Bull Radar

Style Outperformer:

• Mid-Cap Value +.35%

Sector Outperformers:

• Networking +2.67% 2) Hospitals +1.24% 3) Defense +.72%
  

Stocks Rising on Unusual Volume:

• AMPE, LRE, SODA, CIEN, JDSU, VMW, FNSR, ACAD and OCR

Stocks With Unusual Call Option Activity:

• 1) DOLE 2) KKR 3) HMA 4) CIEN 5) GIS
  

Stocks With Most Positive News Mentions:

• 1) BKE 2) COST 3) CIEN 4) MCD 5) SJM
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Bond Losses Accelerate as Junk Sales Surpass 2012: Euro Credit. Bondholder's losses on high-yield debt are deepening in Europe as issuance of junk securities this year already exceeds the total for all of 2012, with companies taking advantage of record-low borrowing costs. Investors forfeited .2 percent on the notes in the first four days of June, following a negative .6% in May and gains of 1.6% in April, Bank of America Merrill Lynch index data show. Losses are mounting as sales of high-yield bonds surge to 34.6 billion euros, the busiest start to a year on record, according to Bloomberg. "Investors are worried about what will happen to the large amount of total-return driven money that has come into credit," said Hans Lorenzen, a credit strategist at Citigroup Inc. in London. "Will investors decide the party is over and it's time to move on?" 

• EU Considering Handing Libor Oversight to ESMA From the U.K. The European Union is considering whether to hand oversight of the scandal-ridden London interbank offered rate to the European Securities and Markets Authority. 

• RTS Futures Signal Bear Market Isn’t Finished: Russia Overnight. Russia’s dollar-denominated RTS Index (RTSI$) entered a bear market and futures contracts pointed to further declines as prospects for weaker commodity prices sour investor sentiment in the world’s biggest energy exporter. Futures on the gauge fell 0.5 percent to 128,490 in New York after the RTS tumbled 1.6 percent to 1,301.08 in Moscow, leaving it down 20 percent from a Jan. 28 peak.

• China Vanke Chairman Says Country Faces Risk of Property Bubble. China Vanke Co. Chairman Wang Shi said the country’s property market faces the risk of a “bubble,” reiterating concerns the nation’s biggest developer by sales raised three months ago. The bubble isn’t “light,” Wang said at a conference in Shanghai today. “If the bubble lasted, it will be dangerous.” Wang said in a March CBS Corp. broadcast of the 60 Minutes news program that the housing bubble could spell “disaster” for China’s real estate market and that debt held by developers is a serious problem. “You can’t generalize for the Chinese market,” he said. “Then of course if the bubbles are not controlled, the result will be catastrophic.” The average price in China’s 10 biggest cities, including Beijing and Shanghai, jumped 9.7 percent from a year earlier to 17,202 yuan per square meter last month, up 1.1 percent from April, SouFun said.

• China Export Gains Seen Halved With Fake-Data Crackdown. China’s crackdown on fake export invoices used to disguise money flows is probably trimming the nation’s trade figures, revealing subdued global demand that will weigh on economic growth. Outbound shipments may have grown 7.1 percent in May from a year earlier, less than half the previous month’s reported 14.7 percent, based on the median estimate of 34 economists ahead of data due June 8. Import growth probably slowed to 6.9 percent from April’s 16.8 percent, a Bloomberg News survey showed.

• China Blogger Who Began Querying Home Prices Taken to Tea. Two men greeted him at the police station as he was escorted in from the January cold. Peng Chengxian didn’t ask who they were. Each wore a light-colored jacket and carried a dark handbag. They must be “Guo Bao,” Peng says he thought. That’s the name of China’s secret police in charge of keeping order among more than 1.3 billion people for the ruling Communist Party. 

• China’s Small-Company Stocks May Fall Further 10%, Shenyin Says. China’s ChiNext index of small companies may fall a further 10 percent from current levels because of valuations and concern they may miss earnings estimates, according to Shenyin & Wanguo Securities Co. The ChiNext index in Shenzhen slipped 0.4 percent to 1,029.11 as of 10:25 a.m., adding to a 5.6 percent slide from this year’s high set on May 27. “Stretched valuations and overly high expectations about the new economy and the short-term success of the economic transformation are the reasons for the correction in the ChiNext,” Wang Sheng, an analyst at the Shanghai-based brokerage, wrote in a report dated today. “Expectations about tight liquidity and lower-than-estimated earnings are catalysts for the decline.” The ChiNext traded at 58.1 times reported earnings on May 30, the highest in almost two years, according to data compiled by Bloomberg.

• Abenomics Won’t Be ’Magic Bullet’ for Japan, Says Johnson of MIT. Japanese Prime Minister Shinzo Abe’s policies to stem deflation and spur growth won’t be a “magic bullet” that shakes the nation’s economy out of stagnation, said Simon Johnson of the Massachusetts Institute of Technology. While Abe’s efforts are “significant,” an aging population, heavy debt loads and a lack of immigration will continue to hobble the Japanese economy, Johnson, a former chief economist at the International Monetary Fund, said in an interview on “Bloomberg Surveillance” with Tom Keene and Sara Eisen.

• Gottex Fund Cuts Bets on Small Japanese Companies After Rally. Gottex Fund Management Holdings (GFMN), which allocates $6.4 billion to hedge funds, has cut its largest Asia fund’s bets on small Japanese companies whose share prices may fall more sharply in the market correction. 

• RBA Rate Cuts Having Smaller Impact on Housing, Treasury Says. Australia’s record-low interest rates are having a weaker impact on the housing industry than has historically been the case, as consumers shy away from taking on more debt, Treasury said. “There’s less appetite for debt and that’s part of the smaller response to interest-rate cuts in terms of how much dwelling activity it’s generating,” Treasury official David Gruen told a parliamentary committee in Canberra today. The department indicated nominal gross domestic product for the year ending June 30 may be weaker than the May budget’s 3.25 percent forecast.

• Emerging Market Stocks Turn From Best to Worst. (video)

• Asian Stocks Slide to Lowest Since January on U.S. Data. Asian stocks fell, with the regional benchmark index heading to a four-month low, after U.S. jobs and factory data missed estimates and investors speculated whether the Federal Reserve will scale back bond purchases. Japanese shares swung between gains and losses. Techtronic Industries Co. (669), a maker of power tools that gets 73 percent of its sales in North America, dropped 4.1 percent in Hong Kong. Rinnai Corp. (5947), a manufacturer of gas appliances, slumped 8.4 percent in Tokyo as it plans to raise as much as 22.5 billion yen ($227 million) in a share sale. Tokyo Electric Power Co. tumbled 8.6 percent, leading Japanese utilities lower. The MSCI Asia Pacific Index slid 0.7 percent to 131.37 as of 12:08 p.m. in Tokyo. More than three shares fell for each that rose on the gauge, which is heading for the lowest close since Jan. 28. The measure fell 8.3 percent through yesterday from this year’s high on May 20 amid concern the Federal Reserve may soon scale back stimulus and as Japanese stock indexes entered a correction last week.

• ETF Selloff Outpacing Junk Signaling More Losses: Credit Markets. Losses on junk-bond exchange-traded funds are outpacing the broader U.S. speculative-grade market by the most in three years, signaling a deepening slump for debt that traded at record-high prices less than a month ago. BlackRock Inc.'s $14.5 billion iShares iBoxx High Yield Corporate Bond ETF, the biggest of its kind, plunged 2.6% in May, 2.1 percentage points more than the decline in the Bank of America Merrill Lynch U.S. High Yield Index. Investors redeemed 3.3 million shares, or about $305 million, from the fund June 4, its biggest one-day outflow on record. While ETFs hold less than $40 billion of the $1.15 trillion U.S. high-yield bond market, they act as a quicker gauge of market sentiment because their shares trade more frequently than most corporate bonds. "The ETFs are more reflective of where the market actually is," said Peter Tchir, founder of hedge-fund adviser TF Market Advisors. ETFs may be "a leading indicator that you're going to see more selling pressure on the market as a whole," he said.

• U.S. Company Credit Swaps Rise as Investors Weigh Fed Stimulus. A gauge of U.S. corporate credit risk rose to the highest level in two months amid speculation on the future pace of Federal Reserve stimulus. The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 3.8 basis points to a mid-price of 85.7 basis points at 4:20 p.m. in New York, according to prices compiled by Bloomberg. That’s the highest level since April 5. The risk premium on the Markit CDX North American High Yield Index rose 18.7 basis points to 426.3 basis points, Bloomberg prices show. The average relative yield on speculative-grade, or junk-rated, debt widened 16 basis points to 540.1 basis points, the biggest jump since April 8, Bloomberg data show.

• Fed Grants Foreign Banks Leeway in Dodd-Frank Swap Pushout Rule. Foreign-based banks won leeway in Dodd-Frank Act requirements to separate swaps trading from their U.S. branches under a Federal Reserve policy released yesterday. The central bank said in an interim final rule that the banks will be eligible to apply for a transition period of 24 months in rules taking effect July 16. The Institute of International Bankers, a lobbying group representing Credit Suisse Group AG (CSGN) and Deutsche Bank AG (DBK) among others, urged the Fed to grant foreign banks the same phase-in process U.S. banks like JPMorgan Chase & Co. (JPM) received earlier this year. 

• Rebar Falls as Stock Market Drop Spurs Concern China’s Slowing. Steel reinforcement-bar futures in Shanghai fell as a six-day decline in the stock market fueled wider concern that growth in China is slowing. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 1.7 percent to 3,422 yuan ($558) a metric ton, before trading at 3,428 at 10:40 a.m. Futures fell 14 percent this year. 

• Rubber Drops as Yen Rebounds, U.S. Data Raise Demand Concerns. Rubber declined for a second day as the Japanese currency traded near a one-month high against the dollar, cutting the appeal of yen-based futures, and after U.S. jobs and factory data missed estimates. The contract for delivery in November fell as much as 2.3 percent to 251.2 yen a kilogram ($2,528 a metric ton) and was at 252.5 yen on the Tokyo Commodity Exchange at 10:08 a.m. Futures extended losses for this year to 16 percent.

• U.S. Crude Output Exceeds Imports for First Time in 16 Years. U.S. domestic crude-oil production exceeded imports last week for the first time in 16 years, a government report showed today. Output was 32,000 barrels a day higher than imports in the seven days ended May 31, according to weekly data from the Energy Information Administration, the Energy Department’s statistical arm. Production had been lower than international purchases since January 1997. A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Oklahoma and Texas. The surge in oil and gas production helped the U.S. meet 88 percent of its own energy needs in February, the highest monthly rate since April 1986, EIA data show. Crude inventories climbed to the highest level in 82 years in the week ended May 24. “It will help U.S. energy independence and help our trade balance quite a bit,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “You have to wonder if you are going to see downward pressure on prices.”

• SAC Said to Tell Employees Firm to Survive Redemptions. Steven A. Cohen’s SAC Capital Advisors LP told employees it plans to stay open for outside investors after significant client redemptions, according to two people with knowledge of the matter. SAC President Tom Conheeney, in a June 4 e-mail to employees, said the firm doesn’t plan to release a number for the redemptions, said the people, who asked not to be identified because the communication is private. SAC doesn’t plan significant staff reductions, Conheeney wrote, according to the people.

Wall Street Journal: 

• IRS Staff Cite Washington Link. Two Workers Tell Congress That Agency Officials Helped Direct Tea-Party Reviews. Two Internal Revenue Service employees in the agency's Cincinnati office told congressional investigators that IRS officials in Washington helped direct the probe of tea-party groups that began in 2010. Transcripts of the interviews, viewed Wednesday by The Wall Street Journal, appear to contradict earlier statements by top IRS officials, who have blamed lower-level workers in Cincinnati.

• Beijing Gets a Pass on Iran Sanctions. The State Department on Wednesday exempted several countries, including China and India, from financial sanctions targeting Iranian oil sales because those countries have continued to reduce their purchases of Iranian crude oil.

• ‘Dark Pools’ Face Scrutiny. Regulators Ask for Details on Stock Trading in Murkiest Parts of the Market. Officials are increasing their scrutiny of an opaque corner of the market where stocks change hands in the dark. 

• The Hidden Jobless Disaster. At the present slow pace of job growth, it will require more than a decade to get back to full employment defined by prerecession standards.

• What Enron and the IRS Have in Common. Ethical meltdowns are rarely the work of a few rogue workers. They take their cues from toxic leadership.

Fox News: 

• Holder misses deadline to clear up testimony on reporter surveillance. Attorney General Eric Holder has missed the deadline set by Republicans to personally explain questionable testimony he gave on reporter surveillance, as lawmakers threaten to subpoena Holder if necessary. 

• Obama's UN ambassador pick has history of controversial comments. The former White House adviser and longtime Obama friend nominated Wednesday as the next U.S. ambassador to the United Nations has a history of controversial comments that could haunt her in confirmation -- including likening U.S. foreign policies to those of the Nazis.

MarketWatch.com:

• ‘Income’ label pays off for mutual funds.

CNBC: 

• Luxury Sales Hit by Chinese Fears of 'Ostentation'. Solid earnings and soaring share prices for Tiffany, Michael Kors and other luxury brands has led to widespread talk of a new boom in high-end goods, but it may be too early to pop the corks on the Dom Perignon. A new study from one of the world's top luxury experts predicts that growth in such sales will be as much as 50% slower this year than last. The main reason: China.

Zero Hedge: 

• Small African Country To "Seize" Chinese Oil Exploration Assets.

• Will Rail Run Out Of Steam Post-Keystone?

• Feeling Confident? Just Two Charts.

• Visualizing IRS-Gate: Bureaucratic Blunder Or Political Profiling?

• Slamming The Money Market “Gates” – Capital Controls Coming To $2.6 Trillion Industry.

Business Insider:

• Here's Why Fannie Mae's Stock Price Makes No Sense To Everyone.  

• REVEALED: NSA Is Collecting Phone Records Of Millions Of Americans Daily.

• Report: Leon Panetta Leaked Top Secret Information On Navy SEALs.

• Iowa City Is About To Take An Unprecedented Stand Against Government Surveillance Technology.

New York Times: 

• Financial Fears as Street Unrest Shakes Turkey.

Reuters:

• China has more cards to play in EU trade dispute - People's Daily. China still has plenty more cards to play in an increasingly ugly trade dispute with the European Union, the official People's Daily newspaper said on Thursday, accusing Europe of not realising that its global power was waning. 

• Tropical Storm Andrea forms over Gulf of Mexico.  Tropical Storm Andrea was swirling over the east-central Gulf, about 310 miles (500 km) southwest of Tampa, Florida, and packing maximum sustained winds of 40 miles per hour (64 kph), the Miami-based National Hurricane Center said.

• U.S. sale of some 'morning-after' pills to all ages allowed. A U.S. appeals court on Wednesday said that some emergency contraception pills now can be sold over-the-counter without age restrictions while the federal government fights a lower court judge's order allowing unrestricted sales.

Financial Times: 

• Paris threatens EU-US talks as China trade war looms. Paris is threatening to block EU-US trade talks that Britain wants to launch at this month’s G8 summit in Northern Ireland if French demands to exclude cultural industries such as music and film are not met. Washington, London and Brussels are pushing hard for a new transatlantic trade agreement to boost the US and European economies, with President Barack Obama swinging his weight behind the move.

• US dividend play at risk of overrunning. When it comes to buying stocks, owning high dividend paying companies has been the trend to follow for some years. But, with the US equity bull market in its fifth year and the S&P 500 occupying record territory, the preference for owning stocks that pay hefty dividends is under assault.

Telegraph: 

• Emerging markets displace Europe as fulcrum of world risk. There is a wicked double edge to the emerging-market boom that has so enthralled us for the past decade. The economies of these rising powers are by now big enough to shake the entire world if they come off the rails. My fear is that a China-led BRICS shock will transmit a wave of deflation across the planet, pushing the West over the edge into another downward leg of trade depression. The eurozone polity cannot withstand such a blow. Youth unemployment is above 40pc in Italy, Spain, Portugal and Greece, and “nominal” GDP is contracting across the four countries, meaning that high debt is rising on a shrinking base. Another twist of the deflation knife will be lethal.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 127.0 +6.0 basis points.

• Asia Pacific Sovereign CDS Index 103.75 +4.25 basis points.

• FTSE-100 futures -.26%.

• S&P 500 futures +.23%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (UTIW)/.03

• (SJM)/1.16

• (CIEN)/.00

• (CONN)/.56

• (ANN)/.40

• (COO)/1.38

• (ZQK)/.04

• (THO)/.88 

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 345K versus 354K the prior week.

• Continuing Claims are estimated to fall to 2973K versus 2986K prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Plosser speaking, Fed's Sarah Bloom Raskin speaking, Spanish/French 10Y note auctions, BoE rate decision, ECB rate decision, Challenger Job Cuts for May, RBC Consumer Outlook Index for June, weekly Bloomberg Consumer Comfort Index, 1Q Change in Household Net Worth, UBS investor conference, (ETH) investor conference and the (V) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Falling into Final Hour on Rising Global Growth Fears, Rising Eurozone Debt Angst, Margin Selling, Transport/Financial Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 17.42 +7.07%

• ISE Sentiment Index 68.0 -19.05%

• Total Put/Call 1.18 +4.42%

• NYSE Arms 1.62 +32.73%

Credit Investor Angst:

• North American Investment Grade CDS Index 84.89 +3.68%

• European Financial Sector CDS Index 156.58 +5.01%

• Western Europe Sovereign Debt CDS Index 83.50 +3.0%

• Emerging Market CDS Index 299.25 +4.5%

• 2-Year Swap Spread 17.0 +.5 bp

• TED Spread 22.75 -1.0 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -13.25 +.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .05% +2 bps

• Yield Curve 180.0 -4 bps

• China Import Iron Ore Spot $116.60/Metric Tonne unch.

• Citi US Economic Surprise Index -29.0 -7.2 points

• 10-Year TIPS Spread 2.16 -3 bps

Overseas Futures:

• Nikkei Futures: Indicating -45 open in Japan

• DAX Futures: Indicating -18 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• Anti-EU Sentiment Increases as Britons Demand Exit, Poll Shows. Rising anti-European Union sentiment and the threat that Britain will quit the bloc may boost nationalist candidates in next year’s European Parliament elections, a poll showed. Pluralities in six countries said things are going in the “wrong direction” in the EU, with a majority in the U.K. favoring a pullout from the bloc if a referendum were held now, Gallup Europe said. EU Parliament balloting in May 2014 risks “the strong mobilization of voters in favor of radical nationalist and anti-EU parties, which could result in a drastic change in the landscape of European democracy,” Gallup Europe said in a statement in Brussels today. Economic ills and a sense of “disconnect” between the people and EU politicians are likely to depress turnout, making it easier for well-organized anti-EU forces to make inroads in the election, the pollsters said.

• Finnish Economy Enters Recession as Euro Slump Saps Output. Finland’s economy shrank in the first quarter, entering a recession as its fellow euro-area countries struggle with austerity and surging unemployment. Gross domestic product, adjusted for seasonal swings, contracted 0.1 percent from the prior three months, when it shrank a revised 0.7 percent, Statistics Finland in Helsinki said today on its website. The slump matched the median estimate of three economists in a Bloomberg survey. The economy also stalled in the third quarter, after being revised from 0.1 percent growth, data showed. 

• Lira Weakens as Turkish Yields Climb on Sixth Day of Protests. The lira weakened and bond yields rose as anti-government demonstrations in Turkey continued for a sixthday. Shares slid, with Akbank TAS among the decliners as Bank of America Merrill Lynch cut the lender to underperform. Markets swung to negative after a record rally in two-year bonds yesterday followed the biggest plunge a day earlier. Protesters accusing Prime Minister Recep Tayyip Erdogan of autocratic governance and citing grievances, including alleged police brutality and curbs on alcohol sales, clashed overnight with police, who responded with tear gas and water cannons in about 10 cities.

• European Stocks Drop to Their Lowest Level in Six Weeks. European stocks retreated to their lowest level in six weeks as investors weighed comments by Federal Reserve policy makers on when to scale back the central bank’s bond-buying program. Tesco Plc slid the most in 16 months after the U.K.’s largest retailer reported same-store sales that fell short of analysts’ estimates. Carrefour SA lost 4.1 percent after HSBC Holdings Plc recommended that investors sell the French retailer’s shares. Man Group Plc plunged 17 percent after reporting a decline in the net assets of its flagship fund. The Stoxx Europe 600 Index dropped 1.5 percent to 295.12 at the close of trading, its lowest level since April 24.

• Obama Team Bullying Cited by Critics in Drive for Uninsured. Anne Filipic, who helped Barack Obama secure a turning-point victory in the 2008 Iowa caucuses, plans to send thousands of volunteers door-to-door this year on a new campaign: to help the president sell his health-care law to the nation’s 50 million uninsured. First, though, her organization, Enroll America, must deal with the fallout from congressional Republicans who say the Obama administration is pressuring companies such as drugmaker Johnson & Johnson to support an outreach effort that could cost as much as $100 million.

Wall Street Journal:

• Apple(AAPL), AT&T(T) Vulnerable to U.S. Ban of Older iPhones. 

Dow Jones:

• IMF to Publish Paper Admitting Lapses in Greece Bailout. IMF says own projections on Greece too optimistic. Says EU commission weak in crisis management.

Fox News:

• Obama names Susan Rice as national security adviser despite Benghazi controversy.

CNBC:  

• No Money Down Mortgages in Martha's Vineyard.

• China's Strength Could Become Its Weakness. Who's afraid of China? Everyone apparently. As China's economic might grows, trading partners from Europe to Asia to the U.S. are crying foul, some louder than others. But growing domestic tensions and internal economic imbalances are forcing Chinese leaders to overhaul the very economic model that has served them so well for the past decade.

Zero Hedge:  

• ADP Misses Expectations, Second Worst Print In Last 8 Months; Sequester Blamed. (graphs)

• Hourly Compensation Crashes Most Ever, Labor Costs Drops By Most In 4 Years, Manufacturing Compensation Plummets By 7%. (graphs)

• Worst Month For Mortgage Applications Since 2009 Driving Mass Layoffs. (graphs)

• ECB To Launch EU-Wide Audit Of Bank's Balance Sheets.

• Non-Manufacturing ISM Comes In Line, Factory Orders Miss: Inventory To Sales Highest Since October 2009. (graphs)

• UBS CIO Warns Of Japanese "Abegeddon" Scenario.

• $179,000 Each - In Debt. (graph)

Business Insider:  

• FED BEIGE BOOK: Growth Is 'Modest To Moderate' Across Most Of America.

• The Richest Families In The World Are Staging A Quiet Rebellion Against Hedge Funds.

• Stephanie Ruhle's Response To Paul Tudor Jones' Women Traders Gaffe Is The Best We've Read.

• Illinois Could Become The Epicenter Of America's Next Oil Boom.

• Japan Is Getting Pulverized Again. (graph)

IndexUniverse:

• Credit Default Swap ETFs Coming To Market. Unlike other products now on the U.S. market, a new family of proposed ETFs from ProShares that is focused on credit default swaps (CDSs) will allow U.S. investors a "pure play" to weigh in on credit quality for the first time. Bond issuers, especially low-credit issuers, have benefited immensely from the Federal Reserve’s low-rate policy as yield-starved investors have crept down the credit spectrum in search of real return. It’s not just U.S. companies that have loaded up on debt either, “global bond issuance is up a stunning 53 percent from the same period in 2012,” according to CNBC. But after a long sustained upward move in bond prices, some are nervous this beast might turn around to bite them. ProShares’ filing seems to capitalize on investor anxiety and be an attempt to placate it.

DrHousingBubble:

• Is the low interest rate environment causing a different kind of housing bubble? The tracking of the Effective Federal Funds Rate and 30-Year Conventional Mortgage. (graphs)

Reuters: 

• Mortgage applications drop as rates surge: MBA. Interest rates on U.S. mortgages continued to surge last week, rising above 4 percent for the first time in a year and driving down demand from homeowners to refinance, data from an industry group showed on Wednesday.Fixed 30-year mortgage rates climbed 17 basis points to average 4.07 percent in the week ended May 31, the Mortgage Bankers Association said. Rates have risen by 48 basis points in the last four weeks, with the most recent upswing driven by nervousness that the Federal Reserve could slow its economic stimulus efforts sooner than had been anticipated. Last week's interest rate was the highest since April 2012 and the first time rates have been above 4 percent since early May of last year. MBA's seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, tumbled 11.5 percent last week. Demand for refinancing was hit hardest by the acceleration in rates, with applications slumping 15.0 percent. The refinance share of total mortgage activity fell to its lowest level since July 2011 at 68 percent of applications from 71 percent the week before. The gauge of loan requests for home purchases - a leading indicator of home sales - held up relatively better, falling just 1.6 percent.

• Senator says Smithfield(SFD) deal has food safety implications. The head of the Senate Agriculture Committee on Wednesday said she was concerned about the food safety implications posed by the proposed purchase of pork producer Smithfield Foods by Shuanghui International, a Chinese meat products company. The federal agencies considering the merger "must take China's and Shuanghui's troubling track record on food safety into account, and do everything in their power to ensure our national security and the health of our families is not jeopardized," Senator Debbie Stabenow, a Michigan Democrat, said in a statement.

• U.S. dollar falls below 99 yen to trade 1 pct lower.

• Canadian oil output to more than double by 2030 -study.

• Colony American Homes postpones IPO as interest rates rise.

Financial Times: 

• Quant hedge funds hit by US bonds sell-off. Some of the world’s biggest quant hedge funds have suffered steep losses in the past two weeks following the sell-off in global bond markets. So-called “CTAs”, which use computer models to automatically spot and ride market trends, were caught out as investors anticipated an end to the Federal Reserve’s measures to stimulate the US economy, triggering a global rout in fixed income investments.

Telegraph:  

• France demands emergency EU summit over China's wine tax threat. France has demanded that the European Union holds an emergency summit after Beijing responded to a Brussels announcement of “anti-dumping” tariffs on Chinese solar panels by threatening retaliatory levies on wine imported from Europe.

Handelsblatt:

• ECB Acting Outside Mandate, ZEW's Fuest Says. ECB has signaled to financial markets that it will guarantee govt debt without limits, and that's not within the bank's mandate, Clemens Fuest, head of Germany's ZEW Center for European Economic Research, says in an interview. ECB is operating in "grey zone", he said. Reasoning of ECB is faulted, while bank hasn't proven wrong the assertion that all it does is ensure cheap credit for countries in crisis. The ECB should step aside and let governments prevent a potential collapse of the euro zone, he said.

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.40%

Sector Underperformers:

• 1) Homebuilders -2.71% 2) Airlines -2.70% 3) I-Banking -2.42%

Stocks Falling on Unusual Volume:

• LNG, NXST, LBAI, MBT, BSBR, ANV, FNFG, UBNT, FLO, TTF, THR, GIII, IBB, CG, ACHC, CLVS, GSK, RHP, CLD, LAMR, AMWD, CSTE, NGLS, RESI, INFI, CLNY BCE, CP, GEL, MMLP, HSII, RYL, FAST, THR, CQP, SKYW, AYR and TSRO

Stocks With Unusual Put Option Activity:

• 1) LYV 2) UA 3) HYG 4) SCHW 5) IYT
  

Stocks With Most Negative News Mentions:

• 1) JOY 2) BBY 3) DOW 4) RH 5) MS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth -.77%

Sector Outperformers:

• Gold & Silver +.73% 2) Oil Service +.04% 3) Drugs -.54%
  

Stocks Rising on Unusual Volume:

• MFRM, DG and AMBA

Stocks With Unusual Call Option Activity:

• 1) TWC 2) DG 3) DOLE 4) K 5) CIT
  

Stocks With Most Positive News Mentions:

• 1) UNH 2) FAST 3) WAG 4) T 5) CTXS
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume