Stocks Lower into Afternoon on Fed Taper Fears, Inflation Concerns, Valuation Worries, Tech/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 17.0 +3.7%
• Bloomberg Global Risk On/Risk Off Index 3,344.0 -14.0 points

• Euro/Yen Carry Return Index 137.90 +.05%

• Emerging Markets Currency Volatility(VXY) 8.6 unch.

• S&P 500 Implied Correlation 47.0 -1.2%

• ISE Sentiment Index 152.0  +21.0 points
  

• Total Put/Call .68 -4.2%

• NYSE Arms 1.23 -18.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 48.9 +.61%
  

• US Energy High-Yield OAS 325.11 -.10%

• European Financial Sector CDS Index 55.11 +.09%

• Italian/German 10Y Yld Spread 102.0 -3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 82.93 +.05%
  

• Emerging Market CDS Index 152.90 +1.31%
  

• China Corp. High-Yield Bond USD ETF(KCCB) 39.15 unch.

• 2-Year Swap Spread 7.75 +1.0 basis point

• TED Spread 10.75 unch.
  

• 3-Month EUR/USD Cross-Currency Basis Swap -3.25 -.25 basis point
  
• MBS  5/10 Treasury Spread  70.75 +1.75 basis points
  
• IHS Markit CMBX BBB- 6 74.75 -.5 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 61.36 -.46%
• 3-Month T-Bill Yield .01% -1.0 basis point
  

• Yield Curve 133.0 +1.0 basis point
  

• China Iron Ore Spot 209.50 USD/Metric Tonne -.8%

• Citi US Economic Surprise Index 50.0 -6.6 points

• Citi Eurozone Economic Surprise Index 122.60 -2.8 points
  

• Citi Emerging Markets Economic Surprise Index 86.3 -.7 point

• 10-Year TIPS Spread 2.39 +1.0 basis point
• 93.0% chance of no change at Sept. 22nd meeting, 93.0% chance of no change at Nov. 3rd meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -71 open in Japan 
• China A50 Futures: Indicating -145 open in China

• DAX Futures: Indicating +15 open in Germany

Portfolio:

• Slightly Lower: On losses in my tech/biotech sector longs
  

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to 75% Net Long
  

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -15.6% Below 100-Day Average 
• 4 Sectors Rising, 7 Sectors Declining
• 32.1% of Issues Advancing, 62.5% Declining
• 134 New 52-Week Highs, 12 New Lows
• 88.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.8%
  
• Bloomberg Global Risk-On/Risk-Off Index 3,339.0 -18.0 points
• Vix 17.2 +5.0%
• Total Put/Call .69 -2.8%
• TRIN/Arms 1.14 -24.0%

Tuesday Watch

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 82.75 unch.

• China Sovereign CDS 35.5 unch.
  

• Bloomberg Emerging Markets Currency Index 61.63 -.01%.
• Bloomberg Global Risk-On/Risk Off Index 3,345.0 -11.0 points.
• Volatility Index(VIX) futures 18.95 -.66%.
• FTSE 100 futures +.23%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.16%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• None of note
  

After the Close:

• (HRB)/5.06
• (LZB)/.74
• (MANU)/.01
• (ORCL)/1.33
  

Economic Releases

8:30 am EST

• Retail Sales Advance MoM for May is estimated to fall -.7% versus unch. in April.
• Retail Sales Ex Autos MoM for May is estimated to rise +.4% versus a -.8% decline in April.
• Retail Sales Ex Autos and Gas for May is estimated unch. versus a -.8% decline in April.
• Empire Manufacturing for June is estimated to fall to 22.5 versus 24.3 in May.
• PPI Final Demand MoM for May is estimated to rise +.5% versus a +.6% gain in April.
• PPI Ex Food and Energy MoM for May is estimated to rise +.5% versus a +.7% gain in April.
  

9:15 am EST

• Capacity Utilization for May is estimated to rise to 75.1% versus 74.9% in April.
• Industrial Production MoM for May is estimated to rise +.7% versus a +.7% gain in April. 
• Manufacturing Production for May is estimated to rise +.8% versus a +.4% gain in April.
  

10:00 am EST

• Business Inventories for April are estimated to fall -.1% versus a +.3% gain in March.
• The NAHB Housing Market Index for June is estimated at 83 versus 83 in May.

4:00 pm EST

• Net Long-Term TIC Flows for April.

Upcoming Splits

• (TTD) 10-for-1
  

Other Potential Market Movers

• The China Retail Sales report, weekly US retail sales reports, 20Y T-Bond auction, Oppenheimer Consumer Growth/E-Commerce Conference and the (HUM) investor day could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -13.9% Below 100-Day Average 
• 3 Sectors Rising, 8 Sectors Declining
• 41.7% of Issues Advancing, 55.1% Declining
• 230 New 52-Week Highs, 8 New Lows
• 89.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.8%
  
• Bloomberg Global Risk-On/Risk-Off Index 3,314.0 -3.0 points
• Vix 16.7 +7.0%
• Total Put/Call .71 -14.5%
• TRIN/Arms 1.01 -3.8%

Monday Watch

Today's Headlines

Bloomberg:           

• China Tells U.S. to Stop Delaying Removal of Iran Sanctions.
• With Merkel Gone, Canada’s Trudeau Wants to Be ‘Dean’ of G-7.
• The G-7’s 1 Billion Pledge for New Vaccine Doses Comes Up Short.    
• Treasuries Dip With Focus on Fed; Stocks Mixed: Markets Wrap.
• Saudi Stocks Lead Mideast Higher as Oil Extends Gains: Inside EM.
• A Meme Stock Is Born: How to Spot the Next Reddit Favorite.  
• G-7 Drops Aim to Shift New Car Sales Away from Oil By 2030. 
• Out-of-Control Shipping Costs Fire Up Prices From Coffee to Toys.
• Fed Dot Plot Seen Shifting to 2023 Rate Liftoff, Economists Say.
• European Bank Stocks Lead Rally After a Decade of Disappointment.

Wall Street Journal:

• U.S. Workers Are Quitting at Highest Rate in Decades.
• G-7 Leaders Rally to Biden’s Call to Challenge China.
• Positive Covid-19 Tests Fall to Lowest Recorded Rate.
• Why That Sofa You Ordered Isn’t Showing Up Soon.
• Schoolyard Justice in Federal Court.
• Markets Are Leaving Little Room for the Fed to Be Wrong on Inflation.
• National Parks Are Overcrowded and Closing Their Gates.
• Chip Shortage Brings Frustration but More Business to Middlemen. 

Fox News:

• Pro-life advocates sound alarm as Dems push nationwide agenda.

CNBC: 

• Top Wall Street analysts say these stocks are poised to deliver significant gains.
• How bad are global shipping snafus? Home Depot contracted its own container ship as a safeguard.
• GM, Ford are all-in on EVs. Here’s how their dealers feel about it.

Zero Hedge: 

• Reviewing Market Signals As Warnings Increase.
• Invesco Launches 2 "Zero Fee" ETFs As Sponsors Compete To Offer Cheapest Funds.
• Doctor Who Wants Indefinite UK Lockdown Says "Sadly, It Can't Be Forever".
• ​Lumber Prices Record Biggest Weekly Drop Ever As Supply Increases.
• Baltimore City Responds After Dozens Of Businesses Threaten Not To Pay Taxes.
• "It Won't Be Pleasant" - Mark Carney Unveils Dystopian New World To Combat Climate 'Crisis'.
• Visualizing The Biggest Companies In The World In 2021.
• Real Interest Rates Suggest It's A Good Time To Buy And Hold Gold.
• Thor Industries Now Has $14 Billion Order Backlog Amid Booming Demand For RVs.
• Visualizing The History Of US Inflation Over 100 Years.
• Mexican Drug Cartel Unveils "Grupo Elite" Special Forces Unit Hunting Rivals.
• Ford's Electric F-150 Lightning Reservations Pass 100,000.
• Gluten-Free Generation: Children With Celiac Disease Doubles In 25-Years.

MarketWatch.com:   

• Opinion: Momentum in the stock market is building toward a breakout.
  
• Opinion: AMD’s stock has been left behind, but not for long — here’s why.

TheGatewayPundit.com:

• Developing: The Same Suspicious SQL Software Discovered in Michigan Dominion Voting Machines Was Just Found in Pennsylvania Dominion Voting Machines.
• Biden Handlers Realize A Joint Press Conference with Putin Would Be Complete Disaster – Decide on Separate Press Conferences.
• PRESIDENT TRUMP on the Biden Admin’s Attempts To Shut Down Arizona Audit: “They Want It Over With Because They Seem to Know What Will Be Found”.
• BREAKING: Reporter Who Broke Clinton-Lynch Tarmac Story Found DEAD in His Apartment.

The Epoch Times:

• Southern Chinese City Halts Local Flights for 10 Days As Virus Spreads.

Digital Blackboard:

• Daily New Cases by Region.

Worldometer:

• New Cases/Deaths by state.

Rt Covid-19:

• How fast virus is growing by state.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading

• Asian indices are -.25% to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 82.75 -1.0 basis point.
• China Sovereign CDS 35.5 unch.
• Bloomberg Emerging Markets Currency Index 61.71 -.04%.
• Bloomberg Global Risk-On/Risk Off Index 3,3352.0 +34.0 points.
• Volatility Index(VIX) futures 18.80 -.27%. 
• Euro Stoxx 50 futures +.22%.
• S&P 500 futures +.08%.
• NASDAQ 100 futures +.17%

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• None of note
  

After the Close:

• None of note
  

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Japan Industrial Production report and the Credit Suisse Communications Conference could also impact trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

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

Today's Headlines

Bloomberg:        

• Asia Reflation Momentum Puts Commodities, Shipping Stocks on Top.  
• Johnson Threatens to Suspend Brexit Protocol in Row With EU. 
• Pros, a Rookie, a Brexit Man and a New Heavyweight: G-7 Guide.
• WallStreetBets Traders Just Can’t Agree on Where to Go Next.
• Tech Stocks Power Market to Record on All-Clear From Treasuries.
• Hot U.S. Inflation Could Stir Once-Sleepy Household Expectations.
• Summers Surprised by Bond Yields Falling Even as Inflation Jumps.
• Security Stocks Eye Best Week in Months as List of Hacks Grows.
• SEC Says It’s Scrutinizing Market Swings as Meme Stocks Surge.  
• U.S. Deaths Decline; Johnson May Extend U.K. Rules: Virus Update.  
• Zombie Stocks Defy Bankruptcy Logic as Meme Traders Bid Them Up. 
• Sorry Millennials, Boomers Are Most Important Group for Market.  
• Lumber Prices Post Biggest–Ever Weekly Drop With Buyers Balking.  
• Five Charts That Show How Much the Crypto Space Just Slowed Down.
• U.S. Water and Power Are Shockingly Vulnerable to Cyberhacks.

Wall Street Journal:

• The Great American Rip-Off.
• A Scientist Who Said No to Covid Groupthink.
• Understanding China’s Covid Propaganda.
• China’s New Power Play: More Control of Tech Companies’ Troves of Data.
• Supply Chains Are Strained. These Companies Are Best Prepared.
• Covid Outbreaks in Asia Disrupt Global Supply Chains.

CNBC:

• Biden to press G-7 leaders to adopt a unified approach to counter China’s rising influence.
• The Fed could be facing a jobs headache in its inflation fight.
• Markets await Fed meeting before making the next big move in week ahead.
• Lawmakers unveil major bipartisan antitrust reforms that could reshape Amazon, Apple, Facebook, Google.

IG:

• Weekend Markets Trading Live.

Barron's:

• Had bullish commentary on (LLY).
• Had bearish commentary on (TSM).

MarketWatch.com:            

• Weekend reads: Everything you need to know about inflation in the U.S.  
• 15 momentum stocks expected to show the best sales growth over the next two years, including Carvana, Tesla and Palantir.

Newsmax:   

• Rep. Jerry Carl to Newsmax: Did Fauci Profit From COVID-19?
• Peter Navarro to Newsmax: Fauci Deeply Involved in COVID Cover-Up.
  

Zero Hedge:

• Environmentalist Groups File Complaint To Block Tesla's German Gigafactory Construction.
• Austin Mass Shooting Leaves 13 Hospitalized - Gunman Still At Large.
• One Shocking Chart That Has Farmers Trembling With Fear.
• "This Is Wealth Redistribution": Blackrock And Other Institutional Investors Buying Entire Neighborhoods At Huge Premiums.
• Stockman Warns "Buckle Up!", May's Soaring CPI Print Was No 'Transitory' Blip.
• Fossil Fuels Aren't Dying, They're Shifting To National And State Backed Companies.
• "Shot Themselves In The Foot" - AMC 'Messiah' Mudrick Battered By Bad Options Bet.
• Victor Davis Hanson: This Isn't Your Father's Left-Wing Revolution.
• The War Over Genetic Privacy Is Just Beginning.
• Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15.
• How Fanatics Took Over The World.
• Perfect Storm: Congestion Plagues South China And US West Coast Ports.
• Western Companies "Shocked" After China Rushes Through Anti-Sanctions Law.
• Pentagon Boss 'Clarifies' Russia & China Pose Biggest Threats After Biden Says It's Climate Change.
• Two Big Problems Are Plaguing Our Economy, New Small Business Survey Reveals.
• Greenwald: Trump DOJ Obtained Data On Schiff And Swalwell, Two Long-Time Champions Of Domestic Spying.
• Bond Yields Plunge Most In A Year, Dollar Spikes As Inflation Soars.
  

TheGatewayPundit.com:

• America Last: Joe Biden Shuffles Alone in the Back of the Pack While G7 Leaders Take Photo with Queen Elizabeth (VIDEO).
• BREAKING: AG Merrick Garland Announces that His DOJ Will Scrutinize Any Post-Election Audits for Evidence of Voting Law Violations!!
• SHOCKING JUMP in Vaccine Deaths Reported This Week at CDC-Linked VAERS Tracking Website.
• After Tormenting General Flynn with Judicial Acts Never Seen Before, Corrupt Judge Sullivan Now Is Persecuting Trump Supporters from Jan 6 Protest.
• Wealthy BLM Co-Founder BUILDS A WALL Around Her Million Dollar Estate. 
• Exclusive: Woke Baptists Are Making The Southern Baptist Convention Look Like “Grand Theft Auto”.

Digital Blackboard:

• Daily New Cases by Region.

Worldometer:

• New Cases/Deaths by state.

Rt Covid-19:

• How fast virus is growing by state.

KFF:

• State Data(Tests/Hospitalizations).