Stocks Higher into Final Hour on Short-Covering, Commodity Bounce, Buyout Speculation, Earnings Optimism

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.20 -6.47%
  
• ISE Sentiment Index 120.0 +57.89%
  
• Total Put/Call .79 -18.56%
  
• NYSE Arms 1.06 +21.70%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.0 +1.16%
  
• European Financial Sector CDS Index 93.67 +6.90%
  
• Western Europe Sovereign Debt CDS Index 191.56 +1.04%
  
• Emerging Market CDS Index 206.27 -.51%
  
• 2-Year Swap Spread 18.0 -1 bp
  
• TED Spread 26.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 260.0 unch.
  
• China Import Iron Ore Spot $179.70/Metric Tonne -.55%
  
• Citi US Economic Surprise Index -32.10 -.8 point
  
• 10-Year TIPS Spread 2.48% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +10 open in Japan
• DAX Futures: Indicating +38 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Medical, Retail and Tech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs despite rising food/energy prices, rising eurozone debt angst, more Mideast unrest and emerging market inflation fears. On the positive side, Hospital, Biotech, Networking, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than 1.50%. Cyclicals and small-caps are outperforming. The US dollar is stable. Copper is rising +1.57%. The 10-year yield is -1 bp to 3.13%, despite today's equity gains. On the negative side, Airline, Homebuilding, I-Banking and Bank shares are down on the day. (XLF) has been heavy throughout the day. The Transports are also relatively weak. The US price for a gallon of gas is falling -.02/gallon today to $3.96/gallon. It is up .84/gallon in 83 days. Oil is rising +4.91%, gold is jumping +1.5% and lumber is falling -2.28%. The Spain sovereign cds is rising +6.81% to 259.25 bps, the Belgium sovereign cds is climbing +5.86% to 152.50 bps, the Greece sovereign cds is soaring +8.1% to 1,459.08 bps, the Ireland sovereign cds is gaining +4.28% to 682.50 bps, the UK sovereign cds is climbing +4.79% to 60.69 bps, the Russia sovereign cds is rising +4.62% to 136.67 bps and the Italy sovereign cds is rising +7.02% to 162.67 bps. The Greece and Ireland sovereign cds are making new record highs and Spain's cds is close to a technical breakout, which is also a large neative. Spain's Ibex 35 was today's worst performer, falling -2.02% and breaking down below its 200-day moving average. The recent US equity rally remains of poor quality as volume, breadth and leadership are lacking. Many of the most beaten up stocks are leading the averages higher today on low volume, which is usually indicative of short-covering. However, unless the eurozone cds begin to come in soon, another decline in the euro currency is likely, which could lead to another wave of commodity selling. I expect US stocks to trade mixed-to-higher into the close from current levels on commodity sector strength, short-covering, earnings optimism, bargain-hunting and buyout speculation.

Today's Headlines

Bloomberg:

• Commodities Rally, Europe Stocks Drop on Greek Debt Downgrade. Commodities rebounded from the steepest weekly slump since 2008 amid optimism about economic growth and speculation recent declines were excessive. European stocks fell, the euro erased gains and Greek bonds tumbled as Standard & Poor’s cut its rating on the nation. The S&P GSCI Index of 24 raw materials jumped 2.2 percent, the most in seven weeks, at 11:35 a.m. in New York following last week’s 11 percent slide. Silver futures climbed 5 percent, oil rallied 3.7 percent and wheat advanced 3.3 percent.
• Greece Leads Surge in European Debt Risk on 'Selective Default' Concerns. Greece led a surge in the cost of insuring European government bonds as Standard & Poor’s cut its credit rating on concern the nation is heading for a “selective default” by extending debt maturities. Credit-default swaps on Greece jumped 30 basis points to a record 1,371 basis points, according to CMA. Swaps on Ireland reached an all-time high of 681 basis points and contracts on Portugal also rose. “One by one, they will all need to renegotiate,” said Bill Blain, co-head of strategy at broker Newedge in London. “As Europe’s most peripheral economy, Greece is just a canary in the coal mine.” Greece was cut two steps to B by S&P, five levels below investment grade, and kept on CreditWatch with negative implications. An extension of debt maturities will be regarded as “burden sharing” for private investors and constitute a “distressed exchange,” the ratings firm said. Swaps on Ireland climbed 22 basis points, according to CMA. Contracts on Portugal rose 16.5 basis points to 659, approaching the record 681 set April 26. Italy increased 11 basis points to 164 and Spain rose 13 to 259, helping push the Markit iTraxx SovX Western Europe Index of swaps on 15 governments up 8 basis points to 197. The Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings rose 6 basis points to 359, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 98.25, JPMorgan prices show. The Markit iTraxx Financial Index of 25 banks and insurers increased 6 to 138.5 and the subordinated index was 14 higher at 242.5.
• Trichet Says Global Central Bankers United in Inflation Fight. European Central Bank President Jean- Claude Trichet said the world’s central bankers are united in fighting inflation fueled by surging commodity prices and fast- growing emerging economies. “There is a solid unity of purpose of all central bankers concentrated on solidly anchoring inflation expectations,” Trichet said today in Basel, Switzerland, after chairing the Global Economy Meeting. The global economic recovery has been “confirmed” and there is “potential for real overheating in emerging countries,” Trichet said. Global rate setters are growing more concerned about inflation as the world economy gathers strength and food and oil prices increase.
• LinkedIn Boosts IPO, Valuing Site at More Than $3 Billion. LinkedIn Corp. increased its planned initial public offering, valuing the largest professional social-networking website at more than $3 billion. The company now plans to sell as much as $315.6 million of shares to expand the business, according to regulatory filing today.
• McDonald's(MCD) April Sales Rise 6% as Drinks Lure U.S. Diners. Analysts projected comparable-store sales would rise 4.1 percent, according to the average of seven estimates compiled by Bloomberg News. Sales in the U.S. climbed 4 percent, the Oak Brook, Illinois-based company said today in a statement.
• Hertz(HTZ) Bids $2.24 Billion for Dollar Thrifty(DTG) to Thwart Avis(CAR). Hertz Global Holdings Inc. (HTZ), the largest publicly traded rental-car company, offered to buy Dollar Thrifty Automotive Group Inc. (DTG) for $2.24 billion in cash and stock, countering a bid by Avis Budget Group Inc. (CAR) Hertz offered $72 a share, 24 percent more than Avis’s offer, the Park Ridge, New Jersey-based company said today in a statement. Dollar Thrifty rose $8.76, or 13 percent, to $78.45 at 10:58 a.m. in New York Stock Exchange composite trading.
• Syria Attacks Protesters as Yemen Violence Flares, Threatening Peace Plan. Security forces in Syria renewed their assault on pro-democracy protesters across the country, shooting at people who joined in demonstrations and seeking to arrest their organizers. Two people were killed in Deir Al-Zour late yesterday as security forces attacked a protest and at least 12 people died in Homs in the past two days, Mahmoud Merhi, head of the Arab Organization for Human Rights, said in a phone interview from Syria today. Six people, four of them women, were killed in Banias on May 7, he said. Some 450 people have been arrested in the coastal city in the past two days, said Ammar Qurabi, head of Syria’s National Organization for Human Rights.

Wall Street Journal:

• Pakistani Leader Defends Military Over bin Laden. Pakistan's prime minister sought to assuage spreading anger at home over the U.S. raid that killed Osama bin Laden in a defiant speech to parliament, rejecting accusations that Pakistanis shielded the al Qaeda leader and suggesting the terror network was created by the U.S.
  

MarketWatch:

• How (CRM) Gets to $300 by Cody Willard.
• FDIC's Bair to Leave Agency July 8th.
  

Zero Hedge:

• Here We Go Again: German Government Advisor Says Eurozone May Not Remain Intact Over Next 12 Months.

Washington Post:

• US Administration Planning $1 Billion Debt Relief for Egypt. The Obama administration has decided to provide about $1 billion in debt relief for Egypt, a senior official said Saturday, in the boldest U.S. effort yet to shore up a key Middle East ally as it attempts a democratic transition. The aid would be part of a major economic aid package that also includes trade and investment incentives, officials said. Economic assistance for Egypt and Tunisia is “fundamental to our capacity to support their democratic transitions,” a senior State Department official said on the condition of anonymity. He said that officials were in the midst of “intense policy formulation” but that the economic package wasn’t finished. Parts of it will need congressional approval. The Egyptian finance and planning ministers visited Washington last month to seek forgiveness of the country’s $3.6 billion debt. Egypt pays about $350 million a year to service the debt, which it incurred buying American farm products. Rep. Dana Rohrabacher (R-Calif.) said at a recent hearing that the United States can’t afford to provide aid as it did in the past. “The stakes [in the Middle East] are very high ... but so is our level of deficit spending,” he said. Some lawmakers want to delay action until they have a better sense of who comes to power in the countries undergoing revolutions. Since the uprisings, the Obama administration has offered Egypt $150 million for economic development and democracy-building, and Tunisia $20 million. A U.S. government agency, the Overseas Private Investment Corp., has also pledged up to $2 billion in loans, loan guarantees and risk insurance for U.S. firms investing in the Middle East and North Africa, on top of an existing $2.6 billion.

The Detroit News:

• Michigan to Get $200 Million for High-Speed Rail. Michigan officials are expected to learn today the state has won about $200 million in federal funds to make high-speed rail a reality.
  

Seeking Alpha:

• Top Biotech Picks by Hedge Fund and Mutual Fund Gurus Concentrated in the Sector.
• The Oil Market Mirage. We want to look at the state of oil demand and the ongoing “China-Saves-the-World” premise.

TechCrunch:

• Apple(AAPL) May Not Have Bought Nuance(NUAN) But...

Real Clear Markets:

• Another Nail In The Keynesian Coffin. The coffin of Keynesianism has so many nails in it now that it is practically surfaced in steel. The notion that government deficits "stimulate" demand, has been proved wrong so many times, and in so many ways, that you would have to be Paul Krugman to still believe in it. However, in its April 28 news release on 1Q2011 GDP, the BEA drove yet another factual wooden stake into Keynesianism's vampire heart - a stake that no one seems to have noticed. What happened should also serve as a warning to Republicans that are still in the grip of the Keynesian superstition. The BEA reported that its first estimate of 1Q2011 real GDP growth was 1.8%. This represented a dramatic fall from 4Q2010 growth of 3.1%. What no one seems to have noticed is that the slowdown occurred in the face of another large dose of Keynesian stimulus.

Politico:

• Gay Donors Fuel Obama's 2012 Campaign. President Barack Obama’s reelection campaign is banking on gay donors to make up the cash it’s losing from other groups of wealthy supporters who have been alienated and disappointed by elements of Obama’s first term. Pleased by an all-out White House push to repeal “don’t ask, don’t tell,” gay donors have surprised campaign officials with the extent of their support. And the campaign’s new fundraising apparatus appears designed to capitalize on their enthusiasm: Obama’s finance committee included one gay man in 2008; there are 15 this year, a source said.

Rasmussen Reports:

• 57% Favor Repeal of Health Care Law. The latest Rasmussen Reports national telephone survey shows that 57% of Likely U.S. Voters now at least somewhat favor repeal of the law. Thirty-six percent (36%) oppose repeal. The new findings include 44% who Strongly Favor repeal of the measure and 26% who are Strongly Opposed.

Reuters:

• Attorney General Eric Holder Vows to Close Guantanamo. U.S. Attorney General Eric Holder said Monday the United States would close the Guantanamo Bay facility holding terrorism suspects in Cuba, despite missing a previous deadline to do so.
• Could Renren Be Vulnerable in a Chinese Crackdown? Imagine buying shares in a company that could be closed down overnight. That is in some ways what Renren (RENN.N), dubbed the Facebook of China, asked investors to do. This week, investors complied: Renren raised $743.4 million in an initial public offering and its shares jumped 29 percent on their first day of trading on the New York Stock Exchange. But Renren's operations, which include social networking, gaming and online commerce, walk a thin line of compliance with strict Chinese regulations around freedom of information -- and if they cross the line, the consequences could be very severe.
• Special Report: What Really Triggered Oil's Greatest Rout. When oil prices fell below $120 a barrel in early New York trade last Thursday, a few big companies that are major oil consumers started buying around $117. It looked like a bargain. Brent crude had been trading above $120 for a month. But the buying proved ill-timed. Crude kept on falling. "They were down millions by the end of the day, trying to catch a falling piano," an executive at a major New York investment bank said. Never before had crude oil plummeted so deeply during the course of a day. At one point, prices were off by nearly $13 a barrel, dipping below $110 a barrel for the first time since March.
• Biden, Clinton Bluntly Press China on Human Rights. Vice President Joseph Biden warned China Monday the United States would press hard on human rights, over which the two sides have a "vigorous" disagreement and criticizing Beijing's latest crackdown on dissent. Biden and Secretary of State Hillary Clinton both used unusually blunt language on human rights at the start of an annual meeting of top officials from the two nations, saying the United States was concerned about Beijing's recent clampdown, which has involving arrests, detentions and secretive confinement of human rights lawyers, protesters and dissidents. "No relationship that's real can be built on a false foundation. Where we disagree, it's important to state it. We will continue to express our views on these issues," Biden said at the opening of the Strategic and Economic Dialogue meeting in Washington.
• Memphis Braces for Mississippi River Flood Crest. More residents were warned on Monday to get out of the way of the raging Mississippi River as it surged toward a near-record crest in its southern reaches, prompting authorities in Louisiana to divert some of the flood waters. "This is the time to gather all important items and be ready to leave your property," Shelby County Mayor Mark Luttrell said, noting the river should crest later on Monday just inches short of a 1937 record.
• CME Group(CME) to Buy Back $750 Million of Shares.
  

International Business Times:

• Christian-Muslim Clashes in Egypt Upset Gains of Revolution. The clashes between Muslims and Christians in Egypt over the weekend left 12 people killed, 180 wounded and one al-Azraa church burnt, giving a new dimension to the post-revolutionary democracy. Egypt's justice minister, Abdel Aziz al-Gindi warned that those who threaten the country's security will face "an iron fist" while the ruling Supreme Council of the Armed Forces said, it is taking stringent “deterrent” measures to stop further violence. The radical movement of Muslims in Cairo known as Salafis has been blamed for the recent attacks on Christians and others whom they disapprove. The current ruling front has miserably failed to halt Salafis' hostility towards the Christians, say opponents.

TimesUnion:

• Portugal Opens Inquiry Into Rating Agencies. Portuguese authorities have opened a criminal inquiry into three international credit rating agencies following a complaint, the Attorney General's office said Monday. The inquiry is based on a complaint filed last month by four Portuguese academics, an official with the Attorney General's office said on condition of anonymity, in keeping with departmental regulations. The four economists claimed the agencies — Moody's, Standard & Poor's and Fitch — caused severe financial losses for Portugal and demanded to know whether they profited from the ratings.

Die Welt:

• Chancellor Angela Merkel's government wants Greece to negotiate an extension of maturities on its bonds before receiving a new European Union aid package, citing officials who participated in a May 6 meeting in Luxembourg. Germany is alone in favoring a debt restructuring for Greece, which would have to be voluntary and conducted in a way that limits writedowns at euro-region banks, citing German officials. The Greek government isn't doing enough to enforce the spending cuts and privatizations it accepted in exchange for help from its euro-region peers, citing members of Merkel's coalition.

Bild:

• Greece should be allowed to leave the euro area because that would cut losses for European taxpayers, Bild, Germany's most-read newspaper, said in an editorial. Letting holders of Greek sovereign debt, including German banks, take losses as a prelude to Greece leaving the euro is preferable to keeping the highly indebted country in the currency area and providing "endless costly rescue packages," columnist Hugo Mueller-Vogg said.

La Tribune:

• Jean-Pierre Jouyet, head of France's autorite des Marches Financiers, said in an interview that the activities of banks in commodities markets need to be regulated. He said that he expects commodity trading regulation to be agreed upon at the G20 summit in November.

Bear Radar

Style Underperformer:

• Large-Cap Value (+.30%)

Sector Underperformers:

• 1) Airlines -1.67% 2) Homebuilders -.38% 3) Banks -.34%

Stocks Falling on Unusual Volume:

• PETS, AUXL, MOBI, ZOLT, IPHI, RP, TC, TSN, HRB and PETS
  

Stocks With Unusual Put Option Activity:

• 1) TPX 2) MBI 3) ATVI 4) TSN 5) DB
  

Stocks With Most Negative News Mentions:

• 1) TE 2) CVLT 3) DYN 4) RADS 5) ZOLT
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+.57%)

Sector Outperformers:

• 1) Oil Service +1.89% 2) Coal +1.47% 3) Gold & Silver +1.11%

Stocks Rising on Unusual Volume:

• SYY, DTG, NUAN, ALKS, ROSE, SLXP, TIBX, OPEN, PCLN, CRR, PMC, WTW, UCO, NFX, BHI, FEIC, NFG, LXU and SHOR
  

Stocks With Unusual Call Option Activity:

• 1) DTG 2) SYY 3) SQNM 4) NUAN 5) TER
  

Stocks With Most Positive News Mentions:

• 1) ALKS 2) FDS 3) TXT 4) MCD 5) MMS

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Monday Watch

Weekend Headlines
Bloomberg:

• EU Said to Consider Requiring Collateral for Providing Extra Aid to Greece. European Union officials may require Greece to provide collateral for aid as policy makers struggle to prevent the euro area’s first sovereign debt restructuring, said a person with direct knowledge of the situation. Expanding the 110 billion-euro ($158 billion) lifeline Greece received last year may mean that assets or revenue from asset sales are used to secure extra funds, the person said. Demanding collateral, an idea floated last year by Finland, may help avoid a political backlash against bailouts. European Union finance officials, who held an unannounced meeting May 6 in Luxembourg, are preparing the help to ease a debt burden that some investors say will lead to a restructuring. Other steps may include lower interest rates or longer maturities on bailout loans, said Norbert Barthle, budget spokesman for German Chancellor Angela Merkel’s ruling party. “We’ll just have to bite the bullet,” Barthle said in an interview yesterday from his district in the state of Baden- Wuerttemberg. “We need to help Greece help itself. What’s the alternative? We don’t want to be pushed over the edge into restructuring.”
• Geithner Will Urge China To Allow Higher Interest Rates, Stronger Currency. Treasury Secretary Timothy F. Geithner will urge China to allow higher interest rates when he meets with Chinese leaders this week, as the U.S. extends its push for a stronger yuan. Geithner will say China should relax controls on the financial system, give foreign banks and insurers more access and make it easier for investors to buy Chinese financial assets, said David Loevinger, the Treasury Department’s senior coordinator for China. Officials from both nations are meeting in Washington today and tomorrow as part of the annual Strategic and Economic Dialogue. The U.S. is pushing for greater market access for financial firms as part of its broader effort to persuade China to ease the restrictions blamed for fueling global imbalances. U.S. officials argue that a yuan kept artificially cheap to help exporters also makes it harder for China to lift interest rates and curb an inflation rate that hit a 32-month high in March. “It’s pretty clear that the current system is hurting them in their inflation fight,” said Dan Dorrow, head of research at Faros Trading LLC, a currency trading firm in Stamford, Connecticut. “The reason for that is the improperly-priced exchange rate.”
• U.S. Seeks Access to Bin Laden Wives, Questions Pakistani Role. Pakistan hasn’t given the U.S. access to three of Osama bin Laden’s widows or other information collected following last week’s operation in Pakistan, creating more questions about the country’s role in hiding the late al- Qaeda leader. National Security Adviser Tom Donilon said the U.S. has requested -- and not yet received -- access to three of bin Laden’s wives and additional materials recovered by the Pakistanis after the May 2 raid in which bin Laden was killed in a compound in Abbottabad, Pakistan. The role, if any, of Pakistani government officials harboring bin Laden also remains a question, President Barack Obama said.
• German Economists Warn Against Greek Exit From Euro, Welt Says. Commerzbank AG (CBK) Chief Economist Joerg Kraemer said it would be “economic suicide” for Greece to return to the drachma, which would prompt a run on local banks to withdraw euros, Welt reported, citing an interview. Thomas Mayer, chief economist at Deutsche Bank AG, said a Greek exit from the euro region would lead to a crisis in Europe’s political and currency union and could cause a bank run in some EU countries, the newspaper said. Thomas Straubhaar, head of the Hamburg-based HWWI economic institute, told the newspaper a euro exit could force Greece into bankruptcy and cause a “domino effect” like the collapse of Lehman Brothers Holdings Inc.
• Hedge Funds Caught in Oil's 'Terrifying' Decline: Energy Markets. Hedge funds were caught with bullish oil bets near record highs last week as crude plunged 15%, the biggest decline in more than two years. While funds and other large speculators reduced so-called net-long positions by 2.4% to 293,823 futures and options in the seven days to May 3, that was still within 5.7% of the record, according to the CFTC's weekly Commitments of Traders report. Bullish bets rose 59% since Feb. 15, reaching an all-time high in March, the data show.
• Ex-Mets Player Dykstra Indicted on Bankruptcy Fraud Charges. Lenny Dykstra, the former Major League Baseball player accused of removing, destroying and selling property from his $18.5 million mansion after filing for bankruptcy in 2009, was charged with fraud in an indictment. Dykstra, 48, a former Philadelphia Phillies and New York Mets outfielder, looted his Sherwood Estates mansion in Thousand Oaks, California, lied to the bankruptcy trustee about who stripped it, and denied selling items owned by the bankruptcy estate, according to the grand jury indictment issued yesterday. A lawyer for the bankruptcy trustee has estimated Dykstra stole or destroyed property worth more than $400,000, U.S. Attorney Andre Birotte in Los Angeles said in an e-mailed statement.
• Syrian Tanks Storm Banias a Day After 40 Protesters Killed. Syrian tanks stormed the coastal city of Banias today, and protesters tried to keep them out by forming human chains amid deadly confrontations with security forces, according to Agence France-Presse. The U.S. called yesterday for a “strong international response” to Syria’s crackdown. Security forces killed as many as 40 people and arrested hundreds during demonstrations on Friday, according to the London-based Syrian Human Rights Committee.
• Euro Rises on Bets Debts Concerns Won't Derail Rate Increases.
  

Wall Street Journal:

• Pakistan-U.S. Rift Widens. Pakistani media aired the name of a man they said is the Central Intelligence Agency's station chief, prompting questions about whether the Pakistani government tried to out a CIA operative in the wake of the killing of Osama bin Laden. The U.S. is looking into the matter. There are no plans at this time to withdraw the station chief. If the government had attempted to publicize the name, that would be the second such outing in the past six months, a sign of how deeply U.S.-Pakistan relations have soured.
• Christians Blame Islamists for Deadly Egypt Clash. Christians blamed Saturday's deadly sectarian clash at two churches near Cairo on Egypt's ultraconservative Salafis, a radical Islamist group whose growing influence is worrying both secularists and the country's Christian minority. Residents of the low-income neighborhood of Imbaba said hundreds of Muslim men armed with small weapons and guns attacked the churches, killing at least 12 people and injuring 210. The attackers, many of whom were wearing the long gowns and beards characteristic of Salafis, torched the Coptic Church of the Holy Virgin and set fire to two apparently Christian-owned homes behind another church in the neighborhood, witnesses said. Saturday's attacks mark the latest incident in a worsening rash of sectarian violence between Egypt's Muslims and its Christian minority since street protests ousted Egypt's former president in February. The rise in sectarianism has appeared in parallel with an increasingly vocal Salafi movement—a fundamentalist form of Islam widely practiced in Saudi Arabia—and is posing a significant challenge for the military leadership that assumed power after President Hosni Mubarak stepped down. "The military council didn't prosecute the people who burned down the church in Sol," said Ramon Shehatta, referring to a previous church-burning in a Cairo suburb in early March. Mr. Nasser was standing in the burnt-out interior of the Church of the Holy Virgin, where hundreds of Christians had gathered for a tearful Mass on Sunday afternoon. "That allowed them to come and burn this church. This won't end. The Christians' hearts are on fire. They will not be quiet." Muslim Brotherhood members have said in the past that despite sharing a few political goals with Salafis, such as the desire to see Sharia law incorporated into the Egyptian legal system, the Brotherhood's conservative ideology shouldn't be confused with the Salafists' fundamentalist views. While many Egyptians had anticipated that the once-illegal Muslim Brotherhood would become more powerful in a democratic Egypt, few had predicted the growing prominence of the Salafis, a catchall term used to describe those Muslims who believe that only the Prophet Muhammad, his contemporary companions and the three generations of believers who followed them practiced Islam in its purest form.
• Gingrich's Secret Weapon: Newt Inc. In the 13 years since he suffered a string of political setbacks and quit the third most powerful job in Washington, Newt Gingrich has been busily laying the foundation for a comeback to an even grander perch.
• Schumer Floats High-Frequency Fees. Sen. Charles Schumer told regulators that sophisticated electronic traders should bear the cost of monitoring their dealings, with special fees assessed to firms that issue and then rapidly cancel securities orders. The New York Democrat said that such charges could defray the expense of building a new system to track in real time the orders that high-frequency traders pump into U.S. markets.
• AIG(AIG) Fall Blunts Talk of Taxpayer Gain.
• Renewal of Pacts Eases Fear for Munis. The municipal-bond market appears to be surmounting one of its most urgent challenges of the year as banks renew billions of dollars worth of expiring credit agreements with state and local governments, avoiding a costly scramble to refinance.
• Shrinking Supplies Mean Bye-Bye Used-Car Bargains.
  
• Guidance Is Sought on Private Trading of Closely Held Companies. SecondMarket Holdings Inc., one of the biggest players in the booming "shadow market" for trading shares of closely held companies such as Facebook Inc. and Twitter Inc., is seeking U.S. approval for how it handles those transactions.
• Reports of 'Suspicious Trading' at SAC Being Sought by Senator. SAC Capital Advisors LLP, one of the nation's most prominent hedge funds, is facing heightening regulatory and legislative heat. Iowa Sen. Charles Grassley, the top Republican on the Senate Judiciary Committee, sent a letter to Wall Street's major self-regulatory organization asking for any reports reflecting "suspicious trading" involving SAC Capital that it had received from exchanges since 2000.
• CEO Pay in 2010 Jumped 11%. Chief executives at the biggest U.S. companies saw their pay jump sharply in 2010, as boards rewarded them for strong profit and share-price growth with bigger bonuses and stock grants. The median value of salaries, bonuses and long-term incentive awards for CEOs of 350 major companies surged 11% to $9.3 million, according to a study of proxy statements conducted for The Wall Street Journal by management consultancy Hay Group.
• On Spending Cuts, Democrats Give Voters the Brush Off. Obama says he'll 'check under the cushions.' But neither he nor his allies on Capitol Hill have initiated any net reductions in spending since last fall's election. Not once.

Marketwatch.com:

• Oil Gains, But Analysts tip Fall to $90 a Barrel. Oil futures recovered some lost ground in early electronic trading on Monday, but analysts said prices could drop as low as $90 a barrel later this month on concerns about global growth and an unwinding of speculative positions.
• Hedge Funds Gain in April, But Lag Equities. Hedge funds were up more than 1% in April, but the $2 trillion industry lagged a strong rally in equity markets that made it tough for managers to short, or bet against stocks.
• ETF Investors at Risk in Next 'Flash Crash'.
  

Fox Business:

• Nasdaq(NDAQ) CEO to Meet With 'Arbs' to Push Hostile Bid for NYSE(NYX). The FOX Business Network has learned that Nasdaq CEO Robert Greifeld plans to meet with a group of 60 investors on Monday as he continues to push his hostile bid to buy the New York Stock Exchange directly with NYSE shareholders.
  

CNBC:

• Chinese Espionage Puts US Secrets in Wrong Hands.
  
• Buffett's Berkshire(BRK/A) Reluctantly Writes Down $506 Million in Stock 'Losses'. The basic headlines from tonight's quarterly earnings report by Berkshire Hathaway weren't a surprise. Warren Buffett previewed the numbers at last weekend's annual meeting. There is, however, an interesting revelation we didn't know. After discussions with the SEC on the subject, Berkshire Hathaway is recording $506 million in "other-than-temporary impairment losses" on two stock holdings: $169 million for Kraft Foods(KFT) and $337 million for a portion of its Wells Fargo stake(WFC). That's not because Berkshire sold the shares at a loss. It's due to accounting rules that require write-downs for unrealized losses when they've been around for awhile. The rules, however, do not include a clear, unambiguous definition of "temporary."

IBD:

• Upgrades For Robot Surgeons Help Intuitive Surgical(ISRG).

Forbes:

• Fed Has Power to Pop Commodity Bubble. Last week the margin requirements for silver — a relatively minor commodity — were changed and triggered a widespread sell off. The evidence of a speculator driven bubble was unmistakable by the end of the week — crude oil was down almost 15%, corn down about 10% and wheat down almost 8%. If margin rule changes for a minor commodity can trigger a general price run, imagine what would happen if a series of broad based rule changes were implemented. Well I have a suggestion for our economic leadership in Washington — go crazy — change the rules for all commodities. I guarantee that the commodities price bubble will instantly pop.

Business Insider:

• Hold On -- Is THIS Why Commodities Got Slammed Last Week? The Dodd Frank OTC FX derivatives exemption only looks like a "win" for traders. Upon closer examination, the exemption might be a defeat. And one of the reasons commodities got slammed this week. Many on Wall Street seem to consider the exemption of FX swaps and forwards (derivatives) a major defeat because of what the Dodd Frank regulation didn't exempt: all other OTC derivatives, namely energy derivatives, but also interest rate swaps. Just because the media reported the exemption as a win doesn't make it so.
• Professor: Here's The REAL Conspiracy Behind Reports of Greece Leaving The Euro. Greek economics professor Yanis Varoufakis expounds more on this theory: It is my considered opinion that Der Spiegel, in consultation with certain circles within the German government (in particular the Finance Ministry) was trying to send a message to the German Chancellor but also the Greek Prime Minister. And what is this message? That there are far worse things than a debt restructure, the worst being a step-by-step dismantling of the euro that will begin once a country like Greece is forced into an impossible situation. And that continuing to live in denial, and to peddle blatant lies about the sustainability of the present course will no longer be tolerated.
• The Column Everyone Is Reading About Pakistan.
• The Column Everyone Is Reading In Pakistan.
• An Undercover Look At The Billion Dollar Fake Goods Market Of Chinatown.
• 66% of Pakistanis Say America Fakes The Killing Of Bin Laden.
  

Zero Hedge:

• Morgan Stanley(MS) Follows Goldman(GS), Downgrades Economy.

LA Times:

• Taliban Renew Attacks in Kandahar; Death Toll Hits 25. Fighting erupted for a second day Sunday between Taliban gunmen and Afghan security forces in the southern city of Kandahar, demonstrating the insurgents' determination to maintain a foothold in the city they consider their spiritual home. Afghanistan's Interior Ministry said Sunday that the death toll in clashes that broke out a day earlier had risen to 25 -- all but two of them Taliban fighters. The Taliban brushed aside the lopsided toll, instead boasting that the fighting had all but paralyzed the country's second-largest city.

Washington Post:

• J.P. Morgan(JPM) in Talks With SEC to Settle CDO Probe. J.P. Morgan Chase said Friday that it may be close to settling an SEC investigation focused on its role in the sale of complex financial instruments tied to mortgages.
  

Reuters:

• Libyan Forces Destroy Misrata Fuel Tanks - Rebels. Libyan government forces destroyed four fuel storage tanks and set several others ablaze in rebel-held Misrata, dealing a blow to the port city's ability to withstand a government siege, rebels said on Saturday. The bombardment of the western city came as artillery rounds fired by forces loyal to Muammar Gaddafi fell in Tunisia in an escalation of fighting near the border with rebels trying to end Gaddafi's rule of more than four decades. Misrata, the last remaining city in the west under rebel control, has been under siege for more than two months and has witnessed some of the war's fiercest fighting. Rebels gave varying accounts of the bombardment but said the attack hit fuel used for export as well as domestic consumption.
• Iraq Won't Cut 12 Million Bpd Oil Output Capacity Goal. Iraq does not plan to lower its 12 million barrel per day oil output capacity goal or to redo contracts with oil firms over their plateau targets, Deputy Prime Minister for energy Hussain al-Shahristani said on Sunday. "Absolutely not. There is no intention at all to renegotiate the contracts," Shahristani told Reuters at the launch of a power plant project outside the city of Kerbala. Shahristani's comment followed market speculation that Iraq might have to officially slash its longstanding production capacity target of 12 million bpd and renegotiate contracts with international oil companies to reduce their individual output targets. "We are contracted for announced production capacity of around 12 million barrels per day," he said. "But how much we will produce, really, this depends on the international market situation and the market demand." Shahristani also said the oil ministry had reached a final draft contract on a $12 billion project to capture associated gas at southern oilfields and sent the deal to Iraq's cabinet for approval.
• BHP Billiton(BHP) Sees Fragile Global Economy Near-Term. BHP Billiton , the world's biggest miner, sees the global economy remaining fragile in the near term and economic growth possibly slowing in the medium term, its chairman said on Monday. "In the short term, although many economies are recovering, the world remains in a fragile state with persistent levels of unemployment and threats of inflation," BHP Chairman Jacques Nasser said in remarks prepared for a business lunch.

Financial Times:

• SEC Reform Proposal Threatens 'Dark Pools'. The US Securities and Exchange Commission is considering a proposal to move more trading back on to exchanges from alternative venues such as “dark pools”, which has drawn sharp criticism from banks and many trading firms. David Shillman, associate director of the SEC’s division of trading and markets, told the Financial Times that a so-called “trade at” rule is “very much in play. There’s interest in it”. The “trade at” rule, which would require non-exchange venues to improve on the displayed market price, is a response to concerns among some academics and market participants that a rising share of trading happening outside of exchanges is making trading more expensive and difficult.
• Biggest Commodity Hedge Fund Loses $400M In Oil Slide. Clive Capital, the world’s largest commodity hedge fund, has been left nursing losses of more than $400m as a result of the dramatic collapse in the price of oil last week. London-based Clive – which manages an estimated $5bn of client money – is the biggest of several big hedge funds believed to be reeling after the unexpected sell-off hit markets late last week. Others, including Astenbeck Capital, the Phibro-owned fund run by Andrew Hall, are thought to have taken double-digit percentage point losses to their portfolios, according to investors. The scale of the losses demonstrates that even the savviest investors in commodities were wrongfooted by the correction, one of the sharpest one-day falls on record. In a letter sent to investors on Friday and seen by the Financial Times, Clive said it was down 8.9 per cent on the week after what it called “extraordinary” price movements on Thursday. Clive’s management said it was at a loss to explain what had caused crude oil markets to be “annihilated”. Most managers remain bullish, however, and expect commodity prices to continue to rise. “Physical markets are quite strong,” said Clive in its letter. “We remain positioned in a number of markets.”
• Commodity Prices Threaten Africa's Recovery. The head of the African Development Bank has said that rising oil and food prices are combining to create a “Molotov cocktail” for Africa as the continent attempts to push ahead with its recovery from the economic crisis.
• Apple(AAPL) is World's Most Valuable Brand.
  

Welt am Sonntag:

• Forty-seven percent of Germans are opposed to providing financial aid to Greece, citing a survey conducted by GfK SE. Only 20% of those surveyed support helping the government in Athens.

Deutschlandfunk Radio:

• German lawmakers Carsten Schneider and Wolf Klinz are in favor of a restructuring of Greece's debt.

Frankfurter Allgemeine Sonntagszeitung:

• Hans-Werner Sinn, president of Germany's Ifo economic institute, said Greece would be better off if it left the euro, citing an interview. Greece's exit from the euro zone would be "the lesser of two evils," Sinn said. Greece could devalue its currency and improve its competitiveness without the common currency, he said.

Irish Times:

• Ireland's Future Depends on Breaking Free From Bailout. Ireland is heading for bankruptcy, which would be catastrophic for a country that trades on its reputation as a safe place to do business, writes MORGAN KELLY. WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed. Ireland is facing economic ruin. While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable.

Focus:

• German Free Democratic Party lawmaker Frank Schaeffler said Germany should support any Greek with to leave the euro region, citing an interview with the politician. Debt restructuring for Greece is "inevitable," Schaeffler said. Some 19 lawmakers of Chancellor Angela Merkel's coalition are decided to vote against the planned European Stability Mechanism, or ESM, the magazine also said in the e-mailed preview of a report to be published May 9. At least another 36 members of parliament are also considering refusing approval for the ESM.
  

China Times:

• China may increase the resource tax the nation imposes on rare earths, citing an official at the Ministry of Finance.

China Business News:

• China's economic growth is expected to slow in the second half of this year, citing Fan Jianping, director of economic forecasting at the State Information Center. As global commodities prices drop, companies may start destocking, Fan said.

China National Radio:

• China's April inflation may have been about 5%, citing market expectations. Inflationary pressure remains relatively large.

Weekend Recommendations
Barron's:

• Made positive comments on (X) and (PFE).

Citigroup:

• Reiterated Buy on (SNI), target $63.

Night Trading

• Asian indices are -.50% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 107.0 -1.5 basis points.
• Asia Pacific Sovereign CDS Index 114.25 -.75 basis point.
  
• S&P 500 futures +.50%.
• NASDAQ 100 futures +.51%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CDE)/.61
• (KWK)/.03
• (HL)/.13
• (STE)/.62
• (RAX)/.11
• (ASEI)/1.30
• (ATVI)/.08
• (SYY)/.41
• (AES)/.26
• (PEGA)/.17
• (TSN)/.44

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The 3-Month and 6-Month Treasury Bills Auctions, JMP Securities Research Conference, (CROX) analyst meeting and the (ATML) analyst meeting could also impact trading today.
  

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

Weekly Outlook

U.S. Week Ahead by MarketWatch (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 mixed as growing Mideast unrest, global growth concerns, rising eurozone debt angst and emerging market inflation fears offset mostly positive earnings reports, bargain-hunting, lower food/energy prices and buyout speculation. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.