Today's Headlines

Bloomberg:

• Euro-Area Economic Confidence Climbs Amid Recession. Economic confidence in the euro area increased in May, adding to signs the region is beginning to emerge from the longest recession in the single-currency era. An index of executive and consumer sentiment rose to 89.4 from 88.6 in April, the European Commission in Brussels said today. That’s in line with the median estimate in a Bloomberg News survey of 33 economists. 
• European Stocks Rebound From Three-Week Low. European stocks climbed, rebounding from a three-week low, as investors weighed data on U.S. economic growth and house sales to gauge the Federal Reserve’s view on continuing stimulus measures. Lonmin Plc and Fresnillo Plc both rallied at least 5.5 percent as precious metals climbed. Genmab A/S jumped to its highest price since August 2009 after its Arzerra cancer treatment met its objective in a trial. Tate & Lyle Plc paced declining shares after earnings missed analyst estimates. The Stoxx Europe 600 Index added 0.4 percent to 303.55 at the close.
• Frontline(FRO) Says Tanker Glut Preventing Recovery as Debt Looms. Frontline (FRO) Ltd., the oil-tanker company led by billionaire John Fredriksen, said an oversupply of the vessels is preventing the market recovery needed to be able to repay a convertible bond maturing in 2015. “The tanker market is massively oversupplied and it may take some time before a reasonable market balance is restored and sustained recovery of the tanker market occurs,” the manager of 32 supertankers said today as it reported a fourth quarterly loss. Its cash might run out if the market doesn’t recover and it can’t raise equity or sell assets, Hamilton, Bermuda-based Frontline said, reiterating comments made Feb. 22. 
• Joy(JOY) Cuts Forecast as Commodity Surplus Curbs Mining Expenditure. Joy Global Inc. (JOY), the largest maker of underground mining equipment, cut its full-year profit and sales forecasts and said it sees no immediate recovery in orders as commodity producers reduce spending amid surplus supply. 
• Gold Futures Advance on Speculation Fed Will Maintain Stimulus. Gold futures rallied the most in a week on speculation that the Federal Reserve will maintain bond purchases to bolster the U.S. economy, boosting demand for the precious metal as a store of value. Silver also rose.

Wall Street Journal:

• Smithfield(SFD) Deal Signals China's Need for Meat, Dairy, Other Food Buys. China's rising hunger is driving ever-larger acquisitions of global food assets as the shifting dietary profile of the world's most populous nation increasingly puts meat, dairy and processed-food producers into play.
• Iron Ore Has Fallen 30% Since February. Iron ore slumped to a seven-month low on Thursday, down 30% from this year's high in February, hit by slowing demand from China and a glut of a supply. The raw material for steel making joins a broad selloff in global commodities and is a key bellwether of economic activity in China, the world's top buyer of iron ore. Signs are mounting that growth is continuing to slow in Asia's largest economy, with traders rushing to sell off supplies of iron ore and steel. Shares of Australian iron-ore producers are also in the cross hairs. "The market is flush with product at the moment," RBS Morgans resources analyst James Wilson said. "The pricing power has switched from the iron-ore miners to the steel mills."

Fox News:

• Fox News, other media outlets refuse off-record meeting with Holder. Fox News joined several other major media outlets Thursday in refusing to send a representative to a meeting with Attorney General Eric Holder on the department's surveillance of reporters if Holder continues to insist that the session be off the record.

CNBC:

• When Chinese Walls Come Crumbling Down. One of the key reforms put in place in the settlement was the bar on basing the compensation of stock analysts on their contribution to investment banking revenue. This was meant to prevent analysts from becoming shills for the corporate clients that were paying fees to the investment banks for stock and bond underwriting deals. A new study suggests that this part of the settlement may have fallen by the wayside.

Zero Hedge:

• Nikkei Plunges Another 5% But "Unsourced" Stick Save Arrives Just In Time. (graph)
• First Shipment Of Russian S-300 Rockets Arrives In Syria. 
• Bad News Is Good As GDP, Claims Miss Pushes Futures Higher; Five States' Data "Estimated". (graphs)
• Jeff Gundlach: "There Is No Such Thing As Economic Analysis Anymore".
• This Won't End Well. (graphs)
• French Jobseekers Reach All-Time High. (graph)

Business Insider:

• CHART OF THE DAY: Here's What 515 Interest Rate Cuts And $12 Trillion Will Do To The Global Credit Markets.
• US Oil Inventories Just Hit An All-Time High.
• Pending Home Sales Miss Expectations, Rising 0.3%.

Reuters:

• Credit crunch casualty Eckert plots hedge fund reincarnation. Fred Eckert - the hedge fund manager who lost $250 million of his own money, saw his firm go bankrupt in the credit crisis, went through a divorce and spent two months in a coma - is back with the launch of his new firm. The 65-year-old former Goldman Sachs executive, who once lived in one of the most expensive houses in New Jersey, has launched a new firm called Phoenix Star Capital. He has already an initial $100 million from investors to pursue the strategy. And despite a chastening credit crisis, the man who once enjoyed a fleet of 18 vintage cars and a 1,500-bottle wine collection before filing for personal bankruptcy in 2010, remains optimistic about his chances. "I'm not afraid of being able to raise substantial amounts," Eckert told Reuters in the American bar of the luxury Savoy hotel in central London. "They (investors) believe my record is excellent." Eckert's former hedge fund firm GSC Group ran $28 billion at its peak, but filed for bankruptcy in 2010 after borrowing around $250 million, some of it just before the credit crisis sent asset prices tumbling and froze money markets.
• Risky derivatives make return for returns' sake. Investors facing record low bond yields are increasingly chasing higher returns via complex derivatives, the instruments at the root of the 2008 global financial crisis, which can punch yawning holes in balance sheets if they go awry. Monetary stimulus from central banks has driven down sovereign and corporate bond yields and sent shares to multi-year highs, which in turn has encouraged investors to buy structured products that bundle derivatives with stocks or bonds to increase returns. "The low interest rate environment is pushing clients to search for yield," said Sebastien Gyger, head of portfolio management for private clients at Lombard Odier. 
• With big-name backers, Chinese firm eyes Smithfield's know-how, brands. In three decades, Wan Long has turned Shuanghui International Holdings from a small, loss-making meat processor into China's largest, and is making his country's biggest takeover of a U.S. company - the $4.7 billion acquisition of Smithfield Foods Inc, the world's leading pork producer. 
• Italy's debt costs rise in hint rally of the vulnerable may be over. Italy's long-term borrowing costs edged up at an auction on Thursday for the first time in three months, adding to signs that a 10-month-long rally in vulnerable euro zone bonds may be faltering.

USA Today:

• 30-year mortgage rate hits 3.81%, a 1-year high.

Telegraph:

• British house prices are '31pc too high' - OECD. (graph) The UK's property market is the eighth most over-valued, according to the Organisation for Economic Cooperation and Development.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.44%

Sector Underperformers:

• 1) Oil Service -.70% 2) Restaurants -.70% 3) REITs -.41%

Stocks Falling on Unusual Volume:

• BAS, HEP, BPFH, IRE, CVI, VNR, CLMT, CM, BWP, VNR, BXMT, BIG, MMLP, KMP, SRDX, PAA, SXL, MG, RHP, PBA, PCL, EPD, VMW, MRC, ADS, VNQI, CM, OSTK, MMP, GLP, GMLP, AREX, CVI, PCL, RHP and UCO

Stocks With Unusual Put Option Activity:

• 1) HK 2) OIH 3) EWJ 4) SFD 5) F
  

Stocks With Most Negative News Mentions:

• 1) HAL 2) BHI 3) SWK 4) DXJ 5) SMG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.59%

Sector Outperformers:

• 1) Gold  & Silver +4.90% 2) Coal +1.98% 3) Networking +1.59%
  

Stocks Rising on Unusual Volume:

• NVE, EXPR, YY, AVGO, EMC, SNE, RKUS, BTU, FIO, ABX, FB, FSLR and GDX

Stocks With Unusual Call Option Activity:

• 1) CLSN 2) HERO 3) STSI 4) CLWR 5) NEM
  

Stocks With Most Positive News Mentions:

• 1) CRBL 2) QCOM 3) DO 4) YHOO 5) FSLR
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• ECB Targeted as Blockupy Protesters Descend on Frankfurt. Frankfurt, Germany’s financial capital and the seat of the European Central Bank, is bracing for as many as 30,000 demonstrators to descend on the city for four days of protests against European leaders’ handling of the sovereign-debt crisis. Activists have set up camp on the outskirts of the trade fair grounds to the west of the city, awaiting the arrival of busloads of people from all over the country as well as from abroad, according to Blockupy, an international group that is organizing the blockades. The biggest action is planned for May 31, when the demonstrators plan to “visibly disturb the usual business of the ECB as well as other actors of the crisis regime,” Blockupy said in a statement on its website. 

• EU Warns of Uncertainty If CFTC Won’t Delay Swaps Rule. The European Union is urging the U.S. to allow time for international talks before it imposes swaps rules on EU lenders, saying that the current timetable would lead to “huge legal and operational uncertainty.” The European Commission wrote to Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, urging him to extend a temporary exemption for overseas banks, which is due to expire on July 12, according to a copy of the letter obtained by Bloomberg News.

• China Failure to Grow With $1 Trillion Credit Seen as Li Warning. China’s economy is proving less responsive to credit, escalating pressure on Premier Li Keqiang to strengthen the role of private enterprise. The government’s broadest measure of credit rose 58 percent to a record 6.16 trillion yuan ($1 trillion) in January-to-March, when gross domestic product gained 7.7 percent, compared with 8.1 percent a year earlier. Each $1 in credit firepower added the equivalent of 17 cents in GDP, down from 29 cents last year and 83 cents in 2007, when global money markets began to freeze, according to data compiled by Bloomberg. The diminishing returns to lending heighten focus on the need for what the International Monetary Fund said yesterday are “decisive” policy changes in the world’s second-largest economy. Without a refocus away from state-approved projects, Li and President Xi Jinping risk overseeing both a further slowdown in growth and an increase in non-performing loans. “Less efficient and more highly leveraged borrowers have been kept afloat, tying up credit that could be used to generate more growth,” said David Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department. “To boost growth, China needs to channel more financing to its private enterprises, which are both more profitable and less leveraged than their state-owned counterparts.” State enterprises have seen their return on equity fall by half in six years, according to CLSA Asia-Pacific Markets in Hong Kong. The biggest concern from China’s credit surge is the money going to companies and state-run enterprises whose performance is deteriorating, Francis Cheung, head of China-Hong Kong strategy, wrote in a May 9 report. 

• China Optimism Declines Among European Companies, Survey Shows. European companies’ optimism for business prospects in China is declining amid slowing growth, rising labor costs, regulatory obstacles and intensified competition, a survey showed. Optimism for future revenue growth among 526 respondents dropped to a four-year low of 71 percent, while 62 percent lack confidence or aren’t sure the government has the resolve to introduce market-driven change, according to a business confidence survey released today in Beijing. It was conducted in March by the European Union Chamber of Commerce in China and Roland Berger Strategy Consultants.

• Asian Stocks Decline as Japanese Exporters Drop on Yen. Asian stocks retreated, with the regional benchmark index heading for its first monthly decline in seven months, as commodities fell and the yen traded near a three-week high. Honda Motor Co. (7267), which gets 46 percent of sales from North America, slid 2.2 percent, on concern a stronger yen will damp the earnings outlook among Japanese exporters. BHP Billiton Ltd. (BHP), the world’s biggest mining company and Australia’s top oil producer, lost 1.3 percent after crude oil and copper futures dropped. National Australia Bank Ltd., the nation’s fourth-biggest lender, fell 0.3 percent, heading for an eighth day of decline, its longest losing streak since November 2010. The MSCI Asia Pacific Index decreased 0.9 percent to 136.77 as of 10:19 a.m. in Tokyo, with all 10 industry groups falling on the gauge, which is poised to close at the lowest level since April 19.

• Brazil Raises Rate to 8% as Inflation Threatens Recovery. Brazil’s central bank accelerated the pace of interest rate increases, as policy makers step up efforts to slow inflation that forestalled the economy’s rebound in the first quarter. The bank’s board, led by President Alexandre Tombini, voted unanimously to raise the benchmark Selic rate 50 basis points to 8.00 percent, matching the forecast of 19 of 57 economists surveyed by Bloomberg. Thirty-eight analysts expected a second straight 25 basis-point increase. 

• Rubber Slumps to Three-Week Low as Yen’s Rebound Reduces Appeal. Rubber slumped to the lowest level in more than three weeks, heading for the fourth monthly decline, as a rebound in Japan’s currency against the dollar reduced the appeal of the yen-based futures. The contract for delivery in November fell as much as 3.7 percent to 257.6 yen a kilogram ($2,540 a metric ton) on the Tokyo Commodity Exchange, the lowest level since May 7. The most-active contract traded at 260.7 yen at 10:14 a.m. and lost 0.8 percent this month.

• Rebar Trades Near Lowest in Eight Months on Overcapacity Concern. Steel reinforcement-bar futures traded near the lowest level in more than eight months on concern that overcapacity at Chinese mills means supply will exceed demand. Rebar for October delivery on the Shanghai Futures Exchange fell to as low as 3,422 yuan a ($558) a metric ton, the lowest for a most-active contract since Sept. 10. It traded at 3,436 at 9:58 a.m. local time. Futures have lost 4.6 percent in May and are set for a fourth monthly decline.

• Copper Users Squeezed as Glut Clogs Warehouse Lines: Commodities. At a time when copper stockpiles are rising to the highest in a decade, manufacturers are paying the biggest premiums for the metal in as much as seven years as financing deals lock up supply and extend lines at warehouses.

• Blankfein Leads Bank CEO Pay With $26 Million Deemed as Overpaid. Bankers at Goldman Sachs Group Inc. had a tumultuous 2012. The firm cut 900 jobs, promoted the fewest executives to the exalted post of partner in more than a decade and slashed the portion of revenue set aside for compensation to 38 percent from 42 percent a year earlier. For the man at the very top of Goldman Sachs’s pay pyramid, Chief Executive Officer Lloyd Blankfein, 2012 was his finest year since the boom times of 2007. Blankfein, 58, was awarded $26 million for his work last year, lifting him to No. 1 in the Bloomberg Markets ranking of the best-paid CEOs at North America’s 20 largest financial companies by customer deposits. John Stumpf, who led Wells Fargo & Co. to a record profit of $18.9 billion, ran a distant second, at $19.3 million, Bloomberg Markets magazine will report in its July issue. The pay of the 20 chiefs increased an average of 7.7 percent for 2012 compared with a year earlier, according to data compiled by Bloomberg. The tally is based on salaries, stock, bonuses and long-term incentive pay awarded to the CEOs for 2012. “All of them are being overpaid,” says Eleanor Bloxham, CEO of Value Alliance Co., a board advisory firm in Westerville, Ohio. “The bank boards still don’t have a good handle on how they should be compensating their executives.” Bloxham says directors lean too much on share performance and instead should look at how CEOs manage risk, including capital ratios that measure financial strength.

• Volcker Cautions Federal Reserve May ‘Fall Short’. Former Federal Reserve Chairman Paul Volcker said today the central bank will probably “fall short” by being asked to do too much. “It’s fashionable to talk about a dual mandate, that policy should somehow be directed toward two objectives, of price stability and full employment,” Volcker told the Economic Club of New York. “Fashionable or not, I find that mandate both operationally confusing and ultimately illusory.” “Asked to do too much, for instance to accommodate misguided fiscal policies, to deal with structural imbalances, to square continuously the hypothetical circles of stability, growth and full employment, then it will inevitably fall short,” Volcker said. Those efforts cause it to lose “sight of its basic responsibility for price stability, a matter that is within the range of its influence.” “The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers,” Volcker said. He said a central bank’s basic responsibility is for a “stable currency.” “Credibility is an enormous asset,” Volcker said. “Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment.” “The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives,” according to Volcker. “Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”  

• U.S. to Ease Iran Sanctions on Laptops, Mobile Phones.

• Google’s(GOOG) Motorola to Sell Made-in-Texas Moto X by October. Google Inc. (GOOG)’s Motorola Mobility handset unit plans to unveil a new smartphone called Moto X by October, stepping up efforts to gain share from Apple Inc. (AAPL) in the market for handheld hardware.

Wall Street Journal:

• Mexico Housing Bust Bruises Investors, Buyers. Hardly anyone turns up nowadays at a Homex sales center for low-income homes in this dusty town north of Mexico City. On a recent Saturday, a banner promising "well-being" flapped in the wind near a sign that read "a new life awaits you." Even the lone saleswoman on duty, Carolayn León, says she no longer believes in her employer after several missed paychecks. She isn't the only one who has lost faith. Home buyers and investors are turning their backs on Mexico's low-income housing darlings, bringing a government-fueled boom that lasted more than a decade to a screeching halt. Scores of new homes in far-flung communities sit empty, while banks have canceled credit lines to some of the country's biggest housing companies.

• Latin America Boom Starts to Fade. Slowdown in China, a Major Commodities Importer From the Region, Drags on Growth; Xi to Visit. 

• Blackstone(BX) Weighs Bigger SAC Withdrawal. SAC Capital's largest outside investor, Blackstone Group, is planning to withdraw close to $400 million from the embattled hedge-fund firm, or potentially twice as much as was expected earlier this month.

• Currencies Cave to Commodity Dive. Aussie Dollar, Others Start to Tumble as Investors Bet on Sustained Price Declines for Raw Materials. Currencies of the world's biggest commodity exporters are plumbing fresh lows, the latest sign that investors are betting on a sustained decline in prices of oil, iron ore, copper and other raw materials.

• Henninger: Obama's Dangerous Confusions. When the President speaks on national security, it is hard to distinguish between personal belief and political calculation.

Fox News:

• Tea Party groups file lawsuit over IRS targeting. A Washington advocacy group filed a lawsuit on Wednesday against the IRS and top Obama administration officials on behalf of 25 Tea Party-related groups, marking the biggest lawsuit to date over the tax agency's practice of targeting conservatives for additional scrutiny.

MarketWatch.com:

• Pimco’s Gross says ‘Bernanke has a lost a little control’.

CNBC:

• China's Grab of US Hogs Stokes Interest on Hill. China's largest acquisition to date of a U.S. company, Smithfield Foods, raised eyebrows on Wednesday among market watchers who question China's interest in taking possession of one of America's largest food producers.

Zero Hedge:

• Flipping Homes Back To 2005 Levels. (graph)

• What Happens After a 70% Stock Market Rally In 6 Months? (graph)

• "Wilful Blindness" And The 3 Bullish Arguments. (graphs)

• Banks Behaving As If 'It' Never Happened.

• Central Banks' Central Bank Warns About Rehypothecation Threats.

• Is This Why Social Unrest In Europe Has Been Subdued (For Now)?

• Sean Corrigan: "Abenomics Is Riddled With Inconsistencies".

Business Insider:

• ANALYST: Tesla(TSLA) Bulls Are Ignoring A Bunch Of Serious Issues. 

• Obamacare Is Driving Some Doctors To Stop Taking Insurance Altogether. 

• Stock Buyback Announcements Have Gone Parabolic. (graph)

• The Global Showdown Over Syria Has Reached A Pivotal Point.

• Google's(GOOG) Face Recognition Technology Can Figure Out Who You Are On Its Own.

New York Times:

• China’s Food Play Extends Its Reach, Already Mighty. If you dined on tilapia recently, chances are it came from China. And that artificial vanilla you just used to make cookies? It, too, may have made the same long journey to your kitchen in the United States. A growing amount of food commonly consumed by Americans — ranging from canned tuna and mandarin oranges to fresh mushrooms and apple juice — is now being imported from China. By the end of last year, the United States imported 4.1 billion pounds of food products from China, according to the Agriculture Department.

The Blaze:

• Krauthammer’s Potentially Damaging Theory: Benghazi’s ‘Biggest Scandal of All’ Has Yet to Be Uncovered — See What It Is.

Reuters: 

• Moody's downgrades Alcoa(AA), sees headwinds for primary metals. Moody's Investors Service downgraded aluminum producer Alcoa Inc. on Wednesday, citing weak aluminum prices and a tough market for the company's primary metals business. Moody's cut Alcoa's senior unsecured debt ratings to Ba1 from Baa3, and assigned a corporate family rating of Ba1. It said the firm's rating outlook is stable.

• BOJ's Kuroda: will reduce JGB volatility to lower L/T yields. Bank of Japan Governor Haruhiko Kuroda said on Thursday the central bank will try to reduce bond market volatility as much as possible to apply strong downward pressure on long-term yields. 

• REFILE-Lawmaker asks US Justice Dept to investigate JPMorgan(JPM) power trading. A U.S. Congressman on Wednesday called on the Department of Justice to investigate JPMorgan Chase & Co's power trading in Michigan, as the Federal Energy Regulatory Commission (FERC) considers whether to sanction the firm. 

• Buffett pays $5.6 bln for Vegas utility, bulks up in West. Berkshire's MidAmerican Energy Holdings Co said on Wednesday it will buy NV Energy for $23.75 per share, a 23 percent premium to NV's Wednesday closing price. NV Energy shares rose to $23.90 in after-hours trading on Wednesday. 

• Mutual funds holding U.S. stocks recorded outflows on Fed fears-ICI. 

• Amazon(AMZN) moving ahead with five original TV series.

• Unusual trading on Smithfield(SFD) calls before deal raises eyebrows.

• Panasonic to cut 5,000 workers from automotive and industrial division.

Telegraph: 

• No saviour in sight as world credit cycle rolls over. This may be as good as it gets for the world economy. The HSBC index for the global business cycle hit a three-year high around Easter, and has since rolled over. 

• Francois Hollande tells European Commission it can't 'dictate' to France. Francois Hollande has warned the European Commission not to “dictate” orders on how France should run its economy after the Brussels executive called for urgent eurozone reforms to avert a “social emergency”.  

• France must reform or the euro will die. Yes, there were sighs of relief on Wednesday as the European Commission stepped back from hitting eurozone countries with fines for their failure to meet targets to cut public spending. Behind the cover of easing up on austerity, the commission flexed new European Union powers to enforce economic reform and France is in its sights.

Yonhap News Agency:

• South Korea's Hyun Says Japan's Economic Policies Fragile. South Korean Finance Minister Hyun Oh Seok described policies being promoted by Japanese Prime Minister Shinzo Abe as "a fragile sand castle," citing Hyun in a Q&A session at an OECD meeting in Paris. Hyun says quantitative easing without improvement in economic fundamentals doesn't support sustainable growth. Says Japan's easing brings adverse effects to region, including more exchange rate volatility.

Xinhua:

• U.S. to Collect Anti-Subsidy Duty on China Shrimp. The U.S. will collect anti-subsidy duty of 5.76% on imports of frozen shrimp from China, citing a preliminary decision announced by the U.S. Dept. of Commerce.

21st Century Business Herald:

• Beijing to Take Measures to Limit Home Prices. China's Beijing will likely cap home prices on a "larger scale" in 2H.

Time-Weekly:

• China Railway Corp. Wants Debts Waived. China Railway Corp. officials have been reaching out to the State Council and asking to have its liabilities waived, citing a person close to the company. The company has total liabilities of 2.84t yuan by the end of March, according to its bond prospectus.

Evening Recommendations 
SunTrust Robinson:

• Rated (BMY) Buy, target $55.

• Rated (LLY) Buy, target $63.

• Rated (PFE) Reduce, target $27. 

Night Trading

• Asian equity indices are -2.0% to -.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 112.50 +5.5 basis points.

• Asia Pacific Sovereign CDS Index 94.50 +3.75 basis points.

• FTSE-100 futures +.06%.

• S&P 500 futures +.10%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JOY)/1.56

• (BIG)/.61

• (COST)/1.03

• (SAFM)/.71

• (PLL)/.73

• (CPRT)/.49

• (PANW)/.05

• (SPLK)/-.06

• (OVTI)/.21

• (ESL)/1.25

• (GES)/.08

• (JOSB)/.34

Economic Releases
8:30 am EST

• 1Q GDP is estimated to rise +2.5% versus a prior estimate of a +2.5% gain.

• 1Q Personal Consumption is estimated to rise +3.3% versus a prior estimate of a +3.2% gain.

• 1Q GDP Price Index is estimated to rise +1.2% versus a prior estimate of a +1.2% gain.

• 1Q Core PCE is estimated to rise +1.2% versus a prior estimate of a +1.2% gain.

• Initial Jobless Claims are estimated at 340K versus 340K the prior week.

• Pending Home Sales for April are estimated to rise +1.5% versus a +1.5% gain in March.

• Continuing Claims  are estimated to rise to 2955K versus 2912K prior.

10:00 am EST

• Pending Home Sales for April are estimated to rise +1.5% versus a +1.5% gain in March.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -500,000 barrels versus a -338,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -500,000 barrels versus a +3,015,000 barrel gain the prior week. Distillate inventories are estimated to fall by -450,000 barrels versus a -1,052,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.3% versus a -.7% decline prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The 7Y T-Note auction, Japan CPI report, China Manufacturing PMI report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (FLEX) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity shares in the region. I expect US stocks to open mixed and 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, Technical Selling, Homebuilder/REIT Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 14.76 +1.93%

• ISE Sentiment Index 98.0 +36.11%

• Total Put/Call .82 -14.58%

• NYSE Arms .44 -39.64%

Credit Investor Angst:

• North American Investment Grade CDS Index 76.65 +1.07%

• European Financial Sector CDS Index 142.98 +4.49%

• Western Europe Sovereign Debt CDS Index 82.0 +1.13%

• Emerging Market CDS Index 267.18 +1.71%

• 2-Year Swap Spread 16.25 -1.25 bps

• TED Spread 24.0 +.25 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -14.5 -.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 182.0 -4 bps

• China Import Iron Ore Spot $112.90/Metric Tonne -4.16%

• Citi US Economic Surprise Index -15.50 -1.2 points

• 10-Year TIPS Spread 2.21 -6 bps

Overseas Futures:

• Nikkei Futures: Indicating -306 open in Japan

• DAX Futures: Indicating +21 open in Germany

Portfolio: 

• Slightly Lower: On losses in my medical/biotech and retail sector longs

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• ECB Warns Financial Weakness Could Break Best Lull in Two Years. The European Central Bank said weakness in the euro-area economy and the fragility of the region’s banks risk ending what it describes as the calmest period in financial markets since 2011. “The main message is that financial stability has improved since the last issue,” ECB Vice President Vitor Constancio said today in Frankfurt as he presented the ECB’s twice-yearly Financial Stability Review. “But the situation remains fragile. The year 2012 was not good at all for banks.” “Particularly vulnerable are banks that are confronted with a significant deterioration of asset quality with high and rising non-performing loan levels,” the ECB said in the report. “Continued and prompt progress in proactively tackling bank balance sheet problems is required.”
• German Unemployment Increased Four Times Forecast in May. German unemployment rose more than four times as much as economists estimated in May as the euro area’s sovereign debt crisis and a long winter took their toll on Europe’s largest economy. The number of people out of work climbed a seasonally adjusted 21,000 to 2.96 million, the Nuremberg-based Federal Labor Agency said today. That’s the fourth straight monthly gain. Economists predicted an increase of 5,000, according to the median of 35 estimates in a Bloomberg News survey.
• Hollande Says EU Can’t Dictate French Economy Policy, Monde Says. President Francois Hollande said the European Commission isn’t in a position to decree French economic policy, Le Monde reported. The commission isn’t there to “dictate what we have to do,” Hollande was quoted as saying by the newspaper. “We have to respect our European commitments on deficit reduction,” he said, according to the report. “As for structural reform, it’s up to us and us alone to decide what path to take to obtain the objective.”
• European Stocks Fall on Concern Fed Will Pare Stimulus. European stocks fell, after the Stoxx Europe 600 Index rallied the most in a month, on concern that the U.S. Federal Reserve will reduce debt purchases as the world’s biggest economy strengthens. PSA Peugeot Citroen declined 4.2 percent following a French newspaper report that Europe’s second-biggest automaker may sell new shares to raise cash. Evraz Plc fell to a record low after Stoxx Ltd. said it will remove the commodity producer from its benchmark Stoxx 600 next month. Hennes & Mauritz AB dropped 2.5 percent as Goldman Sachs Group Inc. recommended investors sell the shares. The Stoxx 600 retreated 1.9 percent to 302.5 at the close of trading.
• Latin America Disappoints After Squandering Commodity Boom. Latin America is disappointing investors, economists and businesses with slower-than-forecast growth as waning commodity prices and strong currencies hit nations that failed to diversify and become more competitive. The five biggest investment-grade markets in the region -- magnets for foreign capital as rich countries stalled --expanded below projections or show signs of weakness. Mexico’s and Brazil’s gross domestic product missed estimates in a Bloomberg survey. Economists polled by Brazil’s central bank cut the country’s 2013 outlook this week for the second time in seven days, anticipating the worst three-year period in a decade.
• Lumber Futures Fall Most in 17 Months as Output Rebounds. Lumber futures fell the most in 17 months on speculation that North American mills from Texas to Alberta are boosting output. 
• Copper Declines on German Jobs Data, IMF's China Forecast. Copper futures fell for the third time in four sessions after German unemployment rose more than expected and the International Monetary Fund cut its forecast for economic growth in China, the world’s top metal consumer. 
• Rosengren Says Significant Fed Accommodation Still Needed. Federal Reserve Bank of Boston President Eric Rosengren said the Fed should press on with record stimulus to speed economic growth, reduce 7.5 percent unemployment and boost inflation running below 2 percent. “While we have seen some improvement in labor market conditions, significant accommodation remains appropriate at this time,” Rosengren said today in remarks prepared for a speech in Minneapolis. “Core inflation remains at the very low end of recent experience, and the unemployment rate is close to the cyclical peaks of the past two recessions.”
• Technology Puts Reach Five-Year Low. The cost of options hedging against losses in U.S. technology shares fell to an almost five-year low. Puts with an exercise price 10% below the Technology Select Sector SPDR Fund cost 6.45 points more than calls betting on a 10% gain, according to three-month data compiled by Bloomberg. The price relationship known as skew slid to 5.19 on May 22, the lowest level since October 2008.

Wall Street Journal:

• OPEC Axes Production Monitoring Committee. OPEC has decided to ax a key committee that monitored its members' compliance with oil production targets and made recommendations on output policy, people familiar with the matter told The Wall Street Journal Wednesday.

Fox News:

• UN gets new info on alleged chemical weapons use in Syria. Britain said Thursday it has sent a letter to Secretary-General Ban Ki-moon with new information on three further incidents of alleged chemical weapons use by the Syrian government. Britain's U.N. Ambassador Mark Lyall Grant said his government has continued to provide new information to the secretary-general and the head of the U.N. team Ban appointed to investigate alleged chemical weapons attacks in Syria.
• House Republicans challenge Holder testimony on reporter surveillance. Top Republicans on the House Judiciary Committee openly challenged Attorney General Eric Holder on Wednesday over his testimony two weeks ago in which he claimed to be unaware of any "potential prosecution" of the press, despite knowing about an investigation that targeted a Fox News reporter. 

MarketWatch: 

• Consumer confidence index is a contrarian indicator.

CNBC:

• FDIC: Banks Net Income in 1Q Hits All-Time High of $40.3 Billion.
• Rising Mortgage Rates, Home Prices a Lethal Brew.

Zero Hedge:

• Meanwhile, Big Investors Quietly Slip Out The Back Door On Housing.
• EU Extends Deficit Deadlines For Most European Countries, Admits Structural Adjustment Failure, Kills Austerity. Translation: the theatrical spectacle of Europe's austerity, which never really took place, is finally over.
• European Credit Contraction Accelerates, Spanish Loan Creation Craters. (graphs)
• Cash And Tarry: Mortgage Applications Plunge At Fastest Rate Since 2009. (graph)
• The Casino At The End Of The Universe. In the end it is almost always leverage that touches off the rush to the exit door and I would say that the financial markets are now levered past what we have ever known before. 

Business Insider:

• Fannie And Freddie Are Getting Smoked — Down 40% Today.
• HARVARD LAW STUDENT: Liberal Law Schools Are Making Students Dumber.
• One Critical Commodity Is Having A Worse Year Than Gold.
• CHINA'S HUAWEI: Get Used To Governments Hacking And Spying On You.
• USA Today Has A Huge Front Page Story About The Bull Market And All The Wealth That's Getting Created.

New York Times:

• Smithfield(SFD) to Be Sold to Chinese Meat Processor. Shuanghui International of China agreed on Wednesday to buy the American meat processor Smithfield Foods for about $4.7 billion, in one of the biggest moves by a Chinese company into the United States to date. It will likely draw close government scrutiny over Chinese food standards, especially amid a number of incidents like a recent scare over bird flu. Though Smithfield has argued that the deal is meant to sell American pork outside of the country and not import Chinese products, regulators are likely to ensure that the company does not lower its quality standards. Shuanghui, also known as Shineway, is China’s largest pork producer and is owned in part by an investment firm run by Goldman Sachs(GS).
• Google(GOOG) Overhauls Gmail to Take On E-Mail Overload.

CBS:

• Apple's(AAPL) Tim Cook talks wearable tech, mum on Apple TV.

Reuters: 

• Volcker warns on limits of U.S. Fed's easy money. Former Federal Reserve Chairman Paul Volcker on Wednesday waded into the debate over when to reduce today's ultra-easy U.S. monetary policies, arguing that the benefits of bond-buying are "limited and diminishing" and warning that central banks are too often late in removing stimulus. 
• Brazil economic growth disappoints again. Brazil's economic growth fell short of forecasts once again in the first quarter as President Dilma Rousseff's numerous stimulus packages failed to aid manufacturers while consumers, frightened by rising inflation, grew more conservative. Even a record corn and soy harvest and a rebound in investment were not enough to avoid disappointing gross domestic product growth of just 0.6 percent compared with the fourth quarter, according to government data released on Wednesday. Analysts expected 0.9 percent growth.
• Brazil will not tolerate high inflation -Finmin Mantega.
• Luxury spending drives Michael Kors(KORS) profit. Upscale accessories maker Michael Kors Holdings Ltd reported a better-than-expected quarterly profit as shoppers spend more on luxury goods, and the company said it would double the number of its stores in Europe, where its sales are booming. The company, formed and owned by fashion designer Michael Kors, has grown at a blistering pace since it went public in 2011, underlining shoppers' appetite for luxury items even in a tough economy.

Telegraph:

• High street feels squeeze as sales fall. Britain's high street was dealt a blow on Wednesday as a poll revealed that retail sales this month sank at their fastest pace in more than a year.
• OECD warns of zero growth in eurozone this year. Pier Carlo Padoan, chief economist at the OECD, says there will be no growth in the eurozone in 2013 and warns of high unemployment in the EU. 

Die Welt:

• Draghi Loses Support in ECB Executive Board. ECB Executive Board members Joerg Asmussen and Yves Mersch oppose ABS purchases, citing central bank officials. Bundesbank President Jens Weidmann also against ABS-purchase program. Mersch is against any further use of non-standard measures.

Bild:

• EU's Ottinger Says Europe Needs a Revamp. European Energy Commissioner Guenther Oettinger is concerned about the economic situation within the European Union, citing Oettinger at an event in Brussels. Oettinger says Brussels hasn't fully realized how bad the situation is, he said. Says especially France isn't prepared; needs a pension reform, longer working life time, less govt spending. Says is concerned about countries like Bulgaria, Romania, Italy that are hardly governable. Says Germany is about to lose part of its competitiveness through minimum wage, women quota, childcare subsidy, its no to fracking. Says Germans are hypocritical, import Russian gas with no concern for environment, but don't want fracking at home, they should at least test it, he said.

TVB: 

• Hong Kong Govt Won't Be Worried If Home Prices Fall 20%. Recent signs showing property market stabilizing is short term, and the govt wouldn't be concerned if prices fell 20%, citing govt officials. Interest rates will definitely climb in the future, dragging down property prices, the official said. The govt doesn't expect huge amount of negative assets cases like in 1998 and 2003, should property prices drop as much as 40% in the long term, the report said.