Stocks Rising into Final Hour on Yen Weakness, Short-Covering, Technical Buying, Biotech/Drug Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Gaining
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.21 -1.12%

• Euro/Yen Carry Return Index 147.68 +.04%

• Emerging Markets Currency Volatility(VXY) 8.27 -1.73%

• S&P 500 Implied Correlation 56.21 -.44%

• ISE Sentiment Index 165.0 +77.42%

• Total Put/Call .71 -15.49% 

• NYSE Arms 1.09 +26.73% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.85 -1.28%

• European Financial Sector CDS Index 79.89 -.08%

• Western Europe Sovereign Debt CDS Index 35.11 -.07%
• Asia Pacific Sovereign Debt CDS Index 87.67 -.70%

• Emerging Market CDS Index 272.68 -1.61%

• China Blended Corporate Spread Index 351.19 -.91%
• 2-Year Swap Spread 14.50 -.5 basis point

• TED Spread 20.0 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.0 unch.

Economic Gauges:

• 3-Month T-Bill Yield .03% +1.0 basis point

• Yield Curve 233.0 unch.

• China Import Iron Ore Spot $113.30/Metric Tonne -2.75%

• Citi US Economic Surprise Index -23.60 +2.5 points

• Citi Emerging Markets Economic Surprise Index -24.80 -1.1 points

• 10-Year TIPS Spread 2.21 unch.

Overseas Futures:

• Nikkei Futures: Indicating +83 open in Japan

• DAX Futures: Indicating n/a open in Germany

Portfolio: 

• Higher: On gains in my tech/medical/biotech/retail sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg: 

• Russia Says Ukraine Failing to Halt Extremists Seeking Civil War. Russia accused the Ukrainian government of failing to rein in extremists as escalating tensions threaten to undermine a diplomatic accord reached last week and stoke calls in the U.S. for economic sanctions. Ukrainian and Russian officials traded accusations about responsibility for attacks that killed three during the weekend. Foreign Minister Sergei Lavrov in Moscow called on the U.S. to hold the Ukrainian authorities accountable for observing the agreement signed in Geneva, which calls for all illegal groups to disarm and seized buildings to be returned.
• Copper Seen Falling as Stronger Dollar Cuts Demand for Metals. Copper futures, trading little changed, were poised to decline for the first time in three sessions as gains in the dollar reduced the metal’s appeal as an alternative investment. The Bloomberg Dollar Spot Index, a gauge against 10 major trading partners, rose for a seventh session, heading for the longest streak since May. Through April 17, copper dropped 11 percent this year amid signs that slowing economic growth would reduce metals consumption in China, the world’s top consumer. 
• Gold Falls to Two-Week Low as Platinum, Palladium Slump. Gold futures for June delivery fell 0.6 percent to $1,285.60 an ounce at 10:39 a.m. on the Comex in New York.
• Keystone Pipeline Fate Now in Hands of Nebraskan Jurists. The focus of the Keystone XL debate has shifted from a fierce lobbying war in Washington to Lincoln, Nebraska, where the state Supreme Court has been asked to weigh a legal challenge to the pipeline.

Wall Street Journal:

• Russia, U.S. Trade Charges of Violating Ukraine Deal. Vice President Biden Arrives in Kiev Amid Threats of New Sanctions on Moscow. 
• China Warns of Rising Risks From 'P2P' Lending. More Headwinds for Sector Expected as Government Curbs Shadow Banking.

Fox News: 

• Meb Keflezighi becomes first American male to win Boston Marathon since 1983.
• Experts warn civilian world not ready for massive EMP-caused blackout.

MarketWatch: 

• Fannie, Freddie cut housing-market forecasts for 2014.

CNBC:

• Watch Art Cashin: This is what we want to see. (video)
• Why Obama's Keystone opposition reeks of politics. (video)

ZeroHedge:

• A Summary Of What Hedge Funds Are Buying And Selling.
• Fukushima Manager Admits Water Woes "Out Of Control", Refutes Lies By PM Abe.
• Sorry Janet: Technology Is Deflationary. Only bankers, governments and other parasites that live off the carrion of debt fear deflation and try to destroy the purchasing power of wages with everything in their power. 
• APC Sporting Russian Flag Parades Around Separatist Occupied Slavyansk. (video)
• Russia Warns It May Enter Recession As Soon As This Quarter.
• John Kerry Admits Geneva "Deal" Worthless.
• Keynesian Knightmare: US Savers Outnumber Spenders By Record Numbers. (graph)

ValueWalk:

• US Large Cap Banks Stuck In A Growth Quagmire: Credit Suisse.

Business Insider:

• A BNP Paribas Banker, His Wife, And His Nephew Were Fatally Shot Outside Their Home.
• This One Chart Shows Which Stores Will Survive The Brick-And-Mortar Apocalypse.
• CHART OF THE DAY: The Escalating Dangerous Game Of Military Chicken Between China And Japan.
• The Average Stock Is More Expensive Now Than It Was At The Peak Of The Dot-Com Bubble In 2000. (graph)

Reuters:

• China steps up purge of online porn amid wider censorship push.

Bear Radar

Style Underperformer:

• Small-Cap Value -.15%

Sector Underperformers:

• 1) Gold & Silver -2.33% 2) Homebuilders -1.0% 3) Gaming -.72%

Stocks Falling on Unusual Volume:

• MGI, ATLS, ARP, LII, RUSHA, APL, TRP, ACTG, CMG, CNSI, ATHN, CPHD, LULU, GLOG, MAC, ABX, TNC, CBF, GPOR, GDOT, UMPQ and GLNG

Stocks With Unusual Put Option Activity:

• 1) KMI 2) MBI 3) FITB 4) KRE 5) DXJ
  

Stocks With Most Negative News Mentions:

• 1) DISCA 2) GM 3) WLT 4) YHOO 5) JBL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.13%

Sector Outperformers:

• 1) Biotech +1.05% 2) Education +.88% 3) Disk Drives +.87%
  

Stocks Rising on Unusual Volume:

• WB, SRPT, AZN, PNK, SCSS, CYTK, MXWL, INSM, NEM and IPXL

Stocks With Unusual Call Option Activity:

• 1) SMH 2) SCSS 3) SRPT 4) VNDA 5) LYB

Stocks With Most Positive News Mentions:

• 1) SRPT 2) NEM 3) STI 4) CDNS 5) AAPL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg:  

• Ukraine Says Russia Preparing Grounds for Invasion. At least three people were killed in a clash in Slovyansk in eastern Ukraine, the nation’s Interior Ministry said, as a top security official accused Russia of exploiting the violence to prepare grounds for an invasion. Three “activists” were shot to death while on duty at a roadblock in an attack early today that also left three other people injured, the ministry said in a posting on its website. It said the assailants took “wounded and killed along with them,” without providing details. Ukraine’s Security Service said saboteurs carried out the assault. 

• Ukraine Separatists Hold Ground as U.S. Eyes Sanctions. Shootouts in eastern Ukraine over the weekend led to calls for more U.S. economic sanctions against Russia, as a diplomatic accord aimed at defusing the crisis showed little sign of taking hold. Ukrainian and Russian officials traded accusations over responsibility for tensions that escalated since last week’s signing of an agreement in Geneva that sought disarmament of all illegal groups and vacating of all seized buildings.

• Japan’s Trade Deficit Widens as Export Growth Weakens: Economy. Japan’s weakest export growth in a year spurred a wider-than-forecast trade deficit in March, adding to challenges for Prime Minister Shinzo Abe in steering the economy through the aftermath of an April 1 sales-tax rise. The shortfall of 1.45 trillion yen ($14.1 billion) reported by the Ministry of Finance in Tokyo today compared with a 1.08 trillion yen median estimate of 28 economists in a Bloomberg News survey. Shipments overseas rose 1.8 percent, while imports jumped 18.1 percent from a year earlier. A spending spree ahead of the tax rise boosted demand for foreign goods, and a surge in energy costs due to the yen’s slide and nuclear shutdowns helped make the deficit the biggest ever for March. Sliding consumer confidence indicates domestic demand may weaken, while slowing export growth suggests external demand may fail to provide much support for an economy set to contract this quarter.

• Kuroda Inflation Focus Risking Money-Market Health: Japan Credit. Money market watchers say Bank of Japan Governor Haruhiko Kuroda risks crippling the foundation of the nation's financial system to achieve his inflation target. The outstanding balance of interbank lending in the so-called call market tumbled 17% this year to 14.1 trillion yen on April ll, the least since January 2003 when the central bank was conducting its first round of easing through bond purchases. The decline in trading makes the money market vulnerable to shocks in times of crisis by increasing volatility, according to UBS AG. BOJ purchases have already eroded debt market trading, with 10-year government bonds untraded on April 14 for the first time in 13 years.

• BOJ Recovery Picture at Odds With Cabinet Data: Chart of the Day.

• Bank Defaults Seen as Dark Side of Deposit Vows: China Credit. Chinese Premier Li Keqiang’s plan to introduce deposit insurance is meant to comfort the nation’s savers as bad loans mount. In the bond market, it’s fueling speculation he’s preparing to let some banks collapse. 

• Yen Drops on Trade Data as Japan Stocks Rise; Gold Slides. Japan’s yen slipped as the country posted a wider-than-estimated trade deficit, while stocks rose in Tokyo. Gold fell and wheat retreated. The yen weakened 0.2 percent versus the dollar as of 12:43 a.m. in Tokyo, sliding against all major peers as exports increased just 1.8 percent in March when economists had projected a 6.5 percent jump. The Nikkei 225 Stock Average added 0.5 percent after surging the most since November last week. 

• Asian Stocks Swing Between Gains, Losses as Telecoms Rise. Asian stocks swung between gains and losses as health-care stocks declined while mobile carriers led the advance. Several markets across the region are shut today for a holiday. SoftBank Corp. added 1.6 percent, pacing gains among Japanese phone companies. Consumer-loan providers Acom Co. (8572) and Aiful Corp. each jumped at least 12 percent after the Nikkei newspaper reported that the ruling party is considering loosening lending restrictions. Ono Pharmaceutical Co. fell 1.8 percent to lead losses among health-care stocks. LG Innotek Co. (011070), which supplies parts used in Apple Inc.’s iPhone and iPad, dropped 3 percent as it retreated from a three-year high. The MSCI Asia Pacific Index fell 0.1 percent to 139.03 as of 12:41 p.m. in Tokyo after rising as much as 0.1 percent.

• Obamacare Triggers Jump in U.S. Consumers’ Health-Care Spending. While it’s been rising fairly steadily since 2000, the share of consumer budgets dedicated to medical care climbed to a record 17.1 percent in February from 16.9 percent in December. About 59 percent of employees say Obamacare could increase insurance costs, according to a PwC U.S. survey of 2,100 employed adults released April 8. About one-third of 700 companies have increased deductibles or other cost-sharing, and 48 percent are considering similar moves, according to a survey by New York-based consulting firm Mercer LLC. “The effect on consumption is already so substantial, we ignore it at our own peril,” Low wrote in a March 28 note to clients. Sales could slow at stores such as Wal-Mart and Target Corp., Low said, as middle-income households spend more on copays and deductibles. Low-earners will be less affected as they benefit from Medicaid expansion and tax credits, he said. Retailers could see effects mounting through 2016 as more people enroll in insurance and more companies ask employees to shoulder higher costs, said Lance Roberts, a partner at STA Wealth Management in Houston. “When you have an increase in costs, combined with a lack of wage increases, the consumer has to make decisions about where they spend their money,” Roberts said. “Less money to spend means less money for retail.”  

• BofA(BAC), NYSE, Brokerages Sued Over High-Frequency Trading. Bank of America Corp. and the New York Stock Exchange were among dozens of exchanges, brokerages and traders sued over high-frequency trading by the city of Providence, Rhode Island, over claims they rigged securities markets to divert billions of dollars from buyers and sellers of shares.

• SEC Said to Weigh Shining Light on Brokers’ Stock Routing. The U.S. Securities and Exchange Commission is weighing a requirement that brokers tell investors exactly where their stock trades go to be executed, a proposal that may address complaints that the decisions are sometimes made without the client’s best interests at heart. The proposal could give investors more insight into whether they are getting the best price when they buy and sell large numbers of shares, according to three people familiar with the matter. Brokers entrusted with orders in the U.S. stock market can choose from dozens of exchanges and private venues. Some money managers such as T. Rowe Price Group Inc. (TROW) have told regulators that incentives offered by exchanges for attracting orders can put a broker’s financial interest at odds with the customer’s.

Wall Street Journal:

• Mortgage Lenders Ease Rules for Home Buyers in Hunt for Business. Banks Ease Standards Enacted After the Housing Boom Turned to Bust in Sign of Rising Confidence.

• The New Winners and Losers in America's Shale Boom. Smaller Drillers With Tight Focus On Quality of Sites Appeal to Investors. 

• Silicon Valley Tech Giants Discussed Hiring, Say Documents. New Details on Class Action Against Apple, Google, Intel and Adobe Show How Facebook Rejected Alleged Hiring Circle.

MarketWatch.com:

• Home sales getting crimped by more than the weather.

• The Fed’s enormous balance sheet in seven charts. (graph)

CNBC:

• China new home prices rise 7.7% on year in March. Average new home prices in China's 70 major cities rose 7.7 percent in March from a year earlier, easing from the previous month's 8.7 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Friday. 

• What this week’s earnings will say about the economy.

Zero Hedge:

• De-Escalation Off: US Deploys Troops To Poland.

• Russia Confirms Troop Build-Up Near Ukraine; Warns West, More Sanctions "Absolutely Unacceptable".

• The Great Stock Buyback Craze Is Finally Ending. (graph)

• If The Smart Money Is Selling, Who's Buying? (graph)

• Democrats Told "Don't Mention 'Economic Recovery' - It's A Political Loser".

• 18 Stats That Prove That Government Dependence Has Reached Epidemic Levels.

• Peak "Greatest Fool". (graph)

• Consumer Confidence Collapses In Japan. (graph)

• David Stockman On 'The QE Follies': Bernanke's Swell Gift To The Big Four Banks.

• This Means War: US To Target Putin's Personal $40 Billion Stash.

• Barclays Latest To Exit Commodity Trading, Layoff Several Thousand Staff.

• Gas Prices Hit 13-Month Highs, Prompt Macro Concerns.

• This Is Madness!

• Five Reported Killed In East Ukraine Following Ultra-nationalist Attack.

• All You Need To Know About Russia, In Charts.

Business Insider:

• Google(GOOG) Is Planning A $100 Smartphone [Report].

• Macy's(M) CEO Explains Why He's Against Raising The Minimum Wage. 

• Japan Begins First Military Expansion In More Than 40 Years.

• Saudi Arabia Prepares To Build the World's Tallest Building.

• IT'S OFFICIAL: Americans Have Already Forgotten One Of The Biggest Lessons Of The Financial Crisis. (graph) This week, Gallup released the latest edition of an annual survey asking Americans what they considered to be the best long-term investment. The No. 1 answer? Real estate!

• Michael Lewis: 'Wall Street Has Gone Insane'.

Wall Street All-Stars:

• Indicator Update: Springtime optimism ahead?

CNN:

• The rise of leveraged loans. Collateralized loan obligations are not inherently bad investments. But demand for yield has led to a reduction in the quality of loans behind them, and the result may be rather ugly.

NY Times:

• Health Care Spending’s Recent Surge Stirs Unease. A surge of insurance enrollment related to rising employment and President Obama’s health care law has likely meant a surge of spending on health care, leaving policy experts wondering whether the government and private businesses can control spending as the economy gets stronger and millions more Americans gain coverage. “Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. health care system,” Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said in a statement.

• Banks Cling to Bundles Holding Risk. The Volcker Rule doesn’t go into effect until 2015, but that hasn’t stopped big bankers and their supporters in Washington from trying to undermine it. The latest fight involves another complex Wall Street creation, a financial instrument known as a collateralized loan obligation. Big banks want to be allowed to own them but regulators say such holdings can be hazardous and may allow the banks to evade the Volcker Rule’s prohibition on risky trading.

AP:

• GM waited years to recall 335,000 Saturn Ions for power steering failures, documents show. General Motors waited years to recall nearly 335,000 Saturn Ions for power steering failures despite getting thousands of consumer complaints and more than 30,000 warranty repair claims, according to government documents released Saturday.The National Highway Traffic Safety Administration, the government's auto safety watchdog, also didn't seek a recall of the compact car from the 2004 through 2007 model years even though it opened an investigation more than two years ago and found 12 crashes and two injuries caused by the problem.

Telegraph:

• Diageo's emerging markets party is starting to wind down. Diageo, like many other consumer companies, has been caught off guard by the severity of the slowdown in China.

WirtschaftsWoche:

• Ifo's Sinn Says Crisis Countries Need to Exit Euro Region. Big writedown for state, bank debt needed in some crisis countries, Hans-Werner Sinn, president of Munich-based Ifo economic institute, says in interview. Euro region needs to be redesigned with rules that work better, some members would then have to leave currency union. Rescue measures such as ESM and ECB's govt bond purchases lead to crisis countries getting deeper into debt. Minimum wage threatens Germany's competitiveness, he said.

Weekend Recommendations

Barron's:

• Bullish commentary on (HD), (GOOG), (RTN), (SRPT), (WFT), (MYCC), (VIVO) and (RHT).

• Bearish commentary on (CMG), (TWTR), (NFLX), (AMZN) and (FB).

Night Trading

• Asian indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 124.50 +1.5 basis points.

• Asia Pacific Sovereign CDS Index 88.25 +.5 basis point.

• FTSE-100 futures n/a.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.26%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KMB)/1.47

• (STI)/.66

• (HAL)/.71

• (NVR)/9.95

• (HAS).10

• (NFLX)/.81

• (BXS)/.30

• (ZION)/.42

• (RCII)/.55

• (WERN)/.20

• (BRO)/.42

• (FWRD)/.37

Economic Releases 
8:30 pm EST

• The Chicago Fed Nat Activity Index for March.

10:00 am EST

• The Leading Index for March is estimated to rise +.7% versus a +.5% gain in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The (GME) Investor Day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the week.

Weekly Outlook

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

BOTTOM LINE: I expect US stocks to finish the week modestly higher on yen weakness, short-covering, technical buying and earnings optimism. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.