Today's Headlines

Bloomberg:

• European Stocks Retreat Amid Turmoil in Spain, Italy. European stocks tumbled the most in more than three months as Spanish and Italian banks retreated with the nations’ government bonds amid signs of returning political uncertainty in the region’s weakest economies. Banco Santander SA (SAN), Spain’s largest bank, sank the most in six months as Prime Minister Mariano Rajoy denied corruption allegations. UniCredit SpA, the biggest lender in Italy, posted the largest drop since June as former premier Silvio Berlusconi gained in opinion polls before elections this month. Julius Baer Group Ltd. (BAER) fell 3.1 percent after the wealth manager reported declining revenue margins. The Stoxx Europe 600 Index (SXXP) retreated 1.5 percent to 283.9 at the close of trading, the largest decline since Oct. 23. “Spanish yields have blown up in the past hour to their highest levels since December as concerns about the Spanish government mount,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in London. “In addition to the growing corruption scandal in Spanish politics, the Italian elections towards the end of the month are also a concern.”

• Commerzbank Reports Quarterly Loss of 720 Million-Euro. Commerzbank AG (CBK), Germany’s second- largest lender, posted its biggest quarterly loss in three years after taking charges related to the sale of Bank Forum and a tax asset writedown. The fourth-quarter loss of 720 million euros ($976 million) compares with a profit of 320 million euros in the year-earlier period, the Frankfurt-based bank said today in a statement. Bank Forum charges totaled 185 million euros, while Commerzbank wrote down 560 million euros on deferred tax accruals.

• Euro Weakens as Spanish, Italian Yields Rise on Political. The euro fell the most in two weeks against the dollar as Italian and Spanish bonds slumped amid political turmoil in the euro-area’s third- and fourth-largest economies, damping demand for the shared currency. The 17-nation euro dropped versus the majority of its 16 major peers as Spanish Prime Minister Mariano Rajoy faced calls to resign after newspaper reports alleged he accepted illegal cash payments. A poll showed former Italy Premier Silvio Berlusconi closed the gap on front-runner Pier Luigi Bersani even as he appeals a four-year prison sentence for tax fraud.

• Australian Homebuilders Can’t Give Them Away: Mortgages. Australian housing developers are resorting to discounts, gift cards and help with mortgage payments to compete for dwindling buyers as home sales slow. Stockland (SGP), Australia’s biggest listed home builder, is giving rebates and gift cards of as much as A$30,000 ($31,300) at projects in Victoria, Queensland and New South Wales states. Devine Ltd. (DVN) is matching deposits in South Australia and taking over mortgage payments for as long as a year in Melbourne. Peet Ltd. (PPC) has been offering discounts of as much as A$50,000 in Western Australia, Queensland and Victoria.

• Spring Airlines May Halt Flights to Japan on China Protests. Spring Airlines Co., China’s biggest carrier outside government control, is considering ending flights to Japan after a territorial dispute between the Asian countries last year emptied planes and caused losses. Spring hasn’t decided on the 12 weekly flights between China and Japan, Chairman Wang Zhenghua said in an interview in Singapore, adding his “Japanese friends” are asking him to continue. Shanghai-based Spring has put on hold plans to add more Japan services as it’s filling less than 50 percent of the seats on those flights, compared with an average 92 percent occupancy on other sectors.

Wall Street Journal:

• U.S., States Plan to File Civil Charges Against S&P. The Justice Department and state prosecutors intend to file civil charges alleging wrongdoing by Standard & Poor's Ratings Services in its rating of mortgage bonds before the financial crisis erupted in 2008, according to people familiar with the matter. The allegations likely would be made in lawsuits by federal and state officials that are expected to be filed as soon as this week, the people said. The alleged wrongdoing by S&P, a unit of McGraw-Hill Cos., MHP -6.56% centers on allegations related to the model used by S&P to rate mortgage bonds. The likely move by U.S. officials would be the first federal enforcement action against a credit-rating firm for alleged illegal behavior related to the crisis. Several state attorneys general are expected to join the case, making it one of the highest-profile and widest-ranging enforcement crisis-era crackdowns.

• 'Volcker Rule,' EU-Style. Germany, U.K. Move to Tackle Proprietary Trading by Banks. Two of Europe's biggest countries moved Monday to beef up laws aimed at solving the problem of banks that are considered too big to fail, but the initiatives again highlighted big differences between European countries' strategies. In the U.K., Chancellor of the Exchequer George Osborne bowed to pressure from a parliamentary commission and said he would give regulators powers to break up banks if they try to circumvent a new law forcing them to separate their retail and commercial banking activities from their riskier, market-based businesses.

MarketWatch.com:

• Banks keep lending standards tight as demand rises. Banks have kept their lending standards fairly tight while demand for business loans, mortgages and car loans has picked up, according to a survey released by the Federal Reserve on Monday. The January senior loan officer survey found that “generally modest” fractions of lenders made it easier to get loans over the last three months. The survey was conducted from officers of 68 domestic banks and 22 foreign ones operating state-side. 

• The cost of air pollution in China. Thick smog hanging over cities may pressure governments to act.

Fox News: 

• Sophisticated cyber-attack hits Energy Department, China possible suspect. The Energy Department has been hit by a major cyber-attack, which resulted in the personal information of several hundred employees being compromised and could have been aimed at obtaining other sensitive information, The Washington Free Beacon reports. 

CNBC: 

• Question of Aiding Cyprus Places Germany in a Bind. When German officials said they would save the euro zone at all costs, the prospect of bailing out Russian oligarchs was not what they had in mind. But eight months before a crucial election in Germany, Chancellor Angela Merkel is facing charges that Europe is doing just that as the tiny island of Cyprus, a haven for Russian cash, threatens to become the next point of contention in the euro crisis.

• Obama Questions 'Carried Interest' Tax Break. President Barack Obama said on Sunday more tax revenue would be needed to reduce the U.S. deficit and signaled he would push hard to get rid of loopholes such as the "carried interest" tax break enjoyed by private equity and hedge fund managers.

• Consumers Taking Financial Hit From Rising Fuel Prices. Consumers have been spending more on gasoline than they have in nearly three decades. With pump prices at their highest level on record for this time of year, the stage is set for an even greater climb in gasoline prices and expenditures than in 2012. Retail gasoline prices have surged 17 cents in a week to top $3.50 a gallon on average, posting the highest prices on record for the beginning of February. (Read More: Gasoline at Highest Price Ever for This Time of Year.)

Zero Hedge:

• It Is Not The United States Of Europe; Just The Opposite. 

• The Subsidy Addiction: Jobs Vs Foodstamps. (graph) 

• Europe Plunges By Most In Six Months. 

• Factory Orders Ex Transports Post First Annual Decline Since July. (graph) 

• Meanwhile In European Financials...(graphs)

• Bank Of Italy Caught Lying About Imploding Monte Paschi, Counters With Even More Ridiculous Lies. 

• Madrid Protests Return: Live Stream.

Business Insider:

• Silvio Berlusconi Made A $5.4 Billion Offer The Caused The Italian Market To Get Crushed Today. 

• Oracle(ORCL) Thumbs Nose At Cisco(CSCO) And Buys Acme Packets(APKT) for $2.1 billion. 

• Hackers Post Private Data From More Than 4,000 US Bank Executives. 

• MICHAEL LEWIS: Break Up Goldman Sachs(GS). 

• Greek Neo-Nazis Golden Dawn March To US Embassy. (video)

• JEFF SAUT: The Stock Market Will Probably Tank After Obama's State Of The Union.

• Here's The Former Marine Accused Of Shooting The US Military's Deadliest Sniper In The Back. 

• Asian Investors Have A Frighteningly Simple Explanation For Why Japan Is Doomed.

Reuters:

• Suicide bomber kills 22 in attack on Iraq militia. A suicide bomber attacked a government-backed militia in Iraq on Monday, killing at least 22 people in an apparent attempt by Sunni insurgents to provoke unrest against Shi'ite Prime Minister Nuri al-Maliki. Dressed in civilian clothes, the bomber infiltrated a meeting of Sahwa tribal fighters and detonated his explosives as they picked up salaries in Taji, a town 20 km (12 miles) north of the capital Baghdad, police said. It was the seventh suicide bombing in a month in Iraq, indicating insurgents are intent on stepping up violence a year after U.S. troops pulled out of the country, where Shi'ite, Sunni and ethnic Kurdish factions still struggle over how to share power.

• Italian prosecutors interview ex-Monte Paschi chairman. Italian prosecutors called in the former chairman of Monte dei Paschi di Siena on Monday as they pursued their corruption investigation into an opaque series of loss-making derivatives trades at the bank. 

• Fed's Fisher says he would support tapering QE3 when time comes. A top U.S. Federal Reserve official critical of the central bank's policy of monetary easing on Monday said he would support tapering, rather than stopping, the Fed's current bond-buying program once the labor market improves. St. Louis Federal Reserve President James Bullard last week advocated such an approach.

Telegraph:

• Eurozone factory prices fall leaving door open for rate cut. Eurozone factory prices fell for the second month in a row in December, leaving room for a possible European Central Bank interest rate cut to revive the weak economy.

Ansa:

• Italy Prosecutor Probing 5 Foreign Banks on Euribor. The prosecutor in Trani, Italy is probing five banks, seven traders, citing judicial sources.

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.21%

Sector Underperformers:

• 1) Steel -2.07% 2) Gaming -2.01% 3) Software -1.73%
  

Stocks Falling on Unusual Volume:

• SNP, VRTU, NXPI, CYOU, BUD, SIMO, RCL, ANW, PT, TI, BAP, IRE, E, TOT, TV, SKYW, ADTN, BVN, WRLS, MCY, CPSI, HLF, INGR, VVI, FTE, SOHU, HTSI, NAP, PRO, PTR, EDW, DRIV, AV, UTEK, CODE, GCI and THO

Stocks With Unusual Put Option Activity:

• 1) RCL 2) ADM 3) YUM 4) EWG 5) HOV
  

Stocks With Most Negative News Mentions:

• 1) NYT 2) CAB 3) TIF 4) MRK 5) BA
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth -.70%

Sector Outperformers:

• 1) Networking +.91% 2) Education +.75% 3) Gold & Silver +.39%
  

Stocks Rising on Unusual Volume:

• APKT, PC, HMY, GOLD, BRO, CYBX, HUM, ALLT and DECK

Stocks With Unusual Call Option Activity:

• 1) MMR 2) APKT 3) HUM 4) UUP 5) CIM
  

Stocks With Most Positive News Mentions:

• 1) UTX 2) UTHR 3) SOHU 4) TSN 5) CLX

Charts:

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

Monday Watch

Weekend Headlines 
Bloomberg: 

• Euro Tremors Risk Market Respite on Spain-Italy, Banks. Europe’s political tremors risk spoiling the region’s market calm, with corruption allegations buffeting Spanish Premier Mariano Rajoy and Italy’s Silvio Berlusconi narrowing the front-runner’s lead as elections loom. Rajoy, facing opposition calls to resign amid contested reports about illegal payments, travels to Berlin today as euro- area leaders schedule a flurry of meetings this week ahead of a Feb. 7-8 European Union summit. Last week’s nationalization of the Netherlands’ fourth-largest bank and a 2.17 billion-euro ($3 billion) loss at Deutsche Bank AG underscore the fragile economic health in the region. “The euro crisis is not over,” German Finance Minister Wolfgang Schaeuble said Feb. 1 at the Munich Security Conference where fellow panelists included Deutsche Bank AG co-Chief Executive Officer Anshu Jain. Still, “we’re in a much better position than we were a year ago,” the minister said. A sluggish economy, uncertainty over the outcome of this month’s Italian election and Rajoy’s new troubles threaten to curtail the time won by politicians with the central-bank bond buying.

• Spain’s Rajoy Fails to Quell Graft Criticism Amid Calls to Quit. Spanish Prime Minister Mariano Rajoy’s assurance that allegations of illegal payments are false failed to contain criticism, with the opposition demanding he step down to restore faith in the political class. “Rajoy should resign to make way for another prime minister who can re-establish the strength, credibility and stability that Spain needs,” opposition leader Alfredo Perez Rubalcaba said during a televised press conference yesterday, a day after Rajoy had faced the public and vowed to carry on. “Spain needs a strong, credible, and trustworthy government.”

• Europe’s Banks Urged to Cut Down All Capital-Heavy Units. The president of the European Banking Federation is urging lenders in the region to reinvent themselves and discard the areas of their business that place too large a capital burden on their balance sheets. “Banks need to be more efficient, that’s very simple,” EBF President Christian Clausen said in an interview in Stockholm last week. “Everything that can be done will be done in terms of moving business.”

• Netanyahu Says Israel Must Stop a Nuclear-Armed Iran. Israeli Prime Minister Benjamin Netanyahu, nominated to form a coalition after winning the most Knesset seats in elections, said stopping Iran from building nuclear arms would be the government’s foremost challenge. “We have many missions to deal with,” Netanyahu said in Jerusalem after being chosen by President Shimon Peres. “But first we must maintain security, and the first task is to stop Iran from arming itself with nuclear weapons.” 

• Hong Kong’s Debt Load Adds to Property Market Risks, HKMA Says. Hong Kong household debt levels close to record highs pose a risk as officials seek to limit property market overheating, said Norman Chan, the head of the city’s central bank. Debt is “near historic high levels,” Chan, the chief executive of the Hong Kong Monetary Authority, told lawmakers today, citing ratios of 58 percent to 59 percent of gross domestic product in the third and fourth quarters. In a housing and economic downturn, repayment may become more difficult, the official said. Overheating in the housing market is the biggest risk to financial stability, Chan said, echoing a warning in December from the International Monetary Fund. Home prices have doubled since the start of 2009, according to a weekly index compiled by Centaline Property Agency Ltd. 

• Hang Seng on Balance Volume Signals Fall: Technical Analysis.

• Fed’s Bullard Urges Cutting QE Pace if Data Stay Strong. Federal Reserve Bank of St. Louis President James Bullard said he expects U.S. growth to gain enough momentum to let the central bank reduce the pace of asset purchases as early as the middle of the year. “We should think about tapering or adjusting the program,” Bullard said yesterday in an interview in Washington. “If you get some good data for a couple of months, maybe you’d say, ‘Okay, we go back to $75 billion per month instead of $85 billion or something like that.’” 

• GM(GM) Plans 10-Weeks of Pickup Downtime as Inventories Rise. General Motors Co. (GM), which saw pickup inventories rise 24 percent last month, will take out 10 weeks of truck production as it prepares to introduce a redesigned Chevrolet Silverado and GMC Sierra in the second quarter. After finishing 2012 with a pickup inventory almost in line with targets, GM yesterday reported that the number of trucks it has on hand rose to a 117-day supply at the end of January from 80 a month earlier. The 10 down weeks are a total for GM’s three pickup plants to allow for the changeover, Jim Cain, a company spokesman, said yesterday in a telephone interview. 

Wall Street Journal: 

• Reid Says New Tax Revenue Vital in a Budget Deal. Senate Majority Leader Harry Reid drew a red line in the budget showdown with Republicans, saying Democrats will demand additional revenue as part of any deal to alter the mandatory spending cuts set to hit at the beginning of next month. The comments, made in an interview Sunday with ABC's "This Week," come as Senate Democrats weigh options for averting at least some of the March 1 cuts, known in Washington as the sequester. One Democratic proposal would seek to offset some of the roughly $85 billion in cuts this year with a combination of tax increases and spending cuts.

• Low Rates Force Companies to Pour Cash Into Pensions. Ford Motor Co.(F) expects to spend $5 billion this year shoring up its pension funds, almost as much as the auto maker spent last year building plants, buying equipment and developing new cars. The nation's second-largest auto maker is one of a who's who of U.S. companies pouring cash into pension plans now being battered by record low interest rates. Verizon Communications Inc.(VZ) contributed $1.7 billion to its pension plan in the fourth quarter and—highlighting companies' sensitivity to this issue—Boeing Co.(BA) now reports "core earnings" to separate out pension expenses. 

• Bondholders Have a New Worry: LBOs. Corporate-bond investors are facing a new threat: private-equity firms launching debt-laden takeovers of companies in their portfolios. With buyouts back in vogue, fund managers specializing in highly rated, or investment-grade, bonds have been scrambling to avoid companies that might fall prey to private equity.

• Tech Titans Clash in 'Cloud'. Google Inc.(GOOG), Microsoft Corp.(MSFT) and Amazon.com Inc.(AMZN) have fought each other for dominance in mobile gadgets and Web searches. The latest front in their war is invisible: computing horsepower. Microsoft and Google are increasingly trying to unseat Amazon in the lucrative business of renting out computing storage and number-crunching to thousands of companies. 

• Syria Rebels Blame Regime for Civilian Massacre. Syrian opposition activists and rebels said dozens of civilians were killed and wounded on Sunday in a missile attack by regime forces against a rebel-controlled neighborhood in the war-ravaged city of Aleppo. Video footage posted by activists on the Internet and purported to be of the attack's aftermath showed several residential buildings in a neighborhood identified as Ansari reduced to heaps of rubble and engulfed in smoke. Rescuers, many of them appearing to be rebel fighters by their dress and weapons, could be seen on the video frantically pulling out the dead and wounded, including children.

• U.K. to Give Regulators Powers to Split Up Banks. U.K. Treasury chief George Osborne on Monday will announce new powers for regulators to split up banks that flout rules designed to ring-fence retail banking from riskier investment-banking activity. In a wide-ranging speech on banking in Bournemouth, England, Mr. Osborne is expected to say the new powers are needed so that taxpayers will never again be on the hook when banks fail, as they were during the financial crisis.

• Dorothy Rabinowitz: Chuck Hagel's Defenseless Performance. Nothing could have harmed the nominee for secretary of defense more than his own confirmation answers.

Fox News:

• Report shows UN admitting solar activity may play significant role in global warming. The Earth has been getting warmer -- but how much of that heat is due to greenhouse gas emissions and how much is due to natural causes? A leaked report by a United Nations’ group dedicated to climate studies says that heat from the sun may play a larger role than previously thought.

• Former Navy SEAL Chris Kyle fatally shot at Texas shooting range. Chris Kyle, a former U.S. Navy SEAL credited with the largest number of confirmed kills, was one of two people fatally shot at a North Texas shooting range Saturday, Texas Highway Patrol confirmed to Fox News.

CNBC:  

• Gasoline at Highest Price Ever for This Time of Year. U.S. drivers are now paying more to fill up their gas tanks than they ever have at this time of year. The national average price of retail gasoline posted its biggest one-day increase in 23 months on Friday, rising four cents to $3.46 a gallon, according to AAA. The average price has risen 13 cents -- a 4 percent increase -- in the past week.

Zero Hedge: 

• With David Tepper "BWICs To The Wall", Has The Smart Money Begun "Greatly Rotating" Out Of Risk?

• How The Fed's Latest QE Is Just Another European Bailout. (graph)

• Former Iranian Central Bank Head Caught Smuggling $70 Million Bank Of Venezuela Check Into Germany.

• China's Broken Shock Absorber.

• Morgan Stanley(MS) On Europe: "We're Getting Worried". (graphs)

• The State Of World 'Macro' At A Glance.

• Bearish VIX Positioning Near Record, As Russell 2000 Non-Commercial Longs At All Time High. (graphs)

• The Un-Manipulated Market That Keeps Merkel Awake At Night. (graph)

• The New Normal In Nine Charts.

Business Insider:

• BofA(BAC): 'SELL-SIGNAL TRIGGERED'. (graph) 

• Two Extremely Ugly Charts About The Current US Recovery. 

• Google's(GOOG) Eric Schmidt Blasts China In New Book. 

• The 'Help Wanted' Index Is Sending A Cautionary Signal. 

• Mario Draghi Can't Stop The Bubble In Europe From Bursting. 

• A Putrid Smell Is Suddenly Emanating From European Banks. 

• OBAMA: 'Yes' The Boy Scouts Should Be Open To Gay Members.

IBD: 

• Hertz Global Car Rental Business Expands With Buyout.

Wall Street All-Stars:

• Indicator Update: Correction Ahead?

Reuters:

• China services' slow uptick highlights mildness of recovery.

• Monte Paschi probe enters crucial week as Italy elections near. An investigation into possible fraud by Monte Paschi bank enters a crucial few days as magistrates question key witnesses in a scandal that has touched off a political fire storm just three weeks before Italy's elections.

• U.S. pension funds sue BlackRock(BLK), allege 'looting' at iShares. Two U.S. pension funds filed a lawsuit against BlackRock, alleging that the world's biggest asset manager had "looted" securities-lending revenues from iShares exchange-traded funds investors, and breached its fiduciary duties.

Financial Times:

• Foxconn plans Chinese union vote. Foxconn, the contract manufacturer whose biggest customer is Apple, is preparing genuinely representative labour union elections in its factories in China for the first time, a powerful sign of the changes in the workshop of the world demanded by an increasingly restive workforce.

Telegraph:

• IMF sees 140m jobs shortage in aging China as 'Lewis Point' hits. China’s vast reserve of cheap workers in the hinterland is vanishing at a vertiginous pace. 

• Twin crises in Italy and Spain stalk markets as political unrest prevails. The escalating political crises in Italy and Spain are being watched with growing concern by bond investors, fearful that both countries could slide into paralysis and lose the crucial backing of the European Central Bank. 

• Keeping this rickety union together calls for more than political will. The strength of the stockmarket this year has been partly due to relief that the euro crisis is apparently over. Yet the market is misguided.  

MailOnline:

• Tory Party suffers backlash on plans to legalise gay marriage as members resign in mass protest. David Cameron is facing a backlash over his support for gay marriage from within his own party as members desert Tory ranks in droves, it emerged today. Large numbers of activists are resigning or refusing to renew their membership in protest at the Government's plans to equalise marriage, MPs say. It is claimed those quitting range from a handful in some seats to dozens in others and more than a hundred in some. 

WirtschaftsWoche: 

• Germany in Talks to Send Nuclear Waste to U.S. The German government is negotiating with the American government to send radioactive waste to the U.S., citing a statement fro a German research ministry spokesperson.

Weekend Recommendations

Barron's:

• Bullish commentary on (WMT), (SNDK) and (GLF).

• Bearish commentary on (HES).

Night Trading

• Asian indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 113.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 88.25 -1.75 basis points.

• FTSE-100 futures +.10%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GCI)/.88 

• (SPG)/2.17

• (SYY)/.41

• (HUM)/1.07

• (CLX)/.81

• (EW)/.77

• (LNCR)/.61

• (GILD)/.48

• (HIG)/.28

• (YUM)/.82

• (APC)/.71

• (PPS)/.65

• (ADVS)/.27

• (GGP)/.29

• (LIFE)/1.11

• (RCL)/.06

• (MKL)/-2.81 

Economic Releases
9:45 am EST

• ISM New York for January is estimated to fall to 52.0 versus 54.3 in December.

10:00 am EST 

• Factory Orders for December are estimated to rise +2.3% versus unch. in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PPI data, CBO budget review, China HSBC Services PMI and the RBA rate decision could also impact trading today.

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

Weekly Outlook

U.S. Week Ahead by Reuters (video). 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on global growth fears, China-Japan/Mideast tensions, rising Eurozone debt angst, profit-taking, technical selling and more shorting. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,513.17 +.68%*




The Weekly Wrap by Briefing.com.

*5-Day Change