Today's Headlines

Bloomberg:

• EU Renews Push for Russian Sanctions; Putin Blames Ukraine. European Union leaders threatened to tighten sanctions on Russia as soon as Thursday over its support for pro-Kremlin rebels in eastern Ukraine, who are engaged in the worst clashes with government troops since a September truce. The leaders condemned the killing of dozens of civilians in “indiscriminate shelling” of the Ukrainian port city of Mariupol and said EU foreign ministers meeting on Jan. 29 will “consider any appropriate action, in particular on further restrictive measures,” EU President Donald Tusk said in an e-mailed statement in Brussels. 

• Putin Needles Ukraine as He Shuns Wartime Allies at Auschwitz. As European leaders and U.S. representatives gathered in Poland to mark the 70th anniversary of the liberation of the Auschwitz concentration camp by the Soviet Red Army, Russian President Vladimir Putin skipped the ceremony to visit the Jewish Museum in Moscow. “The Russian people bore the main burden of the fight against Nazism on their shoulders,” Putin said Tuesday in a speech at the Jewish Museum and Center of Tolerance in Moscow that included an historical dig at Ukraine. 

• Russian Corporate Bonds Fall After S&P Cuts Nation to Junk. Russian companies led declines in European corporate bonds after Standard & Poor’s cut the nation’s credit rating to junk for the first time in a decade. Bonds sold by OAO Russian Railways and OAO Gazprom were the worst performing among 1,925 investment-grade securities in Bank of America Merrill Lynch’s Euro Corporate Index. The state-owned rail operator’s 1 billion euros ($1.1 billion) of 3.3744 percent bonds due May 2021 fell 2.1 cents to 70.8 cents while the natural gas provider’s 1 billion euros of 3.389 percent bonds due March 2020 dropped 1.7 cents to 84.2 cents.

• Tsipras Names Cabinet Heading for Clash Over Bailout and Russia. Greek Prime Minister Alexis Tsipras unveiled a cabinet that threatens to maximize friction with other European Union governments on issues ranging from the country’s bailout agreement to sanctions on Russia. Yanis Varoufakis, a 53-year-old economics professor, will handle negotiations with the euro region and International Monetary Fund over the country’s 240 billion-euro ($273 billion) bailout, after being appointed finance minister. He has called it a “trap” that was destructive for Greece. Foreign Minister Nikos Kotzias is due in Brussels on Thursday to discuss possible additional sanctions on Russia over the conflict in Ukraine. Before the cabinet even meets for the first time tomorrow, the Greek government said that it disagreed with an EU statement in which President Donald Tusk raised the prospect of “further restrictive measures” on Russia.

• China Private Bond Faces Stress as LGFV Says No Pledge. China’s private bond market is facing increased scrutiny after a local-government financing vehicle in the eastern province of Jiangsu said it has no obligation to guarantee notes sold by a manufacturer. Dongfei Mazuoli Textile Machinery Co., based in the city of Dongtai, can’t pay principal and interest on the securities as of Jan. 25, according to a report today on Tencent Holdings Ltd.’s QQ.com. The LGFV had signed a contract with the manufacturer in 2012 to guarantee its bond credit ratings, but doesn’t guarantee the note payments themselves, according to a statement from the financing unit dated Jan. 26. 

• What Clampdown? China Margin Traders Boost Debt to Record. It didn’t take long for the flood of borrowed money to come pouring back into Chinese stocks. After a two-day decline spurred by regulatory efforts to curb margin lending on Jan. 16, the value of shares purchased with borrowed cash has rebounded to an all-time high. The outstanding balance of margin debt on the Shanghai Stock Exchange climbed to a record 771.4 billion yuan ($123 billion) yesterday, up from about 751 billion yuan on Jan. 20. China’s suspension of new margin accounts at three of the nation’s biggest brokerages and notice to ban loans to traders with less than 500,000 yuan has done little to damp the enthusiasm of leveraged investors.

• Greek Bonds, Stocks Drop as Leaders to Spar on Writedown. Greece’s bonds and stocks plunged for a second day as the nation’s newly named cabinet looked set to clash with euro-area finance ministers over its funding needs. While finance chiefs from the 19-nation euro area on Monday signaled their willingness to do a deal with Greek Prime Minister Alexis Tsipras, it’s on the condition he drops his demand for a debt writedown. Representing the Greek side in negotiations with their international creditors will be finance minister Yanis Varoufakis, who has argued that Greece should default while staying a member of the euro area. Greek three-year yields rose 198 basis points, or 1.98 percentage point, to 14.03 percent at 5 p.m. London time, after jumping 197 basis points the previous day. The 3.375 percent notes due in July 2017 fell 3.38, or 33.80 euros per 1,000-euro ($1,132) face amount, to 78.975. The nation’s 10-year yield increased 38 basis points to 9.48 percent. 

• Boko Haram Attacks Leave at Least 30 Dead in Nigeria’s Northeast. Boko Haram Islamists in Nigeria attacked two northeastern towns leaving at least 30 people dead and many injured, a lawmaker said. “They attacked our people in Madagali, Michika and surrounding villages” yesterday, Adamu Kamale, a member of the Adamawa state legislature representing the area, said by phone today from Yola, the state capital. “They destroyed houses and shops and killed a lot of people.” 

• Islamic State to Kill Hostages If Jordan Prisoner Not Freed. A Japanese war journalist held by Islamic State said in a video released Tuesday that he and a Jordanian hostage will be executed if Jordan doesn’t release a convicted jihadist within 24 hours, according to SITE Intelligence Group. 

• Why Fink Says Swiss Avoiding Recession May Be Bad News for Euro. Larry Fink says he’s worried about a recession in Switzerland. That there won’t be one. If the export-dependent Swiss avoid a slump after a surge in the franc it would make the idea of surviving an overvalued currency -- and leaving the euro -- a little more conceivable in Germany, according to Fink, the co-founder and chief executive officer of BlackRock Inc. Think Gerexit.

• European Stocks Fall as Siemens Disappoints, Greek Banks Slide. European stocks declined from a seven-year high, snapping their longest winning streak since April, as Siemens AG and Royal Philips NV posted disappointing earnings, and Greek stocks tumbled. Siemens slid 3 percent, contributing the most to a drop in a gauge of industrial companies, after Europe’s largest engineering firm reported a decline in first-quarter profit. Philips lost 5.9 percent after saying it is behind on its 2016 financial targets. Greek banks dragged a gauge of lenders down. The Stoxx Europe 600 Index slipped 1 percent to 368.7 at the close of trading, after earlier falling as much as 1.4 percent.

• Stronger Dollar Punishes U.S. Earnings From P&G(PG) to DuPont(DD). The dollar’s surge is reducing earnings at American companies from Procter & Gamble Co. (PG) to Pfizer Inc. (PFE) and DuPont Co. that make a large portion of their revenue abroad. P&G, the world’s biggest consumer-products maker, today reported profit that missed analysts’ estimates in the quarter ended Dec. 31 after what Chief Executive Officer A.G. Lafley called “unprecedented” foreign-exchange rate fluctuations reduced sales by 5 percentage points. DuPont and drugmakers Pfizer and Bristol-Myers Squibb Co. (BMY) all posted annual forecasts that trailed predictions, in part because of the dollar.

• Caterpillar(CAT) Forecast Disappoints as Oil Hits Orders. Caterpillar Inc. (CAT), the world’s largest mining and construction equipment maker, forecast 2015 sales and earnings that trailed analysts’ estimates as plunging oil prices signal lower demand from energy companies. 

• Oil Drop Hits Private Equity as Carlyle Seen Leading Decline. Private equity firms, which made record profits in the past two years, are preparing to share the cost of their forays into the U.S. oil business. Combined earnings per share at the four largest firms, which start reporting fourth-quarter results this week, probably fell 58 percent from a year ago, according to 13 analysts surveyed by Bloomberg. Carlyle Group LP (CG) is expected to lead the decline with a 73 percent drop, driven by its energy holdings, and Apollo Global Management LLC (APO) is expected to report a 63 percent drop in earnings. Blackstone Group LP (BX), the most diversified of the buyout firms, should be least affected, with an estimated 32 percent slide. 

• Copper Falls Near 5-Year Low as China Seen Slowing Down. Copper futures approached a five-year low as industrial profit last year posted the smallest gain in data that started in 2000 in China (CNPRTTLY), the world’s largest metal consumer. Earnings in 2014 increased 3.3 percent, Chinese government data showed. In December, profit contracted 8 percent, falling for the third straight month. Copper prices declined as orders for business equipment dropped for the fourth consecutive month in the U.S., the second-biggest user. On the Comex in New York, copper futures for March delivery fell 3.2 percent to settle at $2.4625 a pound at 1:13 p.m. Earlier, the price touched $2.446. On Monday, the metal dropped to $2.419, the lowest for a most-active contract since 2009. Copper is piling up in London Metal Exchange warehouses with inventories climbing for 11 straight sessions, the longest run since April 2013. They have increased to 238,225 metric tons, the highest since April.

CNBC:

• The weird market fact that has investors on edge.

• El-Erian: These are 2 big market risks. (video)

ZeroHedge:

• Greece's New FinMin Explains "This Is What Happens When You Humiliate A Nation & Give It No Hope". (video)

• France 'Proves' Q€ Is Entirely Useless. (graph)

• WTI Crude Jumps As Saudi Oil Minister Meets With Russian, Finnish, And Norwegian Ambassadors. (graph)

• The Bonds Of The Third Largest Austrian Bank Are Crashing. (graph)

• EURUSD Surges Above 1.14 As EU Inflation Expectations Tumble To Lowest Since Q€. (graph).

• Seven Consecutive Downward Reivisions To New Home Sales Data Place Serious Doubts On Report Accuracy. (graph)

• Consumer Confidence Surges To Highest Since The Last Time Markets Crashed. (graph)

• US Services PMI Improves But New Orders Drop To Post-Recession Low. (graph)

• China Leading Index Plunges To 6 Year Lows. (graph)

• "Paid To Wait"? Microsoft(MSFT) Tumbles 10%, Destroys 4 Years Of Dividend Gains. (graph)

• "Prospects For A Home Run In 2015 Aren’t Good" - November Case-Shiller Confirms Ongoing Housing Market Slowdown. (graph)

• "Shadow Of The Crisis Has Not Passed": Durables Goods Orders Collapse. (graph)

David Stockman's Contra Corner:

• The Central Banks’ Cheap Money Deflation Cycle: Iron Ore Supply Soaring, China Demand Faltering, Prices &Profits Collapsing. Economists may teach that low prices and declining demand encourage producers to decrease supply, but the iron ore industry appears to have skipped class that day. “The combination of a further increase in global iron ore supply this year and only subdued demand growth suggests iron ore prices will continue to drift lower,” said Caroline Bain, an analyst at Capital Economics, in a note Monday.

Reuters:

• Exclusive - Apple(AAPL) supplier Foxconn to shrink workforce as sales growth stalls. Taiwan's Foxconn Technology Group, the world's largest contract electronics manufacturer, will cut its massive workforce, the company told Reuters, as the Apple Inc supplier faces declining revenue growth and rising wages in China. Under its flagship unit Hon Hai Precision Industry Co Ltd, the group currently employs about 1.3 million people during peak production times, making it one of the largest private employers in the world. Special assistant to the chairman and group spokesman Louis Woo did not specify a timeframe or target for the reduction, but noted that labour costs had more than doubled since 2010, when the company faced intense media scrutiny following a spate of worker suicides. Revenue growth at the conglomerate tumbled to 1.3 percent in 2013 and only partially recovered to 6.5 percent last year after a long string of double-digit increases from 2003 to 2012. That decade saw the firm ride an explosion of popularity in PCs, smartphones and tablets, largely driven by its main client Apple, but now it is feeling the effects of falling growth and prices in the gadget markets it supplies, a trend that is expected to continue. Growth in smartphone sales will halve this year from 26 percent in 2014, according to researcher IDC, while PC sales will contract by 3 percent. Similarly, the average smartphone will sell for 19 percent less in 2018 than last year's $297. "Even if technology is improving, the price will still come down," Woo said. "We've come to accept that, our customers have come to accept that." Automation will be key to keeping labour costs under control in the long-term, Woo said, as the company pushes to have robotic arms complete mundane tasks currently done by workers.

Telegraph: 

• Sadly for all our futures, cheap money is here to stay. Just get used to it. Central banks have been struggling to normalise interest rate policy. Increasingly, there is reason to doubt they ever will be able to. In the meantime debtors are accommodated at the detriment of creditors, borrowers are favoured at the expense of savers, and the holders of assets are further boosted to the growing exclusion of those who have none. It’s ever harder to believe in a happy ending.

la Repubblica:

• IMF Lagarde Rules Out Greek Debt Cancellation. IMF will restart dialogue with Greece to implement planned structural reforms, IMF Managing Director Christine Lagarde says in an interview. Europe has internal rules that must be respected.

Bear Radar

Style Underperformer:

• Large-Cap Growth -1.22%

Sector Underperformers:

• 1) Software -3.83% 2) Disk Drives -1.91% 3) Internet -1.73%

Stocks Falling on Unusual Volume:

• MSFT, PLT, PKG, CAT, SANM, FCFS, HQY, PHG, SAGE, GGG, MWV, STX, MSTR, TDG, PH, ROK, ENR, HOG, FCX, TTM, GNRC, CRH, CMI, INTC, ZNH, PG and SANM

Stocks With Unusual Put Option Activity:

• 1) HUN 2) MSFT 3) JOY 4) RL 5) CAT

Stocks With Most Negative News Mentions:

• 1) DDD 2) FB 3) AAL 4) COP 5) MRO
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -1.04%

Sector Outperformers:

• 1) Gold & Silver +1.91% 2) Agriculture -.03% 3) Utilities -.08%
  

Stocks Rising on Unusual Volume:

• COMM, LGCY, RMTI and RMBS

Stocks With Unusual Call Option Activity:

• 1) PLUG 2) WLT 3) ZIOP 4) ARIA 5) MNKD
  

Stocks With Most Positive News Mentions:

• 1) CTCT 2) WAT 3) PLD 4) NEE 5) SCSS
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:

• S&P Cuts Russia's Rating to Junk; Sanctions and Oil Slump Hammer Ruble. Russia’s foreign-currency credit rating was cut to junk by Standard & Poor’s, putting it below investment grade for the first time in a decade, as policy makers struggle to boost growth amid international sanctions and a drop in oil prices. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement released on Monday, the same as countries including Bulgaria and Indonesia. The ratings firm said the outlook is “negative.” Russian stocks on U.S. exchanges tumbled with the ruble following the announcement which came after the close of equity trading in Moscow.

• Greece’s Odd-Couple Coalition Only Agrees About Ending Austerity. The two men disagree on just about everything, except this: for Greece, the time of German-dictated austerity must end. Alexis Tsipras became prime minister of Greece on Monday by vowing to challenge the budget-cutting policies demanded by the European Union and International Monetary Fund in return for a 240 billion euro ($270 billion) rescue plan. 

• Syriza’s ‘Bella Ciao’ Casts Shadow Over Italy Presidential Vote. As Greeks welcome Syriza’s historical victory with the Italian partisan anthem “Bella Ciao”, Italian Premier Matteo Renzi is nervously eying resistance within his own party before a key presidential vote this week. “By gaining a clear lead and moving to form a new government in a short time, Syriza leader Alexis Tsipras is also galvanizing his Italian supporters, including a significant number of Renzi’s opponents within his party”, Francesco Galietti, founder of research firm Policy Sonar in Rome, said in a phone interview.

• Nomura says odds up of Abenomics derailing as tax pledge doubted. Nomura Holdings Inc. says the probability that Prime Minister Shinzo Abe's economic policies will end badly is increasing. The worst-case scenario for Nomura chief credit strategist Toshihiro Uomoto to the end of 2017: the economy contracts in the first half of 2016, Abe delays a sales tax rise for a second time, and the Bank of Japan boosts asset purchases to suppress interest rates, causing the yen to tumble. This month, he raised the probability of these events unfolding to 10 per cent to 20 per cent or more, from about 10 per cent. "Signs are mounting that Japan's fiscal sustainability is beginning to crumble," said Uomoto, ranked Japan's No. 1 credit analyst for the past two years by Nikkei Veritas. 

• UBS Says Wealthy Asians Are Abandoning Australian Dollars. Asia’s wealthy are falling out of love with the Aussie dollar as record-low yields and sustained declines persuade them to look elsewhere, according to UBS Group AG. (UBSG) Many of the bank’s wealthiest clients in the region began to abandon the currency as Australia’s bond yield premium over the U.S. slid and the Federal Reserve discussed raising interest rates, said Simon Smiles, Zurich-based chief investment officer for ultra-high-net-worth individuals. The 10-year yield is 74 basis points above that of the U.S., down from 130 a year ago. 

• Rising Vacancies and Default Auctions Show Singapore Property Is on the Decline. The bargain hunters who stuffed themselves into the 50-seat conference room are another sign of the decline of Singapore’s housing market. After five years of price gains, values are falling and defaults are rising following government measures to curb lending and a decline in the number of foreign buyers. Banks auctioned 118 repossessed homes last year, about 10 times the number in 2013, said Mok Sze Sze, head of Singapore auctions at broker Jones Lang LaSalle Inc.

• Asian Stocks Head for Two-Month High on Yen, Europe Optimism. Asian stocks rose, poised for a two-month high, as a weaker yen buoyed Japanese shares amid optimism the actions of Greece’s new government won’t force the nation to leave the euro currency bloc. The MSCI Asia Pacific Index (MXAP) advanced 0.4 percent to 141.24 as of 9:03 a.m. in Tokyo. 

• Oil Trades Near 6-Year Low as OPEC Fails to Turn Focus From Glut. Oil traded near the lowest level in almost six years as OPEC’s warning that prices may surge without new investment in production failed to shift the market’s focus from more immediate signs of a global supply glut.

• Nickel Leads Most Metals Lower as China Industrial Profits Slow. Most base metals declined as data showed industrial profits grew at the slowest pace on record last year in China, adding to signs that demand in the largest consumer may contract. Nickel lost as much as 1.4 percent while copper dropped as much as 0.5 percent. Industrial profits in 2014 grew at 3.3 percent, the weakest in records going back to 2000, according to data released by the National Bureau of Statistics in Beijing on Tuesday. The figure contracted for a third month in December, falling 8 percent. China’s industrial profits are “just another bit of bad news on top of other bad news,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Because the outlook is so gloomy for some time, it’s just reinforcing the downward movement.” 

• Goldman Sachs’s Cohn Sees Oil Falling to $30 in Extended Slump. Oil prices will probably continue to decline and could reach as low as $30 a barrel, according to Gary Cohn, president of Goldman Sachs Group Inc. “We’re probably in the lower, longer view,” Cohn, a former oil trader, said Monday in an interview with CNBC.

• U.S. Says Russian Spy Ring Sought NYSE, Sanction Secrets. Three Russians charged by the U.S. with espionage allegedly sought secrets tied to the New York Stock Exchange and U.S. economic sanctions on Russia, even while one bemoaned his tedious job’s lack of a James Bond flair. The U.S. investigation of the alleged spy ring started within months of the Federal Bureau of Investigation’s June 2010 arrest of 10 Russian agents dubbed the “Illegals,” who had been on “deep cover” assignments, some living in the U.S. for as long as a decade. That year, each of the 10 pleaded guilty to conspiring to act as an unregistered agent of a foreign government, after which they were returned to Russia in a prisoner exchange.

• Microsoft(MSFT) Business-Software License Sales Miss Estimates. Microsoft Corp. (MSFT)’s software-license sales to businesses fell short of analysts’ estimates in the fiscal second quarter, hurt by weak sales in Japan and China. Commercial-licensing revenue fell to $10.7 billion in the period that ended Dec. 31, the world’s largest software maker said Monday in a statement. Analysts on average had projected $10.9 billion, based on a survey conducted by Bloomberg. Unearned revenue, a measure of future sales, was $21.2 billion, compared with estimates of $21.8 billion. The stock slipped 3 percent in extended trading. 

• United Technologies(UTX) Cites Surprise Dollar Gain as Forecast Pared. A surging U.S. dollar against the euro and other currencies surprised United Technologies Corp. (UTX) and forced a cut in the company’s annual profit forecast just weeks after it was given to investors. United Technologies slid 2.1 percent to $116.20 at 5:04 p.m. in New York after the close of regular trading. The euro climbed 0.3 percent to $1.1238 at 5 p.m. in New York after sliding to $1.1098, the weakest level since September 2003. 

• Here's What the Blizzard Is Shutting Down.

• Blizzard: What You Need to Know. (video)

Wall Street Journal:

• Google(GOOG) to Announce Fiber Expansion In Four Cities. Google to Offer Fiber in Atlanta, Charlotte, Raleigh-Durham, N.C., Nashville.

MarketWatch.com:

• U.S. spies on millions of cars. DEA uses license-plate readers to build database for federal, local authorities. The Justice Department has been building a national database to track in real time the movement of vehicles around the U.S., a secret domestic intelligence-gathering program that scans and stores hundreds of millions of records about motorists, according to current and former officials and government documents.

Zero Hedge:

• Why Oil Prices Will Be "Lower For Longer" In 3 Simple Charts. (graph)

• On The Prevalence Of Group Think in The Mainstream Financial Media.

• Obama's Fed Nominee, Who Was Busted And Quit For "Impropriety", Reports Up To $40 Million In Assets.

• Citi(C) Warns "Central Banks' Grip On The World Economy Is Waning".

• "Greece Is Bear Stearns. Italy Is Lehman" - 7 Quick Points On Europe.

• When Hope Triumphs Over Reason: Energy Sector Stocks Most Expensive Since 2002. (graph)

• Seven Decades Of Data Prove This Is A Really Dumb Idea... (But They'll Do It Anyway). 

• Chinese Yuan Strengthens As Industrial Profits Plunge By Most On Record. (graph)

Business Insider:

• Global Interest Rates Are Deceiving Us.

• Brazilian Oil Giant Petrobras May Take A Charge Equal To Almost Half Its Market Value.

• Microsoft(MSFT) Gave All Kinds Of Gloomy Warnings During Today's Earnings Call.

NY Times:

• Investment Riches Built on Auto Loans to Poor. Across the country, there is a booming business in lending to the working poor — those Americans with impaired credit who need cars to get to work. But this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars. An influx of investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution.

Reuters:

• Texas Instruments'(TXN) profit rises, helped by auto industry. Texas Instruments Inc reported higher fourth-quarter results on Monday and gave a revenue outlook for the current quarter in line with expectations, helped by growing demand for chips from the auto industry.

Telegraph:

• Greek coalition braces for debt showdown as Germany rattles sabre. Markets have yet to grasp that the rift between EU creditors and Greece's firebrand premier Alexis Tspiras is 'so large as to be unbridgeable', warns Nomura. 

• Hold the celebrations: Greece is still doomed. The new prime minister must capitulate to the Troika or exit the eurozone. Either way, he’s toast politically.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 108.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 69.75 +1.0 basis point.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MMM)/1.80

• (AKS)/.08

• (AAL)/1.51

• (BMY)/.41

• (CAT)/1.57

• (CIT)/.89

• (COH)/.66

•  (GLW)/.38

• (DHR)/1.03

• (DD)/.71

• (FCX)/.34

• (ITW)/1.13

• (LXK)/1.15

• (LMT)/2.85

• (NUE)/.56

• (OSK)/.25

• (PH)/1.55

• (AMGN)/2.05

• (AAPL)/2.59

• (T)/.60

• (BXP)/1.26

• (EA)/.92

• (ILMN)/.78

• (JNPR)/.31

• (SYK)/1.44

• (X)/.80

• (VMW)/1.07

• (WDC)/2.11

• (YHOO)/.29

Economic Releases
8:30 am EST

• Durable Goods Orders for December are estimated to rise +.4% versus a -.7% decline in November.

• Durables Ex Transports for December are estimated to rise +.6% versus a -.4% decline in November.

• Cap Goods Orders Non-Defense Ex Air for December are estimated to rise +.9% versus unch. in November.

9:00 am EST

• The S&P/CS 20 City MoM SA for November is estimated to rise +.65% versus a +.76% gain in October.

9:45 am EST

• The Preliminary Markit US Services PMI for January is estimated to rise to 53.8 versus 53.3 in December.

10:00 am EST

• New Home Sales for December are estimated to rise to 450K versus 438K in November.

• The Consumer Confidence Index for January is estimated to rise to 95.5 versus 92.6 in December.

• The Richmond Fed Manufacturing Index for January is estimated to fall to 5.0 versus 7.0 in December.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Consumer Price Index, US weekly retail sales reports and the (CRZO) analyst conference 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 lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Reversing Slightly Higher into Final Hour on Central Bank Hopes, Yen Weakness, Short-Covering, Gaming/Hospital Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.0 -3.96%

• Euro/Yen Carry Return Index 139.32 +1.02%

• Emerging Markets Currency Volatility(VXY) 10.28 -3.38%

• S&P 500 Implied Correlation 65.22 +.38%

• ISE Sentiment Index 68.0 +9.68%

• Total Put/Call .89 -29.37%

• NYSE Arms .83 -48.96% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.22 -2.28%
• America Energy Sector High-Yield CDS Index 725.0 -.75%

• European Financial Sector CDS Index 57.46 -.70%

• Western Europe Sovereign Debt CDS Index 23.58 +1.55%
• Asia Pacific Sovereign Debt CDS Index 67.99 +1.48%

• Emerging Market CDS Index 391.37 +.79%

• iBoxx RMB China Corporates High Yield Index 111.78 +.02%
• 2-Year Swap Spread 25.25 unch.

• TED Spread 24.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% -1.0 basis point

• Yield Curve 131.0 unch.

• China Import Iron Ore Spot $63.54/Metric Tonne -4.34%

• Citi US Economic Surprise Index -3.70 -2.2 points
• Citi Eurozone Economic Surprise Index -.4 +.1 point

• Citi Emerging Markets Economic Surprise Index -10.50 -.2 point

• 10-Year TIPS Spread 1.61 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +247 open in Japan

• DAX Futures: Indicating +29 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Ukrainians Direct Fury at Russia as Mariupol Victims Mourned. Ukrainians gathered to mourn 30 civilians killed by rockets in Mariupol, blaming Russia after the deadliest attack yet on the strategic port city, as fighting between government forces and separatists spread. As President Petro Poroshenko called a day of mourning, dozens congregated Sunday to light candles on Kiev’s Independence Square, the area known as Maidan that was the epicenter of the revolt that overthrew the government last year. In the Black Sea city of Odessa and in Kharkiv, near the Russian border, people gathered at the Russian consulate.

• EU Renews Push for Russia Sanctions as Clashes Sweep Ukraine. European Union nations edged closer to tightening sanctions against Russia as fighting between government troops and rebels consumed the front line in eastern Ukraine in the deadliest escalation since a September truce. The EU will add more individuals this week to a list of those facing visa bans and asset freezes over Russia’s involvement in the conflict, Latvian President Andris Berzins, whose country holds the 28-nation bloc’s rotating presidency, said in an interview Monday. The recent events in Ukraine are “more than worrying,” French Foreign Minister Laurent Fabius said, with his German counterpart Frank-Walter Steinmeier warning that more attacks would prompt an EU response.

• Russia Credit Rating Cut to Junk by S&P First Time in Decade. Russia’s credit rating was cut to junk by Standard & Poor’s, putting it below investment grade for the first time in a decade. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement. The grade, which is on par with Bulgaria and Indonesia, has a negative outlook. The world’s biggest energy exporter is on the brink of a recession after oil prices fell to the lowest since 2009 and the U.S. and its allies imposed sanctions over President Vladimir Putin’s actions in Ukraine. The penalties have locked Russian corporate borrowers out of international debt markets and curbed investor appetite for the ruble, stocks and bonds. “Russia’s monetary policy flexibility has become more limited and its economic growth prospects have weakened,” S&P said in a statement. “We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy.”

• Tsipras Win Draws French Congratulations, German Threat. France’s Francois Hollande congratulated Greek Prime Minister-elect Alexis Tsipras on his election victory while urging a new government to stay the reform course, as a top German official threatened a cut-off in aid. Hollande stressed Greco-French “friendship,” even as he called on Tsipras’s new administration to adhere to “growth and stability” in the euro area, according to a government statement in Paris late Sunday. While Chancellor Angela Merkel’s government didn’t comment on Tsipras, one of her top lieutenants said Germany could scrap financial assistance if a new anti-austerity Syriza government veers off course. 

• Spain Deflation Risks Mount as Producer Prices Drop Annual 3.7%. Spanish producer prices plunged the most in more than five years last month, adding to concerns that the economy risks falling into a deflationary spiral. Prices of goods leaving factories, refineries and mines dropped 3.7 percent in December from a year earlier, the National Statistics Institute in Madrid said today. Economists forecast a fall of 3.5 percent, according to a Bloomberg News survey. Prices fell 1.1 percent from the previous month.

• Boko Haram’s Attack on Nigerian State Capital Leaves 65 Dead. At least 65 people were killed in an attack Sunday by Islamist militants on Maiduguri, the capital of the northeastern Nigerian state of Borno, a local militia member said. Armed forces killed 56 militants, while nine soldiers died during the clashes as the military and local vigilante groups fended off an attempt by Boko Haram to capture Maiduguri, Hassan Ibrahim said by phone from the city. The assault was the first major fighting in the state capital since an attack on an army detention center in March. 

• European Stocks Extend Seven-Year High on ECB After Greek Vote. European stocks rose for an eighth day amid optimism about central-bank stimulus, while Greek shares dropped as opposition party Syriza won the Sunday election. The Stoxx Europe 600 Index advanced 0.6 percent to 372.39 at the close of trading in London, after earlier losing as much as 0.5 percent.

• Iron Ore Extends Rout as China Slows, Banks Reduce Forecasts. Iron ore retreated to the lowest level in more than five years as a slowdown in China hurt the outlook for demand in the world’s biggest user while the largest mining companies add to supply, boosting a surplus. Ore with 62 percent content delivered to Qingdao, China, tumbled 4.3 percent to $63.54 a dry metric ton, according to data by Metal Bulletin Ltd. That’s the lowest price on record going back to May 2009, and was the biggest one-day fall since Nov. 18. The commodity is 11 percent lower this year.

• Fed to Raise Rates Midyear Even With Low Inflation, Survey Shows.

• Cliffs(CLF) Scraps Dividend to Help Pay Down Debt. Cliffs Natural Resources Inc. (CLF), the largest U.S. iron-ore producer, will stop paying a dividend as it tries to cut its debt amid a slump in the price of the steelmaking raw material. 

Wall Street Journal:

• Medicare to Rework Billions in Payments. HHS Secretary Burwell Wants 50% of Payments Based on Performance by End of 2018. The Obama administration on Monday set an ambitious goal to rework hundreds of billions of dollars in Medicare payments to doctors and hospitals in an effort to reduce waste and make older Americans healthier.

• European Regulators Pressure Big Banks to Increase Capital. Banks Encouraged to Raise Capital Well Above Formal Regulatory Limits. European regulators are turning up the pressure on large banks to further strengthen their balance sheets amid nagging concerns about Europe’s financial and economic health.

MarketWatch.com:

• Return of the 3% down payment. It is getting easier for some buyers to land a house with less money up front. More lenders are lowering down-payment requirements, allowing borrowers to commit 3%—or even less—of a home’s purchase price to get a mortgage. Many had been requiring down payments of at least 20% since the recession began.

CNBC:

• Live: 'Historic' Snowstorm Bears Down on Northeast.

ZeroHedge:

• Greece's New Leader Sends Germany A Loud Message With His First Act. Tsipras's first meeting with a foreign ambassador since being elected Greek PM was with Russia's Andrey Maslov.

• When A Soaring Dollar "Reflects Loss Of Investor Confidence And Is Potentially Devastating".

• 2 Foot "Quad-Copter" Crashed On White House Grounds.

• "Unambiguously Good"? Dallas Fed Collapses To 20-Month Lows As Orders Plunge. (graph)

• "Leverage Mismatches" - Why Q-ECB May Not Be A Favorable Development.

• Tracking Juno: New York Prepares For One Of Top-5 Snow Storms In History; 50% Of Flights Cancelled.

• Syriza Forms Coalition Government With Anti-Bailout Independent Greeks: What Happens Next.

• The Federal Reserve Has Declared The Winner In The Generational Financial War. (graph)

• US Busts Alleged Russian Spy Ring In Manhattan.

• Saxo Bank: The Syriza Victory Is A Disaster For Europe.

Business Insider: 

• IBM(IBM): Layoffs Are Coming, But Nowhere Close To 100,000.

• HEDGE FUND MANAGER ODEY WARNS: We've Entered A Downturn That Will Be Remembered In 100 Years.

• China Is Shutting Out Western Thinking.

• Putin: Ukraine's Army Is A NATO Proxy Aimed At 'Containing Russia'.

• CNN Says High-Tech Swinger's Parties Are All The Rage In Silicon Valley.

• The Oil Crash Could Trigger Billions In UK Bank Losses.

Reuters:

• Shanghai Plans Stress Test at Banks Over Property Loans. Banks in Shanghai are asked to conduct stress texts over their property loans, citing notice issued by China Banking Regulatory Commission's Shanghai office. The city's banking regulator also asked for continued monitoring over risks stemming from loans borrowed by major property companies outside Shanghai, the report says.

• Russian rouble weakens sharply after S&P downgrade. Russia's rouble weakened sharply late on Monday to trade around 5 percent lower against the U.S. dollar after ratings agency S&P downgraded Russia's sovereign credit rating to below investment grade. The rouble was trading at 67.56 at 1824 GMT, around 5 percent weaker than the previous close on the Moscow Exchange.

• Weak retail business in Europe hits Seagate revenue. Hard-drive maker Seagate Technology Plc's revenue forecast for the current quarter fell well short of analyst estimates, largely due to weakness in Europe, sending the company's shares down as much as 12 percent.

• Mega-funds start to beat retreat from emerging markets. Big pension, insurance and sovereign funds that kept faith with emerging markets during the massive selloffs of 2013 and 2014 may be starting to waver, potentially depriving the sector of a key source of support.

• EMERGING MARKETS-Brazil stocks drop on growth, inflation, energy worries.

Financial Times:

• Athens and creditors dig in on Greek debt. Greece and its international creditors dug in on opposite sides of Europe’s struggle over debt, austerity and economic reform on Monday as Alexis Tsipras, leader of the radical leftwing Syriza party, was sworn in as the new prime minister in Athens. Mr Tsipras dismayed EU governments that oppose extensive debt relief for Greece by moving swiftly to form a coalition with the Independent Greeks, a small, rightwing party that is as fiercely opposed as Syriza to the strict conditions attached to the nation’s €245bn bailout.

Telegraph:

• No debt forgiveness for Greece, say eurozone finance bosses. The eurozone has ruled out debt forgiveness for Greece and warned Alexis Tsipras that his anti-austerity coalition government must honour all past agreements with international creditors.

Bild:

• Merkel Ally Friedrich Says Germany May Scrap Greek Aid. Hans-Peter Friedrich, deputy caucus leader for Merkel's Christian Democratic-led bloc in lower house of parliament, warns Germany may scrap debt assistance to Greece. "The Greeks have the right to vote for whom they want," Friedrich tells Bild in interview. "We have the right to no longer finance Greek debt." "The Greeks now must take responsibility and cannot burden German taxpayers," Friedrich says.

Marbridge Daily:

• Less Than 60% of Online Goods in China Are Genuine Products. China's State Administration for Industry and Commerce (SAIC) has tested 92 batches of products sold online in the second half of 2014 and found that only 54 were genuine articles, equating to 58.7%. The percentage of genuine items on Alibaba Group's (NYSE: BABA) C2C e-commerce site Taobao was the lowest at 37.25%.