Stocks Sharply Lower into Afternoon on Escalating Global Bank Contagion Fears, US Policy-Induced Stagflation Worries, Rising European/Emerging Markets/US High-Yield Debt Angst, Commodity/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume:  Heavy

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 28.2 +19.0%
• DJIA Intraday % Swing 1.07%
  
• Bloomberg Global Risk On/Risk Off Index 42.1 -7.8%

• Euro/Yen Carry Return Index 146.3 -2.5%

• Emerging Markets Currency Volatility(VXY) 11.8 +.1%

• CBOE S&P 500 Implied Correlation Index 44.6 +11.0% 

• ISE Sentiment Index 67.0 -15.0 points
  

• Total Put/Call .97 -10.2%

• NYSE Arms 1.21 +37.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 86.6 +7.0%
  

• US Energy High-Yield OAS 450.77 +12.6%
• Bloomberg TRACE # Distressed Bonds Traded 366.0 -4
  

• European Financial Sector CDS Index 127.93 +19.6% 
• Credit Suisse Subordinated 5Y Credit Default Swap 683.97 +32.1%
  

• Italian/German 10Y Yld Spread 198.0 basis basis points +13.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 139.5 +1.5%
  

• Emerging Market CDS Index 267.25 +4.7%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 27.0 +.20%

• 2-Year Swap Spread 27.5 basis points +3.25 basis points
  

• TED Spread 19.75 basis points +7.0 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -36.5 -12.25 basis points
  
• MBS  5/10 Treasury Spread  158.0 -5.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 623.0 +10.0 basis points
  
• Avg. Auto ABS OAS 63.0 +3.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 47.1 -.93%
• 3-Month T-Bill Yield 4.66% -9.0 basis points
  

• China Iron Ore Spot 130.0 USD/Metric Tonne -1.7%
• Dutch TTF Nat Gas(European benchmark) 42.9 euros/megawatt-hour -2.9%

• Citi US Economic Surprise Index 48.9 -1.4 points

• Citi Eurozone Economic Surprise Index 49.8 -1.8 points
  

• Citi Emerging Markets Economic Surprise Index 21.9 +3.5 points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 225.45 +.08:  Growth Rate +1.2% +.1 percentage point, P/E 17.4 unch.
  
• S&P 500 Current Year Estimated Profit Margin 12.38% unch.
  
• Bloomberg US Financial Conditions Index -.94 -40.0 basis points
  
• Yield Curve -42.25 basis points (2s/10s) +17.75 basis points
• US Atlanta Fed 1Q GDPNow Forecast +3.15% +52.0 basis points
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +4.73% unch.: CPI YoY +5.22% unch.
  
• 10-Year TIPS Spread 2.28 -3.0 basis points
  
• Highest target rate probability for May 3rd FOMC meeting: 50.5%(+4.1 percentage points) chance of 4.75%-5.0%. Highest target rate probability for June 14th meeting: 38.1%(+11.7 percentage points) chance of 4.5%-4.75%.
  

US Covid-19:

• 84 new infections/100K people(last 7 days total). 4.8%(-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 -83.3%(+.1 percentage point) from peak 7-day avg. of 1/9/22 - 1/15/22
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -849 open in Japan 
• China A50 Futures: Indicating -131 open in China

• DAX Futures: Indicating +19 open in Germany

Portfolio:

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

• Disclosed Trades:  Took profits in my commodity longs, added utility longs and added to my (IWM)/(QQQ) hedges
  

• Market Exposure: Moved to Market Neutral
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -3.2%
  

Sector Underperformers:

• 1) Oil Service -7.6% 2) Steel -6.4% 3) Airlines -6.0%

Stocks Falling on Unusual Volume: 

• PAGP, APG, CARR, EQH, PXD, QTWO, NE, CDMO, HEES, FCX, CRL, IBKR, FANG, SCCO, ORA, AMR, ARCH, WCC, UAL, DAL, SBGI, VSAT, STR, HASI, BG, BTU, APA, GES, PBT, SLB, ROCC, DVN, VTLE, WFRD, SBOW, TWI, DAR, SPWR, NOVA, MTDR, PDCE, MRO, FLR, CHRD, RUN, CPE, TDW, HAL, TALO, SM, HPK, X, OVV, STLD, ESTE, AA, EBIX, PACW and FRC
  

Stocks With Unusual Put Option Activity:

• 1) ARI 2) FRC 3) VLY 4) WAL 5) ZION
  

Stocks With Most Negative News Mentions:

• 1) APEI 2) PACW 3) FRC 4) C 5) GES
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -1.4%
  

Sector Outperformers:

• Utilities +.5% 2) Pharma -.6% 3) Internet -.7%

Stocks Rising on Unusual Volume:

• SMAR, S, WU, LOB, CUBI and AAWW
  

Stocks With Unusual Call Option Activity:

• 1) PACW 2) WAL 3) FRC 4) TFC 5) DPST

Stocks With Most Positive News Mentions:

• 1) JNCE 2) SMAR 3) OPEN 4) FTCI 5) STRR
  

Charts:

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

Tomorrow's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open: 

• (ASO)/1.81
• (DG)/2.96
• (GIII)/.44
• (JBL)/1.85
• (SIG)/5.43
• (PLCE)/-4.09
• (TITN)/1.15
• (WSM)/5.46
  

After the Close: 

• (FDX)/2.73
• (GRPN)/-.36
• (AUY)/.06
  

Economic Releases 

8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 205K versus 211K the prior week.
• Continuing Claims are estimated to fall to 1709K versus 1718K prior.
• The Import Price Index MoM for Feb. is estimated to fall -.2% versus a -.2% decline in Jan.
• The Import Price Index ex Petrol MoM for Feb. is estimated to rise +.1% versus a +.2% gain in Jan.
• The Export Price Index MoM for Feb. is estimated to fall -.3% versus a +.8% gain in Jan.
• Housing Starts for Feb. is estimated to rise to 1310K versus 1309K in Jan.
• Building Permits for Feb. is estimated to rise to 1345K versus 1339K in Jan.
• The Philly Fed Business Outlook for March is estimated to rise to -15.0 versus -24.3 in Feb.
• The NY Fed Services Business Activity Index for March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The ECB decision, Australia Employment data, weekly MBA Mortgage Applications report, (DGX) investor day and the BofA Information/Business Services Conference could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Morning Market Internals

NYSE Composite Index:

• Volume Running +58.8% Above 100-Day Average 
• Nasdaq/NYSE Volume Ratio 6.2 -2.4
  
• 11 Sectors Declining, 0 Sectors Rising
• 24.7% of Issues Advancing, 72.2% Declining
• 18 New 52-Week Highs, 95 New Lows
• 36.6%(-10.0%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 24.0 -8.0
  
• Bloomberg Global Risk-On/Risk-Off Index 43.9 -12.9%
  
• Russell 1000: Growth/Value 15,569.0 +.73%
  
• Vix 27.6 +16.5%
• Total Put/Call .98 -9.3%
• TRIN/Arms 1.38 +60.5%
  

Wednesday Watch

Evening Headlines

Bloomberg:         

• China’s $740 Billion Offshore Credit Market Rally Stalls Just as Restructuring Heats Up.
• Australia Bad Loans to Rise, Banks Can Take Shocks, CFR Says.
• TikTok Considers Splitting From ByteDance If Deal With US Fails.  
• TikTok Could Control Data and Divide Americans, FBI’s Wray Says.  
• Argentina Inflation Surpasses 100% as Economic Recession Looms.  
• Asian Equities Advance as Banking Jitters Ease: Markets Wrap.
• Oil Rises From Three-Month Low After SVB Turmoil Rattles Markets.
• Apple Delays Bonuses for Some and Limits Hiring in Latest Cost-Cutting Effort.
• Ex Fed’s Quarles Says SVB Failure Not Due to Easier Bank Rules.
• America’s Largest Owner of Local Sports Channels Files for Bankruptcy.
• Signature Bank Faced Criminal Probe Ahead of Firm’s Collapse.  
• ‘Old-School’ Signature Bank Collapsed After Its Big Crypto Leap.  
• Short Sellers Scored $2 Billion Profit as Regional Banks Plunged.  
• SVB Is a ‘Nail in the Coffin’ for Bay Area Housing Market’s Gold Rush.  
• SVB Exposes ‘Lazy’ ESG Funds as Hundreds Bet on Doomed Bank.  
• Goldman’s Rubner ‘Shocked’ by Big Market Moves, Blames Liquidity.

Wall Street Journal:

• Still Inflated. The White House spins the latest report on consumer prices.
• SVB Creditors Form Group Ahead of Possible Bankruptcy.
• Silicon Valley Bank and Joe Biden’s $19 Trillion Monday. His latest bailout is a solution for him now and a problem for us later.
• Fed to Consider Tougher Rules for Midsize Banks.
• The American Diet Has a Sandwich Problem.
• Russian Jet Collides With U.S. Drone Over Black Sea.
• Credit Suisse Finds Material Weaknesses in Financial Reporting.
• Facebook Parent Plans 10,000 Job Cuts in New Layoffs.
• Some School Districts Are Eliminating Honors Classes. Many Parents Aren’t Happy.
• Ohio Sues Norfolk Southern Over East Palestine Train Derailment.

Fox News:

• Special prosecutor's move shakes up Alec Baldwin 'Rust' shooting manslaughter case.

CNBC.com:

• Private equity firms Apollo and KKR among those reviewing Silicon Valley Bank loans.
• Schumer gives campaign donations from Silicon Valley Bank’s ex-CEO, PAC to charity.
• FDA authorizes Pfizer’s Covid omicron booster as fourth shot for kids under 5.

MarketWatch:       

• SVB’s collapse makes it impossible to say what stocks are worth as bond-market volatility explodes.
• SVB’s sudden collapse: 6 charts show the shock waves that ripped through global markets.
• Why Ray Dalio says SVB collapse is a ‘canary in the coal mine’.
• ‘Net worth of median household is basically nothing,’ says Carl Icahn. ‘We have some major problems in our economy.’.
• As SVB fails, Icahn says one of our major problems in this economy is there’s ‘no leadership on the corporate level’.
• Citadel founder Ken Griffin: Fed’s intervention in SVB collapse shows U.S. capitalism is ‘breaking down before our eyes’.
• Government bonds held at banks may be so-called ‘toxic asset’ of next financial crisis, fund manager says.

Zero Hedge:

• Watch: Trump Vows To "Totally Obliterate The Deep State" In "The Final Battle".
• Kremlin Blames US For Crashed Drone: 'Flying With Transponders Off Towards Russian Border'. 
• New Wuhan Scandal: US Agencies Double-Paid Virus Research Costs.
• Taibbi: In FBI Case, The First Amendment Takes Another Bizarre Hit.
• DeSantis Admin Yanks Hyatt Miami Liquor License For Hosting "Drag Queen Christmas" With Kids Present.
• There's No Such Thing As 'Healthy Obesity'.
• Putin: "Complete Nonsense" That Anyone Other Than State Actor Behind Pipeline Explosions.
• A Mismatch Of Short And Long-Term Interest.
• Treasury To Give Biden Family 'Suspicious Activity' Banking Reports To GOP Investigators.
• Why Not Let Banks Fail?
• Apple Delays Bonuses And Implements Hiring Freeze, Report Says.
• Relief Rally Ruined By Ratings Agencies & Russia; Bitcoin Bid.
• US stocks and yields rebounded in the absence of any additional bank failures and as participants reflected on US CPI data - Newsquawk Asia-Pac Market Open.
• The Return Of The Widowmaker.
• WTI Holds Losses After API Reports Big Product Draws.
• Cathie Wood's ARKK Recorded Largest Inflows In Years As SVB Collapsed.
• Stocks and yields climb on in-line CPI and no more bank failures - Newsquawk US Market Wrap.

Newsmax:      

• Rep. Steil: Biden Policies Had Role in Bank Failures.
• Dr. Carson: Lab-Leak Theory Makes Sense.

TheGatewayPundit.com:

• Newsom Failed to Disclose His Personal Ties with Silicon Valley Bank as He Lobbied For Bailout.
• Tucker Carlson Asked GOP Presidential Hopefuls About Ukraine: Trump Calls for Peace in Europe, Regime Change at Home; DeSantis Response Stuns Establishment.
• BIDEN CRISIS: Moody’s Downgrades Banking Segment to “Negative”, Assets in US Banks Are $2 Trillion LESS than Their Balances.
• Joe Biden Targets Gun Manufacturers in CA Speech: “I Am Determined, Once Again, to Ban Assault Weapons and High-Capacity Magazines!” (VIDEO).
• STUNNING Video Woke Signature Bank Made Before They Went Broke.
• Woke Oscars Suffer Another Year of Brutal Ratings, Third-Lowest Ever: Report.
• If the GOP Tries to Compete with Dems in Mail-In Ballots and Ballot Harvesting They Will Lose.
• JUST IN: Inflation Rises by 0.4% in February and 6.0% Over the Past Year as Prices Remain High – Real Wages Drop for 32nd Straight Month.
• Demand ‘America First’ Science – Stop “Scientific Money Laundering” and Billions Funneled to China Via US-Funded Research.
• Shocking Study Out of Australia Shows up to a 26 Fold Increase in Excess Mortality in 2021 and 2022. Consistent With American Insurance Companies Findings.

The Epoch Times: 

• Opposition Mounts Against Ford’s EV Battery Plant Using Chinese Tech.
• Poilievre Says It’s an ‘Accepted Fact’ That Beijing Helped Elect Trudeau.
• China ‘Sanction Proofing’ its Economy From US: Expert.

Twitter: 

• @NewsBecker - Tucker Carlson on Silicon Valley Bank: "We're about to see bank consolidation, which means more government control. It will mean digital currency. A currency politicians control. You think that's not coming? Of course it's coming." (video)
• @songpinganq - Surveillance in #15minutecities, China uses facial recognition to fine you for jaywalking and debits your bank a/c straight away...and your face will display on a giant screen for everyone to see to shame you. You will lose your social credit scores too. (video)
• @zerohedge - CMBX 15 BBB- new lifetime lows. This is just starting . (graph)

OpenVAERS:

• VAERS US COVID Vaccine Adverse Event Reports. 942,034 Reports(+3,859 from prior week) Through March 3rd, 2023.
  

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.

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 135.75 +3.25 basis points. 

• China Sovereign CDS 75.25 -1.75 basis points. 
• China Iron Ore Spot 132.9 USD/Metric Tonne +.9%.

• Bloomberg Emerging Markets Currency Index 47.5 -.05%.
• Bloomberg Global Risk-On/Risk Off Index  50.7 +.6%. 
• Bloomberg US Financial Conditions Index -.52 +2.0 basis points.
  
• Volatility Index(VIX) futures 23.7 -1.0%.
• Euro Stoxx 50 futures -.05%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.08%.  

Morning Preview Links

BOTTOM LINE: Asian indices are modestly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 25% net long heading into the day.