Stocks Higher into Final Hour on China Bounce, Greece Debt Deal Hopes, Short-Covering, Energy/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.0 -3.36%

• Euro/Yen Carry Return Index 139.60 -.04%

• Emerging Markets Currency Volatility(VXY) 9.18 -1.92%

• S&P 500 Implied Correlation 61.51 -.55%

• ISE Sentiment Index 88.0 +20.5%

• Total Put/Call 1.15 -20.14%

• NYSE Arms .66 -79.20% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.50 -1.0%

• America Energy Sector High-Yield CDS Index 1,268.0 -.76%

• European Financial Sector CDS Index 91.70 -6.99%

• Western Europe Sovereign Debt CDS Index 30.46 -7.35%

• Asia Pacific Sovereign Debt CDS Index 61.21 -5.02%

• Emerging Market CDS Index 310.72 -2.90%
  

• iBoxx Offshore RMB China Corporates High Yield Index 119.13 -.51%

• 2-Year Swap Spread 25.25 -.25 basis point

• TED Spread 27.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -21.75 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 172.0 +6.0 basis points

• China Import Iron Ore Spot $48.99/Metric Tonne +9.87%

• Citi US Economic Surprise Index -22.9 -2.2 points

• Citi Eurozone Economic Surprise Index -6.1 +.3 point

• Citi Emerging Markets Economic Surprise Index -17.50 +.5 point

• 10-Year TIPS Spread 1.86 +1.0 basis point

• # of Months to 1st Fed Rate Hike(Morgan Stanley) 7.87 +.38

Overseas Futures:

• Nikkei 225 Futures: Indicating -110 open in Japan 

• China A50 Futures: Indicating -474 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

• Slightly Lower: On losses in my index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:     

• How China's Market Meltdown Threatens Top Banker's Reform Agenda. Zhou finds himself caught in a stock market rescue that smacks of meddling, not free-market financial reform. A nearly four-week rout that wiped out $3.5 trillion in share market value has forced the central bank to extend funds to a broker lending facility and threatens to undermine support for his market liberalization agenda. “For better or worse this will strengthen the forces who want to slow governor Zhou’s march to a more open capital account,” said David Loevinger, former China specialist for the U.S. Department of the Treasury and now an analyst at fund manager TCW in Los Angeles. “Always worried about losing control, this could give Chinese leaders cold feet about moving to a more capital markets-centered financial sector.” 

• Chinese Markets a Classic Bubble Feeding Itself: Lawson. (video) 

• China Still in Bubble Territory Despite Drop: Foley. (video)

• Irrational Exuberance Triggers Chaos as China Watchdog Sidelined. It wasn’t exactly the same as U.S.-style “irrational exuberance,” but the run-up to China’s great crash of 2015 is leading to similar questions as to why the regulator didn’t do more. China Securities Regulatory Commission officials had tweaked rules for brokerages’ lending for stock purchases. And, similar to former U.S. Federal Reserve Chairman Alan Greenspan, CSRC Chairman Xiao Gang had warned investors against following the stampede into the market “blindly, like sheep.” It wasn’t enough. “Regulators could have been more aggressive in managing margin trading and collateral rules,” said Andrew Wood, a Singapore-based China analyst for BMI Research, a unit of Fitch Ratings. “It was already clear that the market was quite frothy by the beginning of this year.” Instead, the CSRC was left as a bystander as state-run media mostly talked up a market that the Chinese government is determined to use as a tool for wealth creation -- even if that means periods of excess followed by sharp corrections. “When the government policy has been to use a stock-market bubble to boost a household wealth effect, the CSRC could only do so much to regulate the stock market,” said Chen Zhiwu, a finance professor at Yale University, and a former adviser to China’s cabinet.

• This Doomsday Deadline for Greece Might Actually Count. (video) European leaders trudging wearily back to Brussels for another crunch summit on Greece this weekend can take solace in the fact it might just possibly be the last. Maybe. 

• Schaeuble Says Leeway for Greek Debt Reprofiling Is Very Small. German Finance Minister Wolfgang Schaeuble said he’s less optimistic than his French counterpart, Michel Sapin, about the role reprofiling can play in restoring the sustainability of Greece’s debt. Speaking in Frankfurt at a conference organized by the Bundesbank, Germany’s central bank, Schaeuble said debt forgiveness among euro-region countries is banned by the European Union’s treaties. The reprofiling of Greece’s debt in 2012 went beyond what the International Monetary Fund was willing to accept then, he said.

• Tsipras Stuck Between a German Rock and a Greek Left Hard Place. (video) Greece’s Prime Minister Alexis Tsipras is faced with the ultimate dilemma: accept German-advocated austerity measures opposed by hardliners in his own party or take his country out of the euro. While Sunday’s referendum delivered a strong rebuke from Greek voters to the austerity demands, it also put pressure on Tsipras to strike a deal after many people cast their vote as a desire to stay in the euro on better terms. For some hardline members of his Coalition of the Radical Left or Syriza party, however, the vote was a firm sign of rejection of euro membership at all costs. “Tsipras will probably face significant party unrest from the left bloc, which is already calling for him to insist on the path indicated in their view by the ‘no’ vote in the referendum,” Nomura analysts including Lefteris Farmakis and Nick Matthews wrote in a note to clients Wednesday.

• Italian Bonds Reveal Speculation on Greek Deal Creditors Doubt. Take a look at government bonds and you’d be hard pressed to detect the pessimism Europe’s leaders are expressing about the chances of a deal that can save Greece’s place in the euro zone. Investors are cutting the yield premium they demand to hold the bonds of Europe’s more-indebted nations instead of benchmark German securities amid speculation a deal can be reached. Greece must deliver a detailed economic package to creditors on Thursday to win a new funding deal. Chancellor Angela Merkel is willing to let Greece go if Germany doesn’t consider its plans credible, said two officials familiar with her strategy. “Markets appear more optimistic than most of the Greek creditors themselves,” Benjamin Schroeder, a Frankfurt-based interest-rate strategist at Commerzbank AG, wrote in a note to clients. The yield spread between 10-year Italian and German bonds tightened 11 basis points, or 0.11 percentage point, to 144 basis points as of 4:32 p.m. London time. The difference widened to as much as 199 basis points on June 29, the first trading day after Greece called a referendum on austerity. In 2011, the spread reached 575 basis points. The spread between Spanish 10-year debt and German bunds narrowed 12 basis points to 143 basis points on Thursday.

• IMF Cuts World Growth Outlook. (video) The IMF cut its forecast for global growth this year, citing a weaker first quarter in the U.S. and warning that financial-market turbulence from China to Greece clouds the outlook. The world economy will grow 3.3 percent in 2015, less than the 3.5 percent pace projected in April and slower than the 3.4 percent expansion last year, the International Monetary Fund said in revisions to its World Economic Outlook released Thursday in Washington. The fund left its forecast for growth next year unchanged at 3.8 percent.

• Sweet Spot in Emerging Currencies Eludes Morgan Stanley in Rout. From the crisis in Greece to the biggest selloff in Chinese stocks in two decades, emerging-market currencies can’t catch a break. An index of developing-nation exchange rates has fallen more than 5 percent since mid-May to within 0.9 percent of a record set in March. The losses look set to continue, with strategists surveyed by Bloomberg predicting that all but six of the 24 leading emerging-market currencies will weaken through the middle of next year. While the declines have helped cut the trade deficits of countries such as Turkey and South Africa, they’re stoking inflation from Brazil to Russia, which could weigh on growth. That’s redoubling the pressure on currencies already undermined by the prospect of higher interest rates in the U.S., which is luring away investment, and plunging prices for oil and metals. “Emerging-market currencies are under heavy selling pressure again these days, facing a perfect storm of slowing growth in China, the Greece turmoil, the anticipation of Fed rate-hike fears and commodities dropping,” said Bernd Berg, a strategist at Societe Generale SA in London. “Growth momentum in emerging markets is just continuing to collapse.”

• Market Turbulence Worries BRICS as Volatility Stalks Oil, China. The BRICS group of developing nations, meeting in Russia to bolster ties, said they’re disturbed by the turbulence that’s roiled global markets from energy to stocks. “We’re concerned about instability in the markets, the high level of volatility in the prices of energy and raw materials, and the accumulation of sovereign debt of a number of major countries,” Russian President Vladimir Putin said in the city of Ufa, 800 miles east of Moscow. “All these structural imbalances directly affect growth.” The summit of leaders from Brazil, Russia, India, China and South Africa also discussed creating their own credit-ratings company and nurture direct investments between each other. Finance officials from the five nations earlier finalized a $100 billion reserves pool to ease liquidity issues during market stress and are forming a development bank.  

• European Stocks Advance as Greece Concern Fades, China Rebounds. European stocks rose as investors shrugged off concern about Greece’s debt crisis and Chinese shares rebounded. The Stoxx Europe 600 Index added 2.2 percent to 381.06 at the close of trading, after flirting with a correction during the past two days.

• Iron Ore Ending Drop No Cause for Joy as More Losses Seen. (video) Iron ore snapped a 10-day slump that culminated in the biggest one-day drop in at least six years as a selloff in Chinese equities paused and most industrial metals prices climbed, easing selling pressure. Ore with 62 percent content delivered to Qingdao rose 9.9 percent, the most since at least 2009, to $48.99 a dry metric ton on Thursday. It plunged 10 percent to $44.59 a day earlier, the lowest in data going back to May 2009, according to data from Metal Bulletin Ltd. Compared with annual benchmarks that iron ore was traded through until the past several years, that would be the lowest since 2005, according to Clarkson Plc. 

• The Cost of Insuring Against a Commodities Crash Is Rocketing. More fallout from Chinese stocks. China's stock slump has played havoc with the commodities market as traders fret that the economy driving global demand for raw materials is about to tank. The Bloomberg Commodity Index, which includes 22 commodities, everything from live cattle to natural gas, traded near a 13-year low this week as industrial metals and oil tumbled. Nickel plunged 9 percent in a single day. Here's what prices have done over the past five days:

• Not Even a Greek Exit Will Stop the Fed From Raising Rates. Most economists surveyed by Bloomberg see no Greek-related delay in the Fed's plans.  The Greek crisis is no big deal as far as the U.S. economy and the Federal Reserve are concerned. That's the conclusion of a majority of economists polled by Bloomberg this month. They said the crisis won’t hurt the U.S. economy nor deter the Fed from raising interest rates later this year. 

CNBC: 

• These 3 triggers could cause 50% crash: Economist. (video)

Dow Jones:

• Ford(F) to Move Small Car Production Outside U.S. Ford now builds Focus, C-MAX, EVs at plant in Wayne, Michigan.

ZeroHedge: 

• Greek "Compromise" Proposal Leaked, And There May Be A Problem. The problem emerges upon a closer read of the proposal, which is clearly not nearly "capitulatory" enough.

• Nigel Farage Destroys EU Group-Think: "There's A New Berlin Wall... And It's Called The Euro". (video)

• Why China Has No Choice But To Arrest The Sellers. (graph)

• NYSE Issues Official Explanation Why Its Was Offline For Nearly 4 Hours, Blames Software Upgrade.

• Schaeuble Proposes A Trade: US Takes Greece, Germany Takes Puerto Rico.

• Why Janet Is Lost: Her Favorite Charts Show 'JOLTing' Disconnects. (graph)

• Five Years Of Glorious IMF "Hockey Stick" Comedy. (graph)

• "Greece Is No One's Hostage": Leftist Energy Minister Lays Out €2 Billion Russian Gas Project.

• Fed's "Modest Proposal" To Boost US Growth: Issue More Debt.

• There's A Spike In New Lows Around The World's Stock Markets. (graph)

• Draghi Voices "Unprecedented Doubt" Greek Solution Will Be Found: Complete Greek Overnight Summary.

• Initial Jobless Claims Spike To Highest Since Feb, Near Crucial 300k Level. (graph)

• China's "Sweet & Sour" Plunge Protection Lessons From 1987. (graph)

Business Insider:

• 'China is in the midst of a triple bubble'.

• This league table of Greek debt explains why Merkel will show Greece no mercy.

• The Iranian nuclear talks are heading into sudden-death overtime — and the US 'can't wait forever'.

• Oil prices have fallen again, and a 'negative feedback loop' will push them even lower.

Reuters:

• China stems stocks rout, but market faces lengthy hangover. (video) China's malfunctioning stock markets remained semi-frozen, with the shares of around 1,500 listed companies worth around $2.8 trillion - roughly half the market - suspended, and many of those still trading propped up by state-directed buying. "The authorities are capable of slowing the selling and extending market support," said Mark Konyn, chief executive officer at Cathay Conning Asset Management Ltd in Hong Kong. "However, this high level of intervention comes at a significant cost. Such intervention locks up ownership of shares, reduces liquidity and creates an overhang that could plague the market for years."

Telegraph: 

• Greece news live: Germans in rift with the rest of Europe over debt relief as Greek reforms ready 'within hours'. Markets rise on hopes of a deal as Brussels concedes to Greek debt relief after White House pressures creditor to allow for debt sustainability.

• The price the Greeks are willing to pay to stay in the euro. Alexis Tsipras has stopped talking of "red lines", but could now be forced to sign up to a much harsher deal in return for debt relief. 

• Greece and Spain face 'make or break' moment as workers stare into jobs abyss.

Bear Radar

Style Underperformer:

• Mid-Cap Value +.22%

Sector Underperformers:

• 1) Utilities -1.44% 2) Computer Hardware -.75% 3) Semis -.66%

Stocks Falling on Unusual Volume:

• QLGC, COTY, MLNX, MKTO, EROS, WDFC, BRCD, SCLN, ALTR, SMCI, LB, NWE, IDTI, TXN, DDD, AVGO, VIIX, NUS, WRB, AWK, SWKS, GEOS, SIG and KSS

Stocks With Unusual Put Option Activity:

• 1) ALTR 2) SWFT 3) FFIV 4) EWJ 5) EWG
  

Stocks With Most Negative News Mentions:

• 1) SHAK 2) GM 3) REGN 4) XOM 5) QLGC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.98%

Sector Outperformers:

• 1) Alt Energy +2.47% 2) Airlines +1.81% 3) Coal +1.52%
  

Stocks Rising on Unusual Volume:

• DVAX, WB, SOHU, NOAH, SINA, KATE, WBA, CMCM, WBAI, QIHU, NHTC, VIMC and NVAX

Stocks With Unusual Call Option Activity:

• 1) CONN 2) NLY 3) PEP 4) NRG 5) MDY
  

Stocks With Most Positive News Mentions:

• 1) MBLY 2) PNRA 3) GIS 4) BK 5) WBA
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 15.5% Above 100-day average
• 9 Sectors Rising, 1 Sector Declining
• 77.2% of Issues Advancing, 20.6% Declining
• 20 New 52-Week Highs, 39 New Lows
• 38.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.7
• Vix 18.13
• Total Put/Call 1.18
• TRIN/Arms .50

Thursday Watch

Evening Headlines 

Bloomberg:  

• Who Blew Up China’s Stock Bubble? Beijing urged people to buy stocks. Now it’s begging them to stop selling. In China, the invisible hand of the market sometimes needs help from the iron fist of the state. That’s certainly true after a meltdown vaporized $3.5 trillion in the value of shares traded on the Shanghai and Shenzhen exchanges. President Xi Jinping’s government isn’t being subtle in its campaign to reflate the bubble it had a big role in creating. The government has suspended initial public offerings and eased rules on margin loans, even allowing investors to use their homes as collateral to borrow money to buy stocks. 

• China Lets Banks Roll Over Loans Backed by Share Pledges. China’s banking regulator said it will allow lenders to roll over loans backed by shares when they mature and adjust collateral requirements, adding to government efforts to contain the effects of a stock market rout. The China Banking Regulatory Commission also encouraged banks to support companies’ share buybacks by offering them collateralized loans, in a statement on Thursday.

• 50% of All Chinese Listings Suspended. (video)

• China's Market Meddling Makes Yuan Look Like a Poor Reserve Currency. China’s escalating intervention in its collapsing stock market -- after months of quiescence while equities surged -- is tarnishing policy makers’ efforts to establish the yuan as an official reserve currency. An outflow of capital from China earlier this year already exposed the dangers to officials of a full dismantling of cross-border capital controls. The appetite to let domestic investors put more funds overseas won’t be helped by the 34 percent plunge in the Shanghai Composite Index since June 12. Yet greater openness and fewer restrictions on use of the yuan are what’s needed for the currency to qualify to join the dollar, euro, pound and yen in the International Monetary Fund’s reserve-currency basket, known as the SDR.

• China’s Stock Sale Ban Draws Scorns From Templeton, Wells Fargo. Templeton Emerging Markets Group calls it an act of “desperation.” UBS Wealth Management labels it “extreme.” And Wells Fargo Funds Management says it just “postpones the inevitable.” China’s decision to ban major stockholders from selling stakes in listed companies has drawn skepticism from foreign investors. The money managers, with combined assets of almost $4 trillion, say the latest step to stem the country’s equity rout is just another measure to meddle in the market and won’t be enough to restore investors’ confidence. “It suggests desperation,” Mark Mobius, chairman of Templeton Emerging Markets Group, said by phone. “It actually creates more fear because it shows that they’ve lost control.” 

• Greeks Under the Gun to Produce a Reform Plan to Keep Euro. Greece is rushing to pull together a detailed economic package to convince European leaders that it can keep the euro. The government extended capital controls through Monday, and Prime Minister Alexis Tsipras has until midnight Thursday to present his European colleagues with a plan that includes spending cuts, in exchange for a new European bailout. The continent’s most indebted country has never been closer to leaving the currency after more than six European leaders made clear this is Greece’s last chance. Failure to get a deal could result in the European Central Bank cutting funds to Greek banks, forcing the country to issue IOUs or some other form of exchange to prevent economic collapse.

• China Headwinds Collide With Greece to Stymie Emerging Borrowers. Turbulence in global markets is pushing developing-nation debt sales into a freeze. Brazil is delaying its dollar offering to the end of the quarter, a person familiar with the strategy said on Tuesday. Kazakhstan and the Iraqi region of Kurdistan have yet to tap markets after completing investor meetings last month, while the number of issuers forced to postpone offerings will only grow, according to Sergey Dergachev at Union Investment Privatfonds GmbH in Frankfurt. Debt sales have dried up since Gabon’s $500 million offering a month ago as a rout in Chinese equities and the deadlock over a bailout for Greece takes the country to the brink of exiting the euro.  

• China Junk Bond Premiums Gap Most in Two Months Amid Stock Rout. The extra yield investors demand to hold junk debt in China widened the most in two months as the government’s failure to avert a stock slump damped demand for risky assets. The gap between five-year top-rated and AA- rated corporate bond yields increased seven basis points Wednesday to 142.25, matching the steepest climb since May 15, ChinaBond data show. Notes rated AA- or below are considered junk in China’s onshore market.

• China ETF Posts Record Drop Amid More Efforts to Arrest Rout. The early market reaction to China’s latest efforts to stem the nation’s $3.6 trillion stock selloff is in. The largest U.S.-listed exchange-traded fund tracking yuan-denominated equities plunged more than 11 percent Wednesday, the most since it started trading in 2013, after Chinese regulators banned major stockholders from selling stakes in listed companies. The iShares China Large-Cap ETF that tracks the nation’s companies trading in Hong Kong tumbled the most in six years. “A lot of these measures are a little bit desperate,” Jorge Mariscal, chief investment officer for emerging markets at UBS Wealth Management in New York, which oversees $1 trillion in invested assets, said by phone Wednesday. “Some of the interventions have created more volatility and more nervousness than they intended to.”

• Asian Stocks Swing With China as Hong Kong Rebounds, Japan Slips. Asian stocks fluctuated, with Chinese equities swinging between gains and losses as the government tries to stem the rout. Shares in Hong Kong rebounded while Japan’s Topix index slid. Citic Securities Co., China’s biggest brokerage, jumped 13 percent in Hong Kong, heading for its first gain in six days. China Life Insurance Co. gained 5 percent after UBS AG raised its rating on the nation’s largest insurer to buy from neutral. Honda Motor Co. slipped 1.8 percent as Japanese exporters retreated after the yen jumped on Wednesday amid China’s rout. The MSCI Asia Pacific Index was little changed at 139.63 as of 11:18 a.m. in Hong Kong, swinging between a gain of 0.7 percent and a loss of 1.7 percent.

• Iron Rout Seen by Andy Xie Extending Into $30s as Supply Grows. The iron ore rout isn’t done yet and the raw material will extend declines into the $30s a metric ton this year, according to Andy Xie, an independent economist who predicted a collapse in prices in February. Steel demand in China is shrinking while iron ore supplies are still rising, Xie, a former Asia-Pacific chief economist at Morgan Stanley, said in an interview from Hong Kong on Wednesday after benchmark prices collapsed 10 percent. The slump in China’s stock markets, which showed a speculative bubble was bursting, was accelerating declines, according to Xie. “China’s steel production is actually declining, that’s the reality,” Xie said by phone. “All the high-cost guys have to shut down for this market to stop falling. It’s not going to stabilize because Chinese demand is coming back, that’s not going to happen in the foreseeable future.”

• Fed Increase Little More Than Coin Flip for Derivative Traders. Unrest in China and Greece looms large with money-market derivative traders who now see little more than a coin flip's chance that the Federal Reserve will lift interest rates this year. Fed funds futures give a 54 percent probability that the central bank will lift rates in December, down from 59 percent before the Fed on Wednesday released the minutes of its June policy gathering. At the start of the month, the likelihood of the central bank lifting its near-zero benchmark rate this year was nearly 70 percent. The chance of a September hike is now 21 percent.

• NYSE, SEC Suspect Software Update Triggered Trading Halt. A computer malfunction that knocked out trading at the New York Stock Exchange for more than three hours Wednesday probably stemmed from a software update that went awry, said two people briefed on a preliminary review. The NYSE must now verify the cause and report its conclusions to the U.S. Securities and Exchange Commission, said the people who asked not to be named because the inquiry isn’t public. The SEC will use those findings to investigate whether any rule violations occurred, the people said.

Wall Street Journal: 

• Fear Grows in Greece as Decisive Hour Nears. As creditors express skepticism and capital controls bite, many Greeks find euphoria after Sunday’s ‘no’ vote fading fast. Greece requested a new three-year bailout from its skeptical eurozone creditors and pledged some economic overhauls on Wednesday, but the euphoria that some Greeks felt after Sunday’s “no” vote on the last deal was fading fast. 

• Commodities Plunge on Fears of China Cutback. Downturn serves as reminder of weak fundamental outlook. 

• The Iranian Nuclear Paradox. Once an agreement is reached, a U.S.-Iran confrontation becomes more likely, more quickly. The lines are clearly drawn in Washington on President Obama’s plan for a nuclear deal with Iran. As negotiations for a final agreement continue well past their June 30 deadline, most Republicans oppose the deal and Democrats will not block it. Many critics claim to believe that a “good deal,” which would permanently dismantle the...

• Lessons of China’s Crash. Attempts to put a floor under prices are adding to the market panic. Beijing is learning the hard way that intervention can make a stock panic worse. In the past two weeks the Chinese government has rolled out measures to support share prices, even forcing state-run entities to buy. Yet the indexes have continued to fall, and each failure is making it more difficult for the market to find its natural bottom. The Shanghai Composite Index fell a further 5.9% on Wednesday, 32% below its June 12...

Fox News:

• Despite San Francisco criticism, Clinton once backed sanctuary city policies. (video) High-profile Democrats now speaking out about San Francisco's "sanctuary" treatment of an illegal immigrant charged with the murder of a young woman weren't always so critical of the policies. Hillary Clinton and Sen. Dianne Feinstein, D-Calif., both criticized San Francisco for ignoring a federal request to hold Francisco Sanchez -- who already had been deported five times -- when he went into city custody in March. He was released in April, and is now in jail for the murder last week of Kate Steinle, 32.

MarketWatch.com: 

• Why the NYSE trading halt should alarm investors. Even if the NYSE is not the victim of cyber terrorism and is simply experiencing a regular technical glitch, if the exchange was forced to hit the “off” switch, it signals a vulnerability of a market that is almost entirely electronic and highly technical.

• Top 10 S&P 500 companies most exposed to China. 

• China’s stock-market crash is just beginning. Since the Shanghai Composite index dropped from a 52-week high around 5,178 on June 12, it’s been downhill all the way. In just three weeks, stocks listed on mainland China’s most prominent exchange tumbled 30% from their seven-year highs. The even more speculative ChiNext Index has lost 42% of its value over 21 days.

CNBC:

• Greece is bad but this is worse! (video) The twin fears of China and Greece will hang over markets Thursday with China increasingly the bigger concern. "There's definitely an issue if we see a further correction in the Chinese stock market," said Russ Koesterich, BlackRock's chief investment strategist.

Zero Hedge: 

• China Stock Futures Tumble Into Red For 2015 As Crash Protection Costs Hit Record Highs. (graph)

• Utter Desperation: Chinese Police Vow To Arrest "Malicious Short Sellers".

• Hong Kong Hammered As China Crash Contagion Continues. (graph)

• Caught On Tape: The Other Crisis Happening In Greece. (video)

• The "Historic NYSE Halt" Post-Mortem: The Shock And Awe When It All Went Down. (graph)

• There's No Hope For A Deal "Priced In" Greek Bank Bonds. (graph)

• What Greece, Cyprus, And Puerto Rico Have In Common. (graph)

• Crisis Investing Visualized.

• Chinese Media Blames Soros, "Hostile" Foreigners For Stock Bloodbath.

• Greece Illustrates 150 Years Of Socialist Failure In Europe.

• 
  Getting Ridiculous: 70% Of Alcoa's(AA) LTM "Earnings" Are From Restructuring Charges. (graph)
  

• Stocks Slammed On Belligerent Merkel, Broken Markets, & Bearish Minutes. (graph)

Business Insider:

• 'China has destroyed its stock market in order to save it'.

• Bernie Sanders' financial transaction tax proposal could raise $50 billion. 

• Crony capitalism is slowing global economic growth.

• It's impossible to execute trade orders in China.

• Greek youths have soured on the European Union.

• Why you should never take investment advice from a Chinese hairdresser.

• Baltimore mayor fires police commissioner as city's homicide rate spikes.

• Benghazi panel accuses Hillary Clinton of lying.

Reuters:

• Exclusive: Greek banks face closures, bailout or not - sources. Some large Greek banks may have to be shut and taken over by stronger rivals as part of a restructuring of the sector that would follow any bailout of the country, European officials have told Reuters. European leaders will gather on Sunday in a last-ditch attempt to salvage agreement with Greece after months of acrimonious negotiations that have taken the country to the brink of leaving the euro. But regardless of whether or not fresh funds are now unlocked for the government, some Greek banks, damaged by political and economic havoc, may have to be closed and merged with stronger rivals, officials, who asked not to be named, told Reuters. One official said that Greece's four big banks - National Bank of Greece (NBGr.AT), Eurobank (EURBr.AT), Piraeus (BOPr.AT) and Alpha Bank (ACBr.AT) - could be reduced to just two, a measure that would doubtless encounter fierce resistance in Athens.

• Alcoa(AA) earnings hurt by low aluminum prices, higher global surplus seen. Metals company Alcoa Inc reported a quarterly profit that missed expectations due to plunging primary aluminum prices on Wednesday, but revenues topped estimates on an ongoing drive to reduce reliance on the company's legacy commodity business. The New York-based company has been investing in more advanced aerospace and automotive products while selling off some of its more traditional yet costly smelting facilities.

Financial Times:

• Emerging market currencies in line of fire. China's equity rout is leaving its fingerprints all over the currencies of developing economies, already squeezed by the prospect of a rise in US interest rates and the bear market for oil. MSCI’s emerging equity index suffered a 2.5 per cent drop on Wednesday, its biggest in two years.

Telegraph:

• Greece news live: Athens submits three-year bail-out plan as leading economists now predict Grexit. Greece applies for a new three-year bail-out programme after Tsipras is warned banking collapse and humanitarian crisis are four days away.

Evening Recommendations 

• None of Note

Night Trading

• Asian equity indices are -1.0% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 117.75 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 64.5 +2.75 basis points.

• S&P 500 futures +.61%.

• NASDAQ 100 futures +.62%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (PEP)/1.24

• (CUDA)/.08

• (PSMT)/.72

Economic Releases

8:30 am EST

• Initial Jobless Claims are estimated to fall to 275K versus 281K the prior week.

• Continuing Claims are estimated to fall to 2250K versus 2264K prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kocherlakota speaking, Fed's Lael Brainard speaking, Fed's George speaking, BoE rate decision, $13B 3Y T-Bond auction, weekly Bloomberg Consumer Comfort Index, Bloomberg July US Economic Survey, weekly EIA natural gas inventory report, (LB) June Sales call and the (AAL) June Traffic update could also impact trading today.

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