Stocks Slightly Higher into Afternoon on Quarter-End Window-Dressing, Short-Covering, Homebuilding/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 11.39 +1.24%

• Euro/Yen Carry Return Index 144.76 +.15%

• Emerging Markets Currency Volatility(VXY) 5.90 +.68%

• S&P 500 Implied Correlation 48.49 -2.69%

• ISE Sentiment Index 94.0 -33.33%

• Total Put/Call .87 +4.82%

• NYSE Arms .97 -35.15% 

Credit Investor Angst:

• North American Investment Grade CDS Index 58.44 +1.32%

• European Financial Sector CDS Index 67.99 +3.77%

• Western Europe Sovereign Debt CDS Index 29.0 +1.15%
• Asia Pacific Sovereign Debt CDS Index 73.76 +.56%

• Emerging Market CDS Index 237.80 +.85%

• China Blended Corporate Spread Index 307.88 -1.62%
• 2-Year Swap Spread 12.75 unch.

• TED Spread 21.0 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.0 -1.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 207.0 unch.

• China Import Iron Ore Spot $93.80/Metric Tonne -1.16%

• Citi US Economic Surprise Index -22.0 +1.7 points

• Citi Emerging Markets Economic Surprise Index -6.30 -.2 point

• 10-Year TIPS Spread 2.25 unch.

Overseas Futures:

• Nikkei Futures: Indicating +38 open in Japan

• DAX Futures: Indicating +15 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Monday Watch

Weekend Headlines 
Bloomberg:

• Merkel, Hollande Step up Pressure in Ukraine Dispute. German Chancellor Angela Merkel and French President Francois Hollande, in a telephone call lasting more than two hours, stepped up pressure on Russia and Ukraine to resolve their territorial dispute. Ukraine accused pro-Russian rebels of breaking a cease-fire that is due to end today, the same day Russian President Vladimir Putin faces the threat of deeper European Union sanctions. Merkel and Hollande, in yesterday’s call with Putin and Ukrainian President Petro Poroshenko, stressed the importance of “the extension of the cease-fire and the implementation of the peace plan presented by the Ukraine authorities,” according a statement from the French president’s office. 

• Slowing China Economy Dims Profit Outlook to 2012 Low. The most-actively traded Chinese companies in the U.S. are on pace to report the smallest profits in two years as growth in the world’s second-largest economy decelerates to the slowest since 1990. Analysts covering stocks listed on the Bloomberg China-US Equity Index (HSCEI) estimate that on average they will post earnings of $5.64 per share this year, which would be the lowest profits reported since 2012, data compiled by Bloomberg show. They’ve cut revenue forecasts by 7.9 percent in the past 11 weeks. 

• Kuroda Optimism Questioned as Price Outlook Drops. Bank of Japan Governor Haruhiko Kuroda says inflation will get back on track toward his target after a slowdown in the summer. Bond traders are skeptical. The market for inflation-linked debt shows expectations for annual consumer-price increases of 1.25 percent over 10 years, the lowest outlook since April 1 and compared with the BOJ’s goal of 2 percent, according to the so-called break-even rate. The gauge has retreated from as high as 1.39 percent on June 3 as data showed slumping household spending, falling wages and slowing exports. The equivalent U.S. rate was 2.25 percent.

• BIS Damps $2 Trillion Emerging Market Company Debt Spree. More than $2 trillion of foreign borrowing by emerging-market companies since 2008 is leaving them vulnerable to a sudden drop in funding at the first sign of trouble, according to the Bank for International Settlements. Bond investors willing to lend generously when conditions are good can pull out in a crisis or when central banks tighten monetary policy, analysts led by Claudio Borio, head of the monetary and economic department, wrote in the BIS annual report. Emerging-market companies that lose access to external debt markets may then be forced to withdraw bank deposits, depriving domestic lenders of funding as well, they said. 

• ECB Rates Allow Zombie Loans to Stymie Credit, BIS Says. Loose monetary policy makes it easy for euro-area banks to keep bad debt on their books, potentially delaying the flushing out of sour loans, the Bank for International Settlements said in its annual report. The European Central Bank’s record low interest rates and ample liquidity have boosted banks’ lending margins, allowing them to gloss over losses in their business, the Basel, Switzerland-based BIS said in the report, released today. That’s what makes it so crucial to find other means to fix banks’ balance sheets, such as the ECB’s asset-quality review, it said.

• Central Bankers Who Bemoan Low Volatility Share Blame, BIS Says. Central bank policy makers have expressed concern this year that low market volatility is masking future risks. In fact, they’re helping cause the issue they bemoan, the Bank for International Settlements said. Record-low interest rates and unconventional monetary easing by the Federal Reserve, European Central Bank and the Bank of Japan reduced price swings across markets, the BIS wrote in its annual report published today. That’s prompted investors to take greater risks to maintain returns, even amid an uncertain global recovery, according to the BIS, which that acts as a central bank for the world’s monetary authorities. 

• Home-Bias Risk Identified by BIS in Bond Regulations. National supervisors may be encouraging domestic banks to buy their own governments’ bonds because the regulators are able to specify how risky the assets are, the Bank for International Settlements said. Financial institutions in Ireland, Portugal and Spain may be benefiting from a home bias that lowers the amount of capital they need to put aside to compensate for risks tied to the assets they hold, the BIS said in its annual report today. The trend is less evident in Austria, Britain and France, it said.

• Central Banks Face Bumpy Road to Normalization, BIS Says. Central banks shouldn’t procrastinate and must be ready for a rough ride as they exit emergency policy measures, the Bank for International Settlements said. “It will be difficult to ensure a smooth normalization,” the BIS said in its annual report released today. “The prospects for a bumpy exit together with other factors suggest that the predominant risk is that central banks will find themselves behind the curve, exiting too late or too slowly.”

• Emerging Stocks Add to Quarter’s Gain With Won; Oil Falls. Emerging-market stocks rose, with a benchmark gauge heading to its biggest quarterly advance since September 2012, while the yen gained and South Korea’s won hit an almost six-year high. Oil fell on speculation violence in Iraq won’t curb output from OPEC’s second-biggest producer. The MSCI Emerging Markets Index added 0.4 percent by 12:13 p.m. in Tokyo, heading for a 5.6 percent gain since the end of March.

• Fear Thaws Out for Investors as Online Brokers Defy Funk. With U.S. stocks stuck in the sleepiest funk since the dawn of the Internet, one group is waking up: online and discount brokers.

Wall Street Journal: 

• Militants Leverage Iraq Gains in Syria. Flush with Iraqi Successes, ISIS Fights Other Islamists in Syria.

• In Ukraine, Frustration Grows With Kiev's Peace Efforts. Separatists Continue Attacks on Government Troops As European Leaders Urge Cease-Fire Extension.

• A Recovery Stymied by Redistribution. Public policy intended to make layoffs less painful actually made layoffs cheaper and more common. 

MarketWatch.com:

• Hong Kong’s China debt trap. Opinion: Are the city’s banks getting too cozy with mainland Chinese finance.

Fox News:

• Gunmen torch churches, kill dozens in Nigeria. Suspected Islamic extremists sprayed gunfire at worshippers and torched four churches Sunday in a village just miles from the town where more than 200 schoolgirls were kidnapped, witnesses said. At least 30 bodies have been recovered but more are turning up in the bushes, where people tried to escape from Kwada village, said a member of a vigilante group that has had some successes in repelling attacks.

Zero Hedge:

• 5 Things To Ponder: The More Things Change.

• What The CEOs Are Really Saying In Q2: "The Recovery Remains Fragile".

• How The Fed Distorts Everything.

• The Keynesian End Game Is Near: No Escape Velocity This Year, Either.

• China's Replica Of Manhattan Results In Yet Another Ghost City.

• Martin Armstrong Warns Civil Unrest Is Rising Everywhere: "This Won't End Pretty".

• Shinzo Abe And The Three Magic Arrows.

• "The Battle For Baghdad" - A Backgrounder On ISIS' Grand Plan.

• Crushing The Q2 "Recovery" Dream In 1 Simple Chart. (graph)

• 13 Ways Of Looking At Record Low Volatility. (graph)

• The Truth About First Quarter S&P 500 Earnings. (graph)

• Q2 Economic "Hope" Misses The Point. (graph)

• Iraqi Army Retreats From Saddam's Hometown As Assault On ISIS Falters.

• Europe's Fragile Recovery Is Stalling As Germany Sputters.

• Let's Take A Look At The Latest NYSE Margin Debt Data In Historical Context. (graph)

• ISIS Declares A Caliphate; Crucifies 9 Syrian Rebels For Being "Too Moderate". (pics)

• USDJPY Nears 2014 Lows As Goldman Warns Economic "Downside Risks Are High".

• Goldman(GS) Warns Political Risks Are Set To Surge. (pics)

• BofA(BAC) Fears The End Of 'The Japan Trade'.

• Axel Merk: The Fed's Next Move? "If You're Not Concerned, You're Not Paying Attention".

Business Insider:

• A Mexican Military Helicopter Entered The US And Fired On Two Border Patrol Agents.

• China's Crackdown On Corruption May Now Be Weighing On Growth.

• The Kurds May Want To Rethink Independence — Unless They Want To Anger Iran.

• Even The Editor Of Facebook's Mood Study Thought It Was Creepy.

• Privacy Advocates Are Freaking Out About A High-Tech Surveillance Program In A Major US City.

• It's 'Flee Or Be Killed' In Tikrit, Iraq Right Now.

• The 'Islamic Caliphate' Is Now A Reality.

• North Korea Has Detained Two US Citizens And Wants To Put Them On Trial For Crimes Against The State.

• The Sectarian Genie Is Out Of The Bottle From Syria to Iraq.

Wall Street All-Stars:

• Indicator Update: Fireworks Ahead?

NY Times:

• In Home Loans, Subprime Fades as a Dirty Word.

Reuters:

• U.S. government to unveil record fine for France's BNP -sources. The U.S. Justice Department is expected to announce on Monday a settlement with BNP Paribas involving a record fine of nearly $9 billion over alleged U.S. sanctions violations by France's biggest bank, sources familiar with the matter said.

Financial Times:

• Hedge fund correlation risk alarms investors. The industry’s correlation with equity markets rose sharply in the two years leading up to the financial crisis.

Telegraph:

• Standard of living costs for families rise five times more than earnings since before recession, figures show. A couple with two children would now need just under £40,600 between them to afford a decent lifestyle, study finds.

Weekend Recommendations

Barron's:

• Bullish commentary on (NXST), (ADBE), (NTAP), (BAC), (IP), (CHS), (VLO) and (SBGI).

• Bearish commentary on (RMD).

Night Trading

• Asian indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 104.0 +2.75 basis points.

• Asia Pacific Sovereign CDS Index 73.25 -.5 basis point.

• FTSE-100 futures +.10%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
9:00 am EST

• The ISM Milwaukee for June is estimated to fall to 60.0 versus 63.49 in May.

9:45 am EST

• The Chicago Purchasing Manager for June is estimated to fall to 63.0 versus 65.5 in May.

10:00 am EST

• Pending Home Sales for May are estimated to rise +1.2% versus a +.4% gain in April.

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for June is estimated to rise to 10.0 versus 8.0 in May.

Upcoming Splits

• (TMK) 3-for-2

Other Potential Market Movers

• The Fed's Williams speaking, China HSBC China Manufacturing PMI, Eurozone CPI and the Argentina coupon payment could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
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 mixed as Iraq turmoil/Ukraine-Russia tensions, global growth fears and emerging markets debt angst offset quarter-end window-dressing, lower energy prices and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

• S&P 500 1,960.96 -.10%*

 The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,960.96 -.10%

• DJIA 16,851.84 -.56%

• NASDAQ 4,397.93 +.68%

• Russell 2000 1,189.50 +.09%

• S&P 500 High Beta 33.22 +.42%

• Wilshire 5000 20,558.10 -.08%

• Russell 1000 Growth 910.50 +.28%

• Russell 1000 Value 992.94 -.45%

• S&P 500 Consumer Staples 459.49 -1.36%

• Morgan Stanley Cyclical 1,593.82 -.09%

• Morgan Stanley Technology 957.57 +.29%

• Transports 8,175.52 -.36%

• Utilities 571.71 +.93%

• Bloomberg European Bank/Financial Services 106.52 -3.6%

• MSCI Emerging Markets 43.18 -.50%

• HFRX Equity Hedge 1,174.77 -.02%
• HFRX Equity Market Neutral 961.52 -.15%

Sentiment/Internals

• NYSE Cumulative A/D Line 228,353 +.39%

• Bloomberg New Highs-Lows Index 159 -569

• Bloomberg Crude Oil % Bulls 39.39 -21.22%

• CFTC Oil Net Speculative Position 458,969 +.40%

• CFTC Oil Total Open Interest 1,720,856 -.05%

• Total Put/Call .83 +7.79%

• OEX Put/Call 3.50 +253.54%

• ISE Sentiment 141.0 +63.95%

• NYSE Arms 1.48 +40.95%

• Volatility(VIX) 11.26 +3.78%

• S&P 500 Implied Correlation 49.83 +2.98%

• G7 Currency Volatility (VXY) 5.38 -1.10%

• Emerging Markets Currency Volatility (EM-VXY) 5.86 -1.84%

• Smart Money Flow Index 11,436.68 unch.

• ICI Money Mkt Mutual Fund Assets $2.556 Trillion +.20%
• ICI US Equity Weekly Net New Cash Flow -$2.193 Billion

• AAII % Bulls 37.2 +5.8%
• AAII % Bears 21.1 -12.6%

Futures Spot Prices

• CRB Index 310.82 -.67%

• Crude Oil 105.74 -1.45%

• Reformulated Gasoline 309.88 -.98%

• Natural Gas 4.41 -3.18%

• Heating Oil 299.76 -1.80%

• Gold 1,320.0 +.39%

• Bloomberg Base Metals Index 197.01 +1.71%

• Copper 314.90 +1.04%

• US No. 1 Heavy Melt Scrap Steel 357.0 USD/Ton unch.

• China Iron Ore Spot 94.90 USD/Ton +3.04%

• Lumber 337.50 +2.58%

• UBS-Bloomberg Agriculture 1,472.18 -1.0%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 4.4% -10.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index .1242 -4.4%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.94 +.10%

• Citi US Economic Surprise Index -23.70 -13.5 points

• Citi Emerging Markets Economic Surprise Index -6.10 +2.2 points

• Fed Fund Futures imply 44.0% chance of no change, 56.0% chance of 25 basis point cut on 7/30

• US Dollar Index 80.04 -.36%

• Euro/Yen Carry Return Index 144.54 -.26%

• Yield Curve 207.0 -8.0 basis points

• 10-Year US Treasury Yield 2.53% -8.0 basis points

• Federal Reserve's Balance Sheet $4.326 Trillion unch.

• U.S. Sovereign Debt Credit Default Swap 16.97 -2.83%

• Illinois Municipal Debt Credit Default Swap 160.0 +3.23%

• Western Europe Sovereign Debt Credit Default Swap Index 28.67 -1.78%

• Asia Pacific Sovereign Debt Credit Default Swap Index 73.35 -1.60%
  

• Emerging Markets Sovereign Debt CDS Index 188.44 -3.32%
  

• Israel Sovereign Debt Credit Default Swap 77.23 +2.97%
• Iraq Sovereign Debt Credit Default Swap 329.65 +.90%

• Russia Sovereign Debt Credit Default Swap 173.99 -8.11%

• China Blended Corporate Spread Index 312.94 +.54%

• 10-Year TIPS Spread 2.26% -1.0 basis points

• TED Spread 21.50 +1.25 basis points

• 2-Year Swap Spread 12.75 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -9.75 -1.0 basis point

• N. America Investment Grade Credit Default Swap Index 57.68 +2.73%
  

• European Financial Sector Credit Default Swap Index 65.52 +10.41%
  

• Emerging Markets Credit Default Swap Index 235.79 +.03%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 83.0 -1.0 basis point

• M1 Money Supply $2.831 Trillion -.11%

• Commercial Paper Outstanding 1,054.80 +1.20%

• 4-Week Moving Average of Jobless Claims 314,250 +2,500

• Continuing Claims Unemployment Rate 2.0% +10 basis points

• Average 30-Year Mortgage Rate 4.14% -3 basis points

• Weekly Mortgage Applications 348.10 -1.0%

• Bloomberg Consumer Comfort 37.1 unch.

• Weekly Retail Sales +3.40% unch.

• Nationwide Gas $3.68/gallon +.03/gallon

• Baltic Dry Index 824.0 -8.85%

• China (Export) Containerized Freight Index 1,092.11 -.99%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 +20.0%

• Rail Freight Carloads 272,553 +.85%

Best Performing Style

• Large-Cap Growth +.3%

Worst Performing Style

• Large-Cap Value -.5%

Leading Sectors

• Oil Tankers +2.5%

• Homebuliders +2.2%

• Gaming +1.8%

• Education +1.3%

• Utilities +.9%

Lagging Sectors

• Construction -1.4% 

• Road & Rail -1.6%

• Hospitals -2.3%

• Coal -2.3%

• Tobacco -3.2%

Weekly High-Volume Stock Gainers (25)

• VRTX, AERI, SQBG, XONE, IRM, VCYT, TEG, TNC, KMX, SBGI, MEI, HBI, BKS, TWOU, PSG, APOG, GTN, CARA, IXYS, TAM, VHC, AMBA, SGNT, CONE and TREE

Weekly High-Volume Stock Losers (19)

• GIS, GMC, KND, TSCO, DRI, OC, SEAS, REGN, XXIA, EXL, BBBY, TPH, TRGP, VLO, HFC, SCS, DGI, SWHC and WWWW

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Slightly Higher into Final Hour on Quarter-End Window Dressing/Rebalancing, Buyout Speculation, Short-Covering, Oil Service/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 11.73 +.86%

• Euro/Yen Carry Return Index 144.43 -.07%

• Emerging Markets Currency Volatility(VXY) 5.87 -1.34%

• S&P 500 Implied Correlation 50.19 -.32%

• ISE Sentiment Index 133.0 +3.10%

• Total Put/Call .85 -7.61%

• NYSE Arms 1.39 +30.19% 

Credit Investor Angst:

• North American Investment Grade CDS Index 57.62 +1.46%

• European Financial Sector CDS Index 65.59 +3.87%

• Western Europe Sovereign Debt CDS Index 29.05 +2.43%

• Asia Pacific Sovereign Debt CDS Index 73.56 -.29%

• Emerging Market CDS Index 235.81 +2.04%

• China Blended Corporate Spread Index 312.94 +.98%

• 2-Year Swap Spread 12.75 +.25 basis point

• TED Spread 21.50 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -9.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .02% -1.0 basis point

• Yield Curve 207.0 +1.0 basis  point

• China Import Iron Ore Spot $94.90/Metric Tonne -.42%

• Citi US Economic Surprise Index -23.70 -.6 point

• Citi Emerging Markets Economic Surprise Index -6.10 -2.8 points

• 10-Year TIPS Spread 2.25 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +20 open in Japan

• DAX Futures: Indicating +10 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg: 

• Top Cleric Tells Iraq Leaders to Pick Premier by Next Week. Iraq’s top Shiite religious leader escalated pressure on politicians to agree on a new government that can prevent a fracturing of the country, as the military pressed its assault on militants who have seized major cities. Grand Ayatollah Ali al-Sistani, in remarks relayed to worshipers at Friday prayers in the holy city of Karbala, said that picking a prime minister, president and speaker when the legislature meets July 1 will lead to the “desired solution” to the crisis.

• EU Tells Russia to Stop Ukraine Rebels or Face New Costs. The European Union gave Russia three days to stop a separatist rebellion in Ukraine or face deeper sanctions as the government in Kiev prepared to extend a cease-fire originally due to expire tonight. EU leaders meeting in Brussels demanded that the separatists, whom Ukraine and its allies say are backed by Russian President Vladimir Putin’s government, return border checkpoints, release hostages and start talks to implement a peace plan drawn up by Ukrainian President Petro Poroshenko by June 30. Failure to do so will result in “further significant restrictive measures” against Russia, the leaders said in a statement. The U.S. reinforced the EU demands. White House press secretary Josh Earnest said the conditions “are very specific steps that the Russians can take by Monday” or face more economic costs.

• Ukraine to Extend Cease-Fire as President Signs EU Pact. Ukraine will extend a cease-fire in its fight against separatist rebels today after President Petro Poroshenko signed a European Union accord rejected by his predecessor that sent the country spiraling into crisis. The government in Kiev will prolong the week-long truce, which it says has been repeatedly flouted by pro-Russian separatists, by 72 hours from an original plan to end it at 10 p.m. tonight, two European government officials said. The officials asked not to be named because the discussions were private and hadn’t finished. The extension will let talks continue on the release of hostages held by separatists in Ukraine’s eastern border regions, one official said.

• China Builds Its Own Manhattan -- Except It's a Ghost Town. “Investing here won’t be better than throwing money into the water,” Zhang Zhihe, 60, said during a visit to the area last week from neighboring Hebei province to look at potential commercial-property investments. “There will be no way out -- it will be very difficult to find the next buyer.” The deserted area underscores the challenge facing China’s leaders in dealing with the fallout from a record credit-fueled investment spree while sustaining growth and jobs in the world’s second-biggest economy. A Tianjin local-government financing vehicle connected to the developments said revenue fell 68 percent in 2013 to an amount that’s less than one-third of debt due this year.

• High-Yield Bond Sales Set to Exceed $100 Billion in Europe. Sales of junk bonds in Europe are poised to surpass $100 billion for the first time as companies seek to take advantage of record low funding costs and investor demand for higher-yielding securities. Western European companies issued $99 billion of speculative-grade debt this year, up from $56 billion in the first half of 2013, according to data compiled by Bloomberg. Issuance has already surpassed last year’s record $96 billion, the data show. Investors are buying riskier securities after almost six years of suppressed benchmark interest rates eroded yields. Bond investors are shrugging off warnings from central bankers including Federal Reserve Chair Janet Yellen and Bundesbank board member Andreas Dombret that they’ve become too complacent and are making markets vulnerable to a swift reversal.

• EU Leaders Snub Cameron and Pick Juncker for Top EU Post. European Union leaders swept aside U.K. opposition and nominated Jean-Claude Juncker to the EU’s top job, further fraying ties with Britain before its planned referendum on membership of the bloc. Government heads proposed Juncker, a 59-year-old former Luxembourg prime minister, as European Commission president after he ran for the post as the candidate of Europe’s Christian Democratic parties in EU-wide elections. U.K. Prime Minister David Cameron was out-voted by his fellow leaders, the first time such a decision wasn’t taken unanimously.

• Euro-Area Economic Confidence Unexpectedly Fell in June. An index of executive and consumer sentiment fell to 102 from a revised 102.6 in May, the European Commission in Brussels said today. The median forecast in a Bloomberg News survey of 27 economists was for an increase to 103.

• German Inflation Above Forecasts Signals Euro Area Price Pickup. German inflation (GRCP2HYY) exceeded economists’ estimates this month, signaling that the annual rate of consumer-price gains in the euro area may rise from the lowest level in four years. Inflation, calculated using a harmonized European Union method, accelerated to 1 percent in June from 0.6 percent in May, the Federal Statistics Office in Wiesbaden said today. Economists predicted the rate would increase to 0.7 percent, according to the median of 23 estimates in a Bloomberg News survey. Prices rose 0.4 percent on the month, twice as much as forecast. 

• Bulgarian Lenders Under Attack, Central Bank Chief Warns. The Bulgarian central bank warned the financial industry is under organized attack by anonymous e-mails, texts and rumors, threatening the Balkan nation’s security, and urged police to find those responsible. Central bank Governor Ivan Iskrov said that First Investment Bank AD is the target of an “epidemic of rumors and libelous public statements.” He asked prosecutors, the Interior Ministry and the State Agency for National Security to investigate. The Sofix index fell as much as 2.55 percent, its fourth consecutive decline, while First Investment, the third-biggest lender by assets, tumbled 23 percent.

• Market Structure Nightmare Comes True in Barclays Dark Pools Action.

• European Stocks Are Little Changed as Mediaset Gains. European stocks were little changed, with the benchmark index posting its the biggest weekly loss since early April, as investors weighed data that showed U.S. consumer confidence rebounded in June. Mediaset (MS) SpA gained 4 percent after Exane BNP Paribas upgraded its recommendation on the stock. Ophir Energy Plc fell 5.4 percent after UBS AG downgraded the shares. Imagination Technologies Group Plc dropped 5.8 percent after Intel Corp. sold a 9.3 percent stake in the U.K. designer of chip technology for devices. The Stoxx Europe 600 Index added less than 0.1 percent to 341.97 at the close.

Fox News:

• Sources: US letting Benghazi suspects off hook, recent arrest ‘small potatoes’. According to multiple sources on the ground, including some with direct knowledge of the operations to identify and hunt the Benghazi suspects, intelligence that could have been acted upon at times has been ignored or put on hold. Further, they say, the recent capture of Ahmed Abu Khattala -- now on a ship bound for the U.S., expected to arrive this weekend -- was an easy one.

CNBC: 

• Hillary reportedly called Obama 'incompetent and feckless'. The book, "Blood Feud" by Edward Klein, claims Clinton's comments took place at a May 2013 dinner with college friends in Westchester, the New York Post reported. "When her friends asked Hillary to tell them what she thought — really thought — about the president she had served for four draining years, she lit into Obama with a passion that surprised them all," Klein wrote, according to the Post.

ZeroHedge:

• Pentagon Admits Armed Drones Flying Over Baghdad; Top Shiite Cleric Joins US Calling For Maliki Ouster.

• The Panic Behind The Propaganda: Why The Fed Wants You To Sell Your Bonds. (graph)

• What's Behind The Rise In U.S. Industrial Production? (graph)

• Why "Margin Debt" Is Meaningless In The New Shadow Banking Normal. (graph)

• Where The World's Biggest Worries Are.

• UMich Confidence Beats Modestly; Outlook Tumbles To 3-Month Lows. (graph)

• "Not Truly Well Off": Bill Clinton Was Paid $105 Million For 542 Speeches Since 2001.

Washington Post:

• Army Maj. Gen. Dana Pittard to lead U.S. operations in Iraq. The Pentagon has selected a two-star Army general who oversaw U.S. teams in Iraq in 2006 and 2007 to lead its new military mission there.

Reuters:

• Puerto Rico agency debt slumps on downgrades, restructuring law. Puerto Rico public corporation debt slumped on Friday after a new law that allows agencies to restructure their debts sparked fears of an imminent default and led to a slew of downgrades on the electricity, highway, and water authorities.

Telegraph: 

• House prices: stop meddling, Mark Carney, and bite the bullet on interest rates. Credit rationing is a bad idea – and we can only guess at the trouble it will create in the future.

The Economic Times:

• ISIL staged "mass executions" in Iraq's Tikrit: Rights group.
  
  Photograph and satellite imagery indicate that Islamic State in Iraq and the Levant (ISIL) insurgents have carried out mass executions in the northern Iraqi city of Tikrit, Human Rights Watch reported on Friday.
  
  ISIL, radical Islamists who want to re-create a mediaeval-style caliphate straddling Iraq and Syria, has stormed largely unopposed across much of northern Iraq, taking cities including Mosul and Tikrit, seizing border posts with Syria and advancing to within some 100 km (62 mil ..
  
  
  

  Read more at:
  http://economictimes.indiatimes.com/articleshow/37312892.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Bear Radar

Style Underperformer:

• Large-Cap Value -.34%

Sector Underperformers:

• 1) Oil Tankers -1.12% 2) Steel -1.04% 3) Gaming -.77%

Stocks Falling on Unusual Volume:

• ROCK, DG, GLRI, DD, IRM, CBSO, TSCO, FCN, FDO, TEDU, FLS, EAT, REGN, LRN, PBF, TWTR, PM, TOUR, AERI, SODA, VMW, TAHO, VRSN, WMGI and SKM

Stocks With Unusual Put Option Activity:

• 1) HCA 2) TWX 3) LOW 4) DD 5) TGT
  

Stocks With Most Negative News Mentions:

• 1) DD 2) HPQ 3) NSC 4) PM 5)  VRSN
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +.29%

Sector Outperformers:

• 1) Hospitals +.79% 2) Oil Service +.69% 3) Networking +.59%
  

Stocks Rising on Unusual Volume:

• AMED, MTW, KNDI, OLED, GMCR and PRGS

Stocks With Unusual Call Option Activity:

• 1) BDSI 2) ACAS 3) EXPE 4) AGNC 5) ABBV

Stocks With Most Positive News Mentions:

• 1) GPRO 2) KBH 3) NKE 4) AAPL 5) DDD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:

• Kerry Finds U.S. Vision a Hard Sell Amid Mideast Turmoil. Secretary of State John Kerry’s Mideast trip this week has been a lesson in the limits of U.S. power and the difficulty of telling friend from foe in a land where alliances can shift as readily as desert sands. Shortly after Kerry tried to promote cooperation among Iraq’s Sunni and Shiite politicians in Baghdad, Prime Minister Nouri al-Maliki, who’s long enjoyed American support, rejected calls to step aside and clear a path toward a more inclusive government. A day before he met Kerry, the president of Iraq’s semi-autonomous Kurdistan region, Massoud Barzani, told CNN that the time may have come for the region to break with Baghdad and pursue independence. In their talks, Barzani was noncommittal in response to Kerry’s urging that he desist, according to a U.S. official who spoke anonymously because the discussions were private. The U.S. has “very little leverage” with key figures in Iraq, including Maliki, said Faysal Itani, a resident fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East in Washington. “It is not just a question of credibility, it’s a question of commitment.” The lack of leverage was evident elsewhere, as well. Less than 24 hours after Kerry appealed to Egyptian President Abdel-Fattah El-Sisi to relax his crackdown on civil liberties, an Egyptian court sentenced three Al Jazeera English journalists to at least seven years in prison for endangering national security by reporting on the Muslim Brotherhood. Then El-Sisi rebuffed U.S. calls to pardon the journalists. 

• Shanghai Developer Said to Suspend Project on Funding Shortage. A closely held Shanghai developer is said to have suspended construction at a property project due to a lack of funds, two government officials familiar with the matter said. Construction at Shanghai Yuehe Real Estate Co.’s mixed-use project, including residential, office and retail space, in the city was halted this month and the project was frozen by a court, according to the people, who asked not to be identified because they aren’t authorized to speak publicly about the matter. Shanghai Pudong Development Bank Co. (600000), a medium-sized Chinese bank, loaned about 240 million yuan ($39 million) to the 220,000 square meter (2.4 million square foot) development in suburban Jiading district, they said.

• Italian Debt Swells to Rival Germany as Bonds Rally: Euro Credit. As Italy’s borrowing costs fall to new lows, its debt is rising to the most ever. The country owed 5 percent more in April compared with a year earlier, with debt reaching 2.15 trillion euros ($2.9 trillion), Bank of Italy figures show. That matches the outstanding borrowing of Germany, the largest economy in Europe and the most of any country on the continent, at the end of last year, according statistics office Eurostat.

• Asian Stocks Swing as Fed Official Says Rates May Rise. Asian stocks swung between gains and losses, with the regional benchmark index trading near a six-year high, as a Federal Reserve official said the U.S. may raise interest rates by March. Oracle Corp. Japan declined 4.2 percent, leading losses among information technology shares. Ono Pharmaceutical Co. jumped 5.7 percent in Tokyo, leading health-care shares higher, on a report its melanoma drug will be approved. Samsung Electronics Co., South Korea’s largest exporter of consumer electronics, was the biggest drag on the regional index, falling 1.1 percent. The MSCI Asia Pacific Index (MXAP) was little changed at 145.49 as of 9:53 a.m. in Tokyo after dropping as much as 0.2 percent.

• Obama’s Economic Rebound Doesn’t Boost Democratic Allies. Sluggish improvement in living standards among Democrats’ core voters threatens to hurt the party’s candidates in this year’s congressional elections. Median household income among all Americans is still lower than before the recession, which ended five years ago, according to economic consultant Sentier Research. Key Democratic constituents -- blacks, Hispanics, single women and young people -- have been especially hard-hit, and analysts say that could make them less energized about going to the polls. The economic reality is “dampening enthusiasm among some of the voter groups Democrats need most,” said Charlie Cook, publisher of the nonpartisan Cook Political Report.

• Nike Profit Tops Estimates as North American Sales Gain. Nike Inc. (NKE), the world’s largest sporting-goods maker, posted fourth-quarter profit that topped analysts’ estimates as running and basketball gear drove sales in North America. Net income in the quarter ended May 31 rose 5.4 percent to $698 million, or 78 cents a share, from $662 million, or 73 cents, a year ago, the Beaverton, Oregon-based company said today in a statement. The average of 26 analysts’ estimates compiled by Bloomberg was 75 cents. Nike is benefiting from consumers increasingly buying athletic apparel and gear for everyday wear, not just when working out or playing sports.

Wall Street Journal: 

• Iraq's Christian Minority Feels Militant Threat. Shrinking Baghdad Flock Prays Behind Blast Wall; Town of Holy Sites Flees Mortars. Surrounded by a blast wall topped with razor-sharp concertina wire, Our Lady of Salvation Church in downtown Baghdad resembles a fortress more than a sanctuary. Despite the fortifications, however, those who worship there are feeling more vulnerable than ever. An appeal for help in guarding the Syriac Catholic Church this month brought no volunteers. A ragtag trio of armed men protects the churchyard. At Mass, guards patted down worshipers and checked their belongings for concealed weapons and explosives. Only a...

• Credit-Card Lenders Pursue Riskier Borrowers. Cards Issued to Subprime Borrowers Rose 39% in First Quarter. Credit-card lenders are courting riskier borrowers more aggressively than they have since the financial crisis in a bid to jolt revenue in a period of sluggish growth and tight regulation. Banks and other lenders issued 3.7 million credit cards to so-called subprime borrowers during the first quarter, a 39% jump from a year earlier and the most... 

• Major Brokers Cut Ties to Barclays Dark Pool. Decision Follows Accusation of Fraud by New York Attorney General.

Fox News:

• Iran reportedly sent military advisers, head of Quds Force to Iraq. Iran reportedly has sent military advisers into Iraq and dispatched the head of its infamous Quds Force to help Baghdad strategize in its fight against Sunni militants, as the United States takes similar steps despite concern about Tehran's involvement.

• 'Suspicious': Experts, GOP lawmakers question Lerner's lost email explanation. Computer experts and Republican lawmakers are poking holes in IRS claims that the agency did all it could to retrieve embattled ex-official Lois Lerner's allegedly "lost" emails, which the agency blames on a 2011 hard-drive crash.

CNBC: 

• Amazon(AMZN) to launch new local takeout service: Report. Amazon is rolling out a new takeout food service to rival industry leaders GrubHub, Seamless and DeliveryHero, TechCrunch reported Thursday.

• GM(GM) recalls 29,019 Chevy Cruze vehicles: DJ. General Motors on Thursday afternoon recalled 29,019 2013-14 Chevrolet Cruze vehicles because of an airbag issue, Dow Jones reported. The move comes one day after the company asked North American dealers to stop selling the cars.

Zero Hedge: 

• Obama Asks For $500 Million To Equip Syrian Rebels As The ISIS Juggernaut In Iraq Spreads. 

• Abe's Worst Nightmare: Household Spending Collapses As Inflation Spikes. (graph)

• Why Financial Reporters Are Clueless: They Copy And Paste Keynesian/Wall Street Propaganda.

• The Great American Economic Growth Myth. (graph)

• This Has Never Happened Without The US Falling Into Recession. (graph)

• Hillary's Book Sales Crash After 1st Week; Reviews Disastrous.

• NIRP Strikes: Spain To Create Tax On Bank Deposits.

ValueWalk:

• Confidence In US Banks Remains Near Historic Low. (graph)

Business Insider:

• Hedge Funder Says Massive Heist May Have Been Macau's 'Lehman' Moment. 

• Some Of The Bravest People I've Ever Known Are Being Abandoned In Iraq And Afghanistan.

• 5 Reasons Why Excessively Low Rates May Be Harmful To The Economy.

Pensions & Investments:

• Under the hood of hedge fund leverage. One of the key differentiators between hedge funds and other investment vehicles is the use of leverage. Leverage can be your best friend one day, and your worst enemy the next.

Reuters:

• DuPont(DD) cuts profit forecast on slow sales in farm business. Chemicals maker DuPont (DD.N) cut its operating profit forecast for the second quarter and the full year, saying sales in its agriculture and performance chemicals units increased at a slower pace than it had expected. The company's shares fell about 4 percent in extended trading.

• U.S.-based stock funds attract $1.5 bln over week ended - Lipper.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Telegraph: 

• The "Junckernaut" is driving Britain to inevitable separation. Britain’s marital breakdown with much of the rest of the European Union is fast moving beyond the point of no return, with all other member states bar Hungary expected publicly to snub David Cameron at the Ypes summit by appointing Jean-Claude Juncker as president of the European Commission.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 101.25 -.75 basis point.

• Asia Pacific Sovereign CDS Index 73.75 +.5 basis point.

• FTSE-100 futures +.19%.

• S&P 500 futures -.15%.

• NASDAQ 100 futures  -.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AZZ)/.54

• (CMC)/.29

• (FINL)/.21

• (KBH)/.20

Economic Releases
9:55 am EST

• Final Univ. of Mich. Consumer Confidence for June is estimated to rise to 82.0 versus a prior estimate of 81.2.

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK gdp report could impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial 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.