Today's Headlines

Bloomberg:

• IMF Cuts Forecast on Second Year of Europe Contraction. The International Monetary Fund cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce an economic recovery. The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said today in an update of its World Economic Outlook report. While the fund projects growth this year increasing from last year’s 3.2 percent pace, it expects the 17-country euro area to shrink 0.2 percent in 2013, instead of growing 0.2 percent as forecast in October. While measures to stem the debt turmoil last year helped boost financial markets around the world and decrease sovereign bond yields from Spain to Greece, European officials now still face a recession and unemployment at a record 11.8 percent in the euro area. The IMF warned that the region still poses a “large” risk to the rest of the world if efforts under way to strengthen its economies and work on a banking union slip. The forecast for a second year of economic contraction reflects “delays in the transmission of lower sovereign spreads and improved bank liquidity to private sector borrowing conditions,” as uncertainty remains over ending the turmoil that has engulfed nations from Ireland to Cyprus, according to the report. While the forecast for Japan was left unchanged at 1.2 percent this year amid fiscal and monetary plans to stimulate its economy, the fund cut the 2014 prediction by 0.4 percentage point to 0.7 percent. Growth forecasts for Brazil were cut to 3.5 percent this year from 4 percent and to 4 percent from 4.2 percent in 2014. India was lowered 0.1 percentage point to 5.9 percent this year and was left unchanged at 6.4 percent in 2014. In Europe, German growth was cut by 0.3 percentage point to 0.6 percent in 2013 and is seen accelerating to 1.4 percent next year, from 1.3 percent. Spain will contract 1.5 percent this year, compared with 1.3 percent in October and is seen growing 0.8 percent in 2014, 0.2 percentage point less than before. Italy will shrink 1 percent in 2013 rather than 0.7 percent seen in October, and expand 0.5 percent in 2014, unchanged from three months ago, according to the IMF report released today.
• Spain’s Lost Generation Spends Salad Days Toiling in U.K.Carlos Hernandez Sonseca studied six years for a bachelor’s degree and couldn’t find a job near his home outside Madrid when he graduated in 2011. Last year, he took an increasingly well-worn path to the U.K.
• French-German Rejection Points to Cameron Isolation on EU. Germany and France rebuffed U.K. Prime Minister David Cameron’s attempt to customize the terms of membership in the European Union and vowed not to let Britain stand in the way of the overhaul of the euro currency. Cameron’s call today for a new EU deal drew rebukes from government leaders in Berlin and Paris that demonstrated how the debt crisis is driving the 17 euro countries closer together, no matter whether the U.K. stays in the broader 27-country bloc.
• China Overheating Risk Resurfaces, Ex-PBOC Adviser Says. China’s economic risks have shifted back to growing too quickly as new regional-government officials try to boost development, a former central bank adviser said. “The new problem is how to prevent overheating,” which would stoke inflation and asset bubbles while pushing the government to enact controls, Fan Gang, a People’s Bank of China academic adviser from 2006 to 2010, said today in an interview in Davos, Switzerland, where he is attending the World Economic Forum. “That kind of complication has come back again.” Fan’s comments mark a resurfacing of concerns that had receded last year as growth, inflation and the housing market cooled.
• Ryan Says Republican Goal Is ‘Big Down Payment’ on Debt. House Republicans want to force “a big down payment on the debt crisis” during the debate on spending cuts and extending the U.S. government’s borrowing authority, said Budget Committee Chairman Paul Ryan. Ryan said the debt-limit issue, the scheduled March 1 start of $110 billion in automatic spending cuts -- half in defense -- and the need to extend the government’s spending authority past March 27 “are the points” to “force the conversation” on reducing the debt.
• Obama Could Bypass Congress to Fulfill Climate Pledge. President Barack Obama, whose inaugural address made climate change a second-term priority, could bypass Congress and implement much of his environmental agenda unilaterally through regulations and executive action.

MarketWatch.com:

• Dimon hits out at bank regulators. Bank leader defends J.P. Morgan’s record. J.P. Morgan Chase Chief Executive Jamie Dimon on Wednesday criticized regulators, saying some of the steps taken to reform the banking sector since the financial crisis had added more complexity to the system.

Fox News:

• Clinton lashes out at senator over Benghazi questioning. (video) "We were misled that there were supposedly protests and something sprang out of that. ... The American people could have known that (there was no protest) within days, and they didn't know that." At that point, Clinton began to raise her voice. "With all due respect, the fact is we had four dead Americans," she said. "I understand," Johnson said. Clinton continued to speak, raising her voice and gesturing: "Was it because of a protest or is it because of guys out for a walk one night and they decide they go kill some Americans? "What difference, at this point, does it make?" 

CNBC:

• Gazing Into 'Dark Pools,' the Tool that Enables Anonymous Insider Trading. While federal authorities aggressively pursue individual insider stock trading cases — including an ongoing investigation of Wall Street titan Steven A. Cohen's SAC Capital hedge fund — financial regulators remain years away from being able to peer into "dark pools," the high-tech mechanism that insiders use to conduct secret, advantageous transactions.
• Bears on the Brink: 'I Can't Fight It Anymore'. A powerful rally in which virtually all fears have been bypassed has pushed stock marketdetractors to the brink, ready to wave the proverbial white flag as the only direction for the market seems to be up, up, up. "They're almost ready to throw in the towel," Scott Bauer, of Trading Advantage, told CNBC. "I don't want to say 'capitulation,' (but) guys down here really are saying, 'All right, I can't fight it anymore, let's go.'"

Zero Hedge:

• Spanish Q4 GDP Declines At Fastest Pace Since 2009.
• China Narrowly Averts Credit Bubble Pop With Latest Government Bailout Of First Domestic Bond Default.
• The Socialism Of Europe Has Arrived At Our Shores...
• Art Cashin On The Only Sane Voice At The Fed. 
• Assistant Attorney General Admits On TV That In The US Justice Does Not Apply To The Banks. 
• David Einhorn's Q4 Letter.

Business Insider:

• The Real Story Of How 'Untouchable' Wall Street Execs Avoided Prosecution. 
• Top Trucking Economist Warns Q1 Will Be Weak. 
• Link Between Benghazi And Algeria Attacks Shows Arab Spring's Dark Side. 
• Here's An Early Look At How The Payroll Tax Hike Is Hitting Workers. 
• APPLE(AAPL) EARNINGS PREVIEW: It's All About The iPhone And Guidance. 
• 5 Reasons To Be Nervous About The US Stock Market. 
• One Thing Is Clear From Hillary Clinton's Benghazi Testimony: Al Qaeda Is Still Thriving. 
• CHART OF THE DAY: $2.1 Trillion Powder Keg Near The Heart Of The Chinese Banking System.

Reuters: 

• Coach(COH) North American sales sag; shares slump. Coach Inc (COH.N) on Wednesday reported holiday quarter revenue well below Wall Street forecasts, hit by stiff competition in the handbag segment it has long dominated and a tough environment that saw many retailers cut prices to attract shoppers. 
• McDonald's(MCD) says January restaurant sales will fall. McDonald's Corp on Wednesday forecast a decline in global restaurant sales for January, as it and other fast-food chains fight for customers who are spending cautiously during continued economic uncertainty. 
• U.S. chain store sales point to a hit from tax hike. A slowdown in sales growth at many big U.S. retailers suggests a clutch of tax hikes enacted this month is already leading consumers to hold back on spending, putting a brake on economic growth. Sales growth has cooled for three straight weeks when measured from a year earlier in the Johnson Redbook Retail Sales Index, data showed on Wednesday. Compared to the same week one year earlier, the Redbook index rose 1.8 percent in the week ending January 19, down from 1.9 percent in the January 12 week and 2.1 percent in the January 5 week. Sales were up 2.9 percent in the December 29 week from a year earlier. 
• Brazil inflation speeds more than expected in month to mid-Jan.

AP: 

• Panetta opens combat roles to women. Senior defense officials say Pentagon chief Leon Panetta is removing the military's ban on women serving in combat, opening hundreds of thousands of front-line positions and potentially elite commando jobs after more than a decade at war. The groundbreaking move recommended by the Joint Chiefs of Staff overturns a 1994 rule banning women from being assigned to smaller ground combat units. Panetta's decision gives the military services until January 2016 to seek special exceptions if they believe any positions must remain closed to women.

Telegraph:

• Unprecedented pay squeeze signals 'jobs without growth' economy. An unprecedented squeeze on workers’ pay has led to a “jobs without growth” economy, with labour productivity and living standards falling, economists warn following record high employment figures. 
• Britain's exit from the EU is a fifth 'grey swan' threat to business investment, warns Sir Martin Sorrell. The possibility of Britain leaving the European Union is a fifth "grey swan" threat to business investment, according to Sir Martin Sorrell, the chief executive of WPP.