Stocks Falling Substantially into Final Hour on Trade War Worries, European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Tech/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 18.1 +31.3%

• Euro/Yen Carry Return Index 133.31 -.12%

• Emerging Markets Currency Volatility(VXY) 9.63 -1.03%

• S&P 500 Implied Correlation 41.2 +25.9%

• ISE Sentiment Index 119.0 +.85%
  

• Total Put/Call 1.11 +30.6%

• NYSE Arms 1.19 +4.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.81 +3.33%
  

• America Energy Sector High-Yield CDS Index 402.0 -1.17%

• European Financial Sector CDS Index 87.67 +6.64%

• Italian/German 10Y Yld Spread 249.75 +14.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 14.04 +2.33%

• Emerging Market CDS Index 188.81 +4.18%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.50 -.05%

• 2-Year Swap Spread 26.5 unch.

• TED Spread 44.75 +2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -4.75 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.82 -.35%

• 3-Month T-Bill Yield 1.89% -1.0 basis point
  

• Yield Curve 34.75 -1.0 basis point

• China Iron Ore Spot 64.30 USD/Metric Tonne +.05%

• Citi US Economic Surprise Index 3.30 +.1 point

• Citi Eurozone Economic Surprise Index -66.0 +2.1 points

• Citi Emerging Markets Economic Surprise Index -15.60 +2.7 points

• 10-Year TIPS Spread 2.12 -1.0 basis point
  

• 77.8% chance of Fed rate hike at Sept. 26th meeting, 79.0% chance at November 8th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -263 open in Japan 

• China A50 Futures: Indicating -129 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

• Lower: On losses in my retail/biotech/industrial/tech/medical sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

•   Large-Cap Growth -2.0%

Sector Underperformers:

• 1) Semis -3.5% 2) Gaming -3.5% 3) Steel -3.2%

Stocks Falling on Unusual Volume: 

• COOL, CCL, CDNA, CUK, BB, SPLK, HDP, VRNS, NTNX, NFLX, CCL, SFIX and HRI

Stocks With Unusual Put Option Activity:

• 1) PF 2) RHT 3) MRO 4) KMX 5) SHAK

Stocks With Most Negative News Mentions:

• 1) ATI 2) ANW 3) EL 4) INTC 5) FLEX

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value -.7%

Sector Outperformers:

• 1) Utilities +1.6% 2) Foods +.4% 3) REITs -.1%

Stocks Rising on Unusual Volume:

• EDR, NTRA, LGCYO, CPB, GTN, GOOS, CRUS, AMID, HX, NEWT, ALRM, CURO, GFN, VRA, RCKY, EBF, AXP, KB, INNT, HRTX, GPK and CLUB

Stocks With Unusual Call Option Activity:

• 1) CPB 2) BWP 3) XME 4) EMB 5) CRUS

Stocks With Most Positive News Mentions:

• 1) CIEN 2) CRUS 3) VLRX 4) AP 5) LMT

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.9% Above 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 19.3% of Issues Advancing, 77.2% Declining
• 21 New 52-Week Highs, 55 New Lows
• 49.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.8%
• Vix 16.2 +17.4%
• Total Put/Call 1.15 +35.3%
• TRIN/Arms 1.37 +20.6%

Monday Watch

Today's Headlines

Bloomberg:   

• China to Unleash $108 Billion in Reserve Cut for Some Banks. 

• China Won't Target U.S. Companies in Trade Dispute, SCMP Says.

• U.S. Plans Curbs on Chinese Investment, Citing Security Risks.

• Erdogan Election Triumph Takes Turkey Into Era of One-Man Rule.

• Europe Vows to Keep Fighting Trump on Trade.

• EU Businesses Cut U.K. Ties on Brexit and Want Britain Punished.

• Asian Stocks Open Mixed; Turkish Lira Climbs. Asian stocks were off to a muted start as investors assessed a loosening of policy in China amid ongoing trade tensions. Turkey’s lira climbed after Recep Tayyip Erdogan claimed victory in the weekend’s election. Japanese stocks fluctuated, while shares gained in Australia and fell in South Korea. In a move that was widely expected, China reduced the amount of reserves the country’s banks are required to keep on deposit at the central bank, freeing up more than $100 billion to help cushion a slowing economy. The dollar steadied while the yen and the euro nudged higher. The Topix index was little changed as of 9:08 a.m. in Tokyo. Australia’s S&P/ASX 200 Index gained 0.2 percent. South Korea’s Kospi index fell 0.4 percent. Futures on Hong Kong’s Hang Seng Index rose 0.2 percent. Futures on the S&P 500 Index slid 0.1 percent. 

• Five Things You Need to Know to Start Your Day.

Wall Street Journal:

• Trump Plans New Curbs on Chinese Investment.

• Intel’s Chip Stumble Is Letting Rivals Pull Ahead.

• Erdogan Extends His Hold in Turkey in Pivotal Election Win.

• Short of Workers, Restaurants Turn to Robots.

• U.S. Shale Companies Motor Ahead Despite OPEC.

• Hackers Hit Towns Across the U.S.

MarketWatch.com:

• Stock-market leaders yet to be undercut by trade-war fears.

Fox News:

• Trump says America should immediately send back 'these people' who 'invade our Country'.

CNBC:

• Trump issues challenge to trading partners: Bring down barriers or face 'reciprocity'.

• GE is said to close in on a $3B-plus deal to sell industrial engine unit to a private equity firm.

• 
  
  BIS: Bitcoin has not lived up to expectations.

Zero Hedge:    

• China Cuts Reserve Ratio, Unlocks 700BN Yuan Amid Rising Trade War, Mass Defaults And Margin Calls.

• Italy Says "Arrogant" Macron Risks Becoming "Enemy #1" On Migration, Orders Ships To Halt Refugee Pickups.

• Merkel's Troubles Began In Syria And End In Italy.

• Restaurant Owner Who Booted Sanders Says Gay Employees Too Triggered By WH Press Secretary.

• Antifa Calls NYU Prof "A Hero" For Doxxing ICE Employees.

• Maxine Waters Orders Democrats To Form Mob, "Physically Push Back" Against White House Employees.

• BIS Confirms Banks Use "Lehman-Style Trick" To Disguise Debt, Engage In "Window Dressing".

• "Saudi Arabia Has Entered The 21st Century" - Women Take Victory Lap As Driving Ban Ends.

• Germany's Migrant Policy: Why Trump Was Right.

• Atrocity Porn And Hitler Memes Target Trump For Regime Change.

• Bill Maher Defends "Wish" For "A Recession" That Will "Erode Trump's Popularity" .

•   TV Blackout For Erdogan Opposition As Turkey Vote Looms; Goldman On What To Expect Tomorrow.

• Meet Mystery FBI "Agent 5" Who Sent Anti-Trump Texts While On Clinton Taint Team.

• China Hides Real Trade War Retaliation In Plain Sight - Stealth Devaluation.

• China Steps Up US Cyberattacks As Trade Tensions Worsen.

• OPEC "Deal" Ends With Output Confusion, Sets Stage For "Deal Unraveling".

• Presenting America's 20 Best And Worst Paying Jobs.

• Strzok Subpoenaed, Must Appear Before Congress In Five Days.

• Weekend Reading: The Next Big Bubble.

• Crude Crescendo Helps Dow Beat Longest Losing Streak In 40 Years.

Business Insider:

• Trump's 'Space Force' could fuel a new $1 trillion economy, Morgan Stanley says.

Night Trading

• Asian indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 81.0 +.75 basis point.

• Asia Pacific Sovereign CDS Index 13.75 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 69.96 -.15%.

• FTSE 100 futures -.58%

• S&P 500 futures -.53%.

• NASDAQ 100 futures -.53%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• (CCL)/.59

After the Close:

• None of note

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for May.
  

10:00 am EST

• New Home Sales for May are estimated to rise to 669K versus 662K in April.
  

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for June is estimated to fall to 24.0 versus 26.8 in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The German IFO Expectations Index and the (AAWW) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 50% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters. 
• Stocks to Watch Next Week by Seeking Alpha.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as stable long-term rates, US economic optimism and higher energy prices offset trade war fears, emerging markets debt angst and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.