Stocks Falling Substantially into Final Hour on Fed Rate Hike Concerns, Earnings Worries, Rising European/Emerging Markets/US High-Yield Debt Angst, Tech/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.61 +10.29%

• Euro/Yen Carry Return Index 135.29 -1.49%

• Emerging Markets Currency Volatility(VXY) 10.70 +1.04%

• S&P 500 Implied Correlation 60.77 +2.34%

• ISE Sentiment Index 86.0 +14.67%

• Total Put/Call 1.07 -3.60%

• NYSE Arms 2.39 +103.88% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.80 +1.89%
• America Energy Sector High-Yield CDS Index 709.0 +2.15%

• European Financial Sector CDS Index 57.53 +.94%

• Western Europe Sovereign Debt CDS Index 20.10 -.64%
• Asia Pacific Sovereign Debt CDS Index 67.32 +3.23%

• Emerging Market CDS Index 412.90 +2.11%

• iBoxx Offshore RMB China Corporates High Yield Index 113.86 +.01%
• 2-Year Swap Spread 27.25 +.25 basis point

• TED Spread 26.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -23.5 unch.

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 145.0 -5.0 basis points

• China Import Iron Ore Spot $58.15/Metric Tonne -.73%

• Citi US Economic Surprise Index -50.10 -1.1 points
• Citi Eurozone Economic Surprise Index 47.1 -2.4 points

• Citi Emerging Markets Economic Surprise Index 12.30 +.1 point

• 10-Year TIPS Spread 1.74 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -110 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Greece Got a 'Deal' in February, but Here's Why Things Still Haven't Calmed Down
  
  It's one thing to have an agreement. It's another thing to implement it. On February 20th, the Eurogroup came to an agreement with Greece on a way to allow Greece access to further bailout funding.
  The agreement covered the way forward for Greece and consisted of three main elements.
  
• Greek Alternative Reality Clashes With Euro Area Losing Patience. Ask Greek Finance Minister Yanis Varoufakis about his country’s predicament, and you’re likely to get a very different response from the one echoing around the euro region. The Athens University professor said on Monday he’s convinced the six-week-old government is doing what’s needed to secure more funding and avoid bankruptcy. His counterparts, during a euro-area finance ministers’ meeting, spoke of mixed messages, dawdling and a lack of detail over Greece’s deteriorating financial situation. Impressions aside, Greece is running out of time, money and friends. France’s Michel Sapin, whose government had made the most conciliatory noises toward Greek calls for less austerity, expressed frustration with Varoufakis. Spain’s finance minister, concerned about an anti-austerity insurrection at home, also hardened the rhetoric.
• Draghi-Backed Report Says Sovereign Debt No More a Risk-Free Bet. Government debt can no longer be considered a risk-free asset for banks, and international regulators should consider changing the existing legislation, the European Systemic Risk Board said. “If sovereign exposures are in fact subject to default risk, consistency with a risk-focused approach to prudential regulation and supervision requires that this default risk is taken into account,” the ESRB said in a report on Tuesday, citing the majority view among its panel of experts. “Current prudential regulation of sovereign exposures is inconsistent with the conceptual approach that underlies the existing system of regulation.”   
• European Stocks Fall With Energy Shares Amid U.S. Rate Concern. European stocks fell for a second day as oil-and-gas shares dropped and concern grew the Federal Reserve is nearing an interest-rate increase. The Stoxx Europe 600 Index lost 0.9 percent to 389.66 at the close of trading. It earlier rose as much as 0.2 percent. All 19 industry groups fell, with energy shares dropping the most. Royal Dutch Shell Plc, BG Group Plc and BP Plc dropped more than 3 percent as crude fell for a fifth day amid signs a global supply glut will persist.
• History Suggests OPEC's Days Could Be Numbered. Could lower oil prices be the end of OPEC? As OPEC 's refusal to curb oil production contributes to a nine-month plunge in prices, a new paper suggests the group's days may be numbered.
• Fed Spurring Hedges in U.S. Stocks as Call Index Drops: Options. As the bull market in U.S. equities enters its seventh year, options traders are loading up on contracts to protect against losses if the rally loses steam. The ISE Sentiment Index, which tracks the number of calls traded relative to puts, touched the lowest level since June 2013 last week after a surge in hiring fueled speculation the Federal Reserve will raise borrowing costs this year.

Wall Street Journal: 

• Russian Auto Sales Plunge 38%. February’s decline accelerates; worst hit are midprice brands such as Chevrolet, Nissan. 
• CIA Gave Justice Department Secret Phone Scanning Technology. Marshals Service uses airborne devices that mimic cell towers to scan data on thousands of cellphones. 

MarketWatch.com: 

• S&P 500 teeters on major technical support. (graph)

ZeroHedge:

• Recession Alarm: Wholesale Sales Plunge Alongside Factory Orders, Worst Since Lehman. (graph)
• Central Banks Are Crack Dealers & Faith Healers.
• Dear Treasury Secretary Lew: Here Is All You Need To Know About HFT. (graph)
• Why Is Per Capita Energy Consumption At Recession Levels After Six Years Of "Recovery"? (graph)
• 30-Year Bund Yield Hits Record Low As Curve Flattens. (graph)
• Consumer Spending Tumbles: BofA Blames Snow, Oil; Claims Its Models Are Right, Reality Is Wrong. (graph)
• WTI Crude Slides To $48 Handle As Chevron Cuts Costs, Ramps Production. (graph)
• Next Mega-Bailout On Deck: White House Studying "New Bankruptcy Options" For Student-Loan Borrowers. (graph)
• Do Not Show Mario Draghi This Chart. (graph)
• US May Run Out Of Oil Storage Space As Soon As June. (graph)

Business Insider:

• A reporter pretended to be a jihadi bride to expose how ISIS lures women.
• The euro is so weak it's almost at parity with the dollar. (graph)
• It sounds like Obama doesn't have any friends on the world stage.
• Target(TGT) just started firing thousands of workers.
• Deutsche Bank says the euro is going to $0.85.
• More Russian tanks, equipment cross Ukraine border: U.S. official. Russian tanks and heavy military equipment have crossed the Ukrainian border in the last few days in breach of a European-brokered ceasefire agreed on Feb. 12, a senior U.S. State Department said on Tuesday. The comments by U.S. Assistant Secretary of State for Europe, Victoria Nuland, follow accusations by Ukraine and Western governments that Russia continues to send troops and weapons to support separatists in eastern Ukraine despite the ceasefire deal, a charge the Kremlin has denied. Eastern Ukraine and Crimea, the Black Sea peninsula annexed by Russia a year ago, was "suffering a reign of terror," Nuland told a congressional hearing on Ukraine, adding that the White House was still considering whether to arm Ukraine's military.

SiliconANGLE:

• Apple(AAPL) Watch: early reactions from analysts and the fashion conscious.

Investing.com:

• Russia stocks lower at close of trade. Russia stocks were lower after the close on Tuesday, as losses in the Manufacturing, Mining and Power sectors led shares lower. At the close in Moscow, the RTSI fell 6.43%, while the MICEX indexfell 3.65%.

Reuters: 

• Emerging marker currencies plunge as dollar soars. Emerging currencies sold off further on Tuesday with Turkey’s lira and South Africa’s rand hitting multi-year lows against a stronger dollar as expectations of a U.S. interest rate hike compound domestic fiscal and political woes.

Telegraph:

• Defiant Greece at daggers drawn with EU creditors. If Greeks are forced to choose between a restoration of their dignity or continued Troika humiliation, they will choose dignity, says the Greek prime minister.

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.43%

Sector Underperformers:

• 1) Computer Hardware -2.57% 2) Energy -2.01% 3) Banks -2.0%

Stocks Falling on Unusual Volume:

• CLMT, CMTL, MAIN, EEP, NNBR, AKRX, GNC, IDT, TITN, UNFI, OCUL, CTCT, BKS, ROSE, QIHU, PTLA, WAL, CASY, KYTH, AAC, EEQ, KFY, ITCI, BPT, BSAC, VSI, UVE, OHRP, KFY and IMPV
  

Stocks With Unusual Put Option Activity:

• 1) XLK 2) XLB 3) NKE 4) EMC 5) UPS

Stocks With Most Negative News Mentions:

• 1) TRN 2) BKS 3) VLO 4) TGT 5) AA
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -1.01%

Sector Outperformers:

• 1) Utilities +.67% 2) REITs -.10% 3) Gold & Silver -.22%
  

Stocks Rising on Unusual Volume:

• LL, URBN, CS, EXPR and RJET

Stocks With Unusual Call Option Activity:

• 1) KRFT 2) URBN 3) GERN 4) PEP 5) BKS
  

Stocks With Most Positive News Mentions:

• 1) QCOM 2) URBN 3) ESRX 4) GDOT 5) GIMO
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:  

• Euro Area Pushes Greece to Open Books as Talks Resume. European lawmakers piled pressure on Greece to open its books and follow through with pledges agreed to in its rescue package, as the country tries to avoid running out of cash as soon as this month. Greece will resume talks with its creditors in Brussels on Wednesday, alongside technical talks in Athens to comb through data. Finance Minister Yanis Varoufakis said Greece will make “all necessary” data available.
• China Short Sellers Target World’s Biggest Broker Rally. The world-beating surge in Chinese brokerages is reversing as short sellers increase bets against the stocks and investors speculate regulatory changes will erode earnings. Securities firms in China with market value of at least $1 billion have dropped about 15 percent on average this year, after more than doubling in 2014. Short interest, or wagers on a decline, in China Galaxy Securities Co. and Shanghai-based Haitong Securities Co. have climbed to at least 12 percent of outstanding shares, the highest among global peers tracked by Bloomberg and Markit Group Ltd.
• China’s Stocks Fall After Inflation Data as Financials Decline. China’s stocks fell, led by banks and property developers, after the release of inflation data. China Citic Bank Corp and China Merchants Bank Co. declined more than 2 percent. Poly Real Estate Group Co. dropped 2 percent after reporting sales fell 39 percent in February. Glass cover manufacturer Lens Technology Co. will sell initial public offering shares, kicking off 23 IPO sales this week. The Shanghai Composite Index slipped 0.4 percent to 3,289.46 at 9:35 a.m. Hong Kong’s Hang Seng China Enterprises Index decreased 0.4 percent.
• Asian Stocks Advance After U.S. Equities Rebound, Yen Weakens. Asian stocks rose, following a rebound in U.S. equities, as a weaker yen boosted Japanese exporters and investors awaited data on China’s inflation. The MSCI Asia Pacific Index advanced 0.1 percent to 144.08 as of 9:01 a.m. in Tokyo. 
• Dollar Jumps on Rate Outlook. The dollar extended gains, trading near a more-than seven-year high versus the yen, amid speculation U.S. interest rate increases will be brought forward. Chinese shares fell with copper after producer prices plunged. The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, rose 0.3 percent by 11:41 a.m. in Tokyo. The greenback bought 121.66 yen, close to the 121.85 hit on Dec. 8 that was the highest level since July 2007.

Wall Street Journal: 

• Hungry Market Eats Up Oil Bonds. Drop in oil prices has producers raising cash. 
• Fed Broadens Scope of Stress Tests. Tests are becoming part of Fed’s year-round activities.

Fox News:

• Exclusive: El-Sisi urges ‘Arab ready force’ to confront ISIS, questions if US ‘standing by’ Egypt. Egyptian President Abdel Fattah el-Sisi, in an exclusive interview with Fox News, appealed to the U.S. to play a greater role in helping his country fight terrorism -- as he urged the creation of an "Arab ready force" to confront the Islamic State and similar groups.

CNBC:

• Americans took on $57B in credit card debt in 2014. Credit cards have made a comeback. U.S. consumers racked up a record $57.1 billion in net credit card debt in 2014, according to a CardHub survey released Monday. The total marks a 47 percent increase from 2013.
•  Why oil decline could get ugly again. (video) Still drilling at four-decade highs, the U.S. oil industry could help drive another price collapse in crude this spring.
• Fed's Fisher calls for 'prompt' rate hike in final speech. The Federal Reserve should promptly end its easy monetary policy and press ahead with an interest rate hike, followed by a set of gradual moves higher, the head of the Dallas Fed said on Monday in his final speech as a policymaker.

Zero Hedge:

• Greeks Face First Product Shortages As Cash Runs Out, "It's Worse Than In 2012".
• "There Are Huge Gaps" In Clinton's Email Release, Benghazi Probe Chief Blasts.
• Real-Time Q1 GDP Update : 1.2%. (graph)
• Bonds Bid All Day But Stocks Shrug Off Apple's(AAPL) "Turlington Turmoil". (graph)
• Eurogroup Humiliation Of Greece Complete: The Troika Is Coming Back To Athens.
• Venezuela To Start Fingerprinting Supermarket Shoppers.

Business Insider:

• A German politician officially came out in favor of a Grexit.
• Marco Rubio: Obama was a 'backbencher,' I'm the real deal.
• There's a new ticking time bomb inside China's economy.
• America has a problem with Hillary Clinton and Jeb Bush.
• The unexpected failure of this seemingly healthy company shows what can go wrong when you invest in China.

Reuters:

• Qualcomm(QCOM) to buy back up to $15 bln of shares, raise dividend. Chipmaker Qualcomm Inc said it would buy back up to $15 billion of shares and raise its quarterly dividend. Shares of the company, which said it would buy back up to $10 billion of shares in the next 12 months, rose 2.6 percent to $74.60 in extended trading on Monday. Qualcomm also raised its quarterly dividend to 48 cents per share from 42 cents, effective March 25.
• China's deficit plans put squeeze on local government financing. China's plan to run its biggest fiscal deficit since the global financial crisis may help develop its bond market, but the extra competition for funding could sink some of the major providers of local government financing. Local government financing vehicles (LGFVs), which were invented to skirt restrictions on local government fundraising, are already under pressure from Beijing's drive to reduce local debt and migrate provincial financing to a more transparent municipal bond model.
• EMERGING MARKETS-Brazil's real weakens sharply on political, fiscal concerns. 

Telegraph:

• Europe tightens noose as Syriza told to face the 'naked truth' over bail-out. Creditors tell Greece to stop wasting time over enacting reforms as the country scrambles to meet €350m in IMF loan repayments by the end of the week.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 105.75 +1.75 basis points.

• Asia Pacific Sovereign CDS Index 65.25 +.75 basis point.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BKS)/1.19
• (SINA)/.18
• (PAY)/.41

Economic Releases
9:00 am EST 

• The NFIB Small Business Optimism Index for February is estimated to rise to 98.9 versus 97.9 in January.

10:00 am EST

• Wholesale Inventories for January are estimated to fall -.1% versus a +.1% gain in December.
• Wholesale Sales for for January are estimated to fall -.5% versus a -.4% decline in December.
• JOLTS Job Openings for January are estimated at 5050 versus 5028 in December.

Upcoming Splits

• (ROL) 3-for-2

Other Potential Market Movers

• The China New Loans/Inflation reports, USDA's WASDE report, weekly US retail sales reports, RBC Financials conference, Piper Jaffray Tech/Media/Telecom conference, Barclays Healthcare conference, (BMS) investor day, (CVX) analyst meeting and the (XLNX) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and real estate 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 Rising into Final Hour on Lower Long-Term Rates, Oil Bounce, Yen Weakness, Defense/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.08 -.79%

• Euro/Yen Carry Return Index 137.52 +.50%

• Emerging Markets Currency Volatility(VXY) 10.49 +1.29%

• S&P 500 Implied Correlation 59.90 -1.42%

• ISE Sentiment Index 65.0 +18.54%

• Total Put/Call 1.22 +28.42%

• NYSE Arms 1.09 +37.16% 

Credit Investor Angst:

• North American Investment Grade CDS Index 62.89 +1.50%
• America Energy Sector High-Yield CDS Index 692.0 +.26%

• European Financial Sector CDS Index 57.02 +4.68%

• Western Europe Sovereign Debt CDS Index 20.34 -.76%
• Asia Pacific Sovereign Debt CDS Index 65.22 +1.23%

• Emerging Market CDS Index 404.61 +3.67%

• iBoxx Offshore RMB China Corporates High Yield Index 113.86 -.27%
• 2-Year Swap Spread 27.0 +1.25 basis points

• TED Spread 26.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -23.5 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 150.0 -2.0 basis points

• China Import Iron Ore Spot $58.58/Metric Tonne -1.53%

• Citi US Economic Surprise Index -49.0 -1.5 points
• Citi Eurozone Economic Surprise Index 49.5 +.2 point

• Citi Emerging Markets Economic Surprise Index 12.20 +18.1 points

• 10-Year TIPS Spread 1.77 -7.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +88 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Higher: On losses in my tech/medical/retail sector longs and emerging markets shorts

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

• Market Exposure: Moved to 50% Net Long