Morning Market Internals

NYSE Composite Index:

• Volume Running 2.5% Above 100-day average
• 7 Sectors Rising, 3 Sectors Declining
• 54.6% of Issues Advancing, 41.3% Declining
• 31 New 52-Week Highs, 29 New Lows
• 57.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.9
• Vix 13.77
• Total Put/Call 1.07
• TRIN/Arms .92

Friday Watch

Evening Headlines 
Bloomberg:

• When Will Greece Run Out of Cash? (video) 
• The Chinese Can’t Kick Their Savings Habit. Some bank as much as half of their income, suppressing spending.
• South Korean Exports Drop for Fourth Month as Won Strengthens. South Korea’s exports declined the most in more than two years in April, amid concern that the won’s strength is undermining the competitiveness of sales abroad. Overseas shipments fell 8.1 percent in April from a year earlier, the fourth straight monthly decline, the Ministry of Trade, Industry and Energy said on Friday. The median of 18 estimates in a Bloomberg survey was for a 6.6 percent drop. 
• Japan Stocks Slip on Kuroda as Yen Falls. Japanese stocks fell, with the Topix index poised for its worst weekly drop this year, after the central bank governor said no further policy easing was needed for now. The euro headed for its longest run of gains against the yen in almost six months and U.S. equity-index futures advanced. The Topix fell a second day, losing 0.7 percent by 11:14 a.m. in Tokyo following a fourth straight monthly gain. Markets from China to South Korea are closed Friday.
• Oil Producers’ Sale of Future Output Puts a Lid on Price Gains. Oil producers are taking advantage of the biggest monthly price increase since 2009 to sell more of their future output, threatening to slow the rally. New York-traded crude for next-month delivery gained 25 percent in April on signs a record drop in drilling rigs is starting to reduce production, easing the biggest U.S. oil glut in 85 years. December 2016 contracts were up just 8.7 percent in that period.  
• SEC Lacks Accounting Controls It Seeks in Others, GAO Says. The U.S. Securities and Exchange Commission, which polices public companies’ financial reports, lacks internal controls over its own accounting, a government watchdog said Thursday. The SEC in fiscal 2014 didn’t have proper systems in place to account for money the regulator had seized from fraudsters or its inventory of property and equipment, James R. Dalkin, director of the GAO’s office of financial management and assurance, said in a letter to SEC Chair Mary Jo White discussing the findings of an audit.
• The 7 Biggest Questions Ahead of Tesla's(TSLA) Battery Announcement.

Wall Street Journal:

• U.S. Navy Starts to Accompany Ships in Strait Where Iran Seized Cargo Carrier. Warships join American-flagged ships in Hormuz, marking a vigorous response to Tehran.
• Big Banks Use Loophole to Avoid Ban. Loophole allows banks to avoid asking the SEC for a waiver. Big banks are using a little-known loophole to avoid triggering a Securities and Exchange Commission ban on selling certain lucrative products to clients in the wake of enforcement actions.
• The Threat to Melt the Electric Grid. An electromagnetic-pulse attack from North Korea or another U.S. enemy would cause staggering devastation. The Pentagon is moving the headquarters for the North American Aerospace Defense Command (Norad) back into Cheyenne Mountain near Colorado Springs, Colo., a decade after having largely vacated the site.

Fox News:

• Photos show purported ISIS training camp in Afghanistan. (video) New photos purport to show ISIS fighters training at a terrorist camp in Afghanistan, near the Pakistani border, in what may be yet another sign of the black-clad jihadist army's expanding reach. The pictures, obtained by a Pakistani journalist earlier this month and published by the military blog The Long War Journal, show apparent ISIS radicals training, marching in formation and brandishing heavy artillery.

Zero Hedge:

• 16 Signs That The Economy Has Stalled Out And The Next Economic Downturn Is Here.
• Guess Who Predicted The Failure Of QE.
• Well That Hasn't Happened Before - Exhibit 5. (graph)
• No More Greater Fools: Retail Traders Are "Pretty Fully Invested" In Stocks, TD CEO Says.
• LInkedIn Crashes 25% After Missing Revenues, Cutting Outlook. (graph)
• Dollar-nado Sparks Market Turmoil In April. (graph)
• The "Scariest Spreadsheet In Fed Possession" Just Revealed A Very Scary Number For Q2 GDP. (graph)
• Kathamandu: Before And After The Devastation. (pics)

Business Insider:

• Apple(AAPL) is down 6% since blowing out earnings on Monday.
• Dozens of countries are banning US poultry because of a huge bird flu outbreak.
• GRANTHAM WARNS: The Fed is determined to inflate a 'fully-fledged bubble'.

Reuters: 

• Visa(V) forecasts current-quarter profit below Street. Visa Inc, the world's largest credit and debit card company, forecast profit below Wall Street expectations for the current quarter, hurt by continued pressure from lower crude prices and a strong dollar. 
• CME Group(CME) suspends two gold futures traders for allegedly spoofing. CME Group Inc on Thursday suspended two traders from its markets for allegedly colluding to enter orders repeatedly with no intention of trading, a strategy that has been fingered as a key contributor to the 2010 Wall Street flash crash.
• Bubble risk grows as China's stock boom defies gravity. What do a ketchup maker, a precious metal distributor and a medical device company have in common? They are the new poster kids of a boom in China's equity market - and a potential headache for policymakers, as valuations defy fundamentals. Fuelled in part by cheap credit and a crackdown on shadow banking, mom and pop buyers - who make up about 60 percent of the Chinese equities investor base - have been snapping up shares in a rally that has seen the benchmark Shanghai stock index double in six months.

Telegraph:

• ECB too confident QE rescue plan has already worked, economists warn. Central bankers have been too quick to pat themselves on the back.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 107.50 n/a.

• Asia Pacific Sovereign CDS Index 60.75 +.25 basis point.

• S&P 500 futures +.17%.

• NASDAQ 100 futures +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AXL)/.57
• (AON)/1.28
• (CVX)/.81
• (CLX)/1.10
• (CVS)/1.08
• (DUK)/1.14
• (FE)/.52
• (ITT)/.53
• (LM)/.99
• (LPNT)/.99
• (MCO)/1.03
• (ZEUS)/-.33
• (VFC)/.67
• (WY)/.25
• (BRK.B)/2374.70

Economic Releases
9:45 AM EST

• Final Markit US Manufacturing PMI for April is estimated at 54.2 versus a prior estimate of 54.2.

10:00 am EST

• Construction Spending for March is estimated to rise +.5% versus a -.1% decline in February.
• ISM Manufacturing for April is estimated to rise to 52.0 versus 51.5 in March.
• ISM Prices Paid for April is estimated to rise to 42.0 versus 39.0 in March.
• Final Univ. of Michigan Consumer Sentiment for April is estimated at 96.0 versus a prior estimate of 95.9.

Afternoon

• Total Vehicle Sales for April are estimated to fall to 16.9M versus 17.05M in March.

Upcoming Splits

• (GIII) 2-for-1

Other Potential Market Movers

• The Fed's Mester speaking, Fed's Williams speaking and the (BSX) investor day could also impact trading today.

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

Stocks Falling into Final Hour on Rising Long-Term Rates, Earnings Worries, Emerging Markets/US High-Yield Debt Angst, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.45 +7.92%

• Euro/Yen Carry Return Index 140.06 +1.23%

• Emerging Markets Currency Volatility(VXY) 10.09 +2.13%

• S&P 500 Implied Correlation 67.28 +.73%

• ISE Sentiment Index 118.0 +45.68%

• Total Put/Call 1.01 +6.32%

• NYSE Arms .62 +3.38% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.86 +1.97%

• America Energy Sector High-Yield CDS Index 1,079.0 +.66%

• European Financial Sector CDS Index 70.66 -1.91%

• Western Europe Sovereign Debt CDS Index 24.10 -5.45%

• Asia Pacific Sovereign Debt CDS Index 60.31 -.33%

• Emerging Market CDS Index 297.33 +.57%
  

• iBoxx Offshore RMB China Corporates High Yield Index 117.86 +.08%

• 2-Year Swap Spread 25.25 +1.5 basis points

• TED Spread 27.75 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 148.0 unch.

• China Import Iron Ore Spot $56.18/Metric Tonne -1.66%

• Citi US Economic Surprise Index -62.20 +4.6 points

• Citi Eurozone Economic Surprise Index 11.90 -5.3 points

• Citi Emerging Markets Economic Surprise Index -15.6 +.9 point

• 10-Year TIPS Spread 1.94 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -65 open in Japan

• DAX Futures: Indicating -25 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging market shorts 

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• Weapons Buildup by Ukraine Rebels Raises Tensions, Klimkin Says. Ukrainian Foreign Minister Pavlo Klimkin said that a buildup in arms supplies to pro-Russian separatists risks worsening tensions in the country’s easternmost regions, “We are seeing more and more weapons, including heavy weaponry, in the Donetsk and Luhansk regions, more possibilities for terrorists training,” Klimkin said in an interview in New York Wednesday. “There is an extremely high number of armed people there, those who must be disarmed according to the Minsk agreements. All that means additional risks.” 
• Iglesias Says EU Risking Right-Wing Backlash With Greek Pressure. (video) The euro area risks fueling extremist nationalist groups with its hard-line approach to negotiations with Prime Minister Alexis Tsipras, according to the Greek premier’s Spanish ally, Pablo Iglesias. If Greeks don’t win relief from the euro area’s austerity program through Tsipras’s plan to write down the country’s debts and boost government spending, they may embrace the Golden Dawn party instead, according to Iglesias, who leads the Spanish anti-austerity group Podemos and is a lawmaker in the European Parliament.
• German Bonds Drop for Second Day After Region’s $61 Billion Loss. German government bonds declined, extending a selloff from Wednesday that wiped about 55 billion euros ($62 billion) off the value of euro-area debt. The region’s benchmark yields climbed to the highest level in seven weeks, while those of French five-year debt touched their highest since January. Signs that traders rushed to get out of positions amplified the selloff after some money managers said they were considering betting against German debt. Others, including State Street Global Advisors, said this didn’t mark the end of a rally in the region’s debt. Royal Bank of Scotland Group Plc said it was still bullish on the securities.
• Divergent: China's Splintering Growth. From Shanxi to Hainan, China's provincial growth rates are splintering as the world's second-largest economy slows. Plagued by overcapacity and a property slowdown, the industrial northeastern Liaoning province expanded just 1.9 percent from a year earlier, according to a report by 21st Century Business Herald. Nearby Heilongjiang and Jilin are the fourth and fifth slowest growing regions as China's rust belt gets rustier. Northern Shanxi's dependence on coal weighted its growth to 2.5 percent, the second slowest. It's also one of the hardest hit by President Xi Jinping's anti-corruption campaign, with multiple government officials investigated. As college students and pensioners queue for hours to open share-trading accounts, the country's financial capital of Shanghai benefited from the stock market's boom. Financial services contributed 16.6 percent to the city's economy in the first quarter -- higher than the most recent numbers in New York City, Hong Kong and Singapore.
• China Shipbuilding Sector Set to Contract, Yangzijiang Says. Yangzijiang Shipbuilding Holdings Ltd., China’s biggest privately owned shipyard, expects the country’s shipbuilding industry to shrink significantly in the next three years, reversing almost a decade of boom. In three years time, there may be only 30 “active” shipyards in China, from more than 100 now, Chairman Ren Yuanlin said Thursday in a news briefing in Singapore, where the company’s stock is traded. “There will be mergers and acquisitions as well as closures as the shipbuilding industry undergoes restructuring,” Ren said. The shipping sector doesn’t look “optimistic” at the moment, he said. 
• UBS' Richest Clients Still Love Dollar on September Fed Bet. UBS Group AG’s wealthiest clients are still buying dollars even as the most popular trade in the foreign-exchange market has fallen out of favor, according to the world’s largest private bank. UBS expects the Federal Reserve’s first interest-rate increase since 2006 to come in September after policy makers played down the significance of the economy’s slowdown in the first quarter, said Simon Smiles, chief investment officer for ultra-high-net-worth individuals in Zurich.
• Biggest Wealth Fund Joins Bears in Bet Europe Bonds Fade. Norway’s $900 billion sovereign wealth fund is joining Janus Capital’s Bill Gross and Jeffrey Gundlach of Doubleline Capital in betting Europe’s historic bond rally is coming to an end. Yngve Slyngstad, the manager of the Oslo-based fund which on Wednesday reported a record investment return, said he is weighting a 2.5 trillion-krone ($328 billion) bond portfolio to shorter maturities, meaning it will outperform when rates rise. 
• Europe Stocks Fall, Posting April Drop, on Fed Rate-Rise Concern. A third day of declines pushed European stocks to their first monthly drop of the year, as the Federal Reserve left open the prospect of interest-rate increases even amid weak U.S. growth. The Stoxx Europe 600 Index slid 0.4 percent to 395.79 at the close of trading, after earlier losing as much as 1 percent.
• Saudi Arabia Is Burning Through Its Foreign Reserves at a Record Pace. Saudi Arabia is burning through foreign reserves at a record pace as the largesse of the new king and regional turmoil ratchet up pressure on public finances already hurt by the oil price slump. The kingdom spent $36 billion of the central bank’s net foreign assets -- about 5 percent of the total -- in February and March, the biggest two-month drop on record, data released this week show.

ZeroHedge: 

• The Swiss National Bank Is Long $100 Billion In Stocks, Reports Record Loss.
• Dollar Suffers Worst Month In 4 Years - Ends Record Streak Of Gains. (graph)
• 71% Of Wall Street Bankers Admit They Are Too Big To Fail (And Underpaid).
• Punk Q1 GDP Wasn't Surprising: It Extends A 60-Year Trend Of Exploding Money And Imploding Growth. (graph)
• Bund Sell-Off: It's The Supply Stupid.
• NY Fed Head Of Banking Supervision, And Person Who Handed Over Billions In AIG Profits To Goldman, Resigns.
• Billionaire Hypocrisy: George Soros May Owe $7 Billion In Taxes.
• Chicago PMI Bounces. (graph)
• Bunds & Bullion Bloodbath'd. (graph)
• When The Herd Turns.
• No Growth In Personal Income Pushes Savings Rate To Lowest In 2015; Spending Misses Expectations.
• The Last Time Initial Jobless Claims Were This Low Was The Peak Of The Dot-Com Bubble. (graph)

Business Insider:

• The people who nailed the horrific Q1 GDP number have bad news about Q2.
• Hillary Clinton's charity empire hid way more foreign donations than anyone realized.
• Top American NATO commander: We don't know what Putin is thinking or what he'll do next.

Telegraph:

• Defiant Greeks draw battle lines as Grexit crisis deepens. Athens Leftist government risks "unprecedented economic contraction" as it insists it will not cross "red lines" on its electoral promises.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.31%

Sector Underperformers:

• 1) Gold & Silver -2.53% 2) Biotech -2.23% 3) Social Media -2.01%

Stocks Falling on Unusual Volume:

• ECHO, YELP, ASGN, PCRX, HAR, MC, CSII, GNC, GNRC, TREE, LEAF, CRL, KEX, SSYS, ROG, KN, SAM, VAR, APD, BIDU, TEX, CMPR, USLV, MEP, ELGX, GOV, CNW, CELG, CAH, CRM, FIS, BWA, ZLTQ, ADSK, FSS, VA, MUR, ZMH, SNCR, RYL, ELGX, MAR, CAMP, BDC, HAR, SSYS, PRXL, KN, PETX, AMC, ADXS and UIHC

Stocks With Unusual Put Option Activity:

• 1) MBI 2) LOW 3) CY 4) EMR 5) VFC
  

Stocks With Most Negative News Mentions:

• 1) YELP 2) AGIO 3) OI 4) F 5) GM
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth -.65%

Sector Outperformers:

• 1) Oil Service +1.53% 2) Gaming +1.09% 3) Steel +.18%
  

Stocks Rising on Unusual Volume:

• CKSW, OVTI, AAWW, HOS, TTEK, TASR, FOE, TILE, HOLX, ROK, VLTC, AVG, WX, CRR, NSR, COMM, ATW, LKQ, TWI, OIS, EQIX, KBR, MWV, INGR, RKT, MLM and CY

Stocks With Unusual Call Option Activity:

• 1) NRF 2) OVTI 3) GLUU 4) PAA 5) CY
  

Stocks With Most Positive News Mentions:

• 1) OXY 2) CCJ 3) BPMC 4) TASR 5) ROK
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume