Wednesday Watch

Evening Headlines 
Bloomberg: 

• Spain Says 2014 Taxes to Depend on EU Verdict on Deficit Targets. Spain’s government is waiting for the result of negotiations with the European Union on its budget deficit goals before deciding on its tax policy for 2014. ’’Tax decisions for 2014 haven’t been taken yet and will obviously depend on negotiations with the European Commission and other EU partners,’’ Budget Minister Cristobal Montoro said during a conference in Madrid yesterday. ’’It will all depend on the deficit targets that are established and on their underlying economic assumptions.’’

• EU Financial Transaction Tax Seen Costing Britain $6 Billion. The European Union’s planned tax on financial transactions could add 3.95 billion pounds ($6 billion) to the cost of issuing U.K. government debt, according to a report commissioned by the City of London Corporation.

• Verizon(VZ) Denies Report That It’s Considering a Bid for Vodafone(VOD). Verizon Communications Inc. denied that it’s considering a bid for Vodafone Group Plc, disputing a report that said it was discussing a plan with AT&T Inc. to make a joint offer for the U.K. carrier. 

• Euro Remains Lower Before ECB Meeting; Aussie Dollar Advances. The euro remained lower following a drop yesterday amid speculation the European Central Bank will use its meeting tomorrow to signal future economic stimulus.

• Asia Soaring Wages Stoke Inflation as Factory Costs Rise.

• Suntech Unit Bankruptcy Had Roots in Deadbeat Customers. Suntech Power Holdings Co. (STP), forced to put its Chinese solar unit into bankruptcy last month, began that slide into insolvency in 2009 when customers linked to the founder couldn’t pay their bills and the company booked the sales as revenue anyway, regulatory filings show. 

• Asian Stocks Drop a Third Day, led by Raw-Material Shares. Asian stocks dropped for a third day as a decline in shares of raw-material producers offset a surge in Japanese equities as the central bank began a two-day policy meeting. The MSCI Asia Pacific Index (MXAP) slid 0.2 percent to 133.58 as of 11:27 a.m in Tokyo, reversing an earlier advance of as much as 0.3 percent.

• Kim Vows Increased Climate-Change Role to Help Ease Poverty. World Bank President Jim Yong Kim vowed to boost the lender’s contribution to easing the effects of climate change as part of a new goal to eliminate extreme poverty by 2030. Helping mitigate shocks, including those caused by global warming, is one of the conditions needed to reach the poverty reduction target, Kim said in a speech at Georgetown University in Washington today. Also required is sustained fast growth in regions such as sub-Saharan Africa and reduced income inequality, he said. 

• WTI Crude Drops as U.S. Oil Stockpiles Gain. West Texas Intermediate fell for the second time in three days after an industry-funded report showed U.S. crude stockpiles increased the most in four weeks and a government order prevented the restart of a pipeline to the Texas Gulf Coast. Futures slipped as much as 0.7 percent in New York after climbing 0.1 percent yesterday.

• Iron Ore Prices Seen Falling Through Q3 2014 on Supply, NAB Says. New iron ore supply outpaces increases in steel output and will probably push prices lower through third quarter of 2014, National Australia Bank says in report today. Prices to fall to $115/t in final quarter this year vs $127/t in second quarter, analysts James Glenn and Rob Brooker say. Forecasts $100/t in third and final quarters of 2014.

• Obama Control-Tower Shutdowns Spur Mounting Airport Suits. Airports that serve Ohio State University and the headquarters of State Farm Mutual Automobile Insurance Co. joined a lawsuit offensive to stop the U.S. from shutting air-traffic control operations as part of government- wide spending cuts. Since the first suits were filed in federal appeals courts in Manhattan and Washington last week, at least eight more airports brought cases challenging closures scheduled to begin April 7. They include the Central Illinois Regional Airport in Bloomington, where State Farm is based, which handled more than 579,000 passengers in 2011, and the Ohio State University airport in Columbus. “I’ve never seen an issue galvanize people like this,” Spencer Dickerson, executive director of the Alexandria, Virginia-based Contract Tower Association, said in an interview. “The administration made the closing of control towers the poster-child for sequestration.”  

• Kerry: North Korean Reactor Restart Provocative Act. U.S. Secretary of State John Kerry said it would be a “serious step” if North Korea violates its obligations by following through on a threat to restart nuclear facilities shut by a 2007 disarmament accord. The U.S. is committed to defending itself and its allies and “will not be subject to irrational or reckless provocation” by North Korea, Kerry said yesterday after meeting in Washington with South Korean Foreign Minister Yun Byung Se. “If they restart their nuclear facility at Yongbyon, that is in direct violation of their international obligations,” Kerry said. “It would be a provocative act.”

Wall Street Journal: 

• Seoul Seeks Ability to Make Nuclear Fuel. South Korea is pressing the Obama administration for U.S. permission to produce its own nuclear fuel, a move that nonproliferation experts said could trigger a wider nuclear-arms race in North Asia and the Middle East. The negotiation between Seoul and Washington, though part of a broader, long-term civilian nuclear cooperation agreement, is taking place as nuclear pressures swell on both sides of the Korean peninsula. North Korea has expanded its atomic-weapons capability in recent months. It announced Tuesday that it was reopening a reactor complex used to harvest weapons-grade plutonium. Those actions have fueled calls in South Korea for the government in Seoul to respond by developing its own atomic-weapons capability.

• SEC Embraces Social Media. New Way to Make Disclosures Gets Go-Ahead if Investors Are Told Where to Look.

• Poll: Americans’ Top Conspiracy Theories, Revealed. PPP’s conspiracies poll released Tuesday includes looks at long-held theories, as well as contemporary items that play a role in political debates today.

• Silver Bears Pounce as Manufacturing Sputters. Silver prices plunged deeper into bear-market territory, as weak manufacturing data from the world's major economies stoked investor fears that the metal's gradual decline this year is turning into a rout. Silver has shed over 20% of its value since October and its losses this year surpass most other commodities, including gold.

• The Strange Maths of Tesla’s $500/month Model S. Great news for those who have been coveting the 2013 Car of the Year but can’t quite pony up the $60,000+ price tag: the Tesla Model S now has a lease option, announced today after some online hype from founder Elon Musk.

• Arkansas Water System to Ask Exxon(XOM) to Move Its Pipeline. Arkansas officials plan to ask Exxon Mobil Corp. to move a portion of its Pegasus Pipeline to ensure safe drinking water, after thousands of barrels of oil last week spilled from the pipeline into a small-town neighborhood. 

• Half of Hedge Funds Think Their Competitors Are Cheating. Hedge-fund employees seem to agree with federal authorities that their industry needs to clean up its act. Almost half of hedge-fund professionals believe their competitors are engaged in illegal activity and more than a third say they have felt pressure to break rules at work, according to an online survey released Tuesday. Meanwhile, 30% of respondents said they had witnessed misconduct on the job.
  

Fox News:

• Senators vow to oppose UN arms trade treaty. Republican senators -- joined by at least one Democrat -- ripped the international arms trade treaty approved Tuesday by the U.N. General Assembly, calling it a "non-starter" and vowing to oppose Senate ratification. The treaty approved Tuesday was the first of its kind. The resolution was approved at the U.N. by a vote of 154 to 3 with 23 abstentions. But in the U.S. Senate, which must ratify the treaty in order for the United States to be a party to it, opposition is much stronger. 

MarketWatch.com:

• SEC social media ruling could invite scams. Commentary: Look for fraudsters to try and move markets.

• Hollande is missing in action during Cyprus crisis. Commentary: ‘Latin empire’ needed to counterbalance Germany.

Zero Hedge: 

• The 'Walking Dead' Housing Recovery - Zombie Foreclosures.

• Three Macro Monetary Morphine Charts.

• The Four Traits Of Monetary Union Collapse.

• Oil Tanker Market In "State Of Panic" As Charter Rates Plunge, Cargoes Rejected. (graph)

• Biderman Nominates Krugman For 'The Big Lie' Award. (video)

Business Insider: 

• There Are Already Signs That US Economic Momentum Is Sputtering Out.

• There's A Fundamental Shift Going On In The US Labor Market.

• Hollande Is Reeling After 'Unpardonable' Hypocrisy From His Former Tax Chief.

New York Times:

• A Debate in the Open on the Fed. Federal Reserve officials regularly air their views in public speeches, but they rarely engage in public debates. On Tuesday night, two of the officials who disagree most sharply about the Fed’s current policy did just that. The exchange between Charles L. Evans, an outspoken advocate for the Fed’s efforts to stimulate the economy, and Jeffrey M. Lacker, the Fed’s most persistent internal critic, suggested their differences are as much a matter of temperament as economics.

Washington Post:

• Obama administration pushes banks to make home loans to people with weaker credit. The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place. President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

Telegraph: 

• Europe's leaders paralysed as EMU jobless rate hits record high. Eurozone unemployment reached a record 12pc in February and looks certain to ratchet higher as fiscal cuts deepen and manufacturing continues to struggle, raising the spectre of social explosion across southern Europe.

Yonhap News Agency: 

• NK-Kaesong entry ban. North Korea said Wednesday it will ban South Korean workers from entering the inter-Korean industrial park in Kaesong, only allowing South Koreans currently staying at the North's border town to return home. The abrupt entry ban came after Pyongyang threatened to shut down the Kaesong Industrial Complex and launch a pre-emptive nuclear war on Seoul and Washington over South Korea-U.S. joint military drills and U.N. sanctions for its latest nuclear test. There are 861 South Koreans and seven foreign workers staying at the Kaesong complex, home to 123 labor-intensive factories. The complex, the crowning achievement of the June 2000 inter-Korean summit meeting, also employs some 54,000 North Korean workers. The complex, located just north of the DMZ, is significant because it is the only economic link between the two Koreas after Seoul suspended most exchanges with the communist country after the sinking of one of its naval ships in the Yellow Sea in March 2010.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.75% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 119.0 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 96.75 -1.25 basis points.

• FTSE-100 futures -.33%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MON)/2.56

• (CAG)/.56

• (LNCR)/.61

• (JOSB)/.97

• (SCHN)/.25

• (AYI)/.62 

Economic Releases
8:15 am EST

• The ADP Employment Change for March is estimated to rise to 200K versus 198K in February.

10:00 am EST:

• The ISM Non-Manufacturing Composite for March is estimated to fall to 55.5 versus 56.0 in February.

10:30 am EST:

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,050,000 barrels versus a +3,256,000 barrel increase the prior week. Gasoline supplies are estimated to fall by -1,000,000 barrels versus a -1,596,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,100,000 barrels versus a -4,513,000 decline the prior week. Finally, Refinery Utilization is estimated to rise +.3% versus a +2.2% gain the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Williams speaking, Australia trade data and the weekly MBA mortgage applications report 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Short-Covering, Healthcare/Financial Sector Strength

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 13.08 -3.68%

• ISE Sentiment Index 92.0 +92.45%

• Total Put/Call .85 -15.84%

• NYSE Arms 1.02 -15.82%

Credit Investor Angst:

• North American Investment Grade CDS Index 88.13 -2.05%

• European Financial Sector CDS Index 184.73 -5.03%

• Western Europe Sovereign Debt CDS Index 104.33 -.65%

• Emerging Market CDS Index 269.17 -1.50%

• 2-Year Swap Spread 16.25 -.75 bp

• TED Spread 21.5 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -18.25 +1.0 bp

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.

• Yield Curve 162.0 +2 bps

• China Import Iron Ore Spot $136.10/Metric Tonne -.87%

• Citi US Economic Surprise Index 13.60 +1.4 points

• 10-Year TIPS Spread 2.52 unch.

Overseas Futures:

• Nikkei Futures: Indicating a +197 open in Japan

• DAX Futures: Indicating -8 open in Germany

Portfolio: 

• Slightly Higher: On gains in my Biotech/Medical/Retail sector longs and emerging markets shorts
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Euro-Area Unemployment Rises to Record 12% Amid Slump. The euro-area jobless rate rose to a record 12 percent in early 2013, adding to signs that the currency bloc’s recession extended into the first quarter. Unemployment in the 17-nation euro area was 12 percent in February and the January figure was revised up to the same level from 11.9 percent estimated earlier, the European Union’s statistics office in Luxembourg said today. That is the highest since the data series started in 1995 and matches the median estimate of 31 economists in a Bloomberg News survey.
• France to Apply 75% Tax to Soccer Players’ Compensation. “This new tax will cost first-division teams 82 million euros,” France’s Football League said in a statement. “With these crazy labor costs, France will lose its best players, our clubs will see their competitiveness in Europe decline, and the government will lose its best taxpayers.”
• European Stocks Climb to Two-Week High; Vodafone Gains. The Stoxx Europe 600 Index (SXXP) climbed 1.3 percent to 297.52 at the close of trading. The gauge added 5.8 percent in the first quarter as U.S. lawmakers agreed on a compromise budget and optimism grew that central banks around the world will continue stimulus measures to support an economic recovery.
• Black Hawks Near North Korea Show Risks in U.S. Command Shift.
• Raw-Material Bull Market Fading as Supply Expands: Commodities. At a time when U.S. equities are trading near a record and the dollar is having its best start in three years, commodities will finish this quarter little changed from where they were at the end of 2012. The Standard & Poor’s GSCI gauge of 24 raw materials will be at 644 at the end of June, 1.2 percent lower than now, according to the median of nine investor and analyst predictions compiled by Bloomberg.

Wall Street Journal:

• Skepticism Grows Ahead of BOJ Meeting. As Japan's central bank readies a bold plan for reversing chronic price falls and hitting an inflation target of 2% in two years, a chorus of naysayers—ranging from government officials to senior economists and market-watchers—is saying it can't be done.

Dow Jones:

• Valero: EPA Gasoline Plan Will Cost Hundreds of Millions of Dollars. Valero Energy Corp. (VLO) said the cost of complying with new pollution standards for gasoline will cost hundreds of millions of dollars in equipment construction and upgrades alone.

 Fox News:

•  UN adopts pact to regulate multibillion-dollar global arms trade.

MarketWatch:

• Cyprus sits close to exit door as four trends point to euro-zone collapse – UBS.

CNBC:

• Hedge Funds Have a Brutal Quarter, but Loeb Stands Out. Hedge funds, on average, returned just above 3 percent in the first quarter of 2013, a brutal return compared to buyers of an S&P 500 index fund, who enjoyed a 10 percent return on their money. 
• El-Erian: Unfortunately, the Cyprus Crisis Is Not Yet Over. Draconian capital controls have restored a sense of calm to a disorderly situation in Cyprus. At best, this is a short reprieve. If not followed by more fundamental (and inevitably controversial) decisions, it will just be a matter of weeks before the controls go from being a temporary solution to becoming part of an even deeper problem. 
• Fed May Be Able to Pull Back on Stimulus This Year: Lockhart. The Federal Reserve may be able to reduce its bond-buying stimulus plan before the end of this year if economic growth continues to pick up and employment improves further, a top central bank official said.

Zero Hedge: 

• Chart Of The Day: Euro Area Unemployment Hits New Record High.
• Debt = Serfdom.
• Factory Orders "Saved By The Transports", Annual Increase Barely Positive. (graph)
• You Know The Market's Euphoric When...(graph)
• China Raises Epidemic Response Plan Amid Re-Emergence Of Bird Flu.
• Holland: "An Economy On The Brink".

Business Insider: 

• We Just Got To See The European Crisis That's Far Bigger Than Cyprus Or Italy.
• Apple(AAPL) Planning Production Of New iPhone Starting This Quarter.
• US Moves Second Warship Near Korean Peninsula Amid Tensions.
• JIM O'NEILL: I Suspect China Is Growing More Slowly Than Everyone Thinks.

Reuters:

• North Korea to restart nuclear reactor in weapons bid. North Korea said on Tuesday it would revive a mothballed nuclear reactor able to produce bomb-grade plutonium but stressed it was seeking a deterrent capacity and did not repeat recent threats to attack South Korea and the United States. 
• ECB's Coeure warns against consequences of currency war. ECB policymaker Benoit Coeure warned against currency wars on Tuesday, saying currency swings brought about by misguided policies have the potential to become disruptive, especially if other central banks have limited room to maneuver. 
• Italy's "wise men" seek to end political crisis; president gloomy. Italian President Giorgio Napolitano expressed despair on Tuesday at fierce criticism of his latest plan to end a post-election deadlock that has raised fears of months of instability in the euro zone's third largest economy.
• Copper falls to seven-month low as weak data dampens mood.

Financial Times:

• US banks weigh EU bonus cap options. Foreign banks in the City of London are stepping up tactics to mitigate the impact of incoming EU bonus caps. Bankers said US institutions were considering whether it still made sense to base Europe, Middle East and Africa (Emea) business in London, suggesting that Dubai or another Gulf financial centre could benefit instead.
• EU data watchdogs take aim at Google(GOOG). Europe’s largest data-protection authorities have launched a joint action against Google to force it to remedy alleged breaches of EU privacy rules by the search giant.

Telegraph: 

• UK manufacturing shrinks again in March. British manufacturing shrank for a second successive month in March as companies scaled back production, leaving the services sector as the best hope of avoiding a fresh recession.

Bear Radar

Style Underperformer:

• Small-Cap Value -.17%

Sector Underperformers:

• 1) Gold & Silver -3.51% 2) Airlines -2.93% 3) Oil Tankers -2.43%
  

Stocks Falling on Unusual Volume:

• NDAQ, CGI, ADT, DAL, UNXL, X, PKX, ALK, EZPW, AGU, UAL, SFUN, LCC, ANV, SLW, TPX, HPQ, VHC, WLT, KEX, HCA and PAAS

Stocks With Unusual Put Option Activity:

• 1) ALXA 2) STSI 3) XLV 4) TEX 5) X
  

Stocks With Most Negative News Mentions:

• 1) STI 2) RDC 3) EZPW 4) XOM 5) WMT
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.78%

Sector Outperformers:

• 1) HMOs +3.58% 2) I-Banking +3.43% 3) Biotech +1.52%
  

Stocks Rising on Unusual Volume:

• DLLR, HUM, OPTR, EHTH, OMPI, VOD, NUAN, UNH, ASH, HTZ, WCG, AET, CI, DVA, WLP, URBN, VHS, CBST and CHKR

Stocks With Unusual Call Option Activity:

• 1) NDAQ 2) HCA 3) DAL 4) TPX 5) UNH
  

Stocks With Most Positive News Mentions:

• 1) GNC 2) EHTH 3) DVA 4) FFIV 5) SCVL

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Cyprus Seeks More Time to Meet Targets in Talks With Troika. Cyprus government officials will seek easier bailout terms in talks with representatives of the European Union and International Monetary Fund today, before a meeting of euro-area finance officials later this week. “Final outstanding issues in talks with the troika primarily relate to the wider financial sector and fiscal policy and adjustment,” Christos Stylianides, the government’s spokesman, said in Nicosia yesterday. The government has been granted an extension to 2017 from 2016 to secure a primary budget surplus, which excludes interest payments, and it hopes to negotiate an additional year to 2018, he said.

• China's Electricity Use Darkens Metals Outlook: Chart of the Day. China's shrinking electricity use may signal a decelerating economy, a bearish sign for a price index of industrials metals that posted a first-quarter decline for the first time in 12 years. A gauge of six prices from the LME fell 5.6% in the three months ended March, the first drop for the period since 2001. China's electricity demand in January and February gained 5.5% from a year earlier, compared with an increase of 6.7% in those months in 2012 and more than 12% in 2011. "China's power consumption data is flatlining, and that augurs poorly for metals," Peter Sorrentino, a senior fund manager who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. 

• China Repo Rate Rises on Holiday Demand, Property Curb Concerns. China’s benchmark money-market rate rose toward a one-month high as cash demand increased ahead of a holiday and on speculation the central bank will tighten policy to cool the property market.

• Hong Kong Businesses Vanish as Rents Soar: Real Estate. Over the past decade, car-repair shop owner Benny Chan has seen more than 70 percent of his small-business peers disappear as his Hong Kong neighborhood fills up with high-end Western bars and Japanese restaurants. “Rents here are going up multiple times,” said Chan, who’s been in business since 1985 in the Tai Hang area, just east of the ritzy Causeway Bay shopping district. “We’ll all be out of here in the next four to five years.”

• China Cited by U.S. for Trade Barriers on Autos, Steel, Beef. China continues to restrict U.S. producers of autos, steel and beef from gaining access to its markets, and its protection of intellectual-property rights remains inadequate, the U.S. Trade Representative’s office said. While the Asian nation has made progress opening its markets to foreign competition, “some serious problems remain, such as China’s refusal to grant trading rights for certain industries,” according to the agency’s annual report to Congress on trade barriers, released today. The USTR also released two other reports covering health and regulatory trade barriers in China and other countries. 

• China Backs North Korea Economic Zone Amid Kim Nuclear Threat. China expressed support for developing a shared economic zone in a North Korean border city amid Kim Jong Un’s threats to build nuclear weapons and attack South Korea and the U.S. Chen Jian, a vice commerce minister, said at a briefing in Beijing today that he’s “optimistic” about the zone in Rason. “Various work in the Rason zone is proceeding smoothly,” Chen said to reporters. “I haven’t heard anything that it has slowed down.”

• Japan Auto Sales Fall on End of Subsidies as Korea Extends Slump. Japanese vehicle sales fell the most in six quarters after government subsidies ended, while deliveries in South Korea extended their slump. The number of vehicles sold in Japan, Asia’s second-largest auto market, fell 9.4 percent to 1.53 million during the quarter, with Toyota Motor Corp. (7203) seeing a 15 percent drop, according to association data released yesterday. In South Korea, the region’s fourth-largest vehicle market, deliveries declined 2.5 percent as Hyundai Motor Co. (005380) saw a 0.7 percent contraction, based on company statements.

• Corn, Silver, Rubber Expanding Commodity Bear Markets on Supply. Corn, silver and rubber tumbled into bear markets, joining slumps in commodities such as sugar and wheat, on signs that expanding supplies will outpace demand amid increasing concern that global growth will falter. The price of corn in Chicago plunged the most in 24 years yesterday, leaving futures down 23 percent from last year’s closing high and exceeding the 20 percent benchmark for bear markets. The Standard & Poor’s GSCI Agriculture Index of eight raw materials touched a nine-month low yesterday, falling 21 percent from its 2012 peak. Silver in New York and rubber in Tokyo were down more than 20 percent from closing highs. 

• Copper Below March Low Signaling More Losses: Technical Analysis. Copper futures that posted their biggest first-quarter decline in more than a decade are headed lower this month, according to technical analysis by Paul Kavanaugh at FuturePath Trading LLC. The attached chart shows the contract for May delivery on the Comex in New York closed at $3.3745 a pound yesterday, below the intraday low on March 19 of $3.388, the lowest for a most- active contract since August. That suggests the price will drop within a few weeks to $3.31, the lowest price for the May contract last year, Kavanaugh said.

• S&P 500 Rally Shows Analysts Slow or Investors Sanguine. The advance that pushed the Standard & Poor’s 500 Index (SPX) to a record left companies trading closer to analyst price estimates than any time in at least seven years. Shares in the index are 5 percent away from analysts’ mean forecasts after the benchmark gauge rallied 10 percent in the first quarter, according to data compiled by Bloomberg starting in 2006. That’s the smallest difference ever for the median stock and compares with the historical average of 14 percent. 

• Swaps Among Bank Affiliates Exempt From Clearing Under CFTC Rule. Barclays Plc (BARC), JPMorgan Chase & Co. (JPM) and other banks will be exempt from Dodd-Frank Act swap market rules when trading between their own affiliates under a measure completed by the U.S. Commodity Futures Trading Commission. Commissioners approved a rule excluding inter-affiliate trades from requirements that swaps be guaranteed at clearinghouses that protect buyers and sellers against defaults, the CFTC said yesterday. The rule is part of the CFTC’s mandate to cut risk and expand transparency in the $639 trillion global swaps market.

• Humana(HUM) Among Insurers Winning U.S. Medicare Payment Rise. UnitedHealth Group Inc. (UNH), Humana Inc. (HUM) and other medical insurers won an increase rather than a reduction in U.S. payments for Medicare Advantage plans starting next year. Humana shares jumped 9.8 percent in late trading. The February proposal for a 2.2 percent cut in a rate that determines the payments is being revised to a 3.3 percent increase, according to a decision today by the Centers for Medicare and Medicaid Services. The change came after insurers and more than 130 lawmakers complained the Obama administration relied on faulty accounting assumptions.

• Small-Business Insurance Market Promised by Health Law Delayed. Small-business employees will have to wait a year before they can choose their own medical-coverage after the Obama administration delayed implementation of a provision in the 2010 U.S. health-care law. Starting in 2014, workers at companies with fewer than 100 employees were supposed to have been able to choose from a variety of health plans through new small-business insurance marketplaces. They’ll instead wait until at least 2015, according to regulations released by the U.S. Department of Health and Human Services. In the meantime, small-business employees will face a situation similar to what most companies offer, with their employers choosing the coverage. Health insurers will still offer the plans, though they’ll be competing for business from companies, not individuals.

Wall Street Journal: 

• Regulators Let Big Banks Look Safer Than They Are. Capital-ratio rules are upside down—fully collateralized loans are considered riskier than derivatives positions. The recent Senate report on the J.P. Morgan Chase "London Whale" trading debacle revealed emails, telephone conversations and other evidence of how Chase managers manipulated their internal risk models to boost the bank's regulatory capital ratios. Risk models are common and certainly not illegal. Nevertheless, their use in bolstering a bank's capital ratios can give the public a false sense of security about the stability of the nation's largest financial institutions. Capital ratios (also called capital adequacy ratios) reflect the percentage of a bank's assets that are funded with equity and are a key barometer of the institution's financial strength—they measure the bank's ability to absorb losses and still remain solvent. This should be a simple measure, but it isn't. That's because regulators allow banks to use a process called "risk weighting," which allows them to raise their capital ratios by characterizing the assets they hold as "low risk."  

• Iran Cools Nuclear Work as Vote Looms. Supreme Leader Ayatollah Ali Khamenei has decided to keep Iran's nuclear program within limits demanded by Israel for now, according to senior U.S., European and Israeli officials, in a move they believe is designed to avert an international crisis during an Iranian election year.

• Businesses Stay Cautious About Renting Office Space. Businesses moved slowly to fill office space in the first quarter, reflecting continued caution about the economic recovery. An additional 4 million square feet of office space was leased during the quarter, increasing the amount of occupied space by just 0.12%, according to real-estate research service Reis Inc. Asking rents increased 0.7% to $28.66 a square foot annually, while the national office vacancy rate fell to 17% from 17.1%.

• Western Union Eyes Digital Currency Services. Western Union is trying to transform its business for the digital generation. In addition to mobile and online payments, the company is looking at digital currency services.

• Gulf States Curtail Online Dissent. Some Persian Gulf monarchies have been shutting down critics who use social media to spread their views, in response to rising dissent unleashed by the region's Arab Spring rebellions.

• Wind-Power Subsidies? No Thanks. I'm in the green-energy business. If Washington sent a little less 'green' our way, it would be good for the industry.

Fox News: 

• China mobilizing troops, jets near N. Korean border, US officials say. China has placed military forces on heightened alert in the northeastern part of the country as tensions mount on the Korean peninsula following recent threats by Pyongyang to attack, U.S. officials said. Reports from the region reveal the Chinese People's Liberation Army (PLA) recently increased its military posture in response to the heightened tensions, specifically North Korea's declaration of a "state of war" and threats to conduct missile attacks against the United States and South Korea. According to the officials, the PLA has stepped up military mobilization in the border region with North Korea since mid-March, including troop movements and warplane activity. China's navy also conducted live-firing naval drills by warships in the Yellow Sea that were set to end Monday near the Korean peninsula, in apparent support of North Korea, which was angered by ongoing U.S.-South Korean military drills that are set to continue throughout April. 

MarketWatch.com:

• Bubble-era home-equity strategies are back. More wealthy owners are using home loans to play the stock market.

Zero Hedge: 

• Global Economic Slowdown Accelerates Again. (graph)

• So Much For The Stability Of The Centrally-Banked "Fiat" Era. (graph)

• Biggest 2-Week Surge In JPY In 2 Years Prompts Abe-Aso-Kuroda-Iwata Finger-Pointing. (graph)

• The Great Disconnect - Markets Vs. Economy. (graphs)

• Just Six Charts (Ahead Of Earnings).

• Goldman(GS) Sells Equity To Buy Junk.

Business Insider: 

• JACK BOGLE WARNS: Prepare For Two Massive Market Declines In The Next Decade.

• Meet The Man Who Could Finally Destroy 'Too Big To Fail' Banks.

• CHART OF THE DAY: The Insane Parabolic Rise Of Bitcoin.

• Millions Of Teens Are Skipping Facebook And Using A New Breed Of Flirty Mobile Messaging Apps.

• North Korean Video Shows Soldiers Shooting Targets Of US Troops.

• Big Health Insurance CEO Sees 'Troubled Times' For Obamacare.

• 15 Charts That Should Terrify Saudi Arabia.

• There's A Rotation Underway Out Of Small-Cap Stocks That Could Be Bad News For Everyone. (graph)

Reuters:

• Spain to revise down 2013 GDP growth target to -1 percent. Spain will revise down its economic growth forecast for 2013 next week and seek more time from the European Union to reduce its budget deficit as recession cuts deeper than previously expected, a government source told Reuters. Spain's gross domestic product (GDP) will be forecast to shrink by 1 percent, rather than 0.5 percent, the source said, adding that the government intended to shift emphasis to growth rather than deficit reduction. Spain will increase its 2013 deficit target to 6 percent of GDP, from an existing forecast of 4.5 percent. 

• March was bloodiest month in Syria war: rights group. March was the bloodiest month yet in Syria's two-year conflict, with more than 6,000 people killed, a third of them civilians, the Syrian Observatory for Human Rights said on Monday. The group opposes President Bashar al-Assad but has monitored human rights violations on both sides of a revolt that began as peaceful protests but is now a brutal war between forces loyal to Assad and an array of rebel militias. The Britain-based Observatory, which has a network of sources across Syria, has documented 62,554 dead in the conflict, said Rami Abdelrahman, the head of the group. "But we know the number is much, much higher," he told Reuters by telephone. "We estimate it is actually around 120,000 people. Many death tolls are more difficult to document so we are not officially including them yet."

• Nasdaq(NDAQ) to buy eSpeed platform for $750 mln. Nasdaq OMX Group Inc agreed to buy the eSpeed platform from BGC Partners Inc for $750 million in cash, providing the exchange operator an entry point in the electronic fixed income business - one of the largest and the most liquid cash markets in the world. The deal gives Nasdaq more exposure to fixed income markets, at a time when falling stock trading volumes have spurred the exchange operator to find other income sources.

• A fiscal warning from two former U.S. budget chiefs. Two former U.S. budget chiefs who worked for presidents from opposing political parties said on Monday that the government should reduce military spending, scale back Social Security payments and end decade-old income tax cuts to reduce the federal deficit. 

• Carl Icahn takes 9.27 percent passive stake in Nuance(NUAN) - CNBC.

Financial Times:

• Eurozone SMEs struggle to access finance. Teldat and other small companies face disproportionately higher charges than their bigger rivals when they borrow money from banks.

Telegraph: 

• Coutts warns clients of threat from debt markets amid bubble fears. Coutts, the high-end private bank, has warned its clients against exposing their fortunes to a potential collapse of the high-yield debt market amid growing concerns of a new global credit bubble. 

• Time bomb to the next crash is ticking as debt sales surge. After every crash there will always be a handful of experts pointing out that they had seen it all coming years before. 

The Standard:

• Hong Kong Holidays Home Sales Worst in 5 Years.

Shanghai Securities News:

• China 2nd Mortgage Rules May Vary City to City. People's Bank of China won't make unified requirements for down payments and interest rates on second home mortgages after local governments announced detailed property curbs, citing a person familiar with the matter. Local branches of the central bank can "appropriately" raise both requirements, the report said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.75% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 122.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 98.0 +.5 basis point.

• FTSE-100 futures -.09%.

• S&P 500 futures +.04%.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GPN)/.89

• (PBY)/.05

• (MKC)/.56  

Economic Releases
10:00 am EST

• Factory Orders for February are estimated to rise +2.9% versus a -2.0% decline in January.

Afternoon:

• Total Vehicle Sales for March are estimated to fall to 15.3M versus 15.33M in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lockhart speaking, Fed's Kocherlakota speaking, Fed's Evans speaking, Fed's Lacker speaking, Eurozone Manufacturing PMI, Eurozone Unemployment data, German Consumer Confidence, China Non-Manufacturing PMI, ISM New York for March, weekly retail sales reports and the IBD/TIPP Economic Optimism Index for April could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.