Friday Watch

Evening Headlines
Bloomberg:

• Euro Risks Highlighted as Votes Show Swing in Political Pendulum. Four elections this weekend have the potential to reshape the European political map and show how the response to the financial crisis remains hostage to the whims of voters on both sides of the region’s economic divide. Recession-weary Greeks will pick a new government and polls show the French will probably install a Socialist president for the first time since 1981. Local elections will test Italy’s political pulse, and voters in a northern German state may deal a symbolic blow to Chancellor Angela Merkel’s coalition. The May 6 elections capture the popular agitation in debtor and donor countries alike, after emergency loan packages worth 386 billion euros ($508 billion) and a focus on deficit reduction failed to halt the debt crisis. Instead, Europe has been sundered in two economically, with Greece’s unemployment rate of 21.7 percent contrasting with Germany’s 6.8 percent. “We have to look out for political risk still in Europe,” Julian Callow, chief European economist at Barclays Capital in London, said on Bloomberg Television. “We’ve been in a situation frankly in the last year where the politics has really been quite favorable to push through structural economic reforms, to push through fiscal tightening. My concern is the political pendulum is starting to swing back.” The vote in Greece, the epicenter of the euro crisis, may amplify the mutiny against the wage and spending cuts and tax increases that are conditions for drawing on financial aid and staying in the currency.
• Hollande ‘Pragmatic’ on Fiscal Pact, Sueddeutsche Zeitung Says. French Socialist presidential candidate Francois Hollande would be ready for a “pragmatic solution” to a disagreement with German Chancellor Angela Merkel over the so-called fiscal pact that would limit government spending in European Union countries, Sueddeutsche Zeitung said. Hollande’s team has “concrete proposals” on how the fiscal pact can be complemented by measures to stimulate economic growth, the newspaper said, citing notes documenting talks between German diplomats and Hollande aides. Merkel would agree to such an amendment, which may be decided at an EU leaders’ summit in Brussels at the end of June, the newspaper said without citing anyone. Hollande is aware that he would have to speak “tough truths” at the beginning of his term and that there’s no way around pushing France’s budget deficit below 3 percent of gross domestic product next year, the newspaper said, citing notes on the talks.
• Euro Set For Biggest Weekly Decline In A Month. The euro was set for the biggest weekly decline in a month amid concern leadership changes at elections in France and Greece this weekend could derail the region’s austerity efforts. The 17-nation currency was 0.2 percent from an almost two- year low versus the British pound before a private report that may confirm the region’s output of services and manufacturing shrank for a third month. The Dollar Index was poised for a weekly gain before a U.S. data forecast to show employment increased last month in the world’s biggest economy.
• U.K. Commercial Real Estate Falls for Second Straight Quarter. U.K. commercial property values declined by 0.7 percent in the first three months of 2012, the second consecutive quarter of decline, Investment Property Databank said. Values are 31 percent below 2007 levels, making it difficult to refinance five-year loans that are in negative equity and are maturing, London-based IPD said today in a statement. The last time prices fell for two straight quarters was in the first half of 2009.
• Freddie Mac Says Mortgage Refund Demands Hit $3.2 Billion. Freddie Mac, the mortgage-finance company operating under U.S. conservatorship, said its pending requests to lenders for refunds on faulty mortgages rose about 19 percent in the first quarter to $3.2 billion. The new total included 38 percent that were outstanding for more than four months, the McLean, Virginia-based company said today in a securities filing. The sum represents the unpaid balance on requests to sellers and servicers of single-family home loans, and the increase is measured from the end of 2011.
• When Cupcakes Are The Enemy of Schoolkids. Public school students in Maryland’s Montgomery County know they’d better not even think of holding a bake sale to raise money for the football team or math club. Selling sweets is outlawed during the school day, and officials make the rounds to ensure no illicit cupcakes are changing hands. “If a bake sale is going on, it’s reported to administration and it’s taken care of,” says Marla Caplon of the county’s food and nutrition services. “You can’t sell Girl Scout cookies, candy, cakes, any of that stuff.”
• Romney Says Missteps Create ‘Shame’ for Obama in Chen Case. Presumptive Republican presidential nominee Mitt Romney criticized the Obama administration’s handling of a diplomatic dispute with China, saying it failed to protect Chinese dissident Chen Guangcheng. Romney said today missteps by U.S. diplomats led the blind human rights lawyer to leave the American embassy in Beijing, putting him in danger of retribution from Chinese authorities. “If these reports are true, this is a dark day for freedom and it’s a day of shame for the Obama administration,” Romney said during a campaign appearance in Portsmouth, Virginia. “We should stand up and defend freedom wherever it is under attack.”
• RBA Cuts Growth, Inflation Forecasts on Weaker Jobs. The Reserve Bank of Australia cut growth and inflation forecasts as weak labor and housing markets keep price gains in check, underscoring its decision this week to cut interest rates by the most in three years. “Labor market conditions have continued to be on the soft side to date, with large increases in employment in mining and some service industries roughly offset by declines in the manufacturing, hospitality and retail sectors,” the central bank said today in its quarterly monetary policy statement. “A recovery in housing construction is unlikely in the near term.”
• Bank Loan Bundling Investigated by Biden-Schneiderman: Mortgages. New York Attorney General Eric Schneiderman and Delaware’s Beau Biden are investigating banks for failing to package mortgages into bonds as advertised to investors, three months after a group of lenders struck a nationwide $25 billion settlement over foreclosure practices. The states are pursuing allegations that some home loans weren’t correctly transferred into securitizations, undermining investors’ stakes in the mortgages, according to two people with knowledge of the probes. They’re also concerned about improper foreclosures on homeowners as result, said the people, who declined to be identified because they weren’t authorized to speak publicly. The probes prolong the fallout from the six-year housing bust that’s cost Bank of America Corp., JPMorgan Chase & Co. (JPM) and other lenders more than $72 billion because of poor underwriting and shoddy foreclosures. It may also give ammunition to bondholders suing banks, said Isaac Gradman, an attorney and managing member of IMG Enterprises LLC, a mortgage-backed securities consulting firm. “The attorneys general could create a lot of problems for the banks and for the trustees and for bondholders,” Gradman said. “I can’t imagine a better securities law claim than to say that you represented that these were mortgage-backed securities when in fact they were backed by nothing.”

Wall Street Journal:

• Protesters Target Buffett Meeting To Air Burlington Concerns. The tens of thousands of Warren Buffett acolytes descending on Omaha for the company’s annual meeting Saturday will find the eight-foot tall, paper-mache inhaler outside the gathering at the city’s CenturyLink Center. It’ll be set up there by protesters from Southern California who object to plans by a Berkshire subsidiary, the railroad Burlington Northern Santa Fe, to build a massive new rail facility near their homes.
• Heat's on Triparty Repos. U.S. bank regulators are turning up the heat on the financial industry to reduce risk in an obscure but massive corner of the credit market known as triparty repos, where many large institutions get funding for their trading businesses. This $1.7 trillion market came under deep duress during the 2008 financial crisis and the Federal Reserve has been pressing big players—most notably Bank of New York Mellon Corp. and J.P. Morgan Chase & Co.—to reduce their exposure to the market.
• Goldman(GS) Takes Steps to Protect Bond Turf. Goldman Sachs Group Inc. is preparing to roll out a bond-trading platform on which it will charge lower fees than on typical bond trades, according to people familiar with the matter, a move that could help retain customers tempted by rival trading venues being set up by BlackRock Inc. and others. The New York securities firm has been developing an electronic platform called GSessions over the past year, according to a person familiar with its plans.
• New Ripples for Gupta Case. The Galleon Group hedge fund wasn't alone in piling into Goldman Sachs Group Inc. stock hours before the bank announced a $5 billion investment from Warren Buffett's firm at the height of the financial crisis, trading records show.
• Dubai Rethinks Growth Ambitions. Dubai's sky-high ambitions are coming back down to earth as its government reassesses economic development plans hatched near the peak of the boom five years ago. Years after the emirate's economy hit a wall and its corporate flagship, Dubai World, was forced to restructure nearly $25 billion in debt, Dubai is scaling back the double-digit growth goals it set for itself in 2007.
• Greek Elections Seen Leading to Instability. Angry Voters Are Set to Punish Main Parties, Leading to New Polls Within Months and Threatening Bailout Package.
• Moscow Raises Alarm Over Missile-Defense Plan for Europe. Russia's defense establishment rolled out computer-generated images of hypothetical warfare on Thursday to illustrate its fear of a planned Europe-based missile-defense shield and warned of a possible a pre-emptive strike on elements of the system, underscoring the biggest source of tension in U.S.-Russia relations.

Business Insider:

• Company Startup Rates In The US Have Fallen To A Record Low.
• An Amazing Moment Just Happened: Blind Chinese Activist Spoke To The US Congress Via Cellphone.
• One Of The Best Economic Indicators There Is Flashing A Warning Sign.
• FIRST SOLAR(FSLR) POSTS BIG LOSS AS REVENUE COLLAPSES.
• LinkedIn(LNKD) Beats.
  

Zero Hedge:

• Facebook(FB) Details IPO Details, Issues Amended S-1.
• The Unabridged And Illustrated Federal Budget For Dummies - Part 1: Spending. (graphs)
• The Unabridged And Illustrated Federal Budget For Dummies - Part 3: Debt & Deficits. (graphs)
  
• Michael Pettis Revisits 12 Predictions On China.

CNBC:

• Hugh Hendry Predicts Crisis Will Spread to Asia. Hugh Hendry, one of the hedge fund industry's most outspoken managers, has warned that the economic crisis is headed for Asia, with the region's largest economy, China, struggling under a bursting property bubble and tumbling demand for its exports.

NY Times:

• A Weight Hobbling GM(GM). Almost three years after its taxpayer bailout and bankruptcy, the nation’s biggest automaker still can’t shed the stigma of being “Government Motors.” Because the Treasury Department still owns a 26 percent stake in the company, G.M. remains saddled with pay restrictions that limit its ability to recruit new talent, a ban on corporate jets, and lingering image problems in the eyes of some consumers.

AP:

• Yahoo(YHOO) Confirms Misleading Info On New CEO's Resume. A disgruntled Yahoo shareholder questioned the qualifications and integrity of recently hired CEO Scott Thompson after exposing a misrepresentation about the executive's education. The fabrication confirmed Thursday by Yahoo Inc. gives New York hedge fund manager Daniel Loeb more artillery as he tries to topple a board of directors favored by Thompson, who became CEO of the troubled Internet company four months ago. Loeb, whose fund Third Point owns a 5.8 percent stake in Yahoo, gained more leverage when he discovered Thompson doesn't have a bachelor's degree in computer science from a small college in Easton, Massachusetts, as Yahoo stated in a regulatory filing last week.

Reuters:

• U.S. Readies Proposal to Clamp Down on Fracking. The Obama administration wants to clamp down on shale gas drilling on public lands and set standards that proponents of tougher regulation hope will provide a blueprint for drilling oversight nationwide. Industry sources said the Interior Department could propose a new rule on hydraulic fracturing, or fracking, as early as Friday.

TheAsset.Com:

• Hedge Fund Performance Stays Flat in April. Early performance indicators point towards a broadly flat performance from hedge funds in April, according to investment management firm GAM. The HFRX Global Index was up by 0.05 percent through April 27, and up three percent year-to-date.
  

Telegraph:

• France Faces 40% House Price Slump. France faces a property slump of Anglo-Saxon proportions as the frothiest boom in French history finally tips over, threatening the country with an economic shock just as austerity hits. "It is a gigantic bubble, all the more dangerous as it is spread across France," said Pierre Sabatier, from the consultancy PrimeView. "It reached a paroxysm in the summer of 2011. There is a mix of incredulity and denial as it starts to burst but there can be little doubt that all levers propelling the market are disappearing." PrimeView said prices across France have jumped 160pc since 1998, though houshold incomes are up just 35pc. Paris has overtaken New York to become the world's third costliest city at €18,000 (£14,600) per square metre. The boom seemed to defy global gravity last year as southern Europe and the US battled property slumps. The mood has since darkened. "A number of clients tell me they think the market has topped and want to get out," said one French hedge fund manager. Standard & Poor's has told investors to brace for a 15pc correction. Credit Agricole says prices may fall 12pc by the end of next year, expecting a "gradual slide" that could last until 2016.

People's Daily:

• China's real unemployment rate is "relatively high" with a "relatively serious" hidden unemployment problem, according to an article by researchers at the Chinese Academy of Social Sciences including Yang Shengming, Feng Lei and Xia Xianliang published in today's People's Daily. China's yuan exchange rate is "almost at equilibrium," the researchers wrote. Maintaining stable currency rates and financing will be important to stabilizing the job market and alleviating unemployment, they wrote.

Hexun.com:

• Chinese Shipyards Face Bankruptcy on Falling Orders. Almost 500 Chinese shipyards out of a total of more than 1,600 may close because of falling orders and decreasing loans, citing industry data. About 80% of shipyards in the eastern Chinese province of Zhejiang either stopped production or ran at half of production capacity. New orders fell about 40% in the first two months of the year and by 52% in 2011, according to the report.

Evening Recommendations
BMO:

• Rated (RHT) Outperform, target $72.

Night Trading

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 166.50 +1.5 basis points.
  
• Asia Pacific Sovereign CDS Index 134.50 -.25 basis point.
  
• FTSE-100 futures -.35%.
  
• S&P 500 futures +.02%.
  
• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDS)/1.67
• (NVDA)/.16

Economic Releases
8:30 am EST

• The Change in Non-farm Payrolls for April is estimated to rise to 160K versus 120K in March.
• The Unemployment Rate for April is estimated at 8.2% versus 8.2% in March.
• Average Hourly Earnings for April are estimated to rise +.2% versus a +.2% gain in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Evans speaking and the Fed's Williams speaking could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity 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 Less US Economic Optimism, Rising Global Growth Fears, Eurozone Debt Angst, Less Tech Sector Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.87 +5.86%
  
• ISE Sentiment Index 112.0 +.90%
  
• Total Put/Call 1.0 unch.
  
• NYSE Arms 1.73 +10.57%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 95.95 +2.27%
  
• European Financial Sector CDS Index 239.66 +.69%
  
• Western Europe Sovereign Debt CDS Index 273.79 -.58%
  
• Emerging Market CDS Index 243.03 -.25%
  
• 2-Year Swap Spread 28.25 -.25 basis point
  
• TED Spread 39.0 +.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -42.75 +.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 166.0 +1 basis point
  
• China Import Iron Ore Spot $144.90/Metric Tonne +.21%
  
• Citi US Economic Surprise Index -24.20 -3.8 points
  
• 10-Year TIPS Spread 2.26 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a -115 open in Japan
• DAX Futures: Indicating -21 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my Tech, Biotech and Retail sector longs
  
• Disclosed Trades: Added to my (IWM), (QQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• ECB Keeps Rate at 1% as Euro-Area Recovery Stalls. The European Central Bank left interest rates on hold as the region’s economic slump deepens. ECB policy makers meeting in Barcelona today kept the benchmark interest rate at a record low of 1 percent, as predicted by all 58 economists in a Bloomberg News survey. “The latest data suggest the euro area is slowly sliding toward a deeper recession,” said James Nixon, chief European economist at Societe Generale SA in London. At the same time, “with overnight rates already very low, it is hard to see how cuts in interest rates would meaningfully boost growth.” Austerity measures aimed at taming the sovereign debt crisis have pushed the Netherlands and Spain back into recession and prompted French voters to revolt against President Nicolas Sarkozy with an election looming on May 6. The ECB, which has already pumped more than 1 trillion euros ($1.3 trillion) into the banking system, may be reluctant to add to stimulus as it presses governments to take responsibility for the crisis.
• European Power Volumes Declines in April, Broker Group Says. European power handled by London-based brokers declined 2.8% in April from a year earlier, according to the London Energy Brokers' Association. Volumes dropped to 535.7 terawatt-hours from 551 in April last year, the industry group said in its monthly report sent by e-mail today. Volumes in Germany, the region's largest market, dropped 2% to 351 terawatt-hours while 53 terawatt-hours were bought and sold in the UK, it said.
• EU Elections Spur Uncertainty, El-Erian Says: Tom Keene. European elections are driving up market uncertainty as austerity measures have slowed economic growth while failing to resolve the region’s crisis, according to Pacific Investment Management Co.’s Mohamed El-Erian. “There is much more awareness of what needs to be done,” El-Erian, the chief executive officer of the world’s largest manager of bond funds, said in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “That’s the good news. The bad news is you’re doing it in a very difficult political context.”
• US Services Slowdown Signals U.S. Growth May Be Cooling: Economy. Service industries in the U.S. expanded less than projected and consumer confidence weakened, signaling the world’s largest economy may be cooling. The Institute for Supply Management said today its non- manufacturing index fell to a four-month low of 53.5 in April from 56 in March. The median forecast of economists surveyed by Bloomberg News was 55.3. A reading above 50 in the Tempe, Arizona-based group’s gauge signals expansion. The Bloomberg Consumer Comfort Index fell to a two-month low last week. “The economy has recently lost some momentum, and a weaker services sector is completely consistent with that,” said Shugg, whose forecast for the ISM gauge was among the lowest. “Consumer spending is softening somewhat.” Today’s report showed the ISM non-manufacturing survey’s measure of new orders decreased to 53.5, the lowest in six months, from 58.8. The employment gauge dropped to 54.2, the weakest this year, from 56.7 in the prior month.
• Consumer Comfort in U.S. Declines to Lowest Level in Two Months. Consumer confidence dropped last week to a two-month low as more Americans grew concerned about their personal finances. The Bloomberg Consumer Comfort Index fell to minus 37.6 in the week ended April 29 from minus 35.8, surrendering gains that had lifted it to a four-year high last month. Views on finances sank to the lowest point since January and more households said it was a bad time to buy needed items.
• Announced US Job Cuts Rise 11% From Year Ago, Challenger Says. Employers in the U.S. announced more job cuts in April than a year earlier, led by education and government agencies. Planned firings rose 11 percent to 40,559 from April 2011, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc.
• Jobless Claims in U.S. Decline More Than Forecast. Fewer Americans than forecast filed applications for unemployment benefits last week, easing concern the job market was taking a turn for the worse. Jobless claims fell by 27,000 to 365,000 in the week ended April 28, a one-month low, from a revised 392,000 the prior period, Labor Department figures showed today in Washington. The median forecast of 46 economists surveyed by Bloomberg News called for 379,000 applications.
• Oil Falls on 'More Uncertain' European Economic Outlook. Oil tumbled the most in almost a month as European Central Bank President Mario Draghi said the euro area’s economic outlook has become “more uncertain.” Prices dropped as much as 2.4 percent as Draghi said the region’s economic forecast is subject to downside risks, though the ECB still expects a gradual recovery this year. The central bank held its benchmark interest rate at a record low of 1 percent. Oil’s loss accelerated after data showed U.S. service industries expanded at a slower pace than projected in April. “There are still a lot of worries about Europe,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “Some of the latest comments from the ECB are indicating downside risk but they are not looking to do anything at this time.” Crude for June delivery fell $2.26, or 2.1 percent, to $102.96 a barrel at 12:02 p.m. on the New York Mercantile Exchange. It touched $102.65 earlier in the biggest intraday drop since April 4. Prices have declined 7.3 percent in the past year.
• Iran Embargo Impossible to Meet as Ships Need Its Oil. Europe’s oil embargo on Iran is having unforeseen consequences in the shipping market, making it almost impossible to determine if vessels are using fuel that violates the sanctions. Supplies from Iran are a “vital blending component” to make ship fuel, known as bunkers, according to Barclays Capital. The nation accounted for about 8 percent of bunkers exported last year to Asia, the largest market, and about a third of the supply at Fujairah in the United Arab Emirates, the Middle East’s biggest refueling port, Barclays estimates.
• GM(GM) First-Quarter Profit Falls as Losses in Europe Widen. General Motors Co. (GM), the world’s largest automaker, said first-quarter profit slid 61 percent on widening losses in Europe. Net income declined to $1.32 billion from $3.37 billion a year earlier, Detroit-based GM said today in a statement.
• Buffett Trails S&P 500 for Third Straight Year. Berkshire Hathaway Inc. (BRK/A) shareholders missed out on better returns from the Standard & Poor’s 500 Index by sticking with Chairman Warren Buffett after each of his last three annual meetings. Berkshire fell 2.4 percent from the firm’s April 30, 2011, meeting through yesterday, compared with the 2.8 percent advance in the S&P 500. (SPX) This year’s gathering, planned for May 5 in Omaha, Nebraska, concludes three years in which Berkshire climbed about 32 percent, trailing the S&P 500’s gain of around 60 percent.

Wall Street Journal:

• China Activists See Crackdown for Dissident's Escape. China has ramped up pressure on supporters of blind activist Chen Guangcheng, including one ally who was told on Thursday that she would be confined to her home, amid fears of further retaliation for Mr. Chen's high-profile escape from house arrest. Some allies and relatives of Mr. Chen were detained in the immediate days after his escape from home imprisonment in China's eastern Shandong province on April 22. That pressure was renewed with his emergence from the U.S. Embassy in Beijing on Wednesday.
• Warnings Signs Rise for Big Lenders in Asia. When Indonesian tanker operator B.L.T. froze payments on $2 billion of debt earlier this year, blaming a global economic slowdown, the default hit some of the world's biggest banks.
• Minxin Pei: Communist China's Perilous Phase. Disunity among the ruling elites and the rising defiance of dissidents signal that one-party rule could be nearing its end.
  

CNBC.com:

• 'Taxmaggedon' Deal Unlikely Before Year End: Orszag. Congress is unlikely to reach a deal before the end of the year that would derail the coming "taxmaggedon," when several pivotal tax cuts expire, former White House budget director Peter Orszag said. The former head of President Barack Obama's Office of Management and Budget — and current vice chairman of global banking for Citigroup — contradicted consensus belief that Washington will be able to avoid what Federal Reserve Chairman Ben Bernanke has called the “fiscal cliff.” Instead, he said an agreement is unlikely between now and the presidential election, nor will a deal get done during the lame duck congressional session following. Any deal likely won't come until 2013, Orszag said.
• Copper at One-Week Low as Global Growth Worries Weigh. Copper fell to a one-week low on Thursday on uncertainty about U.S. economic growth and after a bond sale by Spain failed to ease investor concerns the heavily indebted nation may hinder euro zone recovery, denting the outlook for metals demand. Three-month copper on the London Metal Exchange slipped to $8,228.50 at 1410 GMT, down 0.9 percent from a $8,305 close on Wednesday. It earlier fell to its lowest level since April 26 at $8,211 a metric ton (1.1023 tons). Prices, which had rallied by more than 14 percent by early February, have since shed 5 percent, trimming the year's gains to around 9 percent. "There is still a whole host of uncertainties in the market. There are troubles in the euro zone, and with non-farm payrolls out of the U.S. tomorrow, there is a lot of scope for volatility in commodity markets," said Societe Generale analyst Robin Bhar.
• Why Small Business Owners Are Hesitant to Hire.
  

Business Insider:

• Scott Brown is Destroying Elizabethe Warren, And She's Getting Blasted for Claiming Native American Blood.
• Albert Edwards: This Is The Biggest Bubble In Recent History, And It's Heading For The Mother Of All Hard Landings.
• Draghi Just Destroyed Dreams of Near Term ECB Action.
• The iPhone 5 Will Be Taller, Thinner, And Have A 4-Inch Screen.
  

Zero Hedge:

• Previewing The First of Many Greek Elections.
• Non-Manufacturing ISM Slides, Posts Biggest Miss In 12 Months. (graph)
  

New York Times:

• U.S. Retail Sales Slow Unexpectedly. The 19 chains tracked by Thomson Reuters reported a thin 0.8 percent increase in sales at stores open at least a year, missing the 1.5 percent gain that analysts were expecting. Combined with strong sales at the start of the year, the lackluster April results indicated that an early burst of consumer spending did not last long. “While projections were that consumer spending would continue to accelerate, there are signs that it may be slowing,” said Alison Jatlow Levy, a retail strategist at the consulting firm Kurt Salmon.
• Societe Generale Profit Drops 20% in First Quarter.
  

BGR:

• Apple's(AAPL) 'iTV' Might Not Launch Until 2014. Rumors surrounding the imminent launch of an Apple-branded HDTV have been swirling for the better part of a year, and while some industry watchers expect the “iTV” to launch as early as this summer, one analyst suggests that we’re still more than a year away from seeing Apple launch an iOS-powered television. JP Morgan analyst Mark Moskowitz said on Thursday that his firm does not believe Apple will release an HDTV in the near future.

Huff Post:

• The Fed's Jelly Donut Policy by David Einhorn. A Jelly Donut is a yummy mid-afternoon energy boost. Two Jelly Donuts are an indulgent breakfast. Three Jelly Donuts may induce a tummy ache. Six Jelly Donuts -- that's an eating disorder. Twelve Jelly Donuts is fraternity pledge hazing. My point is that you can have too much of a good thing and overdoses are destructive. Chairman Bernanke is presently force-feeding us what seems like the 36th Jelly Donut of easy money and wondering why it isn't giving us energy or making us feel better. Instead of a robust recovery, the economy continues to be sluggish. Last year, when asked why his measures weren't working, he suggested it was "bad luck."

Reuters:

• Schroders Fears Euro Zone Hit to Investor Demand. Blue chip investment manager Schroders is bracing for a downturn in investor appetite as the euro zone crisis escalates, after net inflows in its asset management arm helped cap a fall in first quarter profit. Chief Executive Michael Dobson told Reuters in an interview that the company had a strong quarter in its institutional business and a turnaround in retail flows after two quarters of outflows, but it was wary of events in Europe. "You can trace investor demand pretty closely to what's happening in the euro zone and, below, reflected in equity markets," he said. "There are signs of a slowdown. The impact of market uncertainty is seen most immediately in the retail sector, but it also impacts institutional clients."
• Spanish Banks' Toxic Asset Transfer To Be Voluntary. The transfer of Spanish banks' toxic real estate assets into holding companies to value and sell them off will be on a voluntary basis, the economy ministry said on Thursday. Spain, to reassure investors the ailing lenders won't need another rescue, said last week the banks would park their problem assets into liquidation structures within weeks but sources had so far said the move would be compulsory.
• Fed's Plosser Offers 'Optimistic' View of U.S. Growth. The U.S. economy will likely grow at a 3 percent pace this year and next, pushing unemployment down and keeping inflation at or above the Federal Reserve's 2 percent target, Philadelphia Fed President Charles Plosser said on Thursday. That view from Plosser, a leading inflation-focused hawk at the U.S. central bank, suggests a policymaker poised to push for a change to the Fed's near-zero interest rate policy sooner than its current projection of late 2014.
• Alpha Natural(ANR) Cutting Coal Output, Targets. Coal miner Alpha Natural Resources Inc posted a wider-than-expected quarterly loss and cut its 2012 production target, but it forecast that the market for steelmaking coal would improve later this year. The company said on Thursday that because of weak demand from power utilities for its thermal, or steam coal, it would further cut production and double exports of coal used to generate electricity.

Telegraph:

• Iran 'imported over £350 million of weapons in three years'. Iran imported weapons worth over £350 million in the space of three years despite being the target of a United Nations arms embargo, Oxfam will disclose on Thursday.
• Debt Crisis: Live.
  

Globe and Mail:

• Google's(GOOG) Splashes Out $200 Million to Promote 'Premium' Channels. In a flashy presentation to advertisers, YouTube promoted its new channels of original programming, while pledging to spend $200-million to help market them. That's roughly twice what the Google Inc.-owned video site has spent launching some 100 channels of niche-oriented programming. The channels are an ambitious initiative from YouTube, approximately halfway through its rollout.

Shanghai Daily:

• Housing Index Posts Fall in April. SHANGHAI'S existing housing index fell again in April, extending its weakness for the seventh straight month. The index, which tracks price variations of previously-occupied homes, lost 2 points, or 0.09 percent, from March to 2,575 last month, the Shanghai Existing Index Office said yesterday. On an annual basis, the index lost 16 points, or 0.59 percent, weakening for the second consecutive month. "We've noticed a rather slack market sentiment last month as home seekers continued to expect further cuts after the government vowed again to stick to its property curbs. At the same time, an increasing number of home owners have begun to trim their discounts amid a rebound in buyers' inquiries since March," said Lu Bei, an analyst at the office. "Very likely, the market will be dominated soon by a prevailing wait-and-see sentiment."

CRI English:

• Chinese Authorities Target Journalists Involved in Blackmail. Chinese authorities have announced a three-month special campaign against journalists involved in blackmail or demanding pay-offs in news reporting. The crackdown from May 15 will target so-called news reporting and blackmail journalism activities by fake press entities or journalists, and kickback-oriented practices by accredited media organizations and people.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.42%

Sector Underperformers:

• 1) HMOs -4.80% 2) Gold & Silver -4.02% 3) Construction -2.70%

Stocks Falling on Unusual Volume:

• PBH, TSU, STAA, NZT, SFY, CLR, PAAS, CDE, SIMO, IPGP, FCX, PBR, GMCR, TRS, VCLK, EXLS, CBOU, NEWP, RSTI, OTEX, LAMR, SKUL, JIVE, FSYS, MANT, ACFN, DWA, ANSS, NSIT, ZAGG, SHOO, GLNG, VRX, HNT, WTW, HLF, XSD, AIN, PRU, GIL, CNW, NUS, HOTT, CW, ALR, VMED, V, SIL, VC, MASI, ONXX, HUM, JDSU, MGM, H, ARO, CXO, BKS, AVD, CHKM, CXW, MD, GLF, BKD, MUR, ARUN, HSC, HOS, ZIP, HEES, RGR, AEL, CLR, BKE, CVC, ACM, THO and CACI
  

Stocks With Unusual Put Option Activity:

• 1) PRU 2) SPLS 3) SU 4) ACI 5) COST
  

Stocks With Most Negative News Mentions:

• 1) ATML 2) VCLK 3) JDSU 4) HNT 5) RIMM
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.20%

Sector Outperformers:

• 1) Coal +1.91% 2) Road & Rail +.62% 3) Airlines +.27%

Stocks Rising on Unusual Volume:

• ALL, GEOY, LCC, LVLT, BEAM, UPL, PXP, SYNC, Z, WFM, CNQR, MGAM, LQDT, MDAS, AAWW, ASNA, SNN, TDC, SNI, WLT, VHC, SHO, MSCI, MDAS and PWR
  

Stocks With Unusual Call Option Activity:

• 1) PXP 2) GMCR 3) WFM 4) PRU 5) SYY
  

Stocks With Most Positive News Mentions:

• 1) TSCO 2) M 3) TJX 4) IACI 5) ROST
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• French Candidates Clash on How to Emulate Germany to Create Jobs. French President Nicolas Sarkozy and Socialist Francois Hollande clashed in their only campaign debate over everything from how to emulate German employment gains and euro bonds to the role of the European Central Bank. In heated exchanges, marked by the candidates calling each other a liar, Sarkozy and Hollande elaborated on differences over how to rekindle growth with joblessness in France at the highest level in 12 years. “Unemployment has increased,” Hollande said to Sarkozy. “In Germany they make room for social partners, unlike in France.” For his part, Sarkozy said, “after criticizing Germany, it suddenly inspires you.” He said Germany raised sales taxes to help finance lower social charges and unions backed a balanced budget rule that Hollande opposes. The war of words between the two candidates came as Sarkozy fought for his last chance to turn the tide against Hollande before the May 6 runoff. The challenger led with 53.5 percent to 46.5 percent, according to a survey of voting intentions published by BVA today. There was no margin of error published.
• Greeks Reveal Euro or No in First Election Since Downturn. “This crisis has meant a 180-degree turn, a somersault in everyone’s lives, old, young, rich, poor,” says Paschia, 35, who will vote for the anti-immigrant Golden Dawn party instead of the two main parties of Pasok or New Democracy on May 6. “We need new, different voices in parliament.” For the first time since their country became the byword for the European debt crisis, Greeks will have their say at the ballot box rather than in street protests about the economic pain they are enduring for a third successive year in the battle to retain membership of the euro. Faced with the prospect of more budget cuts to keep international funds flowing, many voters are backing small anti- bailout parties that promise an end to austerity measures. While polls show most people don’t want a return to the drachma, opponents warn that could tilt the balance in favor of rejecting the bailout terms and threaten Greece’s membership in the euro.
  
• Traders Tap German Default Swaps at Record Pace: Credit Markets. Credit traders are accumulating protection on Germany's debt at a record pace, with yields on the nation's bonds at all-time lows and speculation rising that it will bear a greater burden toward resolving Europe's sovereign-debt crisis. The net amount of credit-default swaps outstanding on German bunds surged by $671 million last week to $19.8 billion, just shy of the $19.9 billion peak on Nov. 18, and poised to surpass Italy for the first time, according to the Depository Trust & Clearing Corp.
• Merkel Is Cast as Thatcher’s Austerity Goddess. Three decades ago, U.K. Prime Minister Margaret Thatcher was confronted with a nation bordering on irrelevance, a stagnant economy and a set of entrenched beliefs about the relationship between government and the people. Thatcher faced down striking coal miners and forced through a series of free-market reforms that unshackled Britain’s economy and made it vibrant once again. To the chorus of accusations that she was killing the economy, she replied: “There is no alternative.”
• New Europe Ports Seen Unprofitable With Slump Deepening: Freight. Europe’s top container ports face a glut in capacity that’s set to crimp profit margins as new terminals ordered prior to the 2008 slump open for business. Harbors in northern Europe including Antwerp, Hamburg and Rotterdam, the continent’s top three, will increase annual capacity 21 percent to 62.2 million standard 20-foot containers by 2015, according to data compiled by M.M. Warburg & Co.
• EU Ministers Fail to Reach Deal on Bank Capital Rules. European Union finance ministers failed to reach an agreement to toughen bank capital rules in the face of British resistance and now aim for a deal at their next meeting on May 15.
• Chen in Reversal Seeks to Leave China, Criticizes U.S. Officials. Chinese legal activist Chen Guangcheng is being treated in a Beijing hospital after leaving the U.S. embassy under a deal that quickly started to unravel and now threatens to derail annual cabinet-level talks between the two nations. Chen said that, fearing for the safety of his family, he changed his mind about staying in China under the U.S.-brokered deal and now wants to leave with his family, according to interviews with the Associated Press and CNN. He told CNN that felt pressure to leave the embassy, where he was given refuge, and he appealed for help from U.S. Secretary of State Hillary Clinton, who is in Beijing for the China talks. "The embassy kept lobbying me to leave and promised to be with me at the hospital," he told CNN, according to a transcript. "But this afternoon soon after we got here, they were all gone. I'm very disappointed at the U.S. government." Chen's criticism may open President Barack Obama to attacks from Republicans and human rights advocates for failing to support a leading Chinese rights activist.
• Chesapeake(CHK) Bonds Drop After Cash-Flow Estimates Are Cut. The cost to protect against losses on the debt of Chesapeake Energy Corp. (CHK) (CHK) jumped to the highest since September 2009 as the driller, which reported an unexpected first-quarter loss, said it may run out of money next year. Credit-default swaps (CHK) on the company jumped 3.3 percentage points to 7.4 percent upfront as of about 12:30 p.m. in New York, according to CMA, which is owned by CME Group Inc. The driller’s $1.3 billion of 6.775 percent bonds due in March 2019 dropped by 4.1 cents to 94.9 cents on the dollar at 12:20 p.m., the lowest level on record, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
• Obama’s Afghan Partnership Puts Symbolism Over Substance. Perhaps the biggest surprise of President Barack Obama’s appearance in Kabul, Afghanistan, on Tuesday wasn’t the trip itself, but his use of the occasion to make a head-scratching speech and sign a strategic partnership accord that raises more questions than it answers. “Over the last three years, the tide has turned,” the president said. “We broke the Taliban’s momentum.” This triumphant note jars against a Pentagon report released this week, which warned that “the insurgency remains a resilient and determined enemy and will likely attempt to regain lost ground and influence this spring and summer.” Obama can be forgiven for wanting to put the best spin on the situation to Americans, but the Afghans present were probably not convinced about the tide’s turning. Civilian casualties have risen in the last year, and within hours of Obama’s departure, a suicide attack in Kabul killed at least seven.
• Dimon Meets Tarullo as Banks Lobby Fed on Softer Rules. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon led Wall Street bosses in a closed-door meeting to personally lobby Federal Reserve officials about softening proposed reforms that might crimp their profits. The contingent, which included Bank of America Corp. (BAC)’s Brian T. Moynihan, 52, and Goldman Sachs Group Inc. (GS)’s Lloyd C. Blankfein, 57, pressed the Fed on rules they said would overstate trading risks and harm financial markets, the central bank said today in a statement. They also discussed what they see as flaws in Fed stress tests designed to gauge the strength of the nation’s largest lenders.
• Wells Fargo(WFC) Dominates Home Lending as BofA Retreats: Mortgages. Wells Fargo & Co., already the largest U.S. home lender, won the biggest market share ever recorded as competitors led by Bank of America Corp. pulled back after suffering more than $65 billion in combined mortgage losses. Wells Fargo made 33.9 percent of the $385 billion of mortgages originated in the first quarter, up from 30.1 percent in the preceding three months, according to Inside Mortgage Finance. That’s more than triple the share of the closest competitor, JPMorgan Chase & Co., with 10.6 percent. U.S. Bancorp moved into third place from fifth, with 5.2 percent, ahead of Bank of America, with 4.2 percent.
• Whole Foods(WFM) Profit Jumps on Demand for Organic Foods. Whole Foods Market Inc. (WFM), the largest U.S. natural-goods grocer, posted second-quarter profit that topped analysts’ estimates on increased demand for organic foods. Net income climbed 31 percent to $117.7 million, or 64 cents a share, from $89.9 million, or 51 cents, a year earlier, the Austin, Texas-based company said today in a statement. Excluding some items, profit was 64 cents a share. Analysts projected 59 cents, the average of 23 estimates compiled by Bloomberg.

Wall Street Journal:

• As ECB Convenes, France Is the Wild Card. The European Central Bank meets Thursday in Barcelona, but changing Gallic winds may chill the proceedings. The ECB is unlikely to unveil further easing measures, despite Spain's slide into recession and Wednesday's report of record euro-zone joblessness, though it may open the door to future action. Annual euro-zone inflation is 2.6%, above the ECB's 2% target, limiting its room for maneuver for now.
• South Pacific Fund Has Sinking Feeling. The Northern Mariana Islands, a U.S. territory in the Pacific Ocean, managed to recover from brutal World War II battles, but its public pension fund couldn't recover from the financial crisis. The islands' retirement system on April 17 became the first U.S. public pension fund to seek bankruptcy protection.
• Visa(V) Profit Surges; Justice Probes Debit Strategy. The U.S. Justice Department is probing Visa Inc.'s (V) fee changes made in response to new federal regulations that affect debit-card processing, which are already eating into the card giant's dominant debit-market share.
• Carlyle Prices IPO at Lower Range. Facing pushback from some investors, private-equity company Carlyle Group reduced the price for its widely anticipated public offering, a possible sign of the skepticism some investors harbor toward the business.
• CNN Feels Heat on Ratings.
• What ObamaCare May Mean for Taxes. Bischoff: The Obama health-care law includes changes for next year -- unless the Supreme Court acts.
• Henninger: Memo to the Youth Vote. In 2008, he reeled them in with promises of hope and change. In 2012 he's offering cash, promising to protect 3.4% interest on their college loans. We're about to find out if it's true that when you're young, hope springs eternal.

MarketWatch:

• Asia Stocks Pull Back as Chinese Banks Slide.

Business Insider:

• The State Leading America's Wind Farm Charge Sits On An Ocean Of Oil.
• 'The Scream' Just Sold For A Record-Breaking $119 Million.
• Green Mountain(GMCR) Slashes Guidance and Shares Collapse.
  

Zero Hedge:

• 3 Likely Triggers Of The Next Recession.
• Name The Country: 101.5% Debt/GDP And... 1.7% Effective Interest Expense.
• US Complacency Near 9 Year High Versus Europe. (graphs)
  

CNBC:

• IRS Presence at OffshoreAlert Conference Criticized.
  

IBD:

• Dollar Tree(DLTR) Lures Shoppers With More Bang For The Buck.

NY Times:

• Progress Is Seen in Advancing a Final Volcker Rule. A major new rule that has drawn the ire of Wall Street is on track for completion sooner than some bankers had expected, dashing the hopes of financial industry lobbyists, who have pressed for a delay.

Reuters:

• ECB to Hold Fire in Crisis-Hit Spain. The European Central Bank will resist pressure to do more to fight the euro zone crisis when it meets in Barcelona on Thursday, holding fire despite calls to restart its bond-buying programme to shield austerity-hit Spain from further pain. Financial markets are clamouring for the ECB to step up its efforts to fight the two-year-old crisis by buying the sovereign bonds of Spain, which is in recession and has come under intense market pressure since loosening its deficit target for 2012. But ECB policymakers, decamping to the Catalonian capital this week, are more likely to pay homage to Spain's austerity drive than to signal any fresh policy action like restarting the bond-buy programme, or Securities Markets Programme (SMP). The bank has left the plan dormant for the last seven weeks despite a rise in Spain's yields to 6 percent. A break above that, to 7 percent, is considered an unsustainable price to pay for refinancing.
• CEOs rank Texas tops for business, California worst. Texas remains the top state for business and California still holds the title for the worst, according to an annual ranking of states by Chief Executive magazine released on Wednesday. Chief Executive each year surveys CEOs and asks them to grade states in which they do business. This year 650 responded, giving Texas high marks "foremost for its business-friendly tax and regulatory environment," a report on the survey and ranking said on the magazine's website. "Texas easily clinched the No. 1 rank, the eighth successive time it has done so," the report said. "California earns the dubious honor of being ranked dead last for the eighth consecutive year." California "appears to slip deeper into the ninth circle of business hell," the report said. "Each year, the evidence that businesses are leaving California or avoid locating there because of the high cost of doing business due to excessive state taxes and stringent regulations, grows." New York was ranked just ahead of California.

Financial Times:

• Pro-Gay Stance Cost Goldman(GS), Says Blankfein. Lloyd Blankfein told a group of Wall Street gay activists that Goldman Sachs had lost at least one client because of its stance in favour of gay marriage.

Telegraph:

• The Euro Crisis Just Got A Whole Lot Worse. With Europe plunging back into recession and unemployment soaring, Francois Hollande, the French presidential candidate, is calling for growth objectives to be reprioritised over the chemotherapy of austerity. Angela Merkel, the German Chancellor, has meanwhile continued to insist that on the contrary, Europe must persist with the hairshirt. What's needed is political courage and creativity, not more billions thrown away in fiscal stimulus. Stick with the programme, she urges, as the anti-austerity backlash reaches the point of outright political insurrection. Hollande and Merkel are, of course, both wrong. What Europe really needs is a return to free-floating sovereign currencies. Only then will Europe's seemingly interminable debt crisis be lastingly resolved. All the rest is just so much prancing around the goalposts, or an attempt to make the fundamentally unworkable somehow work.

China Daily:

• Housing Prices Decline by .7% in Big Cities in April. Average home prices in 100 Chinese cities fell 0.71 percent year-on-year in April, the first year-on-year drop since June 2011, the country's largest real estate website said on Wednesday. The prices fell 0.34 percent month-on-month, the eighth consecutive fall, according to the China Real Estate Index System, which is affiliated with SouFun Holdings Ltd. "That indicates a further cooling down in the country's real estate market amid persisting tightening measures," said He Tian, director of research at China Index Academy, a Beijing-based real estate research institute. "As property developers' cash flow further tightens, we believe property prices in key cities such as Beijing and Shanghai will slide 5 to 10 percent this year, while second- and third-tier cities may see a drop of more than 10 percent," He added.

China Business News:

• ICBC's Shanghai branches stopped giving 15% discounts on loans to first-home buyers from May, citing loan service agents.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 165.0 +2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 134.75 -.75 basis point.
  
• FTSE-100 futures +.43%.
  
• S&P 500 futures -.04%.
  
• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SLE)/.25
• (ATK)/1.69
• (VIAB)/.89
• (CVC)/.18
• (COCO)/.16
• (EP)/.28
• (ANR)/-.06
• (HCA)/.97
• (GM)/.85
• (LEA)/1.20
• (CXW)
• (PWR)/.17
• (CI)/1.30
• (CAH)/.88
• (AMT)/.74
• (H)/.08
• (SEE)/.21
• (APA)/3.07
• (DNR)/.38
• (KFT)/.56
• (FLR)/.87
• (AIG)/1.13
• (MHK)/.55
• (CF)/4.95
• (CEC)/1.80
• (PSA)/1.42
• (DRIV)/.29
• (JOE)/-.02
• (WRC)/.93
• (FSLR)/.48
• (LNKD)/.09
• (WYNN)/1.42

Economic Releases
8:30 am EST

• Preliminary 1Q Non-farm Productivity is estimated to fall -.6% versus a +.9% gain in 4Q.
• Preliminary 1Q Unit Labor Costs are estimated to rise +2.7% versus a +2.8% gain in 4Q.
• Initial Jobless Claims are estimated to fall to 379K versus 388K the prior week.
• Continuing Claims are estimated to fall to 3311K versus 3315K prior.
  

10:00 am EST

• ISM Non-Manufacturing for April is estimated to fall to 55.3 versus 56.0 in March.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Plosser speaking, Fed's Williams speaking, ECB rate decision, ECB's Draghi speaking, Challenger Job Cuts report for April, ICSC Chain Store Sales for April, RBC Consumer Outlook Index for May, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (TXN) investor meeting, (JBL) analyst meeting could also impact trading today.
  

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