Stocks Falling into Final Hour on Rising Emerging Markets Debt Angst, Increasing Global Growth Fears, Yen Strength, Financial/Commodity Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In  Line

Equity Investor Angst:

• Volatility(VIX) 14.21 +10.7%

• Euro/Yen Carry Return Index 147.33 -.23%

• Emerging Markets Currency Volatility(VXY) 9.15 +5.54%

• S&P 500 Implied Correlation 52.90 +1.24%

• ISE Sentiment Index 96.0 -28.29%

• Total Put/Call .86 +6.17%

• NYSE Arms 1.60 +25.03% 

Credit Investor Angst:

• North American Investment Grade CDS Index 68.03 +3.78%

• European Financial Sector CDS Index 92.99 +5.20%

• Western Europe Sovereign Debt CDS Index 50.0 +4.17%

• Emerging Market CDS Index 320.0 +5.4%

• 2-Year Swap Spread 14.25 +.25 basis point

• TED Spread 20.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.50 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .04% +1.0 basis point

• Yield Curve 241.0 -5.0 basis points

• China Import Iron Ore Spot $123.90/Metric Tonne +.32%

• Citi US Economic Surprise Index 62.50 -.9 point

• Citi Emerging Markets Economic Surprise Index 5.2 +.4 point

• 10-Year TIPS Spread 2.22 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -361 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Higher: On gains in my 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: 

• China Auditors Barred for Six Months Over Blocking SEC Probes. Chinese affiliates of the four largest accounting firms were barred for six months from leading audits of U.S.-listed companies after failing to comply with Securities and Exchange Commission orders for documents at the heart of a series of accounting fraud probes.  

• Abe Comparing China to Pre-World War One Germany Fuels Tensions. China said Prime Minister Shinzo Abe was evading Japan’s “history of aggression” by comparing Sino-Japanese relations to those of the U.K. and Germany prior to World War I. “There’s no need to make an issue of the U.K.-Germany relationship,” Foreign Ministry spokesman Qin Gang told reporters in Beijing yesterday. “Such remarks by Japanese leaders are to evade the history of aggression, to confuse the audience.” Abe told a group of editors at the World Economic Forum in Davos, Switzerland that Germany and the U.K. went to war despite their strong economic ties. He said Japan and China must do everything to avoid a similar fate. The Japanese government later confirmed the remarks.

• Argentina’s Peso Plunges as Central Bank Scales Back Support. Argentina devalued the peso the most in 12 years after the central bank scaled back its intervention in a bid to preserve international reserves that have fallen to a seven-year low. The peso plunged 13.9 percent to 7.9295 per dollar at 2:02 p.m. in Buenos Aires, after falling to as low as 8.2435, according to data compiled by Bloomberg. The decline in the peso marks a policy turn for Argentina which had been selling dollars in the market to manage the foreign exchange rate since abandoning a one-to-one peg with the U.S. dollar in 2002. “They’re running out of cash and they’re sitting in the corner at the moment,” Phillip Blackwood, who oversees $3.5 billion in emerging market assets as a managing partner at EM Quest Capital LLP, said in a phone interview from London. “There’s a feeling in the market that they’re not going to intervene any more.” 

• Argentine Default Chaos Relived as Blackouts Follow Looting. 

• Chilean Peso Drops to Weakest Since 2009 as Copper Prices Sink. Chile’s peso plunged to the weakest level in three years as copper fell and investors fled emerging-market currencies. The currency dropped 1.2 percent to 549.19 per U.S. dollar, the biggest decline in two months and the weakest close since October 2009.

• Venezuela Bonds Plunge After Bolivar Weakened for Travel. Venezuelan bonds plunged to the lowest in more than two years after the government announced the latest partial devaluation of the bolivar, this time for airlines and foreign direct investment. Venezuelans traveling abroad, airlines and foreigners sending remittances home must use a secondary exchange rate determined at weekly auctions, Economy Vice President Rafael Ramirez said yesterday. The rate set at the latest auction was 11.36 bolivars per dollar, compared with the official rate of 6.3. Airlines operating in Venezuela fell and one carrier suspended flights. 

• Rio Olympic Organizers Say Costs Rise by 25% to 7 Billion Reais. Brazil’s operating budget for the 2016 summer Olympics in Rio de Janeiro has increased by 25 percent above initial estimates to about 7 billion reais ($2.91 billion) as a result of new sports and inflation. The original spending plan was for 5.6 billion reais, mostly funded through sponsorships and an International Olympic Committee grant.

• Spanish Unemployment Stays Above 25% as Rajoy Seeks Growth. Spain’s unemployment remained above 25 percent for a sixth straight quarter, underpinning the extent of the damage wrought by a six-year slump in the euro region’s fourth-largest economy. The jobless rate was at 26.03 percent of the workforce in the three months through December compared with 25.98 percent in the previous quarter, the National Statistics Institute in Madrid said today. Economists expected the rate to remain unchanged, according to the median of seven forecast in a Bloomberg News survey.

• Turkey Central Bank Fails to Arrest Lira Slide With Intervention. The Turkish central bank’s first unscheduled currency interventions in more than two years failed to stem the lira’s slide. The currency plunged as much as 2 percent to a record 2.3029 per dollar after the central bank sold foreign currency in multiple attempts to shore up the lira. The bank bought the local currency because of “unhealthy price formations,” according to a statement on its website, which didn’t specify the size of the purchases. It sold about $3 billion, according to HSBC Holdings Plc, citing market estimates.

• European Stocks Drop as Chinese Manufacturing Contracts. European stocks dropped from a six-year high as a report showed manufacturing in China probably contracted this month, and media and technology companies slid. Pearson Plc plunged the most in more than 11 years after saying it probably spent more on reorganization last year than it had forecast. Nokia (NOK1V) Oyj slid the most in 16 months after predicting that profit margins at its network-equipment division will drop in the current quarter. Logitech International SA rallied 18 percent after reporting quarterly profit and sales that exceeded analysts’ estimates. The Stoxx Europe 600 Index fell 1 percent to 332.69 at the close of trading, its biggest decline in more than seven weeks.

• Hard-to-Sell Junk Debt Lures Oaktree to JPMorgan: Credit Markets. Bond investors are losing their aversion to difficult-to-trade corporate debt that handed them some of the biggest losses in the credit crisis. The extra yield note buyers demand to own older, smaller junk bonds that trade infrequently has shrunk to an average 0.25 percentage point this month from more than 1 percentage point a year ago, according to Barclays Plc data. The evaporating premium for illiquid assets is showing the depths to which money managers are reaching to boost returns after a five-year rally that pushed relative yields on junk bonds to the least since August 2007.

• Consumer Confidence in U.S. Held Last Week at One-Month Low. Consumer confidence was little changed last week at a one-month low as Americans confronted having to pay holiday bills.The Bloomberg Consumer Comfort Index held at minus 31 for the period ended Jan. 19.

• Obama Recovery Fails to Resonate as Americans Left Behind. Obama will carry into next week’s State of the Union address weakening approval ratings on the economy. What’s happening, Republicans and some Democrats say, is that voters left behind in the recovery now blame him and not his predecessor, George W. Bush, and could punish Obama’s fellow Democrats in this year’s congressional elections. “At some point, the president is going to start owning the economy,” said Simon Rosenberg, president of NDN, a Democratic-leaning research group. “It could be we’re at that point.”

• Cold Gripping U.S. Preview of Worse Weather Coming Next Week. Frigid temperatures plunging south across the U.S. will hold on through the rest of the week and are a preview of an even sharper cold snap to come, driving energy demand and potentially crimping production. Temperatures across the eastern U.S. and parts of Ontario and Quebec will be at least 8 degrees below normal through Jan. 27, said Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland. Next week will be worse, he said.

• United(UAL) Sees Bookings Slowdown as Pacific Travel Drops. United Continental Holdings Inc. (UAL), the biggest U.S. airline on flights to Asia, said a benchmark revenue measure may show little growth this quarter amid a slowdown in bookings for trans-Pacific travel. Revenue from each seat flown a mile on main jet routes will rise in a range of 0.3 percent to 2.3 percent from a year earlier, the Chicago-based carrier said in a U.S. regulatory filing today. The percentage of available seats sold on flights to Asia over the next six weeks is down 4.9 percentage points.

Wall Street Journal:

• Wal-Mart(WMT) Aims To Match Amazon's Service Offerings. Wal-Mart Will Continue To Build Out New Distribution Centers for Online Delivery.

• Central Banks Should Lean In Against Bubbles, BIS Official Says. The world’s major central banks should be more proactive about restraining excessive asset price increases rather than just trying to clean up the mess after the bubbles pop, according to a new working paper from Claudio Borio, head of the Monetary and Economic Department at Bank for International Settlements. “For monetary policy, this means leaning more deliberately against booms and easing less aggressively and persistently during busts,” the author writes.

Fox News:

• ObamaCare death debt? States can seize assets to recoup Medicaid costs. Tom Gialanella, 56, was shocked to find out he qualified for Medicaid under ObamaCare. The Bothell, Wash., resident had been able to retire early years ago, owns his home outright in a pricey Seattle suburb and is living off his investments.

MarketWatch: 

• The question that scares the bulls and the Fed.

CNBC:

• Up to 1.1M payment cards compromised: Neiman Marcus.

• How US will rescue Olympians if terrorists strike Sochi Games.

• Cashin: Why 'everybody is on alert'. (video)

• It's Black Friday again! Retail woes as deep as the discounts. (graph) The pain retailers felt at the end of 2013 isn't showing signs of relief in the new year. Following the worst holiday season since 2008—one that was underscored by dramatically reduced prices and lower margins—the heavily promotional environment has persisted into January, according to Morgan Stanley analyst Kimberly Greenberger.

ZeroHedge:

• Is The China Bank Run Beginning? Farmers Co-Op Unable To Pay Depositors.

• 1.4 Million Jobless Officially Get The Emergency Claims Axe. (graph)

• Bob Janjuah: "Tick Tock, Not Yet Bear O’Clock". The only real "success" of these current policies is to create significant investment distortions and misallocations of capital, at the expense of the broad real economy, leading to excessive speculation and financial engineering.

• Herbalife(HLF) Plunges After Massachusetts Senator Calls For Investigation.

• Existing Home Sales Miss 4th Month In A Row; Lowest Since October 2012. (graph) 

• Guess The Mystery Chart. If you said the underlying data is comparable store sales for McDonalds(MCD) in the United States, which just dipped by 1.4% - the most since the Lehman crash - then you were 100% accurate.

• A Stunning 63% Of Florida December Home Purchases Were "All Cash". (graph)

Business Insider:

• 9 Apocalyptic Pictures From The Protests In Ukraine.

• It's A Bloodbath In The Global Currency Markets Today.

• How Caterpillar(CAT) Got Bulldozed In China.

NY Times:

• Watchdog Report Says N.S.A. Program Is Illegal and Should End. An independent federal privacy watchdog has concluded that the National Security Agency’s program to collect bulk phone call records has provided only “minimal” benefits in counterterrorism efforts, is illegal and should be shut down. The findings are laid out in a 238-page report, scheduled for release by Thursday and obtained by The New York Times, that represent the first major public statement by the Privacy and Civil Liberties Oversight Board, which Congress made an independent agency in 2007 and only recently became fully operational.

Investing.com:

• Dollar hits session low against yen after U.S. jobs report. USD/JPY hit 103.93, the lowest since January 20 and was last down 0.44% to 104.05.

Reuters:

• IMF warns more work is needed to tackle big bank risk. Big banks still pose a threat to the world financial system because there is a general assumption that governments will come to their rescue in case of trouble, an International Monetary Fund executive said on Thursday. "It is astonishing that officials in countries are still largely ill-equipped to deal with a Lehman Brothers-style bankruptcy, where assets and liabilities are scattered across multiple jurisdictions and entities," Jose Vinals, tasked with financial oversight at the IMF, said in a blog post.

• EMERGING MARKETS-Brazil stock index slips on China data.

• European equity investors brace for deflation threat. European equity investors, worried by the threat of deflation, are turning more cautious on companies with high debt levels and preferring luxury and technology stocks to food retailers. A dip in euro zone inflation in December has fuelled concerns that the region could be on course for an era of falling prices - traditionally bad news for equities shares as it crimps profits and curbs economic growth.

• Global steel output hits record. Global steel production reached a record high in 2013, with growth speeding up as Asia put a foot an the accelerator and offset a contraction in Europe and the United States.  

• US manufacturing growth slows in Jan-Markit. U.S. manufacturing growth slowed in January for the first time in three months, hobbled by new orders, though a recent trend of stronger growth appeared to be intact, an industry report showed on Thursday.

Politico:

• CNN lays off more than 40. 

Telegraph:

• Japan's recovery at risk of stalling on 'premature' tax rise fears Nobel economist Stiglitz. Nobel laureate warns that Japan's premier is pursuing a "risky strategy" by raising the consumption tax from 5pc to 8pc in April. 

• US to run out of money sooner than expected. Government will likely run out of borrowing authority needed to help pay its bills by late February.

PLA Daily:

• China Warned Some Foreign Planes That Enter Air Zone. China's air force has given voice warnings to some foreign military planes that entered China's air defense identification zone.

Bear Radar

Style Underperformer:

• Mid-Cap Value -1.50%

Sector Underperformers:

• 1) Alt Energy -2.86% 2) Steel -2.60% 3) Gaming -2.40%

Stocks Falling on Unusual Volume:

• BRSS, HPP, XLRN, ACAT, HRC, BCG, EBS, YPF, LUX, AEO, HLF, SLM, IPHI, PCP, JNS, NE, XLNX, GNC, TCBI, LPLA, SPLK, CPA, DISCK, QIHU, SFUN, LUV, JEC, ETFC, RDC, FCS, OCN, WLK, JCI, DO, TDW, KEY, CAMP, CREE, TCBI, BGG, JNS and CCMP

Stocks With Unusual Put Option Activity:

• 1) PSX 2) HYG 3) TXN 4) VWO 5) EWJ
  

Stocks With Most Negative News Mentions:

• 1) GM 2) HLF 3) V 4) MELI 5) KEY
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.92%

Sector Outperformers:

• 1) Gold & Silver +2.49% 2) Road & Rail +1.39% 3) HMOs +.12%
  

Stocks Rising on Unusual Volume:

• LOGI, NKTR, NFLX, FFIV, FIO, KERX and LOCK

Stocks With Unusual Call Option Activity:

• 1) RMD 2) AKAM 3) UA 4) RMBS 5) GDP

Stocks With Most Positive News Mentions:

• 1) NFLX 2) VLO 3) IBM 4) EBAY 5) GD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Japan’s Price Gauge Rises Most Since 1998: Economy. A gauge of Japan’s prices rose the most in 15 years as higher energy costs fueled broader inflation pressures, in a sign Prime Minister Shinzo Abe is making progress in stamping out deflation. Prices excluding energy and fresh food rose 0.3 percent in October on year, boosted by a weaker yen and electricity costs that have risen 22 percent since March 2011, when an earthquake led to the shutdown of Japan’s nuclear industry. The gain exceeded a 0.2 percent forecast in a Bloomberg News survey. 

• Zhou Risks Turmoil With Easing of China Rate Controls. China central bank Governor Zhou Xiaochuan faces an obstacle in his efforts to tame financial market volatility: his own plans to free up interest rates. The benchmark money-market rate remains above the average for January even after the People’s Bank of China this week injected more than $62 billion following the biggest jump since June. At the same time, Zhou’s planned removal of interest-rate controls may make volatility tougher to prevent, with Standard Chartered Plc economist Stephen Green saying that crisis is a “rule of financial liberalization.” 

• Investors Protest at ICBC on Concerns of Trust Default.  Investors in a troubled trust product distributed by Industrial & Commercial Bank of China Ltd. gathered outside the lender’s private-banking branch in Shanghai, demanding their money amid concerns of a default. Individuals were asked to sink at least 3 million yuan ($496,000) in the 3 billion-yuan Credit Equals Gold No. 1 product amid guarantees that it was “100 percent safe,” said Fang Ping, who was among 20 investors due to meet ICBC officials at the branch. The product, which comes due on Jan. 31, raised funds for a coal mining company that collapsed after its owner was arrested.

• Australians in Record Loan Spree as House Prices Soar: Mortgages. Australian homebuyers are borrowing at the fastest pace in four years amid record prices, straining debt levels already among the developed world’s highest as interest rates are set to climb. The value of new mortgage approvals jumped 25 percent in November from a year earlier, the fastest annual pace since September 2009, to a record A$26.9 billion ($23.8 billion), according to the statistics bureau. Ten out of 29 economists surveyed by Bloomberg News forecast the Reserve Bank of Australia will raise its benchmark rate by the fourth quarter and the median forecast is for a 25 basis-point increase in the first three months of next year.

• China’s Stocks Drop as Manufacturing Report Signals Contraction. China’s stocks fell for the first time in three days as money-market rates rose and a steeper-than-estimated decline in a manufacturing index heightened concern economic growth is decelerating. Jiangxi Copper Co. and PetroChina Co. paced declines for metal and oil companies. China Construction Bank Corp. dropped 1 percent as a gauge of financial companies slid the most among industry groups. Inner Mongolia Yili Industrial Group Co. surged 4.7 percent after reporting an 80 percent jump in 2013 net income. Hebei Huijin Electromechanical Co., one of eight companies trading today after initial public offerings, surged 45 percent in Shenzhen before being suspended. The Shanghai Composite Index (SHCOMP) slipped 0.5 percent to 2,041.27 at the 11:30 a.m. local-time break.

• Asian Stocks Drop After China’s Flash Manufacturing PMI. Asian stocks fell, with the regional benchmark index heading for its first drop in three days, after a gauge of China’s manufacturing unexpectedly contracted. China Construction Bank Corp. (939) dropped 2 percent in Hong Kong, pacing losses among Chinese lenders. Insurance Australia Group Ltd. dropped 4.2 percent after the company lowered its growth forecast for gross premiums. Nidec Corp. increased 3.7 percent in Tokyo after the precision-motor manufacturer boosted its full-year profit forecast and announced a share buyback. The MSCI Asia Pacific Index fell 0.6 percent to 139.16 as of 11:53 a.m. in Tokyo, with all 10 industry groups on the gauge dropping. 

• Rebar Trades Near 7-Month Low After China Manufacturing Weakens. Steel reinforcement-bar futures in Shanghai traded near a seven-month low as investors weighed a Chinese manufacturing index showing a slowdown against improvement in short-term money supply. Rebar for May delivery on the Shanghai Futures Exchange was at 3,426 yuan ($566) a metric ton at 11:00 a.m. local time. Futures touched 3,403 yuan yesterday, the lowest intra-day level for a most-active contract since June 14. 

• Rubber Reaches 5-Month Low as China Manufacturing Index Declines. Rubber extended losses for a fifth day to the lowest in five months after China’s manufacturing index (EC11FLAS) fell below analyst estimates, deepening concern that demand from the largest user may weaken. The contract for delivery in June on the Tokyo Commodity Exchange retreated as much as 1.3 percent to 245 yen a kilogram ($2,342 a metric ton), the lowest intraday level since Aug. 8. Futures traded at 245.9 yen at 11:25 a.m., dropping 10 percent this year.

• Davos Bankers Struggle to Convince Elite That Markets Are Safer. Top bank executives are struggling to convince the world’s business elite in Davos the financial system is safer, more than five years since it fell into crisis. In what has become a yearly sparring match between bankers and their critics, HSBC Holdings Plc (HSBA) Chairman Douglas Flint and Barclays Plc (BARC) Chief Executive Officer Antony Jenkins, two of Britain’s top bankers, faced criticism yesterday from Paul Singer, the billionaire hedge-fund manager who runs New York-based Elliott Management Corp., and Stanford University professor Anat Admati at a debate at the World Economic Forum. “It can’t be that safer comes from relatively modest improvements in certain metrics plus private and policy maker half-steps,” said Singer, whose New York-based hedge fund manages $24 billion. “Because of the inability of investors to understand the financial condition of the major financial institutions, they aren’t able to stand on their own in the next financial crisis.”  

• Hard-to-Sell Junk Debt Lures Oaktree to JPMorgan: Credit Markets. Bond investors are losing their aversion to difficult-to-trade corporate debt that handed them some of the biggest losses in the credit crisis. The extra yield not buyers demand to own older, smaller junk bonds that trade infrequently has shrunk to an average .25 percentage point this month from more than 1 percentage point a year ago, according to Barclays Plc data. The evaporating premium for illiquid assets is showing the depths to which money managers are reaching to boost returns after a five-year rally that pushed relative yields on junk bonds to the least since August 2007.

• Berkshire(BRK/A) Said to Face Start of U.S. Systemic-Risk Scrutiny. Regulators are starting to scrutinize Warren Buffett’s Berkshire Hathaway Inc. to determine whether it is important enough to the financial system to require Federal Reserve supervision, according to two people with knowledge of the matter.

Wall Street Journal: 

• West Explores Plan B for Forces in Afghanistan. Kabul Diplomats Conclude Karzai Won't Sign Security Deal With U.S.

• Gregory Hicks: Benghazi and the Smearing of Chris Stevens. Shifting blame to our dead ambassador is wrong on the facts. I know—I was there. Last week the Senate Select Committee on Intelligence issued its report on the Sept. 11, 2012, terrorist attacks in Benghazi, Libya. The report concluded that the attack, which resulted in the murder of four Americans, was "preventable." Some have been suggesting that the blame for this tragedy lies at least partly with Ambassador Chris Stevens, who was killed in the attack. This is untrue: The blame lies entirely with Washington.

Fox News:

• Administration fears part of health care system so flawed it could bankrupt insurance companies. While the administration publicly expresses full confidence in its health care law, privately it fears one part of the system is so flawed it could bankrupt insurance companies and cripple ObamaCare itself.

• Ex-EPA official told lawmakers of project to 'modify the DNA' of capitalism. A former high-ranking EPA official who recently was sentenced to prison for fraud told lawmakers last month that, before he left the agency, he was working on a "project" examining ways to "modify the DNA of the capitalist system."

MarketWatch.com:

• Japan’s Abe talks Abenomics, but China comments spark most interest. Japanese Prime Minister Shinzo Abe vowed once again to be a “drillbit” who will break through the “solid rock of vested interests” as he implements the so-called third arrow of “Abenomics” — his effort to rid Japan of chronic deflation.

CNBC: 

• EBay(EBAY) shares soar 7 percent as Icahn takes stake. (video) Activist investor Carl Icahn wants eBay to spin off its PayPal business, but the company doesn't seem to like the idea. 

• Red flags for private equity investors.

Zero Hedge: 

• Netflix(NFLX) Soars To All Time High After Hours On Small Beat; Unfazed By Net Neutrality. 

• Citi(C) Warns "Everything Is Expensive - Pretty Much". (graph)

• Obamacare Strikes Again: Target Drops Part-Timers From Healthcare Plan (And Fires Others Just In Case).

• "Endless Growth" Is the Plan & There Is No Plan B. (graph)

• Axel Weber Warns "Euro Will Come Down To Earth.. Markets Are Disregarding Risks".

• China PMI Signals First Contraction In 6 Months; Drops Most Since May. (graph)

• China's First Default Is Coming: Here's What To Expect.

Business Insider:

• BMW: Here's Why Our New Electric Car Is Better Than Tesla's(TSLA). 

• 10 Big Problems With Wind And Solar Energy.

Reuters: 

• Western Digital(WDC) sees weak third quarter on cautious spending. Western Digital Corp, the world's No. 1 hard-disk drive maker, forecast a tepid third quarter as it expects cautious spending and a decline in the PC market to hit sales. Shares of the company fell 2 percent in extended trade after closing at $88.08 on the Nasdaq on Wednesday.

• Japan business mood up, sales tax hike weighs on outlook -Reuters Tankan. Japanese business sentiment improved for a third straight month in January but it is expected to slide after a sales tax hike in April, a Reuters poll showed, reflecting worries about the tax's impact on private consumption. 

• VW's labour chief says U.S. operations a 'disaster'. Volkswagen AG's top labour representative has dubbed the carmaker's U.S. operations a "disaster" and called for more models and swift decisions to revive the German group's declining fortunes in the world's second-largest auto market. 

• F5(FFIV) forecasts strong revenue after first-quarter beat. Network gear maker F5 Networks Inc forecast current-quarter revenue above Wall Street estimates, helped by strong sales of its data traffic management products, pushing its shares up 11 percent in extended trading.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times:

• Brazil considers the cost of welfare as growth slows. In a television campaign by Brazil’s ruling Workers Party, the country’s former president Luiz Inácio Lula da Silva joins his successor, President Dilma Rousseff, to warn voters that the opposition is planning the “unthinkable”.

Telegraph:

• Davos: despite the optimism, there are serious questions about where the recovery is leading. Almost everywhere, renewed growth remains highly dependent on artificial stimulus.

People's Daily:

• China Plans Industry Overcapacity Warning System. China plans to set up an industrial data platform to warn about possible overcapacity, citing Chen Bin, director-general of the National Development and Reform Commission's industry coordination department.

Time-Weekly:

• China Credit, ICBC, Local Gov't May Bail Out Trust. China Credit Trust and ICBC may each take responsibility for 25% of payments for a troubled 3b yuan trust product known as Credit Equals Gold No. 1, citing a person as saying.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 142.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 111.50 unch.

• FTSE-100 futures -.18%.

• S&P 500 futures -.35%.

• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LUV)/.29

• (KEY)/.25

• (BGG)/.09

• (LMT)/2.11

• (ABC)/.78

• (FITB)/.42

• (BAX)/1.25

• (JCI)/.69

• (MCD)/1.39

• (UNP)/2.49

• (PCP)/3.03

• (MXIM)/.40

• (ALTR)/.31

• (KLAC)/.80

• (MSFT)/.68

• (ISRG)/4.02

• (DFS)/1.18

• (JNPR)/.36

• (SBUX)/.69

• (IGT)/.30

• (JBHT)/.79

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for December is estimated to rise to .9 versus .6 in November.

• Initial Jobless Claims are estimated to rise to 330K versus 326K the prior week.

• Continuing Claims are estimated to fall to 2925K versus 3030K prior.

8:58 am EST

• The Preliminary Market US PMI for January is estimated to rise to 55.0 versus 54.4 in December.

9:00 am EST

• The House Price Index for November is estimated to rise +.4% versus a +.5% gain in October.

10:00 am EST

• Existing Home Sales for December are estimated to rise to 4.92M versus 4.9M in November.

• The Leading Index for December is estimated to rise +.2% versus a +.8% gain in November.

11:00 am EST

• The Kansas City Fed Manf. Activity for January is estimated to rise to 2 versus -3 in December.

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +830,000 barrels versus a -7,658,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,035,000 barrels versus a +6,183,000 barrel gain the prior week. Distillate inventories are estimated to fall by -561,000 barrels versus a -1,023,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.39% versus a -2.3% decline the prior week.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI, 10Y TIPS auction, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Slightly Higher into Afternoon on Diminished Global Growth Fears, Less Eurozone Debt Angst, Short-Covering, Homebuilding/Defense Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 13.0 +1.01%

• Euro/Yen Carry Return Index 147.56 +.02%

• Emerging Markets Currency Volatility(VXY) 8.65 -1.48%

• S&P 500 Implied Correlation 52.75 +5.4%

• ISE Sentiment Index 153.0 +53.0%

• Total Put/Call .82 +9.33%

• NYSE Arms 1.24 -12.50% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.75 +.62%

• European Financial Sector CDS Index 88.39 +.78%

• Western Europe Sovereign Debt CDS Index 48.0 -4.0%

• Emerging Market CDS Index 301.86 +3.64%

• 2-Year Swap Spread 14.0 +.5 basis point

• TED Spread 20.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.0 unch.

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 246.0 +1.0 basis point

• China Import Iron Ore Spot $123.50/Metric Tonne +.24%

• Citi US Economic Surprise Index 63.40 -.7 point

• Citi Emerging Markets Economic Surprise Index 4.8 +.3 point

• 10-Year TIPS Spread 2.25 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan

• DAX Futures: Indicating +21 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long