Stocks Higher into Final Hour on Global Stimulus Hopes, Economy Re-Opening Optimism, Short-Covering, Airline/REIT Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 28.4 +3.2%

• Euro/Yen Carry Return Index 124.15 +.03%

• Emerging Markets Currency Volatility(VXY) 10.77 -.65%

• S&P 500 Implied Correlation 62.3 +2.8%

• ISE Sentiment Index 109.0 +10.0 points

• Total Put/Call .80 -13.0%

• NYSE Arms .79 -53.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 78.4 +.81%
  

• US Energy High-Yield OAS 1,021.43 -.51%

• European Financial Sector CDS Index 81.19 -4.67%

• Italian/German 10Y Yld Spread 189.0 -3.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 101.21 -.23%
  

• Emerging Market CDS Index 279.97 -3.17%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.32 +.25%

• 2-Year Swap Spread 9.0 -.25 basis point

• TED Spread 22.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +.25 basis point
• MBS  5/10 Treasury Spread  114.0 -2.0 basis points
• IHS Markit CMBX BBB- 6 66.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.43 +.46%
• 3-Month T-Bill Yield .13% unch.

• Yield Curve 50.0 -.5 basis point

• China Iron Ore Spot 95.40 USD/Metric Tonne -1.92%

• Citi US Economic Surprise Index -54.70 +.4 point

• Citi Eurozone Economic Surprise Index -265.70 +9.1 points

• Citi Emerging Markets Economic Surprise Index 28.5 +8.9 points

• 10-Year TIPS Spread 1.18 +1.0 basis point
• 99.3% chance of no change at July 29th meeting, 99.3% chance of no change at Sept. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +128 open in Japan 
• China A50 Futures: Indicating -128 open in China

• DAX Futures: Indicating +303 open in Germany

Portfolio:

• Higher: On gains in my industrial/tech/consumer staple sector longs 

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

• Market Exposure: Moved to 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +.1% Above 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 71.6% of Issues Advancing, 26.4% Declining
• 34 New 52-Week Highs, 1 New Low
• 21.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 54.9%
• Vix 28.8 +4.8%
• Total Put/Call .74 -19.6%
• TRIN/Arms .69 -59.7%

Monday Watch

Today's Headlines

Bloomberg:   

• China’s Security Law Sends Hong Kong Residents Dashing for Exit.  

• China’s Factory Outlook Slips in May Amid Slow Recovery.  

• Australia House Prices Fall as Shutdowns Hit Property Market.  

• EU Floats Taxing 70,000 Companies for Market Access, FT Reports.  

• U.S. Stock Futures Slip as Protests Spread; Yen Up: Markets Wrap. U.S. stock futures retreated, while Asian equities were largely mixed in early Monday trading, as investors weighed the violent protests in some American cities that have stoked concerns about a reacceleration in infection rates and a damper on the economic recovery. The yen and gold edged up. S&P 500 futures retreated and shares in Japan and Sydney opened flat. With Amazon scaling back deliveries and Apple closing some stores Sunday, investors are gauging how violence over the weekend will affect the reopening of the world’s largest economy. Crude oil fell. China’s markets will be taking in President Donald Trump’s latest barrage of China criticism, which stopped short of tough sanctions over Hong Kong. Futures on the S&P 500 Index declined 0.5% as of 9:01 a.m. in Tokyo. The index climbed 0.5% on Friday. Japan’s Topix index dipped 0.1%. South Korea’s Kospi index rose 0.4%. Australia’s S&P/ASX 200 Index slid 0.2%. 

• Oil Edges Lower With U.S. Riots Offset by Report on OPEC+ Cuts.

• President Plans Expanded Fall G-7 Meeting With Russia, Others. 

• Protests Hammer U.S. Cities Still Recovering From Lockdown.

• U.S. Cities Wracked by Another Night of Protests: Video.

• Amazon Calls Delivery Drivers Back, Closes Hubs Near Protests.

• Nocera: Riots Breed Chaos, Violence and Most Likely Covid-19.    

• Japan to Ease Entry Bans; Brazil Gets U.S. Drugs: Virus Update.

• Protests May Spark Outbreaks; Russia Approves Drug: Virus Update.   

• Chicago Mulls Delay Amid Protests; U.S. Cases Slow: Virus Update.

• Great Depression-Like Jobless Rate Seen for U.S.

• U.S. Government Is Selling Property in Exclusive Hong Kong Area.  

• Trump Leads Biden in the States He Won in 2016: Campaign Update.  

• Texas Is Showing the World How to Reopen Cautiously.  

• Bitcoin’s Bounce Back Over $9,000 Masks a Potential Downtrend.

Wall Street Journal:

• Cities Racked by Another Night of Violent Protests.

• Cities’ Next Dilemma: Cut Essential Services or Take On More Debt.

• Retailers and Restaurants Grapple With Damage, Just as Many Were Starting to Reopen.

• The Overlooked Disparity: Coronavirus Kills Mostly Men.

• The State Pension Crisis Goes Beyond the Big Blue States.

• Democrats Stick With Tax-Rise Policies, Eyeing 2021.

• U.S. Businesses Brace for Damage as Tensions Grow Over Hong Kong.

• Is It Safe to Reopen Schools? These Countries Say Yes.

• Meat Plants Reopen, But Burgers Stay Pricey.

• New York City Property Taxes Rise as Values Decline.

• American Stocks Are Outpacing the Rest of the World.

• Riots Invite Crime, Not Justice.

• Justice and Disorder.

• Will Canada Send Oil and Gas Packing?

• SpaceX Craft Docks With Space Station, Ushering in New Era.

• Plexiglass Is the New Hot Commodity as Businesses Try to Reopen.

• Chip Industry Seeks Billions to Expand U.S. Manufacturing.

Fox News:

• Big-city Dems who had imposed strict lockdowns now let George Floyd rioters flout rules.

• US cities face toll of violent protests that have left 3 dead, dozens injured, stores burned.

• JIM HANSON: Trump’s right about who’s behind these riots.

CNBC:   

• Amazon, Target and Apple scale back business in cities hit hard by protests. 

• Investors are dangerously downplaying coronavirus and China trade risks, top strategist warns.

• Live updates: Police and protesters clash in another night of violence after killing of George Floyd.

• After flocking downtown to woo millennials, offices might be moving back to the suburbs.

• Coronavirus live updates: As global infections top 6 million, LA suspends testing after riots rock city.

• Five charts that track the U.S. economy as states reopen.

Zero Hedge:

• Looters Overwhelm Police In Santa Monica, Tanker Barrels Into Minneapolis Crowd, As 3rd Night Of Chaos Begins.

• China's Foreign Ministry Tweets "I Can't Breathe!" As America's Rivals Troll US Over Unrest.

• LA Reports Record Jump In COVID-19 Cases As City Distracted By Unrest: Live Updates.

• This Is How Systems Collapse.

• Schlichter: This Election Is Republicans Versus China.

• Here Is The Stunning Chart That Blows Up All Of Modern Central Banking.

• Citi Warns "Markets Are Way Ahead Of Reality", Urges Clients To Raise As Much Money As They Can Before The Next Crash.

• There Is Nothing Normal About The US Savings Rate.

• Are Market Bulls Too Optimistic?

• America Wakes Up After A Night Of Chaos And Destruction: 1,700 Rioters Arrested In Three Days.

• City Leaders To Protesters: 'Coming COVID-19 Second Wave Is Your Fault'.

• "It's A Setup": Mysterious Brick Piles Appear Throughout Major Protest Cities.

• Watch: The Purge 'Message' Blasts Over Loudspeakers As Rioters Torch Cars.

• Trump Designates Antifa "A Terrorist Organization".

• Female Athletes Fight To Keep Biological Men Out Of Their Sports.

• "It's Too Dangerous" - Amazon Orders Delivery Drivers To "Turn Back" Amid Riots As Company Prepares To Cut Hazard Pay.

• "A W-Shaped Epidemic Is Now Emerging As Our Expected Case Forecast".

• Watch Live: Riots Erupt From Coast To Coast; Curfews Imposed; Stores Looted; D.C. Activates National Guard.

• Mapping The The State Of Press Freedom Around The World.

• The Road To Recovery: Which Economies Are Reopening?

• Here Are All The NYC Restaurants That Have Permanently Closed During The Coronavirus Crisis.

• Trump Blasts "Outdated Group Of G7 Countries" - Postpones Summit After Merkel Rebuff, Will Invite Russia Back In.

MarketWatch.com:

• SpaceX successfully launches U.S. astronauts into space. 

• From hashtags to donations, Google, Netflix and other tech companies voice support for protesters.

Business Insider:

• Congress' response to the 2008 financial crisis sparked a decade of inequality and resentment. The US is now repeating that mistake.

• The dangers — and benefits — of a post-pandemic work-from-home revolution.

• Chain restaurants have permanently closed over 500 locations so far in 2020. Here's the full list. 

• Retailers are bracing themselves for a 'huge surge' of returns that could make their massive piles of unsold inventory even bigger.

The Epoch Times:

• US Investors Have Increasing Exposure to Chinese Banks, Bad Loans

• Beijing and Hong Kong Government Dismiss Trump’s Imminent Sanctions Over Security Law.

John Hopkins University:

• Coronavirus Global Cases. (map)

BNO News:

• Tracking coronavirus: Map, data and timeline.

KFF:

• State Data(Tests/Hospitalizations).

Night Trading

• Asian indices are +.75% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.25 unch.

• China Sovereign CDS 52.75 +1.0 basis point.

• Bloomberg Emerging Markets Currency Index 60.25 +.18%.

• FTSE 100 futures +1.1%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (ATHM)/.75

After the Close:

• (ENS)/1.19

• (NGL)/.08

Economic Releases

10:00 am EST

• Construction Spending MoM for April is estimated to fall -7.0% versus a +.9% gain in March.

• ISM Manufacturing for May is estimated to rise to 43.5 versus 41.5 in April.

• ISM Prices Paid for May is estimated to rise to 40.0 versus 35.3 in April.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Manufacturing PMI report, Eurozone PMI report, (RJF) investor day, Morgan Stanley Could Winners Virtual Conference, (REGN) oncology portfolio update and the Goldman Sachs Travel/Leisure Conference could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST

BOTTOM LINE: Asian indices are modestly higher, boosted by financial and industrial 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 week.