Stocks Lower into Final Hour on Russia/Ukraine Tensions, Global Growth Fears, Technical Selling, Financial/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.98 +.33%

• Euro/Yen Carry Return Index 146.43 -.22%

• Emerging Markets Currency Volatility(VXY) 8.71 +.23%

• S&P 500 Implied Correlation 56.29 -1.49%

• ISE Sentiment Index 104.0 +36.84%

• Total Put/Call .85 -15.84%

• NYSE Arms .91 -45.96% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.23 -1.05%

• European Financial Sector CDS Index 97.70 -.17%

• Western Europe Sovereign Debt CDS Index 47.34 +1.15%

• Asia Pacific Sovereign Debt CDS Index 93.13 -.32%

• Emerging Market CDS Index 286.80 -1.81%

• China Blended Corporate Spread Index 368.52 -.10%

• 2-Year Swap Spread 11.5 +.75 basis point

• TED Spread 20.25 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.75 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .03% -1.0 basis point

• Yield Curve 222.0 -4.0 basis points

• China Import Iron Ore Spot $112.30/Metric Tonne +.36%

• Citi US Economic Surprise Index -31.0 +.3 point

• Citi Emerging Markets Economic Surprise Index -7.2 -.2 point

• 10-Year TIPS Spread 2.14 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -32 open in Japan

• DAX Futures: Indicating +2 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical sector longs and index hedges

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• Congress Approves Russian Sanctions With Putin Warnings. The U.S. Senate and House passed separate bills today imposing additional sanctions on Russian officials for the nation’s annexation of Crimea. The Senate bill, passed on a voice vote, includes about $1 billion in loan guarantees and authorizes $150 million in direct assistance to Ukraine. The House legislation would impose additional asset freezes and visa bans on senior Russian officials and corporations. The bill passed 399-19.

• Russia Faces Recession Risk as Capital Outflows Bleed Economy. Russia faces a growing risk of recession as a hemorrhaging of $100 billion in capital this year may bring the economy to a near standstill, according to analysts and government officials. Gross domestic product will expand 1.2 percent in 2014, according to the median estimate of 37 economists in a Bloomberg survey. That compares with a 2.2 percent forecast in last month’s poll. The economy may stagnate at rates below 1 percent and contract if capital outflows reach $150 billion, Economy Minister Alexei Ulyukayev said at a conference in Moscow today.

• China Swap Market 'Too Complacent' Amid Funding Pressure: Nomura. Swap market has been "too complacent" in light of PBOC's relatively aggressive mop up of liquidity, Wee-Khoon Chong, rate strategist at Nomura, wrote. Liquidity may further tighten in coming days and last longer than expected, he wrote.

• Syria Peace Effort Largely a Failure, U.S. Official Says. Attempts to negotiate a diplomatic solution to Syria’s civil war are failing, a U.S. State Department official said, as lawmakers denounced the Obama administration’s response to the country’s turmoil. “The Geneva II process has faltered,” Assistant Secretary of State Anne Patterson said yesterday of talks between Syrian President Bashar al-Assad’s regime and rebels that were organized by Russia and the U.S. “We’ve worked closely with the Russians particularly to try and get them to cooperate with us,” Patterson told the Senate Foreign Relations Committee. “It’s a process that’s largely failed.” 

• European Stocks Little Changed After Rally; H&M Declines. European stocks were little changed, after a two-day rally, as retailers fell, while food and beverage companies climbed. Hennes & Mauritz AB lost 4.3 percent after reporting quarterly profit that missed analysts’ estimates. Babcock International Group Plc posted the biggest drop in four years after agreeing to buy private equity-owned Avincis Group. United Internet AG added 5 percent after saying that earnings jumped 25 percent last year. Marine Harvest ASA rose 2.4 percent after the salmon farmer agreed to sell U.K. farming assets to Cooke Aquaculture Inc. The Stoxx Europe 600 Index gained 0.1 percent to 331.4 at the close of trading in London.

• WTI Crude Rises to Two-Week High on Cushing Supplies. WTI for May delivery gained $1.22, or 1.2 percent, to $101.48 a barrel at 1:01 p.m. on the New York Mercantile Exchange. Futures touched $101.70, the highest level since March 10. The volume of all futures traded was 1.7 percent below the 100-day average.

• Consumer Sentiment Declines to a Seven-Week Low. Consumer confidence in the U.S. declined to the lowest level in seven weeks as Americans turned more pessimistic about the economy. The Bloomberg Consumer Comfort Index fell for a second week, to minus 31.5 in the period ended March 23 from minus 29. For the first time since early February, all three components of the gauge, which also includes measures of the buying climate and personal finances, decreased in the same week. Higher prices at the gas pump and smaller paychecks for employees after inclement winter weather reduced hours combined to damp spirits among lower-income households.

• Fed’s Retreat From Mortgages Approaching Tipping Point. The Federal Reserve is about to find out how well the mortgage-bond market can stand on its own. Fed buying of the securities that helped spur a housing recovery is poised to fall below growth in the $5.5 trillion government-backed market as soon as May, Nomura Holdings Inc. said. Last year, the Fed added twice as much of the debt as was created, suppressing yields that guide mortgage interest rates.

Wall Street Journal:

• For GE(GE), Ukraine Roils Russia Strategy. 

Fox News:

• US intel: More indications than ever Russia could invade Ukraine. New U.S. intelligence assessments say there are more indications than ever that Russia could invade eastern Ukraine, as congressional lawmakers reacted with alarm to Vladimir Putin's rapidly expanding military buildup along the border. "The thinking in the U.S. government is that the likelihood of a major Russian incursion into Ukraine has increased," a senior U.S. official told Fox News.

MarketWatch: 

• Is this the correction, or a coming crash?

CNBC:

• Microsoft(MSFT) unveils Office for Apple's(AAPL) iPad.

• High fliers begin dipping as balloon deflates. (video) What was once sizzling is now burning. The momentum names—the high fliers that sucked in fast money—once again got hit with no regard for quality or prospects Thursday morning.

ZeroHedge:

• Here Is The YouTube "Start A False Flag War With Syria" Leaked Recording That Erdogan Wanted Banned.

• Dear Keynesians: Your Sad Devotion To A Failed Religion Hasn't Conjured Up A Recovery; Here's Why.

• Ukraine Parliament Rejects IMF's Bailout Terms (As US Passes Ukraine Aid Bill).

• Bring Out Your "Toxic Sludge" - European Loan Creation Remains At Record Low Levels.

• Russia To Create Own National Payment System In "Bid To Reduce Dependence On The West".

• Gun-Banning CA Senator Busted For Weapons Trafficking.

• Home Sales Plunge Most In 3 Years, Drop 8th Months In A Row. (graph)

• Half Of Uninsured Say They Plan To Remain Uninsured.

• Initial Jobless Claims Drop To 4-Month Lows. (graph)

Business Insider: 

• New Construction Material Is Lighter Than Water And Stronger Than Steel.

• THE BOX IPO ANALYSIS: This Company Is Burning Twice As Much Cash As Any Comparable Company.

• Apparently There's A 'Goldilocks' Hedge Fund Size.

@LOggOl:

• Russia preparing Ukraine invasion in the next two days, fmr def. min Marchuk says -- Ukr tweets. Don't know credibility of this guy.

The Hill:

• Housing risk high in spite of Qualified Mortgage rule.

Reuters:

• Accenture warns consulting business to remain weak. Accenture Plc warned that weakness in its consulting business that hurt second-quarter results would carry on though the year, sending its shares down as much as 8 percent. The consulting business, which brings in more than half of the company's revenue, has fallen in six of the last seven quarters as customers cut discretionary spending and stiff competition puts pressure on contract prices. 

• Watchmakers see only modest 2014 growth as Chinese and Russian buyers hang back. Swiss watchmakers say a slowdown in their important Chinese market, and political tensions in Russia that could affect wealthy consumers' spending there, are likely to result in only modest sales growth this year. 

• Brazil central bank raises inflation forecast, signals rate hikes. Brazil's central bank raised its 2014 inflation forecast sharply on Thursday and said it sees the economy growing at a moderate pace, signaling it may prolong its cycle of interest-rate hikes to battle naggingly high inflation in an election year. The central bank increased its 2014 inflation forecast to 6.1 percent from its previous estimate of 5.6 percent as a severe drought in southern Brazil hurt crops and raised food prices.

AFP:

• Ukraine says 100,000 Russian troops near border. Nearly 100,000 Russian forces have massed on Ukraine's border, a top Ukrainian defense official told an American audience Thursday, giving a number far higher than US military estimates. "Almost 100,000 soldiers are stationed on the borders of Ukraine and in the direction ... of Kharkiv, Donetsk, " Andriy Parubiy, chairman of Ukraine's national security council, said via a webcast from Kiev. "Russian troops are not in Crimea only, they are along all Ukrainian borders. They're in the south, they're in the east and in the north," Parubiy said.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.51%

Sector Underperformers:

• 1) Gaming -1.71% 2) Banks -1.60% 3) Computer Services -1.36%

Stocks Falling on Unusual Volume:

• PFSI, MCHX, SQI, O, SZYM, ACN, LDOS, CLVS, C, KS, WBAI, PNQI, ENZY, DWRE, MGI, CTU, CMGE, CHSP, QIHU, AI, ECYT, ARII, AYI, DATA, GOMO, CTSH, CHMT, CREE, RNG, AI and GME

Stocks With Unusual Put Option Activity:

• 1) BAX 2) CBS 3) COF 4) XLE 5) C
  

Stocks With Most Negative News Mentions:

• 1) GOOG 2) C 3) BA 4) ACN 5) PCLN
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +.08%

Sector Outperformers:

• 1) Steel +1.75% 2) Oil Service +1.06% 3) Telecom +.67%
  

Stocks Rising on Unusual Volume:

• BAX, LULU, SIG, PBR, AA, VHC, BAS and CRK

Stocks With Unusual Call Option Activity:

• 1) CL 2) VVUS 3) BAX 4) END 5) S

Stocks With Most Positive News Mentions:

• 1) LULU 2) C 3) PVH 4) TWTR 5) YELP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Russian Energy Giants’ Outlooks Lowered Amid Sanction Risks. Standard & Poor’s cut the credit outlooks for Russia’s largest energy companies amid concern international sanctions may cripple the central government. The outlooks for OAO Gazprom, OAO Rosneft, OAO Transneft and OAO Lukoil were lowered to negative from stable today, six days after the New York-based credit-rating service downgraded the outlook for the Russian Federation. S&P cited the companies’ “very strong links” with the government and said geopolitical developments may hinder Russia’s ability to support them. 
• Chinese Stocks Fall After Industrial Profit Growth Slows. China’s stocks fell, sending the benchmark index to its biggest loss in a week, after industrial profit growth slowed at the start of the year and benchmark money-market rates jumped. Trainmaker China CNR Corp. and China Shipping Container Lines Co. slid more than 1 percent to drag down a sub-index of industrial companies. Industrial profits rose 9.4 percent in the first two months of the year, decelerating from 12.2 percent growth in December. Shenzhen O-film Tech Co. plunged 7 percent as a measure of technology companies slumped the most among industry groups. The seven-day repurchase rate, a gauge of funding availability in the banking system, rose the most in two months. The yuan dropped for a third day, losing 0.1 percent. The Shanghai Composite Index slipped 0.7 percent to 2,049.67 at 10:12 a.m. local time.
• Asian Stocks Fall as Bond Risk Rises With Yen on Russia. Asian stocks fell as bond risk in the region climbed and the yen extended gains amid concern President Barack Obama will step up pressure on Russia. Japanese share indexes were dragged lower by dividend payments and platinum rebounded. The MSCI Asia Pacific Index slipped 0.4 percent by 11:03 a.m. in Tokyo with Japan’s Topix index sliding 1.3 percent as most stocks traded without the right to their latest dividend.
• Facebook(FB) Seen Struggling to Win Developers to Virtual Vision. Facebook Inc. Chief Executive Officer Mark Zuckerberg hailed virtual reality as the “future of computing” when he unveiled an agreement to buy Oculus VR Inc. yesterday. Ubisoft SA isn’t so sure.

Wall Street Journal: 

• Crisis in Ukraine. Streaming Coverage:
• The Individual Mandate Goes Poof. The latest delays show that the supposed centerpiece of ObamaCare won't cause the uninsured to buy coverage.

Fox News:

• Critical part of ObamaCare website still not fixed. Even as the Obama administration struggles to deal with the approaching end of open enrollment for health care exchanges, one critical part of the website has yet to be fixed.

CNBC: 

• Behind the massive trade that spooked the market. Starting at 11:57 a.m. ET, a major player started buying May 1,995-strike put options on the S&P 500 for $133 per contract. The trade was not executed in a single block, but over many smaller trades between 11:57 and 1:12 p.m. (and the prices of the contract varied, getting as low as $131.70). On the whole, 15,450 contracts were purchased. And since each contract controls 100 shares, this trade cost about $200 million. 
• Why stocks could stay under pressure.

Zero Hedge:

• How The BRICs (Thanks To Russia) Just Kicked The G-7 Out Of The G-20.
• Beware The Distressed Credit "Canary In The Coalmine". (graph)
• As Russia Controls 51 Ukraine Ships And Moves More Tanks To The Borders, Obama Denounces "Brute Force".
• Citi(C) On The "Known Unknowns" That Are Not Priced In.
• Citi(C) Tumbles Below $5/Share On A Split-Adjusted Basis After Failing Another Fed Stress Test.
• High-Growth Hope Stocks Hammered. (graph)
• Showdown In Ukraine: Putin’s Quest for Ports, Oil, Pipelines & Gas.

ValueWalk:

• Grantham Predicts A Bust ‘Unlike Any Other’. After calling the last two market bubbles, GMO chief strategist sees another on the horizon. GMO co-founder and chief investment strategist Jeremy Grantham is well known for having predicted both the late 90s tech bubble and the recent housing bubble, and now he sees an equity bubble driven by the Federal Reserve’s loose monetary policy and years of qualitative easing.

Business Insider:

• US Intelligence Report Warns Of 'More Probable' Likelihood Of Russian Invasion Of Eastern Ukraine.

Reuters:

• Chinese developers seek alternative financing as investors grow wary. China's property developers are turning to commercial mortgage-backed securities and looking at other alternative financing as creditors grow more discriminating in the face of rising concerns about the country's real estate and debt markets. Bond buyers are shying away from second-tier developers because property sales have cooled as the economy slows. The expected bankruptcy of a local developer and the country's first domestic bond default this month have heightened scrutiny of borrowers.
• Amazon follows Google in slashing cloud computing prices. Amazon.com Inc will drop prices on most of its cloud computing services starting April 1, the largest U.S. online retailer said on Wednesday, a day after rival Google Inc outlined a major price cut of its own.

Telegraph:

• Lord Turner: Housing boom could drag UK back into crisis. Former head of the City regulator says he is worried that economic recovery is built on same factors that led to financial crisis.

Evening Recommendations

• None of Note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 132.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 93.50 -.5 basis point.

• FTSE-100 futures -.45%.

• S&P 500 futures +.15%.

• NASDAQ 100 futures  +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WOR)/.58
• (CMC)/.10
• (WGO)/.30
• (FRED)/.15
• (GME)/1.93
• (RMAX)/.32
• (RH)/.83
• (RHT)/.37

Economic Releases
8:30 am EST

• 4Q GDP is estimated to rise +2.7% versus a prior estimate of a +2.4% gain.
• 4Q Personal Consumption is estimated to rise +2.7% versus a prior gain of a +2.6% gain.
• 4Q GDP Price Index is estimated to rise +1.6% versus a prior estimate of a +1.6% gain.
• 4Q Core PCE is estimated to rise +1.3% versus a prior estimate of a +1.3% gain. 
• Initial Jobless Claims are estimated to rise to 325K versus 320K the prior week.
• Continuing Claims are estimated to fall to 2882K versus 2889K prior.

10:00 am EST

• Pending Home Sales for February are estimated to rise +.2% versus a +.1% gain in January.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Pianalto speaking, Fed's Bullard speaking, Fed's Evans speaking, Japan CPI, $29B 7Y T-Note auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index and the (NDAQ) investor day could also impact trading today.

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

Stocks Reversing Lower into Final Hour on Russia/Ukraine Tensions, Global Growth Fears, Yen Strength, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.48 +3.28%

• Euro/Yen Carry Return Index 146.78 -.49%

• Emerging Markets Currency Volatility(VXY) 8.71 -1.47%

• S&P 500 Implied Correlation 55.57 +2.60%

• ISE Sentiment Index 78.0 -17.0%

• Total Put/Call 1.03 +36.0%

• NYSE Arms 1.11 +23.74% 

Credit Investor Angst:

• North American Investment Grade CDS Index 70.80 -.91%

• European Financial Sector CDS Index 97.87 -2.99%

• Western Europe Sovereign Debt CDS Index 46.80 +1.40%

• Asia Pacific Sovereign Debt CDS Index 93.23 -.86%

• Emerging Market CDS Index 291.0 -2.93%

• China Blended Corporate Spread Index 368.88 -1.63%

• 2-Year Swap Spread 10.75 -3.25 basis points

• TED Spread 19.75 +.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 +1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .04% -1.0 basis point

• Yield Curve 226.0 -5.0 basis points

• China Import Iron Ore Spot $111.90/Metric Tonne +.09%

• Citi US Economic Surprise Index -31.30 +.4 point

• Citi Emerging Markets Economic Surprise Index -7.0 +.1 point

• 10-Year TIPS Spread 2.15 unch.

Overseas Futures:

• Nikkei Futures: Indicating -60 open in Japan

• DAX Futures: Indicating +7 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical sector longs and index hedges

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

• Market Exposure: Moved to 25% Net Long