World stocks are deep in the red once again as China fueled fears about its economy by permitting the yuan to weaken further and a nuclear test by North Korea added to geopolitical worries (see both below). With ever-increasing concerns, investors are continuing to replace risky assets with safe havens such as Japanese yen, U.S. Treasuries, German Bunds and gold. Is more doom and gloom in store for 2016? U.S. futures: Dow -1.5%; S&P -1.6%; Nasdaq -1.7%.

Economy

Chinese shares defied today's market trend to post gains after state media said that last summer's selling ban on major shareholders would remain in place until the government publishes new rules on such disposals. The measure was set to expire at the beginning of next week, but got called off after markets started to crash on Monday. China's positive movement in equities comes despite data showing the country's services sector slowing to its weakest in 17 months, and the yuan plunging to five-year lows in offshore trading. Shanghai +2.3%.

Expanding the U.S.'s foreign-policy challenges, North Korea said it successfully tested its first hydrogen bomb, marking the fourth time the country detonated a nuclear device. According to KCNA, North Korea wanted what it called "the H-bomb of justice" as protection from the "ever-growing nuclear threat and blackmail by the U.S.-led hostile forces." The explosion was initially detected as a magnitude 5.1 earthquake by various geological agencies.

The Federal Open Market Committee did the expected in December, raising its benchmark interest rate above zero for the first time in nearly a decade. Now the question is how soon it plans to raise rates again, and how quickly it will proceed thereafter. Some of those details might surface this afternoon after the Fed releases the minutes from last month's highly watched meeting. The official account will be published at 2:00 p.m. ET.

Brent crude slipped to a fresh 11-year low overnight, while WTI crashed below $35/bbl, as ballooning global oversupply outweighed tensions between Middle East producers Saudi Arabia and Iran. The strength of the dollar is also agitating prices, as the U.S. currency continues to rally ahead of further Federal Reserve rate hikes anticipated later this year. Brent -3.7% to $35.09/bbl; WTI -2.7% to $34.99/bbl. Also on tap: The EIA issues its weekly inventories data at 10:30 a.m. ET.

Stocks

U.S. regulators have grown so concerned that traders are using high-speed computers to manipulate markets that they're planning a new tactic to clamp down on the practice. The Financial Industry Regulatory Authority said it plans to issue report cards this year that will grade firms on how much spoofing flows through their order books, and expects brokers to use the assessments to root out misconduct.

Shares of Apple slid 2.5% on Tuesday following a report that suggested the tech giant may significantly slash its iPhone 6S and 6S Plus output. Japanese news outlet Nikkei reported the tech giant is expected to reduce production on its flagship device by about 30% between January and March. Apple suppliers Cirrus Logic (CRUS -5.9%), Skyworks (SWKS -6%), Qorvo (QRVO -6.3%), Avago (AVGO -3.4%), and InvenSense (INVN -1.9%) also tumbled on the news. AAPL -2.9% premarket.

Samsung Pay is "coming soon" to Australia, Brazil and Singapore, and the mobile payments service is about to become available on Gear S2 smartwatches. In a separate statement, Samsung (OTC:SSNLF) said it would make its latest smartwatch compatible with Apple (NASDAQ:AAPL) devices, highlighting the latest wrinkle between the world's two biggest smartphone makers. An early advantage for Samsung Pay is its compatibility with existing magnetic stripe card readers vs. Apple Pay, which requires retailers to install NFC technology.

Three of the largest U.S. airlines have inched up fares in what could mark the first industry-wide hike since June. According to travel search website FareCompare, Delta Air Lines (NYSE:DAL) increased prices on flights by up to $4 one-way and Southwest Airlines (NYSE:LUV) followed suit. American Airlines (NASDAQ:AAL) also raised domestic fares to match its rivals. While U.S. airlines regularly adjust their fares, hiking prices for nearly all domestic flights is less common and an industry-wide match even less so.

Puerto Rico's latest default means a $10.3M hit for Ambac Financial (NASDAQ:AMBC), which insures some of the debt the island's infrastructure authority PRIFA failed to disburse on Monday. The payment on its own is small for Ambac, but with more than $2B total par exposure to Puerto Rican debt, the company could be in trouble if defaults continue.

Valeant Pharmaceuticals fell 6.8% in after-hours trading yesterday after the company announced it would appoint an interim chief executive officer to replace Michael Pearson (who remains hospitalized for a severe case of pneumonia). It's still unclear, however, if the newly-appointed CEO could become a permanent replacement. Pearson's hospitalization is the latest challenge for Valeant (NYSE:VRX), whose shares have sunk nearly 60% since late August in the face of questions about how it prices and sells its drugs.

Speaking of Valeant...Bill Ackman's Pershing Square ended 2015 with a major 20.5% loss, the worst year in its 11-year history, following a knockout 40% return in 2014. That put the closely watched activist investor into the same league as rival billionaire hedge fund manager David Einhorn, whose Greenlight Capital finished the year with a 20% drop. Barry Rosenstein's Jana Partners also recorded losses, falling 5.4% through December, in an all-around tough year for the hedge fund industry.

Although CFO Fran Shammo had tamped down "speculative" reports about asset sales, Verizon (NYSE:VZ) has started the process of selling its data centers with hopes of drawing more than $2.5B, Reuters reports. A sale process would mean a reversal of the company's moves into hosting and co-location after it paid $1.4B for Terremark in 2011. Citigroup (NYSE:C) is advising Verizon on the possible sale of 48 data centers that generate annual EBITDA of around $275M. VZ -2.1% premarket.

Twitter is building a feature that will allow for posts much longer than its standard 140 characters, and is currently considering a 10,000 character limit, Re/code reports. An end-of-Q1 launch is targeted. "We've spent a lot of time observing what people are doing on Twitter (NYSE:TWTR), and we see them taking screenshots of text and tweeting it," says Jack Dorsey. "Instead, what if that text...was actually text? Text that could be searched. Text that could be highlighted. That's more utility and power."

Sony has now sold more than 35.9M units of its PlayStation 4, as it touts its dominance over rivals Microsoft (NASDAQ:MSFT) and Nintendo (OTCPK:NTDOY). During the holiday season alone, Sony (NYSE:SNE) said it sold 5.7M units, benefiting from a recent round of price cuts as well as a strong upcoming games pipeline for 2016. While Microsoft has been very quiet about its sales figures for the Xbox One, Nintendo's Wii U sold 10.73M units as of September 30.

Six years after plunging sales during the recession forced automakers into bankruptcies and painful restructuring, the industry has roared back to achieve new heights. Strong demand for pickup trucks and SUVs in December helped the sector set an annual record of 17.5M vehicles sold in the United States in 2015. The results topped the previous high of 17.4M vehicles set in 2000, and raised expectations for further increases in the coming months.

The head of Volkswagen's top selling brand is "confident" the German automaker will reach agreement with U.S regulators to bring nearly 500K diesel vehicles into compliance with U.S. emissions laws. Herbert Diess also expects the company to be able to repair about 8.5M diesel cars sold in Europe that don't comply with emissions standards by the end of 2016. On Monday, the U.S. Justice Department sued Volkswagen (OTCPK:VLKAY) for up to $48B for allegedly violating American environmental rules.

Today's Markets

In Asia, Japan -1% to 18191. Hong Kong -1% to 20981. China +2.3% to 3362. India -0.7% to 25406.
In Europe, at midday, London -1.6%. Paris -1.7%. Frankfurt -1.7%.
Futures at 6:20, Dow -1.5%. S&P -1.6%. Nasdaq -1.7%. Crude -2.7% to $34.99. Gold +0.7% to $1085.40.
Ten-year Treasury Yield -7 bps to 2.18%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Gallup U.S. Job Creation Index
8:30 International Trade
9:45 PMI Services Index
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index
10:30 EIA Petroleum Inventories
2:00 PM FOMC minutes