Morning Market Internals

NYSE Composite Index:

• Volume Running 10.7% Below 100-day average
• 4 Sectors Rising, 6 Sectors Declining
• 47.1% of Issues Advancing, 49.5% Declining
• 44 New 52-Week Highs, 50 New Lows
• 51.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.0
• Vix 14.31
• Total Put/Call .92
• TRIN/Arms 1.26

Monday Watch

Today's Headlines 

Bloomberg: 

• Greece’s Endgame Nears as Tsipras Warns Bell May Toll for Europe. Greece faces a week of tough decisions as negotiations over a financial lifeline edged closer toward endgame with creditors showing no signs of budging over what it will take for them to release more money. As another of the government’s self-imposed deadlines for securing a deal on its finances slipped away, disagreements between the two sides on budget targets persisted, a person familiar with the matter said. Greece must make four payments totaling almost 1.6 billion euros ($1.78 billion) to the International Monetary Fund this month and its bailout package backed by the euro region expires at the end of June.
• Greece Pins Hopes on Merkel as Talks Yield Little Progress. Greece’s hopes of sealing an accord with its creditors by the end of May dimmed on Sunday, as disagreements between the two sides on budget targets persisted, a person familiar with the matter said. With technical talks yielding no breakthrough, Greek Prime Minister Alexis Tsipras is seeking the intervention of German Chancellor Angela Merkel and French President Francois Hollande. The three leaders held a “constructive” call on Sunday on the next steps, a German government official said.
• China Stock Rout Grips Market With Deja Vu of 5/30 Catastrophe. The rout wiped out about $350 billion of market value in a week on the Shanghai and Shenzhen exchanges. It so traumatized traders who eight years later they still refer to it by the date it began: the 5/30 catastrophe. The milestone for the modern Chinese stock market, which began in 1990, started on midnight, May 30, 2007, with Hu Jintao’s government unexpectedly announcing it would triple a tax on stock trading. The plunge sparked by the pronouncement had followed a breathless rally, making it eerily similar to last week’s events.  
• Bad Debts Prompt China’s Banks to Balk at Loan-Backed Bond Call. Just as Premier Li Keqiang steps up efforts to revive China’s loan-backed bond market to spur the economy, banks are balking. Chinese lenders have cut offerings of asset-backed securities 45 percent to 43.4 billion yuan ($7 billion) this year, after a 15-fold jump in 2014, Bloomberg-compiled data show. They have reduced loans for four straight months, even as policy makers expanded the securitization quota by 500 billion yuan to free up space on their balance sheets for fresh lending.
• Australia’s Treasury Says Sydney is 'Unequivocally' In a Housing Bubble. Sydney is in the grip of a housing bubble, Australia’s most-senior economic bureaucrat said in one of the strongest warnings yet by a government official. “When you look at the housing price bubble evidence, it’s unequivocally the case in Sydney -- unequivocally,” Treasury Secretary John Fraser said in testimony before a parliamentary committee in Canberra Monday. “Frankly, whatever the data says, just casual observation would tell you that’s the case.” 
• South Korea’s Exports Slump by the Most in Almost Six Years. South Korea’s exports fell the most in almost six years in May, underscoring concern that the slump in overseas sales is harming a recovery in Asia’s fourth-biggest economy. Shipments slid 10.9 percent from a year earlier, the fifth straight monthly decline, the Ministry of Trade, Industry and Energy said on Monday. Imports fell 15.3 percent and the trade surplus was $6.32 billion.
• Asian Stocks Fall as Investors Weigh U.S. Economy, Await Data. Asian stocks fell amid concern about the strength of U.S. economic growth and as investors awaited manufacturing data from China. The MSCI Asia Pacific Index lost 0.4 percent to 150.75 as of 9:01 a.m. in Tokyo.

Wall Street Journal: 

• U.S. Drug Shortages Frustrate Doctors, Patients. Drugs in short supply include cancer treatments and antibiotics; manufacturing snafus.
• OPEC’s Pricing Leverage Is Weakening. OPEC expected to leave crude oil output unchanged, showing how cartel’s power to sway prices has ebbed.
• For Fed, Dollar’s Strength Complicates Rate-Hike Calculus. Currency’s movement, among other factors, could prompt Federal Reserve officials to lower growth forecasts and hold off even longer on raising rates. 
• The Shale Boom Shifts Into Higher Gear. Oil production is becoming a modern manufacturing process, with frackers using the ‘just-in-time’ approach. 

MarketWatch.com: 

• Brennan warns Islamic State threatens U.S. CIA Director John Brennan warned Sunday the threat of Islamic State that is destabilizing the Middle East has “great potential” to reach the United States.
• Why the American Dream is unraveling, in 4 charts. (graph) 

CNBC:

• Market's next concern may float in South China Sea. Although recent price action suggests otherwise, a slow-burning geopolitical situation in the South China Sea may yet become a flashpoint for market volatility.
• Intel(INTC) close to $17B Altera tie-up: Reports.

Zero Hedge:

• Mapping An ISIS Advance: Syria On The Brink.
• When The "Sharing" Economy Goes Too Far: Syphillis Cases Soar 79% In A Year. Sexually transmitted diseases are on the rise in the US, with health officials pointing the finger at casual sex arranged through social media as "the perfect storm." With gonorrhea up 30%, HIV infections up by 33%, and syphilis soaring a shocking 79% in the last year alone, perhaps they have a point.
• This Is How Little It Cost Goldman(GS) To Bribe America's Senators To Fast Track Obama's TPP Bill. 
• "The Fed Has Been Horribly Wrong" Deutsche Bank Admits, Dares To Ask If Yellen Is Planning A Housing Market Crash.
• Defiant Tsipras Warns European Leaders They Are "Making A Grave Mistake".
• How Much More Extreme Can Markets Get? (graph)
• The Pressure Just Shifted From Greece To The US & EU.
• John Kerry Goes Biking In France, Hits Curb, Breaks Leg; Will Fly Back To US In "Specially Outfitted Aircraft".
• China Will Establish No-Fly Zone Over Islands If "Threatened"
• The 10 Most Important Themes To Watch This Summer.
• A First-Hand Account Of The Greek Bank Run.

Business Insider:

• The Iraqi campaign to retake Ramadi from ISIS is a looming disaster.
• ROBERT SHILLER: 'There is a bubble element to what we're seeing.'
• Iran is looking for ways to dodge a key component of the nuclear deal.
• China's slowdown and a Fed rate hike might be the top threats to the world economy this year.
• Margin debt (red in the chart above) hit a new high in April. (graph)
• A new drug could double the life expectancy of lung cancer patients.
• This May has been the deadliest month in Baltimore in nearly 45 years.

Financial Times:

• Shadow banks grab record US loans share. Non-bank lenders have overtaken US banks to grab a record slice of government-backed mortgages, after regulatory curbs on risk-taking and billions of dollars in fines forced mainstream providers to retreat from the $9.8tn home loan market.

Weekend Recommendations

• None of note

Night Trading

• Asian indices are -.50% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 107.0 unch.

• Asia Pacific Sovereign CDS Index 59.75 +1.75 basis points.

• S&P 500 futures +.19%.

• NASDAQ 100 futures +.24%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (PVH)/1.38

Economic Releases

8:30 am EST

• Personal Income for April is estimated to rise by +.3% versus unch. in March.
• Personal Spending for April is estimated to rise by +.2% versus a +.4% gain in March.
• The PCE Core for April is estimated to rise by +.2% versus a +.1% gain in March. 

9:45 am EST

• Final Markit US Manufacturing PMI for May is estimated at 53.8 versus a prior estimate of 53.8.

10:00 am EST

• Construction Spending for April is estimated to rise +.7% versus a -.6% decline in March. 
• ISM Manufacturing for May is estimated to rise to 52.0 versus 51.5 in April.
• ISM Prices Paid for May is estimated to rise to 43.0 versus 40.5 in April.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Rosengren speaking, Eurozone PMI data, Eurozone CPI report, Bank of Australia rate decision, Jefferies Healthcare Conference, Goldman Lodging/Gaming/Restaurant/Leisure Conference, (ZTS) annual meeting and the (BLOX) analyst day could also impact trading today.

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

Weekly Outlook

Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on Fed rate hike worries, global growth fears, European/Emerging Markets debt angst, technical selling, yen strength and earnings concerns. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Today's Headlines

Bloomberg:  

• Greek Talks With Creditors Deepen as Payment Clock Ticks. Greek officials and creditor institutions are locked in talks for another weekend as both sides work against a payment deadline to avert default and a euro-region exit. “The key issue is to resolve the situation so that Greece can remain a member of the euro area,” the European Commission’s vice president, Jyrki Katainen, told Finland’s YLE TV1. “Unfortunately over the past six months things have turned for the worse in Greece, purely for political reasons.”
• Carter Warns China on Sea Tensions While Urging Conduct Code. U.S. Defense Secretary Ashton Carter called for a diplomatic settlement of rival territorial claims in the South China Sea, saying China and its neighbors should agree on a long-delayed code of conduct for the waters before year’s end. “There is no military solution to the South China Sea disputes,” Carter told a conference of regional defense ministers and military chiefs on Saturday in Singapore. “Right now, at this critical juncture, is the time for renewed diplomacy, focused on finding a lasting solution that protects the rights and interests of all.”  
• Futures Show Bullish Dollar Bets Rekindled After Eight Week Drop. Futures show that hedge funds and other large speculators are back on board for the dollar rally, after adding to bullish wagers on the U.S. currency for the first time in nine weeks. The difference in the number of bets on a rise in the dollar compared with those on a loss against eight of the greenback’s major peers increased by 48,829 contracts in the week ended May 26, according to Commodity Futures Trading Commission data compiled by Bloomberg. So-called net long positions is 275,021 contracts, down from a record 448,675 in January.
• Scott Walker Has Early Lead in Iowa Poll as Jeb Bush Faces Challenges. Marco Rubio is a popular second choice, a potential indication of strength if he can convert that support to his own.
• Republicans Demand Records in New Attack on FSOC Transparency. Republican lawmakers stepped up their criticism of a council of U.S. regulators that rules on which companies pose a potential risk to the financial system and demanded documents showing how those decisions are made. Representative Jeb Hensarling, chairman of the House Financial Services Committee, and the heads of five of the panel’s subcommittees sent a letter dated May 26 to Treasury Secretary Jacob J. Lew complaining of “serious deficiencies” in how the Financial Stability Oversight Council decides which companies are systemically important. Lew is the FSOC’s chairman.

MarketWatch.com:

• OPEC may condemn the world to an oil glut for years as big meeting looms. 

ZeroHedge:

• US-Trained Special Forces Chief Joins ISIS, Vows To Bring Jihad To Russia & America.
• Europe Has A Solution For The Unemployment Problem: Fake Jobs.
• Robert Shiller: Unlike 1929 This Time Everything - Stocks, Bonds And Housing - Is Overvalued. (graph)
• The End Of Markets: Central Banks Took Over Everything, Changed Everything. (graph)
• A Generation Of Rate-Hike Rookies Makes Jeff Gundlach Nervous.
• 5 Things To Ponder: Is The Stock Market Rational Or Nuts? (graph)
• Worst Economic Data Day Of 2015 Ends With Some Folks Selling In May. (graph)
• France's National Front Party Joins UK In Call For EU In/Out Referendum.
• Something Smells Fishy.
• Former SEC Officials Demand SEC Chief: Stop Protecting Corporate Cronyism.
• The Bond Market Is Still Broken, JPMorgan Says.
• When, Not If. (graph)
• What Do Falling Corporate Profits Mean With Stocks Near Their Highs? (graph)

Business Insider:

• There is nothing Japan can do if the yen were to suddenly collapse.
• China is getting slammed for its 'militarization' of the South China Sea.
• MORGAN STANLEY: Russia's consumer crisis today is 'much harsher' than it was during the global financial crisis.
• US Treasury Secretary: Europe is courting disaster with the Greek debt crisis.
• ISIS' favorite tactic for overrunning cities is brilliant, devastating, and insane.
• All right folks, it's time I reminded you how frighteningly expensive and risky stocks are ... (graph)
• ISIS is making the biggest threat to oil prices even worse.
• Here's how much stock buybacks are boosting earnings per share. (graph)
• Things are getting ugly in Spain.

Reuters:

• Russia imposes travel ban on 89 EU politicians. Russia has imposed an entry ban on 89 European politicians and military leaders, according to a list seen by Reuters, a move that has angered Europe and worsened its standoff with the West over Moscow's role in the Ukraine conflict.

Telegraph: 

• If China's economy stumbles, the world falls. The shape and future direction of the global economy is being determined by China. 

Market Week in Review

• S&P 500 2,110.53 -.92%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,110.53 -.92%

• DJIA 18,048.60 -1.29%

• NASDAQ 5,078.85 -.24%

• Russell 2000 1,248.06 -.67%

• S&P 500 High Beta 34.73 -2.0% 

• Goldman 50 Most Shorted 143.70 +.58% 

• Wilshire 5000 22,076.60 -.87%

• Russell 1000 Growth 1,012.18 -1.02%

• Russell 1000 Value 1,033.94 -.96%

• S&P 500 Consumer Staples 500.59 -1.24%

• Solactive US Cyclical 138.74 -1.03%

• Morgan Stanley Technology 1,049.61 -.42%

• Transports 8,306.83 -2.74%

• Utilities 587.02 -.26%

• Bloomberg European Bank/Financial Services 119.15 -2.05%

• MSCI Emerging Markets 41.38 -2.68%

• HFRX Equity Hedge 1,226.34 -.02%
• HFRX Equity Market Neutral 987.46 -.17%

Sentiment/Internals

• NYSE Cumulative A/D Line 240,139 -.73%

• Bloomberg New Highs-Lows Index -98 -151

• Bloomberg Crude Oil % Bulls 30.77 -23.08%

• CFTC Oil Net Speculative Position 343,431 +7.25%
• CFTC Oil Total Open Interest 1,621,198 -6.38%

• Total Put/Call 1.17 +39.08%

• OEX Put/Call .81 -84.71%

• ISE Sentiment 97.0 -27.61%

• NYSE Arms 1.20 +25.0%

• Volatility(VIX) 13.90 +16.76%

• S&P 500 Implied Correlation 61.71 +2.36%

• G7 Currency Volatility (VXY) 10.10 +3.17%

• Emerging Markets Currency Volatility (EM-VXY) 9.37 +3.54%

• Smart Money Flow Index 17,567.84 -.84%

• ICI Money Mkt Mutual Fund Assets $2.614 Trillion +.18%
• ICI US Equity Weekly Net New Cash Flow -$5.390 Billion

• AAII % Bulls 27.0 +7.1%
• AAII % Bears 25.1 +.6%

Futures Spot Prices

• CRB Index 223.17 -2.22%

• Crude Oil 60.18 -.86%

• Reformulated Gasoline 208.58 +.22%

• Natural Gas 2.65 -10.93%

• Heating Oil 195.53 -1.52%

• Gold 1,191.0 -1.27%

• Bloomberg Base Metals Index 171.09 -.98%

• Copper 272.60 -4.33%

• US No. 1 Heavy Melt Scrap Steel 231.67 USD/Ton unch.
• China Iron Ore Spot 61.85 USD/Ton +3.15%

• Lumber 273.40 +1.45%

• UBS-Bloomberg Agriculture 1,057.26 -3.11%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 1.4% -10.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.2721 +5.22%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.69 +.18%

• Citi US Economic Surprise Index -54.20 +7.9 points

• Citi Eurozone Economic Surprise Index -11.10 -13.0 points

• Citi Emerging Markets Economic Surprise Index -13.90 +1.3 points

• Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 6/17

• US Dollar Index 96.90 +.73%

• Euro/Yen Carry Return Index 142.40 +1.83%

• Yield Curve 150.0 -9.0 basis points

• 10-Year US Treasury Yield 2.1% -11.0 basis points

• Federal Reserve's Balance Sheet $4.426 Trillion -.37%

• U.S. Sovereign Debt Credit Default Swap 16.67 +1.73%

• Illinois Municipal Debt Credit Default Swap 229.0 +.91%

• Western Europe Sovereign Debt Credit Default Swap Index 22.08 +1.85%

• Asia Pacific Sovereign Debt Credit Default Swap Index 58.31 unch.
  

• Emerging Markets Sovereign Debt CDS Index 311.36 +2.13%
  

• Israel Sovereign Debt Credit Default Swap 65.21 -.43%

• Iraq Sovereign Debt Credit Default Swap 651.86 +90.44%

• Russia Sovereign Debt Credit Default Swap 309.57 +6.78%

• iBoxx Offshore RMB China Corporates High Yield Index 120.09 +.47%

• 10-Year TIPS Spread 1.84% -6.0 basis points

• TED Spread 28.75 +1.5 basis points

• 2-Year Swap Spread 24.5 -1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -21.5 -.75 basis point

• N. America Investment Grade Credit Default Swap Index 64.49 +1.09%

• America Energy Sector High-Yield Credit Default Swap Index 1,117.0 +.73%

• European Financial Sector Credit Default Swap Index 76.51 +3.81%
  

• Emerging Markets Credit Default Swap Index 290.09 +1.40%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 87.50 unch.

• M1 Money Supply $2.969 Trillion -.31%

• Commercial Paper Outstanding 945.20 -2.0%

• 4-Week Moving Average of Jobless Claims 276,250 -4,750

• Continuing Claims Unemployment Rate 1.7% +10 basis points

• Average 30-Year Mortgage Rate 3.87% +3.0 basis points
• Weekly Mortgage Applications 399.90 -1.62%

• Bloomberg Consumer Comfort 40.9 -1.5 points

• Weekly Retail Sales +1.80% -20 basis points

• Nationwide Gas $2.74/gallon unch.

• Baltic Dry Index 588.0 -.68%

• China (Export) Containerized Freight Index 890.42 -.14%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 -20.0%
• Rail Freight Carloads 281,090 +.35%

Best Performing Style

• Small-Cap Growth -.4%

Worst Performing Style

• Large-Cap Growth -1.1%

Leading Sectors

• Semis +3.9%

• HMOs +2.3%

• Hospitals +1.7%

• Networking +1.2%

• Computer Hardware +.9%

Lagging Sectors

• Homebuilders -3.1% 

• Steel -3.3%

• Gaming -3.6%

• Oil Service -4.2%

• Coal -11.2%

Weekly High-Volume Stock Gainers (8)

• RALY, CBMG, BRCM, AAOI, TWC, TIF, ANF and TMUS

Weekly High-Volume Stock Losers (8)

• STE, TPUB, PLAY, SERV, CGI, SMTC, WDAY and OTIC

Weekly Charts

ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change