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 worries, global growth fears, China-Japan/Mideast tensions, Eurozone debt angst, profit-taking, technical selling and more shorting. 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 1,515.60 -.38%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,515.60 -.38%

• DJIA 14,00.57 +.20%

• NASDAQ 3,161.81 -1.15%

• Russell 2000 916.16 -.82%

• Value Line Geometric(broad market) 394.65 -1.07%

• Russell 1000 Growth 691.57 -.41%

• Russell 1000 Value 772.42 -.54%

• Morgan Stanley Consumer 925.0 +.97%

• Morgan Stanley Cyclical 1,116.87 -1.94%

• Morgan Stanley Technology 724.18 -.97%

• Transports 5,943.89 -.06%

• Utilities 477.91 +1.46%

• Bloomberg European Bank/Financial Services 96.27 -.77%

• MSCI Emerging Markets 43.47 -1.24%

• Lyxor L/S Equity Long Bias 1,131.29 +.45%

• Lyxor L/S Equity Variable Bias 841.86 +.80%

Sentiment/Internals

• NYSE Cumulative A/D Line 172,199 -1.0%

• Bloomberg New Highs-Lows Index -97 -744

• Bloomberg Crude Oil % Bulls 16.7 -60.5%

• CFTC Oil Net Speculative Position 257,918 -5.48%

• CFTC Oil Total Open Interest 1,650,211 -.2%

• Total Put/Call .92 +4.55%

• OEX Put/Call 1.73 +203.51%

• ISE Sentiment 120.0 -6.25%

• NYSE Arms .69 -25.81%

• Volatility(VIX) 14.17 +11.93%

• S&P 500 Implied Correlation 58.24 +.80%

• G7 Currency Volatility (VXY) 9.59 +1.80%

• Smart Money Flow Index 11,256.37 -.89%

• Money Mkt Mutual Fund Assets $2.657 Trillion -.90%

• AAII % Bulls 41.8 -1.1%

• AAII % Bears 32.5 +13.1%

Futures Spot Prices

• CRB Index 293.52 -2.05%

• Crude Oil 93.36 -4.1%

• Reformulated Gasoline 308.88 -1.35%

• Natural Gas 3.28 +3.38%

• Heating Oil 311.25 -3.50%

• Gold 1,580.10 -3.33%

• Bloomberg Base Metals Index 211.01 -4.88%

• Copper 354.0 -5.43%

• US No. 1 Heavy Melt Scrap Steel 352.67 USD/Ton unch.

• China Iron Ore Spot 153.60 USD/Ton -.97%

• Lumber 376.10 -4.86%

• UBS-Bloomberg Agriculture 1,532.32 +.35%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 7.6% -80 basis points

• Philly Fed ADS Real-Time Business Conditions Index .0969 -6.2%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 113.56 +.14%

• Citi US Economic Surprise Index -4.80 -2.8 points

• Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 3/20

• US Dollar Index 81.47 +1.29%

• Yield Curve 171.0 -2 basis points

• 10-Year US Treasury Yield 1.96% -4 basis points

• Federal Reserve's Balance Sheet $3.077 Trillion +.67%

• U.S. Sovereign Debt Credit Default Swap 39.0 +.41%

• Illinois Municipal Debt Credit Default Swap 146.0 +.69%

• Western Europe Sovereign Debt Credit Default Swap Index 100.55 +.90%
  

• Emerging Markets Sovereign Debt CDS Index 175.84 +2.96%
  

• Israel Sovereign Debt Credit Default Swap 123.16 +1.13%

• Iraq Sovereign Debt Credit Default Swap 435.04 +2.36%

• China Blended Corporate Spread Index 379.0 -5 basis points

• 10-Year TIPS Spread 2.54% -1 basis point

• TED Spread 16.75 -2.75 basis points

• 2-Year Swap Spread 14.5 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 -2.5 basis points

• N. America Investment Grade Credit Default Swap Index 87.52 +1.23%
  

• European Financial Sector Credit Default Swap Index 150.02 +5.64%
  

• Emerging Markets Credit Default Swap Index 234.53 +1.10%
  

• CMBS Super Senior AAA 10-Year Treasury Spread 90.0 unch.

• M1 Money Supply $2.481 Trillion -.45%

• Commercial Paper Outstanding 1,062.90 -2.10%

• 4-Week Moving Average of Jobless Claims 360,800 +8,300

• Continuing Claims Unemployment Rate 2.4% unch.

• Average 30-Year Mortgage Rate 3.56% +3 basis points

• Weekly Mortgage Applications 782.40 -1.68%

• Bloomberg Consumer Comfort -33.4 +2.5 points

• Weekly Retail Sales +2.8% +40 basis points

• Nationwide Gas $3.78/gallon +.14/gallon

• Baltic Dry Index 737.0 -2.12%

• China (Export) Containerized Freight Index 1,152.47 +.69%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 17.50 unch.

• Rail Freight Carloads 251,078 +2.62%

Best Performing Style

• Large-Cap Growth -.41%

Worst Performing Style

• Mid-Cap Growth -1.04%

Leading Sectors

• Tobacco +1.9%

• Utilities +1.5%

• Restaurants +.8%

• Drugs +.8%

• Telecom +.8%

Lagging Sectors

• Homebuilders -5.4% 

• Disk Drives -6.3%

• Coal -6.8%

• Steel -7.5%

• Gold & Silver -8.4%

Weekly High-Volume Stock Gainers (22)

• NTSP, FFCH, LZB, RRGB, QCOR, BRY, AWAY, PCYC, SWY, SSNC, QLIK, TXRH, VNTV, SEE, SCBT, PEGA, THRM, OMX, CTL, BKW, JACK and MDP

Weekly High-Volume Stock Losers (25)

• SKX, LAD, IART, APA, IPHS, TAL, TSLA, OC, AWI, BGS, IPI, GPI, FOR, TAHO, RP, NFX, VAC, DAKT, IPGP, PPO, ASGN, EBIX, LOGM, EHTH and PAY

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Surging into Final Hour on More Dovish Fed Rhetoric, Less Eurozone Debt Angst, Short-Covering, Tech/Biotech Sector Strength

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 14.48 -4.86%
  

• ISE Sentiment Index 112.0 +20.43%

• Total Put/Call .89 -19.09%

• NYSE Arms .95 -31.91%

Credit Investor Angst:

• North American Investment Grade CDS Index 86.69 -1.95%

• European Financial Sector CDS Index 150.0 -.15%

• Western Europe Sovereign Debt CDS Index 100.55 -.62%

• Emerging Market CDS Index 234.87 -.82%

• 2-Year Swap Spread 14.50 -1 bp

• TED Spread 16.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 -1.75 bps

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.

• Yield Curve 171.0 -2 bps

• China Import Iron Ore Spot $153.60/Metric Tonne -1.66%

• Citi US Economic Surprise Index -4.80 -.1 point

• 10-Year TIPS Spread 2.54 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +115 open in Japan

• DAX Futures: Indicating +25 open in Germany

Portfolio: 

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

Today's Headlines

Bloomberg:

• EU Says Euro Area to Shrink in 2013 as Unemployment Rises. The euro-area economy will shrink in back-to-back years for the first time, driving unemployment higher as governments, consumers and companies curb spending, the European Commission said. Gross domestic product in the 17-nation region will fall 0.3 percent this year, compared with a November prediction of 0.1 percent growth, the Brussels-based commission forecast today. Unemployment will climb to 12.2 percent, up from the previous estimate of 11.8 percent and 11.4 percent last year. 
• ECB Says Banks to Repay Less Than Forecast of Second Loan. The European Central Bank said banks will repay only half the amount of emergency loans economists forecast, indicating financial institutions remain wary of lending to each other. Some 356 banks will hand back 61.1 billion euros ($80.5 billion) of the ECB’s second three-year loan on Feb. 27, the first opportunity for early repayment, the central bank said in a statement today. That compares with a forecast of 122.5 billion euros in a Bloomberg News survey of economists. The euro fell almost half a cent after the report to $1.3157.
• VW Forecasts 2013 Profit That Falls Short of Expectations. Volkswagen AG, Europe’s largest automaker, forecast that 2013 operating profit will match last year’s level, falling short of analysts’ estimates, as the shrinking auto market in its home region weighs on earnings.
• China’s Stocks Post Biggest Weekly Loss in 20 Months on Property. China’s stocks fell, dragging the benchmark index to its steepest weekly loss in 20 months, as higher home prices boosted concern the government will adopt tighter policies to prevent asset bubbles. SAIC Motor Corp., the biggest automaker, dropped 3.2 percent, adding to a five-day loss of 10 percent. China Construction Bank Corp., the largest mortgage lender, led declines for financial companies this week. A gauge of Shanghai property developers posted its worst weekly loss since July. New home prices rose in most cities the government tracked in January, government data showed today. The Shanghai Composite Index (SHCOMP) slid 0.5 percent to 2,314.16 at the close, adding to a 4.9 percent slump this week, the most since May 2011.
• Hong Kong Doubles Stamp Duty on All Property on Bubble Risk. Hong Kong doubled the sales tax on property costing more than HK$2 million ($258,000) and targeted commercial real estate for the first time as bubble risks spread from apartments to parking spaces, shops and hotels. The stamp duty will increase to 8.5 percent of the purchase price for all properties, Hong Kong Financial Secretary John Tsang said at a briefing today. The Hong Kong Monetary Authority also tightened mortgage terms for commercial properties and parking spaces.
• Economists Warn Fed Risks Losing Control Amid Budget Deficits. Four economists, including a former Federal Reserve governor who has co-written research with Chairman Ben S. Bernanke, warned that losses from the central bank’s more than $3 trillion balance sheet could lead to the Fed losing control of monetary policy. “The combination of a massively expanded central bank balance sheet and an unsustainable public debt trajectory is a mix that has the potential to substantially reduce the flexibility of monetary policy,” the economists write. “This mix could induce a bias toward slower exit or easier policy, and be seen as the first step toward fiscal dominance. It could thereby be the cause of longer-term inflation expectations and raise the risk of inflation overall.” The conclusion from economists, including Frederic Mishkin, a governor at the central bank from 2006 to 2008 and an academic collaborator with Bernanke before that, will be presented at the U.S. Monetary Policy Forum in New York. Their paper serves as a high-profile warning to an audience including Boston Fed President Eric Rosengren, Fed Governor Jerome Powell and St. Louis Fed President James Bullard. 
• Gasoline Rally Seen Fueling U.S. Stock Losses: Chart of the Day. (graph) 
• Aluminum Drops for Fifth Day as China Output Adds to Supplies. Aluminum fell for a fifth straight day, the longest slump in two months, on signs that increasing output in China will add to a global glut. Global output increased 5.7 percent in January from a year earlier to 3.917 million metric tons, the International Aluminium Institute said Feb. 20. Chinese production surged 16 percent, the IAI figures showed. Production exceeded demand by 419,400 tons last year, figures from the World Bureau of Metal Statistics showed this week.
• Fattened Margins Seen Shrinking 40% at Banks: Mortgages. Record mortgage profits that drove earnings at Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) are fading as increased competition keeps the rates banks are offering on new loans near all-time lows. The amount that lenders make from packaging each loan into securities and selling them to investors may be down as much as 40 percent from last quarter, Compass Point Research and Trading LLC estimates, as banks absorb most of the costs of tumbling bond prices.

CNBC:

• Italy Goes Down to the Wire as Nervous Investors Watch. Two of the four leading candidates in the Italian election are convicted criminals. Such is the state of politics in this highly-indebted country as Italians go to the polls this weekend to choose a new government. Recent market action shows global investors are nervous about the outcome.
• Pimco's Gross: Fed Not Vigilant Enough. (video) Pimco Founder Bill Gross called out the Federal Reserve on its vigilance in three major areas, during a CNBC interview on Friday. "I don't think the Fed is vigilant in terms of the negative aspects of zero-bound rates," Gross said in an appearance on "Squawk Box" with St. Louis Fed President James Bullard. "I don't think they're vigilant in terms of other central banks and their quantitative easing policies," he added. "I don't they're vigilant in terms of asset prices."
• More States Consider to Ban Credit Card Surcharges. 
• They Bailed On Their Homes - Now They Want Back In. Home sales are slowly climbing back, thanks to investor demand, improving consumer confidence in housing, and the surprising return of former homeowners who once walked away from their commitments. These so-called, "strategic defaulters," some of them investors and some owner-occupants, are coming back to the market, despite damaged credit, and apparently the market is welcoming them back.

Zero Hedge:

• Spain's "Inverse Austerity" Leads To Multi-Year High Budget Deficit. 
• ObamaCare: The Neutron Bomb That Will Decimate Employment. 
• Franco-German Divide Nears Record High. (graphs) 
• Europe's €1.7 Trillion Maturity Cliff In A Declining Excess Liquidity Context. (graph) 
• Bernanke: "There Is No Bubble". 
• Dr. Copper Sends A Deja Vu Warning Signal. (graphs) 
• What The 'Real' Money Thinks Of The Italian Election.

Business Insider:

• Chinese Hackers Have A Weapon Of Mass Destruction That No One Is Talking About. 
• We Now Have Definitive Proof That Higher Taxes Are Bad News For Consumption. 
• It Looks Like Europe Will Do The Unthinkable To Banker Bonuses. 
• 40 Obvious And Painless Ways For The US To Cut Its Budget. 
• Jon Stewart Tears Into Obama: 'What Is In Those Drone Memos That Is So Terrible?'
• China Admits Pollution Has Caused 'Cancer Villages'. 
• Obama's New Bonds Are Clearly A Gimmick To Hide Debt.  
• BREAKING: JUDGE GRANTS GREENLIGHT'S MOTION TO BLOCK APPLE VOTE. 
• Here's How Washington Insiders Think The Sequester Fight Is Going To Go Down. 
• I Have Seen The Scariest Chart In Europe — And It Very Much Resembles This One.

Reuters:

• Darden(DRI) warns on third-quarter profit, cuts FY forecast.Restaurant operator Darden Restaurants Inc cut its full-year profit forecast for the third time this year, as it expects a severe winter coupled with higher payroll taxes and gasoline prices to hurt third-quarter earnings. Darden's forecast underscores the pressure U.S. consumers are facing due to the Jan. 1 expiration of a 2 percentage point cut in payroll taxes, a delay in income tax refund payments and a 30 cent increase in gasoline prices this year through last week.
• METALS-Copper slides to two-month low on global economy concerns.
• Euro hits 6-week low as European bank repayments disappoint. 
• Political problems await when Fed needs to reverse policy -Bullard. Political problems await the U.S. Federal Reserve when it comes time to reverse its very accommodative monetary policies, Federal Reserve Bank of St. Louis President James Bullard said on Friday. "We're going to pay interest on reserves to large banks in the U.S., and to foreign banks, to the tune of tens of billions of dollars, at a time when we're not going to pay anything back to the U.S. Treasury," Bullard said in describing the part of the Fed's planned strategy for the future. "That sounds like a recipe for political problems."
• Abercrombie(ANF) holiday sales down, gives soft forecast. Abercrombie & Fitch Co on Friday reported a drop in comparable sales during the holiday quarter on weakness at its overseas stores and in its Hollister chain, and the youth retailer warned of a sluggish start to the new fiscal year.
  Shares were down 6.4 percent to $45.96 in midday trading.
• Brazil inflation cools less than expected in mid-February. 
• Fed's Bullard-Policy to stay easy despite exit chatter. The U.S. Federal Reserve will keep its monetary policy stance loose for a long while despite increasing signs of concern among policymakers about the potential costs of asset buying, a top Fed official said on Friday. "Fed policy is very easy and it's going to stay easy for a long time," James Bullard, St. Louis Fed president, said in an interview with CNBC television.

Telegraph:

• Eurozone to stay in recession for another year. Unemployment in Europe is "unacceptably high" and threatens "grave social consequences", the European Commission has warned as it painted a gloomy picture of the eurozone's troubled economy.
• France is a 'problem child', says Merkel ally. A leading member of German Chancellor Angela Merkel's conservatives said France was a "problem child" in the eurozone and must scrap its 35-hour work week as well as push back its retirement age.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.57%

Sector Underperformers:

• 1) Oil Tankers -1.31% 2) Coal -1.23% 3) Steel -.70%
  

Stocks Falling on Unusual Volume:

• INT, ANF, TV, BTU, SFY, NTT, MMSI, EBIX, VOLC, MRC, TRLA, AHS, NDSN, CEC, RNF, RAX, AGU, RWT, NCMI, SATS, BLMN, OFIX, TPC, CLGX, EQIX, AYR, MDCO, ELLI, CW and MRC

Stocks With Unusual Put Option Activity:

• 1) RDN 2) DRI 3) JWN 4) AIG 5) HPQ
  

Stocks With Most Negative News Mentions:

• 1) CF 2) POT 3) INT 4) AGU 5) VOLC
  

Charts:

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