Stocks Rising into Final Hour on Euro Bounce, Better Economic Data, Short-Covering, Fund Inflows

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 22.82 -2.48%
  
• ISE Sentiment Index 91.0 -36.36%
  
• Total Put/Call .79 -7.06%
  
• NYSE Arms .87 -36.39%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 118.01 -1.64%
  
• European Financial Sector CDS Index 250.42 -10.22%
  
• Western Europe Sovereign Debt CDS Index 374.17 +5.22%
  
• Emerging Market CDS Index 295.65 -3.69%
  
• 2-Year Swap Spread 48.0 +1 bp
  
• TED Spread 58.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -103.0 +15.5 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 170.0 +7 bps
  
• China Import Iron Ore Spot $138.30/Metric Tonne -.1%
  
• Citi US Economic Surprise Index 65.0 -4.4 points
  
• 10-Year TIPS Spread 2.00 +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +132 open in Japan
• DAX Futures: Indicating -6 open in Germany

Portfolio:

• Higher: On gains in my Tech, Medical, Retail and Biotech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 breaks convincingly above its 200-day moving average as it approaches the high-end of its recent range, despite Eurozone debt angst, global growth fears, technical resistance and high energy prices. On the positive side, Coal, Alt Energy, Oil Service, Steel, Networking, Homebuilding, I-Banking and Bank shares are especially strong, rising more than +3.0%. Cyclical shares are relatively strong and (XLF) has traded well throughout the day. Copper is rising +2.79% and Lumber is gaining +.84%. Major Asian indices are up 1-3% in the new year already, while European shares have risen 2-4% so far. The Bloomberg European Bank/Financial Services Index rose +1.9% today. The euro is surging today as year-end bets against the currency hit a new record. The rise comes despite a think tank’s warning that a Eurozone collapse will commence this year.The Germany sovereign cds is falling -1.8% to 101.83 bps, the Italy sovereign cds is falling -2.26% to 491.83 bps and the China sovereign cds is falling -4.5% to 142.08 bps. Moreover, the European Investment Grade CDS Index is falling -2.89% to 163.49 bps. On the negative side, Utility, Hospital, Restaurant, Telecom, Disk Drive and Education shares are lower-to-flat on the day. Oil is surging +4.2%, the UBS-Bloomberg Ag Spot Index is rising +.88% and Gold is jumping +2.7%. The 10-year yield is rising +8 bps to 1.96%. The Spain sovereign cds is gaining +1.86% to 400.83 bps, the US sovereign cds is jumping +4.57% to 51.18 bps, the UK sovereign cds is gaining +1.72% to 99.17 bps and the France sovereign cds is rising +.02% to 218.33 bps. The Italian/German 10Y Yield Spread is rising +.22% to 502.13 bps(still near the highest since Dec. 1995). The Western Europe Sovereign CDS Index is still approaching its all-time high. The TED spread continues to trend higher and is very near the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is very near the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is rising +9.2% to -103.50 bps, which is back to early-Nov. levels. The Libor-OIS spread is now at the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Overall, European credit gauges are still performing very poorly given that the European debt crisis “can-kicking” solution is supposedly at hand, which remains a large red flag. China Iron Ore Spot has plunged -23.6% since Sept. 7th of last year. Today’s gains are paced by many of last year’s worst performers(coal, steel, homebuilders and Banks) and there are few high-volume big-gainers for a 200+ DJIA day. Overall, today’s rally looks like many of the big headfakes over the last few months. For a sustainable equity advance into the new year, I would still expect to see meaningful European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. One of my longs, (GOOG), is breaking out technically to a multi-year high on volume. While the stock is extended short-term, I see substantial outperformance for the shares over the intermediate-term. I expect US stocks to trade mixed-to-lower into the close from current levels on Eurozone debt angst, global growth fears, rising energy prices, technical resistance, profit-taking and more shorting.

Today's Headlines

Bloomberg:

• Monti Prescribes 'Aspirin' for Debt Ache. Prime Minister Mario Monti is prescribing more “aspirin” to revive an Italian economy that’s probably in a recession and tackle almost half a trillion euros in debt sales after the worst year on record for Italian bonds. At a year-end press conference in Rome on Dec. 29, Monti pledged to ready measures to spur competition and growth in the euro region’s third-biggest economy before a meeting of European finance ministers on Jan. 23. The plan comes after he spent his first month in office enacting 30 billion euros ($39 billion) in austerity and growth measures aimed at taming Italy’s surging borrowing costs. “Monti has taken only one aspirin, now he needs to take two,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, said by phone. Still, “investors are underestimating Italian resolve and European resolve to keep Italy in the monetary union” as well as “the range of tools Italy still can have with a strong leadership,” he said. The key to the euro’s survival may lie with Italy, the region’s second-biggest debtor after Greece. The nation must repay about 130 billion euros in debt in the first quarter with its 10-year bond yield close to the 7 percent level that led Greece, Ireland and Portugal to seek bailouts. The $2.3 trillion economy probably entered a recession in the three months through December, its fourth since 2001, according to the government.
  
• Merkel Resumes Debt Crisis Fight as Scrutiny of German President Increases. Chancellor Angela Merkel returns from a two-week break to the front line of the debt crisis amid a clamor over the conduct of Germany’s president that threatens to damage her own standing and detract from her efforts to defend the euro. Merkel, whose last official engagement was on Dec. 20, will resume her public duties in two days with the public spotlight on President Christian Wulff over a loan from a friend’s wife to buy a house and vacations at the homes of business people. Scrutiny of the mainly ceremonial president intensified yesterday after Bild, Germany’s biggest-selling newspaper, said that the president had attempted to stop the editor from publishing the loan story last month. “The president is Merkel’s creation and if he’s forced to leave in such an ignominious way it would weaken her,” Jan Techau, director of the Brussels-based European center of the Carnegie Endowment for International Peace, said by phone.
• Weidmann Says ECB as Lender of Last Resort Would Be 'Wrong'. Bundesbank President Jens Weidmann said it would be “profoundly wrong” for the European Central Bank to become a lender of last resort and step up its purchases of government bonds to contain the fiscal crisis. “It may appear tempting from the point of view of highly- indebted states and the banks that hold their paper if central banks assume their role of lender of last resort,” Weidmann wrote in an opinion piece for Germany’s Boersen-Zeitung newspaper published today. “However, the Eurosystem would throw its principles overboard and ignore the existing legal framework. This would be the profoundly wrong way.”
• Hungary Borrowing Costs Jump to 2009 High; Bond Risk at Record. Hungary sold three-month Treasury bills at the highest yield since 2009 at its first debt auction after passing laws that diminished the country’s chance of obtaining international financial aid. The cost of contracts to protect the nation’s debt climbed to a record. The government raised 45 billion forint ($190 million), the full amount planned, according to data from the Debt Management Agency published on Bloomberg. The average yield increased to 7.67 percent, the highest for three-month notes since August 2009, climbing from 7.43 percent at the last sale a week ago. “The country’s financing will be impossible over the longer term at such high yields,” Balint Torok, an analyst at Buda-Cash Brokerhaz Zrt., said in a telephone interview. “Investor confidence in Hungary is deteriorating further as the government isn’t showing enough commitment to reaching a deal with the IMF and EU.” The cost of insuring Hungarian bonds using credit-default swaps climbed to 651 basis points from 635 basis points on Dec. 30, data provider CMA said. Declines in 10-year forint-denominated bonds lifted yields 27 basis points to 10.36 percent, the highest since June 2009, according to generic prices compiled by Bloomberg at 5 p.m. in Budapest. The spread over similar-maturity Polish debt rose to 447 basis points, the biggest gap since April 2009.
• U.S. Factories Grow as Manufacturing Improves. U.S. factories expanded in December at the fastest pace in six months, adding to evidence manufacturing is improving from India to the U.K. entering 2012. The Institute for Supply Management’s factory index climbed to 53.9 last month from 52.7 in November, the Tempe, Arizona- based group’s data showed today.
• Construction Spending in U.S. Climbs 1.2%. Construction spending in the U.S. rose in November for a third time in four months, indicating the industry helped boost growth at the end of 2011. Building outlays increased (CNSTTMOM) 1.2 percent, exceeding the median estimate of 46 economists in a Bloomberg survey that called for a 0.5 percent gain, Commerce Department figures showed today in Washington. The October reading was revised down to show a 0.2 percent drop from a previously projected 0.8 percent increase, showing the initial data are susceptible to swings in direction.
• China's Wen Sees 'Relatively Difficult' First Quarter as Exports Weaken. Chinese Premier Wen Jiabao said business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed. “We see downside pressure on our economy and elevated inflation at the same time,” Wen said during a two-day trip to Hunan province, according to a statement on the government’s website yesterday. “We also face problems of weakening external demand and rising costs for companies.” “With an expected deceleration in property investment and exports, we expect to see more weakness in industrial activity.” Nomura Holdings Inc. said last month that China’s economic expansion may decelerate to 7.5 percent in the three months through March from 9.1 percent in the third quarter, as export growth slows and the government’s campaign to check property prices damps investment. The government seeks to stabilize growth and consumer prices (CNCPIYOY) to “promote social harmony,” Wen said. China’s money supply has “structural issues” and one can’t simply say that there is too much or too little lending or sufficient or insufficient liquidity, Wen said. The government will tighten or loosen policies according to the needs of different industries, he said. “Priority will be given to key projects and projects under construction, and we will limit industries suffering from overcapacity, those that cause heavy pollution and are energy intensive,” Wen said, reiterating existing government policy.
• Hedge Funds Had Second-Worst Year in 2011, Eurekahedge Says. The Eurekahedge Hedge Fund Index was down 4.1 percent in 2011, the Singapore-based data provider said in an e-mailed statement. Total asset flows for the year amounted to $67 billion, bringing the entire industry size to $1.72 trillion, it said.
• Oil Increases on Global Manufacturing, Iran Concerns. Oil climbed to a six-week high after manufacturing in the U.S. and Asia expanded in December and as concern persisted that further sanctions against Iran may disrupt shipments. Crude oil for February delivery rose $3.37, or 3.4 percent, to $102.20 a barrel at 11:52 a.m. on the New York Mercantile Exchange. The contract touched $102.88, the highest level since Nov. 17. Futures climbed 8.2 percent in 2011, the third consecutive annual increase. Brent oil for February settlement advanced $3.37, or 3.1 percent, to $110.75 a barrel on the London-based ICE Futures Europe exchange.
• Gold Rises Most in 10 Weeks on Iran Nuclear Concern: Wien Predicts $1,800. Gold futures headed for the biggest gain in 10 weeks on increased demand from investors after reports that Iran produced its first nuclear fuel rod and as the dollar weakened. Silver also gained. A domestically-made rod was inserted into the core of Tehran’s atomic research reactor after performance tests, the Iranian Students News Agency reported yesterday. Blackstone Group LP’s Byron Wien, who had correctly predicted last year’s gain in gold, said bullion will rally 15 percent in 2012 to $1,800 an ounce. “Fear trade is back because of Iran,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Also, we are seeing buying across commodities because of the weaker dollar.” Gold futures for February delivery climbed 2.3 percent to $1,603.40 an ounce at 12:40 p.m. on the Comex in New York, heading for the biggest gain since Oct. 25. While prices rallied 10 percent last year, the 11th straight annual advance, the metal slumped 10 percent in December and touched $1,523.90 on Dec. 29, the lowest since July 7.
• WJB Capital Halts Brokerage Operations. WJB Capital Group Inc., a Wall Street firm with more than 100 employees, shut its brokerage operations amid “financial issues,” according to its main attorney. “A decision was made -- and I might say it was a very painful decision -- that it would terminate its broker-dealer operations, and it has done so,” Mark Skolnick, general counsel for the company at law firm Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow LLP, said today. The firm has some non- brokerage operations and is exploring “other possibilities,” he said. WJB Capital was “unable to resolve its financial issues in a manner that would have allowed it to continue its operations under the current economic climate and the constraints that would’ve been placed on the corporation and its investors,” Skolnick said.

Wall Street Journal:

• Live Blogging the Iowa Caucuses.
• Europe at the Brink - A WSJ Documentary. (video)
• French, Spanish Bond Yields Rise. French government bond yields rose Tuesday as dealers tried to make room for bond supply later this week, with worries over the country losing its coveted triple-A rating also keeping investors cautious. Spanish bonds also suffered after the new government signalled that the budget deficit in 2011 would be higher than previously estimated, spurring investors to book profits after a recent rally. Italian bond yields meanwhile eased with traders citing purchases by the European Central Bank, although the 10-year yield was still just shy of the psychologically crucial 7% mark that in the past toppled Greece, Ireland, and Portugal.
  

MarketWatch:

• Ten Trends for Hedge Fund Flows in 2012.
• Hedge Funds Like These Biotechs.
  

CNBC.com:

• Total Signs $2.3 Billion Shale Deal With Chesapeake(CHK). France's Total signed a $2.3 billion deal with Chesapeake Energy and EnerVest that will see it expand its position in lucrative shale oil and gas basins in the United States.
• Greek, Italian Cash Heads for Hills, or Underground. Greeks and Italians are taking their money and running, moving it abroad or even burying it underground for fear the euro zone crisis will topple banks and wipe out what remains of their savings.
• Euro Break-Up Biggest Threat in 2012: CFOs Survey.
  

Business Insider:

• A Major Conflict Is Stirring Behind The Scenes In North Korea.
• Fed Announces Major Changes In Communication Strategy.
• Jeff Gundlach: 5 Key Factors Every Investor Should Consider In 2012.
• Starbucks(SBUX) Is Hiking Prices On A Bunch Of Its Drinks To Deal With Rising Costs.
• Byron Wien's 10-Predictions For 2012.
• The 10 Biggest Risks The World Is Facing In 2012.
  

Zero Hedge:

• Exposing American Banks' Multi-Trillion Umbilical Cord With Europe.
• Would A Ponzi By Any Other Name Smell As Bad?
  

LA Times:

• Bank of America(BAC) Severing Some Small-Business Credit Lines. Bank of America is demanding that some small-business customers pay off their credit line balances all at once instead of making monthly payments. Bank of America Corp., under pressure to raise capital and cut risks, is severing lines of credit to some small-business owners who have used them to stay afloat. The Charlotte, N.C., bank is demanding that these customers pay off their credit line balances all at once instead of making monthly payments. If they can't pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had.
  

c/net:

• Hitwise: U.S. Google(GOOG)+ Traffic Leaps 55% in December.

Reuters:

• Exclusive: Pakistan Taliban Commanders "at each others throats". Al Qaeda, the Afghan Taliban and Pakistani militants have held a series of meetings aimed at containing what could soon be open warfare between the two most powerful Pakistani Taliban leaders, militant sources have said.

Financial Times:

• US and Europe Steel Prices Diverge Sharply. The $500bn-a-year steel market is one of the best barometers of the health of the manufacturing and construction sectors, and the rare split in transatlantic prices offers an insight into business sentiment in the US and Europe as companies prepare to report their annual results. The price of benchmark hot-rolled coil steel in the US Midwest rose to $756 a tonne in December, 12.5 per cent higher than in November, according to CRU, a leading consultancy. The price of the same type of steel in Germany dropped 7.8 per cent, while in Italy it fell 9.4 per cent. The difference between US and German steel prices is $128 a tonne, the largest gap since May 2008, the consultancy said. The split has averaged $20 a tonne over the past decade.

Telegraph:

• A Depressingly Familiar Story Of Denial From The Eurozone.
  

BBC:

• Greece Warns On Euro Exit If Bailout Not Signed. Greece may have to leave the eurozone if it fails to secure its latest bailout from the EU, IMF and banks, a government spokesperson has warned. "The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis told Skai TV. The government is struggling with public opposition to new austerity measures, demanded by lenders. Analysts suggest the warning is designed to win support for the moves.

Channelnewsasia:

• Singapore Could See 2 Years of Sub-Par Growth. Singapore's economy is expected to enter a phase of slower growth. Deputy Prime Minister Tharman Shanmugaratnam said this is due to the recession in Europe and economic weakness in the US. He added that the expected slowdown may last for at least two years.

Bear Radar

Style Underperformer:

• Small-Cap Growth (+.89%)

Sector Underperformers:

• 1) Utilities -2.10% 2) Hospitals -1.71% 3) Restaurants -.82%

Stocks Falling on Unusual Volume:

• WMB, ZUMZ, GCO, FE, BWLD, PNRA, ESI, NI, AVAV, MDRX, AVEO, TRMB, PANL, THRX, QCOR, IRBT, SPRD, LNCR, SNDK, CPRT, MCHP, WSM, NEE and MTN
  

Stocks With Unusual Put Option Activity:

• 1) SO 2) OCR 3) RY 4) VMC 5) EBAY
  

Stocks With Most Negative News Mentions:

• 1) SO 2) FTEK 3) PEG 4) NEE 5) CEG
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Value (+2.41%)

Sector Outperformers:

• 1) Coal +6.98% 2) Homebuilders +5.60% 3) Steel +4.41%

Stocks Rising on Unusual Volume:

• AIXG, C, BBL, BHP, BTM, SNP, PTR, BT, MAKO, RIMM, TEVA, BLT, IEO, SHG, TRIP, PHH, MJN, DVN, GCI and CHK
  

Stocks With Unusual Call Option Activity:

• 1) PAYX 2) KSS 3) SFLY 4) GILD 5) PANL
  

Stocks With Most Positive News Mentions:

• 1) WSO 2) CSCO 3) CYBX 4) CXW 5) FWLT
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Tuesday Watch

Weekend Headlines
Bloomberg:

• Euro Leaders Seek to Buy Time in Crisis as Debt Sales Loom. European leaders return to work this week seeking to buy time for the Spanish and Italian governments to wrest control over their debt and rescue the single currency from fragmentation in its 10th anniversary year. Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to work out details. “The road to overcoming this won’t be without setbacks, but at the end of this path Europe will emerge stronger from the crisis than before,” Merkel said in a New Year’s speech broadcast Dec. 31. Merkel, whose first official public appointment is on Jan. 5, reiterated that her government will do “everything” to bring the euro out of the slump. Ten years after euro bank notes replaced national currencies on Jan. 1, 2002, the euro has for the first time recorded two consecutive annual losses against the U.S. dollar while plunging to a record low against the yen. That raises the pressure on euro leaders as they struggle to hold the monetary union together in the face of credit downgrades, European Union splits and a looming recession that might compound rising debt.
• European, Brazilian Stocks Advance in First Session of 2012; Euro Weakens. European (SXXP) stocks rallied, following the Stoxx Europe 600 Index’s first annual loss since 2008, after manufacturing in Germany and China beat forecasts. French bonds fell before debt sales this week and the euro weakened. The Stoxx 600 closed up 1.1 percent as Germany’s DAX Index (DAX) surged 3 percent, the biggest gains since Dec. 20 for each. Brazil’s Bovespa (IBOV) index increased 1.9 percent as of 4 p.m. New York time. U.S., U.K. and other markets were closed today for the New Year’s holiday. French 10-year bonds fell for a fourth day, pushing yields nine basis points higher to 3.24 percent. The euro weakened against 13 of 16 major peers. Gold rose.
• Germany Says Greek Debt Talks Near End Amid Writedowns Report. Germany’s government declined to comment on a report that it may push for creditors to accept bigger losses on Greek debt than previously agreed upon, saying only that talks on lowering Greece’s debt level may end soon. Germany is studying a proposal to write down 75 percent of Greek government bonds held by private creditors as part of a planned debt swap to ensure greater debt sustainability, Greek news website Euro2day.gr reported today, without citing anyone.
• Bundesbank’s Weidmann Says Germany Must Continue Budget Efforts. The German government can’t let up in efforts to consolidate its finances as the country contributes to the stability of the euro area, Bundesbank President Jens Weidmann said. “The government’s consolidation pause in the new year isn’t convincing given the growth scenario it is based on,” Weidmann said in an interview with Tagesspiegel. “Germany has a very special responsibility as the stability anchor of the currency union. It is about quickly reaching a structural budget balancing.” Weidmann, who is a council member at the European Central Bank, said the last summit held by European Union leaders didn’t put the region on the path to a common fiscal policy. “It is certainly misleading to speak of fiscal union with the planned framework because national budget sovereignty remains,” the Berlin-based newspaper cited him as saying. The ECB must stick to its mandate of fighting inflation, the Bundesbank president said, the German newspaper reported. “The necessary pressure on politicians can only be maintained if the ECB limits itself to carrying out its compulsory task and doesn’t just step into the breach for fiscal policy,” he said. “We have to make it clear where our legal, but also our real limits, are.”
• Rescued Spain Banks Paid Directors $104 Million, Expansion Says. Seven Spanish savings banks that were bailed out with public money paid their directors almost 80 million euros ($104 million) in basic salaries this year, Expansion reported. Former International Monetary Fund head Rodrigo Rato was the highest paid, earning 2.34 million euros as chairman of Bankia SA, the newspaper said, citing Bank of Spain figures. Any bonus that Rato or the other executives earn on top of their salaries must be approved by the central bank, the Expansion reported. The lenders have received more than 17 billion euros of financing from the country’s rescue fund, Expansion said.
• Italians Must Make Sacrifices to Avoid Collapse, President Says. Italians will have to make sacrifices to avoid financial collapse and must keep faith in Europe, President Giorgio Napolitano said in a New Year’s speech. “Nobody, today -- no social group -- can stall on the commitment to contribute to the revival of public accounts to avoid the financial collapse of Italy,” Napolitano said in his televised speech late yesterday. “The sacrifices won’t be useless. Only united can we progress and count as Europeans in a radically changed world.”
• Iran to Boost Output at Oil Fields Run With Saudis, Times Says. Iran plans to boost output from oil fields it shares with Saudi Arabia, the Tehran Times said, citing Iran Offshore Oil Co. Managing Director Mahmoud Zirakchianzadeh. Iran plans to increase production at the Forouzan oilfield by 40 percent by March 20, 2013, and aims to sign a contract with international oil companies to develop its Esfandiar offshore oilfield, which it shares with Saudi Arabia, the newspaper cited Zirakchiyanzadeh as saying.
• Iran Says It Made Nuclear Fuel Rod, Offers to Resume Talks. Iran produced its first nuclear fuel rod, state-run news agencies reported, as the country offered to restart international talks over its atomic program. The domestically made rod was inserted into the core of Tehran’s atomic research reactor after performance tests, the Iranian Students News Agency reported, citing the country’s atomic energy agency.
  
• Gold, Silver Advance After Iran's First Nuclear Rod Spurs Haven Demand. Gold and silver gained after reports that Iran produced its first nuclear fuel rod, spurring investors to buy the precious metal as a haven. Gold futures for February delivery advanced 0.2 percent to $1,569.70 an ounce at 6:18 p.m. in New York. Silver futures for March delivery rose 0.5 percent to $28.005 an ounce on the Comex. Gold rose 10 percent last year, the 11th straight annual gain, and silver dropped 9.8 percent.
• Russian Crude Oil Production Rose to Post-Soviet High in 2011. Russian oil production rose 1.25 percent in 2011 to a record level for the post-Soviet era, as companies in the world’s largest crude-producing nation took advantage of higher prices and boosted output at new projects. Production grew to an average of 10.27 million barrels a day, according to preliminary data from the Energy Ministry’s CDU-TEK unit.
  
• Exxon(XOM) Gets 'Disappointing' $750 Million After Venezuela Seizure. Petroleos de Venezuela SA (PDVSA) must pay about $750 million to Exxon Mobil Corp. (XOM), a 10th of what the U.S. company is seeking, for assets nationalized by Venezuelan President Hugo Chavez in 2007, according to two people with knowledge of the case. The International Chamber of Commerce in New York, an arbitration court, gave a “favorable” ruling to Venezuela’s state oil company, a spokesman for PDVSA, as the Caracas-based company is known, said yesterday. The ICC awarded a total of $907.6 million to Exxon Mobil, company spokesman Patrick McGinn said today. The judgment was reduced to around $750 million after a counter claim in favor of PDVSA, the people, who declined to be identified because they’re not authorized to speak about the case publicly, said.
• Smallest S&P 500 Gain Since '05 Seen by Wall Street Strategists. Forecasters at securities firms are more conservative on U.S. stocks than any time in seven years, predicting the Standard & Poor’s 500 Index will rise 7.2 percent in 2012 as budget deficits around the world limit gains. The benchmark gauge will climb to 1,348 after it was virtually unchanged in 2011 and the U.S. beat every equity market in the developed world except Ireland, according to the average forecast of 12 strategists tracked by Bloomberg. That’s the smallest predicted return since 2005. Adam Parker of Morgan Stanley, whose estimate for 2011 proved the most accurate among current analysts, said Europe’s debt crisis will keep volatility above historical levels.
• World's Biggest Economies Face $7.6 Trillion Bond Tab as Rally Seen Fading. Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs. Led by Japan’s $3 trillion and the U.S.’s $2.8 trillion, the amount coming due for the Group of Seven nations and Brazil, Russia, India and China is up from $7.4 trillion at this time last year, according to data compiled by Bloomberg.
• Romney Leads in Iowa Poll as Santorum Gains Before State Caucus.
• After Tumult of 2011, Here Are Some Global Hotspots to Watch in 2012: View. Could the world in 2012 surprise us more than it did in 2011? Certainly, after Japan’s earthquake, the Middle East’s upheavals and Osama bin Laden’s death, the bar on shockers will be high. The known unknowns for 2012 already form a daunting list:
• Samsung, Hyundai Tell Workers to Brace for Economic Uncertainty. Samsung Electronics Co. and Hyundai Motor Co., South Korea’s largest companies, told employees to brace for intense competition in a weak global economy as the government called for contingency planning. “South Korea’s economy is facing increased uncertainties this year, and the global economy may rapidly deteriorate if the European debt crisis worsens,” Finance Minister Bahk Jae Wan said in a New Year statement released today. “Contingency plans to prevent contagion from Europe’s crisis should be strengthened.”
• BP(BP) Seeks Recovery of All Spill Damages, Costs From Halliburton(HAL). BP Plc seeks to have Halliburton Co., its cement contractor for the Macondo well project whose blowout set off the 2010 Gulf of Mexico oil spill, pay all of the oil company’s related costs and damages. BP had paid more than $21 billion in cleanup costs and economic damages to individuals, businesses and governments harmed by the spill as of Dec. 1, the company said on its website.

Wall Street Journal:

• Asia Manufacturing Picture Clouds. Manufacturing activity continued to contract in South Korea and Taiwan in December but grew in India, as the euro-zone sovereign debt crisis and the sluggish U.S. recovery hit Asia's export economies harder. Data Monday showed manufacturing contracting for a fifth straight month in South Korea and a seventh month in a row in Taiwan. That followed conflicting readings in recent days from China's two purchasing managers' indexes, with one showing continued contraction and one showing the merest of growth. "Downside risks are materializing" in Korea, HSBC economist Ronald Man said.
• Bridgewater Takes Grim View of 2012. Bridgewater Associates has made big money for investors in recent years by staying bearish on much of the global economy. As the new year rings in, the hedge fund firm has no plans to change that gloomy view. Robert Prince, co-chief investment officer at Bridgewater, and his managers at the world's biggest hedge fund firm are preparing for at least a decade of slow growth and high unemployment for the big developed economies. Mr. Prince describes those economies—the U.S. and Europe, in particular—as "zombies" and says they will remain that way until they work through their mountains of debt.
• Online Profits From Gambling in the Cards. Legal online gambling is coming to the Internet. And that could spell opportunity for big tech companies such as Facebook, Zynga, Apple(AAPL) and Google(GOOG). Last week, the U.S. Justice Department reversed its long-held opinion that most forms of online gambling were illegal. That will allow states to offer nonsports gambling on the Internet, with some limitations. First to go online will be lotteries. These already are a huge business, with $64.8 billion of annual U.S. sales in the year through June, according to the North American Association of State and Provincial Lotteries.
• Why Hedge Funds Tripped in a Volatile Year. Many of the hedge-fund managers who came into 2011 riding a wave of momentum ended the year scratching their heads and nursing losses, whipsawed by markets that seemed to punish them month after month.
• India Raises Iron Ore Export Tax. India has raised the export tax on iron ore, likely increasing local prices and also deepening a slump in shipments of the steelmaking material from the world's third-largest supplier. The government increased the tax to 30%, effective Dec. 30, 2011, from 20% on both iron-ore fines and lumps, according to an order posted on the Central Board of Excise and Customs website Monday. The tax rise will likely hurt India's export competitiveness. India sells iron ore mainly in the spot market to China, unlike Australia and Brazil, the top two iron-ore producers, which sell the commodity mostly through long-term contracts. Shipments from the South Asian country decreased 28% between April and November to 40 million tons, according to the Federation of Indian Mineral Industries. "Indian iron ore will no longer be competitive in the world market," said R.K. Sharma, the federation's secretary general. "This [export tax rise] will push the industry to the verge of dying."
• Arab World Diplomacy Fails to Stop Syria Clash. The Arab League conceded that outside observers have failed to halt the lethal violence in Syria's 10-month civil conflict, exposing pitfalls of the organization's self-reinvention as a regional diplomatic playmaker. Nabil Al Arabi, the secretary-general of the 22-member pan-Arab organization, acknowledged Monday that snipers persisted in major cities, although the league's monitors were often unable to identify their allegiance.
• Fragile Banks Remain Afloat. Ninety-two banks failed in 2011, well below the previous two years' totals. The list of what regulators call "problem banks" is shrinking. And the latest two bank failures were the first in nearly a month—the longest failure-free period in almost three years. So is the era of troubled banks over? Don't bet on it.

Fox News:

• ACLU, Others Slam Obama for Signing Defense Bill That Includes Detainee Provisions. (video) In a scathing statement, the head of the ACLU, and other leading civil liberties and human rights groups who were among President Obama's most ardent campaign supporters said the President's decision to sign a sprawling defense bill including controversial detainee provisions would tarnish his legacy.

CNBC:

• $6.3 Trillion Wiped Off Global Markets in 2011.
  

Business Insider:

• Here's Everything We Know About The iPad 3.
• You Can't Solve A Debt Crisis With More Debt by John Mauldin.
• Everyone Is Starting to Realize The Size Of Britain's Debt Crisis. (graphs)
• David Kotok: 2012 Is Shaping Up To Be A Good Year For Stocks.
• Merkel: 'Next Year Will No Doubt Be More Difficult Than 2011'.
• Like Hell Facebook Is Killing Google(GOOG).
  

Zero Hedge:

• Spain Releases Another Stunner: Deficit Could Be Greater Than 8% Of GDP.
• European Economy Contracts For Fifth Month In A Row. (graph)
  

Seeking Alpha:

• Apparel Stocks Most Loved By Hedge Funds.
• 7 Communications Equipment Companies Hedge Funds Love.
  

Rasmussen Reports:

• Partisan Trends: Number of Democrats Falls to All-Time Low. The number of Republicans in the country increased by a percentage point in December, while the number of Democrats fell back two points to the lowest level ever recorded by Rasmussen Reports. During December, 35.4% of Americans considered themselves Republicans. That’s up from 34.3% in November and just below the high for the year of 35.6% reached in May. At the same time, just 32.7% of adults said they were Democrats, down from 34.9% in November. The previous low for Democrats was 33.0% in August of this year.

Reuters:

• Greece Must Stick to Reforms in 2012 to Stay in Euro - PM. Greece faces another tough year in 2012 but must stick to its programme of austerity and reform to stay in the euro, Prime Minister Lucas Papademos said in a pre-recorded New Year's Eve address. "A very difficult year is ahead of us. We must continue our efforts with decisiveness, to stay in the euro, to make sure we do not waste the sacrifices and do not turn the crisis into an uncontrolled and disastrous bankruptcy," Papademos said, according to a transcript provided by his office. The Greek economy is set to contract for a fifth year in a row in 2012 with fresh record high rates of unemployment as it battles a debt crisis that has spread turmoil across the euro zone. Athens is struggling to agree with banks on a debt swap deal meant to slash its debt mountain, a key part of a second, 130 billion euro bailout package. Greece, which faces bond redemptions of 14.5 billion euros in March, needs to seal the deal to avert a costly default.
• Nigeria President declares state of emergency in some of north. President Goodluck Jonathan declared a state of emergency on Saturday on parts of northern Nigeria plagued by a by a violent Islamist insurgency, and said he would shut any borders with other nations in those areas covered by the decree. "I have in the exercise in the powers conferred on me ... declared a state of emergency in the following parts of the federation," Jonathan told state TV, before going on to list the northern local governments affected by the decree. "The temporary closure of our borders in the affected areas is only an interim measure designed to address the current security challenges and will be resumed as soon as normalcy is restored," he added, in a speech addressing deadly Christmas Day bombings by the Boko Haram sect a week ago.

Financial Times:

• Funding Gap Doubles For US Corporate Pensions. The funding gap for US corporate pension plans almost doubled in 2011 as bond yields dropped and stock market performance failed to keep up with rising liabilities, to leave a far greater hole than at the height of the financial crisis. From a moderate surplus at the end of 2007, pension plan assets at S&P 500 companies now cover only about 74 per cent of estimated liabilities, calculates Credit Suisse, a deficit of roughly $450bn.

The Telegraph:

• Eurozone is Closer to Break-Up, Warns Standard Chartered's Peter Sands. The chief executive of Standard Chartered has warned that there is an increasing likelihood of a country falling out of the eurozone because of the inability of politicians to resolve the crisis. The head of one of Britain's "Big Five" banks warned that any break-up of the single currency would have dire consequences for the global economy because it would be difficult to judge how the contagion would unravel.
• Chinese President Hu Jintao Warns of Cultural Warfare from West. The West is using cultural warfare to divide China, Chinese President Hu Jintao warned the Communist Party on Monday. "Hostile international powers are strengthening their efforts to Westernise and divide us," Mr Hu wrote in the latest edition of Communist Party's magazine, Seeking the Truth. "We must be aware of the seriousness and complexity of the struggles and take powerful measures to prevent and deal with them," he warned in his article. Mr Hu was writing in the revolutionary magazine used by Chairman Mao to spread his ideology after it was launched in 1958.
• Half of Absolute Return Funds Fail to Turn a Profit. They are meant to make money come what may. The reality is different.
• Ambrose Evans-Pritchard: 2012 Could Be The Year Germany Lets The Euro Die.
  

MailOnline:

• Eurozone Collapse 'to start this year' With 99% Chance of Break-Up in Next Decade, Says Think Tank. The stricken eurozone will start disintegrating this year and will almost certainly collapse within the next decade, a think tank warned today. At least one country will quit before the end of the year and there is a 99 per cent chance of a break-up in the next ten years, forecasters at the Centre For Economics And Business Research (CEBR) claimed. They added that 'it now looks as though 2012 will be the year when the euro starts to break up'. Professor Douglas McWilliams, chief executive of the CEBR, said: 'It is not a done deal yet - we are only forecasting a 60 per cent probability - but one forecast is that by the end of the year at least one country, and probably more, will leave.' He warned that Britain could already be in a recession and that economic growth is likely to fall in the last quarter of 2011 and the first quarter of 2012. Greece is 'pretty certain' to leave the euro and Italy will likely do the same, Mr McWilliams said. He added: ‘I would expect to see most of the French and German banking systems bailed out to compensate for the write-downs on their sovereign debts. ‘They might even be nationalised as well. Many other European banks will go back into crisis.’ The bleak outlook comes a day after German chancellor Angela Merkel and French president Nicolas Sarkozy both issued grave New Year warnings on the worsening plight of the stricken eurozone.

The Guardian:

• The NDAA's Historic Assault on American Liberty. Do believe the hype, says Professor Turley: the NDAA, signed into law by President Obama on 31 December, authorises the US military to detain citizens indefinitely without trial. President Barack Obama rang in the New Year by signing the NDAA law with its provision allowing him to indefinitely detain citizens. It was a symbolic moment, to say the least. With Americans distracted with drinking and celebrating, Obama signed one of the greatest rollbacks of civil liberties in the history of our country … and citizens partied in unwitting bliss into the New Year. Ironically, in addition to breaking his promise not to sign the law, Obama broke his promise on signing statements and attached a statement that he really does not want to detain citizens indefinitely (see the text of the statement here).

BBC:

• Recession 'to return' to Europe, Say Economists. The vast majority of leading economists polled by the BBC believe recession will return to Europe next year. One fifth said the eurozone would not exist in its current 17-member form, while the majority put the possibility of a eurozone break-up at 30%-40%. The poll also found that most economists expect UK interest rates to remain at 0.5% throughout next year. It was conducted among 34 UK and European economists who are regularly surveyed by the Bank of England. Of the 27 who responded, 25 forecast recession for Europe next year.

Der Spiegel:

• Germany's federal government will almost double new debt to about $45 billion next year. The increase is because of payments toward Europe's permanent bailout fund, known as the European Stability Mechanism, the magazine said.
  

Het Financieele Dagblad:

• Nout Wellink, a former member of the European Central Bank's governing council, said euro-region countries may have to partly write down their loans to Greece, citing an interview. "The balance between the public and private sector changed in such a way that if writedowns really take place, it's almost unthinkable that the government can escape it," Wellink, the former president of the Dutch central bank, was cited as saying. Wellink questioned whether a writedown of 50% of Greek debt held by banks is sufficient.
• The ECB's offer to banks of unlimited loans for as much as 3 years is is a measure that goes too far, citing Nout Wellink, a former member of the ECB governing council. The possible use of those loans by banks to finance state debt is very risky, citing Wellink.
  

ABC:

• Spain's government authorized the issue of guarantees of $129.5 billion for bond sales by banks, citing the official gazette.
  

Straits Times:

• Singapore Economy Shrank 6% Last Quarter, Experts Estimate. Economists estimate that Singapore's economy may have shrunk about 6 per cent in the fourth quarter of last year, compared with the third quarter, as the global slowdown took its toll. This is based on Prime Minister Lee Hsien Loong's statement on Saturday that full-year growth last year came in at 4.8 per cent, slightly weaker than the expected 5 per cent expansion.

Herald Sun:

• North Korean Army to Act as 'Human Bombs'. NORTH Korea has told its military to become "human rifles and bombs" to defend new leader Kim Jong-Un. The country vowed an all-out push for prosperity, in a New Year message setting out policy goals yesterday. "The entire army should place absolute trust in and follow Kim Jong-Un and become human rifles and bombs to defend him unto death..." an editorial in official newspapers said, a day after the late leader's young son was proclaimed supreme military commander. Jong-Un visited a tank division on New Year's Day, the state KCNA news agency said, accompanied by his influential uncle Jang Song-Thaek, military chief Ri Yong-Ho and other military leaders. "The whole party, the entire army and all the people should possess a firm conviction that they will become human bulwarks and human shields in defending Kim Jong-Un unto death, and follow the great party for ever," the editorial said.

South China Morning Post:

• Hong Kong Property Sales Down by a Third Last Year. Property sales in Hong Kong fell by 33 per cent to just 108,504 deals last year as concerns over the economy and government moves to curb speculation soured buyer sentiment, property agents said.

Xinhua:

• China faces downward pressure on demand in 2012, while the pressure from price increase "continues to be large," Zhang Ping, chairman of the National Development and Reform Commission, was cited as saying.
• China's economic progress was "good overall" in 2011 and the country will maintain last year's economic policies in 2012, citing a leading economic official. The country will keep its macro-economic policies as long as there's no major change in the "domestic and international economic situation," citing Yang Weimin, vice chairman of the Office of the Central Leading Group on Financial and Economic Affairs.
• Chinese Shipbuilding Orders Fall 47% on Slowdown. Chinese shipbuilding orders fell last year as global economic growth slowed, citing data from the National Development and Reform Commission. New orders dropped 47% to 33.69 million deadweight tonnes from January to November.
  

21st Century Business Herald:

• China may let the three biggest state-owned refiners set oil product prices instead of the government, to improve the pricing mechanism, citing people involved in formulating the plan.
  

Riyadh:

• Saudi Arabia will ship crude from its ports on the Red Sea if the Strait of Hormuz is blocked, citing an official. The official said that he doesn't expect a blockade of the strait.
  

Press TV:

• Iran doesn't intend to disrupt shipping in the Strait of Hormuz, citing Deputy Navy Commander Rear Admiral Mahmoud Mousavi.
  

Weekend Recommendations

Barron's:

• Made positive comments on (PCAR).
• Made negative comments on (MO).
  

Night Trading

• Asian indices are +.75% to +2.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 203.50 -1.0 bp.
• Asia Pacific Sovereign CDS Index 162.0 -2.0 bps.
• FTSE-100 futures +1.60%.
  
• S&P 500 futures n/a.
• NASDAQ 100 futures n/a.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PRGS)/.33

Economic Releases
10:00 am EST

• Construction Spending for November is estimated to rise +.4% versus a +.8% gain in October.
• ISM Manufacturing for December is estimated to rise to 53.4 versus 52.7 in November.
• ISM Prices Paid for December is estimated to rise to 48.0 versus 45.0 in November.

2:00 pm EST

• Minutes of FOMC Meeting.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• None of note
  

BOTTOM LINE: Asian indices are higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Weekly Preview by CNBC.
Stocks to Watch Tuesday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as better US economic data, short-covering and lower food/energy prices offsets rising global growth fears, technical selling and Eurozone debt angst. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.