Morning Market Internals

NYSE Composite Index:

• Volume Running 23.7% Above 100-day average
• 0 Sectors Rising, 10 Sectors Declining
• 18.5% of Issues Advancing, 79.1% Declining
• 29 New 52-Week Highs, 36 New Lows
• 58.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.9
• Vix 14.44
• Total Put/Call .93
• TRIN/Arms .79

Thursday Watch

Evening Headlines 
Bloomberg:

• Greece Deal Targeted by Sunday as Tsipras Pushes for Progress. Greece and its euro-area partners are stepping up talks in a bid to break an impasse over bailout aid as early as next week, even as the country’s government sent conflicting signals over its willingness to agree on long-stalled reforms. With Greece facing a cash crunch as early as next week, both sides in a meeting of euro-area officials agreed to pursue intensive negotiations beginning on Thursday with the target of a preliminary deal by May 3, according to two people with knowledge of the talks. The aim would be for finance ministers to sign off on the accord by their next scheduled meeting on May 11, the officials said, asking not to be named because the talks are private. 

• Europe’s Debt Selloff Erases $61 Billion in Value in One Day. Investors revolting against negative yields in Europe wiped 55 billion euros ($61 billion) off the value of the region’s government bonds in one day. The value of European debt dropped to 5.844 trillion euros on Wednesday, the lowest level since March 30, in Bank of America Merrill Lynch’s Euro Government Index.

• The Most-Crowded Trades Come Undone in Markets Roiled by Europe. The year’s most-popular market bets got hammered on Wednesday, showing just how risky it is to follow the crowd. The dollar, which has rallied more than 15 percent during the past 12 months, extended its longest losing streak since August 2013. The euro, which has lost about 19 percent in the period, soared. Oil gained, European stocks tanked, and U.S. Treasures slumped without any obvious reason. And this was all before the Federal Reserve released its policy statement at 2 p.m. after a two-day meeting in Washington, which ended up having relatively little effect on markets. Traders seemed to largely be responding to other events, such as a measure of the euro region’s strength accelerating to the fastest pace since 2009. 

• Brazil Raises Key Rate for Fifth Time as Inflation Quickens. Brazil’s central bank increased the benchmark interest rate for the fifth consecutive meeting to bring surging inflation back to target by the end of next year. The bank’s board, led by its President Alexandre Tombini, in a unanimous vote raised the key rate by a half-point to 13.25 percent Wednesday, the highest since January 2009. The statement accompanying the decision uses the same language as the prior communique. The increase was forecast by 53 of 61 economists surveyed by Bloomberg. The remainder expected a quarter-point boost.  

• Honda Falls Most in Four Years as Profit Forecast Lags Estimates. Honda Motor Co. fell the most in four years in Tokyo trading after forecasting profit that fell short of analyst estimates, as recall costs and weaker overseas currencies erode the carmaker’s earnings. Honda fell as much as 7.7 percent, the biggest intraday decline since March 2011, to 3,999 yen and traded at 4,032.5 yen as of 9:15 a.m.  

• Chinese Stocks in Hong Kong Fall Most in Week Before Data. Chinese stocks trading in Hong Kong fell for a third day, with raw-material companies sliding before Friday’s manufacturing data and Industrial & Commercial Bank of China Ltd. slumping after reporting its weakest first-quarter earnings growth since listing in 2006. Jiangxi Copper Co., the nation’s biggest producer of the metal, plunged 2.8 percent. ICBC, the largest lender, declined the most in three months after net income climbed 1.4 percent and bad-loan charges surged. Official manufacturing data will probably show a reading of 50 in April, down from the previous month’s 50.1, according to economists surveyed by Bloomberg News. Technology companies jumped in Shanghai as investors sought new-economy shares before the factory report. The Hang Seng China Enterprises Index in Hong Kong slid for a third day, losing 1.5 percent to 14,381.10 at 10:22 a.m.

• Asian Stocks Pare Biggest Monthly Advance in 19 Months on Fed. Asian stocks dropped, with the regional benchmark paring its biggest monthly gain since September 2013, as the Federal Reserve downplayed weak U.S. economic growth and kept raising interest rates on the table for later this year. The MSCI Asia Pacific Index fell 0.5 percent to 155.69 as of 9:01 a.m. in Tokyo, heading for a 6.4 percent advance this month.

• OmniVision(OVTI) Said to Near $1.7 Billion Sale to Hua Capital. OmniVision Technologies Inc., whose camera sensors have been used in Apple Inc.’s iPhone, is near an agreement to be acquired by a group of Chinese investors, people with knowledge of the matter said. Hua Capital Management, the Beijing-based private equity firm, will pay about $29 a share for the chip designer, said the people, who asked not to be identified because the transaction hasn’t yet been made public. A purchase at that price would value the company at $1.68 billion. A deal could be announced as soon as Thursday, the people said. Santa Clara, California-based OmniVision rose about 5.9 percent in late trading Wednesday, after ending regular trading at $26.55 a share. Chinese buyers are using takeovers to acquire chip capabilities. Last year, a Beijing-based university led the acquisition of Spreadtrum Communications Inc., a designer of chips used to connect smartphones to cellular networks.

Wall Street Journal:

• Slowing Growth Muddles Fed Plans. Officials expect economic rebound, but rate path uncertain as headwinds lurk.

• Apple(AAPL) Watch: Faulty Taptic Engine Slows Roll Out. Supplies crimped after testing found problems with Chinese-made component that creates gentle tapping sensation.  

• The Slow-Growth Fed. The economy starts another year with a stall despite near-zero rates. 

MarketWatch.com: 

• Fed tests teleconference system to use for possible rate hike. The Federal Reserve on Wednesday took another step to an effort to convince markets that a rate hike could come at any meeting, even one without a formal news conference.

• Baidu(BIDU) shares decline after revenue miss. 

CNBC:

• GoPro(GPRO) is a 'one-trick pony,' expert says. (video) 

• Fed in the business of making things worse: Jim Grant. (video)

Zero Hedge:

• 12 Unanswered Questions About The Baltimore Riots That They Don’t Want Us To Ask.

• The Financial Markets Now Control Everything.

• Three Hurricanes Are Headed Our Way (And There's Nowhere To Hide).

• 1,100 Foreign Donors To Clinton Foundation Never Disclosed & Remain Secret.

• Fed Fails To Spark Buying Frenzy; Stocks, Bonds, Dollar Drop. (graph)

• The Real Financial Crisis That Is Looming. (graph)

• New Saudi King Consolidates Power To Maintain Current Oil Policy.

• The Third And Final Transformation Of Monetary Policy.

Business Insider:

• Marissa Mayer got a nice pay bump to $42 million last year.

• US asks Iran to help in Yemen.

• DEUTSCHE BANK: 'Hold on to your chair...'

• Yelp(YELP) is crashing after earnings miss.

• Baltimore protests spread to New York, DC.

• China's steel production contracted in Q1 for the first time in at least 20 years.

Washington Post: 

• Prisoner in van said Freddie Gray was ‘trying to injure himself,’ document says. A prisoner sharing a police transport van with Freddie Gray told investigators that he could hear Gray “banging against the walls” of the vehicle and believed that he “was intentionally trying to injure himself,” according to a police document obtained by The Washington Post. The prisoner, who is currently in jail, was separated from Gray by a metal partition and could not see him. His statement is contained in an application for a search warrant, which is sealed by the court. The Post was given the document under the condition that the prisoner not be named because the person who provided it feared for the inmate’s safety.

Telegraph:

• Ignore the 'whiff of panic' as US economy stalls. The economy contracted in the first quarter once inventories are stripped out. 'It is hard to put lipstick on that pig,' said UniCredit.

• Apple(AAPL) warns of 'material' impact from EC tax probe. The EU began a formal investigation against Ireland in June last year for alleged state aid to Apple. 

Shanghai Securities News: 

• China Should Avoid Excessive Credit Expansion. China should keep monetary policy neutral and not engage in another round of "excessive" credit expansion, citing Yi Xianrong, a researcher at the Financial Institute of the Chinese Academy of Social Sciences. Deleveraging will promote economic restructuring, Yi says. China should eliminate bubbles in the property market through monetary policy, Yi is cited as saying.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.25% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 107.50 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 60.5 +.75 basis point.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (APD)/1.55

• (ARG)/1.14

• (AB)/.47

• (AMT)/1.17

• (ABC)/1.19

• (ADP)/1.02

• (AVP)/.07

• (BZH)/-.13

• (BWA)/.84

• (BG)/1.13

• (CAH)/1.16

• (CELG)/1.06

• (CI)/1.82

• (CME)/.95

• (CL)/.66

• (COP)/-.17

• (CY)/.07

• (DBD)/.28

• (XOM)/.83

• (LLL)/1.57

• (MOS)/.75

• (PSX)/1.42

• (PBI)/.40

• (POT)/.49

• (RYL)/.45

• (SEE)/.42

• (ZMH)/1.54

• (AIG)/1.19

• (FLR)/.98

• (GILD)/2.32

• (LNKD)/.56

• (SPWR)/.08

• (V)/.61

Economic Releases
8:30 AM EST

• The 1Q Employment Cost Index is estimated to rise +.6% versus a +.6% gain in 4Q.

• Personal Income for March is estimated to rise +.2% versus a +.4% gain in February.

• Personal Spending for March is estimated to rise +.5% versus a +.1% gain in February.

• The PCE Core for March is estimated to rise +.2% versus a +.1% gain in February.

• Initial Jobless Claims are estimated to fall to 290K versus 295K the prior week.

• Continuing Claims are estimated to fall to 2300K versus 2325K prior.

9:00 am EST

• ISM Milwaukee for April is estimated to fall to 53.0 versus 53.25 in March.

9:45 am EST

• Chicago Purchasing Manager for April is estimated to rise to 50.0 versus 46.3 in March.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Tarullo speaking, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (GLW) annual meeting  could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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 Lower into Final Hour on Rising European Debt Angst, Global Growth Fears, Earnings Worries, Healthcare/Gaming Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.93 +4.19%

• Euro/Yen Carry Return Index 138.0 +1.20%

• Emerging Markets Currency Volatility(VXY) 9.91 -.60%

• S&P 500 Implied Correlation 66.19 -1.68%

• ISE Sentiment Index 84.0 -26.96%

• Total Put/Call .95 +4.40%

• NYSE Arms .62 -36.45% 

Credit Investor Angst:

• North American Investment Grade CDS Index 62.31 +1.72%

• America Energy Sector High-Yield CDS Index 1,071.0 +1.0%

• European Financial Sector CDS Index 72.03 +2.06%

• Western Europe Sovereign Debt CDS Index 25.50 +.73%

• Asia Pacific Sovereign Debt CDS Index 60.21 +.84%

• Emerging Market CDS Index 295.0 +.34%
  

• iBoxx Offshore RMB China Corporates High Yield Index 117.77 +.04%

• 2-Year Swap Spread 23.75 unch.

• TED Spread 26.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .00% -1.0 basis point

• Yield Curve 148.0 +5.0 basis points

• China Import Iron Ore Spot $57.13/Metric Tonne -4.59%

• Citi US Economic Surprise Index -66.80 -8.3 points

• Citi Eurozone Economic Surprise Index 17.20 +1.0 point

• Citi Emerging Markets Economic Surprise Index -16.5 -.9 point

• 10-Year TIPS Spread 1.92 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -244 open in Japan

• DAX Futures: Indicating +68 open in Germany

Portfolio: 

• Higher: On gains in my biotech sector longs, index hedges and emerging market shorts 

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg: 

• Rockets Kill in Ukraine as EU Envoy Sees Sanctions Holding. Separatists killed a civilian in a rocket attack in eastern Ukraine, the government said, after the European Union’s envoy to the U.S. said sanctions against Russia will remain in place at least until year-end. Militants also fired on government positions and attacked a power plant in Ukraine’s eastern Luhansk region, the country’s National Security and Defense Council said on Facebook on Wednesday. The clashes further undermine a February cease-fire struck in Minsk, Belarus. They follow fighting near the Sea of Azov port of Mariupol this week that the Organization for Security and Cooperation in Europe called “the most intense” in more than two months. 

• Russia Seizes Candy Factory Owned by Ukraine Leader Poroshenko. A Russian court ordered the seizure of a factory belonging to Ukrainian President Petro Poroshenko’s confectionery business Roshen, hampering his plans to sell assets, the company said. Roshen lost the right to manage some properties at the Lipetsk facility south of Moscow until September 13, according to a statement on the company’s website on Tuesday. The court alleges that Roshen illegally claimed 180 million rubles ($3.5 million) in value-added-tax refunds, Roshen said, adding that it will challenge the ruling. Anna Fadeeva, a spokeswoman for the Basmanny district court in Moscow, didn’t answer repeated phone calls for comment.

• German Bunds Are Tanking After Big Investors Say to Get Out. (video) Good news for Bill Gross. Euro-area government bonds are falling out of favor. Top money managers are turning against the securities after yields dropped to unprecedented lows across the region. Emerging signs of inflation are dimming demand. And investors failed to show up in sufficient numbers for Germany’s debt office to meet its sales goal at Wednesday’s auction of five-year notes.  

• BlackRock(BLK) Predicts a Taper Tantrum Redux in Emerging Markets. The emerging-market swoon touched off by the so-called taper tantrum two years ago is destined to repeat itself, BlackRock Inc. says. When the Federal Reserve raises interest rates, the selloff will be every bit as painful as the rout that ensued in May 2013, when then-Chairman Ben S. Bernanke suggested the central bank would soon wind down its bond-buying program, according to the world’s largest money manager. Developing-nation debt sank as much 10 percent in the wake of the comments while currencies from India’s rupee to Turkey’s lira plunged. 

• Markets Are Making Big Moves all Over the Place Today. (graph)

• Europe Stocks Post Biggest Slump of 2015 as Mining Shares Slide. European stocks tumbled the most since December, with exporters deepening a drop amid a rally in the euro. Continental AG and Volkswagen AG slipped at least 4 percent, sending carmakers to the worst drop among industry groups. Germany’s DAX Index plunged 3.2 percent, the most in a year and among the biggest retreats in western-European markets. Antofagasta Plc and Outokumpu Oyj slid after reporting quarterly results, pushing miners lower. The Stoxx Europe 600 Index fell 2.2 percent to 397.3 at the close of trading, trimming gains this year to 16 percent.

• Bernanke Joins Pimco; Second Consulting Job in Two Weeks. (video) Former Federal Reserve Chairman Ben S. Bernanke is joining Pacific Investment Management Co. as a senior adviser, his second consulting agreement with a top money manager in as many weeks. Bernanke will contribute his economic expertise to the firm’s investment process, the Newport Beach, California-based firm said Wednesday. Bernanke previously spoke at Pimco’s client conference in March and advised on the last two of its quarterly economic forums that guide investment strategy.

• It’s Always a ‘Great Quarter, Guys!’ If You’re an Equity Analyst. From 2007 through 2014, analysts told companies “Great quarter, guys,” on 1,265 of the calls. Bloomberg tracked how many companies were told what a fine job they did, then compared it to the Standard & Poor’s 500 Index for the quarter when the results were reported. While it was very often a great quarter, guys, it wasn't always as great in the broader market.

• America’s Student Debt Pain Threatening a Corner of Bond Market. America’s mounting student-debt problem is threatening to create trouble in part of a $170 billion bond market tied to government-guaranteed loans. With borrowers increasingly struggling to repay their student loans, Moody’s Investors Service is warning it may take investors longer than promised to get their money back. The credit grader said this month it may lower rankings on $3 billion of top-rated debt as investors face the threat of slowing principal payments or even receiving no interest.

CNBC: 

• Fed: All calendar references removed. Following through on indications in March, the Federal Open Market Committee on Wednesday offered no changes to its zero interest rate policy. Not only did it not hike rates, it also removed all hints for what may lie ahead. Calendar references were deleted completely from the post-meeting statement. 

• Consumers just saying no to spending gas savings. (video)

ZeroHedge:

• Flash Crash Scapegoat Can't Afford Bail, Will Remain In Prison. 

• Even Wall Street's Biggest Permabulls Are Throwing In The "Recovery" Towel. (graph)

• WTI Crude Surges Above $59 - Highest In Almost 5 Months. (graph)

• To Commerzbank, German Bunds Are "Flash Crashing". (graph) 

• EUR Strength Sparks DAX Rout To 7-Week Lows. (graph)

• Pending Home Sales Rise In March As Weather Effect Dissipates. (graph)

• Biggest Inventory Build In History Prevents Total Collapse Of The US Economy. (graph)

• US Economy Grinds To A Halt, Again: Q1 GDP Tumbles Below Expectations, Rises Paltry 0.2%. (graph)

Business Insider: 

• Iran's top diplomat has an ominous warning for 2016 candidates.

• The author of a book hammering Hillary Clinton says he now has full-time security.

• New York Post: 'Forget the National Guard, send in the moms'.

Telegraph:

• 'We won't surrender': Firebrand Greek minister risks fresh schism with Europe. Syriza's radical Leftist energy chief warns Grexit will land a 'mortal blow' to monetary union.

Xinhua:

• China Larger Steel Makers 1Q Sales Fall 14.5% Y/Y. Large and medium-sized Chinese steel makers 1Q sales fall to 762.9b yuan, citing data from China Iron and Steel Association. Steel makers' losses from main business were more than 11b yuan in 1Q because demand and prices fell.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.31%

Sector Underperformers:

• 1) Gaming -8.36% 2) HMOs -4.37% 3) Airlines -3.72%

Stocks Falling on Unusual Volume:

• LEAF, BWLD, SSYS, HURN, SAIA, ASND, WYNN, SAVE, IDXX, NVDQ, ACHC, TWTR, GRUB, BGS, ANIK, FARO, MRCY, NATI, PRSC, SLAB, IBP, EIGI, AKAM, HUM, LL, OHI, OI, SLGN, GLW, ENTG, WM, WETF, LVS, TXRH, KKD, ACHC, ULTI, BC, SPW, CNC, WIN and X

Stocks With Unusual Put Option Activity:

• 1) WYNN 2) SSYS 3) AKAM 4) TWTR 5) FXE
  

Stocks With Most Negative News Mentions:

• 1) SSYS 2) WYNN 3) LL 4) LH 5) CNC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cal Value -.41%

Sector Outperformers:

• 1) Oil Service +1.94% 2) Gold & Silver +1.28% 3) Oil Tankers +.85%
  

Stocks Rising on Unusual Volume:

• XPO, LOGM, GPRO, HOT, TSS, MDCA, AVY, XOOM, IPHI, AZPN, BRFS, RPXC, IPI, HOT, CRI, GT, HRG, MDLZ, KBR, VRSK, MTOR and SLCA

Stocks With Unusual Call Option Activity:

• 1) XPO 2) MDLZ 3) SAVE 4) ARCP 5) MDRX
  

Stocks With Most Positive News Mentions:

• 1) LOGM 2) GPRO 3) PRGO 4) OSK 5) LXK
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume