Today's Headlines

Bloomberg:

• Russia May Be Cut to Junk as S&P Says It’s Considering Downgrade. Russia may lose its investment grade for the first time in a decade after Standard & Poor’s signaled it’s considering cutting the country’s rating. “We are reviewing our assessment of Russia’s monetary flexibility and the impact of the weakening economy on its financial system,” S&P said in a statement. The move implies at least a one-in-two likelihood of a “negative rating action” within 90 days, the statement said. S&P said it expects to conclude its review by mid-January. 

• Ukraine Lawmakers Annul Non-Aligned Status in NATO Move. Ukraine’s parliament backed a proposal to cancel the country’s non-aligned status, a decision that Russia denounced as a dangerous step toward seeking membership of NATO. The legislation put forward by President Petro Poroshenko was supported today by 303 of 357 lawmakers in the chamber, hours after the announcement of fresh talks to try to end the conflict with pro-Russian rebels in eastern Ukraine. The bill will help Ukraine as it seeks to achieve “all criteria of membership” for the North Atlantic Treaty Organization, Foreign Minister Pavlo Klimkin told parliament.

• Russia Moves to Stave Off Panic Among Depositors After Rescuing Bank. After arresting a decline in the ruble, Russia is now trying to avert a banking crisis. Lawmakers rushed legislation through the lower house of parliament today allowing the Deposit Insurance Agency to buy stakes in banks before they face bankruptcy proceedings to keep the system stable. While the ruble strengthened for a third day as the government told state-run exporters to sell foreign currency, it’s still down 30 percent in three months.

• Greece Moves Closer to Polls as Samaras Loses Vote. Prime Minister Antonis Samaras failed to win enough backing today for his nominee for president, bringing Greece a step closer to early elections. In the second of three attempts, 168 lawmakers in Greece’s 300-seat chamber voted for Samaras’s nominee, Stavros Dimas, short of the required 200 ballots. Although up from 160 in the first round on Dec. 17, it showed Samaras’s calls for consensus during the weekend didn’t lure enough opposition lawmakers to add to his coalition’s 155 votes. 

• European Stocks Rise to Post Biggest Six-Day Jump in Three Years. European stocks climbed for a sixth day amid better-than-expected U.S. economic-growth data. The Stoxx Europe 600 Index rose 0.6 percent to 344.06 at the close of trading.

• Iron Ore Extends Decline to Lowest Since 2009 as Surplus Builds. Iron ore extended losses to the lowest level in more than five years amid concern that slowing steel demand in China may hurt consumption in the world’s biggest user just as rising supplies deepen a glut. Ore with 62 percent content delivered to Qingdao, China, dropped 1.6 percent to $66.84 a dry metric ton, according to data compiled by Metal Bulletin Ltd. That’s the lowest since June 2, 2009. 

• Oil Futures Advance After U.S. Economic Growth Surges.

CNBC:

• FDA moves to ease ban on gay men's blood donation.

ZeroHedge:

• Here Is The Reason For The "Surge" In Q3 GDP. (graph)

• Natural Gas Suggests $33 Oil. (graph)

• "Off The Grid" Economic Indicators – Q4 2014. (graph)

• Exposing The Deception: How The US Economy "Grew" By $140 Billion As Americans Became Poorer. (graph)

• The Greater Abomination: Washington's Lies About TARP's "Success" Are Worse Than The Original Bailouts, Part I.

• T. Boone Pickens Rages On CNBC: "I Am The Expert, Not You", Says Oil Down Due To "Weak Demand". (video)

• The Housing Recovery Remains Cancelled Due To 6 Months Of Downward Revisions. (graph)

• UMich Consumer Confidence Near 8-Year High, Inflation Expectations Hit 4-Year Lows. (graph)

• Fed Tightening On Deck After Q3 GDP Soars To 5% On Revisions, Highest Since 2003. (graph)

• Durables Goods Data Ugly Across The Board, Worst Since Polar Vortex. (graph)

Business Insider:

• Sony Confirms It Will Let Theaters Show 'The Interview' On Christmas Day After All.

• Florida Is Now Bigger Than New York.

• Traders Are Getting That 1987-Feeling Again.

• ROSENBERG: There's A 'Black Swan' Stewing In China. David Rosenberg, Chief Economist & Strategist at Gluskin Sheff, has identified a big risk looming out there in the global economy: The Chinese housing market.

• David Tepper Is Worried We're About To Relive 1999. 

• Women And Girls Forced Into ISIS Sex Slavery Attempt Suicide.

Telegraph: 

• Russia faces oil export catastrophe, snared in Opec price trap. Russia's crude exports to drop to $95bn over next 12 months as Saudi Arabia and Opec take aim with oil price weapon.

RIA Novosti:

• Medvedev Says Russia Faces Risk of Deep Recession. Russia needs to move to hands-on management like in 2008 crisis, citing Prime Minister Dmitry Medvedev.

Interfax:

• Russia Calls Ukraine Vote on Non-Aligned Status Unfriendly. Decision to drop non-aligned status is unfriendly, political step that will only add tension in ties w/Russia, citing Russia's representative to OSCE Andrey Kelin.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.32%

Sector Underperformers:

• 1) Biotech -5.30% 2) Drugs -2.62% 3) Medical Equipment -1.03%

Stocks Falling on Unusual Volume:

• WNRL, CLDN, RDUS, GDOT, BIB, ACHN, GILD, CELG, ASPS, VRTX, IBB, AGIO, HQL, HQH, REGN, ISIS, SERV, NSM, MGNX, KITE, BTI, OVAS, ENTA, ZU, ALXN, BLUE, ASPX, PCYC and OCN

Stocks With Unusual Put Option Activity:

• 1) CWB 2) EA 3) XLK 4) CELG 5) NVDA

Stocks With Most Negative News Mentions:

• 1) HAL 2) ACHN 3) GMCR 4) CELG 5) AET
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +.49%

Sector Outperformers:

• 1) Gold & Silver +2.89% 2) Gaming +2.19% 3) I-Banks +1.28%
  

Stocks Rising on Unusual Volume:

• VNDA, DDS, SWIR and CHK

Stocks With Unusual Call Option Activity:

• 1) APOL 2) ESRX 3) OCN 4) GNW 5) MET
  

Stocks With Most Positive News Mentions:

• 1) KMB 2) OII 3) CRY 4) LMT 5) WAG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Russia Crisis Makes East European Companies Fret Over 1998 Redux. Shedding communism and embracing the European Union was supposed to shield the former eastern bloc from Russia’s economic pains. A quarter of a century later, there are companies that remain vulnerable. The ruble’s decline is reviving memories of the 1998 default. Moscow’s former satellites have tied their economic fortunes to western Europe and the proportion of exports to Russia is less than 5 percent, yet the financial turmoil is aggravating the pain caused by the trade confrontation between the 28-member EU bloc and Russia.

• China Stock Fever Fails to Infect Foreigners Amid 26% Share Jump. Since the day China loosened access to its stocks in November, the Shanghai Composite Index (SHCOMP) has soared 26 percent as the rest of the world’s markets stood still. Rather than attract overseas buyers, it’s repelling them. While individuals in China are opening the most equity trading accounts since 2007, professionals such as Tai Hui, the chief Asia market strategist at JPMorgan Asset Management, warn the advance has gone too far, too fast.

• RBA Frustrated as Weaker Aussie Goal Thwarted: Australia Credit. The Australian dollar is set for its first annual gain versus its major peers in three years as it outperforms the euro and the yen, frustrating central bank efforts to stimulate the economy with a weaker currency. A correlation-weighted gauge against nine developed-nation counterparts has risen 1.2 percent this year, even as an iron-ore glut halved prices of the nation’s key export. The Aussie climbed 3.9 percent versus the yen and 2.4 percent to the euro. Reserve Bank of Australia Governor Glenn Stevens said this month the local dollar “remains above most estimates of its fundamental value” as he kept interest rates at a record low.

• China’s Stocks Fall From Four-Year High as ICBC, PetroChina Drop. China’s benchmark stock index fell from a four-year high amid concern a world-beating rally over the past month was excessive relative to the outlook for the economy. Industrial & Commercial Bank of China Ltd. and PetroChina Co., the nation’s biggest companies, dropped more than 2 percent. Aluminum Corp. of China Ltd. plunged 6.9 percent after rallying 25 percent in three days. Zijin Mining Group Co. plunged 4.7 percent after its controlling stakeholder cut its stake in the company. Leshi Internet Information & Technology (Beijing) Co. climbed 2.9 percent as the ChiNext small-caps gauge rebounded from the biggest drop in a year. The Shanghai Composite Index (SHCOMP) slid 1.8 percent to 3,071 at 10 a.m., heading for the biggest loss in two weeks and paring a rally over the past month to 24 percent.

• Asian Stocks Drop as Dollar Holds Gains While Oil Climbs. Asian stocks fell, with commodity shares driving the regional index lower for the first time in four days. The dollar traded near a two-week high versus the yen before data on the U.S. economy, while crude oil climbed. The MSCI Asia Pacific excluding Japan Index lost 0.3 percent by 10:01 a.m. in Hong Kong, with a gauge of materials shares sliding 1.4 percent.

• Outlook Sours for Europe’s Oil Titans on Crude Slump: S&P. The U.S. shale-oil industry has made another enemy: Europe’s largest crude explorers. Standard & Poor’s Ratings Services revised its outlook to negative for Royal Dutch Shell Plc (RDSA), Total SA (FP) and BP Plc (BP/) as the oil-market rout driven by weakening demand and a flood of supply from American shale fields threatens cash flow into 2016.

Wall Street Journal:

• De Blasio, Police Unions Postpone Debate Until After NYPD Funerals. Law-Enforcement Agencies Nationwide Assess the Safety of Their Members. Mayor Bill de Blasio and police unions on Monday agreed to end a war of words until two officers fatally shot this past weekend are laid to rest, as law-enforcement agencies nationwide assessed the safety of their members.

• Startup Founders Leverage Hot Market for Early Paydays. Creators of Secret App Cashed in $6 Million in Early Funding Round. 

• Vermont’s Single Payer Washout. The left’s health-care ideal implodes over punishing tax rates.

Fox News:

• GOP report: Top IRS official considered admitting targeting before 2012 election -- but didn’t.

MarketWatch.com:

• Steelcase(SCS) shares slide as revenue comes in light.

Zero Hedge:

• How Japan Bankrupted Itself - Lessons For Europe.

• NYC Mayor de Blasio Slams Reporters For "Enabling" Racial Hatred.

• This Is For You Steve Liesman... Welcome To Economics. (graph)

• It Has Never Been More Expensive For 'Average Joe' To Buy Stocks. (graph)

• Don't Tell Germany Draghi Is About To Monetize 90% Of Bund Issuance.

• US Box Office Spend Plunges To Lowest Since 2000.

Business Insider:

• Here's North Korea's Over-The-Top Official Statement On The Sony Hack.

• Name The Exponential Chart.

Reuters:

• ECB's Hansson: ECB govt bond buys would be 'borderline' - Sueddeutsche Zeitung. Any move by the European Central Bank to buy government bonds would be "very borderline" and should not be made hastily, ECB Governing Council member Ardo Hansson told a German newspaper. "Governments could borrow more money than before because the interest costs would be lower," Sueddeutsche Zeitung quoted Hansson as saying in a summary of an interview to be published on Saturday. One would then have to ask "whether the ECB is illegally financing states or not," said Hansson, who is the head of Estonia's central bank.

Telegraph:

• China quietly joins Asia's currency wars to avert deflation. China is exposed like a sore thumb as countries devalue on all sides, from Russia, to Japan, Indonesia and Malaysia. 

People's Daily:

• Ruble Drop Won't Change China-Russia Ties. Ruble's depreciation affected China's exports to Russia and made it more difficult for the two countries to implement joint projects, yet the challenges shouldn't be exaggerated, according to the commentary.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 103.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 65.25 -2.5 basis points.

• S&P 500 futures +.06%.

• NASDAQ 100 futures  +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WAG)/.75

• (CALM)/.86

Economic Releases
8:30 am EST

• Durable Goods Orders for November are estimated to rise +3.0% versus a +.4% gain in October.

• Durables Ex Transports for November are estimated to rise +1.0% versus a -.9% decline in October.

• Cap Goods Orders Non-Defense Ex Air for November are estimated to rise +1.0% versus a -1.3% decline in October.

• 3Q GDP is estimated to rise +4.3% versus a prior estimate of a +3.9% gain. 

• 3Q Personal Consumption is estimated to rise +2.5% versus a prior estimate of a +2.2% gain.

• 3Q Core PCE is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.
  

9:00 am EST

• FHFA House Price Index for October is estimated to rise +.3% versus unch. in September.

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for December is estimated to fall to 93.5 versus a prior estimate of 93.8.

10:00 am EST

• Richmond Fed Manufacturing Index for December is estimated to rise to 7.0 versus 4.0 in November.

• New Home Sales for November are estimated to rise to 460K versus 458K in October.

• Personal Income for November is estimated to rise +.4% versus a +.2% gain in October.

• Personal Spending for November is estimated to rise +.5% versus a +.2% gain in October.

• The PCE Core for November is estimated to rise +.1% versus a +.2% gain in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The French GDP report, UK GDP report, $35B 5Y T-Note auction, weekly US retail sales reports and the (FDO) special meeting could also impact trading today.

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

Stocks Rising Modestly into Final Hour on Less European/Emerging Markets Debt Angst, Seasonal Strength, Yen Weakness, Defense/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.81 -4.12%

• Euro/Yen Carry Return Index 153.22 +.39%

• Emerging Markets Currency Volatility(VXY) 11.04 +.36%

• S&P 500 Implied Correlation 63.97 -.34%

• ISE Sentiment Index 102.0 +50.0%

• Total Put/Call .79 -9.20%

• NYSE Arms 1.46 +57.25% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.76 +.44% 
• America Energy Sector High-Yield CDS Index 613.0 -2.20%

• European Financial Sector CDS Index 63.28 -4.10%

• Western Europe Sovereign Debt CDS Index 26.72 -9.33%
• Asia Pacific Sovereign Debt CDS Index 65.11 -4.05%

• Emerging Market CDS Index 317.99 -2.60%

• China Blended Corporate Spread Index 344.54 +.38%
• 2-Year Swap Spread 23.5 +.75 basis point

• TED Spread 22.75 +1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% -1.0 basis point

• Yield Curve 150.0 -4.0 basis points

• China Import Iron Ore Spot $67.90/Metric Tonne -1.84%

• Citi US Economic Surprise Index 32.70 +1.2 points
• Citi Eurozone Economic Surprise Index 1.90 +2.7 points

• Citi Emerging Markets Economic Surprise Index -12.80 unch.

• 10-Year TIPS Spread 1.67 +4.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +195 open in Japan

• DAX Futures: Indicating +39 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Russian Rating May Fall to Junk in Economic Crisis, Kudrin Says. Russia’s sovereign debt rating will tumble into junk territory next year as the country plunges into a “full-fledged economic crisis,” former Finance Minister Alexei Kudrin said. Gross domestic product may contract by at least 2 percent in 2015, while inflation will accelerate to 12 percent to 15 percent, Kudrin told reporters in Moscow today. Russia failed to make changes to the economy during “quiet years” and now must face the current crisis unprepared, said Kudrin, who served as finance minister for more than a decade until 2011. 

• Bank of Russia Pledges to Bail Out Trust as Ruble Crisis Hits. Russia’s central bank pledged as much as 30 billion rubles ($531 million) to support National Bank Trust after the ruble plunged and liquidity tightened. The central bank is selecting an investor to help shore up the lender, and the Deposits Security Agency will take over its management, Bank of Russia said in a statement today. The ruble has depreciated 38 percent against the dollar since June, and volatility has soared to the highest since Russia defaulted on local-currency debt 16 years ago, stoking concern that Russian lenders’ asset quality has deteriorated.

• Ruble’s Rescue Comes With Cost for Russian Economy. Russian policy makers are signaling they’re prepared to sacrifice economic growth in order to stabilize the ruble. The Bank of Russia raised its benchmark interest rate by the most in 16 years last week and created a money-market cash squeeze, helping the ruble strengthen 45 percent from a record low on Dec. 16. The consequence of this means the oil producer’s economy may shrink 7.9 percent in 2015, Danske Bank A/S said on Dec. 19, revising a view for a 1.8 percent contraction. 

• China Stock-Manipulation Probe Spurs Concern on Small-Cap Rally. An investigation into stock market manipulation in China is spurring concern of further losses for shares of smaller companies after a benchmark gauge plunged by the most in a year. The China Securities Regulatory Commission is probing companies and individuals involved in suspected market manipulation on 18 stocks and has set up a task force, the regulator said in a Dec. 19 statement on its microblog, citing an unnamed spokesman. Most of these stocks are small companies listed in Shenzhen, according to the statement.

• Brazil Economists Cut GDP and Raise Inflation Forecasts for 2015. Brazil economists cut their gross domestic product forecast and raised their inflation estimate above the official target range as deteriorating confidence will present a challenge for the government’s new economic team. Analysts reduced to 0.55 percent their GDP estimate for 2015 from 0.69 percent the previous week, according to the Dec. 19 central bank survey of about 100 analysts published today. Analysts also cut to 0.13 percent the estimate for growth this year, from 0.16 percent last week.

• European Stocks Advance for Fifth Day as Lenders Lead. European stocks advanced for a fifth day, with banks contributing the most to the gains. The Stoxx Europe 600 Index rose 0.5 percent to 341.97 at the close of trading in London, after earlier adding as much as 0.9 percent.

• Copper Futures Fall on ‘Disappointing’ Drop in U.S. Home Sales. Copper futures for March delivery fell 0.4 percent to settle at $2.8725 a pound at 1:10 p.m. on the Comex in New York. This year, the price has declined 15 percent amid concern that global mined supplies will top demand as the economy cools in China, the largest user.

CNBC:

• Nat gas collapses—‘This is panic selling’. (video)

ZeroHedge:

• Belarus In Full-Blown Hyperinflation Panic: Blocks News, Online Stores; Bans All FX Trading For 2 Years. (graph)

• Bloomberg's Commodity Index Drops To Lowest Since 2009: What Does It Mean?

• Bank Revenues Plummet 17% In October And November According To Citi.

• The Fed Is Running On The Final Fumes Of Its Credibility.

• Existing Home Sales Collapse Most Since July 2010, Downtick In Stock Market Blamed. (graph)

• Grow Your Way Out Of Debt? Don't Make Us Laugh...!

• WTI Crude Plunges Back Below $56, Nasdaq Red On Gilead Weakness. (graph)

• Treasury Surge Set To Continue: Hedge Funds Most Short The 10-Year In Three Years.

Business Insider: 

• South Korea's Nuclear Plant Operator Has Been Hacked.

• Western Journalist: ISIS Is 'Much Stronger And Much More Dangerous' Than People Realize.

MEES:

• Saudi's Naimi Says $20 Oil 'Irrelevant' to OPEC Policy. "Whether it goes to $20/b, $4-0/b, $50b, $60/b, it is irrelevant," Saudi Arabian Oil Minister Ali Al-Naimi said when asked what price would prompt OPEC to cut output. Naimi was asked in interview whether OPEC would maintain output even if prices were to drop to $40-$30/bbl. Naimi said Russia indicated it was unable to cut production during talks with Saudi, Mexico, Venezuela last month. Naimi said Saudi oil production costs are $4-$5/bbl at most.