Stocks Falling Substantially into Final Hour on Earnings Outlook Worries, Less Dovish Than Expected FOMC Statement, US High-Yield Debt Angst, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 22.76 +1.16%

• Euro/Yen Carry Return Index 135.24 +.55%

• Emerging Markets Currency Volatility(VXY) 11.86 +.51%

• S&P 500 Implied Correlation 65.0 +3.39%

• ISE Sentiment Index 143.0 -2.05%

• Total Put/Call .97 +11.49%

• NYSE Arms .60 +11.47% 

Credit Investor Angst:

• North American Investment Grade CDS Index 104.93 +.23%

• America Energy Sector High-Yield CDS Index 1,851.0 +2.28%

• European Financial Sector CDS Index 87.57 -1.46%

• Western Europe Sovereign Debt CDS Index 19.57 -2.93%

• Asia Pacific Sovereign Debt CDS Index 73.77 -.24%

• Emerging Market CDS Index 377.08 -.88%
  

• iBoxx Offshore RMB China Corporate High Yield Index 122.08 -.01%

• 2-Year Swap Spread 7.0 +.5 basis point

• TED Spread 31.0 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -22.0 -.75 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.31 unch.
• 3-Month T-Bill Yield .32% +1.0 basis point

• Yield Curve 117.0 +1.0 basis point

• China Import Iron Ore Spot $42.43/Metric Tonne +3.29%

• Citi US Economic Surprise Index -33.3 +6.1 points

• Citi Eurozone Economic Surprise Index -17.30 -1.7 points

• Citi Emerging Markets Economic Surprise Index -7.4 -.5 point

• 10-Year TIPS Spread 1.40% +4.0 basis points
• 21.1% chance of Fed rate hike at March 16 meeting, 27.2% chance at April 27 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -64 open in Japan 
• China A50 Futures: Indicating +51 open in China

• DAX Futures: Indicating -142 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• China Stocks Fall to 13-Month Low After Industrial Profits Slide. China’s stocks fell to a 13-month low as slumping industrial companies’ profits increased concern the economic slowdown is deepening. The Shanghai Composite Index dropped 0.5 percent to 2,735.56 at the close, extending Tuesday’s 6.4 percent plunge. Airlines and power producers led declines after industrial profits slumped 4.7 percent last month and analysts said a weaker yuan could further hurt earnings of companies with dollar debt. The benchmark gauge pared a loss of as much as 4.1 percent after PetroChina Co., long considered a favorite holding of state-linked rescue funds, jumped the most in three weeks.
• China's $1 Trillion Money Exodus Isn't About Capital Controls. (video) Last year, Chinese policy makers watched $1 trillion in capital head for the exits. Now, the question on the minds of global investors is what exactly will President Xi Jinping’s economic team do about it. One option is to build a wall around the $10 trillion-plus economy with new and comprehensive capital controls. It’s the economic equivalent of breaking the glass and pulling the alarm--and some serious people are advocating it. One is Bank of Japan Governor Haruhiko Kuroda, who turned heads at the talking salons of Davos last week when he urged China to impose capital controls to stem the flow of cash leaving. 
• The Conference Board's New China GDP Figures Suggest 'Hard Landing' Happened Already. (video) An alternate estimate of economic growth. "This year’s Global Economic Outlook uses an alternate series of [gross domestic product] estimates for China, which adjusts for overstated official Chinese data.
• China Swaps at Four-Week High as Odds of Reserve-Ratio Cut Fade.
• PBOC Said to Ask China Banks to Suspend Offshore Yuan Loans. China’s central bank gave guidance two weeks ago to some Chinese banks in Hong Kong to suspend offshore yuan lending to curb short selling and tighten liquidity, said people with knowledge of the matter. The People’s Bank of China told banks including BOC Hong Kong (Holdings) Ltd. and Industrial & Commercial Bank of China (Asia) on Jan. 11 to curb lending unless necessary, said the people, who asked not to be identified as the instructions weren’t public. The central bank hasn’t issued new guidance since then, they said.
• China Resists Kerry Appeal for Tougher North Korea Sanctions. Secretary of State John Kerry failed to secure China’s support for tougher sanctions against North Korea in the wake of its fourth nuclear bomb test earlier this month, with the two sides agreeing only to pursue a new UN Security Council resolution. Kerry and Chinese Foreign Minister Wang Yi announced the commitment Wednesday after meeting in Beijing to discuss a stronger response to Kim Jong Un’s nuclear bomb test earlier this month. While the U.S. is seeking measures like bans on oil exports to China’s neighbor and imports of North Korean mineral resources, China is emphasizing the importance of returning to the negotiating table.
• Aberdeen Sees Sovereign Assets Shrink $19 Billion in Two Years. Aberdeen Asset Management Plc has seen sovereign wealth-fund assets shrink by about 13 billion pounds ($19 billion) since a peak in 2013 as clients from oil-dependent countries cashed out and markets slumped. Chief Executive Officer Martin Gilbert said SWF’s now represent about 2.5 percent, or 7 billion pounds, of Aberdeen’s total assets under management. That’s down from 10 percent two years ago. Aberdeen rose Wednesday after the company said outflows slowed in the first quarter and more cost cuts were announced. 
• European Investment-Bank Overhaul to Wipe Out Profits, Citi Says. Europe’s investment banks will probably see profit wiped out by restructuring costs in the fourth quarter as they make changes started by their U.S. competitors years earlier, according to Citigroup Inc. Deutsche Bank AG, Credit Suisse Group AG and UBS Group AG will post losses for the three months through December, while Barclays Plc will be “broadly break-even,” Citigroup’s Andrew Coombs and Nicholas Herman wrote in a report on Wednesday.
• Europe Bank Rout Erases $434 Billion, Twice Greek Economy: Chart. The plunge in European bank stocks over the past six months has wiped out about 400 billion euros ($434 billion) in market value, an amount that’s more than twice the annual economic output of Greece at current prices. The STOXX Europe 600 Banks Index, grouping 46 lenders, dropped twice as much as the region’s benchmark share index since late July. Banking stocks have fallen 14 percent in January alone, heading for their worst monthly performance since the depths of Europe’s sovereign-debt crisis in 2011. Deutsche Bank AG and Standard Chartered Plc are each down more than 40 percent since July.
• Italy, EU Reach Bad-Debt Deal as Bank Shares Extend Decline. Italy and the European Commission agreed on a plan to help banks offload bad debts, ending months of negotiations on how to ease the burden on the nation’s lenders while staying on the right side of European rules. Banks will be able to securitize bad loans, with senior debt tranches benefiting from a government guarantee priced at market rates, the Italian Treasury said Wednesday. The mechanism to remove soured assets will help lenders clean up their balance sheets and spur lending, the commission had said Tuesday. Italian bank shares reversed early gains on Wednesday on concern the plan may not be enough, after swinging wildly for more than a week on worries that an agreement wouldn’t be reached at all. Bad loans at the nation’s banks, which have been hit by record-low interest rates and a struggling economy, reached a high of 201 billion euros ($217 billion) in November, while the doubtful loans the Italian five largest banks haven’t provisioned for will exceed 120 billion euros. “The Italian version of a bad bank is very different from government-funded bad banks set up in other EU countries, and as such is likely to be a less powerful tool to clean up banks’ balance sheets,” a Citigroup Inc. team including Giada Giani and Guillaume Menuet wrote in a report Wednesday. “Its effectiveness remains to be ascertained.”
• Europe Faces Another Million Refugees This Year, UN Report Says. As many as 1 million people from Africa, the Middle East and Asia will seek refuge in Europe this year, according to a report by global migration agencies, a number that nears levels seen last year in the continent’s worst migration crisis since World War II.
• Europe Shares Rise in Late Trade as Oil Boosts Energy Companies. European stocks erased declines to advance in the final minutes of trading as oil rebounded and investors assessed value after some disappointing earnings reports. A measure of energy companies recovered in afternoon trade as oil rose after data showed stockpiles at the biggest U.S. storage hub dropped. Royal Dutch Shell Plc added 2.9 percent after winning shareholder approval to buy BG Group Plc, which gained 3.5 percent. BASF SE lost 1.8 percent after the world’s largest chemical maker said it will book a 600-million euro ($652 million) charge in the fourth quarter because of lower oil and gas prices. The Stoxx Europe 600 Index advanced 0.3 percent to 340.24 at the close of trading, erasing losses of as much as 1 percent.
• Commodities Junk Faces More Pain Amid Contagion Threat, UBS Says. A prolonged slump in oil prices promises more pain for commodities-related debt and threatens to spread to other parts of the leveraged-finance market, according to UBS Group AG. Energy bonds have borne the brunt of crude’s plunge to a 12-year low, falling 10 percent this year after a 24 percent drop last year. With no end in sight to the oil slump, the market may not be adequately pricing in defaults or compensating investors for mark-to-market and liquidity risks for lower-rated junk companies, UBS strategists led by Matthew Mish wrote in a note Wednesday. "Given the significant widening in commodity spreads, is it the case that the market has largely priced in the risk? Not necessarily," Mish said in a phone interview. "The linkage between commodity spreads and the underlying physical commodity is still very strong. Lower oil will trigger more stress and wider spreads." The premium investors demand to hold junk energy bonds widened to a record 19.3 percent this month, compared with a five-year average of 7.6 percent, Bank of America Merrill Lynch indexes show.
• BlackRock's(BLK) Fink Says 400 Energy Firms May Not Survive Cheap Oil. Laurence D. Fink, chairman of BlackRock Inc., the world’s largest money manager, said as many as 400 energy companies may not survive because oil prices are not high enough for them to meet their debt obligations. “Carbons are going to be cheaper for longer,” Fink said in a presentation to the New Jersey Pension Investment Council in Trenton today. He did not make a forecast for oil prices or name specific companies. Crude is down about 15 percent this year as volatility in global markets adds to concern over brimming U.S. stockpiles and the outlook for increased exports from Iran after the removal of international sanctions. Independent American oil explorers are forecast to report 2015 losses totaling almost $14 billion amid the price collapse, according to data compiled by Bloomberg. 
• Fed Leaves Rates Unchanged; Watching Global Developments. (video) Federal Reserve officials left interest rates unchanged and said they still expect to raise borrowing costs at a “gradual” pace while watching to see how the global economy and markets impact the U.S. outlook. The Federal Open Market Committee is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the central bank said in a statement Wednesday following a two-day meeting in Washington. The Fed omitted a line from the previous statement in December.
• Goldman's Former Head of Junk Bond Trading Has Some Choice Words About the Credit Market. The unwinding of the "efficient capital structure" beckons. It may feel as if bond bears are everywhere these days, but for Jeff Bahl, former head of U.S. high-yield credit trading at Goldman Sachs and now a portfolio manager at Bahl & Gaynor, there aren't enough of ’em. What follows is a "while history does not repeat, it certainly rhymes"-style argument applied to the high-yield debt market, which has jumped from about $944 billion outstanding back in 2008 to $1.8 trillion currently. And while Bahl isn't predicting an "end of times"-style wave of corporate defaults, he is drawing on his two decades of bond trading experience to call for a turn in the credit cycle that will spur deleveraging.
• The Big Bank Long Has Turned into the Big Bank Short. Remember how investors piled into financial stocks betting higher interest rates would stoke an earnings renaissance? A month later, that big long is a big short. The Standard & Poor’s 500 Financials Index has tumbled 11 percent in 2016, putting it on track for its worst month in more than four years. The group -- which includes Berkshire Hathaway Inc., Wells Fargo & Co. and 86 other companies -- is neck-and-neck with commodity stocks for the biggest slide among 10 industries since Federal Reserve policy makers met Dec. 16. The financials index was little changed at 9:44 a.m. in New York. 
• Clinton, Sanders Would Bypass Congress to Tax the Rich. Most of the proposals that Hillary Clinton and Bernie Sanders have pitched for taxing the rich won’t go anywhere if Republicans keep control of the House of Representatives, as expected. But spokesmen for both of the leading candidates for the Democratic presidential nomination said this week that they could take executive action, bypassing Congress, to go after a shorter list: the carried-interest tax advantage that investment-fund managers receive, corporate inversions that companies use to move their tax addresses offshore and -- in Sanders’s case, at least -- a few other parts of the tax code that benefit high-income taxpayers.
• Boeing(BA) Plunges After Weak 2016 Forecast Fans Slowdown Concerns. Boeing Co. fell the most in five months after predicting weaker profit and fewer jetliner deliveries than analysts expected, stoking concerns that airlines’ appetite for new planes is waning amid global economic turmoil. The company was the worst performer among the 30 members of the Dow Jones Industrial Average even though its fourth-quarter profit exceeded estimates by a wide margin. The stock plunged 9.5 percent to $115.87 at 10:14 a.m. in New York after earlier dropping as much as 10 percent, its steepest intraday decline since August.
• Study Says Sarao May Not Have Been Responsible for Flash Crash. Navinder Singh Sarao, dubbed the Hound of Hounslow by newspapers after his arrest for allegedly manipulating markets, has a few academics on his side as he goes back to court next week. Sarao may not have had a material, or even any, impact on the bout of equity market volatility in May 2010 that later became known as the flash crash, according to a draft research report by University of California, Santa Cruz and Stanford University professors dated Jan. 25. The study, which has yet to be formally released because the authors are still soliciting feedback, claims to be the first to analyze the entire order book on a millisecond level.

Zero Hedge: 

• Fed Back-Pedals Hawkishness, Hints At Policy Error.
• Former House Majority Leader Claims FBI Is "Ready To Indict" Hillary Clinton.
• US Economy: On A Knife's Edge. (graph)
• Refugee Murders 22-Year-Old Swedish Woman In Knife Attack.
• Stocks Storm Green, Oil Surges After Russia Says Will Discuss "Possible Production Cuts With OPEC". (graph)
• The Illusion Of Safety: Index Funds Are Not Low-Risk.
• US Crude Inventories Are The Highest Since The Great Depression. (graph)
• Oil Oscillates As Inventories Surge Most In 9 Months And Demand Plunges. (graph)
• Manufacturing Depression Enters Uncharted Territory: Caterpillar(CAT) Retail Sales Have Never Been Worse. (graph)
• New Home Sales Spike To 8 Year Highs, Prices Tumble To 7-Month Lows. (graph)
• In Historic First, Massachusetts Attorney General Warns Gilead(GILD) To Lower Cost Of Hep C Drug Or Face Lawsuit. (graph)

Business Insider:

• Fiat Chrysler's CEO just issued a dire warning for automakers.
• Apple(AAPL) is trying to change its story, and it will not work.

Reuters:

• Exclusive: White House dropped $10 million claim in Iran prisoner deal. Nader Modanlo was facing five more years in federal prison when he got an extraordinary offer: U.S. President Barack Obama was ready to commute his sentence as part of this month's historic and then still-secret prisoner swap with Iran. He said no. To sweeten the deal, the U.S. administration then dropped a claim against the Iran-born aerospace engineer for $10 million that a Maryland jury found he had taken as an illegal payment from Iran, according to interviews with Modanlo, lawyers involved and U.S. officials with knowledge of the matter.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.8%

Sector Underperformers:

• 1) Education -5.9% 2) Defense -2.1% 3) Networking -1.6%

Stocks Falling on Unusual Volume:

• TUP, DV, BA, SC, MPG, TXT, MTSI, TSS, GRA, LCI, NXST, VMW, AAPL, BSET, UBNK, CMPR, SPR, BAH, DWA, BEAV, ACAT, LDOS, HXL, QLIK, SHPG, WMB, BAH, SPR and LZB

Stocks With Unusual Put Option Activity:

• 1) XME 2) EWW 3) KBE 4) SNDK 5)AIG

Stocks With Most Negative News Mentions:

• 1) X 2) REGN 3) BBBY 4) WMB 5)BA

Charts:

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

Bull Radar

Style Outperformer: 

• Large-Cap Value +.7% 

Sector Outperformers:

• 1) Oil Service +2.5% 2) Banks +2.2% 3) Hospitals +2.1% 

Stocks Rising on Unusual Volume: 

• CVLT, TEX, HA, CFG, CFR, CLR, BIIB, HES, COF, TCBI, PB, RES and RDN

Stocks With Unusual Call Option Activity: 

• 1) JNPR 2) SWFT 3) MTG 4) UUP 5) BA

Stocks With Most Positive News Mentions: 

• 1) HA 2) FDX 3) PG 4) SYK 5) BIIB

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +11.8% Above 100-Day Average
• 0 Sectors Rising, 10 Sectors Declining
• 41.7% of Issues Advancing, 55.4% Declining
• 16 New 52-Week Highs, 30 New Lows
• 18.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.7%
• Vix 22.9 +1.7%
• Total Put/Call .92 +5.7%
• TRIN/Arms .62 +18.0%

Wednesday Watch

Evening Headlines
Bloomberg:

• China Stocks Extend Rout as Slumping Profits Add to Outflow Risk. China’s stocks resumed a rout after a report showed industrial companies’ profits slumped, adding to concern a deepening economic slowdown will spur capital outflows. The Shanghai Composite Index dropped 0.6 percent to 2,733.88 as of 9:54 a.m., extending bear-market losses to 25 percent since December. Technology and industrial companies led declines. Industrial profits slid 4.7 percent in December from year-earlier levels. The benchmark gauge tumbled 6.4 percent to a 13-month low on Tuesday after data showed outflows hitting an estimated $1 trillion last year and some of the nation’s most accurate forecasters said the index may not bottom until it falls to the 2,500 level. 
• China's Industrial Profits Drop a Seventh Month as Sales Weaken. Profits at industrial companies in China fell for a seventh month, extending a record streak of declines, as demand and sales weakened amid the economic slowdown. Total profits of China’s industrial enterprises fell 4.7 percent in December from a year earlier, the National Bureau of Statistics said Wednesday in Beijing. That compared with a 1.4 percent drop in November and was the third-biggest drop in more than three years, based on previously reported NBS data since 2011. A main reason for the drop was "weak demand, which led to significant deceleration in production and sales," NBS said in a statement with the data. "Significantly lower prices of industrial products exacerbated the drop."
• Why China Stocks May Fall 10% More, Technically Speaking. Market strategists are looking to the psychologically important support level of 2,500 for the Shanghai Composite Index, which closed Tuesday just shy of 2,750. Metrics used by technical analysts point to the vicinity of that same round number.
• China May No Longer Be Apple’s(AAPL) Great Firewall. (video) The iPhone maker is feeling the effects of an economic slowdown in its most important market. China has been one of Apple's most reliable strongholds during its historic stretch of technology dominance. Even when sales began to level out in the U.S., Europe, and Japan, China was a buffer, promising a massive market of newly middle-class customers looking for a high-end, brand-name smartphone. Sales in Greater China grew 84 percent to $58.7 billion in 2015, making it the company's second-biggest market after the U.S. Apple Chief Executive Officer Tim Cook showered the region with praise at the time for its importance to the company's future.
• China Slowdown Hits Consumer Brands as P&G(PG), J&J(JNJ) See Weak Results. Consumer product giants Procter & Gamble Co. and Johnson & Johnson reported slowing sales for some brands in China last quarter, as weakness in the world’s second-largest economy starts to hurt multinationals that have spent years building up their businesses there. P&G Chief Financial Officer Jon Moeller said Tuesday on a conference call that certain brand categories in China are growing 5 percent to 8 percent annually, “somewhat slower than they were two and three years ago.” Likewise, J&J said international sales from businesses such as its baby care and skin lines were hurt by the Chinese slump.
• Consumer Sentiment Slides in Korea to Match Dark Days of MERS. Consumer sentiment in South Korea has dropped back to where it was last year when an outbreak of a deadly respiratory disease scared away foreign tourists and kept local shoppers at home. A key measure of economic confidence from the central bank indicates a rising number of pessimists among Korean consumers as temporary tax cuts and retail sales promotions end while downbeat news about financial markets continues to grab headlines.
• Credit market turmoil crimps bond sales in worst start since 2005. Bond sales by companies worldwide slowed to an 11-year low in January as investors shunned risk amid a meltdown in capital and commodities markets. About $US329 billion ($472 billion) of debt has been issued so far this month, the least for a January since 2005, when $US299 billion of securities were sold, according to data compiled by Bloomberg. That's despite the biggest day ever for bond sales in the US on January 13 when Anheuser-Busch InBev sold $US46 billion of bonds to fund its takeover of SABMiller. The transaction was the second-largest dollar-denominated debt deal on record.
• Hedge Fund Starts in Asia Drop to 14-Year Low in Turbulent Year. Hedge fund launches in Asia dropped to the lowest in 14 years last year as investors’ preference for big funds and rising regulatory costs converged with a turbulent market. The number of hedge funds that opened in Asia dropped to 76 in 2015, according to Singapore-based data provider Eurekahedge Pte, down from 117 in the prior year and the fewest since 2001. The number was less than half of the peak in 2010, when 188 new hedge funds set up operations.
• Asia Stocks Rise While Oil Slips With U.S. Futures; Aussie Gains. Asian stocks rallied, putting a measure of regional equities on course to erase Tuesday’s drop, and high-yielding currencies strengthened. U.S. index futures slipped as oil resumed declines and Apple Inc. forecast its first drop in sales since 2003. Gains by Japan’s carmakers and banks drove the MSCI Asia Pacific Index’s 1.4 percent advance, while Chinese shares slid after a report showed industrial profits dropped last month.
• World Bank Cuts Iron Ore Predictions Through 2020 as Glut Builds. Iron ore prices are likely to post the biggest loss among metals this year as low-cost supply continues to outstrip consumption, according to the World Bank, which cut its forecasts through 2020. Iron ore demand is nearing its peak and prices will average $42 a metric ton in 2016, a drop of 25 percent from $55.80 last year, the Washington-based lender said in its quarterly outlook Tuesday. In comparison, nickel is due to fall by 16 percent and copper by 9 percent, it said. In October, the bank had forecast 2016 iron ore prices at $59.50. It cut its 2017 estimate for iron ore by 28 percent to $44.10 a ton, and predicted that prices will remain below $50 through 2019 before rising to $51 at the end of the decade.
• Bets on Negative U.S. Rates by End-2017 Jump Above 10% Chance. Federal Reserve officials are expecting to raise interest rates this year and next. Options markets show some investors are taking out protection in case rates instead go negative. The implied probability of U.S. interest rates sinking below zero next year has risen above 10 percent, data compiled by Bloomberg show. The move has been driven by a surge in purchases of contracts that pay out if rates are cut below zero by the end of 2017 and may be linked to investors finding a cheaper way to hedge the opposite bet -- that rates will actually rise as the Federal Reserve expects. The negative-rates trades -- created through the use of call options on futures contracts linked to the U.S. dollar London interbank offered rate -- have been placed as bonds have rallied, said Todd Colvin, a senior vice president at Ambrosino Brothers in Chicago.

Wall Street Journal:

•  Dollar’s Rise Poses Risk for Fed Plans. Rising currency can have same impact as rate increase. As Federal Reserve officials prepare to release interest-rate guidance Wednesday, investors are bracing for the dollar to renew its rise against America’s major trading partners and intensify unrest throughout the world’s financial markets. Unlike stocks and bonds, the dollar has had a relatively muted start to 2016, and investors worry that any resumption of its gains could weigh further on global growth.

Barron's: 

• Byron Wien: Here’s Why I’m Not Optimistic for 2016. The Blackstone strategist updates his 10 Surprises note after three weeks of falling stocks and political fireworks.

MarketWatch: 

• U.S. Steel(X) shares fall on wider-than-expected loss. 
• Talk of OPEC oil-producer ‘cease-fire’ met with skepticism.

CNBC:

• Apple(AAPL) begins to see signs of 'softness' in China. (video)

Zero Hedge:

• US, China Stocks Tumble After Industrial Profits Plunge. (graph)
• Inside China's Dying, Abandoned Factories. (pic)
• This Is What "Stress Levels" Looked Like Two Months Before The Last Three Market Crashes. (graph)
• The Four Scariest Charts For Energy Investors. (graph)
• How The Current Sell-Off Stacks Up To All Previous Bear Markets. (graph)
• Why A Former Fed Official Fears A Global Meltdown.
• Crude Plunges After API Reports Biggest Inventory Build Since 1996. (graph)
• AAPL Earnings Beat Despite Missing Sales, iPhone Expectations; US Revenues Decline.
• Gold Up, Stocks Up, Oil Up, Bonds Up, Fed Up. (graph)

Business Insider:

• 'See how many people watch': Donald Trump says he plans to boycott the Fox News debate.
• Big investors are bailing out of stocks.
• Apple(AAPL) CEO Tim Cook: 'We're seeing extreme conditions, unlike anything we've seen before'.
• APPLE(AAPL) DELIVERS DISAPPOINTING OUTLOOK, BLAMES GLOBAL ECONOMY.
• Republicans are worried that their party is on the verge of self-destruction.
• Texas has been crushed by the oil slump, and it could get worse.
• The 'fear trade' is making gold is look like a good investment again.
• It's already about March — Here's what to expect from the Fed's big statement tomorrow.
• Christian pastor released by Iran vividly describes Tehran's executions of political prisoners.
• VMware(VMW) confirms layoffs and CFO departs after earnings beat.
• Fox News issues incredible response to Donald Trump's Twitter poll about going to the Fox debate. In a Tuesday statement to Business Insider, a spokesperson for the network mused about whether global leaders would be fair to a potential President Trump. "We learned from a secret back channel that the Ayatollah and Putin both intend to treat Donald Trump unfairly when they meet with him if he becomes president — a nefarious source tells us that Trump has his own secret plan to replace the Cabinet with his Twitter followers to see if he should even go to those meetings," the Fox spokesperson said. Roger Ailes, the chairman and CEO of Fox, also said in a statement that his network wasn't backing down on Kelly moderating its debate. "Megyn Kelly is an excellent journalist and the entire network stands behind her — she will absolutely be on the debate stage on Thursday night," Ailes said.

Reuters:

• Travel industry faces growing concern over Zika virus. Airlines, hotels and cruise operators serving Latin America and the Caribbean are facing growing concern among travelers spooked by the mosquito-borne Zika virus. 
• Bearish views abound at elite hedge fund conference. Professional money managers gathered at an elite Morgan Stanley investment conference in Palm Beach, Florida this week expressed a range of pessimistic market views, including so-called bearish takes on the energy sector, China, and stocks such as Valeant Pharmaceuticals(VRX) and SolarCity(SCTY).

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 154.50 +.5 basis point.

• Asia Pacific Sovereign CDS Index 74.0 -3.5 basis points.

• Bloomberg Emerging Markets Currency Index 67.32 +.01%.

• S&P 500 futures -.62%.

• NASDAQ 100 futures -.77%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

• (ANTM)/1.17
• (BIIB)/4.08
• (BA)/1.25
• (CLF)/-.31
• (EMC)/.65
• (FCAU)/.33
• (GD)/2.38
• (HES)/-1.45
• (ITW)/1.21
• (NSC)/1.26
• (PGR)/.46
• (ROK)/1.33
• (STJ)/1.01
• (STT)/1.18
• (UTX)/1.52
• (CRUS)/.81
• (CCI)/1.11
• (EBAY)/.50
• (FB)/.68
• (JNPR)/.59
• (KNX)/.32
• (LRCX)/1.42
• (LVS)/.65
• (MCK)/3.13
• (MSTR)/2.40
• (QCOM)/.91
• (SLG)/1.61
• (TXN)/.75
• (TSCO)/.83  
• (URI)/2.33
• (VAR)/.92
• (VRTX)/.16  

Economic Releases

10:00 am EST

• New Home Sales for December are estimated to rise to 500K versus 490K in November.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +4,377,780 barrels versus a +3,979,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +631,110 barrels versus a +4,563,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,922,220 barrels versus a -1,025,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.74% versus a -.6% decline prior.

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25-.5%.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German Consumer Confidence data, New Zealand rate decision, weekly MBA mortgage applications report, $35B 5Y T-Note auction, (KMI) analyst day, (VALE) analyst meeting and the (PGR) Dec. release could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.