Thursday Watch

Evening Headlines

Bloomberg:

• AI Will Add $15.7 Trillion to the Global Economy. Artificial intelligence may not be so threatening after all. Amid warnings of the economic disruption that robots and automation could unleash on the world economy as traditional roles disappear, researchers are finding that new technologies will help fuel global growth as productivity and consumption soar. AI will contribute as much as $15.7 trillion to the world economy by 2030, according to a PwC report Wednesday. That’s more than the current combined output of China and India.

• Japan Retail Growth Slows as Wages Continue to Disappoint. Japan’s retail sales growth slowed in May compared to last year, signaling that consumers are still reluctant to open their wallets. 

• Equity Rally Extends to Asia as Higher Rates Seen. Stocks in Asia look set to join a rally in U.S. equities as investors bet the global economy can withstand tighter financial conditions as growth picks up. American financial shares climbed on capital return plans. Equity-index futures in Japan, Australia and Hong Kong all advanced after the S&P 500 Index rebounded from the biggest selloff in six weeks, with technology shares snapping back. Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. all climbed in after-hours trading after lifting dividends and buying back shares. The pound held onto its gain triggered by Bank of England chief Mark Carney’s comments that rates may need to rise soon. The loonie had also climbed as Canada’s Stephen Poloz reiterated he’s considering tighter policy. Futures on Japan’s Nikkei 225 Stock Average gained 0.3 percent in Chicago trading. Contracts on Australia’s S&P/ASX 200 Index rose 0.7 percent and futures on Hong Kong’s Hang Seng Index climbed 0.6 percent.

• Banks Unleash Surprisingly Big Payouts After Fed’s Stress Tests. (video) The Federal Reserve told big banks they have more than enough capital, and they promptly announced a windfall for their shareholders. JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. led U.S. firms in unveiling plans to boost dividends and stock buybacks more than analysts had projected, after every lender passed annual stress tests for the first time since the Fed began the reviews in the wake of the 2008 financial crisis. Shares across the industry rallied in late trading. Still, Capital One Financial Corp. slipped more than 2 percent after it was the lone bank to stumble through the exam Wednesday, garnering conditional approval to make payouts while it fixes “material weaknesses” in planning.

Wall Street Journal:

• Anthem Pulling Back on Offering ACA Plans in Nevada. The state’s health insurance exchange says insurers will be offering plans in only three Nevada counties.

Fox News:

• High-tax Connecticut facing new budget mess.

MarketWatch:

• There may be fecal bacteria in your Starbucks(SBUX) iced coffee, investigation finds.

CNBC:

• Citi(C) doubles dividend, bank shares jump after industry passes Fed stress tests. (video)

• Google(GOOGL) has just built a prototype for virtual-reality ads on mobile devices.

• Big bank cash returns just beginning, experts say. (video)

• Why Janet Yellen is very wrong about the banks.

• Alibaba(BABA) to invest $1 billion into Lazada as Southeast Asia awaits Amazon.

Zero Hedge:

• FBI Director McCabe Subject Of Three Separate Federal Inquiries Into Alleged Misconduct: Report.

• Lacy Hunt: The Fed Has Undermined The Economy's Ability To Grow.

• Blue Apron Prices IPO At Bottom Of Deeply Discounted Range.

• Banks Rush To Announce Dividend, Buyback Plans After All Pass Fed's Stress Test, COF Needs To Resubmit Plan.

• Moody's Warns That Private-Label Credit Card Issuers Will Be Crushed By Retail Implosion.

• The Power Grid Is Far More Vulnerable To Cyber Attacks Than Most People Realize.

• "How Did It Go So Wrong" Goldman Asks, As It Slashes Oil Price Target.

• Investors Just Panic-Dumped "Growth" Stocks As ETF Outflows Hit Record High.

• Dollar Dumped, Tech Stocks Pumped As Central Banker Bias Turns Tighter. (graph)

Business Insider: 

• Canada hit 2 critical warning signs for a financial crisis.

• This robot-made pizza in Silicon Valley should terrify Domino's(DPZ) and Pizza Hut.

Night Trading 

• Asian equity indices are +.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 85.50 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 19.5 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.16 +.15%.

• S&P 500 futures +.21%.

• NASDAQ 100 futures +.17%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AYI)/2.03

• (CAG)/.37

• (STZ)/1.98

• (HAIN)/.40

• (MKC)/.76

• (RAD)/-.01

• (WBA)/1.30

• (MU)/1.51

• (NKE)/.50

Economic Releases 
8:30 am EST

• 1Q GDP is estimated to rise +1.2% versus a prior estimate of a +1.2% gain. 

• 1Q Personal Consumption is estimated to rise +.6% versus a prior estimate of a +.6% gain.

• 1Q GDP Price Index is estimated to rise +2.2% versus a prior estimate of a +2.2% gain.

• 1Q Core PCE is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.

• Initial Jobless Claims for last week are estimated to fall to 240K versus 241K the prior week.

• Continuing Claims are estimated to fall to 1934K versus 1944K prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Japan Industrial Production report, German CPI report, weekly EIA Natural Gas Inventory repo and the weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.