Wednesday Watch

Evening Headlines
Bloomberg:

• Madness in Spain Lingers as Ireland Chases Recovery: Mortgages. From atop the stone walls of Avila, Spain, a medieval city an hour's drive northwest of Madrid, beyond the parking lots and empty playgrounds and thousands of vacant new apartments, a construction crane can be seen moving on the horizon as building continues. "Avila isn't an exception," said Jesus Encinar, co-founder of Madrid-based Idealista, Spain's largest property website, and an Avila native. "It's a small-scale example of the madness that gripped the whole real estate industry." In the stages of death of a real estate boom, Spain is still in denial.
• Europe Puts at Record Versus S&P 500 Before Elections: Options. Traders have never paid so much to protect against European stock losses relative to the U.S. as investors prepare for weekend elections in France and Greece. Implied volatility for three-month contracts closest to the level of the Euro Stoxx 50 (SX5E) Index was 54 percent higher yesterday than the Standard & Poor’s 500 Index, according to data compiled by Bloomberg. The gap widened from a 2012 low of 18 percent on March 13, the data show. Investors are insuring equities on concern the elections will undermine plans to contain the debt crisis. French voters pick a president on May 6, the same day as Greece holds parliamentary elections. Francois Hollande, who topped Nicolas Sarkozy in the first round of French voting, has criticized the president’s attempt with German Chancellor Angela Merkel to quell the crisis through budget cuts.
  
• ECB Immunity on Greek Debt Blunts Bond-Buying Tool: Euro Credit. European Central Bank President Mario Draghi's insistence on shielding his institution from losses on Greek debt risks blunting his crisis-fighting tools.
  
• Goldman(GS) Says Rule Curbing Counterparty Links Risks Jobs. Goldman Sachs Group Inc. (GS) said a proposed Federal Reserve rule seeking to limit links between banks could cut U.S. economic growth by as much as 0.4 percentage point and eliminate as many as 300,000 jobs. The estimate, the most specific so far in reaction to the Fed’s proposed rule, was based on New York-based Goldman Sachs’s own research and assessment of how it would affect the corporate debt market, according to an April 30 letter to the Fed that was made public yesterday. “The impact on the corporate bond market alone could drive the elimination of 150,000 to 300,000 American jobs,” wrote Goldman Sachs Chief Risk Officer Craig W. Broderick. “Smaller companies that lack access to alternative sources of capital -- and that drive job creation -- would be hardest hit.”
• Three Fed Policy Makers See No Need to Ease. Three voting members of the Federal Open Market Committee said they don’t see a need to ease policy further as the U.S. economy maintains its expansion. Federal Reserve Bank of Richmond President Jeffrey Lacker said in Washington that more monetary stimulus risks stoking inflation while doing little to strengthen the recovery. San Francisco’s John Williams said the outlook he expects doesn’t warrant more bond buying, and Atlanta’s Dennis Lockhart repeated that he’s skeptical of the benefits of such action.

Wall Street Journal:

• Mexico Balks at Fed Proposal. Mexico joined Wall Street firms in criticizing a Federal Reserve proposal to limit the exposure of banks to individual companies, governments and other banks. Bank of Mexico governor Agustín Carstens knocked the Fed's decision to exempt Treasurys but not the debt of other governments from financial-firm exposure limits, and he urged the U.S. central bank to revisit its decision in a letter dated April 26 that the Fed posted on its website Tuesday.
• The Big Doubt Over Facebook(FB). Facebook Inc. has built a $3 billion-a-year advertising business by convincing marketers to buy new forms of advertising designed to create buzz around their brands. But some advertisers with big spending accounts are wondering whether they're getting their money's worth.
• White House Efforts to Relax Gun Exports Face Resistance. U.S. homeland-security and law-enforcement agencies have objected to Obama administration proposals to relax export restrictions on high-powered firearms, threatening a centerpiece of the president's trade and national-security agenda. The agencies, in internal memos viewed by The Wall Street Journal, warn the changes could help arm drug cartels and terrorists and make it harder for the U.S. to crack down on gun-trafficking.
• Blahous and Capretta: Exposing the Medicare Double Count. The same money can't be spent twice. ObamaCare tries to do precisely that, and the government will have to borrow the difference.

Business Insider:

• INSIDE PINTEREST: An Overnight Success Four Years In The Making.
• Occupy Wall Street Completely Took Over Union Square In A Rally Thousands Of Protesters Strong.
• China HSBC Manufacturing PMI Climbs To 49.3, Employment Down At Fastest Rate In 3 Years.
• JIM CHANOS: 'Natural Gas Is Undergoing A Revolution In The US'.
• There's More And More Evidence That Spain Is The New Greece.

Zero Hedge:

• Total US Debt Soars To 101.5% Of GDP. (graph) There is nothing quite like a $70 billion debt auction settlement at the last day of a month to bring total US debt to a record $15.692 trillion, which happens to be just $600 billion shy of the $16.394 trillion debt ceiling.
• A Different Way of Looking At China.
  

CNBC:

• Cut Tax Rate, Save Small Business: Fiorina. The U.S. marginal tax rate is the highest in the world, and that is putting a big hit on small business, former Hewlett-Packard CEO Carly Fiorina said Tuesday. Small businesses are what drive the U.S. economy and provide jobs, the CNBC contributor told Closing Bell. "I would both lower the marginal rate and close the loopholes. It’s actually small business I’m worried about, not big business," she said of the tax rate on the last dollar of income earned. While big business can "put their jobs and factories anywhere" to avoid paying high U.S. taxes, "net new job creation comes from small business, not large business" and more small businesses have been failing and fewer starting than at any time in the last 40 years," she said.

IBD:

• Lululemon(LULU) Stretches To New Heights With Yoga Apparel.

Reuters:

• International business weighs on OpenTable(OPEN) revenue. OpenTable Inc forecast full-year revenue that fell short of Wall Street estimates, as the online restaurant reservation services provider's international business takes longer than expected to integrate the recent acquisition of a rival. Shares of the company were down 16 percent in extended trading after closing at $43.68 on Tuesday on the Nasdaq.
• Broadcom(BRCM) outlook for profit margin disappoints. Chip maker Broadcom Corp said its gross profit margin for the current quarter would drop from the first quarter because of acquisition-related costs, and its shares fell as much as 1.9 percent in after-hours trade.
• Sturm Ruger(RGR) profit doubles on new gun launches. Gun maker Sturm Ruger and Co Inc's first-quarter profit nearly doubled as sales of its rifles and guns were boosted by strong demand for new products, sending its shares up 4 percent in extended trading.

Financial Times:

• Commodities Prices Dent Company Profits. High oil and commodities prices are starting to dent the profitability of the world’s largest industrial and consumer goods companies, with businesses from Procter & Gamble in the US to BASF in Europe warning of a strong headwind. As companies release their results for the first quarter, executives are warning that rising raw materials prices, particularly oil, are now a problem.

Telegraph:

• Electoral silence on France's slow economic decline. France's economy has weathered the global crisis of the last five years deceptively well, shielded by a Leviathan state and the postponement of hard choices. Yet the underlying decline that began 30 years ago has gathered speed. France's share of eurozone exports has dropped from 17pc to 13pc since 2000.
• Europe needs creativity not billions of euros, says German Chancellor Angela Merkel. Angela Merkel has said Europe needs "political courage and creativity rather than billions of euros" in a thinly disguised rejection of Francois Hollande's pledge to re-write the fiscal pact if he wins the French presidential election on Sunday.

China Securities Journal:

• China New Lending May Have Fallen 30%. New yuan loans may total 700b yuan last month vs 1.01t yuan in March. Th big four banks extended only 101.7b yuan of new loans as of April 25. The big four banks lost >1t yuan of deposits in the first two weeks of April. April new lending was restricted by government loan quotas and a slowing economy.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +1.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 163.0 -2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 135.50 -1.0 basis point.
  
• FTSE-100 futures -.25%.
  
• S&P 500 futures +.13%.
  
• NASDAQ 100 futures +.22%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CBE)/1.00
• (AB)/.24
• (BZH)/-.42
• (ENR)/1.08
• (IACI)/.46
• (WXS)/.91
• (CVS)/.63
• (RDC)/.34
• (TWX)/.64
• (WCG)/.51
• (CVD)/.60
• (ALL)/1.12
• (WFM)/.59
• (IPI)/.29
• (GMCR)./64
• (HTZ)/.00
• (ONXX)/-.78
• (SYMC)/.38
• (WLT)/.80
• (V)/1.51
• (APKT)/.17
• (HIG)/.91
• (TSO)/.27
• (MRO)/.87
• (MA)/5.30
• (AGN)/.87
• (CLX)/1.03
• (CMCSA)/.42
• (DVN)/1.43
• (SPW)/.24
• (SKYW)/-.16
• (ICE)/2.02

Economic Releases
8:15 am EST

• ADP Employment Change for April is estimated to fall to 170K versus 209K in March.
  

10:00 am EST

• Factory Orders for March are estimated to fall -1.7% versus a +1.3% gain in February.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,500,000 barrels versus a +3,978,000 barrel gain the prior week. Distillate supplies are estimated to fall by -350,000 barrels versus a -3,052,000 decline the prior week. Gasoline inventories are estimated to fall by -1,500,000 barrels versus a -2,235,000 decline the prior week. Finally, Refinery Utilization is estimated to rise by .4% versus a +.1% gain the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Evans speaking, Fed's Lacker speaking, Fed's Tarullo speaking, ISM New York and the weekly MBA mortgage applications report could also impact trading today.
  

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