Weekly Outlook

U.S. Week Ahead by Reuters (video). 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, more emerging markets unrest, increasing Eurozone/Asian debt angst, Fed "taper" worries, more shorting and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,606.28 +.87%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,606.28 +.87%

• DJIA 14,909.60 +.75%

• NASDAQ 3,403.25 +1.37%

• Russell 2000 977.48 +1.43%

• S&P 500 High Beta 24.82 +1.06%

• Value Line Geometric(broad market) 419.39 +1.50%

• Russell 1000 Growth 729.59 +.91%

• Russell 1000 Value 820.93 +1.14%

• Morgan Stanley Consumer 982.95 +.38%

• Morgan Stanley Cyclical 1,179.84 +.61%

• Morgan Stanley Technology 745.21 +.12%

• Transports 6,173.86 +1.04%

• Utilities 485.90 +2.99%

• Bloomberg European Bank/Financial Services 88.85 +.77%

• MSCI Emerging Markets 38.64 +2.89%

• HFRX Equity Hedge 1,095.54 +.33%

• HFRX Equity Market Neutral 940.65 +.16%

Sentiment/Internals

• NYSE Cumulative A/D Line 186,348 +1.76%

• Bloomberg New Highs-Lows Index -70 +916

• Bloomberg Crude Oil % Bulls 33.33 +88.84%

• CFTC Oil Net Speculative Position 274,474 -8.12%

• CFTC Oil Total Open Interest 1,809,371 -3.19%

• Total Put/Call .94 -18.97%

• OEX Put/Call 1.38 +18.97%

• ISE Sentiment 90.0 +15.38%

• NYSE Arms 1.36 +47.82%

• Volatility(VIX) 16.86 -10.79%

• S&P 500 Implied Correlation 58.05 +.75%

• G7 Currency Volatility (VXY) 10.99 -3.17%

• Emerging Markets Currency Volatility (EM-VXY) 10.96 -6.40%

• Smart Money Flow Index 11,487.81 +.80%

• Money Mkt Mutual Fund Assets $2.594 Trillion +.33%

• AAII % Bulls 30.3 -19.2%

• AAII % Bears 35.2 +17.4%

Futures Spot Prices

• CRB Index 275.62 -.88%

• Crude Oil 96.56 +2.78%

• Reformulated Gasoline 271.56 -1.17%

• Natural Gas 3.56 -6.36%

• Heating Oil 285.88 +.38%

• Gold 1,223.70 -5.70%

• Bloomberg Base Metals Index 181.25 -.19%

• Copper 305.75 -1.44%

• US No. 1 Heavy Melt Scrap Steel 337.0 USD/Ton +3.1%

• China Iron Ore Spot 116.50 USD/Ton -1.77%

• Lumber 299.0 +3.25%

• UBS-Bloomberg Agriculture 1,440.47 -2.83%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 5.8% -40 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.1296 +9.56%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 116.85 +.04%

• Citi US Economic Surprise Index -9.0 +3.0 points

• Citi Emerging Markets Economic Surprise Index -37.10 +6.6 points

• Fed Fund Futures imply 46.0% chance of no change, 54.0% chance of 25 basis point cut on 7/31

• US Dollar Index 83.14 +.88%

• Euro/Yen Carry Return Index 134.50 +.42%

• Yield Curve 213.0 -3 basis points

• 10-Year US Treasury Yield 2.49% -4 basis points

• Federal Reserve's Balance Sheet $3.436 Trillion +.26%

• U.S. Sovereign Debt Credit Default Swap 27.50 -6.95%

• Illinois Municipal Debt Credit Default Swap 165.0 -7.82%

• Western Europe Sovereign Debt Credit Default Swap Index 95.0 unch.
  

• Emerging Markets Sovereign Debt CDS Index 248.74 +1.09%
  

• Israel Sovereign Debt Credit Default Swap 127.0 -.58%

• China Blended Corporate Spread Index 406.0 -5 basis points

• 10-Year TIPS Spread 1.99% +5 basis points

• TED Spread 24.25 +1 basis point

• 2-Year Swap Spread 15.25 -4.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +2.75 basis points

• N. America Investment Grade Credit Default Swap Index 86.14 -6.64%
  

• European Financial Sector Credit Default Swap Index 166.84 -7.54%
  

• Emerging Markets Credit Default Swap Index 320.02 -15.12%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 135.0 +15 basis points

• M1 Money Supply $2.494 Trillion -.59%

• Commercial Paper Outstanding 1,039.80 +.20%

• 4-Week Moving Average of Jobless Claims 345,800 -2,500

• Continuing Claims Unemployment Rate 2.3% unch.

• Average 30-Year Mortgage Rate 4.46% +53 basis points

• Weekly Mortgage Applications 629.20 -3.04%

• Bloomberg Consumer Comfort -28.3 +1.1 points

• Weekly Retail Sales +2.80% -10 basis points

• Nationwide Gas $3.51/gallon -.08/gallon

• Baltic Dry Index 1,171 +14.02%

• China (Export) Containerized Freight Index 1,013.26 -.38%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 20.0 -11.11%

• Rail Freight Carloads 252,807 -.57%

Best Performing Style

• Mid-Cap Value +1.9%

Worst Performing Style

• Large-Cap Growth +.9%

Leading Sectors

• Alt Energy +5.1%

• Oil Tankers +4.5%

• REITs +3.9%

• Biotech +3.1%

• Utilities +3.0%

Lagging Sectors

• Agriculture -1.1% 

• Computer Services -1.3%

• Gold & Silver -1.4%

• Steel -2.4%

• Coal -8.8%

Weekly High-Volume Stock Gainers (31)

• VHS, KEYN, ISIS, HOMB, INSY, HWAY, MEI, CYTK, SSNI, REV, GMED, BBCN, WMK, COHU, WWWW, WAGE, SIVB, RXN, UMBF, KMR, PRGS, HTGC, MBFI, IGTE, CAMP, UCBI, NWBI, FHN, STBA, FMER and IRBT

Weekly High-Volume Stock Losers (16)

• UFPI, ACRE, BCC, ORCL, AHT, NCI, RGLD, HAWK, FCFS, AGN, PMC, APOL, TREX, BKS, MG and AVD

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 Eurozone Debt Angst, Rising Global Growth Fears, Technical Selling, Homebuilding/Financial Sector Weakness

Today's Market Take:

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.63 -1.36%

• Euro/Yen Carry Return Index 134.66 +.73%

• Emerging Markets Currency Volatility(VXY) 10.96 +.74%

• S&P 500 Implied Correlation 57.76 -2.51%

• ISE Sentiment Index 93.0 +47.62%

• Total Put/Call .92 -9.8%

• NYSE Arms 1.08 -5.82% 

Credit Investor Angst:

• North American Investment Grade CDS Index 87.03 +.22%

• European Financial Sector CDS Index 166.84 +2.17%

• Western Europe Sovereign Debt CDS Index 95.0 unch.

• Emerging Market CDS Index 319.50 +.81%

• 2-Year Swap Spread 15.25 +.25 bp

• TED Spread 24.25 +1.5 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -10.50 +1.25 bps

Economic Gauges:

• 3-Month T-Bill Yield .03% -2 bps

• Yield Curve 212.0 +1 bp

• China Import Iron Ore Spot $116.50/Metric Tonne +1.04%

• Citi US Economic Surprise Index -9.0 -1.9 points

• Citi Emerging Markets Economic Surprise Index -37.10 -.8 point 

• 10-Year TIPS Spread 1.99 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +218 open in Japan

• DAX Futures: Indicating +11 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech 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:

• China Bad-Loan Alarm Sounded by Record Bank Spread Jump. Borrowing costs for Chinese banks have surged the most in at least six years this month as rating companies say a cash crunch threatens to swell bad loans. The yield spread for one-year AAA bank bonds over similar-maturity sovereign notes jumped 56 basis points so far this month to 163 basis points, the most in ChinaBond records going back to 2007. The similar AA gap widened 59 basis points to 188. Even as China Construction Bank Corp. (939) President Zhang Jianguo said yesterday cash conditions have normalized, the benchmark seven-day repurchase rate was fixed at 6.85 percent, almost twice the 3.84 percent average for this year. Money-market rates touched the highest level last week since at least 2003, prompting three of the largest rating agencies to warn banks may run out of cash to pay investors in their wealth management products and to extend new loans, increasing the risk their customers will default. The People’s Bank of China is seeking to wring speculative lending out of the system after total credit approached 200 percent of gross domestic product, according to Fitch Ratings. “There could be unintended consequences from the central bank’s approach,” said Liao Qiang, a Beijing-based director at Standard & Poor’s. “We expect some deleveraging at banks’ interbank and wealth management businesses to unfold. Credit growth would slow. This could pressure banks’ asset quality.”
• Lula Default Scare Echoed in Brazil’s Worst Bond Sell-Off. Brazilian government bonds are suffering the biggest quarterly losses since the run-up to former President Luiz Inacio Lula da Silva’s election in 2002 led to speculation that the nation would default. Dollar-denominated bonds from Brazil, Latin America’s biggest nation, plunged 7.55 percent since the end of March, the biggest slide since a 16 percent drop in the third quarter of 2002 before Lula’s October election that year. The loss this quarter exceeds a decline of 6.15 percent for countries with triple-B ratings, according to Bank of America Corp. Investors are becoming concerned that President Dilma Rousseff’s administration is undoing the progress of her mentor and predecessor, who overcame bondholder skepticism to win the nation’s first-ever investment grade in 2008. Brazil is now grappling with inflation above its 6.5 percent target, the prospect of a credit downgrade and the biggest street protests in more than two decades as speculation increases the Federal Reserve will reduce its unprecedented bond buying that had pushed investors into higher-yielding emerging markets.
• Merkel Says She Blocked Car Carbon Curbs to Shield Auto Jobs. German Chancellor Angela Merkel said that she blocked a draft European Union law aimed at reducing carbon-dioxide emissions from cars over concerns the measure would cost jobs in the auto industry. A coalition of EU states led by Germany prevented approval of the measure at a meeting of diplomats in Brussels earlier this week. Merkel said that she moved to delay the proposal -- which would cap average carbon discharges by passenger vehicles in the bloc at 95 grams a kilometer in 2020 -- to defend jobs. “This is also about employment,” Merkel told reporters in Brussels today after a European Union summit. “That’s why we need time to review and evaluate and decide what we will do. That’s why the vote didn’t happen.” 
• European Stocks Drop After U.S. Business Activity Report. European stocks dropped, paring their biggest weekly gain in almost two months, as drugmakers retreated and a measure of business activity in the U.S. fell more than economists had projected. Air France-KLM Group (AF), Europe’s second-biggest airline by sales, retreated 2.8 percent. Mediaset SpA climbed 2.8 percent after Credit Suisse Group AG raised its price target on the Italian broadcaster. Serco Group Plc added 2.7 percent after predicting that its revenue growth in the first half will exceed its previous estimates. The Stoxx 600 declined 0.5 percent to 285.02 at 4:30 p.m. in London, after earlier advancing as much as 0.4 percent. The equity benchmark has increased 1.6 percent this week, halting a five-week decline. The gauge has still dropped 5.3 percent in June, paring its gain this year to 1.9 percent. 
• Gold Rebounds From 34-Month Low on Physical Demand. Gold prices rebounded from a 34-month low on signs of increased demand for jewelry, coins and bars after the metal headed for the biggest quarterly drop in at least 93 years. “We did see physical buying come in a bit, and if that continues it will provide some support,” Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said in a telephone interview. Through yesterday, the spot price slid 25 percent this quarter, poised for the largest decline since 1920, when Bloomberg data starts. Standard Chartered Plc advised buying gold around $1,200 an ounce. “There is definitely some increase in the pace of physical purchases,” Matt Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “We are also seeing some short covering after prices started rising.” Gold for immediate delivery advanced 1.5 percent to $1,218.81 at 11:56 a.m. New York time. Earlier, the price touched $1,180.50, the lowest since August 2010.
• Corn Leads Grain Plunge as U.S. Acreage Tops Analysts Estimates. Corn, soybean and wheat futures tumbled to the lowest prices in a year after the government said U.S. farmers will plant more grain than forecast and the largest oilseed crop ever. Planting of corn, the biggest domestic crop, jumped to 97.379 million acres, the most since 1936, the U.S. Department of Agriculture said today in a report. Analysts in a Bloomberg survey expected 95.431 million. Wheat acreage reached a four-year high of 56.53 million, and soybeans were sown on a record 77.728 million.
• BlackBerry Falls Most in 12 Years After Touch-Screen Model Flops. BlackBerry’s shares tumbled the most since 2001 after the company reported a surprise loss and weak sales of a new touch-screen model, underscoring its challenges in competing directly with the iPhone and Android devices. The company shipped 6.8 million smartphones last quarter, including about 2.7 million new BlackBerry 10 models -- primarily its flagship Z10 touch-screen phone. Analysts had estimated total shipments of 7.5 million, with about 3.6 million BlackBerry 10 units.

Wall Street Journal: 

• Euro Zone Set to Keep Shrinking. Continued Slump. Will Likely Be Accompanied by Rise in Unemployment. An indicator that has correctly recorded contractions in the euro zone suggests the currency area's economy shrank for a seventh straight quarter, extending its longest postwar slump. Official figures for second-quarter economic activity won’t be released until Aug. 14, but the monthly Eurocoin measure of euro-zone output released Friday signaled a contraction for June, having earlier signaled declines in activity in April and May.

Fox News:

• House panel finds IRS official waived Fifth Amendment right, can be forced to testify in targeting probe. A House Republican-led committee approved a resolution Friday declaring that high-ranking IRS official Lois Lerner waived her Fifth Amendment right against self-incrimination by delivering a statement before the committee in May. 

MarketWatch:

• Noodles & Co. shares soar in trading debut. Shares of Noodles & Co. soared in their trading debut on Friday. The shares were last up 95% at $35.11 in midday trade, after surging to an intraday high of $37.69. The casual-restaurant chain had priced its initial public offering at $18, exceeding its revised range of $15 to $17.
• Home health companies hammered by proposed cuts from Medicare. Home health-care companies took it on the chin Friday after the Centers for Medicare and Medicaid recommended what one analyst called the “worst possible outcome” in rate cuts to the facilities over the next four years.
• U.S. investors stuck in emerging markets crunch. Commentary: Abandoning American stocks was a huge mistake. The iShares MSCI Emerging Markets index ETF EEM +0.43% has lost 16% of its value since its recent high in January — and unlike U.S. indexes, which have made all-time highs this year, it’s still a third below its 2007 peak. That suggests major emerging markets — especially the popular BRIC countries — are in a long-term, secular bear market, leaving little hope for investors counting on outsized returns.

CNBC:

• New Investors Shouldn't Go to China, Starnes Says. (video) American businessman Chip Starnes—who had been held hostage by his workers in China—told CNBC Friday that he was in a no-win situation and received no help from local officials in resolving the pay dispute that started his ordeal.

Zero Hedge:

• Richmond Fed's Lacker: "Falling Markets Should Not Be Too Surprising... Further Volatility Seems Likely".
• Chicago PMI Plummets By Most In Over 4 Years; Weather Blamed. (graphs)
• A Week In Italian Banking Stocks. (graph)
• Weak Close Leaves European Stocks Red Year-To-Date.

Business Insider:

• The Power Of The Financial Lobby: 'For 25 Years, It’s Never Been The Right Moment' To Tighten.
• Horrific Retail Sales In Greece. There had been talk, recently, of "green shoots" (so to speak) in the Greek economy. This strongly suggests otherwise. Latest retail sales numbers from Greece are horrific.
• The Markets Are Facing Some Major Headwinds.
• SocGen: China's Massive Credit Misallocation Will End In A Painful Burst.

New York Times:

• Merkel Plays to Germans as She Jousts With Europe. As European leaders from 27 countries once again trudged off to Brussels on Thursday, this time to discuss how to help their millions of unemployed, few could have any illusion about whose wishes carried the most weight: those of Chancellor Angela Merkel and her country, Germany.

Risk Reversal: 

• Macro Wrap – 3 Reasons to Expect Continued Volatility, $VIX, $SPX. Most of our recent trade strategies have been long volatility structures.  Whether that’s long outright calls or puts, long call spreads or put spreads, or long calendars, our trade structure selection is much different than it was in the spring.  A major reason for that shift is that the underlying volatility regime for the broader market seems to have shifted.

Washington Examiner:

• Europe exits climate money pit as Obama jumps in. What does America have to show for the billions of taxpayer dollars spent to stop climate change? Is the climate better now because of 20 years of throwing money at it? The issue is the climate, not the loads of exorbitantly expensive subsidy scandals, secretive scientists and bureaucratic claptrap we've generated to allegedly stop climate change. The question is, did the claptrap make the climate better?

Reuters:

• Fed's Stein puts focus on September as time to assess QE3. September could be an opportune time for the Federal Reserve to consider scaling back its assets purchase, an influential official of the U.S. central bank said on Friday, though he said the Fed must take a long view of economic progress and not be blinded by the most recent data. 
• Fitch: ESM, Bank Resolution Positive but Sovereign Link Unbroken.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.30%

Sector Underperformers:

• 1) Computer Services -2.32% 2) Homebuilders -1.32% 3) Hospitals -.73%

Stocks Falling on Unusual Volume:

• ACN, SAP, DB, BCS, BSBR, BHP, BBL, FSL, PBR, UPL, RRC, CTCM, CPL, CMS, AMED, BBRY, AZZ, RDA, EQM, SRE, GEVA, SYT, IBM, AMT, OC, HCA, LEN, ALEX, LNN, POT, BTI, NGVC, APD, FFIV and RMD

Stocks With Unusual Put Option Activity:

• 1) CVC 2) NKE 3) BK 4) RYL 5) IBM
  

Stocks With Most Negative News Mentions:

• 1) OC 2) TROW 3) F 4) BBRY 5) JCP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +.08%

Sector Outperformers:

• Gold & Silver +4.60% 2) Oil Tankers +1.79% 3) Utilities +.92%
  

Stocks Rising on Unusual Volume:

• GLD, INVN, PTR, SJR, NGD, CSIQ, MCP, SLT, DCM, IBN, FINL, ABFS, DAN, AG, BVN, BIIB, SLW, BCE, GG, HSP, GDX, SLV and NEM

Stocks With Unusual Call Option Activity:

• 1)BK 2) NKE 3) DVA 4) VWO 5) CVC
  

Stocks With Most Positive News Mentions:

• 1) CVX 2) FFIV 3) LMT 4) BBBY 5) BIIB
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Bad-Loan Alarm Sounded by Record Bank Spread Jump: China Credit. Borrowing costs for Chinese banks have surged the most in at least six years this month as rating companies say a cash crunch threatens to swell bad loans. The yield spread for one-year AAA bank bonds over similar-maturity sovereign notes jumped 56 basis points so far this month to 163 basis points, the most in ChinaBond records going back to 2007. Even as China Construction Bank Corp. President Zhang Jianguo said yesterday cash conditions have normalized, the benchmark seven-day repurchase rate was fixed at 6.85%, almost twice the 3.84% average for this year. Money-market rates touched the highest level last week since at least 2004, prompting three of the largest rating agencies to warn banks may run out of cash to pay investors in their wealth management products and to extend new loans, increasing the risk their customers will default. "There could be unintended consequences from the central bank's approach," said Liao Qiang, a Beijing-based director at S&P. "We expect some deleveraging at banks' interbank and wealth management businesses to unfold. Credit would slow. This could pressure banks' asset quality." 

• Hong Kong Stocks Fail to Lure JPMorgan(JPM) With Worst Developed Drop. Hong Kong stocks are set for the biggest decline among developed markets this half as concern about China’s economy drives valuations 22 percent below the five-year average. The Hang Seng Index tumbled 9.8 percent in 2013, trailing the Standard & Poor’s 500 Index by the most in 15 years and wiping more than $145 billion from the value of shares.

• Hong Kong Protests to Underscore Leung’s Record-Low Appeal. Tens of thousands of demonstrators will march in Hong Kong on Monday, calling for greater democracy and action to narrow the wealth gap, as city leader Leung Chun-ying battles near record-low popularity. The July 1 rally, to mark the anniversary of Hong Kong’s 1997 return to Chinese rule, will draw at least 50,000 people, said Jackie Hung, convenor at the Civil Human Rights Front, which is organizing the protest. 

• Japan Recovery Strengthened in May. Consumer prices excluding fresh food were unchanged from a year before as a weakening yen sent utility costs up at the fastest pace in almost five years. Prices excluding fresh food and energy fell 0.4 percent in May from a year earlier, the statistics bureau in Tokyo reported today. Industrial production advanced 2 percent from April driven by demand from power companies. Retail sales gained 1.5 percent from the previous month.

• Asian Stocks Gain. Toyota Motor Corp. (7203), the world’s biggest carmaker, rose 1.7 percent in Tokyo, pacing gains among the exporters. Mitsubishi UFJ Financial Group Inc., Japan’s No. 1, climbed 4.3 percent after the nation’s industrial output and retail sales exceeded expectations. Sands China Ltd., a Macau casino operator controlled by billionaire Sheldon Adelson, added 1.9 percent in Hong Kong after saying revenue from high-stake gamblers hasn’t declined as China’s economic growth slows. The MSCI Asia Pacific Index climbed 1.4 percent to 130.05 as of 11:11 a.m. in Tokyo, with all 10 industry groups on the measure rising.

• Copper Set for Worst Quarter Since 2011 on China Concerns. Copper and the London Metal Exchange Index of six primary metals headed for the biggest quarterly declines since September 2011 amid as signs of slowing in China and uncertainty about the future of stimulus in the U.S. Metal for delivery in three months on the LME dropped as much as 1.3 percent to $6,660.50 a metric ton and was at $6,753.50 by 10:42 a.m. in Shanghai. Copper fell 10 percent this quarter while the index dropped 9.9 percent. The index touched 2,911 on June 24, the lowest since June 2010. Economists from Goldman Sachs Group Inc. to China International Capital Corp. this week cut their China growth forecasts for this year. China’s central bank on June 25 called on big banks to further their roles as market stabilizers, as signs of the nation’s biggest squeeze on credit in at least a decade pushed interbank borrowing costs to a record last week. China accounts for more than 40 percent of world copper consumption. 

• Gold Extends Decline to 34-Month Low on Worst Quarter Since 1920. Gold fell for a fifth day to the lowest in 34 months and was set for the worst quarterly slump in at least nine decades amid speculation the U.S. Federal Reserve will reduce stimulus as economic data beat estimates. Silver headed for its biggest quarterly loss since 1980. Spot bullion slid as much as 1.7 percent to $1,180.50 an ounce, the lowest since August 2010, and traded at $1,192.80 at 9:54 a.m. in Singapore. Prices have dropped 25 percent since the start of April, the biggest quarterly slide since at least 1920, according to data compiled by Bloomberg. Silver headed for its worst quarter since the Hunt brothers tried to corner the market, while platinum tumbled to the lowest since October 2009.

• Egyptians Hoard Food as Protests Raise Concern of More Mayhem. Ashraf Fouad has stuffed 30,000 Egyptian pounds ($4,300) in a wall safe in his Cairo apartment. Across town, Niven Mankarious has been stocking up on chicken, cheese and other food to last her family a month. Like many Egyptians, they are anxious over the unclear direction their country is taking and fearful that violence will be ignited by June 30 protests aimed at ousting the country’s first democratically elected civilian president, the Islamist Mohamed Mursi. Tensions over this watershed in Egypt’s transition from autocratic rule has battered its stocks and bonds, with the risk of sovereign default at an all-time high. 

• Nike(NKE) Fourth-Quarter Profit Tops Estimates as U.S. Gains. Orders for the Nike brand from June to November, excluding the effects of currency exchange-rate changes, advanced 8 percent. Analysts projected a gain of 8.8 percent, the average of five estimates compiled by Bloomberg. Orders on that basis advanced 12 percent from a year earlier. Nike declined 1.9 percent to $61.15 in extended trading at 7:31 p.m. in New York. The company’s business in China looks like it’s “still a work in progress,” Svezia said, after orders there were little changed. “There was some hope that they were turning the corner.” In China, which had been one of Nike’s fastest-growing markets, sales excluding currency fluctuations fell 1 percent, the third quarterly decline in a row. The company has blamed the deterioration on a slowing Chinese economy and the discounts.

Wall Street Journal: 

• Senate Approves Overhaul of Immigration Laws. Lawmakers Voted 68-32 to Back Bipartisan Bill; Now Goes to House. The Senate easily passed the most sweeping changes to immigration law in nearly 30 years, sending the landmark measure to the House, where conservative lawmakers threaten to slow the drive to grant legal status to many of the estimated 11 million people living illegally in the U.S. The 68-32 vote Thursday marked a major step in a long-debated overhaul to the immigration system and drew ceremonial flourish. Vice President Joe Biden presided over the proceedings, and lawmakers rose from their desks to cast their votes, a rarely used gesture of formality. 

• Anti-U.S. Anger Rises in Egypt. Secularist-Leaning Opposition Groups Say White House Is Supporting the Islamist Leadership They Hope to End. As Egyptians prepare for massive protests against President Mohammed Morsi on Sunday, a large piece of opposition activists' anger is being directed at the U.S. and its perceived support for Egypt's ruling Islamists. A flurry of newspaper articles, talk shows and public statements over the past few weeks have singled out the U.S. for particular scorn while accusing America's diplomatic mission in Cairo of acting as a sort of puppet master behind Mr. Morsi's administration.

• Google(GOOG) Is Developing Android Game Console. Google is developing a videogame console and digital wrist watch powered by its Android operating system. Google is hoping to combat similar devices that Apple(AAPL) may release in the future.

• Cover the IRS, Don't Cover for It. Apologists in the media and elsewhere falsely claim the scandal was just a bungle.

• Obama's Keystone Debacle. The president's environmentalist base has him boxed in on the pipeline.

MarketWatch.com: 

• China top auditor warns on rising debt: report. China's top auditor on Thursday warned about risks threatening the country's economic development and called for better management of state-owned assets, according to a Xinhua news report. Speaking at an ongoing session of the Standing Committee of the National People's Congress -- China's parliament -- Liu Jiayi, auditor general of the National Audit Office, said local governments must improve their debt management as their borrowings have surged. The debt level at 18 provincial-level governments and municipalities had soared to 3.85 trillion yuan ($626 billion) by the end of last year, according to a report submitted to the committee, the report said. Audits showed some companies "blindly invested" in some industries, and some 45 projects without approval had invested 58.3 billion yuan by the end of 2011, Liu reportedly said.

• South Korea industrial output unexpectedly shrinks. South Korea's industrial production unexpectedly shrank in May, swinging back to contraction from April's brief turnaround to expansion in months, government data showed Friday. Industrial output was down 1.4% on-year in May largely on falling shipments of machinery and oil-refinery goods, after a revised 1.6% expansion in April following two months of contraction, according to Statistics Korea. The May reading failed to meet the median forecast of a 1.3% on-year expansion projected in the Dow Jones poll of seven economists.

CNBC: 

• US Charges Chinese Wind Company with Stealing Trade Secrets. Chinese wind turbine maker Sinovel Wind Group Co and two of its employees were charged with stealing trade secrets from U.S.-based AMSC by the Department of Justice (DoJ) on Thursday. 

• CFTC Sues Jon Corzine Over MF Global Failure; Seeks to Ban Him From Futures Industry. U.S. regulators on Thursday settled charges against MF Global over the futures brokerage's collapse, and also charged former Chief Executive Jon Corzine and former Assistant Treasurer Edith O'Brien in connection with the alleged misuse of customer funds.

Zero Hedge:  

• The Wall Street Pleasure And Main Street Pain Of Liquidity. (graph)

• Student Loan Interest Rates On Verge Of Doubling.

• Why The Status Quo Is Doomed. (graphs)

• The Two Big Summer Risks. (graphs)

• Hilsenrath: White House Preparing Bernanke's Replacement.

Business Insider: 

• America Will Overtake Saudi Arabia As The World's Top Oil Producer Within A Decade.

• It's Stunning How Aggressively Investors Dumped Emerging Market Bonds This Week. (graph)

New York Times:

• An Old Champion Returns for Mortgage-Based Bonds. With the recent turmoil in the bond markets, however, the offering was not without drama. The structure of the offering was changed to offer buyers more protection against losses, according to a person briefed on the matter who was not authorized to speak about the private deal. The firm, Shellpoint Partners, of which Mr. Ranieri is chairman, sold  $251 million in residential mortgage-backed securities tied to loans that are not backed by Fannie Mae or Freddie Mac. The largest portion of the deal was sold at a rate of 2.85 percentage points above ultrasafe government debt, according to the person briefed on the deal.

• Moody’s Shows Wider Pension Gap for States. Moody’s Investors Service, dissatisfied with the way states measure what they owe their retirees, released its own numbers on Thursday, showing that the 50 states have, in aggregate, just 48 cents for every dollar in pensions they have promised. That is much less than the 74 cents on the dollar that the states now report, suggesting the states are short by about $980 billion, with many local governments, like school districts, being on the hook for additional billions that they have not disclosed at all.

Reuters: 

• Accenture(ACN) cuts full-year outlook as consulting slows further. Outsourcing and consulting services provider Accenture Plc cut its full-year outlook, citing a pullback in spending by its consulting business clients, after reporting third-quarter revenue below analysts' estimates. Shares of Accenture, whose clients include London's Heathrow Airport, Nokia Oyj, Baker Hughes Inc and AstraZeneca UK, were down 7 percent at $74.60 in extended trading on Thursday.

• Some big U.S. cities at risk of another housing bubble -Shiller. Dramatic home price gains in some of America's largest cities point to a potentially new housing bubble in those areas, according to Robert Shiller, who helped create a closely watched gauge of U.S. housing prices. 

• U.S. muni bond funds report $4.53 bln outflows, largest on record. U.S. municipal bond funds reported $4.53 billion of net outflows in the week ended June 26, the largest withdrawal on record going back to 1992 and more than twice the $2.22 billion of net outflows the week before, according to data released by Lipper on Thursday. 

• U.S. Fed balance sheet grows in latest week. The U.S. Federal Reserve's balance sheet grew in the latest week on increased Treasuries holdings, Fed data released on Thursday showed.

Financial Times: 

• Nike(NKE) to tackle rising Asian labour costs. Nike is to tackle rising labour costs at its Asian factories by “engineering the labour out” of its shoe and clothing production as it seeks to defend its profits. Don Blair, Nike’s chief financial officer, said its objective was to reduce the number of people making its products as he highlighted the impact of a sharp increase in wages in Indonesia.

Telegraph: 

• Tempers fray in France as drastic cuts loom. France's budget watchdog has called for another round of drastic cuts and an immediate freeze in public sector pay and benefits, warning that public finances are badly off track as deep recession eats into tax revenues.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are +.50% to +1.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 151.50 +1.5 basis points.

• Asia Pacific Sovereign CDS Index 112.75 -4.5 basis points.

• FTSE-100 futures -.28%.

• S&P 500 futures -.16%.

• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BBRY)/.07

• (FINL)/.16

• (AZZ)/.61

• (SJR)/.45

Economic Releases
9:00 am EST

• The NAPM-Milwaukee for June is estimated to rise to 45.2 versus 40.7 in May.

9:45 am EST

• The Chicago Purchasing Manager for June is estimated to fall to 55.0 versus 58.7 in May.

9:55 am EST

•  Final Univ. of Mich. Consumer Confidence for June is estimated to rise to 83.0 versus a prior estimate of 82.7.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Stein speaking, Fed's Lacker speaking, Fed's Pianalto speaking, Fed's Williams speaking and the Canadian GDP report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by consumer staple and industrial 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.

Stocks Higher into Final Hour on Less Eurozone/Asian Debt Angst, Lower Long-Term Rates, Window-Dressing, Homebuilding/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.72 -2.85%

• Euro/Yen Carry Return Index 133.78 +.92%

• Emerging Markets Currency Volatility(VXY) 11.07 -1.77%

• S&P 500 Implied Correlation 58.28 -1.49%

• ISE Sentiment Index 62.0 -24.29%

• Total Put/Call .99 +16.47%

• NYSE Arms 1.16 +23.78% 

Credit Investor Angst:

• North American Investment Grade CDS Index 85.87 -2.42%

• European Financial Sector CDS Index 163.30 -2.79%

• Western Europe Sovereign Debt CDS Index 95.0 -1.24%

• Emerging Market CDS Index 318.38 -4.93%

• 2-Year Swap Spread 15.0 +.5 bp

• TED Spread 22.75 +.75 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -10.50 +1.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .05% -1 bp

• Yield Curve 211.0 -4 bps

• China Import Iron Ore Spot $115.30/Metric Tonne +1.32%

• Citi US Economic Surprise Index -7.10 +.9 point

• Citi Emerging Markets Economic Surprise Index -36.30 +.8 point 

• 10-Year TIPS Spread 1.98 +3 bps

Overseas Futures:

• Nikkei Futures: Indicating +357 open in Japan

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/retail/medical sector longs

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

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• Junk Bonds Drop Below Par as Asia Suffers China: Credit Markets. For the first time since August, junk bonds are trading below par amid speculation that companies will have a harder time meeting debt payments as the Federal Reserve prepares to reduce its extraordinary stimulus measures and China reins in its shadow-banking system. Average prices on speculative-grade corporate notes dropped to 99.42 cents on the dollar on June 25, from a record 106.04 cents in May, according to Bank of America Merrill Lynch’s Global High Yield Index. The declines were led by Asia, which saw prices tumble to 97.2 cents, the lowest level in a year. 

• European Stocks Climb After U.S. Data; Alcatel Rallies. European stocks climbed for a third day, the longest winning streak for the Stoxx Europe 600 Index in five weeks, as a report showed that U.S. consumer spending rebounded last month. Alcatel-Lucent (ALU) SA rose 6.4 percent as Morgan Stanley recommended the stock. Drax Group Plc jumped 7.3 percent as the U.K. government updated the subsidies for the different forms of renewable-power generation. Subsea 7 SA (SUBC) tumbled the most in more than 4 1/2 years after the oil-field services provider said its earnings will fail to grow this year. The Stoxx 600 climbed 0.7 percent to 286.42 at the close after earlier declining as much as 0.3 percent.

• Fed’s Powell Sees Scaling Back Asset Purchases Later This Year. Federal Reserve Governor Jerome Powell said the central bank’s asset purchases may be scaled back later this year if growth holds up, and any such trimming depends on economic data rather than the calendar. The Fed may wait “before moderating purchases or even increase them” if the economy weakens, while the large-scale asset purchases “may be moderated somewhat more quickly” should the economy strengthen faster than officials anticipate, Powell said today in the text of remarks prepared for delivery in Washington. 

• Gold Tumbles to 34-Month Low. Gold futures for August delivery dropped 2.2 percent to $1,202.30 at 2:01 p.m. on the Comex in New York. The price touched $1,198.90, the lowest since August 2010. The metal headed for a record quarterly drop amid an equity rally and muted inflation.

• Natural Gas Drops to 16-Week Low on Above-Forecast Supply Gain. Natural gas futures fell to the lowest price in 16 weeks in New York after U.S. stockpiles increased more than forecast. Gas tumbled as much as 4.7 percent as the Energy Information Administration said inventories rose 95 billion cubic feet in the week ended June 21 to 2.533 trillion cubic feet. Analyst estimates and a survey of Bloomberg users both showed a 90-billion increase. Supply gains have topped five-year averages for four straight weeks as mild weather reduced demand. ”Today’s inventory report is a reflection of the fact that we have very sluggish demand picture right now,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “I don’t see a significant call on natural gas for power generation to meet cooling needs because cooling needs aren’t going to be all that high.” Natural gas for August delivery dropped 16.3 cents, or 4.3 percent, to $3.575 per million British thermal units at 12:17 p.m. on the New York Mercantile Exchange after sinking to $3.563, the lowest intraday price for a front-month contract since March 7. Trading was 36 percent above the 100-day average for the time of day.

• Crude Rises for Fourth Day as U.S. Jobless Claims Drop. WTI for August delivery rose $1.63, or 1.7 percent, to $97.13 a barrel at 1:21 p.m. on the New York Mercantile Exchange. The price reached $97.41, the highest since June 20. The volume of all futures traded was 5.2 percent higher than the 100-day average for the time of day. Futures were little changed the second quarter.

Fox News: 

• Watchdog knocks down Dem claim that liberal groups were targeted by IRS. The government watchdog that exposed IRS targeting of conservative groups gave a blunt response to Democrats' claims that the agency also targeted liberals: It never happened. "We found no indication in any of these other materials that 'Progressives' was a term used to refer cases for scrutiny for political campaign intervention," IRS Inspector General J. Russell George wrote in a letter to Democrats.  

CNBC: 

• Jeff Gundlach Now Sees Bargains in Credit Markets. Bond king Jeff Gundlach says the selling wave that roiled credit markets in May and June has come to an end.

• Pending Home Sales Soar 6.7 Percent to Reach 6-Year High.

• Home Builder Sales at Risk Due to Rising Mortgage Rates.

Zero Hedge: 

• Dudley Speaks: "Taper May Be Appropriate Later In 2013".

• Stocks Swing To Best Gain In 6 Months; Volume And Credit Slumping. (graphs)

• NSA Collected "Vast Amounts" of Americans' Emails Under Obama, Guardian Reveals.

• UK Disposable Income Plunges Most In 25 Years. (graph)

• Corzine Officially Charged By CFTC For Filing False Reports, Commingling Funds And Other VIolations.

Business Insider: 

• The Smart Money Is Dumping 'Everything That’s Not Nailed Down'. 

• The UK Is Sitting On Twice As Much Shale Gas Than Previously Thought.

CNNMoney: 

• Mortgage rates soar to 4.46% - biggest jump in 26 years. Rising interest rates have hit mortgages big time. Rates on 30-year, fixed-rate home loans spiked 0.53 percentage points to an average of 4.46% this week -- the largest weekly increase in more than 26 years, according to mortgage giant Freddie Mac. The 30-year loan, which stood at 3.35% as recently as early May, is at its highest level since July 2011. Rates for 15-year loans, popular with homeowners refinancing their mortgages, jumped 0.46 percentage points to 3.5%. An extra percentage point will cost homebuyers with 30-year, fixed-rate mortgages $56 more a month for every $100,000 they borrow.

PilotOnline.com:

• Smithfield(SFD) sale warrants close federal review. FOR VIRGINIANS, Smithfield Foods represents a taste of home. When news broke of a merger agreement between China's largest meat processing enterprise and Smithfield, many mourned the loss of a hometown company to a Chinese firm.

Reuters: 

• U.S. consumer spending, jobs data point to lukewarm growth. U.S. consumer spending rebounded in May and new applications for unemployment benefits fell last week, suggesting the economy remained on a moderate growth path. 

• Brazil central bank sees inflation up, GDP growth down. Brazil's central bank raised its inflation forecasts for 2013 and 2014, signaling that policymakers could accelerate the pace of interest-rate increases in coming months to bring down persistent price pressures. In its quarterly inflation report released on Thursday, the central bank raised its 2013 inflation forecast to 6.0 percent from 5.7 percent. That is above the bank's own informal goal for the year to bring inflation below the 5.84 percent posted in 2012. The new forecast for 2013 topped private estimates in a weekly central bank survey.

• Bank of Spain urges Spanish lenders to curb cash dividends.

Financial Times:

• Italy’s borrowing costs rise at debt sale.

• Iran, Russia and China prop up Assad economy. Iran, Russia and China are propping up Syria’s war-ravaged economy, with President Bashar al-Assad’s regime doing all its business in rials, roubles and renminbi as it seeks to beat western sanctions, according to the country’s senior economics minister.

• ETFs under scrutiny in market turbulence.

WBP Online:

• Spanish retail sales decline 4.6% in May. Retailers reported that sales dropped 4.6% in April, seasonally and calendar adjusted, after recording a upwardly revised 4.8% year-on-year decline in April. Analysts had expected a 6.7% contraction. Retail sales on a calendar adjusted basis in Spain have been on a downward slide since June 2010, while the extent of the 4.6% year-on-year drop this month is the lowest since August last year.

Xinhua:

• China Faces 'Huge' Pressure to Meet Fiscal Revenue Goal. China faces "huge" pressures to meet annual fiscal revenue goal after central government's fiscal revenue drops -.8% y/y in Jan.-April period, citing Finance Minister Lou Jiwei. The central government fiscal revenue will need to growth +11.3% monthly in the remainder of this year to meet the target, Lou said in a report to the National People's Congress today.