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Due to a scheduling conflict blogging will be light over the next few days. Have a great weekend and thanks for reading!

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Friday Watch

Late-Night Headlines
Bloomberg:

- Executives at buyout, venture-capital and hedge-fund firms will pay an estimated $24 billion more in taxes over nine years if President Barack Obama gets his way. Obama’s 2010 budget proposal, released today, proposes raising taxes on the managers by treating carried interest, the portion of profits they take from successful investments, as ordinary income instead of capital gains. That change would boost the tax rate, starting in 2011, to 39.6 percent for most executives from the 15 percent they now pay. Senior Treasury officials told reporters today that the tax increase would apply to all partnerships that use the carried interest structure and wouldn’t exempt any industries. Venture-capital firms have sought to be excluded from any tax rise. The policy would also affect executives of real estate and oil and gas partnerships.

- Congressional Republicans signaled that the debate over President Barack Obama’s $3.55 trillion budget request will widen the partisan divide that has marked his first weeks in office. “The era of big government is back, and Democrats want you to pay for it,” said House Republican Leader John Boehner of Ohio. At a news conference, he said Obama is starting to make former President George W. Bush “look like a piker when it comes to spending.” Republicans attacked Obama’s plan to raise the taxes of families with annual incomes exceeding $250,000 -- the first such increase in 16 years. They also criticized spending proposed in the budget for the new fiscal year that begins Oct. 1. Representative Mike Pence of Indiana, the third-ranking House Republican leader, said Obama can expect unified opposition to his proposed tax increase on top-earners. About half of Americans earning $250,000 are small-business owners, and the proposed increase will stifle the slackening economy, he said. “There will be overwhelming opposition from the American people and House Republicans to the idea that we should raise taxes during a recession,” Pence said in an interview. “Raising taxes in a recession is not a strategy for recovery.”

- Pharmaceutical stocks fell after Eli Lilly & Co.(LLY) and AstraZeneca Plc said they would lose “several hundred million” dollars each in drug sales if a health-care plan proposed today by President Barack Obama is approved. Obama’s budget proposal would raise rebates that drugmakers must provide for patients on Medicaid, the nation’s health plan for the poor, to 22 percent of the manufacturer’s price, from 15 percent. Antipsychotic drugs including Lilly’s Zyprexa and AstraZeneca’s Seroquel for schizophrenia would be especially hard hit, said Lilly spokesmen Ed Sagebiel and AstraZeneca’s Tony Jewell. People taking schizophrenia drugs are disproportionately poor and covered by Medicaid. “Any price change is going to significantly hurt profits,” said Michael Krensavage, the founder of Krensavage Asset Management in New York, in an interview today. “Whenever you talk about an extra dollar of sales lost, a significant portion falls to the bottom line. Any time you move closer to price control, you’re going to spook the drug industry.” “At a time when the economy is not doing particularly well, you’re taking a pretty big bite out of what is at least a semi- healthy part of the American economy,” said Jay Bonitt, vice president of federal affairs for Lilly, in an interview. “We are going to come back with some alternative suggestions and also point out the impact if some of these things were to happen.”

- MetLife Inc.(MET), the biggest U.S. life insurer, was downgraded by Standard & Poor’s as the rating firm cut 10 companies in the industry on concern that losses on bonds and mortgage holdings will rise. “The pressures within the life sector have been building,” S&P said in a statement. “Given the disarray in the credit and capital markets, most insurers’ financial flexibility has decreased in the past six months.”

- The Obama administration has decided to press criminal charges against accused al-Qaeda operative Ali Saleh Kahlah al-Marri, shifting him into the civilian justice system after 5 1/2 years in a military brig, two government officials familiar with the decision said. The move marks a break with the Bush administration, which had argued it could hold al-Marri indefinitely as an enemy combatant based on assertions that he was sent to the U.S. on a terrorism mission. Al-Marri is the only person now being held as an enemy combatant on U.S. soil. He was a legal U.S. resident when he was arrested in Illinois in December 2001 during the investigation of the Sept. 11 attacks. Jonathan Hafetz, an ACLU lawyer who represents al-Marri, said he would urge the Supreme Court to hear the case even if his client is indicted and shifted to civilian custody. “It is important that the Supreme Court continue to review this case,” he said. “It must make clear once and for all that indefinite detention is illegal.” Former President George W. Bush’s administration said in court papers it had evidence that al-Marri trained at an al-Qaeda camp in Afghanistan, was introduced to Osama bin Laden by Sept. 11 mastermind Khalid Sheikh Mohammed and was sent to the U.S. to explore computer hacking methods to disrupt bank records and the financial system. The Bush administration also said al-Marri’s laptop contained technical information about cyanide and other poisonous chemicals.

- Japan headed for its worst postwar recession in January as manufacturers cut production by an unprecedented 10 percent and consumers slashed spending. The month-on-month decline in factory output exceeded December’s record decline of 9.8 percent, the Trade Ministry said today in Tokyo. Household spending fell 5.9 percent from a year earlier, the biggest drop in more than two years.

- Fannie Mae, the mortgage-finance company seized by regulators in September, asked the U.S. Treasury for $15.2 billion in capital and raised the possibility of requesting more aid after a sixth consecutive quarterly loss drove its net worth below zero. A wider fourth-quarter net loss of $25.2 billion, or $4.47 a share, pushed the company to make its first draw from a $200 billion federal lifeline, Washington-based Fannie said in a filing today with the Securities and Exchange Commission. Credit quality deteriorated and debt costs soared, forcing the company to record higher expenses and write down the value of its assets. “We expect the market conditions that contributed to our net loss for each quarter of 2008 to continue and possibly worsen in 2009, which is likely to cause further reductions in our net worth,” Fannie said in a statement accompanying the filing.

- The U.S. Commodity Futures Trading Commission said it is investigating the involvement of United States Oil Fund LP(USO) and other investors regarding an increase in the price difference between two oil contracts this month. The United States Oil Fund is managed by Alameda, California-based United States Commodity Funds LLC and maintains holdings in West Texas Intermediate crude oil, the grade traded on the New York Mercantile Exchange since 1983. The investigation announced today is part of the CFTC’s larger national oil-market probe that was announced last year. “I want to reassure the public that the CFTC takes seriously issues surrounding price movements in our nation’s vital energy markets,” Stephen Obie, acting director of enforcement at the CFTC, said in an e-mailed statement.

- U.S. lawmakers will hold a hearing next week on whether to consider changes to the bankruptcy code that would give retailers more time to find a buyer or restructure and avoid liquidation, according to a person familiar with the proposed legislation. The session will consider whether to eliminate the 210-day limit retailers have to determine which store leases to keep, according to the person, who declined to be identified because the content of the hearings isn’t public. Such a rule change may help companies avoid going out of business as Circuit City Stores Inc. was forced to do when it couldn’t find a buyer.

- Former Bundesbank President Karl Otto Poehl said Germany should resist increasing pressure to rescue other euro-area countries as the financial crisis brings some of them to the brink of default. “A bailout of a debtor country from a surplus country like Germany would be like opening the box of Pandora,” he said yesterday at an event at the London School of Economics. “It’s a very dangerous course that we will enter” and “I’m very much against it, many people in Germany are against it, but the political pressure will increase, it’s obvious.”

- China’s stocks dropped, driving the benchmark index to its worst weekly drop this year, as commodity producers slumped on concern the global recession will damp demand for raw materials and batter profits. “Share prices have really risen too fast this year and funds are now switching from those that gained the most,” said Fan Dizhao, an investment manager at Guotai Asset Management Co. in Shanghai, overseeing the equivalent of $4.7 billion. Investors opened 484,510 new share trading accounts last week, according to the nation’s clearing house, the most since the five days to Jan. 25, 2008, and more than four times the levels recorded last month. Still, concern such gains are unsustainable has dragged the Shanghai Composite down 12 percent from a five-month high reached on Feb. 16. China faces an “asset bubble” if credit growth is not matched by an increase in investment opportunities, chief economist Ha Jiming at China International Capital Corp. said in a note yesterday. Aluminum capacity in China may exceed output by 51 percent this year as a result of expansion in the sector, according to research company CBI China Co.

Wall Street Journal:

- Embattled Citigroup Inc.(C) and the U.S. have reached an agreement in which the government will substantially increase its stake in the bank and in return will demand a boardroom shakeup, according to people familiar with the matter. Under a deal expected to be announced early Friday morning, the Treasury Department has agreed to convert some of its current holdings of preferred Citigroup shares into common stock. The government will convert its stake only to the extent that Citigroup can persuade private investors to do so alongside the government, the people said. The Treasury will match the private investors' conversions dollar-for-dollar up to $25 billion. The size of the government's new stake will hinge on the amount of preferred shares that private investors, including sovereign wealth funds, agree to convert into common stock. The Treasury's stake is expected to rise to 30% to 40% of Citigroup's shares, the people said.

- The president's budget takes on what has long been considered a sacred cow by trying to reduce the mortgage-interest tax deduction for top earners. The president's budget seeks to raise $318 billion over the next decade by lowering the value of itemized tax deductions for the wealthy -- including interest paid on home mortgages. Households that currently pay income taxes at the 33% and 35% rates would only be able to claim deductions at the 28% rate. That means that for every $1,000 in deductions, a household in the top tax bracket would realize a tax savings of $280, down from the current $350. The proposal wouldn't take effect until 2011. The mortgage-interest deduction for owner-occupied homes is estimated to cost the government $100 billion this year, making it the largest government subsidy for housing and one of the most expensive tax deductions. The real-estate industry, which has long squelched efforts to tamper with the mortgage-interest deduction, warned Thursday that any rollback could undermine an already decimated housing market. "It's an awful policy to recommend at this time," said Lawrence Yun, chief economist for the National Association of Realtors. "The source of economic problems is falling home prices, and this proposal raises additional uncertainty" about where and when prices would set a floor, he said.

- A dramatic shift in Washington's view of business is expressed in the Obama budget, which would raise taxes, increase regulation and ax subsidies cherished by corporate America. Makers of brand-name pharmaceuticals would see increased competition, thanks to a proposal to allow people to buy cheaper medicines from other countries. Oil and gas companies, multinational corporations and managers at private-equity firms and real-estate partnerships would be hit by higher tax rates. Financial markets would be subject to tighter oversight, while businesses would see more regulation. Among other things, the Securities and Exchange Commission is proposed to receive a 13% funding boost next fiscal year, bringing its 2010 budget to more than $1 billion. Moreover, a series of corporate subsidies, such as more than $4 billion in payments annually doled out to the private student-loan industry, would be eliminated. Taken together, the proposals usher in a government more skeptical of corporate concerns and more deeply involved in the U.S. economy. That sent a chill through Wall Street that caused student-loan providers and health-care stocks to tumble. Across the board, business leaders, including the U.S. Chamber of Commerce, raised alarms about the budget plan. "You don't build a house by blowing up its foundation," said Bruce Josten, the Chamber's executive vice president for government affairs, who contended the plan would penalize small businesses and entrepreneurs. The Chamber had previously aligned itself with Mr. Obama on big-ticket items such as the stimulus package. "If there was any doubt as to whether this administration would govern from the center, that doubt is now gone," said Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, a trade group. "This budget is a forced march toward socialism, in my opinion, without trying to be dramatic about it."

- The Senate intelligence committee is expected to open a new probe into the Central Intelligence Agency's interrogation program as soon as Friday, congressional aides said, signaling a desire in Congress to examine Bush-era policies, even as President Barack Obama talks of looking to the future rather than the past. The review could produce ammunition for further investigations or lawsuits against Bush administration officials involved in the program.

- Iraq's Ministry of Oil and the British-based Mesopotamia Petroleum Co. signed a joint venture to drill for oil in Iraq, marking the first partnership between a state-owned Iraqi oil company and a foreign firm.

CNBC.com:
- President Obama’s new budget has Cramer wondering if stocks – any of them – are safe. Just look at what the White House’s spending plan does to health-care companies: Medicare changes are turning Humana (HUM) 23.64 -5.72 (-19.48%) and UnitedHealth (UNH) 20.07 -2.96 (-12.85%) into charities. Cigna (CI) 16.39 -1.53 (-8.54%) and Aetna’s (AET) 24.03 -3.05 (-11.27%) margins will shrink. Reimbursement cuts might extend to drug and biotech companies like Eli Lilly (LLY) 31.04 -1.52 (-4.67%) and Genzyme (GENZ) 64.63 -4.44 (-6.43%) These used to be classic recession-resistant stocks, but not anymore. This kind of move makes Obama, well, an enemy, Cramer said. There’s no telling which sector will be next. Maybe he’ll cut defense spending. Maybe he’ll institute a windfall profits tax on the oil companies. So now, on top of their economic woes, investors have to worry about the president’s next potential victim. (video)

NY Times:

- The Energy Department has $25 billion to make loans to hasten the arrival of the next generation of automotive technology — electric-powered cars. But no money has been allocated so far, even though the Advanced Technology Vehicles Manufacturing Loan program, established in 2007, has received applications from 75 companies, including start-ups as well as the three Detroit automakers. With General Motors and Chrysler making repeat visits to Washington to ask for bailout money to stave off insolvency, some members of Congress are starting to ask why the Energy Department money is not flowing yet. The loans also are intended to help fulfill President Obama’s campaign promise of putting one million electric cars on American roads by 2015.

BusinessWeek:

- How the Crisis is Hitting Europe. Its economy harbored far more risk than most people realized, and businesses are more in hock than their US counterparts.

- The Best Undergraduate Business Schools.

Washington Post:

- Commercial banks and investment firms trimmed borrowing over the past week from the Federal Reserve's emergency lending program, a modest sign of some easing in credit strains.

cnet:

- Softbank Mobile, the iPhone carrier in Japan, plans to introduce a new program Friday that will give some iPhones away for free with a new two-year contract. The 8GB iPhone will be free to new subscribers who sign up for a plan starting on Friday, likely to disappoint those who paid the equivalent of $235 (22,782 yen) in the recent past, according to CrunchGear. Softbank is also reducing the price of the 16GB version from $350 to $118 as part of the new "iPhone for everybody Campaign."

Theday.com:

- Contradicting a Barack Obama campaign position, a former transition team official said mining companies could pay federal royalties of up to 8 percent for gold, silver and other hard-rock mining on public lands. John Leshy, who served on the president's Interior Department transition team, told a House panel Thursday that revisions to a 137-year-old hard-rock mining law were long overdue. He said the government should reinstate environmental restrictions for hard-rock mining on public land that were wrongly abandoned by the Bush administration, contending that legislation that would impose environmental controls and first-ever royalty fees would not hurt the industry. In November 2007, candidate Obama told reporters in Nevada that the measure was too burdensome on industry and could end up costing miners jobs in Nevada and other Western states. Sheri Eklund-Brown, chair of the Elko County board of commissioners in Nevada, told the House panel Thursday that the mining industry provides the highest-wage jobs in the state, and "today no community can have enough high-wage jobs." The majority of the federal lands where hard-rock mining operations occur are in 12 Western states: Alaska, Arizona, Colorado, California, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

Boston Globe:

- The U.S. State Department and universities around the country are warning college students headed for Mexico for some spring-break partying of a surge in drug-related murder and mayhem south of the border. "There have been Americans kidnapped, and if you go you need to be very aware and very alert to this fact." Much of the drug violence is happening in border towns, and tourists have generally not been targeted, though there have been killings in the big spring-break resorts of Acapulco and Cancun, well away from the border. Mexico's drug cartels are waging a bloody fight among themselves for smuggling routes and against government forces, carrying out massacres and dumping beheaded bodies in the streets. More than 6,000 people were killed in drug violence in Mexico last year.

Reuters:

- Dell Inc (DELL) posted a sharper-than-expected fall in quarterly revenue as consumers bought cheaper personal computers and overall demand remained weak, but cost cuts helped profit beat Wall Street forecasts. Shares of Dell rose 1.6 percent in a relief rally as investors had feared the results would be worse, after bigger rival Hewlett-Packard Co (HPQ) last week posted disappointing quarterly revenues and cut its full-year outlook.

South China Morning Post:

- The amount of land sold at Chinese government auctions in 60 major mainland cities plunged 53 per cent last month from a year ago as cash-hungry developers became more cautious and put the brakes on acquisitions.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (LTD), target $10.

Night Trading
Asian Indices are -.50% to +1.25% on average.
S&P 500 futures +.33%.
NASDAQ 100 futures +.42%.

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Earnings of Note
Company/EPS Estimate
- (BX)/-.30

- (MIR)/.51

- (RUTH)/-.03

Economic Releases

8:30 am EST

- Preliminary 4Q GDP is estimated to decline 5.4% versus a prior estimate of a 3.8% decrease.

- Preliminary 4Q Personal Consumption is estimated to fall 3.7% versus a prior estimate of a 3.5% decline.

- Preliminary 4Q GDP Price Index is estimated to fall .1% versus a -.1% prior estimate.

- Preliminary 4Q Core PCE is estimated to rise .6% versus a prior estimate of a .6% increase.

9:45 am EST

- The Chicago Purchasing Manager report for February is estimated to fall to 33.0 versus 33.3 in January.

10:00 am EST

- The Final Univ. of Mich. Consumer Confidence reading for February is estimated to fall to 56.0 versus a prior estimated of 56.2.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Bullard speaking, Fed’s Plosser speaking, Fed’s Yellen speaking, NAPM-Milwaukee, Goldman Tech & Internet Conference, Pacific Crest Technology Summit, (ETN) analyst meeting, (IMGN) analyst meeting, (HS) investor day and (PGN) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish at Session Lows, Weighed Down by REIT, HMO, Hospital, Drug, Biotech, Medical and Oil Tanker Shares

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In Play

Stocks Reversing Lower into Final Hour on Tax Hike Worries, Rising Economic Pessimism, More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Biotech longs. I added (QQQQ)/(IWM) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is above average. Investor anxiety is also above average. Today’s overall market action is very bearish. The VIX is falling .09% and is very high at 44.66. The ISE Sentiment Index is about average at 151.0 and the total put/call is low at .66. Finally, the NYSE Arms has been running below average most of the day, hitting .25 at its intraday trough, and is currently 1.0. The Euro Financial Sector Credit Default Swap Index is falling 4.88% today to 143.55 basis points. This index is still below its high of 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is falling 2.71% to 212.88 basis points. The TED spread is rising .99% to 99 basis points. The TED spread is now down 368 basis points in about four months. The 2-year swap spread is falling 2.92% to 62.25 basis points. The Libor-OIS spread is falling .05% to 100.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 2 basis points to .98%, which is down 173 basis points in about seven months. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .27%, which is down 2 basis points today. This morning’s very low put/call and high ISE readings were negative tells. As well, sector breadth was poor, overall breadth was mediocre and there were an unusual number of stocks falling on volume given morning gains. Education, REIT, HMO, Hospital, Biotech, Medical and Oil Tanker shares are under significant pressure today. President Obama’s budget seems to be more damaging to many companies than investors had already anticipated. Asia will likely come under pressure tonight. On the positive side, the AAII % Bulls is still very low at 24.3%, while the % Bears is still very high at 55.14%. Construction, Insurance, Bank, Telecom, Computer Service, Oil Service and Energy Shares are still higher on the day despite the afternoon swoon. Nikkei futures indicate a -52 open in Japan and DAX futures indicate an -62 open in Germany tomorrow. I expect US stocks to trade modestly lower into the close from current levels on rising economic pessimism, more shorting, higher energy prices and tax hike worries.

Today's Headlines

Bloomberg:

- President Barack Obama proposed almost $1 trillion in higher taxes on the 2.6 million highest- earning Americans, Wall Street financiers, U.S.-based multinational corporations, and oil companies to pay for permanent tax breaks for lower earners. Obama’s 2010 budget proposal, released today, would reinstate the top two Clinton-era tax rates of 36 percent and 39.6 percent in 2011, up from the 33 percent and 35 percent the richest Americans now pay. It would raise taxes on capital gains and dividends to 20 percent for top earners, up from the 15 percent set by former President George W. Bush in 2003.

- Copper may fall to $3,000 a metric ton in the second quarter as an economic recovery is delayed, Standard Chartered Plc said. The metal, used in plumbing and electrical wiring, will average $3,155 a ton in the third quarter, 9.9 percent below a previous forecast of $3,500 a ton, Dan Smith, an analyst at Standard Chartered in London, wrote in a report dated Feb. 24. Copper demand will decline 4 percent in 2009, Standard Chartered estimated, its first forecast for this year, Smith said by phone today.

- Crude oil rose to the highest level in a month and gasoline surged more than 6 percent as equities advanced and U.S. stockpiles of the motor fuel dropped.

- American International Group Inc.(AIG) may get a backstop from the U.S. to protect against further losses on credit-default swaps, according to a person familiar with the matter. The federal guarantees may be included in New York-based AIG’s restructured bailout, which the company plans to disclose next week with fourth-quarter results, according to the person, who declined to be identified because the talks are private.

- General Motors Corp.(GM) reported a $30.9 billion annual loss, the second-biggest in its 100-year history, as Chief Executive Officer Rick Wagoner asked the Treasury for more cash to survive through 2009. GM’s cumulative deficit ballooned to $82 billion since the end of 2004, when it last had an annual profit. Full-year sales fell 17 percent, damped by a recession that ravaged new-car demand, GM said today.

- President Barack Obama’s budget plan assumes $78.7 billion in revenue in 2012 from the sale of greenhouse-gas emission permits to polluters, putting new pressure on Congress to pass such legislation by early next year. A “cap-and-trade” program would generate a total of $645.7 billion by 2019, according to the budget blueprint Obama sent to Congress today. Initial funds would be used to invest in “clean” energy, help finance Obama’s tax credit for workers and offset higher energy costs for low- and middle-income people and clean up costs for small businesses. The budget calls for the Environmental Protection Agency to get $19 million to begin setting up an inventory of greenhouse- gas emissions that most scientists say are causing rising temperatures and sea levels.

- Former Federal Reserve Chairman Paul Volcker called on Congress to ensure financial-market stability through regulatory changes including “strong restrictions” on hedge funds, private equity and proprietary trading.

- SLM Corp.(SLM), the largest U.S. student lender, fell as much as 37 percent after President Barack Obama’s first budget called for an end to loan subsidies. Shares of SLM, known as Sallie Mae, fell 36 percent to $5.36 at 11:29 a.m. in New York Stock Exchange composite trading.

- China, home to the best-performing stock market this year, faces an “asset bubble” if credit growth is not matched by an increase in investment opportunities, China International Capital Corp. said. “The country’s strong liquidity supply could diverge from its economic fundamentals if its monetary policies are too loose,” Ha Jiming, chief economist at China International Capital, said in an e-mailed note today. “If a large amount of funds flows into its capital market due to a lack of investment- worthy projects in the real economy, it will likely bring an asset price bubble in an economic downturn.”

- International Business Machines Corp.(IBM) jumped as much as 5 percent in New York trading after reaffirming its profit forecast for this year, signaling the computer- services provider will withstand the deepening recession. Profit will increase to at least $9.20 a share, IBM said in a regulatory filing today. Analysts on average project $9.08, excluding some items, according to a Bloomberg survey. The company also predicted “strong double-digit growth” in long- term contracts.

Wall Street Journal:

- Top executives of Chrysler LLC met Wednesday with President Barack Obama's auto task force in Washington, where they discussed the company's troubled finances, its proposed alliance with Fiat SpA and fuel-efficient vehicle development, said a person familiar with the session. The meeting came about a week after the car maker asked the federal government for up to $5 billion in additional loans to keep it afloat.

- In the tug-of-war for stock-exchange listings, the Nasdaq Stock Market's growing arsenal of weapons is helping it gain ground. With promises of big-screen appearances in Times Square and detailed intelligence on share trading, Nasdaq attracted companies with $80 billion of market capitalization to switch from the New York Stock Exchange in 2008. The milestone nearly matched the Big Board's own record in snatching Nasdaq companies, back in 2000.

- The government should make it a lot more expensive for Americans to drive and should install devices in cars that levy a fee for every mile traveled, according to a report being released Thursday by a congressionally chartered commission. The report lands in the middle of debate over how to pay for roads and other transportation projects and recommends an array of potentially controversial increases in the cost of driving. Among the proposals: raising the 18.4 cents-a-gallon federal gasoline tax by 10 cents, or 54%, and then indexing future increases to inflation. The study estimates that would cost American households about $9 more a month. The plan also calls for adding 15 cents a gallon to the 24.4 cents-a-gallon tax on diesel fuel.

CNBC.com:
- When the NCAA men's basketball tournament comes to Detroit for the Final Four in early April, don't expect to see General Motors(GM) executives, dealers or clients in the suites that they've purchased. CNBC has learned that despite the fact that Pontiac is the official car of the NCAA and the final games are being played in the city of GM's headquarters, the car company is not inviting anyone to watch the action from the luxury suites at The Palace at Auburn Hills.

- The government's "stress-test" of the nation's largest banks could end up discouraging lending as banks hoard cash to appear healthier to regulators, banking analysts say.

- Poll: Do You ‘Win’ or ‘Lose’ with The Obama Budget?

NY Times:

- Carl Icahn has shown a resurgent interest in movie studios, steadily increasing his stake in Lions Gate to 14.5 percent. Now, Nikki Finke of the Deadline Hollywood Daily blog reports that Mr. Icahn is showing interest in another movie studio with a lion in its logo: MGM.

Boston Globe:

- President Barack Obama may be in familiar company when he sits down for his first White House meeting with the Congressional Black Caucus, but it won't be a clubby reunion. Members of the liberal, all-Democratic caucus that just last year counted Obama as one of its own say they plan to press him on their priorities.

The Detroit News:

- The Treasury Department is seriously considering offering government help to auto suppliers seeking to restructure, people briefed on the matter said Wednesday. Suppliers are being squeezed as automakers pull back on production in the face of the worst market for auto sales in decades, raising fears that more suppliers will have to file for bankruptcy.

USA Today:

- Just one-fourth of Americans think the government should continue lending money to Detroit automakers, according to a new USA TODAY/Gallup Poll, even though the manufacturers say they'll go out of business without federal help. That's a huge, and fast, change of heart. In December, before the government approved emergency auto loans, the poll found that 61% favored some kind of government help. "The more people understand what's wrong with General Motors, (GM) the less willing they are to support it," says Porter Stansberry, head of Stansberry & Associates Investment Research.

- The Pentagon has decided to reverse Bush administration policy and allow some media coverage of returning war dead, with family approval, the Associated Press reports.

AP:

- President Barack Obama unveiled a multi-trillion-dollar spending plan Thursday that would boost taxes on the wealthy, curtail Medicare, lay the groundwork for universal health care and leave a string of deficits dwarfing any in the nation's history. In addition to sending Congress his $3.55 trillion budget plan for 2010, Obama proposed more immediate changes that would push spending to $3.94 trillion in the current year. That would result in a record deficit Obama projects will hit $1.75 trillion, reflecting the massive spending being undertaken to battle a severe recession and the worst financial crisis in seven decades.

- At a time when bankers are being pilloried on Capitol Hill as heartless and greedy, Leonard Abess Jr. stands apart. After selling his bank for a fortune last fall, he quietly handed out $60 million in bonuses from his own pocket - and not just to top executives. In all, 471 employees and retirees, including tellers, clerks and secretaries, were rewarded, receiving an average of about $127,000 each."I think everybody was surprised. But knowing Leonard, the type of person he is, I can believe him giving it away," said retiree William Perry, who spent 43 years at City National Bank of Florida, rising from janitor to vice president. Perry, 78, got $50,000, which he is using to help his son pay for law school.

Reuters:
- Cisco Systems Inc (CSCO) Chief Executive John Chambers said the network equipment maker's future acquisitions would likely be small and not involve consumer devices.

Financial Times:
- The rush by retail investors into bullion coins is creating shortages as mints across the world struggle to meet the surge in demand, dealers and mint officials say. The scarcity is lifting coin premiums to as much as 5 per cent above the spot gold price, a level reached briefly after the collapse of Lehman Brothers last September, when coin shortages also surfaced. Bullion coins used to be bought mainly by collectors and gold bugs, but the financial crisis is leading regular retail investors to embrace them, dealers say.

- Iraq has sweetened the terms it is offering international oil companies vying to develop the country’s reserves. Companies such as BP, Royal Dutch Shell, Chevron and Total will now receive stakes of 75 per cent rather than 49 per cent if their bid wins. Iraq has also lowered the production targets it initially demanded companies achieve before they are paid for their work. The change is the first concrete example of the global shift in power beginning to sweep through the oil industry. With the collapse in oil prices, from $147 a barrel last summer to $35, showing no sign of reversal, international oil companies are regaining some of their influence while the clout of oil- and gas-rich countries in which they work has eroded. Iraq’s decision to improve incentives will be followed by others, industry insiders say.

Les Echos:

- US billionaire Wilbur Ross wants to acquire small regional banks weighed down by subprime losses and set up an institution to buy up toxic debt, citing an interview. Ross wants the US government to participate in financing the acquisition of toxic assets and to assume partial responsibility in case of loss. The billionaire will announce a new investment in 60 to 90 days.

Interfax:

- Capital outflows from Russia in January were about $40 billion, citing Finance Minister Alexei Kudrin. Russia’s economy will contract this year even if oil trades at $55 a barrel or higher, citing Kudrin.

National Post:

- Obama’s sneak attack on low taxes. Idea 1 for example is being labeled an attempt to shift tax collection from individuals to corporations. It’s nothing of the kind! Taxes on carbon emissions do not fall on “corporations.” They fall on users of electricity. Idea 2 amounts to a concealed attempt to push the top rate of tax past the 39.6% that prevailed in the 1990s. It’s a violation of Obama’s campaign promise to return to Clinton rates, but no higher. In an attempt to raise taxes without acknowledging the fact, both ideas introduce costly new complexity into American economic life. Cap and trade is a worse idea than a carbon tax. Less lucrative too. The only merit of cap and trade is that it enables the government to collect revenue without admitting that a new tax has been imposed. Likewise, the roll back of deductions empowers accountants and tax-shelter specialists – creating costs to society likely to dwarf the revenues collected, again only in order to enable the government to deny that it has raised tax rates.

Gulf News:
- Dubai house rents may fall as much as 50% by the end of this year as the emirate’s real-estate market cools, citing Marwan Bin Ghalita, the head of Dubai’s Real Estate Regulatory Authority. A quarter of current real-estate projects in Dubai may be completed on time, while the rest may be put on hold, rescheduled or merged with other developments, Ghalita said.

Bear Radar

Style Underperformer:
Large-cap Growth (-.38%)

Sector Underperformers:
HMOs (-10.05%), Education (-6.21%) and Hospitals (-5.56%)

Stocks Falling on Unusual Volume:
NIHD, GDP, ANW, IBN, HUM, NUVA, AET, ANSS, AMAG, MDVN, SYK, MANT, MRK, PSYS, COGT, MDAS, TRLG, STRA, CECO, CPLA, COCO, LOPE, ESRX, LHCG, AMED, APOL, STU, TEG, OCR, SWY, DCI, EME and UHS

Stocks With Unusual Put Option Activity:
1) SLM 2) AET 3) CI 4) FITB 5) CY

Bull Radar

Style Outperformer:
Large-cap Value (+2.34%)

Sector Outperformers:
Banks (+10.57%), Oil Service (-5.62%) and Semis (+4.20%)

Stocks Rising on Unusual Volume:
STI, ZION, UBS, USB, SU, NXY, CNQ, TI, AMT, AFL, VRUS, TMK, SGP, APA, SAFM, ACIW, SHLD, SIGM, XLNX, BOKF, YHOO, DLTR, ALXN, TNDM, WYNN, GBCI, PACW, CEPH, LEAP, ALTR, IBOC, FWLT, ZN, TYL, EQY, CRT and FLS

Stocks With Unusual Call Option Activity:
1) LCC 2) CSX 3) CMA 4) UNH 5) AET

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
Chart Toppers
Real-Time Intraday Quote/Chart
HFR Global Hedge Fund Indices

Thursday Watch

Late-Night Headlines
Bloomberg:

- The leaders of Britain’s market regulator told a parliamentary select committee that “revolutionary” changes in U.K. financial regulations will lead to significantly less proprietary trading by banks.

- Gold is the most favored investment this year ahead of investment-grade bonds and other assets, according to a survey of investment advisers, the producer-funded World Gold Council said.

- President Barack Obama will seek $75.5 billion more for combat operations in Iraq and Afghanistan through the end of this fiscal year, according to three people familiar with the request. It will be submitted along with the fiscal 2010 budget Obama sends to Congress tomorrow. That proposal will request $130 billion for the wars in fiscal 2010 in addition to a total Defense Department budget of about $534 billion, the people said.

- Singapore’s economy shrank the most in at least 33 years last quarter as plunging exports push Asian nations deeper into an economic slump and add pressure for the nation to weaken its currency. Gross domestic product declined an annualized 16.4 percent last quarter from the previous three months, after shrinking a revised 2.1 percent between July and September, the trade ministry said in a report today. The contraction was less than a Jan. 21 estimate of 16.9 percent. Singapore’s dollar fell as the trade ministry said the growth prospect is “weak” this year and that any recovery would likely be gradual. The economy has contracted for three straight quarters, sliding into recession along with Japan, Hong Kong and New Zealand, and manufacturers such as Creative Technology Ltd. are cutting jobs.

- U.S. Interior Secretary Ken Salazar is withdrawing leases the Bush administration offered for the extraction of oil from shale on federal land, and will develop a new plan with higher royalty rates. “We are not taking it off the table for the possibility of development but we are going to be thoughtful and deliberative,” Salazar said in a conference call with reporters. Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell Plc are among companies working on technology to extract the oil by heating the rocks. Oil-shale formations in western U.S. states could hold as many as 800 billion barrels of oil, according to a government estimate. The decision to delay the plan represents the third time Salazar has blocked or put off an energy initiative that former President George W. Bush backed. Salazar earlier this year pushed back a plan to expand drilling for oil and natural gas in the outer continental shelf. He also nullified oil and natural gas leases on about 130,000 acres in Utah. “Secretary Salazar is walking away from utilizing American’s energy resources to become less dependent on foreign countries,” said Representative Doc Hastings of Washington, the top Republican on the House Natural Resources Committee. Hastings said Salazar also was turning his back on jobs that could be generated from oil-shale development during the economic recession.

- Federal Reserve Chairman Ben S. Bernanke said accounting standard-setters need to figure out how the mark-to-market rule blamed for worsening the global financial crisis should be followed when assets aren’t readily traded. The rule, which requires companies to write down assets every quarter to reflect market value, is “a good principle in general” and shouldn’t be suspended entirely, Bernanke told the House Financial Services Committee today. “Accounting authorities have a great deal of work to do to try to figure out how to deal with some of these assets, which are not traded in liquid markets,” he said.

- Federal Reserve Chairman Ben S. Bernanke said while the U.S. government may take “substantial” stakes in Citigroup Inc. and other banks, it doesn’t plan a full- scale nationalization that wipes out stockholders. Nationalization is when the government “seizes” a company, “zeroes out the shareholders and begins to manage and run the bank, and we don’t plan anything like that,” Bernanke told lawmakers in Washington today.

- A top Senate Democrat scheduled a March 4 hearing on a proposed “truth and reconciliation” commission to investigate claims the Bush administration abused its power by authorizing torture and warrantless surveillance of suspected terrorists. In a floor speech, Judiciary Committee Chairman Patrick Leahy of Vermont announced plans for the hearing on his proposal last month for an independent, non-partisan commission. It would be authorized to probe allegations of abuse of executive power, including politicization of law enforcement decisions. Pennsylvania Senator Arlen Specter, the Judiciary Committee’s ranking Republican, said he opposes any “fishing expedition” that will be “expensive, lengthy and will file a report that at best will gather dust.” The Justice Department has the authority to investigate any possible criminal conduct, he said.

- Morgan Stanley(MS), recipient of $10 billion in government aid, won’t entertain clients or attend a U.S. PGA Tour event it sponsors in June amid criticism from U.S. lawmakers about banks’ corporate expenses. Morgan Stanley is the main sponsor for the Memorial Tournament, scheduled for June 4-7 in Dublin, Ohio. “We are not participating this year due to the environment,” Morgan Stanley spokeswoman Mary Claire Delaney said. She declined to elaborate on the statement.

- U.S. Treasury Secretary Timothy Geithner said that a government takeover of troubled banks is unnecessary for solving the country’s deepening economic and financial woes. Nationalization “is the wrong strategy for the country and I don’t think it’s the necessary strategy,” Geithner said, according to a transcript of an interview on public television’s “The News Hour with Jim Lehrer” to be broadcast later tonight.

- China’s human rights record worsened last year in areas that included harassment of dissidents and repression of ethnic minorities such as Tibetans, the State Department said today. Chinese authorities committed killings and torture outside the legal system, coerced confessions of prisoners and used forced labor, the department said in its 2008 report. The government also “increased detention and harassment of dissidents, petitioners, human rights defenders and defense lawyers,” the department said in the study.

- China investors should be “defensively positioned” as a decline in the nation’s tax receipts suggests a steeper slowdown in spending than retail sales figures show, according to Goldman Sachs Group Inc. “Tax data show much sharper deceleration in income and consumption in the past few months than suggested by official retail sales or income growth figures,” Goldman Sachs analysts Joshua Lu, Caroline Li and Fiona Lau wrote in a note today. Value-added tax has “de-linked sharply” from retail sales figures, the analysts wrote. VAT rose 1 percent in the fourth quarter from a year earlier, while retail sales gained 21 percent, according to the note. Growth in China’s individual income-tax receipts “slowed down significantly” in the second half and shrank in December and January, the analysts wrote. This compares with nominal wage growth of 21 percent in the third quarter, the report said. “We think the government’s fiscal stimulus package announced so far may help create jobs, but may not necessarily help boost wages which, in our view, is the key driver of consumption growth,” the note said. “As such we are not hopeful that China’s consumption slowdown will bottom out soon.”

- The yen fell to a three-month low against the US dollar before reports this week that may add to evidence Japan’s recession is deepening, reducing the appeal of its currency as a refuge from the global financial turmoil.

Wall Street Journal:

- The U.S. Commodity Futures Trading Commission has contacted United States Oil Fund LP (USO) and two futures exchanges about their positions in crude, a senior commission official told energy-information provider Platts on Wednesday.

- President Barack Obama will propose a combined $634 billion in upper-income tax increases and cuts to government health spending over 10 years to fund a new program aimed at getting health coverage to all Americans, a senior administration official said Wednesday. The spending cuts are aimed not just at raising money for the new program but also at curbing health-care spending overall, something that the president and many experts believe is critical to the nation's long-term financial health. The cuts would affect a range of interests, including managed care companies, prescription drug manufacturers and hospitals. The senior administration official who previewed the announcement acknowledged that $634 billion wouldn't be enough to pay for the ambitious health-care expansion that Mr. Obama and many Democrats envision. That project is estimated to cost more than $1 trillion over 10 years. Rather, the official described the proposed $634 billion as a "down payment" and said the administration would work with Congress to find the rest. The tax increase is a new proposal from Mr. Obama, one not offered during his presidential campaign, which would limit deductions for filers in the 33% and 35% tax brackets. Under current law, taxpayers who itemize calculate their deductions based on their income tax bracket. So a taxpayer who pays 35% of his income in taxes receives a tax benefit equal to 35% of various expenses deducted -- such as mortgage interest or charitable contributions -- from his taxable income. Under the Obama proposal, the benefit from these deductions would be limited to a maximum of 28% -- even for those taxpayers who are paying higher tax rates.

- Citigroup Inc.(C) is closing in on an agreement to boost the federal government's stake in the company to as much as 40%, according to people familiar with the situation. A deal could be announced as soon as Thursday. But a greater U.S. stake will bring a slew of new complications for executives of the New York company.

- Fidelity Investments' Capital Markets unit will be hiring "aggressively" in the coming months as it looks to capitalize on the depleting prime-brokerage operations of some large financial firms. In a Wednesday interview, Mark Haggerty, president of Fidelity Investments' Capital Markets Services, told Dow Jones Newswires that the unit will be looking to hire in equities, prime brokerage, munis and fixed income.

- The Obama administration, in unveiling details of its financial-rescue plan, laid out a dark economic scenario it expects banks to be able to withstand, the starting point for what could become a significant new infusion of government cash into the banking system.

MarketWatch.com:
- In a sign that record-high levels of payroll cuts may ease in coming months, the number of employers that said they plan to lay off workers dropped steeply in a new survey of 245 large U.S. firms. Thirteen percent of large companies said they are planning job cuts, down from 23% who said that in December and 26% in October, according to the survey conducted in mid-February by consulting firm Watson Wyatt.

CNBC.com:
- Executives of the biggest oil companies are taking their case for expanded offshore drilling to Congress, even as Democratic congressional leaders and the Obama administration promise to put some limits on energy development along the nation's coasts. The executives were testifying Wednesday before the House Natural Resources Committee.

Politico:

- Sen. Robert Byrd (D-W.Va.), the longest-serving Democratic senator, is criticizing President Obama’s appointment of White House “czars” to oversee federal policy, saying these executive positions amount to a power grab by the executive branch. In a letter to Obama on Wednesday, Byrd complained about Obama’s decision to create White House offices on health reform, urban affairs policy, and energy and climate change. Byrd said such positions “can threaten the Constitutional system of checks and balances. At the worst, White House staff have taken direction and control of programmatic areas that are the statutory responsibility of Senate-confirmed officials.” While it's rare for Byrd to criticize a president in his own party, Byrd is a stern constitutional scholar who has always stood up for the legislative branch in its role in checking the power of the White House.

Theday.com:

- Attorney General Eric Holder said Wednesday the Guantanamo detention center is a well-run, professional facility that will be difficult to close - but he's still going to do it. Holder visited the U.S. naval base at Guantanamo Bay, Cuba, on Monday and spoke to reporters about his trip during a news conference Wednesday. Closing Guantanamo, he said, "will not be an easy process. It's one we will do in a way that ensures that people are treated fairly and that the American people are kept safe." Sen. James Inhofe, R-Okla., who is trying to keep Guantanamo open, said he was encouraged by Holder's remarks. "I believe as more time goes by there is a chance the administration will grow to realize that we need Gitmo and must keep it open. More time will allow facts to replace political rhetoric," said Inhofe, who is pushing legislation seeking to bar any Guantanamo detainees from coming to the U.S.

Reuters:

- Intel Corp (INTC) is seeing some predictability return to the chip business this quarter but it is still unclear when the downturn will hit bottom, Chief Executive Paul Otellini said on Wednesday. "I think you have seen the global shock and now people are starting to figure out how to work out of it," he added. Earlier on Wednesday, Cisco Systems Inc (CSCO) Chief Executive John Chambers told the conference he expected business conditions to begin recovering around the end of 2009.

- Chinese spot steel prices fell 5.3 percent in a third consecutive weekly fall, on rising inventory after a much-anticipated demand recovery failed to materialize. Prices of China's benchmark hot-rolled coil fell to around 3,527 yuan ($515.9) a ton this week, from 3,665/3,785 quoted last week, data from Metal Bulletin showed. "Many mills are offering discounts to their list prices to reduce inventory as demand from end-customers is quite weak," said a trader.

- U.S. banking regulators are not pursuing nationalization of troubled institutions struggling to shed toxic assets from their balance sheets, the head of the chairman of the Federal Deposit Insurance Corp said on Wednesday. "Nationalization means different things for different people but nationalization is not the route we're pursuing now," FDIC Chairman Sheila Bair told reporters after speaking to a group of bankers in New York.

Sky News:

- Some European countries are in danger of defaulting on their obligations to the euro region, former Bundesbank President Karl Otto Pohl said. Euro-region countries that are most heavily borrowed and may be unable to serve their debt obligations could be considering leaving the single currency, Pohl said.

Hindustan Times:

- It’s here. After talking of a rebound, putting up with stagnation and offering freebies and discounts, developers hit by a demand crunch and economic slowdown are biting the real bullet, lowering prices in key apartment zones in or around Delhi, Mumbai, Bangalore and Hyderabad. Real-estate prices across the country have fallen by 10-40 per cent. And while prices vary depending on location, size, quality, amenities and time of possession, there are clear indications that the earlier price surge created by speculation and high growth has petered down. Developers are generally still not cutting prices of existing projects, but they face a market in which re-sales could do much the same thing.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (HS), target $21.

- Reiterated Sell on (UA), target $12.

Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 futures +.26%.
NASDAQ 100 futures +.22%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (ESV)/2.05

- (WRC)/.16

- (DYN)/-.03

- (SHLD)/2.69

- (AMT)/.14

- (GM)/-7.46

- (BYD)/.13

- (NOVL)/.06

- (KSS)/1.02

- (ATHN)/.17

- (GPS)/.32

- (RDC)/1.08

- (SWY)/.81

- (PSA)/1.27

- (FTO)/.41

- (DELL)/.27

- (DECK)/3.94

Economic Releases

8:30 am EST

- Durable Goods Orders for January are estimated to fall 2.5% versus a 3.0% decline in December.

- Durables Ex Transports for January are estimated to fall 2.2% versus a 3.9% decline in December.

- Initial Jobless Claims for last week are estimated to fall to 625K versus 627K the prior week.

- Continuing Claims are estimated to rise to 5025K versus 4987K prior.

10:00 am EST

- New Home Sales for January are estimated to fall to 324K versus 331K in December.

Upcoming Splits
- None of note

Other Potential Market Movers
- President Obama releases his first budget proposal, weekly EIA natural gas inventory report, Jeffries Internet Conference, Robert Baird Business Conference, Goldman Tech & Internet Conference, Pacific Crest Technology Summit, (BKC) analyst meeting, (DF) investor day, (SFY) analyst meeting and the (PCG) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.