Bear Radar

Style Underperformer:

• Large-Cap Value -.60%

Sector Underperformers:

• 1) HMOs -1.70% 2) Airlines -1.68% 3) Drugs -1.53%

Stocks Falling on Unusual Volume:

• VRTX, PTR, BP, C, DB, GSK, BV, ABT, ECO, FIO, TTM, DAL, MELI, TRNX, AMED, JIVE, TTWO, ROSE, AMCX, GPOR, TEVA, RPXC, PRIM, DIOD, MCHP, MANT, CERN, WPPGY, DISCA, WPRT, FCN, CFI, FEZ, AGU, MLR, CGX, KRO, FCS, M, MWE, HII, GNRC, RNF, KRO, WTI and AMED
  

Stocks With Unusual Put Option Activity:

• 1) NLY 2) LEN 3) HOT 4) NTAP 5) COF
  

Stocks With Most Negative News Mentions:

• 1) PBI 2) CF 3) CQB 4) CHK 5) T
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.44%

Sector Outperformers:

• 1) Gold & Silver +1.45% 2) Utilities -.07% 3) Foods -.13%

Stocks Rising on Unusual Volume:

• CPWM, NILE, AEM, EGO, SODA, QSFT, TNGO, SCSS, DF, TPX, DF and SEMG
  

Stocks With Unusual Call Option Activity:

• 1) SODA 2) TTWO 3) UPL 4) TEVA 5) GME
  

Stocks With Most Positive News Mentions:

• 1) LYB 2) BA 3) CPWM 4) M 5) GD
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Greek Leaders Given Bailout Ultimatum. Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition, handing them an ultimatum to renounce support for the European Union-led rescue if they want to enter government. Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.” “He interprets, with unbelievable arrogance, the election result as a mandate to drag the country into chaos,” Samaras said late yesterday in televised remarks. “I hope Mr Tsipras will have come to his senses by the time we meet.” Tsipras is due to meet with political leaders from about 5 p.m. in Athens. The stand-off since the inconclusive May 6 election has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.
• Moody's Bank Downgrades Risk Choking European Recovery. Moody’s Investors Service will this month start cutting the credit ratings of more than 100 banks, a move that risks pushing up their funding costs and forcing them to curb lending in a threat to economic growth. BNP Paribas SA (BNP), France’s biggest lender, Deutsche Bank AG, Germany’s largest, and New York-based Morgan Stanley are among firms that face having their short- and long-term debt downgraded to their lowest-ever levels by Moody’s, the ratings company said in February. The cuts, which would follow downgrades by Standard & Poor’s and Fitch Ratings last year, could erode profits, trigger margin calls and leave some firms unable to borrow from money- market funds that have strict rules on who they can lend to. Without access to funding from private sources, banks have had to sell assets and reduce lending. “I’d like to say the views of the rating agencies don’t matter anymore but, unfortunately, they do,” said Philippe Bodereau, London-based head of European credit research at Pacific Investment Management Co., the world’s largest bond investor.
• Dutch Retailers Face Profit Blow as Taxes Chill Spending. Retailers in the Netherlands may have their earnings pinched this year as increased sales taxes and higher excise duties push prices up at a time when household confidence is at the lowest level since 2003. “I am worried about the higher VAT rates and the fact the Dutch government didn’t come up with a good solution for the stagnant housing market,” Ton Anbeek, chief executive officer of furniture retailer Beter Bed Holding NV (BBED), said in a telephone interview. To meet European Union budget rules, the Dutch government will boost the highest value-added tax rate on consumer goods to 21 percent from 19 percent after reaching an austerity agreement with opposition parties last month. Excise duties on tobacco and alcohol will increase starting in October. Dutch consumer confidence hit the lowest level since 2003 in March, according to the Central Bureau of Statistics, after consumer spending dropped 1.3 percent in February.
• China’s Stocks Fall Most in 5 Weeks on Export Slowdown Concerns. China’s (SHCOMP) stocks fell, dragging the benchmark index down by the most in five weeks, as political tension in Greece heightened concern Europe’s debt crisis may further slow Chinese export growth. China Cosco Holdings Co. and Cosco Shipping Co. dropped at least 1.4 percent before a report tomorrow that will show Chinese export growth decelerated. SAIC Motor Corp. slid 2.3 percent after the Xinhua News Agency said China will ban executives at state-owned companies from excessive spending on items such as cars. Sany Heavy Industry Co. paced declines for construction machinery stocks after Nomura Securities Co. said sales of excavators last month were “disappointing.” The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slipped 1 percent to 2,424.91 as of 9:35 a.m. local time, poised for the biggest drop since March 29. The Communist Party of China may delay its planned five- year congress “by a few months” because of an internal debate on the size and composition of nine-member standing committee of the Politburo, Reuters said, citing unidentified people with knowledge of deliberations. “There’s already a lot of uncertainty this year because of the political changes and if stimulus measures are stalled because the congress is postponed, that will have an impact on shares,” Wan said.
• FX: Report of China's Congress Delay May Be AUD Negative: BNP Paribas. Reuters' report that China's Communist Party is considering a delay in its 5-year congress by a few months is likely to fuel speculation there's political infighting within the ruling party, BNP said in a note. This may have markets question the govt's ability to keep the Chinese economy on track in preventing a hard landing. While this may push USD/CNY 12-mo NDF higher, AUD will also remain vulnerable as the political news unfolds.
• Ross Says Looming ‘Freak Show’ May Threaten U.S. Economy. The U.S. economy is at risk of slipping back into recession in 2013 because of likely impasses in Washington over taxes and mandatory spending cuts, said Wilbur Ross, the billionaire investor. “That’s too big a hit for the economy to take,” Ross said today during a discussion at Bloomberg Markets’ Global Financial Elite lunch in New York. “We’re going to have another freak show at the end of the year.” Ross said he’s worried that President Barack Obama and Congress won’t be able to agree on extending tax cuts passed under former President George W. Bush that expire at the end of 2012, or on mandatory spending cuts tied to the extension of the country’s debt-ceiling agreement. He said he’s optimistic about the U.S. economy between now and then, and found a new way to describe the shape of the recovery beyond a “W.” “It’s more like punctuation,” he said. “Dots, dashes, question marks and an occasional exclamation point.” W.L. Ross & Co., his namesake firm known for buying distressed assets in industries from steel to financial services, is largely avoiding investments in what he called “the Club Med countries” of Europe, according to Ross. “It’s way too unsettled, even for our tastes, to be in Spain or countries like that just yet,” he said, adding that he has made deals in countries including Ireland. “You have to be very selective within Europe.”
• India Driving Away Telecom Operators Amid Probe: Tech. India’s mobile-phone industry, once a symbol of rapid growth, is turning into something else: a demonstration of the difficulty of doing business there. Some telecom companies have left and others said they may follow. India has rewritten tax rules, scrapped 122 licenses tainted by graft allegations and recommended charging 11 times more for airwaves in a bid to wrest more money from operators to help plug the widest budget deficit among the biggest emerging markets.
• Rubber Drops Most in 6 Months as European Woes Threaten Recovery. Rubber plunged by the most in six months as political turmoil in Greece deepened concerns Europe’s debt crisis may worsen, threatening the global recovery and sapping investor appetite for the commodity used in tires. October-delivery rubber fell as much as 4.4 percent to 291 yen a kilogram ($3,642 a metric ton), the lowest level for a most-active contract since Jan. 18, before trading at 291.1 yen on the Tokyo Commodity Exchange at 10:50 a.m. It was the largest drop since Nov. 10. The contract has lost 7.8 percent this week.
• FHA New Foreclosures Jump as Modified Loans Default: Mortgages. The number of Federal Housing Administration-insured home loans entering foreclosure jumped in March after half the mortgages it modified to ease repayment terms were in default again a year or more later. “The credit standards are way too loose -- you can get into a house with very little skin in the game, and if home prices drop by a small amount, you’re underwater,” said David Lykken, managing partner at Mortgage Banking Solutions, an Austin, Texas-based consulting firm. “We’ve got to start getting reasonable about standards. What they’ve done so far, some very slight attempts at tightening, don’t really count.”

Wall Street Journal:

• Turmoil in Greece Raises Euro Risk. Though Financial Markets Are Relatively Calm, Concern Grows About Impact of Potential Exit From the Common Currency. Financial markets' relatively calm reaction to the Greek turmoil masked rising risks Greece is on a road that leads to its exit from the euro zone, with hard-to-predict consequences. The weekend's inconclusive elections were seen by many as a possible beginning of the end, by choice or by necessity, for Greece's membership in the common currency.
  
• Annan Raises Fear of Syria Civil War. The Syrian conflict is at risk of breaking into a war that could split the Middle East, the lead international envoy to the country said, presenting his increasingly fragile peace plan as "the only remaining chance" to avert such a fate.
• Expanded Credit Elusive In Private Mortgage Bonds, Issuers Say. If there is a way to begin expanding credit with private mortgage bonds, companies that have issued such securities in the past few years aren't seeing it.
• NYSE Sees Danger of Exchanges Becoming 'Showrooms' for Prices. U.S. stock exchanges are in danger of becoming "showrooms" for prices in an equities market that's increasingly moving behind closed doors, the head of NYSE Euronext (NYX) warned Tuesday.
• Traders See SEC Speed Trap. Investors and regulators blame high-speed traders and computer-driven exchanges for causing problems in the stock market, but some traders are saying the real culprit is the market's own rules. The Securities and Exchange Commission instituted a broad set of rules in 2007 to direct buy and sell orders among stock exchanges. Since then, high-frequency traders along with exchanges have profited from loopholes in the rule, according to Blair Hull, founder of the Chicago investment firm Matlock Capital LLC.
• Broadcom(BRCM) CEO Sees Consolidation Ahead In Mobile-Chip Sector. Consolidation is ahead for the wireless semiconductor sector, according to the chief executive of chip maker Broadcom Corp. (BRCM), with many companies likely to face either a financial or technological squeeze. Scott McGregor, speaking at an investor conference, said the high cost and difficulty of developing new processors for smartphones and tablet computers will cause many chip makers to exit the market.
• Veteran Indiana Senator Ousted. Indiana Sen. Richard Lugar, whose 35 years in the Senate made him one of the longest-serving members, was ousted by a Republican primary opponent Tuesday after running a stumbling campaign and facing a tea-party movement eager to take advantage of his missteps.
• Rising Costs Hit Homeowners Chasing Lower Rates. Mortgage rates may be at rock-bottom levels, but the cost of getting a loan is on the upswing, thanks to reduced competition among banks and tougher lending requirements. Mortgage closing costs averaged $4,143 in 2011, the most recent data available, up 12.4% from a year earlier, according to Bankrate.com. Borrowers seeking to refinance often don't have to pay that full amount, but the prices for some of the most common components of a refinance have jumped as well. Origination fees, for instance, climbed by 12% to an average of $1,045 in 2011, according to Bankrate.com. Attorney costs and other settlement fees rose 9.6% to an average of $544.
• Chesapeake's(CHK) Private Jets in Cross Hairs. A shareholder of embattled natural-gas giant Chesapeake Energy Corp. accused the company of understating the cost of personal jet travel provided to top executives and outside directors by as much as $10 million per year. In a lawsuit filed in state court in Oklahoma City, the shareholder claims that Chesapeake directors misled investors by stating in regulatory filings that personal use of company aircraft was "limited" and that the company's fleet of jets was used "primarily" for business travel.
• North Carolina Backs Ban on Gay Marriage. North Carolina voters on Tuesday approved a constitutional amendment defining marriage as strictly between a man and a woman. The amendment was ahead 61% to 39% with 80% of the precincts reporting statewide, after earlier driving record turnout for early voting.
• Peltz's Trian to Take Stake in Ingersoll(IR). Nelson Peltz's Trian Fund Management LP is expected to report taking a more-than-7% stake in industrial conglomerate Ingersoll-Rand PLC, people familiar with the matter said, as some analysts have maintained the company is underperforming against its rivals.

Business Insider:

• How Goldman Sachs(GS) Blew The Facebook(FB) IPO.
• BOMBSHELL: The Al-Qaeda Underwear Bomber Was Actually A CIA Double Agent.
• 4 Ways That French Foreign Policy Will Change Under Hollande.

Zero Hedge:

• Spain Appears Unsure What A "Bank Bailout" Means.
• John Taylor Says "To Hell With Germany".
• America Will Have Negative Unemployment In January 2022.
  

CNBC:

• Green Mountain's(GMCR) Stiller 'Hurt' to Lose Chairman Title. "I am really shocked and hurt, Stiller told CNBC on Tuesday evening. "There were no SEC laws broken, nothing that was in violation of Federal law. I'm stunned. I've always been transparent with the board. I think it's an overreaction."
• Disney(DIS) Earnings Top Expectations; Shares Rise. Walt Disney reported on Tuesday quarterly earnings and revenue that beat Wall Street's expectations, driven by growth at its media networks such as sports powerhouse ESPN and its theme park business.
• Street Gangs: A New Breed of White Collar Criminals? Gangs are expanding and becoming more violent, posing an increasing risk to communities across the country, according to the National Gang Intelligence Center. And their latest threat is not drugs or prostitution, it’s white-collar crime.

IBD:

• Vitamin Shoppe(VSI) Rallies 15% On Healthy Earnings Growth.

NY Times:

• German Patience With Greece on the Euro Wears Thin. Just weeks ago, the idea that Greece would leave the euro zone was almost unthinkable. Now, with Greece’s newly empowered political parties refusing to abide by the terms of the country’s international loan agreement and Europe’s leaders talking tough, that outcome is looking increasingly likely. Germany’s devotion to the euro and the European Union runs extremely deep and cuts across the political spectrum. But the frustration with Greece here is undeniable. There is a growing conviction that it is up to Greece to follow through on its commitments, that Europe is done negotiating. “Germans are now predominantly of the opinion that they would be better off if Greece left the euro zone,” said Carsten Hefeker, professor of economics and expert on the euro at the University of Siegen. “If the country really is continuing on the path they are taking now, it would be hard to justify keeping them in. How do you deal with a country that says we don’t want to keep any of the commitments we have made?”

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows Mitt Romney earning 49% of the vote and President Obama attracting 44% support. Three percent (3%) would vote for a third party candidate, while another three percent (3%) are undecided.

Reuters:

• Exclusive - Chesapeake(CHK) CEO arranged new $450 million loan from company financier. In the weeks before Chesapeake Energy CEO Aubrey McClendon was stripped of his chairmanship over his personal financial dealings, he arranged an additional $450 million (278.6 million pounds) loan from a long-time backer, according to a person familiar with the transaction.

Financial Times:

• Greek Left Attacks 'Barbarous' Austerity. Greece is heading for a clash with international lenders as the radical leftwing party that came second in the weekend’s election called for the ripping up of a “barbarous” austerity programme underpinning its bailout and questions mounted about the country’s future inside the euro.
• Hollande At Odds With Key Partners On Structural Reform. What got less attention was Mr Hollande’s revealing admission that he did not share Mr Draghi’s vision, quickly endorsed by Angela Merkel, the German chancellor, that such a growth plan should be focused on structural reforms, such as increasing labour market flexibility. Mr Hollande was not coy about this. “Can we really believe that liberalism, privatisations and deregulation, which led us to the financial crisis we are in, will help us get out of the crisis?” he said. His emphasis at the European level is on boosting investment and employment in new energy technology, infrastructure and small businesses through the use of project bonds and institutions such as the European Investment Bank and EU structural funds.

Telegraph:

• Crisis escalates as insurrection breaks German control of Europe. The political dam has broken in Europe. German Chancellor Angela Merkel no longer has enough allies in the club of EU prime ministers to impose her hairshirt agenda. Her methodical plans are disintegrating on every front. The immediate fate of Greece - and the euro - is in the hands of a boyish motorcycle Marxist. Syriza leader deal Alexis Tsipras has vowed to tear up the hated Memorandum, as the EU-IMF "troika" loan package is known. He showed no sign of backing off as he met his country's president and began talks on the formation of an implausible Left front. "The popular verdict clearly renders the bailout null and void," he said.
• Greece Drifts Closer to Euro Exit. A rudderless Greece was drifting closer towards a euro exit on Tuesday night as the man tasked with forming a new government vowed to abandon its austerity promises.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.50% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 173.0 +4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 139.0 -.5 basis point.
  
• FTSE-100 futures +.28%.
  
• S&P 500 futures -.45%.
  
• NASDAQ 100 futures -.41%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FCN)/.61
• (ABVT)/.69
• (DTG)/1.35
• (AOL)/.17
• (M)/.40
• (NWSA)/.31
• (PCLN)/3.95
• (BMC)/.80
• (ATVI)/.04
• (MNST)/.38
• (CSCO)/.47
• (CUZ)/.12
• (CGX)/.77
• (BKC)/.36

Economic Releases
10:00 am EST

• Wholesales Inventories for March are estimated to rise +.6% versus a +.9% 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 +2,840,000 barrel gain the prior week. Distillate inventories are estimated to rise by +125,000 barrels versus a -1,903,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -750,000 barrels versus a -2,009,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.5% versus a +1.3% gain the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Plosser speaking, Fed's Pianalto speaking, 10Y T-Note Auction 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Less Financial Sector Optimism, Technical Selling

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Every Sector Declining
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 19.45 +2.69%
  
• ISE Sentiment Index 51.0 -37.8%
  
• Total Put/Call 1.19 +32.22%
  
• NYSE Arms 2.13 +107.78%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 101.04 +1.15%
  
• European Financial Sector CDS Index 255.98 +4.84%
  
• Western Europe Sovereign Debt CDS Index 279.38 +1.39%
  
• Emerging Market CDS Index 253.88 +2.10%
  
• 2-Year Swap Spread 31.0 +1.25 basis points
  
• TED Spread 38.0 -1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -45.25 -3.75 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% +1 basis point
  
• Yield Curve 158.0 -4 basis points
  
• China Import Iron Ore Spot $142.70/Metric Tonne -.97%
  
• Citi US Economic Surprise Index -22.0 +1.1 points
  
• 10-Year TIPS Spread 2.18 -2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -82 open in Japan
• DAX Futures: Indicating +39 open in Germany
  

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades well off session lows, but still lower for the day, despite rising Eurozone debt angst, less financial sector optimism, high energy prices, rising global growth fears, technical selling, more shorting and less US economic optimism. On the positive side, Biotech and Tobacco shares are rising on the day. Oil is falling -.6% and Gold is down -1.9%. On the negative side, Steel, Alt Energy, Coal, Oil Service, Disk Drive, Telecom, I-Banking, Homebuilding and Restaurant shares are under meaningful pressure, falling more than -1.50%. Cyclicals are underperforming again. Financial shares have lagged throughout the day. Lumber is down -.5% and Copper is down -2.2%. Major Asian Indices were mixed overnight as a +.7% gain in Japan was offset by a -2.2% decline in India. India's Sensex, which finished near session lows, is down -4.5% in 5 days and down -10.7% since Feb. 22. Major European indices fell around -2.0%, led lower by a -2.8% decline in France. French stocks are now down -1.1% ytd and down -12.0% since March 16th. Italian stocks fell another -2.4% and are down -7.7% ytd(-18.5% since March 19th). The Bloomberg European Bank/Financial Services Index fell -2.0%. The Germany sovereign cds is gaining +1.77% to 86.33 bps, the France sovereign cds is jumping +5.0% to 202.92 bps, the Spain sovereign cds is rising +2.88% to 498.51 bps, the Italy sovereign cds is rising +1.2% to 446.33 bps, the Ireland sovereign cds is gaining +1.9% to 587.83 bps, the Brazil sovereign cds is gaining +2.9% to 127.06 bps and the US sovereign cds is surging +3.7% to 40.66 bps. Moreover, the European Investment Grade CDS Index is jumping +4.4% to 150.58 bps and the Italian/German 10Y Yld Spread is gaining +3.0% to 391.20 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -5.0% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -21.0% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +564.0% ytd. The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades. Copper is breaking below its 200-day moving average. Weekly retail sales rose +2.6% this week versus a +3.2% gain the prior week and have decelerated from a +4.1% gain the week ended April 10th. The huge jump in consumer credit for April, given decelerating retail sales and lower gas prices, is another red flag. The 10Y T-Note continues to trade too well, despite a +47.0% gain in less than 3 weeks for the US sovereign cds, and the euro currency is close to a technical breakdown from its recent range. In general, US stocks remain extraordinarily resilient as aggressive dip-buyers once again materialized into an opening swoon. I continue to believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. 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, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting and lower energy prices.

Today's Headlines

Bloomberg:

• Greek Default Risk Returns as Bond Maturity Nears. Two months after forcing through the biggest-ever sovereign bond restructuring, Greece once again faces the prospect of becoming the first developed nation to default on its debt. The government taking office after this weekend’s election has 30 days to decide whether to make today’s interest payment on 20 billion yen ($250 million) of 4.5 percent notes maturing in 2016, or default. Then, by May 15, officials must decide if they’re going to repay the 436 million euros ($555 million) due on a floating-rate note issued a decade ago. “This poses a real challenge to the Greek government,” said Mario Blejer, vice chairman of Banco Hipotecario SA in Buenos Aires, who ran Argentina’s central bank in the aftermath of his country’s default. “If they pay, the new emerging government will be fiercely criticized for paying the foreigners in full after imposing huge losses on small domestic savers. If they don’t pay, they can expect much litigation, as we have experienced here in Argentina.”
• Greece Likely to Exit Euro This Year, FX Concept's Taylor Says. Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC. “This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker and Sara Eisen. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”
• European Stocks Retreat Amid Greece Government Concern. European stocks dropped after the leader of Greece’s biggest political party failed to reach an agreement on a new government following the weekend’s elections. National Bank of Greece SA led a selloff in banks, falling 8.4 percent. Spain’s Bankia SA (BKIA) dropped 4.8 percent. Taylor Wimpey Plc (TW/) led U.K. builders lower after a gauge of house prices fell to a six-month low. Royal KPN NV surged 17 percent after America Movil SAB offered 2.6 billion euros ($3.4 billion) for a larger stake in the business. The Stoxx Europe 600 Index (SXXP) slid 1.7 percent to 250.58 at the close in London as the cost of insuring against default on European sovereign and corporate debt advanced. The Stoxx 600 has fallen 8 percent from this year’s high on March 16, paring the gauge’s advance in 2012 to 2.5 percent. The U.K. and Irish markets were closed for a holiday yesterday. “European political risk remains center stage for financial markets,” wrote Adrian Cattley, a strategist at Citigroup Inc. in a report to clients dated yesterday. Greece’s election result “suggests no quick path to a new stable government and could raise probability of contagion risks.”
• Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 1.5 basis points to 277 at 8:30 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 17 basis points to 672. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 4.5 basis points to 149 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 6 basis points to 250 and the subordinated index was up 7.5 at 405.
• Euro Near Three-Month Low on Greek Leadership Concern.
  
• Commodities Erase 2012 Gains as Economic Outlook May Dim Demand. Commodities fell, erasing this year’s gains, as the struggle by Greek political leaders to form a coalition underscored growing concern that the region’s debt crisis will worsen, dimming prospects for raw-material demand. The Standard & Poor’s GSCI Spot Index dropped for a fifth straight session, heading for its worst run since August. The measure lost as much as 1.6 percent to 641.8, the lowest since Dec. 29. The gauge, which tracks 24 raw materials, was at 642.8 as of 11:22 a.m. in New York, down 0.3 percent for the year. Silver, gold, cocoa and crude oil led the declines. The last annual slump was in 2008. “We’re in a deflationary credit contraction situation globally,” said James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “The banking systems in China, Australia, and obviously much of Europe are under severe stress, and that’s creating this kind of deflationary contraction that’s starting to unfold. You’re starting to get a smell of panic in the air and shift towards bearishness in commodities broadly.”
• Canada Housing Bubble Concern Shown in Insurer Query: Mortgages. Anyone trying to understand the concern over a potential housing bubble in Canada need look no further than the debate among government officials over whether to exit the mortgage insurance business. The board of Canada Mortgage & Housing Corp. considered selling the home loan insurer last year, according to former Chairman Dino Chiesa, whose term ended in March. CMHC, set up in 1946 to promote home ownership, also studied the sale of Australia’s government-owned insurer and presented the findings to the Bank of Canada, according to documents released to Bloomberg News under Canada’s Access to Information Act.
• Al Jazeera English Exits Beijing After Secret-Jail Reports. Al Jazeera English said it was closing its Beijing bureau after China refused to renew the visa of a correspondent whose stories included reports on secret jails and forced abortions in the country. The government also declined to grant approval to replace the correspondent, Melissa Chan, 31, who had reported from China since 2007, Al Jazeera said today. The Foreign Correspondents Club of China said it was "appalled" by the move, which it called an expulsion.
• UK RICS House-Price Gauge Declines to Six-Month Low: Economy.
  

Wall Street Journal:

• Redbook: US Retail Sales Down 1.3% In First Week Of May Vs April. National chain store sales fell 1.3% in the first week of May from April, according to Redbook Research's latest indicator, released Tuesday. The index's fall compared with a targeted 1.1% decline. The Johnson Redbook Index also showed seasonally adjusted sales for the period were up 2.6% from last year, compared with a 2.8% targeted gain.
• French Debt Insurance Costs Rise As Investors Mull Hollande Win. The cost of buying default protection against France climbed in early trading Tuesday as investors continue to weigh the results of the weekend's presidential election. Around 0750 GMT, five-year credit default swaps on France had widened seven basis points to 196 basis points.
• Foiled Plot Highlights U.S. Concern on Yemeni Group. A recently thwarted airline bomb plot shows that al Qaeda's offshoot in Yemen is "the most operationally active" branch of the worldwide terrorist organization, the White House said Tuesday, calling the group a "cancer" that has to be excised from the Arabian Peninsula. Investigators were closely scrutinizing the construction of a garment bomb seized in the plot discovered last month by U.S. officials and their foreign allies. They are looking for clues that would lead to its makers, as well as help aviation security experts improve and adjust airport detection systems.
• Four Things to Watch in Tuesday's Votes.
  

MarketWatch:

• Fossil(FOSL) Net Up 4.2%; Europe Economy Hits Sales. Fossil Inc.'s FOSL -34.37% first-quarter earnings rose 4.2%, but a softening European economy contributed to the watch and fashion-accessories retailer's slower-than-expected sales growth. Shares recently dropped 20% to $101 premarket as the company lowered its full-year earnings estimate by 10 cents, now projecting $5.30 to $5.40 a share.
• March Job Openings Increase to 3.74 Million.
  

CNBC.com:

• Bank of America(BAC) Offers Principal Reductions to 200,000 Homeowners. A select group of struggling mortgage borrowers are about to get an offer that sounds too good to be true. Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reduction. The offer is real, and eligible borrowers could get as much as $150,000 knocked off the balance of their mortgages. It is all part of the $25 billion settlement reached this year between federal and state agencies and the nation’s five largest mortgage servicers over fraudulent foreclosure document processing.
• Market Ignores 'Taxmageddon' to Its Peril: Manager. Noronha, who is flat this year following gains on his shorts but just 1 percent on his long positions, believes 2012 will become more challenging over the coming months as the U.S. election comes to the forefront of investor’s minds. “The U.S. will have to start dealing with issues that some market participants refer to as Taxmageddon," said Noronha The term, favored by Washington pundits, refers to a slew of fiscal decisions on topics including tax breaks that are on hold until after the November 6 elections. “The Taxmageddon effect has been estimated at roughly $500 billion in 2013 alone. It includes the [expiration of the] Bush tax cuts, the general payroll tax rate hike, the regular extenders, the death tax (estate tax) and some of the tax hikes from Obama care,” he said. With a new bill needing to be signed by the beginning of next year to avoid so-called Taxmageddon, Noronha believes it is time to be defensive.
• McDonald's(MCD) April US Same-Store Sales Miss Estimates. Same-restaurant sales in the U.S. rose 3.3 percent, while analysts expected a gain of roughly 5 percent.
• Small Business Optimism on Roller Coaster Ride: Survey. Small business owners were more optimistic in April, but compared to a year ago they haven’t really moved the needle forward on feeling more confident about the economy. While the National Federation of Independent Business’ Small Business Optimism Index rose two points in April to 94.5, the index is back to the same level it had been in February 2011. “It’s positive from last month,” said NFIB chief economist William Dunkelberg. “But we’re in the same place as a year ago, so a whole year has gone by and we don’t go anywhere.”

Business Insider:

• Steve Wynn: Extraordinary Quotes From The Sharpest CEO In The World.
• Iran Is Totally Psyched About The French Elections.
• Tax Rates on Dividends Are Going To Explode, And The Market Is Punishing Dividend Stocks.
  

Zero Hedge:

• Greek Stocks Plummet to 20-Year Lows. (graph)
• European Credit Risk Surges Near 4-Month Highs. (graph)
• Santelli On The Encumbered Youth Of The US. From birth (where the average soon-to-be-taxpayer is already encumbered by $138k) to the future (looking for growth through capital attainment and job creation), Santelli starkly looks into camera, addressing the under-27-year-old demographic and tells them straight "you are paying for a meal that previous generations have eaten".
• Biderman Sums Up Europe's Problem In 30 Seconds. (video)
  

New York Times:

• Leftist Leader in Greece Rules Out Coalition With Incumbents. Greece’s post-election political and economic chaos deepened on Tuesday, when the leader of a leftist anti-austerity party that gained in the balloting ruled out a coalition with the two formerly dominant parties that had backed hugely unpopular budget cuts. The announcement raised further doubts about the country’s future in the euro zone, as well as fears about the stability of the common currency itself.
• AMC Said to Be Talking to Chinese Buyer. AMC Entertainment, which owns the second-largest movie theater chain in North America, is in talks to sell the company or a significant stake in it to the Wanda Group, one of China’s largest theater owners, according to people briefed on the discussions.

CNN:

• Greek Leftist Leader Lays Out Radical Agenda. Greek leftist leader Alexis Tsipras on Tuesday laid out the radical agenda he hopes to pursue if he becomes prime minister, including the cancellation of severe budget-cutting measures forced on the country by international lenders. Laws which cut pensions and salaries and those which "cancel basic workers' rights" must be annulled, Tsipras said as he started efforts to form a governing coalition in the wake of parliamentary elections on Sunday. He also called for state control of the banks, which "remain in the hands of the managers who bankrupted the system," he said. The Greek people voted clearly to reject the austerity demanded by international lenders, Syriza Party leader Tsipras said. The two parties that made the agreement with international lenders "don't have a majority any more to vote for the plundering of the Greek people," Tsipras told lawmakers.

CBS News:

• China to Re-Investigate Human Flesh Capsule Claims. Chinese state media say health officials will launch a new probe into allegations that China manufactures drug capsules filled with powdered flesh from dead babies. The official Xinhua News Agency quoted a Ministry of Health spokesman as saying an investigation launched in August found no such capsules in China. Spokesman Deng Haihua was quoted as saying Tuesday that China would investigate again following new reports of pills being smuggled into South Korea. The Korea Customs Service said Monday it had seized capsules made in northeastern China from babies whose bodies were chopped into small pieces and dried on stoves before being turned into powder.

Gallup:

• Election 2012: Obama 44%, Romney 47%. (graph)
  

Reuters:

• India's Sensex Falls 367 Points, Nifty Below 5,000 as Tax Worries Weigh. The BSE Sensex posted its biggest fall since February 27 on Tuesday after analysts warned about the continued lack of clarity regarding taxation for foreign investors, while the fall in the rupee also weighed. Stock accelerated their falls late in the session, especially in the Nifty index after stop losses were triggered in futures and options markets. Despite the government's changes to the General Anti-Avoidance Rule (GAAR), foreign investors have sold a net of 10.3 billion rupees in Indian stocks on Monday and Tuesday, according to provisional data from the National Stock Exchange. Analysts said the changes were still vague, and added the uncertainty would continue at least until May 31, when a government committee is expected to provide guidelines. "Not all potential concerns in regard to GAAR are completely addressed. We still have to be clear how exactly it is going to be implemented," said Pranav Sayta, a tax partner at Ernst & Young. The 30-share BSE index fell 2.17 percent to 16,546.18 points, while the 50-share NSE index lost 2.23 percent to 4.999.95 points.
• Copper Falls on Dollar Strength, Europe Uncertainty.
  
• Brazil Car Inventory Highest Since 2008 Crisis. Automobile production and sales in Brazil fell in April from March, as inventories climbed to their highest level since the global financial crisis of 2008, raising the specter of idling production lines and continued weak industrial output. Inventories in Brazil's auto sector amounted to 43 days' worth of sales last month, according to the national automakers' association, Anfavea. That was the highest level since November 2008, when stocks reached 56 days of sales. Last year, carmakers idled lines and furloughed workers as inventories rose to 40 days of sales in October, triggering government stimulus and industry protections that upset regional partners such as Mexico. A slumping car industry also aggravated a sharp slowdown in Brazil's industrial output late last year. Banco Votorantim analysts warned in a Monday note that automakers' weak April signaled a moderate recovery at best for industrial production, which contracted unexpectedly in March. Vehicle output fell 15.5 percent to about 260,800 cars and light trucks in April, and sales dropped 14.2 percent to around 257,900 autos, Anfavea said on Monday.
• Exclusive: China Considers Delay of Key Party Congress: Sources. China's ruling Communist Party is seriously considering a delay in its upcoming five-yearly congress by a few months amid internal debate over the size and makeup of its top decision-making body, sources said, as the party struggles to finalize a once-in-a-decade leadership change. The two most senior posts, of president and premier, are not considered in much doubt. But any delay in the congress, no matter the official reason, would likely fuel speculation of infighting over the remaining seats in the nine-member politburo standing committee which calls the shots in China.
• Fed's Fisher Not Yet Ready to Push For Policy Exit. The U.S. Federal Reserve should not start raising interest rates yet, a top Fed official known for his hawkish views on inflation said on Tuesday. "I'm not yet ready to advocate an exit strategy," Dallas Federal Reserve Bank President Richard Fisher told reporters after a speech on the Texas economy in Dallas. "We have to stop accommodating first."
• Wells Fargo(WFC) May Face Fair Lending Claims. Wells Fargo & Co could face civil charges from the U.S. Department of Justice under laws that prohibit discrimination against minority homebuyers, the bank disclosed on Tuesday. The fourth-largest U.S. bank said in a securities filing it believes the charges should not be brought and said it is seeking to show the department that it is in compliance with fair lending laws.

Telegraph:

• Europe Runs Out of Other People's Money. Francois Hollande’s election victory is a symbol of the EU’s decline.
• Debt Crisis: Live. Leader of left-wing Syriza party says Greeks voted against the "barbaric bailout" and austerity pledges are "null and void", while British 10-year borrowing costs drop to historic lows.

Guardian:

• Anti-austerity parties ride protest vote in Italian local elections. The Italian comedian Beppe Grillo has promised that his fledgling party is heading for parliament after his candidates rode a wave of protest against austerity politics and Italy's traditional parties in local elections. "We will see you in parliament," he tweeted, suggesting his Five Star Movement party will field candidates in national elections in 2013. The comic campaigns on green issues, fights corruption and has recently criticised Mario Monti's unpopular tax hikes, as well as claiming Italy should ditch the euro. His party took 14% of the vote in Genoa, 9% in Verona and 19% in Parma, where it forced the mainstream Democratic party into a runoff.

Der Spiegel:

• Fitch Ratings head Paul Taylor says Greece's exit from the euro-zone wouldn't necessarily mean the end of the euro, citing an interview. Germany has a fundamental interest in keeping the common currency as the D-Market would appreciate strongly, Taylor said.

ARD Television:

• Germany's Finance Minister Wolfgang Schaeuble "has no doubt" that France will stick to the agreements reached among all European countries to cut deficits. European countries should not reopen negotiations on agreements that have already been made after each new election.
  

Imerisia:

• Greece's net budget revenue fell 10.2% in April compared with the same month a year earlier as sales tax revenue declined 13.5%.

Sydney Morning Herald:

• Eurozone Faces the Domino Principle. It happens like this: the election result in Greece means pro-austerity parties lack the parliamentary support and the moral authority to govern. Demands from Athens for tough bailout conditions to be softened are turned down by the International Monetary Fund, the European Central Bank and the European Commission. Political impasse in Greece leads to a second general election being called for next month. The German chancellor, Angela Merkel, makes it clear the next tranche of cash to keep Greek banks and the state solvent will not be given unless the plan is adhered to in full. The strains on the single currency become intolerable; Greece leaves the euro and defaults, starting the process by which monetary union unravels.

Xinhua:

• China 'Not Optimistic' on Huangyan Island Situation. China is "not optimistic" on the situation of the disputed islands with Philippines, citing Vice Foreign Minister Fu Ying. China is fully prepared to respond to any action taken by the Philippines to escalate the situation, Fu said.
• China will ban executives at state-owned companies from spending corporate budgets on excessive purchases of assets like cars. Executives at unprofitable state-owned companies may not buy cars or high-end office supplies, or redecorate offices, citing a joint statement from three government departments including the Ministry of Finance. Executives are also banned from covering their family expenses out of company funds, it said.
  

Bear Radar

Style Underperformer:

• Mid-Cap Growth -2.11%

Sector Underperformers:

• 1) Coal -3.86% 2) Oil Service -3.33% 3) Steel -3.30%

Stocks Falling on Unusual Volume:

• DB, AMX, CLMT, SFY, WLL, CCJ, ANDE, FOSL, MAKO, SNCR, QSII, MTRX, ULTA, SCSS, PRGO, NILE, NXTM, EA, ARMH, BSFT, DISCA, LULU, SAVE, WWWW, TSLA, IHG, DNB, SMG, IEO, RL, RPG, ANV, TDC, CNQR, TPC, ANN, NUS, RNF, LNKD, SIL, CROX, RKT, PANL, PVH, VHC, PMT, WYNN, BLT, CFX, GES, GTLS, ANF, PBI, RGR, LRN, SLCA, MOV and GVA
  

Stocks With Unusual Put Option Activity:

• 1) FOSL 2) MAKO 3) RAX 4) LOW 5) ADSK
  

Stocks With Most Negative News Mentions:

• 1) MS 2) EA 3) MCD 4) FCX 5) JWN
  

Charts:

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