Bear Radar

Style Underperformer:

• Small-Cap Value +.11%

Sector Underperformers:

• 1) Gold & Silver -1.85% 2) Homebuilders -1.30% 3) Airlines -1.07%

Stocks Falling on Unusual Volume:

• MDCO, XNPT, NXST, FMX, TCPC, IGTE, HNP, HGG, CCL, SCTY, RKUS, UNXL, ALK, WWWW and WCG

Stocks With Unusual Put Option Activity:

• 1) TIVO 2) BBY 3) MDT 4) JNK 5) EWW
  

Stocks With Most Negative News Mentions:

• 1) BZH 2) WCG 3) CCL 4) PM 5) OSIS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.08%

Sector Outperformers:

• 1) Coal +1.86% 2) Alt Energy +.87% 3) Medical Equipment +.66%
  

Stocks Rising on Unusual Volume:

• MDT, JASO, YY, MNRO, SKS, ABFS, KLIC and WLT

Stocks With Unusual Call Option Activity:

• 1) AMTD 2) WMB 3) MDT 4) XRX 5) UUP
  

Stocks With Most Positive News Mentions:

• 1) CBST 2) AET 3) MDT 4) TJX 5) NOC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• China Trade Surplus Seen by BofA at One-Tenth Customs Figure. China’s trade surplus is one-tenth the official $61 billion reported so far this year after accounting for fake transactions used to disguise hot-money inflows, Bank of America Corp. says. The true surplus is about $6 billion, according to Lu Ting, Bank of America’s head of Greater China economics in Hong Kong. That would be the smallest for January-April since the nation posted a $10.8 billion deficit in 2004. Lu’s calculations suggest the surplus shrank instead of tripling from a year earlier, a sign that global demand is restraining rather than boosting the world’s second-largest economy. Bank of America’s estimate underscores the size of possible discrepancies in the trade data, which has been disputed by analysts for four months, and broader skepticism about Chinese statistics from gross domestic product to jobs. “Growth is weak in China now -- the overstated export growth means the real growth is slightly weaker,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “We are expecting to see a fairly big drop in export growth in the coming months” as regulators crack down on so-called hot-money inflows, he said. 

• Block Says China Banks’ Bad Loans Spread Beyond Government Debt. Carson Block, the short seller who runs Muddy Waters LLC, said China’s bad-loan problem is more widespread than just local government debt and includes public and private sector borrowing. Non-performing loan “figures greatly understate the potential scope of the problem of poor-quality loans,” Block said in an e-mail. “We believe that the PRC banking system will be hit hard by the unwind, and that the government will be forced to recapitalize a number of the banks.”

• Dead Hogs in River No Obstacle as China Pork Prices to Climb. A three-month slump in hog prices in China, the world’s biggest consumer of pork, is poised to end as the government stockpiles frozen meat and shoppers look past a safety scare, the country’s top pig processor said.

• Yen Drops as BOJ Meets While Asian Stocks Retreat; Silver Falls. The yen weakened against all of its 16 major peers as the Bank of Japan starts a two-day policy meeting. Asian stocks retreated from a five-year high and silver led losses in metals as investors weighed the pace of Federal Reserve stimulus efforts. 

• Gold’s Double Bottom Signals Rally to $1,500: Technical Analysis.

Wall Street Journal: 

• China Is Seeking U.S. Assets. Agency Sets Up New York Office to Make Real-Estate, Private-Equity Purchases. China's currency-reserves manager has set up a New York operation to invest in private equity, real estate and other U.S. assets, according to people with knowledge of the move. The move by the State Administration of Foreign Exchange, or SAFE, which oversees the world's largest stockpile of foreign-exchange holdings, comes as it steps up diversification away from U.S. government debt, the people said. 

• Fed Paper Urges Trading Revamp. A Federal Reserve official has called for fundamental changes in financial markets to slow trading and allow investors to better compete with the ultrafast computer programs used by some participants. A paper due to be presented Tuesday by the Federal Reserve Bank of Chicago proposes altering the structure that allows a nonstop stream of trades and instead execute orders every half-second. The proposal is expected to ignite controversy among some traders and exchanges, which have invested heavily in the technology to profit from ultrafast trading. The paper said high-frequency trading has inflated transaction costs, with limited benefits for liquidity and pricing.

• Europe's Recession Sparks Grass-Roots Political Push.

• How to Cut a Job in Italy? Wait, and Wait Some More. It took Whirlpool Corp. WHR -0.90% eight months to close its 1,000-person factory in Fort Smith, Arkansas, last year amid falling sales. In Italy, the world's biggest appliance maker has been trying for three years to cut 500 jobs—with only partial success.

• Role of Health-Law 'Navigators' Under Fire. Lawmakers across the country are tussling over the Obama administration's plans to create a small army of assistants to guide millions of Americans as they sign up for new health-insurance options available this fall. Backers of the health-care overhaul face an uphill battle to spread the word about the law, in the face of consumer research that suggests most uninsured people know little about it and are skeptical about the value of health insurance generally. Some Democrats have openly worried that the administration is doing too little to make sure the enrollment process goes smoothly.

• David Rivkin and Lee Casey: The IRS and the Drive to Stop Free Speech. Such a scandal was bound to happen after the government started trying to rule the expression of political views.

Fox News:

• Search for survivors after massive tornado strikes areas near Oklahoma City, killing at least 51. A tornado at least a half mile-wide with 200mph winds churned through Oklahoma City's suburbs Monday afternoon, killing at least 51 and causing significant property damage for the second day in a row, forcing rescue crews to search for survivors in the debris of flattened homes, businesses and two schools. Amy Elliott, a spokeswoman for the Oklahoma Medical Examiner's Office, said the death toll is expected to rise. Oklahoma City Police say seven of those deaths were children at Plaza Towers Elementary School, which was hit by the tornado, Fox 25 reports. Oklahoma police also told Fox News' Casey Stegall, on the ground in Moore, Okla., that at least four people were killed at a 7-11 convenience store. 

• Watchdog report says DOJ official retaliated against ‘Furious’ whistle-blower, lied about it. The former U.S. Attorney for Arizona could be disbarred, after an investigation found he lied to the Justice Department about his role in trying to discredit the federal whistle-blower who exposed the botched gun-running scheme known as Fast and Furious. An Office of Inspector General report showed that Dennis Burke -- the former chief of staff for Homeland Security Secretary Janet Napolitano appointed as U.S. Attorney for Arizona by President Obama in September 2009 -- lied when asked if he leaked sensitive documents to the press meant to undermine the credibility of ATF whistle-blower John Dodson. The IG report also said Burke likely leaked the memo in retaliation for Dodson's whistle-blowing, and challenged the credibility of statements he made to congressional investigators.

Breaking News:

• Severe storms hit Great Plains, Midwest, May 20, 2013.

CNBC: 

• Tumblr’s Porn Habit—and Other Challenges for New Parent Yahoo(YHOO).

Zero Hedge: 

• Stunning Time-Lapse Video Of 2-Mile Wide Oklahoma Tornado.

• Artificial Growth Exhibit A: China's Inventory Stockpiling Hits All Time High. (graph)

• What Could Possibly Go Wrong Here?

• Chart Of The Day: "It's All About The Earnings" 

• Russia Adds Two More Warships To Mediterranean Task Force Near Syria.

Business Insider: 

• Up To 30 Children Feared Dead After Tornado Destroys Oklahoma School. 

• Oklahoma City Tornado Pictures: 'Total Devastation'.

• REPORT: Steve Cohen Is Considering A Deal That Would Shut His Hedge Fund To Outside Investors.

• BofA: A 'New Berlin Wall' Has Been Erected In Europe. (graph)

• The Most Chilling Details From The Kafkaesque Search Warrant That Went After A Fox News Reporter. 

• UK's Anti-Europe Party Make Huge Breakthrough In New Poll.

• Here's What Apple Will Say To Congress About Taxes Tomorrow.

Real Clear Politics:

• Woodward: Obama Administration Did Not Tell The Truth About Benghazi. (video)

Reuters: 

• Urban Outfitters(URBN) sales miss Street estimates, shares fall. Teen apparel retailer Urban Outfitters Inc's sales missed analysts' estimates even as reduced discounting helped shore up profit in the first quarter. Shares of the company fell as much as 4 percent to $42.77 in post-market trading on Monday.

• EU draft bank rescue law would not shield big deposits. A draft law that a group of European Union lawmakers voted for on Monday would shield small depositors from losing their savings in future bank rescues, but customers with more than 100,000 euros in savings when a bank failed could suffer losses.

Financial Times:

• Sluggish Thai growth deepens fears of wider Asian slowdown. Thailand’s economy grew more slowly than expected in the first three months of this year, adding to a slew of recent disappointing data from other Asian economies that have cast a shadow over one of the world’s fastest-growing regions. The Thai economy contracted by 2.2 per cent seasonally adjusted from the previous quarter.

Evening Recommendations 
Piper Jaffray:

• Rated (HAS) Overweight, target $55.

• Rated (MAT) Overweight, target $53.

• Rated (LF) Overweight, target $11. 

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 101.0 unch.

• Asia Pacific Sovereign CDS Index 84.75 unch.

• FTSE-100 futures -.12%.

• S&P 500 futures -.06%.

• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TDW)/.61

• (AZO)/7.21

• (HD)/.76

• (BBY)/.24

• (MDT)/1.03

• (DKS)/.48

• (TJX)/.62

• (INTU)/2.93

• (NTAP)/.68

• (ADI)/.52

• (SKS)/.18

• (TECD)/1.06   

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, Fed's Bullard speaking, Germany/UK inflation data, weekly retail sales reports, JPMorgan Homebuilding Conference, Goldman Basic Materials Conference, (JPM) shareholder meeting, (MET) investor conference and the (ARMH) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Profit-Taking, Technical Selling, Homebuilding/Healthcare Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 12.99 +4.34%

• ISE Sentiment Index 99.0 +10.0%

• Total Put/Call .78 -2.50%

• NYSE Arms .76 +22.91%

Credit Investor Angst:

• North American Investment Grade CDS Index 70.88 +.80%

• European Financial Sector CDS Index 127.84 -2.29%

• Western Europe Sovereign Debt CDS Index 86.35 -.95%

• Emerging Market CDS Index 247.65 +.46%

• 2-Year Swap Spread 14.5 unch.

• TED Spread 24.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -15.5 +1.75 bps

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 172.0 +2 bps

• China Import Iron Ore Spot $123.0/Metric Tonne -.08%

• Citi US Economic Surprise Index -18.2 -.7 point

• 10-Year TIPS Spread 2.27 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +9 open in Japan

• DAX Futures: Indicating -12 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail/tech/medical sector longs

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg: 

• German Notes Fall on Economy Optimism as Italian Spread Narrows. Germany’s two-year notes declined for the first time in four days amid signs the global economic recovery is gathering pace, damping investor demand for the safest government assets. The extra yield that investors get for holding Italian 10-year securities instead of German bunds narrowed to the least since January as a report showed Italy’s industrial orders increased in March more than economists predicted. German 10-year yields approached the highest in seven weeks and Dutch bonds snapped a two-day gain.
• Europe’s debt frenzy undeterred by record recession. Investors are snapping up long-dated bonds from Europe’s high debt and deficit nations even as prices reach the most expensive levels since 2010 and the region’s deepening recession threatens to hamper deficit-reduction plans.
• European Stocks Advance as Carmakers Climb; Ryanair Rises. European stocks advanced, extending the Stoxx Europe 600 Index’s highest level since June 2008, as the region’s carmakers rallied. Peugeot SA and Volkswagen AG both gained more than 3 percent as Morgan Stanley raised its recommendation on European automobile companies. Ryanair Holdings Plc jumped the most in more than 1 1/2 years as Europe’s largest low-cost carrier said full-year profit rose 13 percent. Fresnillo Plc slid 3.3 percent as silver slumped to its lowest price since October 2010. The Stoxx 600 rose 0.3 percent to 309.77 at the close of trading.
• Luxury Car Prices Fall in China Amid Government Frugality Push. Prices of imported cars in China fell the most in five months, adding to signs that demand for luxury products is slowing because of a government campaign to rein in lavish spending by public servants. Average prices of imported cars in April fell 3.4 percent from a year earlier, according to Cheng Xiaodong, head of auto-price monitoring at the National Development and Reform Commission, China’s top economic planner. That compares with the 0.2 percent increase for locally made passenger vehicles.
• U.S. Faces Downgrade in 2013 Without Budget Deal, Moody’s Warns. U.S. policy makers must address debt loads projected to rise later this decade to avoid a 2013 downgrade, even as the latest budget projections are “credit positive,” according to Moody’s Investors Service. The U.S. budget deficit will drop to $378 billion in 2015 from a record $1.4 trillion in 2009, according Congressional Budget Office data. The federal government will post an $642 billion deficit this year, the first time in five years that the shortfall has been less than $1 trillion. Moody’s said Sept. 11 that the U.S.’s top Aaa rating would likely be cut to Aa1 if an agreement on the debt ratio isn’t reached. 
• Gold Reboundd After Moody’s Says U.S. May Face Downgrade. Gold and silver futures rebounded after Moody’s Investors Service said U.S. policy makers must address debt woes to avoid a credit-rating downgrade this year, boosting the appeal of the metals as a haven. “More needs to be done on the policy front to address this rising debt ratio,” said Steven Hess, a senior vice president at New York-based Moody’s. The ratio of debt to gross domestic product will increase in the long term, according to the Congressional Budget Office. Gold futures for June delivery gained 1.4 percent to settle at $1,384.10 an ounce at 1:43 p.m. on the Comex in New York. Earlier, the price touched $1,336.30, the lowest for a most-active contract since April 18.
• Fed’s Evans Says Economy Has Been ‘Improving Quite a Lot’. Federal Reserve Bank of Chicago President Charles Evans said the U.S. economy has improved “quite a lot” as the central bank maintains record stimulus. “I’m optimistic that the labor market has been doing much, much better and that unemployment is going to continue to go down,” Evans said in a speech in Chicago today. “Currently we have the appropriate monetary policy in place.”
• Arctic Refuge Oil Targeted by Alaksa Amid U.S. Reluctance. Alaska’s government proposed investing its own cash in an assessment of oil reserves in the U.S. Arctic National Wildlife Refuge, seeking to prod the federal government to consider drilling in the protected area. 

Wall Street Journal:

• Vista Equity Partners to Buy Websense(WBSN). Buyout firm Vista Equity Partners agreed to pay about $1 billion to acquire Websense Inc., WBSN +28.64% a maker of software and services designed to help protect companies against cyber attacks and data theft.
• Why the IRS Flap Matters Most for Obama. People in general, and journalists in particular, tend to like things that come in groups of three, because a collection of three is small enough to comprehend but big enough to suggest a trend. That's why it's so damaging that the Obama White House came face-to-face in recent days with three controversies bubbling up at once—the revival of questions about the attacks on U.S. outposts in Benghazi, Libya; the disclosure that the Justice Department secretly subpoenaed a raft of phone records from the Associated Press in search of a leaker; and the news that the Internal Revenue Service targeted for special scrutiny conservative groups seeking tax-exempt status.

Fox News: 

• Fact check rips IRS official over Tea Party targeting claims.

CNBC: 

• Rumors Spark Bank Run, Break-Ins in Brazil. Rumors that Brazil's social security fund called Bolsa Familia was to be cancelled led thousands of people to rush to withdraw money from a Brazilian bank over the weekend. Customers lined up at ATMs at dozens of bank branches of Caixa Economica Federal, a government-owned bank, which pays the social security subsidy on Saturday and Sunday. 
• QE Halt Would Be 'Too Violent' for Market: Fed's Fisher. (video) The Federal Reserve should not go from "wild turkey" monetary policy to "cold turkey" overnight, Dallas Fed President Richard Fisher told CNBC on Monday, saying that when to dial back is the key because stopping would be "too violent for the marketplace."

Zero Hedge: 

• The Most Dangerous Country In Europe.
• Portugal Banks Warn European Leaders: "You Can't Keep Playing With Fire".
• Caterpillar(CAT) North America Sales Collapse Suggests US Economy Back To 2010 Levels.  (graphs)
• Europe's 'Status Quo Pandering' Risks "Radicalization Of An Entire Generation".
• Bernanke "Wealth Effect" Completely Wasted On Trillions In Pension Funds.

Business Insider: 

• Here's The Search Warrant Where The FBI Called A Fox News Reporter A 'Co-Conspirator' In A Leak Investigation.
• Here's Fox News' Scathing Statement On The Leak Investigation Into One Of Its Reporters.
• Goldman(GS) Is Selling The Last Of Its Stake In A Chinese Bank, And Communist Officials Are Probably Pretty Annoyed.
• The Gold Shorts Continue To Pile On. (graph)
• The End Of The Car Age In One Chart.
• CalPers Votes To Split Jamie Dimon's Role.
• Apple(AAPL) Will Begin Production Of A Lighter, Thinner iPad In July, Says DigiTimes.
• This Chart Shows The One Reason Yahoo-Tumblr Skeptics Might Be Right.

Telegraph:

• EU arms second front in China trade war with Huawei probe. The European Commission is poised to launch an anti-dumping probe against Chinese mobile companies Huawei and ZTE, opening a second front in its escalating trade clash with China.
• Japanese growth could be 'sugar high', warns former World Bank president Robert Zoellick. Japan's 0.9pc growth in the first quarter could just be a "sugar high" following the government's massive stimulus measures, former World Bank president Robert Zoellick has said. 

Bear Radar

Style Underperformer:

• Mid-Cap Growth +.15%

Sector Underperformers:

• 1) Biotech -.95% 2) HMOs -.93% 3) Homebuilders -.91%

Stocks Falling on Unusual Volume:

• XNPT, GTN, LMOS, LEAP, YPF, TISI, OSIS, PTY, ALK, SPRD, ICA, DF, WWAV, THOR, CPB, RHT and APO

Stocks With Unusual Put Option Activity:

• 1) MNKD 2) RAD 3) DXJ 4) SCTY 5) XLF
  

Stocks With Most Negative News Mentions:

• 1) KSU 2) SNDK 3) BBBY 4) NTAP 5) AMGN
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume