• Thanks for reading my diary and enjoy your evening.

I am outta here early like the 1-4 Boston Red Sox will be (again) today against the St. Louis Cardinals.

Thanks for reading my diary and enjoy your evening.

• My price is $77.50.

I am bidding $77.50 for more Procter & Gamble (PG) now.

• So far.

Below is what I've been up to today:

• I added to my Direxion Daily Small Cap Bear 3X Shares (TZA) and Apple (AAPL) longs.
• I sold out my TZA calls.
• I added to shorts in Tesla (TSLA), SPDR S&P 500 ETF (SPY) and PowerShares QQQ (QQQ).

• Here they are.

Below are some highlights from the just-released Fed Beige Book:

"Economic conditions continued to expand from January to early February...in most cases the increases were characterized as modest to moderate"

"NY and Philly experienced a slight decline in activity, which was modestly attributed to the unusually severe weather experienced in those regions."

"Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity...Weather was also cited as a contributing factor to softer auto sales in many Districts."

"Manufacturing sales and production in several Districts were negatively impacted by severe winter weather."

"Residential RE markets continued to improve in several areas, albeit modestly...CRE leasing expanded while reports on construction activity were mixed."

"Employment levels improved gradually for most Districts, and shortages of specialized skilled labor continued to be reported. Price pressures remained subdued, with the exception of upward cost pressures for some energy and construction products. Wage pressures remained stable for most Districts...however, a few Districts cited upward wage pressure in some highly skilled jobs in industries such as IT, transportation and construction. Reports from Cleveland, KC and San Francisco indicated that businesses were anticipating wage growth to increase from the recent mild pace as the year progresses."

"The pace of hiring had reportedly softened in Boston, Richmond and Chicago, with those Districts attributing at least part of the recent slowdown to unusually bad winter weather."

"District reports of loan demand and volume were mixed."

"Inflation pressures remained largely unchanged across most Districts...There were some mentions of rising raw materials prices passing thru to final goods."

In other words, bad weather.

• Run, don't walk, to watch Ben Lawsky on 'Fast Money.'

Here is the segment on "Fast Money" in which Ben Lawsky, the New York State Superintendent of Financial Services, provides insight into its investigations of the mortgage-servicing business.

My comments were made previously this afternoon on the subject.

• The real estate maven has more cautious comments.

More cautious housing remarks from real estate maven Mark Hanson:

Good round-up post from Tom at the Calculated Risk blog.  The last time I saw data like these on builders was 2007.

Obviously, builder revs and profits over the past couple of years have had little to do with housing demand and the health of the housing market.  I suppose what happened here is that builders swallowed up the headlines of some massive recovery, mistakenly looked to the investor driven flip, flop, and flapping resale market as a leading coincident or leading indicator, and were left holding a huge bag of expensive houses with household formation in a nosedive and their planned communities and inventory priced 30% above regional affordability.  When perma-bull Ara talks about "missing expectations" and a "lull" (I suppose the weather was so beautiful in CA nobody wanted to spend time home shopping) it must be really bad.

"Hovnanian's net orders in California plunged by 43.4% compared to a year ago."Hovnanian's average net order price in California last quarter was $653,366, up 46.8% from a year ago and up 83.2% from two years ago.

Note, down 43% in CALIFORNIA.  Day'am, that's big.

Once again, "this is not what a durable housing market recovery is supposed to look like".

• Agrium gets a price target raise from Barclays.

Barclays has raised the price target of Agrium (AGU) from $106 to $113 based on an improving fertilizer market.

The upgrade is benefiting Potash (POT) today, which has broken out from its recent trading range.

• Broke even.

I sold the Direxion Daily Small Cap Bear 3X Shares (TZA) March 14 calls (for breakeven) that I purchased yesterday.

Risk control and market momentum remains strong (the March calls require me to be right in timing).

• I added to my long this morning.

• From subscriber GERRY.

Subscriber GERRY had an important question in the comments section about Radian (RDN) and my Best Ideas list.

GERRY wanted to know why I keep the Radian position on the list while I have been selling off the shares and only now remain with tag ends. (See the explanation in the comments section.)

That was a great question and my desire is to make the comments section (and the comments by me, the other contributors and our subscribers) as value-added as the input in my diary.

Let's keep the dialogue fresh and substantive!

• New York banking regulators are now targeting Nationstar.

Break in: New York banking regulators have announced that they are now targeting Nationstar (NSM) in the mortgage-servicing business.

First Ocwen (OCN), now Nationstar.

Three developing problems now facing the mortgage-servicing industry:

1. Policy risk. The cost of servicing mortgages for nonbanks is likely to rise owing to litigation expenses. In its extreme, it could narrow or eliminate their competitive advantage over bank servicers.
2. Investigations/probes are contagious and expensive. This we have learned with subprime lenders (and robo-signing issues) in the last cycle, including Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America (BAC), in which costs/fines seem to go higher and higher with every settlement. If the servicing margins are importantly influenced by burdensome and expensive government intervention, the industry's return on investment will dwindle by an unknown amount.
3. Other state regulators might join in. There is blood in the water, and other state enforcers might feel compelled to act.

These three emerging headwinds are value-deflating.

At some price, the run-off value of the companies will make (relative to the share prices) an investment in the sector compelling.

But we are not yet there.

• Here are his musings at midday.

Midday musings from Sir Arthur Cashin:

A bit early today (doctor appointment) so run rate may be off.

They appear to be consolidating as I suggested in this morning's Comments.  Floor expects another chapter in the Ukraine saga but may not be for days.  Some try to compare Putin's blink to Khrushchev's turning the ships around in the Cuban Missile crisis.  Recall that was not what it appeared at first.

As stocks waffle, traders look to yield on the ten year as the most sensitive and accurate guide to what's going on.

Run rate at 11:45 projects to an NYSE final volume of 620/700 million shares.

• Here is the firm's take.

Goldman Sachs addresses today's disappointing ISM Services release and lowers its jobs forecast for Friday:

1. The ISM nonmanufacturing index fell to 51.6 in February (vs. consensus 53.5) from 54.0 in January. By component, business activity (-1.7pt to 54.6) and employment (-8.9pt to 47.5) fell, while new orders (+0.4pt to 51.3) rose a touch. The inventory index―which is not seasonally adjusted―was unchanged at 50.5 on an n.s.a. basis but seems to have declined substantially on an s.a. basis. Some survey respondents, in particular those in the wholesale trade and construction sectors, cited adverse weather conditions as a cause of slower activity. February's decline leaves the ISM nonmanufacturing index at its lowest level since February 2010.

2. The ISM composite index―including both the manufacturing and nonmanufacturing surveys―fell 1.9pt to 51.8 in February. The composite index places considerably more weight on the nonmanufacturing survey.

3. As a result of the sharp decline in the employment component of the nonmanufacturing index, we have reduced our payrolls forecast to 125k and our private payrolls forecast to 130k.

• The bull market in complacency is reaching epic proportions.

The U.S. stock market is at an interesting juncture now.

Shorts are ridiculed and obliterated (and like the dodo bird virtually a nonexistent disappearing species), longs are emboldened (and have no fear), and multiple theses are being offered to suggest that Mr. Market will never go down.

Finally, the bull market in complacency is reaching epic proportions, as evidenced by my observation regarding the Russell 2000's rise yesterday.

Fasten your seat belts. It just ain't this easy.

• This time on reports that the Washington, D.C. City Council has passed a vote for decriminalization.

Marijuana stocks are soaring on reports that the Washington, D.C. City Council has passed a vote for decriminalization of marijuana.

• And Citi leads the way.

Nice follow-through and constructive action in the financials sector today.

Citigroup (C) is leading the way.

• ISM non-manufacturing, that is.

Peter Boockvar on the ISM non-manufacturing report:

The ISM services index in February was softer than expected falling to 51.6 from 54 and compares with the estimate of 53.5. It's the weakest since February 2010 but as I've said many times, it's just measuring the direction of change, not degree. The components were very mixed. New Orders rose .4 pts to 51.3 but remains below the 6 month average of 53.8. Backlogs rose 3 pts to back above 50 at 52 and is back above its 6 month average of 49.4. The glaring weakness was seen in the Employment component which fell to 47.5 from 56.4, the lowest since March '10. Export Orders were weak, falling 1.5 pts to 47.5, matching the lowest since August '10. Lastly, Prices Paid fell 3.4 pts after rising 2.4 pts in the month prior. Of the 18 industries surveyed, 10 saw growth while 8 saw contraction. Particularly within employment, just 7 saw growth and 8 declines. The ISM listed two comments from respondents on this with "labor reduction to reduce expenses" and "attrition without backfill." Weather also was definitely a factor as it was cited a few times in some of the comments, one being in construction.

The bottom line summary from ISM was this, "The majority of respondents' comments indicate a slowing in the rate of growth m/o/m of business activity. Some of the respondents attribute this to weather conditions. Overall respondents' comments reflect cautiousness regarding business conditions and the economy." From a data standpoint, luckily this is the last of the ISM diffusion indices that will be blamed partly on weather and there are no excuses going forward. Bonds still have questions about the economic rebound (but also now dealing with higher commodity prices) while stocks are still in the all news is good news as no rebound will mean taper of taper and a rebound in their eyes will offset the impact of the taper.

• From ISM.

Break in: ISM non-manufacturing data were quite weak relative to expectations and the lowest print in four years.

• At $255.58.

I covered most of my Tesla (TSLA) short earlier this week at $236.

I am reestablishing some of my short now at $255.58.

• Water stocks have been exploited and are ahead of fundamentals.

For obvious reasons, one of the most important investment themes extant is the water theme.

I have done a great deal of work on this theme, but unfortunately the stocks have been exploited and are, in my view, ahead of fundamentals now.

I will have a lot to say about this if we ever get a market correction!

• Here is the real estate maven's take.

Real estate maven Mark Hanson takes the measure of the housing market and its implications for the consumer, bank earnings and home improvement spending:

With composite and refi apps bouncing around lows only seen a few times since record keeping began and purchase applications down nearly 20% YoY, the laws of small numbers and seasonal factors, the latter which don't work well in an era in which the Fed sneezing can cause mortgage rates to rise or fall 25bps, have turned the weekly mortgage app indices and headlines into red-herrings.  With respect to today's headline, "Up 9.4% YoY"...just because the word "up" is in it, doesn't make it good data release.

The refi index increased 10% WoW (still down 3% from two-weeks ago, unusual for the spring).  But up 10% means little, as we know there are few left to refi unless rates get back down to 3.5%, from 4.5% today, which is why refi apps remain down 70% from May 2013.  Even if they did drop back to 3.5%, refi volume would be muted relative to the last time they were at 3.5%.  In order to get back the refi market we had from Q42011 through 2013 rates have to drop sub-3%, which would create a "benefit" to the millions of Fed-induced serial refinancers, who are largely responsible for most of the volume of every refi-boomlet since 2009.

The purchase index increased 6% WoW.  But, the important number here is that purchase apps have collapsed 19% YoY.  And the 19% likely understates the damage YoY because the large lenders who control the majority of market share -- and are more heavily represented in the MBA survey -- are not only buying the rates market for more business, but have been more aggressive than I have ever seen going after purchase business.

Bottom line:  On a YoY basis, there is nothing about today's number that is good for bank earnings, homeowner balance sheets, home improvement spending, or house purchase volume.  With respect to the purchase market, in the midst of a handoff from the Fed-driven investor cohort to the fundamentals-driven end-user cohort, demand destruction this severe means house prices are simply too high. (See my note yesterday on why).This is not what a "durable housing market recovery" looks like.

• Goldman Sachs has endorsed the name.

I have added to General Motors (GM) over the last few days.

The stock picked up a bid late yesterday and continues to be well-bid this morning on a Goldman Sachs endorsement.

• Here is the firm's take.

Goldman Sachs on the ADP report:

ADP employment rose 139k in February (vs. consensus +155k). The composition of job growth was similar to that seen in January (on a revised basis). However, we think that the decent reported gain in construction employment (+14k) is unlikely to show up in the official payroll report on Friday due to definitional differences between the two surveys. Instead, we expect construction employment to show substantial weather-related weakness. ADP's estimate of January job growth was revised down 48k to +127k, more closely matching the official figure of +142k. ADP has yet to prove itself as a reliable predictor of nonfarm payroll job growth, following methodological revisions in 2012. 

• Specifically, ADP.

ADP said just 139,000 private sector jobs were created in February, 16,000 less than expected. Also, January was revised down by 48,000, to 127,000, the slowest pace of gain since August 2012. Mark Zandi, who helps to compile the figure and speaking on the report is blaming "bad winter weather, especially in mid month" with the flip side being an expected improvement now that the weather has cleared to what he believes to be 200,000-250,000 in upcoming months.

Of the 139,000, 20,000 came from the goods producing sector with 14,000 from construction vs. 17,000 in January and 48,000 in December right before the winter storms. Manufacturing added just 1,000 vs. a loss of 7,000 last month. The biggest contributors to the service providing sector were trade/transportation/utilities and professional/business services. The financial sector shed jobs likely due in part to the mortgage refi area cuts after a drop in January.

ADP said January/February have been the "weakest for financial services employment since January/February of 2011." Overall, small businesses led the way in hiring as they always do.

Bottom line: Whether influenced by weather or not, the FOMC will still likely cut again its asset purchases in a few weeks by giving the weather impact the benefit of the doubt. This will take the monthly number down to $55 billion, a cut of $360 billion annualized year-to-date. But, what happens past this will be decided on if we get the hoped-for bounceback in the economic data, especially an increase in hiring closer to the 200,000 level that we saw on average in the second half of 2013.

• 5 million shares.

I know some subscribers are still long The Mighty Oaktree (OAK).

Last night the company announced a 5 million share secondary.

• Five ways the Ukraine crisis could impact you.

Here is an informative article on five ways the Ukraine situation might impact U.S. consumers.

• At $530.40.

I added further to Apple (AAPL) at $530.40 in premarket trading.

• Rumor has it.

High above the Alps, my gnome is hearing that the iPhone 6 launch will take place this summer.

• Run, don't walk, to read 'Downtown' Josh Brown's 'The Relentless Bid, Explained.'

"Downtown" Josh Brown, in a thoughtful and clear analysis, explains the market's relentless bid.

• Here are some more relevant articles on Ukraine this morning.

In the news:

• Bloomberg -- "Putin Says No Immediate Need to Invade Eastern Ukraine, Leaves Threat Dangling"
• The New York Times -- "Assailing U.S. and Kiev, Putin Keeps Open Option of Force"
• The Telegraph -- "Vladimir Putin Will Get Away With It Again -- Sanctions Would Harm Us More Than Them"
• MarketWatch -- "Putin: U.S. Treats Foreigners Like Lab Rats" 
• The Washington Post: "Obama: Putin's Moves Are Not a 'Sign of Strength'"     

• Here are his morning musings.

The Lindsey Group's Peter Boockvar's early-morning commentary:

Ahead of tomorrow's ECB meeting, there was some pretty good data today in Europe which is lessening expectations of further action from the ECB. The euro zone PMI services index was revised up to 52.6 from the initial print of 51.7. It's up from 51.6 in January and at the highest level since June '11 with Italy's PMI in particular jumping back above 50 to 52.9, the best since March '11. UK services PMI was little changed at 58.2, a touch above the estimate of 58. Retail sales in January for the region in January rose 1.6% m/o/m, twice expectations and Q4 GDP was up by .3% q/o/q, in line but the 3rd quarter in a row of growth, albeit modest. Whether due to a reduced chance of a change from the ECB or still lingering concerns with Russia, the economic data didn't help European markets as the FTSE, CAC, DAX and Euro Stoxx index are all down on the day and also down on the week in contrast to US markets. The euro is basically flat for a 2nd day, not responding at all to the Putin comments yesterday. Kerry meets with the Russian Foreign Minister Sergei Lavrov today in Paris and ahead of that the ruble is up and the Micex is little changed after being down all morning.

China remains a potential issue as the Shanghai index was lower by almost 1% as a solar company say they may not be able to make an interest payment on Friday. The amount is modest, about $15mm, but the symbolism of a corporate default following the two trust products that were bailed out in the last few months highlights the excessive debt problem that China has. Data wise in the Asian region, China, Hong Kong and India saw a slight gain m/o/m in their HSBC PMI services indices. Australia reported a Q4 GDP growth gain of .8% q/o/q, a touch above the estimate of up .7%. The Aussie$ and ASX index both rallied in response.

In the US, a 6 bps downtick in the average 30 yr mortgage rate to 4.47% drove a 9.4% increase in purchase applications off the lowest level since 1995 last week. Refi applications were up by 9.6% but after falling 11.4% last week. Sentiment wise, II said Bulls rose to 54.6 from 53.5, a 6 week high while Bears fell to 15.1 from 17.2, a 6 week low. The spread of 39.5 is just shy of the extreme level of 40+ and remains below the excessive 46.4 spread seen on December 31st. The ADP jobs gain is expected at 155k with weather of course being a swing factor but more so for Friday's payroll number based on the differing methodologies. Because of weather though, the FOMC will still taper again in a few weeks ago regardless of Friday's number as they won't have enough clean data to respond otherwise. The ISM services index is also out today and should show very little weather impact and we'll see what the Beige Book has to say at 2pm.

• Run, don't walk, to read Knowledge@Wharton weigh in on the Ukraine crisis.

A timely Knowlege@Whartoncolumn on the Ukraine crisis. 

• Here's the latest.

The latest from over there:

The high chamber of the Russian parliament reportedly preparing a draft law in case of EU and US sanctions against the country. According to the Russian news agency Itar-Tass, the proposal previews to freeze US and EU assets. A decision that coincides with the diplomatic efforts to ease the tension in Ukraine in Paris and Brussels, where a NATO-Russia meeting will discuss the current situation.

Russian forces seized two Ukrainian missile defence battalions in the Crimea region on Wednesday, Interfax news agency quoted a military source as saying.

-- Euronews