Stocks Surging into Final Hour on Central Bank Hopes, Euro Bounce, Technical Buying, Utility/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 15.63 -2.31%

• Euro/Yen Carry Return Index 134.24 +.87%

• Emerging Markets Currency Volatility(VXY) 10.86 -1.27%

• S&P 500 Implied Correlation 59.24 -1.68%

• ISE Sentiment Index 74.0 -5.13%

• Total Put/Call .97 -19.83%

• NYSE Arms .75 -43.91% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.25 -.88%
• America Energy Sector High-Yield CDS Index 753.0 +1.77%

• European Financial Sector CDS Index 55.75 -.16%

• Western Europe Sovereign Debt CDS Index 20.82 -1.33%
• Asia Pacific Sovereign Debt CDS Index 66.20 -.65%

• Emerging Market CDS Index 421.41 +.45%

• iBoxx Offshore RMB China Corporates High Yield Index 114.01 +.15%
• 2-Year Swap Spread 27.0 -.75 basis point

• TED Spread 25.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -20.25 -1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 145.0 -2.0 basis points

• China Import Iron Ore Spot $57.66/Metric Tonne +2.15%

• Citi US Economic Surprise Index -63.80 -3.7 points
• Citi Eurozone Economic Surprise Index 39.6 -4.5 points

• Citi Emerging Markets Economic Surprise Index 3.80 -1.8 points

• 10-Year TIPS Spread 1.66 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +189 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg: 

• Putin Puts Troops on Full Alert in Western Russia Drills. Russian President Vladimir Putin ordered troops placed on full combat readiness in snap drills in western Russia, as Defense Minister Sergei Shoigu warned the country was facing new threats to its security. Some 38,000 troops, 41 warships, 15 submarines and 110 aircraft are involved in the exercises, Shoigu said on Monday, according to a Russian Defense Ministry statement. “New challenges and threats to military security demand a further increase in the military capabilities of the armed forces,” Shoigu said, the Interfax news service reported. Russia is “deeply concerned about the increase in exercises of NATO countries close to our borders,” Russian Deputy Foreign Minister Aleksey Meshkov said on Monday, according to Tass news service. 
• Merkel Says More EU Russia Sanctions If Truce Violated. German Chancellor Angela Merkel said the European Union would consider imposing further sanctions on Russia at a summit this week if there’s a major violation of the cease-fire in eastern Ukraine. Merkel, speaking at a news conference with Ukrainian President Petro Poroshenko in Berlin on Monday, said a truce agreed Feb. 12 in Minsk between pro-Russian rebels and Ukrainian government forces still isn’t being adhered to even if the situation on the ground has become quieter.
• European Stocks Extend Seven-Year High as German DAX Tops 12,000. European stocks extended their gains, with German equities reaching a fresh record. The Stoxx Europe 600 Index advanced 0.9 percent to 400.18 at the close of trading in London, with automakers leading the gain.
• Biggest Long-Term Treasury ETF Hit by Fastest Outflows on Record. The biggest exchange-traded fund investing in long-term Treasuries is losing investors at the fastest rate ever on concern the Federal Reserve is moving closer to interest-rate increases. The iShares 20+ Year Treasury Bond ETF posted its biggest three-week outflow since its inception in 2002, according to Bloomberg data. The sales came even after Treasuries rallied last week as weaker domestic growth damped the outlook for inflation and combined with the start of additional monetary stimulus in Europe to boost the allure of U.S. government debt.
• There’s Not Much Yellen Can Do to Stop Dollar Rally, SocGen Says. Kit Juckes, a global strategist at Societe Generale SA in London, says there’s not much that can halt the U.S. dollar’s ascent. The greenback is rallying because the rest of the world is doing poorly in comparison. Yet any sign of U.S. weakness would only prompt international investors to pour more money into the nation -- not less -- since a slowdown in America would drag down other, less-stable countries, too, according to Juckes.  
• Funds Run by Robots Now Account for $400 Billion.

Wall Street Journal: 

• Iran’s Nuclear Deal Could Open Oil Flood. A deal to ease Western sanctions could hit an already-glutted global oil market.

MarketWatch.com: 

• Bull market is ‘closer to the end’ than investors think. Jim Stack says sentiment is out of line with the fundamentals.

CNBC: 

• US to hit debt ceiling again, and this time could be worse. (video)
• Top 5 reasons why oil is going lower.

ZeroHedge:

• The Transparent Truthlessness Of The Fed.
• Varoufakis' Latest Fiasco: FinMin Claims "Middle Finger To Germany" Clip Fake; Germany Disagrees. (pic)
• ECB Reports Only €9.8 Billion In Bond Purchases In First Full Week Of Q€.
• Oil Tumbles Under $43 As Key Support Breached; Fresh 6 Year Lows. (graph)
• Homebuilder Sentiment Tumbles To October Lows (and No, It's Not The Weather). (graph)
• US Manufacturing Output Falls For 3rd Month - Worst Since Lehman. (graph)
• Empire State Manufacturing Misses: New Orders Slide To 16 Month Lows, Capex Plunges. (graph)
• Italian Bad Debt Hits Record $197 Billion As Bank Lending Contracts For Unprecedented 33 Consecutive Months. (graph)
• Germany Has Had It With Greece: Schauble Says "Doesn't Know What To Do With Greece Now".
• Sign Of The Times: Santander Floats First "Deep" Subprime Deal Since Crisis.

Business Insider:

• One of tech's most important investors says 'you'll see some dead unicorns this year' among startups worth $1 billion.
• Brazilian protesters are calling for something downright scary.
• The US oil bust just got worse. (graph)
• Putin reappears after mysterious absence.

Bear Radar

Style Underperformer:

• Small-Cap Value +.13%

Sector Underperformers:

• 1) Oil Tankers -1.36% 2) Alt Energy -1.14% 3) Social Media -.32%

Stocks Falling on Unusual Volume:

• LL, SINA, DD, MSG, CWCO, HIBB, SWK, WB, SGMS, MFLX, SIX, WYNN, DTYS, STRP, NSTG, NMM, E, CYBR, CEVA, EGRX, NFLX, RRD, RTI, IGTE, SMP and CVTI
  

Stocks With Unusual Put Option Activity:

• 1) VNQ 2) KRE 3) DD 4) LEN 5) GES

Stocks With Most Negative News Mentions:

• 1) EMN 2) PBR 3) NFLX 4) SWK 5) BTU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.89%

Sector Outperformers:

• 1) Utilities +2.32% 2) Biotech +1.95% 3) HMOs +1.85%
  

Stocks Rising on Unusual Volume:

• LTM, KNDI, EW, ADXS, FRAN, ICPT, UTHR and AKRX

Stocks With Unusual Call Option Activity:

• 1) XLNX 2) MDC 3) ASHR 4) SLXP 5) PG
  

Stocks With Most Positive News Mentions:

• 1) AVGO 2) QRVO 3) VRX 4) SLXP 5) BA
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg: 

• Russia Was Ready for Crimea Nuclear Standoff, Putin Says. Russian President Vladimir Putin said he was ready to put his country’s nuclear forces on alert when he annexed Ukraine’s Crimean peninsula last year in case of intervention by the U.S. and its allies. “We were ready to do that,” Putin said when asked in a documentary film about Russia’s takeover of Crimea aired Sunday on state television if the Kremlin had been prepared to place its nuclear forces on alert. The Russian leader said he warned the U.S. and Europe not to get involved, accusing them of engineering the ouster of Russian-backed Ukrainian President Viktor Yanukovych. “That’s why I think no one wanted to start a world conflict.”
• Pro-Russian Rebels Hopeful on Peace as Ukraine Sees Threat. Pro-Russian rebels said they were hopeful the peace process in east Ukraine will continue as the government in Kiev accused them of breaching a cease-fire agreement amid skirmishes. Ukraine said one of its soldiers was wounded as rebels attacked government positions 32 times during the past 24 hours, military spokesman Andriy Lysenko told reporters in Kiev on Saturday. More than 6,000 people have been killed in the year-old conflict, according to the United Nations. The U.S., the European Union and Ukraine say Russia is supplying the separatists with troops and weapons. Russia denies the accusations.   
• Germans Tired of Greek Demands Want Country to Exit Euro. Berlin cabdriver Jens Mueller says he’s had it with the Greek government and he doesn’t want Germany to send any more of his tax money to be squandered in Athens. “They’ve got a lot of hubris and arrogance, being in the situation they’re in and making all these demands,” said Mueller, 49, waiting for fares near the Brandenburg Gate. “Maybe it’s better for Greece to just leave the euro.” Mueller’s sentiment is shared by a majority of Germans. A poll published March 13 by public broadcaster ZDF found 52 percent of his countrymen no longer want Greece to remain in Europe’s common currency, up from 41 percent last month. The shift is due to a view held by 80 percent of Germans that Greece’s government “isn’t behaving seriously toward its European partners.”
• Record China Debt Means Growth-Rally Mismatch: Chart of the Day. Concern is growing that China’s world-beating stock surge is out of kilter with the country’s economic slowdown and record debt binge. The CHART OF THE DAY shows China’s total public and private debt has increased to more than twice the nation’s economic output, soaring 83 percentage points relative to gross domestic product since 2007. No other developing country has amassed as much debt as quickly, according to data compiled by McKinsey Global Institute. While the economy is growing at the slowest pace since 1990, the Shanghai Composite Index has jumped 64 percent in the past year, the best performance among major equity gauges tracked by Bloomberg. The economic pace is destined to drop to an average 4-5 percent a year over the next five years, from the 7 percent target for 2015, says Ruchir Sharma, who manages more than $25 billion as the head of emerging markets at Morgan Stanley Investment Management. He’s kept about 12 percent of assets in Chinese stocks since 2010, compared with 18 percent in the indexes he uses for benchmarks. The index weighting is high relative to the opportunities given more than half are state-owned companies, says Sharma. Chinese debt is “a ticking time-bomb,” Michael Every, the head of Asia Pacific financial-market research at Rabobank International in Hong Kong, which manages about $700 billion of assets, said by phone March 4. “I fail to see how shares maintain these levels if we continue to see slower growth.” 
• Slowdown Concern Spurs Record Bearish Bets on A-Share ETF. Investors are rushing to buy protection against declines in Chinese stocks amid concern an economic slowdown will undermine their world-beating rally. Demand to hedge against future losses on the largest U.S. exchange-traded fund tracking China’s mainland market climbed to the highest since the ETF was created in November 2013, according to data compiled by Bloomberg. The buying pushed the ratio of bearish to bullish contracts to a five-month high on March 11 as investors pulled $34 million from the fund in a second week of outflows.
• Hundreds of Thousands March in Brazil to Protest Rousseff. Hundreds of thousands of Brazilians, some of them calling for President Dilma Rousseff’s impeachment, took to the nation’s streets Sunday to protest a government beset by scandal and the rising cost of living. The largest protest occurred in Sao Paulo, with 240,000 people as of 2:40 p.m. local time, according to its military police. Protests occurred in cites of 16 states and the federal capital, according to O Globo website. Its TV network reported 45,000 protesters in Brasilia, 20,000 in Belo Horizonte, and 20,000 in Belem, citing the military police of those cities. No violence or vandalism were reported.   
• Aussie Shorts Reach Record as Bears Join BlackRock Seeing Slide. Investors are the most bearish on record about the Australian dollar as BlackRock Inc., the world’s largest money manager, expects the currency to plunge to levels well below what the Reserve Bank prefers.
• Asian Stocks Retreat as Energy Shares Slide, Investors Await Fed. Asian stocks fell as investors awaited this week’s Federal Reserve meeting for clues on the timeline for higher U.S. interest rates. Energy companies led losses as oil resumed last week’s decline. The MSCI Asia Pacific Index dropped 0.3 percent to 143.50 as of 9:02 a.m. in Tokyo after sliding 1 percent last week as a better-than-expected U.S. jobs report spurred speculation the Fed would raise rates sooner than some investors expected.
• Speculators Least Bullish on Oil Since 2013 as Stockpiles Swell. Speculators cut bullish oil wagers to the lowest level in more than two years amid warnings the U.S. supply glut may soon strain storage capacity. Hedge funds and other money managers reduced their net-long position in West Texas Intermediate crude by 2.5 percent in the seven days ended March 10, U.S. Commodity Futures Trading Commission data show. Short wagers rose to a record.

Wall Street Journal:

• Hedge Funds Win as Euro Falls. Bets against the common currency augment returns. The euro’s plunge has given a much-needed lift to hedge funds that have been repeatedly frustrated by the world’s central banks. A bevy of multibillion-dollar funds have gained as much as 9% this year as their managers bet against the euro, riding the European Central Bank’s push to weaken the currency...
• For U.S. Banks, Headwinds Keep Blowing. Investors remain wary of big lenders as low rates and stricter regulation squeeze profits, limit payouts. Bank stocks popped a bit last week after the largest U.S. lenders passed the Federal Reserve “stress tests” with no major hassles. But it was a brief moment of sunshine following several challenging years...
• Obama’s Iran Jam. The White House wants the U.N. to vote but not the U.S. Congress.

CNBC:

• A shadow banking sector has gotten 65 times larger. Shadow banking in general has come back to life after getting hammered during the financial crisis, but one segment has been especially rampant. Peer-to-peer (P2P) lending, in which loans are made privately through individuals who most often connect through a network of relatively new websites, has exploded over the past five years. It is now the fastest-growing sector of non-bank lending, according to an exhaustive Goldman Sachs report on the shadow banking industry.

Zero Hedge:

• 5 Things To Ponder: Return To Reality. (graph)
• Parasite Turns On Parasite: HFT Sues Other HFTs For "Egregious Manipulation" Of Treasury Securities.
• Furious "Plunge Protection" In Final Minutes Fails To Push Stocks Green For 2015. (graph)
• Estonia Fears Being "Overrun By Russia In Minutes", Sweden Sends Troops To Baltic Sea Island.
• Speculation In This Sector Will End "Very Badly," Canada's Warren Buffett Says.
• Is This The Catalyst For The Next Big Leg Down In Oil Prices & Energy Stocks?
• The Coming Chinese Crackup.
• What Goldman's Clients Are Most Concerned About. (graph)
• One Last Look At The Real Economy Before It Implodes - Part 2.
• When Even Varoufakis Mocks The QE "Wizard", The Game Is Almost Up.
• The EU's Stalinesque "4 Year Plan".
• The Ignorance Is Bliss Market (Summed Up In 1 Simple Chart). (graph)
• "An 'Old-Fashioned' Recession Is Spreading Across The World," Billionaire Hedge Fund Manager Warns. (graph)
• North America Crude Oil Production Remains Strong. (graph)
• Clintons Furious At Obama After Valerie Jarrett Linked To Email Leak.
• The Seal Is Broken: DB Is The First Major Bank To Predict Drop In 2015 S&P500 EPS. (graph)
• Saxobank's Chief Economist: 2015 Is A Lost Year (and Here's Why).
• The Full Explanation Of How The ECB Broke Europe's Bond Market. (graph)
• Varoufakis' "Strategy": "No Grexit, But Default Inside The Euro, And Stick The Middle Finger To Germany".
• Who's Hurting From Slumping Commodities. (graph)
• Oil Plunges To Lowest Since March 2009 ($43 WTI) As EURUSD 1.05 Battle Continues. (graph)
• It Is Time For A Criminal Probe Into Tim Geithner's Leaks As Vice Chairman Of The Federal Reserve.
• State Department Shuts US Embassy In 'Ally' Saudi Arabia Amid "Heightened Security Concerns".
• The Bipolar Stock Market (In 3 Simple Charts). (graph)
• The Austrian Black Swan Claims Its First Foreign Casualty: German Duesselhyp Collapses, To Be Bailed Out.

Business Insider:

• If Putin is dead or incapacitated, here are three scenarios for what might happen next.
• Activists think they found a way to convince Democrats to stay away from 'toxic' hedge fund money.
• Silicon Valley's tech elite gives more to Republicans than Democrats.
• 'Downward pressure' in China is intensifying.
• Global currency wars are threatening a Lehman-style crisis.
• There's a new ticking time bomb inside China's economy.
• Canada carries an albatross of debt around its neck.
• ISIS now has a foothold in an oil-rich Mediterranean port city.
• The US dollar is exploding at a probably unprecedented rate.
• MARK CUBAN: Forgiving $1 trillion in student debt is 'the worst thing we could do'.
  However, Cuban thinks massive student-loan forgiveness would just make the bubble keep expanding. "Forgiving the debt is the worst thing you can do, because all it does is bail out the universities," Cuban said.
• The oil rig count crash is following an eerily similar path that gas rigs followed years ago. (graph)
• McConnell: Obama is on the verge of a 'very bad deal' with Iran.
• GREENSPAN: The US is producing oil that has nowhere to go.
• Goldman Sachs(GS) has a stunning new forecast for the euro.

FAS:

• Germany Wants Russia Sanctions in Force Until Year-End. The German government intends to argue at a summit of EU leaders next week for sanctions against Russia to be linked to the full implementation of the Minsk II cease-fire agreement, citing government sources. German government expects opposition from Italy, Greece and Cyprus to such a move.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 107.5 +2.5 basis points.

• Asia Pacific Sovereign CDS Index 66.75 +1.75 basis points.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (XONE)/-.06
• (PWRD)/.37

Economic Releases
8:30 am EST

• Empire Manufacturing for March is estimated to rise to 8.0 versus 7.78 in February.

9:15 am EST

• Industrial Production for February is estimated to rise +.2% versus a +.2% gain in January.
• Capacity Utilization for February is estimated to rise to 79.5% versus 79.4% in January.
• Manufacturing Production for February is estimated unch. versus a +.2% gain in January.

10:00 am EST

• The NAHB Housing Market Index for March is estimated to rise to 56.0 versus 55.0 in February.

4:00 pm EST

• Net Long-Term TIC Flows for January.

Upcoming Splits

• (V) 4-for-1

Other Potential Market Movers

• The Bank of Japan statement could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on Fed rate hike worries, global growth fears, European/Emerging Markets/US High-Yield debt angst, technical selling, commodity weakness and earnings concerns. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.