Stocks Lower into Final Hour on Global Growth Fears, Earnings Worries, Yen Strength, Healthcare/Metals & Mining Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.22 -1.10%

• Euro/Yen Carry Return Index 138.30 -1.68%

• Emerging Markets Currency Volatility(VXY) 10.79 +.85%

• S&P 500 Implied Correlation 64.80 +1.12%

• ISE Sentiment Index 85.0 -52.51%

• Total Put/Call 1.25 +38.89%

• NYSE Arms 1.51 93.08% 

Credit Investor Angst:

• North American Investment Grade CDS Index 67.22 -1.21%
• America Energy Sector High-Yield CDS Index 732.0 -1.51%

• European Financial Sector CDS Index 57.86 -3.49%

• Western Europe Sovereign Debt CDS Index 23.21 -6.65%
• Asia Pacific Sovereign Debt CDS Index 67.99 -.67%

• Emerging Market CDS Index 388.02 -1.38%

• China Blended Corporate Spread Index n/a
• 2-Year Swap Spread 25.25 +.5 basis point

• TED Spread 24.25 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.75 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 131.0 -7.0 basis points

• China Import Iron Ore Spot $66.42/Metric Tonne -.55%

• Citi US Economic Surprise Index -1.50 -5.5 points
• Citi Eurozone Economic Surprise Index -.5 +3.1 points

• Citi Emerging Markets Economic Surprise Index -10.30 +1.8 points

• 10-Year TIPS Spread 1.60 -4.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -72 open in Japan

• DAX Futures: Indicating -17 open in Germany

Portfolio: 

• Higher: On gains in my biotech/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: 

• Surge in Ukraine Violence Is Deadliest Since Truce Deal, UN Says. The United Nations said the surge in violence in Ukraine is the most significant since a September cease-fire, as a separatist leader threatened to mount a new offensive and warned that he will stop taking government troops prisoner. Some 262 people were killed in hostilities between Jan. 13 and Jan. 21, an average of 29 a day, making it “the most deadly period” since the truce was signed Sept. 5 in Minsk, Belarus, the UN said. At least 5,086 have been killed since fighting erupted in April and “the real figure may be considerably higher,” Rupert Colville, spokesman for the UN High Commissioner for Human Rights, said in a statement on the body’s website Friday. 

• Ruble Colluding With Oil Brews Russian Toxic Loan Morass. An increasingly toxic mixture of high interest rates, spiraling inflation and plunging oil means Russian banks will probably need a lot more than the $18 billion set aside last year to protect against bad loans. Russia is facing an “extremely widespread” banking crisis in 2015, and lenders may need to boost provisions for souring debts to $50 billion should oil stay in the mid-$40s, according to Herman Gref, the head of the nation’s biggest lender, OAO Sberbank. That’s after banks increased reserves by 42 percent last year, compared with 27 percent in Turkey and 7.5 percent in Poland in the first 11 months, official figures show.

• Day One for New Saudi King Shows Challenges at Home and Abroad. Saudi King Salman bin Abdulaziz began his first day on the job with a crisis. Just hours before he was named king following the death of King Abdullah bin Abdulaziz, the Yemeni president appointed through a Saudi-led initiative resigned under pressure from rebels the Gulf Arabs say are backed by their main rival, Iran. 

• Anxiety Over Government Probes Spreads to Top-Rated Chinese Borrowers. The surge in borrowing costs for Chinese junk bond issuers is spreading to investment-grade companies amid the nation’s corruption campaign and following missed payments by Kaisa Group Holdings Ltd. The average spread at issuance on dollar-denominated notes from China sold since Jan. 1 with investment-grade ratings has leapt to 259 basis points from 207 in the second half of last year, data compiled by Bloomberg show. Corporate securities from China in the U.S. currency have lost 0.45 percent this year. Only debt from Bangladesh, Mongolia and Sri Lankan companies has lost more among emerging Asian countries, JPMorgan Chase & Co. indexes showed. 

• European Stocks Post Biggest Weekly Advance Since 2011 After ECB. European stocks climbed, posting the best weekly performance since December 2011, amid optimism the European Central Bank’s quantitative-easing measures will spur economic growth in the region. The Stoxx Europe 600 Index rose 1.7 percent to 370.37 at the close of trading, the highest level since December 2007.

• Oil Erases Gains as New Saudi King Says Policies Stable. Oil erased gains in New York following the death of King Abdullah of Saudi Arabia as his successor said policies won’t change in the world’s largest crude exporter. Brent pared an earlier advance of as much as 2.6 percent in London. Salman Bin Abdulaziz Al Saud, who succeeds Abdullah on the throne, said he would maintain his predecessor’s policies.

• Goldman Joins Banks Cutting Iron Ore Outlook on Global Glut. First Citigroup Inc., then UBS Group AG, now Goldman Sachs Group Inc. For iron ore, which plummeted 47 percent in 2014, the cuts to price forecasts from global banks just keep coming in the opening weeks of the year. The steel-making ingredient may average $66 a metric ton this year from an earlier estimate of $80, Goldman Sachs said in a report dated Jan. 23. This is the first time the New York-based bank has reduced its 2015 prediction since March 2013, and it’s at least the fifth bank this month to lower estimates, citing rising seaborne supplies and weaker demand growth from China, the biggest user.

• Copper Set for Longest Slump Since October on China Slowdown. Copper headed for the longest run of weekly losses since October after a report showed manufacturing contracted for a second straight month in China, the world’s top industrial-metals consumer. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.8 this month, after 49.6. in December. Numbers below 50 indicate contraction. Copper stockpiles monitored by the London Metal Exchange rose for a ninth session, the longest stretch since April 2013. “The fundamental story is very weak for copper,” Edward Meir, an analyst at INTL FCStone Inc. in New York, said in a telephone interview. “The stockpile rise is telling us that supplies are ample.” Copper futures for March delivery dropped 3.3 percent to $2.494 a pound at 11:25 a.m. on the Comex in New York. Prices are down 4.8 percent this week, heading for a third straight weekly decline in the longest slump since Oct. 3. The commodity lost 8.7 percent this month through Jan. 22 amid concerns that slower growth on China would erode demand. On the LME, copper for delivery in three months slid 2.8 percent to $5,508.50 a metric ton ($2.50 a pound). In a report Friday, analysts at Goldman Sachs Group Inc. including Max Layton said they “remain bearish” even after prices fell more than 20 percent in the past year. The New York-based bank expects “the fundamentals to weaken further,” and forecast the metal at $5,200 a ton in the next 12 months. Aluminum, lead, nickel, tin and zinc also declined in London. 

• Goldman’s Commodity Outlook Buckles Under Deflation Threat. Cheaper energy and the U.S. dollar’s advance are darkening the outlook for commodities, according to Goldman Sachs Group Inc. The U.S. bank cut its forecasts for metals and mined raw materials including copper, gold and iron ore over the next three years by about 10 to 20 percent as production costs shrink, according to an e-mailed report Friday.

• Dalio’s Call for Doom Borne Out in Mom and Pop Fleeing Junk Debt. The promise of yet another trillion-dollar cash infusion from a central bank isn’t enough to bring individual investors back into the market for risky corporate debt. In fact, they keep bailing. Investors pulled $523 million from global high-yield bond mutual and exchange-traded funds in the week ended Jan. 21, according to data compiled by EPFR Global. They withdrew $868 million from funds that buy U.S. speculative-grade loans, bringing their total assets below $100 billion for the first time since September 2013, Wells Fargo & Co. (WFC) data show. The goal of the European Central Bank’s new 1.1 trillion ($1.3 trillion) euro bond-buying program announced Thursday is to push investors into less-creditworthy notes for bigger -- or even just positive -- returns. So, why aren’t junk bonds getting a serious boost? Individual investors are either leaving a seemingly indefatigable party in risky debt too early, or their sentiment is a harbinger of a deeper, more worrisome idea: That policy makers’ main tool to ignite growth isn’t working so well anymore. With yields so low, “the transmission of the monetary policy mechanism will be less effective,” said Ray Dalio, the U.S. hedge fund manager who runs the $160 billion Bridgewater Associates. “We have a deflationary set of circumstances,” which makes it appealing to just stuff your money under a mattress, he said at a panel discussion in Davos, Switzerland, this week.

• Nothing Is Going to Save the Housing Market. U.S. housing activity remains weak despite six years of federal government aid, strong interest from overseas buyers, rock-bottom interest rates and massive purchases of mortgage bonds by the Federal Reserve. Does this mean housing may never spring back to its pre-recession levels? Many signs point to yes.

• High-Frequency Probe’s First Target Is Barclays. New York Attorney General Eric Schneiderman’s 10-month investigation into high-speed trading has so far led to one big target: Barclays Plc. (BARC).

• Box Surges in Cloud-Storage Debut After $175 Million IPO. Box Inc. jumped in its trading debut after raising $175 million in its initial public offering. The shares rose 73 percent to $24.25 at 1:41 p.m. in New York, after being priced at $14 in the IPO. At the most recent price, Box is valued at about $2.8 billion, above the $2.4 billion valuation it received in a July private-funding round.

ZeroHedge:

• US Rig Count Craters To Lowest Since August 2010. (graph) 

• Did Treasury Secretary Lew Just Call Draghi A Currency Manipulator?

• 3 Things - The Fed, Rig Counts And Employment, ECB. (graph)

• Has The ECB QE Already Failed? 5 Year Inflation Expectations Decline Since Draghi's Announcement. (graph)

• Existing Home Sales Drop Year-Over-Year For First Time Since 2010. (graph)

• US Manufacturing Growth Slows To 1 Year Low As Shale Collapse Cripples New Order Spending. (graph)

• WTI Hits $45 Handle After Treasury Secretary Lew Says "Doesn't Expect US Crude Production To Decline". (graph)

• Syriza Leads In 6 Polls; Leader Tsipras Shuns Merkel, Says "Won't Honor Commitments".

• UPS Tumbles On Missed Earnings, Blames US Domestic Weakness. (graph)

Business Insider: 

• Israel's Strike Against Hezbollah And Iran Is Also A Message To Obama.

• The Euro Has Dropped More In The Last Three Weeks Than It Did All Last Year.

• PRESENTING: An Economics Professor Explains The Danger Of Deflation In 24 Simple Slides.

@Conflict_Report:

• I REPEATTHERE IS A HEAVY RUSSIAN OFFENSIVE HAPPENING BETWEEN HORLIVKA AND ADVEEVKA W/O ANY MEDIA/UKR ARMY REFLECTION.

Telegraph: 

• Kremlin hard-liner: Russians would 'rather starve' than surrender Putin to Western aggressors. Russia's deputy prime minister, speaking at the World Economic Forum, says that his country's dispute with the US and Europe goes far beyond issues over Ukraine. 

• One last gasp for the 'one-size-fits-all’ euro. Telegraph View: The crisis in the eurozone proves that Britain was wise to stay out. One size does not fit all of Europe's economies.

Bear Radar

Style Underperformer:

• Small-Cap Value -.42%

Sector Underperformers:

• 1) Steel -3.85% 2) Gold & Silver -3.51% 3) Hospitals -2.23%

Stocks Falling on Unusual Volume:

• MHG, UPS, EDR, DWA, IRE, TKC, CE, KSU, HLSS, KLAC, KMB, PCP, JBSS, OEC, STJ, ACAT, ALTR, MNTA, ISRG, TOO, RYAM, STT, X, FDX, EMN, LXK and STT

Stocks With Unusual Put Option Activity:

• 1) NOC 2) SPLS 3) SBUX 4) UPS 5) HON

Stocks With Most Negative News Mentions:

• 1) XOM 2) X 3) PCP 4) KMB 5) BAC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.09%

Sector Outperformers:

• 1) Networking +2.17% 2) Restaurants +1.39% 3) Oil Tankers +.69%
  

Stocks Rising on Unusual Volume:

• MIK, VTAE, RDUS, OTIC, INFN, ZINC, PLCM, ETFC, SBUX, RMD, Z, TRLA, NVRO, EVEP, P, IPHI and MSCC

Stocks With Unusual Call Option Activity:

• 1) GDP 2) SYY 3) TSO 4) FXCM 5) INFN
  

Stocks With Most Positive News Mentions:

• 1) LULU 2) SKYW 3) MXIM 4) ETFC 5) RMD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:

• King Abdullah, Saudi Monarch Who Modernized Economy, Dies. King Abdullah, the monarch who oversaw a fivefold increase in the size of the Arab world’s biggest economy and met the Arab Spring with a mixture of force and largesse, has died after almost a decade on the throne. He was born in 1924. Crown Prince Salman bin Abdulaziz, Abdullah’s half-brother, will succeed him, state television announced early on Friday in Riyadh. Abdullah had been in hospital in the Saudi capital since last month, receiving treatment for pneumonia. He became Saudi Arabia’s sixth king in August 2005, after years as de facto ruler since 1996 when King Fahd was incapacitated by a stroke.

• Saudi Arabia’s New King Seen Sticking With Oil Production. King Salman, Saudi Arabia’s new ruler, probably will stick to the oil policy of his predecessor, the late King Abdullah, maintaining production levels to preserve market share even at the cost of depressing prices. A key indicator will be whether Salman, 79, retains the oil minister, Ali al-Naimi, who has driven decision-making since 1995. Naimi, who turns 80 this year, has said he’d like to devote more time to his other job, chairman of the science and technology university named after the late sovereign. “The Saudi leadership has already taken the tough decision to live with lower oil prices,” Florence Eid-Oakden, chief economist at London-based consultants Arabia Monitor, said by phone. “Naimi is well established, he is respected and there shouldn’t be a change as long as the current cabinet is in place.”

• Putin Said to Shrink Inner Circle as Ukraine Hawks Trump Tycoons. Vladimir Putin isn’t just angering leaders from Berlin to Washington. He’s irking some of his richest friends, too, by snubbing their pleas to end the conflict in Ukraine and ostracizing all but a handful of hardliners. The ruble’s plunge has heightened opposition to Putin’s backing of the rebellion in Ukraine among his wealthiest allies, prompting the president to shrink his inner circle from dozens of confidants to a small group of security officials united by their support for the separatists, two longtime associates said. Putin is increasingly suspicious of men who owe their wealth to their ties to him and who are being hurt the most by U.S. and European sanctions, according to the people, who spoke on condition of anonymity to avoid reprisal. The 21 most affluent people in the country lost a total of $61 billion last year, a quarter of their combined fortune, according to the Bloomberg Billionaires Index. 

• Clock Ticks for Samaras as Greek Election Campaign Enters Climax. The fight for power in Greece enters its final hours, with Prime Minister Antonis Samaras making a last-ditch appeal to voters as he tries to defy opinion polls showing a victory for his anti-austerity opponent. The monthlong election campaign wraps up on Friday when Samaras addresses a rally of his New Democracy party at 6 p.m. in Athens. Alexis Tsipras, who leads the opposition Syriza group, will speak on the island of Crete in the evening. 

• China Bank Bad-Loan Ratio Jumps Most in at Least a Decade. Chinese banks’ bad-loan ratio jumped the most in at least a decade in the fourth quarter as a property-market slump and an economic slowdown constrained borrowers’ repayment ability. Nonperforming loans accounted for 1.29 percent of commercial banks’ total advances as of Dec. 31, up from 1.16 percent three months earlier, the China Banking Regulatory Commission said in a statement today. The bad-loan ratio for all banking institutions, including policy banks, stood at 1.64 percent at the end of last year, according to the CBRC. Bad loans may swell to 1.6 percent this year as economic growth weakens, adding pressure on Chinese banks to boost provisions, Bank of Communications Co. estimated last week.

• Everyone Wants to Be China's LendingClub. That Sounds Risky. China’s booming online lending industry will have more failures as it matures beyond a fad, said Soul Htite, whose venture in the nation just sold a stake to Tiger Global Management, the U.S. investment firm run by Chase Coleman. A rush by Internet firms into financial services is a repeat of the mimicry that saw Chinese ventures rise and fall after styling themselves on U.S. discount company Groupon Inc., Htite, 41, said in an interview in Shanghai this week.

• Korean Economy Grows at Slowest Pace in More Than Two Years. South Korea’s economy expanded at the slowest pace in more than two years, underscoring the challenge facing the Park administration and the central bank to spur growth. Gross domestic product grew 0.4 percent in the three months through December from the previous quarter, the Bank of Korea said Friday in Seoul. That matched the median estimate in a Bloomberg News survey and was the weakest gain since the third quarter of 2012. The economy expanded 2.7 percent from a year earlier, compared with expectations for a 2.8 percent gain. 

• Euro Set for 6th Weekly Loss on ECB; Aussie Falls Below 80 Cents. The euro headed for a sixth weekly decline against the dollar after an expansion in the European Central Bank’s bond-buying program pared yields on German bunds relative to U.S. Treasuries. Australia’s currency held a four-day drop after monetary easing by the ECB and Bank of Canada this week spurred speculation the Reserve Bank of Australia will lower borrowing costs.

• Asian Stocks Gain on ECB; Oil Jumps After Saudi King Dies. Asian shares rose, with the regional benchmark index heading for a seven-week high, while the euro traded near an 11-year low after the European Central Bank expanded its asset-buying program. Oil jumped after Saudi Arabia’s King Abdullah died. The MSCI Asia Pacific Index climbed 0.7 percent by 11:58 a.m. in Tokyo, heading for the highest close since Dec. 4.

• Oil Gain Seen Short-Lived After Saudi King Death Amid Oversupply. An increase in oil prices after the death of Saudi Arabia’s King Abdullah will probably be short-lived amid an oversupply in the crude market. 

• Copper Heads for Sixth Weekly Drop as China Manufacturing Slows. Copper headed for a sixth weekly loss after data showed manufacturing contracted in China, the world’s biggest consumer. The metal in London fell as much as 0.8 percent. The preliminary Purchasing Managers’ Index (BCOM) from HSBC Holdings Plc and Markit Economics was at 49.8 in January compared with 49.6 last month. Numbers below 50 indicate contraction. A similar measure for the U.S. on Friday will signal further expansion, according to a survey of economists by Bloomberg News. “The PMI was still low even if it was a little bit better than the previous month,” said Tetsu Emori, a senior fund manager at Astmax Asset Management Inc. “The Chinese market is still slowing.” Copper for delivery in three months on the London Metal Exchange slipped 0.8 percent to $5,622.50 a metric ton ($2.55 a pound). The metal fell 1.8 percent to $5,665 a ton on Thursday, the lowest since Jan. 15. It’s down 1.7 percent this week.

• Skyrocketing Cancer Drug Prices Are Express Scripts’(ESRX) Target. Express Scripts Holding Co. (ESRX), which this year forced price concessions from makers of $1,000-a-day hepatitis C medicines, has set its sights on $37 billion in U.S. spending on cancer medications. Its goal is to start influencing the drugs’ costs as soon as next year.

• Starbucks(SBUX) First-Quarter Profit Surges 82% as Food Sales Gain. The shares rose 3.3 percent to $85.51 at 4:27 p.m. in late trading in New York. They increased 4.7 percent in 2014, the sixth straight year of gains.

Wall Street Journal:

• U.S., Iraq, Prepare Offensive to Retake Mosul From Islamic State. Half of Islamic State Leadership Removed in Strikes. The U.S. and Iraq have begun preparations for an assault by summer to retake Mosul, selecting and training military units and cutting supply lines to Islamic State militants who control Iraq’s second-largest city, the top American commander in the Middle East said.

• A Republic of Disrespect. America’s partisan divisions spread to international relations.

Fox News:

• GOP lawmakers face pressure from base to target ObamaCare – or else. (video) Republican lawmakers are facing rising pressure from conservative groups and activists to go big – or potentially go home – in their fight against ObamaCare.

MarketWatch.com:

• All of the major commodities may fall in price this year, World Bank says.

• U.S. oil supplies hit highest level in 80 years. (graph)

CNBC:

• Currency expert: Euro going ‘well below parity’. "The divergence between the ECB, the [Bank of Japan] easing policy more, and the Federal Reserve—even if you don't fully accept my view that the Fed raises rates in the middle of this year, no matter how you slice it, the Federal Reserve will raise rates well before the ECB and the BOJ—I think that this pushes the euro well below parity next year," he said Thursday on CNBC's "Futures Now."

• Box prices IPO at $14 per share, above expectations. (video)

Zero Hedge:

• What Mario Draghi Said When Asked If His QE Will Unleash Hyperinflation. (video)

• The Truth About The Monetary Stimulus Illusion.

• Deflation Is A Problem For The Fed. (graph)

• ""Whatever It Takes" Or "Make It Stop"". (graph)

• What Reforms: Hours After ECB's QE Announcement, French Government Fails To Reach Job Creation Agreement.

• "Government Is Waging A Perpetual War Against Human Nature... They Can Never Win". Government cannot win against the business cycle. All they ever do is aggravate the cycle and increase the velocity resulting in panics.

• Now Begins The Greatest Heist Since Bernanke Bailed Out Wall Street In September 2008.

• When This Ends, Everybody Gets Hurt (And The End Is Uncomfortably Close). (graph)

• Chinese Stocks Recover From Biggest Plunge In Years As 'Still-Contracting' Manufacturing Industry Improves. (graph)

Business Insider:

• 'Snow Bomb' Going To Hit The East Coast This Weekend.

• Ex-NFL Players On ESPN Think Tom Brady Is Lying.

• Here's Everything We Know About The New Saudi King.

• The ECB Can't Save The Eurozone Economy. Unless governments make structural reforms to address the root causes of deflation, any economic boost Europe gets from the ECB's actions this week will likely be temporary.

RTTNews:

• KLA-Tencor(KLAC) Shares Down 5% On Weak Outlook, Q2 Adj. Profit Tops View.

Reuters:

• U.S.-based stock funds post $5.9 bln outflows in week -Lipper.

Telegraph:

• Mario Draghi's QE blitz may save southern Europe, but at the risk of losing Germany. The ECB has put German political consent for the euro project at risk. Nobody should have any illusions about the implications of such defiance. What is at stake is German political consent for the euro project. Bernd Lucke, the leader of the AfD anti-euro party, called today's decision an "act of desperation and the introduction of eurobonds by the back door" by the ECB. The Bavarian Social Christians (CSU) are also furious. "With this decision, the ECB has crossed the Rubicon," said Angelika Niebler, the party's parliamentary leader. The Bavarian finance minister, Markus Soder, said: "unlimited purchases of sovereign bonds threaten to bring down the whole system." On the Left, Die Linke lashed out at the decision, calling it a gift for insiders. It plunders the savings of the poor to make the "super-rich even richer" by driving up asset prices.

Rheinische Post:

• German exports to Russia dropped by 18% or EU6b last year, Eckhard Cordes, head of committee on Eastern European Economic Relations, said in an interview. Says 2015 may be even worse if crisis isn't solved soon. Says permanent 20% drop in exports to Russia may translate into 60,000 jobs lost in Germany.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are +.75% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.0 -4.0 basis points.

• Asia Pacific Sovereign CDS Index 68.5 -3.0 basis points.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BK)/.59

• (GE)/.55

• (HON)/1.42

• (KSU)/1.23

• (KMB)/1.37

• (MCD)/1.22

• (COL)/1.12

• (STT)/1.27

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for December is estimated to fall to .48 versus .73 in November.

9:45 am EST

• The Preliminary Markit US Manufacturing PMI for January is estimated to rise to 54.0 versus 53.9 in December.

10:00 am EST

• Existing Home Sales for December are estimated to rise to 5.08M versus 4.93M in November.

• The Leading Index for December is estimated to rise +.4% versus a +.6% gain in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI and UK retail sales reports could also impact trading today.

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

Stocks Surging into Final Hour on Central Bank Hopes, Less European Debt Angst, Yen Weakness, Financial/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 16.53 -12.31%

• Euro/Yen Carry Return Index 140.52 -1.79%

• Emerging Markets Currency Volatility(VXY) 10.58 -2.76%

• S&P 500 Implied Correlation 63.17 -3.08%

• ISE Sentiment Index 210.0 +176.32%

• Total Put/Call .93 -13.08%

• NYSE Arms .97 +52.75% 

Credit Investor Angst:

• North American Investment Grade CDS Index 67.96 -2.80%
• America Energy Sector High-Yield CDS Index 737.0 -.26%

• European Financial Sector CDS Index 59.98 -3.85%

• Western Europe Sovereign Debt CDS Index 24.87 -4.24%
• Asia Pacific Sovereign Debt CDS Index 70.08 -1.93%

• Emerging Market CDS Index 394.29 -.60%

• China Blended Corporate Spread Index n/a
• 2-Year Swap Spread 24.75 +.5 basis point

• TED Spread 23.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.5 +2.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 138.0 +2.0 basis points

• China Import Iron Ore Spot $66.79/Metric Tonne -1.5%

• Citi US Economic Surprise Index 4.0 -1.5 points
• Citi Eurozone Economic Surprise Index -3.6 -.2 point

• Citi Emerging Markets Economic Surprise Index -12.10 +.1 point

• 10-Year TIPS Spread 1.64 +3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +276 open in Japan

• DAX Futures: Indicating +81 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long