Stocks Higher into Final Hour on Vaccine Hopes, Better Economic Data, Short-Covering, Airline/Gaming Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 28.4 -3.8%

• Euro/Yen Carry Return Index 126.44 -.22%

• Emerging Markets Currency Volatility(VXY) 9.75 -.61%

• S&P 500 Implied Correlation 56.3 -1.7%

• ISE Sentiment Index 83.0 -22.0 points

• Total Put/Call .60 -28.6%

• NYSE Arms 1.6 +68.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 72.79 -2.09%
  

• US Energy High-Yield OAS 896.20 -1.34%

• European Financial Sector CDS Index 71.75 -3.12%

• Italian/German 10Y Yld Spread 163.5 -2.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index  79.20 -1.41%
  

• Emerging Market CDS Index 191.87 -2.27%
  

• iBoxx Offshore RMB China Corporate High Yield Index 174.85 +.07%

• 2-Year Swap Spread 6.75 unch.

• TED Spread 14.0 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.0 +1.75 basis points
• MBS  5/10 Treasury Spread  97.0 -2.0 basis points
• IHS Markit CMBX BBB- 6 67.75 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.83 +.13%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 48.0 +2.0 basis points

• China Iron Ore Spot 108.36 USD/Metric Tonne -.68%

• Citi US Economic Surprise Index 256.9 +13.5 points

• Citi Eurozone Economic Surprise Index -20.0 +5.3 points

• Citi Emerging Markets Economic Surprise Index -16.70 +5.4 points

• 10-Year TIPS Spread 1.41 +1.0 basis point
• 100.0% chance of no change at Sept. 16 meeting, 100.0% chance of no change at Nov. 5th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +5 open in Japan 
• China A50 Futures: Indicating +26 open in China

• DAX Futures: Indicating -10 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +12.7% Above 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 84.5% of Issues Advancing, 12.9% Declining
• 62 New 52-Week Highs, 0 New Lows
• 28.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.0%
• Vix 28.4 -3.7%
• Total Put/Call .84 unch.
• TRIN/Arms .91 +44.4%

Wednesday Watch

Night Trading 

• Asian equity indices are +.5%  to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 79.25 -1.0 basis point.

• China Sovereign CDS 44.25 -1.5 basis points.

• Bloomberg Emerging Markets Currency Index 60.83 +.12%.

• FTSE 100 futures +1.08%.

• S&P 500 futures +.82%.

• NASDAQ 100 futures +.64%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ASML)/2.06

• (BK)/.92

• (GS)/3.91

• (OMC)/.80

• (PNC)/.75

• (PGR)/1.36

• (USB)/.38

• (UNH)/4.04

After the Close:

• (ADTN)/.01

• (AA)/-.26

• (CNS)/.52

• (SNBR)/-.75

Economic Releases

8:30 am EST

• Empire Manufacturing for July is estimated to rise to 10.0 versus -.2 in June.

• The Import Price Index MoM for June is estimated to rise +1.0% versus a +1.0% gain in May.

• The Import Price Index ex Petro for June is estimated to rise +.1% versus a +.1% gain in May. 

• The Export Price Index MoM for June is estimated to rise +.8% versus a +.5% gain in May.
  

9:15 am EST

• Industrial Production MoM for June is estimated to rise +4.4% versus a +1.4% gain in May.

• Capacity Utilization for June is estimated to rise to 67.8% versus 64.8% in May.

• Manufacturing Production for June is estimated to rise +5.6% versus a +3.8% gain in May.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -88,090 barrels versus a +5,654,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,080,090 barrels versus a -4,839,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,384,360 barrels versus a +3,135,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.45% versus a +2.0% gain prior.

2:00 pm EST

• US Fed Beige Book release.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Harker speaking, the China CPI report and the weekly MBA Mortgage Applications report could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are higher, boosted by financial and commodity 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 Mostly Higher into Final Hour on Global Stimulus Hopes, Short-Covering, Technical Buying, Commodity/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 30.3 -5.8%

• Euro/Yen Carry Return Index 126.65 +.39%

• Emerging Markets Currency Volatility(VXY) 9.87 +1.65%

• S&P 500 Implied Correlation 59.4 -7.8%

• ISE Sentiment Index 105.0 -9.0 points

• Total Put/Call .88 +14.3%

• NYSE Arms .80 -31.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 74.77 -.12%
  

• US Energy High-Yield OAS 910.61 +.16%

• European Financial Sector CDS Index 74.06 +1.09%

• Italian/German 10Y Yld Spread 165.75 +.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index  80.5 +.17%
  

• Emerging Market CDS Index 197.43 -.09%
  

• iBoxx Offshore RMB China Corporate High Yield Index 174.73 +.30%

• 2-Year Swap Spread 6.75 -.5 basis point

• TED Spread 14.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -8.75 +3.0 basis points
• MBS  5/10 Treasury Spread  99.0 +3.0 basis points
• IHS Markit CMBX BBB- 6 68.25 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.78 +.24%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 46.0 -2.0 basis points

• China Iron Ore Spot 106.41 USD/Metric Tonne +-2.53%

• Citi US Economic Surprise Index 243.4 +7.1 points

• Citi Eurozone Economic Surprise Index -25.30 +1.9 points

• Citi Emerging Markets Economic Surprise Index -22.10 -1.9 points

• 10-Year TIPS Spread 1.40 -2.0 basis points
• 100.0% chance of no change at Sept. 16 meeting, 100.0% chance of no change at Nov. 5th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +78 open in Japan 
• China A50 Futures: Indicating +20 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio:

• Higher: On gains in my industrial/consumer staple/biotech/medical sector longs

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

• Market Exposure: Moved to 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.9% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 57.1% of Issues Advancing, 40.2% Declining
• 6 New 52-Week Highs, 10 New Lows
• 25.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.9%
• Vix 32.3 +.4%
• Total Put/Call 1.02 +32.5%
• TRIN/Arms .95 -18.8%