's weekly balance sheet reportweekly EIA natural gas inventory report, (EXP) annual meeting, (SNAP) annual meeting and the (RL) 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 -1.7% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.0 -3.7
• 4 Sectors Rising, 7 Sectors Declining
• 35.6% of Issues Advancing, 62.3% Declining 
• TRIN/Arms .73 -20.7%
• Non-Block Money Flow -$144.6M
  
• 105 New 52-Week Highs, 63 New Lows
• 58.2% (-3.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 58.1 -6.5

Polymarket: 

• Will China invade Taiwan by June 30th 2027? 11.0% unch.
• Strait of Hormuz traffic returns to normal by August 31st 10.0% -4.0 percentage points
• Iran agrees to end enrichment of uranium by Sept. 30th 10.0% +1.0 percentage point
• Israel withdraws from Lebanon by August 31st 3.0% unch.
• US Invades Iran before 2027 25.0% +3.0 percentage points
• US announces end of Iranian blockade by August 31st 45.0% -15.0 percentage points

Other:

• Bloomberg Global Risk-On/Risk-Off Index 121.9 -.3%
• Global Monitor Iran Instability Index 62.0 +8.0 points
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 90.0% unch.
• US High-Yield Tech Sector OAS Index 463.75 -4.75.0 basis points
• Bloomberg Cyclicals/Defensives Index 252.0 -1.0%
• Morgan Stanley Growth vs Value Index 138.6 -3.1%
• CNN Fear & Greed Index 34.0 (FEAR) -4.0
• 1-Day Vix 18.4 +16.2%
• Vix 19.8% +8.9%
• Total Put/Call 1.01 +8.6%

Wednesday Watch

Around X:

• @Business

• Trump welcomed Israeli Prime Minister Netanyahu to the White House Tuesday as the US leader sought to avoid renewed bombing in Iran and instead laid the ground for further diplomacy after both sides paused tit-for-tat strikes. 
• Goldman Sachs Japan says a sharp selloff in Japan’s artificial intelligence-related stocks has created a buying opportunity, arguing that strong earnings could revive investor appetite for semiconductor shares. 
• The Pentagon’s weapons buyer signed off on a deal with General Dynamics Corp. to build nine next-generation attack submarines, even as the company struggles to stay on schedule with an earlier order for nine less advanced subs. 
• ASM forecast revenue for the third quarter that beat analyst estimates, with the artificial intelligence infrastructure build-out driving demand for the chip-equipment maker’s tools. 
• Momentum behind the Clarity Act is fading on Capitol Hill and among crypto watchers. 
• Nvidia CEO Jensen Huang defended open-weight artificial intelligence systems as crucial to developing the nascent AI industry, as officials in Washington consider how to respond to a surprise breakthrough from Chinese startup Moonshot.
  
• Here’s what you need to know to start your day.     

• @ZeroHedge

• Emails show leading officials at NIH, including Fauci, knew the best data indicated no benefit from masks. Why did they proclaim great benefits of masks then? Because these officials were not managing a virus using science. They were managing a population using psychology. (pic)
• Fact check: true. July was the worst month for momentum on record (excluding covid crash). (graph)
• *US, SAUDI ARABIA STRIKE IRAN-BACKED WEAPONS SITES IN IRAQ. 
• Historic Carnage: Worst Day For Hedge Funds Since The Covid Crash. (graph)
• Federal Court Rules For Woman Fired For Refusing COVID-19 Vaccine.
• Decent arb: rate hike odds (per SOFR) for tomorrow's Fed meeting at 32% while http://Polymarket.com has 24%. In either case, would be a market shock as gap between market pricing and Fed decisions one day before meeting has almost never been this wide.
• Previewing The Fed's "Extremely Uncertain" July Decision, And How JPM and Goldman Are Trading It.
• Detroit Gets Drafted: Ford And GM Head Back To The Battlefield.
• Fragile Iran 'Pause' Shattered As US Base In Jordan Comes Under Attack, Oil Jumps.
• The State Of American Elections: For The Left, 'The Worse, The Better'.
• NEW: Dr. Fauci writes in his diary that in June 2021, he received a (classified?) briefing from the CIA on the origins of COVID-19 while in a SCIF (Sensitive Compartmented Information Facility) at NIH, and reveals that the CIA told him they had intercepted Chinese communications in Wuhan, including indications that the Chinese had transferred pangolin viruses from Beijing to Wuhan. Additionally, Fauci writes that the CIA had information from sources that the Chinese military had conducted unknown experiments in Wuhan, and that the CIA had information about a "super spreader" event in China in July 2020 in relation to "passage of a virus in a laboratory." Fauci writes that the CIA briefer, who he names, was "almost pathetic in her naivety and obvious lack of appreciation of any of the science of what she was talking about.". (pic)
• Wouldn't be pressing shorts here.
• RFK Jr. Says HHS Found Fauci Diaries Across 11 Different Servers.
• NYC Councilwoman Sounds Alarm: Mamdani's Property Database Puts Wealthy Homeowners In Crosshairs Of "Luigi-Worshipping Leftist Thugs".
• The same mainstream media that demanded we all trust the science can't bring themselves to report what their favorite scientist wrote in his own diary. I wonder why.
• New Biden Tapes Reveal Hur's "Well-Meaning Elderly Man" Had An $8 Million Motive To Keep Classified Docs.
• The Socialist Monster Awakens.
• Was assured by Ukrainian FM @andrii_sybiha that the attack on an Iranian ship was unintentional and Ukraine seeks no escalation. Iran does not seek escalation either, but made clear any attack on our citizens or interests is unacceptable. There must be restitution for losses. 
• Semis Slammed, Momo Mullered, & AI Credit Cracks; Black Gold & Bond Yields Drop On Deal Hopes.             

• @CNBC  

• CNBC Daily Open: Renewed fire from Iran, a big quarter for SK Hynix and a quake in Japan. 
• Wednesday's big stock stories: What’s likely to move the market in the next trading session.
• S&P 500 futures are little changed as investors analyze earnings, await Fed decision: Live updates. 
• Stocks making the biggest moves after hours: Ford, Teradyne, Visa, KLA Corp and more. 
• Trump administration to ban new Chinese robots and inverters, protecting U.S. AI.      

• @WallStEngine

• SK Hynix $SKHY on customer memory demand: “Our major customers continue to request more memory supply, including for PC and mobile applications.” “Temporary sales adjustments are occurring due to difficulty securing memory. We expect these segments to gradually regain growth momentum as supply shortages ease and AI services become more widely adopted.”
• SK Hynix $SKHY on AI efficiency and infrastructure demand: “As AI models improve and software optimization advances, the compute volume and cost per task continue to decline.” “We do not expect these efficiency gains to reduce overall infrastructure demand. Instead, they should lower the cost and adoption barriers for AI services, expanding the user base and range of applications.” 
• SK HYNIX $SKHY Q2’26 DETAILED EARNINGS HIGHLIGHTS. Revenue: $54.6B (Est. $57.7B) ; +257% YoY, +51% QoQ. Operating Profit: $41.6B (Est. $44.2B) ; +557% YoY. Operating Margin: 76%; +3,500 bps YoY — record high quarterly OPM. Q3 Guide: DRAM Bit Growth: ~+10% QoQ. NAND Bit Growth: Low-single% QoQ, including Solidigm.
• TERADYNE $TER Q2’26 EARNINGS HIGHLIGHTS. Revenue: $1.33B (Est. $1.22B) ; +104% YoY. Adj. EPS: $2.47 (Est. $2.09). Semiconductor Test Revenue: $1.12B. Q3 Guide: Revenue: $1.20B-$1.30B (Est. $1.04B). Non-GAAP EPS: $1.85-$2.15 (Est. $1.53).
• SEAGATE TECHNOLOGY $STX Q4’26 EARNINGS HIGHLIGHTS. Revenue: $3.63B (Est. $3.48B). Adj. EPS: $5.71 (Est. $5.09). Adj Gross Margin: 52.7%; +1,480 bps YoY. Q1'27 Guide: Revenue: $4.1B +/- $100M (Est. $3.75B). Non-GAAP EPS: $7.30 +/- $0.20 (Est. $5.80). 
• BLOOM ENERGY $BE Q2’26 EARNINGS HIGHLIGHTS. Revenue: $1.07B (Est. $827.6M) ; +166% YoY. Adj. EPS: $0.78 (Est. $0.41) ; +680% YoY. Product: $935.4M; +215.4% YoY. Adj Gross Margin: 34.3%; +604 bps YoY. Raises FY26 Guide (Non-GAAP): EPS: $2.55-$2.85 (Est. $2.16). Revenue: $3.9B-$4.2B (Est. $3.73B). Gross Margin: ~34%. Operating Income: $800M-$900M. 

• @MerengoFS

• $MSFT Earnings Preview. 
• $META Earnings Preview.
• $HOOD Earnings Preview. 

Night Trading 

• Asian equity indices are -.50% to +.50% on average. 
• Asia Ex-Japan Investment Grade CDS Index 70.5 unch. 
• China Sovereign CDS 38.5 unch.
• China Iron Ore Spot 98.20 USD/Metric Tonne +.4%. 
• Crude Oil 83.0/bbl. +4.7% 
• Gold 4,086.0 USD/t oz. -.3%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.27 -.08%.
• Bloomberg Emerging Markets Currency Index 34.47 -.04%.
• Bloomberg Global Risk-On/Risk Off Index 123.1 +.7%.
• US 10-Year Yield 4.62% +1.0 basis point.
• Japan 30-Year Yield 3.99% -2.0 basis points.
• Volatility Index(VIX) futures 19.1 +.3%.
• Euro Stoxx 50 futures -.09%. 
• S&P 500 futures +.09%.
• NASDAQ 100 futures +.02%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.

Stocks Reversing Modestly Higher into Final Hour on Further Mideast War De-Escalation, Falling Oil/Long-Term Rates, Earnings Outlook Optimism, Healthcare/Consumer Discretionary Sector Strength

Economic/Market Gauges:

• North American Investment Grade CDS Index 53.3 +.6%
• BofA Private Credit Proxy Index 69.4 +1.5% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .29 -2.0 basis points
• BofA Global Financial Stress Indicator -.05 -3.0 basis points
• European Financial Sector CDS Index 56.0 -.3%
• Emerging Market CDS Index 145.6 -.6%
• Israel Sovereign CDS 65.4 +3.6% 
• Bloomberg Global Trade Policy Uncertainty Index 1.5 unch.
• US Morning Consult Daily Consume Sentiment Index 90.6 -1.0

• Citi US Economic Surprise Index 46.3 -1.8

• Citi Eurozone Economic Surprise Index 49.6 +.1

• Citi Emerging Markets Economic Surprise Index 21.0 +1.4
• S&P 500 Current Quarter EPS Growth Rate YoY(168 of 500 reporting) +65.5% -4.1 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 380.64 +.24:  Growth Rate +29.4% +.1 percentage point, P/E 19.6 +.1
• S&P 500 Current Year Estimated Profit Margin 15.94% -2.0 basis points
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(3 of 10 reporting) +329.2% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 920.28 +.88: Growth Rate +77.5% +.2 percentage point, P/E 18.3 -.1 
• Bloomberg US Financial Conditions Index 1.09 -5.0 basis points
• US Yield Curve 32.5 basis points (2s/10s) +.75 basis point
• Bloomberg Industrial Metal Index 174.2 -.6%
• Dutch TTF Nat Gas(European benchmark) 56.1 euros/megawatt-hour -3.7%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 14.1% +.7 percentage point
• US Atlanta Fed GDPNow Q2 Forecast +1.5% -.1 percentage point
• US 10-Year T-Note Yield 4.60% -5.0 basis points
• 1-Year TIPS Spread 1.75 -6.0 basis points

• Highest target rate probability for September 29th FOMC meeting: 55.6% (-.1 percentage point) chance of 3.75%-4.0%. Highest target rate probability for Oct. 28th meeting: 46.5%(+2.3 percentage points) chance of 3.75%-4.0%. (current target rate is 3.5-3.75%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +260 open in Japan 
• China A50 Futures: Indicating +3 open in China
• KOSPI 200 Futures: Indicating +6 open in South Korea 

• DAX Futures: Indicating +155 open in Germany

Portfolio:

• Higher: On gains in my consumer discretionary/financial/biotech sector longs and emerging market shorts
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 75% net long