BETWEEN THE HEDGES

Wednesday Watch

2013-05-22T00:21:00.002-04:00

Evening Headlines
Bloomberg:

EU Panel Penalties to Hurt Solar Firms From China to U.K. The European Union is poised to penalize imports of Chinese solar products, a move that would increase Europe’s cost for most photovoltaic panels an estimated 45 percent overnight. While officials from the U.S., China and the EU have engaged in preliminary talks to settle a dispute over trade in solar-energy products, according to people familiar with the situation, the EU yesterday said it will stick to its June 6 deadline to decide whether to impose import duties. The EU proposal for tariffs would hurt manufacturers such as China’s Trina Solar Ltd. (TSL) and raise costs to build power plants in Europe, the world’s largest market for solar products and one largely supplied by Chinese manufacturers. Duties will trigger “an increase in prices that is a major concern for Chinese producers as well as developers in the region, who may find that many solar projects are no longer viable,” according to Jenny Chase, Bloomberg New Energy Finance’s chief solar analyst. “The proposed anti-dumping tariffs are higher than the industry expected.”

Caisse de Depot to Sell European Properties Amid ‘Dark Night’. Caisse de Depot et Placement du Quebec is selling some of its European property and redeploying proceeds in assets such as infrastructure while the euro-area economy shrinks, Chief Executive Officer Michael Sabia said. About 20 percent of the Caisse’s C$18 billion ($17.5 billion) of real estate assets are in Western Europe, according to its 2012 annual report. “We are selling real estate assets in Europe,” Sabia said in an interview yesterday at the Bloomberg Canada Economic Summit in Toronto. “Real estate pricing among top quality, platinum-quality assets -- the pricing is quite good, and we are trying to benefit from that and in some other asset categories as well, where selectively asset prices are high.” “There’s a dark night going on in Europe, a dark and foggy night where bad things come out of trees and bite you,” Sabia said. “It’s a pretty scary place. In Europe there are investments to be made, and I think it’s possible to be successful there but there’s no place in the world, other that maybe emerging markets, where the word selectivity is fundamentally important.” Sabia didn’t specify which European properties the Caisse is planning to sell.

BOJ Affirms Easing Plan After Biggest Jump in Yields in 5 Years. The Bank of Japan affirmed a plan to double the monetary base over two years after a jump in bond yields highlighted risks associated with Prime Minister Shinzo Abe’s campaign to revive the economy. The central bank will expand the supply of money in the economy by 60 to 70 trillion yen ($683 billion) a year, as pledged in April, the BOJ said in Tokyo today. Twenty-six of 27 economists in a Bloomberg News survey forecast no change in monetary policy.

Japan Exports Miss Estimates After Yen Slides to 4-Year Low. Japan’s exports missed estimates in April and the trade deficit swelled, highlighting weakness in global demand that may weigh on efforts to revive the world’s third-biggest economy. Overseas shipments rose 3.8 percent from a year earlier, the Finance Ministry said in Tokyo today. That was less than the median 5.4 percent estimate of 26 economists surveyed by Bloomberg News. The trade shortfall widened to 879.9 billion yen ($8.6 billion), the most for the month of April since at least 1979, according to the government. Exports to the European Union fell 3.5 percent from a year earlier, dropping for a 19th month, while those to the U.S. jumped 15 percent. Shipments to China rose 0.3 percent, indicating that demand may be stabilising after past declines.

Australia Consumer Sentiment Slumps Most in 17 Months on Budget. Australian consumer confidence slumped by the most in 17 months as a government announcement the budget would remain in deficit overshadowed record low interest rates, a private survey showed. The sentiment index for May dropped 7 percent to 97.6, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken May 13-18 of 1,200 adults showed today in Sydney. That was the biggest drop since December 2011 and the first time since October 2012 the figure has fallen below 100, which indicates pessimists outnumber optimists.

Asia Stocks Rise to Five-Year High as BOJ Keeps Stimulus. Asian stocks rose, with the regional benchmark index trading at a five-year high, after the Bank of Japan maintained its plan to expand the monetary base. The MSCI Asia Pacific Index advanced 0.4 percent to 144.57 as of 12:08 p.m. in Tokyo. All 10 industry groups on the gauge climbed.

Subprime Mess Left by Pritzker Is Seen as Opening for Opponents. A 61-page report carrying the seal of the U.S. Treasury Department’s inspector general offers a tutorial for Republican senators interested in challenging Penny Pritzker’s commerce secretary nomination. The document chronicles the 2001 failure of a suburban Chicago bank after Pritzker and her family expanded subprime lending there and did pioneering work with the kind of mortgage-backed securitization that would eventually spread and help spark the worst recession since the Great Depression.

Wall Street Journal:

Oklahoma Tornado: Long Minutes of Desperation Inside School Razed by Storm. When the tornado-warning sirens blared, Kelly Law was already in the hallway of Plaza Towers Elementary School, huddled against the wall, shielding as many students as she could with her body. Another eight or 10 teachers did the same, she said. For the long minutes it took the tornado to pass, she shut her eyes and prayed. The roof was ripped away. "It sounded like rivets being pulled out by a monster," Ms. Law said.

Apple(AAPL) CEO Tim Cook, Lawmakers Square Off Over Taxes.

Investors Brave Loans That Fly Solo. The 40-story office tower at 120 Broadway, occupying a full city block just a stone's throw from Wall Street, looks much as it has since its completion in 1915. The market for loans on such commercial properties, by contrast, has changed in recent months and is booming for the first time since the financial crisis.

Pesticides Make a Comeback. Many Corn Farmers Go Back to Using Chemicals as Mother Nature Outwits Genetically Modified Seeds.

Broad Immigration Overhaul Heads to Senate. Bipartisan Committee Agrees on Bill That Would Tighten Border Security, Provide Path to Citizenship.

Microsoft(MSFT) Shows Off Xbox One Console.

The Apple(AAPL) Tax Diversion. Senators beat up a U.S. success for following the tax laws they wrote. You almost have to admire Carl Levin's timing. Amid a furor over politicized IRS tax enforcement, the Michigan Democrat on Tuesday tried to change the subject to a hardy Washington perennial—corporate tax loopholes. Too bad his designated business pinata, Apple, demonstrates instead the insanity of the tax code that Mr. Levin has done so much to write.

Gramm and McMillin: The Debt Problem Hasn't Vanished. While deficit projections have recently moderated, the cost of servicing the national debt will explode once interest rates begin to rise.

Fox News:

Sources challenge White House claim of all-hands-on-deck pursuit of Benghazi suspects. U.S. military sources serving in North Africa are challenging the latest White House claim that the administration is applying "all the resources" at its disposal to bring the Benghazi attackers to justice, charging instead that the Obama administration knows who is responsible but is not acting. "They have let it slip by because of politics, and now we've taken all the correlation we had and dropped the ball because of risk (aversion) -- and now the security in Libya is more fragile than ever," one U.S. special operator told Fox News. The source, speaking on condition of anonymity, confirms that U.S. forces have tracked the alleged attackers since October but have since lost the trail of some of them, as no one up the chain of command would authorize them to capture or kill the targeted militia members.

CNBC:

Cybercriminals Are Coming After Your Mobile Apps: Experts.

Bernanke Expected to Deliver Dovish Message. Federal Reserve Chairman Ben Bernanke is expected to maintain his dovish tone when he speaks to Congress Wednesday, and he is likely to dispel any notion that the Fed is ready to cut back on its easing policy.

Zero Hedge:

Goldman(GS) Confirms 'Recovery' Hopes Have Gone As 'Slowdown' Deepens. (graph)

And The New US Debt Ceiling Is...

Lumber Enters Bear Market. (graph)

"The Math Is Stacked Against Japan - It's Not 'If', It's When". (video)

Global Assured Destruction, Or How Bernanke Now Holds The Entire World Hostage.

Business Insider:

New HD Video Of Oklahoma Tornado Gives The Clearest View Yet. (video)

New Arms Bill In Congress Could Involve Major Sanctions On Russia.

The IRS Official At The Center Of The Scandal Will Plead The Fifth Amendment Before Congress Tomorrow.

Inside The Orwellian World Of Ad-Funded Face-Recognition Technology.

Teens Are Ditching Facebook(FB) For Twitter To Avoid Boring Adults And Drama.

13 Examples Of Americans Being Awesome After The Oklahoma Tornado.

Fox19.com:

Reality Check Exclusive: Cincinnati agent giving orders in IRS scandal? The claim that the ongoing IRS scandal is limited to low level employees is falling apart.

Reuters:

Merck(MRK) signs $5 bln share buyback agreement with Goldman Sachs(GS).

US prosecutors consider using racketeering law against SAC-source.

White House threatens veto of bill to bypass Obama on Keystone. The White House has threatened to veto legislation pending in the U.S House of Representatives that could strip from President Barack Obama the authority to approve the controversial Keystone XL pipeline.

Chemical-safety watchdog criticizes probe of Texas blast. Officials with the U.S. Chemical Safety Board say they may never know what caused last month's deadly fertilizer-plant explosion in Texas because of interference by federal and Texas agencies, according to a letter sent Tuesday by the head of the regulatory board to U.S. Senator Barbara Boxer.

Financial Times:

US farmland faces asset bubble test.

Telegraph:

Stocks are booming, so beware the bust. The return of 'animal spirits’ usually points to better times, but it’s more complicated now.

Nikkei:

Amari Says It's Govt's Job to Avoid Volatility in Yieldds. Nikkei cites remarks made by Japanese Economy Minister Akira Amari to reporters in Tokyo.

National Business Daily:

Some Chinese Banks Stop Copper Trade Financing. Some Chinese banks have stopped issuing letters of credit, a type of trade financing, for copper importers after a government crackdown on hot-money inflows, citing bankers.

China Securities Journal:

China Should Expand Property Tax. Timing is "mature" for China to expand property tax trials, according to a commentary written by reporter Ren Xiao on the front page of China Securities Journal. A property tax will effectively relieve pressure on government's fiscal revenue, especially for local governments. It will be helpful to curb volatility of home prices, according to the commentary.

China Business News:

China Big Steel Companies Face Liability Pressure. China's 30 largest listed steel companies had current liabilities of 759.5b yuan as of 1Q, exceeding their current assets of 530.5b yuan, citing Sheng Zhicheng, deputy secretary general of steel and logistics committee at China Federation of Logistics & Purchasing.

Evening Recommendations

None of note

Night Trading

Asian equity indices are unch. to +.75% on average.

Asia Ex-Japan Investment Grade CDS Index 101.50 +.5 basis point.

Asia Pacific Sovereign CDS Index 85.0 +.25 basis point.

FTSE-100 futures +.17%.

S&P 500 futures -.01%.

NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

(SPLS)/.27

(LOW)/.51

(TOL)/.08

(ZLC)/.00

(TGT)/.84

(AEO)/.17

(EV)/.52

(HPQ)/.81

(SNPS)/.63

(LTD)/.46

(PETM)/.96

(GES)/.08

Economic Releases
10:00 am EST

Existing Home Sales for April are estimated to rise to 4.99M versus 4.92M in March.

10:30 am EST

Bloomberg Consensus estimates call for a weekly crude oil inventory decline of -1,000,000 barrels versus a -624,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -300,000 barrels versus a +2,588,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +2,300,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.5% versus a +1.0% gain the prior week.

2:00 pm EST

FOMC Minutes from April 30-May 1 Meeting.

Upcoming Splits

None of note

Other Potential Market Movers

The Fed's Bernanke speaking, Fed's Fisher speaking, ECB's Draghi speaking, BoJ Decision, German 10Y debt auction, China HSBC Manufacturing PMI, weekly MBA mortgage applications report, (BA) investor conference and the (TMO) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and consumer staple shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Higher into Final Hour on Central Bank Hopes, Short-Covering, Biotech/Retail Sector Strength

2013-05-21T15:06:00.000-04:00

Today's Market Take:

Broad Market Tone:

Advance/Decline Line: Slightly Higher

Sector Performance: Mixed

Volume: Below Average

Market Leading Stocks: Underperforming

Equity Investor Angst:

VIX 13.20 +1.38%

ISE Sentiment Index 171.0 +61.32%

Total Put/Call .85 +7.59%

NYSE Arms .96 +4.78%

Credit Investor Angst:

North American Investment Grade CDS Index 70.29 -1.0%

European Financial Sector CDS Index 131.49 +2.85%

Western Europe Sovereign Debt CDS Index 88.69 +2.72%

Emerging Market CDS Index 248.89 +.58%

2-Year Swap Spread 14.75 +.25 bp

TED Spread 23.25 -1 bp

3-Month EUR/USD Cross-Currency Basis Swap -15.0 +.5 bp

Economic Gauges:

3-Month T-Bill Yield .04% +1 bp

Yield Curve 171.0 -1 bp

China Import Iron Ore Spot $123.60/Metric Tonne +.49%

Citi US Economic Surprise Index -18.70 -.5 point

10-Year TIPS Spread 2.27 unch.

Overseas Futures:

Nikkei Futures: Indicating +145 open in Japan

DAX Futures: Indicating -8 open in Germany

Portfolio:

Slightly Higher: On gains in my retail/medical/biotech sector longs

Disclosed Trades: None

Market Exposure: 75% Net Long

Today's Headlines

2013-05-21T14:42:00.002-04:00

Bloomberg:

European Stocks Fall From 2008 High as Carnival Slides. European stocks retreated from the highest level in almost five years as Carnival Corp. led travel companies lower after cutting its forecasts. Carnival, the world’s largest cruise operator, slid 5.9 percent. Daimler AG declined 2.1 percent as a gauge of automakers fell from the highest close since 2007. Marks & Spencer Group Plc rallied 4.8 percent after saying it will reduce capital spending in an effort to boost profit margins. The Stoxx Europe 600 Index slipped 0.3 percent to 308.75 at 3:31 p.m. in London, as remarks by a Federal Reserve official fueled concern the central bank may reduce stimulus measures.
China Copper Imports Drop to 22-Month Low as Export Slump. Imports of refined copper by China, the biggest user, declined in April to the lowest level since June 2011, while exports fell for the first time in eight months. Inbound shipments were 183,023 metric tons last month, data from the General Administration of Customs showed today. That compared with 218,823 tons in March and 272,903 tons a year ago, according to data compiled by Bloomberg. Exports tumbled 52 percent to 29,072 tons from 60,642 tons a month earlier, the data showed.
Gold, Silver Fall on Bets Fed May Cut U.S. Bond Purchases. Gold and silver futures resumed slumps on speculation that the Federal Reserve may scale back U.S. debt purchases, curbing demand for the precious metals as a store of value. Fed Chairman Ben S. Bernanke will discuss the economic outlook in congressional testimony and the central bank will publish minutes of its latest meeting tomorrow. The bank buys $85 billion of Treasury and mortgage debt a month. The dollar advanced as much as 0.5 percent against a basket of currencies. Yesterday, gold gained 1.4 percent, snapping the longest skid in four years.
Oil-Fixing Probe Accelerates as EU Asks Traders for Help. The investigation into possible oil-price fixing gathered pace as trading houses from Glencore Xstrata Plc, the $70 billion mining firm, to Gunvor Group Ltd. were asked to provide information to European regulators. Glencore Xstrata, Gunvor and Vitol Group, which aren’t under investigation, along with other firms with offices in Switzerland, are assisting the European Commission with the inquiry, said three people familiar with the situation, who asked not to be identified because the matter is private. The commission announced last week that it’s probing whether oil companies colluded to distort prices.
S&P 500 May Reach 2,100, Goldman Sachs Says. Goldman Sachs Group Inc. said the U.S. stock-market rally may last at least another 2 1/2 years, sending the Standard & Poor’s 500 Index (SPX) up 26 percent to 2,100.

Wall Street Journal:

After Oklahoma Tornadoes, Rescue Efforts Focus on Survivors. At Least 24 Dead After Twisters Leave Trail of Chaos Across Oklahoma City Region. Search and rescue efforts continued Tuesday, after deadly tornadoes tore through towns just south of Oklahoma City on Monday, killing and injuring dozens and destroying numerous buildings, including more than one elementary school. Earlier reports on the death toll varied amid a chaotic scene, with the overnight estimate running as high as 51. But Amy Elliott, a spokeswoman for Oklahoma's Chief Medical Examiner, on Tuesday morning told the Associated Press: "We have got good news. The number right now is 24." Most of the 24 victims had been identified and were being returned to loved ones, she said. Authorities said the death toll was expected to rise.

Fox News:

HOW YOU CAN HELP PEOPLE AFFECTED BY OKLAHOMA TORNADO.
IRS official calls decision to use planted question on scandal 'incredibly bad idea'. The outgoing IRS commissioner expressed regret Tuesday for a decision to use a planted question to go public with the agency's practice of targeting conservative groups, calling the move "an incredibly bad idea."
FCC proposing to allow more sex and profanity during kids’ television viewing hours.

CNBC:

Tim Cook: We Pay 'Every Single Dollar' in Taxes Owed. Apple's CEO is disputing assertions by a Senate panel that the company avoids billions of dollars in U.S. taxes by shifting profits to foreign affiliates.
Federal Execs to Get Millions Despite Cuts. Despite the sequester—huge cutbacks in federal spending that were mandated by law in March—some high-level Federal executives are scheduled to get millions of dollars in bonuses, unless there's a law to stop them. According to a report released Friday by the Senate Subcommittee on Financial and Contracting Oversight, the bonuses must be paid under current Congressional regulations, even with some $85 billion in government funding cuts in effect.
It's Back: Shadow Banking Hits Post-Crisis Highs. What Warren Buffett once called "financial weapons of mass destruction" are firing again, with securitization and shadow banking at post-financial crisis highs. The twin powers of bank funding that helped propel the nation into turmoil have regained ground swiftly, and analysts say it's both a challenge for regulators and a sign that the economy is recovering. Securitization, or the channels through which banks repackage loans and farm them off to investors, has hit volume of $225.6 billion by way of 365 deals this year, according to Dealogic.

Zero Hedge:

Business Insider:

Reuters:

Home Depot(HD) Reaps Housing Recovery's Effects. Home Depot reported higher-than-expected quarterly results and raised its sales and profit outlook for the year as the world's largest home improvement chain benefited from a nascent recovery in the U.S. housing market.
Fed's Bullard: bond buying best policy when rates near zero. Massive asset purchases are the closest thing to normal monetary policy once interest rates get near zero, a senior U.S. Federal Reserve official said on Tuesday, recommending that the European Central Bank weigh such action if inflation falls further. St. Louis Federal Reserve Bank President James Bullard, a voting member of the Fed's policy-setting committee this year, also said the U.S. central bank should keep buying bonds, while adjusting the pace of purchases up or down, according to incoming economic data.
Euro rallies to session high against the dollar. The euro rose to a session high against the dollar on Tuesday as investors positioned ahead of testimony from U.S. Federal Reserve Chairman Ben Bernanke on Wednesday.

Financial Times:

Kyle Bass bets on full-blown Japan crisis. Kyle Bass hopes he is wrong, and so may everyone else, as the danger predicted by the founder of Dallas-based Hayman Capital is nothing less than a full blown financial crisis in the world’s third-largest economy, Japan.

Bear Radar

2013-05-21T13:39:00.002-04:00

Style Underperformer:

Small-Cap Value +.11%

Sector Underperformers:

1) Gold & Silver -1.85% 2) Homebuilders -1.30% 3) Airlines -1.07%

Stocks Falling on Unusual Volume:

MDCO, XNPT, NXST, FMX, TCPC, IGTE, HNP, HGG, CCL, SCTY, RKUS, UNXL, ALK, WWWW and WCG

Stocks With Unusual Put Option Activity:

1) TIVO 2) BBY 3) MDT 4) JNK 5) EWW

Stocks With Most Negative News Mentions:

1) BZH 2) WCG 3) CCL 4) PM 5) OSIS

Charts:

ETFs Falling on Unusual Volume

Stocks Falling on Unusual Volume

Bull Radar

2013-05-21T11:38:00.002-04:00

Style Outperformer:

Large-Cap Growth +.08%

Sector Outperformers:

1) Coal +1.86% 2) Alt Energy +.87% 3) Medical Equipment +.66%

Stocks Rising on Unusual Volume:

MDT, JASO, YY, MNRO, SKS, ABFS, KLIC and WLT

Stocks With Unusual Call Option Activity:

1) AMTD 2) WMB 3) MDT 4) XRX 5) UUP

Stocks With Most Positive News Mentions:

1) CBST 2) AET 3) MDT 4) TJX 5) NOC

Charts:

ETFs Rising on Unusual Volume

Stocks Rising on Unusual Volume

Tuesday Watch

2013-05-21T00:22:00.000-04:00

Evening Headlines
Bloomberg:

China Trade Surplus Seen by BofA at One-Tenth Customs Figure. China’s trade surplus is one-tenth the official $61 billion reported so far this year after accounting for fake transactions used to disguise hot-money inflows, Bank of America Corp. says. The true surplus is about $6 billion, according to Lu Ting, Bank of America’s head of Greater China economics in Hong Kong. That would be the smallest for January-April since the nation posted a $10.8 billion deficit in 2004. Lu’s calculations suggest the surplus shrank instead of tripling from a year earlier, a sign that global demand is restraining rather than boosting the world’s second-largest economy. Bank of America’s estimate underscores the size of possible discrepancies in the trade data, which has been disputed by analysts for four months, and broader skepticism about Chinese statistics from gross domestic product to jobs. “Growth is weak in China now -- the overstated export growth means the real growth is slightly weaker,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “We are expecting to see a fairly big drop in export growth in the coming months” as regulators crack down on so-called hot-money inflows, he said.

Block Says China Banks’ Bad Loans Spread Beyond Government Debt. Carson Block, the short seller who runs Muddy Waters LLC, said China’s bad-loan problem is more widespread than just local government debt and includes public and private sector borrowing. Non-performing loan “figures greatly understate the potential scope of the problem of poor-quality loans,” Block said in an e-mail. “We believe that the PRC banking system will be hit hard by the unwind, and that the government will be forced to recapitalize a number of the banks.”

Dead Hogs in River No Obstacle as China Pork Prices to Climb. A three-month slump in hog prices in China, the world’s biggest consumer of pork, is poised to end as the government stockpiles frozen meat and shoppers look past a safety scare, the country’s top pig processor said.

Yen Drops as BOJ Meets While Asian Stocks Retreat; Silver Falls. The yen weakened against all of its 16 major peers as the Bank of Japan starts a two-day policy meeting. Asian stocks retreated from a five-year high and silver led losses in metals as investors weighed the pace of Federal Reserve stimulus efforts.

Gold’s Double Bottom Signals Rally to $1,500: Technical Analysis.

Wall Street Journal:

China Is Seeking U.S. Assets. Agency Sets Up New York Office to Make Real-Estate, Private-Equity Purchases. China's currency-reserves manager has set up a New York operation to invest in private equity, real estate and other U.S. assets, according to people with knowledge of the move. The move by the State Administration of Foreign Exchange, or SAFE, which oversees the world's largest stockpile of foreign-exchange holdings, comes as it steps up diversification away from U.S. government debt, the people said.

Fed Paper Urges Trading Revamp. A Federal Reserve official has called for fundamental changes in financial markets to slow trading and allow investors to better compete with the ultrafast computer programs used by some participants. A paper due to be presented Tuesday by the Federal Reserve Bank of Chicago proposes altering the structure that allows a nonstop stream of trades and instead execute orders every half-second. The proposal is expected to ignite controversy among some traders and exchanges, which have invested heavily in the technology to profit from ultrafast trading. The paper said high-frequency trading has inflated transaction costs, with limited benefits for liquidity and pricing.

Europe's Recession Sparks Grass-Roots Political Push.

How to Cut a Job in Italy? Wait, and Wait Some More. It took Whirlpool Corp. WHR -0.90% eight months to close its 1,000-person factory in Fort Smith, Arkansas, last year amid falling sales. In Italy, the world's biggest appliance maker has been trying for three years to cut 500 jobs—with only partial success.

Role of Health-Law 'Navigators' Under Fire. Lawmakers across the country are tussling over the Obama administration's plans to create a small army of assistants to guide millions of Americans as they sign up for new health-insurance options available this fall. Backers of the health-care overhaul face an uphill battle to spread the word about the law, in the face of consumer research that suggests most uninsured people know little about it and are skeptical about the value of health insurance generally. Some Democrats have openly worried that the administration is doing too little to make sure the enrollment process goes smoothly.

David Rivkin and Lee Casey: The IRS and the Drive to Stop Free Speech. Such a scandal was bound to happen after the government started trying to rule the expression of political views.

Fox News:

Search for survivors after massive tornado strikes areas near Oklahoma City, killing at least 51. A tornado at least a half mile-wide with 200mph winds churned through Oklahoma City's suburbs Monday afternoon, killing at least 51 and causing significant property damage for the second day in a row, forcing rescue crews to search for survivors in the debris of flattened homes, businesses and two schools. Amy Elliott, a spokeswoman for the Oklahoma Medical Examiner's Office, said the death toll is expected to rise. Oklahoma City Police say seven of those deaths were children at Plaza Towers Elementary School, which was hit by the tornado, Fox 25 reports. Oklahoma police also told Fox News' Casey Stegall, on the ground in Moore, Okla., that at least four people were killed at a 7-11 convenience store.

Watchdog report says DOJ official retaliated against ‘Furious’ whistle-blower, lied about it. The former U.S. Attorney for Arizona could be disbarred, after an investigation found he lied to the Justice Department about his role in trying to discredit the federal whistle-blower who exposed the botched gun-running scheme known as Fast and Furious. An Office of Inspector General report showed that Dennis Burke -- the former chief of staff for Homeland Security Secretary Janet Napolitano appointed as U.S. Attorney for Arizona by President Obama in September 2009 -- lied when asked if he leaked sensitive documents to the press meant to undermine the credibility of ATF whistle-blower John Dodson. The IG report also said Burke likely leaked the memo in retaliation for Dodson's whistle-blowing, and challenged the credibility of statements he made to congressional investigators.

Breaking News:

Severe storms hit Great Plains, Midwest, May 20, 2013.

CNBC:

Tumblr’s Porn Habit—and Other Challenges for New Parent Yahoo(YHOO).

Zero Hedge:

Stunning Time-Lapse Video Of 2-Mile Wide Oklahoma Tornado.

Artificial Growth Exhibit A: China's Inventory Stockpiling Hits All Time High. (graph)

What Could Possibly Go Wrong Here?

Chart Of The Day: "It's All About The Earnings"

Russia Adds Two More Warships To Mediterranean Task Force Near Syria.

Business Insider:

Up To 30 Children Feared Dead After Tornado Destroys Oklahoma School.

Oklahoma City Tornado Pictures: 'Total Devastation'.

REPORT: Steve Cohen Is Considering A Deal That Would Shut His Hedge Fund To Outside Investors.

BofA: A 'New Berlin Wall' Has Been Erected In Europe. (graph)

The Most Chilling Details From The Kafkaesque Search Warrant That Went After A Fox News Reporter.

UK's Anti-Europe Party Make Huge Breakthrough In New Poll.

Here's What Apple Will Say To Congress About Taxes Tomorrow.

Real Clear Politics:

Woodward: Obama Administration Did Not Tell The Truth About Benghazi. (video)

Reuters:

Urban Outfitters(URBN) sales miss Street estimates, shares fall. Teen apparel retailer Urban Outfitters Inc's sales missed analysts' estimates even as reduced discounting helped shore up profit in the first quarter. Shares of the company fell as much as 4 percent to $42.77 in post-market trading on Monday.

EU draft bank rescue law would not shield big deposits. A draft law that a group of European Union lawmakers voted for on Monday would shield small depositors from losing their savings in future bank rescues, but customers with more than 100,000 euros in savings when a bank failed could suffer losses.

Financial Times:

Sluggish Thai growth deepens fears of wider Asian slowdown. Thailand’s economy grew more slowly than expected in the first three months of this year, adding to a slew of recent disappointing data from other Asian economies that have cast a shadow over one of the world’s fastest-growing regions. The Thai economy contracted by 2.2 per cent seasonally adjusted from the previous quarter.

Evening Recommendations
Piper Jaffray:

Rated (HAS) Overweight, target $55.

Rated (MAT) Overweight, target $53.

Rated (LF) Overweight, target $11.

Night Trading

Asian equity indices are -.50% to +.25% on average.

Asia Ex-Japan Investment Grade CDS Index 101.0 unch.

Asia Pacific Sovereign CDS Index 84.75 unch.

FTSE-100 futures -.12%.

S&P 500 futures -.06%.

NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

(TDW)/.61

(AZO)/7.21

(HD)/.76

(BBY)/.24

(MDT)/1.03

(DKS)/.48

(TJX)/.62

(INTU)/2.93

(NTAP)/.68

(ADI)/.52

(SKS)/.18

(TECD)/1.06

Economic Releases

None of note

Upcoming Splits

None of note

Other Potential Market Movers

The Fed's Dudley speaking, Fed's Bullard speaking, Germany/UK inflation data, weekly retail sales reports, JPMorgan Homebuilding Conference, Goldman Basic Materials Conference, (JPM) shareholder meeting, (MET) investor conference and the (ARMH) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Profit-Taking, Technical Selling, Homebuilding/Healthcare Sector Weakness

2013-05-20T15:45:00.002-04:00

Broad Market Tone:

Advance/Decline Line: Modestly Higher

Sector Performance: Mixed

Volume: Below Average

Market Leading Stocks: Performing In Line

Equity Investor Angst:

VIX 12.99 +4.34%

ISE Sentiment Index 99.0 +10.0%

Total Put/Call .78 -2.50%

NYSE Arms .76 +22.91%

Credit Investor Angst:

North American Investment Grade CDS Index 70.88 +.80%

European Financial Sector CDS Index 127.84 -2.29%

Western Europe Sovereign Debt CDS Index 86.35 -.95%

Emerging Market CDS Index 247.65 +.46%

2-Year Swap Spread 14.5 unch.

TED Spread 24.25 unch.

3-Month EUR/USD Cross-Currency Basis Swap -15.5 +1.75 bps

Economic Gauges:

3-Month T-Bill Yield .03% unch.

Yield Curve 172.0 +2 bps

China Import Iron Ore Spot $123.0/Metric Tonne -.08%

Citi US Economic Surprise Index -18.2 -.7 point

10-Year TIPS Spread 2.27 +1 bp

Overseas Futures:

Nikkei Futures: Indicating +9 open in Japan

DAX Futures: Indicating -12 open in Germany

Portfolio:

Slightly Higher: On gains in my retail/tech/medical sector longs

Disclosed Trades: None

Market Exposure: 75% Net Long

Today's Headlines

2013-05-20T15:32:00.004-04:00

Bloomberg:

German Notes Fall on Economy Optimism as Italian Spread Narrows. Germany’s two-year notes declined for the first time in four days amid signs the global economic recovery is gathering pace, damping investor demand for the safest government assets. The extra yield that investors get for holding Italian 10-year securities instead of German bunds narrowed to the least since January as a report showed Italy’s industrial orders increased in March more than economists predicted. German 10-year yields approached the highest in seven weeks and Dutch bonds snapped a two-day gain.
Europe’s debt frenzy undeterred by record recession. Investors are snapping up long-dated bonds from Europe’s high debt and deficit nations even as prices reach the most expensive levels since 2010 and the region’s deepening recession threatens to hamper deficit-reduction plans.
European Stocks Advance as Carmakers Climb; Ryanair Rises. European stocks advanced, extending the Stoxx Europe 600 Index’s highest level since June 2008, as the region’s carmakers rallied. Peugeot SA and Volkswagen AG both gained more than 3 percent as Morgan Stanley raised its recommendation on European automobile companies. Ryanair Holdings Plc jumped the most in more than 1 1/2 years as Europe’s largest low-cost carrier said full-year profit rose 13 percent. Fresnillo Plc slid 3.3 percent as silver slumped to its lowest price since October 2010. The Stoxx 600 rose 0.3 percent to 309.77 at the close of trading.
Luxury Car Prices Fall in China Amid Government Frugality Push. Prices of imported cars in China fell the most in five months, adding to signs that demand for luxury products is slowing because of a government campaign to rein in lavish spending by public servants. Average prices of imported cars in April fell 3.4 percent from a year earlier, according to Cheng Xiaodong, head of auto-price monitoring at the National Development and Reform Commission, China’s top economic planner. That compares with the 0.2 percent increase for locally made passenger vehicles.
U.S. Faces Downgrade in 2013 Without Budget Deal, Moody’s Warns. U.S. policy makers must address debt loads projected to rise later this decade to avoid a 2013 downgrade, even as the latest budget projections are “credit positive,” according to Moody’s Investors Service. The U.S. budget deficit will drop to $378 billion in 2015 from a record $1.4 trillion in 2009, according Congressional Budget Office data. The federal government will post an $642 billion deficit this year, the first time in five years that the shortfall has been less than $1 trillion. Moody’s said Sept. 11 that the U.S.’s top Aaa rating would likely be cut to Aa1 if an agreement on the debt ratio isn’t reached.
Gold Reboundd After Moody’s Says U.S. May Face Downgrade. Gold and silver futures rebounded after Moody’s Investors Service said U.S. policy makers must address debt woes to avoid a credit-rating downgrade this year, boosting the appeal of the metals as a haven. “More needs to be done on the policy front to address this rising debt ratio,” said Steven Hess, a senior vice president at New York-based Moody’s. The ratio of debt to gross domestic product will increase in the long term, according to the Congressional Budget Office. Gold futures for June delivery gained 1.4 percent to settle at $1,384.10 an ounce at 1:43 p.m. on the Comex in New York. Earlier, the price touched $1,336.30, the lowest for a most-active contract since April 18.
Fed’s Evans Says Economy Has Been ‘Improving Quite a Lot’. Federal Reserve Bank of Chicago President Charles Evans said the U.S. economy has improved “quite a lot” as the central bank maintains record stimulus. “I’m optimistic that the labor market has been doing much, much better and that unemployment is going to continue to go down,” Evans said in a speech in Chicago today. “Currently we have the appropriate monetary policy in place.”
Arctic Refuge Oil Targeted by Alaksa Amid U.S. Reluctance. Alaska’s government proposed investing its own cash in an assessment of oil reserves in the U.S. Arctic National Wildlife Refuge, seeking to prod the federal government to consider drilling in the protected area.

Wall Street Journal:

Vista Equity Partners to Buy Websense(WBSN). Buyout firm Vista Equity Partners agreed to pay about $1 billion to acquire Websense Inc., WBSN +28.64% a maker of software and services designed to help protect companies against cyber attacks and data theft.
Why the IRS Flap Matters Most for Obama. People in general, and journalists in particular, tend to like things that come in groups of three, because a collection of three is small enough to comprehend but big enough to suggest a trend. That's why it's so damaging that the Obama White House came face-to-face in recent days with three controversies bubbling up at once—the revival of questions about the attacks on U.S. outposts in Benghazi, Libya; the disclosure that the Justice Department secretly subpoenaed a raft of phone records from the Associated Press in search of a leaker; and the news that the Internal Revenue Service targeted for special scrutiny conservative groups seeking tax-exempt status.

Fox News:

Fact check rips IRS official over Tea Party targeting claims.

CNBC:

Rumors Spark Bank Run, Break-Ins in Brazil. Rumors that Brazil's social security fund called Bolsa Familia was to be cancelled led thousands of people to rush to withdraw money from a Brazilian bank over the weekend. Customers lined up at ATMs at dozens of bank branches of Caixa Economica Federal, a government-owned bank, which pays the social security subsidy on Saturday and Sunday.
QE Halt Would Be 'Too Violent' for Market: Fed's Fisher. (video) The Federal Reserve should not go from "wild turkey" monetary policy to "cold turkey" overnight, Dallas Fed President Richard Fisher told CNBC on Monday, saying that when to dial back is the key because stopping would be "too violent for the marketplace."

Zero Hedge:

Business Insider:

Telegraph:

EU arms second front in China trade war with Huawei probe. The European Commission is poised to launch an anti-dumping probe against Chinese mobile companies Huawei and ZTE, opening a second front in its escalating trade clash with China.
Japanese growth could be 'sugar high', warns former World Bank president Robert Zoellick. Japan's 0.9pc growth in the first quarter could just be a "sugar high" following the government's massive stimulus measures, former World Bank president Robert Zoellick has said.

Bear Radar

2013-05-20T13:59:00.002-04:00

Style Underperformer:

Mid-Cap Growth +.15%

Sector Underperformers:

1) Biotech -.95% 2) HMOs -.93% 3) Homebuilders -.91%

Stocks Falling on Unusual Volume:

XNPT, GTN, LMOS, LEAP, YPF, TISI, OSIS, PTY, ALK, SPRD, ICA, DF, WWAV, THOR, CPB, RHT and APO

Stocks With Unusual Put Option Activity:

1) MNKD 2) RAD 3) DXJ 4) SCTY 5) XLF

Stocks With Most Negative News Mentions:

1) KSU 2) SNDK 3) BBBY 4) NTAP 5) AMGN

Charts:

ETFs Falling on Unusual Volume

Stocks Falling on Unusual Volume

Bull Radar

2013-05-20T12:12:00.000-04:00

Style Outperformer:

Small-Cap Value +.75%

Sector Outperformers:

1) Alt Energy +4.44% 2) Gold & Silver +3.50% 3) Coal +3.14%

Stocks Rising on Unusual Volume:

PXP, WPX, RBS, IBKC, WBSN, WCRX, NOAH, SCTY, ACT, GIVN, AMBA, QIHU, FWLT, INSM, YELP, BYI, UNXL, YRCW, YY, TSO, WWWW, CBI, ACAD, FSLR, SPWR, BKS, INFI, VOYA, KBR, SZYM, CVI, XONE, TSO, RH and SN

Stocks With Unusual Call Option Activity:

1) FLR 2) HCA 3) PPHM 4) FXY 5) KSS

Stocks With Most Positive News Mentions:

1) NOV 2) MMR 3) WBSN 4) C 5) CAT

Charts:

ETFs Rising on Unusual Volume

Stocks Rising on Unusual Volume

Monday Watch

2013-05-20T00:26:00.002-04:00

Weekend Headlines
Bloomberg:

Europe's Debt Frenzy Undeterred by Record Recession: Euro Credit. Investors are snapping up long-dated bonds from Europe's high debt and deficit nations even as prices reach the most expensive levels since 2010 and the region's deepening recession threatens to hamper deficit-reduction plans. Bonds maturing in more than 10 years from Greece, Spain, Portugal, Italy and Ireland are the best performers in the world this quarter. "At the moment, the power of monetary policy and the hunt for yields are outweighing the growth factors," said Joost van Leenders, who helps oversee $657 billion as a strategist at BNP Paribas Investment Partners in Amsterdam. "We are not sure how much patience the markets have. Growth prospects in Europe are really a problem and a risk for government finances, so we don't see that as a positive for markets. The rally has gone a bit too far."

Yen Climbs as Japan Signals Negative Impact From Further Losses. The yen climbed versus all 16 major peers after Japan’s Economy Minister Akira Amari said further losses in the currency would threaten to negatively affect people and the government’s job is to minimize that. The yen retreated from near its weakest in more than four years versus the dollar after Amari said yesterday there’s speculation the Japanese currency’s past strength has “been corrected a lot.”

China Small-Cap Bubble Seen Bursting by Chen. Chen Li, the UBS AG strategist who predicted the tumble in China’s smallest shares two years ago, says the companies are poised to retreat again after valuations rose to the biggest premium over larger stocks since 2010. The smaller-company gauge trades for 4.6 times net assets versus 1.7 for the CSI index, the widest gap since June 2010, data compiled by Bloomberg show.

China’s Aluminum Producers Seen Having to Make Cuts Amid Surplus. China, the world’s largest producer of aluminum, will have a “manageable” surplus of the metal for the next five years if companies cut back 4 million to 5 million metric tons of production, according to researcher CRU. China has cut output 1 million metric tons this year and will probably reduce it 2 million tons by 2015, with about 24 million tons produced this year, according to Marco Georgiou, an analyst at CRU in London. Aluminum fell 3.8 percent this year in China and 10 percent in London.

Asia Stocks Head For Highest Close in Nearly Five Years. Asian stocks rose the first time in three days, with the regional gauge heading for the highest close since June 2008, after U.S. consumer sentiment topped estimates and Tokyo Electric Power Co. led Japanese utilities higher. Li & Fung Ltd., a supplier of toys and clothing that gets 63 percent of its sales in the U.S., gained 2.2 percent in Hong Kong. Osaka Gas Co. advanced to the highest in more than five years after the U.S. conditionally approved a Texas liquefied natural gas project partially owned by the energy supplier. Tokyo Electric Power soared 14 percent after the Yomiuri newspaper said it will apply to restart reactors. The MSCI Asia Pacific Index gained 1.3 percent to 144.28 as of 10:13 a.m. in Hong Kong.

Silver Plunges to Lowest Since 2010 as Gold Drops for Eighth Day. Silver plunged to the lowest level since September 2010, sending its ratio to gold to the highest in 33 months, while bullion extended the longest slump in four years as investment holdings contracted and stocks rallied. Silver for immediate delivery tumbled as much as 7 percent to $20.6985 an ounce, and was at $21.345 at 11:32 a.m. in Singapore. The ratio surged to 64.89, the highest since August 2010. Gold lost as much as 1.5 percent to $1,338.85 an ounce, the lowest price since April 18, and was at $1,347.23.

Copper Declines for First Day in Three on China Demand Concerns. Copper dropped for the first time in three days on speculation that China will continue to curb its property market, reducing demand from the world’s biggest consumer. Tin, lead and zinc also fell. Copper for delivery in three months on the London Metal Exchange fell as much as 0.6 percent to $7,260 a metric ton and was at $7,265 at 10:45 a.m. in Tokyo. The metal retreated 1 percent last week. Futures for delivery in July on the Comex were down 0.8 percent at $3.2970 per pound. China’s new-home prices rose last month in 68 of 70 cities tracked by the government, indicating Premier Li Keqiang will need to maintain efforts to cool the property market even as economic growth slows. The nation’s policy makers are trying to avoid property bubbles and make homes more affordable while bolstering an economy that lost steam in the first quarter. “Any measures to cool down China’s property market would be negative for metals,” Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul. An increase in LME stockpiles and an outflow of funds to stock markets also weighed on copper, he said. Copper stockpiles monitored by the LME rose 0.9 percent to 629,950 tons, the highest since Aug. 20, 2003, data from the bourse showed on May 17.

Intelligence Panel Head Says Justice’s AP Probe ’Large Dragnet’. The Justice Department’s subpoena of Associated Press phone records appears to be “a large dragnet” that lacked a clear focus, Michigan Republican Representative Mike Rogers said. “It doesn’t appear to me to be appropriate,” Rogers said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. Rogers’ criticism of the Justice Department is significant because the lawmaker is chairman of the House Intelligence committee and a former FBI agent who had asked for an investigation into leaks of national security information.

Wall Street Journal:

Obama's Counsel Told of IRS Audit Findings Weeks Ago. The White House's chief lawyer learned weeks ago that an audit of the Internal Revenue Service likely would show that agency employees inappropriately targeted conservative groups, a senior White House official said Sunday. That disclosure has prompted a debate over whether the president should have been notified at that time.

Embassy Threats Grow in Mideast. The U.S. is seeing a spike in al Qaeda-related terror plots and threats against its embassies in Libya, Yemen and Egypt, say current and former U.S. officials citing domestic and foreign intelligence reports. The threats against U.S. missions in Tripoli and Yemen's capital, Sana'a, are believed to involve bomb plots by Sunni extremists and perhaps al Qaeda-linked individuals, and have set off alarms among U.S. officials still shaken by last September's attack on a diplomatic outpost in Benghazi, Libya.

Senate Launches Pension-Sale Probe. A Senate committee launched an investigation of a controversial business in which retirees sell pieces of their future pension income to investors for a lump-sum cash payment.

Criminal Charges Weighed Against SAC. Hedge-Fund Company Has Discussed Alternatives Such as Deferred-Prosecution Agreement. U.S. prosecutors are considering possible criminal charges against SAC Capital Advisors LP as a result of the government's insider-trading investigation of the hedge-fund firm, according to people familiar with the matter. The move came before the company told clients Friday that it will no longer provide "unconditional" cooperation with the multiyear probe of SAC and billionaire founder Steven A. Cohen. The firm didn't tell clients the reason for the reversal.

Employers Eye Bare-Bones Health Plans Under New Law. Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Oil Out of Sync With Market Forces. Prices of many commodities are down this year, but U.S. oil futures have rallied. Skeptics say the mismatch is a sign of trouble.

China Property Gains Defy Government Plans. Rapid Rise in Prices Comes Despite Beijing's Efforts to Keep Homes Affordable for First-Time Buyers. Surging credit has kept China's real estate-sector humming despite a renewed attempt by the government to bring prices under control, supporting short-term economic growth but risking a destabilizing decline in prices down the line.

Syria Sweeps Into Rebel Stronghold. Syrian government forces, backed by members of Lebanese militant group Hezbollah, launched a sweeping operation Sunday to capture a rebel stronghold near the Lebanese border, according to Syrian state media and activists opposed to the regime. Taking the town of Qusayr, southwest of the city of Homs, would bolster recent gains by regime forces in central Syria and around the capital, Damascus. It also could further embolden Syrian President Bashar al-Assad, who told an Argentine newspaper over the weekend that his fate would be decided in elections scheduled for next year.

Big Government Loses Control. Tea party and other groups use social media to spread the news about IRS abuse world-wide. What to make of the political scandals that are dominating the headlines and forcing the Obama administration into Nixonian damage control? Technology is finally doing to big government what it has done to big business, big media and other institutions that once could operate with nearly full control over information. The government is losing the ability to manipulate information to avoid accountability.

Marketwatch.com:

Too big to fail is now bigger than ever: Andy Xie. The flawed global financial system essentially holds all major governments hostage. Whenever a crisis happens, the policy priority is to stabilize the financial system for short-term economic stability. This tends to favor TBTF financial institutions. Every crisis makes the problem bigger.

Republicans link IRS scandal, health reform. “Just think about the fact that it’s the IRS that will be responsible for enforcing many of these regulations. If we’ve learned anything this week, it’s that the IRS needs less power, not more,” said Rep. Andy Harris of Maryland, who delivered the Republican response.

Fox News:

Top Obama adviser stakes out defiant defense on IRS, Benghazi, AP scandals. A top White House adviser staked out a defiant defense Sunday on a series of scandals that have hit the Obama administration, going so far as to say it was an “irrelevant fact” where the president was the night of the Benghazi terror attacks and saying the Obama administration wouldn’t cooperate in “partisan fishing expeditions” over IRS officials targeting Tea Party groups. Dan Pfeiffer went on five Sunday talk shows where he tried to reverse the damage done to the Obama administration this week by a series of scandals. On “Fox News Sunday” he tried to hammer home that the president only heard that the IRS unfairly targeted Tea Party groups “when it came out in the news.”

CNBC:

China April Housing Inflation Quickens. China's housing inflation quickened in April, marking the fourth consecutive year-on-year rise and challenging policymakers who are trying to cool record home prices while supporting economic expansion. Average new home prices rose 4.9 percent last month from a year ago, after a year-on-year increase of 3.6 percent in March, according to Reuters calculations from data released by the National Bureau of Statistics (NBS) on Saturday. Rising home prices have reignited concerns about property inflation, adding to pressure on policymakers who are struggling to curb house prices and still spur a strong economic recovery. "The market expectations on rising home prices have not changed thoroughly and the property tightening campaign is still at a critical stage to strictly enforce (curbing measures)," Liu Jianwei, a senior statistician at the NBS, said in a statement.

Bernanke’s Testimony Critical to Oil Prices. The U.S. dollar and its reaction to the Federal Reserve Chairman Ben Bernanke's Congress testimony on Wednesday will prove central for crude oil price direction this week, according to CNBC's weekly survey of market sentiment.

Zero Hedge:

The Debt Ceiling Is Back.

Europe's EUR 500 Billion Ticking NPLTime Bomb.

Why Bulls Should Fear The "Money On The Sidelines". (graphs)

Spot The Odd Continent Out: Total Bank Assets As % Of GDP. (graphs)

North Korea Launches Three Missiles Into Eastern Sea.

Auditing The IRS: "Is There Any Limit To The Scope Where You Folks Can Go?" (video)

Italy's New Government Approval Rating Plummets From 43% To 34% In Three Weeks, Protests Return.

"Boldly They Rode And Well", Or Why Japan Is Not America.

The Bermuda Triangle Of Economics.

Jeff Gundlach: "We Are Drowning In Central Banking".

Toyota Pulls Bond Deal Due To Soaring Yields: The Japanese "VaR Shock" Feedback Loop Is Back.

Crushed By Soaring Energy Costs, Japan Prepares To Reactivate Its Nuclear Power Plants.

Business Insider:

Official Reveals That Obama Administration Members Knew About Conservative IRS Complaints During The Election.

FELIX ZULAUF: Stocks Remind Me Of Gold And They Could See A 'Quick And Painful Adjustment'.

The UK Has Just Had One Lost Decade, And It's About To Enter A Second.

Why The Benghazi Problem Won't Go Away.

The Economy Continues To Send A Ton Of Bearish Signals.

BARRON'S: There Were Two Gigantic, Suspicious Sales Of Gold On Friday That Caused The Price To Plunge.

What A Terrible Year So Far It's Been For BRICs Markets.

AP: Sources Aren't Talking To Us Out Of Fear The US Government Will Spy On Them.

10 Wild Statistics About How Nobody Can Lose In This Market.

IBD:

Google(GOOG) YouTube Takes On TV, Vimeo With Pay-Per-View.

Wall Street All-Stars:

Indicator Update: Are you ready for some Fedspeak?

New York Times:

Chinese Hackers Resume Attacks on U.S. Targets.

San Francisco Chronicle:

Gun control: Cartridge ID law to take effect. A hotly contested gun-control law that was passed in 2007 is finally ready to be implemented, Attorney General Kamala Harris said Friday: a requirement that every new semiautomatic handgun contain "micro-stamping" technology that would allow police to trace a weapon from cartridges found at a crime scene. The law, signed by then-Gov. Arnold Schwarzenegger, made California the first state to require micro-stamping, which engraves the gun's serial number on each cartridge. But the legislation specified that it would take effect only when the technology was available and all private patents had expired. The gun owners' group Calguns Foundation tried to forestall the law at one point by paying a $555 fee in an attempt to extend a patent held by the inventor, who wanted it to lapse. Gun manufacturers said the technology was expensive and ineffective, and a National Rifle Association lawyer has threatened a lawsuit. But at a Los Angeles news conference Friday, Harris announced that micro-stamping had cleared all technological and patenting hurdles and would be required on newly sold semiautomatics, effective immediately.

Washington Post:

A rare peek into a Justice Department leak probe. When the Justice Department began investigating possible leaks of classified information about North Korea in 2009, investigators did more than obtain telephone records of a working journalist suspected of receiving the secret material. They used security badge access records to track the reporter’s comings and goings from the State Department, according to a newly obtained court affidavit. They traced the timing of his calls with a State Department security adviser suspected of sharing the classified report. They obtained a search warrant for the reporter’s personal e-mails.

ValueWalk:

Market Neutral Hedge Fund Exposure Nears 2012 High: BAML. Market Neutral hedge funds increased market exposure to 16% net long, approaching the 2012 high.

Reuters:

Bundesbank says France must take deficit cuts seriously. Bundesbank President Jens Weidmann says France must take deficit cut rules seriously to reduce budget deficits. Weidmann points out that Germany and France have special responsibilities in the eurozone.
France has a special responsibility as a euro zone heavyweight to take deficit reduction rules seriously, even though its budget deficit is above target, Bundesbank President Jens Weidmann said in an interview published yesterday. Weidmann told the Bild am Sonntag newspaper that the credibility of the new euro zone rules would be hurt if their flexibility were pushed to the limit right at the start. “The economic developments in some countries have indeed been weaker than expected and the European rules offer in such cases a certain amount of flexibility,” Weidmann said when asked about Italy, France and Slovenia getting more time to fulfill the stability criteria. “France, but also Germany, has a special responsibility, as heavyweights in the euro zone, to take seriously the new deficit reduction rules created last year to reduce budget deficits.” Weidmann noted that France’s budget deficit was still “far above 3 percent.”

Analysis: High speed trading a stiff challenge for U.S. regulators. Financial trading in world markets has grown so lightning-fast that effective regulation is growing tougher by the second, increasing the threat of crashes sparked by hoaxes, electronic glitches or yet-unknown causes. The latest alarm was triggered by a fake tweet saying that the White House was bombed, prompting a U.S. market nosedive that ended minutes later when the Associated Press said its Twitter account had been hacked. In 2010 U.S. stocks plunged in a "flash crash" following aggressive sales of stock-index futures by a mutual fund.

Yahoo's(YHOO) board approves $1.1 billion Tumblr acquisition: WSJ. Yahoo Inc's board has approved a deal to buy blogging and social networking site Tumblr for $1.1 billion in cash, the Wall Street Journal cited people familiar with the matter as saying on Sunday.

Financial Times:

Portugal’s banks fear ‘Cyprus virus’. Portugal’s top bankers have called on Europe’s leaders to stop “playing with fire” and moderate their stance towards the eurozone periphery, or risk instilling alarm among bank depositors in future. In separate interviews, the heads of the country’s two biggest banks – Millennium BCP and Banco Espírito Santo – said they were concerned that the precedent set by Europe’s treatment of Cyprus’s recent troubles had increased nervousness across the eurozone to dangerous levels.

Telegraph:

Meet the man who is betting against China. Carson Block, the founder of Muddy Waters Research, believes that China’s banks hold more toxic assets than Western peers did ahead of the 2008 financial crash. He is listened to by institutional investors, regulators and politicians but he rarely speaks publicly. Last week, his analysis of Standard Chartered’s exposure to China caused a tremble in its share price and its backers to leap to the bank’s defence. Carson Block has broken his silence this weekend to reveal his fears for the global economy. The secretive fund manager said the risks within China’s banking system are more severe than those in Western financial institutions before the crisis.

France has been ignoring its problems, now the chickens are coming home to roost. It is too early to be sure that the UK economy is finally emerging from the doldrums but the early signs look promising.

Frankfurt Allgemeine Sonntagszeitung:

German SPD to Introduce Referendum Law Next Month. Germany's Social Democratic Party may push for a new law on country-wide referendums. Draft law due to be debated in mid-June allows for referendum to repeal legislation already passed in parliament. Chancellor Angela Merkel's CDU/CSU opposed the introduction of country-wide referendums.

Kathimerini:

EU's Barnier Says ESM Is Last Resort. The ESM will intervene to directly recapitalize euro-area banks only after lenders have exhausted all alternatives, citing an interview with European Commissioner Michel Barnier. Barnier says alternatives include imposing losses on uninsured deposits as in Cyprus.

Apple Daily:

Hong Kong Competitiveness Waning on Possible Bubble. Hong Kong economy shows signs of a possible bubble because of its high dependency on financials and real estate industries, citing the latest Chinese cities competitiveness report from the Chinese Academy of Social Sciences.

Shanghai Securities News:

BOC President Wants Lending-Rate Floor Canceled. Bank of China Ltd. President Li Lihui suggested that China cancel the floor on lending rates and let banks price credit risk, citing Li's speech at a forum yesterday.

People's Daily:

China faces "relatively large pressures" from capital inflows and yuan appreciation, citing Ji Zhihong, an official at the research bureau of the People's Bank of China.

China Securities Journal:

China May Expand Property Tax Trial This Year. China may expand property tax trail to several new cities this year, citing people familiar with the matter.

China Needs Restructuring for Outstanding Debt. China should proactively push forward restructuring of banks' outstanding debt to eliminate possible "external risks," Liu Yuhui, a researcher at the Chinese Academy of Social Sciences, writes in a commentary. China's total debt-to-GDP ratio rose by nearly 60 percentage points between 2009 and 2012, according to the commentary. Debt ratio is still rising as the social financing growth in 1Q was 12 percentage points faster than nominal GDP, Liu wrote. U.S. monetary policy may normalized, putting pressure on capital markets in the Asia-Pacific, he said.

Weekend Recommendations

Barron's:

Bullish commentary on (C), (S), (R) and (RIG).

Night Trading

Asian indices are unch. to +1.25% on average.

Asia Ex-Japan Investment Grade CDS Index 101.0 -1.5 basis points.

Asia Pacific Sovereign CDS Index 84.75 unch.

FTSE-100 futures +.28%.

S&P 500 futures +.05%.

NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

(CPB)/.56

(URBN)/.29

Economic Releases

None of note

Upcoming Splits

None of note

Other Potential Market Movers

The Fed's Evans speaking, Fed's Williams speaking, Chicago Fed Nat Activity Index for April, RBA minutes, Stifel Nicolaus Internet/Media/Communications Conference, UBS Healthcare Conference and the UBS Oil & Gas Conference could also impact trading today.

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

Weekly Outlook

2013-05-19T16:07:00.001-04:00

U.S. Week Ahead by MarketWatch (video).
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 lower on rising global growth fears, more Mideast unrest, Eurozone debt angst, profit-taking, more shorting and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

2013-05-17T23:04:00.002-04:00

S&P 500 1,667.47 +2.07%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

2013-05-17T22:56:00.001-04:00

Indices

S&P 500 1,667.47 +2.07%

DJIA 15,354.40 +1.56%

NASDAQ 3,498.96 +1.82%

Russell 2000 996.28 +2.17%

S&P 500 High Beta 25.99 +2.61%

Value Line Geometric(broad market) 430.82 +1.93%

Russell 1000 Growth 763.92 +1.66%

Russell 1000 Value 846.21 +2.31%

Morgan Stanley Consumer 1,032.47 +1.90%

Morgan Stanley Cyclical 1,236.52 +1.92%

Morgan Stanley Technology 773.72 +2.26%

Transports 6,549.16 +2.72%

Utilities 516.70 +.58%

Bloomberg European Bank/Financial Services 101.02 +2.45%

MSCI Emerging Markets 43.30 -.55%

HFRX Equity Hedge 1,127.74 +.66%

HFRX Equity Market Neutral 939.92 +.03%

Sentiment/Internals

NYSE Cumulative A/D Line 192,643 +.71%

Bloomberg New Highs-Lows Index 609 -202

Bloomberg Crude Oil % Bulls 20.0 -49.23%

CFTC Oil Net Speculative Position 232,590 +5.42%

CFTC Oil Total Open Interest 1,758,686 -.66%

Total Put/Call .80 +8.11%

OEX Put/Call 1.42 -8.39%

ISE Sentiment 90.0 -27.42%

NYSE Arms .62 -29.54%

Volatility(VIX) 12.45 -1.11%

S&P 500 Implied Correlation 56.74 +.05%

G7 Currency Volatility (VXY) 9.94 +3.76%

Emerging Markets Currency Volatility (EM-VXY) 7.97 +11.2%

Smart Money Flow Index 12,138.95 +1.28%

Money Mkt Mutual Fund Assets $2.582 Trillion unch.

AAII % Bulls 38.5 -5.6%

AAII % Bears 29.3 +6.9%

Futures Spot Prices

CRB Index 287.60 -.38%

Crude Oil 96.02 +.05%

Reformulated Gasoline 290.69 +1.74%

Natural Gas 4.05 +3.79%

Heating Oil 293.70 +1.13%

Gold 1,364.70 -5.70%

Bloomberg Base Metals Index 192.81 -.75%

Copper 332.30 -1.76%

US No. 1 Heavy Melt Scrap Steel 349.33 USD/Ton unch.

China Iron Ore Spot 123.10 USD/Ton -5.01%

Lumber 315.80 -6.62%

UBS-Bloomberg Agriculture 1,470.69 -.73%

Economy

ECRI Weekly Leading Economic Index Growth Rate 7.0% -30 basis points

Philly Fed ADS Real-Time Business Conditions Index -.4709 +2.61%

S&P 500 Blended Forward 12 Months Mean EPS Estimate 115.56 +.17%

Citi US Economic Surprise Index -17.50 -10.2 points

Citi Emerging Mkts Economic Surprise Index -47.40 +2.8 points

Fed Fund Futures imply 52.0% chance of no change, 48.0% chance of 25 basis point cut on 6/19

US Dollar Index 84.25 +1.39%

Euro/Yen Carry Return Index 138.13 +.38%

Yield Curve 171.0 +5 basis points

10-Year US Treasury Yield 1.95% +5 basis points

Federal Reserve's Balance Sheet $3.312 Trillion +.93%

U.S. Sovereign Debt Credit Default Swap 29.81 -5.35%

Illinois Municipal Debt Credit Default Swap 117.0 -4.1%

Western Europe Sovereign Debt Credit Default Swap Index 85.50 -2.84%

Emerging Markets Sovereign Debt CDS Index 176.76 +4.45%

Israel Sovereign Debt Credit Default Swap 122.0 +8.54%

China Blended Corporate Spread Index 400.0 -1 basis point

10-Year TIPS Spread 2.26% -8 basis points

TED Spread 24.25 +.25 basis point

2-Year Swap Spread 14.5 +1.0 basis point

3-Month EUR/USD Cross-Currency Basis Swap -17.25 -3.25 basis points

N. America Investment Grade Credit Default Swap Index 70.20 -2.70%

European Financial Sector Credit Default Swap Index 130.83 -2.83%

Emerging Markets Credit Default Swap Index 246.51 +5.61%

CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 98.0 +13 basis points

M1 Money Supply $2.517 Trillion -2.21%

Commercial Paper Outstanding 1,013.60 +2.1%

4-Week Moving Average of Jobless Claims 339,300 +2,500

Continuing Claims Unemployment Rate 2.3% unch.

Average 30-Year Mortgage Rate 3.51% +9 basis points

Weekly Mortgage Applications 876.60 -7.3%

Bloomberg Consumer Comfort -30.2 -.7 point

Weekly Retail Sales +2.80% +60 basis points

Nationwide Gas $3.62/gallon +.06/gallon

Baltic Dry Index 841.0 -4.86%

China (Export) Containerized Freight Index 1,069.97 -1.19%

Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 22.50 unch.

Rail Freight Carloads 248,266 +1.05%

Best Performing Style

Small-Cap Growth +2.6%

Worst Performing Style

Large-Cap Growth +1.7%

Leading Sectors

Education +11.9%

Alt Energy +6.7%

Networking +5.3%

Internet +4.6%

I-Banking +4.6%

Lagging Sectors

Hospitals -1.2%

Agriculture -1.8%

Coal -3.1%

Steel -5.1%

Gold & Silver -10.2%

Weekly High-Volume Stock Gainers (24)

SCTY, MGMB, TEAR, MRIN, TSLA, OPTR, RH, OLP, ENV, SRI, PANL, FANG, ONE, HTH, NNI, WWAV, UBNT, CUB, BBOX, WAGE, CUBI, SSYS, ACET and EOPN

Weekly High-Volume Stock Losers (5)

PIKE, GEVA, WLH, CSC and INFI

Weekly Charts
ETFs

High-Volume Gainers

High-Volume Losers

Stocks

High-Volume Gainers

High-Volume Losers

*5-Day Change

Stocks Surging into Final Hour on US Economic Data, Short-Covering, Performance Angst, Financial/Homebuilding Sector Strength

2013-05-17T16:04:00.002-04:00

Today's Market Take:

Broad Market Tone:

Advance/Decline Line: Higher

Sector Performance: Most Sectors Rising

Volume: Below Average

Market Leading Stocks: Outperforming

Equity Investor Angst:

VIX 12.45 -4.74%

ISE Sentiment Index 77.0 -28.7%

Total Put/Call .82 -15.46%

NYSE Arms .69 -55.51%

Credit Investor Angst:

North American Investment Grade CDS Index 70.08 -2.16%

European Financial Sector CDS Index 130.83 -2.24%

Western Europe Sovereign Debt CDS Index 87.17 -3.51%

Emerging Market CDS Index 246.38 +.58%

2-Year Swap Spread 14.5 +.5 bp

TED Spread 24.25 -.5 bp

3-Month EUR/USD Cross-Currency Basis Swap -17.25 -.5 bp

Economic Gauges:

3-Month T-Bill Yield .03% unch.

Yield Curve 170.0 +7 bps

China Import Iron Ore Spot $123.10/Metric Tonne -1.52%

Citi US Economic Surprise Index -17.5 +5.6 points

10-Year TIPS Spread 2.26 unch.

Overseas Futures:

Nikkei Futures: Indicating +272 open in Japan

DAX Futures: Indicating +57 open in Germany

Portfolio:

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

Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

Market Exposure: Moved to 75% Net Long

Today's Headlines

2013-05-17T15:40:00.004-04:00

Bloomberg:

Banker in Jail Suggests Spain Is Calling Lenders to Account.
Cypriot Bailout Program Faces ‘Unusually High’ Risks, IMF Says. Cyprus may need additional financing if its economy contracts more than expected or there are slippages in implementing the terms of its bailout program with the euro area and International Monetary Fund, IMF staff said. The impact of Cyprus’s banking crisis on gross domestic product and on the country’s fiscal consolidation is “highly uncertain,” the Washington-based institution said in a staff report today. This means risks to the outlook are “substantial and tilted to the downside” as problems would adversely affect the trajectory of Cyprus’s public debt.
Italian Government Suspends Unpopular Property Tax Payment. The Italian Cabinet agreed today to suspend the payment of a residential property tax due in June, an unpopular levy adopted by former Prime Minister Mario Monti to help reduce the country’s budget deficit. The administration led by Premier Enrico Letta pledged to review the tax by Aug. 31. It also approved additional funding of 1 billion euros ($1.3 billion) for workers in a temporary layoff program known as CIG.
Russian GDP Growth at 1.6% as Economy Weakest Since 2009. Russia’s economy grew at the weakest pace since 2009 in the first quarter as the euro area’s longest recession hurt demand for commodity exports and investment at companies including OAO Gazprom cooled. Gross domestic product rose 1.6 percent from a year earlier, slowing for a fifth consecutive quarter, the Federal Statistics Service in Moscow said today in an e-mailed statement. That compares with a median estimate of 1.2 percent in a Bloomberg survey of 23 economists and a 2.1 percent pace in the final three months of 2012. The Economy Ministry estimated first-quarter growth at 1.1 percent.
Dollar Index Reaches Highest Since 2010 on Fed; Aussie Slides. The Dollar Index climbed to the highest level in almost three years amid speculation the Federal Reserve is moving closer to ending its program of asset purchases on signs U.S. economic growth is improving. The greenback rose versus all of its 16 most-traded peers as U.S. leading indicators improved and consumer confidence rose to the highest in almost six years. The American currency climbed past 103 yen for the first time since October 2008. The Australian and New Zealand dollars slid on concern slowing global inflation will damp demand for commodities.
Oil Price-Fixing Probe Widens as Neste Helps EU Inquiry. The European oil price-fixing probe expanded as Neste Oil Oyj (NES1V), Finland’s only refiner, said it was asked to provide information regarding potential manipulation of global crude and biofuel markets. The widening investigation comes as Pannonia Ethanol, a Hungarian biofuel producer, said it lodged a complaint with the European Commission last year after data-pricing company Platts denied requests to contribute to its price-setting process. Meanwhile, Statoil ASA (STL), one of the European oil companies that has been ensnared in the investigation, said it has “zero tolerance” for breaches of rules.
Gold Heads for Longest Slump in Four Years on Fed, Dollar. Gold fell, heading for the longest slump in four years, as the dollar jumped to a 34-month high and a Federal Reserve policy maker said that U.S. monetary stimulus may be reduced within months.

Wall Street Journal:

GOP Lawmakers Criticize IRS as Hearing Opens. House Republicans on Friday probed for political motivations behind the Internal Revenue Service's targeting of conservative groups, saying lawmakers had been lied to and that there had been additional violations at the agency. House Ways and Means Chairman Dave Camp (R., Mich.), saying the revelations so far were "just the tip of the iceberg," asked who started targeting conservative groups, who knew about the practice, why it went on for so long and why the IRS wasn't forthcoming when lawmakers asked whether conservatives were being targeted.

CNBC:

Italian Government 'History' as 'Virus' Spreads: Grillo. Traditional parties that make up Italy's coalition government will become history in less than four months, Beppe Grillo, the leader of the anti-establishment "Five Star Movement" told CNBC, likening the support for his movement to a fast-spreading "virus."
How to Tell If the IRS Is Eyeing You. You consider yourself a law abiding citizen, and you are not starting a nonprofit organization with conservative ties.

Zero Hedge:

Business Insider:

Reuters:

Fitch cuts Slovenia as bailout worries continue.
Fitch throws CMBS hand grenade ahead of SEC meeting. Fitch shook up the US securitization market this week when, on the eve of a long-awaited US SEC public roundtable on credit rating industry reform, it issued an unsolicited comment lambasting the Triple A ratings given by two of its rivals to a new single-asset commercial mortgage-backed security (CMBS) linked to a trophy Manhattan office building.
TABLE-U.S. March factory orders revised to -4.9 pct.

USA Today:

Benghazi e-mails unleash flood of questions.
Obamacare: 3 years in, it faces steep challenges. Poll: Accept The Law or Try to Change It?

Handelsblatt:

Germany Against ECB Idea to Put ABS Risk on EU. "EU-budget guarantees to safeguard ECB measures is a renewed attempt to create a liability union by stealth," Michael Meister, deputy caucus leader for Merkel's CDU/CSU bloc in parliament, said. "The best protection for the ECB is simply to abstain from buying corporate bonds," Meister said. Meister called for a swift end to an "unnecessary discussion". SPD lawmaker Carsten Schneider also warned against burdening EIB saying plan risks turning the institution into "bad bank of Europe".

Manager Magazin:

Germany's Rich Withdraw Money From Banks. Many family offices have no confidence in financial system stability, euro, and withdraw money from banks, money mkt funds, bonds, Yvonne Brueckner of Family Office Panel said.

Bear Radar

2013-05-17T13:12:00.002-04:00

Style Underperformer:

Large-Cap Growth +.28%

Sector Underperformers:

1) Gold & Silver -2.06% 2) Drugs -.75% 3) Agriculture -.50%

Stocks Falling on Unusual Volume:

NGD, STO, CMCSA, MRK, DEO, NGG, ARUN, ADSK, SSI, UNXL, GTU, TSLA, DWRE, YOKU, AEGR, JWN, DE, CODE, CHKR, TD, STO, MIC, FNV, HQH, HQL, MRH, VASC, EW, APL and CHKR

Stocks With Unusual Put Option Activity:

1) RF 2) JWN 3) SCTY 4) TIF 5) XLK

Stocks With Most Negative News Mentions:

1) WSM 2) LTD 3) DE 4) EWZ 5) GS

Charts:

ETFs Falling on Unusual Volume

Stocks Falling on Unusual Volume

Bull Radar

2013-05-17T11:52:00.002-04:00

Style Outperformer:

Mid-Cap Value +.71%

Sector Outperformers:

1) Oil Service +1.68% 2) Alt Energy +1.53% 3) Defense +1.27%

Stocks Rising on Unusual Volume:

TSO, VSAT, SCTY, RKUS, QLIK, GT and ESI

Stocks With Unusual Call Option Activity:

1) JRCC 2) ARUN 3) RRC 4) ILMN 5) XLY

Stocks With Most Positive News Mentions:

1) TDW 2) NOC 3) PIKE 4) AIN 5) UAL

Charts:

ETFs Rising on Unusual Volume

Stocks Rising on Unusual Volume

Friday Watch

2013-05-17T00:35:00.001-04:00

Evening Headlines
Bloomberg:

Vanishing Risk Penalty Alarms Peripheral Investors: Euro Credit. The penalty that companies from Europe's most indebted nations pay to borrow has shrunk to near the least in three years, alarming investors who are concerned that the region's financial crisis is far from over. Buyers of bonds from companies in the region's periphery are being paid 63 basis points more yield than they're getting from companies in core nations such as France and Germany, down from 319 basis points a year ago, according to Bank of America Merrill Lynch indexes. The difference is vanishing even as fundraising by companies from Greece to Spain surged to a record 23.6 billion euros ($30.4 billion) this year, up from 15.3 billion euros in the same period of 2012, according to data compiled by Bloomberg.

EU Bank Stress Tests Delay Makes Way for ECB Supervision Plan. The European Central Bank is set to take center stage as the euro area’s chief banking supervisor, after the European Banking Authority ditched this year’s stress test in favor of an ECB-led review of lenders’ asset quality. The London-based EBA, set up in 2011 to harmonize rules across the European Union, delayed stress tests until 2014 as the ECB’s asset check goes ahead to “help dispel concerns over the deterioration of asset quality due to macroeconomic conditions in Europe,” the agency said a statement yesterday.

Denmark Shelves Euro Goal Indefinitely as Crisis Scars Too Deep. Denmark is shelving indefinitely its euro adoption goal as Prime Minister Helle Thorning-Schmidt says an exchange rate peg without full European monetary membership is proving the best currency regime for the Nordic nation. A euro referendum “in this election term is unrealistic,” Thorning-Schmidt said yesterday in an interview in Stockholm. “I don’t think it makes any sense to discuss the option of a euro referendum in the next term” set to run from 2015 to 2019, she said.

Singh’s Growth Push Imperiled as Graft Scandals Rattle: Economy. Indian Prime Minister Manmohan Singh’s latest skirmish with corruption risks setting back efforts to spur growth, worsening a legislative logjam under a government set to pass the fewest bills ever in a full term. Singh, 80, is grappling with renewed allegations that he has allowed corruption to fester after separate graft probes led to the May 10 dismissal of the law and railways ministers. Parliament ended two days early last week as opposition parties demanding the men’s resignation blocked proceedings, with proposals to open up the country’s pension and insurance industries to overseas investment still stalled.

Sina(SINA) Posts Loss as China Slowdown Damps Online Advertising. Sina Corp. (SINA), owner of China’s largest Twitter-like service, posted a first-quarter loss as an advertising slowdown damped revenue and the company spent more on developing mobile applications.

Asia Stock Index Slides on Earnings, Economic Concerns. Asia’s benchmark stock index fell for a second day as companies from WorleyParsons (WOR) Ltd. to Nippon Sheet Glass Co. forecast weaker earnings and data on jobless claims and housing signaled a slowdown in the U.S. WorleyParsons, Australia’s largest oil and gas engineering company, plunged 13 percent, while Nippon Sheet Glass sank 8.8 percent in Tokyo. Panasonic Corp., Japan’s second-biggest television maker, slid 1.8 percent. Sony Corp. fell 1.6 percent, paring this week’s rally triggered by billionaire Daniel Loeb’s push to get the electronics maker to spin off its entertainment business through an initial public offering. SP Ausnet climbed 2.4 percent after China State Grid Corp. agreed to buy a stake in the Australian electricity distributor. The MSCI Asia Pacific Index slipped 0.3 percent to 142.66 as of 11:01 a.m. Tokyo time, all 10 industry groups in the measure declining.

Copper Set for First Weekly Drop in Four After U.S. Data. Copper declined, poised for the first weekly drop in four, after data showed U.S. jobless claims rose and housing starts slumped, raising concern that demand from the second-biggest user is slowing. Metal for delivery in three months fell as much as 0.6 percent to $7,234 a metric ton on the London Metal Exchange and was at $7,254 at 9:44 a.m. in Shanghai. Copper has retreated 1.7 percent this week, the first drop since the week ended April 19.

Rubber Set for Biggest Weekly Loss in Month as Yen Slump Stalls. Rubber headed for the biggest weekly loss in a month as a slump in Japan’s currency against the dollar stalled, weakening the appeal of yen-denominated futures. Rubber for delivery in October dropped as much as 1.8 percent to 277.3 yen a kilogram ($2,713 a metric ton) before trading at 279.6 yen on the Tokyo Commodity Exchange at 10:27 a.m. Futures have lost 4.9 percent this week, the biggest decline since the week through April 19.

Rebar Set for Weekly Decline as Iron Ore Falls to Five-Month Low. Steel reinforcement-bar futures headed for a weekly loss as the price of iron ore, the main ingredient in steelmaking, fell to the lowest in five months. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 0.6 percent to 3,529 ($575) a metric ton and was at 3,531 at 10:15 a.m. local time. Futures have declined 3 percent this week, the most since the week ended April 19.

Dollar Erases Losses After Williams Says Fed May Taper Purchases. The dollar erased losses versus the yen and euro after Federal Reserve Bank of San Francisco President John Williams said the central bank may begin tapering as early as this summer the pace of its bond purchases. The greenback fell earlier from an almost four-year high versus the yen after weaker-than-forecast reports on U.S. unemployment claims, housing and inflation damped bets the Fed will slow its bond buying under the quantitative-easing stimulus strategy. South Africa’s rand slid to the weakest since 2009 on concern the nation’s economic growth will falter. “He’s hinted at possibility of tapering QE already,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said of Williams in a telephone interview. “But I think it still adds fuel to the fire. Markets have been focusing on tapering, and this remark will certainly be noted.”

Nordstrom(JWN) Slides After Quarterly Revenue Trails Estimates. Nordstrom Inc. (JWN) dropped after the department-store chain posted first-quarter revenue that trailed analysts’ estimates and cut its sales forecast for the year. Nordstrom fell 2.7 percent to $59.45 at 4:42 p.m. after regular trading ended in New York.

Wall Street Journal:

Russia Raises Stakes in Syria. Assad Ally Bolsters Warships in Region; U.S. Sees Warning.
Russia has sent a dozen or more warships to patrol waters near its naval base in Syria, a buildup that U.S. and European officials see as a newly aggressive stance meant partly to warn the West and Israel not to intervene in Syria's bloody civil war. Russia's expanded presence in the eastern Mediterranean, which began attracting U.S. officials' notice three months ago, represents one of its largest sustained naval deployments since the Cold War. While Western officials say they don't fear an impending conflict with Russia's aged fleet, the presence adds a new source of potential danger for miscalculation in an increasingly combustible region. "It is a show of force. It's muscle flexing," a senior U.S. defense official said of the Russian deployments. "It is about demonstrating their commitment to their interests."

Day Traders Steer Tesla(TSLA) Higher.

This Is No Ordinary Scandal. Political abuse of the IRS threatens the basic integrity of our government.

Strassel: The IRS Scandal Started at the Top. The bureaucrats at the Internal Revenue Service did exactly what the president said was the right and honorable thing to do.

Fox News:

ICE admits hundreds of illegal immigrants with criminal records released. Hundreds of illegal immigrants with criminal records were released earlier this year as the Obama administration prepared for budget cuts, according to newly released data that challenged claims the program involved "low-risk" individuals. Immigration and Customs Enforcement released the figures to two top senators, after a three-month delay and under the threat of congressional subpoenas.

MarketWatch.com:

Videogame sales in U.S. suffer tailspin in April. Videogame hardware, software and accessory sales in U.S. retail stores fell 25% in April to $495.2 million, from $657.5 million a year earlier, according to NPD Group, an industry researcher. Data from the month showed double-digit declines in every segment, including software and accessories, though hardware sales saw the most dramatic contraction.

CNBC:

Stock Market Gains Show Signs of Wear. Stocks head into Friday with a 1 percent gain for the week so far, but traders are increasingly seeing signs of wear, particularly as a growing list of disappointing economic reports stacks up against the market's gains.

Dell(DELL) Earnings Fall Short of Estimates; Sales Beat. Dell reported earnings that fell far shy of market expectations on Thursday, but revenue beat forecasts as strength in its enterprise solutions business offset declining PC sales.

Struggling JC Penney(JCP Reports Bigger Loss Than Expected. Struggling department-store retailer JC Penney on Thursday reported operating margins plunged in the first quarter on weak sales and heavy clearance deals, as its new chief executive promised more promotions and a return to basics to win back shoppers.

Zero Hedge:

"America, The Dependent". (graph)

Biderman Busts The 'Sustainable' Deficit Reduction Meme.

Just Plain Silly. (graph)

Austrian "Good" Banks Balk At Bad-Bank Bailout.

Mystery Sponsor Of Weapons And Money To Syrian Mercenary "Rebels" Revealed.

Business Insider:

7 Charts That Show Why Fox Is The Most Dominant Force In Cable News.

Morgan Stanley Explains Why The US Dollar Is The Hottest Currency In The World Again.

The Next Big Enterprise IPO Happens On Friday: Tableau Software.

TEXAS STATE FIRE MARSHAL: Arson Not Ruled Out In Fertilizer Plant Explosion Investigation.

Cisco's(CSCO) John Chambers Repeats Threat To Ship Jobs Overseas If Tax Laws Don't Change.

New York Times:

Russia Sends More Advanced Missiles to Aid Assad in Syria. Russia has sent advanced antiship cruise missiles to Syria, a move that illustrates the depth of its support for the Syrian government led by President Bashar al-Assad, American officials said Thursday.

ABCNews:

IRS Official in Charge During Tea Party Targeting Now Runs Obamacare Office. The Internal Revenue Service official in charge of the tax-exempt organizations at the time when the unit targeted tea party groups now runs the IRS office responsible for the health care legislation. Sarah Hall Ingram served as commissioner of the office responsible for tax-exempt organizations between 2009 and 2012. But Ingram has since left that part of the IRS and is now the director of the IRS’ Affordable Care Act office, the IRS confirmed to ABC News today.

Real Clear Politics:

Schieffer On Scandals: "It's Very, Very Disturbing What We're Seeing". (video) I mean, just all of a sudden you have this thing with the Justice Department where they’re getting all these phone records of all the reporters. The Attorney General, well he didn’t know anything about it. You get to the IRS, they don’t seem to know anything about the Tea Party thing. You come to White House, they don’t know anything about Benghazi. Somebody’s got to grab hold of this thing. It’s very, very disturbing what we’re seeing here.

Reuters:

U.S.-based stock funds reap $8.9 bln as stock markets climb -Lipper.

U.S. Fed hawks call for retreat from mortgage stimulus.

Lower income shoppers still feeling pinched, U.S. retailers say.

Autodesk(ADSK) cuts full-year revenue forecast, shares fall. Autodesk Inc's first-quarter results missed market expectations on sales declines in the Americas and emerging markets, prompting the maker of AutoCAD design software to cut its full-year revenue forecast. Shares of the company fell 5 percent after the bell.

U.S. Fed balance sheet grows in latest week. The U.S. Federal Reserve's balance sheet grew in the latest week as the central bank's holdings of U.S. Treasuries increased, Fed data released on Thursday showed.

Financial Times:

US farmland prices rise despite weak grain market. Farmland prices in the US corn belt have risen at double-digit clip this year despite weaker grain markets in a move that will intensify debate over whether loose monetary policy and congressional largesse are inflating a bubble.

Telegraph:

There may be no halting this tax juggernaut. The latest brainwave from Brussels has the City in its sights, even if Britain goes it alone.

National Business Daily:

China Slows Pace of Some High-Speed Rail Construction. China Railway Corp. may face cash flow shortfall if it doesn't sell bonds "soon", citing a person from the railway system. Some high-speed rail projects have slowed their construction pace, the report said. A high-speed rail connecting Guizhou and Guangdong provinces has delayed its start of service because of a lack of funds, the report said, citing Hu Xiaodeng, a researcher at Guizhou Academy of Social Sciences. Another high-speed rail connecting Henan province and Chongqing has delayed the start of construction, the report said.

Evening Recommendations
Barclays:

Rated (AMT) Overweight, target $98.

Rated (VZ) Overweight, target $59.

Rated (LEAP) Underweight, target $4.

Night Trading

Asian equity indices are -.50% to +.25% on average.

Asia Ex-Japan Investment Grade CDS Index 102.50 +1.0 basis point.

Asia Pacific Sovereign CDS Index 84.75 +.75 basis point.

FTSE-100 futures +.06%.

S&P 500 futures +.15%.

NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

(DCI)/.49

(SSI)/.09

Economic Releases
9:55 am EST

Preliminary Univ. of Mich. Consumer Confidence for May is estimated to rise to 77.9 versus 76.4 in April.

10:00 am EST

Leading Indicators for April are estimated to rise +.2% versus a -.1% decline in March.

Upcoming Splits

(ESBF) 6-for-5

Other Potential Market Movers

The Fed's Kocherlakota speaking and China property price data could also impact trading today.

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 weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Rising Global Growth Fears, Profit-Taking, Homebuilding/Biotech Sector Weakness

2013-05-16T14:47:00.001-04:00

Broad Market Tone:

Advance/Decline Line: About Even

Sector Performance: Mixed

Volume: Below Average

Market Leading Stocks: Underperforming

Equity Investor Angst:

VIX 12.84 +.23%

ISE Sentiment Index 129.0 +29.0%

Total Put/Call .94 +20.51%

NYSE Arms 1.05 +80.56%

Credit Investor Angst:

North American Investment Grade CDS Index 70.28 -1.62%

European Financial Sector CDS Index 133.83 -1.97%

Western Europe Sovereign Debt CDS Index 90.34 +1.89%

Emerging Market CDS Index 243.39 +.88%

2-Year Swap Spread 14.0 -.25 bp

TED Spread 24.75 +1.0 bp

3-Month EUR/USD Cross-Currency Basis Swap -16.75 -1.0 bp

Economic Gauges:

3-Month T-Bill Yield .03% -1 bp

Yield Curve 163.0 -7 bps

China Import Iron Ore Spot $125.0/Metric Tonne -1.11%

Citi US Economic Surprise Index -23.1 -12.5 points

10-Year TIPS Spread 2.26 -3 bps

Overseas Futures:

Nikkei Futures: Indicating +17 open in Japan

DAX Futures: Indicating -5 open in Germany

Portfolio:

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

Disclosed Trades: None

Market Exposure: 75% Net Long

Bear Radar

2013-05-16T14:06:00.003-04:00

Style Underperformer:

Large-Cap Growth -.30%

Sector Underperformers:

1) Homebuilders -2.24% 2) Biotech -1.73% 3) Retail -.80%

Stocks Falling on Unusual Volume:

CRK, NTLS, HES, RF, ARRS, RIO, SWC, INFI, TCP, CLVS, ARIA, JACK, PBH, YRCW, RE, OPTR, BMY, FLT,CSC, PRE, BMRN, SONC, IBB, WX, CRI and INFI

Stocks With Unusual Put Option Activity:

1) GME 2) HUN 3) XLY 4) CELG 5) CSCO

Stocks With Most Negative News Mentions:

1) BRK/A 2) CHK 3) ACAT 4) CSC 5) WFC

Charts:

ETFs Falling on Unusual Volume

Stocks Falling on Unusual Volume

Bull Radar

2013-05-16T11:58:00.003-04:00

Style Outperformer:

Small-Cap Growth +.34%

Sector Outperformers:

1) Networking +3.21% 2) Computer Hardware +1.66% 3) Internet +1.42%

Stocks Rising on Unusual Volume:

CSCO, CIEN, OCN, RBS, ANW, FANG, CUB, EAC, RKUS, KSS, TSRO, TSLA, DSX, AEGR, AV, SCTY, IMOS, EZCH, INXN, VIPS, BID, YPF, NTAP, YELP, FFIV, JDSU, RVBD, STZ, CAVM, EMC, WLT, BPI, DDS and JNPR

Stocks With Unusual Call Option Activity:

1) CSCO 2) TMO 3) KSS 4) CIEN 5) ALTR

Stocks With Most Positive News Mentions:

1) TAP 2) STZ 3) TIF 4) C 5) PAYX

Charts:

ETFs Rising on Unusual Volume

Stocks Rising on Unusual Volume

Thursday Watch

2013-05-16T00:21:00.002-04:00

Evening Headlines
Bloomberg:

France Must Lead Breakup of Euro.

Euro Near 6-Week Low as Inflation Set to Fall to Three-Year Low. The euro slid toward a six-week low before a report that will probably confirm inflation in the 17-nation region was the slowest in three years. The common currency completed a five-day drop yesterday, the longest losing stretch in six months, on speculation the European Central Bank will ease policy after data showed the euro-area economy extended its recession to a record sixth quarter.

China Said to Prepare Anti-Dumping Duties on Polysilicon Imports. China, the world’s biggest maker of solar panels, is preparing to set anti-dumping duties on imports of the raw material used to make the equipment after determining it was sold below cost, said two people with direct knowledge of the matter. The Ministry of Commerce has completed probes that determined the U.S. and European Union are subsidizing producers of polysilicon and that imports of the commodity harmed domestic companies, said the people, who asked not to be identified as they weren’t authorized to discuss the matter publicly. The ministry is holding off on setting duties until the EU issues its ruling on anti-dumping tariffs against Chinese-made solar equipment, which will be a factor in China’s decision, the people said.

Foreign Investment in China Misses Estimates Amid Growth Concern. Foreign direct investment in China lagged behind analysts’ estimates in April, highlighting concern at the growth outlook for the world’s second-biggest economy after an unexpected slowdown last quarter. Investment rose 0.4 percent from a year earlier to $8.4 billion, the Ministry of Commerce said in a statement today in Beijing. That was less than the 5.7 percent gain in March and the 6.2 percent median estimate in a Bloomberg News survey of eight analysts.

Japan GDP Jumps Most in Year as Consumers Open Wallets: Economy. Japan’s economy expanded the most in a year last quarter as consumer spending and export gains outweighed the weakest business investment since the wake of the March 2011 earthquake and tsunami. Gross domestic product rose an annualized 3.5 percent, a Cabinet Office release showed in Tokyo. Private consumption, making up 60 percent of GDP, contributed 2.3 percentage points to the jump. Nominal GDP, which is unadjusted for changes in prices, rose 1.5 percent, also the most in a year. The so-called GDP deflator, a broad measure of prices across the economy, tumbled 1.2 percent from a year before, the most since the final three months of 2011, underscoring Kuroda’s challenge as he seeks to end more than a decade of entrenched deflation.

Most Asian Stocks Drop as Japan’s Banks Fall on Earnings. Most Asian stocks fell as a decline in Japanese banks after forecasting lower earnings offset a report that Japan’s economy expanded faster than analysts estimated in the first quarter. Mitsubishi UFJ Financial Group Inc. sank 2.9 percent, leading Japanese lenders lower. Daewoo Shipbuilding (042660) & Marine Engineering Co., South Korea’s third-biggest shipbuilder, fell 10 percent as first-quarter profit plunged. Dai-ichi Life Insurance Co. (8750), Japan’s second-largest life insurer, jumped 7.3 percent after projecting improved earnings and a stock split. The MSCI Asia Pacific Index slid 0.3 percent to 142.78 as of 12:22 p.m. Tokyo time, erasing gains of as much as 0.5 percent.

Copper Set to Decline 16% on Elliott Wave: Technical Analysis. “From a long-term perspective copper is now in a downtrend, after its spectacular five-wave bull run in the decade between 2001 to 2011,” he said. “In the next wave down, during July to September, it will drop to perhaps as low as $6,037.50.”

Rubber Drops to One-Week Low as Declining Oil Reduces Appeal. Rubber fell to a one-week low on speculation that decreasing oil prices would cut the cost of synthetic products, decreasing the appeal of the natural variety. Rubber for delivery in October dropped as much as 2.3 percent to 276.3 yen a kilogram ($2,707 a metric ton) on the Tokyo Commodity Exchange, the lowest price for the most-active contract since May 9. Futures were at 279.9 yen at 11 a.m., set for a third day of decline and a weekly loss of 4.7 percent.

Rebar Trades Near Lowest in 5 Months on Output, Iron Ore Price. Steel reinforcement-bar futures traded near the lowest level in more than five months amid rising output in China and as iron ore fell into a bear market. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 0.8 percent to 3,526 yuan ($573) a metric ton, the lowest since Dec. 3, and was at 3,562 at 10:54 a.m. local time. The most-active contract has retreated 11 percent this year.

Apple(AAPL) Said to Be Subject of U.S. Senate Offshore Tax Hearing. Apple Inc. will be the subject of a May 21 Senate hearing on U.S. companies’ offshore tax practices, said two people familiar with the inquiry. Apple Chief Executive Officer Tim Cook will testify at the hearing of the Permanent Subcommittee on Investigations, one of the people said. The committee has been examining companies that use various maneuvers to reduce their tax bills, including Microsoft Corp. (MSFT) and Hewlett-Packard Co. (HPQ).

Bristol-Myers(BMY) Drug Cocktail Stymies Melanoma Tumors. Two drugs from Bristol-Myers Squibb Co. (BMY) shrank tumors in as many as half of patients with advanced melanoma, according to early research that may pave the way for cocktails that trigger the immune system to destroy cancer. In the study, 52 melanoma patients were simultaneously treated with Bristol-Myers’s melanoma drug Yervoy and nivolumab, its experimental therapy that targets the immune system in a different way. Tumors shrank in 40 percent of patients, and in 53 percent of those who got the most effective dose combination, according to data released today in advance of the American Society of Clinical Oncology meeting scheduled to begin May 31.

Obama’s Commerce Pick Got $54 Million from Bahamas Trust. U.S. Commerce Secretary nominee Penny Pritzker received $54 million last year from an offshore trust in the Bahamas, according to a disclosure report that describes an empire of casinos, hotels, energy companies and family trusts that may be worth more than $2 billion. Pritzker, whose family founded Hyatt Hotels Corp (H)., has assets valued in a range of $400 million to $2.2 billion, not including holdings in the hotel company, according to documents released yesterday by the U.S. Office of Government Ethics.

Google(GOOG) Rises as Page Updates Music to Maps Services. Google Inc. (GOOG) shares rose to a record after the company unveiled a subscription music-streaming service and overhauled its online maps, part of several product updates aimed at attracting more users and advertisers.

Wall Street Journal:

New Terms Weighed on Default Swaps. An industry group wants to add criteria to a form of debt-default insurance that would lead to payouts for bondholders when banks are rescued. Financial contracts called credit-default swaps act like insurance for bonds and loans. When companies issuing debt experience what is known as an "event of default," sellers of the swaps compensate buyers of the protection. The contracts, also known as derivatives, already pay out on a range of events, including if a company files for bankruptcy protection, misses an interest payment or restructures its debts.

Experiment Brings Human Cloning One Step Closer. Scientists have used cloning technology to transform human skin cells into embryonic stem cells, an experiment that may revive the controversy over human cloning. The researchers stopped well short of creating a human clone. But they showed, for the first time, that it is possible to create cloned embryonic stem cells that are genetically identical to the person from whom they are derived.

Homebuilder William Lyon's IPO Priced At $25 Each, Above Expected Range.

Fox News:

Benghazi emails show State Department had heavy hand in watering down account of attack. State Department officials repeatedly objected to -- and tried to water down -- references to Al Qaeda and prior security warnings in the administration's initial internal story-line on the Benghazi attack, according to dozens of emails and notes released by the White House late Wednesday. The documents also showed the White House, along with several other departments, played a role in editing the so-called "talking points," despite claims from the White House that it was barely involved. And they showed then-CIA Director David Petraeus objected to the watered-down version that would ultimately be used as the basis for U.N. Ambassador Susan Rice's flawed comments on several TV shows the Sunday after the attack. "Frankly, I'd just as soon not use this," Petraeus told his deputy in a Sept. 15 email.

Acting IRS commissioner resigns in wake of agency scandal. President Obama announced Wednesday that acting IRS Commissioner Steven Miller has resigned in the wake of the agency scandal in which conservative groups were targeted. The president made the announcement in a brief statement at the White House, following a meeting with Treasury Secretary Jacob Lew and other top department officials in which they reviewed a highly critical inspector general’s report on the practice. The report concluded poor management allowed agents to improperly target Tea Party and other groups for more than 18 months, starting in 2010.

CNBC:

Cisco(CSCO) Stock Jumps on Surprise Earnings Beat. Cisco on Wednesday reported a surprise beat in earnings and revenue in fiscal third-quarter, suggesting the networking-gear maker's customers are spending more on technology. The company's shares jumped more than 8 percent in after-hours trading.

Flurry of Fed Speakers to Guide Markets. Thursday's markets will navigate data on jobs, housing and inflation, but traders may be most interested in the words of Fed speakers.

Zero Hedge:

Subprime 2.0 - Auto Loan Deliquency Balances Rise 24% YoY. (graph)

Tesla(TSLA) Announces Offering Of Common Stock, Convertible Notes.

Elizabeth Warren Confronts Eric Holder, Ben Bernanke And Mary Jo White On Too-Big-To-Jail.

Chartapalooza: Complex Recovery Paths And Will It Ever Be The Same?

The Holder - Issa Smackdown. (video)

Business Insider:

The Growth Of Collective Leadership In China Hurts Chances For Political Reform.

New York Times:

Big Banks Get Break in Rules to Limit Risks. Under pressure from Wall Street lobbyists, federal regulators have agreed to soften a rule intended to rein in the banking industry’s domination of a risky market. The changes to the rule, which will be announced on Thursday, could effectively empower a few big banks to continue controlling the derivatives market, a main culprit in the financial crisis.

Fox19.com:

EXCLUSIVE: Four local IRS workers allegedly connected to scandal. One of FOX19's two sources went on say that these four IRS workers claim "they simply did what their bosses ordered".

Mediabistro:

Um, Are Journalists a ‘Constituency’? NBC's Lisa Myers says AP/leak story damages WH b/c it upsets the press - "one of the president's most important constituencies."

The Blaze:

Mass. Police Catch 7 ‘Chemical Engineers’ from Pakistan, Saudi Arabia, & Singapore Trespassing Major Reservoir. A group of individuals from Pakistan, Saudi Arabia, and Singapore were caught early Wednesday morning trespassing at the Quabbin Reservoir in Massachusetts, one of the largest man-made public water supplies in the county, CBS Boston reports. The trespassers, five men and two women, were caught in one of the no-trespassing zones of reservoir, according to Massachusetts state police.

Another Headache for the Obamacare ‘Train Wreck’? Small Business Owners Sue IRS Over Employer Mandate. Small business owners in six states are suing the federal government over an IRS regulation imposed under the Affordable Care Act (i.e. “Obamacare”) which, they say, will force them to pay hefty fines, cut their employees’ hours, or burden their businesses. “Because of Obamacare I’ve already been forced to cut my ‘hourly’ employees’ hours from 40 down to 28 so I can keep running my business and keep my employees on the payroll,” J. Allen Tharp, CEO of Olde England’s Lion and Rose and a plaintiff in the suit, told TheBlaze.

Reuters:

JPMorgan(JPM) presses Bloomberg on reporters' access to data. JPMorgan Chase & Co, one of the biggest customers of Bloomberg LP, said on Wednesday it has sent a formal legal request asking the financial data and news company to provide details of what bank information Bloomberg News reporters had been able to see.

Financial Times:

Snags await favourite for Federal Reserve job. Janet Yellen has emerged as the clear frontrunner to become the next chair of the US Federal Reserve, but the choice belongs to one man – Barack Obama – and the selection process can be hard on favourites.

French Economy is 'Cumbersome,' Publicis CEO Says. French people troubles by absence of "real reforms" to lead way out of economic gloom, Publicis CEO Maurice Levy writes. Welfare system "costs far too much", he said. Govts have made "bad" decisions including 35-hr working week. Hard measures are still needed, he said.

Telegraph:

Heroic Spain is damned if it does, and damned if it doesn't. My colleague Jeremy Warner has set off a storm in the Spanish press and something close to a diplomatic incident by asserting in a blog that Spain is insolvent.

Apple Daily:

Taiwan May Cut 2013 GDP Forecast to 3.17%. Taiwan's statistics bureau may lower its GDP forecast after April exports fell, citing statistics bureau head Shih Su-mei. Bureau in February forecast 3.59% GDP growth for 2013.

Evening Recommendations
S&P Capital IQ:

Downgraded (C) to Hold, target $52.

Downgraded (FITB) to Hold, target $18.

Night Trading

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

Asia Ex-Japan Investment Grade CDS Index 101.50 -.5 basis point.

Asia Pacific Sovereign CDS Index 84.0 +1.75 basis points.

FTSE-100 futures -.03%.

S&P 500 futures -.06%.

NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

(FLO)/.43

(WMT)/1.15

(KSS)/.57

(JCP)/-1.05

(DELL)/.35

(JWN)/.76

(ARUN)/.12

(AMAT)/.13

(ADSK)/.45

Economic Releases
8:30 am EST

The Consumer Price Index for April is estimated to fall -.3% versus a -.2% decline in March.

The CPI Ex Food & Energy for April is estimated to rise +.2% versus a +.1% gain in March.

Initial Jobless Claims are estimated to rise to 330K versus 323K the prior week.

Continuing Claims are estimated to fall to 3000K versus 3005K prior.

Housing Starts for April are estimated to fall to 970K versus 1036K in March.

Building Permits for April are estimated to rise to 941K versus 902K in March.

10:00 am EST

Philly Fed for May is estimated to rise to 2.0 versus 1.3 in April.

Upcoming Splits

(CL) 2-for-1

(AOS) 2-for-1

Other Potential Market Movers

The Fed's Lacker speaking, Fed's Williams speaking, Fed's Raskin speaking, Fed's Fisher speaking, Fed's Plosser speaking, Fed's Rosengren speaking, Eurozone inflation data, Bloomberg Economic Expectations Index for May, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, RBC Aerospace/Defense Conference, Morgan Stanley Refining Conference and the (HAE) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Central Bank Hopes, Short-Covering, Performance Angst, Transport/Financial Sector Strength

2013-05-15T16:07:00.001-04:00

Broad Market Tone:

Advance/Decline Line: About Even

Sector Performance: Mixed

Volume: Below Average

Market Leading Stocks: Underperforming

Equity Investor Angst:

VIX 13.03 +2.04%

ISE Sentiment Index 108.0 +9.1%

Total Put/Call .78 -2.50%

NYSE Arms .61 +9.26%

Credit Investor Angst:

North American Investment Grade CDS Index 71.63 -1.48%

European Financial Sector CDS Index 136.52 -2.79%

Western Europe Sovereign Debt CDS Index 88.67 +.76%

Emerging Market CDS Index 241.69 +2.59%

2-Year Swap Spread 14.25 unch.

TED Spread 23.75 unch.

3-Month EUR/USD Cross-Currency Basis Swap -15.75 -.5 bp

Economic Gauges:

3-Month T-Bill Yield .04% unch.

Yield Curve 170.0 -3 bps

China Import Iron Ore Spot $126.40/Metric Tonne -1.33%

Citi US Economic Surprise Index -10.60 -2.9 points

10-Year TIPS Spread 2.29 -3 bps

Overseas Futures:

Nikkei Futures: Indicating +129 open in Japan

DAX Futures: Indicating -1 open in Germany

Portfolio:

Slightly Higher: On gains in my medical/tech/retail sector longs

Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them

Market Exposure: 75% Net Long

Today's Headlines

2013-05-15T15:31:00.004-04:00

Bloomberg:

Euro-Area Recession Deepens as Slowdown Exceeds Estimates. The euro-area economy shrank more than economists forecast in the three months through March, extending a recession to a record sixth quarter and increasing pressure on the currency bloc’s leaders to spur growth. Gross domestic product in the 17-nation euro zone fell 0.2 percent after a 0.6 percent decline in the previous quarter, the European Union’s statistics office in Luxembourg said today. The median of 39 estimates in a Bloomberg News survey was for a 0.1 percent contraction. From a year earlier, the economy shrank 1 percent. The slowdown has spread to the euro core. The German economy, Europe’s largest, expanded less than forecast in the first quarter.

France Slips Into Recession, Adding Pressure on Hollande. The French economy fell back into recession, increasing pressure on President Francois Hollande to adopt policies to revive growth. Gross domestic product shrank 0.2 percent in the three months through March, following a revised 0.2 percent contraction in the previous quarter, national statistics office Insee said today. Economists expected a 0.1 percent drop, the median of 25 forecasts gathered by Bloomberg News showed.

China Banks’ Bad Loans Rise for Sixth Quarter as Economy Slows. Non-performing loans climbed by 33.6 billion yuan ($5.5 billion) in the three months ended March 31, to 526.5 billion yuan, the China Banking Regulatory Commission said in a statement on its website today. Soured debt rose across all lender categories, including state-owned and regional banks.

Moody’s Focuses on Emerging Currency Risk Amid Record Bonds. Moody’s Investors Service said it’s assessing the risk of currency depreciation damaging the creditworthiness of emerging-market companies after record foreign bond sales. Companies from 15 emerging markets sold a record $130 billion of bonds in dollars and euros last year, Moody’s said in an e-mailed report. Total corporate and government international issuance may soar to a peak of $600 billion this year from $430 billion last year, and reach $1 trillion in three years, Hakan Wohlin, global head of debt origination at Deutsche Bank AG in London, said in an interview yesterday. “The amount of U.S. dollar and euro debt outstanding has increased considerably year-by-year, and with it the risk of currency mismatch,” Moody’s analysts including Philip Robinson in London said in the report.

EU Oil Manipulation Probe Shines Light on Platts Pricing. Two weeks after Royal Dutch Shell Plc (RDSA) and Platts changed the way more than half of the world’s crude is valued, the companies along with BP Plc (BP/) and Statoil ASA (STL) are being probed by European antitrust regulators about potential manipulation of oil prices.

Iron Ore Tumbles Into Bear Market on China Growth Concerns. Iron ore slumped into a bear market on concern that slowing economic growth in China, the world’s biggest buyer, will reduce demand as global supplies increase. Ore with 62 percent iron content delivered to the Chinese port of Tianjin fell 1.3 percent to $126.40 a ton today, according to The Steel Index Ltd. The benchmark price has lost 20 percent since Feb. 20, when it reached a 16-month high of $158.90, meeting the common definition of a bear market.

Copper Declines to One-Week Low on Slowing Growth, Ample Supply. Copper fell to a one-week low in New York amid signs that economies are weakening in countries that are the world’s biggest consumers of the metal, contributing to a surge in stockpiles that are the highest since 2003. Germany expanded less than forecast in the first quarter, government statistics showed today. Bank of America Merrill Lynch cut its estimate for growth this year in China, following JPMorgan Chase & Co. by a day. U.S. industrial production declined in April by the most in eight months, the Federal Reserve said. The three nations are the largest copper users. “Every bit of data lately seems to be showing less industrial production, and less manufacturing is going to be a problem for copper,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “The buyers just aren’t there, and we’re seeing a buildup in inventories.” Copper futures for delivery in July fell 1.4 percent to $3.2415 a pound by 10:57 a.m. on the Comex in New York, after touching $3.224, the lowest since May 3. Prices tumbled 2.1 percent yesterday and are down 11 percent this year.

Gold Futures Tumble Below $1,400 as Dollar Extends Gains. Gold futures tumbled below $1,400 an ounce, extending the longest slump in almost three months, as the dollar’s rally eroded demand for the metal as an alternative investment. Silver fell to a three-week low.

New York Area Manufacturing Unexpectedly Contracts. The Federal Reserve Bank of New York’s general economic index declined to minus 1.4 this month from 3.1 in April. Readings less than zero signal contraction in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey called for an increase to 4.

Wall Street Journal:

Lawmakers Press Holder on AP, IRS. Attorney General Testifies Before House Committee; Chairman Calls for 'Answers and Accountability'. Members of Congress expressed concern Wednesday about the Justice Department's subpoena of Associated Press phone records at a hearing where Attorney General Eric Holder faced questions over his record.

Human Cloning Moves Small Step Closer.

MarketWatch:

Fed blame game leads to QE end game.

CNBC:

Taper by 'Fat, Dumb and Happy' Fed Will Hurt: Strategist. (video)

US Home Builder Confidence Rises, Tops Forecast.

Art Is the Next Gold: Novogratz. (video)

US Energy Boom Is Great, Unless You're the Saudis.

Bond 'Death' Cross? Why Yields May Fall Below 1 Percent.

Zero Hedge:

Five Charts To Start The Day.

Industrial Production, Capacity Utilization Both Miss: Good Weather Blamed. (graphs)

Uncharted Territory Cannot Go On Forever.

The Other Great Rotation - From Reach-For-Yield To Dash-For-Trash. (graphs)

Tepper Files First Quarter 13F, Cuts Core Holdings.

Business Insider:

LIVE: Google(GOOG) Is Making Its Biggest Announcements Of The Year.

BOEHNER ON IRS: 'Who Is Going To Jail Over This Scandal?'

The Fed's #1 Assumption About QE Relies On A Misunderstanding Of Basic Portfolio Management.

New York Times:

Why Hedge Funds’ Criticism of the Fed May Be Right. This prebubble euphoria only undermines the Federal Reserve’s fragile credibility. It reinforces the notion that it seems to know only two things: how to inflate bubbles and how to studiously not recognize them.

Chicago Tribune:

Deere(DE) cuts outlook for the year; shares fall. Deere & Co. on Wednesday said its second quarter profit inched higher, beating analysts expectations, but warned that global financial pressures and the cool, wet weather North America could affect sales the rest of the year. The stock gave up almost 5 percent.

Moody's:

Moody's: Global Economic Recovery is Losing Momentum, Especially in Euro Area.

Hedge Fund Alert:

Dow 15,000 Is Boon for Long-Only Strategies. As long/short equity funds continue to underperform the stock market, increasing numbers of managers and investors alike are betting on long-only vehicles. “The long side of the portfolio is what clients are demanding,” said an investment professional who researches hedge funds for a $1.6 billion endowment. “They just want those longs.”

Gartner:

Gartner Says PC Market in Western Europe Declined 20.5 Percent in First Quarter of 2013.

Financial Times:

Spanish banks face fresh hit from bad loans. Spanish banks are bracing themselves for a fresh financial hit, amid rising pressure from the Bank of Spain on lenders to write down the value of their €200bn portfolio of restructured loans to the country’s troubled companies and struggling households. The move is likely to trigger a further rise in bad loan ratios across the system and reduce earnings at a time when most Spanish banks are already suffering from low profitability. Analysts believe the crackdown could also shine a harsh new light on the capital position of some of the weaker banks, forcing them to sell assets to avoid the need to raise fresh capital.