Bear Radar

Style Underperformer:

• Large-Cap Value -1.20%

Sector Underperformers:

• 1) Gold -3.0% 2) Coal -2.40% 3) Steel -2.10%

Stocks Falling on Unusual Volume:

• IVN, YPF, DB, TOT, TIF, DIN, FDML, LFUS, PATK, LBTYK, RIMM, CLVS, SBAC, FAST, TRS, FMCN, APOL, IMOS, VRNT, FSLR, STSA, GOLD, KIOR, XSD, KNM, PPG, TAP and GM
  

Stocks With Unusual Put Option Activity:

• 1) IVN 2) AVP 3) BG 4) HOT 5) GM
  

Stocks With Most Negative News Mentions:

• 1) JRCC 2) USB 3) GOOG 4) RIMM 5) LULU
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.31%

Sector Outperformers:

• 1) Airlines +1.39% 2) Hospitals +1.35% 3) Oil Tankers +1.15%

Stocks Rising on Unusual Volume:

• ABG, PIR, URBN, FINL, SZYM, LNG, CONN, SXCI, CAVM, ESRX, THRX, MDVN, ONXX, Z, CHSI, GLNG, MSTR, ZUMZ, MIND, HAIN, GPN, IHC, CVI, PAG, ABG, DDD, GPI, RGR, SAH, DAL, HCA and EDMC
  

Stocks With Unusual Call Option Activity:

• 1) RRC 2) WLP 3) NOV 4) DBA 5) URBN
  

Stocks With Most Positive News Mentions:

• 1) URBN 2) DAL 3) AN 4) NOC 5) F
  

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Five Years After Crisis, No Normal Recovery: Reinhart and Rogoff.
• Japan's Monetary Base Slides for First Time Since 2008: Economy. Japan’s liquidity supply dropped in March for the first time in more than three years, fueling politicians’ complaints that the central bank should be doing more to end deflation.
• People's Bank of China Governor Zhou Xiaochuan said China's goal is to gradually reduce inflation and that the country is using interest rates combined with other measures to achieve a soft landing. Zhou, speaking on a panel at the Boao Forum for Asia in China today, said using interest rates too much may increase capital inflows.
  
• RBC Sued by U.S. Regulators Over Wash Trades. Royal Bank of Canada was sued by U.S. regulators over claims that the Toronto-based lender engaged in illegal futures trades worth hundreds of millions of dollars to garner tax benefits tied to equities. Canada’s biggest bank made false and misleading statements about “wash trades” from 2007 to 2010 in which affiliates traded among themselves in a way that undermined competition and price discovery on the OneChicago LLC exchange, the Commodity Futures Trading Commission said yesterday in a complaint filed in Manhattan federal court. “A fundamental purpose of the futures markets is to provide an arm’s-length mechanism for market participants to discover prices and shift risks associated with products traded in those markets,” CFTC enforcement director David Meister said in an e-mailed statement. “RBC not only designed and executed a wash sale scheme that undermined that purpose, it went a step further and misled the exchange into believing that its conduct was lawful.”
• Australia LNG Boom Threatened by U.S. Shale Exporters: Energy. Australian liquefied-natural gas projects by companies from Royal Dutch Shell Plc (RDSA) to Woodside Petroleum Ltd. (WPL) and valued at about $100 billion are at risk from rising costs and cheaper U.S. exports. Natural gas trading at a 10-year low in the U.S. and discoveries in Africa also threaten to slow the development of Australian LNG ventures following the approval of eight projects to meet surging demand from China, Japan and South Korea.
• High School Substance Abusers Start Using at Age 14, Study Finds. The 15 percent of U.S. high school seniors who abuse alcohol and drugs first began using them at age 14 or 15, according to a study that's one of the first to track substance-abuse trajectories during this key period. The finding, reported today in the Archives of General Psychiatry, suggests that prevention programs should begin early in adolescence before problems arise, rather than when abuse becomes obvious, said Joel Swendsen, the lead author.
• Tanker Rates Seen Reversing Rally as Oil Glut Expands: Freight. The fastest expansion in oil cargoes since 2004 is exceeding demand and filling up storage tanks from Egypt to Japan, creating a glut that threatens to reverse the biggest gain in shipping rates in five years. Tankers will be carrying 488.8 million barrels by April 14, 3.9 percent more than the week earlier, estimates Oil Movements, which has tracked cargoes for 25 years. Rates for very large crude carriers, each holding 2 million barrels, will drop 58 percent to average $19,750 a day, the median of six analyst forecasts compiled by Bloomberg shows. Shares of Hamilton, Bermuda-based Frontline Ltd. (FRO), the largest operator, will fall 46 percent in 12 months, the average of 19 predictions shows.
• Sina(SINA) Drops to 5-Week Low After Suspending Weibo Commentary. Sina Corp. (SINA), which runs the Twitter- like Weibo service in China, slid to the lowest in five weeks in New York after the company suspended user comments on its microblogging platform. Sina dropped 2.1 percent to $63.66 at the close on the Nasdaq Stock Market, the lowest price since Feb. 27.

Wall Street Journal:

• Wall Street Revamps Muni Swaps. The spike in municipal defaults that some observers forecast for last year never materialized, but that isn't stopping Wall Street from trying to stoke interest in derivatives designed to protect against cities and states not honoring their financial obligations. The efforts, spearheaded by dealer banks like Citigroup Inc. and Goldman Sachs Group Inc., come as pockets of the muni market are showing signs of distress and as traditional bond insurers struggle to bounce back from blows they sustained in the financial crisis.
• Choices Shrink for Subprime Set. A shakeout in the storefront-loan business may make credit even tighter for millions of borrowers with less-than-stellar credit histories.
• SEC Probes Groupon(GRPN). The Securities and Exchange Commission is examining Groupon Inc.'s revision of its first set of financial results as a public company, according to a person familiar with the situation. The regulator's probe into the popular online-coupon company is at a preliminary stage and the SEC hasn't yet decided whether to launch a formal investigation into the matter, the person said.
• Scarred Avon(AVP) Is Takeover Target. Avon Products Inc., weakened by poor financial results, a long-running investigation into alleged overseas bribery and a lame-duck CEO, found itself in play Monday when a smaller rival offered to buy the door-to-door cosmetics company for $10 billion.
• Optical Delusion? Fiber Booms Again, Despite Bust. Telecom contractor Bob Sellenriek recently bought three massive bulldozers and fitted them with cable-burying plows that had been gathering dust in his warehouse for a decade. Mr. Sellenriek needed the plows for something he has done very little of since the telecom bubble burst and wiped out $2 trillion in stock market wealth more than 10 years ago: laying miles of new fiber-optic cable. After years of licking its wounds, and with much of the fiber-optic cable capacity in the ground still unused, the telecom industry is going on another building spree.

Business Insider:

• NBC Edited The 911 Audio and Made George Zimmerman Sound Racist.
• Obama Dares The Supreme Court To Overturn His Health Care Law.
• These Two Countries Are Great Examples Of Why Small Governments Work.
• New Generation Of US Nuclear-Powered Drones Would Be Able To Fly For Months Without Refueling.
• On The Hot Seat: 10 Tech CEOs Who Could Be Fired Tomorrow.
  

Zero Hedge:

• Foodstamp Usage Remains At All Time High, Record Number of Households Receive $277 In Poverty Assistance Monthly. (graphs)
• World's Largest Solar Plant, With Second Largest Ever Department of Energy Loan Guarantee, Files For Bankruptcy.
• 10 'Facts' That Should Worry Europe's Equity 'Fiction'. (graphs)
  

CNBC:

• U.S. Investigates Possible Internet Threat to NYC. U.S. law enforcement and counterterrorism officials are trying to figure out the significance of recent occurrences on websites believed to have close links to al Qaeda, including a graphic some fear could be an attack threat directed at New York City. The graphic contained a picture of the Manhattan skyline superimposed with a Hollywood-style caption that says: "ALQAEDA - coming soon again in New York." It was posted on Monday by a site called the Ansar al Mujahiddin Arabic Forum, or AMAF, a militant web forum which allegedly has close connections to the Afghan Taliban and a key militant leader in Jordan.
• How a Failed Deal Got Goldman Entangled in Sex Trafficking. It’s another day of nightmare headlines for Goldman Sachs. “Goldman fund to exit company owning sex traffic site,” reads the Reuters headline. “How Goldman Sachs Invested in Child Sex Trafficking,” Jezebel’s headline proclaims. At pixel time a search on Google for the phrase “sex traffic” coupled with “Goldman Sachs” produced more than a half a million hits.
• Goldman(GS) Names Schiro as Lead Independent Director.

Seeking Alpha:

• Hedge Funds Love These 18 Rallying Consumer Goods Stocks.

The Tennessean:

• UAW Wants Volkswagen Workers to Seek Union Election. Labor group starts passing out signature cards as first step. The United Auto Workers union has begun passing out cards to employees of the Volkswagen plant in Chattanooga to determine whether there is enough support to hold a union representation election.

CNN:

• Exclusive: The $1.3 Billion Bond Deal Haunting Goldman(GS). What went into the 2006 Fremont Home Loan Trust from Goldman Sachs that has the SEC so bothered?

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-nine percent (39%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).

AP:

• Cops: 7 Dead, 3 Hurt in Christian School Shooting. A gunman opened fire Monday at a Christian university in California, killing at least seven people, wounding three more and setting off an intense, chaotic manhunt that ended with his capture at a nearby shopping center, authorities said. The gunfire erupted around midmorning at Oikos University. Heavily armed officers swarmed the school in a large industrial park near the Oakland airport and, for at least an hour, believed the gunman could still be inside.

Reuters:

• Cavium(CAVM) Cuts 1st-Qtr Forecast. Chipmaker Cavium Inc cut its first-quarter forecast on lower revenue from the service provider, broadband and consumer markets. Cavium shares were down more than 5 percent after the bell. They had closed at $30.57 on Monday on the Nasdaq.

Financial Times:

• CFTC Bans Election-Based Derivatives Contracts. The Commodity Futures Trading Commission on Monday issued an order prohibiting the North American Derivatives Exchange from introducing “political event contracts”, which would have been the first regulated products to allow investors to place bets on the outcome of the 2012 US elections.
• Fears Grow in Asia Over US Swaps Rules. Asian banks and regulators are growing concerned about the potential impact of incoming US financial regulations on the markets for swaps and derivatives, which could stifle the ability of Asian clearinghouses to attract business.

Evening Recommendations
Oppenheimer:

• Rated (HMSY) Outperform, target $41.

Night Trading

• Asian equity indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 154.50 -1.5 basis points.
  
• Asia Pacific Sovereign CDS Index 127.0 +.25 basis point.
• FTSE-100 futures +.13%.
  
• S&P 500 futures -.05%.
  
• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CMVT)/.17

Economic Releases
10:00 am EST

• Factory Orders for February are estimated to rise +1.5% versus a -1.0% decline in January.

2:00 pm EST

• Minutes of FOMC Meeting.

Afternoon

• Total Vehicles Sales for March are estimated to fall to 14.6M versus 15.03M in February.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Williams speaking, Spain Budget Presentation, weekly retail sales reports, ISM New York for March and the Needham Healthcare Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Short-Covering, More US Economic Optimism, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 15.38 -.77%
  
• ISE Sentiment Index 89.0 -8.25%
  
• Total Put/Call .79 -18.56%
  
• NYSE Arms .54 -19.80%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.02 -1.44%
  
• European Financial Sector CDS Index 218.07 -.98%
  
• Western Europe Sovereign Debt CDS Index 266.15 -1.09%
  
• Emerging Market CDS Index 242.09 -1.08%
  
• 2-Year Swap Spread 25.50 +.5 basis point
  
• TED Spread 40.75 +.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -50.0 +.5 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .06% -1 basis point
  
• Yield Curve 187.0 -1 basis point
  
• China Import Iron Ore Spot $147.60/Metric Tonne unch.
  
• Citi US Economic Surprise Index 15.0 -3.9 points
  
• 10-Year TIPS Spread 2.37 +3 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a +46 open in Japan
• DAX Futures: Indicating a +41 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Tech, Retail and Medical sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades near session highs and at a multi-year high despite mixed US economic data, recent strong equity gains, euro weakness and global growth fears. On the positive side, Steel, Coal, Energy, Oil Service, Ag, Hospital, Construction, Education and Road & Rail shares are especially strong, rising more than +1.5%. The Transports have traded well throughout the day. Copper is gaining +2.44% and Lumber is gaining +.54%. Major Asian indices were mixed overnight as a +.76% gain in South Korea was offset by a -.88% loss in Taiwan. Major European indices were mostly higher today, led by a +1.85% gain in the UK. Italian shares did not participate, falling -.2% on the day. The Bloomberg European Financial Services/Bank Index rose +.4% today and is down -3.3% ytd versus a +22.9% gain in (XLF) ytd. The Germany sovereign cds is down -2.26% to 72.0 bps, the Spain sovereign cds is down -1.26% to 431.16 bps, the Italy sovereign cds is down -2.48% to 386.93 bps and the Ireland sovereign cds is down -2.0% to 560.0 bps. On the negative side, Homebuilding, Alt Energy and Oil Tanker shares are under pressure, falling more than -.75%. Gold is rising +.5%, the UBS-Bloomberg Ag Spot Index is rising +.67% and oil is gaining +2.1%. The 10Y Yld is falling -1 bp to 2.19% despite today's equity rally and more economic optimism. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to early-Nov. levels. Lumber is -8.5% since its Dec. 29th high despite the better US economic data, dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -18.5% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +741.0% ytd. Despite mixed economic data in the US and overseas today, investors continue to ignore almost all negatives as the major averages still trade very well into the new quarter. Homebuilders are not participating in today’s rally, which is a red flag for the broad equity market. The biggest underperforming sectors over the last few weeks are leading today. For the recent equity advance to maintain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less eurozone debt angst, more US economic optimism and investor performance angst.

Today's Headlines

Bloomberg:

• Euro-Region Unemployment Surges to 14-Year High, Nears Record. Euro-region unemployment rose to the highest in more than 14 years and manufacturing contracted for an eighth month, adding to signs the economy probably slipped into a recession in the first quarter. The jobless rate in the 17-nation euro area rose to 10.8 percent in February from 10.7 percent a month earlier, the European Union’s statistics office in Luxembourg said today. That’s the highest since June 1997 and close to the record of 10.9 percent. A manufacturing gauge, based on a survey of purchasing managers, fell to 47.7 in March from 49, Markit Economics said. “Unemployment is lagging economic developments and the situation on the labor market will likely remain difficult through 2012,” said Jens Kramer, an economist at NordLB in Hanover, Germany. “Domestic demand is hurt by the difficult labor market and tougher austerity measures. The first and second quarters will show a contraction followed by a slight recovery.” In Italy, the jobless rate rose to 9.3 percent from 9.1 percent based on provisional data. Spain had the highest rate at 23.6 percent. Markit’s euro-area manufacturing gauge dropped to a three- month low in March. A German indicator fell to 48.4 from 50.2 the previous month, while in France the number slipped to 46.7 from 50. “There were further signs that the manufacturing malaise already exhibited at the periphery of the currency bloc was spreading to the core,” Markit said in today’s report. “Demand was weaker in both domestic and export markets.”
• Sovereign, Corporate Bond Risk Falls, Credit-Default Swap Show. The cost of insuring against default on European sovereign and corporate debt fell, according to BNP Paribas SA. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell 7.5 basis points to 262.5 at 8:39 a.m. in London, the lowest in almost two weeks. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 10.5 basis points to 601.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 2.75 basis points to 122.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell four basis points to 216 and the subordinated index declined 4.5 to 355.5.
• Fed's Pianalto Sees 2.5% Economic Growth in 2012, 3% Next Year. Federal Reserve Bank of Cleveland President Sandra Pianalto said that the economic expansion is continuing and that she expects growth of 2.5 percent this year and around 3 percent next year.
• Construction Spending in U.S. Unexpectedly Drops in February. Construction spending in the U.S. unexpectedly fell in February, reflecting broad-based declines that indicate the building industry will take time to stabilize. The 1.1 percent decrease, the biggest in seven months, followed a revised 0.8 percent retreat in January that was larger than previously estimated, Commerce Department figures showed today in Washington. The median estimate of 45 economists surveyed by Bloomberg News called for a 0.6 percent increase.
• Manufacturing in U.S. Grew at Faster Pace in March: Economy. Manufacturing in the U.S. expanded at a faster pace in March, driven by gains in employment and production that signal the world’s biggest economy is underpinning global growth. The Institute for Supply Management’s factory index climbed to 53.4 last month from 52.4 in February, the Tempe, Arizona- based group’s report showed today. Readings greater than 50 signal growth. The median forecast in a Bloomberg News survey called for a gain to 53.

Wall Street Journal:

• The Endless Spending Spree. America's debt is $15.6 trillion and growing. Instead of raising taxes, here's an idea: Let's try capitalism.

CNBC.com:

• No More Easing, But No Rate Hikes Either: Fed's Fisher. While saying "it's a little bit premature to talk about tightening," Dallas Fed President Richard Fisher also believes it's time for the central bank to stand down on any more stimulus.
• Apple's(AAPL) Stock Gets First $1,000-Plus Price Target.
• As Foreclosure Problems Persist, Fed Seeks More Fines. Federal regulators are poised to crack down on eight financial firms that are not part of the recent government settlement over home foreclosure practices involving sloppy, inaccurate or forged documents.
• Greek Economy to Slump 5% This Year: Think Tank.
  

Business Insider:

• OECD: The US Officially Has The Highest Corporate Tax Rate In The World.
• Are You Sitting Down? Check Out The Latest Youth Unemployment Number In Spain.
• CHART OF THE DAY: THE TRUTH ABOUT EUROPE.

Zero Hedge:

• Italian Banks Underwater On LTRO2 After Just One Month.
  
• From All-In To All-Out: Are Macro Hedge Funds The Canary In The Stockmine? (graph)
• Meet The Uber-Kommissar: Germany Expands European Domination Plan; Will Enact European Budget Supervision Panel.

AppleInsider:

• Apple(AAPL) Working on Physical Game Controller for iPads and Other iOS Devices.

Reuters:

• US EPA Delays Rule On Natgas Drilling Emissions. The U.S. environmentregulator and conservation groups have agreed to a two-weekextension on finalizing rules that aim to slash smog-formingemissions from hydraulic fracturing, or fracking, operationswhere natural gas and oil are drilled, an agency spokeswomansaid. The rules, which have now been delayed for the fourth timesince September, are now expected to be finished on April 17instead of April 3.

Guardian:

• Muppets Strike Back at Goldman Sachs. In a new Funny or Die video, the puppets lash back at the banking giant in the wake of Greg Smith's infamous op-ed.

Bear Radar

Style Underperformer:

• Small-Cap Growth +.73%

Sector Underperformers:

• 1) Oil Tankers -1.87% 2) Homebuilders -1.35% 3) Alt Energy -.55%

Stocks Falling on Unusual Volume:

• GRPN, YPF, WIFI, ELGX, ASIA, BODY, FSYS, JVA and GPN

Stocks With Unusual Put Option Activity:

• 1) FSIN 2) STD 3) BX 4) GRPN 5) LOW

Stocks With Most Negative News Mentions:

• 1) GRPN 2) NUE 3) GM 4) TXN 5) LL
  

Charts:

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