Bear Radar

Style Underperformer:

• Large-Cap Growth +.47%

Sector Underperformers:

• 1) REITs -.55% 2) Oil Service -.44% 3) Computer Hardware -.30%

Stocks Falling on Unusual Volume:

• KYN, CONN, HAWK, EIG, GDP, PPO, WAC, FCN, BJRI, TAC, GWPH, MIC, CSGP, ASPS, PBPB, RESI, LGCY, CYBX, SM, OIS, YNDX, CCOI, PRLB, TILE, ACHC, DNR, CLMT, UPL, DXCM, OCN, TRS, HMSY, KYN, AB, RESI, TFM, HOS and CCC

Stocks With Unusual Put Option Activity:

• 1) EBIX 2) EWA 3) EWJ 4) RRC 5) CONN
  

Stocks With Most Negative News Mentions:

• 1) TSCO 2) OCN 3) FB 4) EQY 5) AAPL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.49%

Sector Outperformers:

• 1) Gold & Silver +2.29% 2) Gaming +1.96% 3) Airlines +1.53%
  

Stocks Rising on Unusual Volume:

• ELOS, RPTP, PRAA, AWAY, ICLR, RBCN, PWR, CAR, AVG,  BAS, TRN, ARRS, PDCE, TRAK, JACK, TSLA, ALLE, DAN, CROX, HTZ, BMRN, PGTI, IDCC and BLOX

Stocks With Unusual Call Option Activity:

• 1) SWKS 2) COG 3) RRC 4) AWAY 5) CONN

Stocks With Most Positive News Mentions:

• 1) LMT 2) KO 3) FB 4) GMCR 5) DTV
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Japan Trade Deficit Swells to Record as Import Costs Surge. Japan’s trade deficit widened to a record in January as surging import costs weigh on Prime Minister Shinzo Abe’s campaign to drive a sustained recovery. The 2.79 trillion yen ($27.3 billion) shortfall reported by the Ministry of Finance in Tokyo today exceeded the 2.49 trillion yen median estimate in a Bloomberg News survey of 28 economists.

• BOJ Stimulus Impotence Threatens Inflation Aim: Chart of the Day. The Bank of Japan is getting less and less bang for its yen as it expands monetary-stimulus programs aimed at boosting annual inflation to 2 percent. The CHART OF THE DAY shows the so-called money multiplier fell in January to the lowest since 2003, when data became available, signaling the amount of money in the economy dropped relative to funds provided by the BOJ. The ratio of outstanding bank lending to customer deposits is also tracked as it holds near an all-time low. The lower panel shows the yield on Japan’s 10-year government note struggled to maintain gains since dropping to a record 0.315 percent on April 5, the day after the BOJ expanded monthly bond purchases. 

• Japan’s Penny-Pinching Beer Drinkers Show Challenge to Abenomics. Brewers in Japan face an April sales tax increase, stagnant wages and an aging population, the same challenges Abe’s monetary easing and stimulus spending must overcome to sustain a recovery.

• China Factory Gauge Falls to 7-Month Low Amid Financial Risk. A Chinese manufacturing index fell to the lowest level in seven months, adding to challenges for Communist Party officials grappling with risks to the financial system from trust defaults and soured loans. The preliminary February reading of 48.3 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with January’s final figure of 49.5 and the 49.5 median estimate in a Bloomberg News survey of 17 economists.

• Singapore’s Soaring Land Prices ‘Suicidal’ for Developers.

• Yellen Leads Fed Damned Every Way by Emerging Market Angst. Janet Yellen is discovering that when it comes to providing monetary stimulus, the Federal Reserve is damned by emerging markets when it does and damned when it doesn’t. 

• Asian Stocks Drop With Aussie on China PMI; Copper Slides. Asian stocks declined, with the benchmark regional index dropping from the highest in a month, Australia’s dollar weakened and copper slid as a private index on China’s manufacturing dropped to a seven-month low. South Korea’s won led emerging-market currencies lower. The MSCI Asia Pacific Index fell 1.1 percent by 12:15 p.m. in Tokyo.

• Gold Is Seen Losing Stigma by UBS as 2014 Forecasts Increased.

• Rubber Bear Market Boosts Bridgestone as Inventory Swells. Rubber’s bear market is poised to deepen as the global supply glut stretches into a fourth year and stockpiles in China swell, cutting costs for tiremakers. Futures on the Tokyo Commodity Exchange, the international benchmark, will drop as much as 15 percent to 200 yen a kilogram ($1,956 a metric ton) in 2014 from yesterday’s settlement, according to the median of 15 estimates compiled by Bloomberg News. That’s 63 percent below the record high set in 2011.

• Copper Falls Most in a Week on China Manufacturing Data. Copper dropped by the most in a week, leading industrial metals lower, after a manufacturing gauge for China declined more than estimated, damping demand prospects in the world’s biggest user of metals. The contract for delivery in three months on the London Metal Exchange retreated as much as 0.7 percent to $7,134.25 a metric ton, the biggest loss since Feb. 13, and was at $7,139.75 at 11:38 a.m. in Tokyo. Copper has fallen 3 percent this year, extending a 7.2 percent slump last year.

Wall Street Journal: 

• Truce Declared in Ukraine in Wake of Deadly Violence. President Says Negotiations to Begin to Halt Bloodshed. President Viktor Yanukovych bowed to pressure from the West and a widening rebellion at home by agreeing Wednesday to a truce with demonstrators who spent the day staring down riot police across a smoldering no-man's-land in the center of the capital. The move away from confrontation came as the U.S. and Europe—blindsided by the violence that left at least 25 people dead—edged toward imposing sanctions on Ukrainian officials they deem responsible for the crackdown.

• Deadly Clashes in Ukraine. Streaming Coverage:

• U.S. Feels Putin's Sharp Elbows in Ukraine. Obama Learning Moscow Will Go to Great Lengths to Protect Interests in World Hot Spots.

• NSA Weighs Retaining Data for Suits. Rule That Evidence Can't Be Destroyed Would Lead to Expansion of Controversial Phone Program. 

• Fed Puts Rate Increase on the Radar.  Move Before 2015 Remains Unlikely, but Meeting Minutes Suggest Some Inflation Hawks Are Circling. 

• McNider and Christy: Why Kerry Is Flat Wrong on Climate Change. It was the scientific skeptics who bucked the 'consensus' and said the Earth was round. 

MarketWatch.com:

• Citi economic surprise indicator takes a plunge into the negative. Citi economic surprise indicator takes a plunge into the negative. The Citi Economic Surprise Index for the U.S. hit negative 4 on Wednesday, after touching zero on Tuesday for the first time since early November, according to Citi. It notched a recent peak of 72.7 on Jan. 15.

CNBC:

• Market showing signs of fatigue as traders ignore data.

Zero Hedge: 

• China Manufacturing PMI Misses, Tumbles To 7-Month Low. (graph)

• Tesla(TSLA): When Just GAAP Revenues Are Not Enough, Unleash The Non-GAAP.

• Facebook(FB) Blows $16 Billion On SnapChat Competitor WhatsApp; Stock Tanks.

• Venezuelan Protesters Sum It All Up (In One Banner).

• GE(GE) Sues IRS For $658 Million Tax Refund.

• Does The Trail Of Dead Bankers Lead Somewhere? 
• The Chinese Dominoes Are About To Fall: Complete List Of Upcoming Trust Defaults.

Business Insider: 

• Billionaire Investor Ken Griffin Just Made The Largest Donation Ever To Harvard University.

• A Nebraska Judge Just Threw A Potentially Huge Wrench Into The Keystone Pipeline Permit Process.

• John Hussman Discusses The Ominous 'Three Peaks And A Domed House' Stock Market Formation.

• A Bunch Of People Say They Are Ditching WhatsApp Now That Facebook(FB) Is Buying It.

NBC: 

• Homeland Security Alerts Airlines to Possible Shoe-Bomb Threat. The Department of Homeland Security on Wednesday told airlines about a potential new shoe-bomb threat and urged them to pay extra attention to flights from overseas into the United States.

Reuters:

• Appropriate to refresh U.S. Fed's longer-term 'exit strategy' -Williams. The U.S. Federal Reserve should update its longer-term "exit strategy" for winding down its swollen balance sheet to reflect changes in the plan since it was published in 2011, a top Fed policymaker said on Wednesday. 

• Japan manufacturing mood down, seen sliding further -Reuters Tankan. Sentiment at Japanese manufacturers slipped in February for the first time in five months and is seen sliding further, a Reuters poll showed, a worrying sign the economy may be ill-equipped to cope with a planned sales tax hike in April without further stimulus. Companies also voiced concern about weak shipments to China and risks from emerging market economies which are key markets for Japanese goods.

• Tesla(TSLA) gives strong 2014 outlook, shares jump 12 percent. Tesla Motors Inc (TSLA.O), led by billionaire entrepreneur Elon Musk, posted better-than-expected fourth-quarter results on Wednesday and said deliveries of its Model S electric sedan would surge more than 55 percent this year. Tesla shares jumped 11.8 percent to $216.41 in extended trade following the announcement.

Evening Recommendations

•  None of note
  

Night Trading

• Asian equity indices are -1.25% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 135.75 +3.75 basis points.

• Asia Pacific Sovereign CDS Index 104.75 +3.0 basis points.

• FTSE-100 futures -.67%.

• S&P 500 futures -.36%.

• NASDAQ 100 futures -.31%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PWR)/.43

• (DTV)/1.29

• (WMT)/1.59

• (WBMD)/.24

• (JWN)/1.34

• (VMI)/2.66

• (ESRX)/1.12

• (MHK)/1.75

• (PCLN)/8.29

• (GRPN)/.02

• (INTU)/.02

• (HPQ)/.84

• (NEM)/.44

• (PSA)/2.02

Economic Releases
8:30 am EST

• The Consumer Price Index for January is estimated to rise +.1% versus a +.3% gain in December.

• The CPI Ex Food & Energy is estimated to rise +.1% versus a +.1% gain in December.

• Initial Jobless Claims are estimated to fall to 335K versus 339K the prior week.

• Continuing Claims are estimated to rise to 2970K versus 2953K prior.

8:58 am EST

• The Markit US PMI Preliminary for February is estimated at 53.6.

10:00 am EST

• The Philly Fed for February is estimated to fall to 8.0 versus 9.4 in January.

• The Leading Index for January is estimated to rise +.4% versus a +.1% gain in December.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,111,000 barrels versus a +3,267,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -578,000 barrels versus a -1,853,000 barrel decline the prior week. Distillate supplies are expected to fall by -2,111,000 barrels versus a -731,000 barrel decline the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ Minutes, Eurozone Manufacturing PMI, weekly EIA natural gas inventory report, Bloomberg Economic Expectations Index for February, weekly Bloomberg Consumer Comfort Index and the (MCRS) Investor Meeting could also impact trading today.

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

Stocks Lower into Final Hour on Rising Emerging Markets/European Debt Angst, Ukraine Unrest, US Economic Data, Financial/Gaming Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.85 +7.07%

• Euro/Yen Carry Return Index 146.75 -.10%

• Emerging Markets Currency Volatility(VXY) 8.65 +.70%

• S&P 500 Implied Correlation 52.58 +3.04%

• ISE Sentiment Index 100.0 +14.94%

• Total Put/Call .90 +16.88%

• NYSE Arms 1.15 -26.79% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.95 +1.19%

• European Financial Sector CDS Index 89.35 +1.29%

• Western Europe Sovereign Debt CDS Index 52.66 +1.27%

• Asia Pacific Sovereign Debt CDS Index 103.95 +2.09%

• Emerging Market CDS Index 341.54 +3.09%

• China Blended Corporate Spread Index 356.92 +.44%

• 2-Year Swap Spread 13.5 +.25 basis point

• TED Spread 18.25 -3.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -5.25 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .05% +3.0 basis points

• Yield Curve 242.0 +1.0 basis point

• China Import Iron Ore Spot $123.90/Metric Tonne -.4%

• Citi US Economic Surprise Index -4.0 -4.0 points

• Citi Emerging Markets Economic Surprise Index 19.0 -1.2 points

• 10-Year TIPS Spread 2.15 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -12 open in Japan

• DAX Futures: Indicating -32 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/medical/tech sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Ukraine Moves Toward Martial Law as Western Region Splits. Ukrainian President Viktor Yanukovych moved to quell a growing insurgency by granting sweeping powers to the army and police after a region declared independence from his government, risking wider conflict. Reeling from the bloodiest clashes in a three-month standoff, the Russian-backed leader’s security service said today it’s undertaking a nationwide anti-terrorism operation to restore public order and protect state borders. That gives the army the right to search, detain and even fire on Ukrainians in the course of the operation, the Defense Ministry said in a statement posted on the government’s website.

• Russia Cancels Bond Auctions as Ruble Slides, Yields Climb. Russia canceled its bond auctions for the third time in less than a month as the ruble’s slide to a record low drove up borrowing costs.  The Finance Ministry pulled the sales of 10 billion rubles ($280 million) of January 2028 securities and the same amount of May 2020 notes because “bids didn’t adequately reflect the credit quality of the bonds,” it said in website statements. The yield on the 2028 debt rose 18 basis points to 8.62 percent by the close in Moscow, the highest on record. 

• IMF Warns G-20 of Risks of Deflation, Emerging-Market Turmoil. Risks of prolonged market turmoil in emerging markets and of deflation in the euro area are threatening the world’s improved economic prospects, according to the International Monetary Fund staff. In a note prepared for central bankers and finance ministers from the Group of 20, the IMF said the recovery is still weak and “significant downside risks remain.” A January global growth forecast of 3.7 percent for this year, from 3 percent in 2013, hinges on recent market volatility from Turkey to Brazil being short lived, staff wrote.

• Wall Street Girds for China Bribery Probe as IPOs Beckon. Wall Street hiring in Asia is coming under increasing scrutiny in the wake of a U.S. criminal investigation into whether JPMorgan Chase & Co. employed children of China’s elite in violation of anti-bribery laws. 

• Merkel Joins Developed Nations Backing Fed Taper Before G-20. Developed nations are voicing support for the withdrawal of U.S. monetary stimulus and signaling emerging markets will have to cope with the fallout as best as they can. German Chancellor Angela Merkel’s administration sees U.S. monetary normalization as necessary, a government official told reporters in Berlin overnight. The comment echoes Australian Treasurer Joe Hockey, who in a Feb. 13 interview likened Federal Reserve bond purchases to a drug that the world can’t rely on forever. 

• European Stocks Little Changed as Tenaris, Vallourec Drop. European stocks were little changed, erasing their decline in the final 90 minutes of trading, as Tenaris SA (TEN) and Vallourec SA (VK) slid after the U.S. failed to impose anti-dumping duties on South Korea in a preliminary decision. Tenaris and Vallourec, which make steel tubes, slid at least 4.5 percent. Wolters Kluwer NV slid 4.6 percent after saying restructuring costs will reduce its profit margin in 2014. Lafarge SA (LG) and Carlsberg A/S (CARLB) each rose more than 3 percent after posting fourth-quarter profits that beat estimates. The Stoxx Europe 600 Index added 0.1 percent to 334.94 at the close after earlier dropping as much as 0.6 percent.

• WTI Crude Rises With Cushing Supplies Expected to Fall. March futures for ultra low sulfur diesel, a proxy for heating oil, increased 3.62 cents, or 1.2 percent, to $3.1379 a gallon on the Nymex. Volume was 10 percent above the 100-day average. 

• U.S. Steel Drops After U.S. Rules Korea Isn’t Dumping. U.S. Steel Corp. (X), the nation’s largest producer of the metal by volume, fell the most in 17 months after the Department of Commerce rejected its claim that South Korea is selling steel tubing into the U.S. below cost. U.S. Steel fell 5.8percent to $25.18 at 10:52 a.m. in New York, after declining as much as 7.3 percent, the biggest intraday drop since Aug. 23, 2012. 

• Fed to Change Rate Guidance as Unemployment Falls, Minutes Show. Federal Reserve policy makers plan to soon change their guidance for the path of interest rates as unemployment declines toward a threshold for considering an increase in borrowing costs, minutes of their January meeting showed. “Participants agreed that, with the unemployment rate approaching 6.5 percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed,” according to the record of the meeting, the final one led by Ben S. Bernanke before the end of his term as central bank chairman. “Several” Fed policy makers also said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace” of the Fed’s bond purchases $10 billion at each meeting.

• Einhorn Says Don’t Be Fooled by Companies Beating Estimates. Hedge-fund manager David Einhorn cautioned against betting on the extension of a U.S. stock-market rally that he said was fueled by conditions that are difficult to sustain. The Standard & Poor’s 500 Index surged 30 percent last year. The rally strengthened in the fourth quarter as 74 percent of companies beat analysts’ estimates during the earnings season that ended in November. The equity benchmark is little changed this year after recovering from January declines.

Wall Street Journal:  

• Deadly Clashes in Ukraine. Streaming Coverage:

• FCC Plans to Issue New 'Net Neutrality' Rules. Agency Seeks to Prevent Blocking or Slowing Down of Websites by Internet Providers. The Federal Communications Commission said Wednesday that it will craft new rules to prevent Internet service providers from charging companies like Netflix Inc. NFLX -0.68% or Google Inc. GOOG -0.40% a toll to reach consumers at the highest speeds.

• Health Law's Impact Has Only Begun. Insurers Seek Healthy Enrollees, Doctors Educate New Patients, Employers Wrestle With Added Costs.

• Fed's Bullard Sees Steady Fed Taper.

Fox News:

• Is Ukraine seeing first days of civil war? (video)

MarketWatch:

• Tesla(TSLA) needs to hit these numbers to sustain its gains.

CNBC:

• Lockhart: It would take a lot to knock tapering plan off course. The Federal Reserve will likely end its bond-buying program by the fourth quarter unless the economy takes a serious turn for the worse, a top official at the central bank said Wednesday. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said he expects the economy to grow as much as 3 percent this year and that it was too early to know if a spate of weak data signaled fundamental troubles or the temporary effects of a particularly cold winter. He added that he's still comfortable with the Atlanta Fed's forecast for a rate hike in the second half of 2015.

• Natural gas soars on threat of another polar vortex in March. Natural gas futures spiked on forecasts of another arctic air blast descending on North America and unseasonably cold temperatures in March. March futures soared 10 percent, to more than $6 per million BTUs—a more than four-year high. Natural gas is up nearly 44 percent since Jan. 1, after unusually cold weather sparked record demand and forced a massive draw-down in storage. 

• Big Labor’s Mounting Feud with Barack Obama.

ZeroHedge:

• China Training For "Short, Sharp War" With Japan, US Navy Warns.

• Housing Starts Plunge Most In 3 Years; Permits Tumble - Miss By Most In 7 Months. (graph)

• What's Wrong With These Two Charts. (graph)

• Yen Pushes Market Back To Unchanged On The Year (As US Macro Collapses To 6-Month Lows). (graph)

• In 2013 The Fed Bought 150% More Treasurys Than All Foreigners Combined. (graph)

• Stocks Slide After Fed Uberdove Williams Pours Water On Untaper Hopes.

ValueWalk: 

• Notes to the FOMC – John Mauldin.

Business Insider: 

• BEFORE AND AFTER: Kiev's Independence Square. (pics)

• Video Shows Pussy Riot Members Being Beaten By Cops During A Performance In Sochi.

• 3 Reasons Why The Russian Ruble Is Crumbling.

• The Housing Recovery Has Been Deteriorating For Over A Year Now. (graph)

LA Times:

• European regulator concerned about new Fed rules for foreign banks. A top European Union regulator raised concerns Wednesday about new Federal Reserve rules for foreign banks operating in the U.S., complaining the requirements were adopted unilaterally and could place an unfair burden on EU financial firms.

ABC News:

• The Myths of Marijuana: Former DEA Chief Says Pot Legalization a 'Disaster'. (video)
  
  Peter Bensinger warns that marijuana is not as harmless as many believe.

Reuters:

• Nasdaq to roll out 'kill switch' to help catch trading errors. Nasdaq OMX Group plans to roll out a "kill switch" that would cut off trading of its member firms when pre-set limits are breached, the exchange operator said in a regulatory filing.' 

• Shock investment slump and no Sochi surge deepens Russia's economic woes. A dramatic slump in capital investment by Russian companies in January pointed on Wednesday to Russia's ailing economy continuing to deteriorate fast. There was no sign in data of a boost from preparations for the Sochi Olympics as investment fell by 7 percent compared with a year earlier, a huge undershoot compared with analysts' forecasts in a Reuters poll of a 0.5 percent rise. "It's terrible. It's like in 2009," said Natalia Orlova, an economist at Alfa Bank, referring to the year when Russia's economy shrank by 8 percent as the global financial crunch wreaked havoc on corporate finances. The unexpected plunge in investment last month comes after a year of stagnation. It fell by 0.3 percent in 2013, according to official estimates - a major factor behind lacklustre economic growth of 1.3 percent last year.

Telegraph: 

• Turkey spoils emerging market story as politics go haywire. No country so rudely exposes the illusions behind the $8 trillion stampede into emerging markets more than Turkey.

Bear Radar

Style Underperformer:

• Small-Cap Value -.63%

Sector Underperformers:

• 1) Banks -1.51% 2) Alt Energy -1.43% 3) Gold & Silver -1.35%

Stocks Falling on Unusual Volume:

• OAKS, SM, KMP, PBPB, OCR, LZB, APL, ATLS, SN, TS, TEX, SYKE, MFRM, BCOR, PAIL, DRC, NICE, HSTM, RATE, THG, GRFS, NVS, EPAM, CHE, JOSB, ROSE, CLMT, X and GDP

Stocks With Unusual Put Option Activity:

• 1) CNP 2) PNRA 3) HTZ 4) HD 5) KSU
  

Stocks With Most Negative News Mentions:

• 1) NFLX 2) BAC 3) PEP 4) SCTY 5) CA
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume