Stocks Reversing Lower into Final Hour on Inflation Worries, Earnings Outlook Jitters, Technical Selling, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 14.1 +2.0%
• DJIA Intraday % Swing .84%
  
• Bloomberg Global Risk On/Risk Off Index 72.2 +.2%

• Euro/Yen Carry Return Index 167.5 +.19%

• Emerging Markets Currency Volatility(VXY) 8.6 -.6%

• CBOE S&P 500 Implied Correlation Index 20.3 +4.1% 

• ISE Sentiment Index 105.0 -4.0 points
  

• Total Put/Call .88 -15.4%

• NYSE Arms .68 -23.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 64.2 +1.1%
  

• US Energy High-Yield OAS 309.10 -.12%
• Bloomberg TRACE # Distressed Bonds Traded 339.0 +12
  

• European Financial Sector CDS Index 82.3 +1.4% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 271.9 +.47%
  

• Italian/German 10Y Yld Spread 176.0 basis points unch.
  

• Asia Ex-Japan Investment Grade CDS Index 118.5 -2.5%
  

• Emerging Market CDS Index 205.65 +2.0%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.93 -.08%

• 2-Year SOFR Swap Spread -10.5 basis points +.25 basis point
  

• TED Spread 25.25 basis points +3.25 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +.5 basis point
  
• MBS  5/10 Treasury Spread 168.0 +2.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 866.0 +59.0 basis points
  
• Avg. Auto ABS OAS 75.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 42.3 -.05%
• 3-Month T-Bill Yield 5.42% -2.0 basis points
  

• China Iron Ore Spot 117.9 USD/Metric Tonne -.97%
• Dutch TTF Nat Gas(European benchmark) 34.7 euros/megawatt-hour -3.2%

• Citi US Economic Surprise Index 57.2 -1.3 points

• Citi Eurozone Economic Surprise Index -68.4 +2.9 points

• Citi Emerging Markets Economic Surprise Index 10.5 +1.1 points
• S&P 500 Current Quarter EPS Growth Rate YoY(497 of 500 reporting) -5.6%  +.2 percentage point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 238.84 +.24:  Growth Rate +8.7% +.1 percentage point, P/E 18.7 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.14% +1.0 basis point
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(10 of 10 reporting) +25.4% unch.
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 246.76 +.45: Growth Rate +48.8% +.3 percentage point, P/E 31.9 -.1
  
• Bloomberg US Financial Conditions Index .42 -6.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index .20 -1.0 basis point
  
• US Yield Curve -74.0 basis points (2s/10s) -3.25 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +5.57% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.03% unch.: CPI YoY +3.82% unch.
  
• 10-Year TIPS Spread 2.34 -1.0 basis point
  
• Highest target rate probability for Nov. 1st FOMC meeting: 56.4%(-2.3 percentage points) chance of 5.25%-5.5%. Highest target rate probability for Dec. 13th meeting: 55.8%(+.7 percentage point) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -126 open in Japan 
• China A50 Futures: Indicating +43 open in China

• DAX Futures: Indicating +2 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 50% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -.8%
  

Sector Underperformers:

• 1) Software -2.4% 2) Homebuilding -1.9% 3) Computer Services -1.1%

Stocks Falling on Unusual Volume: 

• PINC, CVI, NTRS, AMPH, BLBD, ORCL, GCT, OFIX and SLRN
  

Stocks With Unusual Put Option Activity:

• 1) CGC 2) ORCL 3) SPCE 4) FANG 5) RTX
  

Stocks With Most Negative News Mentions:

• 1) SLRN 2) ORCL 3) SGHT 4) TLRY 5) DTSS
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.5%
  

Sector Outperformers:

• 1) Oil Service +2.4% 2) Energy +2.2% 3) Banks +2.1%

Stocks Rising on Unusual Volume:

• SFWL, CRNX, MLTX, CASY, CYRX, HOLO, ZION, NBIX, TMCI, SLCA, CABA, PNC, ASAI, ACDC, PACB, SDRL, OVV, PTEN, AVTR, DO, VET, CAMT, OXY, DEN, WRK, FITB, HDSN, NE, FPI, YPF, CIVI, RIOT, COCO, MS, NXST, C, OKE and URBN
  

Stocks With Unusual Call Option Activity:

• 1) ACB 2) ICLN 3) DAL 4) ORCL 5) WE

Stocks With Most Positive News Mentions:

• 1) SKIN 2) MLTX 3) CASY 4) MULN 5) RIG
  

Charts:

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

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

Earnings of Note 
Company/Estimate 

Before the Open:

• (CBRL)/1.61

After the Close: 

• (SMTC)/.02
  

Economic Releases  

8:30 am EST

• The CPI MoM for Aug. is estimated to rise +.6% versus a +.2% gain in July.
• The CPI Ex Food and Energy MoM for Aug. is estimated to rise +.2% versus a +.2% gain in July.
• Real Avg. Weekly Earnings YoY for Aug.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,993,670 barrels versus a -6,307,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -535,830 barrels versus a -2,666,000 barrel decline the prior week. Distillate inventories are estimated to rise by +610,500 barrels versus a +679,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.52% versus a -.2% decline prior.
  

2:00 pm EST

• The Monthly Budget Statement for Aug. is estimated at -$230.0B versus -$219.6B in July.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The UK Industrial Production report, 30Y T-Note auction, weekly MBA Mortgage Applications report, BofA Media/Communications/Entertainment Conference, (MRNA) R&D day, (AI) Defense Forum and the (YUMC) investor day could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• NYSE Volume Running -15.6% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 11.2 +1.4
  
• 5 Sectors Declining, 6 Sectors Rising
• 51.8% of Issues Advancing, 45.3% Declining
• 54 New 52-Week Highs, 73 New Lows
• 44.6%(+2.3%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 52.0 +3.0
  
• Bloomberg Global Risk-On/Risk-Off Index 72.6 +.7%
  
• Russell 1000: Growth/Value 17,630.0 -1.1%
• 1-Day Vix 10.5 +4.7%
  
• Vix 13.9 +.7%
  
• Total Put/Call .86 -17.3%
• TRIN/Arms .63 -40.4%
  

Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 121.0 -1.0 basis point. 

• China Sovereign CDS 71.75 -.25 basis point.
  
• China Iron Ore Spot 117.6 USD/Metric Tonne +.21%.

• Bloomberg Emerging Markets Currency Index 42.3 -.02%.
• Bloomberg Global Risk-On/Risk Off Index 73.5 +1.9%. 
• Bloomberg US Financial Conditions Index 46.0 -2.0 basis points.
  
• Volatility Index(VIX) futures 15.9 +.44%.
• Euro Stoxx 50 futures n/a.

• S&P 500 futures -.12%.

• NASDAQ 100 futures -.12%.  

Morning Preview Links

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer 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 75% net long heading into the day.