Today's Headlines

Bloomberg:

• Euro-Area Economy Shrinks Most Since Depths of Recession. The euro-area recession deepened more than economists forecast with the worst performance in almost four years as the region’s three biggest economies suffered slumping output. Gross domestic product fell 0.6 percent in the fourth quarter from the previous three months, the European Union’s statistics office in Luxembourg said today. That’s the most since the first quarter of 2009 in the aftermath of the collapse of Lehman Brothers Holdings Inc. and exceeded the 0.4 percent median forecast of economists in a Bloomberg survey. The data capped a morning of releases showing that the economies of Germany, France and Italy all shrank more than forecast in the fourth quarter.
• Italian Economy Shrinks Most in Almost Four Years Before Vote.Italy’s economy contracted the most in almost four years in the quarter through December as the country’s fourth recession since 2001 deepened. Gross domestic product shrank 0.9 percent from the previous three months, a sixth quarterly contraction and almost five times the 0.2 percent pace of the third quarter, the National Statistics Institute Istat in Rome said in a preliminary report today. The decline was more than the 0.6 percent median forecast in a Bloomberg News survey of 24 economists. From a year earlier, output shrank 2.7 percent. Italy’s central bank has called on whichever government emerges from this month’s elections to consolidate public finances to boost competitiveness and economic growth, after revising its GDP forecast for the euro region’s third-biggest economy. The economy shrank 2.2 percent in 2012, Istat said today. The Bank of Italy forecast the economy will contract 1 percent this year and won’t emerge from the recession until the second half of 2013, citing weak domestic demand. The central bank’s new forecast is five times the 0.2 percent contraction it estimated in July.
• S&P 500 Bearish Bets at Two-Year Low: Options. Puts protecting against a 10% decline in the S&P 500 cost 7.88 points more than calls betting on a 10% gain, according to three-month options data compiled by Bloomberg. The price relationship known as skew fell to 7.49 on Feb. 1, the lowest since November 2010.
• Euro Drops to Three-Week Low as Recession Deepens; Yen Advances. The euro slid to a three-week low against the dollar after a report showed Europe’s recession deepened more than forecast last quarter, sapping demand for the region’s assets and spurring bets on lower interest rates. The 17-nation currency dropped for a third day versus the yen as separate data showed gross domestic product shrank in both Germany and France. “The GDP data out of the euro zone was quite poor, putting the idea of a potential rate cut by the European Central Bank back on the table,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, said in a telephone interview. “The market priced in further potential for easier monetary policy coming out of the ECB, which led to a weaker euro.” The euro slumped 0.9 percent to $1.3327 at 11:43 a.m. New York time and reached $1.3315, the lowest level since Jan. 24.
• Gold Demand Rose 3.8% in Fourth Quarter, Narrowing Annual Drop. Gold demand rose 3.8 percent in the fourth quarter as Indian purchases jumped, narrowing the first drop in annual usage in three years, the World Gold Council said. India remained last year’s biggest buyer, ahead of China.
• The Real Risk-Takers Are at the Federal Reserve. In a nutshell: The Fed buys risk-free Treasury securities, depressing the yields. The public is goaded into buying riskier assets, such as stocks and corporate bonds, sending those prices higher. Businesses financing themselves with equity have more money to invest. Consumers feel wealthier and spend more. Whenever I hear the bit about risk-taking, I wonder what the dividing line is between encouraging higher asset prices and creating froth in asset markets. How does the Fed know when asset prices have gotten out of whack?
• Chicago Shamed by Murder as Aurora Has Homicide-Free Year. Aurora saw its factories shrivel and its street gangs thrive until the past five years, when its police methodically smothered the criminals by partnering with neighborhood groups as well as state and federal law enforcement. The agencies drew from the playbook used to get the Chicago crime icon Al Capone - - attacking the enterprise, not just the violence it spawns. Aurora’s violent-crime rate has plunged, even as the city’s population soared 38 percent in the last decade to almost 200,000, roughly the size of Salt Lake City. Aurora’s annual homicide total in the past five years averaged fewer than 3, down from 26 in 2002, according to police. The last year for which the city recorded no killings was 1946.
• BlackBerry(BBRY) Co-Founder Balsillie Sells Stake in Company.Jim Balsillie, who served as co- chief executive officer of Research In Motion Ltd. until January of last year, has cut his 5.1 percent ownership stake to zero, raising concern that he has lost confidence in the company.
• Postal Union Millions to Democrats Roils Saturday Cuts. All but five of Congress’s 255 Democrats and independents received campaign donations from postal worker union groups in the past six years, raising the political risk of Postmaster General Patrick Donahoe’s move to end Saturday mail delivery. Political action committees for the seven postal unions contributed $9.6 million from 2007 to 2012 to current members of Congress, 91 percent of it to Democrats and two independents who caucus with them, according to data compiled by Bloomberg from the Federal Election Commission and the Center for Responsive Politics, a Washington-based research group.
• Berkshire(BRK/A) Joins 3G Capital to Buy Heinz(HNZ) in $23 Billion Deal. Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital agreed to buy HJ Heinz Co. for about $23 billion as the billionaires increased their bets on consumer products. The buyers will pay $72.50 a share, compared with yesterday’s closing price of $60.48, according to a statement today. Berkshire will spend about $12 billion to $13 billion on the deal for the maker of condiments and Ore-Ida potato snacks. The transaction is valued at about $28 billion including the assumption of debt, according to the statement.
• Hong Kong Bourse to Start After-Hours Futures Trading. Hong Kong Exchanges & Clearing Ltd., the world’s largest exchange company by market value, said it received regulatory approval to start after-hours futures trading and will begin the service on April 8. Hang Seng Index and H-shares Index futures will be available for trading from 5 p.m. to 11 p.m. from the date, in addition to regular hours, the bourse said in a statement today. Gold futures will also be considered for inclusion at a later stage, it said.

Wall Street Journal: 

• Boehner: House Won’t Act First to Avoid Sequester. House Speaker John Boehner (R., Ohio) challenged the Senate to pass a bill to avoid the across-the-board spending cuts known as the sequester, saying the House won’t act to do so first. At a weekly press conference, Mr. Boehner declined to comment on a Senate Democratic bill that is expected to be unveiled later Thursday that would partially defer the $85 billion in scheduled spending cuts by raising revenues through ending some tax deductions. He said that until the Senate passes such a bill, there was no reason for him to comment on it. The Republican leader said the House had passed legislation last year to shift the burden of the cuts away from defense and other key federal programs. But that bill died at the end of the last Congress, House GOP leaders don’t plan to reintroduce it this year.
• Hagel Nomination Again in Jeopardy. Chuck Hagel's confirmation as the next secretary of defense was again in jeopardy Thursday as Republicans declared he wouldn't have the 60 votes necessary for his nomination to proceed. Republican leaders told Senate Majority Leader Harry Reid (D., Nev.) they were withholding GOP votes until they received more information, a Democratic leadership aide said.

MarketWatch:

• Sen. Warren: Too-big-to-fail is too-big-for-trial. Fed’s Tarullo: changes to Volcker rule ahead. In her first hearing as a U.S. senator Thursday, Elizabeth Warren criticized federal regulators for settling civil cases with Wall Street banks instead of taking them to trial.

CNBC: 

• Expect an Apple TV Event in March: Analyst.
• John Kerry's Good Heinz(HNZ) Day. (video) 
• Why Companies Still Aren't Likely to Invest—or Hire. Investors have opened their wallets following the fiscal bargain struck in Washington, but corporate CEOs may not be so quick to tap into their swelling coffers.
• General Motors(GM) Profits Rise, but Europe, Charges Weigh. Declining market share and continued weakness its European operations dragged on the earnings of General Motors in the fourth quarter, which missed Wall Street's expectations as the company took nearly $34 billion worth of assorted charges against its earnings.

Zero Hedge:

• Initial Claims Plunge As Department Of Labor "Estimates" Claims For Illinois, Connecticut; Blizzard "Blamed". (graph)
• The Pain In Spain Falls Mainly... Everywhere. 
• Guess Who Was Buying HNZ Stock From Its Clients. 
• In Search Of The Economic Recovery. (graphs) 
• Greek Youth Unemployment Tops 60%. (graph) 
• "Boomerang Foreclosures" Are Back As Bernanke's Second Housing Bubble Begins To Pop.

Business Insider:

• 18 Scary Charts That Show The Real Crisis In Europe. 
• CHART: The European Housing Market Is Ridiculously Disconnected. 
• Idaho School Locked Down After Reports Of Intruder With Double-Bladed Ax. 
• BOEHNER: Every Time I Get Into One Of These Negotiations With Obama 'It's My Rear End That Got Burnt'. 
• This Chart Really Drives Home The Dire Direction Of Eurozone GDP. 
• FELIX ZULAUF: If The Stock Market Doesn't Correct Soon, Then We Could Repeat 1987.

Forbes:

• Peer-Reviewed Survey Finds Majority Of Scientists Skeptical Of Global Warming Crisis.

Reuters: 

• Moody's says U.S. states' outlook negative for 6th year.
• Fed's Bullard: raising minimum wage will mean fewer people hired.

The Guardian:

• Oscar Pistorius murder charge: South African police deny burglary claims. Sprinter charged with murdering girlfriend, as police deny making claims that he had thought she was an intruder.

Bear Radar

Style Underperformer:

• Large-Cap Value -.50%

Sector Underperformers:

• 1) Telecom -3.03% 2) Airlines -2.35% 3) Education -2.12%
  

Stocks Falling on Unusual Volume:

• CTL, WIN, TOT, BCS, BBVA, LBTYA, TV, ECA, NFX, UNFI, BPL, EEP, TAP, AFFY, ULTA, WTW, WFM, STMP, FORR, HSP, CTU, GNRC, LCC, ITRI, PRLB, IPI, ALXN, BIN, TNGO, TRIP, MLU, SSS, MDLZ, PNK, NUS, EIX, UPL, NDAQ, UNG, HSC, AFFY, TROX and STRA

Stocks With Unusual Put Option Activity:

• 1) CTL 2) WFM 3) TRIP 4) Z 5) HYG
  

Stocks With Most Negative News Mentions:

• 1) EXPE 2) ETR 3) CPN 4) CLH 5) NFX
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.28%

Sector Outperformers:

• 1) Oil Service +1.93% 2) Gold & Silver +.85% 3) Foods +.45%
  

Stocks Rising on Unusual Volume:

• STZ, HNZ, SWC, BAS, BUD, HAL, CPB, JCOM, PGI, ANGI, Z, SKX, VCLK, CJES, GNC, EZCH, CAR, NTSP, EQIX, BBY, ARUN and LUFK

Stocks With Unusual Call Option Activity:

• 1) ESI 2) GIS 3) TWX 4) MDY 5) GNC
  

Stocks With Most Positive News Mentions:

• 1) TWX 2) GIS 3) IM 4) PEP 5) CAH

Charts:

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

Thursday Watch

Evening Headlines 
Bloomberg: 

• EU Seeks Broad Transaction Tax to Curb Rules ‘Patchwork’. The European Union will propose a far-reaching tax on financial transactions which could be collected worldwide as soon as Jan. 1 next year by the 11 nations that have so far signed up to participate. The plan by the EU in Brussels, to be outlined today, invokes “residence” and “issuance” ties to firms in participating countries, in a bid to prevent traders from escaping the levy by trading outside the tax’s zone, according to documents obtained by Bloomberg News. The plan says that to escape the proposed tax entirely, firms in other nations would have to entirely cease financial-services business with the 11 EU nations involved.

• Italy Tax Pledges Spook Investors as Economy Wilts: Euro Credit. Italian voters, being wooed by promises of lower taxes that are spooking investors, will get a reality check today with data probably showing the country slipping deeper into its fourth recession since 2001. 

• BOJ Rejects Keeping Virtually Zero Rates Until Price Goal Near. The Bank of Japan rejected a proposal for keeping interest rates virtually at zero until a price target is in sight and refrained from adding to stimulus, ahead of leadership changes next month. The central bank kept its asset purchase fund unchanged at 76 trillion yen ($813 billion), according to a BOJ statement released in Tokyo today. That was in line with analysts’ forecasts. Policy makers rejected board member Ryuzo Miyao’s call for the pledge on rates.

• Sakakibara Says Japan Punishes Neighbors as Yen Falls Toward 98. Japan is punishing its trading partners by guiding the yen toward levels that haven’t been seen in almost four years, said Eisuke Sakakibara, a former Ministry of Finance official. Japan’s currency has entered a range of between 88 to 98 per dollar, according to Sakakibara, known as “Mr. Yen” for his efforts to influence exchange rates in the late 1990s. An official from a Group of Seven nation said Japan will be in the spotlight at the Group of 20 gathering this weekend amid concern the yen’s slide has been excessive. “Guiding the yen lower is a policy that punishes neighboring nations,” Sakakibara, 71, said in an interview in Tokyo yesterday. Impressions overseas that Japan is trying to orchestrate further declines in the yen mean that “it will be criticized by the G-7, as well as the G-20,” he said.

• China’s Citic to Buy 13% Stake in Alumina for A$452 Million. Citic Group Corp., China’s largest state-owned investment company, will pay about A$452 million ($468 million) for a stake in Alumina Ltd., partner in the world’s biggest alumina business.

• Perry Goes to California for Jobs After Brown 'Fart' Remark. First, California Governor Jerry Brown mocked a Texas ad campaign to lure jobs from his state as a “burp, barely a fart.” Then Texas Governor Rick Perry escalated the battle with a four-day recruiting trip to Brown’s state, capped by a news conference today to boast of his efforts. “It’s not about bashing California, it’s about promoting Texas,” said Perry, 62, a Republican, on a conference call with reporters. “The ad campaign is doing what it was intended to do: get people talking about the differences of California and Texas.” 

• State Farm Invests in Iran-Linked Firms, California Says. State Farm Mutual Automobile Insurance Co. and units of Cigna Corp. are among insurers investing in firms that do business with Iran, California Insurance Commissioner Dave Jones said. An ING Groep NV unit also has Iran-linked holdings, according to a statement today from Jones. Insurers that operate in California have $198 million invested in firms that do business with Iran’s military, energy and nuclear sectors, down from about $6 billion in 2009 when California began pushing them to divest, Jones said.

• Apple(AAPL) Says It Will Fight Greenlight’s Bid to Block Vote. Apple Inc. said it will fight Greenlight Capital Inc.’s bid to bar the company from adopting a measure restricting its ability to issue preferred stock. 

• Dell(DELL) Said to Plan Shareholder Meetings to Assess Demands for LBO. Dell Inc. is setting up meetings with shareholders to assess their demands for getting its $24.4 billion buyout done and also preparing a public response to critics of the deal, said people with knowledge of the situation.

Wall Street Journal:

• U.S. Funds Score Big by Betting Against Yen. Some of the biggest U.S. hedge-fund investors have made billions betting against the yen, exploiting Japan's determination to weaken its currency and boost its economy. Wagering against the yen has emerged as the hottest trade on Wall Street over the past three months. George Soros, who made a fortune shorting the British pound in the 1990s, has scored gains of almost $1 billion on the trade since November, according to people with knowledge of the firm's positions. Others reaping big trading profits by riding the yen down include David Einhorn's Greenlight Capital, Daniel Loeb's Third Point LLC and Kyle Bass's Hayman Capital Management LP, investors say. 

• Tensions Mount as China Snatches Farms for Homes. 

• U.S. Slams EU's Tax-on-Trades Plan. European Commission Says Proposed Levy Could Raise €35 Billion Annually for the 11 Participating Countries. The U.S. Treasury said it opposes plans by 11 European Union countries to impose a small tax on trades in shares, bonds and derivatives. The European Commission, the EU's executive arm, will propose a new financial-transaction tax it says could raise as much as €35 billion ($47 billion) a year for the 11 participating states, which include Germany, France, Italy and Spain, according to documents to be published Thursday and seen by The Wall Street Journal.

• China's 'Wall' Hits Business. Firms Say Censorship Slows Web Connections, Curbs Access to Services.

• Four Key Questions for Health-Care Law. Thanks to the Supreme Court and Barack Obama's re-election, the Affordable Care Act—"Obamacare" to foes and a few of its friends—isn't going away. The issue now is how it will work. 

• The Rookie. If there's a crisis on Jack Lew's Treasury watch, buy gold.

• Henninger: The State of Obama. The State of the Union speech was about just one thing: the Obama project. Here's what has to be understood. It's all about him. A State of the Union speech normally is about relating a president's public policies to conditions in the country. An Obama State of the Union speech is about one thing: the Obama project.

Fox News:

• Treasury nominee Lew pressed on $1M bonus from bailed-out firm. (video) Treasury secretary nominee Jack Lew was challenged Wednesday over a nearly $1 million bonus he accepted from Citigroup just as the company was getting bailed out by the government, at an at-times tense confirmation hearing on the Hill. 

MarketWatch.com:

• Eight states join lawsuit challenging Dodd-Frank. Lawsuit: System to dismantle a big failing bank is unconstitutional.

CNBC: 

• American and US Airways Merger Create World's Largest Airline.

• Big Investors Lead Bets Against Junk Bonds. Some of the world's most sophisticated credit investors have been ramping up their bets against junk bonds even as retail investors have been pouring money into the asset class. The list of junk-bond bears includes GSO, the credit arm of Blackstone; Apollo Global Management; Centerbridge Partners; Oaktree Capital; and a host of credit and so-called "macro" hedge funds, according to executives familiar with the firms' investment activities.

Zero Hedge: 

• Greek Consumers Most Pessimistic On Earth: 40% Have No Disposable Income. 

• Japan Refuses To Exit Triple-Dip Recession As Q4 GDP Disappoints Expectations Of A Positive Print. (graph)

• Six More Equity Offerings Price After The Close As The Greater Fools Start Getting Second Thoughts.

• Meet Stingray Surveillance: The "Unconstitutional, All-You-Can-Eat Data Buffet".

Business Insider:

• Warren Buffett's Favorite Valuation Metric Has Breached The 100% Level. (graph)

• CITI(C): Stock Market Sentiment Is Perilously Close To All-Out Euphoria. (graph)

• Navy SEAL Chris Kyle Had A Funeral Procession Fit For A Head Of State [VIDEO].

• ACKMAN: 'If The FTC Misses Herbalife(HLF) It's The Equivalent Of The SEC Missing Madoff'.

• CITI(C): OPEC's Days Look Numbered.

NY Times:

• Seeking Growth, Nurses’ Union Links to Teachers’ Union. One of the nation’s largest nurses’ unions — the National Federation of Nurses — plans to announce on Thursday that it will affiliate with the far larger American Federation of Teachers. Barbara Crane, the president of the nurses’ federation, said her group’s national board voted to join forces with the teachers’ union to give the nurses more political clout and money to try to unionize more nurses.

Reuters: 

• MetLife(MET) profit falls on derivative losses; operating profit beats. MetLife Inc reported a 90 percent fall in quarterly profit on derivative losses linked to its credit spreads but the largest U.S. life insurer's operating profit beat estimates. MetLife, heavily exposed to persistently low interest rates, has long had a substantial derivatives program designed to smooth out that risk. But higher interest rates, foreign currency changes and impact of the company's credit spreads resulted in derivative net losses of $924 million, after tax, in the quarter. The company recorded derivative net gains of $351 million a year earlier.

• Whole Foods(WFM) store sales soften, shares fall. Whole Foods Market Inc, the largest U.S. natural and organic grocery chain, said on Wednesday that sales at established stores so far this quarter softened from the prior period and its shares fell 6.1 percent after the close. 

• Cisco(CSCO) results beat Street; CEO sees challenge in Europe. Cisco Systems Inc's quarterly results topped Wall Street views on Wednesday amid early signs tech spending was on the mend, but CEO John Chambers warned the picture was mixed and parts of Europe remained challenging. The company's shares were down 1.7 pct in after hours trading after Cisco reported that revenue growth in Europe - which accounts for a quarter of its business - was down 5 percent.

• Weight Watchers(WTW) forecasts weak full-year earnings; shares fall. Weight Watchers International Inc forecast full-year earnings below Wall Street expectations as attendance at its diet meetings remained low so far this year, sending its shares down more than 15 percent after the bell. 

• Engineers union files complaint, accuses Boeing(BA) of intimidation. A union representing engineers and technical workers at Boeing Co filed a complaint with the National Labor Relations Board accusing the airplane maker's security personnel of stopping union members from distributing leaflets on a labor contract ballot at the Everett factory. 

• Pressure builds for Keystone decision after Obama speech. Environmentalists and industry groups ramped up efforts on Wednesday to influence the White House's decision on the Keystone XL pipeline project, a day after President Barack Obama said he would take action to curb climate-warming emissions. 

• Applied Materials(AMAT) forecasts strong quarter as orders pick up. Applied Materials Inc, the world's largest chip gear maker, posted better-than-expected quarterly results driven by the popularity of smartphones and tablets, and forecast earnings ahead of analysts' estimates for the current quarter. 

• Nvidia(NVDA) revenue outlook misses, PC and tablet chips slow. Nvidia gave a revenue outlook for the current quarter that missed expectations, pointing to a slowing PC industry and slower production of tablets using its chips ahead of the release of newer models.

• Obama Medicare rebate plan could hurt drug companies. President Barack Obama's decision to spotlight drug rebates as a way to save money on Medicare is likely to be opposed by the pharmaceutical industry, which could potentially lose billions of dollars in profits.

Financial Times:

• US authorities widen SAC Capital probe. US authorities are expanding their investigation into potential insider trading involving SAC Capital , the $14bn hedge fund, to include more stocks than previously identified, people familiar with the matter said. The probe by the Federal Bureau of Investigation and the US attorney’s office in Manhattan has widened to include at least four and as many as six more stocks, these people said. 

Telegraph:

• In the last three years UK inflation has eroded a decade of economic growth, and worse is to come.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 111.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 85.50 -1.0 basis point.

• FTSE-100 futures +.07%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALXN)/.53

• (REGN)/1.37

• (JAH)/1.26

• (CAB)/1.21

• (BWA)/1.14

• (VMC)/-.12

• (PEP)/1.05

• (DISCA)/.76

• (APA)/2.29

• (A)/.67

• (TAP)/.64

• (SPW)/1.56

• (GM)/.51

• (DTV)/1.15

• (STRA)/1.44 

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 360K versus 366K the prior week.

• Continuing Claims are estimated to fall to 3205K versus 3224K prior. 

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking, G-20 Meeting, China FDI, BoJ decision, 30Y T-Note auction, weekly EIA natural gas inventory report, Bloomberg Feb. US Economic Survey, weekly Bloomberg Consumer Comfort Index, (JDSU) analyst day, (TEN) analyst meeting and the (OI) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial 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 Lower into Final Hour on Sequester Worries, Profit-Taking, Technical Selling, Consumer Discretionary/Financial Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 13.19 +4.35%
  

• ISE Sentiment Index 128.0 +37.63%

• Total Put/Call .89 -1.11%

• NYSE Arms 1.32 +44.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 87.30 -1.08%

• European Financial Sector CDS Index 140.77 -5.7%

• Western Europe Sovereign Debt CDS Index 99.71 -3.28%

• Emerging Market CDS Index 232.95 -.21%

• 2-Year Swap Spread 15.25 -.5 bp

• TED Spread 20.0 -1.0 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -16.75 +.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .09% +1 bp

• Yield Curve 174.0 +2 bps

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

• Citi US Economic Surprise Index -7.0 +2.0 points

• 10-Year TIPS Spread 2.57 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +75 open in Japan

• DAX Futures: Indicating -5 open in Germany

Portfolio:

• Slightly Higher: On gains in my biotech/tech sector longs
• Disclosed Trades: None
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• King Says U.K. Faces Inflation Bout Plus Weak Growth. Bank of England Governor Mervyn King said Britain faces a further bout of inflation and a muted economic recovery, and pledged officials will look through the volatility in prices to keep nurturing growth where they can. “Inflation is likely to rise further in the near term and may remain above the 2 percent target for the next two years,” King said as he presented the central bank’s Inflation Report in London today. “The MPC’s remit is to deliver price stability in the medium term in a way that avoids undesirable volatility in output in the short run. The prospect of a further prolonged period of above-target inflation must therefore be considered alongside the weakness of the real economy.”
• Fracking Threatens OPEC as U.S. Output at 20-Year High. A surge in U.S. oil production has pushed the country’s output to the highest level since 1992, threatening the dominance of the Organization of Petroleum Exporting Countries. The U.S. pumped 7.06 million barrels a day in the week ended Feb. 8, up 1 percent from the previous week and extending last year’s 19 percent gain, the Energy Information Administration said today. OPEC production fell to the lowest level in a year in January, the Paris-based International Energy Agency said today in its monthly report. Improvements in horizontal drilling and hydraulic fracturing, or fracking, have spurred drilling in states such as Texas, North Dakota and Oklahoma. Saudi Arabia, OPEC’s largest producer, reduced output in December because customers asked for less, Ibrahim al-Muhanna, an adviser to Saudi Arabian Oil Minister Ali al-Naimi, said Jan. 14. “Increasing amounts of North American oil production puts pressure on OPEC to find other markets for their oil,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone today. “It changes the political dynamics between the U.S. and OPEC.” U.S. crude imports have fallen 5.9 percent so far this year, extending a 21 percent decline last year, according to data from the EIA, the statistical arm of the Energy Department. The U.S. met 84 percent of its energy needs in the first 10 months of last year, on pace to reach the highest annual rate of self-sufficiency since 1991.

Wall Street Journal:

• Euro's Rise Threatens Corporate Recovery. The euro's high exchange rate is dimming a rare bright spot for European companies: exports. With the euro up 12% against the dollar since July and up 35% to a three-year high against the yen, European companies are squirming. A stronger currency makes a country's exports more expensive abroad—and thus less competitive—and reduces profit when it is brought back home.

• The President's Plans. Obama offers an agenda aimed at electing a Pelosi House.

MarketWatch.com:

• The 10 most overbought S&P 500 stocks.

• Retailers look increasingly vulnerable.

CNBC:

• Zell: US Border Not a Problem, 'Jobs Aren't Here'. (video) America should not worry too much about protecting its porous borders from illegal immigrants because "the jobs aren't here" so they're not coming anymore, entrepreneur Sam Zell told CNBC on Wednesday. Zell noted that the president's call to increase the federal minimum wage from $7.25 an hour to $9 would cost jobs. "There's no history that says raising the minimum wage does anything other than eliminate jobs," he said.

• Mortgage Mess Still Mires Housing Recovery.

• Drop Coverage or Cut Hours? Big Companies Grapple With Obamacare. For large retail and restaurant chains the big unknown in the year ahead is how much more they'll pay for health coverage. Employers with 50 or more workers who put in 30 hours a week will be required to provide health care coverage or pay a fine, under the Affordable Care Act, also called the ACA or Obamacare. But the details haven't been settled. "We can't really calculate what it's going to be like," said John Mackey, Co-Founder and Co-CEO of Whole Foods, an outspoken critic of the Obama health reform law. 

• State of the Union Reaction: Gun Sales Still Strong. The day after President Barack Obama's emotional plea in his State of the Union message for a "vote" on new gun control measures, it is business as usual at the Blue Ridge Arsenal in Chantilly, Va. The post-Sandy Hook boom in gun sales and even ammunition continues.

Zero Hedge:

• Retail Sales Come In Line, Ex-Autos/Gas Slight Miss.

• Map Of The Day - Spain's Corruptometer. 

• Record February Gas Prices Mean It's Time To Blame The Hedge Funds Again. 

• Europe Is Not "Fixed": Two Charts. 

• Leverage Lurches To Post-Crisis Highs. 
• Global Mobile Phone Sales Post First Decline Since 2009.

Business Insider:

• American Farmland Prices Are Going Bonkers. 

• ART CASHIN: A Dormant US Inflation Indicator Just Spiked, And It's Got Me Thinking Of Weimar And Zimbabwe. 

• Barack Obama Made A Hard Pivot Left In His State Of The Union. 

• McDonald's(MCD) Is Falling After Obama's Call For A $9 Minimum Wage. 

• Since Microsoft Is Giving Dell $2 Billion, Let's Take A Look At Its Bad History Of Investing. 

• Don't Get Excited Yet — That Payroll Tax Hike Will Slam Us In The Next Few Months. 
• Nuclear 'Fingerprinting' Shows Just How Potent North Korean Nukes Have Become. 
• Draconian Cash Controls Are Coming To France.

Reuters: 

• Copper dips on dollar, China demand eyed. 
• Deere(DE) sees modest rise in farm equipment sales this year. Deere & Co, the world's largest farm equipment maker, forecast a modest increase in sales this year despite the prospect of the biggest corn crop in U.S. history, falling short of analysts' expectations and sending its shares down 3 percent. 
• US audit watchdog says may take action against Chinese auditors. The head of the U.S. audit watchdog said on Wednesday his organization may need to resort to enforcement actions against auditors based in China if they fail to hand over documents to U.S. regulators. 
• EMERGING MARKETS-Brazil stocks slip, Mexico IPC off on America Movil.
• Homebuilder Taylor Morrison doubles IPO size.