● US housing starts fall 2.5% in Dec | MarketWatch
● Consumer prices drop as falling oil costs push inflation lower | LA Times
● US Redbook: retail sales growth cooled in Jan’s 2nd week | MNI
● US mortgage applications popped 9% last week | CNBC
● How to Make Sense of Plummeting Global Markets | NY Times
● Oil prices fall near 2003 lows on oversupply, demand worries | Reuters
● How Far Will Markets Fall? Top Investors See No Bottom Yet | Bloomberg

With the US stock market falling like a concrete blimp today, it’s painfully obvious that darkness has descended across the equity landscape. Not surprisingly, the S&P 500 Crash Risk Index (a set of quantitative metrics collectively labeled as such on these pages) crossed the tipping point last Friday (Jan. 15) and will probably remain in an ominous posture once the carnage in today’s action officially goes into the history books. Let’s review a few details, if only for academic reasons.
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And that makes three in a row. Last Friday’s double shot of disappointing economic news in December for retail sales and industrial output was joined by today’s surprisingly soft numbers for residential construction.
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Inflation expectations in the US are sliding again, raising new concerns about the economic outlook. Perhaps today’s update on consumer prices for December (due out at 8:30 am eastern) will allay fears that disinflation risk has reaccelerated. Meantime, Mr. Market has been lowering his outlook for pricing pressure… again.
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● US Home builder confidence steady in Jan | USA Today
● US Economic Confidence Index Rises, Highest Since June | Gallup
● The Debate on Whether America’s Best Days Are Past, or Ahead | NY Times
● Confidence among CEOs sags as China’s slowdown spooks Davos | Reuters
● World faces wave of epic debt defaults, central bank veteran warns | Telegraph
● MSCI All-Country World Stock Index on brink of bear market | Bloomberg
● Mark Carney rules out imminent interest rate rise for UK | Telegraph
● UK unemployment rate fell to its lowest level since 2005 | MNI

Housing starts are expected to slip fractionally to 1.169 million units (seasonally adjusted annual rate) in tomorrow’s December update, according to The Capital Spectator’s average point forecast of several econometric estimates. The projection still represents a modest gain over the year-earlier level of residential construction activity.
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Mean reversion in asset returns is a familiar subject in the academic and empirical literature, but the use–and abuse–of this core concept is all over the map. Depending on where you look, you’ll find interpretations ranging from “it’s nonsense” to a near-religious embrace of the idea that the performance cycle is all you need to know for developing robust estimates of future results. As usual when navigating through the world of finance and economics, however, reality tends to be somewhere in the middle of the extremes.
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● IMF Cuts 2016 Global Growth Forecast to 3.4%… | Bloomberg
● But IMF still sees 2016 growth rising over 2015’s pace | IMF
● Euro zone inflation confirmed at weak 0.2% YoY rate in Dec | Reuters
● China’s Q4 GDP growth weakest since 2009 | Reuters
● IEA Sees Risk of World Drowning in Oil | Bloomberg
● German investor morale slides in Jan as emg mkt slowdown bites | Reuters

Last week’s selling wave pushed most of the major asset classes into the red for the five trading days through Jan. 15, based on a set of proxy ETFs. For the one-year trailing period, everything has lost ground. Negative momentum, in other words, is in high gear.
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● US retail sales end 2015 on weak note | USA Today
● US Dec industrial output slumps for 3rd straight month | Reuters
● US Consumer Sentiment Continues To Improve In Jan | RTT
● Q4 growth outlook for US revised down to a weak 0.6% | Atlanta Fed
● Rate rise calls evaporate as markets plunge; mumurs of Fed reversal | Reuters
● Brent Falls to 12-Year Low Below $28 as Iran’s Oil to Swell Glut | Bloomberg
● Taiwan’s New Leader Faces a Weak Economy and China’s Might | NY Times