Thursday Watch

Evening Headlines

Bloomberg:     

• China’s Slowdown Deepens in August, Early Indicators Show.  

• Mnuchin Says China Trade Meeting Will Happen But Won't Say When.

• Boris Johnson Corners His Opponents and Pushes Brexit Toward a Showdown.

• Worst Unemployment in Decades Strains Indian Consumer Loans.

• Iranian Minister Says Europe Has Two Options to Save the Nuclear Deal.

• Asian Stocks Set for Muted Open; Dollar Gains. Asian stocks look set for a muted open Thursday as investors awaited new developments in the U.S. and China trade negotiations. The dollar strengthened to a nine-month high. Futures nudged higher in Tokyo and Hong Kong, and dipped in Sydney. U.S. futures edged lower after the S&P 500 Index climbed on below average volume as a rally in oil pushed energy shares higher. Ten-year Treasury yields held steady after hitting a three-year low. Currencies were little changed in Asia after Treasury Secretary Steven Mnuchin said the U.S. doesn’t intend to intervene on the dollar for now. The pound weakened and gilts climbed after U.K. Prime Minister Boris Johnson moved to suspend parliament, increasing the risk of a no-deal Brexit. Nikkei 225 futures rose 0.2% in Singapore. Australia’s S&P/ASX 200 Index futures fell 0.1%. Hang Seng Index futures added 0.1%. S&P 500 futures fell 0.1% as of 8:02 a.m. in Tokyo.   

• Five Things You Need to Know to Start Your Day.

• Mnuchin Says U.S. Doesn’t Intend to Intervene on Dollar for Now. 

• GOP Senator Seeks Hearing on Fed ‘Danger’ After Dudley Op-Ed.

• Crypto Crash Prompts Guessing Game as Bitcoin Breaches $10,000 Again.  

• U.S. Corporate Bonds Are Having the Best August in Four Decades.

Wall Street Journal:

• Mainland Chinese Sneak Into Hong Kong’s Protests to Support the Cause.

• Security Concerns Threaten Data Link Backed by Google, Facebook.

• After Brexit, a U.S. Trade Deal.

• How Bayer-Monsanto Became One of the Worst Corporate Deals—in 12 Charts.

• New Concerns Emerge About Long-Term Antidepressant Use.

Fox News:

• Dorian strengthens into a hurricane, could become major Category 3 storm.

CNBC:

• Stocks making the biggest moves after hours: Nutanix, Ollie’s and Guess.

• ‘Never, ever use a debit card,’ warns fraud expert and ex-con artist—here’s what to do instead.

• China’s playing the long game, and is making key moves to hedge against Trump’s tariffs.

• Five Below rises on earnings, but traders see a better dollar store stock.

• Why record low bond yields could keep heading lower as market fears ‘disaster scenario’.

• Apparel retailer Forever 21 weighs bankruptcy filing.

Zero Hedge:  

• MSNBC Anchor Cowers Away From Lies About Trump-Russia Ties.

• FBI Raids Detroit-Area Home Of UAW President Amid Ongoing Corruption Probe.

• Larry Summers Accuses Dudley Of "Trump Derangement Syndrome".

• Mnuchin Says Issuance Of 50 And 100 Year Treasuries Under "Very Serious Consideration".

• Emerging Market FX Plunges To Record Low As Pesos Plummet.

• Stocks & Bonds Pop, Cryptos Drop, As Silver Surges Past Gold Year-To-Date.

Business Insider:   

• Kirsten Gillibrand drops out of the 2020 Democratic presidential race.

• 'I will not endorse that': The CEO of Whole Foods says eating plant-based 'meats' is unhealthy.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 66.5 +.25 basis point.

• China Sovereign CDS 48.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index  64.83 -.02%.

• FTSE 100 futures -.34%.

• S&P 500 futures -.22%.

• NASDAQ 100 futures -.33%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (ANF)/-.52

• (BBY)/.99

• (BURL)/1.14

• (DG)/1.57

• (DLTR)/.82

• (MDP)/1.58

• (PDCO)/.25

• (SAFM)/3.07

• (TECD)/2.31

• (TITN)/.33

• (TD)/1.80

After the Close:

• ((COO)/2.70

• (DELL)/1.49

• (MRVL)/.15

• (ULTA)/2.80

• (WDAY)/.35

Economic Releases
8:30 am EST

• 2Q GDP is estimated to rise +2.0% versus a prior estimate of a +2.1% gain.

• Advance Goods Trade Balance for July is estimated at -$74.4B versus -$74.2B in June.

• Retail Inventories MoM for July is estimated to rise +.3% versus a -.3% decline in June.

• Preliminary Wholesale Inventories MoM for July is estimated to rise +.2% versus unch. in June.

• Initial Jobless Claims for last week are estimated to rise to 214K versu s209K the prior week.

• Continuing Claims are estimated to rise to 1687K versus 1674K prior.
  

10:00 am EST

• Pending Home Sales MoM for July is estimated unch. versus a +2.8% gain in June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI/Unemployment Rate reports, $32B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the (CRM) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are slightly higher, boosted by commodity 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 50% net long heading into the day.

Stocks Rising into Final Hour on Diminished Global Growth Fears, Oil Gain, Short-Covering, Retail/Energy Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 19.3 -5.0%

• Euro/Yen Carry Return Index 122.0 +.16%

• Emerging Markets Currency Volatility(VXY) 9.03 -.66%

• S&P 500 Implied Correlation 45.83 -2.66%

• ISE Sentiment Index 82.0 -15.5%
  

• Total Put/Call 1.22 +28.4%

• NYSE Arms .75 -40.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.11 -2.4%
  

• America Energy Sector High-Yield CDS Index 424.0 +.02%

• European Financial Sector CDS Index 60.53 +.07%

• Italian/German 10Y Yld Spread 175.75 -7.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 66.65 +1.05%
  

• Emerging Market CDS Index 218.29 +1.23%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.84 +.03%

• 2-Year Swap Spread -.75 +1.5 basis points

• TED Spread 14.0 -4.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -15.50 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 64.86 -.20%
• 3-Month T-Bill Yield 1.98% +2.0 basis points

• Yield Curve -.04 unch.

• China Iron Ore Spot 81.50 USD/Metric Tonne +1.24%

• Citi US Economic Surprise Index -12.6 +1.1 points

• Citi Eurozone Economic Surprise Index -41.30 +.7 point

• Citi Emerging Markets Economic Surprise Index -19.7 +.8 point

• 10-Year TIPS Spread 1.56+1.0 basis point
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +31 open in Japan 
• China A50 Futures: Indicating +18 open in China

• DAX Futures: Indicating -1 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.3%

Sector Underperformers:

• 1) Software -.8% 2) Utilities -.3% 3) Insurance -.2%

Stocks Falling on Unusual Volume: 

• PAHC, ADSK, MOV, PLAN, SHOP, PHR and DBD

Stocks With Unusual Put Option Activity:

• 1) ETFC 2) ADSK 3) CPE 4) TIF 5) EZPW

Stocks With Most Negative News Mentions:

• 1) ADSK 2) MOV 3) JNJ 4) WORK 5) CARB

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.5%

Sector Outperformers:

• 1) Oil Service +4.5% 2) Retail +2.7% 3) Banks +1.7%

Stocks Rising on Unusual Volume:

• TGE, PZZA, VET, PSTV, TSE, PM, SYNH, CONN, DY, GBT, CZZ, NOVA, MO, FSLY, NBLX, XEC and MDCO

Stocks With Unusual Call Option Activity:

• 1) TIF 2) NLY 3) GME 4) ADSK 5) PGR

Stocks With Most Positive News Mentions:

• 1) CHS 2) EEI 3) LCI 4) DY 5) PZZA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -12.8% Below 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 67.6% of Issues Advancing, 28.6% Declining
• 90 New 52-Week Highs, 194 New Lows
• 43.99% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.2%
• Vix 20.2 -.5%
• Total Put/Call 1.21 +27.4%
• TRIN/Arms .84 -33.6%

Wednesday Watch

Evening Headlines

Bloomberg: 

• Wary of Trump’s Flip-Flops, China Prepares for the Worst on Trade.  

• Asia Makes Fiscal Push After Rate Cuts to Limit Trade War Damage   

• These Charts Show Japan Has the Advantage in Its Trade Spat With Korea.

• Asia Stocks Look Mixed on Trade; Treasuries Rise. Asian stocks looked set for a mixed session Wednesday as investors assessed the latest in the unpredictable path of trade talks between the U.S. and China. Treasuries rose. Futures slipped in Tokyo, were little changed in Seoul and pointed higher in Hong Kong. U.S. futures rose. U.S. equities finished lower after a seesaw session as it appeared that China was bracing for the worst on the negotiations with U.S. President Donald Trump’s credibility becoming a key impediment to a deal. The 10-year Treasury yield fell below 1.50% to a three-year low and the dollar was steady against major currencies. Crude extended gains on expectations of shrinking U.S. inventories. Nikkei 225 futures fell 0.1% in Singapore. Australia’s S&P/ASX 200 Index futures lost 0.2%. Hang Seng Index futures rose 0.4%. S&P 500 futures rose 0.2% as of 8:20 a.m. in Tokyo.  

• Your Evening Briefing.

• Oil Rises as Industry Data Shows U.S. Crude Inventory Draw.

• A Dollar Rising Into a Possible U.S. Recession Could Be a Bad Omen.  

• Trump Administration Says It Will Build 20 Miles of New ‘Border Barrier’.

• Delta Air Says the Quest for Instagram Photos Is Stoking Demand for Flights.

Wall Street Journal:

• Democrats’ Emerging Tax Idea: Look Beyond Income, Target Wealth.

• De Blasio Gives Up on Educating Poor Kids.

• Driver Complaints About Automatic Brakes Are Rising. 
  

• College Board Drops Plans for SAT Student Adversity Scores.

• Peloton to Pursue Nasdaq Listing, Dual-Class Stock Structure in IPO.

Fox News:

• WH officials respond after Taylor Swift calls them out at VMAs, pushes Equality Act petition.

MarketWatch.com:

• HPE earnings beat sends shares up 8%.   

• 2-year/10-year U.S. Treasury yield curve inversion deepens, flashing ‘red’. 

• Warning signs are flashing in funds that buy leveraged loans.

CNBC:

• Stock dividends are yielding more than the 30-year Treasury bond for the first time in a decade
  

• Purdue Pharma offers $10 billion - $12 billion to settle opioid claims.

• Hasbro CEO: Moving out of China has ‘gone very well for us’
  

• Stocks making the biggest moves after hours: Autodesk, HP and Heico.
  

Zero Hedge:  

• Fighting Escalates Dramatically As Both Sides Prepare For "The Final War" Between Israel And Iran.

• Sub-Prime Auto Credit Deteriorates In July, Says Report.

• Mexican Navy Seizes A Whopping 52k Pounds Of Fentanyl, Intended For The US.

• While Celebrities Pass Off Fake Pictures Of Burning Amazon, Here's What The Raging Fires Actually Look Like.

• Deutsche Bank Says It Has Tax Returns Subpoenaed By Anti-Trump Lawmakers.

• The 'World's Most Bearish Hedge Fund' Asks "Why People Are Not More Bearish" After Tumbling 22% YTD.

• Bill Dudley Shocker: Ex-NY Fed President Urges Fed's Powell To Prevent Trump Re-election.

• WTI Extends Gains Above $55 After Huge Crude Draw.

• China's Oil Imports From Iran Are Rising, New Customs Data Shows.

• New Poll: 70% Of Americans Are Angry At The Political Establishment.

• Silver & Gold Soar, Yields & Small Caps Plunge As Trade-Deal Hope Tanks.

Business Insider:

• Only 33% of Americans believe that Jeffrey Epstein actually died by suicide.

• Walmart says these will be the 48 toys every kid wants this holiday.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 66.25 +1.0 basis point.

• China Sovereign CDS 48.25 unch.

• Bloomberg Emerging Markets Currency Index  64.98 -.02%.

• FTSE 100 futures -.13%.

• S&P 500 futures +.18%.

• NASDAQ 100 futures +.26%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (CHS)/.00

After the Close:

• (FIVE)/.50

• (GES)/.29

• (HRB)/-.75

• (NTNX)/-.56

• (OKTA)/-.10

• (OLLI)/.46

• (PVH)/1.89

• (SMTC)/.36

• (SCVL)/.79

• (WSM)/.83

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,941,000 barrels versus a -2,732,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -137,640 barrels versus a +312,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,156,730 barrels versus a +2,610,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.38% versus a +1.1% gain prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German GFK Confidence report, $441B 5Y T-Note auction and the weekly MBA Mortgage Applications report could also impact trading today.

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