Bull Radar

Style Outperformer:

• Small-Cap Growth +1.26%

Sector Outperformers:

• 1) Education +2.62% 2) Steel +2.46% 3) Computer Hardware +2.25%
  

Stocks Rising on Unusual Volume:

• GDP, LVLT, ARB, TROX, SHFL, GBX, YOKU, CAJ, LOGM, SM, XXIA, PANW, RAX, CAR and FSL

Stocks With Unusual Call Option Activity:

• 1) HTZ 2) DNR 3) APOL 4) RAX 5) GIS
  

Stocks With Most Positive News Mentions:

• 1) CCE 2) NUS 3) NAV 4) ARB 5) CUB

Charts:

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

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Obama Offer Raises Tax Increase Threshold to $400,000. President Barack Obama made a new budget offer that would raise taxes by $1.2 trillion and increase tax rates for households earning more than $400,000 a year, up from $250,000, said a person familiar with the talks. Obama’s plan would cut $1.22 trillion in federal spending, including interest savings, said the person, who spoke on condition of anonymity. It would change the inflation measure used to calculate Social Security benefit increases. In his offer, Obama would increase the U.S. debt limit for two years. 
• U.S. Banks Lack Liquidity to Withstand Crisis, Study Says. U.S. banks representing more than half the industry’s assets need an additional $840 billion in cash on hand to cover short-term obligations if financial markets seize up again, according to a study. The 11 financial firms surveyed, which have about $9.2 trillion in combined assets, need the funds in cash, Treasury bonds or other liquid assets to cover 30 days of debt costs and other expenses under international capital rules, according to a report released today by the New York-based Clearing House, which represents 18 of the largest lenders. The so-called liquidity coverage ratio, a buffer of banks’ liquid assets regulators require in case markets freeze, improved from 59 percent in the fourth quarter of 2010 to 81 percent in the second quarter of this year, the Clearing House said. Three of 11 companies surveyed have a coverage ratio of 100 percent or more while eight have shortfalls. 
• China Home Prices Gain in Majority of Cities as Curbs Stay. China’s new home prices rose in the majority of cities the government tracks in November as property curbs slowed construction, reducing the supply available for sale. Prices climbed in 53 of the 70 cities from the previous month, compared with 35 in October, according to data from the National Bureau of Statistics today. That was the most in 18 months. Prices fell in 10 cities.
• China to Stick to Property Curbs, Ministry Says. China will stick to its property curb policies, Liao Yonglin, an official from the Ministry of Land and Resources, said at a presser today, according to a transcript on the ministry's website.
• China Foreign-Investment Declines for 12th Time in 13 Months. Foreign direct investment in China fell for the 12th time in 13 months, suggesting the nation’s economic-growth rebound has yet to attract a fresh influx of capital spending from abroad. Investment dropped 5.4 percent in November from a year earlier to $8.29 billion, the Ministry of Commerce said in Beijing today. FDI inflows in the first 11 months of the year fell 3.6 percent to $100 billion.
• Copper Falls as Supplies, Budget Impasse Signal Slowing Demand. Copper fell to a one-week low in New York as a jump in stockpiles monitored by the London Metal Exchange and a U.S. budget standoff added to demand concerns. Inventories in warehouses tracked by the LME rose for an eighth session, climbing 9.5 percent to 298,625 metric tons, the most since Sept. 5, 2008, exchange data showed today.
• Lacker Says Fed Asset Buying Won’t Speed Growth Above 2%. Federal Reserve Bank of Richmond President Jeffrey Lacker predicted the economy will grow 2 percent next year and said the Fed’s stepped up purchases of bonds won’t do much to spur the recovery. “It’s not clear that monetary policy, by itself, can bring about any material improvement in economic growth,” Lacker said today in a speech in Charlotte, North Carolina. “The supply of bank reserves is already large enough to support the economic recovery, and the benefits of further asset purchases are unlikely to be sizeable.”
• General Motors(GM) idles Malibu plant in Kansas for 5 weeks-source. General Motors Co idled the Kansas plant that makes the Chevrolet Malibu on Dec. 3 and will not reopen it until Jan. 7 in an attempt to cut into the hefty supply of the midsize sedan, said a source familiar with the situation. The plant, in Fairfax, Kansas, was to be down for a week-and-a-half beginning December 24 for a normal holiday break. An extra 3-1/2 weeks of no-production days were added to allow GM to work through the oversupply of the Malibu and the Buick LaCrosse, which is also made at the plant.
• Samsung Wins Order Denying Apple Request for U.S. Sales Ban. Samsung Electronics Co. won a court order rejecting a permanent U.S. sales ban on 26 of its devices sought by Apple Inc. following a jury verdict in August finding infringement of six of the iPhone maker’s patents.

Wall Street Journal: 

• The Fiscal Cliff: Live Stream.
• Clues Hint at School Shooter's State of Mind.
• Struggles Mount for Greeks as Economy Faces Winter. Maria Katri sent her son to live at a charitable home for poor boys after Greece's economy crashed. Now, as Greece slides deeper into depression, the widowed mother is so poor that her teenage daughter, who stills lives at home, is "jealous that her brother is having a better time than her in the institution," Ms. Katri says. The spread of economic hardship is fraying Greece's social fabric and straining its political cohesion as the country enters the harshest winter of its three-year-old debt crisis. Even the tightknit Greek family—an institution that has helped the population to absorb a collapse in employment—is under pressure as household incomes dwindle.
• Probe Sparks Split on Trades. A regulatory investigation into whether stock exchanges have given unfair advantages to high-speed traders has sparked complaints against the exchanges, fueling a broader debate about how the market operates and is regulated. The Investment Company Institute, trade group for mutual funds, complained in a recent letter to the Securities and Exchange Commission that U.S. stock exchanges "facilitate strategies" for rapid-fire trading firms "that can lead to disorderly markets or that can benefit market participants at the expense of long-term investors." 
• ECB Chief Defends Austerity Measures. European Central Bank President Mario Draghi urged governments to build on "painful progress" they have made on narrowing budget deficits and overhauling their economies, despite the near-term damage these policies have inflicted on business activity and unemployment. Mr. Draghi's strident defense of fiscal austerity as a means of ensuring economic growth in the long run comes against mounting criticism that these measures are weakening already-fragile countries such as Spain and Portugal, leading to persistently high unemployment and sharp contractions in output.
• Apple(AAPL) in Talks With Foursquare About Data-Sharing Deal.
• ObamaCare's Faux Federalism. GOP Governors are smarter than some of their conservative critics. As for conservatives who say running an exchange is a last stand against single-payer medicine, well, all we can say is good luck with that one. ObamaCare was designed to make a Washington-dominated and -paid for system inevitable. Within three or four years the same people who passed ObamaCare will be talking about "solving" ObamaCare's government-created problems with more government. The 26 Governors are merely saying they won't be accomplices.

Fox News:

• The Cost of Spending: Federal government racking up huge tab. The problem is right now you have a situation in which the government in its overspending ways tries to rationalize it by saying that actually the problem is we're under-taxing the American public,” he said. “It's like your irresponsible brother-in-law runs up his credit cards and goes bust and says the real problem is because you've stopped sending me checks."

CNBC: 

• Even Without Congress, Obama Could Act to Restrict Guns. Unburdened by re-election worries and empowered by law to act without Congress, U.S. President Barack Obama could take action to improve background checks on gun buyers, ban certain gun imports and bolster oversight of dealers.

Zero Hedge: 

• Charting US Debt And Deficit Since Inception.
• Latest "Grand Bargain" Compromise Shifts 'Rich' Threshold.
• 36 UBS Bankers To Be Implicated In Liborgate, Criminal Charges To Be Filed.
• Three Divergences Demanding The Stock Bulls' Attention. (graphs)
• Santelli And Schiff On Bernanke's "Roach Motel Of Monetary Policy".
• GE's(GE) Jeff Immelt: "We've Definitely Seen A Slowdown In The Fourth Quarter".

Business Insider:

• The Virus That Turned A Cruise Into A 'Plague Ship' Has Hit Another Ship.
• GOLDMAN(GS): People We Talk To Have Stopped Worrying About The Fiscal Cliff. As reflected by the sinking VIX, the stock market appears to be full-blown complacent about the fiscal cliff.  hopefully they won't be disappointed. 
• Veteran Journalist Says The Media Is Totally Misreporting What's Happening In Syria. Cockburn writes that the regime is "a long way from total defeat, unless there is direct military intervention by foreign powers." As for Assad himself, a Russian source reportedly told The London Times that he plans to “fight to his last bullet” in his Alawite ancestral home, where he would be guarded by "at least seven largely Alawite commando battalions and up to one ballistic missile battalion."

NY Times:

• 2 Former Hedge Fund Managers Found Guilty in Insider Trading Case.
• In Sign of Normalization, Pentagon to Reimburse Pakistan $688 Million. The Pentagon quietly notified Congress this month that it would reimburse Pakistan nearly $700 million for the cost of stationing 140,000 troops on the border with Afghanistan, an effort to normalize support for the Pakistani military after nearly two years of crises and mutual retaliation.
  

Reuters: 

• Obama held talks with Biden, Cabinet members on Newtown response. President Barack Obama held talks on Monday with Vice President Joe Biden and three Cabinet members to look at ways to respond to the Newtown, Connecticut, school shootings, a White House official said.
• Obama 'cliff' offer is flawed but positive - Boehner aides. Aides to House of Representatives Speaker John Boehner said on Monday the latest White House offer on resolving the fiscal cliff impasse is flawed but moves negotiations in a positive direction. "Any movement away from the unrealistic offers the president has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced," said Brendan Buck, a Boehner spokesman. "We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem," Buck said.
• Syria 'genuinely worried' extremists could get chemical weapons. Syria is "genuinely worried" that some countries might equip extremist groups with chemical weapons and then claim they were used by the Syrian government, the country's U.N. envoy said in a letter to U.N. chief Ban Ki-moon and the Security Council. Syria's U.N. Ambassador Bashar Ja'afari also accused the U.S. government of supporting "terrorists" in Syria and waging a campaign that claims Syria could use chemical weapons in the 20-month-old civil war that has killed at least 40,000 people.
• Boeing(BA) resumes $3.6 bln share repurchase program. Boeing Co said Monday it will raise its dividend 10 percent and resume share repurchases after suspending them in 2009. The Chicago-based aerospace company set a regular quarterly dividend of 48.5 cents per share, payable on March 8, meaning Boeing will not join Wal-Mart Stores Inc and other companies that decided to issue dividends in December to avoid the looming possibility of a tax increase in the new year.
• Wal-Mart(WMT) affiliate used bribes to open 19 new stores in Mexico: NY Times. Wal-Mart Stores Inc's Mexican affiliate routinely used bribes to open stores in desirable locations, according to a New York Times investigation published Monday, which cites 19 instances of the retail giant paying off local officials.

Telegraph:

• Major protests expected in Spanish cities. Hundreds of thousands of people are expected to pack the streets of Spanish cities in evening protests against the conservative government's anti-crisis austerity measures.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are unch. to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.0 unch.

• Asia Pacific Sovereign CDS Index 84.0 -.25 basis point.

• FTSE-100 futures +.51%.

• S&P 500 futures +.27%.

• NASDAQ 100 futures +.33%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
 8:30 am EST

• The 3Q Current Account Deficit is estimated at -$103.0B versus -$117.4B in 2Q.

 10:00 am EST

• The NAHB Housing Market Index for December is estimated to rise to 47 versus 46 in November.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, 5Y T-Note auction, weekly retail sales reports, China property price data and the (MED) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Rising into Final Hour on Fiscal Cliff Optimism, Short-Covering, Seasonality, Financial/Homebuilding Sector Strength

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 16.85 -.88%

• ISE Sentiment Index 165.0 +22.2%

• Total Put/Call .73 -17.98%

• NYSE Arms .63 -34.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 92.41 -2.87%

• European Financial Sector CDS Index 147.26 -3.14%

• Western Europe Sovereign Debt CDS Index 110.41 bps unch.

• Emerging Market CDS Index 209.33 bps +.29%

• 2-Year Swap Spread 12.5 -.25 bp

• TED Spread 28.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -23.0 -.5 bp

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 152.0 +4 bps

• China Import Iron Ore Spot $132.20/Metric Tonne +2.24%

• Citi US Economic Surprise Index 47.40 -3.2 points

• 10-Year TIPS Spread 2.48 +2 bps

Overseas Futures:

• Nikkei Futures: Indicating +32 open in Japan

• DAX Futures: Indicating +2 open in Germany

Portfolio:

• Higher: On gains in my retail, tech, medical and biotech sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth +.49%

Sector Underperformers:

• 1) Coal -2.31% 2) Computer Hardware -.40% 3) Semis -.35%
  

Stocks Falling on Unusual Volume:

• END, MLNX, SPWR, SLF, NOR, CLF, HTH, CAVM, CAB, AIRM, RGR, AGX, CUB, NTE, HTHT, AG, UA, PPG, LG, EZCH, CLH, HLF, CBD, ARLP, DBL, BMI, AFFY, MVO, GWAY and GORO

Stocks With Unusual Put Option Activity:

• 1) XOP 2) NWSA 3) UNG 4) RCL 5) EWW
  

Stocks With Most Negative News Mentions:

• 1) TXN 2) FINL 3) SD 4) CAB 5) ACI
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.79%

Sector Outperformers:

• 1) Homebuilders +2.43% 2) Banks +1.83% 3) Insurance +1.15%
  

Stocks Rising on Unusual Volume:

• YPF, CBOU, SA, CPWR, ARIA, KEP, TROX, VVUS, SINA and PPO

Stocks With Unusual Call Option Activity:

• 1) NRG 2) ARIA 3) NUAN 4) RRC 5) RAX
  

Stocks With Most Positive News Mentions:

• 1) PFE 2) COF 3) GRMN 4) DIOD 5) ITRI

Charts:

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

Monday Watch

Weekend Headlines 
Bloomberg: 

• Mario Monti’s Resignation May Slow Year of Euro Agreement. Italian Prime Minister Mario Monti’s looming resignation this week may threaten progress in fighting the three-year debt crisis even as European leaders wrap up the year with newly won breathing room. Monti, under pressure from euro-area and business leaders to enter the Italian election campaign, plans to quit once parliament passes his budget this week. Former Prime Minister Silvio Berlusconi withdrew support from Monti’s government of non-politicians Dec. 6. The Italian upper house starts debate today on the budget, which will then pass to the lower house.
• Moscovici Says 2013 Will Be ‘Very Difficult,’ JDD Reports. French Finance Minister Pierre Moscovici said 2013 will be a “very difficult year” of weak economic growth, according to an interview published in Le Journal du Dimanche. The end of this year will be “especially” difficult, the minister was quoted as saying by the weekly newspaper. France will still keep its growth and deficit targets and focus on lowering debt, he said. 
• China Signals Tolerance of Slower Growth After Meeting. China said it will seek a higher “quality and efficiency” of growth next year, signaling new leaders may accept a reduced pace of expansion in exchange for a more sustainable model. There was no mention of seeking “relatively fast” growth, a policy in place since 2006, in a report yesterday by the state-run Xinhua News Agency after the annual central economic work conference in Beijing. Leaders vowed to target “sustained and healthy development” as they maintain a “prudent” monetary policy and “proactive” fiscal stance, Xinhua said. Chinese leaders assuming power in a once-a-decade handover to be completed in March must decide the pace of market-driven change to boost consumer demand and rein in the role of exports and investment. Communist Party chief Xi Jinping, who made the case for restructuring during a visit to the southern Guangdong province this month, faces an economy likely to have grown this year at the weakest rate since 1999.
• China Potential Economic Growth Cut by Population, Academy Says. Potential economic growth rate to drop to an average 7.2% in 2011-2015 and 6.1% in 2016-2020, according to Cai Fang, director of the Institute of Population and Labor Economics at the China Academy of Social Sciences. 
• Singapore’s Exports Unexpectedly Fell on Slump in Electronics. Singapore’s exports unexpectedly fell for the third time in four months in November as shipments of electronics slumped and companies sold fewer goods to U.S. customers. Non-oil domestic exports fell 2.5 percent from a year earlier, after a 7.9 percent gain in October, the trade promotion agency said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 1.7 percent increase. “We expect electronics exports to underperform in 2013,” Chester Liaw, a Singapore-based economist at Forecast Pte, said before the report. “We only expect a 2 percent rise in non-oil domestic exports over 2013, and that’s coming on the back of a series of low base effects in electronics.” Singapore’s exports are forecast by the Trade Ministry to rise 2 percent to 3 percent in 2012, and as much as 4 percent next year. Electronics shipments by companies such as Venture Corp. fell 16.5 percent in November from a year earlier, after slipping 0.8 percent the previous month, according to the report.
• LDP Reclaims Power in Japan in Landslide With Abe Stimulus Plans. Japan’s Liberal Democratic Party reclaimed power in a landslide victory three years after surrendering half a century of control. Shinzo Abe’s LDP yesterday captured 294 seats in the 480- member lower house of parliament, while Prime Minister Yoshihiko Noda’s Democratic Party of Japan lost three-fourths of its lawmakers, according to public broadcaster NHK’s vote count. Abe, 58, is set to replace Noda, returning to the office he left five years ago for health reasons. The yen fell to a 20-month low against the dollar and stocks rose to an eight-month high on expectations Abe will expand monetary and fiscal stimulus in a bid to defeat deflation. Japan’s seventh leader in six years, he inherits a country in recession, still reeling from the 2011 earthquake and nuclear crisis, and embroiled in a diplomatic dispute with China, with an upper house election only seven months away. “Abe’s popularity will disappear very quickly if he does something wishy-washy or overreacts and leads Japan into a real crisis with China,” said Aiji Tanaka, a political science professor at Waseda University in Tokyo.
• Dubai Project Dreams Evoke 2008 Crash at Banks: Mortgages. Dubai, gearing up for a new development boom, will need to prove to lenders and investors that this one won’t end like the last. With the same bravura that turned the desert sheikhdom into a hub for finance, tourism and real estate, the government is pitching massive projects in the hope of inspiring investment even as banks and builders remain buried under debt from the property-market collapse in 2008. 
• Hedge Funds Reduce Bullish Bets by Most in a Month: Commodities. Hedge funds cut bullish commodity bets by the most in a month as the Federal Reserve warned the U.S. budget impasse may damage the economy, increasing concern about demand just as prices head for the first loss since 2008. Speculators and money managers decreased net-long positions across 18 U.S. futures and options by 11 percent to 802,817 contracts in the week ended Dec. 11, U.S. Commodity Futures Trading Commission data show. Sugar holdings tumbled 68 percent, the most in five years, and those for wheat dropped to the lowest since June. Wagers on higher crude-oil prices tumbled 21 percent, the most since May.
• Google(GOOG) Said to End FTC Probe With Letter Promising Change. Google Inc. is poised to offer voluntary concessions that will end a 20-month antitrust probe of the company’s business practices by U.S. regulators without any enforcement action being taken, two people familiar with the matter said. 
• IPhone 5 Sets China Record With 2 Million Sales in Three Days. 

Wall Street Journal: 

• Profiles of the Victims.
• Updates on School Shooting. 
• GOP Poses Millionaire Tax-Rate Increase.
• The Fiscal Cliff: Live Coverage. 
• Debt Loads Climb in Buyout Deals. Private-equity firms are using almost as much debt to fund acquisitions as they did before the financial crisis, as return-hungry investors rush to buy bonds and loans backing those takeovers. The rise in borrowed money, or leverage, heralds the possibility of juicy returns for buyout groups. Ominously, the surge also brings back memories of the last credit binge around six years ago, which saddled dozens of companies with huge levels of debt. Some companies laden with debt by private-equity firms in the mid 2000s foundered during the recession.
• Hospital Systems Branch Out as Insurers. A growing number of hospital systems are moving to start their own insurance plans, aiming to broaden their roles and prepare for the changes coming under the federal health-care overhaul. Piedmont Healthcare and WellStar Health System, both in the Atlanta area, are set to announce a jointly owned insurance arm, with the goal of marketing coverage to employers and Medicare recipients in 2014. They also will consider selling coverage on a health exchange, one of the online insurance marketplaces required in each state by the health-overhaul law.
• Warren Buffett Knows That Tax Rates Matter by Cliff Asness. The bond market shows that people focus on after-tax cash flows when making investments.

CNBC:  

• Sen. Kerry to Be Nominated for State Dept: Report.

Zero Hedge: 

• Jim Grant: "Central Banks Have Over-Egged The Financial Pudding".
• From High Frequency Trading To A Broken Market: A Primer In Two Parts.
• European Risk Catalysts For The Next Six Months.
• 17 Macro Surprises For 2013.

Business Insider:

• The Markets Are No Longer Sending Useful Price Signals. 
• CHART OF THE DAY: Here's The Recession Indicator That Bears Are Passing Around. 
• PRESENTING: The Worst Housing Market In The World. There remains debate over whether America's housing market has truly bottomed, but it's certainly not as bad as it was during and immediately after the recession. The same cannot be said for Spain. The AP reported Thursday home prices fell 14.4 percent year-over-year in the second quarter and 15.2 percent in the third. Prices in Madrid fell 17.9 percent. The situation is so bad, it threatens the banking system, and in turn threatens the the finances of the entire nation. That in turn threatens all of the Eurozone, as its neighbors wait nervously to see if Spain ends up needing a bailout.
• Not A Single Forecaster in Barron's Has A Negative Forecast For The Market In 2013.
• People Are Leaving California In Record Numbers. 
• The Main Deflationary Event Is Underway. 
• Berlusconi May Have Sparked A Surprising Change In Mario Monti.
• RAIL INDICATORS: The Economy Continues To Soften. (graph)
• Greece Is On The Brink Of Civil War. 
• The Fed Has No Way Out Of Its 'Roach Motel' Monetary Policy. 
• The Economy's Going To Crash If Bernanke Keeps Driving With Two Feet.

Wall Street All-Stars:

• Indicator Update: Time for some clarity.

New York Post:

• Bad trip for guru in 2012. Dalio losing bets. Ray Dalio, who runs the world’s largest hedge-fund firm, the $130 billion Bridgewater Associates, is in danger of losing his hard-won serenity. Dalio, known for practicing transcendental meditation and creating a cult-like atmosphere at the Westport, Conn., firm, is just weeks away from stumbling to a loss for the year. The loss comes just 12 months after Dalio achieved near-genius status for doing what few hedge-fund titans have done: chalking up two back-to-back years of huge double-digit gains in his main macro fund. Now, looking to make a comeback, Dalio this week predicted that interest rates would rise in the latter part of 2013, while suggesting any fiscal deal would depress the economy.

Reuters:  

• Clinton sustains concussion; Benghazi testimony postponed. Secretary of State Hillary Clinton, who canceled an overseas trip last weekend because of illness, suffered a concussion after fainting due to dehydration, prompting the postponement of her scheduled congressional testimony on the attack on a U.S. mission in Libya, officials said on Saturday. "While suffering from a stomach virus, Secretary Clinton became dehydrated and fainted, sustaining a concussion," State Department spokesman Philippe Reines said in a statement. "She has been recovering at home and will continue to be monitored regularly by her doctors. At their recommendation, she will continue to work from home next week, staying in regular contact with department and other officials. She is looking forward to being back in the office soon," Reines added.
• China wealth fund warns of bleak eurozone outlook. China's sovereign wealth fund China Investment Corp said it is "not optimistic" about the outlook for the debt crisis in the eurozone, but will consider investing more in the region if countries create a more friendly environment. Jesse Wang, an executive vice president at CIC, said Europe needed more time to increase fiscal revenues to lift itself out of the crisis. "I think the outlook for the European debt crisis is not optimistic yet," Wang said on Sunday at a forum in Sanya in the southern tropical Hainan island.
• UN chief alarmed by escalating violence in Syria. U.N. Secretary-General Ban Ki-moon expressed alarm on Sunday at the worsening violence in Syria, including the reported mass killing of Alawites and alleged firing of long-range missiles on Syrian territory, Ban's spokesman said. 
• Japan's war on deflation runs into psychology of hard times. The war against deflation in Japan will start with a battle for the pocketbooks of recession-hardened consumers like Kumiko Kuramochi. The Liberal Democratic Party, which stormed to an election victory on Sunday, hopes to persuade Kuramochi and other Japanese that an aggressive monetary policy is going to fire up inflation. The message: buy now before prices start rising again. The problem though is that a bargain-hunting psychology is so entrenched after two decades of stop-start economic growth, 15 years of falling wages and nearly 15 years of deflation that the government will struggle to convince people their incomes will improve enough for them to buy more expensive goods.
• Disputes over small islands pose big conundrum for U.S. Far away from the United States and usually far down the list of things Washington worries about, the obscure islets at the center of bitter spats between China and its neighbors have become a flashpoint that could get hotter and embroil America. This week served up fresh evidence that 2013 likely will bring no pause in tensions rippling the seas around China. Japan on Thursday scrambled fighter jets after a Chinese government plane entered what Japan considers its airspace over disputed islets in the East China Sea, just one of many contested sites.

Telegraph: 

• Japan election winner fires early warning to China. Nationalist parties have seized power in Japan, as the country's new prime minister-in-waiting immediately firing a warning to China over the ownership of islands that have caused months of diplomatic tension.

Welt am Sonntag:

• Frank-Walter Steinmeier, German opposition SPD's chief in parliament, says Chancellor Angela Merkel won't be able to keep promises that her policies won't lead to a writedown on Greek debt. The German government wants to spare voters "uncomfortable truths" until after the 2013 federal election, Steinmeier said.

Boersen-Zeitung:

• K+S Hedges Euro-Dollar at About $1.30 Next Year. Europe's largest potash maker is hedged at $1.28/$1.29 on average for this year, citing CFO Burkhard Lohr in an interview.

Focus:

• European leaders have done about half the work needed to end the sovereign debt crisis, Focus quoted Klaus Regling, CEO of the ESM rescue fund, as saying in an interview. The ESM probably won't be allowed to recapitalize lenders until the euro-area has functioning bank supervisor, which is scheduled to happen by March 2014, he said. Italian spreads may widen if the country drops its reform program.

El Pais:

• Prime Minister Mariano Rajoy told union leaders German Chancellor Angel Merkel is opposed to a sovereign bailout for Spain because she is reluctant to submit the decision to the Bundestag.

Weekend Recommendations

Barron's:

• Bullish commentary on (TROX) and (JNJ).

Citigroup:

• Downgraded (AAPL) to Neutral, target lowered to $575. 

Night Trading

• Asian indices are -.75% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 84.25 unch.

• FTSE-100 futures +.07%.

• S&P 500 futures +.33%.

• NASDAQ 100 futures +.30%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SHFL)/.21

Economic Releases
8:30 am EST

• Empire Manufacturing for December is estimated to rise to -1.0 versus -5.22 in November.

9:00 am EST

• Net Long-term TIC Flows for October is estimated to rise to $25.0B versus $3.3B in September.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lacker speaking, 2Y T-Note auction and the (GE) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly 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 25% net long heading into the week.