Wednesday Watch

Evening Headlines
Bloomberg:

• China's Banks May Be Getting Creative About Hiding Their Losses. Chinese lenders are reacting to a regulatory crackdown on shadow financing by increasing activity in their more opaque receivables accounts, a practice Commerzbank AG estimates may result in losses of as much as 1 trillion yuan ($153 billion) over five years. Banks are increasingly using trusts or asset management plans to lend and recording them as funds to be received rather than as loans, which are subject to stricter regulatory oversight and capital limits. The German bank’s forecast is based on total outstanding receivables of around 11.5 trillion yuan. “Chinese banks haven’t provisioned for receivables and those are essentially riskier loans,” said Xuanlai He, credit analyst at Commerzbank in Singapore. “The eventual losses will have significant impact on China’s economy because you could have contagion risk in banking sector.”

• China's Markets Risk 2009 Timewarp as New Lending Surges: Chart. A bubble in Chinese stocks has burst, the nation’s exports are tumbling, the economy is growing at its slowest pace in years -- and banks are doling out loans faster than ever. The last time that happened in 2009, the Shanghai Composite Index doubled in less than 12 months before embarking on a five-year downward spiral as optimism about stimulus turned into concern excessive credit would worsen overcapacity and boost bad debts.

• China-Based Firms Sell Convertible Debt at Record Pace: Chart. 

• Singapore's January Exports Fall More Than Economists Estimated. The decline in Singapore’s exports deepened in the first month of the year, clouding the economic outlook before the next monetary policy decision due in April. Non-oil domestic exports fell 9.9 percent in January from a year earlier, worse than the median estimate of a 7.6 percent drop in a Bloomberg News survey and the 7.2 percent decline in December, a government report showed Wednesday. Electronics shipments slid 0.6 percent from a year earlier, and petrochemical exports plunged 18.3 percent. Pharmaceuticals rose 6.9 percent.

• Asia's Rate Cut Pressure Seen in Indonesia as Exports Collapse. Once again, Asian central banks face the burden of supporting economic growth. The collapse in Asian exports that began last year is spilling into 2016 with China and Indonesia on Monday reporting shipments fell in January. South Korea’s overseas sales shrank the most since 2009 last month and Thailand’s central bank forecast exports would remain flat in 2016 after contracting for three straight years.

• Japan's Economic Woes Cast Shadow on Abe's Twin Election Choice. With Japan’s economy shrinking, the stock market in turmoil, and a stronger yen threatening export earnings, Prime Minister Shinzo Abe’scalculus on whether to call a snap general election this summer has suddenly grown more complicated. Another win in the lower chamber along with an expected victory in the upper house vote set for the summer could allow Abe’s ruling Liberal Democratic Party to stay in power until 2020, making him the longest-serving premier since the 1970s. With ministerial blunders and economic woes eroding his support, Abe risks the opposition Democratic Party of Japan gaining ground in any double vote.

• Korean Won Weakens to Five-Year Low as Rate-Cut Bets Increase. The won fell to a five-year low as bets increased the Bank of Korea will cut its policy rate and as a drop in oil deterred risk-taking. One of seven board members called for a reduction as the central bank left its benchmark rate at a record low 1.5 percent on Tuesday. It would be "more than reasonable" to expect a cut in the next few months, Gary Yau, a strategist at Credit Agricole CIB in Hong Kong, wrote in a report Tuesday. Crude dropped the most in a week overnight on speculation a pledge by Saudi Arabia and Russia to freeze production at January levels won’t push up prices. 

• Asia Stocks Drop as Topix Fluctuates While Energy Shares Slide. Asian stocks declined as Japanese shares fluctuated while energy shares tracked a slide in oil prices. The MSCI Asia Pacific Index lost 0.3 percent to 118.33 as of 9:20 a.m. in Tokyo. Global shares rallied the past three days after more than $8 trillion was wiped from the value of equities since the start of the year amid concern growth in the world’s largest economies is weaker than forecast. Crude retreated amid bets that a pledge by the two biggest oil producing nations to freeze output won’t succeed in tackling the global surplus.

• Why an OPEC Output Cut Wouldn't Make Much of a Difference. (video)

• Hedge Funds in Asia Had Nowhere to Hide in January ‘Bloodbath’. Hedge funds in Asia, which navigated turbulent markets to post gains in 2015, had nowhere to hide in January. As global stocks, currencies, commodities and risky bonds were roiled in a renewed frenzy of selling in January, hedge funds including those from Quam Asset Management Ltd. and Greenwoods Asset Management Ltd. fell more than 10 percent last month. As a group, Asia-focused hedge funds declined 3.1 percent, their worst start to a year since 2008, according to Singapore-based Eurekahedge Pte. About 81 percent of hedge funds actively reporting to the Asia Long-Short Equities category had negative returns last month, according to the research firm.

• Strategist for $1.7 Trillion in Funds Says Rout Has Room to Run. Don’t be fooled into thinking the rebound in stocks means we’ve reached the bottom, says Marcella Chow, who watches the world’s markets for JPMorgan Asset Management Inc. The global strategist for the $1.7 trillion money manager says she’s on edge, her clients are panicky and she’s telling them to stash as much as 70 percent of holdings in bonds including U.S. Treasuries. Calm won’t return until China’s economy improves and central banks regain credibility with investors, she said. She’s waiting for oil to fall to as low as $22 a barrel, and in the meantime she’s battening down and trying to avoid volatility.

Wall Street Journal:

• President Plans to Nominate a Successor to Justice Antonin Scalia in Next Few Weeks. Administration officials indicated Barack Obama wants a Supreme Court pick who can attract some Republican support. President Barack Obama on Tuesday said he seeks a Supreme Court candidate who “indisputably is qualified” for the job, while administration officials indicated he wants a nominee who can attract some Republican support and complicate GOP plans to push off any confirmation process until after the election.

• Saudi Arabia, Russia, Qatar, Venezuela Agree to Freeze Oil Output. Prices fall, however, as investors look for more action to reduce global petroleum glut. Saudi Arabia and Russia, the world’s two largest crude-oil exporters, said Tuesday they would halt production increases as long as other major producers followed suit, but prices fell anyway as investors looked for more-concrete action to reduce the global glut of petroleum. 

• Iran ‘Foreign Legion’ Leads Battle in Syria’s North. Forces backed by Tehran press assault in Aleppo, marking its regional ambitions. In a mausoleum here for slain members of Hezbollah, the Iran-backed Shiite militant group, a woman prayed next to the tomb of her son’s best friend who was killed three years ago in Damascus, she said, in an attack in which her own son was wounded.

• The Plot to Kill the $100 Bill. The $100 bill could be the most endangered U.S. bank note. The $100 bill is America’s most popular currency denomination. It also could be the most endangered.

Fox News:

• Exclusive: China sends surface-to-air missiles to contested island in provocative move. (video) The Chinese military has deployed an advanced surface-to-air missile system to one of its contested islands in the South China Sea according to civilian satellite imagery exclusively obtained by Fox News, more evidence that China is increasingly "militarizing" its islands in the South China Sea and ramping up tensions in the region. The imagery from ImageSat International (ISI) shows two batteries of eight surface-to-air missile launchers as well as a radar system on Woody Island, part of the Paracel Island chain in the South China Sea.

• Confusion over Scalia’s death stirs sideshow debate, conspiracy theories. (video) As congressional lawmakers and presidential candidates battle over the late Justice Antonin Scalia’s potential Supreme Court replacement, a sideshow debate has developed over the circumstances of his death. Questions linger over the precise cause, after the 79-year-old Scalia was found dead Saturday at a remote Texas ranch.

MarketWatch:

• This has been the worst quarter for company earnings reports since 2009.

• Cerner(CERN) adjusts outlook following weaker bookings. Cerner Corp. on Tuesday adjusted its revenue projections for the year after bookings in the fourth quarter came in below estimates. Shares, down 22% over the past 12 months, tumbled 15% in late trading to $47.40, below the 52-week-low of $52.91 set on Feb. 8 during regular trading.

• Junk-bond market facing record refinancing cliff: Moody’s. A record $947 billion of U.S. high-yield, or “junk,” debt, is scheduled to mature in the next five years, and some issuers may struggle to refinance it, Moody’s Investors Service warned on Tuesday.

CNBC:

• Oil, stocks may be just in 'trial separation'.

Zero Hedge:

• Yuan Extends Slide As China Weakens Fix By Most In 5 Weeks. (graph)

• Presenting The Most Striking Way Chinese Are Evading Capital Controls.

• "You Should Be Very Worried, You Should Be Prepared" Warns Jim Rogers.

• Why Aren't Presidential Candidates Discussing Who They Would Pick For Fed Chairman? 

• Foreign Officials Sell A Record $48 Billion In U.S. Treasurys In December. (graph)

• 50% Of Canadians Say They Are Within $200/Month Of Being Unable To Pay Their Bills.

• Calgary's Housing Market Collapses While "Three-Alarm Blaze" Burns Next Door In Vancouver. (graph)

• Tech IPO Market "Frozen" As Investors "Nurse Wounds" After 40% Collapse. (graph)

• Keynesianism's Long March To The Dustbin Of History.

• Carl Icahn, David Einhorn Dump "No Brainer" Apple(AAPL) Shares.

• "Truck-ocalypse" Hits Main Street As Daimler Fires 1,250 Amid Collapsing Demand. (graph)

• Why The Fed Thinks 'You' Are Crazy.

• Stocks Surge On Biggest Short-Squeeze In 4 Months As Crude, Credit, & Carry Crumble. (graph)

Business Insider:

• China's lending binge may not improve its economic prospects.

• The collapse in global trade is breathtaking.

• Fossil(FOSL) smashes earnings expectations, stock jumps 14%.

• Home prices in the Chinese city of Shenzhen are out of control.

Politico:

• Rubio surges back to electrify South Carolina.

Telegraph:

• There will be another crisis. It’s just a question of when. All eyes are trained on the meeting of G20 finance ministers and central bank governors in Shanghai later this month.

Epoch Times: 

• China May Put Its Nuclear Forces on ‘Hair-Trigger Alert’. The Chinese regime may be changing its policy on nuclear weapons, from one based on “survivability” to one that has its missiles ready to launch at any moment. Recent discussions in the Chinese military “suggest pressure is building to change China’s nuclear posture,” says a new report from the Union of Concerned Scientists. It may be moving, the report says, “toward a policy of launch-on-warning and hair-trigger alert.”

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 164.75 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 79.0 -.5 + basis point. 

• Bloomberg Emerging Markets Currency Index 68.02 -.11%. 

• S&P 500 futures +.12%. 

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ADI)/.53

• (BLMN)/.21

• (DPS)/.98

• (GRMN)/.48

• (NBL)/-.03

• (PCLN)/11.81

• (TMUS)/.15

• (ABX)/.06

• (CF)/.86

• (JACK)/1.03

• (LSCC)/-.13

• (LZB)/.40

• (MRO)/-.48

• (MAR)/.76

• (NTAP)/.68

• (NEM)/.14

• (NVDA)/.43

• (SUNE)/-.67

• (SNPS)/.61

• (VMI)/1.38

• (WMB)/.16   

Economic Releases
8:30 am EST

• Housing Starts for January are estimated to rise to 1173K versus 1149K in December.

• Building Permits for January are estimated to fall to 1200K versus 1232K in Decmeber.

• PPI Final Demand MoM for January is estimated to fall -.2% versus a -.2% decline in December.

• PPI Ex Food and Energy MoM for January is estimated to rise +.1% versus a +.1% gain in December.

• PPI Ex Food, Energy, Trade for January is estimated to rise +.1% versus a +.2% gain in December.  

9:15 am EST

• Industrial Production MoM for January is estimated to rise +.4% versus a -.4% decline in December.

• Capacity Utilization for January is estimated to rise to 76.7% versus 76.5% in December.

• Manufacturing Production for January is estimated to rise +.2% versus a -.1% decline in December. 

2:00 pm EST

• FOMC releases Minutes for Jan. 26-27 Meeting.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, China CPI report, Australia Employment Change, UK Jobless Claims, weekly US retail sales reports, weekly MBA mortgage applications report, Barclays Industrial Conference and the (ETH) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and consumer 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 day.

Stocks Surging into Final Hour on Central Bank Hopes, Less Eurozone/Emerging Markets/US High-Yield Debt Angst, Short-Covering, Retail/Transport Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 22.24 -4.57%

• Euro/Yen Carry Return Index 132.66 -.71%

• Emerging Markets Currency Volatility(VXY) 12.85 -1.0%

• S&P 500 Implied Correlation 63.83 -2.37%

• ISE Sentiment Index 173.0 +53.10%

• Total Put/Call .88 -2.22%

• NYSE Arms .96 +57.98% 

Credit Investor Angst:

• North American Investment Grade CDS Index 121.01 -.37%

• America Energy Sector High-Yield CDS Index 2,346.0 -.55%

• European Financial Sector CDS Index 122.25 +.72%

• Western Europe Sovereign Debt CDS Index 33.40 +1.95%

• Asia Pacific Sovereign Debt CDS Index 79.03 -.43%

• Emerging Market CDS Index 3879.84 -1.98%
  

• iBoxx Offshore RMB China Corporate High Yield Index 123.06 +.15%

• 2-Year Swap Spread 5.5 -2.25 basis points
  

• TED Spread 33.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -22.75 -.5 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.10 -.63%
• 3-Month T-Bill Yield .28% unch.

• Yield Curve 106.0 unch.
  

• China Import Iron Ore Spot $46.78/Metric Tonne +1.12%

• Citi US Economic Surprise Index -46.9 +1.4 points

• Citi Eurozone Economic Surprise Index -30.80 +1.0 point

• Citi Emerging Markets Economic Surprise Index -7.0 -2.2 points

• 10-Year TIPS Spread 1.26% -1.0 basis point
• 5.9% chance of Fed rate hike at April 27 meeting, 11.6% chance at June 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -174 open in Japan 
• China A50 Futures: Indicating -73 open in China

• DAX Futures: Indicating +29 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• China Turns on Taps and Loosens Screws in Bid to Support Growth. (video) China is stepping up support for the economy by ramping up spending and considering new measures to boost bank lending. The nation’s chief planning agency is making more money available to local governments to fund new infrastructure projects, according to people familiar with the matter. Meantime, China’s cabinet has discussed lowering the minimum ratio of provisions that banks must set aside for bad loans, a move that would free up additional cash for lending. Officials are upping their rhetoric too. “Policymakers are battling to prevent any further slowdown, which could escalate into a hard landing,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore. Analysts cautioned that the jump in credit could be a signal the nation’s state-run banks are being instructed to open up the lending spigots, even as authorities promise to rein in the nation’s growing debt pile. “Short-term prospects look brighter, but runaway loan growth will do nothing to ease concerns about China’s over-extended banks and over-indebted corporates,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note.
• China's Debt Surge Has Potential to Pressure Ratings, S&P Says. China is facing systemic risks and potential pressure to its ratings as record-low interest rates and a scramble to repay overseas corporate loans fuel a borrowing spree, according to Standard & Poor’s. The yuan’s worsening outlook is spurring some Chinese companies to raise funds onshore to pay down foreign-currency debt, which could contribute to higher domestic leverage over the next one to two years, Kim Eng Tan, senior director of Asia-Pacific sovereign ratings, said in an interview in Shanghai. Also, local firms tend to borrow as much as they can during an easing cycle, he added. Total social financing and new yuan loans both jumped to all-time highs last month, after the central bank cut interest rates six times since November 2014 and reduced lenders’ reserve-requirement ratios. The cost of servicing overseas debt climbed last year as the yuan weakened 4.5 percent and the currency is forecast to drop a further 3.1 percent in 2016. China’s debt-to-gross-domestic-product ratio climbed to 232 percent at the end of 2014, the highest since Bloomberg started compiling the data in 2004. “The ratio continued to climb, albeit at a slower pace,” said Singapore-based Tan. “While corporate financial risks are not as high as what the leverage level suggests -- as companies tend to hold a lot of liquid assets -- the increase in the debt-to-GDP ratio still poses a systemic risk, which could potentially add pressure to ratings.”
• A Direct Turkey-Russia Clash Is a Growing Risk on Syria Border. There’s only one major group of combatants in the Syrian war that’s backed by both Russia and the U.S. -- and now Turkey is attacking it. For a fourth day on Tuesday, Turkey unleashed its 155-millimeter heavy guns across the border with Syria. The targets were Kurdish forces, whose recent advance is a key part of the Russian plan to restore President Bashar al-Assad’s control over Syria. Syria’s five-year war has turned into a tangled web of proxy conflicts between global and regional powers, with a growing risk that some of them could clash directly. Right now the most dangerous flashpoint is between Russia and NATO member Turkey, which shot down a Russian plane in November. Since then tensions have steadily built as the Assad-Russia alliance -- with help from the Kurds -- threatens to surround Turkish-backed rebels in Aleppo, Syria’s biggest city.
• Emerging Market ETFs Lose Investors for 6th Week, Led by China. Investors pulled money out of U.S. exchange traded funds that buy emerging-market stocks and bonds for the sixth straight week, bringing this year’s total losses to $5.73 billion. Redemptions from emerging-market ETFs that invest across developing nations as well as those that target specific countries totaled $436.3 million in the week ended Feb. 12 compared with withdrawals of $1.16 billion in the previous period, according to data compiled by Bloomberg. The losing streak is the longest since the 11 weeks that ended Sept. 11. Last week, stock funds lost $262.8 million and bond funds declined by $173.5 million. The MSCI Emerging Markets Index fell 3.8 percent in the week. The biggest change was in China and Hong Kong, where funds shrank by $108.7 million, compared with $231.2 million of redemptions the previous week. Investors withdrew $106.6 million from stock funds and $2.1 million from bonds.
• European High-Yield Index Loses 1.58 Percent; All Sectors Negative. (graph) The Bloomberg Euro High Yield Index lost 1.58 percent on a total-return basis during the week ended Feb. 12. The yield to worst rose by 46 basis points, to 6.16 percent.
• The Never-Ending Story: Europe's Banks Face a Frightening Future. If you had to pick the moment when European banking reached the point of no return, which would you choose? The July day in 2012 when Bob Diamond resigned as Barclays’s chief executive officer amid the Libor rigging scandal? Or the fall morning later that year when UBS announced it was pulling out of fixed income and firing 10,000 employees? How about Sept. 12, 2010, when Basel III’s raft of costly capital requirements started upending the economics of global finance? All signature events, to be sure. But try May 21, 2015. That’s when Deutsche Bank stockholders filed into the dome-shaped Festhalle arena in Frankfurt to take part in one of the most venerated and, let’s be honest, boring rituals in corporate life: casting a vote on management’s strategy and performance.
• German Investor Confidence Falls Amid Equity and China Woes. German investor confidence fell to its lowest level since October 2014 as equities plummeted amid slowing Chinese growth and concern over the profitability of euro-area lenders. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, slid to 1.0 in February from 10.2 in January. Economists predicted a decline to zero, according to a Bloomberg survey. "The looming slowdown of the world economy and the uncertain consequences of the falling oil price put a strain on the ZEW Indicator of Economic Sentiment,” said Sascha Steffen, the head of International Finance and Financial Management research at ZEW. “In view of these developments, the concern over an increased credit default risk has already caused stock and bond prices for many banks in Europe, Japan and the US to slump." 
• Europe Stocks Halt Rally as Standard Chartered Leads Banks Lower. (video) A rebound for European stocks once again proved short-lived on renewed concerns about global-growth prospects, dragging banks and miners lower. Lenders fell after their biggest two-day surge since 2011. Mining-related companies also halted a rally that pushed them up 11 percent, with steel-pipe maker Tenaris SA and Norsk Hydro ASA leading declines. Energy stocks reversed an advance, as oil retreated after Saudi Arabia and Russia agreed to freeze output. The Stoxx Europe 600 Index dropped 0.4 percent to 320.37 at the close of trading, after rising as much as 0.8 percent and falling 1 percent. 
• Oil Retreats as Saudi, Russian Output Freeze Seen Leaving Glut. (video) Oil dropped on speculation that a pledge by Saudi Arabia and Russia to freeze production at January levels won’t succeed in tackling the global oil surplus. Crude fell after climbing as much as 7.1 percent in New York. The agreement depends on other producers following suit, Qatar’s Energy Minister Mohammed bin Saleh al-Sada said in Doha Tuesday. The pact won’t be meaningful unless Iran and Iraq, which have been raising output, cooperate, Commerzbank AG said. Saudi Arabia’s Ali al-Naimi said the freeze could be followed by other steps to improve the market. "The market is reacting rationally," said Mike Wittner, head of oil-market research in New York at Societe Generale SA. "There’s been a lot of chatter about a possible cut over the last month, so the reaction has got to be: Is this the best we can do? I struggle to find anything bullish in this announcement."
• The Glaring Problem With Oil Giants' Production Freeze. Has anything really changed? (video) Oil traders aren't too impressed with Saudi Arabia and Russia's accord to cap oil production at near-record levels. After rising above $31.50 per barrel when news of this agreement was reached, front-month West Texas Intermediate futures contracts have since retreated to below $30 per barrel. It's not just the production freeze, rather than an outright cut, that helps explain the minimal impact this announcement has had on prices, or the conditions attached to it. What also doesn't help buoy prices is the fact that for the two largest oil-producing nations, there's been a de facto ceiling at these levels for an extended period of time.
• Vale Expected to Keep Feeding Iron Glut as China Demand Slows. The biggest iron-ore miner is expected to have more bad news for its competitors this week: another quarter of record production. On Thursday, Vale SA will report all-time high output of 88.3 million metric tons for the fourth quarter, up from 88.2 million in the third quarter and 83 million a year earlier, according to the average forecast of seven analysts surveyed by Bloomberg News. Vale will join rivals Rio Tinto Group and BHP Billiton Ltd. in boosting production at a time steel making and demand in China contracts after years of growth.
• Watching Credit Markets for Recession Indicators. (video)
• Fallen Giants Block Path to S&P Bull Market as Amazon Slumps. (video) Anyone expecting a quick exit from the first global bear market in four years should take a look at all the money being lost in sectors dear to individual investors. In a switch from 2015, consumer and technology companies have come to dominate the list of worst-performing American stocks this year, with declines stretching past 20 percent for Amazon.com Inc. and Netflix Inc. Optimism is being squeezed just as the worst start ever for U.S. equities erases about $2.5 trillion from brokerage accounts.
• Community Health Has Surprise Quarterly Loss, Stock Plunges. Shares of Community Health Systems Inc., the U.S.’s second-largest chain of for-profit hospitals, plunged after the company reported an unexpected fourth-quarter loss. The stock fell as much as 29 percent to $13.20, the lowest intraday price since March 2009. With Tuesday’s drop, Community’s shares have lost almost 80 percent of their value since their 52-week closing high of $64.04 on June 26.
• Fed's Kashkari Floats Breaking Up Big Banks to Avert Meltdown. Federal Reserve Bank of Minneapolis President Neel Kashkari will lead an effort to toughen U.S. banking laws to prevent another financial crisis, saying regulators must consider options including breaking up the nation’s largest financial institutions. “The biggest banks are still too big to fail and continue to pose a significant risk to our economy,” Kashkari, who managed the U.S. Treasury’s $700 billion Troubled Asset Relief Program for rescuing banks in the 2008 crisis, said Tuesday in Washington. It was his first public speech since joining the central bank on Jan. 1 as its newest policy maker. 
• Sanders Gains Ground in Nevada, Testing a Clinton Firewall.

Fox News: 

• Cracks in Hillary’s firewall? Black voters divided between Dem candidates. (video)
• Defiant Iran ignores UN ban, hits up Putin for high-tech tanks, fighter jets. (video) Iran’s defense minister met Tuesday in Moscow with Russian President Vladimir Putin about delivery of the advanced S-300 air defense system -- and the purchase of powerful offensive weapons, including Russia's most sophisticated tank and jet fighters. Russian media and two intelligence officials speaking to Fox News confirm the meeting between Putin and Brigadier General Hossein Dehqan, believed to be the architect of the 1983 terror bombing that killed 220 U.S. Marines and 21 other service members in Beirut, Lebanon.

CNBC:

• Momentum most overvalued since tech bust: Analyst. Even with the recent sell-off, momentum stocks are still expensive according to one Wall Street firm. "Momentum stocks trade at an extreme premium to value stocks," JPMorgan's Dubravko Lakos-Bujas wrote in a note to clients Tuesday. "Their valuation spread is the highest since 1980, except for during the tech bubble."
• Deutsche's LaVorgna: All markets point to 'growth problem' . (video)

Zero Hedge:

• China Created More Debt In January Than The GDP Of Norway, Austria Or The UAE.
• These Are The Stocks "The Big Short's" Michael Burry Owned As Of December 31.
• Larry Summers Launches The War On Paper Money: "It's Time To Kill The $100 Bill".
• Consumer Confidence Crashes To 23-Year Low In Norway As Growth Grinds To A Halt. (graph)
• Did Someone 'Tap' The Atlanta Fed On The Shoulder In January? (graph)
• One Third Of Energy Companies Could Go Bankrupt Deloitte Warns As Credit Risk Hits Record High. (graph)
• Don't Confuse Genius With A Bull Market - 10 Steps To Redemption.
• 5,525 Companies Went Bankrupt In Brazil Last Year: "It's A Legitimate Credit Crisis". (graph)
• Why Negative Interest Rates Will Fail.
• One Trader's Dire Warning For Markets: "There's No Way To Know Where This Will Lead".
• Oil Price Volatility Soars Near Record Highs. (graph)
• Crude Crashes 8% From OPEC "Cut Hope" Highs On Storage Concerns. (graph)
• 'Unfixed' Deutsche Bank Stock Slumps For 2nd Day. (graph)
• Homebuilder Confidence Tumbles To Lowest In 9 Months. (graph)
• 2016: The Year Wishful Thinking Fails.
• Buybacks Must Continue: AAPL, IBM Unveil Major Debt Issuance To Fund Shareholder-Friendliness. (graph)
• Empire Fed Contracts For 7th Straight Month, Hovers At 7-Year Lows. (graph)

Business Insider:

• Uber CEO criticizes 'irrational funding going on'.
• Ted Cruz's campaign had a snappy response to Donald Trump's lawsuit threat.
• The stock market is still expensive. (graph)
• Copper prices have crashed 50% and the collapse isn't over yet.
• This could be the biggest Supreme Court case affected by Justice Scalia's sudden death.

Telegraph: 

• German central bank chief on collision course with Draghi over QE. Bundesbank's Jens Weidmann says Europe's economies do not need more stimulus measures ahead of crucial March meeting.

Bear Radar

Style Underperformer:

• Large-Cap Value +1.3%

Sector Underperformers:

• 1) Hospitals -7.6% 2) Gold & Silver -6.3% 3) Utilities -.2%

Stocks Falling on Unusual Volume:

• CYH, VGLT, LPNT, UGLD, SGRY, USLV, GOLD, OAK, JBSS, CSWI, CMP, ICPT, GG, FNV, NP, CORE, DNB, DVN, KWR, FI, NEM, O, FB, WTR and ABX

Stocks With Unusual Put Option Activity:

• 1) MTW 2) EWH 3) SMH 4) BHI 5) XRT

Stocks With Most Negative News Mentions:

• 1) CYH 2) LPNT 3) RIG 4) MRO 5) POL

Charts:

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

Bull Radar

Style Outperformer: 

• Small-Cap Growth +2.5% 

Sector Outperformers:

• 1) Computer Hardware +5.3% 2) Gaming +4.8% 3) Retail +3.9% 

Stocks Rising on Unusual Volume: 

• ADT, LPLA, SUN, CRAY, TGI, GNRC, TIME, QSR, HRL, CSIQ, FEYE, VSAT, WYNN and GPC

Stocks With Unusual Call Option Activity: 

• 1) GRPN 2) ADT 3) UPL 4) NVDA 5) MYL

Stocks With Most Positive News Mentions: 

• 1) MU 2) PANW 3) NOC 4) QCOM 5) BA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +11.5% Above 100-Day Average
• 10 Sectors Rising, 0 Sectors Declining
• 76.9% of Issues Advancing, 21.6% Declining
• 16 New 52-Week Highs, 44 New Lows
• 19.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.9%
• Vix 24.6 -3.1%
• Total Put/Call .86 -4.4%
• TRIN/Arms 1.07 +73.1%