Bear Radar

Style Underperformer:

• Large-Cap Value (+1.28%)

Sector Underperformers:

• 1) Utilities +.57% 2) Banks +..83% 3) Computer Services +.86%

Stocks Falling on Unusual Volume:

• ANGO, SSRX, INSM, SIGA, PCRX, TNDM, RMTI, RBCN, STRA, DTG, KMP, FDS, EVR and NX
  

Stocks With Unusual Put Option Activity:

• 1) JCP 2) SPWRA 3) BBY 4) EWT 5) CYH
  

Stocks With Most Negative News Mentions:

• 1) SPWRA 2) AAP 3) WMT 4) JNPR 5) ACN
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.90%)

Sector Outperformers:

• 1) Coal +3.43% 2) HMOs +2.65% 3) Gaming +2.07%

Stocks Rising on Unusual Volume:

• IVN, SI, TSL, LNC, CAR, BBBB, PHK, AOL, CBRL, SOLR, ZAGG, SINA, BBY, HTZ, ANV, CVI, ZAGG, SWI, MAS, TWI, CBL and MIC
  

Stocks With Unusual Call Option Activity:

• 1) COV 2) CROX 3) CCK 4) DTG 5) K
  

Stocks With Most Positive News Mentions:

• 1) GHM 2) HEI 3) PETD 4) WFR 5) APU
  

Charts:

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

Tuesday Watch

Evening Headlines

Bloomberg:

• China's Inflation Accelerates at Fastest Pace Since 2008. China’s inflation accelerated to 5.5 percent in May, the fastest pace in almost three years, and industrial output grew more than economists forecast. The annual gain in consumer prices matched the median estimate in a Bloomberg News survey of economists. Production rose 13.3 percent last month, the statistics bureau said in Beijing today. That compared with a median 13.1 percent forecast. “The central bank needs to persist with the inflation fight as price gains are proving stickier than previously thought,” Yao Wei, a Hong Kong-based economist with Societe Generale SA, said before today’s release. “Any let-up would see a rebound.” Yao sees inflation peaking at 6.5 percent this month before moderating. Producer prices jumped 6.8 percent in May, the statistics bureau said. Retail sales, which are boosted by inflation, rose 16.9 percent after a 17.1 percent gain in April. Fixed-asset investment excluding rural households expanded 25.8 percent in the first five months, compared with analysts’ 25.2 percent median forecast.
• Fed's Fisher Reiterates Central Bank Has Done Enough to Help U.S. Economy. Federal Reserve Bank of Dallas President Richard Fisher reiterated his view that the central bank has done enough to support the U.S. economy and indicated he won’t support a third round of quantitative easing. “The worst outcome of all would be for the Fed to continue monetizing the debt,” Fisher, 62, said today during a speech in Dallas. “We’ve been doing that since November.” “We’ve done enough,” Fisher said in a speech to the Certified Financial Analysts Society of Dallas-Fort Worth. “I will not support our doing more.” Fisher said it’s “highly unlikely” that the yuan will displace the dollar as the world’s main reserve currency in a “reasonable time frame,” and that it will take a long time for the U.S. housing market to work off its excess inventory.
• Crude Oil Declines for a Third Day in New York on Signals Demand Weakening. Oil declined for a third day in New York as signs that the global economy is slowing stoked speculation that fuel demand may falter. Prices dropped to a four-week low yesterday after government data showed China’s oil-product consumption slid 4 percent in May and Standard & Poor’s cut Greece’s credit rating to the lowest held by a country. Crude for July delivery declined as much as 52 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange, and was at $96.85 at 9:49 a.m. Sydney time. The contract yesterday slid $1.99, or 2 percent, to $97.30, the lowest since May 17. Prices are 29 percent higher the past year.
  
• Fannie Mae, Freddie Mac Remain Risks to Taxpayers, U.S. Regulator Reports. Fannie Mae and Freddie Mac, the mortgage companies operating under U.S. control, are improving their financial condition but remain a risk to taxpayers, the companies’ regulator reported. In its third annual report to Congress released today, the Federal Housing Finance Agency said improved underwriting on the loans that the companies package into mortgage-backed securities helped slow the agencies’ losses to $28 billion in 2010, from $93.6 billion a year earlier.
• China's worst power shortage in seven years may trump policies to battle inflation, as the first government-approved electricity-rate increase on farmers and businesses since November 2009 gets passed along to consumers. "All these retailers who are now playing higher overheads will all of a sudden say, 'Yeah, we'll hike our prices,'" said Ben Simpfendorfer, Hong Kong-based publisher of China Insider, an online newsletter, and former chief China economist at Royal Bank of Scotland Group Plc.
• Volcanic Ash Disrupts Air Travel. Flights across the Southern Hemisphere were disrupted as a cloud of volcanic ash from an eruption in southern Chile widened from Argentina to Australia. United Nations Secretary-General Ban Ki-moon’s plane was diverted from its planned landing today in Buenos Aires to the central province of Cordoba after the capital city closed its two biggest airports, canceling 144 flights by companies including Santiago-based Lan Airlines SA (LAN) and Qantas Airways Ltd. (QAN), Australia’s biggest carrier. “There are ashes throughout the first 9,000 meters of the atmosphere,” said Alejandro Tome, a spokesman at the Argentine civil aviation office, adding that the flight disruptions in the region were “unprecedented.”
• Systemic Firms May Have to Restructure: FDIC. Systemically important financial institutions in the U.S. may have to simplify their business if they can’t provide viable plans for unwinding themselves in a crisis, a senior Federal Deposit Insurance Corp. official said. “Ultimately, a SIFI could be required to restructure its operations if it cannot demonstrate it is resolvable in an orderly manner under the Bankruptcy Code,” Michael Krimminger, the FDIC’s chief counsel, will tell a House Financial Services subcommittee tomorrow at a hearing in Washington.
• Tepco Faces Radioactive Sludge Crisis. Tokyo Electric Power Co., which is struggling to contain the worst nuclear disaster in 25 years has another crisis on its hands: finding storage for enough radioactive sludge to fill an Olympic-sized swimming pool. The utility known as Tepco plans to start decontaminating millions of liters of water poured over melting reactors to keep them from exploding after the March 11 earthquake and tsunami knocked out cooling systems. By the end of the year it expects to have 2,000 cubic meters of highly radioactive sludge separated from the water, said Teruaki Kobayashi, a nuclear facility management official at Tepco. “We haven’t determined a final disposal site for the waste,” Kobayashi said in an interview yesterday.
• IMF Rules Out Fischer as Candidate for Director. The International Monetary Fund said that French Finance Minister Christine Lagarde and Mexican central bank Governor Agustin Carstens are the two candidates to become managing director of the group. In an e-mailed statement, the Washington-based lender omitted mention of Israeli central bank chief Stanley Fischer, who had declared his candidacy last week.
• Tepco Rises 24% After Short Sale, Margin Rule Changes. Tokyo Electric Power Co., which has lost about 90 percent of its value since the March 11 tsunami that crippled its Fukushima Dai-Ichi nuclear plant, gained the most since at least 1974 after the stock exchange clamped down on short-selling of the shares. The stock rose as much as 24 percent to 247 yen, the highest since June 3, and traded at 245 yen as of 12:47 p.m. in Tokyo.
• Tea Party Favorite Bachmann Enters 2012 Race. U.S. Representative Michele Bachmann, a Minnesota Republican known for her uncompromising views and firebrand style, said today that she plans to run for the 2012 Republican presidential nomination.

Wall Street Journal:

• Wave of Unrest Rocks China. Threats to Social Order Increasingly Hit Cities, Bringing Iron-Fist Response. A wave of violent unrest in urban areas of China over the past three weeks is testing the Communist Party's efforts to maintain control over an increasingly complex and fractious society, forcing it to repeatedly deploy its massive security forces to contain public anger over economic and political grievances. The simultaneous challenge to social order in several cities from the industrial north to the export-oriented south represents a new threat for China's leaders in the politically sensitive run-up to a once-a-decade leadership change next year, even though for now the violence doesn't appear to be coordinated. In the latest disturbance, armed police were struggling to restore order in a manufacturing town in southern China Monday after deploying tear gas and armored vehicles against hundreds of migrant workers who overturned police cars, smashed windows and torched government buildings there the night before. The protests, which began Friday night in Zengcheng, in the southern province of Guangdong, followed serious rioting in another city in central China last week, plus bomb attacks on government facilities in two other cities in the past three weeks, and ethnic unrest in the northern region of Inner Mongolia last month. The latest unrest involves violent protests from individuals and large crowds in China's cities, where public anger is growing over issues including corruption and police abuses. The recent violence has exposed the limits of the government's ability to control the urban population using a sophisticated array of tools from Internet censorship to surveillance—part of what party leaders refer to as "social management." Authorities have turned to displays of raw power, deploying paramilitary police and armored vehicles in at least three cities in as many weeks, to prevent the violence from spiraling further as protesters have repeatedly directed their anger at government buildings, often ostentatious symbols of power.
• ECRI's Achuthan: Prolonged U.S. Slowdown Underway. The U.S. economy is “not yet” headed for a double-dip recession, but a sharp and prolonged downturn is underway and may make jobs growth even tougher to come by, an influential analyst said Monday. In an interview with The Wall Street Journal, Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute, said that over the last few months key indicators of long-term economic growth have all begun pointing in one direction: downward. “We’re talking about a cyclical turn that’s pronounced pervasive and persistent, not a one or two month affair,” Achuthan said. He added that the slowdown is likely to last a couple of quarters at least — even as he stopped short of calling it a formal recession, which is defined by two quarters of economic contraction. “This isn’t a story about one country driving [growth] down: China didn’t do this, and the U.S. didn’t’ do this,” he said. “It’s very big…and not something you can deny.” “The broad economy is going to slow alongside the industrial sector starting in the middle of this year, so in that sense it may feel like last year,” Achuthan said, adding that closely watched gauges of economic growth will all begin slowing at the same time. “It’s all going to be synchronized.” ECRI sees jobs growth as “slower” in the months to come, Achuthan says. “You’re not going to see the quarter of a million jobs [created] on average anytime soon,” the economist said, referring to the figure of employment growth that many analysts cite as a benchmark for sufficient growth in employment. “We’re going to get back into that 100 plus or minus range through the summer.”
• GOP Candidates Run Against Regulation. Republican presidential hopefuls on Monday pressed for the dismantling of government regulations drawn up over 40 years, using a candidates' debate here to call for the scaling back or elimination of environmental, labor, financial and health-care rules. The seven candidates on stage at Saint Anselm College avoided challenging each other, a benefit for front-runner Mitt Romney, former governor of Massachusetts.
• Forex Hedge Fund Assets Likely Shrink After May Losses - HFN. Losses at foreign-exchange-focused hedge funds in May might lead to further investor withdrawals from the funds, HedgeFund.net said Monday. The hedge-fund data provider, which tracks about 200 forex funds, said investors pulled $700 million from forex hedge funds in the nine months ended March 31, more than offsetting $580 million in asset appreciation during the period. It estimates a total $51.6 billion in hedge-fund assets were invested in forex strategies at the end of the first quarter. The outflow contrasted with a $110 billion inflow into other types of hedge funds in the nine months ended March 31, HFN said. May was a volatile month for investments in commodities and currencies. The U.S. dollar surged last month as investors dumped currencies of emerging economies and big commodity producers, reversing trades they had engaged in for months. The dollar's appreciation spooked many funds that had been betting against the currency. "Performance from FX strategies in April and May indicate the aggregated positions from the group were negative on the U.S. dollar," HFN said in a report. The correlation of monthly returns of forex strategies to an index measuring the U.S. dollar against a basket of currencies was -0.62 in the last two years.
• Bank CDS Wider, Even as Stocks Rise. Financials are the best-performing sector in the market today, up more than 1%, but Tim Backshall at Capital Context points out that their credit indicators are telling a far different story. Their CDS spreads have been widening and bond yields rising all day, notes Mr. Backshall. According to Markit data, Bank of America and Citi’s one-year CDS spreads are up 3% each, Morgan Stanley’s is up about 4% and Goldman’s is up 1.5%. J.P. Morgan’s two-year spread is up 4.5%.
• High Hopes at Miracle-Gro(SMG) in Medical Marijuana Field. Scotts Miracle-Gro Co. has long sold weed killer. Now, it's hoping to help people grow killer weed.
• Is This the China Bubble Bursting? That sound you hear? It may be the deflating bubble in some Chinese stocks. The market scribblers at Standard & Poor’s crunched the numbers on Chinese Internet and solar companies with more than $100 million in market value. They found that on average, their collection of once-hot companies have lost half their value in the past year, after increasing in price by one-and-a-half-times over the past year. S&P wrote:
• CIA Plans Yemen Drone Strikes. The Central Intelligence Agency is preparing to launch a secret program to kill al Qaeda militants in Yemen, where months of antigovernment protests, an armed revolt and the attempted assassination of the president have left a power vacuum, U.S. officials say.
• Why ObamaCare Is Losing in the Courts. The government's lawyers keep changing their arguments as each one is exposed as constitutionally suspect.
• Uncertainty Is Not The Problem by Clifford S. Asness. It's not the policies we don't know about that are retarding the economy. It's the bad policies we have. Many commentators blame our continuing economic woes on "uncertainty." They allege that recent and anticipated dramatic policy changes make business planning difficult, and that this is retarding growth and employment. This view is not wrong—but our main problem is not the uncertainty surrounding new policies. It is the policies.

CNBC:

• US Phone Taps Convict Three More of Insider Trading.
• Hackers Break Into U.S. Senate Computers. The U.S. Senate's website was hacked over the weekend, leading to a review of all of its websites, in the latest embarrassing breach of security to hit a major U.S.-based institution. The loosely organized hacker group Lulz Security broke into a public portion of the Senate website but did not reach behind a firewall into a more sensitive portion of the network, Martina Bradford, the deputy Senate sergeant at arms, said on Monday. Despite the breach, the Sergeant at Arms Office, which provides security for the Senate, said that the breach had not compromised any individual senator's information.

Business Insider:

• Now It Gets Interesting: Goldman(GS) Gave a Paid Internship to Libyan Official's Brother.

Zero Hedge:

• Capital Context Update: Financials.
• Greek Parliament Preparing Evacuation Tunnel Ahead of Wednesday Vote on IMF Bailout, General Strike and Parliamentary Blockade. June 15, the day of a general strike in Greece, is also the day when the critical "mid-term agreement" between the insolvent country and the Troica will be voted on by the general assembly. "The agreement includes tax increases, slashing of wages and pensions and the lay-off of approximately more 100,000 civil servants in the next few years." Already the blog Occupied London has called for a blockade of the Athens parliament:

IBD:

• Touch-Screen Chips Now Cypress'(CY) Top Moneymaker.

Forbes:

• Ouch! May U.S. Video Game Retail Sales Fall 14% From Year Ago.
• Roubini Warns of Euro Break Up as Greek Credit Rating Tumbles. “The muddle-through approach to the eurozone crisis has failed to resolve the fundamental problems of economic and competitiveness divergence within the Union. If this continues the euro will move toward disorderly debt workouts and eventually a break-up of the monetary union itself as some of the weaker members crash out,” stated Roubini, also known as Dr. Doom, in an op-ed for the FT.

LA Times:

• Southern California Home Prices Continue to Dip in May. The median price falls 8.2% from a year earlier to $280,000, the region's 11th consecutive decline. Sales drop 17.4% to 18,394, a three-year low for May. Southern California's housing market weakened in May, with prices and sales dropping in all of the region's counties, providing further evidence of a sluggish spring shopping season.
  

Politico:

• Poll: Only 1 in 4 Support Libya Mission. Just 26 percent of likely U.S. voters approve of continuing military action in Libya and 59 percent believe President Barack Obama should get congressional approval for the mission, according to a Rasmussen poll released Monday. The poll of 1,000 likely voters on Friday and Saturday found 42 percent oppose American action against Muammar Qadhafi, while 32 percent are undecided. The results represent a 12 percentage increase in support for a congressional authorization for the NATO-led Libya effort since a March Rasmussen poll.
  

Reuters:

• Japan Big Manufacturers' Mood Worsens Sharply in Q2 - Govt. Big Japanese manufacturers grew more pessimistic about business conditions in the three months to June compared with the previous quarter, a survey showed on Tuesday, as the March earthquake and tsunami and subsequent nuclear crisis damaged confidence. The business survey index (BSI) of sentiment at large manufacturers stood at minus 23.3 in April-June, compared with minus 3.2 in January-March, according to the joint survey by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office. The quarterly survey excludes some companies in the northeast directly hit by the March disaster.

Telegraph:

• Rates Must Rise Even If Recovery Falters, Says Bank of England Policymaker Martin Weale. Interest rates should rise now to address soaring inflation even though doing so would hurt the already weak recovery, Bank of England policymaker Martin Weale has urged.
• Duabai's Financial Crisis Laid Bare as 217 New Properties Axed. Dubai's total value of real estate transactions dropped to 119.4 billion dirhams (£20bn) last year compared with 152.9 billion dirhams in 2009. The property sector has been hit hard by the downturn, with projects worth billions of dollars put on hold or cancelled, while property prices slumped as much as 60pc. Land sales fell by 14.9pc in the last year, according to data from Dubai's Department of Land and Properties. The prospectus said only 129 projects have been completed since the beginning of 2009.

Kyodo News:

• Japan's Fukushima prefecture will start distributing radiation-measuring equipment in September to about 34,000 schoolchildren under 15 years of age.

Financial News:

• China should maintain its prudent monetary policy as rising production costs and power shortages indicate the economy is still "hot," citing a central bank adviser. The Asian nation should accelerate the pace of interest rate liberalization, the report said, citing Zhou Qiren, an adviser to the People's Bank of China.
  

China National Radio:

• China may raise interest rates in late June or early July because of estimates for high consumer prices increases in June. The country's consumer price index may be 5.5% in May, citing market estimates.

China Daily:

• China's food safety crisis is largely because of intentional contamination by producers and processors, citing Yu Jun, an official with the Food Safety Commission under the State Council.

Evening Recommendations
RBC Capital Markets:

• Rated (MS) Underperform, target $24.
• Rated (GS) Underperform, target $132.

Night Trading

• Asian equity indices are unch. to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 116.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 120.25 +1.75 basis points.
  
• S&P 500 futures +.64%.
  
• NASDAQ 100 futures +.56%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDS)/.92
• (BBY)/.33
• (CLC)/.56

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for May is estimated to fall to 90.5 versus 91.2 in April.

8:30 am EST

• The Producer Price Index for May is estimated to rise +.1% versus a +.8% gain in April.
• The PPI Ex Food & Energy for May is estimated to rise +.2% versus a +.3% gain in April.
• Advance Retail Sales for May are estimated to fall -.5% versus a +.5% gain in April.
• Retail Sales Less Autos for May are estimated to rise +.2% versus a +.6% gain in April.
• Retail Sales Ex Auto & Gas for May are estimated to rise +.2% versus a +.2% gain in April.

10:00 am EST

• Business Inventories for April are estimated to rise +.9% versus a +1.0% gain in March.

Upcoming Splits

• (CSX) 3-for-1
• (ALC) 2-for-1
  

Other Potential Market Movers

• The Fed's Bernanke speaking on Debt Ceiling/Budget, weekly retail sales reports, William Blair Growth Stock Conference, Deutsche Bank Industrial/Basic Materials Conference, Deutsche Bank Consumer Conference, (CNC) investor day and the (SRZ) investor conference could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by automaker and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Short-Covering, Bargain-Hunting, Lower Food/Energy Prices, Euro Currency Bounce

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 19.26 +1.86%
  
• ISE Sentiment Index 106.0 -10.17%
  
• Total Put/Call 1.07 -7.76%
  
• NYSE Arms .86 -29.18%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 98.75 -.05%
  
• European Financial Sector CDS Index 120.67 +3.31%
  
• Western Europe Sovereign Debt CDS Index 211.58 +2.26%
  
• Emerging Market CDS Index 223.31 +.90%
  
• 2-Year Swap Spread 20.0 +1 bp
  
• TED Spread 21.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .04% +1 bp
  
• Yield Curve 259.0 +2 bps
  
• China Import Iron Ore Spot $172.30/Metric Tonne -.46%
  
• Citi US Economic Surprise Index -96.60 +1.2 points
  
• 10-Year TIPS Spread 2.18% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -5 open in Japan
• DAX Futures: Indicating -1 open in Germany

Portfolio:

• Higher: On gains in my Retail, Medical and Tech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back
  
• Market Exposure: 50 % Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns and rising eurozone debt angst. On the positive side, Software, Telecom, Bank, Drug and Airline shares are especially strong, rising more than +.75%. (XLF) has traded well throughout the day. Oil is falling -1.9%, the UBS-Bloomberg Ag Spot Index is declining -.46% and gold is down -1.06%. On the negative side, Coal, Energy, Oil Service, Ag, Steels, Paper, Internet, Networking shares are especially weak, falling more than -.75%. Cyclicals and Small-caps are underperforming. Lumber is dropping another -1.3%. The US price for a gallon of gas is down -.02/gallon today to $3.70/gallon. It is up .56/gallon in less than 4 months. The Spain sovereign cds is gaining +3.8% to 283.39 bps, the Italy sovereign cds is climbing +3.83% to 177.50 bps, the Portugal sovereign cds is gaining +3.73% to 766.33 bps, the Greece sovereign cds is surging +1.84% to 1,589.77 bps, the Ireland sovereign cds is up +4.36% to 738.84 bps, the Belgium sovereign cds is rising +3.82% to 154.66 bps and the UK sovereign cds is rising +1.93% to 65.14 bps. The Spain sovereign cds is very close to a technical breakout. Moreover, the Portugal sovereign, Ireland sovereign and Greece sovereign cds are hitting new record highs again today. The Citi Latin America Economic Surprise Index is dropping another -11.6 points today to -52.10, which is the lowest level since May 15th, 2009. Brazil's Bovespa is falling another -1.0% today and is down -10.4% ytd as it tests its recent lows. Canadian stocks continue to trade very poorly, as they fall further below their 200-day moving averages, and are now down -3.8% ytd. Most of the fundamentals that have been weighing on equities are not improving yet. However, the technical weakness in energy prices could be a big positive for the broad market longer-term if it continues or accelerates to the downside, which is likely. The debt situation in Europe continues to deteriorate and unrest in China seems to be spreading. Today's mid-day stock bounce looks again like mostly short-covering as breadth remains poor and volume lackluster. The VIX remains subdued, which is also a concern. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth worries, rising eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest, technical selling and more shorting.

Today's Headlines

Bloomberg:

• S&P Cuts Greece Rating, Expects Restructuring. Greece had its credit rating cut three levels by Standard & Poor’s, which branded the nation with the world’s lowest debt grade and said a restructuring looks “increasingly likely.” The move to CCC from B reflects “our view that there is a significantly higher likelihood of one or more defaults,” S&P said in a statement today. “Risks for the implementation of Greece’s EU/IMF borrowing program are rising, given Greece’s increased financing needs and ongoing internal political disagreements surrounding the policy conditions required.”
• Irish, Portuguese Credit-Default Swaps Surge to Records on Greek Contagion. Credit-default swaps on Greece, Ireland and Portugal surged to records on concern European governments’ struggles to resolve the deficit crisis will threaten their ability to pay their debts. Swaps on Greece jumped 47 basis points to an all-time high of 1,610 as of 5:30 p.m. in London after Standard & Poor’s downgraded the nation, according to CMA. Contracts on Ireland soared 27 basis points to 740, Portugal climbed 22 to 764 and the Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 7 basis points to 218, approaching the record 221.75 set Jan. 10. Disagreement between the European Central Bank and Germany over bailing out Greece is undermining investor confidence in the region’s most troubled governments. ECB President Jean- Claude Trichet and German Finance Minister Wolfgang Schaeuble are at odds over who should bear the cost of the second Greek rescue in 14 months. S&P lowered its long-term sovereign credit rating on the nation to CCC with a negative outlook from B. “In our view Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece’s official creditors, would result in one or more defaults under our criteria,” S&P said today. The cost of insuring European corporate bonds also rose. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 6 basis points to 406, after earlier climbing to the highest since March 17, according to JPMorgan Chase & Co.
• China Cracks Down on Local Officials After Regions Struck by Riots, Bombs. Officials in central China’s Hubei province were suspended or detained after protests last week sparked by the death of a local councilman, reflecting rising public anger at abuse of power and a widening income gap. At least five officials in Lichuan were detained or suspended following the June 4 death in police custody of Ran Jianxin, a former head of the city’s anti-corruption bureau who was being questioned over bribery, a government statement said. Photographs purporting to show Ran’s beaten body circulated on the Internet, and his family claimed he had been punished because of earlier allegations of corruption against senior officials over a land deal, the Associated Press reported. Armored cars were used to quell protests on June 9 that were sparked by Ran’s death, with people throwing bottles and eggs as they clashed with police, the AP reported, citing local witnesses. Riots, strikes and protests are on the rise as inequality grows and people lash out at corrupt local governments seeking to generate income by selling homes and farms to real-estate developers at a profit. “People are getting frustrated” at the “systemic exploitation of the have-nots, people at the bottom of the barrel,” said Willy Wo-lap Lam, an adjunct professor of history at the Chinese University of Hong Kong.
• Crude Oil Futures Fall to Three-Week Low in New York as China Demand Slows. Crude oil fell in New York to the lowest level in three weeks as fuel demand from China slowed, bringing the differential between U.S. crude and a U.K. benchmark to a record. Oil dropped as much as 3.2 percent as China’s National Development and Reform Commission said daily consumption of gasoline, diesel and kerosene fell 4 percent last month from April. “We are feeling the effect of weaker demand in the U.S. and China,” said Carl Larry, director of energy derivatives and research with Blue Ocean Brokerage LLC in New York. “We broke the support level of $98, and the next support is $95.18.” Crude oil for July delivery fell $2.67, or 2.7 percent, to $96.62 a barrel at 1:16 p.m. on the New York Mercantile Exchange after declining to $96.13, the lowest intraday level since May 20. Futures are up 31 percent in the past year. China’s daily consumption of fuels dropped to 650,000 metric tons in May, the National Development and Reform Commission said in a statement on its website today, citing preliminary figures. “Where is the demand?” said Richard Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago. “I don’t think we have a rosy, good picture for the world economy.” Saudi Arabia will increase production, though it’s too early to say by how much, an industry official with knowledge of the matter who declined to be identified said on June 10. The al-Hayat newspaper, citing senior officials, reported that the kingdom will boost output to 10 million barrels a day in July from the current 8.8 million.
• California's Top 10 Paid City Managers Raked in $4.7 Million. Robert Gutierrez got $459,468 in salary and severance in 2009 as city manager of Moreno Valley, a suburb with 450 employees and 193,000 residents an hour east of Los Angeles. That’s twice the salary of the governor, responsible for 353,000 employees and 37 million people. Gutierrez wasn’t alone. Almost four in 10 city managers in California were paid more than the state’s chief executive in 2009, according to payroll data. The top 10 shared $4.7 million including bonuses and allowances to oversee cities averaging 115,000, the data shows. Eighty-five managers that year were paid $250,000 or more. “It’s outrageous,” said Deanna Reeder, 49, who lives in Moreno Valley, which had an average personal income of $18,728 in 2009 and an April unemployment rate of 15.6 percent. “California is hurting. Every city is hurting and instead of dealing with it, they overpay some people, and the person they are overpaying doesn’t solve the problems.”
• VF(VFC) to Acquire Timberland(TBL) for $1.8 Billion. VF Corp. (VFC), the world’s largest apparel maker, climbed the most since 2008 in New York trading after agreeing to buy hiking-boot company Timberland Co. (TBL) for about $1.8 billion. The per-share price is $43, the companies said today. VF will pay about 12 times Timberland’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That compares with the 9.7 median multiple in nine shoe and clothing deals since 2006.
• SEC Seeks Halt to Sales of 2 China-Based Stocks. The U.S. Securities and Exchange Commission, as part of a broader probe of China-based firms listed on U.S. exchanges, moved to halt new share offerings in two companies after their independent auditors resigned. SEC investigators claimed that China Intelligent Lighting and Electronics Inc. (CIL) and China Century Dragon Media Inc. failed to disclose that their independent auditors had withdrawn after questioning the accuracy of the companies’ financial statements, according to two separate orders released today.
• BofA(BAC) May Post Added $27 Billion in Housing Losses, Sanford Bernstein Says. Bank of America Corp. (BAC), the largest U.S. lender, may face a further $27 billion of housing-related losses between now and 2013 amid increasing regulation as the economic recovery slows, analysts at Sanford C. Bernstein said. The losses would be in addition to the $46 billion the Charlotte, North Carolina-based lender has already recorded, analysts led by John E. McDonald wrote in a note to clients today. “The process of addressing legacy mortgage issues will be long and arduous,” the analysts said. “Recent declines in home prices and an uptick in employment trends create an upward bias to our loss estimates” for the lender.
• New York, Delaware Said to Probe Trustee Banks for Mortgage Securities. New York has broadened its probe of the U.S. mortgage industry, requesting information from at least five financial institutions that act as trustees for pools of mortgages, a person familiar with the matter said. New York Attorney General Eric Schneiderman’s office requested documents from Deutsche Bank AG (DB) and Bank of New York Mellon Corp. (BK), which act as trustees for mortgage-bond trusts, said the person. Between five and 10 trustees are being asked to provide information, said the person, who declined to be identified because the matter isn’t public.

Wall Street Journal:

• Spain: Police Confirms "Anonymous" Retaliatory Web Attack. Spanish police confirmed Monday that a group of hackers tied to a series of security breaches on websites across the world, attacked its main website soon after midnight Sunday, in apparent retaliation for the recent arrest of three alleged members of the group. On Sunday, "Anonymous" said it launched a denial-of-service attempt to put the police website offline, as part of what it called an ongoing fight against Spain's "corrupt" state.
• China Jitters Delay Companies' Dollar Bonds. Two China-based companies have delayed U.S.-dollar bond issues in Hong Kong, according to people familiar with the matter, in a sign that economic worries and a U.S. probe into the accounting practices of a small number of Chinese firms are hitting broader bond-market sentiment.
  

CNBC.com:

• US Lacks Vision, Strategy to Be Exceptional: Welch. The United States lacks a "fundamental strategy" for being the "most innovative, the most productive, the most competitive country on Earth," former General Electric chairman Jack Welch told CNBC Monday."If you walk down the street you couldn’t get anybody to say what’s the strategy of the country," said Welch.
• Economists Warn Against More Fed Action. The best cure for the ailing economy now is time. That's the overwhelming opinion of leading economists in a new Associated Press survey. They say the Federal Reserve shouldn't bother trying to stimulate the economy — and could actually do damage if it did. The economists are lowering their forecasts for job creation and economic growth for the rest of 2011, mainly because of high oil prices.

Business Insider:

• Regional Bank CEO Writes a Huge Takedown of "The Big Six" Wall Street Banks. Bob Wilmers, the CEO of M&T Bank Corp.(MTB), recently wrote a huge op-ed for Bloomberg about why subjecting regional banks to the same regulations that The Big Six face is killing the economy.
• These 3 Investing Legends Are Getting Destroyed This Year.
• Meet The Hollywood Power Players Attending Michelle Obama's Exclusive Fundraiser Tonight.
  

New York Times:

• China Backtracks on High-Speed Trains. China’s troubled Railway Ministry was dealt another blow on Monday as it announced a reduction in high-speed rail service and contended with a rare protest alleging that its hiring practices were corrupt. The protest erupted outside the ministry’s fortress-like entrance across from the Defense Ministry here. More than 100 demobilized soldiers and their families chanted slogans accusing the ministry of reneging on promises to hire them. The group traveled 750 miles from the northeastern city of Harbin and claimed that one protester had been killed there.

Washington Post:

• Militants Linked to Al-Qaeda Emboldened in Yemen. Islamist extremists, many suspected of links to al-Qaeda, are engaged in an intensifying struggle against government forces for control of southern Yemen, taking advantage of a growing power vacuum to create a stronghold near vital oil-shipping lanes, said residents and Yemeni and U.S. officials.

Forbes:

• There's A Little Black Spot On SunPower(SPWRA) Today. SunPower faces a lawsuit from conservation groups opposing its California Valley Solar Ranch project. The 250 megawatt project had been approved last month after the San Luis Obispo Planning Commission made a detailed report of the impact of the project on the environment. Approval is now subject to the resolution of the lawsuit filed with the California Superior Court. SunPower manufactures and distributes silicon-based solar cells and also produces solar power products for installation on residential and commercial units.

NASDAQ:

• ECB's Nowotny: Greece Reforms to Take Time, Need All-Party Consensus. Structural reforms in Greece will take time and need cross- party support, says European Central Bank Governing Council Member Ewald Nowotny in an interview to be published Tuesday in the Austrian daily newspaper Kurier. "Without an adequately strong will, Greece will not be successful with the reforms. Therefore lenders require a cross-party consensus in Greece," the paper reports Nowotny as saying. Greece needs to quickly eliminate both its budget and current accounts deficits through savings, higher taxes, and Cutbacks on the consumer side, he says. Nowotny adds that the previous Greek package had assumed the Greek economy would recover more quickly and says: "We have learned to be very cautious regarding prospects."

FuturesMag.com:

• Silver ETFs Unload 580 Metric Tons.

White House Dossier:

• Americans Really Want Obamacare Repealed.

HedgeFund.net:

• Obama Wooing Hedge Fund Set for Reelection. President Barack Obama has been meeting with hedge fund executives to win their financial support for his reelection. Obama also plans to meet with more hedge fund executives this month at a New York restaurant.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).

Reuters:

• Local Chinese governments have borrowed "slightly" more than $1.4 trillion from banks via financing vehicles, citing central bank officials.
• Police Use Tear Gas to Quell Riot in Southern China. Riot police poured into a southern Chinese factory town crowded with migrant workers on Monday, a day after militia fired tear gas to quell rioting over the abuse of a pregnant street hawker who became a symbol of simmering grassroots discontent. Video footage and photos shot on mobile phones by residents in Zengcheng in Guangdong province showed angry mobs torching government buildings, smashing police vehicles, and clashing in their thousands with riot police over the weekend. The unrest was triggered by security guards who had set upon the hawker, Wang Lianmei, on Friday, but underlying frustration at other building social pressures including rampant food price and housing inflation, as well as corrupt local officials, had also stoked anger amongst many locals.
• Obama: Debt Problems Are Impediment to US Growth. President Barack Obama said on Monday that the U.S. debt and deficit are a "concrete impediment" to economic growth and hiring and that the recovery must be strengthened as part of a solution to fiscal problems. "We need to solve our medium and long-term debt and deficit problems, not for abstract reasons, but because they are a concrete impediment to growth and jobs," Obama said at a meeting of his jobs and competitiveness advisory council in North Carolina.

Telegraph:

• Britain Faces Biggest Public Sector Strike Wave in Generation, Unions Warn. Britain is facing the biggest wave of public sector strikes in a generation, as a bitter industrial dispute over the government’s controversial pension reforms escalates, union leaders have warned.

Der Tagesspiegel:

• German food prices will rise "strongly" in the near future as raw-material prices have been increasing, citing Matthias Horst, director of the country's food-industry association.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-.24%)

Sector Underperformers:

• 1) Coal -3.0% 2) Oil Service -2.0% 3) Steel -1.31%

Stocks Falling on Unusual Volume:

• OII, PVA, IOC, F, SINA, IR, ACXM, MDRX, ARCC, CTSH, ABB, TIN, SLGN, SSRX, DIOD, RRGB, REXX, JOBS, CHTR, UTHR, PETD, ELOS, GAIN, AREX, ATPG, CWEI, BEXP, MPAA, LULU, PWRD, LCAPA, AWH, NX, FCS, EGN, ANV, BCF, ATW and CIX
  

Stocks With Unusual Put Option Activity:

• 1) NG 2) YUM 3) RF 4) ANR 5) TIN
  

Stocks With Most Negative News Mentions:

• 1) PCLN 2) BK 3) WFC 4) RIMM 5) BA
  

Charts:

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