Tuesday Watch

Evening Headlines
Bloomberg: 

• Saudi's Other Warning Makes Oil Traders Sweat After Doha Failure. After his comments thwarted supply negotiations in Doha, oil traders are weighing another implied warning from the Saudi deputy crown prince: the threat of an intensifying clash with Iran over market share. It was Mohammed Bin Salman’s repeated assertions that the kingdom wouldn’t join an output freeze without Iran that derailed talks between 16 producing countries on April 17. In interviews with Bloomberg News, the prince cautioned that if other producers increased output, Saudi Arabia could respond in kind. Iran is restoring exports after international sanctions over its nuclear program were lifted in January. “It was an indication to Iranians that, look guys, if you’re not joining the table we have enough power to crank up production,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg Television interview Monday. “You can question how much more they can crank it up by, but the chances are that, now there’s no freeze, the Saudis will go ahead and increase their production as they were planning.”
• The Problem in China's Bond Market. (video)
• China's Once Booming Smartphone Sales Barely Grew in 2015: Chart.
• China's Crowded Smartphone Market Heads for an Epic Shakeout. As the economy slows and saturation takes hold, half of 300-plus domestic brands may disappear. The startup Dakele looked pretty smart when it released a phone in China four years ago. The market was doubling annually, and the company put brand-name components inside a device that cost a fraction of the iPhone. That $160 gadget went on sale just four months after Dakele opened its doors, and soon the company, which translates as "Big Cola," made inroads against Huawei Technologies Co. and Xiaomi Corp. Buzz was building for the Dakele 3 model last year, with online reviews calling it the best Apple Inc. clone. Then the sizzle started to fizzle. 
• RBA Says ‘Very Accommodative’ Policy Appropriate, Aussie Hinders. Australia’s central bank said “very accommodative” policy is appropriate given low inflation and reaffirmed the currency’s strength could complicate the economy’s rebalancing away from mining. The Reserve Bank of Australia, in minutes of its April 5 meeting where interest rates were left unchanged at a record-low 2 percent, noted the economy’s 3 percent expansion in 2015 was better than forecast and “broadly consistent” with last year’s improved jobs market. It said recent data suggested the economy “had continued to grow at a moderate pace” in early 2016.
• Asian Stocks Advance as Oil Rebounds to $40; Won, Kiwi Climb. Asian equities rose, following U.S. stocks higher, as crude oil climbed for the first time in five days. South Korea’s won strengthened before a central bank policy meeting and New Zealand’s dollar advanced to a 10-month high. The MSCI Asia Pacific Index climbed to a four-month high as Japan’s Topix jumped more than 3 percent.
• Fed's Rosengren Says Market Is Too Pessimistic on Rate Path. The market’s outlook for interest rates is too dovish for one of the Federal Reserve’s more dovish policy makers. Federal Reserve Bank of Boston President Eric Rosengren said he and many private-sector economists envision a “much healthier U.S. economy” than the forecast implied by financial markets, where investors expect the Fed to raise rates by about one-quarter percentage point a year over the next three years. “The very shallow path of rate increases implied by financial futures-market pricing would likely result in an overheating that necessitates the Fed eventually raising interest rates more quickly than is desirable, which could endanger the ongoing recovery and continued growth,” Rosengren said, according to the text of a speech he is scheduled to deliver Monday in New Britain, Connecticut.
• Netflix Plunges on Forecast for Weakening Subscriber Growth. (video) Netflix Inc., the world’s largest paid online TV network, plunged after rattling investors with forecasts for weakening subscriber growth in the second quarter, especially in newer markets outside the U.S. Netflix expects to add 2 million new international customers, according to a statement Monday on its website. That’s fewer than the 3.45 million average of five analysts’ estimates compiled by Bloomberg. Domestic customers may increase by 500,000 in the second quarter, Netflix said, compared with the 505,000 average of estimates. Netflix plunged as low as $92.38 before recovering to $100 in extended trading after the forecast was released.
• IBM(IBM) Earnings Show It's Still Struggling With New Product Growth. (video) IBM forecast second-quarter profit that fell short of analysts’ projections, signaling its multiyear effort to become a purveyor of cloud products and technology using artificial intelligence won’t soon stop its four-year sales slump. About 38 percent to 39 percent of the company’s full-year earnings forecast of at least $13.50 per share will come in the first half, Chief Financial Officer Martin Schroeter said Monday. That projects to about $2.78 to $2.92 a share, compared with the $3.45 average of analysts’ estimates compiled by Bloomberg.IBM shares fell as much as 5.4 percent to $144.30 in extended trading.

Wall Street Journal:

• Theranos Is Subject of Criminal Probe by U.S. Federal prosecutors are investigating whether the blood-testing company misled investors about the state of its technology and operations. Federal prosecutors have launched a criminal investigation into whether Theranos Inc. misled investors about the state of its technology and operations, according to people familiar with the matter.
• Illumina(ILMN) Lowers Revenue Guidance on Disappointing Europe Results. Gene-sequencing machine maker has made management changes in region. Illumina Inc. lowered its revenue guidance for the first quarter and full year due to disappointing Europe results that have led to management changes in the region. The maker of gene-sequencing machines projects 12% revenue growth for the year, compared with earlier guidance of 16% growth. Illumina said first-quarter revenue was about $572 million. Analysts polled by Thomson Reuters had projected $596 million. Shares fell 18% to $145.25 in after-hours trading. 
• Trump’s Bully Pulpit. His threats to blow up the July convention are a sign of weakness. Donald Trump says he wants to unite the Republican Party, but he keeps acting as if he’s mounting a hostile takeover. He’s now threatening to blow up the party’s July convention because he and his campaign were too lazy or inept to understand the 50 state nomination rules

Fox News: 

• Study confirms medical costs rising for post-ObamaCare patients – along with premiums. (video) For Americans wondering why their health care premiums and deductibles are rising so dramatically, a new study by the Blue Cross Blue Shield Association provides some answers. The study, released on March 30, found that people who enrolled in BCBS after the Affordable Care Act became law had higher rates of disease than those who'd been enrolled before ObamaCare took effect, suggesting insurers indeed are taking on higher-risk and higher-cost patients. Their costs are rising, along with premiums in general.
• AGs, activists accused of 'collusion' on Exxon probe amid new emails. State Democratic officials are facing mounting accusations they secretly coordinated with climate activists to investigate whether ExxonMobil hid the truth about global warming, as new documents show the collaboration went deeper than previously thought. Emails obtained and released by the Energy & Environment Legal Institute show a number of state attorneys general and their staff received advice and guidance from environmental activists at a March 29 meeting in New York, on the same day as a major press conference.

Zero Hedge:

• The Whole System Is Built Upon Lies And "We're In The Terminal Phase".
• Days After Wells Fargo Admits Defrauding The Government, NY Fed Rewards It With Primary Dealer Status.
• Caught On Tape: Chinese Bulldozers Battle As Economic Frustration Boils Over. (video)
• Dozens Of Large Earthquakes Strike As Speculation Mounts That Japan's Southern Island May Split.
• Capitulation? US Equity Bears Dump Shorts Fastest Since 2012. (graph)
• Americans Spend More On Taxes Than On Housing, Food And Clothing. (graph)
• Netflix Crashes After Forecasting Slower Subscriber Growth, Despite Burning $1BN In Last 12 Months. (graph)
• Dow Tops 18,000 As Doha Dud Didn't Matter. (graph)

Business Insider:

• Wary consumers could cause the next recession.
• Brazil is set for years of political turmoil.
• Nordstrom(JWN) is cutting hundreds of jobs, confirming a terrifying new trend among wealthy shoppers.
• The US is 'digging a great big hole'. (graph)

China Business News:

• IMF's Zhu Says China Shouldn't Swap Bad Debt for Equity. China shouldn't swap bad debt for equity to avoid passing on risks to the financial system, citing IMF deputy managing director Zhu Min as saying in an interview. China should use market-oriented ways including debt and bankruptcy restructuring for deleveraging, Zhu said. Govt's stimulus shouldn't be too large as China's real economic growth rate is close to its potential rate, Zhu said.

Night Trading 

• Asian equity indices are -.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 138.75 -1.5 basis points. 
• Asia Pacific Sovereign CDS Index 57.75 +1.25 basis points. 
• Bloomberg Emerging Markets Currency Index 72.73 +.05%. 
• S&P 500 futures +.04%. 
• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (EAT)/.99
• (CMA)/.45
• (GPC)/103
• (GS)/2.50
• (HOG)/1.30
• (JNJ)/1.66
• (KSU)/.97
• (PM)/1.11
• (AMTD)/.38
• (UNH/1.72
• (DFS)/1.29
• (INTC)/.48
• (IBKR)/.43
• (ISRG)/4.33
• (LLTC)/.50
• (MANH)/.39
• (VMW)/.84
• (YHOO)/.07 

Economic Releases  
8:30 am EST

• Housing Starts for March are estimated to fall to 1166K versus 1178K in February.
• Building Permits for March are estimated to rise to 1200K versus 1167K in February.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The German ZEW Index and US weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted 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.