Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Profit-Taking, More Shorting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 16.16 +6.81%
  
• ISE Sentiment Index 61.0 -46.49%
  
• Total Put/Call 1.14 +16.33%
  
• NYSE Arms 2.09 +74.03%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 89.21 +3.55%
  
• European Financial Sector CDS Index 156.55 +10.84%
  
• Western Europe Sovereign Debt CDS Index 227.99 -.75%
  
• Emerging Market CDS Index 239.20 +4.0%
  
• 2-Year Swap Spread 26.75 -.25 basis point
  
• TED Spread 41.25 +2.5 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -53.0 +.75 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .07% -2 basis points
  
• Yield Curve 191.0 -1 basis point
  
• China Import Iron Ore Spot $145.20/Metric Tonne +.21%
  
• Citi US Economic Surprise Index 29.0 -.6 point
  
• 10-Year TIPS Spread 2.38 -2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -187 open in Japan
• DAX Futures: Indicating a -5 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech and Retail sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added 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 lower on rising Eurozone debt angst, high energy prices, profit-taking, more shorting and rising global growth fears. On the positive side, Computer Service, Utility and Restaurant shares are slightly higher on the day. Technology shares are holding up relatively well. Oil is falling -1.2% and Gold is down -.4%. On the negative side, Coal, Oil Tanker, Energy, Oil Service, Steel, Homebuilding and Road & Rail shares are under significant pressure, falling more than -2.5%. Small-caps and the Transports are also underperforming. Lumber is down -.9% and Copper is down -1.9%. Major European indices fell around -1.5%, led by a -1.7% decline in Italy. The Bloomberg European Financial Services/Bank Index is fell -1.9%. The France sovereign cds is up +4.74% to 175.12 bps, the Spain sovereign cds is rising +2.07% to 432.34 bps, the Germany sovereign cds is rising +4.5% to 73.50 bps, the Russia sovereign cds jumped +4.68% to 174.42 bps, the Brazil sovereign cds is up +4.5% to 121.49 bps and the Italy sovereign cds is rising +3.6% to 376.75 bps. Moreover, the European Investment Grade CDS Index is rising +4.1% to 96.33 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak despite investor perceptions that the US economy is accelerating. Lumber is -10.5% since its Dec. 29th high despite the better US economic data, 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 around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +750.0% ytd. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. The most economically sensitive stocks are substantially underperforming today. The blowup in the (TVIX) ETF is a concern for market psychology. One of my longs, market leader (AAPL), isn't trading quite as well of late. The stock weakened into the afternoon for the second day in a row. I suspect we could see some more equity profit-taking/new shorting into quarter-end, given the big move higher in the major averages. For the recent equity advance to maintain traction, 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 mixed-to-higher into the close from current levels on short-covering, more tech sector optimism and investor performance angst.

Today's Headlines

Bloomberg:

• Euro-Area Services, Manufacturing Contracted in March: Economy. Euro-area services and manufacturing output contracted more than economists forecast in March, adding to signs the economy has slipped into recession. A euro-area composite index based on a survey of purchasing managers in both industries dropped to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate today. Economists forecast a gain to 49.6, according to the median of 21 estimates in a Bloomberg News survey. A reading below 50 indicates contraction. Europe's economy may struggle to regain strength after shrinking 0.3 percent in the fourth quarter as governments toughen budget cuts, rising oil prices erode consumers' purchasing power and global demand weakens. "Today's figures clearly show that the recession in the euro zone is far from over," said Peter Vanden Houte, an economist at ING Group in Brussels. "This increases the danger that the debt crisis could come back with vengeance" by making it more difficult for governments to cut budget deficits.
• Italy, Spain Too Big for Firewall to Save, Schaeuble Aid Says. Italy and Spain would be "too big to be saved" by the euro-area's financial backstop and debate should focus on the firewall's quality rather than its size, German Finance Ministry official Ludger Schuknecht said. Ideas "floating around" to boost Europe's defenses against the debt crisis aren't "the ideas that the mega- firewall fans might like," Schuknecht, who heads the ministry's department of fiscal policy, international finance and monetary policy, said at a Bloomberg Link Sovereign Debt Conference in Frankfurt today. "Italy and Spain are too big to be saved by these kind of numbers that we are putting into the window," he said. Making the firewall credible to markets "is much more important than talking about big numbers that are afterwards just a show."
• Sovereign, Corporate Bond Risk Rises on Slowing Growth Concern. Credit-default swaps insuring government and company debt rose after a contraction in manufacturing in Europe and China triggered concern the global economy will slow. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 10 basis points to 280, according to BNP Paribas SA prices at 10:41 a.m. in London. The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings increased 20.5 basis points to 590.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings advanced 2.25 basis points to 116.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 13 basis points to 203 and the subordinated index jumped 14.5 to 326.5, BNP Paribas data show.
• S&P’s Kraemer Says Italy Risks Are Main Focus for Policy Makers. Standard & Poor’s analyst Moritz Kraemer said Italy is the country most under scrutiny by policy makers as its financing needs are larger than the support available from Europe’s crisis-fighting resources. “The country that is most in the eye of the attention of policy makers has to be Italy,” Kraemer said at the Sovereign Debt Conference hosted by Bloomberg Link in Frankfurt today. That is “simply because of its very large financing requirements” which are, “with the current toolbox of safety nets that we have in Europe, beyond credible support."
• China Requires Lawyers to Swear Their Loyalty to Communist Party. China’s Ministry of Justice ordered lawyers who have just obtained or renewed a legal license to take an oath declaring their support for the leadership of the ruling Chinese Communist Party. The ministry said lawyers are required to take such an oath within three months of receiving their certificates, according to a statement posted on the ministry’s website yesterday. Lawyers are also ordered to “strive for the cause of socialism,” according to the oath. The move takes place amid a push by the party to maintain its control across different sections of society. The party needs to “resolutely oppose all erroneous political tendencies contrary to the party’s basic line,” Vice President Xi Jinping said in a March 1 speech.
• Crude Declines on Weak Global Manufacturing Data. Oil fell to a one-week low after manufacturing in the euro area and China contracted this month, signaling that fuel consumption may decline. Futures dropped as much as 2.6 percent as services and output slipped more than forecast in Europe, according to London-based Markit Economics. Crude oil for May delivery fell $2.34, or 2.2 percent, to $104.93 a barrel at 12:26 p.m. on the New York Mercantile Exchange. The contract touched $104.50, the lowest level since March 15. Prices are 6.2 percent higher this year. Brent oil for May settlement declined $1.62, or 1.3 percent, to $122.58 a barrel on the London-based ICE Futures Europe exchange.
• Copper Drops as China Manufacturing May Contract: Shanghai Mover. Copper declined to the lowest in almost two weeks after a preliminary report showed manufacturing in China, the biggest consumer, may contract for a fifth month, eroding demand prospects amid high local stockpiles. Three-month copper fell as much as 1.1 percent to $8,365.50 a metric ton, the lowest level since March 9, on the London Metal Exchange and traded at $8,379 by 3:58 p.m. Tokyo time. “With swelling stockpiles at bonded and exchange warehouses in China, the PMI data has confirmed a slowdown in the country’s economic growth,” said Chae Un Soo, a metals trader at Korea Exchange Bank (004940) Futures Co. in Seoul. Stockpiles tallied by the Shanghai Futures Exchange climbed to 227,276 tons last week, almost four times as much as the beginning of December. Bonded warehouse inventories in Shanghai were at 530,000 tons last week, a Bloomberg News survey showed.

Wall Street Journal:

• FedEx(FDX) Says Economy Isn't As Robust As It Hoped. FedEx says the U.S. and global economies aren't growing as strongly as expected. It expects a mild recession in Europe this year. That outlook on a conference call with analysts overshadowed a strong third quarter for the Memphis, Tenn., company. Online holiday sales helped FedEx more than double its profit in the three-month period ended in February. The world's second-largest package delivery company is predicting growth of 2.1 percent in the U.S., compared with a forecast of 2.5 percent growth by leading economists surveyed by The Associated Press. It dropped its forecast for global growth to 2.3 percent from 2.9 percent.
• March, April to Determine How Soon U.S. Hit Debt Ceiling. The U.S. government is projected to hit the $16.394 trillion debt ceiling sometime later this year, but how quickly we get there depends in large part on how things shape up in March and April.
  

MarketWatch:

• U.S. Jobless Claims Fall 5,000 to 348,000.

CNBC.com:

• 'Worst Still to Come' for Europe: Citi Economist. Despite high-profile measures such as the Greek debt deal and mass pumping of liquidity into the banking system, Europe’s problems have merely been delayed for another day, Willem Buiter, chief economist at Citi, told CNBC.

Business Insider:

• This Midwest Boomtown May Have Just Recorded The Lowest Unemployment Rate In American History. Williston sits on top of the monster oil deposits known as the Bakken shale.
• Members Of Al Qaeda Were Upset When Keith Olbermann Was Fired From MSNBC.
• Citi: We're At The End Of The Commodity Supercycle.
• Gasoline Use Goes Back to Collapsing. (graph) For the latest week, gasoline usage was 8.2% off of what it was the year before.

Zero Hedge:

• Home Prices Miss Large On 9th Consecutive Downward Revision. (graph)
• 12 Charts On China's Chagrin.
• HFT Has Disconnected Commodities From Fundamentals.
• 2 Charts On Why The LTRO Is A 'Real' Failure.
  

Seeking Alpha:

• A Chinese Hard Landing?

Reuters:

• Fed's Fisher Sees No Need for More Monetary Easing. The U.S. economy is in much better shape and does not need further help from the central bank, a top Federal Reserve official known for his hawkish policy views said on Thursday. Although growth is "slower than we would like," Dallas Fed President Richard Fisher told Fox Business Network, "it's gaining momentum." "We will not support further quantitative easing under these circumstances because there's a lot of money lying on the sidelines, lying fallow," he said according to a transcript provided by the network. "We don't need any more monetary morphine."
• U.S. Miners, Steel Shares Drop on China Slowdown. Shares in U.S. steelmakers and coal and metal miners dropped on Thursday on signs that industrial growth was slowing in China, a big consumer of metal and raw materials for its economic building.

Telegraph:

• Eurozone 'Poster Child' Ireland Slumps Back into Recession. Ireland tumbled back into recession at the end of last year, dousing political claims that the "Celtic Tiger" has benefited from its tough austerity programme.

MailOnline:

• Al-Qaeda Fanatic is Dead: Serial Killer Jumps Out Flat Window With All Guns Blazing in Dramatic End to 32-Hour Siege. (pics)
  

Bear Radar

Style Underperformer:

• Small-Cap Value -1.40%

Sector Underperformers:

• 1) Coal -3.50% 2) Oil Service -3.10% 3) Homebuilders -3.0%

Stocks Falling on Unusual Volume:

• FDX, SWC, HES, BCS, GOLD, ASBC, LOGM, INTU, ROSE, BRLI, ABFS, MIDD, SCHN, VRA, TPCG, HAYN, ZEUS, DMND, CLC, IHS, EWP, LGF, THO, EBF, PVD, EWO, GME, WLK, BHI, SDT and MTDR
  

Stocks With Unusual Put Option Activity:

• 1) LCC 2) WLP 3) OIH 4) DISH 5) NKE
  

Stocks With Most Negative News Mentions:

• 1) NLY 2) T 3) BHI 4) CVX 5) OIH
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -1.0%

Sector Outperformers:

• 1) Computer Services -.20% 2) Retail -.50% 3) Gaming -.60%

Stocks Rising on Unusual Volume:

• DFS, SCVL, GIII, DISH, UTIW, CVG, WPI, RGR and DG
  

Stocks With Unusual Call Option Activity:

• 1) GALE 2) ONXX 3) DISH 4) GOLD 5) FRX
  

Stocks With Most Positive News Mentions:

• 1) XOM 2) LVS 3) FDX 4) XEC 5) FSLR
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Ireland Said to Ready Bank-Debt Proposal for ECB Review. Irish Central Bank Governor Patrick Honohan will probably ask the European Central Bank Governing Council today for permission to effectively delay a cash payment on its banking debt, as the country tries to ease the burden of saving its financial system, said two people with direct knowledge of the matter.
  
• Emirates Says 'Whole Load of Airlines' Will Fail in Fuel Squeeze. Emirates, the biggest airline by international traffic, said more carriers will go bust this year as fuel costs and sluggish economies undermine profitability. “We can reel off a whole load of airlines that are teetering on the brink or are really gone,” Tim Clark, the Dubai-based carrier’s president, said in an interview. “Roll this forward to Christmas, another eight or nine months, and we’re going to see this industry in serious trouble.”
• Masters of the Universe Start to Challenge Ben Bernanke. Never mind that inflation has been running consistently above the Fed’s announced goal of 2 percent. Why would the Fed, with a $2.9 trillion balance sheet, a near-zero benchmark rate for the fourth year running, and a recent history of inflating asset bubbles, be so eager to provide more stimulus when the economy is clearly improving?
  
• Tarullo Says Regulators Need to Weigh Volcker Rule Objections. Federal Reserve Governor Daniel Tarullo said U.S. regulators must weigh objections raised by banks and governments to restrictions on proprietary trading under the Dodd Frank Act overhauling financial supervision. “U.S. regulators will need to carefully consider the concerns that have been raised and the broader international implications of the Volcker rule as we work to finalize our implementing rules,” Tarullo said in testimony he plans to deliver to the Senate Banking Committee tomorrow. The central bank released his comments today.
• JPMorgan(JPM), Wells Fargo(WFC) Employees Join Goldman Sachs(GS) Among Top Obama Donors. President Barack Obama's largest campaign donors last month included employees of Wells Fargo & Co.(WFC), JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to an analysis of Federal Election Commission records. Their support indicates that Wall Street, which gave Obama $16 million for his successful 2008 White House run, is opening its checkbook again for the president. The contributions helped Obama raise $21 million in February, including $6.5 million transferred from a joint fundraising committee with the Democratic National Committee. Obama has also focused on technology companies. Employees of Microsoft Corp.(MSFT), based in Redmond, Washington, donated $91,881, his biggest source of contributions from those listing an employer, according to a computer-assisted analysis of FEC reports filed today. Microsoft employees and their families have given almost $300,000 to Obama's re-election, more than anyone else, according to FEC records and the Center for Responsive Politics.
• AMR Said to Ready Bankruptcy Court Bid to Dump Contracts. American Airlines (AMR) plans to begin a U.S. bankruptcy-court process for rejecting union contracts by next week after failing to reach a deal to cut labor costs, two people familiar with the matter said. American’s parent, AMR Corp., will probably ask for court approval within a week to reject collective bargaining contracts barring last-minute agreements with its unions on concessions, said the people, who declined to be identified because it’s a confidential matter.

Wall Street Journal:

• North Korea, Iran Expected to Dominate Nuclear Talks. North Korea and Iran are expected to dominate President Barack Obama's trip to South Korea this weekend, as concerns mount about Tehran's nuclear ambitions and Pyongyang's preparations for a satellite launch the U.S. and its allies said they believe is largely for military purposes.
  
• Diamond Foods(DMND) in Talks With Potential Investors.
• Deutsche Bank(DB) Shields US Unit From Dodd-Frank. Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary to shield it from new regulations that would have required the German bank to pump new capital into the U.S. arm. The bank on Feb. 1 reorganized its U.S. subsidiary, known as Taunus Corp., so that it is no longer classified as a "bank holding company," according to disclosures by the bank and on the U.S. Federal Reserve's website. Deutsche Bank is at least the second large European bank to make such a change, following in the footsteps of the U.K.'s Barclays PLC.
• Accounting Boards Weighs Tightening 'Repo' Rules. Accounting rule makers will consider whether to tighten standards further on the use of a controversial financing technique used at Lehman Brothers Holdings Inc. and MF Global Holdings Ltd.
• Pimco: We're Bullish On U.S. Dollar. Pacific Investment Management Co. has for the remainder of this year abandoned its long-held negative stance against the dollar and is joining others who are predicting it will rise over the short-term. Scott Mather, the head of global bond portfolio management at Newport Beach, Calif.-based Pimco, said Wednesday that the giant asset management firm is buying the dollar primarily against its three peers–the euro, the pound and the Australian dollar.
• UPDATE: McDonald's Chief Skinner Steps Down; COO Named As Replacement.
• French Close In on Gunman. French authorities publicly identified the suspect in a series of shootings of soldiers, schoolchildren and a teacher, characterizing him as an Islamist radical who had been planning to strike again Wednesday. In a day of revelations and turns that gripped France, special forces descended on a Toulouse neighborhood at 3 a.m. Wednesday and surrounded a four-story apartment building, where the standoff continued into Thursday morning.
• Leaders Urge GOP to Unify, Back Romney. Republican officials and strategists, increasingly weary of the divisive presidential-primary fight, stepped forward Wednesday to call for the party to unify behind Mitt Romney and for his rivals to accept his nomination as inevitable.
• China Reins In Chatter as Rumors Run Wild. Bo Xilai Searches Are Blocked as Talk of a Coup, Party Intrigue Overwhelms Censors, Ending Initial Hands-Off Approach. China's social-media services, which had allowed wide discussion of controversial politician Bo Xilai since his ouster last week, are now cracking down on searches for his name, as his downfall seems to have put much of the country on edge and given rise to fevered rumors of political infighting.
• The Supreme Court Weighs ObamaCare. Congress's power to regulate interstate commerce is broad but not limitless.

Business Insider:

• Has The Optimism Broken In Europe?

CNBC:

• China Factory Activity Shrinks for Fifth Month: HSBC Flash PMI. China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed on Thursday. The PMI, the earliest indicator of China's industrial activity, fell back from February's four month high, slipping to 48.1, within a whisker of the level that economists at HSBC consider a crucial level dividing decline from growth. Slowing activity could mean a further relaxation of monetary policy to help underpin growth in the world's second biggest economy, but lingering inflation risks uncovered by the survey highlight the dilemma facing China's policy makers who are determined to keep a lid on prices. The PMI reading, down from February's 49.6, is likely to reinforce the more bearish views on China's economic trajectory. The fall in the new orders sub-index to 46.2 had a particularly bearish effect on the overall index, as it is the single biggest of the five component items comprising the PMI.
• Mobile Banking: Apple(AAPL) Customers Hungry For iBank. Personal banking with Apple? It could happen. With the growing trend toward mobile banking, Apple is already serving as a digital "bank branch" for many iPhone and iPad users. All the Cupertino-based company needs to do now is provide their own virtual teller-like services. And it looks like they might be doing just that.
• Threat of Refinery Union Strike Could Push Gas Prices Higher. Union workers at Tesoro’s Anacortes, Washington refinery have authorized their representatives to call for a strike, one month after rejecting a new contract over benefit issues.
• Alaska Champions $40 Billion Pipeline Plan. BP(BP), Exxon Mobil(XOM) and ConocoPhillips(COP) are in discussions about a $40 billion project to export liquefied natural gas from Alaska to Asia, potentially opening up large but stranded reserves that currently have no route to market.

IBD:

• Valeant Pharma(VRX) Acquires A Taste for Global Buyouts.

NY Times:

• On Wall St., Keeping a Tight Rein on Twitter.
• German Bond Prices Decline, Unsettling Confidence in a Safe Haven.
  

LA Times:

• Marine Sergeant Being Dismissed for Criticizing Obama. The Marine Corps is moving to boot out a Marine for having made "political statements" about the commander-in-chief on a Facebook page. Sgt. Gary Stein, 26, a nine-year veteran, put comments on a Facebook page called the Armed Forces Tea Party page that said he would not follow unlawful orders from President Obama such as ordering the killing of Americans or taking guns away from Americans. He also criticized comments made by Defense Secretary Leon Panetta about Syria.

Forbes:

• How the Government is Helping Hedge Funds Make Billions Off IPOs.
• Broadcom's(BRCM) New GPS Technology Could Help Your Next Smartphone Navigate The Great Indoors.

ars technica:

• Anonymous Revives LulzSec for New Campaign of Hacks and Attacks. With the arrest of its members and the revelation that its leader was an FBI informant, one might have thought that LulzSec would fade into history. Apparently not. A YouTube video posted at the weekend has announced that LulzSec will return. On April 1st the group will be back, and attack corporations and governments, promising "epic operations and pranks."

Reuters:

• Goldman(GS) Conducts Company-Wide Email Review for "Muppet" - Sources. Goldman Sachs Group Inc has begun scanning internal emails for the term "muppet" and other evidence that employees referred to clients in derogatory ways, Chief Executive Lloyd Blankfein told partners in a conference call this week, according to people familiar with the call. The company-wide email review comes after an executive director named Greg Smith resigned last week in a scathing op-ed column in the New York Times in which he said he saw five Goldman managing directors refer to clients as "muppets," at times over internal email.
• Apple's(AAPL) New iPhone Will Use Bigger 4.6-Inch Display - Report. Apple Inc's new iPhone will have a sharper and bigger 4.6-inch "retina" display and is set to be launched around the second quarter, a South Korean media reported on Thursday.
• Portugal Faces General Strike in Test of Austerity. Portugal faces a general strike by workers angered by austerity measures imposed as a condition of a 78-billion euro bailout last year but doubts remain as to whether Thursday's stoppage will receive widespread support. Portugal's largest union, the CGTP, hopes to mobilise mass support but the Portuguese have shown little interest in imitating the kind of protests seen in Greece, despite record unemployment and the worst recession in decades. Some economists fear Portugal may be pushed into seeking a second bailout from its European partners, but the centre-right government is betting that relative public apathy will help it impose painful spending cuts and policy reforms in order to drag the country out of its debt crisis.
• Urban Outfitters(URBN) CFO Eric Artz Resigns.
• Sonic 2Q Sales Miss Market Expectations, Shares Fall. Drive-in restaurant chain Sonic Corp reported a slightly better-than-expected quarterly profit, but missed revenue expectations and said it may continue to see weak sales, sending its shares down 5 percent in after-market trade.
• US Manufacturers See Higher China Solar Duties Ahead. U.S. solar panel manufacturers are still optimistic of winning substantial duties on solar panel imports from China, despite an initial U.S. government ruling that many found surprisingly low, the lead attorney for the industry group said on Wednesday.
  

Financial Times:

• Germany Warns on Keeping EU Market Open. A Brussels proposal on public procurement sends a “protectionist signal” to China that could trigger retaliation and damage the single market, the German government has argued, taking aim at an initiative championed by Nicolas Sarkozy, president of France. The stark German warning, contained in an informal position paper, emerged as the European Commission announced plans that would allow the European Union to exclude foreign companies from public contracts if their own public procurement markets were closed.

Telegraph:

• US Grip on World Bank Challenged. America's traditional grip on the presidency of the World Bank is expected to be challenged for the first time with the nominations for the post from Nigeria and Colombia. The Nigerian finance minister, Ngozi Okonjo-Iweala, and former Colombian finance minister, Jose Antonio Ocampo, are reportedly being put forward to replace Robert Zoellick who is retiring. Ever since the World Bank was established at the Bretton Woods conference after the Second World War, an American has always led it. The understanding also upholds the traditional that a European always heads the International Monetary Fund, created in the wake of the same conference. Leaders of developing economies have called for a break in the tradition but have so far failed to get enough support from other countries. Sources told Reuters that Mr Okonjo-Iweala and Mr Ocampo have gathered support from key countries such as South Africa and Brazil.

Sueddeutsche Zeitung:

• Bundesbank President Jens Weidmann criticized the German government's 2013-2016 budget plans said the country's budget deficit needs to be lowered faster, citing an interview. It's "not very ambitious" that the structural deficit will rise this year and that the government seeks to balance the budget by 2016, Weidmann said.

Xinhua:

• Chinese State Researcher Yu Bin: There is no room for the PBOC to relax monetary policy.

21st Century Business Herald:

• Banks, Trusts Tighten Credit in China's Dalian. Trust firms were ordered by banking regulator to "immediately" report on business status of Dalian-based companies who do business with them, citing people. Trust firms halted some projects in Dalian after regulators ordered them to. Banks are getting cautious on lending in Dalian and banks' headquarters are watching their Dalian branches closely.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 153.0 +3.0 basis points.
  
• Asia Pacific Sovereign CDS Index 113.50 -.5 basis point.
• FTSE-100 futures -.35%.
  
• S&P 500 futures -.16%.
  
• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PERY)/.38
• (IHS)/.81
• (DG)/.82
• (CAG)/.48
• (FDX)/1.35
• (GME)/1.72
• (NKE)/1.16
• (CPWM)/1.50
• (MU)/-.19
• (SCS)/.14

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 350K versus 351K the prior week.
• Continuing Claims are estimated to rise to 3380K versus 3343K prior.
  

10:00 am EST

• The House Price Index for January is estimated to rise +.3% versus a +.7% gain in December.
• Leading Indicators for February are estimated to rise +.6% versus a +.4% gain in January.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Evans speaking, 10Y TIPS auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for March and the (CAB) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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 Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Rising Energy Prices, Global Growth Fears, Profit-Taking

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.09 -3.15%
  
• ISE Sentiment Index 115.0 +30.68%
  
• Total Put/Call .99 +15.12%
  
• NYSE Arms 1.10 +17.32%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 86.15 -4.70%
  
• European Financial Sector CDS Index 141.23 +1.61%
  
• Western Europe Sovereign Debt CDS Index 229.72 +2.63%
  
• Emerging Market CDS Index 229.06 +.64%
  
• 2-Year Swap Spread 27.0 +.25 basis point
  
• TED Spread 38.75 +1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -53.75 +1.0 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .09% -1 basis point
  
• Yield Curve 192.0 -5 basis points
  
• China Import Iron Ore Spot $144.90/Metric Tonne +.07%
  
• Citi US Economic Surprise Index 29.60 -1.2 points
  
• 10-Year TIPS Spread 2.40 -4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -46 open in Japan
• DAX Futures: Indicating a +14 open in Germany

Portfolio:

• Higher: On gains in my Tech, Retail, Biotech and Medical sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 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, rising energy prices, disappointing US housing data, profit-taking and global growth fears. On the positive side, Oil Tanker, Internet, Semi, Disk Drive, Biotech, Computer Service and Road & Rail shares are especially strong, rising more than +.75%. Technology and Transport shares have traded well throughout the day. The Japan sovereign cds is down -2.8% to 104.20 bps and the Saudi sovereign cds is down -2.5% to 115.07 bps. Moreover, the European Investment Grade CDS Index is down -2.21% to 92.58 bps. On the negative side, Alt Energy, Oil Service, Energy, Steel and I-Banking shares are under pressure, falling more than -.75%. Lumber is down -1.2% and Oil is up +.8%. The 10Y Yld is falling -7 bps to 2.29%. Major European indices fell around -.5%, led by a -1.3% decline in Italy. The Bloomberg European Financial Services/Bank Index is fell -.98%. The France sovereign cds is up +1.94% to 167.21 bps, the Spain sovereign cds is rising +3.41% to 423.67 bps, the Belgium sovereign cds is rising +2.1% to 221.33 bps and the Italian/German 10Y Yld Spread is rising +5.5% to 301.96 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak despite investor perceptions that the US economy is accelerating. Lumber is -9.5% since its Dec. 29th high despite the better US economic data, 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 around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -20.5% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +750.0% ytd. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. Most pundits/analysts continue to say that housing has hit a major bottom. However, despite great weather, record low mortgage rates, an improving labor market and soaring stock market, there is little evidence of a meaningful uptick in nationwide sales. The Homebuilder ETF(XHB) is up 65.0% in less than 6 months. I suspect this group will run into trouble over the coming weeks unless a notable uptick in sales materializes soon. Despite a decline in the euro over the last few weeks, plunging nat gas, a recent mild easing of tensions with Iran and some weaker US economic data, oil continues to trade well, which is a broad market negative. US stocks continue to trade very well, led by tech shares today, as they consolidate recent gains in a healthy fashion and ignore almost all negatives. For the recent equity advance to maintain traction, 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 mixed-to-higher into the close from current levels on short-covering, more tech sector optimism and investor performance angst.