Thursday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 118.25 +2.25 basis points. 

• China Sovereign CDS 63.0 +1.75 basis points.
  
• China Iron Ore Spot 109.3 USD/Metric Tonne +1.3%.

• Bloomberg Emerging Markets Currency Index 45.2 -.06%.
• Bloomberg Global Risk-On/Risk Off Index 61.8 +.6%. 
• Bloomberg US Financial Conditions Index .10 -8.0 basis points.
  
• Volatility Index(VIX) futures 17.6 +.6%.
• Euro Stoxx 50 futures -.16%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.02%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by tech and consumer shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 50% net long heading into the day.

Stocks Reversing Lower into Final Hour on US Policy-Induced Stagflation Fears, Fed "Higher for Longer" Worries, Diminishing FANG+ Stock Frenzy, Tech/Pharma Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.9 -.6%
• DJIA Intraday % Swing .42%
  
• Bloomberg Global Risk On/Risk Off Index 61.5 +2.6%

• Euro/Yen Carry Return Index 1575 +.5%

• Emerging Markets Currency Volatility(VXY) 9.67 +1.4%

• CBOE S&P 500 Implied Correlation Index 20.8 -2.5% 

• ISE Sentiment Index 131.0 +18.0 points
  

• Total Put/Call .75 -18.5%

• NYSE Arms .91 +9.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 71.80 -+61%
  

• US Energy High-Yield OAS 385.99 -1.8%
• Bloomberg TRACE # Distressed Bonds Traded 409.0 +11.0
  

• European Financial Sector CDS Index 87.55 +.01% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 296.56 -1.6%
  

• Italian/German 10Y Yld Spread 183.0 basis points +5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 117.4 +.32%
  

• Emerging Market CDS Index 221.8 -2.1%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.07 +.04%

• 2-Year Swap Spread 20.75 basis points +3.0 basis points
  

• TED Spread 23.0 basis points -2.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -22.75 +1.75 basis point
  
• MBS  5/10 Treasury Spread 170.0 +1.0 basis point
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 729.0 +3.0 basis points
  
• Avg. Auto ABS OAS 89.0 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 45.2 -2.1%
• 3-Month T-Bill Yield 5.28% +3.0 basis points
  

• China Iron Ore Spot 109.5 USD/Metric Tonne +.2%
• Dutch TTF Nat Gas(European benchmark) 26.3 euros/megawatt-hour  +5.9%

• Citi US Economic Surprise Index 26.9 -1.1 points

• Citi Eurozone Economic Surprise Index -88.5 -.4 point

• Citi Emerging Markets Economic Surprise Index 14.6 -5.2 points
• S&P 500 Current Quarter EPS Growth Rate YoY(498 of 500 reporting) -3.4% +.1 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.20 -.04:  Growth Rate +2.9% -.1 percentage point, P/E 18.6 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.25% -1.0 basis point
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(10 of 10 reporting) -2.9% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 206.57 -.06: Growth Rate +35.7% -.1 percentage point, P/E 35.6 -.6
  
• Bloomberg US Financial Conditions Index .19 +10.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index -4.28 +11.0 basis points
  
• US Yield Curve -77.0 basis points (2s/10s) +5.75 basis points
• US Atlanta Fed 2Q GDPNow Forecast +2.22% +26.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.71% unch.: CPI YoY +4.13% unch.
  
• 10-Year TIPS Spread 2.26 +5.0 basis points
  
• Highest target rate probability for July 26th FOMC meeting: 51.8%(-.8 percentage point) chance of 5.25%-5.5%. Highest target rate probability for Sept. 20th meeting: 48.%(-.2 percentage point) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +102 open in Japan 
• China A50 Futures: Indicating -71 open in China

• DAX Futures: Indicating -2 open in Germany

Portfolio:

• Higher:  On gains in my utility/industrial sector longs and emerging market shorts
  

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

• Market Exposure: Moved to 50% Net Long
  

Tomorrow's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open:

• (FCEL)/-.08
• (SIG)/1.49
• (TTC)/1.52
  

After the Close: 

• (DOCU)/.56
• (MTN)/8.81
  

Economic Releases  

8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 235K versus 232K the prior week.
• Continuing Claims are estimated to rise to 1802K versus 1795K prior.
  

10:00 am EST

• Wholesale Trade Sales MoM for April is estimated to rise +.9% versus a -2.1% decline in March.

12:00 pm EST

• Household Change in Net Worth for 1Q.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Eurozone GDP report, weekly EIA natural gas inventory report, (PYPL) mgmt. meeting, (TD) investor day and the (NVS) capital markets day could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Afternoon Market Internals

NYSE Composite Index:

• NYSE Volume Running +14.6% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 8.4 -.3
  
• 6 Sectors Declining, 5 Sectors Rising
• 63.2% of Issues Advancing, 34.0% Declining
• 143 New 52-Week Highs, 8 New Lows
• 51.3%(+4.9%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 57.0 +3.0
  
• Bloomberg Global Risk-On/Risk-Off Index 61.2 +2.2%
  
• Russell 1000: Growth/Value 17,014.5 -1.6%
• 1-Day Vix 10.0 -2.6%
  
• Vix 14.1 +1.3% 
  
• Total Put/Call .74 -19.6%
• TRIN/Arms 1.02 -22.9%
  

Wednesday Watch

Evening Headlines

Bloomberg:

• New US Spy Satellites to Track Chinese, Russian Threats in Orbit.
• ByteDance Accused of Helping China Track Hong Kong Activists.
• RBI May Pause Again With Markets Watching for Shift in Stance.
• RBA Alert to Risk Inflation Stays Too High, Too Long, Lowe Says.
• PGA Tour Bows to Saudi Rival in Stunning Combination With LIV Golf.
• Asian Equities Rise With Positive Signs for China: Markets Wrap.
• Oil Steadies as Concerns Over Demand Overshadow Saudi Output Cut.
• Coinbase Is Facing a ‘Life or Death’ Battle With the SEC.
• Coinbase Crackdown Widens as US States Push to Halt Staking Product.
• Apollo CEO Marc Rowan Sees ‘Non-Recession Recession’ as Rate Hikes Bite.
• California Puts a Price on Slavery’s Legacy and Draws a Blueprint for Reparations.
• Gen Z Is Thinking of Retirement Too Early and All Wrong.
• Five Things You Need to Know to Start Your Day.

Zero Hedge:

• Tucker's Back! In Triumphant Return, Demolishes Ukraine Dam Propaganda, Massacres MSM For Ignoring UFO 'Bombshell Of The Millennium'
• Like, Totally Orwellian: Nearly A Third Of GenZ Favors 'Government Surveillance Cameras In Every Household'
• FBI Conduct Sparks Protest At Federal Building In Detroit.
• Media Smears Robert F. Kennedy, Jr. For "Conspiracy Theories" Even As Many Come True.
• Blinken Plans To Visit China In Coming Weeks, Follows "Candid" Dialogue.
• Journalists Are Asking Ukrainian Soldiers To Hide Their Nazi Patches, NYT Admits.
• Santa Monica Residents Push Back Against Outdoor Needle Distribution Site For Homeless.
• US Knew Ukraine Planned To Blow Up Nord Stream Pipeline 3 Months Before It Happened: WaPo.
• What Are Older Office Towers Worth In The New Era? Second San Francisco Office Tower Sells For 70% Off Original Listing Price.
• S&P 500 printed its highest close YTD, while the R2K rallied on regional bank strength - Newsquawk Asia-Pac Market Open.
• DeSantis Claims On Chicago Kid Shootings: Hyperbole Or Fact?
• Netanyahu Threatens Iran, Slams IAEA Amid Major War Drills.
• SPX closes at 2023 in light trade with RUT and DXY firmer on US growth upgrades - Newsquawk US Market Wrap.
• WTI Drops Below Pre-Saudi-Cut Levels After API Signals Big Product Builds.
• The Cloward-Piven Strategy.
• Massive Short Squeeze Sends Small Caps Soaring; Bitcoin Bounces Back Bigly.

Wall Street Journal:

• Air-Quality Levels Worsen in U.S. Due to Canadian Wildfires.
• SEC Sues Coinbase in Latest Move Against Crypto.
• Sequoia to Separate Its China Business.
• Destruction of Ukraine Dam Floods Front Line, Cuts Counteroffensive Options.
• A New CEO Says Employees Can’t Work Remotely After All, and They Revolt.

CNBC.com:

• PGA Tour agrees to merge with Saudi-backed rival LIV Golf.
• West Coast port labor issues continue as some Los Angeles-bound rail shipments get paused.
• SEC asks for emergency order to freeze Binance US assets anywhere in the world.
• The destruction of a major Ukrainian dam could have grave consequences. Here’s what we know so far.

MarketWatch:

• 10 reasons I won’t be buying Apple’s $3,500 Vision Pro VR headset
• Apple’s Vision Pro is ‘frightening’ in the best way—but many questions remain
• Bed Bath & Beyond’s final days bring chaos, confusion and rude customers: ‘It’s all a mess’
• Boeing stock drops on warning about defect on 787 Dreamliner planes.
• Tesla Model 3s now qualify for $7,500 in federal tax credits.

Newsmax:

• House Conservatives Block GOP Bills, Vent Debt-Limit Frustration.
• Dr. Atlas: I 'Was 100 Percent Correct'.
• Rep. Norman: WH Must Bring WHO Treaty to Congress.

Fox News:

• Ukrainian dam destruction sends prices of crucial products soaring.

TheGatewayPundit.com:

• House Conservatives Launch “Extraordinary Rebellion” Against Kevin McCarthy on House Floor Over Debt Deal Anger and Derail Key Leadership Priority – Leadership Threatened to Sink GOP Debt Ceiling Opponent’s Bill to Stop Biden Gun Ban.
• EPIC! Laura Loomer Confronts Disgraced Former FBI Director James Comey – And He Flees the Stage! -VIDEO.
• NPR Publishes Hit Piece on Gateway Pundit Loaded with Personal Smears But Won’t Refute Our Reporting – So Today We Are Releasing New Video Evidence and Information on the ERIC System.
• Tucker Carlson Releases Episode 1 of His ‘Tucker on Twitter’ Program – On the Explosion of the Kakhovka Dam in Ukraine that Was Blown Up Today (VIDEO).
•   NEW: MORE EVIDENCE Shows Voting Machines Were Secretly Reprogrammed and Fraudulently Certified in Maricopa County, AZ – Kari Lake Responds to This Latest Finding.
•   “Gonna Be Historic” – Rep. Anna Paulina Luna Explains How the House Plans to Punish Rep. Adam Schiff for Spreading the Russia Collusion Hoax and that the Vote Will Happen Tomorrow (VIDEO).
•   IT WAS ALL A LIE: Here are Six Videos that Show Capitol Police Moving Barricades, Opening Sets of Locked Doors, Waving in Trump Supporters on January 6th.
• 3 in 10 Young Americans and Mostly Democrats Support Government Cameras Installed in American Households, Survey Says.

 The Epoch Times:

• China, Iran, and Russia ‘Working Closely Together’ to Undermine US: Experts.
• China’s Defense Minister Threatens to Attack ‘Without Hesitation’ Any Nation Attempting to Split It From Taiwan.
• US Ignorant of Investment Fund Portfolio in China: Expert.

Twitter: 

• @AGHuff - This is how #Michigan is being sold out to China. 
• @intheMatrixxx - China's new education campaign is absolutely terrifying, and for some reason, no one is talking about it. (video)
• @acemaxx - The implication is that #risks associated with #concentration, lack of #diversification and #valuation are growing, and market structure is increasingly #fragile, chart Lisa Shalett @MorganStanley.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 963,283 Reports(+1,415 from prior week) Through May 26th, 2023.

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 116.0 -1.25 basis points. 

• China Sovereign CDS 61.25 -.75 basis point.
  
• China Iron Ore Spot 107.4 USD/Metric Tonne +.97%.

• Bloomberg Emerging Markets Currency Index 45.9 -.57%.
• Bloomberg Global Risk-On/Risk Off Index 60.2 +.42%. 
• Bloomberg US Financial Conditions Index .06 -3.0 basis points.
  
• Volatility Index(VIX) futures 17.5 +.5%.
• Euro Stoxx 50 futures +.09%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures -.04%.  

Morning Preview Links

BOTTOM LINE: Asian indices are modestly higher, boosted by tech 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 day.

Stocks Slightly Higher into Close on US Economic "Soft-Landing" Optimism, China Stimulus Hopes, Short-Covering, Financial/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 14.2 -3.7%
• DJIA Intraday % Swing .69%
  
• Bloomberg Global Risk On/Risk Off Index 59.9 +1.0%

• Euro/Yen Carry Return Index 156.8 -.11%

• Emerging Markets Currency Volatility(VXY) 9.54 -.63%

• CBOE S&P 500 Implied Correlation Index 21.9 -2.2% 

• ISE Sentiment Index 113.0 -2.0 points
  

• Total Put/Call .85 -9.6%

• NYSE Arms .75 -24.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 71.4 -.65%
  

• US Energy High-Yield OAS 388.68 -1.9%
• Bloomberg TRACE # Distressed Bonds Traded 398.0 -19.0
  

• European Financial Sector CDS Index 87.5 -1.0% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 301.2 -1.8%
  

• Italian/German 10Y Yld Spread 178.0 basis points +2.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 117.2 -.24%
  

• Emerging Market CDS Index 221.9 -1.6%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 26.0 -.46%

• 2-Year Swap Spread 17.75 basis points +1.0 basis point
  

• TED Spread 25.0 basis points +10.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -24.5 -1.0 basis point
  
• MBS  5/10 Treasury Spread 169.0 -8.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 726.0 +3.0 basis points
  
• Avg. Auto ABS OAS 90.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 46.2 -.23%
• 3-Month T-Bill Yield 5.25% -6.0 basis points
  

• China Iron Ore Spot 106.6 USD/Metric Tonne +.2%
• Dutch TTF Nat Gas(European benchmark) 24.9 euros/megawatt-hour  -12.7%

• Citi US Economic Surprise Index 28.0 -.2 point

• Citi Eurozone Economic Surprise Index -88.1 -5.9 points

• Citi Emerging Markets Economic Surprise Index 19.8 -1.4 points
• S&P 500 Current Quarter EPS Growth Rate YoY(496 of 500 reporting) -3.5% -.7 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 230.24 +.17:  Growth Rate +3.0% +.1 percentage point, P/E 18.6 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.26% +2.0 basis points
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(10 of 10 reporting) -2.9% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 20663 +4.73: Growth Rate +35.8% +3.1 percentage points, P/E 36.2 -.7
  
• Bloomberg US Financial Conditions Index .09 -2.0 basis points
• Bloomberg Euro-Zone Financial Conditions Index -4.39 +12.0 basis points
  
• US Yield Curve -82.75 basis points (2s/10s) -2.75 basis points
• US Atlanta Fed 2Q GDPNow Forecast +1.96% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.71% unch.: CPI YoY +4.13% unch.
  
• 10-Year TIPS Spread 2.21 unch.
  
• Highest target rate probability for July 26th FOMC meeting: 52.7%(+.3 percentage point) chance of 5.25%-5.5%. Highest target rate probability for Sept. 20th meeting: 48.5%(+.1 percentage point) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +250 open in Japan 
• China A50 Futures: Indicating +16 open in China

• DAX Futures: Indicating +52 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long