BETWEEN THE HEDGES

Monday, May 14, 2012

Monday Watch

Posted by Gary .....at 12:23 AM

Weekend Headlines
Bloomberg:

Euro Officials Begin to Weigh Greek Exit. Greece’s possible exit from the euro area moved to the center of Europe’s debt-crisis debate, with officials beginning to weigh the fallout of a withdrawal even as authorities in Athens struggled to form a government. Meetings brokered by Greek President Karolos Papoulias are set to continue today after Syriza, the largest anti-bailout party, rejected a unity government following last week’s inconclusive elections. The country where the 2 1/2-year-old crisis began moved closer to a new vote, and to the possibility of a euro-area exit that was once a taboo among policy makers. Greek withdrawal “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said in Tallinn on May 12. An exit was “technically” possible yet would damage the euro, he said. German Finance Minister Wolfgang Schaeuble reiterated in an interview in Sueddeutsche Zeitung that member states seeking to hold the line on austerity for Greece could not force the country to stay. The debate between growth and austerity will form the centerpiece of talks tomorrow between the newly installed French President Francois Hollande and German Chancellor Angela Merkel, who has championed an agenda of spending cuts. Euro finance ministers meet today and may discuss the international bailout for Greece, as well as the situation in Spain, where the government last week made a fourth attempt to clean up the country’s banks. The euro-area finance ministers will convene in Brussels at 5 p.m. local time.
Merkel's CDU Defeated in Worst Postwar Result in Biggest State. Chancellor Angela Merkel's party was defeated in Germany's most populous state in an election that helped the Social Democrats tighten their grip on the country's regional governments. The SPD, the main opposition party nationally, increased its vote share in yesterday's ballot in North Rhine-Westphalia, enabling Prime Minister Hannelore Kraft to return to power at the head of a government with the Greens in the state capital Dusseldorf. Merkel's Christian Democratic Union fell to its worst score since World War II. The result is a setback for Merkel after she headlined nine campaign rallies in 27 days in North Rhine-Westphalia in a bid to regain the state, the first her CDU lost in 2010 as the debt crisis erupted and voters rebelled against bailing out Greece. The SPD is now in power in 11 of Germany's 16 states.
Syriza Says It Won’t Join Greek National Unity Government. Greece’s biggest anti-bailout party, Syriza, said for the second time in as many days that it won’t join a unity government, pushing the country closer to new elections that have sparked concerns about a euro-area exit. “Syriza won’t betray the Greek people,” leader Alexis Tsipras said in statements televised on state-run NET TV after a meeting brokered by President Karolos Papoulias between the party and the leaders of the New Democracy and Pasok parties. “We are being asked to agree to the destruction of Greek society.” Papoulias began a final bid to coax the three biggest parties into a coalition today after a week of talks which failed to deliver on mandates to form governments. He will meet later today the leaders of the four other parties to probe the likelihood of forming a national-unity government. If Papoulias’s efforts fail, new elections will need to be called.
As European Austerity Ends, So Could the Euro. The problem isn’t just the region’s lack of competitiveness or its budget deficits or the high stock of existing government debt, which the International Monetary Fund now puts at 90 percent of the euro area’s gross domestic product. It is all of the above, compounded by five years of complete political denial.
Weidmann Sees More Aid for Greece as Possible, Sueddeutsche Says. European Central Bank council member Jens Weidmann said further financial support for Greece can be considered if the country sticks to its promises, Sueddeutsche Zeitung reported, citing an interview. “If Greece isn’t keeping its word then it is a democratic decision,” Weidmann, who also heads Germany’s Bundesbank, is quoted as saying. “Consequently, it misses the basis for further financial support.” Weidman also said that it is still not time to drop the extended credit support measures, Sueddeutsche said.
Spain May Need to Inject $6.4 Billion in Bankia, Expansion Says. Spain may need to pump 5 billion euros ($6.4 billion) into Bankia Group to boost the lender’s capital, Expansion reported, citing unidentified people close to the government. The cash injection will be implemented through the purchase of capital contingent notes to be issued by the nationalized lender, Expansion said. Previously the government was expecting to inject 2.5 billion euros of new capital, Expansion said. The measure will be on top of the conversion of 4.5 billion euros of subordinated debt sold two years ago by the bank to the government-run bank bailout fund, or Frob, into new stock, Expansion said.
The European Commission isn't considering easing the terms of a joint bailout for Greece from the European Union and the IMF, an EU spokesman said, denying a report by Athens-based Real News. "I'm not aware of any discussions within the commission to grant new provisions, new concessions in the program" for Greece, Amadeu Altafaj Tardio, a spokesman for the Brussels-based commission, said today.
Kuoni Is Preparing for Possible Greek Exit, SonntagsZeitung Says. Kuoni Reisen Holding AG (KUNN) is holding talks with its Greek business partners to prepare for a possible exit of the country from the euro area, Chief Executive Officer Peter Rothwell told SonntagsZeitung in an interview. The company might introduce special clauses in contracts with Greek hotels so it doesn’t end up paying in euros if the nation uses a cheaper currency, Rothwell told the newspaper.
Bank Regulation to Boost Retail Costs, RBS Chief Tells Telegraph. Lenders may have to charge customers more because of the cost of separating investment banking and retail operations, the Royal Bank of Scotland Group Plc (RBS) Chairman Philip Hampton told the Sunday Telegraph. The banks will probably pass on the cost to customers as the government forces lenders to split their “risky” investment banking from retail units, Hampton said in an interview, the newspaper reported.
JPMorgan(JPM) Rating Cut by Fitch as S&P Reduces Outlook to Negative. JPMorgan Chase & Co., the largest and most profitable U.S. bank, had its credit grade lowered one level by Fitch Ratings and Standard & Poor's said it may follow after the bank revealed a $2 billion trading loss. The lender's long-term issuer default rating was cut to A+ from AA-, and the short-term grade was lowered to F1 from F1+, Fitch said yesterday in a statement. Fitch placed all parent and subsidiary long-term ratings on rating watch negative.
JPMorgan’s(JPM) Trading Loss May Call for More Fed Supervision. JPMorgan Chase & Co. (JPM)’s trading position that led to a $2 billion loss may call for increased Federal Reserve scrutiny of risk management as the central bank steps up its post-crisis supervision of lenders. Fed officials are gathering more information about the trading position, which they have known about for several weeks, according to a person familiar with the matter. They don’t view it as their role to approve or reject individual trades, the person said. Rather, their job is to ensure firms have enough capital to withstand losses, said the person, who wasn’t authorized to discuss the matter and asked not to be identified.
Hedge Funds Are Shadow Banks in Need of Regulation, Bafin Says. Hedge funds act as shadow banks and should be added to the list of organizations in need of regulation, according to Raimund Roeseler, head of banking supervision at Germany’s financial regulator Bafin. Shadow-banking definitions by the Financial Stability Board and the Basel Committee are too narrow, Roeseler said. Bafin is working on its own proposals to regulate the sector and will provide them for the discussion at the FSB, he said. “We probably won’t be able to fix every loophole, but we’ll get a good chunk -- and make dodging rules more tedious and expensive,” Roeseler, 50, said in an interview at his Bonn- based office last week. “Anything already calling itself a hedge fund should be covered, that’s for sure.”
Bullish Wagers Plunge Most in 2012 on Greek Impasse: Commodities. Speculators cut bets on a rally in commodities by the most since November as Greece’s struggle to form a new government and weaker-than-expected industrial output in China erased this year’s gains in raw materials. Money managers reduced net-long positions across 18 U.S. futures and options by 19 percent to 723,239 contracts in the week ended May 8, the biggest decline since Nov. 22, Commodity Futures Trading Commission data show. The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 6.5 percent in eight sessions, the longest slide since December 2008.
Ex-GE(GE) Bankers Convicted of Municipal Bond Bid-Rig Scheme. Three former General Electric Co. (GE) bankers were convicted of defrauding cities and the U.S. Internal Revenue Service in a bid-rigging scheme involving municipal bonds. Dominick Carollo, Steven Goldberg and Peter Grimm were found guilty by a federal jury in Manhattan yesterday of conspiracy to commit fraud by manipulating auctions for municipal bond investment contracts. The government claimed that from August 1999 to November 2006 the men gave kickbacks to brokers hired by local governments to solicit bids, to win auctions and to increase their profits.
The number of Hong Kong-listed companies that postponed the release of earnings statements has risen to a record high this year, fueling concerns about corporate governance among some Chinese businesses.
Aussie Falls Below U.S. Dollar Parity on Greek Concerns. The Australian dollar declined to less than parity with its U.S. counterpart for the first time this year amid concern that Greece will leave the euro bloc, curbing demand for higher-yielding currencies.
Investment, the Engine of U.S. Prosperity, Is Underrated.
Rusal's Quarter Profit Falls 84% on Weaker Aluminum Prices. United Co. Rusal (486), the world’s largest aluminum producer, posted a 84 percent slump in first quarter earnings as prices of the lightweight metal declined. Net income was $74 million for the three months ended March 31, the Moscow-based company said today in a statement. That compares with a restated $451 million a year earlier. Earnings before interest, tax, depreciation and amortization fell 65 percent to $237 million, missing the $261.8 million average estimate of six analysts compiled by Bloomberg.

Wall Street Journal:

Bank Order Led to Losing Trades. J.P. Morgan's Efforts to Shield Itself From European Market Fallout Prompted Disastrous Bets. J.P. Morgan Chase & Co. told traders several months ago to make bets aimed at shielding the bank from the market fallout of Europe's deepening mess. But instead of shrinking the risk, their complicated bets backfired into losses of as much as $200 million a day in late April and early May, people familiar with the situation said. Regulators in the U.S. and U.K. are examining what went wrong, who is responsible and whether J.P. Morgan should have told investors about the losses sooner, according to people familiar with the matter.
Three to Exit JPMorgan(JPM) After Losses. Three high-ranking people are expected to leave J.P. Morgan Chase & Co. this week, said people familiar with the situation, in the latest fallout from a trading blunder that has cost the bank at least $2 billion. The departures involve three of the highest-ranking executives with direct connections to the losses, according to the people familiar.
Exclusive: Yahoo’s(YHOO) Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion. Yahoo’s embattled CEO Scott Thompson (pictured here) is set to step down from his job at the Silicon Valley Internet giant, in what will be a dramatic end to a controversy over a fake computer science degree that he had on his bio, according to multiple sources close to the situation.
LightSquared Moves Toward Bankruptcy. Hedge-fund manager Philip Falcone's LightSquared Inc. venture was preparing Sunday to file for bankruptcy protection after negotiations with lenders to avoid a potential debt default faltered, said people familiar with the matter.
Missing: Stats on Crisis Convictions. It is a question that has been asked time and again since the financial crisis: How many executives have been convicted of criminal wrongdoing related to the tumultuous events of 2008-2009? The Justice Department doesn't know the answer. That is because the department doesn't keep count of the numbers of board-level prosecutions. In a response earlier this month to a March request from Sen. Charles Grassley (R.,Iowa), the Justice Department said it doesn't hold information on defendants' business titles.
The Dimon Principle. J.P. Morgan's(JPM) failed trades may well have passed the Volcker rule.

Business Insider:

Don't Forget About JPMorgan's(JPM) Other Huge Derivatives Losses.
Newsweek's Latest Cover Turns Obama Into A Gay Angel. (pic)
This Cover Of Der Spiegel Isn't Very Subtle.
Air Force Report: Drones May Be Used To Spy On Americans. Following recently passed legislation to allow 30,000 drones to operate over the U.S. by 2020, a newly discovered Air Force document posted by Steve Watson at InfoWars has some interesting implications.
The Worst is NOT Over For China's Economy. (graphs)

Zero Hedge:

CNBC:

Thousands March Against Economic Gloom in Spain, UK. Thousands of Spaniards fed up with economic misery and waving banners against bankers marched on Saturday to mark the first anniversary of the grassroots "Indignados" movement that has sparked similar protests around the world.
Former FDIC Chief: Several Banks 'Too Big to Fail'.

Wall Street All-Stars:

Answers On How To Trade Tech Right Now.

Forbes:

China Crashes in April, Shows Signs of Contraction. Yesterday, the People’s Bank of China lowered the reserve requirement ratio by 50 basis points. Now, China’s banks will have an extra 400 billion yuan—about $63.5 billion—to lend. It was the central bank’s third reduction in the ratio since November. In April, new renminbi-denominated lending fell 8.2% from the same month last year and 32.6%—329.6 billion yuan—from this March. In short, the amount freed up by yesterday’s action is just a little more than the decline in new lending last month. As analysts noted, the cut in the ratio was too little and too late. As a consequence, it will have little effect.

Rasmussen Reports:

Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows Mitt Romney earning 48% of the vote and President Obama attracting 44% support. Four percent (4%) would vote for a third party candidate, while another three percent (3%) are undecided.

Reuters:

Interview - Egypt's Brotherhood Sees Years of Friction Ahead. Egypt is destined for up to eight years of friction between reformists and the powerful military seeking to safeguard its interests after handing power to a civilian president, a senior member of the Muslim Brotherhood said on Sunday. In an interview with Reuters, deputy Brotherhood leader Mahmoud Ezzat forecast victory for the group's candidate Mohamed Mursi in the vote that gets underway this month. The generals are due to hand power to an elected leader on July 1 or sooner.
Brown Pushes Tax Hike as California's Money Woes Deepen. California Governor Jerry Brown was elected in 2010 on a promise to fix the state's chronic fiscal crisis. His weekend announcement of a much bigger-than-expected shortfall in the state budget signals how far he still has to go. In an unusual move that underscored the highly politicized nature of the state budget, Brown took to YouTube on Saturday to deliver the bad news: the state's projected budget deficit for the fiscal year starting July 1 is now $16 billion, up from the $9 billion anticipated in January. The Democratic governor also warned of further cuts to an already-battered public education system if voters rejected a tax increase in a ballot initiative this fall. On Monday, Brown will hold a news conference to detail the new budget deficit and how he intends to close it.
Spain short-term debt costs to stay high after bank plan. Spain will pay high premiums to sell short-term debt on Monday, after the government's latest attempt to fix the banking sector failed to allay concerns about the burden of the clean-up on the country's finances.
Italy Tests Markets In First Post-Elections Bond Sale. Italy will sell three-year bonds on Monday after a solid bill auction last week, in a new test of demand for lower-rated euro zone debt among investors concerned about Greece'e euro membership and the bloc's crisis-fighting strategy.

Financial Times:

Greek Exit From Eurozone 'Possible'. Greece’s exit from the eurozone “would be possible,” even if not in Europe’s interest, and countries should have a democratic right to quit, according to a member of the ECB’s governing council. The comments from Luc Coene, the central bank governor of Belgium, in a Financial Times interview highlight how eurozone policy makers are losing patience with Athens after an inconclusive election threw into doubt Greece’s commitment to reforms demanded under its international bailout.
JPMorgan(JPM) Probe into London Role in Loss. JPMorgan Chase is investigating whether London-based traders hid the extent of losses on credit derivatives positions, according to people familiar with an internal probe following last week’s revelation of $2bn losses. The investigation comes as Jamie Dimon, chief executive, took to US television to say he was “dead wrong” to have dismissed questions over the risk-taking of his chief investment office.

The Telegraph:

Spain's Most Indebted Village Pays The Price Of Its Profligacy. In the Spanish country just East of Madrid stands the village of Pioz, popuation 3600, which has the dubious titled of most indebted place in the troubled country writes Fiona Govan.
JPMorgan's(JPM) $2Bn Loss Costs Hedge Funds Dear. JP Morgan Chase's surprise trading loss has hit London's biggest hedge funds, costing the City's best-known fund managers more than $100m (£62m).
World Edges Close to Deflationary Slump as Money Contracts in China. All key indicators of China's money supply are flashing warning signs. The broader measures have slumped to stagnation levels not seen since the late 1990s.
The Final Death Throes of the Euro. The euro crisis is entering its final stages. Economic pain is now interacting with political resistance to produce intense financial pressure. I expect Greece to leave the euro – and perhaps very soon.

Frankfurter Allgemeine Sonntagszeitung:

ECB council member Jens Weidmann said Greece won't get neither long-term aid from euro countries nor ECB support without saving measures, citing an interview. Weidmann reiterated that if Greece isn't sticking to its promises, it won't get the financial aid. This also includes the refinancing of Greek banks through the euro system, he said.

Der Spiegel:

Greece would receive further aid from the EFSF if it exited the euro, German Finance Minister Wolfgang Schaeuble said.

WirtschaftsWoche:

Greece's exit of the euro area, including stopping its debt service, would cost euro countries EU276b, citing own calculation. Honohan says a Greece exit can be managed, but sees confidence hit.

Bild am Sonntag:

Some 78% of Germans are in favor of halting aid for Greece as long as a new government hasn't committed itself to the agreed savings, citing an Emnid poll.

Welt am Sonntag:

German Finance Minister Wolfgang Schaeuble said he is confident that lawmakers will vote on Europe's debt-reducing fiscal pact in German parliament before the summer break, citing an interview. Germany isn't willing to make changes to the fiscal pact, contracts are valid even after elections, Schaeuble said.

Tagesspiegel:

The euro area is prepared for a possible exit of Greece, citing German lawmaker Michael Meister, the finance spokesman for Chancellor Angel Merkel's ruling CDU bloc. The imminent risk of infection if Greece goes insolvent isn't as high as two years ago due to EFSF, ESM, citing Meister. Meister said he is against renegotiating financial aid for Greece.

Politiken:

Denmark will not support newly elected French President Francois Hollande's plan for a growth package for Europe, citing an interview with Danish Prime Minister Helle Thorning-Schmidt. Danes don't want to increase debt further to get the economy going, she said.

Weekend Recommendations

Barron's:

Made positive comments on (WDC), (CAH) and (IMOS).
Made negative comments on (FB), (HLF), (TPX) and (NUS).

Night Trading

Asian indices are -.50% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 183.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 145.50 unch.
FTSE-100 futures -.81%.
S&P 500 futures -.21%.
NASDAQ 100 futures -.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

(A)/.73
(GRPN)/.01

Economic Releases

None of note

Upcoming Splits

None of note

Other Potential Market Movers

The EU Finance Minister Meeting and the Deutsche Bank Clean Tech/Utilities/Power Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial 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 week.

Sunday, May 13, 2012

Weekly Outlook

Posted by Gary .....at 3:42 PM

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, less US economic optimism, rising Eurozone debt angst, technical selling, less financial sector optimism, more shorting and high energy prices. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Friday, May 11, 2012

Market Week in Review

Posted by Gary .....at 8:37 PM

S&P 500 1,353.39 -1.15%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Posted by Gary .....at 8:32 PM

Indices

S&P 500 1,353.39 -1.15%
DJIA 12,820.60 -1.67%
NASDAQ 2,933.82 -.76%
Russell 2000 790.06 -.22%
Value Line Geometric(broad market) 349.33 -.98%
Russell 1000 Growth 639.93 -1.09%
Russell 1000 Value 663.01 -1.03%
Morgan Stanley Consumer 790.81 -.60%
Morgan Stanley Cyclical 945.77 -1.71%
Morgan Stanley Technology 668.57 -2.38%
Transports 5,140.70 -1.66%
Utilities 472.01 +.88%
Bloomberg European Bank/Financial Services 73.55 -.65%
MSCI Emerging Markets 40.26 -4.21%
Lyxor L/S Equity Long Bias 1,020.61 -2.08%
Lyxor L/S Equity Variable Bias 817.96 -.95%
Lyxor L/S Equity Short Bias 539.14 unch.

Sentiment/Internals

NYSE Cumulative A/D Line 142,291%
Bloomberg New Highs-Lows Index -79 -103
Bloomberg Crude Oil % Bulls 13.0 -60.6%
CFTC Oil Net Speculative Position 183,960 -18.83%
CFTC Oil Total Open Interest 1,590,926 -.70%
Total Put/Call 1.24 +21.57%
OEX Put/Call 1.20 -12.41%
ISE Sentiment 96.0 +28.0%
NYSE Arms 1.30 -30.85%
Volatility(VIX) 19.89 +3.81%
S&P 500 Implied Correlation 68.98 +1.37%
G7 Currency Volatility (VXY) 9.59 +4.81%
Smart Money Flow Index 11,150.52 -.89%
Money Mkt Mutual Fund Assets $2.569 Trillion +.1%
AAII % Bulls 25.40 -28.25%
AAII % Bears 42.06 +47.73%

Futures Spot Prices

CRB Index 291.80 -1.80%
Crude Oil 96.13 -2.49%
Reformulated Gasoline 300.08 +.57%
Natural Gas 2.51 +9.90%
Heating Oil 296.36 -1.63%
Gold 1,584.0 -3.60%
Bloomberg Base Metals Index 209.43 -2.76%
Copper 364.80 -1.99%
US No. 1 Heavy Melt Scrap Steel 400.27 USD/Ton -.60%
China Iron Ore Spot 137.60 USD/Ton -4.51%
Lumber 285.10 +.10%
UBS-Bloomberg Agriculture 1,432.90 -3.35%

Economy

ECRI Weekly Leading Economic Index Growth Rate -.10% -10 basis points
Philly Fed ADS Real-Time Business Conditions Index -.1853 +6.37%
S&P 500 Blended Forward 12 Months Mean EPS Estimate 111.04 +.33%
Citi US Economic Surprise Index -24.30 -.9 point
Fed Fund Futures imply 60.0% chance of no change, 40.0% chance of 25 basis point cut on 6/20
US Dollar Index 80.26 +.95%
Yield Curve 158.0 -4 basis points
10-Year US Treasury Yield 1.84% -4 basis points
Federal Reserve's Balance Sheet $2.847 Trillion unch.
U.S. Sovereign Debt Credit Default Swap 41.50 +3.41%
Illinois Municipal Debt Credit Default Swap 221.0 unch.
Western Europe Sovereign Debt Credit Default Swap Index 285.49 +4.38%
Emerging Markets Sovereign Debt CDS Index 294.25 +5.55%
Saudi Sovereign Debt Credit Default Swap 120.66 +2.69%
Iraq Sovereign Debt Credit Default Swap 464.05 +10.35%
China Blended Corporate Spread Index 599.0 +23 basis points
10-Year TIPS Spread 2.14% -8 basis points
TED Spread 37.5 -2.0 basis points
2-Year Swap Spread 34.0 +5.0 basis points
3-Month EUR/USD Cross-Currency Basis Swap -45.0 -3.5 basis points
N. America Investment Grade Credit Default Swap Index 104.89 +6.76%
Euro Financial Sector Credit Default Swap Index 265.21 +8.59%
Emerging Markets Credit Default Swap Index 269.32 +9.03%
CMBS Super Senior AAA 10-Year Treasury Spread 166.0 +5 basis points
M1 Money Supply $2.252 Trillion -.18%
Commercial Paper Outstanding 966.40 +2.80%
4-Week Moving Average of Jobless Claims 379,000 -4,500
Continuing Claims Unemployment Rate 2.5% -10 basis points
Average 30-Year Mortgage Rate 3.83% -1 basis point
Weekly Mortgage Applications 710.40 +1.75%
Bloomberg Consumer Comfort -40.4 -2.8 points
Weekly Retail Sales +2.60% -60 basis points
Nationwide Gas $3.73/gallon -.07/gallon
U.S. Cooling Demand Next 7 Days 10.0% below normal
Baltic Dry Index 1,138 -1.64%
Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 unch.
Rail Freight Carloads 239,031 -1.38%

Best Performing Style

Small-Cap Value +.21%

Worst Performing Style

Large-Cap Growth -1.09%

Leading Sectors

Biotech +3.83%
Airlines +1.17%
Utilities +.88%
REITs +.52%
Insurance +.15%

Lagging Sectors

Networking -3.33%
Alternative Energy -3.55%
I-Banking -3.93%
Education -5.20%
Steel -5.97%

Weekly High-Volume Stock Gainers (18)

VRTX, HTH, RST, CPWM, VSI, DF, INSP, GNRC, CRZO, LOPE, QSFT, SAPE, CHTR, STAG, PSX, CBOU, LMCA and INWK

Weekly High-Volume Stock Losers (31)

TREX, GLPW, DRIV, GEOY, MANT, GVA, ANV, KOS, BAH, MINI, BAGL, RAX, WAIR, FCN, PSSI, CTSH, SMG, DNB, LRN, PRO, EPAY, TPC, AMAG, QSII, CGX, MTSI, BSFT, AMED, SNCR, FOSL and MAKO

Weekly Charts
ETFs

Stocks

*5-Day Change

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

Posted by Gary .....at 3:33 PM

Broad Market Tone:

Advance/Decline Line: Lower
Sector Performance: Mixed
Volume: Below Average
Market Leading Stocks: Underperforming

Equity Investor Angst:

VIX 19.46 +3.46%
ISE Sentiment Index 116.0 +1.87%
Total Put/Call 1.34 +38.14%
NYSE Arms 1.12 +11.08%

Credit Investor Angst:

North American Investment Grade CDS Index 107.47 +3.23%
European Financial Sector CDS Index 265.08 +.35%
Western Europe Sovereign Debt CDS Index 285.67 +.86%
Emerging Market CDS Index 269.65 +3.25%
2-Year Swap Spread 34.0 +2.25 basis points
TED Spread 37.50 unch.
3-Month EUR/USD Cross-Currency Basis Swap -45.0 -1.0 basis point

Economic Gauges:

3-Month T-Bill Yield .09% unch.
Yield Curve 158.0 -4 basis points
China Import Iron Ore Spot $137.60/Metric Tonne -1.22%
Citi US Economic Surprise Index -24.30 +1.3 points
10-Year TIPS Spread 2.14 -3 basis points

Overseas Futures:

Nikkei Futures: Indicating a +14 open in Japan
DAX Futures: Indicating -34 open in Germany

Portfolio:

Slightly Higher: On gains in my Tech and Biotech sector longs
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 just mildly bearish as the S&P 500 trades slightly lower on the day, despite rising Eurozone debt angst, weakness in some key market leaders, less financial sector optimism, high energy prices, rising global growth fears, technical selling and more shorting. On the positive side, Software, Semi, Biotech and Homebuilding shares are especially strong, rising more than +1.0%. Tech/Homebuilding shares have held up well throughout the day. Oil is falling -.93%, the UBS-Bloomberg Ag Spot Index is down -1.6%, Lumber is gaining +1.9% and Gold is down -.8%. The Portugal sovereign cds is falling -1.6% to 1,074.57 bps. On the negative side, Coal, Steel, Bank, I-Banking and Education shares are under pressure, falling more than -1.0%. Financial shares have lagged throughout the day. Copper is down -1.7%. Major Asian indices fell around -1.0% overnight, led down by a -1.4% decline in South Korea after more poor economic data was reported from the region. The Citi Asia Pacific Economic Surprise Index is plunging -39.3 points today to -57.8 points, which is the worst since April 2009. After crashing in the 4th quarter of last year, China Iron Ore Spot Prices had been recovering until recently. In less than a month, they are now down -7.9%. Major European indices are mixed with a +.95% gain in Germany offset by a -.71% decline in Spain. The Bloomberg European Bank/Financial Services Index is dropping -.77%. The France sovereign cds is rising .4% to 207.02 bps, the Spain sovereign cds is rising +1.2% to 517.59 bps(testing all-time high), the Italy sovereign cds is rising +.5% to 459.03 bps, the Hungary sovereign cds is gaining +1.2% to 525.11 bps and the China sovereign cds is gaining +1.1% to 118.73 bps. Moreover, the European Investment Grade CDS Index is rising +.9% to 158.07 bps and the Italian/German 10Y Yld Spread is gaining +.3% to 399.23 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 -3.0% 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 -24.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +523.0% ytd. The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades. Overall, recent credit gauge deterioration is a big worry with a number of key sovereign cds breaking out technically. There are rumors out of the FT of an impending European LTRO 3. I continue to believe that LTRO 2 will eventually be viewed in a very negative light and I doubt the validity of this rumor. I also still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. US stocks remain extremely resilient as aggressive dip-buying materialized again off an opening swoon. However, the rally is of poor quality. Breadth is negative, the financials and some key market leaders aren’t participating, volume is below average, there are few high-volume big-gainers, copper trades poorly, the 10Y T-Note trades too well, the euro can’t sustain a bounce after its technical breakdown and gauges of credit angst are mostly higher. I have been cautioning for a few weeks that the outperformance the financial sector had enjoyed for several months was likely coming to an end. Recent events make me even more cautious on the sector. 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 modestly lower into the close from current levels on rising Eurozone debt angst, less US economic optimism, rising global growth fears, more shorting, technical selling, market leader weakness and less financial sector optimism.

Today's Headlines

Posted by Gary .....at 2:43 PM

Bloomberg:

Schaeuble Dares Greece Exit as Contingency Plans Start. As German Finance Minister Wolfgang Schaeuble dares Greece to quit the euro, investors and economists are mapping out what he and fellow policy makers need to do to save the single currency if his bluff is called. Emergency lending and bond buying from the European Central Bank coupled with recapitalizations and deposit insurance for lenders and broader powers for the region’s rescue fund are among the prescriptions for insulating Spain and other cash- strained nations from what Citigroup Inc. calls a “Grexit.” Pressure for contingency plans are mounting as Greece’s electoral quagmire forces euro-area officials to publicly revive the once forbidden topic of whether a nation can leave the single currency.
Schaeuble Says Greek Exit Wouldn't Bring Down Europe. German Finance Minister Wolfgang Schaeuble suggested the euro area could handle Greece dropping out, raising pressure on Greek political leaders struggling to form a government amid a rise in anti-bailout sentiment. "We have learned a lot in the last two years and built in protective mechanisms," Schaeuble told the Rheinische Post newspaper in an interview published today, when asked whether the euro area is girded for a Greek exit. His comments were confirmed by the Finance Ministry in Berlin. "The risks of contagion for other countries of the euro zone have been reduced and the euro zone as a whole has become more resistant," Schaeuble said. "The notion that we wouldn't be able to react in a short time to something unforeseen is wrong."
Schaeuble Plans Tighter Control Over State Deficits, FAZ Says. German Finance Minister Wolfgang Schaeuble plans to force the country’s states to define binding spending limits starting in 2014 to ensure adherence to a constitutional balanced-budget rule for the regions from 2020, Frankfurter Allgemeine Zeitung reported. The plan is part of the implementation in Germany of the so-called fiscal pact among 25 European Union governments that aims to ensure budget discipline, the German newspaper said. Tighter budget controls would thwart plans by the government of North Rhine-Westphalia, a coalition of the Social Democrats and Greens that are in opposition at national level, to raise the budget deficit to boost economic growth, the newspaper said. The state votes on May 13.
Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, heading for the biggest weekly increase in about two months. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 1.5 basis points to 285 at 8:35 a.m. in London, and is up 9 basis points this week, the most since March 23. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 12.5 basis points to 700. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4.5 basis points to 161, and is up from 145 last week, heading for the biggest increase since November 25. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose five basis points to 270 and the subordinated index jumped 10 to 440.
Newedge's Blain on Outlook for JPMorgan(JPM). (video) Bill Blain, co-head of the Special Situations Group at Newedge Group Ltd., talks about JPMorgan Chase & Co.'s $2 billion trading loss and the outlook for the banking industry.
Fisher Says Excessively Big Banks Can Lose Risk Focus. Federal Reserve Bank of Dallas President Richard Fisher, when asked about a $2 billion trading loss by JPMorgan Chase & Co. (JPM), said U.S. banks can become so big they lose their focus on risk management. “You can reach a size where risk management becomes an exercise,” Fisher said today in response to audience questions following a speech to the Texas Bankers Association meeting in Fort Worth. “At what point do you reach a size you don’t know what is going on beneath you?”
Facebook(FB) Co-Founder Saverin Gives Up U.S. Citizenship Before IPO. Eduardo Saverin, the billionaire co- founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill. Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion.
Drew Built 30-Year JPMorgan(JPM) Career Embracing Risk. JPMorgan Chase & Co. (JPM) Chief Investment Officer Ina R. Drew, head of the unit responsible for a $2 billion trading loss, built a 30-year career at the largest U.S. bank by embracing risk and avoiding the spotlight. “With everything she does, she thinks in terms of trading,” said Stephen Murray, head of CCMP Capital Advisors LLC, created from a JPMorgan private-equity unit in 2006. “There are risk-lovers, there are risk-haters, and the best traders will take the risk as long as they get paid for it.”
Producer Prices in U.S. Decrease for First Time in Fourth Months. Wholesale prices in the U.S. fell in April for the first time in four months, led by a decline in fuel costs that signals inflation may cool. The producer price index dropped 0.2 percent after no change in March, Labor Department figures showed today in Washington. Economists projected the gauge would be unchanged in April, according to the median estimate in a Bloomberg News survey. The 1.9 percent increase over the past 12 months was the smallest since October 2009.
Consumer Sentiment in U.S. Rises: Economy. The Thomson Reuters/University of Michigan preliminary sentiment index for May climbed to 77.8, the highest since January 2008, from 76.4 the prior month. The gauge was projected to drop to 76, according to the median forecast of 68 economists surveyed by Bloomberg News.
Dismal China, India Data Signal Slowing Growth. Dismal data from China and India on Friday may signal a further weakening of the global recovery, undermining hopes the dynamic emerging economies of Asia can help prop up growth. China reported its industrial production rose 9.3 percent from a year earlier in April, below expectations and down from nearly 12 percent in March. Investment and retail sales also slowed, though easing inflation offers leeway for fresh moves to boost growth. India's industrial output fell 3.5 percent in March from a year earlier on weak manufacturing and investment. Output for the fiscal year ending in March rose 2.8 percent, down from 8.2 percent the year before. The anemic indicators suggest Asia's ability to counter slowing growth in Europe may be limited. It also shows that the brief burst of vitality partly fueled by European stimulus late last year is likely wearing off.
Europe's Luxury Rally Founders as China, Greece Hurt LVMH. The biggest rally in three years for luxury-goods makers in Europe is fizzling on concern slower economic growth in China and renewed euro-area political turmoil after Greece’s inconclusive election will choke off demand. The nine-company Bloomberg European Luxury Goods Index (BNLXGDEU), whose clothiers and watchmakers get 34 percent of sales from Asia, tumbled 5.5 percent over the past five days, the largest decline since Nov. 24, data compiled by Bloomberg show.
China April Home Sales Fall 16% as Property Curbs Remain. China’s home sales transaction value fell 16 percent in April from the previous month as the government reiterated it will keep curbs on the property market. The value of homes sold declined to 315.4 billion yuan ($50 billion) from 373.3 billion yuan in March and 324.9 billion yuan a year earlier, based on the difference between the National Statistics Bureau’s data for the first four months of the year and the first quarter. Housing sales value from January to April fell 13.5 percent to 1.02 trillion yuan from a year earlier, according to the data. “It’s very hard to forecast when sales will fall to the bottom,” said Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG.
U.S. Senator Questions Fed on Chinese Bank Decision. A Federal Reserve decision to let Chinese banks acquire U.S. lenders was challenged by Senator Bob Casey, who said it could open the way for Chinese government-run institutions to undercut U.S. banks. “I worry that these banks and their U.S. subsidiaries will use their state support as a way to underprice U.S. banks,” Casey, a Pennsylvania Democrat and chairman of the Joint Economic Committee, said in a letter yesterday to Fed Chairman Ben S. Bernanke.
France Entrepreneurs Flee From Hollande Wealth Rejection. “What’s really driving my departure is the fact that I don’t share the values that emerged during the election, the rejection of ambition and success,” he said in an interview. “It’s part of France’s difficult relationship with money, but it has reached a new level. Even if it’s utopian, I need to believe for me and my descendants that the sky is the limit.”

Wall Street Journal:

Hedge Funds Profit as JPMorgan(JPM) Sees Losses. For a group of hedge funds and other traders, J.P. Morgan Chase & Co.’s sudden $2.3 billion trading loss means big profits, according to people familiar with the matter. Firms such as BlueMountain Capital Management LLC and BlueCrest Capital Management LP each scored gains of about $30 million, according to people familiar with the matter. Representatives for the firms declined to comment. One trader elsewhere estimated that well more than a dozen firms, including his, as well as traders at banks also profited by taking the other side of J.P. Morgan’s trades.
Spanish Default Protection Costs Hit Fresh Record High. The cost of protecting Spanish government debt against default rose to a fresh record high Friday. Spain's five-year CDS spread--insurance-like financial tools that protect debt holders in the event of a default--widened to 521 basis points, above the intra-day record of 520 basis points hit in April, according to data-provider Markit. The move came amid increased worries about Spain, which has joined Greece at the center of the euro-zone debt crisis. Spain's CDS were 11 basis points wider on the day. This now means it costs an average of $521,000 a year to insure $10 million of debt issued by the country. Italy's five-year CDS was 12 basis points wider at 452 basis points.
Copper Prices Fall on Chinese Data, EU Worries. Copper prices retreated Friday on weaker Chinese industrial production data and simmering concerns about Europe's debt problems. The most actively traded contract, for July delivery, was recently down 4.50 cents, or 1.2%, at $3.6455 a pound on the Comex division of the New York Mercantile Exchange. China's industrial output growth slowed in April to the lowest level since May 2009, stoking worries over slowing growth in the world's second-largest economy. Chinese value-added industrial output rose 9.3% in April from a year earlier, slowing sharply from a 11.9% on-year increase in March. The data fell short of market expectations of a 12.2% gain. "Markets were left unimpressed by the macro reports coming out of China," said Edward Meir, senior commodity analyst with INTL FCStone.
What Beached the London Whale? Credit Indices.

CNBC.com:

Nvidia(NVDA) Revenue, Outlook Beat Street; Shares Jump. Nvidia's quarterly revenue and outlook topped Wall Street estimates on better-than-expected sales of its latest graphics chips, sending its shares up sharply in premarket trade.
Fitch Warns Euro Zone of Downgrades If Greeks Exit. Credit rating agency Fitch put the whole of the euro zone on notice on Friday that were Greece to leave the currency bloc as a result of its current crisis, the remaining countries could find their sovereign ratings at risk. It said it was likely to put all euro area ratings on negative watch if Greece were to leave and that those countries which currently have a negative outlook on their ratings would be at most immediate risk of a downgrade. It said those countries were France, Italy, Spain, Cyprus Ireland, Portugal, Slovenia and Belgium.

Business Insider:

Zero Hedge:

NY Post:

YouTube Considering Introducing Subscription-Based Streaming Service. Insiders familiar with YouTube’s plans stress the move doesn’t mean the Google(GOOG) unit is suddenly going to start charging for what is already available for free — but rather would add some premium offerings not on the site.

New York Times:

SEC Opens Investigation Into JPMorgan's(JPM) $2 Billion Loss.
European Warning Over Spanish Debt. As the Spanish government Friday took further measures to shore up the country’s banking sector, the European Commission injected a new dose of gloom by warning that Madrid was likely to miss its deficit-reduction targets for this year and next by wide margins. Spain was headed for a budget deficit of 6.4 percent of gross domestic product this year and 6.3 percent next year — far beyond the 3 percent maximum allowed under European Union rules and exceeding its own target of 5.3 percent for 2012, according to the commission’s spring economic forecasts. “For Spain, the key to restoring confidence and growth is to tackle the immediate fiscal and financial challenges with full determination,” Olli Rehn, the E.U. economic and monetary affairs commissioner, told reporters. “This calls for a very firm grip to curb the excessive spending of regional governments.”
China's Growth Slows, and Its Political Model Shows Limits.

CNN:

Why It's Time For Higher Interest Rates by Shelia Bair. Progressives, led by Paul Krugman, believe that we can fix our economic woes with more consumer debt and higher inflation. The reality is that near zero interest rates encourage speculation, discourage savings, weaken pension funds, and put millions of baby boomers at risk.