Thursday Watch

Evening Headlines
Bloomberg:

• Asian Bondholders' High-Risk Amnesia. The law of supply and demand can at times generate market imbalances. Right now, Asian credit markets are bucking a rout in stocks simply because there aren’t enough new bonds to go around. On Monday, the difference between the premium Asian and U.S. dollar corporate bonds pay over Treasuries narrowed to 95 basis points, the least since 2008, as measured by two Bank of America Merrill Lynch indexes: 
• Brazil House Takes First Step Toward Capital Gains Tax Hike. Brazil’s lower house of Congress approved legislation to increase taxes on capital gains, as part of a push to boost government revenue and shrink its expanding budget deficit. Legislators voted 205 to 176 in favor of the bill Wednesday, which still must be approved in the Senate before it can become law. The proposal raises taxes on capital gains from the sale of real-estate and corporate assets, changing the rate starting in 2017 from a flat 15 percent to a progressive scale with a higher top rate.
• Kiwi Dollar's Surge Falters With Loonie as Oil's Rebound Doubted. The New Zealand and the Canadian dollars pared weekly gains as investors remained skeptical that a rally in commodity prices will last. The kiwi and loonie climbed to their highest levels in at least four weeks Wednesday as the greenback plunged after signs of a slowing U.S. economy helped derail bets on diverging policies between global central banks. Oil rose for a second day Thursday, extending the biggest gain in almost two weeks and paring its loss for the year to 12 percent.
• Yen Shows Limit of Negative Rates by Wiping Out BOJ Drop in Days. Traders are reminding the Bank of Japan of the limits of monetary policy in weakening a currency. With the ink barely dry on the central bank’s Jan. 29 commitment to implement negative interest rates, the yen has already undone all of its 1.9 percent drop that day and measures of purchasing power parity show the currency is still far from expensive. Commonwealth Bank of Australia is recommending its clients use options to bet on yen strength and Societe Generale SA’s Kit Juckes says he’ll favor bullish trades if the currency holds firm.
• Asian Stocks Outside Japan Rise, Buoyed by Oil Rally. Most Asian stock indexes climbed as a selloff in the dollar underpinned a resurgence in crude oil, while Japanese equities were set to wipe out gains spurred by the central bank’s stimulus boost as the yen traded near a two-week high. The MSCI Asia Pacific excluding Japan Index rose 0.9 percent as of 8:51 a.m. Tokyo time, with Australia’s S&P/ASX 200 Index up 1.1 percent. BHP Billiton Ltd., the world’s biggest mining company, rallied for the first time in four days. The S&P/NZX 50 Index added 0.2 percent in Wellington, while South Korea’s Kospi index gained 0.4 percent.The Topix fell 1.5 percent, headed for its lowest close since Jan. 26, three days before the Bank of Japan ignited a momentary equity rally by unexpectedly imposing a negative interest rates policy.
• Texas Isn't Scared of $30 Oil. (video) Texas has a message for $30 crude doomsayers: Bring it on. A handful of shale patches in the state, which would be the world’s sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence. In the Eagle Ford’s DeWitt County, which produced more than 100,000 barrels a day in November, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year.

Wall Street Journal:

• Investors Cast Wary Eye on Fed Rate Increases. Broad decline in the dollar and a sharp drop this year in U.S. Treasury yields mark significant shift in investor sentiment. Investors are rethinking their expectations for interest-rate increases this year, converging on a view that the Federal Reserve is unlikely to raise rates in March and possibly not even for the rest of the year. The shift was evident in a broad decline in the dollar on Wednesday and in the sharp drop this year in U.S. Treasury yields. Futures markets now are predicting there is little chance that the Fed will raise interest rates... 
• Redstone Resigns as CBS(CBS) Executive Chairman. CEO Moonves will become chairman, while Redstone becomes chairman emeritus.
• Fed’s Brainard Makes Case for ‘Watchful Waiting’. Fed governor says emerging-market stress and slow growth in developed economies could spill over to the U.S. Federal Reserve governor Lael Brainard thinks the reasons for going slow on further interest-rate increases are powerful. The 54-year-old economist is emerging as a significant influence at an uncertain time for monetary policy and market tumult, one whose arguments have traction with the Fed’s leadership.

Fox News:

• Santorum suspends 2016 presidential campaign, endorses Marco Rubio. (video) Former Pennsylvania Sen. Rick Santorum announced Wednesday in an exclusive interview on Fox News’ "On the Record with Greta Van Susteren" he is suspending his 2016 presidential campaign and endorsing Florida Sen. Marco Rubio. Santorum said he came to the decision after discussing it with his wife Karen after the Iowa caucuses. “We decided that we could be better advocates in supporting someone who shared those values and will do better in this race,” Santorum told Van Susteren. While saying he does not “endorse lightly,” Santorum described Rubio as “the new generation, and someone who can bring the country together.” “We wanted to find a candidate that really espoused the values we believed in,” he said. 
• Cruz fires back at Trump's cheating charges, says 'he's losing it'. (video) Ted Cruz fired back at Donald Trump Wednesday over allegations that he “stole” the Iowa election, accusing the billionaire businessman of throwing a “Trumpertantrum” and questioning whether he has the “temperament” to lead. Speaking to reporters in New Hampshire, Cruz quipped that with Trump in charge, Americans might wake up and find he’s “nuked Denmark.” “It seems his reaction to everything is to throw a fit,” the Republican presidential candidate said, adding: “He’s losing it.”
• US ally packed with refugees reaches a 'boiling point'. The leader of a key U.S. ally in the Middle East warned Tuesday that his country is so packed with Syrian refugees, many with ties to the Islamic State terror group, that his nation has reached a "boiling point." "Sooner or later, I think, the dam is going to burst," King Abdullah of Jordan told the BBC. He said his country is housing more than a million Syrians, many of whom came after the 2011 civil war in Syria broke out. Up to 100 new refugees are admitted each day, the network reports. Jordan's welcoming nature has to stop, he said. "We can't do it anymore."

CNBC:

• Kyle Bass: China banks months away from ‘danger territory’.

Zero Hedge:

• PBOC Strengthens Yuan By Most In 2 Months As Golden Week Looms.
• Hedge Funds Fight The PBOC: There Can Be Only Yuan. (graph)
• Shale Shock: Another Leg Lower In Oil Coming After Many Producers Found To Have Far Lower Breakevens. (graph)
• Iraqi Kurd Leader Wants Independence Referendum: "The Time Has Come And The Situation Is Suitable".
• This Is What Central Bankers Think Of Retail Investors.
• Vancouver Real Estate Goes Full-Retard; Average Home Price Now $1.8 Million. (graph)
• Complete And Utter Chaos. (graph)

Business Insider:

• GoPro(GPRO) posts wider-than-expected loss: Guidance for Q1 revenues miss, shares tank 20%.
• GoPro(GPRO) spent $35 million buying $16 million worth of its own stock.
• Valeant(VRX) just put out the last kind of statement a company wants to before a congressional hearing.
• Microsoft(MSFT) has mastered what Apple(AAPL) can't seem to do: Gmail on iOS. Apple's software has been slipping in recent years, pioneering tech blogger Walt Mossberg argues in a piece published in the Verge on Wednesday.
• A hedge fund has laid out why it is closing — and it is enough to set alarm bells ringing everywhere.
• The clearest sign yet that job growth in the US is about to slow down.
• NATO Admiral: We're seeing more Russian submarine activity in the Atlantic than 'since the days of the Cold War'.

Night Trading 

• Asian equity indices are +.25% to +1.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 155.75 +1.75 basis points.

• Asia Pacific Sovereign CDS Index 81.25 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 68.47 +.21%.

• S&P 500 futures +.56%.

• NASDAQ 100 futures +.66%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

• (ABC)/1.25
• (AZN)/.91
• (BZH)/-.08
• (BSX)/.25
• (CSL)/1.11
• (CI)/1.79
• (CLX)/1.05
• (COP)/-.64
• (CS)/.24
• (CMI)/2.12
• (ICE)/3.01
• (OXY)/-.11
• (PM)/.81
• (PJC)/.78
• (RL)/2.14
• (RDS.A)/.27
•  (SNA)/2.18
• (VMC)/.60
• (ATHN)/.41
• (DECK)/4.76
• (DV)/.66
• (LNKD)/.78
• (PPS)/.77
• (SKYW)/.44
• (WYNN)/.78
• (YRCW)/.26 

Economic Releases

7:30 am EST

• Challenger Job Cuts YoY for January.

8:30 am EST

• Preliminary 4Q Non-farm Productivity is estimated to fall by -2.0% versus a +2.2% gain in 3Q.
• Preliminary 4Q Unit Labor Costs are estimated to rise +4.3% versus a +1.8% gain in 3Q.
• Initial Jobless Claims for last week are estimated to fall to 277K versus 278K the prior week. 
• Continuing Claims are estimated to at 2240K versus 2268K prior.  

10:00 am EST:

• Factory Orders for December are estimated to fall by -2.8% versus a -.2% decline in November.
• Final Durable Goods Orders for December are estimated to fall -4.5% versus a prior estimate of a -5.1% decline.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Mester speaking, BoE rate decision, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Reversing Losses into Final Hour on Central Bank Hopes, Emerging Market Currency Gains, Oil Bounce, Commodity/Telecom Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 21.61 -1.68%

• Euro/Yen Carry Return Index 136.39 -.33%

• Emerging Markets Currency Volatility(VXY) 12.57 +1.52%

• S&P 500 Implied Correlation 60.16 -2.58%

• ISE Sentiment Index 123.0 +101.64%

• Total Put/Call .86 -13.13%

• NYSE Arms .88 -60.74% 

Credit Investor Angst:

• North American Investment Grade CDS Index 108.42 -.18%

• America Energy Sector High-Yield CDS Index 2,030.0 +2.73%

• European Financial Sector CDS Index 103.66 +5.42%

• Western Europe Sovereign Debt CDS Index 25.06 +9.96%

• Asia Pacific Sovereign Debt CDS Index 81.81 +.06%

• Emerging Market CDS Index 378.76 -2.38%
  

• iBoxx Offshore RMB China Corporate High Yield Index 122.36 -.07%

• 2-Year Swap Spread 6.25 -.25 basis point

• TED Spread 28.25 +1.75 basis points

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

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.32 +1.1%
• 3-Month T-Bill Yield .33% unch.

• Yield Curve 116.0 +4.0 basis points

• China Import Iron Ore Spot $44.63/Metric Tonne +1.80%

• Citi US Economic Surprise Index -54.2 -3.7 points

• Citi Eurozone Economic Surprise Index -18.60 +.8 point

• Citi Emerging Markets Economic Surprise Index -8.40 +.4 point

• 10-Year TIPS Spread 1.38% +2.0 basis points
• 15.5% chance of Fed rate hike at April 27 meeting, 25.7% chance at June 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -241 open in Japan 
• China A50 Futures: Indicating -81 open in China

• DAX Futures: Indicating +85 open in Germany

Portfolio: 

• Slightly Lower: On losses in my index hedges and emerging markets shorts

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• China Seen Risking Credit Market Crunch With Leverage Crackdown. Six months after a debt-fueled rally in Chinese equity turned into a $5 trillion rout, authorities are stepping up efforts to make sure the same thing doesn’t happen in the bond market. Analysts and investors are concerned the crackdown itself could be a risky move. The People’s Bank of China moved to exert more control over wealth management products, which often invest in debt and are popular among investors seeking yields higher than on deposits. It told lenders Monday it will limit funds raised through the so-called WMPs that they can outsource to other financial institutions to manage, according to people familiar with the matter. The PBOC will also tighten control of leverage that banks take on when buying notes, the people said. External managers often borrow more aggressively for debt purchases, China Merchants Bank Co. said. “There is risk to deleveraging when economic growth is slowing,” Haitong Securities Co. analysts led by Jiang Chao wrote in a report Tuesday. “If there is a limit on how much funds banks can give to third parties to manage, it means a lack of momentum for further leveraging. Based on the history of China’s stock market, there is risk of stampede.”
• Yuan Gap Widens Again as Depreciation Bets Swamp PBOC Fightback. The gap between the Chinese yuan’s exchange rates at home and abroad expanded to the biggest in three weeks, a sign that international traders are reviving bets against the currency after getting burned by the central bank earlier this year. The yuan traded in Hong Kong fell as much as 0.4 percent, taking its discount to the currency in Shanghai to 1.1 percent. That’s the most since Jan. 11, when the People’s Bank of China launched a two-pronged attack on short-sellers by mopping up the currency overseas and choking supply of yuan from the mainland. The assault pushed the offshore rate to a premium that week, before it swung the other way again. “Bears are not giving up on shorting the yuan simply because of the PBOC’s attacks, and they are preparing to return to the game," said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. "There will be a very intense confrontation between short-sellers and the PBOC in the near term. While the market strongly believes there’s room for further declines, the central bank will try its best to keep the yuan stable." The offshore yuan fell 0.25 percent to 6.6444 a dollar as of 6:20 p.m. in Hong Kong on Wednesday, data compiled by Bloomberg show.
• Cash Pouring Out of China Amid Talk of Allowing Even More: Chart. (graph/video)
• ABB Profit Margin Widens as Cost Cuts Help Offset Slowdown. ABB Ltd. fourth-quarter profit margin widened as the Swiss maker of industrial robots cut costs to offset a slowdown in China and the oil and gas industry. A cost-reduction program lifted the operating margin for earnings before interest, taxes and amortization 60 basis points to 11.7 percent in the three months through December, the Oerlikon, Switzerland-based company said in a statement on Wednesday. Net income fell 70 percent to $204 million, although that included $496 million of reorganization charges. “ABB is weathering tough end market conditions with strong cost control,” Goldman Sachs analysts wrote in a note to clients. “While we are positively surprised by these results, we continue to expect deterioration of earnings ahead as base orders slowdown continues to accelerate.” Orders in China declined in the fourth quarter, contributing to the overall fall. While process industries are expected to slow in the world’s second-largest economy this year, ABB plans to seek out areas of growth by moving into western Chinese cities where there is demand for new power plant connections, Spiesshofer said.
• Lenovo Tumbles as Sputtering PC, Phone Demand Hammers Sales. Lenovo Group Ltd. plunged in Hong Kong trading after quarterly revenue declined for the first time in more than six years on stalling demand for phones and computers. Shares fell 10 percent in their biggest decline in two years. The world’s largest PC maker said revenue dropped 8 percent in the three months ended December, even as broadening cost cuts delivered a surprise rise in net income. Lenovo is relying on cutting $1.35 billion from annual costs and eliminating 3,200 jobs to shield its earnings from intensifying smartphone competition and a shrinking market for PCs. While it’s expanding into other businesses, the company still gets more than half of revenue from a market that Intel Corp. last month warned was off to a “soft” start in 2016 amid tepid economic growth.
• LG Default Risk Jumps as Moody's Turns Negative. Credit-default swaps insuring LG Electronics Inc.'s debt against nonpayment jumped 27 basis points to 136 on Tuesday, the biggest increase since September 2011, according to data provider CMA. Moody's Investor Service cut the outlook on the firm's lowest investment-grade debt score to negative from stable. 
• German Note Yield Drops Below Minus 0.5% as Rally Gathers Pace. German government bonds jumped as disappointing U.S. data and expectations of more easing from the European Central Bank created a demand for the securities that pushed two-year yields below minus 0.5 percent for the first time. The move spread to bonds of all maturities, with 30-year bund yields dropping below 1 percent for the first time since May, and eight-year yields turning negative for the first time since April. The rally in bonds has pushed the amount of government debt yielding below zero percent in the Bloomberg Eurozone Sovereign Bond Index to $2.4 trillion.
• European Investment-Grade Corporate Risk Climbs to Two-Year High. The cost of insuring European investment-grade corporate debt rose to the highest since October 2013 as low commodity prices spur concerns about borrowings at energy, metals and mining companies. The Markit iTraxx Europe Index of credit-default swaps on 125 highly rated companies rose for a third day and surpassed 100 basis points for the first time in more than two years, according to data compiled by Bloomberg. The four basis-points climb extended this year’s increase to 24 basis points. “The continued decline in energy and commodity prices, which is connected to China’s slowdown, is putting pressure on companies,” said Craig Veysey, head of fixed income for the private wealth arm of Sanlam Group, which manages about 40 billion pounds ($58 billion) of assets. “It’s not just those in that sector, but banks as well.” Low bond liquidity is also driving more investors to buy credit-default swaps to hedge risk from debt they are unable to sell, London-based Veysey said. The Markit iTraxx Europe Crossover Index of default swaps on non-investment grade companies surpassed 400 basis points for the first time in more than a year. A gauge of credit-default swaps on investment-grade financial companies rose six basis points to 103 basis points, the highest in about two years.
• More Losses for Europe Stocks as Banks Fall, Earnings Disappoint. Declines in banks dragged European stocks lower for a third day, while investors weighed financial results amid concern over global growth. Novo Nordisk A/S slid 7.6 percent and Royal KPN NV lost 1.2 percent after they reported worse-than-estimated earnings. A gauge of lenders posted the worst performance in the Stoxx Europe 600 Index, extending its lowest level since 2012. The regional benchmark deepened a drop after U.S. services data missed estimates, stoking concern about a recovery in the world’s biggest economy. The Stoxx 600 fell 1.5 percent at the close of trading, capping its longest losing streak in two weeks. Italian lenders led declines among European peers, with Banco Popolare SC and Banca Popolare di Milano Scarl tumbling more than 5.7 percent amid concern over their piles of bad debt.
• U.S. Gasoline Glut Keeps Pump Prices on the Road to $1.50: Chart. U.S. gasoline inventories last week jumped to the highest in weekly government data going back to 1990. 
• Bank Selloffs Replacing Oil Rout as Stock Market Pressure Point. Breakdowns in financial stocks are becoming a little too routine for comfort of late. Dragged lower by falling interest rates and credit concern, the KBW Bank Index extended its three-day decline to as much as 7.5 percent earlier Wednesday -- the fifth time this year a loss has exceeded 5 percent over such a stretch, data compiled by Bloomberg show. At times this week, losses from Bank of America Corp. to Citigroup Inc. have exceeded 10 percent.
• Bond Market Is Closer to No Fed Rate Increases Than One for 2016. The Federal Reserve won’t even get close to raising interest rates this year, if bond traders are right. The fixed-income market’s balance tipped toward zero rate hikes this year after a report showed U.S. service industries grew in January at the slowest pace since April 2014. Treasuries drew support from the data as well, briefly pushing the benchmark 10-year yield to a one-year low. The bond world’s skepticism about the Fed’s projected pace of four rate increases this year grew in January as sliding energy prices and stocks raised concern about policy makers’ ability to stoke economic growth. Traders see a 41 percent chance the Fed will raise rates at or before its Dec. 14 meeting, down from a 93 percent probability assigned at the end of last year. “The fall in the value of asset markets is a tightening of financial conditions,” Laurence Mutkin, head of G-10 rates strategy for BNP Paribas SA, said in an interview in New York. “It should affect central-bank policy, since it is tightening.”
• Wall Street's 1% Show Breadth of Market Malaise in Selloff. Twenty-four out of 1,941 stock funds: That’s how many managed to avoid this year’s carnage. After a far-from-stellar 2015 for equities, almost no one was prepared for such a rough start to 2016. As shares worldwide have plunged 7.7 percent, the only funds in positive territory were those lucky enough to focus on utilities and other industries deemed defensive -- those seen as more immune to an economic slowdown. Less than a repudiation of investing skill one month into the new year, the data show the pervasiveness of losses in global markets where $6.5 trillion has been erased. Almost nothing has worked in 2016 as last year’s winners health-care and consumer stocks joined in the meltdown since Dec. 31. “The vast majority of people were caught off guard,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “Utilities, telecoms are the kind of sectors you would jump into -- companies that do relatively well in downturns because they offer products that people won’t stop using. We’re starting to see a rotation into those sectors, and it’s an expression of people preparing for a lower-growth world.”
• Money Managers Bleed Cash After Investors Pull Billions. Money managers are having trouble hanging on to money. Franklin Resources Inc. said Wednesday that investors withdrew $20.6 billion in the fourth quarter, the latest asset manager to highlight the issue of redemptions. Affiliated Mangers Group Inc. said on Tuesday that it had outflows of $6.8 billion, while Waddell & Reed saw $5 billion in withdrawals, contributing to the biggest drop in its stock since the financial crisis of 2008.
• Food Stamps Still Feed One in Seven Americans Despite "Recovery". Wendee Crofoot lost her job as a fundraiser for a non-profit in 2011. After exhausting her savings and giving up her Mountain View, California, apartment she ended up working part-time as a restaurant cashier. The low pay qualified her for food stamps, so she signed up. “It wasn’t something I imagined would ever happen,” said Crofoot, 46. “There just weren’t any jobs.” During the 2007-2009 recession, state and federal governments actively encouraged people like Crofoot to take advantage of the aid. Millions did, and many are still claiming benefits. Enrollment in the Supplemental Nutrition Assistance Program, the formal name for food stamps, remains near record levels, even as the unemployment rate has fallen by half. “When unemployment was rising people said enrollment would fall sharply when things got better," said Parke Wilde, an associate professor of nutrition policy at Tufts University in Boston. "That hasn’t happened.” Another economic downturn could send costs to new heights. 
• YouTube Schedules Original Shows, Movies for New Paid Service. Google’s YouTube will release the first batch of shows from a new original programming drive on Feb. 10, offering three movies and an adventure series designed to lure customers to its $9.99-a-month subscription service.

Fox News: 

• Baltimore mosque set for Obama visit has controversial ties. (video) Barack Obama is making his first presidential visit to a U.S. mosque on Wednesday, but the historic occasion is being overshadowed by criticism that the Baltimore-area center he chose has extremist ties. The controversy centers around the Islamic Society of Baltimore's former imam, who has ties not only to the Muslim Brotherhood but the Northern Virginia mosque where the radical Anwar al-Awlaki used to preach. “As a Muslim American I’m just insulted, this is disgraceful that this is one of the mosques -- or the mosque -- that he’s chosen to visit,” Zuhdi Jasser, of the American Islamic Forum for Democracy, told Fox News on Sunday. “This mosque is very concerning.”

CNBC:

• Bill Gross: 'Shades of 2007' as central banks flunk. (video)

Zero Hedge: 

• Dollar Dumps Most In 7 Years After Dudley Doldrums. (graph)
• China Takes Aim At "Zombie Companies", Says Soaring Job Losses Won't Lead To Popular Revolt.
• Is It Time To Panic About Deutsche Bank(DB)? (graph)
• Trading Desks Stunned By 'Brutal' Selling: "The Crowded Trades Have Come Unglued On Obvious Unwinds".
• "We're Nearing The End" David Stockman Warns, Retail Investors Are "Heading For The Slaughter".
• Is The PBOC Intervening Now? Yuan Is Soaring. (graph)
• Managing Risk Through A Commodity Downturn. (graph)
• When "Whatever It Takes" Fails - Global Bank Risks Are Soaring. (graph)
• Oil Dumps'n'Pumps Despite Crude, Gasoline Inventories Surge. (graph)
• Gold Surges Above Key Technical Level. (graph)
• Manufacturing Recession Spills Over Into Services After Dismal PMI, ISM Data. (graph)
• Germany Unveils "Cash Controls" Push: Ban Transactions Over €5,000, €500 Euro Note.
• Futures Jump After Bill Dudley Hints At Fed "Policy Error", Warns Of "Significant Consequences" From Strong Dollar. (graph)
• Why We Won't Have A "Lehman Moment" In The 2016 Crash.
• ADP Employment Growth Tumbles From Miraculous December Bounce. (graph)

Business Insider:

• We just got terrible news about the most important part of the US economy. (graph) 
• The CEO of Michael Kors(KORS), in 2 sentences, lays out why brick-and-mortar retailers are doomed.
• Ted Cruz's campaign suggests Donald Trump check in to a 'Twitter addiction therapy group'. Trump's claims of fraud center on the actions of Cruz allies caucus night. A third Republican candidate, Ben Carson, had reportedly signaled that he was going to speak early that night in order to fly home to Florida and rest. This was a somewhat unusual declaration as most candidates were planning to rush to the next primary states. Some Cruz supporters quickly speculated that Carson was about to leave the race. Rep. Steve King (R-Iowa), a prominent Cruz surrogate, wrote on Twitter: "Carson looks like he is out. Iowans need to know before they vote. Most will go to Cruz, I hope."
• RICK RIEDER: 2016 is going to be tough for investors.
• Top US military official: Russia has made it 'very clear' that it's not really in Syria to fight ISIS.
• The great skyscraper bubble is about to pop.

The Daily Caller: 

• Sore Loser Trump: ‘Cruz Didn’t Win Iowa, He Stole It’. I couldn’t have been more wrong about Trump’s post-Iowa strategy. Whew! After he gave that gracious concession speech, I figured he was playing rope-a-dope. But no. He’s not covering up and letting Cruz exhaust himself attacking. Probably because Trump realized the frontrunner doesn’t need to attack the loser who’s in second place. Winners don’t punch down. So now we can look forward to this sort of thing from Trump until New Hampshire:

PredictIt:

• Odds for the GOP Nomination:  Marco Rubio .48 +.01, Donald Trump .29 -.01 and Ted Cruz .21 +.01.
• Odds for the Dem Nomination:  Hillary Clinton .78 +.02, Bernie Sanders .25 +.01 and Joe Biden .05 +.01.

Telegraph:

• It’s a Chinese Ponzi scheme that should really scare us. Reports suggest that some 880,000 people have collectively lost £5.3bn after falling for Ding Ning’s hype. 

sky NEWS: 

• Poll: Two-Thirds Say EU Proposals A Bad Deal. As the PM faces down MPs with EU blueprint details, Sky News data suggests more than two-thirds of voters think it is a bad deal.

Le Figaro:

• Radicalized Islamists in France Doubled in Year to 8,250. The number of people in France who have turned toward radical Islam more than doubled to 8,250 from 4,015 in March last year, citing exclusive information gathered by the authorities as of Jan. 28. The number of adolescents and women turning radical is on the rise, according to the report. The Paris region and southeast France saw the biggest jump in numbers.

Interfax:

• Russian Envoy Says Meeting With OPEC Soon Seen as Unlikely. OPEC meeting with countries that aren't part of the organization unlikely in near future, citing Vladimir Voronkov, Russian envoy to intl organizations in Vienna.

O Estado de S. Paulo:

• Brazil Government Members Said to Expect Downgrade by Moody's. Some govt officials see sovereign credit downgrade by Moody's as inevitable. 

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.1%

Sector Underperformers:

• 1) Internet -2.8% 2) Hospitals -2.5% 3) Biotech -2.0%

Stocks Falling on Unusual Volume:

• SNCR, MRD, BWLD, DXB, IAC, SCI, NOV, DKT, MTCH, DB, MPLX, JLL, POL, AXE, CMG, YHOO, NAP, NVO, RDWR, SLAB, LOW, CIT, IESC, POWL, IXYS, GM, TMHC, BDX, CMG, UNM, GOOG, AMZN, AXDX, WDR, WFC, BAC, IDTI, POL, THR, TSLA, JEC, ILMN, RHI, MTW, LNKD, CHUY, XLRN, MDLZ, SUN, VLO, MYGN, NOV, MPC, OLN, RARE, ARCB, MRD and MPLX

Stocks With Unusual Put Option Activity:

• 1) PSX 2) NOV 3) EWJ 4) TXN 5) DKS

Stocks With Most Negative News Mentions:

• 1) LYB 2) CIT 3) WFC 4) AMZN 5) BWLD

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer: 

• Mid-Cap Value +.1% 

Sector Outperformers:

• 1) Gold & Silver +6.4% 2) Steel +3.2% 3) Utilities +1.1% 

Stocks Rising on Unusual Volume: 

• ULTI, RACE, ADT, EPC, KLIC, ENR, AVY, ADSK, VNTV, NEM, EW, BEAV, TGI and TDS

Stocks With Unusual Call Option Activity: 

• 1) LOW 2) DNKN 3) GALE 4) MPC 5) AKRX

Stocks With Most Positive News Mentions: 

• 1) DOW 2) IR 3) GILD 4) T 5) ADSK

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +30.9% Above 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 23.4% of Issues Advancing, 74.7% Declining
• 57 New 52-Week Highs, 211 New Lows
• 19.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.6%
• Vix 23.6 +7.4%
• Total Put/Call .88 -11.1%
• TRIN/Arms 1.13 -50.8%