Bull Radar

Style Outperformer:

• Small-Cap Value +.13%

Sector Outperformers:

• 1) Tobacco +1.1% 2) Airlines +.89% 3) Hospitals +.87%
  

Stocks Rising on Unusual Volume:

• IOC, ACHN, CMCSA, PRLB, WCG, ALB, Z, FTI, PCYC, LO, MM, HTSI and CYH

Stocks With Unusual Call Option Activity:

• 1) SNTA 2) RAX 3) ZIOP 4) BWLD 5) CLF
  

Stocks With Most Positive News Mentions:

• 1) BWLD 2) DE 3) AVP 4) DE 5) PEP

Charts:

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

Wednesday Watch

Evening Headlines 
Bloomberg:

• EU Sees ‘Increasing Signs’ Carbon to Drop More Without Glut Fix. The European Union warned member states that carbon prices are likely to decline further without action to curb oversupply in the world’s biggest emissions market, according to an EU document obtained by Bloomberg News. At stake is the fate of the 54 billion-euro ($72.5 billion) EU cap-and-trade system after an excess of allowances caused by an economic crisis drove prices to a record low of 2.81 euros a metric ton, down as much as 91 percent from a record in April 2006. The Parliament’s environment committee is due to vote on Feb. 19 on the first element of the commission’s proposal: a change to the emissions law to enable postponing auctions of some permits. 

• Obama Calls for Accord to Expand Trade With 27 Nations of EU. President Barack Obama vowed to begin talks on a trade agreement with the European Union, expanding the world’s largest economic relationship, while at the same time finishing discussions for a Pacific-region accord. “Trade that is free and fair across the Atlantic supports millions of good-paying jobs,” Obama said in prepared remarks for his State of the Union speech tonight. It was his strongest commitment to trade negotiations with the EU.

• Bond Yields Deny Draghi Claim of Confidence Return: Euro Credit. If Dutch bonds are anything to go by, investors still need convincing the debt crisis is ending.   

• North Korean Blast Complicates Obama’s Nuclear-Cut Plans. North Korean dictator Kim Jong Un’s latest test of a nuclear device is complicating U.S. President Barack Obama’s plan to reduce the American nuclear arsenal. Any new nuclear weapons treaty would need Senate ratification, and the prospect of support from Congress was clouded by North Korea’s underground nuclear test blast yesterday, its third since 2006. Republican lawmakers cited what they called a growing threat from Kim’s totalitarian regime in demonstrating their opposition to further U.S. arms cuts, including to the nuclear arsenal. North Korea’s nuclear test poses a threat to the U.S. and “underscores the need for the United States to maintain its strong deterrent capabilities,” said Republican Senator John Hoeven of North Dakota, a member of Senate Appropriations Committee. “Yet now, even before implementing the reductions required under the New START Treaty of 2010, the Obama administration has signaled that it may be willing to reduce unilaterally the U.S. nuclear capability even further,” he said in a statement yesterday. “In light of North Korea’s actions today, this is clearly not the time to diminish these critical strategic forces.”

• G-7 Roils Currency Markets With Split on Concern Over Yen. Group of Seven policy makers roiled the currency markets they sought to calm amid conflicting messages on how much of an economic threat is posed by the weakening yen. The yen whipsawed as the G-7 appeared at first yesterday to signal joint acceptance of the Japanese currency’s recent drop, only to see its members offer contradictory interpretations of the group’s stance. One G-7 official said there’s concern about excessive moves in the yen, while the U.K. said the group wasn’t singling out an individual country or exchange rate.

• Japan Margin Trade Doubles Amid Rally, Looser Regulation. Japan’s margin trading doubled last month after collateral rules were eased amid the Nikkei 225 Stock Average’s longest weekly rally in a half century. Margin trades at Matsui Securities Co. and the brokerage unit of SBI Holdings Inc., the two biggest providers, jumped 2.2 times last month to 6.58 trillion yen ($70 billion) from December as the Nikkei 225 capped a 12-week advance. The Financial Services Agency on Jan. 1 eliminated a three-day waiting period on rolling over proceeds from the trades into new investments. Margin accounts allow investors to borrow to buy or sell shares. After a two-decade slide that’s left Japan’s benchmark gauge 71 percent below its 1989 peak, the Nikkei 225’s best three-month run since 2009 is luring individual investors. Retail investors made up 33 percent of equity turnover in the final week of January, up from a weekly average of 21 percent last year before the rally. Margin trades accounted for about 61 percent of transactions by individuals in the week ending Feb. 1, according to Japan Exchange data. That’s up from 55 percent for the week ended Dec. 28 before the rules were relaxed. 

• Fed’s Lacker Says Crisis in 2007 Worsened by Rescue Policy. Federal Reserve Bank of Richmond President Jeffrey Lacker said the financial system was weakened further as it began to fall into crisis in 2007 and 2008 by an “ambiguous rescue policy.” The Richmond Fed president has been one of the biggest critics of an expanded safety net which he says reduces market discipline and creates more risk by raising expectations of bailouts. The Fed used multiple tools to aid financial institutions during the crisis, including opening a funding facility for corporate commercial paper and offering direct support for the Bear Stearns Cos. and American International Group Inc. Richmond Fed researchers estimate that as of December 31, 2011, that 57 percent of financial sector liabilities benefit from perceived government support, up from 45 percent over a decade ago. “It seems quite plausible to me that the signal sent by the Fed’s lending actions in August 2007 dampened the willingness of troubled institutions, such as Bear Stearns and Lehman Brothers, to seek safer solutions to the strains they were facing -- whether by raising capital, selling assets or reducing reliance on short-term funding,” Lacker said in a speech at his alma mater, Franklin & Marshall College in Lancaster, Pennsylvania.

• Apple(AAPL) Said to Have Team Developing Wristwatch Computer. Apple Inc. has a team of about 100 product designers working on a wristwatch-like device that may perform some of the computing tasks now handled by the iPhone and iPad, two people familiar with the company’s plans said. The team, which has grown in the past year, includes managers, members of the marketing group and software and hardware engineers who previously worked on the iPhone and iPad, said the people, who asked not to be named because the plans are private. The team’s size suggests Apple is beyond the experimentation phase in its development, said the people.

• Pharmacyclics(PCYC) Gains ‘Breakthrough’ Status for Cancer Drug. Pharmacyclics Inc., a drugmaker developing an experimental therapy for blood cancers, won “breakthrough” status from U.S. regulators for the medicine that may lead to quicker marketing approval. Pharmacyclics and its partner, New Brunswick, New Jersey- based Johnson & Johnson, will submit the therapy, ibrutinib, to the Food and Drug Administration for approval before the end of the year, the companies said today in separate statements. “This is a historic moment in oncology,” Bob Duggan, chief executive officer of Sunnyvale, California-based Pharmacyclics said in the statement. “We are truly honored to have received this breakthrough designation and are pleased for patients and clinicians with the FDA’s decision to expedite the development of ibrutinib.” 

• Oil May Head to $100 With Two-Year Support: Technical Analysis. Oil in New York may rise toward $100 a barrel if buying interest along the two-year moving average propels prices above a range of about $98.25 to $98.35 a barrel, according to Barclays Plc.

Wall Street Journal:

• Obama Readies Executive Action on Climate. After catapulting climate change to the top of the political agenda with an impassioned call for action in his second inaugural address, President Barack Obama Tuesday night said he’s ready to take unilateral action using executive powers to curb greenhouse-gas emissions if Congress doesn’t. In his first term, President Obama saw a cap-and-trade plan that would cut emissions pass the House, only to die in the Senate in 2010. In his State of the Union speech, he urged Congress to take up the cudgel yet again, but with House Republicans opposed to any plan that would put a price on carbon emissions, that seems unlikely. In the absence of legislation, Mr. Obama said, “I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”

• Bid on Minimum Wage Revives Issue That Has Divided Economists. President Barack Obama's proposal Tuesday to raise the federal minimum wage is likely to rekindle debates over whether the measure helps or hurts low-income workers. White House officials say the move to boost the wage to $9 an hour, from $7.25, is aimed at addressing poverty and helping low-income Americans. But the proposal likely will be opposed by Republicans and business groups, which have traditionally said raising the minimum wage discourages companies from hiring low-skilled workers. 

• A President Hungry for Action Has Bite-Size Budget. Behind that rhetoric lies a starker reality: The president actually has very little money to spend, so he proposed only limited new funding for these programs his party's liberal base loves. Spending caps, tax cuts, Republicans in Congress and the giant squeeze of entitlement programs that are sucking funds away from all else—all are tying his hands.

• French Hint at Lower Growth Forecasts. President François Hollande laid the groundwork Tuesday for lowering France's growth forecasts as the state auditor warned the country will likely miss this year's deficit targets, leaving the Socialist with a policy dilemma as he battles to rein in public finances. France, the second-largest economy in the euro zone after Germany, has so far escaped recession and the depths of crisis seen in Southern Europe. But the country has posted little to no growth since April 2011. Unemployment is above 10% and rising. "It's pointless to present targets if they can't be met," Mr. Hollande said after a meeting with Luxembourg Prime Minister Jean-Claude Juncker. The French president said the government will "change [the growth forecasts] in the coming days if necessary." Mr. Hollande's comments follow the publication of a report by France's state auditor, the Cour des Comptes, that said the deficit-reduction targets were at significant risk because of the slowdown. The auditor said the government has depended too much on raising taxes in trying to balance its budget and needed to focus more on spending cuts. Taxes currently account for over 75% of the effort to bring the deficit down this year, the auditor said. "After three years of using tax-revenue increases massively, the absolute priority can only be to increase efforts already begun to control spending," said Didier Migaud, the head of the audit body. 

• Embattled Economies Cling to Euro. The euro has weighed on winemaker Elio Grasso for years. The currency's high exchange rate shaves into profits of his U.S. exports, while his domestic customers suffer in Italy's long recession. But the silver-haired maker of Barolo wines doesn't want Italy to abandon the euro. "If we were on our own, we'd have bigger problems than Greece," he said in the cavernous cellar below his vineyard. Europe's common currency has left the continent's southern countries depressed, indebted and struggling to compete internationally. 

• Manhunt Leads to Shootout. Fugitive Tracked to Cabin in Mountains, Authorities Say; Fire Postpones Search.

• Apple(AAPL) Defends Position on Cash. Apple Inc. Chief Executive Tim Cook fired back against hedge-fund mogul David Einhorn, defending the company's distribution of cash to its shareholders and calling a recent lawsuit filed by Mr. Einhorn's firm "a silly sideshow." 

• Sequester Looms, No Deal in Sight. Senate Democrats and Republicans squared off Tuesday over whether to try to block across-the-board spending cuts set to begin March 1. Senate Majority Leader Harry Reid (D., Nev.) said his party would seek to avert the cuts, known in Washington as the sequester. Senate Democrats were crafting a bill they plan to introduce this week to replace the cuts with a package of tax increases and other spending reductions that would lower the deficit by $120 billion over 10 years, senior Democratic aides said. But Senate Minority Leader Mitch McConnell (R., Ky.) said it was "pretty clear" the cuts will happen, saying he wasn't interested in "last-minute negotiations" to try to avoid the budgetary belt-tightening. He repeated that Republicans wouldn't support any effort by Democrats to increase federal revenue to avoid or defer the cuts. When asked if he had met with House Speaker John Boehner (R., Ohio) to kick-start talks to avert the sequester, Mr. Reid said he would meet with him later this week.

• Millions Improperly Claimed U.S. Phone Subsidies. The U.S. government spent about $2.2 billion last year to provide phones to low-income Americans, but a Wall Street Journal review of the program shows that a large number of those who received the phones haven't proved they are eligible to receive them.

• From the Citi to the Caymans. Jack Lew rehabilitates what Obama once called a notorious 'tax scam.'

CNBC:

• Plosser: Fed Too Vague With Guidance on Future Path of Rates. The Federal Reserve should be more explicit about the likely future path of interest rates, a top Fed official said on Tuesday, saying that while the central bank's recent changes to guidance on interest rates are a step in the right direction they do not go far enough.

• US Is on Fast-Track to Energy Independence: Study.

Zero Hedge:

• US Posts Two Month Combined Surplus As Debt Rises By $137 Billion. (graph)

• Cov-Lite Loans Hit Record In 2012 As January High Yield Covenant Protection Drops To New Lows. (graph)

• Greek Economy Grinds To A Halt As New Construction Implodes By 66.6%.

• Sentiment More Bullish Than 99% Of All Prior Readings. (graphs)

• The (Two) GOP #SOTU Responses. (video)

Business Insider:

• Not Even Kevin Spacey Knows The Ratings For 'House Of Cards'.

• CLAY CHRISTENSEN: Higher Education Is 'On The Edge Of The Crevasse'.

• NBC's Appallingly Low Ratings Are Disheartening.

• Radical Syrian Rebels Are About To Blur The Border With Iraq.

• FINANCIAL ADVISOR INSIGHTS: ETF Investors Are Fleeing Brazil.

NY Times:

• Big Banks Are Told to Review Their Own Foreclosures. Washington is seeking help from an unlikely group in its effort to distribute billions of dollars to struggling homeowners in foreclosure: the same banks accused of abusing homeowners with shoddy foreclosure practices.

The Blaze: 

• AP Fact Check: Obama Overreaches in State of the Union Speech.

Reuters:

• Cliffs Natural(CLF) posts loss after writedown, cuts payout. Cliffs Natural Resources Inc (CLF.N) reported a quarterly loss on Tuesday, dragged down by a writedown in the value of a Canadian acquisition, higher costs and lower iron ore prices, prompting the miner to slash its dividend by 76 percent. Shares of the Cleveland-based producer of iron ore and metallurgical coal dropped 7.5 percent to $33.86 in after-market trading.

• Comcast(CMCSA) to buy rest of NBC stake for $16.7 billion. Comcast Corp on Tuesday said it would buy General Electric's remaining 49 percent equity stake in their NBCUniversal joint venture for about $16.7 billion, speeding up a deal that had not been expected until at least late 2014. Analysts said Comcast was getting a good deal at that price, while Comcast's chief executive said the company moved because it was eager to take control of the business sooner than planned. Comcast shares rose 7.5 percent in afterhours trading.

• Rackspace(RAX) revenue misses as web hosting growth slows. Web hosting company Rackspace Hosting Inc reported a 25 percent rise in quarterly revenue that narrowly missed analysts' estimates, sending its shares down nearly 10 percent in extended trading on concerns that growth is slowing.

Yomiuri:

• Japan's Suda Says 2% Inflation Goal Not Easy. Central bank's 2% inflation goal isn't easily achievable, former Bank of Japan policy board member Miyako Suda says in an interview. If Japan govt pressures BOJ into hastily achieving goal, central bank may be forced to undertake endless monetary easing, Suda said. The Bank of Japan's credibility would be undermined if BOJ law changed to give govt power to remove governor, Suda said.

• China tensions hit dept stores / Lunar New Year sales plunge as Chinese tourists avoid Japan. According to the Japan National Tourist Organization, Chinese visitors to Japan for the October-December period fell 30 percent to 40 percent from the previous year. "Sales to Chinese customers [in January] were half of what they were a year ago," said a Matsuya department store official.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50%  to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 111.50 -2.5 basis points.

• Asia Pacific Sovereign CDS Index 86.50 -1.5 basis points.

• FTSE-100 futures -.03%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DPS)/.85

• (H)/.12

• (DF)/.30

• (WCG)/1.30

• (DE)/1.40

• (DUK)/.64

• (NVDA)/.30

• (NTAP)/.56

• (MET)/1.18

• (IPI)/.25

• (CAR)/-.07

• (WFM)/.77

• (CSCO)/.48

• (AMAT)/.03

• (JNY)/.08

• (Z)/.00

Economic Releases
8:30 am EST

• The Import Price Index for January is estimated to rise +.8% versus a -.1% decline in December.

• Advance Retail Sales for January are estimated to rise +.1% versus a +.5% gain in December.

• Retail Sales Less Autos for January are estimated to rise +.1% versus a +.3% gain in December.

• Retail Sales Ex Auto & Gas for January are estimated to rise +.4% versus a +.6% gain in December.

10:00 am EST

• Business Inventories for December are estimated to rise +.2% versus a +.3% gain in November.  

10:30 am EST

•  Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,200,000 barrels versus a +2,623,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +500,000 barrels versus a +1,738,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,750,000 barrels versus a -1,042,000 decline the prior week. Finally, Refinery Utilization is estimated unch. versus a -.8% decline the prior week.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking, Eurozone GDP report, Eurozone Industrial Production, Itlay 10Y Bond auction, 10Y T-Note auction, BoE Inflation report, Japan GDP data, weekly MBA Mortgage Applications report, (WAG) analyst day, BofA Merrill Insurance Conference, BB&T Transport Services Conference and the Leerink Swan Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity 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 Slightly Higher into Afternoon on Less Eurozone Debt Angst, Short-Covering, Homebuilding/Financial Sector Strength

Broad Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Light

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 12.81 -1.0%
  

• ISE Sentiment Index 99.0 -2.9%

• Total Put/Call .99 -6.6%

• NYSE Arms .79 -8.83%

Credit Investor Angst:

• North American Investment Grade CDS Index 87.30 -2.42%

• European Financial Sector CDS Index 149.44 -4.65%

• Western Europe Sovereign Debt CDS Index 103.10 -1.75%

• Emerging Market CDS Index 230.35 +1.78%

• 2-Year Swap Spread 15.75 -.25 bp

• TED Spread 21.0 -1.75 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -17.0 +1.0 bp

Economic Gauges:

• 3-Month T-Bill Yield .08% +2 bps

• Yield Curve 172.0 +2 bps

• China Import Iron Ore Spot $155.10/Metric Tonne n/a

• Citi US Economic Surprise Index -9.0 +1.0 point

• 10-Year TIPS Spread 2.56 +2 bps

Overseas Futures:

• Nikkei Futures: Indicating +27 open in Japan

• DAX Futures: Indicating +1 open in Germany

Portfolio:

• Slightly Lower: On losses in my biotech/tech sector longs and index hedges
• Disclosed Trades: None
• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.18%

Sector Underperformers:

• 1) Hospitals -.77% 2) Education -.75% 3) Biotech -.31%
  

Stocks Falling on Unusual Volume:

• LVLT, NOG, KOS, EQIX, BBEP, VAL, RNF, QCOM, COF, MTGE, ORIG, CUB, PRI, QLYS, DNB, TMH, NOG, MMC, NTI, TGH, CRK, BWP, PRE, DMND, HUN, MYGN, AFL, TRP, SSW, KO and HUN

Stocks With Unusual Put Option Activity:

• 1) HCA 2) JDSU 3) PAY 4) FOSL 5) JNK
  

Stocks With Most Negative News Mentions:

• 1) CUB 2) QCOM 3) NBL 4) NFLX 5) BK
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.29%

Sector Outperformers:

• 1) Homebuilders +2.93% 2) Alt Energy +.64% 3) Gold & Silver +.65%
  

Stocks Rising on Unusual Volume:

• CNO, GTE, BCS, KORS, AVP, FOSL, MAS, AOL, BKD, SCTY, SPR, GY, AIZ, TEX and FIRE

Stocks With Unusual Call Option Activity:

• 1) ZIOP 2) BKD 3) MAS 4) BWLD 5) AVP
  

Stocks With Most Positive News Mentions:

• 1) OMC 2) GWW 3) NTAP 4) KORS 5) HPQ

Charts:

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

Tuesday Watch

Evening Headlines 
Bloomberg: 

• South Korea Says Likely North Korea Conducted a Nuclear Test. North Korea likely conducted its third nuclear test today, a South Korean government official said, escalating tensions with an international community that has sought to curb the totalitarian state’s atomic ambitions. “Artificial quake tremors from North Korea are likely to be a nuclear test but we will need to take a closer look at the details to be sure,” South Korean Defense Ministry spokesman Kim Min Seok said by phone. Japanese Prime Minister Shinzo Abe called a meeting of his security council. 

• Euro-Skeptic Grillo Pushes for Italy Debt Renegotiation in Vote. Beppe Grillo, the Italian comic poised to play a spoiler in this month’s national elections, is gaining ground in opinion polls as he campaigns for sovereign debt relief to revive the country’s stagnant economy. “The debt must be renegotiated and the interest on the debt must be renegotiated,” Grillo said yesterday in a Bloomberg Television interview in Trento. “We won’t have growth in this country for 10 years if the climate stays as it is.” Grillo, a self-described populist, has rallied to nearly 20 percent in some polls with a call to reconsider euro membership and to drive established politicians from parliament.

• Peugeot Plant Shutdown Seen Raising Immigrant Joblessness.

• Egyptians Rally Against Mursi on Anniversary of Mubarak Ouster. Egyptians rallied against President Mohamed Mursi to mark the second anniversary of his predecessor’s ouster, in a show of force that could precipitate more violence. Security forces beefed up their presence outside the presidential complex in anticipation of marches descending on the area on the second anniversary of Hosni Mubarak’s departure, the state-run Middle East News agency said. Dozens of protesters temporarily blocked the 6th of October bridge spanning the Nile in central Cairo, chanting slogans against Mursi and his Muslim Brotherhood, it said. 

• Copper Trades Near One-Week Low on China Holiday, Europe Concern. Copper traded near a one-week low as markets in China, the biggest buyer of the metal, are closed this week for the Lunar New Year holiday and data this week may show a contraction in euro-zone economies.

Wall Street Journal: 

• Rubio Gains GOP Influence. Sen. Marco Rubio plans to follow his prime-time response to the president's State of the Union address with his own legislative push on education funding and help for small businesses—all part of a larger effort to build his image as a conservative leader with a bipartisan bent. The Florida senator's star turn as GOP spokesman Tuesday night, when he will give his party's official response to the president, comes as Republicans increasingly look to the 41-year-old lawmaker to be a flag-carrier for the party after its election setbacks last year.

• More Stable Airlines Fly Out of Mergers. Fliers Poised to Benefit From Greater Investments, Stability. The U.S. airline industry is starting to fly high again. An expected merger agreement this week between AMR Corp.'s American Airlines and US Airways Group Inc. could end the latest chapter on consolidation that has helped to stabilize an industry troubled for decades.

• New Rules for Credit-Default Swaps Targeted for April. The credit-default-swap market is set to get its second major overhaul or “big bang” this year as the industry looks to fix structural problems some traders say have been stifling the market. A panel of representatives from banks and investment firms plan to finish new rules for CDS by April, said a person briefed on their discussions. The International Swaps and Derivatives Association and its legal counsel, Allen & Overy, are leading the effort. If supported by enough market participants, the changes would likely be implemented in the second quarter, the person said. The proposals include changes to the effective dates of the protection CDS offer and the assets that can be delivered for settlement in cash. The new rules have the potential to affect trillions of dollars of financial contracts tied to the debt of companies and governments around the world.

• Push to Gauge Value of College Gains Steam. U.S. and state officials are intensifying efforts to hold colleges accountable for what happens after graduation, a sign of frustration with sky-high tuition costs and student-loan debt. Sens. Ron Wyden (D., Ore.) and Marco Rubio (R., Fla.) are expected to reintroduce this week legislation that would require states to make more accessible the average salaries of colleges' graduates. The figures could help prospective students compare salaries by college and major to assess the best return on their investment.

Dow Jones: 

• Moody's Cuts Outlook On Advanced Economies Even as Risks Ease. Moody's Investors Service lowered its outlook Tuesday for the world's advanced economies, even as risks to the global economic recovery continue to diminish. The rating company predicts that real gross domestic product growth for the eight countries in the G-20 of advanced economies, including the U.S., Japan, Germany and the U.K., will be around 1.4% in 2013, 0.2 percentage points lower than Moody's previous forecast in November, reflecting recent weak data. "While business confidence should strengthen as the economic situation improves, fiscal consolidation and high unemployment will continue to impede recovery," Moody's said in its latest Global Macro Outlook report, published Tuesday.

MarketWatch.com: 

• While you were ‘Nemo’ watching, Goldman(GS) got a little bearish on equities.

CNBC:

• State of the Union May Well Set Tone for Budget Talks. President Barack Obama's State of the Union speech Tuesday could drive market focus straight to the next skirmish in the budget and deficit battle with Congress, depending on his tone. Traders are watching to see how the president addresses the "sequester," or the automatic spending cuts that would kick in after March 1, if there is no action by Congress to stop them. "I think we're going to see more of a line drawn in the sand on sequestration," said David Gilmore of FX Analytics. "It will be interesting to see where he is on reducing the deficit. I think we've learned about the fiscal cliff is stuff happens at the last minute. Can kicks should be expected. There's no reason for suicide watch when it comes to fiscal policy."

Zero Hedge: 

• How The Fed Is Handing Over Billions In "Profits" To Foreign Banks Each Year. (graphs)

• "Like Lambs To Slaughter," Observations On The Real Lessons Of Keynes.

• Six Equity Offerings Price After The Close As Insiders Rush To Sell To Retail.

Business Insider: 

• 10 Months From Launch To Sale: Behind The Latest Ludicrously Fast Exit In Enterprise.  

• 'Microsoft Is Basically Malfunctioning,' Says A 20-Year Veteran Of The Company. 

IBD:   

• EBay(EBAY) Machine Picks Up Volume On Mobile Commerce.

CNN: 

• Drones become big business. Companies benefiting from this spending include Northrop Grumman (NOC), General Atomics, Lockheed Martin (LMT), Boeing (BA), Israel Aerospace, and Textron (TXT).

The Blaze:

• Here’s Your Preview of Obama’s State of the Union Address: More Tax Hikes, Less Spending Cuts 

• SEAL Who Allegedly Shot and Killed Bin Laden Reveals Stunning New Details About the Raid — And You Won’t Believe How He Says the Gov’t Has Treated Him Since.

Real Clear Politics: 

• In Health Care, One Law Is Working Like a Charm. “We have to pass the bill so you can find out what’s in it,” said Nancy Pelosi during the debate over Obamacare. The Affordable Care Act passed, and Americans are now finding out. It’s not a pretty picture. Take employment. “Medical device makers in Massachusetts and elsewhere are warning of potential job losses,” reports The Boston Globe, because of a 2.3-percent tax on medical devices imposed by law. Even liberal-heartthrob-turned-Massachusetts-Senator Elizabeth Warren, a supporter of the law, says repealing that tax is “essential.”

Reuters:

• BNY Mellon(BK) loses U.S. tax case, to take $850 mln profit hit. BNY Mellon Corp said on Monday it will take an $850 million charge against first-quarter profit after losing a high-stakes tax case to the U.S. Internal Revenue Service, a move that will also erode some of its capital. The BNY Mellon case was the first to go to trial since the IRS accused several U.S. banks of generating artificial foreign tax credits through loans with London-based Barclays Plc .

• PIMCO flagship fund decreases mortgage holdings in Jan. The PIMCO Total Return Fund, the world's largest bond fund run by Bill Gross, decreased its mortgage holdings to its lowest level since mid-2011, ahead of the prospect of higher interest rates and emerging inflationary pressures. 

• Venezuela Devaluation Hits US, European Companies. Venezuela's latest currency devaluation will hurt a range of U.S. and European companies that sell to consumers in the country, as state-imposed price controls make it more difficult for those companies to protect their profits.

Telegraph: 

• ECB executive warns on Cyprus aid delays. European Central Bank executive board member Joerg Asmussen is pressing for agreement over Cypriot aid within weeks, in a move which will agitate a German government keen to delay any action.

Evening Recommendations 
Bernstein:

• Downgraded Facebook(FB) to Market Perform, lowered target to $27 from $33.

Night Trading

• Asian equity indices are -.25%  to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 114.0 unch.

• Asia Pacific Sovereign CDS Index 88.0 unch.

• FTSE-100 futures -.07%.

• S&P 500 futures -.16%.

• NASDAQ 100 futures -.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FOSL)/2.27

• (KO)/.44

• (CPLA)/.74

• (AB)/.33

• (DBD)/.45

• (GT)/.20

• (AVP)/.27

• (MMC)/.52

• (HUN)/.23

• (OMC)/1.10

• (MHP)/.72

• (BWLD)/.96

• (CLF)/.52

• (RAX)/.21 

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for January is estimated to rise to 89.0 versus 88.0 in December.

10:00 am EST

• JOLTs Job Openings for December are estimated at 3700 versus 3676 in November.

2:00 pm EST

• The Monthly Budget Deficit for January is estimated at -$2.00B versus -$27.41B in December.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Plosser speaking, Fed's Lacker speaking, Fed's George speaking, ECB's Draghi speaking, BoE's Carney speaking, 3Y T-Note auction, Germany inflation data, Iran/IAEA Hearings, EU's transaction tax decision, weekly retail sales reports, CSFB Financial Services Forum, Goldman Tech/Internet Conference(AAPL presentation), Stifel Nicolaus Transports Conference and the (BSX) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and automaker 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 day.