Today's Headlines

Bloomberg:

• Emerging-Market Stocks Decline as Vale Tumbles on China. Emerging-market stocks fell to a four-month low as concern China’s economic growth will falter sank commodity producers from Vale SA (VALE5) to Minmetals Development Co. South Africa’s rand slid to the lowest level in five years. The MSCI Emerging Markets Index dropped 0.9 percent to 964.84 at 11:03 a.m. in New York. The Shanghai Composite Index (SHCOMP) declined to a five-month low as Great Wall Motor Co. (2333) led a slide in automakers and Minmetals retreated 6.3 percent. Brazil’s Ibovespa (IBOV) drove losses among major stock indexes in the Americas as Vale, the world’s biggest iron-ore producer, fell 2 percent. The rand slumped to the lowest since October 2008 on speculation the Federal Reserve will end debt purchases this year. All 10 groups in the measure for developing-nation stocks retreated, led by consumer and commodity companies. “China is slowing down; what they don’t want is a hard landing,” Quincy Krosby, a market strategist at Prudential Financial Inc. in Newark, New Jersey, said by phone. Her firm oversees more than $1 trillion. “There’s also an adjustment process as the Fed begins to taper. As the data begin to gain more traction than initially expected, you’d have the Treasury market making adjustments, and that has ramifications in the emerging markets.” 

• Copper Declines Most in Eight Weeks Amid China Growth Concerns. Copper fell the most in eight weeks amid signs of a slowing economy in China and speculation that the Federal Reserve will further curb stimulus in the U.S., fueling demand concerns in the two biggest users of the metal. China’s producer prices, a measure of cost of goods as they leave the factory, extended the longest slide since the 1990s in December, adding to evidence that the economy weakened last month. Fed officials saw diminishing economic benefits from the central bank’s asset purchases, according to minutes of last month’s policy meeting released yesterday. “Metals are taking their cue from China-related concerns,” Edward Meir, an analyst at INTL FCStone in New York, wrote in a note. “The eagerly awaited Federal Reserve minutes showed a central bank that is now intent on proceeding with its tapering program.” 

• Fitch China Analyst Chu, Who Warned on Debt, Leaving Agency. Charlene Chu, a Beijing-based analyst at Fitch Ratings who said China could face a debt crisis after lending reached double the size of its economy, is leaving the company after almost eight years. Her warnings that China’s debt could spark a crisis preceded Fitch’s April downgrade of the country’s long-term local-currency debt rating, the first cut by one of the top three rating companies in 14 years. Albert Edwards, global strategist at Societe Generale SA, said in 2013 Chu was “a heroine” and “deserves a medal of honor for her stark warnings about the Chinese credit bubble.” “I have to commend them for giving me the freedom to express what is a pretty negative view on China, despite the complications it has brought to Fitch’s own business development here,” said Chu. 

• China Vehicle Sales Seen Slowing on Pollution Controls. China’s main car association forecast that the world’s biggest automobile market will see slower growth this year as anti-pollution and austerity campaigns spread.

• Draghi Strengthens Pledge to Keep Rates at Record Lows. Mario Draghi strengthened the European Central Bank’s pledge to keep interest rates low for as long as necessary and warned that it’s too soon to say the euro region is out of danger. “The Governing Council strongly emphasizes that it will maintain an accommodative stance of monetary policy for as long as necessary,” Draghi told reporters in Frankfurt today after the ECB kept its key rate at a record low of 0.25 percent.

• EUR Money Markets May Push-Back Against Dovish Draghi. Euro money-market rates likely to drift higher in coming weeks as LTRO payback restarts, Bert Lourenco, head of EMEA rates research at HSBC says in an interview, even as ECB President Draghi says would act if unwarranted monetary tightening seen.

• Draghi Faces Mission Conflict as ECB Reviews Banks. Mario Draghi’stwo biggest policy tasks for this year threaten to run into conflict. The European Central Bank president convenes the first rate-setting meeting of 2014 in Frankfurt today with a to-do list that includes supporting the recovery in the 18-nation currency bloc and carrying out a balance-sheet review of its largest lenders. The risk is that banks pull back even further on loans, derailing the already-fragile economic revival, to avoid being ordered to raise more capital.

• Fresenius Bond Offering Seen Setting Record-Low Euro Junk Coupon. Fresenius SE, a German health-care services provider, is marketing high-yield bonds that may pay a record-low coupon for non-financial debt, as the average cost of borrowing holds at the lowest ever.

• European Stocks Decline as Draghi Warns Danger Not Over. European stocks declined as President Mario Draghi reiterated the European Central Bank’s pledge to keep interest rates low as he warned that it’s too soon to say the euro region is out of danger. Arkema SA dropped 3.1 percent after cutting its full-year earnings forecast. Wm Morrison Supermarkets Plc slid the most in more than five years after saying annual profit will be at the lower end of analysts’ estimates. TGS Nopec Geophysical Co. jumped 17 percent after raising its annual revenue projection. AstraZeneca Plc rose 0.7 percent after a diabetes pill it developed with Bristol-Myers Squibb Co. won U.S. approval. The Stoxx Europe 600 Index retreated 0.4 percent to 328.41 at the close of trading.

• WTI Crude Declines to Seven-Month Low on Ample Supply. “The fundamentals don’t look good,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Crude production continues to surge ahead and the refiners are processing this into fuel that is going into storage. There’s also economic uncertainty before tomorrow’s employment report.” WTI for February delivery slipped 56 cents, or 0.6 percent, to $91.77 a barrel at 12:24 p.m. on the New York Mercantile Exchange. Futures touched $91.70, the lowest level since June 3. The volume of all futures traded was 4.4 percent lower than the 100-day average. The contract has fallen 6.8 percent since the start of the year.

• Corn Pile Biggest Since 1994 as Crop Overwhelms Use: Commodities. Stockpiles of corn in the U.S., the world’s top grower, are rising at the fastest pace in 19 years as a record crop overwhelms increased demand for the grain used to make livestock feed and ethanol. Inventories on Dec. 1, the first tally since the harvest was complete, probably totaled 10.764 billion bushels (273.4 million metric tons), 34 percent more than a year earlier, according to the average of 24 analyst estimates in a Bloomberg survey. The biggest gain for that date since 1994 signals ample supplies may extend the slump in March futures by 10 percent to $3.75 a bushel, according to Newedge USA LLC’s Dan Cekander. 

• Aussie Falls for 3rd Day Versus Dollar on Fed Taper Speculation. The Aussie slid 0.3 percent to 88.72 U.S. cents at 5:18 p.m. in Sydney from yesterday, and fell 0.2 percent to NZ$1.0751. On Dec. 18, it reached 88.21 U.S. cents, the weakest since August 2010, and touched NZ$1.0733, a level unseen since October 2008.

• Mexico Stock Exchange Indexes Fail in Latest Bourse Breakdown. Mexican stock investors couldn’t see updates on the benchmark IPC gauge early today, the latest technical breakdown for an exchange that has halted trading at least five times since mid-April because of glitches.

• Retailers Cut Forecasts as December Discounts Hurt Profits. Retailers of all stripes -- from home-goods merchant Pier One Imports Inc. (PIR) to discounter Family Dollar Stores Inc. (FDO) and luxury lingerie seller L Brands Inc. -- are providing hard evidence that the discount war that marked the holiday season will take a toll on profit. L Brands, which owns the Victoria’s Secret and Bath & Body Works brands, and Family Dollar today cut profit forecasts after reporting disappointing December sales as promotions that failed to lure shoppers hurt margins. Pier One cut its fourth-quarter forecast after December sales trailed the chain's expectations. The early results are showing that the discounts -- as steep as 75 percent off at luxury department-store chain Neiman Marcus Group LLC -- didn’t generate sufficient traffic or spur enough purchases of full-priced merchandise to make up for the lost revenue.

• Funds With $100 Billion May Be Too Big to Fail, FSB Says. Investment funds that manage more than $100 billion in assets may be labeled too big to fail, global regulators said, as they seek to expand financial safeguards beyond banks and insurers. Hedge funds with trading activities exceeding a set value of $400 billion to $600 billion would also be assessed by national authorities to gauge whether they need extra rules because their collapse could spark a crisis, the Financial Stability Board said in a statement yesterday.

Wall Street Journal:

• 5 Things We Learned From The ECB Press Conference. 

• Beijing Moves to Bolster Claim in South China Sea. China is trying to bolster the legal basis for its maritime-security forces operating in contested areas of the South China Sea, threatening to complicate already-fraught relations with southern neighbors. A new regulation enacted by the southern island province of Hainan requires non-Chinese fishing vessels wanting to operate in the South China Sea to first obtain permission from China's central government. The new regulation is the latest move by China to assert its claim to disputed territories on its fringes.

Fox News:

• Christie apologizes over lane closures, fires top aide. New Jersey Gov. Chris Christie publicly apologized Thursday for controversial lane closures last year that were arranged by his associates as an apparent act of political revenge, and fired a top aide who was at the center of the scandal. "I come out here to apologize to the people of New Jersey," he said. "I am embarrassed and humiliated." The governor added: "I am stunned by the abject stupidity that was shown here."

MarketWatch:

• Market pulls forward Fed rate-hike expectations.' 

• Fed's George: December taper was 'modest step'.

CNBC:

• Watch Cashin: This jobs number could hurt stocks. (video)

• Ford(F): We can use GPS to track your car movements.

• Social safety nets don't help people get out of poverty: Rubio.

ZeroHedge:

• Hedge Fund Slams Portuguese Bonds With 64 Page Slideshow.

• "Volatile" Jobless Claims Drop To Lowest Since November But 104k Drop Off Emergency Rolls. (graph)

• Inflation Vs Deflation – The Ultimate Chartbook Of 'Monetary Tectonics'. (graph)

• Bill Gross' 2014 Investment Outlook: All About Inflation.

• Stocks Slump With High Yield Credit Worst In 3 Weeks. (graph)

• FINRA Warns Investors Over Leveraged And Inverse ETFs.

• JPMorgan(JPM) To Exit Foodstamp, Other Prepaid Cards Business. Mess with us, we'll mess with you. That is the message one can derive from JPMorgan's surprise announcement that it plans to "sell or wind down its business of issuing prepaid cards for corporate payrolls and government tax refunds and benefits."

• Japanese Consumer Sentiment Slumps - Biggest 6-Month Drop Since 2007. (graph)

ValueWalk:

• Gold Flash Crash Caused By HFT Algorithm, Not Fat Finger.

Business Insider:

• Four Uncomfortable Questions From Chris Christie's Bridgegate Press Conference.

• America Has Pinned Down Global Oil Prices.

• People Don't Like Their Health Plan Options On The Federal Website.

• Facebook(FB) Discovered How Stuff Goes Viral By Analyzing Thousands Of Your Posts.

NY Times:

• Chinese Film Director Fined for Exceeding Child Limits. China’s most internationally known film director, Zhang Yimou, and his wife were ordered by a government office on Thursday to pay a $1.24 million fine for violating family planning limits by having three children.

Time:

• Janet Yellen: The Sixteen Trillion Dollar Woman. In her first and only interview as Fed chief, the economist says why she thinks the housing market is back on track, companies will invest, and more new jobs are on the way this year. She now has the world's largest economy in her hands.

Real Clear Politics:

• Iran's Fingerprints in Fallujah. Four years ago, al-Qaeda appeared to have been destroyed in Iraq. Last week, fighters from the group captured Fallujah, a city where hundreds of Americans were killed or wounded in the last decade fighting the jihadists. How did this stunning reversal of fortune happen?

Reuters:

• France's debt load in 'danger zone' - national audit office. France's national debt has reached a danger zone at an estimated 93.4 percent economic output last year, the head of the public audit office said on Thursday. "The level that's been reached has put our country in a danger zone," the president of the audit office Didier Migaud said in a speech. "Efforts undertaken so far are not sufficient to get out." France's national debt stood at 90.2 percent of GDP at the end of 2012.

• Brazil sells new 10-year local bond at record-high yield. Brazil's Treasury on Thursday paid the highest yield ever to launch a new 10-year benchmark fixed-rate domestic bond, underscoring investor concerns about the deterioration of the country's fiscal and economic fundamentals. 

• EMERGING MARKETS-Brazil stocks drop after China data surprise.

Financial Times:

• Federal Reserve faces prospect of bond market showdown over rates. Bond traders are bringing forward their expectations of when the Federal Reserve will start to tighten policy, leading to a jump in short-term US borrowing costs. Recent economic data have pointed to a gathering American recovery, and could result in a showdown between policy makers and the Treasury market.

Telegraph:

• Majority of Chinese business leaders 'unwilling' to trade with Japan amid tensions. Poll reveals growing reluctance among Chinese businessmen to deal with Japanese firms.

• Barroso triumphant as jobless Europe wastes five (precious) years of global recovery.

Xinhua:

• China to Crack Down on 'Illegal' Journalism, Publishing. Five "special campaigns" to target "counterfeit" reporters, for-profit journalism, children's books, teaching materials for primary, middle school students, paper, magazine publishing, citing statement from State General Administration of Press, Publication, Radio, Film & TV.

• China Bank-Card Consumer-Confidence Index Drops in December. Bankcard Consumer Confidence Index drops 1.25 points y/y, .77 points m/m to 85.43 points.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.45%

Sector Underperformers:

• 1) Steel -2.40% 2) Coal -2.40% 3) Networking -1.73%

Stocks Falling on Unusual Volume:

• VRTU, BBBY, FOX, CTRP, FDO, AMAG, TAL, SIG, ORMP, BBL, YRCW, TBBK, VOXX, FDML, LB, ZLC, CMGE, PIR, ADTN, ESI, ENOC, CSL, UL, MWV, ZUMZ, BWLD, UNFI, BIG, SHLD, TCS, AEL, TFM, SCHN, ADTN, SKYW, OVTI and GLPI

Stocks With Unusual Put Option Activity:

• 1) IBB 2) UAL 3) SPLS 4) YRCW 5) HAL
  

Stocks With Most Negative News Mentions:

• 1) AA 2) LB 3) MU 4) FB 5) BIDU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.21%

Sector Outperformers:

• 1) Airlines +1.36% 2) HMOs +1.28% 3) Utilities +.38%
  

Stocks Rising on Unusual Volume:

• ICPT, GWPH, RCPT, SGMO, GPN, UAL, PWRD, ANGI, M and SWHC

Stocks With Unusual Call Option Activity:

• 1) ARO 2) UAL 3) BBBY 4) TSN 5) USG

Stocks With Most Positive News Mentions:

• 1) OMC 2) F 3) FDO 4) COST 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• China Tells Banks to Improve Disclosures in Shadow-Lending Fight. China’s banking regulator told lenders to publish data including off-balance-sheet assets and interbank liabilities as the government steps up scrutiny of the shadow-finance industry. Lenders with total assets of 1.6 trillion yuan ($264 billion) or more must publish 12 indicators within four months of the end of each financial year, the China Banking Regulatory Commission said in a statement yesterday. The requirement is in line with rules published by the Basel Committee on international banking regulation in July, the CBRC said. 

• China’s Producer Prices Slide in Sign of Weakness in Economy. China’s producer prices, a measure of the cost of goods as they leave the factory, extended the longest slide since the 1990s in December, adding to evidence that the world’s second-largest economy weakened last month. The producer-price index (SHCOMP) fell 1.4 percent from a year before, the 22nd straight drop, and consumer prices rose 2.5 percent -- less than the 2.7 percent median forecast in a Bloomberg News survey, a government report showed in Beijing. Today’s releases followed declines in gauges of manufacturing and services based on surveys of purchasing managers.

• Shadow Banking. The scale of it is almost unfathomable: over $70 trillion worldwide. The Financial Stability Board says it poses “systemic risks” to the global financial system. It’s growing at phenomenal rates in China and India and booming in Western banking capitals as well. The catchall phrase “shadow banking” encompasses risky investment products, private lending between individuals, pawnshop and loan-shark operations in emerging markets, as well as more respectable activities like derivatives, money-market funds, securities lending and repurchase agreements at financial institutions in Europe and the U.S. The common denominator is that these activities flourish outside the regular banking system and often beyond the control of regulators and monetary policy. Together they show how hard it is to restrict risky lending without causing harm.  

• Bank of Korea Holds Rate Even as Yen Clouds Export Outlook. The Bank of Korea kept its benchmark interest rate unchanged for an eighth straight month, even as a weak yen clouds the outlook for exporters competing with Japanese companies. Governor Kim Choong Soo and his board held the seven-day repurchase rate at 2.5 percent after a cut in May, the central bank said in a statement in Seoul today. Eighteen of 19 economists surveyed by Bloomberg News predicted the outcome, with Goldman Sachs Group Inc. foreseeing a cut.

• Asian Stocks Fall as China Producer Prices Extend Decline. Asian stocks fell as China’s factory-gate prices extended the longest streak of declines since the Asian financial crisis and Federal Reserve minutes showed officials saw diminishing benefits from bond buying. Canon Inc. lost 1.8 percent in Tokyo on a report operating profit at the world’s biggest camera maker probably missed its own forecast. Belle International Holdings Ltd., China’s No. 1 seller of footwear, fell 2.3 percent after surging 13 percent yesterday. Daiei Inc. slumped 7.3 percent in Tokyo as the supermarket operator cut full-year forecasts. The MSCI Asia Pacific Index lost 0.5 percent to 139.16 as of 11:26 a.m. in Tokyo, with about five stocks falling for every three that rose.

• Top Aussie Forecaster Fox Sees 10% Drop to 80: Australia Credit. Emirates NBD forecasts a 10 percent slide in Australia’s dollar this year, almost three times the drop predicted by HSBC Holdings Plc., which it ousted as the top forecaster for the currency.

• Rebar Rises for a Second Day as China Steel Output Declines. Steel reinforcement-bar futures in Shanghai climbed for a second day, extending a recovery from an almost seven-month low, as China’s crude steel output fell. Rebar for May delivery on the Shanghai Futures Exchange gained as much as 0.6 percent to 3,488 yuan ($576) a metric ton before trading at 3,478 yuan at 10:05 a.m. local time. The most-active contract closed at 3,465 yuan on Jan. 7, the lowest close since its inception in May. 

• Corn Falls to 40-Month Low, Wheat Drops on Global Supply Outlook. Corn futures tumbled to a 40-month low and wheat fell to the cheapest since 2011 on speculation that a U.S. government report this week will show ample world supplies. Oilseeds also slumped. Inventories of corn in the season ending Oct. 1 probably will rise to 163.08 million metric tons, the highest since 2001, and U.S. winter-wheat planting climbed to a six-year high, according to Bloomberg surveys before the Department of Agriculture’s report on Jan. 10. Canadian Canola futures extended a slump to the lowest since August 2010, and soybeans in Chicago dropped.

• Brazil Swap Rates Rise as Weakened Real Stokes Inflation Concern. Brazil’s swap rates climbed as a weakened currency and better-than-forecast industrial output added to speculation that the central bank will sustain the pace of increases in borrowing costs to curb inflation.

• Iraq Is New Schism for Saudis in Strained Alliance With West. Few goods transit the desert border between the Middle East’s two biggest oil producers, and Saudi authorities have built a fence to help ensure that political instability in Iraq doesn’t cross over either. Dysfunctional ties between the countries have come into focus as a wave of violence sweeps Iraq, turning it into another arena where Saudi interests are diverging from those of the U.S. Fighting is centered in Anbar province, bordering Saudi Arabia, where Sunni fighters with ties to al-Qaeda are rebelling against the Shiite-led government of Nouri al-Maliki, which is supported by Iran. 

• Bed Bath & Beyond(BBBY) Falls After Profit Trails Analysts’ Estimates. Bed Bath & Beyond Inc. (BBBY) fell in extended trading after it reported quarterly net income and forecast fourth quarter profit that trailed analysts’ estimates. The shares declined 8.4 percent to $72.99 at 4:50 p.m. after gaining less than 1 percent to $79.68 at the close in New York.

Wall Street Journal: 

• Fed Eyes Bubble Risks, Minutes Show. Federal Reserve officials in December turned their attention to the risk of dangerous financial bubbles emerging as they scanned a brightening economic outlook and formulated a plan to gradually wind down their bond-buying program this year. While officials agreed that threats to financial stability were modest, the issue was at the center of wide-ranging discussions about emerging threats to the economy, according to minutes of the central bank's Dec. 17-18 policy meeting, which were released Wednesday with the traditional three-week lag. Watching for bubble threats could become one of the first big issues on the plate of Fed Vice Chairwoman Janet Yellen, who takes the reins as chairwoman on Feb. 1 after Ben Bernanke's term as the Fed's leader ends.

• Borrowers Hit Social-Media Hurdles. Regulators Have Concerns About Lenders' Use of Facebook(FB), Other Sites. More lending companies are mining Facebook, Twitter and other social-media data to help determine a borrower's creditworthiness or identity, a trend that is raising concerns among consumer groups and regulators. Lending companies—some of which are backed with venture funding from Google Ventures, the venture-capital arm of Google Inc., and Accel Partners, an early Facebook Inc. investor—are looking at potential problems such as whether applicants put the same job information on their loan application as they posted on LinkedIn, or if they shared on Facebook that they had been let go by an employer. A small business that draws negative reviews on eBay also could undermine its chances of getting more credit, lending companies say.  

• Zumiez(ZUMZ) Cuts Outlook Amid Weaker-Than-Expected Sales. Retailer Says Sales During Holiday Season Were Lower Than Planned. 

• Bridge-Spat Emails Pose Questions For Christie. Emails suggesting that close aides to New Jersey Gov. Chris Christie engineered traffic jams as political retribution against a Democratic mayor are turning into a major test for the national ambitions of a popular Republican considered a leading 2016 presidential contender.

• Richard Vedder and Christopher Denhart: How the College Bubble Will Pop. In 1970, less than 1% of taxi drivers had college degrees. Four decades later, more than 15% do. 

• Gates on Obama. The former Pentagon chief's memoir explains what the world knows. The open secret of Washington memoirs is that they typically confirm what we already know or suspect. In the case of the excerpts from the forthcoming book by Robert Gates, who was Defense Secretary for two years under George W. Bush and two and a half under President Obama, this isn't reassuring.

Fox News:

• Chamber of Commerce vows to fight ObamaCare employer mandate in 2014. The head of the U.S. Chamber of Commerce vowed Wednesday to fight ObamaCare's so-called employer mandate and other "onerous" provisions in the year ahead, even as the pro-business group acknowledged the bill as a whole cannot be repealed in the current climate.

MarketWatch.com:

• Carson Block sticks by China short calls as buyers circle.

CNBC:

• Watch Cashin: This could spark 'outright selling'. (video)

Zero Hedge: 

• Despite Late-Day Melt-Up, Stock Stumble-On As Treasury Curve Crushed. (graph)

• The Real China Threat: Credit Chaos.

• The US Consumer Is So Strong, Macy's(M) Just Fired 2500 And Announced The Closure Of Five Stores.

• Here Is The Next Wall Street Crack Down (And Yes, JPMorgan(JPM) Is In The Middle Of This One Too).

• Shrinking Bulls? (graph)

• When Risk Is Not In Parity: Bridgewater's Massive "All Weather" Fund Ends 2013 Down 3.9%. (graph)

• What Keeps Goldman(GS) Up At Night.

• Japan Plans To "Nationalize" 280 More "Ownership-Unknown" Islands.

Business Insider: 

• Ford Exec: 'We Know Everyone Who Breaks The Law' Thanks To Our GPS In Your Car.

• GARY SHILLING: Here Are 10 Investment Ideas I Like For 2014.

• The Chris Christie Lane Closing Scandal Caused Slower Response Times For Emergency Vehicles.

Reuters:

• Novartis sued by U.S. states over alleged kickbacks to pharmacy firm. U.S. states have sued Novartis over accusations the Swiss drugmaker paid kickbacks to a New York pharmacy company to promote its Exjade drug to treat excessive iron in the blood, the New York Attorney General said. The complaint, unsealed on Wednesday, says Novartis paid New York-based specialty pharmacy company BioScrip to keep patients on Exjade at a time when the Swiss company feared patients were discontinuing its use because of harmful side effects. 

• Russia again blocks U.N. Security Council from condemning Syria attacks. Russia blocked a U.N. Security Council statement on Wednesday that would have expressed outrage at deadly airstrikes by Syrian President Bashar al-Assad's forces and condemned the use of missiles and "barrel bombs" in towns, U.N. diplomats said. Russia, a staunch Assad ally, opposed a similar statement on December 19 that would have condemned attacks by Syrian government troops on civilians. Russia, joined by China, has also vetoed three Security Council resolutions that would have condemned Assad's government and threatened it with sanctions. 

• Qualcomm(QCOM) CEO says still in the dark on China antitrust probe. Qualcomm's CEO Paul Jacobs said on Wednesday that the U.S. mobile chipmaker still has not been notified about why it has come under antitrust scrutiny in China since late last year. In November, Qualcomm announced that China's National Development and Reform Commission had launched an antitrust probe into the company. The chipmaker said it was unaware of any possible violations.

• U.S. Senate panel to mull regulation of banks, physical commodities. A subcommittee of the powerful Senate Banking Committee has scheduled a hearing for Jan. 15 to discuss regulating Wall Street's role in physical commodity markets. Among the witnesses scheduled to speak at the panel are top oversight officials with the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission, and an official from the Federal Reserve's banking supervision arm. The hearing comes as the Fed reconsiders exemptions given to banks since the early 2000s that allow them to engage in the previously prohibited trading of physical commodities.

Financial Times:

• France Should Impose Tax on Smartphones, Film Report Says. Govt-commissioned film industry report revives proposal to introduce 1% tax on sale of devices such as smartphones, tablets.

Telegraph: 

• US Chamber of Commerce warns country is taking from young to support elderly. Remarks reflect the bitter residue of a years-long budget battle that has largely failed to tackle the nation's long-term fiscal problems.

21st Century Business Herald:

• China to Cut 2014 Railway Fixed-Asset Investment. China's 2014 railway fixed-asset investment will be lower than the 660b yuan spent in 2013, citing a person who will attend a railway work conference organized by China Railway Corp. today. China Railway Corp. is cutting investment to pay more attention to investment returns, the report says.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 138.50 +1.5 basis points.

• Asia Pacific Sovereign CDS Index 108.0 -1.5 basis points. 

• FTSE-100 futures +.09%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AYI)/.85

• (FDO)/.69

• (SVU)/.13

• (PRGS)/.41

• (AA)/.06

• (PSMT)/.73

• (CUDA)/.00 

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 335K versus 339K prior.

• Continuing Claims are estimated to rise to 2850K versus 2833K prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kocherlakota speaking, Fed's George speaking, ECB rate decision, BoE rate decision, China Industrial Production/Consumer Confidence, China CPI, $13B 30Y T-Bond auction, Challenger Job Cuts report for December, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the RBC Consumer Outlook for January could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Falling into Final Hour on Rising Long-Term Rates, Emerging Markets Debt Angst, Technical Selling, Energy/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.95 +.23%

• Euro/Yen Carry Return Index 148.40 -.10%

• Emerging Markets Currency Volatility(VXY) 9.11 -.11%

• S&P 500 Implied Correlation 50.36 +.86%

• ISE Sentiment Index 155.0 +1.31%

• Total Put/Call .72 +1.41%

• NYSE Arms .73 -41.86% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.19 +1.52%

• European Financial Sector CDS Index 83.87 +3.74%

• Western Europe Sovereign Debt CDS Index 52.0 unch.

• Emerging Market CDS Index 281.20 +2.64%

• 2-Year Swap Spread 11.0 +.75 basis point

• TED Spread 20.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -1.25 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 257.0 +3 basis points

• China Import Iron Ore Spot $131.50/Metric Tonne -1.72%

• Citi US Economic Surprise Index 63.40 +2.4 points

• Citi Emerging Markets Economic Surprise Index 3.10 +1.6 points

• 10-Year TIPS Spread 2.28 +4 basis points

Overseas Futures:

• Nikkei Futures: Indicating -106 open in Japan

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Higher: On gains in my biotech/medical sector longs, index hedges and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

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.


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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.