Stocks Falling into Final Hour on Global Growth Concerns, Tech Sector Weakness, Growing Mideast Unrest, More Shorting

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 17.58 +2.99%
  
• ISE Sentiment Index 119.0 +35.23%
  
• Total Put/Call .92 -1.08%
  
• NYSE Arms .80 -52.94%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.76 +.59%
  
• European Financial Sector CDS Index 93.17 +.99%
  
• Western Europe Sovereign Debt CDS Index 176.25 -1.67%
  
• Emerging Market CDS Index 205.50 -.28%
  
• 2-Year Swap Spread 19.0 unch.
  
• TED Spread 24.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.
  
• Yield Curve 263.0 -1 bp
  
• China Import Iron Ore Spot $178.50/Metric Tonne -.17%
  
• Citi US Economic Surprise Index -38.30 -3.9 points
  
• 10-Year TIPS Spread 2.35% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -2 open in Japan
• DAX Futures: Indicating -24 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows despite falling energy prices, less eurozone debt angst and falling long-term rates. On the positive side, Airline, HMO and Paper shares are especially strong, rising more than +.5%. (XLF) and (IYR) have outperformed throughout the day. The transports are also relatively strong. Gold is down -.07%, oil is falling -2.23% and lumber is rising +.91%. Silver is down another -4.1% today and has collapsed -32.1% in less than 1 month. The 10-year TIPS spread continues to weaken. The 10-year yield is falling -2 bps to 3.15%. The Spain sovereign cds is falling -4.22% to 225.51 bps, the Portugal sovereign cds is down -4.05% to 593.32 bps, the Ireland sovereign cds is falling -4.9% to 600.11 bps and the Belgium sovereign cds is down -6.58% to 126.53 bps. On the negative side, Gaming, Biotech, Networking, Disk Drive, Computer, Software, Internet, Oil Tanker and Alt Energy shares are under significant pressure, falling more than -1.50%. Small-cap shares are underperforming again. The tech sector is very "heavy" today. The US price for a gallon of gas is falling -.02/gallon today to $3.96/gallon. It is up .82/gallon in 89 days. The UBS-Bloomberg Ag Spot Index is rising +.34% and copper is down -.16%. The China sovereign cds is gaining +1.0% to 71.30 bps, the Israeli sovereign cds is gaining +.75% to 145.03 bps and the US Muni CDS Index is rising +.91% to 125.48 bps. Commodities continue to trade as if further downside is in store. The last time the 10-year TIPS spread broke down technically, which is a longer-term positive, the S&P 500 began a -15% correction in early May 2010. Moreover, the very poor technical action in key stocks, remains a large concern. Asian equities finished near their lows overnight. India's Sensex fell another -1.01% and is now down -10.55% ytd. Brazil's Bovespa also displays very poor technicals, falling another -.8% today and is now down -9.3% ytd. It appears as though more weakness in US stocks is becoming more likely 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.

Today's Headlines

Bloomberg:

• IMF's Strauss-Kahn Ordered Held Without Bail. International Monetary Fund chief Dominique Strauss-Kahn, accused of attempting to rape a hotel maid, was ordered held without bail by a New York judge.
  
• Manufacturing in New York Slows More Than Estimated on Raw-Material Costs. Manufacturing in the New York region expanded at a slower pace than forecast in May, showing that surging raw-material costs are hurting confidence. The Federal Reserve Bank of New York’s general economic index fell to 11.9 from a one-year high of 21.7 in April, the central bank reported today.
• Homebuilder Confidence Fell This Month on Sales Outlook, NAHB Index Shows. Confidence among U.S. homebuilders fell in April, led by a decline in the outlook for sales, a sign the residential construction market may languish near record-low levels. The National Association of Home Builders/Wells Fargo sentiment index declined to 16 this month from 17 in March, data from the Washington-based group showed today. A measure of sales expectations for the next six months dropped to the lowest level since October, and a gauge of current purchases also fell.
• Global Demand for U.S. Assets Fell in March. Global demand for U.S. long-term financial assets such as government bonds slowed in March as investors shifted into shorter-term securities and China trimmed its portfolio of Treasuries. Net buying of long-term equities, notes and bonds totaled $24 billion during the month, compared with net buying of $27.2 billion in February, according to statistics issued today in Washington.
• Tepco Says Fuel in 2 Reactors May Have Melted. Tokyo Electric Power Co. said fuel in other reactors at its damaged nuclear plant may have melted, after confirming rods in the No. 1 unit had fallen from their assembly, potentially delaying plans to resolve the crisis. “The findings at the No. 1 reactor indicate the likelihood that the water level readings in the other reactors aren’t accurate,” Junichi Matsumoto, a general manager at the utility known as Tepco, said today. “It could be that a meltdown similar to that in the No. 1 reactor has occurred.”Moody’s Japan K.K. cut Tepco’s credit ratings and put it on review for further possible downgrade after today’s news. Tepco has been struggling to cool reactors and stop radiation leaks to end the worst nuclear crisis since Chernobyl in 1986. The discovery that fuels rods melted within 16 hours of power being knocked out means it’s unlikely Tepco can meet its timetable for containing the leaks, a nuclear engineering professor said. “Tepco didn’t clearly indicate how much uncertainty and potential negative scenarios were factored into the road map,” said Hironobu Unesaki at Kyoto University. “I don’t think they gathered enough data before coming up with the plan.” Tepco fell 7.3 percent today to 420 yen in Tokyo.
• Pimco Sees Financial Repression in U.S. Amid 'Deteriorating Debt Dynamics'. Pacific Investment Management Co., which runs the world’s largest bond fund, said “deteriorating debt dynamics” will stoke faster inflation and financial repression in the U.S. as well as at least one sovereign-debt restructuring in Europe. “It is a world where several governments in advanced economies, and the U.S. in particular, opt for financial repression and mild inflation as the major way to accommodate their deteriorating debt dynamics,” Newport Beach, California- based El-Erian wrote in a report published today on the firm’s website. “It is a world that heals slowly and unevenly and remains structurally impaired.” Such tactics are evidence officials will continue to “hobble” through in their efforts to propel economies from the aftershocks of the global recession, he said. Europe will remain plagued by its fiscal crisis with “the virtual certainty of at least one, and probably more, sovereign-debt restructurings.”
• Oil Drops on Economy Risk; BofA's Blanch Sees Demand Destruction. Oil dropped for the first day in three in New York after President Barack Obama said failure to raise the U.S. debt ceiling may unravel global finances and threaten growth in the world’s biggest crude consumer. Futures slipped as much as 1.3 percent after Obama said the U.S. “could have a worse recession than we’ve already had,” according to a segment taped for CBS’s “Face the Nation” program. Prices also slid on concern Greece’s debt crisis may worsen, threatening Europe’s economic growth. Oil may drop in the second half of the year amid signs prices are causing demand to slow, said Francisco Blanch, head of Global Commodity Research, Bank of America Merrill Lynch. Crude for June delivery slid as much as $1.30 to $98.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.79 at 1:06 p.m. Sydney time.

Wall Street Journal:

• DOJ Threatened to Sue Over Nasdaq(NDAQ) - NYSE(NYX). Mystery solved. Nasdaq this morning dropped its noisy effort to take over the New York Stock Exchange. It slunk away saying it “became clear” regulators wouldn’t approve a merger of the U.S.’s dominant stock exchanges. Now, the U.S. Department of Justice is taking credit for squashing the Nasdaq deal. the DOJ said Nasdaq and its partner walked away from their $11 billion bid for NYSE “after the Department of Justice informed the companies that it would file an antitrust lawsuit to block the deal.”
• Why The Jobs Market Feels So Dismal by Edward Lazear. The number of hires is the same today as it was when we were shedding jobs at record rates.
• U.S. Condemns Syrian Involvement in Israel. The White House on Monday condemned Syria's involvement in protests along Israel's border over the weekend that led to the death of at least 13 people and urged the countries to show restraint. "We are also strongly opposed to the Syrian government's involvement in inciting yesterday's protests in the Golan Heights," White House Press Secretary Jay Carney said Monday. "Such behavior is unacceptable and does not serve as a distraction from the Syrian government's ongoing repression of demonstrators in its own country."
  

MarketWatch:

• Lowe's(LOW) Cuts Forecast as Sales Drop Unexpectedly.

CNBC.com:

• Medicare, Entitlements on the Table for Cuts: Pelosi. Everything must be on the table as the U.S. Congress works to cut the deficit, including Medicare, Social Security and entitlements, House Minority Leader Nancy Pelosi told CNBC Monday. "All the money is fungible, and at the end of the day the deficit has to be reduced," the California Democrat said the day the $14.3 trillion debt ceiling expired. The government has 11 weeks to raise the debt ceiling or be in default.
• High Commodity Prices to Lower 2011 Growth: Survey. High commodity prices will slow U.S. economic growth and raise inflation this year. The National Association for Business Economics' latest survey showed economists trimmed their 2011 annual average growth estimate to 2.8 percent from 3.3 percent in February. Economists lowered their growth estimates in response to the first-quarter's 1.8 percent annual pace, which was a sharp slowdown from the 3.1 percent rate in the final three months of 2010. Growth was held back by high food and gasoline prices. "Panelists are increasingly concerned about rising commodity prices and inflation," said NABE president Richard Wobbekind. The survey was conducted between April 13 and May 1, and covered 41 economists.
• IMF Chief's Arrest Could Mean Harsher Bailout for Greece.
  

Business Insider:

• The "Facebook of China", the "YouTube of China", and the "Amazon of China" Continue to Get Crushed.

Zero Hedge:

• Treasury Confirms Debt Ceiling To Be Breached Today; Will Tap Pension Funds.
• SocGen On a Chinese Slowdown: Buy China CDS, Sell Hard Commodities. That said, the risks to the global economy, should China implode, are far vaster, and we fail to conceive how the central planning cartel would ever allow this to happen, or the PBoC for that matter, considering today's earlier news of not one but two failed Chinese auctions. From SocGen:
• Full Complaint Against Dominique Strauss-Kahn Released:
• Here It Comes: Shi'ite Iran Sends "Solidarity" Flotilla To Sunni-Controlled Bahrain.
• 2 Chinese Bond Auctions Failed.
  

Internet Retailer:

• Texas Moves Ahead With An Online Sales Tax Bill. The Texas Senate approved by a 30-to-1 vote Friday a bill that would require online and catalog retailers with an in-state physical presence, such as stores or distribution centers, to collect and remit sales tax even if those facilities are operated by subsidiaries. Already approved by the Texas House of Representatives, the bill is expected to go before the governor by the end of this month.

MobileBeat:

• Seagate(STX) Debuts Mobile Wireless Storage for iPhones. Storage giant Seagate is announcing today the first mobile wireless storage device for iOS devices (iPhones, iPads, and iPod Touches). The GoFlex mobile wireless storage device is a battery-powered external hard drive that can wirelessly extend the storage capacity of any Wi-Fi-enabled device. The device can store 500 gigabytes of data and extend a device’s storage via 802.11 b/g/n wireless networking. It has enough storage capacity to back up the entire library of video, music, pictures and documents that most people have on their mobile devices.

Politico:

• Donald Trump Says He Won't Run in 2012. Donald Trump to Donald Trump: “You’re fired.” The publicity-loving New York developer and reality-TV star pulled the plug on his would-be 2012 presidential run Monday afternoon, saying he still believes he'd be best for the job but that he's not ready to give up on making money in the private sector.

Reuters:

• Angela Merkel, IMF Talks Cancelled After Dominique Strauss-Kahn Arrest. Talks between German Chancellor Angela Merkel and arrested IMF chief Dominique Strauss-Kahn, set for Sunday, have been cancelled as the International Monetary Fund will not send a replacement to Berlin, a government source said.

ECO:

• Niall Ferguson, a professor of history at Harvard University in the U.S., said Lehman Brothers Holdings Inc. seems like a "well-run bank" compared with the debt on some German lenders' balance sheets, citing an interview. A restructuring of Greek debt is "unavoidable," Ferguson said. The future of the eurozone largely depends on Germany, he said.

ABC News:

• Japan Extends the Exclusion Zone Around Fukushima. Japan has begun evacuating people from outside the official exclusion zone around the crippled Fukushima nuclear plant. With radiation levels remaining high, small children and pregnant women were the first to be moved with thousands more to be shifted into shelters and temporary housing. As the evacuation zone widened more details have emerged about the meltdown in Fukushima's reactor number one, with revelations the fuel rods probably melted in the hours after the magnitude nine earthquake in March - a fact not discovered until last week.

Bear Radar

Style Underperformer:

• Large-Cap Growth (-.84%)

Sector Underperformers:

• 1) Internet -2.04% 2) Software -1.66% 3) Networking -1.46%

Stocks Falling on Unusual Volume:

• FCX, REDF, ALLT, AMZN, DELL, ISYS, RMBS, HTLD, MDSO, RDEA, VRTU, MIDD, DEST, FEIC, SSRX, TITN, LCAPA, JAZZ, CHBT, NXTM, WBMD, MNRO, YHOO, PEGA, PSO, JCP, TLP, NYX, CXW, FUN, FNB, PXQ, ID, GEO, SEMG and DHX
  

Stocks With Unusual Put Option Activity:

• 1) DELL 2) LOW 3) NYX 4) JCP 5) JWN
  

Stocks With Most Negative News Mentions:

• 1) KEY 2) LOW 3) MSI 4) KNX 5) MGA
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value (+.55%)

Sector Outperformers:

• 1) Coal +2.45% 2) Airlines +1.86% 3) Steel +1.79%

Stocks Rising on Unusual Volume:

• CLF, PBR, BBL, TSO, SINA, BIDU, CISG, SIGA, ENOC, STEC, SNDK, ICE, FE, ANV, RDC, DAR, ATK, DFS and CBOE
  

Stocks With Unusual Call Option Activity:

• 1) AXL 2) NGD 3) SIGA 4) AGN 5) IVN
  

Stocks With Most Positive News Mentions:

• 1) LOW 2) NYX 3) GOOG 4) YHOO 5) SNDK

Charts:

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

Monday Watch

Weekend Headlines
Bloomberg:

• Merkel Risks Revolt Over Greece. Chancellor Angela Merkel faces a gathering storm in her coalition over Germany’s share of euro- area rescues, threatening to undermine her ability to make concessions on additional help for Greece. Merkel’s Free Democratic coalition partner signalled a hardening of its stance on bailouts at a convention as the party leadership fought to quash a revolt over granting rescues. While a motion to eject aid recipients that miss debt-cutting targets from the euro was defeated, a leading rebel said that as many as 50 coalition lawmakers are ready to reject the post-2013 euro bailout fund when it goes to parliament later this year. “We know that public acceptance of European themes is dwindling,” Economy Minister Philipp Roesler told FDP members in the Baltic Sea port of Rostock yesterday in his first speech as party leader. Aid appraisals must be based on “clear conditions with sanctions for failure to adhere to rules,” he said, pledging “no taboos.” FDP lawmaker Frank Schaeffler, who last year called for Greece to sell its islands to cut debt, saw his demand for states to be ejected from the euro “at short notice” in cases of rule breaking defeated in a vote yesterday. Even so, he said that as many as 50 lawmakers across the coalition are prepared to join his revolt against the European Stability Mechanism due to take over from the current rescue fund in mid-2013. That’s an increase of at least 10 votes in the past three weeks, enough to eliminate Merkel’s 41-seat advantage over the opposition when the ESM goes to a vote after the summer recess, leaving her reliant on opposition support. “A year ago I was isolated in the party, but that’s no longer the case,” Schaeffler said in an interview. “A good many Free Democrats share the view in private that something is going badly wrong in solving this crisis.” The bailout skeptics aim to tap a vein of resentment that’s brewing in Germany and other AAA-rated countries such as Finland over being forced to rescue their euro-area neighbors. Twenty percent of Germans view Merkel’s decision last year to help Greece as “right,” according to a poll published May 8 by consumer survey company GfK SE. Another 47 percent of respondents said the decision was “wrong,” suggesting that Merkel’s coalition may struggle to justify any additional aid.
  
• IMF Chief Strauss-Kahn Charged With Attempted Rape. Dominique Strauss-Kahn, head of the International Monetary Fund and a potential candidate for the French presidency, was charged with attempted rape and a criminal sex act on a New York hotel maid, police said. The attack allegedly occurred yesterday against a 32- year-old female at a Sofitel hotel in midtown Manhattan, according to an e-mailed statement by the New York Police Department. Strauss-Kahn, who was taken into custody aboard an Air France flight at John F. Kennedy International Airport, also was charged with unlawful imprisonment. Strauss-Kahn, 62, denied the charges and will plead not guilty, his lawyer Benjamin Brafman said. He is scheduled to appear tonight or tomorrow morning for arraignment in Manhattan Criminal Court. New York police said Strauss-Kahn was picked out of a lineup today by the maid. The arraignment has been delayed while investigators seek a warrant to allow examination of the IMF chief’s body for scratches or the accuser’s DNA, police said. New York Police Deputy Commissioner Paul Browne said the assault occurred about 1 p.m. yesterday when the woman entered the $3,000-a-night suite -- Room 2806 -- Strauss-Kahn had checked into on May 13, Browne said. Strauss-Kahn is alleged to have emerged from a bathroom naked and made two attempts to forcibly have sex with the maid, Browne said in a telephone interview.
• Euro Crisis May Scuttle Eastern Europe Economy as Investors Bet on Region. Eastern Europe’s economic recovery may be scuttled by any Greek debt restructuring, which would curb lending by western banks and undermine investor bets that have propelled the region’s stocks, bonds and currencies. While the region has three of this year’s 10 best- performing currencies and five of the 10 equity indexes that rose the most, 76 percent of its banking market is controlled by western European lenders still threatened by the euro’s debt crisis. “You would expect that the Greek troubles now would have a bigger impact on emerging Europe,” said Neil Shearing, senior emerging-market analyst at Capital Economics in London. “It’s a puzzle. I suspect it might just be the calm before the storm.”
• Euro Falls Before Finance Ministers Meet to Discuss Avoiding Greek Default. The euro fell toward a six-week low against the dollar on concern European finance ministers may fail to quell speculation about Greece’s debt restructuring. “The market is closely watching what will come out from this week’s meetings,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign- exchange margin-trading services. “Any preemptive move is unlikely, and concern about Greece’s restructuring may spread to countries like Ireland. That may continue to give selling pressure for the euro.”
• Israel Clashes With Protesters on Four Fronts on 'Nakba Day'. Israel clashed with demonstrators on four of its borders, leaving as many as nine people dead in violence that Israeli officials blamed on Syria and Iran. The protests in the West Bank, Syria, Lebanon and the Gaza Strip marked the annual observance of what Palestinians call “nakba,” meaning “catastrophe” -- a reference to their displacement as a result of the 1948 establishment of the state of Israel. “I see fingerprints of Iranian provocation and an attempt to use Nakba Day to create conflict,” said Brigadier General Yoav Mordechai, a spokesman for the Israeli army. Finance Minister Yuval Steinitz accused Syrian President Bashar al-Assad of sending protesters across the border to deflect attention from domestic unrest. “The wave of anger that has been sweeping across Arab societies is clearly coming to Israel’s shores now,” said Yoram Meital, director of Ben Gurion University’s Herzog Center for Middle East Studies in Beersheva. “Today’s violence was unprecedented in the way that it happened on several borders at once, and I don’t think it’s over.”
• Louisiana Flood Forces Choices on River Family, Threatens Ruin.
  
• For the first time since July, Citigroup Inc.(C) is seen as more creditworthy than Goldman Sachs Group Inc(GS). Credit-default swaps protecting Citigroup debt from losses are trading at 124 basis points, 8 basis points below contracts on Goldman Sachs, according to data provider CMA.
• Credit-default swaps tied to Indian banks are rising the most this month among the so-called BRIC nations as banks increased provisions, saying their customers will feel the strain of higher interest rates. Contracts tied to government-owned State Bank of India, which some investors perceive as a proxy for the nation, increased 9 basis points to 173 basis points, according to CMA.
• Three U.S. Citizens Among Six Charged With Supporting Taliban in Pakistan. Two Americans of Pakistani descent face a court date tomorrow for allegedly providing “material support” to the Pakistani Taliban. A third U.S. citizen and three other people also were indicted in the case.
• Yahoo's(YHOO) China Toehold Threatened by Rift With Alibaba. Yahoo! Inc.’s toehold in China is under threat by a widening rift with Alibaba Group Holding Ltd., the e-commerce provider it partly owns and that analysts say may account for three-fourths of its market value.
• Oil will fall in the second half as high prices erode demand, said Francisco Blanch, global head of commodity research for Bank of America-Merrill Lynch. "We are already seeing signs of demand destruction," Blanch said today. "If you look at airline passenger loads and utilization, they are starting to drop." Brent crude oil will average $122 a barrel this quarter before declining to $94 in the fourth, he said. "If we go to $130 or $140 a barrel, that would kill the Chinese economy as well as the rest of the world," Blanch said.
  

Wall Street Journal:

• New Details in IMF Sex Case. The arrest of International Monetary Fund chief Dominique Strauss-Kahn on sexual-assault charges threatened to upend French politics and weaken the IMF's central role in resolving Europe's deepening debt crisis.
• Selloff Scares Away Few Bulls. Hedge funds and other investors still have large bets that commodity prices will continue to rise, even after one of the steepest selloffs in years. Money managers cut their net-long position in crude-oil futures by 10% on the New York Mercantile Exchange during the week ended Tuesday, according to data released Friday by the Commodity Futures Trading Commission. The decline left speculative investors holding 233,569 more long contracts that anticipate rising prices than short contracts wagering on a decline. A week earlier, these traders held 258,668 more long contracts. The data marked the beginning of an investor pullback from near-record bullish bets as investors became less enamored with commodities. As of this last report, for example, long positions in the oil market still outnumbered short positions by nearly six to one, even after the week through Tuesday saw crude futures for June delivery fall 6.5% to $103.88 on the New York Mercantile Exchange. Prices settled Friday at $99.65. "Even though we had a huge price plunge, the more salient item is that we are still net long," said Jim Ritterbusch, head of energy-trading adviser Ritterbusch & Associates. "We still have a ways to go as far as forcing more speculative traders out of the long side" in the oil market.
• Banks Woo Funds With Private Peeks. Some big investment banks offer their hedge-fund clients special access to senior deal makers and corporate executives, via dinners or other gatherings—a longstanding practice that is drawing fresh scrutiny.
• WellPoint(WLP) Shakes Up Hospital Payments. WellPoint Inc. is raising the stakes for reimbursing about 1,500 hospitals across the country, cutting off annual payment increases if they fail to deliver on the big health insurer's definition of quality patient care.
• Scandal in China Felt on Wall Street. The scandal of indicted Xinhua Finance founder Loretta Fredy Bush burned some of the sharpest minds on Wall Street, including one of the richest self-made women in the U.S. Last week, Ms. Bush was indicted by a U.S. grand jury on charges that she and two Xinhua directors committed conspiracy, mail fraud, and made false statements, enriching themselves by $50 million. It was the latest incident to highlight the sometimes opaque finances of publicly traded Chinese companies.
• Rising Stars in Resurgent Hedge Funds. Financial News has named its picks for its top 40 under 40 list of up-and-coming men and women in the hedge-fund industry.

Bloomberg Businessweek:

• Profit Estimates Fall Most Since 2009 in Europe as Bull Run Ages. Analysts are cutting European earnings forecasts by the most in almost two years just as equities in the region trail U.S. shares by the widest margin since the bull market began. Estimates for Stoxx Europe 600 Index profit growth dropped by as much as 4 percentage points this year, including the biggest three-month reduction since September 2009, according to data compiled by Bloomberg. Should analysts’ lowest projections for 2011 prove correct, companies would earn about 24 billion euros ($34 billion) less than expected at the start of the year, the data show. Projections for earnings in the Standard & Poor’s 500 Index have risen 4 points in 2011.

CNBC:

• Huge Glencore IPO Brings Secretive Firm to Market. Swiss-based commodity trader Glencore is set to unveil the pricing of its mammoth $12 billion dual IPO in London and Hong Kong later this week, and in what will be be the biggest IPO of the year and the largest in the UK to date, its shares are expected to start regular trading on the London exchange on May 24 and in Hong Kong just one day later.
• Japan Readies New Tactics for Fukushima After Setback. Japanese officials are readying a new approach to cooling reactors at the Fukushima nuclear plant after discovering an Olympic swimming pool-sized pond of radioactive water in the basement of a unit crippled by the March earthquake and tsunami. The discovery has forced officials to abandon their original plan to bring under control the No. 1 reactor at the Fukushima Daiichi plant as they focus on how to deal with the rising pool that some experts see as a threat to groundwater and the Pacific coast.

IBD:

• Board-Sports Enthusiasts Head For Zumiez(ZUMZ).

NY Times:

• Cities Nationwide Heighten Vigilance on Terror. In large and midsize cities across the country, police chiefs and domestic security officials say they have drastically increased counterterrorism operations under the assumption that a “lone wolf” or a small group of terrorists will try to strike on American soil to avenge the killing of Osama bin Laden.
• Money Troubles Take Personal Toll in Greece. A year after Greece received a bailout from Europe and the I.M.F., people’s anxiety has grown into deep despair.

Forbes:

• ExxonMobil(XOM) CEO Says Oil Price Should Be $60 to $70 a Barrel. Rex Tillerson, the boss of ExxonMobil admitted last week that the price of oil–based purely on supply and demand- should be in the $60 to $70 a barrel range. The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds.

Business Insider:

• Is China Really Rebalancing? No. Those who were hoping the answer was yes will have been disappointed by the release Thursday of the World Bank’s China Quarterly Update – April 2011. Here is their summary:
• A Former JPMorgan(JPM) Guy Just Took Over For Dominique Strauss-Kahn.
  

Zero Hedge:

• Druckenmiller Calls Out The Treasury Ponzi Scheme: "It's Not A Free Market, It's Not A Clean Market", Identifies The Real Bond Threat.
• Casualty Reported As Protesters Storm Israel Embassy In Cairo; Video of Palestinians, Syrians Entering Israel-Controlled Golan Heights.
• Is A Deluge Of Latent Accusations Against Strauss-Kahn Imminent?
  

Seeking Alpha:

• Top Software Picks by Fund Gurus Concentrated in the Sector.

San Francisco Chronicle:

• Social-Networking Sites Face New Privacy Battle. California could force Facebook and other social-networking sites to change their privacy protection policies under a first-of-its-kind proposal at the state Capitol that is opposed by much of the Internet industry. Under the proposal, SB242, social-networking sites would have to allow users to establish their privacy settings - like who could view their profile and what information would be public to everyone on the Internet - when they register to join the site instead of after they join. Sites would also have to set defaults to private so that users would choose which information is public.

Reuters:

• Iraqi Drilling Firm Starts Work in Zubair Oilfield. State-run Iraqi Drilling Co has started working in the Zubair oil field under a $250 million contract to drill 23 new wells in the field, developed by Italy's ENI (ENI.MI: Quote), the head of the firm said on Sunday. Director Idrees al-Yassiri said the two-year contract also included overhauling 63 old wells in Zubair. "We have started executing the contract awarded to us by ENI ... The total expected production after completing the project will be more than 250,000 barrels per day from these wells," Yassiri said during a trip to Zubair oilfield.
• IMF Has Doubts Over More Credit for Greece - Paper. The International Monetary Fund has considerable doubts whether heavily indebted Greece should be provided with further credit, newspaper die Welt reported, citing several senior EU diplomats. If the IMF chose not to give a green light to the disbursement of the next 12 billion euro tranche of aid in June, the European Union would take over the whole bill, die Welt reported, without giving more details of its sources.
• Eurozone to Back Portugal Aid, With New Caveats. Euro zone finance ministers are likely to back a bailout package for Portugal on Monday, with new conditions set by Finland, in talks overshadowed by charges against IMF chief Dominique Strauss-Kahn for attempted rape.

Financial Times:

• US Car Loan Providers Move Into Subprime. North American car loan providers have stepped up sharply their exposure to risky subprime buyers as economic conditions improve and lenders seek better profit margins. According to CNW, an Oregon-based market research firm, the credit score of new-car buyers reached a five-year low in early May. Buyers with scores below 670 on the widely used Fico scale – which ranges from 300 to 850 – made up 14.5 per cent of the total.

BBC:

• North Korea and Iran 'Sharing Ballistic Missile Technology'. North Korea and Iran appear to have been exchanging ballistic missile technology in violation of sanctions, a leaked UN report shows. The report, obtained by Reuters, said regular transfers had been taking place through "a neighbouring third country", named by diplomats as China.

International Financial Review:

• What Are CDS Really Worth? It’s a question that politicians have frequently asked over the past couple of years when lambasting the credit default swap market. Now, as rumours abound that Greece will look to avoid triggering CDS when restructuring its debt, even some of the instrument’s most fervent supporters are questioning its value. Christopher Whittall reports. Senior derivatives users, including a member of the board at the International Swaps and Derivatives Association, have warned that the intrinsic value of credit default swaps could be severely compromised if Greece restructured its debt without triggering a credit event. As a consensus has grown among market participants that authorities will look to avoid triggering CDS when restructuring Greek bonds, market participants have been scrambling to understand the potential ramifications of such a development, with many fearing the worst.

Frankfurter Allgemeine Sonntagszeitung:

• German Finance Minister Wolfgang Schaeuble said he will examine the report being prepared for June on Greece's debt-tackling progress "especially closely." Schaeuble said that private creditors should participate in future euro area bailouts within the framework of the European Stability Mechanism.

Der Tagesspiegel:

• European Central Bank Executive Board member Juergen Stark said that further aid for Greece should be conditional on the country "making more consolidation efforts," citing an interview to be published Monday.

Bild am Sonntag:

• The percentage of Germans whose trust in the single European currency is "very low" or "quite low" has increased by 4 percent since December to 58%.
• European Central Bank President Jean-Claude Trichet said "there is no crisis of the euro" and that the ECB would deliver price stability, in an editorial published today.
• A restructuring of Greece's debt mustn't be "excluded" if the current adjustment measures don't work, citing German opposition leader Frank-Walter Steinmeier. Private investors should also bear the cost of the financial crisis, Steinmeier said.

Xinhua:

• Egg prices have risen 24% in China from a year earlier, citing its own monitoring system. Prices are up 5.2% since April 18, according to the report, which was posted on the central government's website.
• Pork prices in China on May 14 had increased 44% from a year earlier due to tight supplies. Pork prices on that day had increased more than 50% from a year earlier in the provinces of Liaoning, Jilin, Anhui, Hunan and Sichuan.
  

Shanghai Securities News:

• China's inflation won't recede soon and the government will probably continue to tighten monetary and fiscal policies, citing its interview with John Lipsky, the first deputy managing director of the IMF.
• China still faces large inflationary pressures and consumer prices haven't peaked, citing Yu Bin, director general of the macroeconomic research department of the State Council's development research center. China's economic growth also faces a slowdown, Yu said.
  

Caijing:

• Financial crisis is "inevitable" for developing countries in the next five to 10 years, citing China central bank adviser Li Daokui. Developing countries like India and Brazil face fiscal deficits and problems that will emerge eventually, citing Li.

Financial News:

• China's unchanging interest rate margin threatens the financial system's safety and affects the effectiveness of regulation, citing Wang Junshou, a deputy head of the China Banking Regulatory Commission's Tianjin branch.

Mainichi:

• More than 200 North Korean engineers are living in Iran to help the country develop nuclear weapons and ballistic missiles, citing a person familiar with the matter.

Weekend Recommendations
Barron's:

• Made positive comments on (SD).
• Made negative comments on (BBBB).
  

Citigroup:

• Reiterated Buy on (RIG), target $90.
• Reiterated Buy on (TEVA), target $67.
  

Night Trading

• Asian indices are -1.25% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 108.0 +1.5 basis points.
• Asia Pacific Sovereign CDS Index 114.50 +1.0 basis point.
  
• S&P 500 futures -.40%.
• NASDAQ 100 futures -.30%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LOW)/.36
• (JCP)/.24
• (URBN)/.24
• (GBE)/-.37

Economic Releases
8:30 am EST

• Empire Manufacturing for May is estimated to fall to 19.7 versus a reading of 21.7 in April.

9:00 am EST'

• Net Long-Term TIC Flows for March are estimated at $32.6 Billion versus $26.9 Billion in February.

10:00 am EST

• The NAHB Housing Market Index for May is estimated to rise to 17 versus a reading of 16 in April.

Upcoming Splits

• (HLF) 2-for-1
  

Other Potential Market Movers

• The 3-Month/6-Month Treasury Bills Auctions, JPMorgan Tech/Media/Telecom Conference, (GFIG) investor day and the (TEX) analyst meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. 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 modestly lower on growing Mideast unrest, global growth concerns, rising eurozone debt angst, more shorting, profit-taking and emerging market inflation fears. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.