Stocks Higher into Final Hour on Less Eurozone Debt Angst, Buyout Speculation, Short-Covering, Energy/Retail Sector Strength

Broad Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 12.34 -.96%
  

• ISE Sentiment Index 111.0 -13.28%

• Total Put/Call 1.03 +17.05%

• NYSE Arms .92 -32.75%

Credit Investor Angst:

• North American Investment Grade CDS Index 85.68 -1.19%

• European Financial Sector CDS Index 142.72 -1.1%

• Western Europe Sovereign Debt CDS Index 99.77 -.45%

• Emerging Market CDS Index 230.50 -.72%

• 2-Year Swap Spread 15.0 -.25 bp

• TED Spread 18.75 -.75 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -17.5 -.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .10% unch.

• Yield Curve 175.0 +1 bp

• China Import Iron Ore Spot $158.0/Metric Tonne+.51%

• Citi US Economic Surprise Index -2.50 -.5 point

• 10-Year TIPS Spread 2.57 +2 bps

Overseas Futures:

• Nikkei Futures: Indicating +68 open in Japan

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech/retail sector longs
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Monti Fights for Relevance as Italy Voters Eye Entertainers. Italian Prime Minister Mario Monti, an economics professor who has never won an election, says he’s aware of his handicap in a campaign dominated by entertainers. “It would be easy to do better than me as far as empathy goes,” Monti said Feb. 6 in an interview televised on La7. 
• Ford(F) Leads Drop as European Auto Sales Decline to Record. European Union car sales fell to the lowest level for a January, with Ford Motor Co. and PSA Peugeot Citroen posting the biggest drops, as economic contractions in the southern part of the region widened to Germany and France. Registrations dropped 8.7 percent to 885,159 vehicles last month from 969,219 cars a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. The figure was the lowest start to the year since the group began tracking sales in 1990, it said.
• India Slowdown ‘Deepening and Widening,’ Credit Suisse Says. Earnings forecasts for the biggest Indian companies are declining again as profits grow at the slowest pace since the financial crisis, according to Credit Suisse Group AG. Consensus earnings-per-share estimates for the 50 companies on the CNX Nifty Index are dropping, after rising in January, Credit Suisse analysts Neelkanth Mishra and Ravi Shankar wrote in a report dated yesterday. Forecasts for earnings growth may drop to 7-8 percent for the fiscal year ending March 31 as wages and borrowing costs rise faster than revenue, they wrote. Projections for 2014 profits may drop as much as 10 percent, the report said. 
• Brazilian Retail Sales Unexpectedly Contracted in December. Brazil’s retail sales unexpectedly contracted in December, the first monthly drop since May, prompting traders to pare bets that the central bank will raise rates in the first half of this year. The volume of sales declined 0.5 percent, after increasing 0.3 percent in November, the national statistics agency said today in Rio de Janeiro. The median estimate from 31 economists surveyed by Bloomberg was for sales to gain 0.8 percent, and the lowest forecast was for a 0.2 percent rise.
• Obama Golf With Woods in Florida Risks Muddling Economic Message. President Barack Obama’s three-day Florida golf getaway featuring a round with Tiger Woods opened him to criticism of tone-deafness for playing when he’s at a budget impasse with Congress that threatens automatic spending cuts in less than two weeks. After spending the President’s Day holiday weekend playing Floridian, a private golf course and club in Palm City, Florida, Obama returned to Washington last night. He faces a March 1 deadline to reach a deal with Congress to avert the $1.2 trillion in automatic cuts, which threaten to crimp the U.S. economic recovery. Joining Woods as Obama’s playing partners were businessmen and backer Jim Crane, who owns the course as well as the Houston Astros baseball team, Anthony Chase, former deputy chairman of the Federal Reserve Bank of Dallas, and Milton Carroll, chairman of Centerpoint Energy Inc. U.S. Trade Representative Ron Kirk, Obama’s Chicago friend Eric Whitaker and presidential aide Marvin Nicholson also joined Obama on the course, according to White House spokesman Josh Earnest. Such a fantasy golf weekend is out of reach for most Americans and presents a contrast to Obama’s inaugural and State of the Union speeches, which focused on economic inequality in the U.S., according to Paul Light, a professor of public service and governance at New York University. “It’s off-tone” Light said “It makes him seem like more of a Washington insider than the strong advocate of the middle class that he wants to be.”
• Copper Falls Most in Four Months on U.S., China Housing. Copper futures in New York fell the most in four months as a drop in U.S. homebuilder confidence and speculation that China will move to cool property purchases damped demand prospects for the metal used in pipes and wiring. “Any sign that China may be limiting its real-estate market is certainly concerning from a demand perspective,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The builder-confidence report is one more slight negative for the market.” Copper futures for May delivery dropped 2.3 percent to $3.668 a pound at 11:44 a.m. on the Comex in New York.
• Ore-Ship Rates Fall Most in Two Months as Chinese Demand Slumps. Charter rates for Capesize ships, the biggest carriers of iron ore, fell the most in two months as demand declined for the steel-making raw material from China, the world’s biggest buyer of the commodity. Daily hire costs for Capesizes declined 7.7 percent to $5,875, figures from the London-based Baltic Exchange showed today. That’s the biggest collapse since Dec. 19, according to the exchange. Capesizes are the largest vessels tracked by the Baltic Dry Index, a broader measure of costs to transport minerals and grains by sea, which lost 1.2 percent to 738, the lowest level since Jan. 8. Chinese port inventories fell to 66.9 million tons on Feb. 1, the lowest since January 2010, according to researcher Beijing Antaike Information Development Co.
• Gasoline Pump Prices Soaring on Refinery Repairs, Oil Rally. U.S. consumers facing the highest gasoline pump prices ever for February may see further increases as global crude oil futures climb and breakdowns and seasonal maintenance at refineries reduce fuel supplies. Gasoline futures have surged 11 percent this year, making the fuel the top performing commodity in the Standard & Poor’s GSCI index. Prices at the pump are up 14 percent this year and have risen 33 straight days, according to AAA data. Brent crude in London, the pricing basis for gasoline imports and for oil used by coastal refiners, advanced to a nine-month high Feb. 8.
• Saudi Oil Output Falls to 19-Month Low as Exports Decline. Saudi Arabia’s crude oil output fell in December to a 19-month low as shipments from OPEC's biggest producer dropped for a third month and domestic consumption decreased, the Joint Organisations Data Initiative said. The kingdom exported 7.06 million barrels of crude a day in December, the least since September 2011, JODI reported, citing statistics the government submitted to the Organization of Petroleum Exporting Countries. Exports were 1.3 percent lower than the previous month. Production dropped 4.8 percent in the month to 9.03 million barrels a day.
• Wal-Mart(WMT) E-Mails Seen Showing Tax Drag Mounting on Retailers. The payroll tax increases and delayed tax returns that Wal-Mart Stores Inc. (WMT) executives blamed in internal e-mails for weak February sales may be poised to hurt other retailers as well. Wal-Mart had the worst monthly sales start in seven years, according to internal e-mails obtained by Bloomberg News and reported Feb. 15. Jerry Murray, Wal-Mart’s vice president of finance and logistics, in a Feb. 12 e-mail called the retailer’s February month-to-date sales “a total disaster.” “It’s not Wal-Mart specific,” David Strasser, an analyst for Janney Montgomery Scott LLC in New York, said in a telephone interview yesterday.
• Carbon Plunges as EU Delays Vote on Fast-Track Market Fix. Carbon prices plunged after the European Parliament’s environment committee postponed a decision on whether to seek fast-track approval of a proposal to tackle a record surplus of emission allowances. The panel backed in a non-binding vote a compromise plan to reduce the supply of European Union carbon permits, though it delayed for about a week a separate decision on authorizing its chairman to start talks with member states on the proposal. EU carbon futures for December fell as much as 20 percent.
• Gold Drops for Fourth Session as Investors Await Fed Minutes. Gold declined for a fourth session as investors weighed whether the Federal Reserve will signal tomorrow in the minutes of its Jan. 29-30 meeting when it plans to end the third round of stimulus measures. 
• ARM(ARMH) Turns Up Pressure on Intel(INTC) as Even Cutlery Gets Smart. ARM Holdings Plc, which has sprinted ahead of Intel Corp. in the market for mobile chips, poses a threat to its rival in another burgeoning business: semiconductors for machines ranging from cars to cutlery.
• Martin Zweig, Author Who Predicted ’87 Stock Crash, Dies.
• Humana(HUM) Falls in Early Trading on Medicare Advantage Rates. Humana Inc., the second-biggest private Medicare insurer, declined as much as 11 percent after saying the U.S. government’s preliminary Medicare Advantage payment rates were less than the company expected. Humana fell 9.3 percent to $70.77 at 9:43 a.m. New York time after hitting $69.78 for its biggest intraday drop since November.
• Boeing(BA) Strike Threat Looms After Dreamliner-Grounding Tumult. Boeing Co., already struggling with the grounding of its 787 Dreamliner, is facing a possible strike by union engineers, threatening even more upheaval as it tries to fix the plane and resume deliveries to customers. Voting ends tonight for 23,000 engineers and technical workers considering whether to authorize a walkout in their dispute over retirement benefits.

Wall Street Journal: 

• Apple's(AAPL) Computers Attacked by Hackers. Apple Inc. said some employee computers were infiltrated by hackers, adding to the wave of companies recently reporting cyber attacks.

MarketWatch:

• Armstrong World(AWI) fourth-quarter profit down 1.2%. Armstrong World Industries Inc.'s AWI -2.53% fourth-quarter earnings edged down 1.2% as the flooring and building products maker's revenue slipped and tax expenses rose, though margins improved. For 2013, the company forecast earnings of $2.30 to $2.60 a share on revenue of $2.7 billion to $2.8 billion. Analysts polled by Thomson Reuters expected $2.89 and $2.72 billion, respectively. For the first quarter, Armstrong predicted revenue of $600 million to $650 million, compared with Wall Street forecasts of $642 million. Armstrong has struggled amid a slow recovery in the construction market. The company, which produces ceilings, floors and cabinets, remained profitable over the past year as cost savings and pricing strategies helped overcome volume declines.

Fox News: 

• Obama pins blame on Republicans for looming cuts, as fiscal hawk warns of 'failed presidency'. President Obama pinned the blame on Republicans Tuesday for looming spending cuts that may be triggered by what was originally a White House proposal -- while a former leader of the president's deficit commission said it's Obama who's on the path to a "failed presidency" if he can't tackle the debt. The president spoke Tuesday at the White House, urging Congress to come up with a short-term fix to cancel sweeping cuts to defense and other programs set to hit March 1. 

CNBC: 

• Apple(AAPL) Is Building Something Bigger Than a TV.
• Obama Debt Solutions ‘Generational Theft:’ Langone. (video) 
• It's 'Go Big or Go Home' on Deficit Reduction: Simpson and Bowles. Erskine Bowles and Alan Simpson proposed a new tax plan on Tuesday in hopes of finding a middle ground between Democrats and Republicans on deficit reduction. If accepted, the plan crafted by the co-chairs of the deficit reduction committee would cut federal spending deeply and reduce the federal budget by $2.4 trillion over 10 years.

Zero Hedge: 

• The Reflation Party Is Ending As China Withdraws Market Liquidity For First Time In Eight Months.
• Freight Shipment Volumes Plunge To Lowest In Two Years. (graph) 
• Chart Of The Day: Europe's Decimated Car Market. 
• NAHB Housing Market Index Posts First Drop In 10 Months, First Miss Since April 2012. (graph) 
• Italian Bank Loans Plunge By Record; Lenders Say "No Cause For Alarm".

Business Insider: 

• China Has Found A Brutally Simple Way To Steal Corporate Secrets. 
• 5 Research-Driven Reasons To Quit Facebook(FB). 
• Reporters Detained For Trying To Film Alleged Nerve Center Of Chinese Hacking. 
• REPORT: China Tried To Hack The 'Holy Grail' Of America's Energy Infrastructure. 
• High Oil Prices Have A Brutal Effect On US Workers. 
• DEUTSCHE BANK: The Fed Will Probably Start Winding Down QE By June.

Reuters:

• Yen rises broadly on doubts over monetary outlook. 
• Spain's banks face more pain from property clear-out. Banks in Spain may take bigger losses than they hoped this year on real estate repossessed from borrowers, as they compete for buyers with Sareb, the agency tasked with clearing up the weaker banks after a property crash. 
• Medtronic(MDT) profit up; shares fall on weak demand in Europe. Medtronic Inc reported higher quarterly earnings on Tuesday, but sales of key heart and spine devices fell and overall European sales weakened in January, sending the company's shares down nearly 3 percent.

Telegraph:

• North Korea envoy warns South of 'final destruction'. South Korea faces "final destruction" if Seoul and its allies continue to push for tougher UN resolutions against North Korea's nuclear programme, Pyongyang warned on Tuesday.

Shanghai Daily:

• 2nd-Home Buyers May Pay More. CHINA may impose tighter housing policies by raising the borrowing costs for second-home buyers, sources told Shanghai Daily yesterday. The government is expected to unveil more policies to rein in property speculation before or after the National People's Congress annual session in March. One of the measures being studied is to increase the borrowing costs for homebuyers, a bank source told Shanghai Daily. Yang Hongxu, vice director at E-house China R&D Institute, a major property services provider and research organization in the country, said on Weibo yesterday that second-home buyers may need to put down 70 percent of the property price as initial payment, with interest rates 30 percent above the benchmark rates. Second-home buyers now have to make an initial payment of 60 percent of the property price, which was raised from 40 percent in 2011. The interest rates they pay are marked up by 10 percent over the benchmark ones.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.16%

Sector Underperformers:

• 1) Gaming -2.01% 2) HMOs -1.83% 3) Homebuilders -1.53%
  

Stocks Falling on Unusual Volume:

• HUM, GPI, YNDX, DAKT, PERY, EC, ADNC, AIXG, SAND, ULTA, AWI, NOW, BCOR, IPGP, SNFCA, MPEL, NGD, LVS, CPA, BP, CIB, MNST, EQIX, VOD, SBGI, EHTH, MWV, ALJ, IMOS, RAX, UNH, CI, MORN, GPC, QLIK, RP, ELLI, ALSN, ALXN and PCYC

Stocks With Unusual Put Option Activity:

• 1) FE 2) MON 3) UNH 4) AKS 5) HNZ
  

Stocks With Most Negative News Mentions:

• 1) OII 2) IPI 3) HUM 4) OCN 5) APA
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.57%

Sector Outperformers:

• 1) Retail +1.08% 2) Airlines +1.06% 3) Drugs +.69%
  

Stocks Rising on Unusual Volume:

• SPWR, FSLR, OMX, MX, SPLS, WWW, SEE, BRKR, CTL, QCOR, ROC and CY

Stocks With Unusual Call Option Activity:

• 1) PPHM 2) ODP 3) GNC 4) SRPT 5) HUM
  

Stocks With Most Positive News Mentions:

• 1) GILD 2) HAL 3) MDT 4) GPC 5) ITW

Charts:

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

Tuesday Watch

Weekend Headlines 
Bloomberg:

•  U.K., Germany, France Urge G-20 Action on Tax Avoidance. Britain, Germany and France called on other Group of 20 nations to curb tax avoidance by international corporations that shift profits to territories where they can pay the lowest amounts. Citing research they commissioned from the Organization for Economic Cooperation and Development that identifies loopholes, finance ministers from the three nations said they will spearhead work to get companies to pay tax where it’s due. The countries provided the OECD with data to help identify schemes used by companies.
• Currency Manipulators Check Global Growth, Australia’s Swan Says. Governments that manipulate their currencies are a hindrance to global growth, Australian Treasurer Wayne Swan said at the meeting of Group of 20 finance ministers in Moscow. “Market-based exchange rates, fiscal and monetary policies supporting jobs and growth; that’s the core of the G-20 agenda,” Swan said in a Bloomberg Television interview yesterday. “To have people artificially target their exchange rates completely repudiates that approach.”
• ECB's Weidmann Says G-20 Statement Should Calm Currencies Debate. Bundesbank President Jens Weidmann spoke to reporters following meetings of Group of 20 nations' finance chiefs in Moscow. In the G-20 "there's unity in rejecting an active exchange-rate policy to bring about competitive advantage," Weidmann said. "Politically-motivated devaluations can't sustainably improve competitiveness, they don't solver structural problems and they set off reactions" elsewhere, he said.  "The clear language in the communique underlines this unity, and will allow the debate in the future to take place with a less excited tone," he said. 
• Saxo Bank CEO Says Euro Is Doomed as Currency Woes Resurface. Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank A/S, said the euro’s recent rally is illusory and the shared currency is set to fail because the continent hasn’t supported it with a fiscal union. “The whole thing is doomed,” Christensen said yesterday in an interview at the bank’s Dubai office. “Right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.” 
• European Bank Puts at Two-Year Low: Options. Puts with an exercise price 10% below bank shares in the Euro Stoxx 50 Index cost an average 4.77 points more than calls 10% above, three-month data compiled by Bloomberg show. The price relationship known as skew slid to 4.6 on Jan. 29, the lowest since May 2011.
• Bank Risks Rise as Germany Curbs ESM Fund Powers: Euro Credit. Germany is insisting that the euro region's rescue fund plays safe on direct aid for banks, underscoring that governments might not be able to count on the firewall to remove the burden of bailouts.
• Merkel Urges EU Members to Implement Financial Transaction Levy. German Chancellor Angela Merkel called on all 27 European Union member countries to back the example of Germany and 10 others that plan a levy on the trading of financial products such as shares and bonds.    
• Italian Undecided Voters Targeted in Campaign’s Last Week. Italian voters are braced for an onslaught of tax-cut promises and attacks on the European Union as the four leading candidates take to the airwaves and criss- cross the country in the election campaign’s final days. Italy goes to the polls Feb. 24-25 in the first parliamentary election since Europe’s sovereign debt crisis threw its political establishment into disarray. Still up for grabs is the 20 percent of voters that pollsters say decide in the final week. The risk is an inconclusive result that denies victory to any and leads to gridlock, requiring a second vote. “The biggest issue is, is it going to be easy to form a government?” said Marc Ostwald, a rates strategist at Monument Securities Ltd. in London. 
• Spain Risks Market Indigestion in Bond-Selling Race: Euro Credit. Spain's bumper debt sales risk saturating the market as the nation's government, agencies and companies vie for investors' cash. "There is the risk that there is some crowding out in the Spanish market, with all the issuance," said Craig Veysey, head of fixed income at Sanlam Private Investments Ltd. in London, a unit of Sanlam Group, which oversees $72 billion.
• Aso Says Japanese Government Not Planning Foreign Bond Buys. Japanese Finance Minister Taro Aso said the government has no intention of buying foreign bonds through a public-private fund, comments that caused the yen to strengthen. “We don’t intend to buy foreign bonds,” Aso told reporters in Tokyo, when asked if such a fund is planned. He also said that the government is not considering any immediate change to the law governing the Bank of Japan. 
• China’s Stocks Drop Most in Month, Led by Cement Shares. China’s stocks fell the most in a month after valuations for the benchmark index climbed to the highest level in 17 months and on concern the government may introduce measures to curb property prices next month. Poly Real Estate Group Co. slumped 4.7 percent, dragging down a gauge of developers after China Business News said the government may impose real-estate curbs around a legislative meeting in March. Anhui Conch Cement Co., the nation’s biggest producer of the building material, slid the most since September 2011 after the government estimated slowing cement output growth. BYD Co., the carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., slid the most in almost a month. The Shanghai Composite Index fell 1.2 percent to 2,393.18 at 1:05 p.m. local time, heading for the biggest loss since Jan. 11. It slid for a second day after a week-long holiday for the Lunar New Year.
• China New Year Retail Sales Growth Slows on Frugal Drive. Retail sales in China during the week-long Lunar New Year festival rose at the slowest pace in four years as a crackdown on extravagant spending by officials and state-owned companies limited outlays on food and drink.
• Rebar Falls to Pace Declines in Copper as Chinese Markets Reopen. Rebar for delivery in October, the most-active contract by volume, fell by as much as 1.8 percent to 4,198 yuan ($672) a metric ton on the Shanghai Futures Exchange, before trading at 4,200 at 10:40 a.m. local time. The Chinese bourse was closed last week for the Lunar New Year holiday. “Declines in the base metals, especially in the bellwether copper, during last week, led to bearish sentiment in the rebar market today,” Wang Yaoyao, analyst at Huawen Futures Co., said by phone from Shanghai. Copper for three-month delivery traded in London fell by 1.1 percent in the week ended Feb. 15. LME zinc for three-month delivery also fell by 1.4 percent in the same period. 
• China Said to Approve Joining Iran Railway Project. China’s State Council approved plans to take part in the building of a high-speed railway line in Iran, two people familiar with the matter said. The project will cost at least $1 billion and the companies participating haven’t yet been set, said the two people, who asked not to be identified because they weren’t authorized to speak publicly about the matter. China’s decision comes as the U.S., the European Union and their allies have tightened sanctions on Iran for a nuclear program they argue is meant to develop atomic bombs.
• Junk Bond Froth Leaks Into Emerging Market Debt: Credit Markets. Junk bonds of companies in emerging markets are the most expensive in seven years relative to the U.S., underscoring concerns by policy markets from Mexico to the Philippines who say the threat of asset bubbles is increasing.
• Singapore’s January Exports Rise Less Than Estimated on Drugs. Singapore’s exports rose less than estimated in January as manufacturers shipped fewer electronics and pharmaceutical goods. Non-oil domestic exports gained 0.5 percent from a year earlier, after a 16.3 percent drop in December, the trade promotion agency said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 3 percent increase. “It’s still looking a little bit subdued” outside of China, Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said before the report. The U.S. economy is still weak and Europe remains in a recession, he said. Singapore’s electronics shipments by companies such as Venture Corp. fell 5.6 percent in January from a year earlier, after slipping 19.1 percent the previous month.
• Saudi Oil Ouptut Drops to 19-Month Low as Exports Decline. Saudi Arabia's crude oil output fell in December to a 19-month low as the biggest OPEC producer shpped less oil and local use of crude dropped, according to the Joint Organizations Data Initiative.
• Hollywood Snubs Best Film as ‘Zero Dark Thirty’ Odds Fade. “Zero Dark Thirty,” the best- reviewed film of 2012, has become an Oscar longshot because of a political backlash in Hollywood over its depiction of torture in the hunt for Osama Bin Laden. Since early January, Kathryn Bigelow’s critically praised movie has sunk to fifth from third among likely best-picture winners at GoldDerby.com, which ranks award prospects. Actors Ed Asner and David Clennon urged academy voters to snub the Sony Corp. film. Author Naomi Wolf called Bigelow “torture’s handmaiden” and compared her to Nazi propagandist Leni Riefenstahl. The outcry from Washington and influential industry voices has made “Zero Dark Thirty” a tough vote for left-leaning Hollywood. It’s led to a split between academy members disturbed by torture scenes that imply waterboarding and other harsh methods worked, and others who defend the filmmakers’ right to free speech and artistic freedom.
• Obama Pal Jesse Jackson Jr.’s Career Derailed by Corruption Charge. Jesse Jackson Jr., the son and namesake of a civil rights icon and once a rising Democratic Party star, would have likely flown on Air Force One yesterday had corruption charges not short-circuited his political career. Instead, as his friend President Barack Obama was flying to Chicago for a speech, accompanied by members of the Illinois congressional delegation, federal prosecutors filed criminal charges against Jackson yesterday in Washington. He resigned from Congress on Nov. 21 as the probe in the case unfolded. Jackson, 47, was accused of misusing $750,000 in campaign funds for purchases including a $43,000 Rolex watch and a hat that belonged to the late pop singer Michael Jackson (no relation). He intends to plead guilty to one count of conspiracy to commit wire fraud, mail fraud and making false statements, one of his lawyers, Brian Heberlig of Steptoe & Johnson LLP, said in an e-mail.
• Reader’s Digest Is Bankrupt as Iconic Publisher Falters. RDA Holding Co., publisher of the 91-year-old Reader’s Digest magazine, filed for bankruptcy to cut $465 million in debt and focus on North American operations as consumers shift from print to electronic media. The company is the latest in a line of iconic businesses to have recently sought court protection from creditors, after Hostess Brands Inc., maker of Twinkies and Wonder Bread, and Eastman Kodak Co., inventor of Kodachrome and the Instamatic camera.

Wall Street Journal: 

• Google(GOOG) Works on Launching Retail Stores. U.S. Outlets Would Likely Sell Internet Giant's Branded Devices, but Plans Remain Unclear; Studying Apple's Playbook.
• CFTC Examines Gas Trades. U.S. commodities regulators are examining sharp price swings in the natural-gas market during the past year that came just before the public announcement of weekly gas-inventory data, a person familiar with the situation said. Officials in the Commodity Futures Trading Commission's market-oversight division have intensified since late last year their customary review of market data in an effort to detect suspicious trading strategies around the reports by the U.S. Energy Information Administration.
• Christensen, Flier and Vijayaraghavan: The Coming Failure of 'Accountable Care'. The Affordable Care Act's updated versions of HMOs are based on flawed assumptions about doctor and patient behavior.
• Amity Shlaes: The Coolidge Lesson on Taxes and Spending. The 30th president had two lion cubs. Their names? Budget Bureau and Tax Reduction.

Fox News:

• Al Qaeda claims responsibility for Baghdad car bombings that killed 37. The car bombs that exploded within minutes in outdoor markets also wounded more than 100 people. The attacks came amid rising sectarian discord in the country and appeared aimed at shaking the Iraqis' confidence in the Shiite-led government.
• Push to keep feds out of state gun markets gains momentum. States across the country are trying to protect gun ownership from the long arm of Washington by proposing bills declaring that firearms made and kept within their borders are not subject to federal restrictions.

CNBC:

• Why Over 8% Unemployment Could Lie Ahead.
• Draghi Could Do This to Weaken the Euro.

Zero Hedge:

• If Europe Were a House... It'd Be Condemned.
• Chart Of The Day: The DV01 Time Bomb Beneath The World's Equity Tranche. (graph)
• Goldman(GS) Implicated In Heinz Insider Trading Probe.
• "Great Rotation", Over. (graph)
• Gas Prices Surge To Highest Ever On This Day At Fastest Pace In Four Years. (graph)
• Video Of The Day: Regulators Squirm When Asked About "Too Big to Jail".
• 2013 Earnings: Just Insert Hockeystick. (graph)

Business Insider: 

• EL-ERIAN: It's Time To Book Some Profits.
• NYSE Margin Debt Is Creeping Toward All-Time Highs Right Along With The S&P 500. (graph)
• Award For Drone Pilots May Be The Most Ridiculous Thing The Pentagon Could Do.
• The SEC Sues Unidentified Traders Over Suspicious Activity Before The Heinz Deal.
• Health Care Cost Inflation Is Slowing, But Obamacare Could Change That.
• Two Nuclear-Armed Russian Bombers Reportedly Skirt US Base.
• BARRON'S BLASTS OBAMA: 'Follow Me, We Can Be Like Greece'.
• A Vast Political Espionage Scandal Is Unfolding In Spain. 
• George Soros Is Going After The Two Most Hated Currencies In The World.
• REPORT: An Overwhelming Number Of The Cyber-Attacks On America Are Coming From This Particular Army Building In China.
• Underwater Homes Are Still A Massive Dark Spot In The Housing Recovery.
• The Solution To California's Problems Is Beneath Its Feet — But Rich Environmentalists Are Having None Of It.
• 18 Companies That Are Probably Freaking Out About Those Leaked Wal-Mart Emails.
• The New Spanish Debt Stats Will Give You Chills.

Wall Street All-Stars:

• Indicator Update: Can We Play the Housing Rebound?

New York Times:

• The Second Mortgage Shell Game. The second mortgages have given the banks a loophole: each dollar a bank forgives goes toward fulfilling its obligation under last year’s settlement. But many lenders have made it a point to almost exclusively modify secondary loans while all but ignoring the troubled, larger primary mortgages.
• Prosecutors, Shifting Strategy, Build New Wall Street Cases. Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks.

CNN: 

• Bomb rips through Shiite enclave in Pakistan, kills dozens. A blast targeting Shiites in a busy Pakistani marketplace killed at least 78 people on Saturday, police told CNN. The attack in the southwestern Pakistan city of Quetta left at least 180 people wounded.

Bradenton Herald:

• Is real estate really on the mend in Florida? Nearly a fifth of region's homes in 'some state of distress'. Given the improvement in local and state residential real estate demonstrated by last week's 2012 Florida Realtors statistics, there's a lot of positive buzz, and possibly a bit of wishful thinking taking place among would-be sellers, Realtors, mortgage brokers, appraisers, developers and contractors.
  
  
  Read more here: http://www.bradenton.com/2013/02/17/4397564/is-real-estate-really-on-the-mend.html#storylink=cpy
  
  Read more here: http://www.bradenton.com/2013/02/17/4397564/is-real-estate-really-on-the-mend.html#storylink=cpy

Reuters: 

• Office Depot, OfficeMax in merger talks: source. U.S. office supply chains Office Depot Inc (ODP) and OfficeMax Inc (OMX) are in advanced discussions for a merger, a person familiar with the matter said on Monday. A deal could come as soon as this week, that person said, adding that the talks were ongoing and could still fall apart.
• EMERGING MARKETS-Brazil stocks fall on worries over domestic economy.
• METALS-Copper falls to near 3-week low on growth concerns.

Financial Times:

• Europe’s budget deal is flawed. When Herman Van Rompuy comes to the European Parliament on Monday he will have some explaining to do. The president of the European Council greeted the conclusion of the recent budget negotiations between heads of government with a celebratory tweet that a deal had been reached, one worth the all-night haggling. But the result left many, including me, distinctly underwhelmed.
• US business hits out at ‘Obamacare’ costs. US retailers and restaurants chains that employ millions of low-wage workers are considering cutting working hours or paying fines rather than enrolling employees in health insurance plans under Barack Obama’s landmark healthcare law.

Meres:

• Syriza, Greece's main opposition and anti-bailout party, would place first if elections were held now with 21.5% voter support, a poll by Pulse RC shows. The New Democracy party of PM Antonis Samaras would get 20%, according to the poll published today. Nationalist Golden Dawn places third with 12% of the vote. Support for New Democracy, Pasok strongest among voters 60 and over. Support for Syriza, Golden Dawn strongest in 30-44 years age group.

El Pais:

• Spanish public debt surpassed EU882b in 2012, citing people close to the government it didn't identify. Debt increased by EU 146b last year, the biggest increase on record. Using independent estimates for GDP for 2012 the debt represents between 83.5% and 84% of GDP.

NHK:

• Japanese Prime Minister Shinzo Abe will ask U.S. to allow shale gas exports to Japan during his meeting with President Obama on Feb. 22.

China Business News: 

• China May Introduce Policy to Curb Home Prices. China may introduce more policies to curb property prices before or after the National People's Congress annual session next month, citing researches including Xie Yifeng. Several Chinese cities tightened housing provident fund policies in recent months. Xie is the head of the Asia-Pacific City Development Research Center's real estate institute.

China Daily:

• The level of trust among Chinese people has fallen to a record low, citing a study by the Institute of Sociology under the Chinese Academy of Social Sciences. Less than half of those in the survey of 1,900 residents in seven Chinese cities including Beijing and Shanghai said "most people can be trusted." The trust level measured by the study was 59.7 points out of 100, down from 62.9 points in 2010, according to the report.
• China Shadow Banking, LGFV Biggest Threat, BOC Chair Says. The biggest threats to China's financial stability are "huge amounts" of shadow banking and loans to local government financing vehicles, Bank of China Ltd. Chairman Xiao Gang writes in a commentary. Capital inflows could increase because of global easing, causing inflation and asset bubbles, Xiao wrote. China must "hold the bottom line" to prevent systemic risks from building, he said.

Weekend Recommendations

Barron's:

• Bullish commentary on (AEO), (ROCM), (OVTI), (VOD) and (BRCM).

• Bearish commentary on (LINE), (QCOM), (WFM), (HEK) and (AAPL). 

Night Trading

• Asian indices are -.5% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 110.50 -.25 basis point.

• Asia Pacific Sovereign CDS Index 84.50 -.5 basis point.

• FTSE-100 futures +.04%.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GPC)/.93

• (FDP)/.04

• (WWW)/.17

• (EE)/.16

• (MDT)/.91

• (SEE)/.29

• (CCO)/.04

• (ADI)/.44

• (LNCR)/.61

• (MDRX)/.20

• (MAR)/.55

• (CF)/6.95

• (DELL)/.38 

Economic Releases
10:00 am EST

• The NAHB Housing Market Index for February is estimated to rise to 48 versus 47 in January.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Germany Zew Survey could also impact trading today.

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

Weekly Outlook

U.S. Week Ahead by MarketWatch (video). 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on US sequestration fears, global growth worries, China-Japan/Mideast tensions, Eurozone debt angst, high energy prices, profit-taking, technical selling and more shorting. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.