“While markets often make double bottoms, three pushes to a high is the most common topping patterns” — J. Bollinger

1. Government Eyed Refi Program Expansion — The Obama administration is considering expanding its mortgage-refinancing programs to include borrowers whose mortgages aren’t backed by the government and who owe more than their homes are worth, according to people familiar with the discussions. Currently only borrowers on loans held by Fannie Mae (FNMA.OB) or Freddie Mac (FMCC.OB) can qualify for the HAMP, leaving about 50% of the nation’s 10.8M underwater mortgages locked out of the program.
2. Holiday sales season looked weak — the early results suggest it’s been a weak holiday season for retailers, with MasterCard’s SpendingPulse reporting sales just 0.7% higher than last year. “It’s a lost season,” says the group’s Michael McNamera.
3. Bank Index (XLF) for 2013 — Will XLF moves higher for 2013? The technical chart below shows a bullish inverse Head-and-Shoulder pattern.

4. Home Prices Post Gain in 2012, Hit a Milestone — Home prices are on track to notch their first yearly gain since 2006, the strongest performance since the housing bust and a development that could accelerate the real-estate rebound even as the broader economy stutters. Since January, prices are up 6.9% so far this year, the largest year-to-date.
5. Ford to invest $773M on Michigan facilities — Ford (F) said it intends to invest more than $773M to upgrade and expand 6 Michigan manufacturing plants. It’s part of a pledge to invest $6.2B in U.S. facilities through the end of 2015.
6. 2012 Commodity Performance — courtesy of Bespoke, below is a chart of Commodity Performance in 2012 YTD.

7. Key ETFs YTD Performance in 2012 — chart highlights the month-to-date, quarter-to-date and year-to-date performance of selected ETFs.

8. Hewlett-Packard Says Justice Department Probing Autonomy — Bloomberg, The U.S. Justice Department opened an investigation relating to Autonomy Corp. after Hewlett- Packard Co. (HPQ) accused the software company of misrepresenting its performance before being bought last year.

The week ahead — Economic data from Econoday.com:

“Genius is the ability to put into effect what is in your mind” — F. Scott Fitzgerald

1. Fitch Rating Agency threatens downgrade if U.S. falls off cliff — Fitch has warned that a failure to avert the fiscal cliff will increase the likelihood that it will strip the U.S. of its AAA rating.
2. House-Senate Defense Conference Agrees on $640.7 Billion — per Bloomberg, House and Senate negotiators reached a deal over a $640.7B defense budget for the current fiscal year, including $88.5B for operations in Afghanistan. However, the spending doesn’t account for the automatic cuts that are due to take place if the fiscal cliff is not averted.
3. BOJ adds to QE but doesn’t increase inflation target — the Bank of Japan has bowed to the demands of incoming Prime Minister Shinzo Abe and increased the size of its asset-purchase program by ¥10T ($119B) to ¥76T, the third hike in the last four months.
4. U.S. unveils plan to manage huge Alaskan oil reserve — Reuter, Interior Secretary Ken Salazar yesterday presented a plan under which the government will open up 11.8M acres of Alaska’s North Slope for energy drilling. The area holds an estimated 549M barrels of economically recoverable oil, or 72% of the crude in the 23M-acre reserve, and 8.7T cubic feet of economically recoverable natural gas.
5. Boehner’s Plan B fiscal cliff bill pulled amid dissension in GOP caucus — House Speaker John Boehner’s proposal to avert the looming fiscal cliff’s automatic tax increases failed to gain enough Republican support. The House will recess until after Christmas with Speaker John Boehner saying it’s now up to the president to work with Senator Reid to create legislation to help the U.S. avert the cliff.
6. Dogs of the Dow strategy in 2012 — per Bespoke, the Dogs of the Dow strategy says to buy the ten highest yielding Dow Jones Industrial Average at the start of each year. YTD, this strategy underperformed the major averages.

The week ahead — Economic data from Econoday.com:

“The market is a voting machine, whereas countless individuals register choices which are the product partly of reason and partly of emotion” — Graham & Dodd

1. Monti’s plan to quit sends markets into turmoil — Italian shares have sunk 3.3% and 10-year bond yields soared 36 bps to 4.88% after Prime Minister Mario Monti said he plans to resign once the 2013 budget is authorized.
2. Japan slips back into recession — Japan’s Q3 GDP fell an annualized 3.5%, worse than a forecast of -3.3%. With the government revising Q2 from growth to slight contraction, the country technically slipped into a recession in the last quarter.
3. Ingersoll to Spin Off Security Unit in Peltz Accord— per WSJ, Ingersoll-Rand PLC (IR) is expected to announce a plan to spin off its security-technology business, launch a share-buyback program and increase its dividend as part of a compromise reached with Trian Fund Management LP.
4. Obama offers to revamp tax code — the White House has reportedly offered to include an overhaul of the corporate tax code in any deal on the fiscal cliff, although it didn’t provide specifics, such as how the reform would affect the overall tax burden. The Administration also cut its goal for new tax revenue to $1.4T from $1.6T.
5. Fed Sets Jobless Rate, Inflation Targets and to Purchase More Bonds — Fed Chairman Ben Bernanke and his colleagues agreed, for the first time, they would hold rates close to zero while the unemployment rate is above 6.5% as long as inflation is not projected to rise above 2.5%. As expected, the Fed announced a new $45 billion bond-buying program in fresh action to keep the recovery going in the languishing jobs market.
6. China manufacturing data show further improvement — MarketWatch, Business conditions for Chinese manufacturers improved further in December. HSBC’s so-called “flash” manufacturing PMI for December — a closely watched indicator of the world’s second-largest economy — came in at 50.9, compared to a final print of 50.5 for November and 49.5 for October. A reading above 50 signals an improvement in activity, while one under 50 represents contraction.

The week ahead — Economic data from Econoday.com:

“Winners never quit and quitters never win” — Vince Lombardi

1. China PMI Grows — MarketWatch, The privately compiled version of China’s manufacturing Purchasing Managers’ Index (PMI) rose to 50.5. The official PMI increased to 50.6 from 50.2, marking a seven-month high for the index.
2. House, White House aim for $32-$35 billion in farm bill cuts — Reuters, both sides believe that spending in the 2012 farm bill should be slashed by $32-35B, with major cuts for subsidies and soil conservation. However, the GOP wants reductions for food stamps, a move the White House is opposed to. Under the fiscal cliff, money for farm programs would fall by up to $10B.
3. Senate Passes $631 Billion U.S. Defense Legislation — Bloomberg, the Senate passed unanimously a measure authorizing $631.4 billion for U.S. defense programs this fiscal year. Huntington Ingalls Industries Inc., Boeing Co. (BA) and General Dynamics Corp. (GD) are among defense contractors that would benefit because the legislation increases funding over this year’s levels for fighter jets, missiles, submarines and other programs.
4. Germany faces possible recession — the Bundesbank has warned that Germany may be entering recession, saying that the economy could contract in FQ4 and FQ1. The bank also cut its 2012 and 2013 GDP predictions to +0.7% and +0.4% respectively from prior forecasts of +1% and +1.6%.
5. Generic Drug Accords Face Review by U.S. Supreme Court — per Bloomberg, the Supreme Court could say today whether it will review a case involving a “pay for delay” agreement in which a pharmaceutical company pays generic rivals tens of millions of dollars to hold off from launching copycat versions of medicines. The FTC says the practice costs customers $3.5B a year, while drug firms argue that it protects innovation. Companies that could be affected include Abbott (ABT), Watson (WPI), Merck (MRK), Bristol-Myers Squibb (BMY) and Teva (TEVA).

The week ahead — Economic data from Econoday.com:

“It wasn’t raining when Noah built the ark” — Warren Buffett

1. Euro zone, IMF secure deal on cutting Greek debt — per Reuter,Euro zone finance ministers and the International Monetary Fund clinched agreement on reducing Greece’s debt in a breakthrough to release urgently needed loans to keep the near-bankrupt economy afloat. Greece’s international lenders agreed on a package of measures to reduce Greek debt by 40 billion euros, cutting it to 124 percent of gross domestic product by 2020 and to reduce the debt pile, they agreed to cut the interest rate on official loans, extend their maturity by 15 years to 30 years, and grant Athens a 10-year interest repayment deferral.
2. Profits at Chinese firms provide more evidence of GDP recovery — profits at Chinese industrial companies jumped 20.5% on year in October to 500B yuan ($80.4B), with growth accelerating from a 7.8% rise in September and providing further evidence that the economy is rebounding.
3. Cyber Monday sales soar 26% — online retail sales jumped 26% from last year on Cyber Monday, IBM said late yesterday, adding that purchases from mobile devices, including tablets, rose 10.2%.
4. Italian 10-year yields fall to two-year low in auction — Italy has sold €2.98B of 10 year bonds at a yield of 4.45%, down from 4.92% in a previous auction and the lowest in two years, indicating how the market tumult over the eurozone debt crisis has somewhat subsided. The government also issued €3B of five-year paper at 3.23%, down from 3.8%. The total sale of €5.98B was at the top end of the government’s target of €4-6B.
5. Fed Likely to Keep Buying Bonds in 1Q 2013— per WSJ, frustrated with the lack of substantial job gains, many Fed officials want the bank to continue buying long-term Treasurys even after Operation Twist expires. The purchases would be in addition to the $40B a month of mortgage-backed securities that the Fed’s been scooping up.
6. Detroit on the Verge of Bankrupcy, Again — courtesy of WSJ, with 2-3 weeks to receive $30M of state aid from Michigan in order not to run out of cash, Detroit is again teetering on the brink of bankruptcy. The aid is contingent on the city implementing the provisions of a deal in April, when Michigan agreed to provide $137M, but those measures haven’t been enacted.
7. Indian FQ2 GDP slows to three-year low — India’s GDP growth declined to a three-year low of 5.3% on year in FQ2 vs +5.5% in Q2 and consensus of +5.2%. The slowing growth comes as the government battles to implement reforms that it sees as vital to reviving the economy.

The week ahead — Economic data from Econoday.com: