Stocks Substantially Lower into Final Hour on Global Recession Fears, Earnings Worries, Technical Selling, Energy/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 39.1 +14.4%

• Euro/Yen Carry Return Index 121.59 -.09%

• Emerging Markets Currency Volatility(VXY) 11.82 +7.4%

• S&P 500 Implied Correlation 77.68 -.55%

• ISE Sentiment Index 57.0 -66.0 points

• Total Put/Call 1.16 +19.6%

• NYSE Arms 1.64 +34.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 89.80 +3.41%
  

• US Energy High-Yield OAS 1,360.12 -.47%

• European Financial Sector CDS Index 105.97 +4.89%

• Italian/German 10Y Yld Spread 235.25 unch.
  

• Asia Ex-Japan Investment Grade CDS Index 117.61 +2.53%
  

• Emerging Market CDS Index 349.60 +4.85%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.64 +.02%

• 2-Year Swap Spread 13.0 +.25 basis point

• TED Spread 47.75 -19.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 6.0 -2.0 basis points
• MBS  5/10 Treasury Spread  105.0 +2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.32 -.45%
• 3-Month T-Bill Yield .09% unch.

• Yield Curve 43.0 +.75 basis point

• China Iron Ore Spot 80.19 USD/Metric Tonne -.30%

• Citi US Economic Surprise Index -128.0 +16.6 points

• Citi Eurozone Economic Surprise Index -267.0 +1.5 points

• Citi Emerging Markets Economic Surprise Index 9.0 -1.2 points

• 10-Year TIPS Spread 1.05 -3.0 basis points
• n/a chance of no change at July 29th meeting, n/a chance of no change at Sept. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -90 open in Japan 
• China A50 Futures: Indicating -665 open in China

• DAX Futures: Indicating -10 open in Germany

Portfolio:

• Slightly Higher: On gains in my index hedges and emerging market shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -5.2%

Sector Underperformers:

• 1) Airlines -9.4% 2) Oil Service -8.0% 3) Gaming 7.0%

Stocks Falling on Unusual Volume: 

• NTUS, DNP, TREE, BA, TREX, ZEN, SILK, TRN, SPH, KRMD, PCTY, LUV, INOV, AMZN, TSLA, CINF, HRC, ZYXI, CNMD, ELY, AAL, LRCX, BRKS, UAL, KRA, KPTI, UCTT, HP, FTAI, SAVE, APA, USCR, WDC, INSG, NCLH, HAFC, CAR, WY and HUBG

Stocks With Unusual Put Option Activity:

• 1) BYD 2) EWU 3) IBB 4) AMAT 5) XHB

Stocks With Most Negative News Mentions:

• 1) TSLA 2) BYND 3) CBT 4) NCLH 5) OAS

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -3.0%

Sector Outperformers:

• 1) Gold & Silver +2.2% 2) Foods -1.5% 3) Pharma -1.9%

Stocks Rising on Unusual Volume:

• LOCO, ASGN, SGEN, BAND, LPLA, FBHS, CALX, CLX, ARCT and MOH

Stocks With Unusual Call Option Activity:

• 1) APO 2) CLX 3) TGTX 4) WDC 5) SYK

Stocks With Most Positive News Mentions:

• 1) ODFL 2) CLX 3) ABBV 4) SGEN 5) MRNA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +18.7% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 12.5% of Issues Advancing, 85.6% Declining
• 3 New 52-Week Highs, 3 New Lows
• 12.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.5%
• Vix 37.7 +10.3%
• Total Put/Call 1.11 +14.4%
• TRIN/Arms 1.53 +25.4%

Friday Watch

Evening Headlines

Bloomberg:                     

• Australia, New Zealand Ponder Mutual Reopening Once Virus Is Contained.

• Stocks Drop Amid Earnings Caution; Dollar Recovers. Japanese shares and U.S. futures dropped after sobering comments from Amazon and Apple about the impact of the coronavirus. The dollar pared overnight losses and Treasury yields ticked lower. Asian trading was limited Friday, with much of the region out on holidays. After U.S. markets closed, Amazon.com warned of a possible second-quarter loss, while Apple omitted an earnings forecast for the first time in more than a decade. Earlier, the S&P 500 Index fell from a seven-week high in wake of a larger-than-expected jump in U.S. jobless claims. Strong results from Microsoft Corp., Facebook Inc. and Tesla Inc. had limited losses on the tech-heavy Nasdaq gauges. Futures on the S&P 500 dropped 1% as of 9:08 a.m. in Tokyo after the index fell 0.9% Thursday. Japan’s Topix Index fell 0.8%. Australia’s ASX/S&P 200 slumped 2.5%. The Stoxx Europe 600 Index decreased 2% Thursday.

• Oil Set to Snap Weekly Losing Streak as Producers Slash Output.

• U.S. Cases Increase 1.2%, Slowest Pace This Month: Virus Update.

• Buybacks Still On at Apple, Alphabet With Tech Giants Flush.

• Gilead Warns About Cloudy Outlook for Rest of Year on Virus.

• U.S. Steel Portends More Blue-Collar Pain With 2,700 Layoffs.  

• As California Chafes Under Lockdown, Governor Targets the Beach.  

• Zendesk Projects Slowing Sales Growth Amid Economic Downturn.   

• Visa Warns It Will Be Challenged ‘for a Number of Quarters’.   

• Einhorn’s Greenlight Hedge Funds Deepen Slump With April Decline.

Wall Street Journal:

• States Struggle to Keep Up With Jobless Claims Surge.

• The FBI’s Flynn Outrage.

• Virus Pushes Colleges to the Breaking Point, Forcing ‘Hard Choices’ About Education.

• Record Contraction in Eurozone Bodes Ill for Global Economy.

• U.K.’s Virus Death Toll Draws Scrutiny.

• Texas Shale Driller Concho Takes $12.6 Billion Charge.

• China Takes Harder Line on Hong Kong Amid Coronavirus Protest Lull.

CNBC.com:

• Dow futures drop more than 200 points after earnings drive Apple and Amazon lower.

• New York City’s transit system discusses going to the Fed for a loan.

• Gilead says it can produce ‘several million’ rounds of remdesivir coronavirus treatments next year.

• Stocks making the biggest moves after hours: Amazon, Apple, Western Digital and more.

• United Airlines loses $1.7 billion in first quarter as bookings plunged in coronavirus pandemic.

• Curbside pickup for retailers is here to stay. This shopping center owner is making it permanent.

• Why the US is facing a hospital bed shortage.

• Flying? Most US airlines will require face masks for passengers as they guard against coronavirus.

Fox News:

• Trump says he's seen evidence virus emerged from Wuhan lab, makes this WHO comparison.

• Dozens of activists, some armed, take protest inside Michigan Capitol.

• Cruz bill would bar US officials from using these Chinese-backed products.

• Biden finally set to speak out on bombshell sex-assault claim weeks later.

MarketWatch.com:             

• Trump threatens use of tariffs against China as coronavirus retaliation.

• Can Apple make new iPhones while dealing with coronavirus, and who will buy them? 

• Apple may not live up to ‘aggressive’ 5G expectations, analyst warns.  

• Mortgage rates fall to record low — here’s why some loan applicants won’t be offered them.

Zero Hedge:      

• President Trump Confirms "High Degree Of Confidence" That COVID-19 Originated In Wuhan Lab: Live Updates.

• "Don't Close RAZOR": Flynn FBI Setup Continues To Unravel As Texts Reveal Strzok Went Off The Rails.

• $6.66 Trillion.

• Brazil's Neighbors Close Borders As Latin America's Biggest COVID-19 "Hot Spot" Reopens.

• The Elephant In The Room Keeping Businesses From Reopening.

• Las Vegas Transforms Casino Into Food Bank As Working Poor Line Up For Miles.

• Pelosi Demands $1 Trillion In Pandemic Relief For States And Local Governments.

• DOJ Finding 'Early Signs Of Fraud' Among COVID Stimulus Applications.

• Mayday On May-Day: "Unprecedented Strikes" Planned At Amazon, Walmart On Friday As Working-Poor Snub Rent Payments.

• Amazon To Use Banned Chinese Firm's Orwellian Thermal Cameras To Scan Workers.

• CMBS Implosion: Unprecedented Surge In New Delinquencies Heralds Commercial Real Estate Disaster.

• AAPL Pumps'n'Dumps After Boosting Buyback But Pulls Guidance Despite "Seeing Pick-Up In April".

• J. Crew Preparing To File For Bankruptcy As Soon As This Weekend.

• Amazon Tumbles After Projecting Shrinking Profits On Billions In Pandemic Costs.

• Stocks Scream To "Most Expensive Ever" In Greatest Month Since '87.

Business Insider:   

• POLL: 23% of Americans who owe a rent or a mortgage payment on Friday aren't sure if they'll have the money for it.

• Energy demand is set to plummet this year as coronavirus presents the biggest shock since World War ll, IEA says.

• Famed short-seller David Einhorn calls out Tesla's billing practices again, erasing the stock's post-earnings gain.

The Epoch Times:

• China Knew Virus Was Contagious But Kept Silent for Days: Leaked Documents.

• Chinese Regime Moves Forward With Political Meeting Despite Beijing City on High Alert for Virus Spread.

John Hopkins University:

• Coronavirus Global Cases. (map)

BNO News:

• Tracking Coronavirus: Map, data and timeline.

Google Docs:

• Coronavirus Testing by State.

Night Trading 

• Asian equity indices are -2.75% to -1.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 121.5 +3.25 basis points.

• China Sovereign CDS 45.0 +1.75 basis points.

• Bloomberg Emerging Markets Currency Index 58.49 -.14%.

• FTSE 100 futures -1.1%.

• S&P 500 futures -.9%.

• NASDAQ 100 futures -1.5%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ABBV)/2.25

• (APO)/.48

• (CBOE)/1.53

• (CHTR)/2.94

• (CVX)/.67

• (CLX)/1.49

• (CL)/.73

• (DISH)/.57

• (EL)/.76

• (XOM)/.06

• (HON)/1.94

• (ITT)/.75

• (JCI)/.36

• (LYB)/1.43

• (MINI)/.40

• (NWL)/.05

• (PSX)/.63

• (WY)/.13

After the Close:

• None of note

Economic Releases
10:00 am EST

• Construction Spending MoM for March is estimated to fall -3.5% versus a -1.3% decline in Feb.

• ISM Manufacturing for April is estimated to fall to 36.0 versus a reading of 49.1 in March.

• ISM Prices Paid for April is estimated to fall to 33.0 versus 37.4 in March.
  

Afternoon:

• Wards Total Vehicle Sales for April is estimated to fall to 6.8M versus 11.37M in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK Money Supply report could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are lower, weighed down by consumer discretionary and financial shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.