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HOW WE GOT HERE

If you just looked at the closing numbers of the U.S. stock market, you would think it was one of the most benign days this year. It was not.

Traders in New York woke up to he yield on the Japanese 10-year government bond trading in negative territory, an unprecedented state of affairs for a bond with that maturity. A lot of attention was centered on Japanese markets. The Nikkei was hit hard, as traders in Asia caught up to Monday’s selloff on Wall Street, and the concerns about Japanese banks. Meanwhile, a big influx of safe-haven money flowed into the yen, pushing it up against the dollar. The unwinding of that “carry trade” was roiling markets from Tokyo to New York.

That setup had U.S. markets in the red early on. The S&P 500 traded as low as 1835  and below where the index finished on Dec. 31, 2013. The yield on the U.S. 10-year was down to 1.71%. Gold was up. Oil was down. It was classic risk-off, and it looked like it might get out of control.

Only, it didn’t. U.S. stocks regrouped, and the Dow even rose as much as 110 points in the afternoon. Oil was still down sharply, and bond yields were lower as well.

Yet the bulls couldn’t hold that brief rally and the day finished largely a wash.

Now thoughts and hopes turn to Washington, where Wednesday morning the Fed’s Janet Yellen trudges over to Capitol Hill to testify to Congress. The markets will be looking for clues Wednesday that Fed is reconsidering its plan to raise rates.

COMING UP

The top event on Wednesday, and the top event of the week, is the Congressional testimony of Fed Chairwoman Janet Yellen. Hearing starts at 10 a.m. ET, first of two days of testimony. The text of her prepared comments will be released at 8:30.

There is minor data on the calendar: MBA mortgage applications (7 a.m.), and the EIA petroleum status report (10:30). San Francisco Fed President John Williams speaks at 1:30. Overseas data include industrial production reports from France (2:45 a.m. ET), Italy (4 a.m.), and the U.K. (4:30).

Earnings reports: Cisco Systems , Expedia , Time Warner , Tesla, and Twitter .

There are three IPOs: Advanced Disposal Services (21.4 million shares, $20-$22), AveXis (4.3 million shares, $19-$21), Proteostasis Therapeutics (3.9 million shares, $12-$14).

MONEYBEAT PODCAST

Mohamed El-Erian, former CEO of PIMCO, and current chief strategist for Allianz , joins Paul Vigna and Stephen Grocer for a two-part conversation about banks, fiscal policy, and his new book, “The Only Game In Town: Central Banks, Instability and Avoiding the Next Collapse.”

MUST READS

Japan Markets Shaken as Investors Seek Shelter Japanese stocks tumbled Tuesday and the benchmark government-bond yield fell into negative territory for the first time, as a global flight to safety threatened to unravel the delicate market balance that Prime Minister Shinzo Abe and the Bank of Japan have tried to build.

Negative Bond Yields in Japan Reflect Lack of Alternatives When Japan’s 10-year yield went below zero, it meant investors were paying for the privilege of lending the government money. But what would be a lousy deal for individuals may be logical for big banks.

The ‘Monetary Madness’ That’s Pushing Japanese Bonds Negative Another financial Rubicon was crossed overnight, when the yield on Japan’s 10-year government bond slipped into negative territory. It’s the latest sign that the world’s central banks are seeing their carefully laid-out plans unwound by a panicky market.

Oil Prices Turn Lower Amid High Stockpiles Oil prices turned lower Tuesday, with the International Energy Agency’s warning of high stockpiles ramping up the urgency to sell global oil even as some U.S. buyers were diving in, attempting to catch a bottom after a historic fall in prices.

Study: The ‘Yellen Put’ Is Real Wall Street has been waiting in vain for the “Yellen put” this year. It may not have to wait much longer, at least if the Federal Reserve follows the pattern of central banking history.

5 Things to Watch in Janet Yellen’s Testimony  Federal Reserve Chairwoman Janet Yellen heads to Capitol Hill on Wednesday and Thursday for two days of congressional testimony, her first public appearance since her press conference in December following the central bank’s hotly debated interest-rate increase. A lot has changed since then. Here are five things to watch.

Deutsche Bank: No Liquidity Crisis but Capital Fears Are Right It will not take much to knock the German bank’s plan off course, which could stop payouts to equity and junior debt investors.

Lloyd Blankfein Sees Big Banks in Sound Health, Despite Recent Losses Goldman Sachs Group’s Lloyd Blankfein defended the financial health of the biggest banks, arguing that investors haven’t accounted fully for the steps the industry has taken to fortify their balance sheets in the years since the financial crisis.

Numbers to Watch in the New Hampshire Primary A loss by Hillary Clinton in New Hampshire would sting less if the former secretary of state carries Democratic voters and trails only among independents in her party’s primary. A victory by businessman Donald Trump would come with caution signs if the Republican doesn’t expand his blue-collar base.

North Korea Rocket Launch Shows Few Gains in Capabilities, Seoul Says North Korea’s latest rocket appears to have been slightly more powerful than a similar device fired in 2012, South Korean officials said, but didn’t demonstrate major progress to suggest Pyongyang could seriously threaten the U.S. mainland with a missile.

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