Stocks Higher into Final Hour on Euro Bounce, More Financial/Homebuilding Sector Optimism, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 19.85 -2.65%
  
• ISE Sentiment Index 96.0 +52.38%
  
• Total Put/Call 1.07 +7.0%
  
• NYSE Arms .76 -69.68%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.04 -2.19%
  
• European Financial Sector CDS Index 247.14 -3.93%
  
• Western Europe Sovereign Debt CDS Index 274.97 -1.36%
  
• Emerging Market CDS Index 266.06 -1.29%
  
• 2-Year Swap Spread 28.75 -2.5 basis points
  
• TED Spread 38.75 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -56.75 +1.5 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 173.0 +4 basis points
  
• China Import Iron Ore Spot $148.70/Metric Tonne +.47%
  
• Citi US Economic Surprise Index 4.80 +.3 point
  
• 10-Year TIPS Spread 2.31 +6 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a +77 open in Japan
• DAX Futures: Indicating +2 open in Germany
  

Portfolio:

• Higher: On gains in my Retail, Medical and Biotech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades back to its 50-day moving average despite Eurozone debt angst, less tech sector optimism, rising global growth fears, less dovish fed commentary and rising energy prices. On the positive side, Alt Energy, Oil Tanker, Networking, Homebuilding, Restaurant and Bank shares are especially strong, rising more than +1.75%. Small-caps and cyclicals are outperforming. Financials have traded well throughout the day. Major European indices rose around +1.25% today, led higher by a +1.9% gain in Spain. Spain is now down -11.6% ytd, which remains a large red flag for the region. The Bloomberg European Financial Services/Bank Index rose +1.9% and is now down -13.8% in about 3 weeks. The Germany sovereign cds is down -1.9% to 74.16 bps, the France sovereign cds is down -1.88% to 186.0 bps and the Portugal sovereign cds is down -2.93% to 1,102.17 bps. Moreover, the European Investment Grade CDS Index is down -3.0% to 142.02 bps. On the negative side, Steel, Software, HMO, Drug, Computer Service, Disk Drive, Computer, Paper, Ag and Energy shares are lower-to-flat on the day. Tech shares have underperformed throughout the day. Oil is gaining +1.3%, Lumber is down -1.1% and Copper is down -.44%. The 10-year yield is only rising +4 bps to 2.03%. Major Asian indices fell around -.75% overnight, led lower by a -1.1% decline in Hong Kong. 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 -7.0% 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 -18.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +712.0% ytd. China's March copper imports fell -4.6% on the month. Overall, credit gauges continue to weaken too much as Europe's debt crisis appears to be in the early stages of reigniting. Market-leader (AAPL) and Dr. Copper did not participate in today's equity rally and bonds barely gave back any of their recent gains, which are all red flags. While the European markets calmed slightly today on rhetoric from an ECB executive board member, I suspect that the markets will eventually force the ECB into actual action before the latest round of debt crisis jitters temporarily subside again. 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-lower into the close from current levels on Eurozone debt angst, less tech sector optimism, rising global growth fears, profit-taking, less dovish fed commentary and rising energy prices.

Today's Headlines

Bloomberg:

• Coeure Triggers Bets ECB Will Restart Bond Purchases for Spain. European Central Bank Executive Board member Benoit Coeure triggered speculation that the bank will revive its bond-purchase program to lower Spain’s borrowing costs as the region’s debt crisis threatens to boil over again.
• Italy Sells 11 Billion Euros of Bills as Crisis Returns. Italy sold 11 billion euros ($14.4 billion) of Treasury bills, meeting its target for the auction as rates rose on one-year debt for the first time since November amid a return of Europe’s sovereign debt crisis. The Rome-based Treasury auctioned 8 billion euros of 361- day bills at 2.84 percent, up from 1.405 percent at the last sale of similar-maturity debt on March 13. Investors bid for 1.52 times the amount offered, up from 1.38 times last month. Also sold were 3 billion euros of three-month bills at 1.249 percent, compared with 0.492 last month. Italy will auction as much as 5 billion euros of bonds tomorrow. “After three months that were calmer than expected, the euro crisis is back,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note before the auction. While current 10-year yields are still “affordable” for Italy and Spain, “if fear feeds on fear, as has often been the case in previous waves of crisis, things could potentially get worse,” he said.
• Spain's Debt Struggle Opens Door to Sarkozy Campaign Message. “Do you want to be in the same situation as Spain or Greece?” Sarkozy said today on France Info radio, the same rhetorical question he’d asked the night before in a Canal-Plus television appearance. “If I hadn’t done pension reform, if I hadn’t decided to only replace one of every two retiring state workers, can you doubt that we’d be in the same situation.” While Sarkozy trails Socialist challenger Francois Hollande in polls for the decisive May 6 vote, the gap has narrowed in recent weeks.
• U.S. Import Prices Jumped 1.3% in March on Fuel, Materials. Prices of goods imported into the U.S. rose more than forecast in March, reflecting higher costs for fuel and industrial materials such as metals. The 1.3 percent gain in the import-price index was the biggest since April 2011 and followed a revised 0.1 percent drop in February that was previously reported as an increase, Labor Department figures showed today in Washington. Economists projected the March gauge would increase 0.8 percent, according to the median forecast in a Bloomberg News survey. Prices excluding fuel climbed 0.5 percent, also the most in 11 months. The cost of imported petroleum and products jumped 4.3 percent in March, the most since April 2011, from the prior month and was up 9.6 percent from a year earlier. Central bank officials indicated they will probably hold off on more monetary accommodation unless prices rise more slowly than their 2 percent target or the economic expansion falters, according to the minutes. Their preferred price gauge, tied to consumer spending and issued by the Commerce Department, rose 2.3 percent in the year ended in February.
• Copper Futures May Fall for Third Day on Signs Demand Will Ebb. Copper may fall for a third day in New York as signs of a worsening debt crisis in Europe and slowing growth in China fuel concern that demand will stall. Rising bond yields and missed deficit targets in Spain signaled that the region’s fiscal crisis may escalate. Copper dropped to a 12-week low yesterday after reports showed lower imports of the metal than a month earlier in China, the world’s biggest user. “Concerns about the health of the global economy are weighing on copper,” Frank Cholly, a senior commodity broker at RJO Futures in Chicago, said in a telephone interview. “The Euro-zone crisis may reignite. It looks like China is slowing.” Yesterday, prices closed lower than the 100- and 200-day moving averages. Falling below the measures can be a bearish signal to some investors who follow historical price patterns.
• Oil Extends Gain as Distillate, Gasoline Inventories Drop. Crude oil for May delivery rose $1.56, or 1.5 percent, to $102.58 a barrel at 12:19 p.m. on the New York Mercantile Exchange. Oil traded at $101.50 before release of the inventory report at 10:30 a.m. Brent oil for May settlement increased 49 cents, or 0.4 percent, to $120.37 a barrel on the London-based ICE Futures Europe exchange.
• Unemployment Falls Fast in U.S. If Men Get College Degree. The U.S. workplace is polarizing between the education haves and have-nots, says David Autor, professor of economics at Massachusetts Institute of Technology in Cambridge. So-called middle-skill jobs, typically well-paying work that doesn’t require extensive higher education, are vanishing, dividing the labor force into high- and low-skill positions. While women are moving up the knowledge ladder, male educational attainment is growing at a slower rate. “It is terrific that women are getting higher levels of education,” Autor says. “The problem is that males are not.”
• North Korea Defies U.S. in Readying Missile Launch as Soon as Tomorrow. North Korea moved ahead with plans to fire a long-range rocket as soon as tomorrow in defiance of warnings from the U.S. that doing so would destabilize the region and scuttle a deal for American food assistance. North Korea has begun fueling the rocket that will put a satellite in orbit sometime between April 12 and 16, Yonhap News cited space agency official Paek Chang Ho as telling a group of foreign journalists in the capital of Pyongyang.
• Fed's Lockhart Says Weak Jobs Report Doesn't Require More QE. Federal Reserve Bank of Atlanta President Dennis Lockhart said while the jobs report for March was disappointing, it doesn’t alter his view that the U.S. economy is growing moderately, and he would be “reticent” to support additional asset purchases, or quantitative easing. “I am still not convinced that another round in this time frame would achieve a great deal,” Lockhart told reporters in Stone Mountain, Georgia, today. “I view it as a policy that would respond more to a fairly dramatic negative change of direction of the economy that could be evidenced by rising unemployment, evidenced by plummeting growth.”
• U.S. Files Antitrust Lawsuit Against Apple(AAPL), Hachette. The U.S. sued Apple Inc. (AAPL), Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster in New York district court, claiming the publishers colluded to fix eBook prices. CBS Corp. (CBS)’s Simon & Schuster, Lagardère SCA’s Hachette Book Group and News Corp. (NWSA)’s HarperCollins settled their suits today, two people familiar with the cases said.
• Rosengren Says U.S. Money Funds Threaten Financial Stability. Money-market funds in the U.S. may be taking excessive risks that pose a threat to financial stability by holding European debt whose value could decline if the region’s crisis worsened, said Federal Reserve Bank of Boston President Eric Rosengren. “A significant source of the credit risk in many prime money market funds over the past year has been the large exposure to European banks,” Rosengren said at Stone Mountain, Georgia, today. In evaluating “risk from unexpected problems in Europe, money-market funds remain an important potential transmission channel to the United States,” he said.

Wall Street Journal:

• Fed Considers Refining 'Stress Tests'. A Federal Reserve official responded Tuesday to widespread criticism of the most recent round of "stress tests," saying the central bank will consult with academics, analysts and banks to improve the process. Fed governor Daniel Tarullo signaled, however, that the Fed would continue to resist calls from bank executives to disclose the details of how it calculates the test results.
• China Seen Bolstering Oil Reserves. China's crude-oil imports jumped to near-record levels in March, bolstering the belief among some energy analysts that the country is again hoarding oil for its strategic reserves. If the predictions prove accurate, China's growing thirst for oil could underpin already-high crude prices and push the country's oil imports above market expectations. On Tuesday, China said its oil imports reached 5.57 million barrels a day in March, the third-highest month on record and a rise of 8.7% from the year-ago month. For the quarter, China's crude imports rose 11% from the year-ago quarter, a much stronger pace than full-year 2011's increase of 6%, the China's General Administration of Customs said.

CNBC.com:

• Forget China GDP, Other Indicators Paint Bearish Picture. Markets may be fixated on China's widely-anticipated growth data due on Friday, but some analysts tell CNBC investors should look beyond the figures and focus on several other indicators which, they say, paint a more dire picture of the economy. According to Paul Gambles, managing partner at MBMG, China's gross domestic product (GDP) data — widely regarded as a barometer of the country's economic health — are among the "less reliable" figures from the government. "We tend to take the view that the least reliable statistics that come out of China are perhaps the GDP numbers, the unemployment numbers and the CPI numbers," Gambles told CNBC on Wednesday. Instead, investors should place more importance on data like energy usage, new car sales external Purchasing Managers' Index, which he said pointed to a less robust Chinese economy.
• Next Generation of US Doctors Sees Gloomy Future. A majority of young doctors feel pessimistic about the future of the U.S. healthcare system, with the new healthcare law cited as the main reason, according to a survey released to Reuters on Wednesday.
• Wasn't Europe Fixed? Fears Arise Again Over Debt Crisis. Europe's debt problems, pushed into the background by an American-style central bank liquidity surge, have come back to revisit the markets, perhaps sooner than many investors had expected. "If the periphery's credit crunch continues, the region's recession could be deeper and its recovery prospects weaker than market expectations," Athanasios Vamvakidis, forex strategist at Bank of America Merrill Lynch, told clients.

Business Insider:

• Natural Gas Market Falling Victim to the Bear. The natural gas market has hit a lull having fallen below $2 per million British thermal units (MMBtu) to record a new 14-year low.
• George Zimmerman to be Charged in Shooting of Trayvon Martin.
• Pretty Soon, We Need to Start Talking A LOT About This Budget Chart.
• 49 Former NASA Scientists Send A Letter Disputing Climate Change. Some prominent voices at NASA are fed up with the agency's activist stance toward climate change. The following letter asking the agency to move away from climate models and to limit its stance to what can be empirically proven, was sent by 49 former NASA scientists and astronauts. The letter criticizes the Goddard Institute For Space Studies especially, where director Jim Hansen and climatologist Gavin Schmidt have been outspoken advocates for action.
• China Went Ahead And Sold Iran $9 Million Of Forbidden US Computer Equipment.
• Obama's DISASTER: People Hate Obamacare More Than Ever.
  

Zero Hedge:

• The Anatomy of a USD-Funding Crisis and the Fed's Global Swap-Line Bailout.
• US Posts Biggest March Budget Deficit In History, Or How The ???? Chart Became The ????+? Chart.
• Beige Book Makes New QE Less Likely.
  

Chillicothe Gazette:

• Paccar's(PCAR) Kenworth Plant to Lay Off 10% of Workers. One in 10 workers at Kenworth Truck Co.'s Chillicothe plant no longer will have a job Monday. Plant Manager Scott Blue confirmed the manufacturer will lay off 10 percent of its work force to prepare for a reduction in production at the site. Blue said orders have fallen off by about 10 percent and the company has to decrease its work force to match the demand. Blue said it's fair to say the news is surprising, but said truck manufacturing companies across the globe are seeing a slump in demand. "We (Kenworth) still have a record market share, so this is absolutely (happening) across the industry," Blue said. In February, PACCAR Inc. reported its fourth quarter sales for 2011 almost doubled but warned the ongoing European debt crisis has resulted in smaller truck orders from eurozone countries.

Reuters:

• Italy Bond Yield Rise Due to Spain Contagion - Debt Management Chief.
  

Telegraph:

• Spanish Epiphany as Depression Deepens? Spain’s industrial output is sliding at an accelerating rate, as is entirely predictable if you enforce draconian fiscal tightening on an economy in deep recession with no offsetting monetary stimulus or exchange rate devaluation. The latest data show that output fell 5.1% (y/y) in February, after 4.3% in January and 3.5% in December. Durable goods fell 14.8pc, the sixth successive monthly fall. Capital goods output fell 10.6pc, according to Raj Badiani from IHS Global Insight. This is politically untenable. Unemployment is already 23.6pc on the Eurostat measure. David Owen from Jefferies Fixed Income expects this to reach 27.5pc by the end of the year (which is roughly 32pc using the old measure from the 1990s, based on a Bank of Spain study).
• Pension Risks Threaten UK Finances, IMF Warns. Britain is at risk of pensions timebomb that could cost the state as much as £750bn, the International Monetary Fund (IMF) has warned.

El Confidencial:

• Madrid will raise the price of bus and train tickets by an average of 11%. The price rise is due to increasing fuel prices.
  

Bear Radar

Style Underperformer:

• Large-Cap Growth +59%

Sector Underperformers:

• 1) Gold & Silver -1.60% 2) Software +.09% 3) HMOs +.29%

Stocks Falling on Unusual Volume:

• FFIV, NTAP, BVN, CRESY, RYAAY, OPNT, VPHM, PCAR, LAYN, JAZZ, SVVC, NFLX, AREX and CSC
  

Stocks With Unusual Put Option Activity:

• 1) VOD 2) FFIV 3) VMW 4) KORS 5) NUAN
  

Stocks With Most Negative News Mentions:

• 1) OPNT 2) NTAP 3) UNG 4) GM 5) JPM
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.38%

Sector Outperformers:

• 1) Homebuilders +2.79% 2) Coal +2.67% 3) Oil Tankers +2.19%

Stocks Rising on Unusual Volume:

• SMSC, FSLR, LVLT, BCS, CMA, SBAC, TITN, DLLR, MFRM, TZOO, ADTN, AA, OI, BPI, WLT and ANR
  

Stocks With Unusual Call Option Activity:

• 1) ZION 2) SVNT 3) NOK 4) VMW 5) FFIV
  

Stocks With Most Positive News Mentions:

• 1) CSC 2) AA 3) CCL 4) VMW 5) ADTN
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Rajoy Says Spain Future at Stake as Debt Crisis Persists. Prime Minister Mariano Rajoy said Spain’s future is at stake in its battle to tame surging bond yields, as the head of the nation’s second-largest region proposed handing back powers to the government to cut costs. With Spanish bonds trading closer to levels that prompted Greece, Ireland and Portugal to seek European bailouts, Rajoy will address lawmakers of his People’s Party today to explain the deepest budget cuts in three decades. The prime minister will speak at 1 p.m. in Madrid. “Without a doubt, a good part of Spain’s future is at stake,” Rajoy told senators yesterday, as he urged regional governments to contribute to spending cuts. “The problem is that the markets can lend or decide not to lend.” Rajoy has stepped up his rhetoric in the past week as he seeks to persuade Spaniards to accept spending reductions and tax increases as a less painful alternative to a bailout. His three-month-old government is struggling to convince investors it can reduce the deficit by a third this year and crack down on overspending by regional administrations.
  
• Top Forecasters See Euro Weakness Returning on Spain. The most-accurate foreign-exchange forecasters say the euro will slide as austerity-driven spending cuts from Spain to Italy reignite debt turmoil and drag the region into recession. Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., who topped the list for the fourth time out of the past six quarters according to data compiled by Bloomberg, expects the euro to drop more than 5 percent to $1.24 at the end of 2012. Westpac Banking Corp., which had the second-lowest margin of error, predicts $1.26.
• Japanese Investors Shun Spain as Crisis Resurfaces: Euro Credit. Japan's biggest investors say it's too early to buy bonds from Europe's most indebted nations as rising Spanish yields spark concern that the region's fiscal crisis has further to run. Kokusai Asset Management Co., which runs Asia's largest mutual fund, Mitsubishi UFJ Asset Management Co., a unit of Japan's biggest publicly traded bank, and Diam Co., part of the nation's second-biggest life insurer, are all shunning Spanish debt. Japanese investors sold a net $43.8 billion of euro-denominated bonds in the 12 months ended Feb. 29, according to figures from the Ministry of Finance in Tokyo. "I'm not planning to add Spanish or Italian bonds anytime soon," said Masataka Horii, who runs the $21.2 billion Kokusai Global Sovereign Open Fund in Tokyo.
• Chinese Exports to Major Trading Partners Showing Signs of Slowing. (graph)
  
• IMF Said Ready to Cut Forecast for China Current-Account Surplus. The International Monetary Fund is set to lower its forecasts for China’s medium-term current- account surplus, according to two officials who have seen the draft report. The Washington-based IMF in September estimated surpluses of more than 7 percent of gross domestic product for 2015 and 2016. The new forecasts for the broadest measure of trade will be published April 17 in the IMF’s World Economic Outlook, according to the officials, who spoke on condition they wouldn’t be named because the figures haven’t been made public.
• N.Y. Renews Opposition to BofA $8.5 Billion Mortgage Accord. New York Attorney General Eric Schneiderman renewed his opposition to Bank of America Corp. (BAC)’s proposed $8.5 billion mortgage-bond settlement, saying the deal covers “a small fraction” of investor losses. Schneiderman’s office asked a New York state judge today to allow it to intervene in the case, saying in a court filing that there are “serious questions about the fairness and adequacy of the proposed settlement.” “The proposed cash payment represents only a tiny percentage of the losses investors have faced and will continue to face,” the attorney general said.
• Credit-Default Swaps in U.S. Jump as Spain Borrowing Costs Rise. A benchmark gauge of U.S. company credit risk touched the highest level in more than two months and the cost to protect U.S. bank debt against losses climbed as a surge in Spanish and Italian bond yields stoked concern that Europe’s debt crisis is worsening. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, climbed for a fifth day, adding 2.6 basis points to a mid-price of 104.7 basis points at 1:27 p.m. in New York, according to Markit Group Ltd. The swaps index, which typically rises as investor confidence deteriorates and falls as it improves, touched 105 basis points, the highest level since Jan. 25. The widening of credit-default swaps tied to bank bonds is “really a reflection of the macro environment and the concerns the market has over Europe,” said Adam Steer, an analyst at Brookfield Investment Management Inc., whose parent Brookfield Asset Management Inc. oversees about $150 billion in assets. “They’ve been very correlated with U.S. macro news as well as Europe macro news it seems for a while now, and that’s what we’re seeing today.” Credit-default swaps on Charlotte, North Carolina-based Bank of America Corp. added 18.1 basis points to 287.8 basis points, the highest level since Feb. 15, and those on JPMorgan Chase & Co. increased 6.3 basis points to 116.1 as of 12 p.m. in New York, according to data provider CMA. Contracts tied to Citigroup Inc., based in New York, climbed 14.2 basis points to 264.7, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Yesterday the average of the six biggest U.S. banks reached the most since Feb. 15, according to CMA data. The U.S. two-year interest-rate swap spread, a measure of stress in credit markets, climbed 2.05 basis points to 30.88 basis points, the widest since February.
• S&P 500 Put Demand Exceeds Europe by Most Since 2008: Options. Demand to protect U.S. stocks from losses is exceeding levels seen in Europe by the most since 2008 on renewed concern that slowing global economic growth will undo the recent US stock rally. The ratio of puts to sell the S&P 500 Index versus calls to buy climbed to 1.97-to-1 on March 28. That was 73% higher than the 1.14-to-1 open-interest ratio for the Euro Stoxx 50 Index, the biggest difference in more than three years, according to data compiled by Bloomberg.
• Profit Drop at U.S. Banks Imperils Rally as Loans Lag Behind GDP. The six largest U.S. lenders, including JPMorgan Chase & Co. and Wells Fargo & Co., may post an 11 percent drop in first-quarter profit, threatening a rally that has pushed bank stocks 19 percent higher this year. The banks will post $15.3 billion in net income when adjusted for one-time items, down from $17.3 billion in last year’s first quarter, according to a Bloomberg survey of analysts. Trading revenue at the biggest lenders is projected to fall 23 percent to $18.3 billion, according to Morgan Stanley analysts, who didn’t include their firm or Wells Fargo.“You can’t expect bank stocks to go straight to the moon,” said Peter Kovalski, a money manager at Alpine Woods Capital Investors LLC in Purchase, New York, which manages about $5 billion. “You have to expect fundamentals to catch up, and there are some headwinds facing the industry. There is a little too much optimism going into this quarter.” U.S. lenders, struggling to expand in commercial banking years after the housing collapse, haven’t matched last year’s overall results, even as bond and equity markets strengthened. Making matters worse, loan balances increased less than the economy, bucking a trend in previous recoveries, said Brian Foran, a New York-based analyst at Nomura Holdings Inc. Loans at the top 25 domestically chartered commercial banks rose 0.4 percent in the quarter through March 28, slowing from 1 percent growth in the previous three months, according to the Federal Reserve. Loans fell to $4.04 trillion from a peak of $4.24 trillion in the fourth quarter of 2008, according to the Fed.
• Apple(AAPL), Macmillan Said to Prepare for U.S. Suit Over eBook. Apple Inc. and the publisher Macmillan are preparing to be sued as soon as tomorrow by the U.S. Justice Department over alleged collusion in the pricing of e-books, according to two people familiar with the matter.
• Carlyle Is Said to Seek Value of Up to $8 Billion in IPO. Carlyle Group, the second-biggest U.S. private-equity firm, will seek a valuation of $7.5 billion to $8 billion in its initial public offering, according to people with knowledge of its plans. Carlyle plans to sell a stake of about 10 percent in the IPO and will start marketing the deal to investors as early as next week, said the people, who asked not to be identified because the information is private. The Washington-based firm, which has been gauging public interest since last year, is targeting an IPO in early May, said another person.
• Emerging Asia Can Refrain From More Stimulus, ADB Says. Policy makers in developing Asia can refrain from further monetary and fiscal stimulus because growth will remain robust, while oil-price spikes can revive the threat of inflation, the Asian Development Bank said.
• Mumbai Is The World's Least Affordable Home Market. (graph) The average Indian would need to work for three centuries to pay for a luxury home in Mumbai, making that city the least affordable in the world for locals, according to an analysis of real estate and wages.

Wall Street Journal:

• Romney Campaign Focuses on General Election. After weeks of training its message on President Barack Obama, the Romney team will turn its attention to the logistics of trying to defeat him.
• Philippine Warship in Standoff With China Vessels. The Philippine government Wednesday said its newest warship is locked in a standoff with two Chinese surveillance vessels in a fresh dispute over fishing rights in the resource-rich South China Sea, potentially escalating an already-tense security environment in the contested region.
• The Obama Rule. Forget Warren Buffett, or whatever other political prop the White House wants to use for its tax agenda. This week the Administration officially endorsed what in essence is the Obama Rule: Taxes must be high simply to spread the wealth, never mind the impact on the economy or government revenue. It's all about "fairness," baby.

Business Insider:

• Why The Bo Xilai Corruption And Murder Scandal Is A Big Deal For China.

Zero Hedge:

• The Era of Independent Central Banks Is Over.

CNBC:

• The Real Threat is Spain, Not Greece: Sullivan. Here’s the fear: Banco Santander, BBVA and the third largest bank in Spain, La Caixa, have combined assets of about $2.7 trillion. Spain’s GDP is just about $1.4 trillion. In other words: Spain’s three biggest banks are nearly twice as big as the entire Spanish economy.
  
• Andy Busch: Health Care Is The Driver of US Long Term Spending Problems.
• The Other MF Global Money Mystery: Trustee's Fees. Former MF Global customers will have to wait a little longer than expected to learn how lucrative the broker's liquidation has been for trustee James Giddens and his law firm. A bankruptcy judge on Monday approved a June 8 deadline requested by Giddens for reporting fees and expenses to the court, meaning the bankruptcy could be in its eighth month before fees are made public.

IBD:

• Visa(V) Charges Ahead With Plan To Grow Sales Overseas.
  

NY Times:

• Lenders Again Dealing Credit to Risky Clients.
  

Absolute Return:

• Hedge Funds Dive Below High Watermarks Again. Fewer funds were above their high watermarks last year than even in 2008, according to a recent analysis of returns from Americas-based hedge funds reported to the HedgeFund Intelligence database.
  

Forbes:

• LDK(LDK) Pushes Back 4th-Quarter Earnings Release Date; Shares Fall 2%. LDK Solar, one of China’s largest integrated solar-related manufacturers, said yesterday it will reschedule the previously announced date for the release of first-quarter profit report.

CNN:

• Refinery Closures Risk Northeast Gas Price Spike.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 24% 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 -17 (see trends).

Reuters:

• Alcoa(AA) Trims Its Aluminum Demand Outlook For China. Alcoa Inc. said on Tuesday it lowered by 1 percentage point its outlook for China's aluminum consumption growth in 2012.
• IMF Working With Egypt on Backing for Loans. The International Monetary Fund said on Tuesday it was staying in close touch with Egyptian authorities as they work out a budget and round up political support that would make an IMF financing package possible.
• Two Fed Officials Voice Worry On Easy Policy. Two Federal Reserve officials expressed concern about the central bank's ultra-loose policy on Tuesday, keeping pressure on their colleagues not to launch another round of monetary easing. Minneapolis Federal Reserve Bank President Narayana Kocherlakota said the U.S. central bank should start pulling back from its extraordinary support for the economy some time in the next six to nine months. "Conditions will warrant raising rates some time in 2013 or, possibly, late 2012," Kocherlakota said. Echoing his concerns, Dallas Fed President Richard Fisher said company leaders are peppering him with concerns about the central bank's aggressive monetary stimulus, which they believe is setting the stage for inflation. "To a person that I speak to, I am pleaded with, 'please no more liquidity'," Fisher told students at the University of Oklahoma's Price College of Business. There is "real concern that with our expanded balance sheet that we are just a little bit of an ember in what could become an inflationary fire," he said.
• Australians Fret on Finances, Shun Home Loans. A measure of Australian consumer confidence fell for a second month in April as people fretted about their finances. The survey of 1,200 people by Westpac Bank and the Melbourne Institute showed its index of consumer sentiment fell 1.6 percent in April to 94.5. That was the lowest reading since August last year and came on top of a 5 percent drop in March. The disappointing news came as government data showed new home loans slipped for a second straight month in February.
• North Korea Says Fuel Being Injected Into Rocket. North Korea said on Wednesday it was injecting fuel into a long-range rocket "as we speak" ahead of a launch condemned by its neighbors and the West. The launch is set to take place between Thursday and next Monday and has prompted neighbors such as the Philippines to re-route their air traffic just in case. Japan said it would shoot down the rocket if it crossed its airspace.

Telegraph:

• Spain's 'Lose-Lose' Struggle Reignites Euro Crisis. The eurozone crisis has returned with a vengeance after Spain’s mounting woes pushed 10-year bonds yields back to the danger line of 6pc and the Madrid bourse crashed to its lowest level since the 2009. Mr de Guindos said Madrid faces a "lose-lose situation" since markets will punish excessive austerity as harshly as too little austerity. Tightening too fast risks pushing the economy into the sort of self-defeating spiral already seen in Greece, where the tax base shrivels. Central bank governor Miguel Ángel Fernández Ordóñez denied that Spain would become the fourth EMU state to need a rescue, but warned that Spanish banks are not yet in the clear. "If the Spanish economy deteriorates more than expected, they’ll have to keep boosting capital," he said.

Xinhua:

• China plans to limit its population to under 1.39B during the five years through 2015, the State Council said in a statement posted on the central government website yesterday.
• The State-Owned Assets Supervision and Administration Commission "in principle" banned central government-owned companies from investing in non-core businesses abroad, citing rules from the agency that will take effect on May 1.
  

China.org:

• China People's Daily Urges Cadres to Support Bo Xilai Suspension. The Chinese Communist Party's official People's Daily urged cadres support the decision to suspend Bo Xilai from his senior party posts after his wife's arrest on suspension of murdering a British citizen.
  

Evening Recommendations
Citigroup Global Markets:

• Rated (NVDA) Outperform, target $19.

Night Trading

• Asian equity indices are -1.25% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 172.50 +7.0 basis points.
  
• Asia Pacific Sovereign CDS Index 140.0 +5.0 basis points.
  
• FTSE-100 futures -.76%.
  
• S&P 500 futures +.27%.
  
• NASDAQ 100 futures +.28%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TITN)/.53
• (ADTN)/.20
  

Economic Releases
8:30 am EST

• The Import Price Index for March is estimated to rise +.8% versus a +.4% gain in February.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a +9,009,000 barrel gain the prior week. Distillate inventories are estimated to fall by -250,000 barrels versus a +19,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,375,000 barrels versus a -1,457,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +1.2% gain the prior week.
  

2:00 pm EST

• Fed's Beige Book.
• The Monthly Budget Deficit for March is estimated to widen to -$196.0B versus -$188.2B in February.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lockhart speaking, Fed's Yellen speaking, Fed's Bullard speaking, Fed's Rosengren speaking, Fed's George speaking, 10Y T-Note Auction, (IHS) Investor Day and the weekly MBA mortgage applications report 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 mixed. 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 Financial Sector Optimism, High Energy Prices

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 20.95 +11.38%
  
• ISE Sentiment Index 66.0 -17.5%
  
• Total Put/Call .96 -1.03%
  
• NYSE Arms 1.89 -24.32%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.56 +2.42%
  
• European Financial Sector CDS Index 257.55 +8.79%
  
• Western Europe Sovereign Debt CDS Index 278.84 +2.23%
  
• Emerging Market CDS Index 271.20 +4.0%
  
• 2-Year Swap Spread 31.25 +2.75 basis points
  
• TED Spread 38.75 +.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -56.75 -2.75 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 169.0 -3 basis points
  
• China Import Iron Ore Spot $148.0/Metric Tonne unch.
  
• Citi US Economic Surprise Index 4.50 -.1 point
  
• 10-Year TIPS Spread 2.25 +2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -160 open in Japan
• DAX Futures: Indicating -23 open in Germany
  

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 is trading near session lows and breaking below its 50-day moving average on rising Eurozone debt angst, less financial/homebuilding sector optimism, rising global growth fears, profit-taking, more shorting and high energy prices. On the positive side, Coal shares are slightly higher on the day. Weekly retail sales rose +4.1% versus a +3.6% gain the prior week. Oil is falling -1.13% and Lumber is rising +.19%. On the negative side, Oil Tanker, Paper, Disk Drive, Biotech, HMO, Homebuilding, Retail, Gaming, Networking, Bank and Construction shares are under significant pressure, falling more than -2.75%. Small-cap and Cyclical shares are underperforming again. Gold is gaining +1.22% and Copper is down -1.76%. The 10-year yield is falling -7 bps to 1.98%. Major Asian indices were mostly lower, led down by a -1.2% decline in Hong Kong. Major European indices plunged around -3.0% today, led down by a -5.0% decline in Italy. Spanish equities fell another -3.0% and are now down -13.2% 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 plunged another -4.3% today. This index is down -15.4% in about 3 weeks and is now convincingly below its 200-day moving average. The Germany sovereign cds rose +2.3% to 75.50 bps, the France sovereign cds is gaining +5.8% to 189.57 bps, the Italy sovereign cds is gaining +4.65% to 437.73 bps, the Spain sovereign cds is up +4.6% to 485.73 bps, the Russia sovereign cds is jumping +6.1% to 204.32 bps and the China sovereign cds is gaining 4.8% to 116.65 bps. Moreover, the European Inv Grade CDS Index is soaring +10.1% to 146.36 bps and the Emerging Markets Sovereign CDS Index jumped +7.0% to 295.50 bps. 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 -6.0% 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 +724.0% ytd. China's March copper imports fell -4.6% on the month. Overall, credit gauges continue to weaken too much as Europe's debt crisis appears to be in the early stages of reigniting. The Italian/German 10Y Yld Spread is up +17.0% in 5 days. German bond yields continue to fall rapidly, despite perceptions that their economy is strong and labor costs are starting to rise too much, which is another large red flag. Stocks are getting short-term oversold for the first time in awhile, however any bounce will likely prove short-lived unless the situation in Europe begins to calm very soon. 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-lower into the close from current levels on rising Eurozone debt angst, less financial sector optimism, rising global growth fears, profit-taking and high energy prices.