Today's Headlines

Bloomberg:

• Spain Left Behind in Global Debt Swaps Rally on Bailout Concern. Spain is the only country in the world that hasn’t benefited from the credit rally fueled by central bank cash as investors bet its government will be the fourth in the euro region to request a rescue. Credit-default swaps insuring Spanish bonds surged 21 percent since the start of the year to 461 basis points, according to CMA, signaling a worsening perception of credit quality. That compares with a 1 percent decline in swaps on Portugal, the next worst-performing nation, and more than 40 percent drops for Norway, Sweden and the U.S. Spain is in “extreme difficulty,” Prime Minister Mariano Rajoy said yesterday, raising the likelihood of a bailout for the second time this week. The government has raised its budget deficit target to 5.3 percent of gross domestic product from 4.4 percent and warned public debt will surge to a record 79.8 percent of GDP this year as it imposes the deepest austerity in at least three decades. “The market is slowly coming around to realizing that despite the fact the original target was abandoned, the current target is still ambitious,” said Ralf Preusser, head of European rates research at Bank of America Merrill Lynch. “Without growth, almost any debt burden is unsustainable.”
• Spanish, Italian Bonds Slide. Spanish and Italian bonds led losses among Europe’s higher-yielding government securities on speculation authorities will struggle to stop the region’s debt crisis from spreading. Spain’s 10-year bonds dropped for a third day after demand fell at a debt sale yesterday and an International Monetary Fund spokesman said the nation is facing “severe” challenges. Germany’s two- and five-year note yields dropped to records as investors sought the safest assets. The slide in Spanish securities pushed 10-year yields to the highest since the European Central Bank started providing three-year loans in December in its longer-term refinancing operations. “Spain is still the focus for the markets,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “The LTRO bid has faded away, and that was evident from the auction results yesterday. The market is still positioning for event risk, and that has supported the move back to the safest assets.” The Spanish 10-year yield climbed six basis points, or 0.06 percentage point, to 5.75 percent at 4:33 p.m. London time after rising to 5.84 percent, the most since Dec. 13. The 5.85 percent securities due January 2022 dropped 0.44, or 4.40 euros per 1,000-euro ($1,306) face amount, to 100.70. The additional yield investors demand to hold Spanish 10- year bonds instead of similar-maturity German bunds expanded 11 basis points to 402 basis points after reaching 410, the widest since Nov. 30.
• Spain's Economic Woes Rattle Investors; Europe Markets Slide.
  
• Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to traders of credit- default swaps. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 4.25 basis points to 133.75 at 3:30 p.m. in London, JPMorgan Chase & Co. prices show. The gauge is up from 125 basis points March 30 and heading for the biggest weekly increase since Dec. 16. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 13 basis points to 650, and is set for a third weekly rise. An increase signals deterioration in perceptions of credit quality. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 8.5 basis points to 235 and the subordinated index was 11 higher at 383.
• Obama Assails Ryan Budget Without Giving a Long-Term Alternative. President Barack Obama has rebuked Republicans for their "radical vision" of a scaled-down government and says it's time to "get serious about the deficit." His own budget fails to do that over the long term. White House projections show federal debt as a proportion of gross domestic product growing by more than three-quarters under Obama's plan to a record 124 percent in 2050, well above the 90 percent danger zone identified by economists Carmen Reinhart and Kenneth Rogoff. And the government's share of the economy climbs to levels not seen since World War II, largely because of surging spending on health care. That concerns Rogoff, a professor at Harvard University in Cambridge, Massachusetts, who co-wrote with Reinhart the book "This Time is Different: Eight Centuries of Financial Folly." Countries with excessive government liabilities historically have suffered "very long periods of tepid growth," he said. "You don't have to have a financial crisis" for that to occur, yet one is often "lurking" in the background, he said.
• Jobless Claims in U.S. Fall. Jobless claims fell 6,000 to 357,000 in the week ended March 31, the fewest since April 2008, the Labor Department reported today in Washington. The median forecast of 43 economists in a Bloomberg News survey estimated a decrease to 355,000. The number of people on unemployment benefit rolls also dropped, while those getting extended payments increased. The four-week moving average, a less- volatile measure than the weekly figures, decreased to 361,750 last week, from 366,000. In addition to the jobless claims, the number of Americans receiving extended benefits under federal programs increased by about 17,000 to 3.26 million in the week ended March 17. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 2.6 percent, today’s report showed. Twenty-six states and territories reported a decline in claims, while 27 reported an increase.
• Oil Rises for First Time in Three Days. Crude for May delivery gained $1.46, or 1.4 percent, to $102.93 a barrel at 11:24 a.m. on the New York Mercantile Exchange, paring the weekly loss to 10 cents. Brent oil for May settlement rose 68 cents, or 0.6 percent, to $123.02 a barrel on the London-based ICE Futures Europe exchange.
• Seattle Shows Risk of Glut as Apartment Construction Surges. The biggest surge of Seattle-area apartment construction in a quarter century is threatening to undercut the growth in rents, a trend that's also emerging in such U.S. cities as Washington and Houston. Seattle went from “dead last” in rent increases three years ago, following the collapse of mortgage lender Washington Mutual Inc., to 13th out of 88 markets last year, according to Axiometrics Inc., a multifamily real estate research company. The construction boom spurred by rising rents is now stoking concern that revenue growth may stall as an increasing number of units compete for tenants.
• New York Fed Markets Group Chief Brian Sack to Resign. Brian Sack, markets group chief at the Federal Reserve Bank of New York, is resigning this year after leading operations implementing the central bank’s monetary policy since June 2009. Sack, 41, will remain at his current post until June 29, the district bank said today in a statement on its website. He will then be placed on leave until his resignation from the New York Fed effective Sept. 14, according to the statement. As head of the markets group, Sack oversaw the record expansion of the Fed’s balance sheet while policy makers turned to unconventional tools such as two quantitative-easing programs in the aftermath of the credit crisis. Using bond purchases as a stimulus tool, the central bank expanded its assets to a record $2.94 trillion on Feb. 15.
• China's Hawaii to Face Hotel Slump as Supply Triples. China’s resort city of Sanya is expected to face a “huge correction” in its hotel market in the next two years as the supply of luxury accommodation triples by early 2013, the head of its tourism association said. The average hotel occupancy rate in Sanya, located on the tropical island known as China’s Hawaii, will drop about 10 percentage points from last year’s 65 to 70 percent, Michel Goget, Ritz-Carlton Sanya’s general manager and chairman of the city’s Tourism Association, said in an interview yesterday. “There’s going to be a huge correction between now and 2014 because there’s an oversupply,” said Goget, citing new additions by international chains in the city. “The demand is still not there. And the airport is almost saturated, so we are going to be all looking for the same business.”
• Taiwan's Stocks Slump Most in 5 Months on Tax Concern. Taiwan’s stocks slumped the most since December and the currency weakened after the stock exchange chairman said the island is likely to impose a capital- gains tax on share transactions.
• Obama Risks Vote Backlash by Warning Court on Health Law. President Barack Obama has shown a willingness to campaign against the U.S. Supreme Court if the justices strike down his 2010 health-care law. It's a strategy that's as risky as it is rare. Taking on the court would mean fighting an institution that polls show is historically the most admired branch of government. That's one reason no major party nominee has made the court a central issue since 1968, when Richard Nixon tapped into voters' unease about rising crime by attacking the expansion of suspects' rights under Chief Justice Earl Warren. "The risk any president faces is that criticism of the Supreme Court can backfire," said William G. Ross, a constitutional law professor at Samford University in Birmingham, Alabama, who has written about the role of judicial issues in presidential campaigns. "People can perceive it as unduly disrespectful of an institution that commands tremendous amounts of public respect."
• Nasdaq Wins Facebook(FB) Listing as Market Fends Off NYSE, NYT Says. Facebook Inc. (FB) plans to list its shares on the Nasdaq Stock Market, according to the New York Times, further cementing the exchange operator’s position as the favored venue for the biggest U.S. technology companies.

Wall Street Journal:

• US Retailers Report Strong Momentum For March Sales. Retailers generally reported strong sales for March, as warmer weather, an earlier Easter and appealing fashions drew customers in. Standouts included Gap Inc. (GPS) and Target Corp. (TGT), while Costco Wholesale Corp. (COST) and teen retailer Buckle Inc. (BKE) came up short. Easter falls two weeks earlier this year than in 2011, which provided a sales boost for everything from apparel to seasonal goods. March also benefited from unseasonably high temperatures in many parts of the country, which brought customers into malls and other shopping locations. Compelling fashions also played a role, analysts said, with people more willing to pay fuller prices for fresh merchandise. Retailers were also able to move older merchandise at promotional prices.
• Romney Plays Down Pennsylvania Hopes.
• High Gas Prices Other Victim: The Gas Station Owner. Many Independent Owners Lose Money Amid Falling Demand; Competition From Warehouse Clubs Is Another Challenge.
  

CNBC.com:

• Bullard: Fed's Rate Language Too Pessimistic. A top Federal Reserve official said on Thursday that the central bank's projection of late 2014 for the first likely increase in interest rates sends too pessimistic a signal as the economic recovery strengthens.

Business Insider:

• Greeks Riot Like Crazy Following Yesterday's Tragic Suicide.

Zero Hedge:

• LTRO #Fail and Two Types of Credit Losses. (graphs)
• Complete YTD Hedge Fund Performance Summary.
• On The Pain in Spain.
  

Reuters:

• World Food Prices Rise Further, Raising Fears of Unrest. Global food prices rose in March for a third straight month with more hikes to come, the UN's food agency said on Thursday, adding to fears of hunger and a new wave of social unrest in poor countries. Record high prices for staple foods last year were one of the main factors that contributed to the Arab Spring uprisings in the Middle East and North Africa, as well as bread riots in other parts of the world.
• Gold Rising, Fading Stimulus Hopes Weigh. Gold inched higher on Thursday after falling to a near three-month low the previous day as weaker prices tempted some buyers, but gains were capped by a stronger dollar and fading hopes for a fresh round of monetary stimulus in the United States. Spot gold was up 0.2 percent at $1,622.30 an ounce at 1121 GMT, while U.S. gold futures for June delivery were up $9.60 an ounce at $1,623.70. The metal has fallen nearly 3 percent this week and while prices regained some ground on Thursday, it was still hovering around its lowest since early January.
• Oil Hedge Fund BlueGold to Liquidate. BlueGold Capital, an oil-focused hedge fund that shot to fame in 2008 by calling the peak of the market, told its investors on Thursday it was liquidating after four years. BlueGold is conducting an "orderly closure" of the business and expects to return about 98 percent of investor capital before the end of the year, the London-based fund said in a letter to investors, a copy of which was obtained by Reuters. It did not give a reason for its closure.

Financial Times:

• Spanish Bonds/Banks/Bonds/Banks. Beyond Thursday’s back-up in Spanish bond yields — questions about Spain’s banks. How could there not be when they’ve been buying so much sovereign debt since the LTRO. Ever since December’s record jump of €22.5bn in purchases in fact, as banks began washing LTRO cash through the domestic bond market. (Chart via Nomura)
• Employers Attack Italy's Labour Reforms. Italy’s leading industrialists and employers have slammed Mario Monti’s revised labour market reforms as inadequate and counterproductive after initial plans were watered down to appease trade unions and the centre-left Democratic party.

Shanghai Daily:

• Existing Housing Index Slips. SHANGHAI'S existing housing index fell for the sixth straight month in March, with nearly 60 percent of monitored areas recording value decreases. The index, which tracks price variations of previously occupied homes, lost 0.13 percent from February to 2,577 points last month, the Shanghai Existing House Index Office said yesterday. "Transaction volume of used homes rebounded last month amid recovering demand from end-users though a sustainable recovery is yet to be confirmed," said Zhang Shu, an analyst at the office. "A revised criteria for 'normal' housing that went into effect in March also helped trigger sentiment among home seekers."
  

Style Underperformer:

• Large-Cap Value -.70%

Sector Underperformers:

• 1) Disk Drives -1.90% 2) Networking -1.70% 3) Gold & Silver -1.30%

Stocks Falling on Unusual Volume:

• PMTC, VELT, BV, SU, TI, DOV, CKEC, PLCM, SPPI, HCSG, SHLM, STX, SVVC, PODD, ALGT, HAIN, SZYM, VELT, QSII, MMYT, COST, FSLR, PAAS, STZ. EWK, EWO, KSS, KMX and BKE
  

Stocks With Unusual Put Option Activity:

• 1) HOV 2) BBT 3) STX 4) EWW 5) SVU
  

Stocks With Most Negative News Mentions:

• 1) MCD 2) IOC 3) PLCM 4) SBUX 5) LNKD
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.42%

Sector Outperformers:

• 1) Restaurants +.81% 2) Oil Service +.69% 3) Retail +.40%

Stocks Rising on Unusual Volume:

• BBBY, PPG, LAD, AVD, TLK, LORL, CLVS, DEST, SCHN, TIBX, ONXX, LQDT, PSMT, MIND, SKUL, ALLT, SBUX, ROST, CXW, CNK, AP and PRX
  

Stocks With Unusual Call Option Activity:

• 1) KMX 2) BBBY 3) TJX 4) JWN 5) TIBX
  

Stocks With Most Positive News Mentions:

• 1) M 2) ROST 3) DEST 4) PPG 5) PNC
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Draghi Scotches ECB Exit Talk as Spain Keeps Crisis Alive. European Central Bank President Mario Draghi quashed talk of an early exit from emergency stimulus measures as Spain struggled to borrow in financial markets, a reminder of the risk that the region’s debt crisis could flare again. Speaking just hours after Spanish Prime Minister Mariano Rajoy warned his country faces “extreme difficulty,” Draghi said yesterday that talk of the ECB starting to withdraw its support for euro-area banks is “premature.” At the same time, in a nod to growing inflation concerns in Germany, he said the ECB won’t hesitate to counter price risks if needed. Policy makers left their benchmark rate at a record low of 1 percent. The ECB has expanded its balance sheet by about 30 percent since Draghi took office in November, pumping more than 1 trillion euros ($1.3 trillion) into the banking system in a bid to stem the debt crisis. Pressure to unwind the emergency measures is rising in Germany, where workers are winning some of the biggest pay increases in two decades, threatening to stoke inflation. “Premature Bundesbank calls for an ECB exit strategy have now triggered a new round of market wobbles, with a focus on Spain,” said Holger Schmieding, chief economist at Berenberg Bank in London. “The risk of a new irrational market panic remains serious.”
• Spain Not Greece Is The Real Test For The European Union. The decisive test of the euro area’s plans for economic recovery was never Greece but Spain, and the European Union shows every sign of failing it. The Spanish government’s new austerity plan hasn’t won investors’ confidence, and this creates a threat not just to Spain but to the whole EU. Europe’s governments need to change course before it’s too late. An auction of Spanish bonds on Wednesday was the first verdict on Spain’s new budget. It didn’t go well. Demand was poor and prices fell. The country’s borrowing costs rose with 10 year bond yields in the secondary market hitting 5.7 percent, the highest since the beginning of the year. The premium over German government bonds increased to nearly four percentage points, the highest since November. The problem is not that Spain’s new austerity plan is too timid. Just the opposite: Under EU orders, Spain is promising what might be the tightest fiscal squeeze that it or any other European economy has ever faced. The new plan calls for the budget deficit to fall from 8.5 percent of gross domestic product to 5.3 percent this year. Since the economy is already shrinking, this requires a discretionary fiscal tightening of roughly 4 percent of GDP -- with the unemployment rate already standing at about 23 percent.
• World Bank Needs Capital Injection, Ocampo Says in FT Op-Ed. Jose Antonio Ocampo, a former Colombian finance minister and one of three candidates to become the next World Bank president, said the lender needs a capital increase. “The institution is a very successful, indeed profitable, global financial co-operative,” Ocampo wrote in an op-ed piece published in the Financial Times. “But its recent response to the global financial crisis, in the absence of a substantial capital injection, has diminished its lending capacity.” The bank needs a capital injection that is based on “a clear, shared set of priorities,” he wrote.
• JPMorgan(JPM) Awards CEO Dimon $23M Pay Package. JPMorgan Chase & Co. (JPM), the largest and most profitable U.S. bank, gave Chairman and Chief Executive Officer Jamie Dimon $23 million in pay and bonuses for 2011, about the same as the previous year. Dimon’s base salary was raised to $1.5 million beginning in March 2011 from $1 million and he received $17 million in restricted stock and options for his performance in 2011, down from $17.4 million the previous year, the New York-based company said today in a proxy statement. His cash bonus was $4.5 million, down from $5 million in 2010, the bank said. The CEO took a salary of $1 million for 2009 and gave up bonuses that year and in 2008 after receiving $49.9 million in total compensation for 2007. Dimon and his wife control almost 5.2 million shares valued at more than $209 million as of March 2, when his total holdings were last disclosed.
• President Scapegoat Can't Stop Picking on Big Oil by Caroline Baum. Obama has elevated scapegoating to a new level.
• Dimon Letter Derides Contrived Financial Rules. Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co. (JPM), used his annual letter to shareholders to rail against “contrived” and confusing financial rules that he said may stymie lending. U.S. and international officials “made the recovery worse than it otherwise would have been,” Dimon wrote in the letter released yesterday. They almost botched the U.S. debt-ceiling vote, constrained bank leverage “at precisely the wrong time” and adopted bad and uncoordinated policy, he wrote. Dimon, 56, defended a banking industry that has been besieged by new rules and public contempt after lax mortgage lending contributed to the worst economic slump since the Great Depression. He championed the use of derivatives and the right of banks to lobby lawmakers, and hailed the U.S. economy and corporations as engines of job growth. “We have hundreds of rules, many of which are uncoordinated and inconsistent with each other,” Dimon said in the 38-page letter, his longest since becoming CEO in December 2005. “Complexity and confusion should have been alleviated, not compounded.” Dimon called a cap on debit-card transaction fees, a provision of the Dodd-Frank Act, “price-fixing by the government that will have the unfortunate consequence of leaving millions of Americans unbanked.” Stricter capital rules will make it “prohibitively more expensive” for banks to lend to consumers with subprime credit scores, about 40 percent of all Americans, he said.

Wall Street Journal:

• Probe of Insurers Gains Steam. New York's top financial regulator is expanding an investigation of insurers that force homeowners policies on borrowers after turning up evidence that consumers were charged too much, according to people familiar with the situation. Benjamin M. Lawsky, superintendent of the New York Department of Financial Services, is issuing new subpoenas and formal document requests to several insurers, demanding justification for how their rates and loss ratios were calculated, these people said.
• As Carbon Prices Sink, Unease Rises. The market for carbon emissions is running out of gas. Prices of emission allowances, which award the holder the right to release carbon dioxide into the atmosphere, have tumbled this week to a record low. They are down 11% from the start of the year and now trade at less than one-fourth of their July 2008 value.
• Henninger: The Supreme Court Lands in Oz. Like the original wizard, Barack Obama doesn't want anyone to look behind the curtain.

MarketWatch:

• Taiwan Stocks Plunge in Latest Tax-Driven Sell-Off. Taiwan stocks returned from a one-day holiday to plunge in Thursday morning trade. The benchmark Taiex was down -2.8%, putting its losses for the week at -4.9%. Taiwan is considering reviving a capital-gains tax, with the possibility sparking across-the-board selling by both foreign and domestic investors. Among some of the market's better-known names, Acer Inc. and Formosa Plastics Corp. each fell 2.2%, while China Airlines Ltd. swooned 4.7% lower.

Business Insider:

• Goldman's(GS) Gloomy Outlook In One Huge Slide.
• The Trailer Is Out For Frontline's New Documentary On The Financial Crisis — And It's EPIC. (video) "Here we are three years plus after, and nothing has changed," said one commenter. It's like they're inside our brains!

Zero Hedge:

• Retail Celebrates Highest Stock Prices Since 2007 With Biggest Redemptions Of 2012. (graph)
• Corzined Marvell Muppets Sue Vampire Squid.
  

CNBC:

• Facebook's(FB) Final Private Trade Values Company at $109 Billion. Facebook’s highly-anticipated final private market transaction has priced on SecondMarket at $43.50 (a record for the private market exchange), according to people familiar with the trade. That final trade values Facebook at roughly $109 billion.
• Exclusive: Falcone Mulls Voluntary Bankruptcy For LightSquared. Hedge fund manager Philip Falcone said in an interview on Wednesday he is "seriously considering" filing a voluntary bankruptcy for LightSquared, the struggling telecom startup in which his Harbinger Capital Partners is the majority owner.

NY Times:

• Huffington Gains More Control in AOL(AOL) Revamping.
  

Institutional Investor:

• Ken Griffin's Citadel, Dan Loeb's Third Point Gain in First Quarter. An initial picture of hedge fund results for the first quarter is emerging. Hedge funds performed pretty well in the first quarter, but still lagged the S&P 500 and Nasdaq Composite, which had their best quarters in years. Ken Griffin’s Citadel has picked up where it left off last year. The Chicago-based hedge fund manager is up more than 8 percent in the first three months after posting a nearly 3 percent gain in March alone. Dan Loeb of Third Point, who is currently waging a proxy fight with Yahoo, posted a 6.5 percent gain in the first quarter.

CNN:

• Exclusive: Bernanke Breaks Bread With Top Bankers. After completing a series of public lectures in Washington, D.C. last week, Federal Reserve Chairman Ben Bernanke quietly slipped into New York City for a private luncheon on Friday with Wall Street executives. Fortune has learned that attendees included Jamie Dimon (J.P. Morgan), Bob Diamond (Barclays), Brady Dougan (Credit Suisse), Larry Fink (Blackrock), Gerald Hassell (Bank of New York Mellon), Glenn Hutchins (Silver Lake), Colm Kelleher (Morgan Stanley), Brian Moynihan (Bank of America), Steve Schwarzman (Blackstone Group) and David Vinar (Goldman Sachs).
• Car Prices At Record Highs - And Rising.
  

Real Clear Politics:

• The Chickens Are Coming Home To Roost by Ed Koch. The chickens are coming home to roost in the Middle East. The experts who supported the removal of President Hosni Mubarak of Egypt, e.g., The New York Times’ Tom Friedman and many others, are perhaps now wondering if they were right to do so. Mubarak was a loyal friend of the United States, a guarantor of the rights of minority Egyptians such as Coptic Christians, and a protector of the peace agreement negotiated by Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin under the auspices of President Jimmy Carter at Camp David.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).

Reuters:

• New Foreclosure Wave to Hit 'Everyday' Borrowers. Subprime loans caused first crisis, now job losses, economy will cause a bigger run. A painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.
• One-Fifth of U.S. Adults Read E-Books As Market Booms - Survey. One in five American adults read an electronic book in the last year, as gift-giving sped the shift away from the printed page, a Pew Research Center survey showed on Wednesday.
• Paulson Hedge Funds Mixed in First Quarter. Closely tracked hedge fund manager John Paulson's oldest fund rose and his Enhanced fund scored double-digit gains in the first quarter but his Advantage funds remained in the red, a source familiar with the numbers said on Wednesday. The firm's oldest portfolio, Paulson Partners, gained 6.6 percent during the quarter while the Paulson Enhanced fund jumped 13.3 percent. Both funds' returns were fueled by the Express Scripts Medco acquisition and gains at Delphi Automotive. The Paulson Advantage fund fell 3.96 percent in March to stand 1.05 percent lower for the year while its Paulson Advantage Plus fund fell 5.45 percent in March and was off 2.23 percent for the quarter. Last year these funds suffered double-digit losses.
• Detroit Avoids State Takeover, More Oversight Looms. Detroit avoided a takeover by the state of Michigan on Wednesday after both a review team and the city council approved a consent agreement that will put the city's struggling finances under stricter control.
• For Some Prominent US Hedge Funds, A Strong 1st Quarter. A handful of prominent hedge fund managers reported strong first quarter results after the industry recorded dismal returns in 2011, but only a few managed to top the performance of the rallying U.S. stock markets.
• Bed Bath & Beyond(BBBY) 4th-qtr beats estimates, shares up. Bed Bath & Beyond Inc reported quarterly results that beat Wall Street expectations as shoppers spent more to spruce up their homes, sending the retailer's shares up more than 4 percent after the bell.
• Ruby Tuesday(RT) 3rd-qtr sales misses, sees weak FY. Ruby Tuesday Inc's quarterly revenue missed Wall Street expectations hurt by a fall in same-store sales, and the casual dining chain forecast full-year adjusted earnings below analysts' estimates. Shares of the company fell 10 percent in extended trade.

Financial Times:

• Morgan Stanley(MS) Tries to Stave Off Ratings Cut. James Gorman, Morgan Stanley’s chief executive, has been in discussions with Moody’s in an attempt to maintain its credit ratings and stave off a downgrade that could diminish the bank’s ability to buy the rest of Citigroup brokerage Smith Barney, according to people familiar with the matter.
• JPMorgan's(JPM) Practices Bring Scrutiny. Three times a pallbearer, never a corpse – that is JPMorgan Chase’s experience of the brutal financial markets of the past few years. At the demise of Bear Stearns, Lehman Brothers and, most recently, MF Global, the bank has been deeply involved: in a rescue bid for Bear and in a complex network of relationships with Lehman and MF Global. Its unrivaled reach raises inevitable questions about its role.

Telegraph:

• Portugal May Need Bailing Out Within A Year, Warns Olli Rehn. Political leaders should be ready to provide a further bail-out for Portugal within the next year, Europe's economic and financial affairs commissioner Olli Rehn has warned.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 159.50 +5.0 basis points.
  
• Asia Pacific Sovereign CDS Index 128.75 +.5 basis point.
  
• FTSE-100 futures +.48%.
  
• S&P 500 futures +.12%.
  
• NASDAQ 100 futures +.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STZ)/.39
• (SCHN)/.32
• (KMX)/.40
• (PIR)/.48

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 355K versus 359K the prior week.
• Continuing Claims are estimated to rise to 3350K versus 3340K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking, ICSC Chain Store Sales for March, Challenger Job Cuts report for March, BoE Rate Announcement, RBC Consumer Outlook Index for April, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by financial and technology 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.

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Less US Economic Optimism, Profit-Taking

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 16.71 +6.71%
  
• ISE Sentiment Index 96.0 -15.79%
  
• Total Put/Call .98 +4.26%
  
• NYSE Arms 1.29 -1.52%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 92.42 +2.08%
  
• European Financial Sector CDS Index 227.32 +4.75%
  
• Western Europe Sovereign Debt CDS Index 270.78 +2.52%
  
• Emerging Market CDS Index 250.99 +2.83%
  
• 2-Year Swap Spread 27.75 +2.5 basis points
  
• TED Spread 39.75 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -50.75 -.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.
  
• Yield Curve 189.0 -2 basis points
  
• China Import Iron Ore Spot $147.60/Metric Tonne unch.
  
• Citi US Economic Surprise Index 6.80 -5.0 points
  
• 10-Year TIPS Spread 2.31 -6 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -70 open in Japan
• DAX Futures: Indicating a +29 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech, Medical and Biotech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short, exited some trading longs
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 trades lower on rising Eurozone debt angst, rising global growth fears, less US economic optimism, profit-taking and more shorting. On the positive side, Homebuilding and Airline shares are holding up relatively well, falling less than -.5%. The Transports are just slightly lower on the day. Oil is falling -2.2%, Gold is down -1.6%, Lumber is rising +.58% and the UBS-Bloomberg Ag Spot Index is down -.55%. The MBA Purchase Applications Index rose +7.2% this week, but remains in the same range it has been trapped in since May 2010. On the negative side, Alt Energy, Oil Tanker, Oil Service, Steel, Internet, Software, Semi, Disk Drive, Networking, Computer Service, Bank, I-Banking, Hospital, Biotech and Education shares are under meaningful pressure, falling more than -2.0%. Financials and Techs have underperformed throughout the day. The MS Cyclical Index(CYC) is underperforming again and is breaking below its 50-day moving average. Copper is down -3.11%. Major Asian indices fell around -1.25% overnight, led lower by a -2.29% decline in Japan. Major European indices are falling around -2.5%, led down by a -2.8% decline in Germany. Spanish equities are falling another -2.1% today and are now down -9.71% ytd. As I have been cautioning for awhile, this remains a large red flag for the region. As well, the Bloomberg European Financial Services/Bank Index is dropping -2.3%. This index is down -11.0% in about 2 weeks and is breaking below its 200-day moving average. 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 mid-Oct. levels. Lumber is -8.5% since its Dec. 29th high despite the better US economic data, 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. Overall, credit gauges are starting to deteriorate too much as Spain’s economic troubles are intensifying at a faster pace than the “kick-the-can” crowd had hoped. I said a couple of months ago that economic optimism would likely peak during 2Q. It is likely that the peak has already passed. This does not mean the major averages can’t move higher after a pullback, but any further rally will likely be led by less economically-sensitive shares. However, if Spain starts unraveling at an accelerating pace, the major averages have likely also seen their peaks for the year. For the recent equity advance to regain 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, lower energy prices and investor performance angst.

Today's Headlines

Bloomberg:

• Rajoy Says Spain in 'Extreme Difficulty' as Bond Demand Drops. Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty” and signaled that his budget cuts are less painful than a bailout would be, as demand for the nation’s debt slumped at an auction. “Spain is facing an economic situation of extreme difficulty, I repeat, of extreme difficulty, and anyone who doesn’t understand that is fooling themselves,” Rajoy told a meeting of his People’s Party today in the southern coastal city of Malaga. Rajoy raised the threat of an international bailout for the second time this week as he sought to defend the deepest austerity moves in at least three decades. While “no one likes” the budget presented last week, he said “the alternative is infinitely worse.”
• Spanish Bonds Slump on Auction as ECB Loans Boost Fades. Spanish notes led losses in European sovereign debt markets after demand fell and borrowing costs rose in the nation’s first auctions since announcing that public debt will surge to a record this year. The yield on Spain’s five-year securities climbed to the highest in 12 weeks amid concern the boost from loans provided under the European Central Bank’s longer-term refinancing operations is waning. Italian, Portuguese and Greek bonds also fell, underperforming benchmark German bunds. The ECB held its main refinancing rate at 1 percent, and President Mario Draghi said downside risks to the economic outlook prevail, including the potential for renewed debt-market tension. “There was a big pop in Spanish yields after the auction results,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. “There’s a concern that the benefit to auctions and Spanish yields from the LTROs is beginning to fade because of the consistently weak economic picture. Some banks may be full up with what they want to buy.” Spain’s five-year note yield climbed 26 basis points, or 0.26 percentage point, to 4.52 percent at 4:30 p.m. London time. It reached 4.55 percent, the highest since Jan. 10.
• Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, according to BNP Paribas SA prices for credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed six basis points to 271 at 2:15 p.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 22.5 basis points to 632.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 5.25 basis points at 129.75 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 10.5 basis points to 227.5 and the subordinated index jumped 14 to 371.
• European Stocks Fall On Above Average Volume. Volvo AB (VOLVB) tumbled 4.8 percent after ACT Research said North American preliminary truck orders in March were less than expected. Carmakers declined, with Peugeot SA and Renault SA (RNO) dropping at least 4 percent each, after a report showed U.S. sales of light vehicles rose less than forecast. Royal Bank of Scotland Group Plc lost 3.2 percent after people familiar with the matter said the lender canceled a bond sale. The Stoxx Europe 600 Index retreated 2.2 percent to 258.50 at the 4.30 p.m. close in London, the biggest decline in almost a month. The number of shares changing hands on the benchmark index was 29 percent more than the average over 30 days, data compiled by Bloomberg show.
• Service Industries in U.S. Kept Growing in March: Economy. The Institute for Supply Management’s non-manufacturing index fell to 56 from a one-year high of 57.3 in February, the Tempe, Arizona-based group’s data showed today. New orders, business activity and prices all expanded at a slower pace last month.
• Company Payrolls in U.S. Grow by Estimated 209,000 Workers. Employment increased by 209,000 for the month after a revised 230,000 gain in February, figures from ADP Employer Services showed today. The median estimate in the Bloomberg News survey called for a 206,000 increase.
• Fed's Lacker Says Markets Saw Odds of Policy Easing as Too High. Federal Reserve Bank of Richmond President Jeffrey Lacker said financial markets had assigned too high a probability that the Fed would begin a new round of asset purchases to reduce borrowing costs and spur economic growth. “I was surprised a couple months ago at the probability market participants seemed to ascribe to further easing,” Lacker, a voting member of the Federal Open Market Committee (FDTR), told reporters and editors today at the Bloomberg News Washington bureau. “While further easing is obviously something that’s conceivable, I wouldn’t favor it unless conditions deteriorated quite substantially” for growth and inflation.
• GE Capital Swaps Gain After Moody's Cuts Debt Rating Two Levels. The cost to protect debt from General Electric Co.'s finance unit against a default rose to the most in almost a month after Moody's Investors Service cut its credit rating by two steps. Credit default swaps on GE Capital Corp. climbed 10 basis points to 147 basis points, the biggest increase since March 6, as of 9:10 a.m. in New York, according to data provider CMA. "Heightened risk" from the finance unit prompted Moody's to cut GE Capital's rating to A1 and reduce the parent company's grade one level to Aa3, the ratings company said yesterday.
• Oil Declines After U.S. Stockpiles Surge the Most Since 2008. Oil tumbled after the Energy Department said U.S. stockpiles surged the most since 2008 as U.S. crude output climbed to the highest level in 12 years. Futures fell to a six-week low as inventories rose 9.01 million barrels to 362.4 million last week, the most since June. Production gained 2.9 percent to 6.05 million barrels a day. Oil also decreased after the Federal Reserve signaled it may refrain from more monetary stimulus. Crude oil for May delivery fell $2.35, or 2.3 percent, to $101.66 a barrel at 12:26 p.m. on the New York Mercantile Exchange. Futures touched $101.08, the lowest level since Feb. 16. The contract traded at $102.78 a barrel before release of the inventory report at 10:30 a.m. Prices have risen 2.9 percent this year. Brent oil for May settlement dropped $1.83, or 1.5 percent, to $123.03 a barrel on the London-based ICE Futures Europe exchange. U.S. crude output last week was at the highest level since December 1999. Domestic production averaged over four weeks rose 5.2 percent from a year earlier, the department said.
• Gold Falls for Second Day. Gold fell to a 12-week low in New York as the dollar strengthened on signs the Federal Reserve may refrain from providing more stimulus measures. Silver retreated the most in five weeks. Silver futures for May delivery slumped 5.5 percent to $31.45 an ounce on the Comex. A close at that level would make it the biggest drop for a most-active contract since Feb. 29. Silver was the biggest decliner on the Standard & Poor’s GSCI Spot Index of 24 raw materials.
• Atlantic Storm Season to Be Below Average, Forecast Says. A cooler Atlantic Ocean will probably produce 10 named storms in the hurricane season that begins June 1, about half last year’s total, according to researchers at Colorado State University. Of those systems, four will probably become hurricanes with winds of at least 74 miles (119 kilometers) per hour and two may grow into major storms with winds of 111 mph or more, according to the forecast. “What we’re expecting right now is a somewhat below- average hurricane season compared to the 1981 to 2010 average,” said Phil Klotzbach, lead author of the forecast begun at the university 29 years ago by Bill Gray, a pioneer in long-range hurricane predictions.
• Obama Health Remarks Draw Order for U.S. View on Court Power. A federal appeals court hearing a challenge to part of the 2010 health-care law ordered President Barack Obama's administration to give its view on whether the U.S. Supreme Court can strike down laws it considers unconstitutional.
• Best Buy's(BBY) Rating May Be Cut to Junk by S&P. Best Buy Co.’s credit rating may be downgraded to junk, or below investment grade, by Standard & Poor’s as the world’s largest consumer-electronics retailer closes stores to reduce costs. “These actions underscore that its current business model is not working and that the steps taken to date have not been enough to improve performance,” S&P said in a statement.

Wall Street Journal:

• Hedge Funds Go On Attack In India. After years of complaining about poor treatment as minority investors in India's publicly traded companies, some Western hedge funds are turning to activist tactics that have not often been tried here. The recent moves may mark the beginning of a more confrontational period between foreign investors and Indian companies, which tend to be owned by either their founders or the government.
• Copper Falls -2.3%. Copper futures slumped as traders continued to cash out of metals on diminished expectations for Federal Reserve stimulus, while an uptick in Spain's borrowing costs renewed concerns about the health of Europe's financial system. The most actively traded copper contract, for May delivery, was recently down 9.15 cents, or 2.3%, at $3.8275 a pound on the Comex division of the New York Mercantile Exchange.
• Shell Considers Building Gas-to-Diesel Plant in Louisiana. Royal Dutch Shell PLC is considering building a giant plant in Louisiana that would convert natural gas into diesel fuel, several people familiar with the company's plans said. The plant, which could cost more than $10 billion, would be similar in size to Shell's Pearl gas-to-liquids facility in the Mideast nation of Qatar, the people said.
• Romney Says Obama Hides His Agenda. Mitt Romney, fresh off of three momentum-building wins in the race for the Republican presidential nomination, accused President Barack Obama on Wednesday of "rhetorical excess" and of muddling his second-term agenda in order to win election. "He wants us to reelect him so we can find out what he will actually do," Mr. Romney told a gathering of newspaper reporters and editors at a Washington hotel. "With all the challenges the nation faces, this is not the time for President Obama's hide-and-seek campaign."
  

Dow Jones:

• Spanish Debt Insurance Costs Climb After Auction. At around 0900 GMT, Spain's five-year credit default swap was 16 basis points wider at 453 basis points, its widest level since November 28, according to data-provider Markit.

MarketWatch:

• Emerging Markets Suffer a Setback on China Worries. Emerging markets made a sizable retreat in the past month, owing largely to concern over a slowdown in China, but that may hardly dent their prospects as a long-term investment.

CNBC.com:

• Europe's Banks Face Capital Hole Under New Rules. Europe's top banks would have had to raise 242 billion euros ($323 billion) or more to achieve minimum capital ratios if tougher rules that are coming in for the industry had been in force last year.

Business Insider:

• Man Kills Himself In The Middle Of The Main Athens Square And This Was His Suicide Note.
• The NSA's General Didn't Lie To Congress About Spying On Americans — They Hire It Out To The Israelis.
• You Have To See This Gorgeous Concept Design Of Google's Top-Secret 'Terminator' Glasses.
• Israel Says The Sanctions Against Iran Absolutely Are Not Working.
• An Impossible 57% of Spain's Budget Is Devoted To Pensions, Unemployment Benefits and Interest.
• It Turns Out Warren Buffett Is A Master Of Avoiding Taxes.
  

Zero Hedge:

• Art Cashin On The End of the "LTRO Effect".
  
• NYSE Margin Debt At Highest Since July. (graph)
• High-Yield Credit Fundamentals Starting to Crack.
• A Thought Experiment: Why Not Just Print, Print, Print and Then Print Some More?
  

New York Times:

• Regulators Penalize JPMorgan(JPM) Over Lehman Ties. When Lehman Brothers collapsed at the height of the financial crisis, JPMorgan Chase was at the center of the storm. The bank was a major lender to the firm, which filed the biggest bankruptcy in United States history. Now, more than three years later, regulators have penalized JPMorgan for actions tied to Lehman’s demise. The Commodity Futures Trading Commission filed a civil case against JPMorgan on Wednesday, the first federal enforcement case to stem from Lehman’s downfall. The bank settled the Lehman matter and agreed to pay a fine of approximately $20 million.

Reuters:

• Israel To Make Do With Fewer Iron Dome Interceptors. Israel is expanding the reach of its Iron Dome rocket interceptors to make do with fewer given the prospect of reduced financial support from a cash-strapped United States, a senior Israeli official said on Wednesday.
• Italy's Monti Makes Concession on Labour Reform. Italian Prime Minister Mario Monti made concessions to unions and a major centre-left party on Wednesday in a bid to ensure swift approval in parliament of labour reforms that would make it easier to fire workers. Monti and Labour Minister Elsa Fornero said the revised proposals would allow courts to order the reinstatement of workers laid off for business reasons where the justification was "manifestly non-existent".

Telegraph:

• Debt Crisis: Live.