Today's Headlines

Bloomberg:  

• Rifts Emerge Between Italy's Populists in Push for Power.

• Italy Bonds Pass Auction Test in a Sign of Easing Market Jitters.

• Italy Banks Under Scrutiny as Messy Politics Prompts Downgrades.

• BofA's Subramanian Says Italy Won't Hurt U.S. Equities.

• German Joblessness Falls to Record Low Despite Signs of Slowdown.

• Bitcoin Heads Toward $7,000 as Pain Returns on Gloomy Technicals.

Wall Street Journal:

• Why CVS Loves ObamaCare.

• Italy’s Crisis—and Europe’.

• U.S. Tariff Threat Could Scuttle Trade Talks With China.

• Italy’s Astonishing Bond Reaction Tests Global Markets.

• OPEC’s Alliance With Russia Shows Signs of Fracturing.

• Then and Now: The Italian Crisis in Seven Charts.

Fox News: 

• NFL owners caved to president, changed anthem rules, Kaepernick case depositions reveal.

CNBC:

• Bitcoin could be extinct by 2118: Yale's Robert Shiller.

• Mary Meeker just presented 294 slides on the future of the internet — read them here.

• Fox CEO James Murdoch rips Facebook as an 'attack surface'.

• Apple(AAPL) chart has me bullish for three reasons, says technician.

• China reportedly lining up countries against US in pending trade war.

• Target(TGT) shares jump as Bank of America calls it a top pick and a good bet on ‘aging millennials’ .

• This is the woman who canceled 'Roseanne,' ABC's first African-American woman president.

• Big US bank exposure to Italy appears ‘modest and manageable’: Jefferies.

• Qualcomm(QCOM) just announced a product that will help take virtual reality everywhere.

Zero Hedge:  

• Israel Warns That "Threshold Of War" Will Be Crossed If Hamas Doesn't Stop Firing Rockets.

• For Italian Bonds, These Are The 12 Charts That Matter The Most. (graph)

• S&P Erases Yesterday's Losses As Rate-Hike Odds Plunge.  

• Euro Spikes, Italian Yields Slide After 5-Star Calls On Savona To Withdraw Candidacy.

• Bill Gross' Bond Fund Just Had Its Biggest Daily Loss Ever.

• Why The Eurozone And The Euro Are Both Doomed.

• Trump Tweets He "Wishes" He Didn't Pick Sessions As Attorney General.

• War Erupts Between Trump's Two Top Trade Advisors Over China.

• Small Caps Soar To Record High On Yet Another Massive Short-Squeeze.

• Q1 GDP Revised To 2.2%, Misses Across The Board.

• ADP Employment Rebounds Off April Plunge But "Hot Job Market" Is Cooling.

• China Trade Deal On The Verge After Beijing Slams Trump's Latest Surprise "Flip-Flop".

The Telegraph:

• Italian assets surge after breakthrough in last-ditch attempts to form government.

Bear Radar

Style Underperformer:

•   Large-Cap Growth +1.2%

Sector Underperformers:

• 1) Airlines -.2% 2) Homebuilders -.1% 3) Telecom +.1%

Stocks Falling on Unusual Volume: 

• KORS, SC, DSW, DQ, OLED, TSRO and DOVA

Stocks With Unusual Put Option Activity:

• 1) GNW 2) MON 3) DG 4) DKS 5) CRM

Stocks With Most Negative News Mentions:

• 1) FN 2) NXPI 3) GCO 4) GE 5) KMP

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.6%

Sector Outperformers:

• 1) Energy +3.2% 2) Oil Service +2.8% 3) Road & Rail +2.0%%

Stocks Rising on Unusual Volume:

• IEFA, DKS, MOV, SPTN, KBWB, HIFR, IBUY, ASYS, ATTU, ABBV, WMS, PRAH, HEI, IGV, EZU, LQ, AAOI, EFAV, MT, TRP, HDB, EXAS, NANO, CW, CRM, VDSI, IRDM, ONE, KBR, SHAK, MNST, XOG, CEQP, GIII, DXC, WCG, HIFR, WCG, HIFR, HPQ, RARE and IGT

Stocks With Unusual Call Option Activity:

• 1) JCI 2) DKS 3) DG 4) MNST 5) DISH

Stocks With Most Positive News Mentions:

• 1) NE 2) ABBV 3) MET 4) UPS 5) CAKE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.3% Above 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 77.9% of Issues Advancing, 19.1% Declining
• 85 New 52-Week Highs, 23 New Lows
• 45.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.8%
• Vix 15.9 -6.6%
• Total Put/Call 1.01 -6.5%
• TRIN/Arms .89 -53.2%

Wednesday Watch

Night Trading 

• Asian equity indices are -2.0% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 75.5 +3.5 basis points. 

• Asia Pacific Sovereign CDS Index 12.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 70.68 +.01%.

• FTSE 100 futures -.16%.

• S&P 500 futures -.17%.

• NASDAQ 100 futures -.30%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ADI)/1.37

• (CHS)/.26

• (DKS)/.44

• (DSW)/.37

• (KORS)/.60

• (SHLD)/-1.51

After the Close:

• (GES)/-.23

• (PVH)/2.25

Economic Releases
8:15 am EST

• The ADP Employment Change for May is estimated to fall to 190K versus 204K in April.

8:30 am EST

• Preliminary Wholesale Inventories for April are estimated to rise +.5% versus a +.3% gain in March. 

• The Advance Goods Trade Deficit for April is estimated at -$71.0B versus -$68.3B in March.

• Retail Inventories MoM for April.

2:00 pm EST

• U.S. Federal Reserve Beige Book Report.

Upcoming Splits

• None of note

Other Potential Market Movers

• The EU/US meetings on steel/aluminum tariffs, Euurozone Industrial Confidence report, weekly MBA Mortgage Applications report, weekly US retail sales reports, Citi Regional Tech Conference, Stifel Dental/Vet Conference, Bernstein Decisions Conference, RBC Consumer/Retail Conference, (CA) analyst meeting, Cowen Tech/Media/Telecom Conference and the (TRMB) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 25% net long heading into the day.

Stocks Falling Substantially into Afternoon on European/Emerging Markets/US High-Yield Debt Angst, Yen Strength, Oil Decline, Financial/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 17.0 +29.2%

• Euro/Yen Carry Return Index 130.17 -1.73%

• Emerging Markets Currency Volatility(VXY) 9.34 +2.75%

• S&P 500 Implied Correlation 39.72 +10.1%

• ISE Sentiment Index 127.0 -1.55%
  

• Total Put/Call .1.08 +20.0%

• NYSE Arms 1.93 +33.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.60 +6.52%
  

• America Energy Sector High-Yield CDS Index 377.0 +1.58%

• European Financial Sector CDS Index 90.67 +19.1%

• Italian/German 10Y Yld Spread 290.5 +85.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 12.39 +2.75%

• Emerging Market CDS Index 167.78 +4.12%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.07 +.15%

• 2-Year Swap Spread 24.0 +1.5 basis points

• TED Spread 43.0-.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -19.25 -3.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.65 -.61%
• 3-Month T-Bill Yield 1.88% -1.0 basis point
  

• Yield Curve 44.0 -1.25 basis points

• China Iron Ore Spot 64.34 USD/Metric Tonne -1.27%

• Citi US Economic Surprise Index 11.20 -.8 point

• Citi Eurozone Economic Surprise Index -93.10 +3.5 points

• Citi Emerging Markets Economic Surprise Index -10.0 -3.0 points

• 10-Year TIPS Spread 2.06 -5.0 basis points
  
• 100.0% chance of Fed rate hike at August 1 meeting, 100.0% chance at September 26 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -383  open in Japan 
• China A50 Futures: Indicating -113 open in China

• DAX Futures: Indicating -76 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long