Thursday Watch

Evening Headlines
Bloomberg:

• Euro Crisis Deepens, Moody's Downgrades Spain, Cyprus. The European debt crisis deepened as the credit ratings of Spain and Cyprus were downgraded by Moody’s Investors Service. Moody’s yesterday cut Spain’s rating three steps to Baa3 from A3, citing the nation’s increased debt burden, weakening economy and limited access to capital markets. Moody’s also lowered Cyprus’s bond rating to Ba3 from Ba1, attributing the downgrade to the material increase in the likelihood of a Greek exit from the euro area, and the resulting increase in the probable amount of support that the government may have to extend to Cypriot banks. Moody’s is following the sentiment of financial markets that weren’t calmed by Europe’s 100 billion-euro ($126 billion) weekend bailout of Spanish banks, said Clay Lowery, a vice president at Washington-based Rock Creek Global Advisors LLC and former assistant Treasury secretary for international affairs. For Moody’s, “it’s not whether you’re going to make money off your investment, it’s what is the creditworthiness of the borrower,” Lowery said. “Spain’s debt load has gotten larger with much more senior debt, so at least the potential for them to default has now gone up.”
• Europe's Divisions Widen as Policy Makers Clash. Tensions among European leaders are breaking into the open as bond investors reject their fixes for a debt crisis that threatens to overwhelm the euro region’s financial firewalls. German Finance Minister Wolfgang Schaeuble sniped at Greek yacht owners in comments published yesterday while Spanish Prime Minister Mariano Rajoy declared “battle” on the European Central Bank. Austrian Finance Minister Maria Fekter retracted a forecast that Italy would need aid, and Spain pushed back against Finnish advice on how to use its 100 billion-euro ($126 billion) bank bailout. Rifts are deepening with Greek elections on June 17 risking the first exit from the single currency as voters buckle under the continent’s most severe austerity program. Spanish bond yields reached a record after the nation’s request for aid for its banks fueled speculation the world’s 12th biggest economy may need a full rescue. “What we’re seeing now says much about the deepening cracks in Europe’s political financial and economic edifice,” Nicholas Spiro, managing director at Spiro Sovereign Strategy in London, said in a telephone interview.
• Germany's Haven Status Fades as Crisis Bill Mounts: Euro Credit. The haven status that drove German yields to record lows is fading as the fourth bailout of a euro member stokes investor concern that the currency bloc's biggest economy will be left picking up a mounting tab. "If the euro-region continues, then there must come a time when there is a fiscal union and burden-sharing, and that would make the market think more deeply about the creditworthiness of Germany," said Ralf Ahrens, who helps manage about $20 billion as head of fixed income at Frankfurt Trust. The discount Germany enjoys relative to the US for 10-year borrowing has narrowed to the least in more than three months after Spain asked for a 100 billion-euro lifeline for its banks on June 9. Traders of credit-default swaps also are buying protection against the risk of losses on German bonds, with the costs of insuring the nation's debt surging to the most since January compared with similar contracts on U.S. debt.
• Italy Holds First Bond Sale After Spain Rescue. Italy holds its first bond auction since Spain’s 100 billion-euro ($126 billion) bank rescue request drove up yields, as the government seeks to convince investors the country won’t be the next to need aid. The Treasury sells as much as 4.5 billion euros of three-, seven- and eight-year bonds today, one day after it was forced to pay 3.972 percent to sell one-year bills, 1.63 percentage points more than at the previous sale a month ago. “The outright demand for this paper is still extremely scarce and it’s ultimately left to the domestic banks and any primary dealers who have obligations to the debt agency in Italy to step up and absorb the supply,” said John Wraith, a fixed- income strategist at Bank of America Merrill Lynch in London. The bailout for Spain aimed to shore up the nation’s banks and stop contagion from spreading to Italy and beyond. The rescue had the opposite effect, driving Spain’s 10-year yield to a euro-era high this week and pushing up Italian borrowing costs in the process. Prime Minister Mario Monti is now trying to convince investors that with a budget deficit and jobless rate less than half that of Spain, that Italy remains a safe bet.
• Credit Suisse Sees China ‘Weak’ for Years as Forecast Cut. “Investment is unlikely to see a meaningful rebound in the foreseeable future,” Tao Dong, the bank’s chief China economist said in a note today. “Government stimulus could moderate the downside risks to growth and perhaps cushion the down-cycle, but we do not see it providing sustainable upward growth momentum.” “We expect China to be in a weak growth cycle for the next several years featuring a weak credit cycle, weak export cycle and weak property cycle,” Tao said. An emerging “deflationary force” may lead to sharp declines in nominal gross domestic profit and corporate profits, he said, adding that the economy is quickly losing momentum.
• China's Stocks Drops As Credit Suisse Cuts GDP Growth Forecast. Chinese stocks fell after Credit Suisse Group AG cut its economic growth forecast for China and a Moody’s Investors Service downgrade of Spain’s sovereign rating hurt prospects for a resolution to Europe’s debt crisis.
• Ford(F) Sees Incentives, Inventories Rising in China. Ford Motor Co., playing catch up in China, said slower growth there is boosting incentives and inventories in the world’s largest vehicle market. “We have seen some increase in incentives and inventories rise in the last six months as a result of the slowing of growth,” Joe Hinrichs, chief of Ford’s Asian operations, said in a presentation yesterday at the Deutsche Bank Global Industrials and Basic Materials Conference in Chicago. “It has gotten more competitive.”
• Swaps Index Traded By Iksil Shrinks as Dimon Seeks to Stem Loss. Wagers in the credit derivatives index said to contribute to JPMorgan Chase & Co.'s $2 billion loss dropped last week to the lowest in three months in a sign that the biggest U.S. bank and hedge funds trading against it may be unwinding bets. The net amount of credit protection bought or sold through Series 9 of the Markit CDX North America Investment Grade Index fell 7.5 percent to $138.4 billion in the week ended June 8, the biggest drop since July, according to the Depository Trust & Clearing Corp. The so-called net notional outstanding surged an unprecedented 67 percent to $150 billion in the 17 weeks ended April 27 as JPMorgan trader Bruno Iksil was said to have amassed a position in the index so large it distorted the market.
• The Regional Feds Need More Independence. All the fuss about whether Jamie Dimon, the chief executive officer of JPMorgan Chase & Co., should remain on the New York Federal Reserve Bank board is missing a larger issue. The entire board is connected to the banking industry and needs reform. It is imperative that the board include some directors who are independent of the banking industry because it performs many vital public functions, including selecting the president of the New York Fed, who also serves as vice chairman of the policy- making Federal Open Market Committee. Yet none of the current directors is entirely independent, not even the six who by law should represent the public.
• Clinton Blames Russia of Fueling Syria's Spiral to Civil War. Syria is "spiraling toward civil war," with Russia supporting the violence by continuing to arm President Bashar al-Assad's regime, U.S. Secretary of State Hillary Clinton said. "We have repeatedly urged the Russian government to cut these military ties completely and to suspend all further support and deliveries," Clinton said yesterday at the State Department. "We know -- because they confirm -- that they continue to deliver."
• Microsoft(MSFT) Said to Be in Talks to Buy Yammer Social Network. Microsoft may pay more than $1 billion, and a deal may be reached as soon as June 15, said one person, who declined to be identified because the negotiations are private.

Wall Street Journal:

• Greece's Rural Voters 'on a Tightrope'. The talk among farmers in this small Greek village these days is about the pain inflicted by the strict terms of the European Union's bailout of their country, as well as the potential perils of rejecting the deal and, perhaps, facing a future outside the euro zone. How voters in Greece's countryside weigh these factors will play a large part in determining the outcome of what is expected to be a close race in critical national elections Sunday between the conservative New Democracy party and its antiausterity, left-wing rivals, Syriza.
• BHP Billiton(BHP) Lowers Outlook for Commodity Prices -Financial Times. BHP Billiton Ltd. has cut slightly its expectations for commodities prices over the next three to five years, the Financial Times reported Wednesday, citing people familiar with the matter. The mining company's cuts to its medium-term outlook don't affect its longer-term outlook for the market, the people told the newspaper.
• Italy's Reform Stall. Monti wants growth but can't pass policies to spur it. If last weekend's bailout of Spain was supposed to reduce the risk of euro-contagion ahead of Sunday's elections in Greece, it hasn't had the desired effect. Yields on Spanish government debt have since hit a high of 6.78% on 10-year bonds. Who would have thought that adding as much as $125 billion in sovereign liabilities would make Madrid more of a credit risk? Now markets are looking to Italy, where the economy is forecast to shrink by 1.9% this year, and where Mario Monti's reform agenda seems to be stalling.

Business Insider:

• The Drumbeat For An International War In Syria Is Building.
• Obama's Stunning Loss Of African-American Support Has Extended To Nevada.

Zero Hedge:

• Hannan: "The Euro Is The Problem, Not The Solution".
• These Three Spanish Banks Will Be Downgraded Tomorrow.
• Biderman & Santschi On "Why Germany Should Leave The Euro".

CNBC:

• Banks Are Ignoring New Bonus Rules: G20 Study. Banks are failing to comply with global rules requiring them to peg bonuses to long-term company performance, the regulatory task force of the Group of 20 leading economies said on Wednesday.

NY Times:

• Dread and Uncertainty Pervade Life in a Diminished Greece. Anyplace else, they might be signs of progress: Traffic moves faster on once clogged streets. Cigarette smoking has dropped sharply. Far less garbage heads for landfills each day. But this is Athens, and the statistics are grim reminders of a middle-class society in rapid decline. Many fear that elections, including voting scheduled for Sunday, offer no clear route out of a deepening political and economic crisis. From its wealthy northern suburbs to the concrete blocks of downtown, there is a sense of an endgame in Athens. “It’s the last days of Pompeii,” said Aris Chatzistefanou, a co-director of “Debtocracy,” a provocative 2011 documentary about the Greek crisis, as he stood, drink in hand, outside a cafe in Exarchia, a thrumming graffiti-filled neighborhood whose night life remains a rare pocket of defiant joy amid the unremitting gloom.
• ‘Proud’ JPMorgan Chief Apologizes. Jamie Dimon, the outspoken chief executive of JPMorgan Chase under scrutiny for a multibillion-dollar trading loss at his firm, apologized for the mishap on Wednesday even as he mounted a fierce defense of his bank. Testifying at a much-anticipated hearing before the Senate Banking Committee, Mr. Dimon said that he was “proud” of the bank, highlighting the firm’s “fortress” balance sheet and its performance during the financial crisis. “We’re doing what a bank is supposed to do,” he told a panel of lawmakers, few of whom posed combative questions during the roughly two-hour hearing.

CNN:

• Exodus resumes: Investors yank $3 billion out of stock mutual funds. Investors went back to bailing out of the stock market during the first week of June, as worries about sluggish U.S. job growth and ongoing debt problems in Europe kept investors on edge. U.S. stock mutual funds lost $3.1 billion in the week ended June 6, according to the Investment Company Institute. That marks the 15th out of 16 weeks that investors have yanked money out.

Twitter Blog:

• Experience More With Expanded Tweets. Starting today, you can discover more interactive experiences inside any Tweet on twitter.com and mobile.twitter.com. When you expand Tweets containing links to partner websites, you can now see content previews, view images, play videos and more.

Real Clear Politics:

• The Terrible End of Europe's Nanny State.

Reuters:

• France backs stronger ECB role in bank surveillance. France wants the European Central Bank to have a stronger role in overseeing banks in the single currency bloc as part of a package of urgent reforms to increase financial stability in Europe, sources said on Wednesday. Joint supervision of banks is one of the key issues to be discussed at a European Union leaders summit in late June that will focus on deepening financial and fiscal integration to bring the raging euro zone crisis under control. Officials in Brussels have suggested that a so-called European "banking union" could include strengthening the London-based European Banking Authority, the EU's fledgling supervisor. Paris, however, prefers supervision of euro zone banks to remain in the single currency area. "France is keen for the European Central Bank to play this role," said a high-level source. "There is no way that France is going to hand power over its banks to an organisation based in London."
• Moody's sees rising odds of default by Stockton, California. The city of Stockton, California, faces a growing likelihood of defaulting on some of its debt obligations as the conclusion of confidential talks with its creditors aimed at averting bankruptcy nears, Moody's Investors Service said on Wednesday. Stockton is in mediation with its creditors, trying to obtain concessions to help close a $26 million budget gap before the July 1 start of its new fiscal year.

Financial Times:

• Rise in US oil supplies haunts Opec talks. At a seminar in the Opec headquarters in Vienna on Wednesday, the rise in US oil supplies was the shadow that fell over every discussion. Over the past three years, the US has accounted for the entire net increase in global oil output, excluding Opec members and former Soviet republics.

Telegraph:

• Europe's sovereign funk denies solutions. It's hard to know whether to laugh or cry. Every week, seemingly, brings some new miracle cure, some further quack remedy, produced as if from the back of a lorry, which promises finally to fix the eurozone debt crisis once and for all.
• Moody's says Spain faces being cut to 'junk' within three months: full statement. Moody's has warned it could cut Spain to "junk" within three months, as it slashed the country's credit rating by three notches, citing the increased debt burden linked to its bank bail-out. Here is the rating agency's statement in full.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 190.0 unch.
  
• Asia Pacific Sovereign CDS Index 152.0 -4.0 basis points.
  
• FTSE-100 futures -.13%.
  
• S&P 500 futures +.44%.
  
• NASDAQ 100 futures +.52%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PIR)/.16
• (SFD)/.53
• (KR)/.73

Economic Releases
8:30 am EST

• The 1Q Current Account Deficit is estimated to widen to -$131.9B versus -$124.1B in 4Q.
• The Consumer Price Index for May is estimated to fall -.2% versus unch. in April.
• The CPI Ex Food & Energy for May is estimated to rise +.2% versus a +.2% gain in April.
• Initial Jobless Claims are estimated to fall to 375K versus 377K the prior week.
• Continuing Claims are estimated to fall to 3270K versus 3293K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Italian bond auction, ECB's Likanen speaking, ECB's Weidmann speaking, Eurogroup head Junker speaking, 30Y T-Bond auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, (CNC) investor day, (CIT) investor day and the (APA) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial 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 Reversing Lower into Final Hour on Disappointing US Economic Data, Eurozone Debt Angst, Consumer Cyclicals Weakness, Technical Selling

Broad Market Tone:

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

Equity Investor Angst:

• VIX 23.89 +8.15%
  
• ISE Sentiment Index 92.0 +17.95%
  
• Total Put/Call 1.26 +10.53%
  
• NYSE Arms 1.02 +82.50%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 125.44 +1.72%
  
• European Financial Sector CDS Index 289.21 -1.25%
  
• Western Europe Sovereign Debt CDS Index 321.20 -.60%
  
• Emerging Market CDS Index 300.86 -.64%
  
• 2-Year Swap Spread 30.25 -.25 basis point
  
• TED Spread 38.25 +.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -54.75 +1.25 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 130.0 -7 basis points
  
• China Import Iron Ore Spot $133.70/Metric Tonne +.45%
  
• Citi US Economic Surprise Index -53.60 -5.2 points
  
• 10-Year TIPS Spread 2.10 -4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -62 open in Japan
• DAX Futures: Indicating -26 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my tech, retail and biotech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, covered some of my (EEM) short, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows on rising Eurozone debt angst, more disappointing US economic data, consumer cyclicals weakness and rising global growth fears. On the positive side, Drug, Airline and Tobacco shares are slightly higher on the day. The UBS-Bloomberg Ag Spot Index is falling -1.02% and Oil is down -1.1%. Major Asian indices were mostly higher overnight, led by a +1.3% gain in China. The Germany sovereign cds is down -1.9% to 107.58 bps, the France sovereign cds is down -2.3% to 211.67 bps, the Spain sovereign cds is down -1.3% to 599.33 bps and the Italy sovereign cds is down -2.3% to 551.33 bps. On the negative side, Alt Energy, Oil Tanker, Oil Service, Networking, Homebuilding, Retail, Education, HMO, Biotech and I-Banking shares are under meaningful pressure, falling more than -1.5%. Lumber is falling -.8%, Copper is falling -.6% and Gold is gaining +.3%. Major European indices are mostly lower, led down by a -.65% decline in Italy. Italian shares are now down -4.0% in 5 days and down -14.5% ytd as they approach their June 1 lows, which is a big red flag. The Bloomberg European Bank/Financial Services Index is down -.04%. This Nigel Farage video is making the rounds today. The Italy 10Y Yld is rising +.7% to 6.75% and the Spain 10Y Yld is gaining +.7% to 6.22%. Weekly retail sales have decelerated to a sluggish rate. 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-Sept. levels. Lumber is -6.0% 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 -60.0% from its Oct. 14th high and is now down around -50.0% ytd. China Iron Ore Spot has plunged -25.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +154.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -26.9% since May 2nd of last year. Overall, recent credit gauge deterioration remains a big worry as most key sovereign cds remain technically strong. The euro currency continues to trade poorly despite today's bounce higher. Oil, lumber and copper also trade poorly given global central bank stimulus hopes and recent stock gains. As well, the 10Y continues to trade too well. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. While European officials' kick-the-can smoke-n-mirrors short-sighted "solutions" to the debt crisis may temporarily placate investors, economies in the region are likely accelerating their contractions right now. As well, the European debt crisis is really beginning to bite emerging market economies now, which will also further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. As well, the "US fiscal cliff "will become more and more of a focus for investors as the year progresses. The upcoming earnings season could proving more challenging than usual for big multi-nationals given US dollar strength and the precipitous declines in some key parts of the global economy during the quarter. Global central bank stimulus hopes have been propping up US stocks, but I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a 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 more disappointing US economic data, rising global growth fears, rising Eurozone debt angst, more shorting, technical selling and consumer cyclical weakness.

Today's Headlines

Bloomberg:

• Rajoy Battles ECB for Loans; Monti Appeals for EU Action. Spain and Italy appealed to European policy makers to step up their response to the financial crisis after a 100 billion-euro ($125 billion) lifeline for Spanish banks failed to calm markets. Spanish Prime Minister Mariano Rajoy said today he’ll “battle” central bankers refusing to buy debt from peripheral nations. Rajoy published a letter to European Union leaders calling for the European Central Bank to buy debt from the countries struggling to shore up their finances. “That is the battle we have to wage in Europe,” Rajoy told the Spanish parliament in Madrid today. “I am waging it.” His Italian counterpart, Mario Monti, told lawmakers in Rome Europe faces a “crucial” moment.
• European Stocks Fall As Borrowing Costs Rise At Debt Sale. European stocks declined as borrowing costs increased at debt auctions in Germany and Italy and as Sweden’s SKF (SKFB) AB reported weakening demand for its products in the second quarter. SKF, the world’s largest maker of ball bearings, dropped 7.3 percent. Renault SA (RNO) led a selloff by carmakers, sliding 4.2 percent. Etablissements Maurel & Prom SA surged the most since 2003 amid takeover speculation. The Stoxx Europe 600 Index (SXXP) dropped 0.4 percent to 242.56 in London.
• Greek Vote Won’t Alter Country’s Crisis, Schaeuble Tells Stern. Greece’s election results won’t change the reality of the country’s economic crisis and won’t prevent the nation from carrying out painful reforms, German Finance Minister Wolfgang Schaeuble told Stern magazine. Greeks on June 17 “can vote however they want,” Schaeuble told the German magazine in an interview today. “But whatever election result we have will change nothing about the actual situation in the country, which is in a painful crisis brought on by a decades-long flawed economy.” The German finance chief was quoted by Stern as saying he had “really great sympathy with the man on the street in Greece” suffering under the effects of austerity. “I can’t spare him that,” he added. “Crises are seldom fair.” “It’s not easy to cut the minimum wage in Greece if you think about all the yacht owners,” Schaeuble said. “But the Greek minimum wage is just dropping to the level of Spain. If the country wants to become competitive again, it has to sink.”
• Tsipras Sees Greece in Euro Even After Repealing Austerity. Alexis Tsipras said he expects the European Union will do all it can to keep Greece in the euro even if he wins elections and carries out his promise to repeal the austerity measures required to receive emergency loans. "We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding," Tsipras, whose Syriza party is vying for first place in pre- election polls, said in an interview in Athens today with Bloomberg Television. "Something like that would be catastrophic not only for Greece but for the entire euro area." Tsipras's promise to abrogate the terms of the bailout amounts to a bet the EU and International Monetary Fund will stop short of kicking Greece out of the 17-nation euro. "We want to simply convince our partners that it's in the interests of all to stop sending EU taxpayers' money into a bottomless pit," Tsipras said. "This money should be used properly in a program that is effective and not on a memorandum that has failed." Syriza was propelled to second place in the inconclusive May 6 vote. Most opinion polls show Syriza and New Democracy, which backs the bailout, running even for first place. According to the last opinion polls on June 1, neither has enough support at this point to rule alone.
• Deutsche Bank(DB) May Have $18 Billion Italy, Spain Gap. Deutsche Bank AG has a funding gap of as much as 14 billion euros ($17.5 billion) at its Italian and Spanish units which could reduce capital levels at the firm if those countries leave the euro, according to analysts at Espirito Santo Investment Bank. Deutsche Bank’s loans amount to 205 percent of deposits at the Italian unit and 314 percent in Spain, according to London- based analyst Andrew Lim, who cited company filings. If those countries exit the euro and the new currencies fall 30 percent, the Frankfurt-based lender could lose as much as 4.2 billion euros of equity as the value of assets at those divisions declines while some funding remains in euros, he said.
• Euro-Area Industrial Output Falls Second Month on Germany. Euro-area industrial production declined for a second month in April, led by a drop in Germany, adding to signs of a deepening economic slump. Output in the 17-nation euro area slipped 0.8 percent from March, when it decreased a revised 0.1 percent, the European Union’s statistics office in Luxembourg said today. Economists had projected a drop of 1.2 percent, the median of 28 estimates in a Bloomberg News survey showed. From a year earlier, production fell 2.3 percent.
• Dimon Says US Fiscal Cliff May Be Reached Before Year-End. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon, testifying to a U.S. Senate panel, said the government is risking an earlier-than-expected fiscal crisis as policy makers stay deadlocked on taxes and the budget. “The one thing to keep in mind about the fiscal cliff is it may not wait until Dec. 31,” Dimon, 56, said today before the Senate Banking Committee, which called him to answer questions about a $2 billion trading loss. “Markets and businesses may start taking actions before that, that create a slowdown in the economy.”
• Dimon Fires Back at 'Complex' System in U.S. Senate Grilling. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon spent much of his time at a hearing where U.S. senators aimed to put him on the defensive firing back at the federal regulatory system. During more than two hours before before the Senate Banking Committee, Dimon described a $2 billion loss in the bank’s chief investment office as a hedge that “morphed into something I can’t justify,” and largely blamed subordinates for a trading strategy gone wrong. The bank is looking at clawing back some of the compensation earned by those responsible, he said.
• Retail Sales in U.S. Declined for a Second Month in May. Retail sales in the U.S. fell in May for a second month, prompting economists to cut forecasts for economic growth as limited job and income gains hold back consumers. The 0.2 percent decrease matched April’s drop that was previously reported as a gain, Commerce Department figures showed today in Washington. Sales excluding car dealerships slumped by the most in two years. The smallest wage gains in a year and unemployment exceeding 8 percent are taking a toll on the consumer spending that accounts for about 70 percent of the economy, leaving it more vulnerable to shocks from the European crisis. “The consumer is pulling back,” said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast the drop in sales. “There isn’t a lot of job creation. We will continue to see softer numbers.”

Wall Street Journal:

• Italy's Inconvenient Truth. Somebody hasn’t been reading their Machiavelli. The Austrian finance minister, Maria Fekter, had the audacity to actually speak plainly and openly this morning, about the state of Italy. This has angered the Italian leadership. Because these are not times for politicians to speak openly.
• Risks Rise as Europe's Banking Ties Fray. The biggest threat to the survival of the euro may not be a Greek exit. It may be the Balkanization of Europe's banking system. Financial markets are braced for the growing likelihood that Greece will abandon the euro sooner or later. That raises the prospect that another euro member will leave, but it's ever easier to cast Greece—with its crippling government debt and political chaos—as sui generis. A bigger deal is the unraveling of the decadelong cross-border integration of European banks.
• Crédit Agricole Girds Greek Unit for Greece Euro Exit. Crédit Agricole SA is making contingency plans to abandon its Greek bank or merge it with a conglomerate of domestic banks in the event of Greece leaving the euro zone, according to a person with direct knowledge of the plans.
• Steep Rise in Health Costs Projected. Economists have been puzzling over whether a three-year slowdown in the growth of health-care spending, prompted by the economy, portends a permanent change. Federal projections indicate that isn't the case. A forecast released Tuesday said the growth rate for U.S. health spending of all types would stay historically low the next two years. But it would increase if most of the federal health-care overhaul takes effect in 2014.
• Goldman(GS) Looks to Forecast the Forecasts. Bank strategists often use analyst forecasts to peer into the future of the stock market, as changes can signal surprises in store. Now, Goldman Sachs Group Inc. is taking it a step further with a new indicator. Call it predicting the predictions.

MarketWatch:

• Crisis focus shifts to Italy ahead of key auction. Italy braces for medium- and long-term-debt auctions.

CNBC.com:

• US Business Inventories Grow in April, Hit Record High.
• Germany Warns Italy Over Euro Zone Crisis. Germany told Italians on Wednesday they must keep taking Prime Minister Mario Monti's tough economic medicine to avoid becoming the next victim of the euro zone debt crisis after a bailout for Spain's banks failed to calm markets.
• Central Bank Money-Printing: $6 Trillion... and Counting. Many more years of money printing from the world's big four central banks now looks destined to add to the $6 trillion already created since 2008 and may transform the relationship between the once fiercely-independent banks and governments.
• US shale boom to create half-million jobs.

Business Insider:

• Barack Obama's Lead In National Polls Has Collapsed.
• Chart of the Day: Spain's Gigantic Debt Problem.
  

Zero Hedge:

• The Cost Of The Best Senate Banking Committee JP Morgan Can Buy: $877,798 In Bribes.
• Italian Bonds Back In The Crosshairs.
• European Banks Preparing To Boycott Big Three Rating Agencies.
• SocGen's Albert Edwards on Spain: "A Bailout Will Solve Nothing".
  

YouTube:

• The Genius of Mutual Indebtedness - Nigel Farage. (video)

@EdConwaySky:

• House prices in Beijing are over 3x more expensive (in relation to income) than in London or New York. (graph)
  

NY Post:

• Romney Leading Obama in Wisconsin, New Poll Finds. Mitt Romney is leading President Barack Obama in Wisconsin, according to a new poll released Wednesday. The new Rasmussen Reports survey showed the Republican nominee leading Obama 47 percent to 44 percent in the Badger State, within the poll's margin of error. The telephone survey of 500 Likely Voters also showed four percent undecided. The poll also found 47 percent of voters approved of Obama's job performance while 52 percent disapproved. Romney, on the other hand, was viewed favorably by 49 percent of respondents and unfavorably by 45 percent.

Bespoke:

• Bank and Broker Default Risk. (graphs)

Reuters:

• Algeria Says OPEC Faces Risk From Oil Price Slide. The Organization of the Petroleum Exporting Countries (OPEC) will face a real risk because of a slide in crude oil prices caused by the group exceeding its production ceiling, Algerian Energy and Mines Minister Youcef Yousfi was quoted as saying on Wednesday. "I hope there will be an awareness of the negative effect (of increased oil production) on prices, particularly in recent weeks, and thus OPEC faces a real risk," Algeria's official APS news agency quoted him as saying in Vienna ahead of an OPEC meeting.
• Exclusive - LME copper players turn up heat on warehouse queues. Global copper market heavyweights are drafting proposals to stop metal from getting stuck in queues leaving storage facilities, as such delays would threaten the credibility of the London Metal Exchange's (LME) flagship product, industry sources said.
• Copper slips on U.S. data, euro debt fears. Copper dipped on Wednesday, reversing earlier gains, after a U.S. retail sales report reinforced views the world's top economy is slowing and added to fears of worsening euro zone debt and upcoming elections in Greece.

Telegraph:

• Debt crisis: Greeks pulling €800m a day from banks. Greeks are withdrawing up to €800m a day from their banks and stocking up on basic food supplies ahead of the election on Sunday that many fear will result in the country being forced out of the euro.
• Debt crisis: Bailed-out Spain pleads for aid from European Central Bank. Spain's prime minister said he is “battling” to get the eurozone’s central bankers to bring down the country’s record borrowing costs, amid predictions the state will need a second bail-out to save itself.

Times:

• UK Chancellor of the Exchequer George Osborne said that if Germany is to save the euro, a Greek withdrawal from the common currency might be the price necessary to secure the German public's acquiescence.
  

Irish Times:

• The European Commission and the IMF can't totally rule out the need for more capital for Irish banks, citing documents supplied to German lawmakers. Risks include continued weakness in the housing market and an increase in non-performing loans.
  

FT Deutschland:

• Every new Greek govt., independent of the June 17 election outcome, will seek amendments to the bailout. The Eurozone won't deny this if it wants to keep Greece in. The Troika expects Greece won't have met the conditions of austerity program.

Tageblatt:

• Europe's banking system cannot be rescued by plowing money into a "common European pot," Luxembourg Finance Minister Luc Frieden said. "I grasp the idea of a banking union in principle, but you cannot mutualize all risks in Europe," Frieden said in a preview of an interview to be published in Tageblatt tomorrow. "Yes to more Europe, but only when it includes an effective and serious banking world that doesn't force some to pay for others' blunders," he said.
  

Bild:

• German Insolvencies Rose in March to the Highest in 2 Years. 2,809 companies went bankrupt during the month.
  

China Daily:

• China's GDP growth in the second quarter may be below 7% if economic data in June doesn't improve, citing Zheng Xinli, vice president of the state-backed China Center for International Economic Exchanges.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.40%

Sector Underperformers:

• 1) Retail -.52% 2) Education -.50% 3) Alt Energy -.43%

Stocks Falling on Unusual Volume:

• SMG, TSCO, RWT, ABB, SHW, TFM, CASY, CTCT, REGN, VPRT, FSLR, BJRI, MYGN, WPPGY, SNHY, SHLM, FNSR, NICE, POWI, PHMD, QCOR, RRGB, CMTL, WTI, BPOP, TKR, M and MPO
  

Stocks With Unusual Put Option Activity:

• 1) KEY 2) WFM 3) TSCO 4) ITW 5) WFT
  

Stocks With Most Negative News Mentions:

• 1) EXPE 2) SMG 3) CMG 4) SHW 5) CECO
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.08%

Sector Outperformers:

• 1) Airlines +1.48% 2) Disk Drives +1.47% 3) Tobacco +1.09%

Stocks Rising on Unusual Volume:

• WIFI, DELL, LNCR, LCC and DAL
  

Stocks With Unusual Call Option Activity:

• 1) SUN 2) RAX 3) DNDN 4) VRSN 5) NAV
  

Stocks With Most Positive News Mentions:

• 1) PM 2) JNJ 3) CELG 4) RTN 5) BA
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Spain's Record Yields Show Italy Bailout Risk. Spain’s benchmark borrowing costs climbed to a record yesterday, raising the specter of sovereign bailouts for the government in Madrid and then Italy that would stretch European Union finances to their limit. The yield on Spanish 10-year government debt rose for a third day, touching 6.83 percent, the highest since 1997, after Fitch Ratings predicted that Prime Minister Mariano Rajoy will miss budget-deficit targets he’s made the foundation of his economic policy. Italian 10-year yields rose to the highest in almost six months. The bond rout wiped out the effects of 1.1 trillion euros ($1.4 trillion) in official funding for euro-region banks that has held yields in check since December. Spain’s 10-year yield is close to the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. Italy, the second-biggest sovereign borrower in the euro area, may need to seek a rescue within months, said James Nixon, chief European economist at Societe Generale SA (GLE) in London. “The crisis will inevitably roll on to the next domino, and that’s Italy,” Nixon said in a telephone interview. “The southern European economies are effectively in free-fall and market appetite for southern European debt is rapidly drying up. I can’t see anything to turn that dynamic around.” European policy makers face a series of hurdles in the coming days as bond investors spurn the 100 billion-euro rescue package for Spanish banks that the European Central Bank said yesterday would bolster financial stability. Italy is due to sell as much as 9.5 billion euros of bills and bonds at auctions today and tomorrow while auditors are due to report on the extent of Spanish banking losses from next week.
• Seeds of Next Crisis Sown as Repressive Loans Bite: Euro Credit. European banks have stuffed their balance sheets with domestic government bonds, compelled by rules on capital and tempted by cheap central bank loans, sowing the seeds for the next stage in the sovereign debt crisis. "We're seeing the increasing balkanization of finance," said Toby Nangle, who helps manage the equivalent of about $49 billion as head of multi asset allocation at Threadneedle Asset Management in London. "It represents the single-currency project in reverse gear."
• Italy Tax Increases Backfire As Monti Tightens Belts. Italian Prime Minister Mario Monti is facing signs that tax increases are beginning to backfire as his new levy on real estate goes into effect. Value-added tax receipts have declined since Monti’s predecessor, Silvio Berlusconi, raised the rate by 1 percentage point in September as the economy was slipping into recession, government data released June 5 showed. The amount collected fell in the 12 months ended April 30 to the lowest since 2006. Finding the right deficit-reduction mix as Monti fights to meet budget targets is critical for Italy to avoid becoming the biggest victim yet of Europe’s financial crisis. A slump that is driving up welfare spending is adding urgency to Monti’s effort to make the economy more competitive amid a growing backlash across Europe against austerity. “This government has raised taxes too much,” said Alberto Alesina, a professor of political economy at Harvard University. “It would be much, much better to lower spending.”
• Greek Bank Deposit Outflows Said to Have Risen Before Elections. Greek deposit outflows have accelerated before this weekend’s elections, two bankers familiar with the situation said, on concern the nation may move closer to abandoning the euro. Daily withdrawals have increased to the upper end of a 100 million-euro ($125 million) to 500 million-euro range this month, one banker said, asking not to be identified because the figures aren’t public. A second banker said the drawdown may have exceeded 700 million euros yesterday. An official for the Bank of Greece (TELL), the Athens-based central bank, declined to comment.
• Worst of China Slowdown Seen in Wenzhou as Stimulus Limited. Jiang Xiangsong has 18 days to pay a 2 million yuan ($314,000) bank debt or his suitcase company in eastern China will go bankrupt. He's close to tears as he realizes his last hope, a government-backed office, won't help. "This is totally useless: If I had any collateral, why the hell would I come here?" he yells at an official in Wenzhou's state-run loan service, set up to help small businesses after rising bankruptcies and suicides prompted Premier Wen Jiabao to visit in October and pledge support. Wenzhou's more than 400,000 businesses make everything from shoes in dusty side streets to synthetic leather in dilapidated factories, much of it financed by unregulated lenders that spread during China's record 2009-10 credit boom. The decline of so-called shadow banking in the city, triggered by Wen's move to rein in a national property bubble, has left Wenzhou bearing the brunt of the country's economic slowdown.
• Gorman Says Three-Level Cut Would Be ‘Somewhat Stunning’. Morgan Stanley (MS) Chief Executive Officer James Gorman said a three-level credit-rating downgrade by Moody’s Investors Service would be “somewhat stunning” given the firm’s increased capital. Moody’s has said it may reduce the rating on New York-based Morgan Stanley by as much as three levels when it announces the results of an industrywide review this month. Morgan Stanley can manage through any potential cut, Gorman said today at an investor conference in New York.
• JPMorgan(JPM) Traders Didn't Understand Risks, CEO Dimon Says. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said traders in a London unit responsible for a $2 billion loss didn't understand the risks they were taking and weren't properly monitored. "This portfolio morphed into something that, rather than protect the firm, created new and potentially larger risks," Dimon said in prepared remarks ahead of his appearance tomorrow before the Senate Banking Committee. "We have let a lot of people down, and we are sorry for it."

Wall Street Journal:

• Threat Spreads Across Europe. Borrowing Costs Rise Across Continent as World Bank Sees Global Impact From Crisis. Borrowing costs for Italy and Spain continued to surge on Tuesday, escalating calls for bigger steps from euro-zone leaders amid a new warning that the crisis is dragging down even the world's resilient emerging economies.
• Berlin's Ballooning Bailout Bill. A billion here, a billion there, and soon you are talking real money. A true fiscal union may still be a distant prospect. But each round of the European sovereign-debt crisis has seen Germany make financial commitments that have raised the cost it would bear if the euro failed. This week's Spanish bailout will raise its exposure to financially stressed countries by as much as €25 billion ($31.2 billion) or so. Is Germany now in too deep to risk the single currency collapsing?
• Pressure Mounts for Italy's Monti. Skittish Investors Fear Economic Overhaul Risks Stalling. Prime Minister Mario Monti's honeymoon is over. Italy's return to the cross hairs of the euro-zone debt crisis has ratcheted up pressure on Mr. Monti to accelerate his turnaround of the country's moribund economy. But the effort is running up against a rising tide of discontent at home. Mr. Monti has passed austerity measures including tax increases and an overhaul of Italy's pension system since taking office in November, garnering widespread praise from investors and world leaders.
• This Moody's Man Is Giving Banks the Blues. Gregory Winans Bauer and his team could cost Morgan Stanley's shareholders more than $9 billion. Not many people outside major banks and credit-rating firms have heard of Mr. Bauer. But the low-key 57-year-old debt analyst is leading a spate of credit downgrades by Moody's Corp.'s Moody's Investors Service that is forcing some of the biggest European and U.S. banks to put up additional capital and causing controversy on Wall Street.
• Tin Pan Valley: The Coming Shakeout for App Makers. Like the Early Music Industry, Today's Apps Are 'Made' By Marketing, Sales.
• U.S. Probes Cable for Limits on Net Video. The Justice Department is conducting a wide-ranging antitrust investigation into whether cable companies are acting improperly to quash nascent competition from online video, according to people familiar with the matter. Justice Department officials have spoken to several online video providers, including Netflix Inc. and Hulu LLC, those people said. Investigators have also questioned Comcast Corp., Time Warner Cable Inc. and other cable companies about issues such as setting data caps, limits to the amount of data a subscriber can download each month, these people said.
• China Firms Under Fire. Lawmakers investigating spying threats from China are pressing two Chinese telecommunications firms active in U.S. markets for details about their relationship with the Chinese government and with U.S. companies.

Dow Jones:

• Low Interest Rates Create New Layer of Risk for CMBS Deals. The extended period of unusually low interest rates is creating fresh headwinds for the commercial mortgage-backed securities market as Wall Street dealers prepare to sell at least $2 billion of bonds in coming weeks. As CMBS yields follow benchmark Treasurys lower, banks are grappling with interest-rate risk--the degree that bond prices fall as rates rise--as much as the credit risk that has dominated the conversation for years. The unexpected turn of events may require dealers to offer floating-rate debt or mark down prices on new fixed-rate CMBS in order to attract investors. Lower prices translate into higher yields on fixed-income securities. "It's very difficult to sell 10-year CMBS right now," Harris Trifon, head of CMBS strategy at Deutsche Bank, said while attending the Commercial Real Estate Finance Council's annual conference in Washington. "It's not that people aren't happy with the asset class. It's more about the yield."

Barron's:

• Scotts Miracle-Gro(SMG) Plunges on Profit Warning. Scotts Miracle-Gro (SMG) fell 14% after-hours as the lawn care company announced that it won’t meet its previous earnings guidance because of reduced demand for its products.

MarketWatch:

• Japan markets unfazed by gridlock of tax politics. Stocks, bonds cool to prospect of another government’s fall over tax.

Business Insider:

• Bill Ackman Has Added A New Short Position To Pershing Square's Portfolio.
• A Surprise Party Could Bail Out Cyprus Within Days.
• The Federal Budget Deficit Is Set To Top $1 Trillion For The Fourth Straight Year.
• This Chart Shows The Bilderberg Group's Connection To Everything In The World.
• The Federal Reserve's Policies Ruined Any Chance We Had Of Cleansing The Economy.

Zero Hedge:

• Biderman On Central Banks: "In The End, They Will Get What They Deserve".
• Ahead Of Tomorrow's Dimon Hearing, Presenting JP Morgan's(JPM) 93.5% Historical Winning Trade Perfection.
• Did Fitch Just End Europe's Hope For LTRO3?

CNBC:

• Full-Scale Bailouts for Italy, Spain in 6 Months: Egan-Jones. Spain and Italy need a full-scale bailout from the European Union because of their high levels of government debt and the credit quality of their banks, and will likely seek help within the next 6 months, according to Sean Egan, Founding Partner and President of Egan-Jones, an independent ratings agency. Poor credit quality of banks usually goes hand-in-hand with poor government finances as the two institutions are “joined at the hip”, Egan told CNBC Asia’s “Squawk Box” on Wednesday. That’s the case for most countries such as the U.S., the U.K., Switzerland and Ireland; Spain and Italy are no exceptions, he said. “It makes little sense to separate the banks’ credit quality from the governments’ credit quality because quite often, they support each other and that’s certainly the case in Italy and Spain,” he said. “We think that Spain will be back at the table, asking for more than the 100 billion euros ($125 billion) that they just asked for, and we think that Italy will also come to the table within the next 6 months.” The worries about Spain’s and Italy’s finances could spread to the rest of Europe, Egan said. Even Germany, seen as the nation with the soundest economy, may not be immune to the crisis. Italy has Europe’s second-highest debt-to-GDP ratio. “When you step back, you see that the combined economies for the EU have a fairly high debt-to-GDP,” Egan said. “There’s the assumption that Germany will be able to pull. That assumption may want to be re-examined.”
• PIMCO Total Return Fund Raises US Treasury Exposure. Bill Gross's PIMCO Total Return Fund, the world's largest bond fund, increased its exposure to U.S. Treasury-related securities to 35 percent in May, up from 31 percent in April, the company said on its website on Tuesday.
• Spain to Charge at Least 8.5% for Loans to Banks. Spanish banks which receive public loans in the form of convertible shares as part of an up to 100 billion euros financial package will be charged an interest rate of at least 8.5 percent, a European Commission spokesman said on Tuesday.
• China Backsliding on Trade Openness, US Tells WTO. China is backsliding on the path of trade openness and economic reform that marked its entry to the World Trade Organization in 2001, the United States said on Tuesday during a biennial review of China's trade policies.

IBD:

• ATV Maker Polaris(PII) Keeps The Pedal To The Metal.

NY Times:

• Bailout in Spain Leaves Taxpayers Liable for the Cost. Many details of the banking bailout remain to be resolved — including which of Europe’s rescue funds will supply the money. The one thing that is clear is that even though the money will be funneled to the banks, the government in Madrid will ultimately be responsible for guaranteeing that $125 billion, adding to the Spanish government’s already rising debt load. That fact, more than any other, probably explains why there was heavy selling of Spanish government bonds on Monday and Tuesday.

Seeking Alpha:

• Bank Of America's(BAC) $67 Trillion In Derivative Positions Explained.
  

Forbes:

• Is Perestroika Coming In California?

CNN:

• Fears rise over EU handling of debt crisis. "The crisis is deteriorating at an ever-increasing pace," said Mark Schofield, a senior strategist at Citigroup. "Investors are increasingly pricing in either of the two tail risks -- full eurozone break-up or fiscal union."

Telegraph:

• Debt crisis: Bundesbank scuppers all talk of EU banking union. Germany's central bank has shot down EU proposals for a European banking union, warning categorically that eurozone liabilities cannot be shared without a fundamental shift towards fiscal and political union.

Bild-Zeitung:

• Germany may cut solar-power subsidies by 20% to 25% annually, citing Michael Fuchs, a lawmaker of the governing Christian Democratic bloc.

Beijing Transportation Research Center:

• Traffic jams in Beijing have eased to an average 55 minutes during weekdays in the first quarter, from 75 minutes a year earlier.

China Securities Journal:

• China's interest rate liberalization is better than rate cuts for promoting the healthy development of the nation's economy and financial reform, China Securities Journal said in a front-page editorial today. Raising the cap on the deposit rate will narrow lenders' net interest margin and push them to offer higher-rate loans to smaller companies, the editorial said. This will increase borrowing costs for state-owned companies and local governments, forcing them to invest limited funds into profitable projects, according to the editorial. Rate liberalization will also drive companies to finance from capital markets, the editorial said.

Evening Recommendations
Jefferies:

• Rated (PIR) Buy, target $20.

Oppenheimer:

• Rated (LOGM) Outperform, target $40.

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 190.0 -6.0 basis points.
  
• Asia Pacific Sovereign CDS Index 156.0 +2.5 basis points.
  
• FTSE-100 futures +.23%.
  
• S&P 500 futures -.23%.
  
• NASDAQ 100 futures -.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KFY)/.27

Economic Releases
8:30 am EST

• The Producer Price Index for May is estimated to fall -.6% versus a -.2% decline in April.
• The PPI Ex Food & Energy for May is estimated to rise +.2% versus a +.2% gain in April.
• Advance Retail Sales for May are estimated to fall -.2% versus a +.1% gain in April.
• Retail Sales Less Autos for May are estimated unch. versus a +.1% gain in April.
• Retail Sales Ex Auto & Gas for May are estimated to rise +.4% versus a +.1% gain in April.
  

10:00 am EST

• Business Inventories for April are estimated to rise +.3% versus a +.3% gain in March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,500,000 barrels versus a -111,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,175,000 barrels versus a +2,253,000 barrel gain the prior week. Gasoline supplies are expected to rise by +1,400,000 barrels versus a +3,346,000 barrel rise the prior week. Finally, Refinery Utilization is estimated unch. versus a +1.9% gain the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Germany/Italy Bond Auctions, weekly MBA mortgage applications report, Jamie Dimon testimony to Senate Banking Committee, 10Y T-Note Auction, Deutsche Bank Industrials/Basic Materials Conference, (DELL) analyst meeting and the (AGU) investor day could also impact trading today.
  

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