Stocks Reversing Higher into Final Hour on Falling Long-Term Rates, More Dovish Fed Commentary, Earnings Outlook Optimism, Tech/Energy Sector Strength

Economic/Market Gauges:

• North American Investment Grade CDS Index 60.4 +.6% 
• BofA Private Credit Proxy Index 69.1 +.3% 
• Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .44 -2.0 basis points
• BofA Global Financial Stress Indicator .05 +4.0 basis points
• European Financial Sector CDS Index 72.2 +4.3% 
• Emerging Market CDS Index 165.4 +3.3% 
• Israel Sovereign CDS 61.0 -.1% 
• Bloomberg Global Trade Policy Uncertainty Index 1.1 -.2
• US Morning Consult Daily Consume Sentiment Index 89.3 +2.5

• Citi US Economic Surprise Index 43.9 -3.0

• Citi Eurozone Economic Surprise Index 75.5 +2.2

• Citi Emerging Markets Economic Surprise Index 25.9 +9.8
• S&P 500 Current Quarter EPS Growth Rate YoY(15 of 500 reporting) +184.6% +170.0 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 404.73 +.22:  Growth Rate +23.3% unch., P/E 18.9 -.2
• S&P 500 Current Year Estimated Profit Margin 16.29% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(1 of 10 reporting) +1,013.1% +n/a
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 1,056.78 +1.34: Growth Rate +57.4% +.2 percentage point, P/E 18.0 -.3
• Bloomberg US Financial Conditions Index 1.09 +6.0 basis points
• US Yield Curve 45.25 basis points (2s/10s) +5.75 basis points
• Bloomberg Industrial Metal Index 173.8 -1.7%
• Dutch TTF Nat Gas(European benchmark) 72.8 euros/megawatt-hour +.6%
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 7.9% -.5 percentage point
• US Atlanta Fed GDPNow Q3 Forecast +3.7% unch.
• US 10-Year T-Note Yield 5.24% -4.0 basis points
• 1-Year TIPS Spread 2.80 +13.0 basis points

• Highest target rate probability for Dec. 9th FOMC meeting: 63.2% (+5.0 percentage points) chance of 4.0%-4.25%. Highest target rate probability for Jan. 27th meeting: 46.9%(+13.9 percentage point) chance of 4.0%-4.25%. (current target rate is 3.75-4.0%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -436 open in Japan 
• China A50 Futures: Indicating -144 open in China
• KOSPI 200 Futures: Indicating +3 open in South Korea 

• DAX Futures: Indicating +185 open in Germany

Portfolio:

• Higher: On gains in my energy/tech/consumer discretionary/industrial sector longs and emerging market shorts
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 100% net long

Bear Radar

Style Underperformer:

• Large-Cap Value +.2%

Sector Underperformers:

• 1) Gambling -1.2% 2) Pharma -1.0% 3) Biotech -1.0%

Stocks Falling on Unusual Volume: 

• MRP, GGAL, CALM, MKC, AYI, NXRT, LIFE, FMX, SCTX, MSGS, MT, CBRS, CARG, HSBC, ING, ADPT, ONT, CAAP, NWG, GLUE, GPCR, PRGS, GRND, LQDA, NKTR and CTVA

Stocks With Unusual Put Option Activity:

• 1) HTZ 2) BITO 3) LUMN 4) FLG 5) MDT

Stocks With Most Negative News Mentions:

• 1) AVEX 2) AVXL 3) INV 4) BZAI 5) GUTS

Sector ETFs With Most Negative Money Flow:

• 1) XLF 2) VGT 3) SOXX 4) XLP 5) VDC

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.3%

Sector Outperformers:

• 1) Computer Services +4.2% 2) Networking +2.7% 3) Energy +2.7%

Stocks Rising on Unusual Volume:

• XRPN, ACN, RZAI, SNPS, FICO, EFOR, EFXT, INOD, COHR, VICR, KD, PAYS, GLOB, UTHR, AAOI, CTSH, LITE, GO, VIAV, CRDO, EXLS, INFY, LIND, FCN, AN, INSP, HURN, FRVO, XENE, CDNS, APMD, GIB, KOD, NGL, FRO, GEV, MSM, JBL, OXY, DHT, TLN, NU, OXM, AGYS, CWK and BJ

Stocks With Unusual Call Option Activity:

• 1) CXW 2) QSR 3) LITX 4) QSI 5) ACN 

Stocks With Most Positive News Mentions:

• 1) ACN 2) SNPS 3) VICR 4) IT 5) CDNS

Sector ETFs With Most Positive Money Flow:

• 1) XLU 2) XLC 3) XLK 4) ARKK 5) VFH

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:

• None of note

After the Close: 

• None of note

Economic Releases 

8:30 am EST

• The Change in Non-Farm Payrolls for Sept. is estimated at +88,000 versus +162,000 in Aug.
• Average Hourly Earnings MoM for Sept. is estimated to rise +.3% versus a +.3% gain in Aug.
• The Unemployment Rate for Sept. is estimated at 4.1% versus 4.1% in Aug. 

10:00 am EST

• Factory Orders for Aug. is estimated to rise +.1% versus a +.9% gain in July.
• Final Durable Goods Orders readings for Aug. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Logan speaking, weekly US Baker Hughes oil rig count, weekly CFTC speculative net positioning report and the (CALM) annual meeting could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Afternoon Market Internals

NYSE Composite Index:

• Volume Running +12.5% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 9.7 -5.6
• 4 Sectors Rising, 7 Sectors Declining
• 50.3% of Issues Advancing, 46.9% Declining 
• TRIN/Arms .94 -23.6%
• Non-Block Money Flow -$205.4M
  
• 14 New 52-Week Highs, 385 New Lows
• 37.5% (+1.2%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 30.6 -2.5

Polymarket: 

• Will China invade Taiwan by June 30th 2027? 9.0% +1.0 percentage point
• Strait of Hormuz traffic returns to normal by October 31st 3.0% -1.0 percentage point
• Iran agrees to end enrichment of uranium by Dec. 31st 10.0% unch.
• Israel withdraws from Lebanon by December 31st 6.0% +2.0 percentage points
• US Invades Iran before 2027 15.0% +1.0 percentage point
• US announces end of Iranian blockade by October 31st 25.0% -5.0 percentage point

Other

• Bloomberg Global Risk-On/Risk-Off Index 136.4 +.3%
• Global Monitor Iran Instability Index 76.0 +13.0
• Strait of Hormuz Oil Tanker Traffic Curtailed Estimate 40.0% unch.
• US High-Yield Tech Sector OAS Index 461.75 +14.75 basis points
• Bloomberg Cyclicals/Defensives Index 273.1 +.5%
• Morgan Stanley Growth vs Value Index 152.9 -.5%
• CNN Fear & Greed Index 28.0 (FEAR) -7.0
• 1-Day Vix 12.1 -1.2%
• Vix 16.4 +.3%
• Total Put/Call .91 +4.6%

Thursday Watch

Night Trading 

• Asian equity indices are -.75% to +.25% on average. 
• Asia Ex-Japan Investment Grade CDS Index 70.0 unch. 
• China Sovereign CDS 35.5 +.5 basis point.
• China Iron Ore Spot 93.20 USD/Metric Tonne -.3%. 
• Crude Oil 90.09/bbl. -.4%. 
• Gold 4,190.50 USD/t oz. +.1%. 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.04 -.10%.
• Bloomberg Emerging Markets Currency Index 33.74 -.03%.
• Bloomberg Global Risk-On/Risk Off Index 136.9 +.6%.
• US 10-Year Yield 5.29% +1.0 basis point.
• Japan 30-Year Yield 4.19% +4.0 basis points.
• Volatility Index(VIX) futures 17.8 -.4%.
• Euro Stoxx 50 futures -.59%. 
• S&P 500 futures +.30%.
• NASDAQ 100 futures +.32%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by utility and financial 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.