Today's Headlines

Bloomberg: 

• Greek Endgame Nears for Tsipras as Collateral Evaporates. (video) Greek banks are running short on the collateral they need to stay alive, a crisis that could help force Prime Minister Alexis Tsipras’s hand after weeks of brinkmanship with creditors. As deposits flee the financial system, lenders use collateral parked at the Greek central bank to tap more and more emergency liquidity every week. In a worst-case scenario, that lifeline will be maxed out within three weeks, pushing banks toward insolvency, some economists say.

• Greek Bonds Tumble on Speculation Cash May Only Last a Few Weeks. Greek bonds plunged, pushing 10-year yields up to the highest since April, as speculation grew that the nation’s financial system may be just weeks away from running out of cash. The time remaining for Greece to strike a deal with its creditors is “very limited,” European Union Economic Commissioner Pierre Moscovici told reporters in Berlin Monday. The Greek government meanwhile repeated its pre-conditions for any deal to be reached, saying it won’t yield ground on its “red lines.”

• German Tourists Cool on Greece as ATMs at Risk of Crunch. Greece’s standoff with creditors is threatening the surge in tourism that helped drag the country out of a six-year slump in 2014. A strong start to the year has tailed off in recent months with potential visitors deterred by the risk of being caught up in a cash crunch. Bookings from Germany were 0.7 percent higher than last year at the end of the first quarter after jumping 12 percent in January, prompting the Greek tourist lobby to consider ditching its forecast for a record number of visitors this year. 

• Emerging Stocks End Three-Day Advance Amid Shifting Fed Outlook. The Shanghai Composite Index declined for a second day as 20 initial public offerings are due to come to market from Tuesday to Thursday, stoking concern that funds will be lured from existing stocks. Lender Banco Bradesco SA led Brazilian stocks lower. The real slumped for a second day as most developing-nation currencies weakened against the dollar. The Ibovespa fell 1.3 percent in Sao Paulo. Bradesco fell 3 percent, while Itau declined 2.1 percent.

• European Stocks Climb as Greek Shares Rebound, Carmakers Advance. A gain in automakers pushed European stocks higher, as Greek equities reversed a drop. The Stoxx Europe 600 Index rose 0.4 percent to 398.09 at the close of trading in London, after falling as much as 0.7 percent. It climbed 0.6 percent earlier.

• $100 Oil Seen Years Away by Petronas as Shale Output Resilient. The rally in crude prices may not last as U.S. shale output remains robust, according to Malaysia’s state oil company. “It will take many years until we see oil prices anywhere near the $100 mark,” Petroliam Nasional Bhd. President and Chief Executive Officer Wan Zulkiflee Wan Ariffin said at a conference in Kuala Lumpur on Monday. “We’ve underestimated the resilience of U.S. shale production. ‘We’re still grappling our way to climb out of this big drop.” 

• China Steel Price Slumps to 12-Year Low as Seasonal Peak Passes. (graph) Chinese prices of steel used mostly to build homes and offices fell to a 12-year low as peak construction season begins to ebb in the world’s biggest consumer. The average spot price of steel reinforcement bar, or rebar, dropped for a 10th day to 2,458 yuan ($396) a metric ton, the lowest level since January 2003, according to data from Beijing Antaike Information Development Co.

• Bubble Blowing to Continue So Long as Yellen Isn’t Raising Rates. Janet Yellen will have to do more than talk about potential asset market bubbles if she is to pop any. Days after Federal Reserve Chair Yellen’s May 6 observation that stock valuations are “quite high,” Citigroup Inc. strategists led by Robert Buckland looked around the world at what central banks have done in the past to rein in financial market excesses. Their answer is that it usually takes at least three interest rate increases and as many as five to spark a slide in equities.

• Nobel Winner’s Math Is Showing S&P 500 Unhinged From Reality. If you sold every share of every company in the U.S. and used the money to buy up all the factories, machines and inventory, you’d have some cash left over. That, in a nutshell, is the math behind a bear case on equities that says prices have outrun reality. The concept is embodied in a measure known as the Q ratio developed by James Tobin, a Nobel Prize-winning economist at Yale University who died in 2002. According to Tobin’s Q, equities in the U.S. are valued about 10 percent above the cost of replacing their underlying assets -- higher than any time other than the Internet bubble and the 1929 peak.

• Endo(ENDP) Buys Par Pharma for $8.05 Billion Amid Hunt for Deals. Endo International Plc, the maker of pain drugs like Opana and Percocet, agreed to buy Par Pharmaceutical Holdings Inc. for $8.05 billion in cash and stock as part of a plan to ignite sales growth and pursue more acquisitions.

CNBC: 

• CEOs love buying stock with your money, not own. As CEOs buy a record amount of stock with shareholder money, they are keeping their wallets in their pockets when it comes to purchasing shares with their own cash. In the last six weeks, U.S. companies made buyback announcements that came to $5.7 billion a day, according to TrimTabs Investment Research. Yet in the month of April executives at those same companies bought only $240 million worth of stock with their own money, the lowest level of insider buying in more than two years. "Insider buying virtually dried up in April, sending the insider sell/buy ratio to its highest level in more than two years," noted the TrimTabs report. It's a troubling contrast that may speak to the true feelings executives have about the staying power of this six-year bull market.

• El-Erian: Markets underestimating liquidity risk. (video) Markets underestimate the risk posed by a lack of liquidity, which looks more dangerous than Greece's precarious debt situation, Mohamed El-Erian said Monday.

ZeroHedge:

• Atlanta Fed 2 - 0 Wall Street Optimists: Q2 GDP Expectations Crash. (graph)

• David Stockman: "We Are Entering The Terminal Phase Of The Global Financial System".

• Investors Are Trapped In A "Twilight Zone", BofAML Warns Of Looming C.R.A.S.H. Risks. (graph)

• S&P 500 Hits Record Above December "Fat Finger" High. (graph)

• Carl Icahn Would Like Tim Cook To Buyback Some More Of His (AAPL) Shares.

• 30Y Treasury Yield Surges Back Above 3.00%, Bunds Flat. (graph)

• Homebuilder Sentiment Slides, Misses For 5th Of Last 6 Months. (graph)

• Shape Of Greek Endgame Emerges: IMF Discussed "Cyprus-Like" Plan After Tsipras Warned Of Looming Default.

• EURUSD & Peripheral Bonds Tumble As Greek Fears Re-Emerge. (graph)

Business Insider:

• The war against ISIS in Iraq just took a dark turn.

• It's time for the US Military to admit ISIS is not losing.

• Goldman Sachs(GS) just slashed its oil forecast for the next 5 years.

• Wall Street is on the verge of saying 'recession'.

Reuters:

• Iran deputy oil min says OPEC unlikely to cut output. The Organisation of the Petroleum Exporting Countries (OPEC) is unlikely to implement a production cut at its next meeting in June, a senior Iranian official said on Monday. Asked if OPEC would cut output at the upcoming June 5 meeting, Iran's Deputy Oil Minister Rokneddin Javadi told Reuters: "I don't think so." 

• Saudi Arabia's March oil exports highest in over 9 years - data. Saudi Arabia's crude exports rose in March to their highest in almost a decade, official data showed on Monday, a sign of unexpectedly strong global demand as the top oil exporter revved up its output to the loftiest rate on record. The OPEC heavyweight shipped 7.898 million barrels per day (bpd) of crude in March, up from 7.350 million bpd in February and 7.474 million bpd in January, figures supplied by Riyadh to the Joint Organisations Data Initiative (JODI) showed.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.09%

Sector Underperformers:

• 1) Coal -3.31% 2) Steel -1.91% 3) Social Media -.91%

Stocks Falling on Unusual Volume:

• ASNA, CUDA, ENDP, EB, GMCR, RRGB, DDS, KITE, TOUR, SPLK, TASR, MLI, CSTM, RCKY, NYLD, INGN, JUNO, EXP, PTR, RYAAY, DV, BAP, AL, WBAI and CRR

Stocks With Unusual Put Option Activity:

• 1) NTAP 2) DISH 3) USB 4) ALTR 5) EWC
  

Stocks With Most Negative News Mentions:

• 1) YELP 2) KSU 3) MUR 4) WB 5) CHK
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.62%

Sector Outperformers:

• 1) Hospitals +1.44% 2) Banks +.98% 3) Biotech +.79%
  

Stocks Rising on Unusual Volume:

• ANN, GIMO, CALM, SGMS, CREE, NHTC and ALTR

Stocks With Unusual Call Option Activity:

• 1) LNG 2) BG 3) HEDJ 4) RPTP 5) RRC
  

Stocks With Most Positive News Mentions:

• 1) GPRO 2) URBN 3) MDT 4) CBI 5) TOL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 20.0% Below 100-day average
• 7 Sectors Rising, 3 Sectors Declining
• 43.3% of Issues Advancing, 53.7% Declining
• 73 New 52-Week Highs, 21 New Lows
• 56.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.6
• Vix 12.92
• Total Put/Call 1.14
• TRIN/Arms .98

Monday Watch

Today's Headlines 
Bloomberg: 

• Greece Remains Defiant as It Seeks Creditor Deal This Week. Greece’s government said it won’t back down on election pledges to end austerity even while seeking to agree on a deal with creditors as soon as this week to unblock financing and avert a default. “We’re striving for a mutually beneficial agreement by Friday,” Nikos Filis, spokesman for the parliamentary group of Prime Minister Alexis Tsipras’s Syriza party, said Sunday in comments broadcast on Mega TV. “Our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures,” he said, adding that “tough negotiations” will take place before a summit meeting of European Union leaders in Riga, Latvia, on May 21-22.
• China Calls On Banks to Support State Projects as Economy Slows. China urged banks to continue funding local government projects under construction and refrain from calling in loans as the country works through an economic downturn. Banks shouldn’t refuse funds to projects approved before the end of 2014 even if borrowing agencies are unable to meet payments, the State Council said Friday in joint announcement with Finance Ministry, central bank and regulator. The council, China’s Cabinet, also urged local governments to use fiscal support as short-term working capital for ongoing projects to prevent or reduce risk. The message raises contradictory signals from a government that’s sought to trim local debt to more manageable levels by recapitalizing banks, overhauling local finances and removing implicit guarantees for corporate borrowing that once helped struggling companies. 
• Iranian Aid Ship Nears Yemen, Raising Risk of Saudi Showdown. An Iranian aid ship is approaching Yemen’s coastline, raising the risk of a showdown with the Saudi-led military coalition blockading Yemeni ports as it battles the country’s Shiite Houthi rebels. The ship carrying food and medicine entered the Gulf of Aden on Sunday, according to Iranian media. Iran’s navy has vowed to protect the vessel, and the government said it won’t allow any country that’s part of Yemen’s war to inspect the cargo. The vessel will arrive at Yemen’s Red Sea port of Hodeidah on May 21, according to a state TV reporter on board.  
• Euro Wreaks Havoc on Carry Trades in Rally Almost No One Foresaw. It was supposed to be so easy. Borrow in euros as the European Central Bank kept interest rates near zero and use the proceeds to invest in the economies where rates are higher, pocketing the difference and generating huge profits. For a while it worked -- that was, until about a month ago when global markets began to go haywire and the euro, instead of falling as most every strategist surveyed by Bloomberg predicted, began to rally. Investors who embraced the carry strategy have seen losses of 3.5 percent since March, according to a UBS Group AG index.
• China Home Prices Fall in 69 Cities on Year. (video)
• China’s Stocks Retreat for Second Day as IPOs Suck Up Liquidity. China’s stocks fell for a second day, led by commodity and financial companies, amid concern a flood of new share sales will lure funds from existing equities. Aluminum Corp. of China Ltd. retreated 4.9 percent after surging 23 percent last week. China Merchants Securities Co. headed for its biggest loss in four months as brokerages slid. The ChiNext index of smaller companies rallied 2.7 percent in Shenzhen. The Shanghai Composite Index dropped 0.6 percent to 4,283.29 at 9:37 a.m., adding to Friday’s 1.6 percent decline.
• Dollar Gains After Loss Streak as China Stocks Fall With Nickel. The dollar climbed against most peers, snapping a four day losing streak. Asian stocks outside Japan slipped with U.S. equity-index futures, and nickel fell. The yen slid 0.4 percent versus the greenback by 11:04 a.m. and New Zealand’s dollar slumped 0.8 percent. The MSCI Asia Pacific Index was little changed with gains in Japan offsetting losses in Hong Kong and China. BHP Billiton Ltd., the world’s biggest miner, tumbled the most in six years before the company’s metals’ spinoff started trading. Standard & Poor’s 500 Index futures fell 0.2 percent. Asian bonds climbed, tracking gains in the U.S. and Europe. Nickel lost 1 percent.
• Hedge Funds Lose Faith in Oil Rally as OPEC Seen Boosting Supply. Speculators are losing faith in the oil rally, judging that OPEC will keep increasing supply from the highest level since 2012. Their net-long position in West Texas Intermediate crude dropped 2.1 percent, as long wagers fell the most in two months and short bets declined to the lowest since August, U.S. Commodity Futures Trading Commission data show.

Wall Street Journal:

• Islamic State Seizes Control of Iraqi City of Ramadi. Takeover is a crushing setback to U.S.-backed efforts to halt the spread of the extremist group. Islamic State seized control of the capital of Iraq’s largest province, killing hundreds of government forces and dealing a crushing setback to U.S.-backed efforts to halt the spread of the extremist group. The fall of the western city of Ramadi, once home to nearly half a million people, represents Islamic State’s biggest military victory this year, gaining it another major Iraqi city among the territory it controls in Iraq...
• Human Stock Pickers Gain Against Indexes. So far this year, actively managed U.S. stock mutual funds have outperformed funds trying to clone the market’s overall performance.'
• Oil Investors Take a Closer Look at Production. A spotlight has landed on a previously overlooked metric as oil traders drill deeper for clues on price movement. 
• Greece’s Debt Battle Exposes Deeper Eurozone Flaws — Horizons. Blame lies with the monetary union’s flawed political structure, where a highly integrated financial system coexists with fragmented and unpredictable governance. That structure means it’s dangerous to assume that bigger eurozone economies such as Spain or Italy won’t also see a revival of investor concerns about their own debt levels when the European Central Bank ends its monetary support for the region’s bond markets.
• Much More Is Needed to Stop Iran From Getting the Bomb. Obama will reluctantly sign a bill giving Congress more say over a final deal. Here’s what we should be looking for.

CNBC:

• Tom Brady isn't the only one that should fear deflation—the economy should too. The specter of deflation is haunting more than New England Patriots quarterback Tom Brady. The whole U.S. economy is now grappling with its effects. As growth splutters, the world's largest economy is facing the real possibility of a spiral in prices.

Zero Hedge:

• How Japan Became The Benchmark For America's Fraudulent "Jobs Recovery". (graph)
• Saudi Arabia To Execute & Display Beheaded Body Of Political Activist In Public "Crucifixion".
• One Gauge Of Investor Sentiment Just Hit A 6-Year High. (graph)
• What Goldman(GS) Is Telling Its Clients: Sell In May And Don't Come Back For One Year. (graph)
• Chinese Hacker Spies Take Over Penn State Engineering Department, School Says.
• Central Planning Goes Global As UN Unveils Major Sustainable Development Agenda "For The Good Of The Planet".
• This Is What Keynesian "Success" Looks Like: Soaring Part-Time Jobs, Record Low Real Wages. (graph)
• Is This The Chart Of A Healthy Stock Market? (graph)
• Final Pillar Of Bull Market Showing Cracks? (graph)
• Presenting The $77 Billion P2P Bubble. (graph)
• How China Covered The World In "Liquidity Swap Lines".

Business Insider:

• How Goldman Sachs(GS) makes money on its top traders — after they quit.
• Pope calls Palestinian leader Abbas 'angel of peace'.
• Greece must choose between 2 catastrophes.
• Britain could leave the EU as early as next year.
• Don't be fooled: ISIS isn't losing.
• ISIS seizes key Iraqi army base, prime minister to send in Shi'ite fighters.
• Lapdogs, Redux: How The Press Tried To Discredit Seymour Hersh’s Last Bombshell Report.

New York Times:

• Hedge Funds Close Doors, Facing Low Returns and Investor Scrutiny. For decades, nearly everything that the billionaire Julian Robertson touched turned to gold. Mr. Robertson, founder of the hedge fund Tiger Management, seeded a network of hugely successful “Tiger Cubs” — companies that in turn seeded more talent. It became the closest thing the hedge fund industry had to a dynasty. Since the start of this year, however, the managers of three firms spun out of that gilded empire have called it quits after volatile performances and sometimes steep losses. They will return money to investors and focus on managing their own wealth.

AFR:

• ASIC Warns Property Prices May Be Near Bubble Territory. ASIC Chairman Greg Medcraft says he's worried about Sydney and Melbourne property markets, in interview. "History shows that people don't know when they are in a bubble until it's over," Medcraft says.

Weekend Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 104.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 59.5 +.25 basis point.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JASO)/.07
• (A)/.39
• (URBN)/.30
• (TTWO)/.28
• (LF)/-.17

Economic Releases
10:00 am EST

• The NAHB Housing Market Index for May is estimated to rise to 57.0 versus 56.0 in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, RBA rate decision, UBS Oil & Gas Conference, UBS Healthcare Conference, JPMorgan Tech/Media/Telecom Conference and the (BAX) investor conference 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 50% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on global growth fears, Fed rate hike worries, earnings concerns, rising Eurozone/Emerging Markets debt angst, technical selling and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.