Stocks Reversing Lower into Afternoon on Surging Long-Term Rates, US Govt Shutdown Concerns, US Auto Strike Impact Worries, Financial/Restaurant Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 19.0 +.3%
• DJIA Intraday % Swing .93% +41.0%
  
• Bloomberg Global Risk On/Risk Off Index 69.6 +.1%

• Euro/Yen Carry Return Index 166.97 -.31%

• Emerging Markets Currency Volatility(VXY) 8.5 +1.1%

• CBOE S&P 500 Implied Correlation Index 29.1 +3.1% 

• ISE Sentiment Index 95.0 +25.0 points
  

• Total Put/Call 1.06 -5.4%

• NYSE Arms .95 -31.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 75.3 +1.5%
  

• US Energy High-Yield OAS 334.13 -.6%
• Bloomberg TRACE # Distressed Bonds Traded 334 +9
  

• European Financial Sector CDS Index 92.61 +.7% 
• Deutsche Bank Subordinated 5Y Credit Default Swap 309.30 +3.4%
  

• Italian/German 10Y Yld Spread 195.0 basis points +2.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 128.1 +.26%
  

• Emerging Market CDS Index 225.90 +2.5%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 24.8 -.13%

• 2-Year SOFR Swap Spread -7.25 basis points +4.25 basis points
  

• TED Spread 17.75 basis points -2.75 basis points
  

• 3-Month EUR/USD Cross-Currency Basis Swap -12.0 -1.0 basis point
  
• MBS  5/10 Treasury Spread 180.0 +5.0 basis points
  
• Bloomberg CMBS Investment Grade Bbb Average OAS 913.0 +3.0 basis points
  
• Avg. Auto ABS OAS 80.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 41.56 -.52%
• 3-Month T-Bill Yield 5.48% +4.0 basis points
  

• China Iron Ore Spot 115.8 USD/Metric Tonne -.64%
• Dutch TTF Nat Gas(European benchmark) 39.3 euros/megawatt-hour -2.5%

• Citi US Economic Surprise Index 48.3 +3.9 points

• Citi Eurozone Economic Surprise Index -46.5 +.8 point

• Citi Emerging Markets Economic Surprise Index 11.3 -.2
• S&P 500 Current Quarter EPS Growth Rate YoY(11 of 500 reporting) +9.7% +1.3 percentage points
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 239.77 +.05:  Growth Rate +9.1% unch., P/E 17.8 -.1
  
• S&P 500 Current Year Estimated Profit Margin 12.13% unch.
  
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) n/a
  
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 263.27 +.28: Growth Rate +58.8% +.2 percentage point, P/E 27.4 -.3
  
• Bloomberg US Financial Conditions Index .12 +6.0.0 basis points
  
• Bloomberg Euro-Zone Financial Conditions Index -.07 +3.0 basis points
  
• US Yield Curve -51.75 basis points (2s/10s) +6.0 basis points
  
• US Atlanta Fed 2Q GDPNow Forecast +4.86% unch.
  

• Cleveland Fed Inflation Nowcast Core PCE YoY +3.95% unch.: CPI YoY +3.69% unch.
  
• 10-Year TIPS Spread 2.35 +3.0 basis points
  
• Highest target rate probability for Dec. 13th FOMC meeting: 56.4%(-5.9 percentage points) chance of 5.25%-5.5%. Highest target rate probability for Jan. 31st meeting: 52.9%(-6.8 percentage points) chance of 5.25%-5.5%.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -440 open in Japan 
• China A50 Futures: Indicating +10 open in China

• DAX Futures: Indicating +59 open in Germany

Portfolio:

• Higher:  On gains in my commodity/industrial sector longs, index hedges and emerging market shorts
  

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some
  

• Market Exposure: 25% Net Long
  

Bear Radar

Style Underperformer:

• Large-Cap Growth -.3%
  

Sector Underperformers:

• 1) Gold & Silver -3.1% 2) Restaurants -1.3% 3) Pharma -1.2%

Stocks Falling on Unusual Volume: 

• OGN, SVV, SYK, CM, LAC, PRGS, GOLD, UBS, GOLF, MASI, AY, EBIX, AY, BEPC,  HTZ, PCRX, NEM, COTY, AEM, GFI, BEP, CWEN/A, WNC, NEE, APLS, VKTX, VFS and NEP
  

Stocks With Unusual Put Option Activity:

• 1) XP 2) DUK 3) PM 4) APLS 5) COST
  

Stocks With Most Negative News Mentions:

• 1) FFIE 2) CC 3) WNC 4) APLS 5) PRGS
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.6%
  

Sector Outperformers:

• 1) Oil Service +3.0% 2) Energy +2.0% 3) Construction +.7%

Stocks Rising on Unusual Volume:

• MLKN, BHVN, METC, PRO, HCC, HAYW, IMVT, UNFI, NET, QTRX, MAT and RMD
  

Stocks With Unusual Call Option Activity:

• 1) TAL 2) GEO 3) KOS 4) EXPE 5) OKE

Stocks With Most Positive News Mentions:

• 1) MLKN 2) BHVN 3) HCC 4) PRO 5) FENG
  

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:

• (ACN)/2.65
• (KMX)/.75
• (JBL)/2.32
  

After the Close: 

• (NKE)/.76
• (BB)/-.07
• (MTN)/-3.3
  

Economic Releases  

8:30 am EST

• 2Q GDP revisions.
• Initial Jobless Claims for last week are estimated to rise to 215K versus 201K the prior week.
• Continuing Claims are estimated to rise to 1675K versus 1662K prior.
  

10:00 am EST

• Pending Home Sales MoM for Aug. is estimated to fall -1.0% versus a +.9% gain in July.
  

11:00 am EST

• The Kansas City Fed Manufacturing Index for Sept. is estimated to fall to -2.0 versus 0.0 in Aug.
  

Upcoming Splits 

• None of note
  

Other Potential Market Movers

• The Eurozone Business Climate Index, 7Y T-Note auction, weekly EIA natural gas inventory report, (INTU) investor day, (FLS) analyst day, (PM) investor day and the (AFRM) fireside chat with DB could also impact global trading tomorrow.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Mid-Day Market Internals

NYSE Composite Index:

• NYSE Volume Running -10.23% Below 100-Day Average 
• Nasdaq/NYSE Volume Ratio 9.9 -1.3
  
• 8 Sectors Declining, 3 Sectors Rising
• 58.0% of Issues Advancing, 39.3% Declining
• 22 New 52-Week Highs, 194 New Lows
• 36.3%(+3.2%) of Issues Above 200-day Moving Average
• Average 14-Day RSI 30.0 -1.0
  
• Bloomberg Global Risk-On/Risk-Off Index 70.5 +1.2%
  
• Russell 1000: Growth/Value 17,369.9 -.09%
  
• 1-Day Vix 13.7 -19.4%
  
• Vix 18.7 -1.2%
  
• Total Put/Call 1.15 +2.7%
• TRIN/Arms 1.06 -23.7%
  

Wednesday Watch

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 128.25 +2.25 basis points. 

• China Sovereign CDS 82.25 +2.5 basis points.
  
• China Iron Ore Spot 114.6 USD/Metric Tonne -.40%.

• Bloomberg Emerging Markets Currency Index 41.76 -.04%.
• Bloomberg Global Risk-On/Risk Off Index 70.0 +.63%. 
• Bloomberg US Financial Conditions Index 3.0 -3.0 basis points.
  
• Volatility Index(VIX) futures 18.9 -1.6%.
• Euro Stoxx 50 futures n/a.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.13%.  

Morning Preview Links

BOTTOM LINE: Asian indices are modestly lower, weighed down by technology and financial 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.