Wednesday Watch

Evening Headlines 
Bloomberg: 

• Japan Core Machinery Orders Fall Most Since ’98 in Abe Challenge. Japan’s core machine orders fell in December the most since 1998, signaling business investment growth could slow in coming months and weigh on a recovery in the world’s third-biggest economy. Core orders fell 15.7 percent from the previous month, the Cabinet Office said in Tokyo today, compared with the median estimate of a 4 percent decline in a Bloomberg survey of 31 economists.  

• China Military Spending Threatens U.S. Superiority, Kendall Says. China’s increased defense spending coupled with shrinking U.S. budgets threatens to end U.S. military superiority, a top American procurement official said. “We’ve relied on technological superiority for decades now as one of the fundamental things that sets our military apart and I do see that that’s not assured given the investments being made by China as well as by other powers,” Frank Kendall, under secretary of defense for acquisition, technology and logistics, told reporters in Singapore today.

• Emerging-Market Sharks Circle Reserves in Rapid Dive: Currencies. Foreign-exchange reserves are emerging as the latest battleground between traders and developing nations trying to stem the worse rout in their currencies since 2008.

• Asian Stocks Climb as Aussie Rises After China Data. Asian stocks climbed for a sixth day, led by Japanese shares, while the Australian dollar rose to a one-month high after Chinese trade data exceeded estimates. Gold slid, halting a five-day gain, and South Korea’s won strengthened. The MSCI Asia Pacific Index added 1 percent as of 11:19 a.m. in Tokyo, where the Topix Index rose 1.5 percent after being closed yesterday for a holiday.

• Rebar Near 17-Month Low as Rising Ore Imports Swell Stockpiles. Steel reinforcement-bar futures in Shanghai traded near the lowest level in more than 17 months as iron ore inventory climbed amid record imports in January. Rebar for May delivery on the Shanghai Futures Exchange traded at 3,388 yuan ($558) a metric ton at 10:14 a.m. local time. Futures settled at 3,386 yuan yesterday, the lowest close for a most-active contract since September 2012.

• Gold Seen Rising to $1,400 on 100-Day Average by Citi Futures. Gold prices are poised to extend their 2014 rebound and reach $1,400 an ounce, the highest since September, according to technical analysis from Citi Futures and RBC Wealth Management.

• Pimco Boosts Government Holdings as Bonds Gain Most Since 2008. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., raised holdings of Treasuries and government-related debt in January as the U.S. bond market had the best start to a year since 2008.

Wall Street Journal: 

• Janet Yellen Doesn’t Mince Words and More on Her Testimony.

• Car Makers Snip Pricing Now to Avoid Haircuts Later. As Inventories Rise, Detroit Searches for a Goldilocks-like Pricing.

Fox News:

• GOP objects to Obama administration easing immigration rules for terror supporters. The Obama administration's use of an executive directive to ease the rules for people trying to enter the United States or stay in the country even though they have given “limited” support to terrorists or terror groups is causing problems for Republicans working on immigration reform.

CNBC: 

• Yellen just added pressure on emerging markets.

Zero Hedge: 

• Which Hedge Fund Strategies Will Work In 2014: Deutsche Bank's Take.

• Another Bitcoin Flash Crash Imminent? Second Major Exchange Follows MtGox In Suspending Withdrawals. (graph)

• Japan Machine Orders Crumble At Fastest Pace In 22 Years As BOJ Board Member Warns More QE May Not Be Coming. (graph)

• House Passes Clean Debt Ceiling 221-201 With Vast Majority Of Republicans Voting Against.

• Are Animal Spirits Deflating?

• Think China's Credit Crisis Is Over? Don't Look At This Chart. (graph)

• 22 Facts About The Coming US Demographic Shock Wave.

Business Insider: 

• Here's Evidence That Millennials Have It Worse Than Any Generation In 50 Years.

• Here's The MVP Guest List For Tonight's White House State Dinner.

• Thousands Of Flights Cancelled As Yet Another Winter Storm Looms.

• Toyota Has Dealt The Australian Auto Industry A Death Blow.

Forbes:

• Why The Next Financial Crisis Could Be Worse Than 2008.

Washington Examiner:

• House Passes ‘Clean’ Debt Ceiling Increase, Without Conditions – Here Are the 28 Republicans Who Voted for It.

Reuters: 

• Procter & Gamble(PG) cuts outlook on emerging market currency impact. Procter & Gamble Co, the world's largest household products maker, cut its sales and earnings outlook for the year on Tuesday to reflect unfavorable foreign exchange rates in Venezuela and the devaluation of currencies in various developing markets.

• Icahn calls for return of Glass-Steagall - FOX Business. Billionaire activist Carl Icahn, who has been making headlines with his epic battle with Apple Inc. , might have another one on his hands - this time with his banker friends. In an interview with FOX Business Network on Tuesday, Icahn called for the reinstatement of the Glass-Steagall Act, which separated investment banks and commercial banks. "I think what they should do is go back to Glass-Steagall," he told FOX Business. "A lot of my friends at these investment banks are going to be real mad at me for saying it, but I really think that was one of the problems in '08."

• Fed to emerging markets: Think on your policy shortcomings. The U.S. Federal Reserve on Tuesday acknowledged it likely triggered a financial market sell-off in the developing world, but said policies in countries such as Turkey, Brazil and India made them especially vulnerable to external shocks. 

• Graco recalling nearly 3.8 million child car seats in U.S.

Nikkei:

• BOJ's Kiuchi Says More Easing May Do More Harm Than Good. Additional monetary easing to avoid potential economic downturn triggered by April's sales tax increase may bring negative side effects, Bank of Japan policy board member Takahide Kiuchi said in an interview. Kiuchi says it's difficult to tell effectiveness of extra easing in boosting inflation.

China Securities Journal:

• China Iron Ore Inventory at Ports 96.3M Tons. Iron ore inventory at China's 34 ports was 96.3 tons as of Feb. 7, near the historical record high of 100m tons, citing custeel.com.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 136.0 -8.0 basis points.

• Asia Pacific Sovereign CDS Index 106.5 -2.0 basis points.

• FTSE-100 futures +.33%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (OC)/.27

• (DPS)/.84

• (AB)/.43

• (DE)/1.53

• (WCG)/1.15

• (MDLZ)/.44

• (SPWR)/.28

• (CBS)/.76

• (NVDA)/.24

• (CSCO)/.46

• (NTAP)/.71

• (AMAT)/.22

• (Z)/.06

• (ANGI)/.13

• (CAKE)/.58

• (MET)/1.29

• (IPI)/.00

• (WFM)/.44

• (CXW)/.55

• (SPW)/1.82

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,630,000 barrels versus a +440,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -10,000 barrels versus a +505,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,865,000 barrels versus a -2,360,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.41% versus a -2.1% decline the prior week.

2:00 pm EST

• The Monthly Budget Deficit for January is estimated at -$10.0B versus $2.9B in December.

Upcoming Splits

• (LIVE) 3-for-1

Other Potential Market Movers

• The Fed's Bullard speaking, BoE inflation report, $24B 10Y T-Note auction, Australia Unemployment report, weekly MBA mortgage applications report, (RCII) investor day, (SCHW) Business Update, BB&T Transport Conference, BofA Insurance Conference and the Leerlink Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Surging into Final Hour on Less Eurozone/Emerging Markets Debt Angst, Yen Weakness, Diminished US Debt Ceiling Worries, Biotech/Commodity Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.32 -6.16%

• Euro/Yen Carry Return Index 146.02 +.33%

• Emerging Markets Currency Volatility(VXY) 9.13 -1.83%

• S&P 500 Implied Correlation 51.52 -1.62%

• ISE Sentiment Index 97.0 -23.62%

• Total Put/Call .89 -4.30%

• NYSE Arms .72 -54.50% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.07 -3.93%

• European Financial Sector CDS Index 89.54 -5.41%

• Western Europe Sovereign Debt CDS Index 53.0 unch.

• Asia Pacific Sovereign Debt CDS Index 106.48 -1.96%

• Emerging Market CDS Index 319.93 -2.79%

• China Blended Corporate Spread Index 361.71 -.16%

• 2-Year Swap Spread 12.25 +.25 basis point

• TED Spread 19.0 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -4.25 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .05% -1.0 basis point

• Yield Curve 239.0 +2.0 basis points

• China Import Iron Ore Spot $120.0/Metric Tonne -.66%

• Citi US Economic Surprise Index 25.70 +1.1 point

• Citi Emerging Markets Economic Surprise Index 13.10 +.7 point

• 10-Year TIPS Spread 2.17 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +230 open in Japan

• DAX Futures: Indicating +25 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:   

• Brevan Said to Shut Emerging Markets Fund After Losses. Geraldine Sundstrom is leaving Brevan Howard Capital Management LP and the firm is shutting her hedge fund after it lost money amid a rout in emerging markets, according to a person with direct knowledge of the decision. Sundstrom’s Brevan Howard Emerging Markets Strategies Master Fund declined 15 percent last year after a sell off for bonds and currencies, said the person, who asked not to be identified because the matter is private. Her fund, which had $2.7 billion in assets as of last June, fell another 1.6 percent in January after investor concerns that emerging markets would continue to decline, the person said.

• Barclays Cuts Up to 12,000 Jobs as Quarterly Profit Falls. Barclays Plc (BARC), the U.K.’s second-biggest bank by assets, will eliminate as many as 12,000 jobs this year, including more than 800 senior bankers, after fourth-quarter profit tumbled. 

• Europe Stocks Rise as Yellen Says Jobs Recovery Not Over. European stocks rose for a fifth day as Federal Reserve Chairman Janet Yellen pledged to continue reducing stimulus as the economy strengthens. Carmakers posted the biggest gain among 19 industry groups in the Stoxx 600 after Goldman Sachs Group Inc. boosted its growth forecasts for auto sales in western Europe. Michelin & Cie. gained 3.3 percent after maintaining its 2015 earnings projection. Barclays Plc sank 3.8 percent after saying its investment-bank division swung to a loss in the fourth quarter. The Stoxx Europe 600 Index added 1.3 percent to 329.52 at the close of trading, taking its five-day gain to 3.8 percent.

• Farm Profits Seen Falling as Five-Year Crop Boom Ends. A waning boom in U.S. crop prices will cut annual farm profits 27 percent this year from a record, potentially denting demand for Deere & Co. (DE:US) tractors and Monsanto Co. (MON:US) chemicals, the government said. Agricultural net income will be $95.8 billion, down from a revised $130.5 billion last year, the U.S. Department of Agriculture said today in its first 2014 forecast. Income for major crops including corn, soybeans and wheat will be $189.4 billion, down 12 percent, while all expenses for feed, chemicals and other items will be $348.2 billion, down 11 percent. Flat demand for corn to make ethanol and fewer exports to China may halt gains in farmland values after a 37 percent jump since 2009, leaving farmers with less to invest.

• Job Openings in U.S. Decrease in December as Hiring Slows. Job openings in the U.S. fell in December from an almost six-year high and hiring slowed, a sign the labor market cooled at the end of the year. The number of positions waiting to be filled declined by 43,000 to 3.99 million, from a revised 4.03 million the prior month, the Labor Department said today in Washington. Fewer Americans quit their jobs.

• Home Prices Rose in Fewer U.S. Markets in Fourth Quarter. Prices for single-family homes rose in 73 percent of U.S. cities in the fourth quarter, fewer than in the previous three months, as surging values in the past two years started to reduce affordability.

• Hillary Clinton Emerged as Top Obama Ally on Health: Book. Hillary Clinton, once President Barack Obama’s political foe, emerged as his top ally on what would become his signature policy achievement: revamping the U.S. health-care system. She quietly advised administration officials and lawmakers uneasy after a summer of attacks by the small-government Tea Party movement, according to the book “HRC: State Secrets and the Rebirth of Hillary Clinton.” (Crown, 440 pages, $26.). 

• Felons Should Regain Voting Rights After Serving: Holder. Felons who have served their sentences shouldn’t be blocked from voting by state laws that disproportionately affect minorities, Attorney General Eric Holder said.

Wall Street Journal:  

• Fed's Yellen Sets a Steady Policy Course. Change in Pace of Bond-Buying Reduction Would Require Sharp Turn in Economy; Labor Market, Inflation Bear Watching.

• EU Pushes to Globalize Internet Governance. European Commission to Propose Steps to Reduce U.S. Influence on Essential Web Functions.

• Foxconn Working With Google(GOOG) on Robotics. Foxconn has long been associated as the partner for Apple, assembling the majority of the U.S. company’s iPhones and iPads.

Fox News:

• Boehner backs down, says House to vote on 'clean' debt-limit hike. House Speaker John Boehner, in an abrupt shift, announced Tuesday that the House would vote on an increase in the nation's borrowing cap without any strings attached. A senior House GOP leadership source told Fox News that the vote is expected Tuesday night, with lawmakers trying to beat the impending snowstorm.

MarketWatch: 

• Dean Foods warns milk prices are headed even higher.

CNBC:

• Fed's Plosser 'worried' about not raising rates. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said Tuesday history is not on the side of the central bank when it comes to raising interest rates in a timely manner, and the risk is financial markets will force its hand.

• 'This isn't your father's Fed': GOP congressman. (video) The chairman of the House Financial Services Committee questioned on Tuesday the usefulness of the Federal Reserve's forward guidance tool—ahead of new Fed Chair Janet Yellen's testimony to the panel.

ZeroHedge:

• John Taylor's Rebuttal Of Yellen: "There Is Little Evidence Monetary Policy Has Helped Economic Or Job Growth".

• Boehner Keeps On Folding: Now Proposes Clean Debt Ceiling Bill.

• 2013 Wholesale Inventories Rise At Slowest Pace In 4 Years. (graph)

• S&P 500 Jumps To Best 4-Day Run In 13 Months. (graph)

Business Insider:

• Lots Of Major Bitcoin Exchanges Are Under A 'Concerted And Massive Attack' Right Now.

• National Weather Service Calls Storm Headed For Atlanta A 'Catastrophic' Event Of 'Historical Proportions'.

• This Is How The Chinese Economic Disaster Scenario Could Unfold.

• Here's What The 'Severe Shock' Of A Chinese Hard Landing Would Mean For The World.

• KRAUTHAMMER: New Obamacare Delay Is 'The Kind Of Stuff You Do In A Banana Republic'.

Reuters:

• European regulators to exempt some banks from harshest stress tests. Regulators will exempt banks that had mandatory European Commission-approved restructuring plans in place last year - such as Monte dei Paschi di Siena - from the harshest of stress tests in 2014, Italian government officials say. The European Banking Authority (EBA) is due to conduct stress tests of euro zone lenders as part of a sector-wide check up by the European Central Bank before taking it takes on supervision from national regulators in November.

• France's SocGen, BNP prepare retail banking cuts - sources. Paribas and Societe Generale, are preparing to make cuts to their domestic retail operations to help contend with the sluggish economy, union sources told Reuters. Retail banking in France has long been a cash cow for the country's top lenders but over the past two years there has been a slowdown in revenue growth as a stalled economy hit household budgets, triggering a drive to cut costs.

Telegraph: 

• Want a scary view of where the economy is heading? Well here it is.

Bild:

• German Economic Adviser Warns of Further ECB Rate Cut. Another interest rate cut wouldn't have direct economic impact, citing an interview with Christoph Schmidt, head of council of economic advisers.

Bear Radar

Style Underperformer:

• Mid-Cap Growth +.66%

Sector Underperformers:

• 1) Networking -.76% 2) Airlines -.20% 3) Internet +.28%

Stocks Falling on Unusual Volume:

• BLOX, NMM, BNNY, QLYS, DF, CBM, RAX, ZTS, WPX, WBMD, CAG, ECHO, ECOM, AMAG, WPP, NSP, INSM, GTS, CMP, CGEN, CYOU, ACAS, MOH, ATO, LIN, OVTI, AYR, DY, NGL, NUAN, WPP, EHTH, MOH, GRPN and GTAT

Stocks With Unusual Put Option Activity:

• 1) CAG 2) RAX 3) RAI 4) GTAT 5) LNG
  

Stocks With Most Negative News Mentions:

• 1) OVTI 2) BNNY 3) APA 4) SOHU 5) KBH
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.43%

Sector Outperformers:

• 1) Gold & Silver +3.49% 2) Steel +2.06% 3) Oil Service +1.12%
  

Stocks Rising on Unusual Volume:

• CADX, BWP, MNK, SCOR, CALL, TTI, SODA, INVN, DWRE, IRBT, WLT, GWR, GMCR, TDC, STLD and SLCA

Stocks With Unusual Call Option Activity:

• 1) MHFI 2) TQNT 3) CAG 4) S 5) INSM

Stocks With Most Positive News Mentions:

• 1) CVS 2) BA 3) TXN 4) GMCR 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:   

• SEC Faces China Auditor Appeal as Ban Imperils Diplomacy. Chinese affiliates of the four largest accounting firms plan to file an appeal to U.S. regulators as soon as today to reverse an administrative judge’s decision to bar them for six months after they stymied investigations of possible accounting fraud. The Securities and Exchange Commission will have to weigh the punishment just as U.S. and Chinese regulators make strides in overcoming some of the legal conflicts that the auditors say prevented them from cooperating with probes of China-based companies listed on U.S. exchanges. China has signaled that the diplomatic progress could be derailed if the SEC upholds the judge’s Jan. 22 decision. The firms said that day they will submit an appeal, which must be filed by Feb. 12.

• Chinese Coal Firms’ Debt Concerns Sink Shares: Chart of the Day. Shares of China’s biggest listed coal producers have dropped to their lowest valuations on record as falling fuel prices make it harder to repay debt.

• Visa(V) CEO Says China Delays Opening Card-Payments Market. Visa Inc. (V) Chief Executive Officer Charlie Scharf said China isn’t opening as quickly as expected to foreign payment processors and must be viewed as a five- to 15-year opportunity. “It’s going to take a long time for the market to actually open up in a way that we actually do have that level playing field,” Scharf told analysts today in New York during an industry conference sponsored by Keefe, Bruyette & Woods Inc.

• Goldman(GS) Fund Manager Bracing for Australia Yield Surge. Goldman Sachs Asset Management is avoiding Australia’s sovereign bonds and favoring floating-rate debt as it predicts 10-year yields may rise as much as one percentage point this year.

• Asian Stocks Outside Japan Gain Fourth Day Before Yellen Speech. A gauge of Asian stocks outside Japan rose, extending gains into a fourth day and heading for a two-week high, before Federal Reserve Chairman Janet Yellen delivers her first testimony on monetary policy. Zijin Mining Group Co. (2899), China’s biggest gold producer, jumped 5.6 percent in Hong Kong as the bullion’s price in Shanghai rallied to the highest this year. Australia & New Zealand Banking Group Ltd., Australia’s third-largest bank by market value, rose 2.4 percent after posting a 13 percent jump in first-quarter cash profit. Cochlear Ltd. sank 10 percent in Sydney after reporting first-half results and a second-half estimate that suggest the maker of hearing implants will miss its full-year profit forecast. The MSCI Asia Pacific excluding Japan Index advanced 0.9 percent to 448.46 as of 11:08 a.m. in Hong Kong.

• Gold Climbs to 2014 High to Head for Longest Rally Since August. Gold jumped to the highest level since November as investors assessed further cuts to U.S. monetary stimulus and Chinese buyers resumed purchases to extend last year’s record consumption. Silver was set for the longest rally since August. Bullion for immediate delivery rose as much as 0.8 percent to $1,284.34 an ounce, the highest price since Nov. 18, and traded at $1,284.08 by 10:29 a.m. in Singapore. A fifth day of gains would be the longest such run since August. Silver added 0.7 percent to $20.213 an ounce, advancing for an eighth day.

• Rebar Trades Near Lowest in 17 Months as China Inventory Climbs. Steel reinforcement-bar futures traded near the lowest level in more than 17 months as stockpiles of the building material climbed amid weak demand after Lunar New Year holidays. Rebar for May delivery on the Shanghai Futures Exchange fell as much as 0.3 percent to 3,411 yuan ($563) a metric ton before trading at 3,418 yuan at 10:08 a.m. local time. Futures touched 3,380 yuan yesterday, the lowest intraday level for a most-active contract since September 2012.

Wall Street Journal:  

• Health-Law Mandate Put Off Again. No Fines for Most Employers Until 2016 as Firms Pressure White House in Wake of Troubled Rollout. Most employers won't face a fine next year if they fail to offer workers health insurance, the Obama administration said Monday, in the latest big delay of the health-law rollout. The Treasury Department, in regulations outlining the Affordable Care Act, said employers with 50 to 99 full-time workers won't have to comply with the law's requirement to provide insurance or pay a fee until 2016. Companies with more workers could avoid some penalties in 2015 if they showed they were offering coverage to at least 70% of full-time workers.

• Frustrated by Karzai, U.S. Shifts Exit Plans. New Military Approach Would Give Obama Flexibility on Afghan Troop Decision.

• Syrian Regime Loyalists Seethe Over U.N. Aid Operation for Rebel Area. Assad Supporters Accuse Relief Workers of Bias in Helping Deliver Food and Evacuating Civilians.

• What to Watch for in Yellen’s Testimony.

• Obama Rewrites ObamaCare. Another day, another lawless exemption, once again for business. 'ObamaCare" is useful shorthand for the Affordable Care Act not least because the law increasingly means whatever President Obama says it does on any given day. His latest lawless rewrite arrived on Monday as the White House decided to delay the law's employer mandate for another year and in some cases maybe forever.

Fox News: 

• US government reportedly ordering drone strikes based on cell phone location. The U.S. government reportedly is ordering some drone strikes based on the location of terror suspects' cell phones -- without necessarily confirming the location of the suspects themselves -- raising concerns about missiles hitting unintended targets.

CNBC: 

• Google(GOG) strikes big ad measurement deal with comScore. Google signed a major advertising deal with comScore to help the world's largest Internet search provider win more business from big brands like Kellogg. 

• Behind the massive bet against Caterpillar. (video) Caterpillar has had a nice run this year, rising nearly 4 percent, which is enough to make it the second-best performing Dow component. But one giant player appears to think the run is over.

Zero Hedge: 

• Will Austrian Bank Woes Be Again the Catalyst For A European Kondratieff Winter?

• 2014's Best And Worst Performing Hedge Funds.

• BofAML: "Equities Are Set To Top And Roll". (graph)

• The US Macro Cycle (It's Not Different Or Sustainable This Time). (graph)

• What Would Chinese Hegemony Look Like?

• Another Conspiracy Theory Becomes Fact: Meet The Men With The Plan Behind Italy's Bloodless Coup.

Business Insider: 

• The Red-Hot Biotech Sector Has Experts Screaming Bubble. 

Washington Post: 

• Obamacare’s $70 billion pay cut. In his State of the Union address, President Obama urged Congress to “give America a raise.” Well, it turns out that Obama is giving America a $70 billion annual pay cut, courtesy of Obamacare.

Reuters:

• Commodity groups launch next attack on U.S. position limits rule. A group of commodity firms came out against a new U.S. rule to curb market speculation in a letter on Monday, after banks successfully shot down an earlier version of the position limits rule in court. The new rule by the Commodity Futures Trading Commission attracted well over 100 comment letters by industry participants after the agency - which regulates swaps and futures - launched it in November.

• Debt limit rise should be tied to budget cuts -U.S. Senator Cruz. U.S. Senator Ted Cruz, the Tea Party firebrand who egged on Republicans in the House of Representatives during last year's government shutdown battle, said on Monday it would be "irresponsible" for Congress to grant President Barack Obama a debt limit increase without spending reforms.

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:

• Investors turn to ‘shadow’ bond market. The shadows are growing in the corporate bond market as investors turn to derivatives to buy and sell. An increasingly illiquid cash bond market is behind the shift, with banks starting to withdraw from market making.

Telegraph:

• ECB paralysed by German court decision as deflation threatens. The ‘thunderbolt’ ruling on eurozone rescue policies by Germany’s top court marks a serious escalation of Europe’s governance crisis.

China Securities Journal:

• China's Economy Will Be 'Very Difficult' This Year. China's economic operation will continue to be "very difficult" this year as it has accumulated problems that it needs to solve, citing Wu Jinglian, researcher at State Council's Development Research Center. Wu warns about the handling of "dead" cos. as a large number of state cos. with high debt ratio are still depending on subsides for survival.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 144.0 unch.

• Asia Pacific Sovereign CDS Index 108.5 -2.5 basis points.

• FTSE-100 futures +.38%.

• S&P 500 futures +.25%.

• NASDAQ 100 futures +.22%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RAI)/.80

• (HCP)/.74

• (REGN)/2.09

• (ZTS)/.34

• (CVS)/1.11

• (ICE)/1.95

• (DF)/.18

• (OMC)/1.13

• (S)/-.36

• (MOS)/.43

• (FEYE)/-.37

• (FOSL)/2.43

Economic Releases
7:30 am EST

• NFIB Small Business Optimism for January is estimated at 93.9 versus 93.9 in December.

10:00 am EST

• JOLTs Job Openings for December are estimated to fall to 3980 versus 4001 in November. 

• Wholesale Inventories for December are estimated to rise +.5% versus a +.5% gain in November.

Upcoming Splits

• (LIVE) 3-for-1

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Plosser speaking, Fed's Lacker speaking, $30B 3Y T-Note auction, weekly retail sales reports, Goldman Tech/Internet Conference, Stifel Transport/Logistics Conference and the (XLNX) investor day could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology 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.