Bear Radar

Style Underperformer:

• Small-Cap Growth -.10%

Sector Underperformers:

• 1) Coal -2.76% 2) Oil Service -1.13% 3) Biotech -.80%

Stocks Falling on Unusual Volume:

• SINA, MMSI, YOKU, OMI, LFC, NOV, CNQ, LNG, ABMD, BVSN, ZOLT, VSAT, SREV, LNCR, SSYS, SOHU, GHDX, IDCC, GTLS, MDVN, SNDK, RTI,KNL, IT, UNM, SBH, LEG, HGSI, CRR, DNB, VSH, VSAT, FIO and LRN
  

Stocks With Unusual Put Option Activity:

• 1) HCA 2) EWY 3) RAI 4) FII 5) TOL
  

Stocks With Most Negative News Mentions:

• 1) SOHU 2) FOSL 3) GCI 4) CNQ 5) F
  

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Papademos to Meet Greek Party Chiefs as ‘Great Sacrifices’ Loom. Greek Prime Minister Lucas Papademos plans today to discuss with the nation’s political leaders the implementation of additional fiscal measures needed to secure a second European Union-led bailout. While Papademos and the party chiefs already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors. European leaders raised pressure on meeting the conditions of the 130 billion-euro ($171 billion) rescue, with German Chancellor Angela Merkel saying “time is running out.” “There are fears that the Greek government will note the country has reached the limits on austerity,” UBS AG currency analysts including Chris Walker in London wrote in a note to clients yesterday. “The week ahead will be extremely significant for event risk and headlines could become a dominant driver for the euro.” At stake is whether Greece can win the bailout, secure a deal with private creditors and remain in the euro region. Finance Minister Evangelos Venizelos told reporters late yesterday that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”
• Irish Urge Children to Leave as Export Recovery Masks Lost Jobs. Anthony Roche is urging his unemployed son to emigrate to Australia from Ireland to escape joblessness stemming from the country’s economic collapse. “I’ve seen the good times and the bad and these are the worst,” Roche, 45, who works a day or two a week after closing his business laying floors for bars and restaurants 18 months ago, said outside a welfare office in Dublin. “There are plenty of people there to work, but there isn’t any work out there. That’s why people are leaving these shores again.” While signs are emerging that Ireland is beginning to recover 15 months after an international bailout, the government says the economy is in the midst of the worst crisis since World War II. The nation’s unemployment rate, at 14.2 percent in January, is close to the highest level since the 1980s when the country last endured similar austerity measures.
• German Workers Demand 6.5% Raise as Siemens Predicts Recession. Two years of minimal wage increases have left Christoph Schoenau, a metallographer for auto and aircraft component maker GKN Plc at a factory near Frankfurt, feeling left out of Germany’s economic rebound. Schoenau, 39, is one of 3.6 million workers in the metal and electrical industries clamoring for as much as 6.5 percent more in their paychecks when unions lock horns with employers next month.
• China's Stocks Decline Most in Eight Weeks on Concern Slowdown Will Worsen. China’s stocks fell, driving the benchmark index to its biggest loss in eight weeks, on concern a slowdown in the economy is hurting earnings as Europe’s debt crisis curbs exports to the nation’s biggest market. Jiangxi Copper Co. retreated 2.4 percent, leading declines for commodity stocks, as metal prices dropped and the Ministry of Industry and Information Technology said industrial production is likely to slow. SAIC Motor Corp., the biggest Chinese automaker, slid 1.4 percent after sales declined last month. GF Securities Co. and Haitong Securities Co. lost at least 3.3 percent after the brokerages posted lower profits. “China is seeking steady growth this year, not high growth,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Europe is still mired in resolving its debt crisis and the process may be prolonged. Globally speaking, it’s a year of slowdown.” The Shanghai Composite Index fell 45 points, or 1.9 percent, to 2,286.17 at the 11:30 a.m. break, set for the biggest loss since Dec. 15. The CSI 300 Index declined 2.2 percent to 2,448.98.
• Australia's Central Bank Unexpectedly Holds Rate at 4.25%. Australia’s central bank unexpectedly kept its benchmark interest rate unchanged as domestic growth withstands Europe’s debt crisis, sending the nation’s currency soaring to a six-month high. “Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made,” Governor Glenn Stevens said in a statement announcing the official cash rate target will stay at 4.25 percent. “Financial market sentiment, though remaining skittish, has generally improved since early December.”
• MF Global’s $310 Million Margin Call Exceeded Its Market Value. MF Global Holdings Ltd., the futures broker that filed the eighth-largest bankruptcy in October, faced a $310 million margin call on its final day that exceeded its market value. Calls for payments tied to bets MF Global made on European sovereign debt increased Oct. 24 and continued through Oct. 31, the day the futures broker formerly run by Jon Corzine filed for bankruptcy protection, according to a report yesterday from James Giddens, a trustee overseeing the brokerage’s liquidation. MF Global had a market value of $198 million on Oct. 28 as it held $6.3 billion in European sovereign-debt trades. After tracing 840 transactions of $327 billion in the company’s final days, Giddens is still analyzing where some of the $1.2 billion in missing customer money “ended up,” he said in the report. Corzine’s firm failed after credit-rating downgrades, a record quarterly loss and revelations about its $6.3 billion European debt trade unnerved investors. The missing money has sparked Congressional hearings and former customers have said it undermined confidence in the futures industry.
• CFTC May Adopt Fund-Registration Rule as Soon as Tomorrow. The U.S. Commodity Futures Trading Commission may complete rules as soon as tomorrow requiring registration by mutual funds when they have investments in commodities, according to a person briefed on the matter. The agency circulated the rule in a private voting process among the CFTC’s five commissioners, according to the person who declined to be identified because the process isn’t public. The rule would rescind exemptions from CFTC registration for mutual funds that use derivatives tied to commodities. The National Futures Association, a Chicago-based nonprofit regulator financed by the industry, sought the change to improve protection of retail investors.
• Farmers Plan Biggest Crops Since 1984, Led by Corn: Commodities. U.S. farmers will plant the most acres in a generation this year, led by the biggest corn crop since World War II, taking advantage of the highest agricultural prices in at least four decades. They will sow corn, soybeans and wheat on 226.9 million acres, the most since 1984, a Bloomberg survey of 36 farmers, bankers and analysts showed. The 2.5 percent gain means an expansion the size of New Jersey, as growers target fields left fallow last year and land freed up from conservation programs. Crop prices, some of which reached the highest averages ever in 2011, bolstered the economies of Midwest growing states, sent net farm income up 28 percent to $100.9 billion and pushed the value of farmland to a record $2,350 an acre, the U.S. Department of Agriculture estimates. Global food costs are down 11 percent from a peak a year ago as grain output rises from China to Canada, United Nations data show. “There is unlikely to be any ground that won’t be planted this year,” said Todd Wachtel, a 40 year-old who farms about 5,700 acres in Altamont, Illinois, and plans to expand his corn fields by 21 percent when seeding begins in early April. “Farmers know that they have to plant more when prices are high because they may not last.”
• Obama Health Rule an Affront to Religious Groups: Ramesh Ponnuru. The liberal Catholics who backed the law and now oppose this regulation have an additional reason for bitterness: It’s not as though the administration has been insisting on a rigid application of the law in all other cases. It has been notorious for handing out waivers freely -- just not to religious groups. The administration’s actions illustrate an underappreciated flaw in the law. Congress, even the liberal Congress of 2009-10, would never have enacted a law forcing religious charities to violate their consciences this way. The law earned the backing of the Sister Keehans of the world by being vague. Much of the health-care statute amounts to a grant of power to the bureaucracy to resolve the key issues. A waiver today, a sweeping regulation tomorrow: It’s not a democratically accountable way of making law -- or rather, it’s not a way of making “law,” as in “the rule of law,” at all.
• Crude Trades Near Two-Day Low of Bets of Weakening Demand in U.S., Europe. Oil traded near a two-day low in New York on speculation that fuel demand may falter as Europe struggles with its debt crisis and stockpiles increase in the U.S., the biggest crude consumer. “The pattern of increased crude inventories and lower gasoline demand has impacted the outlook in the U.S.,” said Ric Spooner, a chief analyst at CMC Markets in Sydney. “Markets are also watching for a resolution in Europe.”

Wall Street Journal:

• Fitch's Colquhoun: China Hard Landing Potentially Biggest Risk For Global Economy In 2012. Fitch Ratings said Tuesday a hard landing for the Chinese economy was potentially the biggest risk for the global economy in 2012.
• Derivatives Entrepreneur to Launch Swaps Exchange. A pioneer in the multitrillion-dollar credit-derivatives market is seeking approval for what could be the first exchange catering to privately traded derivatives, or "swaps," instruments that currently trade off-exchange. Sunil Hirani, who in 1999 co-founded Creditex Group, an electronic execution platform for credit-default swaps, has asked the Commodity Futures Trading Commission to approve the new venture, trueEX, as an exchange or "designated contract market" for swaps, according to documents made public on the CFTC website Jan. 31. Mr. Hirani and other staffers at trueEX also met with CFTC member Scott O'Malia on Feb. 1, CFTC records show.
• Disney's(DIS) ABC, Univision Mull News-Channel Launch. Walt Disney Co. and Univision Communications Inc. are in talks to create a new 24-hour cable-news channel that will broadcast in English, in an effort to keep pace with changing demographics among U.S. Hispanics and reach a new audience of English speakers, people familiar with the negotiations said. The new channel would plunge Disney's ABC News more directly into the fractious cable-news wars, competing alongside Time Warner Inc's CNN, News Corp.'s Fox News and Comcast Corp.'s MSNBC.
• For Sale: AIG's Subprime Bonds. Five Wall Street banks have been invited to bid this week for another multibillion-dollar bundle of risky mortgage bonds held by the Federal Reserve Bank of New York as a result of its 2008 rescue of American International Group Inc. The invited firms are the U.S. securities arms of Barclays PLC, Credit Suisse Group AG, Goldman Sachs Group Inc., Morgan Stanley and Royal Bank of Scotland PLC, according to people familiar with the matter. They said the New York Fed is seeking bids by midweek for residential mortgage-backed securities with an unpaid principal balance of $6 billion, or about half the remaining bonds in a vehicle called Maiden Lane II.U.
• U.S. Sets Money-Market Plan. SEC Aims to Stabilize $2.7 Trillion Industry; Critics Say Rules Would Cut Returns. Regulators are completing a controversial proposal to shore up the $2.7 trillion money-market fund industry, more than three years after the collapse of Lehman Brothers Holdings Inc. sparked a panic that threatened the savings of millions of investors and forced the federal government to intervene.
• Rate Probe Keys On Traders. Investigators Suspect Employees at Some Banks Tried to Manipulate Rates.
• Budget Plan Has Familiar Ring. President Barack Obama will release his budget plan next week, calling for $3 trillion in deficit reductions over 10 years, including $1.5 trillion in tax increases to fall mostly on the wealthiest Americans. If that sounds familiar, it's because the president essentially laid out his budget plan in September, following a failed bipartisan deficit-reduction deal. Mr. Obama's plan for fiscal year 2013, which starts Oct. 1, will mirror the September proposal, senior administration officials said.
• A Fairness Quiz for the President. Is it fair that some of Mr. Obama's largest campaign contributors received federal loan guarantees? President Obama has frequently justified his policies—and judged their outcomes—in terms of equity, justice and fairness. That raises an obvious question: How does our existing system—and his own policy record—stack up according to those criteria?

Business Insider:

• Congress Passes Bill That Opens US Skies To Unmanned Drones.
• CITI'S BUITER: There's A 50% Chance Of A Greek Exit From The Eurozone And Here's How It Would Happen.

Zero Hedge:

• Negative Bank Pre-announcements Begin.
• Bringing The "Not In The Labor Force" Mystery To Light.
  

CNBC:

• Stocks Gains Turn Hedge Fund Losers Into Winners. Last year's hedge fund losers may be turning into winners again. Several of the largest hedge funds that ended last year deep in the red, jumped to good starts in January, giving their wealthy investors reason to believe savvy traders are getting back their magic touch.
• Banks Already Slipping Through New Capital Requirements.
• China Growth Could Halve If Europe Crisis Worsens: IMF. China's annual economic growth could be cut nearly in half this year if Europe's debt crisis tips the world economy into a recession, putting pressure on Beijing to unveil "significant" fiscal stimulus, the International Monetary Fund said.

Washington Post:

• Congressional Earmarks Sometimes Used To Fund Projects Near Lawmakers' Properties. Thirty-three members of Congress have directed more than $300 million in earmarks and other spending provisions to dozens of public projects that are next to or within about two miles of the lawmakers’ own property, according to a Washington Post investigation.

ABC News:

• Another Green Energy Company Stumbles: Fisker Announces Layoffs. Fisker Automotive, the maker of an exotic electric sports car that is being built with help from a $529 million federal government loan guarantee, has announced layoffs at its Delaware plant as it tries to persuade the Department of Energy to send it more public funds.

Financial Times:

• Corporate Defaults Set to Jump in Europe. European corporate defaults are widely expected to climb sharply this year despite the recent improvement in credit market sentiment as bank lending cuts and a deteriorating economic backdrop put many smaller or indebted companies under pressure.

Telegraph:

• Shanghai Shipping Slump as IMF Warns China on Euro Slump. Shanghai shipping volumes contracted sharply in January as Europe's debt crisis curbed demand for Asian goods, stoking fresh doubts about the strength of the Chinese economy. The shipping specialist Lloyd's List said container traffic through the Port of Shanghai - the world's largest - fell by 100,000 boxes in January from a year earlier, or 4pc. Volumes fell by over one million tonnes. The figures may have been distorted by China's Lunar Year but there has been a relentless slide in the Shanghai transport data for months. "China's shipping markets face grievous challenges," said the Shanghai International Shipping Institute. It acknowledged that the industry in the grip of downturn and likely to face a "worsening situation" in early 2012.
• Stalemate in Talks on Greek Austerity Measures. Greek politicians refused to yield to the austerity demands of their "troika" paymasters despite a stark warning from German chancellor Angela Merkel that the stand-off threatened the "entire eurozone".

South China Morning Post:

• Glorious Properties to Cut Construction by 25%. Shanghai-based Glorious Property Holdings says it will cut back on its construction work by 25% to 1.5 million square meters this year after it failed to meet its sales target last year because of sluggish market conditions. "Maintaining a strong cash flow is important amid the credit tightening. The decision was made also because of flagging buying interest," he said. "We have not set a sales target for this year because the outlook for the residential market is still highly uncertain." Cheng said the firm would be cautious in land acquisitions this year even though land prices were falling. Chief financial officer Michael Jiang said he believed the mainland property market would finally emerge from a "chilly winter to become warmer" in 2014. He predicted that home prices would tumble 20% before reaching a "reasonable level". "If home prices plunge 50%, it would severely affect the economy and job stability," he said.

Evening Recommendations
Sterne Agee:

• Rated (IBM) Buy, target $230.
  

Night Trading

• Asian equity indices are -1.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 164.0 +2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 136.0 -1.75 basis points.
• FTSE-100 futures +.09%.
  
• S&P 500 futures -.04%.
  
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STE)/.61
• (LPX)/-.20
• (KO)/.77
• (EMR)/.50
• (SMG)/-1.21
• (VSH)/.18
• (SWI)/.25
• (AGCO)/1.33
• (CBG)/.43
• (DIS)/.71
• (CERN)/.53
• (OPEN)/.29
• (PNRA)/1.41
• (HIG)/.60
• (BWLD)/.67
• (BDX)/1.17

Economic Releases
10:00 am EST

• JOLTs Job Openings for December are estimated to rise to 3250 versus 3161 in November.

3:00 pm EST

• Consumer Credit for December is estimated to fall to $7.0B versus $20.374B in November.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, 3Y T-Note Auction, weekly retail sales reports, IBD/TIPP Economic Optmism Index for February, (PMTC) Analyst Meeting, (SB) Analyst Day, Stifel Nicolaus Tech/Telecom Conference, CSFB Energy Summit, Cowen Aerospace/Defense Conference and the UBS Healthcare Services Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Falling Slightly Into Final Hour on Eurozone Debt Angst, Profit-Taking, Less Tech/Financial Sector Optimism, Global Growth Fears

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.91 +4.74%
  
• ISE Sentiment Index 98.0 -30.50%
  
• Total Put/Call .87 +17.57%
  
• NYSE Arms .83 +40.18%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.39 -.57%
  
• European Financial Sector CDS Index 159.05 -1.28%
  
• Western Europe Sovereign Debt CDS Index 326.69 -1.82%
  
• Emerging Market CDS Index 255.58 -.20%
  
• 2-Year Swap Spread 28.0 +1 bp
  
• TED Spread 46.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -73.0 -1.25 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.
  
• Yield Curve 166.0 -4 bps
  
• China Import Iron Ore Spot $144.80/Metric Tonne +1.05%
• Citi US Economic Surprise Index 79.70 -4.0 points
  
• 10-Year TIPS Spread 2.18 +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -29 open in Japan
• DAX Futures: Indicating +1 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Retail, Medical and Tech sector longs
  
• Disclosed Trades: None of note
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades near session highs and just slightly lower on the day, despite less financial/tech sector optimism, technical selling, global growth fears and Eurozone debt angst. On the positive side, Coal, Oil Tanker, Oil Service and Biotech shares are especially strong, rising more than +1.0%. Oil is falling -.61%, Gold is down -.14% and Lumber is jumping +3.81%. Oil continues to trade very poorly, given the stock rally, euro rally, rising interest from speculators, falling euro debt angst, subsiding emerging market hard-landing fears, improving US data and rising Mid-east tensions. Major Asian indices were mostly higher overnight, led by a +1.1% gain in Japanese shares. The Belgium sovereign cds is falling -3.35% to 212.83 bps and the France sovereign cds is falling -2.05% to 163.17 bps. Moreover, the European Investment Grade CDS Index is falling -2.03% to 114.71 bps. On the negative side, Semi, Bank, Hospital, HMO, Construction, Homebuilding, Gaming, Road & Rail and Airline shares are under pressure, falling more than -1.0%. Financial and Tech shares have underperformed throughout the day. Major European indices were mostly lower on the day, led down by a -.66% decline in French shares. Copper is falling -.94% and the UBS-Bloomberg Ag Spot Index is rising +.51%. The Russia sovereign cds is rising +2.78% to 221.17 bps and the Brazil sovereign cds is rising +1.45% to 139.50 bps. The Portugal sovereign cds is up +19.0% in less than 3 weeks. Lumber is down slightly since its Dec. 29th high despite the better US economic data, more dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the Baltic Dry Index has plunged over -60.0% from its Oct. 14th high and is now down over -50.0% ytd. The 10Y T-Note Yield is falling -3 bps today to 1.89%, which remains a concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data. The Philly Fed’s ADS Real-Time Business Conditions Index has stalled over the last month after showing meaningful improvement from mid-Nov. through year-end. The Western Europe Sovereign CDS Index is still fairly close to its Jan. 9th all-time high. The TED spread, 2Y Euro Swap Spread, 3M Euribor-OIS spread and Libor-OIS spread have improved, but are still at stressed levels. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +480.0% ytd to the highest level since March of last year and approaching their April 2010 record. The market is trading as if ANY outcome in Greece will be a market positive. The S&P 500 still looks poised to test 1,350 over the coming days after a brief pause to digest recent gains. Longer-term, however, economic growth in the Eurozone will likely continue to weaken, which will likely again become an issue for investors as the debt crisis flares once again. For an intermediate-term 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. I expect US stocks to trade mixed-to-higher into the close from current levels on US economic optimism, short-covering and lower energy prices.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.52%

Sector Underperformers:

• 1) Airlines -2.32% 2) Semis -1.61% 3) Homebuilders -1.32%

Stocks Falling on Unusual Volume:

• SIMO, CYOU, HTHT, BWLD, ALGT, BJRI, FFBC, MTSC, HSTM, MATW, CBRL, MDSO, CHU, SNCR, SNP, CVLT, SOHU, SINA, HNT, ACOM, CELL, NLSN, CELL, SWI, SYY, LAZ, HUM, ESRX, MHS, MELI, CTCM, AMGN and CAVM
  

Stocks With Unusual Put Option Activity:

• 1) SOHU 2) OPEN 3) ACN 4) PHM 5) ZNGA
  

Stocks With Most Negative News Mentions:

• 1) WY 2) CBRL 3) MGM 4) HUM 5) LAZ
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth -.06%

Sector Outperformers:

• 1) Oil Tankers +1.39% 2) Alt Energy +.19% 3) Coal +.09%

Stocks Rising on Unusual Volume:

• RDEN, FSLR, ZOLT, DNDN, IHC, GBL, BRO, CRK, CJES, P, INVN, TIVO and SKX
  

Stocks With Unusual Call Option Activity:

• 1) DLPH 2) DRYS 3) EXXI 4) ZNGA 5) P
  

Stocks With Most Positive News Mentions:

• 1) NOC 2) AVAV 3) HCA 4) NUAN 5) LMT
  

Charts:

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

Monday Watch

Weekend Headlines
Bloomberg:

• Europe Leaders Maintain Pressure on Greece. European leaders maintained pressure on Greece to accept terms demanded by international lenders during a weekend of talks to avert a financial collapse. Interim Greek Prime Minister Lucas Papademos struck a tentative deal with party leaders to boost economic competitiveness and extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro ($170 billion) aid package wasn’t forthcoming. “If we determine that it’s all going wrong in Greece, then there won’t be a new program -- and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday. The effort to keep Greece from tumbling into default presents what Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann this weekend called a “make or break” moment. While Greek leaders reached their framework agreement yesterday, New Democracy leader Antonis Samaras said he would “fight” demands made by the so-called troika of international creditors that could deepen a recession. The leaders in Athens will meet today aiming to complete an accord as international creditors imposed an 11 a.m. deadline in Athens for a final deal. Greek Finance Minister Evangelos Venizelos told reporters Feb. 4 that negotiations in Athens for more funding hung “on a razor’s edge.” In Paris, German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today for a joint Cabinet meeting.
• Merkel Ally Opposes Marshall Plan for Greece, Tagesspiegel Says. Peter Altmaier, the chief whip for Chancellor Angela Merkel’s Christian Democrats, opposes a Marshall Plan for Greece, Tagesspiegel reported, citing an interview. The idea of buying growth with government money was adopted in the 2008 financial crises and accelerated the outbreak of the debt crisis, the newspaper cited him saying in a preview of an article for tomorrow’s edition. Such a stimulus plan isn’t possible now because there is no money left to spend, Altmaier said, according to Tagesspiegel.
• EU, IMF Insist on Greek Minimum Wage, Bonus Cuts, Mega TV Says. Greece’s international creditors insist the country cut its minimum wage as a condition of the second financing package for it being discussed in Athens, Mega TV reported, citing unidentified ministers who met with Finance Minister Evangelos Venizelos earlier today. Officials from the European Commission, European Central Bank and International Monetary Fund, the so-called troika, demanded the minimum wage be cut to less than 600 euros ($790) a month and that at least one holiday allowance, the so-called 13th and 14th wages, be abolished, Mega TV said. Pensions paid by supplementary funds should be cut by 35 percent, the Athens- based channel said. Of 4.4 billion euros of measures needed to meet targets for 2011 and 2012, 1.5 billion euros will come from cuts in health- care and defense spending, Mega said. None of the measures should be from tax increases or new levies, it reported.
• Spain Economy May Shrink 1.5% in 2012, de Guindos Tells El Pais. The Spanish economy may shrink about 1.5 percent this year, prompting the government to agree with the European Union on new targets for the country’s budget deficit reduction, Economy Minister Luis de Guindos told El Pais. Spain’s current 2012 deficit target of 4.4 percent was set based on gross domestic product growth of 2.3 percent and is in agreement with the European Union, de Guindos told El Pais. “The deficit reduction should generate confidence but not a negative impact on the economic evolution,” de Guindos told El Pais. “The circumstances have changed, but we have commitments with our communitarian partners so we can’t unilaterally decide.”
• Hedge Funds Underestimating Europe's Will to Force Greek Losses. Hedge funds seeking to wring profits from a Greek debt restructuring are underestimating the will of policy makers to impose losses on them, according to investors who say trying to beat the politicians is too risky. “It’s hard for us to come up with an investment thesis that makes it interesting,” said Robert Rauch, a partner at New York-based Gramercy Advisors LLC, a $2.7 billion hedge fund that has avoided investments in Greek debt. “It’s not clear to us that out of this process you can make any money.”
• China's Economy May Face 'Rough' Landing, Singapore's Lee Says. China's economy may be headed for a "rough landing," Singapore Prime Minister Lee Hsien Loong said. "They've built a lot of infrastructure. They have built a lot of capacity in many industries, autos, some of the electronics industries," Lee said, according to a transcript of an interview airing today on CNN's" Fareed Zakaria GPS" program. "There may be a rough landing, but they will get through it." A Chinese government report on Feb. 1 showed that export orders fell last month even as manufacturing expanded. The stronger manufacturing boosted concern that that the world's second-largest economy will decelerate further as the government refrains from loosening monetary policy to tame inflation and curb property prices.
• China Suffers From Lowest Lunar Sales Growth Since 2009: Retail. Chinese shoppers on their Lunar New Year holiday were less lavish than expected at Hong Kong jewelers, curbed spending on beauty brands and slowed spending at South Korean stores. They may keep that pace in the coming year of the dragon. Holiday sales on the mainland grew 16 percent to 470 billion yuan ($75 billion), according to data from the Ministry of Commerce, the slowest pace since the 2009 financial crisis and three percentage points below last year’s increase. China is finding it is not immune to global economic forces and the slowdown is hitting Chinese consumers, who may increase this year’s spending at a slower pace than in 2011. This may mean trouble for the growing number of foreign companies rushing into China, especially luxury brands, said Jason Yuan, an analyst at UOB Kay Hian in Shanghai. “This year is going to be tough, probably the toughest year for many foreign luxury brands since they entered into China,” he said. “Sales of jewelry and valuable watches during Chinese New Year were quite disappointing,” said Caroline Mak, chairman of the Hong Kong Retail Management Association. “Sales growth of over 30 percent last year is unsustainable against a worsening macro-economic backdrop.” Some member jewelers reported customers buying smaller diamonds than they used to, she said.
• China May See Deeper Slowdown on Crisis: IMF. China’s economic expansion would be cut almost in half if Europe’s debt crisis worsens, a scenario that would warrant “significant” fiscal stimulus from the nation’s government, the International Monetary Fund said. Based on the IMF’s “downside” forecast for the global economy, China’s growth could drop by as much as 4 percentage points from the fund’s current projection, which is for 8.2 percent this year, the organization said in a report released today by its China office in Beijing. The outlook expands on the IMF’s warning last month that the world could plunge into another recession if Europe’s woes deepen. Premier Wen Jiabao reiterated last week his government will “fine-tune” policies to support growth amid the region’s debt crisis and the cooling domestic property market. “China’s growth rate would drop abruptly if the euro area experiences a sharp recession,” the Washington-based IMF said.
• Bullard Says Fed Bond Purchases Not Needed as U.S. Unemployment Rate Falls. A new round of Federal Reserve bond purchases isn’t warranted because the U.S. job market and broader economy are strengthening faster than expected, according to St. Louis Fed President James Bullard. “The economic news and economic data, including today’s data, has been surprising to the upside,” Bullard said yesterday, referring to employment gains. “I need to see significant deterioration in the economy and some threat of deflation or inflation moving significantly below our inflation target before” backing more bond buying by the Fed, he said in a Bloomberg News interview. Bullard, who doesn’t vote on monetary policy this year, was the first Fed official in 2010 to call for a second round of asset purchases. Unlike then, the U.S. isn’t at risk of a broad decline in prices similar to what beset Japan, he said. “Inflation is coming down, but at least for now it is above our inflation target” of 2 percent, Bullard said. “We will see how things develop. But I am also more bullish on the economy as a whole. I do think we have momentum coming out of 2011.” The Federal Open Market Committee pledged Jan. 25 to keep the benchmark interest rate at a record low at least until late 2014. Bullard said he would have dissented from the decision because he opposes tying policy to a calendar date. The committee has “almost no ability to forecast that far in the future,” he said. “My own guess is we will have to move before” late 2014 and begin removing accommodation, Bullard said. The FOMC will continue to debate the date over coming meetings, he said. “When the economy does change, the economic outlook changes significantly, then the committee is going to come under pressure to change the date,” he said. The 2014 pledge by the FOMC “does send a very pessimistic signal about the U.S. economy,” he said. “The truth is, what basis do we have to send such a pessimistic signal?”
• Crude Declines on Greek Debt Concern. Oil fell from a three-day high on concern Greece’s steps to avert a financial collapse may fall short, threatening Europe’s economy and demand for fuel. Futures dropped as much as 0.8 percent before a deadline for Greece to accept terms demanded by international lenders on a bailout package.
• Paulson's Advantage Plus Hedge Fund Said to Rise 5% in January. John Paulson, the billionaire money manager who had his worst year on record in 2011, posted a 5 percent gain in January in one of his largest hedge funds as all strategies rose, according to a person briefed on the returns. Paulson & Co., which is based in New York and manages about $24 billion, lost money in what he called an “aberrational year” on investments including Citigroup Inc., Bank of America Corp. and Sino-Forest Corp. (TRE), the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. Paulson’s Advantage Plus Fund had a 51 percent loss in 2011. The gold share class of the Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, increased 7.4 percent in January.
• JPMorgan(JPM), BofA(BAC) Sued by New York Over Use of Mortgage Database. JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. were sued by New York Attorney General Eric Schneiderman over the use of a mortgage database that the state said led to improper foreclosures. The banks’ use of the database, known as MERS, misled homeowners, undermined foreclosure proceedings and created uncertainty about ownership interests in properties, the state said in the complaint filed yesterday in New York State Supreme Court in Brooklyn.
• Blankfein Gets $7 Million in Stock for 2011. Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, gave Chairman and Chief Executive Officer Lloyd Blankfein a $7 million restricted-stock bonus for 2011, a decrease from $12.6 million a year earlier. Blankfein, 57, received 61,702 shares on Feb. 1, according to a filing with the U.S. Securities and Exchange Commission. The stock closed at $113.45 in New York that day. Goldman Sachs raised Blankfein’s salary to $2 million last year from $600,000. Goldman Sachs’s 2011 earnings dropped 47 percent to the lowest level since 2008 on a second consecutive annual decline in fixed-income trading revenue. The New York-based firm reduced compensation 21 percent and eliminated 2,400 jobs. The stock fell 46 percent in 2011, more than the 18 percent drop in the S&P 500 Financials Index.
• Team Obama Shows Dangerous Penchant for Hubris: Albert R. Hunt. President Barack Obama is headed for political turbulence. That prediction isn’t based on any private polling data or inside information. It’s just common sense: National political campaigns are cyclical, and after an especially good cycle, the Democratic president is due for some downtime. On re-election prospects, the Obamaites are confident when they look at the state of the race, especially the Republicans. They’re showing signs of cockiness. The Bushes were in town for the annual black tie dinner the next night at the Alfalfa Club, a gathering of business and political elites. The two featured speakers, both intended to be brief and humorous, were Obama and Jeb Bush. The president spoke to good reviews. He left before Bush spoke. Obama hates such dinners. Some of his aides, in particular his political adviser David Plouffe, urged him not to spend an evening mingling with the 1 percent. Yet he chose to go, and attendees said it was the first time they could recall a speaker leaving before the other side had its fun. In addition, Obama’s 87-year-old predecessor was present. Imagine the criticism five years ago if President George W. Bush had walked out on a dinner before Hillary Clinton spoke, with Bill Clinton in the audience.

Wall Street Journal:

• Romney Builds Momentum. Mitt Romney, buoyed by a fresh victory in Nevada, appears to be shoring up support among the conservative voters who once appeared tempted by his rivals, putting the former Massachusetts governor in the strongest position since Republicans began voting a month ago.
  
• China's Export Pain May Be Mexico's Gain. Buying stuff from China isn't such a bargain anymore. One consequence of that: Companies that move freight from Mexico are getting busier. China has long been the destination for companies looking to cut costs. A huge population of untapped workers, along with a leadership keen to build out the country's manufacturing infrastructure, made it the world's best place to make things cheaply. But nothing lasts forever. The pool of Chinese workers is getting shallower. China's one-child policy and cultural preference for boys have led to a shrinking population of young people.

Marketwatch.com:

• Deadly Cold Weather Continues in Europe. Cold, snow headed to Greece, Germany and Belgium, forecasters say.

Business Insider:

• When Greece Defaults, The Credit Default Swap Dominoes Will Fall. For your Superbowl half-time reading, here is a brief summary of the situation in Europe:
• WATCH: M.I.A. Gave America The Middle Finger During The Super Bowl Halftime Show. (video)
• This Nano Drone Swarm Is Astonishing And Unnerving In Equal Measure. (video)
  

Zero Hedge:

• How Europe Has Evolved From A Democracy To A Bankocracy And Why Austerity Will Lead To Chaos. (video)
• Explaining Yesterday's Seasonally Adjusted Non-Farm Payroll "Beat".
• 6 Hour Greek Meeting Ends With No Agreement, Troika Demands Answer By 11am Tomorrow, EURUSD Drifts Lower.
• Juncker Warns of Greek Default as Europe's Patience With Greece Runs Out.
  

CNBC:

• China Cuts Dividend Payouts for State Banks. China's Central Huijin Investment Co, the state parent of the country's "Big Four" state banks, said it would cut the dividend payout ratio for three lenders to help relieve their capital strains.
• Regulator to Challenge European Banks' Capital Plans. The European Banking Authority is to challenge a significant proportion of the capital restructuring plans put forward by the continent’s leading banks to meet tough new capital requirements, say three people familiar with the process. The regulator said in December that 30 banks needed to boost capital by an aggregate €115 billion to reach a 9 percent target for core tier one capital, a key measure of financial strength. The banks were given until January 27 to submit plans to the EBA, via national regulators, outlining how they would meet the requirement. The plans will be discussed by the EBA board next week. According to one person close to the process, as much as half of the measures outlined in those plans do not look credible. There are two particularly contentious tactics being employed — shifting the way in which a bank calculates the risk-weighting of its assets; and promising asset sales that are unlikely to attract buyers. Projected profits for the period to June also appeared over-confident in some cases, given the worsening outlook for the eurozone economy.

IBD:

• HMS(HMSY) Thrives On Need For Health Care Cost Control.

LA Times:

• Egypt Says 19 Americans Will Be Ordered To Stand Trial. Relations between Washington and Cairo plummeted further Sunday when Egypt's military-controlled government announced that 19 Americans working for pro-democracy groups, including the son of a Cabinet official, would be ordered to stand trial on licensing and financial charges. The provocative decision by investigating judges comes as the U.S. has threatened to suspend $1.3 billion in annual aid to Egypt's military. It highlights the widening divide between Washington and one of its closest allies over democratic reforms at a time of sweeping political upheaval across North Africa and the Middle East. State media reported judges have referred 43 people, including 19 Americans, to be prosecuted on charges of violating foreign funding laws for nongovernmental organizations working in Egypt. One of them is reported to be Sam LaHood, the Egypt director of the Washington-based International Republican Institute, or IRI, and son of U.S. Transportation Secretary Ray LaHood.
  

NY Times:

• A Mortgage Tornado Warning, Unheeded. YEARS before the housing bust — before all those home loans turned sour and millions of Americans faced foreclosure — a wealthy businessman in Florida set out to blow the whistle on the mortgage game.

Forbes:

• American Airlines: Bankrupt Victim of Weak U.S. Dollar Policies.
  

Huffington Post:

• 2012 Super Bowl Commercials. (videos)
  

Rasmussen Reports:

• Among Uncommitted Voters, Obama Job Approval at 20%.
  

ESPN:

• Eli Manning, Giants thwart Pats again to cap magical run with 4th Super Bowl title.

Reuters:

• Anger After Russia, China Block U.N. Action on Syria. Western and Arab states voiced outrage Sunday after Russia and China vetoed a U.N. resolution that would have backed an Arab plan urging Syrian President Bashar al-Assad to give up power, and Washington vowed harsher sanctions against Damascus. U.S. Secretary of State Hillary Clinton called the veto a "travesty." It came a day after activists say Syrian forces bombarded a district of Homs, killing more than 200 people in the worst night of bloodshed of the 11-month uprising.Russia said the resolution was biased and would have meant taking sides in a civil war. Syria is Moscow's only big ally in the Middle East, home to a Russian naval base and customer for its arms. China's veto appeared to follow Russia's lead.Washington's U.N. ambassador Susan Rice said she was "disgusted" by Russia and China's vetoes Saturday, and "any further bloodshed that flows will be on their hands. "British Foreign Secretary William Hague said Moscow and Beijing had turned their backs on the Arab world. France's Alain Juppe said they "carried a terrible responsibility in the eyes of the world and Syrian people."
• Goldman's(GS) Blankfein Campaigns for Gay Marriage.
  

Financial Times:

• Greek Politicians Oppose Government Austerity Cuts. Greece's coalition government has opposed proposals that seek to cut state-funded jobs and reduce salaries. Representatives from the Pasok, New Democracy and Laos parties won't support the measures sought by the members of the so-called troika: the European Commission, the European Central Bank and the IMF.
• Iran Softens Line on Cutting Oil to Europe. Iran has indicated that its threat to cut oil supplies to European states in order to pre-empt a European Union oil embargo that comes into effect in July may be only a symbolic one.

The Telegraph:

• French Socialists' Latin Revolt Against Germany. The half-century habits of Franco-German condominium die hard. It is a painful process for French elites to admit that monetary union is asphyxiating their economy and must inevitably trap France in mercantilist subordination to Germany.
• Equity Markets Sing a Different Tune From IMF. Global investor sentiment is now not only split down the middle, but the split is getting deeper and wider. The optimists and pessimists are further apart than ever.
• US Hedge Funds Capitalise On Lehman Collapse. It may sound impossible but one of the best financial investments of the past three years has been a collapsed bank. And not just any bank but Lehman Brothers, the world’s biggest bankruptcy.

BBC:

• Iran is intimidating some of the BBC staff working for the Persian service. Families of those working outside of Iran are also being targeted, citing Mark Thompson, its director general.

AFP:

• Syrian Forces 'torture children as young as 13'. Children as young as 13 are a particular target in the "rampant" use of torture by Syrian government forces battling opposition protests, Human Rights Watch said in a report released Friday. The United Nations says hundreds of children have been killed in the crackdown over the past 10 months, and the rights group highlighted cases of children shot in their homes or on the street, or grabbed from schools. It documented 12 cases of children tortured in detention centres and said many more may have suffered similar treatment. "In many cases, security forces have targeted children just as they have targeted adults," said Lois Whitman, children?s rights director at the New York-based Human Rights Watch. The group's report said more than 100 people who had been held by security forces "described rampant use of torture in detention centres against even the youngest detainees, even beyond the 12 cases specifically documented." "Children, some as young as 13, reported to Human Rights Watch that officers kept them in solitary confinement, severely beat and electrocuted them, burned them with cigarettes, and left them to dangle from metal handcuffs for hours at a time, centimetres above the floor," the report said.The parents of one 13-year-old boy from Latakia said he was detained for nine days in December after being accused of burning photos of Syrian president Bashar al-Assad, inciting protests and vandalizing security forces? cars.Security officers burned the boy with cigarettes on his neck and hands and threw boiling water on him, the parents were quoted as saying.Another 13-year-old told Human Rights Watch that security forces tortured him for three days at a military security branch after he was detained in May.He said he fell unconscious after being electrocuted on the stomach."When they interrogated me the second time, they beat me and electrocuted me again. The third time they had some pliers, and they pulled out my toenail," the boy was quoted as saying.

Yonhap News:

• North Korea Developing Unmanned Attack Aircraft From U.S. Drones: Source. North Korea is developing unmanned attack aircraft using U.S. target drones purchased from the Middle East, a military source in Seoul said Sunday, indicating the aircraft will likely target the South. "North Korea recently bought several U.S. MQM-107D Streakers from a Middle Eastern nation that appears to be Syria, and is developing unmanned attack aircraft based on them," the source said on condition of anonymity.
  

Weekend Recommendations
Barron's:

• Made positive comments on (TIVO), (ICON) and (MET).
• Made negative comments on (BWLD).
  

Night Trading

• Asian indices are -.50% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 161.50 -8.0 basis points.
• Asia Pacific Sovereign CDS Index 137.75 -3.75 basis points.
• FTSE-100 futures +.06%.
  
• S&P 500 futures -.31%.
• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SYY)/.44
• (HCA)/.76
• (CNA)/.70
• (HUM)/1.20
• (L)/.90
• (HAS)/1.05
• (CSTR)/.65
• (DNB)/2.11
• (APC)/.63
• (YUM)/.74
• (ADVS)/.14
• (NCR)/.56
• (VECO)/.65
• (PPS)/.42
• (SPF)/.02

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The RBA Rate Decision could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.