Stocks Surging into Final Hour on Less Eurozone Debt Angst, Short-Covering, Earnings Optimism, Buyout Speculation

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 15.99 -6.82%
  
• ISE Sentiment Index 152.0 +17.83%
  
• Total Put/Call .81 +3.85%
  
• NYSE Arms 1.07 -2.46%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.98 -1.13%
  
• European Financial Sector CDS Index 90.08 -2.38%
  
• Western Europe Sovereign Debt CDS Index 189.08 -1.29%
  
• Emerging Market CDS Index 204.64 -.85%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 24.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .03% +3 bps
  
• Yield Curve 261.0 +1 bp
  
• China Import Iron Ore Spot $179.70/Metric Tonne unch.
  
• Citi US Economic Surprise Index -32.60 -.5 point
  
• 10-Year TIPS Spread 2.49% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +92 open in Japan
• DAX Futures: Indicating +33 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 and some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite rising food/energy prices, eurozone debt angst, more Mideast unrest and emerging market inflation fears. On the positive side, Education, REIT, Disk Drive, Utility, Paper, Computer, Hospital and Road & Rail shares are especially strong, rising more than 1.75%. Cyclicals and small-caps are outperforming again. (IYR) has traded well throughout the day. Tech stocks also trade well. Copper is rising +.66%. Weekly retail sales rose +4.7% this week versus a +5.1% gain the prior week. The Spain sovereign cds is falling -4.36% to 248.0 bps, the Italy sovereign cds is down -3.1% to 157.66 bps, the Greece sovereign cds is falling -6.0% to 1,369.63 bps, the Belgium sovereign cds is down -4.09% to 145.83 bps and the UK sovereign cds is down -4.98% to 57.45 bps. On the negative side, Coal shares are down on the day. The US price for a gallon of gas is falling -.01/gallon today to $3.95/gallon. It is up .83/gallon in 84 days. Oil is rising +.76%, gold is gaining +.35% and lumber is falling -1.27%. Today's rally is of better quality as breadth and volume are improved, however market leading stocks are lagging. While the euro is bouncing today, the eurozone's debt problems remain a large worry and will likely resurface over the coming months. One of my longs, (SXCI), is making another new all-time high today. The shares are extended short-term, but I still see substantial upside over the longer-run. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, earnings optimism, bargain-hunting and buyout speculation.

Today's Headlines

Bloomberg:

• Greek Bill Sale Meets Reduced Demand One Day After Debt Downgrade by S&P. Greece paid almost 5 percent to borrow for six months as European policy makers’ talk of an additional aid package to avoid a debt restructuring drove its bonds higher. Greece sold 26-week bills today to yield 4.88 percent, 168 basis points more than Germany paid last month to borrow for 10 years. The rate was higher than the 4.8 percent at the previous auction on April 12. A Greek debt restructuring is “not an option,” European Central Bank Governing Council member Yves Mersch told journalists at a conference in Florence today. “It’s inevitable that Greece will have to borrow more money from the EU and IMF,” said Nick Stamenkovic, a fixed- income strategist at RIA Capital Markets Ltd. in Edinburgh. “The first outcome will be that they will get the necessary external funding and that will provide some temporary support.” Greek newspaper Kathimerini reported that Greece may also be offered a new aid package of at least 80 billion euros to replace the existing one that would cover its financing needs for the next two years. Greece may get an extension of loan repayments, European Central Bank Governing council member Ewald Nowotny said today in an interview with Austrian state broadcaster ORF. Greek bonds gained as reports of additional aid eased concern the country would be forced to restructure its 330 billion euros of outstanding debt. The Greek two-year yield dropped 53 basis points to 25.08 percent, the biggest decline in a week. The 10-year bond yield fell 27 basis points to 15.44 percent. The cost of insuring Greek debt against default fell from a record 1,371 yesterday, dropping 53 basis points to 1,318. The difference in yield between Greece’s benchmark 10-year bond and comparable German debt fell 31 basis points to 12.3 percentage points as of 3:30 p.m. in Athens. German Chancellor Angela Merkel attempted to cool speculation that a new bailout for Greece will come as early as June. “First we need to hear what the status is. Only then can I decide what, if anything, needs to be done,” Merkel told reporters in Berlin today. “We don’t do Greece any favors by speculating” about more aid, she added. “The way to deal with insolvency is not to lend more to the insolvent party, that’s Ponzi finance,” Citigroup Inc. Chief Economist Willem Buiter said in an interview with Ken Prewitt on Bloomberg radio from Edinburgh. “What you have to do is to face up to the reality of restructuring” which means taking “the necessary steps to restructure the sovereigns and the banks that are exposed to the sovereigns.”
• Greek Funds Industry Head Warns Debt Restructuring Would Devastate Economy. Greece’s money managers are warning of damage to an already crippled economy should European leaders move to restructure the country’s debt. Greek 10-year bond yields and the cost of insuring the country’s debt against default rose to all-time highs at the end of April amid speculation about a debt write-off or an extension of repayment timelines. Standard & Poor’s cut Greece’s long-term sovereign credit rating by two levels yesterday to B, five notches below investment grade. The rating may be lowered further, S&P said. “Right now a restructuring shouldn’t and can’t happen,” Aris Xenofos, president of the Hellenic Fund & Asset Management Association representing 36 firms, said in an interview before the downgrade. “It would be devastating for the Greek economy, and detrimental for the rest of the European Union and the euro.”
• Cost of U.S. Imported Goods Rises More Than Estimated on Food, Fuel Prices. Prices of goods imported into the U.S. rose more than forecast in April as a slumping dollar and growing economies overseas pushed up the cost of fuel and food. The 2.2 percent increase in the import-price index followed a revised 2.6 percent gain in March, according to figures from the Labor Department today in Washington. Other reports showed distributors boosted inventories and small businesses lost confidence. Compared with a year earlier, import prices increased 11 percent, exceeding the 10 percent increase projected by economists surveyed and the biggest 12-month gain in a year. Confidence among small companies fell to a seven-month low in April, damped by a deteriorating outlook for the economy, a report from the National Federation of Independent Business showed. The Washington-based group’s optimism index decreased to 91.2, the lowest since September, from 91.9 the prior month. Seven of the measure’s 10 components dropped. Small businesses planning to increase prices held at a net 24 percent of owners for a second month, according to the report. The report on prices from overseas showed the cost of imported petroleum increased 7.2 percent from the prior month and was up 37 percent from a year earlier. Excluding all fuels, import prices climbed 4.3 percent from April 2010, matching the prior month’s 12-month increase as the biggest since October 2008. Imported food was 1.8 percent costlier last month and was up 20 percent from a year earlier, the biggest 12-month increase since records began in 1977.
• Lacker Says Fed Should Plan Withdrawal of Stimulus After QE2 Program Ends. Federal Reserve Bank of Richmond President Jeffrey Lacker said the central bank should turn its attention to withdrawing stimulus after completing its $600 billion bond purchase program at the end of next month. “Barring significant unexpected developments, this should be the high-water mark for monetary stimulus in this cycle, with the focus going forward on the timing and pace of stimulus withdrawal,” Lacker said today in remarks prepared for a speech in Arlington, Virginia. “While timing and pace will depend upon how the economy behaves, I believe it will be important to remember the lesson of the last recovery -- namely, that inflation is capable of rising even if the level of economic activity has not returned to its pre-recession trend,” Lacker said to a gathering of northern Virginia business and community leaders. “It may be necessary to initiate policy tightening well before the unemployment rate has fallen to a rate we would expect to see over the long run,” Lacker said.
• China Ore Imports, Down in April, Unlikely to Rise, Arctic Says. China’s iron ore imports, down 11 percent in April from the month before, are unlikely to rise from current levels in May and June as the world’s biggest steelmaker curbs output, Arctic Securities ASA said. China imported 52.9 million metric tons of iron ore in April, down from 59.5 million tons in March, according to data from the country’s General Administration of Customs. Buyers were deterred by higher prices, Hu Kai, an analyst with researcher Umetal.com, said. Import prices at Tianjin port rose 5.3 percent in April, according to Steel Business Briefing Commodities Research. “We expect iron ore imports in May and June to remain at lower levels due to closure of steel mills as some regions struggle with electricity shortages,” Erik Nikolai Stavseth, an Oslo-based analyst with Arctic, said in an e-mailed note today.

Wall Street Journal:

• Sovereign Wealth Funds Fight for Reputation. The world's largest government-controlled investment funds are gathering in Beijing this week to discuss ways to blunt criticism that their investments are driven by political agendas. The so-called sovereign-wealth funds are seeking to better coordinate their approach as they look to put their vast resources to work world-wide.
• U.S. Pushes China on Human Rights. The U.S. risked China’s wrath by pressing the world’s second-biggest economy on its human rights record, with Secretary of State Hillary Clinton calling it a “fool’s errand” to try and deter dissent and free speech. In an interview with The Atlantic magazine, the top U.S. diplomat accused China “of trying to stop history, which is a fool’s errand.” In some of her strongest language to date, Clinton called China’s human-rights record “deplorable,” according to excerpts of an April 7 interview published today. She cited reports of arrests and “disappearances” of artists, journalists and bloggers. To underline the message, Vice President Joe Biden indicated that criticism on this front would continue -- even at the risk of irritating Chinese authorities, who view it as an intrusion into domestic affairs.
• Latest Treasure Is Location Data. As Lawmakers Ready Hearings, Insurers, Car Makers, Even Shopping Malls Seek to Track Customers. Cellphones that collect people's locations are only the tip of the iceberg: Auto makers, insurance companies and even shopping malls are experimenting with new ways to use this kind of data. Location information is emerging as one of the hottest commodities in the tracking industry—the field of companies that are building businesses based on people's data. Some companies are using the data to build better maps or analyze traffic patterns. Others send users advertisements for services near where they are located. Some insurers hope to use the data to provide discounts to better drivers. On Tuesday in Washington, D.C., a Senate Judiciary subcommittee plans a hearing to consider whether a federal law is required to protect consumer privacy on mobile devices.
• Goldman(GS) Discloses CFTC Probe. Goldman Sachs Group Inc. said the Commodity Futures Trading Commission is investigating its Goldman Sachs Execution and Clearing division's role as clearing broker for an unnamed SEC-registered broker dealer. The agency has orally advised Goldman it intends to bring aiding and abetting, civil fraud and supervision-related charges against the Goldman operation related to its clearing services for this broker-dealer, it added in its quarterly regulatory filing. The CFTC, Goldman said, is basing these charges on allegations the Wall Street giant knew or should have known that the client's subaccounts at Goldman were accounts belonging to customers of the broker-dealer and not the broker-dealer's own accounts.
• Mississippi River Crests in Memphis. The Mississippi River crested Tuesday in Memphis just short of 48 feet after threatening to bring record-setting flooding to the area. National Weather Service meteorologist Bill Borghoff said the river reached 47.85 feet at 2 a.m. and is expected to stay close to that level for the next 24 to 36 hours.
• BlueGold Loses 20% on Oil Bets, But Stays Bullish. BlueGold Capital Management LP, one of the most successful hedge funds over the past few years, is now among the biggest losers amid the sudden downturn in commodity markets. BlueGold, a $2.4 billion London-based fund, has suffered losses of about 20%, or nearly $500 million, so far this month, according to someone close to the matter. The downturn is the firm's worst ever.
  

Business Insider:

• A Quick Look at How Big Hedge Funds Are Trading This Market. (graphs) We went through the latest Hedge Fund Monitor from Bank of America, to find notable moves by large hedge funds across various assets.
• Irish Bombshell: Government Raids PRIVATE Pensions to Pay for Spending.
• Pakistani PM Disses US and Says China Is Its New "All Weather Friend".
• Ken Griffin Explains How The Government Just Enabled Another Huge Bailout of All The Same Firms. Griffin explained in more detail, why he thinks Dodd-Frank is so dangerous.
• More Bad News For Food Prices, As US Crop Situation Deteriorates.
  

New York Times:

• Syria Proclaims It Now Has Upper Hand Over Uprising. The Syrian government has gained the upper hand over a seven-week uprising against the rule of President Bashar al-Assad, a senior official declared Monday, in the clearest sign yet that the leadership believes its crackdown will crush protests that have begun to falter in the face of hundreds of deaths and mass arrests.
• Merkel Resists Pressure on New Aid for Greece. Ignoring mounting criticism from Greece and Ireland over the terms of their bailouts, Chancellor Angela Merkel refused Tuesday to commit Germany to any changes and insisted that “bold reforms” were the only way to make their economies stronger. Mrs. Merkel, as leader of Europe’s strongest economy and the biggest contributor to the rescue package, gave no indication that Germany would be willing to grant more aid — and certainly not at next week’s meeting of E.U. finance ministers. She said she would wait until officials from the E.U., the European Central Bank and the International Monetary Fund complete their assessment of Greece’s progress, particularly about how it was implementing its “bold reforms.” That report is due in June.

ChinaLawBlog:

• US Listed Chinese Company Troubles. Hidden In Plain Sight.

The Detroit News:

• Former GM Execs Sue For Retirement Benefits. More than 100 former General Motors executives are suing the automaker in federal court to recoup pension benefits slashed during the company's historic bankruptcy. The retirees, including former vice presidents and high-ranking managers, are trying to recoup benefits plus interest and want a federal judge to order GM to accurately pay future benefits.

Reuters:

• Slovak Prime Minister Iveta Radicova said restructuring of Greek debt will be inevitable at some point to overcome the country's fiscal crisis. Private financial institutions will need to share losses stemming for such restructuring, she said in an interview.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.45%)

Sector Underperformers:

• 1) Coal -1.37% 2) Gold & Silver -.25% 3) Alt Energy -.06%

Stocks Falling on Unusual Volume:

• IILG, PANL, ITMN, FNGN, HOLI, IOSP, PLCM, SIRO, MOBI, DIOD, EBIX, MDSO, SPRD, ROSE, JRCC, FMCN, CLNE, RIMM, SAFM, LINC, LRN, CNK, MDC, DHX and BID
  

Stocks With Unusual Put Option Activity:

• 1) BSX 2) EWA 3) SID 4) DIS 5) DOW
  

Stocks With Most Negative News Mentions:

• 1) AGP 2) RKT 3) TLB 4) CPB 5) APA
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value (+1.12%)

Sector Outperformers:

• 1) Education +1.70% 2) Utilities +1.48% 3) Oil Tankers +1.31%

Stocks Rising on Unusual Volume:

• TRNX, SNHY, FOSL, TRAK, FEIC, CVLT, PTRY, KITD, OPNT, HELE, CROX, EBAY, SXCI, AZPN, TWGP, GSM, GLBC, SREV, MED, DF, SLH, CE, AZPN, CVI, PPO, PLT, FE, DK, SHOR and CXW
  

Stocks With Unusual Call Option Activity:

• 1) TIE 2) LCC 3) STI 4) HOC 5) CIEN
  

Stocks With Most Positive News Mentions:

• 1) ALKS 2) SAM 3) ARG 4) CHD 5) XEC

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Euro Falls Before Greece Auctions Bills Amid Debt Restructuring Concern. The euro fell to a six-week low against the yen before Greece sells Treasury bills today amid speculation the nation will need to restructure its debt. The 17-nation currency dropped against 11 of its 16 major counterparts after Standard & Poor’s fourth downgrade of Greece since April 2010 rekindled concern the region’s debt crisis is escalating. Australia’s dollar slid before Treasurer Wayne Swan releases his budget today amid assurances of spending cuts. New Zealand’s dollar dropped after the International Monetary Fund said the currency may be as much as 20 percent overvalued. “The markets now view a restructuring of Greece’s debt as a possibility, whereas they hadn’t previously,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a foreign-exchange margin company. “The euro is likely undergoing a downward correction. We may see risk aversion, which would probably benefit the yen.” Greece is scheduled to sell 1.25 billion euros ($1.79 billion) in an auction of 182-day bills today.
• China Has Bigger-Than-Forecast $11.4 Billion Trade Surplus. China reported a more-than-estimated $11.4 billion trade surplus for April as U.S. officials pushed at talks in Washington for faster gains in the yuan. Today’s number, released by the customs bureau, compared with a surplus of $140 million the previous month and $1.68 billion a year earlier.
• Google's(GOOG) YouTube Adding 3,000 Rentals, Challenging Netflix(NFLX). Google Inc. (GOOG)’s YouTube website will add “The King’s Speech,” “Inception” and about 3,000 other titles to its movie-rental service, accelerating its shift into Hollywood entertainment and stepping up competition with Netflix Inc (NFLX). YouTube is adding films from Sony Corp. (6758), Time Warner Inc.’s Warner Bros., Comcast Corp.’s Universal Pictures and Lionsgate, according to a statement today. The additions will push YouTube’s total movie rentals available to more than 6,000. Most of the newer titles will cost $3.99 and up to rent.
• China Money-Supply Jump Potential 'Time-Bomb': Chart of the Day. The growth of China's M2 money supply, which has exceeded the U.S. total, signals further declines in commodities and stocks as it boosts prospects for more interest-rate increases, according to investor Marc Faber. Money supply in China, including money in circulation and deposits, is increasing even after the central bank raised borrowing costs four times and increased banks' reserve requirements seven times since mid-October. "The next time-bomb could be detonated by some adverse economic developments in China," said Faber. "When everybody thinks alike, I become very defensive," said Faber. "I'm deferring any new purchases of the beneficiaries of the inflation trade, except for gold," he said.
• Copper imports by China, the largest consumer, fell 14% in April from the previous month as ample domestic supplies weighed down local prices, curbing demand for more expensive foreign shipments. Inbound movements of copper and products dropped to 262,676 metric tons from 304,299 tons in March, the General Administration of Customs said on its Web site today. The imports were 40% lower than 436,345 tons in April 2010.
  

Wall Street Journal:

• Greek Woes Fuel Fresh Fears. A cut to Greece's credit rating sparked a selloff in the bonds of highly indebted euro-zone countries, fueling concerns that Europe's debt crisis is coming to the boil once more.
  
• Papademos on What Greece Must Do to Address Debt Crisis.
• Floodwaters Spill Into Memphis. Levees Hold as the Swollen Mississippi Nears Record Height, but Some Neighborhoods Are Inundated. The swollen Mississippi River rose to its highest level in nearly 75 years near Memphis, Tenn., Monday, inundating low-lying neighborhoods and acres of farmland and pushing up wholesale gasoline prices as fuel terminals along the waterway closed.
• A Venture-Capital Newbie Shakes Up Silicon Valley. As a newly minted venture capitalist, Marc Andreessen, co-founder of Netscape, aimed for nothing less than big. "Whale" size, as he puts it. Like other investors here, he'd been eying Web companies with explosive growth and global star power. But acquiring shares in tech titans like Facebook is tricky. Most are closely held and don't trade on a public stock market. Interlopers can't simply waltz in. So Mr. Andreessen set out to make his own rules—maneuvering his way into hot private deals at huge cost. Some of his more established rivals weren't amused.
  
• Andrew Hall, the $100 Million Man, Loses Big on Oil and Silver. Investors are trying to locate the biggest losers from the recent commodity-price meltdown. From the sound of a letter sent by well-known trader Andrew Hall to clients days before the tumble began, he would appear to be a prime candidate. And Reuters reported his flagship commodities fund posted declines of 12% last week as oil prices tumbled. But on May 2, Hall, the former star Citigroup trader who now runs Astenbeck Capital Management LLC and also trades for Occidental Petroleum unit Phibro, sounded remarkably bullish about oil, gold and silver – just days before each commodity began tumbling in price. “Some pundits have postulated that the rise in oil prices is sowing the seeds of its own demise” by reducing energy demand, he wrote. “We think not.”
• Paulson Plays the Lehman Bust. Hedge Fund Poised to Score Big on Doomed Bank's Bonds; a 78% Return? Hedge-fund manager John Paulson made $4 billion betting against subprime mortgages, the market that ultimately helped destroy Lehman Brothers Holdings Inc. Now, his fund is poised to make hundreds of millions picking through the investment bank's remains. Mr. Paulson's fund has been snatching up Lehman debt at steep discounts since the day the investment bank collapsed, betting prices would rise while panicked investors fled. Now, as Lehman's estate prepares to wind down, Mr. Paulson's fund could reap profits between $350 million and $726 million on the Lehman trades.
• Military Draws Up Afghan Exit Plan. U.S. military officers in Afghanistan have drawn up preliminary proposals to withdraw as many as 5,000 troops from the country in July and as many as 5,000 more by the year's end, the first phase of a U.S. pullout promised by President Barack Obama, officials say. The proposals, prepared by staff officers in Kabul, are likely to be the subject of fierce internal debate in the White House, State Department and Pentagon—a discussion influenced by calculations about how Osama bin Laden's death will affect the Afghan battlefield.
• Reports of Mortgage Fraud Reach Record Level. Reports of mortgage fraud, which have been increasing since the housing boom, rose to their highest level on record in 2010, Treasury Department figures showed. The Financial Crimes Enforcement Network, a Treasury agency, reported 70,472 "suspicious activity reports" related to suspected mortgage fraud, up from 67,507 in 2009, or a 5% increase. That's the highest number recorded by the government since tracking began in 1996. At the height of the U.S. housing boom, in 2006, more than 37,000 fraud reports were recorded. In 2001, before the housing market heated up, there were 4,695 reports of suspected mortgage fraud.
• Boehner's Debt-Limit Marker. Ah, but what about the bond markets—won't they panic as the debt limit draws near and Treasury predicts disaster? We doubt it. Bond holders want above all to know they'll be repaid, preferably in uninflated dollars, and the best guarantee of repayment will be evidence that Washington has finally donned a fiscal straightjacket. The real path to default is to keep raising the debt limit as if the Treasury can borrow more forever. Ask the Greeks (see below) how that's working out.

CNBC:

• Dennis Gartman: Early Stages Of EU Falling Apart? Though it may sound dramatic, investors are honestly starting to wonder if the financial situation in Europe is about to cause another crisis.

Business Insider:

• Microsoft(MSFT) Close To Buying Skype For $7+ Billion.

Zero Hedge:

• Greece: What's Next? Restructuring. When? Sooner Than You Think.
• And Here They Go For Round Two: CME(CME) Hikes Brent, Crude Margins by 25%, First of Many Such Moves.
  

NY Times:

• House Financial Services Committee Goes Digital. The House Financial Services Committee, which oversees Wall Street and its regulators, caught up with the digital age on Monday as it unveiled a revamped Web site and a blog entitled The Bottom Line.

Forbes:

• Stop Demonizing Drug Companies Over Pay-To-Delay Deals. Drug companies have done their share of sinning over the past decade, but that’s no reason to turn every controversy over drug development into a morality play in which Big Pharma is a villain.
  

Real Clear Politics:

• Wallace to Donilon: If Shooting Bin Laden Is OK, 'Why Can't You Do Waterboarding?' Wallace: We'll stipulate -- I think we'll all stipulate -- that bin Laden was a monster, but why is shooting an unarmed man in the face legal and proper while enhanced interrogation, including waterboarding of a detainee under very strict controls and limits -- why is that over the line?

Reuters:

• PIMCO Raises Bet Against U.S. Government Debt. PIMCO's Bill Gross, the manager of the world's largest bond fund, raised his bet against U.S. government-related debt in April to 4 percent from 3 percent, according to the company's website on Monday.
• "Frothy" U.S. Farmland Values Sideline Some Investors. Rising prices for farmland in the U.S. Midwest and fears that values may be creating an artificial bubble are driving some investors to the sidelines, though strong farm balance sheets are sustaining interest in many sectors, investment experts said on Monday. Surging prices for key row crops, such as corn, soybeans and wheat, are helping support rising values that jumped more than 10 percent in the U.S. Midwest last year and have continued to climb. But if crop prices should plummet, land values could fall rapidly. Farmland values have jumped more than 50 percent above their 2000 levels in inflation-adjusted terms, with investors competing against farmers for accumulation of high-quality land.
• US Republicans Press For Results From US - China Talks. Congressional Republicans on Monday urged the Obama administration to hold China's feet to the fire over currency and industrial policies they said are hurting American companies. "The U.S.-China relationship is critically important. But much work needs to be done to strengthen that relationship and improve U.S. market access into China," Republican members of the House of Representatives Ways and Means Committee said. They put their message in a letter to U.S. Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton, who hosted Chinese officials beginning on Monday two days of high-level talks on economic and geopolitical concerns.
• Dutch Fund Among Hardest Hit by Commodities Rout - Source. Dutch hedge fund Transtrend, owned by Rabobank NV, was one of the biggest losers in last week's commodities slide, an industry source told Reuters on Monday. An official at the fund confirmed it was a "very bad week". The fund's $6 billion flagship portfolio suffered a loss of around 9 percent, according to a fund manager who has seen its reports to client.

Telegraph:

• Greece Angered by S&P Rating Cut. At the same time, the rating agency cut Greece's credit rating from BB- to B, dragging its debt further into junk territory to reflect its more gloomy views. Greece hit back at the downgrade, angrily denying any imminent restructuring. The Greek finance ministry said that there have been "no new developments or decisions since the last rating action" by S&P a month ago so the agency's views were "not justified." In a statement, the ministry added: "Decisions by ratings agencies must be based on objective data, policy makers' announcements and realistic assessments on the conditions facing an economy... When such decisions are based simply on rumours, their validity is seriously cast in doubt".

China Daily:

• China's economic development faces a "bottleneck period" as the government acts to slow growth, cooling inflationary pressures and a "frenetic" real estate market, Zhang Monan, a researcher with the State Information Center, wrote. China's "high-speed growth" of the past 10 years is not expected to last as the country faces pressure from global competition in exports, rising wages and resources prices, and yuan appreciation, Zhang said.
  

Hong Kong Economic Times:

• China's expanding credit by banks raises the risk of a property bubble and constitutes a "huge" risk to the financial system, Yi Xianrong, a researcher with the Chinese Academy of Social Sciences, wrote in a commentary.

Evening Recommendations
Citigroup:

• Rated (MDVN) Buy, target $35.
• Reiterated Buy on (BEN), target $163.

CSFB:

• Rated (APO) Outperform, target $23.

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 106.0 -1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 113.50 -.75 basis point.
  
• S&P 500 futures -.22%.
  
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MDC)/-.44
• (WEN)/.02
• (DF)/.06
• (FOSL)/.66
• (NUAN)/.31
• (DIS)/.57
• (GMR)/-.30
• (PEGA)/.17
• (MDR)/.28
• (EBIX)/.37
• (CVLT)/.23
  

Economic Releases
8:30 am EST

• The NFIB Small Business Optimism Index for April is estimated to fall to 91.8 versus 91.9 in March.
• The Import Price Index for April is estimated to rise +1.8% versus a +2.7% gain in March.

10:00 am EST

• Wholesale Inventories for March are estimated to rise +1.0% versus a +1.0% gain in February.

Upcoming Splits

• (ACGL) 3-for-1
  

Other Potential Market Movers

• The weekly retail sales reports, IDB/TIPP Economic Optimism Index for April, Jefferies Tech/Internet/Media/Telecom Conference, Interop Las Vegas, BofA Merrill Health Care Conference, Wells Fargo Industrials/Construction Conference, UBS Financial Services Conference, BofA Merrill Lynch Smid Cap Conference, BofA Metals/Mining Conference, Robert Baird Growth Stock Conference, (JKHY) analyst day, (XRX) investor conference and the (CE) investor meeting 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 modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

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.