Friday Watch

Evening Headlines 
Bloomberg:

• Casualties From Swiss Shock Spread From New York to New Zealand. Casualties mounted from the Swiss currency shock as a U.S. online brokerage said client debts threatened to push it out of compliance with capital rules and a New Zealand-based dealer went out of business. FXCM Inc., a New York-based company that offers foreign exchange trading services over the Internet, said clients suffered significant losses when the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down. “Due to unprecedented volatility in EUR/CHF pair after the Swiss National Bank announcement this morning, clients experienced significant losses, FXCM said in a statement dated Jan. 15. That ‘‘generated negative equity balances owed to FXCM of approximately $225 million.’’

• SNB Officials Eating Words Risk Lasting Investor Indigestion. Switzerland’s central bank officials have just eaten their words, risking lingering indigestion in financial markets. Just three days after Swiss National Bank (SNBN) Vice President Jean-Pierre Danthine called the franc cap a “pillar” of monetary policy, the SNB yesterday dropped the minimum exchange rate of 1.20 per euro. The shock abandonment of the SNB’s primary policy of the past three years may now leave investors warier of taking officials’ words at face value, according to economists including Karsten Junius, chief economist at Bank J. Safra Sarasin AG in Zurich. By scrapping one tool, the franc cap, SNB President Thomas Jordan risks blunting the effects of another. “The SNB’s credibility has suffered a bit,” said Junius, a former economist at the International Monetary Fund. “Statements will get read in the future with a bit more caution. Verbal interventions will hardly work any more.” 

• Russia Seen Keeping Option of Capital Controls If Outflows Mount. Russian capital outflows probably doubled last year and the government may resort to currency restrictions if the pace doesn’t ease in 2015, according to a Bloomberg survey of economists. Capital controls are likely if private money leaves at a $240 billion annualized rate in 2015, or $60 billion this quarter, according to the median estimate of 14 economists. Outflows more than tripled to $48 billion in the fourth quarter from the previous three months, pushing last year’s total to $133.3 billion, according to the survey. That’s the most since in 2008 and compares with $61 billion in 2013. Russia last had inflows in 2007, according to central bank data.

• Ukraine Faces Default Specter as Russia Puts Neighbor on Notice. The economic pressure being applied by Russia is threatening to push Ukraine to the brink of default, putting the burden on the U.S. and its allies to keep the war-ravaged nation afloat. The risk of Russia calling a $3 billion bond payment, which Prime Minister Dmitry Medvedev this week said will “soon” be decided, is pushing the government in Kiev toward debt-restructuring talks with other creditors, according to economists from London to New York. Such a request by the Kremlin would trigger a sovereign default for Ukraine, said Regis Chatellier, a strategist at Societe Generale SA (GLE) in London. 

• This is Asia's 'Undisputed Loser' From Oil and Fiscal Cuts are Looming. The plunge in oil prices that spurred a currency crisis in Russia and endangered Venezuela’s leadership is also roiling markets in Malaysia, a net oil exporter in Southeast Asia. Economists say it’s not time to panic, yet. For one thing, Malaysia’s oil and gas products account for about 22 percent of its exports, compared with more than 70 percent for Russia’s energy. For another, Prime Minister Najib Razak is buying some fiscal breathing room by abolishing decades-old energy subsidies and introducing a 6 percent goods and services tax in April, according to Nomura Holdings Inc. That would allow Najib to keep close to his budget goals even as declining investor confidence pushed the currency this week to its lowest level since April 2009 and boosted the cost of insuring the nation’s debt.

• Asian Stocks Slide With U.S. Futures, Bonds Climb on SNB. Asian shares dropped with U.S. index futures as the market turmoil sparked by Switzerland abandoning the franc’s cap extended into a second day. Sovereign bonds rallied and gold traded near a four-month high. The MSCI Asia Pacific Index fell 1 percent by 12:15 p.m. in Tokyo, while Standard & Poor’s 500 Index futures slid 0.7 percent following a five-day drop. The franc was near parity with the euro after trading at 1.20096 per euro immediately before the Swiss National Bank announcement. Yields (GACGB10) on 10-year Australian and Japanese debt declined to records. Copper is heading for its biggest weekly loss in three years, while oil is set for the longest weekly losing streak since 1986.

• The Cruel Oil-Market Math Conspiring Against ETF Bulls. The $2.3 billion that has poured into funds that track oil since December would seem like a logical enough investment. After crude dropped about 50 percent to a five-year low, the thinking goes, prices are due for a rebound. There’s just one problem. And it’s a big problem. 

• Oil Heads for Longest Weekly Losing Streak Since 1986 Amid Glut. Oil headed for the longest run of weekly declines since March 1986 as OPEC forecast weaker demand for its crude, adding to signs that a global supply glut that spurred last year’s price collapse may persist. Futures swung between gains and losses in New York and are set for an eighth weekly drop. Demand for oil from the Organization of Petroleum Exporting Countries will average 28.8 million barrels a day, the lowest in 12 years, the group said in a report on Jan. 15. Venezuela, one of OPEC’s 12 members, is seeking to coordinate a plan to calm prices, according to President Nicolas Maduro.

• Copper Poised for Biggest Weekly Fall in Three Years After Rout. Copper headed for the biggest weekly drop in more than three years after a rout driven by lower energy costs and fears that demand will weaken in China, the world’s largest metals user. The metal fell 7.8 percent this week after tumbling to the lowest since 2009. Copper is the worst performing metal so far this year on the Bloomberg Commodity Index (BCOM), which tumbled to the lowest in 12 years this week amid the World Bank cutting its forecast for global growth, citing economic slowdown in Europe and China. Industrial production in the U.S., the second-biggest consumer, fell 0.1 percent in December from the previous month, according to a Bloomberg survey before data due Friday. 

• Judge Puts BP's(BP) Top Fine at $13.7 Billion for Gulf Oil Disaster; U.S. Sought $18 Billion. BP Plc (BP) faces a maximum fine of $13.7 billion after a U.S. judge ruled that the company dumped 3.2 million barrels of oil into the Gulf of Mexico in 2010 -- about a quarter less than the U.S. had calculated. The government’s 4.2 million barrel estimate of the spill size was rejected today by U.S. District Judge Carl Barbier, decreasing the potential maximum fine from $18 billion. BP estimated the flow at 2.45 million barrels. The maximum possible fine would still be the largest U.S. pollution penalty.

• Schlumberger Records Charge, Cuts Jobs After Oil Collapse. Schlumberger Ltd. (SLB), the world’s biggest oilfield-services company, took a $1.77 billion charge in the fourth quarter as it prepares for an “uncertain environment” after the collapse in oil prices. Net income dropped to $302 million, or 23 cents a share, from $1.66 billion, or $1.26, a year earlier, Houston- and Paris-based Schlumberger said in a statement today. The company will cut about 9,000 jobs, 7.1 percent of its workforce, as it anticipates lower spending by customers in 2015. 

Wall Street Journal:

• Belgium Antiterror Raid Leaves Two Suspects Dead. Move Disrupts Imminent Terrorist Plot, Belgian Authorities Say. Belgian police killed two people in a firefight on Thursday evening, disrupting what authorities called an imminent terrorist plot just a week after Islamist extremists set Europe on edge with massacres in Paris.

• Satellite Images Show Boko Haram Massacre in Nigeria. (pic) Amnesty International Says Aerial Photos Reveal Scale of Destruction From This Month’s Attacks.

• How Spending Sapped the Global Recovery. The Obama-Lew lobby is urging Europe to ramp up stimulus spending. Emerging markets would beg to differ.

Fox News: 

• Obama takes heat for terror approach, Gitmo releases as threat spreads. (video) The Obama administration drew fire Thursday from a growing list of frustrated lawmakers over the release of more Guantanamo detainees -- this time Yemeni terrorists to the volatile Arabian Peninsula -- as concerns mount over the spreading threat of Islamic terrorism, and the administration's refusal to publicly call out Islam's radical elements. The Department of Defense announced Wednesday that five Yemeni terror suspects held at Guantanamo Bay were released -- with four of the five heading for Oman, Yemen's neighbor. The release comes despite knowledge that one of the two assassins who carried out the Charlie Hebdo massacre in Paris traveled to Yemen in 2011, and met with the radical American cleric Anwar al-Awlaki.

CNBC:

• Why oil is in more trouble than you think. (video)

Zero Hedge:

• The Greek Bank Runs Have Begun: Two Greek Banks Request Emergency Liquidity Assistance.

• Swissnado Stuns Stocks, Bonds & Bullion Bid. (graph)

• Another Turkish Shocker: "Netanyahu And The French Terrorists Are The Same", PM Says.

• US Macro Data Surprises Are The Worst In Over 10 Years, Post-Thanksgiving. (graph)

• Ukraine President Signs Mobilization Decree: 50,000 To Be Drafted.

• 2 FX Brokers Suffer "Significant Losses" After SNB Surprise, "In Breach Of Regulatory Capital Requirements".

• Why Our Central Planners Are Breeding Failure.

Business Insider:

• Chinese President Xi Jinping Just Took His War On Corruption To A Whole New Level.

• This Chart Makes It Look Like It's All Over In Venezuela.

• Al Sharpton Calls For Emergency Meeting To Address 'Appalling' All-White Oscar Nominees. "The movie industry is like the Rocky Mountains, the higher you get, the whiter it gets," Sharpton quipped in a statement released later in the afternoon.

• Trust Is The Lynchpin Of The Capital Markets — The Swiss National Bank Just Broke It.

• Macau's Casinos Just Took Another Huge Hit.

• Intel's(INTC) Mobile Group Lost More Than $4 Billion Last Year.

Reuters:

• Greece euro exit would be 'extremely dangerous' - ECB's Nowotny. A Greek exit from the euro zone would be an "extremely dangerous" move for the country and a danger for the rest of Europe as well, European Central Bank policymaker Ewald Nowotny said. Greek leftist opposition party Syriza holds a steady lead over ruling conservatives with little over a week of campaigning left for Prime Antonis Samaras to try to close the gap before a snap election on Jan. 25. Financial markets are nervous a Syriza victory could trigger a standoff with EU/IMF lenders that results in Greece leaving the euro zone.

• Intel(INTC) forecasts disappointing revenue; shares fall. Chipmaker Intel Corp forecast revenue and gross margins for this quarter that disappointed investors, sending its shares down 2.7 percent in extended trading. 

• U.S.-based stock funds post $4.1 bln outflows in week -Lipper.

• Target's(TGT) exit from Canada to pressure commercial property market. Target Corp's abrupt decision to withdraw from Canada is troubling news for many mall owners, as the most obvious potential buyer of property assets - Wal-Mart - is expected to cherry-pick from Target's 133 locations. 

• Hedge funds, speculators face big losses on Swiss franc rally. Currency speculators and global macro hedge funds with large short positions in the Swiss franc are staring massive losses in the face after the Swiss National Bank shocked markets on Thursday by removing a three-year-old cap on the currency.

AFP:

• Ukraine warns of Russian military build-up. Ukraine on Thursday renewed accusations of a Russian military build up on its border and approved fresh troop mobilisations as a wave of violence threatened all-out conflict in the country's war-torn east. A national day of mourning was held for 13 people killed on Tuesday when a rocket exploded near a commuter bus travelling towards the Ukrainian city of Donetsk, the worst loss of civilian life since a September truce that only partially halted the violence.

Financial Times:

• Exporters fear Swiss franc ‘tsunami’. The Swiss federation of trade unions said the move would put “massive” pressure on jobs and wages among exporters, while Nick Hayek, chief executive of Swatch Group, one of Switzerland’s leading manufacturers, said: “Jordan is not only the name of the SNB president, but also of a river . . . and today’s SNB action is a tsunami — for the export industry and for tourism, and finally for the entire country.” 

• China funds bring Chaos to metals markets. Shanghai Chaos Investment Co is one of a coterie of funds exercising a growing impact on global metals markets, where the price of everything from aluminium drinks cans to lead batteries is set.

FAZ:

• Merkel Says Russia Sanctions to Remain in Force. German Chancellor Angela Merkel strongly opposes lifting sanctions against Russia, citing interview. Sanctions aren't an end in themselves and can only be lifted if the reasons for them have been eliminated. The annexation of Crimea and events in eastern Ukraine are flagrant violations of international law "shared values". Tells German critics of sanctions it must be clear you have to react when a common understanding of territorial integrity is no longer respected. Political isolation of Moscow will continue and she doesn't count on President Vladimir Putin's participation in the G-7 summit in Bavaria in June.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.50% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 123.0 +4.5 basis points.

• Asia Pacific Sovereign CDS Index 75.0 -.75 basis point .

• S&P 500 futures -.75%.

• NASDAQ 100 futures -1.0%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHW)/.24

• (CMA)/.77

• (GS)/4.32

• (PNC)/1.73

• (STI)/.81

• (WIT)/8.78

Economic Releases
8:30 am EST

• The CPI for December is estimated to fall -.4% versus a -.3% decline in November.

• The CPI Ex Food and Energy for December is estimated to rise +.1% versus a +.1% gain in November. 

9:15 am EST

• Industrial Production for December is estimated to fall -.1% versus a +1.3% gain in November.

• Capacity Utilization for December is estimated to fall to 79.9% versus 80.1% in November.

• Manufacturing Production for December is estimated to rise +.2% versus a +1.1% gain in November. 

10:00 am EST

• Preliminary Univ. of Mich. Consumer Sentiment for January is estimated to rise to 94.1 versus 93.6 in December.

4:00 pm EST

• Net Long-Term TIC Flows for November.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Williams speaking, Fed's Kocherlakota speaking, Eurzone Final CPI and the (CAMP) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Escalating Global Growth Fears, Rising Emerging Markets Debt Angst, Earnings Worries, Homebuilder/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Slightly Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 22.42 +4.42%

• Euro/Yen Carry Return Index 141.33 -2.20%

• Emerging Markets Currency Volatility(VXY) 10.97 +5.28%

• S&P 500 Implied Correlation 66.35 +1.84%

• ISE Sentiment Index 60.0 -45.45%

• Total Put/Call .99 -12.39%

• NYSE Arms 1.08 -16.74% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.39 +1.25%

• America Energy Sector High-Yield CDS Index 726.0 -1.97%

• European Financial Sector CDS Index 67.06 -1.16%

• Western Europe Sovereign Debt CDS Index 26.85 -2.61%

• Asia Pacific Sovereign Debt CDS Index 75.92 +.13%

• Emerging Market CDS Index 387.70 +1.68%

• China Blended Corporate Spread Index 379.40 +2.25%

• 2-Year Swap Spread 23.5 +.75 basis point

• TED Spread 22.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 -3.0 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 133.0 -2.0 basis points

• China Import Iron Ore Spot $68.63/Metric Tonne +.48%

• Citi US Economic Surprise Index 11.70 -7.3 points

• Citi Eurozone Economic Surprise Index -.6 -.4 point

• Citi Emerging Markets Economic Surprise Index -15.10 -1.4 points

• 10-Year TIPS Spread 1.58 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -183 open in Japan

• DAX Futures: Indicating +14 open in Germany

Portfolio: 

• Lower: On losses in my biotech/tech/medical/retail sector longs and emerging markets shorts

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:  

• Mayhem Erupts on Trading Floors After Swiss Central Bank Removes Cap on Franc. At 9:30 a.m. today, trading floors across the City of London erupted. Outbursts of obscenities and confusion followed the Swiss central bank’s surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in London’s financial district. The U-turn sent the franc as much as 41 percent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers. Dealers at banks including Deutsche Bank AG (DBK), UBS Group AG (UBSG) and Goldman Sachs (GS) Group Inc. battled to process orders amid a flood of customer calls and trade requests, according to people with direct knowledge of the events. At least one electronic currency-trading system temporarily halted transactions, adding to the mayhem. “This is the biggest currency shocker in years and it’s likely to create more volatility in the short term,” said James Stanton, head of foreign exchange at deVere Group, a financial adviser that oversees about $10 billion. “Trading positions are extremely vulnerable and volume has gone through the roof.” 

• Ukraine Lurches Back Toward War as Donetsk Airport Battle Rages. Ukraine lurched back toward full-scale conflict as government troops sought to repel an assault by pro-Russian insurgents for control of an eastern airport. Ukraine still holds the Donetsk airport, which has been mostly destroyed since reconstruction that ended in 2012, a presidential adviser said this evening on Facebook. Earlier, Ukraine said cease-fire violations had surged to a record, the security council warned the unrest may spark a “continental war” and Germany’s leader called for emergency peace talks.

• Here's What the Swiss Central Bank Just Did and Why It's Such A Shocker. SwissNational Bank shocked the world when it announced it would remove the cap it had in place to prevent the Swiss franc from rising too high against the euro. Here's what that means and what it's all about. 

• Swiss Currency Shock Hits Exporters;  ‘Words Fail Me,’ Says Swatch CEO. (video) Swiss exporters including Swatch Group AG (UHR) and Richemont slumped in Zurich trading after the central bank’s decision to scrap its cap on the currency saw the franc jump more than 14 percent against the dollar and euro. “Words fail me,” Swatch Chief Executive Officer Nick Hayek said by e-mail. “Today’s SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country.” 

• Eastern European Currencies Dive as Swiss Loan Costs Hurt Banks. Eastern European currencies tumbled and banking stocks slumped after Switzerland’s move to allow its currency to appreciate stoked concern individuals will struggle to repay loans denominated in Swiss francs. Poland’s zloty weakened 15 percent to 4.1533 against the the Swiss currency by 5:56 p.m. in Warsaw, paring an earlier loss of as much as 28 percent. Hungary’s forint and the Romanian leu tumbled to records. Warsaw-listed Getin Noble Bank SA sank 16 percent, while Bank Millennium SA and PKO Bank Polski SA, the country’s biggest lender, slid at least 6.5 percent.

• UBS, Credit Suisse Earnings Seen Hurt by Rising Swiss Franc. (video) Swiss banks stand to see their earnings eroded by a stronger Swiss franc after the country’s central bank allowed the currency to trade freely against the euro again. UBS Group AG (UBSG), the country’s biggest bank, may see profit shrink 14 percent, while its closest competitor, Credit Suisse Group AG (CSGN), could suffer a 15 percent drop, Barclays Plc analysts led by Jeremy Sigee said in a note to clients. They predict a decline of 30 percent for Julius Baer Group Ltd. (BAER) Analysts from Citigroup Inc. and Morgan Stanley shared the view that the abrupt end to the Swiss National Bank’s (SNBN) cap would squeeze earnings, especially for the country’s many private banks.

• Target(TGT) to Abandon Canada After Racking Up Billions in Losses. (video) Target Corp. (TGT) will walk away from Canada less than two years after opening stores there, putting an end to a mismanaged expansion that racked up billions in losses. The shares jumped the most in about eight weeks. The Canadian division, which employs 17,600 people, is seeking court approval to begin liquidation, the Minneapolis-based retailer said today in a statement. Dismantling operations north of the border will lead to a $5.4 billion writedown this quarter, though it will boost profit by next year, Target said. 

• Swiss Stocks Tumble on Central Bank's Surprise; European Equities Rise. Stocks in Switzerland tumbled the most in 25 years, led by the nation’s exporters, while the Euro Stoxx 50 (SX5E) Index rose, after the Swiss National Bank (SNBN) unexpectedly ended its minimum exchange rate. The Swiss Market Index slid 8.7 percent at the close of trading in Zurich, after earlier losing as much as 14 percent. The Euro Stoxx 50 advanced 2.2 percent to 3,157.36.

• OPEC Sees Less Demand for Its Crude, Slower U.S. Supply. The Organization of Petroleum Exporting Countries said it expects weaker demand for its crude this year and predicted that slumping prices will curb growth in U.S. supply. Demand for OPEC oil will average 28.8 million barrels a day, about 100,000 barrels less than forecast last month, the Vienna-based organization said in a monthly report. While the group boosted its 2015 estimate for U.S. oil production, it said annual growth will be slower than previously estimated as lower prices lead to investment cuts and less drilling. Iraq’s output extended gains from its highest level since 1978. 

• Gold Extends Winning Streak to Five Days on Swiss Move. Gold futures headed for the longest rally in more than six months as Switzerland’s decision to decouple its currency from the euro roiled currency markets, boosting demand for the metal as a haven. Gold futures for February delivery surged 2.1 percent to $1,260.30 an ounce at 10:24 a.m. on the Comex in New York, after touching $1,264.60, the highest since Sept. 8. Prices headed for a fifth straight gain, the longest rally since June 25. The metal climbed above its 200-day price average for the first time since September.

• Copper Demand Fading in Europe as Surcharges Drop to 5-Year Low. European demand for copper is weakening after consumers stockpiled the metal at the end of last year amid deepening concerns about the health of the region's economy. The surcharge added to excahnge prices, an indicator of demand, has fallen to the lowest since 2009, according to Bloomberg. The premium is about $35 a metric ton, down from $60 a ton in November. 

• Banks Stung by ‘Volatile Volatility’ as Fixed-Income Drops. Big banks have been begging for volatility. Just not the kind they got last quarter. JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) posted their worst combined quarterly trading revenue since 2011, led by a 23 percent drop in fixed-income, currencies and commodities, or FICC. That contributed to the first annual decline in aggregate net income for the three biggest U.S. banks since the financial crisis. Their stocks fell.

• She's No Greenspan: Yellen Signals She Won't Babysit Markets in Turmoil. Janet Yellen is leaving the Greenspan “put” behind as she charts the first interest-rate increase since 2006 amid growing financial-market volatility. The Federal Reserve chair has signaled she wants to place the economic outlook at the center of policy making, while looking past short-term market fluctuations. To succeed, she must wean investors from the notion, which gained currency under predecessor Alan Greenspan, that the Fed will bail them out if their bets go bad -- just as a put option protects against a drop in stock prices. 

• Lennar(LEN) Shares Tumble as Homebuilder Profitability Weakens. Lennar Corp. (LEN) shares slid after the homebuilder reported increased incentives and narrowing margins, adding to concern that the industry is facing reduced profitability. The Miami-based company, after reporting an almost 50 percent increase in fiscal fourth-quarter profit, said on a conference call Thursday that profit margins are being hurt by a reduced ability to raise prices. The shares sank 5.9 percent to $43.07 at 1:35 p.m. in New York after dropping as much as 9percent, the biggest intraday decline since June 2012. The Standard & Poor’s Supercomposite Homebuilding Index tumbled 5.4 percent. “Across the board, we’re seeing intensified competition as builders go out and chase volume,” Lennar Chief Executive Officer Stuart Miller said on the call.

CNBC:

• Banks searching for answers on awful earnings. (video)

ZeroHedge: 

• "It's Carnage" - Swiss Franc Soars Most Ever After SNB Abandons EURCHF Floor; Macro Hedge Funds Crushed. (graph)

• Crude Collapses Almost 10% From Post-SNB Highs, Erases Yesterday's OPEX Ramp. (graph)

• Philly Fed Crashes From 21 Year Highs To 12 Month Lows, Employment Tumbles. (graph)

• Swiss Stocks Collapse Most In 25 Years: Surveying The European Close Carnage. (graph)

• US Equity Market Liquidity Evaporates To 3 Year Lows. (graph)

• Best Buy(BBY) Is Worst Buy: Stock Crashes After Goldman "Buy" Upgrade.

• Core Producer Prices Jump 0.3%, MOre Than Expected As Sliding Energy Prices Drag Headline PPI Down 0.3%. (graph)

• Initial Jobless Claims Surge Above 300k, Highest Since June 2014. (graph)

• Bank Of America(BAC) Misses Revenue By $2 Billion As Trading Revenue Collapses; Fires Thousands.

Business Insider: 

• One Of The Best Predictors Of Recessions Is Rapidly Approaching The Here-Comes-A-Recession Level. (graph)

• Hedge Funds Got Whacked By The Swiss Franc Rally.

• Putin Just Made A Power Grab For Russia's Private Sector.

Telegraph: 

• World deflationary forces have swept away Switzerland's defences. A month ago the Swiss authorities were still claiming that their currency floor was crucial to prevent a deflation trap. They were right. 

• Cheap oil won't save the world economy, says IMF. Christine Lagarde says growth remains ‘too low, too fragile, and too lopsided’ despite crash in energy prices. 

AfD's Henkel:

• Germany Should Leave Euro After EU Court Opinion. Germany should leave euro area after European Court of Justice opinion backed ECB's OMT bond-buying program, Hans-Olaf Henkel, deputy head of the anti-euro Alternative for Germany party and European Parliament member, says in e-mailed statement. Decision means German govt, parliament and Bundesbank have lost control over spending in addition to currency. ECB's Draghi now has "free hand to finance southern euro states at the expense of German taxpayers and their children." "Germany must now leave the euro area, either alone or together with other euro countries."

Corriere della Sera:

• Italy May Postpone Balanced Budget Goal With EU Rules. With new EU rules, Italy may be able to postpone its balanced budget goal beyond 2017 and have additional EU4b-EU5b to spend for public investments this year.

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.04%

Sector Underperformers:

• 1) Homebuilders -5.23% 2) Oil Tankers -2.44% 3) Biotech -2.21%

Stocks Falling on Unusual Volume:

• JPM, WDR, BAC, PHM, RYL, DPLO, KBH, DHI, MDC, Z, ESPR, PODD, FDO, BBY, LPSN, XON, LEN, BBRY, MOV, DLTR, SAGE, KITE, REG, HVB, DPZ, QURE, CPSI, MGA, KBH, TZOO, DHI, DG, CUDA, C, FXCM, OVAS and LPSN

Stocks With Unusual Put Option Activity:

• 1) JNPR 2) TOL 3) KRE 4) ITB 5) COH

Stocks With Most Negative News Mentions:

• 1) DHI 2) PODD 3) GS 4) BBY 5) OMC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.31%

Sector Outperformers:

• 1) Gold & Silver +5.68% 2) Foods +.82% 3) Airlines +.66%
  

Stocks Rising on Unusual Volume:

• PAYC, SWN, FLML, XON, PPC, TSM, IBN, GG, HDB, W and KLAC

Stocks With Unusual Call Option Activity:

• 1) MAC 2) GSAT 3) FOXA 4) NEM 5) KRFT
  

Stocks With Most Positive News Mentions:

• 1) NOC 2) LLY 3) CSX 4) GLW 5) PPC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Bank of Russia Picks New Monetary Policy Chief as Ruble Plunges. Russia’s central bank replaced its head of monetary policy after a series of emergency measures failed to contain the ruble’s decline, drawing criticism from President Vladimir Putin. Dmitry Tulin, a former central bank official who also worked at the International Monetary Fund and Deloitte LLP, will take on Ksenia Yudaeva’s role as first deputy governor in charge of monetary policy, the Bank of Russia said in a statement yesterday. Yudaeva, who remains a first deputy to Governor Elvira Nabiullina, will focus on forecasting, strategy and financial stability, she told reporters in Moscow. 

• The New Problem Putin Has as Ruble Rout Eases: Chart of the Day.

• China's Credit Growth Surges; Shadow Banking Stages a Comeback. China’s shadow banking industry staged a comeback in December as equity investors and local governments contributed to a surge in credit, underscoring challenges for a central bank trying to revive growth without exacerbating risks. Aggregate financing was 1.69 trillion yuan ($273 billion), the People’s Bank of China said in Beijing today, topping the 1.2 trillion yuan median estimate in a Bloomberg survey. While new yuan loans missed economists’ forecasts, shadow lending rose to the highest in monthly records that began in 2012. 

• China Regulators Watching Online Loans as Risks Multiply. Rising failures in China’s peer-to-peer lending industry may pressure authorities to regulate a segment of Internet finance that almost quadrupled in size last year. The number of platforms that went bankrupt or had difficulty repaying money climbed to 275 in 2014 from 76 a year earlier, according to Yingcan Group, which tracks China’s more than 1,500 online lending sites. Last month, police started investigating the originator of two Sina Corp. (SINA) wealth products for illegal fundraising. 

• China Adds 3.5 Million Investors as Funds Exit: Chart of the Day. Chinese brokerages welcomed more individual investors the past six weeks than any similar period in seven years. Those 3.5 million new customers are being greeted by some fund managers on the way to the exits.

• India Cuts Rates in Unscheduled Move After Inflation Drop. Reserve Bank of India Governor Raghuram Rajan unexpectedly cut interest rates to help revive growth in Asia’s third-largest economy after a slide in the inflation rate. In an unscheduled review, Rajan lowered the benchmark repurchase rate to 7.75 percent from 8 percent, he said in a statement today, the first reduction since May 2013. 

• Bank of Korea Cuts 2015 Forecasts for Inflation, Economic Growth. South Korea’s central bank cut its forecasts for consumer prices and economic expansion this year following a policy meeting at which it kept the benchmark interest rate unchanged at a record low. Inflation will slow to 1.9 percent, from a previous estimate of 2.4 percent, Governor Lee Ju Yeol said today after the bank held the seven-day repurchase rate at 2 percent. Gross domestic product growth is expected to ease to 3.4 percent, compared with an earlier projection of 3.9 percent.

• Most Asian Stocks Advance as Japan Rebound Outweighs U.S. Sales. Most Asian stocks rose as a rebound by Japanese energy companies and exporters outweighed disappointing U.S. retail sales. About two shares rose for each that fell on the MSCI Asia Pacific Index (MXAP), which lost 0.1 percent to 137.35 as of 9:16 a.m. in Tokyo, before markets opened in China and Hong Kong.

• U.S. Output Gains Bolster Concern Over Oil Glut Sending Prices Back Down. Oil resumed its decline after the biggest gain since June 2012 as U.S. crude production increased, bolstering speculation a global supply glut that spurred last year’s price collapse may persist. Futures dropped as much as 0.9 percent in New York. U.S. output surged to 9.19 million barrels a day last week, the fastest pace in weekly records dating back to January 1983, the Energy Information Administration reported yesterday. Crude may fall below a six-month forecast of $39 a barrel and rallies could be thwarted by the speed at which lost shale production can recover, according to Goldman Sachs Group Inc.

• U.S. Oil Output Will Grow Even When Rigs Are Idle: Chart. “We are still riding the wave of the drilling activity that took place when prices were higher,” said Michael Cohen, an analyst at Barclays Plc in New York. Oil production may grow even as the rig count falls due to “the rapid productivity gains in many different places,” he said. 

• Nowhere to Hide for Miners as Copper Joins Commodity Rout. Copper’s plunge is leaving the world’s largest mining companies with nowhere left to hide from the rout engulfing commodities and increasing pressure on them to cut spending and dividends. Copper fell as much as 8.7 percent yesterday in London, triggering a selloff in mining equities including BHP Billiton Ltd. (BHP), Glencore Plc (GLEN) and Rio Tinto Plc. (RIO) The metal is down 12 percent on the London Metal Exchange this year amid concern about a slowdown in China, the biggest consumer of metals.

• Iron Ore Forecasts Cut by UBS on Supply Growth and Oil Rout. Iron ore will extend losses as the biggest producers expand low-cost supply and demand growth stays weak, according to UBS Group AG, which cut price forecasts and listed the commodity as its least-favored metal. Miners’ shares fell, with Fortescue Metals Group Ltd. (FMG) down 17 percent this week. Cheaper energy prices are lowering the cost of mining and shipping metals including iron ore, according to the bank, which forecast a rising global glut. The raw material will average $66 a metric ton this year, 22 percent less than previously forecast, and $65 in 2016, down 21 percent, it said. Surging low-cost supplies from BHP Billiton Ltd. (BHP), Rio Tinto Group and Vale SA are outpacing demand growth in China, spurring a 47 percent plunge in prices last year. UBS’s price-forecast cuts follow similar reductions yesterday from Citigroup Inc., which cited rising supplies and cheaper oil. Among projects set to start output this year amid the bear market is the A$10 billion ($8.2 billion) Roy Hill mine in Australia’s Pilbara.

• Global Gold Demand Seen Rising 15% by HSBC on Asia-to-ETP Buying. Gold demand will rebound in 2015 as bullion consumption in Asia increases and investors return to exchange-traded products backed by the metal, according to HSBC Securities (USA) Inc. Global demand may rise 15 percent to 4,127 metric tons this year, analysts James Steel and Howard Wen wrote in a report dated Jan. 14. Consumption reached a record 4,582.3 tons in 2011, when prices climbed to a peak of $1,921.17 an ounce, according to data from the World Gold Council.

Wall Street Journal: 

• Months of Airstrikes Fail to Slow Islamic State in Syria. Militant Group Has Gained Territory Despite U.S.-Led Strikes, Raising Concerns of the Obama Administration’s Mideast Strategy. More than three months of U.S. airstrikes in Syria have failed to prevent Islamic State militants from expanding their control in that country, according to U.S. and independent assessments, raising new concerns about President Barack Obama’s military strategy in the Middle East. 

• French Jews Face Hate They Left Africa to Escape. France Was Supposed to Be a Safe Haven for Jews Fleeing North Africa Decades Ago. 

• RadioShack Prepares Bankruptcy Filing. Struggling Electronics Chain, in Talks with Lenders, Could File as Soon as Next Month. RadioShack Corp. is preparing to file for bankruptcy protection as early as next month, people familiar with the matter said, following a sputtering turnaround effort that left the electronics chain short on cash.

• Apache(APA) to Lay Off Roughly 5% of Staff. Houston Energy Company to Lay Off As Many As 250 This Week.

• Why We’re Losing to Radical Islam. Fourteen years after 9/11, we still lack a strategy. Congress should lead with hearings on the enemy and how to prevail.

Fox News:

• Fox News Poll: Voters want Obama to sign bill approving Keystone pipeline.

• Lawmakers urge new US strategy as Boko Haram rampages through Africa. (video) One of the most brutal and murderous Islamist militant groups has been steadily gaining ground, inflicting a streak of atrocities shocking by even their standards -- and it's not Al Qaeda or the Islamic State.

MarketWatch.com:

• How to defend your money from the emerging bear market. Another trading day, another bout of volatile stock market action. Yet most investors nowadays aren’t too concerned about the market. This is what happens at market tops. Skeptics are ridiculed as “naysayers,” “permabears” or “doom-and-gloomers.” As the bull market goes higher, many investors think that maybe it really is different this time. Maybe central banks have the power to keep markets levitated indefinitely. Meanwhile, the bubble gets bigger and bigger, until complacent investors accept the bubble as the “new norm.” Nowadays, uber-bulls believe this market is unstoppable, while some experts have made predictions of Dow 20,000 in 2015.

Zero Hedge: 

• Surprise!! Japanese Stocks Surge After Machinery Orders Crash 14.6% - Worst In 5 Years. (graph)

• Markets Turmoiled But Crude 'Buying Panic' Lifted Stocks "Off The Lows". (graph)

• Skyscraper Index Goes Global. (graph)

• Lottery Sales Are Collapsing. (graph)

• What Happens To High-Wage Jobs Next? (graph)

• The Last 3 Times This Happened, The US Was In Recession. (graph)

• 2014's "Robust" Jobs Market Produced No Wages, And Now No Spending. (graph)

• Russia Cuts Off Ukraine Gas Supply To 6 European Countries.

• Goldman Sachs(GS) Warn Oil Prices May "Undershoot" $39. (graph)

Business Insider:

• The End Of OPEC As We Have Known It Is Here.

• Al Qaeda Is Back In A Big Way.

• BAML: Dr. Copper Is Shouting 'Sell' Chinese Stocks. (graph)

• FBI Arrests Ohio Man For Allegedly Plotting ISIS-Style Attack On Capitol.

• Saudi Arabia Is Building A 600-Mile 'Great Wall' To Shield Itself From ISIS.

Reuters: 

• Carlos Slim becomes NY Times(NYT) largest shareholder. New York Times Co said Mexican billionaire Carlos Slim has increased his stake to 16.8 percent, becoming the largest shareholder of the company. 

• Rural India slowdown threatens Modi's promise of "better days". Sugarcane grower Nilesh Kadam has abandoned plans to buy a tractor. He doesn't have enough money, like many Indian farmers hit by erratic weather and sliding prices for the cotton, soybean and rubber they produce. 

• Nasdaq(NDAQ) plans challenge to CME(CME) and ICE(ICE) in energy derivatives. Exchange operator Nasdaq OMX Group is considering entering the energy derivatives market in a challenge to CME Group and Intercontinental Exchange Inc, according to documents seen by Reuters.

Telegraph: 

• Europe's imperial court is a threat to all our democracies. The European Court of Justice has this time departed a long way from the rule of the law, even by its own elastic standards. The European Court of Justice has declared legal supremacy over the sovereign state of Germany, and therefore of Britain, France, Denmark and Poland as well. The ECJ's advocate-general has not only brushed aside the careful findings of the German constitutional court on a matter of highest importance, he has gone so far as to claim that Germany is obliged to submit to the final decision. "We cannot possibly accept this and they know it," said one German jurist close to the case.

Handelsblatt:

• German Politician Sees Conflict Over EU Court Bond Ruling. Klaus-Peter Willsch, economics adviser for Germany's CSU/CDU parliamentary faction, says European Court of Justice ruling on European Central Bank's bond-buying plan may provoke a legal conflict with the Federal Constitutional Court, citing interview. The Karlsruhe-based constitutional court designated the OMT program as incompatible with existing law and the European court ruling can't simply wipe away those concerns. Two institutions heading into a legal conflict unless the ECJ plausibly explains why their ruling isn't contrary to European law. Says a rift has opened up in Europe over the ECB's crisis management strategy. ECB monetary, financial and economic policies have become entangled in a Gordian knot.

Bild:

• German Industry Official Warns of 'Artificial' Inflation. Martin Wansleben, managing director of the DIHK national industry and trade chambers, says that low inflation in 2014 and decline in oil prices will result in a real wage gain of EU5b. European Central Bank's bond purchase program will lead to contrived rise in inflation rates. ECB needs to be cautious about increasing inflation at any cost, he said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 118.5 -.5 basis point.

• Asia Pacific Sovereign CDS Index 75.75 unch.

• S&P 500 futures +.05%.

• NASDAQ 100 futures  +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BLK)/4.68

• (LEN)/.96

• (FAST)/.40

• (BAC)/.31

• (C)/.09

• (PPG)/1.99

• (INTC)/.66

• (SLB)/1.46

Economic Releases
8:30 am EST

• Empire Manufacturing for January is estimated to rise to 5.0 versus -3.58 in December.

• PPI Final Demand for December is estimated to fall -.4% versus a -.2% decline in November.

• PPI Ex Food & Energy for December is estimated to rise +.1% versus unch. in November. 

• Initial Jobless Claims are estimated to fall to 290K versus 294K the prior week.

• Continuing Claims are estimated to fall to 2400K versus 2452K prior.

10:00 am EST

• Philly Fed Business Outlook Index for January is estimated to fall to 18.7 versus 24.5 in December. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The China FDI report, weekly EIA natural gas inventory report, Bloomberg US Economic Survey for January, weekly Bloomberg Consumer Comfort Index and (BBY) holiday results could also impact trading today.

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