Tuesday Watch

Evening Headlines 
Bloomberg: 

• Greece Seeks Bridge Funding But Merkel's Cool to Bailout Compromise. German Chancellor Angela Merkel signaled little willingness to compromise with Greece over the conditions attached to its bailout as the country tries to drum up support for a bridge funding plan before a euro-area finance ministers’ meeting on Wednesday. Greece will seek about 10 billion euros ($11.3 billion) in short-term financing as it tries to stave off a funding crunch while buying time to push its creditors to ease austerity demands, said a government official who asked not to be named because the negotiations are confidential. While French Finance Minister Michel Sapin said Monday that “we need to put together” a plan for bridge funding, any such accord would require Germany to soften its stance in the standoff between Greece and its creditors over the conditions attached to its 240 billion-euro lifeline. The impasse risks leaving Europe’s most-indebted state without any funding as of the end of this month, when its current bailout expires, putting Greece’s euro membership in danger.

• Russia Facing Recession on Sanctions, Lipsky Says. (video)

• Asian Stocks Drop Fourth Day as Greece Concern Drags U.S. Lower. Asian stocks fell for a fourth day, tracking declines in U.S. markets, as Greece’s rejection of the country’s bailout program spurred concern about euro-area stability. The MSCI Asia Pacific Index slipped 0.2 percent to 141 as of 9:03 a.m. in Tokyo, before markets opened in China and Hong Kong.

• Gold Holds Gain as Greek Standoff With Creditors Boosts Demand. Gold held an advance amid concern that a standoff between the new Greek government and its creditors may worsen, with German Chancellor Angela Merkel signaling little willingness to compromise over bailout conditions. Bullion for immediate delivery traded at $1,239.65 an ounce at 8:30 a.m. in Singapore from $1,239.03 on Monday, when prices rose 0.4 percent, according to Bloomberg generic pricing.

• Loeb’s Third Point Cuts Risk as Market Volatility Jumps. Third Point, the hedge-fund firm run by Dan Loeb, said it has reduced risk because of wider swings in the markets. Out of 25 trading days this year, 22 have had intraday moves in the market of more than 1 percent, New York-based Third Point said on Monday in a letter. “Already, 2015 has been marked by increased volatility,” the New York-based hedge fund said in a letter today.

Wall Street Journal: 

• Qualcomm(QCOM) to Pay $975 Million Antitrust Fine to China. Deal Ends Country’s Investigation Into Chip Maker’s Licensing Practices. Qualcomm Inc. became one of the world’s biggest chip makers because of its power over patents. Regulators in China chose to exact a penalty for how it wielded that power, but left the company’s basic business model intact. 

• The Feel-Good Folly of Fossil-Fuel Divestment. The only ones to suffer will be colleges that earn less money for research, services and student scholarships. 

Fox News: 

• Republicans claim payout from big-bank settlements being steered toward 'special interests'. House Republicans are accusing the Obama administration of letting millions of dollars from recent mortgage-lending settlements go toward politically favored advocacy groups, in turn "shortchanging" the people originally harmed by the financial crisis. The separate deals were reached with the Justice Department in summer 2014, with Citigroup agreeing to pay $7 billion for misleading investors over mortgage-backed securities and Bank of America paying $16.65 billion for similar actions. But of the $24 billion, roughly $150 million is tabbed for financial-counseling agencies -- a category that includes liberal-leaning groups such as the National Council of La Raza. 

CNBC: 

• $386M allegedly missing, as investors fear bitcoin Ponzi.

Zero Hedge:

• Should I Trust The Government? (graph)

• How Wall Street, In Broad Daylight, Took Over The US Government. (graph)

• "Controlling Today's Perception Of Tomorrow's Economic Strength" Is THE Fed Mandate.

• Behind The Global Game Of Thrones.

• Yellen, We Have A Problem. (graph)

• Stocks Stumble As Greek Fears Trump Goldilocks Cheers. (graph)

• A Very Slippery Slope: Yes, Your Samsung Smart TV Can Listen To Your Private Conversations.

• Jim Grant: The Greek Monetary Back-Story. (graph)

• A Bull In A China Shop.

• Chinese Producer Prices Tumble For 34th Month In A Row, Worst 'Deflation' Since Oct 2009. (graph)

Business Insider:

• Oil company SandRidge is going to shut 75% of its rigs. US oil and gas producer SandRidge Energy plans to slash its rig count in Oklahoma and Kansas by nearly 75 percent, according to a document obtained by Reuters.

• Radicalism in Egypt may become the main risk to the US's interests in the Middle East.

• IEA: The US oil production party is far from over.

Reuters:

• Fed's George says early rate hikes can foster financial stability. Central banks should not shy away from raising interest rates to head off asset bubbles, a top U.S. Federal Reserve official said on Monday, and should do so earlier rather than later in an economic recovery. "Modestly tighter policy earlier in the business cycle expansion could moderate risk-taking and the potential for destabilizing financial imbalances to build," Kansas City Fed President Esther George said in remarks prepared for delivery at an event hosted by the Bank for International Settlements in Manila, Philippines. "Monetary policy runs the risk of remaining overly accommodative following a downturn, and lead to future instability."

• Urban Outfitters(URBN), Aeropostale(ARO) beat forecasts on strong U.S. holiday sales. U.S. apparel retailers Urban Outfitters Inc and Aeropostale Inc reported better-than-expected quarterly sales after holiday sales in the United States rose the most since 2011. Urban Outfitters shares rose 7.5 percent in extended trading, while Aeropostale's stock jumped 21.2 percent.

Telegraph:

• US defends unruly Greece as Europe steps up 'Grexit' threats. Germany’s vice-chancellor said "zero chances" that his country will respond to Greek demand for Nazi war reparations. 

• The global financial system stands on the brink of second credit crisis. The world financial system stands on the brink of a second credit crisis as interbank lending shows increasing risk. 

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.0 unch.

• Asia Pacific Sovereign CDS Index 69.25 +1.5 basis point.

• S&P 500 futures +.10%.

• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NILE)/.45

• (KO)/.42

• (CVS)/1.20

• (DF)/.10

• (HCP)/.77

• (MLM)/.86

• (TAP)/.69

• (MWW)/.06

• (OMC)/1.26

• (REGN)/2.83

• (HOT)/.76

• (UBS)/.26

• (WYN)/.84

• (AKAM)/.63

• (CERN)/.47

• (FWRD)/.56

• (NCR)/.78 

Economic Releases
9:00 am EST

• The NFIB Small Business Optimism Index for January is estimated to rise to 101.0 versus 100.4 in December.

10:00 am EST

• Wholesale Inventories for December are estimated to rise +.2%  versus a +.8% gain in November. 

• Wholesale Sales for December are estimated to fall -.3% versus a -.3% decline in November.

• The IBD/TIPP Economic Optimism Index for February is estimated to rise to 51.9 versus 51.5 in November.

• JOLTS Job Openings for December are estimated to rise to 4990 versus 4972 in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lacker speaking, UK Manufacturing PMI, USDA's WASDE report, $24B 3Y T-Note auction, weekly US retail sales reports, Stifel Transport/Logistics Conference, BofA Merrill Insurance Conference and the Goldman Tech/Internet Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.