Market Week in Review

S&P 500 1,630.74 -1.20%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,630.74 -1.20%

• DJIA 15,115.50 -1.17%

• NASDAQ 3,455.91 -.10%

• Russell 2000 984.14 -.01%

• S&P 500 High Beta 25.50 -.51%

• Value Line Geometric(broad market) 425.0 -.40%

• Russell 1000 Growth 744.63 -1.30%

• Russell 1000 Value 829.74 -1.03%

• Morgan Stanley Consumer 992.65 -2.32%

• Morgan Stanley Cyclical 1,219.17 -1.18%

• Morgan Stanley Technology 761.26 -.38%

• Transports 6,290.18 -2.17%

• Utilities 482.16 -4.43%

• Bloomberg European Bank/Financial Services 98.29 +1.60%

• MSCI Emerging Markets 41.86 -1.83%

• HFRX Equity Hedge 1,121.72 +.31%

• HFRX Equity Market Neutral 946.01 +.64%

Sentiment/Internals

• NYSE Cumulative A/D Line 189,948 -.60%

• Bloomberg New Highs-Lows Index 116 +192

• Bloomberg Crude Oil % Bulls 23.81 +8.82%

• CFTC Oil Net Speculative Position 257,139 -4.39%

• CFTC Oil Total Open Interest 1,744,717 +.15%

• Total Put/Call 1.18 -7.09%

• OEX Put/Call 2.05 +56.49%

• ISE Sentiment 97.0 +38.57%

• NYSE Arms 1.47 +54.73%

• Volatility(VIX) 16.30 +15.85%

• S&P 500 Implied Correlation 55.15 -.11%

• G7 Currency Volatility (VXY) 10.22 +3.34%
• Emerging Markets Currency Volatility (EM-VXY) 9.76 +14.96%

• Smart Money Flow Index 12,097.22 -.56%

• Money Mkt Mutual Fund Assets $2.613 Trillion +.50%

• AAII % Bulls 36.0 -26.5%

• AAII % Bears 29.6 +37.4%

Futures Spot Prices

• CRB Index 281.85 -1.46%

• Crude Oil 91.97 -2.62%

• Reformulated Gasoline 275.49 -2.54%

• Natural Gas 3.98 -6.57%

• Heating Oil 278.14 -2.72%

• Gold 1,393.0 +.24%

• Bloomberg Base Metals Index 193.94 +1.31%

• Copper 329.25 -1.05%

• US No. 1 Heavy Melt Scrap Steel 349.33 USD/Ton unch.

• China Iron Ore Spot 110.40 USD/Ton -10.4%

• Lumber 306.30 +.23%

• UBS-Bloomberg Agriculture 1,505.91 +1.84%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 6.6% -20 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.3444 +4.65%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 115.92 +.17%

• Citi US Economic Surprise Index -14.40 +.9 point

• Citi Emerging Markets Economic Surprise Index -47.10 +3.9 points

• Fed Fund Futures imply 44.0% chance of no change, 56.0% chance of 25 basis point cut on 6/19

• US Dollar Index 83.37 -.32%

• Euro/Yen Carry Return Index 136.02 -.43%

• Yield Curve 183.0 +7 basis points

• 10-Year US Treasury Yield 2.13% +12 basis points

• Federal Reserve's Balance Sheet $3.342 Trillion -.43%

• U.S. Sovereign Debt Credit Default Swap 27.75 -8.29%

• Illinois Municipal Debt Credit Default Swap 123.0 +3.36%

• Western Europe Sovereign Debt Credit Default Swap Index 82.50 +1.11%
  

• Emerging Markets Sovereign Debt CDS Index 199.50 +6.06%
  

• Israel Sovereign Debt Credit Default Swap 120.0 +2.46%

• China Blended Corporate Spread Index 366.0 -42 basis points

• 10-Year TIPS Spread 2.19% -6 basis points

• TED Spread 25.0 +1.25 basis points

• 2-Year Swap Spread 16.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.25 -.25 basis point

• N. America Investment Grade Credit Default Swap Index 77.45 +2.59%
  

• European Financial Sector Credit Default Swap Index 146.69 +3.05%
  

• Emerging Markets Credit Default Swap Index 279.13 +7.39%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 100.0 -6 basis points

• M1 Money Supply $2.524 Trillion +.19%

• Commercial Paper Outstanding 1,047.80 +1.40%

• 4-Week Moving Average of Jobless Claims 347,300 +7,800

• Continuing Claims Unemployment Rate 2.3% unch.

• Average 30-Year Mortgage Rate 3.81% +22 basis points

• Weekly Mortgage Applications 721.40 -8.80%

• Bloomberg Consumer Comfort -29.7 -.3 point

• Weekly Retail Sales +2.60% unch.

• Nationwide Gas $3.61/gallon -.04/gallon

• Baltic Dry Index 809.0 -2.29%

• China (Export) Containerized Freight Index 1,035.04 -2.16%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 25.0 -16.7%

• Rail Freight Carloads 248,210 -.78%

Best Performing Style

• Small-Cap Growth +.28%

Worst Performing Style

• Large-Cap Growth -1.30%

Leading Sectors

• Networking +6.4%

• Gold & Silver +5.4%

• Hospitals +4.4%

• Disk Drives +2.4%

• Oil Tankers +1.9%

Lagging Sectors

• Telecom -3.2% 

• Coal -3.6%

• REITs -5.4%

• Steel -6.3%

• Homebuilders -6.3%

Weekly High-Volume Stock Gainers (10)

• STEI, SFD, HMA, NVE, INFN, EXPR, SHOS, BOFI, TFM and CRUS

Weekly High-Volume Stock Losers (10)

• FXCM, WPC, BXMT, WWAV, KMB, BAH, AEC, IRC, BIG and ENOC

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Falling into Final Hour on Rising Global Growth Fears, Central Bank Concerns, Rising Eurozone Debt Angst, Commodity/Homebuilding Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Avergage

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 15.48 +6.54%

• ISE Sentiment Index 121.0 +27.37%

• Total Put/Call 1.13 +31.40%

• NYSE Arms .95 +20.44%

Credit Investor Angst:

• North American Investment Grade CDS Index 78.67 +3.08%

• European Financial Sector CDS Index 146.68 +1.45%

• Western Europe Sovereign Debt CDS Index 82.50 +1.0%

• Emerging Market CDS Index 275.21 +2.64%

• 2-Year Swap Spread 16.25 -.25 bp

• TED Spread 24.50 -.5 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -14.25 unch.

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 184.0 +2 bps

• China Import Iron Ore Spot $110.40/Metric Tonne -1.08%

• Citi US Economic Surprise Index -14.40 +4.7 points

• 10-Year TIPS Spread 2.19 +3 bps

Overseas Futures:

• Nikkei Futures: Indicating -181 open in Japan

• DAX Futures: Indicating -10 open in Germany

Portfolio: 

• Higher: On gains in my retail sector longs, index hedges and emerging markets shorts

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Euro-Area Jobless Rate Rises to Record Amid Recession: Economy. The euro-area jobless rate rose to 12.2 percent from 12.1 percent in March, the European Union’s statistics office in Luxembourg said today. That’s in line with the median of 37 economists’ estimates in a Bloomberg News survey. Inflation accelerated in May to 1.4 percent, led by rising prices for food and services, a separate report showed. 
• Russia Stocks Drop to 5-Week Low as Crude Slumps, Banks Retreat. Russian equities fell to a five-week low, extending a fourth-straight monthly drop as crude oil tumbled and the nation’s biggest lenders declined. The Micex Index (INDEXCF) retreated 0.8 percent to 1,350.48 by 11:41 a.m. in Moscow, poised for a 2.5 percent drop in the month. Financial stocks led the declines among industry groups along with utilities, losing 1.2 percent on average.
• Brazil Real Touches Lowest in Four Years, Spurring Intervention. Brazil’s real declined to its weakest level in four years, spurring the central bank to intervene in the foreign-exchange market for the first time since March to bolster the currency. The real pared its drop as the central bank sold 17,600 out of 30,000 currency swap contracts worth $877 million. Yields on interest-rate futures contracts rose the most in four years after policy makers unexpectedly stepped up the pace of increases in borrowing costs on May 29, saying inflation was undermining the economic recovery. “Today, it’s less about the level of the real and more the pace of the move,” Flavia Cattan-Naslausky, a strategist at Royal Bank of Scotland Group Plc, said in a telephone interview from Stamford, Connecticut. “That made the central bank nervous.
• Junk Bonds Losing 0.3 Percent in May to Snap 11 Months of Gains. Junk bonds are headed for their first monthly loss in a year as dealers take on more of the debt amid rising yields and a record pace of issuance. Dollar-denominated speculative-grade bonds have declined 0.3 percent in May after returning 15.4 percent the previous 11 months, according to Bank of America Merrill Lynch index data. 
• Regulators Said Set to Decide Systemically Risky U.S. Non-Banks. U.S. regulators plan to vote next week on whether to label some non-bank companies a potential risk to the financial system, a move that would put them under heightened Federal Reserve supervision, according to three people familiar with the matter. 
• Oil Heads for Monthly Drop as OPEC Keeps Output Target. West Texas Intermediate crude dropped, heading for a second monthly decline, as OPEC kept its output target unchanged for a third consecutive time and U.S. inventories climbed to the highest level in 82 years. Futures fell as much as 1.7 percent after the Organization of Petroleum Exporting Countries maintained its objective of 30 million barrels a day at a meeting in today in Vienna. Ministers from the 12-member group will next gather on Dec. 4. U.S. crude supplies increased 3 million barrels to 397.6 million last week, the most since 1931, a government report showed yesterday.

CNBC:

• Rising Yields May Stifle Boom in Dividend Stocks.

Zero Hedge:

• Why Is The Smart Money Suddenly Getting Out Of Stocks And Real Estate? 
• April Income Lower Than Expected, Leads To Weaker Spending; Savings Rate At Unsustainable Lows. (graph)
• Europe's Scariest Chart Goes Parabolic. (graph)
• Britain To Arm Syrian Rebels; Russia Retaliates By Shipping 10 MiGs To Assad.
• April Core Retail Sales Were Just Revised From A 100% Beat To A Miss.
• Chicago PMI Soars To Highest Since March 2012 Crashing Expectations, Respondents Despondent. (graph)

Business Insider: 

• There Are Four Big Military Developments In China That Startle The US.
• This Reuters Editorial Is The Most Stinging Indictment Of Wall Street Bankers We've Read In A While.
• Here's The Chart That Shows How Investors Fled From Emerging Markets This Week.

Denver Post: 

• Fire Ben Bernanke as Fed CEO: Opinion.

ValueWalk:

• 100 Largest Hedge Funds Manage 61% Of Industry Capital. The mean AUM of the top 100 hedge funds is a little under $13.9 billion. Seventeen of the 100 largest hedge funds have AUM of more than $20 billion. About 75% of the of the top 100 hedge funds are based in the United States. A study conducted by Preqin reveals that the top 100 hedge funds manage about 61 percent of the hedge fund industry’s total capital. Preqin says in its May edition of Hedge Fund Spotlight that hedge funds currently have about $2.3 trillion of assets under management, of that $1.4 trillion is managed by the top 100 hedge funds.

Forbes:

• Rate Shock: In California, Obamacare To Increase Individual Health Insurance Premiums By 64-146%.

Reuters:

• Some Italian banks risk problems, central bank chief says. Some Italian banks face probable difficulties and shareholders must be ready to dilute their stakes and encourage mergers, the country's central bank governor said on Friday. Bank of Italy Governor Ignazio Visco said in a keynote speech that Italy's banks had been weakened by the euro zone's sovereign debt crisis and ensuing recession and some are now "at risk of being in difficulty." Visco did not specify which banks he was referring to.
• Brazil stocks falls more than 2 pct, economic growth concerns.
• METALS-Copper slips on uncertainty ahead of China factory report.
• Portugal union calls strike against government austerity. Portugal's largest labour union has called a general anti-government strike for June 27 to protest against public sector pay cuts, layoffs and other austerity measures imposed to meet EU/IMF bailout terms. The strike will encompass workers in the country's public and private sectors, CGTP chief Armenio Carlos told reporters on Friday, adding that all other unions were welcome to join.
• Stimulus concerns push Europe shares to 1-mth closing low. European shares slid to a one-month closing low on Friday, hit by profit taking at the end of a 12th straight month of gains and after strong U.S. data reignited concerns about a cut in stimulus measures there. The FTSEurofirst 300 index finished 0.9 percent down at 1,216.17 points, the lowest close since early May.
• EURO DEBT SUPPLY-Spain borrowing costs seen up in edgy market. Spanish borrowing costs will likely rise at bond sales next week as concern over when the U.S. Federal Reserve might scale back its economic stimulus brakes a rally in riskier assets. 
• INVESTMENT FOCUS-Sell emerging markets in May, and maybe June and July too.

Real Clear Markets:

• 'Financialization' Of the Economy Suffocates Living Standards.

Telegraph:

• Storm clouds ahead for Barack Obama: less than half of Americans now view their president as ‘honest and trustworthy'. 
• Japan's problems could make the eurozone's look like a garden party by Jim O'Neill. One of the questions I have been asked most frequently over the past couple of years is: what happens if, and when, bond yields rise?  
• Is Brussels trying to force the UK out of the EU?

Valor Economico:

• Brazil Govt Sees GDP Growth of Less Than 3% in 2013. Inflation remains main concern of govt.

The Economic Times: 

• BSE Sensex tanks 455 pts as RBI comment, GDP scare mkt. MUMBAI: Stocks collapsed today with the BSE benchmark Sensex tumbling by 455 points -- the biggest drop in 15 months -- to end below 20,000 mark on on frantic selling after RBI's poor inflation outlook and GDP falling to decade's low came as double whammy to investors betting on rate cut. Investor wealth fell by a whopping Rs 1.1 lakh crore as across market 1,600 scrips ended lower out the 2,500 traded. Stocks in realty, oil & gas, banks, FMCG and PSUs bore the maximum brunt of selling as 12 out of 13 indices closed down. The 30-share Sensex resumed lower and remained in negative terrain throughout the day to settle at one-week low of 19,760.30, a fall of 455.10 points or 2.25 per cent. This is its worst drop since 478-point fall on February 27, 2012.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.25%

Sector Underperformers:

• 1) Gold & Silver -2.35% 2) Coal -1.50% 3) Steel -1.44%

Stocks Falling on Unusual Volume:

• TI, TLK, IBN, HDB, E, PBR, MRCY, WIT, BODY, PANW, UNXL, CPRT, ESL, PLL, CPHD, ESD, LINE, ADS, BBL, BXMT, LNCO, PHG, HMC, AIG, EXL, KMP, HSY, ARCP, EFC, ASML, ROG, OXY and ELP

Stocks With Unusual Put Option Activity:

• 1) SFD 2) AKS 3) JNK 4) MON 5) EWJ
  

Stocks With Most Negative News Mentions:

• 1) MU 2) GS 3) F 4) VMW 5) DISCA
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +.41%

Sector Outperformers:

• 1) Hospitals +1.55% 2) Disk Drives +1.06% 3) Retail +.92%
  

Stocks Rising on Unusual Volume:

• NBG, GES, SGI, ZLC, INFN, OVTI, KKD, LGF, HMA, AEGR, TROX, SWKS, CYH, PNK and AFCE

Stocks With Unusual Call Option Activity:

• 1) PANW 2) TIF 3) CPRT 4) TEX 5) XLU
  

Stocks With Most Positive News Mentions:

• 1) AWAY 2) CP 3) LOW 4) MS 5) CRM
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Japan Consumer Prices Slide in Challenge to Abe Revival Campaign. Japan’s consumer prices dropped for a sixth straight month in April, highlighting the challenge for Prime Minister Shinzo Abe in sustaining confidence in an economic revival. Consumer prices excluding fresh food fell 0.4 percent from a year earlier, the statistics bureau said in Tokyo today, matching the median estimate of 29 economists in a Bloomberg News survey.

• Smithfield(SFD) Bosses to Get $85.4 Million From Chinese Deal. Smithfield Foods Inc. (SFD) executives, who run one of the worst-performing large U.S. food makers over the past five years, are set to reap at least $85.4 million from its sale to China’s Shuanghui International Holdings Ltd. 

• Australia Banks on Track for Biggest Monthly Fall in Three Years. Australian bank stocks are on course for their worst monthly performance in three years as investors cash out of a rally that drove financial shares to a record high in April. The S&P/ASX 200 Banks index has plunged 12 percent this month, set for the biggest decline since May 2010. “Banks have stood out among the pack and investors, having enjoyed the run and higher dividends, are rotating out to other beaten-down sectors,” Stan Shamu, market strategist at Melbourne-based IG Markets, said by phone. “It’s also time to take a hard look at record-low mortgage growth, increasing competition and a slowing economy’s impact on banks.” The International Monetary Fund this week lowered its growth forecasts for China, Australia’s biggest trading partner, to 7.75 percent this year and next, from earlier projections of 8 percent for 2013 and 8.2 percent in 2014. Investment in commodities and energy has peaked, threatening to slow Australia’s economy, the government said this month.

• Rebar Poised for Fourth Monthly Loss on Supply, Iron Ore Price. Steel reinforcement-bar futures headed for a fourth monthly drop as iron ore fell to the lowest in more than seven months and supply from Chinese mills climbed. Rebar for delivery in October on the Shanghai Futures Exchange declined as much as 0.4 percent to 3,424 yuan ($558) a metric ton and was at 3,433 yuan at 10:15 a.m. local time. Futures retreated 4.6 percent in May. Iron ore for immediate delivery at the Tianjin port in China fell 1.2 percent to $111.60 a dry ton yesterday, the lowest since October, according to the Steel Index Ltd. China’s steel output rose by 20.09 million tons in the first four months of this year, Wang Xiaoqi, deputy head of the China Iron and Steel Association, said at a conference in Shanghai this week. About 54 percent of the additional output is sitting in warehouses, Wang said. “High capacity, high output and lower raw-material prices are all pressuring rebar,” Wang Yongliang, an analyst at Beijing CIFCO Futures Co., said in a report today.

• Asian Stocks Rise as Japan’s Topix Rebounds on Outlook. Asian stocks gained, with Japanese equity gauges rebounding after entering a so-called correction yesterday, following reports that Japan’s pension fund may boost stock holdings and the nation’s industrial output expanded faster than analysts estimated. Mitsubishi Estate Co., Japan’s biggest developer by market value, rose 2 percent. Sony Corp. jumped 3.8 in Tokyo percent as people familiar with the matter said the electronics maker is working with Morgan Stanley and Citigroup Inc. to consider adopting Daniel Loeb’s proposal for an initial public offering of its entertainment unit. BHP Billiton Ltd., the world’s largest mining company, gained 1.4 percent in Sydney after copper futures increased. The MSCI Asia Pacific Index added 0.2 percent to 135.83 as of 11:25 a.m. in Tokyo, with about three shares rising for every two that fell. Seven of the 10 industry groups on the gauge advanced. The measure is heading for its first monthly decline in seven months after Japanese indexes entered a correction yesterday after reaching about five-year highs on May 22. 

• Lawson Says European Transaction Tax Will Hurt London. Former Chancellor of the Exchequer Nigel Lawson said the proposed European financial-transaction tax will damage London even though the U.K. isn’t participating.

• Iran Increases its Support for Terrorism, U.S. Says. Iran increased its support of international terrorist-related activities last year, as the capabilities of al-Qaeda’s central leadership in Pakistan declined, the U.S. State Department said. In its annual report on terrorism issued yesterday, the State Department reported a “marked resurgence” in terrorist-related activities last year by Iran, which also is supplying weapons and other “extensive” aid to the Syrian regime for its war against rebel groups. The State Department cited activities by Iran’s Ministry of Intelligence and Security, its Islamic Revolutionary Guard Corps-Quds Force, and its Lebanese ally, Hezbollah. “Iran’s state sponsorship of terrorism and Hezbollah’s terrorist activity have reached a tempo unseen since the 1990s, with attacks plotted in Southeast Asia, Europe, and Africa,” according to the State Department. 

• HTC Said to Cancel Large Windows RT Tablet on Weak Demand. HTC Corp. (2498) has scrapped plans to introduce a full-sized tablet computer with Microsoft Corp. (MSFT)’s Windows RT operating system on concern it will meet with lackluster demand, according to people familiar with the matter.

• ERs Crumbling Amid Doctor Shortage as New Patients Loom: Health. “There’s nothing more appalling than being treated in a hallway bed,” said James Dunford, medical director for the city of San Diego’s emergency medical services system. The emergency room is “the canary in the coal mine” for what patients can expect from U.S. health care over the next few years, he said. ERs, the front line of modern medical care, are crumbling nationwide just as patient visits promise to surge with the 2014 rollout of the Affordable Care Act adding 25 million newly insured patients over time. ER doctors say they expect these people, seeking the everyday care they couldn’t get before, to flood a system already so overcrowded that some hospitals are unable to accept ambulances for days at a time. “There’s a shortage of all types of doctors now, and it will only get worse with many Baby Boomer doctors retiring as the Baby Boomers age,” said Darria Long Gillespie, a doctor at Beth Israel Deaconess Medical Center in Boston.

• What’s Inside the Government’s Deal With Citigroup(C)?

Wall Street Journal: 

• Swoon in Bonds Puts Eye on Fed. The bond market's monthlong plunge has pushed long-term interest rates on mortgages and U.S. Treasurys to their highest levels in more than a year, sparking a debate: Is this a bursting bubble, the aftereffect of clumsy Federal Reserve communication or a welcome sign the U.S. economy is, at last, on the mend.

• Dispute Flares Inside FDA Over Safety of Popular Blood-Pressure Drugs. The top-selling class of blood-pressure drugs is under attack from an unusual source: a senior regulator at the Food and Drug Administration. Bucking his bosses, Thomas A. Marciniak is seeking stronger warnings about the drugs known as angiotensin receptor blockers, or ARBs, according to internal documents reviewed by The Wall Street Journal. 

• Syrian Leader Mocks Foes and Threatens Israel. President Bashar al-Assad mocked the Western-backed opposition groups battling his regime and vowed to attack Israel if it strikes Syria again, in comments that fueled doubts about a positive outcome from planned peace talks.

• Romney Planning to Rejoin National Dialogue. Months After Election Loss, He Will Host Event in Utah for 200 Friends and Campaign Supporters

• David Malpass: Fed Policy Is a Drag on Recovery. The stock market is soaring. Yet real median income has fallen 5%, unheard of except during the Great Depression. Former Federal Reserve Chairman Paul Volcker said in a speech to the Economic Club of New York on Wednesday that the Fed should not be asked to "accommodate misguided fiscal policies" and "will inevitably fall short." He outlined a preferred monetary policy based on orthodox central banking aimed at a stable currency in order to maximize employment. "Credibility is an enormous asset," he said. "Once earned, it must not be frittered away." Those words are true and timely.

• Noonan: An Antidote to Cynicism Poisoning. Restoring public faith will require a full investigation of the IRS's politicization.

Barron's: 

• Palo Alto Networks(PANW) Drops 14%: FYQ3 Rev Misses, EPS Beats.

Fox News:

• Republicans seek IG probe into Sebelius over ObamaCare group donations. Congressional Republicans on Thursday escalated their call for an independent investigation into whether Health and Human Services Secretary Kathleen Sebelius broke the law when she sought donations from private companies for an independent ObamaCare project. Three top Senate Republicans wrote a letter to the HHS inspector general asking his office to launch a probe. It follows a previous GOP call for a review by another internal watchdog, the Government Accountability Office. At issue is Sebelius' effort to solicit donations and other assistance from various charities and executives for a nonprofit group that is helping sign up people for benefits under the federal health care overhaul. 

• Former IRS chief Shulman reportedly visited White House at least 157 times. Even Attorney General Eric Holder, one of Obama's closest allies, visited only 62 times according to the records.

MarketWatch.com:

• Critic of big banks wants Fisher to head Fed. Simon Johnson, an economist who is leading the push for the government to do more to tackle “too big to fail” banks, wants Dallas Fed President Richard Fisher to replace Fed Chief Ben Bernanke when Bernanke’s term expires early next year.

• Netflix(NFLX) to join Nasdaq 100 next week.

CNBC:

• DJIA Price vs. DJIA EPS. (graph)

• For a Job After Graduation, Major in These, Not Those. It pays to go to college in general—but how big a payoff you get can vary wildly depending on what you decide to major in.

Zero Hedge: 

• Being Bernanke - The Game. 

• When An FX Margin Clerk Flaps Its Wings In Japan, US Stocks Slide. (graphs)

• US Worker Wages: "Not Off The Lows". (graphs)

• Are Bond Yields Set To Soar? Not So Fast. 

• Is This China's 'Minsky Moment'? (graph)

• Things That Make You Go Hhmm... Like Our Current Bizarro World.

• IceCap Asset Management: "Bernanke's Bouncing Ball".

Business Insider: 

• An Israeli Attack On New Syrian Missiles Would 'Kill A Lot Of Russians'.

• Newest Issue Of Jihad Magazine 'Inspire' Celebrates Boston Bombings.

Washington Post:

• For Obama’s ex-aides, it’s time to cash in on experience. The decision on whether to approve the Keystone XL oil pipeline is a political headache for President Obama. But to five of his former aides, it represents a business opportunity. Four of them — Bill Burton, Stephanie Cutter, Jim Papa and Paul Tewes — work as consultants for opponents of the project, which would carry heavy crude oil from Canada to Gulf Coast refineries. Another, former White House communications director Anita Dunn, counts the project’s sponsor, TransCanada, among her firm’s clients.

Real Clear Politics:

• Carl Cameron: Democrats Worried About The Impact Of Obama On Party. (video)

Reuters: 

• Ex-Microsoft(MSFT) manager plans to create first U.S. marijuana brand. A former Microsoft executive plans to create the first U.S. national marijuana brand, with cannabis he hopes to eventually import legally from Mexico, and said he was kicking off his business by acquiring medical pot dispensaries in three U.S. states. 

• Omnivision(OVTI) results beat estimates; shares rise. Image sensor maker OmniVision Technologies Inc reported fourth-quarter results that beat market estimates as demand for its products grew. 

• U.S. SEC taking steps to watch for money market fund outflows. The U.S. Securities and Exchange Commission is taking steps to help spot if money starts flowing to alternative investments as the SEC cracks down on money market funds. 

• 'Shadow' home inventory could burden U.S. housing agencies, watchdogs say. Millions of U.S. homeowners are months behind on payments on government-backed mortgages, raising the risk federal housing agencies will end up facing the cost of managing a fresh flood of foreclosed homes, two government watchdogs said on Thursday.

Financial Times:

• Merkel party allies accuse Hollande of shaking EU’s foundations. Leading members of Germany’s ruling Christian Democratic Union party have fiercely criticised François Hollande, accusing the French president of “shaking the foundations of the European Union” just hours before the two countries’ leaders met in Paris in a bid to repair relations. German concern about the French government’s resistance to economic reform and hostility to EU pressure emerged after Mr Hollande said it was not for the European Commission “to dictate” reforms to Paris.

NHK:

• Apple(AAPL) Raises iPad, iPod Prices in Japan on Weaker Yen. Apple raised prices of iPad, iPad 2, iPad mini, iPod series today, citing the U..S. maker of iPhone. Apple Japan website shows iPad mini 16GB Wi-Fi model priced at 32,800 yen; was 28,800 yen when released in Nov.

China Daily:

• China Local Debt Must Be Kept at 'Rational Level'. Chinese local government debt needs to be kept at a "rational level" by imposing a budget-regulated debt financing mechanism, Zhang Monan, a researcher at the State Information Center, writes in a commentary. The slowdown in growth is boosting local government debt to "even higher levels," Zhang wrote. China remains exposed to the risk of growing sovereign debt and is headed for a debt crisis, he said. Debt backed by "covert" guarantees from the central government poses the biggest risks in the medium and long term, Zhang said.

China Business News:

• China May Start Tax on Online Sellers This Year. China may start levying a tax on small and medium-sized online sellers within the year, citing a person familiar with the matter.

Evening Recommendations 
Deutsche Bank:

• Upgraded (MS) to Buy, target $30.

Night Trading

• Asian equity indices are -.50% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 111.0 -1.5 basis points.

• Asia Pacific Sovereign CDS Index 96.0 +1.5 basis points.

• FTSE-100 futures -.03%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GCO)/.87

Economic Releases
8:30 am EST

• Personal Income for April is estimated to rise +.1% versus a +.2% gain in March.

• Personal Spending for April is estimated unch. versus a +2% gain in March.

• The PCE Core for April is estimated to rise +.1% versus unch. in March.

9:00 am EST

• The NAPM-Milwaukee for May is estimated to rise to 49.0 versus 48.43 in April.

9:45 am EST

• Chicago Purchasing Manager for May is estimated to rise to 50.0 versus a reading of 49.0 in April. 

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for May is estimated at 83.7 versus a prior estimate of 83.7.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Pianalto speaking, Italian Unemployment data, Eurozone CPI report, OPEC meeting, G8 meeting, Canadian GDP report, 2013 ASCO meeting and the (IDCC) investor day could also impact trading today.

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

Stocks Higher into Final Hour on Central Bank Hopes, Euro Bounce, Short-Covering, Tech/Financial Sector Strength

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 14.34 -3.30%

• ISE Sentiment Index 102.0 +4.08%

• Total Put/Call .84 -2.33%

• NYSE Arms .65 +34.91%

Credit Investor Angst:

• North American Investment Grade CDS Index 76.11 -.99%

• European Financial Sector CDS Index 144.58 +1.12%

• Western Europe Sovereign Debt CDS Index 81.68 -.39%

• Emerging Market CDS Index 268.93 +.51%

• 2-Year Swap Spread 16.5 +.25 bp

• TED Spread 25.0 +1.0 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .03% -1 bp

• Yield Curve 182.0 unch.

• China Import Iron Ore Spot $111.60/Metric Tonne -1.15%

• Citi US Economic Surprise Index -19.10 -3.6 points

• 10-Year TIPS Spread 2.16 -5 bps

Overseas Futures:

• Nikkei Futures: Indicating +190 open in Japan

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

• Higher: On gains in my medical/biotech/tech/retail sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Euro-Area Economic Confidence Climbs Amid Recession. Economic confidence in the euro area increased in May, adding to signs the region is beginning to emerge from the longest recession in the single-currency era. An index of executive and consumer sentiment rose to 89.4 from 88.6 in April, the European Commission in Brussels said today. That’s in line with the median estimate in a Bloomberg News survey of 33 economists. 
• European Stocks Rebound From Three-Week Low. European stocks climbed, rebounding from a three-week low, as investors weighed data on U.S. economic growth and house sales to gauge the Federal Reserve’s view on continuing stimulus measures. Lonmin Plc and Fresnillo Plc both rallied at least 5.5 percent as precious metals climbed. Genmab A/S jumped to its highest price since August 2009 after its Arzerra cancer treatment met its objective in a trial. Tate & Lyle Plc paced declining shares after earnings missed analyst estimates. The Stoxx Europe 600 Index added 0.4 percent to 303.55 at the close.
• Frontline(FRO) Says Tanker Glut Preventing Recovery as Debt Looms. Frontline (FRO) Ltd., the oil-tanker company led by billionaire John Fredriksen, said an oversupply of the vessels is preventing the market recovery needed to be able to repay a convertible bond maturing in 2015. “The tanker market is massively oversupplied and it may take some time before a reasonable market balance is restored and sustained recovery of the tanker market occurs,” the manager of 32 supertankers said today as it reported a fourth quarterly loss. Its cash might run out if the market doesn’t recover and it can’t raise equity or sell assets, Hamilton, Bermuda-based Frontline said, reiterating comments made Feb. 22. 
• Joy(JOY) Cuts Forecast as Commodity Surplus Curbs Mining Expenditure. Joy Global Inc. (JOY), the largest maker of underground mining equipment, cut its full-year profit and sales forecasts and said it sees no immediate recovery in orders as commodity producers reduce spending amid surplus supply. 
• Gold Futures Advance on Speculation Fed Will Maintain Stimulus. Gold futures rallied the most in a week on speculation that the Federal Reserve will maintain bond purchases to bolster the U.S. economy, boosting demand for the precious metal as a store of value. Silver also rose.

Wall Street Journal:

• Smithfield(SFD) Deal Signals China's Need for Meat, Dairy, Other Food Buys. China's rising hunger is driving ever-larger acquisitions of global food assets as the shifting dietary profile of the world's most populous nation increasingly puts meat, dairy and processed-food producers into play.
• Iron Ore Has Fallen 30% Since February. Iron ore slumped to a seven-month low on Thursday, down 30% from this year's high in February, hit by slowing demand from China and a glut of a supply. The raw material for steel making joins a broad selloff in global commodities and is a key bellwether of economic activity in China, the world's top buyer of iron ore. Signs are mounting that growth is continuing to slow in Asia's largest economy, with traders rushing to sell off supplies of iron ore and steel. Shares of Australian iron-ore producers are also in the cross hairs. "The market is flush with product at the moment," RBS Morgans resources analyst James Wilson said. "The pricing power has switched from the iron-ore miners to the steel mills."

Fox News:

• Fox News, other media outlets refuse off-record meeting with Holder. Fox News joined several other major media outlets Thursday in refusing to send a representative to a meeting with Attorney General Eric Holder on the department's surveillance of reporters if Holder continues to insist that the session be off the record.

CNBC:

• When Chinese Walls Come Crumbling Down. One of the key reforms put in place in the settlement was the bar on basing the compensation of stock analysts on their contribution to investment banking revenue. This was meant to prevent analysts from becoming shills for the corporate clients that were paying fees to the investment banks for stock and bond underwriting deals. A new study suggests that this part of the settlement may have fallen by the wayside.

Zero Hedge:

• Nikkei Plunges Another 5% But "Unsourced" Stick Save Arrives Just In Time. (graph)
• First Shipment Of Russian S-300 Rockets Arrives In Syria. 
• Bad News Is Good As GDP, Claims Miss Pushes Futures Higher; Five States' Data "Estimated". (graphs)
• Jeff Gundlach: "There Is No Such Thing As Economic Analysis Anymore".
• This Won't End Well. (graphs)
• French Jobseekers Reach All-Time High. (graph)

Business Insider:

• CHART OF THE DAY: Here's What 515 Interest Rate Cuts And $12 Trillion Will Do To The Global Credit Markets.
• US Oil Inventories Just Hit An All-Time High.
• Pending Home Sales Miss Expectations, Rising 0.3%.

Reuters:

• Credit crunch casualty Eckert plots hedge fund reincarnation. Fred Eckert - the hedge fund manager who lost $250 million of his own money, saw his firm go bankrupt in the credit crisis, went through a divorce and spent two months in a coma - is back with the launch of his new firm. The 65-year-old former Goldman Sachs executive, who once lived in one of the most expensive houses in New Jersey, has launched a new firm called Phoenix Star Capital. He has already an initial $100 million from investors to pursue the strategy. And despite a chastening credit crisis, the man who once enjoyed a fleet of 18 vintage cars and a 1,500-bottle wine collection before filing for personal bankruptcy in 2010, remains optimistic about his chances. "I'm not afraid of being able to raise substantial amounts," Eckert told Reuters in the American bar of the luxury Savoy hotel in central London. "They (investors) believe my record is excellent." Eckert's former hedge fund firm GSC Group ran $28 billion at its peak, but filed for bankruptcy in 2010 after borrowing around $250 million, some of it just before the credit crisis sent asset prices tumbling and froze money markets.
• Risky derivatives make return for returns' sake. Investors facing record low bond yields are increasingly chasing higher returns via complex derivatives, the instruments at the root of the 2008 global financial crisis, which can punch yawning holes in balance sheets if they go awry. Monetary stimulus from central banks has driven down sovereign and corporate bond yields and sent shares to multi-year highs, which in turn has encouraged investors to buy structured products that bundle derivatives with stocks or bonds to increase returns. "The low interest rate environment is pushing clients to search for yield," said Sebastien Gyger, head of portfolio management for private clients at Lombard Odier. 
• With big-name backers, Chinese firm eyes Smithfield's know-how, brands. In three decades, Wan Long has turned Shuanghui International Holdings from a small, loss-making meat processor into China's largest, and is making his country's biggest takeover of a U.S. company - the $4.7 billion acquisition of Smithfield Foods Inc, the world's leading pork producer. 
• Italy's debt costs rise in hint rally of the vulnerable may be over. Italy's long-term borrowing costs edged up at an auction on Thursday for the first time in three months, adding to signs that a 10-month-long rally in vulnerable euro zone bonds may be faltering.

USA Today:

• 30-year mortgage rate hits 3.81%, a 1-year high.

Telegraph:

• British house prices are '31pc too high' - OECD. (graph) The UK's property market is the eighth most over-valued, according to the Organisation for Economic Cooperation and Development.