Bear Radar

Style Underperformer:

• Mid-Cap Value +.69%

Sector Underperformers:

• 1) Networking -.39% 2) Homebuilders -.16% 3) Alt Energy -.03%

Stocks Falling on Unusual Volume:

• MKTG, LPI, ATVI, NBL, GPRE, FNSR, ADTN, PETM, SPPI, FSLR, RIMM, BID, SHS, MBI, UNG, AH and DGI
  

Stocks With Unusual Put Option Activity:

• 1) SLE 2) FCN 3) IVN 4) SDRL 5) KR
  

Stocks With Most Negative News Mentions:

• 1) SPRD 2) ADTN 3) TMO 4) RIMM 5) MAT
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.59%

Sector Outperformers:

• 1) Construction +1.59% 2) Banks +1.09% 3) Oil Tankers +1.08%

Stocks Rising on Unusual Volume:

• PEGA, STAA, EIX, HEES, HSFT, BSFT, BRLI, ZUMZ, SHOO, PCYC, ARIA, BKE, CCO, MDR, LIZ, GPS, MTZ, BWC, FIO, DAR and IACI

Stocks With Unusual Call Option Activity:

• 1) SLE 2) TRIP 3) SVNT 4) DISH 5) ELN
  

Stocks With Most Positive News Mentions:

• 1) WMT 2) AMD 3) M 4) BA 5) TGT
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Greece Parliament Approves Pension, Health Cuts in Race for Second Bailout. Greece’s parliament approved cuts in pensions and health care a day after ratifying a 3.2 billion euro ($4.3 billion) package of spending reductions to move closer to a rescue package to avert financial collapse. Lawmakers voted 213-58 in favor of the law, Acting Parliament Speaker Grigoris Niotis said early today in remarks on state-run Vouli TV. Approval in parliament allows Prime Minister Lucas Papademos to meet with euro-area partners this week having met most of the conditions demanded by the European Union and International Monetary Fund for Greece to get a lifeline of 130 billion euros. Finance ministers from the region will discuss the second Greek rescue program in Brussels today. “This government will do its utmost to implement fully and effectively both the program and the complementary actions,” Papademos said in the Belgian capital yesterday. There is an “urgent need” for the reforms to be twinned with concrete measures, he said.
• Papademos Rejects Call for Special EU Official to Oversee Greece's Economy. Greek Prime MinisterLucas Papademos rejected a call to appoint a special European Union official to oversee Greece’s economy, hours before euro-area finance chiefs are due to discuss the nation’s rescue package. Luxembourg’s Jean-Claude Juncker, who leads the group of finance ministers from the 17-nation region, called yesterday for an EU commissioner to take charge of rebuilding the Greek economy. The priority is the success of the second bailout for the indebted nation, he told the European Parliament in Brussels. “We welcome the support of the European Commission,” Papademos said at a Brussels press briefing with the president of the commission, Jose Barroso. “This is sufficient -- our own work with the coordination of the commission -- to ensure the effective and full implementation of the program.” Barroso said that the Greek crisis is a “priority for the commission; not only for one commissioner.” The “crucial part” of implementing reforms is in the hands of the Greek authorities, he said. “It is an illusion to think that someone outside Greece is going to solve the problems of Greece,” Barroso said. Euro-area finance ministers will discuss the second Greek rescue program at a gathering led by Juncker today in Brussels. That meeting, which will precede a summit of the 27 EU leaders, probably will finalize the 130 billion-euro ($174 billion) package, a European official said yesterday on condition of anonymity. Greece committed to 3.2 billion euros of extra austerity measures and negotiated terms for the biggest debt restructuring in history to secure the new financing. Papademos said the program for Greece “would be implemented by the Greek government and the Greek authorities.”
• MF Global Collapse Prompts Clash Over Collateral. CME Group Inc. (CME) sparred with the Vanguard Group Inc. and other derivatives buyers over whether U.S. regulators should extend collateral-protection rules designed for the swaps market to the futures industry following the collapse of MF Global Holdings Ltd. Speaking today at the opening of a two-day roundtable organized by the U.S. Commodity Futures Trading Commission, derivatives buyers including Tudor Investment Corp. and Fidelity Investments urged the commission to add the new collateral- segregation standards to the futures market. “We know it’s going to cost more. We know it might increase margining. There are a bunch of buy-side participants who are willing to pay more,” said John Torell, Tudor’s chief financial officer. Tim Doar, managing director at CME, the world largest futures exchange, said the agency shouldn’t “rush to judgment” with regulatory changes.
• BOE's Weale Says There May Not Be Case For Further U.K. Stimulus This May. Bank of England policy maker Martin Weale said that U.K. inflation may prove more persistent than expected, making it unlikely the economy will require further stimulus once the current round of bond purchases ends. Higher oil prices and potential wage pressures as the economy recovers “suggest a risk that there may be more persistence to inflation than one might expect at a time of rising unemployment and weak demand,” Weale said in a speech in London late yesterday. “I do not think there is likely to be a further case once our current program is complete” in early May for more bond purchases.
• Goldman(GS), JPMorgan(JPM) Post Identical Swap Exposure to Europe Nations. JPMorgan Chase & Co. and Goldman Sachs Group Inc., two of the largest derivatives dealers, posted identical gross notional amounts of credit-default swaps bought and sold on five troubled European nations. JPMorgan purchased single-name contracts protecting $147.3 billion of debt and sold $142.4 billion related to the so-called GIIPS nations of Greece, Ireland, Italy, Portugal and Spain, the bank said in its annual filing today. Goldman Sachs disclosed the exact same figures in a filing yesterday. In both cases, the numbers were as of Dec. 31.
• Dan Zwirn's Hedge-Fund Fall Is a Horror Story of Doing Right.
• China's Holding of Treasuries Dropped in '11. China, the largest foreign U.S. creditor, reduced its holdings of U.S. government securities last year for the first time since the Treasury Department began compiling the data in 2001. The world’s second-largest economy held $1.15 trillion Treasuries as of Dec. 31, down from $1.16 trillion at the end of 2010, according to Treasury data released yesterday. The U.S. revised the figures to show that China held about $51 billion more than reported earlier last month. The revision shows nation’s holdings peaked at $1.3149 trillion in July.
• Rising Crude Prices Tap Into a Barrel of Nonsense: Caroline Baum. In some circles, including the current administration, higher oil prices are a goal -- except not in an election year and not when prices are high to begin with. Before he became President Barack Obama’s energy secretary, Steven Chu was an advocate of higher oil prices as a means of curbing the public’s consumption of fossil fuels and increasing the viability of alternative energy. In a September 2008 interview, Chu told the Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” I suspect Chu will refrain from advocating European-style gas prices -- two or three times U.S. prices, courtesy of a hefty value-added tax -- until he returns to academia.
• Gold Falls as Bernanke Damps Stimulus Bets. Gold futures fell as much as $100 to below $1,700 an ounce on signs that that the Federal Reserve will refrain from offering more monetary stimulus to bolster the U.S. economy. In testimony before Congress today, Fed Chairman Ben S. Bernanke gave no signal that the central bank will take new steps to boost liquidity. The dollar rose as much as 0.8 percent against a basket of major currencies, eroding the appeal of the precious metal as an alternative investment. Yesterday, gold reached $1,792.70, a three-month high, even as coin sales by the U.S. mint slumped in February .
• China's February Home Prices Fall Most in 19 Months on Curbs, SouFun Says. China’s February home prices posted the biggest decline in 19 months as the government pledged to maintain curbs on property, according to SouFun Holdings Ltd. (SFUN), the nation’s biggest real-estate website owner. Home prices dropped 0.3 percent last month from January, according to SouFun, which began compiling the figures in July 2010 when housing values fell 1.3 percent. Residential prices slid in 72 of 100 cities tracked by the company last month, 12 more than in January, it said in an e-mailed statement today.

Wall Street Journal:

• Hushed Up: Secret Panel Holds Fate of Greek CDS. A secretive panel of representatives from 15 large banks, hedge funds and investment houses holds the key to potential multibillion-dollar payouts to investors as a Greek default looms. The group meets Thursday morning to rule whether Greece's debt restructuring should trigger payments on insurance-like contracts known as credit-default swaps, or CDS. The impact of their decision will reverberate beyond the narrow confines of the Greek debt market and could affect investors across other European bond markets and the holders of $2.9 trillion in CDS on government debt around the world.
• Relieved Republicans Seek to Keep Focus on Economy. Mitt Romney's twin victories in Michigan and Arizona Tuesday sent a wave of relief through the ranks of his supporters and anxious members of the party establishment, but still left him facing a multistate battleground to the Republican presidential nomination that includes some difficult territory.

MarketWatch:

• China Manufacturing Survey Rise But Still Weak. Rival Chinese manufacturing surveys released Thursday indicated mild improvement in February, though underling data showed surging input prices and deteriorating new orders, suggesting further weakening in the nation’s economy. The closely watched manufacturing Purchasing Managers’ Index (PMI) for February rose to 51.0 on the 100-point scale, up from 50.5 in January, according to the government-backed China Federation of Logistics & Purchasing. The result, just above the 50 mark that separates expansion from contraction, matched the median of economist forecasts polled by Dow Jones Newswires. However, HSBC’s own China manufacturing PMI sat below the key 50 level, even though it also showed improvement, with a rise to 49.6 from the 48.8 recorded in the prior month.

Zero Hedge:

• Complete Paulson 2011 Letter.
• Art Cashin And Europe's Clashin' Culture.
  

CNBC:

• Fannie Mae Seeks $4.6 Billion in Aid After 4Q Loss. Fannie Mae, the biggest source of money for U.S. home loans, said on Wednesday it would seek $4.6 billion in additional federal aid after reporting a fourth-quarter loss.
• Need to Ease 'Goes Away' as Economy Improves: Fed's Plosser. The case for further quantitative easing "goes away" as the U.S. economy improves, Philadelphia Federal Reserve chief Charles Plosser told CNBC Wednesday.
• Greek Default Payouts May Bring Some Costly Surprises.
  

Washington Post:

• For Greece, A Critical Conference Call Between London And New York. After months of riots, high-level summits and geopolitical drama, a part of Greece’s fate will be settled Thursday in an arena far from the public eye: a transAtlantic videoconference. On the call, 15 bankers and hedge fund investors will convene to determine whether Greece has triggered a “credit event” — in essence, a violation of the bonds it has sold to investors.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).

Reuters:

• Syrian Rebels Say They Face 7,000 Government Troops. Syrian rebels defending the besieged Baba Amro district of the city of Homs reported further fighting overnight and said they faced at least 7,000 troops loyal to President Bashar al-Assad.

Financial Times:

• Portuguese Bond Yields Climb On Default Fears. Portugal’s cost of borrowing leapt on Wednesday because of growing worries that the country will follow Greece and head towards a possible default on its debt. Portuguese 10-year bond yields jumped to 13.75 per cent, a rise of 73 basis points, after a report from the troika of the European Union, European Central Bank and the International Monetary Fund unsettled the markets.
• Bundesbank at Odds With ECB Over Loans. The head of Germany’s Bundesbank has launched a powerful attack on Mario Draghi, president of the European Central Bank, in a sign of mounting concern in Europe’s biggest economy at measures being taken to try to contain the eurozone financial crisis. Jens Weidmann’s warning of increasing risk stemming from some ECB policies highlights fears of potential costs for Germany from its role as the eurozone’s biggest creditor nation and may spark fresh doubts about the eurozone’s ability to deal with the long-running banking and sovereign debt crisis.

Telegraph:

• European Central Bank's Cheap Money Has Just Turned Toxic Banks Into Zombie Banks.
• ECB's Mario Draghi Raises The Stakes With Trillion Euro Gamble. Mario Draghi’s latest half-trillion blast of credit averts a funding crunch for crippled banks and crippled EMU states, but raises the ultimate cost to catastrophic levels if the underlying crisis in southern Europe drags on into the middle of the decade.

Sky News:

• Diageo shareholders expect the company to be making contingency plans in the event of a default or withdrawal of any country from the euro, CEO Paul Walsh said in an interview.

Handelsblatt:

• Marc Faber said the European Central Bank's latest loans to European banks will only calm markets short-term, lead to inflation in the long-term and push banks' funding problems into the future, citing the fund manager.
  

21st Century Business Herald:

• The central government has asked the finance ministry and the national tax bureau to as soon as possible give a timetable for expanding a property tax trial nationwide. Shanghai and Chongqing are the only two cities to have started property tax trials so far.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 160.5 -.5 basis point.
  
• Asia Pacific Sovereign CDS Index 129.0 -2.5 basis points.
• FTSE-100 futures -.02%.
  
• S&P 500 futures -.17%.
  
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DIN)/.87
• (KR)/.49
• (FL)/.51
• (ESL)/.75
• (KCP)/.37
  

Economic Releases
8:30 am EST

• Personal Income for January is estimated to rise +.4% versus a +.5% gain in December.
• Personal Spending for January is estimated to rise +.4% versus unch. in December.
• PCE Core for January is estimated to rise +.2% versus a +.2% gain in December.
• Initial Jobless Claims are estimated to rise to 355K versus 351K the prior week.
• Continuing Claims are estimated to rise to 3418K versus 3382K prior.
  

10:00 am EST

• Construction Spending for January is estimated to rise +1.0% versus a +1.5% gain in December.
• ISM Manufacturing for February is estimated to rise to 54.5 versus 54.1 in January.
• ISM Prices Paid for February is estimated to rise to 58.0 versus 55.5 in January.
  

Afternoon

• Total Vehicle Sales for February are estimated to fall to 14.0M versus 14.13M in January.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Pianalto speaking, Fed's Sarah Bloom Raskin speaking, Fed's Lockhart speaking, Fed's Kocherlakota speaking, Fed's Williams speaking, ICSC Chain Store Sales for February, RBC Consumer Outlook Index for March, weekly EIA natural gas inventory report, RBC Restaurant/Leisure Conference, (ANSS) Investor Day and the (LSTR) Mid-Quarter Update could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity 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 Reversing Lower into Final Hour on Eurozone Debt Angst, Less Dovish Fed Commentary, Less Tech Sector Optimism, Rising Energy Prices

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.59 -2.06%
  
• ISE Sentiment Index 148.0 +39.62%
  
• Total Put/Call 1.01 +29.49%
  
• NYSE Arms 1.0 +15.95%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.64 -.34%
  
• European Financial Sector CDS Index 167.50 -.37%
  
• Western Europe Sovereign Debt CDS Index 348.04 +.69%
  
• Emerging Market CDS Index 249.85 -.34%
  
• 2-Year Swap Spread 26.0 -2.5 bps
  
• TED Spread 40.75 +1.75 bps
  
• 3-Month EUR/USD Cross-Currency Basis Swap -67.0 -.5 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .08% -2 bps
  
• Yield Curve 169.0 +4 bps
  
• China Import Iron Ore Spot $143.0/Metric Tonne unch.
  
• Citi US Economic Surprise Index 49.90 +2.3 points
  
• 10-Year TIPS Spread 2.28 +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +71 open in Japan
• DAX Futures: Indicating +23 open in Germany

Portfolio:

• Slightly Lower: On losses in my Retail, Medical and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 reverses opening gains on Eurozone debt angst, less dovish-than-expected Bernanke commentary, rising energy prices, less tech sector optimism, global growth fears, technical selling and profit-taking. On the positive side, Homebuilding shares are especially strong, rising more than +2.0%. Gold is plunging -4.2%. Major Asian indices rose around +.75% overnight, with the exception of Shanghai which fell -.95%. The Germany sovereign cds is falling -2.6% to 78.33 bps, the UK sovereign cds is falling -1.4% to 68.93 bps, the Italy sovereign cds is falling -1.5% to 380.90 bps and the France sovereign cds is dropping -1.5% to 176.12 bps. On the negative side, Coal, Alt Energy, Steel, Semi, Networking and Construction shares are under meaningful pressure, falling more than -1.5%. Small-caps are relatively weak. Tech shares have also traded poorly throughout the day. Oil is rising +.22%, Lumber is falling -.61% and Copper is falling -1.13%. The 10Y T-Note Yield at 1.98% remains a concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data. Despite the recent positive US economic data, the Philly Fed/ADS Real-Time Business Conditions Index has declined -6.04% over the last 6 days and continues to trend lower from its peak in mid-December. As well, the ATA For-Hire Truck Tonnage SA Index fell -4.0% in January. While this is off of a surge in 4Q, it bares monitoring. Lumber is -4.1% 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 Western Europe Sovereign CDS Index is still fairly close to its Jan. 9th all-time high. Overall, credit gauge improvement has stalled over the last few weeks and these gauges are still at stressed levels. China Iron Ore Spot has plunged -21.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +692.0% 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. Alternative Energy shares are getting hit again today(Wilderhill Clean Energy Index -9.2% in 3 weeks). This group continues to trade very poorly considering $100+ oil and the recent broad market rally. I suspect many of these companies will not survive the next global economic downturn. The euro is under pressure on better US economic data, less dovish-than-expected Bernanke commentary, worries over Ireland/Portugal and profit-taking. This is helping to push gold and silver down -4.5% and -6.2%, respectively. Given that hedge funds have recently increased equity market exposure and that gold/gold stocks play a big part in many portfolios, I suspect this could be fueling some of the reversal lower in the broad equity market today. US stocks are extended short-term and still near intermediate-term resistance. As well, the MS Tech Index is flat over the last 9 days, despite the ongoing surge in shares of Apple(AAPL), which is another red flag. For an intermediate-term equity advance from current levels, I would still expect to see further European credit gauge improvement, a further subsiding of 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 modestly lower into the close from current levels on Eurozone debt angst, less dovish-than-expected Bernanke commentary, rising energy prices, less tech sector optimism, global growth fears, technical selling and profit-taking.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.60%

Sector Underperformers:

• 1) Gold & Silver -3.30% 2) Alt Energy -2.0% 3) Construction -1.30%

Stocks Falling on Unusual Volume:

• FSLR, END, YPF, RIC, EXK, CEVA, RIO, LGCY, NRG, BLX, VOCS, SODA, GNTX, SPLS, DWA, TTEC, GIFI, SGMS, PANL, SYKE, SPRD, APEI, SZYM, PAAS, BCPC, RPXC, LAYN, APOL, KYN, DY, SLV, TAL, RPM, GDX, GLD, PRIM, IAU, DDD, JOY, KYN, CDE, SGY, PCS and NOG
  

Stocks With Unusual Put Option Activity:

• 1) ALU 2) CEDC 3) SPLS 4) GNW 5) GGC
  

Stocks With Most Negative News Mentions:

• 1) FSLR 2) CSTR 3) MRO 4) PCS 5) EA
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.20%

Sector Outperformers:

• 1) Homebuilders +.89% 2) Tobacco +.28% 3) Gaming +.19%

Stocks Rising on Unusual Volume:

• EXLS, STEC, VRSK, VVUS, CTCM, CRI, QUAD, AH, QUAD and NUS
  

Stocks With Unusual Call Option Activity:

• 1) ALXA 2) ABC 3) SODA 4) CYH 5) SPLS
  

Stocks With Most Positive News Mentions:

• 1) RDC 2) DDS 3) AZO 4) COST 5) NOC
  

Charts:

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