Stocks Reversing Lower into Afternoon on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, Technical Selling, Road & Rail/Utility Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume:  Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 30.3 -5.0%
• DJIA Intraday % Swing 1.2%
  
• Bloomberg Global Risk On/Risk Off Index 46.7 +.1%

• Euro/Yen Carry Return Index 145.81 -.08%

• Emerging Markets Currency Volatility(VXY) 12.5 -1.3%

• CBOE S&P 500 Implied Correlation Index 48.98 -.33% 

• ISE Sentiment Index 100.0 +7.0 points
  

• Total Put/Call 1.06 -.54%

• NYSE Arms 1.05 -20.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 107.8 +.4%
  

• US Energy High-Yield OAS 452.62 -.4%
• Bloomberg TRACE # Distressed Bonds Traded 411.0 -15.0
  

• European Financial Sector CDS Index 148.43 -3.21%
  

• Italian/German 10Y Yld Spread 241.0 basis points -6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 186.25 +.1%
  

• Emerging Market CDS Index 330.90 -1.6%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.53 -.37%

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

• TED Spread 45.0 basis points +10.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -66.25 basis points +3.5 basis points
  
• MBS  5/10 Treasury Spread  173.0 +5.0 basis points
  
• iShares CMBS ETF 46.07 -.13%
• Avg. Auto ABS OAS .66 -1.0 basis  point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.09 -.35%
• 3-Month T-Bill Yield 3.29% unch.
  

• Yield Curve -41.75 basis points (2s/10s) +.25 basis point
  

• China Iron Ore Spot 94.10 USD/Metric Tonne -2.1%
• Dutch TTF Nat Gas(European benchmark) 18.80 euros/megawatt-hour -7.3%

• Citi US Economic Surprise Index 17.9 -.6 point

• Citi Eurozone Economic Surprise Index .2 +5.9 points
  

• Citi Emerging Markets Economic Surprise Index -4.4 -4.1 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 236.05 +.04:  Growth Rate +15.8% +.1 percentage point, P/E 15.4 +.1
  
• Bloomberg US Financial Conditions Index -1.39 -9.0 basis points
  
• US Atlanta Fed GDPNow Forecast +2.43% +216.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +5.11% +43.0 basis points: CPI YoY +8.20% unch.
  
• 10-Year TIPS Spread 2.15 -6.0 basis points
  
• Highest target rate probability for December 14th FOMC meeting: 48.2%(-.1 percentage point) chance of 4.25%-4.5%. Highest target rate probability for February 1st meeting: 48.7%(+1.2 percentage points) chance of 4.25%-4.5%.
  

US Covid-19:

• 105 new infections/100K people(last 7 days total). 6.0%(-.0 percentage point) of 1/14/22 peak(1,740) -0/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -83.4%(-.7 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +82 open in Japan 
• China A50 Futures: Indicating -22 open in China

• DAX Futures: Indicating -90 open in Germany

Portfolio:

• Slightly Higher:  On losses in my tech/utility/industrial sector longs
  

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

• Market Exposure:  Moved to Market Neutral
  

Morning Market Internals

NYSE Composite Index:

• Volume Running +4.7% Above 100-Day Average 
• 8 Sectors Declining, 3 Sectors Rising
• 18.2% of Issues Advancing, 77.5% Declining
• 7 New 52-Week Highs, 779 New Lows
• 16.6%(-2.6%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 31.0 unch.
  
• Bloomberg Global Risk-On/Risk-Off Index 45.2 -3.1%
  
• Russell 1000: Growth/Value 15,554.7 -.21%
  
• Vix 30.9 -3.2%
• Total Put/Call 1.01 -9.8%
• TRIN/Arms 1.17 -10.7% 

Friday Watch

Evening Headlines

Bloomberg:                

• Truss’s ‘Fairy Tale’ Economics Plunge UK Into a Market Nightmare.   
• Yuan at the Mercy of Overseas Traders Puts China on Alert.  
• Here’s Why China’s Yuan Hit Record Lows Against the Dollar.
• Asian Stocks Set to Fall as Global Selloff Deepens: Markets Wrap.  
• Ian Photos: Flooded Homes, Washed-Out Roads, Broken Power Poles.
• Meta to Cut Headcount for First Time, Slash Budgets Across Teams.
• Peloton, Calm and LinkedIn Add to Growing List of Tech Layoffs.
• Lyft to Freeze Hiring Through Year-End on Economic Uncertainty.    
• Powell Ducks Elizabeth Warren’s Request for Fed Officials’ Trading Records
• CarMax’s Huge Earnings Miss Points to Trouble Ahead for New-Car Market.  
• Nike Falls Amid Eroding Profitability, Inventory Buildup.  
• Top Apple Executive Is Leaving After Making Crude Remarks in TikTok Video.  
• Jay Powell Needs Investors to Lose Money.   
• Banks Dealt Fresh Blow With Collapse of Brightspeed Debt Sale.
• BlackRock Plans Another Crypto ETF After Weak Debut of Its First One.

Wall Street Journal:

• S&P 500 Sets Another Yearly Low.
• Investors Fear Bond-Market Turmoil Entering New Phase.
• Pension Strategy Left Funds Vulnerable to Rate Increases.
• The Silent Price You’ll Pay for Our Mounting National Debt. The cost of borrowing is near untenable levels. If we aren’t already in a ‘doom loop,’ we’re getting close. 
• The First Central Bank Casualty. Britain’s financial turmoil is part of the inevitable monetary correction after central banks let inflation loose. 
• You Can’t Eat Without Natural Gas. The U.S. has the world’s largest proven reserves, but a lack of infrastructure is hindering production. 
• Amylyx’s ALS Drug Approved by FDA.
• Why Are Companies Still Hiring When GDP Is Shrinking?

Fox News:

• Officials issue dire warning about unintended consequence to millions hammered by Hurricane Ian.
• Aerial video shows serious flooding from Hurricane Ian.
• Ian before and after: Videos show Florida devastation in Fort Myers, Sanibel Island.
• Bill Clinton breaks from Dems on illegal immigrant debate.

CNBC.com:

• In a reversal, the Education Department is now excluding some borrowers from student loan relief.
• Apple downgrade sparks tech sell-off, sending Alphabet and Microsoft to one-year lows
• Nike shares fall 10% as overstocked inventory weighs on earnings.
• These 5 expenses are contributing the most to credit card debt this year, survey finds. 
  

MarketWatch:         

• Apple stock may not be a ‘safe haven’ for much longer, Bank of America warns in downgrade. 
• Micron cuts capital spending to stem oversupply cycle; shares flat after hours.
  
• Mortgage rates march toward 7%, reaching highest level since 2007.
  
• Most economists see the U.S. turning into a buyer’s housing market in 2023. Here’s where you’ll see the biggest declines in value.

Zero Hedge:

• The Crash Just Won't Stop But Today Something Changed.
• 'Looks Like Atom Bomb Dropped': Hurricane Ian Levels Neighborhoods In Southwest Florida.
• Elizabeth Warren Turns Attention From Crumbling Economy To Pending Vacuum Cleaner Company Acquisition.
• Minnesota Counties Sued For Duplicate Voter Registrations.
• What Happens When A Fact-Checker Doesn't Get The Facts Right?
• Mackenzie Scott Files For Divorce From Former Science Teacher.
• Al Gore & John Kerry Aim To Hijack The World Bank For Climate Agenda.
• "Historic Levels Of Fraud": US Watchdog Estimates $45.6 Billion Bilked From Pandemic Unemployment Program.
• US stocks declined as global inflationary headwinds persisted - Newsquawk Asia-Pac Market Open.
• Surprise! Democrats Stall Bill Banning Congressional Stock-Trading.
• Everybody has a plan until...
• Memory Holed: "The Election Was Hacked".
• Despite Horrific Guidance And Recession Warnings, Micron Rises Thanks To Aggressive Capex Cuts.
• Stocks & Dollar tumble into month-end while German CPI ignites EZ inflation fears - Newsquawk US Market Wrap.
• Germany Believes High Explosive Devices Equivalent To "500 Kilograms Of TNT" Used To Destroy Nord Stream.
• The Can Has Reached The End Of The Road.
• "We're Horrified": Major Brands Pull Twitter Ad Campaigns Over Child Porn.
• Next Blowup Shows The Sheer Pain In UK Backdrop.

Newsmax: 

• Flooding Strands Florida Residents as Strengthening Ian Steams Toward Carolinas.  
• Sen. Cruz: Senate Should Put AG Garland, FBI on Trial.

TheGatewayPundit.com:

• “Globalists Are Marching Us Relentlessly Toward This Nuclear Armageddon” – EXCLUSIVE with Retired Colonel and Former Virginia State Senator Richard Black.
• FBI Purging Conservative Employees and Retaliating Against Whistleblowers.
• Criminals Disable Entire Fleet Of School Buses By Stealing All The Catalytic Converters (VIDEO).
• “Every Policy that They Articulate, Every Policy that They Pursue, Is Against the Interest of the Nation” – The Great Lou Dobbs on the Biden Gang.
• Advertisers Leaving Twitter Over Their Ads Appearing Next to Child Pornography.
• JUST IN: Senate Passes Stopgap Bill to Avert Government Shutdown – Funding Bill Includes $12.3 Billion for Ukraine.
• Michigan Election Worker Charged for Inserting Thumb Drive into Voting Machine During August Primary (VIDEO).
• First Openly Trans US Army Officer and Wife Arrested in Plot to Give Medical Records to Russia.
  

The Epoch Times:

• China Investing in Military Capabilities to Topple US Defenses: Air Force Secretary.
• US Ignorant of Chinese Intelligence Threat: China Expert.

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 867,627 Reports(+2,042 from prior week) Through September 16th, 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 -1.5% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 187.75 +11.25 basis points. 

• China Sovereign CDS 113.25 +9.0 basis points.
  

• Bloomberg Emerging Markets Currency Index 47.28 +.04%   
• Bloomberg Global Risk-On/Risk Off Index 47.3 +1.5%. 
• Bloomberg US Financial Conditions Index -1.29 +1.0 basis point
  
• Volatility Index(VIX) futures 30.90 -.14%
• Euro Stoxx 50 futures n/a.

• S&P 500 futures +.23%.

• NASDAQ 100 futures +.17%  

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (CCL)/-.15

After the Close:

• None of note
  

Economic Releases

8:30 am EST

• Personal Income for Aug. is estimated to rise +.3% versus a +.2% gain in July.
• Personal Spending for Aug. is estimated to rise +.2% versus a +.1% gain in July.
• The PCE Core MoM for Aug. is estimated to rise +.1% versus a -.1% decline in July.
• The PCE Core YoY for Aug. is estimated to rise +4.7% versus a +4.6% gain in July.
  

9:45 am EST

• MNI Chicago PMI for Sept. is estimated to fall to 51.8 versus 52.2 in Aug.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Brainard speaking, Fed's Bowman speaking, China Manufacturing/Services PMI report and the government funding deadline could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are modestly lower, weighed down by technology and consumer 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 Plunging into Final Hour on US Policy-Induced Stagflation Fears, Earnings Outlook Worries, Surging European/Emerging Markets/US High-Yield Debt Angst, Tech/Consumer Discretionary Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Every Sector Declining
  

• Volume:  Around Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 32.5 +7.7%
• DJIA Intraday % Swing 1.6%
  
• Bloomberg Global Risk On/Risk Off Index 46.5 -3.7%

• Euro/Yen Carry Return Index 145.63 +.77%

• Emerging Markets Currency Volatility(VXY) 12.7 +.6%

• CBOE S&P 500 Implied Correlation Index 50.5 +3.3% 

• ISE Sentiment Index 86.0 -29.0 points
  

• Total Put/Call 1.09 +1.9%

• NYSE Arms 1.24 +138.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 110.28 +3.14%
  

• US Energy High-Yield OAS 459.52 +1.82%
• Bloomberg TRACE # Distressed Bonds Traded 426.0 +15.0
  

• European Financial Sector CDS Index 153.31 +3.74%
  

• Italian/German 10Y Yld Spread 247.0 basis points +6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 186.12 +2.2%
  

• Emerging Market CDS Index 336.26 +5.4%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 25.7 unch.

• 2-Year Swap Spread 28.5 basis points -4.5 basis points
  

• TED Spread 34.25 basis points -.5 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -69.75 basis points -46.0 basis points
  
• MBS  5/10 Treasury Spread  168.0 +5.0 basis points
  
• iShares CMBS ETF 46.03 -.33%
• Avg. Auto ABS OAS .67 +3.0 basis  points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.24 -.19%
• 3-Month T-Bill Yield 3.29% +1.0 basis point
  

• Yield Curve -42.0 basis points (2s/10s) -4.25 basis points
  

• China Iron Ore Spot 96.6 USD/Metric Tonne +.3%
• Dutch TTF Nat Gas(European benchmark) 185.0 euros/megawatt-hour -10.6%

• Citi US Economic Surprise Index 18.5 +3.5 points

• Citi Eurozone Economic Surprise Index -5.7 -4.9 points
  

• Citi Emerging Markets Economic Surprise Index -.3 +.9 point
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 236.01 -.02:  Growth Rate +15.7% -.1 percentage point, P/E 15.3 -.4
  
• Bloomberg US Financial Conditions Index -1.27 +1.0 basis point
  
• US Atlanta Fed GDPNow Forecast +.27% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.68% unch.: CPI YoY +8.20% unch.
  
• 10-Year TIPS Spread 2.21 -12.0 basis points
  
• Highest target rate probability for December 14th FOMC meeting: 61.6%(+15.5 percentage points) chance of 4.25%-4.5%. Highest target rate probability for February 1st meeting: 55.4%(+21.6 percentage points) chance of 4.5%-4.75%.
  

US Covid-19:

• 105 new infections/100K people(last 7 days total). 6.0%(-.4 percentage point) of 1/14/22 peak(1,740) -7/100K people from prior report.
  
• New Covid-19 patient hospital admissions per 100K population -82.7%(-.2 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -372 open in Japan 
• China A50 Futures: Indicating -21 open in China

• DAX Futures: Indicating -37 open in Germany

Portfolio:

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

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

• Market Exposure:  Moved to Market Neutral
  

Bear Radar

Style Underperformer:

• Small-Cap Value -3.0%
  

Sector Underperformers:

• 1) Alt Energy -6.0% 2) Retail -4.6% 3) Shipping -4.5%

Stocks Falling on Unusual Volume: 

• MPW, RQI, FYBR, NKE, KBH, VIRT, OPI, AVNT, VFC, EXPI, TEN, PATH, AHH, AAPL, KAR, NSTG, SLRC, ECC, ADC, LEA, EXC, BPT, UNFI, LAD, RA, MAIN, FSK, CWH, EPR, BWA, WPC, ABR, TREE, CAR, VC, CGBD, BXMT, GNL, GNRC, GSBD, FRG, ORCC, PAG, KREF, THO, DSGN, DX, PMT, PAG, NAPA, EFC, STWD, ACRE, AN, SAH, NLY, TRIN, CVNA and KMX
  

Stocks With Unusual Put Option Activity:

• 1) ACWX 2) INDA 3) ABR 4) GT 5) HOG
  

Stocks With Most Negative News Mentions:

• 1) VEEE 2) KMX 3) RAD 4) CVNA 5) NIO
  

Charts:

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