Thursday Watch

Night Trading 

• Asian equity indices are -.5% to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 92.25 -.5 basis point. 
• Asia Pacific Sovereign CDS Index 21.75 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.34 unch.
• S&P 500 futures +.12%. 
• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (APA)/.16
• (AVP)/.01
• (ARW)/1.44
• (AVP)/.01
• (CAB)/.38
• (CHK)/.17
• (DBD)/.01
• (D)/.95
• (H)/.32
• (K)/1.00
• (MBLY)/.24
• (PWR)/.41
• (REGN)/3.07
• (SFM)/.30
• (VIAB)/.59
• (ZTS)/.48
• (CBS)/.95
• (MRO)/-.10
• (MNST)/.32
• (SHAK)/.08
• (OLED)/.00
• (YRCW)/-.21
• (ZG)/.05

Economic Releases  

7:30 am EST

• Challenger Job Cuts YoY for April.

8:30 am EST

• The Trade Deficit for March is estimated to widen to -$44.5B versus -$43.6B in February.
• Preliminary 1Q Non-Farm Productivity is estimated to fall -.1% versus a +1.3% gain in 4Q. 
• Preliminary 1Q Unit Labor Costs are estimated to rise +2.7% versus a +1.7% gain in 4Q.
• Initial Jobless Claims are estimated to fall to 248K versus 257K the prior week.
• Continuing Claims are estimated to rise to 1990K versus 1988K prior.

10:00 am EST

• Factory Orders for March are estimated to rise +.4% versus a +1.0% gain in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Manufacturing Services report, Eurozone Services PMI report, ECB's Mario Draghi speaking, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, (WHR) investor day, (VZ) annual meeting and the (BKE)/(CATO)/(FRED)/(LB) monthly sales reports could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and consumer 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 Slightly Lower into Final Hour on Earnings Concerns, Fed Rate Hike Fears, Profit-Taking, Telecom/Hospital Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.80 +1.98%

• Euro/Yen Carry Return Index 128.11 +.23%

• Emerging Markets Currency Volatility(VXY) 8.47 -1.17%

• S&P 500 Implied Correlation 43.45 +8.0%

• ISE Sentiment Index 71.0 -25.26%
  

• Total Put/Call 1.05 +40.0%

• NYSE Arms .78 -23.21%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.74 -.62%
  

• America Energy Sector High-Yield CDS Index 373.0 +.1%

• European Financial Sector CDS Index 71.29 -1.17%

• Western Europe Sovereign Debt CDS Index 8.26 -14.5%

• Asia Pacific Sovereign Debt CDS Index 21.74 -1.18%

• Emerging Market CDS Index 191.78 +.74%
  

• iBoxx Offshore RMB China Corporate High Yield Index 137.10 +.02%

• 2-Year Swap Spread 29.0 -1.5 basis points

• TED Spread 31.5 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -32.25 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.42 -.07%
• 3-Month T-Bill Yield .86% +2.0 basis points
  

• Yield Curve 102.0 -1.0 basis point
  

• China Import Iron Ore Spot $68.68/Metric Tonne -.06%

• Citi US Economic Surprise Index -19.50 +2.0 points

• Citi Eurozone Economic Surprise Index 65.80 +.3 point

• Citi Emerging Markets Economic Surprise Index 33.0 -1.7 points

• 10-Year TIPS Spread 1.88 -1.0 basis point
  
• 88.4% chance of Fed rate hike at July 26 meeting, 93.1% chance at Sept. 20 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +170 open in Japan 
• China A50 Futures: Indicating -20 open in China

• DAX Futures: Indicating +15 open in Germany

Portfolio: 

• Slightly Lower: On gains in my retail/biotech sector longs 

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.1%

Sector Underperformers:

• 1) Hospitals -4.9% 2) Steel -4.3% 3) Telecom -2.8%

Stocks Falling on Unusual Volume: 

• IPHI, FLT, AKAM, PBPB, TWLO, DXCM, ETSY, TAP, APC, BG, AZPN, NANO, NXTM, VRSK, ARCC, BOJA, LCI, ADP, NBL, DISCA, PDCE, SNI, DVA, BCC, OMI, DENN, TSE, XOG, VIAB, HBI, CRAY, AERI and SPR

Stocks With Unusual Put Option Activity:

• 1) EPI 2) NUS 3) ETSY 4) GRPN 5) AKAM

Stocks With Most Negative News Mentions:

• 1) PBPB 2) AKAM 3) TWLO 4) ETSY 5) APC

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.1%

Sector Outperformers:

• 1) Gold & Silver +1.1% 2) Airlines +.5% 3) Semis +.4%

Stocks Rising on Unusual Volume:

• OB, MOH, ANGI, DLPH, XENT, FEYE, USNA, HSC, CLDR, FSLR, BYD, CVLT, CRCM, NYT, RM, WD, BPI, WTW, RPXC, AMED, EVHC, HUBS, STRP, BERY, TNET, VWR, LNTH, RRD, MYGN, QUAD, CTXS, RYAM, AIZ, QLYS, BDC, WCG, PAYC, EL, RSPP, SUM and CG

Stocks With Unusual Call Option Activity:

• 1) CMCSA 2) ETFC 3) FEYE 4) FLT 5) RH

Stocks With Most Positive News Mentions:

• 1) FSLR 2) FEYE 3) BYD 4) MOH 5) EL

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.4% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 29.2% of Issues Advancing, 66.0% Declining
• 83 New 52-Week Highs, 37 New Lows
• 55.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.0%
• Vix 10.8 +1.8%
• Total Put/Call 1.15 +53.3%
• TRIN/Arms .75 -26.4%

Wednesday Watch

Evening Headlines

Bloomberg:

• China's Rust-Belt Rebound Is Under Threat From Slowing Inflation. China’s former industrial heartland is being helped out of its economic malaise by surging producer prices and government spending. Those supports may be about to weaken. Two of the biggest laggards posted turnarounds in the first quarter. Growth returned to Liaoning, the heavy-industry base in the northeast, where gross domestic product expanded by 2.4 percent, compared to the 2.5 percent contraction in the same period last year. Shanxi, the northern coal-mining province mired for years in producer-price deflation and excess capacity, grew 6.1 percent versus 4.5 percent in 2016.

• China Stock Traders Are Most Defensive in Years on Growth Doubts.

• Aussie Stocks Drop, Taiwan Bucks Poor Apple(AAPL) Result. A poor Apple Inc. earnings report proved no bar to gains in Taiwan’s electronics-rich stock market and its dollar, while and Australian shares slipped in Asia-Pacific trading lulled by market closures ahead of the Federal Reserve’s policy meeting. Apple fell in after-hours U.S. trading after reporting falling iPhone sales, pulling Nasdaq futures with it. Yet Taiwanese assets advanced, underscoring investors’ continuing appetite for emerging markets amid an upturn in global trade. The kiwi climbed as New Zealand’s jobless rate came in below forecast, while crude rebounded back above $48 a barrel. Equity markets in Hong Kong, Japan and South Korea are closed for holidays. The Taiwan dollar rose with the nation’s equity gauge. Australia’s S&P/ASX 200 Index slid 0.3 percent and New Zealand’s S&P/NZX 50 Index was flat. Taiwan’s Taiex gained 0.2 percent. Hon Hai Precision Industry Co. which makes Apple’s iPhones, was up 0.5 percent, shrugging off its customer’s report on weaker sales.

• Saudi to Keep Full Control of Reserves, Output After Aramco IPO.

• Bain, Carlyle, Thoma Bravo Are Among Bidders for Citrix(CTRX). The buyout firms submitted bids last week, said the people, who asked not to be identified because they weren’t authorized to speak publicly. Citrix, which has a market value of about $12.3 billion, has also attracted interest from at least one strategic suitor, the people said. The name of the corporate bidders couldn’t immediately be learned.

Wall Street Journal:

• Fed Rate Rise Unlikely Wednesday, but Possible June Move in Focus. Fed statement could give hints about the likelihood of a rate increase at the June 13-14 policy meeting.

• GOP Losing Votes on Health Bill, Imperiling Its Chances. Rep. Upton is the latest to say he can’t support measure in current form.

• Trump Adviser Kushner’s Undisclosed Partners Include Goldman and Soros. Investments show ties to major finance and technology names.

• It Took Investors Just Four Months to Pull Nearly $7 Billion From Hedge Fund Giant. The redemptions from Och-Ziff Capital Management Group signal more investor unease with big money managers.

• Climate Editors Have a Meltdown. How did science reporting get so detached from the underlying science?

Fox News:

• Intel on 'imminent threat' drove airline electronics ban, top lawmaker says. (video)

CNBC:

• Tim Cook said how Apple(AAPL) plans to double its fastest growing business by 2020.

• Apple(AAPL) boss Tim Cook says 'reports about future products' likely delayed quarterly iPhone purchases. (video)

• Extension of OPEC's production cut is a 'foregone conclusion,' says Harold Hamm. (video)

Zero Hedge:

• As The Puerto Rico Lawsuits Begin "A Bankruptcy Is A When, Not An If".

• New DNC Chair Vows "No Human Being Is Illegal"; Refuses To Utter Trump's Name.

• Trump: US "Needs A Good Shutdown In September To Fix This Mess".

• Study Finds That Populist Leaders Generate 'Yuge' Equity Rallies Averaging 150% Over 3 Years.

• Auto Bloodbath: Every OEM Misses April Sales Estimates As Inventories Continue To Soar.

• Trump, Putin Hold Phone Call, Discuss North Korea, Syria; Agree To Set Up Meeting.

• WTI/RBOB Pop After Biggest Crude Draw Since 2016, Surprise Gasoline Draw. (graph)

• Bonds Bid On Dismal Data, Crashing Carmakers, And Crude Carnage. (graph)

Telegraph: 

• Belgian finance minister warns EU: change or die.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 92.75 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 22.0 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 72.38 +%.

• S&P 500 futures -.05%. 

• NASDAQ 100 futures -.24%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ADP)/1.23

• (BG)/.71

• (CLX)/1.30

• (DLPH)/1.46

• (ENR)/.34

• (EL)/.73

• (TAP)/1.29

• (KLIC)/.34

• (ICE)/.73

• (HUM)/2.63

• (GRMN)/.45

• (S)/-.03

• (STRA)/.95

• (TWX)/1.45

• (WCG)/1.18

• (YUM)/.60

• (AIG)/1.07

• (CAR)/-.48

• (CF)/.00

• (CAKE)/.73

• (CRUS)/.70

• (FB)/1.12

• (IAC)/.33

• (MET)/1.28

• (PPC)/.39

• (PRU)/2.64

• (TSLA)/-.77

• (RIG)/.06

• (WMB)/.18

Economic Releases  
8:15 am EST

• The ADP Employment Change for April is estimated to fall to 175K versus 263K in March.

9:45 am EST

• ISM Non-Manufacturing for April is estimated to rise to 55.8 versus 55.2 in March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,261,560 barrels versus a -3,641,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,601,330 barrels versus a +3,369,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,288,330 barrels versus a +2,651,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.14% versus a +1.2% gain prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .75%-1.0%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PPI report, German Unemployment report, weekly MBA mortgage applications report, (COST)/(ZUMZ) monthly sales reports and the Deutsche Bank Healthcare Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial 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.