Stocks Rising into Final Hour on Weak Russia Sanctions, Less Emerging Markets/European Debt Angst, Yen Weakness, Gaming/HMO Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.69 -11.95%

• Euro/Yen Carry Return Index 147.73 +.42%

• Emerging Markets Currency Volatility(VXY) 8.96 -1.32%

• S&P 500 Implied Correlation 55.07 -6.69%

• ISE Sentiment Index 90.0 +12.50%

• Total Put/Call .83 +7.79%

• NYSE Arms .86 -44.12% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.09 -3.79%

• European Financial Sector CDS Index 90.20 -4.26%

• Western Europe Sovereign Debt CDS Index 49.56 -.90%
• Asia Pacific Sovereign Debt CDS Index 98.69 -3.08%

• Emerging Market CDS Index 321.72 -2.09%

• China Blended Corporate Spread Index 379.16 unch.
• 2-Year Swap Spread 13.75 -.5 basis point

• TED Spread 18.75 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -4.0 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .05% +1.0 basis point

• Yield Curve 233.0 +3.0 basis points

• China Import Iron Ore Spot $109.60/Metric Tonne -.45%

• Citi US Economic Surprise Index -35.80 -3.1 points

• Citi Emerging Markets Economic Surprise Index -8.70 -.7 point

• 10-Year TIPS Spread 2.19 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +203 open in Japan

• DAX Futures: Indicating +11 open in Germany

Portfolio: 

• Slightly Lower: On losses in my index hedges and emerging markets shorts

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:  

• Obama Says Putin Must Pull Back on Crimea Annexation. President Barack Obama today imposed sanctions on seven top Russian government officials and four others from Ukraine and warned Russia will face more penalties if it doesn’t pull back from Crimea. “Continued Russian military intervention in Ukraine will only deepen Russia’s diplomatic isolation and exact a greater toll on the Russian economy,” Obama said at the White House. The U.S. can “calibrate our response” based on whether Russia chooses “to escalate or to de-escalate the situation.”
• Ukraine Bonds Decline as Investors Weigh Aid Outlook After Vote. Ukraine’s Eurobonds maturing in June fell for the first time in three days as investors sought clarity on the progress of International Monetary Fund aid after a referendum moved the Crimea region closer to secession. The government’s dollar notes declined to 91.86 cents on the dollar from 92.16 on March 14, sending the yield up 2.24 percentage points to 50.5 percent by 3:30 p.m. in Kiev. The hryvnia slid 0.5 percent to 9.75 per dollar, set for the weakest close this month, according to data compiled by Bloomberg. 
• China Developer With $567 Million Debt Said to Collapse. A closely held Chinese real estate developer with 3.5 billion yuan ($566.6 million) of debt has collapsed and its largest shareholder was detained, said government officials familiar with the matter. Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay creditors that include more than 15 banks, with China Construction Bank Corp. (939) holding more than 1 billion yuan of its debt, according to the officials, who asked not to be named because they weren’t authorized to discuss the matter. The company’s majority shareholder and his son, its legal representative, have been detained and face charges of illegal fundraising, the officials said. 
• Europe Stocks Gain as RWE, Vodafone Rise on M&A Activity. European stocks advanced, following their biggest weekly drop since January, as companies from RWE AG to Vodafone (VOD) Group Plc rose amid renewed merger-and-acquisition activity. RWE increased 1.3 percent after L1 Energy agreed to spend 5.1 billion euros ($7.1 billion) on the utility’s Dea division. Vodafone climbed 1.7 percent as the telecommunications company agreed to buy Spanish cable operator Grupo Corporativo Ono SA. Allianz SE rose the most in two months after the insurer agreed to buy assets from Italy’s Unipol Gruppo Finanziario SpA. The Stoxx Europe 600 Index added 1.1 percent to 325.83 at the close of trading. 
• WTI, Brent Oils Slip to Five-Week Lows. West Texas Intermediate for April delivery dropped $1.32 cents, or 1.3 percent, to $97.57 a barrel at 12:46 p.m. on the New York Mercantile Exchange. Futures touched $97.37, the lowest level since Feb. 7. The volume of all futures traded was 13 percent above the 100-day average.
• Risks Mount for Retirees in Limited Energy Partnerships. MLPs are more popular than ever. They’re tax-exempt, publicly traded companies that own pipelines, storage tanks and other cash-generating energy infrastructure and give practically all their income to investors. In 2013, there were a record 21 initial public offerings valued at $8.8 billion and an all-time high of more than $11.9 billion flowed into funds investing in MLPs, according to Morningstar Inc. Today, critics are raising warnings about growing dangers even while retirees like Johns are piling in. Almost unanimously bullish commentaries, such as the reports Johns found online, have attracted droves of individuals to a trade even some professionals have said they don’t understand.

Wall Street Journal: 

• Crisis in Ukraine. Streaming Coverage:
• Old Bull Shows Its Age. Although it doesn’t look like it on the surface, investors and analysts think some basic things are changing. Many see 2013 as an exceptional year, not a harbinger of things to come. Even if stocks finish 2014 with gains, a growing number expect indexes to endure a pullback of more than 10% at some point.

Fox News:

• Is it enough? Obama imposes sanctions on Russian officials over Crimea. Almost immediately, some criticized Obama's response as not being enough to change Putin's course. With Crimea voting Sunday to break off from Ukraine, Russia is poised to potentially annex the disputed peninsula -- and freezing U.S. assets of Putin cronies and barring them from traveling to the U.S. may have limited effect. Four Ukrainians were also sanctioned. "It's unlikely that these will really get President Putin's attention," said Michael Singh, with The Washington Institute for Near East Policy. "Maybe the time for this sort of first step was several weeks ago."

MarketWatch:

• Weak sanctions don’t put any pressure on Russia. Opinion: U.S., EU send a political message, not an economic one.

CNBC:

• Cashin: Could this be China's next problem? (video)
• Amazon(AMZN) sees backlash among Prime members.
• New York could become next state to put brakes on Tesla(TSLA). (video)

ZeroHedge:

• Industrial Production Beats, Recovers February's Big Miss On More Auto Inventory Stacking. (graph)
• Homebuilder Confidence Misses Expectations Again As Outlook Plunges To 10-Month Lows. (graph)
• Russian Stocks, Ruble Respond To Obama's Sanctions By Extending Gains. (graph)
• These Six Euroarea Countries Are In Outright Deflation As Eurozone Inflation Slides To Four Year Lows. (graph)
• Russian Sanctioned By White House Responds On Twitter To "Comrade Obama".

ValueWalk:

• S&P 500 Q1 Earnings Growth Revised Down By 85% Of Companies.

Business Insider:

• GM(GM) Announces Three New, Separate Recalls, And A $300 Million Charge. 
• UN: North Korea Is As Bad As The Nazis; 'No Excuse' For Refusing To Act.

Washington Post:

• Democrats are making income inequality worse.

@EM_Equity:

• International Banks' Exposure to Russian Debt. (graph)

Reuters: 

• Economists raise Brazil 2014 inflation view to 6.11 pct.

MNI:

• US Lumber Prices Await Signal from Housing Mkt. U.S. lumber prices showed little movement in early 2014 at levels below last year's highs as the construction industry stalled in frigid conditions, and dealers wait for any signs of a sustained increase in the annual rate of housing starts, lumber industry participants told MNI.

Telegraph:

• Crimea referendum: EU loads the gun for 'additional and far-reaching' measures against Russia.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.11%

Sector Underperformers:

• 1) Gold & Silver -2.62% 2) REITs -.05% 3) Energy +.27%

Stocks Falling on Unusual Volume:

• LMIA, VRSN, FSYS, MATX, SBGI, NATL, SWC, ICPT, LIN, ADNC, DEO, LGF, GNC, HYGS, TAHO, CNK, NXST, CMRX, HLF, WUBA, YNDX, BOFI, SSP and NOV

Stocks With Unusual Put Option Activity:

• 1) FAST 2) TXN 3) SLB 4) BK 5) EWY
  

Stocks With Most Negative News Mentions:

• 1) GM 2) FCEL 3) VRSN 4) HLF 5) GNC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.62%

Sector Outperformers:

• 1) Computer Hardware +1.22% 2) I-Banks +1.19% 3) HMOs +1.08%
  

Stocks Rising on Unusual Volume:

• JASO, STAA, MOBI, KNDI, LPL, HTZ, SINA, IRBT, SC, ISIS, UCTT, CODE, EGHT and PTEN

Stocks With Unusual Call Option Activity:

• 1) ASH 2) RPTP 3) MEET 4) NCR 5) SWC

Stocks With Most Positive News Mentions:

• 1) AGU 2) T 3) REGN 4) GOOG 5) TWTR
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg:

• West Warns Russia Not to Annex Crimea After Referendum. The U.S. and the European Union warned Russia not to annex Crimea after a referendum in Ukraine’s southern region, setting the stage for sanctions on Russia in the worst diplomatic standoff since the Cold War. A total of 95.5 percent of voters in Black Sea peninsula backed leaving Ukraine to join Russia in the referendum, preliminary results show. The Ukrainian government, the EU and the U.S. consider the vote illegal, while Russia said it “fully met international norms.” Turnout was 82.7 percent, according the election commission. 
• Russia Facing Escalating Sanctions as EU Foreign Ministers Meet. European and U.S. officials will probably hold their most punitive sanctions on Russia in reserve as they wait for President Vladimir Putin to show his hand on whether he plans to push his forces deeper into Ukraine. EU foreign ministers due to meet in Brussels tomorrow are set to impose travel bans and asset freezes on some Russian officials as Putin’s government prepares to annex Crimea after today’s referendum on secession from Ukraine. The “additional and far-reaching consequences” that were floated by the bloc on March 6 will be held back until EU leaders meet later this week in a bid to corral Putin’s ambitions in eastern Ukraine.
• Riots Fuel Fear of Russian Provocation in Ukraine’s Second City. Police patroled Ukraine’s second-biggest city, near the Russian border, after riots last night left two people dead and an officer critically wounded. An attack late yesterday on a Ukrainian cultural organization’s office was a “well planned provocation by pro-Russian activists,” Kharkiv’s regional governor, Ihor Baluta, said today in statement on the administration’s website. A fire still smoldered this morning by the office of Prosvita, a group set up in 1868 to protect and promote Ukraine’s language, as forensics officers removed evidence. The blaze burned a smaller building in a courtyard and the offices were ransacked.
• Micex Rout Seen Worsening as ETF Shorts Grow: Russia Overnight. Russian stock traders are bracing for more losses after the benchmark index entered a bear market last week as concern mounted the country’s push to annex Ukraine’s Crimea region will lead to international sanctions. Wagers that the Market Vectors Russia (RSX:US) exchange-traded fund will decline in New York trading reached a 22-month high after the Micex Index (INDEXCF) fell 7.6 percent in Moscow last week, extending its rout this month to 14 percent. Open interest on put options giving investors the right to sell the ETF reached about 283,000 on March 13, almost double the four-week average and up from a 2014 low of 54,000 in January, data compiled by Bloomberg show. 
• Yuan Volatility Climbs to 18-Month High as Trading Band Doubles. A gauge of expected price swings in China’s yuan climbed to an 18-month high and the offshore exchange rate weakened as the central bank doubled the currency’s trading limits versus the dollar. One-month implied volatility, which is used to price options, rose 29 basis points, or 0.29 percentage point, to 2.72 percent as of 8:22 a.m. in Hong Kong, according to data compiled by Bloomberg. It touched 2.73 percent, the highest since September 2012. The offshore yuan weakened 0.11 percent to 6.1623 per dollar and reached the lowest intra-day level since May. The People’s Bank of China will announce the daily reference rate at around 9:15 a.m, while the yuan in Shanghai will start trading at 9:30 a.m.
• Twin-Deficit Risk Looms for MOF as Yield Jump Seen: Japan Credit. Japan's Ministry of Finance is flagging the risk of twin current-account and fiscal deficits for the first time in at least three decades, just as faster inflation threatens to drive up bond yields. The shortfall in the broadest measure of trade widened almost fivefold in January from a year earlier and the ministry said in a March 10 paper that export deficits could eventually overwhelm income from overseas investments. While Bank of Japan stimulus has weakened the yen by 6.9 percent in the past year against its peers, it hasn't helped the nation's overseas sales enough to offset swelling import costs. "If a current-account shortfall becomes the trend, Japan's fiscal deficits will draw attention and threaten to spur a jump in yields amid capital flight," said Hidenori Suezawa, an SMBC Nikko Securities Inc. analyst who is a member of a MOF advisory panel on government finances. "Such a risk will increase from 2015 onwards."
• ECB Data Demands Called Excessive by Banks Facing Asset Review. Euro-area banks urged the European Central Bank to reduce the information they have to provide as part of a review of their balance sheets because they say the demands are excessive. European Banking Federation Chief Executive Officer Guido Ravoet wrote to the ECB yesterday, asking it to consider “substantially simplifying” the template for part of the Asset Quality Review. In the letter, which was obtained by Bloomberg News, the EBF also said that some of the data sought is not useful. A spokeswoman for the ECB couldn’t immediately confirm that the letter had been received. 
• Nigerian Troops Battle Islamist Insurgents in Northeast City. Nigerian troops repelled an attack by Boko Haram insurgents attempting to free fellow Islamists at an army detention center in the northeastern city of Maiduguri. Soldiers fought with rebels remaining after an attack on the Giwa Barracks in Maiduguri yesterday, killing and arresting some of them, Major-General Chris Olukolade said today in an e-mailed statement. One soldier died, while a “massive armory” used by Boko Haram around the Lake Chad region was captured, Olukolade said. 
• Asian Stocks Slip on Crimea Vote as Gold to Silver Climb. Asian stocks fell, extending the regional index’s steepest weekly slump since 2012, as western nations disputed Crimea’s vote to rejoin Russia and China eased control over the yuan. Gold drove an advance in precious metals while the yen maintained gains against the dollar. The MSCI Asia Pacific Index lost 0.2 percent by 9:45 a.m. in Tokyo, extending last week’s worst weekly decline since May 2012. Japan’s Topix Index dropped 0.4 percent.
• Copper Trades Near 2010 Low as China Widens Yuan Trading Band. Copper in London traded near a 44-month low as China doubled the yuan’s trading limits versus the dollar. The metal for delivery in three months was little changed at $6,466.75 a metric ton at 10:39 a.m. in Hong Kong after rising as much as 0.3 percent and falling as much as 0.4 percent. The contract closed at $6,415 on March 13, the lowest since July 2010.
• Speculators See Gold Gaining With Wheat on Ukraine: Commodities. After shunning gold and wheat for most of last year, hedge fund managers are piling back in as the escalating crisis in Ukraine spurs a rebound in the prices of both commodities. Speculators have the biggest bet on a gold rally since December 2012 and turned bullish on wheat for the first time since November, government data show. Bullion last week reached a six-month high and wheat entered a bull market as Crimea prepared for a referendum. A majority in the disputed vote March 16 chose to leave Ukraine and join Russia, exit polls showed.

Wall Street Journal:

• Crisis in Ukraine. Streaming Coverage:
• Malaysia Airlines Flight 370. Streaming Coverage:
• Adjustable-Rate Mortgages Make a Comeback. Mortgages Whose Rates Can Climb Resurge in Popularity.
• Fresh Corporate Debt Sparks a Feeding Frenzy. Buyers of Recent Deals Able to Flip Bonds for Quick Profits.
• The Hidden Rot in the Jobs Numbers. Hours worked are declining, resulting in the equivalent of a net loss of 100,000 jobs since September.

Fox News:

• Malaysia Airlines flight search: Authorities probe whether pilot's 'obsessive' political views played role in disappearance. Focus on the investigation into the fate of the missing Malaysia Airlines jet remained on the pilots Sunday, as speculation arose over whether one of the men flying the plane could have hijacked it in an anti-government protest.

CNBC:

• E-commerce giant Alibaba starts plan for US IPO.

Zero Hedge:

• China's Credit Nightmare Explained In One Chart. (graph)
• US Drone "Intercepted" Over Crimea By Russian 'Self-Defense' Forces.
• It Has Been A Horrible Week For The Secretariat Of State.
• 5 Things To Ponder: Macro Investing Thoughts.
• US Issues Travel Alert For Russia, Warns Of "Potential Military Clashes (Either Accidental Or Intentional)".
• The Tanks Are Coming While Russia, US "Remain At Odds" Over Ukraine.
• Distorted Markets & Disillusionment One Asset At A Time.
• 19 Signs That The U.S. Consumer Is Tapped Out.
• Blackstone's(BX) Home Buying Binge Drops 70% From Its Peak Last Year.
• China Widens Dollar Trading Band From 1% To 2%, Yuan Volatility Set To Spike.
• Ukraine Says It Has Repelled A Russian Army "Invasion".
• The Fed is Fighting the Wrong Battle Again… And Creating Yet Another Crisis.
• If You Are Considering Buying A House, Read This First.
• Every Chart You Should Be Tracking But Were Too Afraid To Find.
• Maduro Warns Venezuelan Protesters "We Are Coming For You"; Calls John Kerry A "Murderer".
• "Obama Did Not Attend The Meeting", Or In A Moment Of Crisis The President Stands Resolute.
• The Failure of Keynesianism.
• BofA Warns: VIX Spells Trouble. (graph)
• How To Create A Manufacturing Renaissance - Change The Definition. (graph)
• Bulls, Bears, And Bias (In 5 Simple Charts).

 ValueWalk:

• Russell 2000 S&P 500 Valuation Differential At Record Level.

 Business Insider: 

• Crimea's Deputy Prime Minister Made A Troubling Prediction About What Happens Next.
• 3 Reasons Why Bitcoin Isn't The New Gold.
• 6 Russian Combat Planes Armed With Live Missiles Deployed To Belarus.
• We Can't Rule Out The Worst-Case Scenario For Russian Stocks.
• Malaysian PM: Diversion And Communications Shutdown 'Consistent With Deliberate Action By Someone On The Plane'.
• GRANTHAM: Stocks Are 65% Overpriced, But They're Not A Bubble.
• MAP: Here's Why Ukraine Fears A Russian Invasion.
• What Could Have Happened To Flight MH370? 
• This Russian Exclave Has Poland Worried About What Putin Will Do Next.
• 11 Ugly Charts That Confirm China's Dramatic Slowdown.
• US Official: Iran Is Pursuing Banned Items For Nuclear And Missile Work. 

Wall Street All-Stars:

• Indicator Update: Yellen Takes the Stage.

Yahoo Finance:

• This chart says it's about to get worse for China: Yamada.

AFP:

• State TV says Russia could turn US to 'radioactive ash'. A leading anchor on Russian state television on Sunday described Russia as the only country capable of turning the United States into "radioactive ash", in an incendiary comment at the height of tensions over the Crimea referendum. "Russia is the only country in the world realistically capable of turning the United States into radioactive ash," anchor Dmitry Kiselyov said on his weekly news show on state-controlled Rossiya 1 television.

Telegraph:

• China’s debt defaults to hit industrial metals as trading unravels. All the warning signals are now pointing to a continuing slide in prices as the full extent of China’s economic problems emerges and bearish sentiment grips the large commodity trading houses.

 People's Daily: 

• China to Control Population of 'Super Large' Cities. China will strictly control population of large cities with population of more than 5m, according to the text of China's 2014-202 urbanization plan.

Weekend Recommendations 

Barron's:

• Bullish commentary on (AEM), (CQB), (PX), (FEIC), (RHT) and (EMC).
• Bearish commentary on (MATX) and (MW).

Night Trading

• Asian indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 135.50 +1.0 basis point.
• Asia Pacific Sovereign CDS Index 101.75 -.5 basis point.
• FTSE-100 futures -.04%.
• S&P 500 futures +.03%.
• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases 
8:30 am EST

• Empire Manufacturing for March is estimated to rise to 7.0 versus 4.48 in February.

 9:00 am EST

•  Net Long-Term TIC Flows for January are estimated at $30.0B versus -$45.9B in December.

9:15 am EST

• Industrial Production for February is estimated to rise +.2% versus a -.3% decline in January.
• Capacity Utilization for February is estimated to rise to 78.6% versus 78.5% in January.
• Manufacturing Production for February is estimated to rise +.3% versus a -.8% decline in January.
  

10:00 am EST

• The NAHB Housing Market Index for March is estimated to rise to 50 versus 46 in February.
  

Upcoming Splits

• (WLK) 2-for-1

Other Potential Market Movers

• The Eurozone CPI, China property price report and the BofA Smid-Cap Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial 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 week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (audio). 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on Russia/Ukraine tensions, rising global growth fears, increasing emerging markets/European debt angst, technical selling, a stronger yen and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.