Thursday Watch

Evening Headlines
Bloomberg:

• Japan's Exports Drop Most Since 2009 as Sales to China Fall. Japan’s exports fell for a fourth consecutive month and dropped the most since 2009, underscoring continued weakness in an economy that contracted in the final months of 2015. Exports to China, Japan’s largest trading partner, were down almost 18 percent, driving an overall decline of nearly 13 percent in the value of overseas shipments in January from a year earlier. Imports dropped 18 percent, leaving a 645.9 billion yen ($5.7 billion) trade deficit, the Ministry of Finance said on Thursday. Falling exports compound poor sentiment in Japan, where wage gains have stagnated, consumer prices are barely rising and households are reluctant to spend. “The environment for Japanese exports is looking bad as Japanese companies shift production abroad, the global economy slows and the yen strengthens,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “It’s becoming clear that that there is no driver to support Japan’s economy.”

• Australian Unemployment Spikes to 6% as Full-Time Jobs Plunge. (video) Australia’s unemployment rate unexpectedly climbed in January as full-time employment slumped by the most since 2013, reflecting waning stimulus from record-low interest rates and a weaker currency. The local dollar fell about one-third of a U.S. cent.

• Iran's Cool Embrace of Oil Pact Raises Doubts on Supply Freeze. Iran’s qualified backing of an accord led by Saudi Arabia and Russia to cap output sowed doubts that the agreement can succeed in tempering a record global surplus. After talks with fellow OPEC members Qatar, Iraq and Venezuela in Tehran on Wednesday, Iranian Oil Minister Bijan Namdar Zanganeh expressed support for the output freeze without committing to restrain the nation’s own production, according to a report from oil ministry news service Shana. The country has signaled it plans to increase exports this year following the removal of international sanctions last month.  

• Asian Stocks Expand Global Rebound as Oil Rallies; Aussie Slips. Asian stocks joined the global recovery as crude oil’s return to levels last seen at the start of February bolstered sentiment. Australia’s dollar fell amid weak jobs data, while emerging-market currencies rallied. Japanese equities wiped out last session’s retreat, and U.S. index futures climbed with Australian and South Korean shares as crude rose with Iran backing a freeze in output from key energy producing nations. The Malaysian ringgit and won rebounded, while the Indonesian rupiah snapped a two-day drop even as economists predicted interest rates there will be cut Thursday. The MSCI Asia Pacific Index rose 2.1 percent as of 10:41 a.m. Tokyo time. Japan’s Topix index rallied 2.5 percent, after slipping 1.1 percent last session. The Shanghai Composite Index rose 0.2 percent.

• Is the U.S. Yield Curve at a Tipping Point? (video)

Wall Street Journal:

• Overproduction Swamps Smaller Chinese Cities, Revealing Depth of Crisis. Beijing had hoped small cities like Suizhou would help drive the expansion of the middle class and sustain economic growth. Even in China’s remotest places, relentless overproduction—here it is mushrooms and cement trucks—is clouding the country’s path to prosperity and jolting the global economy. When 48-year-old farmer Yang Qun began trading at Suizhou’s bustling morning mushroom market a half decade ago, the fungus industry was expanding, even attracting a rural lending arm of British financial giant HSBC Holdings PLC. Ms. Yang saved...

• U.S. and Apple(AAPL) Dig In for Court Fight Over Encryption. Company refuses to retrieve data from phone of one of San Bernardino killers. Washington and Silicon Valley geared up Wednesday for a high-stakes legal battle over a phone used by one of the San Bernardino, Calif., terrorists, a contest each side views as a must-win in their long fight over security versus privacy.

• Republicans Are Campaigning to Lose. The candidate brawls and party disunity are setting up Clinton or Sanders for a win in November.

• Trump Didn’t Oppose the Iraq War. There’s no record of his clear opposition before March 2003, despite his claims. Donald Trump went loony-left during last Saturday’s GOP debate in South Carolina. In a heated moment the reality TV celebrity told the crowd that President George W. Bush had “lied” about weapons of mass destruction in Iraq. This wasn’t the first time that Mr. Trump went off the deep end as a candidate. In October he blamed President Bush for the Sept. 11 attacks, telling CNN: “They knew an attack was coming. George Tenet, the CIA director, knew in advance there was going to be an attack...

Fox News:

• Cruz dares Trump to sue him over abortion ad, vows to run it 'more frequently'. (video) Ted Cruz is daring Donald Trump to sue him over an ad running in South Carolina that questions his record on abortion, rejecting the billionaire businessman’s complaints and vowing instead to run the ad “more frequently” because voters “deserve to know the truth." "You have been threatening frivolous lawsuits for your entire adult life," Cruz said Wednesday. "Even in the annals of frivolous lawsuits, this takes the cake." The Cruz campaign adamantly defended the ad after the Trump campaign sent a cease-and-desist letter demanding the campaign stop running it.

MarketWatch:

• 2 things we haven’t learned since the 2008 financial crisis. Many economists’ notions about banks and central banks are startlingly wrong

CNBC:

• Trump falls to second in national GOP race: NBC/WSJ poll. (video) Ted Cruz has inched ahead of Donald Trump among Republican voters nationally, according to the latest NBC News/Wall Street Journal poll. In the survey — which contrasts sharply with other national polls — Cruz draws 28 percent, narrowly leading Trump at 26 percent. Trailing behind are Marco Rubio at 17 percent, John Kasich at 11 percent, Ben Carson at 10 percent and Jeb Bush at 4 percent. The poll, taken after Trump's New Hampshire primary win and after a raucous GOP debate in which he bitterly criticized former President George W. Bush, diverged sharply from last month's NBC/WSJ survey in which Trump led Cruz by 33 percent to 20 percent.

• Next wave of store closings may hit luxury: Real estate pro. (video)

Zero Hedge:

• China Food Prices Soar Most Since 2013 As Producer Prices Hit 47th Straight Month Of Deflation. (graph)

• Japanese Trade Data Collapses, Crushes "Devalue Our Way To Prosperity" Dreams. (graph)

• Australia Stops "Cooking" Its Jobs Report And The Result Is A Disaster: Full-Time Jobs Plunge Most Since 2013. (graph)

• 21 New Numbers That Show That The Global Economy Is Absolutely Imploding.

• Housing 'Recovery' Hope Humbled As Billings & Purchases Plunge. (graph)

• "Bigger Than Watergate" - Hillary Clinton And The Syrian Bloodbath.

• 9 Searing Images From Today's Deadly "Terrorist" Attack In Turkish Capital. (pic)

• Venezuela Devalues Currency By 37% As Maduro Announces 62-Fold Increase In Gasoline Prices. (graph)

• "Perma-bears" 2 - BofA Economist 0. (graph)

• BREXIT Risk Spikes To Record High. (graph)

• Oil Extends Gains Above $31 After API Reports Surprise Inventory Draw. (graph)

• Devon Energy(DVN) Announces Sale Of $1 Billion In Stock, Dilutes Existing Shareholders By 13%.

• If Oil Stays At $35, This Is What Energy Company Leverage Will Look Like. (graph)

• As "Plan A" Fails, This Is What The Fed's "Plan B" Would Look Like.

• Explaining The "General Violence Of The Market's Extreme Moves".

• Biggest Short-Squeeze In Over 7 Years Sparks 1000 Point Surge In The Dow. (graph)

Business Insider:

• The hacked Hollywood hospital is not alone — schools and clinics across the country are increasingly being hacked for ransom.

• Jack in the Box(JACK) is getting smashed after earnings disappoint.

• Here's why negative interest rates won't work.

Reuters:

• Marathon Oil(MRO) slashes capex 50 percent, has quarterly loss. Marathon Oil Corp, a U.S. shale exploration company, on Wednesday slashed its 2016 spending 50 percent and swung to a loss as the company's results were hurt by a steep decline in crude oil prices.

• NetApp(NTAP) revenue misses estimates; to cut jobs. NetApp Inc, a data storage equipment maker, reported lower-than-expected quarterly revenue, hurt by weak demand for its storage products, and said it would cut about 12 percent of its workforce. Shares of the company, which also forecast fourth-quarter earnings well below analysts' estimates, were down 2.8 percent at $22.90 in extended trading.

• CF Industries(CF) profit misses estimates as prices weaken. U.S. nitrogen fertilizer producer CF Industries Holdings Inc reported a lower-than-expected quarterly profit, hurt by weakening prices and higher costs. Fertilizer prices have plunged amid soft grain prices and excessive global production. The average selling price for ammonia fell about 18 percent to $458 per ton in the fourth quarter ended Dec. 31, while the price of UAN (urea ammonium nitrate) fell 12.5 percent to $230 per ton, the company said.

Telegraph:

• Negative interest rates are a 'gigantic fiscal failure'. When the debt-laden world faces the next global downturn, it will need the full power of helicopter money, not interest rate gimmicks.

Night Trading 

• Asian equity indices are +.75% to +1.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 161.5 -3.25 basis points. 

• Asia Pacific Sovereign CDS Index 77.5 -1.5 basis points. 

• Bloomberg Emerging Markets Currency Index 68.74 +.1%. 

• S&P 500 futures +.16%. 

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (AAN)/.38

• (CAB)/1.21

• (DNR)/.02

• (DISCA)/.45

• (DISH)/.12

• (DUK)/.92

• (H)/.24

• (LH)/2.00

• (MGM)/.09

• (POOL)/-.01

• (RS)/.82

• (SODA)/.17

• (HOT)/.79

• (TK)/.13

• (WMT)/1.43

• (CRMT)/.50

• (AMAT)/.25

• (CENX)/-.57

• (FLS)/.91

• (FLR)/.93

• (MRVL)/.10

• (JWN)/1.25

Economic Releases
8:30 am EST

• Philly Fed Business Outlook for February is estimated to rise to -3.0 versus -3.5 in January.

• Initial Jobless Claims for last week are estimated to rise to 275K versus 269K prior.

• Continuing Claims are estimated to rise to 2250K versus 2239K prior.    

10:00 am EST

• 4Q Mortgage Delinquencies/Foreclosures.

• The Leading Index for January is estimated to fall -.2% versus a -.2% decline in December.  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, Eurozone Current Account, weekly EIA natural gas inventory report, Bloomberg Economic Expectations Index for February, weekly Bloomberg Consumer Comfort Index and the (MTW) investor meeting 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 50% net long heading into the day.