Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Rising
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.14 -9.66%
  
• ISE Sentiment Index 53.0 -35.37%
  
• Total Put/Call 1.07 -3.60%
  
• NYSE Arms .99 -71.08%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 115.31 -2.3%
  
• European Financial Sector CDS Index 276.06 -.04%
  
• Western Europe Sovereign Debt CDS Index 295.20 -1.13%
  
• Emerging Market CDS Index 290.36 -1.45%
  
• 2-Year Swap Spread 23.75 -2.0 basis points
  
• TED Spread 38.50 -.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -54.50 -1.25 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 136.0 +5 basis points
  
• China Import Iron Ore Spot $137.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index -64.40 +.4 point
  
• 10-Year TIPS Spread 2.08 +1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a +32 open in Japan
• DAX Futures: Indicating +17 open in Germany
  

Portfolio:

• Slightly Higher: On gains in my tech, medical and biotech sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Merkel Parries Push For Debt Plan As Chiefs Agree On Growth Pact. German Chancellor Angela Merkel parried attempts to get her to accept more flexible use of the euro-region’s rescue funds and collectively financing debt, while agreeing with leaders of Italy, Spain and France on a proposal to spur economic growth. In a meeting in Rome, Merkel, Italian Prime Minister Mario Monti, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy said they would lobby their European Union partners to accept a growth plan worth as much as 130 billion euros ($162 billion), or about 1 percent of the euro- region’s economic output. They didn’t give specifics about the plan or how it would be financed. European leaders are looking for a way out of their almost three-year-old debt crisis that has forced four countries to seek bailouts. Leaders are racing to come up with a plan by a summit on June 28-29 to convince the investors that they can salvage the region’s monetary union. In an interview today with a group of European newspapers including Le Monde and El Pais, Monti said the weeklong run up to the summit may prove critical to the survival of the euro. Should leaders fail to produce a blueprint for a tighter fiscal and financial union, there will “be progressively greater speculative attacks” on the currency bloc’s “weaker” nations.
• Bundesbank Swipes at Draghi as European Fault Lines Deepen. The Bundesbank opposition to the European Central Bank’s plan to help ailing financial institutions is its latest swipe at the crisis-fighting efforts of Mario Draghi’s central bank. As Spanish banks scramble for collateral to use in the refinancing operations that are keeping them afloat, the ECB said today it will cut the rating thresholds and amend eligibility requirements for some asset-backed securities. While the move will give stressed banks greater access to ECB liquidity, it may also increase the amount of risk on the central bank’s balance sheet. “We’re critical of this,” Bundesbank spokesman Michael Best said. In terms of collateral, “we won’t accept what we don’t have to accept,” he said. The criticism highlights one of the fault lines dividing European officials as they struggle to end a crisis threatening to rip the currency union apart. As Draghi’s officials scramble to put together policies that will fight the latest stage of the turmoil, German policy makers are emphasizing the dangers of pursuing unorthodox policies that potentially put taxpayers on the hook for future losses. “It’s almost the usual game: the ECB has to do something to alleviate a liquidity crisis and the Bundesbank isn’t very happy about it,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a telephone interview. “The Bundesbank being critical doesn’t fully counteract what the ECB is doing, but possibly makes it a little less effective.”
• German June Business Confidence Drops To Two-Year Low. German business confidence fell to the lowest in more than two years in June as the worsening sovereign debt crisis clouded the economic outlook. The Munich-based Ifo institute said today its business climate index, based on a survey of 7,000 executives, dropped for a second straight month to 105.3 from 106.9 in May. That’s the lowest reading since March 2010. Economists predicted a decline to 105.6, according to the median of 39 estimates in a Bloomberg News survey. Italian consumer confidence fell to a record low, a separate report showed. “The euro area is clearly on the downward turn,” said Stella Wei Wang, an economist at Nomura International Plc in London. “If there is no quick political response to the crisis, the confidence shocks we see now in Europe will worsen the situation.”
• Italy Consumer Confidence Falls Amid Rising Taxes, Unemployment. Italian household confidence fell this month to a record low as joblessness rose and Prime Minister Mario Monti’s fiscal measures deepened the country’s fourth economic recession since 2001. The confidence index fell to 85.3, the lowest since the data series began in 1996, from 86.5 in May, national statistics office Istat said in Rome today. Economists forecast a reading of 86, according to the median of 15 estimates in a Bloomberg News survey. Italy’s new property tax, known as IMU, made its debut this month with the first of three payments due on June 18. The IMU, which marked the return of taxation on primary residences after four years, was part of the 20 billion-euro ($25.1 billion) package that the government passed to cut the country’s deficit. That plan and other measures that have pushed gasoline prices to record levels helped push the economy deeper into the recession. Italy’s joblessness rose in April to a seasonally adjusted 10.1 percent, the highest in 12 years.
• Ghost of Nazi Past Haunts Austerity-Gripped Europe: Euro Credit. The specter of the 1930s financial crisis that culminated in the rise of Adolf Hitler’s Nazi party and the Second World War is stalking Europe.
• Spain Said To Weigh Imposing Losses On Junior Bank Bondholders. Spanish policy makers are considering forcing investors who hold equity and junior debt in banks to absorb losses in a restructuring, according to a person with knowledge of the plan. Such burden sharing is among conditions being negotiated with the European Union in a 100 billion-euro ($126 billion) rescue for Spain’s financial industry, said the person, who asked not to be named as the conversations are private. Depositors who bought subordinated instruments such as preferred stock may be partially shielded from losses through a compensation plan being considered, the person said. Spain is poised to make a formal request for bank aid after asking for the credit line on June 9. The country’s lenders, rocked by the end of a real estate boom, would need as much as 62 billion euros in capital to withstand a worst-case economic scenario, according to Roland Berger and Oliver Wyman, consulting firms hired by the government to conduct stress tests.
• Bernanke’s Twist Sharpens Year-End Anxiety Over Stimulus. Federal Reserve Chairman Ben S. Bernanke has repeatedly warned lawmakers that a fiscal cliff threatens the economy. Now he’s created a precipice of his own. The Fed on June 20 extended its Operation Twist program to swap $267 billion in short-term securities with longer-term debt through December. That end date coincides with reductions in federal spending, a halt to payroll-tax cuts and expiration of income-tax cuts enacted under President George W. Bush. The timing of Bernanke’s easing raises the stakes for the Fed’s four remaining policy meetings this year as investors focus on whether the central bank will provide stimulus for 2013 to help the economy overcome the impact of the fiscal tightening due to take hold in January, said Vincent Reinhart, chief U.S. economist at Morgan Stanley. “They create their own monetary cliff to match the fiscal cliff,” said Reinhart, former head of the Fed board’s Division of Monetary Affairs. That may mean “a world of hurt” for the central bank because there would be a perception the Fed allows fiscal politics to influence its actions.
• Fed's Bullard Says QE3 Would Have 'High Hurdle'. Federal Reserve Bank of St. Louis President James Bullard said today a possible third round of quantitative easing would face a “pretty high hurdle.” “We can do that and I think it would be effective,” Bullard said in a television interview on Bloomberg Surveillance with Tom Keene. “But we’d be taking a lot more risk on our balance sheet. We’d be going further into uncharted territory.” Bullard said that “Treasury yields have gone to extraordinarily low levels. That took some of the pressure off the FOMC since a lot of our policy actions would be trying to get exactly that result.”
• JPMorgan(JPM) CDS Position Rose 400% Against Bank Rivals, Data Show. JPMorgan Chase & Co., whose losses from credit swaps will top $2 billion, amassed a trading position in the contracts last quarter at least four times as large as that of its closest U.S. competitor, a government report showed. Comparing purchases and sales of credit swaps in the first quarter and the fourth quarter last year, JPMorgan bought $148 billion more in notional value of the swaps and sold $232 billion more of the contracts, the Office of the Comptroller of the Currency said today. That compared with Citigroup Inc. (C) buying $36 billion more in credit swaps quarter-on-quarter and selling $46 billion more, while Goldman Sachs Group Inc. (GS) purchased $15 billion more and sold $16 billion more from one quarter to the next, the OCC data show. Bank of America Corp. (BAC) reduced the amounts of credit- default swaps it bought by $589 billion and sold by $587 billion quarter-on-quarter, OCC said. JPMorgan lost $761 million in revenue from trading credit derivatives and securities in the three months ended in March, the OCC said. It earned $2.5 billion in interest-rate derivatives and securities and $545 million in foreign exchange positions, OCC said. All U.S. commercial banks earned $7 billion in revenue by trading over-the-counter derivatives and securities in the first quarter, down 5 percent from the year-earlier period as credit trading slowed, the OCC said in the report. The U.S. agency said its main measure of credit risk in derivatives markets, the so- called net current credit exposure, fell 12 percent, or $53 billion, to $377 billion.
• Syrian Army Kills 144 as 54 Soldiers Also Die, Group Says. Syrian security forces killed 144 people yesterday, a rights group said, making it one of the bloodiest days in recent weeks in President Bashar al-Assad’s crackdown on opposition groups. More than 30 of the deaths came in the central region of Homs, and another 29 in Daraa in the south, the U.K.-based Syrian Observatory for Human Rights said in an e-mailed statement today. It said at least 54 soldiers also died. The Observatory said that Syrian forces shelled towns in the northern Idlib region today, while protests were held in Aleppo, the second-biggest city, which is near the Turkish border. Homs also came under heavy artillery fire again, Al Arabiya television reported.
• Wash Trading by High-Frequency Firms Said To Face Scrutiny. High-frequency trading firms are drawing scrutiny from U.S. regulators seeking evidence that they may be distorting market prices by conducting transactions with themselves, said two people with knowledge of the matter. So-called wash trades, in which a party buys a contract from itself, could be executed inadvertently by firms with multiple algorithms active in the same stock or derivative, said the people, who requested anonymity because the review isn't public. Such trades, which can alter the price of shares if they are executed above or below market rates, would be illegal if deemed intentional efforts to manipulate stocks.
• GM(GM) Recalls 413,418 Chevrolet Cruzes on Engine Fires. General Motors Co. (GM) is recalling 413,418 Chevrolet Cruzes, its best-selling car model in the U.S. last year, following engine-compartment fires. GM is recalling the compact cars from model years 2011 and 2012 in the U.S. because liquids can be trapped near the engine and catch fire, the Detroit-based company said today in an e- mailed statement.

Wall Street Journal:

• Spain to Make Official Aid Request Monday. Spain's government said Friday it plans to make its official request for European Union aid for its banking sector Monday, and expects to have the terms for such aid set by July 9, as discussions continue on ways to inject European aid funds directly into ailing Spanish banks.
• Strassel: Axelrod's ObamaCare Dollars. Emails suggest the White House pushed business to the presidential adviser's former firm to sell the health-care law.

CNBC.com:

• Auditor: Total Illinois Deficit Nears $44 Billion. The state's overall deficit climbed to nearly $44 billion last year, easily the worst in the nation, the Illinois auditor general reported Thursday. The red ink grew by 16.8 percent in a single year, Auditor General William Holland said. The new report includes all of Illinois' assets and liabilities and gives a broader picture of the state's financial condition than simply reviewing the annual budget — one of steady deterioration. With no cash available, more state payments were late and for larger amounts, the audit found. Illinois ended the fiscal year with $4.7 billion in unpaid bills. The state fell further behind in paying tax refunds. Bookkeeping was slow and disorganized. The deficit stood at $43.8 billion as of June 30, 2011, the auditor said. That's $10 billion more than the deficit of the next-highest state, New Jersey, and $33 billion higher than the deficit in California, another state that has been plagued by financial problems.
• IMF Sowing Seeds of the Crisis It Helped Plant - Opinion.

Business Insider:

• That Is An Ugly Fall-Off In Economic Confidence. (graph)
• WATCH: Parents Of Murdered Border Patrol Agent Say The Feds Are Lying About Their Botched Gunrunning Operation.
• David Rosenberg: The Last 2 Fiscal Cliffs Were Awful For America.
• Check Out The Growth Of America's Economy Once You Subtract The Growth Of America's Debt... (graphs)
• Major Storm System Brewing IN The Gulf Of Mexico.
  

Zero Hedge:

• Merkel Reminds Europe Of The Golden Rule.
• Syria Shoots Down NATO-Member Turkey's Military F-4 Jet.
• Spain and The Citi: Here is What Happens Next In The Country With All The Pain.
  

NY Post:

• Press lets scandal hide in plain sight. There’s a reason you don’t know much about the complicated and confusing mess known as “Fast and Furious.” The mainstream media have largely ignored this Obama administration scandal, which would have dominated mainstream front pages and homepages and programs for months had it all taken place under a Republican administration.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows Mitt Romney attracting 48% of the vote, while President Obama earns 43%. Six percent (6%) prefer some other candidate, and another three percent (3%) are undecided.

Reuters:

• Oil cos evacuate some US Gulf staff on storm threat. Energy companies began evacuating non-essential personnel from operations in Gulf of Mexico on Fr iday due to the threat of a weather system in the region developing into a tropical cyclone. Anadarko Petroleum Corp. and Murphy Oil Corp said they were removing non-essential workers from the offshore region, but added production had not been affected. Murphy operates three oil and gas platforms in the Gulf, while Anadarko operates eight.
• Rating Agencies Under New Pressure In Italy. Italian state auditors are investigating whether downgrades of Italy by the three major rating agencies last year hurt the debt-laden country's finances by making it accelerate austerity measures that have deepened its recession. European policymakers, struggling to shore up state finances, have accused analysts of being too quick to cut euro zone sovereign ratings despite bailouts and their spending cuts and tax increases. The rating agencies already face a separate criminal probe in a southern Italian town. "It is not right for agencies to speak so irreverently about Italian sovereign debt, causing economic consequences that everybody can see," Angelo De Dominicis, who heads the prosecutors' office of the Rome state audit court, told Reuters on Friday.
• Spain to stress test banks again, focus on seven. Spain will carry out yet another stress test of its banks by October with a focus on seven lenders, documents released after an independent audit of the banking sector showed on Friday. Doing the test gives Spain at least two more months to negotiate for direct cash injections into lenders as part of a European aid package of up to 100 billion euros ($125 billion), designed to keep the country from sinking deeper into the euro zone debt crisis.
• Germany's Schaeuble says Greece must fulfil commitments. Greece must fulfil the commitments it made in return for its programme of financial aid, German Finance Minister Wolfgang Schaeuble said on Friday, adding that there was no scope for flexibility on the goal of cutting its national debt to 120 percent of GDP. "Greece must fulfil the conditions of the programme," Schaeuble told reporters on the sidelines of a meeting of EU finance ministers in Luxembourg. "We must put a programme together that people in the world believe can work... with 120 percent we have been relatively generous. There is no room for manoeuvre."

Telegraph:

• UK House prices could fall by 11pc, predicts Coutts.

BBC:

• Egypt's Military Warns of "iron fist" Response. Egypt's justice minister has warned that those who threaten the country's security will face "an iron fist". Abdel Aziz al-Gindi was speaking after 12 people died and more than 180 were wounded during clashes between Muslims and Christians in Cairo. More than 190 people detained after the fatal clashes will face military trials, Egypt's army says. The ruling Supreme Council of the Armed Forces called the move a "deterrent" against further violence. "The government's hand is not shaking. The government is not weak," Mr Gindi said, speaking after an emergency cabinet meeting convened by Prime Minister Essam Sharaf. Mr Sharaf postponed a visit to the Gulf to hold the meeting. Mr Gindi said the government would "immediately and firmly implement the laws that criminalise attacks against places of worship and freedom of belief", which would allow for the death penalty to be applied. He said the Egyptian people, police and army were "standing together to foil the counter-revolution", following the popular protests that unseated the government in February.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.25%

Sector Underperformers:

• 1) Road & Rail -2.01% 2) Oil Tankers -1.23% 3) Steel -.75%

Stocks Falling on Unusual Volume:

• ATLS, AEC, CUK, CCL, NOV, ARNA, DTLK, ACTV, LGND, PEET, ASML, PHMD, ALGN, FEIC, PRAA, FLT, WXS, AEC, ITT and R
  

Stocks With Unusual Put Option Activity:

• 1) MNST 2) AVP 3) XLB 4) SNY 5) ETN
  

Stocks With Most Negative News Mentions:

• 1) JPM 2) R 3) ACI 4) BAC 5) GM
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.65%

Sector Outperformers:

• 1) Airlines +1.51% 2) Alt Energy +1.29% 3) Hospitals +1.17%

Stocks Rising on Unusual Volume:

• FSLR, HNR, AREX and PODD
  

Stocks With Unusual Call Option Activity:

• 1) HNR 2) DRI 3) FST 4) NLY 5) WCRX
  

Stocks With Most Positive News Mentions:

• 1) GLW 2) KMB 3) JACK 4) EBIX 5) GEOY
  

Charts:

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

Friday Watch

Evening Headlines
Bloomberg:

• Credit Suisse(CS) Cut 3 Levels as Moody’s Downgrades Banks. Credit Suisse Group AG credit rating was cut three levels and Morgan Stanley (MS)’s was reduced by two as Moody’s Investors Service downgraded 15 banks in moves that may shake up competition among Wall Street’s biggest firms. Credit Suisse was cut to A2, the same as JPMorgan Chase & Co. (JPM) and BNP Paribas SA (BNP), as Moody’s completed a review of global banks with capital-markets operations it announced in February. Morgan Stanley and Zurich-based UBS AG (UBSN), the other firms singled out for three-level reductions, were lowered two steps instead, the ratings firm said yesterday in a statement. “All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in the statement. Lower ratings can lead to higher costs for borrowing and collateral. The downgrades leave Citigroup Inc. (C) and Charlotte, North Carolina-based Bank of America Corp. (BAC) as the lowest-rated banks among the 15 at Baa2, two levels above junk. Moody’s kept the long-term ratings of both lenders on negative outlook, which means they may be cut again.
• IMF Sees Euro Crisis at Critical Stage, Sees Bank Stress. The euro area crisis has reached a “critical stage” and member nations must make a “strong commitment” to the shared currency to stop the plunge in investor confidence, the International Monetary Fund said in a report that recommended issuing common debt as one solution. “Despite extraordinary policy actions, bank and sovereign markets in many parts of the euro area remain under acute stress, raising questions about the viability of the monetary union itself,” the Washington-based organization said in a report today. “The financial and economic environment continues to deteriorate. Investors are withholding funding from member states most in need, moving capital to safe havens and driving risk premiums to new records.” Europe’s monetary system needs a closer union of its banks and more fiscal integration to “arrest the decline in confidence engulfing the region,” the IMF said. A “strong commitment” to the monetary union would restore faith in the shared currency, the organization said.
• Rajoy’s Blown Credibility Puts Spain at Risk of Sovereign Rescue. Spanish Prime Minister Mariano Rajoy has spent much of the political capital he won seven months ago in the biggest landslide in 30 years, floundering against a crisis that risks making Spain the first $1 trillion economy to need a sovereign bailout, investors and analysts say. Rajoy, singled out by leaders at the Group of 20 summit, has been taunted by opposition lawmakers and commentators as borrowing costs soared to a euro-era record even after Spain’s banks received a 100 billion-euro ($127 billion) lifeline. Rajoy called the rescue a victory that solved lenders’ problems. “He clearly doesn’t get it,” said Gary Jenkins, founder of Swordfish Research Ltd. near London, who has tracked bond markets for more than 15 years. “Spain needs someone who can come in and grasp the seriousness of the situation and react to that, not just pretend everything’s okay.”
• Euro Chiefs Spar on Greek, Spanish Aid. European finance ministers battled over the strategy to contain the debt crisis, with creditor countries resisting leniency for Greece and playing down market concerns about the bailout of Spanish banks. Lenders of 240 billion euros ($301 billion) to Greece offered no sign of granting extra time for the newly installed Athens government to meet deficit-cut targets. With Spain set to request as much as 100 billion euros to rescue its teetering banks, the officials quarrelled over how to design a recapitalization program that doesn’t scare investors away from Spanish government bonds. “We still need progress on this issue,” French Finance Minister Pierre Moscovici told reporters late yesterday after a meeting of euro-area finance ministers in Luxembourg. The setup of the Spanish package is so politically sensitive that it will be decided by government leaders at a June 28-29 summit. That summit, the 19th since Greece’s financial meltdown rattled the euro, will try to resolve competing visions over how to reshape the 17-nation economy, with Germany and its fiscally disciplined neighbors unwilling to foist additional burdens on their taxpayers. A foretaste of that confrontation will come later today, when German Chancellor Angela Merkel travels to Rome for crisis talks with Italian Prime Minister Mario Monti, Spanish Prime Minister Mariano Rajoy and French President Francois Hollande. The configuration reflects the shifting alliances that have left Merkel fighting increasingly on her own as concerns about Europe’s economic health migrate from small countries on the periphery to larger ones in the core.
• France to Restrict Minimum Wage Increase to 2%, Echos Reports. The French government will restrict an increase in the minimum wage to no more than 2 percent, Les Echos reported, without citing anyone. An official decision will be taken by June 26, when the government is due to meet with labor unions and employers, the newspaper said. An increase as of July 1 will take the gross hourly minimum wage to 9.40 euros ($11.80), Les Echos reported.
• Commodities Fall Into a Bear Market. Commodities tumbled into a bear market as U.S. reports on manufacturing, jobless claims and home sales signaled a faltering economy after the Federal Reserve refrained from announcing another round of stimulus. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 2.8 percent to settle at 559 at 3:56 p.m. New York time. The gauge has dropped 22 percent from this year’s highest close of 715.52 on Feb. 24, entering a bear market. Earlier, the measure touched 558.14, the lowest since November 2010. Metals and energy led today’s slump.
• FDA report shows extent of problems with metal-on-metal hip implants. Almost 16,800 adverse events associated with metal-on-metal hip implants were reported in the U.S. from 2000-2011, regulators said. The reports almost quadrupled to 682 in 2008 from the year earlier, and rose again after a unit of Johnson & Johnson began recalling hip devices in 2010, according to report posted today on the Food and Drug Administration’s website. Adverse event reports in 2011 totaled 12,137 for the metal-on-metal devices, compared with 6,332 associated with other types of hip implants, according to the FDA document.
• Made in China Not Worth Hassle for Small Firms Returning to U.S. When Sonja Zozula and Jerry Anderson founded LightSaver Technologies Inc. in 2009, everyone told them they should make their emergency lights for homeowners in China. After two years of outsourcing to factories there, last winter they shifted production to Carlsbad, California, about 30 miles (48 kilometers) from their home in San Clemente. “It’s probably 30 percent cheaper to manufacture in China,” Anderson says. Besides hassles including shipping, “it’s a question of, ‘How do I value my time at three in the morning when I have to talk to China?’” he says. As costs in China rise and owners consider the challenges of using factories 12,000 miles and 12 time zones away, many small companies have decided manufacturing overseas isn’t worth the trouble. American production is “increasingly competitive,” says Harry Moser, founder of the Reshoring Initiative, a group of companies and trade associations trying to bring factory jobs back to the U.S. “In the last two years there’s been a dramatic increase” in the amount of work returning.
• International Game(IGT), Bally(BYI) Win Nevada Online Casino Licenses. The Nevada Gaming Commission issued its first two licenses for online betting, bringing the state with the most casino revenue a step closer to real wagering on poker from home. International Game Technology (IGT), based in Reno, Nevada, and Las Vegas-based Bally Technologies Inc. (BYI) received approvals today, according to Michael Lawton, a senior research analyst with the Nevada Gaming Control Board. Companies must still get their systems approved by independent testing laboratories before starting service, Lawton said.
• Liquidnet Says SEC Investigating Dark-Pool Disclosures. The U.S. Securities and Exchange Commission is investigating Liquidnet Holdings Inc. for shortcomings in how the dark-pool owner guarded information about firms using its platform, according to a letter the company sent clients today. SEC staff is “conducting an investigation regarding these matters and has made additional requests for information and documents,” the operator of two equity trading venues said in an e-mail obtained by Bloomberg News. New York-based Liquidnet said the issues identified by the SEC involving its equity capital markets business have been corrected.
• India Puts Rise to Record. (video) Options traders are paying the most on record for bearish contracts on Indian stocks versus bullish ones, protecting against declines as inflation accelerates amid concern the country will lose its investment-grade status.
• Korea Home Price Slide Persists With Property Anxiety. Yook Jeong Soo last month renewed a two-year lease on his three-bedroom home on the outskirts of Seoul, preferring to pay the 30 percent rent increase his landlord demanded rather than buy in the city’s housing market. “The rent rise was huge, I know, but why should I bother buying a house now with borrowed money when I’m not so confident the price will go up?” said the 49-year-old office worker. “The heyday is over for the housing market.”
• Vanishing Households Undercut Claim of Australia Shortage. Australia has almost 1 million fewer households than assumed in government forecasts of a housing shortage, raising doubts about a supply shortfall cited as the main reason the nation will avoid a U.S.-style crash. The Pacific nation had 7.8 million households, data released yesterday from the 2011 Census showed. That compared with estimates of 8.7 million as of June 2010, according to the latest figures used by the National Housing Supply Council, a group created by the government in May 2008 to monitor housing demand, supply and affordability. Australia’s population also grew by 300,000 less than previously estimated, to 21.5 million.
• Gross Warns of Risk Assets as Aberdeen Underweight on Equities. Bill Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co., warned against risk assets, as Aberdeen Asset Management Plc (ADN) said it’s underweight on stocks. Asian shares extended a global rout after manufacturing gauges for the euro area, China and the Philadelphia region signaled contraction. The Federal Reserve this week refrained from introducing a third round of so-called quantitative easing even as the central bank cut its U.S. growth forecast. Gross, who manages $261 billion for the Pimco Total Return Fund, said in a Twitter post that risk markets are vulnerable as the “monetary bag of tricks empties.” “We’re still certainly very comfortable running our underweight equity positions that we took out in March,” said Peter Elston, the Singapore-based head of Asia-Pacific strategy and asset allocation at Aberdeen, which oversees about $270 billion. “Economies will continue to contract. There will be this realization that the governments are not perhaps as able to act as they have been in recent years,” he said in an interview with Bloomberg Television today.

Wall Street Journal:

• A Closer Look at Bernanke's Incremental Approach. Federal Reserve Chairman Ben Bernanke has borne his share of criticism and puzzlement in the past 24 hours — both at his post-meeting press conference and in the blogosphere in places like this, this and this — for not moving more aggressively Wednesday to address a deteriorating economic outlook. The Fed could have launched a big new bond buying program, the thinking goes. Why not go ahead and do it right away, when the central bank’s forecasts for growth and unemployment look so much worse than they did in April and its inflation projections are falling?
• Who Is That Masked Hedge Fund? It is the latest in-vogue accessory among hedge-fund managers: a "masked fund." Bridgewater Associates has "ZQPGGAV00000," John Paulson has "Paulson Fund 1" while Cliff Asness's AQR Capital Management prefers "805-1355888867." The cryptic monikers, more product barcodes than real handles, enable the hedge-fund managers to shield the identities of their funds from the prying eyes of regulators and outsiders in forms filed with the Securities and Exchange Commission. Some 150 private investment advisers opted to mask the real names of their individual funds when they complied with new rules that forced many hedge-fund firms to register with the SEC.
• Emails Tie Goldman(GS) Manager, Rajaratnam. The ties between a top Goldman Sachs Group Inc. manager and the controversial hedge fund Galleon Group Inc. were closer than previously known.
• Courting the Chinese Buyer. Buyers from China are pouring billions into residential property—and developers are courting them with everything from feng shui to lucky numbers.
• EU Banks' Risk in Eyes of Beholder. Worry Is That Lenders Are Boosting Gauge of Their Health. Regulators and investors are concerned that some European banks are artificially boosting a key measure of their financial health, a worry that is further eroding market confidence in the Continent's banks. Such concerns have been building up for more than a year. But they have intensified lately, with a parade of banks announcing that they intend to increase their capital ratios—a key gauge of their abilities to absorb future losses—partly by tinkering with the way they assess the riskiness of their assets. Spanish banks, including Banco Santander SA, are among those that have announced plans to boost their capital ratios.
• In Europe, Idle Car Factories Live On. Few places illustrate the troubles of the European auto industry better than Fiat SpA's vast Mirafiori plant near Turin, Italy. The factory was churning out cars earlier this week but suddenly became a ghost town on Thursday and Friday, its production lines silent and the company's adjacent headquarters offices almost entirely empty and darkened. The same thing happened on two day earlier this month and will again on four more days in July. Shutdowns similar to those at Mirafiori have become a regular occurrence all across Western Europe and reveal an auto-industry crisis that is quietly reaching dire proportions.

Business Insider:

• This Could Be The First Of Many Chinese Developers To Implode.
• A Video Of This Woman Getting Verbally Attacked by Teenagers Went Viral, And Now The Internet Has Raised More Than $300K To Make Her Feel Better. (video)
• Deutsche Bank's Bull Joe Lavorgna: Here's The Bad News....

Zero Hedge:

• Here We Go: Moody's Downgrade Is Out - Morgan Stanley Cut Only 2 Notches, To Face $6.8 Billion In Collateral Calls.
• Taibbi Is Back With The Scam Wall Street Learned From the Mafia.

CNBC:

• No Fast Recovery Seen as M&A Activity Drops 25%. Mergers and acquisitions activity fell 25 percent worldwide in the first half of 2012 as global economic uncertainty reined in companies' expansion plans — and bankers don't expect much improvement over the rest of the year.
• As Facebook(FB) Seeks Answers, SEC Investigates Exchanges.

NY Times:

• NBC News Faces Shift in Television Dominance. Struggling with declining ratings across all three franchises, however, and with news this week that the network is preparing to replace Ann Curry on “Today,” NBC executives are facing a new narrative that is being embraced by the competition. For the first time in more than a decade, NBC News appears to be adrift.

Gallup:

• Obama Job Approval: Approve 43%, Disapprove 49%. (graph)

USA Today:

• Women's Financial Confidence Falters. From 2011 to 2012, women became disproportionately less likely than men to pay their credit card balance in full each month, have an emergency savings fund and have a general understanding of stocks, bonds and mutual funds, the survey found. The gap between men and women widened by at least 6 percentage points in each of those cases. The survey results are particularly worrisome given women's longer life expectancy, combined with the fact that they have less income on average over time from being out of the workforce longer to care for children and subsequently less Social Security to fall back on, says Financial Finesse CEO Liz Davidson.

Reuters:

• Ryder(R) cuts forecast on weak rental demand. Logistics company Ryder Systems Inc cut its quarterly earnings forecast, citing lower demand for its commercial rental services. The company also plans to cut costs and reduce its commercial rental fleet as it expects the weakness to continue through the year. Used vehicle inventory will be high for the remainder of the year, Ryder said in a statement. "Although commercial rental revenue has improved both year-over-year and seasonally, May results reflected lower rental growth than previously discussed," Ryder said in a statement, blaming weak demand and pricing. Ryder forecast second-quarter earnings of 90 cents to 95 cents per share, down from its earlier view of $1.07 to $1.12 per share. Higher medical benefit costs are also expected to hurt earnings. Its shares fell 9 percent to $37 in after-market trading from its Thursday close of $40.75.
• Retail investors net sellers of equity funds-Lipper.
• U.S. Earnings Outlook Pounded by Global Turmoil. Weakening business activity worldwide is hitting U.S. companies where it hurts, with more of them signaling disappointing results than at any time over the past decade. Many bellwether companies, including two Dow components, have come out in recent days with profit warnings, and the slowing in Europe has been cited as a major factor for those outlooks. For every company that has raised its second-quarter profit outlook, 3.6 have warned, the worst ratio since the third quarter of 2001, according to Thomson Reuters data. Firms including PepsiCo Inc, package shipper FedEx Corp and tobacco company Philip Morris all lowered earnings expectations in recent days, citing concerns about Europe. On Wednesday, Procter & Gamble Co cut its growth forecasts for the second time in two months. The consumer products giant also reduced its profit view as it deals with slowing demand in Europe and China.
• Arch Coal(ACI) cuts tenth of workforce on weak market. Arch Coal Inc will cut about a tenth of its workforce, or 750 jobs, as it closes three higher-cost mining complexes and associated plants in response to the weak U.S. market for thermal coal.

Financial Times:

• Troubling times for high fee ‘concierges’. The future of the battered funds of funds industry – which once accounted for as much as two-thirds of all investments in hedge funds worldwide – is coming under scrutiny. According to Hedge Fund Research, funds of funds now make up only a third of the hedge fund industry’s $2tn investor base. And many believe that is bound to shrink further.

Telegraph:

• Debt crisis: desperate Monti needs Merkel summit deal to stop revolt at home. Italy's technocrat government risks a parliamentary mutiny unless premier Mario Monti can secure major concessions from Germany at a crucial summit of the eurozone's Big Four powers in Rome on Friday.
• The Fast and Furious scandal is turning into President Obama's Watergate. Fast and furious hasn’t been discussed a lot in the mainstream media, which is why the facts can seem so preposterous when you read them for the first time. But the story is slowly unraveling and the public is catching up with the madness.
• The IMF helping the euro is feeding the monster on our doorstep. IMF help would set the eurozone on the road to fiscal and political union – let’s not encourage it.

The Independent:

• Downgrade for UK Banks Raises Fears of Credit Crunch. Some of the world's biggest banks – including Barclays, HSBC and Royal Bank of Scotland – had their credit ratings downgraded last night as a result of the eurozone crisis. Moody's downgrades came amid fears that the euro crisis will prompt another credit crunch by making banks afraid of lending to each other, or to anyone else.

The Guardian:

• Mario Monti: we have a week to save the eurozone. Italian prime minister warns that there is no room for failure in talks between single currency's big four countries. Italy's prime minister, Mario Monti, has warned of the apocalyptic consequences of failure at next week's summit of EU leaders, outlining a potential death spiral whose consequences would become more political than economic. The Italian leader is to hold talks with Chancellor Angela Merkel of Germany, the French president, François Hollande, and Spain's prime minister, Mariano Rajoy, in the hope that the single currency's big four countries can pave the way for a breakthrough at next week's meeting. Speaking to the Guardian and a group of leading European newspapers, Monti said that, without a successful outcome at the summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries". The attacks would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules "but which carry with them from the past a high debt". Monti warned: "A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth." Outlining the result of a failure at the talks, Monti said that, faced with creeping economic paralysis, "the frustration of the public towards Europe would grow", creating a vicious circle. "To emerge in good shape from this crisis of the eurozone and the European economy, ever more integration is needed," said Monti. Yet, if the summit failed to resolve the problems quickly, "public opinion, but also that of the governments and parliament… will turn against that greater integration". Monti said he could see the beginnings of the process "even in the Italian parliament, which has traditionally been pro-European and no longer is".

Bangkok Post:

• SCG Results Could Slow On Global Troubles. A prolonged European debt crisis and a slower-than-expected US economic recovery could weigh on the results of the Siam Cement Group (SCG) in the second half of the year. Kan Trakulhoon, the president and chief executive, said the situation in Europe has remained "worrisome", although following the recent elections, Greece has been able to form a government. Prospects for economic recovery in the US dimmed recently, especially in terms of housing, due partly to the European situation, he said. The US and Europe together account for 5% of SCG exports. However, the concern is that if the situation in the US and Europe worsens, Asean and other markets in Asia will be negatively affected.

Evening Recommendations
Wells Fargo:

• Rated (RDEN) Outperform.

Night Trading

• Asian equity indices are -1.50% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 181.0 +6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 143.0 +.75 basis point.
  
• FTSE-100 futures -1.05%.
  
• S&P 500 futures +.31%.
  
• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MLHR)/.30
• (DRI)/1.15
• (CCL)/.08

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The ECOFIN Meetings and the EU Summit could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology 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 Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Tech/Commodity Sector Weakness, Technical Selling

Broad Market Tone:

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

Equity Investor Angst:

• VIX 19.53 +13.28%
  
• ISE Sentiment Index 82.0 -1.20%
  
• Total Put/Call 1.13 +21.51%
  
• NYSE Arms 2.82 +172.48%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 116.81 +2.48%
  
• European Financial Sector CDS Index 276.22 +.35%
  
• Western Europe Sovereign Debt CDS Index 298.56 -2.07%
  
• Emerging Market CDS Index 292.22 +4.56%
  
• 2-Year Swap Spread 25.75 +1.75 basis points
  
• TED Spread 39.0 +.25 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -53.25 -2.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 131.0 -2 basis points
  
• China Import Iron Ore Spot $137.40/Metric Tonne +.44%
  
• Citi US Economic Surprise Index -64.80 -5.5 points
  
• 10-Year TIPS Spread 2.07 -7 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -45 open in Japan
• DAX Futures: Indicating -42 open in Germany
  

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 breaks back below its 50-day moving average and trades near session lows on rising Eurozone debt angst, diminished global central bank stimulus hopes, more weak US economic data, tech/commodity sector weakness and rising global growth fears. On the positive side, Airline and Drug shares are holding up relatively well, falling less than -1.0%. Gold is falling -2.5%, the UBS/Bloomberg Ag Spot Index is down -1.6% and Oil is down -3.2%. The Portugal sovereign cds is down -1.8% to 915.05 bps and the Ireland sovereign cds is down -2.2% to 643.98 bps. On the negative side, Coal, Alt Energy, Oil Tanker, Energy, Oil Service, Steel, Software, Computer, Semi, Disk Drive, Networking, I-Banking, Hospital, Construction and Retail shares are under significant pressure, falling more than -3.0%. Cyclical and small-cap shares have traded poorly throughout the day. Tech shares have also been very heavy. Copper is down -2.6% and Lumber is down -2.9%. Major Asian indices were mostly lower overnight, led down by a -1.3% decline in Hong Kong. Major European indices were modestly lower. The Bloomberg European Bank/Financial Services Index fell -.5%. The Germany sovereign cds is up +1.3% to 101.12 bps, the France sovereign cds is gaining +1.78% to 197.44 bps, the China sovereign cds is up +1.9% to 119.70 bps, the Russia sovereign cds is soaring +5.7% to 234.17 bps, the Brazil sovereign cds is jumping +5.4% to 153.12 bps. As well, the Italian/German 10Y Yld spread is rising +1.5% to 421.36 bps. Weekly retail sales have decelerated to a sluggish rate at +2.5%. US Rail/Trucking 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 late-Aug. levels. Lumber is -10.0% 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 -55.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -23.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +137.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -27.4% since May 2nd of last year. Overall, credit gauge deterioration remains a big worry as most key sovereign cds remain technically strong. The tech sector is under pressure today on worries over handset and pc growth. The euro currency, oil, lumber and copper all trade very poorly given global central bank stimulus hopes and recent stock gains. As well, the 10Y continues to trade too well as the yield is falling another -4 bps today to 1.62%. The AAII % Bulls fell to 32.9 this week, while the % Bears rose to 35.9. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The Citi Eurozone Economic Surprise Index is falling another -6.0 points to -74.3 points, which is the lowest since early Oct. of last year. The “solutions” for the European debt crisis I still hear being bandied about are only bigger kick-the-cans that will eventually lead to an even bigger catastrophe as Germany is engulfed, in my opinion. As well, some key economies in the region are likely accelerating their contractions right now. Moreover, 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. The "US fiscal cliff "will become more and more of a focus for investors as the year progresses. Finally, the upcoming earnings season could prove 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 and hopes for a Eurozone fiscal unity "solution" had been propping up 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 rising eurozone debt angst, diminished global central bank stimulus hopes, rising global growth fears, profit-taking, technical selling, tech/commodity sector weakness and more shorting.