Bull Radar

Style Outperformer:

• Small-Cap Growth +.18%

Sector Outperformers:

• 1) Biotech +.87% 2) Road & Rail +.67% 3) HMOs +.47%
  

Stocks Rising on Unusual Volume:

• BRDR, GEVA, LC, WU, RARE, SRPT, WEN, PLCE, HLF, TOUR, MGI, WD, SWC, ZEN, BMRN and GMED

Stocks With Unusual Call Option Activity:

• 1) FXCM 2) WEN 3) HUM 4) ALXN 5) FOSL
  

Stocks With Most Positive News Mentions:

• 1) OSTK 2) IDXX 3) SRPT 4) CAH 5) EL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 9.9% Above 100-day average
• 2 Sectors Rising, 8 Sectors Declining
• 31.1% of Issues Advancing, 66.4% Declining
• 14 New 52-Week Highs, 55 New Lows
• 52.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.3
• Vix 15.27
• Total Put/Call 1.06
• TRIN/Arms .63

Wednesday Watch

Evening Headlines 
Bloomberg: 

• Bond Damage Tally: $340 Billion Lost as Slump Put in Perspective. Global bond markets have lost about $340 billion since the start of last week as investors ponder the end of a six-year rally that sent yields to record lows. Traders returning from Europe’s May Day holidays sent yields surging across the continent as tensions between Greece and its creditors worsened, adding to the anxiety. Yields began the climb last week as billionaire bond investors Jeffrey Gundlach to Bill Gross questioned the viability of negative yields with the European Central Bank’s stimulus measures appearing to put an end to the risk of deflation.

• It's Time to Get Ready for the End of China's Bull Market. For Chinese investors with a sense of history, the nation’s world-beating equity rally is looking long overdue for a reversal. The bull market turned 883 days old on Tuesday, topping China’s previous record by 56 days, after a 119 percent surge in the Shanghai Composite Index since December 2012. Even if the advance is measured from June 2013 -- when the gauge narrowly avoided a bear-market drop of 20 percent -- it’s still the second longest since Chinese bourses opened for trading in 1990. 

• Origins of Chinese Bond Default Buried in Accounting Footnotes. Investors still wondering how Kaisa Group Holdings Ltd. doubled its debt in six months and triggered China’s first property bond default may want to read page 63 of its 2014 interim report. There, in footnote No. 15 of the Shenzhen-based company’s balance sheet, is a reference to 11 billion yuan ($1.8 billion) in advance deposits for property projects from third parties and for 1.15 billion yuan that needed to be refunded. 

• China Trusts Fuel Rally With Record Rise in Equities Investment. China’s trust companies, part of the shadow-banking industry, boosted their investment in equities by a record 225 billion yuan ($36 billion) in the first quarter, adding fuel to the country’s stock-market rally. About 777 billion yuan of high-yield trust products were invested in stocks at the end of March, more than double the 314 billion yuan a year earlier, according to data released by the China Trustee Association on Wednesday.

• Alibaba's(BABA) Slowing Growth in China Costs Investors $70 Billion, After Alibaba Group Holding Ltd. raised a record $25 billion last year, founder Jack Ma said the Chinese e-commerce company faced the danger of high expectations. He might be right. About $70 billion of market value has evaporated since Ma made that statement in November as investors worry about slowing growth. Alibaba’s dominance at home as a marketplace for buyers and sellers of goods is being undermined by a Chinese economy projected to grow at the slowest pace since 1990 and a consumer shift to mobile shopping that crimps advertising revenue.   

• Asian Stocks Outside Japan Fall Second Day, Following U.S. Slump. Asian stocks outside of Japan dropped for a second day, with the regional gauge extending a two-week low, as banks and information technology shares declined following a slump in U.S. equities. Woolworths Ltd. fell 3.8 percent after Australia’s biggest supermarket chain announced job cuts as sales missed estimates. Commonwealth Bank of Australia slid 4.3 percent as the nation’s top lender by market value posted third-quarter cash profit that was unchanged from a year earlier. HSBC Holdings Plc slipped 1 percent in Hong Kong after first-quarter revenue fell short of expectations at Europe’s largest bank. The MSCI Asia Pacific excluding Japan Index fell 0.8 percent to 509.12 as of 9:34 a.m. in Hong Kong. 

• Dollar Tantrum Screams Buy to Goldman Sachs(GS) Seeing GDP Rebound. Goldman Sachs Group Inc. said investors should build positions that seek to profit from the dollar’s strength as U.S. growth is set to pick up. A gauge of the dollar fell last month for the first time since June. Lower-than-forecast economic data, including first-quarter gross domestic product, fueled speculation the Federal Reserve will keep U.S. interest rates lower for longer.

• BlackRock’s(BLK) On a Mission to Save the Credit-Default Swaps Market. BlackRock Inc. is leading a push to revive trading in a key part of the credit derivatives market that’s shrunk 57 percent as post-crisis regulations made it costlier to trade. The world’s biggest asset manager is targeting contracts known as single-name credit-default swaps -- those tied to individual companies and countries. That piece of the market has declined disproportionately because it has been slower to adapt to new standards for trading. BlackRock has had preliminary discussions with banks and other debt investors for a plan that would route trades through clearinghouses intended to curb risks to the financial system.

• Secret Shorts: Nameless Naysayers Shake Markets in Twitter Age. They were reviled in the age of Rembrandt, outlawed in the time of Newton and, in the days of Napoleon, branded enemies of the state. Now short sellers have embraced the age of Twitter -- and the results are almost as explosive. The Internet has given a new generation of short sellers and researchers tools to spread bearish investment advice in a blink, and, sometimes, do so anonymously. Accusations fly, many fall on deaf ears, but occasionally a post or tweet from a faceless source can wipe out billions of market value.

• U.S. Is Probing Apple(AAPL) Over Its Deals for Beats Music. U.S. antitrust officials are scrutinizing Apple Inc.’s efforts to line up deals with record labels as it prepares to debut a new version of the Beats Music streaming service, according to people familiar with the matter. The Federal Trade Commission is looking at whether Apple is using its position as the largest seller of music downloads through its iTunes store to put rival music services like Spotify Ltd. at a disadvantage, one of the people said.

Wall Street Journal:

• Market U-Turn Rams Hedge Funds. Firms’ bets go sour, as U.S. economy stalls, German bonds fall and oil rebounds. A broad market reversal is battering hedge funds, spoiling the industry’s strongest annual start since the financial crisis. Many funds that bet on global financial and economic trends run by firms such as Fortress Investment Group LLC and Discovery Capital Management LLC suffered losses in April as they tried to benefit from a constellation of market moves that gained momentum in mid-2014 and were widely expected to continue...

• ‘Flash Crash’ Overhaul Is Snarled in Red Tape. Five years after market meltdown, effort to prevent a repeat drags far behind schedule.

• Yellen Meetings With Financial Firm Come Under Scrutiny. Efforts to press Federal Reserve for more details on possible leak focus attention on chairwoman’s contacts. Congressional efforts to press the Federal Reserve for more details about a possible leak have suddenly focused attention on Chairwoman Janet Yellen’s contacts with financial firms.

• Hillary Clinton Backs Path to Citizenship for Illegal Immigrants. Her comments amount to a full-throated embrace of much of the agenda of the immigration-rights movement.

• Hillary’s Constitutional Aversion to Criticism. Candidate Clinton signs on to the campaign to rewrite the First Amendment to limit political speech.

CNBC:

• 'Flash crash' 5 years later: What have we learned? (video)

Zero Hedge:

• Wynn(WYNN) Calls "Big" Recovery "Complete Dream" As Gaming Revenues Collapse.

• Government Using Subprime Mortgages To Pump Housing Recovery - Taxpayers Will Pay Again.

• Oil Rises After API Reports First Inventory Draw In 16 Weeks. (graph)

• Quantitative Easing Is A Squalid Little Lie That Appeals To Economists With No Grasp Of History. 

• Stocks Sinko-No-Buyo As Crude Hits 6-Month Highs. (graph)

• US Economic Confidence Crashes Most Since July To Lowest Since December. (graph)

• 96% Of Americans Expect More Civil Unrest In U.S. Cities This Summer.

• Florida Man Faces 15 Year Sentence For Sex On A Beach (But Still No Bankers In Jail).

• The Mistake Everyone Is Making About Fed Rate Hikes. (graph)

• China Faces End Of "Migrant Miracle" As Demographic Ceiling Imperils Economy,

Business Insider:

• Jeff Gundlach just gave this exclusive presentation to a room full of investors at the New York Yacht Club.

• GUNDLACH: When the Fed starts hiking rates, 'GET OUT' of this asset class.

• The US is in the middle of its biggest bird flu outbreak ever.

• China's monetary binge only harms its economy by feeding leverage.

• California water regulators just adopted unprecedented restrictions amid massive drought.

Reuters: 

• Agrium*AGU) quarterly profit disappoints; boosts dividend 12 pct. Canadian fertilizer and farm retail dealer Agrium Inc on Tuesday reported a first-quarter profit that fell short of expectations, due in part to a late start to the U.S. spring farming season. 

• SolarCity(SCTY) installations top view, sales costs soar. SolarCity Corp, said on Tuesday first-quarter solar installations were higher than expected, despite a particularly snowy winter in many of its key East Coast markets.

Telegraph:

• Bankrupt Greeks blame Troika divisions for debt impasse. Athens says 'serious disagreements and contradictions' among its creditor powers are holding back talks.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 105.50 +.5 basis point.

• Asia Pacific Sovereign CDS Index 60.50 +.5 basis point.

• S&P 500 futures +.28%.

• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDD)/.03

• (BUD)/1.18

• (HAIN)/.45

• (OXY)/.04

• (RDC)/.70

• (SNH)/.45

• (SODA)/.03

• (WEN)/.05

• (CZR)/-1.53

• (CECO)/-.25

• (CF)/4.52

• (EXPD)/.48

• (GMCR)/1.05

• (MRO)/-.46

• (MELI)/.63

• (MET)/1.41

• (PRU)/2.39

• (TSLA)/-.51

• (RIG)/.61

• (WBMD)/.30

• (WFM)/.43

Economic Releases
8:15 am EST

• ADP Employment Change for April is estimated at 200K versus 189K in March.

8:30 am EST

• Preliminary 1Q Non-Farm Productivity is estimated to fall -1.9% versus a -2.2% decline in 4Q.

• Preliminary 1Q Unit Labor Costs are estimated to rise +4.5% versus a +4.1% gain in 4Q.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +900,000 barrels versus a +1,910,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +387,500 barrels versus a +1,713,000 barrel gain the prior week. Distillate inventories are estimated to fall by -75,000 barrels versus a -66,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.57% versus a +.1% gain the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's George speaking, Fed's Lockhart speaking, Eurozone Services PMI report, Australia Employment report, 1Q MBA Mortgage Foreclosures/Mortgage Delinquencies reports, weekly MBA mortgage applications report, Sanford Bernstein Energy Conference, Deutsche Bank Health Care Conference, (FLEX) investor day and the (AMD) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology 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 Surging Eurozone Debt Angst, Rising Long-Term Rates, Global Growth Worries, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Slightly Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.19 +10.43%

• Euro/Yen Carry Return Index 140.18 +.19%

• Emerging Markets Currency Volatility(VXY) 10.39 -.86%

• S&P 500 Implied Correlation 66.88 +3.15%

• ISE Sentiment Index 152.0 +67.03%

• Total Put/Call 1.22 +28.42%

• NYSE Arms .81 -2.50% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.87 +1.67%

• America Energy Sector High-Yield CDS Index 1,083.0 -.32%

• European Financial Sector CDS Index 74.11 +5.25%

• Western Europe Sovereign Debt CDS Index 25.18 +10.73%

• Asia Pacific Sovereign Debt CDS Index 59.80 -.47%

• Emerging Market CDS Index 299.06 -.19%
  

• iBoxx Offshore RMB China Corporates High Yield Index 118.07 +.10%

• 2-Year Swap Spread 26.0 +.25 basis point

• TED Spread 26.50 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.5 -.75 basis point

Economic Gauges:

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

• Yield Curve 155.0 +2.0 basis points

• China Import Iron Ore Spot $58.70/Metric Tonne +2.0%

• Citi US Economic Surprise Index -65.30 -9.2 points

• Citi Eurozone Economic Surprise Index 5.20 -1.3 points

• Citi Emerging Markets Economic Surprise Index -18.10 +.1 point

• 10-Year TIPS Spread 1.93 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -132 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/medical/retail/tech sector longs

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• Greece Says Compromise Not Possible Under Current Conditions. Greece blamed international creditors for the failure to achieve a breakthrough in bailout talks, saying a deal won’t be possible until they agree on a common set of demands. A Greek official said that the European Commission and the International Monetary Fund are confronting the country with too many red lines and need to better coordinate their message. A spokesman for the European Commision wasn’t immediately available for comment.
• EU Demands Concessions as Greece Hurtles Toward Deadlines. Euro-area finance chiefs urged Greece to bow to their terms for releasing aid within days to avert a cash crunch. With Greek officials fanning out across the continent to plead their case, Portuguese Finance Minister Maria Luis Albuquerque warned Tuesday that the currency bloc won’t make contingency plans to prepare for a possible breakdown in talks and encouraged Greek Prime Minister Alexis Tsipras to take the offer on the table. “It has been difficult but we still hope it will be possible to have a good outcome of this discussion,” Albuquerque said in a television interview in London.
• Islamic State Claims Responsibility for Texas Attack. The terrorist group that calls itself Islamic State claimed that "two soldiers of the caliphate" carried out the attack in Garland, Texas, over the weekend, in an audio statement on the Al Bayan radio station on Tuesday, the Associated Press reports. Two men, whom federal officials identified as Elton Simpson and Nadir Soofi, wounded a security officer at a cartoon contest that included images of the prophet Muhammad. Both men were shot and killed by responding officers.  
• Global Bonds Sell Off as Oil Fuels Inflation Concern; Gold Gains. Treasuries fell with European bonds as oil’s rally above $60 a barrel added to signs of higher inflation, while concern rose that Greece won’t be able to resolve its debt crisis. Gold advanced and U.S. stocks slid. The yield on 10-year Treasury notes added four basis points to 2.18 percent at 12:26 p.m. in New York, extending an eight-week high. German bonds resumed losses, while Spanish debt tumbled with Greek stocks. The Standard & Poor’s 500 Index lost 0.6 percent after closing four points from a record, and European equities dropped to the lowest since March 10.   
• China Stocks to Suffer 20% Correction, Mobius Says. (video)
• Emerging Stocks Drop Led by China as Investors Await U.S. Data. Emerging-market stocks headed for a two-week low on concern China will impose measures to cool the world’s best-performing market and as investors awaited U.S. economic data to gauge the timing of an interest-rate increase. The MSCI Emerging Markets Index lost 0.2 percent to 1,046.43 at 9:37 p.m. in New York. The Shanghai Composite Index sank the most in three months as state media warned investors about market risks and concern grew that new share sales will divert funds from existing equities.
• Greek Drop Leads Europe Stocks Down Amid Growing Default Concern. A slide in Greek shares led European stocks to their lowest level in two months on concern that debt negotiations will fail to secure funding in time to prevent the nation defaulting. The Stoxx Europe 600 Index fell 1.5 percent to 391.01 at the close of trading, after earlier rising as much as 1.1 percent on better-than-estimated company results. Shares extended losses after a Greek official said a funding deal won’t be possible until international creditors agree on a common set of demands. Greece’s ASE Index slid 3.9 percent, the most in seven weeks.
• Einhorn’s Greenlight Reduces Stock Wager Amid Productivity Bust. Hedge fund manager David Einhorn is scaling back bets on rising stocks on the prospect that a strong dollar, weak oil prices and a tightening labor market will squeeze corporate profits. “Our current thinking is that 2015 is setting up to be a challenging environment and we are positioned accordingly,” Vinit Sethi, director of research at Einhorn’s DME Advisors, said Tuesday on a conference call discussing results at Greenlight Capital Re Ltd. Einhorn is chairman of Greenlight Re, which uses the hedge fund manager’s investing strategy. Bets on rising assets exceeded short wagers by 15.5 percentage points at the end of March, Cayman Islands-based Greenlight Re said Monday in a regulatory filing. That compares with net exposure of 38.9 percentage points as of Dec. 31.
• David Tepper Dethroned as King of Hedge Fund Pay. (video)

Wall Street Journal: 

• Aetna(AET) to Stop Covering Routine Use of Power Morcellator. Power Morcellation Can Spread Hidden Cancer in Women, Regulators Say.

ZeroHedge:

• Greek Deal In Limbo After "Serious Disagreement" Between EU, IMF.
• Shale Stock Shambles. (graph)
• Sanctions & Saber Rattling Doesn't Stop The US From Importing Russian Petroleum.
• European Bond Yields Are Surging - Draghi, We're Gonna Need A Bigger Bazooka. (graph)
• US Non-Manufacturing Rises (ISM) & Falls (PMI) In April As Export Orders Collapse. (graph)
• Energy Stocks Hit 6-Month High as Valuations Spike To 1999 Peaks. (graph)
• Yemen Rebels Shell Saudi Arabian City, Casualties Reported; Saudis Vow Retaliation.
• So Is This "Unambiguously Bad"? (graph)
• Blogger Ben's Basically Full Of It.
• ISIS Warns Of "Harsher And Worse" US Attacks After Claiming Responsibility For Botched Texas Shooting.
• US Trade Deficit Soars To Worst Since Financial Crisis; Will Push Q1 GDP Negative. (graph)

Business Insider: 

• Americans are losing confidence in the economy. (graph)
• Israeli generals are worried about much more than an Iranian nuclear deal.
• The ongoing plunge in this Chinese freight index looks like trouble. (graph)

Financial Times:

• Latin America will be the hardest hit of emerging regions as the Fed tightens.

Telegraph:

• 'Anglo-Saxon' world would rip apart Europe after a Grexit, says Juncker. European Commission president says Grexit would expose the euro to huge danger as Anglo-Saxon forces would try to dismantle the EU.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.61%

Sector Underperformers:

• 1) Hospitals -2.77% 2) Utilities -2.42% 3) Semis -2.15%

Stocks Falling on Unusual Volume:

• QLYS, NSM, RAIL, KS, KLIC, BBW, SCOR, CGNX, ELLI, XNCR, AEGR, RKT, ACTA, SYNT, IP, WLK, ONDK, BLMN, VNQI, RGR, ANIP, PTCT, DGLY, LNKD, GOV, HRTX, ONCE, ISIS, EGOV, HLS, MFRM, EOG, FCE/A, DENN, NTCT, ZEN, BSFT, MUSA, PBYI and ROSE

Stocks With Unusual Put Option Activity:

• 1) PBI 2) WMB 3) XLY 4) XLU 5) CAR
  

Stocks With Most Negative News Mentions:

• 1) PBYI 2) SBUX 3) BABA 4) MFRM 5) IP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume