Stocks Reversing Lower into Afternoon on China Bubble-Bursting Fears, Greece Bailout Referendum Concerns, Global Growth Worries, Financial/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 17.05 +5.97%

• Euro/Yen Carry Return Index 142.55 +.15%

• Emerging Markets Currency Volatility(VXY) 8.86 -.67%

• S&P 500 Implied Correlation 61.75 +2.37%

• ISE Sentiment Index 62.0 -11.4%

• Total Put/Call 1.0 -11.5%

• NYSE Arms 1.06 -16.27% 

Credit Investor Angst:

• North American Investment Grade CDS Index 68.45 +.03%

• America Energy Sector High-Yield CDS Index 1,225.0 +.84%

• European Financial Sector CDS Index 89.43 +2.22%

• Western Europe Sovereign Debt CDS Index 25.49 -2.56%

• Asia Pacific Sovereign Debt CDS Index 58.42 -1.17%

• Emerging Market CDS Index 301.89 -1.04%
  

• iBoxx Offshore RMB China Corporates High Yield Index 120.76 +.06%

• 2-Year Swap Spread 26.0 +1.5 basis points

• TED Spread 27.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -20.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 175.0 +2.0 basis points

• China Import Iron Ore Spot $55.63/Metric Tonne -6.03%

• Citi US Economic Surprise Index -25.10 -1.0 point

• Citi Eurozone Economic Surprise Index -4.4 +.5 point

• Citi Emerging Markets Economic Surprise Index -18.60 +2.8 points

• 10-Year TIPS Spread 1.92 +1.0 basis point

Overseas Futures:

• Nikkei 225 Futures: Indicating -12 open in Japan 
• China A50 Futures: Indicating -329 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail/medical sector longs and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• Greece Needs $40 Billion in New Euro-Area Financing, IMF Says. Greece needs at least another 36 billion euros ($40 billion) over the next three years from euro-area states and easier terms on existing debt to keep the nation’s finances sustainable, according to an International Monetary Fund analysis. Even if Greece delivers on reforms proposed by its international creditors, euro countries will have to come up with new financing and ease the nation’s debt load through steps such as doubling maturities on existing loans, according to a June 26 “preliminary draft” debt-sustainability analysis released Thursday.

• Defiant Varoufakis Says He’ll Quit If Greeks Endorse Austerity. Yanis Varoufakis said Greece won’t “extend and pretend” that it can pay its debts, vowing to quit as finance minister if voters don’t support the government in Sunday’s referendum. With banks shut and the economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt. 

• Merkel Said to Brace for Greece Turmoil Whichever Way Vote Goes. German Chancellor Angela Merkel’s government is bracing for a protracted phase of political turmoil in Greece followed by tortuous negotiations even if Greeks vote for further austerity on Sunday, according to two people involved in policy making in Berlin. A quick solution to the crisis in Greece isn’t in sight because European rules mean any new negotiations on financial help would be more complex than to date, one of the officials said. The backing of German lawmakers is required even just to restart aid talks, inserting additional uncertainty at a time when trust in Greek intentions is at a low, the second official said. Both asked not to be named discussing government deliberations.

• Greek Referendum on Bailout Too Close to Call, Poll Shows. The battle lines are drawn in Greece. Now the politicians are waiting for the people. A GPO poll cited by euro2day.gr said 47 percent leaned toward a “yes” vote, an endorsement of austerity and the international bailout. The “no” camp, the government’s position rejecting those terms, was 43 percent. The margin of error in the survey of 1,000 people was 3.1 percentage points. 

• Here's the Grim Future That Awaits Greece's Babies Born in the Crisis. Greek children face a very different fate than their German counterparts, economic forecasts show.

• Shanghai Composite Tumbles Below 4,000 as State Support Fails. China’s Shanghai Composite Index fell below the 4,000 level for the first time since April, as margin traders continued to unwind positions amid doubts over the effectiveness of government measures to support equities. The benchmark stock index slumped 3.5 percent to 3,912.77 at the close. The gauge has tumbled 24 percent from its June 12 peak, helping wipe out at least $2.4 trillion of value. Fifteen stocks dropped for each one that rose Thursday, with industrial, power and commodity shares leading losses. The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past.

• China to Individual Investors: Go Ahead, Bet the House on Stocks. In China, you can now literally bet the house on the nation’s tumultuous stock market. Under new rules announced Wednesday by the country’s securities regulator, real estate has become an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker. While the rule change was intended to help revive confidence in China’s $7.7 trillion stock market after a 24 percent slump in less than three weeks, analysts say securities firms may be reluctant to follow through. Accepting real estate as collateral would tether brokerages to another troubled sector of the economy, adding to risk-management challenges as they try to navigate the world’s most-volatile stock market. “It does come across as relatively desperate,” said Wei Hou, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “Globally, illiquid assets such as real estate are not accepted as collateral as they are very hard to liquidate.”

• Three Seconds Has Become an Eternity in the Chinese Stock Market. Lack of continuous pricing prevents investors from using strategies that rely on speed and precision, a hurdle that’s gotten even bigger in recent weeks as volatility in Chinese shares climbed to the most extreme levels worldwide.

• Chinese Stocks Just Lost 10 Times Greece's GDP. "What happens in China will turn out to be far more consequential than any sting that Greece may deliver," says HSBC's Neumann. As China's equity markets lose their roar, the risk is that demand more broadly on the Mainland could take a hit. That would knock out an essential engine of world demand over the past decade. As dramatic as events in Greece currently appear, however, ultimately, it's difficult to see these proving decisive for the world economy.''  

• U.S. Sees Islamic State Casting Wide Net to Catch Young Recruits. How is Islamic State different from al-Qaeda? According to the U.S. Department of Justice, one answer lies in a much more relaxed attitude to recruitment and targets. Al-Qaeda exercises tight control of its membership and focuses on carefully planned large-scale “spectacular” attacks, Assistant Attorney General John Carlin told reporters in London Wednesday. 

• European Stocks Drop Amid Greek Crisis With Automakers Falling. European stocks declined for the third time in four days, as investors awaited a Greek referendum on creditors’ proposals this weekend. The Stoxx Europe 600 Index lost 0.4 percent to 385.46 at the close in London, after rising as much as 0.3 percent in the morning.

• Shale Drillers' Safety Net Is Vanishing. The insurance protecting shale drillers against plummeting prices has become so crucial that for one company, SandRidge Energy Inc., payments from the hedges accounted for a stunning 64 percent of first-quarter revenue. Now the safety net is going away. The insurance that producers bought before the collapse in oil -- much of which guaranteed minimum prices of $90 a barrel or more -- is expiring. As they do, investors are left to wonder how these companies will make up the $3.7 billion the hedges earned them in the first quarter after crude sunk below $60 from a peak of $107 in mid-2014. 

• Iron Exports From Australia’s Port Hedland Expand to Record. Iron ore exports from Australia’s Port Hedland climbed to an all-time high in June as mining companies in the world’s largest shipper increased low-cost supplies. Prices tumbled the most in a year. Total shipments jumped 14 percent to 38.4 million tons last month from a year earlier, the Pilbara Ports Authority said on Thursday. That exceeded the previous record of 38 million tons in May, according to port authority data compiled by Bloomberg. Exports to China were 32.6 million tons, also a record.

• September Fed Liftoff Stays in Play Even as Pay Gains Disappoint. Thursday’s jobs report probably keeps Federal Reserve officials on course to raise rates as soon as September, economists said, although the lack of wage pressure may damp their confidence in the outlook for higher inflation. “The Fed would very much like to raise interest rates in September, and we think they will, but it is far from a sure thing,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. 

• Janus’s Gross Says Economic Cycle Driven by ‘Artificial Rates’. Bill Gross, manager of the $1.5 billion Janus Global Unconstrained Bond Fund, said the U.S. economic cycle is weak and driven primarily by “monetary stimulation” and “artificial interest rates.” Gross, in an interview with Bloomberg Radio, said the current economic environment has the potential to create asset bubbles that may ultimately pop, and the Federal Reserve will have to weigh that, along with employment and inflation data, when it decides whether to raise rates. Although Fed Chair Janet Yellen and Vice Chair Stanley Fischer are “neo-classically demand-driven economists, the ground underneath them is shifting to more monetary, liquidity, financial conditions focus,” Gross said. He added that rates could rise in September. 

• Hedge Funds Had a Really Bad Day This Week. Huge drawdowns after the referendum news. On Monday, as the deteriorating situation in Greece dominated the headlines and roiled markets, some of the world's most prominent hedge funds experienced their largest "drawdown" since August 2007, according to Barclays analyst Keith Parker. Why the big move on Monday? As Parker puts it, it seems a lot of these hedge funds have long positions in peripheral euro-zone bonds. Greek government bond yields jumped sharply on Monday, as markets digested the news of a surprise referendum. The below shows the correlation between the one-month return of macro hedge funds and various asset classes. You can see hedge fund returns are moving more in tandem with Italian government bonds than they are with the euro or oil, for instance.

• Hedge Funds Decline in June as Stocks Tumble on Greek Woes. Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent this year, according to a letter sent to investors, a copy of which was obtained by Bloomberg News. David Einhorn’s main hedge fund at Greenlight Capital fell 4.3 percent in the month, bringing year-to-date losses to 3 percent. Hedge funds on average fell 1.2 percent last month, curbing year-to-date profits to 1.3 percent, according to the HFRX Global Hedge Fund Index.

Wall Street Journal:

• Hilsenrath Analysis: Jobs Report Keeps Fed on Track for 2015 Rate Increase. The Labor Department‘s June employment report, released Thursday, broadly confirmed the Federal Reserve‘s narrative about how the U.S. economic expansion is unfolding in 2015, keeping the central bank on track to raise short-term interest rates later this year, barring some new setback.

• Trader Fights the Market Tide in Shanghai. Ye Fei’s flagship fund was up 388% for the year when the Shanghai market peaked June 12. As the Shanghai Composite slid a further 5% Wednesday, China’s best-performing fund manager fought to save his clients’ investments from a laptop in a basic hotel room. Ye Fei rode the boom beautifully. As of June 12, when the Shanghai Composite Index hit its recent peak, his flagship Yi Tian Ya Li fund was up 388% for the year, making it the top performer among 1,664 “private securities-investment funds” tracked by...

• BP Agrees to Pay $18.7 Billion to Settle Deepwater Horizon Oil Spill Claims. Settlement includes all federal and state claims.

• Anthem(ANTM), Cigna(CI) Rekindle Merger Talks. Cigna also continues to pursue possible takeover of Humana(HUM).

MarketWatch.com: 

• 30-year mortgage rate rises to 4.08%, highest since October. 

• Spain is trying to avoid being Europe’s next debt bomb. But the economy is still shaky and politics are simmering. “We’re at a strong phase of the [economic] cycle here, but cycles aren’t always going to be the same. In fact they’re running a quite large deficit at a strong moment in the cycle,” Hugh said. “How long it is or how it’s all going to work out in the medium term, we don’t know because we haven’t been here before.”

• 3 things to know about Puerto Rico’s debt crisis.

Fox News: 

• US reportedly blocks Arab allies' attempts to deliver weapons to Kurds fighting ISIS. (video) The U.S. has reportedly blocked any attempts by Middle East allies to fly weapons to the Kurds fighting the Islamic State in Iraq. The Telegraph reports that U.S. allies say President Obama and other Western leaders, including Britain’s David Cameron, aren’t showing leadership over the escalating ISIS crisis in Iraq, Syria and throughout the Middle East.

ZeroHedge:

• IMF Bolsters Greek "No" Vote, Says Country Needs Debt Haircut.

• Finally The Truth: "The Greek Debt Is So Big Everyone Understands It Won’t Be Repaid". (graph)

• Crude Slides After US Oil Rig Count Rises For First Time Since December. (graph)

• The Last Time This Happened In Credit, Bernanke Unleashed QE3. (graph)

• Americans Not In The Labor Force Soar By 640,000 To Record 93.6 Million; Participation Rate Drops To 1977 Levels. (graph)

• Since 2007 The US Has Lost 1.4 Million Manufacturers, Gained 1.4 Million Waiters And Bartenders. (graph)

• Factory Orders Scream Recession: Annual Drop Biggest Since 2008. (graph)

• Part-Time Jobs Surge By 161,000; Full-Time Jobs Tumble By 349,000. (graph)

• June Payrolls Increase By 223K, Less Than Expected; Unemployment Rate Drops To 5.3%. (graph)

• The Coming Era Of Pension Poverty. (graph)

Business Insider:

• This poll is absolutely brutal for Chris Christie.

• Analysts say Tesla(TSLA) shares are too expensive, raise their price target 177%.

• June had more IPOs than any month since August 2000. (graph)

• Russia is challenging Nordic countries along their borders.

• A Greek politician told us Grexit will '100%' happen if 'No' wins on Sunday — and plans are already being made.

Washington Post:

• In China, hostile foreign forces blamed for bursting stock market bubble. “Believe in my country,” Cao Zenghui, deputy general manager of Sina Weibo, whose company runs China’s main microblogging service and who personally has more than 100,000 followers, posting a national flag as his profile image. “It is not just a stock market issue any more. I will fight with forces who short China’s economy. No eggs can remain unbroken when the nest is upset.”

Politico:

• Soros helps pro-Clinton Super PACs to $20 million haul. A trio of pro-Hillary Clinton groups raised more than $20 million in the first half of the year, including at least $1 million from billionaire financier George Soros, POLITICO has learned.

Financial Times: 

• Chinese relaxation of lending rules fails to support flagging stocks. China Securities Regulatory Commission moved late on Wednesday to relax collateral rules on margin loans. But that failed to staunch market losses on Thursday, with the Shanghai Composite Index closing down 3.5 per cent and the Shenzhen stock exchange finishing the day down 5.6 per cent. The move to loosen rules on margin finance — using borrowed money to trade shares — represents something of a climbdown by the regulator, which had previously tried to curb leveraged bets.

Telegraph:

• Greece crisis live: IMF says Greece needs €50bn bail-out as Varoufakis says he will resign if there is a "yes" vote. An estimated €8bn has been withdrawn from banks in the last two weeks, as capital controls begin to take their toll.

EKathimerini:

• Greece May See Some Foods Shortages By Next Week. Shortages of commodities of broad consumption such as imported meat, beans, rice will start to be felt next week, citing people from the retail commerce sector.
  
  According to an opinion poll conducted for Efimerida ton Syntakton newspaper between Saturday and Tuesday, 54% of surveyed Greeks are planning to vote "no" with33% planning to vote "yes."
  The poll conducted by the ProRata institute also showed that 86% of those surveyed planned to vote on Sunday.
  - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf
  'Oxi' (No) Leads in Polls Before Sunday Vote in Greece - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf

CNA:

• Greek Shipowners Consider Moving HQs to Cyprus. Greek shipowners, ship management companies are considering moving their HQs to Cyprus given strong economic uncertainty in Greece.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.95%

Sector Underperformers:

• 1) Banks -1.33% 2) Alt Energy -1.15% 3) Steel -1.02%

Stocks Falling on Unusual Volume:

• WAL, CNC, NI, GNRC, CTSH, GTS, CPHD, AHS, ISCA, BAX, WU, GRUB, VTAE, AVAV, DMRC, AZZ, HUM, GCI, ZGNX, LC, WPPGY, UBSI, MNTA, FSTR, EGRX, STL, HW, CPHD, VSLR and ZGNX

Stocks With Unusual Put Option Activity:

• 1) DRI 2) SCHW 3) GREK 4) LEN 5) XME
  

Stocks With Most Negative News Mentions:

• 1) RF 2) UAL 3) HEES 4) FFIV 5) ICON
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.03%

Sector Outperformers:

• 1) Utilities +1.25% 2) HMOs +1.22% 3) Gold & Silver +1.08%
  

Stocks Rising on Unusual Volume:

• AGTC, XOOM, HNT, MDCO, ENR, PRGS, GTLS, AMBC and BP

Stocks With Unusual Call Option Activity:

• 1) EPD 2) FIT 3) CLR 4) IMMU 5) LC
  

Stocks With Most Positive News Mentions:

• 1) ENR 2) HNT 3) T 4) OSK 5) TE
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 7.9% Below 100-day average
• 3 Sectors Rising, 7 Sectors Declining
• 49.1% of Issues Advancing, 47.5% Declining
• 46 New 52-Week Highs, 70 New Lows
• 43.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.6
• Vix 16.6
• Total Put/Call 1.03
• TRIN/Arms .98

Thursday Watch

Evening Headlines 

Bloomberg:  

• Europe Rebuffs Greek Overture as Poll Shows Voters Leaning ‘Yes’. Greek Prime Minister Alexis Tsipras and his creditors sparred heading into Sunday’s referendum on austerity as a poll suggested voters are inclined to accept deeper cuts. As rationing of pensions began in the first week of capital controls, a poll showed a narrow majority going against the government’s wishes in order to keep the euro. A late compromise bid by Tsipras, who’s urging citizens to vote “no,” was roundly quashed by the rest of the euro region, meaning negotiations will have to wait until after the plebiscite.

• Greece Pushes Draghi’s Euro Nearer Reverse as Solidarity Fades. “The idea was to create an irrevocable monetary union that once you’re in, it’s forever,” said Charles Wyplosz, professor of economics at the Graduate Institute of International and Development Studies in Geneva. “The permanence is very much in doubt, especially because you really don’t have a lender of last resort. Under certain circumstances, the central bank can drop you.” 

• U.S. Markets Expect Greek Deal Despite the Drama: Cuggino. (video)

• For China’s Hottest Stocks, a 77% Gain in Four Days Is Bad News. In most stock markets, a 77 percent return in four days would leave investors feeling ecstatic. In China, it’s just the opposite -- at least when it comes to initial public offerings. That four-day advance in Guotai Junan Securities Co., which completed China’s biggest IPO in five years last month, is the worst start among 190 initial share sales on mainland bourses this year. Every other one recorded a gain at or near the 92 percent maximum allowed, according to data compiled by Bloomberg. While regulatory pressure on companies to keep their IPO prices low has led to instant gains once the shares start trading, returns are coming under pressure from a flood of new equity and a tumble in the Shanghai Composite Index. The Bloomberg China IPO Index has dropped 25 percent since the end of May, even as authorities considered a suspension of new deals to ease supply concerns. “Insanity has a limit,” said Francis Lun, the chief executive officer at Geo Securities Ltd. in Hong Kong. “If Guotai keeps rising like a penny stock, it will soon become the biggest company in the world, bigger than Apple.”

• Egypt on War Footing as Sinai Attack Follows Cairo Assassination. Egypt’s army suffered its deadliest blow in years of fighting Islamist militants in the Sinai peninsula, losing dozens of soldiers in a wave of attacks as authorities vowed to respond with more firepower and harsher laws. More than 60 security personnel and six civilians were killed on Wednesday by assailants who used rockets and car bombs, according to the security directorate in north Sinai, which borders Israel and the Gaza Strip. The army command in Cairo gave a confirmed death toll of 17 soldiers in a televised statement, and said more than 100 of the jihadists were killed as F16 jets and Apache helicopters were deployed in pursuit. A group linked to Islamic State claimed responsibility.

• Chinese Stocks Slump as Support Steps Fail to Stem Rout. Chinese stocks slumped, with a gauge of volatility jumping to its highest level since 2008, as margin traders unwound debt and the regulator moved to support shares. The Shanghai Composite Index slid 2.7 percent to 3,946.09 at 10:20 a.m., dragged down by industrial and utility shares.

• Asian Stocks Rise for Third Day as Yen Weakness Buoys Japan. Asian stocks rose for a third day, following gains in Europe and America, with a weaker yen buoying equities in Tokyo as investors awaited developments in Greece and U.S. jobs data. The MSCI Asia Pacific Index gained 0.1 percent to 146.69 as of 9:01 a.m. in Tokyo. Japan’s Topix index advanced 1 percent after the yen slid 0.5 percent Wednesday.

Wall Street Journal: 

• Cash Crunch Hits Everyday Life in Greece. Shutdown of Greece’s banking system cripples businesses, makes it hard for people to pay bills; just €1 billion in cash left. 

• Asia’s Rich Show Love for Junk Bonds. Private-bank clients in region have loaded up on high-yield debt, a market dominated by Chinese property firms. Asia’s wealthy investors have bought nearly $17 billion of high-yield bonds in the past three years, more than double what they purchased in the previous three years despite rising risks among some of the biggest issuers. High-yield-bond issuance has soared in Asia since the start of 2013, and rich individual...

• A Government Snoop That Puts the NSA To Shame. The Consumer Financial Protection Bureau plans to monitor 95% of all credit-card transactions by 2016.

• Free Raises for Everyone. Obama’s plan to help Democrats stay overtime in Washington. If after more than six years as President the economy hasn’t increased take-home pay, here’s an idea: Declare that millions of Americans get a raise by government fiat.

Fox News:

• State Dept. withholds ‘classified’ info from Clinton emails, despite claim of 'no classified material'. (video) A State Department spokesman said Wednesday that details from 25 emails were deemed classified and withheld from the 3,000-page trove of Hillary Clinton documents released overnight -- despite the former secretary of state claiming she never sent classified material on her personal email. State Department spokesman John Kirby acknowledged at a briefing that details from the 25 emails are now considered "classified." The messages were released, with those portions redacted. However, Clinton declared in March that she "did not email any classified material to anyone" on her account.

MarketWatch.com:

• Why are these ‘government’ heads getting raises of 567%? Did you hear the heads of the mortgage giants are getting a raise? Yep. They’ll be earning about six times more than they did last year. Hey, that’s more than good enough for government work, right? In an earlier era, this never would have happened. Say, last year, for instance.

Zero Hedge:

• Athens On The Potomac - It Could Never Happen Here, Right? (graph)

• The "Smartest Money" Is Liquidating Stocks At A Record Pace: "Selling Everything That’s Not Bolted Down". (graph)

• "When People Jump In Even Though It's Overpriced, That's A Bubble" Shiller Warns. (video)

• China Races To Rescue Stocks As Margin Mania Unwind Wreaks Havoc.

• These Six States Just Raised Their Gasoline Tax.

• The Current Oil Price Slump Is Far From Over. (graph)

• Domestic Auto Sales Tumble, Miss For 6th Of Last 7 Months (Don't Tell Phil LeBeau). (graph)

• "The Fallout Ratio" Is Flashing Red - The Chart That Realtors Don't Want You To See. (graph)

• Stocks Surge Despite Dashed Hellenic Hope, Crude Carnages. (graph)

Business Insider:

• Whole Foods(WFM) CEOs admit to charging customers too much.

• Xoom(XOOM) shares skyrocket more than 20% after PayPal bid.

• GET READY: Here's your complete preview of jobs Thursday.

• Economists agree...A huge tax hike is coming. As for financial assets, the best way to protect those gains is simply to sell them – both before bubbles burst, and before capital gains rates get increased to ordinary tax rates.

• US military morale is reportedly at 'rock bottom' again.

• It turns out the NSA was collecting voice calls, photos, passwords, documents, and much more.

• Fauxmentum: The risks of growth at all costs.

• Forget Greece, the China bubble is the real threat to the global economy.

• China is freaking out over the volatility in its stock market.

• Episcopalians overwhelmingly voted to allow religious weddings for same-sex couples.

• China's plummeting stock market could bring oil prices down with it.

Financial Times:

• Tsipras urges Greeks to defy creditors’ ‘blackmail’. Greece’s prime minister accused Europe’s leaders of attempting to “blackmail” Greek voters, just hours after apparently holding out an olive branch to the country’s creditors by accepting most of the terms of the economic reform plan they had tabled last weekend.

Telegraph:

• Europe has suffered a reputational catastrophe in Greece. The eurozone has shown itself unable to manage its basic moral responsibilities. 

• Alexis Tsipras refuses to bow in the face of threats to shut down Greece's banking system. Greek prime minister vows to press ahead with referendum that has been labelled as 'dumb' by Germany and could destroy the banking system warn eurozone officials.

• Germany will not 'pour money' into Greek black hole, warns Angela Merkel ally. Greek crisis: Athens must take steps to repay the IMF if the country is to unlock fresh cash, says Michael Fuchs, as he brands Sunday's referendum a 'stupid' idea.

China Daily:

• China's Shenzhen Home Prices Reach Record Levels. New home prices rose 6.58% in June vs. month earlier, citing survey by China Index Academy. Prices for existing houses rose 8.59% in June m/m, 19.12% y/y, according to the report.

China Securities Journal:

• China Unlikely to Cut Interest Rate in 2H. China isn't likely to cut rates in 2H and may only do so if inflation is lower than 1.5% this year, Chen Bingcai, researcher at Chinese Academy of Governance, writes in a commentary.

Evening Recommendations 

• None of Note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 111.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 59.0 -.75 basis point.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (ISCA)/.40

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for June is estimated to fall to 233K versus 280K in May.

• The Unemployment Rate for June is estimated to fall to 5.4% versus 5.5% in May.

• Average Hourly Earnings for June are estimated to rise +.2% versus a +.3% gain in May.

• Initial Jobless Claims are estimated to fall to 270K versus 271K the prior week. 

• Continuing Claims are estimated to fall to 2236K versus 2247K prior.

10:00 am EST

• Factory Orders for May are estimated to fall -.5% versus a -.4%.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Retail Sales report, ISM New York for June, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (DAL) June Traffic report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.