Bull Radar

Style Outperformer:

• Large-Cap Value -.45%

Sector Outperformers:

• 1) Gold & Silver +1.55% 2) Oil Service +.78% 3) Energy +.71%
  

Stocks Rising on Unusual Volume:

• RH, BDSI, LE, EXP, TWTR, GTAT, RMBS, SPWR, HALO, NMBL, AUXL and SN

Stocks With Unusual Call Option Activity:

• 1) PPL 2) SIRI 3) GERN 4) UPL 5) RH

Stocks With Most Positive News Mentions:

• 1) HPQ 2) BKS 3) RH 4) APC 5) GLD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• Maliki Turns to Militias to Halt al-Qaeda Onslaught. As his army flees from an al-Qaeda splinter group, Iraqi Prime Minister Nouri al-Maliki is rallying Shiite militias to defend his government, raising the specter of civil war in OPEC’s second-biggest oil producer. In a televised news conference yesterday Maliki urged citizens to take up arms after the Islamic State of Iraq and Levant group seized control of the northern city of Mosul, stealing weapons and helicopters from police and army bases as Iraqi government forces fled. He vowed to build an army of volunteers to “pull the thorns out by ourselves.” 

• Australia Employers Cut Workers in May as Unemployment Holds. Australian employers unexpectedly cut payrolls in May, underscoring the likelihood interest rates will remain at a record low for an extended period.

• BOK Holds Rate as Won Near Six-Year High Poses Growth Risk. South Korea’s central bank left its key rate unchanged, supporting growth that faces headwinds from sluggish investment and a won near a six-year high.The central bank held the seven-day repurchase rate at 2.5 percent for a 13th straight month, it said in a statement in Seoul today, as forecast by all 19 economists in a Bloomberg News survey.

• Asian Stocks Retreat From Six-Year High as Kiwi Advances. Asian stocks fell, with the regional benchmark index retreating from its highest close in six years, after U.S. stocks dropped by the most in three weeks. New Zealand’s dollar jumped to a three-week high after its central bank raised interest rates. The MSCI Asia Pacific Index declined 0.5 percent by 9:52 a.m. in Tokyo after closing at the highest level since June 9, 2008. Japan’s Topix index slid 1 percent as the yen gained before the Bank of Japan starts a meeting today.

• Copper Falls as China Port Probe Fuels Demand Concerns. Copper declined for the sixth time in seven sessions in New York as a Chinese probe into financing transactions eroded demand prospects for deals using the metal as collateral. Officials are looking at whether metals stockpiled at Qingdao Port fell short of obligations used to secure loans, and are focusing on Decheng Mining, said two bankers assisting the inquiry. Analysts at Barclays Plc and Goldman Sachs Group Inc. said the probe may curb copper inventory financing, a source of demand. Prices also fell after the World Bank cut its estimate for 2014 global economic growth.

• BofA(BAC) Mortgage Talks Said to Stall as U.S. Prepares Suit. The U.S. is preparing to sue Bank of America Corp. after reaching an impasse in talks to resolve government probes of the lender’s sales of mortgage-backed bonds before the financial crisis, a person familiar with the matter said.

• Health Care Remains Drag for Democrats as 53% Oppose Law.

Wall Street Journal:

• Iraqi Drama Catches U.S. Off Guard. The Quickly Unfolding Drama Prompted a White House Meeting Wednesday of Top Policy Makers and Military Leaders.
  

• Iraq Signals Openness to U.S. Airstrikes Against al Qaeda, U.S. Officials Say. Iraq has privately signaled to the Obama administration that it would allow the U.S. to conduct airstrikes with drones or manned aircraft against al Qaeda militant targets on Iraqi territory, senior U.S. officials said Wednesday. The Obama administration is considering a number of options, including the possibility of providing "kinetic support" for the Iraqi military fighting al Qaeda rebels who seized two major...

• Activist Funds Dust Off 'Greenmail' Playbook. More companies are resorting to an old tactic to get rid of activist investors: Pay them to go away. The practice, which involves buying back shares from activist hedge funds, has raised concerns among some investors because it bears similarities to "greenmail," a controversial strategy popular in the 1980s. Back then, aggressive investors such as Carl Icahn and the late Saul Steinberg bought company shares and... 

• Owners May Move Metal From China. Operators of metals warehouses in South Korea and Taiwan are receiving inquiries about moving metal held in the Chinese port of Qingdao to their facilities in the wake of an investigation into potential irregularities at the port, according to people at three warehouse companies. Metal owners are looking to shift their stocks from China to warehouses in the region that are licensed by the London Metal Exchange, a person at one of the warehouse companies said. LME-licensed warehouses in Korea and Taiwan are among the...

• While Obama Fiddles. The fall of Mosul is as big as Russia's seizure of Crimea. The fall of Mosul, Iraq, to al Qaeda terrorists this week is as big in its implications as Russia's annexation of Crimea. But from the Obama presidency, barely a peep. Barack Obama is fiddling while the world burns. Iraq, Pakistan, Ukraine, Russia, Nigeria, Kenya, Syria. These foreign wildfires, with more surely to come, will burn unabated for two years until the United States has a new president. The one we've got can barely notice...
  

Fox News:

• US spy agencies heard Benghazi attackers using State Dept. cell phones to call terrorist leaders. The terrorists who attacked the U.S. consulate and CIA annex in Benghazi on September 11, 2012 used cell phones, seized from State Department personnel during the attacks, and U.S. spy agencies overheard them contacting more senior terrorist leaders to report on the success of the operation, multiple sources confirmed to Fox News.

MarketWatch.com: 

• Google(GOOG) is planning to enter the U.S power market: Bloomberg. Google Inc. is looking to make a deeper push into the billion-dollar U.S. energy market by developing tools to deliver power more efficiently, Bloomberg News said, citing people familiar with the plans.

CNBC:

• Oil prices head higher as Iraq tensions flare. Surging U.S. oil production was expected to drive oil prices lower this year, but a confluence of geopolitical events—particularly a Sunni militant uprising in Iraq—could now drive already high prices even higher and keep them there.

Zero Hedge: 

• 19 Reasons To Laugh When Anyone Tells You That The Economy Is In Good Shape.

• Global Death Cross Accelerates As World Bank Slashes Growth. (graph)

• Mindblowing Fact Of The Day: China Has Over 52 Million Vacant Homes. (graph)

• The NSA Claims It Is "Too Big to Comply" With A Court Order.

Business Insider: 

• Goldman(GS), Bain To Pay $121 Million In LBO Collusion Settlement.

• TED CRUZ: Israel Could Strike Iran In Months.

• Boko Haram Kidnapped 20 More Women This Week.

• The Wars In Iraq And Syria Have Merged Into A Single Conflict.

Reuters: 

• Japan April core machinery orders fall 9.1 pct mth/mth.

Hong Kong Standard:

• Shenzhen New-Home Sales Plunged 48.8% Y/Y in May. Used-home sales drop 30% y/y, citing data from Chinese city's urban planning commission.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 104.0 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 75.25 +.75 basis point.

• FTSE-100 futures +.12%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures  +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FNSR)/.38

Economic Releases
8:30 am EST

• Retail Sales Advance for May are estimated to rise +.6% versus a +.1% gain in April.

• Retail Sales Ex Auto for May are estimated to rise +.4% versus unch. in April.

• Retail Sales Ex Auto and Gas for May are estimated to rise +.4% versus a -.1% decline in April.

• The Import Price Index for May is estimated to rise +.2% versus a -.4% decline in April.

• Initial Jobless Claims are estimated to fall to 310K versus 312K the prior week.

• Continuing Claims are estimated to rise to 2605K versus 2603K prior.
  

10:00 am EST

• Business Inventories for April are estimated to rise +.4% versus a +.4% gain in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia unemployment report, $13B 30Y T-Bond auction, Bloomberg June US Economic Survey, Bloomberg weekly Consumer Comfort Index, weekly EIA natural gas inventory report, (MFRM) analyst event, (CNX) analyst day and the (BX) investor day could impact trading today.

BOTTOM LINE: Asian indices are mostly 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 Dropping into Final Hour on Escalating Mideast Unrest, Rising Emerging Markets Debt Angst, Yen Strength, Financial/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 11.80 +7.37%

• Euro/Yen Carry Return Index 144.06 -.45%

• Emerging Markets Currency Volatility(VXY) 6.59 +.76%

• S&P 500 Implied Correlation 52.10 +3.99%

• ISE Sentiment Index 99.0 -23.26%

• Total Put/Call .71 +1.43%

• NYSE Arms .88 +11.46% 

Credit Investor Angst:

• North American Investment Grade CDS Index 58.60 +2.10%

• European Financial Sector CDS Index 60.12 +1.05%

• Western Europe Sovereign Debt CDS Index 27.97 -1.01%

• Asia Pacific Sovereign Debt CDS Index 76.31 +2.34%

• Emerging Market CDS Index 242.58 +2.55%

• China Blended Corporate Spread Index 312.14 -.34%

• 2-Year Swap Spread 14.5 +.75 basis point

• TED Spread 20.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -2.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 221.0 +1.0 basis point

• China Import Iron Ore Spot $93.50/Metric Tonne -.11%

• Citi US Economic Surprise Index -13.0 +.2 point

• Citi Emerging Markets Economic Surprise Index -9.60 +2.3 points

• 10-Year TIPS Spread 2.20 unch.

Overseas Futures:

• Nikkei Futures: Indicating -159 open in Japan

• DAX Futures: Indicating -11 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• ISIL Extends Gains in Iraq, Takes Turk Diplomats Hostage. Militants from a breakaway al-Qaeda group took control of more Iraqi towns today, including the birthplace of Saddam Hussein, as the prime minister signaled he’ll deploy militias to halt their advance. After seizing Mosul, Iraq’s second city, yesterday, fighters from the Islamic State in Iraq and the Levant advanced into Tikrit, Saddam’s hometown, Noureddin Qablan, vice chairman of Nineveh provincial council, said by phone. In Mosul, ISIL took dozens of people hostage at the Turkish consulate.

• Iraq Bonds Slump on Mosul Seizure as Stocks Drop Most Since 2012. Iraqi bonds plunged and stocks fell the most in two years after fighters from a breakaway al-Qaeda group took control of Mosul in a move highlighting Prime Minister Nouri al-Maliki’s weakening grip on the country. The yield on the nation’s $2.7 billion of bonds due in January 2028 climbed 41 basis points to 6.91 percent at 12:13 p.m. in New York, the biggest jump in a year on a closing basis, according to data compiled by Bloomberg. The ISX General Index lost 4.6 percent in Baghdad, the most since June 3, 2012. Mosul, Iraq’s second-biggest city, is entirely in the hands of the Islamic State in Iraq and the Levant, or ISIL, with no army or police presence remaining, Noureddin Qablan, the vice chairman of Nineveh provincial council, said by phone late yesterday. Tribal gunmen allied to al-Qaeda were close to capturing Baiji, north of Baghdad and home to Iraq’s biggest petroleum refinery, Al-Jazeera television reported today.

• Ukraine Rejects Gas Offer as Talks End Without Deal. Ukraine rejected a Russian proposal for the price of future natural-gas deliveries as European Union-brokered talks in Brussels ended without an agreement. Russia offered to supply gas for about 20 percent below the current price, a level Ukraine said was still more than it’s willing to pay, EU Energy Commissioner Guenther Oettinger said at a press conference after the three-way meeting. Russia’s energy minister said the country also wants $1.95 billion for past fuel supplies before June 16 or it may cut shipments. 

• Japan Says Chinese Fighter Jets Flew Near Its Planes Again. Chinese fighter jets flew “abnormally close” to Japanese military surveillance planes in the East China Sea, the second incident in less than a month, Japan’s Ministry of Defense said yesterday.

• Vietnam Says China Sent Six Warships to Rig in Disputed Seas. Vietnam said China again shifted an oil rig it has placed in disputed waters, with six warships guarding the structure as the two communist countries continue their South China Sea stand-off.

• RBC Among Canada Banks With Outlook Cut by Moody’s. Royal Bank of Canada and Bank of Nova Scotia (BNS) had their outlooks cut to negative along with the five other largest Canadian lenders by Moody’s Investors Service, which cited rules that would limit government support. Moody’s decision to reduce the outlook from stable reflects its view that the risk for the banks’ debt holders and uninsured depositors “has shifted to the downside,” the New York-based ratings company said today in a statement.

• Apple(AAPL), Starbucks(SBUX) Tax Deals With Irish, Dutch Probed by EU. Tax breaks for Apple Inc. (AAPL), Starbucks Corp. (SBUX) and Fiat Finance & Trade SA in three European Union countries are under investigation by EU competition regulators in a clampdown on special treatment for companies. The EU is checking whether the tax deals in Ireland, the Netherlands and Luxembourg are illegal state aid, according to an e-mailed statement today. Governments can be ordered by the European Commission to claw back unfair aid.

• Europe Stocks Drop as Lufthansa, Vallourec Cut Forecasts. European stocks fell from a six-year high as companies including Deutsche Lufthansa AG and Vallourec SA cut their profit forecasts. Lufthansa slid the most since September 2001 after lowering operating-profit estimates for this year and next. Vallourec SA plunged the most in two years after predicting earnings will drop 10 percent in 2014. Airbus NV lost 3.1 percent after saying Emirates canceled its order for A350 wide-bodied aircraft. Inditex SA rose 1.1 percent after posting first-quarter profit that beat analyst estimates, and saying it plans a share split. The Stoxx Europe 600 Index fell 0.6 percent to 347.74 at the close of trading, its biggest loss since May 15.

• Wheat Enters Bear Market as Corn Drops on Supply Outlook. World wheat inventories by the end of May will reach 188.61 million metric tons, the U.S. Department of Agriculture said today in a report. That compares with last month’s estimate of 187.4 million and 188.08 million forecast by analysts in a Bloomberg survey. The agency also increased its estimate for domestic reserves and said global corn stockpiles will rise to a 15-year high.

• Take Junk Loans, Add Leverage, Slice ’Em Up, Sell, Repeat. Here’s a brain twister: Some investors have grown tired of junk-rated loans, but others are more eager than ever to buy the same debt bundled together and sliced into pieces. Buyers are particularly hungry for the riskiest tiers of these collateralized loan obligations, investments that are the first to lose out if borrowers fail to make interest and principal payments. They also stand to reap bigger returns when companies pay back their loans. Principals at the private-equity firm Stone Point Capital LLC are seeking to capitalize on this boom in demand by starting a new closed-end firm focused mainly on buying the lowest-ranked tranches of CLOs. The proposed Eagle Point Credit Co. can use borrowed money to juice returns on speculative-grade securities backed by junk-rated loans, according to a June 6 filing with the U.S. Securities and Exchange Commission.

• Condo Towers Rise From Boston to L.A. in U.S. Rebound. For the first time since the U.S. housing crash, new condominium towers are sprouting in downtown Boston, Seattle and Los Angeles as developers bet on the return of the riskiest type of residential real estate.

• Your Outlet Knows: How Smart Meters Can Reveal Behavior at Home, What We Watch on TV. Smart meters may be getting too smart for our own good. As businesses look for new ways to gain insight into consumers, utility meters that wirelessly transmit energy-usage data are increasingly drawing attention because of what they can reveal about our behavior at home, such as when and how often we use certain appliances.

Wall Street Journal:

• More Than 1 in 5 Homes in Chinese Cities Are Empty, Survey Says. Southwestern University of Finance and Economics Analysis Finds 49 Million Sold but Vacant Units. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013, or 49 million homes, up from 20.6% in 2011, according to the Survey and Research Center for China Household Finance, which conducted the analysis.

• Eric Cantor to Step Down as House Majority Leader. No. 2 House Republican to Leave Leadership Post by July 31.

MarketWatch.com:

• J.P. Morgan(JPM) could face cuts in pay, jobs: CFO.

• Tensions grow in Hong Kong as China asserts control. White paper has territory worried about its freedoms. Seventeen years after Hong Kong’s transfer to Chinese sovereignty, concerns are growing in the former British colony about democratic rights and freedoms. 

Fox News:

• Why Cantor lost. Cantor lost his race because he was running for Speaker of the House of Representatives while his constituents wanted a congressman.

• FBI director confirms criminal probe of VA. FBI Director James Comey confirmed Wednesday that the bureau's Phoenix branch has opened a criminal investigation of the Veterans Affairs Department, amid mounting calls on Capitol Hill for the Justice Department to get more involved.

• Hagel faces skepticism over claim freed Taliban members were only planners. Defense Secretary Chuck Hagel sought Wednesday to justify to skeptical lawmakers the controversial swap of five hardened Taliban leaders for Sgt. Bowe Bergdahl, claiming the former Guantanamo detainees were planners, and had not directly participated in attacks on Americans.

CNBC: 

• World Bank: 'Now is the time to prepare for next crisis'. (video)

ZeroHedge:

• Al-Qaeda Jihadis Loot Over $400 Million From Mosul Central Bank, Seize Saddam's Hometown.

• FBI Opens Criminal Probe Into Phoenix VA Scandal.

• Mapping Al Qaeda's Grand Ambitions In Iraq And Syria.

• China Bond Auction Fails As PBOC Weakens CNY, Stymies Carry Traders. (graph)

• Bank of America Shocker: New Commercial Loan Plunge Is Largest Since Lehman. (graph)

• Will Spain Default?  
• One Overlooked Reason Why The Middle Class Is in Decline. No wonder the wealth of the middle class keeps declining: every temporary gain from joining the investing feeding frenzy sets up staggering losses when the bubble du jour pops and there's nobody left to sell to. Meanwhile, those who bought early have long since sold out and are now buying outlier assets that are viewed as "risky" by the majority who happily accept high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses and an erosion of real wealth.

Business Insider:

• The 10 Best States For Small Business.

• One 'Undeniable' Statistic Shows How Al Qaeda Is Chewing Up Iraq.

• ISIS Now Controls A Shocking Percentage Of Iraq And Syria. (map)

• Emirates Cancels Order For 70 Airbus A350 Planes.

• Europe Has Finally Found A Way To Make Russia Hurt Economically In Ukraine Crisis.

Washington Post:

• The Return of al-Qaeda. The capture Tuesday of Mosul, the hub of northern Iraq, by al-Qaeda-linked militants is an alarm bell that violent extremists are on the rise again in the Middle East. And it's a good time for President Obama to explain more about how he plans to fight this menace without making the mistakes of the past.

Reuters:

• Merkel says latest ECB moves show euro crisis is not over. Germany's Angela Merkel said on Wednesday the European Central Bank's decisions to cut interest rates to record lows and pump money into the sluggish euro zone economy showed that the crisis in the European Union's single currency area was not yet over.

Financial Times:

• IMF sounds global housing alarm. The world must act to contain the risk of another devastating housing crash, the International Monetary Fund warned on Wednesday, as it published new data showing house prices are well above their historical average in many countries.

Telegraph:

• Iraq oil shock would kill world economic recovery, experts warn. As violence threatens Iraq's oil industry, experts fear crude at $130 per barrel would damage the global economy.

Bear Radar

Style Underperformer:

• Small-Cap Value -.61%

Sector Underperformers:

• 1) Airlines -2.02% 2) Homebuilders -1.82% 3) I-Banks -1.34%

Stocks Falling on Unusual Volume:

• TBBK, SC, CQP, UNFI, AUXL, OXM, HLT, CXDC, GGAL, CBSO, PSXP, DAL, E, JCOM, BCR, COH, STAY, PPL, LULU, ARLP, RLYP, PCP, PKI, BMA and EQM

Stocks With Unusual Put Option Activity:

• 1) XHB 2) XLU 3) ACHN 4) MU 5) FDX
  

Stocks With Most Negative News Mentions:

• 1) GM 2) JPM 3) TBBK 4) TSN 5) UPS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.42%

Sector Outperformers:

• 1) Gold & Silver +1.55% 2) Gaming +1.04% 3) Energy +.53%
  

Stocks Rising on Unusual Volume:

• MONT, SYNA, ULTA, RDEN, APC, WBAI, RMBS, BDSI, INFY, MU, MPEL, SGEN, BYD and PSEC

Stocks With Unusual Call Option Activity:

• 1) AVNR 2) ATML 3) AMKR 4) TAP 5) GALE

Stocks With Most Positive News Mentions:

• 1) SYNA 2) MONT 3) APC 4) MRVL 5) ANGI
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume