MORNING COFFEE

Spanish and Italian Bond Yields Jump. The Yield on the Spanish 10-year bond rose 18 bps to hit a record high of 6.97%.  Additionally a report released shows that Spanish banks borrowed a record €324.6B in May from the ECB, which was much more then the €319.9B borrowed in April.  Now analysts are questioning if the recently agreed upon bank bailout of €100B will be enough.

In Italy yields increased on their €4.5B 3 year bond auction. The government's target range for the auction was €2.75B-4.5B, but yields rose from 3.91% in mid-May to 5.3%.  The 10 year bond yield is also higher in the secondary, up 1 bps at 6.23%.

Currently the 10 year yields in the EU are as follows: Greece 29.45%, Ireland 7.21%, Italy 6.24%, Portugal 10.87%, and Spain 6.97%.

Stockton, CA May Default. Yesterday the rating agency Moody’s warned that the city of Stockton is likely to default on some of its debt obligations. The troubled city has a July 1 deadline with creditors to avoid bankruptcy.

Upgrades

Nike (NKE): McAdams Wright Ragen raised their rating from Sell to Hold. Pre-market: 103.00 +0.78 (0.76%)

Brinker International (EAT): Argus raised their rating from Hold to Buy and placed a target price of $37.00 on the company. Pre-market: 30.47 +0.19 (0.63%)

Zillow Inc (Z): Pacific Crest raised their rating from Sector Perform to Outperform and placed a target price of $40.00 on the company.

Moog Intl (MOG.A): RBC Capital raised their rating from Sector Perform to Outperform and placed a target price of $50.00 on the company.

Best Buy (BBY): Citigroup raised their rating from Sell to Neutral and raised their target price from $18.00 to $21.00. After Hours: 19.50 +0.10 (0.52%)

Coverage Initiated

Tesla (TSLA): Lazard Capital initiated coverage with a Buy rating and target price of $42.00. Pre-market: 29.77 0.00 (0.00%)

Downgrades

Human Genome (HGSI): JMP Securities lowered their rating from Outperform to Market Perform. Pre-market: 13.26 0.00 (0.00%)

Taiwan Semiconductor (TSM): BNP Paribas lowered their rating from Buy to Hold. After Hours: 13.58 +0.03 (0.23%)

Adobe Systems (ADBE): Jefferies lowered their rating from Buy to Hold and lowered their target price from $38.00 to $32.00. Pre-market: 31.52 -0.27 (-0.85%)

Earning Reports

Pier 1 Imports (PIR): Reported EPS of $0.16 in-line with estimates. After Hours: 15.67 +0.09 (0.58%)

Smithfield Foods (SFD): Reported EPS of $0.43 missing estimates by -$0.11. Pre-market: 18.73 -0.84 (-4.29%)

Winnebago Inds (WGO): Reported EPS of $0.13 beating estimates by $0.01. After Hours: 8.75 -0.24 (-2.67%)

Markets: 
Futures at 7:25: Dow +0.23%. S&P +0.17%. Nasdaq +0.22%. Crude -0.06% at $82.57. Gold +0.06% to $1620.30. 

Europe: London -0.68%. Paris -0.46%. Frankfurt -0.57%. 

Asia: Japan -0.22%. Hong Kong -1.15%. China -0.99%. India -1.20%.