Stocks Reversing Higher into Afternoon on Dovish Fed Commentary, Euro/Oil Bounce, Less US High-Yield Debt Angst, Homebuilding/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.22 +3.58%

• Euro/Yen Carry Return Index 134.65 +.26%

• Emerging Markets Currency Volatility(VXY) 10.71 -.65%

• S&P 500 Implied Correlation 60.71 +2.29%

• ISE Sentiment Index 71.0 -20.22%

• Total Put/Call 1.08 +12.50%

• NYSE Arms .93 -15.84% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.34 -1.12%
• America Energy Sector High-Yield CDS Index 736.0 -5.59%

• European Financial Sector CDS Index 59.42 +4.52%

• Western Europe Sovereign Debt CDS Index 23.20 +6.71%
• Asia Pacific Sovereign Debt CDS Index 66.82 +1.55%

• Emerging Market CDS Index 421.46 +.19%

• iBoxx Offshore RMB China Corporates High Yield Index 113.99 +.05%
• 2-Year Swap Spread 25.50 -1.5 basis points

• TED Spread 22.50 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -20.5 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% -2.0 basis points

• Yield Curve 139.0 unch.

• China Import Iron Ore Spot $55.48/Metric Tonne -2.58%

• Citi US Economic Surprise Index -71.90 +.1 point
• Citi Eurozone Economic Surprise Index 40.50 -.3 point

• Citi Emerging Markets Economic Surprise Index .6 -1.7 points

• 10-Year TIPS Spread 1.73 +8.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -20 open in Japan

• DAX Futures: Indicating +58 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg: 

• Tsipras Strikes Defiant Tone With Greek Wall of Dignity. Prime Minister Alexis Tsipras struck a defiant tone over Greece’s bailout ahead of a meeting in Brussels with European leaders, a stance broadly supported by the cash-strapped country’s citizens. “People have asked us to put an end to austerity and bailout agreements, to begin the process of reclaiming the dignity of the nation,” Tsipras said in a speech Wednesday in Athens. “We respond today, tomorrow and on Friday in parliament by building a wall of sovereignty and dignity.” 
• IMF Considers Greece Its Most Unhelpful Client Ever. International Monetary Fund officials told their euro-area colleagues that Greece is the most unhelpful country the organization has dealt with in its 70-year history, according to two people familiar with the talks. In a short and bad-tempered conference call on Tuesday, officials from the IMF, the European Central Bank and the European Commission complained that Greek officials aren’t adhering to a bailout extension deal reached in February or cooperating with creditors, said the people, who asked not to be identified because the call was private. The IMF’s press office had no immediate comment on the discussions.  
• Putin Says Russian People Showed ‘Amazing Patriotism’ on Crimea. Russians and Ukrainians are “one people,” Russian President Vladimir Putin told a rally in Moscow marking the anniversary of the takeover of Crimea. The Russian people showed “amazing discipline, amazing patriotism” in supporting the return of Crimea to its homeland a year ago, Putin told the rally on Wednesday near the Kremlin attended by 110,000 people, according to police. “When it comes to Crimea it is not just about some territory, even a strategic one,” Putin said to cheers from the crowd. “It is about millions of Russian people, millions of our compatriots, who need our help and support. It is about something which makes us a united people and nation.” 
• Russia Accuses Ukraine of Breaching Truce Deal Amid Clashes. Russia accused Ukraine of breaching a cease-fire agreement by assigning a special status to its easternmost regions as skirmishes continued in conflict areas. Ukrainian lawmakers approved motions on Tuesday that envisage self-governance for the rebel-held territories, while appealing to the United Nations and the European Union to send peacekeepers. They also passed a separate decree declaring some Donbas areas an “occupied” territory. That move may undermine the peace process and lead to destabilization, Russian Foreign Minister Sergei Lavrov said.
• Frankfurt Flares as Anti-Austerity Protesters Rage Against ECB. Police vehicles burning in the streets, helicopters circling above, cobblestones ripped from pavements and used as missiles, tossed garbage containers, and the smell of smoke and burning rubber pervading the air. In scenes resembling a war zone, commuters in Frankfurt were greeted with a trail of destruction running through the euro area’s financial capital on Wednesday as thousands of demonstrators descended on the city to protest against austerity measures and monetary policy actions by the European Central Bank.  
• Easy Money Drives Investors Into Stocks, Company Debt, BIS Says. Monetary stimulus around the world is increasing the amount of government bonds with yields below zero, and that’s pushing investors into stocks and corporate debt, the Bank for International Settlements said. European equity funds registered a cumulative inflow of almost $19 billion in the four weeks following the European Central Bank’s announcement in January that it would start buying government bonds, the BIS said in a report published today. That’s the most ever recorded for a similar period, it said. Flows into European high-yield corporate bond funds over the four weeks were the highest in a year, the BIS said. 
• European Stocks Rise as U.K. Shares Climb After Osborne’s Budget. European stocks climbed as U.K. shares rallied after a budget presentation and Swedish equities jumped after a rate cut. The Stoxx Europe 600 Index added 0.3 percent to 398.65 at the close of trading, erasing earlier losses of as much as 0.4 percent.
• Brazilian Real Leads Global Decline on Concern Rating May Be Cut. Brazil’s currency led global declines as a meeting between government officials and Fitch Ratings fed concern the nation’s investment-grade credit grade could be cut. Fitch cited challenges the government faces to rein in spending and shore up fiscal accounts when it said earlier this week that it’s reviewing the country’s rating. Finance Minister Joaquim Levy will stress his commitment to meeting budget targets and sparking growth in the meeting Wednesday, according to a person close to the government’s economic team who isn’t authorized to speak publicly and asked not to be identified.
• Here's a Look at How the Dollar Is Clobbering Other Currencies Around the World. (graph) A great look at the losers.  
• Oklahoma Hiring Freeze Shows No Letup in Oil States’ Fiscal Pain. Oklahoma, the fifth-largest oil-producing state, froze hiring and salaries and is considering tapping reserves with crude prices down almost 60 percent since June. Revenue projections dwindled by more than $300 million from December to February, more than doubling to $611 million the budget deficit that Republican Governor Mary Fallin and lawmakers have to plug for the year starting July 1, state documents show.
• Surprising Natural Gas Output Has BofA Bracing for Sub-$2 Prices. Relentless U.S. production gains that caught many natural gas traders by surprise have triggered a 30 percent plunge in prices since November. Bank of America Corp. says the selloff isn’t over and is telling clients to brace for the possibility of sub-$2 prices for the first time in three years. Gas output will climb to an all-time high of 78.39 billion cubic feet a day this year, an increase of 50 percent over 2005, led by shale reservoirs in Pennsylvania, Louisiana and Texas, government data show.
• FedEx(FDX) Falls After Profit Forecast Narrowed on Currency, Bonuses. FedEx Corp. fell the most in almost two months after the world’s largest cargo airline trimmed the top range of its full-year profit forecast and pared its projection for global economic growth. Earnings will be $8.80 to $8.95 a share in the fiscal year ending May 31, the Memphis, Tennessee-based company said in a statement Wednesday. FedEx had reiterated a forecast of $8.50 to $9 a share on Jan. 23. Analysts estimated $8.98 on average. 

Wall Street Journal:

• Live Blog: Fed Decision and Janet Yellen’s Press Conference.
• U.S. to Examine Leveraged Loans More Frequently. ‘Shared National Credit’ Exams to occur twice annually instead of once as regulators step up scrutiny of buyout deals.

CNBC:

• US rate-storm brews, get set for another 'tantrum'. (video) Emerging markets have every right to feel nervous before Wednesday's U.S. Federal Reserve monetary policy decision, with the central bank widely tipped to pave the way for a rate hike this year.

ZeroHedge:

• ECB Prepares For Grexit, Anticipates 95% Loss On Greek Debt. (graph)
• European Bond Risk Spikes Most Since 2011 As "Graccident" Looms. (graph)
• A Reminder Of The Fed's Interest Rate Conundrum.
• Dollar Demand = Global Economy Has Skidded Over The Cliff. (graph)
• WTI Slumps As Cushing Inventory & Production Hit New Record High. (graph)
• Crash Landing: China Home Prices Plunge At Fastest Pace On Record, Surpass Post-Lehman Collapse. (graph)
• Sweden Slides Further Into NIRP: Cuts To -0.25%; Expands QE. (graph)
• Unequivocally Good? Canadian Wholesale Trade Sales Crash By Most Since Jan 2009. (graph)
• Just One Chart. (graph)
• How Far Will The Euro Fall? (graph)

Business Insider: 

• At least 21 are dead after an attack on a leading museum in Tunisia.
• Iran is creating an 'arc of power' across the Middle East.
• Putin just got one step closer to taking over part of Georgia.
• The Russian auto market is imploding.
• Syria is imposing red lines on the US-led air war on ISIS.
• Russia is putting state-of-the-art missiles in its westernmost Baltic exclave.

Manager Magazin:

• ECB Ran Models on Debt Impact of Greek Exit. ECB staff calculated Greek government debt would fall to 5% of nominal value in case of disorderly exit from euro. If Greece manages to negotiate a debt reduction without leaving the euro, debt would retain a quarter of its nominal value.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.50%

Sector Underperformers:

• 1) Agriculture -1.07% 2) Retail -1.01% 3) Road & Rail -.81%

Stocks Falling on Unusual Volume:

• SQM, RSPP, NKTR, ADBE, PAM, BGC, USG, TUES, BPT, CEN, LRCX, IRBT, VA, HNRG, ZBRA, CBPX, NAV, SWM, FDX, FDS, PHI, VEC, PFG, WYNN and ASML
  

Stocks With Unusual Put Option Activity:

• 1) DHR 2) EPI 3) FDX 4) CLF 5) IYR

Stocks With Most Negative News Mentions:

• 1) FDX 2) NAV 3) ADBE 4) STJ 5) WYNN
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.11%

Sector Outperformers:

• 1) Utilities +.47% 2) Software +54% 3) Hospitals +.35%
  

Stocks Rising on Unusual Volume:

• HUBS, RTRX, HLF, AKRX, JMEI, STLD, AVID and ROVI

Stocks With Unusual Call Option Activity:

• 1) RAD 2) DNKN 3) AKRX 4) HLF 5) KRFT
  

Stocks With Most Positive News Mentions:

• 1) P 2) ORCL 3) RAD 4) GGP 5) PDCO
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:  

• Greeks Lining Up for Social Services Feel Cash Crunch Biting. While Prime Minister Alexis Tsipras grapples with cash reserves that risk running out this month, concern is growing over how his seven-week-old government will find the money to pay about 1.5 billion euros ($1.59 billion) in monthly wages and pensions without a deal with European partners. Tsipras says there’s no chance Greeks won’t be paid, and also told creditors like the International Monetary Fund that they’ll be reimbursed.   

• What Would Capital Controls Mean for Greece? (video)

• Russians See Most Nations Accepting Crimea Takeover, Poll Says. Most Russians believe that other countries will accept Crimea as part of Russia within a few years, despite international sanctions imposed in response to the takeover, a poll showed. Seventy percent of Russians think a majority of countries will recognize President Vladimir Putin’s annexation of the Black Sea peninsula from Ukraine during the next few years, while 8 percent say it will never happen, according to the survey to be published on Wednesday by the state-run All-Russia Center for the Study of Public Opinion, known as VTsIOM. Fifteen percent think recognition will come after a decade or more.

• China Home Prices Fall in More Cities Amid Economic Slowdown. China’s home prices dropped in more cities last month as an economic slowdown weighed on demand even after the government removed property curbs and reduced borrowing costs. New-home prices fell in 66 of the 70 cities tracked by the government from a month earlier, the National Bureau of Statistics said Wednesday, compared with 64 in January. Prices rose in two cities and were unchanged in another two.

• Which Countries Are Most Vulnerable to a China Slowdown? (video)

• Wall Street Traders Run for Cover as Brazilians Take the Streets. Finance Minister Joaquim Levy’s attempt to restore investor confidence in Brazil is being undermined by deepening political turmoil and public dissatisfaction. Traders pushed up the cost to insure the nation’s debt to an almost six-year high on Monday, one day after more than a million Brazilians took the streets to protest government corruption, higher taxes and President Dilma Rousseff’s handling of the economy. The credit-default swaps have risen faster this year than those for Russia, India and China, the three others that make up the BRIC group of nations.  

• Asian Stocks Little Changed as Investors Await Fed Statement. Asia’s benchmark equities gauge was little changed before a Federal Reserve meeting at which officials will assess the economy and debate the timing of the first U.S. interest-rate increase since 2006. The MSCI Asia Pacific Index declined less than 0.1 percent to 144.80 as of 9:00 a.m. in Tokyo, ahead of the Fed’s interest rate decision and policy statement due Wednesday.

• Oil Bonds Lose Investors $7 Billion in 10 Days. Investors lured back into junk-rated energy bonds by their juicy yields are getting burned. Oil prices have fallen more than 15 percent since March 4 to a six-year low of $43.5, wiping out $7 billion of market value of high-yield debt issued by energy companies. Prices on $1.45 billion of notes sold less than two weeks ago by Energy XXI Ltd., an oil producer that was being squeezed by its lenders, have fallen by as much as 10 percent. Comstock Resources Inc.’s $700 million of securities have declined by more than 7 percent since March 6.

• Iron Ore Price Outlook Cut by Australia as Global Supplies Surge. Australia, the world’s biggest iron ore exporter, lowered its outlook for prices this year as rising shipments expand a global glut. Rates will average $60 a metric ton this year, the Department of Industry and Science said in a report. That compares with $63 forecast in December and $88 in 2014, it said.

• Apple(AAPL) Is Out to Blow Up the Cable TV Model. After years of complaining about having to pay for obscure TV channels they never watch, American consumers might finally be getting their way. The industry buzzword is “skinny bundles,” or Web services from providers such as Dish Network Corp. and Apple Inc. that offer just a few popular channels at a lower price. 

Wall Street Journal:

• Israeli Election Too Close to Call. Netanyahu has an edge in coalition building. The Israeli election was too close to call after exit polls showed Prime Minister Benjamin Netanyahu and his top challenger in a virtual tie, but smaller parties were expected to give the conservative leader an edge in building a ruling coalition. Mr. Netanyahu declared victory for his Likud party over Isaac Herzog’s Zionist Union before the release of any official results in a race marked in its final hours by the prime... 

• Fed to Markets: No More Promises. Move away from explicit interest-rate guidance could unnerve investors used to some measure of clarity. The Federal Reserve is about to inject uncertainty back into financial markets after spending years trying to calm investors’ nerves with explicit assurances that interest rates would remain low. Ahead of their policy meeting that ends Wednesday, Fed officials have signaled they want to drop the latest iteration in a succession of low-rate promises—a line in their policy statement pledging to be “patient” before deciding to raise...

• Congress Deserves a Vote on Iran by Joseph I. Lieberman. Large bipartisan majorities in the legislature created the sanctions. Ending them warrants legislative review.

Fox News:

• State Department: No record of Clinton signing 'separation' form. (video)

CNBC:

• A hidden bear market in Dow threatens all stocks. The Dow Jones Industrial Average has a hidden bear market going. A third of the members of the blue chip barometer have hit new 52-week lows this year. By no coincidence, the Dow briefly turned negative for 2015 Tuesday.

• Quicksilver Resources files for Chapter 11 protection. Quicksilver Resources and its U.S. units filed for Chapter 11 bankruptcy protection on Tuesday, adding to a list of oil and gas producers who have folded amid low oil prices. The company listed assets of $1.21 billion and liabilities of $1.35 billion in its bankruptcy petition in a Delaware court.

• Dalio: We're 'cautious' ahead of Fed move. (video) The manager of the world's biggest hedge fund is playing it safe ahead of looming interest rate hikes by the Federal Reserve.

Zero Hedge:

• Hedge Fund Manager Fears "Sudden, Pervasive Loss Of Faith" In Markets; Says "It's A Truly Scary Time".

• Europe's Haves & Have-Nots: Greek Bulls "Throw In The Towel... They've Gone Plain Nuts".

• Greek PM To Meet With Putin Amid Cash Crunch.

• Big Data Algos 'Are' The Singularity & They're Coming To A Stock Market Near You.

• The Price Instability Mandate? Over 2000 Dow Point Swings In 6 Days. (graph)

• Stocks Give Up "Fed Hope" Gains 'Despite' Economic Data & Crude Collapse. (graph)

• WTI Plunges To $42 Handle On Massive API Inventory Build. (graph)

• The Much-Touted Growth Prospects Of BRICS Is Nothing More Than A Commodity-Boom-Fuelled Mirage.

• Energy Credit Risk Soars Most In 2015 As Bankruptcies, Liquidations Loom. (graph)

• The End Is Kind Of Nigh. (graph) You can’t solve a debt problem with more debt. That’s what the Fed is offering. And that is what the European Central Bank and the Bank of Japan are offering too. They are committed to this policy of providing more and more credit to a world that is already drowning in it. For example, what is 1.1% yield on a Spanish 10-year government note if not an invitation for trouble? Or how about a 10-year German government note with a yield of 0.2%? It’s impossible to know what will happen exactly. But someone is going to lose money. These yields are unnatural. And downright dangerous.

Business Insider:

• One chart makes clear why the next year of retail sales will be a big disappointment. (graph)

• Adobe(ADBE) slides 4% because fewer people subscribed to its software than expected.

• China came THIS close to another massive property developer default.

• Alibaba(BABA) is about to open the floodgates for insiders holding 437 million shares.

• Health insurer Premera Blue Cross hacked — 11 million customers' information compromised.

• Oracle(ORCL) has another solid quarter with its cloud business growing well.

Financial Times:

• IMF fears emerging markets instability. The head of the International Monetary Fund warned on Tuesday that emerging markets are set to face a renewed period of economic instability when US interest rates rise this year, forecasting a repeat of 2013’s damaging “taper tantrum” episode of capital flight and rapid currency depreciation.

Welt:

• EU's Moscovici Criticizes Greece for 'Misuse' of the Past. EU Economic Commissioner Pierre Moscovici says serves no purpose to distort the past for present political purposes by mixing demands for war reparations with discussions over a new bailout, citing interview. Doesn't exclude a Greek pullout from the euro, won't keep Greece in the euro zone "at any price" or unless strict conditions acceptable to both sides are met.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 106.0 unch.

• Asia Pacific Sovereign CDS Index 65.75 -.5 basis point.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDX)/1.88

• (GIS)/.67

• (CTAS)/.78

• (GES)/.57

• (MLHR)/.34

• (JBL)/.44

• (WSM)/1.52

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +4,111,110 barrels versus a +4,512,000 barrel increase the prior week. Gasoline supplies are estimated to fall by -866,670 barrels versus a -187,000 barrel decline the prior week. Distillate inventories are estimated to fall by -922,220 barrels versus a +2,527,000 barrel gain the prior week.

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25%.

Upcoming Splits

• (V) 4-for-1

Other Potential Market Movers

• The Fed's Yellen speaking, Fed Policy Update and Econ. Projections, weekly MBA Mortgage Applications report and the JPMorgan Insurance conference could also impact trading today.

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

Stocks Modestly Lower into Final Hour on Global Growth Fears, European/US High-Yield Debt Angst, Oil Decline, Homebuilding/Energy Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 15.91 +1.92%

• Euro/Yen Carry Return Index 134.31 +.31%

• Emerging Markets Currency Volatility(VXY) 10.76 -1.37%

• S&P 500 Implied Correlation 60.04 +1.16%

• ISE Sentiment Index 78.0 +8.33%

• Total Put/Call 1.02 +2.0%

• NYSE Arms 1.09 +114.87% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.44 +.36%
• America Energy Sector High-Yield CDS Index 781.0 +3.65%

• European Financial Sector CDS Index 56.86 +1.89%

• Western Europe Sovereign Debt CDS Index 21.75 +4.42%
• Asia Pacific Sovereign Debt CDS Index 66.10 -.14%

• Emerging Market CDS Index 421.38 +.28%

• iBoxx Offshore RMB China Corporates High Yield Index 113.93 -.07%
• 2-Year Swap Spread 27.0 unch.

• TED Spread 23.50 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.25 unch.

Economic Gauges:

• 3-Month T-Bill Yield .05% +2.0 basis points

• Yield Curve 139.0 -6.0 basis points

• China Import Iron Ore Spot $56.95/Metric Tonne -3.31%

• Citi US Economic Surprise Index -72.0 -8.2 points
• Citi Eurozone Economic Surprise Index 40.80 +1.2 points

• Citi Emerging Markets Economic Surprise Index 2.30 -1.5 points

• 10-Year TIPS Spread 1.65 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -38 open in Japan

• DAX Futures: Indicating +22 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long