Today's Headlines

Bloomberg:

• Spain Banks Face Moody's Downgrades as Bankia Denies Deposit Run. Spanish banks face credit ratings downgrades by Moody’s Investors Service later today as the government denied there was a run on deposits at Bankia SA (BKIA), the ailing lender it’s taking over. Moody’s is expected to make a statement on downgrades for Spanish banks this evening after 9 p.m. in Madrid, said two people with knowledge of the situation, who asked not to be identified because the decision hasn’t been announced. A Moody’s spokeswoman in London declined to comment in a phone interview. A cut in credit ratings for Spanish lenders would cap a tense day for the industry after a report in El Mundo newspaper that about 1 billion euros ($1.3 billion) of deposits had been pulled from Bankia since the government announced plans to take it over on May 9. Bankia’s shares plunged as much as 29 percent. Deputy Economy Minister Fernando Jimenez Latorre used a Madrid news conference on the country’s gross domestic product data to deny Bankia was suffering a flight of deposits. Bankia, the lender with the biggest Spanish asset base, said in a filing to regulators today that changes in deposit level in the first half of May “have a substantially seasonal nature” and that it didn’t expect “substantial changes” in coming days. The main drivers for Moody’s expected action on Spanish banks today are rising loan defaults, a renewed recession, restricted funding access and the reduced ability of the government to support lenders, said one of the people familiar with the plans.
• The cost of insuring against a Spanish default rose to another record, with credit-default swaps on the nation's bonds jumping 13 basis points to a record 553, according to Bloomberg.
• Greek Asset Sales Program to Be Delayed Months, Chief Says. Greece’s 50 billion euro ($63.6 billion) state-asset sales program, a key plank in securing international funds from the European Union and International Monetary Fund, will be delayed by months as the country goes back to the polls to choose a new government. The Hellenic Republic Asset Development Fund said yesterday its board decided to freeze all projects and won’t make any binding decisions until the country holds elections on June 17. That will immediately affect the timetable for the sale of the nation’s gas company, a contract for a state lottery and the lease of the IBC conference center, said Costas Mitropoulos, chief executive officer of the fund.
• European Stocks Drop as ECB Pauses Greek Bank Lending. European stocks declined for a fourth day as the region’s central bank paused lending to some Greek banks and speculation mounted that Spanish banks may have their credit ratings cut at Moody’s Investors Service. Bankia SA (BKIA) sank 14 percent after a report that depositors withdrew 1 billion euros ($1.27 billion) in the past week. Cookson Group Plc (CKSN) rose the most in six weeks after saying it’s considering a separation of its main divisions. The Stoxx Europe 600 Index (SXXP) dropped 1.1 percent to 241.63 at the close of trading, for the longest losing streak since March 22, even as the Federal Reserve signaled further monetary easing remains an option if the U.S. economy worsens.
• Default Swap Bets Rise Most in BRICs Amid Slowdown: China Credit. Investors are increasing purchases of insurance against default on China's debt by the most among the BRIC nations as concern builds that a slowdown will deepen in the world's second-largest economy. The net amount of credit-default swaps on Chinese bonds rose by $189 million, or 2.1%, to $9 billion in the two weeks through May 11, according to data published by NY-based Depository Trust & Clearing Corp. The amount increased by $70 million for Russia contracts and $14.7 million on State Bank of India Ltd.'s debt. The annual cost of insuring China's debt for five years jumped 20 basis points this month to 133 basis points on May 16, the highest since January, according to CME Group Inc. prices.
  
• Chinese Company Debt Is at 'Alarming Levels,' Xinhua Says. Chinese companies have accumulated “alarming levels” of debt and will have difficulty with payments in an economic downturn, Xinhua News Agency said, citing Li Yang, vice president of the Chinese Academy of Social Sciences. The debt-to-asset ratio of Chinese companies is about 105.4 percent, the highest among 20 countries examined in yearlong study by Li’s team of borrowing by China’s government, corporations and individuals, Xinhua reported. Chinese companies tend to borrow from banks instead of raising funds in capital markets, Li said, as cited by Xinhua.
• China Car Dealerships Struggle as Stockpiles Increase. Chinese dealers are struggling with the rising number of unsold cars that’s threatening to deepen price cuts, according to the nation’s biggest automobile dealers’ association. Dealerships for Honda Motor Co. (7267), Chery Automobile Co., BYD Co. (002594) and Geely Automobile Holdings Ltd. (175) carried more than 45 days of inventory as of the end of April, exceeding the threshold that foreshadows debilitating price cuts, Su Hui, vice president of the auto market division at the state-backed China Automobile Dealers Association, said in an interview. The warning signals that vehicle deliveries reported by companies, which have risen more than analysts’ estimates for the past two months, aren’t fully translating to consumer sales and resulting in a pile up at showrooms.
• BRIC Stocks Head for Bear Market as Growth Woes Deepen. The MSCI BRIC Index (MXBRIC) fell, extending the gauge of the largest emerging markets’ drop from this year’s high to 20 percent, on mounting concern that Europe’s debt crisis and slower U.S. economic growth will curb exports. The benchmark index of shares in Brazil, Russia, China and India slipped 0.8 percent to 260.04 at 1 p.m. in New York, swelling its retreat to 20 percent from this year’s peak on March 2, a threshold analysts say marks a bear market. Klabin SA, Latin America’s biggest paper maker, led declines in Brazil’s Bovespa (IBOV) measure. Russia’s 30-stock Micex (INDEXCF) Index sank 4 percent, also entering a bear market. The 21-country MSCI Emerging Markets Index (MXEF) dropped to a four-month low. “Emerging markets had already been suffering their own headwinds and now they’re going to be buffeted by additional negative developments in the developed countries,” Komal Sri- Kumar, chief global strategist at TCW Group Inc., which oversees about $120 billion, said in a phone interview from Los Angeles. “China is facing a slowdown and inflation in India has shot up, making it hard for authorities there to cut rates. At the same time, Greece is on its way to a default. The immediate impact on emerging markets is negative.”
• Confidence Sinks as U.S. Job Market Falters. Consumer confidence fell last week to the lowest level in almost four months and more people than forecast filed claims for unemployment benefits, showing a lack of progress in the job market is rattling Americans. The Bloomberg Consumer Comfort Index dropped in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths, from minus 40.4 in the previous period. Jobless applications were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington. The Bloomberg U.S. consumer comfort index’s 12.2-point decline over the past four weeks has erased almost all of this year’s gains. Readings lower than minus 40 for the Bloomberg index are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. The gauge has averaged minus 15.3 since its inception in December 1985. All three of the Bloomberg Consumer Comfort Index’s components declined last week, today’s report showed. The gauge of personal finances fell to minus 12.9, the fourth straight drop and the weakest reading since November, from minus 11.2 in the prior week. A measure of whether consumers consider it a good or bad time to buy decreased to minus 48.2, a three-month low, from minus 45.8. Americans’ views on the state of the economy fell to a 10-week low of minus 69.6 from minus 64.2.
• Hewlett-Packard(HPQ) Said to Consider Cutting as Many as 25,000 Jobs. Hewlett-Packard Co. is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
• Senate Confirms Power, Stein to Seats on Fed Board. The U.S. Senate today confirmed President Barack Obama’s two nominees to the Federal Reserve Board with both receiving the support of at least 70 senators. The Senate voted 70-24 to confirm the nomination of Jeremy Stein, a Harvard University professor and 74-21 to confirm Jerome Powell, an attorney and private equity investor who was a Treasury undersecretary for President George H.W. Bush.

Wall Street Journal:

• Philly Fed Undercuts the Growth Picture. Stocks are sliding again here late in the morning. The market got a rude shock this morning when the Philadelphia Fed’s monthly manufacturing survey went negative for the first time in eight months.
• Pinterest Raises $100 Million with $1.5 Billion Valuation. Pinterest, the online scrapbooking website that has become a Silicon Valley darling because of its rapid user growth, has raised $100 million in a financing round that values the start-up at $1.5 billion, said people familiar with the matter.
• Greek Leftist Leder Throws Down Gauntlet on Debt. The head of Greece's radical left party says there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts, throwing down a gauntlet that could increase tensions between Greece's recalcitrant politicians and frustrated European creditors.

MarketWatch:

• Wal-Mart(WMT) Rallies as U.S. Gains Traction. Wal-Mart Stores Inc. shares saw their biggest gain in more than three years Thursday after Walmart U.S., its biggest unit, reported the best same-store sales performance in three years while its Sam’s Club and overseas units also topped expectations.

CNBC.com:

• Euro Zone Fears, Starting to Hit Trade, Financing. The euro zone debt crisis is affecting trade as companies shy away from dealing with firms and banks in countries deemed at risk of contagion, a senior banker said on Thursday.
• Fitch Says Top 29 Banks May Need $556 Billion. The world's top 29 banks may need a total $556 billion to meet tougher new capital rules, cutting returns by a fifth and forcing them to curb investor payouts and raise customer charges, Fitch Ratings said on Thursday.

Business Insider:

• Get Ready: This is What Happens If Greece Exits the Euro.
• Israel's Chance to Attack Iran's Nuclear Facilities Is Running Out Fast.
• This Is The Most Likely Outcome To The Fiscal Cliff Crisis.
• Real Estate Crash in China: Foreign Funding Down 80%, Land Sales Down 57%, Starts Down 27%.
  

Zero Hedge:

• Philly Fed Plunges, First Contraction Since September 2011. (graph)
• European Financials Hit Six Month Lows; 12 Down Days In A Row. (graph)
• The American Foreclosure Process Has Ground To A Halt. (graph)
• Fitch Roundtrips On Greece, Re-Downgrades Country.
  

Reuters:

• BHP(BHP) May Delay at Least Two Mega Projects to Rein in Spending. BHP Billiton, the world's biggest miner, is likely to delay signing off on at least two mega projects after its chairman put the brakes on an $80 billion (50.4 billion pounds) plan to grow the company's iron ore, copper and energy operations, analysts say. Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto (RIO) in reconsidering the pace of their long-term expansion in countries such as Australia and Canada.
• Spanish Regions, Central Govt Agree to Deep Spending Cuts. Spain's central government on Thursday approved plans to drastically cut the spending of its indebted regions this year and said it would introduce by July a new mechanism to back their financing needs. As the country races to control finances in its autonomous communities and reassure investors it can meet fiscal targets, the government said the regions had committed to slash spending by 13 billion euros ($16.52 billion) and increase revenues by 5 billion euros ($6.35 billion).
• Fed's Bullard - Long Easy-Money Period Has Risks. A top Federal Reserve policymaker said on Thursday he is worried that the Fed's extended period of ultra-loose monetary policy could be doing damage by discouraging thrift and encouraging undue risk-taking. "I'm worried about these low rates distorting other types of decision-making in the economy," St. Louis Fed President James Bullard told a Rotary Club lunch. "We're implicitly punishing savers ... we're encouraging people to go out and chase yield through other channels."
• US Postal Service to Close or Consolidate 140 Sites.

Telegraph:

• Fitch Warns of Mass Eurozone Downgrades. Ratings agency Fitch warns that all eurozone countries face a greater than 50pc chance of a downgrade if a stable, pro-bail-out government is not formed following Greece's second round of elections.

Valor Economico:

• The worsening of Europe's crisis and the slowdown in China may affect Brazil's economic expansion in the second half of this year and compromise 2013 growth, citing government officials. Brazil's economy is unlikely to grow much more than 2.7% this year, citing the officials.

Diario Economico:

• The so-called troika, which comprises officials from the European Commission, European Central Bank and International Monetary Fund, will study a contingency plan to protect Portugal if Greece exits the euro area. Troika officials will arrive in Lisbon next week for the fourth review of Portugal's aid program and will also look at the country's unemployment figures and the effects on the social security accounts.
  

Shanghai Securities News:

• China will steadfastly continue curbs on the housing market and won't flip-flop on its policies, citing Zhang Xiaohong, deputy director of markets of the Ministry of Housing and Urban-Rural Development.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.83%

Sector Underperformers:

• 1) Oil Tankers -3.70% 2) Homebuilders -3.51% 3) Airlines -3.01%

Stocks Falling on Unusual Volume:

• XHB, NIHD, STO, CHU, CLMT, BCS, CIT, HBHC, JPM, DAL, OSK, ITC, NAV, PHMD, AVEO, RRGB, VNET, DLTR, PANL, LQDT, SVVC, ORLY, PETD, ARMH, LINTA, ALKS, GSVC, GRPN, SIRO, GHDX, RPT, PKB, KEX, AAP, SM, LTD, AIG, SSI, RYL, CAT, ITB, KKR, CHKR, DKS, AL, HUN, ARG, GRA, ACTV, SIRO, ITC, EXP, CYT, ANF, HTZ, XTEX, HGT, RGR, TKR, AZO, APO, LAD, KEX, WAIR, URI, AVEO, TEX, NUS and GME
  

Stocks With Unusual Put Option Activity:

• 1) RSX 2) KBH 3) URI 4) XLF 5) BRK/B
  

Stocks With Most Negative News Mentions:

• 1) ANF 2) AFL 3) YUM 4) JPM 5) AAP
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• IMF's Lagarde Says Greek Euro Exit Would Be Expensive. International Monetary Fund Managing Director Christine Lagarde said a Greek exit from the euro area would be “extremely expensive” and hard. Still, the IMF has to be “technically prepared for anything because it’s our job,” she said in an interview with Dutch public television broadcast today. “I’m not suggesting that this is a desirable solution. I’m just saying that this is within the range of multiple options, one that we have to technically look at.” A Greek caretaker government will prepare new elections probably on June 17 that are shaping up as a ballot on whether the country should remain a euro member, following inconclusive May 6 voting that pushed a political party opposed to Greece’s international bailout into second place. The IMF co-financed two bailout packages to the Mediterranean nation. To stay within the euro region requires efforts to “abide by the program which has been put into place” as conditions attached to the latest loan package, Lagarde said. She said a euro exit wouldn’t reflect the will of the Greek people. “No country is immune from hardship happening anywhere,” Lagarde said. “Within the euro zone, a currency union, what happens to any member is going to affect others.” Her comments echo concern by World Bank President Robert Zoellick that a Greek exit from the euro could have ripple effects reminiscent of 2008, when Lehman Brothers Holdings Inc.’s collapse was followed by a global financial crisis.
  
• Rajoy Risks Bailout Yields in Trial of Spain's Funding. Spain will try to show investors it can keep funding itself today as yields approach levels that pushed other nations into bailouts and foreign investors shun the country’s bonds. Spain will seek to sell 1.5 billion euros ($1.9 billion) to 2.5 billion euros of bonds maturing in 2015 and 2016, about half the level it aimed for a year ago. Spanish 10-year bond yields rose as high as 6.5 percent yesterday, approaching the 7 percent mark that pushed Greece, Ireland and Portugal toward European rescue packages. “Spain is potentially the biggest euro-zone accident waiting to happen,” said Neil Williams, chief economist at Hermes Fund Management in London. “Unless there is a sudden and sustainable improvement in Spain’s underlying competitiveness the next round of euro-zone governments’ support will have to stretch beyond the debtor nations currently on investors’ radars.”
• Dollar Funding Costs Jump as Debt Sales Scrapped: Credit Markets. The cost to borrow in dollars is rising at the fastest pace in five months as Europe's debt crisis leads investors to seek shelter in U.S. assets, spurring companies from China to Brazil to cancel bond sales. One-year cross-currency basis swaps fell to 68 basis points below the euro interbank offered rate yesterday from 53 on May 10, the biggest four-day drop since Dec. 14.
• Italy Tax Agents on Frontline of Anti-Austerity Backlash. For 10 years, Daniela Ballico has been knocking on Romans’ doors seeking back taxes. Now with Italy’s tax-collectors on the frontline of an anti-austerity backlash, she no longer has the courage to ring their bells. Equitalia, the state tax-collection agency, has been targeted in a wave of attacks as Italians chafe under stepped-up efforts to recover an estimated 120 billion euros ($153 billion) in lost revenue from evasion. On May 12, a Molotov cocktail exploded outside Equitalia’s Livorno office, one day after a parcel bomb was delivered to the Rome headquarters, site of a December explosion that tore off part of the general manager’s hand. “I have never seen such a tense atmosphere” said Ballico, who has been employed by Equitalia since 1998 and is now on temporary leave to work for the UGL labor union. “They call us loan sharks, bloodsuckers; my colleagues have to deal with anxiety and stomach aches every day and they are scared.”
• Greenlight's Einhorn Says French Default Not Out of the Question. Hedge-fund manager David Einhorn said there's a possibility the French government may default on its debt. "A French default is not out of the question," Einhorn said today at the Ira Sohn investment conference in New York.
  
• AIG(AIG) Wagers on Subprime Betting Second Time Different: Mortgages. American International Group Inc., the insurer that needed a $182.3 billion bailout from the U.S. government in 2008 after failed mortgage investments, is betting this time it's different. Chief Executive Officer Robert Benmosche has increased non- government-guaranteed residential and commercial-mortgage backed securities holdings by $11.1 billion since 2010 to $28.4 billion at the end of March, according to regulatory filings. The New York-based insurer has acquired debt sold by the Federal Reserve that the central bank acquired from AIG when the company was rescued, including $600 million of CMBS last month. AIG, which is also bolstering its unit that insures home loans with low down payments, is wagering that a more than 35 percent plunge in property values, cheaper prices for the securities and fewer competitors justify returning to investments that four years ago required the government to step in when it was unable to meet margin calls to banks.
• Russian Funds Flee as Anti-Putin Demonstrators Dig In. Investors are fleeing Russia as demonstrators against President Vladimir Putin dig in, exacerbating the impact of Europe’s debt crisis on the country’s markets, money managers from Frankfurt to Moscow said. Activists who clashed with police before Putin’s May 7 inauguration are protesting non-stop in Moscow, using the Occupy Wall Street movement’s tactics. As the benchmark RTS equity index entered a bear market, Russia-focused equity funds recorded $251 million of outflows in the seven days to May 9, the most this year, while China lost $127 million, India $148 million and Brazil $167 million, EPFR Global data show.
• BRIC Stocks Erase 2012 Gains as Technology Shares Drop on China. The MSCI BRIC Index for shares in Brazil, Russia, India and China tumbled for a fourth day, wiping out this year’s gains, as concern deepened that China’s economic growth is slowing and Europe’s debt crisis is spreading. The benchmark measure for the largest developing nations dropped 2.3 percent to 262.10 as of 4:35 p.m. in New York, led by an 11 percent decline in Shanghai-based Semiconductor Manufacturing Corp. after it was cut from the MSCI China Index. The Bovespa Index fell for a seventh day. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, dropped 7.3 percent. The MSCI Emerging Markets Index hit the lowest level since Jan. 2. Gauges sank more than 2 percent from Hungary to Taiwan.
• Bond Market May Not Warn When Debt Crisis Strikes. One by one, European nations are letting their voices be heard, tossing out the party in power and voting in those who, in some cases, have a more radical agenda or, in others, are just willing to say “no” to the status quo. A bas l’austerite! Down with austerity! Up with growth! If only it were that simple. That’s how the trade-off is being portrayed, and perhaps that’s what policy makers pushing the idea, and individuals on the receiving end, want to believe. With many euro-zone countries in recession, one can understand the appeal. Spend more, grow more and presto! The debt shrinks in relation to the economy and becomes more manageable. “Wishful thinking,” said Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics in Washington, who knows a thing or two about debt. “You seldom grow your way out of debt. The historic experience is very rare.”
• Japan Growth Pick-Up Clouded by Deepening Europe Risk: Economy. Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand. Gross domestic product rose an annualized 4.1 percent from the final three months of 2011, exceeding all but seven of 27 estimates in a Bloomberg News survey of economists, a Cabinet Office report showed today in Tokyo. Singapore also reported a rebound in growth last quarter, while warning about the risk of a disorderly European debt default.
• N. Korea Ship Seizes Chinese Boats for Ransom, Global Times Says. A North Korean ship seized three Chinese boats with 29 fishermen aboard and demanded more than $140,000 to release them, China’s Global Times newspaper reported today. The fishing boats were captured at gunpoint while trawling in Chinese waters on May 8, the newspaper said, citing an owner of one of the boats, identified as Zhang Dechang. He said the captors were demanding 300,000 yuan ($47,500) to release each vessel. China’s Foreign Ministry is trying to verify what happened and resolve the issue, state-run China Central Television reported on its website yesterday. A standoff could strain ties between North Korea and China, its main financial and diplomatic backer.
• China Expands Scope for Short Selling, Securities Journal Says. China will start a trial next week that will allow brokerages to borrow stocks for clients wishing to conduct short selling, the China Securities Journal reported. Brokerages can also borrow money on behalf of clients for margin financing, the newspaper reported today, without saying where it got the information. Twenty-five securities companies will participate in the test, along with the stock exchange, fund management companies and China Securities Finance Co., which was set up as an agency to provide funds and stocks for brokerages’ short selling and margin trading.

Wall Street Journal:

• Experts Try to Chart Path for Exit From Currency. Returning to a national currency after more than a decade of using the euro and having its money managed by the European Central Bank would catapult Greece into a financial, legal and political no man's land. Countries have defaulted, devalued, or even withdrawn from a broader monetary union in the past. But none has done it all at once—and certainly not an economy so deeply integrated into global financial markets.
  
• Prospects for European Banks Once Again Darken. The start of 2012 was meant to herald a brighter future for European banks. Five months on, the picture is darkening fast. Until recently, European banks were basking in the glow of €1 trillion ($1.27 trillion) of cheap loans dished out by the European Central Bank. With fears that Greece could exit the euro back on the horizon, a credit-rating review of 114 European financial institutions under way by Moody's and the need for many European banks to shrink themselves back to health, the outlook is less rosy, analysts say. "Clearly sentiment has soured," said James Longsdon, a managing director of European, Middle East and Africa institutions at Fitch Ratings.
• Senators Urge Regulators To Act On Speculative Trading Limits. Senators have urged "swift action" from regulators to curb speculation in gas and oil markets, even as the price of gas has started to fall.
• Blackstone(BX) Loan in Favorable Modification, Deutsche Bank Says. A Blackstone Group LP (BX) property loan has received what "may be one of the more questionable [loan] modifications to date" by getting rosy financing terms at the expense of bondholders, marking a troublesome precedent for distressed real-estate workouts, Deutsche Bank said Wednesday. Special servicer Berkadia Commercial Mortgage extended for two years the maturity on about $400 million of commercial mortgage-backed securities, or CMBS, debt on 16 office properties, leaving the interest rate unchanged at a level more than four percentage points below the market rate.
• SEC Probes Role of Hedge Fund in CDOs. U.S. securities regulators are investigating hedge-fund firm Magnetar Capital LLC, which bet on several mortgage-bond deals that wound up imploding during the financial crisis, according to people familiar with the matter. While Magnetar has faced scrutiny over its role in various collateralized debt obligations, or CDOs, the Illinois firm itself now is a target of an investigation by the Securities and Exchange Commission, these people said.
• Boyd Gaming(BYD) to Buy Peninsula Gaming for $745 Million. Boyd Gaming Corp. (BYD) said Wednesday it will acquire privately held casino operator Peninsula Gaming LLC at a cost of $745 million and is also refinancing $700 million of Peninsula's existing debt. The acquisition gives Boyd a stronger foothold in the Midwest and South and should offset some the pressures the company has felt in its core markets Las Vegas and Atlantic City. In the wake of the announcement, Boyd's share price rose roughly 12% to $7.84 in after-market activity.
• Geithner, Dimon Discussed Volcker Rule In March. Treasury Secretary Timothy Geithner and J.P. Morgan Chase & Co. (JPM) Chief Executive James Dimon met in early March to discuss a new rule restricting commercial banks from trading with their own money, meeting logs released Wednesday by Treasury show.
• White House Steps Up Push to Toughen Rules on Banks. In the wake of losses at J.P. Morgan Chase & Co., the White House is seeking to ensure a tough interpretation of a regulation designed to prevent banks from making bets with their own money, according to people familiar with the matter.
• From 'Caveman' to 'Whale'. Months before Bruno Iksil became famous as the "London whale," the trader who contributed to a loss of more than $2 billion at J.P. Morgan Chase & Co., he earned a different nickname: the "Caveman," for pursuing trades that rivals sometimes thought were overly aggressive but often led to huge profits. Late last year, Mr. Iksil, a London-based trader in J.P. Morgan's Chief Investment Office, turned heads among fellow debt-market traders with a wager against a group of junk-bond-rated companies, traders say.
• Fall in Chinese Loans Poses Economic Threat. Banks Narrow Range of Firms They Are Willing to Assist, While Companies Are Wary of Borrowing Amid Unsure Prospects.

Business Insider:

• Exclusive Photos: Here's The Hot New Way They're Extracting Oil From Canada's Massive Oil Sands.
• It Looks A Lot Like China's Security Head Is About To Be Ousted.
• The Most Important Energy Project In The World Is Happening In This Remote Part Of Canada.

Zero Hedge:

• Quantifying The Plan Z Dry Powder - This Is The Greek ELA Borrowing Capacity.
• The Fabled Greek Mega-Bailout.
• Listing David Einhorn's Likes and Dislikes.
  

CNBC:

• JPMorgan(JPM) Fallout 'Could Get a Lot Worse': Whitney. The JPMorgan Chase trading controversy comes at an inopportune time both for the bank and the industry as a whole, which needs to rethink the way it does business, analyst Meredith Whitney told CNBC.

NY Times:

• JPMorgan's(JPM) Trading Loss Is Said to Rise at Least 50%. The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank.
• Ahead of Facebook(FB) IPO, a Skeptical Madison Ave. With Facebook, Mark Zuckerberg has created a seemingly perfect home on the Web, one where people feel comfortable chatting with friends, playing games, sharing photos and videos, listening to music and revealing the most intimate details of their lives. The $100 billion question is whether Facebook will be a perfect home for advertisers, as well.

market folly:

• Notes From Ira Sohn Conference Presentations 2012.

DerivativesIntelligence:

• Managers Buy Russia CDS On Oil Price Drop. Asset managers are buying credit default swaps on Russia because of the impact lower oil prices could have on the country's finances.
  

Mortgage News Daily:

• Judicial States Continue to Skew Foreclosure Statistics. Nationally the percentage of loans in foreclosure fell slightly but Mike Fratantoni MBA's Vice President of Research and Economics said the top-line figure covers up a couple of trends. "First, the percentage of loans in foreclosure is up for prime and FHA loans. The percentage of subprime loans in foreclosure continues to fall as the subprime loans age and the problems loans are resolved one way or the other. However, the percentage of loans in foreclosure for both FHA loans and prime fixed-rate loans are climbing and are just below all -time records." "The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states," Franantoni said. While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states, 6.9 percent. In contrast that rate has fallen to 2.8 percent in non-judicial state, the lowest since early 2009." The difference in the rates is even more disturbing in certain states. Brinkmann summed up the NDS report saying, "Overall it has good news about where we are going but the bottom line is we are still dependent on the economy." As the job situation has improved so have delinquency figures and as long as this continues and there are no serious problems, such as a melt-down in Europe, we should see more of the same.

The Hill:

• Senate Rejects Obama Budget in 99-0 Vote. A budget resolution based on President Obama’s 2013 budget failed to get any votes in the Senate on Wednesday. In a 99-0 vote, all of the senators present rejected the president’s blueprint. It’s the second year in a row the Senate has voted down Obama’s budget. The House earlier this year unanimously rejected Obama's budget.

Rasmussen Reports:

• 28% Say U.S. Heading in Right Direction.

Reuters:

• Red Robin(RRGB) Sales Miss Estimates; Shares Fall. Restaurant operator Red Robin Gourmet Burgers Inc's first-quarter revenue missed Wall Street estimates, hurt by a decline in guest counts, sending its shares down 8 percent in extended trading.
• Limited Brands(LTD) Q1 Profit Beats, Shares Fall On View. Limited Brands Inc, parent of the Victoria's Secret lingerie store chain, posted a quarterly profit that topped Wall Street's view but its shares fell 3.5 percent after its forecast for the current quarter fell short of analysts' expectations.

Financial Times:

• Spain Bids to Pin Down Real Estate Losses. Spain’s government will on Thursday announce the appointment of Blackrock and Oliver Wyman as independent valuers of the real estate loans that lie at the heart of the country’s banking crisis.

Telegraph:

• Britain must make ready for the storm as clueless Europe tears itself apart. Usually it's war that does the damage; there's a certain irony in the fact that this time around it's a project designed to prevent these periodic outbreaks of insanity by binding nations together in irredeemable economic and legal union – the euro. In fact, the single currency is having the exact opposite effect, only bizarrely, Europeans still refuse to see it. Even the Greeks still cling, ever more desperately, to this totemic symbol of European solidarity.
• Euroland's €1 trillion question: after Greece goes, can Spain stay in? Everyone knows Greece is leaving the euro, the real challenge is preventing the fall-out extending to Spain.

The Guardian:

• Huge Risk of Euro Breakup if EU Fails to Act - David Cameron. David Cameron will issue his starkest warning yet on the plight of the euro on Thursday, saying unless urgent action is taken there will be a breakup, adding he will do whatever possible to keep Britain safe in perilous times. Cameron's stark message comes only a day after the chancellor, George Osborne, had said open speculation about the eurozone was itself damaging the European economy. Cameron and Osborne now believe that with the failure of the Greeks to form a government, a direct warning has to be given to the eurozone leaders about the scale of the threat, and the need for urgent action.

South China Morning Post:

• Solar-Gear Glut to Stay for Year, Suntech(STP) Says. Equipment, parts to remain in global oversupply, downward pressure on prices to continue for at least 1 year, co. Chairman Shi Zhengrong says, citing an interview. Shi said he sees no sign of a price rebound. China should consider asking banks to relax lending to solar-equipment industry because of losses, Shi said.

Evening Recommendations
Piper Jaffray:

• Rated (CFN) Overweight, target $34.

Susquehanna:

• Rated (SNDK) Positive, target $47.

Night Trading

• Asian equity indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 195.0 +2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 158.25 +8.75 basis points.
  
• FTSE-100 futures unch.
  
• S&P 500 futures +.42%.
  
• NASDAQ 100 futures +.36%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AAP)/1.81
• (QSII)/.28
• (SSI)/-.02
• (WMT)/1.04
• (ROST)/.93
• (CSC)/.20
• (GPS)/.45
• (CRM)/.34
• (ARUN)/.16
• (INTU)/2.48
• (BRCD)/.12
• (PLCE)/1.06
• (DLTR)/.97
• (SHLD)/-.67
• (AMAT)/.24
• (ADSK)/.47
• (GME)/.54
• (BKE)/.76
• (PCP)/2.27

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 365K versus 367K the prior week.
• Continuing Claims are estimated to fall to 3225K versus 3229K prior.
  

10:00 am EST

• Philly Fed for May is estimated to rise to 10.0 versus a reading of 8.5 in April.
• Leading Indicators for April are estimated to rise +.1% versus a +.3% gain in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking, Spain 10-Year bond auction, 10-Year TIPS auction, weekly EIA natural gas inventory report, pricing of the (FB) IPO, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for May, BofA Merrill Transports Conference, (SYY) investor day and the (HBC) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer staple 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 Reversing Lower into Final Hour on Rising Global Growth Fears, Rising Eurozone Debt Angst, Less Financial/Tech Sector Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 22.21 +1.09%
  
• ISE Sentiment Index 82.0 -7.87%
  
• Total Put/Call 1.26 +6.78%
  
• NYSE Arms 1.03 -48.03%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 119.18 +1.56%
  
• European Financial Sector CDS Index 290.81 +.74%
  
• Western Europe Sovereign Debt CDS Index 302.35 +1.25%
  
• Emerging Market CDS Index 309.69 +2.26%
  
• 2-Year Swap Spread 36.5 -2.0 basis points
  
• TED Spread 37.5 -.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -51.25 -1.75 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 147.0 -2 basis points
  
• China Import Iron Ore Spot $135.10/Metric Tonne -.59%
  
• Citi US Economic Surprise Index -19.40 +3.6 points
  
• 10-Year TIPS Spread 2.11 -4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -40 open in Japan
• DAX Futures: Indicating -22 open in Germany
  

Portfolio:

• Higher: On gains in my Biotech sector longs and index hedges
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 reverses morning gains and trades near session lows as it tests its early-March lows on rising Eurozone debt angst, high energy prices, rising global growth fears, less financial/tech sector optimism, technical selling and more shorting. On the positive side, Internet, Education and Restaurant shares are rising on the day. The Transports are also holding up relatively well. Oil is falling -.4% and Gold is down -.2%. The Spain sovereign cds is down -1.7% to 537.33 bps and the France sovereign cds is down -.99% to 215.0 bps. On the negative side, Coal, Alt Energy, Oil Tanker, Ag, Steel, Networking, Retail, Semi, Disk Drive and I-Banking shares are under meaningful pressure, falling more than -1.25%. Cyclical shares are underperforming. Tech and financial shares have also been heavy throughout the day. Copper is down -1.3%, Lumber is down -1.3% and the UBS-Bloomberg Ag Spot Index is gaining +1.1%. Major Asian indices fell around -2.25% overnight, led lower by a -3.2% decline in Hong Kong(-9.4% in 2 weeks). Major European indices are falling around -.5%, led lower by a -1.4% decline in Spain. Spain is now down -22.9% ytd and at the lowest level since June 2003. The Bloomberg European Bank/Financial Services Index is down -.9% and has declined -21.9% in less than 2 months. The Germany sovereign cds is gaining +.5% to 96.33 bps, the Italy sovereign cds is rising +.99% to 506.66 bps, the Portugal sovereign cds is gaining +2.9% to 1,137.85 bps, the Ireland sovereign cds is gaining +1.9% to 665.99 bps(+11.3% in 5 days), the UK sovereign cds is gaining +2.3% to 72.66 bps, the Japan sovereign cds is rising +2.5% to 107.88 bps, the China sovereign cds is gaining +2.6% to 132.33 bps(+11.6% in 5 days), the Brazil sovereign cds is gaining +3.3% to 154.15 bps and the Russia sovereign cds is gaining +.99% to 236.99 bps(+14.0% in 5 days). Moreover, the European Investment Grade CDS Index is rising +2.1% to 177.93 bps(+13.1% in 5 days). 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 -30.0% ytd. China Iron Ore Spot has plunged -25.5% since Sept. 7th of last year. Shanghai Copper Inventories have risen +487.0% ytd. Overall, recent credit gauge deterioration is a big worry with most key sovereign cds breaking out technically. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The 10Y T-Note continues to trade too well, with the yield only 9 bps from its record low of 1.67%. Copper continues to trade poorly. Moreover, the CRB Commodities Index is now technically in a bear market, having declined -21.4% since May 2nd of last year. Moreover, the euro currency continues to trade poorly and is accelerating its move towards its Jan. low. I do not expect this low to hold over the coming months. I still don’t hear any viable “solutions” to the European debt crisis and it is really beginning to bite Asia now, which will further pressure exports from the region and raise the odds of more sovereign/bank downgrades. Vague talk of “growth” initiatives doesn’t mean that much given what that normally means in Europe. US stocks remain extremely resilient, especially given the carnage in Asia overnight. 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 modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth fears, more shorting, technical selling and less financial sector optimism.

Today's Headlines

Bloomberg:

• ECB Stops Loans to Some Greek Banks as Draghi Talks Exit. The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area. The Frankfurt-based ECB said today it will push the responsibility for lending to some Greek financial institutions onto the Greek central bank until they have sufficiently boosted their capital. “Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations,” the ECB said in an emailed statement. The move comes after Draghi acknowledged for the first time that Greece could leave the monetary union. While the bank’s “strong preference” is that Greece stays in the 17-nation euro area, the ECB will continue to preserve “the integrity of our balance sheet,” he said in a speech in Frankfurt today. “A Greek exit was seen as an absurdity up to now,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “It is gradually becoming the main scenario. The ECB is prioritizing its balance sheet over monetary-union geography.” Greece faces a fresh election on June 17 that may boost parties opposed to the conditions of its international bailouts, raising the specter of its exit.
• ECB Said to Stick to Current Crisis Stance as Tools Reviewed. The European Central Bank is conducting a comprehensive review of all its policy tools and has no immediate plans to increase stimulus even as market tensions mount, two euro-area officials said. The review, mandated by the central bank’s six-member Executive Board, intends to assess the effectiveness of its measures, including the bond-buying program and long-term refinancing operations, and is scheduled to be completed in June or July, said the officials, who spoke on condition of anonymity because the deliberations are private. A third official said the ECB may not consider taking any further policy action until July, and that the bank sees current market tensions as a way of focusing politicians’ minds on reform efforts.
  
• Euro-Area Inflation Slowed in April, March Exports Declined. European inflation slowed last month and exports dropped in March as the euro region’s spreading fiscal crisis undermined the economy and consumer demand. The inflation rate in the 17-nation euro area fell to 2.6 percent from 2.7 percent in March, the European Union’s statistics office in Luxembourg said today. That’s in line with an initial estimate published on April 30. Euro-region exports fell 0.9 percent in March from the previous month, when they rose 2.2 percent, it said in a separate statement. Euro-area imports dropped 1.1 percent from February, when they rose 3.2 percent, today’s report showed.
• Traders Boost German Default Protection on Europe Crisis Woes. Investors are amassing record amounts of insurance on German government debt on concern Europe’s biggest economy will suffer from the region’s worsening crisis. The net amount of credit-default swaps outstanding on German bonds surged for a fourth week, climbing by $260 million in the period through May 11 to $20.5 billion, according to the Depository Trust & Clearing Corp. That’s up from $16.1 billion last June. Germany is the largest contributor to Europe’s bailout packages for Greece and a collapse of that nation’s economy and its possible exit from the euro area may weigh heavily on Chancellor Angela Merkel’s administration. “A euro breakup is going to be a burden on Germany as well as on any of the others,” said Elisabeth Afseth, an analyst at Investec Bank Plc in London. “The alternative is a large scale bailout, which would obviously also add to German liabilities. It’s hard to see a very positive outcome in any case there.” The cost of insuring German debt is soaring, even as its bond yields fall. Credit-default swaps on Germany jumped 10 basis points this week to a four-month high of 98, signaling worsening perceptions of credit quality. The contracts cost 67 basis points March 19. Swaps on Spain soared as much as seven basis points to a record 553, before falling two basis points to 544. Contracts on Italy climbed eight basis points to 510.25 and swaps on Ireland rose 8.5 basis points to 663, both four-month highs. “If you get a Greek exit or threat of such, it will be more difficult for Ireland to come back to the market,” Afseth said. “If Greece leaves, a precedent has been set for a country leaving the single currency and the issue of contagion is quite real.” The cost of insuring European corporate and financial debt also rose today. The Markit iTraxx Crossover Index of swaps linked to 50 companies with mostly high-yield credit ratings increased 16 basis points to 751. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings advanced for a seventh day, climbing 6.25 basis points to 180.25. Both are the highest since Jan. 9. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 6.5 basis points to 295.5 and the subordinated index jumped 11 to 486.
• European Stocks Extend Four-Month Low Amid Greek Concern. European stocks dropped for a third day, to their lowest level this year, amid growing concern Greece will be forced to leave the euro area. National Bank of Greece SA tumbled 13 percent as the country’s central bank chief said citizens had withdrawn as much as 700 million euros ($891 million) since the May 6 election. Italy’s Banca Carige SpA (CRG) fell to its lowest since at least 1995. Cie. Financiere Richemont SA rose as earnings topped estimates. The Stoxx Europe 600 Index (SXXP) slipped 0.6 percent to 244.4 at the close of trading, having earlier advanced as much as 0.3 percent and lost 1.4 percent. The gauge has tumbled 10 percent from this year’s peak on March 16 amid continued political uncertainty in Greece, entering a so-called correction.
• Bullard Says Labor Policy Is Key to Cut Joblessness. Federal Reserve Bank of St. Louis President James Bullard said fiscal policies are needed to reduce the 8.1 percent U.S. unemployment rate and additional asset purchases by the Fed, or quantitative easing, would risk a surge in inflation. “It may be better to focus on labor market policies to directly address unemployment instead of taking further risks with monetary policy,” Bullard said in Louisville, Kentucky. “If anything, the committee may be trying to do too much with monetary policy, risking monetary instability for the U.S. and the global economy.” “The U.S. macroeconomic data have been stronger than expected as of last autumn,” Bullard said to business people and community leaders in a presentation hosted by the St. Louis Fed. “The main risk is that the committee will, as it has in the past, overcommit to the ultra-easy policy. The policy has been appropriate so far, but could reignite a 1970s-type experience globally if pursued too aggressively.” Bullard also said near-zero interest rates could be creating “distortions” in the economy, including “punishing savers.”
• Facebook's(FB) Saverin May Save $67 Million on U.S. Tax Bill by Renouncing Citizenship. Facebook Inc. (FB) co-founder Eduardo Saverin will save at least $67 million in federal income taxes by dropping U.S. citizenship, according to a Bloomberg analysis of the company’s stock price. Those savings will keep growing if Facebook’s shares increase.
• Several on FOMC Said Easing May Be Needed on Faltering Economy. Several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery on track, minutes of their last meeting showed. “Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough,” according to minutes of the Federal Open Market Committee’s April 24-25 meeting released today in Washington. Central bankers last month affirmed their plan to hold interest rates near zero at least through late 2014 as they sought to push down an unemployment rate that has stayed above 8 percent for more than three years.
• Housing Starts Join U.S. Factories Topping Forecasts. Starts rose 2.6 percent to a 717,000 annual rate from March’s revised 699,000 pace that was stronger than previously reported, Commerce Department figures showed today in Washington. Industrial production climbed 1.1 percent, the most since December 2010, the Federal Reserve said.

Wall Street Journal:

• High-Yield Market Feeling Euro Fears, CDS Spreads Widen. Investors in the European high-yield bond market vented their euro-zone crisis fears Wednesday by buying protection against a default of their companies, but avoided selling their cash bond holdings so far, traders said.
• Facebook(FB) IPO: Insiders Cashing Out. Some of Facebook Inc.'s biggest holders are selling as much as $3.8 billion in extra shares in Friday's initial public offering, a move that could catch the attention of investors buying into the deal. Facebook said Wednesday that it will boost the size of its IPO by 25%, or about 100 million shares, as some of the venture capitalists and early investors decided to sell as much as half of their stakes in the company. Funds run by Goldman Sachs Group and Tiger Global Management, for example, now plan to sell as much as 50% of their stakes.
• China Finds Shrinking Appetite for Loans. When growth in China's economy slows, government leaders typically call on state-owned banks to make loans to rev up activity. But that tactic may not work this time.
• What End of Bush Tax Cuts Means for You. Bischoff: Unless Congress takes action, it's not just the "rich" who will see higher tax bills.

CNBC.com

• Copper Hits 4-Month Low on Greece Turmoil, Dollar. Copper fell to a four-month low on Wednesday, extending losses to a fourth session, as investors recoiled from risky assets fearing the impact of Greece's possible exit from the euro zone and a slowdown in big metals consumer China's economy.
• Supreme Court to Take Up Obamacare's Higher Taxes. While U.S. Supreme Court watchers focus on the controversial insurance requirement in President Barack Obama's healthcare law, lesser known is that the court's ruling next month will also decide the fate of billions of dollars in new taxes.
• Apple(AAPL) to Boost Screen Size on Next iPhone.
  

Business Insider:

• The Next Debt Ceiling Fight Will Be Orders Of Magnitude Worse Than The Last One.
• Chart of the Day: Goldman Shows What Happens If We Fly Off The Fiscal Cliff.
  

Zero Hedge:

• Greece: Before and After.
• European Banks Battered As Reality Sets In. (graphs)
  

New York Times:

• In Scrutiny of JPMorgan(JPM) Loss, Bigger Questions Left Unanswered. The Securities and Exchange Commission and the Federal Bureau of Investigation are looking into JPMorgan Chase’s trading debacle — and if you think anything is going to come of that, well, I’m pretty sure that JPMorgan has some derivatives it would love to sell you. A serious investigation is still necessary.

NY Post:

• The Man Who Beached 'Moby Iksil'. Call him Boaz. A 38-year-old hotshot trader and chess master named Boaz Weinstein was the driving force behind the harpooning of the “London Whale,” hedge-fund industry sources told The Post. Weinstein, who runs Saba Capital Management, helped shine light on the credit default swap index trade that blew a $2.3 billion hole in JPMorgan Chase’s balance sheet.
  

Reuters:

• Greece's Anti-Bailout SYRIZA Leftists Lead in Poll. Greece's radical leftist SYRIZA party is consolidating gains and on track to becoming the biggest group in parliament when voters return to the polls next month, while pro-bailout parties continue to suffer, an opinion poll showed on Wednesday. The VPRC survey polled Greeks over the May 10-14 period as party leaders struggled to cobble together a coalition following an inconclusive May 6 election. Leaders admitted failure on Tuesday, and Greece is set to return to the ballot on June 17, according to a party source.SYRIZA, which placed second in the election this month with nearly 17 percent of the vote, now commands support from 20.3 percent of voters, the poll showed.The conservative New Democracy's support slipped sharply to 14.2 percent while backing for the Socialist PASOK party dipped to 10.9 percent, both well below levels seen in a previous poll conducted after the election.

AP:

• Rajoy Warns Spain Faces Lock-Out From Markets. Spain's prime minister warned Wednesday that the country faced the danger of being locked out of international markets as investors continued to fret about the future of the euro and Greece's place in the 17-country eurozone. "Right now there is a serious risk that (investors) will not lend us money or they will do so at an astronomical rate," Mariano Rajoy told Spanish lawmakers.

Telegraph:

• Eurozone is 'tearing itself apart', says Mervyn King. True, but the UK's problems are as intractable as ever.
• Debt Crisis: Live. Greece names senior judge Panagiotis Pikramenos as caretaker Prime Minister and sets a date for a second election after leaders fail to form government, while the Bank of England has said the UK economy won't recover until 2014.
• IIF's Charles Dallara says Greek exit 'somewhere between catastrophic and armageddon'. The damage to the rest of Europe from Greece leaving the euro would be "somewhere between catastrophic and Armageddon", the chief negotiator for the body representing private sector holders of Greek bonds said on Wednesday.

Valor Economico:

• Brazil's government may transfer portfolios of bad loans from state-owned banks to Empresa Gestora de Ativos, a government-controlled institution, as it seeks to boost credit in the Latin American country.
  

Kathimerini:

• Greece's privatization agency will not proceed with state-asset sales until a new government is formed.
  

Economic Times:

• Hong Kong Shares Post Biggest Loss in Six Month, China Slides. The Hang Seng index posted its biggest loss in six months on Wednesday after mainland media reported flat loan growth for the country's "Big Four" state-owned banks in the first two weeks of May, fanning fears about the slowing Chinese economy. The Hang Seng Index ended down 3.2 percent at 19,259.83, the lowest close since Jan. 16 and its biggest drop in a day since Nov. 10, when it had slumped 5.2 percent. The benchmark broke below its 200-day moving average, currently at 19,831, which is likely to become a significant level for the benchmark with a possible break on either side setting the direction for the market. In the mainland Chinese markets, the CSI300 Index lost 1.6 percent, while the Shanghai Composite Index fell 1.2 percent.

CRI English:

• Shanghai Commercial Property Sales Drop 16% y/y by Area. Shanghai developers sold 4.4m sq.m. of commercial real estate and housing in Jan.-April, citing the city's statistics bureau. Home sales dropped 8% y/y to 3.9m sq.m.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.60%

Sector Underperformers:

• 1) Coal -3.50% 2) Steel -3.0% 3) Agriculture -1.41%

Stocks Falling on Unusual Volume:

• CHU, SNP, MCP, JCP, ANF, ACTV, TNGO, CCJ, CALL, AKAM, TYC, LUK, TAXI, PETD, ASEI, LRCX, FRAN, CNQR, INFA, SVVC, CVV, HCII, HIBB, PANL, NVLS, SNDK, SYNC, LAMR, ACAT, BMC, SDT, INFA, RGR, ITRI, LXU and SPLS
  

Stocks With Unusual Put Option Activity:

• 1) JCP 2) EWA 3) AMAT 4) DELL 5) KGC
  

Stocks With Most Negative News Mentions:

• 1) JPM 2) KLAC 3) ANF 4) LRCX 5) PCX
  

Charts:

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