Stocks Slightly Higher into Final Hour on Central Bank Hopes, Seasonal Strength, Yen Weakness, Gaming/Utililty Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line:  About Even
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.47 +6.69%

• Euro/Yen Carry Return Index 153.25 +.07%

• Emerging Markets Currency Volatility(VXY) 10.84 +.46%

• S&P 500 Implied Correlation 65.06 +.84%

• ISE Sentiment Index 63.0 -34.38%

• Total Put/Call .82 +13.89%

• NYSE Arms .86 -7.08% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.49 +1.87% 
• America Energy Sector High-Yield CDS Index 635.0 +.25%

• European Financial Sector CDS Index 63.60 +2.11%

• Western Europe Sovereign Debt CDS Index 27.55 +3.26%
• Asia Pacific Sovereign Debt CDS Index 63.62 -1.27%

• Emerging Market CDS Index 330.63 +1.56%

• China Blended Corporate Spread Index 340.67 +.64%
• 2-Year Swap Spread 19.25 +.75 basis point

• TED Spread 25.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 150.0 -1.0 basis point

• China Import Iron Ore Spot $68.71/Metric Tonne +2.03%

• Citi US Economic Surprise Index 40.0 +1.4 points
• Citi Eurozone Economic Surprise Index 5.10 +1.4 points

• Citi Emerging Markets Economic Surprise Index -13.50 +.4 point

• 10-Year TIPS Spread 1.65 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +85 open in Japan

• DAX Futures: Indicating -7 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/retail sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Greek Vote Puts ECB Funds at Risk as Crisis Memories Revived. Greece’s descent into political crisis is threatening the country’s financial system. The European Central Bank, already battling the risk of euro-area deflation, may soon have to decide whether to withdraw much of itsfunding for Greek lenders. Special rules on Greek assets accepted as collateral will become invalid if snap elections prevent the country from agreeing to a replacement for its bailout program by the end of February. The prospect of renewed Greek turmoil is reviving memories of the euro-area debt crisis, which started in the southern European nation in 2009 and spread until it threatened the survival of the single currency in 2012.

• Snap Election Risks Greek Lifeline; Nation's Stocks and Bonds Plunge on Government Defeat. Greece faces snap elections next month that risk severing the international lifeline that has supported the country since it sparked Europe’s sovereign debt crisis in 2010. Prime Minister Antonis Samaras said in a live broadcast in Athens today that he will recommend parliamentary elections are held on Jan. 25, almost 18 months before his coalition’s term was due to end. Samaras spoke after he failed in his third attempt to persuade lawmakers to back his candidate for head of state, forcing the legislature’s dissolution.

• Ukraine’s Talks With Separatists Yield No Deal as Clashes Flare. Talks between separatist officials and representatives of Ukraine’s military ended in Donetsk without an agreement as the authorities in Kiev accused rebels of reinforcing their positions in the country’s east. The negotiations will continue on Dec. 31 in Luhansk, another rebel-held stronghold in eastern Ukraine, a news website run by the self-proclaimed Donetsk People’s Republic, known by its Russian abbreviation DAN, reported, citing a local official it didn’t identify. The talks focused on a cease-fire, a prisoner swap, pulling back heavy weapons and implementing peace agreements, it said.

• Russian Economy Shrank in November for First Time Since 2009. Russia’s economy had its first decline since October 2009 last month as manufacturing and investment shrank when a currency rout pushed the ruble to a record low. Gross domestic product shrank 0.5 percent in November from a year earlier after a 0.5 percent increase in October, the Economy Ministry said in a report on its website today. GDP fell 0.2 percent from the previous month on a seasonally adjusted basis after a 0.1 percent advance in October. The economy of the world’s biggest energy exporter is facing its first recession since 2009 next year as oil, trading near a five-year low, and sanctions imposed over Ukraine stoke the country’s worst currency crisis since 1998. With oil prices at $60 a barrel, the economy may contract about 4 percent next year, according to Finance Minister Anton Siluanov.

• Emerging-Market Distressed Debt Loss Is Worst Since 2008. Emerging-market distressed debt losses are the worst this month since the global financial crisis. Bank of America Merrill Lynch’s Distressed Emerging Markets Corporate Plus Index fell 13.4 percent through Dec. 26, set for its worst performance since October 2008, as a tumble in the price of oil sparked a currency crisis in Russia. That brought this year’s decline to 19.7 percent, the most in six years. High-yield distressed securities in the U.S. lost 8 percent, the indexes show. Emerging markets accounted for 14 of the 56 global defaults this year in Standard & Poor’s coverage. 

• Search for AirAsia Jet Widens, but Did Delay Ruin Best Chance of Rescue?

• China Blocks Access to Google’s Gmail as Ban Escalates. China blocked access to Google Inc. (GOOG)’s e-mail service through third-party applications, adding Gmail to the list of services from the search company banned in the world’s largest Internet market. Traffic volume for Gmail dropped about 85 percent on Dec. 26 before falling further the following day and remains near zero today, according to data posted on Google’s Transparency Report page. 

• Europe Stocks Little Changed as Greece’s ASE Declines After Vote. European stocks ended little changed, erasing an earlier decline, while Greece’s ASE Index fell as the nation faces early elections after Prime Minister Antonis Samaras failed a third time to get enough backing for his presidential candidate. The Stoxx Europe 600 Index gained 0.1 percent to 344.27 at the close of trading in London, after falling as much as 0.8 percent. The Greek gauge slid 3.9 percent and as much as 11 percent, the most among 18 western-European markets. The retreat triggered a drop in Spain and Italy’s benchmark equity indexes. “This is bad news for Greece and the euro zone,” said Raimund Saxinger, who helps oversee $22 billion as a fund manager at Frankfurt-Trust Investment GmbH. “The next thing to watch is how the campaigning and the polls will evolve over the next few weeks.”

• Copper Reaches Four-Year Low in London on China Slowdown. Copper for delivery in three months on the LME fell 0.2 percent to settle at $6,290 a metric ton ($2.85 a pound) at 5:50 p.m. in London, after touching $6,230, the lowest since June 2010. 

• Oil Falls to 5-Year Low as Supply Glut Seen Lingering. Oil tumbled to the lowest level in more than five years amid speculation that a global supply glut that’s driven crude into a bear market will continue through the first half of 2015. West Texas Intermediate dropped as much as 3.3 percent, erasing an earlier gain spurred by an escalating conflict in Libya. Fires have been extinguished at three of six tanks at Es Sider, Libya’s largest oil port, which were set ablaze after an attack by militants, said National Oil Corp. spokesman Mohamed Elharari. Crude also fell as the dollar climbed to a two-year high against the euro, reducing the appeal of raw materials as a store of value.

Wall Street Journal: 

• Big Asian Debt Issuers Feel Pinch. Oil Price Drop, China Housing Slowdown Weigh on Energy and Property Companies. Asian companies issued record amounts of bonds this year, but some of that debt is turning sour as falling oil prices and a shakeout in China’s housing market hit energy companies and real-estate developers.

CNBC:

• No breather for Putin—or ruble—as Russia's economy slumps. (video)

ZeroHedge:

• WTI Hits $52 Handle As US Rig Count Tumbles To 8-Month Lows. (graph)

• Brazil's Economy Just Imploded. (graph)

• Just 5 Fun-Durr-Mental Charts. (graph)

• Dallas Fed Tumbles Below Lowest Estimate As Commodity Crash Comes Knocking. (graph)

• When Fearmongering Goes Bad: Greece Scrambles To Prevent Deposit Run Goldman Warned About In Its "Worst Case".

• Flight To Safety Sends 2Y German Yields To Record Low, -10bps! (graph)

• As Greek Bonds Top 12%, What Happens Next? (graph)

• Draghi's QE Plan In Jeopardy After IMF Suspends Aid For Greece Until New Government Is In Place.

Business Insider:

• Texas Business Executives Are Freaked Out About The Crash In Oil Prices.

• Shake Shack Just Filed For An IPO.

• Greece's Leading Prime Ministerial Candidate Could Throw Europe Back Into Crisis.

• There's A Massive Fire Raging At Libya's Largest Oil Port, And The Images Are Unbelievable. (pic)

Bear Radar

Style Underperformer:

• Large-Cap Growth -.05%

Sector Underperformers:

• 1) Gold & Silver -1.92% 2) Oil Tankers -1.51% 3) Social Media -.86%

Stocks Falling on Unusual Volume:

• SNN, CSWC, CSGP, ENBL, XONE, USLV, GLP, EVEP, BCPC, AMBA, GLNG, MZOR, MAIN, ARDX, SNI, PRTA, NGG, SXE, SAIA, IFN, PBYI, FARO, ANET, BT and QIWI

Stocks With Unusual Put Option Activity:

• 1) JNPR 2) TWC 3) MON 4) SWN 5) IEV

Stocks With Most Negative News Mentions:

• 1) SWKS 2) COP 3) AET 4) CAVM 5) RFMD
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value +.34%

Sector Outperformers:

• 1) Gaming +1.62% 2) Steel +1.33% 3) Utilities +.89%
  

Stocks Rising on Unusual Volume:

• MTW, RPTP and JUNO

Stocks With Unusual Call Option Activity:

• 1) BURL 2) AEO 3) MPC 4) RAD 5) TMUS
  

Stocks With Most Positive News Mentions:

• 1) GOOG 2) IMKTA 3) NVDA 4) LIVE 5) CRY
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg:

• The 94% Plunge That Shows Abenomics Is Losing Global Investors. Foreign investors have had just about enough of Abenomics. After pumping record amounts of cash into Japanese shares last year, they’ve hardly added to holdings in 2014. Inflows are down 94 percent this year to 898 billion yen ($7.5 billion), on pace for the smallest annual amount since the 2008 global financial crisis. The month of April 2013 alone registered almost three times as much foreign investment in the stock market as all of 2014.

• Ukraine Tightens Controls Along Borders With Russia, Rebel Areas. Ukraine halted transportation links with Crimea, which was annexed by Russia in March, and stepped up checks along its borders on concern that saboteurs might attempt to enter the country from breakaway areas. “Very intensive saboteur and reconnaissance actions are being carried out now,” Ukrainian military spokesman Andriy Lysenko told reporters today in Kiev. “This measure is temporary. It won’t be permanent.”

• China’s Industrial Profits Drop Most in Two Years Amid Slowdown. China’s industrial profits fell the most in two years last month, the latest data to show a deepening slowdown in the world’s second-biggest economy as pressure grows on the nation’s central bank to ease monetary conditions. Total profits of China’s industrial enterprises in November dropped 4.2 percent from a year earlier, the National Bureau of Statistics said today in Beijing. That followed October’s 2.1 percent decline and a 0.4 percent increase in September. It’s the biggest slide since August 2012, when profits slumped 6.2 percent.

• AirAsia Drops Most Since 2011 After Flight to Singapore Vanishes. AirAsia Bhd. (AIRA) shares headed for the biggest tumble in three years after the Malaysian budget carrier’s flight QZ8501 disappeared en route from Indonesia to Singapore yesterday. The stock slid as much as 13 percent to 2.56 ringgit and was 8.2 percent lower at 9:38 a.m. local time. Shares were cut to a trading sell from buy at Hong Leong Investment Bank Bhd., which lowered its price target to 2.64 ringgit from 3.15 ringgit. AirAsia X Bhd., the long-haul arm of AirAsia, fell 6.6 percent. The FTSE Bursa Malaysia KLCI Index lost 0.6 percent. 

• Euro Near Two-Year Low Amid Greek Elections Concern; Yen Weakens. The euro traded 0.2 percent from a two-year low as Greece’s prime minister attempts to get his presidential candidate confirmed and avoid an early parliamentary election that risks severing the nation’s international lifeline.

• Asian Stocks Climb as Oil Rises While Euro Maintains Loss. Asian stocks rose with markets from Sydney to Hong Kong resuming trading following the Christmas holiday break. The euro traded near a two-year low while oil advanced. The MSCI Asia Pacific Index climbed 0.1 percent by 10:15 a.m. in Tokyo. Japan’s Topix index gained 0.2 percent, set for its highest close since Dec. 9. The Kospi gauge fell 0.5 percent in Seoul as Samsung Electronics Co. traded without the right to a dividend. AirAsia Bhd (AIRA) tumbled as much as 13 percent after one of its planes went missing.

• Iron‑Ore Slump Failing to End Glut as Mines Expand. The collapse in global iron-ore prices isn’t chasing Gina Rinehart away from the red soil of Western Australia that made her a billionaire. Like producers in Brazil and some in China, she can still profit from the metal.

• Copper Near Four-Year Low Amid Signs of Slowdown in China. Copper in London traded near a four-year low after Chinese industrial profits fell and before a manufacturing gauge for the country, the largest metals consumer. The London Metal Exchange resumed trading after the Christmas break. Copper dropped as much as 1.1 percent after closing at the lowest since June 2010 on Dec. 24.

• Insurer That Got $145 Million Loan Under Obamacare Is Almost Broke.

Wall Street Journal:

• Fees Get Leaner on Private Equity. Under Pressure From Investors, Regulators, Firms Give Up Claim on Some Revenue. Facing pressure from investors and heightened scrutiny from federal regulators, some of the largest private-equity firms are giving up their claim to fees that generated hundreds of millions of dollars for them over the years. 

Fox News:

• Families wait as search resumes for missing AirAsia plane carrying 162. A massive search is underway for the missing AirAsia plane carrying 162 people that disappeared on Sunday just after the pilot requested a change in course to avoid bad weather. Rescuers are scouring the Java Sea after their search was halted at night fall late Sunday, Indonesia’s transport ministry told the Star in Malaysia.

CNBC:

• 'The Interview' generated $15 million in four days with 2 million downloads - Sony.

Zero Hedge:

• Drilling Cutbacks Mean Service Companies Forced To Scrap Rigs. (graph)

• Stocks Have Never Been More Expensive Based On Long-Term Growth Forecasts. (graph)

• "Will We Never Learn?" - Meet Subprime Auto 'Title Loans': 2014's Home ATM. (graph)

• Saudi Arabia Ready For $20, $30, $40 Oil. (graph)

• The 'New Normal' In 2014 Summed Up In 1 Simple Chart. (graph)

• Hundreds Of NYPD Officers Turn Their Back On de Blasio Again. (pic)

• The Keynesian End Game Crystalizes In Japan’s Monetary Madness. (graph)

• Holiday Hangover - UPS Expects 15% Surge In "Dirty Business" Of Xmas Gift Returns.

• "Blind Faith In Policymakers Remains A Bad Trade That's Widely Held".

• Spot The Odd One Out. (graph)

• Germany "Not Concerned" As The Cradle Of Democracy Rocks The Autocrats And Kleptocrats. (graph)

• Search For Disappeared Air Asia Flight Suspended: Summary Of The Facts So Far.

• Only War, Inflation And Financial Collapse Can End The Global "Plutonomy", According To Citi(C).

• The Utter Craziness Of Monetarism Is On Full Display. (graph)

Business Insider:

• Pressure Is Intensifying On Russia's Banking Sector. 

• Audi Wants To Catch Up With Tesla(TSLA) On Electric Cars.

• North Korea Rages At Obama After Its Internet Goes Down. 

• 2015 Is Set To Be A Year Of International Turbulence.

• Official Chinese Website Posts An Economic Report With A Bunch Of Numbers And Then Erases All Of Those Numbers.

• Russia Is In Crisis And Putin Is Trying To Survive It.

• Why Electric Cars May Be Much Dirtier Than Gas-Powered Ones.

• Russia Is Building A New Air Force And Navy To Dominate The Growing Arctic Ocean.

• Finally, A Top Wall Street Strategist Goes Contrarian And Predicts US Stocks Will Fall In 2015.

• Illinois Risks Default If It Doesn’t Tackle Its Public Pension Crisis. 

New York Times:

• As Medicaid Rolls Swell, Cuts in Payments to Doctors Threaten Access to Care. Just as millions of people are gaining insurance through Medicaid, the program is poised to make deep cuts in payments to many doctors, prompting some physicians and consumer advocates to warn that the reductions could make it more difficult for Medicaid patients to obtain care. The Affordable Care Act provided a big increase in Medicaid payments for primary care in 2013 and 2014. But the increase expires on Thursday — just weeks after the Obama administration told the Supreme Court that doctors and other providers had no legal right to challenge the adequacy of payments they received from Medicaid. The impact will vary by state, but a study by the Urban Institute, a nonpartisan research organization, estimates that doctors who have been receiving the enhanced payments will see their fees for primary care cut by 43 percent, on average.

Reuters:

• North Korean Internet, 3G mobile network "paralyzed" - Xinhua. North Korea's Internet and 3G mobile networks were paralyzed again on Saturday evening, China's official Xinhua news agency reported on Saturday, with the North Korean government blaming the United States for systemic instability in the country's networks.

Financial Times:

• China zombie factories kept open to give illusion of prosperity. “If you cut down the big tree, all the small trees around it will die,” says 69-year-old Wang Peiqing, referring to the collapse of Highsee Iron and Steel Group, which operated the foundries before its recent closure devastated the economy of a once-prosperous corner of Shanxi province in central China. “The entire region relied on the steel mill; now the young people have to go and look for work across China.” Highsee stopped paying its 10,000 employees six months ago. Local officials estimate the plant supported indirectly the livelihood of about a quarter of Wenxi county’s population of 400,000. Across the vast expanses of China, similar experiences are playing out, with thousands of companies in heavy industrial sectors plagued by chronic overcapacity that should be going bust instead being propped up by local ­governments.

Telegraph:

• Russia's crisis has no end in sight as $50 oil looms, says OECD. Russia is moving towards autarky in the face of falling oil prices and tensions with the West that have left no end in sight for the country's economic woes, says OECD chief economist.

Welt:

• Merkel Adviser Opposes ECB Govt Bond Purchases at Present. There is no reason for the ECB to currently buy government bonds, citing Christoph Schmidt, head of German Chancellor Angela Merkel's council of economic advisers, as saying in an interview. Points to high risk of buying government bonds; says France, Italy could postpone again necessary reforms.

FAS:

• Weidmann: ECB Mustn't Bow to Markets' Bond-Buying Pressure. ECB Governing Council member Jens Weidmann says in interview it shouldn't be decisive for the bank's decision-making that markets have been pushing for and expect ECB bond purchases. Weidmann, who's also Bundesbank President said: Cheap oil is acting like a stimulus package, "so why put monetary policy measures on top of that?" The euro region's central banks would be liable together for any losses from bond purchases, and in the end the taxpayers would foot the bill.

Shanghai Securities News:

• China Researcher Sees No Economic Hard Landing Next Year. Infrastructure investment will continue to support China's economic growth, citing former PBOC adviser Yu Yongding. Growth will fall "significantly" as the economy enters a new development phase, Yu said.

Night Trading

• Asian indices are unch. to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 103.50 unch.

• Asia Pacific Sovereign CDS Index 64.5 unch.

• S&P 500 futures +.09%.

• NASDAQ 100 futures +.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
10:30 am EST

• Dallas Fed Manufacturing Activity for December is estimated to fall to 9.0 versus 10.5 in November.
  

Upcoming Splits

• (HAIN) 2-for-1

Other Potential Market Movers

• The German Retail Sales report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and commodity 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 week.

Weekly Outlook

Global Week Ahead by BusinessDesk. 
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 global growth worries, rising European/Emerging Markets/US High-Yield debt angst, earnings concerns, profit-taking, technical selling and yen strength. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.