Stocks Rising into Final Hour on Less Emerging Markets Debt Angst, Central Bank Hopes, Short-Covering, Telecom/Gaming Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.43 +.56%

• Euro/Yen Carry Return Index 145.99 -.11%

• Emerging Markets Currency Volatility(VXY) 8.89 -1.11%

• S&P 500 Implied Correlation 53.81 -.43%

• ISE Sentiment Index 156.0 +59.18%

• Total Put/Call .91 +7.06%

• NYSE Arms .80 -29.96% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.88 -1.0%

• European Financial Sector CDS Index 88.97 +.49%

• Western Europe Sovereign Debt CDS Index 53.0 unch.

• Asia Pacific Sovereign Debt CDS Index 102.44 -.59%

• Emerging Market CDS Index 305.45 -1.85%

• China Blended Corporate Spread Index 361.05 -.38%

• 2-Year Swap Spread 12.25 +1.0 basis point

• TED Spread 20.0 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -6.0 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 232.0 -2.0 basis points

• China Import Iron Ore Spot $118.0/Metric Tonne +.17%

• Citi US Economic Surprise Index -13.20 -1.8 points

• Citi Emerging Markets Economic Surprise Index 14.70 +1.4 points

• 10-Year TIPS Spread 2.17 unch.

Overseas Futures:

• Nikkei Futures: Indicating -35 open in Japan

• DAX Futures: Indicating +4 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/tech/mdedical sector longs

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Hagel Warns Russia on Ukraine Miscalculation Amid Crimea Unrest. U.S. Defense Secretary Chuck Hagel cautioned the Kremlin against making a “miscalculation” in maneuvering ground and air forces near the border with Ukraine, which is still without a full-time government after the toppling of its pro-Russian president. Joined by NATO allies, Hagel issued the warning after Interfax reported that Russia put fighter jets on alert, stepping up a military drill announced yesterday. Adding to tensions, the parliament of the southern Ukrainian region of Crimea was seized by armed backers of union with Russia. 

• Yanukovych to Appear in Russia Tomorrow as Swiss Freeze Assets. Deposed Ukrainian President Viktor Yanukovych will hold a press conference in neighboring Russia tomorrow, one day after an interim government took charge in Kiev and the Swiss government told banks to freeze his assets. Yanukovych will brief reporters in Rostov-on-Don in southern Russia at 5 p.m. Moscow time, state-run RIA Novosti reported, citing a person close to Yanukovych. The location of the briefing will be announced separately, according to RIA. 

• Emerging Outflows Top $11 Billion as Cash Sent to Europe. Investors are stepping up withdrawals from emerging-market exchange-traded funds and shifting into Europe as concern mounts that growth is faltering in developing nations while advanced economies strengthen. Withdrawals from U.S.-based ETFs investing in emerging-market equities and bonds totaled $11.3 billion this year, already surpassing the redemption of $8.8 billion for the whole 2013, according to data compiled by Bloomberg. Funds investing in European assets added $5 billion in the first two months of 2014, compared with $18 billion full-year inflows in 2013.

• RBS Posts Biggest Loss Since 2008 as McEwan Begins Overhaul. Royal Bank of Scotland Group Plc posted the biggest full-year loss since its bailout in 2008 as Chief Executive Officer Ross McEwan outlined plans to return what he called the industry’s least-trusted lender to profit. 

• Allianz Names El-Erian as Chief Economic Adviser. Allianz SE (ALV) named Mohamed El-Erian to the new role of chief economic adviser following his surprise resignation at the insurer’s Pacific Investment Management Co. unit last month. El-Erian, the former chief executive officer and co-chief investment officer at Newport Beach, California-based Pimco, will spend 50 percent of his time working for Allianz, CEO Michael Diekmann said at a press conference in Munich today. He will dedicate the rest of his time to his family and book projects, Diekmann said.

• European Stocks Retreat as Tension Escalates in Crimea. European stocks declined for a second day as tension escalated in Crimea, following Ukraine’s change of government. WPP Plc (WPP) slid 3.5 percent and Allianz SE dropped 2.3 percent after posting profit that missed estimates. Royal Bank of Scotland Group Plc (RBS) slumped 7.7 percent after the state-owned lender reported its biggest full-year loss since receiving a bailout in 2008. Man Group Plc rallied 14 percent after the world’s largest publicly traded hedge-fund firm announced a $115-million stock buyback. The Stoxx Europe 600 Index slipped 0.2 percent to 337.21 at the close of trading. 

• Yen Climbs as Ukraine Tension Boosts Safety Bid; Ruble Declines. “Putin is conducting military exercises and putting Russian forces on high alert,” said Richard Franulovich, the chief currency strategist for the northern hemisphere at Westpac Banking Corp. “That’s risk-negative.” The yen strengthened 0.2 percent to 102.19 per dollar at 1:59 p.m. New York time, rising the most on a closing basis since Feb. 3. The Japanese currency was little changed at 140.07 per euro, having rallied as much as 0.9 percent earlier. The euro climbed 0.2 percent to $1.3707, after falling as much as 0.3 percent.

• Copper Declines to Three-Week Low on China, U.S. Demand Concerns. Copper futures fell to a three-week low in New York on concern that the U.S. recovery may falter as China’s economy slows, hurting demand from the two largest users of the metal. Jobless claims in the U.S. increased by 14,000 to 348,000 in the week ended Feb. 22, the highest in a month and above all forecasts in a survey, a Labor Department report showed today. Chinese manufacturing probably slowed this month, economists surveyed by Bloomberg said before an official gauge due March 1. Copper prices are down 5.8 percent this year. “We need to see some real strong economic data before the market starts trading higher,” Tom Power, a senior commodities broker at RJO Futures in Chicago, said in a telephone interview. Copper futures for delivery in May slid 0.5 percent to close at $3.201 a pound at 1:18 p.m. on the Comex in New York, after touching $318.35, the lowest since Feb. 4. Prices dropped for seven straight sessions.

• Syria’s ‘Calamity’ Leads U.S. Report on Human Rights. The U.S. described the Syrian war as a “human rights calamity,” while citing Russia, China, Egypt, Turkey and other nations for abuses against their citizens in an annual State Department report.

• Yellen Repeats Fed Likely to Keep Trimming Asset Purchases. Federal Reserve Chair Janet Yellen said the central bank is likely to keep trimming asset purchases, even as policy makers monitor data to determine if recent weakness in the economy is temporary. “Unseasonably cold weather has played some role,” she said in response to a question today from the Senate Banking Committee. “What we need to do, and will be doing in the weeks ahead, is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook.”  

• U.S. Retail Chains See First Profit Decline Since Recession. U.S. retailers last quarter suffered their darkest days since the recession. With results in from 62 of 122 retail chains, the industry has posted its first profit quarterly drop since the economic contraction that ended in 2009, according to Retail Metrics Inc. Revenue also rose at the lowest rate since that year, the research firm found. The results paint a grim picture of an industry hit hard by the sluggish job recovery and slow wage growth, which have turned U.S. consumers into a nation of penny pinchers. Earnings are expected to drop 6.1 percent on average during the holiday quarter, according to Retail Metrics data. The broader pool of Standard & Poor’s 500 Index companies, meanwhile, are estimated to see profit rise 8.5 percent.

• Study Finds SEC Staff Sold Shares Before Cases Made Public. People working for the U.S. Securities and Exchange Commission who owned stock in companies under investigation were more likely to sell shares than other investors in the months before the agency announced it was taking enforcement actions, according to a new academic paper.

• IBM(IBM) Begins Cutting U.S. Jobs in $1 Billion Restructuring. International Business Machines Corp. (IBM) began dismissing U.S. workers today, part of a $1 billion restructuring to help the company meet profit goals as it adapts to shifts in the technology industry.

Wall Street Journal:

• Crisis in Ukraine. Streaming Coverage.

• Tensions in Asia Stoke Rising Nationalism in Japan. Young Conservatives, Japan's Version of U.S.Tea Party, Are Fast Gaining Clout. 

Fox News:

• Law prof: Obama power grab threatens to make president 'government unto himself'.

MarketWatch: 

• Charts point to more downside for emerging markets.

CNBC:

• US-China ties could end badly: Scholar. (video) The United States needs to break out of its co-dependent relationship with China before it's too late, the former chairman of Morgan Stanley Asia told CNBC on Thursday. China is already taking steps to reduce its "unhealthy reliance" on the U.S., which has been slower to make reciprocal strides, said Stephen Roach, senior fellow at the Yale School of Management.

ZeroHedge:

• Obamacare: Now Appearing On Your Restaurant Bill.

• Goldman's(GS) Post-Mortem Of Yellen's Second Day Of Congressional Testimony.

• Ukraine Central Bank Promises Liquidity To Local Banks, With One Condition.

• The Reality Behind The New Home Sales Number.

• Bank of America: "No Evidence Of A Strong Rebound In Spending As The Weather Improved". (graph)

• Meanwhile, More Russian Military Vehicles Amass In The Crimean. (pics)

• Initial Weekly Claims Surge To Highest Of The Year. (graph)

• Another Recessionary Print: Core CapEx Posts First Annual Decline Since 2012. (graph)

Business Insider:

• Australia Had An Ugly Day. Dylan Grice summed up the concerns when he wrote that Australia is "a credit bubble built on a commodity market built on an even bigger Chinese credit bubble." 

• Everyone Is Talking About The Recent Disconnect Between Stocks And Bonds. (graph)

• Neither US Nor NATO Has Plans For What To Do If Russia Intervenes In Ukraine.

• Defiant Yanukovych Finds Protection In Moscow.

CNN:

• Gunmen seize government buildings in Ukraine's Crimea, raise Russian flag. Dozens of armed men seized the regional government administration building and parliament in Ukraine's southern Crimean region Thursday and raised the Russian flag in a challenge to the Eastern European country's new leaders. Crimea, a Black Sea peninsula with an ethnic Russian majority, is the last big bastion of opposition to the new political leadership in the capital, Kiev, after Ukrainian President Viktor Yanukovych's ouster Saturday.

NY Post:

• Russian warship in Cuban port while troops train near Ukraine border. In a pair of brazen moves that resembled 1960s Cold War tactics, a Russian warship cruised into a Cuban port Wednesday as President Vladimir Putin massed troops near his country’s border with Ukraine. The Viktor Leonov, an armed Vishnya-class intelligence-gathering ship, was mysteriously docked at the Port of Havana’s cruise-ship area. The warcraft, which has a crew of around 200, is reportedly armed with 30mm guns and anti-aircraft missiles.

Institutional Investor:

• Robert Shiller Says Markets Have Become More Prone to Bubbles. The Nobel laureate contends that investors need to study human nature and history, and void falling victim to groupthink.

Reuters:

• Fed's Fisher says happy with pace of QE withdrawal. Dallas Federal Reserve Bank President Richard Fisher said on Thursday he would like the U.S. central bank to continue scaling back its monthly bond-buying stimulus at the current pace of $10 billion at each policy meeting. If U.S. economic growth picked up significantly, Fisher said, he "of course might be in favour of further reduction", but even if he did support such a step, he said he knew he "wouldn't win the argument".

• Sears(SHLD) trims losses despite 'tough to terrible' holiday quarter. Sears Holdings Corp said on Thursday its sales fell in a "tough-to-terrible" holiday quarter but store closures helped narrow its losses and it made progress in generating more business via the loyalty program it is betting its future on.

Financial Times:

• Falling renminbi heightens derivatives risks. Chinese companies will face billions of dollars in losses from complex hedging products if the renminbi continues to weaken, analysts and investors have warned. Mainland companies and global investors have bought hundreds of billions of dollars worth of structured products that benefit from renminbi appreciation over the past year, and now face growing pressure after the Chinese currency fell to its lowest level since July.

TheGuardian:

• GCHQ intercepted webcam images of millions of Yahoo users worldwide. Britain's surveillance agency GCHQ, with aid from the US National Security Agency, intercepted and stored the webcam images of millions of internet users not suspected of wrongdoing, secret documents reveal. GCHQ files dating between 2008 and 2010 explicitly state that a surveillance program codenamed Optic Nerve collected still images of Yahoo webcam chats in bulk and saved them to agency databases, regardless of whether individual users were an intelligence target or not. In one six-month period in 2008 alone, the agency collected webcam imagery – including substantial quantities of sexually explicit communications – from more than 1.8 million Yahoo user accounts globally.

Xinhua:

• China to Mark Anti-Japanese War Victory Day on Sept. 3. Standing Committee of National People's Congress also approves China to set Dec. 13 as memorial day for victims of Nanjing Massacre.

Haaretz:

• UN nuclear agency drops sensitive Iran report, sources say. IAEA worries probing deeper into Iran's suspected atomic bomb plans could hinder talks. The UN nuclear watchdog planned a major report on Iran that might have revealed more of its suspected atomic bomb research, but held off as Tehran's relations with the outside world thawed, sources familiar with the matter said Thursday.

Bear Radar

Style Underperformer:

• Large-Cap Value -.05%

Sector Underperformers:

• 1) REITs -.77% 2) Energy -.65% 3) Restaurants -.63%

Stocks Falling on Unusual Volume:

• WAC, CTRX, SFY, CHS, QUAD, BKD, BWC, ANIK, ESC, NDLS, BBEP, CIR, EPL, LINE, DATA, QCOR, NTRI, ESI, EDU, LPI, RL, HTWR, EZCH, DPM, DWA, PZZA, AKRX, CQB, CLR, AMAG, LNCO, NKTR, LKQ and NDLS

Stocks With Unusual Put Option Activity:

• 1) ANV 2) IRM 3) HK 4) SLB 5) DECK
  

Stocks With Most Negative News Mentions:

• 1) GM 2) JNJ 3) KMP 4) GME 5) COP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.29%

Sector Outperformers:

• 1) Steel +2.11% 2) Gold & Silver +1.21% 3) Telecom +1.08%
  

Stocks Rising on Unusual Volume:

• PEIX, DANG, ZU, IQNT, WDAY, BEAT, MDAS, RP, BBY, MYL, SZYM, TIVO, GTI, NOAH, TROX, BDBD, FSLR, CIE, WLL, SHLD, QLIK, TASR and GPOR

Stocks With Unusual Call Option Activity:

• 1) PEIX 2) TIVO 3) WDAY 4) ZTS 5) MYL

Stocks With Most Positive News Mentions:

• 1) BBY 2) JCP 3) EBAY 4) GOOG 5) TSLA
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• Yuan Turns Worst Emerging Carry Trade as PBOC Stokes Volatility. The yuan has gone from being the most attractive carry trade bet in emerging markets to the worst in the space of two months as central bank efforts to weaken the currency cause volatility to surge. The yuan’s Sharpe ratio, which measures returns adjusted for price swings, turned negative this year as three-month implied volatility in the currency rose in February by the most since May, when the Federal Reserve signaled plans to cut stimulus. The exchange rate tumbled the most since 2010 on Feb. 25 amid speculation the People’s Bank of China was intervening to deter one-way bets on currency gains.

• Mersch Says Renminbi May Challenge Dollar’s Reserve Role. China’s renminbi might one day challenge the role of the U.S. dollar as the world’s leading reserve currency, European Central Bank Executive Board member Yves Mersch said. “Having become an important trading and payment currency, the renminbi is now taking the first steps toward establishing itself as an international investment currency,” Mersch said in a speech at Luxembourg’s Renminbi Forum yesterday. “Due to the size of China’s economy and its importance in global trade and, potentially, finance, the renminbi might ultimately come to challenge the U.S. dollar” as a leading reserve currency.

• Hong Kong Editor in Press Freedom Row Critical After Attack. The former chief editor of a Hong Kong newspaper, whose removal from his post led to protests over press freedom in the city, was critically injured after being slashed with a knife by assailants on a motorbike today. The attack on Kevin Lau, chief operating officer at a unit of Media Chinese International Ltd. (685) and former chief editor at Ming Pao Daily News, happened days after at least 1,600 demonstrators held a march to express concerns that media freedom is being eroded. 

• Most Chinese Stocks Fall, Led by Energy, Material Companies. Most Chinese stocks fell, led by energy and material companies. The Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,037.66 at 9:37 a.m. local time. The CSI 300 Index (SHSZ300) lost 0.1 percent. The Hang Seng China Enterprises Index (HSCEI) declined 0.4 percent.

• Aussie Drops With Sydney Stocks; Gold Slides With Corn. The Australian (GACGB10) dollar weakened against major peers and shares in Sydney dropped after private investment fell the most since 2009. Gold held a decline from a 17-week high on speculation the Federal Reserve will continue stimulus cuts while emerging-market currencies declined. 

• Copper Drops to 12-Week Low on Signs China’s Growth Is Slowing. Copper slipped to the lowest price in more than two months amid concern that China’s growth is slowing and as stockpiles rose in the biggest user. The contract for delivery in three months retreated as much as 0.5 percent to $6,994 a metric ton on the London Metal Exchange, the lowest level since Dec. 4 and traded at $7,012.25 by 12:21 p.m. in Tokyo. Futures are down 0.8 percent in February, poised for a second monthly decline.

• Goldman’s(GS) Gmelich Likens Junk Loans to One-Way Freight Train. Investors who have been pouring money into funds that purchase leveraged loans need to be wary of a reversal in demand, according to Justin Gmelich, the head of credit trading at Goldman Sachs Group Inc. “It’s been a bit of a one-way freight train,” Gmelich said in a question and answer session, posted on the company’s website yesterday. “I would just caution those that are involved in the loan space to be mindful of the fact that they’ve been beneficiaries of inflows for 88 straight weeks and the tide can turn.” The floating-rate debt, which offers a shield for investors from rising rates, has seen unprecedented demand with the funds that purchase the debt receiving deposits every single week since the summer of 2012. That enabled speculative-grade companies to raise $676 billion last year of bank debt, with more than 80 percent of that used to escape maturing debt deadlines, according to data compiled by Bloomberg. 

• Vale Posts Record $6.45 Billion Loss After Brazil Tax Accord. Vale SA (VALE5), the world’s largest iron-ore producer, posted a record quarterly loss after settling a decade-long tax dispute with Brazil. Vale’s fourth-quarter net loss widened to $6.45 billion, or $1.25 a share, from a net loss of $2.62 billion, or 51 cents, a year earlier, the Rio de Janeiro-based company said today in a regulatory filing. Earnings before interest, taxes, depreciation and amortization, or adjusted Ebitda, rose to $6.64 billion, beating a $5.9 billion average estimate by 17 analysts compiled by Bloomberg.

Wall Street Journal:

• West Deliberates as Ukraine Economy Sinks. Plummeting Currency Highlights Country's Vulnerability Post-Uprising.

• Rivals Clash on Crimea's Fate.

• Crisis in Ukraine. Streaming Coverage.

• Bradley A. Smith: Connecting the Dots in the IRS Scandal. The 'smoking gun' in the targeting of conservative groups has been hiding in plain sight. The mainstream press has justified its lack of coverage over the Internal Revenue Service targeting of conservative groups because there's been no "smoking gun" tying President Obama to the scandal. This betrays a remarkable, if not willful, failure to understand abuse of power. The political pressure on the IRS to delay or deny tax-exempt status for conservative groups has been obvious to anyone who cares to open his eyes. It did not come from a direct order from the White House, but it didn't have to.

• The Endless Benghazi Coverup. Susan Rice's latest claims about the attacks are no more credible than the ones she made in 2012.

MarketWatch.com:

• Tesla(TSLA): the road to ‘Gigafactory’ is paved with debt.

• Three warning signs from higher gold prices. Opinion: Trouble ahead: China crash? Deflation? New recession?

CNBC:

• One thing Yellen could say that would worry markets. (video)

Zero Hedge:

• Russia Responds To US Warning: Expands Military Presence Globally. Shortly after the US warned Russia over its "provocative actions" with regard Ukraine... RiaNovosti reports defense minister Sergei Shoigu saying Russia plans "to expand permanent military presence outside its borders by placing military bases in a number of foreign countries," including Vietnam, Cuba, Venezuela, Nicaragua, the Seychelles, and Singapore. "The talks are under way, and we are close to signing the relevant documents," Shoigu told reporters in Moscow.

• Morgan Stanley Underwrites TSLA Convertible Offering Day After 100% Stock Price Upgrade.

• JCP's(JCP) Quarter In Charts: Retailer Generates Least Amount Of Cash Flow In Holiday Quarter In Recent History. (graph)

• The Ominous Message in 200 Years of Global Public Finances. (graph)

• Clearing Billions in Profit Is About To Get Much Harder.

• Morgan Stanley(MS) Warns Of "Real Pain" If Chinese Currency Keeps Devaluing.

• Obama Asks Court To Make NSA Database Even Bigger. 

• Is China Set For A Japan-Style Lost-Decade? (graph)

Business Insider:

• Australia's Qantas Is Cutting 5,000 Jobs.

Reuters:

• Brazil central bank raises interest rate to 10.75 pct. Brazil's central bank raised its benchmark interest rate on Wednesday to 10.75 percent from 10.50 percent, slowing the pace of monetary tightening to avoid hurting an economy that is flirting with recession. Thirty-four of 47 economists polled by Reuters last week expected the bank to raise its benchmark Selic lending rate by 25 basis points to 10.75 percent. The rest expected another 50-bps increase.

• Transocean(RIG) profit slides on lower rig demand. Transocean Ltd, owner of the world's largest offshore drilling fleet, said on Wednesday that fourth-quarter profit fell 49 percent from a year ago, hurt by lower rig utilization. The company's net profit attributable to controlling interest fell to $233 million, or 64 cents per share, from $456 million, or $1.26 per share, a year earlier.

• Turkish Prime Minister targeted in second audio tape. A second audio recording, presented as the voice of Turkish Prime Minister Tayyip Erdogan asking his son not to accept an amount of money on offer in a business deal but to hold out for more, was published on YouTube by an anonymous poster using a pseudonym on Wednesday. Erdogan said a similar post on the video-sharing site on Monday, allegedly of him telling his son Bilal to dispose of large sums of cash as a graft investigation erupted, was faked by his political enemies.

• East and West face off over Ukraine's Crimea. Waving the Russian flag and chanting "Russia! Russia!", protesters in Crimea have become the last major bastion of resistance to Ukraine's new rulers. President Viktor Yanukovich's overthrow on Saturday has been accepted across the vast country, even in his power base in the Russian-speaking regions of eastern Ukraine. But Crimea, a Black Sea peninsula attached to the rest of Ukraine by just a narrow strip of land, is alone so far in challenging the new order.

Shanghai Securities News:

• China Economy May See More Volatility in 2014. China's economy in 2014 is very likely to see more quarterly or even monthly volatility because of the occurrence of new economic and financial factors, such as Internet financing and shadow banking, citing Lu Lei, head of Guangdong University of Finance, as saying. Central banks need to avoid "too quickly" changing direction in monetary policy and should us micro-tools to make economy more stable, Lu said.

Evening Recommendations
 Morgan Stanley:

• Rated (MS) Overweight, target $76.

• Rated (WNC) Underweight, target $12.

Night Trading

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 137.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 103.0 -.25 basis point.

• FTSE-100 futures -.22%.

• S&P 500 futures +.23%.

• NASDAQ 100 futures  +.36%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SFY)/.12

• (ZEUS)/.14

• (VRX)/2.06

• (RDC)/.41

• (CECO)/-.44

• (CQB)/-.30

• (KSS)/1.54

• (SHLD)/-1.82

• (ZLC)/1.04

• (HLT)/.16

• (BBY)/1.0

• (ROST)/1.01

• (GPS)/.65

• (MTZ)/.51

• (JOE)/-.01

• (TUMI)/.29

• (AIRM)/.32

• (SLXP)/.93

• (MNST)/.46

• (CRM)/.06

• (SFM)/.06

• (OVTI)/.35 

• (DECK)/3.79

• (WEN)/.10

• (DYN)/-.23

• (CHS)/.15

Economic Releases
8:30 am EST

• Durable Goods Orders for January are estimated to fall -1.7% versus a -4.3% decline in December.

• Durables Ex Transports for January are estimated to fall -.3% versus a -1.6% decline in December.

• Cap Goods Orders Non-Defense Ex Air for January are estimated to fall -.2% versus a -1.3% decline in December.

• Initial Jobless Claims are estimated to fall to 335K versus 336K the prior week.

• Continuing Claims are estimated to rise to 2985K versus 2981K prior.
  

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for February is estimated to fall to 2.0 versus 5.0 in January.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Lockhart speaking, $29B 7Y T-Note auction, Japan CPI/Manufacturing PMI, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, Stifel Industrials Conference, (STT) analyst forum, (HBI) investor day, (BJRI) analyst day and the (CR) analyst conference could also impact trading today.

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

Stocks Reversing Slightly Lower into Final Hour on Rising Emerging Markets Currency/Debt Angst, Global Growth Worries, Technical Selling, Biotech/Telecom Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.39 +5.27%

• Euro/Yen Carry Return Index 146.20 -.24%

• Emerging Markets Currency Volatility(VXY) 8.93 +2.53%

• S&P 500 Implied Correlation 53.42 +2.67%

• ISE Sentiment Index 106.0 +2.91%

• Total Put/Call .81 -2.41%

• NYSE Arms 1.31 +11.87% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.88 +.64%

• European Financial Sector CDS Index 88.54 +1.90%

• Western Europe Sovereign Debt CDS Index 53.0 unch.

• Asia Pacific Sovereign Debt CDS Index 103.04 -.19%

• Emerging Market CDS Index 311.57 +2.63%

• China Blended Corporate Spread Index 362.42 +1.10%

• 2-Year Swap Spread 11.25 -2.25 basis points

• TED Spread 19.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -5.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 234.0 -5.0 basis points

• China Import Iron Ore Spot $117.80/Metric Tonne -1.09%

• Citi US Economic Surprise Index -11.40 +3.2 points

• Citi Emerging Markets Economic Surprise Index 13.30 -.6 point

• 10-Year TIPS Spread 2.17 unch.

Overseas Futures:

• Nikkei Futures: Indicating -55 open in Japan

• DAX Futures: Indicating -20 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech sector longs and index hedges

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back

• Market Exposure: 25% Net Long