Bull Radar

Style Outperformer:

• Small-Cap Value -1.01%

Sector Outperformers:

• 1) Tobacco -.11% 2) Utilities -.60% 3) Drugs -.82%

Stocks Rising on Unusual Volume:

• SZYM, LOPE, CTSH, DMND, SLXP, GNRC, VSI, NVE, EPAY and IVR
  

Stocks With Unusual Call Option Activity:

• 1) GFI 2) MAKO 3) EUO 4) NWSA 5) EDZ
  

Stocks With Most Positive News Mentions:

• 1) VRTX 2) RIMM 3) LMT 4) MCD 5) SNCR
  

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Greek Government Mandate to Pass to Syriza as Samaras Fails. Greek political leaders will meet for a second day today in a bid to form a government, with the mandate for the task being handed to the second-biggest party after New Democracy leader Antonis Samaras said he failed to forge agreement after an election that raised questions about the country's euro membership. Samaras gave up his bid after nearly six hours of talks in Athens yesterday. The attempt to form a government will pass to Alexis Tsipras, the head of Syriza, the second biggest party, which has vowed to cancel the bailout terms. Tsipras will see President Karolos Papoulias today at 2 p.m. Athens time. "I tried to form a coalition government with two goals: that the country remain in the euro and bailout policies change to include growth measures," Samaras said in a statement on state-run NET TV yesterday. "I did what I could to get a result but it was not possible. As such, I have informed the president of the republic and handed back the mandate."
• Greek Default Risk Returns as Bond Maturity Nears: Euro Credit. Two months after forcing through the biggest-ever sovereign bond restructuring, Greece once again faces the prospect of becoming the first developed nation to default on its debt. The government taking office after this weekend's election has 30 days to decide whether to make today's interest payment on 20 billion yen of 4.5% notes maturing in 2016, or default. Then, by May 15, officials must decide if they're going to pay the 436 million euros due on a floating-rate note issued a decade ago. These are among about 7 billion euros of bonds whose holders took advantage of being governed by foreign rather than Greek law to sidestep losses suffered under the private-sector involvement rescheduling, or PSI. Paying the holdouts in full would arouse the ire of Greek taxpayers, as well as investors who cooperated with PSI. A failure to pay would signal Europe's debt crisis is worsening.
• Euro Area Must Take Austerity Pain Now, Dombrovskis Says. Europe’s most indebted nations shouldn’t use their recessions as an excuse to avoid committing to austerity plans if the region is ever to emerge from its debt crisis, Latvian Prime Minister Valdis Dombrovskis said. “It’s important to do the adjustment, if you see that adjustment is needed, to do it quickly, to frontload it and do the bulk already during the crisis,” Dombrovskis said yesterday in an interview in Stockholm. “Certainly austerity is never a very popular subject and in this case the question is, are there really alternatives,” Dombrovskis said. “Of course, a country can say we don’t like austerity, but then the question they should ask first is who is going to finance the budget deficits, financial markets aren’t in the mood to finance large deficits right now.”
• Euro Near Three-Month Low on Greek Leadership Concern. The euro traded 0.6 percent from a three-month low as Greece’s political leaders meet for a second day in a bid to form a new government, after an election raised questions about the country’s membership of the euro bloc. The 17-nation currency maintained a two-day decline against the yen after French President Nicolas Sarkozy, German Chancellor Angela Merkel’s preferred partner for enforcing debt reductions, was defeated by Socialist Francois Hollande. Demand for the yen was limited as Asian stocks climbed before data that may show German industrial production rebounded. The Australia’s dollar dropped against all of its 16 major peers after the country’s trade deficit more than doubled in March. “Regardless of which party eventually manages the Greek government, the next period here looks to be full of uncertainty,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “That’s going to be a negative for the euro.”
• Morgan Stanley(MS) Sees $9.6 Billion Collateral Call If Cut 3 Grades. Morgan Stanley (MS) boosted estimates for additional collateral and termination payments it would have to post to counterparties if its credit-rating is cut as Moody’s Investors Service considers downgrades across the industry. Counterparties may call $7.21 billion in additional collateral or termination payments if Morgan Stanley’s rating is lowered three levels by Moody’s and two grades by Standard & Poor’s, the investment bank said today in a regulatory filing based on March 31 data. It would also have to post $2.4 billion in collateral to certain exchanges and clearinghouses, it said. The total, $9.61 billion, was up from an estimated $6.52 billion as of Dec. 31.
• Wynn Resorts(WYNN) Earnings Miss Estimates on Vegas Shortfall. Wynn Resorts Ltd., the casino company founded by billionaire Steve Wynn, reported first-quarter earnings fell 19 percent, missing analysts projections on lower winnings in Las Vegas. Net income fell to $140.6 million, or $1.23 a share, from $173.8 million, or $1.39, a year ago, Las Vegas-based Wynn said today in a statement (WYNN). Excluding items, profit of $1.33 a share missed the $1.41 average of 21 estimates compiled by Bloomberg.
• Fannie Refused to Punish Countrywide for Bad Debt, Lockhart Says. Fannie Mae refused to seek large amounts of mortgage repurchases from Countrywide Financial Corp. as housing began to crash, according to the former head of its regulator. James Lockhart, who led the Federal Housing Finance Agency until 2009 and its predecessor, the Office of Federal Housing Enterprise Oversight, “spent a lot of time” pushing Fannie Mae executives to seek more so-called putbacks on Countrywide loans that failed to match their promised quality, he said today. “They didn’t want to offend their largest customer,” Lockhart, now the vice chairman at investment firm WL Ross & Co., said during a speech at a Mortgage Bankers Association conference in New York. Trends in mortgage-repurchase demands are among “procyclical” issues in the market, or items that can lead to looser credit during a boom and tighten standards during tougher times, Lockhart said. Policy makers should strive to lessen the dynamic as they remake the housing-finance system, he said. “If people had known how bad the repurchases were going to get, we’d certainly have had a lot more disciplined underwriting,” Lockhart said in an interview.
• Barneys New York Taken Over by Perry Capital in Debt Swap. Barneys New York has been taken over by Perry Capital in a debt-for-equity swap that reduces the luxury retailer's borrowings by $540 million, allowing the chain to invest more in its rebounding business. Perry, which takes over majority control from Istithmar World PJSC, partnered with billionaire Ron Burkle's Yucaipa Cos. investment firm in the conversion, the New York-based company said today in an e-mailed statement. The transaction will reduce Barneys's debt to $50 million from $590 million.
• SEC Hiring Outside Investigator to Study Claims Against Watchdog. The U.S. Securities and Exchange Commission is hiring an outside investigator to study complaints about current and former employees in the agency’s internal watchdog unit, an agency spokesman said. “An individual has raised allegations of misconduct by former and current employees in the Office of Inspector General,” the SEC’s John Nester said today in an e-mail. “The matter was promptly referred to the Council of Inspectors General on Integrity and Efficiency. We are also in the process of hiring an independent investigator to review the claims.”
• Drug-Defying Germs From India Speed Post-Antibiotic Era.

Wall Street Journal:

• Jetliner Bomb Plot Is Foiled. The U.S. thwarted a bomb plot by al Qaeda's Yemeni branch aimed at bringing down a jetliner with a more advanced version of an underwear bomb used in a failed 2009 Christmas Day attempt, officials said Monday. The Central Intelligence Agency, working with foreign security services, was able to seize the bomb—which they believed was intended for a U.S.-bound flight—before the would-be suicide bomber was able to move ahead with his plot, officials said. Because the plot was headed off in its early stages, officials said the effort never represented a threat to Americans or to U.S. allies, nor did airlines face a direct threat. The bomb was "viable," a senior U.S. counterterrorism official said. The official added that it probably would have gone off but it did have some flaws that may have impacted its ability to detonate properly.
• Santorum Endorses Onetime Rival Romney.
• Merger-Arbitrage Hedge Funds Declined In April Despite M&A. April was the most active month for U.S. mergers and acquisitions since October, but hedge fund managers failed to take advantage of the increase in deal activity. Managers who trade on deal news, and other corporate developments that can impact share prices significantly, were the worst performers last month, losing 0.64%, according to the Dow Jones Credit Suisse Hedge Fund Index. Average hedge fund managers lost 0.33% and the Standard & Poor's 500 index declined by 0.7%.

MarketWatch:

• Bank of Japan Buys Record Amount of Stock ETFs. The Bank of Japan stepped back into the stock market Monday, making its largest single-day purchase of exchange-traded funds to date, though the move failed to prevent a sharp fall for the Tokyo equity market.

Business Insider:

• The Way The Pentagon Is Predicting Your Potential To Become A National Threat Is Frightening.

Zero Hedge:

• Consumer Credit Soars As US Government Encourages Student, Car Loan Bubbles. (graphs)
• David Rosenberg's Take On Europe.
• Toxic Spiral: Greek Office Vacancies Soar As Tourism Industry Implodes.
• 2 Charts Exposing America's Record Shadow Welfare State.
  

CNBC:

• Electronic Arts(EA) Shares Skid as Outlook Disappoints. Electronic Arts reported quarterly earnings that beat analysts' expectations, but shares plunged more than 8 percent after-hours as the company's full-year revenue outlook fell short.
• Raising Inflation Target Would Be 'More Than Reckless': Fed's Fisher. The president of the Federal Reserve Bank of Dallas, Richard Fisher, rejected the idea that higher inflation would spur the economy on Monday. Saying the last thing businesses needed in this economy was uncertainty, Fisher sided with Federal Reserve Chairman Ben Bernanke in his public feud with Paul Krugman, the Nobel Prize-winning economist and New York Times columnist. Called “The Battle of the Beards” by The Washington Post, the back-and-forth between the two economists began when Krugman called on the Fed to raise inflation targets, a move Bernanke called “reckless.” “I would say that Ben Bernanke’s guilty of understatement. It would be more than reckless. It’s a silly thing to recommend,” Fisher said on CNBC’s “The Kudlow Report.”
• US and Europe Have Run Out of Monetary Tricks: Andy Xie. The following is an opinion piece from Caixin, a Beijing-based media group specializing in Asia business news and financial information. Industrial production is stalling in India, and its credit rating may be downgraded to junk. Power consumption in China has slowed to about half of last year's level, while consumer price inflation remains stubbornly high. It's obvious the world's largest emerging economies are no longer in a position to carry the global economy through tough times, as they did during the "recovery" years of 2009-'11. And that spells trouble for the United States and Europe.

IBD:

• AutoZone(AZO) Hits Higher Gear With Commercial Business.

NY Times:

• Chinese Exporters' Weakness at Fair Points to Broader Economic Anxiety. The Canton Fair, China’s biggest marketplace for exporters and buyers, announced over the weekend an unexpected decline in contracts signed over the last month at the fair’s spring session. The weak result was the latest sign that exporters across China are struggling to maintain their global competitiveness. Falling export orders are also a warning for the Chinese economy because they coincide with steeply rising wages and higher rents for factory space, pushing many export factories to the brink of insolvency.

LA Times:

• George Soros Backs Pro-Democratic 'Super PAC'. Liberal philanthropist and financial guru George Soros is donating $1 million to American Bridge 21st Century, a “super PAC” that serves as a opposition research clearinghouse for pro-Democratic groups, his spokesman announced Monday evening.
  

Rasmussen Reports:

• New Low: 44% Predict U.S. Economy Will Be Stronger In Five Years.

Reuters:

• Lacker Says Fed Can't Ease Structural Joblessness. Further monetary stimulus would not do much for a U.S. labor market that is plagued by longer-term, structural issues like skills mismatches, Richmond Federal Reserve Bank President Jeffrey Lacker said on Monday.
• Ulta Beauty(ULTA) Raises 1Q Outlook On Higher Store Traffic. Ulta Beauty raised its first-quarter outlook as the beauty products retailer benefited from promotions and new store openings.
• Rackspace Hosting(RAX) Profit Misses as Costs Weigh. Rackspace Hosting Inc reported a first-quarter profit that missed Wall Street expectations as the company spent more on its data centers and beefed up its workforce to cater to the growing demand for cloud computing. Shares of the company, which has topped profit estimates for the last three quarters, fell 13 percent to $50.25 in extended trade.

Financial Times:

• Iran Receiving Yuan for Oil to China Through Russian Banks. Iran is receiving yuan payments for oil it's supplying China via Russian banks, citing oil executives in Beijing and Gulf-based bankers.
• Greece Braces for a Repeat of Elections. Greece is bracing for a repeat general election after its centre-right leader failed to win leftwing support to form a “national salvation government” in the wake of Sunday’s inconclusive outcome at the polls. “We are now heading for a second vote next month in a deeply polarised atmosphere,” said a disappointed government official. The repeat election would probably take place on June 17, he said.

Telegraph:

• New eurozone crisis looms as Spain prepares bail-out. A new eurozone crisis is looming as Spain signalled on Monday it was ready to bail out ailing banks after markets shrugged off the election results in France and Greece.
• German Chancellor Angela Merkel Faces A Fight For The Eurozone's Future. Angela Merkel could be forgiven if she had taken to her bunker on Monday. It was, after all, the 67th anniversary of the German surrender to end the Second World War in Europe.

The Independent:

• Euro Heading for Freefall in Echo of Housing Crash. The euro could go into freefall in the next few weeks as investors come to see it as comparable to a sub-prime mortgage bond, traders warned yesterday after a dramatic day on world stock markets. With European voters giving austerity a clear thumbs-down, currency experts predicted a grim future for the euro, even if some of the countries that use it manage their way though the present difficulty. Jason Conibear, director of the global foreign exchange specialist Cambridge Mercantile, said of the election results: "The initial reaction of the markets after the weekend was to get out of the euro. "There's every chance the euro will go into freefall in the weeks ahead against all the major currencies. Investors are waking up to the fact that the once ridiculous notion that the euro could collapse is increasingly the most likely outcome." That in turn could give a further boost to the UK pound and the US dollar, good for the notion that both nations have "safe-haven" status, but bad for exports which might boost growth. The euro fell sharply in early trading against the dollar yesterday while the pound soared against the euro. Mr Conibear added: "Europe is not the place to be right now. It's got the same appeal for investors as a synthetic CDO." Collateralised debt obligations were one of the dubious financial instruments used to bet on US mortgages that hindsight shows borrowers were never likely to repay. "Whether it was right or wrong, until the French and Greek elections this weekend there was at least a script. The script of austerity has now been torn up and the sovereign peoples of Europe are starting to ad lib," Mr Conibear said.

Xinhua:

• Daimler AG's Mercedes-Benz China sales fall 11% y/y in April to 14,677 vehicles.

Jerusalem Post:

• Egypt Islamist Vows Global Caliphate in Jerusalem. “The capital of the caliphate – the capital of the United States of the Arabs – will be Jerusalem, God willing,” cleric says. Egypt’s Islamists aim to install a global Islamic caliphate with its capital in Jerusalem, a radical Muslim preacher told thousands of Muslim Brotherhood supporters in a clip released Monday. “We can see how the dream of the Islamic caliphate is being realized, God willing, by Dr. Mohamed Mursi,” Safwat Higazi told thousands of Brotherhood supporters at a Cairo soccer stadium as Mursi – the movement’s presidential candidate – and other Brotherhood officials nodded in agreement.

Evening Recommendations
Wells Fargo:

• Upgraded (VRTX) to Outperform.

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 169.0 -2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 139.50 +2..75 basis points.
  
• FTSE-100 futures -.16%.
  
• S&P 500 futures -.11%.
  
• NASDAQ 100 futures -.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TAP)/.43
• (WEN)/.03
• (FOSL)/.92
• (STE)/.59
• (DTV)/1.05
• (SMG)/2.06
• (OMX)/.16
• (THS)/.60
• (PCX)/-.34
• (DISCA)/.60
• (DIS)/.55
• (RAH)/.84

Economic Releases
7:30 am EST

• NFIB Small Business Optimism Index for April is estimated to rise to 93.0 versus a reading of 92.5 in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lacker speaking, Fed's Fisher speaking, ECB's Draghi speaking, JOLTs Job Openings report for March, IBD/TIPP Economic Optimism Index for May, weekly retail sales reports, 3Y T-Note Auction, Greek Bill Auction, BofAMerrill Tech Conference, Wells Fargo Industrial/Construction Conference, Robert Baird Growth Stock Conference, UBS Financial Services Conference and the (ISIL) Analyst Day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial 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 Slightly Higher into Final Hour on Euro Stock Strength, Lower Energy Prices, Short-Covering, More Financial Sector Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.55 -3.18%
  
• ISE Sentiment Index 85.0 +13.33%
  
• Total Put/Call .92 -9.8%
  
• NYSE Arms .95 -49.38%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 99.68 +.85%
  
• European Financial Sector CDS Index 244.12 -.05%
  
• Western Europe Sovereign Debt CDS Index 275.55 +.75%
  
• Emerging Market CDS Index 248.49 +.60%
  
• 2-Year Swap Spread 29.75 +.75 basis point
  
• TED Spread 39.0 -.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -41.5 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .08% +1 basis point
  
• Yield Curve 162.0 unch.
  
• China Import Iron Ore Spot $144.10/Metric Tonne unch.
  
• Citi US Economic Surprise Index -23.10 +.3 point
  
• 10-Year TIPS Spread 2.20 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a +109 open in Japan
• DAX Futures: Indicating +19 open in Germany
  

Portfolio:

• Slightly Higher: On gains in my Medical and Biotech sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite rising Eurozone debt angst, less tech sector optimism, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Internet, Bank, Biotech, HMO, REIT and Airline shares are especially strong, rising more than +.75%. The Transports and Banks have outperformed throughout the day. Oil is falling -.5%, Gold is down -.33% and Copper is gaining +1.0%. The US sovereign cds is down -2.0% to 39.22 bps. Major European indices are mostly higher, led by a +2.6% gain in Italy. The Bloomberg European Bank/Financial Services Index is rising +1.5%. On the negative side, Oil Tanker, Ag, Software, Disk Drive and Computer Service shares are under pressure, falling more than -.75%. Tech shares have lagged throughout the day. Lumber is down -1.5%. Major Asian Indices fell around -2.0% overnight, led lower by a -2.8% decline in Japan(Nikkei -10.4% in less than 6 weeks and close to 200-day ma test). Australia fell -2.2% overnight, closed below its 50-day ma and is testing its intermediate-term uptrend. The Germany sovereign cds is gaining +.79% to 84.83 bps, the France sovereign cds is rising +1.3% to 193.25 bps, the Spain sovereign cds is rising +.91% to 484.55 bps, the Italy sovereign cds is rising +1.0% to 440.88 bps, the Ireland sovereign cds is gaining +1.9% to 576.89 bps and the Japan sovereign cds is surging +4.2% to 98.5 bps. Moreover, the China Blended Corporate Spread Index is gaining +3.1% to 594.0 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -4.0% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +582.0% ytd. China's March refined-copper imports fell -8.0% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. Oil is trading very poorly of late, which is a broad market positive and helping to boost the transports today. Crude looks poised for further short/intermediate-term losses barring any meaningful supply disruptions. The Citi Eurozone Economic Surprise Index is falling another -3.3 points today to -38.0 points, which is the lowest since mid-Nov. of last year. The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades. The 10Y T-Note continues to trade too well and the euro currency is close to a technical breakdown from its recent range. In general, US stocks remain extraordinarily resilient as aggressive dip-buyers once again materialized into an opening swoon. Banks are helping to propel the major averages off the morning lows on the beliefs that a major US housing recovery is underway and that they are mostly insulated from Europe’s woes. I find these views highly suspect and still believe that banks will underperform from current levels through year-end. I continue to believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The results of Europe’s weekend elections make another intense bout of European debt crisis fears more likely and make the eventual “solution” even more problematic over the intermediate-term, in my opinion. As well, given the upcoming US “fiscal cliff” and intensely negative political rhetoric that will surround the election, more equity investor caution is warranted into the second half of the year. 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, a US "fiscal cliff" solution 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 US economic optimism, high energy prices, rising global growth fears, more shorting, profit-taking and less tech sector optimism.

Today's Headlines

Bloomberg:

• Merkel Rejects Stimulus in Challenge to Hollande's Growth Plans. German Chancellor Angela Merkel rejected government stimulus as the way to spur economic growth in Europe, setting up a clash with French President-elect Francois Hollande before he’s even taken office. In her first response to Hollande’s victory in yesterday’s French election, Merkel rejected a return to the “huge” stimulus programs following the financial crisis in favor of business-friendly economic changes. She and Hollande will talk “very openly” about the form of growth to pursue, a discussion now taking place across Europe and “to which the new French president will bring his own accents.” “This discussion is not whether we should pursue consolidation or growth, it’s completely clear that we need both,” Merkel told reporters in Berlin today. “Rather, I think the core of the discussion is whether we again need debt- financed economic programs, or whether we need growth elements that are sustainable and oriented toward the economic strength of certain countries.”
• Greek Election Raises Risk Country Will Exit Eurozone. Greece’s election, in which the two main parties failed to win a combined majority, raised the risk that the nation will exit the euro and prompted calls for policies to boost European economic growth. Greece now faces a 50% to 75% likelihood of leaving the euro in the next year to 18 months, Citigroup Inc. economists Guillaume Menuet and Juergen Michels wrote in a report Monday. They’d previously estimated the risk of a euro exit at 50%. “Every country can decide to leave the common euro area, of course Greece can as well,” Austrian Chancellor Werner Faymann told state radio ORF today. “You just have to know what it means — and the Greeks will have to consider that.”
• Spain's Kindest Month April as Credit Squeeze Looms. Spain will find it harder to borrow in the coming months as interest payments and redemptions that bondholders had available to reinvest in April dry up, and US$1.3 trillion of European Central Bank funding runs out, according to Bloomberg. The nation needs to borrow 11 billion euros (US$14.4 billion) in May and June, according to estimates by Citigroup Inc. There are no scheduled payments in those months to investors who own existing debt, compared with the 16 billion euros available for reinvestment in April. Italy faces a similar squeeze, with its bond sales set to exceed interest and principal payments by 31 billion euros in the next two months. “There is no conviction buying on Spanish bonds from foreign investors, and there is no reason to believe it will suddenly appear,” said John Wraith, a strategist at Bank of America Merrill Lynch in London. “With the impact of the ECB’s loans worn off, reinvestments from coupon or redemptions help. As that goes away, that’s going to make life even harder.”
• Europe, IMF Vow to Pursue Budget Checks on Next Greek Government. Europe and the IMF pledged to resume checks on Greece's eligibility for more aid disbursements when a new Greek government emerges after voters split over the rescue conditions. The EC in Brussels said it "hopes and expects" Greece will fulfill the budget-austerity requirements for a loan payment due in June following the May 6 election.
  
• Euro Drops to 3-Month Low After Greek, French Elections. The euro weakened to a more than three-month low after Francois Hollande was elected president of France and as Greek voters flocked to anti-bailout parties, stoking concern austerity efforts in Europe may be derailed. The 17-nation currency slid for a sixth day, its longest series of declines since September, dropping as much as 1 percent before paring losses. Hollande, who becomes the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region. The yen weakened against most of its major counterparts as stocks gained, boosting demand for risky assets. “It’s a pretty big deal for France and it’s something that’s going to hang over the euro and prevent it from seeing any material recovery over the course of this week,” said Kathy Lien, director of currency research with online-trading firm GFT Forex in New York. “For the European Central Bank, this is going to be yet another reason for them to consider their lack of dovishness.”
• VIX Lowest to CDS Since '09 as Stock Hedges Trail Bonds. Risk perceptions among U.S. equity and credit investors are diverging the most since 2009 as signs of an economic slowdown spur bigger increases in prices to protect against losses in bonds than stocks. The VIX (VIX), the benchmark gauge of U.S. equity derivatives that usually rises when shares fall, closed last week at 0.032 times the level of the Markit CDX North America High Yield Index, which increases when confidence in debt issuers deteriorates, according to data compiled by Bloomberg. That’s near the 2 1/2-year low of 0.027 times reached in March. While the VIX is 21 percent below its one-year average after sinking 58 percent since October, the gauge of credit- default swaps is only 2.4 percent less than the mean. Worsening economic data and concern Europe’s debt crisis is intensifying may make stockholders more inclined to hedge their gains, according to Belmont Capital Group’s Stephen Solaka. “This could signal we have seen lows in the VIX.”
• Commodities Close to Erasing 2012's Gains on Europe, U.S. Data. Commodities fell for a fourth day, all but erasing this year’s gains, after elections in France and Greece showed voters rejecting austerity, while U.S. employers added fewer jobs than forecast, fueling concern that raw- material demand will slow. The Standard & Poor’s GSCI Spot Index had its worst run since August, losing as much as 1.3 percent to 645.29, the lowest level since Dec. 30. The gauge, which tracks 24 raw materials, was at 652.46 by 12:51 p.m. in London, paring gains this year to 1.2 percent. Crude oil in New York slumped as much as 3.2 percent to $95.34 a barrel, the lowest intraday price since Dec. 20. Commodities retreated in March, April and this month on concern that the European debt crisis may endanger the global recovery. Slowing growth in China and worse-than-expected data from the U.S. have also spurred declines.
• Vertex Cystic Fibrosis Combo Aid Breathing in Patients. Vertex Pharmaceuticals Inc. (VRTX), maker of the first medicine to target the underlying cause of cystic fibrosis, gained the most ever after a combination of that drug and a second therapy improved patients’ breathing ability. Vertex climbed 41 percent to $52.57 at 9:32 a.m. New York time, after touching $53.94 for the biggest intraday increase since the company’s shares began trading publicly in 1991.

Wall Street Journal:

• Hollande to Meet Merkel, Discuss EU. French President-elect François Hollande will be inaugurated next Tuesday and head to Berlin soon afterward for a meeting with Chancellor Angela Merkel that will offer early clues on how far the two leaders are ready to go in reconciling their approaches to restoring confidence in the euro zone.
• The New Greek Extremism. Voters are giving up on the political mainstream in Athens.
  

CNBC.com:

• Facebook(FB) IPO Roadshow Disappoints Some Investors.
• Never Mind Europe, Worry About India. The economic slowdown in India is one of the world’s biggest economic stories, but it is commanding only a modicum of attention in the United States.
• Germany's Merkel: Fiscal Pact Not Up for Renegotiation. The European Union's fiscal compact is not up for renegotiation, German Chancellor Angela Merkel said on Monday, a day after Socialist Francois Hollande won France's presidential election.

Business Insider:

• The Colombian Prostitute Who Slept With A U.S. Secret Service Agent Spills More Humiliating Details.
• The Fed Will Hold Off On Another Round Of QE Until At Least December.
• Report: Iran is Turning US Mosques into 'Terror Command Centers' on American Soil.
  

Zero Hedge:

• Greek Bonds Monkeyhammered As Hedge Funds Slash Hands Catching Falling Knives. (graph)
• Greece: Next Steps.
• New Democracy Unable to Form Government, Anti-Bailout Parties Now Get Opportunity to Eject Greece From Euro.
  

New York Times:

• Bank Chief Steps Down as Spain Considers Rescue. Rodrigo Rato, the executive chairman of Bankia, resigned Monday before an anticipated government recapitalization of the company, Spain’s largest real estate lender, which is sitting on €32 billion of troubled assets.

LA Times:

• Rents Soar as Foreclosure Victims, Young Workers Seek Housing. Few new units and tight standards for home loans add to the pressure. The average monthly U.S. rent is at an all-time high, and a 10% jump in Los Angeles County over the next two years is forecast.

Reuters:

• Greek Euro Exit Would Be Catastrophy - EFSF Head. A Greek exit from the euro zone would be catastrophic not just for Greece, the head of the euro zone's temporary rescue fund said on Monday, a day after pro-bailout ruling parties lost their majority in parliament in Athens. If Greece exited the euro zone that would "of course have a huge impact not just for other programme countries, not just for the banks, but also for Greece itself," Regling said, adding Greece's public creditors would also suffer. "It would be a catastrophe for Greece." Regling also said it was completely out of the question that the European Stability Mechanism (ESM) would directly recapitalise banks, a proposal by some policymakers to help Spanish banks.
• Greece Might Run Out Of Cash By End-June If Not Govt - Sources. Greece might run out of cash by end-June if it does not have a government in place to negotiate a next aid tranche with the EU and the IMF and projected state revenues fall short, three finance ministry officials told Reuters on Monday. "If there is no government to negotiate the next tranche with the (EU/IMF/ECB) troika and if the state does not get the projected monthly cash flow, then we could have a liquidity problem from the end of June onwards," one of the officials said.
• Cognizant(CTSH) Cuts Outlook on Weak Banking Demand. Information technology services provider Cognizant Technology Solutions Corp lowered its forecast for the full year for the first time in nearly four years, citing weak demand from financial services clients in North America. Shares of the company fell as much as 20 percent — their sharpest fall in about four-and-a-half years — to an eight-month low of $56.01.
• Italians Reject Monti's Austerity in Local Vote. A maverick comic who wants Italy to quit the euro made big gains in local elections on Monday while former Prime Minister Silvio Berlusconi's party lost heavily as voters joined a wave of anti-austerity anger across Europe and punished incumbent parties. The results, following the victory of French Socialist Francois Hollande and major losses for traditional big parties in Greece on Sunday, will add to pressure for European leaders to ease measures adopted to counter the financial crisis.

Telegraph:

• Hollande Wins and the End of the Euro Draws Nearer. In France, and in Greece, the anti-austerity backlash has achieved a double victory this weekend, bringing closer the point at which the euro breaks asunder. Continued German support for the single currency relies on acceptance of the austerity imposed by the fiscal compact. Both France and Greece have now resoundingly rejected the old political consensus, making the future of the single currency more uncertain than ever.

Xinhua:

• Mainland China-Taiwan Trade Drops 6.7% y/y in 1Q. The total value of trade during the first three months of the year was $35.1B. China exports to Taiwan dropped 8.6% to $7.37B, while imports to China from Taiwan fell 6.1% to $27.8B.

Shanghai Daily:

• Caution Dims Housing Sales. PURCHASES of new homes in Shanghai fell last week, and the average price slipped due to slack sales of mid- to high-end properties. The sales of new homes, excluding government-funded affordable housing, shed 9.6 percent from a week earlier to 153,200 square meters in the city during the seven days ended on Sunday, said a report released yesterday by Shanghai Deovolente Realty Co. "Home seekers have been taking a 'wait-and-see' attitude these days as they expect further price cuts by real estate developers while the developers are reluctant to offer larger discounts," said Lu Qilin, a researcher at Deovolente, explaining the reason for the current situation.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.21%

Sector Underperformers:

• 1) Computer Services -1.61% 2) Oil Tankers -1.60% 3) Construction -.83%

Stocks Falling on Unusual Volume:

• CTSH, BSFT, MINI, KFY, AIG, HMC, GEOY, JCOM, CPS, PETS, EPAY, TGA, LUFK, MFRM, SCSS, RUE, ZAGG, YNDX, PSMT, DRIV, OTEX, TESS, LFUS, GCOM, GGC, TPX, RNF, VMC, ANV, DGI and TPC
  

Stocks With Unusual Put Option Activity:

• 1) TPX 2) CTSH 3) XOP 4) CLNE 5) NOV
  

Stocks With Most Negative News Mentions:

• 1) MELI 2) LNT 3) CTSH 4) BA 5) AIG
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.22%

Sector Outperformers:

• 1) Biotech +1.65% 2) Airlines +1.17% 3) Internet +.47%

Stocks Rising on Unusual Volume:

• UAL, KT, VRTX, SYNC, SPRD, CREE, CONN and TSN
  

Stocks With Unusual Call Option Activity:

• 1) DISH 2) CTSH 3) VRTX 4) EA 5) SYNA
  

Stocks With Most Positive News Mentions:

• 1) NVDA 2) PEP 3) LMT 4) DRC 5) LUV
  

Charts:

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