Wednesday Watch

Evening Headlines 
Bloomberg:  

• Russian Opposition in Despair After Nemtsov as Putin Era Endures. Russia’s liberal opposition is in despair after the Friday night slaying of Nemtsov in the Kremlin’s shadow. While the murder elicited international condemnation and sparked the largest opposition gathering since the protests of 2011-2012 against President Vladimir Putin’s rule, rank-and-file activists say the Russian leader looks stronger than ever.

• Japan Public Debt is Keeping BNP's Chief Credit Analyst Awake at Night. For most of her career, Mana Nakazora has taken a pre-dawn train to work regardless of whether she arrived home just hours earlier. Her colleagues describe BNP Paribas SA’s Tokyo head of investment research as a powerhouse, and she was Japan’s No. 1 bond picker from 2010 to 2012 and No. 2 for the last two years in Nikkei Veritas newspaper polls. Making it to the top in an industry whose corporate bond sales exceeded $70 billion last year can be tough.  

• Macau Analyst Who Predicted Stock Drop Says Worst Is Yet to Come. The worst is yet to come for Macau casinos after February gaming revenue plunged the most on record, according to one of the few analysts who correctly predicted the stocks would fall this year. Gaming revenue will keep sliding through mid-year and dividends will get cut as the cost of new capacity eats into free-cash flow, leaving share valuations too expensive, said Jamie Zhou, an analyst at Macquarie Securities in Hong Kong. Zhou was one of just two analysts tracked by Bloomberg with sell ratings on Sands China Ltd. and Galaxy Entertainment Group Ltd. when he started covering the shares in December.   

• Rajan Cuts India Rates in Unscheduled Move After Modi Budget. India’s central bank lowered interest rates in an unscheduled move for the second time this year, a sign of approval for Prime Minister Narendra Modi’s first full-year budget. Governor Raghuram Rajan cut the benchmark repurchase rate to 7.5 percent from 7.75 percent, the Reserve Bank of India said in a statement on Wednesday. The RBI will seek to bring the inflation rate “to the mid-point” of the inflation target of 4 percent plus or minus 2 percent by the end of a two-year period starting in the fiscal year through March 2017, Rajan said.

• Asian Stocks Retreat on Yen as Aussie Bonds Decline. Asian stocks fell, dragging down the regional benchmark index from an almost six-month high, as a strengthening yen weighed on Japanese exporters. Australian bonds fell after economic growth data, while crude oil traded above $50 a barrel. The MSCI Asia Pacific Index declined 0.4 percent by 11:12 a.m. in Tokyo, while Japan’s Topix lost 1 percent and Nissan Motor Co. sank 2.2 percent.

• Here's the Latest Sign the Oil-Price Plunge Is Hitting the Job Market. (graph) As investors prepare for the release of the February U.S. employment data on Friday, we're getting more inklings of how the shakeout in the oil industry will impact the jobs market, and it doesn't look great: Demand for workers in energy-related occupations is plunging. 

• Yellen Says Fed Seeks to Avert ‘Capture’ by Banks It Oversees. Federal Reserve Chair Janet Yellen, countering criticism from members of Congress, said the central bank is trying to avoid being too cozy with the Wall Street firms it supervises and wants to ensure that regulators aren’t afraid to confront the financial industry. “The risk of regulatory capture is something the Federal Reserve takes very seriously and works very hard to prevent,” Yellen said in remarks prepared for a speech in New York on Tuesday night. “It is important that anyone serving the Fed feel safe speaking up when they have concerns about bias toward industry, and that those concerns be addressed.”  

• Shelby Says He Will Seek Bipartisan Legislation Aimed at Fed. The head of the powerful Senate Banking Committee signaled he wants to work with two Democratic critics of the Federal Reserve to fashion legislation aimed at the Fed after a hearing in which lawmakers of both parties attacked the central bank’s record. “I do see some interests that might be put together hopefully in a legislative package,” Richard Shelby, Republican of Alabama, said Tuesday in a brief interview in Washington. “What we’re going to do is continue hearings and see what we can fashion or bring together.”

Wall Street Journal:

• Netanyahu’s Bet: Congress Will Emerge Dominant in Iran Debate. Israeli leader turns to lawmakers to toughen and broaden nuclear agreement. In appealing to U.S. lawmakers to steer away from the emerging international nuclear deal with Iran, Israeli Prime Minister Benjamin Netanyahu is betting he can use Congress to either circumvent the White House’s diplomacy or at least significantly toughen and broaden the terms of any deal. 

• Insurers’ Biggest Fear: A Health-Law Death Spiral. Supreme Court decision on tax credits could drive up premiums in some states. As the Supreme Court hears arguments on Wednesday in the latest challenge to the Affordable Care Act, health insurers are struggling to prepare for a decision that could unravel the marketplaces created by the law.

• Jeff Immelt’s Overhaul of GE(GE) Impeded by Falling Oil Prices. CEO’s rebuilding of General Electric still hasn’t satisfied many investors, and now there’s this oil business.

• Pro-Growth, Pro-Family Tax Reform. by Mike Lee and Marco Rubio. Cut the corporate rate to 25%.For individuals and families, reduce the current seven brackets to two: 15% and 35%. Six years after the Great Recession officially ended, most Americans can sense that the U.S. economy is still operating below its full potential. Far too many Americans remain unemployed, underemployed or stuck in jobs with stagnant wages and narrow horizons. Many are beginning to wonder: Is this the new normal? We don’t believe it is.

• The Clinton Rules. Foreign donors and private email show how Bill and Hillary work. Hillary Clinton hasn’t even begun her expected presidential candidacy, but already Americans are being reminded of the political entertainment they can expect. To wit, the normal rules of government ethics and transparency apply to everyone except Bill and Hillary.

Fox News:

• Ex-Iranian hostages agree with Bibi: Tehran can't be trusted. They dealt with the Iranian regime first-hand more than three decades ago, when it was founded in an act of war against the U.S., and several survivors of the hostage crisis say the idea of the U.S. negotiating with an unrepentant Tehran makes their blood boil.

CNBC:

• Western leaders hint at more Russian sanctions over Ukraine. (video) U.S. President Barack Obama and European leaders on Tuesday warned Russia that they were ready to step up sanctions if there were further violations of a ceasefire agreement in Ukraine, officials said. The threats came in statements issued after a video conference that brought together Obama and the leaders of Britain, France, Germany and Italy, as well as the head of the European Council.

Zero Hedge:

• How Mario Draghi Is Putting Pensioners At Risk. (graph)

• Hubris Hangover? Stocks, Bonds, & Bullion All Red. (graph)

• As The Battle For Tikrit Begins, A Map Of Who Controls What.

• This Is What Happens When The Government Cracks Down On Subprime Auto Loan. (graph)

• Buffett On Europe: Germany Must Stop Greek Dog Peeing On Its Carpet. (video)

• In "Unprecedented Move" Nobel Peace Prize Chairman Demoted For Decision To Give Obama 2009 Award.

• Crude Parallels: A River Of Denials. (graph)

• Japanese Bonds & Stocks Drop As Services PMI Tumbles Into Contraction. (graph)

• A Match Made In Subprime Hell.

Business Insider:

• Target(TGT) is firing thousands of workers.

• The FAA wants to speed up the approval process for commercial drones.

• The SEC just dealt a 'critical' warning to pharmaceutical companies.

• Russia and Egypt just got even closer.

• The US has so much crude oil that it is running out of places to put it. (graph)

• Tesla(TSLA): We aren't a giant car company and could get crushed.

• US commander: There are 12,000 Russian troops in eastern Ukraine.

• LUMBER LIQUIDATORS(LL): There is no guarantee our wood suppliers will play by the rules.

Quartz:

• The latest signs China’s trillions in debt are getting tricky to handle. The rate cuts highlight the underlying worry that money is dangerously scarce—and that insolvent companies could easily run out of cash. Here’s a breakdown of the problem:

Reuters:

• CBO: U.S. cash may last until November with no debt limit hike. The Congressional Budget Office said on Tuesday that if the U.S. federal debt limit is not raised, the U.S. Treasury Department will exhaust all of its borrowing capacity and run out of cash by October or November, slightly later than a previous forecast.

Telegraph:

• Only mass default will end the world's addiction to debt. As global debt rises off the scale, creditors stand to take a huge hit in a threatened tsunami of defaults. 

• Eurozone faces first regional bankruptcy as debt debacle stalks Austria's Carinthia. Fitch has stripped Austria of its AAA rating, adding that 'within a short space of time the debt dynamics of Austria have deteriorated significantly'.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 101.0 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 61.50 +1.5 basis points.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ANF)/1.16

• (AEO)/.34

• (BF/B)/.86

• (PETM)/1.38

• (TSL)/.13

• (CTRIP)/-.10

• (HRB)/-.13 

Economic Releases
8:15 am EST 

• The ADP Employment Change for February is estimated to rise to 219K versus 213K in January..

9:45 am EST

• Final Markit US Services PMI for February is estimated at 57.0 versus versus a prior estimate of 57.0.

10:00 am EST

• ISM Non-Manufacturing for February is estimated to fall to 56.5 versus 56.7 in January.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +3,887,500 barrels versus a +8,427,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,762,500 barrels versus a -3,118,000 barrel decline the prior week. Distillate supplies are estimated to fall by -2,187,500 barrels versus a -2,711,000 barrel decline the prior week.
  

2:00 pm EST

• Fed's Beige Book.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's George speaking, Fed's Fisher speaking, Fed's Evans speaking, Eurozone Services PMI, weekly MBA mortgage applications report, UBS Consumer Conference, (FAST) Feb. sales release, (XOM) analyst meeting, (CAB) investor day and the (HON) investor conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Lower into Final Hour on Global Growth Fears, Eurozone/Emerging Markets Debt Angst, Yen Strength, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.94 +6.90%

• Euro/Yen Carry Return Index 139.75 -.40%

• Emerging Markets Currency Volatility(VXY) 9.86 +.31%

• S&P 500 Implied Correlation 59.82 +1.86%

• ISE Sentiment Index 101.0 -14.01%

• Total Put/Call .95 -5.94%

• NYSE Arms .98 -23.33% 

Credit Investor Angst:

• North American Investment Grade CDS Index 61.47 +1.15%

• America Energy Sector High-Yield CDS Index 660.0 +2.81%

• European Financial Sector CDS Index 56.95 +2.11%

• Western Europe Sovereign Debt CDS Index 22.67 +5.03%

• Asia Pacific Sovereign Debt CDS Index 61.289 +2.14%

• Emerging Market CDS Index 375.86 +.46%

• iBoxx Offshore RMB China Corporates High Yield Index 114.46 +.13%

• 2-Year Swap Spread 24.75 -.5 basis point

• TED Spread 24.75 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -21.25 +1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 144.0 +2.0 basis points

• China Import Iron Ore Spot $62.24/Metric Tonne -.94%

• Citi US Economic Surprise Index -49.4 -.4 point

• Citi Eurozone Economic Surprise Index 61.8 +3.8 points

• Citi Emerging Markets Economic Surprise Index -6.2 -3.9 points

• 10-Year TIPS Spread 1.87 +4.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -85 open in Japan

• DAX Futures: Indicating +19 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/tech/medical/retail sector longs 

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:  

• Draghi's Rescue Plan Has Created a $103 Billion Problem. S&P Says Sinking Bond Yields Have Worsened Pension Shortfalls. There's a corner of the pension world that needs to brace itself for Mario Draghi. His European Central Bank's 1.1 trillion euro ($1.2 trillion) bond-buying plan might have already blown a 92 billion-euro hole in defined-benefit pension plans by depressing bond yields, Standard & Poor's said Feb. 26. And if the actual start of QE pushes yields further, for longer, companies may have to take drastic measures to make ends meet, and could face a hit to their credit ratings.  

• Ruble Recovers on Oil as Morgan Stanley Warns of Risks to Rally. The ruble ended a two-day drop and Russian stocks and bonds advanced as oil’s return above $60 a barrel improved sentiment, while a Morgan Stanley downgrade cast doubt on the rally. The currency appreciated as much as 1 percent to 62 against dollar as Brent crude rebounded from its biggest slide in a month. Bonds advanced, pulling yields from a four-week high, and the dollar-denominated RTS Index extended the world’s largest gain this year. The Finance Ministry plans to sell 15 billion rubles ($241 million) of floating-rate notes Wednesday.

• China’s Debt Binge Spawns Asset-Backed Bond Boom: Credit Markets. Banks are bundling loans into securities to make room on their balance sheets for more lending amid a fading property boom and stuttering economic growth. This isn’t the U.S. circa 2007, it’s China in 2015. Having banned asset-backed bonds in 2009 after they’d helped spark the global financial crisis, authorities in the world’s second-largest economy started allowing sales in 2012. Issuance has climbed since then to 282.3 billion yuan ($45 billion) last year, almost 15 times the offerings in 2013, according to data compiled by Bloomberg. Sales are already up 147 percent this year versus the same period in 2014. The boom is alarming ratings companies as soured loans rise to the highest in four years and China’s public debt soars to more than 250 percent of its gross domestic product, more than double the ratio for the U.S. and Germany. Chinese banks’ profit growth is slowing and the nation’s economy, which expanded at the weakest pace since 1990 last year, is struggling to regain momentum. “There’s been no real economic crisis in China in the past few decades, but if a severe one happens, the performance of the underlying assets backing these securities could deteriorate significantly,” said Jerome Cheng, a structured finance analyst at Moody’s Investors Service in Hong Kong.

• Macau Casino Revenue Has Record 49% Slump on Weak Demand. Macau gaming revenue almost halved in February as a crackdown on corruption in China kept high-stakes gamblers away during the peak Lunar New Year holiday period. Gross gaming revenue in the world’s biggest gambling hub fell 49 percent to 19.5 billion patacas ($2.4 billion) last month, Macau’s Gaming Inspection and Coordination Bureau said. This compares with the median estimate for a 54 percent decline according to eight analysts surveyed by Bloomberg News. 

• European Stocks Pare Gains as Bank Shares Decline. European stocks fell the most in more than a month as a decline in lenders and automakers dragged the Stoxx Europe 600 Index lower. Barclays Plc fell 3.2 percent after saying it set aside 750 million pounds ($1.2 billion) to settle a currency-manipulation probe. ING Groep NV and BNP Paribas SA also dropped more than 3 percent. Fiat Chrysler Automobiles NV slipped 3.3 percent after posting slower-than-expected sales in February as frigid winter conditions kept American car buyers home. BMW AG retreated 2.8 percent. The Stoxx 600 lost 0.9 percent to 387.68 at the close of trading, erasing gains of as much as 0.3 percent.

• Global Iron Ore Surplus Seen by World Bank Lasting Two Years. If history is any guide the global glut in iron ore may persist for as long as two years, according to the World Bank, which forecasts that the steel-making raw material will average $75 a metric ton this year. “From experience from earlier iron ore episodes as well as other metal markets, it takes about one to two years for either excess supplies to get back to normal levels or excess demand to be met by larger supplies,” John Baffes, a senior economist at the lender, said in an e-mail response to questions.  

• Traders Brace for End of Quiet After VIX’s Biggest Drop: Options. Traders in one of the most popular exchange-traded notes tracking volatility are convinced the calm in U.S. stocks won’t last. Investors added $514 million in February to the iPath S&P 500 VIX Short-Term Futures ETN, known by its ticker symbol VXX, for its biggest monthly inflows since July 2013. The note appreciates as futures on the Chicago Board Options Exchange Volatility Index climb.

Fox News:

• Hillary Clinton's use of private email address while secretary of state draws scrutiny. Former Secretary of State Hillary Clinton used a personal email account to exclusively conduct official business during her time at the State Department, a move that raises questions about access to the full archive of her correspondence, as well as the possibility that she violated federal law requiring official messages to be retained for the record. The existence of the account was discovered by the House select committee investigating the deadly 2012 attacks on the U.S. Consulate in Benghazi, Libya, and was first reported by The New York Times. Clinton did not even have a government email address during her tenure as America's top diplomat, which lasted from 2009 to 2013, and The Times reports that her aides took no action to preserve her emails on department servers, as required by the Federal Records Act. Instead, the paper reports, Clinton's advisers selected which of her emails to turn over to the State Department for archival purposes after going through tens of thousands of pages of correspondence. 
• Netanyahu faces Dem ire in wake of Iran address. (video) Israeli Prime Minister Benjamin Netanyahu brought lawmakers of both parties to their feet Tuesday morning during a controversial address to a joint meeting of Congress -- but that didn't stop Democrats still fuming over his visit from continuing their attacks, not only against the invitation but his message, as well.

CNBC: 

• People aren't spending their gas savings: Zandi.

ZeroHedge:

• BoJ Is Losing Control As Demand Wanes For JGBs. (graph)

• A Complete Preview Of Q€ — And Why It Will Fail.

• Hryvnia Rallies To 1-Month Highs After Ukraine Raises Benchmark Rate To 30%. (graph)

• hdr22@clintonemail.com - How A Romanian Hacker Exposed Hillary Clinton's Secret Email Life.

• GDP Shocker: Atlanta Fed Calculates Q1 Growth Of Only 1.2%. (graph)

Business Insider:

• Benjamin Netanyahu in Congress address: 'This is a bad deal'.

• Chris Christie’s approval in New Jersey has hit a new low.

• If the guy who called the top in the Japanese economy is right, then China faces a hard landing.

• NOT GOOD: Honda, GM, Ford, Chrysler, and Nissan sales all miss expectations.

• Alibaba(BABA) shares are at an all-time low — and people are asking questions about fake customers.

Reuters:

• Fed's Yellen reports assets worth between $4.9 mln and $13.3 mln. Yellen held onto shares of ConocoPhillips and Phillips 66 last year despite steep slides in the companies' stock prices triggered by the oil price slump, according to her 2014 financial disclosure statement. Yellen reported total assets estimated at between $4.9 million and $13.3 million, according to the report filed in January with the Office of Government Ethics. The agency released the report on Tuesday.

The Hill:

• conomic conditions are “getting closer and closer to those where it makes sense to really start thinking seriously about starting this process of normalization,” Williams told the FT in an interview.
  The newspaper said Williams said the Fed might have to hike borrowing costs "much more dramatically" than otherwise if it waited too long, saying it was better to move sooner and raise rates "gradually, thoughtfully." - See more at: http://www.thefiscaltimes.com/latestnews/2015/02/10/Feds-Williams-says-rate-hike-getting-closer-and-closer-FT#sthash.8HLK2bPs.dpuf
  Economic conditions are “getting closer and closer to those where it makes sense to really start thinking seriously about starting this process of normalization,” Williams told the FT in an interview.
  The newspaper said Williams said the Fed might have to hike borrowing costs "much more dramatically" than otherwise if it waited too long, saying it was better to move sooner and raise rates "gradually, thoughtfully." - See more at: http://www.thefiscaltimes.com/latestnews/2015/02/10/Feds-Williams-says-rate-hike-getting-closer-and-closer-FT#sthash.8HLK2bPs.dpuf
  At Least 55 Democrats to Skip Netanyahu's Speech. At least 55 Democrats — eight senators and 47 House members — are vowing to skip the speech, in which Netanyahu is expected to deliver a stinging rebuke of President Obama’s Iran strategy even as the administration is attempting to wrap up delicate talks with Iranian leaders over the future of their nuclear program. Vice President Biden, who is traveling abroad, will be another glaring absence. Late Monday, Sen. Elizabeth Warren (D-Mass.) added her name to the list, according to the Boston Globe.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.03%

Sector Underperformers:

• 1) Semis -2.03% 2) Road & Rail -2.0% 3) Homebuilders -1.86%

Stocks Falling on Unusual Volume:

• NRF, STKL, OAK, PRIM, OPWR, AAC, TEDU, XENT, HTGC, AKRX, SNN, INSY, IG, EPIQ, DPLO, BABY, QTEC, ARCB, MDAS, DQ, RNET, MBLY, PCRX, KYTH, NXPI, NRF, CZR, NMFC, SMRT, CKEC, CALD and ENOC

Stocks With Unusual Put Option Activity:

• 1) FAST 2) XLK 3) CSX 4) MNST 5) STX

Stocks With Most Negative News Mentions:

• 1) MU 2) X 3) BID 4) ARUN 5) AXP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.62%

Sector Outperformers:

• 1) Gaming +.38% 2) Steel +.29% 3) Utilities +.17%
  

Stocks Rising on Unusual Volume:

• LEAF, LL, NTRI, WBAI, XON, TSEM, LPI and GOGO

Stocks With Unusual Call Option Activity:

• 1) OREX 2) SO 3) MEMP 4) GOGO 5) SIRI
  

Stocks With Most Positive News Mentions:

• 1) GPS 2) BBY 3) NBR 4) UAL 5) LEAF
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:  

• Russia to Bury Slain Opposition Leader as Allies Seek Momentum. (video) Russians prepared for the funeral of slain opposition leader Boris Nemtsov as his allies tried to galvanize supporters for a new wave of protests against President Vladimir Putin. Nemtsov’s funeral was due to take place at Moscow’s Troekurovskoe cemetery on Tuesday. He was shot four times in the back while walking on a bridge just steps from the Kremlin last week before he was slated to lead a protest against Putin.   

• Conspiracies Swirl Over Moscow Murder. The contract-style murder last Friday night of Boris Nemtsov, a vocal critic of Russian President Vladimir Putin, has led to accusations of Kremlin complicity but also to a slew of competing theories involving everything from the CIA to Islamic militants and Ukrainian nationalists. Many of the as many as 50,000 people protesting Nemtsov’s death at a rally on Sunday implicated the government in the murder. A political cartoon reproduced as a poster by some attendees showed a picture of the Kremlin bristling with security cameras that were in fact pistols. But Putin supporters have been just as active in offering their theories. 

• Exxon’s(XOM) Russia Exposure Surges as Long View Outweighs Sanctions. Exxon Mobil Corp. shook off the chill of sanctions and has continued to snap up oil drilling rights in Russia, giving it larger exploration holdings in Vladimir Putin’s backyard than in the U.S. Taking the long view, Exxon boosted its Russian holdings to 63.7 million acres last year from 11.4 million at the end of 2014, according to data from U.S. regulatory filings. That dwarfs the 14.6 million acres of rights Exxon holds in the U.S., which until last year was its largest exploration prospect.

• Goldman Partner Who Called Japan's Demise Sees Similarities With China. Forecasts for China to surpass the U.S. as the world’s main economic power are misplaced. So says an observer who foresaw Japan’s eventual demise a year before its land-price bubble began to burst. “The vulnerabilities in China today are very similar to the vulnerabilities in Japan,” said Roy Smith, 76, who was a Goldman Sachs Group Inc. partner when he wrote a column saying Japan’s rise as a financial hegemon was done. “Nobody agrees with me. But they didn’t agree with me in 1990, so at least I have one right.” Among the risks: bad loans, overpriced stocks and a frothy property market are flashing danger for China’s economy and putting pressure on a fragile financial system -- similar to conditions that triggered Japan’s fall, said Smith, a finance professor at New York University’s Stern School of Business. A further parallel is the burden of an aging population, with mounting pension and health-care costs, he says.   

• RBA Keeps Key Rate Unchanged as Currency Decline Eases Pressure. The Reserve Bank of Australia unexpectedly kept interest rates unchanged as a weaker currency helps ease pressure on an economy grappling with tumbling commodity prices. The overnight cash rate target was held at 2.25 percent, Governor Glenn Stevens said in a statement Tuesday following a board meeting in Melbourne. The decision was predicted by 11 of 29 economists surveyed by Bloomberg News, while 18 saw a cut. Markets had priced in about a 60 percent chance of a reduction.

• Asian Stocks Follow U.S. Shares Higher on Consumer Spending, Yen. Asian stocks rose after U.S. equities climbed to records as rising consumer spending signaled strength in the world’s largest economy. Japanese shares gained after the yen weakened. The MSCI Asia Pacific Index advanced 0.1 percent to 146.31 as of 9:02 a.m. in Tokyo. The Topix index added 0.4 percent.

• L-Shaped Oil Recovery Flattens V-Shaped Market Optimists. Get ready for an L-shaped oil recovery. A growing consensus is emerging from the likes of BP Plc, the International Energy Agency, shale wildcatters and even the Saudis that a near-term recovery to $100-a-barrel crude isn’t in the cards. Instead, expect a range of $50 to $60 for at least the next few years. When oil prices plunged sharply in 2008, they rebounded almost as quickly. Several months ago, industry and government touted the same U or V-shaped recovery this time out. On closer examination, a new factor in the marketplace -- shale oil -- has changed their minds.

Wall Street Journal: 

• U.S. Steers Clear of Tikrit, Cites Iran Role in Support of Iraqis. Islamic Revolutionary Guard Corps fighters were on the ground with Iraqi units, U.S. official says. Iraq’s latest push to retake the Sunni city of Tikrit from Islamic State extremists has thrown a new spotlight on the role being assumed by Iran in assisting Baghdad in its fight to regain control of the country. U.S. officials said Iran is supporting the offensive to retake Tikrit, supplying artillery, rocket fire and aerial drones.

• Inside Alibaba, the Sharp-Elbowed World of Chinese E-Commerce. Merchants use fake orders, shell storefronts to gain prominence on Alibaba’s marketplaces.

• Foreign Banks Brace for Fed Stress Tests. Firms hire staff, overhaul operations to meet tougher requirements. The Federal Reserve’s growing scrutiny of global banks has set off a scramble among foreign firms as they staff up and revamp operations to meet the central bank’s rising expectations. The Fed’s stress tests are expected to find shortcomings in risk management at the U.S. units of some foreign banks, including Deutsche Bank AG and Banco Santander SA.

• Israel and the Democrats. Chuck Schumer and other liberal fence-sitters will have their reputations stained forever if they let this Iran deal pass. The Democratic Party is on the cusp of abandoning the state of Israel. That’s a shame, though less for Israel than it is for the Democrats. The Democrats’ historic support for the Jewish state has always been what’s best about the party. The understanding not only that Jews are entitled to a state, but also that a liberal democracy is entitled to defend itself—robustly and sometimes pre-emptively—against illiberal enemies, is why the...

CNBC:

• Fed has 'golden' chance to tighten: Druckenmiller. (video) To avoid wreaking havoc on markets, the Federal Reserve should raise interest rates sooner rather than later, Stanley Druckenmiller said on Monday.

Zero Hedge:

• The Internet Of Things: A Dystopian Nightmare Where Everyone And Everything Will Is Monitored.

• The Problem With The Forward EPS Hockeystick: Millions Of Americans Are About To Lose Their Jobs. (graph)

• Lehman-Like Spending Collapse Sparks Panic-Buying - Nasdaq 5,000; S&P, Dow Records. (graph)

• A Who's Who Of Awful Times To Invest. (graph)

• Retirement At The End Of A Rope. (graph)

• Japan Approaches Limit To Bond Buying Former BOJ Official Okina Warns. (graph)

• US Macro Weakest Since July 2011 As Goldman Affirms Global Economy In Contraction. (graph)

• Breaking Bad (Debt) - Episode 3.

• Citi Reiterates "Keep Calm, And Lever Up" Call.

Business Insider:

• Tesla(TSLA) is up against a critical risk faced by no one else in the auto industry.

• Russia is turning Crimea into a forward operating base against NATO.

• Iran's elite Revolutionary Guards are ramping up domestic surveillance.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 98.0 -.25 basis point.

• Asia Pacific Sovereign CDS Index 60.0 +.75 basis point.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AZO)/6.37

• (BBY)/1.35

• (DKS)/1.22

• (NAV)/-1.17

• (CECO)-.24

• (SWHC)/.12

Economic Releases
9:45 am EST 

• ISM New York for February.

10:00 am EST

• IBD/TIPP Economic Optimism for March is estimated at 47.5 versus 47.5 in February.

Afternoon:

• Total Vehicle Sales for February are estimated to rise to 16.7M versus 16.56M in January.

Upcoming Splits

• (NJR) 2-for-1

• (HBI) 4-for-1

Other Potential Market Movers

• The Fed's Yellen speaking, China HSBC Services PMI, weekly US retail sales reports, Canadian GDP report, Pac Crest Emerging Tech Summit, JPMorgan Aviation/Transport/Industrials Conference, BofA Consumer/Retail Conference, (TGT) investor meeting, (JNPR) analyst update and the (ADP) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity 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.