Stocks Reversing Sharply Lower into Afternoon on US Policy-Induced Stagflation Fears, Fed "Behind the Curve" Worries, Forced Selling Concerns, Tech/Alt Energy 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) 32.0 +9.2%
• Bloomberg Global Risk On/Risk Off Index 3,726.0 -155.0 points

• Euro/Yen Carry Return Index 138.82 -.26%

• Emerging Markets Currency Volatility(VXY) 12.7 +.2%

• CBOE S&P 500 Implied Correlation Index 48.8 +6.1% 

• ISE Sentiment Index 76.0 -41.0 points
  

• Total Put/Call 1.22 +.83%

• NYSE Arms 1.62 +67.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 92.34 +2.7%
  

• US Energy High-Yield OAS 446.46 +.44%

• European Financial Sector CDS Index 110.50 +1.8%

• Italian/German 10Y Yld Spread 206.0 basis points +10.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 130.62 -.87%
  

• Emerging Market CDS Index 303.39 +1.1%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 28.65 -.09%
  
• Russia Sovereign Debt Credit Default Swap 10,121.0 -18.2%
  

• 2-Year Swap Spread 29.25 basis points -.75 basis point
  

• TED Spread 50.0 basis points +5.5 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -18.75 basis points -.75 basis point
  
• MBS  5/10 Treasury Spread  122.0 -1.0 basis point
  
• iShares CMBS ETF 48.59 +.26%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 52.15 +.24%
• 3-Month T-Bill Yield .99% -4.0 basis points
  

• Yield Curve 21.25 basis points (2s/10s) -2.5 basis points
  

• China Iron Ore Spot 131.1 USD/Metric Tonne +1.9%

• Citi US Economic Surprise Index -14.8 -1.5 points

• Citi Eurozone Economic Surprise Index 19.8 -2.5 points
  

• Citi Emerging Markets Economic Surprise Index 10.0 -2.3 points

• 10-Year TIPS Spread 2.59 -8.0 basis points
  
• 0.0%(unch.) chance of no change at July 27th FOMC meeting, 0.0%(unch.) chance of no change at September 21st meeting

US Covid-19:

• 219 new infections/100K people(last 7 days total). 13.0%(+1.0 percentage point) of 1/14 peak +13/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.9%(unch.) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -274 open in Japan 
• China A50 Futures: Indicating -73 open in China

• DAX Futures: Indicating -80 open in Germany

Portfolio:

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

• Disclosed Trades:  Added to my (IWM)/(QQQ) hedges
  

• Market Exposure:  Moved to Market Neutral
  

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.0% Below 100-Day Average 
• 7 Sectors Declining, 4 Sectors Rising
• 45.0% of Issues Advancing, 51.3% Declining
• 10 New 52-Week Highs, 120 New Lows
• 25.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.0% 
• Bloomberg Global Risk-On/Risk-Off Index 3,977.0 +99.0 points
• Russell 1000: Growth/Value 14,783.0 +.04%
  
• Vix 28.8 -1.9%
• Total Put/Call 1.12 -.74%
• TRIN/Arms 1.25 +28.9%

Friday Watch

Evening Headlines

Bloomberg:                  

• China Warns US a ‘Dangerous Situation’ Forming Over Taiwan.  
• Age of Scarcity Begins With $1.6 Trillion Hit to World Economy.
  
• Economists Cut China Growth Forecasts as Lockdowns Hit Economy.
• South Korea Producer Prices Accelerate as Central Bank Mulls Rate Hike.
• Mr. Yen Says Currency May Weaken to 150 Level Last Seen in 1990.
• Asia Stocks Set for Steady Start Amid Lower Dollar: Markets Wrap.
• Oil Heads for Fourth Weekly Gain on Outlook for Products.
• Demand From Kimchi to Diesel: Inflation Indicators From Around the World You Didn’t Know About.
• Fed to Plow Ahead on Half-Point Hikes, Undeterred by Stock Slump.
• If Tesla Isn’t Good Enough for an ESG Index, Then Who Is?
• Musk Says ESG ‘An Outrageous Scam’ After Tesla Index Exclusion.
• Fed’s George Says ‘Rough’ Market Won’t Alter Rate Hike Plan.
• Palm Oil’s Slump Set to Deepen After Indonesia Lifts Export Ban.  
• Biden’s Student Loan Plan Is Personal for 30 Top Aides With Millions in Debt.  
• ‘Hell No’: Finance Firms Tell Texas They Don’t Boycott Energy.

Wall Street Journal:

• High Inflation, Slowing Growth Raise Risk of Global Downturn.
• Treasury yields decline as investors move into safer investments.
• Kohl’s First-Quarter Sales Fell as Retailers Struggle With Inflation.
• Stock Market Is Top-Heavy, but Carnage Is Widespread.
• Why the Markets Are Falling So Much.
• The Baby Formula Shortage Was Made in Washington. The politicians tacitly admit that their policies are responsible.
• The Biden Era Is About Fear, Not Greed. Voters and investors signal their worry.
• More Subprime Borrowers Are Missing Loan Payments.
• Can Ukraine Win? Five Scenarios for the War’s Next Phase.
• Baby-Formula Shortage Leaves Families Desperate, Prompting WIC Program Revamp.
• Teen Babysitters Are Charging $30 an Hour Now, Because They Can.
• Gas Prices Hit New Highs Again With All 50 States Above $4 a Gallon.
  

Fox News:

• Pelosi pushes back against legislation to guard Supreme Court justices after leak.

CNBC.com:

• Palo Alto Networks stock jumps after company lifts full-year forecast.
• Stephen Roach delivers stagflation warning, calls peak inflation debate absurd.
• Rising fuel costs are a massive problem for business and consumers — Here’s why they’re so high.
• Existing home sales fell in April to the lowest level since the start of the pandemic.

MarketWatch:       

• Selloff puts S&P 500 on bear market’s doorstep. If history is a guide, there’s more pain ahead.   
• Deckers sold $2 billion worth of Ugg boots in record year, stock jumps 12%.
  
• S&P 500 earnings are another potential `shock’ awaiting financial markets trying to shake off stagflation fears: economist.

Zero Hedge: 

• "Utter Nonsense": Hawley Eviscerates Energy Secretary For Blaming Inflation On 'Putin Price Hike'. 
  
• Ongoing Surrender "On Far Bigger Scale Than Kyiv Has Acknowledged" At Azovstal.
• Is The Global Debt Bubble About To Burst?
• Economic Optimism Has Collapsed Under Biden: Poll.
• Calls Emerge For China To Deploy Digital "Helicopter Money".
• Border Patrol Union Leader Warns Of "Complete Control" By Cartels Once 'Title 42' Ends.
• DOJ Antitrust Head Set To Heighten Scrutiny On PE Firms Rolling Up Entire Industries.
• Newsquawk Asia-Pac Market Open - US stocks declined in choppy trade.
• "This Should Set Off Alarm Bells Across All Industries": House Passes Fuel Price-Gouging Bill.
• Goldman Is Quietly Handing Out A "Recession Manual" To Clients.
• Newsquawk US Market Wrap: Risk fluctuates after Wednesday bloodbath while Dollar dives.
• Biden Unveils $100 Million More In Weapons To Ukraine Literally Moments After $40BN Approved.
• "My Patience Is Wearing Thin": Citadel's Ken Griffin Is At His Breaking Point With Chicago.
• Bitcoin, Bonds, & Bullion Jump As Dollar Dumps After Dismal Data.

TheGatewayPundit.com: 

• WOW! Biden Regime Hires Michael Chertoff to Lead Disinformation Board – Previously Targeted Gateway Pundit and Breitbart – Another Hunter Biden Laptop Truther.
• NBC News: Hunter Biden Made $11 Million From 2013-2018 – Spent Millions on Luxury Hotels, Luxury Cars, Hookers and Drugs.
• 14 State Populations Were Miscounted in 2020 Census – Overcounting Heavily Favored Democrats.
• Oregon County Suing Voter Integrity Group To Stop Examination Of 2020 Ballots, Admits Systems Can Be Hacked!
• Local Wisconsin FOX Station Has Guts to Run Segment on “2000 Mules” — After National FOX News Channel Bans EVEN A MENTION of the Film (VIDEO).
• Swiss Billionaire Who Is Spending Tens of Millions on Democrat Campaigns Is Reportedly Not Even a US Citizen.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 813,020 Reports(+2,363 from prior week) Through May 6th, 2022.
  

SKirsch.com:

• Using the MGH numbers with our own VAERS queries, we have 247 cases per million doses from the MGH study divided by 5.97 cases per million doses from VAERS. 247/5.97 = 41. This suggests that the VAERS under-reporting factor (URF) is 41X.

Covid-19(Data, Maps, Graphs):

• Our World in Data:  New Global Covid-19 Cases(7-day rolling average graphs). New US Covid Hospital Admissions/ICU Admissions/Deaths
  
• FT.com:  Fully Vaccinated by Country(graph). Global Lockdown Stringency Index(map).
• Bloomberg.com:  International Travel Restrictions.  Case Graphs by State.
  
• NYTimes.com:  County Trends and Clusters. Local ICU Occupancy.
  
• Brown School of Public Health:  Covid Severity by State/County(map).  US Hospital Capacity(region).
  
• CovidActNow:  Covid Severity/Infection Rate by Metro Area.
  
• KFF:  US Vaccinations by Race/Ethnicity.
  
• Carnegie Mellon: Covid-Like Symptoms in Community. Covid Symptom Searches on Google. Covid-Related Dr.Visits.  Restaurant Visits. Wearing Masks. (graphs)
  
• Safegraph.com:  Commerce Patterns(graphs).

Night Trading 

• Asian equity indices are +.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 132.0 +2.5 basis points. 

• China Sovereign CDS  85.25 +.5 basis point.
  

• Bloomberg Emerging Markets Currency Index 52.0 -.06%.  
• Bloomberg Global Risk-On/Risk Off Index 3,843.0 -36.0 points.
• Volatility Index(VIX) futures 28.6 -2.3%.
• Euro Stoxx 50 futures +.8%.

• S&P 500 futures +.55%.

• NASDAQ 100 futures +.8%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (BIG)/1.10
• (HIBB)/3.21
  

After the Close:

• None of note
  

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (TFX) investor day could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

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

Stocks Reversing Modestly Higher into Final Hour on US Dollar Weakness, Lower Long-Term Rates, Short-Covering, Commodity/Alt Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance:  Most Sectors Rising
  

• Volume:  Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 26.7 -4.0%
• Bloomberg Global Risk On/Risk Off Index 3,868.0 -8.0 points

• Euro/Yen Carry Return Index 139.22 +.85%

• Emerging Markets Currency Volatility(VXY) 12.9 +1.42%

• CBOE S&P 500 Implied Correlation Index 47.1 -5.3% 

• ISE Sentiment Index 111.0 +36.0 points
  

• Total Put/Call 1.20 +1.69%

• NYSE Arms .71 -77.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 89.20 -.5%
  

• US Energy High-Yield OAS 445.03 +1.5%

• European Financial Sector CDS Index 108.50 +2.6%

• Italian/German 10Y Yld Spread 196.0 basis points +3.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 132.08 +4.2%
  

• Emerging Market CDS Index 300.40 -1.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 28.61 unch.
  
• Russia Sovereign Debt Credit Default Swap 12,365.3 -19.8%
  

• 2-Year Swap Spread 30.0 basis points +1.5 basis points
  

• TED Spread 44.5 basis points +3.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -18.0 basis points -.25 basis point
  
• MBS  5/10 Treasury Spread  123.0 -5.0 basis points
  
• iShares CMBS ETF 48.44 +.1%
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 52.09 +.86%
• 3-Month T-Bill Yield 1.03% +1.0 basis point
  

• Yield Curve 23.75 basis points (2s/10s) +2.0 basis points
  

• China Iron Ore Spot 127.1 USD/Metric Tonne +2.7%

• Citi US Economic Surprise Index -13.3 -11.0 points

• Citi Eurozone Economic Surprise Index 22.3 -2.2 points
  

• Citi Emerging Markets Economic Surprise Index 12.3 -4.0 points

• 10-Year TIPS Spread 2.67 -8.0 basis points
  
• 0.0%(unch.) chance of no change at July 27th FOMC meeting, 0.0%(unch.) chance of no change at September 21st meeting

US Covid-19:

• 206 new infections/100K people(last 7 days total). 12.0%(unch.) of 1/14 peak +0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -84.9%(+.5 percentage point) from peak 7-day avg. of 1/9/21 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +73 open in Japan 
• China A50 Futures: Indicating +72 open in China

• DAX Futures: Indicating +29 open in Germany

Portfolio:

• Slightly Higher: On gains in my commodity/industrial/medical/tech sector longs
  

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

• Market Exposure:  Moved to 50% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Value -.6%

Sector Underperformers:

• 1) Road & Rail -3.0% 2) Networking -2.8% 3) Insurance -1.9%

Stocks Falling on Unusual Volume: 

• THO, LOVE, K, PM, SHOO, BOOT, MAT, CLX, HPE, IEP, WGO, TGT, CRF, ENTA, SKT, CLM, INBX, BBWI, MNRO, HOG, EXEL, TGI and CSCO
  

Stocks With Unusual Put Option Activity:

• 1) TIP 2) IRBT 3) FL 4) CSCO 5) HPE
  

Stocks With Most Negative News Mentions:

• 1) CSCO 2) UAA 3) BBWI 4) HOG 5) CSX
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +2.4%

Sector Outperformers:

• 1) Gold & Silver +5.0% 2) Alt Energy +4.6% 3) Video Gaming +3.1%%

Stocks Rising on Unusual Volume:

• BILL, DOCS, DDOG, U, SG, SNPS, NEWR, HUBS, COIN, DVAX, BJ, PLCE, Z, KDNY, RBLX, ARCH, PCOR, WOOF, KSS, CLAR and AGL
  

Stocks With Unusual Call Option Activity:

• 1) ATUS 2) ROST 3) COTY 4) BBWI 5) KSS

Stocks With Most Positive News Mentions:

• 1) CMRX 2) NURO 3) SIGA 4) ENPH 5) EBS
  

Charts:

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