Tuesday Watch

Weekend Headlines 
Bloomberg:

• Ukraine Says Russians Cross Border as Airport Battle Rages. Two battalions of Russian soldiers crossed the border into Ukraine, the National Security Council in Kiev said, as government forces and pro-Moscow rebels battled for control of the Donetsk airport. The accusation follows months of complaints from the government in Kiev that Russian President Vladimir Putin is sending funds, weapons and fighters to support a separatist insurgency in Ukraine’s easternmost regions. Putin denies any military involvement in Ukraine, and Russian Defense Ministry spokesman Andrei Bobrun declined to comment when contacted by Bloomberg on Monday in Moscow. “Ukrainian and military intelligence confirms the entering from Russia into Ukrainian territory of men and equipment,” Ukrainian Prime Minister Arseniy Yatsenyuk said in Kiev on Monday. The rebels’ tanks, howitzers, artillery and anti-aircraft systems “can’t be bought at a bazaar in Donetsk or the Russian Federation. They can only come from the stock of the Russian Defense Ministry,” he said.

• Russia Cut to Baa3 by Moody’s on Oil as Junk Rating Looms. Russia’s credit rating was cut to the lowest investment grade by Moody’s Investors Service as plunging oil prices and the worst currency crisis since 1998 drag on growth. Moody’s lowered the country to Baa3, one step above junk, from Baa2. The credit grade matches those of Standard & Poor’s and Fitch Ratings. The rating, on par with India and Turkey, is on review for a further reduction, Moody’s said in a statement.  

• IMF Cuts Global Economic-Growth Forecast by Most in Three Years. The IMF made the steepest cut to its global-growth outlook in three years, with diminished expectations almost everywhere except the U.S. more than offsetting the boost to expansion from lower oil prices. The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the International Monetary Fund said in its quarterly global outlook released late Monday in Washington. The Washington-based lender also cut its estimate for growth next year to 3.7 percent, compared with 4 percent in October.

• Belgium Deploys Troops Amid Threat From Syrian Jihadis. Belgium is deploying more troops on its streets to counter a heightened terror threat as the fallout from last week’s attacks in France led to arrests across Europe and fueled protests in several African countries. Security forces have arrested at least 28 people across the continent after attacks in Paris last week by Islamist gunmen and a deadly police raid on Thursday in the eastern Belgian town of Verviers. The threat is an “urgent and very serious challenge,” Europol Director Rob Wainwright told Sky News today.

• Here’s Why Losses Triggered by Franc-Cap Removal Were So Painful. It’s easy to see why the Swiss National Bank’s surprise decision to abandon the cap on the franc versus the euro wreaked havoc on currency markets. You just have to look at data from the U.S.’s largest derivatives exchange. Speculators using futures to wager the franc would weaken versus the dollar had more than $3 billion worth of such bets as of Jan. 13, according to Bloomberg calculations based on Commodity Futures Trading Commission data. The SNB’s decision two days later to drop the cap sparked a rush for the exit as the franc surged 21 percent versus the greenback.

• China Brokers Fall as Regulator Curbs New Margin Accounts. Chinese brokerages’ shares plunged after the securities regulator suspended three of the biggest firms from adding margin-finance and securities lending accounts for three months following rule violations. Citic Securities Co. (600030), the nation’s biggest broker, fell 14 percent as of 9:35 a.m. in Hong Kong. Haitong Securities Co. and Guotai Junan Securities Co. were among others whose shares tumbled. 

• China’s $20 Trillion Headache Underscored by Stock Market Swings. For China’s central bank, the 36 percent stock market rally through Jan. 16 spurred in part by a surprise November interest-rate cut is the latest reminder that it’s easier to unleash money than to guide it to the right places. Since Zhou Xiaochuan became People’s Bank of China governor in late 2002, the broad money supply base has expanded almost seven times to 122.8 trillion yuan ($20 trillion) while the economy has grown about five times. That translates to a M2/GDP ratio of about 200 percent versus about 70 percent in the U.S., according to data compiled by Bloomberg. 

• Draghi asset-backed bond stimulus seen choked by red tape. Mario Draghi’s plan to stimulate Europe’s economy by buying asset-backed securities is underwhelming investors, with purchases bogged down by bureaucracy and paperwork.

• Banks Struggle to Fight Speculation Denmark’s Euro Peg at Risk. Banks in Scandinavia are joining the Danish government in trying to persuade offshore investors that the Nordic country isn’t about to copy Switzerland and drop its euro peg. SEB AB, the Nordic region’s largest currency trader, said it’s been fielding calls from hedge funds wondering whether Denmark might be next after the Swiss National Bank shocked markets by exiting a three-year-old euro cap on Jan. 15. Economy Minister Morten Oestergaard a day later sought to silence doubts surrounding Denmark’s currency peg, which he said remains “secure.” 

• China Dream Ends for Handan as Steel Slump Spurs Property Losses. Hao is among the collateral damage as China reins in years of debt-fueled investment-led growth that’s evoked comparisons to the period preceding Japan’s lost decades. As policy shifts China toward greater consumption and innovation-led growth, Handan’s reliance on the steel industry for expansion has left it among cities feeling the brunt of adjustment pain.

• Asia Stocks Advance, Led by Tech Shares, Ahead of China GDP Data. Asian stocks rose, led by technology companies, as investors awaited data from China on gross domestic product, factory output and retail sales. The MSCI Asia Pacific Index (MXAP) gained 0.1 percent to 137.74 as of 9:05 a.m. in Tokyo.

• Ibovespa Slumps as Economists Cut Growth Projections; CPFL Sinks. The Ibovespa fell the most in two weeks as CPFL Energia SA led a plunge in utilities and economists reduced their growth forecasts for Brazil. The MSCI Brazil/Consumer Discretionary Index dropped the most in a week, led by retailer Lojas Americanas SA. Utility companies sank after website UOL reported that a blackout hit at least four Brazilian states, without saying how it got the information. Vale SA slid with iron ore. The Ibovespa dropped 2.6 percent to 47,758.01 at the close of trading in Sao Paulo, as 64 of its 68 stocks retreated. The real weakened 1.4 percent to 2.6582 per dollar at 5:31 p.m. local time. Analysts lowered their outlook for Brazil’s growth in 2015 to 0.38 percent from 0.4 percent, according to the median forecast in a central bank survey published Monday.

• European Stocks Rise Third Day Amid Expectations of ECB Stimulus. European stocks advanced for a third day, extending their highest level since 2008, amid investor expectations the European Central Bank will announce a plan for quantitative easing this week. The Stoxx Europe 600 Index added 0.2 percent to 353.18 at the close of trading. The equity gauge pared gains in the final hour after earlier increasing as much as 0.7 percent.

• Treasuries Post Best Start to Year Ever as Global Appetite Rises. Treasuries extended the best start to a year on record after the Swiss National Bank’s unexpected decision to end its exchange-rate cap and cut interest rates fueled appetite for higher-yielding U.S. bonds. The 30-year bond yield reached a record low as oil prices tumbled to the least in 5 1/2 years, sinking inflation expectations. The benchmark 10-year note yield touched the lowest since 2013, buoyed by demand from investors seeking higher yields on speculation the European Central Bank will unveil expanded bond-buying, or quantitative easing, on Jan. 22. 

• Oil Drops Below $48 a Barrel as U.S. Resists Market Intervention. Oil traded below $48 a barrel as the U.S. signaled it won’t intervene in the market even as prices decline. Futures fell as much as 3 percent in New York from the Jan. 16 settlement after floor trading was closed Monday for the Martin Luther King Jr. holiday.

• Iran Sees ‘No Threat’ from Oil at $25 If Prices Keep Tumbling. OPEC has no immediate plan to cut its output target for crude, and Iran is strong enough to withstand a deeper slump in prices even if the country must sell at $25 a barrel, Oil Minister Bijan Namdar Zanganeh said. 

• HSBC Cuts GDP Outlook for 13 Oil Exporters From Russia to U.A.E. The plunge in oil prices prompted HSBC Holdings Plc to cut this year’s economic outlook for 13 crude exporters across central, eastern Europe and the Middle East as public spending drops. Economic growth in the grouping will slow to 1.8 percent, compared with an estimate of 2.6 percent in October, the London-based bank said in a report yesterday. Russia’s gross domestic product may shrink 3.5 percent, compared with an October forecast of a one percent-contraction, the bank said. 

• China Steelmaking Slows as Exports Surge While Demand Cools. China’s crude steel production growth slowed last year as domestic demand weakened and the country exported record volumes. China, the world’s largest steelmaker, produced 822.7 million metric tons in 2014, a record, according to data released by the National Bureau of Statistics on Tuesday in Beijing. Output grew by 0.9 percent last year, compared with a 7.5 percent increase the year before, according to the bureau’s data. Production in December rose for the first time in four months to 68.09 million tons. “You’ve got an industry in overcapacity with utilization rates that are not providing the producers with any pricing power,” Daniel Kang, an analyst at JPMorgan Chase & Co. in Hong Kong, said before the data was released. “We’re expecting growth to be fairly minimal.”

• Gold Assets in Biggest ETP Surge Most Since 2010 on Haven Buying. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, surged the most in more than four years. Assets in the SPDR fund, which counts billionaire John Paulson as its biggest holder, jumped 1.9 percent to 730.89 metric tons on Jan. 16. That’s the biggest gain since May 25, 2010. This week the holdings climbed 3.3 percent. 

• China's copper short sellers not done yet, Citrine fund says. The biggest copper selloff in three years isn't over yet because Chinese traders will probably keep shorting the metal, according to Citrine Capital Management.

• AT&T(T) to Record $10 Billion in Charges for Fourth Quarter. AT&T Inc. (T) said its fourth-quarter results will include a pretax loss of $7.9 billion to account for changes in its pension and retiree benefit plans. The results will also include a $2.1 billion noncash charge because certain copper assets are no longer needed as customer demand declines for older voice and data products, the Dallas-based company said in a regulatory filing Friday. AT&T said its units’ operating results and margins won’t be affected.

Wall Street Journal:

• Fed Officials on Track to Raise Short-Term Rates Later in the Year. While Europeans Weigh Bond-Buying Program to Boost Growth, U.S. Officials Are Upbeat on America’s Economic Prospects.

• EU Considers Taxing Google(GOOG), Other U.S. Internet Firms. Bloc Seeks Single Digital Market in Europe; Auto Sector Is a Concern, Oettinger Says.

Fox News:

• Islamic State backers emerge in Afghanistan, ex-Guantanamo inmate reportedly recruiting. The Islamic State terror group may be making inroads in Afghanistan just weeks after the U.S. ended its 13-year combat mission, with a former Guantanamo Bay detainee said to be involved in the recruiting effort.

MarketWatch.com:

• ‘American Sniper’ shatters January box-office record. Clint Eastwood’s “American Sniper” has shattered the record for highest-grossing January opening weekend -- earning more than twice the gross of the previous record, held by last winter’s “Ride Along.”

• Switzerland could act on currency again, central banker says.

CNBC:

• China economy grows at slowest pace in 24 years.

• Janjuah on 2015: Oil at $30; bonds to go crazy. If you thought 2014 was volatile, hold on to your hats this year as the price of oil could hit $30 a barrel and the bond markets will outperform, according to Bob Janjuah, a closely-watched strategist from Nomura Securities.

Zero Hedge:

• Japan Set To Surpass China As America's Largest Creditor. (graph)

• WTF Chart Of The Day: "Hopium" Edition. (graph)

• This Won't End Well. (graph)

• Volatility Is Back. (graph)

• 5 Things To Ponder: A View Of A Correction.

• The Greek Bank Run Spreads To All Four Largest Banks.

• Counterparty Concerns Surge: US Bank Credit Risk At 11-Month Highs. (graph)

• There Is No Inflation (Unless You Eat Food, Use Water, Live In A House, Get Sick, Go To School, Or Do Taxes).

• Richard Koo Crushes The QE Dream (In 1 Brief Paragraph). (graph)

• The SNB's Wake-Up Call: Keynesian Central Banking Is Destroying Money And Markets. (graph)

• Dramatic Drone Footage Showing The Devastation At The Donetsk Airport. (video)

• The ECB's 4 QE Scenarios, And Why CS Thinks Waking From The "QE Dream" May Be The Worst Possible Outcome.

• "The Consequences Of The SNB Decision Will Not Be Limited To Switzerland".

• "Weak" Market Closes Suggest Trouble Ahead For Stocks. (graph)

• Everest Macro Hedge Fund Blows Up After Nearly $1 BIllion In Swiss Franc Losses.

• 'Pin' Meet 'Housing Bubble 2.0'.

• Central Banks Upside Down.

• The ECB Will Fail Given The "History Lessons Of US And Japan", Warns Deutsche Bank.

• Quote Of The Day: "Venezuela Must Deepen Socialism To Improve Economy" - Maduro. Having apparently failed on his mission to Asia to garner enough support to drag oil prices up to the $100 level he "believes is fair," Maduro went on to explain how he will "change the food supply system, not the economic model," to solve the nation's crisis, since "most of the private sector are parasitic bums."

• Draghi's Looming "Anti-Integration" QE: It's The Structure (Not Size) That Matters.

• The Next Victim Of Crashing Oil Prices: Housing. (graph)

• Ukraine's Poroshenko Rejects Putin's "Peace Plan"; Massive Shelling Ensues.

• Europe's Scariest Chart. (graph)

• SocGen Warns "Hide In Cash" - Avoiding Risk Will Be Pivotal In 2015. (graph)

• What We Can Learn From The Richest Man In Asia.

• Chinese Stocks Crash Following Renewed Crackdown On Margin Accounts. (graph)

• Architect Of Abenomics Says No More BOJ Easing.

• Yemeni Government Admits It Has Lost Control Of Nation Amid "Attempted Coup".

• 27 Facts That Show How The Middle Class Has Fared Under 6 Years Of Barack Obama.

• Christine Lagarde Calls For World To Embrace "New Multilateralism" Order In 2015.

• The End Of HFTs (And Price Discovery): America's Biggest Money Managers Launch Their Own Dark Pool.

• Why The ECB's QE Won't Work (In 4 Brief Minutes). (video)

• Chinese GDP Beats And Misses - Slowest Growth Since 1990's Tiannanmen Square Sanctions Hit. (graph)

Business Insider:

• Fitch Just Lowered Greece's Credit Outlook To 'Negative'.

• The US's Rhetoric On Assad Is Shifting In The Dictator's Favor.

• America Is In The Middle Of A New Cold War.

• The Middle-Class Decline Looms Over Obama's Legacy. Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office. Jobs have been added at the top and bottom of the wage scale, a Reuters analysis of labor statistics shows. In the middle, the economy has shed positions — whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators.

• Russia's Net Outflows Hit Their Highest Level Ever.

• The War In Ukraine Has Reached Another Critical Phase.

• FELIX ZULAUF: 2015 Will Be 'A Trader's Dream, But An Investor's Hell'.

• GUNDLACH: Here's The Bear Case For Stocks In 3 Charts. (graph)

• How We Know Russia's Economic Crisis Has Officially Arrived.

• The Scale Of The Chinese Real Estate Crash Is Terrifying.

• Students Are Blaming Michelle Obama On Twitter For New School Lunches. Desperate students are still taking to Twitter to reveal the horrors of school lunch under First Lady Michelle Obama’s rules, including empty chicken nuggets and complaints that meals taste like “prison food.”

Forbes:

• China Cities Signal Property Crash By Halting Apartment Sales. Without explanation, authorities in two Chinese cities have refused to issue approvals for transfers of apartments built by selected developers, including troubled Kaisa Group. Most analysts believe the extraordinary moves are related to Xi Jinping’s so-called anti-corruption campaign, but that explanation fails to explain certain crucial facts. There is reason to think there could be bankruptcy law factors behind the withholding of the approvals, which have unsettled markets in recent weeks. The bankruptcy explanation suggests a market correction is coming soon.

Reuters:

• Anti-bailout Syriza extends poll lead as Greece's election day nears. Greece's anti-bailout opposition party Syriza appears to be gaining momentum with less than a week before Sunday's snap election, moving further ahead of the co-ruling conservatives in three separate opinion polls. Syriza would garner 33.5 percent of the vote, up from 31.5 percent, while Prime Minister Antonis Samaras' New Democracy party, which has pushed through unpopular reforms as part of an international bailout, stood unchanged on 27 percent.

• Fertilizer maker Mosaic(MOS) forecasts bigger-than-expected Q4 profit. U.S. fertilizer company Mosaic Co on Monday estimated that it would post a larger fourth-quarter profit than expected and surpassed its targets for phosphate sales.

Financial Times:

• Energy bondholders at risk as bank loans ebb. With the price of US crude now less than 50 per cent of its recent peak of $107 a barrel, the likely consequence is that banks will significantly reduce their lending to energy firms across the US, forcing companies to look for alternative sources of financing on more punitive terms.

• S&P 500 earnings face dollar headwind. A sharp increase in the US dollar against both the euro and Japanese yen is expected to crimp profits for some of the country’s largest companies, with some strategists on Wall Street warning the currency’s gain and low energy prices could constrain quarterly S&P 500 earnings growth to just 3 per cent.

Bild:

• ECB Bond Buying Program Will Stall Reforms, Feld Says. France and Italy will continue to languish without reform, Lars Feld, economic adviser to German Chancellor Angela Merkel, said. ECB plans to approve purchase of govt bonds removes pressure on two countries to follow through with reforms. Will have a negative impact on German exports there.

China Finance:

• China Should be Cautious on Monetary Policy. Key of a prudent monetary policy is to provide a neutral and appropriate monetary and finance environment to structural adjustment, Zhang Xiaohui, head of the People's Bank of China's monetary-policy department, writes in the magazine's Jan. 16 issue. China should adjust monetary policy properly at appropriate time, and avoid doing too much or too little. The difficulty to manage liquidity is rising as affected by slower increase in yuan positions, fluctuation in asset prices and a more complex struture of banks' assets and liabilities.

Weekend Recommendations

• None of note

Night Trading

• Asian indices are -.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 122.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 76.5 +1.5 basis points.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DAL)/.77

• (MTB)/1.94

• (ATI)/.00

• (RF)/.21

• (BHI)/1.07

• (MTG)/.14

• (MS)/.50

• (HAL)/1.10

• (JNJ)/1.25

• (IBKR)/.06

• (CREE)/.23

• (NFLX).44

• (IBM)/5.41

• (AMD)/.01

• (CA)/.60

• (HGR)/.44

Economic Releases
10:00 am EST

• The NAHB Housing Market Index for January is estimated to rise to 58.0 versus 57.0 in December.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Retail Sales/GDP/Industrial Production data, German ZEW Sentiment Index and the Jefferies Winter Consumer Summit could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Stocks to Watch Tuesday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as global growth fears, rising European/Emerging Markets/US High-Yield debt angst and earnings concerns offset central bank hopes, short-covering and bargain-hunting. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

• S&P 500 2,019.42 -1.24%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,019.42 -1.24%

• DJIA 17,511.57 -1.27%

• NASDAQ 4,634.38 -1.48%

• Russell 2000 1,176.65 -.76%

• S&P 500 High Beta 32.39 -2.80%

• Wilshire 5000 21,015.06 -1.17%

• Russell 1000 Growth 946.08 -1.11%

• Russell 1000 Value 1,006.32 -1.29%

• S&P 500 Consumer Staples 507.61 +.31%

• Solactive US Cyclical 135.80 -2.22%

• Morgan Stanley Technology 979.12 -2.29%

• Transports 8,764.12 -1.06%

• Utilities 640.74 +2.75%

• Bloomberg European Bank/Financial Services 100.07 +2.13%

• MSCI Emerging Markets 39.38 -.19%

• HFRX Equity Hedge 1,174.59 +.18%
• HFRX Equity Market Neutral 989.44 +.14%

Sentiment/Internals

• NYSE Cumulative A/D Line 230,357 -.27%

• Bloomberg New Highs-Lows Index -384 -324

• Bloomberg Crude Oil % Bulls 27.50 +7.51%

• CFTC Oil Net Speculative Position 275,480 +2.49%

• CFTC Oil Total Open Interest 1,627,535 +8.13%

• Total Put/Call .91 -5.21%

• OEX Put/Call .64 -21.95%

• ISE Sentiment 130.0 +71.05%

• NYSE Arms .56 -61.64%

• Volatility(VIX) 20.95 +19.37%

• S&P 500 Implied Correlation 67.24 +2.48%

• G7 Currency Volatility (VXY) 11.49 +22.23%

• Emerging Markets Currency Volatility (EM-VXY) 11.06 +6.96%

• Smart Money Flow Index 16,463.45 -2.07%

• ICI Money Mkt Mutual Fund Assets $2.705 Trillion -.33%
• ICI US Equity Weekly Net New Cash Flow -$5.395 Billion

• AAII % Bulls 46.1 +12.4%

• AAII % Bears 21.5 -22.4%

Futures Spot Prices

• CRB Index 224.24 -.59%

• Crude Oil 48.69 +1.0%

• Reformulated Gasoline 135.88 +2.55%

• Natural Gas 3.13 +5.50%

• Heating Oil 166.56 -2.29%

• Gold 1,276.90 +4.37%

• Bloomberg Base Metals Index 169.02 -4.97%

• Copper 261.70 -5.16%

• US No. 1 Heavy Melt Scrap Steel 310.80 USD/Ton +.80%

• China Iron Ore Spot 68.61 USD/Ton -3.61%

• Lumber 311.90 -2.44%

• UBS-Bloomberg Agriculture 1,204.36 -2.81%

Economy

• ECRI Weekly Leading Economic Index Growth Rate -5.0% -60 basis points

• Philly Fed ADS Real-Time Business Conditions Index .3062 -5.20%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.38 -.77%

• Citi US Economic Surprise Index 7.20 -23.5 points
• Citi Eurozone Economic Surprise Index 3.80 -4.6 points

• Citi Emerging Markets Economic Surprise Index -15.70 +1.2 points

• Fed Fund Futures imply 48.0% chance of no change, 52.0% chance of 25 basis point cut on 1/28

• US Dollar Index 92.52 +.66%

• Euro/Yen Carry Return Index 142.11 -3.02%

• Yield Curve 135.0 -3.0 basis points

• 10-Year US Treasury Yield 1.84% -10.0 basis points

• Federal Reserve's Balance Sheet $4.476 Trillion +.37%

• U.S. Sovereign Debt Credit Default Swap 16.85 -3.78%

• Illinois Municipal Debt Credit Default Swap 180.0 -1.80%

• Western Europe Sovereign Debt Credit Default Swap Index 26.13 -10.1%

• Asia Pacific Sovereign Debt Credit Default Swap Index 75.10 +1.70%
  

• Emerging Markets Sovereign Debt CDS Index 333.29 +.64%
  

• Israel Sovereign Debt Credit Default Swap 74.50 unch.

• Iraq Sovereign Debt Credit Default Swap 380.52 -1.13%

• Russia Sovereign Debt Credit Default Swap 536.71 -6.96%

• China Blended Corporate Spread Index 384.77 +5.27%

• 10-Year TIPS Spread 1.60% -1.0 basis point

• TED Spread 22.75 -.5 basis point

• 2-Year Swap Spread 24.25 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.25 -4.0 basis points

• N. America Investment Grade Credit Default Swap Index 72.99 +4.61% 
• America Energy Sector High-Yield Credit Default Swap Index 749.0 +5.51%

• European Financial Sector Credit Default Swap Index 66.10 -6.63%
  

• Emerging Markets Credit Default Swap Index 387.55 +2.37%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 90.0 +1.0 basis point

• M1 Money Supply $2.878 Trillion -1.09%

• Commercial Paper Outstanding 1,029.60 -5.2%

• 4-Week Moving Average of Jobless Claims 298,000 +7,500

• Continuing Claims Unemployment Rate 1.8% unch.

• Average 30-Year Mortgage Rate 3.66% -7 basis points

• Weekly Mortgage Applications 492.0 +49.14%

• Bloomberg Consumer Comfort 45.4 +1.8 points

• Weekly Retail Sales +3.80% -80 basis points

• Nationwide Gas $2.08/gallon -.09/gallon

• Baltic Dry Index 749.0 +5.64%

• China (Export) Containerized Freight Index 1,059.30 -.13%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 37.50 -6.25%

• Rail Freight Carloads 240,947 unch.

Best Performing Style

• Small-Cap Value -.4%

Worst Performing Style

• Mid-Cap Growth -1.4%

Leading Sectors

• Gold & Silver +4.4%

• Utilities +2.7%

• REITs +2.2%

• HMOs +2.1%

• Tobacco +1.6%

Lagging Sectors

• Steel -5.0% 

• Homebuilders -6.4%

• Disk Drives -6.4%

• Oil Tankers -7.5%

• Hospitals -7.5%

Weekly High-Volume Stock Gainers (11)

• FMI, TLYS, XON, FCE/A, MFLX, CLVS, PSG, MWIV, ALR, NPSP and BBW

Weekly High-Volume Stock Losers (25)

• SWN, NEWM, SF, DLTR, RYL, LEN, SCCO, MDC, DHI, PAYC, LGIH, IBKC, BBY, SEMI, THC, CUDA, ACM, TIF, DFRG, SNDK, MDLY, PODD, FIVE, FXCM and KBH

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Rising into Final Hour on Commodity Bounce, Central Bank Hopes, Yen Weakness, Energy/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 22.23 -.71%

• Euro/Yen Carry Return Index 142.23 +.75%

• Emerging Markets Currency Volatility(VXY) 11.08 +.4%

• S&P 500 Implied Correlation 68.06 +2.24%

• ISE Sentiment Index 123.0 +95.24%

• Total Put/Call .92 -9.80%

• NYSE Arms .87 -34.86% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.11 -1.45%
• America Energy Sector High-Yield CDS Index 747.0 +.86%

• European Financial Sector CDS Index 65.68 -1.97%

• Western Europe Sovereign Debt CDS Index 26.13 -2.68%
• Asia Pacific Sovereign Debt CDS Index 76.84 +2.59%

• Emerging Market CDS Index 387.27 -.58%

• China Blended Corporate Spread Index 384.77 +1.42%
• 2-Year Swap Spread 24.25 +.75 basis point

• TED Spread 22.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -18.25 -.5 basis point

Economic Gauges:

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

• Yield Curve 134.0 +1.0 basis point

• China Import Iron Ore Spot $68.61/Metric Tonne -.03%

• Citi US Economic Surprise Index 7.20 -4.5 points
• Citi Eurozone Economic Surprise Index -3.8 -3.2 points

• Citi Emerging Markets Economic Surprise Index -15.70 -.6 point

• 10-Year TIPS Spread 1.60 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +171 open in Japan

• DAX Futures: Indicating +59 open in Germany

Portfolio: 

• Higher: On gains in my biotech/tech/medical/retail sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Ukrainian Separatists Attack Airport as Kiev Sends Troops. Pro-Russian militants resumed their assault on Ukrainian government soldiers at Donetsk airport as President Petro Poroshenko sent more troops to the country’s eastern conflict zone. Ukrainian soldiers were holding their positions at the airport, repelling a “full-scale storm” from the separatists, Yuriy Biryukov, a military adviser to Poroshenko, said on his Facebook page today. Separatist leader Oleksandr Zakharchenko said yesterday his forces control 95 percent of the airport, which has become a focal point of the fighting. 

• FXCM Said in Talks With Jefferies for $200 Million Rescue. Jefferies Group is in talks to give FXCM Inc. (FXCM) a cash infusion of about $200 million, people with knowledge of the matter said, extending a lifeline to the currency brokerage hobbled by the Swiss central bank’s decision to let the franc trade freely against the euro. FXCM warned Thursday that client losses due to the Swiss National Bank’s action threatened the broker’s compliance with capital rules. The largest U.S. retail foreign-exchange broker, which handled $1.4 trillion of trades for individuals last quarter, said it was owed $225 million by clients.

• Short Sellers Now Taking Aim at Emerging-Market Bonds. The combination of plunging commodity prices and a soaring dollar is drawing short sellers to emerging-market debt. The two trends are battering the finances of many developing nations, squeezing export revenue and forcing them to rustle up more local currency to repay foreign debt denominated in dollars. Growing numbers of short sellers are betting this squeeze will keep driving down emerging-market bonds: Short interest on the $4.1 billion iShares J.P. Morgan USD Emerging Markets Bond ETF has almost tripled since November to 21 percent of shares outstanding, according to data compiled by Bloomberg and Markit Group Ltd. The fund has lost 2.2 percent since the end of October as developing-nation sovereign yields increased an average 0.45 percentage point. “Widening credit spreads in general and the continued plunge in oil prices are inducing people to want to take more short positions in EMB,” Peter Lannigan, a Stamford, Connecticut-based emerging markets strategist at CRT Capital Group LLC, said in a telephone interview this week. “Investors have traditionally looked at emerging markets as a commodity play.” 

• UBS’s Richest Clients Seen Flocking to Dollars After Swiss Franc Shock. (video) UBS Group AG (UBSG), the largest Swiss bank, said its wealthiest clients will be attracted to U.S. dollars after Switzerland roiled markets by scrapping the franc’s cap. Private-banking customers are concerned a stronger franc will hurt Switzerland’s economy and the businesses they own, Simon Smiles, Zurich-based chief investment officer for ultra-high-net-worth individuals at UBS, said on Friday in an interview. Clients worldwide have yet to decide on whether to change currency allocations, he said. The bank cut its growth forecast for Switzerland and predicts the country will slip into deflation this year.

• ECB Weighing QE Through National Central Banks, Spiegel Says. The plan, which tries to avoid a transfer of risk between member states, envisages purchases in line with the ECB’s capital key, with a limit of 20 percent to 25 percent on each country’s debt, Spiegel said in an article published today, without saying where it got the information. Greece will be excluded from the program because its bonds don’t fulfill the necessary quality criteria, the magazine said.

• Deutsche Bank, Barclays Seen Losing Millions Amid Swiss Rout. Deutsche Bank AG and Barclays Plc (BARC), two of the world’s largest currency dealers, were among the first banks to suffer losses after the Swiss central bank’s surprise decision to abandon a cap on the franc, people with knowledge of the matter said. Deutsche Bank lost $150 million on Thursday amid an unexpected surge in the Swiss franc, said one of the people, who asked not to be identified because the figure hasn’t been made public. Barclays’s losses were less than $100 million, another person said. The losses are still being calculated, and may spread to other asset classes, including equities, one of the people said. 

• The Swiss Just Made Things Worse for the Euro. The euro is shaping to be the biggest casualty of Switzerland’s decision to scrap its currency cap. Soon after the Swiss National Bank unexpectedly ended its three-year policy of keeping the franc weaker than 1.20 per euro, bearish bets on Europe’s common currency soared. While setting a record low versus the franc yesterday, the euro also plunged 3.5 percent against a basket of 10 developed-nation peers, the most since its 1999 debut, and reached an 11-year low against the dollar today.

• Europe Stocks Rise to Highest Since 2008 as Energy Shares Climb. European stocks rose to their highest level since 2008 as gains by oil producers outweighed a slump in Swiss shares. The Stoxx Europe 600 Index climbed 1.1 percent to 352.4 at the close of trading, after earlier losing as much as 0.9 percent.

• Oil Heads for Longest Weekly Losing Streak Since 1986. Oil advanced, paring an eighth weekly decline, as the International Energy Agency lowered forecasts for supplies from outside OPEC and said prices could recover. West Texas Intermediate crude rose as much as 4.7 percent in New York. The U.S. benchmark crude grade is heading for a loss of 0.6 percent this week, capping the longest run of weekly declines since March 1986. Non-OPEC oil producers will boost output this year at a slower rate than previously forecast, aiding a recovery in crude prices, the IEA said in its monthly market report.

• Citigroup(C) Said to Lose More Than $150 Million on Currency Swings. Citigroup Inc., the world’s biggest currencies dealer, lost more than $150 million after the Swiss central bank decided to let the franc trade freely against the euro, according to a person briefed on the matter. The losses occurred on the New York-based bank’s trading desks and aren’t tied to its relationships with FXCM Inc. and other retail trading platforms, said the person, who asked for anonymity because the information hasn’t been disclosed publicly. 

• Venture Funding of U.S. Startups Last Year Was Most Since 2000. The money spigots for U.S. startups opened last year to their widest since the peak of the dot-com boom in 2000. Venture capitalists pumped $48.3 billion into U.S. startups in 2014, according to data today from the National Venture Capital Association and PricewaterhouseCoopers, the most since investors piled $105 billion into closely held companies in 2000. The 2014 total was up 61 percent from $30 billion in 2013 and was more than double the $20.4 billion invested in 2009.

MarketWatch.com:

• Broker reassurances about Swiss exposure may be a red flag for the rest of us. 

• Jim Chanos downbeat on Exxon(XOM), Caterpillar(CAT), Intel(INTC).

Fox News:

• Police in Belgium, France, and Germany make arrests in latest anti-terror raids. (video)
  Dozens of terror suspects were arrested in Belgium, France, and Germany early Friday, a day after Belgian authorities said that they halted a plot to attack police officers by mere hours.
  Eric Van der Sypt, a Belgian federal magistrate, told a news conference Friday in Brussels that 13 people had been detained in Belgium in connection with the plot, with another two arrested in neighboring France. He added that a dozen searches had led to the discovery of four military-style weapons including Kalashnikov assault rifles.

CNBC:

• China shadow banking chills stimulus hopes. "A surge in shadow bank credit – entrusted loans, trust loans, banker's acceptances, corporate bonds and non-financial enterprises' domestic equity – was responsible for December's considerably larger than expected increase in aggregate financing," said Tim Condon, head of Asia research at ING in a note on Friday, noting that shadow bank credit exceeded new yuan-denominated loans for the first time in 2014.

• Market cools for million-dollar homes. Sales of homes for $1 million or more fell 20 percent in the fourth quarter compared with those in the third quarter and posted their worst year-on-year growth since 2011, according to the CNBC Luxury Real-Estate Report, conducted by Redfin, a real-estate brokerage and research firm.

ZeroHedge:

• What Really Happened At The SNB Yesterday: One Person's Take.

• US Oil Rig Count Collapses To Over 4 Year Low (as Production Hits Record High). (graph)

• Greek Debt Will Not Be Included In Bond-Buying Plan; ECB's Knot Warns QE "Distorts Markets"

• Swiss Stocks Slump For Worst Week Since Lehman, Bond Yields Negative To 12 Years. (graph)

• EURUSD Tumbles Below 1.15, Near 12-Year Lows. (graph)

• "Some Folks Were Lying?" Medicaid Chief Tavenner 'Steps Down' After Obamacare "Error".

• Goldman(GS) Tumbles On Worst FICC Revenue Since Lehman, Average Employee Comp Drops To 2012 Levels. (graph)

• Consumer Prices Tumble Most In 6 Years, Core Inflation Misses. (graph)

• Industrial Production Drops By Most In 11 Months (After Biggest Surge Since 2010). (graph)

• Gold Hits $1270 - 4 Month Highs. (graph)

• Despite Dismal Retail Sales, US Consumer Are The Most Exuberant In 10 Years. (graph)

Business Insider: 

• Foreign-Exchange Brokers Are Going Bankrupt In The Swiss Franc's Surge.

• The Head Of Russia's Largest Private Oil Company Thinks Oil Could Go To $25.

Reuters:

• ECB's Coeure says QE must be big to be efficient -paper. Any programme of quantitative easing must be big to be efficient, European Central Bank Executive Board member Benoit Coeure said on Friday in a newspaper interview. "For it to be efficient, it has to be big," Coeure told the Irish Times newspaper. "How big is big enough? This has to be an informed decision based on what we know are the transmission channels."

Financial Times: 

• ECB set to bow to German pressure over QE. The European Central Bank is set to unveil a programme of mass bond buying next week to save the eurozone from deflation, but has bowed to German pressure to ensure that its taxpayers are not liable for any losses incurred on other countries’ debt.