Today's Headlines

Bloomberg:     

• Tsipras Hardens Greek Stance After Collapse of Talks. (video) Greece and its creditors swapped recriminations over the breakdown of bailout talks, each side hardening its position after attempts to bridge their differences collapsed. With markets dropping, Prime Minister Alexis Tsipras portrayed Greece as the torchbearer of democracy, standing firm against creditors’ demand for pension cuts. European Commission spokeswoman Annika Breidthardt said that account of the creditors’ position was a “gross misrepresentation of facts.” “One can only read political motives in the creditors’ insistence on new cuts to pensions after five years of plundering them under the memorandum,” Tsipras said in a statement to Efimerida Ton Syntakton newspaper on Monday. “We will wait patiently for the institutions to move toward realism.”
• Europe Raises Heat on Greece to Make Further Concessions. (video) European policy makers raised pressure on Greece to return to the negotiating table and make further concessions to unlock aid, as each side laid out its demands to rally support for its respective position. Stocks and the euro fell on Monday as the extent of the policy divide that remains to be resolved was laid bare after weekend talks billed by European officials as a last attempt to end the standoff broke up early.o
• Euro Risk Indicators Signal Danger as Greece Bailout Talks Fail. (graph) A gauge of how much banks expect to pay to borrow euros, known as the FRA/OIS spread, jumped to a two-year high. A measure of financial-debt risk that tracks credit-default swaps rose to the highest level since April 2014, while Greek bank bonds reached an almost two-month low. “That’s a sign of risk aversion,” said Steven Major, the global head of fixed-income research at HSBC Holdings Plc in London. “Our view remains that a compromise will be reached even though a few key dates have passed. That said, there’ll be a lot of volatility before we get there.”
• China Margin Loan Cap Leaves Leeway for Biggest Lender GF. China’s most aggressive margin lender, brokerage GF Securities Co., may have room to more than double its financing of customers’ share purchases under the securities regulator’s proposed industry cap. A plan announced Friday to limit lending to four times net capital would set a 234 billion yuan ($38 billion) ceiling for Guangzhou-based GF, based on its 58.5 billion yuan of net capital as of April 10. That compares with 103 billion yuan of lending, the most of any Chinese brokerage, as of March 31. While Chinese officials are trying to limit the risk of a stock boom turning to bust, the planned rules leave room for margin finance to keep expanding after the Shanghai Composite Index already gained more than 140 percent in a year. Brokerages are boosting their lending capacity by selling billions of dollars of stock, with Guotai Junan Securities Co. set to price a mainland share sale this week. Brokers’ rising levels of capital may be able to support as much as 4.5 trillion yuan of finance for margin trading and short selling by year end, China International Capital Corp. analysts Du Lijuan and Mao Junhua said in a note. That would be more than double the 2.2 trillion yuan of funding outstanding as of last week. Rules announced by the China Securities Regulatory Commission on Friday would also let brokers roll over clients’ margin finance contracts beyond six months. 
• Bearish Euro Bets at 2015 Low as Greece Talks Intensify. (video)
• Emerging Stocks Drop as Greece Remains at Impasse With Creditors. Emerging-market stocks fell to the lowest in 11 weeks as Chinese equities tumbled and a standoff in Greece’s talks with creditors sapped demand for riskier assets. Chinese stocks slid from a 2008 high amid concern new share sales may lure funds from existing equities. The lira dropped with Turkish equities as opposition parties balked at working with President Recep Tayyip Erdogan on forming a government. The ruble rose as Russia’s central bank said inflation risks will hinder further monetary easing after cutting its key interest rate for the fourth time this year. Saudi Arabian stocks slid as the market opened to direct foreign investment. The MSCI Emerging Markets Index declined 0.9 percent to 970.81 at 12:45 p.m. in New York.
• Greek Stocks Lead Europe Markets Lower as Debt Talks Break Down. (video) Greece dragged European stocks to their lowest level on almost four months after weekend debt talks between the Mediterranean nation and its creditors broke down. The Stoxx Europe 600 Index slipped 1.6 percent to 383.02 at the close of trading. Greece’s ASE Index dropped 4.7 percent, with Alpha Bank AE and Piraeus Bank SA tumbling at least 9 percent. Italy’s FTSE MIB Index posted the second-worst performance among western-European markets, with a 2.4 percent decline.
• Copper Declines to Three-Month Low on Chinese Demand Concern.

ZeroHedge: 

• Why Greek Pensions Have Become The Biggest Hurdle In The Bailout Negotiations.
• This Is What A Volcker Rule Loophole Looks Like. (video)
• ECB Government Debt Monetization Slows Most Since First Week Of May. (graph)
• Our Phantom Economy. (graph)
• Homebuilder Optimism Soars To 10 Year Highs Amid Rising Rates, Slumping Consumer Sentiment. (graph)
• US Industrial Production Weakest Since January 2010, Flashes Recessionary Red Flag. (graph)
• Grexit Contagion Uncontained: Peripheral Bond Risk Surges As Greek Banks Collapse. (graph)

Business Insider:  

• 67% of economists think the Fed's first rate hike happens in September.
• Cigna(CI) shares explode higher after a report Anthem wants to buy it for $175 per share.
• 'A crash is coming, and it may be terrific'.

ETF Trends:

• Investors Are Ditching Emerging Market Stock ETFs. Investors are dumping emerging market stock exchange traded funds, with global investors redeeming the most from developing stock markets since the financial crisis. For instance, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) experienced $948.2 million in outflows so far this month. According to EPFR Global data, global investors pulled $9.3 billion from stocks in developing countries for the week ended Wednesday, the most since 2008, reports Anjani Trivedi for the Wall Street Journal.

AFP: 

• Spain Foreign Minister Sees 'Real Risk' of Greek Euro Exit. Spain's Foreign Minister Jose Manuel Garcia says he sees "real risk" of Greece leaving the euro zone.

Telegraph:

• Syriza Left demands 'Icelandic' default as Greek defiance stiffens. Greek premier Alexis Tsipras threatens Europe's creditors with a "big no" unless they yield on debt servitude. 
• Greek default is 'all but a certainty' as EU prepares for 'state of emergency'. Eleventh hour bail-out talks last just 45 minutes as Prime Minister Alexis Tsipras is accused of "swindling the world" with his demands.

Bear Radar

Style Underperformer:

• Large-Cap Value -.83%

Sector Underperformers:

• 1) Steel -2.22% 2) Social Media -1.25% 3) Computer Hardware -1.11%

Stocks Falling on Unusual Volume:

• ONDK, CMT, SXC, DSKY, DANG, ITC, SNY, AGIO, HTHT, HUM, BLUE, SYA, MN, MTSI, UNTD, MU, SHLX, ITRI, SGMO, SHLD, PHG, AEGN, LNCE, DDC, ATVI, SAGE and AGIO

Stocks With Unusual Put Option Activity:

• 1) CNX 2) CMI 3) JNPR 4) ORCL 5) EWY
  

Stocks With Most Negative News Mentions:

• 1) SNDK 2) MU 3) SCSS 4) LL 5) STZ
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -.26%

Sector Outperformers:

• 1) HMOs +4.3% 2) Gold & Silver +1.23% 3) Homebuilders +1.04%
  

Stocks Rising on Unusual Volume:

• TRAK, RYL, EYES, SIGM, CSLT, CYBR, INVN, FSLR and NMBL

Stocks With Unusual Call Option Activity:

• 1) EVEP 2) CBS 3) BLUE 4) ORCL 5) RRC
  

Stocks With Most Positive News Mentions:

• 1) TGP 2) JBL 3) CVS 4) TGT 5) PBR
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 7.4% Below 100-day average
• 0 Sectors Rising, 10 Sectors Declining
• 32.5% of Issues Advancing, 64.5% Declining
• 27 New 52-Week Highs, 102 New Lows
• 49.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.9
• Vix 15.2
• Total Put/Call .85
• TRIN/Arms 1.40

Monday Watch

Today's Headlines 

Bloomberg: 

• Greece Enters Fateful Week After Brussels Talks End Fruitlessly. Greece enters what could be a defining week after last-ditch negotiations between representatives of the Greek government and its creditors collapsed on Sunday. The euro dropped as the European Commission said the talks in Brussels had broken up after just 45 minutes with the divide between what creditors asked of Greece and what its government was prepared to do unbridged. The focus now shifts to a June 18 meeting in Luxembourg of euro-area finance ministers, known collectively as the Eurogroup, that may become a make-or-break session deciding Greece’s ability to avert default and its continued membership in the 19-nation euro area. “While some progress was made, the talks did not succeed as there remains a significant gap,” the commission said in a text message. “On this basis, further discussion will now have to take place in the Eurogroup.”

• China's $358 Billion in Margin Loans Points to Next Bear Market. Stock forecasters in search of an early-warning system for the next Chinese bear market are zeroing in on the country’s record $358 billion pile of margin debt. When that three-year build-up of leveraged positions starts to unwind, regulators will struggle to limit the selloff, according to Bocom International Holdings Co. and Rabobank International. Almost all of this year’s biggest declines in the Shanghai Composite Index, including a 6.5 percent slump on May 28, were sparked by investor concerns over margin-trading restrictions. The securities regulator announced plans Friday to limit the amount brokerages can lend for stock trading.

• Fired Miner’s 50% Pay Cut Is Just Start of Australian Wage Pain. Australian wages fell in the first quarter for the first time on record as the wall of Chinese money scooping up the nation’s commodities receded. The implications are profound: stagnant pay limits household spending that accounts for about 55 percent of the economy; it impedes government efforts to repair the budget; and will force the central bank to maintain low interest rates for an extended period or cut even further. 

• Alibaba(BABA) Plans to Create China’s Version of Netflix(NFLX), HBO.

• Euro Dips Lower as Greece Debt Talks Collapse. (video) 

• China Stocks Fall From 7-Year High on Margin Debt Concern. China’s stocks fell, with the benchmark index dropping from its highest level in seven years, amid concern regulators will clamp down on margin debt and a flood of share sales may lure funds away from existing equities. Citic Securities Co. and Haitong Securities Co. slid at least 1.4 percent after the securities regulator said it plans to impose a cap on brokerages’ margin debt. The ChiNext index of smaller companies tumbled 3.6 percent as 25 upcoming initial public offerings may lock up the largest amount of funds since new share sales resumed in January 2014.

• Asian Stocks Fall as Greece Negotiations Collapse With No Deal. Asian stocks dropped for the first time in four days after the latest round of negotiations between Greece and its creditors fell apart. The MSCI Asia Pacific Index declined 0.4 percent to 147.63 as of 9:01 a.m. in Tokyo. Talks in Brussels collapsed after just 45 minutes on Sunday.

• Treasuries Rise as Greek Default Risk Boosts Demand for Safety. Treasuries rose, pushing benchmark yields toward a one-week low, as the threat of a Greek default raised demand for the relative safety of U.S. government securities. Notes and bonds jumped after the European Commission said talks in Brussels between Greece and its creditors broke up after 45 minutes on Sunday. Lawmakers in Germany, the biggest national contributor to Greek aid, warned that the indebted country is at risk of dropping out of the euro currency bloc.

Wall Street Journal: 

• Home Builders Standard Pacific(SPF) and Ryland(RYL) to Merge. Standard Pacific shareholders would own 59% of the combined company, while Ryland’s hold 41%.

• Obama Fights to Save Trade Bill. Republicans dial up pressure on Democrats over faltering deal.

• Obama’s Favors for the Mullahs. The U.S. makes more concessions to Iran in a prelude to a nuclear deal. The U.S. makes more concessions to Iran in a prelude to a nuclear deal. The Obama Administration has long insisted that any nuclear deal will have no effect on U.S. determination to stop Iran’s regional ambitions or support for terrorism. As the political desire for a deal grows more urgent, however, this claim is proving to be hollow.

CNBC: 

• Greek default fears rise as '11th-hour' talks collapse. Talks aimed at reaching an 11th-hour deal between Greek ministers and their bailout creditors collapsed on Sunday evening after a new economic reform proposal submitted by Athens was deemed inadequate to continue negotiations. The breakdown is the clearest sign yet that differences between the two sides may be too wide to breach, increasing the possibility that Athens will not secure the €7.2bn in bailout aid it needs to avoid defaulting on its debts - including a €1.5bn loan repayment due to the International Monetary Fund in just two weeks.

• Huge growth in China’s money funds poses risk. China's asset management industry has had explosive growth in the last two years following the arrival of online money market funds, which have transformed the way millions of Chinese invest their savings. The booming popularity of money funds, however, has led several investment experts to raise serious concerns about risks developing in the industry as a result.

Zero Hedge:

• "Last Chance" Greek Bailout Talks End Without Deal.

• UK Said To Withdraw Spies After Russia, China Hack Snowden Encryption, Sunday Times Reports. (graph)

• For Oil Price, Bad Is The New Good. (graph)

• As "Options Run Out", This Is What Greek Capital Controls Would Look Like.

• The "Global Macro Investor" - An Interview With Raoul Pal.

• The Death Of Capex In 8 Charts. (graph)

• The First Canary To Fall In Unicorn Valley Won't Be The Last.

Business Insider:

• Executives inside some Chinese companies are skimming the cream off the frothy stock market.

• The CEO of a $1 billion 'unicorn' startup admits we're in a bubble.

ARD: 

• Germany's Gabriel Rules Out Saving Greece 'at Any Price'. Germany won't let itself be blackmailed, Vice Chancellor and Economy Minister Sigmar Gabriel says. Some officials in Greek govt "think that the fear of a Greek exit is so great that we'll do anything they want". It shouldn't be the case "that we always say this its the last set of negotiations and then it calamitously carries on," he said.

Night Trading

• Asian indices are -1.25% to -.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 112.0 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 62.5 +1.5 basis points.

• S&P 500 futures -.48%.

• NASDAQ 100 futures -.51%.

Morning Preview Links

Earnings of Note

Company/Estimate 

• None of note

Economic Releases

8:30 am EST

• Empire Manufacturing for June is estimated to rise to 6.0 versus 3.09 in May.
  

9:15 am EST

• Industrial Production for May is estimated to rise +.2% versus a -.3% decline in April. 

• Capacity Utilization for May is estimated to rise to 78.3% versus 78.2% in April.

• Manufacturing Production for May is estimated to rise +.3% versus unch. in April.

10:00 am EST

• The NAHB Housing Market Index for June is estimated to rise to 56.0 versus 54.0 in May.

4:00 pm EST

• Net Long-Term TIC Flows for April.
  

Upcoming Splits

• (PPG) 2-for-1

• (IDXX) 2-for-1

Other Potential Market Movers

• The German Trade Balance report, BIO Intl Convention and the (DNB) investor day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% 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 Greek debt deal concerns, Fed rate hike worries, global growth fears, European/Emerging Markets/US High-Yield debt angst, technical selling and earnings concerns. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.