Wednesday Watch

Evening Headlines 
Bloomberg: 

• Russian Hackers Targeted White House Data. Russian hackers were behind an intrusion in recent months into a non-classified White House computer network, CNN reported. Deputy White House National Security Adviser Ben Rhodes said on CNN that no classified information had been compromised, while declining to link any attacks to Russia. “We do not believe our classified systems were compromised,” Rhodes said Tuesday. He said the White House is “constantly updating” its unclassified system and that personnel are told to act as if information on that network could be compromised by hackers. U.S. intelligence officials say the pace and sophistication of Russian-sponsored attacks have increased as tension over Ukraine has grown and the U.S. has imposed economic sanctions on Russia.
• North Korea Can Miniaturize a Nuclear Weapon, U.S. Says. North Korea has deployed its new road-mobile KN-08 intercontinental ballistic missile and is capable of mounting a miniaturized nuclear warhead on it, the U.S.’s top homeland security commander said. “Our assessment is that they have the ability to put a nuclear weapon on a KN-08 and shoot it at the homeland,” Admiral William Gortney, the head of the U.S. Northern Command, told reporters Tuesday at the Pentagon. “We have not seen them do that” and “we haven’t seen them test the KN-08.” 
• U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices. The world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look almost tame by comparison. The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156. “Chinese technology stocks do resemble the dot-com bubble,” Vincent Chan, the Hong Kong-based head of China research at Credit Suisse Group AG, Switzerland’s second-biggest bank, said in an interview on April 2. “Given stocks fell 50 to 70 percent when that bubble burst in 2000, these small-cap Chinese shares may face big corrections when this one deflates.” 
• Is China In the Middle of a Tech Bubble? (video)
• Chinese Developers Trim Sales Forecasts Amid Housing Doldrums. Chinese developers target lower growth for new-home sales this year, as prospects for the real estate market remain in doubt even after the government eased monetary policy and lifted curbs on housing purchases. Property companies are targeting median growth of 12.6 percent for contract sales this year, less than 2014’s 16 percent annual gain, a Bloomberg survey of 28 listed developers showed. The median of sales were 42.2 billion yuan last year ($6.8b), short of the median target of 44 billion yuan. 
• Asian Stocks Rise for Fifth Day as Material Shares Lead Advance. Asian stocks rose for a fifth day as material and health-care companies advanced and investors await a Bank of Japan policy decision and the release of Federal Reserve meeting minutes. The MSCI Asia Pacific Index added 0.1 percent to 149.21 as of 9:03 a.m. in Tokyo.

Wall Street Journal:

• Israel, U.S. Lawmakers Press Case Against Iran Nuclear Deal. Moves signal fresh domestic and international pressure on negotiations leading up to a summer deadline. Israeli officials and congressional Republicans on Monday set high bars with exacting conditions for a nuclear accord with Iran, signaling fresh domestic and international pressure on negotiations leading up to a summer deadline. Leading Arab governments, including Saudi Arabia, cautiously accepted the landmark diplomacy with Iran, in their most detailed reactions yet. But Saudi officials said they needed more assurances that Iran’s...
• South Carolina Police Officer Charged With Murder in Shooting of Motorist. White officer arrested after officials saw video of black man’s shooting.
• New Hedge Fund Strategy: Dispute the Patent, Short the Stock. Hayman Capital seeks to invalidate patents while betting on a drop in target’s shares. A well-known hedge-fund manager is taking a novel approach to making money: filing and publicizing patent challenges against pharmaceutical companies while also betting against their shares. 
• The Iran Deal and Its Consequences. by Henry Kissinger and George P. Shultz. Mixing shrewd diplomacy with defiance of U.N. resolutions, Iran has turned the negotiation on its head.

Fox News:

• States flouting post-9/11 ID law, giving cards to illegal immigrants that mirror licenses. (video) After the 9/11 attacks, Congress passed the REAL ID Act to prevent foreign nationals from fraudulently obtaining a U.S. driver's license -- by requiring that any ID issued based on unverifiable foreign documents look different in "design or color" from an official driver's license. That way, TSA and other law enforcement would know the ID holder might not be who they say they are.

CNBC:

• Stocks are in a 'stealth correction': Acampora. (video)
• No compelling bargains in markets: Howard Marks. (video)

Zero Hedge:

• Market Breaks After Fed-Driven Buying Frenzy Turns Into Selling Scramble. (graph)
• Crude Tumbles After API Reports Largest Inventory Build In 30 Years. (graph)
• The Greek Counter-Ultimatum To Europe: "We Cannot Keep ISIS Out If You Keep Bullying Us".
• Revolving Debt Crashes Most In Four Years, As Student, Car Loans Go Exponential; Bank Lending Freezes. (graph)
• Russian Government Hacked White House Computer System, CNN Reports.
• Scathing Assessment: "The UK Economy Is A Ticking Time Bomb".
• America: Bankrupt And On Borrowed Time.
• The Government's "Revolving"-est Doors.
• After Viacom's "Shocker", These Companies Are Most At Risk Of Early Terminating Their Stock Buyback Programs.
• China "Can't Believe Its Luck" On Investment Bank.
• Why The Oil Price Collapse Is The Fed's Fault. (graph)

Business Insider:

• REPORT: Royal Dutch Shell is in talks to buy the $46 billion British gas company BG Group.
• Germany: The Greek demand for $306 billion in WWII reparations is 'dumb'.
• One of Obama's Harvard professors likened the president's climate change policies to 'burning the Constitution'.
• Oil prices fall as Saudi Arabia reports record output.

Reuters: 

• Gundlach: 'Fed wants to get off zero,' may hike rates in June. DoubleLine Capital Chief Executive Jeffrey Gundlach said on Tuesday that the Federal Reserve could raise interest rates in June if economic data stabilizes. "The Fed wants to get off zero," Gundlach said on an investor and media webcast. The weak March payrolls report may not be enough to deter an interest-rate increase in mid-June, Gundlach said. "If the economy rolls over again," the Fed will have bullets to cushion any kind of economic weakness, Gundlach said.
• Investors pull $4 bln from hedge funds amid lackluster returns. Wealthy investors protested the hedge fund industry's recent lackluster returns and high fees by pulling a net $4 billion out of the $2.5 trillion industry during the first two months of 2015, data released on Tuesday show. The number contrasts with the heady days of 2014 when investors added $31.6 billion of new money in January and February, research firms BarclayHedge and TrimTabs Investment Research said.

Shanghai Securities News: 

• China May Unveil Subsidy to Iron Ore Producers Mid-April. Amount of domestic subsidy may be based on iron ore quality or adopt fixed rate of 6 yuan/ton, citing industry participants.
  

China Business News:

• Chinese Economy Faces Increasing Downward Pressure. China has plenty of room to support growth with policy reserves, citing an unidentified NDRC official. 1Q economic indicators are unlikely to surprise on the upside, the report cites a state researcher as saying.

Evening Recommendations 
Citi:

• Rated (XRX) Buy.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 107.0 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 57.75 -.5 basis point.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDO)/.73
• (GPN)/1.11
• (RAD)/.08
• (AA)/.25
• (BBBY)/1.80
• (PIR)/.36
• (RECN)/.12
• (WDFC)/.72
• (APOG)/.43

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +3,280,000 barrels versus a +4,766,000 barre increase the prior week. Gasoline supplies are estimated to fall by -1,520,000 barrels versus a -4,258,000 barrel decline the prior week. Distillate inventories are expected to rise by +330,000 barrels versus a +1,325,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.54% versus a +.4% gain prior.
  

2:00 pm EST

• Fed Minutes from March 17-18 FOMC Meeting.
  

Upcoming Splits

• (SBUX) 2-for-1

Other Potential Market Movers

• The Fed's Powell speaking, Eurozone retail sales report, German Factory Orders report, $21B 10Y T-Note auction, weekly MBA mortgage applications report, (UAL) operational data and the (COP) analyst meeting could also impact trading today.

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

Stocks Modestly Higher into Final Hour on Central Bank Hopes, Less European/US High-Yield Debt Angst, Oil Bounce, Biotech/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.18 -3.80%

• Euro/Yen Carry Return Index 136.18 -.12%

• Emerging Markets Currency Volatility(VXY) 9.83 +.10%

• S&P 500 Implied Correlation 64.30 +.56%

• ISE Sentiment Index 102.0 -5.56%

• Total Put/Call .98 +12.64%

• NYSE Arms .89 -3.87% 

Credit Investor Angst:

• North American Investment Grade CDS Index 60.06 -2.66%

• America Energy Sector High-Yield CDS Index 1,094.0 -1.86%

• European Financial Sector CDS Index 66.51 -2.80%

• Western Europe Sovereign Debt CDS Index 21.83 -2.28%

• Asia Pacific Sovereign Debt CDS Index 58.07 -.25%

• Emerging Market CDS Index 302.57 +1.13%
  

• iBoxx Offshore RMB China Corporates High Yield Index 114.87 +.17%

• 2-Year Swap Spread 25.25 -1.0 basis point

• TED Spread 25.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -21.75 +1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% +1.0 basis point

• Yield Curve 137.0 -4.0 basis points

• China Import Iron Ore Spot $48.06/Metric Tonne +2.08%

• Citi US Economic Surprise Index -55.7 +.8 point

• Citi Eurozone Economic Surprise Index 62.50 -1.2 points

• Citi Emerging Markets Economic Surprise Index 4.6 +.1 point

• 10-Year TIPS Spread 1.87 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +235 open in Japan

• DAX Futures: Indicating +28 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value -.24%

Sector Underperformers:

• 1) Homebuilders -1.82% 2) Gold & Silver -1.31% 3) REITs -1.05%

Stocks Falling on Unusual Volume:

• OCUL, GEL, ABGB, SHG, EVR, HPP, GM, OHI, CBMG, ATHN, TRIL, RCPT, PBF, QUNR, SHLM, ES, WWD, DEI, LPLA, ELLI, OVAS, VIAB, RBC, BIS and CNMD
  

Stocks With Unusual Put Option Activity:

• 1) KSS 2) APA 3) JNPR 4) KRE 5) ALTR
  

Stocks With Most Negative News Mentions:

• 1) AXP 2) UBNT 3) EVR 4) BBBY 5) WWD
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.22%

Sector Outperformers:

• 1) Biotech +1.77% 2) Oil Service +1.22% 3) Airlines +.83%
  

Stocks Rising on Unusual Volume:

• AXTA, WBAI, CMCM, CLVS, ASPS, IGT, GBX, ATHM, SPLK, NRZ and INFA

Stocks With Unusual Call Option Activity:

• 1) EPI 2) VGK 3) APOL 4) MYL 5) DUK
  

Stocks With Most Positive News Mentions:

• 1) PAY 2) SPLK 3) FDX 4) LUV 5) COP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Soviet-Era Survival Kicks in for Ukrainians in Rebel Wasteland. Life inside Ukraine’s pro-Russian breakaway republics hinges on a shadow economy flourishing amid the cease-fires, embargoes and severed supply lines of a yearlong war. The shortages underscore the difficulties rebels and their backers in the Kremlin face in establishing a semblance of normality as they seek to cement their rule. They also highlight the mounting costs of the war as the government in Kiev starts debt-restructuring talks.  
• China’s Bond Market May Face Second Default. (video)
• Samsung Profit Beats Estimates With Demand Rising for Its Chips and Displays. Samsung Electronics Co. posted profit that beat analysts’ estimates as rising demand for memory chips and displays more than offset a slump in smartphones. Operating income fell 31 percent to 5.9 trillion won ($5.4 billion) in the three months ended March, the Suwon, South Korea-based company said in a filing Tuesday. That compares with the 5.5 trillion won average of 36 analyst estimates compiled by Bloomberg. The shares rose. 
• FedEx(FDX) Said to Be in Talks to Buy TNT to Expand Europe Deliveries. FedEx Corp. is in discussions to acquire financially struggling Dutch logistics company TNT Express NV to expand package deliveries in Europe, people familiar with the matter said. An agreement may be announced this week, said one of the people, who asked not to be identified because the details are private. Talks are continuing, and it’s still possible no accord may be reached, the people said. TNT’s market value as of April 2 was 3.29 billion euros ($3.6 billion).
• Dollar’s Drop Is Cue to Start Buying for World’s Best Forecaster. It’s time for investors who bailed on the dollar in the past few weeks to get back in, says the most-accurate currencies forecaster. The greenback has tumbled 4.4 percent versus the euro since touching a 12-year high last month amid speculation the Federal Reserve will delay raising interest rates, in part because the dollar’s strength is hurting U.S. economic growth. That concern is overblown, according to ING Groep NV, which topped Bloomberg’s rankings of foreign-exchange analysts for the second quarter in a row.   
• Aussie Within a Cent of Six-Year Low as Yield Falls on Rate Bets. Australia’s dollar traded within a cent of an almost six-year low amid speculation the central bank will cut its key interest rate to an unprecedented low on Tuesday. Three-year government bond yields dropped to a record as swaps traders priced in a better than 70 percent chance the Reserve Bank of Australia will reduce the overnight cash rate target by a quarter percentage point to 2 percent. Economists are less convinced: 17 of 30 surveyed by Bloomberg News predict that the central will keep rates unchanged. The Aussie rose Tuesday after a report showed that February retail sales climbed more than expected.
• Asia Stocks Follow U.S. Rally as Tech, Consumer Companies Gain. Asian stocks rose, following a rally in U.S. equities, after comments by a Federal Reserve official fueled optimism that policy makers in the world’s largest economy will hold interest rates lower for longer. The MSCI Asia Pacific Index advanced 0.2 percent to 149.02 as of 9:03 a.m. in Tokyo. 
• Gold Bust Means Less Mine Spending. The biggest gold bust in three decades is about to end a six-year expansion in mine output. From Russia to South Africa to North America, the biggest producers saw profits turn to losses as prices plunged, forcing them to cut spending on mines in half over three years. While bullion output will probably reach a record in 2015, the increase will be the smallest in at least six years, before production drops 1 percent in 2016, according to Barclays Plc.
• Fed’s Lockhart Favors July-Sept. Liftoff on Weak Jobs Report. Federal Reserve Bank of Atlanta President Dennis Lockhart said while recent economic weakness probably won’t persist, he favors pushing out the central bank’s first rate increase beyond the next two meetings. “I would probably be biased toward the July or September dates as opposed to June,” Lockhart, who votes on monetary policy this year, said in an interview Monday. “We will have more data and we will give the economy a little more time to prove out the thesis that I laid out, that the first quarter was anomalous again, just like a year ago.”
• United(UNH), Humana(HUM) Get Surprise Medicare Revenue Boost From U.S. Health insurers such as UnitedHealth Group Inc. and Humana Inc. will see revenue for commercial Medicare policies increase 1.25 percent next year, reversing an earlier U.S. government proposal that would have cut payments. The announcement was a surprise, since the U.S. has been reducing payments to insurers as it seeks to bring the cost of privately managed Medicare coverage in line with the government-run version of the program for the elderly and disabled. Payments are already falling 4 percent this year, and in February the U.S. proposed an 0.9 percent reduction for 2016.

Wall Street Journal:

• Israel, U.S. Lawmakers Press Case Against Iran Deal. Moves signal fresh domestic and international pressure on negotiations leading up to a summer deadline. Israeli officials and congressional Republicans on Monday set high bars with exacting conditions for a nuclear accord with Iran, signaling fresh domestic and international pressure on negotiations leading up to a summer deadline. Leading Arab governments, including Saudi Arabia, cautiously accepted the landmark diplomacy with Iran, in their most detailed reactions yet. But Saudi officials said they...
• Skin Cancer Removal With Miniaturized Radiation. Many patients prefer the new X-ray treatment to surgical procedures.
• Oil Shipments by Rail Take Slow Track. Safety concerns, low crude prices depress train traffic.

Fox News:

• Obama administration claims Iran deal a ‘forever agreement,’ despite expiration dates. (video) The Obama administration mounted a new argument Monday for why skeptical lawmakers and U.S. allies should back the preliminary nuclear agreement with Iran, calling it a “forever agreement” that would block all pathways to a nuclear weapon and set up tough international inspections with no end date.

MarketWatch.com:

• OPEC has lost its swagger — and may never get it back.
• 6 reasons to sell stocks now and go to cash. 
• Should you follow Mohamed El-Erian and move your investments to cash? The former PIMCO chief says central banks have pushed asset prices to ‘very elevated levels’

Zero Hedge:

• Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" Market.
• John Hussman Explains Why QE Has Done Nothing To Help You.
• 28 Ways 'They' Rig The Market.
• Dismal Data Sparks Biggest Stock Ramp In 5 Months. (graph)
• The Warning Sign One Permabull Is Concerned About Is Now Flashing "Record" Red. (graph)
• Bonds Are Right! DoubleLine's Gundlach Warns Fed "Has Been Wrong For So Long... Offers No Value". (graph)
• Who Is Smarter: Credit Or Equity Investors? (graph)
• When Will Muslims Outnumber Christians? (graph)
• As US Seeks To "Contain" Iran Nuclear Plans, Russia & China Expand Theirs.

Business Insider:

• Vancouver's real estate bubble is getting bigger.
• Biotech company Ocular Therapeutix is imploding after announcing disappointing trial results.
• As Bill Gates promised, Microsoft(MSFT) will soon have its own Apple Pay alternative.
• Viacom(VIA/B) announces layoffs and a massive $785 million charge as part of a 'strategic realignment'.
• Here's how health apps could expose all sorts of new information about you.
• A Carson Block short has been frozen by the Chinese government, and the stock hasn't traded at all today.
• Greece puts a figure on World War II reparation claims from Germany. 
• THE DRONES REPORT: Market forecasts, regulatory barriers, top vendors, and leading commercial applications.

Telegraph: 

• Markets will be caught unaware by a ‘Grexident’. (graph) Fears investors are under-pricing the costs of an accidental Greek exit from the eurozone as Athens remains on a collision course with creditors.

Economic Information Daily:

• China LGFV Private-Public Fund Raising May Be Risky. Some local govt funding vehicles are improperly raising funds under the name of public-private partnership which may bring risks, citing people familiar with the matter. LGFVs have been banned participating in PPP projects as private companies, report says. Some LGFVs have participated in PPP projects through joint ventures, report says, citing people from LGFVs.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are +.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 110.0 unch.

• Asia Pacific Sovereign CDS Index 58.25 -.26 basis point.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GBX)/1.20
• (ISCA)/.29
• (SCHN)/-.10
• (PLAY)/.28
• (TISI)/.11

Economic Releases
10:00 am EST

• The IBD/TIPP Economic Optimism Index for April is estimated to fall to 49.0 versus 49.1 in March.
• JOLTS Job Openings for February are estimated to rise to 5003 versus 4998 in January.
  

3:00 pm EST

• Consumer Credit for February is estimated to rise to $12.250B versus $11.562B in January.
  

Upcoming Splits

• (SBUX) 2-for-1

Other Potential Market Movers

• The Fed's Kocherlakota speaking, Eurozone Services PMI, Eurozone PPI, $24B 3-Year Treasury auction and the weekly US retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity 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 Surging into Final Hour on Central Bank Hopes, Euro/Oil Bounce, Short-Covering, Metals & Mining/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Light

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.46 -1.43%

• Euro/Yen Carry Return Index 136.82 +.33%

• Emerging Markets Currency Volatility(VXY) 9.85 -2.48%

• S&P 500 Implied Correlation 63.07 -1.65%

• ISE Sentiment Index 112.0 +64.71%

• Total Put/Call .88 -21.43%

• NYSE Arms .61 +18.03% 

Credit Investor Angst:

• North American Investment Grade CDS Index 61.41 -2.37%

• America Energy Sector High-Yield CDS Index 1,112.0 -.54%

• European Financial Sector CDS Index 68.43 n/a

• Western Europe Sovereign Debt CDS Index 22.34 -.53%

• Asia Pacific Sovereign Debt CDS Index 58.21 -.63%

• Emerging Market CDS Index 298.57 -4.0%
  

• iBoxx Offshore RMB China Corporates High Yield Index 114.67 +.06%

• 2-Year Swap Spread 26.25 unch.

• TED Spread 26.25 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -22.75 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 141.0 +4.0 basis points

• China Import Iron Ore Spot $47.08/Metric Tonne n/a

• Citi US Economic Surprise Index -56.5 -9.2 points

• Citi Eurozone Economic Surprise Index 63.70 +.6 point

• Citi Emerging Markets Economic Surprise Index 4.5 -.4 point

• 10-Year TIPS Spread 1.85 +4.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +219 open in Japan

• DAX Futures: Indicating +12 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long