Top Stories
Airlines cancel thousands more flights as cold intensifies. Airlines have cancelled over 9,000 flights and delayed thousands of others over the past four days as winter storms dump snow over huge swathes of the U.S. The Midwest is experiencing the coldest weather in almost 20 years, with the highest temperatures in Chicago not even expected to reach zero degrees Fahrenheit (-18 degrees Celsius). The storm is heading towards the East Coast, which already experienced a major whiteout last week.

Fall in Chinese services PMI indicates slowdown is broad-based. Chinese HSBC services PMI dropped to the lowest level since August 2011, falling to 50.9 in December from 52.5 in November. The decline mirrors a drop in the official print and in manufacturing PMI, suggesting that the slowdown in the economy is broad-based. The latest reading was one factor that helped drag down Asian markets today amid fears that China's deceleration will continue in Q1.

Yahoo: Some ads spread malware last week. Yahoo (YHOO) yesterday admitted that some ads on its European Web sites last week "spread malware," which is software that disrupts a computer's operations. Dutch computer security firm Fox-IT estimates that the malware was served to 300,000 users per hour, causing 27,000 infections per hour. However, Apple Mac computers and mobile devices weren't affected.

Top Stock News
Japanese, Chinese shares drop sharply. Japan's Nikkei sank 2.35% on the first day of trading of 2014, although that was off the back of a nine-day winning streak prior to the New Year break. "A consolidation move of some kind was in order for stocks after that long nine-day run up," says asset manager Yoshihiro Okumura. "The magnitude of the fall is understandable considering the dollar's weakness." China's Shanghai composite dropped 1.8%, pulled lower by slowing services growth, the re-opening of the IPO market and concern about how government reform might affect GDP.

JPMorgan, authorities close to $2B deal over Madoff. JPMorgan (JPM) reportedly hopes to reach an agreement with federal authorities this week to pay $2B to settle allegations that it turned a blind eye to Bernard Madoff's Ponzi scheme. The deal would take the bank's payouts over the past 12 months for its various sins to $20B. JPMorgan is expected to be cited for a criminal violation of the Bank Secrecy Act, under which banks have to keep an eye out for money laundering and report suspicious activity. However, JPMorgan won't have to plead guilty to such a breach, as it could jeopardize the firm's charter as a national bank.

Men's Wearhouse raises offer for Jos. A. Bank. Retailer Men's Wearhouse (MW) has increased its bid for Jos. A. Bank Clothiers (JOSB) to $57.50 a share from an offer in November of $55, which the latter rejected. Men's Warehouse has also turned down a proposal from Jos. A Bank, whose shares closed on Friday at $54.41, giving it a market cap of $1.52B.

Boeing workers approve contract, securing new 777X for Seattle. Boeing (BA) machinists have narrowly approved a labor contract that gives up some pension benefits in order to secure assembly of the new 777X airplane in the Seattle region. Had the workers rejected the offer, Boeing would have considered constructing the jet elsewhere, with the company receiving offers from 22 states to host the 777X.

Bezos airlifted from cruise after kidney stone attack. Amazon (AMZN) CEO Jeff Bezos had to be airlifted from a boat in the Galapagos Islands on New Year's Day after suffering a kidney stone attack. The Ecuadorean Navy took Bezos from the boat to the nearby Baltra island, from where he was flown to the U.S. for treatment. No surgery was required and Bezos is apparently now feeling fine. While kidney stones aren't usually serious, the incident might prompt questions about a succession plan at Amazon.

Top Economic & Other News
Eurozone business activity continues to grow. Eurozone composite PMI rose to 52.1 in December from 51.7 in November even as the services print slipped to 51 from 51.2. "December saw the second-largest increase in business activity since June 2011 and rounded off the best quarter for two-and-a-half years," says Markit. Spanish composite PMI hit a 6 1/2 year high and Ireland enjoyed strong growth, although France suffered recession-type contraction. The euro was +0.2% at $1.3617 at the time of writing.

Senate set to approve Yellen as Fed Chair. Congress is due to get back to work today following the winter break, with the Senate expected to approve Janet Yellen as the first female Chairperson of the Federal Reserve. Meanwhile, Senate Democrats want to restore extended unemployment benefits for the long-term jobless, which expired last month and affect 1.3M people. However, Democrats might find it difficult to gather enough GOP votes to pass a procedural ballot; at least one Republican is on side but another four are needed.

Obamacare demand manageable so far. Early reports from health providers and online medical booking service ZocDoc indicate that demand for care from those who bought insurance under Obamacare has been modest so far. There have been fears that the technical problems of the government's HealthCare.gov Web site would cause a flood of patients who thought they had bought insurance to request care only to find that they weren't yet covered.

Chinese municipalities feast on shadow banking. Local municipalities in China have increased their borrowing from the shadow-banking sector amid concerns about the sustainability of soaring debt in the country. With total local-government debt rising to 17.9T yuan ($2.95T) in about 2 1/2 years, trust financing climbed to 8% of the figure from zero and other alternative channels made up 25%. Looking to curb the growth of shadow banking, China's State Council has called for tighter regulation of banks' off-balance-sheet lending and said that trust companies should return to being asset managers and not partake in "credit-type" business.

Economy rebounding relatively well - Harvard economists. A mainstream view is that the recovery of the U.S. economy after the financial crisis has been fairly sluggish. Not so, say Harvard's Carmen Reinhart and Kenneth Rogoff, who argue that the economy is doing quite well compared with what could be expected. In nine major financial crises in the U.S., the average drop in GDP per capita was 9% and the recovery period to the pre-crisis peak was 6.7 years. With the sub-prime crisis, per-capita GDP dropped "just" 5% and the rebound took six years.

Today's Markets:
In Asia, Japan -2.35% to 15909. Hong Kong -0.6% to 22684. China -1.8% to 2046. India -0.3% to 20787.
In Europe, at midday, London -0.1%. Paris +0.1%. Frankfurt +0.2%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +0.6% to $94.53. Gold -0.1% to $1237.80.
Ten-year Treasury Yield -1 bps at 2.98%.

Today's economic calendar:
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index

Notable earnings after today's close: SONC