Wednesday Watch

Evening Headlines 

Bloomberg: 

• Greek Stalemate Leaves Tsipras Facing Final Offer From Creditors. Greek Prime Minister Alexis Tsipras heads to Brussels for talks after finding himself boxed into a corner as creditors prepare to deliver a final proposal to end the stalemate over a financial lifeline. After European leaders and the head of the International Monetary Fund held talks in Berlin on Monday night, creditors agreed on a document designed to avert a default that will be presented to Greece. Tsipras, who said the only plan on the table was one his government submitted, will meet European Commission President Jean-Claude Juncker on Wednesday.
• Hong Kong PMI Gauge Slumps to Lowest Since 2011 on China Drag. A gauge of Hong Kong’s economic health worsened to the weakest level since September 2011 last month as the drag from a slowdown in mainland China intensified. The Hong Kong Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics fell to 47.6 in May, from 48.6 a month earlier. Weaker client demand in mainland China was a key factor driving new business lower, with new order intakes from the mainland falling at the sharpest rate since December 2008, according to the report. Numbers below 50 signal contraction. Hong Kong’s high-end stores have been weighed by slower economic growth in China and a campaign against corruption. Retail sales in the city fell 2.2 percent from a year earlier in April, data Tuesday showed. 
• Who Cares About China’s Economy When Stocks Are Rising This Much. (graph)
• China Stocks Drop for First Time in Three Days in Volatile Trade. Chinese stocks fell for the first time this week amid rising volatility. Utilities and consumer companies led losses as all 10 industry groups in the CSI 300 Index dropped. Huadian Power International Corp. and dairy producer Inner Mongolia Yili Industrial Group Co. lost more than 3 percent. China Construction Bank Corp. dropped 1.4 percent and Shanghai Pudong Development Bank Co. declined 1 percent after the government said it will allow them to issue certificates of deposits, raising concern the cost of attracting deposits will increase. The Shanghai Composite Index dropped 1 percent to 4,860.58 at the 11:30 a.m. break after changing directions about nine times.
• Most Asia Stocks Fall Amid Greece Standoff as Japan Drops on Yen. Most Asian stocks fell as Japanese shares slid on a stronger yen and investors awaited the outcome of talks between Greece and its creditors. About three shares dropped for every two that advanced on the MSCI Asia Pacific Index, which slipped less than 0.1 percent to 150.41 as of 9:02 a.m. in Tokyo. Japan’s Topix index sank 0.3 percent after the yen gained 0.5 percent against the dollar on Tuesday.
• Goldman Sachs(GS) to Companies: Stop Buying Back Your Stock.

Wall Street Journal:

• The Least Transparent Administration. How Team Obama stymies freedom of information requests.

Fox News:

• HRC EMAILS: Federal officials voiced growing alarm over Clinton’s compliance with records laws, documents show. (video) Over a five-year span, senior officials at the National Archives and Records Administrations (NARA) voiced growing alarm about Hillary Clinton’s record-keeping practices as secretary of state, according to internal documents obtained by Fox News.
• ISIS' frightening arsenal: Remote-controlled sniper rifles, steel plated suicide trucks. (video) Captured ISIS weapons show the black-clad militants are developing an arsenal of sophisticated arms, and Kurdish fighters told FoxNews.com they fear the terrorist force's expanding manufacturing capability is making it more formidable by the day.

Zero Hedge:

• Fed Mouthpiece Jon Hilsenrath Furious "Stingy" US Consumers Refuse To Buy The "Recovery" Propaganda.
• Sounding The Alarm On The Country's Vulnerability To An EMP.
• The Defaults Continue In China As Duck Producer Sinks. (graph)
• Greece Faces Moment Of Truth: Troika To Present Final Offer On Wednesday.
• Caught On Tape: Hillary Puts "Everyday American" In Her Proper Place. (video)
• This Is What Market Mania Looks Like. (graph)
• From Whence Cometh Our Wealth - The People's Labor Or The Fed’s Printing Press?
• Auto Sales Reach 10 Year Highs On Record Credit, Record Loan Terms, & Record Ignorance. (graph)
• Blood On The Street In The Big Boys' Markets: Bonds & Dollar "Blatter"-ed.
• Crude Slides After API Shows Another Inventory Build. (graph)
• Chinese Stocks Stumble As Hanergy Debt Debacle Looms Over All The 500%-Club. (graph)

Business Insider:

• Stocks crashed the last two times this happened.
• Denial has become the most crowded trade on Wall Street.
• WikiLeaks offers $100,000 bounty for the secret chapters of Obama's landmark Pacific trade deal.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 106.5 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 59.5 -.25 basis point.

• S&P 500 futures +.04%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (BF/B)/.66
• (NX)/.00
• (VRA)/.02
• (DRC)/.12

Economic Releases

8:15 am EST

• The ADP Employment Change for May is estimated at 200K versus 169K in April.
  

8:30 am EST

• The Trade Deficit for April is estimated at -$44.0B versus -$51.4B in March.

9:45 am EST

• The Final Markit US Services PMI for May is estimated at 56.4 versus a prior reading of 56.4.

10:00 am EST

• The ISM Non-Manufacturing Composite for May is estimated to fall to 57.0 versus 57.8 in April.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,077,780 barrels versus a -2,802,000 barrel decline the prior week. Gasoline supplies are estimated to rise by 11,110 barrels versus a -3,309,000 barrel decline the prior week. Distillate inventories are estimated to rise by 1,277,780 barrels versus a +1,115,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.69% versus a +1.2% gain the prior week.

2:00 pm EST

• US Fed Beige Book release.

Upcoming Splits

• None of note

Other Potential Market Movers

• The ECB's Draghi speaking, Fed's Evans speaking, ECB rate decision, Eurozone retail sales reports, Eurozone Services PMI report, weekly MBA mortgage applications report, Deutsche Bank Industrials/Basic Materials conference, Sandler O'Neill Brokerage conference and the (FAST) May sales release could also impact trading today.

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