Friday Watch

Night Trading 

• Asian equity indices are unch. to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 141.75 -1.0 basis point. 
• Asia Pacific Sovereign CDS Index 52.75 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 70.59 +.01%. 
• S&P 500 futures -.04%. 
• NASDAQ 100 futures -.10%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• None of note

Economic Releases 
8:30 am EST

• The Trade Deficit for April is estimated to widen to -$41.0B versus -$40.4B in March.
• The Change in Non-Farm Payrolls for May is estimated at 160K versus 160K in April. 
• The Unemployment Rate for May is estimated to fall to 4.9% versus 5.0% in April.
• Average Hourly Earnings MoM for May are estimated to rise +.2% versus a +.3% gain in April.

9:45 am EST

• The Final Markit US Services PMI for May is estimated to rise to 51.4 versus a prior estimate of 51.2.
  

10:00 am EST

• The ISM Non-Manufacturing Composite for May is estimated to fall to 55.3 versus 55.7 in April.
• Factory Orders for April are estimated to rise +1.9% versus a +1.1% gain in March.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, Fed's Brainard speaking, Eurozone Services PMI, 2016 ASCO and the (RGLD) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open mixed and to strengthen into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

Stocks Reversing Slightly Higher into Final Hour on Less Emerging Markets Debt Angst, Short-Covering, Technical Buying, Biotech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.81 -2.75%

• Euro/Yen Carry Return Index 126.85 -.96%

• Emerging Markets Currency Volatility(VXY) 10.25 -1.44%

• S&P 500 Implied Correlation 52.42 -.83%

• ISE Sentiment Index 72.0 -31.43%

• Total Put/Call .91 -11.65%

• NYSE Arms .74 -32.73% 

Credit Investor Angst:

• North American Investment Grade CDS Index 77.51 +.23%
  

• America Energy Sector High-Yield CDS Index 894.0 +.47%

• European Financial Sector CDS Index 94.44 +1.81%

• Western Europe Sovereign Debt CDS Index 25.90 +4.71%

• Asia Pacific Sovereign Debt CDS Index 53.25 +.41%

• Emerging Market CDS Index 298.43 -.37%
  

• iBoxx Offshore RMB China Corporate High Yield Index 128.88 +.08%

• 2-Year Swap Spread 15.25 +.5 basis point
  

• TED Spread 39.5 +5.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -34.0 -3.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.59 +.08%
• 3-Month T-Bill Yield .27% -3.0 basis points

• Yield Curve 92.0 -3.0 basis points
  

• China Import Iron Ore Spot $48.18/Metric Tonne -.45%

• Citi US Economic Surprise Index -16.30 +.7 point

• Citi Eurozone Economic Surprise Index 2.50 -1.8 points

• Citi Emerging Markets Economic Surprise Index 7.2 +4.0 points

• 10-Year TIPS Spread 1.58% unch.
  
• 54.8% chance of Fed rate hike at July 27 meeting, 61.1% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +14 open in Japan 
• China A50 Futures: Indicating -181 open in China

• DAX Futures: Indicating +33 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.5%

Sector Underperformers:

• 1) Education -3.5% 2) Coal -2.9% 3) Oil Service -2.2%

Stocks Falling on Unusual Volume:

• DEA, DERM, SIG, BOX, GWRE, AMWD, LILA, OLLI, DV, GXP, ORCL, CTLT, SRPT, AQMS, CSL, HTHT, SHOP, EROS, CMC, COST, TSRA, WRLD, TDG, LILAK, COO and KATE

Stocks With Unusual Put Option Activity:

• 1) OPK 2) ORCL 3) LOW 4) MON 5) CYH

Stocks With Most Negative News Mentions:

• 1) DV 2) BOX 3) SRPT 4) DO 5) CMC

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.1%

Sector Outperformers:

• 1) HMOs +1.3% 2) Biotech +1.2% 3) Networking +.7%

Stocks Rising on Unusual Volume:

• CIEN, NERV, DCI and JOY

Stocks With Unusual Call Option Activity:

• 1) CIEN 2) SIG 3) MAR 4) AMBA 5) AET

Stocks With Most Positive News Mentions:

• 1) EVA 2) CLNE 3) ENV 4) ECOL 5) MGM

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -18.1% Below 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 37.8% of Issues Advancing, 58.7% Declining
• 67 New 52-Week Highs, 6 New Lows
• 57.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.8%
• Vix 14.5 +2.3%
• Total Put/Call 1.39 +49.5%
• TRIN/Arms 1.2 +5.2%

Thursday Watch

Night Trading 

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 142.75 +1.25 basis points. 
• Asia Pacific Sovereign CDS Index 53.0 +.25 basis point.
• Bloomberg Emerging Markets Currency Index 70.56 +.04%. 
• S&P 500 futures -.18%. 
• NASDAQ 100 futures -.21%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (AMWD)/.87
• (CIEN)/.27
• (DCI)/.39
• (HOV)/.03
• (JOY)/-.01
• (AVGO)/2.38
• (COO)/1.92 
• (ZUMZ)/-.11

Economic Releases 
7:30 am EST

• Challenger Job Cuts YoY for May. 

8:15 am EST

• The ADP Employment Change for May is estimated to rise to 173K versus 156K in April. 

8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 270K versus 268K the prior week.
• Continuing Claims are estimated to fall to 2150K versus 2163K prior. 

9:45 am EST

• The ISM New York for May.
  

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,657,100 barrels versus a -4,226,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -498,800 barrels versus a +2,043,000 barrel gain prior. Distillate supplies are estimated to fall by -964,100 barrels versus a -1,284,000 barrel decline prior. Finally, Refinery Utilization is estimated to rise +.7% versus a -.8% decline prior.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Dudley speaking, Fed's Kaplan speaking, OPEC meeting, ECB rate decision, ECB press conference, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (AZPN) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.