Wednesday Watch

Evening Headlines
Bloomberg:

• Health of Europe's Banks May Be Illuminated by ECB Three-Month Loan Demand. The health of Europe’s banks may be exposed today when the European Central Bank offers them three- month loans before a landmark 12-month facility has to be paid back. Banks tomorrow need to repay 442 billion euros ($540 billion), the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year. Demand for three-month cash today will highlight how much banks still rely on the ECB for funding, investors and economists said. The ECB will announce how much money banks have asked for at about 11:15 a.m. in Frankfurt. “The amount that will be rolled over will have powerful information content regarding the health of European banks,” said Luca Cazzulani, senior fixed-income strategist at UniCredit SpA in Milan, Italy’s biggest bank. “As market rates are much lower” than the 1 percent charged by the ECB, “only banks with very limited access to liquidity will bid,” he said. Banks can currently borrow three-month money from each other in the market at about 0.76 percent.
• Stress Tests May Expose German Landesbanken's 'Black Hole'. German officials seeking to bolster confidence in the financial system by releasing the results of banking stress tests may heed calls to shine a light into the accounts of Germany’s state-owned lenders. The Bundesbank and financial regulator BaFin plan to meet today with officials from Germany’s largest lenders, said two people with knowledge of the matter. Among the topics: whether the state-owned banks, or Landesbanken, will agree to publish the results of the evaluations, said the people, who declined to be identified because the talks are confidential. “Stress tests can’t be credible without the Landesbanken,” said Simon Maughan, a London-based banking analyst at MF Global Securities Ltd. “We need clarity on the listed and unlisted sector to see where the real problems are.” Landesbanken are under scrutiny after booking more than $34 billion in credit losses and writedowns during the global financial crisis, according to data compiled by Bloomberg, forcing state bailouts for Bayerische Landesbank, Landesbank Baden-Wuerttemberg, HSH Nordbank AG and WestLB AG. State-owned lenders accounted for 17.5 percent of loans to companies and self-employed people in Germany at the end of last year, compared with 11.9 percent for the country’s largest commercial banks, according to the DSGV association of savings banks. The government will rely on market pressure to compel lenders to publish their stress-test results, the German finance ministry said on June 18. The Association of German Public Sector Banks, which represents 62 lenders including the Landesbanken, opposes publishing results for individual lenders, and is open only to the release of aggregate results. Landesbanken are owned by regional governments and groups of savings banks. “German Landesbanken may harbor a black hole,” said Michael Helsby and Derek De Vries, analysts at Bank of America Merrill Lynch, in a note to clients on June 18. “These are arguably unlikely to pass an unstressed test let alone a stressed one.”
• Bond Sales Plunge as Cash Hoards Allow Debt to Beat Equity: Credit Markets. Companies from the U.S. to Europe and Asia are selling the fewest bonds since 2004, as rising cash levels allow borrowers to weather a slowing economy. Debt offerings fell to $1.17 trillion in the first half of the year, 39 percent less than the same period in 2009, according to data compiled by Bloomberg. The decline was led by financial companies, which issued 35 percent less debt. Issuance is declining as borrowers with 15 percent more cash than a year earlier avoid tapping credit markets amid concern that Europe’s sovereign-debt crisis may slow the global economic recovery. “Companies are sitting on lots of cash,” said Michael Collins, senior investment officer at Prudential Investment Management Inc. in Newark, New Jersey, with about $240 billion of fixed-income assets. “They don’t have a lot of confidence in the growth trajectory of the economy or their businesses, so they’re definitely reticent to expand capacity” and raise debt, he said. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, rose 6 basis points to a mid-price of 122.5 basis points, the highest since June 14, according to Markit Group Ltd. The index has climbed from 88.1 basis points on March 31. In London, the Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings increased 8.59 to 133.12, the highest since June 9. That index was at 78.5 at the end of the first quarter. In the U.S., investment-grade companies have sold $130.1 billion of corporate bonds this quarter, a 48 percent decline from the first three months of 2010, bringing issuance for the year to $381.8 billion, Bloomberg data show. High-yield, high-risk issuance fell to $47.5 billion in the quarter from $70.7 billion in the first three months of the year, Bloomberg data show. Credit markets began to unravel in April as European leaders failed to convince investors they could keep the region’s debt crisis from escalating. Global sales totaled $768 billion in the first quarter before tumbling to $398.5 billion in the current period, Bloomberg data show. Financial companies sold $251.6 billion in the quarter, bringing issuance to $792.3 billion for the first half of the year, the worst start since 2003, Bloomberg data show. European bank balance sheets are coming under heightened scrutiny this week as a lending facility from the region’s central bank expires. Banks need to repay 442 billion euros on July 1 and demand for three-month cash will expose how much banks still rely on the ECB for funding, investors and economists said.
• Obama Pressed to End Foreign-Ship Ban in Debate Over BP(BP) Oil Spill Cleanup.
  
• Petraeus: U.S. May Ease Rules of Engagement in Afghanistan. General David Petraeus today said he’s concerned the U.S. military’s rules of engagement in Afghanistan are too restrictive and putting American forces at risk. General Stanley McChrystal, in an effort to curb civilian casualties, issued directives that sharply curtailed the use of lethal force. Civilian casualties are down, yet some troops have charged that the restrictions make them more vulnerable. U.S. and allied soldiers in Afghanistan are dying at the fastest pace in the war, now nine years old and the longest in U.S. history. “I am keenly aware of concerns by some of our troopers,” Petraeus told the Senate Armed Services Committee. He said he discussed the issue with President Hamid Karzai and other top Afghan officials “and they are in full agreement with me.”
• California Schools Facing 'Financial Disaster' Rises 38% to Record. A record number of California schools are in financial distress and may not meet their commitments over the next two years due to the recession and state budget cuts, according to the California Department of Education. The number of school districts on a semi-annual “fiscal early warning” list issued by the department has jumped 38 percent to 174 districts since January, or 16 percent of the state’s 1,077 local education agencies.
• Fuel Oil Glut in Singapore Widens Price Gap to Dubai Crude: Energy Markets. Fuel-oil prices in Singapore, Asia’s biggest energy trading hub, may weaken relative to Dubai crude as imports from Russia, Mexico and the Caribbean drive up record stockpiles. Deliveries to Singapore will rise as much as 20 percent next month from June to 4.2 million metric tons, according to a Bloomberg survey of seven traders from Singapore to Tokyo, who declined to be identified as they aren’t authorized to speak on transactions. The discount to crude may widen to $9 a barrel, the most in a year, from $5.55 yesterday, the survey showed. “Fuel-oil imports into Singapore will remain steady in July, and probably in August,” said Yasuhito Imaizumi, a Singapore-based trading manager at Petro Summit Pte, a unit of Sumitomo Corp., Japan’s third-largest trading company. Refiners are creating a glut of the heavy residue from processing crude as they boost output of gasoline and diesel. Singapore’s onshore stockpiles climbed to a record 25.7 million barrels on April 21, according to the Ministry of Trade and Industry. Inventories swelled as production has outpaced a recovery in the shipping industry, the main user of 380-centistoke grade of fuel oil.
• Volcker Said to Be Disappointed With Final Version of His Rule.
• Greek Default-Swap Costs Only Beaten by Venezuela. The cost of insuring Greek government debt is now second only to that of Venezuela, where President Hugo Chavez has declared “economic war” against the “bourgeoisie.”
• 'Deep Cover' Spies Had Day Jobs as Consultant, Columnist. Day jobs held by three of the accused “deep-cover” Russian spies may have put them in contact with opinion makers, corporate executives or aspiring technology industry workers.

Wall Street Journal:

• The Bailout Tax. A new tax on financial companies seemed like a good idea to Chris Dodd and Barney Frank at 3 a.m. last Friday, but now their $19 billion levy is threatening to blow up their 2,319-page financial bill. So they're scrambling to replace that cash, but the bigger news here is that Barney and Chris need to impose a bailout tax for what they claim is a bill that will end bailouts.
  
• Lennar(LEN) Cuts Its Prices as Sales Hit a Wall. Builder Lennar Corp. recently cut some prices more than 15% here, but that isn't enough to encourage buyers like Linda Primm. "As far as being in a rush now, no," she says, as she tours a model home in the Rancho D'oro community. "What are you going to get? Nothing." Since the tax-credit for home buyers expired at the end of April, sales of new homes have fallen sharply. In response, builders are cutting prices and offering concessions. But those moves aren't working as well as the tax credit, which credits as much as $8,000. Builder KB Home said last week its second-quarter orders plunged 23%. While price cutting and freebies have long been a part of the business, further price reductions and profit-eroding incentives reduce revenue. That will deal the fragile sector yet another blow, possibly delaying recovery until 2011. "The rest of the summer and the fall are going to be tough for the builders," says Demir Gjokaj, a Majestic Research analyst. "Demand has remained far weaker for far longer than builders expected. Price incentives can't rebuild the spent demographics that cratered demand. That will take time."
  
• SocGen Chief Warns on Bank Tax Impact. The bank taxes proposed by several European governments could hurt their economies at a time when growth is still fragile, said Fréderic Oudéa, the chief executive of Société Générale SA. France, Germany and the United Kingdom have in recent weeks said they would impose various taxes on banks. But Mr. Oudéa said this would be particularly harmful in Europe, where banks deliver about 75% of overall financing needs, compared to some 25% in the U.S. "In Europe, financing the economy is a critical element of growth," he said. "We should pay attention so that the total burden on banks shouldn't be heavy."
• For Farallon, a $1.5 Billion Workout. Hedge-fund giant Farallon Capital Management LLC is restructuring more than $1.5 billion in debt stemming from a big bet on trailer parks, one of the largest attempted workouts involving commercial-property loans sliced and sold to investors in the boom years. The $1.5 billion securitized loan backing Farallon's 2007 purchase of a business operating about 270 mobile-home communities on Friday was placed with a debt-servicing company that deals with troubled loans, according to a spokeswoman for the trailer-park operator.
• Fast Traders Face Off With Big Investors Over 'Gaming'. A high-tech, high-speed poker game is playing out in the stock market, and billions of dollars are at stake. The adversaries are high-frequency traders and big investors such as mutual funds. High-speed firms are using computers to detect large "buy" and "sell" orders to adjust their trades, and traditional investors are scrambling to trade undetected. The showdown has led to an escalating arms race, with players on both sides plowing money into ever-more-powerful technology to trade effectively. It also has led to growing tension between these camps as conventional investors call for greater regulation of their high-frequency counterparts. The clash came to the fore after the May 6 "flash crash," which underscored the rising use of computers and algorithms to trade stocks. Jeff Engelberg, a trader at Southeastern Asset Management Inc., a Memphis, Tenn., value-investing firm with about $35 billion under management, said high-speed traders are jumping ahead of his firm's trades. "Short-term traders are able to get an instantaneous glimpse into the future" through direct feeds to exchange data, he said, turning the market into "something nearer to a casino." High-frequency trading accounts for about two-thirds of U.S. stock-market volume, according to industry estimates. Some say they find certain trades have become more expensive to carry out, thanks to a practice critics call "gaming." With gaming, if a high-speed firm's computers detect a large buy order for a stock, for instance, the firm will instantly start snapping up the stock, expecting to quickly sell it back at a higher price as the investor keeps buying. Phillip Krauss, head of stock trading at Chicago's Harris Investment Management, says his firm's orders are getting picked off by high-speed trading firms that use computer programs to detect orders. "They front-run us," said Mr. Krauss, whose firm manages $15 billion in assets. To protect themselves, traditional investors like Mr. Krauss are stepping up investments in "antigaming" computer power and expertise. Big firms such as Bank of America Corp., acting on behalf of thousands of individual investors who trade through its vast brokerage network, have been rolling out high-tech platforms to help their traders avoid getting gamed. Algorithms are expected to account for about 60% of stock trading this year, up from 28% in 2005, according to Aite Group, a Boston firm that tracks electronic trading. A sharp fall in trading size shows the impact of algorithmic trading, which is typically done in 100- or 200-share chunks. The average size of a trade of a stock listed on the New York Stock Exchange was 268 shares through most of 2009, down from 724 in 2005, according to the SEC. That has made it much more difficult for traders to buy or sell large chunks of stocks. Now, traders must parcel out orders in tiny bits—and some high-speed firms are monitoring the activity for signs of a big trade. Henri Waelbroeck, research director at New York electronic brokerage Pipeline Financial Group Inc., has designed a trading system that alternates algorithms to keep gamers off the scent of big trades. "You need to understand what the games are and how to defend yourself," Mr. Waelbroeck said.
• Arizona, Texas Call for More Border Troops. Officials in Arizona and Texas are clamoring for more National Guard troops along the U.S.-Mexico border, saying that their share of a planned new deployment won't be enough to make a dent in illegal immigration.
• Mexicans Struggle to Regroup After Killing. Leaders of Mexico's former ruling party gathered Tuesday to mourn the assassination of a top gubernatorial candidate, pick a replacement for this weekend's elections, and debate whether the party wants to get behind President Felipe Calderón's assault on drug gangs or continue to criticize the war from the sidelines.
• Why Obamanomics Has Failed. Uncertainty about future taxes and regulations is enemy No. 1 of economic growth.
  

CNBC:

• US Crisis Panel to Examine Goldman(GS), AIG(AIG) Ties. The congressionally appointed panel begins two days of hearings Wednesday, headlined by former AIG Financial Products head Joseph Cassano and Goldman President Gary Cohn. A key focus will be "how the interaction of these two financial giants may or may not have contributed to the causes of the financial crisis,'' Phil Angelides, chairman of the commission, said in a call with reporters on Tuesday. Goldman has long been criticized for benefiting from the U.S. taxpayers' bailout of AIG. Taxpayers pledged up to $182 billion to address problems at AIG's financial products division.

MarketWatch:

• No Upside to China Stocks as Credit Tightens, Strategist Says. Chinese stocks will continue to trend lower in the second half of the year, pressured by tighter lending policies and a gloomy global outlook, according to a leading Hong Kong-based strategist. Andrew Ferris, senior investment strategist for Asia at BNP Paribas, says the sharp sell-off in Shanghai on Tuesday, which saw China stocks skid to a 14-month low, is in line with the overall weakening trend that's been in place since the start of the year. He believes asset prices are likely to remain under pressure until Chinese authorities ease up on their current tightening campaign -- something that won't happen for some time. "They are not going to let go quickly or easily," Ferris said referring to the determination of Chinese authorities to push ahead with recent administrative measures to cool credit growth. "China will continue to have tight monetary policy until the end of year," he added.

Fox News:

• BP(BP) Going Back to Banks for More Funding. BP Plc has approached four major banks in an effort to raise money either through a private placement of debt and lines of credit, looking to raise as much as $10 billion sometime this week to help pay tens of billions of dollars in liabilities stemming from its massive oil spill in the Gulf of Mexico, FOX Business Network has learned.

NY Times:

• In U.S. Bailout of A.I.G., Forgiveness for Big Banks. Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents, reviewed by The New York Times, provide the most comprehensive public record of how the and the Federal Reserve Bank of New YorkTreasury Department orchestrated one of the biggest corporate bailouts in history. The documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks.

Business Insider:

• Quarterly Ratings: Keith Olbermann Is Slipping In The Key 25-54 Demographic.

McClatchy:

• Goldman(GS) Admits it Had Bigger Role in AIG(AIG) Deals. Reversing its oft-repeated position that it was acting only on behalf of its clients in its exotic dealings with the American International Group, Goldman Sachs now says that it also used its own money to make secret wagers against the U.S. housing market. A senior Goldman executive disclosed the "bilateral" wagers on subprime mortgages in an interview with McClatchy, marking the first time that the Wall Street titan has conceded that its dealings with troubled insurer AIG went far beyond acting as an "intermediary" responding to its clients' demands. The official, who Goldman made available to McClatchy on the condition he remain anonymous, declined to reveal how much money Goldman reaped from its trades with AIG. However, the wagers were part of a package of deals that had a face value of $3 billion, and in a recent settlement, AIG agreed to pay Goldman between $1.5 billion and $2 billion. AIG's losses on those deals, for which Goldman is thought to have paid less than $10 million, were ultimately borne by taxpayers as part of the government's bailout of the insurer. Goldman's proprietary trades with AIG in 2005 and 2006 are among those that many members of Congress sought unsuccessfully to ban during recent negotiations for tougher federal regulation of the financial industry. A McClatchy examination, including a review of public records and interviews with present and former Wall Street executives, casts doubt on several of Goldman's claims about its dealings with AIG, which at the time was the world's largest insurer. For example:

Forbes:

• Financial Reform? Sure. But The Systemic Six Are Here to Stay. The Financial Reform Bill, which I've nicknamed The Let's Not Allow Our Largest Donors To Embarrass Us Again Act of 2010, is not a total failure, but it fails miserably to address perhaps the worst part of the crisis - Too Big To Fail. The bill doesn't really address the Hexopoly of Too Big To Fail Banks. I'm also calling these The Systemic Six. The big six banks (Goldie, Morgan, JP, B of A, Wells and Citi) will be limited in their hedge fund investments and trading activity, but not very limited. The interconnectedness, however, is unchanged, and this is the very crux of the matter. Oh well. Maybe we'll get it right after the next economic evisceration. For now, The Hexopoly or The Systemic Six are here to stay.

Real Clear Markets:

• A Doctor's Take On Health Care. As a practicing doctor in California it troubles me that those with the ability to influence health care legislation have either been politically motivated to remain silent, or strikingly inarticulate when it comes to voicing the major issues patients and taxpayers will face with the new health care bill. My own, long-held view has been that any reform should be of the free market variety. In that sense, I'm increasingly scared as I learn more about what's inside the health legislation passed by Congress not long ago. Despite the rising level of unhappiness with what has transpired, it dismays me that the general public, like me, is not fully aware of the financial tsunami that is on the way for patients, insurers and hospitals thanks to this legislation, not to mention the irregular way in which it was passed.

ISDA:

• US Companies May Face US $1 Trillion in Additional Capital and Liquidity Requirements As a Result of Financial Regulatory Reform, According to ISDA Research.

VisionCritical:

• Noticeable Drop for President Obama's Rating in United Stated. The approval rating for U.S. President Barack Obama has dropped markedly this month, and less than one-in-five Americans have a favorable view of the U.S. Congress, a new Angus Reid Public Opinion poll has found. In the online survey of a representative national sample of 1,001 American adults, 44 per cent of respondents (-4 since May) approve of Obama’s performance, while 50 per cent (+5) disapprove. The level of strong approval for the U.S. President (14%) continues to trail the level of strong disapproval by double digits (31%). This month, Independents appear to have turned their back on the U.S. President. This group is now clearly more likely to disapprove of Obama’s performance (60%, +7) than to approve of it (35%, -7). The approval rating for the U.S. Congress stands at 18 per cent this month (-7), while 72 per cent of respondents disapprove of its actions (+9). The level of strong approval is two per cent (-2), while two-in-five Americans (40%, +4) are strongly dissatisfied. Only seven per cent of Republicans and 11 per cent of Independents approve of Congress. This month, just over a third of Democrats (36%, -9) provide a positive assessment of the legislative branch.

Politico:

• Clinton Friend Was Spy's Target. A leading Democratic fundraiser and close political ally of Secretary of State Hillary Clinton was been a target of the alleged ring of Russian spies arrested yesterday by federal authorities. The president of the high-end tax accounting and financial advising firm Morea Financial Services confirmed earlier today that the alleged spy "Cynthia Murphy" was a longtime employee and a vice president at the company, which is located on lower Broadway in Manhattan. Federal and state campaign finance filings suggest that the little-known company manages the finances of one of New York's top Democratic financiers: Alan Patricof, a venture capital figure and the finance chairman of Clinton's Senate campaign, as well as a top presidential campaign fundraiser. According to the federal complaint, Murphy had "several work-related personal meetings" with a person it describes as "a prominent New York-based financier," and says she and her husband and alleged co-conspirator accurately reported back to Moscow that the financier was "prominent in politics" and "an active fundraiser for" a major political party, as well as "a personal friend" of a current Cabinet secretary, and in a position to provide information about foreign policy.
• Democrats, Obama Willing to Scale Back Energy and Climate Change Bill. Key Senate Democrats offered, during a White House meeting with President Barack Obama and skeptical Republicans on Tuesday, to scale back their ambitious plans to cap greenhouse gases across multiple sectors of the economy. Sens. John Kerry and Joe Lieberman told reporters after the 90-minute West Wing meeting that Obama held firm in his calls for a price on greenhouse gases. But they said the president acknowledged that he could agree to a more limited climate and energy bill than any the senators had previously drafted. “We believe we have compromised significantly, and we’re prepared to compromise further,” Kerry said. "The president was very clear about putting a price on carbon" and curbing greenhouse gases, he added.

OECD:

• Growing health spending puts pressure on government budgets, according to OECD Health Data 2010. In all OECD countries total spending on healthcare is rising faster than economic growth, pushing the average ratio of health spending to GDP from 7.8% in 2000 to 9.0% in 2008. Factors pushing health spending up - technological change, population expectations and population ageing - will continue to drive cost higher in the future. In some countries the recent economic downturn, with GDP falling and healthcare costs rising, led to a sharp increase in the ratio of health spending to GDP. In Ireland, the percentage of GDP devoted to health increased from 7.5% in 2007 to 8.7% in 2008. In Spain, it rose from 8.4% to 9.0%.

Reuters:

• General Mills(GIS) Outlook Disappoints; Shares Fall. General Mills Inc (GIS) forecast fiscal 2011 earnings below Wall Street expectations, sending the food maker's shares down more than 4 percent.
• Fiscal 2011 Could Be Hardest Yet for U.S. States - CBPP. U.S. states in fiscal 2011 could be facing the worst budget situation since the recession began in 2007, according to a think-tank report released on Tuesday. States' cumulative budget shortfall "will likely reach $140 billion in the coming year, the largest shortfall yet in a string of huge annual gaps that date back to the beginning of the recession," said the Center on Budget and Policy Priorities.

Financial Times:

• Anadarko(APC) Approved Key BP(BP) Well Designs. Anadarko, the US partner to BP in its ill-fated Macondo well in the Gulf of Mexico, approved several key aspects of the UK company's designs for the project that have been sharply criticised by Washington lawmakers. Anadarko, which owns 25 per cent of Macondo, also knew of significant operational decisions made by BP that some lawmakers believe could have been a factor in causing the explosion at the well, according to senior executives at both companies. Anadarko attempted this month to distance itself from BP by saying the oil spill at the well had been preventable and was likely because of the UK company's "reckless decisions and actions". However, both Anadarko and BP have confirmed to the Financial Times that the US company was aware of design choices that lawmakers, who have accused the UK company of cutting corners to cut costs, have criticised.

Telegraph:

• European Firms 'Wave a Warning Flag' Over Chinese Protectionism. European businesses in China could be forced to “vote with their feet” if China doesn’t do more to create a level-playing field for foreign businesses, the president of the European Chamber of Commerce in China has warned. His remarks followed a survey showing almost 40pc of European firms expect the business environment in China to deteriorate over the next two years, confirming growing fears that China is using backdoor protectionism to shut foreign businesses out of the market. “If things turn sour, China is not necessarily ‘a must’ for our members,” said Jacques de Boisseson, “Nobody should take for granted that European companies will continue investing whatever the business environment.”
• Warning Signals of a Double-Dip Recession Flash Brightly Across the World. Global bond markets are flashing warning signals of a sharp slowdown in growth across the world and a possible slide toward a double-dip recession and outright deflation.

Evening Recommendations
Citigroup:

• Reiterated Buy on (GIS), target $43.

Susquehanna:

• Rated (SYK) Positive, target $64.
• Rated (ZMH) Positive, target $67.
  

Night Trading

• Asian equity indices are -1.75% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 147.0 +12.0 basis points.
• Asia Pacific Sovereign CDS Index 140.0 +8.75 basis points.
  
• S&P 500 futures +.39%.
  
• NASDAQ 100 futures +.38%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AYI)/.56
• (AM)/.78
• (MON)/.79
• (CBK)/.11
• (APOL)/1.54
• (SCHN)/.87

Economic Releases
8:15 am EST

• The ADP Employment Change for June is estimated at +60K versus +55K in May.
  

9:45 am EST

• The Chicago Purchasing Manager report for June is estimated to fall to 59.0 versus a reading of 59.7 in May.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -1,000,000 barrels versus a +2,017,000 barrel build the prior week. Gasoline supplies are estimated to fall by -400,000 barrels versus a -762,000 barrel decline the prior week. Distillate supplies are expected to rise by +950,000 barrels versus a +297,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.15% versus a +1.5% gain the prior week.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Evans speaking, Fed's Duke speaking, Fed's Lockhart speaking, weekly MBA mortgage applications report, NAPM-Milwaukee, Bloomberg Financial Conditions Index for June, Oppenheimer Consumer/Gaming/Lodging/Leisure Conference and the (TDG) Analyst Meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by commodity 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.