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| Monday, January 27, 2014 Advertisement Good morning. Here's what you need to know. — Emerging markets continue to come under pressure to begin the week, and it was a rough overnight session for Asian stocks as the Japanese Nikkei 225 tumbled 2.5% and the Hong Kong Hang Seng fell 2.1%. The FTSE 100 in London and the FTSE MIB in Italy are both down more than one percent as well to begin trading today. However, The dollar-yen exchange rate has stabilized and is up 0.3% from Friday's close, while S&P 500 futures point to a positive open and Treasuries look set to open in the red. — The Turkish lira hit another new record low this morning of 2.388 against the U.S. dollar. Following a surprise announcement by the Central Bank of Turkey that it would hold an emergency meeting on Tuesday at midnight in Ankara, however, the dollar-lira exchange rate plummeted and is now negative on the day (i.e., the lira is strengthening in anticipation of a possible rate hike). The South African rand continues to weaken against the dollar as well ahead of a regularly-scheduled meeting of the South African Reserve Bank's board of directors on Wednesday. — Apple reports earnings for the quarter ended December 31 this afternoon after the closing bell. Analysts predict the maker of the iPhone will report earnings per share of $14.05, up from $13.81 in the same quarter a year earlier. — Caterpillar reports earnings today before the opening bell. The global construction and mining equipment giant is expected to report earnings of $1.28 per share for the quarter ended December 31, down from $1.91 in the same quarter a year earlier. — December U.S. new home sales data are due out at 10 AM ET. Economists predict sales fell 1.9% last month to 455,000 units at an annualized pace after dropping 2.1% to 464,000 units annualized in November. — The Dallas Fed's monthly survey of regional manufacturers is expected to show an improvement in business conditions over the last month. The report's headline index is expected to rise to 3.3 from 3.1. — Japan's trade deficit surged to a record 11.47 trillion yen ($112 billion) in 2013 from 6.94 trillion yen in 2012 as the yen depreciated against the dollar, causing prices of imported fuel to rise in yen terms. The deficit for the month of December was 1.30 trillion yen, larger than the 1.24 trillion yen expected by market economists. — The German Ifo Business Climate Index rose to 110.6 in January from December's 109.5 reading, besting estimates for a smaller advance to 110.0. The improvement in the headline number was driven by the "expectations" sub-index, which rose to 108.9 from 107.4. The "current assessment" sub-index was unchanged at 112.4. — The big focus this week is the January meeting of the Federal Open Market Committee, which concludes on Wednesday afternoon and is followed by the release of its decision on monetary policy. "If history is any guide, the Fed will focus on the domestic — not the international — environment," says Kit Juckes, a global strategist at Société Générale. "With Treasury yields down and the recent U.S. economic data encouraging, the FOMC will probably push ahead and reduce the pace of [bond] buying to $65 billion per month." — Larry Fink, CEO BlackRock, the largest U.S. equity asset manager, is sounding bearish on the stock market. "I hear way too much optimism now," Fink said over the weekend in Davos. "I think the experience of the marketplace this week is going to be indicative of this entire year. We are going to be in a world of much greater volatility." — COMMENTARY: "The credibility of the Federal Reserve’s current guidance will evolve in 2014 into a major issue for investors, even though the market-implied path of the Fed Funds rate remains near the Fed’s projections. We believe that increased focus on inflation will be crucial for Fed credibility in 2014. Indeed, the most recent Fed statement increased the emphasis on inflation data (turning away from the previously paramount 6.5% unemployment threshold). "A detailed top-down and bottom-up survey of U.S. inflation is currently flagging the risk that higher (but not high) inflation emerges in 2014. If this occurs, the markets will gain another reason to periodically question forward guidance. Global growth momentum might slow in the months ahead, but if it were to stabilize this summer, at a time when inflation was higher, the unemployment rate was near 6.5%, and financial flows into risky assets had continued, this could trigger a collapse of forward guidance credibility."—Credit Suisse strategists James Sweeney, Carl Lantz, and Jeremy Schwartz 
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