Stocks Surging into Final Hour on Earnings Optimism, Less European/Emerging Markets/US High-Yield Debt Angst, Oil Gain, Tech/Transport Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 17.4 -10.6%

• Euro/Yen Carry Return Index 123.12 -.39%

• Emerging Markets Currency Volatility(VXY) 8.38 -1.76%

• S&P 500 Implied Correlation 40.6 -8.7%

• ISE Sentiment Index 71.0 -2.7%
  

• Total Put/Call 1.04 -16.8%

• NYSE Arms .94 -5.05%

Credit Investor Angst:

• North American Investment Grade CDS Index 58.75 -1.39%
  

• America Energy Sector High-Yield CDS Index 400.0 -28.9%

• European Financial Sector CDS Index 67.42 -3.38%

• Italian/German 10Y Yld Spread 209.25 +9.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 67.96 -2.04%
  

• Emerging Market CDS Index 174.82 -3.91%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.99 +.04%

• 2-Year Swap Spread -2.75 -1.75 basis points

• TED Spread 19.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -11.5 -3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.45 +.54%
• 3-Month T-Bill Yield 2.01% +1.0 basis point

• Yield Curve 10.25 -.25 basis point

• China Iron Ore Spot 92.25 USD/Metric Tonne +1.72%

• Citi US Economic Surprise Index -31.6 +1.9 points

• Citi Eurozone Economic Surprise Index -53.0 +.3 point

• Citi Emerging Markets Economic Surprise Index -19.9 +1.3 points

• 10-Year TIPS Spread 1.65 +5.0 basis points
• 100.0% chance of Fed rate cut at Sept. 18th meeting, 100.0% chance of cut at October 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +157 open in Japan 
• China A50 Futures: Indicating -10 open in China

• DAX Futures: Indicating -27 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +1.4%

Sector Underperformers:

• 1) Oil Service -.5% 2) I-Banks -.1% 3) Foods +.5%

Stocks Falling on Unusual Volume: 

• GDOT, ICUI, WMGI, MGTX, GKOS, SRPT, Z, KHC, ZG, VIRT, ARNA, RUN, FLO, RDFN, MUR and TPIC

Stocks With Unusual Put Option Activity:

• 1) MNST 2) EOG 3) RDFN 4) CHK 5) KHC

Stocks With Most Negative News Mentions:

• 1) AGS 2) GDOT 3) RYAM 4) ICUI 5) XNCR

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +2.1%

Sector Outperformers:

• 1) Semis +2.5% 2) Steel +2.5% 3) Software +2.4%

Stocks Rising on Unusual Volume:

• INMD, AVDR, IEFA, USMV, STMP, CVNA, JACK, IGV, RRR, LYFT, LBTYA, TLND, EFAV, CDLX, NOBL, IOTS, AMC, AERI, PTLA, AOSL, ROKU, TVTY, PETQ, NEWR, LITE, GTHX, FTDR, HUN, AMD, CECO, MMS, AZPN, AVLR, SYMC, SILK, NTRA, PTLA, FSCT, FBM, PVAC, LAUR, ECPG, TALO, ALB, BKNG, BECN, LPSN, PEGA, SYNA, MRO, EB, CXO, TRGP, SHAK, INGN, LRN, EPAM, UNVR, SWCH, PS, AXGN, LTRPA, MODN, LXP, COMM, AIG and TRIP

Stocks With Unusual Call Option Activity:

• 1) EOG 2) CVNA 3) CAH 4) Z 5) GTT

Stocks With Most Positive News Mentions:

• 1) AMD 2) ROKU 3) CVNA 4) INFN 5) BKNG

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +15.3% Above 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 78.1% of Issues Advancing, 19.8% Declining
• 144 New 52-Week Highs, 92 New Lows
• 50.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.2%
• Vix 17.6 -9.8%
• Total Put/Call 1.07 -14.4%
• TRIN/Arms 1.07 +8.1%

Thursday Watch

Evening Headlines

Bloomberg:

• China Rejects One Demand That Could Help Ease Hong Kong Protests

• Global Bond Market Sounds Shrillest Alarm Yet Over the Economy.

• Stocks Mixed, Treasuries Gain Amid Ongoing Caution. Asian stocks traded mixed and Treasuries edged higher Thursday as investors assessed the implications of the latest central bank moves to bolster growth. Shares were little changed in Tokyo and fell in Sydney. South Korean stocks advanced amid signsof easing tensions with Japan. U.S. futures slipped back after the S&P 500 Index recovered from a decline of as much as 2% to eke out a modest gain Wednesday. Yields on 10-year Treasuries dropped in Asia after closing higher in New York. Oil rebounded on a report top producers were looking at ways to stem the recent slide in prices. The yen ticked higher. Japan’s Topix index dipped 0.1% as of 9:09 a.m. in Tokyo. Australia’s S&P/ASX 200 Index fell 0.8%. South Korea’s Kospi index rose 0.6%. Hang Seng Index futures were little changed. S&P 500 futures fell 0.2%.  

• Rock-Star Economies Flop, World Recession Fears Rise: Eco Day.

• Five Things You Need to Know to Start Your Day.

• Hedge Funds Turn Most Bearish Since 2016, Hone Long Stock Bets

• Ferocious Market Moves Undo Fed Easing, Putting Powell on the Back Foot

• Pimco Is Ready to Think About Negative Yields Reaching the U.S. 

• Medicare Expands Its Coverage of Costly Cancer Breakthrough.  

• AMD(AMD) Says New Server Chip Is Faster Than Intel’s Pricier Offering.  

• Salesforce(CRM) to Acquire ClickSoftware for $1.35 Billion.

Wall Street Journal:

• Inflated Bond Ratings Helped Spur the Financial Crisis. They’re Back.

• Bond Yields Fall, Sparking Big Swings in Stock Market.

• Words That Heal and Words That Don’t.

• The Deep Dangers of Life Online.

• FedEx(FDX) to End Ground Deliveries for Amazon(AMZN).

• China Warns Hong Kong It Will Intervene if Situation Deteriorates.

Fox News:

• Trump, White House rip ‘fraud’ Sherrod Brown, Dayton mayor after visit with mass shooting victims.

• ICE raids net 680 ‘removable aliens’ at Mississippi chicken plants.

MarketWatch.com:

• Roku(ROKU) stock jumps 8% after earnings, outlook beat.

• Symantec stock spikes after report that Broadcom talks resumed and are focused on enterprise unit.

CNBC:

• US-China trade war is hurting farmers, but they’re sticking with Trump.

• Cramer: Action in the bond market does not mean a recession is ‘around the corner’.

• Disney(DIS) might not steal Netflix(NFLX) customers — but it will make it harder for Netflix to raise prices.

• Banks pummeled as rates dive, but analysts say these stocks are already ‘priced for a recession’.

Zero Hedge:

• Heavy Clashes Erupt Between Indian, Pakistani Forces In Kashmir.

• Illinois Finances: Far From "Stable".

• Corzine's Hedge Fund Granted SEC Registration, Warned To Stay Away From Illiquid Securities.

• Consumer Credit Rises To Record $4.1 Trillion As Student, Auto Loans Hit All Time High.

• "We Only Needed A Trigger" - Iron Ore Plunges Into Bear Market, Weak Demand Outlook.

• The Market Is Now Pricing In Odds Of An Emergency 25bps Rate Cut Tomorrow.

• Puerto Rico's Supreme Court Invalidates Swearing In Of New Governor.

• Globalists Have Set Operation "Blame-The-Populists" In Motion.

• Gold & Silver Soar As "Minsky Moment" Fears Spark Market Turmoil.

Business Insider:

• Instagram's lax privacy practices let a trusted partner track millions of users' physical locations, secretly save their stories, and flout its rules.

• A Trump executive order aimed at addressing allegations of anti-conservative bias on social media services like Twitter and Facebook is reportedly in the works.

Telegraph:

• German factory slump stokes recession fears as New Zealand's central bank cut rates.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 68.25 +.25 basis point.

• China Sovereign CDS 52.25 +.25 basis point.

• Bloomberg Emerging Markets Currency Index  66.11 +.03%.

• FTSE 100 futures +.39%.

• S&P 500 futures -.19%.

• NASDAQ 100 futures -.17%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (GOOS)/-.24

• (CAH)/.95

• (KHC)/.61

• (MUR)/.17

• (PRTY)/.36

• (SUP)/-.12

• (VIAB)/1.05

After the Close:

• (ATVI)/.26

• (CBS)/1.13

• (ELY)/.26

• (MTW)/.49

• (NWSA)/.03

• (SYMC)/.33

• (TTD)/.68

• (UBER)/-2.70

• (YELP)/.40

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated at 215K versus 215K the prior week.

• Continuing Claims are estimated to fall to 1690K versus 1699K prior.
  

10:00 am EST

• Wholesale Trade Sales MoM for June is estimated to rise +.2% versus a +.1% gain in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Japan GDP report, China Trade Balance report, weekly EIA natural gas inventory report, $19B 30Y T-Bond auction, Bloomberg Aug. US Economic Survey, weekly Bloomberg Consumer Confidence report, (CATO)/(BKE) monthly sales updates and the (NUVA) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology 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.