Today's Headlines

Bloomberg:

• Brazil December Industrial Output Drops Below Every Estimate. Brazil’s industrial production in December fell by the most in five years, surprising analysts, as the central bank continues to boost interest rates in the world’s second-biggest emerging market. Swap rates fell. Industrial output dropped 3.5 percent from the previous month after declining a revised 0.3 percent in November, the national statistics agency said today in Rio de Janeiro. That was the biggest fall since December 2008, and steeper than predicted by all 37 economists surveyed by Bloomberg, whose median estimate was for a 1.7 percent decline. 
• Pimco Sees Delay in Emerging Markets Recovery on Interest Rates. A recovery in emerging-market growth will be pushed back amid rising interest rates and declines in developing-nations currencies, according to Pacific Investment Management Co. “There is a real possibility that this vicious cycle of rate adjustments in EM coupled with currency weakness will further postpone EM growth recovery,” Masha Gordon, who oversees more than $2.5 billion in assets as London-based head of emerging-market equities at Pimco, said by e-mail today.
• Emerging-Market Stocks Extend Worst Start Ever on Economy. Emerging-market stocks fell, extending the worst start to a year on record, on concern the global economic recovery will wane. Lenovo Group Ltd. (992) drove a selloff in technology companies after five analysts downgrades. The MSCI Emerging Markets Index dropped 0.8 percent to 919.59 at 12:45 p.m. in New York, the lowest in five months. The decline brought this year’s slump to 8.3 percent, the most in the same period since at least 1988.
• Japanese Banks’ Record Earnings Mask Profit-Growth Prospects. Japan’s biggest banks, poised to achieve record annual earnings after last year’s stock-market surge, may still disappoint investors as the equity rally fades, leaving them reliant on a lending recovery for profit. 
• Real Yields at Two-Year High Offer Little Comfort: Turkey Credit. Turkish bond yields near the highest in two years once inflation is accounted for are proving insufficient to lure traders seeing the need for further rate increases to shore up the weakening currency. Real yields on Turkey’s two-year notes touched 3.66 percent on Jan. 28, the most since October 2011, according to data compiled by Bloomberg. That’s higher than Russia, India, Indonesia and South Africa, the data show. Turkish producer prices surged 10.7 percent in January from a year earlier, a report showed yesterday, suggesting the full effect of lira weakness has yet to be passed onto consumers, who saw inflation accelerate more than forecast in the period, to 7.5 percent.
• Owl Creek Said to Short Denmark Expecting Debt Crisis. Owl Creek Asset Management LP, one of last year’s best-performing hedge-fund firms, is betting against Denmark’s sovereign bonds in anticipation of a debt crisis, according to two people familiar with the matter. The $3.2 billion New York-based firm also bought credit default swaps on Danske Bank A/S (DANSKE), the country’s biggest lender, founder and investment chief Jeffrey Altman said last week at a conference panel discussion in Palm Beach, Florida, according to the people, who attended and asked not to be identified because the information is private.
• European Stocks Little Changed; Vestas Drops as UBS Jumps. European stocks were little changed, paring earlier losses, as banks rallied while telecommunication companies fell. UBS (UBSN) AG jumped 5.4 percent after Switzerland’s biggest bank posted earnings that exceeded analysts’ projections. Royal KPN NV lost 4.8 percent after the biggest Dutch telecommunications provider said it would cut jobs as a mobile-phone price war hurt earnings. Vestas Wind Systems A/S dropped 4.8 percent after saying it seeks to raise capital. The Stoxx Europe 600 Index slipped 0.2 percent to 317.58 at the close of trading after earlier dropping as much as 0.8 percent. The Stoxx 600 has fallen 5.5 percent from its six-year high on Jan. 22. 
• Copper Rises, Snapping Longest Slump Since 1995, as Dollar Drops. Copper futures for March delivery rose 0.3 percent to settle at $3.192 a pound at 1:21 p.m. on the Comex in New York. The price dropped in the previous nine sessions, the longest slump since December 1995.
• Natural Gas Surges as Forecasts Show Arctic Cold Persisting. Natural gas futures jumped in New York, rising for the first time in four days, on forecasts for a polar blast that would deplete stockpiles of the heating fuel. Gas gained as much as 7.2 percent as MDA Weather Services predicted below-normal temperatures in most of the lower-48 states through Feb. 13.
• U.S. 1-Month Bill Rate Highest Since October Debt Ceiling Debate. Rates on one-month bills reached the highest since October’s debt-ceiling deadlock after Treasury Secretary Jacob J. Lew reiterated yesterday that the U.S. expects to run out of borrowing capacity by the end of February. Rates surged to as high as 0.14 percent from 0.0304 percent, Bloomberg Bond Trader data show.
• Plunging Stocks Push Volatility to Biggest January Gain: Options. Investors snapping up insurance against stock losses after $1 trillion was erased from U.S. equity values have pushed the cost of options to a record increase for the start of a year. The Chicago Board Options Exchange Volatility Index jumped 34 percent last month for the biggest January advance since it was created in 1990, according to data compiled by Bloomberg. The VIX climbed 16 percent yesterday to 21.44, a one-year high.

Wall Street Journal:

• Health-Care Law Expected to Take Greater Toll on Workforce. The Affordable Care Act is projected to reduce the number of full-time workers by roughly 2.3 million people through 2021 and insure 2 million fewer people this year than previously estimated, the Congressional Budget Office said Tuesday. The CBO had previously estimated the labor force impact would be around 800,000 people in that time frame. CBO said the jobs figures largely represent Americans who will choose not to work rather than those who will lose their jobs or have their workweeks reduced because of the law. The new estimates could further complicate the political landscape ahead of the midterms for some vulnerable Democrats, as Republicans are planning to use the health-care law as a cudgel in November. While the White House has been working to reverse the number of workers who are leaving the labor market, and CBO's new estimates on this phenomenon could embolden many in the GOP.
• Microsoft(MSFT) Names Satya Nadella as CEO. Bill Gates Leaves Chairman Post to Become Technology Adviser. 
• Mexico's Stocks Fall After Long Weekend. Mexico's stocks opened sharply lower Tuesday as local investors returned from a long holiday weekend, while the peso recovered from the previous session's losses in international trading. The benchmark IPC index was recently down 1.5% at 40268 points on volume of 16.7 million shares worth 519.1 million pesos ($38.8 million). Bellwether America Movil (AMX, AMX.MX) L shares were down 1.2% at MXN14.11.

Fox News:

• Obama heaps more blame on Fox in part-two of O'Reilly interview. (video) President Obama extended his criticism of Fox News during the second part of his interview with host Bill O’Reilly, suggesting the network has profited by unfairly covering such stories as the Benghazi terror attacks and the IRS targeting of conservative groups.

MarketWatch:

• Hang Seng in correction as Hong Kong stocks drop. Hong Kong shares dropped into correction territory Tuesday, hitting their lowest level since late July as a U.S. stock selloff extended to Asia. The blue chip Hang Seng Index fell 637.65 points, or 2.9%, to 21,397.77, just above a session low of 21,388.61 hit shortly before the close.

CNBC: 

• RadioShack to close about 500 stores: Report.
• Cashin: Need this to get past 'halfhearted' bounce. (video)

ZeroHedge:

• Bank Of America Warns: "Too Few Bears Out There", "Investors Not Prepared" For Selloff. (graph)
• Factory Orders Drop Most In 5 Months, Inventories Rise Fastest Since June. (graph)
• The $3 Trillion Hole - Why EM Matters To European Banks.
• The US Consumer Is Not Thriving. (graph)
• Marc Faber Fears "A Vicious Circle To The Downside" Is Just Beginning. (video)
• JPMorgan Takes Offense At Argentina's Fabricated Reserves Data. (graph)

ValueWalk:

• Carson Block Shorting Blinx; EM Blowout ‘Inevitable [VIDEO].

Business Insider: 

• The Stock Market Still Looks 67% Overvalued. (graph)

Financial News:

• Risk rises, yields fall – but hunger for debt grows. Investor appetite for higher returns is pushing many of them into ever-riskier debt investments, apparently undaunted by fears of overheating and last week’s emerging-market rout. Overheating in debt markets – government and corporate – was identified as the top concern of top finance industry professionals polled by Financial News at the start of 2014, but the past month has seen investors willing to accept ever more aggressive terms in their hunt for yield. Among the signs:

Forbes:

• The Polar Vortex: Climate Alarmism Blows Hot And Cold.

Reuters:

• Fed's Lacker says tough to see pause in tapering ahead. The U.S. Federal Reserve will probably keep reducing monthly asset purchases at its current pace and it would be hard to make the case for a pause in the tapering process, a senior Fed official said on Tuesday. Richmond Federal Reserve President Jeffrey Lacker said U.S. stocks had performed well looking at the last year and recent moves likely reflected a downward adjustment in expectations for growth.
• Fed's Evans sees 'high hurdle' to deviating from pace of QE3 taper. Only a sharp economic downturn or unexpected rise in inflation could force the Federal Reserve to pause or speed up the pace at which it is cutting its massive bond-buying program, a top Fed official said on Tuesday. "I think it's probably a high hurdle to deviate from that pace over the next several meetings," Chicago Federal Reserve Bank President Charles Evans told reporters after a speech here. Evans said that world financial markets should not be surprised at the Fed's decision to keep tapering its third round of quantitative easing, or QE3, because the cuts come in response to improved momentum in the economy.
• Farm machinery maker Agco forecasts weak demand for 2014. Agriculture machinery maker Agco Corp warned of weak demand in 2014 due to reduced farm income and forecast current-quarter earnings well below Wall Street expectations. Economic uncertainty in Europe, coupled with a slowdown in demand from U.S. farmers, has weighed on Agco as corn prices continue to slide, pressured by a record crop in 2013.
• Boehner: House Republicans want to tackle debt drivers as part of deal. U.S. Congressional Republicans are aiming for deficit-reduction steps as part of any deal to raise the nation's debt limit but have not decided on a strategy yet, House Speaker John Boehner said on Tuesday.