Stocks Reversing Lower into Final Hour on Rising Eurozone/Emerging Markets Debt Angst, Fed Rate Hike Fears, Earnings Worries, Utility/REIT Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 17.66 +4.99%

• Euro/Yen Carry Return Index 140.84 -.08%

• Emerging Markets Currency Volatility(VXY) 10.91 +2.35%

• S&P 500 Implied Correlation 67.36 +3.33%

• ISE Sentiment Index 68.0 -43.80%

• Total Put/Call .97 +1.04%

• NYSE Arms .67 -9.43% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.44 +.14%
• America Energy Sector High-Yield CDS Index 730.0 -1.55%

• European Financial Sector CDS Index 62.93 +1.47%

• Western Europe Sovereign Debt CDS Index 25.48 +2.37%
• Asia Pacific Sovereign Debt CDS Index 67.50 -.28%

• Emerging Market CDS Index 377.70 -.26%

• iBoxx Offshore RMB China Corporates High Yield Index 113.64 +.03%
• 2-Year Swap Spread 26.75 +1.75 basis points

• TED Spread 24.5 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -19.25 -2.0 basis point

Economic Gauges:

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

• Yield Curve 130.0 +1.0 basis point

• China Import Iron Ore Spot $62.49/Metric Tonne +1.38%

• Citi US Economic Surprise Index -25.30 +1.9 points
• Citi Eurozone Economic Surprise Index 24.80 -.9 point

• Citi Emerging Markets Economic Surprise Index -5.30 -.8 point

• 10-Year TIPS Spread 1.72 +3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +192 open in Japan

• DAX Futures: Indicating -69 open in Germany

Portfolio: 

• Higher: On gains in my index hedges and emerging markets shorts

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:  

• Greece Seeks Plan C After Eurogroup Rules Out Bridge Loan. (video) Euro-area governments won’t grant Greece’s request for a short-term financing agreement to keep the country afloat while it renegotiates the terms of its financial support, said Jeroen Dijsselbloem, chairman of the bloc’s finance ministers’ group. “We don’t do” bridge loans, Dijsselbloem told reporters in The Hague on Friday, when asked about Greece’s request. “A simple extension is possible as long as they fully take over the program.” The European Union’s latest rebuff raises the stakes for Greece’s new government, which has already failed in its demands for a debt writedown. The next showdown is scheduled for Feb. 11 in Brussels, when Greek Finance Minister Yanis Varoufakis faces his 18 euro-area counterparts in an emergency meeting after Prime Minister Alexis Tsipras delivers a major policy speech on Sunday.  

• Merkel Holding Emergency Talks With Putin Over Deepening Crisis. (video) German Chancellor Angela Merkel and French President Francois Hollande are holding emergency talks in Moscow with Vladimir Putin in a last-ditch effort to stave off a deeper confrontation with the Russian leader over Ukraine. Merkel and Hollande, whose arrival in the snowy Russian capital as darkness fell was shown live on TV, were whisked off to meet Putin behind closed doors at his official residence within the Kremlin. The two leaders will push him to implement the Minsk cease-fire agreement from last September, two people familiar with the matter said. Merkel is pessimistic about Putin’s willingness to defuse the crisis and plans to deliver the message that Russia faces tougher actions unless he agrees to help end the escalating violence in Ukraine, said one of the people, who asked not to be identified discussing government strategy.

• Putin’s New Challenge: Propping Up Russia’s Ailing Banks. The news broke in a terse announcement on the web: another Russian bank was in trouble. The Jan. 26 statement from SB Bank, a midsize Russian lender, underscored the pressures building inside the nation’s financial system. SB said it was freezing cash withdrawals, initially for just three days. On Friday, the ban was extended for a second time, through Feb. 9. Staggered by the collapse in oil and plunge in the ruble, Russia is now confronting a potential banking crisis.  

• Spanish Bonds Underperform Italy’s as Podemos Gains Popularity. Spain’s bonds are set to underperform their Italian peers for the fifth time in six weeks amid concern the rise of a Spanish anti-austerity party might lead to the sort of turmoil that followed Syriza’s victory in Greece. Podemos, which has pledged to restructure $1.1 trillion of Spanish public debt, widened its lead over Prime Minister Mariano Rajoy’s People’s Party, according to a survey this week by the state polling company. By contrast in Italy, itself no stranger to political upheaval, Sergio Mattarella was elected president on Saturday as a candidate backed by Prime Minister Matteo Renzi. That marked a victory for the Italian premier, who overcame tensions within the governing coalition. “The reason for Spain underpeforming Italy is totally related to investors’ concerns about the political landscape, in relation to what is going on in Greece,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA in Milan. “It’s something that will probably carry on in the near term. The link investors will make is that the next country with a strong anti-austerity movement will be Spain.”

• Currency Devaluations Are an Undeclared War. The global currency war is threatening to prove a silent killer. So says David Woo, head of global rates and currencies research at Bank of America Merrill Lynch in New York. While some question the existence of any conflict -- arguing that falling exchange rates merely reflect efforts by central banks to spur lackluster domestic economies -- Woo expresses concern. “There is a growing consensus in the market that an unspoken currency war has broken out,” he said in a report to clients this week. “The reason why this is a war is that it is ultimately a zero-sum game -- someone gains only because someone else will lose.” The standard view on war-mongering is that by easing monetary policy, central banks from Asia to Europe are hoping to weaken their currencies to boost exports and import prices. Trade rivals then retaliate, creating a spiral of devaluations as witnessed in the 1930s. 

• European Stocks Rise Fifth Day as U.S. Payrolls Exceed Forecasts. European stocks advanced for a fifth day, extending a seven-year high, as data showed employers in the U.S. added more jobs in January than forecast. The Stoxx Europe 600 Index climbed 0.2 percent to 373.31 at the close of trading, after earlier dropping as much as 0.4 percent.

• Shipping Costs Test New Low as China Coal Imports Slide: Freight. Tumbling demand for coal in China and weakening growth in the nation’s iron ore purchases have sent shipping costs to almost the lowest on record. The Baltic Dry Index, a measure of global freight rates for commodities, fell on Friday to within 0.9 percent of the all-time low in July and August of 1986. China’s seaborne coal imports slid 10 percent in 2014, reversing growth of 16 percent the year before, according to Clarkson Plc, the world’s largest shipbroker. The Chinese economy, which buys almost half the world’s coal and ore cargoes, will grow at the slowest pace in 25 years, economists’ forecasts compiled by Bloomberg show. 

• Jobs Report Boosts Odds of Fed Interest-Rate Increase in June. (video) The odds of a Federal Reserve interest-rate increase as early as June rose after a government report showed payroll gains in January capped the biggest three month increase in 17 years. The probability of a Fed liftoff by June, based on trading in futures and options, rose to 27.6 percent on Friday, from 17.6 percent the day before, data compiled by Bloomberg show. The odds of an increase by September were 59.1 percent, up from 44.5 percent. 

• ‘Sell Treasuries!’ Cry Heard Across Wall Street Stunned by Jobs. Yields on 2-year Treasuries increased the most today in about two months, jumping 0.1 percentage point to 0.63 percent at 11:19 a.m. in New York, according to Bloomberg Bond Trader data. Bond bears have been disappointed lately, waiting for the economy to pick up enough to justify higher interest rates from the Federal Reserve. The jobs report -- which showed payrolls advanced by 257,000 last month and delivered the biggest wage increase since 2008 -- should give them new confidence. “The market is starting to realize that we may get earlier hikes than expected,” Mohamed El-Erian, chief economic adviser at Allianz SE, said in a Bloomberg Television interview today.

MarketWatch.com: 

• Europe’s revolt isn’t just in Greece or Spain.

CNBC: 

• Fed 'running out of excuses' for zero rates. (video)

ZeroHedge: 

• Why Is Goldman Suddenly Banging The Table On The Scariest Chart In The Jobs Report. (video)

• US Attorney General Has A Message For The American Markets: Beware Of Foreign Spies. (video)

• S&P Downgrades Greece, Suggests Worst Case Scenario With Bank Runs And "Capital Controls": Full Report.

• US Rig Count Collapse Accelerates, Production Stays High. (graph)

• Treasury Yields Are Soaring Most Since Jan 2009. (graph)

• Greece: Are You Finally Ready To Do The Right Thing And Leave The Euro? (graph)

• January Payrolls Smash Expectations Rising By 257,000 As Hourly Earnings Surge Most Since November 2008. (graph)

Business Insider:

• Things are spiraling out of control for America's top news anchor.

• The dollar is having a monster day.

• The Greeks are still vowing to reject a bailout extension.

• Iran-backed rebels in Yemen just dissolved parliament and took over.

• Russians advised to pull their money out of banks and prepare for 'black market in cash'.

Telegraph: 

• Greek stand-off pushes Europe to the brink. The last thing Germany is going to do is cut a deal with Greece. 

• Greece downgraded as S&P warns cash crisis could force it out of euro. Standard & Poor's cuts Greece to the brink of default and warns that the country could be forced to leave the single currency if it loses access to European funding.

Spiegel:

• Merkel 'Degraded' by New Greek Government, Kauder Says. Germany and Chancellor Angela Merkel have been "degraded several times" by members of the new Greek government, Volker Kauder, caucus leader for Merkel's Christian Union bloc in parliament, says. "These words resonate, to say it quite bluntly." "Germany was among those who saved the Greeks from ruin. It is about time that the entire new government recognizes this instead of attempting to drive a wedge between the euro countries," he said. Prime Minister Alexis Tsipras should focus on taxing rich Greeks, Kauder said. "I would have liked to see the shirt-sleeved new prime minister tackle this first. Taxing the rich should be a field of activity for left-wing populists," he said.

RBC:

• Russia Considers Rules to Revoke Foreign Media Permits. Russia's Communications Ministry is weighing law to allow withdrawal of permits to work in Russia for foreign media that have breached local legislation on extremism or published incorrect data, citing people familiar with the matter.

Bear Radar

Style Underperformer:

• Mid-Cap Value -.65%

Sector Underperformers:

• 1) Education -5.05% 2) Gold & Silver -3.82% 3) Utilities -3.11%

Stocks Falling on Unusual Volume:

• RENT, PLAY, MCHP, TPX, YELP, DV, NMM, EXPE, CTRL, PHT, P, NTGR, STRA, IMPV, TBI, SWIR, GPRO, VVI, SLH, DBVT, SXT, USG, SNY, SERV, GRA, INTU, HME, AMT, HOT, SIRO, PPS, IMPV, NOV, CBRL, CBOE, NSR, DLR, BRKS and EGOV

Stocks With Unusual Put Option Activity:

• 1) MMM 2) XLU 3) CAM 4) SMH 5) DXJ

Stocks With Most Negative News Mentions:

• 1) USG 2) P 3) MXWL 4) TPX 5) INTU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.54%

Sector Outperformers:

• 1) Banks +2.78% 2) Defense +2.09% 3) Homebuilders +1.86%
  

Stocks Rising on Unusual Volume:

• XLS, MTSI, HRS, CBM, TWTR, LNKD, UBNT, ONNN, UFS, YRCW, BKD, VRSN, BWLD, SCHW, LNC, AMTD, MCO, IRBT and BAC

Stocks With Unusual Call Option Activity:

• 1) MMM 2) LNKD 3) CRC 4) MPC 5) WETF
  

Stocks With Most Positive News Mentions:

• 1) BWLD 2) LNKD 3) ITT 4) BBY 5) DNKN
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Greek Leaders Return Home for Rethink After Rebuff From Germany. Prime Minister Alexis Tsipras is preparing to set out the most detailed account yet of his plans to revive the Greek economy after a diplomatic push ended with a rebuff from Germany and a warning shot from the European Central Bank. Tsipras, 40, was greeted by the rare sight of a pro-government demonstration in downtown Athens on Thursday night after he vowed to stick to his anti-bailout campaign pledges, despite their rejection by German Finance Minister Wolfgang Schaeuble. The prime minister will lay out his policy plans on Sunday, in the opening speech of the three-day-long parliamentary debate leading up to a confidence vote to confirm his government.

• Putin Risks New Unrest, Says Economist Who Forecast 2011 Protest. The economist who predicted the largest protests of Vladimir Putin’s rule in 2011-2012 says Russia may be entering a new era of revolt provoked by the economic slump and the deepening conflict in Ukraine. Discontent at tightening political controls at a time of worsening economic hardship may boil over by the next parliamentary elections at the end of 2016, Mikhail Dmitriev said in an interview in Moscow. Serious unrest could be triggered even sooner if fighting increases significantly between Ukraine and pro-Russian separatists, provoking fresh U.S. and European Union sanctions and a deeper economic crisis, he said. “A further escalation of the conflict in Ukraine can increase economic risks,” said Dmitriev. “We will fall further behind developed countries. This is a very dangerous scenario.”  

• In the Shadow of Abenomics, Japan's Poor and Elderly Are Being Left Behind. Since Abe took office two years ago, aggressive monetary easing devalued the yen, bolstering earnings at big companies and lifting the stock market 70 percent. It’s been good for exporters and those who own shares and property, but not so good for those without assets. For them, Abenomics means higher prices and dwindling government support. “If inflation accelerates further under Abe’s policies, inequality will widen,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute Inc. “The socially vulnerable and low-income classes will be worst affected and a cut in livelihood subsidies deals them a double punch.”   

• Conquering China’s Mountain of Debt. Cities and townships must give up their unorthodox borrowing. 

• The Diverging Fates of China's Provinces. (graph) As the tide goes out, not all boats are floating like before. While the world's second-largest economy slowed to a 7.4 percent expansion last year -- just squeaking into the communist government's "about 7.5 percent" target range -- regional data presents a fractured landscape more akin to Europe's than the rising-tide-floats-all-boats numbers we're used to from China. 

• China’s Stocks Head for Longest Weekly Losing Streak Since May. China’s stocks fell, with the benchmark index heading for its longest weekly losing streak since May, on concern an economic slowdown is deepening and new share sales will draw capital from existing shares. Huadian Power International Corp. tumbled 3.8 percent to lead a gauge of utilities lower. Inner Mongolian Baotou Steel Union Co. paced declines by commodity producers. A property index slumped 1.5 percent as China Vanke Co. and Poly Real Estate Group Co. retreated. The Shanghai Composite Index declined 0.9 percent to 3,109.36 at 9:40 a.m. local time, taking this week’s loss to 2.8 percent after manufacturing and services gauges signaled a worsening outlook for the economy and 24 companies prepared to sell shares in initial public offerings.  

• Groups Urge U.S. Fight Against China Foreign Tech Purge. U.S. business groups are calling for immediate action to reverse “troubling” new Chinese government policies in the information technology industry, according to a letter sent to key U.S. officials. If fully implemented, the policies threaten the ability of U.S. companies to participate in China’s $465 billion market for information technology products, according to the letter sent to U.S. Secretary of State John Kerry and other government officials that was signed by 17 business groups. The rules raise “serious” questions about China’s international trade commitments and will have a “significant negative impact” on opportunities for U.S. companies in China, according to the Feb. 4 letter, which was signed by groups including the American Chamber of Commerce in China, the National Foreign Trade Council and the U.S. Information Technology Office.

• Asia Stocks Rise as Ringgit Strengthens With Oil. Asian equities rose, with a gauge of Australian shares heading for a record streak of gains, before U.S. payrolls data. China’s yuan rose the most this year and Malaysia’s ringgit advanced with oil. The MSCI Asia Pacific Index climbed 0.3 percent by 11:17 a.m. in Tokyo, with the S&P/ASX 200 Index up for a 12th straight day in Sydney.  

• Saudis Deepen Asia Oil Discount to a a Record Low. Saudi Arabia, the world’s largest crude exporter, cut prices for March oil sales to Asia, a sign that the desert kingdom is fighting for market share. State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light 90 cents to $2.30 a barrel less than Middle East benchmarks, the company said in an e-mailed statement Thursday. That’s the lowest in at least 14 years since Bloomberg began gathering data.  

• Iron Ore Seen Below $40 by Andy Xie on China Steel Slowdown. Iron ore will slump into the $30s a metric ton this year as low-cost supplies rise and steel demand in China shrinks, according to Andy Xie, a Shanghai-based independent economist who’s forecast a rout for years. “When it peaked at $190, I started talking about a collapse and nobody believed me,” Shanghai-based Xie, a former Asia-Pacific chief economist at Morgan Stanley, said in a phone interview on Thursday. “We need to see prices much, much lower. It can still go down through $40 before we bounce back.”

• Treasuries Not Buying Stock Optimism in Move-VIX Spread: Options. While bond and equity investors often see the world differently, the gap in perceptions is getting extreme. Measures tracking levels of nervousness in the government debt and stock markets have been diverging all year and this week reached the widest since September 2013, according to data compiled by Bloomberg. Most of the spread reflects a 34 percent jump in fixed-income price turbulence as measured by the Bank of America-Merrill Lynch Option Volatility MOVE Index.  

• Here’s Why Your Social Security Number Is Holy Grail for Hackers. The hackers who infiltrated Anthem Inc. made off with one of the most prized possessions in computer crime: the Social Security numbers of as many as 80 million customers of the nation’s second-biggest health insurer.

Wall Street Journal:

• U.S. Boosts Estimated Cost of Student Debt Forgiveness. Higher Forecast Is Driven by Expansion of Pay as You Earn Program.

• Natural Gas Sinks Amid Plentiful Supplies. Prices Fall to a 2½-Year Low Despite Cold Snap in the U.S. Northeast. Not even the freezing weather gripping the U.S. Northeast can stop natural-gas prices from plunging. Investors, convinced that abundant supplies and strong production are more than enough to withstand the current cold snap, sent natural-gas prices to a 2½-year low on Thursday. Sinking natural-gas prices are the latest example of a turn in the commodities cycle.

• Computer-Driven, Automatic Trading Strategies Score Big. So-Called Quant Traders Take Advantage of Volatility. Recent market volatility caught many investors flat-footed. Among the few winners were traders who let a computer be their guide. Hedge-fund managers who employ complicated, automatic-trading strategies made millions off the wild swings in currency and commodity markets in recent weeks, investors said.

• Jobs Data Shouldn’t Muddy Fed Waters.

• Big Pharma’s ObamaCare Reward. For helping pass the law, the drug companies get price controls. Wow, the breakup between President Obama and his former corporate health-care partners must have been bad. The deal he cut with the pharmaceutical industry to pass ObamaCare didn’t even last as long as his Presidency. We can’t wait for the memoir. 

Fox News:

• ISIS expanding ‘international footprint’ with affiliates in more countries, officials warn. The Islamic State, despite being driven by Kurdish fighters from its one-time Syrian stronghold in Kobani last week, nevertheless is extending its reach well beyond Iraq and Syria, military officials and analysts warn -- represented, by some estimates, in nearly a dozen countries. Lt. Gen. Vincent Stewart, director of the Defense Intelligence Agency, delivered a grim assessment earlier this week in testimony to the House Armed Services Committee, as he described how the group was surfacing in North Africa. "With affiliates in Algeria, Egypt, Libya, the group is beginning to assemble a growing international footprint that includes ungoverned and under governed areas,” Stewart said.

• Obama at Prayer Event: Christians did terrible things, too. (video)

CNBC: 

• What investors are looking for in the jobs report. (video)

• Twitter(TWTR) earnings strong, user growth disappoints. (video) Twitter stock soared in Thursday after-hours trading as the company confirmed that it had reached a deal with Google, and reported quarterly earnings and revenue that beat analysts' expectations.

Zero Hedge:

• Chinese Rating Agency Warns Coming Crisis Is Worse Than 2008, Blames US "Printing Press". "I believe we’ll have to face a new world financial crisis in the next few years. It is difficult to give the exact time but all the signs are present, such as the growing volume of debts and the unsteady development of the economies of the US, the EU, China and some other developing countries," he said, adding the situation is even worse than ahead of 2008."

• "Catastrophic Shutdown Of America's Supply Chain Looms" As West Coast Port Worker Talks Break Down.

• 3 Things - The 5.6% Lie, Dividend Cuts, Valuation. (graph)

• "Investors Are Now Playing An Epic Game Of Chicken".

• What Central Bank Defeat Would Look Like, In Charts. (graph)

• Shunned Greece Agrees To Boost Economic Cooperation With Russia.

• The Fed's Stunning Primer For Life In A Negative Interest Rate World. (graph)

Business Insider:

• The most important thing in the Middle East that no one is talking about. "In a wider political sense, the real victor of the Syrian war and in Iraq has been Iran, a triumph for which the Islamic Republic has its militia forces to thank," Smyth writes. Tehran succeeded in turning Syria's war into a sectarian conflict and has benefitted greatly as a result.

• RadioShack files for bankruptcy.

• Pandora(P) stock plunges more than 20% on revenue miss.

• GoPro(GPRO) is crashing.

• The Obama administration is warming up to a US-listed state sponsor of terrorism.

Reuters:

• Yelp(YELP) signs up fewer visitor for its websites; shares down. Yelp Inc signed up fewer subscribers and business customers in the fourth quarter, raising concerns about the consumer review website operator's slowing growth in the United States and its ability to boost revenue from overseas markets. 

• Expedia(EXPE) 4th-qtr profit misses estimates, shares slide. Expedia Inc on Thursday posted a fourth-quarter profit below analysts' expectations and over 30 percent lower than the same quarter a year ago, due in part to currency headwinds and heavy competition in China. The travel services company's shares slid more than 7 percent in extended trading.

Telegraph:

• Instead of paying down its debts, the world’s gone on another credit binge. Global debt has jumped by $57 trillion, or 17pc of global GDP, since the fourth quarter of 2007.

People's Daily:

• PBOC Official Says RRR Cut Not Start of Strong Stimulus. The reserve requirement ratio cut announced by People's Bank of China on Wednesday was based on liquidity and economic conditions, citing Lu Lei, head of PBOC's research bureau. Solely relying on open market operations can't fill funding gap around Chinese New Year holiday because of current yuan positions situation, Lu said. The central bank will stick to the principle of balance between tight and loose while making moves in future based on economic indicators, he said.

Shanghai Securities News:

• Record China IPO Numbers to Lock Up Almost 2t Yuan. 24 Chinese cos. will start the IPO process next week, a record since CSRC restarted IPO approvals last year, locking up nearly 2t yuan in investor money, without citing anyone.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 108.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 67.75 -.75 basis point.

• S&P 500 futures -.08%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALU)/.06

• (AXL)/.54

• (AON)/1.86

• (CBOE)/.66

• (FLILR)/.48

• (MMC)/.66

• (MCO)/.95

• (STRA)/1.18

• (CCJ)/.30

• (D)/.83

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for January is estimated at 230K versus 252K in December.

• The Unemployment Rate for January is estimated at 5.6% versus 5.6% in December.

• Average Hourly Earnings for January are estimated to rise +.3% versus a -.2% decline in December.

• The Labor Force Participation Rate for January is estimated at 62.7% versus 62.7% in December.

3:00 pm EST

• Consumer Credit for December is estimated to rise to $156.0B versus $14.08B in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lockhart speaking, German industrial production report, weekly EIA natural gas inventory report, (GLW) investor meeting and the (STJ) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial 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 Oil Bounce, Less Emerging Markets/US High-Yield Debt Angst, Yen Weakness, Biotech/Commodity Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 17.26 -5.84%

• Euro/Yen Carry Return Index 140.95 +1.46%

• Emerging Markets Currency Volatility(VXY) 10.71 -.74%

• S&P 500 Implied Correlation 65.54 -1.37%

• ISE Sentiment Index 171.0 +67.65%

• Total Put/Call .90 -4.26%

• NYSE Arms .81 -26.58% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.09 -2.64%
• America Energy Sector High-Yield CDS Index 742.0 -1.38%

• European Financial Sector CDS Index 62.01 -.65%

• Western Europe Sovereign Debt CDS Index 24.88 +.71%
• Asia Pacific Sovereign Debt CDS Index 68.20 -.45%

• Emerging Market CDS Index 382.68 -2.08%

• iBoxx Offshore RMB China Corporates High Yield Index 113.60 unch.
• 2-Year Swap Spread 25.0 +.25 basis point

• TED Spread 24.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -17.25 -.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 129.0 +1.0 basis point

• China Import Iron Ore Spot $61.64/Metric Tonne -1.50%

• Citi US Economic Surprise Index -27.20 -14.2 points
• Citi Eurozone Economic Surprise Index 25.70 +4.9 points

• Citi Emerging Markets Economic Surprise Index -4.50 +1.4 points

• 10-Year TIPS Spread 1.69 -2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +216 open in Japan

• DAX Futures: Indicating -21 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long