Bear Radar

Style Underperformer:

• Large-Cap Value -.53%

Sector Underperformers:

• 1) Homebuilding -2.12% 2) Airlines -1.82% 3) REITs -1.63%

Stocks Falling on Unusual Volume:

• TSU, TI, LHO, GHL, DLR, AXP, UNH, WMT, SMCI, AN, POOL, VVUS, JOBS, XLNX, SCHL, EWBC, UMPQ, ISIS, PACW, AKRX, WERN, NAFC, THRX, SSYS, PCYC, WFM, ORLY, EQIX, HOMB, DGX, SYK, WCC, URI, SON, DY, LTM, UMPQ, CVS, LH, SWY, TCB and IRG
  

Stocks With Unusual Put Option Activity:

• 1) KGC 2) ALU 3) WAG 4) SHW 5) COF
  

Stocks With Most Negative News Mentions:

• 1) MS 2) TEX 3) LH 4) F 5) FDX
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.78%

Sector Outperformers:

• 1) Computer Services +2.88% 2) Semis +2.40% 3) Internet +2.29%

Stocks Rising on Unusual Volume:

• EBAY, FIO, TZOO, SWC, MDRX, IBM, FCX, JCP, CHU, MLNX, ROVI, SWKS, SCSS, AMRN, QCOM, DISH, BRCM, RVBD, GGC, WAG, TXT, VFC, CRUS, COF, CVC, PPG and CCK
  

Stocks With Unusual Call Option Activity:

• 1) LSI 2) ALU 3) WAG 4) CVC 5) EBAY
  

Stocks With Most Positive News Mentions:

• 1) LMT 2) ATHN 3) SWK 4) NFX 5) EL
  

Charts:

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

Thursday Watch

Night Trading

• Asian equity indices are +.25% to +1.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 163.0 -4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 135.0 -.5 basis point.
  
• FTSE-100 futures +.34%.
  
• S&P 500 futures +.29%.
  
• NASDAQ 100 futures +.50%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FCS)/.16
• (DO)/.91
• (BBT)/.70
• (KEY)/.18
• (GPC)/1.07
• (TRV)/1.32
• (ADS)/1.91
• (DGX)/1.17
• (AN)/.59
• (UNH)/1.20
• (DHR)/.80
• (LUV)/.32
• (FITB)/.35
• (PM)/1.35
• (VFC)/.94
• (JCI)/.66
• (BAX)/1.11
• (MS)/.29
• (VZ)/.64
• (UNP)/1.97
• (FCX)/.74
• (SHW)/2.12
• (BX)/.11
• (PPG)/2.36
• (SWY)/.49
• (NUE)/.48
• (CMG)/2.30
• (SNDK)/.18
• (ETFC)/.11
• (ISRG)/3.57
• (MSFT)/.62
• (GOOG)/10.15
• (NCR)/.57
• (AMD)/.07
• (CY)/.18
  

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 365K versus 350K the prior week.
• Continuing Claims are estimated to fall to 3300K versus 3304K prior.

10:00 am EST

• Philly Fed for July is estimated to rise to -8.0 versus -16.6 in June.
• Existing Home Sales for June are estimated to rise to 4.62M versus 4.55M in May.
• Leading Indicators for June are estimated to fall -.1% versus a +.3% gain in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Bloomberg weekly Consumer Comfort Index and the Bloomberg Economic Expectations Index for July could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity 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 Global Central Bank Stimulus Hopes, Tech Sector Strength, Short-Covering, Technical Buying

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.97 -3.09%
  
• ISE Sentiment Index 77.0 -36.79%
  
• Total Put/Call .90 +7.14%
  
• NYSE Arms 1.05 +34.01%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 108.77 -2.11%
  
• European Financial Sector CDS Index 268.94 bps -3.01%
  
• Western Europe Sovereign Debt CDS Index 263.12 +.38%
  
• Emerging Market CDS Index 254.93 +2.08%
  
• 2-Year Swap Spread 23.75 +.5 basis point
  
• TED Spread 36.75 +1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -45.75 +1.5 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% -1 basis point
  
• Yield Curve 127.0 +2 basis point
  
• China Import Iron Ore Spot $128.30/Metric Tonne -.85%
  
• Citi US Economic Surprise Index -61.10 +1.2 points
  
• 10-Year TIPS Spread 2.08 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +44 open in Japan
• DAX Futures: Indicating +3 open in Germany
  

Portfolio:

• Slightly Higher: On gains in my Biotech, Retail and Tech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, 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 rising eurozone debt angst, financial/homebuilding sector weakness, rising food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Oil Tanker, Oil Service, Software, Computer, Semi, Disk Drive, Networking and Computer Service shares are especially strong, rising more than +1.0%. Cyclical and tech shares have traded well throughout the day. Gold is falling -.35% and Copper is gaining +.5%. Major European indices are higher, boosted by a +1.8% gain in France. Spain and Italy are not participating in the recent equity rally, falling -3.2% and -1.9%, respectively, over the last week. The Bloomberg European Bank/Financial Services Index is rising +.9% today, but is -1.9% lower over the last 5 days. Brazil is gaining +.9%. The European Investment Grade CDS Index is down -2.3% to 162.4 bps. On the negative side, Telecom, Bank, I-Banking, Homebuilding, REIT, Education and Airline shares are under mild pressure, falling more than -.5%. Financial and Homebuilding shares have traded heavy throughout the day. Oil is up +.85%, Lumber is falling -.6% and the UBS-Bloomberg Ag Spot Index is surging another +1.1%. The UBS-Bloomerg Ag Spot Index is up +26.0% in about 6 weeks. The 10Y T-Note Yld is falling another -2 bps to 1.49%. Major Asian indices were mostly lower last night, led down by a -1.5% decline in South Korea. The Shanghai Property Stock Index fell -3.3% overnight and is down -7.0% in 9 days despite China stimulus hopes. The China benchmark Iron/Ore Spot Price Index has broken down again technically, falling -14.1% since April 13th. As well, the China Hot Rolled Steel Sheet Spot Index is also picking up downside steam, falling -19.1% since Sept. 14 of last year. The Germany sovereign cds is rising +.8% to 75.16 bps, the France soverein cds is jumping 4.8% to 168.91 bps, the Spain sovereign cds is up +2.1% to 576.67 bps, the Italy sovereign cds is gaining +1.3% to 511.33 bps, the UK sovereign cds is gaining +2.2% and the Israeli sovereign cds is jumping +5.0% to 159.0 bps. Moreover, the Italian/German 10Y Yld Spread is rising +1.3% to 487.45 bps and the Spain 10Y Yld is rising +2.0% to 6.96%. US weekly retail sales have decelerated to a sluggish rate at +2.0%, which is the slowest since the week of April 5th of last year. US Trucking Traffic continues to soften. Moreover, the Citi US Economic Surprise Index has fallen back to late-Aug. levels. Lumber is -4.0% 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 -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -29.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +165.0% ytd. Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 25.0 industry-standard worldscale points, which is the lowest since Oct. 2009. The CRB Commodities Index is now down -18.8% since May 2nd of last year despite the recent surge in food prices. Spanish and Italian yields are back in the danger zone. Copper, lumber and the euro currency remain in intermediate-term downtrends. Oil is trading better of late, however given today's equity rally, global central bank stimulus hopes and a spike in Mid-East violence, today's gains were rather muted. The 10Y T-Note continues to trade too well, which remains a big red flag. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The European Investment Grade CDS Index, European Financial Sector CDS Index, Spain sovereign cds and Italian cds, among others, have given back little of their April/May gains and appear to be consolidating before another push higher. The Citi Eurozone Economic Surprise Index is at -68.90 points, which is near the lowest since mid-Sept. of last year. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed. 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. I continue to believe the bar for additional QE is likely higher than the Fed is letting on. If the Fed embarks on another misguided round of QE, which seems to be what investors expect, the Ag Spot Index should push through its Aug. 31, 2011 all-time high. This would likely also lead to another surge in energy prices as it would spur another bout of rioting in the Middle-East. As well, it would greatly curtail any emerging markets stimulus plans, in my opinion. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff " and the election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. The major averages continue to power higher off their recent lows, however the rally remains poor in quality. Volume, breadth, leadership, big volume/gainers are all lacking. Some stocks that reported disappointing results are rising today, which is a noteworthy change. There is a growing disconnect between US equity action and the deteriorating macro environment that is eerily similar to last July, in my opinion. The macro likely must begin improving very soon for equities to avoid a similar fate into the fall. 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-lower into the close from current levels on rising eurozone debt angst, earnings worries, rising food/energy prices, rising global growth fears, more shorting, financial/homebuilding sector weakness and US "fiscal cliff" concerns.

Today's Headlines

Bloomberg:

• IMF Calls on Euro Authorities to Stand Behind Deposit Insurance. The International Monetary Fund called on the European Central Bank and euro-area authorities to stand behind deposit insurance within the currency area to help a common backstop take effect and forestall bank runs. European leaders should make banking union their immediate priority in the efforts to fight the debt crisis, the IMF said in staff reports today related to its annual review of the euro area. The Washington-based lender called for a rapid announcement of a timetable toward common deposit insurance, initially supported by the ECB or some other joint resource until it could eventually be funded by the banks. Existing bank backstops are nationally based and don’t go far enough to reassure customers that their money is safe, the IMF staff said. Cross-border deposit insurance, preferably accompanied by a centralized bank resolution agency, would keep weaker nations from running up against insolvency if their largest lenders run into difficulties.
• Merkel Adviser Calls Political Union Unrealistic, FAZ Says. A political union in Europe that allows for the joint issue of bonds is unrealistic, Claudia Buch, a member of Chancellor Angela Merkel’s council of economic advisers, told Frankfurter Allgemeine Zeitung. “Euro bonds in the framework of a political union, with joint control and a surrendering of fiscal powers, would be theoretically an alternative in the long term,” Buch told the newspaper. “But this way seems politically unrealistic.” Buch, an economist at the University of Tuebingen who replaced Beatrice Weder di Mauro on the panel earlier this year, promoted the debt-redemption fund as an alternative to European Central Bank monetization of sovereign debt, FAZ said.
• Credit Suisse Plans $15.6 Billion Capital Increase. Credit Suisse Group AG (CSGN) Chief Executive Officer Brady Dougan succumbed to pressure from the central bank and senior executives within his firm to increase capital by 15.3 billion francs ($15.6 billion). The lender will also cut an additional 1 billion francs in costs by the end of 2013, the Zurich-based bank said in a statement today. Second-quarter net income rose 2.6 percent to 788 million francs from a year earlier, the company said. Credit Suisse shares rose as much as 6.8 percent.
• Ibrahimovic’s Paris Saint-Germain Salary to Trigger 75% Tax. “These sums are astronomic and unreasonable,” Fourneyron told journalists after a meeting of the French cabinet in Paris. “They’re among the things that we can deplore today in football, the complete lack of regulation.”
• Corn Seen Rallying to Record $8.50 as Drought Kills Crops. Corn may rally to a record $8.50 a bushel as the worst U.S. drought in decades cuts production in the world’s biggest exporter, driving global stockpiles lower, according to broker Newedge USA LLC.
• BofA(BAC) to Cut Another $3 Billion in Expenses. Bank of America Corp., the second- biggest U.S. lender, plans to trim $3 billion in annual expenses from investment banking, trading and wealth-management units. The cuts, which are expected to be completed by the middle of 2015, represent 11 percent of expenses in the targeted areas, the Charlotte, North Carolina-based bank said today in a presentation on its website. The initiatives have already begun, the lender said, without specifying the number of job cuts, which are part of a larger effort to reduce costs by $8 billion.
• Bernanke Says Fed Will 'Take Away The Punch Bowl' When Needed. Federal Reserve Chairman Ben S. Bernanke said U.S. central bankers are capable of removing record stimulus from the financial system and raising interest rates when needed to avoid triggering inflation. “It will be a similar pattern to what we’ve seen in previous episodes where the Fed cut rates, provided support for the recovery, and when the recovery reached a point of takeoff where it could support itself on its own, then the Fed pulled back, took away the punch bowl,” Bernanke told the House Financial Service Committee today in Washington as part of his semi-annual testimony to Congress.
• Home Starts in U.S. Rise to Highest Level Since 2008: Economy. Housing starts rose 6.9 percent to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate.
• Temporary Work Demand Rises as Companies Avoid Commitments: Jobs. Create-A-Pack is among a growing number of businesses turning to staffing companies for temporary workers, reflecting employer concern about the U.S. economic outlook. The number of people on the payrolls of temp-staffing businesses grew 10.7 percent in June to 2.5 million from a year earlier, the biggest increase since May 2011, based on data from the Labor Department. Demand for temporary employees is gaining momentum as companies seek more flexible staffing arrangements, according to Tobey Sommer, director of equity research in Nashville at SunTrust Robinson Humphrey Inc. This has helped create a shift within the labor force, as a “not-easily-forgotten recession” has made many executives cautious about hiring, he said.

Wall Street Journal:

• India’s Economic Data Losing Credibility. Can India’s economic data be trusted? Economists and investors say they are finding it increasingly hard. “Market participants are not able to decide what to make of this data,” said Brinda Jagirdar, economist at the State Bank of India. Frequent and sharp revisions in inflation and factory output data—key determinants of monetary policy—have confounded experts in recent months.
• Staples vs. Solyndra. Mitt Romney needs to make a better argument for Bain capitalism.
  

MarketWatch:

• Palo Alto Networks raises IPO price range.

CNBC.com:

• Greek Leaders Push Back Decision on Austerity Cuts.
• Are Spain’s Banks, Bailouts and Bonds Breaking Europe? Opposition to Spain’s bailout from Holland and Finland, continued German resistance to Eurobonds, the possibilities of fiscal union out of sight and arguments growing over who owns Spain’s debt are a signal that the recent EU summit has resolved nothing, senior economists told CNBC.
• Forcing the Rich to Bail Out Europe. To many in Europe, the Continent has two big economic problems: Huge debt, and high inequality between the rich and the rest. Now some politicians are advocating a plan to solve both.

Business Insider:

• Insurgents Blow Up 22 NATO Trucks On A Crucial Land Route Into Afghanistan.
• FED SAYS MANUFACTURING AND RETAIL SPENDING SUFFERED LAST MONTH.
• The Credit Profile Of Every US State [Infographic].
• EL-ERIAN: The Risk Of Collateral Damage And Unintended Consequences Caused By The Fed Is Material And Growing.
• China's Biggest Companies Warn Of Profit Plunges Up To 80%.

Zero Hedge:

• Revenues And Earnings: Another "Decoupling".
• City Of Compton Next On The Muni Bankruptcy Deck.
• 2 Buses With 40 Israeli Tourists Blow Up At Bulgarian Airport.
• Netanyahu Accuses Iran Of Being Behind Bulgarian Bus Explosion, Promises "Strong Response".
• Santelli Slams "It's Not My Job" Bernanke And Screams "Enough Is Enough".

Reuters:

• Syrian army helicopters bombard districts in Damascus. Syrian army helicopters fired machineguns and in some cases rockets at several residential districts of Damascus as President Bashar al-Assad's forces fought rebels across the capital on Wednesday, residents and activists said.
• World Bank chief warns no region immune to European crisis. World Bank President Jim Yong Kim on Wednesday warned that most regions of the world will be hurt by the debt crisis enveloping the euro zone and said it was vital to protect the strong economic gains of the past decade in the developing world.
• U.S. money fund lending to euro zone fell faster in June. U.S. money market funds pulled money out of the euro zone at a faster pace in June as concerns about the region's debt crisis accelerated, with banks that contribute to the scandal plagued Libor rate in the region among the hardest hit, Credit Suisse said in a report.

Financial Times:

• Prepare for an Even Bigger U-Turn From Ms. Merkel. With Mr Hollande, the risk of France herself becoming a bailout candidate is rapidly growing. While Germany has extended the retirement age to 67, Mr Hollande has started reducing it from 62 to 60. Though France’s youth unemployment rate is four times higher than Germany’s, Mr Hollande has raised the minimum wage to a record level. Last year, the French budget deficit ratio was more than three times as high as Germany’s. There is to be no austerity programme to speak of in France. More and more Germans are discovering that Europe may speak German, but that it acts French. Since Ms Merkel’s U-turn in agreeing to a special bailout arrangement for Spanish banks, the mood in her country has changed. Two hundred economists protested in an open letter to German citizens. Even the German constitutional court believes that enough is enough. In an unprecedented move, the judges publicly asked Germany’s president to withhold his signature under the ESM. Should the court rule that further shifts of power to Brussels are subject to a referendum or should Finland opt to leave the euro, Ms Merkel might face her second “Fukushima”. Remember that after the tsunami hit Japan, it took Ms Merkel just a few days to abandon her energy policy and announce a departure from nuclear energy altogether. When opinion polls showed support for nuclear energy had plunged, she executed the fastest policy change in recent German history. Despite her usual European rhetoric, she didn’t even consult with the French, although they were severely affected by her unilateral action. If a German referendum on Europe became one on the euro instead, she might face similar pressure. That could result in another spectacular policy U-turn, this time on the euro.

Telegraph:

• Germany’s twin euro-martyrs tell Merkel to put up or break up.
• IMF urges action as eurozone enters 'critical' phase. The eurozone is in “critical” danger and the European Central Bank must do more to drag it from the depths of the crisis, the International Monetary Fund has warned.
• Germany could derail eurozone bailout fund, warns ECB's Joerg Asmussen. A senior European Central Bank official has expressed concern that Germany's top court could derail the eurozone's new bailout fund.

De Telegraaf:

• The Netherlands is studying the possibility of getting a collateral deal with Spain in the bailout of banks following Finland's example, citing a spokesman of the Dutch Finance Ministry.
  

The Prodigal Greek:

• A Tragic Common Fate Looms for Greece, Portugal and Spain.
  

O Globo:

• Brazilian public-servant strikes are the main concern of the government's economic team as meeting workers' demands could put at risk the target to expand above 2% this year.
  

Bear Radar

Style Underperformer:

• Large-Cap Value +.38%

Sector Underperformers:

• 1) I-Banking -1.10% 2) REITs -.80% 3) Homebuilding -.73%

Stocks Falling on Unusual Volume:

• DLR, AUQ, GG, BAC, HBC, QSII, SN, AMT, LLL, DLB, MDRX, ABB, ROVI, SSNC, SUSS, AGNC, IBKR, MBFI, ACHC, INTX, JOBS, LBTYK, BPOP, NTRS, EQIX, ACIW, ARNA, STJ, NRP, KCG, URI, SBH, MD and SN
  

Stocks With Unusual Put Option Activity:

• 1) DHR 2) PNC 3) URI 4) BRK/B 5) FXA
  

Stocks With Most Negative News Mentions:

• 1) ROVI 2) IBKR 3) STT 4) BAC 5) COF
  

Charts:

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