Stocks Rising into Final Hour on Less Tech Sector Pessimism, Short-Covering, Better US Economic Data, China Easing Hopes

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 21.19 +1.34%
  
• ISE Sentiment Index 147.0 +65.17%
  
• Total Put/Call .78 +8.33%
  
• NYSE Arms 1.03 -32.97%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 113.31 -2.43%
  
• European Financial Sector CDS Index 228.08 -6.95%
  
• Western Europe Sovereign Debt CDS Index 373.67 -.45%
  
• Emerging Market CDS Index 308.80 -.36%
  
• 2-Year Swap Spread 34.0 -2 bps
  
• TED Spread 54.0 -1 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -83.0 +3 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.
  
• Yield Curve 163.0 -1 bp
  
• China Import Iron Ore Spot $140.20/Metric Tonne -.21%
  
• Citi US Economic Surprise Index 68.90 -3.5 points
  
• 10-Year TIPS Spread 2.03 +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +19 open in Japan
• DAX Futures: Indicating -17 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech, Retail, Biotech and Medical sector longs
  
• Disclosed Trades: Covered some of my (IWM), (QQQ) hedges and some of my (EEM) short, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 builds on recent gains, but trades at session lows near its late-Oct. high, despite financial sector pessimism, some earnings disappointments, rising global growth fears and rising energy prices. On the positive side, Oil Tanker, Semi, HMO, Energy and Alt Energy shares are especially strong, rising more than +1.25%. Tech shares have outperformed throughout the day. Copper is jumping +2.4%. Major European indices rose around +1.0% today. As well, the Bloomberg European Bank/Financial Services Index was +.96% higher on the day. Major Asian indices surged about +1.75% overnight. While China’s ChiNext Index(China’s Nasdaq) rose +4.5% last night, it has still plunged -28.04% since Nov. 15th of last year and is down -9.2% ytd. The Germany sovereign cds is falling -2.2% to 101.67 bps, the France sovereign cds is down -3.88% to 209.33 bps, the UK sovereign cds is down -2.87% to 90.33 bps and the Israel sovereign cds is down -2.82% to 205.67 bps. The Italian/German 10Y Yield Spread is falling -2.92% to 471.06 bps, which is an improvement, but still near the highest since Dec. 1995. On the negative side, Coal, Disk Drive, Bank and I-Bank shares are under meaningful pressure, falling more than -1.25%. As well, the Transports are lower on the day. Oil is gaining +1.5%, Gold is rising +.74% and Lumber is falling -1.55%. Lumber has declined -11.4% since Dec. 29th and is at the lower end of its recent range, near a multi-year low, despite better US economic data, improving sentiment towards homebuilders, stock rally and decline in eurozone debt angst. The 10Y T-Note Yield is falling -2 bps to 1.85%, despite today's stock rally and the recent improvement in economic data. The Portugal sovereign cds is rising another +1.2% to 1,198.0 bps(up +9.9% in 5 days and very near new record high). The Western Europe Sovereign CDS Index is still very near its Jan. 9th all-time high. The TED spread is near the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is near the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is rising +3.42% to -82.58 bps, which is back to mid-Sept. levels. The Libor-OIS spread is still very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Overall, while improving, European credit gauges are still at stressed levels despite the fact that the European debt crisis “can-kicking” solution is supposedly at hand. China Iron Ore Spot has plunged -22.5% since Sept. 7th of last year. Shanghai Copper Inventories are up +124.8% in 5 days to the highest level since April of last year. Action in the 10Y T-Note is especially concerning. The yield never broke out during the big equity rally off the lows/improving economic data and is now close to a technical breakdown. I think overall equity investor complacency regarding the health of the global economy is still fairly high. The market still has a "tired" feel, despite recent gains. For a sustainable equity advance from current levels, I would still expect to see further 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. However, a convincingly break above the late-Oct. S&P 500 high would likely lead to further short-term gains. I expect US stocks to trade mixed-to-lower into the close on Eurozone debt angst, rising global growth fears, more shorting, earnings jitters, financial sector pessimism, technical resistance and profit-taking.

Bear Radar

Style Underperformer:

• Large-Cap Value (+.37%)

Sector Underperformers:

• 1) Disk Drives -.70% 2) I-Banks -.35% 3) Coal -.34%

Stocks Falling on Unusual Volume:

• C, RRD, ACHN, CCL, RCL, KGC, CUK, IAG, JPM, PM, ERF, IVN, UPL, OPNT, PEGA, SAVE, BWLD, SPRD, JDAS, HTWR, PTEN, REGN, CME, SXCI, EDU and TE
  

Stocks With Unusual Put Option Activity:

• 1) CCL 2) RCL 3) RRD 4) AKS 5) PBI
  

Stocks With Most Negative News Mentions:

• 1) MTH 2) RYL 3) ANR 4) CCL 5) JBLU
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.93%

Sector Outperformers:

• 1) Oil Tankers +2.19% 2) Alt Energy +2.09% 3) HMOs +1.77%

Stocks Rising on Unusual Volume:

• CHKP, SWC, CCJ, QSII, IMO, BVSN, TSLA, SHLD, MNST, WFM, VQ, NTL, TTM, CIE, SEE, KMT and MCP
  

Stocks With Unusual Call Option Activity:

• 1) CCL 2) CME 3) INHX 4) AMRN 5) CHKP
  

Stocks With Most Positive News Mentions:

• 1) CMOS 2) LRCX 3) WYNN 4) CSC 5) BA
  

Charts:

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

Tuesday Watch

Weekend Headlines
Bloomberg:

• Leaders Race to Salvage Euro Rescue As Plans Rebuked by S&P Rating Downgrades. European leaders will this week try to rescue under-fire efforts to deliver new fiscal rules and cut Greece’s debt burden as investors ignore Standard & Poor’s euro- region downgrades. Greek officials will reconvene with creditors on Jan. 18 after discussions stalled last week and governments elsewhere are preparing for a Jan. 30 summit as the European Central Bank warns against “watering down” a revamp of budget laws. French borrowing costs fell today as the government in Paris sold 8.59 billion euros ($10.9 billion) in debt. The talks on Greece and budgets may serve as tougher tests of the tentative recovery in investor sentiment than S&P’s decision to cut the ratings of nine euro-region nations, including France. History suggests fallout from the downgrades may be limited. JPMorgan Chase & Co research shows that 10-year yields for the nine sovereigns that lost their AAA status between 1998 and last year’s U.S. downgrade rose an average of two basis points the next week. Efforts to toughen budget laws and make Greek debt more sustainable “deserve far more attention than these rating changes, which as usual are lagging fundamental developments,” Joachim Fels, chief global economist at Morgan Stanley in London, said in a note to clients yesterday.
• Europe Bailout Fund Loses Top Rating at S&P. The European Financial Stability Facility, the euro area’s bailout fund, lost its top credit rating at Standard & Poor’s after earlier downgrades of France and Austria. The rating was cut to AA+ from AAA, S&P said yesterday in a statement and removed the facility from CreditWatch with negative implications. S&P had said on Dec. 6 that the loss of an AAA rating by any of EFSF’s guarantors may lead to a downgrade. “The EFSF’s obligations are no longer fully supported either by guarantees from EFSF members rated AAA by S&P, or by AAA rated securities,” the rating company said. “Credit enhancements sufficient to offset what we view as the reduced creditworthiness of guarantors are currently not in place.” The EFSF, designed to fund rescue packages for Greece, Ireland and Portugal partially with bond sales, owed its AAA rating to guarantees from its sponsoring nations. Two of those sovereigns, France and Austria, were cut on Jan. 13 to AA+ from AAA by S&P, which also downgraded seven other euro countries.
• Euro Decoupling as Draghi Rate Cuts Fail to Restore Correlation Confidence. The euro is losing the relationship with riskier assets that underpinned the currency in 2011 as the deepening sovereign debt crisis reduces the creditworthiness of even the biggest economies in the region. The 17-nation currency has fallen 8.6 percent against the dollar since October, while the Standard & Poor’s 500 Index has gained 2.4 percent, and the correlation between the two dropped to 58 percent from a record 91 percent in November, according to data compiled by Bloomberg. The euro had moved almost in lockstep with investments linked to growth, including stocks and the Australian dollar, since January 2011. This decoupling is taking place as European Central Bank President Mario Draghi cuts interest rates and promises banks unlimited cash for three years to rein in soaring borrowing costs for governments ranging from Italy to Spain to France, which lost its AAA credit rating last week.
• Carnival(CCL) CEO Arison Oversees Response to "Tragic" Italy Cruise from Miami. Carnival Corp. (CCL)’s Micky Arison, who built his company to almost $16 billion in annual revenue as he helped popularize cruise-ship vacations, must now deal with the fallout from the worst accident in the company’s history. Arison is chairman and chief executive officer of Carnival, owner of the Costa Concordia cruise ship that ran aground off the coast of Italy Jan. 13 and left at least six dead with 29 missing. Company officials have joined local authorities in blaming the captain for getting too close to the island of Giglio in the Tyrrhenian Sea.
• Portugal to Test Market With Longest Maturity Sale Since Financial Rescue. Portugal will test the markets’ appetite for debt tomorrow when the country auctions the longest maturity bills since it sought a rescue last year. Investors will be asked to bid for 11-month Portuguese bills with 10-year yields hovering at a record high. The rise in rates followed the Jan. 13 decision by Standard & Poor’s to cut Portugal’s credit rating to non-investment grade, or junk, meaning the nation’s debt can no longer be held by some index- tracking funds.
• German Exit From Euro Is an Option, Linde's CEO Reitzle Tells Der Spiegel. Germany should leave the euro currency zone if the so-called crisis countries fail to carry out reforms to reduce their debt burden, Der Spiegel said, citing an interview with Linde AG (LIN) Chief Executive Officer Wolfgang Reitzle. While an exit would lead to higher unemployment in the short-term, it would increase competitiveness in the longer term, putting Germany on a par with Asian competitors within five years, Reitzle told Spiegel, adding the move was not his preferred option. A Europe-wide recession lasting several years would see Linde’s annual revenue at 9 billion euros ($11.4 billion) rather than 13 billion euros and its main markets would be in Asia, Reitzle told the magazine.
• China Stocks Decline Most in a Month on Europe, Economy Concerns. China's stocks fell, dragging the benchmark index down the most in a month, after Standard & Poor's cut the ratings of nine euro-region nations and before the release of economic data tomorrow. China Cosco Holdings Co., the world's largest operator of dry-bulk ships, paced losses by trade-related companies. Jiangxi Copper Co., China's biggest producer of the metal, dropped 3.5 percent and PetroChina Co. slipped 1.1 percent after commodity prices retreated. Liquor maker Wuliangye Yibin Co. slid after the Xinhua News Agency said some of its products failed tests. “The sovereign rating cuts in Europe will increase the borrowing costs of those countries and hamper their economic growth,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “Tomorrow will show not-so-good economic data with GDP slowing, and that may indicate first- quarter figures will get uglier.” The Shanghai Composite Index dropped 38.39 points, or 1.7 percent, to 2,206.19 at the close, capping a four-day, 3.5 percent decline. The CSI 300 Index slid 2 percent to 2,345.55. China's inflation may rebound because of rising wages, land costs and “imported” inflationary pressure, Ma Jiantang, head of the National Bureau of Statistics, wrote in a commentary published in Qiushi magazine. Shipping companies fell. China Cosco declined 2.2 percent to 4.38 yuan. China Shipping Container Lines Co., the country's second-largest carrier of sea-cargo boxes, dropped 3.5 percent to 2.48 yuan, the biggest retreat since Nov. 30. Concerns over global growth also dragged commodity producers lower as metal and oil prices declined. Jiangxi Copper slid 3.5 percent to 22.61 yuan. Yunnan Copper Industry Co., China's fourth-biggest producer of the metal, eased 2.9 percent to 16.25 yuan. PetroChina, the nation's largest oil company, sank 1.1 percent to 10.09 yuan, the biggest decline in three weeks.
• China Home Sales Rise at Slowest Pace in Three Years on Curbs. China’s 2011 home sales rose at the slowest pace in three years after the country extended measures and added home-purchase restrictions to control the risks of a property bubble. Housing transactions climbed 10 percent to 4.86 trillion yuan ($770 billion), according to the National Bureau of Statistics today. Transactions in December totaled 803.8 billion yuan. “The property industry visibly slowed down quickly in the fourth quarter,” said Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd., who expects the data to worsen in the next two quarters because “developers are already short of capital.”
• Goldman(GS) Shifts to 'Should We Do This' Model, Telegraph Reports. Goldman Sachs Group Inc. (GS) is moving to a “should we do this” model of banking from a creed of “can we do this,” President and Chief Operating Officer Gary Cohn said in an interview with the Sunday Telegraph. “We were the best firm in the world at analyzing ‘can we do something,’” Cohn said in the interview. “We didn’t have as many checkpoints on ‘should we do something.’” “My whole world now is ‘should we do something,’” said Cohn, according to the newspaper. “Those are very difficult issues.”
• Saudi Arabia Can Make Up for Iranian Crude Oil Losses, CNN Says. Saudi Arabia can make up for any loss of crude production if sanctions are placed on Iran, CNN said, citing the country’s oil minister Ali al-Naimi. “I believe we can easily get up to 11.4, 11.8 almost immediately, in a few days,” al-Naimi said in an interview with CNN today. Saudi Arabia has the capacity to produce 12.5 million barrels a day “and we are idling now between 9.4 and 9.8, so we have substantial spare capacity,” he said. “Our wish and hope is we can stabilize this oil price and keep it at a level around $100,” al-Naimi said, when asked about the outlook for 2012 amid tensions in the Persian Gulf. al-Naimi said he doesn’t expect the Strait of Hormuz to be shut for an extended length of time.
• Suezmax Tankers Poised for Worst Yearn in Decade on U.S. Crude: Freight. Suezmaxes, hauling about 1 million barrels of oil, are poised for their worst year in more than a decade as the biggest contraction in U.S. East Coast refining in at least 20 years means less cargo on their largest trade route. The ships, about 50 percent of the size of supertankers, will earn $15,188 a day this year, 12 percent less than in 2011 and the lowest since at least 1997, according to the median of 10 analyst estimates compiled by Bloomberg. Investors may profit from that prediction by selling forward freight agreements, traded by brokers and used to bet on future transport costs, which are anticipating an average of $17,088, according to data from London-based Marex Spectron Group Ltd., which handles the contracts. Rates are dropping for a second year as a capacity glut is compounded by declining demand on the industry’s busiest route. East Coast refineries, which rely on West African oil, are closing at the fastest pace since at least 1992 because they can’t compete with Midwest rivals using cheaper domestic crude, data compiled by Bloomberg Industries show.
• Commodities Face 'Twin Macro Risks' in Europe, China, Morgan Stanley(MS) Says. Commodity markets face the “twin macro risks” of a European recession and a hard landing in China this year, according to Morgan Stanley. The recovery in the value of the U.S. dollar provides additional headwind for the asset class, the bank’s analysts wrote in a report today.

Wall Street Journal:

• S&P: Policy Response Has Not Kept Up With Challenges. The euro zone's policy response to its debt crisis has been largely misguided and is building up future risks, Standard & Poor's analysts said in a conference call Saturday. The call follows a wide-ranging action Friday by S&P which included downgrades of over the half of the currency bloc's 17 sovereigns. "The proper diagnosis would have to give more weight to the...rising imbalances in the euro zone," said Moritz Kramer, head of European sovereign ratings, pointing to issues such as divergences in competitiveness from one country to another, reflected in huge imbalances in national current accounts. Kramer said the centerpiece of December's summit, the adoption of tighter fiscal rules to avoid excessive deficits "wouldn't have identified the risks" in advance, as Germany had one of the largest budget deficits of all during the first 10 years of the euro's existence, whereas Spain had a largely balanced budget. He noted that, although the debt loads of countries such as Spain and Italy "would be manageable under normal circumstances," the current high refinancing needs of both countries make this very difficult. He noted that Italy alone has to refinance more than EUR130 billion of debt between February and April.
• U.S. Warns Israel on Strike. U.S. defense leaders are increasingly concerned that Israel is preparing to take military action against Iran, over U.S. objections, and have stepped up contingency planning to safeguard U.S. facilities in the region in case of a conflict. President Barack Obama, Defense Secretary Leon Panetta and other top officials have delivered a string of private messages to Israeli leaders warning about the dire consequences of a strike.
• GOP Race Intensifies. The tone of the Republican presidential race sharpened Monday, as the field narrowed and the remaining candidates faced off in a feisty debate ahead of South Carolina's primary Saturday, in perhaps their last chance to slow front-runner Mitt Romney.
• German Lawmaker Calls For New Bill To Reduce Rating Agencies' Influence. The credit downgrades from Standard & Poor's Ratings Services must prompt lawmakers to introduce a bill that reduces banks and insurers' dependence on rating agencies' assessments, a senior lawmaker of Chancellor Angela Merkel's conservative party said Saturday.
• Kostin Sees Pain for Russian Banks. The credit profile of Russian companies has weakened as a result of Europe's debt crisis and economic slowdown, and Moscow's banking system will need extra capital and crisis-time loans from the central bank this year, the head of Russia's second-biggest bank and a close ally of Prime Minister Vladimir Putin says. Western European banks that normally fund Russian lenders have already reduced their exposure to Russia, and some have even removed billions of dollars from the country via their local units. At the same time, Russian companies that do business in the European Union, Moscow's biggest trade partner, are seeing less demand for their exports, which is expected to pull down their pre-tax earnings. Nevertheless, even if commodity prices slide steeply in 2012, Russian companies won't be in as much trouble as in 2008, says VTB Group Chief Executive Andrei Kostin.
• UK's Osborne: Must Ensure IMF Is Properly Resourced. The risks faced by the global economy have increased significantly over the past year, and the capacity of the International Monetary Fund may also need to rise to ensure they can be addressed, U.K. Chancellor of the Exchequer George Osborne said Monday. "Britain stands ready to play its part," he said, according to the advance text of a wide-ranging speech to the Asia Financial Forum in Hong Kong. In the prepared remarks, he also touched on the strength of Asian economies, the need for free trade and properly regulated global financial markets.
• Plosser: Fed Tightening Possible Before Mid-2013. The Federal Reserve may have to tighten monetary policy before many now expect, a central bank official said in a speech Wednesday that also said the U.S. economy will do better in 2012 amid improved labor markets. "I believe economic conditions may require the Fed to raise rates before mid-2013," Federal Reserve Bank of Philadelphia President Charles Plosser said in Rochester, N.Y.
• The Risks in ECB's Crisis Moves. The European Central Bank's increasingly swollen balance sheet has helped bring a measure of calm to volatile markets, but some believe it could itself become a problem and bring more volatility to the 17-nation currency bloc. Nearly a year of anticrisis-lending measures have sent the ECB's books to a record €2.73 trillion ($3.46 trillion), some 29% of the euro zone's gross domestic product, its highest percentage ever.
• Japan DPJ Tax Chief Urges Tax Increase. The Japanese ruling party's tax guru warned Monday that credit rating companies could downgrade the nation's public debt at any time if the government fails to demonstrate fiscal responsibility by doubling its national sales tax to finance ballooning social security costs. Unless the country shows that it's serious about reining in its public debt, there will be a credit-rating downgrade "right before our eyes," said Hirohisa Fujii, former finance minister and Democratic Party of Japan tax policy chief.
• Ratos CEO: Has Contingency Plans For Euro Collapse. Swedish private equity company Ratos AB (RATO-B.SK) has several contingency plans to protect it against a possible euro collapse, which Chief Executive Arne Karlsson said is more likely now than it was at the beginning of last year. Karlsson, a long-time euro critic, told Dow Jones Newswires: "At the beginning of 2011 I said there was a 65% chance that the euro would be saved. Today, I'd say it is only 45% likely it will survive."
• U.S. Steps Up S&P Inquiry. Federal prosecutors are stepping up their probe of Standard & Poor's financial crisis-era ratings of troubled mortgage securities, according to former analysts questioned by prosecutors and another person familiar with the situation. The probe is focusing on whether the firm's managers ignored its own standards when assessing the mortgage products in an effort to cater to banking clients eager to sell the securities, according to the former S&P analysts.
• MF Global Probe Focuses on Back Office. Investigators on the hunt for an estimated $1.2 billion in customer money missing since MF Global Holdings Ltd. collapsed are zeroing in on the securities firm's back-office operations in Chicago, people familiar with the situation said. One back-office employee has told people she disputes congressional testimony by Jon S. Corzine, MF Global's former chairman and chief executive, that she provided assurance that a $200 million transfer was proper, according to people familiar with the matter.
• European Banks Seeking Capital Ideas. With a deadline looming to submit plans showing how they will satisfy new capital requirements, European banks are taking unorthodox steps to boost their cash buffers—but the steps do little to fundamentally strengthen their shaky finances.
• Bonuses Are Sinking at Morgan Stanley(MS). Responding to a difficult environment for Wall Street, Morgan Stanley plans to tell employees this week that bonuses will drop sharply, with cash payouts capped at $125,000, according to people familiar with the matter. Some top executives will receive nothing now, deferring their 2011 payouts until the end of this year.

Business Insider:

• The Rise of Dark Inventory In Housing and Oil. Today’s prices are set by bets on expectations of tomorrow’s prices, and these expectations in turn are manipulated by parties that have a vested interest in making investors - and the general public - think a certain expectation is realistic; all it takes is to make that expectation sufficiently opaque, to make sure investors have access to far less information than the parties that deal and/or hold the derivative instruments. That's all it takes to create, out of thin air, a whole new generation of suckers and greater fools. This creates a tremendous cognitive dissonance, a picture of the world that is entirely delusional. And that, of course, can and will not last. Even if a majority of people still wishes to think that it can. What do they know about what's going on behind the curtain? Hardly anything at all. And then they wake up.
• A Look at How Health Reform Is Driving Doctors Out of Business.
  

Zero Hedge:

• Just Say Nein - Bundesbank On European QE: "Abandon The Idea Once And For All"
• The Rise Of Activist Sovereign Hedge Funds, The "Subordination" Spectre, And The Real "Coercive" Restructuring Threat.

CNBC:

• European Hedge Funds Line Up Bets on China Downturn. European hedge fund managers are betting that China's once red hot economic growth will cool dramatically in 2012, hitting companies, economies and commodity prices that have been fuelled by the world's second largest economy in recent years. Managers are taking bets ranging from short positions on equity markets or the currency to buying credit protection on companies that export to China. Others are shorting natural resources stocks in other countries that rely on Chinese demand. "China is an inflated castle in the air," said Pedro de Noronha, managing partner at London-based hedge fund firm Noster Capital, who is using futures to short Chinese H-shares and is also holding a short position on the yuan. "We're quite skeptical and worried," he added. "China needs a healthy U.S. ... consumer and it's not getting it right now.... China could be a catalyst for a severe leg-down in markets," he said. He also cited recent cases of fraud in China and the country's booming real estate sector as issues. "Corporate governance and the rule of law is very different from the West," he said. "(And) there's a huge bad loans issue in banks. The real estate market is probably in the biggest bubble in the world we have right now."
• China GDP Growth at 2 1/2 Year Low but Tops Forecast. China's economy grew at its weakest pace in 2-1/2 years in the latest quarter and it appeared headed for an even sharper slowdown in the coming months as export demand fades and the housing market falters.
• Is Apple(AAPL) Set to Revolutionize the Textbook Industry?
• Better Times, Bigger Crowds at NRF Conference. Bigger crowds at this year's National Retail Federation conference are a tangible sign of last year's solid growth in the retail industry. About 24,000 people are attending the conference in New York this year, the most in its history. Heading into this year, NRF expects growth to slow somewhat, but the industry still expects to outpace the growth of the overall economy. Last year, retail sales rose 4.7 percent and the group anticipates this year sales will rise 3.4 percent to $2.53 trillion. Meanwhile gross domestic product is expected to increase between 2.1 percent and 2.4 percent, according to the average forecasts from economists.

Wall Street All-Stars:

• Have Big Companies Lost Their Earnings Mojo?
  

Insider Monkey:

• Could Obama Be Losing Hedge Fund Support. “Wall Street Democrats aren’t especially happy with the words coming out of Barack Obama’s mouth, but most of them are biting their tongue—and still writing him checks,” writes the Daily Beast.

Chicago Tribune:

• IRS Investigates CME(CME) Members' Tax Records. The U.S. Internal Revenue Service is investigating whether some CME Group Inc. members owe money to the federal government, according to a summons filed Friday in U.S. District Court in Chicago.

AppleInsider:

• iPad May Make Apple(AAPL) World's Largest PC Maker in Holiday Q4 2012.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 21% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).

USA Today:

• Elway: Tebow to Enter Training Camp as Broncos' Starter.

Reuters:

• U.S. Offers Bangladesh $1 Billion in Aid Over Next Five Years. The United States said on Saturday that it would offer Bangladesh close to $1 billion in aid over the next five years. A U.S. Embassy statement said that the money would go towards alleviating poverty and malnutrition, as well as family planning and the fight against infectious diseases. The funds will also be used to support research in improving farm productivity and deal with the impact of climate change. As of 2011, the U.S. government has provided over $5.7 billion in development assistance to Bangladesh.
• JPMorgan(JPM) Could Lose $5 Billion from PIIGS Exposure: Report. JPMorgan Chase & Co (JPM.N) could lose up to $5 billion from its exposure to Portugal, Ireland, Italy, Greece and Spain, Chief Executive Jamie Dimon said in an interview with Class CNBC, carried in Italian newspaper Milano Finanza on Saturday. Dimon said the bank was exposed to the five countries (PIIGS) to the tune of around $15 billion."We fear we could lose up to $5 billion ... We hope the worst won't happen, but even if it did happen, I wouldn't be pulling my hair out," he said. Dimon said Europe was the worst problem for the banking sector. "But the EU and euro are solid even if the states will have to be financially responsible and do all they can to develop common social policies," he said. Dimon said the recent extraordinary liquidity measures taken by the European Central Bank had been a good move. "Banks will have to have more capital and sell assets, but at least they have liquidity," he said. Asked about the U.S. Federal Reserve's bank stress tests, which will come out in March, Dimon said his bank would pass. "I hope the test shows American banks, perhaps with one or two exceptions, are very well capitalized, indeed too much," he said. Dimon said JPMorgan had bought back shares last year for $8 billion. "I hope in 2012 we will do more or less the same." Asked if the bank could take advantage of the problems facing Europe's banks and buy assets, he said, "we have already bought some assets and would like to possess others."
• China Banks Need to Check Hidden Risks - Regulator. Chinese banks must conduct regular stress tests and improve analysis to detect risks that may not be reflected in the falling ratio of bad loans and better loss provisioning, the country's top banking regulator wrote in an article published on Monday.
  

AP:

• PM Warns Violence Could Destabilize Romania. More than 1,000 demonstrators jeered government austerity measures in downtown Bucharest on Monday as Romania's prime minister warned that violent clashes like those that left 59 injured over the weekend could jeopardize stability and economic growth. Protesters who gathered in freezing temperatures for a fifth day of demonstrations chanted "Freedom!" and held banners saying "Hunger and poverty have gripped Romania!" They waved flags with the center ripped out, a symbol of the 1989 uprising against former Communist dictator Nicolae Ceausescu. A car parked in the vicinity was set on fire but firefighters put out the blaze.

Financial Times:

• Monti Seeks German Help on Borrowing. Italy’s prime minister has pleaded for Germany and other creditor countries to do more to help lower his country’s borrowing costs, warning there would be a “powerful backlash” among voters in the eurozone’s struggling periphery if they did not. In an interview just three days after his country’s debt was downgraded two notches by Standard & Poor’s, Mario Monti said he did not dispute the vast majority of the credit rating agency’s diagnosis of Italy’s problems. But he argued the agency’s analysis supported the tack he was taking both at home and in Brussels. He singled out S&P citing “one negative” political risk factor: “European policymaking and political institutions”, not his technocratic government.

The Telegraph:

• Portugal's Borrowing Costs Soar as France Passes First Bond Auction Test. Portugal's borrowing costs jumped to record highs on Monday, as investors had their first chance to react to a series of downgrades by Standard and Poor's (S&P) that saw the country relegated to "junk". Yields on benchmark 10-year government bonds rose nearly 2.3pc, or 228 basis points, to 14.198pc in afternoon trade. The difference between Germany and Portugal's borrowing costs also widened to record highs of 1,243 basis points, following S&P's downgrade of Portugal to below investment grade. The spike in Portugal's borrowing costs came as France sold a range of short term debt in a auction that saw borrowing costs largely fall, although demand waned slightly. Portugal CDS spreads widened 42 basis points to 1,125, compared with a one basis point rise for France and fairly flat trading across the rest of Europe, according to Markit. This means it now costs £1.125m to insure £10m of Portuguese debt. In a statement on Friday, S&P said: "We believe there are significant risks to Portugal's external financing over the next two years as creditors of its private sector, primarily other eurozone banks, are likely to reduce their exposures to Portugal more rapidly than previously anticipated, partly due to uncertainties on the EU's future crisis management policies." The Bank of Portugal has forecast GDP growth to shrink by 3.1pc in 2012, compared with previous estimates of a 2.2pc contraction.
• Greece Sends Officials to US as Default Fears Grow. Greece has sent top officials to the US for talks with the International Monetary Fund as it returns to centre stage in the eurozone crisis over fears that a debt deal impasse with bondholders could trigger a messy default.
• Eurozone's 'big bazooka' bail-out fund is left in tatters by S&P downgrade. Plans for a €1 trillion "big bazooka" to stem the debt crisis were crushed on Monday night as Standard & Poor's stripped the European Financial Stability Fund (EFSF) of its AAA credit rating.

MailOnline:

• Cancer-Stricken Venezuelan President Chavez Given 'Less Than a Year to Live'. Doctors don't expect him to survive until the presidential elections in October.
  

Handelsblatt:

• Germany's subsides for solar energy installations are economically unsustainable and need changing, Economy Minister Philipp Roesler was cited as saying. There is a "glaring disparity" between the level of support photovoltaics receive and the amount of power they contribute, he said, calling for a fundamental reform of Germany's renewable energy law.
  

Der Spiegel:

• German subsidies for solar panels installed in the past year will cost consumers 18 billion euros in 2012, citing a report by the Rhein-Westfalen Institute for Economic Research. This pushes the total level of funding commitments to beyond 100 billion euros, citing the report.
• The European Central Bank has stretched its mandate to the extreme due to its bond-purchase program, the bank's former chief economist Juergen Stark wrote in a departure letter to colleagues, citing the document.
  

Wirtschaftswoche:

• Former Citigroup(C) Senior Vice Chairman William Rhodes said that the 500 billion euros made available via the EFSF is inadequate, citing an interview. Italy alone needs to refinance 307 billion euros this year, and therefore more access to liquidity is needed, he said.
• Germany's Free Democratic Party is discussing whether to leave the federal government coalition, citing a member of the party's executive committee. The party is seeking to make a stand on a policy issue which will bring voters to its side, and may do so the next time Germany provides financial aid to Greece.

FAZ:

• France will not implement any further cost-saving measures after its debt was downgraded by ratings agency S&P, Finance Minister Francois Baroin said.

Passauer Neue Presse:

• German Free Democratic Party lawmaker Frank Schaeffler said his party has ruled out a higher German guarantee for the EFSF, citing an interview. Germany shouldn't guarantee more for the EFSF than the $267 billion Chancellor Angela Merkel's government has agreed to, Schaeffler said. Euro members that lost their AAA credit ratings should make cash contributions to help ensure the 440 billion-euro EFSF can lend at its full potential, Schaeffler said.
  

ABC newspaper:

• An increase in the value-added tax would double Spain's economic decline and for that reason the government has focuses on higher income taxes to help bridge the deficit, Budget Minister Cristobal Montoro said in an interview.

El Pais:

• Spain's Budget Minister Cristobal Montoro pledged to give Spanish regions more time to pay back debts they owe to the government, citing comments he made yesterday at a party meeting in Andalusia. If the regions commit to cut their deficits, Montoro will extend the deadline to 10 years from five years for paying back combined debts of 24 billion euros in debts they owe to the central government for credits on revenue that never came in because of a drop in tax income caused by the economic crisis.

Chosun Ilbo:

• The elder brother of North Korean leader Him Jong Un said Kim's new regime "won't last long" because the leader is too young and inexperienced. The communist nation may also see a power struggle among members of the existing elite, who ordered the sinking of a South Korean warship in 2010 in an act to justify their authority, citing e-mails exchanged between Kim's brother, Kim Jong Nam, and Japanese journalist Yoji Gomi.
  

Xinhua:

• Beijing's new home prices are estimated to have fallen 11.3% last year to an average of 13,173 yuan a square meter, citing the Beijing Real Estate Association.
• China's investment in the power industry will drop this year because of weaker demand and a slowing economy, citing Xue Jing, an analyst with the China Electricity Council.
  

Qiushi:

• China's inflation may rebound because of rising wages, land costs and "imported" inflationary pressure, Ma Jiantang, head of the National Bureau of Statistics writes in a commentary. The country faces medium- and long-term inflationary pressure, Ma wrote. China's economy will face downward pressure this year as the European debt crisis deepens, he said.

Beijing News:

• China GDP Growth May Fall to 6-7% a Year by 2015, Citing Liu Shijin, The Vice President Of The State Council's Development Research Center.

ynetnews.com:

• Netanyahu: Iran Sanctions Ineffective. Prime Minister Benjamin Netanyahu on Monday said that Western sanctions on Iran's nuclear program were ineffective and must be hardened. Speaking at the Knesset's Foreign Affairs and Defense Committee, Netanyahu said: "The sanctions employed thus far are ineffective, they have no impact on the nuclear program. We need tough sanctions against the central bank and oil industry. These things are not happening yet and that is why it has no effect on the nuclear program."

Weekend Recommendations

Barron's:

• Made positive comments on (EL), (AA), (CSCO), (HPQ) and (BBT).
• Made negative comments on (MTG) and (RDN).
  

Night Trading

• Asian indices are +.50% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 202.50 -.5 basis point.
• Asia Pacific Sovereign CDS Index 160.0 +.5 basis point.
• FTSE-100 futures +.43%.
  
• S&P 500 futures +.39%.
• NASDAQ 100 futures +.34%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MTB)/1.52
• (AMTD)/.26
• (WFC)/.72
• (C)/.51
• (FRX)/1.01
• (CREE)/.26
• (LLTC)/.37
• (ADTN)/.46

Economic Releases
8:30 am EST

• Empire Manufacturing for January is estimated to rise to 11.0 versus 9.53 in December.

Upcoming Splits

• (EL) 2-for-1
  

Other Potential Market Movers

• The World Bank Growth Forecasts, Bank of Canada Rate Decision and the (SE) Analyst 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 week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Tuesday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, high energy prices, weaker earnings outlooks, profit-taking, more shorting, technical selling and rising Eurozone debt angst. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,289.09 +.88%*



The Weekly Wrap by Briefing.com.

*5-Day Change