Stocks Reversing Lower into Final Hour on Earnings Worries, Euro Weakness, Technical Selling, Commodity/Road & Rail Sector Weakness

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) 14.0 +11.29%

• Euro/Yen Carry Return Index 132.60 -.38%

• Emerging Markets Currency Volatility(VXY) 9.97 +.71%

• S&P 500 Implied Correlation 63.58 +2.25%

• ISE Sentiment Index 137.0 +28.04%

• Total Put/Call .89 +4.71%

• NYSE Arms .89 +11.93% 

Credit Investor Angst:

• North American Investment Grade CDS Index 61.52 +1.72%

• America Energy Sector High-Yield CDS Index 1,115.0 -1.28%

• European Financial Sector CDS Index 62.54 +.12%

• Western Europe Sovereign Debt CDS Index 21.90 -.05%

• Asia Pacific Sovereign Debt CDS Index 58.80 +.67%

• Emerging Market CDS Index 297.93 +.20%
  

• iBoxx Offshore RMB China Corporates High Yield Index 115.72 +.42%

• 2-Year Swap Spread 26.25 -.25 basis point

• TED Spread 26.25 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -22.0 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% -1.0 basis point

• Yield Curve 140.0 +1.0 basis point

• China Import Iron Ore Spot $48.82/Metric Tonne +2.71%

• Citi US Economic Surprise Index -45.60 +6.6 points

• Citi Eurozone Economic Surprise Index 56.20 -.7 point

• Citi Emerging Markets Economic Surprise Index -6.2 -15.2 points

• 10-Year TIPS Spread 1.81 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +3 open in Japan

• DAX Futures: Indicating -25 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:   

• Flareup in East Ukraine Fighting Sets Stage for Talks in Berlin. Fighting intensified in eastern Ukraine before the country’s foreign minister meets his counterparts from Russia, Germany and France for talks in Berlin on Monday. One Ukrainian soldier was killed and six wounded during the past 24 hours, Oleksandr Motuzyanyk, a presidential military spokesman in Kiev, told reporters on Monday. The number of rebels wounded in the clashes has tripled to an average of 15 a day in the last week, the separatist news website DAN reported, citing the acting director of a trauma center in Donetsk.
• Greek Talks With EU Are ‘Very Complicated’: Dombrovskis. (video)
• European Stocks Extend Record With Spanish Shares at 5-Year High. European stocks advanced for a fifth day, with Spanish equities jumping to their highest levels since January 2010. The Stoxx Europe 600 Index added 0.2 percent to 413.63 at the close of trading in London, after rising as much as 0.3 percent.
• Budget Deficit in U.S. Widens as Spending Exceeds Record Revenue. The budget deficit in the U.S. widened over the first six months of fiscal 2015 as spending on Social Security and health services increased, a government report showed. Spending exceeded revenue by $439.5 billion from October through March, compared with a $413.3 billion deficit in the same period the prior year, Treasury Department figures released Monday showed. The shortfall in March was bigger than economists projected.

Fox News:

• Rubio announces his 2016 GOP presidential campaign. (video) Florida Sen. Marco Rubio said Monday that he is running for president and feels “uniquely qualified” to talk about the future. Rubio, a Republican, is scheduled to make a full-scale announcement later today in Miami at an event before hundreds of supporters and that will include a video message. The first-term senator has long been assembling his political team, including donors who helped previous presidential nominees collect tens of millions of dollars. Now, Rubio's campaign kickoff formalizes what has been unfolding for months.
• Why Marco Rubio has a real shot at 2016 Republican nomination.

ZeroHedge:

• "We Have Come To The End Of The Road" - Greece Prepares For Default, FT Reports.
• The Best And Worst Performing Hedge Funds In 2015. (table)
• She's Back!!
• The "Crude" Reality Of Oil Storage Capacity In Six Easy Charts. (graph)
• Russia Warns "Attempts At Isolation Are Counterproductive & Useless".
• Citi Writes Iron Ore Price Obituary. (graph)
• This Is What Happens When The US Treasury Market Is Taken Hostage By "Malfunctioning Algos". (graph)
• Proxy War Escalates: Russia Lifts Ban On Selling Anti-Aircraft Missiles To Iran.
• Wall Street Reacts To China's Shocking Trade Data.
• USDJPY Tumbles After Abe Advisor Says Yen At 105 "Appropriate". (graph)

Business Insider:

• STAN DRUCKENMILLER: The only way to win the hedge fund game is by being a 'pig'.
• Hackers are coming for your smartwatch.
• OPEC: Some of you non-OPEC oil producers are being stubborn.
• The latest sign of the craziness going on in the Chinese stock market.
• The Fed could be about to make the same mistake it did before the financial crisis. The longer the Fed does nothing, the more Silvia worries that we may be repeating the mistakes of the past. By repeating these mistakes, Silvia sees potential for us to once again head towards a major event in credit markets that, while not large enough to cause a global financial crisis, could, in Silvia's view, majorly upset what have become fairly sanguine markets in the last several years. Silvia writes:
• Russia and Iran begin massive oil-for-goods deal.

Telegraph: 

• How German government debt just got dangerous. "Poisonous cocktail" of events could see investors burnt by holding ultra-safe German government debt. 
• General election chaos could trigger 'Lehman moment' for pound. Experts warn that pound could fall to as low as $1.35 against the dollar over the coming weeks, as traders brace themselves for "messy outcome" after May's general election. 

Xinhua:

• China's Rail-Freight Volume Dropped 9% Y/Y in 1Q. Railways moved 870m mt of cargo in Jan.-March period, citing China Railway Corp.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.24%

Sector Underperformers:

• 1) Gaming -2.15% 2) Road & Rail -1.32% 3) Steel -1.22%

Stocks Falling on Unusual Volume:

• ZNH, CUDA, GE, SINA, CBMG, CORE, MVO, HNP, VTAE, RKUS, SYMC, PFPT, ASPS, QADA, CRS, DOOR, WUBA, HAE, XONE, EDN, LMT, MSB, AFOP, LFC and QLYS

Stocks With Unusual Put Option Activity:

• 1) SYK 2) VLO 3) GE 4) BHI 5) DXJ
  

Stocks With Most Negative News Mentions:

• 1) MO 2) CRS 3) OMC 4) CAM 5) INTC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.52%

Sector Outperformers:

• 1) Airlines +1.12% 2) Computer Hardware +.69% 3) Biotech +.68%
  

Stocks Rising on Unusual Volume:

• BLDR, CLVS, MCRL, NFLX, ATHN, JMEI, BKS, CLDN, AERI, INCY, ADXS, MACK and BXMT

Stocks With Unusual Call Option Activity:

• 1) DNKN 2) IP 3) BRCM 4) HES 5) CLF
  

Stocks With Most Positive News Mentions:

• 1) CLVS 2) NFLX 3) TSL 4) AAPL 5) SHLD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume 20.4% Below 100-day average

• 5 Sectors Rising, 5 Sectors Declining

• 52.8% of Issues Advancing, 43.7% Declining

• 91 New 52-Week Highs, 3 New Lows

• 57.1% of Issues Above 200-day Moving Average (yesterday's close)

• Average 14-Day RSI 46.7 (yesterday's close)

• TRIN/Arms 1.08

Monday Watch

Weekend Headlines 
Bloomberg: 

• World Bank Sees Slower Growth in Developing East Asia. Developing East Asian economies will grow slightly slower this year, the World Bank said, with China’s moderating expansion overshadowing the benefits of lower oil prices and a recovery in rich countries, China’s growth will cool to 7.1 percent in 2015, slower than the 7.2 percent predicted in October and last year’s 7.4 percent expansion, the World Bank said in its East Asia and Pacific Economic Update. Developing East Asia will expand 6.7 percent, easing from 6.9 percent in 2014, it said.

• There’s A Self-Feeding Frenzy in Chinese Equities: Iley. (video)

• China, Russia, Saudi Arabia Increased Defense Most as U.S. Cut. Chinese, Russian and Saudi Arabian defense spending increased the most last year, while U.S. expenditures declined, according to a report by the Stockholm International Peace Research Institute. China’s defense spending rose 9.7 percent from a year earlier to $216 billion, and Russia’s increased 8.1 percent to $84.5 billion, the research group said in its annual report on global defense spending adjusted for inflation. Saudi Arabia had the biggest percentage increase among the top 15 spenders worldwide, rising 17 percent to $80.8 billion.  

• Greed Never Felt So Good to Hong Kong Bulls Chasing Stock Gains. Hong Kong options traders have never been so bullish on the city’s stock market after surging inflows from mainland China propelled the Hang Seng Index to the biggest rally worldwide last week. Wagers on gains for the benchmark gauge increased to the most expensive level on record versus bearish ones Friday as the measure completed a 7.9 percent weekly advance, the most among national equity gauges.

• Hundreds of Thousands March Against President Across Brazil. Brazilians took to the streets for the second time in a month to protest the country’s biggest corruption scandal and government austerity measures aimed at preserving the nation’s investment grade rating. Demonstrators marched in cities throughout the nation, with the biggest gathering occurring at Avenida Paulista, the heart of Brazil’s largest city, Sao Paulo. The state’s military police estimated attendance at 275,000 people. Thousands more thronged Rio de Janeiro’s Copacabana beach, all wearing green and canary yellow shirts as 3,000 joined a protest in Belo Horizonte.  

• Boko Haram Forces 800,000 Children to Flee Violence, UN Says. The number of children fleeing the Boko Haram insurgency in Nigeria doubled in the past year to about 800,000, with women and girls targets of abduction for sexual abuse by the militants, according to a United Nations Children’s Fund report. Boko Haram’s six-year campaign to impose Islamic law in Nigeria has forced more than 1.5 million people from their homes, according to Unicef. The number of displaced includes 1.2 million inside Nigeria, with about 200,000 crossing into neighboring Cameroon, Chad and Niger, stretching social services, health care and other facilities in host communities. 

• Asian Stocks Fluctuate After Biggest Weekly Gain in Five Months. Asia’s benchmark stock gauge swung between gains and losses, after posting its biggest weekly rally in more than five months, as advances by phone companies countered declines for utilities. SoftBank Corp. jumped 2.1 percent after a report that SnapDeal.com, in which the Japanese phone company owns a stake, is planning a U.S. listing. Mesoblast Ltd. surged 25 percent in Sydney after the biotechnology company said it’ll enter into an equity placement pact with Celgene Corp. Tokyo Gas Co. dropped 3.9 percent to lead a decline by utilities after the Japanese power producer said it missed its full-year profit target on impairment charges. The MSCI Asia Pacific Index slipped 0.1 percent to 152.14 as of 9:48 a.m. in Tokyo after climbing less than 0.1 percent.

• The $9 Trillion Short That’s Seen Sending the Dollar Even Higher. Investors speculating the dollar rally is fizzling out may be overlooking trillions of reasons why it will keep on going. There’s pent-up demand for the U.S. currency that will underpin years of appreciation because the world is “structurally short” the dollar, according to investor and former International Monetary Fund economist Stephen Jen. 

• BHP(BHP), Rio(RTP) Faulted by Barnett on Iron as Citigroup Sees $30s. The biggest iron ore producers including BHP Billiton Ltd. and Rio Tinto Group are pursuing a flawed strategy by flooding an oversupplied market and they should slow down expansion plans, according to the premier of Western Australia. “The signal’s going out to the market that there’s going to be ever-increasing amounts of iron ore available even at lower prices,” Colin Barnett said in an interview. “The market signal is wrong, and I believe the major companies have a flawed strategy. I don’t think it’s good business for them or their shareholders,” said Barnett, whose state includes the ore-rich Pilbara, where the bulk of Australian supply is concentrated.

• Druckenmiller Recounting Soros Experiences Blasts Fed Policies. The billionaire investor, who has one of the best long term track records in money management, told an audience at the Lost Tree Club in North Palm Beach, Florida, on Jan. 18 that trouble is looming. “I just have the same horrific sense I had back in ’04,” Druckenmiller said, according to a transcript obtained by Bloomberg News. “Our monetary policy is so much more reckless and so much more aggressively pushing the people in this room and everybody else out the risk curve that we’re doubling down on the same policy that really put us there.” 

• It’s Getting Expensive to Be a Bear as U.S. Rules Pinch Options. More than just a casino for day traders, the options market is where institutions pay millions of dollars a day to hedge investments. Lately, amid a crackdown on risk-taking, they’ve been paying a little more. Prices for Standard & Poor’s 500 Index put contracts, the options that act like insurance policies on stocks because they gain value when shares sink, have jumped this year to the highest levels on record relative to bullish calls, six-month data compiled by Bloomberg show. In one example, an option that appreciates if the market slides 10 percent by July has seen its cost shoot more than 120 percent above the corresponding bet on a rally. That’s twice the average spread since 2005. In a bull market that hasn’t seen a 10 percent correction since 2011, it makes sense that prices are higher to protect equity holdings. But more may be at work. Rocky Fishman, an equity derivatives strategist at Deutsche Bank AG, says hedging costs are going up as dealers are crimped by regulations and self-imposed risk controls stemming from the financial crisis.

• Bloomberg Politics Poll: Democrats and Independents Don’t Want a Hillary Coronation. Exclusive: nationwide poll also shows the vast majority of Americans say they won’t be more or less inclined to vote for Clinton because she represents the idea of America electing its first female president.

• Bloomberg Politics National Poll: Rand Paul, Jeb Bush Face Primary Obstacles. Republican presidential candidate Rand Paul may have a problem with women, and Jeb Bush already has been written off by a large share of potential primary voters, according to a new Bloomberg Politics national poll that underscores the wide-open nature of the race four months before the first primary debate. Just 11 percent of Republican and independent women in the poll said they'd seriously consider supporting Paul, a U.S. senator from Kentucky who announced his presidential bid last week, compared to 22 percent of men. No other Republican contender has a worse spread. Among all Republicans and independents in the poll, 42 percent said they would never consider voting for Bush, a former Florida governor and brother and son to former presidents.

Wall Street Journal:

• U.S. Widens Role in Saudi-led Campaign Against Yemen Rebels. Washington has concerns about Riyadh’s goals in the conflict. The U.S. is expanding its role in Saudi Arabia’s campaign in Yemen, vetting military targets and searching vessels for Yemen-bound Iranian arms amid growing concerns about the goals of the Saudi-led mission, according to U.S. and Arab officials.

• U.S. Consumer Shares Cause Sticker Shock. After sector’s surge in past six months, some investors think prices have climbed too far. U.S. consumer stocks have been flying off the shelves, but some investors are beginning to suffer from sticker shock. Consumer discretionary stocks in the S&P 500—a diverse swath of companies that includes retailers like Macy’s Inc. and Target Corp., as well as auto makers and media companies—have risen 18.8% in the last six months, outpacing the 10.3% gain in the broader S&P 500. Investors are betting the tumble in oil... 

• Wells Fargo(WFC) Warms Up to Risk. Investment banking plays a growing role for traditionally conservative lender. Wells Fargo & Co., the largest bank in the U.S. by market value, has been rewarded for keeping its business simple. Now it is slowly creeping into more complex—and riskier—territory. While many rivals retreat from risk amid regulatory pressures, the bank is expanding into a range of businesses a step removed from its long history as a Main Street lender. Among

• The Hillary Machine. Democrats are falling in line because they feel they have no choice.

• The Dirty Secret of Obama’s Carbon Plan. Taking one-third of U.S. coal-fired power plants off the grid by 2020 simply isn’t workable. Here’s why.

Fox News: 

• Clinton announces 2016 White House bid, asks to be 'champion' of America's middle class. (video) Former Secretary of State Hillary Clinton on Sunday officially announced her 2016 presidential campaign, ending months of speculation over her political plans and immediately elevating her as a target for the field of Republican contenders.

MarketWatch.com: 

• China’s Stock Connect: More boom and bust?

CNBC:

• How Tesla(TSLA) could be cannibalizing itself. (video)

Zero Hedge:

• One Last Look At The Real Economy Before It Implodes - Part 4.

• Chinese Economy "A Lot Worse Than You Think," Bloomberg Says. (graph)

• White House Admits, US States Need To Be Better Prepared For Fiscal Volatility.

• Japan QE Limit Approaching As Goldman Says BoJ Risks Losing Credibility. (graph)

• Germany Orders 100 Tanks To "Ensure Troops Are Ready To Respond To Russian Assertiveness".

• "I Wouldn't Say It's A Bubble," HSBC China Strategy Chief Says Of The Country's Leverage-Driven, Equity Frenzy. (video)

• VIX Closes At 5-Month Lows, BofA Warns Volatility Term Structure Is A "Significant Concern". (graph)

• Here's The Chart That Deutsche Bank Says Everyone Needs To Look At. (graph)

• 5 Things To Ponder: Don't Fight The Fed. (graph)

• Dollar Soars By Most In 43 Months; Stocks, Oil Surge In Week After Worst Payrolls Since 2013. (graph)

• GE(GE) CEO Says Now Is A "Perfect Time To Be A Seller".

• Why The Fed Thinks The Middle Class Is In Worse Shape Than You Think, In Four Charts. (graph)

• Meet The Secretive Group That Runs The World.

• None Dare Call It Fraud - Its Just A "Savings Glut".

• Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "I Know It's Tempting To Invest, But This Will End Very Badly".

• The Science-Fictional Foundation Under Paul Krugman - Part 1.

• The Science-Fictional Foundation Under Paul Krugman - Part 2.

• The Madness Of Crowds Of Central Bankers (Summarized In 1 Chart). (graph)

• Proxy War Crosses Border? Houthis Reportedly Clash With Saudi Troops Near Najran.

• ECB Tries To Fix Money Markets It Broke, Fails.

• Deutsche Bank Upgrades "Full Throttle" Hong Kong Exchange, Crazed Housewife Day Traders Cheer.

• As Bad As Things Were in 2007, They Are MUCH Worse Now. (graph)

• ISIS Releases 11 Minute Video Promising Another "Sept.11" Attack. (video)

• UK Housing Bubble Bursts: Sales Of Luxury Homes Crash By 80% As "Waves Of Wealthy People Are Leaving". (graph)

• China Cites "Insufficient Censorship" In Threat To Shut Down Sina Weibo. 

• 7 Years Later The "Very Serious People" Finally Ask: Was QE Worth It?

• Greek Negotiator "Shocks" Eurozone Officials, Behaves Like "Taxi Driver": Hope Of Greek Deal "Blown".

• Red Flags. (graph)

• China Trade Surplus Crashes As Exports & Imports Collapse In March. (graph)

• One Of These Chinese Things Is Not Like The Other. (graph)

• Bundesbank Warns German Banks To Expect At Least 50% Losses On Austrian "Black Swan". (graph)

Business Insider:

• OPEC is at risk of falling apart.

• With the 5-year anniversary of the BP oil spill, comes new offshore drilling regulations.

• The family that owns Wal-Mart may be selling $15.6 billion in shares.

• Spotify may soon be worth more than $8 billion.

• The Justice Department wants its employees to stop sleeping with prostitutes.

• Yemeni-Americans say the US has 'abandoned' them in a war zone.

• The ISIS takeover of a Palestinian refugee camp near Damascus shows how the group is expanding in Syria.

• Gap's tale of 2 brands shows how broke Americans really are.

• This was not a good week for Obama's Iran policy. Reports of a French fact-sheet that differed from a US government-issued statement suggested that there are no fewer than four different official versions circulating as to what was agreed to in Lausanne, Switzerland, on April 2nd, and that there are key differences between the US, Iranian, French, and EU-Iranian documents. 

• The economy has given the Fed an 'epic, historic window' to raise interest rates.

• Earnings expectations have been cut so low they might just get beat.

• Greece may have blown its best hope.

• The eurozone's economic crisis is far from over.

• China just revealed a terrifying new cyberweapon.

• 21-year-old Jordan Spieth runs away with the Masters, ties the record for lowest score ever.

Reuters:

• Most Brazilians favor impeachment, but few see Rousseff gone: poll. Almost two thirds of Brazilians favor the impeachment of President Dilma Rousseff over a corruption scandal at state-run oil company Petrobras, but roughly as many doubt it would drive her from office, according to a poll released on Saturday. The survey by polling firm Datafolha showed 63 percent of respondents support impeachment in light of the widening police investigation into a huge kickback scheme at Petroleo Brasileiro SA, as the oil giant is formally known. Still, 64 percent said they did not expect the scandal would be enough to cut short Rousseff's second term, which began in January. 

• Japan machinery orders fall, uncertain outlook keeps BOJ on edge. Japan's core machinery orders fell for a second straight month in February in a sign that business investment remains soft, and analysts say the smaller-than-expected decline won't necessarily allow policymakers to relax given an uncertain economic outlook. The 0.4 percent monthly fall in core machinery orders, a highly volatile data series, came as a recent run of weak indicators raised doubts about a sustainable economic rebound following a recession last year.

Financial Times:

• Hedge funds’ bets on strengthening dollar pay off.

Telegraph:

• The eurozone’s economic crisis is far from over. As the eurozone has continued to disappoint, more and more commentators have come to see it as resembling, or in danger of coming to resemble, Japan, writers Roger Bootle. 

• BlackRock(BLK): Fed tightening to trigger market tremors as liquidity evaporates. Complacent investors will be hurt as Fed raises rates, says BlackRock, as managing director warns central banks are running out of ammunition to deal with next crisis. 
  

FAS:

• Greece Not Moving on Structural Reforms in Aid Talks. Euro-region govt representatives "disappointed" about talks so far with Greece on structural reform measures, citing officials familiar with the matter. Greek side isn't moving at all, isn't ready to discuss a reduction of public service pensions, according to the report. Greek representative at April 8 deputy finance ministers' meeting said his country will be insolvent shortly. Greece has until April 20 to submit acceptable list of reforms, only then can EU Commission, ECB, IMF assess the measures in advance of EU finance ministers' meeting April 24 in Riga.

People's Daily:

• China Economy Faces Increasing Downward Pressure. Resources sectors face stronger downward pressure, Pan Jiancheng, an official with China's statistics bureau writes in an article.

China Times:

• China March Power Consumption Growth May Slow. Power use may grow less than 2% in 1Q, lower than the 2.5% growth in the first two months, citing Ouyang Changyu, deputy secretary-general of the China Electricity Council.

Night Trading

• Asian indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 104.25 +.25 basis point.

• Asia Pacific Sovereign CDS Index 58.50 +.25 basis point.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CBSH)/.58

• (OZRK)/.46

• (PBY).00

Economic Releases
2:00 pm EST

• The Monthly Budget Deficit for March is estimated at -$43.4B versus -$36.9B in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China FDI report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and real estate 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 week.