Bear Radar

Style Underperformer:

• Mid-Cap Value +1.10%

Sector Underperformers:

• 1) Gaming +.29% 2) Gold & Silver +.31% 3) Telecom +.40%
  

Stocks Falling on Unusual Volume:

• WAG, CLMT, BBT, WPZ, IPXL, SDT, CWH, JCP, ABM, SHFL, SDR, MDVN, PBT, PFMT, MBI, ISRG and TNGO

Stocks With Unusual Put Option Activity:

• 1) BIG 2) CREE 3) THRX 4) ALXA 5) SWN
  

Stocks With Most Negative News Mentions:

• 1) MSO 2) TXRH 3) CWST 4) MBI 5) RIG
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.30%

Sector Outperformers:

• 1) Alt Energy +2.95% 2) Semis +1.96% 3) Construction +1.80%
  

Stocks Rising on Unusual Volume:

• PZE, APC, CREE, ZOLT, RDN, SNTS, ASNA, CMRE, SA, SSYS, AYI, CAR, URI, SHLD, VECO, RTI, FOR, ACTG, BGS, PCRX, BMC, CVBF, TER and VNO

Stocks With Unusual Call Option Activity:

• 1) CAR 2) THRX 3) TER 4) CREE 5) JNPR
  

Stocks With Most Positive News Mentions:

• 1) APOL 2) QCOM 3) MSTR 4) AMAT 5) XLNX

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• EU Opens Way for Easier Budgets After Italian Austerity Backlash. European finance ministers opened the way for looser budget policies after a backlash against austerity thrust Italy into political limbo and shattered months of relative stability in European markets. Italy’s deadlocked election, France’s refusal to make deeper budget cuts and protests against the shrinking of the welfare state across southern Europe escalated the rebellion against the German-led prescription for fighting the debt crisis. Economic strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” European Union Economic and Monetary Commissioner Olli Rehn told reporters late yesterday after a meeting of euro- area finance ministers in Brussels.
• Euro Chiefs Won’t Rule Out Cyprus Depositor Losses. European finance ministers left open the possibility of saddling bank depositors and bondholders with some of the costs of an aid package for Cyprus, potentially unsettling markets as the bailout negotiations drag on. Dutch Finance Minister Jeroen Dijsselbloem declined to rule out a “bail in” of Cypriot depositors, even after concern over the treatment of bank account holders prompted the first signs of capital flight from the island. “All the questions on the elements” will be dealt with by late March, Dijsselbloem told reporters after chairing a meeting of euro-area finance ministers in Brussels yesterday.
• Wegelin Must Pay $58 Million in U.S. Tax Prosecution. Wegelin & Co. was ordered to pay U.S. authorities almost $58 million at the end of a criminal case after the Swiss bank pleaded guilty to helping American taxpayers hide more than $1.2 billion from the Internal Revenue Service. 
• China Bull Market Ending as Financials Plunge: Chart of the Day. A slump by a Chinese equity gauge of banks, property developers and insurers in the past month is signaling the end to a bull-market rally by the nation's stocks as the government takes steps to prevent asset bubbles. Peaks in the relative performance of financial shares versus the broader market have foreshadowed bear-market declines in the CSI 300 Index, according to data compiled by Bloomberg. "The stock rally is over," Zhou Binglin, a senior economist at Guosen Securities Co. in Shenzhen, said March 1. Banks and developers are "leading indicators," with real estate accounting for about 20% of the economy, he said. 
• China Boosts Defense Spending as Military Modernizes Arsenal. China will boost defense spending 10.7 percent this year as the government modernizes its military arsenal and adopts a more assertive stance in territorial disputes with its neighbors. Military spending is set to rise this year to 740.6 billion yuan ($119 billion) from 669.1 billion, the Ministry of Finance said in a report.
• RBA Holds Key Rate at 3%, Reiterates Scope to Ease Further. Australia’s central bank kept its benchmark interest rate unchanged at a half-century low and reiterated it has room to cut further if needed to boost demand. Governor Glenn Stevens and his board left the overnight cash-rate target at 3 percent, the Reserve Bank of Australia said in a statement today in Melbourne. The decision was predicted by 27 of 29 economists surveyed by Bloomberg. Two forecast a 0.25 percentage point cut.
• Netanyahu Warns Iran Stalling While Biden Presses Talks. Israeli Prime Minister Benjamin Netanyahu said that Iran is using negotiations over its nuclear program to stall for time to develop an atomic weapon, even as Vice President Joe Biden said the U.S. favors diplomacy to stop Iran from getting one. “Diplomacy has not worked,” Netanyahu, speaking via satellite, today told the largest gathering in Washington of a pro-Israel U.S. lobbying group. Iran is “running out the clock,” he said. “It has used negotiations, including the most recent ones, in order to buy time to press ahead with its nuclear program.”

Wall Street Journal: 

• China Moves to Temper Growth. Property Bubble Is a Key Concern. China's ambitions for more moderate growth come after decades of double-digit increases and are a centerpiece of new leaders' plans to be detailed during the annual National People's Congress, which began Tuesday. "We should unswervingly take expanding domestic demand as our long-term strategy for domestic development," said Premier Wen Jiabao, delivering his final report to the congress after 10 years at the helm. The key to that change, he said, is to "enhance people's ability to consume."
• Italy, Spain Close the Risk Divide. Italy's political uncertainty, coupled with relative stability in Spain, brought the gap between the two countries' bond yields to the narrowest point in almost a year on Monday, Financial markets shuddered when last month's parliamentary election in Italy left Europe's third-largest economy without any clear leadership. Since then, yields on 10-year Italian bonds have risen by half a percentage point to 4.867% on Monday, according to Tradeweb.
• Money-Laundering Suspicion Stalls Europe's Latest Bailout. Cyprus's newly elected government is bargaining for a €17 billion bailout from its euro-zone peers. But the little island won't get a cent until it wrestles with a long-standing issue: money laundering. Cyprus's reputation as a transit point for shady cash, and its unusual connections to Russia, are making many of its would-be rescuers nervous.
• Gardner Denver(GDI) Expected to Fetch More than $75 Per Share From KKR.
• U.S., China Reach Deal on North Korea Sanctions. The U.S. and China have reached a deal on a new set of sanctions against North Korea in response to its test of a nuclear weapon last month, U.N. diplomats said. The resolution, which will enforce some existing sanctions and include new ones, will be introduced at a U.N. Security Council meeting on Tuesday, a diplomat said. China has already voted for three sets of sanctions against its reclusive ally for its past nuclear tests and ballistic missile launches, both banned by the Security Council.
• Young Adults Retreat From Piling Up Debt. Young people are racking up larger amounts of student debt than ever before, but fresh data suggest they are becoming warier of borrowing in general: Total debt among young adults dropped in the last decade to the lowest level in 15 years. A typical young U.S. household—defined as one led by someone under age 35—had $15,000 in total debt in 2010, down from $18,000 in 2001 and the lowest since 1995, according to a recent Pew Research Center report and government data. Total debt includes mortgage loans, credit cards, auto lending, student loans and other consumer borrowing. In addition, fewer young adults carried credit-card balances and 22% didn't have any debt at all in 2010—the most since government tracking began in 1983.
• Venezuela Says Chávez Has New Infection, Breathing Problems Worsen. 
• Carbon Power Politics. The next EPA chief and next phase of the Obama green agenda. President Obama gave his second-term global warming agenda a lot more definition Monday with a new Environmental Protection Agency chief to replace Lisa Jackson. Picking Gina McCarthy, one of her top lieutenants and the architect of some of the agency's most destructive carbon rules, is a sign he intends to make good on his vow of "executive actions" if Congress doesn't pass cap and tax.

MarketWatch.com:

• Pawning your portfolio. Wealthy investors are using their stocks and bonds to get large loans. With loans still hard to come by, wealthy investors are embracing a somewhat surprising and potentially risky strategy: pawning their stocks and bonds. 
• A tale of Chinese dwellers in a degraded land.

CNBC: 

• Tumbling Oil Prices May Have Further to Fall. Oil prices, at 2013 lows, could continue to feel pressure, if the global economy turns out to be weaker than expected and production continues to grow in places like the U.S., Brazil and Iraq, according to James Burkhard, vice president and head of oil market research at IHS. "We're going from three million barrels to four million barrels of spare OPEC productive capacity this year," he said, shortly after participating in a panel discussion at the annual IHS CERAWeek conference in Houston.

Zero Hedge: 

• The Fannie Mac Daddy: Fannie Freddie To Merge Select Operations.
• Did The US Government Sanction The Liquidation Of Lehman Brothers?
• Understanding Europe's "Austrian" Solution - The 'Merkel-Draghi' Wager. (graphs)

Business Insider: 

• JCPenney(JCP) Has Color-Coded Employees To Prepare For Future Firings.
• America's Four Biggest Banks Still Have The Ugliest Loan Books In The Business.
• The Outlook For Young Job Seekers Is Depressing.
  

Reuters: 

• Deutsche Bank(DB) selling block of Vornado shares in Penney(JCP). Deutsche Bank is offering a block of 10 million shares in retailer J.C. Penney that is being sold by Vornado Realty Trust, a source familiar with the offering said on Monday. The news, which saw shares of J.C. Penney fall in after-hours trade, came less than a week after the department store chain reported its sharpest sales drop since announcing a grand transformation plan 13 months ago. Vornado is the Penney's third-largest shareholder and its chairman, Steven Roth, sits on the retailer's board.
• Japan opposition Democrat official: cannot support BOJ nominee Iwata.
• Facebook(FB) hit with fresh IPO-related lawsuit. A Facebook Inc shareholder has sued the social networking company's Chief Executive Mark Zuckerberg and others over its troubled IPO, potentially reviving legal claims that a different court dismissed in February. 
• Moody's sees bankruptcy risk in Detroit fiscal emergency. The city of Detroit would have a potential path to bankruptcy court under a state-appointed emergency financial manager, posing risks to the city's bondholders, Moody's Investors Service said on Monday.

Telegraph:

• Europe faces an impossible challenge - why can't Olli Rehn see it? "There is no alternative". That was again the message this weekend from our old friend Olli Rehn in telling Der Spiegel that the eurozone's miscreant periphery has no option but to stick to the assigned path of budgetary consolidation. With Italy in open political revolt and much of the rest of the Club Med deep in the grips of an apparently inescapable depression, there is, he said, no room for manoeuvre. Normally when something isn't working, you try a different approach, but the luckless European economics chief finds himself so locked into the task of defending the indefensible – the single currency - that he is unable to offer alternatives.

Jiji:

• Ex-BOJ Deputy Says More Money Supply Won't Beat Deflation. Jiji cities an interview with former Bank of Japan Deputy Governor Yutaka Yamaguchi.

Evening Recommendations 
RBC Capital:

• Rated (NFLX) Outperform, target $210.

Night Trading

• Asian equity indices are +.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.50 +.5 basis point.

• Asia Pacific Sovereign CDS Index 85.0 -.25 basis point.

• FTSE-100 futures +.50%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CKP)/.17
• (LNCR)/.61
• (SWHC)/.23
• (PAY)/.49 

Economic Releases
10:00 am EST

• ISM Non-Manufacturing Composite for February is estimated to fall to 55.0 versus 55.2 in January.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lacker speaking, Eurozone Services PMI/Retail Sales, Australia gdp report/rate decision, Brazil rate decision, weekly retail sales reports, IBD/TIPP Economic Optimism Index for March, (XLNX) investor day, Deutsche Bank Gaming/Lodging Conference and the Citi Financial Services Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer 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 Reversing Higher into Final Hour on Dovish Fed Commentary, Short-Covering, Homebuilding/Transport Sector Strength

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 14.24 -7.29%
  

• ISE Sentiment Index 102.0 +22.89%

• Total Put/Call 1.14 -3.39%

• NYSE Arms .87 -22.31%

Credit Investor Angst:

• North American Investment Grade CDS Index 84.74 -1.89%

• European Financial Sector CDS Index 159.05 -2.79%

• Western Europe Sovereign Debt CDS Index 101.49 -1.30%

• Emerging Market CDS Index 242.12 -.74%

• 2-Year Swap Spread 14.0 +.25 bp

• TED Spread 19.75 +1.5 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -20.0 +.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .09% -1 bp

• Yield Curve 164.0 +2 bps

• China Import Iron Ore Spot $148.80/Metric Tonne -1.20%

• Citi US Economic Surprise Index 5.20 -1.5 points

• 10-Year TIPS Spread 2.55 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +103 open in Japan

• DAX Futures: Indicating +40 open in Germany

Portfolio: 

• Higher: On gains in my retail/biotech sector longs and emerging markets shorts
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Italy's Debt Highest Since Dictator Mussolini: Chart. Italy’s public debt rose to the highest level since Benito Mussolini won elections 89 years ago, paving the way for his 20-year dictatorship. The CHART OF THE DAY shows debt jumped in 2012 to 127 percent of gross domestic product from 120.8 percent a year earlier. That’s the most since 1924, when Mussolini won 64 percent of the popular vote in elections that opposition members said were marked by irregularities.
• Grillo’s Party May Consider Senate Walk-Out on Gridlock. Beppe Grillo’s senators-elect, who hold a blocking minority in Italy’s upper house of parliament, may consider staging a confidence-vote walk-out to allow a political rival to form a government and ease gridlock. Grillo’s Five Star Movement is seeking to influence the program of Italy’s next government and would require policy concessions in exchange for a walk-out, said two senators-elect who declined to be identified because no deal has been made. Five Star won’t vote to support any government, they said.
• Trichet Says Policies Aimed at Weaker Currencies Detrimental. Former European Central Bank president Jean-Claude Trichet said policies targeted at weakening a country’s exchange rate can trigger competitive devaluations without having any benefit. “We know that these kind of policies are not positive for all participants,” Trichet said in an interview in Tokyo today. “If all currencies are going down it doesn’t change anything.”
• Euro Approaches Three-Month Low Versus Dollar on Italy Concern. The euro approached the lowest level in almost three months against the dollar as Italy moved toward a new election and before data this week economists said will show the region’s economy shrank in the fourth quarter of 2012.
• China Property Shares Drag CSI 300 Down Most in 2 Years on Curbs. China’s stocks plunged, dragging down the CSI 300 (SHSZ300) Index by the most in two years, after the government ordered more measures to cool property prices and growth in the nation’s services industries slowed. The CSI 300, representing the nation’s biggest companies in the Shanghai and Shenzhen stock exchanges, fell 4.6 percent to 2,545.72 at the close, the most since November 2010, while the Shanghai Composite Index (SHCOMP) slid 3.7 percent to 2,273.40, the most since August 2011. China Vanke Co., the nation’s largest property developer, led a gauge of real-estate companies to the steepest tumble since June 2008. Anhui Conch Cement Co. and Sany Heavy Industry Co. dropped by more than 8 percent.
• Crude Drops Below $90 on Signs of Slowing Chinese Growth. West Texas Intermediate crude fell below $90 a barrel for the first time in 2013 as service industries in China expanded at the weakest pace in five months, adding to speculation that demand growth is slowing. Prices declined for the seventh time in nine days as the expansion of the non-manufacturing industry in China, the world’s largest oil-consuming country after the U.S., was the slowest since September. Measures released March 1 pointed to manufacturing growth cooling. Money managers cut bets on rising oil prices in the week ended Feb. 26, according to data from the Commodity Futures Trading Commission.

Wall Street Journal: 

• China Housing Move Sends a Jolt. An aggressive move by China's government to strike at once-again-surging property prices shows rising concern that repeated tightening measures haven't brought prices fully under control.
• Wealthier Households Carry the Spending Load. 
• PIMCO Warns Italian Bond Market Uncertainty to Remain. The current bout of volatility in the Italian government bond market is expected to persist as the fall-out and political stalemate from the recent Italian election continues to hold sway, according to a senior manager at one of the world's most influential bond investors.

MarketWatch: 

• Fed’s Yellen: Full steam ahead on QE3. While there are some potential costs to the purchases, “at this stage, I do not see any that would cause me to advocate a curtailment of our purchase program,” she said. Yellen is seen as a possible replacement for Fed Chairman Ben Bernanke if he steps aside when his second term ends in January 2014.
• China’s top real-estate CEO sees housing bubble, hopes leaders can fix it: report.
  When asked whether homes in China were too expensive, Wang simply answered yes. He told CBS that the average resident trying to buy an apartment in Shanghai would have to pay more than 45 times his or her annual salary. And when asked if there was currently a bubble in the Chinese property market, he said: “yes of course.”

Fox News:

• Employers hoping for an end to labor pains after NLRB picks ruled 'unconstitutional’.

CNBC: 

• Investors Jump Big Into Bull Market, Buying Apple(AAPL) & Facebook(FB): Survey. Retail investors fully embraced this bull market in February, looking past any threat from the sequester crisis in Washington, D.C., and buying stocks more aggressively than they have in three years, according to a sentiment index from TD Ameritrade.

Zero Hedge: 

• Consumer Health Diagnosis "Grim" As Four Out Of Five Spending Indicators Disappoint. (graphs)
• All Roads Lead To Rome.
• Germany's Revenge: Peugeot German New Car Registrations Collapse by 41%.
• Italian Spreads To Worst In 3 Months Amid Sideways European Day. (graphs)
• The Two Eras Of Financial Globalization: A Flashing Red Warning. (graph)
• Gundlach Says Stocks "Obviously Overbought", Buys "More Long-Term Treasuries In Last Month Than In Four Years".

Business Insider: 

• A Small Band Of German Professors Is The Hottest New Threat To The Future Of The Euro.
• The Fed Is Starting To Prepare For A Future PR Nightmare. The possibility of suspending remittances and carrying unrealized losses could complicate the Fed’s relationships with the rest of Washington and the public. While remittances help the federal government pay down debt, any shortfall in operating income leading to a suspension of remittances would require the Fed to borrow from Treasury. And while unrealized losses have no effect on Fed operations because of the way government accounts for them, they would leave a private company technically insolvent. It is unclear how Washington and the public might react to these circumstances and whether the Fed’s independence might be challenged.
• Barack Obama's Approval Rating Is In An Incredible Tailspin.
• Goldman Sachs(GS) Has Already Figured A Way Around Regulation To Some Of The Riskiest Investments On Wall Street.

CNN:

• World's Biggest Mall a China 'Ghost Town'. New South China Mall in Guangdong Province opened in 2005. With 5 million square feet of shopping area, the mall can accommodate 2,350 stores, making it the largest shopping center in the world in terms of leasable space -- more than twice the size of Mall of America, the biggest shopping center in the United States. At the outdoor plaza, hundreds of palm-trees blend with a replica Arc de Triomphe, a giant Egyptian sphinx, fountains and long-stretching canals with gondolas. Only problem is, the mall is virtually deserted.

New York Times:

• China’s Push to Cool Down Housing Raises Questions. Chinese shares fell the most in two years on Monday as the Shanghai stock exchange’s property index tumbled 9.25 percent. Late on Friday, China’s State Council had announced a new set of policies designed to cool down the housing market.

Reuters:

• World stock funds start year with record high demand -TrimTabs. Funds that invest in world stocks attracted $55.1 billion in new cash from investors in the first two months of the year, a record sum according to research firm TrimTabs Investment Research. The funds, which include mutual funds and exchange-traded funds based in the United States that hold world stocks, exceeded the previous two-month record of $49.1 billion at the start of 2006, the research firm said.
• Brazil stocks fall on global growth concerns.

Financial Times:

• Warning signs for US corporate bonds. Could the bond boom be turning? Warning signs are flashing as investors demand higher yields even on US bonds issued by the world’s largest and safest corporate borrowers.

Telegraph:

• Japan pledge for bold action sparks currency war fears. The man set to head Japan’s central bank has pledged to do “everything possible” to propel the country out of its deflation trap, raising fears that a falling yen will spark a currency war.

Handelsblatt:

• Some ECB policy makers think it should exit Troika because involvement risks central bank's independence.

Le Figaro:

• French Transaction Tax Will Miss 2013 Target. The tax will bring in EU600m to EU800m in 2013, compared with the target of EU1.6b. On the NYSE-Euronext, trading in shares subject to the tax fell 21% between August and November 2012, compared with a 10% drop for shares that are exempt.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.20%

Sector Underperformers:

• 1) Gold & Silver -3.40% 2) Steel -2.13% 3) Oil Service -2.03%
  

Stocks Falling on Unusual Volume:

• PANW, SCSS, NSH, NS, HURN, FWLT, SFUN, CAF, TVL, SPLK, PER, VCRA, RIO, APEI, CKEC, LUK, VCLT, QGEN CHN, TECD, TFM, MFRM, MAA, OVTI, YY, MDR, DRC, OVTI, CAF and TECD

Stocks With Unusual Put Option Activity:

• 1) CME 2) JRCC 3) TSO 4) CNX 5) HES
  

Stocks With Most Negative News Mentions:

• 1) MDR 2) MTZ 3) BRK/A 4) TRB 5) DRC
  

Charts:

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