Stocks Falling into Final Hour on Global Growth Worries, Eurozone Debt Concerns, Emerging Market Inflation Fears, More Shorting

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.26 +8.55%
  
• ISE Sentiment Index 74.0 -37.82%
  
• Total Put/Call .95 +20.25%
  
• NYSE Arms 1.80 +62.49%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.44 -.61%
  
• European Financial Sector CDS Index 92.17 +2.65%
  
• Western Europe Sovereign Debt CDS Index 187.92 -.62%
  
• Emerging Market CDS Index 206.46 +.86%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 24.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .02% -1 bp
  
• Yield Curve 261.0 unch.
  
• China Import Iron Ore Spot $179.60/Metric Tonne -.06%
  
• Citi US Economic Surprise Index -35.30 -2.7 points
  
• 10-Year TIPS Spread 2.44% -5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -110 open in Japan
• DAX Futures: Indicating -31 open in Germany

Portfolio:

• Lower: On losses in my Biotech, Medical and Tech sector longs
  
• Disclosed Trades: Added (IWM)/(QQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades near session lows on above average volume despite falling food/energy prices, a strong US dollar and falling long-term rates. On the positive side, Airline, Retail, HMO and Gaming shares are rising on the day. The US sovereign cds is falling -4.19% to 41.18 bps. Oil is falling -4.4%, gold is down -.71% and the UBS-Bloomberg Ag Spot Index is down -2.4%. The 10-year TIPS spread is technically weak and close to a breakdown. The 10-year yield is falling -5 bps to 3.16%. On the negative side, Road & Rail, Homebuilding, Disk Drive, Steel, Ag, Oil Service, Energy, Oil Tanker, Alt Energy and Coal shares are under significant pressure, falling more than -2.0%. The US price for a gallon of gas is rising +.01/gallon today to $3.96/gallon. It is up .84/gallon in 85 days. Copper is falling -3.32% and lumber is falling -1.87%. Copper is breaking down below its 200-day moving average for the first time in months. Lumber has collapsed about -30.0% in six weeks. The Shanghai Composite finished at session lows overnight, falling -.25%, despite strength in the rest of Asia. Moreover, Brazil's Bovespa continues to trade very poorly, falling another -1.7% today and is now down -8.0% for the year. Given how many large funds are heavily weighted in commodity-related securities, and remained bullish even after recent sharp losses, I suspect some high-profile casualties may occur over the coming weeks. I expect US stocks to trade mixed-to-lower into the close from current levels on technical selling, more shorting, eurozone debt worries, rising Mideast unrest, global growth concerns, emerging market inflation fears and profit-taking.

Bear Radar

Style Underperformer:

• Small-Cap Growth (-1.67%)

Sector Underperformers:

• 1) Gold & Silver -4.23% 2) Disk Drives -3.55% 3) Oil Service -3.50%

Stocks Falling on Unusual Volume:

• ALJ, SWC, WTI, FCX, IMO, SU, CPTS, STEC, YHOO, THOR, ACOM, PETD, PANL, SNHY, BCSI, HTHT, LQDT, SSRI, IDCC, FEIC, APEI, HRBN, NXPI, CWEI, AREX, FMCN, AYR, DIS, CYD, IAI, BID, BKH, FNB, RTI, XLE, SFD, MWE, IEZ, IEO, FNB, NRGY, KLIC, HPY, XOP, STWD, SWFT, SIL, RAX, UCO, SLV, AH and IL
  

Stocks With Unusual Put Option Activity:

• 1) NG 2) M 3) DTV 4) EWA 5) DIS
  

Stocks With Most Negative News Mentions:

• 1) BMC 2) TYC 3) CME 4) COP 5) GS
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.25%)

Sector Outperformers:

• 1) Gaming +.86% 2) Retail +.50% 3) Airlines +.30%

Stocks Rising on Unusual Volume:

• AIG, CREE, INTC, JNPR, JNJ, GSK, GLBC, KWK, BAC, TWTC, GCOM, ROVI, IPSU, PEGA, ZAGG, TYPE, ESIO, TZOO, MDSO, SNDA, ECPG, TEVA, TRNS, ASMI, RVBD, BBRG, LMNX, ADBE, CHTR, AGM, RUK, M, SPB, SCO and GNW
  

Stocks With Unusual Call Option Activity:

• 1) GNW 2) XLK 3) DTG 4) M 5) MRVL
  

Stocks With Most Positive News Mentions:

• 1) NUAN 2) AYI 3) INTC 4) OII 5) IPAR

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• China Says It Will Try to Control Inflation, Boost Imports. China said it faces challenges from rising consumer prices and will maintain a “prudent” monetary policy, according to a statement released today following the annual Strategic and Economic Dialogue with U.S. officials. “China will guide its monetary policy to return to normality from an anti-crisis status,” according to the statement distributed by the Chinese delegation to the talks in Washington. “It will try to meet reasonable demand for capital needed for economic growth, while focusing on removing inflationary monetary elements.”
• China Inflation Over 5% Signals More Tightening. China’s inflation held above 5 percent in April and lending exceeded analysts’ estimates, signaling that further monetary tightening may be needed to cool the fastest-growing major economy. Consumer prices rose 5.3 percent from a year earlier and banks extended 740 billion yuan ($114 billion) of local-currency loans, according to reports from the statistics bureau and central bank. Weaker industrial-output growth, also reported today, may diminish price pressures in coming months. Today’s data showed that inflation has exceeded Premier Wen Jiabao’s 4 percent target each month this year. “Inflation is too high and will keep the policy bias in favor of more action over the next few months -- we expect another two rate hikes and further yuan appreciation against the dollar,” said Brian Jackson, an emerging markets strategist at Royal Bank of Canada. “The data looks bad,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. “The economy is slowing more sharply than expected but inflation is not.”
• YPF Makes Argentina's Largest Oil Discovery in Two Decades. YPF SA (YPF), Argentina’s largest company by market value, said it’s discovered the equivalent of about 150 million barrels of shale oil at a field in southern Patagonia, the country’s largest discovery in two decades. YPF, in which Madrid-based Repsol YPF SA (REP) is the controlling shareholder, made the find in the Loma La Lata field, YPF Chief Executive Officer Sebastian Eskenazi said today in a televised speech from Neuquen province. YPF found 4.5 trillion cubic feet of unconventional natural gas in the same area in December.
• Microsoft)MSFT)-Skype Deal May Upset AT&T(T), Verizon(VZ). Microsoft Corp. (MSFT) may have a tougher time convincing wireless operators to support mobile phones with Windows software after its $8.5 billion purchase of Skype Technologies SA, analysts said. Skype’s Internet-calling service will be on Windows phones, as well as Microsoft’s Xbox and Kinect game consoles, the Redmond, Washington-based company said today.
• Fukushima Students Wear Masks as Radiation Looms. Students at the Shoyo Junior High School in Fukushima are wearing masks, caps and long-sleeved jerseys to attend classes as their exposure to radiation is on pace to equal annual limits for nuclear industry workers. “Students are told not to go out to the school yard and we keep windows shut,” said Yukihide Sato, the vice principal at Shoyo Junior High in Date city, about 60 kilometers (37 miles) northwest from the crippled Fukushima Dai-Ichi nuclear station. “Things are getting worse, but I don’t know what to do.” Two months after the March 11 earthquake and tsunami created Japan’s worst nuclear crisis since World War II, schools in Fukushima are waiting for stronger measures from the government to protect its youngest citizens. A parents group will send a petition to Governor Yuhei Sato at 3 p.m. today, asking for the evacuation of more than 1,600 kindergartens, elementary and junior high schools affecting about 300,000 children and teachers. More than three-quarters of the schools receive radiation readings of 0.6 microsievert per hour, Nakate said. That’s 10 times more than the readings in Shinjuku, central Tokyo last week. A chest X-ray delivers a radiation dose of about 100 microsieverts, or 0.1 millisievert, according to the U.S. Food and Drug Administration. A millisievert is 1,000 microsieverts. Readings at Shoyo Junior High reached 3.3 microsieverts an hour on May 2, according to Date city’s education board. The school, which has 245 students and 27 teaching staff, bans female students from wearing skirts, citing radiation concerns, said Vice Principal Sato.

Wall Street Journal:

• Banks Float $5 Billion Deal to End Foreclosure Probe. The nation's biggest banks are willing to pay as much as $5 billion to settle claims by federal and state officials of improper mortgage-servicing practices, according to people familiar with the situation. Such an offer is considerably less than the amounts sought by state and federal officials, some of whom are asking for more than $20 billion in penalties.
• Facebook Security Flaw Exposed User Accounts. A security vulnerability on Facebook Inc. for years gave advertisers and other third parties a way to access users' accounts and personal information, according to security firm Symantec Corp. But Facebook said Tuesday it had fixed the problem and found no evidence of the issue resulting in private information being leaked.
• AIG(AIG) Offering Near Low End of Range. American International Group Inc. and the Treasury decided to move ahead with a stock offering this month for about $9 billion, far less than what officials had once hoped to fetch, people familiar with the decision said.
• Shrinking Oil Supplies Put Alaskan Pipeline at Risk. When the famed Trans Alaska Pipeline carried two million barrels of oil a day, the naturally warm crude surged 800 miles to the Port of Valdez in three days and arrived at a temperature of about 100 degrees. Now, dwindling oil production along Alaska's northern edge means the pipeline carries less than one-third the volume it once did—and the crude takes five times as long to get to its destination.
• Washington Vs. Energy Security by Harold Ford, Jr. Even former President Clinton calls the Obama administration's deep water drilling policy 'ridiculous.'
  
• Boeing(BA) Is Pro-Growth, Not Anti-Union by Jim McNerney. Washington's actions have assaulted the capitalist principles that have sustained America's competitiveness since it became the world's largest economy nearly 140 years ago. Deep into the recent recession, Boeing decided to invest more than $1 billion in a new factory in South Carolina. Surging global demand for our innovative, new 787 Dreamliner exceeded what we could build on one production line and we needed to open another. This was good news for Boeing and for the economy. The new jetliner assembly plant would be the first one built in the U.S. in 40 years. It would create new American jobs at a time when most employers are hunkered down. It would expand the domestic footprint of the nation's leading exporter and make it more competitive against emerging plane makers from China, Russia and elsewhere. And it would bring hope to a state burdened by double-digit unemployment—with the construction phase alone estimated to create more than 9,000 total jobs. Eighteen months later, a North Charleston swamp has been transformed into a state-of-the-art, green-energy powered, 1.2 million square-foot airplane assembly plant. One thousand new workers are hired and being trained to start building planes in July. It is an American industrial success story by every measure. With 9% unemployment nationwide, we need more of them—and soon. Yet the National Labor Relations Board (NLRB) believes it was a mistake and that our actions were unlawful.

Business Insider:

• Here's What John Paulson Said On Housing, Financials, And Gold at UBS's Financial Services Conference.
• Even Mammoth Hedge Fund Man Group Wasn't Immune From Last Week's Oil Crash. Add Man Group to the list of hedge funds, including Astenbeck, Clive Capital and BlueGold, that had a commodity-heavy portfolio crushed when oil nosedived last week. The hedge fund's AHL strategy lost 5.3% last week, according to Marketwatch.
• Goldman Sachs(GS) On The "Crescendo" Of Higher Food, Fuel, And Apparel Prices Coming Later This Year.
  

Zero Hedge:

• NYSE Short Interest Jumps to Highest in 2011, Just In Time For the Squeeze. (graph)
• Aaaand... It's Gone: Tiny Tim Plans Shelving of AIG(AIG) Stock Offering After Stock Plunge Continues.
  

IBD:

• DIY Stores Home Depot(HD) and Lowe's(LOW) Make A Comeback.

Forbes:

• SEC to Raise Threshold for Hedge Fund and Private Equity Fund Investments. It will soon become just a little harder to get past the velvet rope…Today, the Securities and Exchange Commission (SEC) announced its plan to raise certain dollar thresholds that would need to be met before investment advisers can charge their clients performance fees. Performance fees, also known as “carried interest”, are a feature of almost all private equity funds, venture capital funds, hedge funds and other “alternative investment” vehicles. The SEC is required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), by July 21, 2011, and every five years thereafter, to adjust for inflation these dollar amount thresholds. Accordingly, the SEC today announced that it intends to issue an order to revise the dollar amount tests to $1 million for assets under management and $2 million for net worth. As a result, a significant number of individual investors who may previously have been eligible to invest in these alternative funds will soon be excluded. So much for getting into the venture capital fund that backs the next Skype!
• Removing Reserve Bank Presidents From FOMC: Another Bad Idea by Robert McTeer. As if the Dodd-Frank monstrosity weren’t bad enough, along comes another bad idea that falls under the category of no good deed goes unpunished. Mr. Frank has now proposed that the Reserve Bank presidents be removed from the FOMC. He apparently wants a more centralized central bank, centralized—guess where?—in Washington, D.C.
  

CNNMoney:

• U.S. Postal Service Reports $2.2 Billion Loss. The U.S. Postal Service continues to hemorrhage money, with a loss of $2.2 billion in the most recent quarter. The national mail service said Tuesday that it expects to have a cash shortfall and reach its statutory borrowing limit by the time its fiscal year ends in September. That means the agency could be forced to default on some of its payments to the federal government.

NY Times:

• Federal Retreat on Bigger Loans Rattles Housing. For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree. But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.

Seeking Alpha:

• Top Regional Bank Picks by Hedge Fund and Mutual Fund Gurus.

Patently Apple:

• Apple(AAPL) Wins Patents for the iOS Virtual Keyboard, Cover Flow and a Never Released iPad Design and More. The US Patent and Trademark Office officially published a series of 16 newly granted patents for Apple Inc. today. The notables within this group include patents for iLife's iDVD application, a method for creating Web Clip Widgets for iOS devices, Cover Flow and iOS's virtual keyboard. Yet the one granted patent that really stood out this morning was that of an iPad design that never came to market. You just might find it interesting to see what that missing feature is.
  

Reuters:

• CIA To Let Some U.S. Senators See Bin Laden Photos. The CIA has informed two Senate committees that their members can view post-mortem photos of al Qaeda leader Osama bin Laden if they wish, a congressional aide said on Tuesday.
• Disney's(DIS) Rare Revenue Miss Hurts Shares. Walt Disney Co(DIS) reported a rare results miss after "Mars Needs Moms" capped a disappointing quarter at the U.S. box office, sending its shares down 3 percent.
• Rovi(ROVI) Ups FY EPS View On Sonic Synergies, Shares Rise. Rovi Corp raised its full-year profit outlook as it begins to gain from the Sonic Solution integration, sending the Digital entertainment technology firm's shares up 12 percent in extended trade.
• Molycorp(MCP) Narrows Loss as Rare Earth Prices Soar. Shares of Molycorp fell more than 5 percent in aftermarket trading on Tuesday, after the company narrowed its quarterly loss on soaring rare earth oxide prices, but missed analyst expectations.
• The European Union's cap on carbon emissions from airlines must take into account differences between developed and emerging countries, citing Li Jiaxiang, head of the Civil Aviation Administration of China.
  

21st Century Business Herald:

• China will likely lower export tax rebates for some products made by high-polluting, energy-intensive industries or those with overcapacity in the middle of this year to cut the trade surplus.
• China's exports will likely grow less than 20% this year, citing Huo Jianguo, head of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. Export growth will slow in coming months, Huo said.
  

Shangdong Business Daily:

• China central bank adviser Li Daokui said there's still room for interest rate increases, citing Li who made the remarks in the city of Jinan in Shangdong province. The nation's interest rates still need two to three rounds of adjustments to reach the goal of curbing inflation expectations, citing Li.

Evening Recommendations
Citigroup:

• Reiterated Buy on (CE), target $63.
• Reiterated Buy on (CCOI), target $19.

Night Trading

• Asian equity indices are +.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 105.0 -1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 114.0 +.5 basis point.
  
• S&P 500 futures +.06%.
  
• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (M)/.18
• (CSCO)/.37
• (SYMC)/.36
  

Economic Releases
8:30 am EST

• The Trade Deficit for March is estimated to widen to -$47.0 Billion versus -$45.8 Billion in February.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +3,421,000 barrel increase the prior week. Distillate supplies are estimated unch. versus a -1,398,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -750,000 barrels versus a -1,046,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.32% versus a +.1% gain the prior week.

2:00 pm EST

• The Monthly Budget Deficit for April is estimated to shrink to -$41.0 Billion versus -$82.7 Billion in March.

Upcoming Splits

• (ACGL) 3-for-1
  

Other Potential Market Movers

• The weekly MBA mortgage applications rep0rt, JOLTs Job Openings for March, RBC Capital Aerospace/Defense Conference, CSFB Capital Equipment Conference, Barclays Global Services Conference, Deutsche Bank Alt Energy/Utilities/Power Conference, (LXK) analyst meeting, (CSC) investor meeting, (TLM) investor day, (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 financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

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.