Bull Radar

Style Outperformer:

• Large-Cap Value -.20%

Sector Outperformers:

• 1) Gold & Silver +1.29% 2) Utilities +.40% 3) Tobacco +.36%

Stocks Rising on Unusual Volume:

• CRM, VELT, SGEN, YHOO, FINL, INTU, WYNN, MPEL, BWS, FL, BAS and ARO
  

Stocks With Unusual Call Option Activity:

• 1) XLU 2) MDY 3) WYN 4) ADSK 5) OVTI
  

Stocks With Most Positive News Mentions:

• 1) CRM 2) RTN 3) CME 4) TDW 5) BTU
  

Charts:

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

Friday Watch

Evening Headlines
Bloomberg:

• Santander, BBVA Among Spanish Banks Downgraded by Moody’s. Banco Santander (SAN) SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, were cut three levels by Moody’s Investors Service, which cited a recession and mounting loan losses in downgrading 16 of the nation’s banks. Nine firms were cut three notches and seven were kept on review for further reductions, Moody’s said yesterday in a statement. Santander’s U.K.-based subsidiary also was cut. The moves followed Moody’s May 14 downgrade of 26 Italian banks and its Feb. 13 cut of Spain’s sovereign debt. The main drivers for the Spanish bank downgrades were a surge in soured loans, the recession, restricted funding access and the reduced ability of the government to support lenders as its own creditworthiness diminishes, Moody’s said. “Banks will continue to face highly adverse operating and market funding conditions that pose a threat to their creditworthiness,” the ratings firm said. “The Spanish economy has fallen back into recession in first-quarter 2012, and Moody’s does not expect conditions to improve” this year.
• Fitch Cuts Greece as Leaders Spar Over Euro Membership. Greece’s credit rating was downgraded one level by Fitch Ratings on concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area as leaders began campaigning ahead of the second national vote in six weeks. Greece was cut to CCC from B-, according to an e-mailed statement late yesterday in London. The country’s ceiling was revised to B-, Fitch said in the statement.
• U.S. Banks Sold More Swaps on European Debt as Risks Rose. U.S. banks increased sales of protection against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the last quarter of 2011 as the European debt crisis escalated. Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose 10 percent from the previous quarter to $567 billion, according to the most recent data from the Bank for International Settlements. Those guarantees refer to credit-default swaps written on bonds. JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc.(GS), two of the top CDS underwriters in the U.S., say they have bought more protection than they sold, indicating they may benefit from defaults in the region. That outcome is called into question by JPMorgan’s $2 billion loss on similar derivatives, which shows that risks don’t vanish when offsetting bets are taken, said Craig Pirrong, a finance professor at the University of Houston. “All these hedges trade one risk for another,” said Pirrong, whose research focuses on derivatives markets. “The banks say they’re flat on European risk, but that’s based on aggregated positions. We don’t know how those will hold off if the European crisis blows up.” JPMorgan Chairman and Chief Executive Officer Jamie Dimon said last week that the bank was trying to reposition a portfolio of corporate credit derivatives and used a flawed trading strategy. The lender, the largest in the U.S. by assets, is believed to have sold protection on an index of corporate debt and bought protection on the same index to hedge its initial bet, according to market participants who asked not to be identified because their trading strategies aren’t public. The two bets moved in opposite directions this year, causing losses and proving that even hedges that look perfect can break down, Pirrong said.
• Japan Bond Risk Surges To Seven-Month High, Default Swaps Show. The cost of insuring Japanese corporate debt from default surged to the highest in more than seven months, according to traders of credit-default swaps. Asian and Australian bond risk gauges also climbed. The Markit iTraxx Japan index increased 7 basis points to 218.5 basis points as of 9:27 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark is on course for its highest since Oct. 5, according to data provider CMA. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 8 basis points to 201.5 as of 8:04 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is poised to close at its highest since Jan. 16, CMA prices show. The Markit iTraxx Australia index rose 7 basis points to 202 basis points as of 10:18 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge is set for its highest since Nov. 29, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
• North Korea Seen Restarting Work On Nuclear Reactor. North Korea has restarted construction on a nuclear reactor that is an essential component in building nuclear weapons, according to a U.S. university monitoring project. Commercial satellite imagery from April 30 shows that the Pyongyang government is close to completing a containment building for a new experimental light water reactor, according to a website maintained by Johns Hopkins University’s School of Advanced International Studies based in Washington.
• U.S. Imposes Anti-Dumping Duties on Chinese Solar Imports. The U.S. Commerce Department imposed tariffs of 31 percent to 250 percent on Chinese solar-product imports, siding with companies including SolarWorld AG (SWV) in the U.S. that said the items were sold below the cost of production. The fees, announced today in an e-mailed statement, add to duties as high as 4.73 percent imposed earlier for getting unfair subsidies from China’s government. SolarWorld had asked for levies of more than 100 percent. Aaron Chew, a New York- based analyst at Maxim Group LLC, said before the decision that tariffs higher than 10 percent would be considered a victory for the U.S. companies.
• Facebook(FB) Poses Biggest Test Of Rule Curbing Market Orders. Facebook Inc. (FB)’s initial public offering will be the biggest test of a rule introduced in 2011 to protect investors and curb volatility on the first day a company trades. The Financial Industry Regulatory Authority reminded more than 4,400 member firms on May 15 that they shouldn’t accept buy requests known as market orders until trading begins. Such transactions are authorizations to purchase at the best available price, as opposed to limit orders that require investors to specify a minimum or maximum.
• Fed Said to Study How Banks Manage Cash After JPMorgan(JPM) Loss. JPMorgan Chase & Co.'s $2 billion trading loss has prompted the Federal Reserve Bank of New York to examine how banks in its district are managing cash after receiving a flood of deposits since the credit crisis, according to a person familiar with the matter.
• BRIC Bear Market Not Cheap Enough for de Vaulx Finding Zero Buys. The MSCI BRIC (MXBRIC) Index’s slide into a bear market has left equities in the biggest emerging economies trading at the lowest levels since 2009 versus global shares. That’s still not cheap enough for Charles de Vaulx to add a single stock from Brazil, Russia, India or China to his $9.7 billion IVA Worldwide Fund, which beat MSCI’s global gauge by 29 percentage points since its inception in 2008. He’s waiting for further declines of 10 percent to 20 percent before buying.
• High-Yield Debt ETFs Set Markets 'Abuzz' Following Record Trades. The largest trades on record in shares of two exchange-traded funds that invest in junk debt are attracting attention to the four-year-old market that allows anyone from banks to retirees fast and discreet access to speculative-grade bonds and loans. The transactions were completed hours before JPMorgan Chase & Co. disclosed $2 billion of trading losses tied to credit derivatives, an announcement that has heightened awareness of big trades in debt markets.
  
• China Home Prices Fall In More Than Half Cities Tracked. China’s home prices fell in a record 46 of 70 cities tracked by the government in April from a year earlier as officials pledged to keep restrictions on property purchases that have sapped buyer demand. The eastern city of Wenzhou led declines with a 12.3 percent slump in values from a year earlier, while Beijing dropped 1 percent and Shanghai prices declined 1.3 percent, according to data released by the statistics bureau today.
• Shoppers Skipping Pomegranates Show India Rate Dilemma: Economy. Surging food costs offer the most visible sign of India’s inability to contain price pressures, threatening spending in the world’s second-most populous nation. Even as the nation’s benchmark wholesale-price inflation has eased to below 9 percent after breaching that level most of last year, a recently introduced consumer-price gauge shows how little room the central bank has cut to cut interest rates and spur growth. India’s consumer-price index climbed 9.47 percent from a year earlier in March as the cost of egg, vegetables, fish and meat products rose, after an 8.83 percent advance in February. Wholesale-price inflation in April was 7.23 percent, with food prices jumping 10.5 percent.

Wall Street Journal:

• Defiant Message From Greece. The head of Greece's radical left party—throwing down a gauntlet that could increase tensions between Greece and its frustrated European creditors—said he sees little chance Europe will cut off funding to the country but that if it does, Athens will stop paying its debts. A financial collapse in Greece would drag down the rest of the euro zone, said Alexis Tsipras, the 37-year-old head of the Coalition of the Radical Left, known as Syriza, and potentially the country's next prime minister. Instead, he said, Europe must consider a more growth-oriented policy to arrest Greece's spiraling recession.
  
• Groupon(GRPN) Stock Spike Probed. A Wall Street regulator is examining trading in Groupon Inc. that sent its stock price soaring hours before a favorable earnings announcement Monday, according to a person familiar with the matter. The review by the Financial Industry Regulatory Authority, or Finra, is at an early stage, the person said. It follows unusually heavy trading in shares of the online-coupon company in the run-up to its release of strong financial results.
• Groups Sue Again Over Oil Drilling off Alaska. A coalition of environmental and tribal groups filed a challenge Wednesday to a federal air-emissions permit for a Royal Dutch Shell PLC drilling ship, the latest legal maneuver aimed at stopping the oil giant's exploration plan off Alaska's Arctic coast.
• Ross King Retires From Goldman Sachs(GS). Goldman Sachs managing director and chairman of its Financing Group Ross King has retired from the Wall Street bank.
• Key Void at Top for J.P. Morgan(JPM). J.P. Morgan Chase & Co. didn't have a treasurer in place during a five-month period when the bank's Chief Investment Office placed trades that led to more than $2 billion in losses. In addition, the executive put in charge of risk management for the Chief Investment Office in February had little experience in the subject at the time and is the brother-in-law of another top J.P. Morgan executive. Some current and former employees who were stunned by the losses say the staffing decisions may have made it easier for the bad positions to go unchecked.
• Inside JPMorgan;s(JPM) Blunder. J.P. Morgan Chase & Co. Chairman and Chief Executive Officer James Dimon had just committed the most expensive blunder of his 30-year career, failing to detect the risk of trades that had begun to generate huge losses at the bank. On April 30, associates who were gathered in a conference room handed Mr. Dimon summaries and analyses of the losses. But there were no details about the trades themselves. "I want to see the positions!" he barked, throwing down the papers, according to attendees. "Now! I want to see everything!"
• The Brains of Hedge-Fund Operations. Of all the elite financial circles, hedge-fund titans may be the most exclusive—and some of the most tight-lipped when it comes to talking to the press. Hedge-fund heavyweights may invest in companies going public more often than they actually go out in public themselves: Indeed, many hedge funders reportedly skipped their own gala in March, a Cipriani Wall Street affair benefiting Hedge Funds Care. So it was with some anticipation that this reporter headed to Tao where a handful of legendary investors gathered to talk up a new deal—that is, a book.

MarketWatch:

• Facebook(FB) IPO Coverage.
• Only Reforms Can Revive China's Growth: Andy Xie.
• Asia Stocks Tumble as Spain Joins List of Fears.
  

Business Insider:

• NEW: Photos From Trayvon Martin Killing Show Zimmerman Bloody And Injured.
• SocGen: This Chinese Indicator Will Predict A Hard Landing.
• BAML's Comprehensive Guide To A Greek Exit, And Its Likely Impact On Markets.
  

Zero Hedge:

• So How Are JPM's(JPM) Prop "Counterparties" Faring?
• One Epic Chinese Bubble - One Chart.
• Everything You Need To Know About Europe's Dilemma In 4 Minutes.
• It's Not Over Yet For JPM(JPM).
  

CNBC:

• Facebook(FB) Prices at $38 With Trading Set to Start Friday.
• A Permanent Precedent. The irritation of the eurozone with Greece is at extreme levels. After all, 80 percent of Greeks say they are in favour of staying in the euro, but then they fail to elect politicians prepared to implement the agreed programme. This drives creditors crazy. Increasingly, the latter are inclined to accept Greek exit, even welcome it.

ABC News:

• FDA Investigating Z-Pak Antibiotic Linked to Heart Risks. The U.S Food and Drug Administration is investigating the antibiotic azithromycin, commonly known as Z-Pak, after a study linked the drug to an increased risk of death. The study, published Wednesday in the New England Journal of Medicine, found patients prescribed Z-Pak were more likely to die than those prescribed amoxicillin, another antibiotic. The results were especially pronounced for those who died of heart attacks, strokes, sudden cardiac death and other cardiovascular causes. Last year, doctors wrote 55.3 million prescriptions for Z-Pak, according to IMS Health.

Reuters:

• Exclusive: U.N. Panel Probes Possible N. Korea Arms Trade With Syria, Myanmar. A U.N. panel of experts that monitors compliance with sanctions on North Korea is investigating reports of possible weapons-related shipments by Pyongyang to Syria and Myanmar, the panel said in a confidential report seen by Reuters on Thursday. "The DPRK (North Korea) continues actively to defy the measures in the (U.N. sanctions) resolutions," the panel said in the report, which it submitted to the U.N. Security Council's North Korea sanctions committee earlier this week.
• JPMorgan(JPM) Unit Has $100 Billion in Securitised Assets, Structured Debt - FT. The unit at the center of JPMorgan Chase & Co's recently revealed $2 billion trading loss has built up more than $100 billion in positions in asset-backed securities and structured products, the Financial Times said on Thursday. The newspaper said this portfolio comprises the "complex, risky bonds at the centre of the financial crisis in 2008", but did not say whether any of the holdings are in unhedged positions. It said the portfolio is separate from holdings in credit derivatives that led to the trading loss by JPMorgan's chief investment office, which has sparked much criticism of the largest U.S. bank and its chief executive, Jamie Dimon. The chief investment office has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralized loan obligations in all markets for three years, the newspaper said, citing more than a dozen senior traders and credit experts. That office's "non-vanilla" portfolio has grown to more than $150 billion, the newspaper said, without citing sources or providing details of the holdings.
• Salesforce(CRM) Ups FY Outlook On Strong Q1, Pipeline. Web-based software maker Salesforce.com Inc raised its full-year outlook after reporting first-quarter results that beat Wall Street forecasts on strong growth across all regions, sending its shares up 7 percent in after-hours trade.
• Option Players Seek Shelter as Risk Gauge Rises. Option investors are seeking protection against a sharp decline in U.S. equities in the near term as uncertainty grows over the European debt crisis and the health of the global economy.
• Autodesk(ADSK) gives weak outlook on Europe worries. Design-software maker Autodesk Inc forecast second-quarter revenue below analysts' estimates citing weakness in Europe, sending its shares down 5 percent after market.
• Equity ETF Outflows Dominate, Bond Funds Gain - Lipper.
  

Financial Times:

• Two Tiers, One Crisis For Spanish Banks. Who is right – the International Monetary Fund or the market? Until a couple of weeks ago, nervous investors had ignored the IMF’s recent assessment that about 70 per cent of Spain’s banks looked essentially healthy and instead had sent all bank shares tumbling by about 40 per cent on the previous year.

Telegraph:

• Are The Germans Destined To Save The Euro? It is an article of faith in Berlin that the single currency must survive, whatever the cost.

The Financial Express:

• Half of corporate India’s forex exposure unhedged, says RBI. The Reserve Bank of India’s (RBI) central board is expected to discuss next week the elevated levels of unhedged foreign currency exposure at private and state-owned companies, which has made them increasingly vulnerable to the sharp depreciation of the rupee. According to data submitted by the Reserve Bank of India (RBI) to the finance ministry, approximately 60% of companies’ non-trade related exposure is unhedged, while the proportion of uncovered exposure for trade loans is lower at 40%. This was the situation at the end of March and since then, the rupee has slipped by more than 11%.

The Economic Times

• India Warns Banks to Avoid Risky Debt Restructuring. The Indian government's finance ministry issued a warning, citing a letter from the corporate restructuring unit. Indian companies facing large debts and cash shortages are looking to rearrange loans.
  

Ming Pao Daily:

• Sotheby's Hong Kong Sales See Fewer China Buyers. Sotheby's Hong Kong spring auction sales fell 30% to $317 million from a year earlier because there were fewer mainland Chinese buyers, citing Kevin Ching, chief executive officer of Sotheby's Asia.

Shanghai Securities News:

• Shanghai stock exchange started a series of measures to curb excessive speculation in new share issues, citing the exchange.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -2.50% to -1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 201.50 +6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 155.50 -2.75 basis points.
  
• FTSE-100 futures -1.30%.
  
• S&P 500 futures -.05%.
  
• NASDAQ 100 futures +.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ANN)/.51
• (BWS)/.09
• (DCI)/.43
• (FL)/.74
• (HIBB)/.92

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The G-8 meeting and the (WIT) Analyst Day could also impact trading today.
  

BOTTOM LINE: Asian indices are sharply lower, weighed down by technology and financial 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/Tech Sector Optimism, Technical Selling

Broad Market Tone:

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

Equity Investor Angst:

• VIX 23.33 +4.76%
  
• ISE Sentiment Index 92.0 +15.0%
  
• Total Put/Call 1.42 +14.52%
  
• NYSE Arms .91 -20.65%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 121.14 +1.86%
  
• European Financial Sector CDS Index 305.03 +4.79%
  
• Western Europe Sovereign Debt CDS Index 308.14 +1.87%
  
• Emerging Market CDS Index 313.28 +.97%
  
• 2-Year Swap Spread 35.75 -.75 basis point
  
• TED Spread 37.5 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -49.25 +2.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 140.0 -7 basis points
  
• China Import Iron Ore Spot $133.60/Metric Tonne -1.11%
  
• Citi US Economic Surprise Index -25.10 -5.7 points
  
• 10-Year TIPS Spread 2.11 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating a -171 open in Japan
• DAX Futures: Indicating -22 open in Germany
  

Portfolio:

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

Today's Headlines

Bloomberg:

• Spain Banks Face Moody's Downgrades as Bankia Denies Deposit Run. Spanish banks face credit ratings downgrades by Moody’s Investors Service later today as the government denied there was a run on deposits at Bankia SA (BKIA), the ailing lender it’s taking over. Moody’s is expected to make a statement on downgrades for Spanish banks this evening after 9 p.m. in Madrid, said two people with knowledge of the situation, who asked not to be identified because the decision hasn’t been announced. A Moody’s spokeswoman in London declined to comment in a phone interview. A cut in credit ratings for Spanish lenders would cap a tense day for the industry after a report in El Mundo newspaper that about 1 billion euros ($1.3 billion) of deposits had been pulled from Bankia since the government announced plans to take it over on May 9. Bankia’s shares plunged as much as 29 percent. Deputy Economy Minister Fernando Jimenez Latorre used a Madrid news conference on the country’s gross domestic product data to deny Bankia was suffering a flight of deposits. Bankia, the lender with the biggest Spanish asset base, said in a filing to regulators today that changes in deposit level in the first half of May “have a substantially seasonal nature” and that it didn’t expect “substantial changes” in coming days. The main drivers for Moody’s expected action on Spanish banks today are rising loan defaults, a renewed recession, restricted funding access and the reduced ability of the government to support lenders, said one of the people familiar with the plans.
• The cost of insuring against a Spanish default rose to another record, with credit-default swaps on the nation's bonds jumping 13 basis points to a record 553, according to Bloomberg.
• Greek Asset Sales Program to Be Delayed Months, Chief Says. Greece’s 50 billion euro ($63.6 billion) state-asset sales program, a key plank in securing international funds from the European Union and International Monetary Fund, will be delayed by months as the country goes back to the polls to choose a new government. The Hellenic Republic Asset Development Fund said yesterday its board decided to freeze all projects and won’t make any binding decisions until the country holds elections on June 17. That will immediately affect the timetable for the sale of the nation’s gas company, a contract for a state lottery and the lease of the IBC conference center, said Costas Mitropoulos, chief executive officer of the fund.
• European Stocks Drop as ECB Pauses Greek Bank Lending. European stocks declined for a fourth day as the region’s central bank paused lending to some Greek banks and speculation mounted that Spanish banks may have their credit ratings cut at Moody’s Investors Service. Bankia SA (BKIA) sank 14 percent after a report that depositors withdrew 1 billion euros ($1.27 billion) in the past week. Cookson Group Plc (CKSN) rose the most in six weeks after saying it’s considering a separation of its main divisions. The Stoxx Europe 600 Index (SXXP) dropped 1.1 percent to 241.63 at the close of trading, for the longest losing streak since March 22, even as the Federal Reserve signaled further monetary easing remains an option if the U.S. economy worsens.
• Default Swap Bets Rise Most in BRICs Amid Slowdown: China Credit. Investors are increasing purchases of insurance against default on China's debt by the most among the BRIC nations as concern builds that a slowdown will deepen in the world's second-largest economy. The net amount of credit-default swaps on Chinese bonds rose by $189 million, or 2.1%, to $9 billion in the two weeks through May 11, according to data published by NY-based Depository Trust & Clearing Corp. The amount increased by $70 million for Russia contracts and $14.7 million on State Bank of India Ltd.'s debt. The annual cost of insuring China's debt for five years jumped 20 basis points this month to 133 basis points on May 16, the highest since January, according to CME Group Inc. prices.
  
• Chinese Company Debt Is at 'Alarming Levels,' Xinhua Says. Chinese companies have accumulated “alarming levels” of debt and will have difficulty with payments in an economic downturn, Xinhua News Agency said, citing Li Yang, vice president of the Chinese Academy of Social Sciences. The debt-to-asset ratio of Chinese companies is about 105.4 percent, the highest among 20 countries examined in yearlong study by Li’s team of borrowing by China’s government, corporations and individuals, Xinhua reported. Chinese companies tend to borrow from banks instead of raising funds in capital markets, Li said, as cited by Xinhua.
• China Car Dealerships Struggle as Stockpiles Increase. Chinese dealers are struggling with the rising number of unsold cars that’s threatening to deepen price cuts, according to the nation’s biggest automobile dealers’ association. Dealerships for Honda Motor Co. (7267), Chery Automobile Co., BYD Co. (002594) and Geely Automobile Holdings Ltd. (175) carried more than 45 days of inventory as of the end of April, exceeding the threshold that foreshadows debilitating price cuts, Su Hui, vice president of the auto market division at the state-backed China Automobile Dealers Association, said in an interview. The warning signals that vehicle deliveries reported by companies, which have risen more than analysts’ estimates for the past two months, aren’t fully translating to consumer sales and resulting in a pile up at showrooms.
• BRIC Stocks Head for Bear Market as Growth Woes Deepen. The MSCI BRIC Index (MXBRIC) fell, extending the gauge of the largest emerging markets’ drop from this year’s high to 20 percent, on mounting concern that Europe’s debt crisis and slower U.S. economic growth will curb exports. The benchmark index of shares in Brazil, Russia, China and India slipped 0.8 percent to 260.04 at 1 p.m. in New York, swelling its retreat to 20 percent from this year’s peak on March 2, a threshold analysts say marks a bear market. Klabin SA, Latin America’s biggest paper maker, led declines in Brazil’s Bovespa (IBOV) measure. Russia’s 30-stock Micex (INDEXCF) Index sank 4 percent, also entering a bear market. The 21-country MSCI Emerging Markets Index (MXEF) dropped to a four-month low. “Emerging markets had already been suffering their own headwinds and now they’re going to be buffeted by additional negative developments in the developed countries,” Komal Sri- Kumar, chief global strategist at TCW Group Inc., which oversees about $120 billion, said in a phone interview from Los Angeles. “China is facing a slowdown and inflation in India has shot up, making it hard for authorities there to cut rates. At the same time, Greece is on its way to a default. The immediate impact on emerging markets is negative.”
• Confidence Sinks as U.S. Job Market Falters. Consumer confidence fell last week to the lowest level in almost four months and more people than forecast filed claims for unemployment benefits, showing a lack of progress in the job market is rattling Americans. The Bloomberg Consumer Comfort Index dropped in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths, from minus 40.4 in the previous period. Jobless applications were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington. The Bloomberg U.S. consumer comfort index’s 12.2-point decline over the past four weeks has erased almost all of this year’s gains. Readings lower than minus 40 for the Bloomberg index are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. The gauge has averaged minus 15.3 since its inception in December 1985. All three of the Bloomberg Consumer Comfort Index’s components declined last week, today’s report showed. The gauge of personal finances fell to minus 12.9, the fourth straight drop and the weakest reading since November, from minus 11.2 in the prior week. A measure of whether consumers consider it a good or bad time to buy decreased to minus 48.2, a three-month low, from minus 45.8. Americans’ views on the state of the economy fell to a 10-week low of minus 69.6 from minus 64.2.
• Hewlett-Packard(HPQ) Said to Consider Cutting as Many as 25,000 Jobs. Hewlett-Packard Co. is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
• Senate Confirms Power, Stein to Seats on Fed Board. The U.S. Senate today confirmed President Barack Obama’s two nominees to the Federal Reserve Board with both receiving the support of at least 70 senators. The Senate voted 70-24 to confirm the nomination of Jeremy Stein, a Harvard University professor and 74-21 to confirm Jerome Powell, an attorney and private equity investor who was a Treasury undersecretary for President George H.W. Bush.

Wall Street Journal:

• Philly Fed Undercuts the Growth Picture. Stocks are sliding again here late in the morning. The market got a rude shock this morning when the Philadelphia Fed’s monthly manufacturing survey went negative for the first time in eight months.
• Pinterest Raises $100 Million with $1.5 Billion Valuation. Pinterest, the online scrapbooking website that has become a Silicon Valley darling because of its rapid user growth, has raised $100 million in a financing round that values the start-up at $1.5 billion, said people familiar with the matter.
• Greek Leftist Leder Throws Down Gauntlet on Debt. The head of Greece's radical left party says there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts, throwing down a gauntlet that could increase tensions between Greece's recalcitrant politicians and frustrated European creditors.

MarketWatch:

• Wal-Mart(WMT) Rallies as U.S. Gains Traction. Wal-Mart Stores Inc. shares saw their biggest gain in more than three years Thursday after Walmart U.S., its biggest unit, reported the best same-store sales performance in three years while its Sam’s Club and overseas units also topped expectations.

CNBC.com:

• Euro Zone Fears, Starting to Hit Trade, Financing. The euro zone debt crisis is affecting trade as companies shy away from dealing with firms and banks in countries deemed at risk of contagion, a senior banker said on Thursday.
• Fitch Says Top 29 Banks May Need $556 Billion. The world's top 29 banks may need a total $556 billion to meet tougher new capital rules, cutting returns by a fifth and forcing them to curb investor payouts and raise customer charges, Fitch Ratings said on Thursday.

Business Insider:

• Get Ready: This is What Happens If Greece Exits the Euro.
• Israel's Chance to Attack Iran's Nuclear Facilities Is Running Out Fast.
• This Is The Most Likely Outcome To The Fiscal Cliff Crisis.
• Real Estate Crash in China: Foreign Funding Down 80%, Land Sales Down 57%, Starts Down 27%.
  

Zero Hedge:

• Philly Fed Plunges, First Contraction Since September 2011. (graph)
• European Financials Hit Six Month Lows; 12 Down Days In A Row. (graph)
• The American Foreclosure Process Has Ground To A Halt. (graph)
• Fitch Roundtrips On Greece, Re-Downgrades Country.
  

Reuters:

• BHP(BHP) May Delay at Least Two Mega Projects to Rein in Spending. BHP Billiton, the world's biggest miner, is likely to delay signing off on at least two mega projects after its chairman put the brakes on an $80 billion (50.4 billion pounds) plan to grow the company's iron ore, copper and energy operations, analysts say. Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto (RIO) in reconsidering the pace of their long-term expansion in countries such as Australia and Canada.
• Spanish Regions, Central Govt Agree to Deep Spending Cuts. Spain's central government on Thursday approved plans to drastically cut the spending of its indebted regions this year and said it would introduce by July a new mechanism to back their financing needs. As the country races to control finances in its autonomous communities and reassure investors it can meet fiscal targets, the government said the regions had committed to slash spending by 13 billion euros ($16.52 billion) and increase revenues by 5 billion euros ($6.35 billion).
• Fed's Bullard - Long Easy-Money Period Has Risks. A top Federal Reserve policymaker said on Thursday he is worried that the Fed's extended period of ultra-loose monetary policy could be doing damage by discouraging thrift and encouraging undue risk-taking. "I'm worried about these low rates distorting other types of decision-making in the economy," St. Louis Fed President James Bullard told a Rotary Club lunch. "We're implicitly punishing savers ... we're encouraging people to go out and chase yield through other channels."
• US Postal Service to Close or Consolidate 140 Sites.

Telegraph:

• Fitch Warns of Mass Eurozone Downgrades. Ratings agency Fitch warns that all eurozone countries face a greater than 50pc chance of a downgrade if a stable, pro-bail-out government is not formed following Greece's second round of elections.

Valor Economico:

• The worsening of Europe's crisis and the slowdown in China may affect Brazil's economic expansion in the second half of this year and compromise 2013 growth, citing government officials. Brazil's economy is unlikely to grow much more than 2.7% this year, citing the officials.

Diario Economico:

• The so-called troika, which comprises officials from the European Commission, European Central Bank and International Monetary Fund, will study a contingency plan to protect Portugal if Greece exits the euro area. Troika officials will arrive in Lisbon next week for the fourth review of Portugal's aid program and will also look at the country's unemployment figures and the effects on the social security accounts.
  

Shanghai Securities News:

• China will steadfastly continue curbs on the housing market and won't flip-flop on its policies, citing Zhang Xiaohong, deputy director of markets of the Ministry of Housing and Urban-Rural Development.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.83%

Sector Underperformers:

• 1) Oil Tankers -3.70% 2) Homebuilders -3.51% 3) Airlines -3.01%

Stocks Falling on Unusual Volume:

• XHB, NIHD, STO, CHU, CLMT, BCS, CIT, HBHC, JPM, DAL, OSK, ITC, NAV, PHMD, AVEO, RRGB, VNET, DLTR, PANL, LQDT, SVVC, ORLY, PETD, ARMH, LINTA, ALKS, GSVC, GRPN, SIRO, GHDX, RPT, PKB, KEX, AAP, SM, LTD, AIG, SSI, RYL, CAT, ITB, KKR, CHKR, DKS, AL, HUN, ARG, GRA, ACTV, SIRO, ITC, EXP, CYT, ANF, HTZ, XTEX, HGT, RGR, TKR, AZO, APO, LAD, KEX, WAIR, URI, AVEO, TEX, NUS and GME
  

Stocks With Unusual Put Option Activity:

• 1) RSX 2) KBH 3) URI 4) XLF 5) BRK/B
  

Stocks With Most Negative News Mentions:

• 1) ANF 2) AFL 3) YUM 4) JPM 5) AAP
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• IMF's Lagarde Says Greek Euro Exit Would Be Expensive. International Monetary Fund Managing Director Christine Lagarde said a Greek exit from the euro area would be “extremely expensive” and hard. Still, the IMF has to be “technically prepared for anything because it’s our job,” she said in an interview with Dutch public television broadcast today. “I’m not suggesting that this is a desirable solution. I’m just saying that this is within the range of multiple options, one that we have to technically look at.” A Greek caretaker government will prepare new elections probably on June 17 that are shaping up as a ballot on whether the country should remain a euro member, following inconclusive May 6 voting that pushed a political party opposed to Greece’s international bailout into second place. The IMF co-financed two bailout packages to the Mediterranean nation. To stay within the euro region requires efforts to “abide by the program which has been put into place” as conditions attached to the latest loan package, Lagarde said. She said a euro exit wouldn’t reflect the will of the Greek people. “No country is immune from hardship happening anywhere,” Lagarde said. “Within the euro zone, a currency union, what happens to any member is going to affect others.” Her comments echo concern by World Bank President Robert Zoellick that a Greek exit from the euro could have ripple effects reminiscent of 2008, when Lehman Brothers Holdings Inc.’s collapse was followed by a global financial crisis.
  
• Rajoy Risks Bailout Yields in Trial of Spain's Funding. Spain will try to show investors it can keep funding itself today as yields approach levels that pushed other nations into bailouts and foreign investors shun the country’s bonds. Spain will seek to sell 1.5 billion euros ($1.9 billion) to 2.5 billion euros of bonds maturing in 2015 and 2016, about half the level it aimed for a year ago. Spanish 10-year bond yields rose as high as 6.5 percent yesterday, approaching the 7 percent mark that pushed Greece, Ireland and Portugal toward European rescue packages. “Spain is potentially the biggest euro-zone accident waiting to happen,” said Neil Williams, chief economist at Hermes Fund Management in London. “Unless there is a sudden and sustainable improvement in Spain’s underlying competitiveness the next round of euro-zone governments’ support will have to stretch beyond the debtor nations currently on investors’ radars.”
• Dollar Funding Costs Jump as Debt Sales Scrapped: Credit Markets. The cost to borrow in dollars is rising at the fastest pace in five months as Europe's debt crisis leads investors to seek shelter in U.S. assets, spurring companies from China to Brazil to cancel bond sales. One-year cross-currency basis swaps fell to 68 basis points below the euro interbank offered rate yesterday from 53 on May 10, the biggest four-day drop since Dec. 14.
• Italy Tax Agents on Frontline of Anti-Austerity Backlash. For 10 years, Daniela Ballico has been knocking on Romans’ doors seeking back taxes. Now with Italy’s tax-collectors on the frontline of an anti-austerity backlash, she no longer has the courage to ring their bells. Equitalia, the state tax-collection agency, has been targeted in a wave of attacks as Italians chafe under stepped-up efforts to recover an estimated 120 billion euros ($153 billion) in lost revenue from evasion. On May 12, a Molotov cocktail exploded outside Equitalia’s Livorno office, one day after a parcel bomb was delivered to the Rome headquarters, site of a December explosion that tore off part of the general manager’s hand. “I have never seen such a tense atmosphere” said Ballico, who has been employed by Equitalia since 1998 and is now on temporary leave to work for the UGL labor union. “They call us loan sharks, bloodsuckers; my colleagues have to deal with anxiety and stomach aches every day and they are scared.”
• Greenlight's Einhorn Says French Default Not Out of the Question. Hedge-fund manager David Einhorn said there's a possibility the French government may default on its debt. "A French default is not out of the question," Einhorn said today at the Ira Sohn investment conference in New York.
  
• AIG(AIG) Wagers on Subprime Betting Second Time Different: Mortgages. American International Group Inc., the insurer that needed a $182.3 billion bailout from the U.S. government in 2008 after failed mortgage investments, is betting this time it's different. Chief Executive Officer Robert Benmosche has increased non- government-guaranteed residential and commercial-mortgage backed securities holdings by $11.1 billion since 2010 to $28.4 billion at the end of March, according to regulatory filings. The New York-based insurer has acquired debt sold by the Federal Reserve that the central bank acquired from AIG when the company was rescued, including $600 million of CMBS last month. AIG, which is also bolstering its unit that insures home loans with low down payments, is wagering that a more than 35 percent plunge in property values, cheaper prices for the securities and fewer competitors justify returning to investments that four years ago required the government to step in when it was unable to meet margin calls to banks.
• Russian Funds Flee as Anti-Putin Demonstrators Dig In. Investors are fleeing Russia as demonstrators against President Vladimir Putin dig in, exacerbating the impact of Europe’s debt crisis on the country’s markets, money managers from Frankfurt to Moscow said. Activists who clashed with police before Putin’s May 7 inauguration are protesting non-stop in Moscow, using the Occupy Wall Street movement’s tactics. As the benchmark RTS equity index entered a bear market, Russia-focused equity funds recorded $251 million of outflows in the seven days to May 9, the most this year, while China lost $127 million, India $148 million and Brazil $167 million, EPFR Global data show.
• BRIC Stocks Erase 2012 Gains as Technology Shares Drop on China. The MSCI BRIC Index for shares in Brazil, Russia, India and China tumbled for a fourth day, wiping out this year’s gains, as concern deepened that China’s economic growth is slowing and Europe’s debt crisis is spreading. The benchmark measure for the largest developing nations dropped 2.3 percent to 262.10 as of 4:35 p.m. in New York, led by an 11 percent decline in Shanghai-based Semiconductor Manufacturing Corp. after it was cut from the MSCI China Index. The Bovespa Index fell for a seventh day. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, dropped 7.3 percent. The MSCI Emerging Markets Index hit the lowest level since Jan. 2. Gauges sank more than 2 percent from Hungary to Taiwan.
• Bond Market May Not Warn When Debt Crisis Strikes. One by one, European nations are letting their voices be heard, tossing out the party in power and voting in those who, in some cases, have a more radical agenda or, in others, are just willing to say “no” to the status quo. A bas l’austerite! Down with austerity! Up with growth! If only it were that simple. That’s how the trade-off is being portrayed, and perhaps that’s what policy makers pushing the idea, and individuals on the receiving end, want to believe. With many euro-zone countries in recession, one can understand the appeal. Spend more, grow more and presto! The debt shrinks in relation to the economy and becomes more manageable. “Wishful thinking,” said Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics in Washington, who knows a thing or two about debt. “You seldom grow your way out of debt. The historic experience is very rare.”
• Japan Growth Pick-Up Clouded by Deepening Europe Risk: Economy. Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand. Gross domestic product rose an annualized 4.1 percent from the final three months of 2011, exceeding all but seven of 27 estimates in a Bloomberg News survey of economists, a Cabinet Office report showed today in Tokyo. Singapore also reported a rebound in growth last quarter, while warning about the risk of a disorderly European debt default.
• N. Korea Ship Seizes Chinese Boats for Ransom, Global Times Says. A North Korean ship seized three Chinese boats with 29 fishermen aboard and demanded more than $140,000 to release them, China’s Global Times newspaper reported today. The fishing boats were captured at gunpoint while trawling in Chinese waters on May 8, the newspaper said, citing an owner of one of the boats, identified as Zhang Dechang. He said the captors were demanding 300,000 yuan ($47,500) to release each vessel. China’s Foreign Ministry is trying to verify what happened and resolve the issue, state-run China Central Television reported on its website yesterday. A standoff could strain ties between North Korea and China, its main financial and diplomatic backer.
• China Expands Scope for Short Selling, Securities Journal Says. China will start a trial next week that will allow brokerages to borrow stocks for clients wishing to conduct short selling, the China Securities Journal reported. Brokerages can also borrow money on behalf of clients for margin financing, the newspaper reported today, without saying where it got the information. Twenty-five securities companies will participate in the test, along with the stock exchange, fund management companies and China Securities Finance Co., which was set up as an agency to provide funds and stocks for brokerages’ short selling and margin trading.

Wall Street Journal:

• Experts Try to Chart Path for Exit From Currency. Returning to a national currency after more than a decade of using the euro and having its money managed by the European Central Bank would catapult Greece into a financial, legal and political no man's land. Countries have defaulted, devalued, or even withdrawn from a broader monetary union in the past. But none has done it all at once—and certainly not an economy so deeply integrated into global financial markets.
  
• Prospects for European Banks Once Again Darken. The start of 2012 was meant to herald a brighter future for European banks. Five months on, the picture is darkening fast. Until recently, European banks were basking in the glow of €1 trillion ($1.27 trillion) of cheap loans dished out by the European Central Bank. With fears that Greece could exit the euro back on the horizon, a credit-rating review of 114 European financial institutions under way by Moody's and the need for many European banks to shrink themselves back to health, the outlook is less rosy, analysts say. "Clearly sentiment has soured," said James Longsdon, a managing director of European, Middle East and Africa institutions at Fitch Ratings.
• Senators Urge Regulators To Act On Speculative Trading Limits. Senators have urged "swift action" from regulators to curb speculation in gas and oil markets, even as the price of gas has started to fall.
• Blackstone(BX) Loan in Favorable Modification, Deutsche Bank Says. A Blackstone Group LP (BX) property loan has received what "may be one of the more questionable [loan] modifications to date" by getting rosy financing terms at the expense of bondholders, marking a troublesome precedent for distressed real-estate workouts, Deutsche Bank said Wednesday. Special servicer Berkadia Commercial Mortgage extended for two years the maturity on about $400 million of commercial mortgage-backed securities, or CMBS, debt on 16 office properties, leaving the interest rate unchanged at a level more than four percentage points below the market rate.
• SEC Probes Role of Hedge Fund in CDOs. U.S. securities regulators are investigating hedge-fund firm Magnetar Capital LLC, which bet on several mortgage-bond deals that wound up imploding during the financial crisis, according to people familiar with the matter. While Magnetar has faced scrutiny over its role in various collateralized debt obligations, or CDOs, the Illinois firm itself now is a target of an investigation by the Securities and Exchange Commission, these people said.
• Boyd Gaming(BYD) to Buy Peninsula Gaming for $745 Million. Boyd Gaming Corp. (BYD) said Wednesday it will acquire privately held casino operator Peninsula Gaming LLC at a cost of $745 million and is also refinancing $700 million of Peninsula's existing debt. The acquisition gives Boyd a stronger foothold in the Midwest and South and should offset some the pressures the company has felt in its core markets Las Vegas and Atlantic City. In the wake of the announcement, Boyd's share price rose roughly 12% to $7.84 in after-market activity.
• Geithner, Dimon Discussed Volcker Rule In March. Treasury Secretary Timothy Geithner and J.P. Morgan Chase & Co. (JPM) Chief Executive James Dimon met in early March to discuss a new rule restricting commercial banks from trading with their own money, meeting logs released Wednesday by Treasury show.
• White House Steps Up Push to Toughen Rules on Banks. In the wake of losses at J.P. Morgan Chase & Co., the White House is seeking to ensure a tough interpretation of a regulation designed to prevent banks from making bets with their own money, according to people familiar with the matter.
• From 'Caveman' to 'Whale'. Months before Bruno Iksil became famous as the "London whale," the trader who contributed to a loss of more than $2 billion at J.P. Morgan Chase & Co., he earned a different nickname: the "Caveman," for pursuing trades that rivals sometimes thought were overly aggressive but often led to huge profits. Late last year, Mr. Iksil, a London-based trader in J.P. Morgan's Chief Investment Office, turned heads among fellow debt-market traders with a wager against a group of junk-bond-rated companies, traders say.
• Fall in Chinese Loans Poses Economic Threat. Banks Narrow Range of Firms They Are Willing to Assist, While Companies Are Wary of Borrowing Amid Unsure Prospects.

Business Insider:

• Exclusive Photos: Here's The Hot New Way They're Extracting Oil From Canada's Massive Oil Sands.
• It Looks A Lot Like China's Security Head Is About To Be Ousted.
• The Most Important Energy Project In The World Is Happening In This Remote Part Of Canada.

Zero Hedge:

• Quantifying The Plan Z Dry Powder - This Is The Greek ELA Borrowing Capacity.
• The Fabled Greek Mega-Bailout.
• Listing David Einhorn's Likes and Dislikes.
  

CNBC:

• JPMorgan(JPM) Fallout 'Could Get a Lot Worse': Whitney. The JPMorgan Chase trading controversy comes at an inopportune time both for the bank and the industry as a whole, which needs to rethink the way it does business, analyst Meredith Whitney told CNBC.

NY Times:

• JPMorgan's(JPM) Trading Loss Is Said to Rise at Least 50%. The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank.
• Ahead of Facebook(FB) IPO, a Skeptical Madison Ave. With Facebook, Mark Zuckerberg has created a seemingly perfect home on the Web, one where people feel comfortable chatting with friends, playing games, sharing photos and videos, listening to music and revealing the most intimate details of their lives. The $100 billion question is whether Facebook will be a perfect home for advertisers, as well.

market folly:

• Notes From Ira Sohn Conference Presentations 2012.

DerivativesIntelligence:

• Managers Buy Russia CDS On Oil Price Drop. Asset managers are buying credit default swaps on Russia because of the impact lower oil prices could have on the country's finances.
  

Mortgage News Daily:

• Judicial States Continue to Skew Foreclosure Statistics. Nationally the percentage of loans in foreclosure fell slightly but Mike Fratantoni MBA's Vice President of Research and Economics said the top-line figure covers up a couple of trends. "First, the percentage of loans in foreclosure is up for prime and FHA loans. The percentage of subprime loans in foreclosure continues to fall as the subprime loans age and the problems loans are resolved one way or the other. However, the percentage of loans in foreclosure for both FHA loans and prime fixed-rate loans are climbing and are just below all -time records." "The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states," Franantoni said. While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states, 6.9 percent. In contrast that rate has fallen to 2.8 percent in non-judicial state, the lowest since early 2009." The difference in the rates is even more disturbing in certain states. Brinkmann summed up the NDS report saying, "Overall it has good news about where we are going but the bottom line is we are still dependent on the economy." As the job situation has improved so have delinquency figures and as long as this continues and there are no serious problems, such as a melt-down in Europe, we should see more of the same.

The Hill:

• Senate Rejects Obama Budget in 99-0 Vote. A budget resolution based on President Obama’s 2013 budget failed to get any votes in the Senate on Wednesday. In a 99-0 vote, all of the senators present rejected the president’s blueprint. It’s the second year in a row the Senate has voted down Obama’s budget. The House earlier this year unanimously rejected Obama's budget.

Rasmussen Reports:

• 28% Say U.S. Heading in Right Direction.

Reuters:

• Red Robin(RRGB) Sales Miss Estimates; Shares Fall. Restaurant operator Red Robin Gourmet Burgers Inc's first-quarter revenue missed Wall Street estimates, hurt by a decline in guest counts, sending its shares down 8 percent in extended trading.
• Limited Brands(LTD) Q1 Profit Beats, Shares Fall On View. Limited Brands Inc, parent of the Victoria's Secret lingerie store chain, posted a quarterly profit that topped Wall Street's view but its shares fell 3.5 percent after its forecast for the current quarter fell short of analysts' expectations.

Financial Times:

• Spain Bids to Pin Down Real Estate Losses. Spain’s government will on Thursday announce the appointment of Blackrock and Oliver Wyman as independent valuers of the real estate loans that lie at the heart of the country’s banking crisis.

Telegraph:

• Britain must make ready for the storm as clueless Europe tears itself apart. Usually it's war that does the damage; there's a certain irony in the fact that this time around it's a project designed to prevent these periodic outbreaks of insanity by binding nations together in irredeemable economic and legal union – the euro. In fact, the single currency is having the exact opposite effect, only bizarrely, Europeans still refuse to see it. Even the Greeks still cling, ever more desperately, to this totemic symbol of European solidarity.
• Euroland's €1 trillion question: after Greece goes, can Spain stay in? Everyone knows Greece is leaving the euro, the real challenge is preventing the fall-out extending to Spain.

The Guardian:

• Huge Risk of Euro Breakup if EU Fails to Act - David Cameron. David Cameron will issue his starkest warning yet on the plight of the euro on Thursday, saying unless urgent action is taken there will be a breakup, adding he will do whatever possible to keep Britain safe in perilous times. Cameron's stark message comes only a day after the chancellor, George Osborne, had said open speculation about the eurozone was itself damaging the European economy. Cameron and Osborne now believe that with the failure of the Greeks to form a government, a direct warning has to be given to the eurozone leaders about the scale of the threat, and the need for urgent action.

South China Morning Post:

• Solar-Gear Glut to Stay for Year, Suntech(STP) Says. Equipment, parts to remain in global oversupply, downward pressure on prices to continue for at least 1 year, co. Chairman Shi Zhengrong says, citing an interview. Shi said he sees no sign of a price rebound. China should consider asking banks to relax lending to solar-equipment industry because of losses, Shi said.

Evening Recommendations
Piper Jaffray:

• Rated (CFN) Overweight, target $34.

Susquehanna:

• Rated (SNDK) Positive, target $47.

Night Trading

• Asian equity indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 195.0 +2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 158.25 +8.75 basis points.
  
• FTSE-100 futures unch.
  
• S&P 500 futures +.42%.
  
• NASDAQ 100 futures +.36%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AAP)/1.81
• (QSII)/.28
• (SSI)/-.02
• (WMT)/1.04
• (ROST)/.93
• (CSC)/.20
• (GPS)/.45
• (CRM)/.34
• (ARUN)/.16
• (INTU)/2.48
• (BRCD)/.12
• (PLCE)/1.06
• (DLTR)/.97
• (SHLD)/-.67
• (AMAT)/.24
• (ADSK)/.47
• (GME)/.54
• (BKE)/.76
• (PCP)/2.27

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 365K versus 367K the prior week.
• Continuing Claims are estimated to fall to 3225K versus 3229K prior.
  

10:00 am EST

• Philly Fed for May is estimated to rise to 10.0 versus a reading of 8.5 in April.
• Leading Indicators for April are estimated to rise +.1% versus a +.3% gain in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking, Spain 10-Year bond auction, 10-Year TIPS auction, weekly EIA natural gas inventory report, pricing of the (FB) IPO, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for May, BofA Merrill Transports Conference, (SYY) investor day and the (HBC) investor day could also impact trading today.
  

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