Stocks Rising into Final Hour on More Financial/Tech Sector Optimism, Better US Economic Data, Short-Covering, Investor Performance Angst

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.27 -5.06%
  
• ISE Sentiment Index 118.0 +24.21%
  
• Total Put/Call 1.02 +14.61%
  
• NYSE Arms 1.09 +13.13%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 96.59 -1.51%
  
• European Financial Sector CDS Index 184.17 +.41%
  
• Western Europe Sovereign Debt CDS Index 350.23 -.10%
  
• Emerging Market CDS Index 251.40 -.37%
  
• 2-Year Swap Spread 30.0 +.5 bp
  
• TED Spread 40.50 -.5 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -71.0 -2.5 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .09% +1 bp
  
• Yield Curve 168.0 -3 bps
  
• China Import Iron Ore Spot $138.70/Metric Tonne +2.06%
• Citi US Economic Surprise Index 58.30 -1.5 points
  
• 10-Year TIPS Spread 2.31 +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -10 open in Japan
• DAX Futures: Indicating +9 open in Germany

Portfolio:

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

Today's Headlines

Bloomberg:

• Euro Economy to Contract as Italy, Spain Tumble, EU Says. Europe's economy will shrink in 2012, with Italy and Spain facing sudden crunches as they battle to escape the debt crisis, the European Commission said. The 17-nation euro economy will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain. "The euro area has entered into a mild recession," European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels today after releasing the forecasts. "Prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization." Two days after Greece clinched a second bailout, the forecasts showed an economy pockmarked by the two-year-old fiscal crisis and looked set to stiffen resistance in southern Europe to further doses of German-demanded austerity. The full-year Europe-wide contraction would be the first since 2009, when a 4.3 percent drop in the wake of the U.S.-led banking crisis exposed the overborrowing and imbalances that plunged Europe into its sovereign debt troubles.
• Syrians Defy Crackdown on Eve of Meeting. Syrian opposition supporters rallied in Aleppo and the government resumed its assault on Homs as U.S., European and Arab politicians prepared to meet in Tunisia tomorrow to seek ways to oust President Bashar al-Assad. Assad’s forces started shelling the Baba Amr neighborhood of Homs at 7 a.m., the U.K.-based Syrian Observatory for Human Rights said. The residential area is where Marie Colvin, an American reporter working for the U.K.’s Sunday Times, and French photographer Remi Ochlik were killed yesterday. Mortar shells also landed on the Khalideyeh neighborhood of Homs, the group said, while explosions were heard in Aleppo where protesters had rallied for the funeral of an eight-year-old child who died in gunfire overnight.
• Oil Increases to Nine-Month High. Crude oil for April delivery gained 58 cents, or 0.5 percent, to $106.86 a barrel at 12:53 p.m. on the New York Mercantile Exchange. Earlier, futures touched $107.09 a barrel, the highest price since May 5. Oil has risen 8.9 percent in the past year. Brent oil for April settlement increased 17 cents to $123.07 a barrel on the ICE Futures Europe exchange in London.
• Home Prices Declined 2.4% in Fourth Quarter. U.S. home prices fell 2.4 percent in the fourth quarter from a year earlier, as sales were boosted by investors seeking lower-cost distressed properties. Prices dropped 0.1 percent from the prior three months on a seasonally adjusted basis, the Federal Housing Finance Agency said today in a report from Washington. In December, prices retreated 0.8 percent from a year earlier, while increasing 0.7 percent from the previous month.
• USPS Plans 35,000 Job Cuts as Plants Shut. The U.S. Postal Service, which predicts an annual loss of $18.2 billion by 2015, plans to eliminate 5.4 percent of its workforce by closing almost half of its mail-processing facilities to cut costs. The service plans to shut 223 of its 461 mail-processing plants by February 2013, Postmaster General Patrick Donahoe said in a telephone interview today. The closings will cut about 35,000 jobs, said David Partenheimer, a Postal Service spokesman.
• Germany Slashes Subsides for Solar Energy to Curb Boom in Installations. Germany, the world’s biggest market for solar power, plans record reductions in subsidies for the industry as part of a program to rein in a boom in installations. Environment Minister Norbert Roettgen said he plans to cut premium rates for solar power by between 20.2 percent and 29 percent from March 9 and decrease them further each month beginning in May. Plants larger than 10 megawatts won’t get support after July 1.
• Junk ETFs Draw Most Cash on Record as High-Yield Hunt Speeds Up. Exchange-traded funds for speculative-grade bonds are drawing the biggest inflows on record from investors seeking easier access to higher-yielding assets. ETFs that track junk-bond indexes have tapped $5.5 billion of investments in the securities this year, according to data from Lipper. That almost quadruples the $1.4 billion recorded during the same period of 2011, which was then the highest since the fund research firm started tracking junk ETF data in 2007.
• Global Warming Made First Tiny Horses Even Smaller, Michigan Study Finds. Global warming 50 million years ago caused the first horses, already tiny in stature compared with present-day animals, to shrink 30 percent to about 8.5 pounds, the size of a house cat today, a study suggests. Later, as the climate cooled, the horse called Sifrhippus began to grow in size, according to research in the journal Science. Scientists the University of Michigan’s Museum of Paleontology used fossilized teeth to make the size estimates. From 1906 to 2005, the world was an “unequivocal” warming trend, according to the Environmental Protection Agency’s website. The earth warmed about 1 to 1.7 degrees Fahrenheit over that time, much less than the warming trend 56 million years ago.
• Obama Apologizes for Koran Burning as Afghans, Troops Killed. President Barack Obama apologized for the burning of Korans on a U.S. air base in Afghanistan as Afghans and NATO troops died in a third day of riots over the treatment of the Islamic scripture. At least five deaths raised the riots' Afghan death toll to 12, according to provincial officials reached by phone from Kabul. An Afghan in an army uniform killed two soldiers of the U.S.-led coalition force in Afghanistan, a statement from its headquarters said. Obama wrote to Afghan President Hamid Karzai that "I wish to express my deep regret for the reported incident" in which personnel at the Bagram air base threw copies of the Koran and other books into a burning rubbish pile. "I extend to you and the Afghan people my sincere apologies," Obama wrote, according to a statement from Karzai's office. "We will take the appropriate steps to avoid any recurrence, to include holding accountable those responsible," Obama said.

Wall Street Journal:

• Brazil Wants IMF to Give More Say to Emerging Nations - Source. Changes to the quotas that represent member countries' voting weight in the International Monetary Fund should reflect emerging economies' larger presence in the world economy, a Brazilian government official said Thursday.
• Commerzbank CEO Questions Greek Bond Deal. Commerzbank AG Chief Executive Martin Blessing Thursday criticized the bond-exchange program Greece is seeking to slash its debt, comparing the so-called voluntary nature of private-sector involvement in the deal to "the Spanish inquisition."
  

MarketWatch:

• Romney Tops Obama in Gallup Poll; Santorum Closes Gap.

Fox News:

• Rapid-Fire Attacks Across Iraq Kill 55 People. A rapid series of attacks spread over a wide swath of Iraq killed at least 55 people on Thursday, targeting mostly security forces in what Iraqi officials called "frantic attempts" by insurgents to show civilians that their country was doomed to violence for years to come. The apparently coordinated bombings and shootings unfolded over hours in the capital Baghdad -- where most of the deaths occurred -- and 11 other cities. They struck government offices, restaurants and one in the town of Musayyib hit close to a primary school. At least 225 people were wounded.

CNBC.com:

• Apple(AAPL) Adopts Board Voting Standard, Ponders Dividend. Apple on Thursday adopted a measure long desired by investors and corporate governance activists, granting its shareholders a bigger say in the appointment of directors to the board of the world's largest technology company. Chief Executive Tim Cook also repeated that he has been "thinking very deeply" about investors' demands that the consumer electronics company return some of its $98 billion in cash and securities to shareholders via a dividend.
• P&G(PG) to Cut 5,700 Jobs. Procter & Gamble plans to cut about 5,700 nonmanufacturing jobs as part of a new plan to reduce costs by $10 billion by the end of fiscal 2016, Chief Executive Officer Bob McDonald said on Thursday.
• Is The Smart Money Heading For The Sidelines?
  

Zero Hedge:

• Only 10% of Hedge Funds are Outperforming the S&P In 2012.
• Brent In Euros At All Time High. (graph)
  

Boston Globe:

• Austerity Anger: Poll Finds Greeks Dislike Germany. Pro-austerity Germany is not the flavor of the month in debt-crippled Greece. Sentiments ranging from anger to downright hatred dominate Greeks' view of their country's biggest international creditor, according to a poll in Thursday's Epikaira magazine. Asked to identify their main feelings on Germany, 41 percent of respondents named anger, indignation or fury. An additional 30 percent ranged from disappointment and fear to revulsion. Total positive sentiments were just 8.6 percent. Some 79 percent said they saw Germany's role in Europe as negative, while 81 percent offered a poor opinion of Chancellor Angela Merkel.

Reuters:

• Copper Dips On Weak Outlook For Euro Zone.

Telegraph:

• What's the Greek Debt Crisis All About?
  

Frankfurter Allgemeine Zeitung:

• European Central Bank President Mario Draghi said Greece's implementation of its reform program must be "flawless," citing an interview. "Since everything depends on the implementation of the program, monitoring is very important. And that is being taken care of," Draghi said.
  

Handelsblatt:

• Germany's government doesn't want Greece to get any funds from its second bailout package until the country has implemented the agreed structural reforms, citing a draft government document.
  

El Mundo:

• Italian Prime Minister Mario Monti said Europe's system of social protection such as unemployment payments and pensions is at risk unless the bloc's economy can increase its competitiveness. "There is a real risk that welfare in Europe as we have known it may disappear," Monti said.

Bear Radar

Style Underperformer:

• Large-Cap Value -.01%

Sector Underperformers:

• 1) Alt Energy -2.10% 2) Airlines -1.0% 3) Agriculture -.63%

Stocks Falling on Unusual Volume:

• FSLR, HPQ, AEP, KLIC, WTS, UAL, ALK, AWAY, ANSS, USHS, SKUL, ICON, ARII, NIHD, INTU, WPRT, GEVA, USMO, BBRG, HSTM, GRMN, NDSN, ZUMZ, PDCO, GTI, EME, TFX, SAM, IRM, SWY, ALJ, CE, PSEC, GDP, CWH, KSS, TWI, CXO, NEWP, SKUL, ICON, SWY, CIE, PPO and EME
  

Stocks With Unusual Put Option Activity:

• 1) FTR 2) GPS 3) CIE 4) HPQ 5) JWN
  

Stocks With Most Negative News Mentions:

• 1) NUVA 2) ZUMZ 3) NIHD 4) WLT 5) ICON
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.30%

Sector Outperformers:

• 1) Construction +2.33% 2) Biotech +1.94% 3) Computer Services +1.90%

Stocks Rising on Unusual Volume:

• VVUS, DDD, BVSN, IBM, SSYS, PANL, MKTX, ANGI, LNTA, BLKB, SXCI, CBOU, SHLD, HOLI, FWLT, HSNI, LOOP, MASI, QCOR, AVGO, ESRX, EZCH, GTLS, MIC, EXH, PCS, QEP, LVLT, DNR, LL, GVA, AEL, REXX, FLR, WLL, MASI, CQB, SM, LOOP, EBAY, UGI, HTZ and DDS
  

Stocks With Unusual Call Option Activity:

• 1) IAU 2) VVUS 3) WLL 4) HPQ 5) FLR
  

Stocks With Most Positive News Mentions:

• 1) VVUS 2) K 3) MGM 4) PFG 5) THI
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• IMF Resources Talks Should Follow Europe Financial Firewall, Brainard Says. Group of 20 nations should discuss possible further resources for the International Monetary Fund after Europe decides on its financial firewall, the U.S. Treasury Department’s top international official said. “I’m sure when Europe’s response becomes clear the G-20 will be able to better assess IMF resources.” Brainard said a discussion on further IMF resources should follow European leaders’ assessment on the capabilities of a firewall at a March 1-2 summit. The IMF is seeking $500 billion in additional lending power.
  
• Shanghai Reiterates Property Curbs. Shanghai reiterated its property curbs late yesterday after Shanghai Securities News reported that China’s financial center was easing measures to allow a broader pool of people to buy second homes. Shanghai isn’t changing its housing policies and will continue implementing home-purchase restrictions, Liu Haisheng, the head of the city’s housing authority, said in a statement on its website.
• China Stock Rally to End as Polices Disappoint, BofA(BAC) Says. China's stocks may fall as much as 13 percent by the end of the year as the central bank's “fine- tuning” of monetary policies won't be enough to offset an economic slowdown, according to Bank of America Corp. The government needs to cut interest rates or relax curbs in the property market to sustain this year's 9.3 percent rebound for the Shanghai Composite Index, David Cui, chief China strategist at the Merrill Lynch unit, said in an interview in its Shanghai office yesterday. Cui, 43, who has been bearish on China equities since May 2010, said the Shanghai gauge may drop to 2,100 by year-end. It rose 0.9 percent to 2,403.59 yesterday. “If the government only does fine tuning, it's not sufficient to remove the major overhangs behind the poor market performance over the past two years or so, including a lack of a new and sustainable growth driver and the banking system's bad debts,” said Cui. “The markets will likely remain lukewarm.” The Shanghai gauge tumbled 33 percent over the past two years, making it the worst performer among the world's 10 biggest markets. “Inflation is still a threat,” Cui said. “That is one of the reasons central bank hasn't been more forthcoming with loosening.” Bank of America joins China International Capital Corp. in predicting losses for China's stocks this year. “The reserve ratio cut is largely technical and we don't really read that as loosening,” Cui said. “The stronger indicator will be M2 growth, loan growth or a cut in interest rates.”
• iPad Battle Reveals Bank of China as Apple(AAPL) Opponent. Apple Inc. (AAPL)’s legal fight for the iPad name in China doesn’t just pit the world’s most-valuable company against a failed Hong Kong display maker. Some of the nation’s biggest banks also are opposing the technology giant.
• Iran's Snub of UN Inspectors Dims Prospects for Nuclear Accord. Iran’s refusal to let United Nations experts investigate allegations of illicit nuclear activities at a military base doesn’t inspire confidence for a return to negotiations with the international community, U.S. officials and nuclear-proliferation specialists said. An International Atomic Energy Agency team visiting Tehran was denied access to the Parchin military base during two days of meetings that ended Feb. 21. IAEA Director General Yukiya Amano expressed disappointment that the team “engaged in a constructive spirit, but no agreement was reached.”
• Vivus(VVUS) Weight-Loss Pill Qnexa Wins Backing of FDA Panel. Vivus Inc.’s weight-loss pill Qnexa won the backing of a U.S. advisory panel as the company seeks to gain approval for the first new obesity drug in 13 years. Advisers to the Food and Drug Administration voted 20-2 today that Qnexa’s benefits outweigh its risks at a meeting at agency headquarters in Silver Spring, Maryland. The FDA isn’t required to follow the panel’s recommendation. The agency is scheduled to make a decision on the drug, which it rejected in 2010, by April 17.
• H-P(HPQ) Forecast Misses Estimates Amid Slump. Hewlett-Packard Co. (HPQ) forecast fiscal second-quarter profit that missed analysts’ estimates as consumers curtail personal-computer buying, doing more computing on smartphones and tablets made by rivals. Profit excluding some items will be 88 cents to 91 cents a share for the period that ends in April, Hewlett-Packard said today in a statement. That fell short of 95 cents, the average analyst estimate, according to data compiled by Bloomberg. Sales in the PC group dropped 15 percent to $8.87 billion in the period that ended in January, as consumers held off on buying new machines in the first full quarter under Chief Executive Officer Meg Whitman. Revenue from servers, printers and storage gear also declined.

Wall Street Journal:

• Santorum Draws Fire in Fight for GOP Lead. Republican presidential candidate Mitt Romney sought Wednesday to portray Rick Santorum's 16-year career in Congress as a betrayal of conservative principles, using a televised debate to try to define his top rival at a moment when many voters are paying new attention to the former senator.
  
• New Push for Reform in China. Influential Report to Warn of Economic Crisis Unless State-Run Firms Are Scaled Back. An exclusive preview of an economic report on China, prepared by the World Bank and government insiders considered to have the ear of the nation's leaders, offers a surprising prescription: China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms. "China 2030," a report set to be released Monday, addresses some of China's most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it.
  
• BATS Gets Closer to Going Public. BATS Global Markets may launch its long-planned initial public offering by the end of March in what would be the first U.S. flotation in almost four years launched on an exchange not run by NYSE Euronext or Nasdaq OMX Group Inc.
• U.S. Defends Targeted Killings. The Pentagon's top lawyer on Wednesday defended the use of targeted killings to eliminate suspected terrorists and militants, in an expansion of the Obama administration's public justification for its primary counterterrorism tool. Unmanned drone strikes and special-operations raids have been used to kill terrorist leaders such as Osama bin Laden, Anwar al-Awlaki and hundreds of other suspected operatives in attacks that have grown under President Barack Obama, but that have troubled some of the president's chief political allies.
• Asia Firms Stampede to Bonds or Funding. Asian companies are tapping bond markets at a record pace, worried that the euro-zone crisis may deepen and make it more difficult and expensive for them to secure funds later in the year, say bankers who arrange borrowing.
• Chinese Suppliers Linked to Impure Heparin. The Food and Drug Administration said Wednesday it found 14 additional Chinese companies supplied contaminated raw material to make heparin, a widely used blood thinner.
• Romney's Tax Reboot. His 20% marginal rate cut changes the tax reform debate.
• Health Care's Coming Price Revolution. The private sector is moving to give people the information they need to get treatments that are worth the money. But ObamaCare blocks the way. The old-line Marxists used to talk about "heightening the contradictions" of capitalism to make things worse and hasten the revolution. One of the great ironies of the Affordable Care Act is that it may be doing just that.

Zero Hedge:

• Negative Salaries, Negative Bailout and Now Negative Gold - Greece Just Became The Bankster's Paradise.
• Goldman(GS) Goes Long WTI.
• Number of European Money Losing Companies Rises for First Time in 2 Years, Doubles.
  

CNBC:

• Walgreen(WAG), Other Pharmacies Form Nationwide Network. Walgreen Co. and some independent drugstores are investing in a nationwide push to give pharmacists a chance to work more with patients to improve care and cut costs. The drugstores have invested in RxAlly, a Leesburg, Va., private company that is launching a network involving 20,000 pharmacies focused on better care coordination.
• UK and Japan Warn Volcker Rule Poses Threat to Recovery. The UK and Japan have urged the U.S. to rewrite its so-called “Volcker rule”, claiming that trading restrictions on U.S. banks could hit the international sovereign debt market at a delicate moment in the global recovery. George Osborne, the British chancellor, has joined forces with Jun Azumi, his Japanese counterpart, in warning in a column in today’s Financial Times that the U.S. banking reforms could make it “more difficult, costlier and riskier for countries to issue and distribute debt”, at a time when many eurozone countries are already under strain. The article is the highest profile expression of international concern about the impact of the U.S. reforms, coming from the finance ministers of two countries regarded as among Washington’s greatest economic allies.
• Huge Private Debts Pose Another Hurdle for Euro Zone. Away from the markets' fixation with the debts of Greece and other governments, concern is growing at the painfully slow progress Europe is making in tackling a much bigger mountain of corporate and household debt.

IBD:

• Liquidity Services(LQDT) Takes eBay Model In Unique Direction.
  

NY Times:

• Behind the Google(GOOG) Goggles, Virtual Reality.
• In Germany, a Limp Domestic Economy Stifled by Regulation.
  

Opalesque:

• CFTC Rescinds Hedge Fund Exemptions. The Commodities Futures Trading Commission (CFTC) has significantly changed how hedge funds will be able to participate in commodities. Earlier this month the Commission rescinded several exemptions provided to private funds that operate commodity pools. By removing these exemptions, funds that operate commodity pools will now be required to register with the CFTC as Commodity Pool Operators (CPOs) and may be required to take certification examinations. The rules also include foreign investment advisers that have US clients.

Reuters:

• US Grilling Season Seen Costly as Beef Prices Surge. The grilling season this spring is shaping up to be the costliest ever for Americans already feeling the pinch from rising gasoline prices.

Financial Times:

• Germany Fights Eurozone Firewall Moves. The German government is set to resist or delay increasing the size of the eurozone’s financial “firewall” against contagion from the Greek debt crisis, in the face of mounting pressure from its partners, the International Monetary Fund and the US administration.
• Record Sterling Oil Price Sparks Fears. Oil prices have soared to a record high in sterling terms and are approaching euro highs, raising fears that European countries struggling with heavy debts will face further barriers to economic recovery. “This is a regional oil shock,” said Amrita Sen, commodities analyst at Barclays Capital in London.

Telegraph:

• ECB's Mario Draghi Magic Corrupts Bond Markets. The European Central Bank's blitz of measures to stave off a credit crunch and shore up EMU states are profoundly distorting debt markets and may ultimately do more harm than good. ECB boss Mario Draghi has sparked a blistering rally in global asset markets by lending banks as much as they want for three years at 1pc, but bond experts say the side-effects are toxic and the benefits are wearing off. "It's a sugar rush," said Alberto Gallo, European credit chief at RBS. "It lowers the risk of defaults, but also lowers recovery rates if things go wrong." Lenders must provide the ECB with collateral, at a haircut of up to 65pc, using up ever more of their balance sheets. The ECB has first claim on these assets, pushing other creditors down the pecking order. The longer it goes on, the worse it gets. "There is no such thing as a free lunch. Liquidity today comes at the price of subordination tomorrow," said Mr Gallo, warning that BBVA, BNP, Commerzbank, Intesa, Santander and Unicredit are all vulnerable.
• Spain Appeals to Brussels For Easier Deficit Reduction Targets. Spain has appealed to Brussels for softer deficit-reduction targets, raising fears that Europe's rescue strategies are unworkable in the bigger eurozone economies and not just Greece.

The Australian:

• Julia Gillard Calls Leadership Vote as Kevin Rudd States His Case For A Return As PM. JULIA Gillard says she will go to the backbench if she loses a Monday leadership ballot, and would not recontest the prime ministership. Announcing a ballot for 10am on Monday in Canberra, Ms Gillard challenged Kevin Rudd to give the same undertaking, seeking to lock the former foreign minister into a one-shot strategy.

China National Radio:

• China will implement resource tax and power price reform in western regions of the country first, citing Du Ying, a deputy director with the National Development and Reform Commission.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 165.0 +5.0 basis points.
  
• Asia Pacific Sovereign CDS Index 133.0 +1.75 basis points.
• FTSE-100 futures -.14%.
  
• S&P 500 futures -.06%.
  
• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDS)/2.02
• (PDCO)/.50
• (CKP)/-.06
• (DISH)/.61
• (KSS)/1.80
• (AMT)/.72
• (TGT)/1.39
• (SHLD)/.68
• (DNR)/.34
• (TTC)/.60
• (SWY)/.64
• (GPS)/.42
• (WBMD)/.29
• (OVTI)/.11
• (CRM)/.40
• (MNST)/.37
• (AIG)/.56
• (DECK)/3.14
• (ADSK)/.45
• (MHK)/.72
• (VNO)/.1.23
• (PSA)/1.58

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 355K versus 348K the prior week.
• Continuing Claims are estimated to rise to 3455K versus 3462K prior.

10:00 am EST

• The House Price Index for December is estimated to rise +.1% versus a +1.0% gain in November.
• The House Price Index for 4Q is estimated to rise +.2% versus a +.2% gain in 3Q.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,350,000 barrels versus a -171,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,500,000 barrels versus a -2,867,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +250,000 barrels versus a +400,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a +1.2% gain the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The 7Y T-Note Auction, Kansas City Fed Manufacturing Index for Februrary and weekly Bloomberg Consumer Comfort Index could also impact trading today.
  

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

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Less Financial Sector Optimism, Profit-Taking

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 18.20 +.05%
  
• ISE Sentiment Index 115.0 +21.05%
  
• Total Put/Call .91 +5.81%
  
• NYSE Arms 1.24 +27.37%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 98.08 +.96%
  
• European Financial Sector CDS Index 183.02 +2.76%
  
• Western Europe Sovereign Debt CDS Index 350.54 +2.55%
  
• Emerging Market CDS Index 252.57 -.23%
  
• 2-Year Swap Spread 29.50 unch.
  
• TED Spread 41.0 -1 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -68.50 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .08% +1 bp
  
• Yield Curve 171.0 -3 bps
  
• China Import Iron Ore Spot $135.90/Metric Tonne +.37%
• Citi US Economic Surprise Index 59.80 -2.0 points
  
• 10-Year TIPS Spread 2.30 +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +19 open in Japan
• DAX Futures: Indicating -1 open in Germany

Portfolio:

• Slightly Lower: On losses in my Retail and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some of them
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades slightly lower on rising Eurozone debt angst, high energy prices, global growth fears, profit-taking, technical selling and more shorting. On the positive side, Oil Service and Hospital shares are especially strong, rising more than +1.0%. Lumber is rising +2.98%. The UK sovereign cds is falling -2.1% to 72.17 bps. On the negative side, Coal, Alt Energy, Computer, Disk Drive, Networking, Bank, HMO, Insurance, Homebuilding and Airline shares are under meaningful pressure, falling more than -1.0%. Financial shares are underperforming today and the Transports continue to trade poorly. The Transportation Index is now down -4.3% since Feb. 3 versus a +1.1% gain for the S&P 500. Gold is surging +1.0% and the UBS-Bloomberg Ag Spot Index is rising +.34%. Weekly retail sales rose +2.7% versus a +2.6% gain the prior week. The recent breakout in oil will provide another headwind for sales. Lumber is -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 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 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. Overall, credit gauges have deteriorated recently despite the Greece debt deal and remain at stressed levels. China Iron Ore Spot has plunged -25.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +670.0% ytd and are still very near their recent all-time high. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. Major European indices fell around -.75% today, led by a -1.3% decline in Spanish shares. The Bloomberg European Financial Services/Bank Index is dropped -2.44%. US stocks are still technically extended short-term and are right near intermediate-term resistance with bullish sentiment elevated, energy price becoming a major global headwind and quite a bit of good news likely priced in around current levels. 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-lower into the close from current levels on rising Eurozone debt angst, high energy prices, global growth fears, profit-taking, technical selling and more shorting.