Bear Radar

Style Underperformer:

• Small-Cap Growth -1.60%

Sector Underperformers:

• 1) Steel -2.60% 2) Computer Hardware -1.82% 3) Homebuilders -1.81%

Stocks Falling on Unusual Volume:

• GYRO, SEMG, RNR, LAMR, RGEN, ICLD, SWFT, SNY, TTF, SOXX, TEO, LVNTA, ADEP, UIHC, ANIK, AAXJ, CMGE, GIL, MPLX, VALE, VXUS, TDW, COLM, PSXP, ABB, KS, LNKD, AMBA, ISIL, ATHL, ZLTQ and ACET

Stocks With Unusual Put Option Activity:

• 1) EWY 2) UNG 3) SLB 4) MGM 5) BHI
  

Stocks With Most Negative News Mentions:

• 1) WFC 2) AMZN 3) INTC 4) EBAY 5) ADI
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.71%

Sector Outperformers:

• 1) Gold & Silver +3.29% 2) Hospitals +1.27% 3) Gaming +1.14%
  

Stocks Rising on Unusual Volume:

• ORMP, KNDI, CROX, ONVO, YRCW, ASNA, CHS, ANN, X, RGLD and SPLK

Stocks With Unusual Call Option Activity:

• 1) PLUG 2) LPX 3) MCP 4) CYH 5) LAMR

Stocks With Most Positive News Mentions:

• 1) AAL 2) ARIA 3) TWTR 4) URBN 5) CROX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Chinese Manufacturing Gauges Drop as Xi Grapples With Risks. Chinese manufacturing indexes fell in December, underscoring challenges for President Xi Jinping as he tries to sustain growth in the world’s second-largest economy while rolling out reforms. A Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics fell to 50.5 from 50.8 the previous month, according to a statement today, and a separate gauge compiled by the statistics bureau and logistics federation released yesterday declined to 51 from 51.4.

• Hyundai-Kia Forecast Slowest Sales Growth in Eight Years. Hyundai Motor Co. (005380) and affiliate Kia Motors Corp. (000270), South Korea’s two largest automakers, forecast their weakest sales growth in eight years as competition intensifies and the stronger won hampers exports. Hyundai and Kia’s combined deliveries will increase 4 percent to 7.86 million vehicles in 2014, Chung Mong Koo, chairman of both automakers, told employees during a new year address in Seoul today. That’s the slowest growth since 2006 and falls short of the 8 million units projected based on the average estimate of five analysts surveyed by Bloomberg News. 

• Singapore GDP Contracted Last Quarter as Output Eased: Economy. Singapore’s economy shrank for the first time in five quarters after its manufacturing and services industries weakened. Gross domestic product fell an annualized 2.7 percent in the three months to Dec. 31 from the previous quarter, when it expanded a revised 2.2 percent, the trade ministry said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 1.3 percent contraction.

• China’s Stocks Decline After Manufacturing Gauges Show Slowdown. China’s stocks retreated, led by energy and consumer companies, after gauges of manufacturing in the world’s second-largest economy fell. Yanzhou Coal Mining Co. and Datong Coal Industry Co. paced declines among energy stocks. Kweichow Moutai Co. (600519) and Wuliangye Yibin Co., the nation’s biggest liquor makers, dropped at least 1.7 percent. Bullion producer Shandong Gold Mining Co. jumped 6.1 percent after scrapping an asset-purchase plan. The Shanghai Composite Index (SHCOMP) dropped 0.4 percent to 2,106.70 at the 11:30 a.m. break. It slid 6.8 percent last year, making it the worst-performing benchmark equity index in Asia.

• Asian Stocks Drop After China Manufacturing Gauges Slide. Asian stocks dropped, with a regional index of equities retreating from a three-week high, after gauges of manufacturing in China declined, underscoring challenges for President Xi Jinping as he tries to sustain economic momentum while rolling out reforms. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, fell 1.2 percent in Hong Kong. Hyundai Motor Co. and Kia Motors Corp. fell at least 4.7 percent after South Korea’s largest automakers forecast their weakest sales growth in eight years. BHP Billiton Ltd., Rio Tinto Group and Fortescue Metals Group Ltd., Australia’s biggest iron-ore exporters, gained at least 0.6 percent as shipments from the world’s No. 1 exporter of the commodity resumed after a cyclone. The MSCI Asia Pacific excluding Japan Index slipped 0.5 percent to 466.04 as of 11:41 a.m. in Hong Kong, erasing gains of as much as 0.2 percent. Japanese markets are closed for a holiday. 

• Gold Rebounds With Silver. Gold rallied from its worst year in more than three decades as a decline to a six-month low was seen spurring physical purchases, potentially prompting some investors to reverse bets on lower prices. Silver jumped. Bullion for immediate delivery traded at $1,224.09 at 12:03 p.m. in Singapore from $1,205.65 on Dec. 31, when prices sank to $1,182.27, the lowest level since June 28. 

• Rebar Rises First Time in Three Days as Property Prices Advance. Steel reinforcement-bar futures in Shanghai climbed for the first time in three days as rising new home prices in China signaled housing construction will increase and a manufacturing gauge showed continued expansion. Rebar for May delivery on the Shanghai Futures Exchange gained as much as 0.5 percent to 3,587 yuan ($593) a metric ton and traded at 3,582 yuan by 10:49 a.m. local time.

• Fiat Agrees to Buy Rest of Chrysler in $4.35 Billion Deal. Fiat SpA (F) agreed to buy the remaining stake in Chrysler Group LLC owned by a United Auto Workers retiree health-care trust in a $4.35 billion deal, the last step needed before the Italian and U.S. carmakers can merge to create the seventh-largest automaker. Sergio Marchionne, chief executive officer of both carmakers, structured the deal, announced yesterday, so that Chrysler puts up most of the cash, easing strains on the Italian parent as it seeks to end losses in Europe.

• New Year Storm to Dump Foot of Snow From NYC to Boston. Almost a foot of snow is forecast for the New York area, potentially snarling travel across the U.S. Northeast following the New Year’s Day holiday. The storm may give way to the coldest temperatures so far this season.

Wall Street Journal: 

• De Blasio Vows to Shape a Liberal New York. New Mayor Outlines Proposals on Taxes, Police Stops, but He Faces Challenges. New Mayor Outlines Proposals on Taxes, Police Stops, but He Faces Challenges.

• A Few Brave Investors Scored Huge, Market-Beating Wins. Gold Bears and Stock Bulls Were 2013's Victors. A trader who made more than $100 million from a $10 million bet against gold. A hedge fund that gained 42% after a bullish wager on stocks. A firm that saw returns of 48% thanks in part to soaring Japanese stocks. These were among the winning investors who managed to rack up huge gains forecasting a handful of key shifts in a year that vexed many market gurus.

• WSJ Columnists Sound Off on 2014. The Wall Street Journal's Columnists Give a Glimpse of What to Expect This Year.

• The Economic Hokum of 'Secular Stagnation'. Blaming the market for the failure of bad government policies is no more persuasive now than it was in the 1930s. The evidence continues to mount that government policy has been to blame for the disappointing economic performance in recent years. Yet many don't want to hear it, and they offer a series of alternative explanations including most recently the re-emergence of a chestnut, "secular stagnation." When it became clear that the recovery from recession—which officially ended in mid-2009—was unprecedentedly weak, policy makers found an excuse in the depth of the financial crisis. Treasury Secretary Tim Geithner argued in August 2010 that "recoveries that follow financial crises are typically a hard climb. That is reality." This argument is put forth frequently by government officials, and it's loosely based on a popular 2009 book by Carmen Reinhart and Kenneth Rogoff, "This Time Is Different."

Fox News:

• Religion enters ObamaCare debate as Sotomayor halts mandate for group of nuns. Supreme Court Justice Sonia Sotomayor put religion at the forefront of the ObamaCare debate by offering reprieve to nuns who want to opt out of the Affordable Care Act. Sotomayor issued the order late Tuesday, one day before parts of the health care law were set to go into effect.

• ‘Rate Shock’? ObamaCare launch brings renewed concern over insurance tax. New Year's Day marks the start of coverage under ObamaCare for millions of people -- but it also marks the start of a massive tax increase which could further inflate premiums. Beginning Wednesday, the Affordable Care Act imposes an annual fee on health insurers. The fee is projected to bring in $8 billion next year and roughly $100 billion over the next decade, making it one of the biggest under the law.

MarketWatch.com:

• Thai political crisis worsens. Antigovernment protesters across Southeast Asia took to the streets to mark the New Year, with Thailand lurching further toward a full-blown crisis after election officials Wednesday said demonstrators are close to achieving their goal of preventing fresh polls from going ahead.

CNBC:

• US consumers a hard sell for traditional retail. If there was one lesson from this year's holiday shopping season, it is that many traditional retailers are having to work a lot harder to persuade Americans to open their pocketbooks.

• Doctors, hospitals expect confusion as Obamacare starts. Hospitals and medical practices across the United States are bracing for confusion and administrative hassles as new insurance plans under President Barack Obama's healthcare law take effect on Wednesday.

• Five things that could go wrong in 2014.

Zero Hedge:

• Stephen Roach Warns China's Policy Incoherence Has Become Evident.

• How Will The Economy Improve In 2014 If Almost Everyone Has Less Money To Spend? (graph)

• Obamacare Goes Live Today: Here Is The Next Big Problem.

• JPMorgan(JPM) Presents "The Era Of Central Bank-Driven Equity Rallies".

• But the Progressives Told Us Abenomics Would Be Great for Japan. (graph)

• Japanese Population Plunges By Record In 2013.

ValueWalk:

• 55 Tax Cuts About To Expire.

Business Insider:

• I Decided To Delete All My Facebook(FB) Activity, And It Was Incredibly Hard.

• Iraq Had Its Most Violent Year Since 2008 — And The Future Could Be Much Worse.

• Thousands March In Hong Kong In Escalating Battle For Democracy.

• LIVE: THOUSANDS OF COMPANIES AROUND THE WORLD REVEAL THE STATE OF THE ECONOMY.

Reuters: 

• Investors continue to pull out from DoubleLine's flagship fund. Jeffrey Gundlach's DoubleLine Total Return Bond Fund had outflows of $2.08 billion in December, marking the seventh straight month of investor withdrawals from the fund, data from Morningstar showed on Wednesday.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times:  

• ECB modestly successful in tempering eurozone rates divergence. European Central Bank action has had only modest success in easing big differences in interest rates paid by businesses across the eurozone, which remain near peaks seen at the height of the region’s debt crisis.
  
  Companies in the eurozone’s weakest economies still face significantly higher borrowing costs than rivals in countries such as Germany, according to a cross-market analysis by Goldman Sachs. The extent of the divergence has fallen since a peak in May 2013 but is higher than in mid-2011.

Telegraph:

• Great dollar rally of 2014 as Fukuyama's History returns in tooth and claw. China and Japan are on a quasi-war footing, one misjudgement away from a chain of events that would shatter all economic assumptions.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.75% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 129.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 105.25 +.25 basis point. 

• FTSE-100 futures +.19%.

• S&P 500 futures n/a.

• NASDAQ 100 futures n/a.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RECN)/.15

Economic Releases
 8:30 am EST

• Initial Jobless Claims are estimated to rise to 342K versus 338K the prior week.

• Continuing Claims are estimated to fall to 2900K versus2923K prior.

8:58 am EST

• Markit US PMI Final for December is estimated at 54.7 versus 54.7 in November.

10:00 am EST

• ISM Manufacturing for December is estimated to fall to 56.8 versus 57.3 in November.

• ISM Prices Paid for December is estimated to rise to 53.0 versus 52.5 in November.

• Construction Spending for November is estimated to rise +.7% versus a +.8% gain in October.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Manufacturing PMI, China Services PMI and the weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial 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 day.

Stocks Slightly Higher into Final Hour on Weaker Yen, Seasonality, Investor Performance Angst, Commodity/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.29 +5.4%

• Euro/Yen Carry Return Index 150.97 -.27%

• Emerging Markets Currency Volatility(VXY) 9.24 -.11%

• S&P 500 Implied Correlation 50.63 unch.

• ISE Sentiment Index 178.0 +93.48%

• Total Put/Call .65 -10.96%

• NYSE Arms 1.02 -.97% 

Credit Investor Angst:

• North American Investment Grade CDS Index 62.34 -2.20%

• European Financial Sector CDS Index 87.20 -.30%

• Western Europe Sovereign Debt CDS Index 59.69 -.43%

• Emerging Market CDS Index 273.80 +.03%

• 2-Year Swap Spread 10.5 +1.0 basis point

• TED Spread 18.0 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.25 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .07% +1.0 basis point

• Yield Curve 265.0 +6.0 basis points

• China Import Iron Ore Spot $134.20/Metric Tonne unch.
  

• Citi US Economic Surprise Index 52.20 +2.0 points

• Citi Emerging Markets Economic Surprise Index -6.40 +.3 point

• 10-Year TIPS Spread 2.23 +2.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +99 open in Japan

• DAX Futures: Indicating +49 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech 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’s Dec. New Home Prices Rise Most in 2013: SouFun. China’s new home prices in December jumped by the most last year even as the country’s biggest cities tightened property controls to moderate price gains. The average price rose 12 percent from a year earlier to 10,833 yuan ($1,789) per square meter (10.76 square feet), SouFun Holdings Ltd., the nation’s biggest real estate website owner, said in an e-mailed statement yesterday based on a survey of 100 cities. Prices climbed 0.7 percent from November. 

• China’s Tianjin to Begin Restricting Car Population, Xinhua Says. China’s northern Tianjin municipality will begin restricting its car population next year to control traffic congestion and air pollution, the official Xinhua News Agency reported. Only 100,000 new license plates will be issued in Tianjin next year, of which 60,000 will be distributed by lottery and the rest auctioned off for a minimum bid of 10,000 yuan ($1,650) each, according to Xinhua. Government departments will be banned from buying new official cars and all proceeds from the auctions will go to support public transportation, Xinhua reported, citing a plan approved by the Tianjin government.

• Revlon to Exit Operations in China, Cut 1,100 Jobs. Revlon Inc. (REV), the maker of cosmetics under its namesake and Almay brands, will cease operations in China and eliminate about 1,100 positions, including 940 beauty advisers, as it restructures its struggling business. 

• Toyoda Predicts Emerging Markets Slowdown to Persist This Year. A slowdown in emerging markets will extend into this year, compounding uncertainty over demand in China and at home, according to a group representing Japan’s auto manufacturers. “A deceleration is seen in emerging markets that have been growing rapidly until now,” Akio Toyoda, president of Toyota Motor Corp. (7203) and chairman of the Japan Automobile Manufacturers Association, said in a statement. “This year, the situation is unpredictable.” Slowing demand in emerging markets including India, Thailand, Brazil and Russia has marred an earnings boom for Japanese exporters as the weaker yen drives up profits.

• Europe Stocks Post Best Year Since 2009 Before U.S. Data. European stocks advanced, with the Stoxx Europe 600 Index posting its biggest annual gain since 2009, amid shortened trading hours for New Year’s Eve before American consumer confidence and housing data. SBM Offshore NV added 1 percent for its longest winning streak in two months. Real estate companies gained, with Land Securities Group Plc and Unibail-Rodamco SE increasing more than 1.5 percent. Banco Comercial Portugues SA dropped 1.3 percent for its worst two-day slump in almost six months. The Stoxx 600 added 0.3 percent to 328.04 at 1:53 p.m. in London, extending its rise this year to 17 percent as the European Central Bank pledged to keep interest rates low for an extended period.

• U.S. 10-Year Yield Climbs to 2-Year High as Data Stoke Fed Bets. Treasuries fell, pushing 10-year note yields to the highest level in more than two years, as gains in U.S. consumer confidence and home sales bolstered bets the Federal Reserve will end bond purchases next year. Thirty-year bond yields also reached the highest since 2011. The 10-year yield climbed six basis points, or 0.06 percentage point, to 3.03 percent at 2 p.m. New York time, according to Bloomberg Bond Trader prices. It was the highest level since July 2011.

• Copper Falls, Capping Annual Drop, as Global Supply Gains. Copper prices fell in London, capping a 7.2 percent annual decline, as inventories in 2013 climbed for the first time in four years. Stockpiles monitored by the London Metal Exchange gained 14 percent this year. Mine openings and expansion from Peru to Mongolia will leave a supply surplus of 127,000 metric tons in 2014, Barclays Plc has forecast. Economic growth in China, the world’s biggest user of the metal, has slowed every year since 2010.

• Commodities Set for First Drop in 5 Years as Corn to Gold Tumble. Commodities headed for the first annual drop in five years as supply exceeded demand for corn to sugar to nickel and after investors lost faith in precious metals as a store of value amid signs economies are improving. The Standard & Poor’s GSCI gauge of 24 raw materials fell 0.4 percent to 633.51 by 1:44 p.m. in London for a 2 percent decline this year. Corn led the retreat with a 39 percent plunge, with silver and gold the next worst performers. Commodity-fund investments fell by a record $88 billion to $332 billion in the first 11 months, Barclays Plc estimates. 

• If 2013 Was Hard on Obamacare, Just Wait for 2014.

Fox News:

• Politicians, companies see green as FAA approves drone test sites. Are drones the engine of the next economic boom? Officials in the six states selected Monday to develop drone test sites certainly seem to think so. Despite concern about government surveillance dominating the headlines this year, those behind the successful bids ended 2013 cheering over the possibility of a new commercial drone industry. "This is wonderful news for Nevada that creates a huge opportunity for our economy," Senate Majority Leader Harry Reid, D-Nev., said in a statement, after his state was selected as one of the six sites.

• Passengers, crew stuck on ship trapped in Antarctic ice ring in 2014. Passengers and crew who set off on an expedition to prove climate change are ringing in the new year in the same place where they have been for the past week: stuck in ice at the bottom of the world. The 74 scientists, tourists and crew on the Russian ship MV Akademik Shokalskiy, which has been trapped near Antarctica since last Tuesday, are expecting to be airlifted from the ship by a helicopter.

MarketWatch: 

• U.S. and China: When the giants unwind by Andy Xie. Commentary: Withdrawal of stimulus could well cause a fresh crisis.

CNBC:

• Housing market could be facing another bubble: Shiller. (video)

• Watch Art Cashin: Two key focal points for 2014. (video)

ZeroHedge:

• The Best And Worst Hedge Funds Of 2013.

• Poverty In Italy Rises To All Time High.

• When Risk Is Separated From Gain, The System Is Doomed.

• Case Shiller Index Rises At Fastest Annual Pace Since 2006; Detroit Home Prices Soaring 17.3%. (graph)

• Chicago PMI Tumbles As Inventories Collapse Most Since 1977. (graph)

• The Trends To Watch For In 2014.

ValueWalk:

• The Crisis of the Middle Class and American Power: Stratfor. 

• Charles De Vaulx: We worry About Massive Misallocation of Capital In China.

Business Insider:

• APPLE(AAPL): We Had No Idea The NSA Has A Way To Spy On Your iPhone.

• KRAUTHAMMER: The New York Times' Benghazi Bombshell Was Published To 'Protect Hillary'.

NY Post:

• NY State Probing Insurer for Booting 2,000 Doctors. State Attorney General Eric Schneiderman is probing insurance giant UnitedHealth(UNH) for booting 2,000 New York doctors from its Medicare Advantage health plan.

c/net:

• iPhone scores 100,000 China Mobile preorders -- analyst.

Reuters: 

• Chinese recycling tycoon says he wants to buy New York Times. An eccentric Chinese recycling magnate said on Tuesday he was preparing to open negotiations to buy the New York Times Co. Chen Guangbiao, a well-known philanthropist, is something of a celebrity in China. During a particularly murky bout of pollution in January, the ebullient and tireless self-promoter handed out free cans of "fresh air."

Boersen-Zeitung:

• Merkel Adviser Opposes ECB Bond Purchases. ECB buying bonds if European governments fail to implement reforms to combat sovereign debt crisis wouldn't be "healthy," citing Christoph Schmidt, head of German Chancellor Angela Merkel's council of economic advisers.

Bear Radar

Style Underperformer:

• Small-Cap Value +.19%

Sector Underperformers:

• 1) Restaurants -.21% 2) REITs -.20% 3) Oil Tankers -.18%

Stocks Falling on Unusual Volume:

• UNXL, USLV, RUTH, KNDI, AXDX, EXAS, ADUS, APFC, FNGN, DGLD, MGNX, DEST, ACHC, ENZY, CTRP, SATS, ELLI, CLFD and DGX

Stocks With Unusual Put Option Activity:

• 1) AVP 2) ITB 3) IEF 4) DXJ 5) YHOO
  

Stocks With Most Negative News Mentions:

• 1) IBM 2) JCP 3) BTU 4) TWTR 5) WU
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume