Bear Radar

Style Underperformer:

• Small-Cap Growth -1.23%

Sector Underperformers:

• 1) Gaming -2.75% 2) Homebuilders -2.22% 3) Steel -2.02%

Stocks Falling on Unusual Volume:

• LOCK, WTW, NRX, JBSS, REMY, SSL, GXP, PRO, RESN, IPHI, OZRK, HI, CEMP, LJPC, SYNA, FDML, DIN, DSPG, CPF, LPL, XRAY, MGPI, KNDI, KIRK and IGOV

Stocks With Unusual Put Option Activity:

• 1) UPS 2) MDR 3) COH 4) AIG 5) TXN

Stocks With Most Negative News Mentions:

• 1) SYNA 2) WTW 3) GM 4) NSC 5) AAPL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.45%

Sector Outperformers:

• 1) Gold & Silver +.98% 2) REITs +.88% 3) Drugs +.04%
  

Stocks Rising on Unusual Volume:

• PWRD, LINE and LNCO

Stocks With Unusual Call Option Activity:

• 1) MNKD 2) GME 3) BBBY 4) CERS 5) TLT
  

Stocks With Most Positive News Mentions:

• 1) RAD 2) BBBY 3) LH 4) FNF 5) ABBV
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:

• Ukrainian Army and Rebels Trade Blame Amid Warning of Hard 2015. Separatist rebels fired on Ukrainian forces 23 times on New Year’s eve, wounding three soldiers, the country’s military spokesman said. Nobody was killed during the incidents in Ukraine’s eastern regions of Donetsk and Luhansk in the past 24 hours, Andriy Lysenko, the spokesman, told reporters in Kiev today. Five “enemy” drones were also spotted in the conflict-affected areas overnight, he said, while a soldier who had been “abducted by bandits” was freed by Ukrainian special forces. Militants made “numerous attempts to provoke Ukrainian servicemen” in order to blame the military for violations of a cease-fire, Lysenko said. Rebels continue to receive supplies of weapons from across the Russian border, he said.

• China Developer Kaisa’s Bonds Plunge After Loan Default. Bonds of Kaisa Group Holdings Ltd. plunged to record lows after the Chinese developer defaulted on a loan following the resignation of its chairman. The developer’s $800 million of 8.875 percent notes due 2018 and sold to investors at par in March 2013 tumbled to 43.087 cents on the dollar as of 10:11 a.m. in Hong Kong, from 66.263 cents on the dollar on Dec. 31, sending yields to 43.285 percent. Its $500 million of 10.25 percent debentures due 2020 slid to 38.683 cents on the dollar to yield 38.984 percent. The securities were sold to investors at 100 cents on the dollar in January 2013.

• Singapore GDP Rose Less Than Estimated as Manufacturing Shrank. Singapore’s economy expanded less than economists estimated last quarter after its manufacturing industry weakened with slowing growth in China and an uneven global recovery. Gross domestic product rose an annualized 1.6 percent in the three months to Dec. 31 from the previous quarter, when it expanded 3.1 percent, the trade ministry said in a statement today. The median of five estimates in a Bloomberg News survey was for a 3 percent expansion.

• Singapore Home Prices Post Longest Losing Streak in Decade. Singapore’s home prices dropped for a fifth consecutive quarter, the longest losing streak in more than a decade, as tighter mortgage curbs cooled demand in Asia’s second-most expensive housing market. An index tracking private residential prices fell 1 percent to 205.8 points in the three months ended Dec. 31, the longest stretch of declines since March 2004 and bringing the slide to 4.9 percent from the record high set in September 2013, according to preliminary data released by the Urban Redevelopment Authority today.

• New Year's Stampede Kills 36 in Shanghai as Massive Holiday Approaches. China demanded a review of crowd-safety procedures as dozens of people remain in Shanghai’s hospitals after a deadly stampede on New Year’s Eve killed 36 and caused the cancellation of celebrations across the city. At least 47 people were injured, including 40 still serious enough to required hospitalization, the Shanghai government said on its website. The stampede -- the city’s deadliest disaster since 2010 -- started about 11:35 p.m. on New Year’s Eve as tens of thousands of people crowded into the historic Bund riverside district for a light show.

• Hyundai and Kia Forecast Slowest Sales Growth in Nine Years. Hyundai Motor Co. (005380) and Kia Motors Corp. (000270), South Korea’s largest automakers, forecast their weakest sales growth in nine years as they run out of capacity to increase output and competition intensifies in major markets. The companies’ combined deliveries will rise 2.5 percent to 8.2 million vehicles in 2015, Chung Mong Koo, chairman of both automakers, said during a New Year address to employees in Seoul today. That would be the slowest growth since 2006. The forecast was in line with analysts’ estimate of 8.2 million units this year, based on the median of five estimates in a Bloomberg News survey. 

• Dollar Rises to Five-Year High as U.S. Index Futures, Oil Climb. The dollar rose to its highest level in more than five years and U.S. stock-index futures advanced before the release of American factory data. Oil gained with silver, while tin dropped. The Bloomberg Dollar Spot Index strengthened 0.3 percent at 10:41 a.m. in Hong Kong. The yen retreated 0.5 percent and the euro headed for its lowest level since June 2010.

• Commoditie Cap Record Losing Run on Crude Oil to Dollar. Commodities capped the biggest annual loss since the global financial crisis in 2008, retreating for a record fourth year,as a global glut spurred a rout in oil prices and a stronger dollar cut the allure of raw materials. The Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, ended 1.7 percent lower at 104.3285 points yesterday, after dropping as much as 1.8 percent to the lowest since March 2009 earlier. It lost 17 percent last year, with crude, gasoline and heating oil the biggest decliners. The fourth year of losses was the longest run since at least 1991.

Wall Street Journal:

• Overseas Headwinds Test U.S. Economy. Nation’s Biggest Challenge Is Doldrums Abroad.  

• Housing Market Enters 2015 Facing Affordability Pressures. Few Signs of Breakout or Sharp Slowdown for Sector.

Fox News:

• First AirAsia victim's body identified as search hampered by bad weather.

MarketWatch.com:

• 10 ‘gray swans’ that could upend the market in 2015. 

Zero Hedge:

• Congressman Confirms Foreign Central Banks Buying US Stock Futures Is Good For Liquidity.

• S&P 500 Closes 2014 Weak, Up 6th Year In A Row; Treasuries Triple Dow's Gains.

• As Greek Default Risk Soars To 66%, Morgan Stanley Warns ECB May Be Unable To Launch QE.

• UK Literally Runs Out Of Bricks In Scramble To Build Unprecedented Housing Bubble. (graph)

• Forget Toasters & Spiderman Towels, Chinese Banks Lure New Deposits With iPhones & Mercedes.

• Occam's Oil. (graph)

• Weaponized Ebola? ISIS Militants Said To Contract Deadly Virus.

• The Best And Worst Hedge Funds Of 2014, And Everyone Inbetween. (table)

• "Audit The Fed" Bill Gains Momentum, Yellen Starts Damage Control.

• The Japanese Stock-Buying Greatest Fool Uncovered: France. (graph)

Business Insider:

• The Most Hilarious Chart Of 2014. (graph)

• Here's How Every Major Asset Class On The Planet Did In 2014.

• 2015 Will Be The Year Of Dollar Danger For The World.

• Poroshenko To Ukraine: This Year Will Not Be Easy.

• Report: Syria's War Killed More Than 33,000 Civilians In 2014.

• China Is Sputtering.

• The Euro Is Starting The Year At New Lows.

Reuters:

• Brazil's Rousseff vows budget cuts, anti-corruption push in 2nd term. Brazil's President Dilma Rousseff began her second term Thursday vowing to rein in government spending to curb inflation and pull Latin America's largest economy out of a four-year slump.

Telegraph:

• Greek expulsion from the euro would demolish EMU’s contagion firewall. Should EMU leaders choose to cut off liquidity support for the Greek banking system they might find that their contagion defences are a fiction.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 109.0 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 67.25 +.25 basis point.

• S&P 500 futures +.46%.

• NASDAQ 100 futures  +.46%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
9:45 am EST

• Final Markit US Manufacturing PMI for December is estimated to rise to 54.0 versus a prior estimate of 53.7.

10:00 am EST

• Construction Spending for November is estimated to rise +.4% versus a +1.1% gain in October.

• ISM Manufacturing for December is estimated to fall to 57.5 versus 58.7 in November.

• ISM Prices Paid for December is estimated to fall to 44.0 versus 44.5 in November. 

Upcoming Splits

• (GNTX) 2-for-1

Other Potential Market Movers

• The Fed's Mester speaking, Eurzone PMI report, China Services PMI report and the (RAD) sales update could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial 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 Reversing Lower into Final Hour on Global Growth Fears, US High-Yield Debt Angst, Profit-Taking, Utility/Healthcare Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 18.90 +18.72%

• Euro/Yen Carry Return Index 151.50 -.09%

• Emerging Markets Currency Volatility(VXY) 10.79 -.74%

• S&P 500 Implied Correlation 67.64 +3.19%

• ISE Sentiment Index 52.0 -49.41%

• Total Put/Call .89 -10.10%

• NYSE Arms 1.29 +11.82% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.12 unch.
• America Energy Sector High-Yield CDS Index 641.0 +1.05%

• European Financial Sector CDS Index 67.44 +1.46%

• Western Europe Sovereign Debt CDS Index 27.20 -2.37%
• Asia Pacific Sovereign Debt CDS Index 67.15 +.34%

• Emerging Market CDS Index 338.33 +.84%

• China Blended Corporate Spread Index 331.44 -3.02%
• 2-Year Swap Spread 23.0 +2.75 basis points

• TED Spread 24.0 -1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.5 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .04% +3.0 basis points

• Yield Curve 151.0 +1.0 basis point

• China Import Iron Ore Spot $71.26/Metric Tonne +.15%

• Citi US Economic Surprise Index 34.70 -3.7 points
• Citi Eurozone Economic Surprise Index 10.20 +1.0 point

• Citi Emerging Markets Economic Surprise Index -12.40 +.6 point

• 10-Year TIPS Spread 1.68 +4.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -21 open in Japan

• DAX Futures: Indicating +38 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/retail sector longs and index hedges 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Russian Inflation Soars to Fastest Since 2009 After Ruble Rout. Russian inflation quickened to the fastest in more than five years after the country’s worst currency crisis since 1998 stoked price growth. Consumer prices rose 11.4 percent in December from a year earlier, compared with 9.1 percent in November, the Federal Statistics Service in Moscow said today in an e-mailed statement, citing preliminary data. That exceeded the median estimate of 14 economists in a Bloomberg survey for 11.2 percent. Prices jumped 2.6 percent from the previous month. 

• Kremlin Foe Navalny Defiant at 'Filthy' Punishment as a Weakened Putin Stares Down Dissent. Russian opposition leader Alexey Navalny remains defiant after violating house arrest to reach a protest by the Kremlin, thumbing his nose at the system that spared him while locking up his brother. The 38-year-old lawyer poked fun as policemen remained stationed outside his apartment after he was escorted home from the rally, saying on Twitter today: “They themselves don’t know why they’re standing there. Don’t want water or tea.”

• Greek Polling Points to Coalition as Voters Reject System. Greek polling data suggest neither Prime Minister Antonis Samaras’s New Democracy nor the main opposition Syriza party will win an outright majority in next month’s election, meaning coalition negotiations or even a repeat vote will be needed. Pollster Elias Nikolakopoulos said current projections of voting intentions for the Jan. 25 elections show the lower limit for securing at least 151 seats in the country’s 300-seat chamber is about 38 percent. Alexis Tsipras’s Syriza led New Democracy by 28 percent to 25 percent in a survey by Marc published on Alpha TV’s website this week.

• Emerging Stocks Slide for Second Year as Oil, Fed Curtail Demand. Emerging-market stocks headed for their first back-to-back annual loss in 12 years as sliding oil and bets for higher U.S. interest rates curbed the appeal of riskier assets. Chinese shares jumped on the final day of 2014. The MSCI Emerging Markets Index added 0.4 percent to 958.06 at 12:06 p.m. in New York, reducing the decline this year to 4.5 percent. While crude’s plunge into a bear market in 2014 dragged down stocks of oil exporters from Russia to Saudi Arabia, it supported shares of net energy importers including Turkey and India. Developing-country currencies and equities also fell amid bets that the Federal Reserve will raise interest rates amid signs the U.S. economy is strengthening. 

• European Stocks Climb, Trimming First December Drop Since 2008. European stocks advanced in the last day of the year, paring their first December decline since 2008. The Stoxx Europe 600 Index rose 0.4 percent to 342.28 today, trimming this month’s loss to 1.4 percent. The gauge fell in December amid a slump in energy producers and in Greek equities as Prime Minister Antonis Samaras failed to get enough backing for his presidential candidate, leading to early elections. The Stoxx 600 has gained for a third year, up 4.3 percent in 2014.

• Commodities Head for Record Losing Run on Oil to Dollar. Commodities headed for the biggest annual loss since the global financial crisis in 2008, retreating for a record fourth year, as a global glut spurred a rout in oil prices and a stronger dollar cut the allure of raw materials. The Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, fell 0.9 percent to 105.1845 points at 8:53 a.m. in New York, after dropping to the lowest level since March 2009 earlier today. It’s lost 16 percent this year, with crude, gasoline and heating oil the biggest decliners. A fourth year of losses would be the longest since at least 1991.

• Oil Drops in Worst Year Since ’08. Crude oil fell, heading for its worst year since 2008 amid a global supply glut, dragging commodities to a fourth straight annual drop. U.S. equities fluctuated on the way to a 13 percent rally this year, while stocks rose in Europe to finish a third yearly increase. West Texas Intermediate crude dropped 2.1 percent to $52.98 a barrel at 12:06 p.m. in New York and the Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, decreased 1.1 percent for a 17 percent slide in 2014.

• U.S. Easing of Oil Exports Challenges OPEC's Strategy. The Obama administration’s move to allow exports of ultralight crude without government approval may encourage shale drilling and thwart Saudi Arabia’s strategy to curb U.S. output, further weakening oil markets, according to Citigroup Inc. A type of crude known as condensate can be exported if it is run through a distillation tower, which separates the hydrocarbons that make up the oil, according to U.S. government guidelines published yesterday. That may boost supplies ready to be sold overseas to as much as 1 million barrels a day by the end of 2015, Citigroup analysts led by Ed Morse in New York said in an e-mailed report. 

• Inflation No-Show Unlikely to Slow Fed Rate Liftoff: Economy. Economists are slashing U.S. inflation forecasts for 2015 as oil prices tumble. What’s not changing are predictions that the Federal Reserve will raise its benchmark interest rate anyway, probably around mid-year. “We’re still saying June with risks to September,” said Michael Gapen, the New York-based chief U.S. economistfor Barclays Plc. The Fed “can push rates higher in the middle of the year, even though visually that may look awkward if headline inflation is around zero.”

• Apple(AAPL) Customers Sue Over Shortage of Storage Space in iOS 8. Apple Inc. (AAPL) misleads consumers about the amount of storage space used by its iOS 8 operating system in iPhones, iPods and iPads, two users claimed in a suit targeting the software, adding a new wrinkle to a product introduction that has been riddled with hiccups and missteps.

Wall Street Journal:

• More Bodies Recovered From AirAsia Wreckage Amid Choppy Weather. Divers Stand By in High Swells; Seven Bodies Found.

Fox News:

• Obama adviser Gruber admitted ObamaCare might not be affordable.

CNBC: 

• Oil at $14 a barrel? Here's how it could happen. 

ZeroHedge:

• AirAsia Wreckage Reveals Latest Plane Crash Mystery.

• Is The CDS Market Manipulated?

• What Wall Of Worry? 2014 Was The Least 'Bearish' For Investors Ever. (graph) Investors have never - ever - been less bearish about the stock market than they are in 2014...

• 2015 Housing Trends: Will The Echo Bubble Continue Expanding?

• Saudi King Abdullah Hospitalization Sends Stocks Tumbling But It's Oil That Is Suddenly Paying Attention. (graph)

• Existing Home Sales Revised Lower (Again), Midwest Slumps For 6th Month In A Row. (graph)

• Chicago PMI MIsses, Drops To 5-Month Lows. (graph)

• Initial Jobless Claims Rise 17k, End 2014 At Same Level As In July. (graph)

• Why Is The Fed Hiring An "Emergency Preparedness Specialist Familiar With DHS Directives".

• 2014: The Year The US Decoupled (Again). (graph)

Business Insider:

• The Sony Hackers Are Now Threatening CNN!

• Russia's Ruble Crisis Is Following The Same Pattern That Destroyed The Soviet Union.

• The Ruble Is Plunging. The ruble is getting slammed. At around 11:20 a.m. ET Wednesday, it got as weak as 62.03 rubles per dollar after closing 56.71 on Tuesday. This was a nearly 5% plunge.

NY Post:

• NYPD Probing 63 Threats Against Cops and Mayor.

Reuters:

• Data point to 'unbelievably' steep climb before AirAsia crash-source. 

• U.S. crude stocks decline, Cushing glut grows -EIA. Crude stocks at the Cushing delivery hub rose by 1.995 million barrels, EIA said.

• Oilfield housing firm's stumble may herald more oil industry pain. A nasty profit warning and deep job cuts. A gutted capital budget, a suspended dividend and shares tumbling by more than half on a single day. The retrenchment at Civeo Corp, which provides temporary housing for oilfield workers and miners, is the most-severe symptom of pain inflicted on the oil service industry by the slide in crude prices, and may presage similar steps by peers.

Telegraph:

• Even $20 oil will struggle to save self–harming eurozone. Falling oil prices are unlikely to make much of a difference to a continent economically marooned by bad policy and an increasingly fractious political environment.

Bear Radar

Style Underperformer:

• Large-Cap Value -.41%

Sector Underperformers:

• 1) Oil Tankers -1.0% 2) Disk Drives -.70% 3) Energy -.62%

Stocks Falling on Unusual Volume:

• USLV, IEP, BIS, MVO, BLX, MCF, WRLD, WBAI, WGO, YDLE, HCLP, AGTC, SFS, LOCO and COHR

Stocks With Unusual Put Option Activity:

• 1) GT 2) XLU 3) XLK 4) ALTR 5) IP

Stocks With Most Negative News Mentions:

• 1) WMT 2) AAPL 3) BK 4) AEP 5) BBSI
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume