Late-Night Headlines
Bloomberg:
- Interest-rate derivatives are signaling credit markets are returning to levels not seen in a year as the Federal Reserve keeps its target lending rate pinned near zero to unfreeze lending. The CHART OF THE DAY shows the two-year interest rate swap spread narrowed to 61.50 basis points yesterday, the least since January 2008. The spread, which is the difference between the rate to exchange floating for fixed interest payments for two years and comparable U.S. Treasury yields, is a gauge of investors’ perceptions of credit risk. Swap rates are based on expectations for the London interbank offered rate, or Libor. “The move tighter in swap spreads is definitely a positive for the credit markets,” said Saumil Parikh, a portfolio manager at Pacific Investment Management Co. in Newport Beach, California, which oversees more than $790.3 billion in assets. “It is an important step in the sequential healing process of U.S. credit conditions and it signals immediately that there is decreasing risk in the inter-bank lending market.”
- The accounting scandal that caused Satyam Computer Services Ltd.(SAY) to collapse yesterday is shaking investor confidence in Indian stocks, putting an end to the market’s best start since 2000. “How did they manage to conceal a fraud of such magnitude even from the auditors?” said Greg Kuhnert, a London-based fund manager at Investec Asset Management Ltd., which manages about $10 billion and sold its 0.15 percent stake in Satyam last month. “That to me is a huge concern and is making me very nervous about the situation in India now.” India’s Sensex index tumbled 7.3 percent yesterday, led by a 78 percent plunge in Satyam, after Chairman Ramalinga Raju said profits at the company had been inflated for years and then resigned. Satyam American depositary receipts fell $8.42, or 90 percent, to 93 cents before the opening of the New York Stock Exchange, which then halted trading in the stock.
- House Democrats plan votes this week on two measures that would make it easier for U.S. workers to win pay-discrimination lawsuits, overriding business groups’ opposition. One bill would let workers sue on a claim they are underpaid because of discrimination that occurred years earlier. It would undo a 2007 U.S. Supreme Court decision barring such lawsuits. The second measure would lift a cap on damages in pay-bias suits and restrict defenses that can be raised by employers. Majority Leader Steny Hoyer, a Maryland Democrat, said the measures will be put to a vote on Jan. 9. Business lobbyists say Speaker Nancy Pelosi, of California, and other Democratic leaders are pushing the proposals to reward unions for supporting the party in November. “It shows that labor won the election,” said John Engler, president of the National Association of Manufacturers. “There’s no sugar-coating that.”
- Brazilian stocks declined for the first time in two weeks on concern the slowdown in Latin America’s biggest economy is worsening, hurting the outlook for metals and oil. Cia. Siderurgica Nacional SA led a drop in steelmakers after Itau Corretora said manufacturing will be weak through the first half of the year. Cia. Vale do Rio Doce, the world’s biggest iron ore miner, slumped more than 5 percent as metal prices declined. Petroleo Brasileiro SA fell for the first time in seven days on plunging oil prices and a newspaper report that the energy producer is seeking as much as $15 billion in loans.
- Pershing Square International Ltd., the biggest hedge fund of activist investor William Ackman, lost 12 percent in 2008, less than industry average. The fund fell 0.2 percent in December, New York-based Pershing said in a Jan. 6 letter to investors, a copy of which was obtained by Bloomberg News. It lost money on retailer Target Corp., which dropped 31 percent last year, soft-drink maker Dr Pepper Snapple Group Inc. and book-store chains Borders Group Inc. and Barnes & Noble Inc.
- The U.S. Securities and Exchange Commission opened a new investigation into whether Pequot Capital Management Inc., the hedge fund run by Arthur Samberg, illegally profited from inside information on Microsoft Corp. in 2001, two people familiar with the matter said.
- Corn prices that reached a record $7.9925 a bushel last year are headed for a decade-long slump below $4 as production in the U.S., the world’s top grower, catches up with demand, according to congressional analysts. The average cash price will bottom out at $3.65 in the 2012-2013 marketing year, then rise no higher than $3.94 through 2019, the analysts from the Congressional Budget Office said in a document used as part of a government-wide estimate of federal spending over the next decade.
- The euro fell against the US dollar before data that may show the jobless rate rose and retail sales declined in the countries sharing the currency, bolstering speculation the European Central Bank will lower interest rates. The European unemployment rate increased to 7.8 percent in November from 7.7 percent the previous month, according to a Bloomberg News survey of economists before the release of the data at 11 a.m. in Luxembourg today. A separate report tomorrow will show retail sales in the countries using the euro fell 1.7 percent in November from a year earlier after a 2.1 percent decline in the previous month, according to another survey.
- Democrats on the Senate Finance Committee will make some “tweaks” to President-elect Barack Obama’s fiscal stimulus plan to add items sought by lawmakers such as a “stronger energy component,” said the tax-writing panel’s chairman.
- Bank of China Ltd. fell the most in a month in Hong Kong trading after billionaire Li Ka-shing sold a $511 million stake in the nation’s third-largest lender following the end of a three-year lockup period. Li, ranked Asia’s richest man by Forbes Magazine, follows UBS AG and Bank of America Corp. in cutting holdings in Chinese lenders after stakes they bought in 2005 became freely traded. Royal Bank of Scotland Group Plc, the bank controlled by the U.K. government, is in talks sell shares in Bank of China, the Financial Times reported today.
Wall Street Journal:
- Wyeth(WYE) is in talks to purchase Dutch vaccine maker Crucell NV as the big U.S. drug maker attempts to grab a larger share of one of the industry's fastest-growing segments.
- Citigroup Inc.(C) is leading other lenders in advanced talks with key senators on legislation that would allow judges to set new repayment terms for millions of mortgage holders who wind up in bankruptcy court, people involved in the talks say. A person close to Citigroup said that it is still negotiating details of an agreement with lawmakers, and that it hasn't made a final decision to embrace the "cramdown" legislation. But the efforts mark a surprising change of direction by the financial-services industry. Banks have consistently fought such legislation.
- Swiss bank Union Bancaire Privée, which faces hefty losses in the alleged Ponzi scheme run by money manager Bernard Madoff, is threatening to pull several billion dollars of investments from large U.S. hedge funds because they don't use a full-time independent administrator. The effort by Union Bancaire Privée, or UBP, is notable because it is one of the world's largest investors in hedge funds, with about $124.5 billion of assets as of June.
- President-elect Barack Obama and Senate Democrats backed down Wednesday from an embarrassing political fight with the man appointed by accused Illinois Gov. Rod Blagojevich to fill Mr. Obama's Senate seat. The reversal came days after Democratic leaders said they would refuse to seat Roland Burris -- a former state attorney general -- because of corruption allegations against the governor.
- President-elect Barack Obama's unexpected pick to lead the Central Intelligence Agency cleared a key hurdle on Wednesday when he won the backing of the previously skeptical incoming chairman of the Senate intelligence committee. Sen. Dianne Feinstein (D., Calif.) said Wednesday that after speaking late Tuesday with Leon Panetta, she now supports his nomination. She said Mr. Panetta allayed her concerns about his lack of direct intelligence experience by assuring her that he would surround himself with intelligence professionals at the CIA.
MarketWatch.com: The Kingate funds, run by FIM Advisers LLP, are considering joining a class-action lawsuit against Bernard Madoff after investing at least $2.7 billion with him.
The funds are likely to be part of a group of investors eligible to join a class-action suit filed by Irwin Kellner on Dec. 12. In his complaint, Kellner -- a columnist for MarketWatch, the publisher of this report -- claims he lost more than $3 million because of Madoff's alleged fraud.
NY Times:
- PITTSBURGH — This is what life in one American city looks like after an industrial collapse: Unemployment is 5.5 percent, far below the national average. While housing prices sank nearly everywhere in the last year, they rose here. Wages are also up. Foreclosures are comparatively uncommon. A generation ago, the steel industry that built Pittsburgh and still dominated its economy entered its death throes. In the early 1980s, the city was being talked about the way Detroit is now. Its very survival was in question.
- More than a year after the United States entered a recession, Europe is now catching up quickly as the pain of job losses and shrinking orders spreads. Data released Wednesday showed that the monthly unemployment rate in Germany rose in December for the first time in three years — by 18,000, to 7.6 percent. Throughout most of 2008, German strength ensured that unemployment held steady at the European level despite sharp rises in Spain and Ireland, two countries hit hard by the housing crisis. But it appears that Germany, too, is suffering. “Europe is now rushing rapidly into a recession, faster than the United States,” said Bart van Ark, chief economist of the Conference Board, a nonprofit group that assesses business trends.
IBD:
- The process goes smoother for Frazer, Pa.-based Cephalon (CEPH), which lands medicines at low cost and turns them into market winners.
USA Today.com:
- Millions of consumers by year's end should be able to watch free, over-the-air television on cellphones, PDAs and other portable digital devices as the result of initiatives that will be unveiled Thursday by some of the nation's largest TV station owners and electronics manufacturers. The changes promoting on-the-go viewing are "quite significant," says John Eck, president of the NBC TV Network and Media Works. "If we play it right, it can be a compelling service," for example, by offering local news, which normally isn't available from cellphone video services. At least 63 stations in 22 cities — including New York, Chicago, Philadelphia, San Francisco, Boston and Washington — will transmit news, entertainment and sports to portable devices this year, according to the broadcast industry's Open Mobile Video Coalition (OMVC). The initial group will include affiliates of ABC, CBS, Fox, NBC, CW, ION and PBS. Each city will have a different mix. Most will simulcast regularly scheduled shows.
Reuters:
- Yahoo Inc(YHOO) unveiled on Wednesday a list of partners to aid its push to bring the Internet and television together, hoping their joint effort will finally connect with consumers.
- Sony Corp's (SNE) sales on some of its core products, including flatscreen TVs and Blu-ray DVD players, exceeded its expectations during the U.S. holiday season despite the sharp economic downturn. Seeking to stoke consumer demand this year, Sony unveiled a series of new products on Wednesday including a line of eco-friendly, energy-efficient flat TVs and what it called the world's lightest 8-inch notebook computer.
Straits Times:
- Singapore ’s prime office rents may fall about 40% by next year, citing a report by Cushman and Wakefield
Late Buy/Sell Recommendations
Citigroup:
Night Trading
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Before the Bell CNBC Video Global Commentary WSJ Intl Markets Performance Commodity Movers Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Daily Stock Events Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (SGR)/.66
- (SCHN)/-1.45
- (LWSN)/.07
- (APOL)/.97
- (MDRX)/.13
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 545K versus 492K the prior week.
- Continuing Claims are estimated to fall to 4483K versus 4506K prior.
3:00 pm EST
- Consumer Credit for November is estimated unch. versus a -$3.5B decline in October.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are sharply lower, weighed down by commodity and technology stocks in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
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