Bear Radar

Style Underperformer:

• Small-Cap Value -.2%

Sector Underperformers:

• 1) Gaming -2.2% 2) Airlines -1.4% 3) Disk Drives -1.4%

Stocks Falling on Unusual Volume:

• IONS, PSTG, ANF, SIG, BRS, WBMD, APIC, MOV, CSC, YDKN, GES, NTAP, RUBI, RYI, CUK, DL, CM, EXCU, CSRA, BBH, WCN, SPTN, PODD, CCL and DXPE

Stocks With Unusual Put Option Activity:

• 1) XOP 2) BSX 3) SHPG 4) DLTR 5) HPQ

Stocks With Most Negative News Mentions:

• 1) GES 2) CCL 3) UNT 4) TDW 5) PSTG

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer: 

• Large-Cap Growth -.2%

Sector Outperformers:

• 1) Utilities +.9% 2) Foods +.5% 3) Telecom +.4% 

Stocks Rising on Unusual Volume: 

• FLXN, GOGO, DLTR, GCO, LGF, CPRT, ALNY, PDCO, JACK, SHLD, BURL, PVH, DG and HPQ

Stocks With Unusual Call Option Activity: 

• 1) SIG 2) NGL 3) ALLY 4) GOGO 5) MDY

Stocks With Most Positive News Mentions: 

• 1) JACK 2) FLO 3) COST 4) LGF 5) NERV

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -12.7% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 48.0% of Issues Advancing, 48.5% Declining
• 48 New 52-Week Highs, 10 New Lows
• 56.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.1%
• Vix 13.8 -1.1%
• Total Put/Call .92 -6.1%
• TRIN/Arms 1.07 +80.0%

Thursday Watch

Evening Headlines
Bloomberg: 

• Lending in China Is So Risky That Cows Are Now Collateralized. In the creative world of Chinese lending, there’s a new trade in town: the cow leaseback. China Huishan Dairy Holdings Co., which operates the largest number of dairy farms in the country, is selling about a quarter of its herd -– some 50,000 animals -- to Guangdong Yuexin Finance Lease Co. for 1 billion yuan ($152 million) and then renting them back. With an estimated $1.3 trillion of risky loans in the country, Chinese banks are becoming more cautious about lending, forcing some companies to look for new ways to borrow. Finance leasing has been growing in popularity, especially for purchases of equipment. But cows?
• Europe’s Troubles Pile Up at Home as Leaders Cross Globe for G-7. When Germany hosted last year’s Group of Seven summit, European leaders assured President Barack Obama they were up to dealing with the crises on their doorstep. Twelve months on, Europe’s challenges have multiplied to an extent that questions the wisdom of making the 6,000-mile trip to Japan for the G-7. From Brexit to migration, home-grown terrorism to the destabilizing impact of surging populism, Europe has seldom looked in more need of political leadership at home. Global summits usually provide an opportunity for heads of government to play the role of international dealmakers. But right now Prime Ministers David Cameron and Matteo Renzi, Chancellor Angela Merkel and President Francois Hollande are faced with coalescing crises -- and restive electorates -- that demand attention in their own countries.
• Saudi Arabia Has a Plan B to Try to Stop Iran’s Economic Rise. Saudi Arabia couldn’t stop the Iran nuclear deal from being signed. Plan B is to limit Iran’s ability to reap its benefits. The kingdom is mobilizing its Gulf allies to make sure that, more than four months after the lifting of sanctions on the Islamic Republic, Iran’s opening-up to the global economy doesn’t go smoothly. Last month the Saudis scuttled a bid to stabilize crude prices because it would have allowed their bitter foe to grab a larger share of oil markets. And in Dubai, once their main gateway to the world, Iranian businessmen privately complain of increasing restrictions. It’s a rearguard action by the Saudis as the U.S. reassesses its role in the Middle East and investors are drawn to the allure of Iran as the world’s last untapped major frontier market. Still, there are other drags on doing business with Iran that play into the Saudi effort: European banks are still reluctant to do business in the Islamic Republic for fear of possible U.S. sanctions.
• Fed Rate Speculation Casts Shadow on Emerging Currencies: Chart.
• Asia Stocks Rise as Economic Optimism Fuels Global Stocks Rally. Asian stocks rose, sending the regional equities benchmark gauge toward the biggest two-day gain in more than a month, as optimism the U.S. economy is strong enough for increased interest rates fueled a global equity rally. The MSCI Asia Pacific Index climbed 0.7 percent to 127.62 as of 9:05 a.m. in Tokyo, after a global rally sent U.S. equities to the highest level in almost a month.

Wall Street Journal:

• Trillions in Debt. U.S. household borrowing nears precrisis peaks; global debt has already topped 2008 levels. If current trends persist through the end of the year, U.S. households will owe as much as they did at the peak of borrowing in 2008. Global debt has already topped 2008 levels and keeps rising. That’s pretty astonishing so soon after debt-driven crises in the U.S. and Europe and endless worries about too much borrowing in Japan, China and emerging markets.
• Watchdog Faults Hillary Clinton’s Email Practices at State Department. Report to Congress also faults previous secretaries of state for lapses and criticizes the broader lapses at the department.
• Fannie, Freddie and an Outbreak of Amnesia. The growing ‘recap and release’ movement is a bad idea that could lead to another financial disaster.

CNBC:

• HP(HPQ) reports mixed quarter, falling PC and printing revenues. (video) HP Inc. reported on Wednesday that its quarterly adjusted earnings topped Wall Street estimates, but its revenues fell short of analyst expectations. The company said it saw second-quarter adjusted earnings of 41 cents per share on net revenues of $11.59 billion. Analysts expect HP to post earnings of 38 cents per share on $11.72 billion in revenue for its fiscal 2016 second quarter, according to a Thomson Reuters consensus estimate. Those results represented a roughly 11 percent decline in revenue and a 5 percent increase in earnings per share over the comparable year-ago period, HP said. Shares in the company fell about 3 percent in after-hours trading after the results were released, but then moved into positive territory as investors digested the news.

Zero Hedge:

• "Someday We'll Be Microchipping All Of Our Children".
• "Dovish" Fed Expectations Collapse To Lowest Since 2015. (graph)
• Federal Reserve Accidentally Admits It Is Causing Inequality.
• Daiwa: "Round Two Of China Capital Outflows Is About To Begin". (graph)
• Add It Up... And It Doesn't Add Up. (graph)
• Volumeless Short Squeeze Lifts Stocks Green For 2016, Oil Nears $50. (graph)

Business Insider:

• Japan's prime minister publicly scolded Obama to his face over 'despicable' Okinawa murder.
• Facebook's trending scandal could change the way we read news.
• PIPPA MALMGREN: China thinks the US will default via inflation.
• Insiders tell us that Domo, the $2 billion startup that came out of nowhere, is full of hype.
• Donald Trump spent much of a big rally thrashing Republican rivals who no longer threaten him. Donald Trump may be trying to unite the Republican Party, but he's still having fun mocking his former rivals.
• All Paul Ryan has left is his dignity, and he must not let Donald Trump steal it.
• Manhattan luxury sales are crashing. (graph)
• Here's what could sink the US auto boom.

Telegraph: 

• Brexit will make us richer. That's why Leave could still win.

Economic Information Daily:

• China's Consumption-To-GDP Ratio May Exceed 60% This Year. Ratio is expected to be a record high in past 10 years, citing a report from the research institute at the China Council for the Promotion of International Trade.

Night Trading 

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 142.0 -1.75 basis points. 
• Asia Pacific Sovereign CDS Index 52.75 -.5 basis point.
• Bloomberg Emerging Markets Currency Index 70.87 +.06%. 
• S&P 500 futures -.14%. 
• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ANF)/-.51
• (CHS)/.31
• (DG)/.95
• (DLTR)/.81
• (FRED)/.02
• (GCO)/.39
• (IGT)/.48
• (PDCO)/.75
• (SAFM)/1.52
• (SHLD)/-3.20
• (TSL)/.24
• (DECK)/.06
• (GME)/.61
• (PANW)/.42
• (ULTA)/1.29

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 275K versus 278K the prior week.
• Continuing Claims are estimated to fall to 2142K versus 2152K prior.
• Preliminary Durable Goods Orders for April are estimated to rise +.5% versus a +.8% gain in March.  
• Preliminary Durables Ex Transports for April are estimated to rise +.3% versus a -.2% decline in March.
• Preliminary Cap Goods Orders Non-Defense Ex-Air are estimated to rise +.3% versus a +.1% gain in March.  

10:00 am EST

• Pending Home Sales MoM for April are estimated to rise +.7% versus a +1.4% gain in March. 

11:00 am EST

• Kansas City Fed Manufacturing for May is estimated to rise to -3 versus -4 in April.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Bullard speaking, Japan CPI report, UK GDP report, $20B 7Y T-Note auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Confidence Index, (DHR) analyst event, (SANM) analyst day, (MCD) annual meeting, (FIT) general meeting(FLO) annual meeting, (WDC) Q4 guidance call and the (SYMC) analyst day 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Rising into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Short-Covering, Commodity/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.77 -4.4%

• Euro/Yen Carry Return Index 128.38 +.27%

• Emerging Markets Currency Volatility(VXY) 10.65 -.36%

• S&P 500 Implied Correlation 53.15 -1.51%

• ISE Sentiment Index 107.0 +33.75%

• Total Put/Call .94 -6.93%

• NYSE Arms .59 -47.76% 

Credit Investor Angst:

• North American Investment Grade CDS Index 77.26 -2.98%
  

• America Energy Sector High-Yield CDS Index 928.0 -3.73%

• European Financial Sector CDS Index 89.50 -3.94%

• Western Europe Sovereign Debt CDS Index 25.65 -1.82%

• Asia Pacific Sovereign Debt CDS Index 52.78 -.96%

• Emerging Market CDS Index 302.0 -.91%
  

• iBoxx Offshore RMB China Corporate High Yield Index 128.66 +.19%

• 2-Year Swap Spread 12.75 -1.5 basis points
  

• TED Spread 31.0 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -27.75 +.75 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.81 +.29%
• 3-Month T-Bill Yield .32% -2.0 basis points

• Yield Curve 96.0 +1.0 basis point
  

• China Import Iron Ore Spot $50.41/Metric Tonne -1.85%

• Citi US Economic Surprise Index -23.30 -1.3 points

• Citi Eurozone Economic Surprise Index 7.3 +4.7 points

• Citi Emerging Markets Economic Surprise Index -2.6 -.8 point

• 10-Year TIPS Spread 1.62% +2.0 basis points
  
• 53.8% chance of Fed rate hike at July 27 meeting, 63.0% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +173 open in Japan 
• China A50 Futures: Indicating +20 open in China

• DAX Futures: Indicating -10 open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/retail/medical sector longs
  

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:      

• Greece Wins Pledge for Debt Relief as IMF Bows to Euro Plan. (video) Greece’s creditors reached a preliminary accord to ease the country’s debt burden but left the important details to be hammered out after Germany’s federal election next year. At a meeting of euro-area finance ministers in Brussels that ended early Wednesday, and paved the way for a 10.3 billion-euro ($11.5 billion) aid payout, the International Monetary Fund retreated from its hard-line stance for concrete and generous measures on Greece’s debt, allowing creditors to announce a “breakthrough” despite giving no figures or real commitments.
• China Weakens Yuan Fixing to Lowest Since 2011 as Dollar Climbs. (video)
• Macau Economy Seen at Risk as Moody’s Downgrades Gambling Hub. Moody’s Investors Service downgraded the Macau government’s credit rating, reflecting concerns the Chinese city that’s home to units of Las Vegas Sands Corp. and Wynn Resorts Ltd. will suffer volatile growth amid slumping gaming revenue. The world’s largest casino hub was cut by one grade to Aa3 and assigned a negative outlook, the rating agency said in a statement Wednesday. Moody’s also lowered Macau’s long-term foreign currency bond ceiling to Aa2 from Aaa and its long-term foreign currency deposit ceiling to Aa3 from Aa2.
• Traders’ Hopes Dim as Brazil Dream Team Faces Fiscal Nightmare. Brazil bond investors are dialing back their optimism after newly appointed Finance Minister Henrique Meirelles acknowledged that the country’s fiscal problems are much worse than anyone had imagined. Yields on government notes due in 2025 have jumped 0.55 percentage point from an almost 12-month low on May 12, when the minister took office. Since then, Meirelles -- part of a group of cabinet officials that Goldman Sachs Group Inc. dubbed a “dream team” -- has said the economy is in worse shape than he anticipated. Brazil will also face a budget deficit excluding interest payments that’s 75 percent greater than the one forecast by the previous government.
  
• Burned Indian Bankers Turn Scrooges After Bad Loans Swell Losses. It’s back to square one. Loan growth at Indian banks is slowing again, proving that a rebound seen in February was just a blip. Credit grew 9.16 percent in the 12 months through April 29, the least since October, and compared with an average of about 14 percent over the last five years, fortnightly central bank data compiled by Bloomberg show. Growth reached as high as 11.6 percent in the period through Feb. 19. A lending revival has eluded Prime Minister Narendra Modi, hindering efforts to spur investment as he completes two years in office this week. Twelve Indian state-run banks reported combined losses of 206 billion rupees ($3.1 billion) for the March quarter, hurt by surging bad debts. That’s made banks unwilling to part with funds, just as falling short-term commercial paper rates drive borrowers to the money markets, according to Sundaram Asset Management Co.
• European Stocks Cap Best 2-Day Gain in 3 Months on U.S. Optimism. European equities posted their biggest back-to-back advance since February as optimism grew the U.S. economy is strong enough to withstand higher interest rates. The Stoxx Europe 600 Index added 1.3 percent at the close of trading. Banks posted the biggest gains among industry groups, followed by energy shares and miners as commodities rose. Europe’s benchmark jumped yesterday after better-than-forecast U.S. housing data signaled economic strength before a potential Federal Reserve rate hike next month.
• Pre-OPEC Meeting Said to Have No Discussion of Oil-Output Limits. (video) The final preparatory gathering of officials from the Organization of Petroleum Exporting Countries before the ministerial meeting on June 2 didn’t discuss any limits on crude output, the latest signal that the group will stick to its current strategy of letting low prices eradicate a supply glut. Discussions at the Economic Commission Board in Vienna, at which representatives of OPEC members review the market, focused on technical matters, said two people familiar with the matter, who asked not to be identified because the talks were private.
• Shell Cuts 2,200 More Jobs to Withstand Lower-for-Longer Oil. (video) Royal Dutch Shell Plc will cut 2,200 more jobs, taking the tally of losses to 12,500 from 2015 to 2016 as Europe’s biggest oil producer continues to adjust to the slump in prices. At least 5,000 jobs will be cut this year, the company said in an e-mailed statement. These reductions are in response to oil prices staying “lower for longer,” and a result of the acquisition of BG Group Plc earlier this year, said Paul Goodfellow, Shell’s vice president for the U.K. and Ireland. Shell and BG employed about 94,600 people at the end of 2015. “These are tough times for our industry,” Goodfellow said in the statement. “We have to take further difficult decisions to ensure Shell remains competitive through the current prolonged downturn.”
• Tiffany(TIF) Sales Trail Estimates on Weaker Demand From Tourists. (video) Tiffany & Co., the luxury jewelry retailer, posted first-quarter sales that missed analysts’ estimates, hurt by weak demand from tourists and domestic U.S. consumers. Revenue fell 7.4 percent to $891.3 million in the quarter through April 30, the New York-based company said Wednesday in a statement. Analysts had estimated $915 million, on average. Profit, which fell for a sixth straight quarter, was 69 cents a share, or 64 cents, excluding a tax benefit. Analysts projected 68 cents. The shares slipped as much as 3.1 percent to $61.89 in New York. Tiffany already had slid 16 percent this year through Tuesday.
• Alibaba(BABA) Undergoing SEC Investigation Over Accounting Practices. Alibaba Group Holding Ltd. said it’s being investigated by the U.S. Securities and Exchange Commission over its accounting practices and whether they violate federal laws. The company is providing documents and cooperating with the probe, according to the Hangzhou, China-based company’s annual report. The investigation is looking at consolidation practices, related party transactions and data reported from its Singles’ Day promotion.

Zero Hedge: 

• Hillary In Trouble: State Department Says Clinton Did Not Comply With Record Policies: Full Report.
• Myopic Markets & The Looming Mall REITs Massacre.
• Will The Fed Hike In June? It's All In The Hands Of China Now, Deutsche Bank Explains.
• Emerging Markets Turmoil Signal Pain Ahead For US Stocks. (graph)
• Feds Probing Potential Insider Trading By Senator Bob Corker.
• US Services PMI Tumbles, Misses By Most On Record "Dealing Blow To Q2 Rebound Hopes". (graph)
• In Today's Layoff News: Microsoft Fires 1,850; Intel Cuts 350; Shell Terminating 2,200.
• WTI Crude Nears $50 Then Tumbles After Bigger Than Expected Gasoline Build Offsets Production Cut. (graph)