Today's Headlines

Bloomberg: 

• China Provinces Set Lower Growth Goals for 2014. At least seven Chinese provinces are setting lower growth targets for this year than in 2013, adding to signs that expansion will slow as the government focuses on policies to sustain the economy in the long term. Hebei, which borders Beijing in the north, set an 8 percent growth goal amid “unprecedented pressure” from air-pollution controls, according to an annual work report published yesterday in the official Hebei Daily. Last year’s target was 9 percent. Fujian in the southeast and Gansu and Ningxia in the northwest are also targeting slower expansion, state-run websites show. President Xi Jinping is trying to shift local officials’ focus to environmental protection and containing debt rather than just short-term economic growth. The latest regional targets suggest leaders will set a national goal this year of 7 percent, down from 7.5 percent in 2013, said Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole CIB. “We are facing increasingly severe difficulties and contradictions,” Hebei Governor Zhang Qingwei said in the work report delivered Jan. 8, according to Hebei Daily. 

• Great Wall’s H8 Dents Confidence in Asia’s Richest Car Executive. Great Wall Motor Co. (2333)’s billionaire Chairman Wei Jianjun pushed back deliveries of the company’s most expensive SUV after the automotive press panned the Haval H8 in test drives. It turned out to be a $2.4 billion decision. That’s how much his company lost in market value yesterday after the delay prompted Great Wall shares to plunge 12 percent, the most in five years, in Hong Kong trading the following day.

• Geely Predicts Slower Sales Growth After Missing 2013 Target. Geely Automobile Holdings Ltd. (175), the Chinese automaker whose parent owns Volvo Cars, predicted its sales growth will slow this year to less than half the pace of 2013 and trail the industry in the world’s largest auto market.

• European Stocks Erase Drop as RWE Rises on Court Ruling. European stocks erased their decline in the final half an hour of trading as RWE AG rallied, leading utility shares higher. RWE jumped 5 percent after a German federal court ruled in its favor. Celesio AG slid 4.4 percent after McKesson Corp. said it failed to gain support from enough of the drug wholesaler’s shareholders to complete an acquisition. Jeronimo Martins SGPS SA declined 2.8 percent after the Portuguese retailer said sales growth slowed in Poland, its largest market. The Stoxx Europe 600 Index added 0.2 percent to 331.23 at the close of trading in London.

• WTI Crude Rises. WTI for February delivery rose 85 cents, or 0.9 percent, to $92.65 a barrel at 12:55 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 24 percent above the 100-day average. Prices have fallen in eight of the 11 days since they topped $100 on Dec. 27.

• Fed Weighs Further Restrictions on Banks’ Commodities Operations. The Federal Reserve today said it is considering whether to impose new restrictions on banks’ trading and warehousing of physical commodities. The Fed is seeking comment on ways to curb ownership and trading of commodities such as oil, gas and aluminum by deposit-taking banks. The regulator asked the industry 24 questions, including ones on the risk the activities could pose, potential conflicts of interests, and risks and benefits of imposing additional capital standards.

• U.S. Regulators Said Ready to Ease Volcker CDO Limits for Banks. U.S. regulators are set to give banks an exemption from Volcker Rule limits for collateralized debt obligations composed mostly of small-bank securities, according to two people briefed on the agencies’ plans. The adjustment to the rule, which could come as soon as today, would allow banks to keep CDOs backed by trust-preferred securities while limiting the level of insurance and big-bank content, said the people, who requested anonymity because the regulators haven’t acted.

• GameStop(GME) Tumbles After Cutting Forecast as Game Sales Drop. GameStop Corp. (GME) tumbled the most in 11 years after the video-game retailer cut its earnings forecast because of lower-than-expected sales of games and reduced profit margin from consoles in the holiday period. GameStop shares fell 18 percent to $37.34 at 12:03 p.m. in New York, after dropping to $36.20, the biggest intraday decline since December 2002.

• State Fiscal Strains Lingering in Recovery, Report Says. U.S. state revenue isn’t rising fast enough to keep up with the cost of funding pensions, health care and public works projects, underscoring financial strains that persist during the economic recovery, according to a report.

• Regeneron’s(REGN) Eylea Tops Analysts’ Fourth-Quarter Sales Estimates. Regeneron Pharmaceuticals Inc. (REGN) reported fourth-quarter revenue of the eye drug Eylea, the company’s top-selling product, that beat analysts’ estimates. Sales were $400 million last quarter, Chief Executive Officer Len Schleifer said today at the annual JPMorgan Chase & Co. (JPM) health-care conference in San Francisco. The demand beat the $377.5 million average of eight analyst estimates compiled by Bloomberg.

• Tesla(TSLA) Rises After Model S Sales in 2013 Exceed Forecast. Tesla Motors Inc. (TSLA), the maker of high-end electric cars, gained the most in six weeks after the carmaker said it delivered 6,900 Model S sedans in the fourth quarter, pushing full-year sales beyond a company target. Tesla rose 12 percent, the biggest intraday increase since Dec. 3, to $156.40 at 1:41 p.m. New York time, after earlier rising to as much as$156.44.

Wall Street Journal: 

• Regulators at Odds on Reining In China's Shadow Lending. PBOC Sees the Banking Commission as Unwilling to Get Tough. China's effort to rein in runaway credit is being hampered by infighting between the central bank and the nation's banking regulator, say officials at both institutions, with the two agencies sparring especially over how hard to press so-called shadow bankers. The officials say that the People's Bank of China, concerned about banks finding ways to move loans off their books, has been frustrated at what it sees as the unwillingness of the China Banking Regulatory Commission to toughen regulation of banks' dealings with shadow lenders, an array of formal and informal institutions creating credit outside the formal bank channels. The differences highlight the competing interests of the PBOC, which looks at overall financial stability, and the CBRC, which oversees the formal banking sector. Neither has clearly defined authority over shadow lending, the fastest-growing part of China's financial sector that often lends to borrowers considered too risky for traditional banks, including local governments, property developers and big companies burdened by overcapacity.

• What Secrets Your Phone Is Sharing About You. Businesses Use Sensors to Track Customers, Build Shopper Profiles.

• Christie, Official Who Arranged Bridge Closures Were Together During Fiasco.

• Fed’s Plosser: Weak December Jobs Data Shouldn’t Affect Taper. Federal Reserve Bank of Philadelphia President Charles Plosser said Tuesday that weak December jobs data won’t stop the central bank from pressing forward with its plans to cut the pace of its bond-buying stimulus program.

Fox News:

• Leaked private comments reveal Israeli defense minister’s scorn for Kerry. Israel's hawkish defense minister trashed Secretary of State John Kerry and the peace deal he is trying to broker between Israel and the Palestinian Authority in off-the-record comments nonetheless published by the nation's leading daily newspaper. “In reality, there have been no negotiations between us and the Palestinians for all these months – but rather between us and the Americans,” Moshe Ya’alon said in comments published in the pages of Yediot Aharonot. “The only thing that can 'save us' is for John Kerry to win a Nobel Prize and leave us in peace.” 

• Rouhani: World powers ‘surrendered’ to Iran with nuclear deal. Iranian President Hassan Rouhani boasted on Twitter that the United States and other world powers effectively "surrendered" to Tehran with the newly struck nuclear deal. "Our relationship w/ the world is based on Iranian nation's interests. In #Geneva agreement world powers surrendered to Iranian nation's will," a tweet from the Iranian leader's account said on Tuesday.

MarketWatch: 

• Gold ends lower on equities strength, Fed comments. Gold futures settled lower on Tuesday with strength in U.S. equities, a rise in retail sales and comments from Federal Reserve officials pointing to the prospects of further tapering of the central bank’s bond-buying program fueling the metal’s first loss in four sessions.

CNBC:

• Problems brewing at Starbucks? (video)

ZeroHedge:

• The Biggest Surprise In Today's JPM Earnings Report.

• December Retail Sales Beat Due To November Revision Lower, Electronics Sales Tumble.

• Greek Deflation Continues For 10th Straight Month; Stocks Up 19% In 9 Days. (graph)

• It's A Lose-Lose-Lose Deal For America: How Real Estate Bubbles Push Rents Higher.

• What's Wrong With This Picture? (graph)

• Spanish Lending Rates Soar To Highest Since 2008. (graph)

• 1,582-Page Spending Bill Hinges On NSA Giving Congress 5 Years Of Records.

• Fed's Fisher Says "Investors Have Beer Goggles From Liquidity", Joins Goldman In Stock Correction Warning.

Business Insider:

• Court Ends 'Net Neutrality' On A Technicality.

• Israel Defense Minister Reportedly Says John Kerry Is Acting 'Obsessive' And 'Messianic'.

NY Times:

• India’s Infrastructure Projects Stalled by Red Tape.

Tradersmagazine.com:

• The Big Data Edge for Hedge Funds. The term ‘Big Data’ has been around for some time but questions remain exactly how hedge funds and other buysides exploit the vast stores of data that has never been available to them in the past and continue to grow each day.

Reuters:

• US holiday sales rise but discounts to hit margins -NRF. U.S. retail sales rose 3.8 percent in the 2013 holiday season, the National Retail Federation said, but the trade body warned that deep discounting could hurt retailers' profits. Retailers offered the biggest promotions since the 2008 recession to get shoppers to spend, but many slashed profit forecasts last week because of the deals.

• Wells Fargo(WFC) profit beats estimates; mortgage loans slump. Wells Fargo & Co reported a better-than-expected 11 percent jump in fourth-quarter profit, though mortgage financing was at its slowest in five years, and the bank's shares fell in morning trading. The fourth-largest U.S. bank by assets said cost cuts, and dipping into money it had set aside to cover bad loans, helped it post a record profit even though revenue fell 6 percent, as fewer consumers refinanced home loans due to higher mortgage rates.

• EMERGING MARKETS-Brazil stocks rise slightly on telecom merger.

Red Orbit:

• Multiple New Cases of H7N9 Have Been Confirmed In The Last Week. Last week, redOrbit reported that several new cases of human infection with H7N9 had been confirmed since the New Year began. In the past week, the World Health Organization has received reports from two Chines health agencies confirming 13 cases of H7N9 bird flu.
  
  Last week, redOrbit reported that several new cases of human infection with H7N9 had been confirmed since the New Year began. In the past week, the World Health Organization (WHO) has received reports from two Chinese health agencies confirming 13 new cases of H7N9 bird flu.
  Read more at http://www.redorbit.com/news/health/1113045864/h7n9-rise-multiple-new-confirmed-cases-china-011414/#FsoYrYAMzVEcB8l3.99

Financial Times:

• Fannie Mae warns of fall in US house prices. Weakening demand by financial companies that have been snapping up thousands of US homes on the cheap could fuel a future fall in house prices, the chief economist of Fannie Mae has warned. The warning is one of the first instances of a US government agency voicing concern about the increased involvement of institutional buyers – including some from the “shadow banking” sector – in the country’s property market.

Bear Radar

Style Underperformer:

• Large-Cap Value +.56%

Sector Underperformers:

• 1) Gold & Silver -.94% 2) Steel -.33% 3) Retail +.08%

Stocks Falling on Unusual Volume:

• APU, GME, ICPT, SSYS, SGI, TNXP, RTRX, FDO, WWW, DDD, TKMR, MCK, PNTR, ZLTQ, ATK, BBBY, XONE, GALT, ECOM, FLT, WAC, BONT, BA, ALNY and CPA

Stocks With Unusual Put Option Activity:

• 1) FDO 2) EWJ 3) NUE 4) SSYS 5) TXN
  

Stocks With Most Negative News Mentions:

• 1) GME 2) SBUX 3) TGT 4) YRCW 5) BONT
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.98%

Sector Outperformers:

• 1) Semis +1.84% 2) Biotech +1.71% 3) Gaming +1.59%
  

Stocks Rising on Unusual Volume:

• ISRG, DAN, GES, NXTM, AZN, FTNT, AMBA, HWAY, JBL, RESI, PAY, LOCK, SUNE, BAS, XEC, AFSI and TXTR

Stocks With Unusual Call Option Activity:

• 1) MPC 2) IGT 3) ARR 4) TWC 5) ISIS

Stocks With Most Positive News Mentions:

• 1) ISRG 2) INTC 3) HCA 4) EVHC 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Japan Current-Account Gap Widens to Record on Weaker Yen. Japan’s current-account deficit widened to a record in November as imports climbed, underscoring challenges for Prime MinisterShinzo Abe as he tries to drive a sustained economic rebound. The 592.8 billion yen ($5.7 billion) shortfall in the widest measure of trade, reported today by the Ministry of Finance in Tokyo, was wider than a median forecast of a 368.9 billion yen deficit in a Bloomberg News survey of 24 economists. Weakness in the yen and extra demand for energy because of nuclear-plant shutdowns are driving up Japan’s import bill, highlighting drags on the recovery that will also include a sales-tax increase in April. A longer-term risk for the nation is any shift to a sustained deficit that would undermine investor confidence in Japanese government debt. 

• Tech Upstarts Paying 17 Times Interest Upset China Banks.

• Great Wall Tumbles After Delaying Haval H8 SUV. Great Wall Motor Co. (2333), China’s biggest sport utility vehicle maker, fell the most in more than five years in Hong Kong trading after delaying its Haval H8 model to address technical deficiencies. Great Wall tumbled 18 percent to HK$32.20 as of 9:31 a.m., the biggest decline since October 2008. Hong Kong’s benchmark Hang Seng Index dropped 1.1 percent. The company’s Shanghai-traded shares fell 9.1 percent.

• Chinese Stocks to Trail World for Fifth Year: Chart of the Day. Chinese stocks may trail global peers for a fifth straight year as higher borrowing costs hurt earnings and a flood of ipos divert funds from existing shares, according to Bank Julius Baer & Co.  

• Top Samsung Analyst Predicts Wipeout Will Deepen: Korea Markets. The slump in Samsung Electronics Co. (005930) that wiped out $28 billion of market value in six weeks will deepen as Apple Inc. (AAPL:US) and Chinese rivals take market share in handsets, according to the stock’s most-accurate forecaster.

• Asian Stocks Fall First Time in 3 Days, Pacing U.S. Loss. Asian stocks fell, with the regional benchmark index on course for its first loss in three days as it paced the biggest drop in U.S. stocks since November amid concern over valuations. Great Wall Motor Co., China’s biggest maker of sport utility vehicles, plunged 11 percent in Hong Kong after delaying the introduction of its Haval H8 model for three months to address technical deficiencies. Honda Motor Co. (7267), a Japanese carmaker that gets 47 percent of its sales in North America, lost 3.3 percent. Dainippon Sumitomo Pharma Co. fell 6 percent in Tokyo after the head of its New York-based partner Intercept Pharmaceuticals Inc. said he may need the help of a larger drugmaker to bring a liver-disease treatment to market. The MSCI Asia Pacific Index lost 1 percent to 139.25 as of 12:28 p.m. in Tokyo. 

• Rubber Touches Five-Month Low as Chinese Stockpiles Expand. Rubber futures in Tokyo reached a five-month low as stockpiles in China continued expanding, deepening concern that demand from the largest user is slowing. The contract for delivery in June on the Tokyo Commodity Exchange dropped as much as 3.9 percent to 246.4 yen a kilogram ($2,385 a metric ton), the lowest level since Aug. 8, and was at 247.1 yen at 10:14 a.m. local time. Futures extended last week’s 6.6 percent drop, the most since the five days through April 19. Markets in Tokyo were closed yesterday for a holiday. 

• Rebar Rises Amid Expectation Chinese Mills Will Cut Production. Steel reinforcement-bar futures climbed in Shanghai amid expectations that Chinese steel mills will continue to cut output to reduce emissions and as demand slows in winter. Rebar for May delivery on the Shanghai Futures Exchange gained as much as 0.7 percent to 3,486 yuan ($577) a metric ton, before trading at 3,473 yuan at 10:41 a.m. local time.

• Fed Said to Release Plan to Limit Banks’ Commodities Activities. The Federal Reserve is poised to take a preliminary step toward limiting banks’ activities with commodities amid Congressional scrutiny, according to three people briefed on the discussions. The Federal Reserve is planning to release a notice seeking information on ways to curb banks’ ownership and trading of some commodities as it tries to cut risk for deposit-taking banks, said the people, who requested anonymity because the talks are private. Regulators and lawmakers have said raw-materials assets could lead to catastrophic losses, collapses and public bailouts.

• ECB Sees Bad-Debt Rules as Threat to Credible Bank Review. The European Central Bank is concerned that national differences in how bad debt is classified could cripple its probe into the health of euro-area banks, according to an internal ECB document. Bad-debt classification practices across Europe show “material differences that, if not considered, would severely affect the consistency and credibility of the exercise,” according to the undated document obtained by Bloomberg News. A person familiar with the text said it was drawn up in late November and contains the ECB’s latest thinking on the subject. An ECB spokeswoman declined to comment. 

• Hensarling Seeks More Constraint on Fed’s Emergency Loan Power. The committee chairman, Texas Republican Jeb Hensarling, outlined objections to the Fed’s proposed regulations in a letter today to Fed Chairman Ben S. Bernanke. Fed officials drew up the rules on its emergency lending power to meet requirements of the Dodd-Frank Act intended to prevent bailouts of individual institutions in danger of failing. “Disappointingly, the proposed rule does not provide any real or binding constraints on the Federal Reserve’s discretion to conduct bailouts of failing financial firms,” Hensarling wrote in today’s letter, according to a copy obtained by Bloomberg News.

• Loan Standards Slide to Deepen in CMBS Deals Rush, Moody's Says. Underwriting standards on commercial mortgages packaged into bonds are poised to slide this year as surging sales of the securities allow landlords to pile more debt onto properties, according to Moody's Investors Service. 

• Obamacare Customers Skew Older as Young Wait for Shakeout. About 70 percent of Obamacare’s customers are 35 years of age or older, indicating that U.S. health-care overhaul is initially attracting a less healthy population that may drive up insurance premiums. The federal- and state-run insurance exchanges signed up 2.2 million people for private health plans in the three months ended Dec. 28, the U.S. Department of Health and Human Services said in a report released today. About 24 percent were 18- to 34-year-olds, and about one-third were 55 or older.

• Apple(AAPL) Loses Bid to Block Antitrust Monitor in E-Book Case. Apple Inc. (AAPL) lost a bid to stop a monitor appointed in an electronic books price-fixing case from continuing to interview top company officials, including Chief Executive Officer Tim Cook and board member Al Gore, the former U.S. vice president.

• Google(GOOG) Buying Nest for $3.2 Billion to Expand in Devices. Google Inc. (GOOG:US) is buying digital thermostat maker Nest Labs for $3.2 billion as the Internet search company moves deeper into Web-connected devices.

Wall Street Journal: 

• House, Senate Negotiators Seal $1 Trillion Spending Deal. Controversial EPA, Abortion Riders Dropped. House and Senate negotiators Monday unveiled a $1.012 trillion bill to fund the federal government for the next 8½ months, a compromise that marks a temporary ceasefire in the budget wars that have rocked Congress and the economy in recent years. The compromise restores some of the funding cut last year from domestic programs such as the National Institutes of Health and Head Start, but keeps overall discretionary spending lower than when President Barack Obama took office in 2009, when it totaled $1.013 trillion.

• Thai Protesters Turn Focus to Stock Exchange. Antigovernment Activists Seek to Escalate Efforts After Clogging Central Bangkok. After turning central Bangkok into a flag-waving sea of protest Monday, antigovernment activists now say they are preparing to take their campaign to the next level by seizing Thailand's stock exchange. The protesters' drive to force Prime Minister Yingluck Shinawatra from office and eliminate the influence of her brother, billionaire former leader Thaksin Shinawatra, has been marked by a series of escalating protests, each more ambitious than the last. Monday's rally was touted as a bid to shut down Bangkok for a week or more and reboot Thailand's democracy, this time without the Shinawatra clan in command.

• For-Profit College Probe Expands. State Attorneys General Join CFPB in Review of Lending Practices. The Consumer Financial Protection Bureau and state attorneys general are expanding a probe of for-profit colleges and their student- lending practices, according to government officials and regulatory filings. Kentucky Attorney General Jack Conway, who chairs a group of 32 state attorneys general investigating for-profit colleges, said states are working with the CFPB to ferret out unfair or deceptive student lending and other practices. "I expect in 2014 you'll see action by the CFPB in coordination with states in coming months," Mr. Conway said in an interview. 

• Fighting Among Rebels Boosts Syrian Regime. Assad's Forces Benefit From Northern Conflict Between Opposition, al Qaeda-Linked Group. Pro-regime forces have consolidated recent gains in and around the northern city of Aleppo, Syria's economic hub. These forces are also geared up to recapture more territory around the city, in a potential major setback for rebels after 18 months of battles to oust the regime from parts of the city that have remained under its control.

• Ex-Citigroup(C) Executive to Serve as Hedge Fund Chairman. John Havens Was Citi's President in 2011 and 2012.

• Charter Makes Offer for Time Warner Cable. Bid of $37.4 billion Aimed at Bringing Cable Company to the Table.

• America's Dwindling Economic Freedom. Regulation, taxes and debt knock the U.S. out of the world's top 10. (rankings)

Zero Hedge:

• To This Day, No One Knows What Financial Firms Are Sitting on.

• The IRS Stunningly Admits Its Own Mafia Tactics.

• Stocks Crater Most In Over 4 Months. (graph)

• Welcome To The Blackstone Recovery: Over 11 Million Americans Spend More Than Half Their Income On Rent. (graph)

• The Number Of Working Age Americans Without A Job Has Risen By Almost 10 Million Under Obama.

• Obamacare Enrollment Explained In Three Charts.

• Just Three Charts.

ValueWalk:

• Panic/Euphoria Model Now At Higher Level Than Pre-Crisis: Citi. (graph)

Business Insider: 

• People Are Freaking Out About Google(GOOG) Having Access To Their Whole House Now That It Bought Nest.

LA Times:

• New Iran agreement includes secret side deal, Tehran official says. Key elements of a new nuclear agreement between Iran and six world powers are contained in an informal, 30-page text not yet publicly acknowledged by Western officials, Iran’s chief negotiator said Monday. When officials from Iran and the world powers announced that they had completed the implementing agreement, they didn’t release the text of the deal, nor did they acknowledge the existence of an informal addendum. In the interview, Araqchi referred to the side agreement using the English word “nonpaper,” a diplomatic term used for an informal side agreement that doesn’t have to be disclosed publicly. The nonpaper deals with such important details as the operation of a joint commission to oversee how the deal is implemented and Iran’s right to continue nuclear research and development during the next several months, he said.

Forbes: 

• Why Singapore's Economy Is Heading For An Iceland-Style Meltdown.

Real Clear Politics: 

• Freezing Is the New Warming. Now we can see what they mean when the warmthers say that global warming is supported by an ironclad scientific consensus. The theory is so irrefutable that it's unfalsifiable! Which is to say that it has become a cognitive spaghetti bowl full of ad hoc rationalizations, rather than a genuine scientific hypothesis.

Reuters:

• Japanese stocks tumble as yen hits 4-week high. Asian shares came under pressure on Tuesday, with Japanese stocks tumbling more than 2 percent as the yen hit a four-week high against the dollar after last week's surprisingly weak jobs report raised concerns about the U.S. growth outlook. 

• Yum's(YUM) China sales fall short on weakness at Pizza Hut. Yum Brands Inc on Monday said December sales at established restaurants in China, its top market, rose a smaller-than-expected 2 percent after weakness at its Pizza Hut Casual Dining chain weighed on a recovery at KFC, which is recovering from a food safety scare and avian flu worries. Yum's China same-restaurant sales for December included a 5 percent increase at KFC and a 3 percent decline at Pizza Hut. Analysts polled by Consensus Metrix expected same-restaurant sales to rise 6 percent at KFC and 5.7 percent at Pizza Hut.

Vendomosti:

• Russia May Boost Dividend Tax to 13% From 9%. Dividend tax will be made equal to income tax on salary, citing Deputy Finance Minister Sergei Shatalov.

China Securities Journal:

• China Shouldn't Stop IPO Reform. High prices and other problems with Chinese IPOs shouldn't derail market-oriented reforms after a freeze on IPO approvals was ended, according to a front-page editorial.

Study Times:

• China Faced With 'Unconventional' Security Threats. China faces with "unconventional" security threats from computer network safety, extremist forces, ideology and culture, citing National Defense University professor Gong Fangbin.

Evening Recommendations
RBC:

• Rated (SSYS) Outperform, target $175. 

• Rated (DDD) Outperform, target $118.

Night Trading

• Asian equity indices are -1.50% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 140.0 +2.5 basis points.

• Asia Pacific Sovereign CDS Index 107.50 -1.0 basis point. 

• FTSE-100 futures -.49%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JPM)/1.37

• (CBSH)/.71

• (WFC)/.98

• (LLTC)/.50
  

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for December is estimated to rise to 93.1 versus 92.5 in November.

8:30 am EST

• Retail Sales Advance for December are estimated to rise +.1% versus a +.7% gain in November. 

• Retail Sales Ex Autos for December are estimated to rise +.4% versus a +.4% gain in November.

• Retail Sales Ex Autos and Gas for December are estimated to rise +.3% versus a +.6% gain in November.

• The Import Price Index for December is estimated to rise +.4% versus a -.6% decline in November.
  

10:00 am EST

• Business Inventories for November are estimated to rise +.3% versus a +.7% gain in October.

Upcoming Splits

• (RLI) 2-for-1

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Plosser speaking, UK inflation data, weekly retail sales reports, Needham Growth Conference and the Deutsche Bank Auto Industry Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity 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 Global Growth Fears, Valuation Worries, Surging Yen, Energy/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.18 +8.57%

• Euro/Yen Carry Return Index 146.69 -1.22%

• Emerging Markets Currency Volatility(VXY) 8.42 -.71%

• S&P 500 Implied Correlation 51.23 +4.67%

• ISE Sentiment Index 111.0 +4.72%

• Total Put/Call .69 -8.0%

• NYSE Arms 1.67 +40.0% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.04 +3.26%

• European Financial Sector CDS Index 87.33 +1.55%

• Western Europe Sovereign Debt CDS Index 51.0 +2.0%

• Emerging Market CDS Index 284.35 +1.57%

• 2-Year Swap Spread 11.75 -.25 basis point

• TED Spread 21.25 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.75 -1.0 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% -1 basis point

• Yield Curve 247.0 -2 basis points

• China Import Iron Ore Spot $130.90/Metric Tonne +.15%

• Citi US Economic Surprise Index 66.10 +.6 point

• Citi Emerging Markets Economic Surprise Index .1 +1.0 point

• 10-Year TIPS Spread 2.26 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating -412 open in Japan

• DAX Futures: Indicating -70 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail/biotech/medical/tech sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added (VXX) long, took some profits in retail sector longs

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• China’s Record Number of IPOs to Curb Small-Cap Equities. The number of Chinese initial public offerings will accelerate to a record pace in coming months, dragging down small-company stocks, according to UBS AG. There will be some 60 to 80 IPOs each month from March to June, Chen Li, chief China equity strategist at UBS, said at a briefing in Shanghai. Increased stock supply will hold back share prices of smaller companies on the ChiNext Index after they surged last year, he said. The regulator approved about 50 companies to sell stock in China following new rules in November aimed at strengthening investor protection and stamping out price manipulation. The ChiNext gauge of Shenzhen-listed companies with an average market capitalization of $1.5 billion is more than four times more expensive than the Shanghai Composite Index. “The sales pace is unprecedented,” Chen said. “Starting March, that’ll pose a big challenge to the valuation of ChiNext companies.” 

• Brazil Swap Rates Rise on Outlook for Inflation; Real Advances. Brazil’s shorter-term swap rates climbed to a six-week high as economists increased their inflation forecast for 2014, adding to speculation that the central bank will extend borrowing cost increases. Swap rates on the contract maturing in January 2015 rose for a fourth straight day, increasing 12 basis points, or 0.12 percentage point, to 10.73 percent at 1:56 p.m. in Sao Paulo. The real appreciated 0.6 percent to 2.3443 per U.S. dollar, the strongest level since Dec. 27. 

• Rise of 'Common Man' in India Threatens Stability of Government Coalition. The sudden popularity of India’s anti-graft Aam Aadmi Party is prompting concern at companies such as Maruti Suzuki India (MSIL) Ltd. that this year’s general election will fail to create a stable government. Arvind Kejriwal’s one-year-old Aam Aadmi plans to contest as many as 300 seats after taking power in the national capital last month, according to senior party leader Yogendra Yadav. That threatens to reduce the chances of the ruling Congress Party or main opposition Bharatiya Janata Party emerging with a majority in the election, which is due by May. 

• European Stocks Advance Second Day as Bank Shares Climb. European stocks advanced for a second day, after the Stoxx Europe 600 Index posted its first full-weekly gain of 2014, as a global banking-supervision body eased rules linked to minimum-capital requirements for lenders. A gauge of banking shares climbed to its highest level since April 2011 after the Basel Committee on Banking Supervision’s announcement on capital requirements. UBS (UBSN) AG added 3.1 percent as Chief Executive Officer Sergio Ermotti said the lender won’t spin off its investment-banking business. ICAP (IAP) Plc fell 1.1 percent as Goldman Sachs Group Inc. downgraded the world’s biggest interdealer broker. The Stoxx 600 climbed 0.2 percent to 330.72 at the close of trading.

• WTI Crude Drops. WTI for February delivery fell 85 cents, or 0.9 percent, to $91.87 a barrel at 1:36 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 12 percent below the 100-day average. Oil is down 6.7 percent so far this year.

• Federal Reserve Said to Probe Banks Over Forex Fixing. The Federal Reserve is investigating whether traders at the world’s biggest banks rigged benchmark currency rates, raising the risk that firms will be penalized for lax controls as regulators look for wrongdoing.

• Priced Out: Where Higher Rates Could Hurt Home Buyers Most.

• Elizabeth Warren’s War on Job Creators. Senator Elizabeth Warren is drawing praise from progressives for her legislation that would bar companies from requiring prospective hires to submit to a credit check as a condition of employment.

• Lululemon(LULU) Falls After Cutting Revenue, Earnings Forecast. Lululemon Athletica Inc. (LULU) shares dropped the most in seven months after the yogawear retailer cut its revenue and earnings forecast for the quarter ending Feb. 2. Lululemon fell 15 percent to $50.86 at 9:41 a.m. in New York and earlier fell as much as 16 percent for the largest intraday decline since June 11.

• Suntory to Buy Beam(BEAM) in $16 Billion Deal. Suntory Holdings Ltd., the closely held Japanese whiskey and beer maker, agreed to buy Beam Inc. (BEAM) for $16 billion including debt to gain brands such as Maker’s Mark whiskey and create the world’s third-largest premium spirits company.

• SodaStream(SODA) Plunges Most Since 2011 After Earnings Data. SodaStream International Ltd. (SODA), the Israeli maker of home soda machines, fell the most since 2011 in New York after the company reported preliminary earnings that missed analyst estimates. Shares of Lod, Israel-based SodaStream dropped 22 percent to $39.07 at 11:52 a.m. in New York, the biggest decline since August 2011.

Fox News:

• Obama backer leading IRS probe visited White House in ’09, records show. The Justice Department attorney leading the probe into whether the IRS improperly targeted Tea Party groups visited the White House in 2009 as a guest of President Obama, according to official visitor logs.  The visit raises more questions about possible ties between Barbara Kay Bosserman and Obama, after Republican lawmakers complained last week she should not be leading the probe into the IRS.

CNBC:

• Without rebirth, malls face extinction: Developer. (video)

• Retailers' present to Wall Street? A lump of coal. A few weeks after consumers finished unwrapping presents, a wave of retailers are gifting Wall Street with lumps of coal. On Monday, Lululemon Athletica and Express became the latest retailers to warn investors of disappointing earnings in the holiday quarter. These negative forecasts follow similar warnings last week from a range of retail companies, including American Eagle Outfitters and Zumiez. In response, Lululemon stock shed 16 percent and Express shares dropped about 2.5 percent. 

• Scared? This could be the perfect time to get protection. Even as stocks see a soft start to the year, investors don't seem to be getting too fearful. In fact, the market's "fear gauge" fell Monday to a low touched only once in the past 10 months, and that could give investors a great chance to get protection.

ZeroHedge:

• After Seven Lean Years, Part 1: US Residential Real Estate: The Present Position And Future Prospects. (graph)

• Chart Of The Day: Labor Force (Lack Of) Participation Or "We'll Just Make It Up As We Go Along".

• Baltic Dry Index Crashes 18% In 2 Days. (graph)

• Polar Vortex - The Sequel: Coming To A Frozen US City Near You.

• BofAML Warns USDJPY Trend Has Turned. (graph)

• Lockhart "Positive" Hawkishness Sparks Tapering Tumble In Stocks (Dow At Lows Of Year).

• Japanese Stocks Lose All Post-Taper Gains As USDJPY Dives.

ValueWalk:

• The Valuation Question: Rich By Any Measure? The forward P/E ratio for the S&P 500 during the past 5-year, 10-year, and 35- year periods has averaged 13.2x, 14.1x, and 13.0x, respectively. At 15.9x, the current aggregate forward P/E multiple is high by historical standards.

Business Insider:

• The Average Hedge Fund These Days Is Basically An Overpriced Index Fund. According to this chart from Morgan Stanley's Adam Parker, "hedge funds in aggregate are essentially long the S&P 500."

• Goldman(GS) Sounds The Alarm On Stocks. 

• 'One Thing That Could Go Wrong Is China'.

• One Chart That Shows How Big Of A Disaster The Fed's New Communication Strategy Has Been.

• Justice Scalia Rips Into Obama's 'Self-Interested' Use Of His Power.

SeekingAlpha:

• Commercial Loans: A Bubble About To Burst?

The Federalist:

• Why Is Religion Invisible To The Media? A 12-year-old girl wrote herself a note before she died. It contained an amazing message of hope and redemption. That was before the media got to it.

Reuters:

• FOREX-Dollar tumbles vs yen after jobs shock prompts stimulus rethink. The dollar tumbled to its lowest in almost a month against the yen on Monday, as investors caught out by Friday's soft U.S. jobs data reassessed how quickly the Federal Reserve might scale back its stimulus.The dollar's weakness also helped push the Australian dollar to a one-month high and the New Zealand dollar to a near-two-month high against the greenback. The U.S. dollar slid 0.7 percent to 103.37 yen, having fallen to 103.26 at one point, its lowest level since Dec. 18. The greenback's losses accelerated after it breached Friday's intraday low of 103.83 yen.

• Low interest rates may spur asset bubbles -German ECB candidate. A prolonged period of accommodative monetary policy brings risks and low interest rates may spur asset price bubbles, said Sabine Lautenschlaeger, Germany's candidate for a vacant seat on the European Central Bank's board. Speaking to a European parliament committee on Monday as part of her vetting, Lautenschlaeger said economic data from the euro zone suggested "we have seen the trough in economic activity, even in the member states hit hardest by the crisis." "A period of prolonged monetary policy accommodation with interest rates being low for a long period is not without its risks," she added. "In fact low interest rates may be associated with spurring asset price bubbles", she told the committee in Strasbourg. 

• TREASURIES-Yields at 3-week lows as economic expectations fall.

• Merck(MRK) shares jump on early filing for skin cancer drug. Shares of Merck & Co Inc rose as much as 6.5 percent Monday after it filed the first part of an application to market its experimental drug, MK-3475, for advanced melanoma, putting the treatment on track to become the first in a new class of promising cancer drugs to reach the market.

Nikkei:

• Japan to Tax Online Content Sales in 2015. Govt will implement tax on sales of electronic books, digital music and other online products from abroad as early as fiscal 2015.