• Large-Cap Value -.03%

• 1) Gold & Silver +4.88% 2) Oil Service +.99% 3) I-Banking +.69%

• SHLD, WMT, EGO, PAAS, PCYC, JACK, NTES, PLCE, CTRP, KNM, MM, GDX and BKE
  

• 1) ALR 2) ABV 3) DLTR 4) VRSN 5) ZSL
  

• 1) CAT 2) TIF 3) NOC 4) WMT 5) CSC
  

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

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• Mid-Cap Growth -1.83%

• 1) Oil Tankers -3.70% 2) Homebuilders -3.51% 3) Airlines -3.01%

• XHB, NIHD, STO, CHU, CLMT, BCS, CIT, HBHC, JPM, DAL, OSK, ITC, NAV, PHMD, AVEO, RRGB, VNET, DLTR, PANL, LQDT, SVVC, ORLY, PETD, ARMH, LINTA, ALKS, GSVC, GRPN, SIRO, GHDX, RPT, PKB, KEX, AAP, SM, LTD, AIG, SSI, RYL, CAT, ITB, KKR, CHKR, DKS, AL, HUN, ARG, GRA, ACTV, SIRO, ITC, EXP, CYT, ANF, HTZ, XTEX, HGT, RGR, TKR, AZO, APO, LAD, KEX, WAIR, URI, AVEO, TEX, NUS and GME
  

• 1) RSX 2) KBH 3) URI 4) XLF 5) BRK/B
  

• 1) ANF 2) AFL 3) YUM 4) JPM 5) AAP
  

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

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• Advance/Decline Line: Sharply Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

• VIX 23.33 +4.76%
  
• ISE Sentiment Index 92.0 +15.0%
  
• Total Put/Call 1.42 +14.52%
  
• NYSE Arms .91 -20.65%
  

• North American Investment Grade CDS Index 121.14 +1.86%
  
• European Financial Sector CDS Index 305.03 +4.79%
  
• Western Europe Sovereign Debt CDS Index 308.14 +1.87%
  
• Emerging Market CDS Index 313.28 +.97%
  
• 2-Year Swap Spread 35.75 -.75 basis point
  
• TED Spread 37.5 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -49.25 +2.0 basis points
  

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 140.0 -7 basis points
  
• China Import Iron Ore Spot $133.60/Metric Tonne -1.11%
  
• Citi US Economic Surprise Index -25.10 -5.7 points
  
• 10-Year TIPS Spread 2.11 unch.
  

• Nikkei Futures: Indicating a -171 open in Japan
• DAX Futures: Indicating -22 open in Germany
  

• Slightly Lower: On losses in my Biotech, Medical, Retail and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  
• Market Exposure: Moved to 25% Net Long

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• Santander, BBVA Among Spanish Banks Downgraded by Moody’s. Banco Santander (SAN) SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, were cut three levels by Moody’s Investors Service, which cited a recession and mounting loan losses in downgrading 16 of the nation’s banks. Nine firms were cut three notches and seven were kept on review for further reductions, Moody’s said yesterday in a statement. Santander’s U.K.-based subsidiary also was cut. The moves followed Moody’s May 14 downgrade of 26 Italian banks and its Feb. 13 cut of Spain’s sovereign debt. The main drivers for the Spanish bank downgrades were a surge in soured loans, the recession, restricted funding access and the reduced ability of the government to support lenders as its own creditworthiness diminishes, Moody’s said. “Banks will continue to face highly adverse operating and market funding conditions that pose a threat to their creditworthiness,” the ratings firm said. “The Spanish economy has fallen back into recession in first-quarter 2012, and Moody’s does not expect conditions to improve” this year.
• Fitch Cuts Greece as Leaders Spar Over Euro Membership. Greece’s credit rating was downgraded one level by Fitch Ratings on concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area as leaders began campaigning ahead of the second national vote in six weeks. Greece was cut to CCC from B-, according to an e-mailed statement late yesterday in London. The country’s ceiling was revised to B-, Fitch said in the statement.
• U.S. Banks Sold More Swaps on European Debt as Risks Rose. U.S. banks increased sales of protection against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the last quarter of 2011 as the European debt crisis escalated. Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose 10 percent from the previous quarter to $567 billion, according to the most recent data from the Bank for International Settlements. Those guarantees refer to credit-default swaps written on bonds. JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc.(GS), two of the top CDS underwriters in the U.S., say they have bought more protection than they sold, indicating they may benefit from defaults in the region. That outcome is called into question by JPMorgan’s $2 billion loss on similar derivatives, which shows that risks don’t vanish when offsetting bets are taken, said Craig Pirrong, a finance professor at the University of Houston. “All these hedges trade one risk for another,” said Pirrong, whose research focuses on derivatives markets. “The banks say they’re flat on European risk, but that’s based on aggregated positions. We don’t know how those will hold off if the European crisis blows up.” JPMorgan Chairman and Chief Executive Officer Jamie Dimon said last week that the bank was trying to reposition a portfolio of corporate credit derivatives and used a flawed trading strategy. The lender, the largest in the U.S. by assets, is believed to have sold protection on an index of corporate debt and bought protection on the same index to hedge its initial bet, according to market participants who asked not to be identified because their trading strategies aren’t public. The two bets moved in opposite directions this year, causing losses and proving that even hedges that look perfect can break down, Pirrong said.
• Japan Bond Risk Surges To Seven-Month High, Default Swaps Show. The cost of insuring Japanese corporate debt from default surged to the highest in more than seven months, according to traders of credit-default swaps. Asian and Australian bond risk gauges also climbed. The Markit iTraxx Japan index increased 7 basis points to 218.5 basis points as of 9:27 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark is on course for its highest since Oct. 5, according to data provider CMA. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 8 basis points to 201.5 as of 8:04 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is poised to close at its highest since Jan. 16, CMA prices show. The Markit iTraxx Australia index rose 7 basis points to 202 basis points as of 10:18 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge is set for its highest since Nov. 29, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
• North Korea Seen Restarting Work On Nuclear Reactor. North Korea has restarted construction on a nuclear reactor that is an essential component in building nuclear weapons, according to a U.S. university monitoring project. Commercial satellite imagery from April 30 shows that the Pyongyang government is close to completing a containment building for a new experimental light water reactor, according to a website maintained by Johns Hopkins University’s School of Advanced International Studies based in Washington.
• U.S. Imposes Anti-Dumping Duties on Chinese Solar Imports. The U.S. Commerce Department imposed tariffs of 31 percent to 250 percent on Chinese solar-product imports, siding with companies including SolarWorld AG (SWV) in the U.S. that said the items were sold below the cost of production. The fees, announced today in an e-mailed statement, add to duties as high as 4.73 percent imposed earlier for getting unfair subsidies from China’s government. SolarWorld had asked for levies of more than 100 percent. Aaron Chew, a New York- based analyst at Maxim Group LLC, said before the decision that tariffs higher than 10 percent would be considered a victory for the U.S. companies.
• Facebook(FB) Poses Biggest Test Of Rule Curbing Market Orders. Facebook Inc. (FB)’s initial public offering will be the biggest test of a rule introduced in 2011 to protect investors and curb volatility on the first day a company trades. The Financial Industry Regulatory Authority reminded more than 4,400 member firms on May 15 that they shouldn’t accept buy requests known as market orders until trading begins. Such transactions are authorizations to purchase at the best available price, as opposed to limit orders that require investors to specify a minimum or maximum.
• Fed Said to Study How Banks Manage Cash After JPMorgan(JPM) Loss. JPMorgan Chase & Co.’s $2 billion trading loss has prompted the Federal Reserve Bank of New York to examine how banks in its district are managing cash after receiving a flood of deposits since the credit crisis, according to a person familiar with the matter.
• BRIC Bear Market Not Cheap Enough for de Vaulx Finding Zero Buys. The MSCI BRIC (MXBRIC) Index’s slide into a bear market has left equities in the biggest emerging economies trading at the lowest levels since 2009 versus global shares. That’s still not cheap enough for Charles de Vaulx to add a single stock from Brazil, Russia, India or China to his $9.7 billion IVA Worldwide Fund, which beat MSCI’s global gauge by 29 percentage points since its inception in 2008. He’s waiting for further declines of 10 percent to 20 percent before buying.
• High-Yield Debt ETFs Set Markets ‘Abuzz’ Following Record Trades. The largest trades on record in shares of two exchange-traded funds that invest in junk debt are attracting attention to the four-year-old market that allows anyone from banks to retirees fast and discreet access to speculative-grade bonds and loans. The transactions were completed hours before JPMorgan Chase & Co. disclosed $2 billion of trading losses tied to credit derivatives, an announcement that has heightened awareness of big trades in debt markets.
  
• China Home Prices Fall In More Than Half Cities Tracked. China’s home prices fell in a record 46 of 70 cities tracked by the government in April from a year earlier as officials pledged to keep restrictions on property purchases that have sapped buyer demand. The eastern city of Wenzhou led declines with a 12.3 percent slump in values from a year earlier, while Beijing dropped 1 percent and Shanghai prices declined 1.3 percent, according to data released by the statistics bureau today.
• Shoppers Skipping Pomegranates Show India Rate Dilemma: Economy. Surging food costs offer the most visible sign of India’s inability to contain price pressures, threatening spending in the world’s second-most populous nation. Even as the nation’s benchmark wholesale-price inflation has eased to below 9 percent after breaching that level most of last year, a recently introduced consumer-price gauge shows how little room the central bank has cut to cut interest rates and spur growth. India’s consumer-price index climbed 9.47 percent from a year earlier in March as the cost of egg, vegetables, fish and meat products rose, after an 8.83 percent advance in February. Wholesale-price inflation in April was 7.23 percent, with food prices jumping 10.5 percent.

• Defiant Message From Greece. The head of Greece’s radical left party—throwing down a gauntlet that could increase tensions between Greece and its frustrated European creditors—said he sees little chance Europe will cut off funding to the country but that if it does, Athens will stop paying its debts. A financial collapse in Greece would drag down the rest of the euro zone, said Alexis Tsipras, the 37-year-old head of the Coalition of the Radical Left, known as Syriza, and potentially the country’s next prime minister. Instead, he said, Europe must consider a more growth-oriented policy to arrest Greece’s spiraling recession.
  
• Groupon(GRPN) Stock Spike Probed. A Wall Street regulator is examining trading in Groupon Inc. that sent its stock price soaring hours before a favorable earnings announcement Monday, according to a person familiar with the matter. The review by the Financial Industry Regulatory Authority, or Finra, is at an early stage, the person said. It follows unusually heavy trading in shares of the online-coupon company in the run-up to its release of strong financial results.
• Groups Sue Again Over Oil Drilling off Alaska. A coalition of environmental and tribal groups filed a challenge Wednesday to a federal air-emissions permit for a Royal Dutch Shell PLC drilling ship, the latest legal maneuver aimed at stopping the oil giant’s exploration plan off Alaska’s Arctic coast.
• Ross King Retires From Goldman Sachs(GS). Goldman Sachs managing director and chairman of its Financing Group Ross King has retired from the Wall Street bank.
• Key Void at Top for J.P. Morgan(JPM). J.P. Morgan Chase & Co. didn’t have a treasurer in place during a five-month period when the bank’s Chief Investment Office placed trades that led to more than $2 billion in losses. In addition, the executive put in charge of risk management for the Chief Investment Office in February had little experience in the subject at the time and is the brother-in-law of another top J.P. Morgan executive. Some current and former employees who were stunned by the losses say the staffing decisions may have made it easier for the bad positions to go unchecked.
• Inside JPMorgan;s(JPM) Blunder. J.P. Morgan Chase & Co. Chairman and Chief Executive Officer James Dimon had just committed the most expensive blunder of his 30-year career, failing to detect the risk of trades that had begun to generate huge losses at the bank. On April 30, associates who were gathered in a conference room handed Mr. Dimon summaries and analyses of the losses. But there were no details about the trades themselves. “I want to see the positions!” he barked, throwing down the papers, according to attendees. “Now! I want to see everything!”
• The Brains of Hedge-Fund Operations. Of all the elite financial circles, hedge-fund titans may be the most exclusive—and some of the most tight-lipped when it comes to talking to the press. Hedge-fund heavyweights may invest in companies going public more often than they actually go out in public themselves: Indeed, many hedge funders reportedly skipped their own gala in March, a Cipriani Wall Street affair benefiting Hedge Funds Care. So it was with some anticipation that this reporter headed to Tao where a handful of legendary investors gathered to talk up a new deal—that is, a book.

• Facebook(FB) IPO Coverage.
• Only Reforms Can Revive China’s Growth: Andy Xie.
• Asia Stocks Tumble as Spain Joins List of Fears.
  

• NEW: Photos From Trayvon Martin Killing Show Zimmerman Bloody And Injured.
• SocGen: This Chinese Indicator Will Predict A Hard Landing.
• BAML’s Comprehensive Guide To A Greek Exit, And Its Likely Impact On Markets.
  

• So How Are JPM’s(JPM) Prop “Counterparties” Faring?
• One Epic Chinese Bubble – One Chart.
• Everything You Need To Know About Europe’s Dilemma In 4 Minutes.
• It’s Not Over Yet For JPM(JPM).
  

• Facebook(FB) Prices at $38 With Trading Set to Start Friday.
• A Permanent Precedent. The irritation of the eurozone with Greece is at extreme levels. After all, 80 percent of Greeks say they are in favour of staying in the euro, but then they fail to elect politicians prepared to implement the agreed programme. This drives creditors crazy. Increasingly, the latter are inclined to accept Greek exit, even welcome it.

• FDA Investigating Z-Pak Antibiotic Linked to Heart Risks. The U.S Food and Drug Administration is investigating the antibiotic azithromycin, commonly known as Z-Pak, after a study linked the drug to an increased risk of death. The study, published Wednesday in the New England Journal of Medicine, found patients prescribed Z-Pak were more likely to die than those prescribed amoxicillin, another antibiotic. The results were especially pronounced for those who died of heart attacks, strokes, sudden cardiac death and other cardiovascular causes. Last year, doctors wrote 55.3 million prescriptions for Z-Pak, according to IMS Health.

• Exclusive: U.N. Panel Probes Possible N. Korea Arms Trade With Syria, Myanmar. A U.N. panel of experts that monitors compliance with sanctions on North Korea is investigating reports of possible weapons-related shipments by Pyongyang to Syria and Myanmar, the panel said in a confidential report seen by Reuters on Thursday. “The DPRK (North Korea) continues actively to defy the measures in the (U.N. sanctions) resolutions,” the panel said in the report, which it submitted to the U.N. Security Council’s North Korea sanctions committee earlier this week.
• JPMorgan(JPM) Unit Has $100 Billion in Securitised Assets, Structured Debt – FT. The unit at the center of JPMorgan Chase & Co’s recently revealed $2 billion trading loss has built up more than $100 billion in positions in asset-backed securities and structured products, the Financial Times said on Thursday. The newspaper said this portfolio comprises the “complex, risky bonds at the centre of the financial crisis in 2008″, but did not say whether any of the holdings are in unhedged positions. It said the portfolio is separate from holdings in credit derivatives that led to the trading loss by JPMorgan’s chief investment office, which has sparked much criticism of the largest U.S. bank and its chief executive, Jamie Dimon. The chief investment office has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralized loan obligations in all markets for three years, the newspaper said, citing more than a dozen senior traders and credit experts. That office’s “non-vanilla” portfolio has grown to more than $150 billion, the newspaper said, without citing sources or providing details of the holdings.
• Salesforce(CRM) Ups FY Outlook On Strong Q1, Pipeline. Web-based software maker Salesforce.com Inc raised its full-year outlook after reporting first-quarter results that beat Wall Street forecasts on strong growth across all regions, sending its shares up 7 percent in after-hours trade.
• Option Players Seek Shelter as Risk Gauge Rises. Option investors are seeking protection against a sharp decline in U.S. equities in the near term as uncertainty grows over the European debt crisis and the health of the global economy.
• Autodesk(ADSK) gives weak outlook on Europe worries. Design-software maker Autodesk Inc forecast second-quarter revenue below analysts’ estimates citing weakness in Europe, sending its shares down 5 percent after market.
• Equity ETF Outflows Dominate, Bond Funds Gain – Lipper.
  

• Two Tiers, One Crisis For Spanish Banks. Who is right – the International Monetary Fund or the market? Until a couple of weeks ago, nervous investors had ignored the IMF’s recent assessment that about 70 per cent of Spain’s banks looked essentially healthy and instead had sent all bank shares tumbling by about 40 per cent on the previous year.

• Are The Germans Destined To Save The Euro? It is an article of faith in Berlin that the single currency must survive, whatever the cost.

• Half of corporate India’s forex exposure unhedged, says RBI. The Reserve Bank of India’s (RBI) central board is expected to discuss next week the elevated levels of unhedged foreign currency exposure at private and state-owned companies, which has made them increasingly vulnerable to the sharp depreciation of the rupee. According to data submitted by the Reserve Bank of India (RBI) to the finance ministry, approximately 60% of companies’ non-trade related exposure is unhedged, while the proportion of uncovered exposure for trade loans is lower at 40%. This was the situation at the end of March and since then, the rupee has slipped by more than 11%.

• India Warns Banks to Avoid Risky Debt Restructuring. The Indian government’s finance ministry issued a warning, citing a letter from the corporate restructuring unit. Indian companies facing large debts and cash shortages are looking to rearrange loans.
  

• Sotheby’s Hong Kong Sales See Fewer China Buyers. Sotheby’s Hong Kong spring auction sales fell 30% to $317 million from a year earlier because there were fewer mainland Chinese buyers, citing Kevin Ching, chief executive officer of Sotheby’s Asia.

• Shanghai stock exchange started a series of measures to curb excessive speculation in new share issues, citing the exchange.

• None of note

• Asian equity indices are -2.50% to -1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 201.50 +6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 155.50 -2.75 basis points.
  
• FTSE-100 futures -1.30%.
  
• S&P 500 futures -.05%.
  
• NASDAQ 100 futures +.02%.

• (ANN)/.51
• (BWS)/.09
• (DCI)/.43
• (FL)/.74
• (HIBB)/.92

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The G-8 meeting and the (WIT) Analyst Day could also impact trading today.
  

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• Greek President Told Banks Anxious as Deposits Pulled. Greek President Karolos Papoulias was told by the central bank chief this week that financial institutions are becoming anxious about their prospects as Greeks pull out cash after the inconclusive May 6 elections. Central bank head George Provopoulos told Papoulias that Greeks have withdrawn as much as 700 million euros ($891 million) and the situation could worsen, according to the transcript of the president’s meeting with party leaders on May 14 that was published yesterday. “Provopoulos told me that of course there’s no panic but there’s great fear which can evolve into panic,” he said. Greece’s future in the euro has been thrown into doubt by the political standoff, forcing the president to call for new elections yesterday. German Finance Minister Wolfgang Schaeuble called the next vote a referendum on whether Greece exits the euro, a move that would leave lenders to its government, businesses and households unsure of recouping their money. The risk of a run on Greek banks is “a very serious problem,” Yannis Ioannides, professor of economics at Tufts University in Massachusetts, told Bloomberg Television. He said the European Central Bank needs to guarantee deposits held by the region’s lenders to guard against contagion. “That’s the only way to kill a bank run: not words but deeds.”
• Europe Must Face Ugly Reality of Greek Exit from Euro. A Greek exit from the euro area has the potential to be the European Union’s most economically and politically destructive event of a generation. Unfortunately, Europe has reached the point where it must prepare for such an outcome. Whether Greeks want it or not, circumstances could soon force their country to return to the drachma. Europe’s leaders, as Luxembourg Prime Minister Jean-Claude Juncker hinted, might extend Greece’s deadlines to meet the budget targets required for rescue money, but they won’t provide emergency financing to a government that refuses austerity measures. Without Europe’s help, Greece’s government (whoever ends up leading it) faces a dilemma: Cut spending even more than under the austerity program, or default on its debts and print a new currency to pay its bills.
  
• Germany Demands That ECB Pays Back EFSF Guarantee, FTD Reports. Germany and the European Financial Stability Facility has demanded that the European Central Bank pay back a 35 billion-euro ($45 billion) guarantee to the EFSF, Financial Times Deutschland said in a preview of a story that will run tomorrow, without saying where it got the information. The ECB received the guarantee from the EFSF to cover risks during the Greek government debt swap in March and wants to keep it for as long as 10 months because of outstanding so-called selective default bonds, the newspaper reported.
• Brazil Builders Plunge as PDG Profit Tumble Deepens Slump. MRV Engenharia (MRVE3) & Participacoes and PDG Realty (PDGR3) SA Empreendimentos & Participacoes led a plunge among Brazilian real-estate companies after reporting first-quarter profit that fell more than forecast. MRV lost 15 percent to 9.43 reais at the close in Sao Paulo, the biggest decline on the BM&FBovespa Real Estate Index, which retreated 4 percent. PDG, the country’s largest homebuilder by sales, fell 9.8 percent to 3.67 reais, making it the worst performer this year on the benchmark Bovespa index. PDG and MRV joined Rossi Residencial SA (RSID3), Brookfield Incorporacoes SA (BISA3) and Gafisa SA (GFSA3) in reporting lower profit or net losses last quarter. Homebuilders overextended themselves after 7.5 percent economic growth in 2010 spurred construction, creating a property glut as expansion slowed, said Luiz Roberto Calado, a vice president at the Brazilian Finance Managers Association. “They basically overestimated demand,” Calado, who published a book in 2010 on Brazilian real estate, said by phone from Sao Paulo. “They started buying land and creating lots of projects, but family income just hasn’t risen as much as housing prices. Even with credit, houses and apartments don’t seem affordable anymore.”
• Goldman(GS), Merrill E-Mails Show Naked Shorting, Filing Says. Goldman Sachs Group Inc. (GS) and Merrill Lynch & Co. employees discussed helping naked short-sales by market-maker clients in e-mails the banks sought to keep secret, including one in which a Merrill official told another to ignore compliance rules, Overstock.com Inc. (OSTK) said in a court filing. The online retailer accused Merrill, now part of Bank of America Corp., and Goldman Sachs of manipulating its stock from 2005 to 2007, causing its shares to fall. Clearing operations at the banks intentionally failed to locate and deliver borrowed shares for clients shorting stocks, including two traders who were fined and suspended from the industry, Overstock’s attorneys said in court filings earlier this year.
• JC Penney(JCP) Reports First-Quarter Loss Amid Sales Slump. J.C. Penney Co. (JCP), the department-store chain led by Apple Inc.’s (AAPL) former stores chief, reported a first- quarter loss and said it will discontinue its quarterly dividend after sales fell more than anticipated. The shares declined. The loss of $163 million, or 75 cents a share, compared with profit of $64 million, or 28 cents, a year earlier, the Plano, Texas-based company said today in a statement. Sales slumped 20 percent to $3.15 billion, missing the $3.43 billion average of 16 estimates compiled by Bloomberg. The shares fell 13 percent to $29 at 5:53 p.m. in New York. At the close, J.C. Penney had dropped 5.2 percent this year.
• Romney Focuses on U.S. Debt in Attacking Obama for Slow Recovery. Mitt Romney decried the ballooning of the federal debt and said it “threatens what it means to be an American,” as he argued that government deficits are hurting the nation’s economic recovery and President Barack Obama has made the situation worse. “America counted on President Obama to rescue the economy, tame the deficit and help create jobs,” the presumed Republican presidential nominee told supporters today in Des Moines, Iowa. Criticizing the $831 billion stimulus package enacted shortly into Obama’s term and other administration actions, Romney said the president “bailed out the public sector, gave billions of your dollars to companies of his friends and added almost as much debt to the country as all the prior presidents combined.” As a consequence, “we are now enduring the most tepid recovery in modern history,” Romney said.
• China Power Output Shows Deeper Economic Slump: Chart of the Day. China’s economic slowdown may be worse than forecast as growth in electricity generation, a leading indicator of gdp, was almost non-existent last month. Power generation rose .7% in April from a year earlier, down from 7.2% in March, the National Bureau of Statistics said on its website. Industrial production in the world’s second-largest economy, which accounts for more than 70% of electricity use, rose at the slowest pace in about three years last month. “Power production is one of the coincident indicators of the economy,” said Michael Parker, an analyst in Hong Kong at Sanford C. Bernstein & Co. “To see the number so sharply down, I think the problem of macro issues comes into question.”
• JPMorgan’s Specific Trades Weren’t Monitored, Regulator Says. JPMorgan Chase & Co. (JPM)’s individual trades that led to a $2 billion loss weren’t monitored by the Office of the Comptroller of the Currency, which said it didn’t expect to be notified about the positions. The job of the OCC, which oversees U.S. national banks including JPMorgan Chase Bank N.A., is to oversee wider risk- management policies and limits and to alert company management when it sees activities that range far from expectations, said Bryan Hubbard, an OCC spokesman.
• China’s Hong Kong Home-Buying Influx Wanes, Midland Says. Mainland Chinese investors accounted for a smaller percentage of Hong Kong’s new home sales for a second quarter as the country’s economy slowed and local buyers returned to the market, according to Midland Holdings Ltd. (1200) Mainland purchasers made up 36.8 percent of all new home sales by value in the first quarter, from 37.9 percent in the previous three months, Hong Kong’s biggest publicly traded realtor said in an e-mail yesterday. The figure reached 53.9 percent in the third quarter last year, Midland said.

• More Real-Estate Loans Default in Europe. European commercial-real-estate markets are struggling with a sharp increase in problem mortgages just as more European countries slip back into recession. A growing number of landlords, hit with falling rents and occupancies, are defaulting on loans, and it is happening not just in the most-troubled parts of Europe but in big centers like London and Frankfurt. Values already are down nearly 20% since their 2007 peak across Europe, according to CBRE Group Inc. Meantime, billions of euros of commercial mortgages are coming due, but little capital is available for refinancing.
• China Big Four Banks Barely Issue New Yuan Loans In 1H May – Report. China’s biggest four banks barely issued any new yuan loans in the first two weeks of May, extending the country’s weak credit growth last month, the state-run Shanghai Securities News reported Wednesday, citing an unnamed source. The four banks–Industrial & Commercial Bank of China Ltd. 1398.HK -2.08% (601398.SH), China Construction Bank Corp. 0939.HK -2.20% (601939.SH), Bank of China Ltd. 3988.HK -2.35% (601988.SH) and Agricultural Bank of China Ltd. 1288.HK -0.60% (601288.SH)–usually account for 30% of new yuan loans issued by China’s whole banking system. The rare and unusually dismal performance by the banks is expected to fuel concerns that despite Beijing’s efforts to step up credit easing, corporate demand for loans remains too weak to reverse the trend.
• Regulator Laments Role of Largest Mortgage Lenders. The U.S. mortgage industry has become too concentrated in the hands of a few large players, a leading housing regulator said Tuesday, expressing a concern many small lenders are voicing as regulators consider how to overhaul the nation’s mortgage system.
• JPMorgan’s(JPM) $2 Billion-Plus Loss Came On Three-Legged Trade. The complex web of trades that saddled J.P. Morgan Chase & Co. (JPM) with at least $2 billion in losses had three key components, according to people familiar with the bank’s strategy. Now, rival traders, seeking to reap gains from J.P. Morgan’s losses, are scurrying to guess which parts the bank is unwinding, and how.
• Loeb’s Third Point Reveals Apple(AAPL), Google(GOOG), Cisco(CSCO) Stakes. Third Point LLC, the hedge fund that recently won a proxy battle for further control of embattled Internet firm Yahoo Inc., has turned its attention to other large tech firms recently.
• Tom Frost: The Big Danger With Big Banks. Taxpayer safety nets such as the FDIC should be available only to banks that are in the loan business, not those in the investment business.

• Yahoo!(YHOO): Einhorn Dumps It, Stands Pat on (AAPL); Trims (DELL), (MSFT).

• Asia Stocks Dive as Greek Political Crisis Deepens. Asia’s stock markets fell sharply Wednesday, with commodity firms among those hardest hit after news that Greece’s political impasse would force new elections in the country. Hong Kong’s Hang Seng Index was among the region’s worst performers Wednesday, tumbling 2.4%, with Sullivan citing the Hong Kong market’s relatively high liquidity. Australia’s S&P/ASX 200 wasn’t far behind with a 1.8% drop, as weak commodity prices sent major mining names lower.
• Filings Show 45% of China Companies See Slowdown.
  

• Elizabeth Warren Is Getting Destroyed More For Calling Herself A Native American.
• 3 Reasons Why You Should Expect France’s Wealthy Elite To Move To London.
• Attention Facebook(FB) Investors: This (GM) Ad Cancellation Is Big, Bad News.
  

• Of Whitney Tilson’s $345MM In AUM, $104MM Is In Call Options, $24MM Is In Warrants.
• Majority of Neo-Normal Greek Cops Vote Neo-Nazi. In a somewhat stunning revelation, especially after our earlier note on the Golden Dawn leader’s ‘position’ on the issues of the day, GreekReporter notes via the news paper To Vima, that more than half of all police officers in Greece voted for pro-Nazi party Golden Dawn in the elections of May 6th. It’s not really for us to judge (well maybe it is) but when some polling stations report Golden Dawn receiving 19-24% of the votes, things are going from the dismal to the horrific (and potentially chaotic) very fast.
• Market Deja Deja Deja… Oh Forget It! (graphs)
  

• Facebook(FB) to Increase IPO Deal Size by 25%: Source.
• High-Speed Trading: Profit – and Danger – in Milliseconds.

IBD:

• Ulta Beauty(ULTA) Wows Customers With Trendy New Brands.
  

NY Times:

• Needy States Use Housing Aid Cash to Plug Budgets. Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.

• Activist Ackman’s Pershing Square Still Betting On JC Penney(JCP), Canadian Pacific(CP).

• Obama Lists Millions in Assets in 2011. The White House released documents Tuesday that show President Barack Obama and the first family hold assets valued at between $2.6 million and $8.3 million. The disclosure forms, required by the Ethics in Government Act, show the president’s largest asset, by far, is U.S. debt in the form of Treasury notes and bills. In total, the president has between $1.6 million and $6.3 million invested in Treasury debt.

• U.S. Energy Independence Is No Longer Just A Pipe Dream.

• Chicago braces for violence at NATO summit. Chicago police, who have a reputation for dealing toughly with protesters, will be prepared for the worst with new riot gear, including “sound cannon”, if demonstrators at the NATO summit get out of line this weekend. America’s third-largest city and President Barack Obama’s hometown has never hosted anything like the meeting starting on Sunday, which will draw representatives from some 50 countries, including leaders of the 28 members of the military alliance.
• PIMCO: Euro zone to ‘evolve into smaller’ entity. Pacific Investment Management Co., which manages the world’s largest bond fund, sees a high probability that the euro zone “will evolve into a smaller and less imperfect entity.” “Simply put, the status quo is no longer an option for Europe over the three- to five-year horizon,” PIMCO Chief Executive Officer Mohamed El-Erian wrote in a report outlining the Newport Beach, California-based company’s medium-term economic outlook. “The higher probability outcome is that the eurozone will evolve into a smaller and less imperfect entity – namely, a closer political union of countries with more similar conditions.”
• Sina Corp(SINA) Could See Further Losses Due to Weibo – CEO. Sina Corp could post further losses due to its investment in microblogging platform, Weibo, its Chief Executive Officer Charles Chao said on Wednesday. Sina Corp reported quarterly results that beat Wall Street’s targets after advertising revenue shot up 9 percent despite a weak Chinese market, propelling its shares up 7 percent in after hours.

• Bankers’ Talks On Curbing Rating Agencies. Up to 20 of Europe’s top banks will on Wednesday discuss a plan to foil the dominance of the much criticised big three credit agencies at a private meeting of finance directors in Frankfurt. Some of the banks want to change the culture of information disclosure to the likes of Standard & Poor’s, Moody’s and Fitch to level the playing field for potential new entrants.
• JPMorgan(JPM) loss exposes derivatives dangers. As JPMorgan reels from a complicated hedging strategy, one that misfired to the tune of at least $2.3bn in losses, derivatives-market participants worried about new rules on trading fear it will be harder to argue for more lenient treatment.
• US Bank CDS Hit Fresh 2012 Highs. Credit default swaps on major US banks, including JPMorgan Chase, hit fresh highs for the year on Tuesday as problems in Greece intensified. The cost of default protection on JPMorgan debt rose 8 basis points to 147, the highest level this year.

• Italy’s Banks Shaken as Economic Slump Deepens. As Greece erupts, Italy is moving into the eye of the storm. Its economy is contracting at speeds not seen since the depths of the slump in 2009 as draconian austerity bites, greatly increasing the risk of social revolt and a banking crisis. With the world’s third largest debt after the US and Japan at €1.9 trillion (£1.18 trillion), it is big enough to bring the global financial system to its knees. It is also in the front line of contagion as the Greek crisis metastasizes. Yields on 10-year Italian debt jumped 16 points to 5.86pc on Tuesday after Italy’s data agency said the country is sliding even into deeper recession, with GDP shrinking 0.8pc in the first quarter. Output is now 6pc below its peak in 2008. Italy has been trapped in perma-slump for a decade, the only major state to suffer a fall in real per capita income since 2000. Rising anger has led to a spate of violent attacks by terrorist groups over recent weeks, all too like the traumatic ‘years of lead’ in the late 1970s. The government is mulling use of troops to protect targets after anarchists shot the head of Ansaldo Nucleare last week and hurled petrol bombs at tax offices.
• Global Lenders Face ‘Killer Losses’ on Greek Debt. Foreign holders of €422bn of Greek debt were warned to brace themselves for “killer losses” as coalition talks in Athens collapsed, threatening Greece’s future in the eurozone.

• IMF Jets In For Stress Tests On Australia’s Big Four Banks. THE big four banks face increasing scrutiny from both the International Monetary Fund and the credit rating agencies as Europe’s financial problems drive up offshore funding costs, just as domestic growth stutters. IMF officials arrived in Sydney this week for meetings with ANZ, Commonwealth Bank, National Australia Bank and Westpac.

• None of note

• Asian equity indices are -2.50% to -1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 192.5 +2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 149.50 -1.0 basis point.
  
• FTSE-100 futures -.75%.
  
• S&P 500 futures -.14%.
  
• NASDAQ 100 futures -.20%.

• (TGT)/1.00
• (DE)/2.53
• (SPLS)/.30
• (ANF)/.01
• (LTD)/.40
• (JACK)/.31
• (RRGB)/.66
• (CHS)/.30

• Housing Starts for April are estimated to rise to 685K versus 654K in March.
• Building Permits for April are estimated to fall to 730K versus 747K in March.
  

9:15 am EST

• Industrial Production for April is estimated to rise +.6% versus unch. in March.
• Capacity Utilization for April is estimated to rise to 79.0% versus 78.6% in March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,750,000 barrels versus a +3,652,000 barrel gain the prior week. Distillate supplies are estimated to rise by +150,000 barrels versus a -3,251,000 barrel decline the prior week. Gasoline supplies are expected to fall by -100,000 barrels versus a -2,613,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.5% versus a +.4% gain the prior week.
  

2:00 pm EST

• Minutes of FOMC Meeting
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The France/Germany Bond/Bund Auctions, Fed’s Bullard speaking, 1Q Mortgage Delinquencies, 1Q MBA Mortgage Foreclosures, weekly MBA mortgage applications report, (NCR) investor day could also impact trading today.
  

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• Small-Cap Growth +.49%

• 1) Airlines +1.39% 2) Gold & Silver +1.28% 3) Oil Service +1.27%

• SFD, GM, SINA, PBR, VNET, GE, ACHC, OSUR, RDWR, ABMD, GRPN, PAAS, CREE, MAKO, TKF, CHS, KOF, LM, GT, VHC, NUS and COG
  

• 1) SSRI 2) AEM 3) EGO 4) ANN 5) MHR
  

• 1) NOC 2) SD 3) ESV 4) ANF 5) PGR
  

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

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• Large-Cap Growth -.60%

• 1) Coal -3.50% 2) Steel -3.0% 3) Agriculture -1.41%

• CHU, SNP, MCP, JCP, ANF, ACTV, TNGO, CCJ, CALL, AKAM, TYC, LUK, TAXI, PETD, ASEI, LRCX, FRAN, CNQR, INFA, SVVC, CVV, HCII, HIBB, PANL, NVLS, SNDK, SYNC, LAMR, ACAT, BMC, SDT, INFA, RGR, ITRI, LXU and SPLS
  

• 1) JCP 2) EWA 3) AMAT 4) DELL 5) KGC
  

• 1) JPM 2) KLAC 3) ANF 4) LRCX 5) PCX
  

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

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