Thursday Watch

Evening Headlines 
Bloomberg:

• Revenge of Disaffected Europe Risks New Crisis Sparked in Greece. They speak different languages, they come from different backgrounds, yet all have the same message of frustration that’s threatening to redraw the European political map over the next year. Starting with elections this Sunday in Greece and heading west to Ireland via Britain and Spain, polls show Europeans will vent their anger over issues from widening income disparities and record unemployment to unprecedented immigration. For Athens pensioner Irini Smyrni, the moment she’d had enough was when her younger daughter lost her job with the government last year. For Dublin florist Nicola Johns, it was when her business fell behind on rent. 

• Greek Election Battle in Final Days With Syriza Maintaining Lead. The election battle between Greek Prime Minister Antonis Samaras and opposition leader Alexis Tsipras moved into its final stretch, with Tsipras’s anti-bailout Syriza party maintaining its lead before voting day on Jan. 25. 

• Draghi Is Pushing Boundaries of Euro Region with QE Program. Mario Draghi is about to bring Europe’s integration project across the Rubicon. At about 2:30 p.m. in Frankfurt, the European Central Bank president will probably commit to a quantitative-easing program that may exceed 1 trillion euros ($1.2 trillion). While the move comes much later than that of the Federal Reserve, which ended its own QE three months ago, the ECB’s arrival at this point still marks a critical juncture in the history of the currency and the European unity it embodies.

• Emerging Markets, Currencies Look Ripe to Short Sell: Bloomberg Poll. Emerging-market stocks and currencies are luring global investors for all the wrong reasons right now. A quarterly Bloomberg Global Poll showed there was a two-fold surge in the number of respondents who identified developing-nation equities and currencies as the assets they’d most like to bet against. For currencies, the percentage jumped to 12 percent from 6 percent in November while for stocks, it rose to 7 percent from 3 percent.

• Brazil Keeps Pace of Rate Increases by Boosting to 12.25%. Brazilian policy makers raised borrowing costs for a third straight meeting as analysts forecast they will miss the country’s inflation target. The central bank’s board, led by bank President Alexandre Tombini, boosted the benchmark rate to 12.25 percent from 11.75 percent, as forecast by 56 of 60 economists surveyed by Bloomberg. The vote was unanimous and took into consideration “the macroeconomic scenario and the inflation outlook,” according to the central bank statement. Four analysts had forecast a quarter-point increase.

• Japan Margin Traders Record Yen Shorts Facing Swiss, Oil Shocks. (graph) Margin traders in Japan raised bets the yen would fall against the dollar to a record amid their currency’s best start to a year since 2010. Wagers from individuals for the Japanese currency to decline outnumbered bets it would gain by 522,856 contracts on Jan. 15, the biggest net shorts since Tokyo Financial Exchange Inc.’s Click 365 began collecting the data in 2006. The figure more than doubled since Sept. 30 as the Bank of Japan’s unexpected Oct. 31 decision to expand bond purchases, known as quantitative easing, drove the yen to an 8 1/2-year low in 2014.

• Asian Stocks Fall Before European Central Bank Stimulus Decision. Asian stocks fell even amid speculation the European Central Bank will boost stimulus through a sovereign-bond purchase program under the quantitative-easing strategy. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 134.46 as of 9:05 a.m. in Tokyo before markets open in China and Hong Kong. 

• Oil Drops as Iraq Signals Production Boost to Offset Price Slide. Oil fell as Iraq said it needs to boost crude production and exports to compensate for lower prices, signaling the global supply glut that spurred the market’s collapse may persist. Futures dropped as much as 1.2 percent in New York. Iraq has lost about 50 percent of its revenue because of the price decline, Iraq’s Deputy Prime Minister Rowsch Nuri Shaways said in Davos, Switzerland. Crude stockpiles in the U.S., the world’s biggest oil consumer, probably expanded for a second week, a Bloomberg News survey shows before government data on Thursday.

• Bankruptcy Forecaster Sees Junk-Debt Bubble Bursting Next Year. A bubble in the leveraged-finance market is growing and may burst in 12 to 18 months, said Edward Altman, a specialist in credit markets who developed a model for predicting corporate bankruptcies. “We think it’s building,” Altman told a gathering of corporate restructuring experts Wednesday in New York. He said the current “benign credit cycle” encouraged by low interest rates has been going on for five years and led to a “frothy” market. “You’ll be busier at this time next year.” A financial crisis isn’t necessarily expected, since few economists are also predicting a U.S. economic recession, Altman told the Turnaround Management Association, a group of consultants, lawyers, liquidators and other professionals who advise distressed companies. Altman is the director of research in credit and debt markets at New York University’s Salomon Center for the Study of Financial Institutions. He developed the “Z-Score,” a method of predicting a company’s likelihood of bankruptcy.

• AmEx(AXP) to Cut More Than 4,000 Jobs This Year After Unit Sale. American Express Co. will cut several thousand jobs this year across the company as part of a restructuring, according a person familiar with the decision. AmEx, the biggest U.S. credit-card issuer by purchases, will take a $313 million pretax charge in the fourth quarter to “improve operating efficiencies,” the New York-based company said Wednesday in a statement as it reported results for the period. The person, who asked not to be identified because the reductions weren’t publicly disclosed, declined to elaborate.

Wall Street Journal:

• U.S. Steel to Idle Plants and Lay Off 545 More Workers. Company to Idle Units in Illinois and Indiana; Cites Low-Cost Imports, Restructuring.

• State of the Union Drew Lowest TV Audience in 15 Years. President Barack Obama‘s 2015 State of the Union address drew the lowest television viewership for any such speech in the last 15 years, according to new data from Nielsen. 

• Google(GOOG) to Sell Wireless Service in Deals With Sprint, T-Mobile. Move Likely to Push Rivals to Cut Prices, Improve Speeds.  

• Falling Oil Prices Worry Regional-Bank Investors. Questions About Loans to Energy Firms Dominate Conversation During Earnings Blitz. 

• Obama’s American Sniper. Seeing “American Sniper” made the State of the Union speech pretty unbearable.

• The World’s Monetary Dead End. The European Central Bank embraces quantitative easing despite the sorry track record of ‘helicopter money.’ Central banks in the U.S., Japan and Europe are trapped in a loop. They are fully invested in the theory that zero rates and bond buying are stimulative and add to inflation, yet growth, inflation and median incomes keep going down. 

• Now He’s After Middle-Class Savers. Mr. Obama prepares to wipe out popular vehicles for funding education. President Obama is pitching his new tax plan as a way to help the middle class at the expense of the rich. But middle-class savers are bound to notice if he achieves two of the White House’s stated goals—to “roll back” tax benefits of 529 college savings plans and “repeal tax incentives going forward” for Coverdell Education Savings Accounts.

Fox News:

•  Police are using new radar that can track you inside your home. (video)

Zero Hedge:

• Japan Bought The Most Foreign Stocks Since Records Began Last Week. (graph)

• The Only Road Out Of Davos.

• Total Announced Job Cuts In 2015 Just Topped 32,000. (graph)

• The Most Economically-Correlated Commodity Is Flashing Red. (graph)

• Panmure: Draghi's QE Will Fail, 2015 Will Be The Year Of "The Great Unwinding". (graph)

• Market Tensions Mount: Canada, Crude, Copper, Small-Caps, & Credit. (graph)

• 12 Signs That The Economy Is Really Starting To Bleed Oil Patch Jobs.

• Kaisa Default Contagion: China's $245bn Corporate Bond Market "Is Too Complacent". (graph)

• Greece - By The Numbers.

NY Times:

• U.S. Not Expected to Fault Officer in Ferguson Case. Justice Department lawyers will recommend that no civil rights charges be brought against the police officer who fatally shot an unarmed teenager in Ferguson, Mo., after an F.B.I. investigation found no evidence to support charges, law enforcement officials said Wednesday.

Reuters:

• New York says Barclays not cooperating in 'dark pool' probe. New York's top law enforcer on Wednesday accused Barclays Plc of defying his subpoenas in a probe of high-speed trading in its private "dark pool," and moved to expand his lawsuit accusing the British bank of fraud.

• JPMorgan(JPM) CEO Dimon's pay package rose above $20 mln in 2014.

• SanDisk(SNDK) warns of weak first half of 2015, hurt by lean inventory. Memory chipmaker SanDisk Corp forecast current-quarter and full-year 2015 revenue well below Wall Street expectations, saying it would be unable to meet demand for flash memory storage chips until mid-year due to lean inventory levels. 

• U.S.-based stock funds attract first weekly inflows since Nov -ICI.

• Fear of deflation as Chinese hold back on gadgets, getaways. Lennon Yu may be Beijing's worst nightmare: the 24-year-old is willing to wait for car prices to fall before buying. This mindset, if it becomes widespread, could threaten to trap China's cooling economy in a deflationary rut. 

• F5 Networks(FFIV) revenue misses estimates as big deals slow down. Network equipment maker F5 Networks Inc reported revenue that missed Wall Street's estimates for the first time in eight quarters due to "a marked decrease in the number of deals greater than $1 million". The company also forecast current-quarter revenue and profit below market estimates, sending its shares down nearly 16 percent to $106 in extended trading.

Telegraph: 

• European economic storm is casting dark clouds over Davos. Slow growth and low inflation seem to have become the established condition, at least for advanced Western economies.

• EU has squandered last chance to make euro workable, warns Ex-Bundesbank chief. Axel Weber says it is "hard to say" whether Europe would be in better shape today if the euro had never been launched, a tactful evasion understood as nostalgia for the stability of the D-Mark. 

• Ukraine president Petro Poroshenko tells Russia: we will never bow down. Ukraine's president tells Russian policymakers: you are not for peace, you are for war. 

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 113.0 -8.0 basis points.

• Asia Pacific Sovereign CDS Index 71.5 -3.25 basis points.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LUV)/.55

• (TRV)/2.54

• (CY)/.14

• (ALK)/.93

• (BBT)/.73

• (KEY)/.26

• (PCP)/3.08

• (JCI)/.77

• (VZ)/.72

• (UNP)/1.52

• (COF)/1.75

• (ETFC)/.25

• (ISRG)/4.37

• (KLAC)/.51

• (ALTR)/.35

• (MXIM)/.29

• (FII)/.38

• (SBUX)/.80

• (JBHT)/.88

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 300K versus 316K the prior week.

• Continuing Claims are estimated to fall to 2400K versus 2424K prior. 

9:00 am EST

• The FHFA House Price Index for November is estimated to rise +.3% versus a +.6% gain in October.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for January is estimated at 8.0 versus 8.0 in December.

• Bloomberg consensus estimates call for a weekly EIA crude oil inventory build of +2,670,000 barrels versus a +5,389,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,350,000 barrels versus a +3,171,000 barrel gain the prior week. Distillate inventories are estimated to rise by +780,000 barrels versus a +2,925,000 barrel gain the prior week. Finally, Refinery Utilization is expected to fall by -.83% versus a -2.9% decline the prior week.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The ECB rate decision, Draghi press conference, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for January, eco10weekly EIA natural gas inventory report and the (PGH) investor day could also impact trading today.

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

Stocks Rising into Final Hour on Central Bank Hopes, Commodity Bounce, Short-Covering, Healthcare/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 19.47 -2.11%

• Euro/Yen Carry Return Index 142.75 -.37%

• Emerging Markets Currency Volatility(VXY) 10.86 -2.25%

• S&P 500 Implied Correlation 65.44 +1.88%

• ISE Sentiment Index 85.0 +28.79%

• Total Put/Call 1.09 +37.97%

• NYSE Arms .63 -33.57% 

Credit Investor Angst:

• North American Investment Grade CDS Index 70.71 -1.97%
• America Energy Sector High-Yield CDS Index 739.0 -.93%

• European Financial Sector CDS Index 62.58 -2.47%

• Western Europe Sovereign Debt CDS Index 25.97 +4.05%
• Asia Pacific Sovereign Debt CDS Index 71.36 -4.71%

• Emerging Market CDS Index 393.67 +1.12%

• China Blended Corporate Spread Index n/a
• 2-Year Swap Spread 24.25 -.25 basis point

• TED Spread 23.5 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +1.5 basis points

Economic Gauges:

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

• Yield Curve 136.0 +5.0 basis points

• China Import Iron Ore Spot $67.81/Metric Tonne -.51%

• Citi US Economic Surprise Index 5.50 +.7 point
• Citi Eurozone Economic Surprise Index -3.4 -.1 point

• Citi Emerging Markets Economic Surprise Index -12.20 +1.6 points

• 10-Year TIPS Spread 1.61 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +55 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Poroshenko Sees Grave Danger Ukraine Conflict Will Escalate. Ukraine is in “grave danger” of an escalation in its conflict against separatists, President Petro Poroshenko said, as diplomats prepare to revive peace talks and NATO accused Russia of involvement in the fighting. “The situation can get worse in days,” Poroshenko said on Wednesday in an interview with Bloomberg TV in Davos, Switzerland. Additional Russian fighters and equipment crossing the border are putting pressure on Ukraine’s army, which is “defending democracy and freedom,” he said. Russian Foreign Minister Sergei Lavrov reiterated there was no proof that his country is providing military support to the separatists. 

• Swiss Add to Russian Corporate Despair as Debt Costs Jump. Thomas Jordan just cost some of Russia’s biggest state-run companies half a billion dollars. The Swiss National Bank president’s surprise decision to ditch the franc cap last week swelled what Russian corporates owe through the end of next year on debt denominated in the currency by 33 billion rubles ($502 million). Since the Jan. 15 change, the extra yield investors demand to hold OAO VTB Bank’s franc notes due in May 2018 versus its dollar debt jumped 2.70 percentage points. As recently as Dec. 24, the rate was at a record discount of 2.63 percentage points. Rising costs for the debt is another hurdle for at least nine companies already reeling from the fallout of sanctions over the war in Ukraine, plunging oil prices, the slumping ruble and an economy teetering on the edge of a recession.

• ECB Seeks to Inject Up to 1.1 Trillion Euros Into Economy in Deflation Fight. (video) Mario Draghi called on the European Central Bank to make its biggest push yet to fend off deflation and revive the economy by unleashing a debt-buying spree of 1.1 trillion euros ($1.3 trillion). The ECB president and his Executive Board proposed spending 50 billion euros a month through December 2016, two euro-area central-bank officials said. The plan still faces a tense debate in the Governing Council and may change before the final decision on Thursday, the people said, asking not to be identified as the talks are private. An ECB spokesman declined to comment.

• Top Concern for Davos Bankers: Credit Disruption After Fed Tightens. Deutsche Bank AG (DBK) co-Chief Executive Officer Anshu Jain’s biggest worry this year? Unexpected aftershocks when the Federal Reserve starts tightening, especially in the corporate bond market. “A disruptive credit event following a Fed turn would be at the top of my worry list,” Jain said at a panel discussion at the World Economic Forum in Davos, Switzerland on Wednesday. “Sometime in the next six, max 12 months, we are going to get that Fed turn. That’s going to be very significant.”

• Russia Rating in Balance as Kudrin Sees No Will for Overhaul. Russia faces an uphill task to avoid a downgrade of its sovereign credit rating below investment grade because the government hasn’t yet committed to overhauling the economy, according to former Finance Minister Alexei Kudrin.

• IMF Says Gulf States Set to Swing Into Deficit as Oil Falls. The oil-rich nations of the Persian Gulf are set to post budget deficits this year after a plunge in crude prices, the International Monetary Fund said. The six nations of the Gulf Cooperation Council will have a collective fiscal gap of 6.3 percent of gross domestic product, a swing of about 11 percentage points from last year’s surplus, the IMF said in a report published in Washington on Wednesday. While many nations have enough savings to avoid steep cuts and “limit the drag on growth,” they will need to adjust spending plans in the longer term, it said.

• Manhattan Luxury Condos Sit on Market While Foreign Buyers Manhattan real estate agent Lisa Gustin listed a four-bedroom Tribeca loft for $7.45 million in October, expecting a quick sale. Instead, she cut the price this month by $550,000. “I thought for sure a foreign buyer would come in,” said Gustin, a broker at Brown Harris Stevens who is still marketing the 3,800-square-foot (353-square-meter) apartment at 195 Hudson St. “So many new condos are coming up right now. They’ve been building them for the past few years and now they’re really hurting the resales.” A flood of new high-priced condominiums and mansions are coming to market in New York, Miami and Los Angeles just as international buyers, who helped fuel demand in the three cities, are seeing their purchasing power wane with the strengthening dollar. Signs of a pullback may already be showing in Manhattan, where luxury-home sales have slowed amid a surge in construction of towers aimed at U.S. millionaires and foreign investors.

• Central Banks Step Up Low-Inflation Fight as Canada Cuts Rate. Global central banks intensified their battle against slowing inflation as the risk of defeat mounts. The Bank of Canada unexpectedly cut its main interest rate for the first time since 2009 on Wednesday in Ottawa, saying the oil-price shock will drag down inflation. The Bank of Japan expanded and extended a lending program, while two Bank of England policy makers dropped calls for higher interest rates. 

• ECB Proposes QE Stimulus of 50 Billion Euros a Month. (video) European stocks extended a seven-year high as the European Central Bank was said to plan further stimulus measures. The Stoxx Europe 600 Index rose 0.6 percent to 358.12 at the close of trading in London, reversing earlier losses after two euro-area central-bank officials said the ECB Executive Board has recommended asset purchases of 50 billion euros ($58 billion) a month until December 2016.

• Kurd Oil Producers Unrelenting to Boost Supply at low Prices. Oil producers in Iraqi Kurdistan are unrelenting in their goal to boost output even after the collapse in international prices to below $50 a barrel. Genel Energy Plc (GENL), headed by former BP Plc chief Tony Hayward, is sticking with plans to increase capacity 74 percent to 400,000 barrels a day this year at its Kurdish Taq Taq and Tawke fields. Norway’s DNO ASA (DNO) owns 55 percent of Tawke.

• Crude Collapse Has Investors Braced for ’80s-Like Oil Casualties. When a glut of crude flooded the market in the 1980s, scores of energy companies disappeared through almost five years of depressed prices. Investors are worried history is repeating itself. The supply overhang led to a 66 percent slide in prices over four months, starting in November 1985. Bankruptcies and mergers reduced the number of U.S. producers by 54 percent before a price rebound took hold in 1990. 

• Oil Rebounds From Biggest Drop in Week as Drilling Slows. Oil rebounded from the biggest drop in a week amid signs that prices near a 5 1/2-year low are slowing drilling in the U.S. Futures rose as much as 3.7 percent in New York and 3.3 percent in London. BHP Billiton Ltd., the largest overseas investor in U.S. shale, said it will cut the number of active drill rigs in the country by almost 40 percent. The rapid decline in oil prices may deter investment in all types of energy needed to meet future demand, the head of the International Energy Agency said.

• Fat Junk-Bond Fees Are Hard to Get in Latest Wall Street Lament. Wall Street’s biggest bond brokers just limped through a rough year for trading revenues. They may be in for more pain as one of their most lucrative businesses dries up. They’ve shepherded only $9.7 billion of U.S. junk bonds into the hands of investors this year, making 2015 the slowest start in six years, according to data compiled by Bloomberg. The fees to underwrite this debt are about three times those on higher-rated corporate notes -- and will be sorely missed by the likes of JPMorgan Chase & Co. (JPM), Bank of America Corp. and Citigroup Inc. (C) The three biggest U.S. banks just posted their first annual decline in aggregate net income since the global financial crisis.

Wall Street Journal:

• J.P. Morgan(JPM) Creates Unit to Meet New Bond Trading Patterns. J.P. Morgan Chase, the world’s largest investment bank in fixed income trading by revenue, has set up a new 12-person unit focused solely on trading credit index products such as credit default swap benchmarks and exchange-traded funds. The bank says the Global Credit Index business, which it claims is the first of its kind at a major investment bank, was established in response to a boom in customer demand for trading indexes instead of individual bonds, where investors and bankers complain that liquidity has been drying up.

Fox News: 

• What Obama didn’t say: Address skips over debt, entitlement crisis. (video)

• Boehner invites Netanyahu to address Congress on Iran, after Obama veto threat.

ZeroHedge:

• Hedge Fund Manager Loses 99.8% In 9 Months, Tells Investors He Is "Sorry" For "Overzealousness".

• Chart Of The Day: The Impossible Is Possible Edition.

• Greece's Bailout Programs Are Not Working.

• Are Central Bankers Losing The Plot: "The SNB Move Signals A Spectacular Loss Of Nerve".

• Fact-Checking Obama's State Of The Union Speech.

• World Leaders Demand "Central Bank Of Oil"; IMF Warns Price Drop Is Permanent; OPEC Expects "Rebound To Normal Soon". (graph)

• 30Y Treasury Yield Tumbles To Record Low. (graph)

• Building Permits Slide For 2nd Month, Miss Expectations; Starts Near Cycle Highs. (graph)

• The Next SNB? Goldman Warns Bank Of Japan "At Risk Of Losing Credibility".

Business Insider: 

• Netflix(NFLX) Opened The Door For Short Sellers With One Sentence From Its CEO.

• North Korea And Russia's Latest Deal Undermines America's 'Weaponization Of Finance' Plan.

• The President Of Ukraine Nearly Broke Down In Tears As He Held Up A Piece Of A Blown-Up Bus And Accused Russia Of 'Terror'.

• More Russian Soldiers Enter Ukraine As Separatists Extend Land Grab.

Handelsblatt:

• Rajan Says Capital Flows Threaten Emerging Markets. Global liquidity flows prompted by central banks in industrial countries could threaten financial stability in emerging markets if they're not properly managed, Reserve Bank of India Governor Raghuram Rajan says in opinion article. "Global growth remains weak. In the U.S., it may look as if the recovery is strengthening, but the euro area is threatening to follow Japan into recession. Emerging markets are concerned about suffering, through their export-oriented strategies, because of stagnation abroad."

Bear Radar

Style Underperformer:

• Small-Cap Growth -.11%

Sector Underperformers:

• 1) Computer Services -2.22% 2) Gold & Silver -1.92% 3) Computer Hardware -1.15%

Stocks Falling on Unusual Volume:

• ALNY, SMCI, IGTE, ACTG, NVS, AFFX, IMKTA, IBM, ID, CA, EDU, TM, SAIA, ILMN, GPI, OTIC, ZINC, GRFS, AAVL, ADMS, BCPC, KITE, BMA, ISSI and RCI

Stocks With Unusual Put Option Activity:

• 1) CMA 2) EBAY 3) BSX 4) SMH 5) IBM

Stocks With Most Negative News Mentions:

• 1) VNO 2) DNB 3) FITB 4) MCD 5) MS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.69%

Sector Outperformers:

• 1) Coal +2.71% 2) HMOs +1.84% 3) Energy +1.59%
  

Stocks Rising on Unusual Volume:

• NFLX, DAN, CREE, NTRS, SNE, FANG, AMZN, SGY, CLDX, TGTX, WWD and ICPT

Stocks With Unusual Call Option Activity:

• 1) FXCM 2) SYMC 3) QLIK 4) FITB 5) TWX
  

Stocks With Most Positive News Mentions:

• 1) WFM 2) CREE 3) NFLX 4) UNH 5) NTRS
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• Ukraine Violence Forces Rush of Diplomacy as Airport Fight Rages. The escalation of fighting in Ukraine after a lull last month, which is threatening to tip the country into full-blown war, is forcing diplomats across Europe to seek ways to stem the violence. Foreign Ministers from Ukraine, Russia and France have been invited by Germany to meet in Berlin Wednesday to try to revive peace negotiations as some of the fiercest clashes in months go on in the shattered remains of Donetsk airport in eastern Ukraine between separatists and government troops. “The situation is very dangerous,” Anton Lavrov, an independent defense analyst in Torzhok, Russia, said by phone. “It’s not clear at all that they will be able to renew the cease-fire. It could lead to full-scale clashes across the front and big losses on both sides.”  

• World’s Wildest Stocks Show Chinese Booms and Busts Getting Bigger on Debt. The one thing China’s bulls and bears can agree on is that swings in the world’s most-volatile major stock market are only going to get bigger after equity traders took on record amounts of debt. Both Bank of America Corp. strategist David Cui, who predicts Chinese shares will fall, and JPMorgan Chase & Co.’s Adrian Mowat, who has an overweight rating, say the surge in margin lending to all-time highs is amplifying price fluctuations in the $4.9 trillion market. Volatility in the benchmark Shanghai Composite Index reached the highest level since 2009 this week after rising more than fourfold since July. 

• China Stock Euphoria Fading, 58% of Investors Say Rally Over: Bloomberg Poll. China’s world-beating stock rally is over, according to the latest Bloomberg Global Poll. Fifty-eight percent of the survey’s 481 respondents said the Shanghai Composite Index (SHCOMP) will either decline or remain little changed over the next six months after posting a 55 percent advance since June. Only 30 percent said the gauge will extend gains. The number of poll participants that picked China as among the best opportunities for investing fell by almost half from the fourth quarter to just 13 percent. 

• Samaras Pledges No More Cuts for Greeks in Election Fight. The following are the main pledges of Greek Prime Minister Antonis Samaras, leader of governing New Democracy party, ahead of the national election on Jan. 25. Samaras, 63, made the pledges in New Democracy’s election prospectus and on the campaign trail. -- Victory for New Democracy “will keep Greece in the euro area,” Samaras says, while a Syriza win would set the country on a collision course with its creditors, potentially forcing it out of the currency bloc

• Abe Leaves Middle East Facing Islamic State Hostage Crisis. Japanese Prime Minister Shinzo Abe shortened a Middle East trip to deal with a hostage crisis after Islamic State militants threatened to kill two Japanese hostages within 72 hours. Abe departed Israel an hour earlier than planned on Tuesday evening having earlier pledged $200 million in non-military aid to nations confronted by the al-Qaeda breakaway group, public broadcaster NHK reported. Islamic State demanded a ransom equivalent to the promised financial support.

• Asian Stocks Retreat Before BOJ Decision as Consumer Shares Fall. Asian stocks fell, led by consumer-discretionary shares, ahead of a Bank of Japan statement on monetary policy. The MSCI Asia Pacific Index (MXAP) dropped 0.2 percent to 138.29 as of 9:03 a.m. in Tokyo. All 33 economists surveyed by Bloomberg forecast no change to BOJbond-buying after it expanded the already unprecedented program in October. Japanese shares slid in Tokyo.

• Oil Trades Near $47 as U.S. Crude Stockpiles Seen Worsening Glut. Oil traded near $47 a barrel as forecasts for a second weekly gain in U.S. crude inventories bolstered speculation that a global glut that spurred last year’s price collapse may persist.

• Druckenmiller Alums at PointState Make $1 Billion on Oil. Hedge fund manager Zach Schreiber stood on stage at Avery Fisher Hall in New York eight months ago and made a bold prediction. “We believe crude oil is going lower -- much lower,” Schreiber, 42, told the audience of roughly 3,000 investors, including some of the biggest money managers in the industry. “If you are long, I’m sorry for you.” Then he showed a slide of a car stuffed with clowns.

• Junk Replaces Government Debt as Most-Disdained in Investor Poll. Junk bonds have supplanted sovereign debt as the asset investors would most like to bet against amid concern that a slowdown in global economic expansion will make it harder for the world’s neediest borrowers to meet their obligations. With both the International Monetary Fund and World Bank lowering their world growth forecast this month, 18 percent of the respondents to a quarterly Bloomberg Global Poll chose speculative-grade debt as the favored asset class to short, or set up trades that would profit from a decline in prices, given the chance. That exceeds the 13 percent that would bet against government securities from the Group of Seven nations. 

Wall Street Journal: 

• Live Blog: Obama’s State of the Union Address.

• Uprising in Yemen Fans U.S. Concerns. Capture of Presidential Palace Raises Worries About Instability That Could Plague Fight Against Terrorism. A militia group demanding a greater say over Yemen’s new constitution took over the presidential palace here Tuesday, sparking fresh concerns about a country that has become a cornerstone of U.S. counterterrorism strategy.

• Dollar’s Rise Squeezes U.S. Firms. Avon(AVP), Expedia(EXPE), P&G(PG) Face Challenges as Currency Strengthens.

• China Confronts ‘New Normal’ of Slower Growth. Companies Struggle to Find Their Footing as Government Seeks Ways to Boost Economy.

• Climate Reporting’s Hot Mess. AP takes the cake in the relentless campaign by global-warming journalists to discredit their own profession.  

• The Gaslight Presidency. Obama’s policies have crushed middle-class incomes, and he proposes more of the same. In the 1944 film “Gaslight,” a con artist manipulates his new wife psychologically to make her doubt her own sanity in a scheme to steal her inheritance. That’s increasingly the way to understand President Obama’s behavior toward Congress and especially the tax increase he floated in Tuesday’s State of the Union. The only plausible rationale is that he thinks he can gain politically by driving Republicans nuts.

Fox News: 

• Al Qaeda operative freed from US federal prison early for ‘time served'. Ali Saleh Kahlah al Marri -- an admitted Al Qaeda operative in the United States -- was released last week from a federal prison prior to completing his 15-year sentence because of “time served,” the Justice Department told Fox News on Tuesday.

CNBC:

• Bristol-Myers Squibb(BMY) appoints Caforio new CEO.

Zero Hedge:  

• 'Everything Is Awesome' SOTU Post-Mortem: "It's Not Government's Job To Make Everybody Rich". (graph)

• For IBM(IBM) The Buyback Frenzy Ends With A Bang As Q4 Revenues Plunge Most Since Lehman. (graph)

• NFLX Beats Q4 EPS On Tax Gain, Misses Revenues, Guides Lower, Cash Burn Soars, Reports $9.5Bn In Off-Balance Sheet Obligations. (graph)

• The "Deflationary Vortex": Global Dollar Economy Suffers Biggest Plunge Since Lehman, Down $4 Trillion. (graph)

• Downgrading The US Will Cost S&P $1.5 Billion.

• Honda US Sales Chief Fears "Stupid" Auto Loans Vicious Cycle.

• Spot The (IMF) Difference. (graph)

• 11 Facts That Won't Be In Tonight's State Of The Union.

• Investors Are Losing Faith And "Markets Will Riot" Warns Albert Edwards.

Business Insider:

• SpaceX Just Raised $1 Billion And Google And Fidelity Will Now Own 10% Of The Company.

• Mysterious Bombs Are Exploding In Ukraine — And Not In The War-Torn East.

• The Two Scariest Slides From IBM's(IBM) Earnings Presentation.

• Russia Is Sending Some Serious Weaponry To The Arctic.

• ISIS Is Building Strength On Lebanon's Doorstep.

• Australian Mining Giant BHP Is Shutting Down 40% Of Its US Shale Wells.

Politico: 

• GOP response transcript: Joni Ernst GOP response (text, video).

AFP:

• Ukrainian President Cuts Short Visit to Davos. President cuts short visit as situation deteriorates in rebel-held east.

Financial Times:

• Tensions simmer over eurozone QE as investors buy up Spanish debt. Investors piled into peripheral eurozone debt on Tuesday ahead of the European Central Bank’s widely expected launch of large-scale bond purchases even as political resentment mounted over German attempts to water down the programme.

Telegraph:

• Central bank prophet fears QE warfare pushing world financial system out of control. Former BIS chief economist warns that QE in Europe is doomed to failure and may draw the region into deeper difficulties. The economic prophet who foresaw the Lehman crisis with uncanny accuracy is even more worried about the world's financial system going into 2015. Beggar-thy-neighbour devaluations are spreading to every region. All the major central banks are stoking asset bubbles deliberately to put off the day of reckoning. This time emerging markets have been drawn into the quagmire as well, corrupted by the leakage from quantitative easing (QE) in the West. "We are in a world that is dangerously unanchored," said William White, the Swiss-based chairman of the OECD's Review Committee. "We're seeing true currency wars and everybody is doing it, and I have no idea where this is going to end."

• QE is not the long-term cure required for the ailing euro. Throwing billions of euros at the eurozone's problems won't solve the single currency's underlying problems and contradictions.

The Guardian:

• Boko Haram claims Baga massacre and threatens Nigeria's neighbours. Boko Haram’s leader Abubakar Shekau has claimed responsibility for the recent massacre of hundreds of people in the northeast Nigerian town of Baga and made renewed threats to neighbouring Niger, Chad and Cameroon in a video published online on Tuesday.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 121.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 74.75 -1.75 basis points.

• S&P 500 futures +.04%.

• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NTRS)/.81

• (UNH)/1.50

• (FITB)/.42

• (USB)/.77

• (AMTD)/.39

• (FFIV)/1.49

• (AXP)/1.38

• (EBAY)/.89

• (URI)/2.10

• (BGG)/.14

• (SNDK)/1.24

• (XLNX)/.61

• (DFS)/1.30

• (NVEC)/.71

• (RJF)/.86

• (CCI)/1.07

Economic Releases
8:30 am EST

• Housing Starts for December are estimated to rise to 1040K versus 128K in November.

• Building Permits for December are estimated to rise to 1060K versus 1035K in November. 

9:45 am EST

• Chicago Purchasing Managers Revise Seasonally Adjusted Data. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK unemployment rate, CIBC Institutional Investor Conference, weekly MBA mortgage applications report and the (MSFT) Windows 10 Event could also impact trading today.

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