Today's Headlines

Bloomberg:

• Ukraine Premier Bids to Calm East as Putin Presses Europe. Ukraine’s premier sought to ease tensions among Russian speakers in the east demanding greater autonomy as President Vladimir Putin appealed to Europe to provide aid to the cash-strapped nation to ensure gas supplies. Arseniy Yatsenyuk told reporters today in the city of Donetsk, where pro-Russian protesters have seized the local-government headquarters, that his administration in Kiev wants to give greater powers to the regions and to resolve the crisis that’s gripping the country as soon as possible. Having annexed Crimea and deployed thousands of troops along the border, Putin has been ratcheting up pressure on Ukraine, threatening yesterday to halt gas shipments. Ukraine is dominating discussions at the spring meetings of the International Monetary Fund and World Bank, which started today.

• Toxic Debt Condemned in Crisis Heralded as Europe’s Savior. Asset-backed securities were denounced for causing the financial crisis. Now the debt is being seen as a savior for Europe’s economy. The European Central Bank signaled this week that plans to ward off deflation may center on asset-backed securities, while policy makers are promoting an expansion of the market. The efforts come as sales of the bonds fell to $102.5 billion in Europe last year from $449 billion in 2007 and less than the $174 billion of issuance in the U.S., according to JPMorgan Chase & Co. 

• China Normal Growth Needs Only Minor Policy Changes: Zhou. China’s central bank chief said the nation needs only minor policy adjustments when growth is within a normal range, adding to signals that the government will avoid taking broader action to counter a slowdown. The State Council has a target for about 7.5 percent growth and has studied the range, and “we don’t have to roll out significant policies” when growth is in a normal range, People’s Bank of China Governor Zhou Xiaochuan said today in Boao, China.

• China Bond Sale Fails First Time Since June on Rate Outlook. China’s Ministry of Finance failed to sell all of the bonds offered at an auction today for the first time in 10 months amid speculation short-term interest rates will climb as corporate tax payments tie up funds. The ministry sold 20.7 billion yuan ($3.3 billion) of one-year debt today, less than the planned issuance of 28 billion yuan, according to a statement on its website. The average yield of 3.63 percent compared with the median estimate of 3.4 percent in a Bloomberg News survey yesterday, when the yield on similar-maturity existing notes was 3.32 percent. 

• China’s H Shares Decline Most in Two Months as Tencent Retreats. Chinese stocks dropped, sending mainland companies in Hong Kong to the biggest decline in two months, as falling producer prices signaled weakening economic growth and technology shares sank on valuation concerns. Anhui Conch Cement Co. (600585), China’s biggest cement maker, slid the most since 2011 in Hong Kong. The ChiNext index, which has a 32 percent weighting in smaller technology stocks, lost 1.3 percent after U.S. peers tumbled yesterday on concern valuations are too high. Tencent Holdings Ltd. (700), Asia’s biggest Internet company, dropped 6.8 percent. The Hang Seng China Enterprises Index (HSCEI) slid 1.9 percent to 10,228.42 at the close.

• G-20 Deeply Disappointed U.S. Preventing IMF-Resources Boost. Global finance chiefs pressed the U.S. to allow an increase in the financial resources of the International Monetary Fund as they argued the Ukraine crisis underscores the lender’s importance. “We are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms,” Group of 20 finance ministers and central bankers said in a statement released after talks in Washington today. “We urge the U.S. to ratify these reforms at the earliest opportunity.”

• Ebola Outbreak Empties Hotels as West Africa Borders Closed. West Africa is fighting to contain the spread of the disease that has claimed the lives of 111 people in Guinea and Liberia, the worst outbreak in seven years, and kills as many as nine out of 10 people who contract it. There’s no cure or vaccine for the hemorrhagic fever that will probably continue to spread in the region for a few more months, according to the World Health Organization. 

• European Stocks Drop as Stoxx 600 Posts Weekly Slide. European stocks fell for a second day, with the benchmark index posting its biggest weekly drop in almost a month, as investors speculated that equity gains have overshot the earnings outlook. ARM Holdings Plc lost 4.5 percent as information-technology shares caught up with a slump in their U.S. peers yesterday. Thales SA declined the most since July 2012 after JPMorgan Chase & Co. lowered its recommendation. Mediaset Espana Comunicacion SA tumbled to the lowest price since November after its second-biggest shareholder sold a part of its stake. Salzgitter AG rose 1.2 percent after Citigroup Inc. advised investors to buy the stock. The Stoxx Europe 600 Index fell 1.4 percent to 328.77 at the close London.

• Nasdaq Swings Hit Highest Since 2011 as VIX Stays Calm. The selloff that is sending shares in the Nasdaq 100 Index to the wildest swings since Europe’s debt crisis is failing to stir equal panic in option prices. That bothers Bruce Bittles. “They’ll have to show a lot of pessimism before this decline is over,” said Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion. “It certainly looks like this correction could carry on.” Losses of 5 percent or more from Facebook Inc. to Tesla Motors Inc. and Netflix Inc. drove the Nasdaq 100 down 3.1 percent yesterday, the worst retreat in two years. During April, the gauge has moved 1.5 percent a day on average, the most since November 2011. At the same time, prices for options are below levels from February and October. Concern earnings growth is slowing, valuations are stretched and that speculators got too bullish has erased $700 billion from the value of American equities in the past week. Losses that began in shares with the biggest gains have spread to the broader market, where the Standard & Poor’s 500 Index (SPX) reached a record on April 2. 

• Wells Fargo(WFC), JPMorgan(JPM) Vexed by Low Demand for Mortgages. Weak demand for home loans continued to drag on results at Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) as the two largest U.S. mortgage lenders grappled for pieces of a shrunken market. 

• Computer Strategies Often Rely on Unsound Math, Researchers Say. Investment strategies that use computer models to decide when to buy and sell securities based on historical market trends are usually unsupported scientifically because of back-testing flaws, according to the 126-year-old American Mathematical Society. “We are not implying that those technical analysts, quantitative researchers or fund managers are ‘snake oil salesmen,’” David H. Bailey, a research fellow at the University of California, Davis, and three co-authors said in a paper in the May issue of the society’s magazine Notices. “Hedge-fund managers are often unaware that most back-tests presented to them by researchers and analysts may be useless.”

• Millions of Android Devices Vulnerable to Heartbleed Bug. Millions of smartphones and tablets running Google Inc. (GOOG)’s Android operating system have the Heartbleed software bug, in a sign of how broadly the flaw extends beyond the Web and into consumer devices. 

Wall Street Journal: 

• J.P. Morgan(JPM) Net Misses Estimates; Shares Drop. Profit Falls 19%, Hit by Weak Trading Revenue, Drop in Mortgage Lending.

• Senators Ask DOJ to Require GM(GM) to Establish Victims Fund. Justice Department Also Asked to Oppose Any GM Action to Deny Responsibility. 

• U.S. Corn Exports to China Dry Up Over GMO Concerns. Cargill, ADM Split With Seed Makers Over Stalled Shipments of Genetically Modified Grain.

• Auto Sales Slow in China as Economy Cools. Slumping Minivan Sales Weigh on March Data.

• IEA Trims 2014 Oil Demand Growth Forecast.

MarketWatch: 

• A bigger 10%-15% correction is coming this autumn: Bank of America Merrill Lynch.

• Gap(GPS) isn’t the only retailer with inventory problems.

CNBC: 

• It's 'hostile' for businesses today: Langone. (video) Excessive regulation has created a "hostile" environment for business owners in the United States, curbing liquidity and putting a drag on the economy, billionaire investment banker and business magnate Ken Langone said Friday on CNBC. "We are in a period of intense and unreasonable regulation and we're seeing the fruits of that environment," said Langone, co-founder of Home Depot, on "Squawk on the Street." "We have to accept the fact that what's going on today doesn't come without cost and the cost is economic growth."

ZeroHedge: 

• Europe Folds As Putin Tells It To Pay Ukraine's Gazprom Bill, Or Else. 

• Best And Worst Performing Hedge Funds Of 2014: The Full List. (table)

• Here Is The Reason Why Half Of Today's IPOs Were Pulled.

• What's Wrong With This "Housing Recovery" Picture? (graph)

• Consumers Love Slumping Stocks - Confidence Jumps To 8 Month Highs. (graph)

• Deutsche Bank: "The Oxygen That Has Fuelled The 5 Year Bull Market Is Slowly Draining Out".

• US/UK Investigating New Assad Chemical Attacks In Syria.

Business Insider:

• More Foul Play Leading Up To Crimea Secession Vote Uncovered In UN Report.

• TECHNICAL ANALYST: The Stock Market Just Broke Through A Key Level, And Now There's An Air Pocket. (graph)

• Here's The Awesome Presentation That Jeff Gundlach Just Gave To Investors At The New York Yacht Club.

• SEC May Crack Down On 'Dark Pool' Trading Outside Exchanges.

• The '1997' Chart That Has Everyone Worried About Japan. (graph)

Reuters:

• TREASURIES-U.S. bond prices gain as stock market drop spurs safety bid. U.S. Treasuries prices rose on Friday as nervous investors pulled out of stock markets worldwide and piled into less risky government debt, sending the U.S. 30-year bond yield to its lowest level since July. 

• Greece likely to need more financing help in next two years -IMF.

Financial Times:

• Tiger Cub funds hit in tech-led stock slide. Will hedge fund history repeat itself, or will it rhyme? In the late 1990s, as technology shares surged ever higher, one of the world’s most renowned hedge fund managers was distraught. Now, as many investors ponder whether markets are in the grip of a second technology bubble, the Cubs, it seems, are determined not to make the same mistake that led to their mentor’s demise. As investors debate whether markets are in the grip of a second technology bubble Tiger Cub hedge funds have piled in to loftily valued US technology shares such as Facebook, Amazon and Tesla Motors. And, last month, as many of these names that had performed so strongly over last year began to fall, these hedge funds suffered heavy losses.

Financial Express: 

• Industrial production in India dips 1.9 pct in February, enters negative zone. After feeble signs of a recovery, industrial production once again slipped into negative territory and contracted 1.9 per cent in February due to poor performance in manufacturing, especially capital goods. Factory output as measured by the index of industrial production (IIP) showed a decline of 0.1 per cent during the 11-month period from April to February, compared with growth of 0.9 per cent in the corresponding period a year earlier. Manufacturing, which constitutes over 75 per cent of the index, declined 3.7 per cent in February as against growth of 2.1 per cent in the same month a year ago. Production of capital goods, a barometer of demand, shrank 17.4 per cent, in sharp contrast to an expansion of 9.1 per cent in the same month in 2012.

India's statistics office is likely to say in two weeks that growth this year will slump further to an 11-year low, undermining the government's optimism that it would at least be flat at 5% on the back of a recovery in the second half.

The advanced estimate for FY14 is set to come in below that level, said an official who didn't want to be named.

The economy expanded 4.6% in the first half and would need to rise 5.4% in the second for growth to come in at 5%, which doesn't lo ..

Read more at:
http://economictimes.indiatimes.com/articleshow/29268974.cms?utm_source=hootsuite&utm_campaign=hootsuite&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Gloomy outlook: India's GDP may sink below 5% to an 11-year low

Read more at:
http://economictimes.indiatimes.com/articleshow/29268974.cms?utm_source=hootsuite&utm_campaign=hootsuite&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Bear Radar

Style Underperformer:

• Small-Cap Growth -.82%

Sector Underperformers:

• 1) Coal -2.02% 2) Retail -1.41% 3) I-Banking -1.33%

Stocks Falling on Unusual Volume:

• DWCH, VJET, RLYP, HRB, PSB, WPPGY, GPS, TECD, CBSO, LDRH, PJC, FLDM, FAST, APO, WCG, NQ, JPM, OAK, HVT, PCYC, CNSL, USNA, ASML, LAZ, GWRE, SPWR, Z, ULTA and ELLI

Stocks With Unusual Put Option Activity:

• 1) COST 2) HYG 3) XLV 4) EWW 5) XLF
  

Stocks With Most Negative News Mentions:

• 1) JPM 2) GM 3) GPS 4) MS 5) ISRG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.45%

Sector Outperformers:

• 1) Biotech +1.06% 2) Airlines +.48% 3) Gaming +.46%
  

Stocks Rising on Unusual Volume:

• ZIGO, GLOG, FANG, DEPO and GILD

Stocks With Unusual Call Option Activity:

• 1) HZNP 2) TIBX 3) HRB 4) NRF 5) SPXU

Stocks With Most Positive News Mentions:

• 1) ZIGO 2) OSK 3) BXP 4) WFC 5) CELG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

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.