Thursday, June 28, 2012

Stocks Falling into Final Hour on ObamaCare Ruling, Rising Eurozone Debt Angst, Rising Global Growth Fears, Tech/Medical Sector Weakness

Posted by Gary .....at 3:47 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 20.71 +6.48%
  • ISE Sentiment Index 95.0 +7.95%
  • Total Put/Call 1.06 +12.77%
  • NYSE Arms 1.24 +57.25%
Credit Investor Angst:
  • North American Investment Grade CDS Index 119.11 +1.22%
  • European Financial Sector CDS Index 289.28 +.76%
  • Western Europe Sovereign Debt CDS Index 296.87 -.29%
  • Emerging Market CDS Index 307.31 +3.64%
  • 2-Year Swap Spread 25.50 +2.0 basis points
  • TED Spread 38.5 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -59.0 -1.25 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .08% unch.
  • Yield Curve 128.0 -3 basis points
  • China Import Iron Ore Spot $134.90/Metric Tonne -.37%
  • Citi US Economic Surprise Index -60.60 +.3 point
  • 10-Year TIPS Spread 2.07 -1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating -50 open in Japan
  • DAX Futures: Indicating +3 open in Germany
Portfolio:
  • Slightly Lower: On losses in my tech, retail, medical and biotech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short, then covered some of them.
  • Market Exposure: 50% Net Long
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Today's Headlines

Posted by Gary .....at 3:10 PM

Bloomberg:
  • EU Chiefs Put Bond Buying on Table as Crisis Summit Opens. European Union leaders focused on immediate help for Spain and Italy at the start of a two-day summit intended to chart a path out of their financial crisis. The 27 government chiefs will discuss buying Spanish and Italian government bonds to bring down borrowing costs that are near euro-era records, Finnish Prime Minister Jyrki Katainen said. He also proposed that bailout funds buy collateralized government debt in primary markets. “I’ve come for very rapid solutions to support countries in difficulty on the markets,” French President Francois Hollande told reporters as he arrived in Brussels. Without specifying Spain or Italy, he said they “have made considerable efforts to deal with their public accounts.” Leaders will consider short-term measures to stem the sovereign debt turmoil as EU President Herman Van Rompuy’s road map to strengthen the bloc’s common currency and financial oversight ran into immediate opposition from Germany.
  • Euro-Area Confidence Slumps, German Unemployment Rises. Economic confidence in the euro area slumped to the lowest in more than 2 1/2 years in June and German unemployment increased more than economists forecast, adding to signs the European economy fell into a recession. An index of executive and consumer sentiment in the 17- nation euro area dropped to 89.9 from a revised 90.5 in May, the European Commission in Brussels said today. That’s the lowest since October 2009. In Germany, the number of people out of work rose a seasonally adjusted 7,000 to 2.88 million, a separate report showed. Economists in a Bloomberg News survey had forecast a gain of 3,000 in the month. Rising unemployment in Europe’s largest economy underscores indications of a deepening economic slump as the sovereign-debt crisis shifts from periphery states to core members. “Germany won’t be able to disconnect from the euro-region developments,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “The second quarter will show an economic contraction and there are no signs of improvement for the following three months. Whether the situation stabilizes afterward hinges decisively on the euro crisis and latest developments are no real reason for optimism.”
  • UK Disposable Income Plunges As Economy Contracts .3%. Britons’ disposable income fell for a second quarter in the first three months of the year, when consumer spending unexpectedly declined and the economy shrank. Real disposable income dropped 0.9 percent from the previous three months, when it also fell by that amount, the Office for National Statistics said today in London. Consumer spending was revised to a 0.1 percent decline from a 0.1 percent increase, while gross domestic product fell 0.3 percent. The decline in consumer spending in the first quarter followed a 0.5 percent increase in the October-December period and declines in the preceding three quarters. Real disposable income is now at its lowest in three years. The savings ratio declined to 6.4 percent from 6.9 percent, the lowest in a year.
  • Derivatives Show Money-Market Stress Rises as Euro Summit Opens. Forward markets signaled increased stress in the money markets as European leaders began a two-day summit on the region’s debt crisis. Predictions in the forward market for the gap between the London interbank offered rate and federal funds, known as Libor- OIS, rose to 33.2 basis points from 31.3 basis points yesterday, according to the second rolling three month so-called FRA/OIS spread. The difference between the two-year swap rate and the comparable-maturity Treasury note yield, known as the swap spread, widened 1.5 basis points to 25 basis points.
  • European Stocks Fall as EU Leaders Hold Summit. The Stoxx Europe 600 Index slid 0.5 percent to 244.67 at the close in London, after earlier dropping as much as 1.3 percent. The benchmark measure has fallen 10 percent from its high in March, paring its gain for the year to 0.1 percent, as the euro area’s sovereign-debt crisis threatened a slowdown in global growth. The volume of shares traded on the gauge was 9.1 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.
  • Roach Says Euro Ponzi Scheme Won't Get Fixed by Van Rompuy. Stephen Roach, a professor at Yale University, said the euro-area debt crisis is a result of the currency bloc effectively being a Ponzi scheme, and European Union President Herman Van Rompuy’s plan to solve the turmoil “is not worth the paper it’s printed on.” “It is the vaguest report for a region in crisis I have ever seen in my entire life,” Roach, former non-executive chairman for Morgan Stanley in Asia, said in an interview with Tom Keene and Sara Eisen on Bloomberg Television’s “Bloomberg Surveillance” in New York today. “He talks about a vision. The guy has got sunglasses on. He can’t see the light of day.”
  • China Local Government Finances Are Unsustainable, Auditor Says. The finances of China’s county-level governments are unstable and unsustainable as the majority of their fiscal income comes from sources other than taxation, the nation’s top auditor said. About 60 percent of revenue raised last year by 54 counties investigated by the National Audit Office wasn’t derived from taxes, Liu Jiayi, the head of the agency, told a meeting of the legislature yesterday, according to a transcript of his speech on the audit office’s website. Total fiscal revenue at those counties rose 17 percent to 112 billion yuan ($17.6 billion) last year, Liu said.
  • China's Stock Index Erases 2012 Gain After June Plunge. China’s Shanghai Composite Index (SHCOMP), the world’s second worst-performing stocks measure this month, erased this year’s gain on concern a manufacturing slump and the European debt crisis will deepen the economic slowdown. The Shanghai index dropped 1 percent to 2,195.84 at the close, a seventh day of losses. The gauge has lost 7.4 percent in June. The measure had gained as much as 12 percent this year through its peak on March 2. Trading values on the Shanghai Stock Exchange fell to a five-month low yesterday. “The economy is still slowing and earnings growth forecasts have further room to be revised downward,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Weak sentiment will dominate as investors have no idea how slow earnings growth will be.”
  • China Stocks to Extend Drop After Losing 2012 Gains, BoCo. China’s stocks are poised to extend losses after erasing this year’s gains amid concerns over a slowing economy, according to the only strategist who forecast declines for Chinese shares in 2012. The economy probably expanded at a “subpar” rate in the second quarter and investors should buy shares of companies such as consumer-staples producers, whose earnings may be sheltered from the slowdown, Hao Hong, head of Chinese research at Bank of Communications Co. in Hong Kong, said by e-mail yesterday, declining to name stocks. The Shanghai Composite Index may fall “briefly” below 2,000 in a worse-case scenario, he said.
  • Jobless Claims in U.S. Hovered Last Week Near 2012 High. The number of applications for unemployment benefits hovered last week near the highest level of the year, showing little improvement in the U.S. labor market. Jobless claims decreased by 6,000 to 386,000 in the week ended June 23, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The prior week’s reading was revised up to 392,000 from 387,000, matching an April figure as the steepest of 2012. Concern about the fallout from the European debt crisis and the so-called fiscal cliff that will face the U.S. at the end of this year may prompt employers to keep payrolls lean. “There is no progress,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “There is clearly an underlying weakness that is troubling. The labor market is sputtering along, struggling to create jobs. The pace of consumer spending will slow in the second quarter.”
  • Stockton, California, Retirees Feel Shock of Benefit Rollback.
Wall Street Journal:
  • Supreme Court Upholds Obamacare as Tax. In a surprise conclusion to a constitutional showdown, Chief Justice John Roberts joined the Supreme Court's four liberals Thursday to uphold the linchpin of President Barack Obama's health plan, the individual mandate requiring citizens to carry insurance or pay a penalty. By a 5-4 vote, the court held the mandate valid under Congress' constitutional authority "to lay and collect Taxes" to provide for "the general Welfare of the United States." The penalty for failing to carry insurance possesses "the essential feature of any tax," producing revenue for the government, Chief Justice Roberts wrote. Although the Obama administration always asserted the penalty was valid under the federal taxing power, until Thursday no court had fully accepted that theory. Those that upheld the Patient Protection and Affordable Care Act, as the law is known, did so under Congress's constitutional power to regulate interstate commerce.
  • The ObamaCare Tax by Stephen Moore.
MarketWatch:
 Fox News:
  • U.S. Subprime Auto-Loan Rates of Near 20% Underpin Bond-Issue Boom. Nearly anyone can get a car loan these days, as long as they are willing to stomach dizzyingly high interest rates--and yield-hungry investors continue to embrace riskier credits. The alignment of those factors is spawning bigger and more frequent subprime auto asset-backed securities issues this year, including this week's $1.4 billion deal from Santander Consumer USA, the largest of its kind since 2007. In all, Santander, General Motors Co.'s (GM) GM Financial and smaller lenders have issued $10 billion of subprime auto-related ABS year-to-date, which is 20% ahead of last year's pace and adding to the overall rise in securities backed by auto loans and leases, rental cars and dealer floor plans, according to Barclays. The jump in issuance is being driven by a boom in lending to car buyers with dented credit, a stark contrast to the paucity of subprime loans for housing.
CNBC.com:

Business Insider:

Zero Hedge:

NY Post:

greentechsolar:
  • Abound Solar to Soon Close Its Doors. Another DOE loan recipient giving up the ghost. Many solar jobs will be lost, and many fingers will be pointed. The VC-funded DOE loan-recipient was working with the cadmium telluride (CdTe) thin-film materials system and had hoped to achieve the success of its CdTe competitor First Solar. The firm was the beneficiary of a $400 million DOE loan guarantee, only $70 million of which has been drawn down. So, despite the imminent comparisons to Solyndra, this is bad news -- but not quite on the scandalous scale of that solar module maker.

Rasmussen Reports:

Reuters:

  • Barlcays(BCS) Plunges 15.6%, Leads European Shares Lower. European shares ended lower on Thursday, led by banks, with investors primed for disappointment from the latest European Union summit to tackle the debt crisis, but not expecting a further steep market selloff. A 2.5 percent decline in banking shares, led by a 15.6 percent slump in Barclays following investigations that found it tried to manipulate key market interest rates, also weighed on the choppy market that witnessed sharp swings on contrasting comments from European policymakers and leaders.
  • John Paulson's Returns Falter Again; Investors Fret. Billionaire trader John Paulson has told his wealthy investors that he has learned from his mistakes of 2011, which produced enormous losses for his closely watched hedge fund. The founder and manager of Paulson & Co, who made his fortune and fame by betting against the subprime mortgage market, went so far as to tell investors in January that last year's big losses, including a 50 percent decline in his popular Advantage Plus fund, were an "aberration." But as the months tick on, many investors are still waiting to see the dramatic turnaround Paulson has vowed to deliver. Halfway through 2012, Advantage Plus is down again, losing 10 percent through May. Another big portfolio that bets on gold - once a bright spot for Paulson - was also in the red. In both cases, he blamed losses in gold stocks for the declines. This has taken a huge bite out of the firm's assets, which have fallen to $22 billion from $38 billion early last year, according to investors. Redemptions were substantial, but poor performance accounted for the bulk of the drop, they said.
  • China starts "combat ready" patrols in disputed seas. China has begun combat-ready patrols in the waters around a disputed group of islands in the South China Sea, the Defence Ministry said on Thursday, the latest escalation in tension over the potentially resource-rich area. Asked about what China would do in response to Vietnamese air patrols over the Spratly Islands, the ministry's spokesman, Geng Yansheng, said China would "resolutely oppose any militarily provocative behavior". "In order to protect national sovereignty and our security and development interests, the Chinese military has already set up a normal, combat-ready patrol system in seas under our control," he said. "The Chinese military's resolve and will to defend territorial sovereignty and protect our maritime rights and interests is firm and unshakeable," Geng added, according to a transcript on the ministry's website (www.mod.gov.cn) of comments at a briefing.
  • Some small business owners see '12 as year to sell. Jim Angleton did not plan on selling his small financial services business this year, but when a foreign buyer approached with the right offer he went ahead without regrets. "There's uncertainty moving forward," said Angleton, 56, who sold a unit of his Miami-based company, AEGIS FinServ Corp, which issues debit and credit cards to U.S. government employees working abroad. "Tax rules are constantly changing and they don't make sense. This time next year I'll probably be thankful I did this."
  • Brazil cenbank slashes 2012 growth view, eyes rate cuts.
  • Moody's sees Affordable Care Act pressuring hospitals.

Telegraph:

BusinessWorld:

  • EU Plans Curbs on Hedge Fund Pay. European regulators published draft rules today to crack down on excessive bonuses for managers of hedge funds, a sector politicians have blamed for worsening euro zone debt problems. Policymakers have already clamped down on bankers' bonuses, a move that has proved popular in the wider world where most people's incomes are becoming ever-more squeezed. The prospect of big bonuses can also encourage employees at financial firms to take excessive risks, regulators say. The European Securities and Markets Authority (ESMA) said on Thursday such curbs must be extended to managers of alternative investment funds, including hedge funds and private equity and real estate funds. The rules could have a huge effect on hedge fund managers - the bulk of whose pay is from performance fees - and will apply from the end of this year to senior managers, risk takers and employees whose total package puts them in the same bracket as top management.

Republica:

  • Germany's Resources Not Unlimited. Foreign Minister Guido Westerwelle says Germany is against "euro bonds as putting debts together doesn't help growth," he said.

Sina:

  • Eurozone Crisis' Ripple Effect Felt In China. A solution to the eurozone's fiscal woes is not expected in the near future, despite a two-day meeting by the leaders of EU members states on Thursday to discuss a solution to the crisis. The crisis has triggered an economic recession and even stoked fears of a dissolution of the eurozone. Its ripple effect, however, has reached all the way to China, a major trading partner of the EU. Chinese exporters are among the direct victims of a crisis that has led to high unemployment, a reduction in consumer spending and a corresponding depletion of demand for Chinese-made goods. Small clothing companies in south China's Guangdong province are feeling the pinch. Their profits have already been squeezed by the Chinese currency's sharp appreciation against the euro, as well as increases in the cost of labor and raw materials. The Chinese yuan has appreciated by 23 percent against the euro since 2010, making Chinese goods less competitive in the eurozone. "Despite higher costs on our side, European traders still ask for lower prices. We are left with lower profits," said Shen Yonglin, chairman of Guangzhou Shenshi Clothing Co.
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Bear Radar

Posted by Gary .....at 1:29 PM

Style Underperformer:
  • Mid-Cap Growth -1.70%
Sector Underperformers:
  • 1) Biotech -2.82% 2) Steel -2.71% 3) Computer Hardware -2.40%
Stocks Falling on Unusual Volume:
  • BCS, DB, UBSI, AET, FDO, AMED, HK, ETP, DO, FTI, PLXS, PCYC, VRTX, LULU, SGNT, LKQ, ARNA, ORLY, CYOU, MNST, PAYX, DLTR, CYMI, ROST, LHCG, OVTI, AKRX, JAKK, STX, UCO, CMG, COG and WLP
Stocks With Unusual Put Option Activity:
  • 1) CI 2) SYMC 3) WLP 4) MAR 5) PAYX
Stocks With Most Negative News Mentions:
  • 1) STX 2) JPM 3) MNST 4) C 5) RHI
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:02 AM

Style Outperformer:
  • Small-Cap Value -.81%
Sector Outperformers:
  • 1) Hospitals +1.89% 2) Coal +.89% 3) Oil Tankers -.03%
Stocks Rising on Unusual Volume:
  • CYH, HMA, OFG, HMSY, HCA, AGP, MSM and WOR
Stocks With Unusual Call Option Activity:
  • 1) CVH 2) USG 3) AOL 4) OREX 5) VRTX
Stocks With Most Positive News Mentions:
  • 1) BA 2) AET 3) RTN 4) LMT 5) QCOM
Charts:
0 comments

Wednesday, June 27, 2012

Thursday Watch

Posted by Gary .....at 11:59 PM

Evening Headlines
Bloomberg:
  • European Bank Union ‘Premature’ Amid Resistance to Debt Sharing. A European banking union is no fix for the region’s lenders, trading at a fraction of the book value of their assets, without closer fiscal integration and a solution to the sovereign debt crisis, investors say. Policy makers will discuss ways to coordinate bank oversight, bring together national deposit guarantees and combine crisis management powers at a summit in Brussels today and tomorrow in an effort to bolster confidence in the region’s lenders. For a banking union to succeed, investors say, Europe must achieve for lenders what it’s failed to accomplish for governments: shared liabilities. “Talk about a banking union is too premature,” said Guy de Blonay, a London-based fund manager at Jupiter Fund Management Plc, which oversees about $37.5 billion. “Europe hasn’t taken steps to restoring an orderly sovereign debt market. You need economies to borrow at a decent rate.” Lenders in Europe, burdened by $1.2 trillion of holdings in Spanish, Portuguese, Italian and Irish government bonds, face rising bad loans as the single-currency region teeters on the brink of recession. Governments’ struggles to repay their debt as economies contract is adding to skepticism they can support ailing lenders. Germany’s opposition to sharing government and bank liabilities is raising concern a banking union will become another blunt tool in efforts to tame the crisis.
  • Summit Stalemate Endangers Top Sovereign Ratings: Euro Credit. As European leaders debate how to save the 17-nation euro area at their summit today, investors are pricing in savage credit downgrades with four countries losing their Aaa status. Austria, Finland, France and the Netherlands may be cut by as many as nine levels from their top grades, according to a Moody's Analytics review of credit-default swaps prices. Demand for haven securities drove two-year note yields on Germany to a record low of minus .012 percent this month. Bondholders are accumulating debt insurance on concern sovereign borrowing costs will rise as ratings are undermined by the surging bill for bailing out weaker euro-area nations, recessions curb tax revenue and welfare payments increase. With Spain and Cyprus seeking aid this week, markets are skeptical the summit will find a pathway out of the crisis. "Investors are gradually discovering that a large proportion of stuff they thought was safe is turning out not to be," said Matt King, global head of credit strategy at Citigroup Inc. in London. "We are concerned that even as the magnitude of the risks is becoming bigger, policy makers seem as far apart as ever when it comes to agreeing on solutions."
  • Germany’s Steinbrueck Tells Passauer Shared Debt Needs Oversight. European debt sharing isn’t possible without countries accepting external budget oversight, Peer Steinbrueck, Germany’s former Finance Minister, told Passauer Neue Presse. “First I want to see that Germany and the Mediterranean countries say, ‘Great, the rule will be: if we can’t keep our own budgets in order, our budget rights will move to a European institution,’” the newspaper cited Steinbrueck as saying in an e-mailed preview of an interview to be published today. “Otherwise it’s not acceptable for Germany to accept liability for others. That would be like giving out a credit card: others do the shopping, and Germany pays.” Steinbrueck ruled out a banking union with common deposit insurance as suggested by European Union President Herman Van Rompuy, the newspaper said. Strengthening national deposit insurance together with broader European oversight and a European bank liquidation law would be possible, the newspaper cited the Social Democrat lawmaker as saying.
  • Will Angela Merkel Save Europe’s Banks? Europe’s leaders have raised hopes that, when they meet Thursday and Friday in Brussels, they will agree on a banking union aimed at severing the link between the health of the euro area’s financial institutions and the solvency of its governments. The plan’s success or failure, as with so much else in the currency union today, will depend on one person: German Chancellor Angela Merkel. Ultimately, the question of joint liability is a political one that goes far beyond banking. No currency union consisting of economies and cultures as different as, say, Germany and Spain can work unless its members agree to share the risks of financial and economic shocks. Refusing to do so is tantamount to rejecting the euro. So what will it be, Frau Merkel?
  • China’s Housing Curbs Will Remain ‘Tight,’ Shui On’s Lee Says. The Chinese government’s curbs on the housing market will remain “tight” this year, preventing transactions and prices from rebounding significantly, according to Shui On Land Ltd. (272), the developer controlled by Hong Kong billionaire Vincent Lo. “The volume of transactions has increased and sentiment is improving, but any substantial turnaround is unlikely,” said Freddy Lee, chief executive officer of Shanghai-based Shui On, in an interview in Singapore yesterday. “I feel that prices will maintain where they are for a while.”
  • China Local Government Finances Are Unsustainable, Auditor Says. The finances of China's county-level governments are unstable and unsustainable as the majority of their fiscal income comes from sources other than taxation, the nation's top auditor said. About 60% of revenue raised last year by 54 counties investigated by the National Audit Office wasn't derived from taxes, Liu Jiayi, the head of the agency, told a meeting of the legislature yesterday, according to a transcript of his speech on the audit office's website. Local governments have been forced to turn to non-tax income such as land sales and to increase debt because of the imbalance in tax revenue and spending obligations with the central government, Jia Kang, director of the finance ministry's Institute of Fiscal Science, was cited by the paper as saying.
  • China’s Stocks Decline for Seventh Day on Earnings Concerns. China’s stocks fell, dragging down the benchmark index for a seventh day, on concern the nation’s economic slowdown is curbing earnings growth. Gansu Qilianshan Cement Group Co. declined 2 percent after it said first-half profit may have dropped more than 50 percent from a year earlier. Inner Mongolia Baotou Steel Rare Earth Hi- Tech led a gauge of material producers to the steepest loss among industry groups after the U.S., Europe and Japan asked the World Trade Organization to resolve disputes over China’s limits on exports of rare-earths materials. “The economy is still slowing and earnings growth forecasts have further room to be revised downward,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Weak sentiment will dominate as investors have no idea how slow earnings growth will be.”
  • Dealmaking Rebound Falters as Crisis Threatens Confidence. Dealmaking failed to make a comeback in the second quarter as the European debt crisis and volatile stock markets forced companies to delay big acquisitions. Takeovers fell about 2 percent from the first three months of the year to about $450 billion, the lowest level since 2009, according to data compiled by Bloomberg. Eaton Corp. (ETN)’s proposed purchase of Cooper Industries Plc (CBE) and Pfizer Inc. (PFE)’s sale of its infant-nutrition unit were the only deals to top $10 billion.
  • Mortgage Seizures Create ‘Very Serious Concerns,’ Sifma Says. Wall Street’s largest lobbying group is objecting to the use of eminent domain by municipalities to seize mortgages packaged into bonds so the loans can be shrunk to aid homeowners who owe more than their properties’ values. Both the investment firm and bank members of the Securities Industry and Financial Markets Association have “very serious concerns” based on an agreement approved last week by San Bernardino officials granting the authority to study and create such a program, said Ken Bentsen, executive vice president for public policy and advocacy at the New York-based trade group. By using eminent-domain powers, municipalities can force the sale of private property at prices deemed to be fair if doing so serves a public purpose.
  • Barclays(BCS) May Implicate Other Banks, Pitt Says. (video) Former U.S. Securities and Exchange Commission Chairman Harvey Pitt talks about record fines imposed by U.S. and U.K. regulators against Barclays Plc after the bank admitted it submitted false London and euro interbank offered rates.

Wall Street Journal:

  • European Banks Are Facing More Pain In Spain. Spanish-owned banks aren't the only ones under pressure to fortify themselves against Spain's crumbling economy. Foreign banks with big Spanish operations also find themselves in a tough position—and with few options. Three European banks—Barclays PLC, Deutsche Bank AG and ING Bank NV—have large Spanish units. They already have pumped in billions of euros of capital to shore up those businesses, but as the Spanish government conducts a wide-ranging review of the sector's health and the economy continues to struggle, they could demand even more, according to bankers and analysts.
  • Optimism on Europe Doesn't Add Up. In Europe there is hope, and then there is math. And the two are on a collision course. Optimists are counting on the latest make-or-break European summit that starts Thursday to deliver convincing steps toward the fiscal and banking unions deemed necessary to keep the euro alive. Unfortunately, even best-case scenarios for the two-day summit won't change some bleak arithmetic. This suggests the debt crisis will rage in Spain and Italy for years.
  • IRS Probes Political Group Tied to Rove. The Internal Revenue Service is taking initial steps to examine whether Crossroads GPS, a pro-Republican group affiliated with Karl Rove, and similar political entities are violating their tax-exempt status by spending too much on partisan activities.
  • Regulators Ramp Up Queries Into CDS Trades at Data Warehouse. Regulators are increasing the number of queries they make into global credit-default swaps trades reported to the Depository Trust & Clearing Corp., according to figures the data warehouse provider released Wednesday. DTCC said regulators submitted 360 searches in May, the most recent month for which data is available, compared with 37 searches in the same month last year. In April, the number of searches rose to 579 from 77 a year earlier.
  • News Corp.(NWSA) Board Approves Split in Principle. News Corp.'s board unanimously approved a plan to split the media conglomerate in two pieces, separating its lucrative entertainment operations from its publishing business, said a person familiar with the situation.
  • Google's(GOOG) New Role as Gadget Maker. Web Giant to Brandish Tablet, Home Media Player in Hardware Turf War With Apple, Amazon.
  • Madoff's Brother to Plead Guilty to Criminal Charges. Bernard Madoff's younger brother, Peter, is expected to plead guilty to criminal charges and has agreed to go to prison for 10 years, in the first admission of wrongdoing by a family member in a multibillion-dollar investment business that turned out to be "just one big lie."
Dow Jones:
  • SEC to Miss Deadline on Hedge Fund Ad Rules. The Securities and Exchange Commission will miss next week's deadline to adopt rules allowing hedge funds to engage in mass marketing but will likely move on the matter soon, SEC Chairman Mary Schapiro will say in prepared testimony for a hearing Thursday.
Business Insider:
 Zero Hedge:
 CNBC:

IBD:

NY Times:

  • Attack Raises Fears of a New Gang War in Macau. A senior figure in Macau’s gambling industry was severely beaten by six men in a restaurant at his own casino, the highest-profile case of violence in the city’s booming gambling business since Portugal handed control of the former colony back to China in 1999.

LA Times:

  • Tiny Telescopes Implanted Into Eyes Help Elderly Patient See Better. UC Irvine ophthalmologists implanted tiny telescopes in two patients suffering from age-related, end-stage macular degeneration, the university announced this week. Doctors from the university's Gavin Herbert Eye Institute in December inserted one of the 4-millimeter telescopes into an 85-year-old Irvine resident's eye and another in a 94-year-old Anaheim resident's eye, according to a UCI statement. The devices restore limited vision by projecting an image onto the undamaged section of the retina, enabling patients to recognize faces, read and perform daily activities. After the implant, the Irvine resident was able to see her son's face for the first time in more than a decade.
  • Facebook's(FB) Advertising Growth Slowed Down A Lot In The Last Year. Facebook's U.S. advertising growth has slowed down to a third of what it was in 2011, according to a report issued Wednesday. After growing at impressive rates in the 60% range during the first three quarters of 2011, Facebook's advertising growth fell by more than half to 30% in the fourth quarter, and during the first part of 2012, the growth rate went down to 21.2%, according to a report by the IDC. The slowing growth has resulted in Facebook losing market share. After holding on to almost 14% of display advertising at the end of 2011, Facebook's share is now down to 12%.
Rasmussen Reports:
Reuters:
  • Glencore fights to save $26 billion Xstrata bid. Commodities trader Glencore fought to save its $26 billion bid for miner Xstrata on Wednesday after shareholder Qatar stunned the pair with a late demand for better terms, forcing them to push back the timing of the deal.
  • Moody's downgrades 11 Brazilian banks. Moody's Investors Service said it had downgraded the ratings of 11 Brazilian financial institutions in line with its review of global banks.
  • Fed officials differ on whether more easing needed. Top Federal Reserve officials differed on whether the U.S. central bank needs to be more aggressive in spurring economic growth, indicating another round of easing is far from certain. Chicago Federal Reserve Bank President Charles Evans, one of the U.S. central bank's strongest advocates for further monetary policy easing, said Wednesday he is flummoxed by the Fed's timidity in the face of high unemployment and low inflation. However, his colleague, Atlanta Fed leader Dennis Lockhart, said the Fed would only need to act further if the economy took a turn for the worse or if Europe's simmering debt crisis boils over.
  • Italy debt cost likely to rise after Merkel rebuff. Investors are likely to drive Italy's borrowing costs further above 6 percent at a bond auction on Thursday after German Chancellor Angela Merkel brushed aside Spanish and Italian pleas for emergency action to steady debt markets. Battling with rising interest payments on its 1.95 trillion euro ($2.4 trillion) debt, Italy is offering up to 5.5 billion euros in five- and 10-year bonds just hours before the start of an EU summit where Prime Minister Mario Monti will keep pushing for joint moves to contain government funding costs.
Telegraph:

expressindia.com:
  • Ansari Arrest Confirms Pakistan Role: PC. INDIA today claimed that the interrogation of Zabiuddin Ansari alias Abu Jundal — a key suspect in the Mumbai terrorist attack who has been arrested recently — had confirmed its suspicion that “state actors” in Pakistan had a role to play in the November 2008 attacks that left close to 200 people dead.
Evening Recommendations
Wells Fargo:
  • Rated (AAPL) Outperform, target $640-$660.
  • Rated (EMC) Outperform, target $29-$30.
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 183.50 -2.5 basis points.
  • Asia Pacific Sovereign CDS Index 150.0 -1.25 basis points.
  • FTSE-100 futures +.33%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.15%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (FDO)/1.07
  • (NKE)/1.37
  • (TIBX)/.23
  • (AM)/.69
  • (SCHN)/.25
  • (WOR)/.52
Economic Releases
8:30 am EST
  • 1Q GDP is estimated to rise +1.9% versus a prior estimate of a +1.9% gain.
  • 1Q Personal Consumption is estimated to rise +2.7% versus a prior estimate of a +2.7% gain.
  • 1Q GDP Price Index is estimated to rise+1.7% versus a prior estimate of a +1.7% gain.
  • 1Q Core PCE is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.
  • Initial Jobless Claims are estimated to fall to 385K versus 387K the prior week.
  • Continuing Claims are estimated to fall to 3280K versus 3299K prior.
11:00 am EST
  • Kansas City Fed Manufacturing Activity for June is estimated to fall to 4.0 versus 9.0 in May.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The Supreme Court's ObamaCare decision, EU Leader's Summit, Fed's Fisher speaking, Fed's Pianalto speaking, 7Y T-Note Auction, German Unemployment data, Annual Crop Acreage Report, weekly EIA natural gas inventory data and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
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Stocks Rising into Final Hour on Quarter-End Window-Dressing, Short-Covering, Eurozone Debt Crisis Hopes, Financial/Homebuilding Sector Strength

Posted by Gary .....at 3:50 PM

Broad Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 19.90 +.91%
  • ISE Sentiment Index 75.0 -15.73%
  • Total Put/Call .94 -6.0%
  • NYSE Arms .94 +.98%
Credit Investor Angst:
  • North American Investment Grade CDS Index 118.05 -.88%
  • European Financial Sector CDS Index 287.10 -1.61%
  • Western Europe Sovereign Debt CDS Index 297.02 -1.03%
  • Emerging Market CDS Index 296.95 -.50%
  • 2-Year Swap Spread 23.50 +.25 basis point
  • TED Spread 38.5 +.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -57.75 +.25 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .08% -1 basis point
  • Yield Curve 131.0 -2 basis points
  • China Import Iron Ore Spot $135.40/Metric Tonne unch.
  • Citi US Economic Surprise Index -60.90 +1.3 points
  • 10-Year TIPS Spread 2.08 unch.
Overseas Futures:
  • Nikkei Futures: Indicating +55 open in Japan
  • DAX Futures: Indicating -1 open in Germany
Portfolio:
  • Slightly Higher: On gains in my tech, medical and biotech sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite Eurozone debt angst, rising energy prices, consumer discretionary sector weakness and rising global growth fears. On the positive side, Coal, Oil Tanker, Oil Service, Ag, I-Banking, Hospital, Construction and Homebuilding shares are especially strong, rising more than +1.25%. Small-cap stocks are outperforming. Copper is gaining +.8%. Major Asian indices were mostly higher overnight, led by a +1.03% gain in Hong Kong. However, Shanghai fell another -.23% and is down -3.64% in 5 days despite more talk of rate cuts and stimulus. Major European indices are rising about +1.25%, led by a +2.4% gain in Italy. The Bloomberg European Bank/Financial Services Index is gaining +2.48%. The France sovereign cds is down -1.3% to 198.0 bps, the Spain sovereign cds is down -1.5% to 587.33 bps, the UK sovereign cds is down -2.2% to 70.99 bps and the Japan sovereign cds is down -5.11% to 88.74 bps. Moreover, the European Investment Grade CDS Index is down -1.3% to 177.06 bps. On the negative side, Steel, Disk Drive, Telecom, HMO, REIT, Retail and Restaurant shares are lower-to-flat on the day. The UBS-Bloomberg Ag Spot Index is rising another +1.1%, Lumber is down -.3%, Oil is up +1.3% and Gold is up +.2%. The Citi Latin America Economic Surprise Index is falling to -12.9 today, which is the lowest since mid-Oct. of last year. Brazil is down another -1.0% today, is now down -6.8% in 5 days and is down -6.2% ytd, which is another red flag for the global economy. The Germany sovereign cds is gaining +.9% to 102.75 bps and the China sovereign cds is gaining another +.28% to 125.17 bps(+7.1% in 5 days). Moreover, the Spain 10Y Yld is rising +.8% to 6.93% and the Italian 10Y Yld is gaining +.4% to 6.2%. US weekly retail sales have decelerated to a sluggish rate at +2.3%, which is the slowest since the week of April 5th of last year. US Rail/Trucking Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to late-Aug. levels. Lumber is -12.0% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -25.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +130.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -25.2% since May 2nd of last year. Overall, credit gauge deterioration remains a big worry as most key sovereign cds remain technically strong. The euro currency, oil, lumber and copper all continue to trade poorly given global central bank stimulus hopes, some better US economic data and recent stock gains. As well, the 10Y continues to trade too well as the yield is unch. today at 1.62%. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. Equity investors appear to be pricing in another big kick-the-can “solution” to the European debt crisis, which is surprising given how many disappointments we have seen out of these summits and the rapid deterioration in some key economies in the region. The Citi Eurozone Economic Surprise Index is at -90.50 points, which is the lowest since early-Sept. of last year. Moreover, the “solutions” for the European debt crisis I still hear being bandied about are only bigger kick-the-cans that will eventually lead to an even bigger catastrophe as Germany is engulfed, in my opinion. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. The "US fiscal cliff "will likely become more and more of a focus for investors as the year progresses. Finally, the upcoming earnings season could prove more challenging than usual for big multi-nationals given US dollar strength and the precipitous declines in some key parts of the global economy during the quarter. I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. The declines in retail/restaurant shares today are noteworthy. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on quarter-end window-dressing, short-covering, bargain-hunting and financial/homebuilding sector strength.
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