Today's Headlines

Bloomberg:

• U.K. Construction Output Declines to Lowest Since 1998. U.K. construction output fell to its lowest level in more than 14 years in the first quarter as work on new building projects declined across the industry. Output measured by volume dropped 2.4 percent from the previous three months to its lowest since the fourth quarter of 1998, the Office for National Statistics in London said today. That compares with the 2.5 percent decline estimated in gross domestic product data on April 25.

• European Stocks Rally for a Third Week; BT Group Climbs. European stocks rallied for a third week, closing at their highest level in almost five years, as companies from BT Group Plc to Hochtief AG posted earnings that beat estimates, while economic data exceeded expectations.

• Carson Block Says He’s Shorting Debt of Standard Chartered. Carson Block, the short seller who runs Muddy Waters LLC, said he is betting against the debt of Standard Chartered Bank Plc because of the “deteriorating” quality of its loan book. Block said the London-based bank’s $1 billion loan to Samin Tan, chairman of Bumi Plc (BUMI), the coal company at the center of a dispute between co-founders Nathaniel Rothschild and Indonesia’s Bakrie family, and loans to Far East Energy Corp. (FEEC), were ‘red flags.’ Standard Chartered will also come under stress when China’s economy slows down, Block said. “We believe the quality of Standard Chartered’s loans are deteriorating,” Block said at the SkyBridge Alternatives Conference in Las Vegas today.

• Mexico Industry Output Falls Three Times More Than Forecast. Output slid 4.9 percent from a year earlier, the biggest decline since the end of the 2009 recession and more than the 1.4 percent median estimate of 16 economists surveyed by Bloomberg. Manufacturing contracted 5.8 percent and construction fell 5.2 percent, the national statistics institute said on its website today.

• Dollar Rally Spurs Commodity Selloff as U.S. Stocks Fluctuate. The Dollar Index extended its biggest two-day rally since July, triggering plunges in oil and gold, and Treasuries tumbled. U.S. stocks retreated, trimming a third straight weekly gain. The Dollar Index, a gauge of the currency against six major peers, added 0.6 percent to 83.27 at 12:37 p.m. in New York to extend its two-day advance to 1.7 percent. 

• OPEC Crude Production Rises to Five-Month High on Saudi Increase. OPEC boosted crude output in April to the highest in five months as Saudi Arabia increased production, helping lower oil prices amid concern that global economic growth is slowing. The Organization of Petroleum Exporting Countries produced 30.46 million barrels a day last month, up from 30.18 million in March, the group’s Vienna-based secretariat said today in its Monthly Oil Market Report. That’s the most since November. The estimates are based on secondary sources.   

• Gold Extends Weekly Drop as Stronger Dollar Curbs Demand. Gold declined to a two-week low and headed for the biggest drop in more than three weeks in New York as a stronger dollar curbed demand for the metal as an alternative investment.

• Bernanke Sees Important Risks in Wholesale Funding. Federal Reserve Chairman Ben S. Bernanke said risks persist in wholesale funding markets used frequently by Wall Street brokers to finance securities trading. “Important risks remain in the short-term wholesale funding markets,” Bernanke said today in a speech at a Chicago Fed banking conference. “One of the key risks is how the system would respond to the failure of a broker-dealer or other major borrower.” 

• Credit Pinch for Small Business Impedes U.S. Job Growth. Tighter lending standards among U.S. community banks help explain why small businesses are adding jobs at only half the pace of large employers. The Federal Deposit Insurance Corp. says the 6,900 institutions it classifies as community banks supply almost half of small business loans. 

• Actavis Said to Be in Early Talks to Buy Warner Chilcott(WCRX).

Wall Street Journal:

• Investors Rediscovering Margin Debt. Small investors are borrowing against their portfolios at a rapid clip, reaching levels of debt not seen since the financial crisis. The trend—driven by a combination of rising stock values and rock-bottom interest rates—is sparking a growing debate among market watchers. To some, this trend in so-called margin debt is a sign of investors' increasing confidence in a bull market for stocks that has already lifted the Dow Jones Industrial Average 15.1% in 2013. But to others it is a warning sign that the Federal Reserve's easy-money policies are creating a bubble mentality among stock investors.

• U.S. Expects Record Corn Crop. U.S. corn futures added to their losses Friday after the government forecast a record crop. The U.S. Department of Agriculture, in a monthly crop report, forecast that greater-than-expected domestic supplies in the next year. As of Aug. 31, 2014—the end of the crop year that will begin with this autumn's harvest—the report predicts stockpiles will total 2.004 billion bushels. Analysts in an earlier Dow Jones Newswires poll had on average expected a forecast of 1.973 billion bushels. The projection would mark the highest level for late-summer corn stockpiles since 2005.

Fox News:

• Texas officials launch criminal investigation into fertilizer plant explosion that killed 14. Texas law enforcement officials on Friday launched a criminal investigation into the massive fertilizer plant explosion that killed 14 people last month. Investigators have largely treated the West Fertilizer Co. blast that killed 14 people as an industrial accident, but the Texas Department of Public Safety said in statement that the agency has now instructed the Texas Rangers and the McLennan County Sheriff's Department to conduct a criminal probe.

CNBC:

• Jack Lew: Debt Ceiling Won't Be Reached Until Labor Day. U.S. Treasury Secretary Jack Lew told CNBC on Friday that the U.S. debt ceiling would not be reached until September, though he said it was not an excuse for Congress to relax. "The debt limit will be reached in just a few days when it expires on May 18 but because of the cash flows we can predict that we will be okay until Labor Day," Lew told CNBC in an interview in London.

• Zell on Market: A 'Giant Game of Musical Chairs'. Sam Zell looks at the stock market and doesn't like what he sees: Zooming prices that normally would come with economic prosperity are hard to find in the current environment.

• Canada's Housing Market: The Next Big Short?

Zero Hedge: 

• Weidmann Slams French 'Savings' - Widening Franco-German Divide.

• Credit Shock Dead Ahead: China Money Formation Soars To 2-Year High As Delinquent Loans Surge By 29%. (graphs)

• EURUSD's Worst Week In Six But European Stocks/Sovereigns Surge. (graphs)

• Italian Bad Loans Re-Accelerate - Up 21.7% YoY. (graph)

• Hugh Hendry: Japan's 'Reflationary' Gain "Is The Last Thing The Global Economy Needs".

Business Insider: 

• Texas Paramedic Arrested For Possession Of 'Destructive Device'.

• REPORT: Tamerlan Tsarnaev Buried At Muslim Site In Virginia.

• The Stock Market's Fundamentals Are Deteriorating.

• The Launch Of Obamacare Is Shaping Up To Be A Trainwreck.

• Facebook(FB) Home Is A Flop: Employees Know It And Users Don't Like It.

LA Times: 

• True Religion(TRLG) to be sold to TowerBrook for $835 million.

Reuters: 

• JPMorgan(JPM) board unanimously backs Dimon as chairman, CEO-letter.

• US prime money funds raise euro zone exposure in April-JPMorgan. U.S. prime money market funds slightly increased their holdings of euro zone bank debt in April after Cyprus received a bailout to manage its bank problems, according to a report by JPMorgan Securities released on Friday. 

• European development bank cuts growth forecast for emerging economies. Europe's development bank slashed its 2013 growth forecasts for emerging Europe and North Africa on Friday by almost a full percentage point, saying a sharp slowdown in Russia would drag down the regional economy. 

• US junk bond market ignites as money keeps pouring in. The US junk bond market is back in full swing, with investors embracing riskier assets in the hunt for yield and issuers getting away with historically tight pricing - and increasingly aggressive structures.

USA Today:

• IRS apologizes for targeting conservative groups. The Internal Revenue Service apologized Friday for inappropriately flagging conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status. Lois Lerner, who heads the IRS unit that oversees tax-exempt groups, said organizations that included the words "tea party" or "patriot" in their applications for tax-exempt status were singled out for additional reviews. Her remarks came at an American Bar Association gathering.

ABC News:

• Exclusive: Benghazi Talking Points Underwent 12 Revisions, Scrubbed of Terror Reference. When it became clear last fall that the CIA’s now discredited Benghazi talking points were flawed, the White House said repeatedly the documents were put together almost entirely by the intelligence community, but White House documents reviewed by Congress suggest a different story. ABC News has obtained 12 different versions of the talking points that show they were extensively edited as they evolved from the drafts first written entirely by the CIA to the final version distributed to Congress and to U.S. Ambassador to the U.N. Susan Rice before she appeared on five talk shows the Sunday after that attack.

Telegraph:

• Spain is officially insolvent: get your money out while you still can. I'd not noticed this until someone drew my attention to it, but the latest IMF Fiscal Monitor, published last month, comes about as close to declaring Spain insolvent as you are ever likely to see in official analysis of this sort. Of course, it doesn't actually say this outright. The IMF is far too diplomatic for such language. But that's the plain meaning of its latest forecasts, which at last have an air of realism about them, rather than being the usual dose of wishful thinking.

• G7: US warns Japan to stick to rules on currency. Japan is pushing the boundaries of international agreements to avoid competitve currency devaluations, the US Treasury Secretary has warned, as the International Monetary Fund said unprecedented monetary easing could lead to a "serious boom and bust".  

Market News International: 

• China Banks Face More Curbs On Wealth Products. People's Bank of China and China Central Depository & Clearing notified banks that their wealth management product accounts can't trade among themselves or with the bank's own proprietary trading account, citing traders. New regulations will make the process of how banks are allowed to offload assets underlying wealth products more complicated.

Bear Radar

Style Underperformer:

• Large-Cap Value -.31%

Sector Underperformers:

• 1) Gold & Silver -1.80% 2) Coal -1.71% 3) Steel -1.57%

Stocks Falling on Unusual Volume:

• EGY, DK, TCB, CIB, HES, ANAC, TEO, APO, AMAP, GLPW, CHE, KYAK, OPTR, PANL, ET, OFIX, CEO, AIRM, SIRO, MDRX, CG, GHDX, CFN, MBI, AL, GEVA, NKA, NBL, BID, CTB, SFUN, FSP, TCB, EVEP and TNGO

Stocks With Unusual Put Option Activity:

• 1) FTK 2) TSLA 3) MU 4) SCHW 5) EWJ
  

Stocks With Most Negative News Mentions:

• 1) CCL 2) LTD 3) KSS 4) LVS 5) JCP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.39%

Sector Outperformers:

• 1) Biotech +.89% 2) Disk Drives +.87% 3) Hospitals +.73%
  

Stocks Rising on Unusual Volume:

• BT, TSLA, SZYM, TRLG, UBNT, PCLN, FTK, GPS, SCTY, WCRX, SWFT and SPWR

Stocks With Unusual Call Option Activity:

• 1) ABFS 2) TIVO 3) ROC 4) WAG 5) SQNM
  

Stocks With Most Positive News Mentions:

• 1) ABCO 2) GVA 3) BSX 4) TRLG 5) PEP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Italy Can Keep Tax Pledges Without Budget Cuts, Saccomanni Says. The Italian government won’t need to make more budget cuts this year to finance a plan to ease taxes, and it remains committed to suspending payment of an unpopular property levy, Finance Minister Fabrizio Saccomanni said. The government held a Cabinet meeting yesterday to suspend the June payment of the tax on primary residences in a bid to make good on Prime Minister Enrico Letta’s inauguration pledge. The decision was put off until the next meeting, which may be held as soon as May 12, when Letta’s new government holds a retreat at a monastery near Siena, Italy, Saccomanni said on the “Otto e Mezzo” program on La 7 television

• Chinese Freight Traffic Showing Signs of Weakness. (graph)

• Swiss Watches Unworn as China Tackles Graft: Chart of the Day. (graph) The CHART OF THE DAY shows Chinese imports of Swiss-made watches tumbled 24 percent in the first quarter from a year earlier for a third straight decline, while shipments to Hong Kong sank 9.3 percent, according to trade data from Switzerland.

• Sony Misses Estimates as Hirai Drives Samsung Challenge. Sony Corp. (6758) forecast annual profit that missed analysts’ estimates as Chief Executive Officer Kazuo Hirai rolls out new Xperia smartphones and Bravia televisions to recapture market share lost to Samsung Electronics Co. 

• RBA Cuts CPI Outlook as Aussie, Mine-Boom Peak Weigh on GDP. The Reserve Bank of Australia lowered its inflation outlook and reiterated its forecast for “below trend” growth this year, reflecting an elevated currency, a crest in resource investment and fiscal tightening. “The outlook for non-mining business investment remains relatively weak over the next few months,” the RBA said in its quarterly monetary policy statement released in Sydney today. “The approaching peak in resource investment, the high level of the Australian dollar and ongoing fiscal consolidation are all likely to weigh on growth over the next year or so, while at the same time the low level of interest rates is helping to support demand.”

• Most Asian Stocks Rise as Topix Jumps to 4 1/2 Year High. Most Asian stocks rose, with Japan’s Topix Index headed for a 4 1/2 year high as the yen weakened to 100 per dollar for the first time since 2009, boosting the earnings outlook for exporters. 

• Yen Breach of 100 Per Dollar Foreshadows More Weakness. The yen is poised to weaken even further versus the dollar after breaking a key support level at 100 for the first time in four years, trading patterns show. 

• Commodity Investors Withdrew a Record $9.3 Billion Last Month. Investors withdrew a record $9.3 billion from commodity exchange-traded products as gold sales pushed the metal into a bear market, BlackRock Inc (BLK) said. The outflow for commodities in April pushed the total for the first four months this year to $17.8 billion, compared with inflows of $6 billion for the same period last year, BlackRock said in a report dated April 30. The previous record for commodity sales was $5.2 billion in February. Gold outflows were an all-time high of $8.7 billion last month as the metal slid to a two-year low in London on April 16, two sessions after falling into a bear market. The Standard & Poor’s GSCI gauge of 24 raw materials fell 4.7 percent last month, the most since May.

• Natural Rubber Imports by India Seen Falling as Car Sales Shrink. Natural rubber imports by India, the world’s third-biggest user, are poised to drop for the first time in five years from a record as declining car sales crimp demand for the commodity used in tires. Inbound shipments are estimated to drop 17 percent to 180,000 metric tons in the year that started April 1 from an all-time high of 217,364 tons a year earlier, Sheela Thomas, chairman of the Rubber Board of India, said in an e-mailed interview. The biggest slump in car sales since 2001 last year boosted local rubber stockpiles 13 percent to 266,000 tons, and will make up for a domestic shortfall in supplies, she said. Reduced demand from India may accelerate a decline in futures in Tokyo, which have lost about 9 percent this year and entered a bear market in April on signs that weak demand from China, the largest user, will expand a global glut.

• Copper Pares Third Weekly Advance on China Demand Concern. Copper declined, paring a third weekly advance, on speculation that inflation may accelerate in China, curbing further stimulus. Tin also dropped. Copper for delivery in three months lost as much as 1.1 percent to $7,275.25 a metric ton on the London Metal Exchange before trading at $7,345 as of 9:55 a.m. Shanghai time.

• Pimco Raises Treasuries Holdings to Highest Level Since 2010. Pacific Investment Management Co.’s Bill Gross raised the holdings of Treasuries in his flagship fund at to the highest level since July 2010 while warning that investors face potential losses from central-bank policies. The proportion of U.S. government securities in the $292.9 billion Total Return Fund increased to 39 percent in April, from 33 percent in March, according to data on Newport Beach, California-based Pimco’s website. Mortgage holdings rose to 34 percent, from 33 percent in March, which was the lowest level since August 2011. The company doesn’t comment directly on monthly changes in its portfolio holdings.

• Venezuela Inflation Soars Toward 30% as Maduro Cuts Dollar Sales. Venezuelan consumer prices soared the most in three years last month as President Nicolas Maduro’s government reduced dollar sales to importers and the central bank’s scarcity index reached the highest on record.

Wall Street Journal: 

• Martin Feldstein: The Federal Reserve's Policy Dead End. Quantitative easing hasn't led to faster growth. A better recovery depends on the White House and Congress.

• ESPN Eyes Subsidizing Wireless-Data Plans. Smartphone users who binge on video, games and other content must monitor their usage to ensure they don't run over monthly data caps that wireless carriers have put in place in recent years. Now, some media companies whose mobile content gets a lot of traffic are considering arrangements with wireless carriers that would ensure their users can watch, surf and play as much as they want without being hit with stiff overage charges.

• Falling Deficit Alters Debate. Improving Federal Finances Lessen Pressure on Democrats, Republicans to Negotiate. Rising government revenue from tax collections and bailout paybacks are shrinking the federal deficit faster than expected, delaying the point when the government will reach the so-called debt ceiling and altering the budget debate in Washington.

• Icahn, Southeastern Propose Alternative to Dell(DELL) Buyout.

• Hezbollah Says Syria to Supply Strategic Weapons. Hezbollah's leader on Thursday said Syria will provide him with weapons that will change the balance of power in his battle with Israel and threatened to fight the Jewish state from inside Syria, ramping up tensions after last week's Israeli airstrikes there.

• Peggy Noonan: The Inconvenient Truth About Benghazi. Did the Obama administration's politically expedient story cost American lives?

Fox News:

• Republican leaders boycott controversial ObamaCare board. The Republican leaders of the House and Senate announced Thursday that they will boycott the ObamaCare-created committee responsible for holding down Medicare costs, in a challenge to a controversial element of the health care overhaul. The Individual Payment Advisory Board, or IPAB, has been described as a "death panel" by some of its fiercest critics. Though that epithet is not often used anymore to describe the panel, Republicans still say it would hurt seniors by forcing doctors to stop seeing patients. 

• Border Violence Spillover to the U.S. Needs to Be Acknowledged.

CNBC: 

• ‘Ridiculously Bearish for Miners’: Gartman. (video) The move in the U.S. dollar bodes poorly for gold and worse for mining companies, Dennis Gartman of The Gartman Letter said Thursday on CNBC. "It broke out against every currency out there, even the Aussie, so this is a dollar move, and a dollar move to this sort of strength cannot be construed as being anything other than bearish for the metals and ridiculously bearish for the miners," he said. 

• Brent-WTI Oil Spread Collapse Spooks Refiners, Railways. The near $20 premium North Sea Brent held for much of 2012 over U.S. benchmark West Texas Intermediate (WTI) has fallen to less than $8 a barrel, the lowest since the crude-by-rail boom began to gather steam in early 2011. 

• Keep On, or Enough Already? Fed Officials Spar Over More Easing. Little over a week after U.S. Federal Reserve policymakers overwhelmingly endorsed a plan to keep buying bonds to spur economic growth and hiring, they are airing their differences over their super-easy policy.

Zero Hedge: 

• Jeff Gundlach Corrects The "Bonds Bad, Stocks Good" Meme. (video)

• Is Abenomics Going To Put Japan Back On The Map?

• For Central Bankers, 512 Times Just May Be The Charm. (graph)

• Jim Grant On Gold's Recent Drop: "Confidence In Bernanke Is Utterly Misplaced".

Business Insider: 

• Corporate Labor Hoarding Could Explain Falling Jobless Claims.

• Deadly SARS-Like Virus Spreads To France And Saudi Arabia.

New York Times: 

• Falcone and S.E.C. Reach a Deal.

The Blaze:

• ‘Lies and Deceit’: See What the Families of the SEAL Team 6 Members Slain in Chopper Crash Alleged at Their Press Conference. Military experts and the families of the soldiers killed in the August 6, 2011, helicopter crash in Afghanistan — the single largest loss of soldiers’ lives in the Afghanistan campaign — think it is fitting that they are sharing details regarding the unusual events and unanswered questions surrounding their son’s deaths now at a time when similar themes are being discussed at the Benghazi hearings.

Reuters: 

• Huge cyber bank theft spans 27 countries. In one of the biggest ever bank heists, a global cyber crime ring stole $45 million from two Middle Eastern banks by hacking into credit card processing firms and withdrawing money from ATMs in 27 countries, U.S. prosecutors said on Thursday. The U.S. Justice Department accused eight men of allegedly forming the New York-based cell of the organization, and said seven of them have been arrested. The eighth, allegedly a leader of the cell, was reported to have been murdered in the Dominican Republic on April 27.

• U.S.-based taxable bond funds attract record $8.88 bln inflow.

• Brazil's big government seen as good for politics, bad for economy. President Dilma Rousseff added a new minister to her Cabinet on Thursday, further enlarging a federal government whose rapid growth since her leftist party came to power a decade ago has increased Brazil's heavy tax burden. Rousseff, who is seeking re-election next year, swore in Guilherme Afif Domingos to head the newly created Ministry of Micro and Small Businesses, the country's 39th ministry.

• JPMorgan(JPM) sued by California over 'illegal' debt collections. California's attorney general sued JPMorgan Chase & Co on Thursday, accusing the company of falsely signing documents to unlawfully collect credit card debt from thousands of customers. The lawsuit accuses JPMorgan of engaging in widespread, illegal "robo-signing" of legal documents to commit debt-collection abuses against approximately 100,000 California credit card borrowers.

• Priceline(PCLN) sees Q2 profit below estimates, shares fall. Online travel agency Priceline.com on Thursday forecast second quarter profit would fall below analysts' estimates due to global expansion costs and its shares slid 3 percent in after hours trading. 

• U.S. automakers urge congressional response to falling yen. U.S. automakers called on Congress to take action in response to the falling value of the Japanese yen, which they said has hurt their exports and was a good reason to keep Japan out of a proposed U.S.-led free trade pact. "It's time for U.S. lawmakers to say they have had enough," American Automotive Policy Council President Matt Blunt said in a statement on Thursday, as the dollar rose to its highest value in over four years, blasting through the 100-yen mark. 

• U.S. Fed balance sheet grows in latest week. The Fed's balance sheet, which is a broad gauge of its lending to the financial system, stood at $3.281 trillion on May 8, compared to $3.274 trillion on May 1.

Telegraph:

• Britain must be ready to 'walk away' from EU, says Boris Johnson. Boris Johnson has said Britain "must be prepared" to "walk away" from the European Union if David Cameron's efforts to strike a new deal with Brussels fail.

Evening Recommendations 
Janney Montgomery:

• Rated (DDD) Buy, target $56.

• Rated (SSYS) Buy, target $101.

• Rated (PRLB) Buy, target $60. 

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 100.5 +1.5 basis points.

• Asia Pacific Sovereign CDS Index 82.0 +1.5 basis points.

• FTSE-100 futures +.12%.

• S&P 500 futures +.22%.

• NASDAQ 100 futures +.26%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MT)/-.16

• (WCRX)/.84

• (TRLG)/.34

Economic Releases
2:00 pm EST

• The Monthly Budget Statement for April is estimated at $110.0B versus $59.1B in March.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's George speaking, Fed's Evans speaking, China Money Supply/New Loan data, USDA Crop Report, Canada Unemployment report, (SWFT) investor day and the (WY) analyst meeting could also impact trading today.

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

Stocks Lower into Final Hour on Rising Global Growth Fears, Eurozone Debt Angst, QE Worries, Transport/Commodity Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 13.26 +4.74%

• ISE Sentiment Index 99.0 -29.29%

• Total Put/Call 1.01 +16.09%

• NYSE Arms 1.05 +20.40%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.44 +2.06%

• European Financial Sector CDS Index 136.48 +2.56%

• Western Europe Sovereign Debt CDS Index 89.50 -2.07%

• Emerging Market CDS Index 230.71 -.56%

• 2-Year Swap Spread 13.5 -.25 bp

• TED Spread 24.0 +.5 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +.5 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 159.0 +5 bps

• China Import Iron Ore Spot $130.20/Metric Tonne unch.

• Citi US Economic Surprise Index -6.9 +1.0 point

• 10-Year TIPS Spread 2.30 +2 bps

Overseas Futures:

• Nikkei Futures: Indicating +375 open in Japan

• DAX Futures: Indicating -12 open in Germany

Portfolio: 

• Higher: On gains in my retail/medical/biotech sector longs and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg: 

• Spanish Bonds Fall as Auction Demand Wanes; Italian Debt Drops. Spanish government bonds fell, pushing 10-year yields to the highest level this month, as demand dropped when the nation sold a combined 4.57 billion euros ($5.99 billion) of securities at an auction. Longer-maturity debt led declines as investors submitted bids for 1.62 times the amount of the 13-year bonds sold today, down from 2.85 times at the previous auction in January. The so-called bid-to-cover ratio also worsened for three- and five-year notes. Spain’s 10-year yield fell to the lowest in three years last week after the European Central Bank cut its main refinancing rate to boost growth. Italian bonds also declined.
• ECB Seen Desisting From Further Rate Cut Until 2015. The European Central Bank will refrain from cutting its interest rate again until at least 2015, according to economists surveyed since President Mario Draghi’s pledge last week to deliver another reduction if needed. The Frankfurt-based central bank will leave its main refinancing rate at a record-low 0.5 percent until the end of 2014, according to the median of 18 forecasts in the monthly Bloomberg survey of economists. The same survey shows that 27 of 32 economists predict no cut in the benchmark by the end of 2013, while five see a reduction to 0.25 percent. 
• Yen Weakens Past 100 Per Dollar for First Time in Four Years. The yen weakened beyond 100 per dollar for the first time in four years as the Bank of Japan’s deflation-fighting measures have the currency headed for its longest streak of monthly losses in almost two decades.

Fox News:

• Boehner calls for release of Benghazi emails as pressure grows on administration. Pressure on the Obama administration to release more information about the Benghazi attack grew Thursday, as House Speaker John Boehner demanded officials turn over emails pertaining to the controversial "talking points" and another top Republican appealed for more whistle-blowers to come forward. On the heels of a dramatic hearing where three whistle-blowers testified, Fox News has learned that former Vice President Dick Cheney on Thursday, on the Hill for a meeting with House Republicans, also told lawmakers: "I think Hillary (Clinton) should be subpoenaed if necessary."

CNBC:

• Mortgage Delinquency Rate Rises as Inventory Eases. The delinquency rate on U.S. home mortgages rose in the first quarter as more homeowners fell behind on payments for the first time, data from an industry group showed on Thursday. The seasonally adjusted delinquency rate on all loans rose to 7.25 percent from 7.09 percent in the first quarter but was down from 7.40 percent a year ago, according to the report from the Mortgage Bankers Association.

Zero Hedge:

• Greek Unemployment Hits New Record High, Youth Jobless Rises By 5% In One Month To 64.2%. (graph)
• The Depressing Effect Of QE.
• Initial Claims Drop To 324K, Lowest Since January 2008. (graph)
• The Complete Ira Sohn Conference Highlights. 
• Wholesales Sales Drop By Most Since March 2009; Relentless Inventory Accumulation Continues. (graph)
• The "Labor Hoarding" Effect. (graph)
• "QE-Off Rumor?" Bonds Down, Stocks Down, Gold Down.

Business Insider:

• CHARLES RAMSEY: Take That Reward And Give It To The Kidnap Victims.
• CHART OF THE DAY: The Short Sellers Are Getting Destroyed. (graph)
• New York Could Be America's First City To Let Non-Citizens Vote.
• The EU's Unofficial Spy Services Are Growing Out-Of-Control.
• ROSENBERG: America's Labor Market Mess Spells Trouble For Stocks.
• GOP SENATOR: There's A 'Glaring Omission' On Benghazi That Will Eventually Cause 'Real Trouble'.

Real Clear Politics:

• A Coverup Laid Bare. Thanks to House Republicans, Americans finally got to hear from the State Department officials the Obama administration never wanted to testify. They are now called “whistleblowers,” but that’s only because their accounts of what really happened in Libya on Sept. 11, 2012, were buried by the administration, apparently in the furtherance of Democrats’ election-year imperatives.

Reuters: 

• Fed's Plosser adds voice to too-big-to-fail criticisms. The United States is falling short in its effort to end the problem of too-big-to-fail banks and should require higher capital and adopt a fresh approach to winding down firms that face bankruptcy, a top Federal Reserve official warned on Thursday. In a speech, Philadelphia Fed President Charles Plosser threw his weight behind growing momentum among regulators and politicians to crack down on big banks some five years after the global financial crisis led to massive government bailouts and a deep recession. "Can we end too big to fail? I think we can, but I believe the current efforts may come up short," Plosser told the Annual Simon New York City Conference.
• Copper slips, taking breather after 3-week high.

Eesti Paeevaleht:

• Europe's Austerity Is 'Pure Irony,' Estonia's Ligi Says. Europe accounts for half of global social spending with less than 10% of world population, Estonian Finance Minister Juergen Ligi said in an interview. Excessive taxes and imprecisely allocated public spending are main drags on regional development. "Actual austerity hasn't been noticeable in most countries, he said.

Xinhua:

• China's Inflation Pressures Haven't Eased. China's inflation pressures haven't eased because of large domestic money supply and quantitative easing policies of major developed countries, citing Zhang Liqun, a researcher with the State Council's Development Research Center. China shouldn't have expansionary policies now to boost economic growth, otherwise inflation will rebound.