Stocks Lower into Final Hour on Earnings Concerns, Oil Decline, Profit-Taking, Commodity/Road & Rail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.26 +2.96%

• Euro/Yen Carry Return Index 139.64 -1.0%

• Emerging Markets Currency Volatility(VXY) 9.75 +.41%

• S&P 500 Implied Correlation 60.36 -.35%

• ISE Sentiment Index 9164.0 +86.36%

• Total Put/Call 1.03 +3.0%

• NYSE Arms 1.52 +48.21% 

Credit Investor Angst:

• North American Investment Grade CDS Index 61.86 +.22%
• America Energy Sector High-Yield CDS Index 648.0 -1.80%

• European Financial Sector CDS Index 53.95 -5.06%

• Western Europe Sovereign Debt CDS Index 22.68 -2.28%
• Asia Pacific Sovereign Debt CDS Index 60.65 -4.0%

• Emerging Market CDS Index 377.14 -.54%

• iBoxx Offshore RMB China Corporates High Yield Index 114.27 +.09%
• 2-Year Swap Spread 24.5 -.25 basis point

• TED Spread 24.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -20.75 -1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 137.0 +1.0 basis point

• China Import Iron Ore Spot $62.37/Metric Tonne -.91%

• Citi US Economic Surprise Index -41.80 -5.3 points
• Citi Eurozone Economic Surprise Index 49.90 -.7 point

• Citi Emerging Markets Economic Surprise Index -7.0 +.3 point

• 10-Year TIPS Spread 1.80 +6.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +55 open in Japan

• DAX Futures: Indicating -15 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/tecch sector longs 

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:  

• Merkel Tested by Dissent on Greek Bailout in Her Party. Chancellor Angela Merkel faces increased dissent within her governing coalition over extending Greece’s bailout as part of her goal of keeping the euro area intact. While senior lawmakers say almost all of Merkel’s Christian Democratic bloc will back the four-month reprieve for Greece in a lower-house vote on Friday, 22 of the 311 caucus members opposed the measure in a straw poll Thursday, nine more than voted against passage of Greece’s second bailout in 2012.  
• Merkel’s Truths Lead Greece to Unavoidable Deal on Euro Bailout. (video) It took a few simple truths from Germany’s Angela Merkel on the basics of euro-area crisis management to pacify the combative new government in Athens. The chancellor explained to Greek Prime Minister Alexis Tsipras what an aide in her office called reality. There wasn’t much time to reach the deal needed to keep Greece afloat and Germany wasn’t going to budge, Merkel told him in a 50-minute phone conversation on Feb. 19. It was their first substantive exchange since he’d won election Jan. 25.  
• Ukraine Says Truce Takes Hold as Army Begins Weapons Pullback. Ukraine signaled the latest attempt at peace in its easternmost regions is taking hold and said the military would start withdrawing heavy weapons from the front lines. There were no cease-fire breaches after 12:45 a.m. local time, the military said Thursday, before announcing the arms removal. While Russian Foreign Minister Sergei Lavrov accused the U.S. and Europe of seeking to derail dialogue, he said the peace deal was showing tangible results and there are no “ideal truces.” The rebels said some fighting continues.
• European Stocks Extend 2007 High as Bayer, GDF Gain on Earnings. European stocks climbed to the highest level since July 2007 as Bayer AG and GDF Suez SA rose after reporting earnings. The Stoxx Europe 600 Index advanced 1 percent to 390.69 at the close of trading, the biggest gain in more than a month.
• Major Firms Are Saying the Stage Is Set For Another Crisis In The Bond Market. The stage is set for another financial crisis to unravel years of relative calm in debt markets. At least that’s how firms from UBS Group AG to Invesco Ltd. see it. Here’s why: Prices in the world’s biggest bond market are swinging and the plunge in oil is sinking the economies of nations from Venezuela to Nigeria. To top all that off, the fundamental structure of the bond market has changed in a way that makes it difficult for regulators to gauge exactly where risks are building. As stresses grow, “we believe the probability of an ‘accident’ increases,” Invesco analysts including Rob Waldner wrote in the $786.5 billion manager’s February fixed-income outlook. “The overall environment for risky assets, and particularly for credit, is deteriorating.”
• Consumer Comfort Falls to 2015 Low as View of U.S. Economy Dims. Consumer sentiment retreated last week to the lowest level of the year as Americans’ views of the economy and their finances dimmed. The Bloomberg Consumer Comfort Index fell to 42.7 in the period ended Feb. 22 from 44.6 a week earlier. The 1.9-point decline was the biggest since May 2014. A gauge of the current state of the economy slumped by the most in almost four years. Confidence has deteriorated in three of the last four weeks as gasoline prices started climbing from the lowest level since 2009. Sentiment is also being restrained by what Federal Reserve Chair Janet Yellen this week called “sluggish” wage growth, even as the labor market continues to improve.

ZeroHedge:

• FCC Votes In Favor Of Obama's Net Neutrality - Has The Slippery Slope To Web Censorship Begun? 
• "Faith In Fed Abilities" Are Too Firmly Embedded In The Investor Class.
• Amid Probe, NY Governor Cuomo Orders Mass Deletion Of Government Emails.
• Greece Suffers Biggest Bank Run In History: January Deposits Plunge To 2005 Levels. (graph)
• Capital Goods Shipments Tumble, 6th Miss In A Row. (graph)
• US Posts First Negative Inflation Print Since Lehman On Gas Price Plunge. (graph)
• Initial Jobless Claims Surge Most Since 2013. (graph)

Business Insider: 

• The most exciting things you'll be able to do with the Apple Watch.
• Oil is getting slammed.

Telegraph: 

• Opec veteran warns cartel emergency meeting won't stop rout in prices. Qatar's former finance minister says the traditional oil producing countries will struggle to halt the fall in prices. 
• Germans say 'Nein!' to Greek bail-out deal. “No more billions for greedy Greeks,” Germany’s biggest-selling mass-market newspaper has said.

Frankfurter Allgemeine Zeitung:

• Greek Bailout May Be Bigger Than Expected, Says EU's Oettinger. Greece's 2015 budget to be burdened by election and following insecurity, EU Commissioner Guenther Oettinger says in interview. Greece must not abandon reforms and shift focus to fighting tax evasion and corruption as fiscal effects unclear. France needs to present proposals by May to reduce budget deficit to prevent tougher stance by EU including possible sanctions, Oettinger says.

Bear Radar

Style Underperformer:

• Mid-Cap Value -.45%

Sector Underperformers:

• 1) Coal -3.51% 2) Oil Service -1.55% 3) Steel -1.50%

Stocks Falling on Unusual Volume:

• BOOT, LKQ, BPT, IL, MIC, PAA, ES, TASR, BDBD, NSM, HAWK, EYES, WDAY, PLKI, LL, MBLY, NBL, ANIK, SSS, CWEI, IQNT, RLYP, SFM, CTRX, DAKT, AWAY, NBL, ICON, CHK, SEAS, SHLD, CNSL, BNFT, NFX, BPT, EYES, HSC and WAC

Stocks With Unusual Put Option Activity:

• 1) ARUN 2) EXEL 3) NFX 4) GPS 5) XME

Stocks With Most Negative News Mentions:

• 1) ANF 2) PCYC 3) SEAS 4) LL 5) BAC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.30%

Sector Outperformers:

• 1) Hospitals +1.63% 2) Gold & Silver +1.16% 3) Disk Drives +1.12%
  

Stocks Rising on Unusual Volume:

• CYBX, PGTI, UIL, AMAG, AAOI, RGR, CRM, AVGO, BKS, CRI, ELGX, AKRX, HEES, UVE, ZIOP, TRUE, NEWM, INSY, ONNN, EPAM, NTI, HFC, FOE, AES, MDVN and DDD

Stocks With Unusual Call Option Activity:

• 1) ARUN 2) HYG 3) CRM 4) FE 5) WDAY
  

Stocks With Most Positive News Mentions:

• 1) CRM 2) MDVN 3) VMC 4) JAKK 5) JAZZ
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:  

• Ukraine Risks Losing IMF Support for Aid If War Escalates. Ukraine risks losing support from IMF member countries for a proposed $17.5 billion bailout if the conflict in the former Soviet republic continues to escalate, according to two people familiar with the matter. The new four-year loan program is awaiting approval by the International Monetary Fund’s executive board, which represents the lender’s 188 member nations. Getting the panel’s consent will become more challenging if pro-Russia rebels continue their advance and seize territory such as the strategic port city of Mariupol, one of the people said. 
• Bond Rout Might Not Be So Bad as Economists Cut Yield Forecasts. This year’s selloff in Treasuries might not be so bad after all. While economists surveyed by Bloomberg predict prices will fall, sending benchmark 10-year yields up more than half a percentage point, they’re also scaling back forecasts for the size of the decline. Ten-year yields will be 2.62 percent by Dec. 31, based on the latest responses, down from about 3.60 percent that the surveys projected six months ago. 
• Asian Stocks Retreat From Highs as Aussie Bonds Climb. Asian stocks slipped from a five-month high while Australian bond yields fell to a three-week low after the nation’s business investment slumped more than estimated. Oil held above $50 a barrel in New York. The MSCI Asia Pacific Index dropped 0.3 percent by 11:10 a.m. in Tokyo, with five stocks falling for every three that gained.

Wall Street Journal:

• Fed’s Yellen Fends Off Charges of Partisan Tilt. House Republicans seize on calendar records, pre-election speeches that seem to favor Democrats as evidence of need to audit central bank. Federal Reserve Chairwoman Janet Yellen came under fire from Republican lawmakers who charged she had politicized the central bank, allegations she rejected in her most acrimonious congressional hearing in a year as Fed chief.
• U.S., Israel Trade Barbs Over Iran Talks. Top U.S. officials sharpened efforts to undermine Israeli Prime Minister Benjamin Netanyahu ahead of his Washington visit. Top U.S. officials sharpened efforts to undermine Israeli Prime Minister Benjamin Netanyahu ahead of his visit to Washington next week as tensions rose over his push to scuttle a possible nuclear deal with Iran. At what U.S. officials say is a historic low point in relations between the longtime allies, the White House now sees Mr. Netanyahu as a serious threat to President Barack Obama’s efforts to reach an agreement with Iran.

CNBC:

• Morgan Stanley(MS), DOJ reach $2.6B settlement, in principle.

Zero Hedge:

• Doubts (And Bond Yields) Are Rising Again In Greece. (graph)
• Falling AAPL Ends Nasdaq Anti-Gravity Streak. (graph)
• The Most Important Commodity For Housing Is Screaming "Recession". (graph)
• Ukraine Enters The Endgame.
• Russia's Military Exercises Are 10 Times Larger Than NATO's.
• Is This The Most Important Chart For The Future Of The World's Reserve Currency? (graph)
• Janet Yellen Is Freaking Out About "Audit The Fed" – Here Are 100 Reasons Why She Should Be.
• Brazil Consumer Confidence Collapses To Lowest. Ever. (graph)

Business Insider:

• Analysts are becoming increasingly suspicious of Berkshire Hathaway(BRK/A).
• Salesforce.com's(CRM) stock soars to all-time high after it posts a good quarter and CEO vows to double revenue.
• Russia can't defeat NATO — but Putin might still try.
• Don’t kid yourself: Stocks are just as overvalued today as they were in 2000. (graph)
• Excess debt is like a black hole, sucking in all the life around it.

Telegraph: 

• Greece to stop privatisations as Syriza faces backlash on deal. The Syriza leadership risks falling between two stools as it tries chip away at the austerity regime without triggering Greece's ejection from the euro.

Edaily:

• S. Korea Showing Signs of Deflation Stage, PM Lee Says. South Korea's economy is showing signs typical of deflation stage amid global economic slowdown, citing Prime Minister Lee Wan Koo.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 100.75 unch.

• Asia Pacific Sovereign CDS Index 63.75 -1.75 basis points.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CRI)/1.27
• (SFY)/-.32
• (DDD)/.25
• (CHS)/.02
• (KSS)/1.80
• (SHLD)/-1.89
• (JCP)/.13
• (ROST)/1.11
• (GPS)/.74
• (MTZ)/.38
• (HLF)/1.22
• (MNST)/.59
• (ADSK)/.24
• (OVTI)/.29

Economic Releases
8:30 am EST 

• The CPI for January is estimated to fall -.6% versus a -.4% decline in December.
• The CPI Ex Food and Energy for January is estimated to rise +.1% versus unch. in December.
• Durable Good Orders for January is estimated to rise +1.6% versus a -3.4% decline in December.
• Durables Ex Transports for January are estimated to rise +.5% versus a -.8% decline in December.
• Cap Goods Orders Non-Defense Ex Air for January are estimated to rise +.3% versus a -.6% decline in December.
• Initial Jobless Claims are estimated to rise to 290K versus 283K the prior week.
• Continuing Claims are estimated to fall to 2395K versus 2425K prior.

9:00 am EST

• The FHFA House Price Index for December is estimated to rise +.5% versus a +.8% gain in November.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for February is estimated at 3.0 versus 3.0 in January.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lockhart speaking, Japan CPI, German Unemployment Rate, $27B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (CR) analyst conference could also impact trading today.

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

Stocks Reversing Slightly Lower into Final Hour on Earnings Concerns, Profit-Taking, Technical Selling, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.68 -.07%

• Euro/Yen Carry Return Index 140.99 +.05%

• Emerging Markets Currency Volatility(VXY) 9.80 -2.87%

• S&P 500 Implied Correlation 59.70 -1.70%

• ISE Sentiment Index 91.0 +3.41%

• Total Put/Call 1.03 +3.0%

• NYSE Arms 1.11 +14.07% 

Credit Investor Angst:

• North American Investment Grade CDS Index 61.64 -.56%
• America Energy Sector High-Yield CDS Index 650.0 -5.30%

• European Financial Sector CDS Index 56.70 +.44%

• Western Europe Sovereign Debt CDS Index 23.21 -.62%
• Asia Pacific Sovereign Debt CDS Index 63.60 -2.17%

• Emerging Market CDS Index 379.73 +.49%

• iBoxx Offshore RMB China Corporates High Yield Index 114.17 +.30%
• 2-Year Swap Spread 24.75 -4.25 basis points

• TED Spread 24.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 +1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 136.0 -7.0 basis points

• China Import Iron Ore Spot $62.94/Metric Tonne -1.67%

• Citi US Economic Surprise Index -47.10 +.7 point
• Citi Eurozone Economic Surprise Index 50.6 +.8 point

• Citi Emerging Markets Economic Surprise Index -7.30 +2.4 points

• 10-Year TIPS Spread 1.74 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +39 open in Japan

• DAX Futures: Indicating -7 open in Germany

Portfolio: 

• Higher: On gains in my biotech/retail sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long