Today's Headlines

Bloomberg:  

• Banker in Jail Suggests Spain Is Calling Lenders to Account.
• Cypriot Bailout Program Faces ‘Unusually High’ Risks, IMF Says. Cyprus may need additional financing if its economy contracts more than expected or there are slippages in implementing the terms of its bailout program with the euro area and International Monetary Fund, IMF staff said. The impact of Cyprus’s banking crisis on gross domestic product and on the country’s fiscal consolidation is “highly uncertain,” the Washington-based institution said in a staff report today. This means risks to the outlook are “substantial and tilted to the downside” as problems would adversely affect the trajectory of Cyprus’s public debt. 
• Italian Government Suspends Unpopular Property Tax Payment. The Italian Cabinet agreed today to suspend the payment of a residential property tax due in June, an unpopular levy adopted by former Prime Minister Mario Monti to help reduce the country’s budget deficit. The administration led by Premier Enrico Letta pledged to review the tax by Aug. 31. It also approved additional funding of 1 billion euros ($1.3 billion) for workers in a temporary layoff program known as CIG.
• Russian GDP Growth at 1.6% as Economy Weakest Since 2009. Russia’s economy grew at the weakest pace since 2009 in the first quarter as the euro area’s longest recession hurt demand for commodity exports and investment at companies including OAO Gazprom cooled. Gross domestic product rose 1.6 percent from a year earlier, slowing for a fifth consecutive quarter, the Federal Statistics Service in Moscow said today in an e-mailed statement. That compares with a median estimate of 1.2 percent in a Bloomberg survey of 23 economists and a 2.1 percent pace in the final three months of 2012. The Economy Ministry estimated first-quarter growth at 1.1 percent.
• Dollar Index Reaches Highest Since 2010 on Fed; Aussie Slides. The Dollar Index climbed to the highest level in almost three years amid speculation the Federal Reserve is moving closer to ending its program of asset purchases on signs U.S. economic growth is improving. The greenback rose versus all of its 16 most-traded peers as U.S. leading indicators improved and consumer confidence rose to the highest in almost six years. The American currency climbed past 103 yen for the first time since October 2008. The Australian and New Zealand dollars slid on concern slowing global inflation will damp demand for commodities.
• Oil Price-Fixing Probe Widens as Neste Helps EU Inquiry. The European oil price-fixing probe expanded as Neste Oil Oyj (NES1V), Finland’s only refiner, said it was asked to provide information regarding potential manipulation of global crude and biofuel markets. The widening investigation comes as Pannonia Ethanol, a Hungarian biofuel producer, said it lodged a complaint with the European Commission last year after data-pricing company Platts denied requests to contribute to its price-setting process. Meanwhile, Statoil ASA (STL), one of the European oil companies that has been ensnared in the investigation, said it has “zero tolerance” for breaches of rules.
• Gold Heads for Longest Slump in Four Years on Fed, Dollar. Gold fell, heading for the longest slump in four years, as the dollar jumped to a 34-month high and a Federal Reserve policy maker said that U.S. monetary stimulus may be reduced within months.

Wall Street Journal: 

• GOP Lawmakers Criticize IRS as Hearing Opens. House Republicans on Friday probed for political motivations behind the Internal Revenue Service's targeting of conservative groups, saying lawmakers had been lied to and that there had been additional violations at the agency. House Ways and Means Chairman Dave Camp (R., Mich.), saying the revelations so far were "just the tip of the iceberg," asked who started targeting conservative groups, who knew about the practice, why it went on for so long and why the IRS wasn't forthcoming when lawmakers asked whether conservatives were being targeted. 

CNBC: 

• Italian Government 'History' as 'Virus' Spreads: Grillo. Traditional parties that make up Italy's coalition government will become history in less than four months, Beppe Grillo, the leader of the anti-establishment "Five Star Movement" told CNBC, likening the support for his movement to a fast-spreading "virus."  
• How to Tell If the IRS Is Eyeing You. You consider yourself a law abiding citizen, and you are not starting a nonprofit organization with conservative ties.

Zero Hedge:

• The Ugly Truth Behind Spain's First Trade Surplus In Over 40 Years. (graph)
• Chinese Profitability Squeezed Further By Third Year Of Double-Digit Wage Gains. (graph)
• Michigan Confidence Soars To Highest Since 2007, Biggest Beat Of Expectations On Record. (graph)
• Charting Irrational Credit Bubble Exuberance Euphoria.

Business Insider:

• It's Time To Discuss The Secret CIA Operation At The Heart Of The Benghazi Scandal.
• The Riskiest Places In The World [MAP].
• Here's The Top Stock Held By Each Of The 50 Biggest Hedge Funds.
• Woman At The Center Of The IRS Scandal Is Now In Charge Of Implementing Obamacare.
• Rupert Murdoch Says Facebook(FFB) Is Starting To Implode, Just Like 'Crappy MySpace' Did.

Reuters:

• Fitch cuts Slovenia as bailout worries continue.
• Fitch throws CMBS hand grenade ahead of SEC meeting. Fitch shook up the US securitization market this week when, on the eve of a long-awaited US SEC public roundtable on credit rating industry reform, it issued an unsolicited comment lambasting the Triple A ratings given by two of its rivals to a new single-asset commercial mortgage-backed security (CMBS) linked to a trophy Manhattan office building. 
• TABLE-U.S. March factory orders revised to -4.9 pct.

USA Today:

• Benghazi e-mails unleash flood of questions.
• Obamacare: 3 years in, it faces steep challenges. Poll: Accept The Law or Try to Change It?

Handelsblatt:

• Germany Against ECB Idea to Put ABS Risk on EU. "EU-budget guarantees to safeguard ECB measures is a renewed attempt to create a liability union by stealth," Michael Meister, deputy caucus leader for Merkel's CDU/CSU bloc in parliament, said. "The best protection for the ECB is simply to abstain from buying corporate bonds," Meister said. Meister called for a swift end to an "unnecessary discussion". SPD lawmaker Carsten Schneider also warned against burdening EIB saying plan risks turning the institution into "bad bank of Europe".

Manager Magazin:

• Germany's Rich Withdraw Money From Banks. Many family offices have no confidence in financial system stability, euro, and withdraw money from banks, money mkt funds, bonds, Yvonne Brueckner of Family Office Panel said.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.28%

Sector Underperformers:

• 1) Gold & Silver -2.06% 2) Drugs -.75% 3) Agriculture -.50%

Stocks Falling on Unusual Volume:

• NGD, STO, CMCSA, MRK, DEO, NGG, ARUN, ADSK, SSI, UNXL, GTU, TSLA, DWRE, YOKU, AEGR, JWN, DE, CODE, CHKR, TD, STO, MIC, FNV, HQH, HQL, MRH, VASC, EW, APL and CHKR

Stocks With Unusual Put Option Activity:

• 1) RF 2) JWN 3) SCTY 4) TIF 5) XLK
  

Stocks With Most Negative News Mentions:

• 1) WSM 2) LTD 3) DE 4) EWZ 5) GS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.71%

Sector Outperformers:

• 1) Oil Service +1.68% 2) Alt Energy +1.53% 3) Defense +1.27%
  

Stocks Rising on Unusual Volume:

• TSO, VSAT, SCTY, RKUS, QLIK, GT and ESI

Stocks With Unusual Call Option Activity:

• 1) JRCC 2) ARUN 3) RRC 4) ILMN 5) XLY
  

Stocks With Most Positive News Mentions:

• 1) TDW 2) NOC 3) PIKE 4) AIN 5) UAL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:

• Vanishing Risk Penalty Alarms Peripheral Investors: Euro Credit. The penalty that companies from Europe's most indebted nations pay to borrow has shrunk to near the least in three years, alarming investors who are concerned that the region's financial crisis is far from over. Buyers of bonds from companies in the region's periphery are being paid 63 basis points more yield than they're getting from companies in core nations such as France and Germany, down from 319 basis points a year ago, according to Bank of America Merrill Lynch indexes. The difference is vanishing even as fundraising by companies from Greece to Spain surged to a record 23.6 billion euros ($30.4 billion) this year, up from 15.3 billion euros in the same period of 2012, according to data compiled by Bloomberg. 

• EU Bank Stress Tests Delay Makes Way for ECB Supervision Plan. The European Central Bank is set to take center stage as the euro area’s chief banking supervisor, after the European Banking Authority ditched this year’s stress test in favor of an ECB-led review of lenders’ asset quality. The London-based EBA, set up in 2011 to harmonize rules across the European Union, delayed stress tests until 2014 as the ECB’s asset check goes ahead to “help dispel concerns over the deterioration of asset quality due to macroeconomic conditions in Europe,” the agency said a statement yesterday. 

• Denmark Shelves Euro Goal Indefinitely as Crisis Scars Too Deep. Denmark is shelving indefinitely its euro adoption goal as Prime Minister Helle Thorning-Schmidt says an exchange rate peg without full European monetary membership is proving the best currency regime for the Nordic nation. A euro referendum “in this election term is unrealistic,” Thorning-Schmidt said yesterday in an interview in Stockholm. “I don’t think it makes any sense to discuss the option of a euro referendum in the next term” set to run from 2015 to 2019, she said.

• Singh’s Growth Push Imperiled as Graft Scandals Rattle: Economy. Indian Prime Minister Manmohan Singh’s latest skirmish with corruption risks setting back efforts to spur growth, worsening a legislative logjam under a government set to pass the fewest bills ever in a full term. Singh, 80, is grappling with renewed allegations that he has allowed corruption to fester after separate graft probes led to the May 10 dismissal of the law and railways ministers. Parliament ended two days early last week as opposition parties demanding the men’s resignation blocked proceedings, with proposals to open up the country’s pension and insurance industries to overseas investment still stalled. 

• Sina(SINA) Posts Loss as China Slowdown Damps Online Advertising. Sina Corp. (SINA), owner of China’s largest Twitter-like service, posted a first-quarter loss as an advertising slowdown damped revenue and the company spent more on developing mobile applications.

• Asia Stock Index Slides on Earnings, Economic Concerns. Asia’s benchmark stock index fell for a second day as companies from WorleyParsons (WOR) Ltd. to Nippon Sheet Glass Co. forecast weaker earnings and data on jobless claims and housing signaled a slowdown in the U.S. WorleyParsons, Australia’s largest oil and gas engineering company, plunged 13 percent, while Nippon Sheet Glass sank 8.8 percent in Tokyo. Panasonic Corp., Japan’s second-biggest television maker, slid 1.8 percent. Sony Corp. fell 1.6 percent, paring this week’s rally triggered by billionaire Daniel Loeb’s push to get the electronics maker to spin off its entertainment business through an initial public offering. SP Ausnet climbed 2.4 percent after China State Grid Corp. agreed to buy a stake in the Australian electricity distributor. The MSCI Asia Pacific Index slipped 0.3 percent to 142.66 as of 11:01 a.m. Tokyo time, all 10 industry groups in the measure declining.

• Copper Set for First Weekly Drop in Four After U.S. Data. Copper declined, poised for the first weekly drop in four, after data showed U.S. jobless claims rose and housing starts slumped, raising concern that demand from the second-biggest user is slowing. Metal for delivery in three months fell as much as 0.6 percent to $7,234 a metric ton on the London Metal Exchange and was at $7,254 at 9:44 a.m. in Shanghai. Copper has retreated 1.7 percent this week, the first drop since the week ended April 19.

• Rubber Set for Biggest Weekly Loss in Month as Yen Slump Stalls. Rubber headed for the biggest weekly loss in a month as a slump in Japan’s currency against the dollar stalled, weakening the appeal of yen-denominated futures. Rubber for delivery in October dropped as much as 1.8 percent to 277.3 yen a kilogram ($2,713 a metric ton) before trading at 279.6 yen on the Tokyo Commodity Exchange at 10:27 a.m. Futures have lost 4.9 percent this week, the biggest decline since the week through April 19.

• Rebar Set for Weekly Decline as Iron Ore Falls to Five-Month Low. Steel reinforcement-bar futures headed for a weekly loss as the price of iron ore, the main ingredient in steelmaking, fell to the lowest in five months. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 0.6 percent to 3,529 ($575) a metric ton and was at 3,531 at 10:15 a.m. local time. Futures have declined 3 percent this week, the most since the week ended April 19.

• Dollar Erases Losses After Williams Says Fed May Taper Purchases. The dollar erased losses versus the yen and euro after Federal Reserve Bank of San Francisco President John Williams said the central bank may begin tapering as early as this summer the pace of its bond purchases. The greenback fell earlier from an almost four-year high versus the yen after weaker-than-forecast reports on U.S. unemployment claims, housing and inflation damped bets the Fed will slow its bond buying under the quantitative-easing stimulus strategy. South Africa’s rand slid to the weakest since 2009 on concern the nation’s economic growth will falter. “He’s hinted at possibility of tapering QE already,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said of Williams in a telephone interview. “But I think it still adds fuel to the fire. Markets have been focusing on tapering, and this remark will certainly be noted.” 

• Nordstrom(JWN) Slides After Quarterly Revenue Trails Estimates. Nordstrom Inc. (JWN) dropped after the department-store chain posted first-quarter revenue that trailed analysts’ estimates and cut its sales forecast for the year. Nordstrom fell 2.7 percent to $59.45 at 4:42 p.m. after regular trading ended in New York.

Wall Street Journal: 

• Russia Raises Stakes in Syria. Assad Ally Bolsters Warships in Region; U.S. Sees Warning.
  Russia has sent a dozen or more warships to patrol waters near its naval base in Syria, a buildup that U.S. and European officials see as a newly aggressive stance meant partly to warn the West and Israel not to intervene in Syria's bloody civil war. Russia's expanded presence in the eastern Mediterranean, which began attracting U.S. officials' notice three months ago, represents one of its largest sustained naval deployments since the Cold War. While Western officials say they don't fear an impending conflict with Russia's aged fleet, the presence adds a new source of potential danger for miscalculation in an increasingly combustible region. "It is a show of force. It's muscle flexing," a senior U.S. defense official said of the Russian deployments. "It is about demonstrating their commitment to their interests." 

• Day Traders Steer Tesla(TSLA) Higher. 

• This Is No Ordinary Scandal. Political abuse of the IRS threatens the basic integrity of our government.

• Strassel: The IRS Scandal Started at the Top. The bureaucrats at the Internal Revenue Service did exactly what the president said was the right and honorable thing to do.

Fox News: 

• ICE admits hundreds of illegal immigrants with criminal records released. Hundreds of illegal immigrants with criminal records were released earlier this year as the Obama administration prepared for budget cuts, according to newly released data that challenged claims the program involved "low-risk" individuals. Immigration and Customs Enforcement released the figures to two top senators, after a three-month delay and under the threat of congressional subpoenas.

MarketWatch.com:

• Videogame sales in U.S. suffer tailspin in April. Videogame hardware, software and accessory sales in U.S. retail stores fell 25% in April to $495.2 million, from $657.5 million a year earlier, according to NPD Group, an industry researcher. Data from the month showed double-digit declines in every segment, including software and accessories, though hardware sales saw the most dramatic contraction.

CNBC: 

• Stock Market Gains Show Signs of Wear. Stocks head into Friday with a 1 percent gain for the week so far, but traders are increasingly seeing signs of wear, particularly as a growing list of disappointing economic reports stacks up against the market's gains.

• Dell(DELL) Earnings Fall Short of Estimates; Sales Beat. Dell reported earnings that fell far shy of market expectations on Thursday, but revenue beat forecasts as strength in its enterprise solutions business offset declining PC sales. 

• Struggling JC Penney(JCP Reports Bigger Loss Than Expected. Struggling department-store retailer JC Penney on Thursday reported operating margins plunged in the first quarter on weak sales and heavy clearance deals, as its new chief executive promised more promotions and a return to basics to win back shoppers.

Zero Hedge: 

• "America, The Dependent". (graph)

• Biderman Busts The 'Sustainable' Deficit Reduction Meme.

• Just Plain Silly. (graph)

• Austrian "Good" Banks Balk At Bad-Bank Bailout.

• Mystery Sponsor Of Weapons And Money To Syrian Mercenary "Rebels" Revealed.

Business Insider:

• 7 Charts That Show Why Fox Is The Most Dominant Force In Cable News.

• Morgan Stanley Explains Why The US Dollar Is The Hottest Currency In The World Again. 

• The Next Big Enterprise IPO Happens On Friday: Tableau Software.

• TEXAS STATE FIRE MARSHAL: Arson Not Ruled Out In Fertilizer Plant Explosion Investigation.

• Cisco's(CSCO) John Chambers Repeats Threat To Ship Jobs Overseas If Tax Laws Don't Change.

New York Times:

• Russia Sends More Advanced Missiles to Aid Assad in Syria. Russia has sent advanced antiship cruise missiles to Syria, a move that illustrates the depth of its support for the Syrian government led by President Bashar al-Assad, American officials said Thursday.

ABCNews:

• IRS Official in Charge During Tea Party Targeting Now Runs Obamacare Office. The Internal Revenue Service official in charge of the tax-exempt organizations at the time when the unit targeted tea party groups now runs the IRS office responsible for the health care legislation. Sarah Hall Ingram served as commissioner of the office responsible for tax-exempt organizations between 2009 and 2012. But Ingram has since left that part of the IRS and is now the director of the IRS’ Affordable Care Act office, the IRS confirmed to ABC News today.

Real Clear Politics:

• Schieffer On Scandals: "It's Very, Very Disturbing What We're Seeing". (video) I mean, just all of a sudden you have this thing with the Justice Department where they’re getting all these phone records of all the reporters. The Attorney General, well he didn’t know anything about it. You get to the IRS, they don’t seem to know anything about the Tea Party thing. You come to White House, they don’t know anything about Benghazi. Somebody’s got to grab hold of this thing. It’s very, very disturbing what we’re seeing here.

Reuters:

• U.S.-based stock funds reap $8.9 bln as stock markets climb -Lipper.

• U.S. Fed hawks call for retreat from mortgage stimulus.

• Lower income shoppers still feeling pinched, U.S. retailers say.

• Autodesk(ADSK) cuts full-year revenue forecast, shares fall. Autodesk Inc's first-quarter results missed market expectations on sales declines in the Americas and emerging markets, prompting the maker of AutoCAD design software to cut its full-year revenue forecast. Shares of the company fell 5 percent after the bell. 

• U.S. Fed balance sheet grows in latest week. The U.S. Federal Reserve's balance sheet grew in the latest week as the central bank's holdings of U.S. Treasuries increased, Fed data released on Thursday showed.

Financial Times: 

• US farmland prices rise despite weak grain market. Farmland prices in the US corn belt have risen at double-digit clip this year despite weaker grain markets in a move that will intensify debate over whether loose monetary policy and congressional largesse are inflating a bubble.

Telegraph: 

• There may be no halting this tax juggernaut. The latest brainwave from Brussels has the City in its sights, even if Britain goes it alone.

National Business Daily:

• China Slows Pace of Some High-Speed Rail Construction. China Railway Corp. may face cash flow shortfall if it doesn't sell bonds "soon", citing a person from the railway system. Some high-speed rail projects have slowed their construction pace, the report said. A high-speed rail connecting Guizhou and Guangdong provinces has delayed its start of service because of a lack of funds, the report said, citing Hu Xiaodeng, a researcher at Guizhou Academy of Social Sciences. Another high-speed rail connecting Henan province and Chongqing has delayed the start of construction, the report said.

Evening Recommendations 
Barclays:

• Rated (AMT) Overweight, target $98.

• Rated (VZ) Overweight, target $59.

• Rated (LEAP) Underweight, target $4. 

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 102.50 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 84.75 +.75 basis point.

• FTSE-100 futures +.06%.

• S&P 500 futures +.15%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DCI)/.49

• (SSI)/.09 

Economic Releases
9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for May is estimated to rise to 77.9 versus 76.4 in April. 

10:00 am EST

• Leading Indicators for April are estimated to rise +.2% versus a -.1% decline in March.  

Upcoming Splits

• (ESBF) 6-for-5

Other Potential Market Movers

• The Fed's Kocherlakota speaking and China property price data could also impact trading today.

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

Stocks Slightly Lower into Final Hour on Rising Global Growth Fears, Profit-Taking, Homebuilding/Biotech Sector Weakness

Broad Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 12.84 +.23%

• ISE Sentiment Index 129.0 +29.0%

• Total Put/Call .94 +20.51%

• NYSE Arms 1.05 +80.56%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.28 -1.62%

• European Financial Sector CDS Index 133.83 -1.97%

• Western Europe Sovereign Debt CDS Index 90.34 +1.89%

• Emerging Market CDS Index 243.39 +.88%

• 2-Year Swap Spread 14.0 -.25 bp

• TED Spread 24.75 +1.0 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -16.75 -1.0 bp

Economic Gauges:

• 3-Month T-Bill Yield .03% -1 bp

• Yield Curve 163.0 -7 bps

• China Import Iron Ore Spot $125.0/Metric Tonne -1.11%

• Citi US Economic Surprise Index -23.1 -12.5 points

• 10-Year TIPS Spread 2.26 -3 bps

Overseas Futures:

• Nikkei Futures: Indicating +17 open in Japan

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

• Slightly Lower: On losses in my medical/biotech/retail sector longs

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.30%

Sector Underperformers:

• 1) Homebuilders -2.24% 2) Biotech -1.73% 3) Retail -.80%

Stocks Falling on Unusual Volume:

• CRK, NTLS, HES, RF, ARRS, RIO, SWC, INFI, TCP, CLVS, ARIA, JACK, PBH, YRCW, RE, OPTR, BMY, FLT,CSC, PRE, BMRN, SONC, IBB, WX, CRI and INFI

Stocks With Unusual Put Option Activity:

• 1) GME 2) HUN 3) XLY 4) CELG 5) CSCO
  

Stocks With Most Negative News Mentions:

• 1) BRK/A 2) CHK 3) ACAT 4) CSC 5) WFC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume