Bull Radar

Style Outperformer:

• Small-Cap Growth +1.38%

Sector Outperformers:

• 1) Homebuilders +2.79% 2) Coal +2.67% 3) Oil Tankers +2.19%

Stocks Rising on Unusual Volume:

• SMSC, FSLR, LVLT, BCS, CMA, SBAC, TITN, DLLR, MFRM, TZOO, ADTN, AA, OI, BPI, WLT and ANR
  

Stocks With Unusual Call Option Activity:

• 1) ZION 2) SVNT 3) NOK 4) VMW 5) FFIV
  

Stocks With Most Positive News Mentions:

• 1) CSC 2) AA 3) CCL 4) VMW 5) ADTN
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Rajoy Says Spain Future at Stake as Debt Crisis Persists. Prime Minister Mariano Rajoy said Spain’s future is at stake in its battle to tame surging bond yields, as the head of the nation’s second-largest region proposed handing back powers to the government to cut costs. With Spanish bonds trading closer to levels that prompted Greece, Ireland and Portugal to seek European bailouts, Rajoy will address lawmakers of his People’s Party today to explain the deepest budget cuts in three decades. The prime minister will speak at 1 p.m. in Madrid. “Without a doubt, a good part of Spain’s future is at stake,” Rajoy told senators yesterday, as he urged regional governments to contribute to spending cuts. “The problem is that the markets can lend or decide not to lend.” Rajoy has stepped up his rhetoric in the past week as he seeks to persuade Spaniards to accept spending reductions and tax increases as a less painful alternative to a bailout. His three-month-old government is struggling to convince investors it can reduce the deficit by a third this year and crack down on overspending by regional administrations.
  
• Top Forecasters See Euro Weakness Returning on Spain. The most-accurate foreign-exchange forecasters say the euro will slide as austerity-driven spending cuts from Spain to Italy reignite debt turmoil and drag the region into recession. Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., who topped the list for the fourth time out of the past six quarters according to data compiled by Bloomberg, expects the euro to drop more than 5 percent to $1.24 at the end of 2012. Westpac Banking Corp., which had the second-lowest margin of error, predicts $1.26.
• Japanese Investors Shun Spain as Crisis Resurfaces: Euro Credit. Japan's biggest investors say it's too early to buy bonds from Europe's most indebted nations as rising Spanish yields spark concern that the region's fiscal crisis has further to run. Kokusai Asset Management Co., which runs Asia's largest mutual fund, Mitsubishi UFJ Asset Management Co., a unit of Japan's biggest publicly traded bank, and Diam Co., part of the nation's second-biggest life insurer, are all shunning Spanish debt. Japanese investors sold a net $43.8 billion of euro-denominated bonds in the 12 months ended Feb. 29, according to figures from the Ministry of Finance in Tokyo. "I'm not planning to add Spanish or Italian bonds anytime soon," said Masataka Horii, who runs the $21.2 billion Kokusai Global Sovereign Open Fund in Tokyo.
• Chinese Exports to Major Trading Partners Showing Signs of Slowing. (graph)
  
• IMF Said Ready to Cut Forecast for China Current-Account Surplus. The International Monetary Fund is set to lower its forecasts for China’s medium-term current- account surplus, according to two officials who have seen the draft report. The Washington-based IMF in September estimated surpluses of more than 7 percent of gross domestic product for 2015 and 2016. The new forecasts for the broadest measure of trade will be published April 17 in the IMF’s World Economic Outlook, according to the officials, who spoke on condition they wouldn’t be named because the figures haven’t been made public.
• N.Y. Renews Opposition to BofA $8.5 Billion Mortgage Accord. New York Attorney General Eric Schneiderman renewed his opposition to Bank of America Corp. (BAC)’s proposed $8.5 billion mortgage-bond settlement, saying the deal covers “a small fraction” of investor losses. Schneiderman’s office asked a New York state judge today to allow it to intervene in the case, saying in a court filing that there are “serious questions about the fairness and adequacy of the proposed settlement.” “The proposed cash payment represents only a tiny percentage of the losses investors have faced and will continue to face,” the attorney general said.
• Credit-Default Swaps in U.S. Jump as Spain Borrowing Costs Rise. A benchmark gauge of U.S. company credit risk touched the highest level in more than two months and the cost to protect U.S. bank debt against losses climbed as a surge in Spanish and Italian bond yields stoked concern that Europe’s debt crisis is worsening. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, climbed for a fifth day, adding 2.6 basis points to a mid-price of 104.7 basis points at 1:27 p.m. in New York, according to Markit Group Ltd. The swaps index, which typically rises as investor confidence deteriorates and falls as it improves, touched 105 basis points, the highest level since Jan. 25. The widening of credit-default swaps tied to bank bonds is “really a reflection of the macro environment and the concerns the market has over Europe,” said Adam Steer, an analyst at Brookfield Investment Management Inc., whose parent Brookfield Asset Management Inc. oversees about $150 billion in assets. “They’ve been very correlated with U.S. macro news as well as Europe macro news it seems for a while now, and that’s what we’re seeing today.” Credit-default swaps on Charlotte, North Carolina-based Bank of America Corp. added 18.1 basis points to 287.8 basis points, the highest level since Feb. 15, and those on JPMorgan Chase & Co. increased 6.3 basis points to 116.1 as of 12 p.m. in New York, according to data provider CMA. Contracts tied to Citigroup Inc., based in New York, climbed 14.2 basis points to 264.7, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Yesterday the average of the six biggest U.S. banks reached the most since Feb. 15, according to CMA data. The U.S. two-year interest-rate swap spread, a measure of stress in credit markets, climbed 2.05 basis points to 30.88 basis points, the widest since February.
• S&P 500 Put Demand Exceeds Europe by Most Since 2008: Options. Demand to protect U.S. stocks from losses is exceeding levels seen in Europe by the most since 2008 on renewed concern that slowing global economic growth will undo the recent US stock rally. The ratio of puts to sell the S&P 500 Index versus calls to buy climbed to 1.97-to-1 on March 28. That was 73% higher than the 1.14-to-1 open-interest ratio for the Euro Stoxx 50 Index, the biggest difference in more than three years, according to data compiled by Bloomberg.
• Profit Drop at U.S. Banks Imperils Rally as Loans Lag Behind GDP. The six largest U.S. lenders, including JPMorgan Chase & Co. and Wells Fargo & Co., may post an 11 percent drop in first-quarter profit, threatening a rally that has pushed bank stocks 19 percent higher this year. The banks will post $15.3 billion in net income when adjusted for one-time items, down from $17.3 billion in last year’s first quarter, according to a Bloomberg survey of analysts. Trading revenue at the biggest lenders is projected to fall 23 percent to $18.3 billion, according to Morgan Stanley analysts, who didn’t include their firm or Wells Fargo.“You can’t expect bank stocks to go straight to the moon,” said Peter Kovalski, a money manager at Alpine Woods Capital Investors LLC in Purchase, New York, which manages about $5 billion. “You have to expect fundamentals to catch up, and there are some headwinds facing the industry. There is a little too much optimism going into this quarter.” U.S. lenders, struggling to expand in commercial banking years after the housing collapse, haven’t matched last year’s overall results, even as bond and equity markets strengthened. Making matters worse, loan balances increased less than the economy, bucking a trend in previous recoveries, said Brian Foran, a New York-based analyst at Nomura Holdings Inc. Loans at the top 25 domestically chartered commercial banks rose 0.4 percent in the quarter through March 28, slowing from 1 percent growth in the previous three months, according to the Federal Reserve. Loans fell to $4.04 trillion from a peak of $4.24 trillion in the fourth quarter of 2008, according to the Fed.
• Apple(AAPL), Macmillan Said to Prepare for U.S. Suit Over eBook. Apple Inc. and the publisher Macmillan are preparing to be sued as soon as tomorrow by the U.S. Justice Department over alleged collusion in the pricing of e-books, according to two people familiar with the matter.
• Carlyle Is Said to Seek Value of Up to $8 Billion in IPO. Carlyle Group, the second-biggest U.S. private-equity firm, will seek a valuation of $7.5 billion to $8 billion in its initial public offering, according to people with knowledge of its plans. Carlyle plans to sell a stake of about 10 percent in the IPO and will start marketing the deal to investors as early as next week, said the people, who asked not to be identified because the information is private. The Washington-based firm, which has been gauging public interest since last year, is targeting an IPO in early May, said another person.
• Emerging Asia Can Refrain From More Stimulus, ADB Says. Policy makers in developing Asia can refrain from further monetary and fiscal stimulus because growth will remain robust, while oil-price spikes can revive the threat of inflation, the Asian Development Bank said.
• Mumbai Is The World's Least Affordable Home Market. (graph) The average Indian would need to work for three centuries to pay for a luxury home in Mumbai, making that city the least affordable in the world for locals, according to an analysis of real estate and wages.

Wall Street Journal:

• Romney Campaign Focuses on General Election. After weeks of training its message on President Barack Obama, the Romney team will turn its attention to the logistics of trying to defeat him.
• Philippine Warship in Standoff With China Vessels. The Philippine government Wednesday said its newest warship is locked in a standoff with two Chinese surveillance vessels in a fresh dispute over fishing rights in the resource-rich South China Sea, potentially escalating an already-tense security environment in the contested region.
• The Obama Rule. Forget Warren Buffett, or whatever other political prop the White House wants to use for its tax agenda. This week the Administration officially endorsed what in essence is the Obama Rule: Taxes must be high simply to spread the wealth, never mind the impact on the economy or government revenue. It's all about "fairness," baby.

Business Insider:

• Why The Bo Xilai Corruption And Murder Scandal Is A Big Deal For China.

Zero Hedge:

• The Era of Independent Central Banks Is Over.

CNBC:

• The Real Threat is Spain, Not Greece: Sullivan. Here’s the fear: Banco Santander, BBVA and the third largest bank in Spain, La Caixa, have combined assets of about $2.7 trillion. Spain’s GDP is just about $1.4 trillion. In other words: Spain’s three biggest banks are nearly twice as big as the entire Spanish economy.
  
• Andy Busch: Health Care Is The Driver of US Long Term Spending Problems.
• The Other MF Global Money Mystery: Trustee's Fees. Former MF Global customers will have to wait a little longer than expected to learn how lucrative the broker's liquidation has been for trustee James Giddens and his law firm. A bankruptcy judge on Monday approved a June 8 deadline requested by Giddens for reporting fees and expenses to the court, meaning the bankruptcy could be in its eighth month before fees are made public.

IBD:

• Visa(V) Charges Ahead With Plan To Grow Sales Overseas.
  

NY Times:

• Lenders Again Dealing Credit to Risky Clients.
  

Absolute Return:

• Hedge Funds Dive Below High Watermarks Again. Fewer funds were above their high watermarks last year than even in 2008, according to a recent analysis of returns from Americas-based hedge funds reported to the HedgeFund Intelligence database.
  

Forbes:

• LDK(LDK) Pushes Back 4th-Quarter Earnings Release Date; Shares Fall 2%. LDK Solar, one of China’s largest integrated solar-related manufacturers, said yesterday it will reschedule the previously announced date for the release of first-quarter profit report.

CNN:

• Refinery Closures Risk Northeast Gas Price Spike.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).

Reuters:

• Alcoa(AA) Trims Its Aluminum Demand Outlook For China. Alcoa Inc. said on Tuesday it lowered by 1 percentage point its outlook for China's aluminum consumption growth in 2012.
• IMF Working With Egypt on Backing for Loans. The International Monetary Fund said on Tuesday it was staying in close touch with Egyptian authorities as they work out a budget and round up political support that would make an IMF financing package possible.
• Two Fed Officials Voice Worry On Easy Policy. Two Federal Reserve officials expressed concern about the central bank's ultra-loose policy on Tuesday, keeping pressure on their colleagues not to launch another round of monetary easing. Minneapolis Federal Reserve Bank President Narayana Kocherlakota said the U.S. central bank should start pulling back from its extraordinary support for the economy some time in the next six to nine months. "Conditions will warrant raising rates some time in 2013 or, possibly, late 2012," Kocherlakota said. Echoing his concerns, Dallas Fed President Richard Fisher said company leaders are peppering him with concerns about the central bank's aggressive monetary stimulus, which they believe is setting the stage for inflation. "To a person that I speak to, I am pleaded with, 'please no more liquidity'," Fisher told students at the University of Oklahoma's Price College of Business. There is "real concern that with our expanded balance sheet that we are just a little bit of an ember in what could become an inflationary fire," he said.
• Australians Fret on Finances, Shun Home Loans. A measure of Australian consumer confidence fell for a second month in April as people fretted about their finances. The survey of 1,200 people by Westpac Bank and the Melbourne Institute showed its index of consumer sentiment fell 1.6 percent in April to 94.5. That was the lowest reading since August last year and came on top of a 5 percent drop in March. The disappointing news came as government data showed new home loans slipped for a second straight month in February.
• North Korea Says Fuel Being Injected Into Rocket. North Korea said on Wednesday it was injecting fuel into a long-range rocket "as we speak" ahead of a launch condemned by its neighbors and the West. The launch is set to take place between Thursday and next Monday and has prompted neighbors such as the Philippines to re-route their air traffic just in case. Japan said it would shoot down the rocket if it crossed its airspace.

Telegraph:

• Spain's 'Lose-Lose' Struggle Reignites Euro Crisis. The eurozone crisis has returned with a vengeance after Spain’s mounting woes pushed 10-year bonds yields back to the danger line of 6pc and the Madrid bourse crashed to its lowest level since the 2009. Mr de Guindos said Madrid faces a "lose-lose situation" since markets will punish excessive austerity as harshly as too little austerity. Tightening too fast risks pushing the economy into the sort of self-defeating spiral already seen in Greece, where the tax base shrivels. Central bank governor Miguel Ángel Fernández Ordóñez denied that Spain would become the fourth EMU state to need a rescue, but warned that Spanish banks are not yet in the clear. "If the Spanish economy deteriorates more than expected, they’ll have to keep boosting capital," he said.

Xinhua:

• China plans to limit its population to under 1.39B during the five years through 2015, the State Council said in a statement posted on the central government website yesterday.
• The State-Owned Assets Supervision and Administration Commission "in principle" banned central government-owned companies from investing in non-core businesses abroad, citing rules from the agency that will take effect on May 1.
  

China.org:

• China People's Daily Urges Cadres to Support Bo Xilai Suspension. The Chinese Communist Party's official People's Daily urged cadres support the decision to suspend Bo Xilai from his senior party posts after his wife's arrest on suspension of murdering a British citizen.
  

Evening Recommendations
Citigroup Global Markets:

• Rated (NVDA) Outperform, target $19.

Night Trading

• Asian equity indices are -1.25% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 172.50 +7.0 basis points.
  
• Asia Pacific Sovereign CDS Index 140.0 +5.0 basis points.
  
• FTSE-100 futures -.76%.
  
• S&P 500 futures +.27%.
  
• NASDAQ 100 futures +.28%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TITN)/.53
• (ADTN)/.20
  

Economic Releases
8:30 am EST

• The Import Price Index for March is estimated to rise +.8% versus a +.4% gain in February.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a +9,009,000 barrel gain the prior week. Distillate inventories are estimated to fall by -250,000 barrels versus a +19,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,375,000 barrels versus a -1,457,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +1.2% gain the prior week.
  

2:00 pm EST

• Fed's Beige Book.
• The Monthly Budget Deficit for March is estimated to widen to -$196.0B versus -$188.2B in February.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lockhart speaking, Fed's Yellen speaking, Fed's Bullard speaking, Fed's Rosengren speaking, Fed's George speaking, 10Y T-Note Auction, (IHS) Investor Day and the weekly MBA mortgage applications report could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by financial and technology 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 Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Less Financial Sector Optimism, High Energy Prices

Broad Market Tone:

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

Equity Investor Angst:

• VIX 20.95 +11.38%
  
• ISE Sentiment Index 66.0 -17.5%
  
• Total Put/Call .96 -1.03%
  
• NYSE Arms 1.89 -24.32%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.56 +2.42%
  
• European Financial Sector CDS Index 257.55 +8.79%
  
• Western Europe Sovereign Debt CDS Index 278.84 +2.23%
  
• Emerging Market CDS Index 271.20 +4.0%
  
• 2-Year Swap Spread 31.25 +2.75 basis points
  
• TED Spread 38.75 +.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -56.75 -2.75 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 169.0 -3 basis points
  
• China Import Iron Ore Spot $148.0/Metric Tonne unch.
  
• Citi US Economic Surprise Index 4.50 -.1 point
  
• 10-Year TIPS Spread 2.25 +2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -160 open in Japan
• DAX Futures: Indicating -23 open in Germany
  

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 is trading near session lows and breaking below its 50-day moving average on rising Eurozone debt angst, less financial/homebuilding sector optimism, rising global growth fears, profit-taking, more shorting and high energy prices. On the positive side, Coal shares are slightly higher on the day. Weekly retail sales rose +4.1% versus a +3.6% gain the prior week. Oil is falling -1.13% and Lumber is rising +.19%. On the negative side, Oil Tanker, Paper, Disk Drive, Biotech, HMO, Homebuilding, Retail, Gaming, Networking, Bank and Construction shares are under significant pressure, falling more than -2.75%. Small-cap and Cyclical shares are underperforming again. Gold is gaining +1.22% and Copper is down -1.76%. The 10-year yield is falling -7 bps to 1.98%. Major Asian indices were mostly lower, led down by a -1.2% decline in Hong Kong. Major European indices plunged around -3.0% today, led down by a -5.0% decline in Italy. Spanish equities fell another -3.0% and are now down -13.2% ytd. As I have been cautioning for awhile, this remains a large red flag for the region. As well, the Bloomberg European Financial Services/Bank Index plunged another -4.3% today. This index is down -15.4% in about 3 weeks and is now convincingly below its 200-day moving average. The Germany sovereign cds rose +2.3% to 75.50 bps, the France sovereign cds is gaining +5.8% to 189.57 bps, the Italy sovereign cds is gaining +4.65% to 437.73 bps, the Spain sovereign cds is up +4.6% to 485.73 bps, the Russia sovereign cds is jumping +6.1% to 204.32 bps and the China sovereign cds is gaining 4.8% to 116.65 bps. Moreover, the European Inv Grade CDS Index is soaring +10.1% to 146.36 bps and the Emerging Markets Sovereign CDS Index jumped +7.0% to 295.50 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -6.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -18.5% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +724.0% ytd. China's March copper imports fell -4.6% on the month. Overall, credit gauges continue to weaken too much as Europe's debt crisis appears to be in the early stages of reigniting. The Italian/German 10Y Yld Spread is up +17.0% in 5 days. German bond yields continue to fall rapidly, despite perceptions that their economy is strong and labor costs are starting to rise too much, which is another large red flag. Stocks are getting short-term oversold for the first time in awhile, however any bounce will likely prove short-lived unless the situation in Europe begins to calm very soon. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, less financial sector optimism, rising global growth fears, profit-taking and high energy prices.

Today's Headlines

Bloomberg:

• Spanish Bonds Fall Even as Rajoy Unveils More Budget Cuts. Spain’s efforts to calm investors with 10 billion euros ($13 billion) of budget cuts in education and health failed to stem concerns the nation may be the fourth euro member to need a bailout. The yield on Spain’s 10-year benchmark bond surged 20 basis points to 5.95 percent today as Economy Minister Luis de Guindos declined to rule out a rescue for Spain and Bank of Spain Governor Miguel Angel Fernandez Ordonez said the nation’s lenders may need additional capital if the economy weakens more than expected. Prime Minister Mariano Rajoy yesterday unexpectedly announced the 10 billion-euro package, less than two weeks after unveiling the most austere budget in more than three decades. Rajoy is targeting basic public services for the first time since his election in December in a bid to convince investors he can bring order to the nation’s finances. “There are growing fears that the Spanish economy is caught in a pernicious circle,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e- mailed response to questions. “The weakness of government finances, the fragility of banks and worries about the scale of the recession all feed on each other.”
• Monti's Overhaul of Italy Can't Stop Pain From Spain. Prime Minister Mario Monti’s efforts to overhaul the economy and protect Italy from the region’s debt crisis may be overwhelmed by Spain’s deepening fiscal woes and the fading effect of European Central Bank three-year lending.
• European Stocks Retreat After U.S. Jobs Report Trails Estimates. European stocks tumbled to a two- month low amid mounting concern about the region’s debt crisis and as a U.S. report showed employers in the world’s largest economy added fewer jobs in March than forecast. UniCredit SpA (UCG), Intesa Sanpaolo SpA and Banca Popolare Di Milano Scarl (PMI) dropped more than 6.5 percent. Banco Santander SA (SAN) declined as Spanish bond yields rose and the country’s government increased its efforts to bring the country’s deficit under control. Vedanta Resources Plc (VED) led a retreat in mining companies as copper fell in London and the metal producer reported lower iron-ore sales. The Stoxx Europe 600 Index dropped 2.5 percent to 252.57 at the close in London, its lowest since Jan. 30. European markets were closed yesterday for the Easter Monday holiday. The volume of shares changing hands in the gauge’s companies was 7.6 percent higher today than the average of the last 30 days. “Last week’s poor jobs report raises doubts about the strength of the U.S. expansion,” Dan Morris, a global strategist at JPMorgan Asset Management in London, wrote in a report to clients. “There are some uncomfortable parallels between the current macroeconomic environment and that of July last year when equity markets began their precipitous fall. Investors are worried again about the euro-zone crisis.”
• French Business Confidence Stalls, Factory Output Drops: Economy. French business confidence stagnated and factory output dropped, underlining the challenge the victor in the country’s presidential election will face in reviving economic growth. A gauge of sentiment among factory executives was unchanged at 95 in March after dropping in February, the Bank of France said today. Manufacturing production fell 1.2 percent in February, a third month of declines, the national statistics office, Insee, said in Paris.
• Corporate Bond Risk Rises in Europe on Renewed Recovery Concerns. The cost of insuring against default on European corporate debt rose on concern that a slowdown in U.S. job creation is hampering the global recovery. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings climbed 27 basis points to 667 at 10 a.m. in London, the highest since Jan. 19, according to BNP Paribas SA. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 7 basis points to 139.5. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 11.5 basis points to 247.5 and the subordinated index climbed 17 to 398. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments jumped 5.5 basis points to 276.5.
• VIX Rises a Record Eighth Day as Europe Concerns Increase. The Chicago Board Options Exchange Volatility Index (VIX) advanced for a record eighth day as surging Spanish and Italian bond yields intensified concern about the European debt crisis. The gauge known as the VIX, which measures the cost of Standard & Poor’s 500 Index options, rose 9 percent to 20.51 at 1:10 p.m. New York time today. The VIX, which tumbled as much as 70 percent since reaching a 29-month high on Aug. 8, advanced 22 percent in the seven trading sessions before today.
• Best Buy's(BBY) Dunn Resigns as CEO; Mikan to Serve in Interim. Best Buy Co. (BBY) said Chief Executive Officer Brian Dunn resigned and board member G. Mike Mikan is taking the position on an interim basis as the company focuses on smaller stores and Internet sales.
• Shadow Banks on Trial as China’s Rich Sister Faces Death. Operating outside the banking system or government regulation, the informal networks provide an important source of economic growth, capital for private companies and return for investors seeking to beat inflation. Premier Wen Jiabao, in an unusual move, weighed in on the case at a March 14 news conference. His comments highlighted a public debate over the importance of shadow banking to the Chinese economy, government efforts to bring it under control -- and whether capital punishment is an effective means to do so. “Chinese companies, especially small ones, need access to funds,” Wen said when asked about Wu’s case. “Banks have yet to be able to meet those companies’ needs, and there is a massive amount of idle private capital. We need to bring private finance out into the open.”

Wall Street Journal:

• IMF Poised to Lower View on China's Trade. The International Monetary Fund is poised to sharply reduce its long-term forecast of China's current-account surplus, the broadest measure of a nation's trade, which would strengthen Beijing's defense against the U.S. argument that the Chinese currency is "substantially undervalued." Several individuals informed of the debate said the IMF would significantly lower its long-term current account surplus in the update of its flagship publication, the World Economic Outlook, to be released April 17, from the forecast of more than 7% of gross domestic product in the September WEO.
• Santorum Suspends Presidential Campaign. Rick Santorum abruptly suspended his White House campaign Tuesday, clearing the way for front-runner Mitt Romney to claim the Republican presidential nomination.

Barron's:

• Sony(SNE) Drops 8%: Deeper FY12 Loss Seen On Tax Adjustment. Shares of Sony (SNE) are down $1.58, almost 8%, at $18.53 after the company this morning warned its fiscal year ended in March will come in lower than expected because of a ¥300 billion non-cash charge to reflect the adjustment of certain assets. The expected net loss of ¥520 billion, or U.S. $6.4 billion, is worse than the ¥220 billion the company had forecast on February 2nd, and worse than the $2.7 billion loss the Street has been expecting.

Dow Jones:

• Small Business Confidence Retreats In March - NFIB. Small U.S. business owners became slightly less confident in March, data released Tuesday showed, as rising prices and slowing sales curbed six months of budding optimism about the economy. The National Federation of Independent Business's small-business optimism index fell to 92.5 from 94.3 in February. March's reading ended what had been six consecutive months of increases. "What could have been a trend in job growth is more likely a blip," said NFIB Chief Economist Bill Dunkelberg, who authored the report. "The mood of owners is subdued--they just can't seem to shake off the uncertainties out there," he said. Businesses surveyed by the NFIB cited building inflation pressures as "the number one business problem," with worker compensation costs rising to their highest level since 2008. A net 21% of the respondents expect to raise their prices in the coming months, NFIB said. A positive trend in profits that had materialized in earlier months appeared to " fizzle." According to the report, only one of the index's 10 subcomponents rose during March. The subindex of expected business conditions in the next six months fell 2 percentage points to -8% last month, coinciding with a downturn in earnings trends, which fell four points to -23%. The sole index that showed positive growth was the "inventories too low" subcomponent, which only advanced by one point, to 3%.

Business Insider:

• It Begins: The First Casualty of China's Real Estate Crash.
• Charts: Why Obamacare Adds Hundreds Of Billions To The Deficit.
• Goldman(GS) Says The Worst of the Good Weather 'Payback' Hasn't Even Happened Yet.
• The US Army is Stocking Up On a Ton of Anti-Radiation Pills To Protect Troops.
• JPMorgan(JPM): One of These 15 Companies Could Be The Next Apple(AAPL).
  

Zero Hedge:

• Carnage Ala Milanese: Italian Stock Bloodbath.
• Muddy Waters Is Back, Alleging Fushi Copperworld(FSIN) Representing High Risk Of Fraud.
  

InvestmentWeek:

• German Bonds Yielding Less Than Japan For First Time. Yields on tranches of German debt fell below the amount paid by Japan for the first time ever mid-afternoon, as investors considered the likelihood of another round of stimulus in Europe. As Spanish bond yields rose ever nearer to 6%, and the country's equity market hit a 3-year low, investors were seen buying up German debt, driving down yields to new lows. The payout on 2-year bunds fell to 0.109%, below that of even Japan which yields 0.111% on its 2-year note. It is the first time since Bloomberg began collating data in 1990 that it has yielded less than Japan. The record low came as Spanish rates soared, with the yield on the country's 10-year debt hitting 5.972%, the highest level since mid-December. Investors are spooked by what is being seen as a worsening of the debt crisis, and are now betting intervention from the European Central Bank will not be enough to tackle the problems seen in peripheral Europe.

US News:

• How 'Shadow Inventory' Hurts the Housing Market. A shadow inventory explosion? Roger Staiger, an adjunct faculty member of the John Hopkins Carey Business School, warns that the numbers cited by the National Association of Realtors are too low. He believes the shadow inventory is going to get much, much bigger. "I'm predicting another 2 million homes to be foreclosed," says Staiger. "I would say there are about 3 million homes close to foreclosure or in distress, meaning owners are 90 days delinquent on payments."

Reuters:

• China Removes Bo Xilai From Elite Central Committee - Sources. China's Communist Party has decided to expel former leadership contender Bo Xilai from the elite Central Committee, sources said on Tuesday, citing a decision likely to disclose details of a scandal that has shaken a looming leadership succession.
• China Says Bo Xilai's Wife Suspected of Murder - Xinhua. The wife of the former high-flying Communist Party chief of China's Chongqing city is suspected in the murder of British national Neil Heywood, Chinese state media reported on Tuesday.
• Copper Near 3-Month Low; Nerves Fray on Growth Worries. China March copper imports fell 4.6 pct on month. The data showed that the use of copper for financing purposes by traders in China's cash-strapped market was still popular, although suggested that weak end-use demand may be feeding through to imports, analysts said, keeping a lid on prices.
• Commodity Exporters Should Brace For Lower Prices: IMF. The IMF said some commodity-exporting nations should save their windfalls from current higher prices to protect their economies in the event of a price downswing. Other exporting countries should use commodities profits to reduce their debt, the IMF said in analytical chapters of its World Economic Outlook report. Commodity-exporting countries should prepare for lower prices given weaker global economic activity and lower demand, the International Monetary Fund said on Tuesday. "Given weak global activity and heightened downside risks to the near-term outlook, commodity exporters may be in for a downturn," the IMF said. "If downside risks to global economic growth materialize, there could be even greater challenges facing commodity exporters, most of which are emerging and developing economies," the IMF said.
• CEOs Worried Fed Setting 'Inflationary Fire' - Fisher. Chiefs of U.S. companies big and small are worried the Federal Reserve's bond-buying programs could lead to uncontrolled inflation, a top Fed official known for his opposition to further monetary stimulus said on Tuesday. "To a person that I speak to, I am pleaded with, 'please no more liquidity'," Dallas Federal Reserve Bank President Richard Fisher told students at the University of Oklahoma's Price College of Business. There is "real concern that with our expanded balance sheet that we are just a little bit of an ember in what could become an inflationary fire."
• US Gasoline Prices Rise, Demand Drops - MasterCard. U.S. gasoline demand fell once again last week, down 0.8 percent from the previous week, as prices rose to just under $4 a gallon, MasterCard said in its weekly Spending Pulse report on Tuesday. Gasoline demand in the week to April 6, which covered the Easter and Passover holiday weekend, fell 2.4 percent compared with the same week last year, MasterCard said. A gallon of gasoline cost $3.94 at the pump last week , 2 cents higher than the previous week. This was 5.9 percent more expensive than a year earlier. MasterCard data also showed the four-week moving average for demand dropped for the 55th straight week, down 4.7 percent from a year earlier.

Financial Times:

• Eurotrashing, Again. Risk is ‘off’ again, clearly. At this point we should default to Bob Janjuah, the Nomura bear who has just published a fresh take on central bank bubble blowing. A taste:
• JPMorgan's(JPM) Giant Unwitting Catalyst Trade.
  

Open Europe:

• Spanish Banks May Be Forced to Seek Eurozone Bailout. The increasing exposure of its banks to potentially toxic loans, the difficulty in curbing Spanish regions' spending and the risk of reforms not taking effect quickly enough, all raise serious questions as to whether the Spanish economy will make it through without some sort of external help.
  

Finanz und Wirtschaft:

• China's real estate market may already be a burst bubble, citing an interview with James Chanos, founder of Kynikos Associates Ltd. If the Chinese government slows the building boom, it's not clear what will fill the gap to support the economy, Chanos said.
  

Expansion:

• Deputy Budget Minister Miguel Ferre said Spain will have to consider increasing sales tax should an amnesty for tax-evaders fail to raise sufficient revenue. "Spain is in an emergency situation," citing Ferre.

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.02%

Sector Underperformers:

• 1) Oil Tankers -4.11% 2) Homebuilders -3.76% 3) HMOs -3.03%

Stocks Falling on Unusual Volume:

• BCS, SNE, DE, OII, KMX, IMO, DLLR, TNGO, LVLT, E, AES, AU, PBCT, CRESY, VPHM, TSPT, OPTR, HALO, DXPE, HMIN, FAST, ORIG, VVUS, TITN, PCLN, CONN, ITMN, COHR, PENN, SLXP, INWK, KFRC, BEAV, EWO, PEJ, RSP, PYZ, EWP, JKJ, JKI, CCH, AOL, CNC, CNK, SNI, MOH, MAIN, WCG, BPI, SZYM, RGR, URI, GBX and WNR
  

Stocks With Unusual Put Option Activity:

• 1) TSL 2) LNC 3) HYG 4) WHR 5) KSS
  

Stocks With Most Negative News Mentions:

• 1) BBY 2) F 3) LUV 4) AA 5) GS
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.42%

Sector Outperformers:

• 1) Semis -.02% 2) Drugs -.10% 3) Restaurants -.20%

Stocks Rising on Unusual Volume:

• CRK, IOC, CREE, AKRX, WPRT, TPL and PVR
  

Stocks With Unusual Call Option Activity:

• 1) IAG 2) SVU 3) VVUS 4) SQNM 5) TSPT
  

Stocks With Most Positive News Mentions:

• 1) AA 2) JEC 3) FDO 4) AAPL 5) BA
  

Charts:

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