Wednesday Watch

Evening Headlines 
Bloomberg: 

• Japan Core Machinery Orders Fall Most Since ’98 in Abe Challenge. Japan’s core machine orders fell in December the most since 1998, signaling business investment growth could slow in coming months and weigh on a recovery in the world’s third-biggest economy. Core orders fell 15.7 percent from the previous month, the Cabinet Office said in Tokyo today, compared with the median estimate of a 4 percent decline in a Bloomberg survey of 31 economists.  

• China Military Spending Threatens U.S. Superiority, Kendall Says. China’s increased defense spending coupled with shrinking U.S. budgets threatens to end U.S. military superiority, a top American procurement official said. “We’ve relied on technological superiority for decades now as one of the fundamental things that sets our military apart and I do see that that’s not assured given the investments being made by China as well as by other powers,” Frank Kendall, under secretary of defense for acquisition, technology and logistics, told reporters in Singapore today.

• Emerging-Market Sharks Circle Reserves in Rapid Dive: Currencies. Foreign-exchange reserves are emerging as the latest battleground between traders and developing nations trying to stem the worse rout in their currencies since 2008.

• Asian Stocks Climb as Aussie Rises After China Data. Asian stocks climbed for a sixth day, led by Japanese shares, while the Australian dollar rose to a one-month high after Chinese trade data exceeded estimates. Gold slid, halting a five-day gain, and South Korea’s won strengthened. The MSCI Asia Pacific Index added 1 percent as of 11:19 a.m. in Tokyo, where the Topix Index rose 1.5 percent after being closed yesterday for a holiday.

• Rebar Near 17-Month Low as Rising Ore Imports Swell Stockpiles. Steel reinforcement-bar futures in Shanghai traded near the lowest level in more than 17 months as iron ore inventory climbed amid record imports in January. Rebar for May delivery on the Shanghai Futures Exchange traded at 3,388 yuan ($558) a metric ton at 10:14 a.m. local time. Futures settled at 3,386 yuan yesterday, the lowest close for a most-active contract since September 2012.

• Gold Seen Rising to $1,400 on 100-Day Average by Citi Futures. Gold prices are poised to extend their 2014 rebound and reach $1,400 an ounce, the highest since September, according to technical analysis from Citi Futures and RBC Wealth Management.

• Pimco Boosts Government Holdings as Bonds Gain Most Since 2008. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., raised holdings of Treasuries and government-related debt in January as the U.S. bond market had the best start to a year since 2008.

Wall Street Journal: 

• Janet Yellen Doesn’t Mince Words and More on Her Testimony.

• Car Makers Snip Pricing Now to Avoid Haircuts Later. As Inventories Rise, Detroit Searches for a Goldilocks-like Pricing.

Fox News:

• GOP objects to Obama administration easing immigration rules for terror supporters. The Obama administration's use of an executive directive to ease the rules for people trying to enter the United States or stay in the country even though they have given “limited” support to terrorists or terror groups is causing problems for Republicans working on immigration reform.

CNBC: 

• Yellen just added pressure on emerging markets.

Zero Hedge: 

• Which Hedge Fund Strategies Will Work In 2014: Deutsche Bank's Take.

• Another Bitcoin Flash Crash Imminent? Second Major Exchange Follows MtGox In Suspending Withdrawals. (graph)

• Japan Machine Orders Crumble At Fastest Pace In 22 Years As BOJ Board Member Warns More QE May Not Be Coming. (graph)

• House Passes Clean Debt Ceiling 221-201 With Vast Majority Of Republicans Voting Against.

• Are Animal Spirits Deflating?

• Think China's Credit Crisis Is Over? Don't Look At This Chart. (graph)

• 22 Facts About The Coming US Demographic Shock Wave.

Business Insider: 

• Here's Evidence That Millennials Have It Worse Than Any Generation In 50 Years.

• Here's The MVP Guest List For Tonight's White House State Dinner.

• Thousands Of Flights Cancelled As Yet Another Winter Storm Looms.

• Toyota Has Dealt The Australian Auto Industry A Death Blow.

Forbes:

• Why The Next Financial Crisis Could Be Worse Than 2008.

Washington Examiner:

• House Passes ‘Clean’ Debt Ceiling Increase, Without Conditions – Here Are the 28 Republicans Who Voted for It.

Reuters: 

• Procter & Gamble(PG) cuts outlook on emerging market currency impact. Procter & Gamble Co, the world's largest household products maker, cut its sales and earnings outlook for the year on Tuesday to reflect unfavorable foreign exchange rates in Venezuela and the devaluation of currencies in various developing markets.

• Icahn calls for return of Glass-Steagall - FOX Business. Billionaire activist Carl Icahn, who has been making headlines with his epic battle with Apple Inc. , might have another one on his hands - this time with his banker friends. In an interview with FOX Business Network on Tuesday, Icahn called for the reinstatement of the Glass-Steagall Act, which separated investment banks and commercial banks. "I think what they should do is go back to Glass-Steagall," he told FOX Business. "A lot of my friends at these investment banks are going to be real mad at me for saying it, but I really think that was one of the problems in '08."

• Fed to emerging markets: Think on your policy shortcomings. The U.S. Federal Reserve on Tuesday acknowledged it likely triggered a financial market sell-off in the developing world, but said policies in countries such as Turkey, Brazil and India made them especially vulnerable to external shocks. 

• Graco recalling nearly 3.8 million child car seats in U.S.

Nikkei:

• BOJ's Kiuchi Says More Easing May Do More Harm Than Good. Additional monetary easing to avoid potential economic downturn triggered by April's sales tax increase may bring negative side effects, Bank of Japan policy board member Takahide Kiuchi said in an interview. Kiuchi says it's difficult to tell effectiveness of extra easing in boosting inflation.

China Securities Journal:

• China Iron Ore Inventory at Ports 96.3M Tons. Iron ore inventory at China's 34 ports was 96.3 tons as of Feb. 7, near the historical record high of 100m tons, citing custeel.com.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 136.0 -8.0 basis points.

• Asia Pacific Sovereign CDS Index 106.5 -2.0 basis points.

• FTSE-100 futures +.33%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (OC)/.27

• (DPS)/.84

• (AB)/.43

• (DE)/1.53

• (WCG)/1.15

• (MDLZ)/.44

• (SPWR)/.28

• (CBS)/.76

• (NVDA)/.24

• (CSCO)/.46

• (NTAP)/.71

• (AMAT)/.22

• (Z)/.06

• (ANGI)/.13

• (CAKE)/.58

• (MET)/1.29

• (IPI)/.00

• (WFM)/.44

• (CXW)/.55

• (SPW)/1.82

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,630,000 barrels versus a +440,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -10,000 barrels versus a +505,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,865,000 barrels versus a -2,360,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.41% versus a -2.1% decline the prior week.

2:00 pm EST

• The Monthly Budget Deficit for January is estimated at -$10.0B versus $2.9B in December.

Upcoming Splits

• (LIVE) 3-for-1

Other Potential Market Movers

• The Fed's Bullard speaking, BoE inflation report, $24B 10Y T-Note auction, Australia Unemployment report, weekly MBA mortgage applications report, (RCII) investor day, (SCHW) Business Update, BB&T Transport Conference, BofA Insurance Conference and the Leerlink Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by industrial and commodity 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 day.