Stocks Rising Slightly Into Final Hour on US Economic Optimism, Euro Bounce, Short-Covering, Tech Sector Optimism

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Sector Performance Mixed
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.78 +.11%
  
• ISE Sentiment Index 104.0 +15.56%
  
• Total Put/Call .80 -4.76%
  
• NYSE Arms 1.08 +35.81%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.64 +.26%
  
• European Financial Sector CDS Index 155.69 -1.87%
  
• Western Europe Sovereign Debt CDS Index 324.07 -.79%
  
• Emerging Market CDS Index 256.17 +.91%
  
• 2-Year Swap Spread 29.75 +1.75 bps
  
• TED Spread 44.25 -1.75 bps
  
• 3-Month EUR/USD Cross-Currency Basis Swap -72.25 +.75 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.
  
• Yield Curve 172.0 +6 bps
  
• China Import Iron Ore Spot $144.70/Metric Tonne -.10%
• Citi US Economic Surprise Index 77.60 -2.1 points
  
• 10-Year TIPS Spread 2.20 +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +38 open in Japan
• DAX Futures: Indicating +5 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades near session highs, despite less financial sector optimism, profit-taking, global growth fears, rising energy prices and Eurozone debt angst. On the positive side, Energy, Networking, HMO, Retail, Restaurant and Tobacco shares are especially strong, rising more than +.75%. Tech shares are relatively strong again today. Copper is up +.33% and the UBS-Bloomberg Ag Spot Index is down -.41%. Oil continues to trade poorly, despite today's bounce, 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 European indices were slightly higher on the day, led by a +.62% gain in Italian shares. The Bloomberg European Bank/Financial Services Index rose +.6%. German industrial production fell the most since January 2009 in December, dropping -2.9%. However, investors continue to price in another Eurozone debt crisis “can-kicking” and stabilizing economic activity in the region. The Spain sovereign cds is falling -3.1% to 343.67 bps, the Italy sovereign cds is falling -3.55% to 373.0 bps, the Portugal sovereign cds is down -5.25% to 1,207.04 bps. On the negative side, Coal, Oil Tanker, Oil Service and Biotech shares are under pressure, falling more than -.75%. Financial shares have underperformed throughout the day. Oil is rising +1.55%, Lumber is falling -2.4% and Gold is jumping +1.5%. The Portugal sovereign cds is still up +12.0% in less than 3 weeks. Lumber is down -2.0% 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 rising +7 bps today to 1.98%, but 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 +485.0% ytd to the highest level since March of last year and approaching their April 2010 record. Johnson Redbook weekly retail sales rose +2.5% this week versus a +2.7% gain the prior week. This is subpar for a recovery and the weakest reading since April 5th of last year. US stocks continue to trade very well. Almost all negatives are currently being ignored as the “buy every dip” mentality remains firmly in place. While this can continue a while longer, European economic data must begin to trend notably better over the coming months for the S&P 500 to break above approaching technical resistance, in my opinion. Given the austerity measures that have yet to take hold in the region, this remains a large question mark. One of my longs, (AAPL), continues to trade very well as it made another all-time high. I still see substantial outperformance for the shares over the intermediate-term. As well, since I added to my (GOOG) long around its 200-day, the stock has bounced strongly as it approaches its 50-day. I expect this recent outperformance to continue over the intermediate-term as the Facebook IPO draws attention to GOOG’s reasonable valuation and fundamentals improve in the second half of the year. 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, a bounce in the euro and tech sector optimism.

Today's Headlines

Bloomberg:

• Greece, Troika Work on Final Rescue Draft. Greece’s government and international creditors are working on the final draft of an agreement on budget and structural measures needed to free up a second aid package, a Greek official said. The document is being drafted at a meeting between Finance Minister Evangelos Venizelos and representatives of Greece’s creditors and will be discussed by political leaders later in the day, the government official told reporters in Athens today on customary condition of anonymity. Caretaker Greek Prime Minister Lucas Papademos plans to convene the nation’s political leaders to seek consensus on the cuts required for a bailout, as unions called a strike to protest and European leaders pressed Greece to reach a deal. Papademos hasn’t yet set a time for the meeting with leaders. While the prime minister and party chiefs have 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 for a 130 billion-euro ($171 billion) rescue. German Chancellor Angela Merkel said “time is running out” to reach an accord, while unions derided the conditions as “blackmail.” “It is clear we are going into another drama for Greece with many questions unanswered,” Patrick Legland, head of research at Societe Generale SA, told Bloomberg Television today. “It’s kind of a catch-22 where they have to reduce their deficit but there is no growth. It’s very tricky.”
  
• Bernanke: 8.3% Unemployment Rate Understates Job Market Weakness. Federal Reserve Chairman Ben S. Bernanke said the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market. “It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said today in response to questions at a hearing before the Senate Budget Committee in Washington. “There are also a lot of people who are either out of the labor force because they don’t think they can find work” or in part- time jobs." The percentage of the unemployed who have remained without work for 27 weeks or more rose to 42.9 percent in January from 42.5 percent in December, the Labor Department said.
• Oil Rises on Weaker Dollar After Bernanke Says Jobs Market Not Healthy. Oil rose as the dollar weakened after Federal Reserve Chairman Ben S. Bernanke said that the jobs market is far from healthy. West Texas Intermediate crude gained at a faster pace than North Sea Brent in London, reducing the European benchmark’s premium over New York oil for the first time in nine days. The dollar fell on Bernanke’s comments and signs that Greece is near a debt agreement. “Bernanke made some pretty bearish statements and the dollar tanked,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Once the dollar dropped you saw WTI rebound.” Oil for March delivery rose $1.77, or 1.8 percent, to $98.68 a barrel at 1:03 p.m. on the New York Mercantile Exchange after falling to $95.84. Prices have slipped 15 cents this year.
• U.S. Job Openings Rise by the Most in Almost a Year. Job openings in the U.S. increased in December by the most in almost a year, showing employers are gaining confidence the economy will keep growing in 2012. The number of positions waiting to be filled climbed by 258,000, the biggest gain since February 2011, to 3.38 million, the Labor Department said today in Washington. Excluding government agencies, openings at private employers climbed to the highest level since August 2008.
• Banks Pay Homeowners to Avoid Foreclosures. Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe. Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.
• China Will Increase Domestic Diesel, Gasoline Prices Tomorrow, NDRC Says. China, the world’s second-biggest oil consumer, raised domestic fuel tariffs for the first time in 10 months to spur production by refiners including China Petroleum & Chemical Corp. and PetroChina Co. Retail gasoline and diesel cost 300 yuan ($47.58) a metric ton more starting today, the National Development and Reform Commission said on its website yesterday. The increase is equivalent to 0.22 yuan a liter on average nationwide for gasoline and 0.26 yuan a liter for diesel, the nation’s top economic planning agency said.
• UBS(UBS) Posts 76% Drop in Quarterly Profit.
• Credit VROOMs: Auto Loans in 30 Seconds. Three years ago, credit was so tight that the owner of a legal firm with a $400,000 salary and a very good credit score of more than 700 couldn’t get financed to buy the car he wanted from Michael Mosser’s dealership. “The world is upside-down compared to then,” said Mosser, general manager of Chevrolet and Cadillac stores in Ann Arbor, Michigan. “Today, somebody with a 500 credit score, I can get approved and in a Malibu,” which starts at $22,110. Lenders resisted extending credit to car buyers when the mortgage market collapsed in 2008, helping push General Motors Corp. and Chrysler LLC into bankruptcy and sending U.S. sales to the lowest point in almost three decades. Amid a slow housing market, auto demand is rebounding, spurring lenders from Bank of America Corp. to Capital One Financial Corp. to approve buyers faster and at better rates to compete for a piece of an expanding market. “Banks have had to look elsewhere for growth opportunities, and auto has been one of the nice spaces over the last couple years,” Curt Beaudouin, a bank analyst for Moody’s Investors Service in New York, said in a phone interview.
• Egyptian Generals Said to Drop Meetings With U.S. Lawmakers. An Egyptian military delegation visiting Washington canceled talks with U.S. senators because the group was called home amid a dispute over charges against American pro-democracy workers, according to Senate aides. The generals were scheduled to meet as soon as yesterday with senators including Carl Levin, a Michigan Democrat who heads the Senate Armed Services Committee, and John McCain of Arizona, the top Republican on the panel, according to two Senate aides familiar with the cancellation who spoke on condition of anonymity because they weren't authorized to comment publicly.
  

MarketWatch:

• Gold Futures Jump on Bernanke, Greece. Gold futures gained Tuesday, rising as U.S. Federal Reserve Chairman Ben Bernanke gave testimony to Congress and Greece reportedly neared a deal that would pave the way to more aid. Gold futures for April delivery GC2J +1.40% rose $14.60, or 0.9%, to $1,739.50 an ounce on the Comex division of New York Mercantile Exchange.
• Europe in Grip of Uncommon Deep Freeze. (pics)
  

CNBC.com:

• After US Oil Snub, Canada Focuses on China.

Zero Hedge:

• China Bail Out Europe? Quite The Opposite Actualy, As Chinese Banks Cut European Exposure.
• Merkel Summarizes The Situation.
  

ABC Newsa:

• 'Anonymous' Hacks Personal Info of Oakland Officials. 'Anonymous' has released the personal information of some of Oakland's top city officials online in response to clashes between Occupy Oakland and the police.

Washington Free Beacon:

• Deepak Chopra, Russell Simmons To Fundraise For Obama In NYC. Prospective partygoers can choose from three levels of tickets, “Event Chair” ($35,800), “Event Host” ($10,000), or for those with shallower pockets, “Gala Attendee” ($1,000 a piece). Their massive wealth notwithstanding, Simmons and Chopra were both vocal supporters of the “Occupy” movements, and were named to TheBlaze.com’s list of the “Top Ten Richest Celebrities Supporting ‘Occupy Wall Street.’”

Reuters:

• US Gasoline Demand Down Again With High Prices - MasterCard(MA). U.S. motorists drove fewer miles last week as continuing high prices kept consumers away from the pump, MasterCard said in its weekly SpendingPulse report on Tuesday. Retail gasoline demand fell 5.3 percent from a year ago and 2.8 percent from the previous week, the report said. Prices rose by 8 cents on average to $3.47 per gallon, 11.9 percent higher than the same week last year. The four-week average demand fell for the 46th straight time last week, down 4.9 percent compared with a year ago.

Financial Times:

• Beijing Office Rents Outstrip New York. Prime office rents in Beijing’s central business district rose 75 per cent last year, the fastest globally, and up from a 48 per cent increase in 2010, according to the survey. It now costs $130 a year for a square foot of a top-grade office in Beijing, compared with $239 in London’s West End and $120 in midtown Manhattan.

Telegraph:

• An orderly EMU break-up, à la Français. Salut souverainistes. For those wanting more details on the euro break-up plan drafted by French economists, here is the link to the L’Observatoire de L’Europe website. A few extracts, loosely translated: "The obstinate determination of governments to take us by forced march deeper into the euro impasse can only lead to the general aggravation of the economic situation in Europe." "Even though our American and Chinese competitors have an interest in the survival of the single currency, the euro is condemned to an uncontrollable explosion sooner or late".
• Debt Crisis and Greek Debt Talks: Live.
  

Der Spiegel:

• It's Time to End the Greek Rescue Farce. For the past two years, Greece has wrangled with the euro-zone states and the International Monetary Fund (IMF) over its so-called "rescue." Austerity measures have been agreed to, aid has been paid and private creditors have been forced to accept "voluntary" debt haircuts. Despite all this, Greece is in even worse shape today than it was then. Its economy is shrinking, the debt ratio is rising and the country and its banks have been cut off from capital markets. There isn't even the slightest sign that the situation might improve. Something has gone very wrong with this rescue.

Globe and Mail:

• Rogers, BCE Vying For A Bite of Apple's(AAPL) iTV. Canada’s largest telecommunications companies are squaring off in a fight about the future of television. Rogers Communications Inc. and BCE Inc. are in talks with Apple Inc. (AAPL-Q469.385.411.17%) to become Canadian launch partners for its much-hyped Apple iTV, a product that has the potential to revolutionize TV viewing by turning conventional televisions into gigantic iPads.

Shanghai Daily:

• Shanghai Existing Home Sales Decline to 5-Year Low. SALES of existing homes dropped to a five-year low in Shanghai last month and more than half of the transactions involved properties that were sold at not more than 900,000 yuan (US$142,630). A total of 4,200 previously occupied units, mainly houses, were sold across the city in January, the lowest monthly transactions recorded since 2007, according to data released yesterday by Century 21 China Real Estate. The sales marked a fall of 45 percent from December and a plunge of 80 percent from same month a year earlier. "The significant retreat was mainly a result of the Spring Festival holiday but it was still a record low volume if we compared it to figures in the same period in previous years," said Eric Luo, an analyst with Century 21.

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