Stocks Slightly Lower into Final Hour on Less Economic Optimism, Oil Decline, Technical Selling, Energy/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.29 +1.78%

• Euro/Yen Carry Return Index 127.76 +.41%

• Emerging Markets Currency Volatility(VXY) 8.55 -1.72%

• S&P 500 Implied Correlation 42.34 +1.24%

• ISE Sentiment Index 103.0 +9.57%
  

• Total Put/Call .69 -17.86%

• NYSE Arms .96 -25.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.27 -.45%
  

• America Energy Sector High-Yield CDS Index 371.0 +.14%

• European Financial Sector CDS Index 72.24 -2.47%

• Western Europe Sovereign Debt CDS Index 9.71 +4.19%

• Asia Pacific Sovereign Debt CDS Index 22.02 -1.81%

• Emerging Market CDS Index 190.83 -2.32%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.07 -.06%

• 2-Year Swap Spread 30.50 unch.

• TED Spread 33.5 -4.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -32.5 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.47 +.23%
• 3-Month T-Bill Yield .84% +4.0 basis points
  

• Yield Curve 103.0 -1.0 basis point
  

• China Import Iron Ore Spot $68.80/Metric Tonne-.12

• Citi US Economic Surprise Index -21.50 -.9 point

• Citi Eurozone Economic Surprise Index 65.50 +3.0 points

• Citi Emerging Markets Economic Surprise Index 34.7 -4.6 points

• 10-Year TIPS Spread 1.89 -4.0 basis points
  
• 67.1% chance of Fed rate hike at June 14 meeting, 70.0% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +37 open in Japan 
• China A50 Futures: Indicating -7 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.2%

Sector Outperformers:

• 1) Hospitals +10.1% 2) Coal +4.5% 3) Airlines +2.0%

Stocks Rising on Unusual Volume:

• CHGG, IAC, LMAT, THC, LMNX, SHOP, COH, GLPG, CYH, CACC, IRTC, SYF, TWTR, TXRH, CGNX, INST, CMI, BZUN, EPC, IPGP, WLK, ARCH, DORM, BSFT, CMCM, CYH, PBI, RCII, NTNX, GPRE, NLS, IPGP, MLM, ECHO, CMI, W, EPC, CSU and HLT

Stocks With Unusual Call Option Activity:

• 1) COH 2) ULTA 3) MA 4) MOS 5) TRN

Stocks With Most Positive News Mentions:

• 1) CGNX 2) THC 3) COH 4) CMI 5) DAL

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +13.1% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 47.1% of Issues Advancing, 48.1% Declining
• 135 New 52-Week Highs, 20 New Lows
• 55.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.4%
• Vix 10.2 +.9%
• Total Put/Call .78 -7.1%
• TRIN/Arms 1.0 -22.7%

Tuesday Watch

Evening Headlines

Bloomberg:

• Japanese Stocks Climb as Yen Weakens; Bonds Slip. Stocks in Japan climbed as the yen weakened for a fourth day, with most of Asia’s other major equity markets returning from holidays to kick off their trading week. Equities in Tokyo and Seoul led gains in Asia after U.S. shares advanced, pushing the Nasdaq Composite Index to an all-time high. The yield on 10-year Treasuries jumped as the U.S. Treasury secretary said his department is considering debt longer than 30 years. Oil traded near a one-month low. The Australian dollar extended gains ahead of the Reserve Bank of Australia’s decision on policy. The yen traded at 111.91 per dollar as of 9:28 a.m. in Tokyo, slightly lower following a 0.3 percent slide on Monday. The Topix index rose 0.5 percent, climbing for a second day to the highest since March. South Korea’s Kospi index advanced 0.6 percent, approaching its all-time high. Australia’s S&P/ASX 200 Index slipped 0.3 percent, breaking a seven-day rally. Markets in China, Hong Kong, Singapore, the U.K. and Germany are among those reopening after a holiday. 
• Pipeline Companies Push Back Against Trump's ‘Buy American’ Rule. A directive requiring U.S. pipeline companies to use American steel and iron in their projects is testing President Donald Trump’s ability to keep his promises to two industries on opposing sides of the issue. In comments to the U.S. Department of Commerce, which is crafting the so-called "Buy American" plan, pipeline companies and their trade groups argued the change would increase costs and disrupt operations. Steel companies, meanwhile, embraced the policy as an opportunity to take advantage of the country’s surging oil and gas production. And Trump has vowed to support both. 
• Trump's U.S. Looks Past Energy Independence to Global Dominance. The U.S. is in the position to be energy-dominant, not just independent, thanks to fracking and plans to loosen drilling regulations, Interior Secretary Ryan Zinke said Monday. Oil production across the U.S. may increase by 17 percent to a record 10.24 million barrels a day by the end of next year as companies cut costs and become more efficient in drilling, especially in areas such as West Texas and North Dakota. Domestic output hasn’t surpassed 10 million barrels a day since 1970. At a time when OPEC and other producers are cutting output, U.S. exports surged above 1 million barrels a day for the first time. 
• IAC(IAC) to Buy Angie's(ANGI) List in Deal Valued at Over $500 Million.

Wall Street Journal:

• Donald Trump Gambles on Big Health-Care Victory. White House makes concessions on spending bill to devote all its energy to rounding up House votes against Affordable Care Act.
• Goldman Sachs(GS) Embraces Banking’s Bland Side: Lending Money. The investment bank, seeking growth beyond its elite Wall Street turf, is moving to finance corporate takeovers, lend against mansions and make personal loans for things such as kitchen remodels.
• Trump Preparing To Replace Top Banking Regulator – Sources. Thomas Curry could be replaced this week.
• Apple’s(AAPL) Cash Hoard Set to Top $250 Billion. Tech giant’s unequaled stash draws calls for buybacks, acquisitions as corporate tax shift looms.

Fox News:

• Trump mum on North Korea red line, says: 'I act if I have to act'. (video)

CNBC:

• Economic model predicts Trump may get that GDP surge he wants this quarter.

Zero Hedge:

• "That's Enough" - Angry Trump Kicks CBS Reporter Out Of Oval Office.
• Elizabeth Warren Blasts Ignorant Obama For Abandoning Working Class That's "Getting Kicked In The Teeth".
• Trump Calls Bannon "Alt-Left", Says He "Isn't Going Anywhere".
• Melissa Zimdars Exposed: The Truth About The "Fake News" List From Its Creator.
• As Incentives Soar, Auto OEMs Argue That Sticker Prices Are Dragging Down Sales.
• Nasdaq Flies As Risk Dies And Traders Buy The Bank-Break-Up Dip. (graph)
• 51% Of Murders In The U.S. Come From Just 2% Of The Counties. (map)
• Trump Destroys Michelle O's Legacy; Makes School Lunches Great Again.

Night Trading 

• Asian equity indices are unch. to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 93.25 -1.25 basis points. 
• Asia Pacific Sovereign CDS Index 22.5 +.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.38 +.1%.
• S&P 500 futures -.05%. 
• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AET)/2.35
• (MO)/.74
• (ADM)/.62
• (BDX)/2.23
• (BP)/.07
• (COH)/.44
• (COP)/.03
• (CMI)/1.80
• (CVS)/1.10
• (ETN)/.88
• (EMR)/.58
• (HCA)/1.74
• (HCP)/.48
• (HLT)/.28
• (LL)/-.20
• (MA)/.95
• (MRK)/.83
• (MOS)/.20
• (PFE)/.67
• (SMG)/2.89
• (AKAM)/.67
• (APC)/-.25
• (AAPL)/2.02
• (FSLR)/-.15
• (GILD)/2.28
• (MDLZ)/.50
• (PZZA)/.74
• (WBMD)/.27

Economic Releases  
Afternoon

• Total Vehicle Sales for April are estimated to rise to 17.13M versus 16.53M in March.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI report, weekly US retail sales reports, (F) April sales call, (DAL) April Traffic report, (MSFT) product event and the (XLNX) analyst meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Healthcare/Tax Reform Hopes, Earnings Optimism, Yen Weakness, Tech/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 10.24 -5.36%

• Euro/Yen Carry Return Index 127.30 +.34%

• Emerging Markets Currency Volatility(VXY) 8.67 +.70%

• S&P 500 Implied Correlation 41.79 -3.15%

• ISE Sentiment Index 91.0 +26.39%
  

• Total Put/Call .83 -13.54%

• NYSE Arms 1.0 -15.18%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.31 -.8%
  

• America Energy Sector High-Yield CDS Index 372.0 -.24%

• European Financial Sector CDS Index 74.05 -.20%

• Western Europe Sovereign Debt CDS Index 9.31 +1.53%

• Asia Pacific Sovereign Debt CDS Index 22.43 +.74%

• Emerging Market CDS Index 195.54 +.03%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.19 +.02%

• 2-Year Swap Spread 30.0 -1.25 basis points

• TED Spread 37.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -33.5 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.32 +.03%
• 3-Month T-Bill Yield .80% unch.
  

• Yield Curve 104.0 +2.0 basis points
  

• China Import Iron Ore Spot $68.80/Metric Tonne n/a

• Citi US Economic Surprise Index -20.60 -15.8 points

• Citi Eurozone Economic Surprise Index 68.50 -1.9 points

• Citi Emerging Markets Economic Surprise Index 39.3 -.2 point

• 10-Year TIPS Spread 1.93 -1.0 basis point
  
• 69.7% chance of Fed rate hike at June 14 meeting, 72.0% chance at July 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +65 open in Japan 
• China A50 Futures: Indicating -5 open in China

• DAX Futures: Indicating +29 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long