Tuesday Watch

Evening Headlines 
Bloomberg:

• Charlie Hebdo To Print 3 Million Copies With Muhammad Cover. Charlie Hebdo will print 3 million copies of a special issue of the satirical magazine, depicting the Prophet Muhammad on the cover, a week after an attack at its headquarters left a third of its journalists dead. Publishers of the weekly magazine will put the copies on newsstands worldwide in 16 languages on Jan. 14. The issue will feature a cartoon of Muhammad, crying, on a green background, holding a board saying “Je suis Charlie” or “I am Charlie.” Above his image is written “All is Forgiven.”

• Chinese Car Dealers Find Days of ‘Printing Money’ Ending. China’s car dealers are in open revolt over industry practices that have slashed profits, threatening growth prospects for companies such as General Motors Co. and Volkswagen AG in the world’s biggest auto market. Retailers are banding together under the state-backed China Automobile Dealers Association to demand lower sales targets and a bigger share of profit from vehicle sales. Bayerische Motoren Werke AG’s agreement last week to pay 5.1 billion yuan ($820 million) to its dealers has emboldened distributors for VW and Toyota Motor Corp. to demand similar concessions. 

• China’s $300 Billion Errors May Mask Fund Outflows, Goldman Says. Growing error items in China’s balance of payments may reflect a pickup in hidden cash transfers from the nation and the central bank will likely favor a stable yuan to prevent outflows quickening, Goldman Sachs Group Inc. said. Net errors and omissions, an accounting fix used to plug the gap when official records of cross-border flows don’t balance, was negative by more than $300 billion since 2010, Goldman Sachs economists MK Tang and Maggie Wei wrote in a note today. That included a record $63 billion in the third quarter of 2014, a year in which yuan sentiment soured and President Xi Jinping’s anti-corruption drive widened. “Since such outflows may be harder to contain with regulations, a continuation of their recent acceleration could start posing tangible financial stability concerns,” Tang and Wei wrote in the note.

• Yen’s Top Forecaster Halts Sell Call as Oil Cuts Japan Deficit. The best forecaster on the yen says he hasn’t recommended selling the Japanese currency in a few months as lower oil prices provide solace for Japan’s deteriorating trade balance. Jens Nordvig, managing director of currency research at Nomura Holdings Inc., said the 45 percent slump in oil since the end of October will trim Japan’s trade deficit by around $500 million. The deficit was at 894 billion yen ($7.6 billion) in November, a 29th straight month of shortfall. “We’ve had a couple years where we’ve been very focused on trading the yen from the short side, but we actually haven’t been short for quite a few months,” Nordvig said in an interview today. Low “oil prices are positive for Japan’s trade balance.” 

• Japan Boosts Defense Spending to Counter China’s Island Claims. Japan will increase defense spending for a third straight year as Prime Minister Shinzo Abe seeks to counter China’s claims to remote islands in the East China Sea. The budget for the year starting April will be 4.98 trillion yen ($42 billion), up from 4.84 trillion yen in fiscal 2014, according to documents obtained by Bloomberg. Spending on defense will account for about 5 percent of the national budget, which is set to be approved by the cabinet tomorrow.

• Short Sellers Bet Korean Shipyards’ Misery to Deepen. South Korean shipbuilders, last year’s biggest stock-market losers, are the most popular target for short sellers in 2015 as falling crude hurts oil-rig demand. Bearish wagers used borrowed stock against Hyundai Mipo Dockyard Co. (010620) rose to 7.3 percent of shares outstanding on Jan. 8, the highest level on the Kospi index and up from 4.3 percent a year ago, according to data compiled by Bloomberg and Markit Group Ltd. Short interest in Daewoo Shipbuilding & Marine Engineering Co. and Hyundai Heavy Industries Co. (009540) has more than tripled in the past 12 months. 

• Draghi Faces Legal Test on Bond Buys as ECB Readies QE Plan. European Central Bank President Mario Draghi will get a legal readout tomorrow on a predecessor to the quantitative easing plan that he’s set to reveal later this month. An adviser to the EU Court of Justice will say whether the European Central Bank’s Outright Monetary Transactions program overstepped the law in a non-binding opinion that may signal whether QE must also be reined in. “If the opinion is favorable and the conditions attached are not too restrictive, it would open the way to QE by the ECB right now,” said Pierre-Henri Conac, a professor of financial-markets law at the University of Luxembourg.

• Global PC Shipments Fall 2.4% in Fourth Quarter, IDC Says. Worldwide personal-computer shipments dropped 2.4 percent in the fourth quarter as demand from businesses for new machines waned, market researcher IDC said. The decline was less than the 4.8 percent fall that IDC had projected for the quarter, the firm said today in a statement. PC sales totaled 80.8 million for the quarter, down from 82.2 million units a year earlier.

• Asian Stocks Decline as Oil Slumps, Yen Drags Japan Shares Lower. Asian stocks fell as oil at a 5 1/2 year low weighed on energy companies and a stronger yen and declines in U.S. equities dragged down Japanese shares as the market opened after a holiday. The MSCI Asia Pacific Index (MXAP) slipped 0.4 percent to 137.32 as of 9:01 a.m. in Tokyo, before markets opened in Hong Kong and China. 

• U.A.E. Sticks With Oil Output Boost Even as Prices Drop. The United Arab Emirates will stick with a plan to increase oil-production capacity to 3.5 million barrels a day in 2017 even as an oversupply pushed prices to the lowest in more than five years. “In this time of unstable oil prices, we are showing in Abu Dhabi and across the country that we remain dedicated to reach our long-term production goals,” Energy Minister Suhail Al Mazrouei said in a presentation in Abu Dhabi yesterday. “Our investments remain there.”

• Oil Extends Loss to Near $45 as U.S. Supply Seen Worsening Glut. West Texas Intermediate for February delivery decreased as much as 77 cents to $45.30 a barrel in electronic trading on the New York Mercantile Exchange and was at $45.45 at 12:57 p.m. Sydney time. 

• Fed’s Williams Says June Rate Rise ‘Reasonable’ Amid Labor Gains. Federal Reserve Bank of San Francisco President John Williams, who will vote on policy this year, said raising interest rates in June would be a close call amid “strong momentum” in the labor market and weaker wage gains. “I would expect by June that the argument pro and con for lifting off rates will be probably a close call” assuming that inflation doesn’t fall further, Williams said today in a telephone interview from his San Francisco office. “It’s a reasonable guess.”

Wall Street Journal:

• France Hunts for Attack Accomplices. Prime Minister Warns of Continued Threats After Attack on Charlie Hebdo and Other Violence. France dispatched thousands of police and troops to protect synagogues and Jewish schools as investigators searched for possible accomplices to the militants behind last week’s terror attacks and warned of more threats.

• As Oil Slips Below $50, Canada Digs In for Long Haul. Oil-Sands Operators, Seeing Long-Term Value, Aren’t Likely to Shut Off the Tap Any Time Soon. Even as oil prices settled below $50 a barrel Monday for the first time in nearly six years, those companies are unlikely to shut off the tap anytime soon thanks to those huge upfront costs, combined with long-term break-even points and lengthy production lives. Unlike shale oil, which requires constant drilling of new wells to maintain output levels, once an oil-sands site is developed it will produce tens or hundreds of thousands of barrels a day, steadily, for up to three decades.

• The Pension Sink Is Gulping Billions in Tax Raises. Remember that ‘temporary’ tax hike for California schools? Most is now going to public worker retirements.

• The Scandal of Free Speech. A year from now none but the unfeint of heart will still be with Charlie. 

Fox News:

• Paris attacks prompt fears France's Muslim 'no-go' zones incubating jihad. (video) In hundreds of French "no-go" zones  -- neighborhoods where neither tourists nor cops dare enter -- poor and alienated Muslims have intimidated the government into largely ceding authority over them, prompting fears that the kind of jihad that gave rise to last week's attack in Paris is festering unchecked.

MarketWatch.com:

• Wolverine Worldwide's(WWW) stock tumbles after downbeat profit outlook. Shares of Wolverine Worldwide, tumbled 8.9% in after-hours trade Monday, after the apparel and footwear company provided a downbeat profit outlook for 2015.

CNBC:

• Citadel beats markets with big year. In a year where many hedge funds posted unimpressive returns, Citadel, the Chicago money-management giant known for its swift movement and out-of-stock positions, generated more than 23 percent returns in its equity hedge fund and almost 18 percent in its multi-strategy flagship funds, Kensington and Wellington, according to someone who reviewed the numbers.

Zero Hedge:

• The 'Golden Age Of The Central Banker' Has Reached "The Cult Phase".

• Germany's Sinn Blasts Draghi: "Deflation Is Just A Pretext To Bailout Southern Europe". (graph)

• How Alcoa(AA) Just Smashed Earnings Expectations. (graph)

• Did The Fed Ignite The "Irresponsibility" Of US Oil Over-Supply? (graph)

• The Central Banks Still Appear To Be In Control (Or So They Think).

• When Even Bloomberg Makes Fun Of China's Stock Bubble.

Business Insider:

• This Will Be Charlie Hebdo's First Post-Attack Cover. (pic)

• MAULDIN: A Tsunami Of Change Is Coming To The Global Economy.

• Three On-Demand Taxi Startups Are Joining Forces To Take On Uber.

• RadioShack Just Got A $500 Million Lifeline.

• TOM LEE: These 8 Stocks Should Thrive When Oil Is Falling And The Dollar Is Rising.

Reuters:

• Cutting 'patient' from Fed guidance should signal hike near: Lacker. The Federal Reserve should stop talking about the need for a "patient" interest rate policy just before it thinks it will begin hiking rates, a top Fed policymaker said on Monday. Richmond Federal Bank President Jeffrey Lacker said in an interview with Reuters that the Fed's guidance in December that it would be patient with raising rates harkened back to a strategy employed in 2004.

• German anti-Islamist rally swells after attacks in France. A record 25,000 anti-Islamist protesters marched through the east German city of Dresden on Monday, many holding banners with anti-immigrant slogans, and held a minute's silence for the victims of last week's attacks in France. Chancellor Angela Merkel and other senior German politicians have called for people to stay away from rallies organised by PEGIDA, or Patriotic Europeans Against the Islamisation of the West - people who Merkel has said have "hatred in their hearts".

• United Airlines considers outsourcing jobs at 28 U.S. airports. United Airlines is assessing whether to outsource jobs at airports around the country in a cost-cutting effort that could impact some 2,000 workers. The Chicago-based carrier informed employees Monday that jobs up for review included baggage handlers and gate and customer service agents at 28 airports that are not hubs, ranging from Atlanta to Anchorage. It has yet to make any decisions.

• Nasdaq says short interest down 3.8 pct in late Dec. As of Dec. 31, short interest fell to about 8.125 billion shares, compared with 8.442 billion shares as of Dec. 15.

Liquidity crunch a catalyst for big China slowdown – analysts The mini liquidity crunch is the early warning sign of a substantial economic correction long overdue, amid rising leverage and a broken growth model, say bearish analysts.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3222433/Liquidity-crunch-a-catalyst-for-big-China-slowdownanalysts.html?copyrightInfo=true

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 120.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 74.75 +1.0 basis point.

• S&P 500 futures +.11%.

• NASDAQ 100 futures  +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (IHS)/1.55

• (KBH)/.57

• (CSX)/.49

• (LLTC)/.49

Economic Releases
9:00 am EST

• The NFIB Small Business Optimism Index for December is estimated to rise to 98.5 versus 98.1 in November. 

10:00 am EST

• The IBD/TIPP Economic Optimism Index for January is estimated to rise to 48.7 versus 48.4 in December. 

• JOLTS Job Openings for November are estimated to rise to 4850 versus 4834 in October. 

2:00 pm EST

• The Monthly Budget Statement for December is estimated at $3.0B.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kocherlakota speaking, $21B 10Y T-Note auction, UK CPI report, US weekly retail sales reports, Needham Growth Conference, Deutsche Bank Auto Conference, BMO Energy Forum, JPMorgan Healthcare Conference and the (MNST) business update could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and retail shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Stocks Falling into Final Hour on Gobal Growth Fears, Rising Emerging Markets/US High-Yield Debt Angst, Earnings Worries, Energy/Technology Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.98 +13.85%

• Euro/Yen Carry Return Index 146.33 -.15%

• Emerging Markets Currency Volatility(VXY) 10.49 +1.45%

• S&P 500 Implied Correlation 65.81 +1.05%

• ISE Sentiment Index 109.0 +43.43%

• Total Put/Call 1.08 +12.5%

• NYSE Arms 1.32 -9.13% 

Credit Investor Angst:

• North American Investment Grade CDS Index 70.80 +2.08%

• America Energy Sector High-Yield CDS Index 712.0 +1.3%

• European Financial Sector CDS Index 69.47 -1.88%

• Western Europe Sovereign Debt CDS Index 27.88 -4.08%

• Asia Pacific Sovereign Debt CDS Index 74.01 +.22%

• Emerging Market CDS Index 393.16 +3.85%

• China Blended Corporate Spread Index 366.63 +.31%

• 2-Year Swap Spread 22.75 -.75 basis point

• TED Spread 23.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.25 unch.

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 136.0 -4.0 basis points

• China Import Iron Ore Spot $70.30/Metric Tonne -1.24%

• Citi US Economic Surprise Index 30.80 +.1 point

• Citi Eurozone Economic Surprise Index .1 -.7 point

• Citi Emerging Markets Economic Surprise Index -16.20 +.7 point

• 10-Year TIPS Spread 1.57 -5.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -283 open in Japan

• DAX Futures: Indicating -25 open in Germany

Portfolio: 

• Higher: On gains in my biotech/medical sector longs, index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• French Attacks Prompt East Europe Calls for Curbs on Immigration. Hungary’s prime minister and the Czech president demanded a tougher stance on immigrants to the European Union as fallout from the terrorist attacks in France last week spread to former communist countries. Hungarian Prime Minister Viktor Orban said the EU must limit immigration to people seeking political asylum. Czech President Milos Zeman said the foreign incomers and their descendants who can’t adapt and follow local norms should “return home,” according to an interview published in Denik newspaper Jan 10. “Immigration is a bad thing,” Orban said yesterday on Hungarian public television after attending a march in Paris to mark the killings in France. “We shouldn’t view it as if it had any use because it only brings problems and peril to Europeans and so it must be stopped.”

• Top Russian Ruble Forecaster Sees Fresh Run at Record Low. The world’s top ruble forecaster is unimpressed by the currency’s 30 percent rebound from a record low. The analyst -- Danske Bank A/S’s Vladimir Miklashevsky -- says the ruble could be testing new lows again this quarter as the plunge in oil, Russia’s top export, threatens to cost the country its investment-grade credit ratings and turns Russians away from their currency. The ruble traded at 62.32 per dollar at 2:35 p.m. in Moscow, after reaching 80.1 on Dec. 16, the weakest on record. 

• Ukraine Eurobonds Drop as Goldman Sees More Than 70% Haircut. Ukraine’s foreign-currency borrowing costs rose for a second day as Goldman Sachs Group Inc. (GS) said a debt writedown may erase 70 percent of the bonds’ value and Russia said it may demand the early repayment of a $3 billion bond. Ukraine’s dollar-denominated debt maturing July 2017 fell 2.7 cents to 59.87 cents on the dollar by 6:52 p.m. in Kiev after rising 2.2 cents last week as the European Union pledged further financial aid. The yield on the notes rose 229 basis points to 34.20 percent, nearing the record 36.10 percent reached last week.

• Greek Contagion Concerns Attract Bears to Spain, Italy. Traders are buying up protection should Greece’s potential exit from the euro trigger a domino drop in Spanish and Italian stocks. Investors are pulling out of exchange-traded funds tracking the equities, while driving up costs to hedge against declines. The price of bearish options versus bullish ones on the iShares MSCI Spain Capped ETF hit a 20-month high last week, while the cost of the contracts on the iShares MSCI Italy Capped ETF jumped 27 percent since early December, according to data compiled by Bloomberg. 

• Emerging Energy Stocks Drop on Goldman Oil Outlook; Real Weakens. Emerging-market stocks fell, ending a three-day advance, as oil’s plunge below $48 a barrel dragged down energy companies from Russia to India. The real fell from a one-month high as economists cut their growth forecasts for Brazil. OAO Rosneft slid 1.3 percent in Moscow. Reliance Industries Ltd., India’s largest oil refinery, decreased 1.2 percent. Coal India Ltd. dropped 4.6 percent after reports the government will sell shares in the company. Stocks in net oil importers Turkey and Egypt climbed. The ruble weakened 2.3 percent after Fitch Ratings Ltd. cut Russia’s credit rating. The MSCI Emerging Markets Index decreased 0.6 percent to 955.48 at 10:51 a.m. in New York. 

• Europe Stocks Rise as Health-Care Gains Offset Energy. European stocks advanced for the third time in four days, pushed higher by drugmakers and Greek equities. The Stoxx Europe 600 Index added 0.6 percent to 339.87 at the close of trading in London, after earlier climbing as much as 1.1 percent and falling 0.4 percent. Roche Holding AG helped send health-care companies up 0.9 percent, and Greece’s ASE Index climbed 3.8 percent, completing its biggest two-day rally since November. The broad European benchmark gauge fell 1 percent last week for a second decline, posting its worst start to a year since 2008.

• Copper Falling to 5-Year Low Defies Forecasts for Better Economy. Economists say the world economy will do better this year. The copper market is saying that won’t be enough to eliminate a supply glut that’s lasted at least two years. Prices of the metal slumped to the lowest since October 2009 today, fueled by concerns that output is outpacing demand. China’s copper consumption will grow at the slowest pace since at least 2010, Deutsche Bank AG predicts. At the same time, global economic growth will be the best in four years, economist estimates compiled by Bloomberg show. 

• Oil Falls to 5 1/2-Year Low; Goldman, SocGen Cut Price Outlook. West Texas Intermediate decreased as much as 5.1 percent to $45.90 a barrel, and Brent 5.9 percent to $47.18. Crude has to “stay lower for longer” if investment in shale is to be curtailed to re-balance the global market, according to Goldman analysts. Prices need to return to $100 a barrel for economic equilibrium, Venezuelan President Nicolas Maduro said in Iran during a tour of Middle Eastern OPEC members.

• Oil Whacks S&P 500 Earnings Growth. Forecasts for first-quarter profits in the Standard & Poor’s 500 Index have fallen by 6.4 percentage points from three months ago, the biggest decrease since 2009, according to more than 6,000 analyst estimates compiled by Bloomberg. Reductions spread across nine of 10 industry groups and energy companies saw the biggest cut. Earnings pessimism is growing just as the best three-year rally since the technology boom pushed equity valuations to the highest level since 2010.

• Shale Drillers Can Brag About Their Holdings. Investors Ask: How's Your Debt? U.S. shale drillers may tout how much oil they have in the ground or how cheaply they can get it out. For stock investors, what matters most is debt. The worst performers among U.S. oil producers in a Bloomberg index owe about 5.7 times more than they earn, before certain deductions, compared with 1.7 times for companies that have taken less of a hit. Operations, such as where the companies drill or how much oil versus gas they pump, matter less. 

• Utah Mall’s Travails Expose Property Weak Link: Mortgages. “There’s a level of complacency among investors,” he said. “Competitive pressures that haven’t been seen in decades are making some retailers and some properties obsolete.” Even as U.S. real estate prices surpass their November 2007 peak, neighborhood shopping centers, malls and other retail properties remain 15 percent below their record, according to indexes compiled by Moody’s and Real Capital Analytics Inc. Retail is the only major type of commercial real estate, which also includes office buildings and warehouses, that failed to achieve price growth of at least 10 percent in the 12 months through November. 

• Tiffany(TIF) Shares Tumble After Jeweler Cuts Annual Forecast. Tiffany & Co. (TIF) shares fell the most in more than three years after a sluggish holiday season spurred the luxury jewelry chain to cut its annual forecast. Sales in November and December declined 1 percent to $1.02 billion worldwide, the New York-based company said today in a statement. Currency fluctuations and a continued slump in Japan took a toll on the results, along with a surprise slowdown in its home market.

Wall Street Journal:

• Islamic State Adds to Terror In Afghanistan. Raises Prospect of Battling Jihadists, Rising Terrorism. Adherents of Islamic State this weekend declared their intention to step up operations in Afghan territory where the Taliban have long held sway, raising the prospect of battling jihadist groups and rising terrorism in the region.

• Big Market Moves to Dent Results at U.S. Banks. Many Executives Have Already Flagged Difficult Trading Environment.

Barron's:

• SanDisk(SNDK) Drops 11%: Cuts Q4 Rev View; FBN Sees Samsung the Main Culprit.
  SanDisk said the reduced outlook was “primarily due to weaker than expected sales of retail and iNAND products.” SanDisk’s iNAND products are flash memory modules that are built into mobile devices such as smartphones and tablets.

Fox News:

• White House admits should have sent 'higher-profile' official to Paris rally. (video) The White House acknowledged Monday that it erred in not sending a higher-level official to the massive rally in Paris against Islamic terrorism. "We should have sent someone with a higher profile to be there," Press Secretary Josh Earnest said.

ZeroHedge: 

• ISIS Supporters Hack US CentCom's Twitter, YouTube Account, Threaten US Soldiers, Release "China Scenario" Details.

• Gold Hits $1235 As Commodities Crash To 12-Year Lows Amid $45 Oil. (graph)

• The Scariest Chart For America's Shale Industry. (graph)

• Greeks Stop Paying Taxes Ahead Of Elections As Central Bank Scrambles To Halt Bank Run Rumors.

• The Confessions Begin: Goldman, BofA Warn Crude Crash Will Have Negative Impact On GDP, Earnings. (graph)

• Even Warren Buffett Must Be Getting Concerned At This Market. (graph)

Business Insider:

• Russia's New Military Doctrine Shows Moscow's Geopolitical Ambitions.

• Goldman Sachs(GS) Just Slashed Its Forecast For The Ruble.

• A New Report Says The US 'Manufacturing Renaissance' Doesn't Exist.

Reuters: 

• Lululemon(LULU) forecast signals turnaround moves bearing fruit. Lululemon Athletica Inc issued a robust forecast for the current quarter on Monday that topped market expectations and lifted its shares as strong holiday sales signaled the Canadian yogawear maker's comeback efforts may be paying off.

Financial Times:

• Greece and Russia face high debt problem by Mohamed El-Erian.

Telegraph:

• Deflation is coming to the UK - and it will have a huge impact on business. Inflation has been hard-wired into the economic system for so long that it will be very hard to adjust to falling prices.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.92%

Sector Underperformers:

• 1) Oil Tankers -5.23% 2) Oil Service -4.05% 3) Disk Drives -3.20%

Stocks Falling on Unusual Volume:

• TIF, SNDK, GMLP, BITA, LORL, NLS, FDO, THC, SRPT, ACM, DG, DFRG, SJT, SWN, TYG, GCO, KMF, SCHN, HBHC, MU, HUBG, TEP, IOC, IMKTA, ARUN and THC

Stocks With Unusual Put Option Activity:

• 1) JIVE 2) TIF 3) VLO 4) SNDK 5) LRCX

Stocks With Most Negative News Mentions:

• 1) ARUN 2) SNDK 3) PBR 4) TIF 5) AAL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth -.35%

Sector Outperformers:

• 1) Gold & Silver +2.66% 2) REITs +.56% 3) Homebuilders +.33%
  

Stocks Rising on Unusual Volume:

• NPSP, FMI, TKMR, MWIV, LULU, BURL, CEMP, HOLX, BBW, RMTI and BMY

Stocks With Unusual Call Option Activity:

• 1) NPSP 2) SNSS 3) HCA 4) EXPR 5) SIRI
  

Stocks With Most Positive News Mentions:

• 1) SPF 2) LULU 3) ALK 4) HOLX 5) MWIV
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg:

• Parisians Wary of More Attacks After Shootings. Three days of gunshots, killings, car chases, hostage-taking and police raids have traumatized a city better known for its art, culture and cuisine. The immediate crisis that began Jan. 7 with the massacre of 12 people at weekly magazine Charlie Hebdo and the separate killing of a policewoman ended yesterday with police raids on two sites that killed three suspects.

• Russia Cut to One Step Above Junk by Fitch on Oil, Sanctions. Russia’s credit rating was cut to the lowest investment grade by Fitch Ratings after plummeting oil prices and the conflict over Ukraine triggered the worst currency crisis since the country’s 1998 default. Fitch, which last downgraded Russia in 2009, cut the sovereign one step to BBB-, according to a statement issued Friday in New York. The grade, on par with India and Turkey, has a negative outlook. “The economic outlook has deteriorated significantly since mid-2014 following sharp falls in the oil price and the ruble, coupled with a steep rise in interest rates,” Fitch said in the statement. “Plunging oil prices have exposed the close link between growth and oil.” 

• Russia’s Soaring Misery Index. Russians may be more miserable than the data suggest. The CHART OF THE DAY shows the Misery Index -- inflation plus unemployment -- for Russia climbed 39 percent last year to 16.6, moving it closer to similar gauges in Greece and Turkey. While Russian consumer prices surged last year, pushing up the index, official data showed that the jobless rate fell even as slumping oil exports and international sanctions pushed the economy toward a recession.

• Samaras Still Trails Syriza 14 Days Before Greek Election. Greek Prime Minister Antonis Samaras entered the two-week countdown to Jan. 25 elections with opinion polls showing he has so far failed to narrow the lead held by his main opponent, Alexis Tsipras of Syriza. Separate polls by Kapa Research and Alco put Syriza’s lead over Samaras’s New Democracy party at 2.6 percentage points and 3.2 percentage points respectively, both little changed. The Kapa poll for yesterday’s To Vima newspaper, which ran under the front-page headline, “The Left’s Opportunity,” gave Syriza 28.1 percent support to 25.5 percent for New Democracy. 

• Charlene Chu Says China’s Credit Risks Worsening. Charlene Chu, the former Fitch Ratings Ltd. analyst known for her warnings over China’s debt risks, said that the dangers are increasing as the outlook for the nation’s growth deteriorates. “We’ve got the biggest debt bubble that the world has ever seen and credit is continuing to grow twice as fast” as the economy, Chu, 43, a partner of Autonomous Research Asia Ltd., said in an interview in Hong Kong today with Bloomberg Television’s Angie Lau. “We’ve got deflation looming on the horizon.” The nation’s accumulation of debt from record borrowing has prompted some analysts to draw comparisons with Japan before its “lost decade” of economic stagnation and with Asian nations tipped into crisis in the late 1990s. Debt in China was equivalent to 251 percent of gross domestic product, according to a June estimate from Standard Chartered Plc.

• It’s Amateur Hour in the Booming Chinese Stock Market. As Chinese retail investors pour back into the world’s hottest stock market, they’re leaving their fingerprints all over the place. The most telltale sign: The Chinese equivalent of penny stocks, assets that have long held an allure for amateurs, are trouncing the benchmark index. Shares in China’s CSI 300 Index that were quoted below 5 yuan (81 cents) at the end of September have since jumped an average 63 percent. That compares with a 35 percent gain for all index stocks and 11 percent for those priced above 50 yuan. That outsized rally reflects the growing market impact of inexperienced investors in a country where new stock accounts are opening at the fastest pace since 2007 and individuals comprise about 80 percent of equity trading. While professional investors measure a stock’s worth relative to the company’s assets or earnings prospects, it’s the price appearing on computer screens that matters most to people like 35-year-old housewife He Mei. As she sees it, the math is simple -- low price equals low risk and lots of value. 

• Oil Falls as Goldman Cuts Outlook While Venezuela Seeks Recovery. Oil extended losses from the lowest level in more than 5 1/2 years as Goldman Sachs Group Inc. reduced its price forecasts and Venezuela called on OPEC producers to work together to spur a recovery. Futures slid as much as 2.1 percent in London after a seventh weekly drop. Crude has to “stay lower for longer” if investment in shale is to be curtailed to re-balance the global market, according to Goldman analysts.

• Oil Producers Betting on Price Drop With OPEC Not Curbing Output. The oil industry was listening as OPEC talked down crude prices to a more than five-year low. Drillers, refiners and other merchants increased bets on lower prices to the most in three years in the week ended Jan. 6, government data show. Producers idled the most rigs since 1991, with some paying to break leases on drilling equipment. Producers are hedging more and drilling less on concern that the biggest plunge in prices since 2008 will continue.

• Copper Holds Losses Near Five-Year Low on Demand Growth Concern. Copper in London held losses near the weakest in more than five years on speculation demand growth my falter amid signs of uneven economic growth in the U.S., Germany and China, the largest metals consumers. Copper was little changed after ending last week at the lowest since October 2009. The biggest drop in U.S. hourly wages since records began in 2006 overshadowed a steeper-than-forecast payrolls increase, while German industrial production in November unexpectedly fell for the first time in three months, data showed Jan. 9. China’s factory-gate prices last month dropped the most in two years, extending a record stretch of declines.

• Gold Extends Gain to One-Month High as U.S. Wages Stall Dollar. Bullion for immediate delivery advanced as much as 0.3 percent to $1,226.95 an ounce, the highest price since Dec. 12, and traded at $1,226.94 at 9:20 a.m. in Singapore, according to Bloomberg generic pricing. The metal climbed 1.2 percent on Jan. 9 to cap the biggest weekly gain since June as assets in the SPDR Gold Trust, the world’s largest exchange-traded product backed by bullion, rose the most since July.

• John Paulson Hit by 2014 Losses as Advantage Plus Fund Falls 36%. Billionaire John Paulson posted 2014 losses in most of his hedge funds after wrong-way bets on energy securities added to declines from a failed merger and investments in Fannie Mae and Freddie Mac. The 59-year-old manager’s Advantage Plus Fund fell 36 percent last year after a 3.1 percent loss in December, two people with knowledge of the returns said.

• Apple(AAPL) Changes App Pricing Worldwide, Spurred by Currency Swings. Apple Inc. (AAPL) changed the prices of software applications from Canada to Europe today, in one of the company’s more comprehensive global responses to currency swings in recent years. With the U.S. dollar rising, Apple earlier this week told software makers selling programs through its online App Store that it’s increasing app prices in the European Union, Norway, Canada and Russia because of foreign exchange rates and taxes. The changes took effect today, with the entry-level price for apps in Canada rising to $1.19 from 99 cents. In Europe, the basic app price jumped to 0.99 euro from 0.89 euro. 

• The Coming Wave of New Cancer Fighting Drugs. The hottest area in cancer drugs is going mainstream this year. If 2014 proved that the most promising new group of oncology drugs in generations could work, 2015 brings a crowded field that sees winners and losers in a market eventually worth $30 billion a year or more in the next decade.

Wall Street Journal:

• Paris Displays Defiance With Huge Rally. (pic) World Leaders Gather With Crowds to Show Solidarity After Terror Attacks. France, joined by world leaders locked arm-in-arm, mounted its largest-ever demonstration on Sunday in a defiant, if fragile, display of unity against terrorist attacks that tore through its capital last week. More than three million people of different political and religious stripes marched in rallies across the country. Nearly half of them flooded the streets of Paris, transforming its manicured avenues into human rivers.

• GM(GM) Readies Electric Rival to Tesla(TSLA). Auto Maker to Show Concept of Family-Size Car That Gets 200 Miles on a Charge. 

• Nasdaq Looks to Operate Dark Pools for Banks. Move Follows Years of Trying to Coax Trading Back Onto Exchanges.  

• Commodities Fall as Stockpiles Mount Up. Some Producers Carry on Despite Declines; Trouble in the Far North. Two years ago, Daniel Nilsson’s family bought a hotel in the town of Pajala, Sweden, some 50 miles above the Arctic Circle. The nearby Kaunisvaara iron-ore mine had just started production, and the Nilssons installed new meeting facilities and revamped the nightclub.

• ‘Grexit’ Could Happen by Accident. Greek Crisis Testing Eurozone to the Limit. Since the eurozone’s inception, its survival has rested on a paradox. On the one hand, the stability of the single currency hinges on the market’s faith in its irreversibility. It was to restore this faith that European Central Bank President Mario Draghi promised in 2012 to do “whatever it takes” to keep the bloc together. 

• European Central Bank’s Bond-Buying Plans Face Doubt. Some Economists Say the Move Will Do Little to Stimulate Limp Economy. The European Central Bank is widely expected to follow the U.S. Federal Reserve’s lead this month with a new program of bond purchases meant to stimulate the eurozone’s limp economy. Whether it works is another matter.

Fox News:

• Holder, top US official in Paris for terror talks, not seen at unity march. Attorney General Eric Holder is in Paris to attend a meeting on fighting terrorism, but did not participate in a march with world leaders Sunday to honor the 17 people killed last week in France. More than 40 world leaders marched arm in arm through Paris to rally for unity and freedom of expression and to honor the victims of the three days of terrorist attacks.

MarketWatch.com:

• Foreign ownership of U.S. equities hits 69- year high. The U.S. stock markets are globalizing, and the British and Canadians are leading the charge. Foreign ownership of U.S. stocks totaled 16% in 2014, the highest in 69 years since such records have been kept, according to a Goldman Sachs report.

• Stock market risk is higher today than it was in the dot-com era.

CNBC: 

• Shire, NPS Pharma(NPSP) to merge in $5.2 billion deal. Shire said it will acquire NPS Pharmaceuticals in an all-stock transaction for about $5.2 billion, the companies said in a joint statement on Sunday. Shire will pay $46.00 per NPS share, representing a premium of about 7.2 percent over NPS' Friday close.

Zero Hedge:

• The Cost Of Obama's "Free" Community College Plan To Taxpayers? $60 Billion. (graph)

• Do You Pay Rent To Blackstone: This Is Where Wall Street Is America's Landlord. (map)

• Stephen Roach Warns: "The Fed Is In Total Denial... On What It Put The World Through A Decade Ago".

• Mikhail Gorbachev Warns of Major (Nuclear) War In Europe Over Ukraine.

• 5 Things To Ponder: What This Way Cometh. (graph)

• Oil's 7th Weekly Drop In A Row Drags Stocks To Worst Start To Year Since 2009. (graph)

• These Are The Two Most Crowded Trades As We Enter 2015. (graph)

• Price Discovery And Emerging Markets.

• What Hath QE Wrought? (graph)

• US Ally Saudi Arabia Lashes Blogger 1000 Times For "Islam Insult".

• A Permabull Throws In The Towel: "Stocks Are Massively Overvalued", Key Multiples Are Post-War Records. None other than Jim Paulsen has just thrown in the permabull towel and in a letter to Wells Capital clients titled "Median NYSE Price/Earnings Multiple at Post-War RECORD", admits that the market is about as overvalued as ever, based on numerous criteria but mostly due to the median (not average) P/E multiple surging to fresh all time highs! 

• Arson Attack On German Newspaper After Printing Charlie Hebdo Cartoons As Thousands Take To The Streets In France.

• Credit Giving Equities A Red Flag. (graph)

• The Stimulus Monkeys Are Screeching And The Central Banks Are Pushing On A String.

• Saudi Prince Warns "We Will Not See $100 Oil Again", Calls Anti-Russia Conspiracy "Baloney".

• The Fed Is Losing, If Not Already Lost, Control.

• Citi(C), Goldman(GS), ICAP And Others Prepare For Grexit... Again.

• Russia, Ukraine, And Greece – Default Probabilities. (graph)

• The Collective Delusion Of Grandeur Fades: Central Bank Inflationism Is Visibly On The Wane. (graph)

• Chinese Stocks Give Up 2015 Gains, Plunge On Kaisa Default Fears. (graph)

Business Insider:

• Russia's Downgrade Paints A Horrific Picture Of Economic Collapse.

• Boko Haram Just Pulled Off One Of The Deadliest Terrorist Attacks In History.

• The US Issues A Global Travel Warning After Recent Terror Attacks.

• Almost Nobody Wants To Buy Fitness Trackers.

• France's Prime Minister Declares War On Radical Islam.

• RAOUL PAL: The Dollar Surge And Oil Crash Are Far From Over.

• 5.6 Million Obamacare Enrollees Could Lose Their Health Insurance.

• 'Today Paris Is The Capital Of The World'. (pic)

• The 7 German Banks That Survived The Financial Crisis Are Still A Mess.

• Here's What Makes Paris-Style Terrorist Attacks So Scary.

• 15 Charts To Watch In 2015.

• Yemeni Security Officials: Brothers Behind Charlie Hebdo Attack Trained With Al Qaeda.

• Christianity Is Exploding In China And The Communist Party Isn't Happy.

NY Post:

• NYPD Put on High Alert after ISIS Releases New Video. NYPD cops were put on high alert Saturday night after ISIS released a propaganda video urging the killing of “intelligence officers, police officers, soldiers, and civilians” in the US. “Strike their police, security, and intelligence members, as well as their treacherous agents,” the vile video (pictured), released on Twitter by ISIS spokesman Abu Mohammad Al-Adnani, urges. “If you are assigned to a fixed post, do not sit together in the RMP [police car],” members of the Sergeants Benevolent Association were instructed in an e-mail obtained by The Post. “At least one officer must stand outside the vehicle at all times. Pay attention to your surroundings. Officers must pay close attention to approaching vehicles . . . Pay close attention to people as they approach. Look for their hands.”

Reuters:

• More losses loom for Russian bonds as credit rating heads back to junk. Russia's credit rating looks set to tumble into junk for the first time in more than a decade, a move that would exclude its bonds from a couple of high-profile indexes and may set off another wave of capital outflows. The Fitch agency cut its rating on Russia to 'BBB minus' from 'BBB' on Friday, citing a significant deterioration in the country's economic outlook due to the slump in oil prices and falling value of the rouble.

CNN:

• Source: Terror cells activated in France. French law enforcement officers have been told to erase their social media presence and to carry their weapons at all times because terror sleeper cells have been activated over the last 24 hours in the country, a French police source who attended a briefing Saturday told CNN terror analyst Samuel Laurent. Ahmedy Coulibaly, a suspect killed Friday during a deadly kosher market hostage siege, had made several phone calls about targeting police officers in France, according to the source.

Telegraph:

• Suicide bombing by '10-year-old girl in Nigeria kills at least 10'. A girl, thought to be 10 years old, blows herself up in the northeast Nigerian city of Maiduguri.

Handelsblatt:

• BMW Projects Slowing China Growth in 2015. China growth rate to converge with that of the U.S. this year, citing BMW sales director Ian Robertson. Robertson says he expects single-digit growth rates in both markets this year.

TASS:

• Russia May Seek Early Repayment of Ukraine's $3b Bond. Ukraine violating number of conditions of bailout bond sold to Russia in December 2013, citing a Russian govt. source. Russia will "likely" demand repayment of note in "near future," according to the report.

National Business Daily:

• Bad Loans at Banks Rebound in China's Wenzhou. Wenzhou city is trying to control private financing risks and handle the rebound of bad loans at banks, citing Vice Mayor Wang Yi.

Shanghai Securities News:

• China Stock Investor Confidence Rises to Record. An A-share investor confidence index rose 28.1% y/y to a record 71.2 in December, according to a survey by China Securities Investor Protection Fund. A reading above 50 indicates investors are optimistic, the report said. Over 60% of investors polled expect a strong market.

Night Trading

• Asian indices are -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 118.0 +4.0 basis points.

• Asia Pacific Sovereign CDS Index 73.75 +3.0 basis points.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AA)/.27

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lockhart speaking, Labor Market Conditions Index for December, 3Y T-Note auction, WASDE Crop report, (HXL) investor meeting and the (TIF) sales update could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate 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 25% net long heading into the week.