Bull Radar

Style Outperformer:

• Large-Cap Value -1.22%

Sector Outperformers:

• 1) Utilities -.18% 2) Networking -.20% 3) Telecom -.24%
  

Stocks Rising on Unusual Volume:

• GTIV, VIPS, CSCO, CLVS, BIS, KND, MNTA, AMED and TXTR

Stocks With Unusual Call Option Activity:

• 1) ADSK 2) AEO 3) TPX 4) RDN 5) CSCO

Stocks With Most Positive News Mentions:

• 1) D 2) WMT 3) A 4) T 5) GM
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• Ukraine Slides Deeper Toward War as Russia Warns on Vote. Russia’s foreign minister said Ukraine is sliding into a civil war that will make it impossible to hold legitimate elections, as Ukrainian leaders and their international allies blamed Russia for the violence. “When Ukrainians kill Ukrainians, I believe it’s as close to civil war as you can get,” Sergei Lavrov told Bloomberg Television in an interview in Moscow yesterday. “In the east and south of Ukraine, there is a war, a real war, with heavy weaponry used, and if this is something that is conducive to free and fair elections, then I don’t understand something about freedom.” 

• UBS Sees 20% Drop for Biggest China Stocks on Profit Drop. UBS AG says it’s time to start cutting Chinese profit forecasts again. Chen Li, the chief China equity strategist at UBS, estimates companies in the nation’s CSI 300 Index (SHSZ300) will post a 3 percent drop in earnings this year, versus consensus forecasts for a 14 percent gain. As analysts downgrade projections to account for a weak property market and depreciating yuan, China’s biggest non-bank stocks may extend this year’s drop to 20 percent, Chen says. The Shanghai-based strategist sees parallels with 2012, when the nation’s slowing economy spurred analysts to reduce profit estimates and the CSI 300 index fell more than 20 percent from its May high through the December low.

• Japan Defense Academy Recruitment Jumps as China Tensions Rise. A 6:00 a.m. bugle call summons 22-year-old student Mutsumi Iida to begin a day organized by the minute between study, sports and training until lights out at 10:30 p.m. She picked the National Defense Academy over the freedom of an ordinary university as the best route to her dream of becoming an officer in Japan’s Marine Self-Defense Forces. The largest number of young people in 26 years followed in Iida’s footsteps to the college this year, as Prime Minister Shinzo Abe pushes a more active defense posture. Abe today will announce plans to reinterpret Japan’s pacifist constitution to expand the role of the military.

• Asian Stocks Fall as Yen Holds Gain; Nickel, Crude Slip. Asian stocks dropped, pushing the regional index down from a four-month high, as Japanese shares slid after U.S. gauges retreated from record highs. The yen maintained gains while crude oil fell with industrial metals. The MSCI Asia Pacific Index lost 0.5 percent by 10:02 a.m. in Tokyo, after closing at the highest level since Jan. 13 yesterday.

• Nickel Plunges More Than 9%, Biggest Slump Since 2011. Nickel slumped the most in 31 months as investors deemed the metal’s rally this year as overdone. Contracts for delivery in three months on the London metal Exchange dropped as much as 9.7 percent, the largest intraday drop since September 2011, to $18,090. The metal, which touched $21,625 on May 13 and is the still the best performer on LME this year, traded at $18,460 at 10:13 a.m. Shanghai time.

• Obama Said to Put Personal Push Behind EPA’s Emissions Rules. U.S. President Barack Obama plans to personally unveil proposed carbon-emissions rules for power plants, elevating climate change policy as a top tier issue for his final two years in office, according to two people familiar with White House strategy. Obama is preparing to make the announcement with Environmental Protection Agency Administrator Gina McCarthy, who said yesterday the rules are on track to be proposed by June 2, according to the people, who spoke on the condition of anonymity because the schedule is still being planned. 

• Cisco(CSCO) Revenue Forecast Tops Estimate on Pickup in U.S. Cisco Systems Inc. (CSCO) gave a forecast for fourth-quarter revenue that topped analysts’ estimates as orders in the U.S. climb on demand for networking machines to handle data traffic, making up for weaker emerging-market sales. Cisco’s revenue in the current period through July will be $12 billion to $12.3 billion, based on the company’s forecast for a decline of 1 percent to 3 percent from a year earlier. Analysts were projecting, on average, sales of $11.8 billion.

Wall Street Journal:

• Ukraine 'Close to Civil War,' Says Russian Foreign Minister. Talks Open in Kiev Without Separatists as Moscow Calls for Considering 'Needs of All the Country's Regions'.

• Crisis in Ukraine: Streaming Coverage.

• Interest Rates Sink Globally in Expectation of Stimulus. Nervous Investors Pile Into Bonds. Global bond rates dropped to their lowest levels of the year Wednesday, as central bankers signaled their determination to jolt the world's largest economies out of their malaise. Investors piled into U.S., German and British government bonds—used to price everything from mortgages to car loans—driving down their yields. The yield on the 10-year U.S. Treasury dropped to as low as 2.523%, its lowest level in more than six months. In...

CNBC:

• Obamacare 'won't have a happy ending': Ken Langone. Burdensome levels of regulation are stunting growth, and nowhere is that more prevalent than with the Affordable Care Act, businessman Ken Langone said Wednesday. 

• CNBC charts the top 100 fee-only wealth management firms. The CNBC Digital editorial team presents our inaugural list of the Top 100 Fee-Only Wealth Management Firms. Click here for the full firm financial and contact details.

Zero Hedge:

• IceCap Asset Management: "The Only Thing Booming In Europe Is Separatist Movements".

• Here's Why The Baltic Dry Index Is Collapsing (In 1 Image).

• Moar QE Hopes Dashed As Japanese GDP Rebounds To Best Since Q3 2011.

• The Max Pain Trade. (graph)

• How The Debt Trap Swallowed Asia In Three Charts. (chart)

• Geithner Confirms Mafia-Linked Berlusconi's Forced Ouster, But Says US Did Not "Have Blood On Our Hands".

• Vietnamese Mob Burns Foreign Factories In Anti-China Riots (21 Dead, 90 Injured).

ValueWalk:

• David Tepper Turns More Bearish: SALT Conference 2014. 

• David Einhorn, Seth Klarman Warn Of Tech Bubble, But Like MU.

Business Insider:

• Bill Clinton Just Gave A Grave Warning About Putin's Plan For Ukraine.

• Forget Sanctions Over Ukraine: Russia Scores Massive Gas Pipeline Deal With China.

• If You Think Kidnapping Those Girls Was Bad, Look What Else Boko Haram Has Done Recently.

 Telegraph:

• Modi's Thatcherite talk cannot restore India's flagging fortunes. India's superpower dreams are giving way to the same old reality of poverty.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 115.75 -1.75 basis points.

• Asia Pacific Sovereign CDS Index 81.75 -1.25 basis points.

• FTSE-100 futures -.17%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures  +.07%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly 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 25% net long heading into the day.

Stocks Falling into Final Hour on Russia/Ukraine Tensions, Global Growth Fears, Yen Strength, Homebuilding/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 12.25 +.99%

• Euro/Yen Carry Return Index 145.63 -.40%

• Emerging Markets Currency Volatility(VXY) 7.19 +.14%

• S&P 500 Implied Correlation 56.59 +2.43%

• ISE Sentiment Index 87.0 -26.27%

• Total Put/Call 1.07 +21.59%

• NYSE Arms 1.09 +26.20% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.02 +.97%

• European Financial Sector CDS Index 72.80 +.76%

• Western Europe Sovereign Debt CDS Index 31.94 +.69%
• Asia Pacific Sovereign Debt CDS Index 82.03 -1.09%

• Emerging Market CDS Index 264.64 -1.34%

• China Blended Corporate Spread Index 354.73 -.59%
• 2-Year Swap Spread 13.75 +.25 basis point

• TED Spread 20.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -7.0 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 217.0 -6.0 basis points

• China Import Iron Ore Spot $103.50/Metric Tonne +.49%

• Citi US Economic Surprise Index -11.40 +1.3 points

• Citi Emerging Markets Economic Surprise Index -27.10 -.4 point

• 10-Year TIPS Spread 2.17 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -145 open in Japan

• DAX Futures: Indicating -12 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Ukraine ‘Close to Civil War as You Can Get,’ Russia Says. Ukraine “is as close to civil war as you can get” and a solution must be found that satisfies all regions, Russian Foreign Minister Sergei Lavrov said. Russia has “no intention” of sending its troops anywhere, Lavrov said in an interview today with Bloomberg Television at the Foreign Ministry building in central Moscow. While holding Russia accountable for Ukraine’s presidential election on May 25 is “ridiculous,” the vote can’t be legitimate if it’s impeded by fighting, he said. There’s already a “real war” between government forces and separatist fighters in the country’s east and south, Lavrov said. Any attempt to grant NATO membership to Ukraine would be “an issue for Russia” and its inclusion in the alliance would hurt European security, he said.
• Mizuho Leads Japan’s Big Banks in Forecasting Annual Profit Drop. Mizuho Financial Group Inc. (8411) led Japan’s three biggest banks in forecasting a drop in earnings for this year as loan growth loses momentum and returns from stock investments wane.
• China Insurers’ Investment Risks Accumulating, Regulator Writes. Chinese insurers face increasing risks from their investments in property and local government debt as the nation’s economic growth slows, according to a senior regulatory official. The China Insurance Regulatory Commission will focus more on risk prevention, and seek to avert any systemic or regional crisis, Chen Wenhui, a vice chairman of the watchdog, wrote in an article published in the Shanghai Securities News today. The regulator’s warnings add to signs of growing concerns among policy makers about risks from an economic slowdown.
• China Plays Cat and Mouse With Vietnam Coast Guard on Rig. From his Vietnamese Coast Guard boat at night, Lieutenant Phan Chi Cuong can see the yellow lights of an oil rig 10 nautical miles away. Owned by a Chinese company, it sits in waters near islands claimed by both nations in the South China Sea.
• Sony Unexpectedly Forecasts Loss on PC Exit, Restructuring Costs. Sony Corp. (6758) unexpectedly forecast an annual loss, the sixth in seven years, casting further doubt on Chief Executive Officer Kazuo Hirai’s ability to revive the company amid restructuring efforts. The net loss will probably be 50 billion yen ($490 million) in the 12 months ending March 31, the Tokyo-based company said in a statement yesterday. That compares with the 57.1 billion-yen profit average of 19 estimates compiled by Bloomberg and a 128.4 billion-yen net loss the year earlier.
• Deere(DE) Cuts Sales Forecast After Decline in Equipment Volumes. Deere & Co. (DE), the largest agricultural-equipment maker, posted lower-than-expected sales and reduced its full-year revenue outlook after shipping less machinery while the dollar weakened against other currencies. Equipment sales in the fiscal second quarter through April dropped to $9.25 billion from $10.3 billion a year earlier, the Moline, Illinois-based company said today in a statement. That trailed the $9.65 billion average of 12 analysts’ estimates compiled by Bloomberg.

ZeroHedge: 

• Santelli Introduces Subprime 2.0. (video)
• What Can Possibly Go Wrong: In China Homes Are Offered "Zero Money Down".
• White House On Biden's Son Joining Ukraine Gas Giant - No Ethical Issues Here.
• 10Y Treasury Yield Breaks Key Support. (graph)
• What Food Inflation? (graph)

Financial Times:

• European banks’ bad loans hit €1tn. A majority of Europe’s banks have suffered a jump in bad loans even as investors lined up to lend them money, according to a study by Fitch, the rating agency. Impaired loan volumes rose 8.1 per cent in 2013 to slightly more than €1tn compared with the year before, said the Fitch analysis, which used banks’ financial results for the years ending 2012 and 2013.

Bear Radar

Style Underperformer:

• Small-Cap Value -1.03%

Sector Underperformers:

• 1) Gaming -2.52% 2) Homebuilding -2.31% 3) Banks -1.51%

Stocks Falling on Unusual Volume:

• JGW, ENZY, AR, HYGS, FOSL, LFL, TTWO, BANC, URS, INSY, WAT, DOOR, MMLP, RDY, LLL, SNE, NVO, NXPI, ICON, CUB, RDEN, TRAK, SQM, WHR, DXYN and RAX

Stocks With Unusual Put Option Activity:

• 1) FOSL 2) M 3) CSCO 4) DE 5) WY
  

Stocks With Most Negative News Mentions:

• 1) C 2) DE 3) WMT 4) ZLC 5) PCLN
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.31%

Sector Outperformers:

• 1) Steel +1.24% 2) Biotech +.89% 3) Gold & Silver +.71%
  

Stocks Rising on Unusual Volume:

• ZU, STKL, OSIR, IRM, CLDX, CRTO, ISIS, KATE, IMPV, RUBI, BLUE, XON, XONE and VMI

Stocks With Unusual Call Option Activity:

• 1) HUN 2) RAI 3) NEE 4) WIN 5) IRM

Stocks With Most Positive News Mentions:

• 1) M 2) RNF 3) ISIS 4) SHLD 5) YHOO
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume