Bear Radar

Style Underperformer:

• Mid-Cap Value +.04%

Sector Underperformers:

• 1) Airlines -.71% 2) Biotech -.70% 3) Energy -.60%

Stocks Falling on Unusual Volume:

• LKQ, IHS, QIWI, NUS, FAST, MMYT, KOS, GM, XONE, BPT, SBGI, VC, USNA, SPH, HTWR, ABG, PETM, LAD, ORMP, UBNT, BCRX, ULTA, NFLX, UN, INCY, ENOC, ECOM, ICE, AN, NXST, LIN and VEEV

Stocks With Unusual Put Option Activity:

• 1) EWJ 2) FAST 3) ULTA 4) XONE 5) KRE
  

Stocks With Most Negative News Mentions:

• 1) XEL 2) TGT 3) SPLS 4) GRPN 5) CELG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.49%

Sector Outperformers:

• 1) Coal +2.37% 2) Oil Tankers +2.11% 3) Computer Hardware +1.57%
  

Stocks Rising on Unusual Volume:

• NUVA, FEYE, MWW, KBR, GMED, MDRX, NQ, NTAP, TDC, BAS, MWV, REXX, RHI and IPI

Stocks With Unusual Call Option Activity:

• 1) VNDA 2) NTAP 3) NUS 4) TDC 5) BEAM

Stocks With Most Positive News Mentions:

• 1) T 2) BAC 3) GM 4)  5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg: 

• China’s Credit Growth Slows. China’s broadest measure of new credit fell in December while money-supply growth and new yuan loans trailed estimates amid a cash crunch and government efforts to curb speculative lending. Aggregate financing was 1.23 trillion yuan ($204 billion), the People’s Bank of China said today in Beijing. That compared with 1.63 trillion yuan a year earlier. China’s foreign-exchange reserves, the world’s largest, rose to a record $3.82 trillion at the end of December from September’s $3.66 trillion. A record decline in new credit in the second half is set to limit the pace of economic expansion this year as policy makers focus on controlling financial risks and implementing the broadest reforms since the 1990s. China’s debt buildup has evoked comparisons to Japan before its lost decade and the run-up to the Asian financial crisis. 

• China Stocks Drop as Financial, Utility Companies Lead Retreat. China’s stocks fell, dragged down by financial and utility companies. Data today showed new bank loans and money supply trailed economists’ estimates, while the government’s broadest measure of credit beat projections. Industrial & Commercial Bank of China Ltd. and Huaxia Bank Co. slid at least 0.9 pecent to pace declines for financial companies. Great Wall Motor Co., the biggest maker of sport-utility vehicles, dropped 1.9 percent, extending losses after it delayed the introduction of a model. Anhui Conch Cement Co. (600585), China’s biggest cement maker, climbed 2.3 percent after it estimated profit increased 50 percent last year. The Shanghai Composite Index (SHCOMP) slipped 0.4 percent to 2,018.17 as of 10:19 a.m.

• Asian Stocks Rebound as Yen Drop Fuels Japan; Won Falls. Asian stocks rose, rebounding from the benchmark index’s biggest drop since September, and the dollar appreciated on optimism the global economy is strengthening. Gold fell for a second day. The MSCI Asia Pacific Index gained 0.4 percent at 10:56 a.m. in Tokyo, following yesterday’s 1.5 percent tumble.

• Hollande Faces Investors Deserting French Debt: Euro Credit. President Francois Hollande’s surest supporters since taking office have been buyers of French bonds. Some of them are now deserting the country's debt. The French government debt auction last week drew the weakest demand in a decade as investors piled into Spanish and Italian securities. The yield on France’s benchmark 10-year bonds is at 2.5 percent now from a record low of 1.74 percent in April last year. French and Belgian bonds are the worst performers among the euro region’s major issuers this year.

• Firms Tripling Junk Returns Lure Most Since '07: Credit Markets. Firms that use borrowed money to lend to the smallest and riskiest companies are attracting cash at the fastest pace since before the crisis, wooing buyers with returns that are triple those of the broader junk-debt market. Investors from retirees to wealthy individuals plowed $4.1 billion into publicly traded business development corporations last year, the most since 2007, as the firms known as BDCs gained an average 16.4%. The entities are juicing returns by borrowing about 50 cents for every dollar raised from equity investors, up from 36 cents in 2011. After shunning funds that used derivatives and leverage in the years after the 208 credit crisis, buyers are returning to pad yields that reached record lows last year.

Wall Street Journal: 

• Apple's(AAPL) China Mobile Deal to Extend Beyond Handsets. Millions of iPhones Already Ordered, Says Asian Wireless Carrier. Speaking in a small media briefing to Chinese media and The Wall Street Journal, Apple Chief Executive Tim Cook said he is "incredibly optimistic" about the outcome of the cooperation with the Chinese carrier. "We've gotten to know each other....today is a beginning, and I think there are lots more things our companies can do together in the future," Mr. Cook said.

Fox News:

• The Benghazi Transcripts: Did White House exaggerate Obama's preparation for 9/11 anniversary? On the eve of the terrorist attacks that killed U.S. Ambassador to Libya Christopher Stevens and three other Americans in Benghazi, the Obama White House may have exaggerated the scope and depth of President Obama's preparation for such attacks, newly declassified documents show. On Sept. 10, 2012 -- the day before Al Qaeda-linked terrorists carried out the bloody assault on the U.S. consulate and a related annex in Benghazi -- the White House Press Office issued a press release entitled "Readout of the President's Meeting with Senior Administration Officials on Our Preparedness and Security Posture on the Eleventh Anniversary of September 11th."

MarketWatch.com:

• ExOne(XONE) shares drop on outlook, 3-D printer shares slide.

Zero Hedge: 

• This Won't End Well. (graph)

• Stocks Reverse Yesterday's Losses On Low-Volume, Carry-Driven Melt Up. (graph)

• Bob Shiller Warns Fed 'Fire-Fighting' Is "Not A recipe For A Happy Ending".

• Unemployment Rate Set To Plunge As Bill To Restore Jobless Benefits Fails To Pass Senate.

• Baltic Dry Continues Collapse - Worst Slide Since Financial Crisis. (graph)

• China Expands Military "With Peace In Mind".

• Gundlach's First Webcast Of 2014: "Let the Race Begin! 2014 Markets: Year of the Horse".

Business Insider:

• Several Retailers Have Reported Horrible Numbers.

• MARC FABER: We're In A Gigantic Financial Asset Bubble That Could Burst Any Day.

Washington Post: 

• Border-patrol drones being borrowed by other agencies more often than previously known. Federal, state and local law enforcement agencies are increasingly borrowing border-patrol drones for domestic surveillance operations, newly released records show, a harbinger of what is expected to become the commonplace use of unmanned aircraft by police.

NY Times:

• N.S.A. Devises Radio Pathway Into Computers. The National Security Agency has implanted software in nearly 100,000 computers around the world that allows the United States to conduct surveillance on those machines and can also create a digital highway for launching cyberattacks. While most of the software is inserted by gaining access to computer networks, the N.S.A. has increasingly made use of a secret technology that enables it to enter and alter data in computers even if they are not connected to the Internet, according to N.S.A. documents, computer experts and American officials.

Reuters: 

• Senate panel to criticize State Dept. over Benghazi response. A report by the Senate Intelligence Committee to be released on Wednesday was expected to criticize the State Department for inadequate security at the U.S. diplomatic post in Benghazi, Libya, when it suffered a deadly attack on September 11, 2012. Sources familiar with the findings said the report, which had bipartisan approval, found that in the previous months U.S. intelligence agencies repeatedly warned about possible attacks in Benghazi, but the State Department paid too little attention.

• (GM) to pay first quarterly dividend in almost six years. 

• Fannie, Freddie watchdog in probe of alleged Wall St front running. A U.S. government watchdog is involved in an investigation of whether bank traders manipulated markets and engaged in front running of orders from Fannie Mae and Freddie Mac in the interest-rate swaps market, according to an FBI intelligence bulletin reviewed by Reuters. Reuters reported on Monday that the FBI had warned regulators and security officers at financial services firms about potential abuse by traders with advance knowledge of large orders submitted by the U.S. government-owned mortgage giants.

• Intel(INTC) shelves cutting-edge Arizona chip factory. Intel Corp, hit by slumping personal computer sales, has put off opening a major chip factory that President Barack Obama once held up as an example of U.S. manufacturing potential.

People's Daily:

• China to Curb Coal-Fired Power Projects to Cut Pollution. China won't approve new coal-fired power plan projects in Shanghai, Tianjin, Hebei province, and the Yangtze River and Perarl River deltas in 2014 to curb air pollution.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 140.0 unch.

• Asia Pacific Sovereign CDS Index 108.50 +1.0 basis point. 

• FTSE-100 futures +.25%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FAST)/.34

• (BAC)/.27

• (FUL)/.75

• (CSX)/.43

• (KMP)/.73 

• (PLXS)/.61

Economic Releases
8:30 am EST

• Empire Manufacturing for January is estimated to rise to 3.5 versus .98 in December.

• The Producer Price Index for December is estimated to rise +.4% versus a -.1% decline in November.

• The PPI Ex Food & Energy for December is estimated to rise +.1% versus a +.1% gain in November.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -673,000 barrels versus a -2,675,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,495,000 barrels versus a +6,243,000 barrel gain the prior week. Distillate supplies are estimated to rise by +1,214,000 barrels versus a +5,826,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.31% versus a -.1% decline the prior week.
  

2:00 pm EST

• U.S. Fed's Beige Book release.

Upcoming Splits

• (RLI) 2-for-1

Other Potential Market Movers

• The Fed's Lockhart speaking, Fed's Evans speaking, Eurozone Trade balance, Australia Unemployment, weekly MBA mortgage applications report and the (DPZ) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Surging into Final Hour on Diminished Global Growth Fears, Yen Weakness, Earnings, Biotech/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 12.31 -7.30%

• Euro/Yen Carry Return Index 148.62 +1.17%

• Emerging Markets Currency Volatility(VXY) 8.41 +.24%

• S&P 500 Implied Correlation 50.40 -1.66%

• ISE Sentiment Index 158.0 +42.3%

• Total Put/Call .67 -6.94%

• NYSE Arms .75 -62.48% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.01 -1.73%

• European Financial Sector CDS Index 86.37 -1.1%

• Western Europe Sovereign Debt CDS Index 51.99 +1.95%

• Emerging Market CDS Index 284.53 +.32%

• 2-Year Swap Spread 12.25 +5 basis point

• TED Spread 20.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -1.25 +1.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 248.0 +1 basis point

• China Import Iron Ore Spot $129.50/Metric Tonne -1.07%

• Citi US Economic Surprise Index 70.30 +4.2 points

• Citi Emerging Markets Economic Surprise Index .6 +.5 point

• 10-Year TIPS Spread 2.25 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +328 open in Japan

• DAX Futures: Indicating +26 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short

• Market Exposure: Moved to 50% Net Long

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