Bull Radar

Style Outperformer:

• Small-Cap Value +.69%

Sector Outperformers:

• 1) Gaming +1.39% 2) Gold & Silver +1.17% 3) Homebuilders +1.19%
  

Stocks Rising on Unusual Volume:

• IDCC, TSLA, XRS and ORMP

Stocks With Unusual Call Option Activity:

• 1) SPG 2) MWW 3) UPL 4) CHTP 5) NIHD

Stocks With Most Positive News Mentions:

• 1) BA 2) AAPL 3) PCU 4) AXP 5) FB
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Starbucks(SBUX) to Audi Face China Clampdown on Foreign Firms. As Chinese President Xi Jinping promises the nation’s biggest market opening in two decades, the reality for some of the most successful foreign companies in the country is a raft of probes and laws that curb their operations. This month, after China’s ruling Communist Party promised to make markets “decisive” in shaping the world’s second-largest economy, carmakers Jaguar Land Rover Automotive Plc, Fuji Heavy Industries Ltd. (7270)’s Subaru division and Audi AG became the latest targets when state media accused them of charging “unfair” prices for spare parts.    

• PBOC’s Opacity Leaves Markets Guessing Amid Cash Crunch. China’s second cash crunch this year is revealing some of the risks behind pledges by the nation’s leaders to elevate the role of markets, in a country where policy makers are unaccustomed to detailing their intentions.

• Beijing Warns Against Outdoor Activities on Heavily Polluted Air. Beijing warned the young, elderly and ill among its 20 million inhabitants to stay indoors as air pollution exceeded World Health Organization-recommended levels by more than 10 times today. The concentration of PM2.5, fine air particulates that pose the greatest health risk, was 260 micrograms per cubic meter at 10 a.m. near Tiananmen Square, compared with an average of 188 over the past 24 hours, the Beijing Municipal Environmental Monitoring Center said on its website. The WHO recommends 24-hour exposure to PM2.5 concentrations no higher than 25 micrograms per cubic meter. 

• Singapore Slowdown May Hurt Banks in 2014. (video)

• Most Asian Stocks Climb on U.S. Most Asian stocks gained after data showed the U.S. economic recovery gaining momentum and as Japan’s Nikkei 225 Stock Average topped 16,000 for the first time in six years. Energy shares rose the most among the MSCI Asia Pacific Index sectors, while consumer staples led declines. Mitsubishi Motors Corp. jumped 4.8 percent after the Japanese carmaker raised its operating-profit forecast. Agricultural Bank of China Ltd., the nation’s third-biggest lender, gained 1.3 percent as China’s central bank acted to ease a cash crunch. The MSCI Asia Pacific Index gained 0.1 percent to 139.33 as of 11:57 a.m. in Tokyo, with about two shares rising for each that fell.

• Rebar Rises From Four-Week Low as China Vows to Curb Pollution. Steel reinforcement-bar futures in Shanghai climbed for the first time in nine days after state media reported China would halt new steel plant projects and take stricter measures to curb air pollution. Rebar for May delivery on the Shanghai Futures Exchange rose as much as 0.4 percent to 3,627 yuan ($597) a metric ton, and traded at 3,621 yuan at 10 a.m. local time. The most-active contract yesterday closed at 3,612 yuan a ton, the lowest level since Nov. 21. 

• Rubber in Tokyo Drops to Two-Week Low as China Stockpiles Jump. Rubber futures fell to a two-week low after data showed stockpiles in biggest-consumer China expanded and shipments from Vietnam jumped, raising speculation supply may grow faster than demand. The contract for delivery in May on the Tokyo Commodity Exchange declined as much as 2.8 percent to 275 yen a kilogram ($2,635 a metric ton), the lowest level since Dec. 6, and traded at 276 yen at 10:41 a.m. local time. The drop expanded losses this year to 8.8 percent.

• Fed’s Fisher Says He Argued for $20 Billion Taper to Asset Buys. Federal Reserve Bank of Dallas President Richard Fisher, who will be a voting member of the policy-setting committee next year, said he argued for a $20 billion reduction in the Fed’s monthly bond purchasing pace instead of the $10 billion announced last week. “The market could have digested that,” he said in an interview with Fox Business Network today. The Federal Open Market Committee announced on Dec. 18 that it would dial back its monthly bond purchases to $75 billion from $85 billion on signs of an improved labor market. Fisher has been among the most vocal critics of the so-called quantitative easing program that began in September 2012 and has been calling for an early slowdown to the purchases.

Wall Street Journal: 

• Merkel Hits Wall With Europe Fix. Angela Merkel's Signature Project Is Floundering a Week Into the German Chancellor's Third Term. Angela Merkel's signature project for the next four years—re-engineering the euro zone—is floundering just a week into the German chancellor's third term. Other European governments, wary of Berlin's growing dominance in the region, are blocking a proposal by Ms. Merkel that would grant the European Union's executive arm direct oversight of members' economic policies. The standoff, which is unlikely to be resolved in the short term, leaves the euro zone without a strategy for the far-reaching overhauls that governments in the currency bloc had previously insisted were vital for the euro's survival. 

• Target(TGT) Discusses Breach With State Attorneys. Retailer Updates Officials on Investigation.

Fox News:

• US sending Marines to Africa in preparation for evacuations in South Sudan. The U.S. military is sending Marines and aircraft to the Horn of Africa in anticipation they may be needed to respond to the violence in South Sudan, Fox News confirms.  A senior U.S. Defense official told Fox News that 150 Marines are being moved from Moron, Spain, to Camp Lemonnier in Djibouti, in case the State Department asks for their assistance in evacuating U.S. citizens left in South Sudan.

MarketWatch.com: 

• Tax selling likely to mark start of 2014: Dan Zanger.

CNBC: 

• ‘Rude awakening’ for commodities in 2014: Pro. (video)

• ABA threatens to sue regulators over Volcker Rule. The American Bankers Association said it will file a lawsuit challenging the Volcker Rule unless regulators agree to suspend portions that restrict certain collateralized debt obligations of trust-preferred securities, American Banker reported Monday. 

• As the clock ticks, retail traffic continues slide. Brick-and-mortar retailers saw no signs of relief last week, as store traffic in the final week before Christmas posted the third straight week of double-digit declines, according to the most recent report from ShopperTrak. According to the analytics firm, traffic for the week ended Dec. 22—which included the crucial final weekend before Christmas—was down 21.2 percent year over year. The first two weeks of December saw double-digit decreases, which trailed a 4 percent decline over Black Friday weekend, it said. In-store sales fell 3.1 percent from the same week in 2012, ShopperTrak added.

Zero Hedge: 

• On The 100th Anniversary Of The Federal Reserve Here Are 100 Reasons To Shut It Down Forever.

• China Folds, "Un-Tapers"; But Repo Rates Remain Elevated. (graph)

• China's Liquidity Crisis Worsens As Fed Vs PBOC "Taper" Wars Escalate. (graph)

• Thyroid Cancers Surge Among Fukushima Youths.

• 13 Charts Of 13 Years For Christmas 2013.

• HFT Pays: CEO Of Firm That Accounts For 5% Of US Equity Volume Selling His NY Mansion For $114 Million.

• BofAML: Euro Bears Should Be Salivating.

Business Insider: 

• The Biggest Financial Story In The World Is Playing Out Right Now In China. Patrick Chovanec, chief strategist at Silvercrest Asset Management, told Business Insider in a telephone interview, that China's financial system has "high blood pressure." He said China's interbank lending market is "a petri dish of risk," and that this is the most important financial story this holiday season. Here are some key points from our interview with Chovanec:

Washington Post: 

• Edward Snowden, after months of NSA revelations, says his mission’s accomplished.

The Blaze:

• Blaze Exclusive: Pakistani Terror Group Threatens Deadly Attacks on New York, Washington, D.C. Pakistan’s most dangerous terrorist organization, the Tehreek-e-Taliban (TTP), has promised it will attack New York and Washington, D.C., in an act of revenge with suicide fighters, according to a newly released video obtained by TheBlaze.

Reuters: 

• Exclusive: Assad's secret oil lifeline: Iraqi crude from Egypt. The Syrian government of President Bashar al-Assad has received substantial imports of Iraqi crude oil from an Egyptian port in the last nine months, shipping and payments documents show, part of an under-the-radar trade that has kept his military running despite Western sanctions. Assad's government has been blacklisted by Western powers for its role in the two-and-a-half year civil war, forcing Damascus to rely on strategic ally Iran - itself the target of Western sanctions over its nuclear program - as its main supplier of crude oil.

• NYSE proposes 'kill switch' to help catch trading errors. IntercontinentalExchange Group's NYSE Euronext unit has filed a plan with regulators to offer firms that trade on the New York Stock Exchange a "kill switch" that could cut off trading if preset levels were breached.

Telegraph: 

• IMF says Cyprus support for Troika austerity 'sputtering' as slump drags on. A continuing dispute between the Cypriot government and the central bank is sapping confidence, the IMF has warned.

Japan Daily Press:

• China strongly criticizes Japan on increased military spending plans. China has criticized Japan’s move to boost military spending and accused the country of using regional tensions and disputes as an “excuse” to bolster defense capabilities. This after Prime Minister Shinzo Abe and his cabinet members approved spending of 24.7 trillion yen ($240 billion) from 2014 to 2019, increasing the military budget by 5% over a period of 5 years.

Shanghai Securities News:

• China Central, Western Govt Debt Riskier. China's local government debt in central and western regions has higher risks than in eastern regions, citing Li Yang, vice president at Chinese Academy of Social Sciences.

China Securities Journal:

• BOC Researcher Sees 2014 Liquidity Not Optimistic. China's liquidity outlook in 2014 isn't optimistic, and the central bank should "appropriately" cut banks' reserve requirement ratio 1-2 times, citing Bank of China researcher Wen Bin.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 122.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 103.0 +1.25 basis points. 

• FTSE-100 futures +.07%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
 8:30 am EST

• Durable Goods Orders for November is estimated to rise +2.0% versus a -2.0% decline in October. 

• Durables Ex Transports for November is estimated to rise +.7% versus a -.1% decline in October.

• Cap Goods Orders Non-defense Ex-Air for November is estimated to rise +.7% versus a -1.2% decline in October.

9:00 am EST

• The House Price Index for October is estimated to rise +.5% versus a +.3% gain in September.

10:00 am EST

• New Home Sales for November are estimated to fall to 440K versus 444K in October.

• Richmond Fed Manufacturing Index for December is estimated to fall to 10.0 versus 13.0 in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ economic report, weekly retail sales reports and the weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial 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 Rising into Afternoon on Global Growth Optimism, Investor Performance Angst, Seasonality, Tech/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.19 -4.35%

• Euro/Yen Carry Return Index 148.58 +.11%

• Emerging Markets Currency Volatility(VXY) 9.01 -1.1%

• S&P 500 Implied Correlation 50.93 -1.03%

• ISE Sentiment Index 133.0 -30.73%

• Total Put/Call .64 -13.51%

• NYSE Arms .97 -26.65% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.22 -1.99%

• European Financial Sector CDS Index 85.70 -1.87%

• Western Europe Sovereign Debt CDS Index 60.85 +.85%

• Emerging Market CDS Index 265.20 -.90%

• 2-Year Swap Spread 9.25 +1.25 basis points

• TED Spread 18.5 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -1.75 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .06% +1 basis point

• Yield Curve 254.0 +3.0 basis points

• China Import Iron Ore Spot $131.90/Metric Tonne -.60%
  

• Citi US Economic Surprise Index 44.9 -2.1 points

• Citi Emerging Markets Economic Surprise Index -11.1 +.9 point

• 10-Year TIPS Spread 2.17 +1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +255 open in Japan

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• China Money Rates Surge as Banks Struggle to Meet Demand. China’s benchmark money-market rate climbed for a seventh day and interest-rate swaps increased as banks hoarded cash to meet year-end regulatory requirements. The seven-day repurchase rate, a gauge of funding availability in the banking system, jumped 124 basis points today to 8.84 percent, the highest level since June 20, according to a daily fixing from the National Interbank Funding Center. The rate, which has more than doubled from 4.37 percent in the past week, touched a record 10.77 percent in June.

• China Steps Up Graft Crackdown Targeting Ministers to Chiefs. Chinese authorities are stepping up a crackdown on corruption, including confiscating the passports of some local leaders, in moves that underscore President Xi Jinping’s determination to root out graft. Vice Minister of Public Security Li Dongsheng became the second member of the Communist Party’s central committee to be probed this year for suspected corruption. The capital of southern Guangdong province told 2,014 village chiefs to hand in their passports to prevent corrupt local officials from fleeing abroad, the Guangzhou Daily reported. Targeting those Xi has described as both “tigers and flies” -- cadres at the top and bottom of the power ladder -- may help bolster the party’s image as economic expansion slows and public discontent over corruption increases. 

• Central Bank Chiefs to Weigh Debt Rule Changes Amid Bank Outcry. Central bankers from around the world will meet next month to discuss whether to scale back their plans for a debt limit that banks say will force them to rein in lending. Bank of England Governor Mark Carney has said that central bank and regulatory chiefs will meet in Basel in January “to come to an agreement, an international agreement, on the definition” of the debt-limit rule, known as a leverage ratio. The meeting will take place on Jan. 12, according to three people with knowledge of the plans. Banks such as BNP Paribas SA (BNP), Bank of America Corp. and Citigroup Inc. (C) have called for a rewrite of the draft leverage rule published in June, saying it would adversely affect economic growth and job creation, make it more expensive for governments to sell their debt and give banks incentives to invest in riskier assets. 

• Italy Approves ‘Google(GOOG) Tax’ on Internet Companies. Italy’s Parliament today passed a new tax on web advertising, the so-called “Google tax,” which will require Internet companies to sell ads from locally-registered companies, instead of from units based in havens such as Ireland, Luxembourg and Bermuda. The tax has stirred controversy, with some lawyers saying it probably violates European Union laws regarding non-discrimination over commercial activity and could be subject to legal challenges.

• European Stocks Climb on IMF Outlook. European stocks advanced, posting the biggest four-day rally since April, after the International Monetary Fund said it will raise its U.S. growth outlook. ARM Holdings Plc, which designs chips for Apple Inc. (AAPL)’s iPhones, increased 3.9 percent as the U.S. company struck a deal to sell the smartphone through China Mobile Ltd. Lanxess AG rose 4.4 percent after its chief executive officer said the chemical maker will reach its full-year earnings forecast. Orell Fuessli Holding AG declined 2.2 percent after predicting “clearly negative” earnings for 2013. The Stoxx Europe 600 Index climbed 0.7 percent to 323.40 at the close of trading in London.

• Junk Loans Top ’08 Record as Safeguards Stripped: Credit Markets. “The worst deals are made in the best of times is a phrase we hear often,” Frank Ossino, a money manager in Hartford, Connecticut, who oversees $2.5 billion of loans at Newfleet Asset Management LLC, said in a telephone interview. “While the default environment will remain low, ever more aggressive transactions become the seeds of the next default cycle.”

Wall Street Journal: 

• Margin Debt Hits Yet Another New High. Investors borrowed another record amount against their brokerage accounts in November, as so-called margin debt rose for a sixth straight month. Last month, investors borrowed $423.7 billion against their portfolios, exceeding October’s record of $412.4 billion, according to the New York Stock Exchange. The Big Board’s member brokerage firms report the level of borrowing, known as margin debt, held against client accounts monthly. Margin-debt levels rose 2.7% from the prior month.

MarketWatch:

• When do the markets close on Christmas Eve?

• Obamacare raising health costs for most, poll finds. A survey of 18,000 MarketWatch readers on the impact of health reform.

CNBC:

• Chart of the Day: Obamacare's middle class burden. As the New York Times reported on Saturday, those who just barely qualify for subsidies under the Affordable Care Act pay a small fraction of those who just barely do not qualify. In some cases that difference can be a few hundreds of dollars, but in others — like Polk County, Wisconsin — the gap can be thousands of dollars.

• Fed's Lacker: Expect tapering by $10B per meeting, depending on data. (video)

ZeroHedge:

• US Savings Rate Slides As Personal Incomes Below Expectations; Real Disposable Income Growth Tumbles. (graph)

• How Goldman(GS) Quickly Found The Volcker Rule Loopholes.

• Consumer Confidence Surges Most In Over 4 Years With Conditions At 6-Year Highs. (graph)

• Russia Sends Over 75 Armored Trucks To Syria.

• Stocks "Euphoric" For 6th Straight Week. (graph)

• Chinese Investments In US Commercial Property Soar By 500%.

Business Insider:

• Fewer Stocks Are Driving The Market To All-Time Highs. (graph)

• BYRON WIEN: 'This Chart Worries Me'.

CNN:

• CNN Poll: Health care law support drops to all-time low. Only 35% of those questioned in the poll say they support the health care law, a 5-point drop in less than a month. Sixty-two percent say they oppose the law, up four points from November. Nearly all of the newfound opposition is coming from women.

NYRB:

• The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?

Reuters:

• Italian, Spanish bond yields rise on talk local banks may sell. Spanish and Italian bond yields rose on Monday amid speculation that banks in both countries may reduce their holdings before the European Central Bank reviews their balance sheets next year. 

• Economists raise Brazil 2014 inflation view, cut GDP forecast. (table)

Financial Times:

• Europe banks overexposed to domestic debt. The economic fates of European governments and financial institutions are set to become ever more intertwined next year despite concerns about the rise of a potentially destabilising “sovereign-bank” nexus.

Telegraph:

• China's cash crunch threatens Shadow Banking shock. The credit squeeze in China is no longer a local issue and any misjudgment by the central bank will have global ramifications. 

• Bank of England warning on housing bubble as prices rise. Andrew Bailey says Bank of England is watching the housing market carefully and will not allow a 'free-for-all’ in mortgage provision.

Xinhua:

• Chinese Bankers Pay Close Attention to Local Debt Issues. Chinese bankers are paying close attention to protection of lender's rights and government intervention as local government liabilities come due, citing a survey result from the China Banking Association.

Netease: 

• China Academy Sees Risks From Property Loan, Local Debt. Major risks that China faces in the near term are in property lending, local debt and banks' bad loans, citing a report by the Chinese Academy of Social Sciences. Longer-term risks include overseas assets and corporate debt.

China National Radio:

• China to Halt Some New Projects to Curb Overcapacity. China will ban new construction projects in the steel, electrolytic aluminum and cement industries in the next few years to curb overcapacity, citing Miao Wei, Minister of Industry and Information Technology.

Bear Radar

Style Underperformer:

• Large-Cap Value +.49%

Sector Underperformers:

• 1) Hospitals -.70% 2) Coal -.70% 3) Oil Service -.25%

Stocks Falling on Unusual Volume:

• TSRO, VFC, TXT, KORS, ACXM, AVD, BSMX, CBM, CNW, SHLO, INF, THC, TXTR, APOG, OME, MO, WAG, ALK and NSM

Stocks With Unusual Put Option Activity:

• 1) LAMR 2) HOT 3) MGM 4) AXP 5) NAV
  

Stocks With Most Negative News Mentions:

• 1) TSRO 2) TIF 3) KORS 4) TGT 5) MSFT
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.69%

Sector Outperformers:

• 1) Homebuilders +2.68% 2) Oil Tankers +1.19% 3) Steel +1.09%
  

Stocks Rising on Unusual Volume:

• XRTX, UTHR, YRCW, RGP, AMBC, WPRT, DRI, NM, KBH, AMBA and USG

Stocks With Unusual Call Option Activity:

• 1) IP 2) EXPE 3) TMUS 4) GLUU 5) CYH

Stocks With Most Positive News Mentions:

• 1) RGP 2) ORCL 3) CAG 4) AAPL 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg:

• Russia ’98 Crisis Haunts Deutsche Bank’s Smith Seeing China Bust. When the Deutsche Bank AG equity strategist looks at the country, he says he detects some of the same signs of a financial meltdown that led him to predict Russia’s 1998 stock market crash months in advance. China’s expansion is being fueled by soaring corporate borrowing, a high-risk model that needs to be replaced by the kind of free-market measures and budget cuts that fed Russia’s growth in the aftermath of the country’s default and subsequent 44 percent monthly tumble in the Micex Index (INDEXCF), Smith said. “There is potential for a debt trap in industrial companies which can trigger an economy-wide financial crisis as early as next year,” Smith said in an interview from London on Dec. 12, a day after he issued a report predicting China’s slowdown will lead to a 10 percent decline in emerging-market stocks next year. “If I am wrong on China, I am wrong on everything.” 

• Citic Sees PBOC Staying Out of Market to Curb Debt: China Credit. Two of China’s three biggest securities firms predict the central bank will refrain from using open-market operations to inject funds this week as policy makers seek to rein in debt and contain inflation. 

• Japan Unveils Record 2014 Budget Draft as Debt Burden Mounts. Japan unveiled a record budget for the next fiscal year, as Prime Minister Shinzo Abe boosts spending on social security, defense and public works while trying to contain the growth of the world’s biggest debt burden. “The government needs to show that it’s moving in the right direction on fiscal discipline but this budget lacks punch,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “The government must cut spending to reach the planned target of a surplus in 2020.” 

• Australia Sets Higher Capital Buffer for Four Biggest Banks. Australia’s four largest banks will need to carry an extra 1 percent of core tier 1 capital from Jan. 1, 2016, due to their systemically important status, according to the country’s banking regulator. Australia & New Zealand Banking Group Ltd. (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank Ltd. and Westpac Banking Corp. (WBC) need to have a greater capacity to absorb losses, the Australian Prudential Regulation Authority said in a statement today.

• Thailand’s Baht Declines to a Three-Year Low on Political Unrest. Thailand’s baht fell to the weakest level in more than three years on concern prolonged political unrest will damp investment and hurt the economy. Bonds gained. More than 1,000 anti-government protesters have surrounded Prime Minister Yingluck Shinawatra’s home in Bangkok, as she criticized the opposition’s plan to boycott a Feb. 2 election. Suthep Thaugsuban, leader of the opposition Democrat party, has vowed to thwart the polls, which were announced after Yingluck dissolved the parliament on Dec. 9 amid mass protests. The Thai currency has lost 4.9 percent in the past two months as the main stock index dropped 7.9 percent.

• Asia Stocks Rise as IMF Bullish After U.S. Growth Data. Asian stocks outside Japan rose after data showed faster-than-estimated economic growth in the U.S. and the International Monetary Fund said it’s raising its outlook for the world’s largest economy. Hyundai Merchant Marine Co. (011200), Korea’s second-largest shipping company, surged 15 percent in Seoul after Hyundai Group said it plans to sell assets including financial units and its hotel business for at least 3.3 trillion won ($3.1 billion). Echo Entertainment Group Ltd. (EGP) advanced 3.7 percent in Sydney after a managing director of its Star casino resigned. China Mobile Ltd. added 1.1 percent in Hong Kong after striking a deal with Apple Inc. to sell the iPhone in the world’s largest wireless market. The MSCI Asia Pacific excluding Japan Index climbed 0.4 percent to 461.33 as of 9:40 a.m. in Hong Kong, as all 10 industry groups advanced. Japanese markets are closed today.

• Rebar in Shanghai Falls to Four-Week Low as Ore Price Declines. Steel reinforcement-bar futures dropped for an eight straight day, slipping to the lowest level in more than four weeks as iron ore prices fell and traders’ inventory in China increased. Rebar for May delivery on the Shanghai Futures Exchange retreated as much as 0.4 percent to 3,611 yuan ($595) a metric ton, the lowest since Nov. 22, and was at 3,618 yuan at 10:42 a.m. local time. The most-active contract lost 1.3 percent last week, the biggest such drop since the period ended Nov. 15.

• Hedge Funds Cut Gold Bull Bets Amid Record Outflows: Commodities. Money managers reduced their net-long position by 2.8 percent to 32,524 futures and options in the week ended Dec. 17, U.S. Commodity Futures Trading Commission data show. Short holdings climbed 1.2 percent to 75,199, within 6 percent of the record reached in July. Net-bullish holdings across 18 U.S.- traded commodities rose 8.5 percent to a seven-week high, led by soybeans, natural gas and cotton. 

• Solo French Startups Face Curbs as Hollande Heeds Lobbies. Now the Socialist government of Francois Hollande is pushing to restrict use of the status and the tax breaks it brings. The curbs may limit the designation to two years and cut the maximum allowed annual income in half to 19,000 euros ($26,000). The government, backed by France’s established small business lobby, says the rules have been abused. Supporters of the current system say Hollande is killing one of the few dynamic corners of the French economy.

• Junk Loans Top '08 Record as Safeguards Stripped: Credit Markets. The amount of loans to the riskiest U.S. companies ballooned to a record this year, propelled by unprecedented demand for floating-rate debt that offers protection from rising interest rates. The market for junk-rated loans increased to $683 billion, exceeding the 2008 peak of $596 billion, according to S&P's Capital IQ Leveraged Commentary and Data. The $130 billion surge this year was fueled by borrowings that don't include typical lender protections such as limits on leverage. Loans, which suffered the biggest losses in the fixed-income market during the financial crisis, staged a comeback as investors funneled a record $64.4 billion into funds that buy the debt in anticipation the Federal Reserve would start unwinding its bond buying that's suppressed borrowing costs. The demand has enabled companies take on more debt for shareholder rewards, prompting regulators to warn that the excesses which contributed to the credit crisis may be creeping back.

Wall Street Journal: 

• South Sudan Refugees Swell As Americans Are Evacuated. Country the U.S. Helped Create Might Be Spiraling Toward Civil War. The U.S. military on Sunday rushed to evacuate American citizens from a rebel-held town in South Sudan, the latest sign that a country the U.S. helped create might be spiraling toward civil war. About 15 Americans were evacuated on Sunday from the town of Bor in helicopters, according to a State Department spokeswoman. The flights were part of a broader exodus of international workers and South Sudanese from fighting between factions of South Sudan's army. The U.S. has evacuated about 380 U.S. officials and private citizens, said the spokeswoman, Jen Psaki.

• Goldman(GS) Real-Estate Play Skirts Volcker Rule. The Volcker rule prohibits banks from owning more than 3% of a hedge fund or private-equity portfolio. So why did Goldman Sachs Group Inc. tell would-be investors that it would contribute up to 20% in a new fund that makes loans backed by office buildings, hotels, shopping centers and other properties? Because regulators excluded many real-estate loans from the tough restrictions on investment funds, allowing Wall Street firms to continue making concentrated bets—sometimes risky ones—with their own capital.

• Rule Change on Health Insurance Rattles Industry. Consumers Rush to Sign Up for Coverage to Take Effect in New Year. Monday is the final day for consumers to get new health coverage that takes effect when the new year arrives, leaving thousands of people racing to sign up in time—and health insurers trying to figure out whether the federal health law will work in the way they had hoped. The number of Americans enrolling continues to fall short of the goals the Obama administration has laid out, which is a problem for the White House.

• The Fed Celebrates Its 100th Birthday. The institution created to end bank failures has morphed into an engine of financial and economic instability. 

Marketwatch.com:

• China’s money market spikes. Commentary: Why rebalancing could become messy.

Fox News:

• Arab League rejects US proposal in Mideast deal. The Arab League says it rejects a continued Israeli troop presence on the eastern border of a future state of Palestine, a proposal Palestinians say was floated by the U.S. earlier this month. Arab League chief Nabil Elaraby said Saturday no peace deal would work with Israeli presence in a Palestinian state.

CNBC: 

• Tiffany(TIF) to pay Swatch $449 million in damages, cuts outlook. Tiffany & Co on Sunday cut its full-year outlook following a Dutch court ruling that it must pay Swatch Group 402 million Swiss francs ($448.79 million) in damages.

• Goldman(GS): Cut your emerging markets exposure by a third. Goldman Sachs has a clear warning for investors: Emerging markets will continue to disappoint. In a December report, the bank's investment management division predicted "the strong possibility of significant underperformance and heightened volatility over the next five to 10 years." The client note, titled "Emerging Markets: As the Tide Goes Out," recommended that investors with a "moderate" tolerance for risk reduce their exposure by one-third, from 9 percent to 6 percent of overall portfolios. 

• Democratic senator warns of Obamacare 'meltdown'. President Barack Obama's healthcare law could have a "meltdown" and make it difficult for his Democratic Party to keep control of the U.S. Senate next year if ongoing problems with the program are not resolved, a Democratic senator said on Sunday. Senator Joe Manchin of West Virginia, who has urged delaying a penalty for people who do not enroll for health insurance in 2014 under the law, told CNN that a transitional year was needed for the complex healthcare program, commonly known as Obamacare, to work. "If it's so much more expensive than what we anticipated and if the coverage is not as good as what we had, you've got a complete meltdown at that time," Manchin told CNN's "State of the Union" program.

Zero Hedge:

• Bonds' Best Day In 8 Months As Stocks Close At Record Highs. (graph)

• What CEOs Are Really Worried About - Discounting And Obamacare.

• 5 Things To Ponder This Weekend - The Taper Edition.

• Jim Grant Slams "Central Planning" Fed - "We Are Living In A Hall Of Mirrors".

• Obamacare Confusion Sends Hospital Admissions To Lowest On Record.

• The Illustrated Guide To 4 Years Of Currency Wars. (graph)

• The Ultimate Chartbook Of The Most Important FOMC Meeting Ever.

• 1% Spike In Yields = $200 Billion In Losses For US Firms. (graph)

• "The Chinese Don't Want Dollars Anymore, They Want Gold" - London's Gold Vaults Are Empty: This Is Why.

• US Sailors, Assisting With Fukushima Clean Up, Crippled By Cancer.

• 3 "Hangovers" From The FOMC's 'Taper'.

• The Last 3 Times This Happened, Markets Turmoiled. (graph)

• JPMorgan(JPM) Imposes Spending Caps On 10% Of Its Debit Cards Due To Target Security Breach. 

• Chicken Sales Plummet in China, Hong Kong After Bird Flu Returns.

Business Insider:

• Facebook(FB) Screwed Lots Of Online Retailers Just In Time For The Holidays.

• The NSA Had A Secret Deal With A Highly Influential Computer Security Firm.

• 30 American Jobs Headed For The Trash Pile.

• Turkish PM Threatens To Expel Foreign Ambassadors As Corruption Scandal Widens.

• Fights Erupt At Stores Across The Country Over The Release Of The New Air Jordan Sneaker. (video)

• A Century On, There Are Uncomfortable Parallels With The Era That Led To The First World War.

• Pretty Soon We Need To Talk About Inflation. (graphs)

• It's Wild To Think That The US Was Worried About Energy Supply Constraints Just A Few Years Ago. (graphs)

Wall Street All-Stars:

• Indicator Update: Review of 2013 Trends — Hot or Not?

 Automotive News:

• GM(GM), Ford(F) extend holiday shutdowns at several North American plants.  General Motors and Ford Motor Co. are extending holiday downtime at several North American assembly plants to keep car inventories in check. GM and its dealers had a 148-day supply of LaCrosse models on Dec. 1, up from 98 days a month earlier, according to the Automotive News Data Center. Supply of the Malibu was 71 days, up from 60 on Nov. 1. There was a 99-day supply of Regal on Dec. 1, up from 88 days on Nov. 1. Camaro inventory swelled to a 167-day supply, from 135 days on Nov. 1.

Seeking Alpha:

• It's Official: New EU Bank Reform Disastrous For EU, Euro, Everyone - 14 Reasons. 

The Blaze:

• ‘How Is This Affordable?’: Experts Warn of Looming Obamacare ‘Sticker Shock’. As a key enrollment deadline hits Monday, many without health insurance have been comparing policies on the new government health care marketplace and doing what you might expect: They’re picking the cheapest plans, the Associated Press reported. But health insurance experts are concerned that many of these consumers will be in for a shock when they get medical care in 2014 and discover they’re paying for most of their plans’ initial costs.

• ‘Big Brother Truly Is Watching You,’ Says Democratic Senator. ‘Big Brother Truly Is Watching You,’ Says Democratic Senator. Democratic Sen. (D-W.Va.) warned Sunday that we live in an era where, “Big Brother truly is watching you.” “You know, we always heard as a child growing up and in different phases of our life, that Big Brother is watching you,” Manchin told CNN’s Candy Crowley. “And now we found out that Big Brother is truly watching you.”

Reuters:

• Thousands in anti-corruption protests; Erdogan defiant. Thousands took to the streets of Istanbul on Sunday to protest against the government over a corruption scandal that has led to multiple arrests and exposed a rift between Prime Minister Tayyip Erdogan and an influential U.S.-based Muslim cleric. Twenty-four people, including the sons of two ministers and the head of state-owned Halkbank, have been formally charged in connection with the corruption inquiry that Erdogan has called a "dirty operation" to undermine his rule. 

• ECB's Praet says Italy must stay on path to lower debt- paper. Italy must keep its public accounts in check and stay on its planned path to lower debt as its economy shows signs of emerging from recession, European Central Bank Executive Board member Peter Praet said in interview on Sunday. Praet said there was still risk of another slowdown in the euro zone's third-biggest economy if economic reforms were not brought in.

USA Today:

• Apple(AAPL) reaches iPhone deal with China Mobile. Apple has reached a long-awaited deal to bring iPhone to China Mobile, world's biggest phone carrier. The companies announced a multi-year deal, to begin selling the iPhone 5s and iPhone 5c in China on Jan. 17. Pricing was not announced.

Financial Times:

• China Asks Media to Tone Down Cash Crunch Stories. China propaganda officials ordered financial journalists and media outlets to tone down their coverage of a liquidity crunch in the interbank market, citing two people with direct knowledge of the matter who asked not to be named. In some cases, Chinese censors forbid reporters using the use of Chinese words for "cash crunch" in stories.

Die Welt:

• Fed Faces Taper Difficulty, Former ECB Executive Says. Former ECB Executive Board member Juergen Stark spoke in interview with Die Welt am Sontag. Stark says: Effect of US Federal Reserve asset purchases on real economy become less as time progressed. "Therefore it will be all the more difficult to get out of this extremely loose monetary policy, because the markets have become used to the flood of liquidity." "The Fed's tapering is just a baby step, when compared with the amount of excess liquidity that's in the markets". "That is exactly the problem with such ultra-expansive monetary policy. The interest-rate steering function disappears completely, and asset prices become distorted. New bubbles can appear easily". An ECB bond-buying program to avert deflation isn't needed as "in the euro area, there is no danger of deflation".

Kyodo:

• Japan Adds 3 Years to Fukushima Radiation Cleanup. Nuclear decontamination work had been scheduled for completion by March 31.

Global Times:

• China confirms H5N2 bird flu outbreak in Hebei. An outbreak of H5N2 bird flu in poultry has been reported in north China's Hebei Province, the Ministry of Agriculture (MOA) announced on Saturday. The disease has killed 4,000 chickens raised by a farm in Baoding City after they showed symptoms of the suspected avian flu on Dec. 17, according to the MOA. The National Avian Influenza Reference Laboratory on Saturday confirmed the epidemic was H5N2 bird flu after testing samples collected at the farm.

Shanghai Securities News: 

• China May Raise Benchmark Interest Rates in 1H. China may raise the benchmark deposit and lending interest rates in 1H if CPI growth is above 4%, citing Wang Guogang, head of the Institute of Finance and Banking under the Chinese Academy of Social Sciences.

Weekend Recommendations

Barron's:

• Bullish commentary on (AMT), (PVH), (APA), (PNR) and (AMBC).

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 122.50 +.5 basis point.

• Asia Pacific Sovereign CDS Index 101.75 unch.

• FTSE-100 futures +.47%.

• S&P 500 futures +.35%.

• NASDAQ 100 futures +.47%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases 
8:30 am EST 

• Chicago Fed Nat Manufacturing Activity for Dec. is estimated to rise to .25 versus -.18 in October.

• Personal Income for November is estimated to rise +.5% versus a -.1% decline in October.

• Personal Spending for November is estimated to rise +.5% versus a +.3% gain in October.

• The PCE Core for November is estimated to rise +.1% versus a +.1% gain in October.

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for December is estimated to rise to 83.0 versus a prior estimate of 82.5.
  

Upcoming Splits

• (VFC) 4-for-1

Other Potential Market Movers

• The Canadian GDP report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology 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 week.

Weekly Outlook

Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as rising long-term rates, profit-taking and increasing emerging markets/European debt angst offsets seasonality, investor performance angst and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,818.32 +2.4%*




The Weekly Wrap by Briefing.com.

*5-Day Change