Bear Radar

Style Underperformer:

• Large-Cap Growth +.2%

Sector Underperformers:

• 1) Utilities -1.0% 2) Oil Tankers -.9% 3) Medical Equipment -.8%

Stocks Falling on Unusual Volume:

• FIVN, HCLP, BOBE, CRAY, PRGO, CWCO, WFM, ZBIO, GBT, TARO, EW, SCG, VNET, UTG, HEP, UTHR, NWE, FRGI, CAH, RYAAY, CTRP, PLAY, MORN, HSY and UNF

Stocks With Unusual Put Option Activity:

• 1) TWTR 2) XOPP 3) PSX 4) WFM 5) XLF

Stocks With Most Negative News Mentions:

• 1) WFM 2) UTHR 3) CSCO 4) ODP 5) COP

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.8%

Sector Outperformers:

• 1) Disk Drives +3.5% 2) Steel +2.5% 3) Gold & Silver +1.8%

Stocks Rising on Unusual Volume:

• HMNY, SGRY, EMES, TWTR, GKOS, JUNO and ACIA

Stocks With Unusual Call Option Activity:

• 1) PPL 2) EXAS 3) NRG 4) JUNO 5) HSY

Stocks With Most Positive News Mentions:

• 1) ODP 2) X 3) HOG 4) BBBY 5) ANF

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -16.8% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 74.1% of Issues Advancing, 22.9% Declining
• 43 New 52-Week Highs, 8 New Lows
• 53.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.5%
• Vix 19.2 -6.2%
• Total Put/Call 1.50 +45.63%
• TRIN/Arms .83 -39.14%

Wednesday Watch

Evening Headlines
Bloomberg: 

• Chinese Stocks Denied MSCI Entry in Blow to Xi’s Ambitions. China’s domestic equities were denied entry into MSCI Inc.’s benchmark indexes for a third time, a setback for President Xi Jinping’s efforts to raise the profile of mainland markets and turn the yuan into an international currency. The index compiler cited the need for additional improvements in the accessibility of the A-share market for the decision, according to a statement on Tuesday. MSCI, whose emerging-market index is tracked by investors with $1.5 trillion in assets, said it will reconsider inclusion in its 2017 market classification review, while not ruling out an earlier announcement. China was rejected despite a flurry of measures this year to address MSCI’s concerns, including curbs on arbitrary trading halts and looser restrictions on cross-border capital flows. The decision suggests international investors are still uncomfortable putting their money in the $6 trillion market after a botched government campaign to prop up share prices roiled global equities last year.
• Yuan Declines to Five-Year Low as Concern Over Outflows Deepens. China’s yuan weakened to a five-year low, weighed down by signs of a slowing economy and concern that capital outflows may accelerate. The currency fell 0.19 percent to 6.5966 per dollar by the close on Tuesday in Shanghai, according to quotes from China Foreign Exchange Trading System. That’s the lowest for the yuan since February 2011 and extending its drop over the past month to 1 percent. The decline came before MSCI Inc. decided against including mainland shares in benchmark indexes. The offshore yuan weakened to as low as 6.6155 after the announcement, the lowest since February, before paring declines.
• Republican Senators Lose Hope That Donald Trump Will Change. South Dakota Senator John Thune, the No. 3 Republican, said Trump's recent statements have been "concerning" and reflect his style throughout the campaign. "Everything he's said in the last couple of weeks has been concerning," Thune said. "I think the message has been conveyed from our members. And we're, I guess, hoping that he'll take it to heart." Then he rolled his eyes, admitting that strategy doesn't seem to be working "at the moment.

Wall Street Journal:

• Orlando Gunman’s Outspoken Father Becomes a Vivid Figure. In rambling talk with reporters, Seddique Mateen expresses bafflement at son’s actions.

Fox News:

• Federal prosecutors convene grand jury to investigate wife of Orlando massacre gunman, source says. (video) Federal prosecutors have convened a grand jury to investigate the wife of the Orlando nightclub shooter, seeking to charge her as an accessory to 49 counts of murder and 53 counts of attempted murder as well as with failure to notify law enforcement about the pending terrorist attack and lying to federal agents, a federal law enforcement source confirmed Tuesday to FoxNews.com.

CNBC:

• One Kings Lane: From almost $1 billion to 'not material'. One Kings Lane, an online retailer, raised money in 2014 at a valuation of close to $1 billion. Now it hardly carries a price tag. Bed Bath & Beyond said Tuesday that it acquired One Kings Lane in an all-cash deal, and the purchase price was "not material."

Zero Hedge:

• This Is The Contract The Orlando Killer's Employer Signed With DHS To Transport Illegal Immigrants, Potential Terrorists.
• An Inconvenient Truth: How The Obama Administration Became Earth's Largest Arms Dealer.
• Is America Waking Up? New Gallup Poll Reveals Americans Less Confident In Core Institutions - Especially Banks.
• How Low Can Bond Yields Go? Lower. (graph)
• Russia Is Reportedly Set To Release Clinton's Intercepted Emails.
• China ETF Tumbles After MSCI Snubs China For 2nd Time, Delays Inclusion In Emerging Market Index.
• Oil Tumbles To $47 Handle After Unexpected Crude Inventory Builds Across The Entire Complex. (graph)
• "There Is A General Softening In The Consumer's Ability To Pay" - Why Credit Card Companies Are Crashing.
• Stocks Plunge Most In 4 Months As Yuan Turmoils To 5-Year Lows. (graph)

Business Insider: 

• The single most devastating statistic for Donald Trump in new major national poll. An overwhelming 55% of total respondents said they could never support Trump. In comparison, 43% of those polled said they could never support Clinton. 
• ‘Discouraged’: GOP leaders give brutal assessment of Trump’s immediate reaction to Orlando attack.
• GUNDLACH: It's going to be a rocky summer.
• Alibaba(BABA) CEO Jack Ma: Fakes are often better than the real thing.

Night Trading 

• Asian equity indices are -.5% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 149.5 +2.25 basis points. 
• Asia Pacific Sovereign CDS Index 55.50 +1.0 basis point.
• Bloomberg Emerging Markets Currency Index 71.15 -.08%. 
• S&P 500 futures +.01%. 
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (CTRP)/-.06
• (JBL)/.15
• (KFY)/.54

Economic Releases  
8:30 am EST

• PPI Final Demand MoM for May is estimated to rise +.3% versus a +.2% gain in April.
• PPI Ex Food and Energy MoM for May is estimated to rise +.1% versus a +.1% gain in April.
• Empire Manufacturing for June is estimated to rise to -4.5 versus -9.02 in May.

9:15 am EST

• Industrial Production MoM for May is estimated to fall -.2% versus a +.7% gain in April.
• Capacity Utilization for May is estimated to fall to 75.2% versus 75.4% in April.
• Manufacturing Production for May is estimated to fall -.1% versus a +.3% gain in April. 

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,127,780 barrels versus a -3,226,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -650,000 barrels versus a +1,010,000 increase the prior week. Distillate supplies are estimated to fall by -66,670 barrels versus a +1,754,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.41% versus a +1.1% gain prior.
  

2:00 pm EST

• The FOMC is expected to keep the benchmark Fed Funds rate at .25%-.5%.

4:00 pm EST

• Net Long-Term TIC Flows for April. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Yellen Press Conference, FOMC Policy Update/Economic Projections, BoJ rate decision, weekly MBA mortgage applications report and the (BLK) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity and technology 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.

Stocks Lower into Final Hour on Escalating Brexit Fears, Rising Eurozone/Emerging Markets/US High-Yield Debt Angst, Emerging Market Currency Worries, Transport/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 20.87 -.48%

• Euro/Yen Carry Return Index 124.15 -.9%

• Emerging Markets Currency Volatility(VXY) 11.29 +2.54%

• S&P 500 Implied Correlation 60.21 -3.18%

• ISE Sentiment Index 83.0 +23.53%

• Total Put/Call 1.01 +8.6%

• NYSE Arms 1.64 +25.98% 

Credit Investor Angst:

• North American Investment Grade CDS Index 84.69 +3.83%
  

• America Energy Sector High-Yield CDS Index 764.0 +1.64%

• European Financial Sector CDS Index 114.62 +6.08%

• Western Europe Sovereign Debt CDS Index 29.96 +5.12%

• Asia Pacific Sovereign Debt CDS Index 55.36 +1.72%

• Emerging Market CDS Index 310.04 +3.45%
  

• iBoxx Offshore RMB China Corporate High Yield Index 129.28 -.17%

• 2-Year Swap Spread 15.25 +1.0 basis point
  

• TED Spread 38.5 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -37.0 -4.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.20 -.57%
• 3-Month T-Bill Yield .27% +2.0 basis points

• Yield Curve 89.0 -1.0 basis point
  

• China Import Iron Ore Spot $50.57/Metric Tonne -4.42%

• Citi US Economic Surprise Index -22.30 +.6 point

• Citi Eurozone Economic Surprise Index -4.20 +.5 point

• Citi Emerging Markets Economic Surprise Index -1.7 -.6 point

• 10-Year TIPS Spread 1.48% -3.0 basis points
  
• 17.6% chance of Fed rate hike at July 27 meeting, 32.2% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -120 open in Japan 
• China A50 Futures: Indicating -326 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging market shorts
  

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• Brexit Camp Is Ahead in Fifth U.K. Opinion Poll in 24 Hours. (video) The campaign for Britain to leave the European Union led in a fifth opinion poll published over the past 24 hours, showing Prime Minister David Cameron is foundering in his efforts to persuade voters to reject a so-called Brexit. The pound fell to a two-month low. The online survey of 2,497 adults carried out by TNS June 7-13 found 47 percent backing “Leave” and 40 percent for “Remain.” It comes after four phone and online surveys released Monday by ICM, YouGov Plc and ORB showed leads of between 1 point and 7 points.
• China Near-Term Outlook Buoyed as Medium-Term Risks Rise: IMF. (video) China’s near-term economic outlook is being buoyed by policy support even as its medium-term prospects become more uncertain because of rapidly rising credit, excess industrial capacity and financial sector risks, the International Monetary Fund said. Overall reforms have advanced impressively in areas from shifting to services as a greater driver of growth to liberalization of financial markets, the IMF Deputy Managing Director David Lipton said in a press statement at the conclusion of its annual Article IV review of China’s economy in Beijing. Because of a lack of progress reining in credit growth and hardening budget constraints on state enterprises, vulnerabilities are still rising even as the buffers to deal with shocks are eroding, he said.
• Yuan Approaches Five-Year Low Amid Concern Over Economy, Brexit. The yuan drew closer to a five-year low as concern over China’s economic slowdown and Britain’s vote on European Union membership spurred selling in riskier assets. The Chinese currency traded within 0.1 percent of its low set in January after slumping the most in a month on Monday. The exchange rate fell 0.11 percent to 6.5917 a dollar as of 4:53 p.m., and dropped to its lowest level since 2014 versus trading peers including the yen and the euro. Volatility in China’s financial markets is growing amid speculation authorities won’t add to stimulus even as the economic outlook deteriorates. The Shanghai Composite Index tumbled the most in three months on Monday before MSCI Inc.’s decision Wednesday on whether to add yuan-denominated shares in its global indexes. 
• Sub-Zero Bond Yields Strike the German 10-Year. (video)
• Bond Risk Rises in Europe With Brexit Concerns as Issuance Slows. Corporate bond risk surged in Europe and issuance slowed as concern grew that the U.K. will vote to leave the European Union. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies rose for a fourth day, climbing to a three-month high of 87 basis points, according to data compiled by Bloomberg. Non-financial companies sold about 14 billion euros of bonds this month, compared with about 30 billion euros in the same period in May, according to data compiled by Bloomberg. “There’s massive insecurity in the market,” said Anthony Peters, a strategist at Sol Capital Markets. “Who’s going to commit their customers’ money if they don’t know what happens next?”
• Brazil Stocks, Real Decline Amid Brexit Concern as Vale Retreats. The Ibovespa led losses among major equity benchmarks in the world and the real retreated amid increased angst over the possibility of the U.K. leaving the European Union and as commodities slumped. Vale SA, the world’s largest iron-ore producer, and state-controlled oil producer Petroleo Brasileiro SA were among the index’s biggest losers on Tuesday. Raw-material companies, which account for 21 percent of the Ibovespa’s weighting, have been hit as the prices of their products fall on the uncertainties regarding global growth. The real dropped 0.3 percent to 3.4945 per dollar. The Ibovespa dropped 2.4 percent to 48,460.65 at 3:17 p.m. in Sao Paulo as all but one of its 59 stocks fell. Vale and Petrobras dropped at least 2.3 percent, while the Bloomberg Commodity Index slumped.
• European Stocks Slide for Fifth Day as Brexit, Fed Decision Loom. (video) Stocks in Europe fell to an almost four-month low as speculation intensified that Britain will vote to leave the European Union and traders awaited central-bank meetings. The Stoxx Europe 600 Index dropped 1.9 percent at the close of trading. The benchmark capped its worst five-day plunge since February as Britain’s largest-selling newspaper backed a so-called Brexit and five polls put the U.K.’s “Leave” campaign ahead of “Remain,” before the June 23 referendum. The pound fell, and Germany’s 10-year bund yield dropped below zero for the first time ever. A measure of euro-area stock volatility jumped 12 percent, taking its five-day gain to 64 percent, as investorsalso prepared for policy reviews by the Federal Reserve and the Bank of Japan tomorrow. All 19 groups on the Stoxx 600 fell, with miners and energy shares sliding the most.
• Oil Drops as Dollar Strength Curbs Investors’ Commodity Appetite. Oil fell to the lowest level in more than a week as risk aversion among investors sent equities lower and bolstered the U.S. dollar, reducing the appetite for commodities. Futures lost as much as 1.8 percent in New York after falling 4.6 percent the previous three sessions.
• U.S. Recession Odds Climb to 55% as Yield Curve Flattens: Chart.
• Credit-Card Issuers Fall as Synchrony Sees Higher Write-Offs. Credit-card issuers were the worst performers among financial stocks Tuesday after Synchrony Financial said it expects higher write-offs within the next year as consumers struggle to repay loans. Synchrony tumbled as much as 15 percent, the biggest drop since its 2014 initial public offering, and American Express Co. fell 3.9 percent, the most in the Dow Jones Industrial Average. Capital One Financial Corp. and Discover Financial Services also slid.

Fox News:

• Wife of nightclub shooter knew of deadly plans, source says. (video)

Zero Hedge:

• JPM's Quant Guru Unveils The $1 Trillion Catalyst That Will Unleash The Next Market In Turmoil.
• S&P Breaks Below Crucial Support As BofAML Warns Of Bearish "Shooting Star".
• Meet Noor Zahi Salman: The Orlando Shooter's Mysterious Second Wife Knew Of His Plans, May Be Charged.
• Business Inventories/Sales Ratio Hovers At Recessionary Highs Despite 'Adjusted' Car Sales Surge. (graph)
• European Funding Stress Emerges As Credit Suisse, Deutsche Bank Collapse To Record Lows. (graph)
• Cameron’s Deceit And Lies: What He Promised, What He Delivered.
• Retail Sales Growth Slows As 'Home-Buying'-Proxy Tumbles. (graph)
• The Selling Returns With A Vengeance: The "Smart Money" Dumps Most Stocks Since mid-April.

Business Insider:

• Russian hackers breached DNC computer network, stole opposition research on Trump.
• A rule has been broken on Wall Street, and 'any banker with a brain' is now looking for an exit.
• Uber is turning to the riskiest part of the debt market to raise up to another $2 billion.
• Florida governor: Obama 'has not called' after Orlando terror attack.
• Donald Trump revokes The Washington Post's press credentials over 'dishonest' headline.