Today's Headlines

Bloomberg:

• Euro-Area Unemployment at 12.1% Shows Economic Struggles. Euro-area unemployment held at a record in November as policy makers struggled to bolster the recovery from the currency bloc’s longest recession. The jobless rate remained at 12.1 percent, the European Union’s statistics office in Luxembourg said today. That’s in line with the median estimate in a Bloomberg News survey of 26 economists. After several revisions of previous months’ data, unemployment has been stable at that level since April. 
• Did Soros Just Predict a China Crash? George Soros probably shouldn't expect any warm invitations to Beijing -- not with the much-reviled short seller warning of a giant Chinese crash.
• Europe Stocks Remain Little Changed After ADP Jobs Report. European stocks were little changed, near their highest level since May 2008, after a report showed U.S. companies hired more workers than forecast. A gauge of European banks rose for a fourth day as bond yields fell for the region’s most indebted countries. Celesio AG rallied 9.3 percent amid a report that McKesson Corp. may increase its bid for the drug distributor. J Sainsbury Plc lost 2.4 percent after the retailer cut its full-year sales forecast. Kion Group AG slid 2 percent after its biggest shareholder sold a 10.8 percent stake in the forklift maker. The Stoxx Europe 600 Index added 0.1 percent to 329.75 at the close of trading in London after the equity benchmark yesterday climbed to its highest level in five years and seven months.
• Gold Declines for Third Day on Dollar Strength, U.S. Jobs Data. Gold futures for February delivery lost 0.7 percent to $1,220.70 an ounce at 10:02 a.m. on the Comex in New York. Prices declined 0.7 percent in the previous two days. 
• WTI Oil Falls to Five-Week Low on Products Supply. WTI for February delivery dropped 74 cents, or 0.8 percent, to $92.93 a barrel at 12:30 a.m. on the New York Mercantile Exchange. It touched $92.81, the lowest level since Dec. 2. Futures traded at $93.54 before the release of the report at 10:30 a.m. in Washington. The volume of all futures traded was 13 percent above the 100-day average.
• Companies in U.S. Added 238,000 Jobs in December, ADP Says. Companies added more workers than projected in December as U.S. employers grew more optimistic about the prospects for demand, a private report based on payrolls showed today. The 238,000 increase in employment was the biggest since November 2012 and followed a revised 229,000 gain in November that was stronger than initially estimated, according to the ADP Research Institute in Roseland, New Jersey. The December tally exceeded the most optimistic forecast in a Bloomberg survey in which the median projection called for a 200,000 advance.
• Treasuries Retreat While U.S. Stocks Fluctuate After Jobs Report. The yield on 10-year Treasury notes rose five basis points to 2.99 percent as of 11:09 a.m. in New York. The Standard & Poor’s 500 Index slid 0.1 percent to 1,836.17. The dollar appreciated versus 14 of 16 major peers and gold dropped 0.7 percent.
• Calls to Drop 1970s-Era U.S. Oil Export Ban Stir Fight. Almost four decades after the Arab oil embargo, political leaders are beginning to contemplate what was once unthinkable: lifting restrictions on the export of U.S. crude oil. Senator Lisa Murkowski of Alaska, the top Republican on the Senate’s energy committee, and the American Petroleum Institute held events yesterday to push for an end to the export ban. U.S. Energy Secretary Ernest Moniz has said it’s time to revisit the policy amid forecasts the U.S. will surpass Saudi Arabia and Russia to become the world’s largest oil producer by next year. 
• Forest(FRX) Agrees to Acquire Aptalis for $2.9 Billion in Cash. Forest Laboratories Inc. (FRX), maker of the Alzheimer’s drug Namenda, will buy Aptalis Pharma for $2.9 billion, adding treatments for gastrointestinal ailments and cystic fibrosis.
• J.C. Penney(JCP) Sinks After Statement Lacks Sales Data. J.C. Penney Co. (JCP) tumbled after raising doubts about its turnaround by releasing a two-paragraph statement on holiday results that didn’t include sales data it had provided the previous three months. The shares sank 7.6 percent to $7.57 at 12:13 p.m. in New York and earlier fell as much as 9.3 percent for the largest intraday drop since Dec. 5.
• Riverbed(RVBD) Receives $3.08 Billion Takeover Offer From Elliott. Elliott, which along with its affiliates owns about 10.5 percent of Riverbed, offered to pay $19 a share, according to a statement today, a 6.4 percent premium to the stock’s close yesterday.

Wall Street Journal:

• Key Passages in Fed Minutes: Consensus on QE, Focus on Bubbles by Jon Hilsenrath. 
• CES 2014: Updates.

Fox News:

• Outbreak of 'nightmare bacteria' in Illinois stirs worry. The largest outbreak to date of one strain of what authorities have called "nightmare bacteria" is adding to concerns about the spread of such drug-resistant bugs. The outbreak, centered on a hospital in a Chicago suburb, has infected 44 people in Illinois over the past year, the Centers for Disease Control and Prevention said. The bug, known as carbapenem-resistant enterobacteriaceae, bears a rare enzyme that breaks down antibiotics. "This is a huge cluster," said Alex Kallen, a medical officer with the CDC and supervisor for the Illinois outbreak investigation, noting that only 97 cases of the infection have been reported to the agency since 2009. 
• Obama administration under pressure to turn attention back to Iraq. As Al Qaeda-aligned insurgents make unprecedented post-war gains in Iraq, U.S. military officials and others in the Obama administration are keeping their distance -- despite mounting calls to ratchet up involvement amid fears the country is teetering on the brink of civil war. Administration officials are now trying to find some middle ground, which so far includes sending additional shipments of Hellfire missiles to Baghdad, as well as surveillance drones. Lawmakers, though, claim it's clear the administration could be doing more.

MarketWatch:

• Fed tapered as it saw QE benefits slip over time. Federal Reserve officials agreed in December to start to wind down their asset-purchase program as most believed that the benefits of the controversial policy were eroding over time, according to minutes from their last meeting released Wednesday.

CNBC: 

• US moves closer to letting banks into pot business. (video) Recreational marijuana is legal in Colorado and Washington, and medicinal marijuana laws exist in 20 states. New York soon will become No. 21 on that list. But federal law currently prohibits banks and credit card companies from processing pot business transactions. That may all be about to change. 
• Consumers say they're shelling out more for health insurance. Feeling lighter in the wallet and unhappier about Obamacare? You're not alone. Support for the Affordable Care Act has plummeted since late last summer, and people with employer-based health insurance say they increasingly are paying more for out-of-pocket medical expenses, a new Bankrate.com survey released Wednesday revealed.

ZeroHedge: 

• Approval Of EU Leadership Plunges To Record Low In Spain, Greece. (graph)
• Retail Sales Point To Continuing "Struggle Through" Economy. (graph)
• Holiday Shopper Traffic Tumbles 14.6% As Online Sales Miss Expectations.
• Yahoo Virus Converts Millions Of Computers Into Bitcoin Mining Slaves.
• 10 Year Auction Prices Over 3.00% For First Time Since May 2011. (graph)
• The Fed Is Concerned About Small Cap Forward Multiples And Covenant Lite Loans?

Business Insider:

• Police Say Man With 48 Bombs Also Had Top Secret Clearance, Guns, A Vest, And Blueprints.
• Democrats' Odds Of Retaking The House Take Another Brutal Hit.
• The Death Of Casual Dining In One Chart.
• This One Paragraph Shows How This Could Just Be The Start Of Chris Christie's Problems.
• Here Are The 4 Big Stories That Will Dominate China's Volatile Financial Markets In 2014.

Quartz:

• Why Spain’s economy is in horrific shape but bond markets think the crisis is over.

Reuters:

• Alibaba division bans bitcoin after China crackdown as IPO looms. China's biggest online marketplace, Alibaba Group Holding Ltd's Taobao, will ban the sale of bitcoins on the heels of a government crackdown against the virtual currency to plug a potential gap in its tight controls on capital flows. 
• 2014’s top 10 political risks by Ian Bremmer. 
• Brazil posts biggest dollar outflow in over a decade. Brazil recorded a net foreign exchange outflow of $12.3 billion in 2013, the first negative result since the global financial crisis in 2008, and the worst deficit since investors panicked over the election of President Luiz Inacio Lula da Silva in 2002, central bank data showed on Wednesday. 
• High liquidity mustn't create bubbles, Schaeuble says. Policymakers must closely watch ultra-high liquidity provided by the world's big central banks to ensure no new asset bubbles form, German Finance Minister Wolfgang Schaeuble said on Wednesday, reiterating a long-standing warning. "We must keep a watch on liquidity levels to ensure new bubbles aren't being created," Schaeuble said at a news conference with visiting U.S. Treasury Secretary Jack Lew. "We share a responsibility to do everything to prevent new crises and new bubbles from emerging," he said, adding however that politicians should not tell central banks how to do their jobs.

AP:

• Reversals in Hard-Won Iraqi City Vex Veterans. The image of two charred American bodies hanging from a bridge as a jubilant crowd pelted them with shoes seared the name Fallujah into the American psyche. The brutal house-to-house battle to tame the Iraqi insurgent stronghold cemented its place in U.S. military history. So it is no surprise that the city's recent fall to al-Qaida-linked forces has touched a nerve for the service members who fought and bled there. Some call the news "disheartening," saying it revives painful memories of their sacrifice.

Telegraph:

• Italian joblessness hits record as it seeks higher foreign investment. Italian joblessness hits a fresh high, underlining challenge for the country’s fragile coalition in convincing the international markets it is on the path to recovery.

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true

Kyodo:

• Japan's Ruling LDP Scraps No-War Pledge in 2014 Draft. The draft deletes a phrase vowing devotion to a peaceful state, while adding language honoring the war dead in the section on visiting the Yasukuni shrine.

Nikkei:

• Canon FY Op Profit About 320b Yen, Below Forecast. Misses co. forecast of 360b yen. Mean analyst est. 359.6b yen.

Bear Radar

Style Underperformer:

• Large-Cap Value -.40%

Sector Underperformers:

• 1) Coal -1.08% 2) Energy -.85% 3) Retail -.75%

Stocks Falling on Unusual Volume:

• AZZ, AMBA, SNY, BR, KRO, NBIX, RBCN, GLPI, SHOO, TAL, INGR, SI, QCOR, AKRX, FEYE, REV, CLI, HRS, HOMB, CLX, VRSK, SCSS, TXTR, ABAX, GES, ITG, IBKR, GOGO, ARII and TCS

Stocks With Unusual Put Option Activity:

• 1) UTX 2) COH 3) JNPR 4) SNDK 5) BHI
  

Stocks With Most Negative News Mentions:

• 1) TWTR 2) FB 3) THC 4) HUM 5) GS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.24%

Sector Outperformers:

• 1) Biotech +1.63% 2) Semis +1.18% 3) Gaming +.87%
  

Stocks Rising on Unusual Volume:

• FRX, APOL, PWRD, CCIH, STZ, ORMP, TASR, SB, QIHU, FLIR, MCK, BITA, MTW, MU, ROVI, RVBD, SODA, SNDK, YELP, MCK, DV and ENDP

Stocks With Unusual Call Option Activity:

• 1) TMO 2) APOL 3) RVBD 4) HUM 5) IRM

Stocks With Most Positive News Mentions:

• 1) FRX 2) STZ 3) YELP 4) RVBD 5) SBUX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• China’s Credit Hole Seen Limiting 2014 Growth Prospects. China’s new credit probably fell by a record in the second half amid a crackdown on speculative lending, limiting prospects for economic expansion this year as policy makers focus on controlling financial risks. The broadest measure, aggregate financing, was 7.1 trillion yuan ($1.2 trillion) based on published figures plus economists’ median estimate for December data due in coming days. That would be about 931 billion yuan less than in July-to-December 2012, the largest drop in figures going back to 2002. 

• Crisis Risk Flagged by Haitong as Debt Snowballs: China Credit. China's second-biggest brokerage said record debt threatens to trigger a financial crisis as borrowing costs jump to unprecedented highs despite a cooling economy. Liabilities at non-financial companies may rise to more than 150% of gdp in 2014, raising default risks, according to Haitong Securities Co. The ratio of 139% at the end of 2012 was already the highest among the world's 10 biggest economies, according to the most recent data. "We are concerned that the debt snowball may be bigger and bigger and turn into a crisis," Li Ning, a Shanghai-based bond analyst at Haitong Securities, said in an interview. 

• Thai Army Chief Urges Public to Ignore Rumors of a Coup. Thailand’s army chief urged the public not to believe rumors of a possible coup, saying the movement of military hardware into Bangkok was for an annual parade and not to oust Prime Minister Yingluck Shinawatra. “People are scared of something that hasn’t taken place yet,” Army Chief Prayuth Chan-Ocha told reporters in Bangkok yesterday. “Don’t be scared if you can’t see it. Everything must happen for a reason,” he said, before adding, “without a reason, nothing will happen.” 

• Asian Stocks Rebound Before Minutes; Gas Climbs on Cold. Asian stocks climbed for the first time this year as Japanese shares rallied on a weaker yen before the release of Federal Reserve minutes. Gold fell a second day while natural gas advanced. The MSCI Asia Pacific Index rose 0.5 percent by 12:53 p.m. in Tokyo, after falling to a 2 1/2-week low yesterday.

• Rebar Climbs From 7-Month Low on Signs China Supporting Equities. Steel reinforcement-bar futures rose for the first time in four days on speculation that China’s government will take steps to shore up equity markets and as some investors considered a drop to a seven-month low overdone. Rebar for May delivery on the Shanghai Futures Exchange gained as much as 0.5 percent to 3,481 yuan ($575) a metric ton and traded at 3,471 yuan at 10:15 a.m. local time. The most-active contract ended at 3,465 yuan yesterday, the lowest close since its inception in May. 

• Arctic Cold Cuts Fuel Supplies as Refineries to Pipelines Freeze. Record cold weather pummeled energy infrastructure across the U.S., prompting gas pipeline operators to reduce flows, fuel terminals to shut loading racks and refineries to scale back production.

• Stress Tests Spurring $82 Billion Bad Debt Selloff: Euro Credit. Skaters gliding across the ice rink at the five-star Le Meridien Lav hotel are unwitting extras in the final acts of the financial crisis as they practice their turns on the shores of the Adriatic Sea. Paying as much as 700 euros ($952) a night, they’ve kept the Split, Croatia-based hotel afloat since it was seized by Hypo Alpe-Adria-Bank International AG when the owners failed to manage repayments on about 50 million euros of loans.

• EU Puts Banking-Union Credibility on Line in Resolution Talks. The credibility of Europe’s efforts to restore confidence in its financial system hangs in the balance as lawmakers try to broker a deal on a bank-failure authority for the 18-nation euro area. As U.S. Treasury Secretary Jacob J. Lew tours European Union capitals to push for tougher banking regulations, negotiators in Brussels begin a sprint today to create a central agency for saving or shuttering euro-zone banks before elections in May.

• Hedge Funds Up 7.4% in 2013 to Trail S&P 500 for Fifth Year. Hedge funds returned an average of 7.4 percent in 2013, trailing the Standard & Poor’s 500 Index (SPX) for the fifth straight year as U.S. markets rallied to record levels. Hedge funds rose less than 0.1 percent in December, compared with the S&P 500’s 2.4 percent return. The Bloomberg Hedge Funds Aggregate Index is down 1.8 percent from its July 2007 peak. The index is weighted by market capitalization and tracks 2,257 funds, 1,264 of which have reported returns for December.

• Sony Corp.(SNE) to Offer Web-Based TV Service in U.S. Sony Corp. (6758) will begin testing an Internet-based pay-television service in the U.S. this year, bringing live and on-demand programming to TVs and its PlayStation game consoles.

Wall Street Journal:

• Top 10 Revelations From Robert Gates’s Memoir. Mr. Gates says that domestic politics factored into “virtually every major national security problem” the Obama White House faced. At one point, Mr. Gates writes, he witnessed a conversation between Mr. Obama and Mrs. Clinton in which the president “conceded vaguely” that his opposition to the 2007 military surge in Iraq was a political calculation. Mr. Gates called the exchange “remarkable.” 

• Selloff Accelerates in Emerging Markets. Worries Over Coming Elections, Growth Prospects Rattle Investors. Investors are bailing out of emerging markets from Turkey and Brazil to Thailand and Indonesia, extending a selloff that began last year, amid concerns about faltering economies and political unrest. Indonesia's currency on Tuesday hit its lowest level against the dollar since the financial crisis in Asia trading. Meanwhile, the Turkish lira plumbed record lows against the greenback this week. The MSCI Emerging Markets Index, a gauge of stocks in 21 developing markets, slipped 3.1% in the first four trading days of 2014, building on a 5% loss in 2013. This compares with double-digit-percentage rallies in stock markets in the U.S., Japan and Europe last year.

• The Future of Coal: New Pollution Rules Choke Old Power Plants. Southern Co. Builds New Plant That Captures CO2. The Price: $5.24 Billion. The world was riveted in October by eerie photos of Harbin, an industrial city in northeastern China that was smothered by thick smog from burning coal. The U.S. had its own encounters with choking pollution several decades ago. Though nearly forgotten today, the incidents sparked the creation of the Environmental Protection Agency and federal regulations that have reshaped the electricity industry—then and now the country's largest industrial source of air pollution.

• Shanghai Tower Developers Seek Leasing Agent. The state-owned developer of what will be China's tallest building is taking the unusual step of moving to hire a leasing agent, underscoring the challenges of finding tenants as the country's economy cools.

• Federal Probe Targets Banks Over Bonds. Inquiry Looks for Deliberate Mispricing of Mortgage Bonds Key to Financial Crisis. Federal investigators are probing whether a number of Wall Street banks cheated clients in the years following the financial crisis by deliberately mispricing a type of mortgage bond that was central to the economic turmoil, according to people close to the inquiry. The investigation is a potential blow to the banks, who are just starting to move on from years of intense scrutiny tied to their roles in the crisis.

Fox News:

• Former Defense Secretary Robert Gates slams Obama's leadership style in new book. Former Defense Secretary Robert Gates, in his upcoming memoir, has harsh words for President Obama’s leadership style and commitment to the Afghanistan war, accusing the president of losing faith in his own strategy. “For him, it’s all about getting out,” he wrote. The tone of Gates’ book is a break from Washington decorum, in which former Cabinet members rarely level tough judgments against sitting presidents. Gates writes that by early 2010 he had concluded the president “doesn’t believe in his own strategy, and doesn’t consider the war to be his.” The book, “Duty: Memoirs of a Secretary at War,” is scheduled for a Jan. 14 release by the Knopf DoubleDay Publishing Group. Excerpts, confirmed by Fox News, were first reported by The Washington Post and New York Times.

• Vermont plots course for single-payer health care system. While all eyes are on the ObamaCare rollout, an ambitious health care experiment is going forward in Vermont that would create a government-run alternative know as a "single-payer" system -- and it's starting to attract more attention from liberals frustrated with the Affordable Care Act's implementation.

CNBC:

• Wells Fargo(WFC) bear: Brace for a risky, volatile year. (video)

Zero Hedge:

• Don't Worry Folks, The Fed Says Stocks Aren't Overvalued.

• Will Corporate Spending Float The Economy in 2014? (graph)

• Keynesian Folly And Irrational Apoplithorismosphobia.

• JPMorgan(JPM), Madoff, And Why No One Dared Ask "The Cult" Any "Serious Questions As Long As The Performance Is Good".

• Michael Pettis Warns China Bulls "It Is Almost Impossible For Growth To Remain This High".

• An Austrian Wolf In Keynesian Sheep's Clothing.

• Japanese Consumer Squeezed As Phone Prices Rise At Fastest Pace In 21 Years. (graph)

Business Insider:

• The Defining Photo Of Chicago's Frozen Week. (pic)

• N.Y. Cops And Firefighters Among 106 Accused In 'Massive' 9/11 Fraud.

• Iraq Poised To Launch An 'All Out Assault' On Fallujah That Looks Awfully Familiar.

• The US Is Sending More Tanks And Troops To South Korea.

• It's Official: Ford CEO Alan Mulally Says He Won't Be Microsoft's Next CEO.

FXStreet.com: 

• Flash: Fed Faces Huge Problems Ahead - Nomura.

Crain's Chicago Business:

• Chicago vote set on $15 minimum wage. In a potentially big development that hasn't drawn much attention, the Chicago Board of Elections gave the OK for a vote in March on whether the city ought to implement a $15-an-hour minimum wage for many companies.

The Blaze:

• The ‘Surprising’ & ‘Dismaying’ Things Former Defense Secretary Robert Gates Says Clinton & Obama Admitted to Him.

Reuters:

• Goldman(GS), JPMorgan(JPM) and peers must rethink pay to meet EU cap. Investment bankers working in London for many top U.S. and European groups face a major overhaul of their pay structure, as their recent bonuses have far exceeded new EU rules which will curb payouts to be made this time next year. 

• Container Store(TCS) posts quarterly loss, shares fall. Storage products retailer Container Store Group Inc reported a third-quarter loss, hurt by costs associated with its initial public offering, sending its shares down 9 percent after the bell.

• Chipmaker Micron(MU) posts quarterly profit. Memory chip maker Micron Technology Inc posted a first-quarter net profit, compared with a loss a year earlier, helped by a strong recovery in chip prices. 

• Fed's Williams expects steady, measured cuts to bond buys. The Federal Reserve will make gradual cuts to its massive bond- buying program in coming months as long as the economy continues to improve, and only a significant deviation from those expectations would force it to change tack, a top Fed official said on Tuesday. "I see us continuing, over the next few meetings, steady measured reductions in the pace of asset purchases," San Francisco Federal Reserve Bank President John Williams told reporters after a speech.

South China Morning Post:

• China Develops 'Too Dangerous' Web-Profiling Program. Program developed by Chinese Academy of Sciences can determine an Internet-user's personality with 90% accuracy, citing Zhu Tingshao, director of academy's Computational Cyber Psychology Lab. Program is too dangerous to let out of lab without greater privacy protections.

• Chinese health agency pledges smoking ban by year's end. Health agency's pledge for nationwide regulation outlawing smoking in public places seen as first timetable towards meeting WHO commitment.

21st Century Business Herald:

• China May Levy Property Taxes on Rural Real Estate. Chinese authorities are considering the possibility of levying property taxes on real estate built on collectively-owned land in rural areas, citing a person close to the Ministry of Housing and Urban-Rural Development.

Evening Recommendations
CSFB:

• Rated (CAKE), (CMG), (EAT), (SBUX) Outperform.

• Rated (DRI) Underperform.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 137.0 +2.5 basis points.

• Asia Pacific Sovereign CDS Index 109.50 unch. 

• FTSE-100 futures -.03%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STZ)/.91

• (MON)/.64

• (RT)/-.28

• (BBBY)/1.15

• (GPN)/1.02

• (SCHN)/-.06

• (GBX)/.53

Economic Releases
8:15 am EST

• ADP Employment Change for December is estimated at 200K versus 215K in November.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,651,000 barrels versus a -7,007,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,430,000 barrels versus a +844,000 barrel gain the prior week. Distillate inventories are estimated to rise by +2,060,000 barrels versus a +5,042,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.28% versus a -.3% decline the prior week.
  

2:00 pm EST

• Dec. 17-18 FOMC Meeting Minutes.

3:00 pm EST

• Consumer Credit for November is estimated at $14.250B versus $18.186B in October.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Trade data, Eurozone retail sales, $21B 10Y T-Note auction, Goldman Sachs Energy Conference, (ROVI) investor meeting and the weekly MBA mortgage applications report 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 modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Lower Long-Term Rates, Weaker Yen, Healthcare/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 12.97 -4.28%

• Euro/Yen Carry Return Index 148.42 +.15%

• Emerging Markets Currency Volatility(VXY) 9.15 -2.56%

• S&P 500 Implied Correlation 49.60 -1.80%

• ISE Sentiment Index 165.0 +29.92%

• Total Put/Call .70 -1.45%

• NYSE Arms 1.35 +17.12% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.77 +1.19%

• European Financial Sector CDS Index 80.82 -1.13%

• Western Europe Sovereign Debt CDS Index 52.0 -3.98%

• Emerging Market CDS Index 274.11 +.38%

• 2-Year Swap Spread 10.25 -.5 basis point

• TED Spread 20.0 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -1.75 +2.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .04% -1 basis point

• Yield Curve 254.0 -3 basis points

• China Import Iron Ore Spot $133.80/Metric Tonne -.74%

• Citi US Economic Surprise Index 61.0 +11.9 points

• Citi Emerging Markets Economic Surprise Index 1.5 -.1 point

• 10-Year TIPS Spread 2.24 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +186 open in Japan

• DAX Futures: Indicating +1 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/tech/medical sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• Euro-Area Inflation Slows to 0.8% as Economy Strains to Grow. Euro-area inflation slowed in December, retreating farther from the European Central Bank’s ceiling as the 18-nation currency bloc struggled to strengthen its recovery from a record-long recession. The annual rate dipped to 0.8 percent from 0.9 percent in November, the European Union’s statistics office in Luxembourg said in a preliminary estimate today. That’s in line with the median forecast in a Bloomberg News survey of 31 economists. The rate has been below the ECB’s 2 percent ceiling for 11 months, and sank to a four-year low of 0.7 percent in October. 

• Gold Falls for Second Day on Dollar Rally, Fed Taper Bets. Gold futures for February delivery fell 0.8 percent to $1,227.60 an ounce at 9:56 a.m. on the Comex in New York. Yesterday, the price settled less than 0.1 percent lower after plunging by more than $30 in about a minute, spurring a 10-second trading pause.

• Syria Rebel Infighting Erupts on Rising al-Qaeda Influence. Syrian rebels seeking to topple President Bashar al-Assad are turning on al-Qaeda militants who previously fought alongside them as the rising influence of the group threatens to scuttle their foreign backing. Fighters from the Free Syrian Army, the main rebel force, and other Islamist groups clashed with the al-Qaeda linked Islamic State of Iraq and the Levant in its northeastern stronghold, the U.K.-based Syrian Observatory for Human Rights said yesterday. Other battles broke out in the northern Aleppo province. At least 274 people, including 46 civilians, were killed in fighting from Jan. 3 to Jan. 6, the Observatory said in an e-mailed statement.

• Yellen’s Record-Low Senate Support Reflects Fed’s Politicization. Janet Yellen’s confirmation as chairman of the Federal Reserve with the least Senate support on record shows that the central bank still faces intense political scrutiny six years after the financial crisis. The Senate vote of 56-26 to confirm Yellen means she garnered even less support than outgoing Chairman Ben S. Bernanke, whose 2010 confirmation for a second term by a vote of 70-30 represented the most opposition for a Fed chief. Bernanke’s term ends Jan. 31. 

• Rosengren Signals Support for Taper Strategy After Dissent. Federal Reserve Bank of Boston President Eric Rosengren, the only dissenter against a Fed decision to taper bond buying, said he is now comfortable with the strategy to gradually cut monthly purchases in the future. “I preferred to wait before beginning the program, but the program it looks like we’re embarked on is a very gradual program and I think a gradual removal of accommodation is appropriate,” Rosengren said today in an interview with Bloomberg News, indicating he would not persist in objecting to the Fed’s strategy.

• Chicago Colder Than South Pole as Frigid Air Clamps Down on U.S. Frigid air clamped down on much of the U.S. for a second day, giving Chicago a morning temperature lower than the South Pole and breaking records across the country as road, rail and air transportation snarled.

Wall Street Journal: 

• Brazil Stocks Reverse to Decline Intraday on Ratings Worries. Brazil's Bovespa stocks index gave up an early advance to decline in intraday trading Tuesday following talk that ratings agency Standard & Poors could consider lowering the country's credit ratings in 2014. As of 12:30 p.m. EST, the main Sao Paulo index declined 0.9% to 50,513 points. Traders noted the Bovespa erased moderate gains posted earlier in the session after reports that S&P representatives in a roundtable discussion with journalists Tuesday affirmed they might still consider a ratings cut this year before Brazil's October general elections.

CNBC: 

• Why inflation threat could lead to a 'panic taper'. (video)

• Danger on the rails: New rules could hit stocks. Recent accidents involving crude oil being shipped from the Bakken area of North Dakota and Montana are raising eyebrows on Wall Street and have analysts looking at companies that could be exposed to new rules governing oil shipments from the region.

ZeroHedge: 

• The Fed In 2014: A Story Of Unintended Consequences And Goldilocks.

• India Minister Warns Of "The Return Of The Ugly American".

• Muppets Crucified After Goldman Closes One Of Its "Top Trades For 2014" At A 13.5% Loss Less Than A Week Into 2014. "Goldman is selling China equities (via the HSCWI Index), while buying copper (via Dec 2014 futs), or at least advising its flow clients to do the opposite while admitting that "for the long China equity/short commodity pair trade to “work” best, these two assets, which are usually positively correlated, will have to move in opposite directions."

• SocGen Initiaties Coverage On Goldman(GS) With "Sell" Rating, $138 Price Target.

Business Insider:

• Here's Why Extreme Cold Is Disastrous For Air Travel.

• Wall Street's Biggest Bear In 2013 Just Published Her 2014 Outlook, And It's Wild.

• JP Morgan(JPM) Pulled $275 Million Of Its Own Money From Madoff Feeder Funds Months Before His Arrest.

• Netflix(NFLX) Is Down Today After Analyst Says Amazon And Hulu Are Catching Up.

• Oracle's(ORCL) Latest Acquisition Should Be Making Cisco(CSCO) Very Nervous.

• CHART OF THE DAY: UBS Says This Is The Most Important Chart On China.

• EURASIA GROUP: Here Are The 10 Greatest Risks To Global Stability.

Reuters: 

• Fed to ease foot off accelerator, but won't hit brakes: Williams. The Federal Reserve will likely phase out its massive bond-buying stimulus this year if the U.S. economic recovery strengthens as expected, a top Fed official said on Tuesday, but it is still far from any thought of hiking interest rates. 

• Brazil auto sales fall for 1st time in decade, rebound looks weak. Motor vehicle sales in Brazil are likely to stage a feeble recovery in 2014 from their first annual drop in a decade, an industry group said on Tuesday, as tighter credit and higher taxes stifle the world's fourth-largest car market.

Telegraph:

• Eurozone losing 'safety margin' against deflation trap as core gauge falls to record low. Fall in inflation raises fears that eurozone is 'sleepwalking into a deflation trap'. The great unknown is what will happen in China, now the epicentre of global risk. Societe Generale said Beijing may be tempted to push down the yuan to cushion the blow as it pops the credit bubble, and to counter devaluation by Japan. This would risk a repeat of the East Asia currency war in 1998, this time on a bigger scale and with the world less able to handle the consequences.

Xinhua:

• China to Improve GDP Calculation Method in 2014. Ma Jiantang, head of China's statistics bureau, said China will be rigorous in calculating quarterly GDP data and local GDP data this year. China faces problem that the sum of provincial GDP data is higher than the national figure, the report said. NBS will steadily promote setting up a "national unified economic calculation system," Ma said.