Tuesday Watch

Evening Headlines

Bloomberg:

• European Banks' Capital Shortfall Means Greece Debt Default Not an Option. A failure by European regulators to make banks raise enough capital to withstand a sovereign default is complicating efforts to resolve Greece’s debt crisis. The “fragilities” of Europe’s banking industry mean a Greek default isn’t an option, European Union Economic and Monetary Affairs Commissioner Olli Rehn said in New York last week. By delaying a decision some investors consider inevitable, policy makers risk increasing the cost to European taxpayers and prolonging Greece’s economic pain. “European officials are trying to buy time for the troubled economies to get their house in order and the banks to be strengthened,” said Guy de Blonay, who helps manage about $41 billion at Jupiter Asset Management Ltd. in London. While estimates of the capital shortfall vary, the vulnerability of European banks to a sovereign shock isn’t disputed. Independent Credit View, a Swiss rating company that predicted Ireland’s banks would need another bailout last year, found in a study to be published tomorrow that 33 of Europe’s biggest banks would need $347 billion of additional capital by the end of 2012 to boost their tangible common equity to 10 percent, even before any sovereign default.
  
• Fed Said to Back 3% Surcharge for Big Banks. The Federal Reserve supports a proposal at the Basel Committee on Banking Supervision that calls for a maximum capital surcharge of 3 percentage points on the largest global banks, according to a person familiar with the discussions. International central bankers and supervisors meeting in Basel, Switzerland, have decided that banks need to hold more capital to avoid future taxpayer-funded bailouts. Financial stock indexes fell in Europe and the U.S. yesterday as traders interpreted June 3 remarks by Fed Governor Daniel Tarullo as leaving the door open to surcharges of as much as 7 percentage points. “A 7 percentage-point surcharge for the largest banks would be a disaster,” said Jason Goldberg, senior analyst at Barclays Capital Inc. in New York. “It will certainly restrict lending and curb economic growth if true.”
• Crude Declines for a Third Day on Speculation OPEC Will Increase Quotas. Oil dropped for a third day in New York amid speculation OPEC may increase output quotas when it meets in Vienna tomorrow. Futures slipped as much as 0.6 percent today after falling to the lowest in two weeks yesterday. The Organization of Petroleum Exporting Countries may raise production limits, Barclays Plc said June 6. The International Energy Agency said on May 19 it saw “an urgent need” for more oil to help bring down high prices threatening economies. Crude also slid on signs fuel demand is faltering along with economic growth. Options traders increased bets that oil prices will fall further. The most-active option was the July $95 put, which rose 17 cents to 79 cents. The second-most active contract was the August $90 put, which climbed 13 cents to $1.05. “There is speculation that OPEC may raise production targets this week, on concerns from some OPEC members that higher oil prices are curbing demand,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, wrote in a note today. A “recalibration” of OPEC’s output target closer to actual output is expected, Barclays analysts led by London-based Paul Horsnell said in yesterday’s report.
  
• Regional Fiscal Revolt in Spain Risks Spreading: Euro Credit. Catalonia's refusal to meet Spain's deficit target risks encouraging other regions to join in rebellion just as Prime Minister Jose Luis Rodriguez Zapatero's authority may be weakened by the approach of general elections. Catalonia, Spain's largest region with an economy the size of Portugal's, plans a 2011 deficit twice as wide as its target, in a move Moody's Investors Service said yesterday was "credit negative" for Spain. Zapatero will have to decide between allowing Catalonia to sell enough debt to fund the shortfall or antagonizing a state that has traditionally backed Socialists in national voting.
  
• Frontline(FRO) Billionaire Fredriksen Bets Tankers Collapsing: Freight Markets. The most bearish investor in the oil- tanker market right now may be the one with the most at stake. At a time when analysts covering Frontline Ltd. expect shares of the world’s biggest supertanker operator to gain 1.7 percent in 12 months, its Chairman John Fredriksen says the biggest crash in the cost of ships has yet to happen. It will be within “a year or two” that the market “collapses,” the 67-year- old said in an interview in Oslo last month. For Fredriksen, whose fortune was valued by Forbes magazine at $10.7 billion in March, that will be an opportunity to buy more vessels at a discount, he said. For other investors, it may mean that the more than doubling in freight rates predicted for next year by forward freight agreements, traded by brokers and used to bet on future shipping costs, is too optimistic. “Betting against John Fredriksen tends to be a bad idea,” said Erik Nikolai Stavseth of Arctic Securities ASA in Oslo, whose recommendations on the shares of shipping companies returned 16 percent in three months. “He’s been a bellwether and he’s always been able to spot the cycle early,” said the analyst, who has a “sell” rating on Frontline and expects the U.S. shares to drop about 32 percent in a year. The industry is contending with a glut of capacity as the fleet expands twice as fast as demand.
• Fisher Says Central Bank Has 'Done Enough if Not Too Much' to Help Economy. Federal Reserve Bank of Dallas President Richard Fisher said the central bank has “done enough if not too much” to stimulate the economy and “one has to question the efficacy” of doing more. While “it’s going to be a very slow slog” for the economy, the U.S. should grow at more than a 3 percent annual rate in the second half of this year, Fisher, 62, said today in response to audience questions after a speech in New York. The Fed is set to complete its second round of large-scale bond purchases this month, and Fisher has said he will be among the first policy makers to push for a reversal of policy as needed.
• Peruvian Stocks' Biggest Plunge in 30 Years Forces Trading Suspension. Peru’s stock exchange halted trading after the benchmark index plunged a record 12 percent as investors speculated Ollanta Humala will seek more state control of the economy as the nation’s next president. Mining companies led the Lima General Index lower after Humala, who during the campaign pledged to raise royalties on the industry, claimed victory in yesterday’s election. The currency and bonds also fell. The bourse twice suspended trading today, ending the session three hours early, as Alturas Minerals Corp. (ALT) and Minera IRL Ltd. (MIRL) dropped more than 20 percent.
• Goldberg: Iran Wants the Bomb, and It's Well on Its Way. The Iranian government, which is known neither for transparency nor candor, has insisted for many years that the goal of its nuclear program is entirely peaceful. And for many years, the International Atomic Energy Agency, whose motto is “Atoms for Peace,” has tended to give the ayatollahs the benefit of the doubt on this question. The agency’s former chairman, Mohamed ElBaradei, now a candidate for the presidency of Egypt, seemed to take the attitude that anxiety about Iran’s nuclear objectives was motivated by the strategic self-interest, even the paranoia, of the U.S., Israel and the Arab states near Iran, rather than by the reality-based worry that bloody-minded mullahs bent on dominating the Middle East aren’t the sort of people who should have the bomb. The new chairman of the IAEA, Yukiya Amano of Japan, seems more skeptical of Iran’s claim of nuclear virginity. He is, by many accounts, preparing a comprehensive indictment of Iran’s nuclear program to be issued later this year.
• Ex-Met Dykstra Charged With Grand Theft, Drug Possession in Los Angeles. Lenny Dykstra, a former New York Mets and Philadelphia Phillies outfielder, was charged with grand theft for allegedly trying to lease cars using phony business and credit information and with drug possession. Dykstra, 48, who was indicted on a separate federal bankruptcy fraud charge May 5, tried to lease high-end cars from several dealerships by providing fraudulent information and claiming credit through a phony business, Home Free Systems, Los Angeles Deputy District Attorney Alex Karkanen said today in a statement. The ex-ballplayer was charged with five counts of attempted grand theft auto, eight counts of filing false financial statements, four counts of identity theft, three counts of grand theft auto and three counts of possession of a controlled substance, according to the e-mailed statement. Police found cocaine, the drug Ecstasy and Somatropin, a synthetic human growth hormone, during a search of his home in Encino, California, prosecutors said.
• N. Korea Setting Up Economic Zone Near China. North Korea said it will set up a new economic zone near its border with China, signaling the nation’s deepening dependence on its economic benefactor after leader Kim Jong Il’s three visits there in the past year. The Hwanggumphyong and Wihwa Islands Economic Zone will be set up to “boost friendship with China and expand and develop external economic relations,” North Korea’s state-run Korean Central News Agency said late yesterday, citing a parliamentary decree.
• Muddy Waters to Release More Sino-Forest Research After Sparking 71% Slump.
• Google(GOOG) Reports on Hacker Attacks 'Defamed' China, People's Daily Says. Google Inc. (GOOG)’s reports that Chinese hackers may have organized attacks on U.S. and Asian government officials using the company’s Gmail service “defamed China,” the official People’s Daily said in an editorial. Google was “strongly insinuating” without evidence that the Chinese government directed the alleged cyber attacks, the editorial said. The U.S. company’s accusations were “very serious” and reinforced the “western world’s negative perceptions of China,” according to the Chinese Communist Party-affiliated newspaper. Internet hackers tried to steal passwords from hundreds of users of Google’s Gmail e-mail service, targeting the accounts of government officials in the U.S. and Asia, the Mountain View, California-based company said last week.

Wall Street Journal:

• Weiner Now Says He Sent Photos. Rep. Anthony Weiner on Monday admitted sending sexually suggestive photographs or messages to six women online over three years, but said he wouldn't resign over his behavior or the lies he told to cover it up. The New York Democrat's effort to control the damage caused by disclosures about his secret online life didn't satisfy his party's leaders. House Minority Leader Nancy Pelosi (D., Calif.) called for a congressional ethics investigation of Mr. Weiner, a request that was immediately seconded by Rep. Steve Israel, head of the House Democrats' campaign arm and a fellow New York lawmaker. Ms Pelosi said an investigation was needed "to determine whether any official resources were used or any other violation of House rules occurred.''
• Obama to Lose Top Economic Adviser. Austan Goolsbee, chairman of the White House Council of Economic Advisers, will leave his position by the end of the summer, marking the latest shake-up in President Barack Obama's economic team. Mr. Goolsbee, who assumed the top job at the economic council last September, will return this fall to his position as a professor at the University of Chicago, the White House announced on Monday.
• Pimco Takes Bath on Lehman. Losses on certain Lehman bonds traded by Mr. Gross's firm, Pacific Investment Management Co., exceed $3.4 billion, according to a Wall Street Journal analysis of liquidation plans and investment disclosures filed in a federal bankruptcy court in New York.
• Hacker Group Says It Hit A Sony Unit Computer Network Again. A group of hackers said they hit a Sony Corp. (SNE, 6758.TO) unit computer network on Monday, the latest in a string of attacks on the Japanese technology-and-media giant.
• Japan Concedes Severity of Blast.
• May Storms Caused Up to $7 Billion in Insured Losses. The thunderstorms and tornadoes that struck the U.S. at the end of May caused insured losses of $4 billion to $7 billion, according to a disaster-modeling firm.
• SecurIDs Come Under Siege. Security Breach Forces RSA to Offer to Replace Nearly All of Its Millions of 'Tokens'.
• Goldman(GS) Ex-Director Sued Over Alleged Tips in Galleon Case. A Goldman Sachs Group Inc. shareholder sued a former Goldman director on Monday over tips the one-time board member allegedly gave hedge-fund founder Raj Rajaratnam about the investment bank. The lawsuit, filed in federal court in Manhattan, is seeking to recover "short-swing" profits the shareholder contends Rajat Gupta, a former Goldman director, likely made as a result of trading by Mr. Rajaratnam, the founder of Galleon Group.
• ObamaCare's Next Constitutional Challenge. The Medicaid provision of the health law spells the death knell for competition among the states.

CNBC:

• A Merciless May for Many Hedge Funds. May was a painful month for many hedge funds, as the market struggled with the double whammy of a slowing economy and the final throes of the Fed’s current quantitative easing program. In the macro space, where funds trade everything from currencies to stocks, the damage was widespread. Moore, Caxton, and Fortress, all multibillion-dollar global players, each saw declines of at least a few percentage points in their flagship macro funds, according to hedge-fund reports and people familiar with the matter.
• Saudis Raise Oil Production to Curb Prices. Saudi Arabia has been quietly increasing its crude oil production ahead of Wednesday’s meeting of the Opec oil cartel, in a sign that Riyadh is trying to bring oil prices down to more comfortable levels for consumers in the US, Europe and China. The kingdom boosted production in May by about 200,000 barrels a day and it is on course to increase it by another 200,000-300,000 b/d this month, taking its output above the critical 9m b/d level for the first time since mid-2008.

Business Insider:

• 67 Years Later: Incredible Photos From The D-Day Invasion.
• 8 Reasons Why Bank Stocks Are Getting Crushed Again.
• A Huge Supreme Court Ruling Just Paved The Way For Tons More Shareholder Lawsuits.
  

Zero Hedge:

• Quantifying The Treasury's Plunder of Retirement Accounts: $80 Billion Between The G- And CSRD Funds Since Debt Ceiling Breach. In other words, retirement funds have seen a "disinvestment" of nearly $80 billion in the past 3 weeks just to make space for further funding of bloated government, defense spending, and healthcare benefits.
• Handelsblatt Reports Second Greek Bailout Package to be Delayed.
  

Forbes:

• McKinsey: 30% of Employers to "Definitely or Probably" Stop Offering Health Insurance After 2014.

Politico:

• Weiner: 'I apologize to Andrew Breitbart'. Rep. Anthony Weiner (D-NY) doled out his first apologies to his wife and his constituents, but also apologized to the media and to Andrew Breitbart specifically during a long and rambling press conference in which he seemed determined to answer every last reporter’s question. Breitbart had demanded an apology a few minutes before from the same podium, where he climbed after Weiner did not show up on time to his own press conference. “I’d like an apology from him,” Breitbart said. “This was his strategy, to blame me…so I’m here for some vindication.”

The Hill:

• When Hedge Funds Drive Educational Policy, Who Profits? With more than two trillion dollars of debt put on the backs of American taxpayers over the last two years, it is not surprising that Washington's spending spree also produced a bumper crop of waste, fraud and abuse. With the publication of the “Gainful Employment” rule this past Thursday, we bear witness to one of the most egregious (albeit inventive) examples of the unseemly intersection of special interests and big government. Fraud and corruption take on a new face in the intersection of Wall Street, the not-for profit world, and the U.S. Department of Education (DoED). The process which produced “Gainful Employment” demonstrates a new tactic: hedge fund short-sellers seeking to enrich themselves by a campaign which benefitted from a Senatorial hearing, a flawed GAO study and a one-sided government regulation. Is this any way for educational policy to be made?

Telegraph:

• European Central Bank Risks Being 'Wiped Out' by Bail-Outs. The European Central Bank is "looking increasingly vulnerable" and may face "hefty losses" as a result of propping up indebted eurozone countries, a leading think-tank has warned. The International Monetary Fund's partner in the recent international bail-out missions is itself in danger of becoming a liability, Open Europe has argued. In a report published on Monday entitled A House Built on Sand?, Open Europe has calculated that the ECB has a total exposure of about €444bn (£397bn) to "struggling eurozone economies". The bank is now "23 to 24 times levered" as a result of bailing out Greece, Ireland, Portugal and Spain. The London-based think tank argued: "Should the ECB see its assets fall by just 4.23pc in value . . . its entire capital base would be wiped out." Open Europe said: "Hefty losses for the ECB are no longer a remote risk." It added: "The ECB is ultimately underwritten by taxpayers which means there is a hidden – and potentially huge – cost of the eurozone crisis to taxpayers buried in the ECB's books."

Economic Information Daily:

• China's central bank may raise interest rates by 25 basis points this weekend and may increase banks' reserve requirement ratios by 50 basis points next week after inflation, investment and some of the other economic indicators for May are released, citing analysts.

China Daily:

• Chinese airlines won't join the European Union's emissions trading scheme and will accept the consequences, citing Chai Haibo, deputy secretary-general of the China Air Transport Association. The group and Air China Ltd. will jointly file a lawsuit in Germany against the scheme at a future date, Chai said at a meeting of the Intl. Air Transport Assoc. in Singapore. Chai called the EU scheme "radically unreasonable." Carriers that do not participate in the scheme face possible fines and flight suspensions.
• China supports Ban Ki-moon's bid for re-election as secretary-general of the United Nations, Hong Lei, a spokesman for the China Ministry of Foreign Affairs, said in a statement.
  

China Business:

• China's restrictions on the number of homes citizens can buy in 105 cities may expand to small cities to thwart speculative property demand, citing a person close to the Ministry of Housing and Urban-Rural Development.

Evening Recommendations
Barclays Capital:

• Rated (HD) Overweight, target $41.
• Rated (ORLY) Overweight, target $71.
• Rated (PETM) Overweight, target $51.
• Rated (PIR) Overweight, target $13.
• Rated (WSM) Overweight, target $45.
• Rated (BBBY) Overweight, target $63.
• Rated (TSCO) Overweight, target $70.
  
• Rated (AZO) Overweight, target $336.
  
• Rated (ODP) Underweight, target $4.
• Rated (OMX) Underweight, target $7.
• Rated (RSH) Underweight, target $13.
• Rated (BKS) Underweight, target $17.
  

Night Trading

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 112.0 +2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 116.0 +.25 basis point.
  
• S&P 500 futures +.18%.
  
• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NAV)/1.17
• (TLB)/.03
• (BAH)/.28
• (ABM)/.27
• (ALOG)/.44
• (BOBE)/.66
• (CMTL)/.39
• (HOV)/-.51
• (LDK)/.86
• (OXM)/1.00
• (ULTA)/.31

Economic Releases
3:00 pm EST

• Consumer Credit for April is estimated to fall to $5.0B versus $6.016B in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lockhart speaking, JOLTs Job Opendings for April, IBD/TIPP Economic Optimism Index for June, 3-Year Treasury Note Auction, weekly retail sales reports, RBC Tech/Media/Communications Conference, CSFB Aerospace/Defense Conference, Wells Fargo Financial Services Conference, Needham's Internet/Digital Media Conference, Deutsche Bank Financial Services Conference, Keefe Bruyette Woods Investment/Specialty Finance Conference, JPMorgan Industries Conference, (PLCE) Analyst Day, (F) Investor Day, (G) Investor Day, (VRNM) Investor Day and the (ENOC) Investor Day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 50% net long heading into the day.

Stocks Falling into Final Hour on Global Growth Worries, Financial Sector Weakness, Eurozone Debt Angst, Rising Mideast Unrest

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 18.27 +1.78%
  
• ISE Sentiment Index 102.0 -8.93%
  
• Total Put/Call 1.07 -13.01%
  
• NYSE Arms 2.57 +67.98%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.27 -.15%
  
• European Financial Sector CDS Index 107.83 -.60%
  
• Western Europe Sovereign Debt CDS Index 188.58 -1.05%
  
• Emerging Market CDS Index 220.80 +1.13%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 23.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .02% -1 bp
  
• Yield Curve 257.0 +1 bp
  
• China Import Iron Ore Spot $170.20/Metric Tonne unch.
  
• Citi US Economic Surprise Index -112.70 +4.5 points
  
• 10-Year TIPS Spread 2.23% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -50 open in Japan
• DAX Futures: Indicating -30 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech, Retail, Medical and Biotech sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades near session lows, breaking technical support at 1,300, on global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns, eurozone debt angst and financial sector weakness. On the positive side, Oil Tanker and Restaurant shares are higher on the day. Oil is falling -1.9% and the UBS-Bloomberg Ag Spot Index is dropping -2.0%. The Russia sovereign cds is falling -1.95% to 135.0 bps and the Hungary sovereign cds is falling -2.06% to 237.69 bps. On the negative side, Airline, Education, Gaming, Tobacco, Homebuilders, Construction, HMO, Hospital, Biotech, I-Banks, Banks, Disk Drives, Steel, Oil Service, Energy, Alt Energy and Coal shares are under significant pressure, falling more than -2.0%. Small-cap and cyclical stocks are underperforming again. (XLF)/(IYR) are also underperforming. Transport shares have also been heavy throughout the day. Lumber is falling -1.63% and has plunged -37.0% since January 4th. The US price for a gallon of gas is down -.02/gallon today to $3.77/gallon. It is up .63/gallon in less than 4 months. The Spain sovereign cds is rising +1.05% to 239.63 bps, the Italy sovereign cds is gaining +2.46% to 148.67 bps, the Portugal sovereign cds is rising +1.33% to 674.07 bps, the Greece sovereign cds is rising +1.53% to 1,395.96 bps, the Ireland sovereign cds is gaining +1.14% to 649.10 bps, the Brazil sovereign cds is rising +1.25% to 109.35 bps and the UK sovereign cds is rising +2.07% to 56.19 bps. The Citi Latin America Economic Surprise Index is falling another -4.9 points today to -31.60. Brazil's Bovespa is falling -2.0% today to session lows and is down -9.0% ytd, while it looks like it is rolling over again technically. The Nikkei also looks to be rolling over again. Oil is being propped up by rising Mideast unrest and US dollar weakness. Unless there is another spike in violence that actually threatens production or another unlikely euro surge very soon, I suspect oil is about to take another dive lower, which would be a longer-term positive. The broad market is worse today than the major averages suggest. A test of DJIA 12,000 is likely over the coming days. I expect US stocks to trade modestly lower into the close from current levels on global growth worries, rising eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest, financial sector weakness, technical selling and more shorting.

Today's Headlines

Bloomberg:

• German Banks Top French With $23 Billion in Greek Debt, BIS Report Says. German lenders were the biggest foreign owners of Greek government bonds with $22.7 billion in holdings last year, making them a likely negotiation partner in burden-sharing deals for the country, data from the Bank for International Settlements showed. French banks, which led the group of Greek creditors with overall claims amounting to $56.7 billion, trailed their German peers on sovereign debt with $15 billion, according to the June report from the Basel, Switzerland-based BIS. The overall figure for French banks was inflated by $39.6 billion in lending to companies and households, mainly because of Credit Agricole SA (ACA)’s Greek unit, Emporiki Bank SA. (TEMP) German lenders have no major units in the country. At the end of 2010, Greek government bonds held by banks in countries reporting to the BIS totaled $54.2 billion, of which 96 percent was owned by European lenders. Germany and France, which accounted for 69 percent, may be asked to weigh in when the European Union goes ahead with plans to win Greece creditors to roll over their debt in a “Vienna-style” program.
• Goldman(GS) Survey Shows EU-Tested Banks May Need to Raise $42 Billion. Banks in the European Union may have to raise 29 billion euros ($42 billion) following this year’s stress tests, according to a survey by Goldman Sachs Group Inc. (GS) Nine of the 91 lenders examined may fail, London-based analysts Jernej Omahen, Peter Oppenheimer, Christian Mueller- Glissmann and Peter Skoog wrote in a report today, citing the average response in a survey of 113 participants from the financial industry. Spanish, German and Greek banks would need to raise the most new capital, according to the poll. The share of participants saying they expect results of the stress test to be “credible” was smaller than last year.
• Plosser: Stimulus Exit Plan Would Offer Stability. Federal Reserve Bank of Philadelphia President Charles Plosser said a plan to withdraw the central bank’s record monetary stimulus and “normalize” interest-rate policy would help avert confusion in financial markets. “By articulating a systematic plan that gets us to our objective, we improve communication with the public, reduce uncertainty in the marketplace and lend credibility to the commitment that policy makers will follow through,” Plosser said today in Helsinki in the prepared text of a speech. Plosser outlined two plans for reducing the balance sheet. The Fed could quicken the pace of sales while raising the federal funds rate. Or the pace of sales would remain constant and the central bank would use the interest rate to respond to changing economic conditions.
• Peruvian Stocks Fall Most Since 2008, Sol, Bonds Sink as Leftist Humala Claims Win. Peruvian stocks tumbled the most in two years, the currency sank and dollar bonds fell after former army rebel Ollanta Humala claimed victory in the presidential runoff yesterday and sparked concern that his government will seek more control of the economy. Peru’s benchmark Lima General Index of stocks declined the most since October 2008, retreating 8.7 percent to 19,378.78 at 9:31 a.m. New York time, before trading was halted. The cost to protect Peru’s debt from non-payment with credit-default swaps jumped 20 basis points to 168, the highest since April 27, according to data provider CMA in London.
• Apple's(AAPL) Jobs Shows New Mac Software Features. Apple Inc. (AAPL) Chief Executive Officer Steve Jobs emerged from medical leave to show off the company’s new Mac OS X Lion software, which includes more touch options and a service called AirDrop that shares files over Wi-Fi. Apple is adding 250 new features to the operating system, executives said today at the Apple Worldwide Developers Conference in San Francisco. The event marked Jobs’s second public appearance of 2011.
• Goldman Sachs(GS) Criminal Probe May Allow Use of Powerful New York State Law. The criminal investigation of Goldman Sachs Group Inc. (GS) by the Manhattan District Attorney’s Office has at its disposal a 90-year-old New York law that makes it easier for state prosecutors to bring charges than their federal counterparts. District Attorney Cyrus Vance Jr. subpoenaed Goldman Sachs, the fifth-biggest U.S. bank by assets, for records on its activities leading into the credit crisis, two people familiar with the matter said. Vance may bring charges under the state’s Martin Act, which lawyers call a potent tool for New York prosecutors probing investment frauds, Ponzi schemes and other white-collar crime.

Wall Street Journal:

• Global TV Shipments Off 29% Sequentially In 1Q On Inventory - Report.
• Live Blog: Apple's(AAPL) Unveiling of the iCloud.
  

MarketWatch:

• Banks Pull Europe Stocks Lower. Angus Campbell, head of sales at London Capital Group, said that there had been no firm progress on Greece and that investors are likely to remain wary. “We’re seeing a continuation of the lackluster performance of markets from last week,” Campbell said. “The Friday meeting [on Greece] didn’t really resolve anything, it was the same old things — just a lot of rhetoric.” Adding to the pressure on bank stocks, The Wall Street Journal reported that there is growing support among European finance officials for a plan that would press private-sector creditors into accepting delayed repayments.

CNBC.com:

• Taxpayers Dollars Still Bailing Out Banks. None of America's largest banks raise money on the free market. Every single one of them is propped up by an implicit taxpayer guarantee that is very similar to the backstops provided to Fannie Mae and Freddie Mac. It is a huge subsidy by taxpayers to the banks, enabling them to be far more profitable than they would be otherise.
• Greece Pushes Austerity Plan as Unrest Keeps Growing.
  

Business Insider:

• WEINERGATE II: It's Going to Be VERY Hard for Anthony Weiner to Explain This New Shirtless Photo.
• Welcome to the Mini "Greece" That's Inside Spain.
• Here's What Happens When US Energy Spending Passes 9% of GDP. The energy limit model to economic growth is working beautifully, having come into play prior to the 2008 crisis and now once again forcing another global slowdown.
• How Greek Protesters See The EU In One Simple Photograph. (pic)
• Dick Bove: The Economy is Slowing, SELL Wells Fargo(WFC).
  

Zero Hedge:

• Tim Geithner's Remarks to the International Monetary Conference On Systemic Risk.
• John Taylor of Currency Hedge Fund FX Concepts Says He Is Now Long The USD As Of a Week Ago. (video)
• Fitch Blows at Greek Bailout House of Cards, Says On Closing of Distressed Debt Exchange Will Place Sovereign Rating Into Default.
• Muddy Waters' Carson Block Discusses Sino-Forest, Says Will Keep Short In "Ponzi" Until Stock Hits Zero. (video)
  

NY Post:

• Watchdog Bites. FINRA Won't Let Me Hire More Brokers: Schiff. As The Post recently reported, small brokerage firms like Schiff's are complaining that the Financial Industry Regulatory Authority (Finra) has been hobbling their businesses with over-regulation. Finra is a self-regulatory agency funded by the brokerage industry. Critics charge that Finra is beholden to big brokerage firms and boosts its investigation totals by going after smaller firms that are more likely to settle than fight.
• Japan Says Fukushima's Radiation Twice as Bad as First Reported.
  

New York Times:

• Syria, Claiming 120 Officers Killed, Hints at Retaliation. Syria’s state news agency reported Monday that “armed gangs” had killed 120 police, security personnel and civilians in multiple attacks in a northwestern town, and that residents were “pleading” for the army to intervene. The reports could not be independently verified, but regardless of whether the numbers are inflated, they appear likely to presage an even harsher crackdown on antigovernment protesters.

Digital Trends:

• Sina's(SINA) Weibo Aims to Take Down Twitter With US Version. Sina Weibo’s US debut would represent the first major Chinese social network to launch in the United States. But considering the Chinese government’s stranglehold on free speech in-country, which highly restricts what users can and cannot say on Sina Weibo, it will be interesting to see if the American version takes a different approach to censorship. If not, don’t expect much of a fight.

CNN Money:

• Meredith Whitney: State Finances Are Worse Than Estimated. The outspoken municipal bond bear follows up with more evidence that the fiscal troubles in many states are far greater than we've been told.

Politico:

• Internet Sales Tax Push Gains Currency.

Rasmussen Reports:

• 54% Favor Repeal of Health Care Law, 56% Say Law Will Increase Deficit. The latest Rasmussen Reports national telephone survey of Likely Voters shows that 54% of Likely U.S. Voters at least somewhat favor repeal of the law, while 39% are at least somewhat opposed. This includes 40% who Strongly Favor repeal and 26% who Strongly Oppose it.

Daily Yomiuri Online:

• Worried Residents Near Evacuation Zone Weigh Leaving. Fearing high radiation levels from the Fukushima No. 1 nuclear power plant, people living just outside the evacuation zone established by the government are considering leaving voluntarily. The cities of Date and Soma, both in Fukushima Prefecture, are preparing to offer public housing units and other facilities to people who live close to the evacuation zone the government established outside the no-entry zone within a 20-kilometer radius from the plant.

Bear Radar

Style Underperformer:

• Mid-Cap Value (-1.05%)

Sector Underperformers:

• 1) Education -2.91% 2) Oil Service -2.10% 3) Construction -2.05%

Stocks Falling on Unusual Volume:

• PRGS, VRNT, THI, LNG, BAC, GPRO, UTHR, PRGS, GTIV, IPXL, CYBX, CBOE, CHSI, TNAV, MELI, DWA, SNCR, BANRD, RSTI, SOLR, PODD, AIRM, CSII, LCAPA, WOOF, JKL, FEU, BAP, JKG, BVN, PUW, PWO, PWY, SMG, DWA, LO and SCCO
  

Stocks With Unusual Put Option Activity:

• 1) CYH 2) LO 3) CMED 4) XL 5) NUE
  

Stocks With Most Negative News Mentions:

• 1) HAL 2) LOW 3) AVY 4) SMG 5) LMT
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.12%)

Sector Outperformers:

• 1) Oil Tankers +1.42% 2) Restaurants +1.12% 3) Defense +.30%

Stocks Rising on Unusual Volume:

• RT, SBUX, DELL, ENOC, SEE, PTRY, OSG and HOG
  

Stocks With Unusual Call Option Activity:

• 1) GPRO 2) RRC 3) QPSA 4) SCCO 5) UTHR
  

Stocks With Most Positive News Mentions:

• 1) TASR 2) AEO 3) WY 4) AOS 5) BYD
  

Charts:

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

Monday Watch

Weekend Headlines
Bloomberg:

• Papandreou Faces Growing Backlash as Last EU Bailout Premier. George Papandreou is the last man standing among the euro-area leaders who needed a handout after Jose Socrates’s defeat in Portuguese elections yesterday. For Papandreou and the investors and taxpayers who will share the cost of a beefed-up bailout for Greece, questions are increasing about whether he will complete a term that runs until 2013 and enact the budget cuts and asset sales that his benefactors demand. The Greek premier, who has won assurances that international lenders will make the next payment of last year’s 110 billion-euro ($161 billion) rescue, will aim to quell growing dissent this week within his Socialist party -- known as Pasok -- over deeper budget cuts and asset sales as voters’ patience wears thin and public protests mount. “The coming week may well test the seams of Pasok in parliament and could prove a challenge too much for Papandreou,” said Jens Bastian, a visiting economist at St. Antony’s College, Oxford University in England. “It is a make or break situation for his leadership of the party and the government.”
• Slowing U.S. Growth Prompts Optimists to Question Durability of Recovery. A string of disappointing economic data capped by last week’s jobs report is prompting even some of the more optimistic economists to question the durability of the U.S. recovery. While analysts such as Stephen Stanley of Pierpoint Securities LLC and Michael Feroli of JPMorgan Chase & Co. still see growth strengthening in the months ahead, they voiced concern that the lull in the economy may prove prolonged, leaving it more vulnerable to external shocks or policy missteps.
• OPEC Overshadowed by Qaddafi in Most-Hostile Meeting Since 1990 Gulf War. OPEC ministers meeting in Vienna this week will find themselves supporting opposing camps of a military conflict for the first time in 21 years, with hostilities in Libya complicating an agreement on oil quotas. Not since Saddam Hussein invaded Kuwait in 1990 has the producer group gathered with some nations giving financial and military support to a movement seeking to topple the government of a fellow member. While Libyan leader Muammar Qaddafi is trying to quash a rebellion in a country that holds Africa’s largest crude reserves, Qatar, Kuwait and the United Arab Emirates are backing the insurgents.
• Commodity Bubbles Caused by Speculators Need Intervention, UN Agency Says. Commodity markets need international oversight, more transparency and intervention to deflate bubbles because increasing speculation means prices are no longer driven by supply and demand, the United Nations said. Increased investment in commodity markets has encouraged “herding behavior” and creates bubbles, the UN’s Conference on Trade and Development said in a report published today. Anticipation of the global economic recovery played a “disproportionate role” in higher commodity prices, it said. “Prices can move far from levels justified by the fundamentals for extended periods, leading to an increasing risk of price bubbles,” the UN said in the report. “Due to these distortions, commodity prices do not always provide correct signals about the relative scarcity of commodities.” The UN’s Food Price Index neared a record set in February last month as commodity futures gained. Corn on the Chicago Board of Trade and silver have more than doubled in the past year and gold is up 27 percent. Rice is up 32 percent. The “financialization” of commodity markets that’s increased since 2004 has led to a lack of “price discovery” that farmers and miners use to make hedging decisions, according to the UN report. “Market participants make trading decisions based on factors that are totally unrelated to the respective commodity, such as portfolio considerations, or they may be following a trend,” the UN agency said. “The price discovery mechanism is seriously distorted.” Providing more timely data on fundamentals, information about market participants, especially in Europe, increasing position limits and banning proprietary trading by financial institutions that are involved in making hedging decisions for their clients are ways to solve problems associated with speculative investments in commodities, the UN said. Introducing a tax system that slows financial market activities and more government involvement in trading is needed to ensure traders are considering supply and demand fundamentals when investing, it said. Study organizers who interviewed 22 market participants reported “widespread herd behavior,” the agency said. “Physical traders, in particular, emphasized that the activities of financial players have strong effects on commodity markets and sometimes impair the functioning of commodity futures for hedging,” according to the report.
• Tepco Slumps to Record Low on Radiation Spike. Tokyo Electric Power Co. fell to a record low after reports that radiation levels surged at its crippled Fukushima plant and the president of Japan’s largest stock exchange said the utility should be liquidated. The owner of the crippled Fukushima Dai-Ichi nuclear plant plunged as much as 28 percent to 206 yen, the most since the utility known as Tepco starting trading in 1974. The stock traded 24 percent lower at 218 yen at 11 a.m. in Tokyo and was the biggest decliner in the Topix Electric Power & Gas Index. Radiation readings inside the No. 1 reactor building spiked to the highest level yet, almost three months after the disaster started, Kyodo News reported June 4, citing data from Tepco. In a separate report, the Asahi newspaper cited Tokyo Stock Exchange President Atsushi Saito as saying that the utility should undergo restructuring similar to Japan Airlines Co., which filed for bankruptcy protection in 2010.
• Funds Boost Bullish Commodity Bets Amid Improving Global Growth Prospects. Funds boosted bets on rising commodity prices to the highest in four weeks, led by copper, amid signs that the global economic recovery will remain resilient and boost demand for raw materials. Speculators raised their net-long positions in 18 commodities by 7.3 percent to 1.26 million futures and options contracts in the week ended May 31, government data compiled by Bloomberg show. That’s the highest since May 3. Copper holdings more than doubled. A measure of bullish agriculture bets also climbed as adverse global weather curbed crop production.
• Lead Smelters in China May Cut Output as Demand Slows, Regulation Tightens. Lead smelters in China, the world’s largest producer and consumer, may idle capacity as demand slows amid a power shortage and as the nation clamps down on polluting units, according to Beijing Antaike Information Development Co. “Lead demand has been weak and while we haven’t heard of smelters cutting output, many have brought forward their annual maintenance shutdowns, which is essentially the same thing,” said Hu Yongda, an analyst at state-owned Antaike. He didn’t give an estimate of how much capacity may be affected. Reduced Chinese demand may accelerate a decline in prices in London this year as consumption is forecast by the International Lead and Zinc Study Group to trail output for a fourth year. Moves to tighten rules on production of so-called e-bikes and lead-acid batteries may cool demand for lead, Zhu Yan, an analyst at Xiangyu Futures Co., said from Shanghai. “The fundamentals for lead are looking quite bleak at the moment, with the announcements about the electric bicycles and battery makers,” Zhu said from Shanghai.
• House Demands Obama Explain Military Mission in Libya Amid 'War Fatigue'. The U.S. House of Representatives, reflecting what one Republican termed “war fatigue” along with puzzlement over the U.S. military’s role in Libya, is demanding a fuller explanation for the mission from President Barack Obama. In a bipartisan vote, the House yesterday adopted Speaker John Boehner’s resolution that directs Obama to describe “in detail” the U.S. “security interests and objectives” for supporting the North Atlantic Treaty Organization’s bombing campaign against Libyan dictator Muammar Qaddafi. The resolution, approved 268-145, was an alternative to Ohio Democrat Dennis Kucinich’s proposal to force the end of U.S. support for the mission in 15 days.
• Palmer Ends Fourth Try at $3.6 Billion Resourcehouse IPO as Investors Balk. Resourcehouse Ltd., the iron ore and coal company controlled by Australian billionaire Clive Palmer, pulled its planned initial public offering in Hong Kong for a fourth time, citing negative market conditions.
• IMF Agrees to $3 Billion for Post-Mubarak Transition. Egypt and a visiting International Monetary Fund mission agreed to a $3 billion loan as the North African country seeks to fund its widening budget deficit after a popular revolt earlier this year. The 12-month loan is part of wider international support pledges for Egypt, where the turmoil that accompanied the uprising that led to the ouster of President Hosni Mubarak has hurt revenue from tourism and industrial output.
• Airline Profits Forecast Cut 54% by IATA on Japan Quake, Rising Fuel Costs.
  

Wall Street Journal:

• Violence Flares Up at Israeli Border. Violence along the border between Syria and the Israeli-controlled Golan Heights escalated, claiming casualties on Sunday, as Israeli soldiers opened fire on demonstrators in two locations who sought to march across the frontier on the anniversary of the outbreak of the 1967 Arab-Israeli war. Syria's state news agency said 23 people were killed and more than 350 were injured. Israeli officials accused Syria of backing the protests to distract attention from its repression of weekslong antiregime protests, and said Lebanese authorities avoided a flare-up by declaring the border a closed military zone.
• Drone Attacks Split U.S. Officials. Fissures have opened within the Obama administration over the drone program targeting militants in Pakistan, with the U.S. ambassador to Pakistan and some top military leaders pushing to rein in the Central Intelligence Agency's aggressive pace of strikes.
• Staying on Boards After Humble Exit. Many CEOs Who Leave Under a Cloud Remain as Directors Elsewhere, With Some Paid Handsomely.
• Exchange-Traded Derivatives Trades Surges in First Quarter - BIS. Trading volumes on international derivatives exchanges, measured by the notional amount of traded contracts, increased 21% on the quarter during the first quarter of 2011, the Bank for International Settlements said late Sunday. The rise to $581 trillion came from a growth in activity "in all market segments except foreign exchange," the BIS said in its Quarterly Review. Open interest, also measured in notional amounts, expanded by 24% from the fourth quarter 2010.
• Goldman(GS) Plans to Fight Back Against Senate Report. Goldman Sachs Group Inc., trying to counter a Senate subcommittee report that is fueling investigations and suspicion of the firm, plans to accuse the subcommittee of drastically overstating Goldman's bets against the housing market in 2007, people familiar with the situation said.
• Helping Chips to Sip Power. A team of Silicon Valley veterans is claiming they can reduce power consumption in computer chips by 50%, potentially extending the battery life of portable devices and helping chip manufacturers keep pace with giants like Intel Corp.
• Feds to Biotech Firms: Shut Up. Medicine will suffer if Washington controls the flow of scientific information. A federal judge sentenced the former head of a biotech company to six months of home confinement this spring and fined him $20,000. His offense? Issuing a single press release about a drug.
• China, Patents and U.S. Jobs. A new report suggests better intellectual property protection by Beijing could create 2.1 million American jobs.

Business Insider:

• There Are Thousands of People Protesting in Athens' Syntagma Square Right Now. (pic) For the 12th day in a row, protesters continue to make their voices heard in Athens. There are reports of 50,000 to 500,000 (likely closer to the former) protesting in Syntagma Square this evening, against the government program of austerity measures, and the current political situation. Protesters have been camped out here all week, similar to the situation in Spain in the run up to their regional elections. Whether or not they'll have any impact on the implementation of the country's latest austerity plan remains to be seen.
• It's Official: John Paulson Has Been Getting Clobbered. John Paulson is hitting a rough patch. The FT is reporting that for May, his flagship Advantage Fund, fell 6%. That compares to an average decline of just 1.39% in the month. For the year he's now down 7.6%. And that's before June -- which is already off to a rough start. On Friday we mentioned how Paulson probably lost hundreds of millions in shares of Sino-Forest, the latest case of a Chinese stock getting killed after a short-seller raises questions about accounting. Well on Friday, says WSJ, Paulson told investors that this stock did in fact represent 2% of his Advantage Fund, and at this point represents a loss to the fund of around $323 million. Meanwhile, another one of his big past winners -- his gold fund -- fell 6.4% in May.
• The Greek Debt Problem "In Simple Mathematics".
• This Week's 10 Best WEINERGATE Jokes.
• China Scolded Over Recent Aggressive Moves in South China Sea. China has come under fire for its actions in the South China Sea from U.S. officials and the leaders of countries in the region, according to the Financial Times.
• Fukushima Radiation Jumps to Record Levels, As Tepco Warns That Heavy Rain Will Cause Toxic Pools to Overflow. Things seem to be getting worse at the Fukushima Nuclear Plant. Today Tepco announced radiation readings of up to 4,000 millisieverts per hour at reactor No. 1 -- the highest air radiation yet at that reactor, according to Japan Times. This follows video of steam rising from the reactor floor. Tepco also warned that pools of radioactive water will overflow by June 20 or sooner if there is heavy rain.
• A Few Charts That Show Why Quantitative Easing Was A Miserable Failure.
• Al Qaeda Video Calls On Americans To "Buy Guns and Start Shooting People".

Zero Hedge:

• Two Clear Warning Signs in the Credit Markets.
• China Car Sales Tumble For Second Month In A Row, As Goldman(GS) Sees Spike In China Inflation To Multi-Year Highs.
• Another China Rate Hike As Early As This Week Expected.
  

LA Times:

• Video Game Consoles' Dominance is Crumbling. Consoles are losing ground in video gaming as players turn to tablets and smartphones.

denverpost.com:

• Construction Important to Recovery, But Struggles Could Drag Colorado Down. If Colorado's economy is battered and bruised after more than three years of recession and tepid recovery, the state's construction industry is decimated. The sector lost 60,000 jobs during the past three years — a reduction of more than a third, and almost half of Colorado's total job loss of about 130,000. The contraction worsened in recent months, sapping momentum from a delicate turnaround for the state and diminishing one of its biggest employment bases. Combined with related sectors including real estate sales, mortgage lending and the manufacture and retail of building products, construction has an outsized economic impact in Colorado.

TwinCities.com:

• Big Money Moves Into the Midwest Grain Trade. For rural farm co-ops, it's definitely a new era when East Coast hedge funds, Asian corporations and investors for billionaire George Soros come a-courting. Across the Midwest, well-heeled outside investors are on the prowl to acquire the hard assets of U.S. agribusiness.

Reuters:

• Iraq Says Supports OPEC Output Hike to Meet Demand. Iraq supports an increase in OPEC output if a production hike is needed to meet rising global demand for crude, Deputy Prime Minister Hussain al-Shahristani told Reuters on Saturday. OPEC oil ministers will meet on June 8 in Vienna to decide on output policy. Oil prices were being pushed by unrest in countries like Libya and not by actual low supplies, Shahristani said.
• Iran Backs Arab Uprisings Unless Pro-U.S. - Khamenei. Iran backs all Muslim uprisings except those stirred up by Washington, Supreme Leader Ayatollah Ali Khamenei said on Saturday, a stance that explains Tehran's lack of support for anti-government protesters in ally Syria. Addressing a crowd commemorating the death of Ayatollah Ruhollah Khomeini, Khamenei said the leader of the 1979 Islamic Revolution had predicted events in the Middle East over the last few months where Arabs have risen up against oppressive regimes. Non-Arab, predominantly Shi'ite Muslim Iran relished the fall in February of Egyptian President Hosni Mubarak, a U.S.-backed secularist who made peace with Israel. Tehran has also voiced support for pro-democracy movements elsewhere in the region, especially Bahrain where the Sunni monarchy was aided by Saudi Arabia and the United Arab Emirates to put down democracy protests led by majority Shi'ite Muslims. But the Islamic Republic, which crushed its own mass protests after the disputed re-election of hardline President Mahmoud Ahmadinejad in June 2009, has not expressed backing for demonstrators in Syria where President Bashar al-Assad is a key regional ally. "Our stance is clear: wherever a movement is Islamic, popular and anti-American, we support it," Khamenei told the crowd which punctuated his speech at Khomeini's mausoleum on the outskirts of Tehran with chants of "Death to America."
• Iraq Sees Oil Output at 3 Million BPD by Year-End. Iraq expects its oil output to rise to 3 million barrels per day by the end of this year and sees it growing an additional 500,000 to 1 million bpd next year, Deputy Prime Minister Hussain al-Shahristani said on Saturday. Shahristani said Iraq's programme to install new single point moorings or SPMs would help increase export capacity by an additional 1.8 million bpd by the end of this year. The OPEC member's current output is about 2.7 million to 2.8 million bpd. Iraq's oil exports in May averaged 2.225 mln bpd.
• BIS - Banks May Need More Cash to Clear Derivatives. The world's top 14 derivatives dealers may need extra cash to handle a surge in transaction clearing, especially in choppy markets, the Bank for International Settlements (BIS) said.

BBC:

• Eurozone Woes Are US Woes. A different perspective on the risks the world faces from the financial woes of Greece, Ireland and Portugal is provided by a new class of statistics published today by the Bank for International Settlements, the central bankers' central bank. What it shows is that US banks are collectively second or third most exposed to the woes of Greece, Portugal and Ireland, through what the BIS calls their "potential exposure" to these countries. This new visibility for the big bets US banks have made on the eurozone's most overstretched economies could prove controversial in Washington - coming so soon after these banks were bailed out by US taxpayers.

Irish Independent:

• We Will Default, So Let's Get On With It. Ireland will default, when it does happen we should not do it alone but with Greece and Portugal; we should consider leaving Europe given how badly they treat us; we need to take a scalpel to our public sector and Ireland will take five to seven years from now to recover. Those are the views of Larry McDonald, former Lehman Brothers vice president turned international best-selling author, who was in Dublin last week speaking at the Irish Funds Industry Association. McDonald was, until September 2008, vice president of distressed debt and convertible securities trading at Lehman Brothers. He was heralded by many colleagues at Lehman for both his early 2006 call on the subprime crisis and the $46m in trading profits realised from it.

Bild am Sonntag:

• Horst Seehofer, head of German Chancellor Angela Merkel's coalition partner SCU, said it's not certain yet that the lower house of parliament will support more aid for Greece, citing an interview. "We won't issue a black check," Seehofer, who leads the sister party to Merkel's Christian Democrats and is also prime minister of Bavaria's state government, was quoted as saying. The parliament will only agree on loans under strict conditions such as a "maximum" effort by Greece to consolidate its budget, Seehofer said.
• The large number of patients sickened by the E. coli outbreak in Germany has created a "tense situation" for hospitals in the north of the country, Health Minister Daniel Bahr said in an interview.
  

Kyodo News:

• Radiation readings from inside Tokyo Electric Power Co.'s No. 1 reactor building in the Fukushima Dai-Ichi facility were as high as 4,000 millsieverts an hour, the highest recorded at the plant, citing data from the utility.

Weekend Recommendations
Barron's:

• Made positive comments on (FCX) and (HXL).
• Made negative comments on (LO).
  

Night Trading

• Asian indices are -1.0% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 110.0 +.75 basis point.
• Asia Pacific Sovereign CDS Index 115.75 +2.25 basis points.
  
• S&P 500 futures unch.
• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GIII)/.04

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed Chairman Bernanke speaking to Intl Monetary Conference, Fed's Plosser speaking, Fed's Fisher speaking, 3-Month/6-Month Treasury Bill Auction, Goldman Sachs Healthcare Conference, RBC Capital Markets Energy/Power Conference, BofA Merrill Telecom/Media/Tech Conference, Goldman Sachs Lodging/Gaming/Restaurant/Leisure Conference, Jefferies Healthcare Conference and the (ATML) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by automaker and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.