Tuesday Watch

Weekend Headlines 
Bloomberg: 

• Asian Stocks Pare Loss as Yen Falls, Boosting Exporters. Asian stocks pared losses, with volatility in Japanese shares reaching the highest in more than two years, as a weakening yen boosted the earnings outlook for exporters. Woolworths Ltd. (WOW) sank 1.1 percent, a fifth day of declines for Australia’s largest retailer. Toho Holdings Co. lost 5.3 percent as the maker of medical equipment said it will raise funds to reinvestment in capital. Toyota Motor Corp., the world’s biggest carmaker, climbed 3.2 percent as a weakening yen boosted the earnings outlook for Japanese exporters. The MSCI Asia Pacific Index slid 0.1 percent to 136.77 as of 11:05 a.m. in Hong Kong, with about three stocks rising for every two that fell. 

Zero Hedge:

• Abenomics 101 - The 15 Most Frequently Asked Questions.

• Here Are $18.6 Billion SAC Capital's Largest Stock Positions.

• Mystery Surrounding Collapse Of Hong Kong Mercantile Exchange Deepens; Four Arrested.

• "Those Who Believe In Abenomics Are Suffering From Amnesia".

• The Fed's Real Worry - A Pick Up In Deflation.

• Japan Opposition Accuses Ruling Party Of Creating Stock Bubble.

• Asset Valuation And Fed Policy: We've Seen This Movie Before. 

• Grant Williams: "Do The Math!"

• The Chart That The BoJ Is Most Worried About (And So Should You Be). (graph)

• Which Asset Class Is The Most Sensitive To a Fed "Taper"?

• Hedge Fund Performance Update: Dan Loeb Is Crushing It In 2013, Everyone Else - Not So Much.

• Europe Ends Arms Embargo For Syrian Rebels, Desperate To Break Russian NatGas Export Monopoly.

Business Insider:

• 21 Stock Market Warning Signs Giving Global Investors Cold Sweats.

• In One Chart, Here's How Investors Are Massively Giving Up On Commodities.

• REPORT: SAC Capital's Biggest Outside Investor Wants To Pull Money Out.

• Google(GOOG) Is Planning To Build Its Own Wireless Network.

• New Satellite Pictures Show A Revolution Waiting To Happen In Bahrain.

• Stockholm Riots Leave Sweden's Dreams Of Perfect Society Up In Smoke.

• The Surging Yen, The Plunging Aussie Dollar, And Everything Else Going On In The Currency Markets.

• Rail Traffic Confirms That The Economy Remains Sluggish. (graph)

• Investors Are Borrowing Like Crazy To Leverage Up Their Stock Market Bets.

• Another Electric Car Company Is Going Bankrupt.

• MAULDIN: Japan Is On The Brink Of Disaster.

• Bombs Found In Oregon Teen's Bedroom, Allegedly Planning An Attack Bigger Than Columbine.

• Drones With Facial Recognition Technology Will End Anonymity, Everywhere.

Wall Street All-Stars:

• Indicator Update: Look for even more volatility this week!

Welt:

• German Anti-Euro Party Says Euro Breakup Matter of Time. Bernd Lucke, the Alternative for Germany party's leader, comments in an interview. The government is delaying a breakup of the currency through cash payments, increasing the amount German citizens will have to pay in the end, Lucke said. Lucke says he fears the breakup, which will be "completely out of control" when it happens, will lead to "major disruptions," including not being able to pay social benefits and pensions.

Sueddeutsche Zeitung:

• Munich Re CEO Says Some EU States Worry Him, Nikolaus von Bomhard says France is causing him "big concern" as the country is missing "important first steps" in reforms, citing interview.

People's Daily:

• China Shouldn't Rely on Economic Stimulus. China should not rely on issuing stimulus policies similar to the ones introduced in the past for its economic growth, citing Li Xuesong, a researcher at the Chinese Academy of Social Sciences. Since China's GDP continues to grow, the size of the stimulus needed will get larger, therefore using stimulus is not sustainable, the report cites Li as saying. China will not introduce a new 4t yuan stimulus plan, the report says.

Night Trading

• Asian indices are unch. to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.50 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 93.75 +2.0 basis points.

• FTSE-100 futures +.92%.

• S&P 500 futures +.30%.

• NASDAQ 100 futures +.48%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TIF)/.52

• (UNFI)/.64 

Economic Releases
9:00 am EST

• The S&P/CS 20 City MoM% SA for March is estimated to rise +1.0% versus a +1.24% gain in February.

10:00 am EST

• The Richmond Fed Manufacturing Index for May is estimated to rise to -4 versus -6 in April.

• Consumer Confidence for May is estimated to rise to 71.0 versus 68.1 in April.

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for May is estimated to rise to -10.0 versus -15.6 in April. 

Upcoming Splits

• (NBL) 2-for-1

• (WFM) 2-for-1

Other Potential Market Movers

• The Italian 10Y auction, Eurozone retail sales data, BoJ's Kuroda speaking, 2Y T-Note auction and the (LSTR) Mid-Quarter Update could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and consumer staple 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 week.

Weekly Outlook

Wall St. Week Ahead by Reuters.
Stocks to Watch Tuesday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, more Mideast unrest, Eurozone debt angst, profit-taking, more shorting and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,649.60 -1.07%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,649.60 -1.07%

• DJIA 15,303.10 -.33%

• NASDAQ 3,459.14 -1.13%

• Russell 2000 984.28 -1.20%

• S&P 500 High Beta 25.53 -1.77%

• Value Line Geometric(broad market) 426.16 -1.08%

• Russell 1000 Growth 753.90 -1.31%

• Russell 1000 Value 837.57 -1.02%

• Morgan Stanley Consumer 1,019.37 -1.27%

• Morgan Stanley Cyclical 1,220.95 -1.26%

• Morgan Stanley Technology 759.88 -1.79%

• Transports 6,395.70 -2.34%

• Utilities 499.21 -3.38%

• Bloomberg European Bank/Financial Services 96.74 -4.24%

• MSCI Emerging Markets 42.54 -1.76%

• HFRX Equity Hedge 1,124.43 -.24%

• HFRX Equity Market Neutral 938.97 +.07%

Sentiment/Internals

• NYSE Cumulative A/D Line 191,103 -.09%

• Bloomberg New Highs-Lows Index -76 -685

• Bloomberg Crude Oil % Bulls 21.88 +9.40%

• CFTC Oil Net Speculative Position 268,944 +15.63%

• CFTC Oil Total Open Interest 1,742,051 -.95%

• Total Put/Call 1.27 +58.75%

• OEX Put/Call 1.31 -7.75%

• ISE Sentiment 70.0 -22.22%

• NYSE Arms 1.19 +91.93%

• Volatility(VIX) 13.99 +12.37%

• S&P 500 Implied Correlation 53.74 -5.29%

• G7 Currency Volatility (VXY) 9.98 +.40%
• Emerging Markets Currency Volatility (EM-VXY) 8.49 +6.5%

• Smart Money Flow Index 12,165.66 +.22%

• Money Mkt Mutual Fund Assets $2.601 Trillion +.80%

• AAII % Bulls 49.0 +27.2%

• AAII % Bears 21.6 -26.5%

Futures Spot Prices

• CRB Index 284.89 -.94%

• Crude Oil 94.15 -1.95%

• Reformulated Gasoline 283.90 -2.1%

• Natural Gas 4.24 +4.41%

• Heating Oil 285.69 -2.81%

• Gold 1,386.60 +2.1%

• Bloomberg Base Metals Index 191.44 -.71%

• Copper 329.55 -.53%

• US No. 1 Heavy Melt Scrap Steel 349.33 USD/Ton unch.

• China Iron Ore Spot 123.20 USD/Ton +.08%

• Lumber 297.40 -5.65%

• UBS-Bloomberg Agriculture 1,478.69 +.54%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 6.8% -20 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.3206 +9.61%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 115.72 +.14%

• Citi US Economic Surprise Index -15.30 +2.2 points

• Citi Emerging Markets Economic Surprise Index -51.0 -3.6 points

• Fed Fund Futures imply 46.0% chance of no change, 54.0% chance of 25 basis point cut on 6/19

• US Dollar Index 83.70 -.60%

• Euro/Yen Carry Return Index 136.61 -1.13%

• Yield Curve 176.0 +5 basis points

• 10-Year US Treasury Yield 2.01% +6 basis points

• Federal Reserve's Balance Sheet $3.356 Trillion +1.35%

• U.S. Sovereign Debt Credit Default Swap 30.26 +1.49%

• Illinois Municipal Debt Credit Default Swap 119.0 +1.71%

• Western Europe Sovereign Debt Credit Default Swap Index 81.59 -4.57%
  

• Emerging Markets Sovereign Debt CDS Index 188.09 +6.41%
  

• Israel Sovereign Debt Credit Default Swap 117.12 -4.0%

• China Blended Corporate Spread Index 408.0 +8 basis points

• 10-Year TIPS Spread 2.25% -1 basis point

• TED Spread 23.75 -.5 basis point

• 2-Year Swap Spread 16.0 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 +3.25 basis points

• N. America Investment Grade Credit Default Swap Index 75.49 +7.54%
  

• European Financial Sector Credit Default Swap Index 142.35 +8.81%
  

• Emerging Markets Credit Default Swap Index 259.92 +5.44%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 106.0 +8 basis points

• M1 Money Supply $2.520 Trillion +.13%

• Commercial Paper Outstanding 1,033.40 +2.0%

• 4-Week Moving Average of Jobless Claims 339,500 +200

• Continuing Claims Unemployment Rate 2.3% unch.

• Average 30-Year Mortgage Rate 3.59% +8 basis points

• Weekly Mortgage Applications 791.0 -9.77%

• Bloomberg Consumer Comfort -29.4 +.8 point

• Weekly Retail Sales +2.60% -20 basis points

• Nationwide Gas $3.65/gallon +.03/gallon

• Baltic Dry Index 828.0 -2.59%

• China (Export) Containerized Freight Index 1,057.92 -1.13%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 +33.3%

• Rail Freight Carloads 250,156 +.76%

Best Performing Style

• Large-Cap Value -1.02%

Worst Performing Style

• Mid-Cap Value -1.97%

Leading Sectors

• Gold & Silver +3.2%

• Coal +3.1%

• Disk Drives +2.4%

• Alt Energy +1.7%

• Oil Tankers +1.0%

Lagging Sectors

• Internet -2.8% 

• I-Banking -3.0%

• Networking -3.4%

• Utilities -3.4%

• REITs -3.8%

Weekly High-Volume Stock Gainers (12)

• SKS, WBSN, RUE, SSNI, BAH, CBST, LPS, DY, PNX, SGNT, SCTY and MNRO

Weekly High-Volume Stock Losers (14)

• CCL, ARRS, RPAI, MDCO, FPO, HGG, DXM, HR, IRWD, UNXL, OSIS, IGTE, TISI and GME

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Profit-Taking, Retail/Tech Sector Weakness

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Light

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 14.32 +1.78%

• ISE Sentiment Index 78.0 -10.34%

• Total Put/Call 1.23 +23.0%

• NYSE Arms 1.13 +18.80%

Credit Investor Angst:

• North American Investment Grade CDS Index 75.64 +3.27%

• European Financial Sector CDS Index 142.35 +4.70%

• Western Europe Sovereign Debt CDS Index 78.66 -1.26%

• Emerging Market CDS Index 259.92 +1.24%

• 2-Year Swap Spread 16.0 +.5 bp

• TED Spread 23.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 +.5 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 176.0 -1 bp

• China Import Iron Ore Spot $123.20/Metric Tonne n/a

• Citi US Economic Surprise Index -15.30 +2.5 points

• 10-Year TIPS Spread 2.25 unch.

Overseas Futures:

• Nikkei Futures: Indicating -342 open in Japan

• DAX Futures: Indicating +13 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my to (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• German First-Quarter Growth Damped by Construction, Investment. The German economy’s return to growth in the first quarter was hampered by declines in construction activity and investment as a severe winter and a recession in Europe damped demand. Construction fell 2.1 percent from the fourth quarter and capital investment dropped 1.5 percent, the Federal Statistics Office in Wiesbaden said today. Gross domestic product increased 0.1 percent, the office said, confirming a May 15 estimate. From a year earlier, the economy shrank 0.2 percent when adjusted for working days.

• Corporate Bond Sales Slow in Europe on Fed Stimulus Speculation. Sales of corporate bonds in Europe fell to the lowest in nearly two months this week as concern the Federal Reserve will taper asset purchases roiled markets. U.K. tour operator Thomas Cook Group Plc (TCG) and French real estate investment company Gecina SA (GFC) were among companies that sold 8.4 billion euros ($10.9 billion) of bonds, down from 19.5 billion euros last week and the least since the week ending April 6, according to data compiled by Bloomberg. The cost of insuring the debt rose, with the Markit iTraxx Europe Index of credit-default swamps climbing 4.5 basis points to 96. 

• European Stocks Post Weekly Drop Amid Fed Stimulus Signs. European stocks posted their first weekly loss in more than a month as investors debated when the Federal Reserve will scale back momentary stimulus and Chinese manufacturing unexpectedly shrank.FirstGroup Plc tumbled 43 percent after the U.K. bus and rail company halted its dividend and announced a rights offer to avert a credit downgrade. SAP AG, the largest maker of enterprise-management software, dropped the most in 21 months after changing its board structure. Bankia SA (BKIA), the nationalized Spanish bank, sank 85 percent before a debt swap next week. The Stoxx Europe 600 Index fell 1.7 percent to 303.35 this week, including the worst drop in 10 months on May 23 after Fed Chairman Ben S. Bernanke said the central bank will consider paring its stimulus measures if the U.S. economy improves.

• Dollar Bond Sales Slump in Asia as Costs Leap on Stimulus Doubts. Sales of U.S. dollar-denominated bonds by Asian issuers slumped more than 70 percent this week as yields rose the most in almost four months. Vedanta Resources Plc, the miner controlled by billionaire Anil Agarwal, led $2.1 billion of new sales in the region outside Japan, the least since the week ending April 5 in which companies halted issuance through a holiday period in Hong Kong and China, data compiled by Bloomberg show. Yields climbed 13 basis points to 4.4 percent as of yesterday, on track for the biggest weekly rise since the start of February, according to JPMorgan Chase & Co. indexes. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 1 basis point to 106 basis points as of 8:21 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its biggest weekly increase in nine weeks, and yesterday rose to the highest since May 2, according to data provider CMA. The Markit iTraxx Japan index fell 3.5 basis points to 81.25 basis points as of 9:20 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark climbed 8.33 basis points yesterday to 82.33, the steepest increase this year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market. The Markit iTraxx Australia index declined 0.5 basis point to 103.5 as of 11:07 a.m. in Sydney, according to Westpac Banking Corp. prices. The measure also touched a three-week high yesterday, CMA data show.

• HSBC Says ‘Worrying’ Countries Act Unilaterally on Rules. HSBC Holdings Plc (HSBA) Chairman Douglas Flint said it’s “worrying” that more countries are acting unilaterally on regulation as financial oversight undergoes its biggest change since the Great Depression of the 1930s. “This puts at risk globally consistent regulation and also risks ‘balkanizing’ firms’ capital and liquidity resources,” Flint told shareholders at the bank’s annual meeting in London today. “This risks a retreat from globalization and greater financial exclusion -- neither consistent with the pursuit of growth.” He didn’t mention specific countries. 

• Copper Declines for Second Straight Day on China Outlook. Copper futures declined for the second straight day on signs of slowing economic growth in China, the world’s biggest consumer of industrial metal. Yesterday, a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics showed a preliminary reading of 49.6 for May, below the level of 50 separating growth and contraction, driving copper down 2.3 percent, the most in three weeks. “The weak Chinese numbers hung heavily over the metals group and seemed to be dwarfing concern about the legitimate supply bottlenecks that have cropped up in the copper complex the last few weeks,” Edward Meir, an analyst at INTL FCStone in New York, said in a report. “It remains to be seen if China will invest more in urbanization projects.” Copper futures for July delivery declined 0.5 percent to 3.288 a pound at 10:29 a.m. on the Comex in New York. The price headed for the second straight weekly drop.

• More Evidence Shows Teens Prefer Twitter, Reddit to Facebook(FB). Some of Facebook’s (FB) core users have told researchers that their enthusiasm is waning with each visit to the social network. They get increasingly annoyed when their friends share inane details or broadcast the trivial drama of their lives. Furthermore, keeping up with the daily discourse on Facebook is becoming a chore for some and a source of stress for others.

Wall Street Journal:

• Google(GOOG) Plans to Fund, Develop Wireless Networks in Emerging Markets.

Fox News:

• Obama Admin's Attempts to Intimidate Will Fail by Roger Ailes.

• Nearly 70 percent of adoption credit claims were audited by IRS, report finds.

CNBC:

• Nikkei Goes for Wild Ride for Second Day. Japan's stock market witnessed a second-straight day of heightened volatility on Friday, swinging from gains of 3 percent to deep losses before bouncing back again, leaving traders puzzled as to what was going on in Asia's biggest stock market. The Nikkei, which rose about 3 percent in early trade, fell more than 3 percent in the final hour of Tokyo trade before paring those losses. The Nikkei closed up 0.9 percent at14,612 points.

Zero Hedge:

• Why Italian Bonds Have A Long Way Down To Go. (graph)

• The Rout In Spain.

• The Housing UnRecovery Is Here: Architectural Billings Plunge Most Since 2008. (graph)

• Spot The Trend In US Durable Goods And CapEx Spending. (graph)

• The Two Charts That Keep Draghi Up At Night.

• European Bonds Plunge Most In 8 Months, Stocks Worst Week In 2 Months. (graphs)

• Europe Opens $80 Trillion Shadow Banking Pandora's Box: Will Seek To Collapse Repo "Collateral Chains".

Business Insider:

• This Week's Volatility Reflects A Major Change In The Market's Trend.

• Why Democrats Can't Be Trusted To Control Wall Street by Robert Reich. Who needs Republicans when Wall Street has the Democrats? With the help of congressional Democrats, the Street is rolling back financial reforms enacted after its near meltdown.

• Jon Stewart Hammers Obama And The Justice Department For Leak Investigations On Journalists. (video)

• 70 Out Of 85 Lines In A House Committee Financial Regulation Bill Were Written By Citigroup(C).

• There's No Magic Keynesian Bullet That'll Save Europe.

@RonnieSpence: 

• ALL YOU NEED TO KNOW ABOUT SENTIMENT:NYSE Margin Debt hit all time record highs in April. (graph)

NBC News:

• Holder OK'd search warrant for Fox News reporter's private emails, official says. Attorney General Eric Holder signed off on a controversial search warrant that identified Fox News reporter James Rosen as a “possible co-conspirator” in violations of the Espionage Act and authorized seizure of his private emails, a law enforcement official told NBC News on Thursday.

Reuters: 

• COMMENT: Nikkei nosedive not just a correction.

• Valeant Pharma(VRX) near deal to acquire Bausch & Lomb -source.

• Hedge funds bet on Aussie dollar slide. Hedge funds hungry for trade ideas after the success of their bets on Japan's recovery have been turning their attention to the Australian dollar, betting the end of the commodities boom will drive down the currency. 

• Brazil bank lending slows in April, sign of uneven economy. Growth in Brazil's bank lending slowed in April, the latest sign that an expansion in Latin America's largest economy remains uneven in the face of faster inflation and a robust job market. Outstanding bank loans in Brazil totaled a record 2.45 trillion reais ($1.2 trillion) at the end of April, while growth in bank lending slightly slowed to 16.4 percent in the 12 months through March, ther central bank said in a report on Friday.

Telegraph:

• Southern Europe slides back to 'analogue dark age'. A lack of digital investment and the shrinking number of local subsidiaries owned by large firms is sending Southern European states on a "backwards slide" to an analogue age, a new study has revealed.

Xinhua:

• China's Xi Vows Not to Sacrifice Environment for Growth. China to promote green, sustainable, low-carbon development pattern, citing President Xi Jinping's remarks to a study session. China to set, "strictly observe" environmental "red line" restricting industrial development to protect nature. Nature needs more space to restore itself, he said. China to set up evaluation system to cover waste of resources, environmental damage, ecological benefits.