Bull Radar

Style Outperformer:

• Large-Cap Growth -.56%

Sector Outperformers:

• 1) Networking +.85% 2) HMOs -.03% 3) Internet -.15%

Stocks Rising on Unusual Volume:

• LGF, PMC, BRKS, CBOE, MPWR, DMND, RPXC, NXPI, IPGP, LQDT, ALXN, HK, PCYC, AMAP, KNM, CIE, THS, BRKS and ATW
  

Stocks With Unusual Call Option Activity:

• 1) AFL 2) CIE 3) CBOE 4) EDZ 5) LNKD
  

Stocks With Most Positive News Mentions:

• 1) JDSU 2) RF 3) EFX 4) CIE 5) BRKS
  

Charts:

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

Friday Watch

Evening Headlines
Bloomberg:

• Greek Lawmakers Must Back Cuts or Risk Euro Exit, Venizelos Says. Greek Finance Minister Evangelos Venizelos pressed domestic political leaders to yield to conditions for a bailout, saying a refusal would open the way for the country’s exit from the euro. Venizelos said his euro-area counterparts refused to approve a second aid package for Greece yesterday at an emergency meeting because the government fell short of austerity demands and because of a lack of assurances by Greek party leaders that they will stick to their commitments after elections due as soon as April. Another extraordinary assembly of the ministers was set for Feb. 15. “From today until the next meeting of the eurogroup, our country, our homeland, our society has to think and make a definitive, strategic decision,” Venizelos, 55, told reporters after the Brussels talks. “If we see the salvation and future of the country in the euro area, in Europe, we have to do whatever we have to do to get the program approved.” The standoff puts the spotlight on the leaders of the three Greek political parties backing the caretaker government of Prime Minister Lucas Papademos, a former European Central Bank vice president. Haggling over austerity measures between Papademos and the “troika” of the European Commission, ECB and International Monetary Fund stalled for days over pension cuts until the premier announced a “general political agreement” hours before yesterday’s Brussels meeting. Greece, which faces a 14.5 billion-euro bond payment ($19.3 billion) on March 20, has since July been seeking a new aid package to follow an initial rescue of 110 billion euros in emergency loans approved in May 2010. The new program foresees a loss of more than 70 percent for bondholders in a voluntary debt exchange and extra public aid of 130 billion euros. The Greek parliament is due to vote on the accord this weekend. “If our homeland, our people favor another policy that necessarily leads outside the euro area and thus outside European integration, we have to say that directly to ourselves and to our fellow citizens,” Venizelos said. “Nobody can hide behind another.”
• Draghi Slams 'Virility Statements' as Ackermann Shuns ECB Loans. European Central Bank President Mario Draghi lashed out at bankers who said tapping the ECB's three-year-loan program carries a stigma, after executives including Deutsche Bank AG's Josef Ackermann said they shunned the loans. “There is no stigma whatsoever on these facilities,” Draghi said at a press conference in Frankfurt yesterday. “Some have made some sort of statements that I would call statements of virility, namely it would be undignified for a bank, a serious bank, to access these facilities. Now let me say that the very same banks that made these statements access facilities of different kinds -- but still government facilities.”
  
• Greek Doctors Battle Hospital Superbug. Greek doctors are fighting a new invisible foe every day at their hospitals: a pneumonia-causing superbug that most existing antibiotics can’t kill. The culprit is spreading through health centers already weighed down by a shortage of nurses. The hospital-acquired germ killed as many as half of people with blood cancers infected at Laiko General Hospital, a 500-bed facility in central Athens. The drug-resistant K. pneumoniae bacteria have a genetic mutation that allows them to evade such powerful drugs as AstraZeneca Plc’s Merrem and Johnson & Johnson’s Doribax. A 2010 survey found 49 percent of K. pneumoniae samples in Greece aren’t killed by the antibiotics of last resort, known as carbapenems, according to the European Antimicrobial Resistance Surveillance Network. Many doctors have even tried colistin, a 50-year-old drug so potent that it can damage kidneys. “We’re not used to seeing people die of an untreatable infection,” said John Rex, vice president for clinical infection at London-based AstraZeneca, which is developing a new generation of antibiotics. “That’s like something in a novel of 200 years ago.”
• Chinese Recession May Pummel Commodities, Smead Capital CEO Says. China is at risk of falling into a recession by about 2015 that would reduce commodity prices as much as 70 percent, according to the chief executive officer at Smead Capital Management Inc. Commodities from copper to crude oil may drop 50 percent to 70 percent from current prices in three years to five years, Bill Smead, CEO of the Seattle-based mutual fund, said in an interview in Singapore. China, the world’s biggest consumer of energy, metals and grains, has a 30 percent chance of slipping into a recession as property prices fall, hurting local banks that made loans to developers and home buyers, he said. Smead, whose fund manages $170 million and has stakes in Starbucks Corp. (SBUX), McDonald’s Corp. (MCD) and Bank of New York Mellon Corp., doesn’t own natural-resource companies because commodity prices are “massively overvalued,” he said. “Commodities are currently 50 to 70 percent above their cost of production,” Smead said. “History shows prices tend to bottom near the production cost. That’s at about $50 to $55 a barrel for crude oil.” Companies and banks that financed China’s construction boom, which started in 2008, show signs of accumulating more debt than they can pay off, he said. China’s government debt, which may have risen to 20 trillion yuan ($3.14 trillion) by the end of 2010, or about 50 percent of its gross domestic product, is becoming a major constraint on its economic growth, research firm Beijing Fost Economic Consulting Company Ltd. said in December. “Local banks are woefully undercapitalized,” Smead said. “They financed all these developers when it was all build, build, build, build, build. Now, all these buildings are coming up and nobody wants them.” Local governments in China, prohibited from directly taking bank loans or selling bonds, have set up more than 6,000 financing companies to sidestep those rules and raise funds for building stadiums, roads and bridges, the National Audit Office said in a June report. Governments at provincial, city and county levels amassed 10.7 trillion yuan of debt by the end of 2010, the auditor said. Home prices fell for a fifth month in January, according to SouFun Holdings Ltd., the nation’s biggest real-estate website owner that began compiling the figures in July 2010. “We’re not negative about the long-term prospects for the Chinese economy,” Smead said. “But what needs to happen for the success story in China to continue is that they have to clean the system. And that’s what a recession will do.” He recommends buying so-called custody banks like Bank of New York Mellon Corp. (BK) and U.S. equities with low exposure to the Chinese market.
• China's Exports, Imports Fall as Surplus Surges. China’s exports fell and imports slid more than forecast in January, the first declines in two years, as a weeklong holiday disrupted trade and commodity prices dropped. Overseas shipments decreased 0.5 percent from a year earlier, the customs bureau said on its website today. Imports dropped 15.3 percent, compared with a median economist estimate for a 3.6 percent fall. The data may add to concerns that demand from China will be insufficient to help global growth withstand weakness from Europe’s debt crisis. Commerce Minister Chen Deming said yesterday January exports “cannot make us optimistic” and the International Monetary Fund cautioned this week a deterioration in Europe could cut China’s expansion almost in half this year. “Domestic demand was genuinely weak in January, while exports remained on a gradual downward trend,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA. The decline in exports compared with the median estimate for a 1.4 percent drop in a Bloomberg News survey of 31 economists. The median analyst estimate was for a $10.4 billion trade surplus last month after a $16.5 billion excess in December and $6.46 billion a year ago. Imports fell for the first time since October 2009. Last year, purchases from overseas rose 51 percent in January from a year earlier; in January 2010, they surged 86 percent.
• Fed Plays Wall Street Favorites in Secret Bond Deals: Mortgages. The Federal Reserve secretly selected a handful of banks to bid for debt securities acquired by taxpayers in the U.S. bailout of American International Group Inc., and the rest of Wall Street is wondering what happened to the transparency the central bank said it was committed to upholding. “The exclusivity by which the process has shut out smaller dealers is a little un-American,” said David Castillo, head of sales and trading at broker Further Lane Securities LP in San Francisco, who said he would have liked to participate. “It seems odd that if you want to get the best possible price that it wouldn’t be open to anyone who wants to put in the most competitive bid.” After inviting more than 40 broker-dealers to take part in a series of auctions last year, the Federal Reserve Bank of New York asked only Goldman Sachs Group Inc., Credit Suisse Group AG (CSGN) and Barclays Plc (BARC) to bid on the full $13.2 billion of bonds offered in two sales over the past month. The central bank switched to a less open process after traders blamed the regular, more public disposals for damaging prices in 2011. This week, Goldman Sachs bought $6.2 billion of bonds in an auction. The selectivity has irked firms that weren’t also given the chance to profit from the auctions, and raises the question of whether the Fed got the highest price for U.S. taxpayers, who gave insurer AIG a $182.3 billion bailout. The New York Fed resumed its sales of the assets in January after the market recouped a portion of last year’s losses. “The purpose should be to get the best price for the taxpayer,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta who’s now chief monetary economist for Sarasota, Florida-based Cumberland Advisors. “Anybody knows the more bidders the better, so it’s a little hard to understand why they would essentially pick potential winners and losers. That smacks of crony capitalism.”
• Gross Raises Holdings of Treasuries to Highest Since 2010. Pacific Investment Management Co.’s Bill Gross, a year after banishing U.S. government debt from the world’s biggest bond fund, increased his holdings of Treasuries to the highest level since July 2010. Gross increased the proportion of U.S. government and Treasury debt in Pimco’s $250.5 billion Total Return Fund in January to 38 percent from 30 percent in December, according to a report placed on the company’s website.
• Senate Democrats Split Over Obama's Contraception Rule. The Obama administration’s decision to issue a contraception-coverage rule without a broad exemption for religious groups is creating an election-year split among Senate Democrats, with some Catholics in the party joining Republicans in calls to modify or scrap it. Senator Joe Manchin, a West Virginia Democrat up for re- election in November, introduced a bill today that would block the federal government from requiring health insurance plans to cover contraception if the purchaser opposes it for religious or moral reasons. “I feel it’s wrong, the direction and the position that the administration is taking,” Manchin said. “I think it needs to be rebuild, return, and let’s go back to where we were.” Some other Catholic Democrats in the Senate, including John Kerry of Massachusetts and Claire McCaskill of Missouri, said they want the administration to adjust its rule.
• U.S. Banks Face More Costs After $25 Billion Mortgage Deal. Bank of America Corp.(BAC) and other U.S. lenders’ settlement over foreclosure lapses leaves the firms vulnerable to years of litigation and billions of dollars in liabilities for their roles in the housing collapse. Government officials can still pursue claims tied to the packaging of loans into securities, criminal-enforcement actions and fair-lending violations, U.S. Attorney General Eric Holder said today in a press conference. “It’s a big check with narrow immunity,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and now an analyst with FBR Capital Markets in Arlington, Virginia. “You get the state attorneys general off your back, but you’re not getting immunity from securitizations, which could come with their own steep cost down the road.” “Because of the narrow nature and the fact that the banks didn’t get the widespread assurances they were seeking, this was mostly meaningless,” said David Lykken, managing partner at Mortgage Banking Solutions, an Austin-based consulting firm. Regulators are “aggressive” on pursuing securities claims and created a task force to do so, said Department of Housing and Urban Development Secretary Shaun Donovan. The deal doesn’t protect banks from claims related to creating defective loans sold to government-owned Fannie Mae and Freddie Mac, he said. While banks have largely reserved for costs from today’s deal, bigger lenders could face as much as $2 billion a quarter in legal expenses from remaining issues, said Richard Bove, a bank analyst at Rochdale Securities LLC, in an interview with Bloomberg Television. He compared lenders’ predicament to that faced by tobacco and asbestos firms after government agreements. “What we’re going to see for the next five to seven years is these lawsuits going through court after court,” Bove said.
• P&G(PG) Said to Seek Termination of Pringles Sale to Diamond(DMND). Procter & Gamble Co. has decided it will seek to terminate its sale of the Pringles snack business to Diamond Foods Inc., said three people with knowledge of the situation, following the accounting probe that ousted Diamond’s chief executive officer.
• Oil Falls From Three-Week High as Global Economic Concern Counters U.S. Outlook. Oil fell from the highest settlement in three weeks, trimming a weekly gain, as concern that Europe’s debt crisis will worsen and curb global commodity demand countered signs of an economic recovery in the U.S. West Texas Intermediate futures declined as much as 0.5 percent, snapping the longest winning streak since December. Greece won’t receive financial aid until it implements an austerity plan, according to Luxembourg Prime Minister Jean- Claude Juncker. China’s exports fell for the first time in more than two years and OPEC cut its forecast for oil demand. The Organization of Petroleum Exporting Countries reduced its estimate of crude consumption for this year by 120,000 barrels a day to 88.76 million a day, the group’s Vienna-based secretariat said in its monthly market report yesterday. Supply from the 12 members increased to 30.9 million barrels a day last month, the most since October 2008, compared with estimated requirements of 29.55 million, the report showed.

Wall Street Journal:

• Google(GOOG) Developing Home Entertainment System. Google Inc. is developing a home-entertainment system that streams music wirelessly throughout the home and would be marketed under the company's own brand, according to people briefed on the company's plans. The effort marks a sharp shift in strategy for Google, which for the first would time would design and market consumer electronic devices under the Google brand.
• Treasury Explores Final Exit From Bank Bailouts. The Treasury Department is weighing the sale of stakes it owns in hundreds of smaller banks, a senior Obama administration official said, potentially accelerating the government's exit from the financial-system rescue. More than three years after the launch of the Troubled Asset Relief Program, the federal government still owns stakes in about 370 banks. While the biggest institutions, such as Citigroup Inc. and Bank of America Corp., have long since paid back their bailouts, many smaller banks have struggled to repay the government.
• Roads to Nowhere: Program to Win Over Afghan Fails. U.S. taxpayers paid Afghan entrepreneur Ajmal Hasas millions of dollars as part of a plan to win over villages in the country's insurgent heartlands. Instead, Mr. Hasas' seven-mile road construction project went so awry that his security guards opened fire on some of the very villagers he was trying to woo on behalf of his American funders. Mr. Hasas was a point man in a $400 million U.S. Agency for International Development campaign to build as much as 1,200 miles of roads in some of the Afghanistan's most remote and turbulent places.
• Budget Ducks Big Benefit Cuts. President Barack Obama's budget proposal Monday will offer several measures to trim the federal deficit in the next 10 years. But it would leave largely unchanged the biggest drivers of future government spending: the Medicare, Medicaid and Social Security programs that are expanding rapidly as the baby boom turns into a senior boom.
• As Syria Strikes Kill Scores, Opposition Seeks Backing. Syrian forces reportedly killed scores of people during the sixth straight day of attacks on the city of Homs, as opposition leaders and international alliances moved on disparate fronts in an attempt to resolve the conflict. Members from the Syrian National Council, an umbrella of opposition groups, met Thursday in Qatar, ahead of a weekend Arab League summit aimed at hashing out the next moves on Syria. Another opposition group met with leaders in Beijing.

MarketWatch:

• True Religion(TRLG) Profit Drops On Weaker Sales. True Religion Apparel Inc.'s TRLG -22.56% fourth-quarter earnings sank 8.4% as the jeans-maker saw weaker sales in its wholesale business, though its direct consumer unit showed strength. Shares slid 22% to $28.70 after hours as the company missed earnings and revenue expectations and as it gave a downbeat 2012 profit forecast.
• Insiders Are Selling Heavily. Commentary: July was last time insiders were equally as bearish.

Zero Hedge:

• Greece Is Nicht Sehr Happy With Frau Merkel.
• Schaeuble Blesses Gaspar: German FinMin Promises To Rescue Portugal.
  

IBD:

• Discovery's(DISCA) Animal Magnetism Draws In All Markets.

NY Times:

• In Europe, Stagnation as a Way of Life. For all the struggles that Greece has gone through to satisfy its demanding lenders, Europe’s troubles are not going away.

CNN:

• Fewer Young Adults Hold Jobs Than Ever Before. The share of young adults with jobs has hit its lowest level since the government started keeping records just after World War II. By the end of 2011, only 54.3% of those between the ages of 18 and 24 were employed, according to a Pew Research Center report released Thursday. And the gap in employment between the young and all working-age adults is roughly 15 percentage points -- the widest on record.

Reuters:

• EU's Barnier Expresses Concern About Volcker Rule. Michel Barnier, the European commissioner in charge of financial regulation, wrote U.S. regulators earlier this week raising concerns about the impact that a ban on most proprietary trading by banks could have on financial markets outside the United States. Barnier said that a proposed U.S. rule implementing the ban applies too broadly to foreign banks and markets and should instead focus only on trading activities that occur in the United States. He raised the concern that the proposal would make trading markets less liquid, which can raise the costs of borrowing and increase market volatility.
• LinkedIn(LNKD) Upbeat for 2012 on Members, Product Growth. Professional networking service LinkedIn's outlook for the current quarter and the full year surpassed expectations as the company banks on continued strong product and subscription growth after its fourth-quarter revenue beat estimates.

Financial Times:

• Germans Concerned Over Draghi Liquidity Offer. Mario Draghi has run into Bundesbank resistance over easing access to European Central Bank offers of three-year liquidity for eurozone banks, highlighting German unease over the measures the ECB president has taken to turn the region’s fortunes.

Telegraph:

• Quantitative Easing: Pensioners Are Paying The Price For Sir Mervyn's 'funny money'. George Osborne should come clean about the long-term effects of quantitative easing.
• Euro Crisis Averted? Don't Believe A Word Of It. Greece may be clinging on, but the eurozone’s real problems remain resolutely unaddressed. There’s nothing like the long Christmas break for calming things down. Back in early December, it looked as if the euro was on its last legs. Then everyone went on holiday, and by the time they got back, seemed quite to have forgotten what they were originally panicking about. No one honestly believes the eurozone crisis has been vanquished, but since early January there has been a lull in the storm and even a sense of beginning to get on top of things. The European Central Bank’s promise of unlimited liquidity for the stricken banking system seems to be turning things around. Successful resolution of the Greek debt talks yesterday has added to the impression of a crisis in retreat. Regrettably, it’s a view which is almost certainly wrong, both in political and economic terms. The ECB’s actions have bought time, but haven’t addressed the causes of the crisis. The problem of widely divergent competitiveness uncorrected by free-floating exchange rates remains exactly the same as before.
• Greeks Approve 'Tombstone' Austerity Deal With Troika. Politicians in Athens surrendered after a four-day stand-off and approved a tough austerity package in a bid to avoid bankruptcy, but a meeting of eurozone finance ministers said €325m (£273m) of extra cuts are needed.

TVI:

• Germany would be willing to consider adjusting terms of Portugal's aid program once "substantive decision" is made on Greece, Finance Minister Wolfgang Schaeuble tells Portuguese counterpart Vitor Gaspar, in video clip on website of Portuguese TV station TVI.

Globe and Mail:

• Camp Oil Sands: Alberta's New Economic Boom.

Global Times:

• Tibet officials 'Prepare for war'. Officials in the Tibet Autonomous Region have been ordered to recognize the "grave situation" in maintaining stability and to ready themselves for "a war against secessionist sabotage," months before a major plenary session of the Communist Party of China. The fight against the Dalai Lama clique is a "long-term, complicated and sometimes even acute" one, Chen Quanguo, regional Party chief of Tibet, was quoted by the Tibet Daily Thursday as saying. "For those irresponsible officials who walk away from their duties, fail to implement policies or are found guilty of dereliction of duty in maintaining stability, they shall be immediately removed from their posts, pending punishment, regardless of how great the contributions they made in the past or what kind of position they held," Chen warned in a strongly worded speech. Chen asked local officials to "improve the precautionary and emergency management mechanism," and ensure the government's ability to immediately and resolutely handle any emergency. "We should make every effort to win the tough battle to maintain stability, and seize the initiative in our fight against separatism," Chen said. Xu Zhitao, an official with the United Front Work Department of the CPC Central Committee, told the Global Times Thursday that "secessionists led by the Dalai Lama appeared more determined to plot conspiracies this year." The Dalai Lama clique had claimed that they might carry out some schemes to wreck the upcoming Tibetan New Year, which falls on February 22 this year, according to Xu.
  

People's Daily:

• European Unions implementation of the same aviation carbon tax across all economies hurts the aviation industry in developing nations, according to a commentary written by Zhong Sheng. Environmental standards should be set based on "common but differentiated responsibilities", the commentary said.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 159.0 -2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 135.0 +.25 basis point.
• FTSE-100 futures -.15%.
  
• S&P 500 futures -.48%.
  
• NASDAQ 100 futures -.31%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALU)/.08
• (AB)/.23
• (ACI)/.31
• (FLIR)/.45
• (IPGP)/.64
• (LH)/1.41
• (LYB)/.75
• (NYX)/.49
• (PPL)/.62
• (THS)/.87
  

Economic Releases
8:30 am EST

• The Trade Deficit for December is estimated to widen to -$48.5B versus -$47.8B in November.

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for February is estimated to fall to 74.8 versus 75.0 in January.

2:00 pm EST

• The Monthly Budget Deficit for January is estimated at -$34.0B versus -$49.8B in December.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Pianalto speaking, (AEP) Investor Meeting, (MAT) Analyst Presentation and the (MU) Analyst Conference could also impact trading today.
  

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

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