Stocks Surging into Afternoon on Diminished China Trade Tensions, Less Global Growth Pessimism, Oil Gain, Tech/Transport Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 17.8 -8.1%

• Euro/Yen Carry Return Index 122.36 +.24%

• Emerging Markets Currency Volatility(VXY) 9.10 +.66%

• S&P 500 Implied Correlation 43.99 -4.6%

• ISE Sentiment Index 80.0 -7.0%
  

• Total Put/Call 1.01 -13.7%

• NYSE Arms .82 +57.69%

Credit Investor Angst:

• North American Investment Grade CDS Index 53.80 -2.67%
  

• America Energy Sector High-Yield CDS Index 421.0 -.89%

• European Financial Sector CDS Index 58.25 -3.78%

• Italian/German 10Y Yld Spread 175.75 -7.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 66.65 +1.05%
  

• Emerging Market CDS Index 218.29 +1.23%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.91 +.05%

• 2-Year Swap Spread -.25 +.5 basis point

• TED Spread 13.75 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -13.75 +1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 64.89 +.07%
• 3-Month T-Bill Yield 1.98% unch.

• Yield Curve -.01 +3.0 basis points

• China Iron Ore Spot 81.30 USD/Metric Tonne +.94%

• Citi US Economic Surprise Index -11.6 +1.0 point

• Citi Eurozone Economic Surprise Index -34.10 +7.2 points

• Citi Emerging Markets Economic Surprise Index -18.1 +1.6 points

• 10-Year TIPS Spread 1.61+5.0 basis points
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +270 open in Japan 
• China A50 Futures: Indicating +150 open in China

• DAX Futures: Indicating +25 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +1.3%

Sector Underperformers:

• 1) Gold & Silver -2.8% 2) Tobacco -.8% 3) Utilities +.5%

Stocks Falling on Unusual Volume: 

• OLLI, SY, MFGP, BBY, ANF, OKTA, GLNG, HRB, ELF, WSM, BMA, GGAL, PAM, ENPH, AU, AG and MOV

Stocks With Unusual Put Option Activity:

• 1) SWN 2) DG 3) BBY 4) MNK 5) ANF

Stocks With Most Negative News Mentions:

• 1) RLGY 2) ANF 3) MOV 4) ABMD 5) TPR

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.8%

Sector Outperformers:

• 1) Semis +2.8% 2) Airlines +2.4% 3) Banks +2.3%

Stocks Rising on Unusual Volume:

• NTNX, USMV, BURL, NOBL, TLYS, MTRX, ESTC, GES, IGV, TECD, DG, IEFA, WRLD, SCVL, TSE, FSLY, MBUU, FIVE, AMSWA, QDEL, PVH, GEF, JBL, HAIN, BYSI, SCVL, MEI, ZUO, RGS and HEES

Stocks With Unusual Call Option Activity:

• 1) FOXA 2) XRT 3) XHB 4) GME 5) XLI

Stocks With Most Positive News Mentions:

• 1) BURL 2) GES 3) NTNX 4) TECD 5) DG

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -1.9% Below 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 78.2% of Issues Advancing, 19.0% Declining
• 127 New 52-Week Highs, 48 New Lows
• 45.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.1%
• Vix 17.6 -8.9%
• Total Put/Call 1.07 -8.6%
• TRIN/Arms .84 +61.5%

Thursday Watch

Evening Headlines

Bloomberg:     

• China’s Slowdown Deepens in August, Early Indicators Show.  

• Mnuchin Says China Trade Meeting Will Happen But Won't Say When.

• Boris Johnson Corners His Opponents and Pushes Brexit Toward a Showdown.

• Worst Unemployment in Decades Strains Indian Consumer Loans.

• Iranian Minister Says Europe Has Two Options to Save the Nuclear Deal.

• Asian Stocks Set for Muted Open; Dollar Gains. Asian stocks look set for a muted open Thursday as investors awaited new developments in the U.S. and China trade negotiations. The dollar strengthened to a nine-month high. Futures nudged higher in Tokyo and Hong Kong, and dipped in Sydney. U.S. futures edged lower after the S&P 500 Index climbed on below average volume as a rally in oil pushed energy shares higher. Ten-year Treasury yields held steady after hitting a three-year low. Currencies were little changed in Asia after Treasury Secretary Steven Mnuchin said the U.S. doesn’t intend to intervene on the dollar for now. The pound weakened and gilts climbed after U.K. Prime Minister Boris Johnson moved to suspend parliament, increasing the risk of a no-deal Brexit. Nikkei 225 futures rose 0.2% in Singapore. Australia’s S&P/ASX 200 Index futures fell 0.1%. Hang Seng Index futures added 0.1%. S&P 500 futures fell 0.1% as of 8:02 a.m. in Tokyo.   

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

• Mnuchin Says U.S. Doesn’t Intend to Intervene on Dollar for Now. 

• GOP Senator Seeks Hearing on Fed ‘Danger’ After Dudley Op-Ed.

• Crypto Crash Prompts Guessing Game as Bitcoin Breaches $10,000 Again.  

• U.S. Corporate Bonds Are Having the Best August in Four Decades.

Wall Street Journal:

• Mainland Chinese Sneak Into Hong Kong’s Protests to Support the Cause.

• Security Concerns Threaten Data Link Backed by Google, Facebook.

• After Brexit, a U.S. Trade Deal.

• How Bayer-Monsanto Became One of the Worst Corporate Deals—in 12 Charts.

• New Concerns Emerge About Long-Term Antidepressant Use.

Fox News:

• Dorian strengthens into a hurricane, could become major Category 3 storm.

CNBC:

• Stocks making the biggest moves after hours: Nutanix, Ollie’s and Guess.

• ‘Never, ever use a debit card,’ warns fraud expert and ex-con artist—here’s what to do instead.

• China’s playing the long game, and is making key moves to hedge against Trump’s tariffs.

• Five Below rises on earnings, but traders see a better dollar store stock.

• Why record low bond yields could keep heading lower as market fears ‘disaster scenario’.

• Apparel retailer Forever 21 weighs bankruptcy filing.

Zero Hedge:  

• MSNBC Anchor Cowers Away From Lies About Trump-Russia Ties.

• FBI Raids Detroit-Area Home Of UAW President Amid Ongoing Corruption Probe.

• Larry Summers Accuses Dudley Of "Trump Derangement Syndrome".

• Mnuchin Says Issuance Of 50 And 100 Year Treasuries Under "Very Serious Consideration".

• Emerging Market FX Plunges To Record Low As Pesos Plummet.

• Stocks & Bonds Pop, Cryptos Drop, As Silver Surges Past Gold Year-To-Date.

Business Insider:   

• Kirsten Gillibrand drops out of the 2020 Democratic presidential race.

• 'I will not endorse that': The CEO of Whole Foods says eating plant-based 'meats' is unhealthy.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 66.5 +.25 basis point.

• China Sovereign CDS 48.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index  64.83 -.02%.

• FTSE 100 futures -.34%.

• S&P 500 futures -.22%.

• NASDAQ 100 futures -.33%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (ANF)/-.52

• (BBY)/.99

• (BURL)/1.14

• (DG)/1.57

• (DLTR)/.82

• (MDP)/1.58

• (PDCO)/.25

• (SAFM)/3.07

• (TECD)/2.31

• (TITN)/.33

• (TD)/1.80

After the Close:

• ((COO)/2.70

• (DELL)/1.49

• (MRVL)/.15

• (ULTA)/2.80

• (WDAY)/.35

Economic Releases
8:30 am EST

• 2Q GDP is estimated to rise +2.0% versus a prior estimate of a +2.1% gain.

• Advance Goods Trade Balance for July is estimated at -$74.4B versus -$74.2B in June.

• Retail Inventories MoM for July is estimated to rise +.3% versus a -.3% decline in June.

• Preliminary Wholesale Inventories MoM for July is estimated to rise +.2% versus unch. in June.

• Initial Jobless Claims for last week are estimated to rise to 214K versu s209K the prior week.

• Continuing Claims are estimated to rise to 1687K versus 1674K prior.
  

10:00 am EST

• Pending Home Sales MoM for July is estimated unch. versus a +2.8% gain in June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI/Unemployment Rate reports, $32B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the (CRM) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are slightly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.