Bull Radar

Style Outperformer:

• Small-Cap Value -.81%

Sector Outperformers:

• 1) Hospitals +1.89% 2) Coal +.89% 3) Oil Tankers -.03%

Stocks Rising on Unusual Volume:

• CYH, HMA, OFG, HMSY, HCA, AGP, MSM and WOR
  

Stocks With Unusual Call Option Activity:

• 1) CVH 2) USG 3) AOL 4) OREX 5) VRTX
  

Stocks With Most Positive News Mentions:

• 1) BA 2) AET 3) RTN 4) LMT 5) QCOM
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• European Bank Union ‘Premature’ Amid Resistance to Debt Sharing. A European banking union is no fix for the region’s lenders, trading at a fraction of the book value of their assets, without closer fiscal integration and a solution to the sovereign debt crisis, investors say. Policy makers will discuss ways to coordinate bank oversight, bring together national deposit guarantees and combine crisis management powers at a summit in Brussels today and tomorrow in an effort to bolster confidence in the region’s lenders. For a banking union to succeed, investors say, Europe must achieve for lenders what it’s failed to accomplish for governments: shared liabilities. “Talk about a banking union is too premature,” said Guy de Blonay, a London-based fund manager at Jupiter Fund Management Plc, which oversees about $37.5 billion. “Europe hasn’t taken steps to restoring an orderly sovereign debt market. You need economies to borrow at a decent rate.” Lenders in Europe, burdened by $1.2 trillion of holdings in Spanish, Portuguese, Italian and Irish government bonds, face rising bad loans as the single-currency region teeters on the brink of recession. Governments’ struggles to repay their debt as economies contract is adding to skepticism they can support ailing lenders. Germany’s opposition to sharing government and bank liabilities is raising concern a banking union will become another blunt tool in efforts to tame the crisis.
• Summit Stalemate Endangers Top Sovereign Ratings: Euro Credit. As European leaders debate how to save the 17-nation euro area at their summit today, investors are pricing in savage credit downgrades with four countries losing their Aaa status. Austria, Finland, France and the Netherlands may be cut by as many as nine levels from their top grades, according to a Moody's Analytics review of credit-default swaps prices. Demand for haven securities drove two-year note yields on Germany to a record low of minus .012 percent this month. Bondholders are accumulating debt insurance on concern sovereign borrowing costs will rise as ratings are undermined by the surging bill for bailing out weaker euro-area nations, recessions curb tax revenue and welfare payments increase. With Spain and Cyprus seeking aid this week, markets are skeptical the summit will find a pathway out of the crisis. "Investors are gradually discovering that a large proportion of stuff they thought was safe is turning out not to be," said Matt King, global head of credit strategy at Citigroup Inc. in London. "We are concerned that even as the magnitude of the risks is becoming bigger, policy makers seem as far apart as ever when it comes to agreeing on solutions."
• Germany’s Steinbrueck Tells Passauer Shared Debt Needs Oversight. European debt sharing isn’t possible without countries accepting external budget oversight, Peer Steinbrueck, Germany’s former Finance Minister, told Passauer Neue Presse. “First I want to see that Germany and the Mediterranean countries say, ‘Great, the rule will be: if we can’t keep our own budgets in order, our budget rights will move to a European institution,’” the newspaper cited Steinbrueck as saying in an e-mailed preview of an interview to be published today. “Otherwise it’s not acceptable for Germany to accept liability for others. That would be like giving out a credit card: others do the shopping, and Germany pays.” Steinbrueck ruled out a banking union with common deposit insurance as suggested by European Union President Herman Van Rompuy, the newspaper said. Strengthening national deposit insurance together with broader European oversight and a European bank liquidation law would be possible, the newspaper cited the Social Democrat lawmaker as saying.
• Will Angela Merkel Save Europe’s Banks? Europe’s leaders have raised hopes that, when they meet Thursday and Friday in Brussels, they will agree on a banking union aimed at severing the link between the health of the euro area’s financial institutions and the solvency of its governments. The plan’s success or failure, as with so much else in the currency union today, will depend on one person: German Chancellor Angela Merkel. Ultimately, the question of joint liability is a political one that goes far beyond banking. No currency union consisting of economies and cultures as different as, say, Germany and Spain can work unless its members agree to share the risks of financial and economic shocks. Refusing to do so is tantamount to rejecting the euro. So what will it be, Frau Merkel?
• China’s Housing Curbs Will Remain ‘Tight,’ Shui On’s Lee Says. The Chinese government’s curbs on the housing market will remain “tight” this year, preventing transactions and prices from rebounding significantly, according to Shui On Land Ltd. (272), the developer controlled by Hong Kong billionaire Vincent Lo. “The volume of transactions has increased and sentiment is improving, but any substantial turnaround is unlikely,” said Freddy Lee, chief executive officer of Shanghai-based Shui On, in an interview in Singapore yesterday. “I feel that prices will maintain where they are for a while.”
• China Local Government Finances Are Unsustainable, Auditor Says. The finances of China's county-level governments are unstable and unsustainable as the majority of their fiscal income comes from sources other than taxation, the nation's top auditor said. About 60% of revenue raised last year by 54 counties investigated by the National Audit Office wasn't derived from taxes, Liu Jiayi, the head of the agency, told a meeting of the legislature yesterday, according to a transcript of his speech on the audit office's website. Local governments have been forced to turn to non-tax income such as land sales and to increase debt because of the imbalance in tax revenue and spending obligations with the central government, Jia Kang, director of the finance ministry's Institute of Fiscal Science, was cited by the paper as saying.
• China’s Stocks Decline for Seventh Day on Earnings Concerns. China’s stocks fell, dragging down the benchmark index for a seventh day, on concern the nation’s economic slowdown is curbing earnings growth. Gansu Qilianshan Cement Group Co. declined 2 percent after it said first-half profit may have dropped more than 50 percent from a year earlier. Inner Mongolia Baotou Steel Rare Earth Hi- Tech led a gauge of material producers to the steepest loss among industry groups after the U.S., Europe and Japan asked the World Trade Organization to resolve disputes over China’s limits on exports of rare-earths materials. “The economy is still slowing and earnings growth forecasts have further room to be revised downward,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Weak sentiment will dominate as investors have no idea how slow earnings growth will be.”
• Dealmaking Rebound Falters as Crisis Threatens Confidence. Dealmaking failed to make a comeback in the second quarter as the European debt crisis and volatile stock markets forced companies to delay big acquisitions. Takeovers fell about 2 percent from the first three months of the year to about $450 billion, the lowest level since 2009, according to data compiled by Bloomberg. Eaton Corp. (ETN)’s proposed purchase of Cooper Industries Plc (CBE) and Pfizer Inc. (PFE)’s sale of its infant-nutrition unit were the only deals to top $10 billion.
• Mortgage Seizures Create ‘Very Serious Concerns,’ Sifma Says. Wall Street’s largest lobbying group is objecting to the use of eminent domain by municipalities to seize mortgages packaged into bonds so the loans can be shrunk to aid homeowners who owe more than their properties’ values. Both the investment firm and bank members of the Securities Industry and Financial Markets Association have “very serious concerns” based on an agreement approved last week by San Bernardino officials granting the authority to study and create such a program, said Ken Bentsen, executive vice president for public policy and advocacy at the New York-based trade group. By using eminent-domain powers, municipalities can force the sale of private property at prices deemed to be fair if doing so serves a public purpose.
• Barclays(BCS) May Implicate Other Banks, Pitt Says. (video) Former U.S. Securities and Exchange Commission Chairman Harvey Pitt talks about record fines imposed by U.S. and U.K. regulators against Barclays Plc after the bank admitted it submitted false London and euro interbank offered rates.
  

Wall Street Journal:

• European Banks Are Facing More Pain In Spain. Spanish-owned banks aren't the only ones under pressure to fortify themselves against Spain's crumbling economy. Foreign banks with big Spanish operations also find themselves in a tough position—and with few options. Three European banks—Barclays PLC, Deutsche Bank AG and ING Bank NV—have large Spanish units. They already have pumped in billions of euros of capital to shore up those businesses, but as the Spanish government conducts a wide-ranging review of the sector's health and the economy continues to struggle, they could demand even more, according to bankers and analysts.
• Optimism on Europe Doesn't Add Up. In Europe there is hope, and then there is math. And the two are on a collision course. Optimists are counting on the latest make-or-break European summit that starts Thursday to deliver convincing steps toward the fiscal and banking unions deemed necessary to keep the euro alive. Unfortunately, even best-case scenarios for the two-day summit won't change some bleak arithmetic. This suggests the debt crisis will rage in Spain and Italy for years.
• IRS Probes Political Group Tied to Rove. The Internal Revenue Service is taking initial steps to examine whether Crossroads GPS, a pro-Republican group affiliated with Karl Rove, and similar political entities are violating their tax-exempt status by spending too much on partisan activities.
• Regulators Ramp Up Queries Into CDS Trades at Data Warehouse. Regulators are increasing the number of queries they make into global credit-default swaps trades reported to the Depository Trust & Clearing Corp., according to figures the data warehouse provider released Wednesday. DTCC said regulators submitted 360 searches in May, the most recent month for which data is available, compared with 37 searches in the same month last year. In April, the number of searches rose to 579 from 77 a year earlier.
• News Corp.(NWSA) Board Approves Split in Principle. News Corp.'s board unanimously approved a plan to split the media conglomerate in two pieces, separating its lucrative entertainment operations from its publishing business, said a person familiar with the situation.
• Google's(GOOG) New Role as Gadget Maker. Web Giant to Brandish Tablet, Home Media Player in Hardware Turf War With Apple, Amazon.
• Madoff's Brother to Plead Guilty to Criminal Charges. Bernard Madoff's younger brother, Peter, is expected to plead guilty to criminal charges and has agreed to go to prison for 10 years, in the first admission of wrongdoing by a family member in a multibillion-dollar investment business that turned out to be "just one big lie."

Dow Jones:

• SEC to Miss Deadline on Hedge Fund Ad Rules. The Securities and Exchange Commission will miss next week's deadline to adopt rules allowing hedge funds to engage in mass marketing but will likely move on the matter soon, SEC Chairman Mary Schapiro will say in prepared testimony for a hearing Thursday.

Business Insider:

• Large Defense Company Is Already Threatening Massive Layoffs On January 1 Next Year If The Fiscal Cliff Hits.
• Here's What To Expect From The Supreme Court's Big Obamacare Ruling.
• The Really Big Show In Europe Is Italy.
• These 31 Democrats Could Join Republicans And Hold Attorney General Eric Holder In Contempt Tomorrow.
• FITCH: The Eurozone Is Entering The 'Danger Zone'.

Zero Hedge:

• How Much To Save The Euro?

CNBC:

• Stockton, Calif., Prepares for Bankruptcy. Are Other US Cities at Risk?

IBD:

• Wright Express(WXS) Fuel Cards Help Truckers Fill Tanks.

NY Times:

• Attack Raises Fears of a New Gang War in Macau. A senior figure in Macau’s gambling industry was severely beaten by six men in a restaurant at his own casino, the highest-profile case of violence in the city’s booming gambling business since Portugal handed control of the former colony back to China in 1999.

LA Times:

• Tiny Telescopes Implanted Into Eyes Help Elderly Patient See Better. UC Irvine ophthalmologists implanted tiny telescopes in two patients suffering from age-related, end-stage macular degeneration, the university announced this week. Doctors from the university's Gavin Herbert Eye Institute in December inserted one of the 4-millimeter telescopes into an 85-year-old Irvine resident's eye and another in a 94-year-old Anaheim resident's eye, according to a UCI statement. The devices restore limited vision by projecting an image onto the undamaged section of the retina, enabling patients to recognize faces, read and perform daily activities. After the implant, the Irvine resident was able to see her son's face for the first time in more than a decade.
• Facebook's(FB) Advertising Growth Slowed Down A Lot In The Last Year. Facebook's U.S. advertising growth has slowed down to a third of what it was in 2011, according to a report issued Wednesday. After growing at impressive rates in the 60% range during the first three quarters of 2011, Facebook's advertising growth fell by more than half to 30% in the fourth quarter, and during the first part of 2012, the growth rate went down to 21.2%, according to a report by the IDC. The slowing growth has resulted in Facebook losing market share. After holding on to almost 14% of display advertising at the end of 2011, Facebook's share is now down to 12%.

Rasmussen Reports:

• 27% Say U.S. Heading in Right Direction.

Reuters:

• Glencore fights to save $26 billion Xstrata bid. Commodities trader Glencore fought to save its $26 billion bid for miner Xstrata on Wednesday after shareholder Qatar stunned the pair with a late demand for better terms, forcing them to push back the timing of the deal.
• Moody's downgrades 11 Brazilian banks. Moody's Investors Service said it had downgraded the ratings of 11 Brazilian financial institutions in line with its review of global banks.
• Fed officials differ on whether more easing needed. Top Federal Reserve officials differed on whether the U.S. central bank needs to be more aggressive in spurring economic growth, indicating another round of easing is far from certain. Chicago Federal Reserve Bank President Charles Evans, one of the U.S. central bank's strongest advocates for further monetary policy easing, said Wednesday he is flummoxed by the Fed's timidity in the face of high unemployment and low inflation. However, his colleague, Atlanta Fed leader Dennis Lockhart, said the Fed would only need to act further if the economy took a turn for the worse or if Europe's simmering debt crisis boils over.
• Italy debt cost likely to rise after Merkel rebuff. Investors are likely to drive Italy's borrowing costs further above 6 percent at a bond auction on Thursday after German Chancellor Angela Merkel brushed aside Spanish and Italian pleas for emergency action to steady debt markets. Battling with rising interest payments on its 1.95 trillion euro ($2.4 trillion) debt, Italy is offering up to 5.5 billion euros in five- and 10-year bonds just hours before the start of an EU summit where Prime Minister Mario Monti will keep pushing for joint moves to contain government funding costs.

Telegraph:

• Banks face billions of dollars of claims after Barclays settles. Damages claims running to billions of dollars against the world’s biggest banks have been given fresh “credibility” by Barclays £290m Libor settlement, lawyers said.
• Angela Merkel dismisses Spain and Italy's pleas for aid. Pleas from Spain and Italy for urgent financial aid from the eurozone to bring down borrowing costs were dismissed by Angela Merkel as divisions hardened on the eve of a critical summit.

expressindia.com:

• Ansari Arrest Confirms Pakistan Role: PC. INDIA today claimed that the interrogation of Zabiuddin Ansari alias Abu Jundal — a key suspect in the Mumbai terrorist attack who has been arrested recently — had confirmed its suspicion that “state actors” in Pakistan had a role to play in the November 2008 attacks that left close to 200 people dead.

Evening Recommendations
Wells Fargo:

• Rated (AAPL) Outperform, target $640-$660.
• Rated (EMC) Outperform, target $29-$30.
  

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 183.50 -2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 150.0 -1.25 basis points.
  
• FTSE-100 futures +.33%.
  
• S&P 500 futures +.11%.
  
• NASDAQ 100 futures +.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDO)/1.07
• (NKE)/1.37
• (TIBX)/.23
• (AM)/.69
• (SCHN)/.25
• (WOR)/.52
  

Economic Releases
8:30 am EST

• 1Q GDP is estimated to rise +1.9% versus a prior estimate of a +1.9% gain.
• 1Q Personal Consumption is estimated to rise +2.7% versus a prior estimate of a +2.7% gain.
• 1Q GDP Price Index is estimated to rise+1.7% versus a prior estimate of a +1.7% gain.
• 1Q Core PCE is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.
• Initial Jobless Claims are estimated to fall to 385K versus 387K the prior week.
• Continuing Claims are estimated to fall to 3280K versus 3299K prior.
  

11:00 am EST

• Kansas City Fed Manufacturing Activity for June is estimated to fall to 4.0 versus 9.0 in May.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Supreme Court's ObamaCare decision, EU Leader's Summit, Fed's Fisher speaking, Fed's Pianalto speaking, 7Y T-Note Auction, German Unemployment data, Annual Crop Acreage Report, weekly EIA natural gas inventory data and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
  

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

Stocks Rising into Final Hour on Quarter-End Window-Dressing, Short-Covering, Eurozone Debt Crisis Hopes, Financial/Homebuilding Sector Strength

Broad Market Tone:

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

Equity Investor Angst:

• VIX 19.90 +.91%
  
• ISE Sentiment Index 75.0 -15.73%
  
• Total Put/Call .94 -6.0%
  
• NYSE Arms .94 +.98%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 118.05 -.88%
  
• European Financial Sector CDS Index 287.10 -1.61%
  
• Western Europe Sovereign Debt CDS Index 297.02 -1.03%
  
• Emerging Market CDS Index 296.95 -.50%
  
• 2-Year Swap Spread 23.50 +.25 basis point
  
• TED Spread 38.5 +.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -57.75 +.25 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .08% -1 basis point
  
• Yield Curve 131.0 -2 basis points
  
• China Import Iron Ore Spot $135.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index -60.90 +1.3 points
  
• 10-Year TIPS Spread 2.08 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +55 open in Japan
• DAX Futures: Indicating -1 open in Germany
  

Portfolio:

• Slightly Higher: On gains in my tech, medical and biotech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite Eurozone debt angst, rising energy prices, consumer discretionary sector weakness and rising global growth fears. On the positive side, Coal, Oil Tanker, Oil Service, Ag, I-Banking, Hospital, Construction and Homebuilding shares are especially strong, rising more than +1.25%. Small-cap stocks are outperforming. Copper is gaining +.8%. Major Asian indices were mostly higher overnight, led by a +1.03% gain in Hong Kong. However, Shanghai fell another -.23% and is down -3.64% in 5 days despite more talk of rate cuts and stimulus. Major European indices are rising about +1.25%, led by a +2.4% gain in Italy. The Bloomberg European Bank/Financial Services Index is gaining +2.48%. The France sovereign cds is down -1.3% to 198.0 bps, the Spain sovereign cds is down -1.5% to 587.33 bps, the UK sovereign cds is down -2.2% to 70.99 bps and the Japan sovereign cds is down -5.11% to 88.74 bps. Moreover, the European Investment Grade CDS Index is down -1.3% to 177.06 bps. On the negative side, Steel, Disk Drive, Telecom, HMO, REIT, Retail and Restaurant shares are lower-to-flat on the day. The UBS-Bloomberg Ag Spot Index is rising another +1.1%, Lumber is down -.3%, Oil is up +1.3% and Gold is up +.2%. The Citi Latin America Economic Surprise Index is falling to -12.9 today, which is the lowest since mid-Oct. of last year. Brazil is down another -1.0% today, is now down -6.8% in 5 days and is down -6.2% ytd, which is another red flag for the global economy. The Germany sovereign cds is gaining +.9% to 102.75 bps and the China sovereign cds is gaining another +.28% to 125.17 bps(+7.1% in 5 days). Moreover, the Spain 10Y Yld is rising +.8% to 6.93% and the Italian 10Y Yld is gaining +.4% to 6.2%. US weekly retail sales have decelerated to a sluggish rate at +2.3%, which is the slowest since the week of April 5th of last year. 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 -12.0% since its March 1st 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 -25.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +130.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -25.2% since May 2nd of last year. Overall, credit gauge deterioration remains a big worry as most key sovereign cds remain technically strong. The euro currency, oil, lumber and copper all continue to trade poorly given global central bank stimulus hopes, some better US economic data and recent stock gains. As well, the 10Y continues to trade too well as the yield is unch. today at 1.62%. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. Equity investors appear to be pricing in another big kick-the-can “solution” to the European debt crisis, which is surprising given how many disappointments we have seen out of these summits and the rapid deterioration in some key economies in the region. The Citi Eurozone Economic Surprise Index is at -90.50 points, which is the lowest since early-Sept. of last year. Moreover, 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. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. The "US fiscal cliff "will likely 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. I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. The declines in retail/restaurant shares today are noteworthy. 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 mixed-to-higher into the close from current levels on quarter-end window-dressing, short-covering, bargain-hunting and financial/homebuilding sector strength.

Today's Headlines

Bloomberg:

• Merkel Rebuffs Rajoy Plea, Shuts Door To Euro Area Bonds. German Chancellor Angela Merkel shut the door to joint euro-area bonds as a means of lowering Spain’s borrowing costs, saying they are the “wrong way” to achieve the greater European integration needed to stem the debt crisis. Speaking three hours after Spanish Prime Minister Mariano Rajoy made a plea for help from tomorrow’s European summit, Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.” “I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures,” Merkel told lower-house lawmakers in Berlin today. “Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured.” Merkel is under growing pressure from her European and global counterparts to soften her opposition to debt sharing in the euro area and do more to cut borrowing costs for Spain and Italy. Rajoy, outlining his goals for the two-day European Union summit beginning in Brussels tomorrow, said that Spain can’t go on financing itself at current borrowing rates for long. “The most important thing today is being able to finance ourselves in the markets, that’s the main issue,” Rajoy said in Parliament in Madrid. “And on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” using the “available instruments.”
• Spain Scraps Election Pledge as Worsening Slump Hits Deficit. Spain’s government is studying tax increases to rein in the budget deficit, including scrapping a rebate for homeowners that Prime Minister Mariano Rajoy introduced six months ago to meet a campaign pledge. The government needs to plug the deficit as data showed the central administration’s shortfall for the first five months approaching the full-year target and the Bank of Spain said the recession deepened in the second quarter. The government in Madrid may eliminate the tax rebate for mortgage holders and create environmental levies, Deputy Budget Minister Marta Fernandez Curras said yesterday. Spain’s six-month old government enacted two election pledges at its second Cabinet meeting in December, raising pensions and restoring the rebate for homeowners scrapped by the previous administration. That policy is now in danger after the government already broke campaign promises by cutting firing costs and raising income tax as it battles the deficit amid a recession. The yield on Spain’s benchmark 10-year bond rose for a third day, reaching 6.93 percent at 3:49 p.m. in Madrid, compared with 6.38 percent on June 22. The spread with similar German maturities widened to 541 basis points from 536 basis points yesterday.
• Spanish Yield Curve Flattening May Sink Euro: Technical Analysis. Trading patterns suggest a flattening of the yield curve for Spanish sovereign debt to levels last seen in November would push the euro to less than $1.2288, according to Citigroup.
  
• China's Stocks Fall for 6th Day After Daiwa Cuts Growth Estimate. China’s stocks fell for a sixth day, the longest losing streak in six months, after Daiwa Securities Group Inc. cut its second-quarter growth estimate for the world’s second-biggest economy. Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co. led a gauge of material producers lower on the prospect of weaker demand. Shanxi Coal International Energy Group Co. (600546) dropped to the lowest level since August 2010 after the board approved the resignation of its chairman. China Oilfield Services Ltd. (2883) and Offshore Oil Engineering Co. jumped more than 6 percent on expectations oil equipment makers will benefit after Cnooc Ltd. invited bids for oil blocks. “The market is bearish on the long-term outlook for China’s economic growth and we haven’t seen a new driver for the economy emerge so far,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million.
• Copper Backwardation Widens as One Firm Holds 40-49% of Stocks. Copper for immediate delivery rose to $20 a metric ton more than the three-month contract after the LME reported one unidentified company holds almost half of copper stockpiles in warehouses. The so-called backwardation, signaling limited supplies in the near future, was the most since May 28 by 3:18 p.m. in London. One company held 40-49% of copper worth at least $669 million and stored in LME warehouses by June 25, the LME's daily Warrant Banding Report showed. Inventories in LME-approved warehouses have climbed 10% this month, heading for the first monthly increase since September.
• Iron-Ore Price Forecast Lowered by Australia as China Cools. Australia, the world’s biggest iron ore exporter, cut its price forecast and said rates may decline 11 percent from last year as slowing growth in China, the largest buyer, curbs demand. The steelmaking raw-material will average $136 a metric ton in 2012, the Bureau of Resources and Energy Economics said in a report today. That compares with $140 estimated by the Canberra- based bureau in March and an average of $153 last year. Shipments from the country may total 479 million tons, down from the 493 million tons predicted in March, it said. Prices dropped 2.2 percent this year as the Chinese economy expands at the slowest pace since 2009 and Europe’s debt crisis threatens global growth.
• Oil Pares Gain on Gasoline Supply Increases. Oil futures pared gains after the Energy Department said gasoline stockpiles increased more than twice as much as expected last week. Gasoline inventories climbed 2.08 million barrels as refineries raised their production levels to a five-year high, Energy Department data showed. Stockpiles were forecast to gain 1 million barrels, according to a Bloomberg survey. Crude inventories fell less than expected. Crude oil for August delivery advanced $1.12, or 1.4 percent, to $80.48 a barrel at 12:22 p.m. on the New York Mercantile Exchange. Oil traded at $80.69 a barrel before release of the inventory report at 10:30 a.m. Earlier, it touched $80.92. Brent oil for August settlement increased 72 cents, or 0.8 percent, to $93.74 a barrel on the London-based ICE Futures Europe exchange, after surging 2.2 percent yesterday. Gasoline stockpiles increased to 204.8 million barrels in the week ended June 22, the highest level since May 4, the Energy Department reported. Refineries raised their utilization rate to 92.6 percent, up from the previous week’s 91.9 percent and the highest level since July 2007, the report showed.
• Slowdown Concern Ebbs on Durable Goods, U.S. Home Sales. Orders for durable goods and the number of Americans signing contracts to buy an existing home rebounded in May, easing concern the world’s largest economy is faltering. Bookings for goods meant to last at least three years rose 1.1 percent, the first increase since February, a Commerce Department report showed today in Washington. Pending home sales climbed 5.9 percent after slumping 5.5 percent in April, according to data from the National Association of Realtors.
• Older Workers In U.S. Drive Competition In Labor Market. About 74 percent of Americans say they plan to work past age 65, according to a May study by economists Jay Bryson and Sarah Watt of Wells Fargo Securities LLC in Charlotte, North Carolina. Thirty-nine percent said they need to earn to make ends meet or maintain their lifestyle, and 35 percent wanted to stay employed. “Many seniors simply aren’t in a position to retire,” said Watt, whose research was based on a Wells Fargo retirement survey done in 2011. “More people are hanging on to the job longer,” she said, as a result of the recession and some longer-term trends.
• Facebook(FB) Analysts See Shares Staying Less Than $38 IPO Price.
• Arena's(ARNA) Weight-Loss Pill Approved By U.S. Regulators. Arena Pharmaceuticals Inc. (ARNA) won Food and Drug Administration approval of its weight-loss pill lorcaserin, making it the first obesity medication cleared for sale in the U.S. in 13 years. Arena gained backing to market the treatment, dubbed Belviq, which affects an area of the brain that helps a person eat less and feel full after consuming small amounts of food, the FDA said today in a statement. Arena has licensed the medicine to Tokyo-based Eisai Co. (4523) to sell in the U.S.
• Japan Sales Tax Risks Growth Grinding to Halt in 2014: Economy. Japan’s Prime Minister Yoshihiko Noda risks stalling the economy by pushing through a higher sales tax that may damp consumption even as it aids efforts to tame the world’s largest debt burden. The nation’s recovery after last year’s earthquake and tsunami could grind to a halt in 2014 when the first increase will take effect, according to UBS AG and Itochu Corp. (8001)

Wall Street Journal:

• Live From Google(GOOG) I/O: A Tablet, a Streaming Media Player and More.
  

CNBC.com:

• McDonald's(MCD) comp. sales haven't necessarily bottomed out for the year, CEO Jim Skinner said in an interview.
• Europe's Worst Nightmare: What If Euro Can't Be Saved? Here's a nightmare for Europe's leaders to ponder as they prepare for yet another summit to tackle the euro zone crisis: a bond auction fails in Spain, spreading solvency worries to Italy and beyond and triggering uncontrollable bank runs that spell the single currency's end.
• Merkel Says No Rash Decisions as Spain Sounds Alarm. German Chancellor Angela Merkel said on Wednesday, one day before a crunch European Union summit, that there were no quick or easy solutions to end the euro zone's debt crisis and leaders should avoid making rash promises they could not keep.
• US Mortgage Applications Fell Last Week. Applications for U.S. home mortgages fell last week as refinancing applications for government loans slowed, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.1 percent in the week ended June 22. The MBA's seasonally adjusted index of refinancing applications decreased by 8.3 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell by 1.4 percent.

Business Insider:

• Check Out Huge Photos Of Google's Brand New Nexus Tablet.
• A Map Of The US States Most Affected By Cancer.
• UBS: 15 Stocks That Investors Are Shorting Like Crazy.
• DEADLOCK LOOMS IN ITALY As Monti Threatens Resignation And Berlusconi Wants Euro Exit.
• Chinese Corporations Are Massively Short The US Dollar.

Zero Hedge:

• Shocking Details Of Barclays Epic Lie-bor Fraud: "Duuuude…Whats Up With Ur Guys 34.5 3m Fix…Tell Him To Get It Up!"
• Where Has All The EUR Tail-Risk Gone?
• Presenting Europe's 'Over-Indebtedness' Roadmap To Catastrophe. (graphs)
  
• The Breathless (And Baseless) Bailout Hope.

Reuters:

• Peabody Energy(BTU) cuts 2012 capex amid weak coal demand. Peabody Energy Corp, the largest U.S. coal miner, cut its capital budget for the year by about 8 percent at a time when demand for U.S. thermal coal remains weak.

Telegraph:

• Angela Merkel isn't bluffing; like everyone else in Europe, she's defending national sovereignty. You turn if you want to. The lady's not for turning. No, not Mrs Thatcher, but Angela Merkel, the latest big beast of the European political scene to dig her heels in and refuse to go along with the international consensus.
• Bob Diamond forgoes bonus as Barclays(BCS) fined for Libor manipulation. Barclays took part in an international conspiracy that could have meant customers paid millions more than they should have to borrow money from banks.
• David Cameron under pressure to veto EU power grab. David Cameron is under pressure to use his veto to block a EU power grab to supervise the City of London and to wrest wider concessions at a Brussels summit on Thursday.

Times:

• Infrastructure Spending Is No Panacea, HSBC's King Says. Infrastructure spending, the latest "big idea" for generating economic growth in Europe, is a road to nowhere, Stephen King, the chief economist at HSBC Holdings Plc, wrote. Whatever else has been lacking in southern Europe, it has not been a willingness to spend on infrastructure, as the new airports at Athens and Madrid demonstrate, he said. Spain has made a colossal investment in high-speed rail and its ambition is to construct a 6,000-mile high-speed network by 2020, the world's densest relative either to land mass or population size, King said. If infrastructure investment equals economic salvation, it may be asked why Greece's economy has shrunk by 16% in the past 2 years, and why youth unemployment in both Greece and Spain is above 50%, he said.
  

Europa:

• Employment: Quarterly Review shows EU labour market and social situation continues to deteriorate.

L'Hebdo:

• German Finance Minister Wolfgang Schaeuble said introducing euro bonds would prompt countries to spend more, citing an interview. "Anyone who has the possibility to spend money at the expense of others will not hesitate to do so," he said. "You would, I would. The markets know that. And that is why you would not be convinced either by euro bonds."
  

Folha de S. Paulo:

• Silval Barbosa, governor of the Brazilian state of Mato Grosso, signed a letter of intent with China Development Bank Corp. to build a railroad between the state's capital Cuiaba and the city of Santarem in the state of Para, citing the Mato Grosso government. The bank agreed to lend $10 billion for the project in return for products and services being imported from China.
  

Bear Radar

Style Underperformer:

• Large-Cap Growth +.39%

Sector Underperformers:

• 1) Restaurants -1.72% 2) Retail -1.01% 3) Steel -.52%

Stocks Falling on Unusual Volume:

• ORLY, AZO, CMG, TSCO, ROST, JWN, PNRA, DLTR, HNR, WIN, PWE, OMER, MNRO, QSII, SHFL, HAS, TNGO, SHOO, AT and GPC
  

Stocks With Unusual Put Option Activity:

• 1) MAKO 2) CTXS 3) MON 4) HRB 5) RSH
  

Stocks With Most Negative News Mentions:

• 1) JWN 2) M 3) SKS 4) MCD 5) XOM
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.77%

Sector Outperformers:

• 1) Coal +2.90% 2) Homebuilding +2.79% 3) Oil Tankers +1.36%

Stocks Rising on Unusual Volume:

• BBG, EVEP, GEOY, LORL, AMRN, AVAV, LNCR, WPRT, UIS, SSYS, COG, LEN, NSM, RRC and TOL
  

Stocks With Unusual Call Option Activity:

• 1) ACAS 2) COG 3) AMRN 4) GIS 5) LNCR
  

Stocks With Most Positive News Mentions:

• 1) AVAV 2) UNH 3) BA 4) LMT 5) UIS
  

Charts:

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