With all the major indices at 3 1/2 month lows, early negotiations on the "fiscal cliff" are not particularly promising, with President Barack Obama calling for $1.6 trillion in additional tax revenue over the next decade, twice what he had discussed with congressional leaders in the summer of 2011.
The president holds a press conference at 1:30 p.m. ET, but the meetings with congressional leaders start on Friday. (Read More: America's Looming Economic Crisis)
Italy sold 3.5 billion euros ($4.4 billion) of new bonds; yields fell.
Waiting for China: The political transition has now occurred, and the markets are now waiting to hear of any stimulus plans. The stock market is taking a wait and see attitude — stocks were up fractionally in Shanghai, but are just above 3 1/2-year lows.
1) IPO speed bump: Three initial public offerings failed to price last night: Radius Health (osteoporosis drug maker), Silvercrest Asset Management, and Energy & Exploration Partners all failed to attract sufficient interest. The first two were postponed, not cancelled; Energy & Exploration Partners was withdrawn.
Ruckus Wireless is the hot IPO to watch, pricing Thursday for Friday.
2) Global fertilizer market weaker: Fertilizer maker Mosaic lowered expectations for both potash and phosphate volumes, citing weaker international crop nutrient markets (it didn't specify which). Other nutrient suppliers such as Potash and CF Industries were also weak.
What this means: It's likely that retailers are delaying their fertilizer orders because they are concerned about either price changes, or are not sure how much their customers (farmers) are going to be ordering. It used to be the retailers would order mass supplies well in advance of delivery to customers; that appears to be changing.
3) Retail earnings continue strong. Abercrombie & Fitch surprised everyone with a strong beat; same-store sales declined 3 percent, but that was far less than most expected, and a significant improvement over the second quarter, when same-store sales were down 10 percent. Same-store sales in the U.S. (75 percent of sales) were up 2 percent, international (Europe) was down 19 percent. Full-year guidance was raised to $2.85 to $3 a share from prior guidance of $2.50 to $2.75 a share.
4) Finally seeing downgrades of Home Depot. I said yesterday that the biggest gripe I had with the retailer was the valuation at 21 times 2012 earnings (21 times! S&P 500 is at about 13 times!). Today, Raymond James downgraded it on exactly that, and refused to raise its target price of $62 now that it has been passed. Raymond James is in the minority: Most have argued that with the housing market recovering, Home Depot can continue to build on the momentum it's shown for the past year. (Read More: Home Depot Earnings Beat, Raises Outlook.)
—By CNBC's Bob Pisani
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