Morning Market Internals

NYSE Composite Index:

• Volume Running -18.3% Below 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 50.7% of Issues Advancing, 44.3% Declining
• 43 New 52-Week Highs, 4 New Lows
• 56.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.2%
• Vix 13.3 +7.3%
• Total Put/Call .80 -12.1%
• TRIN/Arms 1.10 -9.5%

Stocks Slightly Higher into Final Hour on Economic Optimism, Oil Gain, Yen Weakness, Financial/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.83 -8.2%

• Euro/Yen Carry Return Index 123.17 -.07%

• Emerging Markets Currency Volatility(VXY) 9.26 +1.54%

• S&P 500 Implied Correlation 43.16 -3.66%

• ISE Sentiment Index 120.0 +81.82%
  

• Total Put/Call .92 +1.1%

• NYSE Arms 1.11 -21.29%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.47 -.83%
  

• America Energy Sector High-Yield CDS Index 349.0 -1.07%

• European Financial Sector CDS Index 89.01 -2.48%

• Western Europe Sovereign Debt CDS Index 12.78 -.39%

• Asia Pacific Sovereign Debt CDS Index 21.01 +.41%

• Emerging Market CDS Index 210.08 -.64%
  

• iBoxx Offshore RMB China Corporate High Yield Index 136.66 +.19%

• 2-Year Swap Spread 34.0 +.5 basis point

• TED Spread 35.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -22.75 -.5 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.84 +.02%
• 3-Month T-Bill Yield .80% unch.
  

• Yield Curve 110.0 unch.
  

• China Import Iron Ore Spot $80.92/Metric Tonne -.76%

• Citi US Economic Surprise Index 47.30 +1.6 points

• Citi Eurozone Economic Surprise Index 36.0 -1.6 points

• Citi Emerging Markets Economic Surprise Index 29.60 -8.0 points

• 10-Year TIPS Spread 1.96 -1.0 basis point
  
• 63.2% chance of Fed rate hike at June 14 meeting, 67.3% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +155 open in Japan 
• China A50 Futures: Indicating +6 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Draghi Draws Line Under ECB Rate Debate and Warns on Prices. (video) Mario Draghi sought to quash the idea that the European Central Bank will begin tightening policy sooner than planned, saying that inflation in the euro area isn’t strong enough for officials to start signaling such a shift. “I do not see cause to deviate from the indications we have been consistently providing in the introductory statement to our press conferences,” the ECB President said in a speech in Frankfurt on Thursday. “We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook -- which remains conditional on a very substantial degree of monetary accommodation.”

• Mobius Says China Stocks Are Too Expensive After Tech-Led Surge. Mark Mobius is tempering his bullishness toward China’s equity market. The legendary emerging-market investor says Chinese shares traded offshore have become too pricey after an almost 20 percent jump in technology stocks helped propel the MSCI China Index to its most expensive level in more than six years.

• China's Local Debt Nightmare Is Getting a Rerun After Rating Cut. The first ever downgrade of a Chinese local-government financing vehicle by an international ratings agency is reigniting concern over the debt-saddled entities, amid angst there could be more cuts to come. S&P Global Ratings reduced its credit rating on Jiangsu NewHeadline Development Group, a construction services provider and one of the largest financing firms owned by Lianyungang City -- in China’s eastern Jiangsu province -- by one notch to BB Thursday. S&P attributed the cut to the local government’s high debt burden and said the LGFV’s credit profile will remain under pressure for the next two years.

• European Stocks Advance as Energy Rally Outweighs Fed Concern. (video) European stocks rose as a rally in oil companies offset concern over minutes from the last Federal Reserve meeting that showed policy makers may shrink the U.S. central bank’s balance sheet this year. The Stoxx Europe 600 Index rose 0.2 percent at the close, after losing as much as 0.8 percent earlier in the day. Real estate companies closed at the highest level since October, while energy shares tracked an advance in oil. Lenders gained 0.3 percent, after reversing a drop of as much as 1.3 percent, as concern eased that a balance-sheet reduction could damp the need for the Fed to raise interest rates.

• Congressional Clock Running Out on Repealing Obama's Late Rule. (video) Hunting bears by airplane is legal again in Alaska and the mentally-ill can purchase guns thanks to Republicans’ successful use of a once-obscure law allowing them to quickly roll back regulations. But with a key deadline for using what’s known as the Congressional Review Act looming, plenty of other rules targeted for elimination are likely to be spared -- or fall into the longer, laborious process of review by the administration.

• Fed's Williams Sees Balance-Sheet Shrinking Taking Five Years. (video) Federal Reserve Bank of San Francisco President John Williams said it may take the U.S. central bank around five years to shrink its balance sheet to a more normal size once that process gets underway. Speaking with reporters Thursday in Frankfurt, Williams said it made sense to begin the roll-off toward the end of 2017. The length of time it takes would depend on how far officials want to trim a balance sheet swollen to $4.5 trillion by three rounds of asset purchases designed to protect the U.S. economy from the financial crisis.

• Facebook(FB) Starts to Educate Users on How to Spot Fake News. 

• Consumer Comfort in U.S. Rises for Fifth Time in Last Six Weeks. 

• Rue21 Said to Ready Bankruptcy Filing as Soon as This Month.

Wall Street Journal:

• Why Americans Are More Likely to Work for a Large Employer, in 20 Charts.

• Not a Dot-Com Bubble, not 2007, but a Nasty Mix of Both. There is so much more debt than usual being piled up by companies outside the finance sector.

Fox News:

• Republicans go ‘nuclear,’ bust through Democratic filibuster on Gorsuch. (video)

• Harvard students say Trump is more dangerous than ISIS. (video)

CNBC:

• What can the Fed buy with its behemoth balance sheet?

• Iowa Obamacare market gets second big hit as insurer Aetna says it will drop out in 2018.

Zero Hedge:

• Senate Republicans Trigger Nuclear Option, "Crushing Democratic Blockade" Of Gorsuch.

• What Trump's Border Wall May Look Like: Here Are The Proposed Designs.

• Gary Cohn Backs Reinstating Glass-Steagal, Breaking Up Big Banks.

• Kashkari Slams Dimon: "If Demand For Loans Is High, Why Are You Buying Back Your Stock?"

• Report Shows Spy Agencies "Routinely" Unmasked Lawmakers' "Everyday Lives".

• OPEC's No.2 Goes Rogue: Plans 600,000 Bpd Oil Output Increase.

• Trump Tells Members Of Congress He Is Considering Military Action In Syria.

• NY Fed Disagrees With Minutes: Does Not Expect Balance Sheet Renormalization Until Mid-2018.

• Initial Jobless Claims Suddenly Crash By Most In 2 Years. (graph)

• Janet Yellen To Hold Previously Unannounced Speech On Monday, Take Twitter Questions.

• House Intel Committee Chair Nunes Recuses Himself From Russia Probe.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.3%

Sector Underperformers:

• 1) Gold & Silver -.3% 2) Utilities -.2% 3) Oil Tankers -.2%

Stocks Falling on Unusual Volume: 

• CAFD, WGO, RECN, MSM, NLNK, AMD, CHU and SEAS

Stocks With Unusual Put Option Activity:

• 1) KMX 2) STZ 3) HBI 4) BBBY 5) K

Stocks With Most Negative News Mentions:

• 1) CAFD 2) NAT 3) BG 4) AL 5) SGYP

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.0%

Sector Outperformers:

• 1) Coal +3.2% 2) Gaming +1.7% 3) Retail +1.7%

Stocks Rising on Unusual Volume:

• AKTX, EVBG, SUN, BBBY, YUMC, KMX, JAZZ, FGEN, LB, REI, HOFT, STZ, ZLTQ, FRED, COOL, AAOI, GBX, NTNX, TEAM, ENV, VEC, SALT, AN, KSS, LW, NVCR, CARA, ZUMZ and LW

Stocks With Unusual Call Option Activity:

• 1) BBBY 2) XLB 3) STZ 4) KMX 5) XRT

Stocks With Most Positive News Mentions:

• 1) AEHR 2) STZ 3) DXC 4) RUSHA 5) BBBY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -12.1% Below 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 54.9% of Issues Advancing, 40.8% Declining
• 22 New 52-Week Highs, 19 New Lows
• 54.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.2%
• Vix 12.3 -4.3%
• Total Put/Call .98 +7.7%
• TRIN/Arms .65 -54.0%