Friday Watch

Evening Headlines 
Bloomberg: 

• U.S. Warns Russia of More Sanctions as G-7 Studies Ukraine Aid. The U.S. threatened Russia with more sanctions for its incursion into Ukraine as global finance chiefs debated how best to deliver aid to the beleaguered former Soviet republic. With Group of Seven finance ministers and central bankers meeting yesterday in Washington, U.S. Treasury Secretary Jacob J. Lew delivered the warning in talks with his Russian counterpart, Anton Siluanov. It was made just hours after Russian President Vladimir Putin threatened to halt natural gas shipments to Ukraine. “Secretary Lew emphasized that Russia’s ongoing occupation and purported annexation of Crimea is illegal and illegitimate,” the Treasury said in a statement after the officials met. “The United States is prepared to impose additional significant sanctions on Russia if it continues to escalate the situation in Ukraine.”   

• Japan Stocks Set for Worst Week Since 2011 Quake With 7.1% Slump. Japan’s Topix index fell for a sixth day, heading for its biggest weekly slump since the March 2011 earthquake, as the yen rose and a selloff in technology stocks resumed. Fast Retailing Co. tumbled. “As market sentiment worsens in the U.S., investors tend to focus on negatives, creating a downward spiral,” said Juichi Wako, a Tokyo-based equity strategist at Nomura Holdings Inc., the nation’s biggest brokerage. “We’re seeing a necessary correction in technology shares.” SoftBank Corp., a mobile-phone operator and Internet-company investor, was the biggest drag on the Topix today, while Yahoo Japan Corp., which operates an online portal site, slid 2.9 percent. Fast Retailing tumbled 8 percent, extending its weekly drop to 13 percent, after Asia’s biggest clothing retailer cut its forecast for annual profit as costs rise and demand weakens for the company’s casual wear in Japan. Nissan Motor Co., a carmaker that gets about 80 percent of revenue abroad, lost 2 percent. 

• Fast Retailing Plunges in Tokyo After Cutting Profit Forecast. Fast Retailing Co. (9983), Asia’s biggest clothing retailer, fell the most in nine months in Tokyo trading after lowering its annual profit forecast, citing higher costs and weak demand. Net income will be about 88 billion yen ($865 million) for the year ending August, lower than its previous forecast of 92 billion yen, the Yamaguchi, Japan-based company said yesterday after the market closed. That compares with a 94.5 billion yen average of 19 analysts estimates compiled by Bloomberg. 

• Property Trust Sales Drop 49% as Vicious Loop Seen: China Credit. Chinese developers raised 49 percent less through trusts in the first quarter as the collapse of Zhejiang Xingrun Real Estate Co. highlighted default risks. “The banking system and the shadow banking system are becoming concerned about exposure,” David Cui, China strategist at Bank of America said in an interview yesterday. “Once people refuse to provide credit to developers, their balance sheets will be under pressure, forcing them to cut prices. Once enough of them cut prices, fewer people would buy because most people buy property only when they think the price is going up. If this persists, it will turn into a vicious loop.”  

• China Fake Data to Skew More Export Numbers. China’s data distortions will muddy analysis of the nation’s trade until at least June, making it harder to assess the strength of the world’s biggest exporter and second-largest economy. That’s when China will provide figures that compare with what Royal Bank of Scotland Group Plc economist Louis Kuijs says are “pretty clean” numbers from May 2013 that followed a crackdown on inflated invoices used to disguise capital inflows.

• Turkish Lira Drops Most in Three Weeks as Moody’s Cuts Outlook. Turkey’s lira dropped the most in three weeks after Moody’s Investors Service lowered its outlook on the nation’s debt rating to negative from stable. Moody’s cited “increased pressure on external financing position driven by heightened political uncertainty, lower global liquidity and slowing near-term economic outlook” as reasons for the decision. The lira fell 0.5 percent to 2.1187 per dollar as of 9:09 a.m. in Singapore, according to data compiled by Bloomberg. The currency was headed for a 0.3 percent weekly loss. 

• Asian Stocks Sink With Aussie on Tech Rout. Asian stocks slid, pushing the regional index down the most in three weeks, while emerging-market and commodity currencies weakened as a renewed selloff in U.S. technology shares cut demand for riskier assets. The MSCI Asia Pacific Index sank 1 percent by 12:06 p.m. in Tokyo, its biggest drop since March 20. Fast Retailing Co. drove a 2.3 percent tumble in Japan’s Nikkei 225 Stock Average, which is headed for the steepest weekly drop among developed markets.

• Dollar Set for Biggest Weekly Drop in Eight Months; Aussie Falls. The dollar was set for the biggest weekly slide in eight months against a basket of its major peers as the Federal Reserve’s meeting minutes damped speculation that U.S. interest rates will rise. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, was little changed at 1,005.53 at 11:23 a.m. in Tokyo. It has lost 1.1 percent since April 4, set for the biggest weekly drop since the period ended Aug. 9.

• Options Trader Spends $5.3 Million to Bet Russell 2000 Will Drop. An investor paid about $5.3 million for a trade that will pay off if the iShares Russell 2000 ETF falls at least 2 percent by May. The trader bought 40,000 bearish contracts on the small-cap stock ETF (IWM) expiring in May with a strike price of $113, while selling the same number of May $107 puts in a strategy known as a put spread, according to JonesTrading Institutional Services LLC.

Wall Street Journal:

• Who Is Sylvia Burwell, HHS Secretary Sebelius's Expected Replacement? Ms. Burwell Has a Low Public Profile, But Is One of the Most Experienced Officials in Obama's White House.

• Heartbleed Bug Found in Cisco(CSCO) Routers, Juniper(JNPR) Gear. Encryption Bug Affects Equipment That Connects to the Web.

• Finra Scrutinizes Banks' Role in Bond Market. Regulators Are Looking at Whether Some Money Managers Are Favored at the Expense of Other Investors.

• Sensitive Market Data Leaked After Government Phone Call. Agency Provided Vital U.S. Funding Information, but Who Was Listening In? 

• Citigroup(C) Faces Inquiry in California Over Failure to Report Suspicious Activity. Some Transactions Involved Suspected Drug-Cartel Members.

CNBC:

• Stocks could continue to lose ground. (video) The bloodbath in stocks could continue, even if the market manages to bounce Friday.

Zero Hedge:

• Marc Faber Warns "The Market Is Waking Up To How Clueless The Fed Is". (video)

• Blythe Masters Under Investigation By Federal Prosecutors.

• Carl Icahn Warns: "Easy To Fake Earnings" Thanks To Fed; "Major Correction Coming". (video)

• Santelli Slams "Don't Ignore The Long-End... Recessionary Pressures Are Building". (video)

• David Stockman: The Born Again Jobs Scam, Part 2: The Fed’s Labor Market Delusion.

• Obamacare Claims Its Latest Victim: Kathleen Sebelius Resigns As US Health Secretary.

Business Insider: 

• SAC Capital Agrees To Pay $1.8 Billion In Largest Insider Trading Settlement In History.

• Chinese Producer Prices Fall For 25th Straight Month.

• Brazil's Massive Spending Spree Has Failed To Generate The Growth The Country Desperately Needs.

Reuters:

• Asia overtakes U.S. as top destination for Venezuela oil -PDVSA. Asia overtook North America last year as the main destination for Venezuelan exports of crude oil and processed fuels, according to preliminary data submitted to parliament by state oil company PDVSA. 

• GM(GM) shares drop to near IPO price of $33. Investors' concerns about ongoing turmoil at General Motors Co, linked to the deaths of at least 13 people, could push the automaker's shares below GM's $33 IPO price for the first time since last June. 

• China should be very cautious with any stimulus - central bank. The Chinese government and central bank should be "very cautious" in implementing any stimulus programs because they tend to be less efficient than natural market forces in boosting growth, a People's Bank of China official said on Thursday. "Any kind of stimulus package should be very cautious in the sense that you should believe that the market driver is the natural and the most efficient way to grow, and a stimulus growth driver is not as efficient as the natural market driver," Yi said. "And the government and the central bank should be very cautious." 

• Gundlach: global economy 'deflationary scare' could happen again. Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, said on Thursday the global economy could potentially see a "deflationary scare" again and added that he likes gold as a diversifier. 

• Hedge funds' March performance worst in nine months - data. Hedge funds had their weakest month since mid-2013 in March, data showed on Thursday, as investments took a hit from tensions in Ukraine and fears of a slowdown in China. The asset-weighted SS&C GlobeOp Capital Performance Index showed the gross return of the average fund was minus 1.03 percent in March, the first and largest monthly drop since last June, although they remain up 2.46 percent year to date.

South China Morning Post:

• China Must Fix Housing Bubble Before Yuan Opening, Yu Says. Govt should keep "certain capital account controls" while allowing yuan to float, Yu Yongding said, citing the economist's comments to a housing forum. Domestic problems including the housing bubble, inefficient allocation of resources must be resolved before full opening.

Shanghai Securities News:

• China Drafts Plan to Control Energy Consumption. China is drafting a plan to control energy and coal consumption as part of pollution control efforts, citing a person from the National Development and Reform Commission.

Hong Kong Economic Journal:

• BYD March Vehicle Sales Volume Drops 25% y/y. Co's vehicle sales in the month dropped to 39,000 from 51,700 a year ago, citing Li Yunfei, deputy general manager of the sales division. Total sales in the first quarter dropped to 100,300 vs 143,000 a year ago.

Evening Recommendations
ISI Group:

• Rated (QCOM) Strong Buy, target $90. 

• Rated (NXPI) Strong Buy, target $85.

• Rated (MU) Strong Buy, target $30.

• Rated (LRCX) Strong Buy, target $70. 

• Rated (AMAT) Strong Buy, target $25.

• Rated (FSL) Cautious, target $20.

• Rated (LLTC) Cautious, target $46.

Night Trading

• Asian equity indices are -1.25% to -.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 120.5 -1.25 basis points.

• Asia Pacific Sovereign CDS Index 86.5 unch.

• FTSE-100 futures -.71%.

• S&P 500 futures +.11%.

• NASDAQ 100 futures  +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FAST)/.38

• (JPM)/1.39

• (WFC)/.97

Economic Releases
8:30 am EST

• PPI Final Demand MoM for March is estimated to rise +.1% versus a -.1% decline in February.

• PPI Ex Food and Energy MoM for March is estimated to rise +.2% versus a -.2% decline in February.

9:55 am EST

• Preliminary Univ. of Michigan Consumer Confidence for April is estimated to rise to 81.0 versus 80.0 in March. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI and (DYN) investor day could also impact trading today.

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

Stocks Falling Substantially into Final Hour on Russia/Ukraine Tensions, Rising Global Growth Fears, Yen Strength, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Every Sector Declining
  

• Volume: Slightly Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 15.47 +11.94%

• Euro/Yen Carry Return Index 147.07 -.26%

• Emerging Markets Currency Volatility(VXY) 8.21 -.24%

• S&P 500 Implied Correlation 55.54 +5.95%

• ISE Sentiment Index 58.0 -34.09%

• Total Put/Call .93 +52.46% 

• NYSE Arms 1.54 +45.93% 

Credit Investor Angst:

• North American Investment Grade CDS Index 67.58 +3.22%

• European Financial Sector CDS Index 81.16 -1.01%

• Western Europe Sovereign Debt CDS Index 42.36 -.43%
• Asia Pacific Sovereign Debt CDS Index 86.36 -.11%

• Emerging Market CDS Index 270.10 -.23%

• China Blended Corporate Spread Index 351.33 -.76%
• 2-Year Swap Spread 13.5 unch.

• TED Spread 19.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -1.75 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 228.0 -4.0 basis points

• China Import Iron Ore Spot $119.10/Metric Tonne -.25%

• Citi US Economic Surprise Index -41.80 +3.4 points

• Citi Emerging Markets Economic Surprise Index -10.20 -7.1 points

• 10-Year TIPS Spread 2.14 unch.

Overseas Futures:

• Nikkei Futures: Indicating -260 open in Japan

• DAX Futures: Indicating -50 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• NATO Blames Russia for Ethnic Unrest Amid Gas Threat. Russian President Vladimir Putin threatened to shut off gas deliveries through Ukraine unless European leaders took steps to stabilize the country as NATO accused Russia of stoking ethnic unrest in its eastern regions. With some 40,000 combat-ready troops massing along the border with Ukraine, Russia is trying to subvert its neighbor’s government and force it to devolve power, North Atlantic Treaty Organization Secretary-General Anders Fogh Rasmussen said today in Prague. Rasmussen is using “Cold War-era rhetoric” in a bid to “close the ranks” between member countries in the face of a “sham external threat,” the Russian Foreign Ministry said on its website. “Russia is stirring up ethnic tensions in eastern Ukraine,” Rasmussen said. “If Russia is serious about a dialogue, the first step should be to pull back its troops.”

• Goldman(GS) Says China Junk Debt Not Paying Enough for Default Risk. Investors in high-yield bonds from China, the majority of which come from the real estate industry, aren’t being paid enough for assuming the risk of economic slowdown and defaults, Goldman Sachs Group Inc. said. “For China high yield, we do not think there is sufficient premium to compensate for these risks, especially given the potentially high correlation risks in the real estate sector,” analysts at the New York investment bank including Hong Kong-based Kenneth Ho wrote in a report today. Dollar bonds from issuers in China returned 2.24 percent since Dec. 31, tied with South Korea for third-worst performer in 15 Asian markets tracked by JPMorgan Chase & Co.

• Property Trust Sales Drop 49% as Vicious Loop Seen: China Credit. Chinese developers raised 49 percent less through trusts in the first quarter as the collapse of Zhejiang Xingrun Real Estate Co. highlighted default risks. Issuance of the property-related plans, which raise funds from wealthy investors, slid to 50.7 billion yuan($8.16 billion) from 99.7 billion yuan in the fourth quarter, according to data compiled by Use Trust. The yield on AA rated five-year bonds has climbed 172 basis points in the past year to 7.25 percent, according to Chinabond. "The banking system and the shadow banking system are becoming concerned about exposure in the property sector," David Cui, China strategist at Bank of America said in an interview yesterday. "Once people refuse to provide credit to developers, developers' balance sheets will be under pressure, forcing them to cut prices. Once enough of them cut prices, fewer people would buy because most people buy property only when they think the price is going up. If this persists, it will turn into a vicious loop." The collapse of Xingrun, a builder in a city south of Shanghai, with 3.5 billion yuan in liabilities last month is adding to concerns as developers grapple with trust repayments equivalent to the size of Puerto Rico's economy this year.

• Rupiah Falls as Stocks Drop Most Since August on Election. Indonesian stocks had the biggest drop since August and the rupiah weakened by the most in three weeks after Jakarta Governor Joko Widodo’s party received less support than expected in parliamentary elections. The Jakarta Composite index of shares fell 3.2 percent from April 8 to close at 4,765.729, the steepest decline since Aug. 27. The currency weakened 0.6 percent, the most since March 20, to 11,355 per dollar, prices from local banks show.

• Fast Retailing Cuts Profit Forecast Amid Waning Japan Demand. Fast Retailing Co. (9983), Asia’s biggest clothing retailer, cut its forecast for annual profit as costs rose and demand weakens for the company’s casual wear in Japan. Net income will be about 88 billion yen ($865 million) for the year ending August, lower than its previous forecast of 92 billion yen, the maker of Uniqlo brand clothing said yesterday. That compares with the 94.5 billion yen average of 19 analyst estimates compiled by Bloomberg. 

• Japan’s Dispatches of Jets Against China Rise to Record. Japan’s dispatches of fighter jets to pursue Chinese aircraft rose by a third in the past year to a record 415 times, reflecting growing tensions stemming from a territorial dispute in the East China Sea.

• European Stocks Drop as China Imports Unexpectedly Plunge. European stocks declined as a report showed Chinese imports unexpectedly slumped last month, outweighing gains by personal- and household-goods companies after LVMH Moet Hennessy Louis Vuitton SA posted results. Tryg A/S lost 4 percent after reporting first-quarter net income that missed analysts’ estimates. LVMH added 3.2 percent as the world’s largest luxury-goods company posted the fastest growth in fashion and leather-goods sales in two years. The Stoxx Europe 600 Index fell 0.5 percent to 333.41 at the close of trading.

• Dollar Drops to Lowest in 5 Months as Yen Gains. The yen gained to the strongest in three weeks against the greenback as an unexpected decline in Chinese exports revived demand for safer assets.

• Treasuries Rise as Cooled Fed Rate Concern Fuels Bond Sale Bids. Treasuries rose as the U.S. sale of $13 billion in 30-year bonds drew higher-than-average demand a day after Federal Reserve minutes damped bets policy makers would accelerate interest-rate increases. Benchmark 10-year yields declined five basis points to 2.64 percent.

• Faulty Hedges in Junk Loans Foil Rate Protection: Credit Markets. Ashish Shah, who manages company-debt investments for a living, has a message for individuals who’ve poured $70.7 billion into junk-rated loans since 2012: You’ll probably be disappointed. Below-investment grade loans have attracted new cash for a record 94 weeks by promising interest payments that will float higher along with benchmark rates. The catch: More than 85 percent of the debt won’t actually do that until the three-month London interbank offered rate, or Libor (US0003M), more than quadruples to exceed 1 percent, Morgan Stanley data show. Futures show that traders don’t expect Libor to breach that level for almost two years. In the meantime, prices on the $1 trillion of outstanding U.S. loans are poised to fall when the Federal Reserve raises borrowing costs.  

• Technology IPOs Face Skittishness as Market Momentum Slips. Goodbye, momentum. Technology companies had a relatively easy time marketing initial public offerings while stock markets were steadily rising: the Nasdaq 100 Index rose 33 percent to a 14-year high in the year through early March. For Sabre Corp., Weibo Corp., Leju Holdings Ltd. and Paycom Software Inc., which are pitching to raise $1.63 billion over the next week, the timing may not be ideal. Since that early March peak, the technology benchmark has dropped more than 5 percent - and newly public shares have been hit particularly hard. Almost all the Internet and software IPOs that were conducted since 2012 fell in the 10 days through April 7, and the median drop was about 11 percent, data compiled by Deutsche Bank AG show.

Wall Street Journal:

• Chinese Premier Li Warns Southeast Asia Nations Against 'Provocations'. Remarks Follow Philippines Legal Challenge to Its Claims in South China Sea. 

• China Prepares Way for New Low in Growth. Amid More Signs of Weakening, Premier Leaves Wiggle Room to Miss 7.5% Target.

Fox News:

• House panel votes to hold ex-IRS official Lerner in contempt of Congress.

MarketWatch: 

• OPEC oil output drops; cartel lowers 2014 forecast. Production by the Organization of the Petroleum Exporting Countries, which supplies more than a third of the oil consumed globally each day, fell by over half a million barrels a day last month to 29.6 million barrels a day, the group said in its monthly oil market report. A steep drop in Iraq’s oil output of nearly 300,000 barrels a day led the decline, though there was also a substantial downturn in Angola, Libya and Saudi Arabia last month. 

• Gold near 3-week high after ‘dovish’ Fed minutes. Prices close above $1,320; sharp drop in U.S. equities adds support.

CNBC:

• Art Cashin: 'We need to be very careful'. (video)

• Fidelity looking to open new trading platform. Fidelity Investments is working with other asset managers to create a new trading platform aimed at lowering costs for its customers.

• Why tech losses at hedge funds can hurt you. Is it only the rich who get hurt when hedge funds lose money, or should regular investors pay attention?

ZeroHedge:

• It's On: Gazprom Prepares "Symbolic" Bond Issue In Chinese Yuan.

• Nasdaq Biotech Index Crucified, Falls Most Since August 2011. (graph)

• Donetsk Creates "People's Army".

• Is The Fed To Blame For The Bursting Of The Tech Bubble? *TARULLO SEES RISK OF LARGE LOSSES IN LEVERAGED LOAN FUNDS *TARULLO: FARMLAND, SMALL TECH FIRM VALUATIONS SEEM `STRETCHED' *TARULLO SEES RISK OF LARGE LOSSES IN HIGH-YIELD CORPORATE BONDS *TARULLO FAVORS KEEPING OPTION OF USING RATES AGAINST BUBBLES. 

• 10 Year Breakdown To 2.4% Possible BofA Warns. (graph)

• Satellite Photos Released Revealing Russian Military Build Up. (pics)

• Picturing The Gap Between Hope And Reality In Stocks. (graph)

• Banks Win Again As Proposed "Toughened" Basel Derivatives Rule "Seems To Have Evaporated".

Business Insider:

• Ten Warning Signs We Could Be Headed For A Crash.

Politico:

• Limbaugh: CBS has 'declared war on the heartland of America' by hiring Colbert.

Reuters:

• Family Dollar(FDO), other retailers see shoppers pull back. Family Dollar Stores Inc, seeking to reverse declining sales and profit, said on Thursday it is slashing prices to win shoppers, cutting jobs, and shutting hundreds of weak performing stores. The discount retailer, which caters to lower income shoppers, many living paycheck to paycheck, reported sales at stores open at least a year fell 3.8 percent in the quarter ended March 1. It expects sales to decline this quarter, too. Family Dollar Chief Executive Howard Levine on a call with investors pointed to "a more financially constrained consumer," echoing recent comments from rivals. Wal-Mart Stores Inc a few weeks ago said sharp cuts in food stamp benefits and higher payroll taxes had pinched its customers.

• EMERGING MARKETS-Latam stocks fall on weak Chinese trade data.

South China Morning Post:

• Beijing rules out strong stimulus despite trade decline. Beijing maintains emphasis on structural reforms and urbanisation to drive growth after a decline in exports and imports for March. He said: "We won't adopt short-term strong stimulus policies just because of temporary fluctuations in the economy. Instead, we will put more emphasis on promoting healthy development.

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.82%

Sector Underperformers:

• 1) Biotech -5.71% 2) Social Media -4.02% 3) Alt Energy -3.33%

Stocks Falling on Unusual Volume:

• HCLP, BBBY, TS, APAM, PSMT, CTRX, CBSH, FDO, TM, COG, APOG, ALG, EBAY, HQH, CTCT, POOL, HIBB, FMBI, TQQQ, HMC, VISN, IBB, WUBA, N, CRS, NMBL, MNST, GILD, CTRX, FEYE, NOW and IMPV

Stocks With Unusual Put Option Activity:

• 1) XBI 2) BBBY 3) ADM 4) EWY 5) WDAY
  

Stocks With Most Negative News Mentions:

• 1) CVX 2) BBBY 3) GS 4) PCLN 5) COG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.45%

Sector Outperformers:

• 1) Tobacco +.19% 2) Utilities +.09% 3) Telecom +.07%
  

Stocks Rising on Unusual Volume:

• CSH

Stocks With Unusual Call Option Activity:

• 1) KOG 2) HST 3) SE 4) RAD 5) BBBY

Stocks With Most Positive News Mentions:

• 1) COST 2) RAD 3) ADP 4) LNKD 5) NKE
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Putin Seen Signing China Gas Deal as Crisis Forces Russia’s Hand. Vladimir Putin is more likely to sign a 30-year deal to supply pipeline gas to China next month after more than a decade of false starts because the crisis in Ukraine is forcing Russia to look for markets outside Europe.

• Ukraine’s Rust Belt Fears Ruin as Putin Threatens to Choke Trade. For Pavel Cesnek, the future of his sprawling locomotive maker in eastern Ukraine lies in the balance and its fate will be sealed across the Russian border. The head of Luganskteplovoz in the city of Luhansk rules over a communist-era factory and workforce of 6,500 that builds trains primarily for state-run OAO Russian Railways. Like many local businessmen, he fears the pro-European government in Kiev will antagonize the Kremlin into unleashing trade restrictions that could wipe out industry across Ukraine’s rust belt. “Trade ties with Russia are an existential question -- to be or not to be,” said the 40-year-old Czech. “Without Russia, there’d be a total collapse for me, my workers and my owner.”

• PC Shipments Drop; Corporate Demand Slows Pace of Decline. Worldwide personal-computer shipments dropped in the first quarter as consumers in emerging markets opted for smartphones and tablets, while corporate demand helped slow the pace of the decline, researchers said. Unit sales fell 1.7 percent from a year earlier to 76.6 million, market researcher Gartner Inc. said today in a statement. IDC, another technology-research firm, said quarterly shipments worldwide fell 4.4 percent to 73.4 million. The PC market is on course for a third annual contraction, threatening earnings at companies that rely on sales of the devices, such as Intel Corp. (INTC) and Hewlett-Packard Co. 

• Asian Stocks Pare Gains With Aussie as China Trade Drops. Asian stocks pared gains and Australia’s dollar trimmed its advance as Chinese trade figures unexpectedly fell, tempering optimism after the Federal Reserve eased concern about when U.S. rates will rise. Indonesian equities tumbled after elections failed to show a clear winner. The MSCI Asia Pacific Index advanced 0.3 percent by 11:41 a.m. in Tokyo, after gaining as much as 0.9 percent before China’s data release.

• Gold Near Two-Week High on Speculation U.S. Rates Will Stay Low. Bullion for immediate delivery traded at $1,313.13 an ounce at 8:41 a.m. in Singapore from $1,311.80 yesterday, when the metal completed a two-day advance that’s the longest streak in a month, according to Bloomberg generic pricing.

• Iron-Ore Bear Market Deepens as Aussie Mines Expand: Commodities. The world is mining more iron ore than steelmakers need. Australia, the largest supplier, sent 504 ships from Port Hedland during the first quarter carrying enough iron-ore exports to build more than 700 Golden Gate Bridges. Shipments jumped 35 percent to the biggest buyer, China, where inventories have ballooned to the highest ever. After companies including BHP Billiton Ltd. and Rio Tinto Group expanded capacity to meet surging steel demand, output is climbing just as China’s economy slows to the weakest since 1990. Prices that already are down 14 percent in the past year will slump at least 16 percent further in the second half to less than $100 a metric ton, the lowest level since 2012, according to Credit Suisse Group AG and Standard Chartered Plc.

• JPMorgan’s(JPM) Dimon Says Cyber Intruders Could Breach Bank Defenses. JPMorgan Chase & Co. (JPM) is facing “increasingly complex and more dangerous” cyberattacks and some of the intruders may get through, Chief Executive Officer Jamie Dimon said. “It is going to be a continual and likely never-ending battle to stay ahead of it -- and, unfortunately, not every battle will be won,” Dimon wrote today in his annual letter to shareholders of the New York-based bank. The company will boost spending on cybersecurity to $250 million this year from $200 million in 2012, with future efforts expanding “exponentially,” he wrote.

• Bed Bath & Beyond(BBBY) Drops After Profit Forecast Trails Estimates. Bed Bath & Beyond Inc. (BBBY) tumbled as much as 5.9 percent in late trading after the retail chain’s first-quarter profit forecast fell short of analysts’ estimates.

Wall Street Journal: 

• Pro-Russia Citizens of Eastern Ukraine Occupy Buildings and Wait for Russia. 'Donetsk People's Republic' Wants Independence From Kiev; Moscow Hasn't Responded—So Far.

• G-7 Mulls New Sanctions Against Russia. Ministers Consider Formal Warning as Putin Ratchets Up Pressure on Ukraine Over Energy Supplies. 

• IRS at the Crossroads. New evidence that Lois Lerner targeted conservative groups.

CNBC: 

• Dimon warns regulation will push credit costs higher. Jamie Dimon, chief executive of JPMorgan Chase, has warned that customers will face more costly credit or be denied certain financial products altogether as a result of tougher regulation. Mr Dimon is famous for clashing with regulators, including Mark Carney, head of the Financial Stability Board and now governor of the Bank of England, as well as slamming capital rules as "anti-American".

Zero Hedge: 

• The Stunning Metamorphosis Of An "Obama Girl".

• Fed Cat Bounce. (graph)

• Citi(C) Warns The Leverage Clock Is Ticking. (graph)

• US Households To Withdraw $430 Billion From Stocks In 2014 - Most Since Last Bubble. (graph)

• Fed Admits Policies Benefit Rich, Fears For "Nation's Democratic Heritage".

• 16 Signs That Most Americans Are Not Prepared For The Coming Economic Collapse.

• China Warns Obama "US Is Moving In A Direction We Don't Want To See".

• Asian Data Double Whammy Sparks FOMC-Exuberance Unwind.

Business Insider:

• Two Absolutely Awful Datapoints From Japan.

• The US Is Reportedly Refusing To Give Ukraine Intelligence About An Impending Russian Invasion.

Reuters:

• Chevron(CVX) expects first-quarter profit to slip. Chevron Corp, the second-largest oil company in the United States, said on Wednesday it expected first-quarter income to slip because of high currency conversion costs and environmental charges in its mining unit.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 121.75 -.75 basis point.

• Asia Pacific Sovereign CDS Index 86.5 -1.25 basis points.

• FTSE-100 futures +.30%.

• S&P 500 futures -.04%.

• NASDAQ 100 futures  -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PIR)/.41

• (RAD)/.04

• (FDO)/.89

• (TITN)/.20

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 320K versus 326K the prior week.

• Continuing Claims are estimated to fall to 2835K versus 2836K prior.

• Import Price Index for March is estimated to rise +.2% versus a +.9% gain in February.

2:00 pm EST

• The Monthly Budget Deficit for March is estimated at -$36.0B versus -$106.5B in February.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, China inflation data, BoE rate decision, $13B 30Y T-Bond auction, weekly EIA natural gas inventory report, Bloomberg April US Economic Survey, weekly Bloomberg Consumer Comfort Index, (COP) analyst meeting, (HST) investor day and the (PSX) analyst meeting could also impact trading today.

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