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

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Around Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 18.44 +1.54%
  
• ISE Sentiment Index 126.0 +51.81%
  
• Total Put/Call .87 +7.41%
  
• NYSE Arms .87 -9.06%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.29 -2.05%
  
• European Financial Sector CDS Index 167.15 +2.40%
  
• Western Europe Sovereign Debt CDS Index 325.73 -.02%
  
• Emerging Market CDS Index 257.78 +.37%
  
• 2-Year Swap Spread 27.0 -1.25 bps
  
• TED Spread 42.25 -1.25 bps
  
• 3-Month EUR/USD Cross-Currency Basis Swap -67.50 -.75 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .08% +1 bp
  
• Yield Curve 177.0 +5 bps
  
• China Import Iron Ore Spot $144.70/Metric Tonne -.28%
• Citi US Economic Surprise Index 76.60 +.2 point
  
• 10-Year TIPS Spread 2.19 -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +43 open in Japan
• DAX Futures: Indicating +20 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades near session highs, despite recent sharp gains, global growth fears, higher energy prices, less financial sector optimism and Eurozone debt angst. On the positive side, Coal, Alt Energy, Education, Tobacco and Construction shares are especially strong, rising more than +1.0%. Tech shares have traded well throughout the day. Copper is up +1.64%, Lumber is rising +2.4% and Gold is down -.32%. Oil continues to trade 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 European indices rose around +.5% today with the Bloomberg European Bank/Financial Services Index rising +.73%. Despite the Greece debt resolution machinations, investors continue to price is a Eurozone debt crisis “can-kicking” and stabilizing economic growth in the region. The Spain sovereign cds is falling -1.1% to 348.0 bps and the US sovereign cds is falling -1.2% to 37.79 bps. On the negative side, Disk Drive, Networking, Hospital, REIT and Medical shares are under pressure, falling more than -.75%. The Financials have stalled and the Transports are lower over the last 5 days. Oil is rising +.8%. The France sovereign cds is rising +1.54% to 162.83 bps, the Portugal sovereign cds is gaining +1.33% to 1,212.68 bps, the Ireland sovereign cds is rising +1.1% to 564.0 bps and the Belgium sovereign cds is rising +3.3% to 216.67 bps. The Portugal sovereign cds is still up +13.0% in less than 3 weeks. Lumber is flat 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 weekly MBA Purchase Applications Index has been around the same level since May 2010. 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 +5 bps to 2.04% today, 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 continue to improve, 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 +535.0% ytd to the highest level since March of last year and approaching their April 2010 record. Major Asian indices were mixed overnight despite a higher-than-expected inflation reading out of China. I still believe that inflation in many key emerging markets remains a larger problem than commonly perceived. Significant monetary easing in these markets with inflation around current levels will prove a large policy error over the intermediate-term, in my opinion. The AAII % Bulls jumped to 51.64 this week, while the % Bears fell to 20.19. The 6-week moving average of % Bears is 20.36%, the lowest since July 2005. While most investor sentiment gauges continue to flash caution, hedge fund underperformance in January indicated a large group of investors did not have enough market exposure, which is a positive. Almost all negatives continue to be ignored as the “buy every dip” mentality remains firmly in place. However, given market leader Apple’s(AAPL) accelerating gains over the last week, and tech leadership in general, the broad market doesn’t trade as well as I would have expected. 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:

• Euro Finance Chiefs to Defer Decision on Greece. European finance chiefs are set to defer ratifying a 130 billion-euro ($173 billion) rescue for Greece, pressing the government in Athens to put a newly struck austerity plan into action. “It’s up to the Greek government by concrete actions -- through legislation, other actions -- to convince its European partners that the second program can be made to work,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said today as he arrived for an emergency meeting of euro-area finance ministers in Brussels. European stocks rose for the first time in four days and the euro reached a two-month high against the dollar as the accord in Athens after all-night talks spurred optimism over enactment of the financial lifeline and debt-swap agreement needed for Greece to dodge default and economic collapse.
• El-Erian: Greece Agreement May Be Questionable. The agreement reached by Greek political leaders to win the nation’s second bailout may be “analytically questionable,” Pacific Investment Management Co.’s Mohamed A. El-Erian said. “It is very unlikely to lead to growth, jobs, financial stability and new investments,” El-Erian, chief executive and co-chief investment officer of the world’s biggest manager of bond funds, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “This agreement will be very difficult to sell when the principals, those who have agreed, have to go to their constituents.”
• ECB Taking Losses on Greek Debt May Sink Italy: Euro Credit. The International Monetary Fund's pressure on the European Central Bank to take part in Greek debt writedowns may backfire by deterring the central bank from extending its program of buying bonds from distressed nations. Greek creditors meet in Paris today to discuss a debt-swap designed to halve the nation's privately held obligations by eliminating 100 billion euros ($132 billion) of debt. While bonds bought by the ECB in its Securities Market Program are exempt from the deal, Greece needs to trim its burdens further to qualify for further aid and make a payment of 14.5 billion euros on March 20. "They will have to think of something, but it would be wrong to force the ECB to take losses," said Stuart Thomson, who helps oversee $121 billion at Ignis Asset Management in Glasgow. "The ECB taking a haircut would imply a fiscal transfer, which isn't its mandate. And the SMP would collapse if they do that. We can do without another rout in the market."
• Sovereign Default Swap Costs Rise as Greek Credit Event Looms. The cost of insuring European government bonds rose amid speculation a bailout package for Greece will trigger a credit event leading to a payout on default swaps insuring the nation’s debt. Investors are betting losses will have to be imposed on private investors who fail to support a debt restructuring through so-called collective action clauses. The nation’s creditors meet in Paris today to discuss a debt-swap designed to halve the country’s privately held obligations. A payout on Greek swaps makes it more likely contracts on other indebted nations may be triggered, and the Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed five basis points to 328 at 11:30 a.m. in London, the highest in a week. “Collective action clauses will have to go in place,” Paul Donovan, deputy head of global economics at UBS AG in London, said in an interview with Caroline Hyde on Bloomberg Television’s “First Look.” “That will mean that credit- default swaps should be triggered.” “Even 70 percent participation is not enough to reach a 120 percent target,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam. “That target is already short based on new expectations of GDP growth. They really want full participation and the only possibility for that is a coercive exchange. The risk is high for a credit event.” The cost of insuring European financial company debt also rose with the Markit iTraxx Financial Index linked to senior bonds of 25 banks and insurers increasing eight basis points to 211 and the subordinated index climbing 10 to 351, according to JPMorgan Chase & Co. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped nine basis points to 572 while the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 0.25 basis point to 131.5 basis points.
• Draghi Softens Outlook on Risks as ECB Refuses to Show Its Hand on Greece. European Central Bank President Mario Draghi signaled the economic outlook has improved, suggesting policy makers may be less inclined to add to stimulus as Greece reached agreement on austerity measures to secure a bailout. “The economic outlook remains subject to high uncertainty and downside risks,” Draghi said at a press conference in Frankfurt today. Last month, he said the outlook was subject to “substantial” downside risks. The ECB left its benchmark interest rate at a record low of 1 percent, as predicted by 55 of 57 economists in a Bloomberg News survey, and Draghi said officials didn’t discuss a rate change. “With the more optimistic outlook, a March rate cut is still possible but far from certain,” said Christian Schulz, senior economist at Berenberg Bank in London. “If the rebound in confidence indicators gains strength and more hard data confirms the trend, the ECB may leave rates unchanged.”
• US. Jobless Claims Fell Last Week to 358,000. (video)
  
• World Food Prices Rose Most in 11 Months. Global food prices rose 1.9 percent in January, the biggest gain in 11 months as the cost of oilseeds, dairy and grains increased, the United Nations Food and Agriculture Organization said. An index of 55 food items climbed to 214.3 points from a restated 210.3 points in December, the Rome-based FAO said on its website today. All commodity groups in the index advanced, according to the UN agency. Costlier food is driving up living costs in China, home to about a fifth of the world population. Chinese inflation unexpectedly accelerated in January on the back of food prices, which rose 10.5 percent last month compared with a year earlier, up from 9.1 percent in December, the country’s National Bureau of Statistics reported today. “International prices of all major cereals with the exception of rice rose in January,” the FAO wrote. “Prices of all the commodity groups that compose the index registered gains, with oils increasing the most.”
• U.S. Postal Service Loses $3.3B, Warns of Cash Drain. The U.S. Postal Service said it lost $3.3 billion in the quarter ended Dec. 31 -- typically its strongest -- and that it expects to run out of cash in October unless Congress agrees to cuts in facilities and employees. “If the Postal Service is unable to reduce its operating costs by $20 billion a year by 2015, we may not be able to return to profitability,” Postmaster General Patrick Donahoe said at a board meeting in Washington today. “We may become a long-term burden to the taxpayers if we are not able to make these reductions quickly.” The ninth consecutive quarter of losses may increase pressure on Congress from the Postal Service and customers to approve legislation intended to return it to solvency.
• Oil Rises for Third Day on U.S. Jobless Claims, Greek Austerity Agreement. Crude for March delivery gained $1.08, or 1.1 percent, to $99.79 a barrel at 1:06 p.m. on the New York Mercantile Exchange. Prices are up 1 percent this year. Earlier, they touched $100.18 a barrel. Brent oil for March settlement increased $1.19, or 1 percent, to $118.39 a barrel on the ICE Futures Europe exchange, rising for an eighth day. Total fuel demand in the U.S. fell to 17.6 million barrels a day last week, the lowest level since 1999, the Energy Department reported yesterday. The Organization of Petroleum Exporting Countries also cut its 2012 forecast for global oil consumption by 120,000 barrels a day to 88.76 million in its monthly market report today. The Energy Department trimmed its global demand forecast for the year to 89.25 million barrels a day on Feb. 7 from 89.38 million in January.
• Chen Says China Exports Probably Fell in January, Hurting Small Businesses. Chinese Commerce Minister Chen Deming said exports probably fell in January after foreign trade slowed in the second half of last year, as he pledged to maintain “stability” in the yuan’s exchange rate. Overseas (CNFREXPY) sales last month “cannot make us optimistic” and are “expected to have negative year-on-year growth due to Chinese New Year and other factors,” Chen said yesterday in a written response to Bloomberg News. “Chinese trading companies, particularly small and micro businesses, have come under growing pressure.”
• Syria Forces Hit Opposition Towns Amid Turkey-Russia Plans to End Conflict. Syrian President Bashar al-Assad’s forces attacked cities where the opposition is concentrated as countries including Turkey, France and Russia sought to present their own solutions to end the violence. Syria’s army continued shelling Homs, killing at least 126 people, Al Jazeera reported today, and more than 300 people have died during Assad’s siege since Feb. 3, Human Rights Watch said today. More than 5,400 people have died since protests began last March, according to the United Nations.

Wall Street Journal:

• Euro-Zone Ministers to Review Greek Deal. Euro-zone finance ministers gathered here on Thursday to review a new Greek political accord on budget austerity and the details of a planned debt restructuring aimed at slashing the country's debt burden to private creditors by €100 billion ($132.6 billion).

CNBC.com:

• 'Mortgage Deal from Hell' Hurts Responsible Borrowers: Bove. (video) Homeowners who kept up on their payments would lose while those who fell behind would win under an apparent deal between big banks and state governments, banking analyst Dick Bove said. The agreement, expected to be worth at least $26 billion, would compensate both victims of alleged foreclosure fraud and underwater homeowners whose debt exceeds the value of their properties. While the agreement is being hailed in some circles as justice for those duped into buying overvalued homes, Bove, the vice president of equity research at Rochdale Securities, thinks the deal is misguided. "Those people lucky or smart enough to stop making payments on their homes may get their loan balances reduced," he said. "Other beneficiaries of the agreement may be homeowners who have seen the value of their houses drop below the size of their mortgages. They get a freebie that other homeowners who have paid their mortgages down will not get."

Business Insider:

• 20 Ways The Recession Has Changed How Young Adults See The World.
• A Guide To The Horrible Youth Unemployment Mess In Europe.
• The Corruption Of Our Entire Political Class Explained In One Paragraph.
• Socgen: China's Labor Problems Are About To Get A Lot Worse.
• Suddenly, A Bunch Of iPad 3 Parts Are Leaking And They Hint At A Big Boost In Performance.
  

Zero Hedge:

• iEconomy: This Is How Apple(AAPL) Distorts The Market.
• Is The Foreclosure Settlement A Shadow Bailout For Broke California?
  

Seeking Alpha:

• Facebook(FB) Now Has Competition. (graph) Among social networks, Google + (GOOG) is growing faster than Facebook, just after one year of existence. While it took Facebook nearly a year to reach a million users and more than four years to reach 100 million, it took only Google+ about two weeks to reach 10 million, and less than a year to reach 100 million. Paul Allen, the founder of Ancestry.com, says Google+ could reach 400 million users by the end of the year. At its foundation, Google+ benefits from huge competitive advantages such as solid network effects over Facebook. Around 2004, at the foundation of Facebook, the web site was available only to students. Google+ is getting advertising from the world's largest search engine.

market folly:

• Bridgewater's Ray Dalio Interview With Charlie Rose. (video)
  

HedgeFund.net:

• Illinois Pension Takes First Step Into Hedge Funds. The $6.85 billion pension will allocate approximately 9% to Blackstone Alternative Asset Management, Diversified Global Asset Management and The Rock Group, according to a HFMWeek report.

Telegraph:

• Debt Crisis and Greek Talks: Live.
  

Frankfurter Allgemeine Zeitung:

• Subsides from the European Union ruined the economy in Greece as the country didn't invest the funds it received in new and competitive technologies and spent it on consumption rather, Greek Economy Minister Michalis Chrysochoidis said in an interview. As a result, producers switched to become importers as that offered better returns, Chrysochoidis said. Spending cuts and a worsening recession could lead to a "big bang" at some point in Greece, he said.

Market News International:

• China lenders' reserve-requirement cuts may be postponed after inflation jumped last month, citing government officials and economists.

CCTV:

• China still faces "relatively large" pressure from imported inflation, citing Sheng Laiyun, a spokesman for the National Bureau of Statistics.

Bear Radar

Style Underperformer:

• Large-Cap Value -.15%

Sector Underperformers:

• 1) Disk Drives -.90% 2) Medical Equipment -.70% 3) REITs -.60%

Stocks Falling on Unusual Volume:

• CS, BCE, PEP, JCOM, IRBT, OPNT, IOC, SNCR, YPF, DMND, IPXL, GRPN, SGI, ANDE, NANO, DNKN, OPNT, MAKO, MDSO, TRCR, SOHU, FORR, SREV, OPEN, MMYT, QCOR, SPSC, NTL, NPO, FMC, BGC, HCA, DFT and TRIP
  

Stocks With Unusual Put Option Activity:

• 1) NUAN 2) MTG 3) VMC 4) TSL 5) EWT
  

Stocks With Most Negative News Mentions:

• 1) TRIP 2) IRBT 3) APKT 4) GRPN 5) PEP
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.39%

Sector Outperformers:

• 1) Tobacco +1.39% 2) Coal +1.37% 3) Alt Energy +1.36%

Stocks Rising on Unusual Volume:

• LNG, LO, BG, AAPL, HMY, PM, HES, TLEO, THOR, AKAM, SCSS, MITK, ALXN, ARBA, HPY, GIL, ENS, TSL, EFX, TDC, CVA, CODE, HPY, SIX, EFX, KBH, ENS, V and WFM
  

Stocks With Unusual Call Option Activity:

• 1) DMND 2) ATML 3) NWL 4) AEO 5) V
  

Stocks With Most Positive News Mentions:

• 1) AKAM 2) THOR 3) ONNN 4) URBN 5) AAPL
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Greece Talks Stall as Venizelos Heads To Brussels. Greek Finance Minister Evangelos Venizelos said there is still uncertainty on the terms of a 130 billion-euro ($172 billion) rescue package for Greece ahead of a meeting of euro area finance ministers today. “There are issues outstanding that must be resolved by the time the eurogroup meets,” Venizelos told reporters in Athens today after a meeting with Prime Minister Lucas Papademos and European Union and International Monetary Fund officials that ended just before 6 a.m. “As the prime minister said, there is agreement on all the issues bar one.” The meeting with the so-called troika of lenders, representing the European Commission, the European Central Bank and the IMF, took place after leaders of the three parties supporting the government met Papademos and failed to resolve a dispute over pension cuts. The hitch came after a meeting of almost eight hours that was due to complete a package designed to help the country avert default that’s been on the table since July. Greece faces a 14.5 billion-euro bond payment on March 20 and is struggling to secure financing to avert a collapse of the economy that could spark a new round of contagion in the euro area. Papademos and the leaders of the three parties supporting the government “agreed on all the points of the program with the exception of one which requires further elaboration and discussion” with the lenders, according to an e-mailed statement from the premier’s office in Athens. “This discussion will occur immediately so that it can be completed in light of the meeting of euro area finance ministers” today.
• ECB Taking Losses on Greek Debt Risk Sinking Italy: Euro Credit. The IMF's pressure on the ECB to take part in Greek debt writedowns may backfire by deterring the central bank from extending its program of buying bonds from distressed nations. "They will have to think of something, but it would be wrong to force the ECB to take losses," said Stuart Thomson, who helps oversee $121 billion at Ignis Asset Management in Glasgow. "The ECB taking a haircut would imply a fiscal transfer, which isn't its mandate. And the SMP would collapse if they do that. We can do without another rout in the market."
  
• Draghi's First 100 Days Presage ECB Aid to Avoid Greek Default. In his first 100 days as European Central Bank President, Mario Draghi has taken unprecedented action to tackle the sovereign debt crisis. Greece may push him even further into unknown territory. Draghi will today face questions on the ECB’s possible role in helping Greece reduce its debt as the threat of a disorderly default mounts. While the ECB has remained silent on its intentions, options canvassed range from selling its Greek bond holdings at the discount price it paid for them to taking a loss on the Greek assets held in investment portfolios, two euro-area officials said late last week on condition of anonymity. At stake is whether Greece can complete a private sector deal to reduce its debt by as much as 100 billion euros ($133 billion) and secure a second bailout package that will allow it to pay its bills -- key steps toward ending the debt crisis. The ECB has been instrumental in easing the turmoil since Draghi took the reins on Nov. 1, offering banks unlimited three-year loans and reversing the two rate hikes implemented by his predecessor, Jean-Claude Trichet. “When Mario Draghi looks back this week at his first 100 days as ECB president, he can be satisfied,” said Carsten Brzeski, senior economist at ING Group in Brussels. “But pressure on the ECB to join the burden sharing on Greece has increased. Everything will be done to avoid a disorderly default, at least in the short term.”
• Diamond Foods(DMND) Foods Names New CEO on Audit Results. Diamond Foods Inc. said Wednesday it is replacing its CEO and chief financial officer after an internal investigation found that the company improperly accounted for payments to walnut growers and it needs to restate two years of financial results. The news sent shares of the San Francisco-based company plummeting more than 43 percent in after-hours trading.
• Japan Machine Orders Fall More-Than-Estimated 7.1% as Yen Climbs. Japan’s machinery orders fell at the fastest pace in three months in December as a faltering global economy and gains by the yen dimmed the outlook for exporters. Bookings, an indicator of capital spending, decreased 7.1 percent from the previous month, the Cabinet Office said in Tokyo today, after surging 15 percent in November. The median estimate of 29 economists surveyed by Bloomberg News was for a 5 percent decline. Japan’s exports fell for three straight months through December as European leaders grappled with the debt crisis that is driving the euro region into a recession.
• Expats Say China's Mortgage Rules Too Restrictive. (video) China said last week it will limit mortgage loans for home purchases by foreigners to stem overseas investment in its property market as part of efforts to cool prices. Bloomberg's Stephen Engle reports from Beijing on the potential impact this new regulation may have on expatriates who call the country home.

Wall Street Journal:

• U.S. Plans to Sue Banks Over Bonds. Federal securities regulators plan to warn several major banks that they intend to sue them over mortgage-related actions linked to the financial crisis, according to people familiar with the matter. The move would mark a stepped-up regulatory effort to hold Wall Street accountable for its sale of bonds linked to subprime mortgages in 2007 and 2008. At issue is whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people said. It isn't clear which firms will receive the formal Securities and Exchange Commission enforcement warnings, known as "Wells notices."
• Egypt Judges Detail Evidence Against Americans, Others. Foreign nongovernmental organizations are working to manipulate Egypt's postrevolutionary politics, two Egyptian judges said on Wednesday, in the latest signal that Egypt won't back down from an investigation that has bruised relations with one of America's strongest security partners in the Middle East. For the first time since the inquiry began last summer, the investigating judges detailed a body of evidence, including seized maps, videos and cash, they say implicates 43 civil-society workers, including at least 16 Americans, in acts of ill-defined political subterfuge.
• Banks Near $25 Billion Pact on Foreclosure Probe. Government officials are on the verge of an agreement worth as much as $25 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders. The agreement covers five banks: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. Together, the five handle payments on 55% of all outstanding home loans, or about 27 million mortgages, according to Inside Mortgage Finance
• Blackstone(BX), Partner Raise $1 Billion to Develop Shale Field. Blackstone Group LP is expected to announce Thursday that the firm and an energy company in which it invested raised $1 billion from commercial banks to develop south Texas oil fields, according to people familiar with the matter. The deal, involving GeoSouthern Energy Corp., shows the vast capital flowing into the U.S. oil patch, where some $145 billion is expected to be spent on drilling and completing onshore wells this year, nearly double the $73 billion spent in 2009.
• Tweets About Prophet Muhammad Spark Saudi Death Threats. A 23-year-old Saudi columnist fled the country, his associates said, after tweets on the human nature of the Prophet Muhammad touched off a campaign in which prominent clerics and thousands of their followers used Twitter, YouTube, email and fax to demand the man's execution. The campaign against the writer, Hamza Kashgari, stunned many Saudis with the speed, number, and intensity of messages calling for his death.
• Loss Prompts UBS(UBS) to Claw Back Bonuses. UBS AG has notified employees it will claw back part of the bonuses due to its best-paid investment bankers this year because of a trading scandal last year that put the unit into the red for 2011, according to a person familiar with the matter. The move is likely to further upset some top employees at a bank that has already faced problems retaining top bankers and is now in the midst of a sweeping revamp of its investment bank.
• Google(GOOG) Near Launch of Cloud Storage Service. Google Inc. is close to launching a cloud-storage service that would rival one of Silicon Valley's hottest start-ups, cloud-storage provider Dropbox Inc., according to people familiar with the matter. Like Dropbox, Google's storage service, called Drive, is a response to the growth of Internet-connected mobile devices like smartphones and tablets and the rise of "cloud computing," or storing files online so that they can be retrieved from multiple devices, these people said.
• New Way to Pay Doctors. UnitedHealth(UNH), Nation's Largest Insurer, Is Latest to Announce Fee Overhaul. Efforts to change how Americans pay for health care are gathering momentum on a national scale as UnitedHealth Group Inc., the largest U.S. health insurer, becomes the latest carrier to say it is overhauling its fees for medical providers.

MarketWatch:

• CME Group(CME) Cut by S&P as MF Global Fallout Spreads. CME Group Inc. saw its credit rating cut by Standard & Poor's and could face further downgrades because of reputational damage linked to the exchange operator's role in the collapse of MF Global. Standard & Poor's Ratings Services cut CME's long-term rating by a notch to AA-, citing the potential cost of a financial safety net established for clients in the wake of the unfolding controversy surrounding the bankruptcy of MF Global Holdings' (MFGLQ).

Business Insider:

• States Are Refusing To Lock Up Americans Without Due Process.
• A Chinese Government-Owned Firm Has Been Charged With Stealing Trade Secrets From DuPont(DD).
  

Zero Hedge:

• Are Government Unions Out Of Control? An Infographic.

CNBC:

• Cisco(CSCO) Beats Street's Earnings Estimates, Boosts Dividend. Cisco Systems reported quarterly earnings and revenue that beat analysts' expectations Wednesday as its restructuring effort appears to finally be paying off. The company also announced plans to raise its dividend. Cisco's better-than-expected revenue growth was from more than "routing and switching," CEO John Chambers told CNBC Wednesday, it was also data centers, cloud computing and $1 billion in cost-cutting measures.
• Groupon(GRPN) Posts Positive Revenue, Misses on Earnings. In its first earnings announcement since going public last year, Groupon beat on revenue but missed on earnings as user growth slowed from the breakneck pace of past quarters. "The number of active customers came in short. That means not enough people are buying Groupons,” said Sameet Sinha, an analyst at B.Riley. "Yes, you can get fewer people to buy more, but how long can that continue? You need to start investing in new customer growth."
• Visa(V) Earnings Top Forecasts as Credit-Card Use Climbs. Visa reported a higher quarterly profit as the world's largest credit and debit card processing network benefited from consumers swiping their cards more, and authorized a new $500 million share repurchase program.

IBD:

• Steven Madden(SHOO) Hopes To Grow From Buy Of Canada Stores.

NY Times:

• Push to Avert Foreclosures Hits Court Logjam.

Forbes:

• The IMF Deserves To Be Put On A Drastic Diet by Steve Forbes.
• Global Warming Alarmism Points To Bad Karma For Your Tax Dollars.
  

CNN:

• New Nuclear Reactors Set To Be OK'd For Georgia. The U.S. Nuclear Regulatory Commission is expected to approve licenses to build two new nuclear reactors Thursday, the first approvals in over 30 years.

Seeking Alpha:

• 15 Hedge Fund Favorites Trading Strongly Ahead Of Earnings.

Washington Post:

• China's Inflation Rebounds in January, Renewing Pressure to Control Living Costs. China’s inflation rebounded in January as food prices soared, renewing pressure on Beijing to control surging living costs as it tries to boost slowing growth in the world’s second-largest economy amid warnings of a global downturn. Consumer prices rose by an unexpectedly strong 4.5 percent over a year earlier, up from December’s 4.1 percent, data showed Thursday. Food prices jumped 10.5 percent, accelerating from the previous month’s 9.1 percent. “It makes us more concerned that the risk of inflation is not going away,” said Nomura economist Zhiwei Zhang. Among Chinese planners “it will reinforce concerns about inflation that already were there.” The price spike could complicate the communist government’s efforts to revive growth that slowed to a 2 1/2-year low of 8.9 percent in the final quarter of 2011. Chinese leaders are gradually easing controls to boost growth and job creation but are moving cautiously for fear of igniting a new price spiral. “In the short term, it also lowers the possibility of policy loosening,” Zhang said.

Derivatives Intelligence:

• Vanguard Sees Greek Threat To Sovereign CDS Market. If credit default swaps aren't triggered on Greek debt, the sovereign CDS market will likely break down, according to Nick Pierce, head of fixed income in Europe at Vanguard.
  

USA Today:

• Momentum Growing for Sales Taxes on Online Purchases.

Reuters:

• Greece must find 300M Euros savings within 15 days: government. Greece has two weeks to identify fiscal savings worth 300 million euros ($398 million) under a new bailout deal with the European Union and IMF, a senior Greek government official said on Thursday. "Greece has another 15 days to specify fiscal savings worth 300 million euros," the official said on condition of anonymity.
  
• Egypt to Deploy Soldiers, Tanks Ahead of Strike. Egypt's ruling generals said on Wednesday they would deploy more soldiers and tanks across the country, an announcement seen as a warning to activists planning a national strike on the anniversary of the overthrow of President Hosni Mubarak. Campaigners demanding a swifter transition to civilian rule have called for mass walkouts and civil disobedience on Feb. 11. At least 15 people have died in street fighting in Cairo and the eastern city of Suez in recent days, unrest provoked by the death of 74 people after a soccer match.
• Akamai(AKAM) Q4 Beats as Demand for Online Content Soars. Internet content delivery company Akamai Technologies Inc posted a fourth-quarter profit above analysts' expectations, helped by growing demand for online content, sending its shares up 12 percent in trading after the bell.
  

Tibet Daily:

• China ordered a heightened state of alert and tighter "control of the society" in Tibet, citing the region's communist party chief Chen Quanguo as saying in a speech. Government officials should focus on maintaining stability and fighting separatism, Chen said.

Shanghai Securities News:

• The China Banking Regulatory Commission will punish banks for non-compliant off-balance sheet lending, citing bankers. Non-compliant lending includes wealth management products, loan transfers and financing bills used to get around loan quotas.

Evening Recommendations
CSFB:

• Reiterated Outperform on (RL), raised estimates, boosted target to $190.
  

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 161.0 -4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 134.75 -2.25 basis points.
• FTSE-100 futures +.33%.
  
• S&P 500 futures -.07%.
  
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CBOE)/.34
• (BDC)/.53
• (KKR)/.75
• (CLI)/.67
• (PM)/1.09
• (CPO)/1.11
• (ALXN)/.34
• (BG)/1.53
• (PEP)/1.12
• (SEE)/.49
• (STMP)/.22
• (ATVI)/.56
• (LNKD)/.07
• (NUAN)/.36
• (ASEI)/.78
• (EXPE)/.52
• (PBI)/.60

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 370K versus 367K the prior week.
• Continuing Claims are estimated to rise to 3500K versus 3437K prior.

10:00 am EST

• Wholesale Inventories for December are estimated to rise +.4% versus a +.1% gain in November.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The BoE Rate Decision, ECB Rate Decision, 30Y T-Bond Auction, USDA Crop report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (STT) Analyst Forum could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down 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 day.

Stocks Slightly Higher into Final Hour on More Financial/Tech Sector Optimism, Short-Covering, Asian Stock Gains

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.14 +2.78%
  
• ISE Sentiment Index 110.0 +8.91%
  
• Total Put/Call .82 +9.33%
  
• NYSE Arms .86 -26.23%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 96.26 +1.72%
  
• European Financial Sector CDS Index 163.20 +4.75%
  
• Western Europe Sovereign Debt CDS Index 325.73 +.48%
  
• Emerging Market CDS Index 257.21 +.50%
  
• 2-Year Swap Spread 28.25 -1.5 bps
  
• TED Spread 43.75 -.5 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -68.25 +4.0 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.
  
• Yield Curve 172.0 unch.
  
• China Import Iron Ore Spot $144.70/Metric Tonne -1.04%
• Citi US Economic Surprise Index 76.40 -1.2 points
  
• 10-Year TIPS Spread 2.20 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -10 open in Japan
• DAX Futures: Indicating +39 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades near session highs, despite recent sharp gains, global growth fears and Eurozone debt angst. On the positive side, Alt Energy, Computer, Semi, Disk Drive, Bank and HMO shares are especially strong, rising more than +1.0%. Tech and Financial shares have traded well throughout the day. Copper is up +.7% and Gold is down -.75%. Oil continues to trade 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 rose around +1.5% overnight, led by a +2.4% gain in Shanghai. The Japan sovereign cds is falling -5.6% to 116.86 bps and the US sovereign cds is falling -4.2% to 38.24 bps. On the negative side, Coal, Oil Tanker, Steel, Biotech and Airlines shares are under pressure, falling more than -1.0%. The Transports have underperformed throughout the day again. Lumber is falling -.85%. The Portugal sovereign cds is still up +12.0% in less than 3 weeks. Lumber is down -2.2% 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 weekly MBA Purchase Applications Index has been around the same level since May 2010. 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 unch. today at 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. 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. 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/financial sector optimism.